CPI Inflation Reaction, Sarat Sethi Weighs In, Record-Breaking Lakers Sale 8/12/26

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**Brian Sullivan** (0:51)
Docs now back to being less than 1 percent from new record highs. Welcome to Power Lunch everybody with Kelly, and Brian, and a special guest host.
Our friend Sarat Sethi, managing partner Douglas C. Lane join us for the entire hour, with real-world ideas just for you also happening. Inflation easing and a wave of strong tech earnings, reigniting demand for chips and memory, and what energy producing stocks could produce you. Some investing energy of their own. The head of Evercore's Power and Utility Research is here.

**Kelly Evans** (1:22)
We have some key voices to help navigate all of this. Lizanne Saunders, the Chief Investment Strategist at Schwab, and Torsten Schlag, the Chief Economist at Apollo. They will both be joining us coming up. But first, Sarat, before we dive into all of that, so much, we haven't talked to you about the Nvidia deal this week. AI financing, Iran, the latest there, whatever is going to happen, energy, inflation. So taking all of that in, what do you think is most important for investors to focus on?

**Sarat Sethi** (1:50)
Well, I think the AI trade keeps on continuing, and you're seeing now Nvidia going into really using the credit markets, borrowing, and more and more as to supporting their key customers. We saw earnings, strong earnings last night too. So that trade is still going on. What's interesting is when that trade happens, certain sectors fall off. So we need all the sectors or most of the ones to start moving together, but we just haven't seen that at one point. One moves and the other one moves the other way.

**Kelly Evans** (2:20)
Yeah. And so look at the market today and the names that are jumping, which some of them had been under pressure, no doubt, but CoreWeave, Super Micro, Nebius is up 27% after earnings, Lumentum is jumping, the memory names, which that had traded down a lot from the highs, that's back up seven or eight percent. So what do you do? What does that tell you?

**Sarat Sethi** (2:41)
Well, part of that is going to be short covering too, right? Because you did have some of the momentum kind of going against these companies too. But in the meantime, if you own these, you're feeling very happy, but I wouldn't chase them. I kind of look at some of the laggards today and say, hey, healthcare is out, financials are out. Maybe if you wanted to buy some of those in there, or just as they kind of trade down, to get some more exposure in there.

**Brian Sullivan** (3:03)
Because valuations, they are not rich. We talked about it a bit on Squawk Box this morning. If you look at some of these tech earnings, you could make the case for S&P 500 price to earnings at 20 times, which is historically not high, not low. But anybody with a rational mind could say that's a fairly fair valuation.

**Sarat Sethi** (3:21)
Hey, listen, you know, NVIDIA, Google, some of our top holdings, the question is, are these peak earnings? Are we getting closer to peak earnings? And what's the growth rate? What is the second derivative going forward for these earnings for the next three to five years? That's what the market really cares for.

**Brian Sullivan** (3:36)
Well, how do we do this growth rate next year? We got these numbers this year, and we got to comp against these numbers next year. Why am I doing so much of this?

**Sarat Sethi** (3:44)
Because that's the issue, right? If they don't grow as fast as they have for the last year or the last 24 months, the market then automatically starts discounting it, and we've seen when multiples compress. I mean, hey, we've seen it in healthcare, we've seen it in financials, we've seen it in parts of technology. Look at software companies that have gone down 40% to 65% just on multiple compression, and earnings have not changed. It's just what happens is investor sentiment changes, and if sentiment moves the other way, like it did for memory stocks for a few weeks there, you had stocks that were up 700% were down 50% to 75%.