11AM Hour: FCC Chairman Brendan Carr, Apollo's Torsten Slok & Macao Gambling Revenue Lags 10/9/26

0:00This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules.

0:35Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington. Good Friday morning. Welcome to Squawk on the Street. I'm Carl Quintanillo with Leslie Picker here at Post 9 of the New York Stock Exchange. Sarah Eisen's off today. Elon Musk and SpaceX making a move to challenge U.S. wireless leaders with this deal to purchase a large spectrum portfolio, pushing Starlink further into telecom.

1:16The deal still requires FCC approval, though, and we will be joined exclusively by Chairman Brendan Carr. Plus, the Trump administration launching a new effort to oust Fed Governor Lisa Cook. We'll discuss what's driving the investigation and the implications for the central bank. Meantime, tech stocks rebounding following yesterday's sell-off. We're joined by Gabelli's veteran tech fund manager, John Belton, to break down the move and what the AI CapEx boom in recent economic data might mean for future Fed policy. Right now, though, markets, you can see a bit of a rebound from yesterday. The Nasdaq up about half a percent, as well as the S &P and Dow.

1:49Now, 10-year also higher now at about 528 at this point in time. For more on the market, let's bring in Chief Economist over at Apollo Global Management. Torsten Slock is here with us at Post 9. Happy Friday to you, T. Always good to have you. Your thoughts on, I guess, this break in the uptrend on the 10-year. Was that significant yesterday? And what's the likelihood that it continues that upward trajectory? Well, the key issue is, of course, that rates are going up for two reasons. Number one, the economy is strong. We have high-stick inflation. We have high energy prices. There's just a lot of momentum in the economy because of AI.

2:23That's also the worries, of course, about fiscal situation, and that's also supporting. So with that in mind, why is it that we're seeing a break? Well, the economic data has been slowing slightly with the employment report more recently. But broadly speaking, the momentum in the economy because of the AI trade is just so strong. So we should expect to see still more upward pressure on long rates. To what target? Well, this becomes the issue, namely, when will long rates break the economy? And because the economy is now split into two, namely AI is not sensitive to interest rates, whereas housing, autos that are traditionally very sensitive to interest rates, they are not doing well in those sectors.

2:56That means that it all becomes a function of how long can the AI trade continue while we at the same time have all these weaknesses, especially in the housing sector, but also in the auto sector because of interest rates being so high. And the answer to that is AI will continue to dominate. So we expect that rates will still be under more upward pressure. Would Fed Chair Slock let AI run, or would he risk damaging home building more? Well, this is the challenge for WASH and the FOMC. The 12 voting members, of course, need to decide. Do they want to believe in the AI build out and the boom continuing?

3:28Or are they getting more and more worried that the drag from housing? I mean, mortgage rates during the pandemic were 2.7. Now they're 7.2. And remember that home prices are high, mortgage rates are high. It's really difficult for anyone to enter the housing market And at the same time, the construction of homes is also really, really weak. So on the one hand, housing is really weak. Autos are also really weak because it's expensive to buy a car, to lease a car. So you have to put apples and oranges up on the scale if you're the Fed. Are you more worried about the slowdown of the interest rate sensitive parts?

3:56So far, the AI trade has dominated. Of the 2 % GDP growth we normally have, 1 % is points at the moment is coming from AI alone. So because AI is not interest rate sensitive, that means that AI will continue to support. Do you think XAI, we'd be growing at one? Absolutely. Wow. That says a lot. Well, that's because the consumer is still doing okay, even outside of the wealth effect coming from AI. But that's still telling you that there's a significant reason why the economy is doing well, and it is not sensitive to interest rates, and that is the challenge for the Fed at the moment. Is there a point where AI does become more sensitive to interest rates?

4:28Obviously, you have this whole supply bottleneck that's kept prices high, and the build-out in fervor and demand still is very strong. But if interest rates do reach a certain level, does it become more sensitive to monetary policy? Absolutely, Leslie. I think that discussion has less to do with the Fed and has more to do with the fact that when is the payoff from AI going to arrive? In other words, how quickly will the revenues arrive? At the moment, markets are assuming that the revenues are going to come very, very quickly. Any stock price is the future discount, present value of these net cash flows in the future.

4:59So the consequence of that is, of course, that if those cash flows come slower, that means also the stock prices should be lower. But today, the cash flows are expected to come quickly. So I think the answer to that question depends less on what the level of interest rates are and much more on, well, what is the speed with which these cash flows are going to arrive. Because if the revenue from all the data center investments are going to come a little bit slower, either for political reasons or because it's just becoming more expensive, then, of course, the consequence is that, therefore, the cash flows will also arrive slower for literally all companies in the AI complex.

5:28Yeah, we were talking earlier last hour about how the high cost of capital could be also impacting some of these IPOs. that are postponing. So I was just curious if, you know, you do start to see that in terms of financing implications for AI, in terms of the just the risky parts of the market being impacted if the risk free rate is higher, and whether that ultimately, you know, regardless of the growth, given, you know, what the Fed does, if it ultimately has an impact. And credit markets are already voting with a feet on this question, because CDS spreads have widened out a number of AI names.

5:58Also, of course, spreads on hyperscalers have also widened out. So you are beginning to see a premium, meaning some extra pricing coming in, in terms of AI companies that more questions are being asked exactly about what is the speed with which the payoffs will be arriving. And this is so critical, because any stock price today, of course, depends on, well, if the cash flows for the company looks like this, the stock price should be high. If it looked like this, of course, the stock price should be low. So that's why I don't think this is a Fed discussion. And that's why there's really not much that 12 FOMC members can do about this, other than basically watch what's going on in the AI space.

6:29And they are watching like the rest of us and trying to figure out, well, is this something that will be a huge payoff and therefore we should be hiking a lot more? Or is this going to take a lot longer and therefore the revenues are going to arrive slower and therefore we should maybe not be hiking more? I'm curious to get your take on what CBO told us yesterday, kind of throwing some cold water on the notion that we can grow our way out of the debt issue. Was that surprising to you? Yeah, that was a bit surprising. They have, of course, for quite some time basically had a very strong view that debt to GDP is going to rise for the next many years.

7:00And now there's been some discussion around that maybe if AI is successful, maybe we can raise more taxes, therefore the tax revenue can be higher. And if that's the case, maybe that could be helping in terms of flattening out a little bit the steepness with which the debt problem is in front of us. But the problem is, what they were saying yesterday, is that there's not much they can do because the steepness of the debt problem is just so severe over the next five, 10 years, that even if we get some improvement in GDP growth, some improvement and productivity is not never really at this point going to solve the fiscal problems that we have, which therefore also puts upward pressure on rates.

7:34So it's not only inflation putting upward pressure on the front end, it's also in the long end, the fiscal challenges continue to also put upward pressure on 10-year rates. We didn't even touch on France. We don't really talk about Japan because we're busy talking about France. Torsten, please come back soon. That says always Torsten's lock. Meantime, President Trump appointing a committee to investigate statements by the Fed's Lisa Cook. Steve Leisman has been digging into this and joins us with more. Steve. Leslie, good morning. The White House announcing a, quote, committee of inquiry to investigate allegations that Federal Reserve Governor Lisa Cook made false statements in connection with one or more mortgage instruments.

8:10And that's a quote from the document that's according to a presidential memorandum released in the last hour by the White House sent to the attorney general and setting up a very unique committee of inquiry that we, as far as we can tell, It goes back to perhaps the era of Taft or even Hoover. In just the past several minutes, CNBC received a statement from Cook's attorneys, Abby Lowell and Norm Eisen, saying, and I quote her, we have grave doubts that this hearing, in quotes, is a legitimate one that would conform to the law. But if it is anything close to objective, the conclusion will be that Governor Cook did not commit mortgage fraud, leaving no cause to remove her from the Federal Reserve Board.

8:52And just Democratic Senator Elizabeth Warren also releasing a statement moments ago in which she said President Trump is convening an illegitimate show trial in his dangerous quest to illegally take over our nation's central bank. She called it a kangaroo court. Members of the panel include Keith Sonderling. He is the acting head of the OGE. Kevin Hassett, the NEC director and Andrea Lucas, the EEOC chair. Hassett has previously called the mortgage charges against Cook serious and said Cook was being partisan by not stepping aside. Fed watchers we've spoken to, one on air here, Krishna Guha, and one I've spoken to, quickly chimed in and said this is a continuing attack by the president on the Federal Reserve's independence.

9:38The Justice Department has not charged Cook with mortgage fraud, which does raise questions about the criminality of these allegations against her. These have been out here for more than a year now. The Supreme Court ruled earlier this year, in June, that is, the president was not within his rights to fire Cook, saying it had not provided all the process and provided her a means to respond. Carl, this probably will end up back at the Supreme Court, though the hearing itself is scheduled for November 5th, two days after the election. Yeah, it comes on the heels of that Fed Inspector General finding on Powell and the renovation.

10:13Certainly questions for Hassett the next time he's on. Steve will talk about it more, I'm sure. Thank you, Steve Leisman, this morning. Meantime, Hurricane Isaiah is approaching the U.S. Gulf Coast. It is now a cap three. AccuWeather's Jeff Cornish joins us this morning with an update. Hey, Jeff. This storm is really wrapped up, and we are concerned about it in a big way. So thanks for having me on to talk about this as the lightning increases. When there's a lot of lightning near the center of a strengthening hurricane, that means that it's really in a significant phase of strengthening. So we saw this ramp up from Category 1 last night to Category 3 today, and it is closing in on the central Gulf Coast.

10:50We're going to see that happen later on tonight. Now from an economic standpoint, which I know you're always dialed into on CNBC, a lot of the oil rigs are west of this. So this is absolutely not the worst case scenario from that standpoint, but it is certainly impacting about the easternmost 15 percent in a direct way, and that's going to be a significant storyline as well. Overall, though, the worst part of this storm is on the east side, that right front quadrant where we're going to see the greatest impacts. So the storm surge will be by far worse on the east side of landfall as opposed to on the west side.

11:23So it's not a major, major storm for New Orleans, but it will be for Mobile and especially Pensacola. If we had to pick one city for landfall, unfortunately, we're probably going to land very close to Pensacola, Pensacola Beach this evening. Landfall is likely to occur tonight close to 11 p.m., between 8 p.m. and 1 a.m. Eastern time, or between 7 p.m. and midnight Central time, most likely near Pensacola Beach. And to the point about that strong onshore wind, that onshore wind is like a plow just shoving gulf water into land. a six to ten foot storm surge concave bits of coastline some of the bays are going to be inundated here with six to ten feet beyond your typical high tide that will be destructive as will be the wind in the eastern eye wall with gusts of a hundred to a hundred and twenty miles per hour in areas especially around Pensacola so that we're the big concern here is for long-lived power outages there will be some very heavy rain even in western North Carolina not a repeat of Helene there one thing that will help us in that regard is that the The storm will be moving forward, which should minimize the number of days in which we're seeing heavy rain.

12:27Still 8 to 12 inches for sun to your landfall, 4 to 8 inches of rain in the coastal Carolinas and in the mountains to the west. Jeff, appreciate that. So much gulf refining in its path as well. That's Jeff over at AccuWeather. When we come back, FCC Chair Carr is with us. We'll talk about SpaceX acquiring this nationwide spectrum portfolio as Starlink looks to take on some traditional carriers. Plus, OpenAI's revenue is in question after a new report, which sends shockwaves across the tech sector. We'll talk about whether or not those fears are misplaced. Squawk on the Street will be right back.

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14:14It's the holiday season at House of Burrell, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington. Welcome back to Squawking the Street. SpaceX yesterday announcing its acquisition of a nationwide low-band spectrum portfolio. That's a key move in the company's efforts to take on traditional wireless.

14:55AT &T, Verizon, T-Mo all taking a hit from that news. Meantime, the FCC announcing earlier this week it'll vote later this month to decide if the agency will move forward on a new spectrum auction in a bid to boost direct-to-device services, the same tech used by SpaceX's Starlink. And joining us this morning in a CBC exclusive is the chairman of the FCC, Brendan Carr. Chair Carr, good to have you back. Good to see you, yep. Streets really wrestling with this one because the stocks are moving, but some of the desks are pointing out, look, a real network needs power and leases and spectrum and customer support, device support.

15:31How big of a deal do you think this is? Well, if you step back, one of the things that President Trump has been clear about from day one is he wants America to lead the world in next-generation technologies, and we're seeing that across the communications sector, whether it's 5G, 6G, or now this new generation of what we call direct-to-device technology where you can go right from a satellite to your smartphone. We're seeing a lot of new competition and investment. I mean, at the FCC, we've seen probably over$100 billion in deal flow in spectrum alone. And we've reinvigorated the FCC's work on spectrum auctions.

16:06We're probably going to bring over$100 billion of spectrum into the market over the next two years. So we're seeing a lot of competition. We're seeing a lot of innovation. Look, there's going to be moves in the market. People are going to try to out-compete, out-innovate. And I think that's great. We're going to see how this plays out. It's not for us ultimately to pick winners and losers. The market will decide. Consumers will decide. But all of this ultimately is going to be really good news for the American consumers. They're going to see speeds up. They're going to see prices down. It's a really interesting environment right now.

16:34Yeah. Do you foresee any cooperation between, for example, SpaceX and any of the legacies? Well, there's a tremendous number of ways that this could play out. And we just want to make sure that markets and consumers can decide. The traditional mobile wireless carriers, they have a joint venture where they're working together on potentially direct-to-sell technologies. There's other direct-to-sell players out there. Amazon is now getting a significant number of satellites up. I think they're starting their direct-to-sell service sometime later this year. So it's a real interesting era. There's a lot of change.

17:09I think a lot of this really goes back to earlier, a couple years ago, a year ago actually, when EchoStar exited the mobile wireless market and pushed their spectrum into the market. You've seen a lot of moves made since then. since Echostar exited. And again, ultimately, it's going to be really to the benefit of consumers. In fact, there was a study out, I think a week or two ago, that just said that prices for high-speed fiber internet are down 7 % to 14 % for consumers over the last year. So this is all good competition. Again, we don't know exactly how it's going to play out, but let's see what happens.

17:42Yeah, I'm thinking back to when I think it was either Secretary Yellen or maybe Fed Chair Yellen who said that wireless was actually a big needle mover and just overall price activity in this country, meaning CPI, you'd think that'd be a welcome relief given the inflation backdrop? Well, if you step back again, you know, what happened in my perspective during the Biden years is, at least in the technology sector, they put a real regulatory wet blanket on top of this sector. There was heavy-handed regulation, deal flow dropped to about zero, and the market was sort of stuck in a lot of irrational ways, spectrum being a key piece of that, right?

18:18We had spectrum in the hands of providers that weren't necessarily using it, that weren't putting it to its highest and best use. And I think it's a good thing that spectrum can now rationalize. And now is the time for people to do that. Consumers are going to benefit. Again, we're seeing prices drive down. And that's a good thing, whether it's for CPI or just for consumers' pocketbooks. Brendan, Verizon had some thoughts on this, saying in a statement, quote, Satellite complements traditional terrestrial networks. Acquisition of spectrum alone does not provide the network or infrastructure to offer true nationwide coverage or to compete with mobile providers.

18:52Essentially, they say a company can have billions of dollars of spectrum, but if they do not have the network to use it, it's just empty airwaves. Does the FCC, will it be monitoring SpaceX's use of spectrum and its ability to really build out the true traditional terrestrial type of infrastructure needed to be a mobile carrier that competes? Well, there is a big debate taking place right now. Is SpaceX serious about being a traditional mobile wireless carriers with terrestrial towers? There's people that are taking both sides of that bet right now. Again, we're going to step back and watch it.

19:29But again, for our part, we just want to make sure that this spectrum can continue to move. When you talk about spectrum as a general matter, maybe sort of just a quick 101 for viewers, there's basically three categories of spectrum out there, what we call low-band spectrum, which is really good for covering wide geographies, penetrating through buildings. There's then high-band spectrum, which gives you really high capacity, high data rates, but it doesn't travel very far. It doesn't go through buildings. And then there's the mid-band spectrum, obviously, which is a significant compromise between the two of those.

19:58That's really what people view as the Goldilocks. So SpaceX obtained mid-band spectrum through that Echo Star deal. Now, this new deal announced yesterday gives them the low-band spectrum, at least a portion of low-band spectrum. So carriers are moving away from high-band. So if people are serious about getting into the terrestrial game, you're going to want a portfolio that includes both mid-band and low-band. SpaceX now has that. But again, there's going to be lots more spectrum on the market. As you noted in the opening, we've got 25 MHz coming online and in auction soon. That's sort of right between mid-ban and low-ban.

20:30So there's lots of opportunities. And again, we think there's going to be a range of providers that are going to innovate, that are going to compete, and that are going to succeed. Turning to Disney, Chair Carr, it was a busy week. This lawyer for Disney did urge a U.S. judge to block the FCC's early review of the licenses for their eight company-owned ABC TV stations. How do you think that hearing went? I think it went really well. I mean, look, the DOJ lawyer that was representing the FCC there made clear that Disney filed a meritless case in the wrong court at the wrong time. They have made clear that they don't like the fact that the FCC issued a decision to call their licenses in for early renewal.

21:11But the Communications Act is clear that if you have an issue with that FCC decision, you appeal it to the full commission, then you go to the Court of Appeals. But instead, Disney has tried to run an end run on that process. So ultimately, I think we're going to succeed on that issue alone. And look, as we've talked a lot about on this program, broadcasters are simply fundamentally different than cable shows or podcasts. They made a deal with the American public. They got to comply with their statutory and regulatory obligations. And we have a significant investigation going into Disney right now.

21:40There's been petitions to deny filed against Disney that goes both to their DEI discrimination, potentially, as well as their other conduct during their license term. So we feel good about where we are in that litigation. But again, we also have a number of proceedings, probably a dozen or more, looking at broadcasters across the board to make sure that they're complying with their public interest. So it's not just one particular investigation that we're solely focused on. And we're going to continue to move on all fronts to remind broadcasters that they've got to operate in the public interest.

22:11The lawyer argued that the FCC, in their words, was holding a guillotine over ABC's head and said that already the news division there had tempered some coverage of the administration. Is that OK with you? Well, Disney's PR game sort of is running headlong into Disney's legal strategy. As a PR matter, Disney says that they're fighting and they're standing up and they're not changing anything. And you get into court and all of a sudden their lawyers start playing possum and claim that they've had to significantly change how they do their operations, that they're not bringing Democrat candidates on TV as much, that they are significantly altering their behavior.

22:44So I don't know how you reconcile their public PR game with their courthouse lawyering. But what I'll say is if anyone has had to change their conduct because the FCC is looking to impose and hold them accountable to the public interest, then perhaps that they weren't operating in the public interest in the first part. But anybody that has been operating in the public interest, consistent with their regulatory obligations, should feel no need to change their conduct now that the FCC says we're going to enforce those laws. Well, I think part of it, though, is the definition of the public interest and whether that has changed over time.

23:15How close are you to making a decision about the fate of those licenses? Well, we haven't made a decision and we haven't made a decision about when we're making a decision. And in terms of the public interest standard, I think the FCK law is actually pretty clear. In fact, we summarized it recently to make sure that people understand it, that the touchstone ultimately is localism. We want people identifying the needs of their local communities and responding to it. And I think this country is really better off when we have trusted, respected national news media. We want that. Hold government officials across the political spectrum accountable.

23:50But the data is coming back, studies, Pew and others, and saying the American people simply don't trust these legacy broadcast journalists. That's not good for that industry, but it's not good for the country either. We want a trusted, respected news media. Finally, Chair Carr, a touchy one. The Pentagon, an official yesterday said that the Army officer convicted in the Fort Hood shooting in 2009 would be executed in public, that that would be broadcast via live stream. It's scheduled for December 3rd. I don't know whether you want to view this broadcast versus live stream, but I just wonder if you think it's healthy for the airwaves in general, given that it's been normally a practice that we associate with more terrorist regimes around the world.

24:34Well, I think, look, my understanding is it's not on broadcast TV, so I don't think there's a role for the FCC one way or the other there. But I trust Secretary Hegseth. I mean, he's implementing the laws and the regulations that are relevant to the Department of War. And I think he's doing a great job. And I trust that he's making the right call on these issues. Is it something that you would allow on broadcast if they wanted to? Look, I mean, ultimately, we're going to defer to Secretary Hegseth and, you know, his decisions on how to move forward with this. chair car thank you uh obviously a lot of ground to cover appreciate the time as always good to see you yeah great to be with you guys appreciate it thanks fcc chair brandon car still ahead gabelli funds portfolio manager john belton will join us we'll discuss where he sees opportunity in the tech sector right now later on we'll bring you a live report from macau the world's gambling capital where betting is lagging pre-pandemic levels despite some record visits our contested brewer is there at the nba commissioner this morning squawk in the street i'll be right back Ever notice how every new AI tool asks you to explain your business to it all over again?

25:37Google 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. Make work less work. Try Google Workspace with Gemini at goo.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.

26:20Download the latest episode and subscribe at schwab.com slash marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington,

27:02Had some curveballs thrown our way this week, but the S &P really pinned to 7 ,800 as it had been prior to, say, this report in the FT yesterday about OpenAI's revenue run rate. VIX with a 14 handle is sort of a classic Friday VIX action going into the weekend. So true. Time now for a news update. Brandon Gomez has that for us. Hey, Brandon. Hi, Leslie. Hours after former International Criminal Court Judge Navi Pillai was awarded the Nobel Peace Prize, the Trump administration imposed sanctions on the court. The move was expected. Secretary of State Rubio announced a plan over the summer to isolate the court and called on other countries to withdraw from it.

27:39Meantime, in tech news, AI surveillance startup Flock is reportedly laying off hundreds of employees as it faces mounting backlash over its surveillance cameras and license plate readers. That's according to Reuters, which says it represents about 18 percent of the workforce and comes after a voluntary buyout program was offered. And the former Prince Andrew awarded$400 ,000 in compensation today after the king evicted him from his longtime home amid outcries over his relationship with Jeffrey Epstein. The Crown Estate, which manages royal assets around the world, released the figure today as it announced the former prince has fully vacated the 30-room Royal Lodge near Windsor Castle.

28:16At your news this hour, Leslie, I'll send things back to you. All right, Brandon, thank you. Coming up, Gabelli Funds Portfolio Manager John Belton will join us. We'll discuss how a report around OpenAI's softer-than-expected revenue is impacting the broader tech sector. Later on, the social reckoning debuts in theaters this weekend. We're going to break down the box office expectations amid a flurry of news in the movie business when we come back. Welcome back. OpenAI's annualized revenue in September coming in below expectations. Kate Rooney joins us with more on the domino effect to the broader tech sector.

28:47Kate, we talked about it in the wake of the report. We have had the overnight to chew on it a bit. But, Carl, I like the air quotes. That's right. So there has been a lot of attention around an accounting discrepancy, as it was described in OpenAI's revenue numbers. The initial headline sent shockwaves through the tech sector. It pulled down some of the chip names, the Nasdaq as well. The headline that got everyone's attention, OpenAI's revenue was about 20 billion dollars, lower than expected. The Financial Times reporting annualized revenue approaching around 50 billion dollars at the end of September.

29:19That was compared to$70 billion. It was widely reported. I did confirm those numbers with a source. But importantly, the discrepancy from what I'm hearing was more about accounting than slowing demand, which is really what spooked the market. OpenAI in previous projections had included sales, from what I'm hearing, through cloud partners. Think of Amazon and Microsoft in new pitch decks for its latest funding round. I am now hearing they are excluding certain partners from revenue. It is considered a cleaner number when they go out for this fundraise. It is part of a$30 billion ongoing fundraise at a$1.4 trillion valuation, according to sources.

29:56That has been gaining momentum from what I'm hearing. No term sheet has been signed yet. But these AI companies are also widely using annualized revenue and their run rates to show growth rather than traditional public company metrics. So that can also make it harder for investors to get a full picture here. The knee-jerk reaction from the market yesterday was a reminder, guys, of how dependent this entire AI trade is right now on the growth of private AI companies. So any breadcrumb that revenue isn't keeping up tends to add to the bear case. AI companies could be overbuilding. And then the demand isn't there on top of all that.

30:29And the question around chip demand, a lot of these tech names are investors in OpenAI and Anthropic. A lot of the biggest tech names, again, have a stake in these guys. So that adds to the weakness and sort of the knee-jerk reaction we saw. Yeah. And the questions around circular financing, growth versus net revenue, so many kind of accounting questions here as well. Is there a sense that going public would be a net positive for clearing up some of these issues? Or could it actually be just even more confusing given that there isn't quite the same standard of accounting as there is for other companies that may be going public?

31:10Yeah, Leslie, there's sort of two camps in this. There are the folks who say, gosh, if they just went public, we would have this all in the public eye. They would have to report quarterly results. But I was talking to a banker yesterday who said this is actually making some investors nervous because, first of all, you have rates going up. A lot of the build-out for AI has been increasingly dependent on debt. If these companies and their IPOs don't go well and you actually see weakness in the numbers, that's causing jitters. So I think the folks that want these companies to go public also want them to go public and have the results look good to prop up the AI trade and keep the momentum going.

31:44The other side of this is if they don't go public, then you don't have the downside necessarily. So if they're able to kind of keep the numbers behind the scenes, grow in private, then you don't have the knee-jerk reactions. But the problem right now is that a lot of this is based on reports, based on what a lot of us hear from sources. And it's not full information. And it's annualized revenue, as I said. So it's sort of a moment in time extrapolated out, trying to show growth. And that's more of a venture mindset versus public markets. But I think what's unique about these companies, they're trillion dollar private companies, and they are so tied to the entire market, not just the tech trade.

32:20You saw the hit on the Nasdaq. It took the S &P down yesterday. So it's a good reminder. Yeah, no, it's spot on. And the kind of ubiquity of ARR as that metric is because the growth has been so strong that it was incomparable to a lot of typical companies in terms of its growth rate. And that was seen as a way to fully capture that. But it's also created some confusion, to your point, because it's not these are not kind of audited financials that are publicly disclosed. They are kind of game of telephone communicated through sourcing to reporters. And so it leads to some confusion there. Kate, thank you for keeps us busy.

32:55Exactly. For sure. We appreciate you explaining all of that, Kate Rooney. For more on the tech trade, let's bring in Gabelli Funds Portfolio Manager John Belton. John, what is your take on all of this, especially given the knee-jerk reaction we saw yesterday, Kate's clarifying explanation of kind of where the discrepancy may have been? What do you think this means for the sanctity of the market and for the financials of these companies? Well, yeah, thanks, Leslie. I mean, first, I'm surprised we're still talking about this. I am amazed at how exciting suddenly accounting, gross versus net revenue accounting has become for the market.

33:36But I guess the bigger point, which Kate really touched on, is the market is paying such close attention to revenue trends at OpenAI and Anthropic, and for good reason. My view is the sooner we get financials for those companies out in the public domain, the healthier it's going to be for the market. So I think if you look back over the last several months, when the tech tape has been strongest, when the tech sector has been acting best, it's been when you've had some assurance that open AI and anthropic revenue trends have been heading in the right direction. That has really been the story of 2026, revenue growth at those companies.

34:17That is what's driven such massive appreciation, a lot of these AI stocks. So I think revenues for these companies are going to continue to be very important. The sooner we get more official disclosure on it, the better. I don't know about you. I feel like accounting has always been really exciting, but maybe even more so in the last 24 hours or so. So given just the, you know, what you underscored there, how important is open AI and Anthropic to just the viability of the ecosystem? And are you concerned that so much attention and pressure is being put on two companies, you know, with the broader supply chain and the broader tech sector?

34:59No, I think these are just the bellwethers of sort of a new era of generative AI. And I think if you take a step back, where has AI technology found commercial applicability? Where has it found commercial use cases? First, I'd say it was digital advertising. Second was, I'd say, data processing. And then third has been these generative AI model services. So things like chatbot services and agentic products like agentic coding tools and most recently consumer agents. And so I think so long as AI technology has use cases, has users, has adoption and has monetization, this capital investment cycle can continue.

35:43And so I think that's why the market is so laser focused on these companies is because collectively they're now generating what? Closing in on$150 billion of ARR that's grown, I don't know, close to 10x so far this year. That is just a very positive indication of where the monetization potential for the technology is going from here. I think that's giving management teams the confidence to continue the capital investment cycle. And that's giving investors the confidence to invest behind that capital investment cycle. Although others sort of are watching this transition to open source versus frontier and wondering whether that creates revenue risk that's new.

36:27John, what's your take on that? Well, yeah, so I don't think it has to be open AI and Anthropic that end up the long term winners for the whole tech tape to succeed. I think what's really important is, are there going to be, again, new products and services that are created with this technology that can be monetized by somebody? And so I think what do open source models unlock? They unlock cheaper access to the technology for more people. They potentially expand the market in that way. And I think long term, the hope is they lead to the development of more products and services that leverage AI technology.

37:09I also think that, go ahead, Carl. And I was going to say, like, if you're right and they don't need to be the two winners, does the change, I mean, the then suggested change in their valuation create risk for the investment ecosystem that's built around them? I think first I'd start by saying I don't think it's open antidepressant valuation that's the most important thing to the market right now. I think it's their revenue trends. And I think their revenue trends, they are the giants in the industry today. And so as a public markets investor, their revenues is kind of the cleanest estimate I get of the size of the market and the trajectory at which the market is growing.

37:55Should we be concerned about the inability for the IPO market to kind of be hospitable to some of these data center companies to kind of be accommodative to some of the other the aura rings of the world that are trying to come out? And does that potentially create any headwinds for Anthropik and OpenAI's ability to make their own debuts, which have already been on a stretch timetable relative to potentially what we could have seen if they decided to go as fast as possible? Look, again, I think it's their fundamentals, not the performance of their IPOs on day one or week one or month one that really matters for over the medium to long term here.

38:36So, you know, I think the IPO market, you'd have to ask a much smarter banker than me for a view on that. But I view that as more of a kind of near term barometer on market sentiment that can be fleeting. but really what's important to the long-term, to the data center vendors, to all the companies in that supply chain, in that value chain, what's really important is the long-term fundamentals of businesses like OpenAI and Anthropic. All right. Never a dull moment in this space, John. Thank you. Appreciate it. Thank you. When we come back, I'll bring you a live report from Macau, the gambling capital of the world.

39:16We will discuss why gambling revenue is lagging despite some record visits to that region. We're back in a minute. Welcome back. The NBA is back in Macau for a second year. And while the visits to the region have hit records, gambling revenue is still lagging pre-pandemic levels. Contessa Brewer joins us live from Macau with more. Good evening to you, Contessa. Thank you, Leslie. Nice to see you. Look, it's a big week in Macau. Golden Week has just wrapped up where Chinese families travel. NBA China Games pit the Houston Rockets against the Dallas Mavericks. The Rockets won tonight, but there's another matchup on Sunday.

39:54This is exactly what the Macau government envisioned when it extracted commitments from the six casino companies here to invest big in non-gaming amenities. And it looks like it's working. Visitation is way up over pre-pandemic levels. August just set an all-time record for monthly visits, up 6 % over last year. But gambling revenue declined 7 percent. And then September saw an additional 17 drop month over month in gross gaming revenue. It looks like these visitors just aren't hitting the baccarat tables the way they used to before the pandemic. Analysts are blaming Chinese macroeconomic issues and tax crackdowns on offshore accounts.

40:36I asked Las Vegas and CEO Patrick Dumont whether this is just the new normal. Lots of visitors, less gambling. We invest through cycles. No business goes straight up. And I think for us, we're very bullish about the future. We're very excited about the tourism and the type of tourists that we have coming to this market. This is the number one gaming market in the world. It has had some volatility, but in our view, the future looks very bright. Seaport research analyst Vitaly Umansky says that MGM and Sands have gained market share recently. Wynn and Melco have lost it. He's forecasting softness for the rest of October, flat through the rest of the year and then only 3 % growth next year.

41:20So, you know, for investors, they just want to see some big catalyst and they're just not getting it right now, guys. Kintessa, how would you compare what you see on the ground there with what you see in Las Vegas?

41:35It looks very similar. I mean, now this is NBA weekend, so you've got everybody wearing NBA jerseys and shopping for merch. That looks very much the way it does in Las Vegas when the Raiders are playing or if you've got a big sporting event like F1, people are coming in for these tentpole events. That is what the Macau government wanted. They wanted to see a diversification for their economy away from hardcore gambling. They cracked down on the junkets. I mentioned the tax, the offshore tax issues here. It's just a different kind of mix. Although I did ask MGM and Wynn's last week when I was in Las Vegas about Macau and they said look they're still getting a lot of serious gamblers coming in and filling it out but maybe they're bringing their teenagers with them and their wives and their families and all of those folks are enjoying the more family friendly amenities that Macau is now offering.

42:31Your world tour continues contestually you go from Monte Carlo from here? Yeah I mean that's that would be next I haven't actually figured out how to make CNBC pay for the round the world trip. But where in the world is Contessa Brewer has a ring to it? Really great stuff and great stuff with the commissioner today really brought to life just the craze behind basketball in that part of the world. Contessa Brewer. Yeah, I mean, and these Chinese fans are just incredible. They really have a lot of passion. Yeah, more, I'm sure more throughout the course of the day. If you can stay up, that's our Contessa Brewer in the cow.

43:05When we come back, the social reckoning hitting theaters this weekend. We'll break down what to expect after a short break. Welcome back. The Social Reckoning is making its debut in theaters this weekend. Our Julia Boorstin joins us with more. Hey, Julia. Well, big tech is under the microscope in Hollywood with Sony's The Social Reckoning from filmmaker Aaron Sorkin. It's his take on the Facebook files, whistleblower Francis Haugen, and it's a follow on his Oscar winning hit The Social Network from back in 2010. But this film is projected to open with just seven to eight million at the domestic box office this weekend, far less than the more than$22 million opening for the social network 16 years ago.

43:42Also, this film, which is more focused on Haugen than Zuckerberg, has drawn a Rotten Tomatoes critic score of 58 percent, while the social network score was 96 percent. Another factor that could hurt this weekend's film, which is about Haugen's release of internal Facebook documents, which showed the company's knowledge of societal harm users is that it's up against MLB playoff games in addition to the NFL. We reached out to Meta about the movies. They told us they have no comment on the film. Now, it's unclear what kind of reach or impact Sony's movie will have, but it is one of a number of films that is looking at the negative impact of technology.

44:23And historically, movies have impacted public perception around the likes of climate change and other topics. Now, another one of these films. Also out today is Alex Gibney's four-hour Elon Musk documentary. It will have a limited release by independent studio Bleecker Street. Now, early showings of this documentary drew critical acclaim and also criticism from Musk on X. And then Artificial, the movie about Sam Altman's brief ejection from the CEO role at OpenAI. That opens wide on Christmas Day, and it is already generating a lot of buzz. Carl? Yeah, Julia, did you even throw in the Elizabeth Holmes documentary from Nathan Fielder, which, by the way, is getting buzzed as to whether or not it should or would be considered not for best documentary, but the Oscar for best picture?

45:12Yeah, you know, I did not want to include Elizabeth Holmes in the same category as Mark Zuckerberg and Elon Musk because Elizabeth Holmes is a convicted felon. So there is, it's really interesting that while there's this documentary about her in the lead up to her time going into prison, you have a real critical look at these CEOs who are running publicly traded companies, these real tech giants who are succeeding right now in their work in the tech ecosystem. So that's really an interesting moment right now for these successful tech giants. I would say Elizabeth Holmes, who is a convicted felon, that documentary looks fascinating.

45:49I cannot wait to see it, but perhaps a different kind of critical look at the tech. I guess we could have done Cupertino instead on television. But your point is right. The zeitgeist is definitely moving. Yeah, the zeitgeist is moving. Cupertino is a TV show that is about lawyers who are taking on the tech giants in Silicon Valley. We're in a moment right now where there is so much conversation about the potential dangers of tech. And now Holly was jumping into that as well. Julia, thanks so much. Julia Boorstin watching some of the movie business. By the way, a reminder, Sarah is on real time with Bill Maher, airing tonight at 10 p.m.

46:27Eastern time on HBO. Michael Douglas, I think, is the one on one interview with Maher. But she will be at the table with Senator Tillis. Going to be an interesting conversation. Yeah, as we as there's just so much to consider in politics and business. Absolutely. Clear out those Friday plans, Friday night plans to watch. Our thanks, as always. Thank you. Look forward to CPI next week. Seventy eight hundred. Have a good weekend. 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.

47:02You 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. To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules.

47:33Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.