10AM Hour: Buffett Steps Down as Berkshire Chairman, Yen Reacts to BOJ Rate Hike, Mbappe Moves ‘On’ from Nike 9/18/26

0:00We're an agent supposed to take things off your plate. Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. Building a portfolio with Fidelity Basket Portfolios is kind of like making a sandwich.

0:33It's as simple as picking your stocks and ETFs, sort of like your meats and other topics, and managing it as one big juicy investment. Now that's pretty good. Learn more at fidelity.com slash baskets. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC. Member NYSC SIPC. Good Friday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Cantania and David Faber. We are live, as always, from Post 9 of the New York Stock Exchange. Coming up on the Today Show, we will talk about the big news out of Berkshire as Warren Buffett steps down as chairman, effective immediately.

1:12Ariel's John Rogers will join us to discuss. Plus, Apple's iPhone 18 models hitting shelves today in a big test for the post-Tim Cook era. Longtime Apple watcher John Gruber will put out his review of the new devices. He'll join us. And a big departure at Nike as soccer superstar Killian Mbappe leaves the brand and signs on with a competitor. It's big news. We've got details straight ahead. First up, though, it's the top story of the day. The Japanese yen, of course, which is making a big move right now. Take a look at the top. Why are you laughing? It's the most important story. No, you know what?

1:46I actually thought about doing it. Did you not mention it last hour? I thought about doing it in the nine. And then you waited for me. We didn't get to it, and I knew you would lead with it. So I'm very excited. Give me the reaction. You're excited. The Yen hikes rates, Sarah, and the yen. They hike rates, and the yen goes the other way. What's happening, Sarah? What's happening? It's a big move, too. It's a 1.2 percent move. What's happening is the market wasn't impressed with the message, even though the Bank of Japan governor, Weida, signaled that he's open to doing more and very likely could do more.

2:14Here's the quote, basically, on what's changing the regime now in Japan. They have inflation. A little bit. Not a lot. They have 2 percent inflation. But basically, Weta said a good example would be what the U.S. and European central banks did. Underlying inflation hasn't exceeded 2 percent yet, and we want to keep it that way. That's why we'd like to act preemptively. The market didn't think it was that hawkish. The other thing that came out of it is that there were two dissents. So people were people are thinking the bar is going to be a little bit higher to get the Bank of Japan to move more.

2:46And then the other reason why we could be seeing such a big move in the other way is because we had this unusual campaign by Treasury Secretary Besant in the lead up to today's move, basically telegraphing that the Japanese would do this. And part of it was his interview with me in Asheville a few weeks ago at G20. Remember this? Listen. I have information that the market doesn't have. And it's my belief that the Japanese government and that the BOJ will do the things that will lead to a stronger yet. Which would be raising rates, I guess. I think the market's pricing that in now. Yeah, for them to raise rates.

3:24So, yeah, we basically talked about it. He talked about it. He made it clear. The U.S. has a lot of interest here. Just take a look at the dollar versus the yen. Since the coordinated intervention between Besant, the Treasury, and the Japanese. And basically, so they stepped in when it got past 160. It was like around 163. It worked for a good period of time. That's the dip down. It's going back the other way. Again, it's really hard to fight the currency market, and it has to be led by fundamental things like raising rates and changing behaviors. You mentioned the two dissenters. Is the market also reacting to what, that things are not going quite as fast as they might have thought in terms of a tightening schedule?

4:05It wasn't perceived that it will continue, that they will continue hiking. I see. And that, you know, if we get this, they get a softer inflation report, then there's definitely those on the committee that are still in favor of not hiking. The reason I'm leading with this and why it's so important, and I do emphasize this a lot, but I think it's good to know. Japan, it's not just a currency story. It's a global liquidity story when it comes to the Japanese yen. For decades, they've had super low interest rates or negative interest rates. And so it was a funding currency. Everybody, investors around the world, they borrowed yen and they bought other currencies.

4:41And with that, they bought higher yielding assets, stocks, corporate bonds, right? So it's the underpinning of, I think, a bigger market story. And that's why it's so important. The yen carry trade. The yen carry trade. That's what it is. The other thing is, and here's vital knowledge on this, with the yen getting hit fairly hard versus the dollar, this could become a headwind for risk sentiment as extended Japanese yen slump might rekindle worries about Japan selling treasuries to intervene. The other big thing here is that Japan is a creditor nation. Their households and government, they hold a lot of foreign assets, including U.S.

5:17treasuries. They're the biggest holder of foreign treasuries. You know, UK, China, Belgium, these are all big holders. Japan is the biggest. And so the concern is if the currency continues to go this way, which is weakened past levels where the Japanese authorities clearly think is OK, if they have to intervene, then they have to sell treasuries. And we know Besant and others don't want, you know, we need treasury. We need buyers now and we need holders now because there's concerns about higher rates. So that's why, you know, we pay such close attention to all this. And it really matters for the markets.

5:50Foreign ownership of Treasuries, nine-month low as of July. We know that hedge funds are kind of filling that space as the basis trade has become more important. And the competition with AI companies for funding. Goldman's got some numbers out today looking at 2027 hyperscaler IG. I think they're, what's their number? It's high. Yes, it's got a forehand, a$420 billion of global IG hyperscaler debt issuance next year. Right. So it's competition when it comes to those treasury auctions, which we're going to see because, you know, we have to fund a really big deficit in this country. So we need all the buyers we can.

6:27And so that's one risk potentially of the yen going the other way and not being so convinced of this hiking cycle by the Bank of Japan. From more on the markets this morning, let's bring in Cantor, Chief Equity and MacroStriagist, Eric Johnston, talk about the week we've had, Eric, sort of the seasonal periods we're going into. kind of the vibe right now is, yeah, we might be able to endure some multiple compression if earnings can stay, you know, well into double digits. Do you agree? I do. You know, there's this big wall of worry right now in the markets, whether it's rates, oil, you know, seasonality, midterms, et cetera.

7:03And that's actually, even though price hasn't really corrected much, the P multiple has actually corrected a decent amount where you're now below 19 on forward four quarter estimates. And our view is that third quarter and fourth quarter estimates are still too low. So we think the October earnings season is going to be a very good one where you're going to see more estimate revisions higher. And the market's probably going to front run that, meaning I think we're going to see the rally start prior to that October earnings season on the bet that the forward four quarters, which are now about$400, are going to move up to the 415 zone by the time we get to the early November.

7:47Right. I mean, I'm just thinking of the conference commentary this week alone from the banks, from the transports, from the airlines, from the staples. That doesn't really rhyme with what you're saying. Well, the demand picture from the takeaway from the conferences over the past couple of weeks has been very good. The issue that has been brought up, of course, is is expenses. And essentially a lot of that's coming from oil. But the reality is, is that that part of the market, when we talk about the S &P 500, is just so small in terms of that marginal difference of what oil could do to the benefits you're going to see in revisions coming from the tech sector.

8:33And so it's just overwhelmed from that perspective. And then demand, even from the airlines, they've said they've been surprised how strong the demand is, even with the higher fare prices. And that all comes back to the wealth effect, which continues to be a very strong driver of consumer spending and offsetting a lot of the issues around higher oil prices. Yeah, I mean, that's definitely why we're pinned to the action lately in Amex, to see if, in fact, that spending power is there. Would you argue that rate risk is more important right now than oil risk? I would say I'm certainly, I'm more concerned about the oil risk.

9:16And that, of course, will feed into rates. I think rate with oil where it is now, I think the rate market is actually in good shape right now. and that the risk reward actually favors from here lower yields. You've got the Treasury that is clearly on the side of lower yields. Positioning right now in the investor community is very short bonds. And from an inflation perspective, the core inflation trends right now have actually been good the last four months. They're obviously being offset from a headline perspective. But the oil perspective is, you know, that's where the big variable is. And I don't have I don't have a view there.

9:59And that's really the big risk that, of course, can work both ways. And the setup for equities is that they'll go a lot higher on a smaller sell off in oil versus getting hit from a higher move in oil. I mean, is there a number, though, that would make you question the earnings picture and the bullish equity view and bullish view of the economy if oil got? that high? You know, I think you'd have to get even from here a real big move. So if you look at oil over the last five years, we're about 25 percent above the average for the last five years. So while that is, you know, it's a fair amount on an inflation adjusted perspective, it's just it's just not that big considering the, you know, where oil is as a percent of the overall economy.

10:49But to answer your question, you know, if we got another 20 percent move, yes, that would start to cause concerns because that's just going to eat away at some of the positives that have been offsetting. But just oil even just staying here, I think, is very absorbable by the economy and by earnings. Yeah. I mean, two things strike me. One is your comment about J.P. Morgan yesterday. We don't have a baseline view on crude anymore because it's too hard to game this one out. The other is that, I mean, there's some good charts floating around today looking at treasuries versus not crude, but treasuries versus the diesel crack spread.

11:27And it's almost it's almost pound for pound. That's what the line is, whether or not bond traders are crackheads right now. That's right. I mean, that's really been the concern is not just, you know, as you rightly said, not just looking at the oil price, but what are actual businesses and consumers actually paying? And diesel is certainly showing that the widest of the spreads. And as we know, diesel goes into so much in the economy. So those spreads are also closely watched by the rate market. Yeah, I think we're on watch today to see whether or not every state, all 50 states will have diesel averages above six.

12:08Eric, it's going to get interesting next week with FedSpeak as well. Appreciate the time as always. Thanks, guys. Thank you. Eric Johnson. Here's our roadmap for you for the rest of the hour. Coming up, the end of an era at Berkshire. We'll talk about Warren Buffett's decision to step down as chairman less than a year after giving up the CEO role. Plus, we will be joined by the CEO of data center operator, NTT. It runs a campus in Loudoun County, Virginia. The so-called data center alley that is now moving to slow down the pace of new data center applications. And will Apple's new iPhone lineup move the needle for shareholders?

12:39Longtime Apple watcher John Gruber will join us with his review as the 18, the 18 Pro, 18 Pro Max all go on sale. Kind of weak breadth here. Session lows down 165. Stay with us. 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. VantageScore 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. VantageScore safely broadens access to the credit economy and brings 5 million mortgage-ready borrowers into the market.

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13:59Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. Building a portfolio with Fidelity Basket Portfolios is kind of like making a sandwich. It's as simple as picking your stocks and ETFs, sort of like your meats and other topics, and managing it as one big juicy investment. Mmm, now that's pretty good. Learn more at fidelity.com slash baskets. Investing involves risks, including risk of loss. Fidelity Brokers Services, LLC. Member NYSC SIPC.

14:36Welcome back. Time for our ETF spotlight. Focusing today on AI stocks as the debate swirls around data centers, becomes a hot button issue ahead of the midterm elections. Check out the GlobalX Data Center and Digital Infrastructure ETF. The ticker is DTCR. The fund's top holdings include Digital Realty Trust, American Tower, Equinix. DTCR got off to a pretty hot start this year, but is now down around 15 percent from its peak in June. Kind of similar to the trend for the viral AI-focused DRAM ATF, which exploded higher since it's launched in April, but has since pulled back since late June on some of the AI skepticism and certainly the political pushback.

15:17Sticking with data centers, Virginia's Loudoun County may be known as Data Center Alley, but the county's board of supervisors just voted earlier this week to move forward on drafting legislation that would pause new data center applications for up to 12 months. Our next guest has a presence, or his company does, across the U.S., but calls Northern Virginia its flagship market for data centers. Joining us now is NTT Global Data Center CEO Doug Adams. Doug, good to have you. First of all, what does this mean for your company in terms of whether, in fact, it actually happens and what the impact would be?

15:52Good morning. Thanks for having me on the show, by the way. I think being a global company, we have 160 data centers in 21 different countries. The legislation in one county doesn't make a big difference for, I think, the industry or me as a company. We do operate seven data centers in Loudoun, and it is a little offsetting to see that we are having a pause. I think there needs to be a collective look at how data centers are run and how they impact society and different markets. But I'm not sure pauses is the right way to handle it. I think we should just look for better behavior from data centers.

16:33And what does that mean? I mean, we, of course, have been covering the growing opposition nationwide in this country to data centers for any number of different reasons, some of it perhaps simply because they're the physical manifestation of AI, which scares many people. So how do you combat that? So great question. We've seen this large wave of nimbyism over the last six months to a year. Some of it's grounded, honestly, in truth. There are some data centers that just don't behave well and have used excess water and power and behaved in ways that aren't good for communities. I think there are other data centers like mine that contribute greatly to communities.

17:16We heat 10 ,000 homes in our European facilities. We donate money to schools and have education buses in India. In the U.S., we've built baseball fields, soccer fields, donated to fire departments, power departments. I think different providers behave in different ways. I think the larger, more sophisticated providers are actually adding back to the communities. Remember, our employees live in those communities. Right. Right. You know, you mentioned, of course, you operate over a fairly large geographic footprint, perhaps. So not being able to put a new data center in Virginia might not necessarily be a detriment.

17:54You have, I think it's what, 10 billion in CapEx committed through 2027. You're looking at adding, and again, correct me if I'm wrong, I think a gigawatt of new capacity. But we're talking there North America, Japan, Europe, even APAC. What looks most attractive to you then, I'm curious, when you look out at the world and where data centers are needed? So the U.S. is still the most attractive global market. We've put billions of dollars of infrastructure into the U.S. As we see a bit of this NIMBYism movement, we are moving more dollars into Europe and into Asia. We're seeing extreme growth in the U.S., though, driven by AI tailwinds.

18:35I will remind everybody, data centers are not just about AI. If you look at the compound annual growth before AI, it was about 15 percent. Now it's about 30 percent. The whole digital economy is driving data centers. It's not just AI. Do you think there's a coordinated campaign against data centers in this country? And who's funding it? I mean, Axios had a report about China secretly funding, fueling America's data center rage. What do you think is really going on here? Yes, sir. I think there's a lot of conversation about whether there is a coordinated effort or not. I'm not sure if there is.

19:11What I will tell you is that the rhetoric and the passion around this has reached an unhealthy level. I think that data centers need to do a better job of communicating where we sit in the environments that we build and we need to get our story out better. I think we've done a very poor job of talking about the tax basis that we donate to, the jobs we create, the things that we're doing for society. And I think that we just need to take a collective deep breath and make sure that we communicate the benefits that data centers bring. Whether it's coordinated or not, I'm not 100 percent sure. I do think it's in our country's best interest to continue to build data centers because I think the digital economy and AI and the other things it brings are very important for the progress of the U.S.

20:02And finally, Doug, I'll just end on the broad question that we're asking here all the time and many in the markets are, which is are you seeing any signs of AI infrastructure demand cooling? Is the pace perhaps of new commitments for 27 slowing in any way? None. We've seen absolutely no pullback, no drawback. We've had no canceled projects. Again, data centers are more than just AI. But even in the AI area, we've seen no project pullbacks. We're still in a situation where demand is dwarfing supply. And so I have a very bullish outlook, and we've seen no pullbacks at all. In fact, I think what really concerns us is the constraints around powered land, around the labor pool, around the equipment availability.

20:54Zero pullback. OK, Doug, thanks for your time. Appreciate you coming on. Thank you. Appreciate it. Have a nice day. You too. When we come back, Netflix, one of the worst performers in the S &P after a downgrade from Wells Fargo. We'll get into why that firm is growing bearish. Plus, the news of the morning, Warren Buffett stepping down as chairman of Berkshire Hathaway. What he said in his letter to shareholders when Squawk on the Street returns.

21:20Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

21:53Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. If your workday happens in two languages, this one's for you. Whisperflow is a voice-to-text app. You talk, it types, and any app in more than 100 languages. The email in English, The text to your mom in Spanish.

22:32The client note in Portuguese. And it switches languages as you do. With the ums and typos gone. Four times faster than typing. Whisperflow is free. Get it at whisperflow.ai. That's W-I-S-P-R flow dot A-I. Welcome back. Shares of Netflix under pressure today. Actually near the bottom of the S &P 500 this morning. After the stock got a downgrade to underweight from equal weight at Wells Fargo. the firm slashing its price target to 57, down from 80. Analysts there worried about the engagement trend specifically, saying the company has lacked big original series and it is showing. I mean, they really traced the call, David, back to the walking away from the bidding for Warner Brothers Discovery and some of the concerns there around hits and engagement and strategy.

23:19Yeah, it's also putting the spotlight once again on YouTube's dominance to a certain extent, because part of So part of the report is talking about Nielsen and YouTube's U.S. TV timeshare rising from 9 percent to roughly 14 percent while Netflix is flat. And that does seem to have been, again, I'm not sure that's new in particular, but the focus does seem to be getting investors to say, maybe I don't want to own some other names. So Disney is down. Fox is down. Of course, Fox and that deal to acquire Roku as well in the middle of that. You got Paramount down. I won't do Warner Brothers because that's sort of trades on it in a different way.

23:54Even our parent company, Versant, which owns a lot of cable networks, including some entertainment cable networks, Comcast, which still owns NBC, splitting that off. And then I would note Alphabet is up. It was up as much as 2 percent, Google. Now it's up less than 1 percent. But it is the owner of YouTube, which is the beast, as I said earlier. Why can't they do a hit, though? Aren't they spending a record amount on content? Yeah, I mean, they do have some hits. I guess it's just not enough because in the opinion of Wells Fargo, they've got what they're doing. they call a top 100 problem, where they represent 20 % of all viewing hours, but only 0.01 % of their content.

24:32I don't know. I really enjoyed the review of Emily in Paris by Vice President J.D. Vance to the New York Post. I don't know if you guys saw that. He called it the Shakespeare of our time, which I tend to agree with. Yeah. Americans overseas get treated differently these days. We're watching Berkshire this morning as Warren Buffett does step down as a chairman going to executive chair, our chair and emeritus. His son Howard will replace him as chair. In a letter to shareholders, Buffett writes, quote, father time always wins. He has, however, been generous with me. He's given me the opportunity to see Berkshire reach a point where I'm more than confident than ever about what lies ahead.

25:07For more on these changes, let's bring in CNBC senior markets commentator and resident Berkshire watcher. One of them. Yes. Mike Santoli. What are your thoughts on this? Warren continues to dictate the terms of him backing away. So that's the first thing. Obviously, there's cultural continuity here with Howard Baker stepping in and being the chair. So what that also means is they will continue to have the separation of chairman and CEO. Remember, of course, Warren himself was CEO and chairman for all those years. He also, over the years, has not necessarily taken a stand on whether all companies should separate those things.

25:44In fact, a while back, he supported Jamie Dimon, continuing to hold both those titles. Beyond that, I think people are hoping it doesn't necessarily indicate there's further physical decline or anything like that and more than he wants to. As he says, essentially, further cede the ground to Greg Abel. And I think if you're a Berkshire investor, what you probably want is the combination of that cultural continuity, the sense of what Berkshire is supposed to be about, the long-term thinking, the shareholder regard, And then also some fresh eyes. And I do think that Abel is showing that he can offer that to some degree.

26:21Obviously, you have the alphabet buy to whatever degree that was in consultation with Buffett himself. And then just some stuff around the portfolio, because it's not as if, and Buffett would have admitted this, these companies were not assembled with a grand plan or strategy in mind. It was opportunistic. It was along the way. And so maybe there's stuff in there that just doesn't fit or can be better deployed, that capital elsewhere. And then the stock portfolio, it's doing fine. It's exactly equal to the cash holdings. It's like$360 billion each. It's a trillion-dollar market cap. There's not a ton of credit being given to the operating businesses in terms of a hefty multiple or anything like that.

26:59But it's been sitting around this kind of fair value level on a price-to-book basis for a while. I was going to say, you've got to go back a few years to have it beat the S &P. Yes, it has definitely lagged. I have a chart here of Berkshire Hathaway. This is only this year. relative to what I would consider to be its peer component parts. Insurance has been a tough sector, especially auto insurance. That's Geico. So that's actually been a little bit of an anchor. Quality stocks, I think, kind of captures where the portfolio, the public stock portfolio is. Of course, utilities. Now, there's not things represented here, like railroads are not in here.

27:34But my point is that Berkshire itself is right in the middle of all that. It's not outperforming. It's not underperforming. what you might expect if you did a kind of generic sum of the parts, Berkshire Hathaway. Sorry, if you did a sum of the parts, would you get a far higher, or do you get a higher price? Oh, I imagine so. Yeah. I mean, look, you have to tax adjust the portfolio, the public stock. So who knows what, yeah, that really affects us on the open market. You know, he's owned American Express for 40-something, 50 years, whatever it is. But I do think that, yes, you could probably try to optimize and maximize.

28:08It's not clear the company gets credit for, you know, a lot of the subscale privately held stuff that's sort of in there. And maybe you could churn. What they don't lack is is capital. Right. So it's not like you want to sell it to put it in T-bells. Right. We have a lot of T-bells already. Now the T-bells are earning a little more than they were last week. But it's one of those things where I think the thing I'll be watching is whether ABLE has the same kind of patience to wait for dislocations in the market. or rare deals that are presented to Berkshire Hathaway, you know, when you really have the odds in your favor.

28:44If you really were to trade at a significant discount to the sum of the parts, and Buffett is no longer a part of the equation, is it treated like any other company? And therefore, is it possible you'll get restive shareholders? Yeah, I mean, that would be the fascinating part of it. I mean, if he's away, you know, his stake, I guess his super voting stake goes away, he's going to donate it. I mean, that's the other thing with Howard Buffett. You know, he's an incredibly well-adjusted guy. He's mostly a philanthropist and a farmer. And, you know, he's got all these other interests, a photographer.

29:14And he's incredibly well-adjusted for a guy whose father gave almost all of his fortune to people other than his children. But it's something where I do think you would certainly see the makings of activists or somebody trying to rattle things. Now, it trades at 1.4 times book value. It's hard to demonstrate that it's completely below liquidation value. Right. It's also happening at a time where the conglomerate premium has essentially been erased. Oh, sure. From all kinds of industries. Yeah. I mean, look, you got the Buffett premium has been bled away to some degree since he decided to step down as CEO.

29:47And then, yeah, nobody's pretending this stuff works. Now, there is a home builder, home related section of Berkshire Hathaway that has kind of come together over the years. They bought Taylor Morrison. They have Clayton Homes. They got Sherwin Williams. They have all these building products companies as well. Do they have a carpet company, too? Exactly. They do. Shaw? Shaw. Yeah. Exactly, yeah. So they have a drywall company, I think. So essentially, I don't think they meant to do it, but they ended up there. Plus, you know, the railroads and the truck stop company. The candy and ice cream. Transportation stuff.

30:23Right. Right. And then you've got, you know, the maximum, you know, calorie. Are you still going to, I mean, annual meetings will be different. Yeah, actually very much so. So presumably he won't have really any Q &A, but we'll see. Howard Buffett is well adjusted because his father didn't leave him all that money. That's the way to think about it. And by the way, I think he's getting plenty. It's just for anybody else, he's just not getting$100 billion. Mike, thanks. We'll have a lot more on what this all means for Berkshire later on when we talk to John Rogers, a Vareal Investments founder and co-CEO, of course, longtime friend of the program.

30:59Let's get a CNBC News update with Sima Mouni. Morning, Sima. Good morning, Carl. Here's what we're watching at this hour. Hundreds of thousands of Iranians participated today in a massive government-organized rally in the nation's capital. They marched in combat uniform and pledged their readiness to take up arms after months of war with the U.S.-Iranian military commanders and officials also took part in the rally, stressing unity despite growing economic strain. In other news, the head of the U.S. Postal Service says the agency stopped working on developing a computer system for mail-in voting.

31:30He told Associated Press his agency abandoned the effort after the Supreme Court struck down proposed Trump administration rules. The changes would have enabled the Postal Service to determine who would receive a ballot rather than the states. And another court lost for the Trump administration after a federal judge struck down an order that cut$600 million in grants for training teachers. The education department said the funds were being used for diversity, equity, and inclusion training, but the judge said that there was no obvious criteria for what programs would be considered DEI and that the order was illegal.

32:05David, I'll send it back to you. Okay, thank you, Seema. When we come back, the iPhone 18 hitting the market today. We're going to tell you what you need to know about Apple's latest launch. Plus, Nike loses star power. French soccer icon Mbappe is going to end his partnership with the brand. And we'll have a look at the rival he's now joining. That's when we come back. Welcome back. Apple CEO John Ternus was at the company's flagship store in Manhattan this morning for the first iPhone release of his tenure. The iPhone 18 Pro and Pro Max are out after being revealed by Apple last week. Our next guest released his 5 ,000-word review last night.

32:40Let's bring in John Gruber, author of Daring Fireball Blog, since 2002 host of the tech podcast, The Talk Show. He's reviewed every iPhone model since Apple debuted its first smartphone 20 years ago. So, John, welcome. How does this one stack up? Well, I think it's a curious year because the most exciting iPhone of the year, obviously, is the iPhone Duo, which isn't out for another month. And so but the iPhone 18 Pro is the flagship iPhone. It is, you know, it's the one that has the event on Fifth Avenue this morning. And there's never really been a situation like that where they're launching the one that is the flagship for most people that's going to bring in the most sales and the people are least excited about it.

33:29You say 18 Pro is boring because it's exactly like the iPhone 17 Pro, except for specific details inside the phone that are obviously better. So is it worth the upgrade, I guess, is the question. Well, I think if you have a 17 Pro, no. And I think we're long past the point. I more or less say this every year as I review these things. But it's the idea that people are normal people, like who aren't professional iPhone reviewers and commentators, are going to upgrade every year is, I mean, that's not the point of it. Most normal people upgrade every three or four years. and when there are relatively boring, incremental, hey, it's 20 % faster, photos are 20 % better.

34:12People who watch CNBC know how compounding interest works. 20 % improvements year over year over year. If you upgrade after four years, you've got twice the performance. Yeah. You know, the 18 Pro is that type of year. If you've got or are familiar with the 17 Pro, it's, yeah, it's a little faster. It's a little nicer. The camera has slightly better features. The battery lasts, you know, a couple hours longer, but nothing is radically different. It's not going to make people who see you say, whoa, whereas John Ternus takes the iPhone duo out of his pocket at the Emmys and the show stops. Well, also, the other thing that so-called normal people might not know is that the chip is important here, right, to talk about because they use their own C2 cellular modem and their own ship.

35:04And so that's kind of a new terrain. Right. And so on the cellular modem front, it's Apple has been sourcing cellular modems from Qualcomm for as long as they've been making iPhones. And they've never had a very good relationship, the two companies. I forget, five, six, seven years ago, Apple bought what was Intel's modem group and integrated it. And They've been working towards the point. And with some of the lesser iPhone models, the first one that came with Apple's own modem was the 16E, the sort of low-priced iPhone two years ago. At this point, all of the 18 Pro models around the world use Apple's cellular modem, not Qualcomm's, except the 18 Pro Max in the United States.

35:55It's like just sort of an asterisk. Do customers need to worry about it? Absolutely not. They won't notice anything. But people looking at Qualcomm's numbers or Qualcomm's relationship with Apple, I personally think this is probably the last time Apple's ever going to use a Qualcomm modem in any product. John, how broad can the audience for a duo be? At starting price of$2 ,000 and a novel form factor, this year, I don't think it's going to be very broad. I think you really have to circle back. And again, it's not just because I've been writing about it that long. But I really think you have to circle back to the original iPhone 20 years ago.

36:37When the whole idea of a, at the time,$400 or$500 cell phone that didn't have any buttons on the front face. That, you know, could browse the web. It was so novel. It did, you know, it was a success for Apple, the original model. But, you know, millions sold. not hundreds or a billion sold. And when you walked around with the original iPhone, like I remember going to the grocery store with it and complete strangers would say, oh my God, is that an iPhone? What do you think of it? Right? I mean, Carl, you probably had one. I mean, people would stop you and say, oh my God, is that an iPhone? And I think that's what's going to happen starting next month with the duo.

37:18It's not going to sell in great numbers, not just because of the price, but I think there's going to be severe supply constraints. I think this thing is going to go on sale even at this price. And very shortly after the pre-orders launch, I think you're going to see weeks-long delays between when you order and when you're going to get it. But for the people who get it early and they take it out, they are going to get stopped by strangers and they're going to say, oh, my God, is that an iPhone duo? Is that a reason to get it? For some people. I think for some people like me, it's a reason not to.

37:54But it depends on whether you like being stopped by strangers, you know. Yeah. Good point, John. Thank you for joining us. We appreciate it. Oh, thanks for having me. Yeah, it's good to talk to you. John Gruber. Still ahead this morning, what a Democratic win of either chamber of Congress might mean for the street and how the debate around AI might be front and center for the midterms. Plus, he was sounding the alarm on AI long before it was popular. The author of the bestseller, If Anyone Builds It, Everyone Dies. will join us next hour. Don't go away. Welcome back to Squawking the Street. The 2026 midterms less than seven weeks away.

38:31Calci markets are now pricing in a Democratic win in both the House and the Senate. Joining us this morning for what that outcome might mean for markets and more is Sarah Bianchi, Evercore ISI's public policy chief strategist. Sarah, happy Friday. Great to have you with us. Thanks for the time. Thanks for having me. You seem to agree that the House is likely, you seem a little bit more uncertain about the Senate. Well, there's some very tough states for Democrats here. They're going to have to win at least two, where President Trump won by more than 10 points in 2024. But, you know, even since we upped our call to 50-50, I think the Democrats have gotten more momentum this week.

39:10We are seeing where some of the MAGA PAC is spending money in some House districts, where the president won by as much as 17 points. So you can see by where the money's going that the Republicans are very nervous. And I don't think the AI kind of uproar this week particularly helped. So it is a good fall to be a Democrat. You've written a lot about data centers, AI, not just from a federal policy framework, but how it might play out in localities and in states. But do you think that'll be the number one sort of federal priority if they do take a chamber? Well, it is, as you said, it is a lot of governor's races are really trading on this.

39:53That's where we're seeing the moratorium. Interestingly, the House, Speaker Johnson, made sure to pass a data center affordability, making sure that, you know, folks pay their own way this week. So it doesn't make me think that that's going to go to a federal moratorium. But I certainly think if the Democrats have the kind of sweep that some think they will, The markets are going to have to wake up and see that there's a lot out here that Americans are really anxious about. And it's bipartisan. The president has been a big defender of AI, but he's an outlier in both parties. So I'm not sure we'll see a federal moratorium, but I think there's a lot more to come on AI policy from here on out.

40:39What about other policies? What else do you think investors should be paying attention to besides the AI policy that could change if we see chambers of Congress change? I mean, the reality is, is a lot of what President Trump does, he does with executive authority, Paris, immigration, China, Iran. That's not going to change. I don't really think of Donald Trump and lame duck president in the same sentence. I think he's going to run us through the tape. So I do think the Democrats will have some more leverage in terms of spending and negotiations, getting some of the health care spending back that was lost in the big, beautiful bill.

41:20They certainly have a lot of investigations and a lot of hearings. And if they win both the House and the Senate, they're going to have to show that they can govern. Right now, it's been a very anti-Trump party. But I don't expect Congress to be really active. I do think that the markets will do a read through to the 28 elections, which will start the day after the midterms end. Yeah, we were mentioning a note out of Wells today looking at the percent of the time when Dems control a chamber where there are bank hearings. Wells argues it's about 90 percent, but they don't seem to think it's a derailment of the DREG thesis.

41:58They call it more like a dent. Would you agree? I think that's right. And I think look of all the industries that are under pressure right now in Washington, whether it's pharmaceuticals, health insurers, hospitals, big tech, AI. I think the banks are kind of hiding below the radar screen. So I think they're going to do as well as anybody. But I certainly expect some of these chip makers, some of these AI companies to be called to testify before the Congress. And I think there will certainly be a lot of questions about the risks that we learned about this week. Well, conversation will heat up over the next seven weeks.

42:35Hope to have you back before then, Sarah. Always appreciate your work. Thanks for the time today. Sarah Bianchi over at Evercore. Thank you. Thanks for having me. After this, French soccer star Mbappe, he's leaving Nike. And we're going to look at rumors as well that the company could be departing the Dow. That's when Squawk on the Street returns. Welcome back. Nike losing more star power this morning. French soccer icon, Kylian Mbappe, ending his long-term partnership and announcing he is signing with ON to lead its push into soccer. ON also signing Terry Henry to be the company's director of football.

43:11Nike saying in a statement, Kylian's journey with Nike began when he was nine years old. Over nearly two decades, we've shared moments that shaped the game, and he has been an important part of Nike football. We are proud of what we achieved together on and off the pitch. As he moves into the next phase of his career, we wish him continued success for what comes next. And in a twist, CNBC has learned from a source familiar with the matter that Ahn didn't steal Mbappe, but rather Nike let him go. Regardless, for Nike, it's the latest in what's been viewed as a challenging turnaround effort. The company also announcing some new leadership changes to its board, appointing Alexander Arnaud, the son of LVMH CEO Bernard Arnault to its board of directors this week, a move that's met with some criticism.

43:53And if that wasn't enough, there are now rumors beginning to swirl and reports that Nike's falling share price could mean its days as a member of the Dow, Jones Industrial Average, could be numbered. I know you find that very important, David. But, you know, the Mbappe thing is a big deal. Yeah. Because, you know, I have a six and eight. I have two boys that play soccer, six and eight. And when we go to get them cleats, the first question is what cleats are Mbappe wearing? Really? Yes. I mean, he is probably one of their biggest global athletes that resonates with both U.S. and global fans. And he's young.

44:30I mean, this is not one of the sort of like older generation like the LeBrons, for instance, or Ronaldo's, which are the other big stars, of course, that Nike has. Yes, they have Holland, which is also great, but I don't know that anyone really rises to star power of Mbappe. Oh, well, the Spanish kid. What's his name? Vinny Jr. they have. No, no, no. I'm from the World Cup. Young guy. Really young guy. Come on, guys. Give it to me. Oh, yeah, yeah, yeah. My kids are obsessed with him. He's amazing. He's only 18 years old. He's amazing. But look, I think, you know, Mbappe has the brand. He has the name.

45:04And I think it's indicative of what Nike's challenges have been really since Elliott Hill took over, which is, you know, the cool factor and the resonating with young kids. And I think that's why also people were like, why did they bring on Bernard Arnault's son to become a member of the board? It's like, yes, you can make the argument, the rational argument on Nike stock, which a lot of analysts do, that nobody has the scale and the breadth of the supply chain and the geographic footprint and the R &D. and the designers, but when it comes down to some of his business, it's just what's cool right now and what's resonating with kids.

45:40Yamin Lamal is who I was thinking of. Yes, they love him. It was$177 stock five years ago. Yeah. $177. I know. There are only 17 S &Pers that have been cut in half from their 52-week high. Lulu, Nike, Trade Desk, but the small group, but Nike's one of them. The other question, I think, and by the way, I mean, And what Nike, I think, would argue is that they have a roster of all the biggest athletes, and they're not just going to bet on one, you know, one big one, which is what On is doing here. And I think the question is, is this a bullish sign for On? You know, there's been a lot of commentary as well.

46:15Jeffries, which has been negative on this name, actually looks at it more like a Steph Curry for Under Armour, which was not good, you know, one global star unable to sort of lift an entire franchise, which they do have to build from scratch now. So it's going to be an uphill battle. They have their investor day next week, and we've got the CEO on, so we'll talk about it. 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.

46:47You 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.

47:29Now that's pretty good. Learn more at fidelity.com slash baskets. Investing involves risk, including risk of loss. Fidelity Broker Services, LLC. Member NYSC SIPC.