11AM Hour: Apple Drops After Earnings, Election Day Expectations & Investing in the Private Markets 11/3/26

0:00I'm Mike McNerney, Equity Investment Strategist. Markets move fast. My mission is to provide market insights to our clients that help turn uncertainty into opportunity. Janice Henderson, investing in a brighter future together.

0:41ever. 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. Today, it's election day in America, with millions heading to the polls. We'll dig into the market and investor implications with the control of Congress at stake. Plus, after a several-year hiatus, veteran investor Bob Peck is back. He's been covering Internet companies and the tech sector for more than 30 years, as you probably know. We'll get his take on the current AI investment cycle, this upcoming Anthropic IPO and how the current climate has some similarities, he says, to the 90s tech bubble.

1:15And Gabelli Portfolio Manager John Belton is with us. Why, he says we're seeing harsh street reactions to earnings despite strong fundamentals. And that is something that resonates today, certainly with the likes of, I don't know, Palantir, Shopify. We talked to the CEOs. They, you know, they say business is great. Yes. Take a look at the market trying to shave some losses on the Dow now down just fractionally. Still trying to work our way back to, say, last Thursday's close, which would be just above 7 ,700, but the S &P tacking on another 45 points this morning. Yeah, we'll start with some big earnings movers.

1:47I mentioned Palantir. Apple is under pressure today. Mackenzie Sagalos is covering the Apple story for us, and she has more about why the stock's under pressure. Mackenzie. So, Sarah, Apple's been Wall Street's favorite place to hide out from the AI trade this year. It spent$9 billion on CapEx, down 30 % from a year ago, while its hyperscaler peers spent$600 billion plus combined. Not to mention the fact that Apple's sitting on a cash hoard worth$137 billion. But this quarter really laid bare just how exposed Apple actually is to the AI build-out. It's bidding up memory chips inside every iPhone and Mac, and Apple is now also paying the cloud costs of running Siri AI.

2:28TD Cowan estimates every 5 % rise in memory prices costs Apple half a point of gross margin. Now, the firm also thinks that most of that$33 billion that Apple committed to suppliers between June and September is for memory. All of that is weighing on margins, which are now on track for a third straight quarterly decline, with CEO John Ternus saying on the call that memory prices will keep rising beyond December. Apple's been raising prices on its devices to make up the difference, but bears say that is just a Band-Aid. You've got KeyBank arguing this morning in a note that hikes are covering up falling unit sales and calls the stock extremely overvalued.

3:07UBS sees Apple's valuation shrinking from 36 to 31 times forward earnings. Even the bulls are trimming. You've got several firms raising their sales forecast this morning and still cutting their earnings estimates. Evercore says that only two things end the squeeze, either memory prices cooling or Siri AI making real money. Now, when I sat down with the new Apple CEO in Cupertino yesterday, he told me that the company is already working on monetizing AI, that Siri would push people to upgrade their devices and Apple plans to put usage caps on the service. Guys? Mac, my favorite number of the morning is the percent of revenue that it's spending on CapEx, less than 2 % of their revenue on CapEx, which kind of ratifies that notion that they're going to let the others dip into free cash and go into debt to fund some of theirs.

3:57But what was also interesting, Carl, it was CFO Kevin Preck was talking about the fact that Apple will significantly increase, in his words, their AI investment, mostly through R &D. So not talking about any sort of potential M &A or acqui-hire situation. It is already up that R &D segment, up 32 percent. And another question that came up, Jim Cramer and I spoke to Ternus yesterday and specifically asked whether they were looking to diversify away from Gemini as Google starts to fall behind in this AI race. and stood behind that partnership. Obviously, these two companies have very close ties, whether that's through the search deal that they have in terms of offering Google search through Safari or now this Gemini relationship with Siri AI.

4:38But to your point, Carl, they're staying out of having to spend like a frontier model maker. But there is a question that Siri AI, the experience still falls behind, especially on the agentic piece of this. And so there's a question, do they have to diversify to stay competitive there? All right, thank you, Mackenzie. Apple at the bottom of the triple Qs, while NVIDIA and AMD are at the top today. Let's bring in Seema Modi with more on Palantir, which also seemed to have a very good quarter, but the stock is selling off. Really strong quarter. And we spoke to CEO Alex Karp, Sarah and Carl. His message was that the enterprise customer is increasingly adopting open-weight models.

5:11That's what really drove Palantir's commercial revenue business, that for the first time ever eclipsed government sales and grew triple digits. Year on year, it comes after Anthropics S1 showed revenue slowing in the third quarter. And remember, Anthropic did list open-weight models as one of its competitive risk factors. In our conversation, Corp pointing to the, quote, uncapped liabilities that the Frontier Labs face, doubling down on his belief that they have no choice but to nationalize, a point that he made to you guys about a month ago. The debate now around Palantir is whether this growth rate in the commercial business is sustainable.

5:43Even in this quarter, it saw 64 deals valued at$10 million or more, down from the 73 in the previous quarter. Some talk about remaining performance obligations. Its backlog locked in a slower growth rate than the previous quarter. Executives blaming shorter contracts. That's likely a sign that customers are eager to test out open-weight models as a pilot before sort of committing to longer-term contracts. But executives, including CARP on the call, guys, really made that point that they are seeing that transition from short to long-term contracts. This is just sort of a novel technology that companies are getting used to.

6:18I'm just looking at the, say, a six-month. I mean, the volatility in June,$106, then to$212 basically a few months later, and then giving back some. Still trying to hang on to gains for the full year, though. That's really been part of Palantir's story, even since going public in 2020, Carl, a name that has been favored by the retail community in addition to talking to CARP. Next to him was Chief Financial Officer David Glaser, and I asked him about this conversation around a stock split, a buyback. That has been top of mind for some of the retail investors out there. And he said at this point we're just focused on executing.

6:52That's not really something we're looking at. But it's definitely an interesting moment in the company's business to sort of see this reinvention from a pure play government contractor that, you know, sells its software to the U.S. government to one now that is really trying to lean in on the open weight opportunity with its operational layer. And I love how, I mean, he described in only a way that he could how their interactions are going with commercial customers is like a first date into bed kind of thing. He said about how fast these sales are going. We've gone from being the most attractive person in the physics department to being the captain of the football team.

7:24He entered the meeting when I was on this call with him just saying growth is great. Like he did. The enthusiasm is there. And but I think it was notable this time around versus previous conversations we had. I know the stock move is not reflecting that right now as people try to parse through deal flow. Is it slowing? What does that mean? But, I mean, pretty impressive full year guide and triple digit growth for revenue. Seema, thanks. It's an important story. Seema Modi on Palantir today. For more on this latest wave of tech earnings, what it means for the broader markets, let's bring in Gabelli Funds Portfolio Manager, John Belton.

7:56John, great to see you again. Thanks for joining us. Yeah, happy to be here. Where do you think we are? I mean, we're getting into an interesting period. We're clearing midterms. We're clearing some mutual fund year end. Will there be the will to defend some of the winners from earlier in the year? Yeah, it's a very complicated market right now. I think midterms is probably playing some role in the recent volatility. You've had, obviously, over the last few months, higher interest rates, higher oil prices, resumption of tensions in the Middle East. There's a lot of kind of macro issues that the market has had to grapple with.

8:31And then on top of that, you've had some kind of more specific AI themes maybe take a go a little bit south. Like you had specifically anthropic revenue slowing in the third quarter. So it's been a tough tape for tech. That said, I think fundamentals for these tech companies remain pretty strong overall, particularly for these cloud services businesses. So I do think once the dust settles, once some of these macro factors normalize, yeah, I think there will be intent to defend these names, which are still very high quality trading at lower valuations and strong fundamentals. Right. And that you think that process of maybe taking off some hedges, regrossing, for example, adding some leverage, you think that can happen by your end?

9:19Hard to make a call on that, to be honest, Carl. But, you know, longer term, I think that's those are the sorts of dynamics that can create opportunities for patient investors. How do you look at the Anthropic IPO? This is an amazing, an amazing company. It's clearly a poster child for the AI supply chain right now. I think what's really interesting about Anthropic and OpenAI, these two companies are sort of the clearest illustration of this return on investment debate that's going on in the market. So companies putting investment into data, into constructing data centers, constructing infrastructure.

10:02It's Anthropic at the end of the day that's created useful products and services with that technology and that's monetizing that technology. So that's why the market is so laser focused on anthropic revenues. I think that's going to continue. It's going to be healthy to get that name into the public market. So we have more regular disclosure and clearer disclosure. And how does that what does that mean for you when it comes to your portfolio construction? How do you look at that and what do you take from it? Look, I mean, I think right now I'm thinking about my portfolio as there are names that are within the supply chain.

10:38And then there are sort of other names connected to AI that are more at the application layer trying to make use of this technology and create useful products and services. For those names that are within the AI supply chain, so some of the semiconductor companies, the data center industrials, the cloud services business, is you're going to need a company like Anthropic or competitors to continue to show really strong revenue growth, to prove that that supply chain has durability, that this capital investment cycle has legs. For some of these other companies, I think, you know, companies like you were just talking about Palantir, which I don't own, but I'm interested in companies that are sort of making use of AI technology.

11:24Those can, I think, work regardless of what's happening with some of these LLM businesses. I think, John, one dramatic story is Caterpillar. We brought it up earlier this morning. End of June, it was up 86 % for the year. Now, single-digit return for the year, underperforming the S &P. I mean, you could couple that with GE Vranova, but that seems to have priced in a lot of slowdown in the kind of construction we're talking about, right? Caterpillar has been a tough one because I think this is a stock that's had sort of two stories that investors have been drawn to. On one hand, you've got this sort of secular tailwind for their power and energy business as a major supplier of reciprocating engines, which is being used in the power generation supply chain for AI data centers.

12:10And then the other, you have this cyclical story for their construction and mining businesses. You know, what we heard in this last quarter is that that cyclical rebound story may be taking longer than expected to play out. But the secular story on the A.I. side, they're talking about an order book that's basically booked through the end of the decade. I think a lot to be excited about there. It's just taking longer for that cyclical story to play out. So what do you like any of these any of these beaten down? It sounds like you said you're interested in Palantir. Like if you're nibbling on any of these stocks that you think are having inappropriate earnings reactions.

12:49I like the hyperscalers here. I like the three large cloud services businesses, Microsoft, Amazon, Google. Maybe that's boring, but I think these are businesses that are accelerating at scale. They're very different from these neocloud businesses like Amazon AWS as an example. They have something like 5 million customers. This is not a business that just constructs data centers for at-scale AI companies. This is a very diversified, broad-based, complex business delivering hundreds of applications to millions of customers. They said that Amazon management said AWS is growing 40 percent each of the next two years.

13:28To me, that's visibility this company has never had before. Just amazing visibility and the strong growth stock that's really beaten up trading at an all time low multiple. So I like these sorts of high quality mega cap companies where, again, fundamentals very strong. There's concern about the CapEx cycle, but I have good confidence that that CapEx is delivering returns. Yeah, well, long, long time shareholders definitely have experience with these kinds of windows of investment. And we'll see what kind of dust does get settled in the coming weeks. John, always good to talk to you. Thanks so much.

14:05Thank you, Carl. John Belden-Gabelli. Coming up, Morgan Stanley is head of U.S. public policy research. joins us. We'll discuss the impact of today's elections on AI policy, dealmaking, and more. Plus, New York Angels board member Bob Peck will join us, how he's looking at investing in AI and the private markets right now. We're back in a minute. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture. Vantage Score is changing that by modernizing credit scoring. VantageScore uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments.

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15:26No 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. Computers are getting smarter, Silicon Valley's getting weirder, and AI is taking over. At least that's what everyone keeps telling us. Welcome to Machine Gods, a new NPR podcast that will be your field guide to the AI-powered future. We're veteran tech journalists with front row seats to the industry. And twice a week, we'll make sure you get smarter about AI, so you know what's real, what's hype, and what might come next.

16:00Listen to Machine Gods from NPR on the NPR app or wherever you get your podcasts.

16:08Welcome back. The midterm elections are finally here. Our Megan Casella joins us with what to expect today. Morning, Megan. Morning, Carl. So after months of campaigning and nearly$12 billion in ad spending, tonight we will at least start to get a sense of how each party is faring in these midterm elections. Now, Democrats are poised to do well. The president's party nearly always loses House seats in the midterms. And given Republicans' narrow majority right now, Democrats only need to flip a net three seats to take the Speaker's gavel. That means they could lose every race rated a toss-up and still retake control in the House.

16:41The Senate, though, is a much different story. Democrats need a net four seats here, which means they would need to flip at least two in states that President Trump won by double digits just two years ago. Now, CNBC's election desk has zeroed in on five toss-up races that will likely determine the balance of power. One of these, Michigan, is currently a blue seat. So Democrats will likely need to keep that and win three of the others that you see here out of Maine, Alaska, Texas, and Ohio. Maine and Alaska both count their ballots, especially slowly, and both have ranked choice voting. So it's very possible that Senate control could come down to those two seats.

17:16That then means it could be days or weeks before we know who will control the Senate. And if you're anxious to gauge how things are going, I know a lot of people are, there could be some early indicators tonight. So the earliest polls will close at 6 p.m. That's in parts of Kentucky and Indiana. There are two toss-up House seats there, one near Lexington, another near Indianapolis. And if those go blue, Democrats will be taking note. In the Senate, watch the Florida and South Carolina polls when they close there at 7 p.m. If Republicans win those easily, the blue wave might not be as big as some forecasters have been expecting.

17:50guys. How is the president? What do you make of how the president has spent his time in the final days leading up to the midterms and what they're focused on? It's been a really fascinating look. The president has been barnstorming this country, going out there with so much more energy than I think a lot of people expected. And then a lot of his predecessors did, honestly, something like 25 rallies in the last month and a number of tele-rallies as well. He's been focusing his time predominantly in red states, which has been really fascinating. It's just not something that you see a whole lot. Often you see presidents trying to go to the closest races.

18:22It's a reflection of what the map looks like this year. All the competitive races are in these red states that he won by more than 10 points. The White House has had different reasons for all of this, but it is a reflection of where they think they really need to shore up the vote. The president was in Mississippi, for example. He was in South Carolina three times in the last month. You just don't see things like that in usually these deep red states. Texas is on that list as well. The other thing he did was yesterday a big press conference or news event standing in front of the reflecting pool and talking primarily about the renovations that he's done around Washington, the reflecting pool being on that list.

18:56That was a surprising move. A lot of analysts really felt that in a race where polls have shown repeatedly that voters really care about pocketbook issues and polls have showed they don't like how much time this White House has spent focused on renovating Washington. that was highlighting something that they felt like didn't need to be front and center on the eve of Election Day. All right, Megan, we will see. Megan Casella, for more on how the markets are looking at the midterm elections, let's bring in Morgan Stanley's head of U.S. public policy research, Ariana Salvatore. Welcome back. It's good to have you.

19:27So from investors' point of view, what's most important? So it's interesting. We were just talking about the president. Executive policy here is the story for markets. Those have been the variables that have driven volatility for the past two years. And in my conversations with clients, they're really focused on what happens with U.S.-Iran, right? What does the tariff regime look like next year? What is the broader geopolitical backdrop? What is the deregulation backdrop? It's all stuff president controls. Correct. So Congress matters for fiscal policy. And of course, oversight, hearings, investigations, et cetera, can matter at the margin.

19:57But for the key drivers of markets, we're looking at the executives. That's why I think that Michigan is so important with the Senate race, because, a lot of it could determine the direction of the Democratic Party. They're running someone who the whole party has gotten, well, not the whole party, gotten behind, who has some extreme views. And I think that'll be very telling as to what happens heading into 28. The next two years are going to be really fascinating to understand how Democrats kind of coalesce around their key objectives, what types of policies are really popular within the caucus, because it's a lot easier to be in the minority than the majority in Congress, right?

20:30That sort of fragmentation is going to be a challenge for leadership in any outcome. And so I think the next two years are going to be really indicative of where the overall direction of travel is going in terms of Medicare for all, in terms of defunding ICE. These are all proposals that have come up over the course of the campaign, including AI and labor policies. So that's just a taste of what we're going to see over the next couple of years. You think if Abbott survives in Texas and the Senate stays red, you get sort of a boost of AI sentiment recovery? I think when it comes to AI sentiment, markets are going to zoom out and look at the overall landscape.

21:02So, yes, the Texas race matters a lot. We've been highlighting that as one of the key ones to flag. But I think if you see, by and large, Republicans hold control, that's bullish for AI sentiment. By and large, conversely, if Democrats were to sweep, take both the House and the Senate, that's probably a negative. The Texas story matters a lot because there are a lot of gigawatts kind of in scope here. But our view is that this will be a conditional build out. So even if that race were to flip, that CapEx can kind of find a home in other states. So it's more about longer permitting, more community engagement, things like that.

21:30Correct. Most of the policy action is state and local tax abatements, the broader tax structure, citing permitting, all of that. But we think that at the national level, you can see the introduction of things like a federal ban or tariff on data centers, undoing parts of the OBBA. None of that will come to fruition, in our view at least, for the next two years. I do like your notion that if there is a blue sweep, M &A is likely to, they're going to try to get in or at least announce while the getting's good, yes? Yeah, absolutely. That is going to be, in our view, a catalyst for sort of an increase in announcements in M &A next year.

22:02You know, deal times can range months to sometimes even years. And so we think that a lot of corporates, of course, politics is not the only factor. Rates, the macro backdrop, all these things matter a lot. CEO confidence. But as far as politics goes right now, I think the expectation is post-2028, you're going to have a tougher regime ahead. You don't read the midterm results as a 28 signal necessarily? So we think it's a little bit dangerous to extrapolate too much from the results, where I do think there are some interesting kind of tea leaves to read are on the policies themselves. So health care, Social Security, I think Maine is like a microcosm of that debate.

22:34In terms of overall outcomes, no, we don't think that you can extrapolate too much from midterms to general. The correlation is poor and the issues don't really carry over in a very clean way. Affordability is always the top concern for voters. Right. So to the extent that people are focused on gas prices, that's obviously damaging the incumbent Republicans. But back in 2022, it was the same thing. The focus was grocery prices. That was post-pandemic inflation. That was bad for the incumbent Biden administration. So it's not so clean one to the next. Can anything happen at the congressional level if the Dems do sweep on this affordability issue that makes affordability better?

23:07So I think at the margin, there are some policies that can be introduced. By and large, what we've been saying is the affordability policy has to mainly come from the president through tariff changes, right? So that is his really only manner to kind of directly control consumer prices. To that point, we've actually seen a less aggressive tariff path this whole year, I would say. Exemptions, delays, etc. I think that can change next year. But broader affordability policy, it's going to be hard when you have Congress competing with fiscal deadlines, you know, oversight, investigation. That just takes up a lot of political capital and a lot of time on the floor, too.

23:39On the fiscal deadline thing, is it your base case that we're talking about the debt limit by the end of the year? And what's the implication for the rate backdrop? We can be talking about the debt limit. I don't know if that means we'll do anything about the debt limit, but I do think that's more of like a later 2027 catalyst. For rates markets in particular, the elections are not necessarily a catalyst. They're not a huge driver. We think that they can possibly matter insofar as they affect equity markets. And, of course, with a Republican hold, that keeps more fiscal kind of in the conversation, right?

24:08So that can be probably a boost to issue. And so that's kind of the mechanism that our rate strategists are looking at this through. By and large, not really a macro catalyst. What about sector by sector? We're always looking at health care and pharma and energy. And while there might be minor changes, is there any industry that you're focused on in particular in terms of a big change? A small handful. I would say defense matters a lot because we do have the defense bill that has to pass by the end of this calendar year. Of course, the elections can change the incentive structures around that.

24:34And I would say when it comes to health care and consumer sectors, the snap and Medicaid cuts are really what's kind of on the chopping block here. I think if Democrats get a big enough majority, if leadership can, like I said, kind of get all these different corners of the caucus together, maybe they can negotiate around some of these fiscal deadlines to put off or extend those SNAP and Medicaid cuts that were legislated through the OBBA. So possibly it would be good for those sectors, I guess, consumer staples. Yeah, exactly. For those sectors that are already sort of anticipating a fall off in participation, also an upside risk to our growth forecast.

25:04I know it's not apples to apples, but after Brazil, is your model less reliant on polls or prediction markets or any of those derivative products? What I will say is we look at an aggregate of indicators. So don't over-index to one in particular. Polls, prediction markets, the economic backdrop, inflation data, unemployment data, all of these things matter. So we caution clients against reading too much into one specific indicator. You kind of have to look at these things all together. Do you guys see a rate move possible? not on the back of this election specifically. Like I said, it would really come down to fiscal policy and if we see a sizable enough move in the equity market.

25:42But as far as rates go, there's not too much, we think, in the near term. All right, Ariana, thank you very much for taking all the questions. Thank you, guys. We appreciate it. Ariana Salvatore, Morgan Stanley, head of U.S. Public Policy Research. Still ahead, shares of Clorox up 3%. We'll break down what's driving that move higher. Plus, oil prices are falling again today on hopes that U.S. and Iran are actually moving toward a diplomatic resolution. We'll bring you the latest in a moment. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much.

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27:34That's W-I-S-P-R flow dot A-I. Welcome back. Let's get to some stocks to watch today. Shares of Clorox are jumping after earnings and revenue beat estimates. The company getting a boost from its recent acquisition of Purell maker Gojo. Clorox, though, trimming its earnings forecast due to rising costs. The stock up almost 3 percent. Shares of Dr. Pepper, Keurig Dr. Pepper falling. That is despite the company beating estimates thanks to steady demand for pricier drinks. The CEO on the earnings call saying the coffee business, though, remains challenged. And then shares of Shopify are dropping after the company reported its first revenue miss since 2022.

28:12Shopify's president, Harley Finkelstein, joined us last hour. And here's what he said about what he's seeing from the consumer. I think businesses are really optimistic. I think shoppers are feeling some economic pressure, which means every new dollar spent is a more deliberate decision. But truth is, we're seeing growth across merchant sizes, geographies and channels. Strength seems very broad based. You really play down the myths and any signs of weakness. You know, some of the analysts are writing about whether it's a slower rate of growth for GMB, which is a key metric for them. But but he said absolutely not.

28:44And in fact, that AI is helping supercharge their business. Yeah. I mean, versus consensus that GMV misses less than one percent. Very minor. I know. But they say it they see it going below 30 and wonder if that's a new trend, which he also pushed back on. Stock has come back from the worst levels. It's down now seven and a quarter. I think it's down 16 pre-market. Yeah. Let's get a news update as well with Pippa Stevens. Hey, Pippa. Carl, President Trump said this morning that the U.S. will stop giving Israel$4 billion in annual aid after this year, but will sell arms to his closest ally in the Middle East.

29:15The president made the comments as voters head to the polls. U.S. aid to Israel and the war in Gaza have become flashpoint issues in this campaign cycle. Israeli Prime Minister Benjamin Netanyahu has yet to comment. Spanish police opened an investigation into possible involuntary manslaughter after Tenerife player Jesus de Miguel died after an on-field collision with the opposing goalkeeper. The Spanish striker suffered cardiac arrest after being hit in the chest and later died. The goalkeeper was given a red card immediately after the collision. And Google announced today that it's making it easier to restrict AI tools for K-12 students, but there's a trade-off.

29:54The company says it will turn off those tools early next year unless administrators specifically choose to make them available. But according to Google, schools that choose to block AI entirely will also lose access to Google search because it's so integrated with AI. Sarah? Yeah, that's one they're going to have to figure out. The whole education in AI. Thank you, Pippa. Coming up, New York Angels board member Bob Peck joins us. How he's looking at the AI trade right now in Anthropic ahead of an upcoming IPO. Plus, we'll tell you what to expect. Another important print tonight with AMD and Lisa Su on with us tomorrow morning.

30:29We're back in just a minute. Welcome back. Wall Street awaiting Anthropics upcoming IPO. The AI giant submitting that revised S1 yesterday, as you know, reporting some compute and infrastructure spending commitments totaling nearly$900 billion. Our next guest does have a finger on the pulse of private equity and the IPO markets and joins us with some takeaways. Joining us this morning at Post 9, Bob Peck, former Wells Fargo chairman of Global Internet Investment Banking, now a board member of the New York Angels Investment Group. You are a sight for sore eyes. Great to have you back, Bob. Thanks for having me back.

30:58It's great to see you both. I always love being here on set with you. There's so many times we've wished you would have been at this table, but since we have you now, takeaways from this S1? Yeah, absolutely. First, maybe let me hit just on New York Angels. led by our chair Cindy Cook. It's been around for 20 years. We've invested over$180 million in over 360 companies. We've had a bunch of investments you probably know, like Bombas, Pinterest. We're going to deal right now with Mark Cuban on a living seawall deal called Kind Designs. So very one of the preeminent investment groups in the United States.

31:32And what we do is we keep an eye on the private equity side of things, right? Particularly, we keep an eye on the public side, too, to see if that helped inform maybe where sentiment's going. It's not going to impact any of our near-term investments, but it's going to impact sentiment where we think multiples and what long-term value could be and all that. So looking at Anthropic is obviously, I think, one of the seminal moments this year for us, right? And really could help shape sentiment as we head into 2027. How would you gauge sentiment on it right now? I would say it's positive, right? And I don't know if they have our graphic, but if you look at the general sort of way to frame valuation and what can happen here, I know the Wall Street Journal was out this morning talking about$1.5,$1.6 trillion.

32:10We tried to do some back-of-the-envelope math, seeing does that make sense, right? Would it make sense to get up to$2 trillion? One of the ways we looked at it was looking at EV to sales multiples on high-growth SaaS companies. That would get you close to about$2 trillion. We also looked at normalized EBITDA on companies that were growing this rate back in the day, so like Google or NVIDIA or Facebook, and putting a 40-times multiple where they were trading then on the profit expected would get you around this 1.6 number. You saw Chamath come out the other day and say he thought 1.5 was about right.

32:43The dean of valuation, Ansoas de Motoren, came out. He thought 1.5 was about right. So you can see sort of this central tendency of value sort of shaking in this 1.5 to 2.0 number. And, you know, if you go with the journal study, you can see them pricing 1.5, 1.6, and then maybe popping up towards that 2.0 number would make a lot of sense. Right. Do you think filling in that blank on October makes a big difference either way? I really don't. I really don't. I think we've got enough information. They dropped in the three Q numbers. We have a good feel for growth. You can just sort of like straight line that a little bit.

33:14Maybe you're shaking out 60 million of revenues this year. What's that going to next year? You could talk 130, 150. You have your sort of range there and then you can start doing some of your math on what you think it's worth to you. And ultimately, at the end of the day, it's going to be that multiple you're willing to pay right on those revenues or on that normalized EBITDA. So this number makes sense to you, but there are a lot of other giant eye-popping numbers, whether it's CapEx or valuations or future commitments without revenues. Completely. I mean, you went through the Internet boom and bubble, lived it.

33:45We lived it. That's how you learn this stuff. What parallels do you see? Yeah. Well, first of all, on the compute and commitments and all that, right? So compute was up 4x, right? But revenues were up 11x, right? So you're still seeing that expansion there, right? of that$850 billion you're talking about of commitments, over half of that is past 2031 to 2045. So just see how far out that's going. And that's all going to be success-based as they get the revenues coming in the door. But to answer your question, I mean, my whole career was built around the Internet, and I basically started taking over coverage right after the Dopp bombs, so pulling the embers out of what happened there.

34:20And that's where you saw these companies emerge, you know, Google, Amazon, even Yahoo, and then led to new companies, right, Facebook, Uber, et cetera. So I sort of think the analogy here is something similar to that. I think some of these companies are not capitalized correctly going into any sort of increasing interest rates or any sort of turmoil. Like who? Like the neocloud? I don't want to call specific ones. Neoclouds, I think, you know, Elon's pointing to them, sort of obvious ones, but some that maybe aren't or they're overcapitalized. And then I think there's going to be these large ones that come out that are really going to take advantage, sort of like the Googles did, the Amazons did, and really be able to grow into this next wave of AI.

34:53So I think it's a really exciting time. And it may be even more exciting than where I started my career in Internet back in 2002. Because the numbers are just bigger? Yeah, they really are. I mean, you're doing trillions now, right? Versus back in our day, we were talking tens of billions, you know, hoping to get 100 billion, right? So big differences. What's the best way to capture the value right now? In the AI side of things? Yeah, on this boom. Well, I think there's multiple ways, right? But I think we're going to look towards the open AIs when they go IPO. Anthropic will be a shining light for us.

35:22And even we'll see what happens with Facebook and Meta and Google and Gemini and all that. So we'll have to see where those lead for us. We had a table up yesterday, a sort of dramatic single-day price declines in ServiceNow, IBM, Intel, in the last few months. Is that telling us something about where sentiment is or is headed? Yeah. I think it's a little more cautious than maybe where we were six months ago. But all of them were very different. And so Google declined, what, 12 % that day, and that was due to some pressure, quite honestly, from AI and lack of monetization on it. Yet Intel declined the other day, talking about PC demand, you know, being weaker than what they thought, right?

35:58So some margin pressure over at Apple, right? So there's been various reasons, but I do think that's why the street right now is looking so much towards these big IPOs. So we'll get Anthropic. I think it's going to be a positive catalyst for the tech environment. And then we look to 2027 to get OpenAI coming out. And are you as constructive on that one? I haven't seen the S1 yet. So I have to see the S1. If you recall, this is what we did back when I was at SunTrust. We looked at Twitter. I don't know if you remember like that. We came out and had a price target on Twitter based on the S1 not having the bankers numbers.

36:29And, you know, it was pretty helpful. Yeah. We're coming up on that anniversary. November. Yes. Yeah. What about some of the companies that are already public now in the valuations we're seeing for some of these hyperscalers? Yeah. Do they make sense to you? Yeah, I think they do, right? You've seen some pullback, right? You're still talking large numbers, right? These companies are valued, you know,$2 trillion,$3 trillion,$4 trillion. So they're still very well. Some of the parts of their own business, I mean, first of all, it was such a strength that they were able to be so profitable as they fund the compute.

36:59But at the same time now, Wall Street is realizing that some parts of their businesses are getting disrupted, like a Google search. I think Google's probably the poster child for that, right? So does Google recapture some of the searches that are going to AI? And even if it does, is it at a lower monetization, right? Now, you see OpenAI starting to roll out some ad-based products. We'll see how that plays into all this as well. But I think it's one of the biggest questions. And that's where you're having those bull bear debates, right? I don't think it's a clean 100 % story to the right or to the left, right?

37:29I think you're going to see these bull bear arguments. I remember when Google IPO'd announced this behemoth, right? And I remember all the concerns. It's just one of many search engines. Moonshots. Yeah, moonshots, right? Don't be evil. I remember the growth in 2Q that was being based off because the IPO was in August was not that strong and people were concerned. So I think we need to look a little bit further down. And that's one of the things we try and do at New York Angels, right? We're not looking out just one year. We're looking out five years, 10 years, quite honestly, and where we think some of these trends can go.

37:56There are still those who argue that, I don't know, take the S &P 493, are not seeing the margin benefit of AI in ways you would expect. I assume you're going to argue that's just too soon. Well, what I think is interesting, too, is that you saw Anthropics enterprise customers grow 12x in the last year. So enterprises are spending on this, right? What I think is even more interesting, you saw their net revenue retention grow 900%. 900, right? And pretty good revenue distribution. Yeah, absolutely. I mean, 900 retention is insane. A good SaaS company would have, you know, in the 130s, 50s, that's fantastic numbers.

38:35But to see that the customers are still spending on this shows they're seeing something that's promised towards a good return or feel they just need to be there. How do you find the winners and losers in software on AI? That's a good question. Probably outside my domain to specifically answer that. That's not who you used to be. You used to be able to answer questions like that. I'll probably answer the software analysts. But I do think that, you know, the whole tech world, if not the entire market, is going to be looking at this IPO. And I think it's poised well. I think the valuation numbers make sense based on the back of the envelope math you've seen me do.

39:05And so I think it should be setting us up well for hopefully then a good open AI. And then finally, is the SpaceX clearing that event? Has that been instructive on what you think this one might be like? Exactly right. Well, in fact, in some of the math I did, I actually used the analyst valuations on XAI within SpaceX, right, to give a feel for how were they looking at that and what that could be. I thought that was very informative, and that's why we use it as one of our evaluation methods. You'll come back more often? Absolutely. Thanks for having me. I really appreciate it. It's good to be back.

39:33Yes, you too. Bob Beck. All right, coming up, we're going to take a closer look at the moves in the oil market today as prices fall here for a second day in a row. U.S. reportedly striking an Iranian island in the Strait of Hormuz overnight. We'll fill you in in just a moment. Welcome back. Oil prices are falling again today as the market hopes for a diplomatic resolution between the U.S. and Iran. Pippa Stevens with the latest. Pippa. Good morning, Sarah. Oil is in the red and choppy trading on multiple headlines about where exactly things stand between the U.S. and Iran. A crew did take a leg lower this morning on unconfirmed reports about a draft memo of understanding before bouncing off the lows as Iranian leaders said the U.S.

40:12response to Iran's demands were not convincing. This follows the U.S. reportedly striking Iran's Geshem Island last night, according to MSNOW, in what cited officials described as a defensive measure. Still, all of this points to diplomacy seemingly being back on the table, which is what sent oil tumbling yesterday as the geopolitical risk premium erodes. But there is a camp, including TD Securities, that says the picture looking forward is still one of higher for longer, with Brent remaining in the$90 to$100 range. But there's a risk it could spike as the Middle East and Russia-Ukraine conflicts remain unresolved.

40:46Now, overnight, we saw Ukraine attack more Russian refineries ahead of those trilateral talks set to take place next week in Abu Dhabi. Now, as Americans head to the polls today, the national average for a gallon of gas sitting at 415, according to AAA, just about a two month low, but more than a dollar 30 higher than at the start of the year. According to estimates from Brown University, the war has cost American households an extra one thousand one hundred and fifty dollars in elevated fuel costs. Guys, Pippa, we we talked with you yesterday about what the picture would look like if you got an MOU and you could start to assess damage around various pieces of infrastructure.

41:23I did notice Marathon is out today and says they do expect elevated refining margins through at least the middle of next year. That's right. And we've heard that really from a number of the big energy companies, including Darren Woods, who on Friday said that, you know, he doesn't see refinery normalization until well into next year and possibly even longer. And as he put it, you know, it's a third of it is thanks to the Middle East. A third of it is thanks to trying to have and spare capacity to export more fuel that they are not utilizing right now. And then a third of it is the Russia and Ukraine war that is ongoing.

41:56So it's kind of this confluence of all these different regional events that are coming together to distort the picture. And on top of that, Marathon said that they saw very strong demand for gasoline, diesel and jet fuel. Of course, right now we are in a traditionally weak demand period for gasoline. And then for diesel, things start to ramp up once the heating season really kicks off. But what we've seen is that these refiners are running as much as they can. And last week, utilization was at 92.8 percent. That was the highest going back to 2003. So they are continuing to profit in this environment.

42:27But as we look forward, the key thing is going to be the extent to which they can take advantage of the different prices and different grades of crude. Marathon, of course, is a beneficiary of some of that cheaper Canadian crude that's coming down. And they're able to refine that and then turn a profit on that. So as these stocks kind of have more than doubled this year, it seems like going forward, investors will increasingly be focused on where the advantage is for those different refiners. Yeah, yeah. Some of those middle distillates like jet fuel, really, really interesting. Pippa, thanks.

42:53Pippa Stevens this morning. Still ahead, we'll break down what to expect when AMD reports tonight. We're back in just a moment. Welcome back. AMD set to report tonight after the bell. Seema Modi working multiple beats today. Talks about what to expect. Hey, Seema. Hey, Carl and Sarah. Well, following Intel's massive move last week, investors will want to know if AMD shares an equally negative outlook on the PC market due in part to soaring memory prices. And when Lisa Su, the CEO of AMD, sees prices easing. Remember, it is Intel's main challenger in the CPU market. Its stock dropped about 9 percent post Intel's report.

43:28And Intel CEO at the time, Lip Bhutan, said he does not see PC demand improving in 2027. Beyond PCs, the general chatter around AMD is its massive stock outperformance this year, outpacing Nvidia. And if this marks sort of a shift in semiconductor leadership, as Sue makes big investments in data centers and the technology there to provide a full stack option similar to Nvidia, most recently acquiring World Labs for about$9 billion in AI research startup. Another question will be on AI financing. Just today, Meta is out with a$20 to$25 billion bond sale. I'm hearing it's going to be about two-thirds dollars, one-third of that will be euros, according to sources we spoke to.

44:11Keep in mind, AMD has raised about$5 billion in debt two months ago, substantially less than its peers like NVIDIA and the other hyperscalers that have been very active in the debt market to fund the cost of the AI build-out. Analysts on the whole are behind the stock. There are no sell ratings on AMD, according to FactSet. They come an analyst. They're touting the company's growing list of hyperscaler customers, including Meta, Oracle and OpenAI. And remember, Anthropics Financials did show that spending on compute is rising. The challenge, guys, is that the chip market is expanding. There's not just NVIDIA and AMD now.

44:45There's Broadcom, Google with their custom chips at the Frontier Labs certainly have options. And CEO Lisa Su will need to prove that AMD is able to secure those longer term contracts, guys. Yeah, I mean, Amazon, too. They're all in the chip game right now, Seema. Is there any sense that that's having an impact on NVIDIA and AMD and the others? It's a good point. Going into this report for AMD, the big talker has been around Meta and its relationship with AMD, given that Muse works off of AMD's processors. So how big of a revenue opportunity that is is something that we want clarity on on tonight's call.

45:21And also just the broader sentiment around semiconductors, Sarah. We know the GPU depreciation debate continues. Is it five years? Is it seven years? Investors as a whole, I think, will be reading the tea leaves on the conference call tonight. Yeah, and as far as drawdowns go, I mean, AMD isn't a bit of a drawdown, but not nearly the drawdown that Intel's been in from its own all-time high. It's going to be really interesting. Seema, thanks for that. And, of course, tomorrow, don't miss AMD's Lisa Su. She'll be with us on Squawk on the Street, trying to get a better picture of what's happening in the market, whether that's share or the backdrop or anything else.

45:55Yeah, important for the AI trade. Also more economic data. You know, we'll get ADP, the private sector jobs read tomorrow ahead of the government report on Friday. And I just want to note, you know, the number that you brought us at the top of the show, which was job openings. This is some hot data that indicates that job market has been strengthening. If you go inside that data, the quit rate, you know, the Americans, that actually went up, which is a sign of confidence. People quit when they feel like they can get another job. And the layoff rate actually came down. So that all bodes well for a jobs market on a day where Americans are going to the polls and trying to figure out what's going to happen.

46:29On jolts. Actually, factory orders weren't too bad either. Endurables. Macro data has been pretty much a safe backdrop all week long. We'll see what we get on the drop is number on Friday. Vicks, by the way, still trying to get close back to 21 ahead of the election results. Hopefully we'll get some tonight. 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.

47:05Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer. To every clinician finishing notes at 9 p.m., there is a faster way. Whisperflow is a voice-to-text app. You talk, it types in your EHR, your email, anywhere you type. Say the progress note, the referral letter, the patient instructions, and it comes out clean and formatted with your terminology spelled right.

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