10AM Hour: Intel Plummets, Amazon’s Earnings Miss, Largest Crypto Heist Ever 10/30/26

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1:03Good Friday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Katania and David Faber. We are live, as always, from Post 9 of the New York Stock Exchange. Some scary moves for tech today as Intel loses more than a quarter of its value and Amazon pulls back, though well off its lows at this point. We'll talk about what the technology sell-off means for your money. Plus, Citigroup's Scott Kronert is sticking by his bull thesis into year Despite the volatility this week, he joins us to explain why. And it is being called the biggest crypto hack ever. We've got the latest for you on the$6 billion heist at Binance.

1:36And we'll get the first reaction from the head of the CFTC, Michael Selig. But first, guys, we are seeing this broader tech sell-off. And the story in the bond market has been buying Treasury. Yields have really come down this week. And we continue to see that pattern today. Why? Because AI, as we've been saying every single day, is increasingly part of the macro narrative. It is the driver of the market. It is the driver of the economy. So when there's fear about AI, whether it's disruption or slowdowns or demand, it's now increasingly being reflected in the bond market. And we know this from the recent data.

2:15We yesterday looked at how AI was impacting inflation and GDP. Just to give you a sense here, within the latest GDP report, this was the third quarter report that we got yesterday, how much of an impact it's having. It's adding 0.9 points on information processing and equipment and adding another 0.1 to 0.2 on software. And then with data center structures, adding more. If you look at the total AI gross investment, I mean, you're talking about near one point of GDP right now. Our GDP number was 3.6%. I mean, if you look overall, I mean, you do have to subtract imports because we import a lot of that hardware from places like Taiwan and others.

2:59So that subtracts from GDP. But I think if you look at it no matter what, it shows overall GDP is at least a half a percent impacted by AI. At least 0.5 points as much as one point on GDP. So that's why, you know, this is increasingly a story that is a driver of our economy right now. Can I come back to the bond market for a second, though? Go for it. The whole idea of crowding out, which we've been talking about, there's been no let up, I would argue, in spending. I mean, Microsoft yesterday out with just a$25 billion bond deal. By the way, 5.55 % for 10 years for Microsoft. That's what they're paying of the$25 billion.

3:40They did$4 billion at that. So just surge you the spread. Met is negative free cash flow. Amazon's negative free cash flow. Alphabet's negative free cash flow, meaning they're going to need to either borrow or spend to keep up with the CapEx. Sorry, borrow or issue more equity to keep up with CapEx. Is this crowding out thing not real, though? I mean, what, that it's crowding out demand for U.S. Treasuries as well? It could be. You need a lot of investors to go in. The thing is, you know, when you have a risk off day or a trade like today or like we've seen in recent patterns, there's plenty of demand for treasuries.

4:16People just go right back in and they buy treasuries. Right. You know, so there's a lot of international demand. But look, we've heard that. We've heard that from the bottom. I know we've heard it. I'm just curious as to whether it might actually be true. Look, we have a good updated chart that shows how much so far this year is being issued across equity and debt. And it basically amounts to the entire GDP of New Zealand. We're talking about$271 billion. So increasingly tied in with our markets. I mean, I'm just giving you more charts to show how large these numbers are. That's just what's been issued, not what's been spent, obviously, which is far, far more.

4:52More. $700 billion. Yeah. And then if you look at a percent of, so looking at AI investment as a percent, capital investment as a share of GDP. In other words, how much it's driving this economy. This is from Goldman Sachs. Increasing amount of the economy all the way up to almost, you know, 3 % of the overall economy, which is so important. There's also, you know, an increasing case that it's driving jobs, too, and it's become a source of jobs. We have this interesting study from Indeed. Here we go. Indeed. Share of job postings mentioning AI terms as of September 30th. And you can see it's a big driver of momentum.

5:33It's not like, you know, people are necessarily getting fired like we thought when it comes to the AI revolution yet. I mean, that could be happening. Although today, Goldman, higher AI adoption is now associated with weaker employment growth and higher unemployment. Yeah, well, we'll wait to see that. We'll wait to see that in the actual numbers, which hasn't really showed up. But those are the Indeed postings. And then there's a great chart. Do they say when they're hiring an electrician to build a data center, be part of the AI revolution, and that shows up in that? Maybe. Look at this chart.

6:00It shows AI dentist center jobs relative to overall manufacturing jobs. And you can see that's clearly where the momentum is. Yeah, we've shown office construction versus data center construction. We've done this a few times, right? Yeah. It's a source of demand, at least in the near term and medium term, for building out these data centers. And I think increasingly, if you're looking for, I don't know, I was talking to the head of McKinsey recently. What are you looking for in college grads? We're looking for proficiency with AI. That's what they're looking for. So I think that's what the Indeed data reflects.

6:30Let's get to Intel this morning, leading the tech sell-off this morning, plummeting after giving that weak current quarter guidance, despite a number of ratings changes from analysts. Our next guest is maintaining his overweight, although he did trim his target. Let's get to key bank capital markets equity research analyst John Vinn, as the sell-off, John, basically puts it on pace for its worst day in its history. You think they have some options here and that margins may come under, what, moderate pressure? Yeah, I think in the near term, the PC outlook is incredibly disappointing. And they've also had issues with one of their fabs in Israel that had an explosion this past quarter.

7:10And it resulted in a 200 basis point downtick in gross margins. But I think from our perspective, why we're keeping the overweight is for the long term. I think what you're playing for is not PCs. You're playing for an opportunity for them to be successful in boundary, not only on the front end, but also advanced packaging, where, like, 2030, we think there's an opportunity for them to do north of, like,$30 billion between those two opportunities alone. So their exposure and leverage on data center and CPU can, what, outrace whatever memory crunch we get in PCs? I think so over the longer term.

7:51Certainly in the near term, PCs are going to continue to be under pressure. They're obviously going through a pretty significant correction. But, you know, we've got server data center for them growing 60 % next year. You know, I think obviously we de-risked our numbers given their guidance. But I think the combination of Foundry as well as server CPU can more than make up for the downfall in PCs that we're seeing right now. Why did it come as such a shock to the market and to analysts? I think it came as a shock given the magnitude of the correction, right? If you look at the PC market this year, you know, it's probably going to decline about 12%.

8:35But when you think about just the components, there's kind of a whiplash effect. So they tend to either overcorrect to the upside when PC units are growing and then overcorrect to the downside when PC units are declining. So relative to the down 10 percent outlook for next year, you know, they're probably going to decline probably 25 to 30 percent. And that was that was where this price came. AMD shares are down almost 9 percent. Obviously, it's had a great year as a stock still. I'm curious, I mean, is that deserved in your opinion? You know, was there a share take maybe going on as well still from AMD?

9:17I think AMD being down this morning is not a surprise. You know, they've got, you know, meaningful PC exposure as well. And I do think that they're probably still gaining a little bit of share in the PC front. But the magnitude of this correction in broad-based is not, it is the traffic to Intel. So there's probably a little bit of concerns on E &D's outlook just given the PC from Intel F. So you do have some degree of patience on the foundry side, too. And you think we'll finally get those large customer announcements? Yeah, I think we do. I think Lefue last night said that the expectation is that you're going to get a couple major customer announcements over the next couple quarters on advanced packaging.

10:07We think those customer announcements potentially are going to come from Google and AWS. Where does then Intel stand on your list of favorites relative to its peers? I think it's one of our top picks here. I think it's got a very interesting secular story and a very unique story, not only on server CPU that's tied to this outside demand we're seeing from authentic AI, but also longer term with leading edge semiconductor manufacturing coming to the U.S. Well, it's clearly an important story in aggregate for American manufacturing and tech. That is for sure. We've gotten thesis on the bullish and the bearish side lately.

10:53John, appreciate it very much. An important story. Thanks. John Vinn over Key. All right. Here's our roadmap for the rest of the hour. When we come back, the optimist view on the market. We'll talk to Citigroup Scott Kronert about why he still sees a path higher for the S &P 500 into year end, even after all this volatility this week. Plus, we'll have a lot more on Amazon's quarter. We'll talk to an analyst as well. Stock down about 2 percent, well off the lows. And Bitcoin's under some pressure following that massive Binance hack. We're going to talk to the CEO of a blockchain security company that says it was among the first to detect it.

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12:09With higher predictability and greater access to credit, everybody wins. Get started at VantageScore.com. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

12:49Schwab 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. Welcome back. Tech's seeing significant pressure as mega caps pull back on earnings. But nearly every other sector in the S &P 500 is actually higher for the week. Our next guest still sees the path for the S &P to end the year above 8 ,000.

13:28Let's bring in Scott Kronert, head of U.S. equity strategy at Citi Research. How do you read the action today and this week broadly, Scott, where tech got slammed and everyone else held up nicely? Well, it's funny, Sarah. We've been using this quip that it takes a village. And what I mean by that is when you look at the construction of the S &P, and we've talked about this, you've got over half of the index that's probably tied to the AI playbook, whereas the other half is beating the more traditional macro drummers. And so the point of it is that to get to an 8100 level, you need both sides of the market working.

14:04But we have a fairly stable index and aggregate today aside that I think is a function of this discussion, that you can still have that half that is, let's say at the margin, less affected by AI performing well for its own reasons relative to the AI influence. I would say in general, though, the path 8100 obviously is much trickier given the news flow this week for sure. Why? What has you concerned fundamentally? Well, because no matter how you cut it, you need components of this AI playbook to continue to provide a tailwind. And I would say in particular, the semi-component of this. Now, in looking at the news flow and the earnings over the past couple of days, it seems like more of the angst is tied to traditional businesses as opposed to that AI component.

14:55And you see that in sort of the revenue numbers. And so I think the storyline that says there's still a path for spending persists. Now, over the past couple of weeks, we've been having to navigate concerns regarding funding that, whether it's equity or debt. But also what we need to see, and I think we've gotten this week's earnings reports, is confidence that you are seeing the AI-related revenues continue to come through, which ultimately supports the spending and the market's willingness to finance it. What examples are you thinking of? Well, I think if you just go back and look at Microsoft's results as an example.

15:38Now, I know we got a financing off of there, but I would say that, you know, generally speaking, you're starting to see some evidence that the AI-related part of their business is seeing some traction. And, you know, I think we got that in last night's Amazon results as well. We had a conversation a few months ago where we argued with you that the MAG-7 framework was eroding a bit. And then they made a stand. Where do you think we are now? I think it continues to erode. But it's still, when you look at that MAG-7 we've been using, MAG-8, you're still talking a significant part of the index, obviously.

16:17Let's say around 40 % or so. So no matter how you cut it, you need to have that component contributing in some way, shape, or form. Now, that can happen because you get outsized moves by one or two of the components, or you get the ongoing risk on tailwind that comes with this. But I think, to look at it, you're still somewhat lagging the broader index year to date. So again, it's going to come down to many components of the AI trade. getting to a point where investors continue to feel comfortable, not so much with the magnitude of the spending right now today and into next year. That's well identified.

16:57It's really this persistence of spending that you can see a line to sight towards sort of the CapEx playbook up into the right, I think, over the next several years. See, I think, Scott, the story of the week was that groups like utilities and consumer staples came to life in real estate because we really saw some pressure on yields. I mean, the 10-year, well below 5 % now, 30-year came down as well. That, in other words, gave the momentum to the rest of the market to rally. And that, in part, was caused by, I think, some of the sell-off in technology and questions around the AI trade and the AI story.

17:34So it's difficult to choose which one you want. It's certainly pretty circular here, Sarah. I mean, you know, we've been saying for some time now, to your point, you know, we need to see this triumvirate of oil prices, inflation concerns, and then rates turn from a headwind to a tailwind. So we've been saying, I need oil prices lower. Guess what? I haven't gotten lower oil prices. But what we have seen, to your point, is this rotation back to treasuries. You go back and look at the action of those sectors, and they all turn lower with Jackson Hole and the Warsh hawkish commentary coming out of that.

18:12But what's happened as we've gone through the October time frame is that you've seen a mean reversion higher in those more traditionally rate-sensitive parts of the market. Again, right now what that's doing is, generally speaking, holding the core S &P index not too far off of its highs. But still, to my beginning comments, I still need both halves of the market to work in concert to push higher. And I think we still need to see for that to unfold, again, conviction and persistence of the AI spending profile, as well as I think some signs of relief still on the inflation dynamics as well. Finally, Scott, if you look at midterm years or midterm cycles, and you go six months out from the midterm, I mean, S &P is higher, I think, every time, right, since 1950?

19:01Pretty much, but that also is the way, yeah, I think that's a fair assessment. Normally what happens in the midterms, very normally on average, is that you sell off two months ahead of the midterms and then you begin to stabilize and bottom a month ahead of the midterms, right? And then coming out the other side, you alleviate some of the uncertainty that pertained to the midterms and you can get back on track. I like to think this time's a little bit different from the historical context. But there's no question in our mind that we still have some lingering areas of uncertainty as pertains to next week's elections that we're going to have to ferret, you know, one step at a time here.

19:43All right, Scott, we'll take your optimism. Thank you. After a tough week, at least for tech investors, Scott Kroner from Citi. Still to come this morning, it is the largest crypto heist on record. Binance looking to recover more than$6 billion. We're going to discuss the fallout with one cyber company that claims it was among the first to detect the attack using some of its AI models. Stay with us. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more.

20:21No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab 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 market update podcast or find Schwab Market Update wherever you get your podcasts.

21:05You know, Kevin, sometimes I feel like computers are the only thing around here that are getting smarter. Yeah, my model hasn't had an update in a while. But that changes now. We think that we can smarten these listeners up about all things related to this crazy new future. Welcome to Machine Gods, a new NPR podcast that will be your guide to the AI future. Twice a week, we're going to help you get smarter about AI so you know what's real, what's hype, and what you should probably install on your phone. Listen to Machine Gods from NPR on the NPR app or wherever you get your podcasts.

21:40The world's largest crypto exchange, Binance, has just been hit with the world's largest crypto hack. The firm suspending transactions following a heist with an estimated impact of more than six billion dollars. Eamon Jabris is on the story, has more for us. Eamon. Yeah, David, that's right. They are calling it the largest crypto heist of all time. And almost all of it happened within the space of about 20 minutes yesterday. The crypto analysis firm TRM Labs says an attacker very quickly moved approximately$6.36 billion out of Binance wallets on 10 blockchains. They say that makes this about four times the size of the next largest heist, which was the$1.5 billion Bybit hack of February 2025.

22:26Now, Binance has suspended withdrawals on several networks, and TRM attributes the attack to Trader Trader, the nickname for North Korea's elite hacking unit. Binance co-founder Chen Peng Zhao, who served four months in prison for violating the Bank Secrecy Act and was later pardoned by President Trump, put out reassuring messages on social media overnight. He wrote, user funds are safe. It does look like a hack on Binance. Appreciate the quick freeze from Tether and Circle. I don't manage Binance anymore, but as a shareholder, I expect all user funds will be fully covered. And all this raises several key questions, guys.

23:06How will a payout of this magnitude impact Binance? Will this shake user confidence in crypto more broadly? And with AI impacts on encryption looming just over the horizon, are we going to see a lot more of this in the near-term future? Back over to you. Protect people against this. Eamon, thank you. Our next guest firm says it was among the first to detect the hack against Binance. Joining us now first on CNBC is Ito Ben-Natan, the CEO of Blockade. It's a blockchain security company that works to protect exchanges and financial institutions from hacks and fraud like this. Ito, thank you for joining us.

23:42I see among your client list you have Coinbase, you have Stellar, Polymarket. But Binance is not one of your clients, right, in terms of fraud protection? I can't comment on our relationship with Binance, but ever since the incident, we've been working really closely with them and everyone across the ecosystem to make sure they're secured and really try to contain the exposure of funds across the ecosystem. So you were, I mean, you spotted this. Can you just tell us a little bit about that? Yeah, so Blockade leverages advanced AI models. We scan every single transaction across every single blockchain in the world.

24:17And we're able to identify various different fingerprints and leading indicators for threats exactly like this one. And so we were able to identify this hack, which is the largest hack, not just in crypto, but in the world globally ever, and notify many participants across the ecosystem, notify our customers, and work with the ecosystem to really kind of protect the fallout of what's going on now. Obviously, the scale of this is what makes it so big. But what about how it was done? Wasn't it like done through withdrawals, like they were able to withdraw and not necessarily hack the blockchain?

24:53Just explain it for us. Yeah, what's really interesting about this incident and you guys mentioned previously the Bybit hack as well. These are two of the largest hacks in the world globally. And what we're seeing is that threat actors are financially motivated. They're looking to make as much money as they possibly can. And so they target crypto infrastructure. So it's not surprising that the largest tax in the world have targeted crypto infrastructure this way. And specifically what we're saying is that the threat actors are actually not stealing or compromising the keys or the cryptography or the blockchains themselves.

25:22But instead, they are performing these advanced cyber operations, moving, pivoting, moving laterally inside of the network, and ultimately getting to a position where they're able to convince some sort of signing service, some sort of piece of infrastructure that Binance or others are using to ultimately issue and sign transactions. And so this threat actor, right, trader trader in this case, carefully crafted this payload, which is a malicious transaction that they were able to then insert into the signing service, which caused, you know, all the funds to be transferred to this threat actor. And that's exactly what happened.

25:55You know, there's certainly a heightened concern, broadly speaking, about the new AI models enabling hackers to do things we've never seen before. But I'm curious, in this case, is it reflective of some of those concerns? Do we have any idea or was it something that conceivably could have been done in the way you just described prior to sort of the newer AI tools being available to the so-called bad guys? Yeah, you know, I think hindsight is 20-20. It's no surprise. I mean, it's no coincidence that the largest hacks in the history of the world have happened over the past months or so. Right. We saw we've seen Binance now.

26:30We have an incident with BitCat. We have an incident with Bybit and many, many others. And so, you know, obviously these are fueled by the advancements across AI that threat actors are using to kind of, you know, perform these types of threats. And I think we're entering over the past few months, it's really become clear that everything that can be hacked will be hacked. That doesn't mean that you can't prevent these things, right? Obviously, you can prevent them. We saw that the threat actor was not able to steal the private key. It was, you know, sufficiently secure. But what they were able to do is from the position that they had gotten to inside of the network, basically perform a set of transactions that ultimately resulted in the loss of funds anyways.

27:05And so they were able to, you know, carefully crowd these transactions that, when signed, actually transferred assets to the threat actor control wallet. I think some were attributing it to North Korean hackers. Is that something that you can corroborate? Yeah, we're saying the same thing, right? I think, you know, you mentioned some of the other firms that have seen and like us have seen kind of the movement of these funds to shared wallet infrastructure. So Lockheed has seen the same kind of movement. What we have also seen, though, is that there are similar binary fingerprints in the smart contract infrastructure and other things that the threat actors are using.

27:43And so in the technology that we use to identify these types of threats and prevent them before they happen. You mentioned some of our customers. We're live with them scanning every single one of their transactions to prevent exactly this type of threat. Stimulating and validating these transactions before they are executed to make sure a catastrophic kind of incident like this doesn't happen again. And so in this way, we identify these different binary signatures and they're very similar to previous hacks and incidents that we can attribute to North Korea. Is there anything that governments should be doing?

28:13I mean, you're looking at all the Bitcoin, the blockchain stocks selling off today. I guess this is one that shakes confidence in the system at a time where, you know, we we have seen increased regulation around the system. Is there more that governments to do can do to safeguard this beyond just, you know, companies hiring your your software and your product to protect them? Yes. So we have seen a lot of regulation kind of coming up or being kind of discussed. Obviously, you know, we were disappointed to see that clarity didn't pass. But, you know, the SEC has released guidance. The CFTC has released guidance, OCC and others.

28:46You know, I think the new regulation that's coming into place has clear definitions of cybersecurity. Obviously, we can always do better. You know, we can call on and kind of isolate these specific types of hacks and, you know, require different types of exchanges and custodians to simulate and validate transactions, pre-execution, you know, using solutions like ours or deploy different types of monitoring solutions to identify these different threats leading up to this hack. Right. We had seen 50 attempts before the actual transactions took place. right, every single one of those would have been able to identify that, hey, this is happening, and hey, you need to take a look at this.

29:20And I think regulation can go and specifically call out these types of things. I think we're in the right direction. We're not there yet, though. Got it. Well, really helpful to have your insight and what you're seeing on the other side, Ido. Thank you for taking the time today. Thanks so much for having me. It's good to have you. Ido Ben-Naton, the CEO of Blockade. We're going to talk more about this story next hour. We'll be joined by the CFTC chairman, Michael Selig. The industry was just having a moment because Dan Druckenmiller came out and he had his first post and he's backing a trade XYZ and blockchain.

29:50Everyone was all excited. And then this. Yeah, well, trade XYZ is also about those perpetual futures. Yes. But it kind of lit a fire under all these stocks yesterday. Got people excited. Yeah. Well, Bitcoin is, as we saw, down. Let's get a CNBC News update. Brandon Gomez has that for us. Brandon. Hi. Good morning, David. Ukrainian forces hit a Russian oil refinery earlier today, ending what was a two-week pause on energy infrastructure targets. That pause coming amid pressure from the Trump administration after the president publicly blamed high global fuel prices on the strikes. Meantime, President Trump announced yesterday that he is canceling planned weekend campaign rallies in both Kansas and Iowa, where Republicans are facing several tough races, and that he would instead phone into rallies nationwide.

30:34But this morning, a White House official told our sister network MSNOW that the president is expected to make stops in Iowa and Kansas on Sunday. Since the beginning of the month, President Trump has hosted 25 rallies in 19 states. And Pope Leo may have just become the first sitting pope to cast a vote in an election. The Chicago Sun-Times reports the pope requested an Illinois mail-in ballot early this month, and the Vatican confirmed this morning that he submitted it, writing in a statement that the Holy Father believes in the right and duty to participate in the democratic process. Carl, that's your news.

31:08I'll send things back to you. All right, Brandon. Thanks so much, Brandon Gomez. After the break, we'll dig into Amazon's earnings. Stock is off of the early lows, but 238 is still the lowest print since late July. As for the broader markets on this final trading day of October, Nasdaq tried to get a little bit of a bid mid-morning, but close to session lows here, down almost two and a half percent. S &P down 115. We're back in three. Welcome back. You can see shares of Amazon, that's well off the lows, still down though about 2%. This after the company reported earnings after the bell yesterday, AWS revenue was very strong.

31:43Company also reporting that over the last 12 months, it had$42 billion worth of negative free cash flow. Why? Well, because it's going to spend $220 billion in CapEx for 2026. Let's bring in John Blackledge, a senior internet analyst at TD Cowan has a buy rating on the stock, did cut his price target to$340. I don't know. You know, what's your take on the quarter? Are you surprised the stock is down? Yeah, I'm not. I think the big thing is investors had higher expectations for AWS revenue growth. And I think street consensus, like, for instance, like you mentioned, AWS revenue grew 39 percent year over year.

32:24Six straight quarter of acceleration beat the street consensus by 2%. But I think it was below investor expectations. We thought it was like kind of investors were looking for kind of low 40th percent growth. And then they gave AWS revenue guide for 27 and 28 a 40 % revenue growth in those two years, which was above street consensus preprint. But I think it was a little bit below or kind of in line with where investors were. So I don't think investors brought down AWS numbers all that much. And that's why I thought the pre-market action looked a little harsh. And I think that's why it's down to today.

33:06They weren't raising numbers. And like you said, we lowered numbers a little bit and went to 340. But I think that's pretty much kind of why it's down a little bit today. Yeah. I mean, to your point, acceleration from what was, what, 36.7 % growth to 39.3 % and then into the 40s for AWS, which is by far the most profitable part of this company. So I don't know. You still have a buy on it. Break it down for me in terms of how you see things from here. Yeah. I mean, it's about AWS and the core e-commerce business also doing well. But I think all the investor attention for the most part is on AWS because it's the highest multiple business.

33:48And so we're still above the street next year for AWS revenue growth. We're 43 percent. We're above on the on the AWS margin. That was another thing, David, that was that was good. You saw the AWS operating margin was about 39 percent. So it's holding up very well, despite, like you mentioned, the rising capbacks and rising depreciation. They're doing a great job of managing costs amidst rising depreciation. And so we have op margins at AWS, you know, kind of in the high 30s next year and in 2028. So I think AWS should lead the way, recognize that there's going to be another step up in CapEx next year.

34:24But that's just because demand is so strong. You heard CEO Jassy say they're seeing AI demand into 2029. You know, last quarter it was like, oh, we're seeing it kind of into 2028. So, yeah, I think AWS will lead. And also, you know, 21 times earnings on our next year's estimates. We have AWS growing earnings about 27 % annually in the next five years. So, you know, we think it's a good time for long-term investors to get involved. I was just trying to think how many times we've seen a year-to-date gain of single digits. I mean, normally, don't they put together gains of maybe 10 to 15? In terms of stock, Carl?

35:08Yeah. And we go, well, we have we have two months to go. And, you know, and yeah, so two months to go. And and we have while the spotlight has been on AWS, you know, the holidays are coming up. in talking with the company last night. They think they were pretty bullish on the consumer and the holidays. I think they're adding 300 ,000 people. You know, the core business, which they also called out as another potential trillion-dollar revenue business in the next five to 10 years, is doing so well. Record delivery speeds, really fast-paced unit growth. And so they really do have their two core businesses firing really on all cylinders, which I thought was interesting relative to Google or Alphabet, which had a really harsh downtick yesterday.

36:02Amazon is not facing any real long-term secular threats for AWS and e-commerce, whereas Google Search is a bit. We were trying to spell out that difference earlier this morning. Do you think they're going to join the equity issuance party? We have them raising. We have CapEx next year at 330 billion. We have them raising 75 billion in debt next year, Carl. So it could be a mix of debt or equity. But from a leverage ratio perspective, you know, it's very low. So assuming the debt markets are receptive, we think it probably would be maybe more so on the debt side. Yeah. I mean, finally, Google Cloud, smaller for sure, although 30 billion in revenues for a quarter is not bad.

36:50I mean, it is it is growing at at least two times that the rate of AWS, isn't it? Yeah, for sure. I mean, one hundred three percent growth, incredible. And we have grown over 100 percent next year. A big part of that, well, an emerging part of that is their TPU system sales, which we have generating 60 billion in revenue next year from the TPU system sales. And so, yeah, this is this is not a winner take all kind of environment for these hyperscalers. Everyone, although there's so much need for capacity that they're they're spending as much as they can to get it. And there's so much demand. And so they're all monetizing off of it.

37:31And so. So, yeah, I mean, Google Cloud, great. AWS doing great. I mean, AWS growth, you know, this quarter, 39 percent. It was a double from last year. So and they gave me the framework for, you know, kind of even accelerating growth the next couple of years. So both both of those cloud businesses are in great shape. Got it. Have they made the case that it all works together? Like all the it's just so many distinct like I was reading this morning about Leo capitalization, you know, the satellite company. Like there's just so many parts of this story. And I wonder if they've, you know, is it a just move on based on AWS revenue numbers or, you know, do investors fully have the picture because there's, you know, the e-commerce we were talking about and then so many other pieces.

38:11Yeah, we are in this AI moment. So I do think it is really about, you know, kind of AWS top line, the operating income, as I mentioned, and the CapEx trajectory and how much capacity they add. And they're really not getting credit, unfortunately, for the strong e-commerce business, for strong ad business. And Leo is an emerging business, though. They'll try to compete. You know, we cover SpaceX now. They'll try to compete with Starlink. But, you know, that's really going to launch in full next year. So, yeah. And, you know, they have bets. And they do play the long game, as does Alphabet. And so we'll see how, you know, we'll see how they add to, you know, shareholder value in the coming years.

38:55All right. We certainly will. John, appreciate it. John Blackburn. Thank you. Another tech name getting crushed today is Twilio. We're going to talk with the CEO next hour about their latest earnings and guidance. And up next, a CNBC investigation into unusual trading activity in prediction markets tied to election outcomes, raising questions about who's placing these bets and what their activity might signal. Gamble on Democracy is coming up next. There are four days until the midterm elections, and citing prediction market odds has become a regular part of America's information diet. But could this impact voter behavior and are these odds vulnerable to manipulation?

39:34Melissa Lee is here with a preview of our latest CNBC investigation, Gamble on Democracy. The race for mayor of Los Angeles was unconventional in every way. Former TV reality show star Spencer Pratt versus a city council member and the incumbent mayor in the June primary. I know what the consequences of failed leadership are. That's why I'm running for mayor. AI-generated campaign ads and prediction markets buzzing with activity. In fact, it is the highest-traded mayoral race in 2026, surpassing$47 million in bets, a highly liquid market that theoretically should reflect the will of the people.

40:13Raman overtook reality star turned wannabe politician Spencer Pratt. Except it didn't. The prediction markets not only got it wrong leading up to the election, But during the race, there were numerous unusual instances of price spikes on Calci and Polymarket International that pushed the odds in Pratt's favor, according to an exclusive analysis for CNBC by the Anti-Corruption Data Collective, or ACDC, a nonprofit that brings together journalists, academics, policy experts and data scientists who work to expose corruption. I feel extremely worried that we don't have enough information, we don't have enough data in order to truly know what may happen come November.

40:55In the L.A. elections, the discrepancy between the prediction market odds and the actual outcome fueled voter doubt about the integrity of the election itself, a precursor of what could come this November. Already on these platforms, the amount wagered on contracts related to the 2026 congressional elections has more than triple total bets on the 2024 races. And people are increasingly using the platforms as a source of information. And as election wagers become more and more part of the national discourse, the concerns are growing about the impact the odds can have on voter behavior and whether those odds are vulnerable to manipulation.

41:35In data shared exclusively with CNBC, ACDC found that of 167 congressional markets worth more than$100 ,000, 38, or about 23%, experienced price spikes, moving the contract price 30 cents or more. Both Polymarket and CalShane say markets are efficient and price spikes correct. And both platforms did give us an exclusive look at how they combat suspicious trades and market manipulation, a top priority for them, especially as we near the midterms. Still, there is concern that too much responsibility is being placed on these platforms when the stakes are so high. By the way, CNBC has a commercial partnership with CalShane uses the company's market data across its broadcast digital and subscription platforms.

42:20And for more, you can watch a full story. Go to CNBC.com slash investigations. I mean, is there an insinuation that there was wrongdoing here or manipulation or just that the prediction market got it wrong on that L.A. election? Well, if the prediction markets are supposed to be sort of a read of what people think and they bill themselves as more accurate than polling, then there's a question as to how did they get it wrong? And what's interesting about these price spikes, You know, all these markets are built on the idea that people want to make money ultimately. But when you push up a price in order to increase a candidate's odds, let's say you're a bad actor, you could be an enthusiastic bettor too, like a big supporter of somebody's candidacy.

43:01I was going to say, Spencer Pratt followers probably were more active on the prediction markets. And it could be. But you're losing money. Every time you bid up that contract price and you see contracts go in after that initial spike, going higher and higher and higher, your profit margin is dwindling. So chances go higher, your payouts are going down. So what is the motive behind this? And so these are things that we just have to figure out. Calci says that they are very accurate when it comes to predicting elections. They say across U.S. elections since 2024, whenever a candidate was favored in terms of the contracts of probabilities, that candidate went on to win that race nine times out of ten.

43:41This year, the volumes are much higher. It will be interesting to see how this all shakes out. Do we know to what extent, if any, people's voting decisions are made in part by looking at what the odds are on various candidates? We don't know. But what we do know is that candidates have definitely used their odds. They cite them at campaign rallies. They have used it, like my odds, donate to my campaign. And the risk is... You could say the same thing about polls, though, can't you? Absolutely. Except for polling, there's the methodology. There's a plus or minus room for error, right? for prediction markets, there is not that sort of methodology.

44:13You don't know what is behind that. You mentioned the 44 million being highly liquid. Do we think that is a highly liquid market, I guess, in this business? Right. And when we said, you know, ACDC does crunch, 167 congressional markets of$100 ,000 or more, there are plenty that are less. But the$100 ,000 or more created a price spike of 30 cents. Those are supposed to be liquid markets. These are just questions. We don't know the answers. We'll find out this November. All right. We've got the CFTC chair next hour. We'll ask him about it as well and check out the full investigation online. Thank you, Melissa.

44:47Busy day in the options pits as investors react to tech volatility. We'll take you to the SIBO in Chicago next. Welcome back. VIX briefly above 20 this morning, jumping over the past couple of days as these tech names get hit on earnings. Let's get to Oliver Rennick and SIBO in Chicago, see what options are saying. Happy Friday, Oliver. Same to you, Carl. Some action down here, but it could have been a lot more wild, I think. VIX hasn't exactly gone ballistic. We're right below 20, which is coming up on last Friday's high for vol, but still below the VIX 22 plus from two Fridays ago. And by the way, the setup was arguably looking like VIX could have gone big at the open because yesterday VIX was down while stocks were down.

45:30So there could have been a catch up scramble. But instead, there's mostly just concentrated action in the SPY ETF, which is where we see the heaviest volumes right now. And the put-call ratio for SPY is surging towards puts at an almost 2 to 1 ratio, which looks like the most bearish one-day volume skew all year for the ETF. And it's happening on more than half a billion dollars traded in premium the first hour alone. Now, queues actually are doing even more, a few hundred million dollars more. And in the queues, we see some gutsy bulls hanging on. There's more calls trading by volume. Many of them look sold.

46:10But the single biggest trade in the queues this morning was someone selling$16 million of puts at the 670 strike expiring mid-December. Gives the Nasdaq some berth to drop, but still a neutral to bullish view, Carl. Oliver, thanks. Important action to watch as we move into yet another eventful week next week. Oliver, Renick and SIBO. After the break, an exclusive with the CEO of Twilio on earnings. That stock dropping better than 17 % this morning on results. We're back in three minutes. 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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