10AM Hour: Contrarian Market Call, Micron Results Preview, New Eli Lilly Weight-Loss Data 9/30/26

0:02At Janus Henderson Investors, we believe working together is the way to work better. Like combining your portfolio plans and our in-depth strategy, your valued assets and our valuable insights, your vision and our mission, working in harmony to seek the right investment opportunities. Janus Henderson Investors, investing in a brighter future together. A better customer service career is calling in Atlanta. With over 45 years of stability and success, Uline is growing and looking for a senior customer service manager in Atlanta. Relocation assistance is available for qualified candidates. Plus, you'll get full health coverage and 401k with 6 % match starting day one.

0:48Better team, better opportunities, better career. Learn more and apply now to be the senior customer service manager in Uline's Atlanta market at Uline.jobs. Good Wednesday morning. Welcome to Spock on the Street. I'm Sarah Eisen with Carl Quintanilla and Mike Santoli. We are live from Post 9 of the New York Stock Exchange. David Faber's off again. Coming up on the show today, it's the final day of the third quarter. And Evercourt's Julian Emanuel has a new contrarian call for the home stretch of the year. He'll join us in a moment on that. Plus, Micron in focus as one of the market's AI darlings gets ready for results after the bell.

1:20We'll get you set up for that. And newly installed Treasury Department official David Zervos will join us. His first interview since taking the position this week. as the bond market remains front and center. And today it's all about the economic data. We did get the Fed's preferred inflation measure, the PCE number. Take a look at where we stand, pretty much in line with expectations. Look, we got a strong GDP estimate for the second quarter, a strong GDP number revision, 2.2 percent. And then inflation comes in in line, up 3.4 percent for the month of August. If you look at the monthly change, which a lot of people are looking at, 0.3 percent from a month earlier.

1:59If you take out food and energy, the core, which has been less volatile and more reassuring, price rose 0.2 percent on the month. If you go inside the numbers and look at where the hottest categories are month over month, you'll see motor vehicles and parts, recreational goods and vehicles, clothing and footwear, actually, which hasn't, it's been kind of a soft spot on pricing. And furnishings, too, have been soft. So that little bit of life there, food services and accommodations. Again, these are inflation. This is the sort of where the monthly inflation is coming out. I will just add to it, though, like hot data, the GDP number, and then also the spending number.

2:40Spending was really strong for the month of August. And this is an inflation adjusted, unlike the retail sales, 0.6 % increase in spending, which was the biggest monthly jump since March 2025. So I think the takeaway is economy is still in good shape, still have this inflation problem. Maybe they'll hike in October. They'll certainly hike in December, according to the bond market. And it looks clear for them to focus on inflation. PC inflation was an undershoot relative to forecasts, for the most part, especially at the core. And odds for an October hike actually came down. But it didn't really take out any total anticipated hikes from the curve.

3:18So it's kind of a wash. There was a methodological change. Some of that had some downward revisions to prior months in terms of inflation. So it's probably a net pleasant surprise, although it's still 3 percent. That's kind of the takeaway you would have. I think here with the economic reports, I think it shows an economic lift. For the most part. I think the big question is that huge jump in consumption, outpacing by a lot incomes so far this year and also in the last month and quarter. So I think that is something that the market is asking. How sustainable is it? What's driving it? But net net, yes, I think you still have pretty stable growth, good growth, better than expected in the second quarter.

4:02And then obviously you have the inflation picture, which is at least based on today's number, no worse than we thought it was. Yeah, I mean, I guess the other takeaway in some of the notes I'm reading, Mike, Because even if even if the numbers were a little bit of an undershoot, like overall, we're still in the ballpark. And the problem is inflation is above target and it's not slowing. You know, sure. That's that's that's the Fed's problem. Right. So that's kind of the one take on it. But you're right. I mean, that's nice to see a little bit of sufficient timeliness has been the question. Yeah, it's interesting how the market is reacting to it because it is, again, a Nasdaq 100 type day.

4:35And that's what's what's so far in the morning. Driving the index is higher. Breath is nothing special, even though bond yields have come off the boil. Bond yields got some relief yesterday on John Williams, New York Fed president, kind of saying no hurry to hike in October, perhaps. He is kind of on the dovish end of the spectrum. But not really a lot of absolute relief in terms of yields coming off their highs. And then today's, you know, you had a better than expected ADP jobs report, whether that matters or not for private sector job growth. Chicago PMI, second best state in about four years.

5:05So the bond market's been unable to relax with all this going on. And then, of course, we have the official jobs number on Friday. Last day of the quarter, I think, is also significant because it's just very noisy. The second half of this quarter has been an absolute mess below the headline index. All these pockets of the market are getting washed out. That's stocks versus bonds on a quarter-to-date basis. There would have been a pretty big mechanical rebalancing trade out of stocks into bonds, buy asset allocators, probably mostly done. on tax loss selling is making a real hash of a lot of parts of this market.

5:37If there's a net positive, I know we'll talk about this in a bit, it's the defensive parts of the market that look the worst, utilities and staples and such. So it's not as if the market is saying, oh, no, we're super worried about some kind of a macro stress event, even though consumer cycles have also been bad. It's much more about these orphaned parts of the market that can't really go up against higher yields, higher oil. and, you know, the AI trade overtakes it all. Although maybe the economy is more resilient than we think, just going through these second quarter GDP revisions. The number was revised to 2.2 from 1.5 percent.

6:14It's a big growth. And under that is demand. I mean, it's household consumption growth goes to 3.8 from 3.4. That's good. Gross private investment, really big leap there. And final sales to private domestic purchasers also to 4.6 percent. I mean, those are the demand drivers of the economy, and they look good going into the third quarter. It is the final trading day here of the third quarter. Let's bring in Julian Emanuel, Evercore's chief equity and quantitative strategist, as we try to make sense of some of the economic data and the sharp moves here we've seen, certainly in the bond market and the impact on equities.

6:48How do you think we're set up? So let's go back to the end of the last hour when Jim previewed his spot with Danny Meyer this evening with a book called What Could Possibly Go Right? So for the last six weeks, as situational awareness gave way to more AI angst and the market started churning, we've been suggesting and typical of September that you put on some hedges. We love these negative beta stocks, energy heavy. They've worked nicely when tech doesn't work. And small cap puts. Look, small caps have been a disaster in September. But the big take here is that the economy remains strong. And as you were just saying, consumer spending is maybe resilient plus.

7:33And so when we think about what could possibly go right, we have no idea how to handicap what's going on in terms of negotiations or lack thereof with Iran, only to recognize that oil prices have come down the last couple of weeks. And if they come down further, these consumer discretionary stocks, when consumer sentiment is completely opposite of what they're actually doing, are set to rip. Yeah, I mean, you certainly have the makings of that kind of relief rally. What's been interesting is you mentioned oil down a couple of weeks in a row. The linkage everybody was making a lot about in terms of Treasury yields and oil working in lockstep, it's loosened up quite a bit because you haven't had yields come in as much as oil has.

8:19I don't know if you have to have an interpretation of why that might be or what it's going to say about the potential catalyst for that kind of relief rally. Well, I think there's a number of factors. And, you know, first of all, from a macro perspective, the macro trade of, you know, short bond markets globally has been much easier than the whipsaws around the commodity markets and the whipsaws around the stock market. Let's face that. And so that's certainly been part of it. But again, you know, we've got better than expected inflation numbers, but they're still high. We don't think the Fed's going to hike in October, but we do think they'll hike in December.

8:55And so you still have to work through that. But the bottom line is that we have to also appreciate that a lot of the reason that bond yields are up here is because the economy is so strong. So hike in December, but then what kind of like tightening cycle do you guys envision? And how much can the equity market withstand? So I think we're going to demure from forward guidance on that the same way Chair Warsh demures from forward guidance. And so he knows. And it's very, very much. Look, the other thing that's gotten investors concerned is this linkage between bond yields going up and the potential for hyperscaler debt issuance to become more challenged.

9:34Look, we've already seen a couple IPOs pulled in the last week that tell you that things aren't quite as rosy as we thought. And so that's a concern. But it's also at the same time likely to get the Fed to err on the side of not putting the foot on the hiking gas if it's at all possible. You still are carrying an S &P target that's not far from where we are right now. Right. And yet you also point out and I think this is an important point that, you know, a tech driven bull market will likely remain a tech driven bull market until the end. So the AI theme is the thing to harness to. So that suggests maybe not a whole lot of upside push from the dominant, you know, tech related parts of this market.

10:16If you don't think we get beyond 77.50. So, again, that that's year. And at this point, with three months left for a strategist, that's almost day trading. Yeah. But but the fact is, is that we're still acknowledging that there's political risk around what's going on with Iran. We could be wrong. It may not go right. And also the midterms. Right. You could get volatility. We'd expect volatility around there. But put it all together. And look, we're upset to see the broadening stop broadening in the last month. And we're perturbed by the fact that financials have really performed poorly. That's not good for a really strong bull market.

10:55But the fact is that there have been lots of times where tech does the heavy lifting. And we continue to think this is one of those times. I'm glad you mentioned financials because we said with Jim the XLF now red again for the year. You think anything they can say in the coming weeks in earnings calls that will reverse that? So we don't normally impute a lot of value to the tone of how financials report and how their prices respond in terms of how the rest of the earnings season is going to go. This is a big deal. OK, these stocks are in a lot for a variety of reasons, muse, curve flattening, you name it, whatever it is.

11:36Build out. Yeah. The whole thing. And so what they say, but more importantly, how the shares respond is really going to tell the tale for, you know, our view on how volatile it gets, the run up in the midterms and then our expectations, you know, for your traditional Santa Claus rally. What is the risk on the midterms? Is it actually policy risk or is it just uncertainty or what? Well, our core view, when Sarah Bianchi from our policy team was sort of first to market on saying that the Senate was a toss up, was that yields were going to go screaming higher. OK, we got that. I don't know that you want to press that bet as hard.

12:16But look, again, in this concept of what could possibly go right, although the statistics don't bear it out that divided government is better for stocks than unified government, it still does seem to work that way in the minds of investors. So maybe we shouldn't fear the fact that Democrats take one or both houses. And maybe gridlock will end up being good considering how much policy volatility is out there anyway. You think the yield move is tied to the fact that the Senate is a toss-up? Well, I think it's tied to the fact that there is not one single human being in Washington that wants to exercise fiscal prudence of any kind.

12:58That's fair. Yes. That is true. But we keep talking about how this is a global yield move. And not that everybody's fiscal situation is better, necessarily. But it seems just sort of a general sense out there that governments are just going to need to finance bigger deficits. Right. And governments, we're competing for funding against Europe, Japan and the hyperscalers. Yeah, true. Yeah. That competition for capital. Julian, thank you for joining us. Thank you. With a view on the rest of the year. Julian Emanuel from Evercore. Take a look at our roadmap for the rest of the hour. After the break, is OpenAI's new DOTS agent a threat to Meta's muse?

13:32We'll take a look at how the two products do stack up against each other. Plus, will Micron's momentum continue? We'll talk about what to want from that report after the Bell, with the stock up nearly 300 % this year, even after a 15 % pullback. And David Zervos joins us. His first interview since joining the Treasury Department as multi-decade highs for bond yields remain front and center. Squawk on the street. It's back after a quick break.

13:57Legacy 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. Vantage 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.

14:34With higher predictability and greater access to credit, everybody wins. Get started at VantageScore.com. This message comes from Wise Business, the only account your business needs to scale globally. You're building a business with global ambitions, but hidden fees are eating into your margins. With Wise Business, you can pay overseas suppliers without exchange rate markups. Have customers worldwide get payment details in 22 currencies so you get more of each hard-earned payment without hidden conversion fees. Be smart. Get wise business. Download the app. T's and C's apply. The quarter pounder with cheese is made with 100 % fresh beef.

15:15Cook when you order it. Add hot crispy fries and an ice cold Coke and hopefully a lot of napkins. All for$8.

15:27Welcome back. We have some breaking news on Eli Lilly. Let's get to Annika Kim-Constantino with the details. Morning, Annika. Morning, Mike. Lilly just released promising data showing that its experimental combo regimen showed stronger weight loss compared to the company's existing obesity drug in a mid-stage trial. It's a closely watched treatment that takes Lilly's experimental drug targeting a gut hormone called amylin and combines it with the company's blockbuster terzepatide drug, which is the active ingredient in Zepound and Munjaro. In this trial on patients with obesity and type 2 diabetes, the combo treatment helped patients lose up to roughly 23 % of their weight on average at 48 weeks.

16:06That surpasses the nearly 15 % weight loss caused by a high dose of terzepatide alone in the study. We also saw a greater reduction in a key measure of blood sugar levels among those people who took the combo compared to the people on terzepatide. Lilly told me this combo could be helpful for people who didn't respond to or see the results that they wanted on existing GLP-1 products, and also said it aligns with their goal of bringing a variety of treatment options for patients. We did see higher side effects with the combo compared to terzepatide in the trial, but Lilly cautioned against reading too much into that since it's phase two trials, and Lilly plans to refine dosing and help lower those side effects in phase three trials that will begin at the end of this year, So that will be the real test for this treatment, Mike.

16:53And Annika, we also did get, did we not, some news from Novo on how effective its oral treatment was or the replacement of the injectables? You're exactly right, Mike. So Novo released data based on real world data that it got from Rose telehealth platform. And basically it showed that patients who actually switch from obesity injections, such as ZappBound or Wiggovi, actually continue to lose weight after they switch to the Wiggovi pill and stay on treatment for three months. And so this really shows that patients may not have to actually stay on injections forever. They could potentially switch to a convenient option like the Wiggovi pill here.

17:29Annika, thank you for that big story today in obesity. That's our Annika Kim-Constantino. Let's turn to Meta under a bit of pressure this morning following OpenAI's reveal of that rival agent yesterday called Dots. Our Julia Boorstin joins us with more on how we might compare the two if they are in competition. Morning, Julia. Well, Carl, shares of Meta rose 3 % yesterday afternoon following OpenAI's announcement of its agent called Dots, which rivals Meta's agent. Now, Dots is only available for paying customers, while Meta's Muse agent is available for free with the option for power users to pay for a premium subscription.

18:06Wall Street seeing this distinction in business model as an advantage for Mark Zuckerberg to continue Meta's stronghold on the consumer market, while Dots focuses more on the enterprise. Mark Mahaney at RBC saying, quote, We see Meta with Muse as the clear leader in the personal AI agent space. The longer term contest will depend on whether Meta can convert its consumer reach into habitual use before OpenAI expands dots to lower priced and free plans and whether OpenAI can demonstrate enough reliability and security to justify its substantially higher initial cost. Now, this all comes as Mark Zuckerberg appeared at the White House with President Trump and other AI leaders yesterday, aligning himself with the administration's push for super intelligence.

18:53Now, Meta has been riding the AI momentum wave. Shares are up about 26 % in the past month. The stock is down a bit today and also dropped on Monday when Meta announced its own enterprise AI business, where Meta does not have a successful track record in the enterprise, though it does have 200 million businesses on its platforms, including over 10 million advertisers. they would be ideal target customers for its Muse AI use and the small business launch that it introduced on Tuesday. I mean, we've been talking a lot about Muse. I've been using Muse a lot. Julia, how much is it a game changer, do you think, for all the other folks that were there in that room with Mark Zuckerberg?

19:36You know, Sam Altman had to respond with Kate Rooney yesterday to a question about it. He said, I think the product is good, but obviously sounded more confident in his own products? I think the conversation with Sam Altman and the question that Kate Rooney asked is a lot more relevant now than it was when I interviewed Sam Altman in July. Back then, Meta did not have a strong consumer play around AI. It had its Meta AI tool, but it didn't have this really game-changing for Meta agent, right? This agent is really a leap forward in terms of what Meta is offering. So when Kate Rooney asked Sam Altman that, he said he was not threatened by Meta.

20:15But I think the key question here is who owns the consumer AI experience? Mark Zuckerberg wants it to be him. He's selling all this hardware, the glasses. He talked about the Muse Charm, the little device that's going to enable you to talk to your agent anytime. And for Zuckerberg, this is really an opportunity to make sure he's not beholden to any other device makers or other companies when it comes to having that relationship with the consumer. As to the enterprise, we'll see whether Mark Zuckerberg uses his relationship with small businesses who are advertisers, have a presence on the platform, to really compete with OpenAI around the business that OpenAI launched yesterday.

20:54But I think pricing is going to be key, and the fact that Mark Zuckerberg has these pre-existing relationships will be helpful. Julia, there's a budding conversation already about what happens to the consumer who can't afford an agent or who simply doesn't want to play with an agent and whether or not, I don't know, e-commerce marketing becomes sort of two-tiered over time or whether retailers try to make up maybe for some margin compression for those with agents by charging more for those or don't? Well, if you want to use the meta agent, the meta Muse AI agent, you don't have to pay for that.

21:31The way Mark Zuckerberg is going to make money on that, he said the new business model is going to be transactions made through the Muse AI platform that those interactions, they will take a cut of those transactions down the line. So you're right that if you see more people making purchases on Walmart through their Muse AI agent, that's going to change the marketing equation. But I think the fact that we have seen so many of these companies, Best Buy, Walmart, Sephora, get on board with Mark Zuckerberg's vision, this is probably them paying a cut to Mark Zuckerberg is probably like marketing.

22:03They're saying we're getting access to those consumers. I think there will still be plenty of people who do not use a Muse AI agent and just shop the old fashioned way, either online or in stores. And there will still be marketing for those people. But I think this is really a new business model for Zuckerberg in particular. OK, Julia, thank you. And by the way, we're going to have much more on Meta's disruption to a broad array of industries. Remember, we saw lots of stocks react in the wake of the Muse release. We're going to be joined by the CEO of Charles Schwab in the next hour. That stock getting caught up in some of the fears about automated trading.

22:34When we come back, management changes at General Mills and Mattel. Why we're seeing a reshuffle at the top of those companies. Plus, AI infrastructure firm Accelivation making its public debut at the Nasdaq this morning after pricing below the range after a number of other companies recently delayed IPOs. The CEO joins us in just a few. This message comes from Wise Business, the only account your business needs to scale globally. You're building a business with global ambitions, but hidden fees are eating into your margins. With Wise Business, you can pay overseas suppliers without exchange rate markups.

23:10Have customers worldwide get payment details in 22 currencies so you get more of each hard-earned payment without hidden conversion fees. Be smart. Get wise business. Download the app. T's and C's apply. The quarter pounder with cheese is made with 100 % fresh beef, cooked when you order it. Then comes the melted cheese, the slivered onions, the pickles, the ketchup, and the mustard. Add hot crispy fries and an ice-cold Coke, all for$8. And if things go well, one loose fry at the bottom of the bag. The Quarter Pounder with Cheese Meal, now$8. Ba-da-ba-ba-ba. If you like YouTube, you'll love YouTube Premium.

23:58Hi, I'm Sean Evans from Hot Ones, and I want to tell you about YouTube Premium. It has offline downloads, so you can watch without Wi-Fi. Background play, so you can lock your phone, and it still plays, baby. Oh, and it is completely ad-free. Yes, I said it, ad-free. Try YouTube Premium for two months free at youtube.com slash premium. Trial eligibility varies. Terms apply. Cancel any time.

24:26Welcome back. We're about 30 minutes into the hour. Here are three big movers we're watching. First up, General Mills announcing a CEO transition. Jeff Harmoning will step down and become executive chairman, with COO Dana McNabb taking over as CEO. The changes take effect January 1st. first. General Mills shares have been nearly cut in half over the past three years, down almost 2 percent this morning. Mattel also announcing a change as CEO Enon Christ steps down. He's saying he's saying he's taking a senior leadership role at another public company. Roger Lynch, a Mattel board member since 2018 and current CEO of Condé Nast, will lead Mattel.

25:02Mattel making a big push into entertainment as of late, but the stock still losing a third of its value over the past five years off three and three quarters percent right now. We're also watching CoreWeave hired this morning after the company announced the availability of NVIDIA's Verirubin chip on its platform and said it had signed up the first customer on that system. CoreWeave CEO Mike Intrader joined us last hour, talked about the strong demand for compute that he continues to see. This is a wave that's been moving through the market since the agentic explosion started to take place. You are going to see substantial demand for CPUs across the board.

25:40They are going to be inside the GPU servers. They are going to be independent of the GPU servers. There is going to be a massive amount of demand for that type of compute also. Yeah, I don't know if anyone doubts the ultimate demand. It's a lot about the capital structure. It's a lot about how fast these facilities can be built. And now all these reports that So many of these NVIDIA chips are bought and waiting to be installed as opposed to actually doing the work. So market so far is, you know, mildly encouraged here. Core Reve up 1.2 percent. And I think there are still questions about whether they're going to be allowed to just build them.

26:14Oh, yeah. You know, as much as they want because of the political backlash. Stocks still up about 22 percent this year. We've got a news alert now on the FTC. Eamon Jabbers has the details in Washington. Eamon. This is a breaking report from the New York Post, which just posted a story in the past couple of minutes. They are reporting that Federal Trade Commission Chairman Andrew Ferguson has launched what they're calling a sweeping investigation into the frontier AI labs. And this the idea here as we watch video of Andrew Ferguson arriving yesterday at that AI CEO meeting at the White House. We had a chance to talk to him very briefly there.

26:52And what the New York Post is reporting is that they're going to hit these companies with requests for information, demands for details on some of these incidents and the potential dangers that the technology poses to consumers. We're efforting a little bit more detail here from the FTC on what exactly it is that they're going to be looking for, which CEOs they may may want to testify and how this investigation will play out. But an FTC spokesperson does confirm for us the contents of this reporting. So it is clear that there's at least the beginning now of an investigation into these companies by the federal regulator here, looking at just what kind of a danger these companies might pose for American consumers.

27:33Sarah. Well, they said they wanted to be regulated. So here we go. There you go. Thank you, Eamon Chabbers. Time now for a news update. Brandon Gomez has it for us. Morning, Brandon. Morning, Sarah. Israeli officials say a fight between pilots of a fly Dubai plane may be an attempted terror attack. Authorities say the co-pilot of the flight from Dubai to Tel Aviv stabbed the captain in an attempt to crash the plane. Officials say the cabin crew took control of the flight and diverted it to Saudi Arabia. Aircraft data appears to show the plane descended by roughly 14 ,000 feet in less than 30 seconds before the first emergency signal went out.

28:07Meantime, Defense Secretary Pete Hegseth expected to announce cuts to Pentagon leadership later today. during his State of the Force address. Pentagon officials say he will direct all military services to cut 20 % of senior officer ranks, doubling the previous 10 % target he ordered last spring. And Mattel announced a CEO shakeup today, saying longtime chief executive Anand Kreese would leave the Toymaker. Kondé Nast CEO Roger Lynch, a Mattel board member, will take over the role. Mattel says Kreese will take a senior leadership position at another public company, but to not specify where he is going.

28:41Guys, send things back to you. All right, Brandon, thanks for that. Got some breaking news out of the SEC. For that, we'll turn to Dom Chu. Morning, Dom. Good morning, Carl. So the Securities and Exchange Commission has voted this morning to propose a set of rules changes meant to provide better and more responsible access for retail investors to private markets. So some of the key points here, registered investment advisors will now be allowed to receive performance-based compensation that will allow them to provide access to private investments and then be compensated based on how well they do for their clients.

29:12It's also, let's call those interval funds, right, that invest in less liquid private capital investments. It will allow them to schedule share repurchases at certain times that better match the underlying liquidity of their portfolios. It also allows certain closed-end funds to sell their products with multiple share classes. Also, in a separate but related move, the SEC is also seeking public comment on a proposal that will look to give retail investors added ways to be characterized as a so-called accredited investor, including the consideration of things like professional certifications, designations or credentials.

29:48SEC Chair Paul Atkins says, quote, investor demand for private market investment opportunities is growing. And one of my priorities for the commission is to explore ways to facilitate the ability of individual investors to participate in private markets while at the same time protecting those investors from bad actors and fraud. So a very interesting development, a retailization, I guess, of these private markets. Carl, I'll send things back over to you. Yeah, really interesting as we've sort of processed frustration over time, over the years, Mike, about the inability to access some of these more private instruments.

30:24Yes, definite debate as to whether or how big a problem that is in terms of, you know, at this point when the value of the private investments are so high already, It's not as if you're getting it on the ground floor. And I think to some, it looks like the private capital industry looking for more ways to dissipate the risk. But is this the barrier, the fact that they're not accredited investors? I mean, Schwab and others have been buying companies to try to gain access. They pool the investments and chop it up and you can get. No, I think the accreditation probably has a little bit of a stale definition in terms of the wealth levels and such that you have to have.

30:59But I do think that if it broadened it, those people would have a greater ability to directly invest in those companies as opposed to using the intermediary. Interesting, Dom. Thank you. That's our Dom Chu. When we come back, we'll look ahead to Micron tonight with an analyst who thinks the stock has the potential to nearly double even after this 275 percent gain for the year. And then next hour, speaking of all of this, the CEO of Schwab will join us. Stock's down about 7 % in about a week as they got caught up in the disruption fears related to Muse. Stay with us. Welcome back. Micron sets a report earnings after the bell today in what will be a big test for the AI trade.

31:37That stock up nearly 300 % so far this year. Last quarter, it popped 16 % after its results. Let's bring in Mehdi Hosseini. He's senior equity research analyst at Sussuahana. He has a buy rating on the stock with a$2 ,000 share price target. Mehdi, it's great to see you. So the stock up huge, but it was all basically by early June, right? So four months here. Stock is flat. Valuation has been compressed because forward earnings have held up well. What do you think are the key levers here in this current report that's going to decide whether the stock can pivot higher from here? Yeah, I think the whole AI trade has been debated since June.

32:16If you actually go back to the start of AI and how AI has created incremental demand for semiconductor, there has been this debate when would the cycle peak. As you look forward, it comes down to the debate. What is incremental to AI? Is it memory? Is it compute? I make an argument that compute is actually becoming more commoditized. And it's memory that makes a difference. And in that context, Micron and the peer group should be able to maintain their margin profile. And if that's the case, then the stock will be re-rated. Make a long story short, we expect Micron earnings to reach$30,$40 on a quarterly basis.

33:06And ultimately, Micron should be able to hit a$50 quarterly earning or$200 annualized. So if you believe memory is becoming more important or perhaps the defining, you know, link in the value chain here as things grow, clearly the market has doubts about just exactly how long we can project those dynamics and how long the margins can hold up. Otherwise, we wouldn't be trading as cheaply as we are. So can the company manage to give reassurance that there's there's legs to this trade? When you look at the whole AI trade, everyone has been trying to make a call. Everybody has been, since 2005, everybody has been trying to call it up.

33:51I think looking forward, it's not so much of what management will say for the next quarter. It's about sustainability of margin profile. I think management will highlight the discipline that the memory industry has been trying to employ and therefore maintain margin. So, in my opinion, will highlight demand diversification and how they are disciplined with CapEx and how they're able to sustain operating margin in the 70%. ultimately it comes down to who can have a 70 % margin profile in AI. Is that memory? Is that foundry? Is it customers like NVIDIA and AMD? And I think, like you said, it is a memory that makes a difference and they should be able to stay in margin profile.

34:42Isn't it also, though, that memory is the most supply constrained at the moment in terms of building all that out? Of course. And this goes back to the discipline. But I think, Sarah, what makes a difference here In the past, when we were going through the successive generation of iPhone, there was only one demand driver, and that was a smartphone. And Apple, to a large extent, was driving the demand and followed by Android. Now we have a diversification in demand drivers. We also have diversification in customer base. So you have a diversification in application and customers. And this is what drives the sustainability of pricing combined with disciplined capex and disciplined spending should help sustain margins.

35:31You mentioned that people have been trying to call a peak in this cycle for a while. The sell side hasn't. There's 95 percent of the analysts that cover Micron have a buy. The consensus price targets for 50 percent upside. I'm wondering where the wall of worry lies among buyers of the stock at this point. In other words, do they think micron demand trends are going to be very sensitive to any slowdown in data center build? Or is it the, you know, whether it's lower cost models that start to come to the fore? Is micron going to not necessarily be able to participate in much of those? What do you think the big worry points are?

36:06Yeah, so when it comes to memory, there's always been this big divide between sales side and buy side. But ultimately, when you look at the AI, and especially as we transition from training to inferencing, as we look at the monetization of AI, it comes down to the demand drivers for inferencing. You do need more memory in terms of a DRAM. if you think about it, CPU and the shortage of CPU, well, that drives incremental demand for DRAM, and you need the storage for storing the data. So ultimately, it comes down to sustaining that diversification of demand drivers, sustaining diversification of the customer mix.

36:53As to the divide between the sell side and buy side, I think that's inherent to the industry, and I think it comes down to investors and a buy side gaining incremental confidence that the margins will sustain. And the sell side, you know, what we have estimates and we have been used to cycles and we're struggling in how to justify the margins sustaining by 70 percent. And I think my crowd executing will drive incremental confidence among buy side investors. All right. Mehdi, we'll see you this evening if the company can make that case. Thank you very much for the time. Thank you, Sammy. A lot more coming up on Micron tomorrow when we are joined by the CEO, Sandrine Marotra, in the 9 a.m.

37:38hour to react to earnings. Plus, next hour we'll be joined by David Zervos, his first interview since joining the Treasury Department, when Squawk on the Street returns. Microsoft, one of the big winners of 3Q, up around 40 percent, best quarter in about 28 years for that company. Let's get to Oliver Rennick at CBO with a look at what options are saying. Morning, Oliver. Hey, Carl. This morning's economic data is passing the market's muster as stocks rally and the VIX slips back below 16. Microsoft stands out with big options flows and volume more than twice the 30-day average, with a heavy preference for call buying as traders bought almost 75 ,000 calls out of the gate compared to under 15 ,000 puts bought.

38:20Traders also sold calls, but of the$130 million in premium tied to call trading, more than 60 % of it was likely initiated by buyers. And the biggest trade of the day represents the sentiment well. In the December 18th expiry, someone spent$12 million buying 3 ,000 in the money, 500 strike calls on Microsoft, and lowered their cost by selling about$2 million of 600 strikes expiring the same day against it, creating a bullish spread trade with a break even near$540 or about 4 % higher in Microsoft, which would be a new high on a closing basis. And another name to watch right now is NVIDIA, up almost 2 % this morning and about$5 away from its own record ahead of Micron.

39:05Call buying, outpaced put buying more than 2 to 1, thanks to some big buyers of the 250 and 260 strike calls expiring in March, looking for a big rally for NVIDIA through next year. guys. And Oliver, so you have that action in NVIDIA, which has been the lower volatility, you know, semi by a lot here. And how does that feed into what we're anticipating from Micron? It's a great point, Mike, because Micron, of course, brings up the question of if we will return to the high swinging, high beta memory driven part of the semiconductor group. And The volatility in Micron has actually decreased significantly.

39:45That was one of the things we noticed in the options going into that is that the implied move yesterday of about 7 % was lower than in the past year for Micron. But obviously, if you could get Micron, the swinging name, to start swinging to the upside again, and NVIDIA, the stable name, to grind towards highs, it's hard to imagine a more bullish situation for the market. Yep, it would excite some folks. Oliver, thanks very much. Up next, AI infrastructure firm Accelivation making its public debut this week after a number of other firms have recently pulled their listings. We'll talk to the CEO next.

40:19Welcome back. We're awaiting the first trade for AI infrastructure firm Accelivation. It's going to debut on the Nasdaq today, ticker ACCV. The Ohio-based company raised$540 million in its IPO, selling$30 million at$18. It came in below the target price range of$20 to$24, right now indicated right at 18. Let's bring in CEO Michael Rubiera for a first on CBC interview. Michael, good to have you. Appreciate the time. Congratulations. Thank you. And thank you for having me on. You're entering two big topics of discussion on our desk. That is, of course, the data center, but also the IPO pipeline.

40:53Can you talk about the timing at least? Yeah. So for business, obviously, the timing, the market is a little bit rough right now, but we weren't afraid of that. We've built a great company. We've been able to grow substantially over the last few years, and we really thought this was the right time to be able to go to the market and to be able to, most importantly, involve our employees in this process and be able to transfer a lot of the value back to our employees who created the value of the last few years. You talk about the platform being fully integrated, and I think the phrase your team uses is hard to replicate.

41:27Why is that? Yeah, so we operate in the white space, and the white space is very different, let's say, than the gray space and mission critical environments. It's the last six months of a project. It's the most important six months because it's between us and time to compute. And what we do is we custom design solutions with our customers to enable them to be able to roll out solutions faster. So for example, data center white space build out used to be stick built, where you would ship a lot of products to the field and you'd have a large field installation team put it all together. Over the last few months, we've transitioned that entirely to where we manufacture the data hall complete in our facilities and ship it to complete, which allows our customers to reduce time to compute.

42:10Have you noticed any of the elements of friction, societal, financial, things that we've talked about at least here for the last few months that appear to be, I don't know, I won't say threatening, but putting some sand in the gears of the build-out? Knock on wood, we have not seen a slowdown at all. We partner with the best of the best hyperscalers as well as the best of the best neoclouds. And because we're involved in the last six months of the project, we're working on projects that started two years ago. But we also have a real good line of visibility into the future as well by having those partnerships with our customers, where they're going, where they're building, and how they really see the future.

42:51And, Michael, where are the bottlenecks for you, if there are any? So if these projects are underway and there's still a backlog there, are there components? Are there areas to link up with power? Anything else that feels like it still needs to be sorted out? When it comes to our part of the build out, we are a completely vertically integrated manufacturer. So we're a child of COVID. We launched this business in January 2021, a time in which the supply chains were completely destroyed in this country. And so we had to become vertically integrated. So we control all the major inputs into our product lines.

43:28If there are delays and they're rare, it typically happens upstream in the gray space, usually around power availability of some of the medium-voltage gear. But where we operate, we typically are able to execute our projects in the timelines that are needed. One thing you do talk about is compressing the time from the design phase to deployment. And I think you put some numbers on it, right? The reduction in installation time? Yeah, so we're seeing, for example, a time savings of over 80 percent by being able to manufacture these products in our factories and ship them complete. And so when you're talking about a large gigawatt campus, that time savings is significant because it's all about time to compute for our customers.

44:11And we enable them to get online faster and to start generating revenue. What do you use the proceeds for today? It's a combination of, of course, we're paying down some of our debt to be investment grade. We're going to be under three times when we launch. But the most important is we're actually giving back to all 2 ,000 employees who helped build this company. So we announced shortly after the opening bell that every single one of our employees, regardless of level in our company, will receive between$100 ,000 and$250 ,000 of equity and cash to share in what we were able to generate. So that's what really excites us the most.

44:51These are the employees that helped build this company, and now we have a chance to give back to the communities in which we operate. Michael, really interesting. We'll obviously watch the business model as you go forward and hope you'll come back and give us some updates on how the trajectory is unfolding. I appreciate it. Thank you much. And congrats again, Michael Rubiera over at Accelivation. As we look to see some IPOs happen. And also good to look to see how this one trades, because that'll be a little bit of a verdict on whether, in fact, the market was receptive or not. And also how it trades compared to a lot of the other AI industrials, which have actually come well off their highs because of the backlog concerns.

45:29All 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. You 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.

46:00To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer. Something amazing is happening in animation. Studios are processing data faster. That's because CDW showed them new ways to maximize their infrastructure, then built a flexible Dell Technologies data solution. More automation led to reduced maintenance times and greater efficiency, so that creativity stays the star of the show. Dell Technologies and CDW. Make amazing happen. Learn more at cdw.com slash delldatacenter.