Power Lunch - Tech Trade Stumbles 12/12/25

Episode Date: December 12, 2025

Oracle stock slides. Broadcom shares fall after earnings. Lululemon leads the S&P 500 after announcing a CEO change.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch on this Friday afternoon, alongside Kelly Evans. I'm Dominic Chu. Now, we've got our eyes on the tech trade as the concerns there continue to mount with that. The sell-off of many of the darlings of the AI trade are still in full effect right now. Broadcom, Nvidia, and the other chip names are all down today, dragging the overall markets with them. And we're going to take a historical look at valuations of the mega-cap tech names within that space with Ed Yardinney. But before that, Oracle firing back on a report that it is delaying some of its data centers for open AI. We're going to have much more on that story

in just a moment, Kelly. Shares down about 4%. Plus, a leadership change at Lulu that is spiking the specialty retailer's stock to the top of the S&P today. It's up about 10%. One long time bear upgraded the stock this morning on brighter horizons ahead. And we'll have one more retail name he believes also has big upside. And no one is moving houses because they are locked into low mortgage rates compared to the ones on offer today. A report from City offers an interesting solution to this gridlock problem that will bring you later on. All right. Well, Oracle is off session lows right now. Breaking news, though, crossing in the last hour or so about a report that the company was delaying some of its data center projects. Sima Modi joins us now with more on that

story. So what exactly is the nuance here? And what exactly is Oracle saying about this report? Well, this is a vote of confidence for Oracle, Kelly, and Oracle is saying it is fully aligned with OpenAI. It is refuting that story from Bloomberg that suggested Oracle was delaying some of the data centers. It was essentially developing for Open AI. And if you look at those comments from Oracle spokesperson, they add that we remain

confident in our ability to execute against both our contractual commitments and future expansion plans. They add that there are no delays at any sites and all milestones remain on track. So the big story here is over the past couple of weeks, there's been concerns around whether this $300 billion deal with Open AI remains intact, whether Open AI can fulfill this commitment. So these statements are significant, and that is why you're seeing the stock bounce off the lows of the day. However, at the same time, Oracle did publish a new 10Q, and in that 10Q, it revealed a much larger data center lease number than previously expected.

So that is resurrecting this conversation around financing. You know, a couple of weeks ago, Oracle went to the debt market to raise $18 billion in a jumbo bond sale. This 10Q that suggests bigger than expected leases for data centers brings up the question of what else Oracle is going to do on the financing side. On the earnings call 48 hours ago, the company did say debt is an option. The big question now is just how much debt the company needs to raise. They had suggested that it would be less than $100 billion, which was the ballpark estimate that analysts had been throwing out there prior to earnings.

but less than $100 billion still isn't the level of specificity that the market wants. I did speak to one credit investor who said the debt sale would likely come in early next year. That's just what they're speculating based on the latest data we have from Oracle and these numbers being thrown out there. That is earlier than the mid-20206 estimate that previously was expected. The other thing that a lot of folks were keying on that Oracle report was about this kind of, you know, we talked about RPO's. Nobody really talked about RPO's until we talked about Oracle's earnings the last time around these remaining performance obligations. They surged again, but just how bullish can those numbers be viewed as or what lens do you have to look at them through? Because anyone who says, look at the size of this order backlog, has got to say this is a good thing.

But at what point is the order backlog not growing fast enough to even catch up to the valuations that people want for Oracle? No, you're exactly right. It was a very impressive backlog that showed $523 billion higher. than the previous quarter in Q1. It also showed that it's not just dependent on OpenAI. They have other customers like META and NVIDIA. But I think, again, the question is just the cost to fund this buildout, the cost to bring up these data centers

and all the different equipment that goes inside. You know, GPUs is Oracle's essentially number one expense. And Larry Ellison, the founder and chairman, talked about how they're looking at different ways to secure favorable financing terms for chips, whether it's allowing customers to bring in the chips to their data centers, leasing chips from the major suppliers, not just from Nvidia, but others as well.

But if that's the case, then, the question is, what are the gross margin structure of those types of deals? That level of detail we still don't have yet, and it's something we want answers on. All right, Seema, thanks. Appreciate it very much, Sima Modi, as the stock continues to gyrate with these concerns, same is true of Broadcom. The shares are down about 11% right now for its worst day since April, as the market is concerned about the pace of growth and its chip business, its impact on

margins. Christina Parts the Nevelas has the latest. Hi, Christina. Hi. Well, Seaman just talked about margins, and I think that's probably one of the biggest nitpicks for sell side guys and just investors in general for this company. And that's because not only did the CEO Hocktown talk about margins be decreasing later in the following year, primarily because of memory prices, but in the second half of 2026, they're going to be shipping a lot of rack. So it's not just the individual chips. It's all of the chips, the networking components, the memory chips that go in it. And so for that, margins tend to be lower with racks because you were relying on other third-party vendors for said components.

So we know memory prices, for example, have been climbing dramatically. There's tight supply. And so that weighs on a lot of companies that have to buy these memory chips and then pass it on to consumers. Dell, for example, Dell's margins have actually been hurt for just that reason and they've had to pass it on to consumers. HPE talked about raising prices in November for the same reason. So margins was a big factor with Broadcom.

There was a few other issues, I should say, the report was still relatively strong. It was really the earnings call where Hocktown just didn't convince a lot of sell side guys and investors listening in on the call that their AI revenue for fiscal 2026, where was that guide? He didn't really want to talk about that. And then Open AI, too. It seems like Open AI is not the mystery fifth customer that they've spoken about. He even said that they have an agreement with Open AI, which some people could perceive that as maybe not a contractual agreement. agreement, much like we heard after Open AI joined forces with NVIDIA, they had this splashy event, and then later on we

find out that NVIDIA is not actually in a binding contract with Open AI. So there's all of this risk and concern. And then the third point, which is the biggest one, is the stock and the valuation. This is an expensive stock. The valuation 4P is much higher than NVIDIA. The stock has run up dramatically just over the last little while on this AI momentum, on this custom chip momentum, and the Gemini 3 using Google-based broad-com chips, too. So these are all factors as to why you're seeing such a reversal

today in this company. Yeah, exactly. Christina, appreciate it very much, Christina Parts and Nevelis. And as the market continues to rotate away from some of these large-cap tech names, should investors reevaluate this strategy at heading into 2026 if you thought that was the sure bet? Joining us to discuss is Craig Johnson, the chief market technician at Piper Sandler, and Matt Orton is the chief market strategist at Raymond James. Welcome to you both. And, Craig, I think you've said, like, lean into the rotation, financial, industrials, the broadening out. Is that right? Absolutely, Kelly. That's exactly what we're seeing in this market. And it's been an interesting message as I've been conveying this to investors

over the last couple days. This is a bull market, but it's a rotational bull market at this point in time. We have been seeing stocks like you just were mentioning Oracle, Nvidia, Broadcom. All these stocks look like you're still due for some profit taking at this point in time. And it's, you know, honestly, leading to a lot of bit of frustration among investors. And then you start looking at energy, which we just did upgrade here in our publication this week. And we also start to see some strength in health care, too. Things that haven't worked in a long time, Kelly, are starting to poke their head up. These cyclicals look good.

And it looks like it's going to be an interesting play into 2026. Matt, it's interesting that the way that the chart set up is maybe aligning in some ways with some of the fundamentals that are also part of the market narrative right now, specifically around things like valuations, about this broadening out kind of trade happening. Even the small caps are now participating in that catch-up trade. Are we in the early stages of this right now, or is this just a blip on the radar like we've seen in the past

that fizzles out in a few weeks? It's a great question. It's one that most of our clients are asking us right now, how sustainable is this rotation? And I think it is sustainable in some key areas, because when you look at what's driving, I would argue a lot of this movement into small caps. and say the energy complex, it comes down to economic fundamentals.

And the economy has been much more resilient than expected. The Fed on Wednesday reaffirm the fact that their economic outlook is more optimistic than it has been in the past. And in an environment where rates are coming down and have already come down meaningfully, that directly benefits small cap companies. So I'm quite optimistic on the outlook for small caps going forward. But I also think balance is really key for this year. while you're seeing some profit taking in tech, they are still the lion's share of earnings growth for this market.

You still need to lean into the AI trade, but you can finally start to find success in areas, say, health care, areas like energy. Even financials is a key overweight, I think, heading into next year in regional banks, in particular, which gets you down market cap. I mean, I think overall the health care trade's been one that we've been trying to highlight as the catch-up, right?

The small-cap trade is the catch-up trade. The value sectors are in play right now. I think maybe the question I have about that, aside from the sustainability aspect of it, is if you are to find leadership in some of those value sectors, is it the ones that we've seen already so far? Is it going to be health care? It could be those industrial's financials. Or is it going to be somewhere else that we want to lean in that market towards?

I know that you're still long tech, right? I know that you still like names like Broadcom. I know that you still have Nvidia as part of that kind of overall thesis. But just how much do you then alter the strategy? How do you rejigger the portfolio? to take that view? So I think you need to look at where you're going to put marginal dollars to work in this market. So I'm not leaving trades like Broadcom, like you mentioned.

Today's a painful day, but the long-term thesis still very much remains intact. But as I think about putting some of those marginal dollars to work, I don't think there's significant credit concerns in this market. And as a result, I'm comfortable leaning into regional banks because we have seen strong earnings from most of those companies. And if rates are lower, net interest margins are improving. And as the market gets more comfortable where credit is, I think that's a key area that's sustainable with respect to expansion.

Healthcare, for example, there's a lot going on in the healthcare space. And I think you need to think about health care with each specific vertical. While I don't want to own some of the HMOs, there's regulatory risk associated with it. There's a reason why those stocks are so cheap. Medical devices, I think, lean into the fact that we do have an aging population with more and more chronic diseases. We've seen a bottoming with respect to earnings growth in that. part of the market. And I also think biotechnology also gets you further down market cap. But

biotech has been working very well this year because there's increased M&A activity. You're finally starting to see a need from the big pharmaceutical companies to fill their drug pipelines that are starting to face very real patent cliffs over the next three to five years. So that's very sustainable. And that's what you want to lean into as an investor. Quickly to both of you, Craig, to you first, what do you do with the AI trade exactly? Well, Kelly, with the AI trade, I'm looking to actually take some money out of the AI trade at this point in time. I think to think that you can see Nvidia double from here, I think is challenging math, right? Going to close to a $9 or a $10 trillion market cap, that would be like 10x, the market cap of the entire Russell 2000 index.

So from an investor looking to make money to buy stocks out here, I would be taking some money out of that. I would be going down cap is where I would be going. I'd be going into areas inside of health care. I'd be looking at energy. I'd be looking at financials. And again, financials should really benefit from a steepening of the yield curve. I think that's a pretty straightforward play for a lot of investors. And I would also be looking at industrials because we are going to see some CAPEX benefits coming

as we get into 2026. You will see some of the buildout of these data centers continue to happen into 2026, but there's a lot more opportunities is just beyond tech. And I remind people that the three big. best performing sector so far this year has been basic materials, telecom communication, and also utilities. It has nothing to do with tech at this point in time. So I would be continuing to see that rotation take. I think we made it just. The P multiple side of this market. Whenever we've had double-digit earnings growth, and I go all the way back to 1986, leveraging the portal work here

that our fundamental strategy team has done, and I would just note nine out of 17 times when you've had double-digit earnings growth, you've seen P.E. multiple contraction happen, and the median return for the market was 3%. This is going to be a year that's going to be an okay year. Bull market isn't over, but it's going to be probably a single-digit return for the year, and hence our 7150 target that we set out, kind of low on the street. But I think that's going to be the reality that investors need to face for next year. Same question. So Craig said he's actually leaning out of the AI trade, Matt. Your sounds a little bit more nuanced, or just to even give a name like,

Oracle, because you said you don't share some of these debt concerns, if I was hearing that correctly. Is that something you'd lean into on this sell-off opportunity? Yeah, I wouldn't be leaning into Oracle at this point. I have questions about the sustainability of open AI spending, but a name like an alphabet, looks really, really attractive to continue to lean into on the AISA. Even up 85%. Even up 85% because the fundamentals are there, the free cash flow and balance sheet is there. But another key theme to perhaps complement tech that's tech adjacent is defense. I've been telling our clients all of this year to play offense with defense. And it's been a winning trade. And I think it continues to win heading into next year as you see massive investments,

not just from the U.S., but from countries around the world in Asia, Pacific, in Europe, needing to step up their defense spending. And so a name like L3 Harris has been a top pick of mine this year, their lever to avionics, their lever to space, their lever to Golden Dome and Star Wars, and you're seeing a lot of money being spent. And I also, when you go further down market cap, a company like a Crackin Robotics. It's a marine technology company that specializes in robotics. But you think of the drones, which have been a huge area of investment. Next stage of that is underwater unmanned vehicles. So there's a lot to be excited for that's tech adjacent, but sits in different parts of the market with other fundamental drivers. All right. And Craig,

from a fundamental point of view, those are in compelling cases. The charts, though, are what you're looking at right now? So are there places, specific stocks, ETFs that are good setups, so to speak for a move to the upside? I'm not sure. Craig, are you there? All right. So we were going to get the chart view on that. But along the lines for the trade on the fundamental defense side of things, we know that

there are tailwinds for that. There could be macro spending things at play. But I wonder now, if you take a look at the way that things are set up internationally. You mentioned some of those international markets. Are there still opportunities outside of the U.S. and are they attractive? We've talked about the devaluation of the dollar at times and how that's kind of providing a tailwind, but does that have legs? It does, Dom. I like international markets. I don't think investors should be fading the strength that you've seen from overseas markets this year. When I look at international markets, I very specifically like European financials.

There's tailwinds to their earnings growth story, capital return story. I think periphery banks can continue to perform very, very well. I look at a market like Japan. It has some of the highest earnings upgrade revision ratios around the world, and you think of fiscal spending that should directly benefit a lot of companies in Japan. But emerging markets are very, very, I think, interesting at this point, especially countries like India, which really did not succeed so far this year. It's been the laggard across the EM complex, but when you think of a country that's printing 8% GDP growth, long-term 7% plus targets, where you've seen a trough in earnings, and most

importantly for client portfolios, its correlation to the S&P 500 on a rolling six-month basis is just above zero. So it provides very strong diversification benefits and the ability to appreciate in a growing economy. Hard to find that these days. No, I know. Zero correlation. Everything goes together, I think. Bitcoin, the metals. I can't think of what else would be. Not even bonds. Right, exactly. Gentlemen, thank you both really appreciated today. Matt Orton and Craig Johnson joining us on the markets. After the break, our tech valuations, two for investors. Ed Yardinney will weigh in with his point of view next. All right, welcome back to Powerlens. We're going to stick with the tech trade and bring in Ed Yardini of Yardini research.

Ed, we want to kind of take a look back at some of these historical tech valuations. Overall, there's been a case made by more than a handful of strategists and traders. out there, that when we talk about valuations in the current market, that it is not fair to compare them to what we've seen historically over the past 20, 30, 40, 50 years, because the entire paradigm has changed. It is now a higher ceiling and a higher floor for valuations. Is that an argument that you buy into and believe? Well, it's the traditional, this time is different argument, I suppose, and that more often than that doesn't work. But look, the reality, the is that we're looking at the S&P 500 PE, forward PE, now suddenly a bit below 30.

And back during 1999, the tech bubble, the multiples for that sector was 50. So we're really not in the kind of bubble territory we had seen back in 1999. And then, of course, some of the arguments being made at this time as different are relevant. There's certainly less seller financing than there was back in 1999 when telecommunications companies did a lot of that, and it turned out to blow up in their faces. Also, a lot of companies were spending on technology in 1999 trying to upgrade their equipment so that it would work at the turn of the millennium. These are not issues today, of course, but the circular financing is, I guess, one of the

concerns today. The quality of earnings is one of the concerns today. Last week, I actually recommended underweighting the Magnificent Seven because I felt that they're just starting to compete against each other pretty aggressively. And so as a result, I said, you know, maybe moving to move into some other areas of tech, but also continue to overweight financials and industrials. What was the term, Kelly? right? Wasn't it the impressive 493 or I forget that what the term? Yeah, so you said

to kind of move towards there, but from that valuation's perspective then, can you compare other parts of the market that are not the magnificent seven to those historical averages more closely than you can with these mega cap tech stocks? Are they just in a league of their own? And do you have to value them differently

than the impressive 493? Yeah, I don't want to go into the this time it's different story. I don't think it's going to be that radically different in terms of valuation. Valuation is high whenever growth expectations are high. In 1999, I don't recall too many, if any, people really saying we were in a tech bubble, that we were in a dot-com bubble. It just kind of all of a sudden blew up and then benefit of hindsight. Everybody said, oh, yeah, we were in a bubble. This time around, there's nothing but questions all the time

about whether we're in a bubble. And I think the answer is already in front of us. Yes, we're in a bubble, and the bubble's losing air. It's not bursting. It's losing air. Valuation multiples are coming down. Why? Because there's a recognition that AI has caused the magnificent servant to compete with each other.

Dom, the analogy I use is the Game of Thrones. You know, in the opening credits, the towers kind of go up and down. Basically, we've had seven kingdoms here in the Magnificent Seven. They've had big moats around them, and they've operated kind of independently without bothering each other. Now with AI, suddenly they're competing with each other, and competition tends to bring margins down. Ed, why do you think, or do you think, that this is the year that the party ends, or

2026, while there are many out there who still expect that the AI bubble has several years left before we get to the really kind of top off phase? Well, I think because there's every sign that people are coming around to viewing the Magnificent Seven is maybe a little less magnificent and starting to focus on the impressive 493 or maybe Smith caps. We're seeing, obviously, small cap stocks doing quite well with the Russell 2000 at a record high. But I think what's changed for me over the past several weeks is I think Michael Burry kind of suddenly

made us realize that there really are a lot of uncertainties with regards to the future growth rate of these magnificent seven companies that are not competing in this AI race. And in addition, we know that there's a lot of question marks about whether all this capital spending is going to pay off in a decent return. So suddenly there's a lot of uncertainty about the projections for strong growth in these seven companies. And I think the market's still in a bull market. People still want to be in the market. But I think you're going to see some lightning up, as we already are over the past several days in the Magnificent Seven. And I think more money goes into financials, industrials,

financials have done well. And I think even healthcare, I haven't been recommending health care as an overweight, but I am now. There you go, because that we just, even for the insurers, because our last guest said he likes other parts of health care medical devices, biotech, but he wouldn't to go near the HMOs? I think that makes sense. That makes sense to me. All right. A little bit of a tactical sheen on a secular play.

Ed, really appreciate your time. Have a great weekend. Thank you. Ed Yardinney, if you need Yardinney research. After the break, lots to get to in the bond market today after that Fed rate cut on Wednesday. You can see the two-year down sharply for the week in return. We'll have the bond report right after this. Welcome back. This might be partly why we're seeing some pressure on markets today.

The 10-year yield is back up towards 4.2% after a little bit of hawkish pushback from some Fed officials today. Let's get over to Rick Santelli with the bond report. And Rick, do you think that's what's going on here? It's, you know, less of a dovish look than we had after the Fed meeting. You know, I know that all roads lead to the Fed. The Fed is a hugely important group of people that move markets and make big decisions. But I also think there is life outside of the Fed. and I do think what's going on in large part has to do with just the dynamics of the economy

and the dynamics of debt issuance, then add in what the Fed has done and what the Fed may do, and I think you have a very interesting mix. And if you look at what is going on with the yield curve, it's easy. Two years are down about four basis points on the week, 10 years up about five basis points on the week. We've moved that 2's 10 spread quite a bit. So as you go and look at the 210 spread, it's now already out 5 basis points on the week. basis points today, and if you look at it, it's hovering at 67 basis points. Hasn't been this wide in nearly four years.

But there's so many moving pieces here from the long end of the market. So let's go through it. Let's go to the whiteboard. Here's 10 year yields starting on September 1st. Now this pattern, many would say, is just top of the range. So here we are top of the range. But that's not what I think. I think you have an Elliott Wave pattern going on here.

We'll keep it simple. but simple. Five waves. One, two, three, four, and the fifth is developing. Historically, the first wave and the fifth wave are roughly equal. So right now that first wave was nine basis points. The middle wave, the fifth way, a third wave is always the biggest. That's 13 basis points. So if we add basically nine to where it began, the bottom of the fourth wave at 415, basically get you to 4. A quarter. Now, you might say, well, geez, four and a quarter isn't that far away. Well, first of all, the pattern's been developed. developing for a while. Many of my trading sources have been jumping on that. But what's more

important is that dynamic of having the upward trend in the long end is going to continue to fuel steepening right into year end. Hey, Rick, it's Dom. One of the other things I'm hearing a little bit more kind of chatter about in my circles here is this idea of what the treasury market is relative to what we are seeing on the corporate side of things. We've talked a lot about issuance to fund things like artificial intelligence. If you take a look at things like both corporate investment grade, and you take a look at the high yield slash junk markets, what exactly is the spread movement there? And do we think that there's any more kind of

dramatic moves ahead in terms of its relativity to what's happening with rates? There's some concrete, but a lot of anticipation that a lot of the AI is funded with debt, and a lot of that debt, of course, is outside the government. But when you add that in to what is already a large issuance on the government side, the two of them together, Well, just think about it. It's all about supply and demand. So we see a boatload of supply from the corporate boat investment and high yield. And we see a boatload of issuance coming from sovereigns, not only the U.S. all around the globe. So that indeed is a major reason, Dom. And, of course, some of that has been already affecting what's going on in the MAG 7 and in the equity space. I love the whiteboard, Rick. Great stuff. Really appreciate it. Thank you. Rick Santelli.

All right, time to get your running shoes on. Our next guest thinks so. He's bringing us a name he thinks is ready for 70% upside, a run, if you will, in 2026. We'll tell you what that stock is right after this. All right, welcome back to Power Lunch. Big changes are afoot at Lulu Lemon, the company announcing that its CEO, Calvin McDonald, is leaving in January. Those shares are up today, but they're still down 60% in just the last two years. And our next guest says that the CEO departure is good news.

He is upgrading those shares today after having a sell rating on them for more than two years now. That analyst is Randy Connick, the senior analyst at Jeffries, who covers many of these atleisure and athletic apparel type names. So let's talk a little bit about this. Yep. Why, you've been a bear for a while, and you've been correct. Yep. What exactly was the primary catalyst for why you think that this stock is now upside down?

Look, it all started with a leadership issue with the company. So what we noticed a couple of years ago is the management team was trying to stretch, pun intended, in the wrong directions with the company. They were running out of gas in the core with the leggings product, and they were starting to try to sell non-core products to non-core customers, teeny boppers with the belt bags, sweaters, logo products, ankle length skirts that we've talked about in the past. it just didn't work, right? And with that leadership strategy, they kept at it. And they kept telling the market, just believe in us. We're going to give you newness over the next couple quarters, the next couple of years. It's been a number of years. It just didn't work. The U.S. business is fading. So with the leadership departure today or announced last night, that's a big positive for the business. He was getting wrinkled by the founder, too, right? Is that right? Or am I imagining that?

Chip Wilson. Yeah, yeah. The founder wasn't happy either. So I guess we were on this crusade together. But in other words, Lulu has been caught off foot by the fashion, which evidently has shifted to denim and all this. So is it, you know, 50% is a fashion issue, 50% is the leadership issue? How would you kind of like diagnose that? And what do they do now, even with fresh leadership, when they might be off cycle? So majority of it was a leadership issue. The problem now to get long on the stock, which is why we're hold, we're not byrated, is that the company is facing very difficult multi-year comparisons. It was the It brand and the It space for the last five years.

To your point, like 15 years. Oh, correct. So now that you're talking about the rise in denim, the rise of jogging pants or more casual wide leg looks, that's not Lulu Lemon's sweet spot. So if they're at this high levels of productivity, it's going to be very difficult for them to kind of get back their mojo and grow again. Their business was down 5% in the U.S. this quarter. In comp, that's a problem.

And that's not going to return any time soon. That's why we were able to upgrade because a leadership change with the wrong leader is the right move. But we're not going to see growth again, I think, until 2007. How much of this, though, Kelly, I'm not sure about you. I do own a number of pieces of that leisure. Because that was the second one of their story. Yes, correct. And I was an early adopter of the ABC pant for golf specifically and everything else, right?

Yeah. But now there are names like Vori and Rhone and Public Rec, Ministry of Seventh. I mean, all of these guys are now basically trying to chip away at market share at Lulu Lemon. That competitive dynamic is only growing fiercer. How does Lulu survive that? I think it's going to be a problem because I think where the Bulls had talked about Lulu and were bullish, it was on the fact that they thought the business, the brand was fine. But you just brought it up, Dom.

They have to compete with these other brands, but they also have to compete with Ralph Lauren, Abercrombie and Fitch, The Gap, H&M, Zara, et cetera, around the world. It's not that easy. That's why, you know, something like Nike, I know we're going to talk about that in a second. They have a better competitive moat than Lulu Lemon. All right, so let's bring up, because you brought it up, right? Nike reports next week, you have a buy rating on Nike looking for what is anticipated in your mind to be 70% upside. It seems to me this is a category even more challenged than Lulu.

I agree. I mean, this is so crazy. It's been an underperformer for so long. What exactly then changed for you to say that this is a stock that is now going to be moving higher and troughing out now? The theme of, it's so bad, it's good. It's good. Yeah. So, look, we upgraded Nike in the beginning of last year, around February or so. It's a little early, but what do we notice?

We noticed that the company lost market share. Nike went from selling one out of every four shoes or sneakers in the world to one out of every five. That's a little bit of market share loss, but it's not existential. So, you know, the company had the wrong CEO. They fired him. They hired back a company veteran, which was the right choice. He came in, fixed the culture right away, and he fixed the playbook with a simplicity of, let's fix product and let's balance distribution.

He's doing that. Now, the numbers are terrible, but everybody knows it. And unlike Lulu, where we're just at the start of some continued erosion in the U.S. market, Nike's already gone through that. Their operating margins at Nike are cut in half. The earnings per share, cut in half. We're about to see the easiest comparisons in consumer discretionary for Nike against all these other companies going into 2026. That's why you want to buy this stock.

And it's the number one market share in a compelling market of sneakers. It's not, it's an easy call. How much of this is going to be a competitive dynamic with the other, I think of on running, on cloud, right? Totally. These guys are ones who said that they're not cutting prices. They're actually going to raise them because of cost pressures and everything else. And people are still paying full price for that gear. The Nike brand is a very strong one.

At what point can they compete on things like price and brand loyalty to drive that next leg of growth higher? Well, look, first and foremost, we have a sell rating. We're the only sell rating on-on. So we want investors to get rid of that stock. Here's why. The tan is limited. So the on is doing well right now. Everyone on Wall Street goes to work in those sneakers.

I get it. But on has a limited tan. Why? They're not selling products to kids. They don't sell, they don't have lower price products to less lower income communities, lower income customers, excuse me. And that is going to be a problem for their continued growth in the long term. Whereas Nike, Nike is the most ubiquitous brand in the entire world that can be put on a baby

to a grandparent apparel and footwear. On can't do that. And you can buy the most ubiquitous brand in the world, Nike today, for less than $100 billion of market cap. It's a $75 billion brand at retail, whereas On is a $4 billion brand, which, the $15 billion market cap, just doesn't make sense. It's a tough call, which would you rather? I know for you.

I know what you're saying. And so I'm like, I don't know, man, like those margins, the brand quality, what is the must reason to buy it, right? The gear, the shoes. I don't know if they have, I don't know, we have to go. But I take your point. Maybe if they just come out with one really category killer product, they could get that mojo back.

Well, they're starting to with running. True. And the World Cup's on the way. There you go. True. Big catalyst. All right. Randy, thanks.

Really appreciate it today. Thanks, Randy Konek. Let's get to Bertha Coombs for the CNBC News Update. Hey, Katie. I'm sorry. Fired University of Michigan football coach Sharon Moore is now charged with felony home invasion and stalking. The university says it fired Moore on Wednesday over an inappropriate relationship with a staff member. Police detained him hours later.

Prosecutors accused him of terrorizing his former girlfriend after losing the head coaching job. California is leading a coalition of states suing the Trump administration over its $100,000 fee on H-1B visas for highly skilled foreign workers. The state's attorney general argues that immigration authorities are only allowed by law to collect fees necessary to cover the cost of administering visa programs. California's tech industry is particularly reliant on H-1B visas. This is at least the third lawsuit challenging the increased fee. And HBO Max is making its streaming options a little more like cable. The service is launching a new channels option for U.S. users that allows subscribers to watch continuous streams of fan favorites, including Harry Potter, Sex in the City, and Friends.

Although Dom, I know Kelly and I probably already stream, you know, the Magnolia Network stuff all the time. And the Hallmark, Hallmark and everything else out there, I'm sure. All right, thank you very much, Bertha Coombs, for the news update there. Now we are cooking with gas, but should you be? Dinah Oleg has that story coming up right after this. Keep it right here. CryptoWatch is sponsored by Crypto.com. If you have a gas stove, it's not only maybe a little bit bad for your health.

It could be bad for the health of the planet as well. High methane emissions are the problem, but people still like to cook with gas because of its quick power. What if you could get that another way, though? Diana Oleg is here to explain in her continuing series on climate startups. Diana? Well, Kelly, one answer to gas is induction cooking. Now, it's been around a long time, but requires a full up. upgrade to your electrical system, which for some can be a deal breaker.

But what about a battery-operated induction range? New York City is about to get a lot of them. It's sleek and it's modern, but otherwise it looks just like any other induction range. But it's not. California-based startup, Copper, invented a battery-equipped induction stove that plugs into a regular 120-volt outlet, making it an easy upgrade from, gas to induction without upgrading your electrical system. The copper uses batteries to make appliances better.

It makes them easier to install, higher performance, makes them work when the power is out, and makes them support the grid. The range is more energy efficient than natural gas. The easy transition to electric landed the startup a $32 million partnership with New York City's Housing Authority to deploy 10,000 battery-equipped stoves into city-owned housing. They see the wild costs that come from maintaining aging gas pipe systems in those buildings. And so we allow them a cost-effective alternative to avoid having to do those upgrades.

Not only is the upgrade easy, but the lithium-ion battery actually becomes a grid asset. As in, you charge the stove when electricity is cheapest, avoiding usage during peak load times. The idea of creating this distributed storage farm is what makes copper exciting to investors like climactic. Copper is actually building a distributed storage solution that really solves one of the greatest challenges of our time, which is how we keep up with the energy consumption, whether it's from data centers and AI or just our natural growth in energy consumption. In addition to climactic, copper is backed by Prelude Ventures, Building Ventures, Voyager Ventures, Collaborative Fund and Designer Fund. Total funding to date $38 million. Copper is working with other multifamily housing developers as well as other housing authorities.

It doesn't have a huge direct-to-consumer business, but you can buy one on the website. It's not cheap. Model start at $6,000, but there are tax credits. And again, you don't have to upgrade your electrical system, which can be pricey. Back to you guys. All right. So, Diana, do we know this reduces methane, which is a huge climate offender? Do we know how much the methane is reduced by?

I'm so glad you asked, Dom, because I do have the answer. So the methane leakage from gas stoves is equivalent to the same leakage from tailpipes of half a million cars every year. So that's what we're saving. All right. That's a lot of methane. Dina Oleg, thank you very much for the story there. We appreciate it.

All right, coming up on the show, how do we unlock the gridlock in the housing market? There is a new note from Citigroup that has some interesting ideas on how to unlock everything in housing. That idea is coming up next. us. Welcome back to Power Lunch. Stubberantly high mortgage rates are freezing America's housing market in place. The national average on a 30-year fixed-rate mortgage sits at about 6.27 percent right now. That's below the peaks that we saw early this year, but still high enough to keep millions of homeowners locked into the low rates that they secured years ago when they bought

their homes or refinanced. Now, a new report from the City Institute calls it a growing crisis of immobility with families, quote-unquote, stuck in homes that they've outgrown because moving means giving up a once-in-a-lifetime loan rate. But the report lays out a provocative solution aimed at breaking this gridlock. So what they propose is lenders who continue to hold a loan could actually offer their borrowers a new mortgage at an interest rate that lands somewhere between their existing low rate and then today's current market rate, a shared value approach designed to kind of unlock supply in the housing market, restore workforce mobility, and slowly rebuild affordability across the entire housing market.

An interesting concept only because if you are one of those folks that were lucky enough to lock into a two or a three-handle mortgage, Kelly, over that time, would it get you out of your house moving to another one if you could get a rate somewhere? in that kind of four to five percent range if the bank would still do it. And that's, I'm curious because I think it might actually do some good and unlock some of those housing markets. We've seen a trend in assumable mortgages, a couple of companies that are working on that or other kinds of innovative things that we've seen proposals. That's what Ryan Sourhant was talking about. Could you kind of raise the exclusion for capital gains on your home so that

people will be more willing to sell their property? I think people are trying to come at this from all angles now. And it's not just that too. I think this idea that you could also remedy many of the unintended ripple effects with these housing markets being stuck. Because I know for one thing, I've heard people talking about this idea that even public school enrollments are starting to get skewed because people are staying in their homes longer when they would have normally sold to a younger family who has somebody else. Yeah, right near an elementary school where there certainly that pressure is on. Coming up, we'll take a look at a brand new name that just went public last hour.

What does it tell us about the IPO market? Don't sleep on this IPO today. Wealthfront went public. It was formerly maybe an acquisition target by UBS. That didn't happen. And now it priced at 14 last night. And it went public at 14 today. And it's a little bit above that level now.

Publicly traded robo advisor in the growing wealth management industry. The CEO is on air earlier today making some analogies to Robin Hood. That's done quite well, Dom. Maybe hinting they could have a similar valuation. Dan Premack last hour also said, while it isn't the most jazzy opening of all time, the fact that these more boring companies can get out and do successful IPOs is a good sign for the market.

Right. It does mean there is still appetite out there for that sort of thing. And Medline is the next one, a big one before the end of the year. A couple of weeks time. There we go. All right. Thanks very much for watching, Power Lunch. Closing bell starts right now.