11AM Hour: Apple’s iPhone Duo Goes on Sale, Tesla Unveils Roadster, Proofpoint CEO on $6.3B Cyber Security Deal 10/16/26

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1:04Good Friday morning again. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla live from Post 9 of the New York Stock Exchange. Today, the AI trades no good, very bad week with the Nasdaq 100 down 4 percent. Semiconductors pacing for a seven straight down day. But we are joined by one veteran tech investor who says it's the narrative, not the fundamentals, which have shifted. Plus, he's known as the father of the iPod, co-creator of the iPhone, and the founder of Nest, Tony Fidel, will join us. We'll talk about tech's push into this new AI agentic era and why he believes Apple is positioned to win on the trust and safety front.

1:39And the AI boom reshaping the cybersecurity landscape. Toma Bravo's proof point acquiring Varonis Systems in a more than$6 billion deal. The CEO joins us this hour. As for the markets, a little continued pressure on the Nasdaq. NDX down a full percent, But breadth is pretty good, almost 2 to 1 positive, 1 percent gains in financials and energy and staples. As you can see, the 10-year, 509, actually not quite to session highs. We got a little above 5.1 this morning. But, man, what a week for Treasuries. And for the NASDAQ. I mean, the NASDAQ has gone down pretty much all week. There hasn't been too much relief.

2:13A little bit yesterday in the semiconductors, but information tech, communication services, those are the weak sectors right now. Let's begin with what has been a painful week for many parts of the AI trade. Mike Santoli, senior markets commentator, co-anchor of Closing Bill Overtime here. When you think about the week in review, do you think it's one we'll remember in months? I think it could be in terms of the latest wave in a multi-month process of having this reckoning with where exactly the AI hardware trade in particular and credit-sensitive AI is going to be. So I mentioned earlier, quality has actually been ballast for this market.

2:51The S &P 500 is down less than 1%. You've got 4 % down for the NDX. That's momentum relative to quality. And the reason it's important is just look at the crazy peak in momentum in June. And then we have the big purge in July. Everybody says maybe it's an all clear, it's washed out, and only a half-hearted bounce above that. So this is not uncommon to have one of these speculative peaks and have a multi-month process of it trying to get sorted out. Now, AI infrastructure, in particular power and industrial infrastructure, that's this ETF AIPO, which I think is very illustrative, too. And that's going against the Mag 7.

3:24So the AI trade is a little more migrating toward the big platforms that nobody wanted earlier in the year, like Mag 7. And then that sort of excludes, at least recently, NVIDIA. And the Apple versus NVIDIA kind of toggle has been fascinating, too. You now have Apple outperforming NVIDIA on a year-to-date basis. Look, they're both up plenty. They're both, you know, five plus trillion dollar market caps. So they're doing more than their share at this point. They're like, you know, whatever they are, like one sixth or one seventh of the S &P 500. But it still shows you that the market right now is a little bit less willing to bet on the durability of the hardware bottleneck credit sensitive parts of AI.

4:07So it's it's it's getting rationalized. I mean, I don't know that it's necessarily saying it's game over. Yesterday's lows might sort of haunt the semis in the Nasdaq for a little while. Like, maybe they have to be tested. But it was a pretty impressive intraday comeback. I do wonder now if we're in this period where if rates start rising again, then core weave and, you know, the whole complex sells off. Because that's ultimately what's driving this action. It is. Or at least it's sort of the big immediate pressure point. And it's credit spreads on top of what the Treasury yields are. I mean, that's been the whole story.

4:42You know, it's not really leaking away from that too much. I think Oracle is absolutely the central linchpin here. It is a triple B, therefore, investment grade credit that does not trade like one. OK, its longer term debt is in the eights. It's eight and a half percent, you know, not in the sixes, which is where a lot of other investment grade. This chart actually gets picked up by B of A today and Hartnett's note, who also says go long peak yield beneficiaries. And I wonder if XLU, ITB, they got a taste yesterday. They did. And it shows you. It's funny because as much as everyone complained about how narrow the market had been over the prior six weeks, eight weeks, whatever it was, the fact that it was narrow and the fact that the majority of stocks had gotten so hit to the downside meant you had room for relief once yields came in.

5:32And so the market is, I think, acting in an almost best case scenario, given the erratic nature of some of the AI trade and how it's willing to kind of move on to the next thing and take shelter. By that you mean it could have been a lot uglier. It could be a lot uglier. So this sort of like defense through rotation dynamics of this market continue to hold it up there, even as you were asking earlier this week about the sort of peaks that we saw earlier in the summer in the S &P 500. We're still trading in the August 4th range. The August 4th rate did this big gain, and we're still there. It's two and a half months later.

6:07Okay, Mike, thank you. Mike Santoli. For more on the weakness we've seen around tech in particular and the AI trade, let's bring in Jason Greenberg, Jeffrey's executive chairman of TMT Investment Banking. Jason, you say it's the narrative, not the fundamentals that have changed. What do you mean? Notice what's moved. The narrative, not the fundamentals. In the last week, what have we had? A hot inflation print. We've had a rate hike talk. We've had a big chip CEO questioning whether AI labs are overspending and worries about how this buildout is actually being financed. But as you just pointed out, the S &P is 1 % off its all-time high.

6:41And the real question is, why? And if you step back and look at earnings, and at the end of the day, you know, the market is all about earnings. We have unprecedented mid-cycle earnings growth on the back of unprecedented levels of AI investment, even ignoring the AI trade. So take out the Mag-7, take out broader tech, take out energy. Earnings growth across the other 400 constituents of the S &P 500 is still up 5 % for the median company. So I think, you know, everything we're seeing in general is really investors beginning to get skittish about the story, not about the fundamentals. Is that impacting your world, the world of investment banking?

7:19You know, look, I'm with CEOs and boards all the time. And the interesting thing is that negativity right now is really an investor and market phenomenon. It's the market asking who's going to earn a return on all the spending, who can continue to spend. And, you know, you've mentioned, I think, in the last few minutes, a lot of businesses, which I would say are cost of capital businesses. At the end of the day, their ability to garner a sufficient return depends on how they can actually finance what they do. But that's a small part, eventually, of what the market for this is. if you look at the AI demand itself, there's not a collapse in AI demand.

7:52Boards I'm speaking with aren't asking whether or not they're going to continue or expand their investment in AI. They're asking harder questions. What's the ROI? And fundamentally, is AI going to threaten my business model? And this makes boards more thoughtful, management teams more thoughtful, and frankly, more active. Jason, one of the things that got thrown into the mix last couple of weeks was a report by your colleague, Chris Wood, not about financing and not about debt, but about the Chinese and the notion that they are a tech peer now to the U.S. in AI and throwing into doubt the likelihood that Anthropica and open AI could ever be profitable.

8:28Is that a house view? You know, look, I think everyone has their own opinion based on their own experience. The concept that China is a competitor in AI and technology on maybe not completely equal, but on roughly equal terms, I don't think is debatable. The answer is yes. I think there's pockets in areas that the U.S. continues to lead in. There's pockets the Chinese lead in. And I think ultimately, you know, you're going to see that play out over the next five or 10 years. But then how do you think about open source risk to revenue of these huge private players? Well, look, at the end of the day, it comes down to token consumption.

9:08It's effectively buying intelligence to the extent that open source models are able to offer intelligence at a lower price per token for an output, they'll gain share. Do I think that's likely to happen? Do I think that we can't copy the same form of models that they have? I don't. I couldn't tell you in five years which of the foundational models or which of the open source models will win. It's too early right now. What I can tell you in aggregate, if you look at the growth on spending on effectively AI intelligence, I mean, it continues to expand at a tremendous pace. What about IPOs? We've seen some data center companies pull IPOs.

9:47Do you think that, anthropic aside, which is, I know, planning to IPO, that it's going to be a slowdown here? I think investors are looking at the rates of multiple expansion or return expansion on some of the recent IPOs. And it's really not a question of is the market willing or open to buying IPOs. It's what's the price at which they need to pay. Without commenting on a couple of the specific IPOs you've mentioned that have been pulled recently, it's really a question of value. There's definitely investor demand to continue to buy leading growth companies. I think what you need is one of the handful of large name, impactful IPOs to go out and have people make some money.

10:30At the end of the day, greed reigns. If people make money on IPOs, they'll put more money in new ones. Jason Greenberg, executive chairman of TMT Investment Banking from Jeffries. Thank you. Thanks for having me. Still to come this hour, Apple's new iPhone duo reportedly selling out in minutes after opening for pre-orders this morning. We're going to be joined by someone who actually helped create the very first iPhone. That's Tony Fidel with a closer look at Apple's product strategy. And then Tesla's Roadster making quite the splash during its debut demo last night, doing flips, driving upside down.

11:04We'll tell you everything you need to know. And by the way, there was not someone inside there driving, right? That's what Musk said. I'm not sure if it's ready for that yet. I don't know if I would do it. We'll be right back. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture. Vantage Score is changing that by modernizing credit scoring. Vantage Score uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments.

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12:17When it comes to reinforcing safer work from start to finish, Hilti brings tools, systems, and services built to support the way you lead so that every person goes home safe. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud.

12:56Check response, subscription required. Welcome back, CalciTraders, making some bets about when or if Tesla and SpaceX could merge. The timeline jumping up across the board after Tesla showed off that splashy demo of its long-awaited Roadster, which, of course, did include rocket thruster technology. Traders now pricing in a 55 % chance companies could become one before April of next year. For more on the Roadster debut, let's bring in our Phil LeBeau, who watched last night. Phil, a lot of armchair engineers today talking about how much PSI, did it have a full battery pack. Sarah just mentioned not a human driver in this case.

13:36Yeah, and we don't know all of the details about the exact makeup of the vehicle. A few of them have come out. But the bottom line is this. From a 50 ,000-foot view, this is an example in Elon Musk's world of what is possible if you were to have SpaceX combined with Tesla working on vehicles together. He said, look, I can make a flying vehicle someday, and that's what they demonstrated last night. Look, someone will look at this and say, well, that's really kind of a cool trick. Are we really going to see this in the real world? No, you will never see this on a real road. But it is an example of the Roadster using SpaceX thrusters and other technology.

14:13And Elon Musk talked about this last night. Here's what he had to say. This is the culmination of incredible work by Tesla and SpaceX engineers working closely together to make something that you haven't seen in any movie that's better than any James Bond car. Okay, so there are three versions of the new Roadster. There is the performance version. Call that the base version. It will be street legal. It'll be tricked out. It'll have great performance in terms of zero to 60, potentially under a second. Then there's the thrust version. Now, that has the race course technology, including essentially a huge suction system which holds the vehicle close to the ground.

15:03That is going to be one that people who want to use a vehicle on race courses, they would buy that one. And then there's the rocket version, which has SpaceX technology. It will not, repeat, not be street legal. I don't imagine it will ever be street legal if that technology is ever put out there. And by the way, as you take a look at all of these demonstrations today, and look, they did exactly what Tesla wants to do. They have people talking about the potential for SpaceX and Tesla together. Keep in mind, we do not have pricing yet on the new Roadsters. Production is supposed to start in 2028.

15:40And as you take a look at shares of Tesla, remember, we get the Q3 results from Tesla next week. And we're showing you Tesla versus SpaceX here. A lot of people look at Tesla guys as a tracking stock for SpaceX. We'll see next week when they report their quarterly results if Elon Musk talks about any further detail in terms of the potential of SpaceX buying Tesla or folding Tesla into SpaceX. Yeah, a lot of people think it's just an inevitability. I mean, look, you can't he built a car that can fly. You have to. That's like a pretty extraordinary accomplishment, Phil. But the point is not, you're saying, to actually sell these cars?

16:22Well, I mean, they will build the Roadster and sell the Roadster. But do I think they're ever going to sell one that has the SpaceX technology that you will be able to use out on a road? No. You want to take it out to Bonneville Salt Flats? Sure, you could probably do it out there somewhere in a private course area. And how many they sell remains to be seen. The point that I'm making is you will never see a vehicle out on the roads in the United States or really anywhere doing what that vehicle did last night. I can't imagine that regulators would be like, yeah, we're comfortable with that. No way.

16:55Not not not in our lifetime. Yeah, but maybe that's not the point. You know, making a practical flying car for people on the roads. That's not the point. Yeah. That's not the point. The point is to show what is possible, Sarah. And he did that. It did it hands down in spades. It was a great performance. It has people talking. Interestingly, a lot of the desk notes, you know, Morgan Stanley is a good example. They are getting more positive, but it's not because of the Roadster last night. They say better execution on Robotaxi, CyberCab expanding in Austin, a million miles unsupervised. That kind of commercial scale on autonomous is maybe more important right now.

17:32Far more important. And that's what will really drive the long term success of Tesla. Elon Musk has made it clear the future is in autonomous and robotics and AI. Now, if that includes looping Tesla into SpaceX, that's a possibility. But it's not about the Roadster, which is a halo car. And halo cars are built by all automakers to generate conversation. And boy, did he generate conversation last night. Yeah, it's stunning. It was spectacular. Thank you. I'm excited to show my kids. Phil Abo. When we come back, Apple historically using major design changes to see just how much consumers are willing to pay for its products.

18:12We're going to be joined by one of the co-creators of the iPhone, Tony Fidel, for more on the company's strategy with the duo. Toma Bravo owned Proofpoint, a more than$6 billion cybersecurity deal. CEO is going to join us in a few moments here. Dow hanging on to some gains of 190 points. Don't go anywhere. Pressure doesn't change what matters most. The people on your site. You lead the job. You set the standard. The crew counts on you to get it right. Pros know leadership starts with safety. That's why staying ahead matters. Catching issues before they escalate. Keeping small risks from becoming bigger ones.

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19:22Try it now for two months free at youtube.com slash premium. Trial eligibility varies. Terms apply. Cancel any time. That's a mouthful. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud.

19:56Check response, subscription required. Welcome back. Apple's iPhone Duo going on presale this morning with a pretty hefty price tag. So can the debut ignite a meaningful upgrade cycle? That's the focus of today's tech check with Mackenzie Sagalos. What are you hearing, Mac? So, Sarah, this is really a test of whether Apple can use its most dramatic iPhone redesign since it launched to get customers to spend more and push the iPhone even further as a status symbol. Now, the Duo, it starts at$1 ,999 with with the highest-end models topping 3 ,000. But Apple's foldable doesn't need mass market scale to move iPhone revenue.

20:34Foldables account for just over 2 % of global smartphone unit sales this year, but nearly 7 % of industry revenue. IDC expects 10 million duos to sell in the first 12 months, with shipments growing another 70 % next year, potentially making Apple the world's number one foldable brand. And many of those buyers are expected to be existing iPhone customers, essentially trading up or adding a second phone. But there's also an opportunity in China where foldables are already much more established and Huawei controls 80 percent of that market. Now, analysts I spoke to expect this demand to outrun supply, and that is exactly what we are seeing this morning.

21:12Launch day store stock disappeared almost immediately, and some orders are now slipping into January of 2027. Now, I personally priced out a base model with Apple care in a case. I was looking at$2 ,317 after tax, roughly the cost of three MacBook Neos. And within just a couple of hours, because I did not check out that cart, delivery slipped from mid-December to late January. And that kind of scarcity can feed the cool factor too, right? Apple has used this luxury playbook before when a former Burberry CEO ran retail, putting the gold Apple Watch on Vogue China's cover and partnering with Hermes.

21:51Now it is bringing that same status appeal to the iPhone itself as smartphone growth slows and that growth depends more on getting customers to spend more per phone, not simply selling more of them. Guys? Great setup, Mac. Thank you. I'm Mackenzie Sagalos. Let's stick with this demand picture for the duo. Joining us this morning, former Apple executive, co-creator of the iPhone and creator of the iPod, Tony Fidel. Well, Tony, long time no see. Great to have you back. Good morning. Great to be here. I've been dying to ask you all morning about this form factor and the history of it. Was this something you guys considered back in the day?

22:26Well, we were considering the iPad, of course. And so what you really look at in this form factor is that this is for one set of customers, an iPad that they can take with them anywhere. And so there's a pent up demand for that. But really where all the demand is coming from is the iPhone buyer who just wants novelty. They want something different. It's been years and years without any real dramatic change. This is a dramatic change. And I think that, you know, when you look at the form factor, it is dramatically different. You know, the question remains to see is how usable is it compared to the phone that they have today?

23:03because it's not going to be easy to type with one hand, you know, holding the device. Opening it up and typing that way is also an issue. So if you look at most iPads, they have keyboards attached to them today. So I think there's a lot of things that people are going for, the novelty and how cool it is. But I think there's going to be a lot of things that people are going to be questioning after they actually have them for the long term. But without a doubt, this is totally supply constrained. You sound like maybe a net skeptic on its usefulness. Yeah. You know what? I think it's going to be we're going to have to see a lot more usability from the app developers.

23:43So we're going to have to see our app developers embrace it so that because you're going to want to. How many times are you going to open it every day like and have that extra weight, have that extra thickness and an extra width? So I think that it's going to be remain to be seen, but people are going to buy these regardless. But I think the developers are going to really make some really innovations here that the world hasn't seen yet. Beyond as a status symbol and looking cool and different, is there anything practical about a foldable phone like this that people would need? Oh, absolutely. If we look at it, just say you're on a plane.

24:19You know, you want to watch media. You're going to want to consume a document or what have you. There's going to be a lot of reasons why, like I said, an iPad in your pocket, wherever you go. And so you don't have to have a phone and an iPad. So I think there are many, both business and entertainment uses for this type of device. The other big news of the week at Apple, of course, is this push into home. And I wonder what you make of that. Is it ripe for a refresh, either just from the home part or the Siri part? Well, I think, you know, we had nested the home stuff 15 years ago. And so we're finally seeing that the smart home is going to become a reality.

25:02And I think with AI, AI is absolutely the way that the smart home is going to work for people. Today with the new home view, you know, I think it's a great form factor, but I don't think they're going to get it right until the version three. It's kind of like the Apple Watch. The Apple Watch, when it first came out, was, oh, that's an interesting form factor. What's going to happen? but it didn't hit the right marks for the first two versions until the third version it got and figured out it was a health device and a fitness device i think home view right now is not clear what it is it's going to it's going to need third parties today there's no app store on it so i think it's going to you know it's going to be an interesting product but it's going to really come into its own in about one to two years after we get real software and and they've changed up the product a bunch.

25:50But I think it's going to be on the relative order of Apple TV business for Apple long term. Yeah. As someone who founded Nest, right, you know the home space pretty well. Is this a competitive threat for a Nest? Oh, this is, you know, to me, you know, there's the products, there's the actual devices that this talks to. And then there's the, you know, kind of your interfaith that lives in your kitchen or in a different room in your house. So I think from, you know, a Google Home, Nest Home perspective, yes, that is absolutely a competition. But there's all the devices around and Apple's chosen not to make those.

26:29So there's that still ecosystem is going to thrive and it's going to thrive even more now that Apple has entered. And you're going to see a lot more of those devices that hook to these types of HomeView products. While we have you, Tony, I'd love to get you on Muse and agents. Sarah has been using it a lot. Every conversation we have with a bank CEO or a retail CEO is about how the protocol is going to work. How's it going to move your money safely and with privacy? I mean, what do you make of this? Is it the future? So absolutely. Agents are the future. And the way that Muse has been constructed is absolutely phenomenal.

27:09It's a great product. You know, we have to worry about the trust factor here. And so I've heard through the grapevine that they're going to have some really interesting trust announcements coming in the next few weeks. So, you know, it remains to be seen, but this is the future. This is the direction. LLMs, they're the databases of tomorrow. Really where the innovation lies is in the agentic frameworks, like Muse, like Instinct, like, you know, perplexity. Apple has to do the same thing. Apple absolutely has to. They need to, they have all the devices, they have all the silicon, they have all the software, but they don't have the agentic framework so they can plug in third-party LLMs like they're doing today with Google and such.

27:51Well, now they're collaborating, first public collaboration since 2017 with Meta, where they're basically letting Meta's new smart open AI model run on the Mac. I do wonder, I love Alexander Wang from Meta, their AI chiefs, his quote to Axios. We're excited for mommy and daddy to be playing nice again on this. But I wonder how you read into that, to this collaboration, especially when it comes to the safety concerns around these personal chatbots. Well, you know, again, like I said, I think they're going to have some very interesting announcements in a few weeks about the security. And if you look at Apple and they have incredible security around data privacy.

28:30And so I know for a fact that Apple is not going to all of a sudden change that in the Muse model. And I think when you see these new announcements from Meta, you're going to see that it's going to be copacetic with Apple's privacy push. In the meantime, don't give them my credit card information. Is that what you're saying? Meta Muse? I'm not. I'm not. You're not doing that. Not right now. No, no. Why? What's the difference? We give it to the wallets. We use it online. for shopping? What are you worried about? But that's when you're using it. That's when you're actually using it. And you're actually, sometimes, and I've seen this, that agents can go off and make transactions on your behalf without you ever really acknowledging it.

29:13And then who's on the hook? Is that credit card? Is that news? Liability, liability, liability. Right. Absolutely. Yeah. Fascinating. That handoff is really getting interesting. And it's just barreling its way into our daily lives by the day, Tony. Great having you. Please come back soon. You know, we value your insight so much. Thank you. Great to be here. Have a great weekend, guys. You too. Tony Fidel. Time now for a news update. Contessa Brewer has it for us. Contessa. Sarah, Six Flags Over Georgia has reopened this morning, days after a 42-year-old man was thrown to his death from the Goliath roller coaster.

29:49Goliath itself will remain closed while authorities continued the investigation. At least 11 similar coasters across the U.S. and Canada temporarily shut down following the fatal incident. Several brush fires are burning across Southern California as hot, dry Santa Ana winds raise the risk of rapid spread. Evacuations are underway near Malibu, where a 200-acre Bryson fire forced the evacuation of a juvenile facility. More than 150 ,000 California customers are without power. Often they shut down the lines when this kind of thing develops out of safety's sake. But at any rate, the fire threat continues, they think, through Saturday.

30:30And the Vatican released the first images of Pope Leo since his lung cancer surgery. It showed him celebrating mass at a hospital in Rome. Doctors say the 71-year-old continues to improve after part of his right lung was removed. Hopefully, it is expected to make his first appearance since the hospitalization. That's expected to happen on Sunday. So we'll wait for that. Sarah. OK, Gintessa, thank you. When we come back, strategist Warren Pies explains why investors may need to throw out the traditional models for assessing risk in the markets right now. He's going to give us his prediction for how much further the S &P could run this year.

31:04And let's get a check on CoreWeave this morning. Near some session lows, down another 9 percent. Not quite to yesterday's lows, but the Nasdaq is now close to session lows, down a full percent as this AI sell-off continues in parts. Stay with us. Welcome back. Checking the broader markets here. Nasdaq continues to try to work its way out of this hole, but down a full percent now. More breadth, more broadening means the Dow is going to benefit some, up 145. Joining us to discuss this morning is Warren Pies, 314 co-founder and strategist. Warren, what a week. It's great to have you. Great to be here.

31:38It sounds like your general view is, yeah, this is late cycle stuff, but not necessarily reason to freak out, even if investors are nervous. Yeah, I mean, we're overweight equities. We've been there since the day after the Fed hiked rates in September. And our concern was that the market had not priced in the risk of a Fed hike. And we were impressed with how the market has handled that so far. And so that is our posture still. But, I mean, I think we are late cycle. The Fed's hiking. The Fed went from having your back to trying to break your back if you're an investor. And you have to take account of that and be appropriately paranoid.

32:14So, yeah, I think we looked around. We can sense a lot of nervousness from our clients. But I think that when I really dig into the concerns this week, I don't see anything that's going to derail the bull market. I think that we're still on track for probably breaking through 8000 on the S &P before the year's over. And I want to maintain an equity overweight. And I do think tech will ultimately lead that that bull run. Yeah, that's that was kind of rhymes with what Goldman said. The perfect recipe, their words were to bust through AK. A lot of that was sort of positioning seasonality stuff. Is that what you're referring to?

32:51Yeah, I mean, this has been a push and pull kind of market where, you know, in really how it expresses itself is through breadth concerns. So that's one of the concerns we've heard a lot over these these weeks is that, hey, this market's so narrow. And these things have really these bouts of weak breadth or market narrowness have really occurred since the AI period, AI era, when rates back up. And so and in fact, it's kind of counterintuitive and not what you would expect from like the your your traditional wisdom in the markets. But these week breadth periods, when you say get 20 percent of S &P 500 stocks, only 20 percent above their 50 day or something like that, that's a very good entry point in this post-AI era.

33:34It's as long as rates behave. And so that's the cocktail that we're dealing with right now. We had 22, less than 22 percent of S &P stocks above their 50 day just entering into October. Rates were pushing higher and now we're getting rates going off and the market's broadening a bit. that's exactly what you want to see. Let tech catch his breath and then take back leadership. So, yeah, positioning is working in favor. That's exactly what I was going to say from your original point about why you don't think that the bull market is derailed and we're going to 8000 is unless rates don't behave. And if and then that raises the question about why rates have been going up, if it's inflationary concerns or that the Fed hikes like that's still happening, As evidenced by the reports we got this week.

34:18I mean, if it's the fiscal concerns, not much is changing on that front. Don't see any action from Congress. So you have to wonder what what pulls rates down. Right. Ultimately, if you're going to feel confident in the equity market, don't you? Yeah. I mean, I think the only disconcerting thing about the way we've gotten rates down in the equity market is by dinging the A.I. trade, which is the market. So, yeah, I can understand why there's some nervousness around it. But I think when you zoom out, I think the Fed is ultimately behind the rise in rates. There's a lot of confusion. Yes, there's some secular forces at work, but watch what happened when the Fed hiked rates.

34:55You know, there was there was a whole theory out there that we were going to hike and that would bring down the long end. That's not what happened. And I think what the market's doing is it went through this what I'd say is some nasty inflation day this week. And still the odds of a hike in October are on the floor. So the market is basically getting comfortable with the idea that Fed's not hiking in October. They're going to wait and go again in December. And from there, who knows? The data is going to dictate what they do. I think that's a recipe that the rates market will look at and say, OK, we're roughly fair value in yields now.

35:27And that's all you need for the equity market to get into gear here is for rates to stop going up 10 basis points every week. All right. When you think about 27, though, Warren, real yields at 3 percent, earnings positive, strong, but decelerating midterms, potential power shift. PPI is jumping in a month more than it did an entire years in a prior era. Does that make you net cautious on the next year? Yeah, we haven't written down our estimates for next year, so there's nothing like official. But, yeah, I can see all that. I think that if I want to be comfortable with being overweight equities right now, I think the thing that really does soothe my worries is the growth we've seen in earnings.

36:13And so, yeah, the market's been basically chopping for a few months now, but the forward P ratio is contracted by almost 20%, 18 plus percent. You really don't. If we're going to call for a bear market on top of that, there's really only the GFC where you've seen that kind of a P.E. contraction ever in history. So the real the real support to this market is the earning story. So as long as earnings continue to unfold the way they have. And yes, they will. The growth rate is going to decelerate next year, but it's still a very high growth rate. And the thing I'm seeing early on that's actually soothing some of my fears about 2027 is the next year estimates, they usually dip between October to December.

36:58We're seeing next year estimates really continue to rise in recent days. This is what we saw last year that really got us at 314 expecting a big earnings boom in 2026. And so we're seeing some of the similar things occur for 2027. As long as earnings are growing that much, it's going to be difficult to really get much downside in the equity market. Yeah, yeah, it really is like trying to keep a beach ball underwater. And we'll learn a lot more next week, a much broader spectrum of corporate commentary, some of the industrials and tech and media. Warren, thanks so much. Talk soon. Warren Pies. When we come back, a more than six billion dollar cybersecurity deal.

37:39Toma Bravo owned Proofpoint agreeing to buy Varonis. will be joined by the Proofpoint CEO next. And then Netflix making some big moves ahead of earnings. Will layoffs and management changes be enough to turn around a stock that has fallen around 25 % this year? That's when Spock on the Street returns. Welcome back. Toma Bravo owned Proofpoint, announcing a$6.3 billion take private deal for AI cybersecurity firm Varonis yesterday. Joining us now is Proofpoint CEO Sumit Dwan. Thank you for joining us, Sumit. So you're paying a 52 % premium to Varonis' share price before all that takeover speculation.

38:13How do you justify that? Why is it worth it? Sarah, thank you for having me. Look, opportunities like this don't come every day. What we are seeing at board level and CEO level is interest in adopting AI and cybersecurity. Those are the two priorities. And as we look at Varonis and Proofpoint together, we become the provider of cybersecurity for data so that you can adopt AI safely. And with that promise, we believe we're in a unique position to help customers. I mean, it's clearly, we're in a moment of cybersecurity, the big wake-up call with some of the incidents that have happened around AI.

38:56What does Proofpoint and Varonis do differently? What's your competitive edge there versus some of the other cyber players? Yeah, look, cybersecurity now is evolving to a new frontier, all because of AI. If you think about AI, it feeds off of data. So data has become the next frontier of protection for cybersecurity. And Proofpoint and Varonis together become the largest cybersecurity player solving data security. None of the other providers were designed and built for protecting data. And Proofpoint and Varonis is. Is AI fundamentally making the world and business less secure because of these cyber risks?

39:41Look, every enterprise is adopting AI. You zoom out, board level, CEO level, they want to adopt AI. But you have to do that with the right cybersecurity to make sure that, you know, risks of AI doesn't mean you do less AI. Risks of AI means you do that with the right cybersecurity for data. And that's what Proofpoint and Varonis brings to our customers. They can adopt AI now more safely and with high speed. So five years ago, was it five years ago, Tomo Bravo basically took you private, $12.3 billion now with this multi-billion dollar deal. How should investors think about a path back to the public markets potentially?

40:23Right now, our focus obviously is in closing the transaction. But look, we have two companies now coming together that have high growth. and together provide a solution to a major problem for cybersecurity that no other provider does. None of them were designed or built for this. So we think that combined company is going to be attractive to public investors. And as we close this transaction, we are going to assess it. You know, we used to joke that, you know, in aggregate, shares of cyber companies moved on events, meaning they moved on hacks. You needed to have an emergency before you got some change in this price action.

41:02Does that remain the same or would further attacks suggest that maybe the technology is not keeping up with the aggressors? You know, there's always market anxiety or market interest that comes up with attacks. But in general, if you look at the fundamentals, that is cybersecurity a critical component to enable new technologies like AI? The answer is 100 percent. That's why it's a top priority for the board and the CEOs that we speak with. So we believe at the end of the day, those fundamental pull from customers would make a solution like Proofpoint and Varonis be critical for securing data and adopting AI.

41:42Well, thank you for joining us to talk through some of your thought behind the deal. We appreciate it. Well, thank you for having me. Sumit Dewan, Proofpoint CEO. Yeah. While we're talking, getting a news alert on the NBA and betting markets. Contestive Brewer joins us here at Post 9. Yeah. So the NBA has just issued a statement saying that they have banned certain kinds of bets from their authorized gaming operators. That's the major sports betting networks. Remember last week, Adam Silver told me whether it's called a prediction market, whether it's a sports betting, it's the same issues for our league as the NFL.

42:17And that we think that there are integrity issues around all of this. So what they're trying to do is they're saying first of markets there. You can't do that anymore. The first team to do a certain thing like the markets related to an individual player scoring a first basket, a three pointer rebound, an assist, a steal, a block. Anything where it's open to manipulation, where a player could throw the game so that somebody else could make money. They're trying to ban the real question about this. Remember, so this means FanDuel and DraftKings and Bally's and BetMGM. They're going to work with the NBA on this.

42:51The question is whether the prediction markets, like Kalshi, with whom we have a commercial relationship here at CNBC, will follow suit. The whole reason the NFL filed that amicus brief with the Supreme Court last week is because the prediction markets have refused to take down certain bets available that are open to manipulation. And the NFL said, we just can't have it. It affects the integrity of the game. Okay. Big deal. I guess. I think it's a big deal in terms of protecting the betting and knowing, especially the NBA has had these scandals where Daunte Porter from the Raptors had been accused and then charged with throwing games on purpose.

43:34It's just not the kind of scenario that you want. It taints the game. And in terms of the leagues that are being most aggressive and putting in guardrails? NFL. NFL. By far, it has been very intentional in the way that it's educating its players, its coaches, the locker room staff is not allowed to bet on football at all. So and they have very strict rules and regulations and monitoring in place. Now the NBA says we also are going to be more intentional in our monitoring. They're using AI to look at the kinds of bets that are coming in, where they're coming in from. We'll see if that makes a difference for the future.

44:13Fascinating. Welcome home. Thanks. Long travels. Yes. After this, Netflix looks to turn around a stock price that is down about 25 percent this year. We'll look at the newly announced leadership changes and what it means for the strategy in just a minute. Welcome back. Netflix announcing some big management changes ahead of earnings next week. Julia Boorstin joins us with the details. Julia. Sarah, that's right. In a big shakeup, Netflix appointing Fox and Disney veteran Peter Rice as chief content officer, replacing Bella Bajaria. This comes on the heels of Netflix laying off 6 % of its staff earlier this week and amid growing concerns about weakening engagement.

44:52Aptopia reported that Netflix subscriber churn doubled between the second and third quarter of this year. J.P. Morgan writing this morning, quote, this is the clearest move that Netflix management has made that acknowledges their engagement problem. Wedbush writing, quote, his long tenure at Fox and then Disney after its acquisition of Fox gives him unique insight into the consolidation of two major studios relevant if Netflix chooses to go after another studio, saying Rice fits well as Netflix pushes deeper into theatrical and builds a broader platform with varied content. With the stock down about 40 percent in the past year, Netflix has been ramping investment in nontraditional content, bringing over YouTubers and investing in podcasts.

45:36The question is whether Rice can improve the quality of Netflix's core business, which is, of course, film and TV episodes. Guys? It's going to be interesting next week here when we get earnings. Julia, thank you. Julia Borson on Netflix. I was just looking at who else is on the docket that has had sort of issues surrounding the stock. Verizon, AT &T are on their way. Meta, Tesla, of course, as we mentioned. Amex next Friday. A lot of sort of lingering questions about strategy around a lot of those models. Yeah, I mean, not all of them with issues, but just I think in general, it'll be good to hear from companies that are both using and applying AI and also those that are investing big, like the Meadows of the world, just given the shakiness of this week.

46:20And it's hard, you know, with event risk. We get earnings next week, a little bit of economic data, like housing and manufacturing. But who knew CoreWeave would be the story of this week, the bond prices. So we'll be watching the credit market carefully as well. Yeah. I mean, you mentioned B of A and Savita's note this morning. They're still pretty constructive on the build-out, but they do think that the bigger opportunity is moving away from the build-out itself into the return on investment from the broader set of users now that we're talking about. Which is why it's a more complex question than just is there demand for the build-out.

46:53It's is the use, is the revenue being generated happening fast enough to help finance the build-out? And also, are rates making that more complicated as well as the cost of capital rises? 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.

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