Mad Money 11/05/26 | Audio Only

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Hey, I'm Cramer. Welcome to Mad Money. Welcome to Cramer, my friends. I'm just trying to save you some money. My job is not just to entertain, but on days like today, I've got to put it in context and I need to do some education. So call me at 1-800-743-CNBC or tweet me at @JimCramer.

We left here 24 hours ago feeling fabulous. The market was up huge yesterday. If you remember, we were headed toward Nirvana as investors figured that the war would wind down, the tariffs would be scrapped, so inflation would peak and there would be liberty and justice for all. Today, though, we address the other side of this week's midterm results: the idea that the data center theme is falling apart and that could take the whole shebang down. You listen to the commentators, as I did yesterday, and it didn't occur, and we are now in a vicious bear market of incredible proportions. And that's why the Dow fell 1,833 points, the S&P tumbled 4.36%, the NASDAQ, the center of the blast zone, plummeted 5.52%.

Not to minimize it. That was terrible. We more than totally reversed yesterday's gains, which Dave was right about, though. Was it yesterday's incredible rally or today's vicious selloff? Frankly, kind of both, because we've had two stock markets happening at once for a very long time. We just don't talk about it. There were the stocks that occasionally had big moves, but for the most part were pretty humdrum, kind of puttering along, not making much money, if at all. They were unattractive to most traders. And then we had the tech momentum stocks that knew no bounds. The traders were moths; those stocks were flames. For months, though, since June, we have seen money transferred from the red-hot section, which increasingly became concentrated in the data center trade, to the humdrum section in search of growth. It had been a drip, drip, drip tech selloff since the peak in momentum this summer, as many traders pronounced a lot, a lot of tech just too risky to own, while others seemed to lust in the thrill and unbooked profits of it all. Now, though, suddenly after the election results, we got a real problem on our hands, don't we? Seemingly out of nowhere, the electors seem to almost speak as one: they hate the data centers and don't want them built in their neighborhoods, or their counties, or even their states.

The victory of a slew of data center restrictions on a whole host of states shocked those investors still in any of the stocks connected to data centers, and many people have them, as well as any bonds connected to those smaller builders of data centers trying to put up these gigantic, expensive buildings. They're difficult to do. If you didn't know any better, for today's action, you would think that not another data center will be built in this country. Now, I don't think that's going to happen, even as I know it'll be harder to build them going forward. Or you could say it's no longer a drip out of tech; it is now a torrent selloff.

That's the notion that caused a huge amount of fear today, and lots of people, drawing parallels, say the dot-com collapse. Look, having traded through 2000 and having created a dot-com that didn't collapse, let me say at this moment it is not like then, when hundreds of worthless companies were bid up insanely. Here's why. With the exception of a small handful of semiconductor stocks and the neoclouds — those are companies that build the data centers, often using their knowledge of building Bitcoin factories — things have never really gotten out of control with the vast majority of the rest of the market. In fact, many of the stocks in this market haven't been doing much at all. Now, when the smoke clears, I think it's their chance to shine. Now, we did have overexuberance in the spring when we saw frenzied buying of the memory stocks and other data center suppliers, not to mention these neoclouds I keep talking about: this CoreWeave, this Nebius, among a small handful of others. We later found out that much of that rally was fueled by leverage, both from ill-conceived two- and three-times ETFs from novice hedge fund managers out on a hot hand, and from Korean buying. Well, also there was some firm called Situational Awareness.

We also had the endless chatter about private companies, OpenAI and Anthropic, whose valuations seem to triple every few months or so on the way to IPOs that have not yet occurred. And we had a gigantic deal from Elon Musk and SpaceX, which brought out a ton of speculation. These are all part of the data center theme, and it is falling apart right before our eyes. I'm not denying that. But there is some good news. With the exception of these neocloud companies, most of the businesses involved with the data center are good, solid companies with lots of revenue and pretty plenty of earnings. The bad news is that their stocks were presuming an endless wave of data center building that may no longer be the case. Without that, these stocks might still be too high. I think there still will be a lot of data center building, especially in the next two years. But after that, I think there is real doubt about a lot of the speculative projects that these neocloud outfits are trying to build. Their projects will most likely be delayed by new regulations in the wake of the election. I do worry about these companies, and more specifically the billions of dollars in debt that they have accrued, and all the different finance companies that have offered it to them. Not all of these companies are going to make it. Maybe they're NGMI — not going to make it, as the kids say.

I think the market's simply trying to price in these big changes. It's getting messy out there with rumors of more large hedge funds blowing up. Isn't that what they do all the time? Like we saw this summer in dramatic headlines about the trillions of dollars being lost. Hey, it's going to happen. Remember, though, trillions of dollars have been made over the past few years. You just have to keep them. It's all happening. The basic premise of the data center is not something that's a gigantic joke, though. These companies make a product called compute, and it's worth a ton of money in a world where artificial intelligence is a real part of business. I could even argue it's worth more if fewer new data centers will be built in a couple years' time. That, to me, is the big difference between now and 2000.

Back then we had huge companies that were making products that no one needed. We had gigantic telco products that no one wanted. We had companies that were claiming they made products that they weren't. We had companies that were buying products that really weren't. We had dark fiber, static, bogus websites — hundreds of companies with no reason for being. We had those things. These days, compute — the very product being made right now — is very valuable. Although I will concede that compute is hard to understand, but just because you don't understand it doesn't mean it's a joke or worthless or a con game. In the new world we are in, we can't get enough of the stuff, and people are paying fortunes for it. We're going to talk to a company later on — a real good, solid company, stock's going up. They bought a ton of it. At the end of the food chain are two private companies that I just mentioned: Anthropic and OpenAI. And it's not clear how profitable they are because they're private. Anthropic is supposed to come public this month, but now it seems fair to wonder if that's even possible. That would be bad. Even if it does make it to the market, will the company really be worth the two trillion rumored that it was, or one and a half trillion, or a trillion? I mean, what happens if it's less? Until we know that, it's tough to say what everything else in the space is worth. And that's weighing on everything.

Lurking behind the scenes, as I mentioned, is a huge amount of debt being raised to finance the brick-and-mortar part of the data center. That's what I am chiefly worried about. That's the real problem, and that's what could really hurt the stock market: the debt side. Some of the biggest debt is indeed trouble. I have to redouble my efforts to focus on this worry factor above all others to help you make the right decisions. Right now, no one of significance is defaulting on their debt, and I don't mean to scare you. The only issue with the debt is that it's connected to these neocloud companies — CoreWeave, Nebius, and a couple others that I mentioned. But that's not enough to sink us. So to sum up, we have some very valuable companies that were bid up above where they should have gone because business was so red-hot great. We were gradually working off those excesses, but with this week's election, that gradual process has now turned violent. That's uncomfortable, but it's not existential. The more worrisome part, again, is the debt that's out there with the buildout. Will it be money good? I sure would feel better if Anthropic or OpenAI went public so we could see that when you spend money on compute, you can make a real return.

Right now, it seems like only a handful of semiconductor companies are doing that: Nvidia, AMD, memory companies, as well as a few other one-offs like Dell. Those stocks had been holding up better than most, but they haven't lately. Nvidia collapsed into the red today, dropped nine points, now negative for the year. I know the percentage losses seem gigantic, but the money coming out of the hot sectors is indeed going into other sectors. The interest rates are actually going down. It's not going to bonds. What should you be doing? All right. Tomorrow I have a big CNBC Investing Club annual meeting, and I'm going to lay out a course of action. Suffice it to say that we all know the market's gotten real nasty, but we also know that interest rates are well off their highs and going lower. We have a sense that the world might not end soon because of the election. We have a sense that inflation may be getting more tame. So be sure you have some cash. Unlike when I say that you should just wait and see — uh-uh, it's not like that. If you don't have some cash, I want you to raise some tomorrow. Take some losses in those data center-related companies if you don't have enough cash, and accept that we are accelerating what was going on for months — something that lots of funds with borrowed money weren't expecting to happen and are now blowing up. I wish I could say that today's flush was the bottom, but I look at the charts and there still seems like there's no support for so many tech stocks, especially the semis, because they ran up so much on the way up. But however it might feel, it's actually an orderly decline, because unlike 2000, which was a rout, these are mostly lucrative companies with stocks that just went too high. The bottom line: I, for one, am actually glad that they're ripping off the darn band-aid from this market rather than slowly trying to take it off a little bit each day. I wish we didn't have yesterday's big increase and I wish we didn't have today's big losses, but they are two sides of the same coin. People, if you have cash, you will not panic. You won't be complacent either. You'll be clear-headed, and that will help you lose less money until things get better, because they always do. Let's go to Rich in Texas. Rich?

Okay. Well, let's talk about those things. First of all, I talked about Intel pretty much every night because I was worried about how it did. Did I talk about Reddit? Yes, I did. I said that Google had changed its algorithm and hurt Reddit, but I think it's a valuable company. Am I perfect? Hardly. Have I tried my best in the last 45 years? I sure as hell hope so. Are you disappointed in me? Well, if you are, all I can tell you is I did my best. Let's go to Joe in New Jersey, please. Joe?

I am thrilled that you called, Joe. Good to have you.

Well, that's great, Joe. I mean, some people think I don't have a brain in my body. Other people think I got a big brain. You know what? I think it's a bit of a mix of both.

Well, look, I don't think we need to add any tech right now. Both Palo Alto and CrowdStrike got very, very hurt today. And I'm mindful of the fact that these are what are known as high price-to-earnings multiple stocks. And so, therefore, we're going to have to give them some berth because right now the market's in a bearish mode. Some people would say we're in a bear market that started literally, I don't know, a few weeks ago. I look at Palo Alto and say it's made us a lot of money, and sometimes we have to give back some money in order to be able to make big money. That's been my philosophy since 1981. You know what? I'm going to stick by it. It works. Even for our first caller, if you had given me the chance to be able to help you on Mad Money today. The averages got hammered today with the data center stocks taking a beating. But is it a buying opportunity? Could these names have further to fall? Well, we have to talk about what is going to happen and play out tomorrow. Then, as tech stocks slide, I'm going to check in with the state of the buy now, pay later space with the firm Affirm for earnings. Plus, with travel stocks in the red, I'm going to catch up with Airbnb to see what the road ahead may look like for the sector. So stay with Mad Money.

We don't know what to pay for any of the stocks connected to the data center anymore. And that's why this moment is just so darn fraught. I mean, that is the real issue, because if the election results aren't met with a slew of new regulations, you probably should start buying these stocks pretty soon. But if tight regulations and bans are now going to surface throughout the country, you have to avoid them. Unless, of course, the regulations don't cover any of the near-term developments planned and approved. Phew. Tomorrow, I'm hosting our CNBC Investing Club annual meeting. Always a lot of fun, although this year's meeting might be a tad tougher. And I am totally conscious that no one really knows how to value stocks in a world where things might be good next year, but not the following year, or maybe the year after that. If you think, for example, that Nvidia is going to have a good year in 2027 and just meet the current estimates set out for the company, then you'd have a stock with a growth rate of 70% that's selling for less than 12 times next year's earnings. I mean, that's an incredible, ridiculous bargain. And now it's down for the year. But it is not a bargain if the following year it can't grow any further because the US won't permit new data centers as fast as they do now. How fast will they permit them? Will it be like the oil and gas pipelines, which companies struggled to get approvals for from the fossil-fuel-hating Biden administration? Will they be like the nuclear power plants in the early mid-'70s when the country turned on that fuel? Or will the whole thing just be delayed a little bit and the buildout still occur, just at a more leisurely pace than the frenzied rate it's having now? See, we don't know. The data center stocks have gone up so much over the last few years that it's difficult to tell how much they can fall. If Nvidia had a clear line of sight to its own destiny, and that line of sight is positive, it should be buying back billions of dollars of shares right here as part of its $235 billion buyback that it's already committed to. Remember, companies have been throwing money at Nvidia. And while it's been a big spender itself, buying stakes in many companies, it is not as if they've gone all in when it comes to owning its own stock. Why not buy it? Of course, maybe they're gun-shy too. Perhaps the read is that there won't be nearly as much demand in the next few years as there is right now, which means the stock has some downside. Or maybe they bought a ton today and they don't have to disclose. See, that's not how I would do it, though. When I ran buybacks, I waited for days like today to stand there at each level and buy until the sellers were sated. Sure, that may be too hard today, but I think Nvidia at under 12 times next year's earnings is going to prove to be a bargain. You know, they have to take some pain first.

It's tougher to get to the more commodity-oriented companies, though. For example, Micron has many strategic customer agreements that are known as take-or-pay contracts, meaning companies will have to pay them even if they don't take delivery of the chips. Now, though, you might have to ask, will they be around to pay them? I know that sounds dire, but what if companies like I've been talking about — these neoclouds, smaller neocloud builders with no other businesses to fall back on — sign take-or-pay contracts? Could they possibly default on them? Anything's possible. Still, Micron has some ability to forecast based on those strategic customer agreements. It is free to do a gigantic buyback if it wishes starting December 9th. That's a date imposed by the company's deal with the federal government as part of its CHIPS Act funding. Perhaps the toughest to analyze is the stock of AMD. They just reported Tuesday night, and it was spectacular — one of the best quarters I have ever seen. When I interviewed CEO Lisa Su yesterday, she reiterated that she sees a trillion-dollar total addressable market for the data centers and its AI coming up. If that's the case, then you can and should be buying her stock right now. Do you want to? The stock was at $188 in March. $188. Hmm. By that token, $404 seems awfully high to me. Maybe that's the real problem. Here's the bottom line: these dramatic moves you're seeing reflect the market trying to figure out in real time how much to pay for stocks where the next year still looks great. But it's absolutely true that the future for tech is now darker than it was before this week's election. To be sure, it's a messy process that we're watching. You need to be careful when the swings are this violent. But if you keep your head, have some cash. Like I said before, you know what we're going to do? We're going to get through this together. Mad Money's back after the break.

After the bell, Affirm, the buy now, pay later company that we prefer on this show, delivered a strong fiscal first quarter. Revenue jumped 35% to $1.26 billion, beating expectations, while earnings came in at 47 cents a share, again, versus the 38-cent estimate. Affirm also raised its full-year outlook for purchase volume and for profit margins. Now, shares came under pressure in today's miserable selloff ahead of the report. They're down a little more after hours. I do not think you should look upon what's happening right now in the market as a referendum on this excellent company. Do these results give investors a reason to take another look? Let's check in with Max Levchin. He's Affirm's founder and CEO. Mr. Levchin, welcome back to Mad Money.

All right, Max. 12 straight consecutive quarters of 30% plus gross merchandise volume, and also becoming more profitable. Does anyone have anywhere near that record from the time that they started? Anyone?

GAAP profitable. That means not made-up profitable, means GAAP profitable. Affirm card active cardholders doubled over the past year. Now, cardholders — they tend to make a lot more purchases than non-cardholders. Correct?

Let me ask you — I signed up before the interview. I got the card in 90 seconds. I just checked the box at the top. Why doesn't everyone check the boxes? This sure was a heck of a lot easier than anything else, and it sent me right to Amazon. I mean, what's the problem here?

Now, you have Sam's Club, a place I like very much. I know that Walmart's not necessarily yours — doesn't mean you don't do business with them — but Sam's Club's got to be one of the marquee accounts that's still left, right?

At the same time, I don't mean to minimize the fact that there are — I don't know what percentage of the world does not have an Affirm card right now.

All right. Now you mentioned about the vast majority pay. On page nine of your deck, you say credit quality: 30-plus-day delinquencies, of course excluding Peloton and Pay-in-X loans, increased nine basis points year over year and increased 35 basis points quarter over quarter to 2.9. Is a 35-basis-point increase something that we should be concerned about if we're going to buy the stock of Affirm?

Right. I'm glad you brought it up. There are charts that would have indicated that, but I have to be sure because I'm looking — look, Max, you know this. The stock stat I want everyone to have, any objections, anything that they think might be wrong, to be brought up in the interview because you're here and you're the most forthright guy in your business. On a loan product basis, GMV mix shifted slightly to interest-bearing loans, which increased 34%. So Affirm card GMV, which grew 170% in the quarter, continues to skew heavily toward interest-bearing loans. Are we okay with that?

You just brought up the thing that I wanted to know most. I mean, there's a lot of people I think the election seemed to be a referendum: too much inflation, perhaps not enough, too much money being spent on health care versus the dollars that you take home. And yet, I don't hear anything that makes me think, from what I see here, that it couldn't be a great holiday season.

You mentioned something in the zeitgeist that is a kind of a stream of thought, which is that while people are very excited about agentic shopping, we actually like shopping. Do you think that agentic could be capped, and if it's capped, is that good or bad for Affirm?

All right, let's leave it there. Max, again, an excellent quarter. I wish other people had that kind of growth and that kind of transparency because it would make everybody's job — would put me out of business — but it would make everybody else's job very easy. That's Max Levchin, founder and CEO of Affirm, AFRM. Thank you, Max. Great to have you on the show.

As we try to figure out where to turn after this brutal day for stocks, one group we always like to look at first: the companies that we know are doing well because they just reported. Take Airbnb, the company that lets you book whole-home rentals and hotels. Airbnb reported a really unbelievable quarter tonight. Really a beat-and-raise quarter after the close, as revenue continued to accelerate and the business gets increasingly profitable too. Earlier tonight, we had a chance to check in with Airbnb co-founder and CEO Brian Chesky about these excellent results. So, take a look.

Mr. Chesky, welcome back to Mad Money.

I miss you, Brian. I got to tell you, we have some bad days in the market. Everybody says, 'Well, look, everything's bad.' I'm looking at your business. I am seeing accelerated revenue, top-line growth, unbelievable growth rates, nights and seats booked, gross booking volumes, revenue. What is driving the acceleration for Airbnb's top line?

All right. So, Brian, when you talk about AI, I think people are listening, they're saying, look, AI, everybody talks about it. Everyone's got a take on it. The fact is AI does cost you money, right? You have to pay something in order to get it. How do you measure the return on what you pay for AI?

All right. So, let me play devil's advocate. I never knew that things were bad. I've been using it the whole way. I've always felt things were good. As a customer, I don't see necessarily that something is so much better because I thought it was good to begin with. A customer like me, maybe not as tech-savvy as you — what would I be seeing that I should be noticing that is so much better than what I've seen all along?

That's — I definitely, I definitely see that. I have to tell you that it's been a pretty seamless process the whole way. But I like this. The thing I got to tell you that I like the most: we're big points users. We're Amex points users, but I've always felt that was separate for hotels. But you announced at the end of October this, what I think is kind of a dream partnership — over 1 million listings to American Express travel. I look at it the other way: bring American Express travel to over 1 million listings. How is the points program working? Because that's how every — look, my daughters don't go anywhere unless it's on points. That's just the way society is. I don't have that. But that again is something that you recognize is more important than many other things when it comes to travel.

All right. So, where are people going? Tell me where. What are the hot places?

All right. So, just tell me — I can't believe France because they're rioting in the streets in Paris, but obviously there's people who like to go to —