10AM Hour: Wells Fargo on Netflix Downgrade, Hollywood Super-Agent Ari Emanuel, Edison Internation CEO on Data Center Demand 9/21/26

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1:04Good Monday morning. Welcome to Squawk in the Street. I'm Carl Cantoneo with Kelly Evans, Mike Santoli here at Post 9 of the New York Stock Exchange. Sarah Eisen and David Faber are off today. Stocks kicking off the week in the green on some hopes for some positive policy talks coming from the president's meeting with China's Xi Jinping. We'll get more on what to expect. Netflix gets downgraded to sell, as you might know by now, by one Wall Street firm. That this Friday. We'll talk to the man behind the call about what concerns him about the streaming giant. And Hollywood super agent Ari Emanuel on his new memoir, The Inside Stories, about how he says rage has helped him get to where he is today.

1:39Plus, the latest on TKO, Emanuel's longtime partner, Mark Shabira, as well. Let's begin with the markets, though, and tech trying to take charge once again. Mike, I know you've been talking about its efforts to rescue the broader market. Yeah, it has, as most of the market has really settled back into a decent little pullback under the surface for a little while. Now, take a look at the Q-top. This is an ETF that's the biggest 30 stocks in the NASDAQ 100, which I like as a broader version of MAG-7. If you look at it relative to the equal weighted S &P 500, it's really started to separate to the upside again.

2:10Q-top. It's a Q-tip, but Q-top. Exactly. But it's the top of the Qs, I think, is the idea. And so you see that steady and then that blip higher right at the end right there. And again, Again, that's the S &P 500 against the equal weighted S &P. So obviously leadership coming from the biggest names out there. And, you know, the other piece of it, the S &P 500 as a whole has kept it to like a 3 % pullback from the highs and is now as of the highs of this morning and actually right now we're above last week's high. So if you just want to look at it in terms of technical, tactical cues, it's at least doing a little bit of work to say that we don't have to give back too much on the headline level.

2:51It's still a matter of debate, though. Where do we leave the Russell 2000s? You know, things that are down the food chain. Not in a great spot, actually, because that's bearing the brunt. And, you know, one of the arguments for, oh, parts of the market are washed out is the Russell. And it's really going to script. It's underperforming today. It's further off its highs than the rest of the market. And what it mostly tells you is, you know, Fed tightening still matters for parts of the economy and the markets. And I think that is one piece of it. You know, another piece of it is people are making the case that sentiment has reset a fair degree.

3:26There's more skepticism in the market. People are less enthusiastic. Retail trading flows, things like that, have moderated since the early summer highs. That's a net benefit as well. I don't think it's anything like some kind of fat pitch. Everybody hates the market. Nothing like that. It's just much more about we've come off the boil in a lot of respects. Now, the big picture is what can we expect for overall equity returns from here? We're still going to hit four years on this bull market. It's giving you some pretty good three consecutive 20 % upside gains. And the initial conditions maybe don't tell you that we're going to blast higher from here.

4:01But don't they say we're coming up on the four-year anniversary of the launch of ChatGPT also, which I'd like a week-long special on that. It coincided for obvious reasons. Imagine if that hadn't come along, how bad the economy and the market were looking that year. But four years, they say, and I don't know how true this is, you always want to stick with the leadership throughout that rally. So for those who want to say get out of tech and like, but if this is a tech-driven rally, then in every pullback until this market, bull market literally ends, should you be sticking with tech? That is how as a bull market matures, you basically, it becomes maybe a little bit more selective in terms of what got you there.

4:35And the leadership does tend to persist. Yeah, I think I've always said this. Everyone celebrates the broadening trade when everything but tech works. that doesn't make it safer, doesn't make it a more stable market. People feel like it's more virtuous and it's stock picking and it's fundamentals, and it kind of is, but for the overall tape, it can create instability. For interludes, it's good, but I don't think it's necessarily something that can last for long. Prolonged periods when the equal weight outperforms are known as bear markets. This is a terrible way to get to Charlie Wabrinskoy. Well, or the perfect way, perhaps.

5:09So we're going to talk more about the markets. We'll bring in Ariel Investments, Vice Chairman Charlie Verbrensko. Charlie, give us your take here in terms of, I guess, the general setup. And then how would you navigate a market that still seems fixated on the AI excited? My overall assessment is you guys gave a summary of the market without talking about small cap value, which has been extremely strong. It started about a year ago when we were having these conversations about tech leading everything and how you had to be so invested in tech. and tech was expensive and S &P was at 23 times earnings, whereas stubbornly small cap value, 2 ,500 value, was trading more like 13, 14 times.

5:51Eventually value matters and that's really paid off this year. Small cap value has beaten the tar out of the broad market and out of growth. And the reason that happened was it was just very effectively and welcomingly priced at a very attractive multiple. So what we've still got is we've got interest rates changing direction, which is the big headline. Don't miss. Don't bury the lead. We had 40 years of declining interest rates. We've now got a reversal in that. And that's got big implications. And what are those implications, I guess, Charlie, because one of the ways that, you know, people are trying to explain how the market has behaved is that we're somehow digesting 10 year treasuries at 5 percent, even though they're up from, you know, 1 % five years ago, or at least the market is believing it can do that for now?

6:43Yeah, so the first thing that's obvious but is very important is that leveraged companies do worse in a rising interest rate environment. And certain asset classes like private equity and leveraged buyouts have been extremely helped by declining interest rates for 40 years. The 10-year Treasury basically declined over every 10-year period over the last four years, from 1980 to 2020. Interest rates steadily declined, all the way down to below 1%. That was very helpful for private equity. That was very helpful for leveraged companies. And importantly, it was helpful for tech because tech has long-duration cash flows.

7:24The tech companies earn their money way out in the future. As interest rates come down, that's very good for long-duration assets. Small cap value has short duration. The cash flow is now and over the next five years. And so increasing interest rates are less negative for small cap value than for long duration tech. Charlie, can you talk more about small cap value? Because to a lot of people that recoil and go, oh, that sounds like the worst quadrant of the market to be in. And you're saying it's the best one right now. I mean, it just is this year. And, of course, over 60 years, it's been the best place to be.

8:03The University of Chicago got famous for doing studies on the small cap outperformance, the value outperformance. That hasn't been true for the last 15 years. But for long periods of time, small cap value did the best. And it's for the reason you just said, Kelly, is because people don't like to own small cap value. They want to own sexy, big growth. That's what's popular. Popular bids up the price and brings down the returns. You want to buy what's out of favor. That's with Warren Buffett retiring. That's his most important teaching, is that you want to buy what others are selling and sell what others are buying.

8:41Small cap value has been what everybody wants to sell for the last 50 years, and that's made it attractive. Didn't he sort of recant that? I mean, when I think now, wasn't the whole narrative arc that people would say about Buffett? And he himself, even in the 2024 shareholder letter, I think he talked again about this. And he said, you know, buying Berkshire was a terrible decision. I had to stop buying. I'm not saying that small cap value is all cigar butts, but he said, you know, Charlie helped me see the light. And over time, he started buying companies more like an Apple. Right. That said, the journal Charlie today also has this fascinating look at how Home Depot is like the best performer in the S &P 500, more so than Apple when you do dividend reinvestment total return.

9:16So, you know, yes, you're right that some of these stocks that are out of favor can do really well, especially when you take the total return factored in. But, you know, the idea that just because something's cheap is worth buying, I feel like that's something that Buffett ended up repudiating. That's right. But he went from Ben Graham cigar bots to growth at a reasonable price. But what he never went away from was trying to buy when others were selling. When was Warren Buffett the most aggressive in the great financial crisis in 2008? That's when he made big investments in Goldman Sachs when people were talking about it going to zero.

9:54And why is he keeping$300 billion in cash right now? Because everybody is so excited about the market. So the concept of being contrarian, being an independent thinker, buying what's out of fashion, Warren never changed that. Fair enough. I guess, though, Charlie, that would suggest if the likes of Berkshire Hathaway want to be sitting on the dry powder, there's just less to do. Is that the way you feel in your orbit, that there's just not as many compelling values, or you still think there are? Yeah, that's the great point, Mike. That is, unfortunately, the fact, especially in the larger cap universe.

10:32We did have an overpriced S &P, which is 500 stocks trading at 23 times earnings. It absolutely was, and I'm afraid to say still is the case that this is a market that is above average price. There is below average opportunity in this market today. And that is because, frankly, people have been making a lot of money. There's obviously FOMO. People have not wanted to sit on the sidelines and miss this market. And so prices got bid up. We're going to see in a rising interest rate environment if that changes. But right now, on a scale of 1 to 10, where 10 is a bubble, extremely expensive, 1 is dirt cheap, table-pounding buy, I'm around a 7 right now for the broad market.

11:13It's a little bit above average price. I'm not scared today. Prices have come down for the S &P 500, but we're still a little bit expensive. All right. To curb your enthusiasm-type market, I guess, Charlie. Thank you. Thank you, Mike. Charlie Bobrenskine. Take a look at our roadmap for the rest of the hour, including potential media merger movement. I'll look at some new reports this morning that say Paramount Skydance and Warner Brothers Discovery might be close to a settlement with California to win approval for their deal. Plus, legendary Hollywood agent Ari Emanuel out with a new memoir, also revealing some new details about the White House UFC fight.

11:48And then hands off the wheel. We'll hit the open road in Texas with a live look at a driverless semi-truck making its way across the state. Swalk on the Street is back after this break. With the Discover Cashback Card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to Discover. Terms apply. See discover.com slash 5 for details. Your financial life rarely fits between nine and five, and the questions shaping your future don't follow a schedule.

12:32That's why Citi created Citi Sky, a secure AI member of your Citi Wealth team, built with the Gemini platform on Google Cloud. Whether expanding your portfolio or planning your future, you'll be able to access tailored wealth guidance on your time. Start building with Gemini at cloud.google.com. Citi Wealth investment products and services are provided by Citigroup Global Markets, Inc., member FINRA and SIPC. 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.

13:09and 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. Paramount and Warner Brothers Discovery shares are both rising this morning. A new report says Paramount Skydance has reached a settlement in its California antitrust case. Let's bring in Stephen Cahall. He's a senior equity analyst at Wells Fargo. He just downgraded Netflix to underperform. Stephen, more on that in just a moment.

13:43And it's good to see you this morning. Let's start with Paramount. And how close is this to the finish line? The headlines look like it's pretty close. And over the weekend, there was a growing number of headlines suggesting that the two were in talks. Just to put it in context, some weeks and months had gone by where it didn't seem like the company and the attorney general in California were really having constructive conversations. It certainly looks like that's changed. And now we're getting close to potentially the goal line here. Anything that could cause a stumble now at the goal line? It's not over till it's over, right?

14:19So this is a very politically charged situation, I think, for the state of California. It's an extremely important deal for David Ellison and all of the Paramount and Warner Brothers shareholders. So the complexity of this cannot be understated. But I think where we are is that the company really wants to get this deal done. And even though I have a more negative view on the capital structure, there's a lot of industrial logic behind the deal. I assume that the state of California has a lot of vested interest in this deal being successful as well in terms of job creation and investment. So no reason that the two sides can't come together and make this work.

14:56Concessions reportedly include a billion and a half production investment in California, keeping the studio lots, keeping the headquarters in California. That, of course, is a big point back and forth. Releasing 30 films a year under penalty of divesting Miramax. Selling some cable networks. The New York Times mentions Comedy Central could be one of them and protecting CNN's independence. What of those are strategic to you and which of those will create ripple effects that could be felt across the industry, turning now to kind of a Netflix and the other players post this potential settlement? Yeah, so I would say that from the materiality of Paramount Skydance and Warner Brothers Financials, There isn't anything here that probably sort of pulls the rug out from a financial and operating perspective.

15:4030 films a year is what the two companies are already at already. And there's been a number of commitments in various forms that that's going to be the case. You know, editorial independence, I think, is probably part of the motivation behind the state. But that isn't something that's going to have a significant financial implications. And while the cable networks do provide a lot of the EBITDA of the company, they're sort of underweight from a rationale or from a valuation perspective. So the thing to keep our eye on as we learn the terms of this is just going to be whether there's any negative impact on the synergy realization that Paramount is forecast, because you are going to have a fair amount of debt on this company.

16:19So leverage is going to play a big role in how investors look at it. Stephen, we talked a lot about your downgraded Netflix last week. Stock's already having its worst year since 22. Can you expand on the thesis and maybe roll in how a larger Peace Sky would alter that, if at all? Sure. So just to expand on the thesis, you know, I'll step back. And from a few months ago, as a longtime Netflix subscriber, I didn't feel like I was watching as much as I had historically. My team and I decided to dig into the upcoming slate and see if we could really understand whether or not anything had changed at Netflix.

16:59And, you know, the quick conclusion of that note is that we do feel like there's a bit of a studio turnaround that's maybe going on here. The content isn't quite as strong as it has been. And you're going to see that in the engagement trends in the second half of the year. And that may set up the company for really less earnings power in 2027 and 2028, which would be reflected in the valuation. So that's why we downloaded or downgraded the stock on Friday in a pretty detailed report. The impact of Paramount, Skydance and Warner Brothers on that, I mean, first off, is given the amount of debt that Paramount will have, my guess is that they are not going to pull back licensing of all content to Netflix, which probably helps Netflix's engagement overall.

17:40However, that is certainly Paramount's long-term view is to make sort of a killer app that combines Paramount Plus and Warner Brothers. So once they feel like they have their financial house in order, whether that's done through deleveraging debt or raising more equity, I think they're going to pull all the content they can back to their own platform to make it stronger over time. And part of the story here is that YouTube really is the main adversary in terms of eyeball hours at this point. And how is Netflix, I guess, attempting to meet that threat? And what does it mean for the user experience and also the advertising engine that Netflix is trying to build?

18:22So Netflix is, you know, I don't think anyone would disagree, of the major streaming platforms, the most diverse in terms of content, right? You have series, you have movies, you have documentaries, reality TV, video games, and YouTube is the other, of course, highly diverse content platform. and I think what you're seeing out of Netflix and at least this is kind of our conclusion is that they are trying to take the fight more directly to YouTube with things like vertical video, video podcast. They've done a number of deals with YouTube creators, which even YouTube has responded to to try to exclusively lock up some of those creators.

18:59And a lot of that does go to the fact that Netflix is increasingly going to be an ad supported platform in a way that it wasn't historically. That's changing the nature of the content that they're releasing. So if the opportunity is for Netflix to become more like YouTube, maybe the risk is that they might alienate some of their longtime subscribers who think of them more like an Apple or an HBO that are there for the premium content, which it does feel like there's less of these days. Stephen, just quickly before you go, a world in which Netflix is less dominant is a world in which there's this proliferation of other apps consumers are juggling.

19:35And I'm just curious what you think that means for the overall stickiness of their engagement with any of these streaming platforms? Yeah, I mean, I think some things that we're falling back on as, you know, sort of trends in an age of AI. Video entertainment, you know, it's important. It's been important for a long time. It will remain important in the future, and Netflix is a big part of that. But if you look at what's done really well in 2026, it's the box office, which just continues to be on fire with almost, you know, kind of every weekend a new breakout film. And it's sports. And those are two areas where Netflix is currently underweight.

20:13Doesn't mean they will be forever, but they are right now. And those are places where some of their peers are a little more overweight. So that could be rebalancing this equation a little bit. Sure. To your point, they're live. They're in person. They're social experiences in many ways. And perhaps that explains why they both moved into sports and tried to get Warner Brothers. Stephen, thanks very much. Appreciate it. Thank you. Stephen K. Hall. Later on this morning, legendary Hollywood agent Ari Emanuel is coming up, along with TKO President Mark Shapiro. Emanuel is out with a new memoir and provides some new details about that White House UFC fight and what it means for business.

20:48In a few minutes, too, we'll check in with our Phil LeBeau as we speak, riding in an autonomous truck on the way from Houston to Palmer, Texas. Stay with us. At Fanatic Sportsbook, we're talking real fan cash on every bet. Spend it on jerseys, tickets, collectibles, and more. Rewards hit different here. New customers can bet and get up to$1 ,000 in fan cash over 10 days. Fanatics, the only sports book to reward every bet. Must be 21 plus. Gambling problem? Call 1-800-GAMBLER or 1-800-MY-RESET. CT, call 888-789-7777. MA, call 800-327-5050. NY, call 877-8HOPE-NY. MD, visit mdgamblinghelp.org. Offer not available in all states.

21:27Terms apply. See Fanatics app for details. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

22:02Schwab 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. The always colorful Ari Emanuel, Hollywood super agent, WME executive chair, and TKO CEO has a new memoir out. It's called Roll the Calls, and it traces his path from the CAA mailroom to building a Hollywood and sports entertainment empire.

22:43Also revisits the people who shaped that journey, including Michael Ovitz and Ron Haber. Our David Faber spoke with Emanuel and TKO president and CEO Mark Shapiro on Friday and began by asking Ari why he decided to write the book now. Take a listen. I would say there's two reasons. One, being a parent of dyslexic kids, understanding the anxiety that brings and having seen my mother go through it with me because I'm dyslexic and coming out on the other side of that. I think it's important for parents to read it, understand what it takes to help your kids, the anxiety you have, but coming out of it, I think if you do the right things, your kids can be incredible and free thinkers and have emotional endurance.

23:30And then for kids, just generally starting out in business, hopefully I was really honest, and I hope you see that, that it's not easy. And this is their Thomas Guide or Waze, if you're speaking now, because I had a Thomas Guide when I was in the mailroom. And it's very tough. but if you have agency for yourself it's an incredible ride and i go through all the ups and downs of what it takes to be successful and it is difficult but it is really satisfying i haven't gotten to a part where you really take somebody apart nobody you know you sort of talk about everybody's foibles but you seem to have treated obits okay so far right this guy haber who you worked for who seemed to have taught you a lot as well i don't know my is there something later in the book where you just push people.

24:21But I would say, you know, Mike is, you know, he's on Mount Rushmore. That being said, we had a nice interchange, and we got together afterwards, and I think you'll enjoy all the ups and downs, personally, and people. Shapiro wanted to interrupt there, but it's not his book. This is the one thing that's not. I assume you've read it. You've read it several times, and he's been working on this for years. Right. What I was going to say for you is, not to interrupt him, was the Ovid stories, the anecdote of him almost throwing a chair at Ovid's, wrecking his entire office as he's quitting and leaving for another agency is one of the greats.

25:00A lot of people write books, though, when they're kind of done. Are you done with your career? Well, I would say the following. Since we just, Mark and I, started Mari together, I'm far from done. I think we've accomplished a lot now at TKO. we have a lot more to do, which maybe we'll get into now. So I'm still kicking until Shapiro kicks me out. He's got a lifelong seat. I would assume so. And would you think anything less, especially after you finish roll the calls, you'll say to yourself, how is this guy ever taking the exit door? It's not going to happen. You're not going to stop, right? Yeah, you won't ever stop.

25:35Well, I would say the following. Would you like to have a life of meaning or a life of pleasure? I think if you have a life of meaning, it is pleasurable. Most people think, oh, I just want pleasure. I enjoy what I do. It gives me great meaning. It gives me great purpose. I'm having a great time. I have a great partner. All right, let's talk a bit about that partnership. I want to get to Mari, which obviously is your private effort. You two are our partners on. But let's talk about the public effort that our viewers care about as well. Mark, we saw each other very briefly at Goldman Sachs' conference last week.

26:08You presented. And, you know, there was a moment, I think, where you push back a lot on this Wall Street narrative, in particular around WWE, UFC, WWE, obviously, two of the key components of TKO. That sponsorship momentum is decelerating. But you did say partnership revenue grew 2 percent in Q1 and 8 percent in Q2 versus the prior year. It was a sharp slowdown. So what's the pushback? 24 to 25, we grew 90-plus percent because WWE was new to TKO, and we took the playbook from UFC. We applied it to WWE, and we took down the low-hanging fruit. This year, what you've seen is 2 and 8 percent, respectively, in the first two quarters because we have so many international events this first half of the year, which don't allow us to sell as much, as many global partnerships as we otherwise would.

26:58But it's back-loaded. The second half, a ton of global partnership deals take effect. Many multi-year, all high margin, all recurring. And we will finish over 20 % year-over-year increase on WWE partnership revenue for the year. So it's more to come. So it's really the calendar. It's a story to tell. This is all timing. On your last call, I think your CFO also did quantify the margin that you took from the biggest travaganza for the president's birthday around the 250th anniversary of the country. $30 million. Was it worth a$30 million margin? That was actually in plan. We actually knew it was one of the great brand experiences of all time for us on a global basis.

27:40So we had it in plan. So from our perspective, it was already pre-baked. One of a kind. This is a one of a kind. Everyone else would kill to have something like that. That kind of stage, that kind of backdrop. $1 billion. $1 billion in earned media. Yeah, how do you quantify that? There are companies that we pay a lot of money to do this, right? At the end of the day... You think that's a real number of billion dollars earned media? I think it's actually conservative. And do you think that will actually redound your benefit in the future in terms of... For sure. We're growing our audience. We're growing our reach.

28:12We're growing our engagement. We're taking UFC all over the world. We're seen in over 200 countries and territories right now, either live and in person to come and see the actual fight card, or on television with our new deal, Paramount+. And, you know, we have our kind of site fees are up all over the place. People are calling us from all over the world wanting us to come. We're kind of regulating that as it relates to our domestic and our international, both for the WWE and the UFC. So, again, back to this idea of sort of one time, that there was a segment hit, margins went down at UFC. That's one time as a result of this event?

28:49Absolutely. And we forecast that. It is one time. If we could do another fight at the White House next year, we would. You would do it. This kind of exposure, David, we had news outlets covering it, not just sports. We broke out into the mainstream. That kind of awareness for the UFC is truly unprecedented and something we'll capitalize on in terms of business growth going forward. I'm going through my notes here because I wanted to come back to something, guys. It's back to the public markets and its endeavor, of course, which was once a public company, went private with your partner Silver Lake.

29:21There's something called appraisal rights. It gets somewhat complicated, but people will say, hey, you guys are paying too little. We're putting in appraisal rights. It was kind of a record number for a deal of this type that we saw. I think it's still at Delaware. It's still in court. Where do things stand with the appraisal rights and when we may get a decision in terms of whether you guys didn't pay enough and therefore owe these people who asked for these rights? Look, here's what I'd say. It's running through the process right now. We're proud that Endeavor shareholders got a 60 % premium when we signed the deal with Endeavor.

29:52Silver Lake, let's start right there. So those shareholders got a 60 % premium. At the same time, we know our long-term stockholders are quite happy that they received the highest ever free cash flow multiple for a media take private. What you have here is when the deal was signed, frankly, long after the deal was signed, a bunch of hedge funds piled in, hoping they could make a case and kind of don't look over here. This wasn't such a great deal, courts. Not to be. In fact, when they piled in and did that, we believe they actually broke the law. Many of them. Some of them broke the law. And we'll see how it plays out.

30:32We don't think Delaware is going to reward breaking the law, but we'll see what happens. Listen, you'll see if there was collusion. And we're not here to decide that. The courts will decide that. But I do think you'll find out with the hedge funds, there was some funny business going on. Finally, when we talk content, well, I'm curious. I mean, we continue to see prices for franchises, obviously, just skyrocket. TV contracts in certain areas. We've talked. We've had this conversation. You obviously worked at ESPN earlier in your career. Football is so important. But do we ever get to an end here or does this thing just keep going?

31:04It's so funny that you say that. It kind of reminds me when we first had Endeavor. where everybody said, when are prices going to stop as it relates to and how much content is going to be made? It's on the trajectory. Mark says this all the time. It's the great reality show sports. You don't know the end. It's engagement. It's water cooler. It's everything. And for us at TKO, we have, I don't know,$15 billion worth of long-term contracts. He'll talk about all the kind of cash flow that we have and all the guaranteed contracts. But I would say to you the following. if the Lakers are selling for$12.5 billion, Mark and I are involved in four leagues.

31:46If one team is worth 12.5, Mark will yank the chain on my leash when I say this. What is four leagues worth then? And I don't want to be the guy that sits here every day and says we're undervalued like every CEO. but I think our leagues are global. They're 365 days a year, and we're just getting started in global, and we have a lot of guaranteed contracts. So I'm very bullish. WWE, UFC, the boxing. And bull riding. Football boxing and PBR. And remember, the two of us just bought in as limited partners in the Las Vegas Raiders at a pretty healthy valuation of$9.5 billion. So that answers the question right there.

32:26We're believers. It's all still going north. Finally, back to the book. So again, I'm going to finish this weekend. It starts with you talking about rage, which you have a lot of. I mean, as much as it used to, has it mellowed you at all? You're asking me? Ask him. All right. Is it the same? Absolutely it has mellowed. It's not who he was when he was 30 years old, running around town and threatening everyone from here to Sunday. The bottom line is he's definitely more even keeled. But he's high energy. He's frenetic. He's moving at a quick pace. He's not slowing down. And he's very curious. And that curiosity drives a lot of this high energy.

33:11Here's what I would say. Patience is better, right? Is your patience better? Barely. I wanted to interrupt you four times. So here's what I would say. I've kind of done the following. The rage has not stopped. There is times I understand when I'm on the field. And it's pretty intense. and I feel bad for him and everybody around me. And then I've realized also, as my beautiful wife, Sarah Stottinger, when you're not on the field, you should not be on the field. And that has permitted me to be more successful when I'm on the field. A lot more from that interview on CNBC.com later on today. So fun to get a glimpse into his life.

33:49Time now for a CNBC News update. Let's get over to Pippa Stevens for that. Pippa? Kelly, the Department of Homeland Security says its investigations unit is now leading the probe into the shooting of a Venezuelan national by an ICE officer in Austin, Texas. DHS officials said in a statement overnight that the man is in stable condition and is in federal custody pending removal. They also said he had a final order of removal from an immigration judge. Austin's mayor said he wants the city's police force to have a role in the investigation to serve as third-party eyes. Russia launched an attack on southern Ukraine overnight after he fired more than 1 ,000 drones at Russia over the weekend.

34:28President Trump said today on social media the, quote, ridiculous and never-ending war must be ended, saying the conflict has caused Russia to lose control of its diesel oil industry. And the president said this weekend the massive arch he is pushing to be built in Washington, D.C., would double as a top-grade military complex that would house drones and snipers and store ammunition. He has tried to justify the project by insisting it has national security purposes. Mike, back to you. Hi, Pippa. Thank you. After the break, we'll take you live to Texas and check in with our Phil LeBeau, who's in the middle of a ride on an autonomous trucking trip from Houston to Palmer.

35:06Then the CEO of Edison International is with us, one of the largest utilities in the United States, how the AI build out is impacting energy prices, plus how they're thinking about growing climate risks to the grid. Stay with us. Welcome back. Autonomous trucking, self-driving trucks has long promised to reduce costs and help ease a shortage of drivers out there on our interstates and roadways. Phil Lebeau is now getting a firsthand look at this technology this morning as he makes his way from Houston to Palmer, Texas. Phil, again, I'm not trying to be a dunce about this. I did not know this was illegal.

35:38Are you telling me that if I'm out there on Route 80, that there might be a driverless tractor trailer before, behind or next to me? Probably not on 80. Down here in Texas, where Aurora Innovation has been testing their trucks for some time, they've been doing these rides. Now, usually it's been with a driver, a safety monitor behind the wheel. But as we head up I-45 to Palmer, just outside of Dallas, if you look over here, we've got a camera showing you there's nobody behind the wheel here. Why are we in this truck now? The technology has been developing. that's not the story as much as the fact that they now feel confident enough and are ready to begin commercial driverless rides.

36:20In fact, this is a shipment that's going up to Palmer. They'll be making another one back down to Houston once we're done with this drive today. Aurora believes that we are on the cusp of taking commercial autonomous trucking to the next level. They'll have 20 of these trucks making runs primarily here in the Dallas area going all the way down to El Paso, El Paso, out to Phoenix. Generally, in this part of the country is where most of these rides will be. Then they're going to ramp up to about 200 trucks by the end of this year. And then when we've talked with Chris Ermsson, the CEO of Aurora Innovation, he has said, look, we will be in the thousands.

36:57We will be cash flow positive by 2028 and that they believe they'll be unit positive, profitable next year and that they are at an inflection point. They've got their investor day later this week. It'll be interesting to see, Kelly, as they talk with their investors to see what the uptake is. This is a stock that really hasn't done anything over the last year and a half, primarily because investors have looked at the autonomous trucking industry and they've said, great, you're testing it. There are companies that are interested. When does it take off? And, Mike, this is an example of what we're seeing.

37:30This is a commercial run. There will be more commercial runs. And just to put in dollars and cents for you, Mike, if there's no driver in the truck on this run today, 85 cents a mile. That's the cost. If there were a driver in this vehicle, Aurora says it would be about$1.18 per mile. So$0.85 per mile versus$1.18 per mile. You can see why trucking and shipping companies are enthusiastic about autonomous trucking. No doubt about it, Phil. Very cool. We're seeing vehicles pass you there. I guess you aren't maxed out on speed, but you're getting where you need to go. Phil, thanks very much. We're 65.

38:06We're doing the limit. Yeah, that works. All right. Don't want to get pulled over. Thanks, Phil. We'll talk again later. Speaking of trucking, a lot more coming up next hour. Diesel prices at the pump at all time highs. The CEO of Schneider joins us to discuss how those costs are hitting the economy and the consumer. And then after the break, the CEO of Edison International, one of the largest utilities in the country, on AI power demand and some of the most prominent risks facing the grid. Don't go in. Welcome back. Data Center Pushback, gaining some steam in California with towns and residents worried about energy costs and pollution.

38:41Our next guest oversees one of the biggest electric utility providers in the country. He joins us this morning with his outlook. Let's bring in Edison International CEO Pedro Pizarro, parent company of Southern California Edison, which does serve some 15 million people across the state. Pedro, welcome. Good to have I know you're in town for Climate Week, although we normally turn to you for discussions about the grid and data centers. How are you feeling right now about the chapter we're in and some of the social friction we're getting on this stuff? Well, first, thanks for having me on again.

39:12And look, clearly, this is a big focus area right now for communities across the country. In Southern California, we don't have the same sort of growth in data centers. We don't have training centers, but we still have infant centers. And so I think people are appropriately focused on affordability, reliability. You know, we do believe that done right, data centers can actually be helpful in adding load and therefore re-loosing pressure on system average rates. But clearly, developers need to do a good job in engaging with the communities. What guidance would you give to your colleagues across the industry who might be in areas of the country where it's a little more profound?

39:48Well, I think as an industry at EEI or Trade Association, we're very focused on how we continue to invest in the system. And, you know, my colleagues and I are collectively investing something like$1.4 trillion over the next five years. And so, you know, the advice that we give each other is continue to work with our communities, continue to work with regulators, make sure that on the grid side of things, we are engaging with communities as we plan our expansion, and, you know, push for regulations that continue to make sure that data centers carry the costs that they're creating, but also, you know, recognize that done right, this load can be very beneficial.

40:24Pedro, it's Kelly here, and I think all investors are concerned about your future when California failed to pass any legislation that would cap your liabilities for future wildfires. Why would anybody want exposure to that kind of potential future liability? Well, Kelly, thanks for asking the question. And look, when you look at the fundamentals for our company, we are in the middle of an area that continues to enjoy a lot of growth. We've recommitted ourselves to our 5 % to 7 % EPS annual growth rate through 2030. but we do need support from the state, not just for the utilities, but really for the state as a whole in developing the right framework for wildfire mitigation and wildfire liability management.

41:02The state has taken some good steps over the years. The California Earthquake Authority was tasked with the job of looking at what else the state needs to do. It determined that more work needs to be done across the economy, not just utilities, in reducing fire risk, shoring up the insurance market. And we do need legislators to continue the process of setting up a new framework. What is the issue? Is it that Californians feel that they're paying for your liability protection? Do you know how much they might be paying? Because what happens to you and your competitors if you don't have a cap on that liability?

41:37Literally, what are your options for the next year or two? Well, Kelly, I think you're seeing that in what the credit rating agencies are doing. Right. So today, Southern California Edison and EIX are at the lowest possible investment grade credit ratings. Fitch last week just changed our outlook to negative. And ultimately, this is not just a shareholder issue. This is a customer issue because that is driving the cost of debt up. And the cost of debt is something that is passed straight through to our customers. And so this could mean, you know, hundreds of millions of dollars or more in cost exposure for customers if the framework isn't addressed.

42:13So really, this is a case where looking not only at what needs to be done to manage liability for utilities, but to manage this across all parts of the economy, the insurance market, the building market, etc. This all ultimately comes down to the customer cost. And we're going to minimize that. And we're going to ensure the safety of our citizens by addressing this with the right sort of framework now. Pedro, this Ratepayer Protection Act, which was on the Hill last week, would basically require large load customers to bear the brunt of additions to the grid that serve them. Does that thing have legs?

42:50What's that all about? Well, you know, we actually signed on to the ratepayer protection pledge that preceded it. You know, we think it could be helpful if it makes its way through Washington. At the core of it is making sure that the rules are fair, that when a data center comes in, it's welcomed, it does the things right, but it also bears the cost that it's creating on the system. Look, as I said earlier, we think this can actually be good for customers. we estimate that done right, an extra gigawatt of load in our area, whether it's data centers or whether it's electrification or manufacturing, every extra gigawatt can actually reduce our system average rate by a half to 1.2%.

43:32That could mean well over a billion dollars in customer benefit over the lifetime of that investment. So it needs to be done right. And that's what the pledge is all about. Finally, I mentioned Climate Week at the open here. When it comes to fire, flooding? I mean, what are the priorities policy-wise going into this week? Well, just today we released our latest white paper. It's called Adapting Today, Energizing for a More Resilient Tomorrow. And we have looked once again at the climate adaptation needs in California. And Carl, what's already locked in for 2050 is pretty dire.

44:13Over Over the half century from 2000 to 2050, we expect it to be an extra foot of sea level rise. We expect to see more extreme heat that's going to add the equivalent load of adding half a million homes to our territory. We have about four million plus homes. So adding half a million homes just due to temperature rise is significant. We have about 10 ,000 distribution poles that we now think are at risk from flooding. And so this paper is not just about the investments we need to make in the grid, but how we collaborate with communities. with regulators to do planning jointly to take the investments on now that will help make the community safer, but also reduce costs.

44:51An outside party estimated that every dollar spent on resilience now can eliminate$6 of future costs in dealing after the storm or after the fire and$7 in economic losses in the community. Important trends to watch, Pedro. Of course, we're praying for some good snowpack out west this winter, that's for sure. Pedro Pizarro of Edison. Thanks so much. Thank you, Carl and Kelly. Tough situation to be in right now. Up next, we'll look at the bounce in crypto and what the options market is saying about the possibility of 90K. And we're also watching shares of AMD seeing a big pop today and briefly topping the trillion dollar market cap line for the first time.

45:33We're just below that level right now with a 9 % rally. Stay with us. Welcome back. Bitcoin bouncing even after the Clarity Act failed to advance after a key Senate vote. Let's get to Oliver Rennick and CBO in Chicago with a look at what the options market is signaling about crypto's next move. Oliver. Hey, Mike, it is very risk-on this morning as options traders pile into the usual suspects, plus some new ones. Last week's most popular chip trades for call buyers, AMD and Intel, are soaring. SpaceX is inching toward$160 ,000, and Bitcoin finally breaking out as call buyers chase IBIT and MSTR.

46:10The most notable actions definitely in this crypto space this morning were IBIT and Master are doing three to four times more options volume than the 30-day average. 130 ,000 calls were likely bought in IBIT this morning, more than double what was bought in puts, and eight of the top ten contracts bought were calls. There was a lot of call buying in the Jan 15th expiry that included the 51 and 52 strikes, which would bring Bitcoin near year-to-date highs. In strategy, things were even more aggressive, with buyers of the 220 strike call expiring Friday. That option needs a 30 % rally this week.

46:49And then finally, back to SpaceX, the key thing to watch as this stock keeps grinding higher has been put sellers, and we see some of those in there this morning too, guys. Oliver, appreciate that very much. It's Oliver Renegg watching some options action for us. Coming up in a few moments, diesel, another all-time high this morning. We'll ask the CEO of trucking giant Schneider how those record fuel costs are beginning to ripple through the economy as Squawk on the Street continues after this. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium.

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