Morning Call 9/29/26

0:00At Edward Jones, we believe rich is more than caring about the latest and greatest. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are, with personalized financial strategies that help protect what matters, so you can preserve your progress while creating a path forward. The key to being rich is knowing what counts. Let's find your rich together. Edward Jones, member SIPC. Pro save big with early Black Friday deals at Lowe's. Shop new select DeWalt 20-volt max nailers under$350 for a limited time, like the 18-gauge Brad nailer.

0:43Now just$269. Plus, get up to 50 % off select ladders. With deals like these, it's easy to keep your jobs moving all season long. Get Black Friday deals early at Lowe's, in-store and online. Valid through 1118, while supplies last. Selection varies by location.

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

1:16Morgan Brennan: Good Tuesday morning. Let's get a check on U.S. stock futures after a down day for the major averages yesterday. You can see it's a mixed picture this morning. Dow poised to open down 80 points. The S &P basically flat, up one point right now, and the Nasdaq up 33 points. It's a mixed picture as we come to the end, not only of the month, but of the quarter as well, with the Nasdaq right now poised for gains for the end of the third quarter. Can you believe we're talking about that? Well, let's take a look at what's happening in treasuries with the 10-year yield hitting its highest level since 2007.

1:47Morgan Brennan: You can see right there, U.S. 10-year treasury, 4.24 % right now. Fed-sensitive two-year Treasury, 4.94 percent. And the 30-year Treasury yield, 5.55 percent. We got a lot of data on deck today. July S &P Case-Shiller home prices. We've got September consumer confidence. We've got August jolts, because remember, this is jobs week. And we're watching the action in metals with gold coming off of its worst day since June. You can see slightly higher, fractionally higher, trading right around 41.72 an ounce. And let's get a check on energy, since we know that continues to be in focus, particularly amid, say, a thawing in diplomatic relations in recent days between the U.S.

2:30Morgan Brennan: and Iran, and reports that they are having indirect talks here this week. WTI is basically flat, trading around$92.64 a barrel, and Brent is flat as well, trading right around$105 a barrel. We're going to have more on the energy picture, including natural gas, as we head into the colder winter months as well in just a little bit. But first, let's see how Europe and Asia are shaping up in trading. And Steve Sedgwick is in London with all of it. Steve.

2:58Hey, Morgan, good to see you. Fourth quarter's here. Does that mean we can start talking about Christmas? No. OK, I won't mention it then. We've got Halloween first, haven't we? Look, Asian equity markets under a bit of pressure today following that down day on Wall Street. Bond yields continuing to climb. Here's interesting. The Australian Central Bank has raised rates to their highest level in 15 years, adding it will continue to, quote, do what it considers necessary. So quite a hawkish line to contain inflation from Michelle Bullock, who is the kind of the equivalent of Kevin Walsh over at the RBA.

3:31But this is interesting. The inflation in Australia is 3.5 percent. So I did a bit of compare and contrast. In the US, as you well know, it is 3.4 percent. So virtually the same. But they've just put rates up to 4.6 percent, Whereas we all know the Fed funds rate now is 3.75 to 4 percent. So they're 0.600 percent higher than the top end of the Fed funds rate. And their bond markets are currently trading around about the 5.375 percent mark for the 10 year, as opposed to the U.S., which, of course, is touching around about the 5.245 level as well. So just a little bit of an indicator on a very crude level where U.S.

4:07rates could be on similar inflation that we're seeing out of Australia. Right. Tech stocks in Europe are boosting equity markets today. We're offsetting some of that oil pressure. Also keeping an eye on closed developments out of the UK Prime Minister Andy Burnham, who is due to address the Labour Party conference today in Liverpool. Amid speculation, he might announce a review of crucial pensions policy. Morgan, back to you.

4:32Morgan Brennan: All right, Steve Sedgwick, thank you. Of course, that does get at the heart of a big macro trend right now, and that is central banks, particularly in the developed markets, entering or continuing in their hiking cycles. Well, let's turn now to the top story here in the U.S. Anthropic reportedly warning investors that its technology may pose, quote, catastrophic or existential risks to humanity. That is according to its S1, its IPO prospectus, which was leaked to Reuters and the Financial Times, which were able to review the document after it was circulated to a small group of investors and partners.

5:04Morgan Brennan: Now, according to those reports, Anthropic plans to spend$518 billion on cloud computing and infrastructure in the coming years and reporting a net$42 billion loss last year, despite revenue growing at 12-fold to$4.6 billion. Further, its backers are confident that the company can fetch a$2 trillion valuation in its offering as it continues at this ferocious top-line growth rate. And if you're talking about a$2 trillion valuation, that's greater than the previous record holder, which was SpaceX, when it went public this past summer. Well, winners in the wake of Anthropik's AI build-out, we're watching names like Vertiv, Arista, GE Vernova, Bloom Energy, Caterpillar.

5:45Morgan Brennan: Those are all up big year-to-date. You can see those moves on the screen. But news from Anthropik also coming as rival OpenAI says that it's scrapping the debut of its latest Astra AI model due to safety issues raised during testing. The company had planned to launch the more capable model known as GPT 6.1 in the coming days or weeks, but it will now focus on improving the safety of future models, which expects to be even more capable. The company may offer some clues at its developer day, which will happen today. Also a lot of focus on the debut, potential debut of its own AI agent. Well, the move by OpenAI coming after NVIDIA CEO Jensen Wong told CNBC yesterday that the rogue AI agent problem is something that industry is hard at work addressing.

6:35We hope it's an engineering problem. I believe it's an engineering problem. I know it's an engineering problem. And we all need to hope that it's an engineering problem. If it's not an engineering problem. It's not solvable. And so the fact that all of these companies still are advancing the state of the art is because they also believe it's solvable. These are some of the brightest engineers in the world. I work with all of them. And this is a technically solvable problem.

6:59Morgan Brennan: All right. Well, speaking of Jensen Wong, CNBC confirming that the NVIDIA chief will be joined by Anthropics CEO Dario Amadei, Meta CEO Mark Zuckerberg, and quite a few others for a luncheon at the White House today, along with President Trump and House Speaker Mike Johnson. So we'll be watching all of that. But in the meantime, if we stick with the AI trade, a number of cyber names getting a bump yesterday on the back of NVIDIA's open agent safety platform and new security controls around autonomous AI agents. CrowdStrike and Palo Alto networks, among more than 100 organizations working with NVIDIA on that platform, up over four and a half and nearly 3 % yesterday, respectively.

7:37Morgan Brennan: Other names like Cloudflare, Okta, Zscaler, also higher. And keep in mind, we were trading right near record highs for many of these cyber names. This morning, all the stocks are, you can see right there, looking to add two gains, albeit fractionally this morning. So for more on the safety risks around AI, let's bring in Nick Schneider, CEO of cybersecurity company Arctic Wolf. Nick, it's great to have you on the show. Just start right there. Your reaction to the news that we did get from Jensen Wong yesterday and what it means here. Yeah, I think it's a step in the right direction. Clearly, there are risks associated with the use and leverage of these tools.

8:14Obviously, these tools are out in the wild today, you know, both for defenders but also for bad actors. So it's going to be incumbent on not only the frontier but also individual businesses and the defenders to ensure that these agents can be used in a trusted way and in a way that isn't going to cause damage to the businesses that they're trying to protect.

8:34Morgan Brennan: To use your phrase out in the wild, who's responsible for them being out in the wild? Is this humans and maybe not enough priority on the guardrails and on the sandboxes themselves? Or is this unintended consequences of AI and agents as we roll out this technology in real time? Yeah, I think it's a combination of both, honestly. Obviously, we're working hard as an organization or as a country to advance our AI capabilities. And in getting those capabilities out into the wild, especially as a lot of these technologies are new and advancing at a rate that is unprecedented, we're learning a little bit along the way.

9:19And I think what's important for organizations as they look to protect against these technologies is to ensure that they have a way to be able to implement them in a trusted way. So make sure that the organizations that they're working with to understand how to use these technologies, make sure that they understand how to trust these technologies within their organizations, and make sure that as they look forward that they're getting the benefits out of these technologies that they'd expect as they look to defend against bad actors.

9:48Morgan Brennan: Yeah, here's why I ask, because it's one thing to have offensive capabilities and agents run rogue and create bot swarms and do all kinds of things that were unintended and create unintended consequences. If you're an attacker, that's probably good for you. But if you're on the defensive side and you're and you're focused on the cybersecurity protection side, the risks associated with that, how do you implement or strengthen those guardrails? And what does it mean for a company like Arctic Wolf and the market opportunity here? Yeah, so I think it's important to remember that a lot of the same techniques that we used prior to the wave of AI are still applicable here to cybersecurity.

10:30So just like with human teams or human users, you're going to want to understand who they are. You're going to want to understand what access they have, what guardrails they have to be able to use those technologies, who they interact with and how they interact within an organization. I think all of that is true of organizations as they're looking at the implementation or the use of AI now within their organizations. I think it's just taken to a different level. Right. The speed with which these technologies can act, the time to exploit that these bad actors are able to implement is unprecedented.

11:03And I think as we look towards the market and market demand as Arctic Wolf, all of these things play directly into who we've always been as a business. We have built our business around providing security operations for organizations that otherwise struggle to be able to implement. I think in today's day and age, that is the vast majority of organizations. And we've built into our agentic swarm AI protections to make sure that we can defend and help our organizations that are partnered with Arctic Wolf defend at machine speed because it's going to be an imperative for them moving forward.

11:38Morgan Brennan: Are you seeing more business growing demand in the midst of this whole conversation right now? Absolutely. Every customer that I've spoken with is working towards obviously improving their overall security posture and in particular looking for ways to be able to get their business to be able to move at the speed with which AI is coming at them. I think previously cybersecurity had a tools problem and that organizations were struggling to implement a variety of different tools and make them work together. And then simultaneously a skills challenge to be able to make those tools work together in the context of the humans or the organization that they've built.

12:14I think both of those problems are just escalated now in the age of AI. And the only way to combat this problem is to be able to kind of meet the potential problem of AI with regards to speed and urgency with the same urgency and speed as a defender.

12:32Morgan Brennan: All right. Nick Schneider, it's great to have you on. CEO of Arctic Wolf. Appreciate it. Thank you. We've got a lot more to come here on Morning Call, including we're digging into one critical corner of the energy market and why you should be paying very close attention. Plus, we got much more on the AI build-out debate. The head of one union, one of the largest in the country, on the front lines of it all. And the unlikely partnerships that you should be tracking. And later, reports of succession greatly exaggerated. What Goldman Sachs has to say about the future of its CEO, David Solomon, and the succession plans that are or perhaps are not underway there right now.

13:11Morgan Brennan: We got a very busy hour still ahead when Morning Call returns. With the power and endurance of Toyota trucks, you can go to the most incredible places like this valley where the echo does different voices. Hello. Hello. Hello. Hello. We know what we're made of. Toyota trucks. If you like YouTube, you'll love YouTube Premium. It's destroying athlete, creator and YouTube Maxer. YouTube Premium enhances how I use YouTube with awesome features like offline downloads. So I can download my favorite training videos before I hit the gym. so no Wi-Fi doesn't turn leg day into loading day. Plus, I get ad-free videos, background play, and so much more.

13:52YouTube Premium is like YouTube got some extra games. Try YouTube Premium for two months free at youtube.com slash premium. Trial eligibility varies. Terms apply. Cancel any time. Tired of the same old game night? Switch things up with Chumba Casino. Play over 200 free online social casino games. From classic slots and blackjack to exclusive in-house favorites you won't find anywhere else. However long you got, you can play your way anytime, anywhere. Make your next chill night a little more fun with Chumba Casino. Only available in permitted states. No purchase necessary. See terms and conditions for details.

14:28VGW group or were prohibited by Log 21+.

14:33Morgan Brennan: Welcome back. We're checking oil prices, which are edging higher, as traders continue to assess uncertainty around ceasefire talks between the U.S. and Iran. And by edging higher, I mean fractionally. We're trading just below$93 a barrel for WTI, and Brent crude is about$105.50 per barrel. Digging deeper, though, into the energy complex and another energy commodity that we don't always talk as much about, and we should, natural gas. U.S. spot prices, they're flat on the first day of the November contract, as the front month October futures falling 3 % yesterday as the weekend storm knocked out northeast prices to multi-year lows.

15:11Morgan Brennan: In Europe, prices are off the highs, hit earlier this month, but remain elevated on supply worries ahead of winter, with the Strait of Hormuz still largely closed. Joining me now is Nick Potter, president of Equinor Natural Gas, the U.S. subsidiary of Norway's Equinor. This is the largest supplier of NatGas to Europe. And Nick, it's great to have you on set. It's like the fun fact, if you want to call it fun, I don't know if we're going to use that word. You look at energy prices this year. Crude oil is up 60 percent since the start of the year. You've seen a doubling in heating oil contracts.

15:45Morgan Brennan: But NatGas, at least U.S. NatGas, is actually fractionally lower. Yeah. Why? Yeah. Well, I think it's amazing, too. If we were having this conversation earlier in the year, it would be the exact opposite. So we would have been talking about how low oil could have gone, how low European global gas could go. And now where are we? We're in a very different situation. So I think for a lot of folks in the market, those lower oil prices were going to be a welcome development because after years of inflation, those were going to really help. And now we're in, like you said, we're in a very different world.

16:09Crude's over 100. We're looking at European gas prices,$24,$25 per amount BTU. That's about$140 per barrel if you convert that on an equivalency basis. Meanwhile, in the U.S., gas is sitting around$3. So there's a very different story in the U.S. right now for natural gas. Everything else is kind of blinking scarcity. In the U.S., we're still kind of business as usual on the natural gas side.

16:30Morgan Brennan: Why is there such a dramatic and aggressive divergence between what we're seeing in U.S. natural gas and what we're seeing in Europe right now, where some contracts, to your point, have doubled or even tripled this year? Yeah, so European gas is essentially 10 times higher than U.S. gas right now. And again, there's a little bit something going on there, right? Historically, the U.S. has been a bit of a gas island in the sense that what it produces, it has to then consume. Now, we've started to export more in the form of LNG. But again, it's still not enough to close that arbitrage window. But I think that's our view now, that at some point, one of these things is not like the other.

17:01If you have global energy prices this high and U.S. gas prices down this low, at some point, the market loves to arb that out. And LNG is not enough to just do that. But I think the AI story, which you alluded to earlier on in your show, we're seeing a lot of new demand pop up for these data centers, for this AI. And again, increasingly, gas is going to be what fuels a lot of these data centers.

17:21Morgan Brennan: OK, I want to get into that more in just a moment. But first, one more question, because, you know, I did an interview with Interior Secretary Doug Burgum a couple of weeks ago. And one of the points he made is that 20 months ago, the U.S. wasn't exporting any LNG to Europe. And now it's something like two thirds of the mix going into Europe right now. So when you do see such a spread between the two, how does it speak to the bottleneck, perhaps, that is the infrastructure piece of the story? Yeah, and I think infrastructure is critical here because we have an abundance of energy, right? Now it's really critical about how we get that energy to the markets that it needs to be.

17:52So what we're seeing now in the U.S. is about 20 billion cubic feet of exports. Let's call it 110 BCF a day market. And we really think now, too, with what's going on in the Middle East, you're going to see more and more projects go forward. So for every reason behind that, there's going to be more companies looking to export LNG from the U.S., but that takes time, right? You can't immediately have a new facility up and running. But with those types of spreads, people are going to look to take advantage of that.

18:17Morgan Brennan: Okay, let's talk AI infrastructure. I mean, one company, for example, SpaceX, I know they're building out their own NatGas supplies and infrastructure in real time right now as they build out their data centers. But what are we seeing? How does that fuel this infrastructure build out right now? And I think that's the interesting part, because again, if we think about closing those spreads, right, LNG couldn't do it all on its own. But I think the AI data center is going to really help on that side. So what's going to happen is essentially, if you think of some of these companies, right, essentially at the beginning, it was chips were the shortage.

18:47Now we're talking about power being the shortage. And at some point, there's going to be a realization that gas is actually the shortage to this whole thing. And if you look at operating margins for some of these companies in the AI space, some of these hyperscalers, 30 % to 40 % operating margins, there's a willingness to pay for power at speed because they want to get these facilities up and running. And again, I think if you initially had looked at how these were going to be fueled, it was going to be renewables at first, and it was going to be on-grid power. And now because of some of the delays of building new power plants and interconnections, it's all behind the meter.

19:17So to have the behind-the-meter solutions, it takes natural gas. So, again, I think that's one of those things that the market's not truly realizing now is that these data centers are popping up and they're consuming natural gas. And these things are huge. We're talking two-gigawatt facilities. That's essentially 1.5 to 2 million homes that one of these data centers plopped down in the middle of West Virginia, Ohio, or Pennsylvania is adding to the grid. Some of these want to be as much as eight gigawatts. That's New York City, right? So huge amounts of energy demand, but these companies are pushing forward because the margins are very large on the end product there.

19:48Morgan Brennan: It's interesting to hear you say that, because when we look at semiconductors, we're going to get micron earnings later this week, case in point. Very cyclical markets that are now shifting to a secular growth story. And so if I'm picking up what you're putting down, you're suggesting that we could be seeing a similar secular shift in terms of the demand picture for natural gas. Longer term. And I want you to respond to that. But shorter term, what should we keep in mind in terms of going into the winter because weather still moves nat gas, at least on a daily basis? Well, and that's the thing, right?

20:15If we think of global energy right now, we've seen that there's a reliability issue with what's going on in the Middle East, what's going on in Russia. And again, the winter is always a very volatile time for energy markets because Mother Nature can do whatever it wants. So if you look at European storage right now, it's below averages. It's about 70 percent filled, which is low for this time of year, about 16 percent below the five-year average. U.S. has relatively good storage right now going into winter, but that's not to say if we get a cold winter, you're going to see a lot of volatility.

20:44And that volatility is going to occur when we already have stress in the system. Now, if you talk to the meteorologist now, the super El Nino is leading people to believe that it's going to be a warmer than normal winter. But who knows? If we get a cold stretch, I think systems in both Europe and the U.S. could be stressed to a certain extent. So there's a real short-term risk because of the reliability issues we're seeing elsewhere that if you do get cold showing up this winter, you're going to see higher prices.

21:11Morgan Brennan: Okay. Nick Potter, it's great to have you here on set. Keep us updated. Thanks, Morgan. All right. Straight ahead. AMD making a more than$8 billion bet on physical AI and a new chief scientist. Can we call this an$8 billion aqua hire? Maybe. Morning call will be back after this. with the power and endurance of Toyota trucks you can go to the most incredible places like this valley where the Echo does different voices hello we know what we're made of Toyota trucks 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.

21:58I get ad-free, I get backroom play, and there's like a ton more in there. You should try it. If you like YouTube, you'll love YouTube Premium. Try it now for two months free at youtube.com slash premium. Trial eligibility varies. Terms apply. Cancel anytime. That's a mouthful. Tyler Reddick here from 2311 Racing. And Bubba Wallace. You know what's the worst part of a race? A rain delay. Sitting around and waiting for the track to dry is dull. But instead of waiting, we hang out with Chumba Casino. Social casino slots, bingo, solitaire, plenty of fun to keep us entertained. So why let a rain delay slow you down?

22:33Play now at ChumbaCasino.com. Let's Chumba! No purchase necessary. VGW Group. Void where prohibited by law. CT &C's 21 Plus. Sponsored by Chumba Casino.

22:45Morgan Brennan: Welcome back to Morning Call. Let's get a check on some of the morning's latest headlines. Goldman Sachs says there's no definitive timeline for CEO David Solomon to step down. That statement follows a Wall Street Journal report that the board has discussed replacing Solomon with his deputy, John Waldron, as soon as the end of next year or in 2028. Solomon has been Goldman's CEO since 2018. Well, the journal also reports that it could become executive chair for a year or two after leaving the CEO role. Well, AMD is striking a deal to buy World Labs for more than$8 billion. The company is an AI lab that's working on so-called world model or a deep learning model that's intended to understand physical reality.

23:25Morgan Brennan: World Labs was founded by Fei-Fei Li, who is considered an AI pioneer. She's typically nicknamed the godmother of AI for her work building the ImageNet database. She will join AMD as executive VP and chief scientist. You can see shares of Advanced Micro are up about half a percent this morning. Well, shares of Xi 'an, it's a different story, sinking in Hong Kong trade today. The fast fashion company reporting second quarter profits fell by two thirds, hit by fallout from the Iran war and the elimination of the so-called de minimis loophole in the U.S., a tariff dynamic that we've covered quite a bit here over the last however many months, seven months.

24:02Morgan Brennan: Xi 'an stock is down 35 percent since its IPO on September 1st. And the Pentagon awarding RTX and its Raytheon business a provisional multi-year contract worth nearly$21 billion to speed up production of AMRAAM missiles amid concerns about weapons stockpiles. The AMRAAM is used in air-to-air combat and advances surface-to-air missile systems in the U.S. and more than a dozen other countries. Keep in mind, we have seen all of these preliminary multi-year deals struck. This is the latest one to shift into contract mode. You can see those shares are up fractionally. And AstraZeneca is investing$2 billion in Summit Therapeutics.

24:40Morgan Brennan: That would give it a roughly 12 % stake. The companies will also collaborate on a series of studies testing how their cancer treatments work together. You could see AstraZeneca up almost 2 % and Summit Therapeutics surging almost 23 % this morning. Well, still on deck. Anthropics, go public plans how China wants to get a piece of the action. And we've got much more on the AI buildout debate as Jensen Huang faces renewed pushback from the Vatican. Morning call. We'll be right back. It's interesting to note that just today I read that the head of NVIDIA claims that he has found some way of inserting into AI certain guardrails, if you will, or limits so that they won't go outside of their particular units and cause the damage that people are talking about.

25:32He's the same one, however, that says there should be no limits placed and no government regulation, et cetera, et cetera. This is a problem that I think we need to sit down and talk about.

25:42Morgan Brennan: I'm Morgan Brennan. Welcome back to Morning Call. Let's get a check on U.S. stock futures this Tuesday morning. You can see we're in the red here, albeit fractional moves, at least for the S &P, which is poised to open down about seven points. The Dow down 113, the Nasdaq down 20 points. That's after a down day for the major averages yesterday. And as we get ready to close out the quarter, what is currently a mixed picture for the major averages? Let's take a look at what's happening in the bond market, too, and specifically with Treasuries. Yields right now, U.S. 10-year Treasury yielding 5.24 percent.

26:13Morgan Brennan: We're hovering right around the highs that were last seen in 2007. And Fed-sensitive two-year Treasury, 4.94 percent. 30-year treasury is yielding 5.55%. We've got breaking news on the AI front. Meta Platforms announcing that it is launching Muse for small business. The company is saying since the AI agent rolled out earlier this month that Muse adoption, quote, has exceeded our expectations, adding that many of the people using Muse are also entrepreneurs and business owners. And so they are now focused on targeting that particular contingent here for business efforts. And it's not just news from Meta either.

26:50Morgan Brennan: Anthropic is reportedly warning investors that its technology may pose, quote, catastrophic or existential risks to humanity, quote unquote, in its IPO prospectus. And this is according to Reuters and the Financial Times, which were able to review the document after it was circulated to a small group of partners. Now, from the reports, Anthropic plans to spend$518 billion on cloud computing and infrastructure in the coming years and reporting a net$42 billion loss last year, despite revenue growing 12-fold to$4.6 billion. Now, winners in the wake of Anthropics AI build-out, names like Vertiv, Arista, GE, Vernova, and more.

27:26Morgan Brennan: But the news for Anthropics coming as rival OpenAI says that it's scrapping the debut of its latest Astra AI model due to safety issues raised during testing. It will now focus on improving the safety of future models, which it expects to be even more capable. The company may offer some clues at its developer day today. Well, speaking of OpenAI, CNBC confirming company president Greg Brockman will be joined by Anthropics CEO Dario Amadei, Meta CEO Mark Zuckerberg and quite a few others for a luncheon at the White House today, along with President Trump and House Speaker Mike Johnson. Well, Trump's tech CEO summit coming just one day after NVIDIA CEO Jensen Huang rejected a White House characterization of an AI model distillation as theft, quote unquote, telling CNBC that training or learning from competitors' products is competition, even when it happens in China.

28:20People distill my products every single day. They take it and they strip it down to its raw parts. They test everything. That's called competition. Do you think that's fair game? You think distillation is not robbery? That's called competition. Okay. Yeah, you're allowed to test somebody else's products all you want. People strip our products down to nothing, down to bones. And I prefer they dent. I really prefer they dent.

28:48Morgan Brennan: Well, not everyone in China is looking to beat NVIDIA Anthropic and others at their own game. Some are trying to profit from it. Our Eunice Yun is taking a closer look. This manufacturer in the middle of China wants in on America's AI data center boom. SK Lee is global VP with Singapore registered BrightRay, whose sole manufacturer is this Chinese one called Prefab DC. They make prefabricated data centers. We can see very big potential in the U.S. market. China market is equally important, but we can see that there's stronger demand in the U.S. In 2025, the U.S. had 5 ,427 data centers, China 449.

29:33That rapid build-out has led to supply shortages and backlogs. On average, data centers in the U.S. take two to three years to build. Chinese demand is low due to a lack of capital and overcapacity. China is definitely very important towards the U.S. supply chain for data centers at the moment. We're in a situation where we don't have what we need domestically. And if we do, it's going to be several year long lead times. China can offer those at a much more favorable timing. Brightray has data centers in China and Southeast Asia. We can cut down the speed of deployment by at least half. And we can also control the quality right at the factory.

30:12Yet some people in the U.S. worry about cybersecurity risks and America depending on the supply chain of its main AI competitor. What would you say to those people? I can say that if that is the case, the AI industry in the U.S. might be affected, there will be a longer timeline, and that will affect the way this is done in the U.S.

30:36China, the world's largest manufacturer, already ships electrical gear to the U.S., like transformers and fiber optic cables. But, Morgan, just to illustrate how sensitive and how fierce this rivalry is between the U.S. and China when it comes to AI, there are reports now that the Chinese are imposing travel restrictions on the families of top AI workers in order to keep all the critical know-how in-house. And this comes after there were regulations kicking in earlier this month that allowed the authorities here to impose exit bans on any IT professionals who are suspected of potentially undermining the tech security of the nation.

31:21Wow.

31:22Morgan Brennan: That's really fascinating. And we talk about talent wars in AI here in the U.S., but that takes it to a whole other level when you look at it through the lens of China as well. Eunice Yun, thank you. Great reporting, as always. And let's keep this conversation going. Bring in Sean McGarvey, president of North America's Building Trades Unit, the NABTU, representing more than three million skilled craft professionals in the U.S. and Canada. The company is also on the front line of the AI build-out, inking deals and MOUs in recent months with names like Oracle, OpenAI, Microsoft, Meta, and BlackRock.

31:55Morgan Brennan: It's great to have you here, Sean. Welcome to you. I do want to get your reaction to the report we just got from Eunice regarding the possibility of China looking to pitch more placement in the U.S. AI supply chain. And we do know this is a national security topic and we do know it's important one. It's an important one for our economy as well. Well, thank you for having me. Appreciate that. First of all, I'm not a company. I'm a union. North America's Building Trade Union represents 14 craft unions in the United States and Canada. So with that being said, that report you just gave was alarming.

32:33I believe the president of the United States should take action today to ban the import of prefabricated data centers from China. So we're totally against that.

32:44Morgan Brennan: So what are you seeing in terms of worker placement in this AI infrastructure build out right now and what it means for all of your skilled union members? Well, we're growing at a tremendous pace. There are more and more people coming through apprenticeship readiness programs and our 1 ,600 apprenticeship programs in the United States and finding themselves squarely in the middle class. And the build out of the data center infrastructure, the digital infrastructure of this country is a big part of the growth of the middle class right now. You know, it's interesting. Five years ago, 10 years ago, I think folks might have been surprised to hear about partnerships, growing partnerships between a union such as yours and Silicon Valley.

33:28Morgan Brennan: What has changed here? Why is it so important for the union and its workers to be partnering in this AI infrastructure build-out, especially as we look to the midterm elections and what has become a political hot potato in terms of the debate around this? Well, for us, it's not new. For different industries over the generations, whether it's power, whether it's chemical, whether it's pharmaceutical. We've been partnering with industries for decades and decades to get capital investment from them started in the United States and then in conjunction with that, jobs for our members because we're the people that build those facilities.

34:06This is a natural next step for us now that the data center construction and big tech companies are now building in the United States has accelerated. That's a natural partnership for us.

34:19Morgan Brennan: What is your response then when we see moratoriums or we'll say slowdowns in development in states like New York or Texas or others right now? Well, we think they're misguided. We believe there should be guardrails. We believe Governor Shapiro laid out a great set of principles and his grid principles. There should be protections for the local community. There should be the elimination of non-disclosure agreements. They should know what the impacts are going to be to their communities, whether it comes to power generation, water uses, environmental impact, jobs, tax base. And then they should ultimately make the decision locally whether they want a data center located in their community or not.

35:02So, you know, the debate is a good debate. It's a fair debate. moratoriums and pauses do not work for the United States, do not work for our national security, do not work for our economic security. There's plenty of places in the United States, brownfield sites across this country, particularly across the Midwest, that are perfectly set up for data center construction.

35:26Morgan Brennan: Given the fact that the union and its members are very much on the front lines of all of this build out right now, we see it show up in the macroeconomic data, just how meaningful it is to GDP. What are you seeing right now in real time in terms of this build out, how it's manifesting and what it does mean as you have folks in Silicon Valley, for example, that call this a new industrial revolution? Well, we agree with them. It is a new industrial revolution. It's the reindustrialization of America, as my friend Jensen Hong and me have discussed many times. And we're not only building data centers, we're building chips plants, we're building other advanced manufacturing facilities.

36:06We're updating existing manufacturing facilities with the latest technology across the United States. So this is our chance. This is our moment for this generation to take our economy to the next level. And data is going to be a big part of it.

36:20Morgan Brennan: I find myself having conversations with folks in industry for the better part of a year about a bifurcation in the labor market. The fact there's a mismatch that we need more skilled workers, more tradespeople. We don't have enough of them, even as perhaps we're starting to see disruption from AI in white collar work. What are you seeing? What does it mean in terms of getting more people into the pipeline for these types of jobs? Well, what we've been telling the industry for 18 months now is we need to be talked about earlier in the decision making process when they're starting to decide on long lead equipment buys when they're in the early planning stages.

36:56That's when they need to decide their labor strategy, because we have 1600 training centers in the United States. We have over 300 ,000 people in our training programs. We spend$3 billion of our own money every year, and we can ramp that up to a million. What we need is deals earlier in the pipeline so that we know how many people and particular skilled crafts are going to need in a particular geographic area. So we're not concerned about that. And we think the now that we're getting ready to announce, you know, of course, we've got deals with OpenAI and Microsoft. soft. BlackRock is a huge one for us.

37:29We're getting very quickly going to announce a deal with QTS, with Blackstone, with others, Google that we're talking to. And they understand now that they need to work with us much earlier because there's more than enough Americans that want these jobs and we have the training capacity to train them. But we have to be earlier in the deal, not two weeks before you're going to break ground and you need 500 electricians or 500 labors. It doesn't work that way. We have to pre-plan this stuff.

37:55Morgan Brennan: OK. Sean McGarvey, the president of North America's Building Trades Union. I appreciate you coming on and having this conversation. Look forward to continuing it with you. Thank you for having me. Look forward to it. Well, coming up at the top of the hour, Squawk Box is live from Washington, D.C., digging into the debate around AI, including key lawmakers taking on big roles on the front line of the regulation. It all starts at 6 a.m. Eastern. But in the meantime, We still have a lot more show to bring you. We're back after this. Welcome back to Morning Call. Let's get a check on shares of Boeing, which are up fractionally.

38:26Morgan Brennan: NASA announcing a game plan with the company yesterday afternoon to bring its Starliner astronaut capsule online for missions to the International Space Station. Starliner hasn't flown since stranding two astronauts aboard the ISS for nearly 300 days in 2024 through 2025. NASA will purchase more flights and invest an additional$359 million to upgrade Starliner and certify United Launch Alliance's new Vulcan rocket to do the launches. Now, I spoke with NASA Administrator Jared Isaacman, and I asked why the renewed effort is happening now. When the initial commercial crew program was established, the idea was always to have two providers that be able to take our astronauts to and from Earth orbit to the International Space Station and maybe future commercial space stations.

39:10Dragon's been a wild success. No one's doubting that. But we were always committed to seeing it through with the Boeing Starliner spacecraft. We had a press event earlier this year where we released the findings of that incident where we had to transfer crew from Starliner to Dragon to bring them home safely a couple years ago. But that report had a series of recommendations. We've been implementing that. Boeing is cooperating really well. And now we're going to get back into the business of flying the Boeing Starliner spacecraft. on crewed Starliner one before the end of the year and then within two years.

39:41Ideally, before then, we'll have crew back on board.

39:44Morgan Brennan: Well, Boeing Starliner is part of the commercial crew program alongside SpaceX and its crew Dragon capsule, which will carry the Crew-13 astronauts to the space station for NASA later this week. Well, speaking of SpaceX, huge milestone as Starship reached orbit for the first time ever yesterday, deployed the first 26 next-gen V3 Starlink satellites successfully as well. It was supposed to be a 10-hour mission. We had one of the six engines go out on the Starship vehicle, though, and so the company ultimately decided to end the flight earlier than planned. But nonetheless, it was an orderly landing in the ocean for both the super heavy booster and really for the most part for the Starship vehicle as well.

40:25Morgan Brennan: You can see shares of SpaceX are bouncing back this morning up about three quarters of one percent after selling off with the broader market yesterday. day. Overall, though, a big mission success, something the NASA administrator weighed in on as well. You can check that out at CMC.com. Morning Call is back after this. It's time for your call sheet where we look at the topics driving the trading day ahead. Crew members today, John Stoltzfus, Brent Kabucha, and Mark Short. Great to have you all here. Mark, I'm going to kick this off with you. We've been having this conversation all hour about AI, whether it's from a security standpoint, whether it's from a worker, an economic standpoint with a union president on just a short while ago.

41:02Morgan Brennan: We do know that it's a huge topic coming into midterm elections. Look, it's a huge topic. I think more and more Americans have concerns and fears. And I think that when you see that environment happen, it's the natural instinct for legislators to want to regulate. I think President Trump's instincts are right on this. We're in a race with China, and there's nothing that China would like more than see the people in that building behind me choose how to regulate it. And I think the reality is that with the hugging face, cyber attack and challenges, there's certainly those who are in the front who want to have some sort of liability protection.

41:36And so in some ways, those who are most calling for regulations have a self-interest to give them protections. But I think it's a dangerous pathway to go down to have congressmen and senators in Washington be the ones regulating this industry. And I think that the president's instincts are correct here.

41:54Morgan Brennan: Okay. John, I want to get your thoughts on this, especially as we have seen the AI trade really buoy the market more broadly this year. We're going to get Micron results and a few other AI-related names this week that I think are going to matter perhaps more than usual to the market, given all of this, and then OpenAI Developer Day today, too. Well, when we look at it, we have to think that the luncheon today will be interesting to see what comes out of that, the luncheon at the White House with the president. In addition to that, we'd have to say that self-regulation, in our view, you know, I've been in this business for 43 years is always a little bit worrisome, but also heavy regulation would be terrible for AI.

42:34We do need to be competitive with China. We are ahead of them now, and we should give them plenty of competition going forward. I think the biggest risk is regulation, yet we do need some kind of regulation in our viewpoint. Most industries have some regulation, and as long as it's not overkill, it'll probably be good to protect people because of the bad actor that's out there, you know, the bad actors, plural, that can do significant damage with the power of AI.

43:06Morgan Brennan: Yeah. And Brent, and I think I butchered your name earlier, so I apologize for that, Kachuba. I want to get your thoughts on all this, because we also got a leak to Anthropic S1 as well. And we know some of these big mega private companies are also driving the action we are seeing in publicly traded stocks right now, too. Yeah. And from my perspective, there's a revenue issue here. We need to see AI driving revenue as token prices keep plummeting and dropping. Anthropic revenues are projected to be kind of flat right now. And so there's some questions around when that IPO is going to come out.

43:36So while there's a big regulatory capture kind of discussion happening, we also need to see that these companies are producing revenue and that the AI spend is being justified. And so some of this is a little bit more simple economics. And for the market writ large, if you look back over the last couple of weeks here, you have IWM and small caps are down six to eight percent. The Dow is down six percent, while the NASDAQ is up two percent. And so, you know, this is a market that desperately needs this AI trade to work out. And so if it starts to roll over with micron earnings, particularly coming up on a Wednesday, and that story just starts to roll over, the AI leg of the trade kind of falls out, then the equity market writ large has a major problem.

44:15Morgan Brennan: Yeah, and we're going to get some consumer results this week, too, and commentary with that, whether it's Nike or even today, CarMax and Carnival. Mark, how does it speak to the affordability picture for consumers, especially as we do have energy elevated here? Well, look, I think that Donald Trump was elected in large part on two issues a couple years ago. One was to secure the border, which he did pretty quickly. But the second was affordability, and that continues to linger in voters' minds. and inflation is driving a lot of the midterm cycle results. And I think you particularly see in the Midwest where there's a lot of focus on energy prices.

44:48There should be on diesel prices, on fertilizer costs. But I think it was already rocky because of the president's trade agenda. And for many farmers across middle America, they've been unable to find markets to export their goods because of the retaliation of this trade agenda. And so it's creating a very difficult environment for Republicans in Midwest America. Okay.

45:09Morgan Brennan: John, I want to get your thoughts on this because we know what we've seen in the energy market has driven action in other markets, too. How do you see that here right now moving forward, especially as we have bonds, we have Treasury yields breaking to multi-decade highs? Well, I think related to oil, if you look at WTI, it's off about 17 percent from its peak in April, yet it's still significantly extended. So it's a problem for the consumer, particularly related to sentiment. there's a difference between how they talk the talk and how they walk the walk because the consumer has been remarkably resilient on many counts here and not just at the high end but from a broad spectrum of the consumer and then of course related to interest rates we think at five and a quarter we actually think the bond market is looking towards a normalization at this point okay unfortunately i leave the conversation there thank you to our call crew Tyler Reddick here from 2311 Racing.

46:11And Bubba Wallace. You know what's the worst part of a race? A rain delay. Sitting around and waiting for the track to dry is dull. But instead of waiting, we hang out with Chumba Casino. Social casino slots, bingo, solitaire, plenty of fun to keep us entertained. So why let a rain delay slow you down? Play now at ChumbaCasino.com. Let's Chumba! No purchase necessary. VGW Group. Void where prohibited by law. CT &C's 21 Plus, sponsored by Jumbo Casino.