11AM Hour: Dell CEO on AI, Wells Fargo CFO on Earnings & UnitedHealth's Beat and Raise 10/13/26

0:00Some of the most important design choices are the ones that go unnoticed. The details that together make an experience feel intuitive, comfortable, and above all, exhilarating. At Acura, that means looking closely at how every detail can make your experience behind the wheel more rewarding. Every lesson learned and every idea refined becomes part of what comes next, and it lives inside every MDX, ADX, and Integra. That's precision-crafted performance. That's Acura. 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.

0:37and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts. Good Tuesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Sarah Eisen, live at Post 9 of the New York Stock Exchange. Coming up this hour, an exclusive with Dell's founder, chairman and CEO, Michael Dell. He'll join Faber live here at the New York Stock Exchange. The tech giant capitalizing on this AI boom. Stock notching huge gains so far this year.

1:13Plus, shares of Wells Fargo under pressure this morning. The bank delivering a mixed quarter with profit rising. But one key metric coming in lighter than expected. We'll discuss all of it with the bank's CFO, Mike Santamassimo, first on CNBC. And UnitedHealth raising its profit outlook amid continued turnaround efforts. We'll discuss with a top health care analyst. What a busy morning between J &J, UNH, the banks, of course. Dow had a nice pop at the open, lost it, trying to get some back. S &P's down just slightly. Ten-year Treasury getting some relief on yields about 522. And the VIX is still sub-16.

1:47Let's begin with bank earnings this morning. Leslie Picker's got more on that. Busy morning, LP. Busy morning indeed, Carl. Pretty mixed results. Goldman Sachs and Citigroup beating on the top and bottom lines. Wells Fargo beating on the bottom but missing on the top. J.P. Morgan missed on both. And you can see the mixed performance in today's trading. However, those that shared guidance either maintained or lifted a profitability metric for loan making called net interest income. Investment banking held up with most firms either matching or surpassing guidance that their executives had given.

2:17Although the four reporters from this morning each saw declines on a quarter over quarter basis. You can see that in the far right column over there. So on the call, on the JPMorgan media call, CFO Jeremy Barnum gave a bit of color where he said that the pipeline remains, quote, very, very strong and says in terms of dealmaking, he leans, quote, more on the side of delayed rather than canceled. Goldman Sachs CEO David Solomon reiterated that on their respective analyst call while declining to say whether or not capital markets activity has already peaked. So IPOs that came in September were really the result of conversations in May and June around valuation expectations.

2:57Things got a little bit softer in September. The IPO market was wide open. It's just if you expected a valuation and you got something 10 to 15 percent less, you might choose not to go forward. You might choose to wait. But the IPO market is still in pretty good shape. I'd say capital markets activities are strong. There's no question the overall macro environment is a little bit more complicated. The rates environment a little bit more complicated. But the activity levels that we're seeing are still pretty good. Solomon said all the tech innovation and the AI infrastructure activity that's out there is a, quote, real good ballast for capital markets activity on a go forward basis, noting that doesn't mean there won't be bumps.

3:39Guys, I thought that was really interesting. The comments about the five year or the 10 year at five, not really scaring him in terms of operating environment. And then the notion that they are well aware of the broader concerns about, as I think they put it, unchecked advancements in AI. Yeah, which both of those comments kind of echoed what we heard from the JP Morgan call as well. This idea that there's been a lot of concern over AI and the guardrails that banks can have in place. If, say, an AI agent is able to go out there and tell you, oh, you're not making much on your deposits, why don't you go put your money elsewhere?

4:15J.P. Morgan said they're basically going to have a firewall against that, not allowing a rogue agent to completely get rid of everything in someone's bank account, but noting that the agents are helpful internally. And then to your point, Carl, about just what's going on with rates, another thing that we heard from both firms is this idea, and also Wells Fargo to a certain extent, that the moves that we've seen in rates so far haven't made much of an impact on loan demand, on what they're seeing with deposits. But then this idea that if things were to go another percent higher, this was something that was discussed on the JP Morgan call, that could have a much bigger impact.

4:54And that would be more of a problem for the economy and macro picture than what we've seen, say, from four to five. It does. It does raise some important questions about, like, who's responsible when you give these chatbots, your your bank account data, your credit card data. If they go rogue, are you on the hook? Is your bank on the hook? Is the is met on the hook? Yeah, and retailers, too. Like if your agent goes and purchases something that you may not really want and, you know, is it the retailer that's on the hook for that merchandise and how you return it and all those things? I don't know.

5:27I think it's a big open question. And so you're starting to see banks and other types of companies really trying to put those walls up before things get out of hand. Yeah. And also the AI companies should make sure their chatbots don't go rogue. Thank you, Leslie Picker. For more on the earnings picture and the impact on your portfolio, let's bring in Neuberger Wealth Managing Director Holly Newman-Croft. Welcome back. It's good to have you. Thank you. I think the earnings read from the banks is like healthy economy. The AI boom is happening, and yet there are risks like rates and oil. So what's your what's your bullish level of enthusiasm right now?

6:06I'm still bullish. I'm still optimistic. But Neuberger came out with our asset allocation committee views forward looking. We're a little bit more cautiously optimistic, I would say. The economy is strong. The markets are strong. Look, this week marks the four-year anniversary of the S &P's bull market run. So our clients and your viewers have certainly benefited from that. And while we are still maintaining our overweight position to U.S. large cap stocks, we have pulled back our overweights to small caps, international developed and emerging market equities, just back to neutral because of some of the concerns that we're seeing in the market.

6:45Like what? What concerns you about those groups? Well, so each one is independent. But let's start by saying the overweight year-to-date has really played out, right? The U.S. small cap space is up 14 % year-to-date. Emerging market equities up 24 % year-to-date. So it's been a good overweight so far. Profit-taking? Yeah. So as stewards of our clients' capital, we're going to lock in some of those profits, take some of the risks off the table. In the small cap space, actually in line with the small cap consumer sentiment that came out this morning, there's concerns about inflation, higher energy prices all being passed along to the consumer.

7:27Also, small cap stocks tend to have floating rate exposure. And as rates go up, those interest expenses really do become punitive. So there's some concern in that space. One thing I found interesting about the survey was the concern among small cap business managers about finding high quality labor. Yeah, yeah. Sarah mentioned that in the last hour. I was just looking at Russell versus S &P for the year. Russell was ahead almost this entire year until just recently. Until just recently. Was that a trigger for you? It was up 24 percent through August and now up 14 percent. So, listen, these interest rates, these higher rates, and we expect that they're going to be higher.

8:07That's going to be hard for these companies that have a lot of exposure to debt. So we're taking some risk off, locking in gains, but still maintaining a neutral positioning. In emerging market equities, the concern really is concentration in the exponential growth that we've seen. In that index, the top three companies account for almost 30 percent of the index. So up 24 percent, locking gains. And then I wouldn't be me if I didn't say, why don't we take advantage of the higher yields, right? If you're an ultra high net worth taxable investor and you can lock in a taxable equivalent yield of almost 8%, which is in line with long term equity returns.

8:51Why not? Sleep easy. Take some risk off. There's a lot of uncertainty in the market. And if nothing else, uncertainty leads to volatility. And so, you know, let our clients sleep at night. Yeah. So commodities was also on there as something that you prefer. Commodities, we went more overweight. Look, energy commodities has played out very well, and it's a good hedge to inflation. So we have been overweight commodities for quite some time. We are maintaining that exposure. You know, what was presented as a six-week conflict in the Middle East has proven anything but. There's no end in sight. Oil prices are higher.

9:33The expectation is that they're going to stay higher. Interestingly, it hasn't impacted the consumer, but it might. It might down the road. The consumer is also sitting on a portfolio that we just discussed has had four years of a bull market. Those who own stocks. Yes, exactly. That's increasingly being seen as the delineation in the consumer. is whether you own assets or stocks. Exactly, exactly. And more and more, I think consumers have a stock portfolio, more, let's say, than 10 years ago. We're seeing that a much more common theme. But it's the top tier of the consumer that really does drive our economy, and we're a consumer-driven economy.

10:18I always like to ask about the sentiment of your own clients. I guess, like, high net worth individuals who have a lot of, what, money in the market? They have a lot of money in the market. They're reading the headlines. I would say they're cautiously optimistic. Markets are strong. Company balance sheets are strong. AI spend is continuing. That's all good. Inflation is high. Rates are high and expected to go up. The war in the Middle East. We have new leadership at the Fed not giving forward guidance. So that leads to more uncertainty. I think, you know, a lot to talk about pros and cons, but I think overall, we are cautiously optimistic.

11:03Stay invested. Be prudent. Don't be greedy. Take some risk off the table and rebalance your portfolio more in line to your long-term goals so you can sleep at night. We had slightly increased our position in cash, actually, to take advantage of some of the volatility. because volatility might make you nauseous, but it also does create some opportunities for investors. All right, Holly, thank you very much for sharing some of the advice with our audience. As always, Holly Newman-Croft, Managing Director at Newburger. Thank you. As we're talking, getting some Boeing orders and deliveries. Let's get to Phil LeBeau on that.

11:40Morning, Phil. Good morning, Carl. These are September numbers. Let's start first off with deliveries because that's really what so much of the market is focused on when you're talking about the commercial airplane business at Boeing. Last month, Boeing delivered 57 airplanes, 43 of those being 737 MAX models. Year-to-date, the company has delivered 475 planes. On the order side, a strong lump in September, 165 planes were ordered. Year-to-date net orders total 618 planes, with the backlog now standing at 6 ,371 planes. Guys, I'll send it back to you. All right, Phil, thank you very much, Phil LeBeau.

12:17So when we come back, Dell CEO Michael Dell will join us in an exclusive interview. Faber's got him. We'll talk about how he's looking at the AI build-out right now. Plus, UnitedHealth beating earnings estimates and raising its outlook. We'll talk to a top analyst about the progress of the turnaround plan over there. Squawk on the street. 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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13:33Every lesson learned and every idea refined becomes part of what comes next, and it lives inside every MDX, ADX, and Integra. That's precision crafted performance. That's Acura. Hey, Fidelity. Can I get a second opinion on stocks in the Fidelity app? With Fidelity, it's easy to get an outside opinion from independent experts in a single score. And then? When you're ready, trade U.S. stocks and ETFs with no commissions. That's right. I am always right. Investing involves risk, including risk of loss. Zero dollar commission does not apply to customers designated by Fidelity as a professional equity trader.

14:07A limited number of ETFs are subject to a service fee of$100. See details at Fidelity.com slash commissions. Fidelity Broker Services, LLC, member NYSE SIPC. UNH with a beat across the board and raising its full year profit guidance. Management said on the call earlier that consensus estimates for 27, quote, may understate the opportunity ahead. Joining us now for her first reaction to the results, J.P. Morgan, head of health care services research, Lisa Gills here at Post 9. It's great to have you back. It's so nice to be here. Thanks for having me. Is the stock responding the way it should? It's not.

14:38And I'll tell you, I think that based on talking to our trading desk, I think it has nothing to do with the results and everything to do with the midterm elections. Really? I think there's a lot of angst. If you look at all of managed care is down today, a lot of angst going into the midterm elections. Just as kind of a quick reminder, generally speaking, investors think that a red sweep is good for Medicare Advantage. Blue sweep is good for hospitals and Medicaid. And there's just a lot of uncertainty right now as we go into the midterm elections. When we look at the fundamentals, though, they were great at United.

15:06Yes. Beat across the board. The comment that you made that that Wayne Devite made around 2023. Right. That's about three percent higher than where us and consensus currently are for next year. And I think that's the starting point. I would expect them to continue to beat and raise. Right. Is the that trade you mentioned on the midterm. Is that you expect it to play out in classic fashion or there are strange things about this year that can make a difference? I think there are some strange things about this year. I think, one, if you look at some of the Democratic candidates are much more socialist than what we've seen historically.

15:38I think the reason that that managed care and Medicare specifically is a little bit in limbo is just really not knowing where we're going to go from a congressional standpoint. And even if you think about the Trump administration came in, generally Republicans are really good for for profit health care, especially in Medicare Advantage. If you look at the rates for 27 for Medicare Advantage, up only single digits, right, kind of mid single digits, three-ish percent. And I think that when investors are looking at this, they're like, OK, if we have more of a blue sweep, could there be more legislative things that are going to come down the pike?

16:16How do we think about Medicare? How do we think about Medicare Advantage on a go forward basis? With all that said, though, the fundamentals are really strong. This management team has taken the opportunity to really turn around the business over the last 12 months. And you see that in the numbers. How did they do that? Yeah. So, Sarah, I think there are really three things that they've done over the last 12 months. One, reset the base, right? And the interesting part about managed care is you get to reprice your book. So if you think about the cost trend, for example, and Medicare has been running very high single digit to 10 percent.

16:48So when they priced for 26, they assumed that we'd have a 10 % type of medical cost. And then if you think about commercial, et cetera, right, you get that opportunity each and every year to reprice. And then thirdly, making investments in your business. And they're starting to pay dividends. If you listen to the call today or you read the transcript, what you're going to hear is them making investments in artificial intelligence that will drive a better outcome for the member, driving it around. We do this all the time. So better experience for the member, but also lowering overall SG &A costs.

17:23Last week, the news was about Humana and these ratings. So you're talking about star ratings. Yes, yes. How big of a deal was that? I mean, I'm looking at a well outpaced UNH for the year. So again, if we think about rebasing, the number for this year for Humana is about$9 of earnings. Recapturing your stars. So they had gone to about a quarter of their plans were going to be in four plus rated star plans. For those that don't follow it as closely, that's a bonus payment. And it's a really important bonus payment because it can help to drive your supplemental benefits for membership and also to drive your profitability.

17:55So by regaining that, they've talked about getting back closer to the upper 30s from an earnings perspective. So going from nine dollars of earnings this year to call it upper 30s in 2028. So a really big deal. And it's a very big deal to recapture it in a year's period of time. So going from about 24, 25 percent to 94 percent of your plans. Right. I'm trying to remember the percentage of members who were in a four or more. It's like 90 some odd percent, right? 94 percent. Is that is that unprecedented or historic? We have seen others in the 90 percent range in the past, but it is clearly unprecedented for 2028, given where everybody else came out.

18:32The average for the industry is about 70 percent. So materially higher than where the rest of the industry is. Not to harp too much on the midterm risk that I'm just thinking about. What is the sort of worst-case scenario that Congress, if we do get a blue sweep, could do to these businesses? Probably not much of anything, to be honest with you. I mean, I personally do not believe that Trump is going to sign anything into law that a blue sweep brings forward. I think what we hear a lot from long-term investors is what happens next March when we have 12 Democrats standing on the stage for the 2028 elections and start talking about health care, start talking about Medicare for all.

19:08And I think that's probably what more of the concern is. And this belief that depending on who wins the midterms for the Democrats will give you an idea who will really come forward as front runners going into 2028. The farther left, you mean, the higher odds of Medicare for all type policy? Yeah, the higher chance that there's more talk about Medicare for all. I think, you know, you all probably remember back in 2010 when Obama tried to pass something around this and we saw changes with the Affordable Care Act, but really watered down and ultimately turned out to be a great buying opportunity across managed care.

19:43But I think many investors are concerned that, hey, you know, what do we hear in the midterm elections? What do we hear around Medicare for the longer term? And we're hopeful that people come back to the fundamentals. I also think that there's definitely this trade between AI and tech versus health care. Or anything else. Or anything else. But your mute chatbot, you don't have to stay on the phone, theoretically, for five hours anymore with your health insurance. Isn't that great? To try to do these files. Is that ultimately negative and disruptive for the health care company? No, no. It's good for them, right?

20:17So from the perspective of having a better outcome for the member, having that member's ability to be able to get through, get the appointment that they need. I think, and you probably have heard me say this over the years, that I think the issue with our health care system is that we really try to solve for when someone's sick rather than to try to keep people well. And by going to your primary care doctor, doing that annual visit, not waiting on hold for three hours and saying, hey, you know what? I'll skip my mammogram this year because I waited on hold too long. People will get the care that they need.

20:49That's a couple of days in a row now we've had discussions about how technology hopefully will change public health for the better. Really good to have you. Say hi to Jim while you're here. Hi, Jim. Thanks to you. Thank you so much for having me. Thanks for coming. Good to see you guys. All right. When we come back on the show, Wells Fargo stock has actually come back. It was down more than three and a half percent about an hour ago. We're going to talk to the CFO, Mike Santamassimo, about the quarter, his reaction to earnings, what he sees from consumers right now and much more. Plus, Dell's chief, Michael Dell, will join us exclusively.

21:21We'll get his thoughts on the AI build out, how it's impacting business when we're back in a minute. Some of the most important design choices are the ones that go unnoticed. The details that together make an experience feel intuitive, comfortable, and above all, exhilarating. At Acura, that means looking closely at how every detail can make your experience behind the wheel more rewarding. Every lesson learned and every idea refined becomes part of what comes next, and it lives inside every MDX, ADX, and Integra. That's precision-crafted performance. That's Acura. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

21:57Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts. At Jared Jewelers, we know it's about more than fine jewelry. It's the moment they open the box. That smile they can't hide. Knowing you chose exactly right. Because the right gift can bring a lifetime of meaning.

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22:53Awful lot of drama for a market that is essentially at the same price, S &P, as it was on August 5th. For the time being, though, breadth pretty evenly split here. Been all over the map regarding the banks, as you mentioned, going in and out of the green. VIX a little bit positive at 15 and change. Yeah, some weakness in the AI trade. Memory coming under a little pressure after that update from China and after South Korea overnight. It's the biggest two-day pullback since July. We'll get a news update now. Dom Chu has it for us. Good morning, Dom. Good morning, Sarah. Good morning, Carl. Six Flags is temporarily closing nine roller coasters across six of its amusement parks following an incident in Georgia that left one person dead and several others injured.

23:35Officials have not confirmed how the person died or the roller coaster involved, but local TV showed riders being evacuated from the Goliath coaster at Six Flags over Georgia. Less than two weeks ago, a Six Flags Southern California park announced the retirement of a roller coaster following lawsuits alleging riders suffered serious brain injuries. A former gang leader convicted of orchestrating the 1996 drive-by shooting death of hip-hop legend Tupac Shakur is scheduled to be back in the Las Vegas courtroom today for sentencing. Dwayne David was found guilty of first-degree murder back in August.

24:10He faces a maximum penalty of life in prison without parole. And NASA's Perseverance rover has set a new record. The space agency announced it has now trekked 28.1 miles since arriving on Mars nearly five and a half years ago, which is a record for the longest distance driven by any vehicle outside of Earth. It's one of two active NASA rovers on Mars. The other is, by the way, Curiosity, which has traveled, Sarah, 23.7 miles since arriving back in 2012. I'll send things back over to you. All right. Cool to see the progress there. Thank you, Dom. When we come back, the CFO of Wells Fargo joins us.

24:47His first reaction to earnings and what he's seeing from the consumer. When Squawk on the Street comes right back. Feels like 1999, a two-speed market. You've got it completely, perfectly bifurcated in the sense that you have, obviously, everything that's adopting AI and everything that's not, and they're going in opposite directions. And that was pretty much the case in 1999. that. Paul Trudeau-Jones on Squawk this morning talking to our Andrew Ross Storkin about some of the analogs he thinks between today and the late 90s in terms of stocks. He did say that next year is going to be challenging, maybe the most challenging growth environment in his view since maybe 2002, although he didn't discount the idea of a nice push into year end once the midterms clear.

25:33Yeah, I mean, I'll be short all year. That's what he said, the whole year, which is pretty bearish. She said he's long oil, which the market wouldn't like if it goes up another, what he said,$20 to$25, which he predicts could happen on the war in the Middle East. And also, you know, he, as a lot of these billionaire hedge fund managers have been warning about, has warned about the fiscal deficit and did say, the only question is, are we at some sort of tipping point? And he says that he thinks we are, at least 60-40, that that's ultimately what's happening. And so that is, you know, a scenario to make you ultimately bearish.

26:08He also said some of the things that have helped the market, like M &A, for instance, he sees fading in the next year. So coming out. I mean, there was some nice pushback to that notion out of Goldman Sachs, for example, today, arguing that the pipeline on IPOs is robust, even though we've had. And the other notion was that I think it was Diamond who said they've been delayed, not canceled. Right. Pushback. Right. Because because of this move higher in rates, you mean, I guess the The question is how long and how far higher do rates move? Because that could wreck a lot of things. When we come back, Dell's Michael Dell will join us exclusively.

26:41We'll get his take on the AI build-out and growing safety concerns in just a minute. Back shares of Dell up more than 300 % just this year, thanks to a boost from surging AI demand. Our David Faber joins us this morning with Dell's CEO Michael Dell in an exclusive interview. Take it away, David. Thank you, Carl. Yeah, very happy to be joined by Michael Dell up here on a nice balcony at the New York Stock Exchange. Thank you for being with us. Great to be with you, David. I like how we're all decked out here with Dell Technologies. I like it. All delled out. Yeah. Important moment, as they all seem to be these days, Michael, and certainly for somebody with your experience, having navigated through so many different transitions in the technology world.

27:21But let me just to the current moment, specifically data center moratoriums, this idea that perhaps public opposition is going to really stand in the way of the ability to build out the AI ecosystem at the rate we'd been anticipating. Is that a concern to you? Look, I think there's a much more active discussion now with the communities about where are these data centers sited? What's the source of the power? Are they generating their own power? Are they using the power from the grid? Are they using the latest sort of liquid cooled systems that have closed-loop cooling in them and really don't use much water at all, or not, right?

28:05And so I think that's a good thing. And we have a large backlog of these projects. Yes. We haven't really seen that much in the way of delays. And I think it's good that there's now this sort of active engagement with communities. These data centers are also going all over the world. And, you know, the workloads are, the demand is being generated from all over the world. So it's an issue that I think, you know, It is an issue that is front and center right now. I mean, your company has had incredible financial performance over the last year. And to be clear, we don't build data centers. But you put the racks inside them.

28:51But if there are fewer of them or perhaps at a slower pace, one would anticipate that that will impact the broad ecosystem, including, of course, the provider of the servers such as Dell. I mean, is it a concern to you? Are you seeing anything right now that indicates perhaps that your expectations for next year, for example, were too aggressive? No, no, not seeing anything that would affect our expectations. Okay. And in terms of it being a concern for you, where does it sort of stand when you look at your overall business? You know, we talk to our customers about it and hear what they're doing to address it.

29:27And certainly there are things we can do to make the systems more efficient, to reduce the energy consumption. There's a lot of work around modular data centers, which have in some ways a better, you know, environmental footprint and that sort of thing. So we're all working together to address this. I don't see it as a big impediment to 2027. Yeah. I mean, even in your own home state of Texas, at least it's been an issue of late. But there does seem to be a belief that after the midterms, perhaps things will abate in terms of the pressure. Do you do you see that as a possibility? We'll see. I don't I don't I don't have any.

30:07Yeah. Any real insight on that. I'd love to get your insight on the safety debate, given, as I kind of call you, the OG. You've been at it since 1984 when you were 19 years old. But as I said, you've been through so many transitions, and you have a unique perspective, Michael. On one side, I would make the argument, Jensen Wong, liability laws were enough. We can protect ourselves from rogue AI models. The responsibility lies with the labs. This idea of pacing, and again, I'm putting words in his mouth, but so to speak, is not something that needs to happen. We simply need them to do the right thing.

30:41on the other, the likes of a Bill Gates who says this technology is the most dangerous thing the world's ever seen and it needs to be safeguarded in a way that doesn't exist now. Where is Michael Dell in that debate? I think we've always had technology that can do great things and maybe do some not so great things. So fire can heat your home. It can also burn down your whole village. So that's not good. So we have to have safeguards and controls. I think the companies that are making the models are thinking about this quite a lot. They're thinking about how they work together. I think there's a role for government to play there.

31:19And, you know, organizations that use these tools also need to have kind of bounded permissions for what the tools and the agents do. There has to be monitoring and certainly human oversight whenever there's some potential bad thing that could happen. And so here again, I think the industry is listening and is responding to a lot of the concerns and challenges out there. And also, you know, it's not just the frontier models. You have the open source and open weight models, small models, and customers will choose. They love choice. Right. And it's not always going to be the latest and most powerful frontier models that solve the challenges that they have.

32:09No, many may choose the cheaper models. You talk about a role for government, though, in the safety debate. What do you see as that role? i i i i'm not a policymaker i mean we we talk with the policymakers you spend a good amount of time we give them our we give them our thoughts and and uh but you know i'm not going to try to to come up with but currently the u.s government is i would call it more of a hands-off approach that we have to continue to move forward at a substantial pace we have to maintain the race condition with china and stay ahead is that the way you see it I think it's very important that we stay ahead.

32:47And, you know, if we let's let's suppose that, you know, we say, well, we're not going to have AI. We're not going to have data centers. You know, I think that would be very bad for the U.S. economy and it would be great for, you know, another particular country and economy. And so I don't think that's the answer. So I think we can find a path here where we have safe systems that are also incredibly powerful. Yeah. Do you put yourself more in the Jensen Wang camp, not to name it, but sort of more on that side of the safety debate? Yeah, generally. I mean, but again, Jensen is creating models, right?

33:25He's got his own models. We don't create models, right? We create infrastructure. Right. That allows the compute to run those models. We make the infrastructure. The infrastructure doesn't actually know what it's going to do. So, you know, since I started 42 years ago, we've sold over a billion computers. OK, when they leave the factory, they don't actually know what they're going to do. Right. Somebody programs them and sometimes they program them to do great things. Maybe they're curing cancer. Maybe they're running the New York Stock Exchange. But sometimes not so great things. So, yeah, yeah.

34:00But most of the time, actually, they're doing fantastic things. But if I were to ask, well, I will ask you, are you worried about the AI future? Are you worried about so many of the existential risks that have been raised by the likes of Anthropik? Your answer is what? I think we're all going to be here in 2030 and it'll be just fine. We have to think about these things and plan and, you know, create countermeasures. Humans are very good at that. Whenever there have been challenges and risks like this, we worry about them and we obsess about them. Like you just asked me the question, right? And so there will be a lot of work that goes into that to make sure that bad things don't happen.

34:40Yeah. You talk about 2030, of course. We're not that far away. We're only a little more than three years. When it comes to the momentum that you've seen in your business, you know, can the pricing per GPU, in your opinion, just continue to go higher? Well, you know, the GPUs themselves are, you know, getting larger, right, with more and more memory. And the price is sort of a function of what does it cost to build the fad? Per hour, I meant, by the way. I didn't add that. But I'm just, you know, the overall cost, yeah. Well, you know, there's sort of different elements here, right? There are smaller systems that run on less powerful infrastructure.

35:23But then if you want to train the most powerful systems, you're going to need the latest semiconductors and memory in order to do that. And it comes with a cost. And look, I think the impact that this technology has on the economy is starting to be understood. And it's quite powerful. And we've had this sort of wave of usage by the frontier labs and, you know, certain companies. And now we're starting to see this wave in the enterprise. But it's really just beginning. And I think there will be a ton of infrastructure, you know, deployed around that. Some of it will be super powerful. Some will be.

36:05But you see no diminishment in demand, I guess, would be. We don't. At all. There's more demand than supply. There is. And you would continue to see that or expect that to be the case through how long? Through 2030? It certainly gets harder to predict as you go out in time. But the point is that it takes about four years to build a new semiconductor fab. You've had a lot of the CEOs talking about they're building a new fab. When's it going to be ready? 2029, 2030. So these things take time to kind of stand up. and the models and what the agents are capable of doing are evolving much more rapidly than people anticipated.

36:45So if you go back four years ago and say, okay, who was building all the logic fabs, all the memory fabs? They weren't. Not to anticipate the demand we have today. So I do think it gets worse next year in terms of demand supply. Well, on the memory side in particular. And maybe it's a four-year problem because there's just not enough supply. Well, fueling all of this, of course, is the capital markets, the debt markets. Yeah, maybe there's not enough capital. Well, there you go. All right. That's my question. I mean, is that a concern for you? You know your way around the capital markets. I think all these things are concerns, right?

37:23You know, maybe it's regulation. Maybe it's capital. Maybe we don't have enough memory chips. Maybe some of all of the above. But what we see right now is a lot of those are being addressed and there's incredible demand. And we're still at the beginning of the S-curve of this. I mean, any cycle for technology is sort of a combination of, you know, excesses and, you know, incredible opportunity and skepticism all at the same time. And this is all in the mix. One of the benefits of having lived a while is having seen it before, and you have as well. Do you think this is a bubble? I don't think there's enough supply for it to be a bubble.

38:07And what we see from our customers is they're using what we provide them immediately, and they want more of it. And the things that you've talked about as sort of risks and challenges, I think those are mitigants to there actually being a bubble. Yeah. And, you know, we watch closely to see, all right, you know, are these customers really going to use this? Who are they supplying to? What are their applications? And, you know, if somebody just shows up and says, we want to buy these things, you know, here's an order. We're not just like taking every order. I mean, we're literally prioritizing based on what we believe is the, you know, the customers are actually going to use it.

38:53And use to a certain extent. And they have to have the capital and they have to have a data center. And, you know, there's a lot of things. So what would be a sign of a bubble then in that process? Would there be something that would be a signal to you? If people were buying in advance of their need and they weren't actually using it. And, you know, one of the things that I watch is the rental price for the older systems. Okay. So you can look this up on the Bloomberg Terminal or other places and see the price to rent an H100 chip. We were selling these four years ago. And I think about a week ago, the H100 rental price hit a one-year high.

39:35That's very unusual. If you'd ask me, did I think that was going to happen? No, is the answer. But it's happening. Why? Because the demand for compute is so strong. Why is the demand strong? Because our customers can get an incredible return on compute and creating intelligence. Yeah. Speaking of compute and intelligence, you've said that the move from compute to intelligence, which we're in the midst of, rewires how companies operate. You've gone on to say, Michael, that only 10 to 15 percent of companies understand that. What does that mean? So there's a tendency when a new technology comes out to want to bolt it on to the old process that you have.

40:15And every company's organization, its tools, its systems, its processes are a function of what was available at the time they created them. So now we have something completely different. And if you're not sort of reimagining how you get to those outcomes, you're just not going to get the result you want. And very few companies have really understood that. It's a harder thing to do, right? You have to simplify and standardize all your processes. You have to get all the data together because it's a whole different data architecture, data platform that, you know, we help our customers with. And then after all that is when you apply the AI and the technology.

40:52Right. Well, you've done it at Dell. And I know we've been doing it for three years and you see it in our operating leverage and it will continue. And I change a lot in the last three years. It'll be more in the next three years. And even your headcount down 11 ,000 to, I think, 97 ,000 with revenues obviously up substantially 19 percent. Is that what we're going to see from a lot of companies because of the efficiencies that you've been able to garner as a result of the changes you just discussed? I think there is a cost and efficiency element to this, but that's really just the first step. What happens is you get speed and you get capacity increases and you get the ability to expand and grow far faster.

41:33And that's now what we're seeing at Dell. That's what you're seeing. Not necessarily the headcount reduction. Look at our growth. Your growth has been unreal in terms of your backlog. By the way, that does lead to a question. I mean, you did$4.1 billion in income last quarter, but only a billion in free cash flow. Your receivables were up to$6 billion. You are financing your customers. Is that anything of a concern, given all the other pressures we just talked about? Most of it is short term, like three to four months. And so, you know, we kind of hand it off to the banks, the lenders of all sorts of different varieties.

42:10But most of what we do with Dell Financial Services is on the shorter end of the curve. And finally, we're here at the New York Stock Exchange. You've helped create some future CNBC viewers with your donations, of course, along with your wife. $6.25 billion in certain zip codes. One of them sent me a letter yesterday and mentioned that he watches CNBC with his mom. He's eight years old. I love that. That's a future viewer. There you go. So can you just keep doing this? Are you going to keep giving more or are you done? Well, of course we're not done. We created a foundation in 1999, and it's focused on children in urban poverty.

42:53and that's what we've been doing for 27 years. We're going to keep doing it. And yes, more to come. And including in the Invest America accounts? Well, we'll see. I mean, there are many ways to help children in urban poverty, both in the United States and, you know, 97 % of children don't live in America, so we'll help some of them too, right? So there are lots of ways for us to do that and we'll continue those efforts just as we have for the last 27 years. Michael, always appreciate your taking time. Thank you. Thank you. Michael Dell, CEO, founder, of course, of Dell Technologies, which is on all the billboards here as well.

43:31Carl, send it over to you. All right, I'll take it, David. Want to get to Wells Fargo because the stock is moving a little bit lower after the company reported mixed results for the third quarter. Bottom line beats expectations while net interest, income and revenue fall short of estimates. Joining us in a first on CNBC interview to break down the quarter is Wells Fargo CFO Mike Santamassimo. I mean, you guys sounded really bullish. I think you sound really confident about where the business is and how it's doing. I mean, is the market reaction just attributed to expectations around analyst numbers?

44:03What do you think? Well, I mean, look, I'll leave that to others to decide. But I think, you know, when you look at the underlying results, Sarah, like they're really good. You're seeing good, you know, continued momentum in really all the businesses, revenues up in every business. You saw great loan growth, 11 percent up year on year. You see, you know, client assets in WIM up a lot. You see, you know, M &A revenue up 30 percent. Equity capital markets revenue up, you know, significantly. And so really across the board, you can see, you know, really good results in some of the core underlying drivers that we see.

44:37And then we saw our net interest margin stabilize as well in the quarter, which we expected to see happen. Yeah, because that was one of the that was one of the concerns, I think, in last quarter. So how should the street interpret the stabilization and net interest margin? Is that a signal that the progress is happening post-lifting the asset cap? Well, I think you see the progress already each quarter that over the last four or five quarters now in terms of just the momentum growing. And you can see it in the slides that we put out where you look at the prior number of years really not growing much.

45:11And then every quarter since then, you've seen really significant growth come through. And really, as you look at the net interest margin, what that really shows is this good stabilization of the underlying trends. You see the higher rate environment starting to come through in terms of helping it as you look forward. And so for us, the opportunity I think we have ahead of ours is just as big as it was last quarter. And I think we feel really good about the team's ability to execute on it. And we're seeing it come through in the results. And I think, you know, we guided to, you know, a$13 billion, you know, plus or minus sort of net interest income in the quarter.

45:48And I think that sets us up really well as we go into next year. Where can those margins get to? Three basis points? Well, we'll see. You know, I think I think when you look at the net interest margin, you know, X markets, you know, are taking our markets business out. It is asset sensitive. So we're getting the benefit of like higher rates repricing across all of the low, all of the interest-earning assets categories. And if rates do go up from here, you'll start to see the benefit, and you'll see that net interest margin sort of grow from here. On the market side, it's a little different, where you have this negative impact for higher rates on the market's business, net interest income, but that overall business is growing quite good.

46:30And I think we expect to see a lot of opportunity to continue to come through in the coming quarters there as well. Looks like you guys were fairly aggressive on buybacks in the quarter, Mike. Do you step on the gas on that front? Well, you know, actually, Carly, we're$2.5 billion. It's down a little bit from what we saw the last, you know, couple quarters. And I think as we look forward from here, you know, we approach it in the same way. Like, we really want to be there to support clients. So we look at what kind of growth is going to be there. We look at all the risks. And I think, you know, we'll use buybacks as that last lever.

47:03But I think as you come into this higher rate environment, you know, you're a little cautious initially on buybacks. But overall, I think over a long period of time, we've got a lot of capital flexibility. We have a lot of excess capital. And I think that should give us the ability to support clients and return more back to shareholders. I mean, Charlie sounded really, in the quote, in the release, which I shared earlier, bullish on the consumer and the momentum, despite higher rates, despite higher oil prices. Can you just give us a sense of what you're seeing right now in terms of spending and deposits and credit quality?

47:36It all feels like it's holding up pretty well. Yeah, I mean, the short answer is both consumer and businesses are doing really well. On the consumer side, you know, the fact that people have jobs and unemployment is really low still is a great sign. You're seeing wages keep up with inflation. You're seeing activity levels increase every week, year on year. We see that through our debit and credit card spend. And on the commercial side, people came into this environment in a really good shape. And so the credit picture across both of them, both sides of the businesses, is quite strong now. And it's hard to see exactly what's going to change that.

48:11And I think despite higher oil prices, despite higher gas prices, I think both sides of the equation have been able to really kind of work through that. On the consumer side, it's only 3 % to 6 % of spend. It's significant for some people, but nonetheless, people can calibrate other categories of spend and kind of work through it. And we're just not seeing any sort of like cracks around delinquency trends that would lead you to believe you're going to see any near term stress that come come through, at least at least for now. Although, Mike, you know, saving rate has come in a bit. We know real wages are negative for like five straight months.

48:45There have been some think pieces that suggest stock ownership is really the magic elixir for the consumer. Some argue that, you know, they always say the stock market is not the economy, but in some ways, maybe it is. Is that going too far? probably you know carl i think when you you know certainly savings trends are coming down you're seeing you know people move from savings to consumption but when you look at like all cohorts of clients you know from higher income levels to lower income levels and particularly in the lower income levels you're seeing wages keep up with inflation over the you know cumulatively over time you may see some noise like in a couple months here or there but when you look at it over a slightly longer time period you're seeing you know wages at least or more than in some cases is more than keep up with inflation.

49:27And that's really helping people keep up the activity that's out there. And you just don't see debt-to-income levels getting to unsustainable places at this point. They all seem pretty reasonable, even at different income levels. So overall, I think things are pretty strong. So as long as the unemployment picture stays low and the unemployment picture stays pretty strong, I think you should be able to continue to see some really healthy trends for the foreseeable future. All right, Mike. Thank you very much for the report card on what you're seeing in the business and out in the economy. We'll have you back on, talk about some of these AI disruption fears.

50:06But for now, thank you. Mike Santamassimo, CFO of Wells Fargo. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

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