10AM Hour: Bank of America CEO on Earnings, FBI Arrests Saudi OpenAI Employee, Meta’s Muse Boost 10/14/26

0:00At Janice Henderson, we strive to deliver better outcomes through insight-led investing, innovation for clients, and a partnership approach that's core to our identity. I'm Jessica Liancini, Head of Fixed Income Client Portfolio Management. I'm passionate about my role in investments. It allows me to partner with our clients, simplify fixed income, and support them in achieving better outcomes for their clients. Janice Henderson, investing in a brighter future together. Some of the most important design choices are the ones that go unnoticed. The details that together make an experience feel intuitive, comfortable, and above all, exhilarating.

0:38At Acura, that means looking closely at how every detail could make your experience behind the wheel more rewarding. Every lesson learned and every idea refined becomes part of what comes next, and it lives inside every MDX, ADX, and Integra. That's precision-crafted performance. That's Acura. Good Wednesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with David Faber here at Post 9 of the New York Stock Exchange. Sarah Eisen is off today stocks are mixed yields are higher following a hotter than expected CPI print ever cores Julian Emanuel will join us in a moment with his reaction and why he says the S &P will end the year below current levels a big interview with the base chief Brian Moynihan stocks falling hard today after quarterly earnings were hit by this 1.2 billion dollar fine from Treasury also had Morgan Stanley's Ted Pick will join us after his bank beat estimates on the top of the bottom line.

1:27And we'll talk about the FBI's arrest of this Saudi OpenAI employee who allegedly planted a recording device in an executive conference room. Let's start, though, with this morning's CPI number rising to 3.7 percent year over year. And of course, we are joined by Steve Leisman to help us understand what the number means and what the impact is. Steve. Good morning, David. Yeah, a hot CPI core number causing a rethink on the street for the outlook for the Fed is October meeting, and that rethink is for a hike. October odds now at 50 percent. That's more than double what it was going into the number at 22 percent December now at 96 percent and was at 90 percent before the number.

2:10Here's the data coming in where we thought it was going to be on the headline 06 leading to a year over year of 3.7. But it was the core CPI at 03. We'll talk more about that number in a second, but it had been expected to be zero to the 2.6 year over year. That's a tick higher. 2.5 bottom line going the wrong way on the Fed. How'd we get there? Energy surging 9.3 percent. Bleeding into airline fares up 1.2 percent. Used cars, though, also rising hospital services. Shelter, a big part of the reason why the core went up. It had been really favorable and helpful to the core rate. It went the other way from zero to two to zero three in the month of September.

2:50One surprising category I want to look at here, audio and video equipment, up 3.6 percent year over year. This is a category you can see on the left of that chart. It had been deflating until the tariffs came along. It backs up one of the Fed fears that tariffs could still be working their way into the economy and consumer prices. Also could be a factor there. The rise in memory chips could be playing a factor. Joe Buswellas from RSM writing, one can clearly observe evidence that the three shocks trade, the three shocks, trade, energy and artificial intelligence all are combining to drive inflation higher heading into the final three months of the year.

3:26And it could have been worse, guys. The actual core increase. Let's take it out. Zero point three three five. That means it was really this close to rounding up to a zero point four percent increase. Tomorrow's PPI will be the key. It flees it part of the PCE report. A hot report could make it difficult for the feds to justify an October pause, guys. And then Steve will work our way to retail sales. I think it was JPM yesterday suggesting that with the energy squeeze, fading fiscal stimulus, maybe the consumer takes a quarter or two off. Well, we keep waiting for that, Carl. Every month I look at the retail sales report, our own CNBC NRF monitor, and I do the following exercise.

4:07Gas was up. I knew that. What happened to discretionary spending? And it has only just barely ticked off, Carl. And that could be a source of disinflation down the road. If consumers stop or find it difficult to buy things other than the essentials, you could get some disinflation there. And by the way, Carl, worth pointing out, the two-year is having a day-to-day, not on the good side of 489 was the number. It went into the number at 476. And so what that is telling you, Carl, is if you think about that as the longer run outlook of the market for the Fed funds rate, it's over 100 basis points more than the current funds rate.

4:47So it's telling you that the market thinks the Fed has work to do more work than the Fed itself thinks it has to do. All right. Steve, thanks. A lot more to come. Steve Leisman, for more on the print today and the market reaction, let's bring in Julian Emanuel, Evercore ISI, Chief Equity Derivatives and Quantitative Strategist. It's always great to have you in, Jay. Great to be here. After everything Steve said, you still don't think they move in October? We don't. But I got a level set because you put out that bearish stuff on the water. Our year-end price target is$77.50. So we're really in line where things are now.

5:21And I, for one, am very thankful that I didn't know it on January 1st that the 10-year yield would be 5.3 and that West Texas would be$95 a barrel because I wouldn't have said the S &P would be up 13 % this year. That having been said, if you look at this four-year bull market, turn four yesterday, it has been a story of essentially unbelievable earnings strength, punctuated by periods of macro fright that have caused viable sell-offs. And in our mind, the sort of box that Chair Warsh and the Fed have boxed themselves into now, and let's be frank about this, scheduling an FOMC meeting six days before the midterm elections is an own goal of epic proportion.

6:09And that makes the entire thing more difficult. But look, we knew all along there was more work to be done. We don't think they go in October because obviously the political ramifications. I call into mind 1992 when President Bush lost that election and blamed Greenspan for it the entire time. But also, in our view, it's this idea that if you actually hike in October, Warsh is putting his cards on the table as being one of the more hawkishly screwed FOMC members. And he clearly doesn't want to, you know, give forward guidance that would implicitly be forward guidance by hiking in October. I mean, Williams is out today saying, I'm not clear to me we need to do more than one.

6:57And that's the other problem. If you look at the rhetoric of the FOMC over the last weeks, it's skewed dovishly. And that clearly is incongruous with the numbers we saw this morning. Julian, you said, you know, if you knew where West Texas was and where rates were, you probably would not have thought we'd be up, what, 13-plus percent still, even with today's decline in the S &P. But we are now at 5.3 percent. That's what I can get. The risk-free rate. I mean, I just do wonder, in terms of flows, And we heard from Paul Tudor Jones yesterday saying that next year is going to be a bad year, largely because he believes the flows are not going towards stocks any longer.

7:33How do you view it? And how important is that, despite the incredible earnings growth that we've been getting? Flows are always and everywhere important. And if you look at the data, the public has continued buying, although nowhere near at the pace of buying that we saw leading up into that epic IPO in June, which again is also another element of importance, leading into two more potential epic IPOs. We're talking about SpaceX and then OpenAI and Anthropik coming potentially at some time, let's call it. That's right. That's right. And so that's very, very important. But I would also say that, interestingly enough, there's this perception that risk appetite has diminished.

8:13We would argue it's actually moved speculatively. You know, think about it. There have been periods of time where Bitcoin had booms and busts, periods of time you think about early 2021 when the meme stocks skyrocketed. Viacom. Well, right. Strangely enough, the speculative instrument of choice in the last several months is Pokemon trading cards. I was just looking and seeing. I think we threw them all away. I had so many. My sons, they're all gone. Anyhow, I don't know what they would have been worth. All right, so what am I supposed to do with that? You're supposed to understand that the combination of earning strength, which we see continuing into 2027, and the appetite for speculative action in an environment where, in fact, multiples have already compressed quite significantly, sets up the potential for the bull market to continue.

9:14OK, but there's a bear market in a lot of names and a lot of sectors. A lot. I mean, I'm looking at the banks right now. They're not looking pretty. Consumer, anything related to housing, go on from there. No, and there's no question about it. But again, as we've seen throughout history in the late 90s are the perfect example. If there's enough tailwind behind the places where the earnings growth is right now, the market can lift at the index level. The only question for us is, is there a price in the 10-year yield where hyperscaler issuance becomes more problematic and the economy slows down?

9:50And in our mind, look, we don't know when this bull market is going to end. Our base case is it goes into 2027. But at some point, we will likely find that price. What do you think the pain threshold is on the 10? So, and this is another one, because if you'd asked me on January 1st, I probably would have said 5%, like everyone else. And part of the beauty of this year is that actually global yields have gone much further relative to the 10-year yield. So our answer there would be you have to watch the credit markets. And I go back to what Larry Fink said to you in the last hour, is that the credit markets have been very well behaved.

10:33And part of that is the genius of American finance finding different ways of getting liquidity into the hands of companies. Yeah, including now securitizing GPUs, which Larry spent a lot of time talking about. They'll be securitizing Pokemon cards at some point, I would imagine. I won't have anything to give them, but yeah, they may. Julian, our thanks as always. Good to see you. Thank you. Take a look at our roadmap for the rest of the hour. Coming up first on CNBC, B of A's Brian Moynihan. Stock having its worst session since April of 2025 after that fine from Treasury. Plus, shares of Meta now up 40 % since mid-August.

11:11This is investors bet on the success of its Muse agent. We're going to talk with one analyst who says he sees a lot more upside ahead. And after the break, espionage at OpenAI. We'll talk about the FBI's arrest of that Saudi employee who allegedly planted a recording device in an executive conference room. Let's walk on the streets back in a minute as the Dow goes slightly red. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture. Vantage Score is changing that by modernizing credit scoring. Vantage Score uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments.

11:57Vantage Score safely broadens access to the credit economy and brings 5 million mortgage-ready borrowers into the market. That's why top lenders like Rocket Mortgage, as well as nine of the top 10 banks, rely on Vantage Score 4.0. With higher predictability and greater access to credit, everybody wins. Get started at VantageScore.com. Some of the most important design choices are the ones that go unnoticed. The details that together make an experience feel intuitive, comfortable, and above all, exhilarating. At Acura, that means looking closely at how every detail could make your experience behind the wheel more rewarding.

12:31Every lesson learned and every idea refined becomes part of what comes next, and it lives inside every MDX, ADX, and Integra. That's precision-crafted performance. That's Acura. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud.

13:08Check response, subscription required. Welcome back. Three big movies we're watching. First up, Bending Spoons. Berkshire Hathaway investing another$330 million in the Italian-based tech conglomerate after a$600 million investment around the IPO. Stocks up better than 35%. Netflix laying off 6 % of the staff, eliminating about 1 ,000 jobs. The cuts come after the stock's been nearly cut in half over the last year and had failed in that bid for Warner Brothers Discovery. Co-CEOs Greg Peters and Ted Sarandos saying most of the impacted positions would be in product, tech, legal, and HR. And we're watching ASML profit blowing past expectations.

13:45Management says customers are, quote, expressing interest in placing orders for 29 and 2030, indicating long-term demand. And we talked earlier, David, how they raise their guidance for the year, for the third time this year. And talk about demand through 2030 as well, but not necessarily having a positive impact on the overall AI complex. Another name we wanted to get to, in part because if you are an owner of Skydance shares, you may be looking at them going, what's going on? Not to worry. It is not a news-related move here. It is simply a function of the fact that the public float, it's about 471 million shares, are entitled to warrants.

14:24We've known this for quite some time, but those warrants have now been issued. And you can see where they're priced. They go from 12 to a cap of 30 bucks a share. You get them when you have shares of Skydance. Again, the new investors, the money that came in to help finance the purchase of Warner Brothers from the Ellison family, from private equity firm Redbird, from their partners in Saudi Arabia, Abu Dhabi and others, they bought the stock at 12, but they didn't get the warrants. Only the public float. So it's a small percentage of the overall equity, about 9%. There it is. You can do your Black-Souls model, whatever it is you do, to figure out the potential value.

15:05It's got a 10-year lifespan, do these warrants. Again, 12, capped at 30. And right now the market's saying they're worth$2.32 a share. So you add that back to basically a$7 stock and you get back to where the stock was. So that's what it is. It's going to show up in your account wherever you hold the stock. Decide what you want to do with it, but it's going to be potentially of some value. And that is why you're seeing that decline in the overall share price. All right. Meantime, we're following a developing story involving OpenAI this morning after an employee was arrested and charged over a hidden microphone he allegedly planted in a conference room at the company's headquarters.

15:42Eamon Javers is in D.C. and he has more on this story. Eamon. David, that now former OpenAI employee has been arrested and charged with using or endeavoring to use a device to intercept oral communications. They say Abdul Rahman Al-Fazan, 35 years old, is a Saudi national and was arrested on October 9th. DOJ says Al-Fazan had been employed as an engineer by OpenAI since July of 2025. And on or about September 30th, OpenAI personnel discovered a surreptitious audio recording device that was inserted into a USB port on the back of a television in an executive conference room inside one of the OpenAI buildings in San Francisco.

16:24Now, this is an image of the device they say they found, which was concealed in toilet paper, and its contents were encrypted. The DOJ also says that closed-circuit TV footage inside OpenAI's office showed that Al-Fazan appeared near the executive conference room on multiple dates before the device was discovered, even though he had no authority or access to participate in meetings that were taking place there. Now, the complaint says this particular conference room was used to discuss highly sensitive matters, including confidential, technical, commercial and strategic information. And then take a look at this photo, David.

17:01The complaint alleges that Alphazan entered the executive conference room on October 5th and appeared to look behind the television into which the device had been placed. And this, they say, is an image showing that moment. You know, interesting there, somebody obviously placed a camera behind this TV in order to capture this image. So you can imagine this is part of the investigation to see if they could find somebody coming along to investigate that device. Now, the Department of Justice is silent on who Al-Fazan may or may not have been working with or for in this effort. So difficult to say whether this is alleged corporate espionage or a state-sponsored effort or something else altogether.

17:40In a statement, OpenAI said that it referred the incident to the FBI and said in part this. At this time, we have no indications of this individual inappropriately accessing or exfiltrating model weights, source code or customer data. The employee was terminated. And we've reached out to Al-Fazan's lawyer this morning for comment. We haven't heard back yet, but clearly we want to get his side of the story as well, guys. Back over to you. Yeah, you know, I'm just in my mind now suddenly thinking, well, what about the Saudis, the PIF? their investments, if they have an open AI, not to mention, of course, we know they invested heavily with SoftBank, at least Envision Fund One.

18:16There was so much of the capital, which, and that SoftBank, of course, a big investor. It's just interesting to try to understand who he may have been trying to spy for. Again, not coming to any conclusions here, Eamon, but certainly a warning sign as well to any companies that are conducting this kind of, you know, important research that goes on at a lab like OpenAI's. Yeah, you can imagine all of these frontier labs are the targets of enormous amounts of industrial and nation-state espionage, right? That is the holy grail of global technology. Everyone who's not building it is certainly trying to steal it in terms of international intelligence agencies.

18:51In this case, though, David, it's fascinating. This guy, Alphazan, who has been arrested here, simultaneously worked as an engineer at OpenAI and also at a Saudi venture capital firm, which I am told by a former high ranking CIA officer is sort of an extension of the Saudi state. And at that venture capital firm, he worked alongside one of the princes in the Saudi royal family who's also an employee there. So Al-Fazan is somebody who is certainly well connected in Saudi Arabia and connected to Saudi finance efforts. So you wonder, you know, why was he holding two jobs simultaneously, this role at the Saudi VC firm and this role at OpenAI?

19:33Was OpenAI, you know, eager to have him on board to get access to Saudi financing as part of their effort to raise capital? There's a lot of questions here. We don't know all the answers to how this happened, but it is a fascinating case. Yeah. The reporting around that VC firm, to your point about the member of the Saudi royal family as a venture partner is getting a look today. Amen. Really interesting. Amen, Javers. Bank of America Chief Brian Moynihan coming up next with his first reaction to earnings and that more than a billion dollar fine levied against the firm by Treasury. Stock currently down almost 8%, as we said.

20:08We're session definitely into the spring of 25. Next hour, Morgan Stanley's Ted Pick, fresh off results. Stay with us. Some of the most important design choices are the ones that go unnoticed. The details that together make an experience feel intuitive, comfortable, and above all, exhilarating. At Acura, that means looking closely at how every detail could make your experience behind the wheel more rewarding. Every lesson learned and every idea refined becomes part of what comes next, and it lives inside every MDX, ADX, and Integra. That's precision-crafted performance. That's Acura. Ever notice how every new AI tool asks you to explain your business to it all over again?

20:47Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished.

21:27No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. Welcome back. Take a look at Bank of America shares down 7.8 % this morning. This after the company reported a drop in profit in the third quarter due in part to a more than one billion dollar fine from the Treasury Department. That was tied to anti-money laundering practices. Leslie Pickard joins us now and she has her guest, of course, is Bank of America CEO Brian Moynihan. Leslie. David, thank you.

22:04And Brian, thank you for taking the time. There's a lot to get to this morning, but we'll start on that point that David just laid out. Treasury saying that B of A failed to report more than five billion dollars in suspicious transactions. And you signed a consent order in 2024 to fix all of this. And regulators said that the problems continued after that. What do you think broke down and how close is the firm to fixing it? Well, we put lots of resources against thousands of extra teammates. We've lowered the thresholds of reporting that you can see reflected in some of the technical areas. It took us a while to get eye to eye with the regulators about what exactly they wanted our role to be because we file a lot of SARS.

22:46And so the good news is the penalty went through last quarter. The good news is we've built up the resources and are deep into remediating activities and we'll resolve it like we've done with many issues in the past in this company. It's one of the things we know what to do. There was a bit of a time where we went back and forth about what the right answer was, and that's behind us and we're moving forward. You've said that the remediation efforts are already baked into your run rate expenses at this point in time. But as part of the consent order, the new one, consultants will be reviewing transactions going back four years to 2022.

23:20Can you rule out additional penalties or regulatory actions that could stem from that look back? The look backs that they're talking about are obviously in the provisions, but we've already had to do look backs for the periods of time and the thresholds. It's a very technical thing. So we're confident that we are on the right course to remediate everything and the work's going on. And when I say it's in a run rate on expense, what I mean is in the third quarter and in the fourth quarter, expenses are flat, and in the third quarter, we'll have$200-plus million of income expenses going against the resolution.

23:57And so as we've saved money in other parts of the company, we've deployed it over here. And as we get this ironed out and get through the process, we'll take those expenses back out and put them to other use. And again, any sense of timeline for when you expect this to all be truly in the past? Well, there's two elements. One is we've got to do the work and then the regulars look at it. So I don't want to speculate about the precise timeline, but we've been working hard on it for a good period of time and we'll continue to do so. Now, broadly speaking, the administration has been easing up on banks across the board.

24:28I think a lot of people feel this is a deregulatory environment for the banking system. Yet the Treasury secretary personally singled out B of A in yesterday's release with a statement from Secretary Besson, which is somewhat of a rarity for someone at his level in this type of an announcement. And then this morning, B of A was named as one of nine banks in an OCC report that alleged it engaged in debanking activities across political, religious and social views. Are you concerned with where BOV stands with the Trump administration right now? Oh, I'm not concerned. We do a great job for America, and I think all of us have a common interest in making America successful.

25:08And so if you look at our earnings, what you see in our earnings is great core customer activity. We're the largest small business lender and business banker. And these rules on the question of debanking and stuff have been out there in the fair access laws, and we've been adapting to them. So I'm confident that we'll all get to the right place. Let's turn to earnings because you can see their shares are down about 8 % today. The street is really focused on some underperformance in trading and banking. That's kind of the Wall Street side of the business. Is this a result of kind of product mix against the cycle or did you lose market share in the quarter?

25:46And I ask because, you know, it was a bit of a mixed quarter across the board, but there were some of your peers who did see improvement in some of these businesses. Yeah, so I think you have to sort the businesses. So we have four segments per report. We earned$8 billion at the business line level. The consumer earned 40-plus percent of it. The wealth management business earned 20 percent, and the commercial business earned about 20 percent. And so that leaves the markets business, which is one of the smaller businesses, earned about a billion and change, which is a good performance. It's a solid performance.

26:20They had 17 quarters of a year-over-year growth. This quarter was one of the best third quarter of 2026. It was one of the best third quarters they had. But the reality is our strength, both from an underwriting side and from a trading side, is around fixed income. And we have a much bigger fixed income business relative to our equity business. Our equity business grew up double digits, et cetera. But the fixed income mix is what impacted us. We made money trading during the quarter,$5 billion plus. We made money most days. But when rates go up that much, clients froze and that activity slowed way down.

26:50And we took the hit for that. That mixed difference is part of the explanation. At the end of the day, we continue to make good money. And I think that if you look at the whole company, the revenue growth,$30 billion up 3%. The NI expectation, 8 % for this year now, up from 5 % to 7 % previously to 8%. Next year, we increased our guidance from 5 % to 7 % to 8 % plus. That is the core engine of the company kicking in. And the nice thing about Bank of America is we have a bounce of businesses across the classic what you all call Main Street and Wall Street. And we strive to be excellent in each of them.

27:27In this quarter, we didn't do as relatively well in the Wall Street businesses. But the Main Street businesses, frankly, outperformed our peers. Yeah. I mean, you know, Brian, plenty of money, but not enough to satisfy Wall Street leads this morning. And perhaps part of that may be that even when you exclude the charge, your return on tangible common equity, I think, was 14.9 percent. That's down from 15.3 percent a year ago. Reported was 12.6 percent. How do you get back to 16 percent or to that 16 percent number? I know you've talked about in the past. And what gives you the confidence you can?

28:01Well, we talked about it in the past as we get to 16 percent at the end of next year. And we passed it in the second quarter of this year. So six quarters in advance, 15 percent. and adjusted for the charge this quarter, as you said, and we're confident that'll move back up. Why? Because the NII growing$400 million from the second quarter, the third quarter, and expected to grow at the same level in the fourth quarter all drops to the bottom line. And that really is the capabilities coming in. So this quarter we had, the third quarter we had the expenses for the AML, etc. We also had the expenses for remediation of the AI models and things like that.

28:38A lot of that will come back out of the system and we'll be able to deploy it to better use to help grow the company. And so that's the expense management flattish while that NNI kicks in, starts to give you the operating leverage of 200 to 300 basis points and the ROTCE, the return to change of common equity, which at 15 % is way above our cost of capital. And by the way, we achieved a goal early and we expect to continue to achieve it. Okay, so when I look at adjusted expenses rising about 7%, revenue is only up 3%. You talk about that 200 to 300 basis points of operating leverage, even though this quarter was negative, you're very confident 2027 is going to be a very different picture.

29:14Yeah, because in the second quarter, we're 600 basis points. And we caution people, that's probably going to change, too. Because that really is, if you look at it year over year and think of the expense growth on a nominal dollar basis, a billion one to two, of the three pieces that incentives for our wealth management business, which performed the top of the market, The pre-tax margin went up by 300 basis points. The earnings growth was 17 % or 18 % or something like that. The revenue growth was strong. That business had$400 million in incentives last year's quarter for this quarter. If you look at the clearing exchange going to the markets business, even the equity business being up, that was$300 million in expense growth.

29:53That leaves$500 million, of which half was really on mythos and the consent order stuff or more. And that means the rest expense gross is relatively modest because we're down 3 ,000 people, even though we've added people to deal with cleaning up the regulatory issues. So when you put that all together, that gives us great confidence that the NII drops the bottom line. That produces a good operating leverage environment. And this year, we will still have strong operating leverage. It'll just be bumpy quarter to quarter by the trading platform's performance. I want to ask you, Brian, about the double-edged sword that is AI for multinationals these days.

30:27I know you say in the release that you're making, quote, discipline investments in AI. You also just mentioned the Mythos expense. And you had Jamie Dimon from J.P. Morgan saying yesterday that the firm is going to block AI agents from operating on behalf of customers to access accounts. And I'm just curious how you think about the expenses related to protecting the firm against rogue AI, AI agents, and all of that in this environment where things can get very unpredictable pretty quickly. well and i think all that risk is real risk and you know that's why when the uh frontier type models and the came out and the autonomous agents that you were using those you know a lot of us sat down and said how do we figure out how to get through this quickly not only for our company but for our industry and then across all industries a lot of work being done on that that is that is we put on a thousand contractors to help us do the patching work uh in the second quarter and And those people remain here today helping us on top of the 3 ,000 people we have in that area.

31:32But that cost, once you patch, you don't have to patch as much, so to speak. The pipeline moves through. We're moving through it quickly. And that is to just all these pieces of software. So your proprietary software, then the third parties are adjusting their software, the open source people are dealing with. So you have various programs going on, but we've got to stay ahead of them. And we've got to be mindful that the people doing the software development are the people who are trying to sell us the services. and we think we're spending$1 and$3 to remediate the issues they're creating by releasing these models, we've got an interesting dialogue because we're the larger clients.

32:04So I think that's all sorting out as we speak. That's completely different from the agentic and the authorization. We strongly believe there should be a human in the loop to authorize money moving out of your account. And we have said that and we're working with the agentic agent providers to say, hey, you really don't want consumers coming back and say money moved out of my account. I don't know why and I don't know where it went. And the agent did it and they were authorized and saying, OK, the bank, we turn and say the agent did it. It was authorized. They say the bank did it. And we go around in circles.

32:39So we're trying to figure out a set of protocols like we did with the aggregators and others about that.

32:46Brian, thank you. Leslie, thank you for bringing Brian to us as well. Brian Moynihan, of course, CEO of Bank of America. Interesting comments there as well at the end, Carl, involving Meta, which we're keeping a close eye on. In fact, we're going to be talking to an analyst about later as well. Given a lot of providers out there don't want to have its agent crawling around on their system. Yes, it does remain one of the fastest downloaded apps on the stores. We will see Leslie again next hour for an exclusive with Morgan Stanley's Ted Pick following those results. So stay tuned for that. All right, let's get a CNBC News update now.

33:20Brandon Gomez has it for us. Brandon. David, Ukraine is accusing Elon Musk's SpaceX of crippling its drones by limiting Starlink services. Military officials say Kiev's defense force did not receive warning before SpaceX limited functioning of military-grade Starlink terminals, which disrupted several missions. Poland, which pays for Ukraine's Starlink subscriptions, responded to the allegations, telling Elon Musk his European customers are watching him. Meantime, the morning after the Vatican revealed Pope Leo has lung cancer, the Holy Father sees saying that the pontiff resumed eating normally today and began walking around his room after an operation to remove the cancer from part of his right lung.

34:01Officials say his recovery is progressing as expected. And Nielsen says record ratings from the World Cup have carried into U.S. viewership of the sport after the tournament. According to new data, the number of U.S. residents who identify as soccer fans increased 13 % from July 2025 to July 2026. Nielsen says the rise has been seen across leagues, including Major League Soccer in the U.S., as well as the English Premier League and Spain's La Liga. David, send things back to you. Okay, Bren, thank you. Up next, speaking of meta, of course, that new Muse model is giving the stock another lift, at least this week, although not today.

34:38We will look at how its latest model, that is AI model, not just an agent, stacks up to the competition when we come back. I'm sure there's a meta pulling back this morning, but of course still higher on the week. This after it unveiled its newest line of AI models. Now the company says Muse Wonder and Muse Wonderful. They scored nearly as well as Anthropix's most advanced models on reasoning, writing, and coding tests. Meta stock has been on a run since mid-August, up almost 40 % since it hit lows around 550. That on the strength of its Muse agent. Let's bring in Brent Thill. AI software or internet analyst at Jeffries, has a buy on the stock, raises price target, and always helps us make sense of all of this stuff.

35:22So how big is Muse Agent going to be in your mind, Brent? Well, my use in the last few weeks suggests this is one of my best new pals. I'd say that we've been really impressed with the quality of the product. We think it's going to be a huge hit. It's the closest thing to a killer app we've seen in a long time. And so I think it's really early. The downsides of these agents right now, David, are many of the sites are getting blocked. You know, you want tickets to a football game, it blocks a ticket master. You want a Home Depot sprinkler, which I try to order on Sunday, I was blocked. So, you know, last night I was able to get a Yeti cooler sent without having to do any work.

36:05The agent just ordered a couple of Yeti items. So I think right now we're seeing, you know, a third of these sites are getting blocked. Bank of America talked about this. The CEO talked about financial services agents blocking these agents. I think in the next three or five years, that's going to change. I think every one of these businesses is going to accept agents. And that will be a mistake to block them all. And if they open up the access, Meta and other companies providing these agents, it's a huge win for them. It's a big win for companies like Salesforce.com and other front office agents that have to accept and actually understand, does it need to go to a human?

36:45Can I digitally fulfill it? So we're big fans. It's really early, again, in terms of the evolution of these agents. But I can tell you, in our own bench test and our own use, this is a product that I think most people should investigate and use. And we've already found huge value in our own workday and our own personal workday. Brent, is there a value in them being first? I mean, instinct is out there. Smaller company, not sure how they're paying for all their compute. And we can expect that, you know, all the other major, I can't imagine that Anthropica or OpenAI and many others, Google, will not be introducing their own agents.

37:23I mean, this will evolve as everything does. Does it matter that news was first? And can they keep a lead? Yeah, it matters that they're first because you effectively, I'm opening up email access, credit card information, shipping, home address, all that is being opened. And so once you do that and you feel safe and you feel secure and you're seeing an ROI, why would you switch? So I've already opened that up. We're trying all the agents, by the way. I'd say instinct is very aggressive. It is built into your text messaging. It's not an application. It's built into your text. So instinct's also really interesting.

38:00But I think there is a market mover advantage to being first. And as Zuckerberg said at Meta, the system's just going to keep getting smarter and smarter with these new models as they roll out. And the more information you give it, the more personal it gets. So when you wake up and say, hey, David, would you like a coffee? Would you like this breakfast delivered? Would you like this done for your family? Those things are going to be more personal the more you use it. And again, it's also going to come across the device. You put your glasses on to go for a walk in Central Park. You effectively have a Mews keychain that you could bring on your bike ride.

38:37You don't even need your phone to pay for things and ask questions. So they're going to unveil the Mews system through a whole series of gadgets where, you know, you effectively are going to be able to have interface to your home lighting, to your sound, to many things in your life. And so I think this is also going to be important, which is it's not going to just be on your phone. And this is where Meta is taking this that the other AI companies are not taking it today. Is there any friction from the privacy angle? And we've talked about sort of the concerns around glasses, for example, being recorded without your permission.

39:17Agents will build dossiers based on you if it communicates with you. How much of that is a headwind? I mean, it's a worry. I think ultimately it's what you're comfortable. I've opened it to everything. So I've just basically accepted the consequence. You know, are we going to see agents go rogue, starting sending emails, doing transactions, buying things that, you know, buying the 17th cup at Yeti that I didn't authorize? I authorized one to be bought last night and executed. But that is a risk. But right now, I think the upside of what the systems are doing and what I see in terms of what it's doing for us is far exceeding the actual risk and cost factor.

40:01So as long as that stays overweight, you know, the premium of creating joy and happiness for you in your life, that will, I think consumers will be open. You give them your social security number yet? No, I have not. I have not. And I'm not doing bank transfers yet. So that hasn't happened. OK, but it sounds like you will at some point. You'll be ready to. I'm I'm happy to connect it to everything. I believe and I think that, again, what I've seen so far, we're really impressed. And agent to agent, is that where we're going to end up? We're never going to be in the loop at all. Yeah, what's going to happen is your agent and my agent are going to talk and they'll say, you know, David really likes the sushi place.

40:42and let's meet here for dinner versus where you want to go and the agents will coordinate together. It's already happening at Instinct. Our agents are coordinating on a Boulder parents weekend for our son in the football game. So my Instinct agent's coordinating with my wife's agent already. Can it fix the Boulder quarterback issue? No, it does not fix the primetime issue. No, we don't. We have an issue. We do have an issue. All right, Brent, always, always good to have you. And I look forward to speaking to your agent later as well. Thank you. Have your agent call my agent. Yeah, exactly. When we come back, BlackRock's Larry Fink just gave us a warning about what would happen to the economy if data center construction stops.

41:25We'll get to those comments in a minute. This is what I'm trying to tell every politician. You know, there's a lot of rumors and fear about data centers. Most of it is on misinformation. Most of it is wrong. you know whether it's use of water i mean you know golf courses use more water than the data i mean i can go on and all the different things but if we have a moratorium of some sort in this country we will be in a recession so much of our economy as you said david is is based on the build out of this cap act that was the ceo of blackrock of course larry fink he joined us in the last hour and warning that a halt on data center construction, well, in his opinion, at least, could push the economy into a recession, given, of course, the percent of GDP and growth that is a part of all of that spending right now.

42:18His comments follow my interview yesterday with Dell's chairman and CEO, Michael Dell, where he talked about the importance of the AI build-out for the overall economy as well. I think the impact that this technology has on the economy is starting to be understood. And it's quite powerful. We've had this sort of wave of usage by the frontier labs and certain companies. And now we're starting to see this wave in the enterprise. But it's really just beginning. And I think there will be a ton of infrastructure deployed around that. Some of it will be super powerful. Some will be. But you see no diminishment in demand, I guess, would be.

43:02We don't. At all. There's more demand than supply. Well, those agents talking to agents, Carl, we can imagine there will be even need for more supply. I thought Fink was interesting how much time we spent about talking about the securitization of chips becoming an important development to ensure that there is still sufficient capital for companies out there. Yeah, all part of their push to tap into private liquidity as opposed to public. I keep thinking back to Hock Tan. They gave a pretty seminal interview a few days ago, and one of his ideas was that it's no longer power, for example, that's going to be the key gating issue.

43:38It is financing. Yeah, it's capital. And I think we'll take a look at shares of CoreWeave today or Nebius, some of these neoclads, because they are down. And I can argue that just even given what you heard from Fink and others and the story about Coral Weave now looking to insurance companies as a key source of capital. And it does raise this concern that's been in the marketplace, which is simply, you know, how much capital and at what price? Because that becomes also the key consideration with rates where they are. Yeah. Oracle, you know, not Oracle down six or so, still going back 10 weeks to early August at 132.

44:16I mean, those are the names. And when you're thinking about capital constraint and or becoming more expensive that you would go to in terms of at least potentially selling. And we are seeing that significant weakness there. When we come back, speaking of weakness, the Sox ETF currently riding its longest losing streak in more than a year. What the options market is signaling about chips in just a moment. Welcome back. Chip stocks hitting a rough patch lately. The Sox and the SMH ETFs seeing their longest losing streaks in more than a year. Let's get to Oliver Renick at SIBO, see what the options markets are saying.

44:46Hey, Oliver. Hey, Carl, not a good morning for technology. The combination of resurgent treasury yields and an outlook for heavy debt issuance by CoreWeave is proving to be a bad combination for key AI players, in particular those that offer GPU as a service. The panic is spilling over into options on popular neocloud trades like CoreWeave and Nebius. CoreWeave, as you guys mentioned, down big near one-year lows. Options trading is 10 times the 30-day average in Corweave right now. 300 ,000 puts traded on the stock this morning, about two-thirds the total volume, with more than twice as many puts likely bought versus calls.

45:27That is the highest put-call ratio in Corweave since April. The silver lining is that the second biggest trade in the entire market today was a$7.5 million put spread sale in Corweave, selling the 60 strike and buying the 50 in the Jan 15th expiry. But it's just a bet the stock will hold its 52-week lows, and those are still technically 10 % away. And after that, the most popular contract by volume was the 37.5 strike put expiring in December, thanks to someone that opened a new position betting. This thing drops 40 % the next two months. The action is a little more hopeful in Nebius, where put and call premium was roughly evenly split.

46:08And then if you go down the supply chain further to memory, we do see some dip buying in Micron, where traders are buying more calls than it looks like they are puts. But they're also still selling a lot of calls, it looks like, against them, guys. Wow. That core weave action would definitely extend the range to the downside that we've been in for more than a year. Thanks, Oliver. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium.

46:41You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer. What happens when you combine a cozy night in with the whole family in matching Old Navy jingle jammies?

47:12It's a holiday moment of joy, at least for the time it takes to snap a picture. Shop a plethora of prints this year in jammies for everyone. Adults, kids, toddlers, babies, and even pets. Grab matching sets in classic plaids, whimsical designs, and even Disney-themed prints. Plus, they have coordinating graphic tees, sweatshirts, cozy socks, pet sweaters, and fleece blankets. Get more merry for your money at Old Navy this holiday season. Thank you.