10AM Hour: Fed Decision Day, SK Hynix Surges, Robinhood CEO on Earnings 10/28/26

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1:05Schwab 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. Good Wednesday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla and David Faber. We are live, as always, from Post 9 of the New York Stock Exchange. Jam-packed day of catalysts here on Wall Street, with a Fed decision coming in just a few hours and a slew of earnings reports after the close, including Alphabet and Microsoft.

1:46We're going to break down what it all means for your money. Plus, shares of Robinhood getting hit hard here in early trading after a mixed print as crypto revenue dragged on the quarter. Robinhood chief Vlad Tenev will join us to discuss in a first on CNBC interview. We'll also get to the big move this morning for SK Hynix and what it signals for the AI trade as the Korean chipmaker jumps after reporting just a 630 percent surge in profits. But guys, it is Fed Day and we do get a big decision today. Markets not expecting any change on interest rates after they raised interest rates in the last meeting.

2:20But the market does expect them to raise again in December. So what will Warsh say? The new Fed chairman doesn't like to give forward guidance. Let's just show you where we are on the mandate. Remember, the Fed's job is to keep inflation stable and maximum employment. So unemployment, the jobs front, it's been pretty good. You heard today from the Visa CEO that we're in a low hire, low fire environment, and that's keeping the consumer very strong. Here's some data from the ADP latest data, which is a weekly private sector job additions. And it shows we had just under 17 ,000 jobs added in the last week.

2:58It was a little bit cooler. So that's where the low hire comes from. But it's still positive. The four-week rolling average for the week is still, you know, around that 16 ,000, 17 ,000. But it's come down. And then the low fire environment can best be seen in the initial jobless claims. This is how many Americans file for unemployment claims every single week. And it continues to be lower and lower numbers, sort of defying expectations around this point in the cycle. And also with all the worries about artificial intelligence. And we'll monitor things like the Microsoft News. But so far, the latest data show that we really have not seen anything dramatic in terms of a tick up in Americans filing for unemployment claims.

3:38In fact, it's been quite the opposite. They've been under 200 ,000 for six weeks in a row. I mean, these are like claims numbers we last saw in the 70s, late 60s, early 70s. A lot of retirees who are not going to be looking for new work. Well, yeah, I mean, that's part of it. But also, you're just not seeing companies, whether they're responding to higher input costs or economic headwinds or uncertainty or AI, they're just we're not seeing any kind of math layoffs. So that's on the jobs front. Things are looking good. Fed's doing, you know, doesn't have to react necessarily on that. On the inflation front, that's where the problems are.

4:14That's why they hiked interest rates last time. And the latest data show, here's a great, the FII survey came out. That was the big meeting I was supposed to be at in Saudi Arabia this week. Oh, yeah. That didn't happen because of the Houthis. But they did release a survey today. And this is global. They asked more than 60 ,000 people what the top global priority is, what should be. And it was cost of living. So 56 percent of respondents highlighted concerns about cost of living. That was up from last year. Rising prices of everyday essentials energy costs were among the common concerns. There was a lot about artificial intelligence concerns as well.

4:50But I think the cost of living as the main concern is notable. And then we're getting some commentary and color from the companies that are all reporting. And I've been showing this thread of higher costs and higher inflation. Today, we've got C.H. Robinson talking about truckload spot rates expected to inflect higher during the Q4. as capacity seasonally tightens during the holiday timeframe between Thanksgiving and New Year's. NXP Semi for 2027, we continue to see higher input costs in many areas. And unfortunately, we will pass those to consumers. So if I were asking Kevin Warsh a question today, and I know this is a fun game for reporters because he doesn't answer questions, I would ask why he didn't raise interest rates today.

5:30You know, the market doesn't expect him to raise interest rates, and he's definitely not going to say because the midterms are next week. So I think that is a question. You don't think it's a good enough excuse, the midterm thing? Well, I don't think that they can say that because the Fed has to stay like way away from politics. So if he said midterms, that would be shocking and very uncharacteristic for any Fed chair to say that because they're not supposed to react at all to anything happening politically. They're just supposed to focus on their mandate. It's not whether it's an excuse or not.

5:59I mean, clearly, I think that what they'll say and what they'll insinuate is they did one. They want to see how it goes. They know that there's more work to do. But I think the question is, you know, how much work? How close are they? When do they think they're going to get to 2 percent? Yeah, you see Canada today hiking, and they do raise their inflation forecast. They were looking for a 2. Now they are looking at 3.1. Yeah, they were kind of the last holdout of the major central banks that hadn't raised yet. So I don't think it was that surprising. We'll get more. We'll get Bank of Japan and Europe.

6:31But this is a global issue, as I noted in that FII survey. The higher cost of living, higher oil prices, higher diesel prices, and that's filtering through. The other story is the AI build-out. And by the way, that's been inflationary, too. SK Hynix, look today. It's surging after reporting record revenue and profits as part of a blowout third quarter. We're waiting results from Microsoft and Alphabet after the bell. Let's bring in Dom Rizzo, Portfolio Manager for T. Rowe Price's Global Technology Fund. He's got more than$9 billion of assets under management. Welcome back. It's good to have you.

7:02Thanks for having me, Sarah. So SK Hynix, that's one of your holdings, right? How did it stack up to your expectations? It was very strong, you know, like you said, north of 600 % profit growth. So that's always a good place to be. But look, the hard part on memory is two things. One, memory stocks historically don't work that well in a decelerating revenue growth environment. Can't go from 600 % growth to 800 % growth, probably. It probably needs to naturally decelerate. And then the second thing is what I'm really looking for is who can take share in the CapEx budget. So don't get me wrong, very happy with the Hynix print.

7:37But when I look around, memory's gone from 5 % of the CapEx budget to roughly 40 % of the CapEx budget, where CPUs, on the other hand, are probably going to go from 5 % of the CapEx budget to 10%. So you think this memory trade is getting a little played out? It's not that it's getting played out. It's just that I think there's other areas with faster improving fundamentals. And if you think about my framework, I really look for stocks with improving fundamentals, revenue growth that's accelerating operating margins that are expanding. And that points me to have my biggest bets today in the CPU names.

8:06Like what? Intel and AMD. Yeah. And why is that? It's agentic, right? The difference of a training workload and an agentic workload is night and day. The GPU to CPU ratio for training is 8 to 1. in inference and particularly for agentic, it may be four to one in favor of CPUs. And there's two great companies that make x86 CPUs and it's Intel and AMD. And you don't think it's reflected at all yet, that expectation? I think the numbers may be way too low. You do. Yeah. So let's take Intel as an example. If you look at a few years, the street has gross margins of 45%. But if you go back a few years, Intel was printing gross margins in the 60s, right?

8:49We remember a time of mid-60s in gross margins for Intel. And I don't see why, if they can get their costs in line under LitBoo's leadership, that we can see a path to historical gross margins at Intel over a few-year period. Don't get me wrong. Yeah. It's been an interesting week already. Of course, we got an S1 from this company called Anthropic. I think you guys own it privately or have. We're all waiting for one key blank to be filled in, which is the ARR number for October and or at least some sense as to where things stand for the fourth quarter. How important will that be, not just for Anthropik, but for the broader AI trade?

9:24Well, look at what's happened in the market the past few days after the third-party data, like the YIPIT data, has shown some acceleration in the frontier labs, right? The market's been really strong. And when did the market start selling off? It's when we started to see the frontier labs decelerate. Anthropik itself from 145 % growth to 45 % growth. Now, look, when I originally invested in Anthropic, they were doing$5 billion of run rate revenue. Right. The numbers now north is 70. What was so great about the S1 is we saw how, you know, one, how mission critical, but how capital efficient this company has been.

10:01They've raised$140 billion. They still got 130, you know, or so when you throw in the marketable securities. That's only$10 billion of cash burn to get to$70 billion of run rate revenue. They now have more cash than Microsoft. Right. Well, they do set up, I mean, these kind of lease deals. For example, the huge deal yesterday,$63 billion. But they pay that over five years. It's leasing from an SPV that's been set up. It's not like they're putting the cash out immediately. What I've learned about these headline numbers is the devils in the details, right? Often it's over five years. It's not necessarily take or pay.

10:34There's a whole bunch of different things. There's two things that I'm really focused on. Number one is frontier versus open source token share, right? I actually think open source tokens are going to be abundant, and I think they're going to be super cheap. And I think that all the economics over time are going to accrue to the frontier. Why? People think it's going to open source. Yeah, I think there'll be a lot of open source, but I actually think, look, I'll give you an example in real life. If you had to bet the company bet, right, do you want your lawyer using frontier intelligence or average intelligence?

11:06Are you willing to pay 20x more for a great outcome? I know, but how many of those bets are there, really? I think the world operates at the frontier. So you think there's a plethora of bet the company bets? I mean, I get the sort of everyday work that will get done, that will need to get done. Look, Carl, like I said, I think 80 % of the tokens will be open source. But I think where does economic value accrue? It accrues to where is the most important bet in the company. And I think that's why we see such dispergent salaries at organizations, right? Who's making the most important decision? How are they making that decision?

11:38And I'll give you one really important difference. Task completion is what drives the frontier. It's not IQ. Can you finish the task? And it's a completely different thing. And when I think about what the task can be created by co-work today versus an open source model, it's night and day. Last thing I would say, the place that the labs are being completely underestimated is collaboration and productivity. So collaboration and productivity, who does that sound a lot like? Microsoft. I think OpenAI or Anthropic are coming right at the productivity suite of Microsoft over time. Ah, that's sort of what Reed Hastings said the other day about Oracle, saying there could be a new Oracle, for example, that uses all these tools to go right at the heart of their model.

12:20Look, I think the Microsoft example is so interesting. Like, we have Google and Microsoft tonight, right? I think the cloud numbers are going to be blowout. Yeah. 47%, I don't know, on Microsoft. Triple-digit growth for Google GCP, right? They're going to be absolute blowout. What I'm worried about the most for Microsoft is the productivity suite. So I own it, but I'm super underweight. And why am I super underweight? Microsoft takes price better than Disney. I have a three-year-old. Have you looked at the Disney prices lately? Not in a while, because mine are older now. They just keep going. But Microsoft's E5 suite takes price better than Disney.

13:00Microsoft's a wonder. We've been talking about the possibility since really since chat was introduced almost four years ago that it could ultimately, even though Microsoft, of course, was its benefactor, that it would eventually potentially replace those tools. What signs are you seeing that that's possible? Number one is collaboration. So think about how you typically used to work in an organization, right? You would have Microsoft Word. You'd say down document one, version one, send it to a friend, document one, version two, document one, version three. The true unlock for the labs, and this is where stickiness comes into play.

13:33So the best bear argument is like, hey, the models aren't sticky. I can swap between an API. It's a pretty good argument. You have to know the bear arguments, right, to be a good bull. And I would say the area that that's underestimating is the application and multiplayer AI. Can we all work on the same document together with our clawed AI agent, with our open AI AI agent, maybe with our GrokBot AI agent? And what does that mean for long-term productivity organizations? I think it's very strong. Last thing, and I respect the Microsoft management team so much. I would not be surprised if they tap-danced their way out of this.

14:13But this collaboration and productivity issue will be what hooks the labs into long-term strength and organizations. Before you go, I wanted to get you on a six-month AMD versus Intel. Yeah. What's happened? Look, there's a couple of different pieces here.

14:32I'm always trying to optimize for my clients over an 18 to 36 month basis. And so if you look at what really happened is June 25th or June 22nd, whatever the market peak, had a lot of speculation around it. We had the whole Leopold thing, which we talked about last time I was here. And I think Intel got caught up in some of that speculation. And that's OK. It doesn't change the long-term 18-month outlook. There has been some share dynamics. AMD has been taking a bit of share at the high end of CPU. And then, of course, I think the MI450 on the GPU side is going to be a really, really strong chip.

15:09But, again, I think the CPU trend is bigger than either company. I think it's going to be great for both of them. You do. And all that money they're spending on the fabs as well. Well, look, TSMC is such a juggernaut, right? But we have to make leading-edge chips in America. I've been playing with this thesis, David. We'll talk about it later, about the labs actually being similar to Intel in the 90s. The labs had these huge capital costs and very low incremental costs. And what did that lead to over time? It led to transistor costs, effectively asymptotting to zero. What does that naturally result in?

15:47It actually results in natural monopolies or duopolies over time. Some people have said airlines publicly. I actually think it may be integrated device manufacturers in 1997, right? It's a night and day different comparison. And the difference is two things. One is demand higher than supply. And then two, what is the value you're adding to your customers? Going back to the Intel manufacturing strategy, it's going to take a while to get true leading-edge external customers at Intel. But if there's one person who can do it, it's LibBooten. So that's your highest conviction? They're both. Intel and AMD are my two biggest bets.

16:23Well, it's great to talk about the whole portfolio and some of your ideas, Dom. Thank you. Thank you so much, guys. As always, come back soon. Dom Rizzo from T-Row. Here's our roadmap for you for the rest of the hour. Still ahead, we've got much more on the tech trade and what to expect tonight from Alphabet and Microsoft results. We'll talk to an analyst who says they're both buys ahead of the reports. Plus, data center infrastructure company Vertiv, those shares are up double digits. This is management says the largest ever infrastructure build out is accelerating. We will talk more about that.

16:52And don't miss our first on CNBC interview with Robin Hood's Vlad Tenev. Stocks under some pressure following a decline in crypto, some disappointments in net interest income on a pretty tame environment going into the meeting. Vic's almost 17. 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. 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.

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18:39Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.

18:54We're watching this morning. The first is GSK, the drug maker falling after vaccine sales disappoint, especially with its shingles vaccine, which saw some weakness in China. Right now, the stock's down about three and a half percent. Chrysler, Dodge, and G-maker Stellantis with a big jump. The best day, in fact, since April of 25, the European automakers saw Q3 revenue rise by 1%, adjusted oper net up 184%. Companies in the middle of a$70 billion turnaround strategy. While still negative, the free cash flow also saw some improvement. And then two companies front and center in the AI build-out with results, Vertiv and GE Renova, both with earnings beats.

19:30See them moving in some opposite directions. SEMA has been watching both of those companies as we kind of pay attention to the turn in this build-out story, SEMA. It's an important one, Carl. And I spoke to GE Vrnova CEO Scott Strasek in the last hour about what happens if we do see a slowdown in AI and the trickle-down effect on companies like GE Vrnova. Strasek saying they've got 100 customers in the backlog for gas, spanning 25 countries, and that the market forgets that 200 gigawatts of coal will slowly go offline, prompting the need for gas as what he says will be a force multiplier. The AI financing debate that has pressured a lot of AI stakeholders, including GE Vranova, over the last few weeks.

20:08But Strasik reinforcing that GE Vranova requires big upfront payments from the hyperscaler customers. These projects, he says, are sticky. Customers do have conviction that the schedule remains on target. As for why the stock is down today, the street is pegging it to the electrification business, which did see orders down 9 percent year-over-year, 15 percent sequentially. It does follow very strong results from Vertiv as orders doubled in the quarter, fueled by AI and data center construction. The CEO there is saying it's powering and cooling hardware is expanding Vertiv's role in the build out with high performing chips, just requiring much more cooling and how that's not going to change, especially as workloads go from training to inference, guys.

20:49Did you get any color, Seema, on how, I mean, since demand is so strong, I would think these companies have a lot of pricing power. I've been trying to follow the thread on how inflationary the buildout is. What's happening with pricing? So pricing for, let's talk about GE Renova, their gas turbines, are sort of set for 2027 and 2028. Those projects are already in construction. But I think the question is what happens beyond 2030, where, you know, Strasik did talk about how there's still a lot of demand even towards the end of this decade. I think one of the big questions, Sarah, is how the data center pushback that we're seeing across the U.S., politically speaking, how that could delay timelines.

21:30I would say he said, Skrzewicz telling me that they're taking it very seriously and that projects that are deeply into construction for 27 and 28, there's no change. But he did say projects that are going into 2029 and 2030 where construction is just starting. That's where it's a little bit more complex of a local dynamic right now. We're doing everything we can to support our customers. So that tells you that it's still a wait and see situation for those projects. Yeah, I mean, the growth numbers are really crazy. Thank you, Seema. Seema Modi, still to come, two big tests for the tech trade. How Wall Street is thinking about Microsoft and Alphabet ahead of results tonight.

22:07Plus, do not miss Robin Hood, CEO Vlad Tenev, the stock falling after an earnings miss. The crypto revenues weighing on the outlook as well. He's going to join us in just a few minutes. building a portfolio with fidelity basket portfolios it's 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 now that's pretty good learn more at fidelity.com slash baskets investing involves risk including risk of loss. Fidelity Brokers Services, LLC. Member NYSC SIPC. I've given my blood, my sweat, my tears to this island.

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23:32Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.

23:50Time now for a CNBC News update. Dom Chu has it for us. Morning, Dom. Good morning, Sarah. Spanish authorities say at least 64 people were killed today in a high-speed train crash. They say the train slammed into the back of another stopped train in central Spain. Officials say at least 80 people were hurt and rescue workers are continuing to search the wreckage for more victims. This was the second major train accident in Spain this year after nearly 50 people died when a high-speed train derailed back in January. Brazilian Senator Flavio Bolsonaro arrived in Miami today after losing in Sunday's presidential election to leftist incumbent President Lula da Silva.

24:27It comes after multiple reports said the U.S. would issue him and his family visas. Bolsonaro is defying an order from Brazil's Supreme Court

24:39laundering investigation. And jury selection will begin today in a Los Angeles trial over claims meta platforms and Snap were designed to get kids and teens addicted to their platforms. The case centers on two young girls who say their addictive features worsened their mental health. Guys, I will send things back over to you. Microsoft and Alphabet are set to report earnings. That'll be after the market closes today. It's the next big test for the tech trade. Separately, the information reporting yesterday that OpenAI is planning to buy Google's AI chips, despite being a long-time NVIDIA customer.

25:14Let's bring in Brent Thill. He's senior software analyst at Jeffries, has a buy on both Microsoft and Alphabet. We both, we both, we can imagine, I would assume, Brent, we talked to our guest earlier from T. Row, that the cloud numbers from both are going to be quite strong. But I am curious as to where your focus is going to lie for each of these companies. Yeah, good morning, David. The acceleration in Microsoft's application business and Azure, and then the focus on, you know, they've said repeatedly the last three quarters, PowerShell capacity is the constraint to get these AI systems up and going.

25:52So how is that constraint going inside those data centers? But I think Microsoft has been the most balanced, steady story. It's got the best two operators with Nadella and the CFO Amy Hood. So this is a story that we still really like. Consistency, and they're not going to burn all their free cash flow on data centers and AI. They have a very high margin software business that can fund these lower margin AI investments in the near term. So a story of stability and consistency is one that we like. and Microsoft. For Google, I think the real key focus is the search business, right? So search peaked, you know, in the last couple quarters, and that search number has been coming down.

26:42So to see kind of sustainable 15 % growth in search plus is going to be a key bogey line. And I think ultimately, the use of these agents, right? So if my personal agent doesn't need to go to Google, Like, what is that going to do to search volume? So I think there's a lot of concern. Obviously, these new personal search agents and the business agents are really new. So we don't think that's going to have a material impact now. But Google's multiple has fell from close to 20 times to the low teens. So the multiple has really been under pressure with these concerns. And if they can actually just quell those concerns, the multiple is very attractive.

27:21It's only basically one turn above. How can they call those concerns, though, Brent? I mean, again, you bring up larger or longer term concerns about the AI labs and or their ability to disintermediate certain parts of these companies, businesses. How do you quell a concern like that in a quarter? It's not going to happen overnight. But I think, remember, Google is going to own the agents. Right. So if you think about Google, it's a one stop shop. Right. You have Gemini with the agents. You have all the data in the world. You have the best capital position of many of the big tech companies. You have the diversity of their businesses between YouTube, YouTube TV.

28:00They have so many different, they have multiple assets that have billions of users. So they have an incredibly diverse set of revenue engines. So if one is off, the other can pick up. And clearly, search is the biggest concern. But that has been sitting in the mid to high team growth rates, which no one thought would happen. And that's why Google stock had a massive outperformance. That concern is back. So you just have to keep knocking out those fires, if you will, every quarter that, hey, it's not there's not some sudden new technology that's going to completely. We don't believe that's happening, by the way.

28:36We do not believe there's any major disruption to their business. The one concern I think we've heard is the advertisers are enamored by what Meta is doing with Muse. And some advertisers have said we're shifting a little budget from Google over to Meta to experiment. But beyond that, there really hasn't been any big concerns from the channel that we've heard. Brent, I'm wondering how you're thinking about the funding element of the build out, because we moved from the free cash flow chapter to the debt chapter. Now we seem to be moving further from the debt chapter into the new equity chapter.

29:12Is the equity part a new, like, bottomless well of money for those who need to spend? Yeah, I mean, again, we're having to build this infrastructure ahead of the revenue. And I think we're seeing what we think will be three to four really good companies that are going to come out of this in our world, right? Of the big hyperscalers, Amazon, Google, Meta, and Microsoft will be able to fund this. Will Oracle be in the best position? Will CoreWeave and some of the others longer term be in the best position? Maybe not. We know that these core hyperscalers have insane businesses, right? They're big ad businesses that can fund the build-up.

29:57So they have built-in cash flow mechanisms to help fund this. So you look at Microsoft's software business, right? I mean, many of these businesses are 60, 70 percent operating margins and throw up huge cash flow. So they have a built in mechanism inside their own businesses. But, yes, they're going to go for debt like Meta did this week. They're going to go for more equity. When is this going to end? I think, again, look at the SpaceX numbers. No one thought they would put up, you know, 200, 250 billion dollars of CapEx to build out. No one had that number, you know, on their model. So I think short term, you know, get ready, fasten your seatbelt.

30:37There's going to be a lot more drama. But again, I think three years when you look back, you're going to realize there were only a handful of companies that really built this. And the ROI, we believe we are seeing signs that it is there and it will be there, you know, five years out from now. Which then raises the circular financing question about the economies here, right? If they're going to be winners and losers, for instance, how do you feel as someone who's recommending Google stock that they're deepening their partnership with OpenAI? There was a report this week that they're going to be buying Google chips, that they're going to be developing frontier models off Google Cloud.

31:14Is that the sort of thing that makes you encouraged or worried? I think CIOs and enterprises want diversity and they don't want one vendor to own this. And so the ability for all these companies to interoperate, sorry for the really bad shades, but I'm in Vegas at Oracle's cloud world. You know, a couple of years ago, no one thought Larry Ellison, CEO of Oracle, would sit on stage with Matt Gorman, the CEO of AWS. And so this is what the CIOs want. They want interoperability. They want these technologies to work together. They don't need 100 of them to work together, but they want the big companies, the open AI, Anthropic, all the top companies to interoperate and work.

31:58And you saw that partnership with Salesforce and some of the AI labs. This is what the enterprises need to have confidence that they can inject the AI systems into their enterprise. You see this in the private world with Databricks, partnering with Microsoft and many of the top companies. So I think this is exactly what an enterprise needs. And the enterprise adoption of AI is like, I mean, we're it's tiny. We're early days. It's tiny. Yeah, it's just the beginning. Finally, real quick, Brent, you know, we had a guest, Dom Rizzo, who runs a nine billion dollar funded T-Row. He owns some Microsoft, but he was concerned ultimately that the collaboration tools that will come from the likes of an open AI or an anthropic will really raise a competitive threat for Microsoft's place in the enterprise in terms of allowing people to collaborate.

32:47Do you share any of those long term concerns? Yeah, valid fear. Are we going to code with the other AI labs to build these new productivity tools? I think the beauty of Microsoft is that you can get those tools at Microsoft. For example, Jefferies internally can deploy the AI labs, OpenAI and the others inside the framework of all their software and make sure it's safe, secure, deployed. we can shut employees off that are using too many of the AI systems through the Microsoft framework. So Microsoft becomes the gateway, the harness, if you will, for those tools. So we look at it as a way where they're going to benefit potentially side by side.

33:29Even if you picked another tool, you're going to use the Microsoft ecosystem to deploy alongside many of the other Microsoft applications you've had. So that very valid fear. But I think just last quarter, they just told you, that that business where the worry is that they're going to see acceleration in that business. So that's a signal that, you know, maybe that fear is is not as is great right now. Two to three years out, no question. The labs are going to we call them frenemies. They're going to be friends in areas and they're going to they're going to try to take their lunch in other areas.

34:03So it's going to be a fascinating race to watch. And we're going to we're going to see a lot of competition. more down the road. Today, the labs need Microsoft because they have the data. The labs don't have the data. Right. Right. OK. Well, it is, as you say, a fascinating race to keep an eye on. We always appreciate your help as well along the way. Brent, thank you. Thank you. Robin Hood's Vlad Tenev is coming up after the break. We'll get his first reaction to earnings as the stock is down on this crypto revenue and profit miss. Later on, don't miss the Treasury Secretary, Scott Besson, following the Fed decision, he'll sit down with Sully at 4 p.m.

34:39Eastern time. We're back in a couple of minutes. Robinhood shares under a bit of pressure, but off the lows today after an earnings miss. This drop in crypto revenue puts some pressure on the stock as well. Let's get to our Kate Rooney, who joins us with CEO Vlad Tenev in San Francisco. Morning, Kate. Hey, Carl. Good morning. Thank you so much. And Vlad, great to see you in person. Thanks for coming in. Always a pleasure to be here with you. Bright and early after earnings. You guys reported yesterday. Let's start there. I mean, you sounded really bullish on the earnings call. You talked about record revenue.

35:07EPS did miss, though, and fell. It seems like there's this disconnect. You know, the stock was down 7 % after earnings. It's down this morning. What do you think the market or the street is missing in the near term? Well, if you look at the quarter, records across the board, record revenue, record adjusted EBITDA. We have record total platform assets at close to$400 billion on the platform, Plus, trading records across the board and market share in all of our assets continues to increase. I think we introduced a new metric, our adjusted EPS. And if you look at adjusted EPS, it was$0.60 versus$0.55.

35:49So that was actually a beat. And what that is intended to cover is the operating performance of the business. So some of our activities around appreciation or depreciation of our venture funds. So Robin Hood Ventures vehicles, you know, we remove that from from adjusted EPS because we wanted to give people a better impression of how the operating business is actually performing. I think what you saw, I mean, stocks move up and down, but I think we're off the lows of after the earnings call. And I think what's happening is, I mean, hopefully that gives people time to digest this new metric, which which we understand is is always kind of a new thing.

36:37One of the interesting themes from the call was event contracts and prediction markets made up a bigger chunk of at least transaction based revenue compared to crypto. I mean, that's that's a huge shift for you guys. Crypto used to be pretty significant or it does tend to sort of make up a decent amount of revenue, at least in a bull market. Are these the same clients? I just wonder about the dynamic of whoever's trading on prediction markets. Are they kind of bailing on crypto to go into event contracts? And what does that look like for you guys? I don't think there's a cannibalization effect.

37:10I think what you're seeing is our business is continuing to diversify. Right. Which which is a very good thing. We have 14 business lines now that are generating 100 million in annual revenue. And particularly these trading or trading businesses tend to have a market driven behavior. So sometimes crypto is up. Sometimes, you know, equities and options are doing well. You have commodities that people are trading at different times and they ebb and flow. They're kind of like sine waves of different frequencies. So I think now it happens that crypto is in a relative winter. That said, though, you also look at Robinhood Chain, which we launched on July 1st.

37:59That's been a top five chain in the industry since then with over$100 billion in decentralized trading volume and over$50 million in chain fees. And even though that's crypto technology, it's fundamentally different than, you know, trading Bitcoin or Bitcoin trading volume. So even within crypto, our business is diversifying. One of the things that came up on the earnings call within prediction markets was people placing, I don't want to say bets, but trades on things like the price of crypto or an earnings miss. It seems like there's this convergence of those asset classes in a way. I also wonder about the risk here.

38:40Are there contracts that are technically legal that you guys would just draw a line and say, it just feels a little bit too risky? How are you thinking about what to get into and the risk associated with things like betting on the price of crypto through an event contract? Yeah. So crypto 15 minute up down markets have been a new kind of asset class within prediction markets that's been growing. And there's a tremendous amount of interest in customers. Yeah. And I think we actually expect that to expand. I think that a lot of people have an interest in these short-term price predictions. I mean, you've seen the growth of zero-day options, for instance.

39:23You guys have talked about that. And I think for the most active traders, the capital efficiency of doing like a short-term view, these contracts are attractive for that reason. So you can imagine, you know, around earnings, around company events, you know, those types of contracts, you know, allow the traders to capitalize on opportunities and hedge their risks. So we see those expanding. And I think, you know, for a while I've been talking about how prediction markets started as just sports. But now, you know, you're seeing a ton of product innovation. I think the second category is crypto price movement.

40:05And another category that we're actually introducing, we announced it at Hood Summit, is company KPI and earnings prediction markets. So you'll be able to actually predict and trade on company EPS, company revenue, and of course, operational KPIs as well. One thing that also drives trading volume is IPOs. You guys saw a huge uptick from the SpaceX IPO. What are you anticipating for Anthropic and what's your expectation for how much they will actually allocate to retail compared to SpaceX? Have you talked to them about it? Yeah, so I can't mention anything specific around the Anthropic IPO. What I can tell you is the SpaceX IPO, which we were a selling group member, was a retail watershed event.

40:48event. I mean, you look at our business around the time of the SpaceX IPO and, you know, really huge influx of new customer signups, existing customers deposited more funds. The IPO itself drew tremendous interest. And so I think that, you know, as generational companies come into the market, particularly those that are sort of in unique categories, retail gets gets excited and we have to make sure we have the best platform, the best experience across the board for for these types of traders. We got to wrap. But I do want to ask you about Elon Musk donating SpaceX shares. Do you expect more founders to do that?

41:30Anthropic obviously didn't. They're going to donate through a long term trust. But what's your expectation for founders directly donating to the public? I think it's an amazing thing. And in fact, the Trump Accounts program, which we're honored to be the sole initial trustee in brokerage for in partnership with BNY and the U.S. government, I think that the U.S. doesn't have a great philanthropic vehicle. You know, if you want to donate money, you have to vet charities. Some of them, unfortunately, are unscrupulous. The ones that are doing reasonable things tend to be highly inefficient. And so Trump Accounts is direct philanthropy at extremely, extremely efficient, direct to children.

42:16And I think that, you know, we've been working on the program with our partners. I think we're going to build many things that are going to be just amazing for donors. So excited to see Elon donation. I think there will be many others as well. Appreciate it, Vlad. Well, great to see you in person. Thanks so much. And we'll send it back over to you guys. Thanks, Kate. Okay, thank you. Kate Rooney out in San Francisco. After the break, the other kind of chip stock in focus today. Chipotle out with results after the bell following a rough performance so far this year. And the options market is saying more pain could be coming.

42:49Plus, next hour, do not miss the CEO of JLL, his first interview following earnings. We'll get a good snapshot on commercial real estate, how the outlook for higher rates is impacting his business ahead of the Fed decision today. We'll be right back. Chipotle getting ready to report earnings. That'll be after the bell. The stock, as you see, down about 22 percent year to date. Options traders betting there could be more pain ahead. Let's get to Oliver Rennick at CBO in Chicago. He's got more for us. For us, Oliver. Hey, David, a lot of big earnings tonight, but one with the most interesting bull bear battle going on right now is Chipotle.

43:24It's been a really big volume week, in particular after yesterday someone bought a bunch of at the money puts, It's one of several bearish trades that sent volume to eight times the average. This morning, volume remains elevated at more than twice the normal. And it looks like today it's mostly bulls who are buying the 29 strike call expiring Friday and the 30 strike expiring in mid-January. Overall, more than 8 ,000 calls were likely bought this morning compared to under 500 puts. So it's a stark shift from yesterday, though on lower volume. If you zoom out on the long-term chart, you can see why tensions are high here.

44:03$27 has been a key level of support going back to 2020. But some technicians might look at this and also see a broad head and shoulders pattern that can get nasty if it breaks down further. Right now, the implied move for Chipotle is just under 7%. That's notably bigger than the 5.5 % average swing after earnings the past two years. During that time, it had four rallies and four sell-offs during that period, so also a tie. But bears do have the recent trend with Chipotle down 60 % from its 2024 high. Carl, back to you. All right, I'll take it. There was a really good chart going around showing that since Brian Nifkel left Chipotle to lead Starbucks, Starbucks stock is up 30%, and Chipotle is down 50%.

44:51Oliver, thank you. We'll look for Chipotle after the bell. And quick programming note. Do not miss Chipotle CEO Scott Boatwright. He's going to be on Mad Money with Jim tonight at 6 p.m. Eastern. Meantime, after the break, new Houthi attacks on this Saudi refinery have oil a little bit higher. Brent re-approaching 116. We'll get some details on the scale of the damage as we go to break. Watch shares of Wendy's jumping after a group of investors led by Peltz's Tryon offered to buy the burger chain for one point four billion. Stay with us. Welcome back. Oil jumping on the back of those new Houthi attacks on a Saudi Arabian refinery and reports of more strikes against Iran after the midterms.

45:29Pippa Stevens has more. Pippa. Hey, Sarah. So the current backdrop is one of escalation. Aramco's Rastanur refinery, that's the largest in the country, hit by a ballistic missile as the Houthis continue their attacks on Saudi Arabia's energy infrastructure, with the U.S. reportedly warning Persian Gulf countries to be prepared for a short, intense military campaign after the midterms. That's according to The Wall Street Journal. Now, Iran is clearly feeling the pressure from depleted oil revenue and can endure, negotiate or escalate. And Eurasia Group saying the last looks the most likely, arguing Iran will resist U.S.

46:01pressure and mount an aggressive retaliation that could include non-energy infrastructure targets. Now, Iran is also saying it will take action against Sinokar ships transiting Hormuz, leading the JMIC to say vessels which do not need to transit the area are advised to remain well clear. Meantime, in Europe, natural gas crossing above 100 euros per megawatt hour for the first time in four years, now tripling since the war in Iran began. Italian utility Edison saying Qatar Energy extended the force majeure on LNG deliveries to the country until the end of December, currently at$100.18. Guys? All right, Pippa, definitely we'll see how this develops in the coming days.

46:38Pippa Stevens. 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. 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.

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