Yields Spike As Consumer Confidence Drops… And Altman Weighs In On AI Pacing 9/29/26

21:10Tim Seymour:Where the handoff is. The other big AI event today, OpenAI holding its annual developers conference. Professor Kate Rooney spoke to CEO Sam Altman and CFO Sarah Fryer earlier today. Kate, what's the latest? Hey, Melissa, that's right. We are here at OpenAI's Developer Day in San Francisco. It segues from what you guys were talking about. The theme of the day is bots. In particular, OpenAI announced DOTS. So this is their autonomous agents that can work on your behalf, work behind the scenes. I would say that's the biggest headline that we got today. Also, ChatGPT got an update on weekly actives.

21:44Tim Seymour:1.2 billion worldwide. And then also, I mean, I should say this group here is really the next generation of big companies. There are a lot of startups here. These are kind of the power users of AI that OpenAI is trying to court and trying to convince that their technology is the best. It's the one they should be using. But you have the split screen where you have the safety debate at the same time where OpenAI has had issues. We talk about hugging face. We talk about some of these rogue agents going off the rails. We spoke to Sam Altman, the CEO of OpenAI earlier, who said that they are, in some cases, walking back some of this technology and in other cases, depending on the situation, evaluating safety when it comes to what models should be released.

22:25Tim Seymour:I also asked him about liability. You know, we think about these startups and companies using AI. I asked him who's at fault, really, if something goes wrong. Here's what Altman said. If you think about the auto industry, for example, if there's faulty parts, you know, know, you can be liable in some ways there. If the car manufacturer puts them together in a way that's outside of the spec of what they're supposed to do, then the car manufacturer could be. And if someone's driving drunk, it's their fault. So, you know, depending on whether the fault is in the model and how it's used or someone misusing it intentionally, I assume we'll have like a, you know, a new liability framework.

23:02Tim Seymour:Mel, we also spoke to Sarah Fryer, the CFO of OpenAI as well. We got news and had confirmed a Bloomberg headline earlier that OpenAI is in talks to raise about$30 billion in private markets. That would launch its valuation to$1.4 trillion ahead of an IPO. She wouldn't comment on that specifically, but did confirm that their annualized run rate in terms of revenue grew about 70 % in the quarter, said they are seeing a lot of momentum, and pointed back to this DOTS agent, said it is a way for them to grow revenue, and it's paid versus Muse, which is free. So, thinks that that's going to be a tailwind for them.

23:37Tim Seymour:All right, Kate, thank you. Kate Rooney, interesting to hear the liability question, because if you think about, I mean, if there is liability assigned, then you have moral hazard in terms of going fast until you break something because you're on the hook for whatever is broken. But in this case, you know, what he was pointing out were very discrete instances where damage is sort of defined in this box. Here, we're talking about an AI agent that could go rogue, that could be deployed by a company by accident that will then have an impact on another company or an infrastructure that belongs to the public.

24:08Tim Seymour:I mean, the sort of variations of how you can bring this is endless. Yeah, where does the buck stop? Right. Not here, everyone wants to say. Right, right. Yeah, I don't know. That's an outstanding question. I mean, we had, was it Gary from the other day on talking about, yes, Gary Marcus talking about this idea of if a person were to be an actor that did these things, right, and broke into what— They would be in jail. Yes. And yet here, it's sort of like, well, it's the price of innovation. Right. I don't know. If you were at that—it sounds like from that White House meeting today, keep going.

24:47Yeah. We got you. But don't worry. This is morally binding.

24:52Tim Seymour:Coming up, could Meta take a bite out of Apple by one analyst's warning of a muse threat for the tech giant and the part of its business most at risk? plus a binging bounce in Netflix. Shares rebounding from two-month lows, the reason one Wall Street firm is getting bullish and where shares could be streaming to next. Don't go anywhere. Fast Money is back in the day.

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26:47Tim Seymour:Welcome back to Fast Money. Bank of America issuing a warning today that Meta's Muse AI agent could pose a risk to Apple's services business. Analysts saying the agent could shift spending away from the tech giant by transacting on users' behalf rather than routing fees through the App Store. B of A did keep their buy rating on the stock, though, pointing to Apple's grip on hardware and devices. Courtney, what do you make of this call? Interesting that it would be the services. They're saying whoever owns sort of whatever routes that transaction is the winner of that cost. It won't go to the App Store anymore.

27:20Yeah, I mean, it could be. I think that these are all going to bring up new concerns. I don't think we have thought about before Muse even existed here, right? But I think ultimately when you look at this, Apple's AI strategy is really their on-device AI. So, yes, maybe it takes away from their services, but do they win in this other new area that they're trying to win in AI? But also, I think when it comes to Muse, it's pretty interesting that today it was actually up on the news even when OpenAI is coming out with dots. So you're seeing, like, more competition. But then you get this note out today.

27:45Everyone's kind of assuming that Muse is the winner here. And I think that's kind of an interesting thought process here. They might be. But Gene pointed out earlier, there's now seven of these agentic AIs, eight maybe once Anthropic comes out. At what point maybe it is Muse that takes away from Apple. Maybe Siri gets it together. I don't know. Or one of these other companies. So, yes, is it at risk? Yeah. Is it Muse who does it? I think that's that's the big question still. Isn't Apple, the app store, 86 percent of what they do is commission free. They get it on 14 percent where they have the 30 percent commission after the first year.

28:17Then it goes to 15 percent. But none of these things that Muse is going to be touching are actually what Apple gets paid on. Apple gets paid on gaming and things that are bought inside of gaming. Muse is not going to touch gaming. Muse is going to touch your food delivery. Muse is going to touch your airline tickets. Apple doesn't get paid on those. So I get the thesis. But in practice, I don't think it actually happens right now. So we're not talking about a huge portion of the pie and we're not talking about a huge amount of commissions. I don't know what Muse is going to get paid. I thought this MongoDB thing was kind of mind blowing, actually.

28:56And in terms of enterprise, focus on enterprise. Yes. And so I don't know what they're going to. I mean, they plan on getting a cut of a lot more things than I originally thought, I think. Yeah. Right. So I don't know. I don't know what's safe. But it does sort of feel very reminiscent of where we were with this apocalypse, I don't know, six, eight months ago. And some of them are thriving and some are really not.

29:21Tim Seymour:Coming up, someone on Wall Street is starting to tune in. Why one firm is getting bullish on Netflix, even if the upside isn't as great as it once was. You're watching Fast Money Live from the NASDAQ Market Side in Times Square. Back right after this.

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31:17Tim Seymour:Welcome back to Fast Money. Netflix getting a rare upgrade today as analysts at Deutsche Bank upgraded the streamer from a hold to a buy saying concerns over U.S. viewing trends are overshadowing international strength and an ability to leverage AI across the platform. Analysts, though, did lower the price target from$100 to$95 after adjusting operating income and free cash flow estimates there. They're saying, you know what, the stock already sort of factors in this mature U.S. business, but undervalues a very high growth international business that Netflix has. Well, one thing that's, first of all, the valuation has come down a lot, right?

31:52We are very much at a sub-market multiple for Netflix that I don't think should be a sub-market multiple company with a great balance sheet. One of the things that I thought would happen in AI was that the cost of content would come down, Actually making the shows comes down. Maybe that's true. But what else has happened is the cost of content has gone up. Right. If they're trying to be YouTube light or YouTube competitor and they're paying a lot for content there, they're paying a lot for content, live sports. They're paying a lot for content everywhere. So that that I didn't get right. I'm long.

32:27I've been long for a long time. I like it here. I think there is still growth to be had. And I think at this valuation, the risk reward to me seems very compelling. But, you know, to be fair, I am long already. Yeah, I would agree. I think I think the fact that this has come down so much, I mean, you're looking at 18 to 20 times forward earnings here, which is is much cheaper than where Netflix should have been, historically speaking. And I think it's ultimately worth something to look at here. But I think one thing we need to see is when we look at their advertising revenue, That's going to really have to do a lot of the bulk here if you're seeing this mature U.S.

32:59business at this point in time. If you're not seeing as much subscriber increases or additional users, that's really going to have to pick up the steam here. So I think seeing does that happen is something you absolutely want to watch when it comes to Netflix. I mean, the stock has, to Karen's point, it has re-rated. You're paying 22, 25 times where a couple of years ago you were flatlining around 43 times. When you look at the chart, we're back to the same level two years ago where the stock actually took off. So if you're not an owner of Netflix, I would say you could probably take a stab at it here, keep it on a short stop.

33:29And then if you are an owner, I would not be selling it. Now, you've waited. You went through the pain. Whenever around this table, we're streaming. I'm still streaming from Netflix first. And then I go somewhere outside of that. So I get the concerns, but I would be a buyer of the stock here.

33:45Tim Seymour:Coming up, navigating the staggering rise in rates plus a drop in consumer confidence as inflation fears ramp up. The details when Fast Money returns.

34:01Tim Seymour:Welcome back to Fast Money. Stocks largely in the red today. The Dow down a quarter of a percent. S &P 500 and Nasdaq posting small losses, but the Nasdaq 100 managing to see a small gain. Semi-stocks seeing gains with names like Marvell, Armholding and ASML among the group's leaders. Micron also higher ahead of its earnings report tomorrow. The stock has nearly quadrupled this year, but has plateaued over the past few months. And Boeing jumping after hours after the company won a Pentagon contract to supply the Navy's next-gen fighter jet. The contract valued at more than$20 billion. Meantime, Treasury yields continuing their trek higher.

34:35Tim Seymour:The 30-year now levels last seen in 2002. Ten-year yields closing in on 5.3 percent and the two-year climbing just shy of 5 percent before pulling back. The gains coming as inflation concerns continue to rankle the market and consumers. The conference board, we say reading on consumer confidence, plunged to its lowest level since 2014 in September. That took a bite out of retail stocks, AutoNation, Dollar Tree, Walmart, just some of the names seeing outsized losses. So if rates keep rising, is there even more pain to come for the consumer? And by the way, we just saw this cross, the 30-year fixed mortgage hitting 7.58 percent, which is the highest level since November 13th of 2023.

35:14Tim Seymour:So another way in which a consumer sees some more pressure, Elizabeth. Yeah, I do think that the consumer is going to start to feel some real purchasing power degradation going forward here. And, you know, on the bond market, I was here in June or July saying we were going to five and I got so much flack for that. We're there. Maybe we're in a better spot. But I still think you could see fair value on bonds at closer to 6 percent. So on the 10 on the 10 years specifically. So I don't know that all that all that pain is gone. What I don't tend to care that much about consumer sentiment surveys.

35:49I don't put a lot of stick in it. But I do think there's some tail risk here for the administration that if you're getting these super negative consumer sentiments, you've got higher yields. Does that not put more pressure on Warsh, at least from the White House? Like we've got to do something here. This isn't moving in the right direction. But the interesting thing about this move in yields is that if you think about the move index, the bond market volatility index, it was a nothing burger basically from March until last week when it went up like 30 percent and hit highs that we hadn't seen since Liberation Day.

36:20So I think things are finally starting to wake up. But most of the real the yield move lately has really been a real yield move.

36:28Tim Seymour:Some people would say that this is all because we have a great economy. Yeah, one person would say that or two people would say that. I think a lot of economists would say that with, you know, that what we're seeing, you know, we're seeing people still have their jobs. They're still spending. The numbers are holding up. We've got a great stock market. We've got earnings growth. Look, we do have a strong economy. I think, you know, there's a couple of things behind that. And Worsh said it himself. We've got like pretty loose financial conditions other than than yields. We've got, you know, an equity market close to all time highs.

37:00We've got a weak dollar. So we've got loose financial conditions. Things do look OK, but it's precarious and it's resting on a handful of things. So on the labor question, I've been a contrarian there a little bit, but I don't actually think the labor market is as strong as everybody is saying. It reminds me of a time a decade ago when they were saying everything's fine, everything's fine, everything's fine, everything was not fine. And I also don't think that we've done a really good job of estimating labor post-COVID, post-immigration policies. So I think you might see that change going forward.

37:31And you have to remember that on a wage basis that people are starting to finally see that pinch in their paycheck versus inflation. And you get to the point where, you know, I had a conversation with my husband who's staying home now if this doesn't you know, if it doesn't make sense to send the kids to daycare. So I think you might see those conversations pop back up. You know, if the labor market isn't as strong as we think it is, then there's really no reason to push for for rates to be higher than where they're at now. Now, you know, I think for better or worse and probably better, the Fed has taken a backseat on this last maybe the last week or so.

38:06We've seen real real rates rise. But break evens, 10 year break evens, five year break evens really haven't moved at all. So this is not a longer dated inflation worry. This is a now inflation worry. So I saw that pocket between 505 and 530 in the 10 year. There's probably another pocket to 555. And then we get to that 6 % range. I think you could see to pop higher if they don't hike. I know that there's a lot of people who are strategists who are saying that there's not going to be a hike in October. I don't put any stake in that. You look back, 27 past elections, 33 % of the time there was an action.

38:44So that's nine. Yes, six were cuts. That tends to be more popular than a hike. But it still happens. And we had it happen in 2022. We had action happen there, so it could happen. But I think it's a mistake. I do think we have an underlying inflation problem. And I don't think that it's just, you know, two wars going on. And I don't I don't think it's just a pure energy crisis. What I will say about the energy part of that Fed decision is they always say we're going to look through these temporary blips. Well, now it's not temporary. Like I found out at work the other day that a diaper cost raw material, something a lot of people in America buy, 65 percent of that has oil related components that are rising that cost.

39:18So it's going to start to hit parts that aren't immediately obvious, and they're going to have to do something about that. And Warsh himself, let's take the metric he uses, he wants to see that the percentage of components in PCE are declining, not rising, and they're still elevated. They're 60-something percent, according to his numbers.

39:35Tim Seymour:So what you're painting in terms of the picture of the economy and thinking about that 6 % on the 10-year year, what happens to stocks? Where should stocks be? So I think credit investors tend to be doom and gloom. I think stocks are OK. I think it depends on this. You said this earlier today. I even think it depends on the speed. It depends on the velocity. And Eddie Ardenny was on earlier this week, and I agree with him. If you get to a place where yields are higher than nominal GDP, then you run into a problem because then if it's too low, you're funding zombie companies. If you get too high, good projects aren't getting funded.

40:10I think stocks can continue to go from here. They've shown resilient earnings. We're not at problem levels yet. But if you go to 6 percent, you know, liquidity split, that could be a problem. All right.

40:20Tim Seymour:We do have the text of the A.I. agreement that was signed at the White House earlier today. President Trump hosting the Truth Social, the White House accord on what he's calling super intelligence. The document lays out four layers of controls, including partnerships with an independent auditor to assess frontier models and designating an independent committee on the company's boards to oversee the effort. Despite all the companies represented at the White House today, the letter is only signed by the Trump leaders, Trump and leaders of NVIDIA, XAI, Meta, Google, Anthropic and OpenAI and says that over time it may make sense to codify these steps into laws or regulations.

40:57Tim Seymour:Right now, he says this is a self-policing agreement that is morally binding. Coming up, the stocks to watch as the gaming industry goes through some big changes and how the rise in prediction markets is shaking up the space. That's when he's back at two.

41:18Tim Seymour:Welcome back to Fast Money Casino. Stocks under pressure this year as the gaming industry faces threats from prediction markets and a decline in international travel. Contessa Brewer is live in Las Vegas with more. Contessa. Hi there, Melissa. Yeah, Caesars has the rare stock in the green year to date. CEO Tom Reed told me today he's absolutely gleeful at the freedom from caring about his share price since Tazers is being sold to Fertitta Entertainment. MGM CEO Bill Hornbuckle told me today, well, actually he wouldn't tell me what the right offer price is for MGM, but Barry Diller is no longer in the market to buy it.

41:52I asked Hornbuckle, OK, well, is it true you're considering buying People, Inc.? Here's what he said. I love you. Look, we're going to do, as we've always wanted to do, what's in the best interest of shareholders. And trying to unlock the value of a company that we think is grossly undervalued, particularly when you look at the sum of the parts, in a very complicated business, whether it's BetMGM, Asia, Japan, now the Las Vegas story, the idea is to unlock that value. And so we'll continue to pursue that mission and see where it goes. And that's... Is that a yes? We're going to... No. I didn't say, yes, you did.

42:35Wynn Resort CEO Craig Billings told me he's bullish on Vegas, on Macau,

42:40Tim Seymour:and his new integrated resort in the UAE. In spite of the Iran conflict, he says life on the ground is normal, supply chain is normal, just elevated costs related to the conflict. So he thinks they're on to open in September of next year, Melissa. Have you heard anything about the trends in Macau lately, Contessa? Well, what happened is the visitation just rebounded for August. They set their best August ever for visitation in Macau. The problem is visitation doesn't translate to gambling revenue. And there's a real disconnect between how much those visitors are spending on stuff like, you know, coming to the NBA China games, which happens next week in Macau.

43:20And I'll be there. I think the issue for them is, are the gamblers coming? Are the big spenders coming? And both Bill Hornbuckle and Craig Billings, CEOs of Wynn and MGM, said they're still seeing those big gamblers coming and that it looks good, even in luxury retail, which has been hit in other parts of China by customers who seem like they've been pulling back a bit.

43:43Tim Seymour:Contessa, thank you. Contessa Brewer in Las Vegas for us. Steve, where's your trade here? Yeah, they all look terrible. I mean, if you think about discretionary dollars, this is the discretionary of discretionary dollars. and you have to travel to get there physically. It's all about online gaming. So I would say if you want to be in the gaming world, play the online gamers because those are the ones that you're attached to, that you don't have to travel anywhere, that you can place your bets. This is the real growth area, not the actual physical. Coming up, smart ring maker Aura postponing its IPO on the day shares were supposed to price.

44:17Tim Seymour:What is behind this decision? Is there a broader implication for the IPO market? More Fast Money in 2.

44:30Tim Seymour:Welcome back to Fast Money. Smart ring maker Aura announcing it will postpone plans for its Nasdaq IPO due to uncertainty in the market. The company, which was supposed to price shares today, saying the delay comes despite strong demand and strengthening of the business since it launched the IPO process just last week. It's just the latest company to delay offerings after nuclear services company Holtec and Bamboo Insurance did the same in the past 10 days or so. Karen, do you think this is any indication of the pipeline? Maybe. I think that, well, these consumer products have not a great history, some of them.

45:05I do have an O-ring. I like it. It tells me a little I sleep. I knew that, but it's good to get the affirmation, I guess. But I think if you think about some other things like a Fitbit or a GoPro or things like that came out, you know, hugely successful and then not. It is interesting to me. My read through is, well, the IPO pipeline, what does that mean for the big money center banks that are in the business of feeding that pipeline? That's not a great data point.

45:32Tim Seymour:Yeah. At a time when financials are down about 7%, 6 plus percent in the past month, Elizabeth, do you like financials here? Yeah, I think some financials are baby with the bathwater moment here. There's a couple I won't name specifically, but they operate more like tech companies. So I'm not really sure why they're getting beaten up so much. But I think there certainly are problems given the yield curve with some of these regional banks. Yeah. Yeah, and I think what's interesting, too, is I think this IPO is probably more a function of it being overpriced. Because I think when you look at it, there was what?

46:02It was like three quarters of it were existing venture exiters, right? So you're saying, OK, I'm getting into this. Most people who are trying to get out at the same time. And a lot of money they were raising was going in to pay taxes on the existing employees' stock options. So I think that's the question is, like, are we just paying too much for this? I think this is more of an aura question than an overall IPO question. That's my takeaway from this.

46:23Tim Seymour:Up next, final trades.

46:31Tim Seymour:Time for the final trade. Elizabeth. C-I-B-R, NASDAQ, cybersecurity trade. We don't know what the rules of the road are going to be yet, but we all want an airbag. All right. Great to have you, Elizabeth. Thank you. Karen. Yes. Zoom communications down like 20 % in the cesspocalypse. Lots of cash, lots of anthropic ownership here. Courtney. Financials have been down on rates being up. I think I take a look at J.P. Moore again as we approach earnings season here. See. Apple. All right. Thank you for watching Fast. Matt and Money with Jim Cramer starts right now.

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