AI mania, China and Treasury moves put markets on alert 9/22/26

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0:41We've got plenty under$50. Plus, my Lowe's rewards members get same-day delivery for free. Shop Black Friday deals before the rush at Lowe's. Valid through 1118,$25 minimum, and loyalty membership acquired. Order eligible items by 2 p.m. Subject to weight and size restrictions and availability. Terms at lowes.com slash shipping terms. NASDAQ looking for another record. I'm Morgan Brunen, and this is your morning call.

1:18Good Tuesday morning after a wild run for stocks yesterday that saw chip stocks surge and the Nasdaq close at a record all-time high. Nasdaq 100 yesterday closing up 2.8 percent. Let's get a look at U.S. stock futures this morning. You can see more green on the screen, albeit very modest moves here, with the S &P poised to open up five points, the Dow 72 points, and the Nasdaq 14 points, basically hovering around the flat line. We continue to track the action in the chip trade, though, after AMD became the 16th stock to hit a trillion-dollar market cap. Other names like Arm and Intel also closing sharply higher.

1:53We'll have more on that in just a moment. But as you can see right there on your screen, pre-market moves. We're taking a little bit of a breather here this morning after the strong start to the week. The AI trade all coming Coming back to Facebook and Instagram parent Meta and hype around its Muse AI agent. Those shares surged yesterday, closing up 11.5 percent, highest level since October of last year. And if we get a check this morning, up fractionally again as well, up about half a percent ahead of MetaConnect, the event that investors are watching closely that kicks off tomorrow. Shares are tracking for their best monthly gain in more than 13 years.

2:28And another name to watch this morning in the AI trade is Alibaba. Alibaba, that is higher in Asia and in the pre-market here in the U.S., up about 2 percent. And we're going to have much more on what's fueling that jump coming up this hour. Meantime, let's get a check on energy with WTI still below$100 a barrel, well below$100 a barrel. Wow, we've seen quite a move here in the last couple of days. It's trading just below$94 a barrel, down another 2 percent this morning. Brent is down more than 1 percent. It is back below$100, too, trading at$99 a barrel. Even so, keep an eye on diesel because that is still ticking higher.

3:03Remember, that happens on a lag here. Hitting another record this morning, we're now at$6.53 a gallon. That is the national average, according to AAA. Let's also get a check on yields and what we're seeing in the bond market. You could say taking a bit of a breather here across the curve. U.S. 10-year Treasury yielding 4.93 percent right now. Two-year Treasury, 4.73 percent. And that is after the two-year hit its highest level. The yield hit its highest level since July of 2024 in trading yesterday. 30-year Treasury, 5.27 percent. Let's see how Europe and Asia are faring right now. Steve Sedgwick is in London with what we're seeing globally.

3:41Steve.

3:44Morgan, don't you just absolutely love our job? Everything that you and I were being told that the market was terrified about last week, It's gone. We don't care about AI killing us this week. We don't care about valuations and Cape PE valuations at the same level they were in 1998. We're not worried about a bond market route. We're not worried about the oil price or inflation or interest rates or any of that. All we care about is the rally. And tech stocks continued to power Asian indices this morning as declining oil prices that you mentioned there lifted wider sentiment. Now, look, a meeting between Presidents Trump and Xi later this week, absolutely in focus, especially for those Asian markets.

4:21But major European indices, well, let's have a look at those. They're a touch lower today. Investors also awaiting updates from the UN General Assembly, where, of course, the president is expected to deliver remarks. Mr. Trump also expected to hold a bilat with the Ukrainian president, Vladimir Zelensky, who might well turn around and say, Sir, are you sure it's just us and what we're doing in Russia that's leading those diesel prices that Morgan just mentioned to these record levels? Are you sure it's just what we're doing in Russia? Nothing to do with a little bit further south in the Middle East?

4:51I'm not sure Zensky will say that, but I wonder if he's thinking that. Anyway, he's also going to have a very interesting meeting with the UK Prime Minister Andy Burnham. That is the first time those two have met. Morgan, back to you. A lot to watch today. Appreciate it. Let's keep the conversation going. Bring in John Kadunas, CEO at Calamos Investments, with$53 billion in assets under management. And, John, it's great to have you here on set. Welcome to you. A lot to talk about when it comes to the markets right now. I think we're going to start with this renewal, though, of the AI trade, Because at least in trading yesterday, when you looked under the hood on the S &P 500, I mean, it was all or nothing.

5:26AI, even as other things, showed signs of weaknesses. Your thoughts? Well, AI is here. It's not going anywhere. We tell our investors you have to be involved. But it's a stock picker's market, too, because not all the trades are going to do well. Not all the companies are going to do well. We look at it in two fragmentations. We look at it, one, in infrastructure and then the other one in software. And they trade differently. They have different risk parameters. So you have to be very careful to try to pick the right ones because they will lead. And we've seen even like the GDP numbers came out last.

6:03I think about 30 percent are attributed just because of the AI. So you have to focus on it. You have to look at it. It's here. And it's going to be a major part of going forward. How are you tracking energy prices right now, whether it's diesel, whether it's crude oil? It just seems like so many other assets are taking their cue there. And in a week where you have President Trump addressing the U.N. and having these bilateral meetings, as Steve Sedgwick just mentioned, how how much is geopolitics factoring in here? It's a lot of it is event risk. The geopolitics has always been huge. But underlying oil has always been the basis of the entire economy going back for over 100 years.

6:44And so it's not surprising that the fluctuations in the market happen when oil is over 100 or if it's under 60. So that's something that we look at. But we tell our clients that you have to be in a diversified portfolio. And you have to be in products that you can take these type of volatile swings in the market in order for you to have good, consistent returns. So there's products out there that can kind of keep things more even and not have to deal with the daily issues of what is happening, whether it's the crisis in Iran, whether oil going up a lot, whether we're anticipating what the Fed's going to do.

7:26And we tell clients you can't sit there and anticipate and make market moves on what the Fed's going to do, what's going to happen in the elections, you know, where are rates going. You need to have a portfolio that will take all that into consideration. So you could, you know, whether it's one way or the other, you can still have downside protection and capture a decent amount of the upside. So is don't fight the Fed, is that a thing of yesteryear now then? No, you know, I don't think so. Well, look, I think what the Fed governor is trying to do is they want the market to follow, you know, for the Fed to follow the market, not the other way around.

8:07They don't want to set the tone in terms of what's happening. And I think it's a healthy way. And for them raising the rates, I'm not sure that that's going to do anything. I think maybe they might do one more. They probably should have done it earlier. But at this point, I think once there is some kind of resolution in the Middle East with oil and it goes down, I do feel it's transitory. I do feel insurance interest rates are transitory right now. And when those come back, I think the market's going to rally, continue to rally here. And we have the support of AI as well. Speaking of comeback, Bitcoin trading around$86 ,000 this morning, breaking through, I think, what was kind of closely watched as a key technical level in trading this week.

8:52You are in that marketplace. You have products in the marketplace. Your thoughts? Sure. We last year developed an ETF, which is 100 % principle protected for people that can't take the volatile swings in Bitcoin. So we feel that we also have a 90 and 80 % protected type Bitcoin. So it has a similar volatility to money markets, to equities, to commodities. And you can put this in your portfolio. Bitcoin is here to stay. That's what we feel. That's what we believe. I think that just because the act didn't pass last week, I think the Clarity Act, I think the SEC the next day made some rulings where it's helped Bitcoin.

9:43and we've seen it gone up in price instead of down. I think the weak players are out of the market. And I think, you know, we're going to see a cycle in the next three months, even though it might take a little bit of a breather here, really go up. It trades in like four-year cycles. And in October should be the low of that four years where we start to see the rise again for the next four years. So I think that Bitcoin is definitely an allocation that most portfolios are starting to have, even the big sovereign wealth funds. It's not, are you in Bitcoin? It's how much are you allocated? And if we had this conversation a year ago with the biggest banks in the world, JP Morgan, Morgan Stanley and all that, they did not want to participate.

10:28And now they're in and they're participating. They're lending against it and everything else. So it's here. It's here to stay. It's a long-term hold. Don't watch it every day because you're not going to be happy, but we feel it's a great investment. All right. And of course, you and I did have this conversation a year ago. What a difference a year makes in all ways today. It's great to have you here to start off the hour. John, continuous at Calamos. It's great to have you. Thanks. All right. Well, we got a lot more to come here on Morning Call. We really do, including ahead of U.S.-China talks on AI this week, Alibaba unveiling what it calls China's most powerful AI chip, our Eunice Yun.

11:06It's going to take a closer look. Plus. AI is not direct stimulus, but it went from$300 billion last year, the whole hyperscaler ecosystem, to like$700 billion this year, maybe a trillion more next year. That's like 1 % increase to GDP each year. And obviously, it may add a little bit to inflation because you're hiring people, you're building factories, you're buying equipment and copper wires and building power plants and all that. But it will be. It's an unbelievable technology. Much more than Meta's Muse. We're going to look under the hood at the red-hot AI trade even more. What's really driving the sector to near record highs?

11:40And later, more than 800 flights canceled across the U.S., the northeastern U.S., the state of play this morning as Newark, JFK, Philadelphia, and other airports try and get back to business. And by the way, what's one of the busiest travel weeks of the year in the New York metro area? Morning call. We'll be right back. Hey, what's up, guys? It's Haley Bailey. Okay, I need to tell you about something. I just got YouTube Premium. It's got tons of awesome features like offline downloads so I can download my favorite videos before I travel and watch them whenever I don't have Wi-Fi because we all know airplane Wi-Fi is the worst.

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13:03Despite a citywide blackout, this company is still up and running. That's because CDW deployed and managed a cost-effective Eaton Triplight Series SmartPro UPS to safeguard equipment easily and reliably. Keep the power on and protect your IT equipment from electrical challenges. Triplight by Eaton and CDW. Make amazing happen. Find out more at cdw.com slash triplight. Welcome back to Morning Call. Well, returning back to shares of Alibaba, higher in the pre-market and over in Asia after unveiling its new AI chip and plans to sharply expand its data center build out. Eunice Yun has more from Beijing.

13:42Hi, Eunice. Hey, Morgan. Well, Alibaba was winning over investors with its aggressive bets on the AI build out. Today at a conference, the company unveiled what it described as China's most powerful AI chip. So this chip is seen as a competitor to NVIDIA. And the CEO said that when clustered, these chips would be able to be used for more advanced frontier model training. In addition, the CEO set a target for global data center capacity at more than 20 gigawatts globally by 2032 on what he described as exponentially rising demand. And just to give you a sense of what that means, a 50 megawatt data center is seen as a mid-sized one in the industry.

14:28He also teased more advanced AI models, which he said would be trained with between 5 to 10 trillion parameters. So in theory, that means that these AI models would be able to handle much more complex reasoning. Now, this is all part of the e-commerce giant's plan to try to turn itself into an AI powerhouse, spending$53 billion over the next three years. Now, investors were also rewarding Tencent because Tencent unveiled a new AI image model. A lot of people were feeling optimistic because the company said that this image model was going to be integrated across its products. And people are starting to get a sense or at least hoping that Tencent will be able to then improve its AI to perform tasks on its very popular social media app, WeChat.

15:20And then, Morgan, because of that, there are a lot of people who are drawing parallels with Meta's Muse AI and its ability to have an agent to perform important tasks. I mean, it's such a big week for the entire AI conversation, not to mention the fact that you have this Trump-Xi summit that's going to take place over the next couple of days. And AI seems to be front and center. So I'm going to diverge a little bit here, digress a little bit here. I'm really curious what you're seeing and hearing and reporting on from the ground in China ahead of that meeting and how AI is being perceived with that.

15:55Right. Well, so from the very top, President Xi Jinping has in the past said that there needs to be more guardrails on AI. At a very important conference over the summer, he had said that AI needed to be in human hands. So it has to be under human control. But of course, we see just in the examples today that the AI development continues and in a very fast pace. And in fact, in terms of the official media and on social media, there are a lot of skeptics about the U.S. call for an AI slowdown. And the perception is that, hey, maybe this is just a way to kind of keep China down and contain China's own development when it comes to AI.

16:37So it's going to be a very complicated conversation, I think, between the two presidents. All right. Eunice Yun, always great to have you. Appreciate it. Well, Texas Governor Greg Abbott tightens the screws on new AI data center projects in the Lone Star State. Speaking of the broader AI debate. But first, we're watching the price of copper coming off its first five-day win streak of the year. The number to watch for an all-time high is$6.90. That's for the U.S. traded contract. And we're close to it, a couple cents away. Morning call. We'll be right back.

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18:58A milestone. A memory in the making. Make every moment unforgettable with 20 % off storewide. Exclusions apply. See Jared.com backslash radio for details. Jared, make the holiday last forever. Shop Jared Jewelers. Welcome back to Morning Call. World leaders not only taking part in the U.N. General Assembly this week, but in Climate Week in New York as well. As heads of state and the business community discuss climate impact, new energy opportunities with the price of traditional sources spiking, and how AI and other innovations can better mitigate natural disasters. Advancements in space technology are helping scientists to better understand and manage Earth's climate and observation of that climate.

19:41Well, for more, let's bring in Dirk Wallinger, CEO of York Space Systems, to discuss that and more. Dirk, it's great to have you back on the show. Welcome to you. Let's start right there. Thanks for having me. Let's start right there, because you did just get awarded a contract by Tomorrow.io, and they were on our show talking about this last week, but to help build out this next generation of satellites for better weather forecasting. What does that mean for York? It's significant not only for York, but really for our country and the world overall. I mean, the reality is that 71 percent of the world's population doesn't have any ground coverage at all.

20:12Five billion people have none as well. And so what tomorrow's building is a really amazing constellation to measure, you know, atmospheric data and bring that in so that we can help to kind of save lives and give better models and more alerts more quickly. How does it speak to the large but perhaps even more quickly growing demand for all things Earth observation and Earth monitoring monitoring right now, whether it is from a climate and weather standpoint or even just given the geopolitical dynamics that we're navigating right now? Well, obviously, it's really great for weather. But in general, this move to services from things that used to be provided by the government, but now the technology exists for great companies like tomorrow to provide, you know, very frequent data from space more affordably, where these things were just not possible 10 years ago.

20:59It really speaks to the American economy, our ability to deliver technical solutions. And this service model, I think, is something that can grow and really help the U.S. economy overall. As we talk about more AI and autonomy, including on the battlefield, and I ask this knowing that you play pretty heavily in the national security space space. What is what is the opportunity there to look at next generation connectivity? Because all of these machines, all of these drones are going to have to be able to speak to each other. And what we're seeing in real time with some of these conflicts around the world is that when GPS and other forms of connection get knocked out, it becomes much more difficult.

21:36Yeah, what we're seeing with the autonomy is that I think people don't fully comprehend the impact that it's going to have in our entire national defense architecture. If you're looking at what's happening with drones and autonomy and operations remotely in Ukraine, the average lifespan for a new Russian recruit is 20 to 30 minutes. Right. So what it really says is that we can't afford to have people in harm's way anymore. There needs to be full operation, fleet operation worldwide, globally, where they're not in the theater and in the front. And obviously, space is the natural layer that can handle that autonomy.

22:10And you're going to see this fusing of the space economy with the autonomous economy and the unmanned economy to really be a driver for total change in the national defense architecture. The other big topic that is in focus has been really for a while now. It's something we talked about with the chairman of Ex-Im Bank, John Yovanovitch, yesterday. Whether it's from, you know, metals and mining and things that are coming out of the ground or the high ground, meaning space, there is a need for a much more resilient and stronger, more robust supply chain. How do you see all of that evolving when it comes to manufacturing here in the U.S.

22:47in the name of national security? Yeah, I think what you're going to need to see is U.S. firms stepping up to invest in the capability to move that supply chain to the U.S. So as an example, York has invested$755 million in production, moving that to the U.S. for things like solar cells in particular. Ninety eight percent of the raw materials for solar cells come from China. And obviously that's going to be a major hurdle for the United States if our power systems all come from China. And so you're going to need to see U.S. companies step up and start to invest in the U.S. and move that capability here.

23:20That's going to become increasingly important for national defense, but just our commercial economy as well. Yeah. I mean, part of that supply chain is going to be the actual capacity to launch. And this is something we've been reporting out. I've been reporting out for a while, but it's definitely getting more attention with Starship from SpaceX poised to come online and perhaps bring some Falcon fleet capacity offline here in the near term as well. But do you have enough, I guess, is there enough in the marketplace, enough rockets to launch the satellites that you need to go to orbit here? Right now we do, but it is a pending concern for sure.

23:55There is a scarcity. Starship will help with that significantly. But other companies like Firefly, ULA, Blue Origin who are coming online, we do desperately need that capacity. And so, you know, hopefully the U.S. government continues to invest in that launch capacity because it certainly is a looming and pending problem in front of us. If we're not investing in that now, buying rockets and giving them the opportunity to launch and quite frankly, fail a few times, too, but get back up. So, yes, it is a legitimate concern. And hopefully the government and other companies in the industry invest in capability.

24:32So in light of all of this, whether it's U.N. General Assembly or whether it's the Trump-She meeting, your thoughts on or expectations as the CEO of a space company on what we could see in terms of partnerships, deals, alliances or a path forward between all of these different players? We're already starting to see some kind of movement as far as NATO partners go and friendlies and allies there. I mean, I think us and our true adversaries, We're probably not going to see a lot of continued cooperation there. It's just it's not really in either party's interest. There's not enough trust built there.

25:07But the NATO allies have been with us for, you know, five or six decades now. They've shown themselves to be phenomenal partners. And I think that there's a growing understanding that we do need to work together. It's too big of a problem. There's too many challenges out there. And if we go at it individually, it's probably not going to result in a good result. So hopefully we're going to see continued cooperation. And we're seeing more of that. We'd like to see it move more quickly. And we are at least starting to see a little bit of urgency with we do really need to be in this together. Dirk Wallinger of York Space Systems.

25:37It's great to have you on. Appreciate it. As we had to break, the biotech IPO pipeline is in focus with NVIDIA backed Iambic Therapeutics filing for a U.S. IPO. That happens after the closing bell last night after the market close, along with Retention Pharma and T-Rex Bio. They both filed on Friday. According to Renaissance Capital, all five of the year's best-performing IPOs that raised$50 million or more, they're all biotech. Morning Call continues next. I'm Morgan Brennan. Welcome back to Morning Call. After a wild run for stocks yesterday that saw the chip stocks surge and the Nasdaq close at a record all-time high, let's get a check on where we stand here this morning pre-market.

26:21And you can see there's some green on the screen, but very small moves. The S &P is poised to open ever so slightly higher, two points, basically right around the flatline. Dow up 63. The Nasdaq up 12 points. Nasdaq 100, by the way, had a 2.8 percent gain type of day yesterday. Watching yields as well and what we've been seeing in the bond market, as we do see bonds a bit firmer here. U.S. 10-year Treasury yielding 4.94 percent. The U.S. two-year, Fed-sensitive U.S. two-year Treasury yielding 4.74 percent. That's after it touched its highest level, that yield, since 2024. And the 30-year Treasury, 4.27%.

27:01We're also watching energy right now. WTI is well below$100 a barrel. It is actually trading down about 1 % right now. So coming off the lows we've seen here in the past 30 minutes, trading below$95 a barrel. Brent crude is also below$100, down about 1%, trading around$99.50 a barrel. There are some reports this morning, a Kyoto report that Iran has offered to reopen the straight-up-core moves in the next seven days. Devil's in the details. But that does seem to be factoring into the move we're seeing in crude this morning. Diesel, though, that's still ticking higher. Another record high this morning, according to AAA.

27:41$6.53 a gallon now. It has been quite the move. We're also going to keep an eye on crypto following yesterday's big run for Bitcoin. You can see Bitcoin is down fractionally right now, but we're still trading just below$86 ,000. And this is the highest we've seen since the start of the year. Global markets mostly higher, too. That's the session that we saw in Asia overnight. And you can see early trade in Europe is also showing some green, albeit minuscule moves, she said this morning. We also want to get a check on the Chinese yuan, which has been strengthening against the dollar. hit a three and a half year high yesterday ahead of this Trump-Xi meeting later this week that kicks off tomorrow.

28:25And that is something to watch as trade talks, AI talks, and a strengthening of the yuan are all in focus from the U.S. side. So we're going to continue to talk a little bit more about that in just a moment. But in the meantime, we do want to turn back to the tech trade. Meta's 11 percent jump on Monday capped what has been a 40 percent rally over the past month, a rally in which Meta has added half a trillion dollars in market cap. You can see fractionally higher again this morning. Much of this coming after the launch of AI chatbot Muse on September 8th, which overtook ChatGPT as the leading iOS free app in the U.S.

29:02last Friday. Now, the early success driving semi-stocks, too, as investors see Muse as a boon for the already bottlenecked CPU market. Advanced micro devices, AMD and Intel, soared 10 percent and 12 percent on Monday, respectively. And shares of each are now up more than 30 percent over the past month. That moved delivering AMD into the trillion dollar market cap club as it became the 16th company to tout 12 zeros. And it raises stakes on Metis Connect events tomorrow, where Mark Zuckerberg and team will sell Main Street and Wall Street on its approach to combining hardware and software to own the consumer AI ecosystem and also attempt to convince developers to build tools and agents on top of its AI subscription service.

29:45Meta has really emerged here as the company positioned, at least right now, to lead the American open-weight model push. Well, President Trump is set to address world leaders at the UN General Assembly later this morning. This is going to be about 10 a.m. Eastern. The president is expected to use his speech to defend his global policies, specifically the war in Iran. And Trump is also expected to meet with leaders on the sidelines of the event and sign a recently announced security deal with the prime ministers of Denmark and Greenland. All of this comes ahead of Thursday's big meeting in Washington between the president and China's Xi Jinping.

30:21And Chinese and U.S. officials are wrapping up their second day of talks in New York yesterday ahead of that meeting, once again discussing AI trade, other investments. So speaking with our colleagues at CNBC TV 18, JPMorgan Chase's Jamie Dimon, who will be among the U.S. business leaders attending the Trump-She State dinner on Thursday night, laid out his expectations for the summit. Actually, Secretary Bessing came out the other day and said that, you know, we're making products of, I think, a border trade, you know, things which shouldn't be tariffed, you know, raising real issues, talking about AI, think of security around AI.

30:58I think that's what they should do, fully engaged. You know, we're not going to agree on everything. You know, they're aiding and abetting in some way, you know, Russia. Obviously, we're on a different side of that. And so it's a complex thing. But I hope they'll raise all those issues. And, you know, this is important for the whole free world. For more, let's bring in Isaac Stonefish, founder and CEO of the geopolitical analysis firm Strategy Risks. Isaac, it's great to have you on the show. As someone who counsels corporate America and investors and others on what it is to navigate the U.S.-China relationship, what it is for American businesses to do business in China.

31:32What are your expectations this week?

31:37My expectations are quite low. I think people who are optimistic about the U.S.-China relationship are glad that the two sides are meeting at all. And there's some glimmers of hope in this AI dialogue, but there's also a lot of fear that Beijing is just going to use this to pay lip service to the idea that China is the responsible global stakeholder. They'll have a lot of empty conversations, and both sides will continue this frenetic competition at pace. I mean, when you think about the AI piece alone, is China the responsible stakeholder, especially if so much of their model making in the AI world has been tied to distillation efforts and basically theft of U.S.

32:14technology, as the U.S. side has suggested? It's nice to be able to give a one word answer. No. OK. So in light of all this, what I guess what are your expectations in terms of any sort of trade deals and then perhaps just as importantly execution on them? So soybeans are always in play because it's one of the least politically sensitive issues to deal with. I think there will be some gifts to both the U.S. companies and Chinese companies. I think for what American companies are doing and seeing, really, this is another opportunity for them to balance more on the U.S. side versus the Chinese side.

32:53I think Apple especially, Apple is a new CEO, a real possibility that Apple decides to move closer to, I don't want to say American values, but to the American business community here, especially in things like memory, than what they've been doing in the past. But really, it's individual companies needing to figure out and to understand that both the U.S. and China want them to pick sides. And they're all loathe to do it. You know, it's interesting. We're just getting headlines here just a few moments ago that DeepSeek's founder is actually set to present at the U.N. At the U.N. as well. Reuters reporting that Chinese A.I.

33:33startup DeepSeek will be among the companies briefing the U.N. Security Council this week on the risks tied to artificial intelligence. Now, OpenAI CEO Sam Altman also plans to brief the meeting. But the fact that we are seeing major innovators and stakeholders within this global AI landscape getting ready to brief here to the U.N. signals what? So the Ministry of State Security pretty recently put out its risks on how China fears AI. But really, the biggest fear that China has is that AI will disturb the Communist Party's rule. And the funny thing about DeepSeek is that Beijing fears DeepSeek more than the United States.

34:13And so we have to understand Beijing's fears on this as well. From a global perspective, it's also that, I mean, right now this is very much a U.S.-China race. And Europe and other parts of the world aren't really playing into it. So finally, I guess just to put a cap on all of this, what would your guidance be to corporate America as we do have a big week of geopolitical events? this is the time to to study up to be cautious and to realize also that probably the biggest signifier is not what happens this week but what happens in the midterms and understand that if the dems win a lot of the global business activities will be much further scrutinized the other thing to keep in mind is that the us and china increasingly have completely different regulatory environments and you need to really focus on the compliance of both sides to stay out of the crosshairs of both Washington and Beijing.

35:06All right. Isaac Stonefish, it's great to have you on. Appreciate it. We've got a lot more to come here on Morning Call, including travel turmoil, details on the cause of that massive air traffic outage in the Northeast, and the sector and stocks that are getting renewed attention in the wake of it. Plus, OpenAI takes new steps to calm fears around development and safety. We're going to dive into that. Morning Call will be right back. Welcome back. We're checking out some of the morning's latest headlines. Transportation Secretary Sean Duffy says damaged telecom lines have been repaired and that all airports in the Northeast are resuming normal operations.

35:40This after a failed circuit and damaged backup connection near Philadelphia forced airports across the region to cancel more than 800 flights yesterday and more than 600 at Newark Airport alone. Jeffrey's noting that the ground stop may bring renewed attention to the $12.5 billion FAA modernization program that was awarded back in 2025 to PE-backed Paraton, with IT service providers like Parsons and SAIC standing to benefit. Also, one of the airlines most impacted, according to Jeffries, is United Airlines. Well, a week after rival Anthropic unveiled its own recommendations, OpenAI releasing a set of proposals late yesterday for the safe and secure development of the AI frontier, with a focus on what the industry calls recursive self-improvement, or RSI, something we've talked about here on the show.

36:28That is something that has excited developers over its potential to create models that can upgrade themselves without human involvement. The company is calling for international cooperation to develop frontier standards. Well, if we stick with the AI trade, Texas Governor Greg Abbott is ordering his state's environmental regulator to halt all data centers-related permits until a waitlist backlog of other projects looking to connecting to the electric grid can be cleared. Well, last month, Governor Abbott imposed a moratorium on new data center grid approvals, and this order now expands that order to environmental approvals.

37:06And Amazon is blocking Meta's Muse AI assistant from accessing its retail site, saying as Amazon prohibits companies from using automated tools to shop on behalf of customers. Now, in comments to CNBC yesterday evening, Amazon saying it was not made aware in advance that Muse would access our store, nor did it authorize it, adding that Muse does not self-identify raising serious questions about retailer and customer data is handled and protected. Well, straight ahead, the morning call crew teeing up the trading day ahead and why one member says AI mania in the markets is in full force. We're back in just a moment.

37:46Welcome back. Here's what to watch today. and buckle up. We're going to hear from three Fed officials across the day. President Trump delivers his speech at the U.N. General Assembly just before 10 a.m. Eastern. And there's going to be some bilateral meetings to keep an eye out for as well. We're also going to get earnings from AutoZone, Thor Industries, and KB Home. Well, it's time for your call sheet where we look at the topics driving the trading day ahead. Crew members today on set, we've got Michael Rourke, Jones Trading, Chief Market Strategist. And on remote, we've got One Point BFG Wealth Partners Chief Investment Officer Peter Bookvar and American Enterprise Institute Economic Policy Analyst James Pethokoukis.

38:22Both are CNBC contributors. All right. We actually have a lot to get to here and we have some time to do it. I'm looking forward to this. Mike, I'm going to start this with you because we teased it just before the break. The AI trade, your assessment right now after a strong start to the week. I mean, mania is back. Yeah. You know, I believe the AI trade's a bubble. Obviously, Muse has reinvigorated Meta platforms. The way I describe it is Meta has taken the role that Google had at the beginning of the year and lost, where it's a big publicly traded company with billions of users. So if it has a good enough AI product, it can distribute that very well, very effectively.

39:03And therefore, it makes a very interesting play. I mean, a month ago when this rally started, Meta was 15 times forward earnings. Now it's 20 times earnings. It's gone up almost 40 percent in the past month. But I can understand where that enthusiasm comes from. But on the flip side, we have to think about there have to be some losers out there. And again, as you drive down pricing of AI products, it's going to be very competitive for those frontier, you know, a challenge for those frontier models, frontier labs out there to protect their margins, you know, as they get ready to come public. Yeah, which, of course, has been part of the debate around the safety debates regarding pacing the frontier and OpenAI and Anthropic and others coming out and raising the alarms about that.

39:49Jimmy, it's not just AI mania in the markets. It's AI mania in the political cycle ahead of midterms, too. Yeah, I mean, right now, listen, my sort of my sort of longer term call is that when we get to the midterm election and I think certainly, you know, the 2028 presidential election, they're going to be talking a lot about inflation. But right now, like the hot issue, obviously, is AI. And I wonder how much of a foundation on any kind of AI rally is despite sort of the blizzard of like negativity about safety. You have, you know, the Bernie Sanders banned super intelligence bill. Every politician is trying to think of ways to limit this technology, stop data centers from being built.

40:31But the fact that the president of the United States is saying, no, we shouldn't pause. We shouldn't stop. We need to accelerate. So while there will be on the Washington side, while there will be like a lot more bills coming up about what to do about A.I., various sort of auditing regimes or what have you. At least I think as long as Donald Trump is president, we're not getting any sort of A.I. ban or the kind of, I think, substantive legislation, I think that would really undermine this rally. Yeah, I mean, it has been interesting to hear comments from others in the administration, though, Peter, because they basically said, hey, listen, you can regulate yourselves and you can move as quickly as you want on the frontier yourselves.

41:08But case in point, Treasury Secretary Besson on CNBC yesterday said we're not giving you a liability shield. So I guess it raises the question, what do investors need to know or understand about where we are in this AI buildup, not just in the public markets, but also in the private markets, given what we are seeing with token prices coming down and what that means for the open AIs and anthropics of the world? Well, I think I read over the weekend that some estimate for open AI in particular was that through the next five years, including 2026, they're going to burn through$280 billion of cash.

41:44So we better hope that they become a profitable entity or else they're not going to make it. And the competition with the open source, I think, is the biggest challenge. I think broadly, the U.S. economy, the U.S. stock market still remains hugely dependent on it. I mean, yesterday was a great day in the market, but only 46 percent of the stocks on the New York Stock Exchange closed above its 200-day moving average. That was actually down from last Friday, and it's below the 64 percent that we saw last month. So we're so hugely reliant on it that we better hope that at the end of the day, these businesses actually start making money.

42:28Does this put greater onus, Mike, on Qualcomm with a Snapdragon event that kicks off today or in particular Meta with Connect Tomorrow? Well, obviously, Meta is going to be the big focus with Connect Tomorrow and Muse is the hottest thing. Qualcomm is having its own rally because it has its own push into CPUs, which seem to be the beneficiary of this agentic AI. I just want to say I really agree with what Peter says here. When you think about how many probably hundreds of billions of dollars in the backlog of the major publicly traded technology firms are the frontier AI labs. So if they don't succeed, it becomes a real issue.

43:10And of course, they're doing tens of billions of dollars of revenues already. They're on pace to do that this year. But of course, you have to earn profits at some point in time. And that's where the real issue arises. So it's going to be interesting to see how this plays out. Yeah. Jimmy, whether it's AI on the geopolitical stage today and this week, you have the Trump-Xi summit that kicks off tomorrow. You have some of these AI entrepreneurs. And by the way, not just U.S. entrepreneurs like Sam Altman, but also the founder of DeepSeek from China, addressing the UN Security Council this week as well.

43:43How to understand these navigating dynamics that are playing out in real time when it comes to the geopolitical lens, too. Well, listen, you know, you know, while I'm skeptical right now under this president, whether anything on like a from Washington is going to really affect the regulatory climate for these companies, They're not waiting. You know, they're constantly coming up with sort of new plans or coming up with, you know, OpenAge came up with these, you know, guidelines for making sort of, you know, the monitoring of these frontier models more transparent. I think that stuff's going to continue.

44:21I would expect you would hear probably similar things coming out of China, which to me sort of, you know, undermines sort of the oomph for there to be something done by government, at least in this country. But I think it's still going to be like a center stage. And I'll tell you, boy, oh, boy, Peter's talking about these companies not making it. Everybody in Washington is counting on them making it because they want to tax them to pay to sort of distribute the wealth. But, of course, there has to be some wealth to distribute for, you know, first. Yeah. Peter, I want to give you a chance to react to that.

44:50And also, I do want to get more into what we should expect from UNGA and some of these other events this week. Well, just to further quantify it, I think OpenAI and Anthropic are more than half of the backlog of the big hyperscalers. So there's a huge dependency on these companies to be profitable. I think the benefits of the technology that's being created is going to accrue to all of us. But whether it eventually accrues to the actual producers of the infrastructure and the products, I still think that remains to be seen. Yeah, Jimmy, I do want to go back to what else we're expecting. We have we have the president addressing the General Assembly today, but we're also expecting some bilats, including with Ukrainian President Zelensky.

45:34I think first meeting between Trump and the new U.K. prime minister today as well. And then, of course, meeting with all of the Gulf country leadership to what is going to matter the most here. I think what matters the most is U.S. China, U.S. talking to China if anything comes out regarding AI. I know there's been some talk earlier from Treasury Secretary Besant about coming up with some sort of notification system about something happening with these AI, with the frontier AI models. I think like that's the kind of I mean, that's a very sort of that's kind of thing we've seen in the past or in the Cold War.

46:11Where at the very beginning, you see countries making sure they're communicating, communicating, communicating about risk, things happening in their countries. That kind of conversation, I think, is a great first step to expect to be some sort of, you know, international regulatory governance regime coming out of the U.S. China before all this kind of other kind of groundwork gets laid is, you know, kind of absurd. All right. We got 20 seconds left. Final thoughts, Mike. No, it's going to be interesting. I am focused on the the upcoming Treasury repurchase that will get the announcement tomorrow.

46:43The operation will be Thursday. That's Scott Besson's new plan to stabilize the Treasury market. So I think the markets can be focused back on that again. Obviously, we have the 10 year yield. It's come down off of five percent. So that's what I'll be watching. It's going to be interesting to see how it plays out and see if the Treasury market remains stable and can maybe muster a rally. All right. Thank you so much. Short Morning Call Crew. Great to have you. Ulcerative colitis and Crohn's disease symptoms don't pause for the moments that matter. That's why understanding your treatment options matters.

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