10AM Hour: Stocks Pull Back from Records, SpaceX Raising Money to Buy Nvidia Chips, New McKinsey Report on Job Impact from AI 10/7/26

0:00We're an agent supposed to take things off your plate. Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

0:33Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts. Good Wednesday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla and David Faber. We are live, as always, from Post 9 of the New York Stock Exchange. Stocks are pulling back from record highs as the 10-year yield touches its highest level since 2002.

1:10We'll talk to market expert Rebecca Patterson about the rising risks of these higher rates. Plus, SpaceX under some pressure this morning following a recent rally there after a report said the company was looking to raise tens of billions of dollars in debt to buy NVIDIA chips. We'll talk about that and much more with Sequoia partner and SpaceX investor Sean McGuire. And we'll discuss a new report from McKinsey on AI's impact on the job market, which says millions of workers could be forced to look for new jobs in the coming decade. We're going to get into some specifics with him there. But, guys, we've got to start with the market action, and that is in the bond market, again, where the 10-year Treasury yield reaches a new high since April 2002.

1:50two. And we're looking at those those levels right now. 30 years at the highest since May 2002. We do actually have an important auction of 10 years, 10 year yield, 10 year notes coming later. But look, this is the challenge, whether it's happening for some of the right reasons, because the economy is strong or because of fiscal concerns in Europe and in the U.S. or, you know, the competition with bonds is now we're talking about Tesla issuing debt. All of that is in the mix. I mean, SpaceX, sorry. That's all right. Elon Musk. One day they're going to be the same company. So you'll be fine. OK, so SpaceX is doing debt.

2:29I mean, all of that is part of the story here, right, which is competition for buyers on debt. And that is basically what's happening. It's standing in the way. We do get this$39 billion of 10-year notes on Wednesday. I guess it'll attest whether yields are attractive or investors might demand an even bigger premium to buy the debt. That's at 10 a.m. Look, we know at 1 p.m., excuse me, we know that it has an impact on mortgage rates. And I think it's worth mentioning today that we saw mortgage rates climbing for a seventh week in a row. And we're now at the highest level in nearly three years.

3:03The 30-year fixed rate mortgage, 7.49 percent. That's the highest point since November 2023, according to the latest figures. I will note, though, that Goldman Sachs indicates that it's not as painful, perhaps, because most people actually have mortgages at much lower yields. They refinanced rates in 2020 and 2021. And the gap between those rates and current rates is a huge cost to moving, which is why we're not seeing buying new homes at these very high mortgage rates. They say over 90 percent of borrowers now hold mortgages priced below market rates, leaving them with little incentive to move.

3:46Obviously, when mortgage rates were 3 percent, it was a lot more attractive. And so maybe that's why it's not having a huge impact on the housing market, except for the fact that we're just not seeing new buyers come in because these rates are so high, guys. I mean, this is how it affects the real economy. We are seeing an impact on the banks themselves in terms of their stock prices, not on the other side. We've mentioned it in the last hour, but it is worth noting what had been very strong gains for much of the group, at least the biggest names, have evaporated. And now you've got Goldman Sachs, as Carl mentioned earlier, down for the year.

4:17Wells has been already, but in everything retreating to not significant gains and well below the S &P. Sarah, I guess rates there was also a concern. A concern, even though you would think a healthy economy and a strong capital market. Yep. I mean, you're talking about$40 billion bond deals today. you'd expect that those would be beneficial. There's nice fees associated typically with those kinds of deals. And the capital raising doesn't stop. But these stocks have not done well. You know, the other thing is the economy's held up relatively well, but there are forecasts for more pain. You know, the sort of story with rates is the oil prices and the rising energy prices.

4:54And there are some new warnings out today. The EIA forecasting 4 % higher electricity bills, for instance, 21 percent higher heating oil expenditures. In the Northeast, we pay for, you know, a lot of the oil prices for heating, high oil prices. And according to the National Energy Assistance Directors Association, which is a nonprofit, families with the heat with oil could pay 50 percent more this winter than last. I mean, that's a higher forecast than the EIA. But still, the question is, how much can we withstand here in the consumer? Because as we've been reporting overall, economy's been holding up pretty well.

5:32I mean, I just went back, you know, I track all the weekly spending numbers, the credit card numbers from Bank of America. And what they've seen is in their last check, end of September, 5.6 % growth in weekly card spending, healthy growth, broad-based growth across the board, engaging in different categories. So the question is, what happens next, right? As we continue to see these high oil prices and these high rates, does it actually break the strength we've seen? Yeah. I mean, I keep looking at Amex down 20 % for the year, one of the worst down names of the year. I mean, that's a proxy for spending, is it not?

6:08I don't know. At the high end? High end, small business. I mean, I know there's wars going on within credit cards, but, and that's expensive. And maybe some AI disruption fears in there as well, just about, you know, people getting savings as they're using all these consumer chatbots. I don't know. That might be part of the mix. We've talked about that a bit as well, I know. But yeah, that is a notable decline, particularly given spending continues to be strong, right? Spending continues to be strong and broad based is what we're hearing as well. You know, the unemployment rate is at 4.2 percent.

6:37So that is still a really strong snapshot. Now, income gains are not what they used to be, especially with inflation. And that's certainly something to watch. But as long as people have jobs, we've seen this trend where they might feel lousy and their confidence surveys are weak. but they're still spending. Yeah. Yeah, real wages negative for, I think, five months in a row. I know, I said it. I mentioned it. Let's get to the broader markets as the S &P and NASDAQ do pull back from yesterday's record close, and the 10-year gets to that highest level since 2002. Rebecca Patterson's with us today, former chief investment strategist at Bridgewater, now a senior fellow for the Council on Foreign Relations.

7:14Great day to have you back, Rebecca. Thank you. Good to see you. You make the point that AI is great, maybe too great. Yes. What do you mean by that? Yeah, too much of a good thing at the wrong time. It is great. It's supporting growth. Obviously, it's driving these stock markets higher, not just in the U.S., but around the world. But too much of a good thing. You know, Sarah, you just mentioned housing and mortgages. When you have all the workers, all the inputs going to data centers, you don't have enough for residential construction. And you are seeing the National Association of Home Builders index near a record low, about half of the 10-year average.

7:50So that's one too much. Another too much that you all talk about a lot is the debt situation, right? We have so much AI debt, not just in dollars, but in a number of currencies. And it's crowding out demand for other corporate debt. And as obviously we're talking about today, government debt. So there's a few areas where it's too much of a good thing. I would say people in Korea looking at the Kospi's volatility would definitely say it's been too much of a good thing. When you look at the volatility in that market this year, that's been unprecedented. And wrong time only because if when you think about the size of the AI infrastructure build out spent right Brookings last week suggested it could be over ten point three trillion dollars over a five, six year period.

8:30That is multiples bigger than what we got after 2008, bigger than what we got in 2020. And in those times we needed stimulus because we had zero inflation and zero interest rates in a recession. We don't have that now. So we're getting this tsunami of private sector stimulus when the economy doesn't need it. It's not that we're overheating, but it pushes the Fed and other central banks to raise rates, and that pushes up interest rates. So two questions. One is, are rates too blunt of a tool to slow that down, as the Times suggested this week? And then high-yield credit cracking, is that a precursor to equity weakness or not?

9:08I mean, I think what we're seeing in high-yield credit and even some of the investment-grade credits now. The spread overall is tight, but under the hood, you are starting to see some differentiation. I think we have to keep a close eye on that. We know that retail sales are holding up, but the lower income folks are trading down, right? And they're dipping into savings more to make ends meet. So we have some vulnerabilities, but we know earnings next week, I guess it kicks off. What are they expecting? 27 % year on year for this quarter. So as long as you said, Sarah, People have jobs, they have incomes, they feel lousy, but they're spending.

9:44If the spending continues, earnings can be an offset to the rates. But at a certain point, the rates become the dominant force. And I don't know what that level is. And that's when you buy bonds? Oof. Maybe some. But the problem is the underlying fundamentals are still lousy, right? Governments are still adding spending. They're adding to the deficits. And as these interest rates go up, the debt servicing costs go up, and that keeps making the deficit even bigger. We're now into a slow-motion debt spiral. And again, I'm not— So the bond market's talking to us. You sound like Dahlia. Well, you know, I work for the guy.

10:20But I think we are seeing that. Look, France is obviously in a much worse place than the United States. But France, the U.K., Japan, the U.S., the Fragile Four, we're all in the same boat, by and large. You know, a$40 billion bond deal today we've been talking about from SpaceX. You mentioned some of those CapEx numbers. Really, the most close comparison is probably the build-out of the railroads in the late 1800s in this country in terms of CapEx as a percent of the overall economy. And today's is almost double that. Is it? As a share of GDP. As a share of GDP. As a share of GDP. All right, but what about this whole crowding out effect?

10:55Is it real? I mean, is there any way to quantify it? I haven't seen any quantification done yet that I think is credible, and I haven't had the time yet to do it properly myself. I would say it's a factor. It's not the dominant factor. But the fact that you have these extra bonds at a time when governments supply$2 trillion of government debt being issued this year, and the buyers have shifted. Ten years ago, I mean, Sarah, you talk to these central banks all the time. We had central banks buying a much bigger share, and they're sticky. Today, that has switched to hedge funds as the marginal buyer.

11:31And they're a lot more tactical, which means more volatility. So do you worry about demand for U.S. debt? I mean, we're going to have demand. But the question is, do we have enough demand to meet the increasing supply? And that's what I worry about. You don't think that at the first, I don't know, ugly economic report or serious concern, there'll just be a stampede back into U.S. bonds? The question is, do we get the ugly economic report and inflation coming down? If inflation is coming down with softer consumer data, for example, then the market will expect Fed easing. And I do think you could see yields come down on a cyclical basis.

12:09But if we're still at war, if the Strait of Hormuz is still causing diesel prices to be$6 or higher, then it's going to be very hard for the Fed to cut as much as they would like to address the job market if inflation is still a concern. This is sort of the pernicious theory that if we were to, say, have a recession, you might actually see long-term rates go higher because the federal tax receipts would take a hit. I mean, I would be shocked at that because there are so many investors out there who have managed portfolios, 70-30 portfolios, and there's just going to be an asset allocation shift into bonds.

12:45Maybe that's more short-term bonds cash than long-term, but there will be a shift. So I'd be shocked if that happens. What I do think is more reasonable is that the degree of diversification benefit you get from bonds this next time is a lot less than what you've gotten historically. How big of a problem is France going to be? Because they don't have another election for a few months, a presidential election. And no politician can swallow the kind of cuts in these deficits that they need. Both France and some of these other countries, too. 100%. I mean, the French finance minister is now threatening to pass a budget without parliament.

13:19It's not going to fly. There will be a no confidence vote. We'll go through this rigmarole again. We'll have, what, six prime ministers in five years in France. But that is the problem. They're stuck. And they're protesting it. Exactly. So you have all these angry voters saying the government needs to do more to help us. And more equals more spending, not spending cuts. So how do you stabilize your fiscal dynamics when voters are going to throw you out of office if you don't spend more? It's very hard to get that to work unless you grow your way out of it. And that's where we all keep praying that AI is going to be this miracle.

13:56And it might be. But the question is, will it be soon enough or are we going to have a little crisis first and then we have the AI benefits coming down in the next two, three, five years? I don't know. And I'm not saying there will be a crisis. I'm saying that we're in a situation where the vulnerabilities are getting worse and we're seeing cracks. So what's safe? I mean, if bonds, if treasures aren't safe, is it equity? I mean, look, you are seeing people buying investment-grade corporate debt. When I look during crisis like this in the past, you want to own these current account surplus countries, budget surplus countries.

14:31But they, for a very good reason, have very small bond markets because they don't have to issue much. So Singapore, beautiful country to have debt. They don't have a lot of debt you can buy. Gold comes back. Now, gold isn't doing that well because interest rates are going up and gold has no yield. but a small piece of gold in a portfolio, I would argue, to go through the next ride, it would still be something I'd look at. Defensive equities, I mean, a lot of them have underperformed this year. Maybe you take a second look at a few of them that are less rate sensitive. But I agree, it's a tough question.

15:02It is a tough question. We raised some good issues there, Rebecca. Thanks. Good to see you, as always. Thanks for having me. All right, here's our roadmap for the rest of the hour. We're still ahead. Sequoia partner Sean McGuire with us to discuss new reports about this major debt raise from SpaceX, plus, of course, his firm's big bet on Israeli tech on this third anniversary of October 7th. Also ahead, what Marvell's CEO just told us about his outlook for chip demand as the AI winner, at least one of those stocks that's certainly been winning. It is pulling back a bit today after a massive run this year.

15:35And why McKinsey says more than 10 million workers will need to look for new jobs in the next 10 years as we're at early opening lows here. Dow's down 540. 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. VantageScore safely broadens access to the credit economy and brings 5 million mortgage-ready borrowers into the market.

16:18That's why top lenders like Rocket Mortgage, as well as nine of the top 10 banks, rely on VantageScore 4.0. With higher predictability and greater access to credit, everybody wins. Get started at VantageScore.com. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out to work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow.

16:53Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. Hey, Fidelity. What's it cost to invest with the Fidelity app? Start with as little as$1 with no account fees or trade commissions on U.S. stocks and ETFs. Hmm, that's music to my ears. I can only talk. Investing involves risk, including risk of loss. Zero account fees apply to retail brokerage accounts only. Zero dollar commission does not apply to customers designated by Fidelity as a professional equity trader. A limited number of ETFs are subject to a service fee of$100. See details at Fidelity.com slash commissions.

17:26Fidelity Brokerage Services, LLC, member NYSE SIPC. Welcome back. SpaceX is in talks with Apollo and a number of banks as well that will support what will be a$40 billion sale of bonds to those potential buyers. All of this to help the company buy a lot of GPUs from NVIDIA. Seema Modi joins us now. She has more for us. Seema. We're told by a source familiar that, yes, Apollo Capital, along with a few banks, are looking to finance SpaceX's purchase of about$40 billion worth of NVIDIA GPUs and will tap the investment-grade debt market to do so. Notable here that this is specifically NVIDIA chips, not any of the chips being designed by the hyperscalers.

18:06We're told, though, that these discussions that are happening between SpaceX, Apollo and the banks are preliminary, still in early stages, no timeline on when this deal will go live. But it does highlight, right, Wall Street's growing efforts to finance the AI build-out and increasingly rely on the debt market. Apollo, worth noting, was involved in another deal in August in a massive financing effort with NVIDIA, another one with Broadcom. And an interesting moment, guys, for SpaceX. It just went public four months ago in June, raising$80 billion there. Two weeks later, then, went to the bond market.

18:36We reported at that time to raise$25 billion. And now the company making another financing push here, this time specifically for its hardware need. David. Yeah, and speaking to people who are also working on the deal scene, I mean, they just say the desire for capital is endless. I mean, you cover the likes of Oracle and so many of these other names. It just keeps coming. And it does seem as though, at least based on conversations I had, there's going to be more behind this one. Right, David. From what the source shared with me, who I spoke to, is that the compute scarcity, that story just doesn't seem to ease anytime soon.

19:10There are no projections as to when the shortage will ease. And therefore, that's creating just an enormous amount of demand. And, you know, you also look at that other deal between Broadcom, which is looking to finance the purchase, finance Anthropics purchase of chips, its specific chips. So it also also highlights just the circular nature of a lot of these deals as well. Yeah, I mean, right. NVIDIA makes a lot of money. And, of course, then that money in part goes to help create demand for its chips. Right. Sort of that, right, that circularity. Seema, thank you. Seema Modi. We'll keep an eye on SpaceX.

19:47shares and as well if we get any news on potential pricing for that deal as well. For more on the stock though, let's bring in William Blair, industrial's research analyst, Louis De Palma. He has an outperform rating on shares of SpaceX. What do you make of this bond deal? For having me back on the show. So what do I make of it? Well, NVIDIA does not give away its GB300s for free. NVIDIA is a$5 trillion company for a reason, and SpaceX has to pay billions of dollars for these chips. We estimate SpaceX is going to spend approximately$50 billion on AI CapEx this year and north of$100 billion next year.

20:31and SpaceX needs funding to pay for these chips in order to accommodate its customers. Anthropic is coming online in October as well as Google. And so SpaceX is part of this compute-feeding frenzy. Yeah, all right. Well, I guess the point or the question is, will it be money well spent? Yeah, thus far, SpaceX has been able to achieve a payback of less than a year. And it's been able to do this because there's such a scarcity right now in that if you look at Microsoft with CoPilot, it's ramping considerably. Meta launched its Muse, a Gentic app, earlier last week, and that had a tremendous debut.

21:23Anthropic is doing amazing. that the demand has been through the roof. We cover Palantir, who's seeing its revenue grow for an U.S. enterprise by more than 150%. So right now, enterprises and hyperscalers, they cannot get enough of the super intelligence as they refer to it now. Yeah, I'm looking at your coverage list. You obviously do follow a lot of things that deal in outer space. So do you think that orbital data centers will be a real thing? And if so, when? We definitely think they will be a real thing from the perspective that SpaceX, when they launch their Starlink satellites, and there are over 11 ,000 in orbit right now, these Starlink satellites are effectively mini computers already, in that they have solar panels, they have processors.

22:24They're not as sophisticated as NVIDIA GPUs, but they have processors for enabling the KU band satellite uplink and downlink. So SpaceX is more or less taking their Starlink satellite design and enhancing it with larger solar arrays in order to provide orbital compute. So, you know, they expect to have, I believe, a demonstration satellite launched by the end of 2027 and, you know, hundreds in 2028. So if you're if you own the stock, if you're an equity investor, do you just ignore the rising credit risk of these companies? Because, I mean, we are seeing spreads widen out on the U.S. investment grade secondary market, on the credit default swaps.

23:17I mean, nothing crazy, but as these companies borrow more, at what point do you have to think about credit risk? It's a great question. And right now, investors are lining up in order to fund these types of ventures. OpenAI is reportedly in the process. I believe you reported that they're looking to raise$30 billion. dollars. Blue Origin is in the market right now, raising money. If you look at SpaceX, you know, given the company's track record and the companies that they signed up, you know, there are, you know, a multitude of very large institutional investors. And, you know, we talk to SpaceX investors all the time in the equity markets, and they're very eager to, you know, own positions given the diversification between orbital compute, terrestrial compute, Starlink mobile, Starlink broadband, Starship.

24:24We didn't even talk about Starship and the Flight 14 that took place. So there's so many things going on and TerraFab as well. There's a lot of excitement from investors, not only in SpaceX, but across the ecosystem. All right. Well, we're going to leave it there for now, at least, Louis. Thank you. Fantastic. Great to be on. Nice to have you. A lot more coming up on SpaceX next hour when we're joined by Sequoia partner and early SpaceX investor Sean McGuire. Also ahead, Porsche hosting its Investor Day. We'll take a look at its plan to turn around two years of slowing sales. And we'll look at this new congressional panel report shared exclusively with CNBC, linking trading platform Webull with the Chinese Communist Party.

25:13Stock's down, actually off of the lowest, down 20%. Stay with us.

25:19From kickoff to the final whistle, trade the biggest moments in football with Calci, America's number one prediction market platform. Next Sunday, Tampa Bay takes on 5-2 Chicago. Tampa Bay is currently trading at 38 % to win. A$100 trade pays out over$190 if they come out on top. Download CalShe. Use code FOWL to get$25 when you trade$25. K-A-L-S-H-I. CalShe. Trade what's next. 18-plus only restrictions and eligibility requirements apply. Event contract trading involves risk and may not be suitable for all investors. CalShe products are not available in all jurisdictions. Prices, values, and available markets may differ from those mentioned.

26:00For more information, see calshi.com slash regulatory.

26:30Make work less work with Gemini on Google Cloud. Check response, subscription required. 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. Welcome back. We're about 30 minutes here into the hour.

27:08Here are three big movers we're watching, including Constellation Brands off session lows. The owner of Corona and Modelo reporting better than expected earnings. However, beer margins falling by 160 basis points on the quarter. Beer depletions, which is a metric that tracks distributor sales, were also down. The stock is off about a third of a percent. Meantime, trading platform Webull getting crushed. A report from a bipartisan congressional committee shared exclusively with us at CNBC says the company is linked in structural ways with the Chinese government. Webull saying the report contains, quote, significant inaccuracies.

27:42We're going to have much more on that story coming up next hour, but the stock is getting hit pretty hard. TD Cowan upgrades Marvell on the heels of its investor day. They say the concentration and margin risk associated with custom XPU programs has largely been de-risked. Price target goes to$3.50 a share. Last hour, the CEO, Matt Murphy, joined the crew talking about those custom chips. Listen. Our business in 2028 is going to be$12 billion plus in custom already. So that drive from 28 to 30 is not a stretch, and it's not a huge portion of the market. So I think that's why we gave some headroom, too, on our ranges.

28:22We said, look, it's not just$80 billion target. There's a range of outcomes. We actually gave ranges on all of our businesses. So, you know, investors can take a look, and they can make their own judgments. But we think the midpoint of$80 billion is very achievable at the company level. All right, 90 % of analysts have a buy rating. A lot of them raise their price targets, clearly buying into the bullish story here. Yeah, and we talked to him as well about just the incredible growth from the total addressable market just for those custom chips as well, which in April of 24, he was talking about a$40 billion market.

28:53Carl, now it's$235 billion market. Obviously, they're not taking all that market, about 13 percent, based on what the numbers they gave, but it just shows the incredible growth. Stifel says TAM seemed growing to$400 billion in 2030. I think that's right. Is that just custom or is that everything? I don't know. Total addressable market, maybe. Got some good discussion of scale in versus scale out and how the racks are designed and they move from copper to fiber. And then kind of an interesting color on how they think of guidance, you know, not about being aggressive or conservative, just sort of how they set up a rational midpoint and then the range.

29:32Right. And that 30 and 30, right? $30 a share in earnings by 2031, I think it was. or yeah, it's interesting as well. We have talked a lot about the replacement of copper in the data center in terms of connectivity between racks. But now they're talking about within the rack itself, starting to replace the copper and what that opportunity is. All right, you can see those stock a bit off after, of course, a nice move yesterday. Let's get a CNBC News update. Pippa Stevens has that for us. Pippa. Good morning, David. Attorneys for Krista Pike will be in court for an emergency hearing today in a bid to preserve evidence from her failed execution attempt in Tennessee last week.

30:10That includes medical equipment used during the attempt, as well as training materials, surveillance footage, and employment records. They also want access to Pike to independently document her current condition. Tennessee officials said yesterday she was awake and talking, but her prognosis remains unclear. Meanwhile, the U.S. issued a formal diplomatic message to Russia regarding its lack of information sharing about the unexplained death of a worker at a plague lab in Siberia. It comes as the World Health Organization says it will also press Russia for more details as it investigates reports about a second potential plague case.

30:47And a new three-part docuseries about Sam Bankman-Fried's multi-billion dollar crypto fraud case is coming to Amazon Prime Video. It's called The Boy Who Stole Billions with a question mark in the title. The streamer says it will include exclusive first-hand accounts from Bankman Freed in prison. The docuseries premieres in November. Carl. Pippa, thanks so much. Pippa Stevens. When we come back, Inside Porsche's turnaround plan, the company hosting an investor day today, how it's looking to boost these two years now of slowing global sales. Later on today, don't miss David's interview with newly named AIZAR J.

31:21Clayton, the national security director, adding to his responsibilities. responsibilities. We'll talk to Palo Alto's chief Nikesh Arora as well after attending the president's AI luncheon last week. It's coming up at 315 Eastern time. Squawk on the streets back in a minute. Welcome back. Porsche hosting its investor day this morning, looking to turn around several years now of slowing sales. Our Phil Lebeau has more on the company's strategy. Morning, Phil. Good morning, Carl. This is the new vision being put forth by Porsche CEO, Dr. Michael Leiters. He did this in Germany this morning, and it basically is almost replicating the strategy that has been so successful for Ferrari.

31:57Big surprise, Dr. Leiter's previously worked at Ferrari. That was two jobs ago, but he understands the success of having a premium brand that people want the exclusivity. And therefore, Porsche is gonna be pivoting. And part of that pivot is to work on greater exclusivity and basically greater profits is what they're hoping to get by not having as much volume. They'll be raising the top model prices by about 20%. The focus, again, higher margin models, not trying to be all things to all customers who are looking for a Porsche, but trying to say to people, you want exclusive? That's what you get with Porsche.

32:32They also plan to cut costs by 20 percent. Operating margin of 10 to 15 percent is the target with fewer model variants. And that's the key here. Doing more with less. As you take a look at shares of Porsche versus Ferrari over the last three years, the reason we're showing you this is that Porsche believes this is the key to getting back to profit. and growing the shares. I shouldn't say complete profitability. They had a slight profit last year, but you really want to grow the exclusivity. Bottom line is this, guys. What Ferrari has done is what Porsche is trying to do under Dr. Lighters. They will get to give the Q3 results next week.

33:10We'll also see a concept car from then. Really focusing on the core DNA of Porsche is going to be the focus. Meantime, Phil, you and I chatted last week about used car prices and whether or not we might get some negative year-on-year prints. Did we learn anything? We did. We have seen a drop, according to Cox Automotive, which puts out the monthly Mannheim used auto report. They were down 0.6 percent compared to the same month last year, down 1.1 percent compared to August. The biggest drop is in pickups and SUVs. Both of those saw prices dropping anywhere from 4.3 to 4.4 percent. And as you take a look at what's happening in the used car market, take a look at CarMax.

33:52In September, EV prices, now this is for the whole industry, not just at CarMax, and we're going to show you Carvana here in a second, but EV prices, they were up as were small car prices. So what you're looking at here is the consumer shifting, more fuel-efficient models. And if there are EVs that they can move into, they're going to try to do that. And that's why you see some of those prices moving a little bit higher. You know, Phil, back to Porsche or really sort of the larger market in Europe, in particular EVs. I know you've been following it so closely in terms of the Chinese EVs. I mean, what are they doing over there?

34:29Do they continue to allow them to come in? And what kind of a competitive threat do they really represent to Volkswagen and Porsche and so many of the others? Well, Europe is what you see automakers point to here in the United States and say, don't do what they did because they didn't have enough barriers up there in terms of tariffs. And as a result, the Chinese have been very successful building sales in Europe, especially in the UK. We reported on that this month. And so what Porsche is trying to do, there's still demand for Porsches, especially internal combustion engine vehicles. There are people who want that performance and they want the feeling of driving an internal combustion engine vehicle.

35:10Porsche is leaning into that and saying, if you want exclusivity, you know what Porsche stands for, especially on the performance side of the equation here. That's what we think we can do better. And if you look at Porsche over the last several years, David, look, they're getting their lunch handed or eaten in China. Not just them, all automakers who are not Chinese based because of the competition that is there. And they essentially, as they were expanding their lineup with SUVs, crossovers, I think Dr. Leiters has said, no, no, no, no, no, no. We can still build those. We'll sell some of those.

35:46But we need to get back to what we're known for, which is performance and sports cars. OK. Phil, thank you. Phil Lebeau. Up next, a new report from McKinsey details the widespread impact that AI could have on the job market. We're going to look at how many workers may need to switch occupations. Keep patient. And let's give you a quick check here on shares of Skydance. Not a great start over the last yesterday's session and then today's as well, down another 7.5%. Tomorrow, though, big day. The management team is going to be here on the floor. And I'll have an opportunity to speak to David Ellison, the company's chairman and CEO.

36:24And in on Kryze as well, its co-CEO. That'll be at 8.45 on Squawk Box, and most likely we'll come into Squawk on the street as well. We're back at this. Welcome back. McKinsey & Company out with new predictions on how AI and automation will disrupt the U.S. labor market. The bottom line, roughly 11 million workers may need to change occupations by 2035. Joining us now, McKinsey & Company North America Chair Eric Kutcher. Eric, welcome back. It's good to have you. It's great to be here. Thanks for having me. So there still is this fear out there that AI is going to come and kill jobs. True or false?

37:00Yeah, so I think the headline here is actually really good news. And I think last time I was here, I talked about good news as well. We're actually saying we think there are going to be more jobs in 2035 than there are today. That's not a headline we get every day. But they will be different. Yeah, let's come back to that in a moment. The other part of this is those jobs are going to pay more money than the jobs that people have today. That's a doubly good headline. Now, there's a problem. There's a real challenge as we go through this. We're going to have something like 35 million jobs that are impacted by AI.

37:29Two-thirds of that will leave people with better jobs in the same profession, in the same occupation. I can go through an example that we're already seeing today. But 11 million jobs are going to need, people are going to have to change jobs, change professions. And that's not an easy change. There are real limitations. There are limitations in terms of where those jobs will be. There are limitations on credentials, right? And so there's this real challenge of how do you begin to look at those 11 million and the sources of where those people can come from and create those opportunities for them.

38:00Where do those 11 million jobs that are displaced come from? What types of jobs? So what you're going to find is they typically are lower wage jobs. You know, a great example would be a lot of people think that executive assistant type roles will actually be displaced by AI. We see a bunch of the types of things that you do today being done more and more by the AI. Here's what's super interesting. If you look at the skills that a lot of EAs have, they are incredible project managers, right? Project management pays a lot more than an EA does. So how do we think about that transition? But one of the barriers is there's often credentials need to become a project manager.

38:35So we have to work through that. But the 11 million people should have better opportunities going forward if we can. The problem is the rate and pace of change. 11 million jobs changing over a 10-year period is four times the amount of change we're used to. Also, I mean, changing jobs often requires changing your residence or changing the town you live in. And we're in a housing market that is locked up. I just wonder if that's going to be a source of friction. Look, as I said, the good news is there's 11 million jobs, if you will, that will be displaced that need new jobs. There are 16 million, we believe, openings out there.

39:11So there's more than enough opportunity. but you hit one of the barriers I talked about, right? If you need to move, this has always been a barrier. It hit the manufacturing workers years ago, right? I have a house, I have a mortgage, I can't move. So what do I do? And so we're going to have to think about how do you reduce those barriers if we're going to get the most out of our labor force. You think privacy is a barrier from the corporate standpoint of not trusting this new EA with all of your data and history? Oh, I think this takes time. I don't think we're talking, I gave you the EA example more about the skill set.

39:44I was with a CFO recently and he was saying one of the things that's fascinating is as I look for maybe more procurement capabilities today, I figured out the best skills for that come from my treasury department. So it's a bit of where I was just using a skills example to kind of get there. I think some of this will take real time. I don't think we're yet trusting the AI to do those types of activities. I have to say, I'm surprised but encouraged to hear you talk about people in the same professions are going to be earning more money. But I'm curious, I mean, obviously you guys advise and consult with many businesses.

40:14So what are you seeing that leads you to that conclusion? Yeah, so first let's talk about what these roles are that changed. I said I would come back to this. Think about software development. It wasn't that long that we were reading the headlines that there will be no need for software developers any longer. The reality is I think if you look in Silicon Valley, the number one job opening today is for software developers. We are producing more code than we've ever produced. Actually, individuals are producing less code than we've ever produced. but someone is overseeing that code and then having to think through how do I take that code and turn it into product and product release and price.

40:48All of that is an expansion of what the software developer was doing before. And so we are seeing much more growth in the places that we thought we were going to see the biggest displacement. And that's where two-thirds of the jobs that are impacted are going to end up there. I'll give you another example. I was with two executives the other day. We were going through their workforce planning that they do annually, 7 ,500 hours per year spent on workforce planning. Turns out we've shown them now we can do that in tens of hours. And the CFO starts salivating. He goes, this is amazing. Think about all the hours we can save and the people we don't need.

41:21And the CHRO turns to him and says, well, what about activity X, Y, and Z? Do you want us to do more of those? Because now that we don't have people tied up here, we can do all the things we've been talking about that we haven't been able to do. And he goes, oh yeah, that's actually right. So what you're going to see is the roles that have been doing work that is necessary but not necessarily as valuable is going to shift to the valuable. But they're not laying those people off. No, no, they're not. They're actually using them to do the things they wanted to do that they've not been able to do.

41:50Those who are less positive, though, would say this is a new technology, it's the early days, and that to the extent that human cognition has been a scarce resource, it's not going to be. When AGI is here and when it's ubiquitous. And therefore, so many jobs are just not going to be needed. I think we still think there's going to be human in the loop. I think we still believe that that is the way that we will build trust into the system. And we talked about over the next 10 years, and I think over the next 10 years, we think humans are going to play an outsized role in that. It's funny, you know, Bill Gates talked to Ezra Klein in the past few days, and his point was, encoding is a good example, where the quality threshold got crossed, and eventually soon 100 % of code will be machine written, but that will then move to legal and accounting and everything else.

42:37Is there anything wrong with that framework? Well, I think you're going to see lots of activities where the AI is doing. I mean, we see it in what we do today, right? And by the way, we've always seen it. I think about what we do as a profession. Years ago, what I used to do now or what the teams did two months ago or three months ago, So they are now using the AI to do some of that work. But what they're finding is that opens up more questions and that opens up more analytics. That opens up more scenarios that they have to work their way through. I wish I could say that we're seeing that there's less work for the individual to do.

43:09It's actually more right now. And the pace of change just keeps increasing, doesn't it? Because all the work can get done a lot more quickly. And you actually realize that maybe solutions we had before aren't the right solutions, given what we now have the ability to go analyze and begin to act on. It's interesting to hear you talk about your own business, because I think consulting is one place where the AI narrative was, well, we're not going to need as many consultants because AI can just do that work. It was a pressure on Accenture for a while. We just saw them have a good quarter and prove that there's still value there.

43:37What are you finding with your own folks? Yeah, look, this headline, you know, there's a lot of headlines that we look back on and say maybe they weren't quite right. This is another headline I think we just had wrong so far. And I think we've been consistent on this. We've seen more demand for our services than we've seen any time in the recent past, right? The performance that we're seeing right now is there's more questions. And I've said this, this is 80 % of business transformation and 20 % of technology. The technology is well in excess of what we're using it for today. Business transformations are hard because you're talking about changing how individuals behave.

44:09And if you do it in a way that it feels like they're going to take away their jobs, they don't want to do it. So you have to find a way that it feels like it's enhancing. And the challenge in doing that, first figuring out where you go, how to do it to get there, is a real struggle. And we're seeing more demand than we've ever seen. Is that temporary, though, as this transition? I don't think so. I think I think I think this transformation that we're going through is a 10 to 15 year journey. I just don't think and I can't predict what happens 10 to 15 years from now. But the next 10 to 15 years feel pretty good.

44:38All right, Eric, thank you for joining us and talking about some of some of the work that you're doing and what you're seeing over at McKinsey. We appreciate it. Always love being here. Thank you. Chair of North America. Moving on, Bitcoin price is pulling back today as investors take some risk off the table. We're going to look at what the options market is signaling about crypto overall. That'll be next. Bitcoin has gotten caught up in today's broad pullback. Let's get to Oliver Rennick at CBO in Chicago, see what options are saying. Hey, Oliver. Hey, Carl, some tough whiplash this morning for bulls, but mostly those who took the record highs in stocks yesterday as an all clear to go full on risk on of all forms.

45:15Stocks like NVIDIA, Micron and Apple are holding up so far, But the March higher in interest rates is separating the wheat from chaff as crypto assets fall the farthest behind. Bitcoin's down 3 % and Ethereum's down 5 % to the lowest in two and a half weeks. Options traders in IBIT are battling it out this morning as we saw some heavy put buying in the Bitcoin fund right at the open. But then stabilized as we saw repeat buyers of the 48 and a half strike call expiring this coming Monday. But the biggest trade on the tape is looming bearish with someone selling$625 ,000 worth of the 53-63 strike call spread expiring in mid-December.

45:58A bet that Bitcoin has maxed out for the year. By comparison, equity traders are keeping a cooler ahead so far. Despite the early pop in VIX this morning, the two biggest trades in VIX were a put buy, betting it stays below$16, and a call spread sale betting VIX doesn't get past 22. Oliver, thanks for that. Kind of fits with the overall picture this morning. Dow down 540. Take a look at some of the internals of the Dow. Meantime, you got almost every sector red. Breath, basically four to one negative. 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.

46:43You 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. To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer. Hey Fidelity, Can I get a second opinion on stocks in the Fidelity app?

47:13With Fidelity, it's easy to get an outside opinion from independent experts in a single score. And then? When you're ready, trade U.S. stocks and ETFs with no commissions. That's right. I am always right. Investing involves risk, including risk of loss. Zero dollar commission does not apply to customers designated by Fidelity as a professional equity trader. A limited number of ETFs are subject to a service fee of$100. See details at Fidelity.com slash commissions. Fidelity Broker Services, LLC, member NYSE SIPC.