I’m in the “nod and change the subject” camp.
The only thing you can do beyond that is try to find something nice to say, eg. “That sure is innovative structure, that USC education is paying off…” or “I found that last one riveting.”
I picked up this use of “riveting” when I was still in high school; there was a famous episode of bloom county where Opus the penguin gets a nose job, and his friend responds to the situation with that adjective. Perfect.