Flying Cars, Deep Value in Korea, and Tech on Deck 10/16/26

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Kelly Evans (0:56)

You're listening to The Exchange. Here's today's show.

Leslie, thank you very much. The rotation out of AI continues as Elon Musk and Apple's duo steal the scene today. I'm Kelly Evans and welcome to The Exchange. AI weakness sending the NASDAQ lower again. It's now down three percent this week with today's one and a half percent drop. That's its worst weekly performance since July. Meanwhile, the S&P, for what it's worth, down three quarters of a percent. But the names on the next board will tell you the story. CoreWeave, Nebius and Iren all sharply lower again. CoreWeave's now below 62

Memory in the broader Semi's trade, that's also weaker. Get this, the SOX Semi ETF is down for the ninth straight session. That's its longest losing streak in two decades. Pay attention to this. DRAM down four percent, SOX down two. The good news, that de-risking is driving bond yields lower. The 10-year swinging 25 basis points have peaked to drop this week, settling around 512 today up a couple basis points. But our next guest says, CoreWeb is not the canary in the coal mine for the AI trade. Let's bring in Sylvan Capital's Michael Sansaterra. Perfect voice to recap everything that's happened this week, Michael. We've had a chance to, I don't know, get out the notebook. You've heard from Brad Gerstner this week and many, many others. And what does it leave you thinking?

Michael Sansaterra (2:15)

It leaves me thinking we're in a pullback for AI again. We've seen a couple of these now, and it's exciting and terrifying and hand-wringing, but at the end of the day, the fundamentals look strong still, and you get these little windows of noise that I think give investors a chance to look at long-term positions and buy stocks.

Kelly Evans (2:32)

So when you hear the longest losing streak for the chips in 20 years, right? And we know what kind of run they were on coming into this.

Doesn't that mean that, to me, it kind of feels like the trade is over, right?

Frank Holland (2:47)

And how do you think about it?

Michael Sansaterra (2:48)

The trade might be over.

The trade is one thing, the investment is another, right?

I think that the value of the hyperbolic move in semis gets overstated, right? If earnings are going up 100% across the board in a space, and stocks go up 120%, you can expect some reckoning in both. So I think that trade, to your point, is really the key here. Fundamentally, though, we're looking into earnings season. We're understanding what the demand is for compute, what the appetite is for capex, and things look pretty strong. Now, CoreWeave specifically, it's not a stock we own, we don't own it. Seeing issues with their unsecured debt is an absolute reason to be concerned as far as CoreWeave shareholders are concerned. And I can't speak to the ins and outs of if you should really be worried about the stock or not. What I can tell you, though, is that the hyperscalers are borrowing money at 5.2 to 6.2%. We have not seen on a market-adjusted basis. We're not seeing the squeeze in the places where CapEx and free cash flow are the most important. So CoreWeave is not a great thing, but it's also not a canary necessarily. It's just not the same kind of balance sheet as the places where the lion's share of these assets are really coming from.

Kelly Evans (3:59)

And the analyst we spoke with yesterday who's been cautious on these neoclouds, as they're called, he said the reason why is that ultimately their competition is the hyperscalers. So I can't say whether that's the way it's going or not, but that's certainly where you're placing your bets, right? Can you run through your kind of, I won't say trades, your investments and kind of piece by piece, not only who they are but how long you plan to own them and what kind of price action would even, you know, you'd pay that much attention to right now.