Closing Bell 10/8/26

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0:58Scott Wapner: All right, Brian, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9, right here at the New York Stock Exchange. This Maker Break Hour begins with the AI trade. That headline today about OpenAI's revenues did move the market midday. We're following all of it. Take a look at the scorecard here with 60 to go in regulation. Third line down, NASDAQ, down 1.3%. That's leading things lower. Many of the chip names are falling. Pretty much anything exposed to OpenAI or Anthropic, Oracle getting hit pretty hard. We're going to have much more on this story coming up in just a moment.

1:28Scott Wapner: We're also following another report, this one that Starbucks could be considering a deal for Chipotle, moving both stocks. But as you see, in opposite directions, Chipotle up substantially near six and a half percent. Starbucks going the opposite direction, though, gets us to our talk of the tape. Open questions about OpenAI's business. Let's get right to Kate Rooney, who's following that story for us. What does this all mean to you? Well, Scott, the headline is that this is an accounting change. So I'm hearing from a source that OpenAI is now reporting $50 billion in annualized revenue. It's about$20 billion lower than what had been widely reported.

2:05We had heard it was around$68 billion. Others had reported$70 billion. I'm told that number included gross revenue from some of their cloud partners, which is something anthropic from what I'm hearing also includes in what has been explosive revenue and some of the numbers that have been put out by that company. This was first reported by the Financial Times. The new revenue figure is being seen by investors as a cleaner number. So many are doing the same for Anthropic. They're trying to strip out some of the partner revenue and then trying to compare these companies apples to apples. The numbers, from what I'm hearing, were disclosed to investors as part of an ongoing fundraise.

2:40OpenAI, according to sources, looking to raise around$30 billion additional dollars. This would be a$1.4 trillion valuation. That round, from what I'm hearing, is gaining momentum, although no term sheets have been signed yet. No comment from OpenAI on that one. But the FT headline, as you mentioned, Scott, did very much move markets, took the Nasdaq lower as investors read the word discrepancy as a possible threat to the entire AI buildout. So So the through line here is that OpenAI's revenue, if that is lower, could mean lower growth, and then growth is slowing, and then that could potentially mean that the industry is overbuilding.

3:14So that's really been the bear case when you look at AI, but it does speak to some of the opacity of what are now trillion-dollar private AI companies, and they are so tied to public markets. So that knee-jerk reaction really emphasizes how important these private companies are. Scott.

3:27Scott Wapner: So I've got a question for you. So if OpenAI is essentially trying to gross up their revenues. Are they trying to make the number look more robust to the market than it actually is? So, Scott, from what I'm hearing, it's sort of the opposite because this is happening. It was disclosed in a pitch deck to private investors that are supposed to be participating in this round. The number is now lower, and they're saying that this is a cleaner way to describe the revenue and stripping out some of the cloud revenue. So in the past, they have included some of that extra revenue from cloud partners, which is, I mean, they're not public companies.

4:14So there's no sort of gap away or adjusted way to go out and do this. So we're sort of relying on, you know, what investors and what sources are able to tell us. They're now moving that down and sort of going to the lowest common denominator using the revenue number that It goes exactly to their balance sheet. And this, again, is going out to investors. So it's part of how they're marketing for this latest funding, Ron Scott.

4:36Scott Wapner: Until the story came out, I didn't realize that OpenAI and Anthropic calculate their revenues differently or account for them differently. Why so? So it apparently is the way that they have struck some of these compute deals. And so there's some nuance behind who is the principal in the deal and who is not. And I guess the way that Anthropic and OpenAI have struck compute deals also results in a difference in accounting. So that's what I've heard in previous rounds that I've reported on this. And unclear what it means for sort of this$50 billion number and how that all plays out. But that's been the biggest sort of takeaway is that they do these deals differently and therefore account for them differently.

5:21And we'll see, you know, these companies, in order for us to have the full picture, we've got to get an S1. We've got to get quarterly earnings. I mean, these are trillion-dollar private companies, and we really just get breadcrumbs in terms of the financials. They have no obligation to tell, you know, a retail audience, a public audience, what their numbers are. It's really only the private investors that have gotten in on these rounds until now.

5:43Scott Wapner: But how should we think about— Oh, go ahead, Scott. I'm sorry, finish it. Nope, you finish your thought. I was just going to say, I mean, yes, they're private companies, but, you know, some of the biggest investors in this company, you have Amazon, you have Microsoft, you have NVIDIA. So it just speaks to the influence and the importance of these companies for the overall market. And I just thought that knee-jerk reaction really spelled that story out. It's sort of this domino effect and just underlines how important their revenue is for the overall build-out, the whole market story at this point.

6:10Scott Wapner: Because, I mean, how should we think about the revenue growth rate? That's one of the most important metrics as well. I mean, you just recently spoke with CFO Sarah Fryer. I will say, Scott, the last we heard from CFO Sarah Fryer is 70 percent growth quarter to date. So even if you strip out some of these numbers, the growth rate from what she is saying, what she said publicly, is that it's up 70 percent of the quarter. So that still signals strong growth. It's not like anything has changed. It's sort of just a difference in the way that they're accounting for it. Although that's that's sort of all we know, Scott.

6:44I would say she said it publicly. We've talked about the growth rate in terms of the revenue. but we also don't know what profitability looks like, what the bottom line looks like here, and how much these companies are losing. It's quite impressive to have tens of billions of dollars in revenue, but we don't know if they're losing that equivalent as they spend big on all of these data centers.

7:05Scott Wapner: All right, Kate, thank you. That's Kate Rooney. Fallout in the markets, as Kate said, as we showed you at the top of the show, pretty immediate, somewhat dramatic, names with a direct link to OpenAI falling. Seema Modi following all of it for us. What can you show us. Well, Scott, if OpenAI is not growing revenue as fast as the market previously expected, the question is what the knock-on effect is for. It's partners that rely on the Frontier Lab for business, like Oracle that is developing data centers for the Frontier Lab. It currently makes up 50 % of Oracle's backlog. OpenAI's cloud partners, Amazon, Google, and the companies involved in renting out chips to the LLM, like CoreWeave and Nebius.

7:40At the heart of all this, though, Scott, is the semiconductor names, NVIDIA and AMD that have seen massive demand for their high-performing GPUs predicated on OpenAI's growth, both stocks trading down, as is Broadcom, which is developing OpenAI's custom chip jalapeno. While investors today are adjusting down their expectations, we did speak to Gil Lurie at DA Davidson, who said he wouldn't be making any changes to his portfolio and that OpenAI's$50 billion revenue target, he says, is very impressive, but also adding that that is why these companies need to go public. So reinforcing what Kate Rooney was just saying they're just too big, too important to stay private, Scott.

8:17Scott Wapner: All right, Seema, thank you very much for that. That's Seema Modi. Now let's welcome in Big Technologies, Alex Kanchowitz, a CNBC contributor as well. Had to get your perspective here, too. How should our viewers read that? Is this a nothing burger? Is it a simple accounting issue? What's the deal? Well, I don't think it's entirely a nothing burger. Yes, it's a simple accounting issue, but there's also some sloppiness on OpenAI's part. The fact that the number got out there, the Financial Times and its story said OpenAI didn't deny the bigger number, and now we have the smaller number coming out.

8:50OpenAI has to be more proactive. If you see a number that's$20 billion more than what your revenue is, even if you're a private company, it's probably a good idea, given how your ties are to public companies like we're seeing today, to get in front of that and actually get the accurate number out. Now, for the market overall, I think we're seeing some skittishness around the AI trade, because even though this was a minor story, we have seen companies like NVIDIA, like AMD get hit. Now, they're both those two companies and the other companies we're talking about are doing mostly pretty well on the year.

9:21But I think investors are looking at what's going on in AI. They understand that companies have been pulling back some of their spend on these companies. They're seeing that they're routing some of their spend to AI models that are standard and not the frontier, not the best ones. And I think the market is just waiting for a moment where if they see something go wrong, they're going to pull back way more than they did today. So that's what I read into it.

9:43Scott Wapner: It speaks to the fragility of the trade itself. And I'm talking about the tech trade, how exposed, leveraged, whatever word you want to use, that the entire trade. And for that matter, if we're talking about a trade that is essentially 40 plus percent of the market, the entire stock market is leveraged at the current time to open AI and Anthropic in many respects. That's right. Well, market breadth is really bad right now. You see a lot of top heavy action, you know, while the rest of the S &P 500, the 493 aren't doing as well as the top seven. So I think that right now, if you see a pullback, that could really change the whole narrative that we're seeing around the market.

10:23You're right. It really does. What we're seeing today in the S &P 500 and the market more broadly really does hinge on the performance of open AI and Anthropic. We're going to see the Anthropic IPO, you know, within the next couple of weeks, most likely open AI next year. And any hiccup in the story, any wrinkle in the story, we could see what we saw today or worse. And that's pretty uncomfortable, I think, if you're looking at, you know, the way that the market is going to go from here.

10:48Scott Wapner: But it seems like, you know, the headlines that have come out over the last, let's call it handful of weeks, have raised more questions about open AI than answers. Right. I mean, we're talking about we talked to you not that long ago about a string of departures, wondering what that means for the road towards an IPO. People who have left and raised questions about security and safety. And now here we are talking about actual numbers. Yeah, ultimately, these companies, they're going to show lots of losses, right? They're going to show big revenue gains, but losses that are outpacing them. We saw that with the leaked Anthropic S1 numbers that came out last week.

11:33And so a lot of this is going to depend on whether investors and whether the market overall believes on the stories that these companies are telling them as they come out. It's going to be as much of a narrative as it's going to be on the balance sheet, but the balance sheet has to back up the narrative. And I think you're right. Like as we're seeing stories about how the balance sheet might not look as great as initially anticipated, even if it's today a minor story, if that looks any bigger or if there are other problems that we're not aware of that will come out in the future, that complicates the narrative.

12:04And if you're thinking about what could be the trigger moment that sends a lot of this into a bit of a spiral, you know, we saw an example today of what it could look like, but it would just be on a much broader scale.

12:17Scott Wapner: AK, thanks. Appreciate it. Alex Kanchowitz joining us once again. To our panel now on the markets, Solas' Dan Greenhouse, BNY's Alicia Levine, Robin Hood's Stephanie Gill. Good to have everybody here at Post 9. I'll start with you. You see the market reaction to something maybe nuanced, maybe kind of nothing, but it shows you the fragility of what's at stake here, doesn't it? Yeah. You used the word fragility. I'm tempted to push back and say— I'd rather use stability. And what I mean by that is, listen, Alex touched on it and we've alluded to it 100 times. The market is levered to the AI trade.

12:55That's not breaking news. Obviously, as you said, 40 % of the market at a headline level, even more so when you get down into some of the subsectors. So if something were to go wrong, then obviously that would be, for lack of a better word, probably devastating for the public equity markets, not to mention private. But you brought up nuance. I don't know that we know exactly what's going on here. If this is just revenue reclassification, then it's not that big of a deal. Also, I would argue it could be maybe for some reason, this is not what's happening, it appears, but perhaps that$20 billion is shifting from OpenAI to a competitor like Anthropic.

13:30So there could be that. Again, that doesn't appear to be what's the case. You can't, from the brief information that we have, make any larger determinants. But the reason I say—

13:39Scott Wapner: You're kind of making my point, I feel, in some respects. Like you say, well, we don't really know what's going on here. Well, OK, we don't know what's really going on here, yet we've given all of this the benefit of the doubt that it's going to be the greatest thing that we've ever seen in the market. And the market's bid itself up. And a lot of these stocks that are leveraged, in fact, to OpenAI and Anthropic have gotten the benefit of the doubt. And even you say, well, we don't really know what's going on here because they're private companies and we only have so much information. I'm not an investor in either OpenAI or Solis, is not an investor in either OpenAI or Anthropic.

14:09So I'm devoid of, obviously, private information. But I do know from the public companies that have reported, there's no suggestion that demand is slowed down from virtually anybody. That's the information on which I have to hang my hat. But again, about the fragility, I don't think it tells you anything new. I mean, the market sells off because we have some esoteric information, certainly incomplete information about a private company. I don't think that's telling me anything I wouldn't have been able to tell you an hour ago, four hours ago, five hours ago, which is we are leveraged to this trade.

14:39And when negative headlines come up, it creates in the short term some volatility. I mean, it shows you exuberance around this whole story

14:53Scott Wapner: has been given the benefit of the doubt to be as exuberant as we've been. My point, I think more broadly, is that trade and this market can't afford a major hiccup in the story. And any time there's a headline like you saw today and reporting that Kate did following that, if anything questions the story, you got a potential problem. My only point. Fair? So I think it's fair, but I'd say the reaction is actually quite small. And I would say that what we heard today could just be cleaning up numbers in anticipation of an S1 to standardize what the financials are. And perhaps there are teams in there looking at everything and saying we've got to standardize this because we're going to be playing in the big boy market soon in the public markets and we have to do this.

15:45To your point, most of the market is levered to the AI trade. because we are not only looking at the AI beneficiaries and the hyperscalers, but we're also looking at the companies such as healthcare and financials and industrials that are going to be the beneficiaries of using it. And so what's happened is margins have gotten larger. Revenue is being driven higher. And so to the extent that there's a question on ROI or pace of investment, yes, that's going to be a negative story. I don't think this story in particular is that meaningful. And you see it because the reaction is actually quite calm if it meant anything more than just cleaning up numbers.

16:26And I don't know. Oh, for sure.

16:27Scott Wapner: But, I mean, you do have, you know, some stocks that are down around 5%, a big collection of the semiconductor names, the oracles. You could throw up a core weave. I mean, there are a bunch of stocks that are reacting to this kind of story. So those are the most exposed in their revenue line are going to trade lower on a relative basis. But if you look at some of the semis, there's a reason they're trading in six and seven times forward earnings, because there is a concern that the level of earnings is not sustainable in the future. So I would say the pricing is already reflecting some understanding that there could be some slowdown in the future as yet unknown.

17:06This can go on for two, three years. We don't know. So I don't think this is actually a huge hit to it, but it's a recognition, not just the market, but the economy is also 1 % of U.S. GDP in the first half of the year is due to CapEx, whether it's manufacturing or whether it's investment in chips. So it is something to pay attention to overall.

17:26Scott Wapner: Not to mention, Steph, the fact that in the environment that we're in with interest rates backed up, this trade has gotten more concentrated yet again. So you could say that the market itself is once again more leveraged to this trade in ways that it has gone through cycles, small cycles, obviously, as the market had broadened. The market wasn't so reliant every day on the AI trade. Well, here we are in a more concentrated, top-heavy environment where, once again, we're kind of everything reliant on that trade. The market previously, I'd say, wasn't also as reliant on interest rates. Yes, there is a relationship there, but I think that the top-heavy part of the market is much more sensitive to interest rates just because, and I wrote a piece about this in Investors Guild, that companies are starting to act like banks, whether they admit it or not.

18:20Like, NVIDIA has over$500 billion worth of commitments in some way, shape, or form, right? And obviously, anybody who is on the receiving end of that is going to be sensitive to that and whether the spending is going to continue. But then also, if interest rates continue to be high and there's a lot of issuance, then you end up having an environment where, you know, a lot of things can move the needle on the trade. And you could say the same thing about the energy trade, right? If you have a move toward peace, then the expectations of there come down as well. And that's the best or second best performing sector this year.

18:55So I think there's a lot of sensitivity in the market because everything is already in the prices. I will say it is the best performing sector. And it is the best performing sector not because of data centers, but because of what's gone on in the Middle East for exactly the reasons you just articulated.

19:11Scott Wapner: I'm going to throw my hat in that ring. Okay. How are you thinking about the relationship between where rates currently are and where stocks currently are? There's a pretty good list. For most of the year, the S &P 500 equal weight, and I think it's very important. We talk about the equal weight on the show. It's very important for investors out there. I invest in stocks. Solace invests in stocks. When you invest, you pick stocks, not the market. And the equal weight is down, call it 5 % or 6%. It bounced a little bit. The relationship between the two is very clear. Oh, if I could, let's throw up, guys.

19:44Scott Wapner: We have a chart. I think we still have the ability to show it. The equal weight versus the NASDAQ, for example. Sure. Over the last month. Yeah. And if in the control room we can show up after that, because that's very important as well. The equal weight and the 10-year yield. In the last month or two, as soon as you got this last. All related. Same thing, basically. The last 40 or 50 basis points of move in the 10-year coincided almost to the penny, as Carterworth would say, for the peak in the equal weight. So while the big cap tech names have held up OK on a rotational basis, there is a lot of pain throughout the rest of the market.

20:2370 % of the market is down since that peak. I think it's roughly a third of the market is down 10 % or more. There's been some real pain here, and it is directly related to rates. Now, to Steph's point, if and when we get some solution in the Middle East and oil prices start coming down and perhaps the Fed with raising interest rates calms some parts of the economy down and rates start to come down, you're going to set the stage for another up move in the broader market. I would even say that like a little bit of a slowdown in the AI trade actually can help with the rate story as well, because I do think we need a little bit of calm in the bond market.

20:57Scott Wapner: I've got to leave it there. I have some more news. Thank you very much for being here. I've got to get back to Kate Rooney. She does have some more news that is hitting cyber stocks at the moment. What do you see here? Hey, Scott. So this is a headline from Anthropic. Cyber stocks, as you mentioned, lower on this news. One of the biggest cyber ETFs bug is lower on this headline that Anthropic is now launching a new cyber security initiative. They say it's aimed at using artificial intelligence to protect critical infrastructure and software from cyber attacks. They say they're expanding their push into cyber.

21:28They're calling it Anthropic Cyber Mission. It's initiative focusing on two areas. They're talking about critical infrastructure, so protecting things like the power grid, energy systems, water systems, transportation and government systems. And then say that they are going to be providing some of their most advanced AI models. So think of Fable that we've talked about in the past to help defend some of those systems. And they also are talking here about open source software, which has been really seen as a threat to Anthropik. But in this announcement, they say they are offering a free tool to basically let their AI models regularly scan software for security vulnerabilities and propose certain fixes.

22:06Clearly, cyber has been having this moment as we talk about some of the fears in AI if Anthropic is going to be giving this away for free. That is explaining some of the weakness in this ETF and some of the other major cyber stocks.

22:18Scott Wapner: I mean, if we let's let's look at the let's look at the bug, for example, I guess from year to date. Guys, throw that up for me, too. I mean, how many times are we going to go through this exercise where Anthropic comes out with something that is deemed to be a competitor to cyber stocks? Because you saw it in February and then you saw it in March and it took the space down, as you see on this chart that we're showing here. And then once the market figured out that all of this safety and security news was going to be just bullish for anything related to cybersecurity, no matter who was really coming out with what, And obviously, there was a huge recovery.

22:56Scott Wapner: If you look from May, from the spring until now, it's been a huge comeback. But, you know, here we are once again. Yeah. Overall, it's been extremely bullish, as you mentioned, Scott, for cyber. Nikesh Arora, the CEO of Palo Alto Network, said recently in an interview that Dario Amadei and Anthropic, talking about the risk of cyber, did more for his marketing than he could have done in years. So overall, it's been a positive. And I think long term, it's still seen as positive, as you mentioned. That ETF is up about 50 percent year to date. But you're speaking to this moment where in the beginning of this year, so many of the software companies would just sell off in any specific AI news from Anthropic, whether it was legal software, whether they were getting into any sort of app layer.

23:37But I think what calmed the markets and what has eased a lot of investor fears around software was the partnership between Salesforce and Claude. And Claude and Dario Abadei at the time saying, we come in peace. We are not here to disrupt you. We want to be good partners. And that has been their strategy. recently, we haven't seen as abrupt of a sell-off. I mean, the ETF's down slightly, but it's not anywhere near as drastic as sort of the sell-offs we were seeing earlier this year, as you alluded to, Scott.

24:04Scott Wapner: Oh, for sure. Kate, thank you. Raise your hand if you have more that we need to know about today. It's Kate Rooney. Just getting started. Up next, is a big deal brewing in the restaurant industry? Starbucks and Chipotle moving on reports of possible merger talks. Starbucks shareholder Stephanie Link joins us with her reaction next.

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26:06Scott Wapner: You got this. There's no prescription treatment, but there is a vaccine that can help protect you. Find out more at Pfizer for all dot com. Pfizer out due yesterday. Welcome back. Starbucks and Chipotle moving in opposite directions this hour on reports of a potential deal, at least talk. Our Brandon Gomez joins us now with more. It is very early. Just reports of of thoughts. What do we make of this? Yeah, emphasis on potential. But look, Starbucks CEO Brian Nicol is really the one that's at the heart of this story. Since he left Chipotle in September of 2024, the stock has nearly halved before today's pop.

26:45Now, all while its growth story remains overwhelmingly U.S.-centric. Now, you can take a look at Starbucks shares under nickel. Yes, shares are flat after today's move lower. But take a look at that chart year to date. That's when his back to Starbucks turnaround plan has started to be rewarded by investors. You can see up 7 percent this year. The company adding baristas, speeding up service, streamlining the menu and renovating cafes. with early returns encouraging as sales and margins continue to improve. Now, a combination could give Chipotle access to Starbucks' global real estate and digital loyalty platforms, while Starbucks would gain a stronger lunch and dinner business, which has been looking to expand.

27:22But still, Scott, the financials are daunting. Chipotle is roughly as valuable as Starbucks, so a premium bid would be a more than$40 to$50 billion bet. And unlike a typical restaurant roll-up, the cost synergies, they're limited. Different food supply chains, labor models, operations. We did just get this statement from Starbucks saying that they are telling us they do not comment on market speculation and will continue to execute on its turnaround, Scott. But as you can see, Cher is moving in opposite directions today.

27:48Scott Wapner: Yeah. All right. Good stuff, Brandon. Thank you. Good thing for us is Stephanie Link does comment on market speculation. She owns Starbucks and she joins us now. You told our producers when we reached out to you ahead of halftime today that you were shocked. You would be shocked if this happened, that, quote, they haven't even fixed Starbucks. What does that mean? Well, yeah, my first instinct was I was really very surprised because they are undergoing a turnaround story, Scott, and they're probably in the fourth or fifth inning. We have seen improvement. They did same store sales last quarter, 8 percent, and they did grow earnings 85 percent.

28:25But their operating margins are still depressed, and they have a long way to go, to go from 10 % operating margins to 15, 16, to get to that$4 in earnings power. So they have a lot of wood to chop. That's why I was so surprised. Then I kind of stood back, and beyond the price tag and beyond the financing, because we really don't know a lot of details, if anyone could pull this off, it's Brian Nichol. Brian Nichol is a consumer guy through and through. He started his career in 1995 as an intern at P &G. And then he worked his way up at Yum Brands and Pizza Hut and Taco Bell. And then, of course, at Chipotle, he doubled the revenues.

29:02He increased profit sevenfold and he increased the stock price eightfold. So he knows the consumer, but he also knows Chipotle. And so I think he could pull this off if they're going to do it. And I think with$50 billion in annualized sales, they will have the size and the scale. And, of course, they will have an opportunity to expand Chipotle. They only have 4 ,200 stores domestically. I mean, Starbucks has 41 ,000 globally, so they'll use the locations to help there as well. So it totally changes the story from being a kind of a simple one to much more complex. But I actually added to it when the stock was down 6 % today, because it's very rare when you get a stock like this, a quality company management team, down 6%.

29:44Scott Wapner: Did you add to it because you figured there was just no way that whatever is speculation would morph into actual reality? Well, I think it's a long shot, but if they do do it, I do think over the long haul, they can pull it off. And I think it would be a very powerful story, a very powerful company. It will take a long time, but I just thought the reaction was too extreme at this point in time. Which company needs more work, you think? Chipotle, for sure. I mean, they definitely are. They're slowly making strides. But I think they have to improve the—and I mean, they have great product, but I do think they have to continue to see improvement there.

30:28And execution has been very spotty. I think the one thing that Brian Nicol brought to Starbucks is better execution, consistent execution. You know, the four CEOs that Starbucks had before Brian Nicol couldn't get it together, right? And so that's why Howard Schultz has had to come back so many times to revive this company. Now you have Brian Nicol at the helm, and he's getting more consistent, more predictable. And that's why I think they can get to 15%, 16 % operating margins over the next couple of years. And$4 a share in earnings power makes this stock pretty attractive, especially up down 6 % today.

31:05Scott Wapner: We'll talk to you soon. Appreciate it. As always, Stephanie Link. Coming up, Goldman, Sarah Nason-Tarajano. She'll join me live right here at Post 9. Tell us where she sees the market heading. Final stretch of the year.

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32:52Scott Wapner: What were lower today? Markets reacting to that story that first broke by the FT about OpenAI revenues being lower than Signal. Tech names leading that decline, as you know by now. For more on where the markets are heading, we're joined by Goldman's Sarah Nason-Tarajano. Back with us at Post9. Nice to see you again. Great to be here. So when you see a market reaction to a headline like that, what do you think about in terms of how exposed or leveraged just tech is to a couple of companies right now? There's no question. It's a very concentrated market. But it's one of the reasons for the majority of our investors, you know, people have been saying it's a stock picking market.

33:31But you have to remember that involves picking the right stocks. And so we really tell our investors, you know, using the index is a great way to get all this exposure and watch all the underlying themes play out that are complicated. You can get exposure. The S &P has 44 percent market cap exposure to AI infrastructure, including hyperscalers.

33:52Scott Wapner: For better or worse. Right. And by the way, we like doing it on a tax advantage basis where you can take advantage of volatility and dispersion to sort of, you know, continue to outperform the market on an after tax basis when there is some volatility under the hood. The headline of your appearance might as well be you still really like the market. I do. I still really like the market. You know, it's hard to be as enthusiastic with a market that's up 13 percent year to date. We have to acknowledge that. But I think it's worth looking under the hood. Right. We're not more expensive from a valuation perspective.

34:25We're cheaper. That's right. A year ago, 23 times. Today, 19 times. And so we're at like about the average of the last 10 years. I think we've got to look to earnings. And if earnings deliver what we think they're going to deliver, they have the ability to keep driving this market higher. And our clients want to be long equities over cycles, right? That, you know, prices appreciate, stocks go up in general. And we would say look at dislocations to add exposure.

34:52Scott Wapner: See, I thought you were going to say it's hard to be as enthusiastic with interest rates where they are, not so much that we're up 13 % on the year, because as more people are talking about, and I know you're thinking about and talking about with clients too, there's competition for the first time that's pretty attractive with rates. There is. And, you know, I think interest rates, we have to keep it in context, right? If you go back over 50 years, you know, having a 10-year over 5 % is not so unusual. 50 % of the time it's been there. I think a lot's going to depend on, you know, the velocity of what we expect.

35:26And we just expect, you know, we expect a right height in December. And that's really all we're expecting. And so if, you know, we can stay at sort of these higher rates and companies can still perform in earnings, I'm not particularly worried about the equity market. But we are looking at fixed income, right? Clients have, you know, access to new capital via dividends, via appreciation that we've seen in the equity market. So fixed income is definitely getting more attractive, but it's not one or the other to me.

35:52Scott Wapner: But, I mean, the velocity has been a story. Well, you know, a month ago, I mean, a 10-year is up, what, 50 basis points, essentially, in a month? That's not a slow move. It's not a slow move, but I think that, you know, the economy has proven to be pretty stable. I think, you know, from kind of a jobs perspective, it's better than expected. Earnings are expected to continue to deliver. And so as long as we can sort of stay in this zone and control the velocity, I think you can have, you know, equities continue to perform here. But by the way, I'm having more conversations around fixed income than I've ever had with clients.

36:26Scott Wapner: Really? Yes. And so we are finding that our clients like thinking about fixed income to diversify a little bit from equities. That makes sense, by the way. And also really interesting current yield versus cash. And we really like sort of the more intermediate. We're recommending about a four-year duration. We get nervous going too far out on the curve, right? Exposure to higher rates. But, you know, interest rates, you're getting paid to be in fixed income. And then think about people in high-tax jurisdictions. Municipals are more attractive than they've been in a long time. You think about someone in a top tax bracket, your tax equivalent yields is about 6.5%.

37:03Last 20 years, it's been 3.5%. So this looks pretty interesting from a yield perspective.

37:09Scott Wapner: But you're not having the conversations more so about fixed income than you ever had because clients are starting to get a little nervous about the equity market. It's just about the opportunities that exist. It's about where they're putting their cash. It's about where they're putting new capital, right? Most clients aren't going to sell equities here. I mean, they have tremendous gains over the last five or ten years. You know, you take a pretty big tax hit to make that switch. So it's more about where to put new capital. All right. Thanks for coming back, bye. Great to be here. Nice to get up with you again.

37:37Scott Wapner: Thanks so much. Tarahana, Goldman Sachs. Coming up, another major shakeup in the world of golf. John Rahm said to be leaving Liv. What that exit means for the league's shaky future? I think you can still call it that. That story's next.

37:58Welcome back.

37:58Scott Wapner: A major blow to the future of Liv Golf. Two-time major champion John Rahm leaving that league as it fights to emerge from bankruptcy. our Alex Sherman following the story. This was always the question following what's been taking place lately, whether Rahm would stay, whether DeChambeau would stay. What do we know? So we still don't know on Bryson DeChambeau, but we do know that Jon Rahm is now the latest in a series of players who are saying that they do not want to be a part of Live 2.0. This follows Sergio Garcia, who recently also said no. Then you back it up a few months, Patrick Reed, Brooks Koepka, They said, no, we're still waiting on Dustin Johnson and Phil Mickelson, among other players, to decide whether or not they want to be a part of this idea of a new Live Golf, a Live 2.0.

38:46The player deadline is October 25th. So we will get a sense of those outstanding players soon enough about they're going to need to say either yes or no here. BC Partners, who has stepped up to be the lead investor in this new conception of LiveGolf, they will have the ultimate yes or no to move forward with a LiveGolf 2.0, in part based on the players that say yes or no. So that is one of the clauses in this new agreement that they have come up with with the league itself in order to decide whether or not this is a viable product moving forward. So after that deadline of October 25th passes, in essence, BC Partners will take a look and say, you know what, we feel like this roster of players is good enough to move forward or we don't see a future here.

39:36And they will, you know, at that point, bow out. And that would really be the death knell of Live Golf. Right now, if you take a look at what BC Partners is saying and also the CEO of Live Golf, they're very much gung-ho about the prospects of this. I mean, they just spoke last week, and both Scott O 'Neill and the lead investor for BC Partners expressed optimism moving forward.

40:01Scott Wapner: So that's where we are now, Scott. But still fair to say we're on shaky, if not unsettled ground, until we hear from the players around that October 25th deadline, and then the lead investor makes a decision, yay or nay. And when you say players, it's really Bryson DeShim. I mean, that is the big next shoe to drop here, whether he's in or he's out. At that question, if he's in, you could then say, well, is he enough? But if he's out, then I think there's a real question about whether or not this league can move forward. All right. Appreciate it, Alex. Thank you. As always, Alex Sherman. Coming up, more leadership changes at Apple.

40:38Scott Wapner: Details inside the market zone next.

40:46Scott Wapner: Closing bell market zone time. Fortress investments. Elizabeth Burton here to break down these crucial moments of the trading day. Oliver Rennick is standing by in Chicago. CBO Global Markets will play some options action. Mackenzie Segalos watching Apple Forrest. There's news there. Get to that in just a moment. But let's play options action first. Ali Ware. Hey, Scott, this record rally has been met with much skepticism. Look at today's open interest ratio of puts to call options in the queues. It's the highest since late June at almost one and a half in favor of puts. The last time it was this high was in the midst of a choppy August, and it wasn't a great timing tool.

41:27But it did give a useful heads up at its year-to-date high of 1.7 back in March before a steep spring sell-off. And that metric, though, is not a be-all, end-all. Some big traders today stepped in front of those put flows, including someone who sold$15 million of 740 strike puts just six points away from here. And the biggest options purchase of the day was a trader who bought$8 million worth of 835 strike calls expiring in March. Scott, those need a 14 % rally in queues to pay off.

42:06Scott Wapner: Oliver, thank you. That's Oliver Rennick. Let's go to Mackenzie Segalis now for that news on Apple. What do we know here? So, Scott, Apple is the only MAG7 name in the green today. as the rest of big tech sells off on that open AI revenue versus spending concerns that you were discussing earlier in the hour. Now, Apple, of course, has been the clear outlier on CapEx, spending less than$3 billion a quarter while leaning more heavily on partners like Google and its Gemini models instead of building out the same level of AI infrastructure itself. Apple shares also getting a lift today from another leadership reshuffle under John Ternis.

42:38Long-time dealmaker Steve Smith taking over M &A from Adrian Perica with that team moving back under the CFO. Apple historically hasn't done many big acquisitions. It's mostly bought smaller companies and teams while handling broader corporate development and partnerships like the OpenAI deal. So the question now is whether that changes under Ternus, especially with Apple still behind in AI. A more aggressive M &A strategy could become one way to close the gap, Scott.

43:06Scott Wapner: Mac, thank you. Mackenzie Sigalis, Elizabeth Burton, sitting next to me, as we said, Fortress Investment Group, chief strategist, welcome. What do you like best in the market right now? Everything. I like floating rate credit, specifically private credit. I know you're probably not going to believe me because of where I work, but I promise I do, and I haven't said it on here before. Okay. But I think this is kind of the perfect environment, and I can't make a really big case right now for equity. Wow. So it's the perfect environment for private credit? It's the perfect choice right now, relatively speaking, for private credit.

43:37I think, look, the economy is resilient, but we do have higher rates happening right now, and we've still got sticky inflation. We've got a compressed equity risk premium. If you pull some of the filings from the BDCs, take your favorite, look at the returns on that, unlevered around 9%. You've got unlevered 9 % returns in something that's senior secured, bilaterally negotiated. Why wouldn't you take that over equity market, let's call it 6 % to 9 % expected return over time, in a riskier position with a lot of concentration risk.

44:09Scott Wapner: It's interesting. We did a story earlier this week with a guest on a survey that said investor appetite towards private credit, even after all of the software stuff and the countless stories that we've done and everybody else has done and the amount of conversation it's taken up, hasn't waned at all. Investors still love this stuff. Yeah. You know, I think a lot of the headlines were in a very specific part of the investor group. but it was mostly retail, that were having trouble with some of the redemption cues. On the institutional side, I think there's certainly a healthy appetite that's broadened out.

44:41It's not just direct lending 1.0, you've got assets-based, you've got specialty finance, you've got secondaries coming online. And there's been huge disappointments on the private side of equity. And if you want to have a private investment with some sort of protection in it, I think private credit offers a lot of opportunity. And if anything, parts of it, these yields are resetting at a higher level and that's good for clients.

45:01Scott Wapner: Yeah. Are we still going to be moving to different parts of the AI story, do you think, related to private credit? We're just sort of moving along the tracks here. What was software is going to be something else, which may present risk in and of itself, too. I think it is isolated for now. I think you've seen pockets that are also seeing some stress, like health care, paper products. There are parts of it, but there are certainly more opportunities, and it's going to have to broaden. On the AI story, there's a trillion dollars needed from private credit. The industry is, what, one and a half. It's going to have to broaden out for the U.S.

45:32It's been predominantly U.S. finance. We've seen some from Canada, very little from Europe. So it's going to have to broaden. But there are ways to play AI in private credit that have less exposure. For example, intellectual property. Who knows who the winners are going to be in five years, but the underlying technology might be the same. So there's a lot of different ways that you can kind of think about this. Look for investments that have other uses beyond the AI story.

45:55Scott Wapner: How are you thinking about rates? You know, I don't know, 10 years backed up 50 basis points in 30 days. You know, I thought the 10-year was going to five months ago, so we're kind of there. Now what's next? I think you see it in the 5 % to 6 % level, which is around fair value of the 10-year. You know, coming up on the Fed meeting, if they choose not to hike, I think you're going to get a little pop there. You'll see a return of the bond vigilantes. That problem has not been solved. Nothing has been solved in the last 30 days. And, well, we don't think they're going to hike in October, do you?

46:24So I'm probably a little out of consensus here. I think it's closer to 50-50.

46:27Scott Wapner: Really? I do. Well, we'll see. I mean, December seems to be very much. December, it was almost 99%. This morning it looked like it was closer to the high 80s, so it's pulled back a bit. It does look like it does go. Governor Chris Waller, he was pretty hockey this morning. We'll see you soon. Bell's ring in the way. Thanks for back to the floor. That doesn't work out. Dow's actually going to go out green. And we've recovered a bunch from that headline midday or so. I'll see you tomorrow.

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