Morning Call 10/9/26

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1:00Morgan Brennan: I'm Morgan Brennan, and this is your Morning Call.

1:16Morgan Brennan: Good Friday morning. Let's get a check on U.S. stock futures, which are right near session highs here pre-market. NASDAQ coming off its worst day since August, but reversing course here this morning. Poised to open up about 240 points or about 1 percent higher. The Dow up 64 points. The S &P poised to open higher by about 32 points. Ahead of what we're seeing in the action this morning, we are on pace basically for gains for the major averages, albeit fractionally. NASDAQ is basically unchanged ahead of the move we're seeing this morning for the week. S &P and Dow fractionally higher. Treasuries are still hovering near their highest levels since 2002, though.

1:54Morgan Brennan: Take a look at the screen right there. You can see yields are a bit higher across the curve. U.S. 10-year Treasury yielding 5.24 percent. 30-year Treasury, 5.61 percent. And Fed-sensitive two-year, 4.77 percent. So let's also get a check on the dollar index this week, because it's been a real round-trip move for the dollar index. The level there, 102.08. We're basically flat to slightly lower here this morning for the dollar against other major currencies. But of course, we've seen some big moves in general in FX this week, particularly when it comes to the euro. And let's get a check on energy, too, because that is lower after sharp moves higher yesterday.

2:32Morgan Brennan: Taking a bit of a breather here. WTI is down about 1.2 percent, trading around$90 a barrel. Brent crude is down 1.5 percent, trading just below$103 per barrel. Brent crude is actually higher on the week. The other one to keep an eye on, despite the fact that you see some pressure here, pre-market is the ultra-low sulfur diesel contract because that has ripped higher this week. It's still on pace for gains of about 6.5%. We're going to have more on energy in just a moment and why that matters going into another weekend. Some of this morning's top stock stories, though. Let's check shares of wireless giants AT &T, T-Mobile, and Verizon, all sinking ahead of the open after Elon Musk's SpaceX struck a deal to acquire a portfolio of spectrum licenses in a direct challenge to the legacy wireless providers.

3:18Morgan Brennan: In the U.S., we're going to have much more on that a bit later in the hour, but look at these moves that we're seeing pre-market, down anywhere from 5%, 6 % to 7%, 8 % for the wireless carriers. SpaceX, meantime, is up 4 % on this report. As I mentioned, we've got much more coming up on all of that spectrum. One of the key commodities that doesn't get talked about enough, perhaps. We're going to change that. Watching shares of Apple as well. Japan's Nikkei reporting the company is telling some of its suppliers to cut component production for its new iPhone 18 Pro and 18 Pro Max. So, after an expected initial demand, this, as Bloomberg reports, the company may look to unveil a touchscreen MacBook and new Mac Mini as soon as this month.

4:00Morgan Brennan: You can see shares of Apple down 2 percent. Federal regulators are fining American Express$350 million for failing to catch and report money laundering in its system. The move marks one of the steepest penalties imposed by financial authorities in President Trump's second term. So in a statement, American Express saying the bank is, quote, fully committed. Well, the financial institution is fully committed to addressing those concerns. Those shares are down fractionally for the financial services company. Let's see how Europe and Asia are wrapping up their week. Karen's show is in London with more.

4:34Morgan Brennan: And Karen, what a week it's been.

4:38Good morning to you, Morgan. Well, we have Europe in the green this morning, despite a pullback in U.S. trade overnight. Seems as though we're getting our signals from your futures there. Telecom stocks sinking, though, amid those fears that SpaceX is going after the mobile market. Tech that can penetrate walls and bring coverage to offices. So big moves in the telecoms here. But more broadly, we may end up flat to slightly weaker after some earlier selling across European markets this week. Now, when it comes to Asia, those equity markets also shrugging off that report from OpenAI. Although there is a note of caution here, both Korea and Taiwan indices are closed today.

5:12So both of those are highly sensitive to the AI trade. So we may see that reaction come next week. Meantime, SoftBank closing in the red after the Financial Times reported that founder and CEO Masayoshi Son has been holding talks with senior figures in the UAE looking to raise up to$100 billion to scale up the company's bet on AI. It does, of course, come just weeks after the firm completed the largest junk bond offering on record, paying yields close to 10 % to raise more than$11 billion. But no doubt, I think a test under the hood around the AI resilience,

5:43Morgan Brennan: thanks to the open AI story around revenue. Morgan, back to you. All right, Karen Cho. Thank you. Have a wonderful weekend. We're going to turn to a developing story. We're going to check oil prices again. This after President Trump says the U.S. will not attack Iran before the midterm elections, citing productive talks with Tehran. The price relief coming as data from the U.N. and Kepler shows that Iran has struck at least nine vessels in the Strait of Hormuz in the last week. Oil flows through the strait had recovered to near pre-war levels in late September, close to 16 million barrels a week ago.

6:12Morgan Brennan: But that dropped to half of that by Monday. No diesel, gasoline or other refined products are reported to have made it through the waterway on Monday. We're also tracking Iran-backed Houthi rebels in Yemen, stepping up attacks on Saudi Arabia, claiming they struck Riyadh's airport yesterday with a ballistic missile, setting a parked plane ablaze. Nearly half the flights scheduled for today have been canceled. So let's bring in Amina Bakker, head of Middle East and OPEC Plus Insights at Kepler. Amina, it's great to have you back on the show. I want to start right there. What are you seeing? What is Kepler tracking in real time in terms of the state of the strait?

6:47Thanks, Morgan. Yeah, as you mentioned, I mean, we have been seeing more attacks in the Strait of Hormuz, which led to less volumes. Our latest figures show an average something around 9.9 million barrels a day going through the straits. And that's off the average of 16, when you mentioned that last month. And we're just seeing generally more threats, escalation happening, whether in the Strait of Hormuz or attacks on Saudi targets, including airports. So, I mean, the whole region remains very, very exposed, despite President Trump's statement yesterday saying that he is not planning to attack Iran right now, but the military option is there.

7:34I personally think that the timeline is still kind of up in the air. And the fact that he said that it might happen after the midterms might even suggest that it might happen before.

7:44Morgan Brennan: I'm glad you brought that up because we did get those comments from President Trump in the wake of quite a few other headlines suggesting that escalation could potentially be on the table here as we do see this force buildup, further force buildup from the U.S. So as we do go into another weekend, And as we are counting down to midterm elections here in the U.S., as the volatility does pick up again in the region, what would you be watching for in terms of understanding how this could play out in the near term? Sure. There are also kind of talk around the fact that Iran might have a preemptive attack, anticipating a potential U.S.

8:25attack. So that's something we're watching very closely. But generally speaking, Morgan, we're just seeing the war really spread. More groups are involved now. The Houthis are incredibly active in their attacks. We know that Saudi Arabia, along with Pakistan and Turkey as well, are stepping up attacks in Yemen. So we're going to remain in this kind of period of volatility and high oil prices. I don't expect prices to come down anytime soon.

8:55Morgan Brennan: Very quickly here, we also had a report that the IAEA says that the 100-barrel reserve release is not going to be incremental to the$400 million already agreed to back in March. How much is that contributing to what we're seeing in terms of the refined picture, refined product picture, and what we've seen in prices? No, for sure. I mean, the headline figure of$100 million, I think those in the market and familiar with the industry know that that's just a headline figure. We weren't actually going to see 100 million barrels. It's probably going to be just a portion of that. Again, I see that as a very, very temporary solution.

9:31And if that time isn't used very wisely to end the conflict, we're just going to find ourselves in an even worse situation than where we started.

9:39Morgan Brennan: Okay. Amina Bakar, it's great to have you on to kick off the hour. Appreciate it. Have a good weekend. Thank you. We're going to turn back stateside. Energy infrastructure across the Gulf now bracing for the arrival of Hurricane Isaias. That's expected to make landfall later today. Energy traders on alert as natural gas prices pop 3 % on the week. We're actually up almost 11 % in natural gas over the past month now. It's been a stealth rally here. We're basically flat on the air. According to the U.S. Marine Minerals Administration, nearly two-thirds of Gulf oil production and more than half of natural gas production has been shut in as of yesterday afternoon.

10:18Morgan Brennan: So AccuWeather's Bernie Raynaud is in State College, Pennsylvania. He's tracking the storm for us. Bernie, good to see you. Good to see you, Morgan. Sorry we have to talk about Issa E.S. and the first hurricane of the season. And unfortunately, Issa E.S. is beginning to strengthen here. Now maximum staying winds at 110 miles per hour. By the way, look at the satellite. You can see the eye popping right in there. That's an indication that Issa E.S. is going to be strengthening. It'll continue to pull northward. We're looking for landfall around 11 o 'clock tonight near Pensacola. The biggest impact will be along and along the eastern side of Issa Eas.

10:56So this is going to be the first landfalling hurricane and it's going to do a lot of damage. It is not the worst case scenario for the oil rigs or the refineries. You can see here's all the oil rigs, but the storm is passing off to the east, having some impact. The worst case scenario would be a track a little farther to the West. Same story with the refineries. The majority of the refineries are across Louisiana and Texas, sub refineries here across parts of Mississippi. Impact? Yes. Worst case scenario, Morgan? No. Back to you.

11:32Morgan Brennan: All right. Bernie Raynau. Thank you. Amazing. We've got a lot more to come here on Morning Call, including trading the technicals and what NVIDIA needs to do now to reaffirm the market's recent move to the upside. Plus, we've got a double black eye for big tech as the White House cracks down on a critical part of its workforce and open AI sales prospects are not as rosy as once seemed. We're going to debate that, dig into that. And later, the latest blockbuster IPO to pull its listing before it even traded. A very busy hour still ahead when Morning Call returns. With the Discover Cashback Card, it's payback time when you earn cash back on everyday purchases.

12:13Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to Discover. Terms apply. See discover.com slash 5 for details. weren't agents supposed to take things off your plate building another to handle the others is a bit much don't make more work out of work Gemini is the one agent that knows all parts of your business and actually gets stuff done you give it a project close your laptop and when you come back the job's finished no matter your industry or role your agent has the skills to help every team stay in their flow seriously make work less work with Gemini on Google Cloud check response subscription required.

13:02It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl. Burlington.

13:33Morgan Brennan: Welcome back to Morning Call. I sat down exclusively this week with David George, the general partner at A16Z, the world's largest venture capital firm who heads up growth investing for the firm. He recently published a report on the state of the markets using some really cool charts to show the impact of tech and AI on the economy. Here's what he had to say. The big takeaway was tech is kind of the everything cycle. So historically, tech has not been a major contributor to CapEx. Now it is. Tech accounts for 55 % of capital spending in the U.S. Tech now, if you look at the stock market, contributes 76 % of the earnings growth, incremental earnings growth that happens in the stock market is a result of tech.

14:17About 40 % of the stock market composition itself is technology. And if you look at just the capital spending side of things, we just surpassed as a percentage of GDP the amount of CapEx spent on new AI buildout compared to railroads.

14:35Morgan Brennan: Well, we have much more of my exclusive and extensive conversation with David George Monday on Morning Call. But in the meantime, you can check out the full interview right now on CNBC.com. That is going up this hour. In the meantime, though, we're going to bring in Jay Woods, chief market strategist at Freedom Capital Markets, a CNBC contributor. And Jay, you're coming with charts. I'm bringing you a chart to start first, because this is one of the charts from that state of the markets report from A16Z I just referenced. And to me, it kind of tells the story, especially as we do go into another earning season here.

15:06Morgan Brennan: This is hyperscalers versus semiconductors in terms of free cash flow and how that has reversed course here. Your thoughts? As we do see a very top heavy tech, top heavy market. We see a hockey stick as far as that spread goes in semiconductors. I think this is bullish for the overall market. As you said, or as you were talking in that interview prior, this is an AI revolution to spend the growth. It's 40 percent of the S &P 500. When we look at these tech names and it's not slowing down. So to me, this is something where we like to see this kind of come back a little bit. But it's fascinating.

15:45And that's what tells the story of this market now. And that's what's going to tell the story if we can take legs higher over the coming months. And I have one important stock that we're going to talk about in a second.

15:56Morgan Brennan: Okay. Do you want to talk about that stock first or do you want to talk about the technicals for the broader market first? Well, we can talk about the technicals for the broader market. We kind of are in this chop zone where we're taking steps higher, but it feels like something's going to give. When we talk about the market next week, all eyes are going to be on the financials. The financials, the XLF, They had a major uptrend that was broken. I did not like this. We've had a topping formation. They're in correction territory. It's down 10 percent from its high. We're holding on right now to some support, key support around$53, just below the 200-day moving average.

16:30When Goldman-Morgan report next week, that's going to tell us a lot. I expect us to get a relief rally. Those stocks are oversold. Those stocks are down 20 percent from when? Last quarter when they reported blowout earnings. So let's see if the financials can lead us back. When we have strong bull markets, financials are always a big part of it. Didn't happen in 23 when we started, but I'd like to see them get back on track. And with the IPO market, something we want to watch from Morgan and Goldman, SpaceX results will help them. But what's next? This robust pipeline has kind of gotten clogged.

17:04So I want to hear what they have to say about that.

17:05Morgan Brennan: Yeah. Every time you say Morgan, I'm like, yes, yes. OK, so let's talk about the stock you want to talk about and the chart there. Well, the most important stock to me, and you hate to put it on one, but it's NVIDIA. NVIDIA did something very fascinating this week, and now it's got me a little concerned. It broke out. Now, I'm drawing with my fingers, so these are not ideals, but let's try it again. We got above this$2.35. Doing a pretty good job. I don't think I can draw that straight away. I've got to grow my nails a little bit. But above$2.35 to me was a breakout, and we had it. And then all of a sudden, we broke down from that.

17:35This could be a potential bull trap. Short-term momentum could wane, and we could see it pull back. you know, to this 215, 220 area. Technically, fundamentally, there's nothing wrong with this stock. This stock is undervalued. Historically, I'm in the stock. I want to stay in the stock. But when you're talking about short-term headwinds, NVIDIA, semiconductor space, may be stumbling. We saw it on that news yesterday in the middle of the day with ChatGPT, a little scare. We don't know if that was, you know, warranted or not. But these stocks are going to give us another opportunity to get in. I don't think they're ready to lift off just yet.

18:10this has me concerned. I want to see 240, two closes, maybe three days close above 240 to get me price confirmation that we're going to take that next leg higher. That next leg higher should take us to 270, and that will start the next momentum phase of this bull run, which I think will happen sometime late November, early December into year end.

18:29Morgan Brennan: Okay. We'll be watching for it. In the meantime, we've got some key technicals to track. Always great to have you here, Jay. Always great to be here. Thank you. All right, Jay Woods. Straight ahead, SpaceX's big play to take on big wireless. The stocks that are reacting big this morning. Morning call is right after this. With the Discover Cashback card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants.

19:07It pays to discover. Terms apply. See discover.com slash five for details.

19:37Make work less work with Gemini on Google Cloud. Check response. Subscription required. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five. More style means more celebration. Number four. Buy gifts, but remember to treat yourself, too. Number three. There is no dress code, but always leave them talking. Number two. Show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.

20:14Morgan Brennan: Welcome back to Morning Call. It's a big deal to cap off a busy week of M &A. SpaceX is buying cellular spectrum licenses from investment firm Grain Management. It's the biggest move yet into the wireless market. The Wall Street Journal pegging that deal at$8 billion. The U.S. licenses, which are in the 800 megahertz band, are tailored for wireless service from cell phone towers rather than satellites, and they would add to a growing arsenal of spectrum assets for SpaceX as it builds out its Starlink mobile business to offer not only broadband but cell service as well. Now, this as SpaceX upgrades and launches new Starlink satellites, and after the FCC approved SpaceX's bid to launch up to 15 ,000 satellites dedicated just to this mobile service.

20:55Morgan Brennan: Shares of AT &T, Verizon, and T-Mobile getting hit on the news, all down notably, each about 5.5 % to 6.5%. And that adds to a disruption trade that's already been playing out for the telco stocks since SpaceX went public in June. T-Mobile has actually been SpaceX's partner for some wireless connections. It'll be curious to see what happens there. And it's not just telcos that are under pressure. AST SpaceMobile is down 3 % this morning. That is the other direct-to-device satellite operator. And we are keeping an eye on other names in the space space, too, that are in the connectivity business.

21:29Morgan Brennan: Global Star, which Amazon is purchasing, Iridium, which Rocket Lab is purchasing right now. So what is jumping on the news? Well, it's mobile tower stocks like American Tower. Crown Castle is up eight and a half percent right now. SBA Communications is up as well. So for more, let's bring in Louis De Palma, who covers SpaceX for William Blair and released a note on the deal late last night. He has an outperform reading on SpaceX's stock. Louis, it's great to have you on the show. I want to start right there because I know you've been tracking all of this and the opportunity here when it comes to the connectivity business for SpaceX.

22:02Morgan Brennan: Your thoughts? It's great to be on the show. And so we cover SpaceX, AST, Space Mobile, Iridium, many of the companies that you mentioned here. And the analogy that I would bring up is I'm sure you and many of the audience is familiar with k-pop demon hunters and this is the equivalent i would say of the song the takedown in which huntrix the group is taking a shot at sadra boys in that over the past three or four months on the conference circuit um at &t and t-mobile they've actually been taking many shots at spacex's wireless plans for Starlink Mobile. And SpaceX's COO on the recent earnings call described using femtocells and different wireless technology.

22:59And the wireless carriers who are the incumbents here, they've seen their stock price go down and they've expressed deep skepticism. So for SpaceX, they ultimately would rather partner with one of the wireless carriers versus building out their own cellular network. And this partnership is called an MVNO. So it's really interesting right now.

23:24Morgan Brennan: It's really interesting right now. And SpaceX shares are popping about 4 % on this right now, pre-market. If they're going to have to go it alone and continue to add more spectrum here and start to build out more on the terrestrial side, which it would seem, and I'd be curious whether you think this is the case, but it seems like perhaps that is the path forward for them. What does that mean in terms of further potential M &A? What does that also mean in terms of spending for SpaceX, which is aggressively ramping all of its other AI-related bets too? Yeah, great, great question, Morgan. So wireless is ultimately a scale game.

24:02So you know how SpaceX has amazing Starlink satellite service, and that's because it has 11 ,000 satellites in low Earth orbit. Part of the reason that AT &T, Verizon, and T-Mobile have excellent wireless service in most markets is because they each have approximately 70 ,000 towers, and they've spent over$100 billion on Spectrum over the past several decades. And they've spent a lot more on Spectrum than SpaceX. And so if SpaceX is going to compete, they're going to need to make many more moves similar to the grain mobile acquisition that was announced yesterday. And last September, they announced that they were spending$23 billion of Spectrum from EchoStar In this industry, you mentioned Globalstar and how Amazon is buying Globalstar for its spectrum.

25:02Rocket Lab is buying Iridium. There's speculation that Viasac could be a takeout candidate in that, you know, there's a battle amongst the different providers here to accumulate as much spectrum as possible.

25:18Morgan Brennan: Yeah. They want to compete or partner with AT &T, Verizon, T-Mobile. Yeah, I mean, I've been talking about it for quite some time now, just the value and an ongoing increased value of spectrum, especially in a world in which everything's connected. And AI basically eats the economy here. You need all that connectivity to do it. Robotics, compute could just go down the list here and what that means not only for SpaceX and Tesla, but for everybody else, too, in this new era. So is there room for everybody on the space side then when you see shares of AST Space Mobile under pressure? I mean, I have to think there's going to be some demand for redundancy, whether it is some of the names you just mentioned or even I know Blue Origin and Amazon are getting into this game in a bigger way, too.

26:05Definitely. I think there is an opportunity for AST Space Mobile. But AST is going to have to compete with Amazon in that both of those companies are positioning themselves to be the allies of these wireless carriers. So the wireless carriers, they want to fill their dead spots with satellite. And it appears that SpaceX is going to be more of a competitor than a partner. And so over the next few years and over the very near term, actually, AST Space Mobile is expected to roll out a demo service with AT &T and Verizon later this year. That could be pushed back, but that's expected to be later this year.

26:54And Amazon is expected to enter the market in perhaps 2029 or 2030. So there is room for several providers here. And Viasat launched a joint venture called Equitus in which Viasat wants to take advantage of its spectrum position. So the reason this market is compelling is because when you're talking satellite, you're talking global. So even though this grain management acquisition by SpaceX is taking all the headlines, it's really only for the United States market. And so SpaceX is targeting the global market. So they're going after Vodafone. They're going after Deutsche Telekom, Orange, American Mobile, Telefonica, et cetera.

27:46Morgan Brennan: Yeah. And actually, we see all those shares down right now as well. Louis De Palma, great to have you on to cover all of it. Great to be on, Morgan. Also worth noting, shares of Viasat are up 3.5%, 4 % right now, as we do talk about the possibility of Viasat as a takeover target. We're going to hear more on the SpaceX deal as well when FCC Chairman Brendan Carr joins CNBC exclusively at 11 a.m. Eastern. Well, still on deck, OpenAI turning heads as it breaks its silence on the exit of three of its former researchers. We've got that reaction next. One Morning Call returns. I'm Morgan Brennan. Welcome back to Morning Call.

28:22Morgan Brennan: Let's get a check on U.S. stock futures, which are firmly in the green. The Nasdaq is coming off of its worst day since August, but reversing course here this morning. Poised to open up 230 points or about 1 percent higher. The Dow is poised for gains at 79 points. The S &P 32 points. Basically, we're on pace for gains, give or take, for all the major averages, though, the Dow and the Nasdaq ahead of the moves this morning. We're basically unchanged here. The S &P poised for gains of about half a percent on the week. Let's get to the AI trade. Chat GPT maker OpenAI in a post on X this morning says that it fired three researchers last week after an investigation found that they violated policies on handling sensitive information, adding the firings were not about speaking out or raising safety concerns.

29:07Morgan Brennan: The company adding it is actively finalizing contracts with third-party safety assessors and will announce details in the coming weeks. But today's disclosure coming after OpenAI and the tech sector were dealt with two serious black eyes yesterday. First, the Labor Department saying that it permanently suspended Microsoft, along with Adobe and a number of other major tech firms from its permanent labor certification programming, alleging abuse of the U.S. worker visa program. Vice President J.D. Vance making the announcement in Washington. Our message to Microsoft is you're a great American company, but you've got to hire great American workers.

29:42You cannot lay off American workers and then replace them with foreign indentured servants.

29:47Morgan Brennan: Well, in a statement, Microsoft defending its use of the programs and saying that it looks forward to providing the administration with additional information to support its case. But that news, as shares of NVIDIA, Oracle, CoreWeave and other AI names, got hit hard yesterday after CNBC confirmed a report that OpenAI's annualized revenue at the end of September was roughly$18 billion lower than previously reported at just$50 billion. Bloomberg reporting this morning, however, that's expected to hit$70 billion by the end of this year and then some. And those stocks bouncing back in a very big way pre-market this morning, adding to the gains we just laid out for you for the major averages.

30:24Morgan Brennan: Well, joining me now on this is Ruman Chowdhury. She was a special AI envoy for the State Department during the Biden administration, a member of the Department of Homeland Security's AI Safety and Security Board, and currently co-founder and CEO at Humane Intelligence, which is a public benefit corporation. It's great to have you on the show. Welcome to you. A lot to get to here. And maybe I'll just ask you a very general question to start, and that is your reaction to what we have seen and what we have heard in the last 24 hours, whether it's on the safety side, whether it's on the investment side, or whether it's on the policy side.

30:58Yeah, well, great to be with you, Morgan. Again, I think, you know, as any day ends in a Y, the AI space is constantly volatile. A couple of things we saw yesterday is, as you've mentioned, open AI, fire safety researchers, it is very concerning given the current volatile space and policy where everyone's trying to figure out how to build independent verification organizations. Now, of course, the big critique at the moment is that companies are going off making private contracts and showing up with vendors saying, hello, here are our independent evaluators, that is simply not how any other industry works that has this kind of independent verification.

31:35Now, of course, Congress and even at the state level, I've been having a ton of conversations with people simply trying to figure out how to structure regulation. But right now, we have this short-term problem of what the companies themselves are calling a house on fire moment, but a medium and long-term problem of an institutional structural gap for actual independence.

31:54Morgan Brennan: Yeah. I mean, the independent evaluator piece of this and that, you know, sort of tucked into the paperwork we saw signed last week, I think has not necessarily been getting enough attention publicly or at least from investors here. How would you expect that to evolve and develop? And perhaps just as critically, how notable is it the fact that it's going to be U.S. companies that are subjecting themselves to this, but the Alibabas and Chinese frontier labs of the world likely won't. Well, the other thing that came out yesterday was a pretty big survey by Gallup Bentley. And what it showed is that consumer interest and consumer expectations of AI are an all-time low.

32:35And interestingly, this is quite different from what we usually see. We usually see people afraid of a new technology or skeptical of it, then they adopt it, and then skepticism drops. And AI has been the other way around. People's mistrust of AI, their belief that companies will not be able to self-regulate has actually increased over time. But also people will say about 70 % of the respondents said that they are very familiar with the technology and have used the technology. So I think, you know, it is actually a pretty key move here to be introducing independent evaluation. I think that is the trust gap in alignment with, as you've pointed out, OpenAI and Anthropic, neither of them have met their revenue goals.

33:13They don't expect to meet their revenue goals. And in the leaked IPO documents from Anthropic, they are far, far ways away from being profitable to any of their investors. So I actually think it's a net good thing. I think the U.S. leading in not just innovation, but good regulation makes a lot of sense. I mean, I've said before, brakes help you drive faster. People are more confident using AI. This is at the application layer, even just at home, if they know that it's being regulated. and right now with the companies themselves banging a drum about, you know, AI may kill us all, it just leads to a very unstable and insecure market.

33:46I'll also add that, by the way, China has plenty of consumer protections. Of course, their government is nothing like ours. Their citizens have no recourse. But it's interesting to note that even just last week, China launched new protections to stop people from developing parasocial relationships with AI and to protect children, protections we don't have in the U.S.

34:05Morgan Brennan: Interesting. And I don't think we spent enough time focusing on some of that from the U.S. standpoint as well. So that's a key point. When I was speaking with Andreessen Horowitz, it's David George. One of the points that he made was that we're such early stages in terms of, to use his word, diffusion, in terms of both people and enterprises engaging with and using AI and AI agents. If you establish greater trust here and better rules of the road, whether it's from a self-regulation standpoint or a government regulation standpoint, do you think that actually propels growth to move more quickly, adoption to move more quickly?

34:41Yeah, that's exactly it. And to be clear, we've been in the world of self-regulation for about a decade in AI in general, machine learning, and for the past three years in generative AI. And it just doesn't work. And to your point, we make tech into this monolith, but tech is not just the frontier labs. Tech also includes the everyday companies that are going to touch your lives. This could be American Express, Bank of America, General Motors. They're all using artificial intelligence. Now, for these companies, they want the technology to be as de-risked as possible. It's really hard for them to figure out how to develop good risk management and governance for this product that they want to put in front of their customers.

35:21And let's say a car company puts AI in their car and something bad happens, no one's there blaming the AI company. They're going to blame the car company. And they're very, very aware of that. So yeah, it's not just for the average American consumer. These are also the big CEOs of other companies. And I also shared, as you mentioned, the Safety and Security Board also had seats from critical infrastructure companies that are all thinking about the same thing. What everybody wants is to understand what the rules of the road are, how they can and cannot build, especially if companies continue to have all this privileged information and all the best talent.

35:54We simply cannot just have them not being transparent and not sharing with the rest of us.

35:58Morgan Brennan: Should we be focusing more on the talent piece of this? I mean, the numbers I've heard from folks in the industry is that you have basically, give or take, about 1 ,000 AI engineers that everyone sort of wants working at their companies right now. We've seen the end of non-competes in California as well. We know the rivalry for top tech talent is probably the fiercest it's ever been. So when you see crackdowns on things like foreign worker visas. Does that have an impact or no? It has a massive impact. I mean, I don't know if people realize how much of the tech industry is built on immigrants who came to this country.

36:33And to be clear, all these immigrants that come over to the United States are seeking to become citizens of the U.S. They want to be active contributors to the economy of the U.S., to their culture. They raise their family and their children here. They're a really big part of community in Seattle and San Francisco. So it is a bit of an incorrect statement to be calling them indentured servants. These people want to come to America. They see America as the land of opportunity, and rightfully so, because it has been so for many decades, including for my parents. But yes, there is a very small group of people that has this talent.

37:05And I will also add, Morgan, that there's an even smaller community of people who know how to evaluate AI algorithms. So I've started a new foundation, the Independent AI Evaluation Foundation. we're professionalizing the field of practice. And, you know, that's something that's net new. I mean, there are maybe two or three firms that everybody talks about when they talk about independent evaluation. As we start to think about how we evaluate beyond catastrophic risk, beyond this idea of humanity ending us all, and start to introduce independent evaluation for things like AI and education, for which there's a moratorium in two of the biggest cities in the United States, LA and New York City, right?

37:40If we want to bring in people to do those kinds of evaluations, that talent simply does not yet exist and needs to be cultivated.

37:47Morgan Brennan: All right. Ramon Chowdhury, great to have you on. Conversation, I hope we can continue here. So fascinating. It's all evolving, the way it's evolving. We're going to head to break. Quick check on Chipotle and Starbucks, though. Starbucks denying Financial Times report that the company has explored a takeover of Chipotle. A spokesperson telling CNBC in part that, quote, our team is laser focused on executing our back to Starbucks strategy. We have strong momentum and confidence in our long-term growth potential. You can see shares of both are up fractionally this morning. We're also checking where the top AI platforms stand on market share.

38:20Morgan Brennan: As far as traders on prediction market CalShare are concerned, you can see that right there on your screen. Deep Seek, 80%. Let's see. OK, well, we can take a look. A lot more action in open AI, Deep Seek this week. And Morning Call will be back after this. I've got a news alert for you. Australian AI data center operator Firmus has withdrawn its planned mega IPO in a statement to CNBC, the company citing market volatility and conditions for the decision. Firmus, which is backed by NVIDIA, had reportedly sought to raise five billion dollars through the IPO, which would have valued it at more than 30 billion dollars, nearly triple its valuation back in August.

38:57Morgan Brennan: They're saying that they're going to tap into the private markets and reconsider next year. C shares of NVIDIA, though, are up one point six percent. And we got the call crew after this break. Stay with us. It's call sheet time where we look at the topics driving the trading day. Hey, crew members today, John Stoltz, of Oppenheimer Asset Management, Marco Papich of BCA Research, and Jessica Inskip of Stockbrokers.com. I can say words today. It's great to have all of you here. There's a lot to get to. Marco, I'm going to kick this off with you, especially since it's your first time here on set.

39:26Morgan Brennan: What are you watching, especially as we do tick down to midterms and macro has really been driving so much of the conversation in the markets? Well, thank you, Morgan. I mean, I think the midterms are obviously so critical, particularly everybody expects the Democrats to have a sweep. And normally, in normal conditions, that would be great for the stock market. Why? Because you would have effectively divided government. Markets love that. Markets love it when there's a gridlock in the government. This time around, however, if the Democrats end up outperforming their current already lofty expectations, What could happen is that markets start focusing on 2028 and Democrats taking the presidency.

40:05And that could force markets to start pricing in higher taxes. So I think that that's a real critical issue to watch. Democrats outperforming what's already expected to be a sweep.

40:15Morgan Brennan: Meaning tax cuts have peaked here, potentially. Oh, 100 percent. Yeah. Your thoughts, Jessica, as we do have an S &P that's sitting right near record highs and a similar story for the Nasdaq. And obviously, it's AI versus everything else. It is. So taking a peek, actually, at the technicals at a deep dive last night, just looking at yields correlations, and there really wasn't much of a story there. But what I find interesting, if we look beneath the surface, every single sector is either bottoming or improving less real estate or it's already in a bullish trading cycle. That's very good for a setup going into earnings season.

40:50But the big, big issue or risk I see within the market is yields. Yields are putting a ceiling on the market. When we see those normalize or we have some type of resolution, then that's going to allow us to go further. So essentially what I'm seeing is we're going to have a rise of the tides, but we could have a stopping point if we don't have any resolution with the Strait of Hormuz or yields normalizing. One of those two needs to happen, and we need more certainty within the market. So very key number today is just watching the S &P 500 equal weight. This week has it's come over two of its major defense lines, which puts us right to an area of resistance.

41:26So we need to be right around 8600 on that level. We close there. That's a really good setup into earnings season. That's a good setup into the midterms. And then we just need that certainty and some risk removed.

41:38Morgan Brennan: What do you think, John? Great to be on the show this morning, Morgan. I've got to say that when we look at it, we're primarily focused on revenue and earnings growth. with next week the beginning, really, of the unofficial opening of earnings season when the big banks begin to report. We've got to expect that the expectations are fairly high. Analysts are looking for over 30 percent earnings growth in terms of the S &P 500, as I recall, with Q3 earnings. Related to the election, we've got to think that the election will come and it will pass. The market will likely be happy to know that the winner will be known or the winners will be known at the end of it.

42:25And it'll take it from there. Most important thing for the markets, revenue growth and earnings growth. And so far, you know, in the last four quarters have been remarkably good, even getting better. So let's see how that goes. Diversification key here.

42:39Morgan Brennan: It's not it's not just political elections here in the U.S., Marco. I mean, we started the week with a huge surge in Brazilian assets as we look to a runoff there for presidential elections in that country. And then obviously France has been dominating the headlines and also driving global bond markets as well. Well, so first of all, I would argue that all bond markets have sold off in terms of the sovereigns, even those that are actually fiscally prudent, which is interesting and tells me that the sell-off here at home has very little to do with fiscal policy. Australia and Canada are prudent countries that haven't actually blown out their deficits.

43:14And yet their yields are going up as well. France has been caught in this as well. And I compare this to what happened in the 1990s when in 97 the Fed started raising rates, bond yields were surging, something broke, and you had East Asia effectively break. In 22, you had Silicon Valley Bank break. These don't necessarily mark the end of the cycle. In fact, quite often what happens when something does break is they get bailed out. And that leads to another surge, 12, 18 months more of considerable upside to the market. So is France a risk? Yes, it is. However, at the same time, if the ECB intervenes, that could actually be incredible catalyst for the next year or two of upside.

43:58Morgan Brennan: Excuse me. I've got a little something in my throat here. And to your point, I mean, there's a speculation that ECB is going to step in in some form or fashion where France is concerned. Meantime, energy, you just mentioned it. I'm totally joking right now. Sorry, Morgan. Want to get your thoughts because we've got winners and losers. Delta reporting this morning, as she said. Thank you, Morgan. You're doing a great job there. Talking about yields, though, I think that's really important right now because of the baseline that's set within our markets right now. So as we're rising, we have to think about yields.

44:32I think of it as investor demand. So as we have emerging markets, they have to offer more yield just because they're competing with the U.S., which this subsequent domino effect is very important to pay attention to. But what I've noticed is when I looked at yield correlation and the 10-year very specifically, it shows more with consumer discretionary utilities and technology. But with technology, it changes because of the implication of headline risk. So what that tells me is it is an earnings story, to your point, yield story, to your point. And the harmony that we need is really just stabilization of yields.

45:13I know I keep saying that, but that's the big catalyst. It's very difficult when you look at the earnings yield of the S &P 500 versus the dividends yields of the S &P 500 versus what yields are offering. there is a point where yields start getting more attractive and we only have so much capital and it goes into that. So even though we have a good earnings story, if that doesn't happen, it's so difficult to go higher. That's the ceiling on the market.

45:34Morgan Brennan: OK, we got 20 seconds left, John. I want to give you final thoughts here, especially since we've had a lot of M &A this week, including the SpaceX news this morning. I have to say the fundamentals remain remarkably good in terms of resilience. resilience. The definition of that really is it's resilience says you're able to overcome the obstacles. And that's where we think we are right now. We think related to M &A, it will be selective here going forward because of the overextension in some areas in the data centers. OK, thank you so much to our call crew. I hope everyone has a great weekend. It's the holiday season at House of Burrell, which means that it's the perfect moment to review some key rules.

46:14Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.