10AM Hour: Midterms Market Impact, Marvell Buys Lumentum, & Applied Digital CEO Talks AI Buildout Concerns 11/2/26

The hosts opened with stocks recovering as oil prices eased after the Nasdaq’s worst month since March 2025; the Dow was up nearly 600 points. ISM manufacturing came in at 55.5 versus 54.5 expected, marking the tenth straight month above 50. Prices paid remained elevated at 75.2, though below 77.9, new orders looked strong, and employment slipped slightly to 52.4. Steve Leisman noted the debate over whether data-center construction explains much of the manufacturing strength or whether the improvement is broader. The week ahead includes Apple, Palantir, Marriott, Pfizer, Amgen, AMD, Airbnb, Lyft, Affirm, JOLTS, private payrolls, and Friday’s employment report.

The hosts examined indicators voters may feel ahead of the midterms. Gas was $4.17 per gallon, about $1.13—or nearly 40%—above a year earlier; Maine was highlighted because half its households use heating oil, the highest share in the country. In contrast, stocks have performed well since President Trump took office, and 156 million Americans, or 58% of adults, own stocks directly or through funds and retirement accounts. The ten-year yield has pushed 30-year mortgage rates to 7.27%, nearly three percentage points higher since January. Unemployment remains low at 4.2%, with decent wage growth and few delinquencies, producing mixed signals of pain and resilience.

Kate Rooney reported that Anthropic’s amended S-1 still omitted October revenue, disappointing investors who expected a fresh acceleration signal. The filing showed approximately $33 billion of revenue for the nine months ending September 30, up about 1,200% year over year, and nearly $16 billion in third-quarter revenue versus roughly $11.5 billion a year earlier. Anthropic posted a $567 million operating loss, compared with almost $1 billion of operating profit in June, largely because $5 billion of compute was purchased through expensive short-term commitments. Infrastructure and compute expenses approached $10 billion, while total compute commitments reportedly reached nearly $900 billion through 2045; adjusted operating margins fell from 19% to 15%.

Rockefeller International’s Ruchir Sharma argued that the AI boom differs from earlier investment booms because governments are heavily indebted and competing with companies to raise money. AI development remains dependent on debt, and that competition is helping keep interest rates high. He viewed recent Treasury-yield relief as positive, especially if oil also declines, but said rates cannot fall very far because lower financing costs would encourage governments and companies to borrow more. Sharma said deficits will probably continue rising regardless of the midterm outcome because Washington has repeatedly been warned without experiencing an obvious crisis. He saw no evidence yet that AI borrowing is crowding out Treasury demand; a failed auction could be the decisive warning.

Needham analyst Laura Martin said Apple held up during the tech sell-off because it generates enormous free cash flow, returns capital, and is not spending heavily on AI capital expenditures. She expected $56 billion in iPhone revenue and about $31 billion from services, whose margin is roughly 75%, but forecast 300 basis points of overall margin compression as memory costs rise. She wants CEO John Ternus to explain whether Apple will raise iPhone prices or accept lower margins. Apple’s 2.5 billion-device installed base is its moat, but Google and Meta want to replace smartphones with glasses and capture Apple’s platform economics. China, responsible for about 20% of iPhone sales, remains a key risk.

Applied Digital CEO Wes Cummins rejected grouping his company with neoclouds, describing it instead as a technical real-estate business that builds data centers and signs long-term, take-or-pay leases. Its CoreWeave facility is fully financed and has a Meta offtake agreement, while the company is increasingly targeting investment-grade hyperscalers. Applied Digital has about 1.4 gigawatts of leased capacity representing $36 billion of contracted revenue, but has financed roughly 600 megawatts and must finance another 800. Cummins said project finance and bond markets remain available, though at higher rates than the 6.75% to 7% debt previously raised. The company turned on 250 megawatts in 12 months and expects another 600 megawatts in the next year.

Cummins said Applied Digital deliberately builds where communities want data centers, particularly North Dakota, where the company claims its activity lowered electricity bills by about $50 million over five years. Rather than expand into states with heavier permitting opposition, it prefers adding capacity in supportive locations. North Dakota’s oil field creates associated natural-gas supply, and a new pipeline could improve power availability. Cummins remained confident in the company’s 2030 goal of 3.5 to 4 gigawatts, provided demand remains strong. He acknowledged that the stock is being traded with the broader AI group and that consolidation opportunities exist, but said organic growth is currently so strong that Applied Digital is not aggressively pursuing acquisitions.

The hosts reviewed Marvell’s agreement to buy Lumentum in a stock deal valued at 4.5 Marvell shares per Lumentum share, described as a low-premium transaction and one of the largest technology deals. Marvell CEO Matt Murphy said lasers and optical components are in short supply across the semiconductor industry, but argued Lumentum’s light sources become differentiated when coupled with Marvell’s proprietary semiconductor technology. The main objections are whether Lumentum’s products are merely commodities, whether Marvell is giving up too much stock, and how long regulatory review will take—particularly in China. The companies are targeting a first-half 2028 closing, and Murphy said Marvell has experience completing large deals.

Ahead of Palantir’s earnings, Oliver Rennick said the stock had fallen 40% in the first half of the year before rallying 70%, while its average post-earnings move over the last two years was 10%. Options implied an even larger 11% move this time. Positioning leaned bearish: the put-to-call ratio reached its highest level in a year after Palantir made early-October highs, and more than half of the morning’s options volume involved puts. A notable trade bought 750 in-the-money February 250-strike puts for $5.1 million, while the most active contract was a 125-strike put expiring Friday that cost 33 cents and would require a 33% weekly decline to pay off.