Mad Money w/ Jim Cramer 9/16/26

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1:16Hey, I'm Kramer. Welcome to a special West Coast edition of Mad Money. Welcome to Kramerica. Other people want to make friends? I'm just trying to save a little bit of money. My job is not just to entertain, but to do some teaching, too. So call me at 1-800-743-CBC. Tweet me at Jim Cramer. If you buy stocks here, you are now, as of today, officially fighting the Federal Reserve. That's what happens when the Fed decides to raise rates as it did this very afternoon. The first rate hike, a quarter of a percent, creates a lot of confusion and often a quick dive, which is exactly what we saw today.

1:50I mean, just. She knew nothing. And that produces selling. We aren't sure if there's going to be multiple hikes, which would be really bad for the stock market, or we're only going to get one, maybe two. Not so bad for the market. From the looks of things and the harsh words we heard today from the new Fed chief, Kevin Marsh, we're going to get many hikes until the job is done. The job being slowing inflation appreciably. And that is why the Dow plunged 631 points, just to be lost 0.45%. But the Nasdaq fell only 0.01%, and that was a nice comeback. More on that in a moment. So even as I'm out here on the West Coast, where these rates mean very little, because tech does thrive no matter what.

2:27Let me explain why this decision was ripe for the longer term, but miserable for the shorter term, and why the stock market may need to take a hit beyond today if inflation doesn't settle down. Big if. First, understand this economy does have a real head of steam, mostly because of the great data center build-out. These behemoths are beasts when it comes to capital expenditures. And you know what? I still think they will be house of pleasure when the smoke clears from the rate hike. See, they're distorting the economy, but there's no sign that the data center strength is slackening and rates won't impact it all that much.

3:02And that's true for tech earnings. The growth will most likely continue apace. Employment is full, which is fantastic for the stock market. Lots of discretionary income, lots of savings and lots of spending. I know we keep waiting for AI to destroy jobs, but right now this cycle is creating jobs by the second, mostly trade jobs. And the economy does keep strengthening. But there's a real downside to the build-out, too, and that's what we heard today from Warsh. We have an economy that isn't used to working with its hands. Service jobs make up two-thirds of the workforce. When you have the biggest capital expenditure cycle in history, one that involves endless bond sales, referenced today by the Fed's chief in his speech, and lots of stock offerings, you're going to get hit with too much inflation, and the Fed does have to pump the brakes.

3:43And that's what started today. Ordinarily, we could probably handle that level of inflation to build-out causes. But these are not ordinary times. We already had good, you know, I'd say pretty predominant inflation. We're three and change. That's way too high historically. Our new Fed chief is a serious person, and he's been on bringing the rate down to 2 percent by 2029. Even though President Trump picked him to cut rates, well, he knows that we need to keep inflation down to preserve the buying power of the dollar and the net worth of your savings. There are two things making worse life difficult here.

4:14The first is man-made, the relentless run in oil prices. You could say that when the war with Iran ends, inflation will go down. But who the heck knows when it'll end? If anything, the longer, higher oil prices last, the more likely it embeds itself in the system. It makes everything expensive. Oil prices are passed on to you, the consumer. The Fed can't change that unless it raises rates to the point where we can't afford to drive as much. We don't need to drive because we all lose our jobs or because we don't spend that much. I don't think we're going to reach that point. But the longer oil stays up, the more likely it is that we'll see more rate hikes.

4:44And every hike from here, well, it'll be something that's going to knock down stocks. The other spur to inflation is the real bear. The printing press. We're running a distinctly suboptimal budget deficit. Neither the president nor Congress seems to care. Our government has a trillion dollars in interest spending alone. That's hideous. A serious person like Warsh doesn't want the presses to print because printing money is inflationary. I think he'd smash them if he could, but that's beyond the Fed's control. All they can do is raise rates until Congress and the president get serious about spending.

5:14If they did, look out. That would be... Fantastic. When you raise rates, the economy slows. If you can combat the printing presses and help keep inflation down, stocks can go up. But can it keep the president down? I know that Warsh is doing what's right. But what happens when the president goes ballistic? He could be about, you know, he might be like a swarm of AI agents penetrating the walls of a hug and face. In the end, I don't think it matters what the president says because Warsh is such a gamer. He knows what he wants and it isn't necessarily good for business or the stock market. We're serious about this.

5:46He said at one point, we're serious about this. I like that. I don't think anyone, especially the president, doubts now. I hope Warsh has skin like tungsten because he's going to need it. Do all stocks go down when the Fed tightens? For many, the stock market is a commodity like bonds, like real estate, like the dollar. When you learn to be a professional money manager, you recognize that the Fed can crimp credit creation. Fed chief reference to the hyperscalers as companies that can crowd out a lot of borrowers. You raise rates, you can shut the spickle off. So there are managers who are taught to sell all stocks when the Fed tightens and go into cash.

6:14Because you sell stocks when the economy slows, Warsh made it clear that's the plan. That selling crushed us today until tech rallied at the end of the day. But there are other managers who say stay the course. I'm picking the stocks of companies that can do well regardless of what happens with interest rates, like pharma. There are other things that can do okay here, like tech. And then there's the rest, financials, retail, travel, leisure, so many others, all not so hot. The rest before this was small. Lots of stocks going higher, the rest small. But it's going to keep growing and growing and growing as long as inflation readings stay high.

6:47So there's, I just say, it's just harder and harder to find good stocks. I hope the Washington comments might have come to the bond market, which has been terrible with rates going up relentlessly. Nope. Interest rates were going down before the Fed chief started talking, and then they reversed and went up. Bad. And again, another thing that gives us fewer stocks to buy. Ultimately, I think I like it when the Fed chief shows gumption. But it's not good for the near term for most stocks. Long term, it's essential because it prevents runaway inflation. For now, though, look, if you're trying to manage money like I do with my travel trust, you can follow along at CMC Investing Club.

7:20There are fewer stocks to buy, fewer to hold, more stocks to sell. Did Warsh want us to lose money today? No. But whereas Combs interpreters meaning he wants as few stocks as possible going higher, for many, yes, makes it harder to make money. And making money with borrowed money is going to be a sin from now on, if there weren't already. But there's always a bull market somewhere, as I say at the end of the show. We just need to find one or two sectors that can thrive, even in this environment. It's harder, but it can be done. I've done it before. I hope we can do it again. The bottom line, I think the buyers will come back, especially to tech, because it's not on a rate cycle.

7:53It's on an industrial revolution cycle. But a lot of groups simply don't work as long as Kevin Marsh is on the warpath. And Marsh is definitely on the warpath. Let's go to Jerry in Missouri. Jerry. Hey, Jim. Thanks for taking my call. Absolutely. What's happening? Well, Jim, just wondering, you talk to Michael Intrader often. I was just wondering if you think Corlea is going to break out anytime soon. OK, so Corlea's got a yin and yang here. It's borrowing a lot of money and that's going to be harder now if the Fed starts raising rates. But it's smack in the middle of the great industrial build out.

8:26And so, therefore, I think it's going to be OK to buy. But it's become more speculative as the Fed raises rates. It's become a more speculative situation. And you've got to think about that because that may not be what you really want. Let's go to Jerry in Florida, please. Jerry. Yeah. Hi, Jim. The company I'm wondering about is Raytheon, RTX. What's going on with Raytheon? OK, here's what's happening. We've been looking at companies that have high priced earnings multiples, and we've been shrinking them. As the Fed raises rates, the multiple that people pay for earnings will go down. Right now, it's 27 times earnings.

9:02In a rate cycle where the Fed is raising rates, that P.E. multiple, which is why I wrote my whole book about P.E. multiples, That has to come down, and that's why that stock is going lower. All right, listen to me. Buyers will come back, but they won't come back to the same place. And remember, from now on, we're fighting the Fed. On May 19th, the cyber stocks are unique in position in this market with all the talk of AI safety. They're not dancing to the Fed. I'm going to sit down on Palo Alto Networks to find out how the company is staying ahead of the game. Then Arm Holdings is the center of what could be a multi-year chip shortage.

9:33I'm getting the latest from the company's CEO. And Okta has finally broken free of the AI displacement fears and is really starting to get a beat on the bad agents. I've got to see you. Stay with Kramer.

9:53Don't miss a second of Mad Money. Follow at Jim Kramer on X. Have a question? Tweet Kramer. Hashtag Mad Mentions. Send Jim an email to madmoneyatcnbc.com. or give us a call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com.

10:16Hey, Fidelity. What's it cost to invest with the Fidelity app? Start with as little as$1 with no account fees or trade commissions on U.S. stocks and ETFs. Hmm, that's music to my ears. I can only talk. Investing involves risk, including risk of loss. Zero account fees apply to retail brokerage accounts only. Zero dollar commission does not apply to customers designated by Fidelity as a professional equity trader. A limited number of ETFs are subject to a service fee of$100. See details at Fidelity.com slash commissions. Fidelity Brokerage Services, LLC, member NYSE SIPC. A lot can happen between now and November, 2028.

10:50Two more summers, two more holiday seasons, and plenty of time to enjoy your new renewal by Anderson Windows. Because right now, you can buy new windows and pay nothing until November, 2028. New windows now. Paying for them? That can wait. Buy now and pay nothing until November 2028. Get started at RenewalByAndersonHome.com. Hurry. Offer ends November 30th. Only valid on initial visit. If you're a parent and want to help set up your child for success, then IXL is right for your family. As an effective and affordable online learning program, IXL covers math, language arts, science, and social studies using interactive practice problems for kids from pre-K to 12th grade.

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11:51I came out this afternoon this week right as everybody started talking about the need to slow down AI development, prevent agents from running wild. But in the end, I think this whole issue comes down to great hygiene, cybersecurity. And that's why I want to check in with Palo Alto Networks, a cybersecurity leader that we own for the Travel Trust. This week, Palo Alto's stock caught fire up a quick 14 percent because Wall Street finally recognizes that you can't have powerful AI without equally powerful cybersecurity. Don't take it from me. Let's think deeper with Nikesh Arora, the chairman, CEO of Palo Alto Networks, and an expert on what's happening right now and many other things.

12:24Mr. Arora, welcome back to Mad Money. Nice to see you, Jim. How are Good, Nikesh. Look, we've got Dario. Yes. We can trust first name people. Dario talking about pacing the frontier. And then we have Nikesh talking about the pacing is a ninja move. What does that mean? Well, Jim, I've been listening very carefully to all the rhetoric about what should happen. Should AI be slowed down and what are the bad effects of AI? AI is an amazing technology. I think what we have in front of us is once in a lifetime opportunity to embrace something that is going to be so impactful across the board. And I don't see how it's going to slow down.

13:03I don't see researchers not wanting to win. As I said, there is no competitive support where I found people saying, oh, wait a minute, let's all take a break together because we should slow it down. I think the right conversation is how do we make sure all the power of AI can be harnessed for the right reasons and for good? And that's the conversation that should be had. I think the right conversation is how do you make sure that AI can be delivered safely and securely so we can use it for good things? That's the conversation to have. I think the idea that we should be fearful of AI and we should wait and we should slow down, it's just antithetical to what's going to happen.

13:36So it's about time to have the real conversation. Well, is it too cynical to think that perhaps this is like a car race where they wave the yellow flag and no one's allowed to pass? Oh, this is a cow strike analogy. We're doing a Palo Alto analogy here. Come on. I saw you do that. I saw you make yellow flag. I got him after cow strike. You got the yellow flag. That's the wrong guy. Nothing but trouble. At least you're smiling. If this was a conference call with the analysts, I know you wouldn't be smiling. No, look, I think there's enough room in this market. I heard Rene before this, and he said there's a lot of room, and it's a big market.

14:04He's going to make money, and NVIDIA is going to make money. It's going to work in cybersecurity as well. Oh, let me pivot a little. So you're doing this. Fed raises rates today. Kind of serious impact on cybersecurity? I don't think so. Look, I think right now, I don't think there's an impact on technology. I don't know. I think the majority of the company's spend is going to pivot to technology. For the first time in my career, my finance guys want AI people. My HR people want AI. What are you going to do with them? It's like, we're going to make sure our processes are better. We're going to use AI in our business.

14:35So for the first time, the demand for technology is coming across the organization from everyone, whether it's customer service, logistics, security. Everybody wants more money to do better AI. So in that environment, I think technology spend continues to go up. So the demand right now looks like it's infinite. And the more technology you deploy, at least in the enterprise, you're going to have to do it securely. Well, I think if I were on the board of a publicly traded company right now, and I've been on them, I would be saying to the chairman and the CEO, if we do something wrong and we hurt another company and we do not have Palo Alto, a process, a process that's Palo Alto, we're going to get sued for everything.

15:15But at least if we call the cash and we bring them in, we'll have been known as someone that had a duty of care. I think the fear people have is, for the first time in life, we have a non-deterministic technology. Everything else historically in technology has been deterministic. It's been input and output. And you test for the output, and you test it nine weeks from Sunday and say, okay, I'm 99.9 % sure the output is going to be consistent with my expectation. In the case of AI, the output constantly morphs. When output constantly morphs, you cannot figure out whether the agent or AI that you use is going to deliver with the intent that you set up there for it, which is what happened when agents ran away.

15:59Let's talk about the hug and face. Do you think it's worse than people realize that this 1 ,200 agents got together and congregated and became this colony of hate? I mean, is it one of those things that we give them human characteristics? Imagine you created a civilization where you told 1 ,200 people there were no rules and their job was to go win. What would happen? They'd stampede and win. Right. So what have you done? This is a science experiment. Right. It's a science experiment. We say with no constraints, no guard lays, no governance, no training, no nothing, the only objective is capture the flag.

16:39And do it with whatever you've seen in your training. And the training is the world's knowledge because we train using public knowledge. So the agents know every good thing, bad thing that has been done in the world. They've been trained on it. So they're basically executing to the task. Well, then how can you be smarter than they are? Well, I think, let's be clear, no enterprise in the world is going to enable agents in their infrastructure without ample governance, guardrails. That's every conversation that I have with every CEO, CIO or chairman. They're saying, great, we'd like to use AI. How do we do it in a way that it doesn't go rogue on us?

17:13But does anyone call you and you say to them, guys, you've got to slow down. You're going too fast. No, I think what we say is you have to be thoughtful. You have to understand the expectation. You have to understand the intent of this. For example, you know, we are talking to people about deploying agents. We're like, here's what happens. Agents are created by human beings. Agents take their credentials and run away and start doing things for them. We say, listen, what are you going to do? You tell us what the task expectation of the agent is. What would the agent just the credentials to be able to execute the task?

17:40Right. If you restrict agents and give them credentials just to execute the task that you intend, and you allow them latitude in there to be non-deterministic, then there's a higher probability that you can govern them, you can keep them in check. That technology is being built. At this point in time, the AI lab should be chatting with us and saying, how do we put this in place? Because we have something to contribute, they have something to contribute. Historically, you've never had technology where cybersecurity was not required. It's not like, oh, I have a Dell server, it's secure, but I still have to come in and make sure it's secure.

18:10I have Salesforce. It's secure. But I still have to come in and make sure it's secure. That's true they are. They attack the country with no defenses. A typical country does have defenses. But let me ask you. If they don't bring you in, I mean, it bothered me tremendously. Now, let me, hear me. I'm not blowing smoke with this. All the different commentary I read from these people, why don't they say, you know what, we sat down with Nikesh Arora, we sat down with our friend, George, okay? And we realized, you know what, they're processes, and we're going to be able to do it. it right with guardrails.

18:42Instead, they just say, oh, my God, we don't know what we are. People are dying everywhere. And it's going to be like, go check your trust in a state's lawyer. And I'm like thinking, come on, grow up. It's happening. Look, it's happening. We are talking to all the people in the AI lab ecosystem. We are working with them. We are building hooks into their products to create security. There's a lag. There's a lag between research and execution. But enterprises live here in execution land. They don't live in research land. Right. So, So yes, research is telling you that, holy, we don't pay attention and we're not going to keep track of these agents.

19:14Bad things can happen. And that's true. It can. It's our job as responsible leaders of cybersecurity companies or responsible leaders of companies, period, to make sure that we deploy AI in a way that it's safe and secure. And that's going to happen. And that's why you bought CyberArk. Yes, you bought CyberArk because, you know, you can't do stuff without identity. If you can identify these, you can kill them. Well, at least that you know who they are and what they're going to do. You know who they are. But the one thing I am scared about, and scared is the wrong word, I'm concerned, I think in the hands of very smart people in North Korea or Iran, there's some damage that can be done.

19:49And there you really have to be thinking on your feet about what is the most nefarious thing that could happen. Look, every technology has both sides. It has a dark side and a good side. And the good news is the majority of the uses that we use technology for are for good. There is always an opportunity or the chance that somebody is going to take the technology and use it adversely. And that is what, you know, if you saw the Mythos moment, that was what it was about. Right. The fear is not that we will, as good actors use Mythos. The fear is bad actors will take Mythos and start using capabilities like that and start attacking companies and be able to enter the infrastructure.

20:25So we are all aware of it. We're all building capability to block that capability, block the Mythos like behavior. and get ready for a time when AI is getting more and more powerful. So I just think the impetus right now is that every company needs to look hard and say, we're moving into a new world. A new world is where you have to be able to do cyber defense at real-time speed because the bad actors are going to be able to attack you at real-time speed. And there's no one who knows enough at their own companies, I believe. It might have one or two people who do this, but this is about a process and bringing in a big company.

20:58You know, Jim, for eight years, I was trying to convince the world. You said nine in your stuff. Well, it's been eight years since I joined Palo Alto. It's coming in the ninth year now. But in nine years, I've been trying to get people to pay attention to cybersecurity. And you know what? Our friend Dario did it with one thing. He said he's a much better marketer than I am. You know, it's funny. If I were back on Wall Street, I would have said raising numbers, Palo Alto Networks. That's the Kesher Roy, our champion CEO of Palo Alto. So it's talk that we own for the trust. And holy cow, has it been great.

21:30Mad Money's back in for the break. Coming up, Kramer's linking up with the CEO of Arm Holdings to get a grip on the chipmaker's current status. Next.

21:44Hey, Fidelity. What's it cost to invest with the Fidelity app? Start with as little as$1 with no account fees or trade commissions on U.S. stocks and ETFs. Hmm, that's music to my ears. I can only talk. Investing involves risk, including risk of loss. Zero account fees apply to retail brokerage accounts only. Zero dollar commission does not apply to customers designated by Fidelity as a professional equity trader. A limited number of ETFs are subject to a service fee of$100. See details at Fidelity.com slash commissions. Fidelity Brokerage Services, LLC, member NYSE SIPC. A lot can happen between now and November, 2028.

22:17Two more summers, two more holiday seasons, and plenty of time to enjoy your new renewal by Anderson Windows. Because right now, you can buy new windows and pay nothing until November 2028. New windows now. Paying for them? That can wait. Buy now and pay nothing until November 2028. Get started at RenewalByAndersonHome.com. Hurry. Offer ends November 30th. Only valid on initial visit. If you're a parent and want to help set up your child for success, then iExcel is right for your family. As an effective and affordable online learning program, iXL covers math, language arts, science, and social studies using interactive practice problems for kids from pre-K to 12th grade.

22:58Listeners can get an exclusive 20 % off iXL membership when they sign up today at iXL.com slash 20. Visit iXL.com slash 20 to get the most effective learning program out there at the best price.

23:18the whole ai data center cohort peaked in june then most of them bottomed near the end of july before rebounding like crazy some of the stocks are still off their highs arm holdings major chip design company now also makes its own cpus stock was went to 452 in june now pulled back to just under 244 that's down 46 but i don't think you should look like that i think you should look like this. It doubled from the last time I saw our next guest. People are worried about a self-imposed slowdown in the data center coming from the big frontier AI labs, which is why Arm got slammed on Monday. But I think we're looking at a molding your chip shortage regardless.

23:53Do not take it from me. Let's check in with Rene Haas. He's the CEO of Arm Home to get a better read of the situation. Rene, welcome back to Mad Money. Thank you, Jim. Great to see you again. Okay, so you're going to be my testimony for my view at the top of the show. We had a Fed rate, I could say a quarter percent. And what I say is you have to look at companies where demand is so great that a quarter percent really doesn't stop the buyers. And I think demand is so great for your product that it really won't matter all that much whether the rates are three and three quarters or four. I don't know how to exactly link what Chairman Walsh did today in terms of our overall demand in terms of percentages.

24:31But what I can say, Jim, is that demand for our technology, whether it's at the edge, whether it's in automotive, robotics, and certainly the data center, has never been stronger. And I know you've heard, you've had a lot of folks on this week talk about AI, but it really is AI because AI is so compute intensive. It requires so much in terms of CPUs, GPUs, memories, and that's the hardware arm is. So, yeah, demand for us, it's just never looked better. I know when you first unveiled your plan for, say, just$2 billion in business, you didn't have the foundry space. I felt you were a little more, we got it down to a billion, but I felt you were giving us a little more leeway in thinking that maybe you could get some more machines to make what you need.

25:19Yeah, so what we said in the earnings call, I think it was May timeframe, that we had visibility to$2 billion. And what we said in the last earnings call was that our confidence to achieve that$2 billion number had increased from May to July. Here I am in September. What I can tell you is, Jim, I'm more confident today than I was on that July earnings call. That's terrific. That's an inflection. You know that. You say that. Yeah. We're feeling good about it. We're feeling really good about it. OK, so now let's take a head on, Dario, and these issues involving potential slowdown. I mean, to me, what these companies are going to be, look, I'm in the Jensen Wong school thought mostly because I think you taught me to be there.

26:00But I think Jensen is saying, listen, these companies are going to be responsible. They're going to do the right thing. There'll be guardrails. But it's going to continue to advance the pace because the demand is so great. Oh, of course. You know, it's interesting. Some of the things have come out this last week. You know, my view on it is that ultimately any company that's putting out a product needs to stand behind the quality, reliability and safety. I mean, that's a kind of a fundamental table stakes issue. Companies need to get it right. Governments don't get it right. Fifteen companies don't get it right.

26:30It's kind of the hygiene of what you're doing building a company. I think what's different here is that, number one, AI's got this mystical quality about it that people get really afraid about. And secondly, these are young companies. These are young companies developing products really, really fast, and the advancements are taking place very, very quickly. All that means is, as a product company, there's the hygiene you put in place through engineering, quality, reliability, safety. They'll figure it out. But the answer is not, let's all collectively tap on the brakes, because I don't even know how one product solves that versus another.

27:04It just doesn't really make a lot of sense to me. But I would tell you there was something that happened this weekend, which is that I would tell people exactly what you said, because it's the common sense view. But they would come back and say, Jim, these people wouldn't say we're all going to die by 2030 if it weren't true. You know, Arm delivers tons of products, thousands of products, 350 billion chips. In everything. In everything. Quality, reliability, we have to stand behind it. Can you imagine if we had security issues or safety issues that caused our products to burn on fire? I tell you, I'd sue you.

27:37I would sue you. And if we had an intern who worked at the company six months and looked at the quality process we had and then came out and said all of our products are going to blow up and everyone's going to die, it's just irresponsible. So I found sort of the knee jerk to all this a little sensational, but not grounded in logic. Okay, I think that's you coming down where I am. Now, I want to talk about robots for a second and self-driving cars. How many CPUs do these things really need if they're going to be good robots and good self-driving cars? A lot. And it starts with the distribution of where the CPUs are.

28:12You've got CPUs that are the brains of these machines. So literally in a robot, you'd have a couple of very large CPU clusters. And when I say CPU clusters, these are chips that could have 10 CPUs, 20 CPUs, 60 CPUs. And then you've got multiple brains. In other words, you may have something in the head, you may have something in the torso. And then when you go out to the limbs, the sensors, the controllers, things that can do the perception, there are CPUs there. Hundreds and hundreds of CPUs in robots. And similar in an automobile, literally hundreds of CPUs. Well, that's going to be the big gating factor then.

28:47We can't make enough CPUs to do all that. Demand is off the charts, as we talked about earlier. And the big constraint is going to be supply. And supply is around wafers for building the logic chips. But it's not just the wafers, Jim. It's the substrates. It's the testers. It's the memory. It's the entire supply chain. So we are we are looking at some really complex supply chain issues, I think, for the next number of years. So I was initially worried when you said, listen, we're going to go in and make our own and we also make them for everybody else. I mean, you're the world's largest people.

29:20I mean, I should have said that from the very beginning. You're by far the world's largest. But it sounds like there's so much demand. No one is going to say to you, Renee, you can't come in against us. They're going to say, can you please help us? Our problems have been far more the latter than the former. You know, when we were having discussions about this internally, we were thinking about how do we respond to the questions that say, you know, gosh, why are you doing this? You're infringing on my space. The questions we get is, can you make more? Can you deliver them faster? When is your next generation coming out?

29:48And there's plenty of room for everybody. I mean, Jensen builds a CPU based on ARM. He's talked about fantastic demand for Vera. So the world's pretty big and there's a lot of space for all of us. Do you think there's still people who remember your company as really a cell phone company? And maybe that's why I still think it's incredibly undervalued. It's possible. You know, that's the history of the company. But in a very short time, Data Center is going to be our largest business. And that we've seen double digit growth in that over the last number of years. Really, the thing about Arm is we are the compute platform for AI.

30:20Every AI application is going to run through Arm one shape or another. Now, I will say this to our viewers. You said this many times. You come on Squawk on the Street. I hope you continue to do so. And it would be like 140 going down to 120. And you and I would be very frustrated because we knew that the demand was insane. But I think it took a little while for people to realize what you've done with the company. We've been very conservative traditionally about how we talk about the numbers. And I'm very, very confident when I tell you that things were better in July. They were in May and they were better in September in terms of how they look in July.

30:52I hope people take that to the bank because we have essentially beat every single quarter since we've been public. Well, that's why I want people to understand just because the Fed raises rates doesn't mean it's the end of the world. There's some people have such strong demand that their stocks continue apace. That's Renee Haas, CEO of Arm Holdings. Please look at this. The trust had a great position. We made so much money candidly. And then we took profits and that was a big mistake. Man, money's back after the break. Coming up, is Okta positioned to lock down gains as we enter the agentic era?

31:25Kramer's investigating with the CEO. Next.

31:37Now that everybody's bringing their hands over the risks of AI, I'm going to drill down on the cybersecurity place that I think can help mitigate the risk. Take Okta, a major player in identity verification that reported a phenomenal quarter in late August. Stocks now up 140%, 144 % over the past six months. In part because it's no longer being held back by AI displacement warriors. Turns out artificial intelligence was never going to make Okta obsolete. Their security software is more essential than ever now that you've got AI agents roaming around the Internet. So let's take a closer look at Todd McKinnon, old friend of the show, co-founder and CEO of Okta.

32:12We're more. Todd, welcome back to Mad Money. It's great to be here, Jim. All right, so Todd, I've got an interview that you did September 9th before what happened. Okay, this is it. And you you're very prescient. You predicted that this could happen. But you said that they have these things have identities. And basically, if you have an identity, I can stop you. Well, here's the deal. AI agents, they're a powerful new identity type. So it used to just be you would have some software and you would integrate it together. And now these AI agents can make decisions on their own. And to make them more powerful, you have to do one key important thing.

32:48And that's give them access to more data, more tools, more actions that they can take. And that means that you have to give them an identity so that you can control and monitor and have visibility into that data and those actions. And that gives you insight into the potential negative repercussions. And so you can prevent it and control it. Well, I think this is really important. We had a lot of people discussing in some pretty fiery language what could go wrong. And then when I read what you do and I think, wait a second. Look, there may be a lot of these. They may seem nefarious, but as long as they have an identity, even if they are nefarious, they can still be stopped.

33:25Yeah, we think the key is visibility and control. So OpenAI and HuggingFace, everyone's heard about this problem that happened where an OpenAI model jumped containment and went after this company HuggingFace. Now OpenAI said that their model was not connected to the internet. Now, turns out that it was connected to the internet. So by bringing visibility and control with something like Okta, you actually know what your AI is connected to. So it's not going to be a magic fix for all this, but the foundation of the fix is visibility and control. And once you have that in place, then you can take the right actions.

34:00Then you can have a good risk assessment of what's actually happening. So you're offering, as you say, the blueprint for the secure agentic enterprise. It's very important. When I talk to customers. But you probably talked how many customers. I'm on a plane every week getting out there in the world and talking to customers. And they ask about competition. Investors ask all the time about competition. What's your competition? And they expect me to talk about maybe a platform player. Confusion. Confusion is that. Yeah. I read your stuff. Because every vendor is going to the customer and saying, we have the answer to everything.

34:33We can do it all. And it looks, to the customer's mind, it's a bunch of overlap and a bunch of confusion. So we're trying to work with everyone in the industry and say, here are the elements you need to be successful. You need this plan for your real-time visibility, your plan for identity, and we're focused on the identity and we're going to fix that. So a universal director of identity? That's what you need at a company? You have to have a system of record of your AI agents. But you can't, right? You have to have a central repository of your agent so you can see what they're doing and see what they're connected to.

35:03It's the foundation for control. OK, so like many other people, this isn't one of those issues that transcend stocks. So, I mean, for instance, I was telling my wife I was going to see you. She knows that I talked to you and that you've got a real solid head. And she goes, well, I mean, unless everybody uses your friend, I mean, isn't everyone going to die? And I said, oh, God, no. And she goes, well, then you just want your friend. Todd, I've covered Todd for a long time, but maybe he's just a rational person offering a solution. I think I don't. One of the things we don't do is we don't oversimplify it.

35:33We know that there's tremendous potential in AI technology. And the way you make it more powerful is you give it more data. You give it more connections. You give it more power. You give more capability. And I want that to happen. And I want the benefits to accrue to everyone's company and everyone's organizations. I want America to win. I want the world to win. But the only way to do that while also mitigating the risks is visibility and control. And we're in a perfect situation because the key to visibility and control is identity. You have to know where these agents are. But can you know 1 ,200 in a swarm that are coming?

36:05That's like a stampede. How do you stop a swarm? Well, the systems that contract this stuff are quite big and quite powerful. We have a lot of computer science and a lot of sophistication on the defense as well as the office. Yeah, but aren't you saying, oh, my God, to your team, here comes 1 ,200? I mean, what do you do? Well, I mean, first of all, we give the tools to our customers to track them and control them and block them. And the whole world is becoming agentic. This part of the narrative is probably underhyped. We talk about agents. Everyone talks about AI. But the reality is that everything is turning into an agent.

36:37Your phone is going to be an agent. Your TV is going to be an agent. Your car is going to be an agent. So it's about visibility and control across all of technology. That's the stakes. But one of the things that bothered me about this whole incident, Todd, when I first heard it, I said, Are they talking to people like Todd? Are they talking to people like George Kurtz at CrowdStrike? Because that's who they should be discussing things with. They shouldn't be going on Twitter and saying we're all going to die like a bad Hollywood movie. I think a lot of times they're trying to do the right thing.

37:08There are risks and there are things that everyone's worried about. The problem is that it's going to take the ecosystem, as you said. It's going to take the model companies. It's going to take the SaaS applications. is going to take the security infrastructure. That's why this concept of a blueprint is so powerful, this blueprint that can get everyone coordinated in the right lane working together to take what is really the future of technology and making sure we balance off the potential with the risk and get the right outcomes for everyone. Maybe Dario's letter would have been better, and he's a smart guy, I'm not going to tell him what to do, but if he had said, listen, we need time to do exactly what you did, as opposed to say, we've got to go slower, because go slower was interpreted as hobbling yourself.

37:48But time to be able to do the things you're talking about, I think, seems well served. I think the right discussion is not about speed. I think the right discussion in companies, it's always about priority. What's the priority? Right. So it's not about slowing down because you want to go slow. It's about prioritizing the things we have to do as an industry to keep it safe. Well, if that's the case, that's a little more like what Jensen Wong's doing. I hate the idea that there's some sort of zero-sum thing. To me, you're offering a legitimate, pragmatic way to be able to get it under control, regardless of how long it may necessarily take.

38:20Yeah. And if we have the right priorities in industry, the timelines will work themselves out because we won't, as Jensen said, we're not going to ship products before they're ready. Right. We're going to make sure we prioritize the right controls and safety. And for us, that all starts with this visibility and control concept, which is so important. But I would tell you that when I really, I mean, you constantly mention that, that if something went wrong and my business was hurt by this, I would sue these guys to see if they did what you just talked about. If they didn't have that process, their business would probably go under.

38:54This really matters. Well, it matters to the companies to put the right controls in place. and our advice to the companies using AI is make sure as you connect it to more things and as you give it more data and you open it up to your data warehouses and your applications and you rework your business processes, make sure you have the right blueprint in place to get that visibility and control. And that starts with identity and we're here to help you with that. Boy, Todd, I don't know. You've taught me identity. I remember the first time you taught it to me and I thought it was like, you know, some sort of a card, but you've certainly explained it to me.

39:24It used to be. Yes, well, look, I thank you. The world's moved on. You have always been a clear-headed, rational person, and it sounds like we need you more than ever. Thank you, Todd. Thanks for having me. Todd McKinnis, he's the co-founder and CEO of Okta. Their money's back after the break. Thank you. Coming up, he's the fastest mind on Wall Street, so we're putting him to the test with your help. Bring on the lightning round next.

39:57It is time.

40:04And then the lightning round is over. Are you ready? Steve Dye. Tell them what I'm going to do. Let's start with Douglas in Alaska. Douglas. Let's get to work. Expanding operations in New Jersey, Pennsylvania, and Texas. Partnerships with NVIDIA and Google. 16 networking data center build-ups and AI defense systems. Dr. Kramer, what are your thoughts on Nokia? I like Nokia very much. I'm glad you brought it to our attention. I think it's a terrific situation, and I would be a buyer right here, right now. Let's go to Chris in Maryland. Chris. Hey, Jim. This is Chris from Minneapolis, Maryland. Nice.

40:41I'm calling in about the NASDAQ ticker SHIP. Bulk transportation is on fire. I think it's a terrific situation. It's not an expensive stock, and I think the yield is safe. I'd be a buyer. Let's go to Kira in Arizona. Kira. Hello, Professor Jim. How's it going? It's actually going excellent. Thank you. How about you? It's going good for me. Yeah. Perfect. Perfect. Oh, yeah, yeah. I'm doing good. Yeah. All right. I want to get your thoughts on Hub Group with everything going on with the company in the transportation sector. Do you think the stock is a buy right now? That's a tough one. That's a tough one.

41:18After J.B. Hunt announced bad numbers last night, my travel says, It's just a small position in trucker. And I've got to tell you, it's going to be rough going for a little bit. Got to wait till oil calms down and then we're OK. Let's go to Quentin in Georgia. Quentin. Booyah, Jim. Booyah. Jim, this company has$8.4 billion in backlog, huge exposure to the U.S. nuclear navy, and growing advanced reactor opportunities. Yet the stock sits near its 52-week low. So at this valuation, isn't BWX technology a major buying opportunity right here? No, I'll tell you the problem with BWX. The price earnings multiple at 30 is too high.

41:58I think it's a great company. I mean, really terrific, but it's too expensive, even though it has nuclear. We have to hold off. Let's go to Bruce in Illinois, please. Bruce. Jimmy Chill, I own stock in Dominion Energy, and they are supposed to merge with NextEra Energy. If the merger is approved, my shares of Dominion will be converted into shares of NextEra. What are your thoughts of NextEra? Take the money and run. Take the money and run. Honestly. I mean, I just think you take the money. You've won. Don't fool around. That's not a good stock to own versus the one that you own. Let's go to Chris in New Hampshire.

42:32Chris. Hey, Jim. What do you think of RDW, Red Wire? We're in a rate tightening cycle. In a rate tightening cycle, we cannot buy a company. that are losing money left and right. It just won't work. And that, ladies and gentlemen, is the conclusion of the lightning round. The lightning round is sponsored by Charles Schwab. Coming up, Kramer's making the case that you can still buy the AI stocks, even if the companies do slow things down. Next.

43:14Tomorrow, kick off the trading day with Swak on the Street. Live from Post 9 at the NYSE. David, the swarm turned out to be smart, turned out to be nefarious, and I worry about North Korea and Iran. I'm not worrying about you unleashing a swarm. You are the least of my worries. Good. I should be. There's a compliment. AI, David, not your bitch, let me tell you. List of worries. AI, favor. It all starts at 9 a.m. Eastern.

43:53When I look at what's happening with AI since the big open AI hugging face incident, it feels like nuclear power all over again. If the Three Mile Island really blew up in 1979, we stopped building nuclear plants for decades, even as it proved over time, to be the cleanest and relatively safest form of power at scale ever invented. When we learned that OpenAI launched powerful AI agents that were meant to test vulnerabilities, and somehow they coordinated a joint attack on Hugging Face, a totally separate company, it redefined the safety debate. If these agents could basically anthropomorphize into enemy agents as a team, hiding themselves, lying to OpenAI, covering their tracks, just like real bad guys, then we have, I'd say, some reason to worry.

44:36It's like three miles all over again, and the regulation in its way could be quite stifling. The word was well articulated by Dario Amadei. He's the CEO of Anthropic, talking about how this kind of thing is an existential issue for humanity. Not as bad as the ex-anthropic researcher who said humanity faces an AI death sentence four years from now. But still pretty bad. The solution in his eyes? A slowdown in AI development. Lots of intervention to do things safely because we need to ensure that this kind of intrusion won't happen. Slacking the pace, basically. Now, I've got two hats on this one.

45:05First is my stock picking hat where I want to help you try to make some money. From that perspective, I worry about how an AI spending slowdown could hurt all sorts of companies like NVIDIA, Intel, Micron, among many others. Those are the ones that the club owns. Call me meretricious, but I have a job to do. Help you save money. Second, though, there's my human being hat, not my top priority right here. But when these companies are talking about an existential threat to the human race, it's something I can't ignore. Now that I've studied this issue, that's what a lot of times I've spent out here.

45:34I believe that some regulation and guardrails are necessary here. But if these entities feel like they have to slow down spending, hey, they don't need to wait for the government. Stop the slowdown. Just spend less. What can I say? If Microsoft, OpenAI, and Anthropoc are worried, then they should slow down. They understand their own issues. And if we want some sort of combination of the National Highway Traffic Safety Administration, Atomic Energy Commission, and maybe a watchdog like the International Atomic Energy, count me in. But otherwise, I stand with NVIDIA's Jensen Wong, who argues that these execs are responsible.

46:04They'll do the right thing to prevent the throng of unauthorized agents. I think they'll do it if only to protect themselves from mass tort litigation, lack of any willingness. Who's going to insure them? What I'm not so sure of is what happens if a foreign enemy unleashes its own swarm of AI agents. For that, I have to rely on Palo Alto, Okta, CrowdStrike, and others to be one step ahead of the enemy. Historically, that's been a safe bet. I like what I heard from these companies this week. Now, how about my first hat, the investing hat that worried about data center spending? I think the spending will proceed apace.

46:35Anthropics just making so much money and opening eyes not far behind. You give them$10 billion worth of gigawatts and they can make$30 billion. They aren't going to slow down the important parts of their business. Honestly, I doubt they'll slow down much at all because there's just too much money at stake for them to stop now. They will be prudent and they will welcome regulators, but they're going to keep building. And that's why I think after the Fed fallout debates, these companies that make components for the data centers, I think they're all buys. You can have some big companies slow down while others remain responsible and confident without slowing.

47:03and are using the right cybersecurity tools. That's why these cybersecurity stocks make so much sense to me. From Okta to CrowdStrike to Palo Alto, that's why we own two of them, CrowdStrike and Palo Alto, for the club. I asked every exec out here if they're getting ready for the death sentence in 2030, although I did it a little more subtly to Sarah Fyre because she works at OpenAI, where the commotion originated, and I came away thinking we have some time to fix things. But let's understand each other. We have to fix them, no matter what. I like to say there's always a bull market somewhere.

47:33I promise you're going to find it just for you. Right here on Mad Money, I'm Jim Cramer. See you tomorrow.

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