Hello and welcome to Market Domination. I'm Jake Connley, live from our New York headquarters. We just heard the closing bell. Let's take a look at how stocks ended the day with our very own Jared Blickery. Jared, what are we seeing after that day of red on Friday?
All right. Well, you know what? It's another day of red in the stock market, but not the overall stock market. It is just chip stocks mainly, and throw in some software, especially cybersecurity to boot. Let's go to the Wi-Fi interactive and we can check out today's price action. First in the Dow, another day when the Dow is positive, and we can see it's still kind of closing in the mid part of its range. A little sell-off on the close, but up about 200 points there. NASDAQ though, really taking it on the chin. Started out green. Chips were green when I began the day about 9:30 a.m. Eastern, and ended in the red, down about another 1%. S&P 500 down about half that, and small caps up just a little bit into the close.
But let's check out the bond market one more time. Then we're going to go to some heat maps. So here's the 10-year T-note yield down to 4.89, about three basis points down on the day. And you can see that's well below 5%. It was elevated above that just a month ago. The AI sell-off has really dented bond yields, which is usually good for stocks, but not when it comes as a result of an AI selloff. There's all kinds of feedback loops involved there. So it's pretty interesting to watch that. But here we have the large-cap sectors for the day. Consumer discretionary, that was up over 2%. That's in the upper left. Financials number two, the materials, staples, industrials, real estate, the entire top row is up over 1%. And yet, as we saw just a minute ago, the S&P 500 down. So it's a lot of those big names dragging, and yet tech was not the worst performer. It was energy, down about 3.9%.
Tech down 3%. And let me just show you real quickly how things have fared since the October 6th interim high. You can see it's been a lot of gains except for some of those big names in tech and also communication services where you find Alphabet and Meta to a lesser extent, also industrials. But let's check out today's price action in the NASDAQ 100. And here we see the big names. A lot of those underwater. Apple reporting in about 30 minutes. That's down 2%. Nvidia down over 1%. Microsoft over 2.5%. Amazon though, that was up 2%. That's why consumer discretionary is in part higher. Walmart also part of that group. Well, maybe it's consumer staples, but nevertheless, Walmart up over 3%, SpaceX up 1%, Tesla up 1%. So Elon Musk had a pretty good day, but I'll show you who did not have a good day. That would be the chip group. And I'm going to sort by performance so you can really see those dark red names. Lumentum and Marvell, those are, that's an M&A story, but you can see Lumentum there down almost 20%, Marvell down about 12, 13%. But it wasn't just them. Here's Intel down another 8%. Let me show you the last three days. 37%. Most of that was Friday after earnings. And then also today, so today was down another 8% there. AMD down 7% there, reporting after the bell tomorrow, Jake. And tell you what, there's a lot happening. I think we got Palantir earnings in just a minute. So you let me know if you want to continue on because there's a little bit more carnage here in software, but for the most part, pretty good day for the stock market, not so good for a lot of the tech trade.
Jared, I think we'll take that. Thank you for your insight as always, sir. Well, Americans head to the polls tomorrow for the 2026 midterms. With affordability, AI infrastructure, and the war in Iran dominating the ballot, stocks historically rally once the election uncertainty clears. Joining us now with his post-election playbook is Scott Croner, Citi head of US equity strategy. Scott, it is great to see you. Thank you for coming in to chat with us today. I want to maybe start here. Polling shows really two realistic outcomes for these elections. You either have a Democratic sweep through the House and the Senate, or we see the House turn blue while the Senate stays in Republican hands, given who's in the White House, that the White House is Republican-held. Both of those scenarios on the surface kind of sound like split government, like nothing's going to get done, but there is some nuance between those outcomes. Let's start there, Scott. What is the difference you see for the markets between those two outcomes?
Yeah. Okay. So, I think you're spot on, Jake, with calling it or referring to it as nuances. Let's start out and level set here. In terms of fundamental impact of the midterms, we don't think we're going to see much impact in a split Congress or even in a blue sweep, if you will. What matters a little bit more is as to sentiment, right? And so what we would suggest is that yes, the pollsters and the prediction markets have gradually now favored a blue sweep, which is something that we thought would probably make some sense to assess a month or so ago. But now we're looking at this blue sweep scenario. But you still have a range of potential outcomes now whereby you have to really kind of look at outlier effects. Outlier one would be if in fact the Republicans hold the Senate. Outlier two though would be if you get a stronger Senate sweep in favor of the Democrats than is currently being projected. So we've got base case probably looking at a blue sweep, but you got outlier cases that still set up for some volatility in the days ahead.
Scott, I want to drill down in that just a little bit. You know, there's a sense here that the idea is, okay, the Democrats take the House. But to your point, it also matters the amount of seats they pick up, what that split looks like after the election. How does the amount of seats Democrats may or may not pick up impact what things might look like going forward after the election?
Yeah. So, let's pivot over and talk a little bit more specifically on the Senate because we think that's where the immediate discussion really takes this. The House looks like it's a pretty foregone conclusion to the extent we can debate. But over in the Senate, it's where it gets interesting because these new senators are going to be in for six-year terms, right? So, I'd say right now the consensus projection out there is probably a 52-48 Democrat-Republican split, if you will. However, if you see that 52 moving out to 53, 54, who knows, maybe 55, then you begin to set up a different discussion thinking ahead two years to the '28 presidential elections. You probably in that mode would still have a democratically controlled House and Senate. But what it does then is set up a different discussion around the presidential election. The bottom line here is when we look at that outcome, it does two things for us. Number one, it conjures the '24 election whereby the main Democratic policy platform was higher corporate taxes. And then number two would be as we come back to this AI storyline, if a more massive blue sweep kind of goes hand-in-hand with Democratic control in certain state legislatures such as Texas, then this sentiment shift on anti-AI becomes increasingly more relevant as well.
Scott, I want to drill into that last point you're mentioning there. I think it's a really smart one on the data center, the fact that we see the data center issue on the ballot in so many races, including some really key races, AI really on the ballot here, depending on the outcomes we get tomorrow and into Wednesday. What's your team expecting for the impact to the data center economy? Is this something that the market's really priced in, or is this left to be an unknown until we see how some of these ballot measures and races end up?
Yeah, we suspect that ultimately a lot of these concerns are dealt with. You find some means of compromise that gets you past some of these moratoriums and towards construction. But in the marketplace right now, it's a sentiment issue. And what it ties back to is the earlier discussion on how the semiconductor part of the market's trending right now, sort of this AI data center supply chain that's kind of really led by the tech enablers as we call them, but really comes back to the semis and related. So if you think about it, you've got the potential of delays in buildouts, and then you throw in the other aspect in terms of how are we going to finance all of this expected capital expenditure. And what ends up happening is the sentiment shift as a function of those two has been markedly negative for the semis. And that's what you're seeing in the tech trade certainly over these past few days. But that's how it kind of comes together: elections plus the financing mechanism in general.
Scott, on the data center front, on the AI front, what are maybe two or three of the key races your team's going to be watching tomorrow night to see kind of the direction of travel for where this is going?
Yeah. You know, I'd say first and foremost, it's probably Texas is the one that jumps out at us, and we're going to be watching that one pretty closely. There are a couple of other states, but I think in terms of where the issues are, where the Senate races along with the governorship come into play, and where there's a lot of data center activity and existing moratoriums, it kind of starts there, right? So, that's where I would put most of the focus. But again, you know, this is going to be one of those topics that's going to be ongoing in terms of, you know, does your average American really support AI buildout? Some of the polls would say maybe not. But there is probably a path to compromise, but it will take time. And what that does in the meantime is just lead to this uncertainty dynamic that we'll have to contend with.
Scott, the other source of uncertainty for Americans around the midterms, one of those at least, is the Iran war and how the election might impact what's happening there. President Trump again today reiterating this idea that he will not strike Iran after the midterms, but that of course doesn't mean things can't change. There's a theory that if the Republicans lose control of the House and maybe the Senate, then President Trump might feel a little more emboldened to act. How should investors be reading the impact of the midterms on the war going forward, given how uncertain all this is? What's the impact you see there, and how should people be looking at that issue?
Yeah, very fair question. So, we sit back and we look at it, and you know, in a strategist's seat, you like to get conviction or think you have conviction around something. Trying to get conviction on how Iran unwinds is really quite difficult right now. So, we're sort of information takers on this, and it's hard to see where the actual midterms will make that much of a difference in terms of finding a path to resolution. That said, as a result, we maintain a focus on the oil price direction as it potentially influences inflation expectations and with it interest rate expectations. We've seen rates pull back here. We saw some relief on oil prices today. When that happens, you can see what happens under the surface. You begin to trigger a little bit more of a broadening play within the markets whereby that half of the index that isn't so directly exposed to AI can benefit. And I think that's some of what happened in the marketplace today. So, we're watching oil prices as a lead indicator read through to inflation, ultimate read through to Fed actions as we go forward.
Scott, thank you for your time, sir. Much appreciated for your insight. We always enjoy having you. Well, coming up, we'll bring you Palantir's latest results on the other side of the break. Do not go anywhere.
Palantir third-quarter earnings crossing the wire moments ago. Let me get you those numbers. Diving in here, Q3 revenue coming in at $2.313 billion, growing by 96% year over year. That beat analyst estimates of $2.17 billion. Third-quarter adjusted EPS coming in at 44 cents. Analysts had been looking for 41 cents. That's also a beat. Let's take a look at the revenue segments here. US commercial coming in at $984 million for the quarter versus estimates of $937 million. And US government revenue, Palantir reporting at $953 million, also surpassing analyst estimates. That marks the first quarter on record for Palantir that US commercial revenue has surpassed the US government business. Just another massive beat for Palantir on this quarter. Stock is moving up in after-hours trading. We're bringing in Gil Luria, head of technology research at D.A. Davidson, for more here. Gil, it's great to see you. Alex Karp, the CEO of Palantir, calling this a celestial quarter in his statement he just put out. Is this a celestial quarter for Palantir?
It actually is. In fact, in the title of the press release, they said that they are crushing it, and I'm not paraphrasing, and they are. There are no other software companies growing at these rates. This company is doubling, and this is at an $8 billion run rate. They're doubling with over 60% margins. There's no other software company even remotely close to that. You know, if you look at the next cohort of fast-growth companies, they're growing in the 30s with maybe half the margin at best. So Palantir is extraordinary. They're doing extraordinarily well. Every time we think they can't possibly accelerate more, they did 93% growth last quarter. We thought there's no way they can accelerate from that. And here we are with 96% growth. So yes, it is celestial.
Gil, I want to take one of the headlines coming out here that US commercial revenue for the first time surpassing US government revenue. What do you make of that shift in where the money's coming from for Palantir?
Yeah, the commercial business moves faster, right? The fact that they have such extraordinary growth in government is really decades of work that they've entrenched themselves as a prime provider on the software side for a variety of government agencies, usually associated with the Department of War. But on the commercial side, it can scale a lot faster. They don't have that many customers. They have in the magnitude of a thousand customers, and they have millions of potential customers. So as those customers attract new customers, and then they have growth within the existing customer base, that just scales very rapidly. And these days Palantir's gotten especially good at scaling. You'll note that they're not growing their headcount by 96%. They're growing their headcount by a lot less than that. So they're able to get scale even on their forward-deployed engineers, which is what's really remarkable here.
Gil, you make a point in your note today about the trust that Palantir has. You write, "Trust means Palantir is naturally positioned to become the control plane, the orchestration layer, and the harness provider for a wide range of customers," pointing out the growing distrust in the frontier labs, especially around some of the promises to not look at customer data. What kind of edge do you see that trust that Palantir, that you say it has? What kind of edge does that give it?
It gives them an extraordinarily long runway because Anthropic and Palantir — I'm sorry, Anthropic and OpenAI — famously now have more than $100 billion of revenue. Palantir only has $8 billion. And what companies are now working directly with OpenAI and Palantir, and what the point Alex Karp is making is that that doesn't make sense. OpenAI and Palantir want to compete with everybody to justify their size and to continue to grow. And so if you're a company that's interfacing directly with the frontier models, you're really providing them all the valuable information about how to compete with you. And Dr. Karp is warning everybody that's not a good idea. And he's really only started delivering that message. So we're early on in that, which is as companies realize that they're giving away their business, and in fact they're not just giving it away — Anthropic and OpenAI take all their business secrets with them. As companies realize that, they're going to want to buffer, they're going to layer in the middle, and Palantir's perfectly positioned to do that. They already do that for both their commercial and their government customers, and so that's a very natural place for them to continue to grow and extend that runway.
I believe Alex Karp calls this idea sovereign AI, the idea that he's been pushing forward. Do you see that idea getting picked up by customers when you're out talking to clients, talking to people? Do you see that idea of sovereign AI kind of gaining hold?
Very much so. We just attended their event a couple of weeks ago, and the difference between that event and the one before that, AIPCon 11 from AIPCon 10, that topic went from not even being there to being the primary conversation. Because if you're a Palantir customer, again, one of those thousand commercial entities that's spending often tens of millions if not hundreds of millions of dollars on Palantir, you are paying attention to that message. You do realize that this is what Palantir does. The whole secret sauce of Palantir is how do you take disparate data sources, combine them without sacrificing privacy and confidentiality, and then apply AI tools to draw conclusions and execute mission-critical tasks. That is what Palantir does. And if you're a Palantir customer, you're definitely recognizing that and you're embracing it because you feel like that gives you an advantage over your competitors.
Yeah. One of the long-running critiques of Palantir's stock has just been how expensive it is in terms of the valuations, the multiples it trades at. I'm curious what you make of that hesitancy from some on the street.
It had been justified. It's just that the valuation, even now, even after the big run since July, is just a slight premium to that cohort of companies. If we talk about the cohort of the other four or five fast-growing software companies, you're talking about Datadog, Snowflake, CrowdStrike, Shopify. Palantir only trades at a slight premium to that group that grows a third of the rate with half the profit at best. So that premium is very much justified. And as long as Palantir continues to grow at these rates and even accelerate from these rates, it's going to warrant that premium and possibly even a higher premium than that.
Gil, you see Palantir becoming kind of the layer that customers trust to manage AI. This comes back to that sovereign AI argument. Curious what you make of, you know, someone might say, what protects that position as model developers and even companies using their own AI can kind of develop that themselves and build some of that security? And what gives Palantir a moat with the technology it's building?
