10AM Hour: Apple's Foldable Future, SpaceX Shakes Up Telecom, OpenAI’s New Valuation 10/23/26

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1:03Good Friday morning and welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla and David Faber. We are live, as always, from Post 9 of the New York Stock Exchange. Stocks are under more pressure today following tech's big sell-off as the Nasdaq comes off its worst day since June. We've got a great lineup to work through this renewed volatility, including Torsten Schlock from Apollo, noted investor Dan Niles as well. Plus, will Apple's folding phone move the needle for shareholders? We'll talk to longtime blogger John Gruber as the duo officially hits the shelves and the stock hits a record high.

1:34Also, the CEO of CrowdStrike will join us amid big questions this week around vulnerabilities in a key programming language. Got some PMIs this morning to work with and some UMich now. Let's get to Steve Leisman. Hey, Steve.

1:50we're waiting on the michigan uh consumer sentiment number we're looking for 46.3 this is the uh uh final number for the month and we're just waiting on the number and i think we have there it is it just came in at uh university end at 46.7 is what we have here and that's up from 46.3. Expectations, 48.8. So that is also a bit of an increase from the preliminary number. Looking at the expectations for inflation, the one month at 4.7, that looks like it's unchanged from the prior. And five-year inflation expectations, 3.5%. That is also unchanged from the prior. Taking a quick look at what's happening with bond markets, not really reacting very much.

2:36I'm seeing 498 on the 10-year after that big downdraft in yields yesterday, the two-year 467. That is also unchanged. And once again, on the Fed probabilities where we saw that decline yesterday that went along with lower bond yields, 10.5 % or 11 % probability of an October hike. And just a little bit more doubt or a little bit less confidence in that December hike, now trading about 79.5%. And I'm hearing that that number is actually 48. 48. So we'll report that. That's an upgrade. Interesting time to upgrade it, given that what's happened to gas prices. It looks like the consumer got just a touch more confident in the month.

3:13Sarah? Okay. Thank you very much, Steve Leisman. Yeah, it looks like 48. For October, 48.1 was September's number. You know, there's this discussion now about the Federal Reserve and what it should be doing. It has a big meeting next week, and the market doesn't think it'll raise interest rates again. There's like a 90 % chance that it doesn't. However, there is a case that they should be raising rates. If you look at the numbers and the commentary from the last Fed meeting, inflation is very much a story. I've just been going through some of the commentary from the big earnings reporters. First, for instance, Procter & Gamble CFO reported yesterday, at this level of commodity pressure, it's not a projection, it's just a fact.

3:52The industry generally is pricing up because there is no way to recover this level of commodity pressure without pricing. That's a fact of the past. In other words, talking about the higher input costs and pricing costs. Western Digital CFO in the midterm, and I've indicated this before. This is not a surprise. We are facing some input cost increases. Tractor Supply CEO, we're going to need to offset the reinvested tariff refunds and anticipate continued inflationary pressures, particularly with higher diesel. Just add Packaging Corporation of America from the cost side. In addition to increasing freight, we saw significant increases in recycled fiber and purchase power and chemical costs during the quarter, and we expect these input costs to continue to go up.

4:33So that's the anecdotal. And then, of course, we got the CPI and the PPI, and those numbers came in hot as well. I think the market, David, feels like the Fed did a hike. They can kind of wait to see how things go. And this is a dicey time right before the midterm election, a week before the midterms. So it seemed maybe that they wouldn't pull a hike at this. Seems unlikely. I mean, it seems unlikely, but I think there's a debate and a case of why maybe they should be. One other, you know, they have a dual mandate, so it's inflation they need to get on top of, but also, you know, to protect the jobs market.

5:06And there are signs that that is improving. I just wanted to show you what the Indeed job posting index showed, because it actually showed growth year over year, turned positive as of October 16th, for the first time since 2022, where we've seen this index just showing that there's more postings for job openings. That's a good sign, and I think it jibes with some of the anecdotal data and evidence we've had lately, Carl, that the job market is on pretty solid limits. Hanging in there. I mean, claims 194 yesterday, I think, was the fourth lowest in not just the cycle. Claims are staggering. I mean, everyone thought artificial intelligence was coming for our jobs or people would worry about these inflationary pressures and high oil prices, and they'd cut back.

5:49No, you're not seeing the layoffs happen. Well, we have seen the layoffs. We have Barclays, Amex today, eBay. Not in a broad enough scale that it impacts the claims. What we've been saying is that it might just get absorbed in attrition and retirement. Exactly. I mean, look, so there's a case for higher interest rates. But then there's also a case that a lot of this is just driven by supply shocks and the wars. And, you know, we talked to Bill Ackman yesterday in Pershing Square. And he said, if we can find some resolution to both the Iran war, which, you know, he said has been executed very well, and the Russia-Ukraine war, then 2027 looks really great from an inflation and economy perspective.

6:27Listen. No one likes higher energy prices. No one likes higher gas prices. But I think we have to look at this on a longer-term basis. And again, once the overhang of the war is done, and it sounds like we're also potentially heading in the right direction on Russia-Ukraine, energy prices could come way down. And obviously that would be very, very good for inflation and for markets. I would say Iran and Russia, Ukraine are sort of two things holding what is still a very booming kind of market environment. You get those out of the way. Inflation comes down. Rates come down. We're going to have an amazing 2027.

7:08That would be quite a setup. Sounds just like the president. I think he's a supporter. They're on the same page. Not a lot of daylight between the two of them. I think he's a fan and supporter, especially on foreign policy, and he's speaking out about it. I did want to come back to you on one thing, which is, you know, we have not seen the job eradication perhaps from AI. It doesn't mean it's not coming. No, it doesn't mean it's not coming. When you ultimately are able to replace human cognition with a machine, which has typically been a scarce resource, it might change things. Sure. But so far, it's been better than predicted.

7:39And I think that a lot of the firms that use AI the most and invest the most, you know, the IBMs, for instance, are saying we're hiring more. We're enabling and empowering our people to do more. Everybody building data centers right now is certainly full employment. Although Barclays yesterday, 5 ,000 jobs. And as you pointed out, David, the brunt of that being borne by developers. It was, yeah, information services and things of that nature. Yeah. I mean, right. We'll see. I mean, we have to see how it changes. Of course. By the way, and that's a problem for the Fed, too, if that happens. It's not like they can do anything, like loosen interest rates.

8:10Maybe that stirs demand, but that's not really getting at the artificial intelligence problem. Right. Or opportunity. Which is conceivably a seminal change the likes of electricity. All right. Are we moving on here? I guess we are. Let's give you a quick check on the market. Of course, there it is right in front of me. NASDAQ after a very bad day yesterday, off just ever so slightly. The S &P, though, is down about a half a percent. Joining us now to discuss that action. and who knows what else is Apollo's chief economist, Torsten Slough. Always good to have you, Torsten. You know, I like to talk to you.

8:41I mean, I'm sure Sarah wants to talk to you about rates and things, but you've done a good amount of work on data center buildouts, you know, facing significant supply chain bottlenecks. How are you thinking about capital and capital constraints, given it's certainly a concern in the overall market?

8:57John Gruber: Well, there is a big issue that we do need a lot of long-duration investments in data centers, in infrastructure, in energy transition, in renewable energy, across the board, these investments are needed to basically get the economy on track for growth in the future. And the question now at the moment is, where is the capital going to come from? Because at the same time, we also need a lot of capital for government deficits. And all those things combined basically means that at the moment we have a shortage of capital and we have an abundance of good ideas that we need to invest in, which is a complete opposite of where we were from 2010 to 2020, where we had a savings glut.

9:31John Gruber: Now we have a savings shortage. And that's, of course, very important because that means the rates and spreads are moving higher because investors are beginning to demand higher yield for those investments now that there is less savings for those long duration assets. Yeah. Do you see it as a gating issue over time in terms of the ability to develop this technology? I do think that is an important part of the discussion, especially in the AI trade, because first of all, the conversation about, well, what is even the amount of data centers that we're going to build. There's shortages of transformers.

9:58John Gruber: There's shortages of curtain wall. There's shortages of a lot of different components where you, in some cases, have to wait up to 20 months before you can build your data center. So even just building data centers is going to take time, which will have negative consequences for the equity holders in data centers. And on top of that, we're also beginning to ask questions about, well, will the companies who are buying compute actually be willing to pay for that compute? So in economics, it's not only about the queue, meaning the volume of demand for compute. It's also the price for that compute.

10:23John Gruber: and what is the willingness for businesses that are not in the Magnificent 7 but in the S &P 493 to pay for that compute and the risks are rising that they will not be able to pay as much. That might be why the ramp data for token spending is beginning to weaken. Why are the risks rising, sorry? Because the risks are rising now that is spending from the ramp data on actual tokens is beginning to flatten out, suggesting that there is a declining appetite among S &P 493 businesses who used to see tokens probably as a growth center but are now more only seeing tokens as a drag on margins. You kind of got to this yesterday with your chart about, I think you called it circular, just usage, right?

10:58Among the, what, the hyperscalers, is it? Or is it venture capital in general?

11:02John Gruber: So normally we talk about circular financing and how is the data center build out finance and everything that comes along with the infrastructure. But now there's also more evidence, again, also from Ramp that shows that when you look at who are the consumers of tokens, the main consumers of tokens are really venture capital-backed companies. So that's also beginning to raise questions whether S &P 493, those are ultimately the businesses where you need to see some growth in earnings, need to see some growth in profit margins. And at this point, there is little bit no evidence of revenue per employee growth going up.

11:32John Gruber: There's no evidence of profit margins going up in the S &P 493. So that's what we're waiting for. And then we see this spillover to be outside the tech sector to also show the revenue growth coming in the S &P 493. I mean, given we're still in an environment where we're supply constrained by this and so many other things like oil, should the Fed be raising rates next week? Well, of course, if you put this into the Fed's most loved framework for this, namely the Taylor rule, exactly to your point, Sarah, well, if you look at just a dual mandate, we should absolutely be raising rates. The labor market is strong and inflation is broadening out.

12:01John Gruber: The last inflation rate was truly ugly, getting broader inflation across a broader set of categories. But the Fed is probably also watching what's going on, of course, with the AI trade. You have CDS and a lot of AI names widening out. Spreads on hyperscalers have been widening out. They're probably also watching what's going on with oil prices, and they may actually also even be watching what's going on in France. All those things are creating a little bit more complicated situation where it's not just about looking at the latest data for inflation unemployment, but there are some things suggesting that the leading indicators of what's happening with the turbulence in markets at the moment, especially in credit markets, could be a worry for the Fed if they look several months ahead.

12:34I mean, they could also assume that a lot of this is because of the wars. I mean, as Bill Ackman said, with Russia, Ukraine, with Iran, and that is, the Fed doesn't traditionally respond to just supply shocks.

12:47John Gruber: Yeah, the problem with that is that the San Francisco Fed actually has quantified where is inflation coming from, and they find that half of inflation comes from supply shock. So in that sense, Ackman is right to say that it is oil prices. It is commodity prices that have gone up. But the other half is telling you that the economy is still pretty good. At the moment, GDP growth is about 2%, and roughly 1 % of that comes because of the AI spending boom. So the AI spending boom is still playing a very important role in why inflation is still so high. So it's not only supply. The Fed certainly should also and will look at this and say it is actually also demand.

13:18So for obvious reasons, you keep an eye on that AI spending boom. You've been following it closely. Do you have any predictions for us in 2027?

13:25John Gruber: Well, but that's because normally my job is to look just at inflation, unemployment, and those are the things we just looked at in 2006, 2007, and 2008, and you and I were talking about this. But then we all missed out that there was something going on underneath the hood in housing, And the big question is, are we missing something that's going on underneath the hood in AI? Because is the AI trade just so far only helping the Magnificent Seven? It has to spill over to the S &P 493. And at this point, unfortunately, there's just no evidence that the bottom line of the S &P 493 is getting any boost from AI.

13:54John Gruber: Profit margins are not growing. Revenue per employee is not growing. Do you think that's why we're not seeing the job losses? I think exactly why we're not seeing the job losses. If the companies have not yet figured out exactly how to implement AI, it may be coming. But in the worst case, it may also not be coming. And that's what I think, especially in the macro world, more people are beginning to spend time on. Many people missed out the housing situation in 2006, 7, 8. Well, now we need to do all the homework of thinking about tokens, compute, AI demand, and in particular the buildup. So what does that do to the hope that you could grow your way out of this budget deficit?

14:24John Gruber: That is going to be very, very difficult. The challenge, of course, is that the Congressional Budget Office is predicting that we're just going to see nothing but an increase in debt to GDP. So I think that is an aspect where we just need to play the cards that we've been dealt in this poker game. It's going to be very, very difficult to see any time in the term that anyone is going to return those things so that we get a more sustainable fiscal situation. So that's telling you a different word that the term premium, the long-term interest rates, will continue to be under some upward pressure because the fiscal situation is unfortunately not getting there.

14:52We have a fair amount of treasuries rolling over next year, don't we?

14:54John Gruber: Well, then we have about a third of all treasuries will mature in the next 12 months. That's about$10 trillion. dollars and more and more debt is issued in the front end, which raises a lot more focus on what's going on in the front end of the curve rather than the normal, oh, this will all get financed. Well, if we roll over more and more and more and more is issued in the front end, that also makes, of course, Treasury issuance more dependent on what the Fed is doing. So there's just a lot of things going into the challenges with fiscal policy that's not only about the term premium and long rates, but also has a lot to do with the discussions around what is there caught between the Fed and the Treasury.

15:24Although we've had a nice rally in the 10 years below 5 percent.

15:27John Gruber: Yeah, but that's because the AI trade is beginning to make people say, maybe I should take money out of tech and put it into a trade. So that's why on this scale, the arguments for rates going higher are inflation, it's oil prices, it's fiscal worries, and arguments, of course, for rates going lower, which have been dominating, is fears about the AI trade, especially credit spreads widening out for CDS and for hyperscalers. It's getting so much attention and needs to be thought so much about in markets. All right, you're going to let us know when you start to see AI diffused in the enterprise and having a real impact, right?

15:53Absolutely. You're going to rush on set and say, I've seen the evidence. Let's see if an eye on the Danish flag.

15:57John Gruber: I'll let you know. Okay. Torsten, thank you. Have a great weekend. Thank you. Torsten Slott. All right. Here's our roadmap for the rest of the hour. When we come back, will Apple's folding Duophone move the needle for shareholders? We'll talk to longtime Apple blogger John Gruber, who just put out a 9 ,000-word review of the new device. As Apple hits a record high, look at a summary. That's a lot of words. Plus, shares of AT &T and Verizon, they are down. Elon Musk taking steps to establish a wireless network, terrestrial wireless network. We'll give you the details ahead. And don't miss the CEO of CrowdStrike, warning this week that vulnerabilities in that key programming language will lead to what he says many downstream breaches over the coming months as the Nasdaq briefly loses 26K here for the first time in a month.

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18:19Market Update podcast or find Schwab Market Update wherever you get your podcasts. Welcome back. Apple share is touching a record high as the folding iPhone duo hit store shelves this morning. Our Mackenzie Sagalos is outside the flagship in New York City on Fifth Avenue. Hey again, Mac. Hey, Carl. So now that the store doors are open, the early read is clearly there's a lot of interest here. We've seen people camp out overnight everywhere from New York and Austin, where CEO John Turnus just welcomed customers in to Beijing and Sydney. But almost every signal that we have right now is an imperfect gauge of demand.

18:57Long lines can also reflect very limited supply. Delivery dates stretching into January tell you that demand exceeded the iPhones Apple had available, but they don't tell us how many phones Apple actually had to sell. I've asked Apple that question, and they haven't answered it, beyond saying that production is ramping as we speak. So ultimately, that's a supply chain question for Chairman Tim Cook, because there are still real questions about how quickly Apple can make more of these. Bloomberg has reported that output was running in the hundreds of units a day earlier in the ramp with low yields on the folding display and hinge among those bottlenecks.

19:32Apple marketing chief Greg Joswiak pushed back on the idea that production problems are behind these weights, telling me that Apple is on plan and making phones as quickly as it can. Morgan Stanley estimating roughly six and a half million units will be produced this year. That's tiny relative to the overall iPhone business, but potentially enormous for foldables as a category. IDCC's Apple capturing roughly 40 percent of that market next year, overtaking Samsung for the top spot. So over this weekend, we will be watching how quickly stores sell through their walk-in stock, whether those delivery windows move in or out, and what third-party sell-through data starts to show us.

20:12Guys? Mac, we know Ternus made his bones in hardware. What's on the line for him with the rollout of this product, which obviously the development of which predated his succession? I mean, John Ternus actually placed the patents for this 15 years ago, so it's been on his mind for a while. Now he is in the top job, and in less than two months, he's rolled out two entirely new product categories. Next week, Apple has an event coming up in Los Angeles where they're widely expected to announce the first ever touchscreen MacBook Pro, something that they have put off for years, citing ergonomics. Others might say that there's a fear that it would cataply their iPad line.

20:49But what all this points to is Apple returning to its roots. What it does better than anyone else is product. And whereas you have Siri AI still very much receiving mixed reviews in terms of performance when you stack it up against models from Quad, you have this entirely different segment of sales that are just working for them. And we've also seen them lean into this premium end of the spectrum. And when you go into foldables, that is a very high margin category for them. My supply chain experts telling me that we're looking at 55 % gross margin versus 45 % gross margin on the 18 Pro. So this is Ternus really looking to make up the difference, especially as he's facing headwinds for the services business.

21:28That's typically Apple's highest margin business. The growth there has been slowing as of the last few quarters. All right. Keep an eye on those lines for us, Mackenzie Cigalos. For more on the iPhone duo, let's bring in John Gruber, author of Daring Fireball, Apple Blog. He just came out with his 9 ,000-word review of the new iPhone today. So what is the upshot, John? Do people need to go out and buy this? Oh, man. I would say your hunch of, hey, do I need a$2 ,000 iPhone that doesn't look anything like my existing iPhone? is probably not. It's an early adopter device, I would say, not just for the price.

22:08And to boil an 8 ,900 word review, not 9 ,000, down to a TV hit, I would say if you love your existing iPhone, if you really love it, this is not the iPhone for you. Because when you take the Duo out of your pocket and you use the small outer screen, It isn't magically as big as a regular iPhone. It is small and cramped. And it is double the thickness and double the weight. It feels very thick and heavy when it's folded up. It gives you less space. You see a lot fewer of your text messages when the keyboard is up, taking up half of the tiny screen. It is not great when it's folded up. You open it up, and it is like having an iPad mini.

22:57And if anything, I actually like it better than an actual iPad Mini. I like what Apple's done with the software better than what they've done with iPad OS. So if you would rather carry around an iPad Mini that you can fold in half just to put it in your pocket and purse, and you don't care so much about your iPhone, it might be the device for you. If you love your iPhone and you use it all the time, no. We were showing your quote, basically summarizing that it's a crappy phone. I think you say, right? But amazing iPad mini with better software that can fold up and fit into your pocket, which is the take.

23:33So is it a design decision or a practicality decision, do you think, in terms of the improvements? I think it's inherent to the foldable design. I don't think anybody is going to crack this until some kind of hypothetical future technology where it's literally just the screen and no metal and the battery can be like a science fiction type design where it is literally like folding a piece of cardboard or thick paper. I mean, and that's decades away. I think in the meantime, when an unfolded foldable phone is sort of like a regular phone in thickness, it is going to feel twice as thick and twice as heavy in the folded state.

24:17It's really about how much time you think you're going to use after opening it every single time you use it versus how much are you going to use the outer screen. John, what do you make of the notion that the way it fits in your hand, it's less conducive to vertical scrolling that might actually help wean you away from addiction, say, to social media? I honestly think, and for me, I actually, well, social media, I don't know. But I don't consider myself to have a phone addiction. My wife might disagree. I'm not looking to cut down on the amount of time that I use my phone. I know that there are many, many people who do.

25:02And this actually might be something that people find compelling about the device. that basically you take it out and the easiest thing to do, use the outer screen, is sort of inconvenient and clunky. And it's going to make you sort of think, do I really want to unfold this and do something? Or should I just put it back in my pocket and purse? And I have found myself in the 10, 11 days that I've been using it full time actually doing that. There are times where I find myself thinking, if I really want to continue with this, I should just open it up. and I think, eh, I don't want to open it up.

25:37I'm just waiting in line here at the store for another minute. I'm just going to put it back in my pocket. And so if that's really what you're thinking and you'd like to spend less just distraction time on your phone, maybe. But I don't foresee Apple starting an ad campaign that says, the iPhone Duo,$2 ,000, you'll spend less time on it. Well, then I do wonder, they'll keep iterating, though. So what do you think is next? and what would be a favorable progression of this new technology or form factor? Well, the best thing I can say about it is it really is a new category, and I know they're calling it the iPhone Duo.

26:17They could have just easily called it, in my opinion, the iPad Duo, where it's really fundamentally an iPad that you unfold, but that you can fold it in half and take it with you like your iPhone. It is sort of a middle ground between an iPhone and an iPad. And I think that's a new category. And I know that there have been Android foldables, ones from Samsung for seven years. But the segment just before I came on, Apple's going to overtake that in months because this is a much more compelling device and much more thoughtful. So there is clearly tons of headroom to go forward with this form factor.

26:56The single biggest one, the one that I would love to see in a second or hopefully second, but second or third generation would be face ID instead of touch ID. The fact that you have to go back to touch ID and put your finger on the side button of the phone every single time you unlock it is my single biggest irritation. Yeah, you go deep on that with the Apple Watch and everything. You know, my seven-year-old says, if you want to take from a younger demographic, like, why get a phone that looks like an iPad if you can just get an iPad? The kids really like iPads. It feels like you guys are kind of in some potty phone there.

27:34Last word, John? Do you think this is going to be big for Apple? I mean, as you heard McKenzie set it up, you know, they're testing the margins here at a time where all their input costs are increasing. I do think it's good for Apple. And it's, you know, we know the numbers. And it's exactly like McKenzie said,$6 million for this year, you know, give or take. I don't know. Who knows? Maybe it's$7 million. Maybe they'll get it up to$8 million. That is a sliver of the unit sales for the iPhone. But they are selling out. That's a great look for Apple. So I can't say that they've mismanaged supply.

28:07It is a very strong look brand-wise to be able to say, hey, you can't get your hands on this. And if you order one today, you have to wait until February to get it. It makes it look in demand. No other foldable on the market has anything like that. So there's sort of a cachet here. And if the typical thing that happens with what I'm calling an early adopter product, all the normal people out there wait a year or a generation or two, and it will be better. And I think the margins will come back into line with Apple's usual margins a year, two years down the line for this when it becomes more of a, you know, if you do it by a pie chart, a nice big thick slice of the pie of how many iPhones Apple sells per year.

28:53Right now, it is a very it's going to wind up being for the next year a very thin slice. John Gruber, thank you for joining us with your first take. Daring Fireball. Always a pleasure to be here. Thank you. Up next, the telecom stocks that are getting hit on new reported plans from SpaceX to really create a fourth competitor in wireless in the United States. Plus, new CNBC reporting detailing OpenAI's latest funding efforts. We're going to have a look at those numbers. That is when Squawk on the Street returns. Who's ready for a bike ride? Peppa Pig is learning to ride her bike. First, pop on her helmet.

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30:56We've had this dynamic where the Dow has outperformed as tech stocks underperform, and today it's kind of the reverse. I mean, the winners, information technology in the S &P is up. We've got Micron, AMD, SpaceX, Intel. Those are all higher, but, you know, pretty broad weakness, I guess, is pulling things down. Otherwise, it's just tech, real estate, and energy that are higher. About 30 minutes into the hour, some of the movers that were watching this morning. First up, American Express, the biggest decliner in the Dow. EPS beat, but revenue was amiss. Total card spend falling slightly from the previous quarter.

31:27Company also announcing it will cut 5 % of its global workforce, trying to limit the impact of rising costs. Deckers is down on the back of results. The owner of brands like Uggs and Hoka missing revenue expectations, slightly lowering its revenue guidance for the year in what the company calls a challenging consumer environment. And definitely watching the telecom space, Verizon, AT &T, Timo under significant pressure here as Bloomberg reports that SpaceX aims to secure at least 80 ,000 cell sites across the country. Tower companies jumping on that news as well. David, we mentioned Crown Castle and AMT at the top of the 9 a.m.

32:02Yeah, they're the biggest beneficiaries. And it's not the first time that's happened. Of course, remember, we first heard about this as a real possibility when SpaceX announced that purchase of Spectrum from a company called Grain. And we saw the tower stocks rise as a result of the expectation that if they really were going to try and become a serious competitor to the likes of the three names you just mentioned, they would have to build out a terrestrial network, which does involve leasing a lot of space on towers around the country. We knew they were going to do this. I mean, this is pretty clear in the S1.

32:33We were talking about the threat to these telcos. Yes. It feels like kind of a drip, drip, drip. But can they fight back? Can they fight back? I mean, their argument would be that right now they have a superior offering of both broadband and wireless, first of all. Like I'm channeling John Stanky here, the CEO of AT &T, in terms of what he would say, and fiber, which is a far better way to deliver all of these different services than Starlink and certain areas where Starlink would not be able to effectively or have a robust broadband presence. So I think that's one way. But, you know, Sarah, the question we continue to have is where, first of all, It's going to cost a lot of money to create a terrestrial cellular network.

33:15But what will it be priced at? Is their marginal cost at Starlink just going to be less than everybody else's? And if that's the case, one would imagine they get a lot of market share. The other parlor game is which of the three legacy big guys would be most likely to partner with SpaceX? It's kind of been whispered that Verizon would be most likely. And almost every time we get pressure, Verizon's down the least. That's a good point. Yeah, well, Verizon does have those MVNOs. In other words, giving capacity it has on its network to the likes of Comcast and Charter, which operates under the Spectrum brand.

33:46So they have done that in the past, but it really would be enabling a competitor. So, you know, it's very much unclear whether that would actually be something that happens. Right. We already see price wars in the space constantly. We do. We do. Starlink could start subsidizing your Apple phone, right? Yeah. All right. Verizon down 3 percent. AT &T, T-Mobile all down as well. Time now for a CNBC News update. Dom Chu has it for us. Good morning, Dom. Good morning, Sarah. French authorities are deploying 70 ,000 police officers ahead of nationwide cost-of-living protests taking place on Saturday.

34:17Some of the country's most popular tourist attractions, including the Louvre and Eiffel Tower, will close as officials brace for possible violence. Last weekend's demonstrations erupted into fires, looting, and clashes with police. Armored vehicles, helicopters, and water cannons will also be deployed. The Justice Department has opened a criminal investigation into longtime Trump ally Corey Lewandowski over allegations he profited from his role as a top Homeland Security advisor. The probe follows a referral from the department's internal watchdog group. Lewandowski has denied wrongdoing and has not been charged.

34:52And Pope Leo is canceling a planned trip to an interface peace gathering in Assisi on doctor's advice as he recovers from lung cancer surgery. The Vatican says follow-up imaging shows the 71-year-old pontiff is recovering well and no further cancer treatment is needed. Leo will send a message to Tuesday's gathering in central Italy instead. Carl, I'll send things back over to you. All right, Tom, thanks very much. When we come back, how the war in Iran and rising oil prices may impact the midterms, with Brent crude now close to a six-month high above 116. Next hour, don't miss the CEO of cybersecurity firm CrowdStrike.

35:28George Kurtz will break down just how vulnerable governments and businesses are to some of the flaws in this programming language, PHP, when we return. Welcome back. With less than two weeks until the midterms, the war in the Middle East and the impact of energy prices definitely front of mind for many American voters. Iran says it attacked seven tankers in the strait on Thursday, and that has helped to send oil to its highest level in six months. The U.S. and Israel reportedly preparing to carry out strikes on Iran after the midterms. Let's bring in Sarah Bianchi, Chief Strategist of International Political Affairs and Public Policy at Evercore ISI.

36:02Sarah, great to have you, especially in these crucial final weeks. Thanks for being with us. Thanks for having me. What a world. We've been monitoring prediction markets. I see Cook Political moves a few more races toward the Dems today. Do you expect this to tighten as things normally do in the final weeks? uh look i think the house both a lot of the political experts uh are moving more races in that direction the house races do move more unnaturally with uh a public sentiment unlike some of these senate races where candidate quality in places like michigan and maine can be a real factor uh so i don't believe uh they will uh really tighten in a meaningful way that impacts the House.

36:47But, you know, there's certainly we are seeing, you know, some of the traditional get out the vote. And I do think some of the stops the president's making will help get some of the Republican base out in a way that will be. When you think about policy shifts, dynamic shifts that lead you to various trades, I mean, do you start going long, some elements of health care and shorting others? What seems obvious right now? Well, I think if the Democrats take even just one House, that will give them a lot of leverage around debt ceiling negotiations and funding spending next year. And I do think they will use that, as you said, for health care spending, either add back some cuts we've seen in Medicaid or the Affordable Care Act with the Senate.

37:40If they win the Senate, then that will even be kind of more the case. So I do think health care is one clear place. But we also remind investors that Trump is still the president. He has most of his activity, whether it's Iran, AI or tariffs, he still has a lot of control over. And then I think we also remind investors that the 2028 election starts the day after the midterms. And a lot of implications of what happens next Tuesday for that as well. You know, the socialists, Sarah, get a lot of the airtime in media and social media, a lot of attention. Has it shifted the principles and the policies of the Democratic Party, though, as it relates to whether we could see a sweep and what investors should expect?

38:28Look, I think the message that most Democrats are running on is we need to check on Trump and affordability. And I don't really see a lot of kind of full-throated policy issues that reflect really proposals that reflect kind of progressive or centrist thinking or kind of all of the above. I think one of the things to watch for the progressive movement is does Dr. El-Sayed win in Michigan? AOC and other progressive have made that kind of a standing ground as to whether they can win in tough presidential states. I do think he's probably going to pull it out. I think there will be a disconnect between his numbers and the Democratic governors that will make other.

39:13But I expect that we are going to have a whole new slew of stories about where the DSA movement goes from here right after these. Finally, Sarah, a question that probably nobody really wants to talk about. But Bob Rubin did write this op-ed in The Times this week where he said the president has expressed desire to interfere with and even usurp the midterm elections. November 3rd could be a defining test for the rule of law in this country. He thinks markets underpricing that risk. How are you guys even approaching that topic? Yeah, we have talked to folks on all sides. There's certainly a lot of preparations going on in states by both Republican Secretary of State and Democrats.

39:56A lot of outside watching here. You know, if it is left, you know, the closer it is, the harder that becomes. I would say in my mind, the biggest risk is whether they agree to seek people in the House. The House of Representatives actually has a lot of jurisdiction over what it can do. So I am a little bit more worried about that being a problem than I am about some of these certifications and such. Right. But that would that be more of a January issue then. Yep. More of a January issue. And there are some people who believe Speaker Johnson wouldn't do that. But, you know, I think we got to be prepared for everything.

40:36But look, it is better that either however these elections go, the less close they are, the easier it is to kind of have people, you know, do the right thing and count the vote. So I do think it's a little bit different for Trump that he is not himself on the ballot. So he is able to kind of explain away some of the losses. But certainly we all need to be prepared for all scenarios. Sarah, appreciate it. We'll see what we get in a couple of weeks and beyond. Sarah Bianchi over Evercore ISI. Thanks, Adam. When we come back, new details about OpenAI's latest funding efforts and a new valuation. We're going to break down the numbers for you.

41:14The next hour, do not miss tech investor Dan Niles, how he's thinking about this week's tech pressure and the outlook for Microsoft, Amazon, Alphabet, all reporting in the coming days. We'll be right back. Welcome back. CNBC learning new details about OpenAI's latest fundraising efforts. Kate Rooney joins us. She has the reporting on it. Kate. Hey, David. Well, OpenAI, from what we're hearing, is getting closer to wrapping up another funding round ahead of its IPO, this time at a$1.25 trillion valuation. so that number does not include the new cash being raised. It's the pre-money number. This is according to two sources close to that deal.

41:50The AI giant raising up to$30 billion. From what I'm hearing, the final size of this round is still being worked out right now. The FT reporting after our initial piece yesterday that OpenAI wasn't quite able to raise at the initial$1.4 trillion it first laid out. I did ask around about that as well. I heard from investors that open AI had indeed initially gone out with slightly higher price. This lower price that they're now going for and we're reporting does speak to the amount of exposure right now that investors, at least in private markets, have in this name ahead of an IPO. You have the public companies.

42:22You've got Amazon and Microsoft as major backers. You've got a lot of large private market investors as well, sovereign wealth funds that already have invested in this company and just the overall market conditions with more jitters right now around the AI trade, as you guys have been talking about. One source close to this deal told the investors from the United Arab Emirates and CO2 are going to be the ones leading this round. Both right now are existing investors. And then there was also a compute aspect to this deal. OpenAI is negotiating a commercial deal with the UAE to secure more computing capacity from that region.

42:54That is according to a person familiar with those talks behind the scenes. Sources describe this as an an opportunistic bridge to an IPO to raise money, CFO Sarah Fryer has told investors that a public listing will likely come in 2027. And from what I'm hearing, OpenAI told people yesterday that it wants those signatures by the end of next week. And guys, OpenAI has already filed confidentially to go public. Rival Anthropic could make its IPO filing public very soon and then list in November from what we're hearing. Yeah. And to your point, of course, they are getting ahead of that Anthropic IPO, which will raise conceivably a lot more money than even$30 billion.

43:31Of course,$30 billion for a private company is still an enormous sum of money. Sometimes we can lose sight of that, given all the big numbers, Kate. But one of the key questions remains, what are we seeing from the two companies? Are you hearing anything? I mean, everybody wants to talk to me about is Anthropik re-accelerating its growth rate? What is OpenAI doing right now in terms of acceleration and the like? That's one thing, David, that I've been hearing from investors behind the scenes. And one reason that OpenAI has been able to be opportunistic, because they have seen an uptick in revenue growth and have been from what investors say.

44:03Again, they are backing this company and believe in it, but they would argue OpenAI had fallen behind Anthropic, was sort of the underdog, and with its newest models and also price competition has been able to make some ground, take a bit of market share in the enterprise side of the business. And they are using that narrative as they go out and fundraise, and you're seeing that in pitch decks to really try to show the revenue growth and momentum. And no matter what, the elephant in the room for either of these companies is their biggest rival, their competitor. So they need to show that they are taking from Anthropic, that it's not a second player here.

44:38But I would say the narrative has shifted a bit. OpenAI, again, has sort of had this renaissance as it's gotten better models and been able to be more competitive on enterprise, which is really where Anthropic was dominating, at least in the beginning of this year. Yeah. It's also just interesting to compare it to what's happening in the public market, where there's been a bit of a fire strike from the institutional side on these growth stocks and how long that takes to kind of flow into the private market. I think it's being reflected, Sarah. I think this slightly lower valuation, it's a tough time to raise money.

45:08And I was talking to an investor yesterday who said, you know, it's a feat if they can pull this off and get this money in before you may see more volatility and the market's just extremely choppy. All right. Thank you, Kate. Up next, chips getting a bit of a bounce today, but an interesting trade just happened in the options pits. We'll tell you about that next. Plus, we'll get to this move in Moderna and the leak of a new cancer vaccine trial. Some data there. The stock is down big on the week. We'll be right back. Welcome back. The Van X Semiconductor ETF down double digits this month. How's the market thinking about this sell-off?

45:39Let's get to Oliver Rennick at CBO in Chicago, get a look at what the options are saying. Hey, Oliver. Hey, Carl. Some lingering fear in the tech trade. It seems like lots of put activity in the semiconductor ETFs. Flows look downright bearish in the SMH sector fund and mixed, if not bearish, in the three times levered long fund Sox L. Both are trading about twice as many options as usual after semis broke down yesterday to the lowest since August. The top seven contracts traded by volume in SMH this morning were puts, and a little over 75 % of the premium traded there looked like it was initiated by put buyers.

46:20There was one big trade in particular at the 510 strike expiring next Wednesday as someone opened a new position of more than 8 ,700 contracts worth just over$4 million. At$4.65, a contract, they need SMH to drop another 4.3 % through next week. Looking at Sox L, which does more trading than SMH, and about 10 times as much as its short counterpart Sox S, the most popular contract to buy is the 80-strike put expiring today. But right behind it by volume is the 85 and 90-strike calls looking for a turnaround into the weekend. Those bulls, though, are going to need something to change pretty quickly as the market stays under pressure and VIX just keeps inching higher, hitting 20 plus this morning, guys.

47:06Yeah, we talked around till yesterday about some of those levered chip ETFs, really interesting flows in the last couple of weeks. Oliver, thanks, Oliver Rennick. When we come back, CrowdStrike's George Kurtz is with us on the vulnerabilities in this coding language, you might have heard of it, called PHP, when Squawk on the Street comes back. All opinions expressed by Squawk on the Street participants are solely their opinions and do

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