10AM Hour: Geopolitical Risks for the Market, AI Rebound Coming? Fifth Third CEO on Earnings 10/19/26

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0:40Right. Okay, we can afford that. You know what? Forget the music budget. We're going to stick with whatever's in the public domain. Give it a try at mintmobile.com slash switch. Upfront payment of$45 for three months,$90 for six months, or$180 for 12-month plan required. $15 per month equivalent. Taxes and fees extra. New customer offer for initial plan term only. Greater than 50 gigabytes may slow when network is busy. See terms. Good Monday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with David Faber. We are live, as always, from Post 9 of the New York Stock Exchange. Carl Quintanilla has the day off.

1:08Tech attempting to rebound today as the Nasdaq 100 comes off its worst week since the tariff tantrum back in 2025. We'll talk to an analyst about the names in the sector that he says to buy on the dip. Plus, geopolitics and sharp focus this morning have made new developments around Iran and Russia and growing unrest in France. We'll get to all of that and the impact on the oil market and beyond. and in a huge week for earnings. We'll talk to the CEO of Fifth Third Bank, fresh off results this morning, for his read on the consumer and the rape story. First of all, let's get homebuilder sentiment.

1:40That data just crossing down. Olick has that for us. Diana. That's right. Good morning. Homebuilder sentiment dropped three points in October to 29, according to the NAHB. That is the lowest level since June of 2012, and it's a miss. The street was looking for 31. Anything below 50 is considered negative. sentiment stood at 37 last October. Now, this is all about rising mortgage rates. The average rate on the 30-year fix began moving higher in September, and it just kept going. The builders also noted higher gas prices and inflation as weakening buyer traffic, not to mention driving up their own costs, especially on building materials and diesel fuel.

2:20Of the index's three components, buyer traffic fell five points to just 18, current sales conditions fell two points to 33 and sales expectations in the next six months drop five points to 32. In addition, 43 percent of builders cut prices in October. That's the highest share during the 2020 to 2026 period. 65 percent reported using sales incentives. Also, the chairman of the NHB in the release noted nationwide more than one third of builders reported immigration enforcement activity in their market areas during the past month, causing construction delays and discouraging legal workers from reporting to work.

3:00So not a great report, Sarah. Yeah, but also not so surprising with these rising mortgage rates. Thank you, Diana. Yeah, Diana Olek. I'm focused on France today because of the sometimes violent protests that we saw the video over the weekend going on around Paris, around other major cities in France. Hard not to be focused on that. And this morning it's showing up in the market. French government bond yields are up sharply. And I think, David, it highlights the fact that the protests and the demonstrations underscore how hard it is going to be for any government to cut back on public spending at a time where they need to because debt has ballooned.

3:39Here's a look at the yield problem for France. Germany, I compare it to because that's kind of the benchmark in Europe, the sort of safe haven. And you can see yields have really taken off. The fact that yields are higher makes it more expensive for the government to borrow at a time where already debt has grown so big. And so that's why people are worried about this debt spiral where they might have to actually borrow to help finance their debt. Here's the problem. Here's the government debt to GDP in France. We're about 120 percent. And that's high. And it's problematic because the country doesn't have a lot of growth and it has borrowed a lot.

4:16Just take a look at the deficits, the government deficit of France relative to its GDP compared to some of the other European countries. Italy, remember Italy was such a basket case with its deficit? France is worse right now as a percent to GDP. It's set to be a little above 5%. I think the important point you made, because, of course, if we put the United States up there, we would actually be even higher in terms of our budget deficit as a percent of GDP. But we do have growth. We have growth. And they don't. And our unemployment rate is about half of what theirs is. Right. And we have better ability to borrow because we are the reserve currency and people still want our debt.

4:51And I know that's not something necessarily you can take for granted, but it makes it a completely different story. And look at what's happening with French GDP. This is the biggest difference. We have growth. You can tackle. That's what I just said. Yeah, as you said, you can tackle some of the fiscal problems if you can grow your way out of it. And that's the big promise and hope of AI, right? That it'll lead to this productivity boom that will lead to growth rates that will help fight our big debt levels. France does not have that. They have relied on public spending. And I think that that's actually a warning for those that are saying that socialism would be a better model because the welfare state is not cutting it right now.

5:28There's the unemployment rate, okay? 8.3 percent. We're at 4.2 percent. So that's another big, stark difference between the U.S. and France. And then for young people who are driving a lot of these protests, 21.6 percent unemployment rate. This is all very problematic as well. It's not just fiscal. It's not just economic. It's political as well. Macron's approval rating has plummeted. It's now around 15 percent or 18 percent there, approval rating. So that's a lot sharper, sharply lower than where we are right now, say, with President Trump's approval rating. And the problem is nobody can do— President Trump's approval rating is at about 30 percent?

6:05But it's, yeah, 30s. But it makes it really hard for any politician there to be able to take the medicine. To do anything. To do the austerity, to get the budget under control. Have we been able to do the medicine? I mean, we run$2 trillion deficits right now. We don't have it. First of all, we don't have rioting on the streets. We don't have unsustainable borrowing levels. I'm not talking about that. I'm talking about we don't have unsustainable borrowing levels. Right now? I mean, we don't. We don't. We don't. Of course not. To your point, that said, we have a$40-plus billion national debt. At some point.

6:35At some point, that's going to become an issue. Of course. And we always wonder when that point is. And we talk about it all the time. Of course, it never seems to be the point. Even when we talk about it maybe being the point, it doesn't end up being it, in part because of what you just said. It's going to force a market kind of crisis, right, to get politicians to do anything when it comes to cutting back spending. But I think the important point is that France is in a much more urgent place. And every time they have a new prime minister who comes in to do that, they get booted because it turns out it's not popular.

7:02Although it's the president who really does things. there. And they've had the same president for a long time. For a long time. And there's an election in April. It's a different system. Look, the combo, I think, of the political problems, the economic problems, the fiscal problems and the unrest is making for a dangerous combination. And you see that play out in the markets right now. The euro is weaker. And I think that also raises the question of whether this can spread beyond France and whether it's a bigger problem for Europe. I mean, nobody. We're not at crisis levels right now, but obviously it's something we're watching right now.

7:31Yeah. No. Okay. Yeah. So I don't know. Were you watching the protests over the weekend? Not really. I mean, obviously, yes. Was I watching them closely? No. I was enjoying the beautiful fall foliage. That's true. We had some nice weather. Being outdoors. I try and get away from it. But I know you were very focused on that. And enjoying the foliage. Let's check in on the overall market right now, because it does look like the S &P 500 is higher. We're starting the week on a green note, at least, if you look at the S &P and the Nasdaq. I would mention one One thing, Sarah, very quickly, just the core wave shares are now flat.

8:04And that obviously has been a real focus because, of course, we know the beating that stock took last week on these concerns overall about cost of capital, access to capital, upgrades this morning from the likes of Goldman Sachs. There did appear to be some momentum. Jim did say, don't buy the early weight, let it settle in. So we'll see how things go here. And, of course, we don't know how the rest of the major of the day is going to go for the next six hours or so of trading. But interesting to note that stock now not up after being up as much as 5 % in the early going. So you think the market is following it?

8:37Like that's the stock right now. It does. And a lot of it depends on what's happening in the treasury market as well. We're seeing firmer treasury yields. We are, yeah. If that comes down. Any reason in particular for that? I mean, we had a big, we had buying last week. So it seems like there's a reversal of the trend right now. It's also been pretty tightly correlated with oil prices. Oil's lower today. So it doesn't seem like that's necessarily the reason. But watch it, because higher Treasury yields makes it harder for companies like Corweave to borrow. Interestingly, though, as you know, many of these stocks were suffering last week, despite what was ultimately the rise in price of bonds, which meant the yields came down Thursday and Friday.

9:14It's like there's a lagged impact on the bonds. People realize, oh, wait a second, these yields are high. Corweave and other highly levered companies that need to borrow are going to feel it. Let's talk about all of this with Anastasia Amoroso. She's Chief Investment Strategist at Partners Group. She joins us here at Post 9. Welcome back. So how do you feel about the market today, given some of these pressure points, core weave, bond yields, and what caused some worry last week? Better. I think I feel better about the market after the clearing that we had last week. And there are a couple of things.

9:46You know, first of all, we did worry about the higher cost of debt and what that's going to do to the AI build-out. But I will say, parsing through all the different parts of the AI ecosystem. If you think about the hyperscalers, they have plenty of capacity to actually take on that additional debt. I say that because of the starting point that they had, which is quite low debt ratios. And also they do have just plenty of interest coverage ratios to work with. You know, when I think about the semiconductors, there's plenty of free cash flow, which also the cash flows are formidable. So they really do also allow for that additional cost of capital.

10:18But here's probably the most important point. Even when you look at a company like CoreWeave, we shouldn't automatically assume that the wider credit spreads translate to just the cost of debt going up on every single project. And in fact, a lot of these companies fix the debt and they hedge it. And so it's not an automatic reset. And then finally, if we are dealing with a higher for longer rate environment, that's going to be embedded in new projects going forward. So you put all that together and perhaps the picture was not as bad as initially thought last week. And then, Sarah, the other point is you've got NVIDIA GTC this week.

10:55You've got meta results coming out this week. I think they can be catalysts actually for the markets. But, you know, to David's point, CoreWeave, bond yields are higher. Maybe bond yields are higher because French bond yields are sharply higher. And sometimes, you know, you see this global move when it comes to rates. And those are problems that are hard to figure out where they're going to go. That's right. So how do you make a call on the equity market not knowing? I mean, that's why we published our fourth quarter chart book, and it was titled Higher for Longer. Because I do think even though maybe the Fed is now going to be as hawkish as markets are currently anticipating, I do agree with you, Sarah, wholeheartedly that it's going to be really challenging to resolve what's happening in the back end of the curve.

11:36Partially what's happening in the back end of the curve is sticky inflation. But again, we do see signs of that easing. Solid growth. I don't actually expect growth to materially accelerate from here. But the third thing is the term premium. And those term premiums are rising globally. And look, it is, to your point, all interconnected. And if I look at the debt to GDP ratios, if I look at the budget deficits, there's no quick fix. So I do think it's higher for longer. But again, what does this mean? Similar to the core weave example, in the U.S. economy, most of the debt is actually fixed today.

12:07or some of the debt is actually hedged if it was floating initially. So it is not a quick reset and it's not a quick headwind, I would say, to form for the markets. We are going to get earnings. You mentioned Meta. We're also going to get SpaceX as well this week. I mean, but what would it be? I can certainly imagine a scenario in which they indicate their demand remains through the roof, so to speak, and CapEx numbers will probably be raised. but it doesn't necessarily mean it's enough to move the entire market. It may be a positive, perhaps, for either one of those company stocks, depending on what they say.

12:43What do you think they'd have to say more broadly to sort of give credence to this scenario you're discussing? Yeah, I think the markets started to worry about a couple of things. First of all, the competition that is coming from, let's say, China and from all the other open models. And the other interesting question, actually, a client asked me the other day, what happens beyond 2028 or 2029 when some of this capex potentially comes to an end? Will we actually see a cliff? So I think for all of those companies, what's really important for them to say is this is a long-term, five, ten-year-plus trend that is going to continue.

13:14And I think, you know, in the case of Meta, for example, and also I think we can hear this from NVIDIA as well, we are just at the very, very nascent point of adoption of agentic AI. We just are making our segue from conversational AI to agentic AI. But if you look at tokens, for example, if you look at token consumption just this year, David, it's quadrupled in the last five months. But that's actually still a very beginning, because if you think about what's possible because of consumer agents, because of enterprise agents, we can see a 24-fold increase in that token consumption. So to the extent that we see the CEO of NVIDIA and Meta and SpaceX and others allude to that, I think that would really reinvigorate the AI market.

14:00Yeah, I just wonder, I don't know that that's in question, I guess. I think that uniformly there is a belief in what you're saying. It's much more focused right now on these concerns around capital, the ultimate return, how much of this money is really going to generate a return over the long period of time. And conceivably, what capacity will not go online as a result of some of these companies not being able to bring it on when they think they can. That's right. I mean, I think that's true, but a company like Beta could actually give us a glimpse of ROI on AI. I do think that we are starting to see a payoff in some of the digitals and sales marketing parts of the organization.

14:37Also, the adoption numbers for Metamuse have been quite strong and encouraging. And the stock obviously reflects that, having had a great rally in terms of that. But the question for investors, to your point, is to what extent that starts to translate into revenue. Maybe it's early days, but if they can give us glimpses of what the trajectory there is, that's certainly supportive. All right, Anastasia, thank you for joining us. Thanks so much. Let's kick off the week with the markets. Anastasia Amoroso. Here's our roadmap for the rest of the hour. After the break, is the worst over for tech? We'll talk with an analyst about one name that got slammed last week that he says is a buy.

15:10Plus, Anthropic says it plans to commit 5 % of its shares to a public benefit fund. We're going to talk about that decision and what it signals about sentiment towards the frontier AI companies. And we'll talk to the chief forecaster at Gartner after its report on neoclads last week helped spark some of these fears around the AI trades. Walk on the street. We'll be right back after a quick break. 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.

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16:22Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. This holiday, all plans, even unlimited, are just$15 a month. A holiday deal this good obviously deserves an enormously expensive holiday song, like All I Want. Right. Okay, we can afford that.

16:55You know what? Forget the music budget. We're going to stick with whatever's in the public domain. Give it a try at mintmobile.com slash switch. Upfront payment of$45 for three months,$90 for six months, or$180 for a 12-month plan required,$15 per month equivalent, taxes and fees extra. New customer offer for initial plan term only. Greater than 50 gigabytes may slow when network is busy. See terms. Welcome back. Yeah, CoreWeave shares had bounced this morning rather sharply. Then they went negative a moment ago. Sarah and I were talking about that. You can see, though, up about 2 % now. Our next guest believes the rotation away from CoreWeave came from a financing scare.

17:31Not a broken business. Let's bring in Amit Dariyanani, Senior Managing Director at Evercore ISI. Covers IT hardware, communication stocks. Has an outperform rating on CoreWeave. And a$150 stock price. All right, all that's out of the way. Yeah, what about their business model right now? How much is it impacted, though, even if business is good, if they have to pay a lot more to borrow? You know, maybe I'll start the discussion with this, right? The fact that you have to start talking about the solvency of any company, probably not a good place to start the discussion anyway. But, you know, I've been there right now.

18:03Now, here's what I say, Corby. A lot of the funding really comes from the backlog that they have. And the backlog, at the end of the day, is backed by customers like Meta, Microsoft, OpenAI, and Propit. And they have been able to raise a lot of this funding at 5.5 % using these DDTL facilities, for example. What the market is focused on is a very small tranche of the debt, which is unsecure finance. That is the one that's yielding 14%, 15 % that folks are really worried about. I don't think all new clouds are equal. And I think the issues you see in certain new clouds in Australia or somewhere else don't transpire into a core view where we think the return on the investment capital is still fairly high, and they still have access to a lot of funding, given the backlog of the AAA customers they have, given the immediate backstop they have.

18:51So I think there's other ways to fund what they need to do for the next couple of years. But again, I will concede and say, not a good place to start talking about the solvency of any company when you're talking about funding and how much you need to be raising money. Yeah, no, it can create its own sort of outcome if you have that narrative going on. But to your point, and Michael Intrader is, you know, a frequent guest on the show. He's made the point many times, Amit, as well, in terms of how they finance things. What are they seeing on the demand side then? And what are you calculating in terms of on their return of invested capital?

19:24Yeah, so two parts, right? On the demand side, if you look at GPU rental prices, for example, that number has kept going up by 15, 20 percent every quarter of the last two quarters. So I would say from a demand perspective, from a return perspective, revenue perspective, this model has gotten more attractive in the last six months versus not, right? Corbib historically was funding a lot, financially getting revenues on deals at about 10, 11 million bucks a megawatt. They've had a couple of contracts recently that have been at 30 to 40 million dollars per megawatt. So you're seeing really good demand for that product.

20:00Now, our analysis is this company can sustain 15 to 20 percent return on invested capital on a per project basis. Now, projects can all vary a little bit, but it's 15 to 20 percent return on a per project basis, which even they can do. And so to the extent financing goes up by 100, 200 basis points, I think it's a very livable outcome. It doesn't change the business model. If they really have to start funding everything at 15 percent, there's an issue over here. Yeah, so I guess that answers that I was going to say it feels like the market was asking whether the business model is sustainable with yield with rates continuing to rise.

20:36You know, the part I would say is like to some degree, the answer to that depends. What are you going to do with all these tokens, right? If these tokens are sold to a meta or entropic or someone else and they can generate really good economic value out of it, then this business model is.

20:56Oh, I mean, it's I'm it's shot froze. I'm it is. Yeah, he froze. But I get, you know, sounding like a lot of sounding like a lot of analysts, I think, stepping out and saying there's no fundamental problem, no fundamental problem, even with the borrowing, but acknowledging that you never want to be talking about a company solvency. Right. And that that can create its own outcomes sometimes if, in fact, investors pull back and pull back in a significant way. All right, well. Thanks, Emmett. Yeah. We'll have you back. I'm Eitarianani, Evercore ISI. It's a buy on CoreWeave. Still to come this hour, steelmaker Cleveland Cliffs surging on the back of strong results.

21:36We're going to break down that quarter next. Plus the CEO of Regional Bank, Fifth Third. Revenue coming up short. We'll get to results and how higher rates are impacting his business, the consumer, the lending picture when Squawk on the Street returns. At Fnatic Sportsbook, We're talking real fan cash on every bet. Spend it on jerseys, tickets, collectibles, and more. Rewards hit different here. New customers can bet and get up to$1 ,000 in fan cash over 10 days. Fanatics, the only sports book to reward every bet. Must be 21 plus. Gambling problem? Call 1-800-GAMBLER or 1-800-MY-RESET. CT, call 888-789-7777.

22:11MA, call 800-327-5050. And Y, call 877-8-HOPE-NY. MD, visit mdgamblinghelp.org. Offer not available in all states. Terms apply. See Fanatics app for details. weren't agents supposed to take things off your plate building another to handle the others is a bit much don't make more work out of work gemini is the one agent that knows all parts of your business and actually gets stuff done you give it a project close your laptop and when you come back the job's finished no matter your industry or role your agent has the skills to help every team stay in their flow seriously make work less work with gemini on google cloud check response subscription required.

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23:43year ago. The company now expecting 2027 adjusted EBITDA to exceed$4 billion, compared with Wall Street expectations of around$2.5 billion, boosted by domestic trade policies, stock gaining almost 12%. And then Intel on the move. JPMorgan upgrades the stock to neutral from underweight, citing improving execution under the CEO, Liv Bhutan, and growing confidence in the company's turnaround. They say agentic AI workloads and tight advanced chip supplies will help support Higher 2027 earnings estimates. A little bit of a catch-up if they were underweight to neutral. But clearly, Intel has surpassed their price target.

24:20And now they're feeling good about the new leadership. Yeah. Jim made it the focus of his mad dash in the 9 o 'clock hour. Of course, he's been positive on Intel since the early days of Liputan taking over as CEO. I guess a lot of it, though, depends on AI spending infrastructure trade, right, which it is very much a part of. And the fact that it has pulled back, it's what, like 30 percent off the highs in June. So it's very much gets sort of dragged into that with some of the other semiconductors. And it's a little bit earlier on its journey than, say, the Broadcoms and AMDs. Yeah, in terms of especially right with all the fabs that it is conceivably building.

25:01Always interesting to note the U.S. government does own 10 percent. Intel as well, which still has a half a trillion dollar market cap. And they're up on it sharply. Yeah, yeah, yeah. We, the government got in at$100 billion. So it's a nice game. Very nice game. I wonder what happens to that game. Does it get put in some sort of a sovereign fund of some kind? It should get put into these Trump accounts. We could use it right now to help reduce the deficit. Yeah, that would be one idea. Or pay for some stuff. We could give it to the kids. As Elon Musk conceivably is going to be doing with a share of each share, one share of his of SpaceX.

25:38That's what we'll get to that. And anthropic in the public benefit. We don't know exactly where that's going. But this is I mean, we have heard so much that the biggest one of the biggest risks with A.I. is that it only benefits a few and people don't share in it. It's one of the biggest criticisms of Senator Bernie Sanders who wants, you know, the public to own A.I. And I think that these companies are stepping up and they're they're answering for that because you don't want to see massive inequality. and pushback politically, as we're seeing on AI, so that we can't build it. Right. Yeah, that's all.

26:09I mean, although in an economy like ours, even$50 billion or$100 billion is not necessarily going to move the needle. No, but it's a step. It's a gesture. Let's get a CBC News update. Dom Chu has that for us. Dom. David, good morning, Sarah. The Supreme Court rejected an appeal today brought by the man accused of masterminding the 9-11 terror attacks. Khalid Sheikh Mohammed was fighting to have the government honor a 2024 plea deal with military prosecutors that would have given him and two co-conspirators life sentences. The then-Defense Secretary Lloyd Austin later rejected that proposal. Mohammed is now set to stand trial before a military commission in 2028.

26:51Australia's prime minister says a car attack on an independent lawmaker in the country was no accident and that the nation's counterterrorism team is investigating. Police said a driver hit 65-year-old Helen Haynes outside of her office today, critically injuring her. The driver has been arrested and is being interviewed. And Japan is preparing to launch a mission today that could bring the first-ever samples from a Martian moon back to Earth. It will take 10 months for the spacecraft to reach its destination, where it will spend three years studying the larger of Mars' two moons. If all goes to plan, the spacecraft will return to Earth in the year 2031, David.

27:30I'll send things back over to you. OK, thank you, Dom. Up next, Vladimir Putin reportedly pushing for a three-way summit that would include President Trump and China's Xi Jinping to discuss the war in Ukraine. Of course, it would not include Ukraine's President Zelensky. Former Assistant Secretary of State Punita Talwar is going to join us next at Post 9. We'll discuss that. Plus, in the next hour, don't miss TD Bank U.S. Vice Chair Jeff Solomon. Let's find out whether he's growing more cautious on the AI trade. We're back in a moment. Geopolitical unrest gripping Europe and the Middle East. First, there's Iran warning over the weekend that it's developed a new operational plan to respond to any renewed strikes by the U.S.

28:14and Israel. And then there's Russia reportedly proposing a summit between President Putin, President Trump and China's President Xi to negotiate an end to that war. And of course, France, which we talked about, where more than half a million people have taken part in protests against rising living costs, declining public services. Joining us to talk about all of this at Post 9 makes sense of the headlines is Puneet Talwar, former ambassador to Morocco under the Biden administration, former Iran advisor and assistant secretary of state for political military affairs to President Obama. It's great to have you back.

28:43Thanks for being with you. And just reading some headlines about security alerts rising, the U.S. embassy is raising the security alert across the Middle East. I think it encompasses almost 12 countries now. What does that signify to you? Well, the situation in the Middle East has been in a state of unrest for several months now. So this is not at all surprising. And when I was in government, this is the prudent thing that we would do. You wanted to go through the security channels, diplomatic security, other parts of the government. who are watching the various threat streams and basically, I think, appropriately warning U.S.

29:19citizens that the environment there is really in a state of some degree of volatility and that anything could happen at any time. And with the political threats and the rhetoric that's going around, I think it's a smart thing to do. What are the chances now that the U.S. comes back and ramps up attacks on Iran with or without Israel? We've seen, you know, President Trump has suggested that perhaps after the midterms, He might do something. The Iranians say that they're preparing for that. They seem to be assuming that as well. But it's unclear, actually, what's going to happen here. I think we're in a stalemate with Iran.

29:53We are basically imposing a great deal of pressure on the Iranian economy through the blockade. Is that working? I don't see any sign that Iran is about to capitulate or collapse. On the flip side, we are getting oil out of the Strait of Hormuz. But Iran is not at the level it was before the war. And it's coming out at a huge risk premium. So Iran thinks, basically, that this is going to pose a lot of cost on the global economy, provide it with leverage. But I don't see the United States capitulating either to Iran's demands. So how does this end? Well, this could go on for a very long time. The longer it continues, you could have more cycles of escalation and de-escalation, unless there's a diplomatic breakthrough.

30:35But diplomacy, while it's going on indirectly, primarily through the countries at this point, does not seem to be going anywhere either. Other side of the world, of course, the other war, Ukraine, Russia, the president basically overturning many of the sanctions that had just been passed by the Senate and the House. And he had signed against Russia. What do you make of this? His supporters say he's just trying to figure out a way to end this thing. Yeah. And by giving Russia perhaps, you know, this opportunity, it'll get Putin to the negotiating table. Yes, and I think President Trump has been clear that he wants this war to end.

31:14Unfortunately, I think the set of policies and this public clash with Ukraine and with President Zelensky is going to have the opposite effect. The notion of sitting down with President Xi, with President Putin to basically decide Ukraine's fate without Ukraine there, all of this could actually prolong the war and increase bloodshed. The best way to bring this war to a successful, or I would say to a close, not a successful one, but to a close, is to be able to support Ukraine militarily and through economic means so that Russia realizes that it won't be able to win this. That's not happening now, though.

31:52No, but on the battlefield, Ukraine has actually regained some ground in recent months. Last month was a very difficult month for Russia. There was an anonymous report from NATO that said that over 50 ,000 casualties occurred on the Russian side, which is quite tremendous. But Russia is also ramping up its own attack. It's got these new jet-powered drones that are basically able to penetrate Ukrainian air defenses. They're trying to weaken the morale of Ukrainian civilians going into a winter there. And they basically want to undermine support for the war in Ukraine. And so we should be standing with Europe and with Ukraine as well.

32:30Speaking of Europe, I mean, I was telling David, I thought the scenes of violence and destruction in France were pretty horrifying over the weekend. I mean, this was not peaceful demonstrations. It was quite the opposite. Where do you think that leaves a country like this and Europe in a much more complicated world, as we're talking about? I agree with you, Sarah. It was really very difficult to see those scenes coming out of there. Now, the protests actually started off peacefully. The vast majority were. But then rioters and looters basically took advantage of that. And you have a situation now where we're six months out from a French election next April and May.

33:09The polls suggest that the national rally, the far right, headed by Marine Le Pen, is actually in the lead in those elections. And they were very quick to jump on this and basically say they are the only party that can restore law and order in France. Meanwhile, the center, which is in charge right now, is pointing fingers at the far left. The far left is pointing fingers at the centrist parties as well. Moreover, I just say that the French toolkit is very limited right now. France has one of the highest debt burdens in Europe. It has one of the highest tax burdens in Europe as well. And it has weak economic growth.

33:44So it does not have a lot of room to maneuver and to provide additional spending to respond to the protesters. Do you think that Macron is being too not tough enough when it comes to restoring law and order? Well, I think his interior minister offered to resign. He rejected that. He said there was no basically excuse for what happened over the weekend. They seem to have calmed down now. They seem to have been caught off guard. All right, Puneet, a lot of a lot of unfolding situations. We'll have you back on. Thank you for joining us. Great to be with you. Puneet Talwar. After the break, the CEO of Regional Bank Fifth Third revenue misses estimates.

34:19while profits did come in better than expected. You can see the stock up almost 2%. We're going to get to the quarter, talk about the impact of higher rates on the company's business. Later, Gartner's chief forecaster will join us after the report on Neoclouds that he co-authored last week cited as one reason why we had a sell-off in any number of the names that were mentioned. Welcome back. Take a look at shares of Fifth Third. Bancorp hired this morning, this after the company reported an earnings beat for Q3, pointed to stable credit quality, despite the broader macro landscape, also seeing a 21 % boost in mortgage banking revenues quarter on quarter.

34:58Joining us now on a CNBC exclusive is Fifth Third CEO, Tim Spence. Good to have you. You know, I know core EPS beat by three cents. You did have a provision and things of that nature. How do you characterize the quarter overall? I think the quarter was great. It's easy to forget now because it happened a little bit more than a month ago, but we completed what is the single largest conversion that Fifth Third has done in its 168-year history with the technical conversion of Comerica over Labor Day weekend at the end of September. And despite that being in the middle of the quarter, we hit a 141 ROA, 20.6 % return on tangible common equity, both of which were above what we committed to achieve in full year 2027.

35:50And an efficiency ratio of 45, 50. Go ahead. Sorry, let me actually jump in and just ask about the Comerica integration. You know, you talk about the synergies. How much remains for the fourth quarter and 27 in terms of expense synergy from that, Tim? I think a good bit. We have the vast majority of the expense synergies are in the barn at this stage in terms of the actions having been taken. A little bit more work to go on trust conversion, and then internally our payroll conversion will happen. But when we get through the fourth quarter, the net$850 million in expense synergies that we committed to will be fully in the run rate of the combined company.

36:33We expect all three of our core profitability measures to be in excess of what we committed to when we announced the deal just over a year ago. Yeah. Commercial mortgage, construction lending seem to have driven at least half of your incremental loan growth. And I'm just curious as to what your expectations might be for that going forward, given the move up in rates at the long end. Yeah, I expect that construction in particular will be a little bit slower across the industry. In our case, this had as much to do with timing as anything else. North of 85 % of all the new construction loans that we made in the third quarter were two existing sponsors who were initiating projects that they had in the works.

37:19And we focus on a segment of the commercial real estate market where the sponsors have deep pockets, principally provide full recourse, and where, therefore, the projects that they've undertaken are maybe a little bit less impacted by the move up in rates than you would see in commercial real estate more broadly. What about AI, Tim? The market is so focused on AI and the build-out. How exposed is a massive regional bank like yours to the AI lending and build-out? Is that a risk or an opportunity? Yeah, so narrowly as it relates to commercial lending, we've elected to sit out data center construction financing.

38:03So we have very little exposure there. And the exposure we have is legacy hyperscalers who are doing cloud hosting as opposed to AI. I wouldn't say that I think I'm smarter than the next person. But generally, unproven categories that are growing quickly, at a minimum, don't get priced well out of the gate. And I think we've seen that a little bit when you look at the rates that bonds attached to data center construction are now trading at and the blowout of CDS spreads in certain portions of that market. As it relates to AI as an enabling technology, we're over the mood about what we're going to be able to do there for clients and the ways we're going to be able to use the technology to deliver just better service, frankly, as much as anything else.

38:57Do you see it as disruptive to banks, to deposits? Oh, I think new platform technologies are always disruptive, right? Whether it was the rollout of the computer in the 70s or the internet, and now certainly AI. I think, though, that maybe the market has its focus wrong here. Like, what happens when you have technologies that either eliminate friction or improve price discovery is that the people who only have price as an element of their value proposition are the ones that get disrupted. So if you look at the large regional banks, certainly fifth third among them, we differentiate on the basis of distribution, we differentiate on the basis of product quality, and we differentiate on the basis of being able to serve people broadly across their relationship.

39:52Those are all factors that, if anything, I think AI is going to allow us to enhance over time. It's the folks that are basically internet-only banks, the neobanks, whose only lever is price, that I think are probably more exposed here. And that's certainly not the way that the market has read it. Plus, I just would note, if AI is good enough to facilitate better deposit sorting, it's going to have a huge impact on the cost structure of our industry. And it's going to mean that non-interest expenses decline at least proportionally and maybe faster than we see any impact to margins in our regular way lending and deposit taking activity.

40:35Tim, something else AI enhances the ability of criminals to use the tools that are now available. It's a real fear. I know I'm sure you may share it. I'm curious to hear your thoughts. But when I talk to your peers, are you spending enough? Do you feel like you have the defenses you need in place to make sure something bad does not happen to your institution? Yeah, I mean, you never feel like you're spending enough because the foundation of our business is trust. And that trust with our customers is rooted in our ability to keep their money safe. We spend a lot here. We're spending a lot more on an annual basis now than we certainly were a few years ago.

41:18and are going to have to use machines to fight machines as it relates to cybersecurity and fraud and otherwise. We actually open sourced the harness that we built, building on our experience with frontier models throughout the spring and summer this year to make the technology that Fifth Third is using to do deep code scanning and otherwise available to anybody who has a similar cyber defense need. We did that because, frankly, the harness that we had built internally was outperforming the other open source solutions that were available on the market. And we are working as an industry broadly to ensure that open source, to ensure that the core vendors and that we individually are all well protected as it relates to cyber vulnerabilities.

42:12because if one of us struggles on this measure, everybody struggles. So I expect the banking sector as a whole, you know, to work very hard to ensure that people stay safe and that they can have confidence. Well, we certainly hope that's going to be the case. Appreciate you taking some time, Tim. Thank you. Thank you. Thanks, Tim. After the break, how options traders are thinking about Meta ahead of results later this week. Plus, next hour, Anthropik says it will set aside 5 % of its equity for a new public benefit fund to help with AI job disruption. More on that initiative when we come back.

42:48Welcome back. NASDAQ sitting near session highs, as you can see, up, yeah, 1.3%. Chip stocks helping lead the comeback, at least for today. Let's get to Seema Modi. She's got a closer look at some of those movers. Seema. Hey, David, will Evercore ISI out with a note this morning that leans a bit more bullish, saying the pullback that we've recently seen in these names comes ahead of what they think will be a strong hyperscaler earnings season, pointing to the fact that the H100, that's NVIDIA's older chip, has held up in terms of pricing ever since Anthropik's latest model came out. And then separately, Bank of America's semiconductor team just returning from Asia, sharing with clients that investors there are a bit more anxious about the AI funding cycle, and that has caught names like Samsung and SK Hynix in a broader sell-off.

43:30This week, the focus remains on CoreWeave, And if it's debt, which is still trading above 15 percent right now, by the way, could impact its ability to raise capital, the implications that could have on future demand for chips. Though consensus amongst credit folks we spoke to over the weekend is that GPU backed loans will be the go to option for these companies. Unsecured debt will be less desirable, especially at 15 percent. And that brings us to the next important event, which is Meta earnings. Evercore's TMT team adding that the biggest question is not whether Meta will issue stock, but how big Meta's equity offering could be.

44:02They say the market is comfortable for$30 billion. And remember, Google had an$80 billion stock issuance, guys, a couple months ago. Oracle, as we know, has engaged in one as well. It does sort of mark this next leg in the whole AI funding story. This, as we await numbers from two semiconductor equipment stocks this week, we have Texas Instruments and LAM Research. Both have been caught up in the semi-sell-off. They report on Wednesday. Sarah. Hey, thank you. It's going to be a busy week for AI News, SEMA. And speaking of Meta as well, reporting the stock had seen a big run up into earnings, though it did pull back last week.

44:36So how are options traders playing the name? Let's get to Oliver Rennick at the SIBO in Chicago. Oliver. Hey, Sarah. All eyes are indeed on Meta this week as the social media giant is at the center of the AI trade with its muse assistant, the cutting edge of consumer AI productization. Options traders are pricing a 7 % move for Meta after earnings Wednesday, which may sound big, but it's actually below the 9 % median move the past year and the average 8 % move the past two years. Meta's also had a few big crashes after recent earnings, falling after three of its last four reports. So safe to say there's a bit of tension here going into this number after last week's sell-off in tech.

45:18Options trading this morning in Meta is about evenly split between puts and calls by volume, but it does look like more calls were initiated by sellers and more puts initiated by buyers. So perhaps some trepidation showing up here as Meta tried and failed, don't forget, last month to make a new record. Of the top five contracts bought by volume today, all expire this afternoon. Four were puts with the 690 strike getting the most attention, guys. Okay, Oliver. Oliver Rennick at the SIBO in Chicago. Thank you very much, Oliver. I mean, David, the market has come back a little bit. I guess we're watching core wave shares, right?

46:00Yeah, we're keeping an eye on it as a reflection for sort of so many others. And the Nasdaq is, as you point out, up almost 1.4 % right now. Amazon is a leader. Got some nice coverage from an analyst. Intel as well, upgrade from JP Morgan. And we've got a lot of event catalysts in the way of earnings. Not a lot of economic data this week, some housing. Had some weaker sentiment from homebuilders kicking us off. 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.

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