11AM Hour: Anthropic Investor Pauline Yang, Royal Caribbean CEO & Hormel CEO 10/27/26

0:00Jason Liberty: Tu Sausage McMuffin with Egg no cambió. Tu recibo, sí. El Sausage McMuffin with Egg Extra Value Meal. Trae un hash brown y un café pequeño por 5 dólares. Solo en McDonald's por tiempo limitado. Precios y participación pueden variar. El precio de la promoción puede ser más bajo que el precio del meal.

0:15Pauline Yang: This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts. Good Tuesday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla, live from Post 9 of the New York Stock Exchange.

0:50Pauline Yang: Today, we are joined by Anthropic investor Pauline Yang of Altimeter Capital, which led Anthropic Series H-Round this past spring, marked Altimeter's largest investment to date, why she's focused on compute efficiency and enterprise as key drivers of growth.

1:04Jason Liberty: Veteran tech investor Roger McNamee is with us, pouring some cold water on this Anthropic optimism, why he says the IPO is an opportunity for existing investors to cash out rather than for new investors to get rich.

1:17Pauline Yang: And shares of Royal Caribbean seeing a nice pop this morning. The industry's biggest cruise operator delivering a beat and raise quarter. CEO Jason Liberty with us to discuss the outlook with 2027 bookings pacing ahead of historic levels.

1:29Jason Liberty: As for the markets, kind of in the range, still above 7 ,700 this morning, though, with most sectors are green, including some nice gains in information technology, communication services. Definitely the halo from that Anthropic prospectus continues to benefit some of the bulls in tech with the 10 years. Still south of five.

1:47Pauline Yang: Yeah, that's helpful. Let's start with the AI trade following the release of Anthropics S1 filing yesterday. Broadcom also announcing a$63 billion financing agreement alongside Blackstone, Bank of America, Citigroup, and Morgan Stanley to fund AI chips and networking equipment for Anthropic. The deal reportedly finalized after an 11th hour push by Broadcom CEO Hock Tan over the weekend to keep the banks on board following jitters around rising interest rates and their exposure to the AI buildout. Our next guest, Firm Lead Anthropics Series H funding round earlier this year, is calling the S1 filing incredibly impressive.

2:23Pauline Yang: Joining us here is partner at Altimeter Capital, Pauline Yang. Welcome back, Pauline. It's great to have you.

2:29John Ghingo: Good morning. Thanks for having me on again.

2:31Pauline Yang: What do you think is the most impressive part here?

2:34John Ghingo: I think there was one stat that really stood out to me, which was that in the history of the company, Anthropic burned less than$10 billion of cash to get to a calculated quarter Q3 revenue of$16.8 billion. Now, if you annualize that quarterly revenue, that's almost seven times multiple, right? Again, if you're thinking about three years of a lot of burn and the fact that this last quarter covered all of that and much more, I think that is by far the most impressive stat coming out of the S-1.

3:09Pauline Yang: But what do you make of this report that, you know, it took Hocktan really getting in there and providing financial guarantees to protect lenders from losses in the event that Anthropic defaults on these loans? This is a different kind of financing environment, and it's making people nervous.

3:26John Ghingo: I think the first thing, again, that came out of the S1 was that this company has already a lot of cash on the balance sheet. So in Q2, they had$130 billion of cash on the balance sheet. The rumors around the IPO is the company is going to raise$75 to$100 billion, which means that they'll have over$200 billion of cash on the balance sheet. Just to put that into perspective, that is more cash than basically every hyperscaler, including SpaceX, including Meta, except for Amazon. Amazon is the only one that has more cash than this company. And so I do think that the fact that this company has a really strong balance sheet and the fact that the billions of compute that they have coming, that ratio, you know, if you think about the 500 billion that they have disclosed in the S1 up until 2033.

4:13John Ghingo: three, right? I think that that ratio is actually a much less onerous ratio than I think people thought. But I certainly think, look, the rumors around the S1 numbers had been floating around. But I think until the S1 dropped and all the figures were kind of public, it took a little bit of time for the market to analyze and process that.

4:36Jason Liberty: Yeah, we made note of the cash balances yesterday as we were pouring through the filing. And the obvious question is, well, why would you need to go public if you had that kind of horde. Is the obvious answer that they see the backdrop for capital raising degrading over time and it's a bit of a land rush? No.

4:56John Ghingo: In my perspective, I think that in large part, this is a company that wants to make sure that they're in the strongest position possible. And certainly, as investors in both the public and private markets, it's easier to raise capital in the public markets. It's easier to issue debt in the public markets. And so I think that Anthropic is doing the right thing by positioning itself to be able to tap into all these different types of capital in the public markets. And certainly we're excited to continue to own it into the public markets and also have retail investors be able to be part of this journey.

5:32John Ghingo: And I think the opening letter that the founders wrote was really well written. I think, you know, made a really clear narrative that this is going to be a multi-decade journey in the largest tech wave and innovation wave in human history.

5:49Pauline Yang: So you don't plan to sell it?

5:52John Ghingo: Certainly not. I think Altimeter is certainly hoping for a big IPO allocation. We hope that it'll be one of our most sizable investments in our hedge fund. And already our private funds, this is our largest investment, not even considering kind of the fair market value if this company goes out at$1.5 to$2 trillion in valuation. So we're very excited and long-term holders of this company.

6:16Pauline Yang: I mean, the other argument that's getting tossed around a lot is just the tokenomics, basically, and the falling price of tokens and at the same time increasing adoption of open-weight models and what ultimately that might mean for these very strong margins that Anthropic has and its edge.

6:34John Ghingo: Yeah, I think there was a really great stat that they put out there. So when they released Claude Opus 5.5, which, by the way, the developers that I've been speaking to have been absolutely raving about, they cut prices pretty meaningfully. And they shared that basically that price cut allowed to drop customer costs per task by 40 percent while preserving margins. And so the fact that they have this amazing compute engine and are able to serve tokens much more cheaply while maintaining these incredibly high gross margins is incredibly bullish for the company. And I think to your question about open source, you know, we as Altimeter, we are big users of AI and we benchmark cost per task across open source, across other models.

7:20John Ghingo: And I think even if you set aside the financial costs, which, by the way, we haven't found that the cost of running open source model is cheaper, but you also have to take into account things like enterprise readiness, right, ability to deliver the model reliably and with low latency. And so I think, and by the way, that's if you can secure compute, which over the last year, it's been a very compute, we've been in a compute shortage, right? And so if you add all those things up, certainly we think that open source has a place in the world, but we continue to believe that most of the spend is going to be with the frontier models.

7:57Jason Liberty: The other thing that got a lot of attention yesterday, of course, were within the risk factors, sort of this mix of your fiduciary responsibility to maximize profit and revenue and then attend to these societal risks, which they're quite plain about. I wonder how you think they balance that in the framing of the S1.

8:16John Ghingo: Yeah, look, I think that this is an unprecedented company in so many ways. And certainly I think AI, the way that it's being adopted, the way that Anthropic and the management team expects for this to be adopted. You know, certainly there's it's an unprecedented governance structure. But I think that's to address the unprecedented opportunity. But again, the risks of the company. Now, what I would also say, though, is having observed this team and this management team for many years now, I know that this is one of the best teams, the best team to really take the models and make them the most capable, but also align that with safety and alignment.

8:55John Ghingo: And so the fact that they've taken meaningful compute, put it against safety and alignment, have paused training for a month to be able to secure the environment and the models better. I think that's really, really strong indication that this company is going to be able to handle that balance incredibly well.

9:14Pauline Yang: So I know we can't do valuations yet. We don't know the amount of shares or where it's priced. But how are you guys? I mean, how do you guys think about this? Is this a$5 trillion company one day? Is it a$2 trillion company? What does that look like for you?

9:28John Ghingo: Yeah, I think, you know, in our model, we certainly think that the range that has been the most rumored, right, is$1.5 trillion to$2 trillion. Let's take the midpoint of that and say$1.8 trillion. That would represent the largest IPO in human history, larger than SpaceX that went out earlier this year. And by the way, I actually don't think that the, when we look at our underwriting, even a$1.8 trillion market cap is really not that onerous. You know, what we're projecting for next year, Altimeter's model is$140 billion of GAAP revenue. And that translates to just a little bit over 11 times forward revenue.

10:07John Ghingo: And by the way, that's for a company that's still growing two and a half acts that is very capital efficient and is in the dead center of the most important wave of technology and innovation. To us, that feels, you know, dare I say cheap, but certainly like a fair price and I think has room to continue to run and grow, especially if you look at how other companies like Palantir, like Palo Alto Networks are trading, that certainly multiple does not seem onerous.

10:35Pauline Yang: What's the edge? What keeps Anthropic at the top versus an open AI or a Google or Meta or all these others that are developing their own models?

10:45John Ghingo: I think that Anthropic has really perfected and really improved on this flywheel. They released the best models again. I think Opus 5.5 has been kind of undoubtedly the best model on the market for now a month, which allows them to generate more revenue. Certainly, I think this company, the business model of this company is driven by model releases, which then gets them to having more profits, which then is able to allow them to allocate more compute to training. There was this amazing stat that the company shared yesterday that of its entire compute budget in the first half of 2026, 70 plus percent of that went into training.

11:26John Ghingo: So when you have that big of a training budget, you can train the best models, which again, that gets you more revenue, which again, gets you more profit. And the cycle kind of continues. And I certainly think that they have the next model waiting, which is Fable 5.5, which I expect to come out in the next year. And that should top in terms of intelligence, should be the smartest model that is commercially available. And so I think that that flywheel is what is going to keep Anthropic at the edge for years to come.

11:59Pauline Yang: Well, that's the bullish case. Pauline, thank you for joining us. Thank you so much for having me. this IPO, Pauline Yang, from Altimeter Capital.

12:08Jason Liberty: Thank you so much. When we come back this morning, the CEO of Hormel is going to join us. His first interview in this new role. We'll talk some food inflation and his plans for the company.

12:16Pauline Yang: Later, CEO of Royal Caribbean with us on the heels of a beat and raise. We're going to break down those results, discuss the broader demand right now for travel. We'll be right back.

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13:25Pauline Yang: This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts.

13:57Jason Liberty: Welcome back. Hormel underwent a CEO change earlier this week. President John Gingo is taking over for interim chief Jeff Ettinger. John is standing by with our Brandon Gomez. Good morning, Brandon. Hey, good morning, Carl. Thank you. And John, thank you for joining us this morning. Thank you for having me, Brandon. My pleasure. Of course. So look, second day on the job, right? But not new to the company, been president since 2025. I mean, talk to us a little bit about in your first year, what innovations need to take place, what changes need to take place from your playbook? Yeah, so I am new in the CEO role, but you're right.

14:28Jason Liberty: I've been working as president of the company for the past 15 months. And it is a great honor, I should start by saying, to lead this company. We've been here in Austin, Minnesota, our global headquarters for 135 years. I love the starting point we have as a company, a great protein-centric portfolio that's been built over many years. And our goal over the first year here is to continue to unlock the value from that portfolio. So think about renovation of our brands, innovating to meet customer and consumer needs around their growing demand for protein and growing appetite for protein, and then continuing the modernization of our company, our supply chain, our technology, our data, and doing all of that with long-term in mind, but urgency to deliver today and tomorrow.

15:08Jason Liberty: You lay out the groundwork for what issues you want to tackle. I mean, if you look back at the stock for the last five years, I think it's down about 50%. I mean, is there something that the market is still getting wrong when it comes to Hormel, and how are the issues that you just laid out going to address perhaps some of those concerns? Well, I believe there's a tremendous amount of value in this company and in our portfolio. If you kind of look at the breadth of how we go to market with our protein-centric portfolio, we cover breakfast, lunch, dinner. We cover the snacking occasions that consumers are increasingly moving to in terms of looking for more substantial snacks.

15:41Jason Liberty: And we also have a wonderful food service business, which has put up 12 consecutive quarters of growth through our third quarter this year, top-line growth, a business that's been able to grow in ups and downs in terms of food service industry dynamics. So our ability to just really unleash the power of this portfolio by accelerating the renovation of our brands, innovation that supports what our operators need on the food service side, as well as our home consumers need on the retail side, we believe there's a tremendous upside for this company and for the top-line and bottom-line growth we can deliver.

16:11Jason Liberty: I mean, you talk about reaching the consumer. I mean, there is a player on the in-between, right, the grocers. And there's this trend right now where there's a lot of these emerging brands or even private label brands that are going head to head with legacy CPG like a Hormel. How are you navigating that environment as well, again, in order to execute and bring these products to consumers that you're trying to, that are focused on more protein or whatever the trend might be at the time? Well, we need to stay one step ahead, frankly, of private label competitors, but all competitors. I would point to one of our core categories we've been in for a long time, bacon.

16:43Jason Liberty: As an example of that, in the bacon space, we continue to do really well from a market share perspective. And the way we're doing that is by delivering the types of bacon formats consumers want, especially younger consumers. So we have a microwave-ready bacon platform that continues to grow for us. We have what we call oven-ready bacon, which is relatively new. That's bacon sold on a disposable tray where you actually don't have to clean up after the bacon. That's really resonant with younger consumers. And most recently, we've introduced portion-packed bacon. So you don't have to prepare the whole pound of bacon.

17:12Jason Liberty: You can actually do smaller portion sizes, which is great from a value perspective, great from a food waste perspective, and super convenient. So we need to continue to take these legacy categories and brands and really reframe them for today's consumer and tomorrow's consumer. And that's how we can win. And how are you, I mean, it's great to hear the sort of the highlights in bacon. I think about latest CPI prints in the different categories. Obviously, we've seen beef upticking, you know, month over month. How are you readjusting the portfolio of Hormel's branded products to sort of combat that inflationary pressure you've been seeing?

17:43Jason Liberty: Well, when we talk about inflation, you know, we do see two sides of it. Certainly, we know from our consumers and talking to them that they're feeling what we call the cumulative effects of inflation over some time. On top of that, more recently, they felt the pain of higher gas prices at the pumps. And so we look at our portfolio and number one, we have a great breath. Hormel for a long time has had affordable protein products. So think about our center store portfolio, products like Spam, Hormel Chili, Dinti Moore Stew. These are really affordable protein options that can help consumers stretch a meal that are within arm's reach in the pantry.

18:16Jason Liberty: And those have a lot of value at a time like this. But we continue to do well with our premium brands too. If you think about an Applegate in the natural organic meat space or a Columbus Kraftmeats more in the charcuterie space, consumers will stretch up for those as long as we have the value equation right. So we need to work our whole portfolio, make sure we're really listening to consumers and delivering those extra benefits that they're willing to pay for. I know that, again, you're in a quiet period right now, but I think it was last quarter that you lowered sales outlook after retail volumes fell about 9 percent.

18:46Jason Liberty: How much of that weakness is this sort of mix and how much of it is it is consumer demand? I mean, we're seeing health amongst the consumer in terms of where they're spending. It's just a matter of which brands they're gravitating towards. Yeah, we've been doing quite a bit of work on our portfolio in terms of shaping it for the future. So there are a number of businesses that we have announced divesting over the past year. Some of those on the retail side of our business, one on the international side of our business. And so we continue to look for which businesses strategically set us up for the future and which maybe are a little bit less strategic for where the company is heading.

19:19Jason Liberty: So certainly there is an element at play in terms of that. We do see from a protein standpoint, if you just look big picture at the food industry, the long-term trend around protein has been there for decades, frankly, with consumers gravitating toward more protein-rich foods. And so we see an opportunity for us to position and modernize our portfolio and position it in ways where we can actually capture a bigger share of food going forward because we have this protein-centric portfolio that's extremely aligned, both in the food service space and in the retail space, frankly, for what consumers want.

19:50Jason Liberty: And perhaps some of that will play out with the Brick Bush acquisition, which is a topic for another day. But, John, thank you for joining us this morning. I appreciate you talking us through it. Thank you so much.

19:59Pauline Yang: OK, when we come back, Boeing shares are tanking down 10 percent and hitting session lows after a commentary on its earnings call. We've got news on that next.

20:06Jason Liberty: We're just a week away from the midterms. We'll take a closer look at why the far left has been gaining some ground.

20:12Pauline Yang: And later, why Facebook investor turned critic Roger McNamee is sounding an alarm on a potential AI bubble. We're back in a moment.

20:20Jason Liberty: to sausage McMuffin with egg no cambio tu recibo si el sausage McMuffin with egg extra value meal trae un hash brown y un café pequeño por cinco dólares solo en mcdonald's por tiempo limitado precios y participación pueden variar el precio de la promoción puede ser más bajo que el precio

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21:04Jason Liberty: Introducing Fidelity Trader Plus. With customizable tools and charts you can access across all your devices. Try our most powerful trading platform yet at fidelity.com slash trader plus. Investing involves risk, including risk of Fidelity Brokerage Services, LLC. Member NYSE SIPC. Welcome back. Check out shares of Boeing falling hard this hour, hitting session lows as management makes some comments on the earnings call about the pace of 737 max production. Earlier in the 9 a.m. hour, we talked with Kelly Ortberg. Our Phil LeBeau asked about when Ortberg expected to get to 47 max planes a month and why the pace of production was taking longer than expected.

21:41Jason Liberty: we're working on that we're trying to stabilize i know everybody wants us to go faster but we're going to do it right make sure that the production system is stable we're delivering high quality safe aircraft and so i expect that stabilization period will last the balance of this year into early next year boeing's pacing for the worst day since the tariff announcements in april of 25 They do guide free cash flow to$3 billion next year, streets at 5.5. For 2028, they guide to$6 billion and streets at 9.6. So quite a bit of delta between the guidance and the consensus.

22:17Pauline Yang: Yeah, perhaps why the accelerated sell-off here. Meantime, we are just a week away now from the midterm elections. Contessa Brewer joins us live from Dearborn, Michigan, with a look at why the far left has been gaining ground. Contessa. Hi there, Sarah. Yeah, look, the main thoroughfare here in Dearborn is picturesque and charming, but the widespread feeling that the system isn't working is driving sentiment. Polls show a divided electorate, a tight race for Senate, and Michigan State University's poll yesterday suggested Islamophobia could be influencing results. Former President Obama and President Trump Both were in Michigan this weekend to stump for their respective candidates.

23:00Pauline Yang: Trump hurling insults at progressive Democrat Abdul Al-Sayed over his Muslim religion. And Al-Sayed was asked to respond yesterday.

23:11Jason Liberty: When you don't want to talk about gas and groceries and seeing a doctor, you just start making deflections and deceptions based on no evidence. But like that's their whole play. you know what that tells you? They have nothing to say about solving the problems in your life. They're not talking about any of the things that government's actually supposed to solve. Why? Because Donald Trump has created those problems. They're his problems. So like I've always said, my name and my faith are not the reason you can't afford your gas, not the reason you can't afford your groceries, not the reason you can't pay your rent or your mortgage.

23:52Pauline Yang: My graduates campaign did not make the candidate available to us to talk about about this, but look, in CNBC's All-American survey, respondents made it clear Democrats have cornered the market on who would do a better job on gas prices, food and grocery costs, housing affordability. You heard that there from El-Sayed. With gas prices in this state now pushing toward$5 a gallon on average, and in fact, we saw diesel more than$7 in Detroit, we've seen a 25 percent decrease in Canadian tourists to this state. Tariffs are disrupting the auto trade here. Michigan clearly has a lot economically riding on the next two years, guys.

24:30Pauline Yang: Yeah, I mean, a lot of blame from the Democrats about affordability issues. What's their solution here? You know, I think in part, and this is one of the things that I asked El-Sayed about, is how do you go about and balance Medicare for all, which he's proposing, with a soaring deficit and the fact that entitlements are already crippling under the economic pressure? Social security is in danger. And he and then he just reverted back. He goes, yeah, but that's the deficit is deficit is like that because of Trump's policies. They gave tax breaks to billionaires. So and look on on Roger's side. And I saw a campaign ad this morning from him saying if El Syed gets in the AOC and Bernie Sanders have proposed a green energy tax that's going to cost Michiganders in their utilities.

25:19Pauline Yang: And it's going to cost you 20 cents a gallon in what you pay for gas. And so he's really pointing out how some of the policies that the progressive left is proposing could increase costs. It's clear that economics are top of mind here. Fifty percent of those who responded to a recent survey for Marist said that economy and jobs are among the factors that are driving their vote. But this is a referendum.

25:46Jason Liberty: Yeah. And as we watch the prediction markets, it's hard not to notice how much prediction markets have been humbled in the last couple of days, given the results out of Brazil.

25:56Pauline Yang: They were also dead wrong about him in the primary. They had him up by double digits. He won by less than a percent in the Democratic primary. Contessa, sorry. OK, OK. But but here's the thing about the prediction markets. And I just want to point this out. So the polls show there's a new one from WDIV that shows El-Sayed, this is a poll today, with 51 percent support and Mike Rogers with 45 percent support. But if you look at Kalshi, the probability of El-Sayed winning is 69 percent. That doesn't mean he gets 69 percent of the vote. It means that's the probability. OK, this is this is, again, Islamophobia.

26:32Pauline Yang: But the probability and look at do you see that dip where you see El Saeed coming down and Mike Rogers coming up and then it sort of widens again. We see that in Kansas and Texas. When you look at Calci, there's this change in trend that happened mid-September. I had J.B. McKenzie, the head of futures and trading for Robinhood on a panel this week at a prediction conference. And he said, you know what's driving the moves? It's not who's campaigning for you. Obama and Trump being in Michigan, who cares? It's not the debate. He said it's the economic data coming out. So the Fed decision, CPI coming out, PPI coming out.

27:12Pauline Yang: That's where you're seeing that bifurcation in trend on the prediction networks. Here it is for Texas between Tallarico and Paxton. And that's really telling.

27:23Jason Liberty: Yeah, Texas, Iowa, Maine, Michigan, Kansas. It's going to be really interesting in a week's time. Contessa, thank you. Contessa Brewer in Dearborn today. Sure. Let's get a news update with Mackenzie Sagalos. Hi, Mac.

27:36Pauline Yang: Hey, Carl. The president of Finland and prime minister of Norway held a call with Vladimir Putin this morning to discuss the prospects of peace with Ukraine. The Nordic leader said, quote, the discussion was frank and substantive. It comes a week after Special Envoy Steve Wyckoff visited Putin after holding talks with Vladimir Zelensky in Norway. A federal appeals court panel late yesterday rejected a Trump administration request to set aside about 20 ,000 California ballots that the Justice Department alleges are likely non-citizen voters. The appeals panel questioned the accuracy of the federal government's list of voters and argued that setting aside ballots risks disenfranchising those voters.

28:13Pauline Yang: A different federal judge will address the underlying merits of the case today. And defense tech startup Andrel and chipmaker Qualcomm are teaming up to build laptops designed and assembled in the U.S. The companies say that the new laptops called Blue Chip intend to supply America's most critical industries, including government, defense and first responders. No word on how much the U.S.-made laptops will cost, though. Carl, sending it back to you.

28:37Jason Liberty: All right, Mac, thanks very much. Still ahead, the CEO of Royal Caribbean will be with us after earnings. We'll get a closer look at the quarter, discuss his demand outlook.

28:44Pauline Yang: Plus, early Google and Facebook investor Roger McNamee is back with us. Why he says Anthropics IPO is an opportunity for existing investors to cash out rather than for new investors to get rich. He'll be here to make his case. We'll be right back. Welcome back. Take a look at shares of Royal Caribbean higher this morning after reporting an earnings beat in Q3 and raising guidance into year end, pointing to strong vacation demand and bookings into 2027, even in the face of higher fuel costs. Joining us now in a CNBC exclusive is Royal Caribbean CEO Jason Liberty. Welcome back, Jason. It's great to have you.

29:18Pauline Yang: So talk a little bit more about what you're seeing right now in terms of future bookings.

29:23Jason Liberty: Well, first, great to be here, Sarah. And we're really excited to see the momentum coming off the third quarter. Obviously, on the third quarter, on the top line, we did better than we had expected and significantly better on the bottom line. But what we're seeing is high quality demand or significant demand for the different cruise experience or vacation experiences that we're delivering. We've seen an uptick in bookings as well as our guests willing to pay us more today and tomorrow than they did yesterday. And so we see a relatively healthy consumer, which is also what you can point to on board spend.

29:56Jason Liberty: On board spend has been elevated above our expectations. And so we're seeing our guests. We have 180 ,000 guests spending in real time, and we're seeing them spend more than we thought they were going to.

30:07Pauline Yang: How do you square that with the rising inflation and the affordability concerns? We just had a reporter in Michigan, in Dearborn, Michigan, where the Cal Shia, you know, sometimes some of these races, the Cal Shia's are moving with the inflationary prints. How do you make sense of it?

30:23Jason Liberty: Yeah, I think there's a few things that are in play. I think you've seen a significant trend for some time that people are buying less stuff. They're buying more experiences. You know, they're buying less homes and they're trading for more and more experiences. I think the other thing that you're also seeing is just the value that our guests, you know, are getting for the experience. And so, you know, we still trade at a pretty significant discount to land-based vacations, which we are every day trying to close. But that value gap, I think, also makes us a little bit more insulated to some of the noise that's happening, whether it's geopolitically or whether it's inside the economy.

30:59Pauline Yang: What about the fuel cost for you and what's happened with rising prices? How do you mitigate that?

31:08Jason Liberty: Yeah, well, we're anywhere between 50 to 65 percent hedged on the fuel side. We're a little bit over 60 percent hedged here for 2026. And so that's helping insulate us from some of the impacts on the rising fuel costs. It's obviously still impacting us, which evaporated a good chunk of our Q3 earnings beat into the full year guide. But we're continuing to hedge. And we watch. I mean, one of the things I think that has been a pleasant surprise is we haven't really seen fuel impact consumer spending behavior on experiences, which is something we watch obviously very closely. Street's gotten a little bit incrementally bearish on some of your rivals who have higher concentration to European cruises.

31:54Jason Liberty: But the argument is basically if geopolitical tensions last for long enough, that yields in the back half of 27 are endangered when it comes to U.S. demand. Is that a fair worry? Well, I think we've heard similar things for some time, Carl, around how these geopolitical activities are impacting the different markets that we do business in. It's not that we don't see points of challenges, but really what we've seen is that even in those points of challenges, the consumer comes roaring back as relates to the vacation experiences. And they're not willing to trade their vacation, you know, whether it's once or twice a year.

32:35Jason Liberty: You know, it's one of their highest priorities of the things that they're looking to do. And so because of that, you know, they're trading their vacation experience for other things that might be further down their list of priorities. But would you expect European as a root structure to give way to more strength in other areas in Alaska, Caribbean, something else? Well, demand, especially what we see from North Americans, as well as for Europeans, for our European deployment, is very strong. It was very strong this year. It was a little bit lower than our expectations were. That had more to do with some of the geopolitical activities that were happening in the Middle East and rising air costs.

33:15Jason Liberty: Once that air cost stabilized, we saw demand roar back for European bookings and sailings here in 2026. And we're seeing that strong demand trend is also occurring now for 2027 and beyond.

33:30Pauline Yang: A lot of questions from investors and analysts around the Sandals deal. I guess you announced that you're going to acquire, what, a little more, 50 percent or so? And it's kind of new terrain. What's the vision here?

33:44Jason Liberty: Yeah, well, we have been, you know, for some time, when you think about our royal brand, Celebrity and Silver Sea, We own each of those segments, whether it's family, whether it's premium, whether it's ultra luxury and expedition. And we're producing net promoter scores that are in the low to mid 70s. So we have like unicorn territory on the guest experience that we're delivering. So our guests really trust us. And so we're expanding, listening to our customers. What are they doing when they're not with us? They go into onto river. And so we're building out a river business that goes live next year.

34:16Jason Liberty: And they also go to all inclusive resorts in the Caribbean. And the leading brands in the Caribbean is Sandals and Beaches. We're going to bring them and connect them to our loyalty system, into our technology, getting more reps out of that guests, which drive higher margin and value in return for our shareholders.

34:35Pauline Yang: So it's a lot of, I guess, symmetry. The people who are going on cruises are staying at these resorts. Is that demo expanding?

34:44Jason Liberty: Yeah, and I'll just add, I mean, it's also, it's not a tradeoff. These are additional vacations they're taking. So we today get about 20 % to 25 % of our customers' wallet. And what are they doing when they're not with us? One of those things, like I said, is going to all-inclusive resorts. And we're trying to go from how do we get 20 % to 25 % of our customers' wallet to 45 % or 50 % of our customers' wallet, delivering really high-quality vacation experiences, which gets them to rep more in our ecosystem, which we're seeing today as our loyalty, you know, just our loyalty guests alone are now almost half of the guests that sail with us.

35:20Jason Liberty: And so we're getting more reps more often. And that's the ultimate goal is to go from a vacation of a lifetime to a lifetime of vacations.

35:28Pauline Yang: All right, Jason, thank you for joining us. Really good to get the color on the quarter. Jason Liberty, CEO of Royal Caribbean. My pleasure.

35:33Jason Liberty: Take care.

35:35Pauline Yang: You too.

35:35Jason Liberty: Still ahead, we'll bring you a live report from Oracle AI World in Vegas. What to expect ahead of the keynote in the next hour. We'll be right back. Getting some news on Oracle today. Let's get to Seema Modi live from Oracle AI World in Las Vegas. Morning, Seema.

35:50Pauline Yang: Hey, Carl. We've just learned that OpenAI CEO Sam Altman will be joining Oracle co-CEO Clay McGurick on stage at the company's AI World Conference here in Vegas, where investors will want a status check, a much-needed status check on Oracle's$300 billion contract with the Frontier Lab. Just over a year ago, that news broke, sending shares of Oracle up about 36 percent in one day, the all-time high, cementing the company's role in this growing AI build-out. But that initial excitement started to wane as Oracle had to pursue financing options, including debt and equity, to fund its data center pipeline.

36:24Pauline Yang: Altman's forthcoming remarks here in Vegas just one day after its key competitor, Anthropic, dropping its S1 financials. We'll have to see if that comes up at all. and whether the data center build out across the nation, which is currently facing steep political pushback just one week away till the midterms. Whether that comes up in conversation, we'll want to know if timelines could potentially get elongated. The timing also coinciding with increased anxiety around the borrowing binge that we've been seeing take place across the AI landscape. Broadcom with its latest$63 billion debt deal. An example, guys, of just how it's not just NVIDIA that is now playing a bigger role in backstopping a lot of these chip financing deals, But CEO Hawk Tan of Broadcom now entering the stage in a big way when we get Altman and Clay Bumar of Oracle on stage.

37:10Pauline Yang: We'll see if the financing piece of this whole AI puzzle comes up in conversation or later today when we hear from founder of Oracle, Larry Ellison. Guys? Yeah. And also any reference to the bond market and the credit concerns which have affected the spreads around Oracle. Thank you, Seema. Seema Modi, we'll look forward to a lot more news from you at the Oracle AI Day in Vegas. Coming up early, Facebook and Google investor Roger McNamee joins us, why he says AI's existential risks are all hype, but there's a real dangerous bubble building. We're back in a moment. Welcome back.

37:41Jason Liberty: When it comes to how we should be thinking about Anthropics IPO, our next guest is out with an op-ed calling it, quote, an opportunity for existing investors to cash out rather than new investors to get rich. Joining us this morning, Roger McNamee, early investor in Google and Facebook and co-founder of Elevation Partners. Roger, it's quite a piece. You do say that the choices being made by the folks running the industry limit the opportunity for returns over the next few years. I mean, you don't honestly believe we're in the late stages of this build out, do you? No, Carl. I think the problem here is I think we're in the late stages of the business model that Anthropic has put into its S1.

38:22Jason Liberty: I mean, let us be clear. The good news is this company went from zero to 16 billion in half a year. they did that in a matter of what, four years? I mean, that is truly an astonishing, exceptional thing. The problem with the S1 is that it's speculative fiction. It is a moment in time, and it's a very special moment in time because the company has managed to get to this point by trading equity for compute capacity. And that leasing of compute capacity has been at huge discounts to what the cash price of the capacity would have been. And what the S-1 tells you is that going forward, well, they're going to be buying their compute capacity from here, which means they're going to pay a dollar for a dollar's worth of compute capacity instead of paying, say, 25 cents for it.

39:09Jason Liberty: And those kinds of things suggest that what's in the S-1 now is largely a model that won't recur. In fact, probably won't even be sustained through the September quarter. The S-1 conspicuously leaves out the September numbers, so we don't really know. We are waiting for the fill out on the current quarter, the September quarter. Indeed. Still though, wouldn't you want to see how much they're going to sell and at what price? Well, I mean, to be clear, the issues that we're looking at here for this whole industry is that they made a series of bets. They picked large language models as the technology.

39:45Jason Liberty: There are clearly issues with that, and they've been forced to add in neural net technology on top to try to make it work better. They made the choice to have one-size-fits-all solutions in a tech world where customers really prefer that you pick a point solution that provides an immediate ROI. Quite clearly, customers are not getting that. And the way you know that is that there are no known examples of companies paying more for their AI capacity than it costs the vendor to deliver it. And then the third thing is they've spent, what, a trillion and a half dollars so far. And basically all the infrastructure that they've bought has been at full retail prices.

40:25Jason Liberty: By the time we got to Google and the internet, we'd taken three orders of magnitude out of the cost of the infrastructure. And in many areas, in many use cases, the cost of the infrastructure of AI is still rising. Those are not formulas for high returns for equity investors from here. And my core point is just buying the IPO is not going to be the optimal strategy. In fact, I think the IPO itself is really a very dangerous thing for investors. And this whole industry has a lot to prove, which it hasn't done yet.

40:57Pauline Yang: It's so interesting, Roger. I thought you were going to be against it because of the societal concerns. You know, because we've come to you so much over the years around social media and the risks and harm to society. But it sounds like you just have a problem with the economics of the business.

41:16Jason Liberty: Oh, I definitely have a problem with economics. To be clear, to be clear, I have a huge problem with the societal harms. But we're talking about an IPO here. We're on CNBC and we're talking about an IPO. And the core thing that I'm suggesting here is not that they haven't done something remarkable. I mean, yes, they had to steal the collected works of humanity to do it. But the reality of this thing is that they've made a set of bets that are not actually working out the way they expected. They believe that there is a scaling law that leads them to valuable intelligence as a product. And the evidence so far is wherever that scaling benefit is, we aren't close to it yet.

41:59Jason Liberty: The cost of this stuff is still way higher than what customers are willing to pay for it. And Gartner had a report this week or last week, I guess, that only 13 percent of CIOs see any kind of transformational benefit of any investment that they've made.

42:14Pauline Yang: Anthropic, Meta, Amazon, Alphabet. Definitely. They're all just ramping CapEx. They're continuing to spend SpaceX, Elon Musk, and because they ultimately do see an environment where it pays off.

42:29Jason Liberty: I believe that you have the worst case of fear of missing out I've ever seen among the people running the big tech companies. Google could have easily pointed out in 2022 that a probabilistic system like a large language model would not actually be very valuable in a search situation because in search people need precision. They need the right answer. They don't want something where there's a 10 to 20 percent chance that is wrong. They need the actual right answer. But they didn't do that. They got scared. They felt they had to chase Microsoft. And keep in mind, these guys are billionaires. They spend most of their time with their security people and then the second most of the time with their family.

43:09Jason Liberty: And, you know, they don't get in touch with the real world very much. And so they look at each other and they feel like they have to compete. I mean, if you've got$100 billion worth of net worth, what are you going to do all day? You're going to compete to try to be the guy with$101 trillion. And, you know, it's like, OK, but I would get to say we're investors. This is our money, OK? We don't need to play their game. And I would encourage people not to do that. We just heard from Arcema Modi in Las Vegas at Oracle AI World that Altman's going to speak. What's on the line now, do you think, for OpenAI in the wake of this prospectus?

43:44Jason Liberty: Well, OpenAI appears to be in huge, huge difficulty. I mean, you know, for one thing, if you have a product that has now hacked, I think, at least hundreds of enterprises, if not more than that, If you have a product that has been implicated in terrorism events and in people's suicides, you have legal problems that are really huge. And by the way, this applies to Anthropic too, that fundamentally, hacking is a felony under federal law. And if you create a product and you design it to hack, which quite clearly these companies don't. Remember, this is software. It doesn't do things because it feels like it.

44:20Jason Liberty: It does things because you program it. And, you know, if it hacks, you should be liable under federal law. Well, we're back to the discussion Sarah and I had with Alex Karp a few weeks ago about unprecedented liability. Yeah, it's just going to add up. Well, that's my point. And, you know, I sit there and go, look, all you need to know financially is that these financial statements grossly understate the cost of compute going forward. Which means whatever you think the margins are today, they're going to be much worse as soon as these guys have to pay for their own compute at 100 cents on the dollar.

44:53Jason Liberty: And, you know, there are a million other things that don't add up here. That's why I think we should view this S1 as speculative fiction because, you know, it's a great story. It's a really great story, but it's hundreds of pages. And those hundreds of pages are not there to clarify the story. They're there to make you come to a certain conclusion. And the fact that we're talking about so much suggests that so far they've been successful. And based on the feedback I get on Twitter, a lot of people who disagree with me are sitting there going, I love this story. And I go, look, God bless. It's your money.

45:24Jason Liberty: Right, right. But I'm sitting here going, look, I'm giving. Yeah, exactly. We're going to find out what happens. And maybe I'm right. Maybe I'm wrong. But if I'm right, we're going to wish we'd done something about it.

45:33Pauline Yang: You can't accuse CNBC of not having alternative takes, right? That's true. Everyone should hear both sides of the argument.

45:39Jason Liberty: You guys are the best. You're the only journalist left.

45:43Pauline Yang: Roger, thanks. Roger, Mac. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

46:16Pauline Yang: To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer.

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