10AM Hour: Stocks Dive as Oil Spikes, Reaction to Meta and Tesla Results, IBM CEO on Demand 10/22/26

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1:04Good Thursday morning and welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla and David Faber. We are live, as always, from Post 9 of the New York Stock Exchange. Stocks are under pressure this morning as renewed mid-ease tensions send oil higher and tech names pull back on AI capital concerns. We'll talk about the macro picture and much more when we are joined exclusively by Pershing Square founder and CEO Bill Ackman. Also ahead, we'll dig into the moves from Meta and Tesla and the back of results, including that new share structure at Meta. More questions about a Tesla-SpaceX merger and, of course, key developments around capital spending for all of them.

1:36And then what Arvind Krishna, the CEO of IBM, just told me about the quarter, why he says his business is durable despite concerns about demand destruction that go back to last quarter. Yeah. All right. We're going to start, though, with the latest in Iran. There are a number of reports that point to the potential for escalating tensions between the U.S., Israel, and Iran, and that is having an impact on oil prices. Eamon Jabbers is in D.C., and he has the latest for us. Eamon. Yeah, David, that's right. We are seeing a cluster of indicators that the U.S. and Iran could be heading back toward open warfare.

2:07Last night, President Trump hinted as much to reporters when he was asked about what's coming next on Iran. Here's what he said. He said, we're going to have something one way or the other that will happen fairly soon. Most people seem to think it's after the election and we're going to see what happens. So the president not being specific there, but certainly hinting. And at the same time, we saw Reuters report that the U.S. State Department is preparing to order departure of some personnel and family members at U.S. embassies across the Gulf region. And CBS is reporting that the White House and the Pentagon have prepared plans to use the so-called mother of all bombs on military sites in Iran, if so ordered by President Trump.

2:46And two senior UAE government officials tell MSNOW that the UAE has agreed to assist Saudi Arabia with their fight against the Houthis. That potentially widens that conflict, which of course has had significant consequences so far for Saudi Arabia. And as for Iran themselves, an official there saying Its armed forces have prepared a more devastating plan as it deals with increased threats from the U.S. and Israel. Guys, back over to you. Eamon, the mother of all bombs, was that when we attacked in June of 25? Did we use that then? That's a good question, David. I'm going to have to go back and check.

3:26I don't think we did. I think those were B-1 bomber attacks on those nuclear sites in Iran at that time. But look, it's a non-nuclear, you know, conventional weapon, but certainly enormous blast capacity. The question is, what are you blasting with it? And do you have the intelligence enough to assure that you can destroy those nuclear sites? The president said back in 25 that he had destroyed the nuclear sites. Then he clearly decided in 26 that those nuclear sites were still there and still active enough to justify starting this war. So the question is, is U.S. intelligence good enough to know what it is that we're hitting?

4:04You know, you can blast away, but if you're not blasting away in the right place, it doesn't really achieve your strategic objective. All right, Eamon Javers, thank you. Meantime, you know, the U.S. has put enormous economic pressure on Iran. There's new data from Kepler showing that actually Iran's oil that has been sitting at sea, you know, the ones where it makes money by selling to China, has been completely depleted. Check out this chart, which again comes from Kepler and shows you the on-water oil reserves of Iran. They have collapsed, as you can see at the bottom of the chart, at 866 ,000 barrels.

4:38By the start of the war in February, Iran had around 135 million barrels located overseas. A lot of it was off the coast of Malaysia and Singapore. I mean, worth billions and billions of dollars after the price of oil surged. And then as the U.S. has taken steps with the blockade and then reimposing the blockade again and now continued pressure, we have seen an effective strategy here of cutting Iran off from its key moneymaker, which is oil, that it ships. This is something that Treasury Secretary Besson has been talking a lot about this week. He did a podcast with Mark Halpern, and he talked about just how tough of shape the economy is in Iran because of what's happening with oil, because of the currency.

5:19He says panic is starting to set in and that currency has collapsed. We're seeing that inflation is more than 100 percent. We think the economy could be down by double digits. So we are eight weeks into Operation Outcast, as they've called it. And I don't know whether it's going to take four more weeks or eight more weeks. But at a point, their economy will go nonlinear. Yeah. But a key question, of course, there remains that whether the leadership in Iran actually cares about the escalating hardships of the population. This is a leadership that was willing to go onto the streets and kill tens of thousands of people.

5:48And so I don't know the answer to that. Do you? Well, I guess, you know, and Secretary Besson and President Trump have faced that question before from the press. And what they say is ultimately, though, the regime needs power. And at some point, you know, if they're completely choked off from any revenues or economy, either the people rise up or the, you know, the power fades or they come to their knees begging for some sort of deal. I think that's how the administration is playing it. I just thought that chart, though, was new and interesting. You know, it's earnings season here in the U.S. and we're starting to get color on.

6:21We often look at the consumer companies and how they're reacting to higher oil prices. But there are actually some unexpected winners in corporate America from what's happening with the oil prices. Just wanted to share with you CXX, the railroad. You would think that the high oil would actually be a big cost. But actually, they're saying fuel contributed about half of our revenue growth. Reduced trucking availability, high truck rate and elevated diesel costs continue to benefit their intermodal segment. So they're actually a beneficiary. Conversions from the highway remain strong. Their total intermodal volume is up 7 % and reached an all-time record high with revenue up 20%.

6:56So that's actually been helpful. Also, another surprising place, thanks to Chase Manzi, our producer, who finds all these great tidbits in these earnings, Texas Instruments. Also talking about auto demand coming in pretty strong. And listen to this, this little tidbit in there. The CEO says, I think customers have not kept a lot of inventory on their side. So when they saw maybe demand growing, maybe a little bit more of EV as fuel prices went up, they were not well positioned. Talking about the automakers, but also interesting to note that there was a little more interest in EVs, electric vehicles, as these fuel prices rose.

7:29And then another non-direct energy beneficiary here is Dow. This is the chemical company, the CFO, talking about polyethylene prices rebounding in the second half of the quarter, supported by elevated feedstock costs and demand remain resilient, as evidenced by year-over-year volume growth, excluding supply constraints related to the Middle East conflict. And then they talk about how volumes were notably strong across the world. It accounts for, historic accounts for 40 % of global polyethylene exports. So, look, while certainly we feel it as consumers, we pay the prices at the pump, there are some, I think, unexpected corporate winners where it's inflating their business, just what we've seen, the supply concerns around chemicals, oil, and everything else.

8:14Surcharges can be helpful in a lot of cases when it comes to transports, although the efficiency at CSX and UNP was actually pretty impressive. But, I mean, look at what the defense names are doing today. I mean, war is a consumer, and that does lead to volume, and that leads to profits. Yeah, I mean, it's stimulative in some parts of the economy, I guess, is part of it. I'll just leave you with the Honeywell one as well. continue to believe that ongoing transition to LNG and renewable as priority fuel, increasing pipeline activity from refurbishment and rebuilds in the Middle East, and the refining buildout in Africa will drive a meaningful energy upcycle over the next couple years.

8:48So they see this lasting. And then, you know, the good news is, what, 40 percent or more of U.S. households are heated with natural gas, where prices have gone the other way. So hopefully it won't be too expensive when it comes to winter heat this year. Yeah, although in the Northeast particularly it can be tough. in terms of sort of the refining capacity and getting that heating oil. Oh, yeah. Heating oil is up, what, 80 year on year, something like that, for states like New Hampshire and Maine. Because the pipelines are not there to get the natural gas to that part of the country. Where it gets cold, by the way.

9:20It does. Really cold. Not yet, luckily. Nice fall. It is nice. For more on the markets, let's bring in Truist Advisory Services' C.A.O. Keith Lerner to talk about some of the chop, Keith, that we've gotten these last few days and, I don't know, I guess indecision regarding whether or not the CapEx build-out can keep up not just with cash flow, but now with credit. Yeah, well, great to be with you guys. You know, what we've been calling the market more recently was a two-speed stock market in some ways, but the love-hate relationship with tech continues. So what we're really seeing this month is just rotation.

9:55Last month, there were only two sectors up, tech and communication services. They were both up about 4%. thing. So what do we see this month? Two sectors down, tech and communication. So you went from this kind of narrow rally to this, you know, more expanding rally and tech's taking a breather. But even this morning, as rates have pulled back, those areas that have been hit by interest rates are starting to get a bit. You know, you're looking at the home builders, as an example, some of the retailers, as you just mentioned, some of the transports as well. So to us, this is more of another rotation that we've seen during this bull market.

10:30We still think tech is long-term leadership, but obviously going through a little bit of a short-term setback here. Do you think the 10-year, which is almost at 499, you think that's hinting at demand destruction? You know, in some ways you would say yes, but then as I just mentioned, look at some of the hotel stocks the last couple of weeks. They're making new highs. Some of the revenue numbers showing that hotel stays are actually increasing. I mentioned transports rebounding as well. So I think part of this move, this move down in yields, was there was just an overshoot, number one. And then two, obviously, the credit concerns around tech as well as far as the spending.

11:12But just a couple of weeks ago, we saw that The Economist, the front page of The Economist, talked about concerns about bond yields going higher. The IMF talked about it last week. Those tend to be contrarian indicators. and we had a really strong bid around 535. And we were very vocal that we thought the risk reward had improved. And we still like fixed income at these levels. Yeah, it's not contrarian in France. Fair enough. I know. I was just going to say I disappointed David when I came in this morning. He said, you're doing France, right? Because we are seeing this move on the spreads. They're blowing out, especially relative to the German debt.

11:45And what's interesting is there's buying of U.S. Treasury. So are we a safe haven if Europe gets worse or not? Do we all trade together? No, I think so. It's interesting because a lot of my conversations as I'm on the road is about the fiscal picture in the U.S. And I always say it's not great here, but it's worse other places. And think about France. Not only is federal government debt going up quite a bit, but there are private debts going up. I think an undertold story in the U.S. is the federal debt as a percentage of GDP is relatively high. But when we look at corporate debt and household debt relative to the GDP, those figures have come down meaningfully.

12:23So there's almost been a transfer. So again, we may not be in a great place, but on a relative basis, we look pretty good. And we like the U.S. on a relative basis on the fixed income side as well. Are you seeing any, do you think anything regarding the war or the midterms are clearing events of sorts? Yeah, it's an open question. You know, it's interesting because there's a lot of debate whether midterms are a clearing event. I will tell you, unlike past years, the midterms are not the number one conversation coming up in my conversations. It's more about AI and tech. And then the oil story, I think people are kind of braced for higher for longer.

12:57So I don't know if they're clearing events. I will say, just as a tidbit, historically, as you get closer to the midterms, we have historically seen a fourth quarter rally about 84 % of the time since 1950. The one caveat, the one that didn't work, was 2018, and that was around Fed tightening. So I think the Fed meeting is also going to be important. But I think at the end of the day, we have to have these earnings continue to deliver. That is our base case. That is the north star of this bull market. So I think that's going to be the most impactful thing. And we have a big week of earnings coming up in tech over the next week or two.

13:32Keith, good stuff. We're going to learn a lot, especially next week. We'll talk, I'm sure, not far after that. Keith Lerner at Truist. Thanks. Great, thank you. Get a look at our roadmap for the rest of the hour. After the break, former Tesla board member Steve Wesley is with us. We'll get his take on the quarter and the three headwinds that he sees around a merger with SpaceX. Plus, Meta unveils a new share class to fund its AI build-out and also make sure Mark Zuckerberg doesn't dilute his voting shares. We'll talk about what it means overall for the company. And later, we've got a big exclusive interview for you with Pershing Square founder and CEO Bill Ackman.

14:04He is live today from the Tel Aviv Stock Exchange. Talk to him about why he's there. talk about the macro setup, AI, investing in Israel right now, and much more. Squawk on the street. We'll be right back. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture. Vantage Score is changing that by modernizing credit scoring. Vantage Score uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments.

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15:21Make 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 marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts. Welcome back.

16:00Take a look at shows of Tesla down very slightly. This after, of course, the company's earnings. Third quarter results, they came in after Elon Musk publicly discussed the idea of buying Tesla with SpaceX and said the boards of both companies are forming special committees, which would allow them to have negotiations about that combination. Let's bring in Steve Wesley. He's a former Tesla board member, founder of the Wesley Group. Can only imagine what it's like on that board now, Steve, as you get that special committee together of, you know, non-affiliated directors, I guess, who are going to have to try and negotiate this thing.

16:36You think it's going to happen? Well, look, I think, as you say, Elon's launched committees for both companies. I think there's little doubt, but the answer is going to come back to me. I think they're going to move toward it quite quickly. Yeah. What do you think about the possibility of it, given your future, your former role as, of course, a Tesla board member? Well, look, I think what Elon's really looking for is he sees the synergies. He wants to combine SpaceX's AI and compete with Tesla's cars, energy, robotics. I'm sure accelerating 100 billion plus in the pay package has crossed his mind.

17:15Recent developments have made it a lot easier if just one SEC approval for auto voting. So I think at the Tesla annual meeting, you're would like you to hear an announcement on this. It's going to be as early as this year. Some people think they're going to try to get this done before the elections if they possibly can. The big question is going to be what are regulators going to say and what will SpaceX have to do to get this done? Big hurdles, I think, valuation, SEC approval, and how are they going to deal with Tesla and China? Yeah, I don't know that they're going to be announcing it in the next few weeks, but certainly they want to get it done before the end of the Trump administration, one would think.

17:52And there are plenty of governance issues, as you say, as well. Let's come back to the quarter itself. You know, you've helped us follow this company for quite some time. Total revenue flat, automotive revenue down 3 percent, profit up 9 percent. Give me your take on the quarter. Look, there's four things here. Solid quarter, 25 ,000 units more above what analysts thought. But there's still flat growth. Do about 28 or They did$28 billion for the quarter on track, I think, for about$105,$106 billion. But they've got to show real growth. But at the end of the day, Musk and Tussle need to make the case they're not just a car company.

18:31They are a tech company. So I think they've got four shots on goal for growth. We'll see how many of those they can hear. You know, Kara Swisher, the sort of leftist podcast host, said that Musk might be in jail right now if the Democrats win both the House and the Senate. she would worry about him. It also came on a day where the Wall Street Journal reported that basically he throttled Starlink to Ukraine and that it wasn't, you know, a decision by President Trump after he said he did not and that it would be a government decision, which I think just raises questions about the political risk here for Elon and for shareholders of SpaceX and potentially Tesla.

19:12Well, I think that's right. Now, I don't think he's going to be going to jail at the time soon. But I think there is going to be more scrutiny. People will be asking more questions. They'll be asking questions about interlocking members on the board. These are just things that are going to come up. But I think the real issue, when it gets right down to it, is can Tesla show growth? Can they really make the case? And look, give them credit. They haven't had many new vehicles for the last few years. But the Semi looks like a deal to deal. Looks like they're going to sell at least 50 ,000 units this coming year at about 300 ,000 apiece.

19:43That's$15 billion in new revenue. Energy, they've got a new plant coming on in Berkshire, Texas, 50 gigawatts of new power there. Everybody in the world is clamoring for new power. So they've got new stuff coming. The real issue is, can they get a full self-driving breakthrough? They've just got to get regulatory approval in more cities than Austin. And can they get some optimist humanoid robots in the market? Those are the things that have to happen. That's what I was going to ask you about. You know, Optimus robots, obviously, which do play in as well to SpaceX ultimately being the owner, given the compute, given so many other things that will be involved there.

20:21What do you see as the as the potential and their ability to deliver on it, Steve? Well, there's huge potential, but I don't know how to say this politely. Beating these firms like Unitree, X-Bang and China in real years, they'll ship 50 ,000 numinoid robots this year. U.S. competitors coming on quickly, Boston Robotics figure, they're a lot tougher to beat than General Motors and Ford. These are companies that are attuned to the future. They're moving quickly. So it's going to be tougher, just like Waymo is an awful lot tougher to beat in the autonomous vehicle space. Tesla, essentially only 800 driverless vehicles on the road today.

21:01Waymo will have 8 ,000 by the end of the year. Waymo heading to 50 ,000 by 2030. So they're going to have to find a higher gear at home with the investors that they're a tech company, not a car company. Yeah, when I hear you talking, all of it comes back to me to thinking about, all right, well, this is what the SpaceX special committee and its advisors are going to have to figure out in terms of what they think it's worth paying for Tesla. Because, you know, you can talk all about the fundamentals here, but it does seem Elon Musk typically gets what he wants. And so whether it's a year or a year and a half from now, we're probably going to be talking about one company, Steve, right?

21:36It's exactly right. Look, there's going to be a Musk glow here because the guys had a pretty impressive track record. You've got to give them credit for that. But at the end of the day, if they do a little over$100 billion in revenue this year, trading about$1.5 trillion already, that's a 15x revenue multiple way over that in the P.E. ratio,$150 to$200. How much of a premium are they going to pay on that? Yeah, that's a good question. One we may get the answer to at least over some time. And I'm sure we'll talk between now and then. Yeah, for sure. Steve, thank you as always. You bet. Thanks a lot.

22:11All right. Up next, IBM with beats on the top and bottom lines. We'll bring you comments from CEO Arvind Krishna about the quarter and what he sees down the road. Plus, Meta's pullback intensifies here following last night's results as credit concerns rise. We're going to talk with Guggenheim's analyst about the market reaction. 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. No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow.

22:50Make 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 marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. What happens when you combine a cozy night in with the whole family in matching Old Navy jingle jammies?

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24:23getting signed, he said, well, all that demand destruction was deferrable, not destruction, which he said was proven by this quarter. It just took a little longer. He said what was happening was their enterprise customers, those people got worked up about cyber. We know about the headlines with AI and semiconductor pricing. That was what caused a little bit of the delay. But ultimately, the customers realized that prices on semis are up so much, but IBM's products are not. And he He says their software is mission critical. In other words, companies need it. Things like payment transactions, for instance.

24:56On the customers, and just I asked him what he was seeing across enterprise demand right now for AI. He said the Frontier LLMs use tons of tokens at a high expense. And for us, it's fractions of a cent as opposed to dollars. In other words, he's really making the case that IBM's value here is in both helping customers with the open weight models and also that they don't need the sophistication and the high price of these LLMs, these frontier models, which are closed. He added, we've seen a huge focus change from the enterprise right now, saying the resonance of open weight has inflected. It's up to us to make it easy enough for them to do it.

25:36In terms of what comes next, he tells me, I predict by 2030, 80 percent of token users will be open weight models. They're 96 percent as good and 10 times cheaper. And then he also said that he predicts there will be a lot more American open weight models. Because then, of course, I asked, you know, is that really a good thing that they're using the Chinese open weight models? And he said, yes, as long as these companies own it and set in place their own guardrails. But that's really the pitch and where they're seeing the value as enterprises adopt these AI use cases. But it's not unimportant as well when it comes to the debate around valuation for the likes of Anthropoc, Urban AI, or even Meta, which claims it has a frontier model now as well with Meta Wonder.

26:18I'm sorry, Muse Wonder. Right. Because what will enterprise really be willing to pay for if there's open-weight models that are, as he just said, so much cheaper? What do you need them for? And again, that just does go to them. If they're 96 % is good, yeah. Yeah. That's the issue. Although, you know, he did say 80 % will be open-weight. So, you know, Frontiers can have the 20 % of token users. Right, and it may be 20 % of an enormous addressable market. And so it may fulfill everybody's hopes and dreams. But it's a key question. It certainly is. And I think that IBM is, you know, that's where they're doing the business, on the open side of the...

26:56Right. He also talked on the call as well about just helping companies implement AI and how you diffuse it in the organization and how Red Hat is helped by that. And some of their other services are also aided just by the efforts they need to undertake at enterprises to incorporate AI in their workflow. Yeah, services is important, although it's still the third worst Dow name of the year. Only McDonald's and Nike have been worse on the Dow year to date. I think investors are trying to figure out the cadence of the numbers. You know, IBM gets really scrutinized with, you know, beat, miss, you know, by several hundred million dollars.

27:30And it was lumpy, you know, especially with the mainframe and the 9 percent software sales come back that we saw this quarter. People are wondering how sustainable is that and why didn't they change the revenue guidance? You know, because they're being a little cautious that they didn't up the revenue guidance based on what they're seeing. And I talked to him about that. He said they're just they're trying to be prudent about it and kind of look at the look at the business more than just on a quarterly basis. Let's get a CNBC News update this morning as well with Dom Chu. Hey, Dom. Good morning, Carl.

27:58Ukraine says Russia pounded its capital overnight, hours after Moscow agreed to resume three-way talks on ending the war. Ukrainian President Vladimir Zelensky said Moscow deployed three ballistic missiles carrying cluster munition warheads, which are designed to burst in midair and then scatter bomblets over a wider area. Meanwhile, Russia said Ukraine launched 630 drones towards Moscow during the night. Minnesota Representative Ilhan Omar says she will have to move out of her Washington, D.C. home because of escalating threats following a federal raid earlier this month. In her first interview since the incident, Omar said she was confident she didn't do anything wrong.

28:39Federal authorities are investigating potential fraud in her family's immigration paperwork. And new data shows the U.S. fertility rate has fallen to another record low. A CDC report found that for every 1 ,000 women aged 15 to 44, around 53 gave birth in 2025. That's down from 54 in 1 ,000 in the previous year. There was a bump in the birth rate in women's ages 30 to 40, but that was offset by a decline in teen pregnancies. Carl, I'll send things back over to you guys. All right, Don, thanks. When we come back, is this big pullback from Meta a buying opportunity? Worst day for the stock here since the end of July.

29:19We'll talk to an analyst about what's weighing on at post earnings. Then the CEO of Pinnacles with us, his first interview following results, how the firm is thinking about increasing cyber risks to the banking sector. When we're back in just a minute, Dow session lows. Welcome back. Tech is under pressure this morning with the Nasdaq now down a little more than 2%, dragged by Meta in part despite reporting record revenue and strong growth for its new Muse AI agent. The tech giant also announcing plans to split and create a new class of non-voting stock in an effort to help fund its AI spending.

29:50David, you've been looking into this. What can you report? Well, we can just try and explain to people what it is. Of course, you would issue these shares to existing shareholders, but they don't come with any votes. It would allow the company, if it were to undertake, as many expect it will in the not-too-distant future, a raising of equity to issue these new shares, which do not dilute the voting power of one Mark Zuckerberg, who got him at about 60.6 % of the vote in the company. So he completely and totally controls Meta as a result of that voting power that he has. His economics are somewhere around 13%.

30:29Of course, he also is facing the possibility, as Mr. Zuckerberg, and this does seem to be another reason that they undertook this of having to shed some of his wealth if that wealth tax in California actually passes. And this would allow him to sell C shares as opposed to lessening his voting power by having to sell the shares that he currently holds, which have those votes. So that's something else he has committed to spending at least the next eight years in California to run the company as a result of this agreement that he reached with the board and a special committee, apparently, that was set up on the board to negotiate with him for these C shares.

31:09The other impact would be that, you know, you may see a discount once they're issued in these C shares versus the voting shares. We've seen that in other cases as well, because they will be issued for equity, to raise equity, because they may be issued in deals and things of that nature. And then finally, there is the discrepancy, which may continue in terms of his overall economic ownership versus his vote, which could continue to widen. The vote grows economic ownership. The vote stays the same, economics reduce. But do you think this is, I mean, the stock, why is the stock down so much? This quarter was good.

31:43I mean, and I think analysts mostly were impressed about the Muse numbers, the$10 million. It's actually the third quarter in a row that the The stock has fallen 5 % plus on earnings, thanks to Bespoke on that one this morning. I think it's also, you know, they did go negative free cash flow for the first time. CapEx now 135 to 145 billion this year. They did change their CapEx guidance. I think they narrowed it a little, right? They narrowed it, and they didn't offer us really any guidance for the future. But, you know, maybe the fact that they really have gone negative free cash flow has gotten some people's attention to the tune of negative$2 billion or so.

32:16Obviously, there's going to be no letup in the spending taking place there. And everybody can take a guess, Carl, as to what it's going to be next year. What,$250 billion seems to be where a lot of analysts are congregating in CapEx? Watching the CDSs, like the spreads are, you know, five-year highs. So that, I think, jives with concerns about just how much it's going to cost. Or maybe it's what people think the mix of equity versus debt will be to fund some of that build-out next year, right? Yeah. I mean, there seems little doubt of an expectation there's going to have to be an equity raise of some kind.

32:44It may be, obviously, wait until these C-shares are out there so they can issue them. The company also had a nice run into earnings. Let's bring in Michael Morris, entertainment and media analyst at Guggenheim. He has a buy rating on the stock,$850 price target. What's your take on the action in MetaStock today, down 6 % or so? Thanks. Yeah, just hearing your comments, I don't disagree with a lot of the analysis you just did, which is the pressure that we are hearing from investors on the bear side has to do with capital needs and the form that that takes, right? So there was a filing, an SEC filing associated with this class C share creation that talked about a little bit of the behind the scenes process, including the need for, quote unquote, hundreds of billions of dollars to fund this.

33:33And I think that was viewed as incremental when we look at the conversations that we have had. And I think that that combined with the timing and some of the complexity is probably what's driving the pressure. I think that the results themselves were pretty fantastic from an operating perspective. And we are certainly in the camp that is bullish on the Muse product and some of the other peripheral products. But Muse in particular, I think, is going to be a transformative product for the company. And so we are bullish, but we understand where this pressure is coming from today. So you tell investors to buy on the dip.

34:06I mean, the news, the 10 million, the fact that a lot of it is coming around shopping and transactions, that 25 percent of users who signed up come back during the day. Does that give you like a clear path to monetization? Because right now it's free. Absolutely. I think there are a number of ways to monetize. Meta has a tremendous track record of both rolling out broadly, iterating, monetizing. I think that's the case. Hearing that the transaction value is over$200 per transaction, I think it was a fabulous number to hear. And I think that there are many, many more ways that this company can monetize beyond just taking a cut of transaction value, which is a bit of what they talked about yesterday.

34:48But I think that this is going to be a tremendous tool for businesses to reach their customers. I think that's a revenue stream for the business. And I think over time, you're actually going to see individuals, agents interacting with businesses, agents. And I think that that's going to drive a lot of growth for the business as well. I mean, they are, you know, certainly the banks don't want Muse crawling over them. And there are any number of other businesses that may choose not too large ones. I just wonder what your expectations are there and whether you're focused on engagement and where that stands.

35:18Is it increasing or is it sort of leveling off in terms of people who are using Muse? Do we know? I don't know specifically about Muse engagement, though I think the feedback from the company, both on the core business, right, which showed all time highs across the family of apps, which is incredibly impressive for a company as mature as it is. I think the early feedback with respect to engagement is very high on Muse. And I agree with you. This is a disruptive technology and it raises questions about how businesses want to be interacting with it. But I think at the end of the day, the consumers will speak.

35:54And if it is creating value to the consumer and it's rolling out in force, you'll have those who want to participate and those who don't. And there's an opportunity for those who are willing and interested in participating to actually take some share from those who don't. So I really like the positioning. I don't think it is simple or smooth. I think there will be many different things that have to happen along the way. But overall, I think it is incredible technology that's going to help consumers and, frankly, help small and medium-sized businesses. Yeah, there are already some stories on the tape today about U.S.

36:29banks sort of fighting off unvetted agents, having to rewrite terms of service. That's going to be complicated, but likely to get worked out over time. Do you have numbers on expenses or CapEx for next year? Sure. We're looking for CapEx in the range of about$225 billion next year. I heard your comment about 250 previously. Certainly going into the quarter, the consensus numbers were closer to 200. But you can do sort of the math on what's implied for the fourth quarter rate, talking about that going into next year. And then, of course, the incremental comment about those capital needs. It seems like it will be higher rather than lower.

37:07But keep in mind, you go back a couple of weeks and hearing the company talk about Mark Zuckerberg in particular talking about the business and having a full stack approach. And so what that means is really not being beholden to other data service providers, not being beholden to other operating systems, which I think is something that's been a sticking point for Meta in the past, relying on other operating systems. Meta wants to fully control this. They want to control their destiny. They don't want to have to buy capacity from third parties. We've heard this week alone and not surprisingly that the cost of compute continues to go up.

37:44So these investments are certainly significant, but they are positioning the company to be autonomous for the long term. And we like these investments. We think these ultimately will be high return investments. Why do they need to spend so much? because they uniquely have the opportunity one to leverage what they're investing in within their business and to be one of the few businesses that is able to build capacity at scale for the likelihood that many many many businesses from here need this compute capacity and to the extent that it only gets more difficult to build out that capacity being one of a very small handful of companies that controls that uniquely positions them for the future they i I believe that they need to take advantage of that.

38:30I completely understand the risk associated with this high level of expense, but these are scarce resources. This is scarce capacity that the company is building. And they are one of the few, one of the very, very few that has their own business to deploy this into that's already growing. You look at the core numbers. This business is attractively priced on a core business that's growing well over 20 percent. And the incremental spend is going into a high risk, but an incredibly potentially high return business in meters and to a lesser extent, their frontier model. OK, Michael, thank you for joining us to defend the stock, which is down almost 9 percent right now.

39:12Michael Morris, Guggenheim, entertainment and media analyst. Got the Nasdaq down as well. I was just going to say, David, 2.2 percent. A lot of the laggards here are around fiber. We mentioned GE Vrinova earlier today, second worst S &P here with these session lows and yields almost with a four handle on the 10. I know. Friendly for the stock market, usually. You would think so. Coming up, what Jensen Wong had to say about the turbulence for some of the NeoCloud names, including, of course, that one, which continues to worsen its sell-off. Plus, next hour, don't miss it, Pershing Square's Bill Ackman.

39:47He'll be live from the Tel Aviv Stock Exchange to get his outlook for the market. The AI trade as Israelis are heading to the polls. They have a big election coming up next week. That'll be in the 11 a.m. That shiny AI and tech trade is losing some of its luster as we approach the end of the year. So are there opportunities in this market that are not necessarily all AI all the time? We'll speak with a wealth manager who says there are a number of overlooked names that are having opportunities in the recent market volatility. Tune into our Market Navigator segment later on today on Power Lunch for that shopping list.

40:21That's 2 p.m. Eastern time. NASDAQ down 2.25%, near-session lows. The core we've under more pressure this morning, now down more than 30 % in a month. Dip buyers might be starting to emerge, though, in some options. Let's get to Oliver Renick at CBO in Chicago with that story. Hey, Oliver. Hey, Carl. Not quite as bad today as you might think. Neoclouds are getting hit. Nebias slipped under last week's lows. Core we've stocked is trying to hang on as long as it's above about$57. Both companies have big GPU supply partnerships with Meta, which, of course, as you guys talked about, is getting slammed after earnings.

40:57But the options flows in CoreWeave and Nebius in particular could be worse, I think. Volume is pumped up. It's about three times the 30-day average in both. And there is a lot of call selling happening. But it doesn't look like there's a ton of puts being initiated by buyers this morning. That means there is certainly a negative cloud with the call selling that's happening and these traders betting against upside, but not quite the pile on of folks betting on further downside that we saw last week. For example, put trading in CoreWeave last week exploded and the put to call ratio went above one for the first time in seven months, meaning more puts open than calls.

41:38Today, that's actually coming down a bit. It's twice as many calls are trading than puts. But remember, a lot of them look like they were initiated by call sellers, which is at best neutral, if not bearish, betting against upside. But at the same time, 31 ,000 calls in Corweave looked like they were initiated by buyers compared to about 21 ,000 puts. And get this, the biggest trade of the day when I came down here in Corweave was actually someone who bought just shy of 1 ,065 strike calls expiring December 18th for$635 ,000. It's possible that person might be buying back calls that they had sold, but on face value, it looks like they're putting on a bullish position that needs CoreWeave to rally 23%, guys.

42:23Some bullish conviction. Thank you, Oliver. Oliver Rennick, CEO of Pinnacle Financial, coming up after the break. Bucking the downtrend today, how he's thinking about increasing cyber risks to the banking sector. That's a hot topic. And do not miss our interview next hour with Pershing Square's Bill Ackman on a variety of topics, including the AI trade, his portfolio, and why he's doubling down on Israel. We'll be right back. Welcome back. Take a look at shares of Pinnacle this morning, up a percent after reporting an earnings beat in Q3 and reaffirming guidance for the year, pointing to some strong credit performance and growing fee income.

42:56Joining us in a CNBC exclusive today is Pinnacle Financial Partners CEO Kevin Blair. Our bank oversees more than 400 locations across the southeast United States. Kevin, welcome back. Always good to have you. Great to be with you, Carl. How are you today? Good, good. The guidance, the backdrop feels kind of good. I guess some are pointing to deposit costs and net interest income, yes? Yeah, look, I think when you announce earnings, you have such a positive story. And then people try to understand where are the holes in your quarter. You know, for us, we talked a lot about this is a pattern. We've had three quarters in a row of strong loan growth.

43:32Our deposits have grown 9 % this year. Our EPS is up over 20%. Fee income up 15%. So it is a story of growth. And some of the questions that come with growth are, what's the cost of that growth? How much were your deposits costs going forward? Do you have the type of liquidity to sustain this level of growth? And so those are questions we expect. But the general theme, the overarching theme, is we've had a great first three quarters of the year. And I think it's setting us up for having a strong fourth quarter. And then we'll start talking about carrying that into 2027. Does loan growth inflect either way going into 27?

44:09It could. Maybe what's a little different with our models, we try to look at the overarching economic environment. But our model is predicated on hiring new talent. And so our pipeline of talent has been very robust. We've added 222 new revenue producers this year. those individuals will come on board and they'll start to consolidate their book by generating new loans and deposits. And so that's going to generate growth. That's why we get that strong double-digit growth. If you rely just on the economy, if the economy were to slow, then generally you're going to get a slower level of overall growth.

44:44That's not the main reason. That's not the lever that we're using to get there. We did query our clients this quarter. And what's interesting, I think it's good to just keep it in perspective. About 38 % of our clients believe that their business will grow over the next 12 months. Compare that with only 15 % that believe it will decline. So you still have a two-for-one there where you're getting twice as much growth as you would get contraction. It's starting to level off a little bit. That 15 % in contraction is up about four percentage points versus last quarter. But it's still a very constructive environment for growth.

45:18What about AI? I know you talked about this on the call. and you did this big deal. So can you compete with some of the bigger banks when it comes to investing around AI? I mean, one of the reasons for deals has been to grow scale so that you can increase technology, but how are you utilizing it and how do you compete? Well, Sarah, it's a great question. I think AI provides an equal level of competition. We're investing in AI to enable the same model that we've run for quite some time. We're trying to make this a great place to work And we're trying to make it a place where we create a unique client experience that drives loyalty.

45:55And when you stick to your knitting, when you focus on those things that allow you to create a competitive advantage, you're just leveraging new tools that allow you to do that better. So like any technological wave, I think you don't get the benefit by just buying the tool. You've got to re-engineer, restructure your processes that allow you to differentiate your offering. And that's what we're doing. We're leveraging it to drive productivity. We're leveraging it to improve the client experience. Every hour that we give back to one of our bankers gets returned to the client. So less work inside the four walls of the firm, that hour goes back to the clients.

46:31So I would submit to you that AI is not replacing the human touch. It's actually enhancing it, and it's going to give us the ability to create capacity for all of our team members to do more to strengthen those trusted relationships. Kevin, come back soon. Want to get you on the merger integration. and obviously agents, as we ask all banking CEOs. We'll do that next time. Always good to have you. Love to, Carl. Thank you so much. I've come there over at Pinnacle. When we come back, Pershing Square's Bill Ackman, live from the Tel Aviv Stock Exchange. Look at his outlook for the market, geopolitics, and volatility.

47:04Speaking of which, Bix above 19, 10-year, 5-0, and the homebuilders, best week since August. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

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