The AI Trade in Focus: Altimeter's Brad Gerstner joins "Halftime Report" live in San Francisco 10/15/26

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0:58Scott Wapner: I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast, the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in.

1:15Scott Wapner: Carl, thanks so much. Welcome to that special Halftime Report today, AI in America. I am Scott Wapner at One Market in San Francisco, and over the next hour and during closing bell later on this afternoon, We'll look deep into the AI trade, assess the risks and rewards of this societal transformation and what the recent action in the stock market suggests about the road ahead for investors. Altimeter's Brad Gerstner is with me today for the hour. He's been in nearly every major meeting at the White House that they've held on AI. Snowflake's CEO is going to join me as well today as the future of software in this AI age remains a hotly debated subject.

1:50Scott Wapner: The Investment Committee with me as well. Josh Brown, Stephanie Link, Malcolm Etheridge. Can't wait to hear from everybody today. You know what the market picture looks like, but let's show you because the Dow's up big, but AI stocks are not. I want to start with you as we think about semis, what's happening with CoreWeave, and we'll get to CoreWeave more specifically in a moment. Is this about AI slowdown concerns? Is this about debt levels and interest rates going up? Is this about choice C, all of the above? What do you think? Yeah, of course, it's all of the above. First, great to be back here.

2:25We talked about this maybe a month ago, right? The number one question in the market today is, do the AI revenues justify the CapEx buildout? I mean, frankly, it goes back to the conversation I had with Sam Altman on my podcast last October when I asked him the question, how can you make a trillion dollars in spending commitments when you have 13 billion in gap revenue? Well, what happened this year is revenues exploded higher, right? Remember, the forecast for Anthropic at the start of this year,$30 billion. Now, a lot of the reports have them doing at least $100 billion. We'll get into that a little bit today.

2:57But the fact of the matter is AI revenues exploded higher this year. And now we're in this phase of consolidation. People are starting to worry, is open source commoditizing the frontier labs? Are the revenues sustainable? And at the same time, then they're hearing in the marketplace that things may have slowed down. So that plus higher rates, plus some of the political stuff going on in the background, background has people scared. I will tell you, I'm on the I'm on the more positive side of this, but I think it's good. We have this churn in the market. It avoids bubbles.

3:27Scott Wapner: OK, you're more positive. You're on the more positive side. But your actions suggest that you are getting more cautious, don't they? I mean, you've taken your exposure down. Yes. I mean, I did, you know, a presentation at the All In Summit about a month ago. I said I had taken my exposure down to medium, small. I think I had shared that with you just the week before then. And the reason for that is I saw a lot of these AI stocks in April and May. We had the biggest move in semis in history. Right. And that was that fuse was lit by the Anthropic Revenue Report in March of the year. And I just thought they got ahead of themselves that we were going to consolidate a little bit.

4:07And it turns out there were even more fears that came along, inflation rates, et cetera. So our exposures are the lowest they've been in three years, right, over the course of the last couple of months.

4:18Scott Wapner: The lowest they've been in three years. How can you then profess how sort of positive you still are? Because remember, remember, I live in two simultaneous but different worlds. One world is I manage money for people in a hedge fund. And so my job is to make sure I avoid some of the drawdown in my long only fund and in my growth funds and venture funds. We're investing for the next five to 10 years. So I'm telling you, when I look at 27 and 28, I'm even more positive and we can get into why. But you have to acknowledge that there's going to be chop along the way. So it doesn't surprise me at all that we've had some of that chop, some of that consolidation.

4:56Why am I getting more positive? Why am I leaning in and maybe start buying over the course of the next couple of weeks? Because I'm seeing prices come in and start to get enticing.

5:05Scott Wapner: Well, I mean, Josh, that that's the trillion dollar question, whether there's more pain to be had in this market, whether we're going to get to some levels that are attractive, not only to a Brad Gerstner, but to a Josh Brown and any investor who is now watching this program, thinking about where we are and where they think we're going. yeah look i i think something really interesting happened this week we finally got the answer or part of the answer to the riddle that everybody's been wondering about the question was why have rates been marching higher really since june but accelerating into the end of september and early october and it was this big debate is it oil prices uh feeding into inflation expectations Is it reverse crowding out where all this debt coming from the AI CapEx build out is making it so the government has to raise the rate in order to entice buyers?

6:02I think what we learned yesterday was the latter is a really big driver of rates. Think about what happened. We had a hot PPI, hot CPI doesn't really matter because in the end, bonds fell when it looked like there would be less bonds coming from the core weaves and the neoclouds and maybe even some of the established incumbents in in data centers. all of a sudden we had this crazy move in rates, what looks like a blow off top in the five year, in the 10 year. That tells you how much of the rise in rates is coming from just too many bonds being offered by corporate America. If we think there's going to be a slowdown there, and that's what the stock prices of Nebius and Corweave and the rest tell you, all of a sudden we get rates come in and look what's working in the market today.

6:53Everything other than AI caught a big bid from health care to even staples. We're seeing housing related plays move. That's a really interesting situation, I think, for people that are trying to figure out where from here. The answer for stock market investors is, hey, do yourself a favor. Instead of adding the fifth semiconductor name to your portfolio, look elsewhere.

7:17Scott Wapner: That's what the market is telling us today. Well, Steph, there's been a debate about the looking elsewhere, right? I mean, the market became much more concentrated at the expense of the elsewhere, which you've been advocating for repeatedly. And now maybe the pendulum is starting to swing back the other way as we ask more serious questions about where we are in the AI trade. Well, I don't think it's one or the other. I think it's both. And you know, I have been adding to technology on any of the declines, But I also have been very much exposed to, yeah, the 493 other stocks and other sectors. And I think the reason is because the economy continues to grow in the face of higher rates and higher inflation.

8:01We're still growing north of three percent. And like today's data, I know we were all focused on PPI and yesterday CPI. But did you look at retail sales, how great that was? And weekly jobless claims, a four week moving average of one hundred and ninety eight thousand. the lowest level since 1969. You look at some of the manufacturing regional series, like the Philly Fed, the Empire Fed. There are a lot of good things that are happening beyond technology, beyond AI. And yeah, I think we should see a catch-up because I think you are going to see earnings. I thought the bank earnings this week, yeah, a little sloppy.

8:37But outside of capital markets and M &A, the rest of the businesses are humming. And you have these stocks that have been, And at one point, Morgan Stanley was up 25 percent this year, down flat on the year. And so the valuations are coming down. At the same time, Scott, in the semiconductor space, I do not think that AI and the food chain, I don't think it's dead. We haven't seen any kind of any kind of change in the one trillion dollar spend that we're seeing from the hyperscalers. Rate's certainly going to hurt some of the bad players that have bad balance sheets. Poor Weave has 50 billion in debt.

9:10Oracle has 167 billion in debt. So sure, higher rates are going to hurt them. But you've got cash generators that are actually down just as much that are opportunities. NVIDIA and Broadcom, Micron, I know we'll get to all of them later. But you have very healthy companies that are getting caught up in this tailwind of just concern. And I think you're going to see opportunities in tech as well as beyond tech.

9:34Scott Wapner: Malcolm, what do you make of what's been happening with the AI centric trade? Yeah, I think that what we're seeing is potentially a changing of the guard. So I heard Brad mention we're probably going to see a tremendous amount of chop between now and when we finally get there. I'm listening to Josh and Stephanie talk about looking outside of the mag seven, let's say, or the hyperscalers for the opportunity to stick with the A.I. trade or to diversify. And what I think we're looking at is not necessarily a changing of the guard in the sense that A.I. is no longer going to be the thing that's powering the economy as well as the stock market.

10:05Maybe what we're looking at is just some other companies beneath the surface that we haven't really paid attention to because they're not the chips. They're not the core weaves of the Nebius. They're not the hyperscalers, the Mag7 that's doing all the building. They're the companies that are really going to weaponize the AI technology as it's as it's being constructed right now. And they're going to figure out ways to do a lot more with a lot less. And that is what's going to drive the second leg of the AI revolution. And I think that's probably the question that we should be looking to answer.

10:34Is it one where we've got to actually take the market down entirely to make that rotation? Or is it one that we can successfully make the leap between where we are right now and those companies that will come out as the new leaders at the forefront of the AI revolution? I'm thinking software. Obviously, that's a very direct link. But I'm looking also at the companies beyond that. You heard Brian Moynihan, for example, talking about how they've had to add 1 ,000 people to their 3 ,000-piece orchestra to help build out their cybersecurity outfit. But it's also expected that they're going to see something like a 700 million dollar savings starting next year just from what they've done to deploy AI across the bank.

11:12And that's one company out of however many thousands of global enterprises. So I think that's where the real opportunity is that investors should be paying attention to and figuring out how to get to where the puck is going.

11:24Scott Wapner: You, Brad, have really said, and I think you said it as much already, that sort of all roads kind of lead back to open AI and Anthropic. Right. And the hope that their revenues are going to grow fast enough to meet the commitments that the market expects them to make. It's kind of the whole story at this point. You were at the investor day yesterday. I was. You have. You've been an early investor in Anthropic. What'd you make of what you heard? Well, I can't get into anything that was, you know, that was said in the room yesterday. But what I will share is this. If I had to do a vibe check coming out of the room, right, I found it very fascinating.

12:04You know, you had a lot of the most important investors in the world in the room. And I would say the vibe check was a nine or a 10 out of 10. Right. Very bullish in terms of how they feel about this company. Now, they're probably looking at it over a one, two, three year time horizon, not over the next 30 days. If you look at what was reported that was said in the room and the reaction in the market to that was quite negative, right? Or at least my interpretation of it was quite negative. So you had this, you know, this asymmetry between, I think, how people feel about it. Certainly from an altimeter perspective, the information I've gathered over the last few weeks, including yesterday, make me more bullish on Anthropik, their IPO and the road ahead.

12:45not less bullish, but, you know, they're going to have to wait until they flip the S1 and they can share some of that information with the world, do their roadshow. And I can't wait for this company to get public because retail investors are going to be excited about this and long only and mutual funds and sovereigns and, you know, lots of folks and they should get the chance to invest in this business. And, you know, and then I'll be able to share a lot more, you know, of what we want to say. But the fact of the matter is, I think that AI, like I, you know, I just did this podcast with Jensen, you know, I think it's accelerating.

13:16It's accelerating because we're entering a recursive loop where the machine is building more of what comes next, right? The machines are building 80, 90 % of the code that, you know, that drives the next product release. That is a recursive loop that accelerates. Some people call this the singularity, right? But I think that that's what we're going to see in 27. So remember the breakthrough we saw with Opus 4.5 last December that led to Claude Code. Without that, we wouldn't have had any of these revenues. Okay, that was one product. Now imagine having a variety of those breakthroughs for cyber, for knowledge work, for bio, for material sciences.

13:53I think we're on the verge of having Claude Code moments for a lot of these industries, and it's going to drive a lot of it.

13:58Scott Wapner: I know you're limited, as you said, to what you're allowed to say, but I appreciate you confirming that you're in the room as an early investor. Our Kate Rooney is not limited, to what she can say about this. And you do have the numbers that were reported and how investors are reacting to what we know. What can you tell us? Exactly. Well, Brad, we'll let you off the hook. You don't need to share the numbers. We talked to some folks that were in the room. We do have those new numbers that were shared at Anthropics Investor Day here in San Francisco yesterday. So I did talk to folks who were in there, not Brad, but Anthropics did tell investors the revenue was just shy of$17 billion for the third quarter, that was up 45 percent from what we're hearing sequentially, I should say.

14:40So objectively, that is strong growth for any tech name. But for comparison, revenue was up about 140 percent quarter to quarter earlier this year. So the bar is just sky high for Anthropik. And a lot of these AI names, the street is reacting to that this morning. DA Davidson, I thought, put it well this morning. They said the market does appear to be reading the Anthropik update as a negative, which is understandable considering how on edge this market has been about anything around the AI trade. The bulls, though, are absorbing the news pointed to profitability. So this was a topic in the room as well yesterday from what we're hearing.

15:12Anthropic did tell investors it was profitable on an adjusted basis in the quarter, 80 percent plus margins. So the reaction to those results do, again, speak to expectations overall, plus some jitters about the spending behind the AI boom, if all of it is justified based on some of this revenue growth. Also, if Anthropic can support what has been reported to be a two trillion dollar valuation, That is the number that we have heard being floated. Anthropic is targeting an IPO before Thanksgiving. No date quite yet, guys, but we're waiting on that S1 flip. So Brad can talk about it.

15:43Scott Wapner: The not good enough seems to be the trending outcome, whether it's Piper Sandler today. And that's what they're saying. The numbers are obviously huge. You said, you know, you dropped the podcast that you just did with Jensen. Correct. Into which he's as bullish as he ever has sounded. It sounds to me about where he thinks revenue growth is going to go for the labs. Right. Right. I think I think Jensen in the podcast, I asked him the question, are you confident that they're going to 2x revenue next year? Which if they exited this year at what is reported to be 100 billion or something like that, that would be like 200 billion exit next year.

16:19So I wanted to know what his opinion was on that. He's a big investor in Anthropic. He's a big investor in OpenAI. And he said, I'm pretty sure it was something to the effect that at least 2x next year. So I think that a lot of the investors that are closest to the pipeline of what is happening on the models, remember this. All of the revenue is derivative of model capability. None of the revenue would have happened this year without Claude Code. Claude Code became better than any software engineer at writing software, so it replaced them. And that revenue skyrocketed. They're looking into the models that are already completed, Scott, not speculating on what they might do.

16:59The models that are already completed in the labs and saying with high confidence it's going to unlock other products like Claude Code. I happen to agree with that, but that's what makes a market. I also like the consolidation of the chop. I think the debate you're seeing in the market is the right debate. The questions are the right questions. And so we'll see when this thing comes public. I suspect if they choose to come public, there's going to be tremendous demand based on everything I know about the company. Remember, in the SpaceX IPO, I think it was$100 billion offering. You had, I think, about$350 billion of demand for that offering, and the stock's done incredibly well coming out of that.

17:38I suspect here you would have over$500 billion of demand for this offering. So I think the stock would do fine. Where it prices, none of us, like, I don't really care. I don't think the company really cares. Is it at$1.5? Is it at$1.75? Is it at$2? Like, those things are irrelevant if you're going to own the stock over the course of the next year or two. What do you think about that? It's a great point. I wonder at what point open source, what OpenAI has done. We know you're also an investor in OpenAI. What point competition starts to bite into the revenue growth? And I mean, there was a slowdown sequentially.

18:07So you look at the expectation, but that's slower than what they saw in the first quarter. What do you think is going on there? I mean, is it more competition? Is it open source? Or are people just getting burnt out from spending big on these expensive models? So first, I would say the open source competition, the open AI competition has existed all year. Right. So some people look at their Q2 numbers and say, oh, those were good. But they also had that competition there. So I might look for something else as explanation. I've seen a lot of reports out there on maybe, you know, they they turn the knob down on distillation.

18:40There's been a lot of conversation in Washington and other places about the need for the labs themselves to cut back on the distillation. This is Chinese models, mostly running lots, millions and billions of dollars of queries against these models, which generate revenue. Yeah. Right. But then allow those competitors to catch up. It's a national security threat. And so the company, as has been reported, you know, suggested they were going to do something about that.

19:06Scott Wapner: And that they were close to, you know, if not solving it, making significant steps against it. I think it's fair to say that Anthropic is devoting significant compute resources and significant intellectual resources to stopping this. Dario is very, very committed to that. And so if they were to do that and if that is what has been, you know, again, I've seen all these reports out there, the five to seven percent of revenue and all this stuff. That would be billions of dollars of revenue that would have been in Q2 but would have come out of Q3. So if you normalize those two things, it might look a little different.

19:40Well, the irony is that these open source models, the cheaper ones that are almost as good as Anthropic, you're saying, have been essentially ripped off from Anthropic and OpenAI. So I think for our audience, that is sort of the full picture here, that they make money on these. But what's happening in the background is they are copying those models and offering basically a discount version. Let me be very clear about two things. Number one is I want there to be a very vibrant ecosystem of competition, including open source, and there will be. You saw the results out of Muse this week. Thinking Machines is on the result of some big breakthroughs.

20:14Reflection just launched a new open source model. We see what Google is doing. So we have very, very healthy competition. I might argue this is the most competitive market in all of technology. And they're posting these results with that in mind. With that said, if you said to me, Brad, are they extending their lead over everybody else or is the lead shrinking? I think the consensus view in the world is that it's shrinking. I think and I am on the exact opposite side of that. When you think about recursive loops of intelligence, they increase at an accelerating rate. And intelligence is the log of compute.

20:50These guys are adding the most compute next year. So you're ahead. You're entering a recursive loop and you have the most compute. Now, you're comparing Chinese model to their released models. Each of these labs has models complete inside the labs that they're doing safety testing on and lots of other things. So they may be generations ahead to the benchmarks that you're looking at and comparing to. For example, Navier Stokes was not solved by Astra. So you have to ask what solved it. What solved the millennium math problems at OpenAI? Well, clearly an unreleased model solved those things that is much further along than the open source models.

21:30Scott Wapner: So you disagree then with Gavin Baker, who posts, quote, why are the frontier models cutting price? Might it possibly just possibly be the result of the fact that they're losing share to open weight models? You agree with that? So look at what, in fact, happened. Number one, every generation of model becomes much, much more capable. OK, so with the same amount of compute, you're producing a lot more intelligence density and you get to choose what to do with that game. You can either harvest it, in which case you keep the margin or you share that margin back and you get more competitive. What did AWS do over the last 10 years when they had those improvements?

22:08Right. A hundred price cuts over a course of 10 years to expand their competitive moat. It was beneficial for the consumer, also beneficial for the company. What I would say is look at their lower level of models, Haiku and Sonnet. They're going to have closed source models that are cheap, as cheap as or cheaper than the open source models. But on the frontier, the frontier intelligence, people are still going to pay a lot of money for frontier intelligence. You think they will? I mean, one of the other things I thought interesting that Gavin brought up was this run rate revenue that everybody's been so focused on.

22:40I had heard that Anthropics is trying to move away from that, of course, as they go public. But it's a snapshot in time that then people extrapolate, sort of look over the full year. Do you think we should be moving away from that? And that has sort of been how all the AI labs in private markets have been disclosing their revenue.

22:56Scott Wapner: Let me also add, before you answer that, on another post of his, no one, I mean literally no one in the supply chain takes the ridiculous$1 trillion in unfunded spending commitments from open and anthropic, even vaguely seriously. They're functionally irrelevant and should be obvious to everyone. So put that with what you're saying. And these are all sort of questions that are being raised on the other side of the bull bear debate. I talk to Gavin all the time. And he's, by the way, he's still positive on open AI and anthropic. I want to make sure that that's totally clear. I talk to him all the time.

23:26He's a great analyst. He's on the right side of this. I'm just saying there's not a lot of daylight. Gavin's like the frontier labs are going to capture a huge portion of the economic value and the open source labs are because we're dealing with the largest TAM in the history of the world. Go back to run rate here for a second. I agree with you. Run rate is valuable because it tells us something about the pulse, the health of the business at a given moment in time. I don't particularly love it when you release that as a public market company. It's like Roblox releasing DAUs every month, right?

23:57How many daily average users? Because we habituate people to that monthly cadence. And the stock's all like this. It's not great for investors. But I think another way to think about the health of the business, how many customers did you add last month? How much did they spend? How much of the Fortune 500 do you have? How much of the Fortune 2000 that you have? So I think if you peel back the onion on those things at Anthropic and OpenAI, they tell incredible stories. I will stipulate this. This is the largest cat. I've been out here for 25 years. There is not a single person or a single company, small, medium or large, that's not going to use AI.

24:33100 percent of them are going to use it. Let's say 20 to 30 percent of their usage is open source. And let's say 50 percent of their usage over time is going to be on the frontier for companies like Lilly and Bristol. and the most important companies in the world. It is a massive market for all these guys, and we are just getting started.

24:49Scott Wapner: Kate, thank you so much for being here with us. We'll see you later on this afternoon as well as Kate Rooney continues to participate in our AI in America special. Let's hit CoreWeave, okay? Let's do it. Stock's down again. Seems to be the poster stock right now at the heart of all of the concerns that we see. Steph was talking about$50 billion in debt. Yields are like 15%. CDS, you know, blowing out, et cetera, et cetera, et cetera. Um, where does your position currently stand in core? Yeah. So I don't, I don't own core today. You don't own it. Um, but you know, listen, we were, we were, we were pre IPO.

25:21Scott Wapner: I know you were pre IPO and you bet, you've been a big, big, you've been a big investor in this name. We have. Um, but you know, I told you that over the course of the last three months, we took our exposures down to the lowest levels we've had, not because of anything specific to core, but just because I said, AI is overshot. But we're going to have a period of consolidation. We wanted to make sure that, you know, we bought, we moved 10 % of our book two months ago into meta. We moved 10 % into Tesla. We were diversifying into other names that we were excited about. We had to go somewhere to get that capital.

25:53So we diversified out of AI and took our overall exposures down. Let me say a few things, though, about CoreWeave. Number one, the team that's running CoreWeave, one of the best in the business. 90 % of the stuff that I read out there is like misinformation with respect to CoreWeave. like the idea that they have to pay 15 % on their debt. No, 15 % is the public mark on 20 % of their debt. They're still paying 9 % on that. And all the stuff that is secured by the GPUs, which is 80 % of everything they borrow, is rock solid and relatively cheap. So I think there's probably opportunity today in CoreWeave in both the equity and the debt.

26:30I'm sure my team is back at the shop working away on that, and somebody will make the pitch to me. But, you know, this is what happens, Scott, in these moments. Everybody freaks out. Oh, my God, Anthropics revenue was a little less than we thought it was going to be. Oh, my God, we're not going to build out all this compute. So they just sell everything in the compute stack because it had gone up in a parabolic fashion in April on that.

26:53Scott Wapner: So Jensen was speaking in Sweden today, says NVIDIA doesn't need to backstop CoreWeave, says CoreWeave's cost of capital is, quote, actually decreasing, says Coral Weave's strength is improving every day. But the market seems like it's going to be jittery around this name for a while, simply because of the amount of debt that it's taken out. You've got the data center debate, which is now still feels like it's escalating. Yeah. I mean, I think there were some probably some weak hands that got funded by venture capitalists, maybe even some in the public market, some of them that had their IPOs pulled.

27:24So I think you'll see some washing out. But the fact of the matter is, I think Coral Weave, like I said, Mike Entrader, who runs that business, one of the best. I think their capital stack is good. I think their partnerships like they have with NVIDIA are fantastic. They're going to be one of the new AI hyperscalers, you know, these neoclouds that make it to the other side. But on a mark-to-market basis, let me just say one thing. They went public, I think, at$30 a share. I don't know. The stock's at$60 a share today. It's still a double off the IPO, which occurred sometime in the last two years, right?

27:55Not terrible. It's just that the stock went up to maybe$180 a share when people said, oh, I'm going to give it an AI multiple. And now they're saying, oh, maybe it's a GPU rental business. And maybe a GPU rental business should not have the same multiple that I'm giving to an Anthropic or a SpaceX. And that is the type of market behavior that we want. It's separating winners from losers. It's applying appropriate multiples. So I wouldn't panic in this moment. And frankly, I think if I were if you put a gun to my head today and said buy or sell core weave, I'm a buyer of core weave today.

28:25Scott Wapner: We'll leave it there. We'll take a break. We'll come back up next to debate over AI safety as more big players are now speaking out. This special halftime report, AI in America, back from San Francisco right after this. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture. Vantage Score is changing that by modernizing credit scoring. Vantage Score uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments.

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30:21Scott Wapner: We're back in One Market in San Francisco. AI safety and security has been the conversation ever since Anthropics. Dario Amadei published his Pace the Frontier letter. Back with Brad here. So Satya Nadella of Microsoft had his own post over the weekend in which he said, quote, we need a human controlled emergency break in case models behave unexpectedly or get compromised and can't simply rely on assurances from the model makers. What was your take on that? I think it's a good idea. And, you know, we had this meeting at the White House two weeks ago, and he shared good ideas like that, as did Jensen and Elon and Jeff Bezos and Dario and Greg Brockman, etc.

31:03And that's what was so terrific about that meeting. Everybody got to throw these ideas on the table. I actually think you'd be surprised how little daylight there is. Again, when I read Twitter, it sounds like there's huge daylight between where Dario is and where Sacha is, as an example. I think most people agree that we need to have some level of, you know, engineering software-led containment. You know, and there are other things we need to do. And perhaps we ought to talk about what those other things are. But I like Sacha's idea. I think other people like Sacha's idea. OpenShell, which was announced by NVIDIA, is another version of this, right, which is the ability to deploy these models safely.

31:38Nobody's going to rely just on the model companies. Of course, they're going to look at their entire data estate. We're going to have Shridhar on from Snowflake here in a little bit. And they're going to think about their current software providers and the things they can do to make sure that they contain or put a safety break on.

31:52Scott Wapner: What do you mean engineering software-led containment? Does that mean, I mean, do you think we need a larger regulatory look at all of this? Because that seems to be where the heart of the debate is now. whether we need some sort of agency-level oversight into what's happening here, because we truly don't know what we don't know about what these models are capable of doing. You know, I asked this question to Jensen on the pod. You know, do you worry about the world that you're bringing your kids into? And I can just tell you for everybody in that room, we all had kids. We all have kids. We all care deeply about the future of the country and deeply about the future we create for our kids.

32:34and I think we all have a lot of confidence we can do it safely. Let's just first talk about what we have.

32:37Scott Wapner: Well, who's the we? You guys? Everybody in that room, including a lot of regulators like, you know, Jay Clayton, who was in that room. But let me just talk about what we have, because I think it's very mischaracterized. We have a frontier model review framework, right, that is led by the Commerce Department, Casey. Every frontier model is going to get reviewed before it gets released. We are the only country on the planet that's actually sanctioned a frontier model and pulled it out of production like we did earlier this year with Mythos. So this idea that we're not reviewing the frontier models is a farce.

33:10Second, what we signed at the White House, the White House Accord on Superintelligence, is a Sarbanes-Oxley-like approach. Internal audits, external audits, board oversight creates massive liability for these companies. But that was a law.

33:22Scott Wapner: That was a law. And let me just give you the third. This is a non-binding agreement signed by a bunch of people. Let me give you the third leg on the stool. The third leg on the stool, the SI force led by Jay Clayton, Emil, you know, Scott Kapoor, et cetera, on it. That's going to oversee critical industries and cyber. So we have a three-legged stool and approach to regulation in this country. And I know that Bernie and Elizabeth and a lot of other people in the Senate are saying, oh, my God, we're not doing anything. This is crazy. We need to have the FDA for AI. Guy, we need to take a breath and realize there is a massive amount of work going on to keep America safe.

34:00We're four years into this. OK, we have very powerful models. We just talked about all the anti distillation work that's getting done. You can imagine that commerce is currently reviewing the next wave of models coming out of these two companies. Why haven't we released the model, Scott? Well, maybe because we're spending a lot of time reviewing the models. But if you listen to senators, they would have you believe that no work is being done on this. So I think we first need to acknowledge that there's a lot more being done than is being characterized. Whether or not we need more, remember, the fourth bullet point in the White House accord on superintelligence was this is just a start.

34:34We will reconvene this group routinely. We will have to evolve the framework as the technology evolves. And so I feel good about that. I'm not saying that we never need to formalize or codify any of this stuff into law. But we did the right thing and we moved quickly and we got a good a good regulatory framework.

34:53Scott Wapner: Well, I'll go back to what if we don't know exactly what we're supposed to be preparing for or or essentially putting guardrails around. It goes to what Bill Gates was talking about, that AI is going to be like an evolutionary event that it's going to grow, quote, insanely smarter at an exponential rate in the years ahead. And we're not going to be able as humans to keep up with it. So if we can't keep up with it as humans, how do we know what the power ultimately is going to be and how to put those guardrails around it? Well, I think it's really important. Like we have to have a pro-human approach to how we bring it into existence.

35:26Right. We train the model. This is a piece of software. At the end of the day. Right. We're not it's not a new species that we're bringing into into being is a piece of software that we are training. So how we choose to train it, the frameworks, we want those disclosed. Right. We want those audited. We want those reviewed. Those are all the things that these three legs of the stool are meant to address. But I will also say this. It's going to have to be the case that the intelligence is going to have to be the one to oversee the intelligence. Right. So the people who are in the best position to monitor this are the cyber capabilities out of the models themselves.

36:02Right. Because they're going to be so capable. So to me, I of course, we have to be very thoughtful about this. We all have to get together and evolve this. But I don't think, you know, is there a group of humans that I think has the platonic right truth as to how we set this up? Do I think there's an FDA for AI that can give us the Ten Commandments on how we run? No, I think that'll set us back. Remember, there is no safety off the frontier. If we end up in second place, if China gets there first, I can guarantee we're not safe.

36:30Scott Wapner: OK, I want to go to that then because of what Alexander Wang said, the head of Meta AI, right, the designer of Muse, who said recently, quote, Quote, I personally changed my own opinion on this matter, talking about China. In the past, I was very worried about China. I had read these old speeches that were given by the PRC officials in the past that talked about how they viewed AI as this opportunity to leapfrog the West. That's what this whole discussion is about. Quote, but as time's gone on, I think we're painting them to be too much of a boogeyman when they're going to see the same things that we see in terms of this is powerful technology.

37:03Scott Wapner: There's going to be a lot of shared goals in making sure that AI goes well. I think it's well said by Alex, but I would say this. The only difference I would add, trust but verify. Like, trust but verify. Am I just going to trust that they're going to take care of all of this for us? No, I'm not going to trust that, right? But I do think it's encouraging. Xi had his second meeting. I was at the Xi state dinner a few weeks ago. Second face-to-face meeting with the president this year. We've never had the presidents of the two countries meet more than one time a year. Now they've met twice, and they're committed to meeting another two times.

37:34So that coordination, and there was a lot of conversation about AI, not only between President Xi and President Trump, but also between Besant and his counterpart in China. So I think there's a lot of important conversation going on and coordination going on. I'm hopeful. I think that some of the things Alex says may in fact be right, but I think we have to verify as well as trust.

37:54Scott Wapner: OK, this important conversation continues after the breakup. Next, the future of software in the age of AI. Snowflake CEO Sridhar Ramaswamy is here. He'll be right at this desk next. Hi, I'm Roman Mars, host of 99 % Invisible. It's a podcast about all the thought that goes into things most people don't even think about. You're going to see stories everywhere. Follow and listen to 99 % Invisible wherever you get your podcasts. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done.

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39:20Scott Wapner: All right, we're turning on the time machine because it was three years ago in these very same seats that our next guest joined Brad and me as the CEO of Neva Systems, a company that was bought by Snowflake. Well, Sridhar Ramaswamy was then named Snowflake's CEO. And as you see, he is back with us now. So welcome back as we, I think, really try and do a three years later pulse check on where we are. And I want you to listen to what you told us then, and then we can react to it after we listen. Pay attention to this. Everything, as I said, from email to how you buy products to how you approve things, how you analyze what's going on with your business is going to be changed in a big way.

40:00And so there's a huge market for brand new applications that are going to be built on top of the things that are existing.

40:08Scott Wapner: Okay, you were obviously correct. And we've taken leaps further, haven't we? That's right. That's right. I think pretty much everyone underestimated what we could do with AI. AI went from here's a cute chatbot to, oh, cool, I can attach it to the real world and get information about it too. Oh wait, this can actually think through complicated things and take actions on our behalf. That's what we call the agentic enterprise in the world of enterprises. And that's the pull that you're seeing with Snowflake's success, how we did last quarter, what we guided to for this quarter, and how much more work that we all have to do.

40:45It's combining intelligence and data to drive how we work.

40:50Scott Wapner: Do you still think in some ways we're underestimating the power of what artificial intelligence, super intelligence, as some are calling it now, presents? Absolutely. I think it's very early. I think all of us over the past 50 years have navigated this world of information just super painfully. I joke to people that most of my life for the past 50 years, I've pretty much been copying text from one screen into another screen. That's my life. That's kind of all our lives. And I think AI can distill all of that away and focus us on what's the thing that really matters, what's the judgment that you need to bring to the table.

41:25And I think we are very, very early in that journey.

41:28Scott Wapner: The software trade has been so volatile, as you know. And the IGV is way off of its lows, and your stock has had an amazing year. Do you feel like we're getting better in understanding the winners from the losers and how the winners are actually going to win? I think it's early. There's going to be a lot of impact on all kinds of things. But I think all of us also need to internalize that the act of software creation is just fundamentally different. And the example that I give to people is like software has become industrialized, and we are still trying to figure out what exactly that means. That means that software has gone from, you know, dude in a garage or five people in a team doing this slowly, painfully, crafting it, to you can mass produce software.

42:13And we think that areas like data platforms become more powerful in a world like this because storing, accessing, acting on high-quality information ends up having such a big impact. But it's also a little bit of what happened to media. There's going to be lots and lots of software, and there are going to be fewer players that are going to be very effective at delivering it both to consumers as well as enterprises.

42:39Scott Wapner: You no longer own it in your hedge fund, but you have a lot of exposure personally to the stock still. It's one of my biggest personal holdings, so great job this year. The stock's up 50%. But to your point, Scott, part of the reason that I continued to own it in a big way was this difference between – you talk about IGV as though all software is created equal. The fact of the matter is, talk to us a little bit about what makes the data platform so different than application software, perhaps, and what you see happening with your data platform that gives you so much excitement about the future.

43:15First of all, what needed, reams and reams of software purchases, installing, integrating, has disappeared because you can now reason with data in English. In fact, one of my data teams that doesn't write a lot of software, they always just worked on data setup systems, they've had a huge impact on my company, the sales team, the finance team, because they don't know any better. And that's what I mean by industrialization, because you can write a sequence of English and have the underlying systems take actions on your behalf. That's the power of data platforms, because the distance between what humans want to do and data has collapsed.

43:55It's also collapsed the distance between how people implement software, the system integrators, and the data platforms, because you can do that a whole lot faster. It's just made the aperture of what's possible with Snowflake so much bigger.

44:07Scott Wapner: Josh, I'd love to get you and Steph involved as you both own the stock and I believe are still bullish on it. Josh, you first. Yes, I am bullish. And I love this awakening that's taken place this year, probably mostly in the last three months, where enterprises can run agentic flows directly in the data. We're not talking about layers on top of anymore. And I think that's really helped the share price. I'd love to hear your take on if a CIO were making a decision right now about where to put their agents, why would they choose Snowflake over Databricks? I know there's been a convergence between the lake, the warehouse, what you guys do, what they do.

44:53Talk about how that decision gets made and why that should be a catalyst for Snowflake going forward. Well, we have always been the enterprise-grade platform where people have put their most valuable data in. And the big differentiator for us has been that our product is super tightly integrated. It's not a bunch of do-it-yourself pieces that you have to assemble. If you create an agent, for example, it automatically obeys all the access restrictions on the data that's underneath. and we make it super easy for you to get value then from these agents. It's also we are enterprise-grade ready, whether it is permissions or things like disaster recovery that a lot of our customers really, really care about.

45:41It's the time to value and simplicity where we stand out. And, you know, customers like Kraft Heinz, you went from perhaps getting competitive intelligence every couple of weeks to getting it in real time. There are tons and tons of examples like this of how quickly people get value from the data that they have brought into Snowflake. How about you, Steph? Sridhar, thanks for joining us today. I'm a long-term shareholder, very happy. So thank you. So you have done some M &A, Neva, Observe, to increase your technology talent, but also to expand your platform capabilities. So how do you balance organic R &D against token acquisitions as you fill in the gaps in the Ejecti stack?

46:26This is a great question. I think, you know, Brad and I were just talking. AI has made it possible for us to create software just a whole lot faster. I would say the bar for big acquisitions has gone up in a big way because the messiness of things like, you know, actually getting the merger done and getting the teams to work together is extraordinarily high. We continue to make strategic acquisitions. We acquired a company called Natoma, which brings this technology called MCP, which basically connects our agents to all the applications that are sitting within an enterprise. We will be thoughtful about these acquisitions.

47:01They are more likely to be small rather than big so that they are not distracting. But it's not an either or. We are investing heavily into how do we create new aspects of data platforms faster in-house, but also acquired companies. I want young, hungry CEOs that want to go make a big difference in the world.

47:19Scott Wapner: Well, you have news today. Before I let you go, this partnership expansion with Lumen Technologies to build a private, secure lane that lets enterprises now move on-prem data into Snowflake's platform without touching the public Internet. That sounds to me like a safety and security type conversation. It's also an ease of use conversation because Lumen works with many, many companies on the planet. They power their infrastructure, like basically their tech infrastructure of all kind. But getting highly capable agents, observability on top of the data is a pain. We want to make it super easy to bring that information over into Snowflake.

48:00We are very excited for this partnership.

48:02Scott Wapner: All right. We appreciate your time. I'm excited that you're back with us after, again, three plus years as we take a pulse check on where we are in AI in America. Sridhar, thanks. Thank you, Scott. Sridhar, welcome to me. All right. Halftime live from One Market in San Francisco. Back right after this. Welcome back. A special AI edition of Josh Brown's Best Stocks in the Market. Is that what we're looking at today? Yeah. And we, for the first time, got a chance to write up Palantir because it made the list as of last week. And we were super excited. We were super excited to be able to do that.

48:34This is a roller coaster. This is a stock that in the last few years has had a drawdown as much as 85%. It's got an insanely high beta. It really moves. And just to give an example of what I'm talking about, this is a stock that hit a record high last November. We talked about it on the show that day. Then it got cut in half into June during the whole SaaSpocalypse. and then it doubled and it's back on the list. The thing is, the fundamentals got better and better and better the entire time the stock was falling. Revenue growth has now accelerated, accelerated, not just grown, for nine straight quarters.

49:17In the middle of 2024, they were reporting 27 % growth. Last quarter, 93 % growth. Their U.S. commercial business is absolutely exploding. People will look at this and say, oh, my God, it's so expensive. It always has been. That's not what we're doing here with this column. What we're trying to do is outline the technical setup. What I would say is for people that have a little bit longer time frame than a day trader, 166 is the line. That's where both September lows came in. Stock bounced off that level. RSI about 63. Not at all crazy extended. I think it could work here, but you have to accept the stock is a roller coaster.

49:59On any given day, something crazy could happen. It's not for everyone.

50:04Scott Wapner: Okay. Thank you for that. We'll take a break. We'll get final trades, including one, I think, from Brad. You're going to give us one, right? Why not? All right. We'll do it after the break. All right. Three o 'clock Eastern this afternoon. Closing bell. Our special continues on AI in America. Nikesh Arora, the Palo Alto CEO, of course, he joins us. We look very much forward to that. Misha Laskin, the Reflection AI CEO, will join us as well. Their new open source model, that's a huge story. The Nobel-winning economist on the future of jobs will join us today. And the tech investor, Jeff Richards.

50:36Scott Wapner: So we got a stacked hand later on. We look forward to that as well. You have a final trade? I'll go to you first. What do you got? Yeah, I like it. I'm going to go unorthodox. I'm going to go unorthodox here. So if we have an anthropic IPO this year, right, that's my trade. It's non-consensus. There's a lot of chatter, a lot of negative chatter coming out of yesterday. I think when we look back in 10 years from now, the Google and the Amazon of this era have now become more clear to me. Right. And I think Anthropic will be one of the enduring and great companies in the country. I know you keep saying if we do.

51:05Scott Wapner: Do you expect that we will? Yes, very much so. When do you think? What's your best guess? In terms of when they're going to go public? Yeah. Yeah, I think that's I think we're talking, you know, weeks, not not months. Oh, OK. It's been great having you here. Thanks for having me. Thanks. It's been awesome. Malcolm, what's your final trade today? Yeah, I'm going to go crowd strike, and I'll point you to my previous comments about B of A spending a couple hundred million in six months to address cyber vulnerabilities. All right. We'll ask Nikesh obviously later about the vulnerability of cyber attacks from all, everything that we've really been talking about.

51:37Scott Wapner: Stephanie Link, what about you? Wells Fargo, so I bought after they reported earnings. I thought it was a solid quarter. The turnaround is definitely beginning, and the stock is very cheap. How about Netflix there, Josh? Tell us more. I actually like it as a trade from a risk-reward standpoint. 67, now a double bottom. Stock is acting defensively on red days for the NASDAQ. I think you could risk five points here. Earnings next week. Okay. Guys, great stuff. I'll see you in a couple hours. The exchange is now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.

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