Power Lunch - Stocks slide as questions bubble up over AI valuations 11/4/25

Episode Date: November 4, 2025

The government shutdown continues as elections across the country take place. Steve Liesman joins the show to discuss "AI washing." And what should investors make of Michael Burry's put options on Nvidia and Palantir? Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

the AI trade encountering a rare bear. As the famed investor behind the big short reveals, his next short targets, NVIDIA and Palantir, leaving Palantir CEO Alex Carr bewildered and using some language that we will not repeat right here. Hello and welcome to Power Lunch, everybody. Always a family show. I am Brian. Kelly will be back in early December.

Stock's getting buried right now. Some of the big tech names posting a rare down day. We'll have much more in all of the, that in just a moment. Speaking of AI, we've got a little new slang for you. How about AI washing? We'll explain what it is and why companies could be using it to mislead you about why they are cutting jobs. Plus, the DC shutdown reaching record territory, day 35, tied for the longest in American history. We'll tell you all what investors should be doing now. Protect yourself against an even more extended shutdown. All right, there is a lot to do on this very

busy Tuesday. We're going to start with this. We'll call this Michael Burry versus the world. You may remember the name from the subprime crisis. Burry, the hyper-focused hedge fund manager who famously dared to bet against many of the subprime loans in the housing market in 2006 and 2007. He was mocked until he wasn't and he was right and he ended up getting fabulously rich and even starred in Michael Lewis's book that became a movie, The Big Short, Well, Bury now making another huge and risky bet. Burris hedge fund, Cyan Asset Management, just released documents showing big short bets against both Pallentier and Invidian.

Now, Bury is using options, not stocks, to make the gamble. And the publicly available filings show that his bet against Pallentere is nearly $1 billion. His bet against Vividia smaller, still about $187 million. Of course, these are tiny bets relative to. to these companies' respective market caps. But it's more that such a high-profile investor is daring to go after two of the hottest stocks in the world, and that's causing its own stir.

In fact, Palantir founder in C.R.X. Karp, he was on Squawk Box this morning, and he didn't mince words about what he thought about these bets. Currently, as far as I can tell, the two companies he's shorting are the ones making all the money, which is super weird. The idea that chips in ontology is what you want to short is bat-h-crazy. That word that we blanked out, it's a flying reptile.

Anyway, mammal, excuse me. This all comes, you know, hangs upside down. And there's a man who wears a black suit. Anywho, this all comes investor grapple with increasingly high and concentrated valuations. New data from Jeffries highlighting how the gap between the S&P 500, which, as we showed you yesterday, is nearly four. 30%, just a couple of big technology stocks, and the rest of the market, has not been this wide since 2003. While we don't know exactly why Burry is making this bet, he has given us a few clues via his ex, his Twitter account.

He posted this picture from a previous account using his movie photograph of Christian Bale, saying, sometimes you see bubbles. He also posted a picture of the cult investing book Capital account, highlighting how much telecom prices fell after the intranet bubble burst. Of course, we did reach out to Michael Burry this morning. He declined to comment on his positions or his post, and we want to be clear. It is unclear whether Burry is profiting from today's drop.

The filing reflects positions at the end of September. So, of course, he could have closed them. He could have doubled the size of them. He could have adjusted them in any possible way. But both those stocks are trading down today. Palantir off more than 8%. Invidia down about 3%. Let's talk more about all of this, how the trade might work, the risks and more. Joining us now, Susquehontas co-head of derivative strategy, Chris Murphy and KKM Financial CEO, Jeff Kilberg, both of them very well known for their current and former options for. Chris, I'm going to start with you. You are an options guru now. First off, what's your just general take on this trade? And secondly, why do you think you would use options and not equity? Hey, Brian. Well, you kind of hit the nail on the head. We do not have enough information about the specifics of these puts. And not only could they be expired, they could be way out of the money and be worth 10 cents. So, you know, I think until we get more information, and if Michael Burry's willing to give more information,

I would say that this is less aggressive than simply going out there and shorting the stock. If he's buying an out-of-the-money put option, that's the most that he can lose. And, you know, those notional calculations really overstate the size of these options because you're multiplying the size of the option trade times the current value of the stock. But once again, we don't know if he paid 50 bucks or $0.5. Yeah, Jeff Kilberg, listen, and he's out there sort of on his Twitter account, basically saying, watch out for fake news. The filings are correct. These are with the SEC. So I want to make that known. And we don't know exactly where things are right now. I think the bigger focus, and maybe Jeff speak to this, is this idea that Burry, who went against basically almost everybody in the world in 06, kind of doing that again. What's your take on not the mechanic? but the trade itself. Well, so you're right.

And it was a great book, and it was even a better movie when he talked about the big short. He made so much money off that subprime. But remember, he was two years early in that trade, so he had some pain as there's associated decay and owning puts. But what's interesting, his big call, his big fade on Tesla in 2021, or when he just simply tweeted sell in 2023 about the S&P 500, we saw Tesla double from 2021.

We also saw the S&P 500 up about 70%. I don't think Hollywood's going to call to make a movie on either one of those calls. So I want to be measured here. I think Chris brings up a great point. We don't know what the actual notion of value. We don't know what he's hedging. But the 13F that you talk about, which is the SEC filing, it is very opaque. It doesn't give us expiration.

He could be out of this trade. But nonetheless, going at Alex Carp and Nvidia, bring a little Greek mythology into it. That's like going at Zeus and Apollo, the two AI gods, Nvidia being the near $5 trillion god, and now Palantara, the new. baby son of Zeus. We are seeing at about $500 billion. So I think it's very aggressive that he's going at the AI guides in this manner. And I don't know why you want a short AI.

You can protect. You can hedge. But trying to be short, I think is absolute bad idea. Bat guano. And by the way, Zeus and Apollo also the name of Higgins' two Dobermans and Magnum. I mean, don't forget about that. Chris Murphy, how expensive would this trade be? If the people at home for some reason they want to follow Michael Burry, I'm not saying do that.

but if they wanted to do it, how hard and expensive is it to buy options in these names that are puts against them or even short the equity? I mean, Palantir options are expensive. It's a high volatility stock. But once again, he might be long a put spread. Short puts don't show up on these filings. So, you know, he could be long a $1 put spread for a nickel. So, you know, we just don't know. I would say I would not want to be short Palantir. So if I was bearish on the stock, I would be using the options as opposed to just being straight short it. But it is a higher volatility stock because of appropriate reason. So it's going to be more expensive to buy puts out right. So go back to that

previous point. You said he could do the $1 put spread. And the only reason we think we have an idea is to what he's doing is because he's posting pictures of book, you know, book pages where they're talking about how telecom prices. fell so you can extrapolate that out. We're trying to. And by the way, to your point, this could be closed. It could be the other way.

We're talking about the mechanics of the trade more. So, Chris, why would he want to do what you initially mentioned? Is there any chance that he would be long these names, any strategy where he would be long these names? And this would be a way to do that

in a backhanded way? I mean, he could certainly, well, his long, the stock would show up on the filings as well. That's what I said. What I'm trying to say is if he really wanted to tell the market how much he hated the stock, he would talk about which options he's actually long and how much risk he actually has on the table as opposed to pictures and memes. Yeah. And that's, again, I'm trying to Jeff edge it very nicely

because it is a little bit more opaque, but it does appear to be moving the stocks. It seems clear that at one point he is now. It may not be so. I mean, look at the year it's had. It's up over 150 percent. It's up over 440 percent since it's been in into the S&P 500 going back about a year and a half. But I think what's interesting, Chris brought it up, if you're looking just a hedge, because think about it, Nvidia itself is 10% of the S&P 500 now. So if you are looking at hedge,

you can go out to the end of December 19th expiration, you can buy a 190 put, about $10 lower from where we're currently training in Nvidia right now. You can pay $8. And that could potentially give you some hedge if you have more of an AI beta-like portfolio. So I think it makes a ton of sense if you want to book profits or synthetically,

take some profits off the table. But I think trying to be short, NVIDIA is short Pallantir, that is trying to swim upstream. And I'm not a strong swimmer, Sully. No, I've seen you swim. It's, you know, you get across the water. But, Chris, I mean, here's a thing.

To Jeff's point, Nvidia is 10% of the S&P 500. It's owned by over 600 major ETFs. I mean, is this like playing in traffic, trying to bet against it? Not, not, maybe you're right in all your thesis if you have one, but just the flow of investment dollars into the equity, which is probably going to push it higher, how much harder does that potentially make betting against any name like

that? I mean, I can just talk from what we see on our desk on these down days. A lot of people looking to sell puts, a lot of people looking to buy the dip. I do think it is a little bit of swimming against the current. You know, that said, you don't necessarily need. You don't necessarily need, the stock to even trade down to that, you know, $10 lower strike. You know, if we sell off a couple percent, volatility moves higher, you can sell out those puts for a good profit. And actually right now, the puts are less expensive in some of these Mag 7 names compared to the calls because there's so much FOMO going on. So, you know, if you were to be long one of these stocks and, you know, wanting to hedge into year end, you know, one of those callers where you

sell an upside call and buy a downside put, you're actually getting better risk reward than you have for most of the last year because there's so much FOMO outside of Michael Burry in this market. Yeah, I would say it's, again, Michael Burry versus the world. Jeff, very quickly, before we wrap it up, I do want to ask you about something else. I want to ask you about Bitcoin, because Bitcoin is $127,000 on August 17. Moments ago. Bitcoin fell below $100,000 again. It's still made a lot of people, a lot of money. It's made a lot of people very rich.

Do you make anything of the decline that we have seen the last couple of weeks? I think it's pulling in of risk. I mean, when no one's talking about Michael Saylor, he bought 42,000 Bitcoin's about $4.5 billion of Notional, and we're not beating him up. Burry's the one kind of in the radar right now. But it's fascinating.

In Q3, all his disclosures, Warren Buffett, bought $200 billion of treasuries. He's lost money on that. Michael Burry, he's bought some puts. He's lost money in that. And Michael Saylor with the Bitcoin component, yes, you are seeing a pullback. So I think when you look at Bitcoin, it has more of a correlation to the AI Mag 7 trade in the QQs, the NASDAQ, than anything.

So I think this is actually very healthy. I think you will see a chase in the year end. And I think the Christmas point, people are using this advantage. We're only 2% off the all-time high, which was just put in last week, Sully. Nobody's making a bid. Jeff, we're not making a big deal about this decline. There's no markets and turmoil special. Not yet.

Yet. But by the way, you called, Jeff, when we had, last time we had a market decline, you said, buy it and you were exactly right. I mean, we're not making too much the overall decline. But when Bitcoin's, you know, 20% off its high in a couple weeks, it's what's newsworthy. Yeah, but everyone's had more access to buy Bitcoin with all the proliferation of ETF Bitcoin. So I think it's a lot of people are putting it into their portfolios.

Advisors, I know, are included in their portfolios. So it makes all sense in the world to see a bit of a pullback in Bitcoin. Things go up, things go down, and guess what? Sometimes selling can be even a little bit healthy. Jeff Kilberg in turmoil, we appreciate it. Chris Murphy, Susquehanna, gentlemen both, really appreciate it. All right, in the meantime, we've got a news alert on a brewing battle between Amazon and the AI startup perplexity.

Mackenzie Sigalos, what's going on? So, Brian, you got Amazon sending a cease and desist letter to perplexity, the Silicon Valley startup out here that is known for, its AI-powered web browser. It's a company that's already facing legal scrutiny over how it scrapes content online, and this time it's Amazon trying to block perplexity from letting users shop on its platform using AI agents. Now, Perplexity just fired back. They sent me their official response. They're saying that Amazon's campaign to prevent users from shopping with their own AI assistance has reached new heights this week. They're accusing Amazon of using

litigious bullying to block user choice, arguing that AI agents are simply extensions of the user, not bots, and they can't crawl or scrape. Perplexity says these tools act solely on a person's behalf, insisting that big tech shouldn't control how people shop online. It's worth noting here that this comes as Amazon tries to drive users to its own AI assistant, Rufus, something that they talked up last week during their earnings call. I'm out to Amazon for comment, and I'm also out to alphabet because recently Google unveiled its own AI agents built into its Chrome browser, ones that could theoretically shop Amazon too, Brian. They're all fighting in the same sandbox. It's a very big sandbox, but they're all fighting.

McKenzie Sigalos, thank you. Also, we've got some breaking news right now from Washington, D.C. Amon Jabbers at the White House. Amon, what's going on your way? Brian, we just had a briefing from White House Press Secretary Caroline Levin, and she handled a couple of the big open questions facing this White House to do. day. The first one was in response to the president's social media post earlier today on SNAP benefits, the president suggesting that he would not authorize the payment of SNAP benefits. Remember, about $100 billion a year go out in SNAP benefits, affects about 40 million Americans. After that social media comment, White House wouldn't take any questions about what the president meant by that.

Caroline Levin addressing it in the press conference just now. She said what the president meant was they are not going to defy a court order to pay those payments. They are going to continue to find a way to make those payments. But what the president was referring to, she said, was any future payments. And she said that the president wants Democrats to come to the table and negotiate to reopen the government so that these SNAP benefits are not affected going forward. On the pardon for Binance founder, Zizi, this has become a bit of a flashpoint this week after the president in a 60 minutes interview on Sunday night said he didn't know CISI.

who he issued a pardon to in the crypto industry. Caroline Levitt was asked, given that the president has said that the former president Joe Biden, pardoned people, didn't know what he was doing, had no idea, how does that square with the president saying, you know, he didn't know CZ and gave him a pardon? Well, what Levitt said is the president was suggesting that he didn't know him personally,

didn't have a personal relationship with him, and therefore it was appropriate to go ahead and issue that pardon. She said the White House does. take the pardon process very seriously. There is an aggressive and transparent vetting process that goes on for those pardons and everything that the president did was appropriate. Also, we got an answer on a breaking news story from the Wall Street Journal just a short time ago. Got the headline right here. What the Wall Street Journal was reporting is that the president is negotiating a deal with the OZempik maker to sell some weight loss drugs for $149. The Wall Street Journal reporting

that Novo Nordisk and Eli Lilly would gain Medicare and Medicaid coverage for those blockbuster weight loss drugs. Interesting response from Leavitt. I think you've got to characterize it as a non-denial denial. She said that she's said that the president himself has said this is something the administration is engaged in looking into, but she won't get ahead of the president on any future announcements. So I think that would mean that we should be on alert for future announcements on that front, Brian. Back over to you. All right, Amy Javis, Amy, thank you very much. All right. government shutdown rolls on. Talk more about it.

Next. All right, we just have the breaking news out of Washington, so let's stay there because the partial government shutdown now entering. Really, it's 35th day. Matching the record from 2018. So how should you think about it

from an investing or a wealth management perspective? Monica Guerra is head of U.S. policy at Morgan Stanley, wealth management, and joins us now. Monica, welcome, obviously, listen, snap food benefits, lack of paychecks. airports, everything else. That's all real world impact. But I've got to imagine that Morgan Stanley

Wealth Management's clients are asking about this, when or how much will it matter, and where, how are you answering them? I mean, we're seeing and actually start to show up when we're thinking about those concerns, right? Our clients are asking almost every day. And what we've estimated is that those snap benefit expiration, once we actually get to a place where they aren't being paid out, could drag on personal income by 0.4%. And the important thing about that, while that's a small number, it's hitting the lower end of the economy. So it has a bigger impact for food and beverage, for example. We know, and it's hard to say, because you know that families are actually being

impacted. We've shown our viewers that historically, government shutdowns really haven't mattered for the market. In fact, markets have tended to rise into them. But now that we're tied for the longest on record, is there a point? And there doesn't seem to be any end of this at all. is there a point in which it does matter for the markets? Yeah, I think once we get into holidays, people are going to get nervous, right, if it extends that long. Now, that is not our base case. We do think that post-election, it alleviates the pressure for Democrats and Republicans and

that we could get some consensus to move forward. But if it does go on and we're wrong, right, that's when I think people start to get nervous when legislators are itching to go home for the holidays and we don't have a resolution. Yeah, we've got elections today, by the way, in New Jersey, in Virginia, and for the of New York City, these are all big deals. They tend to be a little more regional, but is there a national or investing implication on the New York City mayor race, on the Virginia gubernatorial race? And when we're thinking about New York City, that's all about housing, and that's local, right? That's going to be hyper, hyperlocal for looking at New Jersey. I think that's actually

the closest to a true referendum on current political debate. So you have, know, Cheryl, speaking ahead, but then the GOP candidate, you know, he's right on her tails. And I think that's indicative, right, of how 50-50 were split. Virginia is a different story. It looks like they might go down, might go blue. And that's because they're also a very heavy government employee state. So they have a very different dynamic. The shutdown could impact that election.

Right. So the shutdown. Who are on the fence are like, this is ridiculous or whatever it might be, or we need a paycheck. Right. Exactly. Exactly. So New Jersey is, I would just keep my focus there. But if we're thinking about a forward look, you know, midterms, not really quite an impact. But what it could do is it could at least give both parties an impetus to come together and actually get a deal so that we can get through these hot places. What would that deal, what would a deal, any deal look like? Healthcare is top of the line there, right?

So when we're thinking about ACA subsidies. And what's interesting is that the GOP and Democrats want ACA subsidy extension. Democrats want it permanent. GOP wants something more moderate, you know, temporary and or at a lower level. That's kind of what the big fight is about. That's the big fight. That's the core. $340 billion versus $1.5 trillion.

Right, right. And so when we're thinking about those ACA subsidy extension, once you get that, essentially, if we're thinking about the market implication, you know, healthcare is likely to have a nice tailwind off of that. Now, not the Medicaid heavy, right? So you still want to be a stock picker. But when we're thinking about insurance companies on those private exchange. changes, we think that there could be some upside. Because a lot of these insurance companies, stocks have gotten just crushed.

They've been like kneecapped. They're just waiting, right? I mean, and the thing is, is that we don't have an answer. And once that we have that answer, then people can look forward and invest. Do you have any kind of a base case, Monica, about when this whole thing may in? I mean, I have a feeling it's going to happen at the airports. I think it's going to be just a day where one of these major airports and I flew a couple days ago and I'm flying again in a couple days, I hope, just gets totally shut down. And that's

when people realize they don't care about Republican or Democrat. They just need to get to their job interview, their kids' graduation, a funeral, whatever it might be. When do you think this might end? I think it's all about air traffic controllers as well. That's what happened last time. Four days later, once you had a real shutdown, four days later, we had resolution. So we're blowing past that the historic length. Tonight, 923, it'll be day 36. And so that is going to be a big factor. But when we're thinking about air traffic controllers, people are concerned about safety. They want to get home. They want to get home for the holidays. Well, you live north of the city. I live south of the city. I'm in the city enough. Probably so are you. Looks like we're going to

get a 34-year-old with very scant job experience and some other stuff. As our mayor, is this going to be a big win for the Connecticut, New Jersey housing markets if we get a mom-dami win? potentially. I mean, it's definitely going to be a tenant-friendly environment, right? And when we're thinking about taxes, we would expect taxes to increase. Are you going to get everything on the wish list? Most likely not. The New York City budget can't support that. So, you know, again, this we have to take... Also, the mayor doesn't control taxes. Well, the thing... Right? We're thinking about city council.

I mean, you're saying stuff, but like, I don't know if you can do this stuff that you say. Well, and I say a lot of things. I don't do a lot. Yeah, so they also have to work with the state, right? And hold on some of these issues. everything. So it is a complex environment. One thing I just want to really emphasize here is that New York City has its own set of problems, right, its own set of things that are really motivating Mamdani's, you know, efforts. I'm travel of the country that's not necessarily the same priority set as everyone else. And so I don't think that this is going to be necessarily the bastion of what the Democratic Party looks like going forward. I could tell I was just in San Francisco,

and as we highlighted on this very fine program and network, that's a city on the rise. They went through a lot of mistakes. They figured it out. We'll see what happens. Fascinating nonetheless. Monica Guerra. Thank you very much. Thank you.

All right. All right. Time now for your daily bond report, Treasury yields. They're a little bit down. We talked about it. The government shutdown entering day 35. The 10-year yield, though,

still above 4%. Of course, official governmental economic data, either hard to come by or not coming at all. We're looking at all the private sector jobs data, ADP and more. 10-year yields, the Fed cut rates. Vaughn market pulled a honey manager. It didn't care.

I'm using family-friendly language. All right, up next, are there some big gains ahead for the little guys? For the small caps, talk about just that in your market navigator. All right, time now for today's market navigator. And forget big cap tech. I mean, it's been running the show. But your next test says it's really time to think a little smaller. Chris Tesson, his managing partner and chief investment.

officer at Qaitas investments. He is making the case that small caps are compelling by right now. Chris, welcome to Market Navigator and to Power Lunch. We've been talking about this for a while. We've heard this argument that small caps are kind of the place to be. They've done well, by the way, the last couple of months. Why do you think they're going to continue to do that? I think we're early in the cycle for small and microcap.

We've sort of microcap has been kind of our flagship since the inception of the firm. And really, there's a couple of things. One is from a valuation perspective, small and microcap stocks are significantly undervalued relative to large. Even though microcap, for example, has led the market year-to-date through yesterday, it was up nearly 20 percent, outperforming the MAG 7, the Russell 1,000, every major index, but still gets generally less attention because of the longer-term performance of large-cap stocks. What's really interesting to note is that microcap, for example, has lagged large cap annualized over the past decade by almost 6% a year.

So we're really in the very early cycle for a resurgence of small and microcap names. And it's been underrepresented in portfolios, not just for individuals, but for pensions as well and large consultants, partially because it hasn't done as well. But these things tend to cycle, and it feels like we're early in the cycle. notably, the beginning of the cycle looks very different, and that it can be led by sort of more speculative names and more aggressive stocks. We've, Chris, we've talked a lot on this network. Sorry to interrupt about the benefit, the M&A environment, which is likely to get better.

Would that be a good thing for the smaller cap stocks? We saw more deal flow? Absolutely. It's been a source of excess return for the managers. that we allocate to as a multi-manager. And I think, again, it's sort of early in the cycle. Lower rates help that. For sure, there's no question.

But the MNA cycle is a powerful catalyst for the space. Yeah, and something that we've also been watching pretty aggressively. Chris Tesson, really appreciate you coming on CBC and Market Navigator, Chris. Thank you. Have a great day. Thanks so much. All right. On deck, why the term AI washing is now making its way around corporate America

and what it really means or doesn't be. All welcome back. You've probably heard the term greenwashing, right? It's when companies are claiming to be environmentally sensitive or green. It's really nothing more than a marketing trick. Well, now maybe get ready for AI washing. It's happening. And like greenwashing, maybe, like Public Enemy said, don't believe the hype. Steve Leesman joining us now with more on AI washing. Is this like when an airline's like, we're environmental, just recycle your napkin? Yeah, it's kind of similar in that they're saying. something over here and doing something else over there. And the issue, Brian, here, is that they're potentially laying off people because of other problems in the business, but the layoffs they're saying are attributing to AI. So it's like, oh, we may have problems in the business, but we're not talking about that. We're laying off 10,000 or 5,000 or 4,000 people because of the idea that we have AI coming in. But in some cases, that turns out not to be the case or a kind of

something you can't really prove. So that's the second part, I think, is probably where it is, right, where you've got, you might have a couple people getting laid off because of AI. Let's say a company lays off 5,000 people. 50 are related directly to AI. The other 49, 50 or not, but you can't say the company's lying, right? Right. So there's a couple things going on. First of all, these numbers are huge, some of these big layoffs, 4,000, 5,000, 10,000, 34,000 at UPS. and they suggested it was AI and somewhat automation-related. But as far as we can tell, companies don't have the ability to do layoffs at that scale using AI yet. It may happen, but we're not there yet.

The other thing that's really interesting is everybody wants this story to be true. And they want it to be true now. Think it through. Why is that massive upfront investment in the infrastructure? And we're looking for and waiting for the results. Are we over investing? Are we overpaying? Not if we're getting the kind of results where companies can lay off tens of thousands of workers.

So everybody is receptive. So the company says a little bit of AI and the media blows it up or Wall Street blows it up into, look, all these benefits are out there. But at some point, Brian, they're going to turn around with this AI investment and ask the seminal question from the book that was written in the 30s, where are the customers? yachts. And we don't know when that's going to happen. Where are the results and when are the results of the users and the buyers of AI? The benefit of the company saying AI would be that it's not something you could necessarily push back on, right? It's very hard to prove. It's like

very hard to prove. It's just that logistically we, you know, what we hear we can prove, there are companies that are saying entry level jobs. call centers. Those are things that you can imagine and think through how you can scale that up. Lower skilled jobs. Those are things we can imagine and how they're scaled up. The other element that we're seeing now in AI that seems to be demonstrable is this idea that companies are holding the line on hiring. They're not bringing on new people because they think AI will eventually able to take some of the added revenue that's there. It's an important point because in some of these layoff announcements. We have seen, there's two ways to look at a layoff. Number one is people

are currently employed by the company and they get laid off. They're like, Mr. Mrs. Jones, thank you for your service. Here's a severance check, whatever. Or they just say these positions will be eliminated and not filled. Not filled. Right. So when the people leave naturally, how do we look at the difference? A really good example of how this kind of took off. And I tried to get to the bottom of this. Amazon announced these 14,000. layoffs. The media had these AI headlines out there. Amazon fed that narrative, but then the next day or a couple days later, Jassy had to physically or literally walk it back. He said, this is not AI. These are not AI driven layoffs. He told them culture, but because there were so many questions, how are you laying

off 14,000 people now because of AI? There was pushback. Because it doesn't work that good yet. It's just not there. It may well happen. I don't. want to say this train is not going to be riding down the tracks. It's just that these are early days yet for the technology and the ability seem to be relatively limited. Maybe it can do it. But the ability of a company to come in and say, we're whacking tens of thousands of people because of AI. I think that's attenuated at the moment. Shall I say? Yeah, it's an important point. And you got me thinking about Johnny Cash because I hear that train of coming. It's coming around the bend. It's coming around the bend. And I ain't seen sunshine since I don't know when.

Is that the guy he killed a man just to watch him die? In Reno. Yeah, Reno. Steve Leesman, thank you. I don't know why you ended in that lugubrious note, Brian. Fulsom, because I was actually just in Folsom, California. That's actually, it was in my head. Got it.

Along with a lot of other. You get to do that on your show, right? Anything weird. Let's get out of Courtney Reagan for a CNBC News Update. Thank you, Brian. An attorney for former FDX CEO, Sam Bankman-Fried, argued today in front of a federal appeals court that his fraud convictions should be overturned.

She claims the judge at his 2023 trial unfairly limited what evidence the defense team could present. Bankman Freed is serving a 25-year prison term after a jury convicted him of defrauding customers and investors of billions of dollars while he ran his crypto exchange. The court will rule at a later date. The USS S Gerald Ford aircraft carrier reportedly left the Mediterranean Sea this morning just over a week after Defense Secretary Pete Higgseth ordered it to the Caribbean. That's according to the Associated Press. The deployment marks a massive escalation in the military buildup in the region amid numerous U.S. military strikes in the Caribbean on alleged drug-carrying vessels. And Transportation Secretary Sean Duffy warned the U.S. may be forced to close down some airspace next week if staffing shortages from the government shutdown persist. Duffy argues the ongoing shutdown could bring, quote, mass chaos with numerous flight delays and cancellations.

Brian, back over to you. I think it's all, we talked about it earlier, Courtney. I think it's all going to start. at the airports. I truly believe that. Courtney Reagan, thank you. Thanks. All right, coming up, we're going to talk about whether today's weakness, is it the start of something more or just a healthy down day in a continuation of a bull market? All right, welcome back. Stocks, they are down across the board today. In fact, the NASDAQ is down considerably. It's down about 1.9% right now, one of the worst days we've seen the last couple of weeks. Now, this could have to do with the Michael Burry short on

NVIDIA and Palantir that we talked about at the top of the show. It could have concerns, over valuations, or it could just be more sellers than buyers. Joining us, Matt Orton, Chief Market Strategist, at Raymond James Investment Management. Good day to have you on, Matt. We're not making too much of this decline, but you and I were chatting right before, you know, we came out of commercial break. And the reason a day like today is getting, I think, more attention is that we haven't had many of them, right?

That's exactly it. I think investors forget that the market can go down and that it's very, very healthy. And that's why I've been telling our clients that you should look to use downside opportunistically if you get it and fade the froth in the market. There's a lot of high quality companies who have posted really, really strong earnings that might happen to be levered to some... What does that mean? Fade the froth. Fade the froth. So a lot of the nuclear names, a lot of the crypto type names, the quantum names that have really rallied, I'd say disproportionately with respect to the earnings or even the revenues that they may or may not have. and instead look to buy the high-quality companies that are growing at double-digit top and bottom-line numbers

who you know or lover to sustainable long-term trends like AI. I think you're just, I think you're, and I don't put words in my mouth, if I'm wrong, tell me, I think you're describing the difference between trading. You know, there are bars in South Korea now. You can go to a bar, true story, and watch people trade. Like we watch football. They're watching people trade. And I think they're betting on those traders.

That's not investing. That's trading or some people might even say that's gambling. There's a difference. There is. There's a key difference. And I think what we need to remind ourselves as long-term investors is that the market goes up, it goes down, but you want to invest in earnings growth going forward. And there's been a lot of, I'll say, euphoria in the overall market.

But we're lucky. We're in earning season right now. We're seeing a lot of these long-term durable trends like artificial intelligence, the CAP-X super cycle, continue to show that. durability. And that's what I want to lean into. If there's weakness and companies that are posting really solid results, like a Sterling infrastructure, a name that's levered to data center buildouts, those are the types of names that I want to make sure I'm long and stay long. And especially if there's downside, use that to your advantage.

That's interesting because I would put some of the data center companies in your previous mix, but it sounds like your company Sterling, you don't feel like it's maybe gotten the love or the froth of some others. No, it might be really big this year. But they just reported results last night, and you're seeing double-digit earnings growth. Not only do they have a backlog back to 2029 with very significant visibility, their margins are actually expanding as they continue to build out data centers. So those are the types of companies I like to see, improving margins, visibility into earnings going forward, and lever to a durable theme like AI. And by the way, stock down a little bit today, but not nearly as much as the overall NASDAQ. So maybe that's a positive sign.

And Matt, we're glad you here. Thank you because it is important to remind people. Stocks can and will go down. That's why you get paid, not you, but we all get paid to own stocks. That's the benefit of the risk. Matt Orton, thank you very much. Thank you. All right, coming up, cruising for a bruising, Norwegian, the worst stock in the S&P 500 today.

We'll find out why, despite what many say are pretty good numbers. Contessa Brewer, up next with that. All right, let's talk cruises, because, Look at Norwegian cruise lines. That stock's down 15.5% right now. It is the single worst performing stock in the S&P 500. Other cruise line shares not down as much, but they are down in sympathy. Let's try to understand why, because the numbers on the surface, they look pretty good.

Joining us Gaming, Travel and Leisure correspondent, Contessa Brewer, the numbers, they didn't look that bad. No, look, if you're setting record revenues, best third quarter ever, they said on the earnings call, And you're watching the stock sink like a stone to the bottom of the sea. You've got to wonder what's going on. That's a bad metaphor for cruise lines. I'm just saying what happened was Wall Street wanted more. They wanted much, much more. They have gotten used to these sort of yields from the cruise lines that keep setting record over record.

And what you saw was Norwegian saying, we're going to pull back our full year guidance on net yields or how much money they're making per passenger. but still, forward bookings look phenomenal. They actually lifted fourth quarter earnings guidance. And they said that their 2026 bookings look fantastic. I talked to CEO, Harry Summer, about this exclusively earlier today as the stock was sinking. Here's what he told me about the margin improvement. It talks to the fact that consumers continue to be interested in experiences. They value experiences.

They value the value, I should say, cruises have to offer. And they're also very optimistic about the future because they're making their plans now for Q2, Q3, even into Q4 of next year. Listen, they have seen 600 basis points in improvement since the end of 2023. And that trajectory is forecast to go through the end of the decade. So something is working here. They're also opening up new destinations in their private island, like they're going to have the water park open for the holidays. And this is really interesting. While we've seen all of this commentary about budget travelers pulling back, Norwegian is investing in families. They're saying we really think that we can make huge profits

with premium families. They come on board. They buy their tickets. Yes, they're fitting four people to a cabin, but you know what happens. You know what happens. I don't. I've never been on. I've never been on a cruise. You're missing out because I'll tell you what. It's great for multi-generational travel and, you know, it is a good value. If you don't add on the drinks package, You have to do that even for soda or orange juice and those kinds of things on the... I'm just saying that I'm not giving my kids drinks. I want to make that clear. We're talking about children all of a sudden.

No, no, families. That's what families, that's what they mean by families, shove more kids into the cabin, but then they're paying for excursions on all those on board spending extras. So the guidance wasn't terrible either. So the number, because, you know, third quarter, best third quarter ever, that's backward looking. They want to look ahead. Markets look forward. The guidance didn't sound like was that horrible.

Have you heard anything from any of these cruise line operators you're talking to that sounds that horrible? I can't remember that you have. I just think it's that the investors want more. More is more. They want perfection. These stocks, many of them might have been priced at perfection. Well, this one's been cheap and it's down 25% year to date. And it's a lot cheaper than its competitors in particular.

But there's big plans for Norwegian. Is there a general trend on travel? There's been a lot of things going around X and Twitter. about Vegas is cooked. No? Well, Vegas had a rough summer and it showed up in the bottom line, but group bookings are back. So we'll see what happens in 2026. We sure will. Also, Vegas is like 135 degrees in the summer. So there is that contest. Not quite that lot. Thank you. It might be an exaggeration. We're back 134 degrees. We're back right after this. All right. Welcome back. Before we turn it over to Scott

and the closing bell. They're going to have a lot, a lot of market action in the last hour. We're going to show you the setup right now because the selling has. intensified just a bit, but NASDA composite is down just under 2%. It's down 1.9%. The SEP, down 1.17%. Selling has accelerated. We'll see how the final hour shakes out. We will see you tomorrow on Power Lunch.

Closing Bell. We're going to start right now.