11AM Hour: CrowdStrike CEO, Tech Investor Dan Niles & Moderna's Vaccine Data Leak 10/23/26

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1:03Good Friday morning. Welcome to Squawk on the Street. I'm Carl Kingston here with Sarah Eisen, live with Post 9 of the New York Stock Exchange. Today, call it tech's pain trade. Nasdaq's coming off the worst day since June. Veteran tech investor Dan Niles will be with us to explain why he thinks we have not yet seen the top of the AI trade yet. Plus, a new warning from cybersecurity firm CrowdStrike uncovering new threats from AI agents carrying out real-world intrusions. CEO George Kurtz will be here to explain. And shares of Moderna and Merck under some pressure despite some positive results from this breakthrough vaccine for the deadliest form of skin cancer.

1:38We will explore the investor and the market implications. As for the market, Dow's trying to erase some declines here. We were down almost 800 points, now down 539. Only energy and IT is working. The VIX is actually trying to flip red as we're back to 19. Brent and WTI have been pretty stubborn all day around 116 on Brent. Let's get more on today's market action with Man Group. Chief market strategist Christina Hooper. What happened? Feels like investors have really soured or at least stepped back from the AI trade and all of the bullishness that came with it. Well, I think this is a natural part of a very significant technological innovation.

2:17The first phase, of course, is this incredible excitement. Nothing can go wrong. Everything looks fantastic. We're now at the part where reality seeps in, where there are concerns about when companies, when the hyperscalers are going to make their money back. There's a lot more difficulty raising money. It's more expensive to borrow. And so naturally, we're seeing more discernment, more scrutiny. And that, of course, has resulted in a pretty significant pullback. It also has implications for the overall economy, because thinking about the two key drivers of U.S. economic growth, one has been AI CapEx.

2:54So that raises concerns. That's why it's slowing down, AI CapEx, is it? Is it? It hasn't been announced yet. But do we really think it's going to continue at the current pace and meet expectations for next year, which are much higher than this year, just given how much more difficult it is to raise money and how much more expensive it is? Are you talking about CapEx guidance or actual like commitments that won't be able to be funded or both? So I think it's a case of both. Let's see how this plays out. I don't think we're going to hear anything this quarter, but certainly as we get closer to 2027 and start 2027, we might hear some change in strategy, maybe a moderation in investment.

3:37I would not take that off the table. I think that's very much a potential option, at least for some. So are you downgrading your economic outlook here? I do think that we're going to see an economic downturn. It is, it seems to me, inevitable that we're having increased pressure on consumers. That's the other driver of economic growth. And we could easily see a moderation in AI CapEx. But we could also see, you know, oil prices come down eventually if there's a resolution, hopefully, to the wars. And, you know, the consumer has proven very resilient. And that would be a further tailwind at a time where job growth continues to hang in there.

4:15So job growth has been pretty anemic, and it's come largely from the health care sector. So if we see any kind of deterioration there, and we could see some impact from the one big, beautiful bill that hasn't actually hit yet or hit fully yet, there is a lot of pressure on consumers. It's getting worse. We're seeing it in some of the numbers. And I think that ultimately what we're going to see in 2027 is more moderation. Yes, we could get a reprieve if oil prices came down significantly. But that's not something that can change overnight, because it's not just about the war in the Middle East ending.

4:50It's about rebuilding refinery capacity. And so that can take time. I mean, we got the Defense Production Act invoked today, an act from 1950 that would allow the government to lean on domestic production and refining. But I'm just curious, like yesterday we saw this huge broadening in a lot of consumer names, a lot of consumer staples. Is that a safe trade if, in fact, you're looking for a macro slowdown? I think certainly consumer staples make sense. And also, this is about valuations. I think there's a recognition that valuations are high. and if we were to see some disappointment in earnings growth, expected earnings growth, that we'd naturally see or we'd typically see some kind of difficulty facing the high valuation areas of the stock market like tech.

5:37It's also a story about yields. Yields have remained elevated on the very long end. The 30-year is still very elevated. And that's the area that can exert pressure on long-duration assets like technology. So I think it's a story about rotation to what's perceived to be a healthier area. So are you guys at Man Group getting more defensive? So we have so many different portfolios doing different things. But from my perspective, I think it's a time for investors to look at their portfolios and say, we're at a crossroads. There are so many potential paths from here. So we better be prepared for a variety of different scenarios, including stagflation.

6:15So what do you do in that scenario? So interestingly, we went back and looked historically at what performed well, which asset classes performed well in stagflationary environments. Some of the defensive sectors, like health care, wholesale and retail, performed well. We also saw, of course, gold and precious metals perform well, particularly gold. And we also saw different alternative strategies, like multi-asset trends and multi-factor equities perform well in stagflationary environments. You don't need a recession for stagflation. You just need an economic downturn. I know, but the Atlanta Fed is like tracking 3.5 % real growth for the third quarter.

6:53That's not slow. Although to your point, I mean, OBBA will be a drag on growth next year on GDP by like six-tenths. The Brookings Institute's fiscal monitor shows that as of the third quarter, we're net negative fiscal stimulus. And factor in those other pressures, right? We now are in a situation where inflation, headline inflation, is 3.7 percent. The most recent wage growth reading, 3 percent. That's a very difficult environment for consumers longer term if something doesn't change. I know. We're just coming off a bank earnings season, though, where they're talking about how great the credit environment is and how consumers are holding up well, whether it's delinquencies or deposits or credit card spending.

7:32But that's largely looking in the rearview mirror. And I think we have to look forward, and that's what the stock market's going to be doing. OK, Christina, thank you for joining us with the warning. We appreciate it. Christina Hooper from Man Group. Watching telecom names today, they're all falling as SpaceX reportedly now is seeking to access 80 ,000 cell sites. Our Julia Boorstin has more on this continued pounding on some of these legacy names, JB. That's right, Carl. Take a look at shares of AT &T, Verizon, T-Mobile down 6%, 2%, and 5 % respectively on the headline that SpaceX is making a key move to build its own mobile network to compete with those wireless carriers.

8:12And tower companies, American Tower and Crown Castle, are surging on that news, up about 5 % and 9.5%, respectively. No comment from SpaceX on this headline. This comes after an AT &T's earnings call Wednesday. CEO John Stanky downplayed an immediate threat from SpaceX, saying, quote, it takes a lot of years and a huge level investment to get to the kind of performance levels that customers have become accustomed to. But in the wake of this headline, analysts are raising red flags. Barclays writing, quote, We believe it would be a mistake for telecom companies to take this threat lightly. Going on to say, We see significant risk to telecom valuations despite SpaceX's efforts being unlikely to impact operators for a long time.

8:56And Wells Fargo says, My sense is that there is still heavy skepticism around the technical dynamics at play, specifically SpaceX's lack of spectrum relative to the big three, which means a less dense network with less capacity. However, there is an upper C-band auction coming where SpaceX can bid on more spectrum, which could in theory solve this problem. Now, the FCC C-band spectrum auction, which will be essential for SpaceX to be a mobile player, is set to conclude by July of 2027. In the meantime, as Wells Fargo put it, more headwinds for telcos and more tailwinds for towers. Sarah? Okay, Julia Boorstin, thank you for watching the telcos.

9:35Coming up, CrowdStrike CEO George Kurtz will join us, how he's thinking about this new internet security flaw impacting the software that runs much of the internet. Later on, we'll talk with tech investor Dan Niles, why he thinks we have not yet reached the top of the AI trade. When 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. VantageScore 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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10:58Make work less work. Try Google Workspace with Gemini at go.gle slash workspace with Gemini. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and And subscribe at schwab.com slash market update podcast or find Schwab Market Update wherever you get your podcasts. Welcome back.

11:37Some of the biggest players in cybersecurity getting a boost this week after critical vulnerabilities were discovered in an open source programming language called PHP, which powers much of the Internet. If exploited, those security flaws could enable hackers to take control of web servers, steal sensitive data, disrupt services and much more. Joining us in a CNBC exclusive is CrowdStrike founder and CEO George Kurtz. It's great to have you here. I mean, every week it's like we need you to help explain and translate how problematic this is, this PHP. Can you tell us? Well, it's great to be here.

12:09And, Sarah, this is a big one. I mean, this affects tens of millions of Internet-facing servers. It's a vulnerability that's been around, several vulnerabilities that have been around for almost 20 years. And AI has now proven the exploitability of this vulnerability. It's been known for some time, but it's been theoretical whether it could be exploited. And AI has proven it can be exploited, which is now forcing everyone into this very quick patch cycle, which has become problematic. And one of the things that we're telling anyone, enterprises, small companies, etc., that you need to be looking at your watch, not a calendar, when you're thinking about patching this.

12:54It is that critical at the moment. And what does that mean, to patch it? Well, essentially, let's talk about what this issue is. So PHP is a language that actually drives the Internet and websites. and there's an interpreter, which means that you're interpreting the language and there's a vulnerability in that. And this is what's allowing these adversaries to execute code. So essentially they can execute commands on these vulnerable web servers. They need to be patched in order to fix this vulnerability that's been around for the better part of 20 years, there's several of them. And the problem with this is there are so many older versions of PHP and this interpreter that's out there, that they're never going to be patched.

13:41And this is part of the long tail of these vulnerabilities that we see. As an example, the large companies, they're going to patch their systems. The modern versions of PHP are going to get patched. But the older versions are not necessarily going to get patched. And what's most problematic and one of the areas I think people are not talking enough about is all the old Internet appliances, the routers and the firewalls these old Internet devices that actually use old versions of PHP that will never be patched. There's going to be a long tail of these vulnerabilities, and you're going to see a lot of breaches happening in the coming months from this.

14:16So, George, walk us through, not to doomsday, but what are some downside scenarios or examples of things that could go wrong? Well, what can go wrong is a lot of what you've already seen and reported on. You know, you've got data breaches. You've got ransomware. You've got the ability to steal trade secrets. You've got disruption. All of the things that you have been reporting on, we've been talking about, you know, myself on your network for many years. That is now all possible. But with AI, it's actually just democratizing who can do this. We wrote a report on this, and we're seeing many different adversary groups with very low skill now able to conduct nation-state-level attacks for basically the cost of tokens and a prompt.

15:03And that's the scary part. You're going to have more exploitation with more people doing it with even a lower level of skill because AI is going to bring the skill level up to the nation state. We call it now the agent state. Can we, I don't understand this fully, but can there be a migration away from PHP to help protect some of the Internet? Yeah, it's not a migration away. It's a language that's used. it's like HTML you can think about it that way it's used when you render a website when you go to a website and you see what it looks like that's what happens so it's a fantastic technology you just need to patch it and it's an open source technology which means there's a whole bunch of amazing volunteers that have built this over the years back to 1995 and they have to volunteer and they have to keep this technology healthy the challenge you have is it's very complicated And when you start patching these systems, sometimes operationally you'll break something and you'll get a website that might look weird when you actually go to it.

16:06So that's a bit of the challenge. So the fixes are there. They just have to be deployed. But if it's an older, unsupported version, which many different sites have, you're going to have to upgrade to the latest one and make sure that you have the right patches in place. And just to be clear, I mean, there's been a lot of talk lately about cyber problems and scary moments when it comes to AI. This is not necessarily one that's driven by AI, right? This is just, it was discovered by that? Well, this is the interesting part, Sarah. These vulnerabilities were discovered, I would say, over the last six years in different forms.

16:40They were known. But it was thought that they were too complex to be exploited. So they were never really fixed because it's a complicated fix that can cause incompatibility with other websites. So AI actually was the accelerant that basically figured out how to create a very esoteric exploit that would actually be able to exploit that vulnerability. And once the exploitability, meaning that it was possible to gain remote control over this website, once that was proven, then we had a massive issue on our hands. And that's, I think, the underappreciated fact. It wasn't that it wasn't necessarily known.

17:19Some of those issues were known. It wasn't fixed because the creators thought it wasn't actually a problem. It couldn't be exploited. But AI proved otherwise. So in other words, it's a story of how AI can be an enabler. Because there's been all these stories about how AI is making the world less secure. Well, the same AI that can find these vulnerabilities or the same AI that the attackers can use can be used by the defenders. And obviously, it's a big part of what CrowdStrike has been doing. and the security industry in general is using defensive AI at the same or greater parity to what the offense has.

17:58And that's the only way we're going to stop it because the vulnerabilities are coming too fast. As an example, AI attacks, we've seen double month over month from July, August and September at CrowdStrike. They've doubled every month. So it almost becomes unsustainable unless you're using defensive AI to be able to combat what the offense is doing. And that's, again, what CrowdStrike's focused on. That's what you do. George, on a different topic, not necessarily a tax, but I'm curious to know how you see, for example, banks managing the rise of agents. Amex has earnings out today, and Steve Squarey was quoted as saying, we don't want AI agents to be pinging Resi every four seconds and disadvantaging our other card members.

18:43How are these protocols going to get written? Well, this is going to be a really interesting discussion to have over the next couple of years. You've got Muse, you've got Instinct, you've got a whole bunch of other dots, etc. And now a lot of the traffic is agentic traffic. And just talking to people, they're basically setting their agents up to get the best restaurant as soon as it opens up. The kids are putting their bank account information in. Some of the adults are a little bit more reluctant, but lots of the kids don't care. They just put anything in. And I was at a CEO event last week talking to several of the large bank CEOs.

19:21And everyone's concerned about it because obviously the liability goes back sometimes to the bank, even though it shouldn't. So there's a lot of work that has to happen in terms of how these agents are actually going to interact with things like banks, how they're going to do it securely, how you create secure password vaults so that the identity and the passwords are safe. And then what is allowed and what isn't allowed. And one of the biggest areas is understanding the liability framework on using an agent that goes rogue or wild and does something it shouldn't and somebody loses money. That has to be solved.

19:54Right. Well, so is AI moving faster than your defense of it? Well, I mean, the good thing is we're creating our own frontier caliber AI. We've created our super intelligence lab and we create both offensive models, red models and defensive model, blue models. We've teamed up with NVIDIA. We've created amazing defensive technologies. And this is what I built the company on over 15 years ago. And the attacks that we're seeing are coming faster. But the AI we're creating is keeping up with the attacks. And obviously, we want to make sure we continue to be ahead of the curve, keeping all of our customers safe.

20:29Yeah, well, I imagine you're getting a lot of customer action. Stock's up another 4.5 % today, 90 % in the last 12 months. George, thank you for coming on and helping us translate some of the risks here. Thank you so much. Thank you so much. Meantime, President Trump making some comments as he leaves the White House for Florida today. Let's get to Eamon Javers. Morning, Eamon. Yeah, good morning to you, Carl. If anything, the president sort of adding to the confusion here around this whole controversy over who, if anybody, ordered Starlink to slow down its service for Ukraine. The president was asked who ordered that slowdown, and he was also asked here if he had spoken to Elon Musk.

21:08Remember, there was some reporting earlier in the week that the president did speak to Elon Musk and did ask him to turn that service back on for the Ukrainians. But the president here said, actually, that's not the case. Here's the answer that he gave to this question of who slowed it down and then whether or not he had spoken to Elon Musk. Take a listen. I wouldn't tell you if I did now. I have no idea, but I wouldn't tell you if I did now. Why would I tell you? Zelensky said they still are receiving slow. Well, if there is a problem, I'll get it straight to you. I have not spoken to him. I might have to, but I have not.

21:40I've heard it was fixed, but if it's not, I'll speak to him. So you hear the president there saying, I've heard it's fixed. If it's not, I'll speak to him. The president seems to be suggesting that the slowdown of Starlink is not something that he wants, and he wants Elon Musk to speed up the service for the Ukrainian military. We'll see if we get any comment from Elon Musk on that. Meanwhile, on two other subjects, on Iran, the president struck a confident note saying that the United States could end the war in Iran anytime it wants and that the United States could take all of Iran's oil if it wanted to.

22:15And then on the NFL, guys, interesting. Remember, there's that game coming up this weekend in Paris. There have been those protests in Paris. The president suggested he was concerned about the operation of the NFL in Paris, given the scale of the demonstrations that we've seen there. And he said the NFL could have called off that game in Paris. The NFL has said, at least so far, that they're going ahead with the game, guys. Back over to you. All right, Eamon, stay in touch. Eamon Javris, when we come back, shares of Moderna falling after its skin cancer vaccine data leaked. You saw the action yesterday.

22:47We're going to talk to a top analyst about why the stock is hanging in here despite the data seeming positive. And later, the first Russian diesel tanker from President Trump's deal with President Putin is actually heading to the U.S. We're going to break down the impact with the average diesel price now above$6. Back in a moment. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow.

23:26Make work less work. Try Google Workspace with Gemini at go.gle slash workspace with Gemini. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and And subscribe at schwab.com slash market update podcast. Or find Schwab Market Update wherever you get your podcasts. This holiday, all plans, even unlimited, are just$15 a month.

24:07A holiday deal this good obviously deserves an enormously expensive holiday song. Like, all I want. Right. Okay, we can afford that. You know what? Forget the music budget. We're going to stick with whatever's in the public domain. Give it a try at mintmobile.com slash switch. Upfront payment of$45 for three months,$90 for six months, or$180 for a 12-month plan required. $15 per month equivalent. Taxes and fees extra. New customer offer for initial plan term only. Greater than 50 gigabytes may slow when network is busy. See terms. Welcome back. Let's get to some movers this morning. Shares of Gucci owner are carrying or plunging after earnings.

24:39Same store, sales declining by 1%. Watch Bloom Energy also dropping despite the company beating estimates and raising guidance. Investors focusing on its negative free cash flow for the quarter. one of the worst S &P years today. And then shares of Amex are lower despite an earnings beat, the company cutting 5 % of its workforce. CFO tells CNBC the restructuring charge is to make the company, quote, leaner, more agile, and also to prepare for AI. Follows Barclays yesterday, also cutting about 5 % of its staff in some respect due to AI. They didn't necessarily attach it to that dynamic. Yeah, well, we'll keep track of those announcements for sure.

25:16Time now for news update. Dom Chu has it for us. Morning, Dom. Good morning, Sarah. The Israeli government today ordered its army to prepare for a full closure of the West Bank. The order came after Israeli soldiers killed two men in the military said that had launched an attack on the city of Hebron. The army said it prevented a terror attack against Israeli civilians, but did not provide any further details. Meanwhile, Etsy is banning AI generated recipes, patterns and instructions from its online marketplace and making other rules around the use of AI, including prohibiting sellers from creating AI-generated listings that do not have any human involvement.

25:52Etsy says confusion about AI content has emerged as a top barrier to people shopping more on that site. And the New York City Council voted to ban horse-drawn carriages from Central Park in two years. The carriage industry has been criticized as a form of animal cruelty and a nuisance in a crowded park with pedestrians. The bill, crafted in part by Mayor Mamdani's office, passed with a veto-proof margin of 40 to 7. Lawmakers for the Transportation Workers Union vowed to challenge that legislation, Carl, in court. I'll send things back over to you. Been a long battle. We'll see what happens next, Don.

26:26Thank you. When we come back, a closer look at the memory space. Why shares of Western Didge? SK Hynek's on the move today. Plus, tech investor Dan Niles joins us. His expectations for another big week of earnings next week. We'll be right back. Welcome back. Let's get to the memory space this morning. Some Uvers, Western Digital and SK Hynix going in a different direction. Seema Modi joins us with more. Seema. Sarah and Carl, there seem to be these conflicting forces. Positive earnings but negative sentiment. Western Digital is doing its best to sort of revive the memory storage trade. With its report, I mean, earnings were strong.

26:58Margins better than expected. CEO Irving Tan talking about their plans to increase capacity on their disk drives. But shares are basically flat. Some optimism on the street this morning. Barclays, they see no signs of an oversupply, adding that higher pricing is indicative of more aggressive deals that can offset rising costs. Morgan Stanley seeing the report as conviction for the bull case at a positive data point ahead of a number of companies in this sector reporting next week. Elsewhere, SK Hynix scrapping its plans to list Soledigm in the U.S. due to regulatory pushback. The company saying it would continue exploring alternative financing options to support the subsidiary's growth.

27:35Investors, guys, sort of see this as a positive. A potential listing was seen as dilutive to existing shareholders. The halted IPO comes amid a bit of a freeze with other AI firms or companies tied to AI pushing back their timeline to go public. We saw N-Scale, Firmus, SB Energy, which is backed by SoftBank. We did see South Korean data center company Ellis, which we talked about, making its debut overseas earlier this week. It initially fell but is currently trading above its IPO price. This as a new chart makes the rounds from Wells Fargo that shows hedge funds have scaled back their exposure to the AI infrastructure trade, which does speak to the performance we've seen as of late.

28:13Yeah, I mean, there is this question about from institutional investors. I'll just put a note on it about how there's a buyer strike when it comes to growth equity. It's amazing how quickly the mood changed around these names. Right. And it's sort of timing coinciding with a quiet period for a number of companies. Case in point, Corweave, you won't hear officially from executives on what they plan to do in terms of additional financing options that they have in their arsenal until perhaps mid-November at this point. They haven't disclosed their earnings date as of yet. But until then, the market is sort of working off of their own speculation on what the company will do next.

28:44I would point out, Corweave, down now 16 % for this week. By the way, after falling 25 % last week, and this is now the second week that its 2032 bond remains above 15%. That's distressed territory. Yeah, we need we need answers. Yes. So no relief there. Seema, thank you. Seema Modi. And by the way, do not miss the CEO of Western Digital today, 1 p.m. on The Exchange. Let's stick with tech and the outlook for the sector ahead of more mega cap earnings next week. Joining us this morning, Niles, investment management founder and portfolio manager, Dan Niles. Dan, what a what a treat to have you, especially after yesterday.

29:19I wonder whether you think yesterday was important over the longer term. Well, I mean, I think this whole week, if you look at it, you've seen two major things in my mind come to the forefront. The first is that you're repricing two things. You're repricing debt. So CoreWeave, unsecured debt trading above 15 percent. It tells you that these marginal neocloud players, they're going to have a pretty rough time going forward. And I don't think you've ever heard me talk positively about these types of companies on air. The second one is the equity financing piece also is becoming problematic, right?

29:59SB Energy getting pushed back, AirTrunk, N-Scale, Farmus, Farmus and N-Scale, both backed by NVIDIA. You know, those deals getting shoved or pulled. And even you could argue the valuation at which people are thinking OpenAI gets done at, maybe it's at$1.25 trillion, not$1.4. or anthropic talks after their analyst day or investor day that that valuation may need to be pulled down a little bit for the IPO to get it done. These are all things that you go, if you believe that there's circular financing going on, which I think most rational investors believe there is, then you're cutting off one source of supply.

30:41And then you've got Facebook's 8K that just came out where they talk about trying to get, you know, They want to get out and raise money because they're afraid competitors will, quote, saturate the market. And it's a challenging financing environment. It's challenging for a company with one trillion in market cap. What about for everyone? Yes. But when you think about the blast radius, I mean, how far away is the danger? I mean, we're watching Bloom Energy today. We've been talking Cat, GE Vernova, Vertiv. I mean, when do you start to see value farther away from the locus of the pain? Well, I think the good news is, hopefully, you'll be able to start differentiate.

31:21And so the companies that really have strong balance sheets and income statements and cash flows, those will continue to do well. I think these companies that used to be crypto miners that decided, oh, you know what, I want in on AI, so I'm going to become a neocloud. I think those guys are going to continue to have a problem. And I believe that, you know, three years from now, most of them, 75 percent of them won't exist anymore in their current form. So I think the good news is you're starting to clean out some of this stuff. And you've seen it with some of the stronger players, the Microsoft schools, Amazons, which are going to report next week, hanging in a lot better than a core.

32:05All right. So is that where you're are you? Are you buying on the dips with these big the big hyperscalers? I'm getting bloodied fingers, but yes, that's where I'm looking at names that I like because I go, that's where I want to be involved. And then I do like semiconductor infrastructure. It got way ahead of itself. It's come back down a lot. And so, you know, I did some stuff yesterday to get myself more involved with some of those names I had issues with. And so that's kind of how I'm thinking about this. And don't forget, I can have shorts as well. So a lot of this is when you've got these massive moves in a day, you're putting on a short one day, taking it off the next because it's down like 10 percent or so.

32:47And likewise, you're buying into names that are getting clobbered for 10 percent where you go, OK, this one's actually a good one. And so it's a very challenging environment. Yeah, I mean, I guess, Dan, so you have to pick which one you think will be able to monetize and make all of this worth it. Like if you if OpenAI and Anthropic go public right now, how do you think they would do? I would like it because I could go ahead and short them, because for me, I look at it and I go Anthropic's revenue growth. Now, these are stats, right? But their revenue growth was up one hundred forty five percent sequentially in Q1.

33:26That went to forty five percent in Q2. So you go, wow, there's a big slowdown. Now, why is that? Well, open source, right? You have companies saying, hey, and Microsoft's been awesome at this, which is why they're one of my favorites to be an ultimate winner. You go, they own 27 percent of open AI, but they've given you the sandbox for corporations that you can then run Copilot in. And then they're going to route your query to the best thing to get it done. And that might be some open source model. And then for the last 10 percent, maybe that goes to open AI or an anthropic. And so I think when I think about the long-term winners, which I think is how you have to think about beyond just the day-to-day moves in the stocks, Microsoft wins in enterprise because 95 % of corporations have, S &P corporations have M365, right?

34:21And so you can just run Copilot in it. It's safe. And then in consumer, you've got Google and Android distribution, right? All those smartphones. And then, of course, you have Apple through iOS. And so that's how I think of the ultimate winners in this that I want to be stay involved with as I'm shorting, selling, trading around the marginal players. Yeah. Interesting. It is a really interesting time to play any kind of offense. You got earnings decelerating, the Fed, the election, a lot of things happening in the next couple of weeks. Dan, stay in touch. We'll talk soon, I hope. Dan Niles. Awesome.

34:58That's good. Let's get back to Eamon Javers in Washington with some more breaking news from the Trump administration. Eamon. Sarah, that's right. The Department of Justice has filed a highly unusual lawsuit against the Alaska elections officials. They are seeking, the Department of Justice is, to block certification of the Alaska Senate race if the Republican candidate in that race, Daniel Sullivan, were to lose the race. The argument here from the Department of Justice is that the election should not be certified if the incumbent Republican Senator Sullivan loses the race because there is another candidate in the race with a very similar name.

35:36Daniel J. Sullivan is also running for Senate in this race. The Department of Justice here under President Trump is arguing that that is election trickery, in essence, and designed to confuse voters by running a candidate with a similar name and siphon off Daniel Sullivan incumbent Senator Daniel Sullivan's support. What's interesting about this case, if we can bring up the last paragraph, what the Department of Justice is seeking here is to block the defendants, that is the Alaska elections officials, from certifying any result that may be impacted by voter confusion pending an investigation to determine whether votes cast for Daniel J.

36:15Sullivan were meant to be cast for Senator Sullivan. So the question is, how can you have an investigation about what voters' intent was when they cast their ballot, given that votes are anonymous in the United States of America. It seems very difficult to have an investigation of voter intent after the fact. And guys, very striking to see the U.S. Department of Justice filing this case. There used to be a norm around political actions by the Department of Justice. There was a 60-day rule. It was sort of a rule of thumb that the Department of Justice would not file any cases within 60 days of an election that might impact one side or the other of the election.

36:55Those days are obviously long since passed. We are seeing this just ahead of the election. And of course, what's fascinating here is it's the Trump Department of Justice here weighing in on behalf of the Republican incumbent senator here. Typically, this is the kind of case that would have been filed by the Republican campaign itself saying, hey, wait a second, there's trickery in this election. we're being disadvantaged by this, we want to file this case. Here you have the U.S. government stepping in on behalf of the incumbent Republican senator. So some wild stuff all the way around, guys. Back over to you.

37:30Yeah, I guess they could have gone at it themselves, right, and said that they're just running a spoiler to confuse voters. Right. The Republican campaign could have filed this lawsuit and said, hey, look, the other side is doing some trickery here. This is not fair. We want some relief. Instead, you have the U.S. Department of Justice under the attorney general doing that on their behalf. All right. Well, battle for Senate could come down to Alaska. So a lot at stake here. Thank you, Eamon. Still ahead, shares of Moderna are heading lower after its cancer vaccine data leaked. We'll talk to a top analyst about why the stock is down so much after trial results appeared positive.

38:03We're back in a moment. Welcome back to Squawk on the Street. Moderna falling hard this week after that partial data from the company's cancer vaccine with Merck leaked, which showed largely positive indications, including a 42 % reduction in the risk of melanoma returning. Merck's chief joined us earlier this morning saying that you need to look at the longer term data to appreciate the benefits of the vaccine. What's not appreciated is because this is an immunization, much like you would get if you got a vaccine, you really need to look at the six month data. That's the time that allows your body to fully mount an immune response.

38:39at six months, it reduced the risk of recurrence or death by 58%. So this is meaningful if you're a patient, if you're a family member of a patient, to be able to say, I can reduce by more than half the risk at six months that I'm going to have the cancer recur. Our next guest says the market response to the data appears to be a sell the news reaction. Joining us today, William Blair, research analyst, Miles Minter. Miles, always appreciate it. Good to see you. is it a classic knee-jerk response or is there something in there that would be that would suppress mRNA valuation? Yeah, definitely. I think it's the former.

39:17Our first look at the data, obviously, without seeing the full data presentation, which will be made on Saturday, is definitely positive. You know, Moderna shares are obviously, you know, were up 700 plus percent year to date. So that's a substantial rise. And I do think that, you know, seeing this data is definitely a sell the news event. You know, what we did see is that there is a 42 percent risk reduction if you add this personalised neoadjuvant vaccine on top of the standard of care, in these melanoma patients that are post-surgery. That's never been seen before. not for lack of trying but this is a very unique data set and potentially standard of care changing I think it's just taking time for the market to digest this there's certainly debate around valuation particularly on the Moderna side as well as to how much of a peak sales product this could actually be and how many additional tumor types do we actually need to see this vaccine potentially have efficacy in to justify this valuation so that's really what the street's debating And there's certainly a cell, the positive news event heading into ESMO.

40:30Are there questions about Moderna's ability to scale or produce? There certainly are. So, you know, to walk you through what this vaccine actually looks like at the point of surgery where these tumors are removed, you would take a biopsy and that would actually be sequenced. That data is sent to Moderna, who actually creates this vaccine, personalised to that individual tumour of that individual patient. So obviously that needs to be manufactured, sent back to the patient. And currently that takes about six weeks on average. At least that's what we understand in the clinical study. Moderna, the producer of this individualised vaccine, is aiming to expedite that process.

41:11And to put it into perspective, patients, when they actually get these tumours removed, will receive their first dose of Keytruda, you know, as that surgery is completed. And then they'll come back three weeks later to either an infusion centre or at home to receive that second dose. if Moderna can increase or expedite the speed of manufacturing here, they could actually get into patients at that second infusion of Keytruda, which would actually fit, at least in our view, into that patient's sort of treatment journey as the standard of care Keytruda is. Why is it a vaccine? Isn't it a treatment?

41:48So, yes. So this is getting into the biology of it. The method is a vaccine here. So we're actually using mRNA to express things called antigens. They're things that are expressed by this tumour that are circulating around the body. And basically you're creating an mRNA to replicate that. And you're teaching the immune system, much like you would with a vaccine against a seasonal virus, for instance, to try and attack that tumour. So it's a therapy in the way that you're not preventing cancer from occurring in the first place. But you're using that vaccine modality to help target your immune system to prevent recurrence of that tumor once it's been removed from the system.

42:32Yeah, it definitely sounds extremely cool. We'll be looking for a lot more information over the weekend. Maybe we'll talk on the other side, Miles. Thanks so much. Sounds good. Thanks for having me. Still ahead, the first Russian diesel tanker from President Trump's deal with President Putin is heading to the U.S. We'll discuss the implications after a quick break. Welcome back. Russia's first diesel tanker from President Trump's deal with President Putin now headed to this country. Our Pippa Stevens has details. Morning, Pippa. Good morning, Carl. So the ship left Primorsk, Russia this morning with 440 ,000 metric tons of diesel signaling a November 7th arrival in New York.

43:08Now, this would be the first Russian diesel cargo heading to the U.S. in more than three years, according to data from Kepler, and comes after President Trump earlier this month struck a deal with President Putin for more diesel. But the ship's volume is not large. It's carrying roughly 300 ,000 barrels. U.S. daily diesel demand is about 4 million barrels per day. So this cargo is about 7.5 percent of one day's worth of demand. And over the last four weeks, average daily distillate exports from the U.S. has been 1.5 million barrels per day. Now, the ship is multi-flagged and registered to a Greek company, but we don't know who the buyer of the cargo is.

43:44And with freight rates where they are, this is going to be an expensive cargo to move. and it doesn't necessarily make economic sense, notes Andy Lippow. Europe hasn't lifted sanctions, so the cargo can't go there, but it could go elsewhere. But it is important to note that the arrival is still a few weeks away and the final destination could still change. Meantime, Brent taking out$117 this morning, now less than$10 away from its post-war high back in April. And take a look at European natural gas. It's above€93 per megawatt hour. That is a nearly four-year high. It's also 11.5 times higher than where U.S.

44:16nat gas prices are trading. Guys. Pippa, we mentioned earlier this Defense Production Act now applying to domestic production and refining. Ken, theoretically, what could that do? I mean, refiners make decisions on decade-long basis, so it's hard to see whether or not this moves the needle. And it seems like the administration keeps proposing new things, whether you look at the red-dye diesel or, you know, even the waiver of the federal tax and then Russia or this Defense Production Act. It seems like it's increasingly desperate to try to show we are doing something when the reality is that these are globally priced commodities.

44:51And so no one action is really going to be able to move the needle. One notable thing is that Ukraine has paused the severity of its attacks on Russian refining infrastructure. We saw them kind of shift a little bit to attacking some of the actual tanks versus the refineries directly. So does that signal some sort of stoppage because that could meaningfully move the needle? But for the time being, I mean, refiners are not going to make decisions today that will change the trajectory of their investment in their CapEx, especially when this is still viewed within the market as temporary rather than, you know, a many decades structural shift.

45:24OK, thank you, Pippa Stevens, with another day of elevated energy prices. You know, next week is going to be critical because a lot of these forces that have been driving stocks come to a head. We've got a Fed meeting on the question of higher interest rates and what the signal might be if we get one. And then on the AI trade, we'll get Google or Alphabet and Microsoft on Wednesday and then Amazon on Thursday amid questions about whether, you know, all the spending is going to be worth it. And will they continue to increase spending? We'll also get PCE inflation, which is a key one for the Fed on Thursday.

45:54And then another a lot of other stocks like Visa and Coca-Cola to see how the economic backdrop is holding up amid higher oil prices and higher rates. Yeah, I wonder if I saw B of A calling for a 3.1 core PCE and a Fed hike, which even they said was a heavy lift. I don't know. Market has 90 % odds that they don't hike next week. It's so close to the midterms. Yeah, it's going to be busy. Let's get to the judge. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet, or another medium.

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