10AM Hour: Cracks in the Tech Trade? Bitcoin Concerns, SpaceX “Significantly Overvalued”

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Carl Quintanilla (1:03)

Good Thursday morning, welcome to Squawk on the Street. I'm Carl Quintanilla with David Faber, Leslie Picker here at Post 9 of the New York Stock Exchange. Sara Eisen's on assignment. Coming up this hour, what a morning. Our cracks beginning to form in the AI trade. We'll talk about Broadcom's pullback today and what it signals about the tech ecosystem. Bitcoin falling to its lowest level since February as it paces for its worst first half in four years. We'll talk to bullish CEO, former NYSE president, Tom Farley about whether it's the start of a new crypto winter.

As the SpaceX IPO roadshow gets ready to kick off, we'll hear from one analyst who says the company is worth less than half of its IPO target valuation.

David Faber (1:42)

Let's begin with technology overall. Broadcom, CrowdStrike, a general sell-off going on this morning, in part because of those Broadcom earnings. In fact, its failure to raise its guidance for AI revenue in particular for fiscal year 27 is pressuring names across the board, whether it's NVIDIA or Intel or Arm or AMD. Mike Santoli is here with us. Interesting rotation this morning.

Mike Santoli (2:07)

Exactly. The first instinct of this market when the leadership group that everybody knew was monstrously overstretched to the upside and actually threatening to eat the rest of the index, which is chips and AI hardware, pulls back 5 percent in the Philadelphia Semi-Index. The first instinct is to find other things to buy, at least for now. In fact, breath is positive, so it's one of these going from now or to broad. That's the positive way this could rebalance itself. It's only one day, you don't want to say it's going to work. One thing I think helping the overall market, you see there the semiconductor ETF, it's a 24 percent drop from yesterday's close to get to its 50 day average, which would just be like a very normal digestion thing to do. It doesn't have to get there, but it just tells you how elevated it was relative to its longer term trend.

I do think one thing helping the overall market is what a laggard Mag-7 as a group has been. You've seen the leaders today in terms of upside contribution to the S&P, Alphabet, which was 12 percent off its high, Microsoft's helping out, Med is helping out. Mag-7 has not been where the action is, and so it can act as a little bit of defense, of course, as well as laggard stocks. That's the positive part. The negative is, are we undergoing a broader rethink of the whole AI thesis for now? Is it doing a stutter step? We've had one each year since ChatGPT. Twenty-three, you had a little bit of a, are we doing too much in the way of CapEx? Twenty-four, of course, July of 24, you had another one of those kind of crisis of faith moments about whether it was all going to be worth it. DeepSeek, obviously gave a while.

David Faber (3:42)

How do we have a crisis of crisis? Google, I mean, come back to this, I'm a broken rectory.

Mike Santoli (3:47)

Sure.

David Faber (3:48)

But you've been doing this a long time too. That was extraordinary.

Mike Santoli (3:51)

Extraordinary.

David Faber (3:52)

$85 billion in equity raised through both common and converts and basically saying we don't have enough money.

Mike Santoli (3:57)

That's right. Well, but I think the question is, if you see that and you see how the market has a full appetite to take down that amount of money in an instant, and yet still the stocks can't perform, because that's how the market tells you what's already priced. And I think that when you see how desperate the traders have been to look for every little underexploited pocket of this food chain and just the HPE trade, all of this stuff shows you that kind of urgency to find the next thing that's not yet reflective of the longer-term trend. So I don't think it's really going to change the overall story.