Apple’s Foldable iPhone, Brent Tops $100, AT&T CEO Interview 9/9/26

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1:06Can an Apple a day keep the market bears at bay? Apple kicking off a big event right now out west. Welcome to Power Lunch here in the east. We are Kelly and Brian. We'll get to Apple in a second, but energy also front and center today. Oil here creeping back toward 100 bucks a barrel, but does it even matter to your money? Yeah, surprisingly kind of a whimper today, but a big day for AT &T. Apple's new iPhones hitting the shelves and AT &T is looking to ride the upgrade wave with a fresh device cycle that could fuel subscriber growth. AT &T CEO John Stanky joins us live from the Goldman Technology Conference with a shareholder update on their growth strategy.

1:43We'll talk about that next. All right, so we've got a lot to do, but let us start with the big event of the day. That is Apple. Now, Apple is not only debuting some new products, it is also debuting a new CEO. Mackenzie Cigalos joining us from the event in Cupertino, California. And Mac, I know there's some new things rolling out, but I guess one other big theme would be let the John Ternus era begin. And so it has right now on stage. John Ternus has been introducing the new foldable phone. This is the most significant form factor change to this device in company history. It is called the iPhone Duo.

2:19They compare it to the size of a passport when it's closed and then it opens up to something that resembles a small iPad. This is why iOS 27 has this new handoff feature where essentially the same phone number can seamlessly move from an iPhone 18. We just got that, the 18 Pro and Pro Max, over to this new iPhone Duo foldable phone. In terms of what we've seen on the product side so far, that 18 Pro and Pro Max, they are talking about better battery life, introducing a few new colors, saying that the specs inside are better, the A20 Pro chip. So basically incremental updates here to the hardware, but the actual cosmetics of this 18 Pro, very much the same, which is why the foldable is so compelling.

3:02Not seeing a lot happening with the stock, though. It's down 1%. What I will say on the AI side of this, because this entire presentation has been very much about presenting what Apple's AI strategy as John Ternus selling this idea of the iPhone as the ideal hardware for this new AI era. But some interesting features centered around the watch that I just want to walk you through briefly. We've got something called audio intelligence here and a feature specifically called Siri Recap. So what this does, Apple says that the watch can use essentially ambient listening throughout the day and then at the end of the day give you a wrap up, a summary of all the conversations you've had.

3:41have to imagine that they've been having a lot of conversations with lawyers about what this means in states that are one-party consent, but certainly a step up in terms of some of the Siri AI features that were first introduced at WWDC here in Cupertino earlier this summer. Guys? The foldable is probably, other than seeing John Ternus himself, who I thought handled it with such a plum. Imagine for a second, you're the person who follows Steve Jobs and then Tim Cook, who added, you know, four and a half trillion of value. You're that guy. The moment to see he he was he looked at ease on stage, frankly.

4:17And that's because he spent half his life at this company, 25 years building the hardware that's really the bread and butter of this company, half of their revenue, the half a trillion dollars that they bring in every year in terms of overall revenue. But half of that comes from the iPhone. And that's what John Ternus has been building. And so this is his big day because, yes, he's introducing himself to Wall Street and the consumer, but he's showing what he's been working on in his R &D lab, essentially. And so we're getting these bump up specs, but the foldable is something that they have been working on for years now.

4:47And this is something where we're still waiting to hear about pricing that typically comes at the end of the presentation. We don't know yet when they're going to release it. There were reports to indicate that this wouldn't actually come until the end of October, early November. And at least historically, this hasn't been a huge seller across Huawei and Samsung, only 23 million units a year. But you have to imagine, I'm looking at these. I'm going to go test it out in a couple minutes, guys. But I'm looking at the live footage of this. And it's just nobody to date has gotten that seamless screen right.

5:18And it looks pretty impressive from what I'm seeing right now. Everyone's curious about the fold. Will they have a fold line? Will they have solved the fold problem? Yes, exactly. I will say my buddy's had a foldable Samsung phone for about three years. So I'm not knocking Apple on. But I'm saying this is not a new thing. Like, I've used it. It's been around. Can they make it more elegant? That's the real question. Does it fit in a dude's pocket? It's small. Did you notice? It's the size of a passport. Yeah. That's a critical question for guys. I mean, like, for me. I have pockets, too. I'm not throwing in a backpack.

5:52It matters to me, too. I'm not. I want to put it in a pocket. Yes. Mackenzie, come back with updates. Mackenzie Cigalos. Let's talk the stock side of the story. See if Will McGuff, if it'll fit in his pocket. He is CIO at Prime Capital Financial. He owns Apple for their clients. A couple of things that we think, I don't know if this has been confirmed yet. This was the rumors ahead of time. If you get the foldable, you don't get the telephoto camera lens. Some people care about that, better camera. You also don't get the face ID. You do maybe get battery life, and Apple told us you can now port your number.

6:21So if you, Brian, want to try it, you can get a foldable and have your normal iPhone. Okay. And just, you know, use both with the same phone number, which has been a big hang-up for people. Anyway, Will, what are your thoughts? Kelly, Brian, thanks for having me today. And I think you hit the nail on the head here with new energy coming, new CEO, John Ternus, new product. But working with our advisors and our clients, we really ask the question, like, what is Apple these days? It gets a Mag 7 company, obviously, but it's not an AI company. It's not a hyperscaler. And what we're seeing in real time is a re-rating from growth to value of a stock like Apple.

6:53It trades at 33 times earning, which is more like a consumer staple than a tech stock, which to me speaks to the certainty of the cash flows. It grows pretty slowly, 8 % to 12 % a year. And what we're seeing now in Cupertino is just more reaffirmation that they're going to have the pipeline come to continue that growth. So the year is 2035. Are they laughing all the way to the bank on this strategy by not doing what Meta and everybody else is doing? Or are we all standing here going, oh, well, it went then from a, you know, a company that's just a consumer staple that makes some cool products is not worth as much in a decade as it is today?

7:30Well, this is the classic tradeoff of what you're paying for it, in my opinion. It trades at 33X, NVIDIA is 24X. Costco and Walmart are more expensive than Apple. So Apple's in this great spot. It sits between kind of a consumer staple and a growth company. And really the point I would like to remind everybody here of is we're seeing SpaceX, Anthropic, OpenAI. Those are the growth stocks going forward. Mag7 and software is re-rating in real time to more of a value play for our clients and our advisors. I'm going to say something I shouldn't say, but that's kind of my hallmark, which is Apple. I've been doing this.

8:02I used to go to those events. Apple stock doesn't move on these product events. That's not taking anything away from what's happening today. It doesn't always sell off. They almost sell off a little bit. But to your point over time, Will, is where the value is. If enough people buy this new foldable phone, you increase cash flow, increase free cash flow. Maybe the stock gets a bit re-rated. You mentioned consumer staple. I would argue that outside of basic necessities, I mean the rawest food and shelter, this thing, this phone, is the most staple of all the staples. People walk around with it like a cigarette.

8:42Totally. there's 180 million of them in the country with about 360 million populations. So that tells you everything you need to know about the utilization of the iPhone. And ultimately, it's going to continue its slow growth by continuing to expand its product set to have users enticed to continue to buy their products. We're going to see touchscreen MacBooks. John Ternus comes from a hardware standpoint. And so he's really, I think, reaffirming Apple's direction into the future is based upon all the product and hardware work they've done. And of course, you can use hardware to run AI and they can tangentially drop AI to help kind of get some buzz around it.

9:16But ultimately, they're a consumer staple stock that should be positioned alongside other value stocks. And like, let's go get it. Is it a must own? That's a tough question, in my opinion. It's a top two stock in the country, right, from a market cap standpoint. So it's NVIDIA and Apple. You have pretty dire tracking error if you don't own it. So I think, you know, given its place in the capital structure, you should own Apple. Well, also, as you say, it's your anti-LLM AI play. You know, it is a way to have exposure, even though you're saying it's value, but to have some exposure to grow without having to worry about the balance sheet ramifications from everybody who's going to war right now trying to one-up each other with these models.

9:54And what do you think of the way it's going to handle Siri now? Yeah, exactly. It's the number one question we get from clients and client events. How do I diversify away from AI? It's Apple. That's the number one question you get? Clients are concerned. How to diversify away from AI? They have clients for like there's your that's the lead of this. And I should have been the lead of the interview. Yeah. So that's exactly what we're positioning is that even though it's a tech stock, it trades like a consumer staple tangentially related to AI. It provides diversification against the Google and hyperscalers of the world.

10:25What else is in your anti LLM, anti AI basket? If you're trying to hang out in the top cap structure here in the States, it's the GLP one name. So Lilly would be the other name that we like there. Some bellwethers are attractive to us. But again, they're they're tangentially related. If you look at Caterpillar, it's data center built out. So it's AI. What about Chase? I mean, so I think that's a great point to talk about here is this rate environment is beneficial to the banks. And there's a lot of cool things you can do with fixed income. One of our other key things we're working with our advisors on is to let rates do the work going forward.

10:57We've had a couple of like 20 percent year, 20 percent year, 15 percent year on track for a 15 to 20 percent year this year. In equities. In equities. And so I think you need to look at the rate environment as helping to be the balance of a portfolio. for the next five to 10 years. You are here. I'm going to take you to Treasury today and they can hug you because you're going to be in that. And when we have the A-plus bond auction, these are the people who are buying debt at these. Yeah, totally. I mean, we're building portfolios for clients and we've got 22 ,000 of them and over hundreds of advisors.

11:23So there's different flavors for different types of folks. But at the end of the day, you need some type of diversification in your portfolio. I know we got to go. We got Halima next block on oil specifically. But from a market perspective, Will, are your clients talking at all about the price of oil? because the market doesn't seem to care. Well, you want me to tell you? And I shouldn't say that. I should make it the lead story, and it's a big deal. Can I tell you why the market doesn't care? So we were$100 a barrel oil like 2011 through 2014. And 2022. Well, the S &P was under$2 ,000. I know.

11:52The S &P is pushing$8 ,000 now, and oil is still at$100. You're going to take away the thing I'm doing in the next spot. So that's like, I'm from Alabama, so keep it simple. Like, to me,$400 a barrel oil would be concerning to the markets if you're just extrapolating S &P returns versus oil returns. Oil's gone nowhere for 15 years. S &P is up 4x. So that's your answer. That's literally what I'm doing in the next block. But that's a good tease. You actually teased it for us. So thank you. Thanks for having me. Thanks for coming, Will. We really appreciate it. Will McGough of Prime Capital Finance.

12:20All right. So as Kelly kind of alluded to, your other big story today, Scott Besant versus the bond market, sort of. Earlier today, the Treasury Secretary announcing the size of their big buyback. Now, the buyback itself will hit tomorrow, but it's up to$6 billion. That was 3x the normal amount. Let's go to Chicago and our friend Rick Santelli. Rick, we can kind of see how the bond market is reacting, selling a little bit. How are you and the bond traders reacting? You know, it's just more of the same. Most of the bond traders I talked to for a month have been looking to test 5%. So really nothing out of the ordinary.

12:58And yes, you're right. It's the biggest buyback by Treasury, okay, by the U.S. Treasury. In terms of the Federal Reserve and their buybacks that fattened up their balance sheet to over$9 trillion, well, what the Treasury's doing is microscopic, truly, by comparison. It's just a bit out of the ordinary. And at 11 o 'clock Eastern, look at the charts. Here's a six-hour chart, twos and tens. Both of them moved higher. Obviously, that orange line is the tens, and the tens moved much higher quicker. And if we look at the 2-10 spread, you see it right there, the steepening of the yield curve. And 10 years are on pace to continue to close at the highest yields going back to October of 23.

13:37But, and this is important, we're not alone. This is a global event. The Mideast and energy prices, which you keep referencing adequately and do a wonderful job, Brian, is one of the driving forces. And it's a bigger force in much of Europe and Asia. I just picked a couple. The Gilt right there, hovering just below 530. Highest yield close in 20 years. If you look at what's going on in the boon, 344. Highest yield close since 2011. These yields continue to move up, and I could have showed you France and Italy as well. Brian, back to you. Rick, thank you, and thank you for the kind words. All right, we are just getting started.

14:18And coming up, one of America's fastest-growing AI companies on a big defense deal it just made. And, Kelly, you know the real risk of AI, I don't know, killing us all. Great. There's that. But before we get to that, Alima Croft is here on the energy powder kegs around Iran and also around Moscow.

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16:19All right, with oil prices in America creeping back toward 100 bucks a barrel and higher overseas, We want to take a look at how the stock market, oil, and oil stocks have correlated in both the near and the medium term. Now, the last time oil prices were this high was actually just about three months ago, back in June. Now, since that time, the stock market overall, the S &P 500, is just nudged higher by about 1.5%. But oil and gas stocks have surged, rising almost 15 % in just three months. So it's been a good run on the energy stock side, not great overall. But what about a bit of a longer or medium term?

16:55We forget, but four years ago, the price of oil was as high or higher than it is right now. On July 11th, 2022, crude oil hit 97 bucks a barrel. In fact, it was 120 a barrel back in June of that year on reaction to Russia's invasion of Ukraine. So in the 50 or so months between then and now, something remarkable has happened. The U.S. stock market, what Will referred to moments ago, Kelly, has nearly doubled. In July of 2022, the S &P 500 was just below 4 ,000. It is now clawing closer to 8 ,000. To be precise, the overall market measured by the S &P 500 is up 93 % since oil was at these prices back in the summer of four years ago.

17:42In the meantime, the XOP, oil and gas ETF, has risen 68 % in that same four-plus year period, although most of those gains have come in the last few months. All right, three small conclusions. Number one, no one can really know how these dual wars, one with Iran, the other between Russia and Ukraine, are going to play out. Two, if you do believe oil prices are ultimately going to come back down, the macro stock market could be a good long place to invest, by the way, as it always is. And three, if you think oil prices are going to remain high, history says oil and gas stocks could be worth your time and money, kind of like Piper Sandler's Craig Johnson said on this very show yesterday.

18:26All right. For more on$100 oil, all things energy and global macro, let's bring in Halima Croft, head of global commodity strategy at RBC Capital Markets, also a CBC contributor. And I'm not saying, Halima, that the higher price of oil and gasoline, particularly diesel, doesn't matter. It matters to a lot of people, particularly on the lower end of the socioeconomic spectrum. But the macro market hasn't reacted as much. I'm sure you guys have these conversations amongst teams at RBC Capital Markets. Is there a point you think at which this really starts to take a bite? I think the real question is, Brian, I think a lot of people in this market have been anticipating an end game to this conflict.

19:10And so as we get into a situation where this looks like we could be hitting the one year anniversary of this war come February, or if we don't get a diplomatic off-ramp, I think then the real questions will emerge about what does it look like in Europe if we don't get a resolution in terms of gas markets there? I mean, think about it. Almost no Qatar LNG has reached the market. Europe is well below where it should be in terms of storage. What if we get a cold winter there? So Europe are watching very, very carefully. There does not seem to be a clear end to the product problems because we have two problems.

19:46We have the Iran war, but we also have the ongoing Russia-Ukraine war. And the diesel price situation shows no signs of abating. So, again, I think duration really matters. And I think some of the complacency was due to the fact that we had ample reserves, at least accrued, going into this conflict and the belief that this would be over soon. Yeah. Can we define soon? Because I don't see any. Let's focus on Russia for a second. Everybody's focused on Iran. I get it. We had ships being blown up. We'll get to that in a second. Kind of an odd strategy for Iran, given that they have a limited supply of ships.

20:22And when one gets blown up, that's one less they had. But I want to go to Russia. A lot of people don't realize this. But they should just go on their interwebs and search for Google or Bing, whatever you want to do. Drone attack Leipzig, Germany. And there was a near drone attack in Germany at an airport. didn't get a lot of attention here, that Germany blamed on Russia. In other words, if Germany is right, Russia may have tried to hit a German airport with a drone. That doesn't seem like a war that is de-escalating. It seems like something that is escalating. And so the question would be, what would be the U.S.

21:03Article 5 commitment in such a situation if that attack had been successful? But Brian, to your point, I mean, Russia is such a large exporter of diesel, such a large product exporter. What has been Ukraine's strategy for the past 12 months is aggressively attacking Russian refineries to deny fuel to the front lines and also more broadly go after the Russian ATM that funds the war. And so that conflict is really in focus as we think about the shortage of refinery capacity. We have one war, which has become clearly an energy war in terms of refineries. When we think about the Iran war, some refineries in the Middle East have been attacked.

21:45And then if you think about the U.S., our refineries are running at 98 percent capacity. There is no shortage. There's no spare refinery capacity that we can utilize. There's no way to call an OPEC of refineries and get more refineries online. Halima, appreciate it for now. Thank you very much. Halima Croft joining us. Thank you. Thank you. Let's get back to Mackenzie Sigalos, who has more headlines from the Apple event. You know, the way that he's holding the phone, I don't really see the fold, Mac. But anyway. I'm about to go test it out because the event just wrapped, Kelly. And we have pricing now for the iPhone Duo.

22:18It is going to start at$19.99 for that base 256 gigabyte model. It scales up to two terabytes. That might be where some of that pricing around that$3 ,000 mark came in running up to this event. in terms of the timing of when you can get your hands on this. Pre-orders will start October 16th. It's going to be available October 23rd. A few of the concessions that we've talked about, no face ID, just touch ID, but there is a telephoto lens and there was a question as to whether or not that would be made available. They talk about all the deep integrations of Siri AI into this product. I will say it looks very similar and is at the same price point as the Samsung Galaxy Z Fold.

22:57So we're going to see whether or not this goes head to head in that market. One of the biggest takeaways from this event is just how high-end Apple has gone with this launch. You cannot buy an iPhone in terms of this latest generation for less than$1 ,200. We only got the 18 Pro and the 18 Pro Max. That is a total departure from past strategy where you've at least had this baseline model where you can enter a new price point to enter for Apple. So clearly looking to make up for some of the margin squeeze with memory by kind of forcing people into these higher tiers. We've seen the company do this before, kind of either phasing out a lower memory option or just starting you at a higher baseline.

23:37And that's certainly what we are seeing here. And what I will say in terms of the stock, not a great reaction, still down around one percent. Part of that might also be that the 18 Pro and the 18 Pro Max didn't hike the price more. It was only one hundred dollars per model. We saw we actually saw the stock rewarded when we saw 20 percent hikes to the Mac and the iPad. So I have to wonder if shareholders were looking for a little bit more of the consumer to take that on. Only other thing I would say is that Apple upgrade that leasing program we were talking about a few weeks ago. Certainly going to be coming in handy as you look at a nearly$2 ,000 entering price for this new foldable phone.

24:17Mackenzie, thank you. Mackenzie Cigalos. Brian, just to point out, if we show that chart, this is a better trading pattern than we usually see for Apple events. The shares could go green. And if they do, it could be a couple of reasons why it's down about a percent right now. To quote Gene Munster, we talked about last hour, he said the new foldable iPhone duo, no seam, ultra thin, 50 percent larger screen. His take, they're going to sell more than he thought before seeing it. Thought it'd be five percent of iPhone revenue in 27. Now he thinks it's going to be 10 percent. Everyone still thought the price was going to be over 2K.

24:45A one nine nine nine is a big deal because it's close enough, as McKenzie was saying, to the price of the new regular 18s. people might just go ahead and say, I'll give it a try. Big deal for Apple. Well, it is over two grand if you have sales tax, which everybody does. People buy it because this is your computer now. But I mean, let's be clear. Two thousand dollars. I don't want to say it's a phone. You can't call it a phone, can you? Can we call it a phone? Can we call it a phone? It's not a phone. It's a computer that has a phone on it. If people thought five percent would be the number. I mean, no one thought this was.

25:19But that's more expensive than a MacBook, although you're not going to put that up to your ears, so I guess I get it. And it has the good camera, the best camera, which is a surprise. This is a telephoto lens you spoke of earlier. I don't... What wizardry is this? My phone is a couple of years old, so I don't know if I have this thing or not. But if you care about having the best camera, you are going to have to sacrifice that to use the Duo, the foldable phone. But you don't. They found a way to actually include that. So that will make it easier for people to say, yeah, I'll try it. Can I play just, I don't want to say devil's advocate.

25:47I do wonder. We'll ask our viewers. I have no idea. Will that foldable phone, which looks cool, will it take away market share from the iPad? Because now you have that. Do you need a small iPad? Not an iPad Pro, but do you need that at home? Apple might be great with that because I don't think the iPads, are they$2 ,000 devices? I mean, yeah, if you get the iPad Pro, the big one with the big processor and a lot of memory, maybe cellular coverage. But I do want it's a good question for the audience. Will the foldable phone take market share from the iPad? And as we debate that, who's really in control, us or the AI?

26:26We will debate those risks, rewards and the road ahead with Sandbox AQ CEO Jack Heidere right after the break.

27:09Thank you.

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28:20Oh, hi. Apple just unveiled its latest iPhone lineup. We're going to get to more on Apple and John Stanky of AT &T and our friend Jack Hittery of Sandbox. Thank you in a moment, Kelly. What we want to do right now is do an Apple price check because you weren't making a call. Oh, I'll make a call. You're making the call. Kelly Evans, make it a call. Because this is so typical. I was so skeptical that I would ever want the foldable iPhone. Then I see it today. I see that price point and I start thinking, I don't know. It's kind of cute. Maybe it's actually going to be a big deal. You know what we have on December 25th every year?

28:56This thing called Christmas. Eric, if you're out there. All right. Let's talk more about this from maybe the other side of that coin, the companies that actually make the telecoms, that want to sell the iPhones to put them on their network. And for that, we don't have it, but we do out in West. In the Communicopia event in San Francisco, David Faber is with a guy who I think David may know something about selling phones. Hi, David. About selling phones. And that is the AT &T chairman and CEO. Yes, it is. And he does. John Stanky is his name. It's nice to see you here, John. It's good to be back.

29:35They were just talking back in the studio, of course, about the new iPhones from Apple. I can remember the time when you actually were the only one carrying the iPhone back in those days. I remember those days, too. Yeah, those were good days and good days for AT &T. But here we are. I'm curious to get your thoughts. A price point of$2 ,000 for a foldable phone. But across the board, prices are higher as a result of memory costs, for example. What is your sense in terms of the consumer's willingness to spend at that level? and as AT &T's willingness to potentially subsidize some of those sales?

30:11Well, look, I don't think this is the first time prices have gone up on devices. I mean, they've kind of been steadily going up over the last number of years. So we have some indication of what happens when this occurs. And oftentimes that pricing ultimately comes back to the consumer in some way, shape or form. And plan price is going up or lease structure is changing. And we've seen their behavior shift as a result of it. We used to see devices replaced every 24 months. Now it's closer to 36 months. That's an artifact of price goes up, demand gets moderated in a little form. I expect we'll see a little bit of that happen.

30:49I don't think anybody's going to be out there subsidizing a$2 ,000 device for free. But I do expect that there'll be ways that people can maybe get their hands on that, depending on the products and services that they choose to buy from somebody. and it'll be commensurate with the price of the device. And with memory prices going up, I expect some of that's probably going to land back on the consumer. I don't think subsidy is going to go up dramatically. There's been a little bit of increase in subsidy the last couple of years, and it's because customer values have gone up. We don't have that dynamic occurring right now, so my guess is it probably goes into pricing in the consumer.

31:26You do. So from your perspective, again, so no subsidy wars, so to speak, as we've seen in the past? At least with current model, that's probably going to be the case. Maybe there'll be some play in the current model minus one. So the previous version of it where that gets a little bit more active on promotions. But, you know, that's a rational move. Yeah. I mean, you just mentioned it. You've said it before in terms of demand suppression. I mean, kind of how much inflation can the wireless market absorb before it changes upgrade rates and things like that? Well, I think, as I said, we've seen it before.

31:59When it goes up$100 and you see a little bit modest suppression that goes on, people adjust and do things differently. They live with their device a little bit longer. Look, at the end of the day, Apple's a really successful company. They're going to continue to be successful and sell a lot of devices. And we navigate our way through these moments reasonably well. By meeting the customer needs, I expect we're going to do the same thing. All right, let's move on specifically to more things in your business. I actually want to take it right to this conference. A guy named Jason Armstrong is the CFO of a company I used to know called Comcast.

32:32He presented here a few hours ago and, of course, sent Comcast stock down. What else is new? He was talking about competition in fiber. He said in the third quarter, what he calls a rational competition in terms of pricing has continued. Fiber pricing, standalone fiber pricing,$30 to$40 range for a gig is irrational. He says they've been seeing it in the marketplace. It's not, to us, a rational price point, given what you have to spend in terms of your build-up per household at$1 ,500 and$2 ,000 in a rural market. Are you responsible for some of that pricing, or are you seeing it from some of your competitors?

33:14Yeah, I think maybe Jason's perspective is held on he runs a broadband business, and he resells wireless. In our case, we run a wireless business that we own and operate, and we run a broadband business. And we have a high percentage of our customers, for example, that have multi-line accounts with us, four lines, five lines, six lines, family plans with even more extended family on it. What we can do for promoting on those large accounts is probably a little bit different than what he might see in his book of business. And so what I think it's possibly rational to be down at those price points, if the entire book of business in the household is as strong as it might be in our circumstance.

33:55I don't think that's irrational. I think that's a good way to go in and get the next 10 % penetration in markets. That's a key part of your strategy, isn't it, Tom? 100%. Is it working? It's working. Look at our last quarterly results. Acceleration in customer growth in both our broadband and our wireless space. We had the most new accounts that we've had in over three years of the business. We had margins improving. We had acceleration in service revenues. We had acceleration in EPS. We had acceleration in EBITDA. And when you kind of look at all those things, look, it's suggesting that we're getting a higher share of total industry service revenues.

34:36And that's really our goal, not necessarily to apportion it to one product or the other. We just want a higher percentage of the household spend. So you're perfectly comfortable spending, and obviously your CapEx spending is only going up. You're talking about, what,$250 billion over the next five years. Generally, that's broad infrastructure, but you're comfortable with the spending that you're doing on Fiverr in terms of the return that it's providing? Look, we've been at the 24-ish level for the last several years. In terms of CapEx. Yeah,$24 billion. Yeah,$24 billion roughly for the last several years.

35:06That's what's built this foundation that's getting you the accelerated growth that you saw coming out of last quarter. That's not going to go on forever. You know, we're in a position where we're building a lot of fiber and we're going to get to the tail end of our wireless retrofit that we've been doing, which is going to wrap up largely this year, a little bit in the next year, and fiber will start to slow down. So we think we've got a great return formula right now. A couple of things to hit on before we can sort of wrap up. Echo Star, obviously you closed that transaction. transaction. Take your leverage up, I think around to 3.2.

35:42And I'm accustomed to you guys being below three of late. You want to target two and a half, but you also kind of moved up buybacks because you thought the stock was cheap. Kind of equate those two for me, I mean, in terms of getting leverage down, but still spending on buybacks and what EchoStore is going to do for you in terms of the spectrum, I should say. Well, I just gave you what happened last quarter in terms of the operations of the business. And so the operational cash flows are very strong. And that gives us the confidence to go ahead and move faster on a share buyback. And as you know, we've given guidance that we're going to be back down to two and a half turns after we do the Echostar transaction.

36:17Part of that's being fueled by the extra growth that that spectrum is bringing in. And we have another transaction that will be completing fairly shortly for us to establish our JV for the Lumen assets that we brought in. When that JV gets established, there'll be an infusion of cash that comes as a result of that that allow us to take a tranche of that debt down immediately. And John, I mean, your stock is up about 11 % over the last three months. It's had a relatively good run for a period of time, at least over the last couple of years. But there's the specter of Starlink out there that every investor wants to talk about.

36:55Do you take it seriously when Musk says that they're going to become a real competitor in the wireless business? I take every competitor that comes in seriously, and I'm certainly not going to take somebody as talented and innovative as Elon Musk and the companies that he stewards without a real serious consideration. But it should be understood for multiple years. You just talked about the level of investment we've been making. The foundation of that has been to get extensive fiber capillaries out there because fiber is absolutely 100 % the best way to move data. And it always will be, at least in my lifetime.

37:32You believe that firmly, obviously, and you've put the strategy in place. Put the company's name on it, my name on it. And so we've been doing that for a number of years to put us in a position where we can compete with anybody. And I feel really strongly that I'm sure there'll be some innovative opportunities that come from satellite. There'll be some desire to work their way into parts of our business. And Our job is to take our great wireless infrastructure, our great fiber, our great ability to support customers and meld these products and services together on one bill with new features and win in the market.

38:05And we have every intent to do that. When he gets that Starship up and running, it can increase the capacity of the satellites in the Constellations 20-fold. That's not a concern? And he can go and put more and more satellites out there, and there's still not going to be fiber in terms of their ability to, one, perform on latency. to reliability, and three, what it can do to ultimately take on more capacity. Not to mention all that data. I mean, I would assume we're only going one way. Then, you know, the upstream becomes really important from a technical perspective, and especially in a mobile world, going from a low-powered handset device up to a satellite is always going to be constrained in upstream capacity.

38:43We've talked about all the infrastructure we've built inside stadiums and hospitals in high-rise buildings where if you're in downtown Chicago, 45 % of your traffic is coming from inside a building. That's being handled differently than cell towers outside or a satellite that can pick up something on the street. We're in a really good position in terms of that infrastructure and what it can do to meet customers' expectations. Well, John, I appreciate you taking a little time and getting an update. Thank you. It's good to see you again, David. Good to see you too. John, thank you to the chairman and CEO of AT &T.

39:14Brian, send it back to you. David and John Stanky. Thank you very much. All right. Up next, Sandbox AQ CEO Jack Hittery on the risks and the rewards of AI as his company just made another big deal. Jack's one of the smartest minds in the world, particularly around AI. You're going to want to hear what he has to say. What's next?

39:47Seems to be a new AI partnership every day. Today is no exception to that. Sandbox AQ announcing today it's partnering with Northrop Grumman to use its navigation technology on unmanned drones. Joining us now to talk about the technology behind that partnership is the CEO of Sandbox AQ, Jack Hittery. Jack, it's great to have you here. Welcome. Good to see you. The questions about autonomous drones are so vast that I almost hesitate to delve into that before asking you about AI safety, broadly speaking. I mean, here we are with headlines and researchers saying, yeah, you know, X percent chances kills humanity.

40:22It almost makes drones seem like a sideshow. I mean, can you talk about from your point of view, you have deep concern in this space. Should we be concerned about what AI can do? Well, as we all know, AI has a tremendous amount of potential for positive, but also there are definitely risks. Starting with the drones, we know the future of both civilian and in warfare is drones. We see it every day right now in our screens with Russia, Ukraine, with Iran. And so it's very important that the drones can find out where they're going. The GPS is being denied. It's being jammed. It's being spoofed in these theaters of war.

41:01And so it's critical that we find ways of navigating without GPS. There is no GPS when a war is going on. And that's where this partnership with Northrop Grumman comes into play. We use our quantitative software from Sandbox AQ with their drones, the Lumberjack drone, a really powerful machine that can be used for a variety of applications in the theater of war. And demonstrated successfully that with magnetic navigation, picking up the magnetic field of the earth, we can navigate successfully without GPS. Yes. So that's a key milestone right there. The use of quantitative AI and a drone together for a big success.

41:41This is so critical, Jack, because it's not and I don't want to scare people any more than, you know, the whole killing humanity thing, which is. You talk to people, you know, and we've talked to people, too, and they'll say, listen, if there is a real war, people can shut off GPS. If your car is being driven by GPS, maybe the car just drives into a tree because the GPS goes down. your technology that you're helping to develop and other things with critical materials and minerals and things like that. That's to get around that. Is that correct? It's to make it so that's not a vulnerability for either the Defense Department or I would imagine down the road, maybe us even just in our cars and our daily lives.

42:23Yeah, there's both civilian and military applications here. We have to become a resilient society. We have to know that even if GPS is out, we can function both in wartime, but also the critical national infrastructure of our country, making sure that flights can go, making sure logistics and freight and all that continues to function without GPS. It's critical that we become resilient. You mentioned critical materials, Brian, another key area. We cannot continue to be dependent on other countries to import it, all of these critical materials for batteries, for energy, for semiconductors. We must start making semiconductors in the United States, and we're beginning to do so.

43:07And we're proud that we won the award to kick off that process there as well. When it comes to the larger picture of AI, it's fundamental that we've got to make sure the AI is tested in sandboxes, no pun intended, but in sandboxes that are cut off from the Internet so that we can really understand what is inside these AI models before they're let out. And by the way, to their credit, Anthropic, OpenAI, Google and others have all spoken to these issues and these risks. They are aware of them. They're speaking to them. They're addressing them. This is something that everyone has a role to play, both industry and government.

43:46Big award. Department of Commerce, Sandbox AQ,$500 million. Jack Kittery, always appreciate your insight and your views on the program, Jack. Thank you. Great to see you all. Thank you. Let's get over to Frank Holland now for the CNBC News update. Frank. Hi, Kelly. President Trump promised this afternoon that oil prices would come tumbling down, but not until right after the midterms. He said the administration would get gas prices below$2 a gallon. AAA says the current national average is$4.22. He did not give details on how he plans to get prices lower. The U.N.'s nuclear watchdog passed a resolution today reporting Iran to the United Nations Security Council for the first time in 20 years.

44:27Diplomats said Iran was in breach of its nonproliferation obligations. The Security Council is unlikely to act on the report because Iranian allies, Russia and China, are permanent veto-wielding members of that Security Council. Iranian officials reacted to the resolution, calling it a political move. The Tate brothers lost their bid today to be released from a Miami jail as they fight extradition to the U.K. where they are wanted on rape charges. This latest development comes after Romania indicted the social media influencers on similar charges last week. The brothers have denied all wrongdoing.

44:59Kelly. All right, Frank, thank you. Coming up, we're digging into Oracle ahead of tomorrow's earnings report. Don't go anywhere. The share is still down 16 percent, but on an upswing lately. We'll be right back.

45:21Oracle is trading near the flatline ahead of its earnings tomorrow. But what can we glean from the options market? Let's ask Julia Spina. She's head of research at IG Group North America and at CNBC Contributor. Welcome. Thank you. So Oracle seems very tied to the OpenAI story, is it not? What are the options telling us about it? I'm sure it looks a lot different now than it did a week ago. It did, actually. We're seeing some pretty interesting behavior in the options itself. Right now, the options are pricing about an 11 % move, so about$18 move around earnings. And that sounds like a very big reaction to earnings, but that's actually pretty standard for Oracle, I would say.

45:57If we look at the realized moves from the past three earnings cycles, those reactions range from about 8.5 % to 10.8%. So that 11 % range is not terribly unreasonable. But what I think is important to note for Oracle is that, you know, just a year ago, it had a 35 percent rip to the upside following, you know, very good earnings report. I think you're a physicist by training. I am not a physicist. But when you said 5 to 8 percent and 11 percent, I thought to myself, well, 11 percent is more than double the low end. So there is some pretty significant volatility priced into Oracle losses. It's pretty significant.

46:31Yeah, it's pretty significant. But for Oracle itself, it's just a very volatile name. So it actually kind of lines up with what we've seen sort of the last three quarters. But I think to that point that, you know, September, almost a year ago, that really big move to the upside that we saw from Oracle really blew past investor expectations. And this is, you know, the stock has had kind of a habit of doing that. So that's something that's important to note. And then the other factor as well is that CPI prints the day after earnings. So these are kind of factored into that 11 percent move, but not terribly out of character for Oracle, I would say.

47:04Yeah. I mean, we had Amazon, Microsoft. Those were 15 % movers for multi-truthers. This is why we can't get rid of earnings season. If we go to twice a year reporting. Is it a season like fall? Yeah, it's my favorite season maybe. I'm not a pumpkin. Earnings season sweater. You sit by the fire with some pumpkin latte. And I guess there's always these questions. I don't know if there's any insight on this. Is the move a move to be fated? I mean, it's probably asking too much of kind of the one-day move or maybe the way that they might trade in conjunction with the earnings reaction then kind of looking out a week or so.

47:32Right. Oh, that's a good question. And it's actually pretty interesting to see how the options themselves are kind of trading right now. When we're looking at calls and then puts, so calls, which really give you that upside exposure, and then puts, which kind of give you that downside protection. And so what we're seeing around earnings is that calls are trading a lot richer than puts, which means investors are basically paying more money to get that upside exposure versus the downside protection, which is kind of the opposite of what you normally see in equities markets, right? Usually you see people paying more for the downside protection as opposed to the upside.

48:03So that being said, that's a trend that we've seen really the last couple of earnings cycles. We see that kind of accelerate with Oracle specifically. We've seen kind of those calls trading richer where especially this has picked up in the last two weeks. So we've had nice momentum from the stock and it seems like people might potentially be chasing that or they don't want to miss out on another big upside rip, which, you know, it has had a recent history of doing. Makes sense. Yeah. And in the wake of Astra, especially Julia Banks. Thank you so much. Good to see you, Julia Spina. Take a short break.

48:34Back right after this.

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