11AM Hour: Intel Plunges After Earnings, CFTC Chairman on Utah Charging Kalshi & Twilio CEO on Earnings 10/30/26

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1:05Good Friday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla, live from post-night of the New York Stock Exchange. Today, big tech's troubled week. Set to wipe out more than$1 trillion in market value as earnings reports renew fears about the AI boom fading and all the disruption fears. We'll discuss whether the pullback presents a buying opportunity. Twilio is getting caught up in tech's pain today despite delivering an earnings beat. The street expressing some concerns about slowing revenue growth compared to its AI expectations. And we'll break down the quarter with the CEO in just a few minutes.

1:37And the escalating battle over predictions market oversight with the Trump administration's top Wall Street regulator now suing Utah over its attempt to clamp down on Calci. We're going to discuss all of this exclusively with the CFTC chairman Michael Selig. As for the markets, We close out October with a month-to-date loss just slightly for the S &P at 76.20. Sectors that are working today really just include health care, staples, utilities, and energy. Got some relief in yields, though, with the 10-year briefly getting down to 491, about a seven-week low. Yeah, maybe helping some of the other sectors, the bond-sensitive ones like staples and health care and utilities, really climb back to life this week in a big way.

2:19Intel is the stock story of the day. It's on pace for its worst day since 1974 after issuing tepid current quarter guidance. Joining us now to discuss the results is more insights and strategy CEO and chief analyst Patrick Moorhead. So just to just to get it straight of why the market is so disappointed, Patrick, it's on the PC slowdown. Right. And what they said about demand, given the high memory chip pricing. But that wasn't that wasn't really the hope of why people were buying Intel. So does the price reaction make sense to you? It really doesn't because the reason that people are buying or were buying Intel in the 120s was all about foundry or the ability to make chips for other chip makers.

3:01And nothing has changed related to that. Maybe there are some questions about Intel's ability to execute on that based on what's going on right now. But it doesn't make a whole lot of sense, particularly given that everybody knew the PC market was going to be a way down. I do think that Intel's guide could have incorporated that. And there was even discussions in prior quarters about the slowdown. We're seeing it everywhere. But I think when it comes to execution, getting substrates to make chips and the PC market, we'll see a light comparison when AMD posts next week. So you'd be a buyer on the weakness today?

3:47I think Intel's prognosis is very, very positive here. And I think a stock that was at the 120s now in the 60s looks like a very good deal. You know, I do wonder, though, if PC demand is deteriorating worse than the market expects, if that does have further implications on the momentum when it comes to building out the foundry and AI business in America, if it can't balance those two businesses in the right way? I think once Intel gets their products aligned with their foundry, meaning Intel's PCs and servers are spread out across multiple different levels of manufacturing, spreading spread out between Intel's own factories and even TSMC.

4:35In 2027, there was an alignment where server chips as well as PC chips are aligned on 18A and 18AP, where Intel can actually make a whole lot more money. The great thing about the PC market, even though it's tragic right now, is that demand doesn't go away, right? just people may have ridden a PC for five years. They're not going to wait for another three years to buy it. So that demand is very much pushing forward as soon as memory prices can get a little bit more stable and less crazy. When is that? Well, right now it's looking like 2028. I know some people are super optimistic about 2027, but quite frankly, I'm not seeing it given the latest disclosures.

5:33And we had forecasted eight months ago that at least on the server side, memory would be an issue at least into 2030. And we heard that from Micron and SK recently acknowledging that. But the PC market is different. The memory is less complex than is going into the data center. So I do have optimism for 28, just not a whole lot of optimism for 27. You know, the other day we were looking at a six month of AMD versus Intel. And even before today or last night, AMD was handily beating it. Now the spread's even wider because Intel's down 30 % over six months and AMD's up 40. But do you think there's risk in AMD's quarter?

6:17Does it converge maybe closer? Does that spread narrow? I think there's less risk just given the fungibility of wafers and packaging coming out of TSMC. Both PC makers will have the same potential challenges with inventory in the PC market. But on the data center side, I believe that TSMC is going out of their way to supply AMD with as many wafers to make their chips. Because quite frankly, it's a meat comp. It's competition between TSMC Foundry and the Intel Foundry. So I'm actually optimistic about AMD's prognosis. You know, Bernstein put out a note saying before you get to the future, you have to live through the present.

7:06I thought that was a good way to put it. And in a way, it's kind of reminiscent of the Google quarter where core business of search is being disrupted by AI. And they've got a great AI story as well that's growing very fast. The question is, how do you how do you deal with some of these these companies that are facing disruption in their own business to get to the other end? And how long does that take? Yeah, so I think it's a fair I think it's a fair assessment by Stacey, who is the king of who is the king of one liners. but this this particularly is true in the intel foundry business meaning uh looking forward at foundry execution of intel's own products uh there will be carryover to the execution uh in in the future um but but i think intel is a little bit different on this given all of the challenges they came in with and by the way when lipu came in he did not make the claim that this was going to be a couple-year turnaround.

8:05This is going to be a multi-year turnaround, and I think we're seeing some products and maybe even some execution hiccups on the way there. So what I will be looking at very closely is execution from other chip makers on substrates and how other makers like AMD were impacted. And if it's a very similar type of story, which I don't think it will be, then I think a lot of Intel's challenges can be blamed on market-oriented or things out of their control. OK, stock's still up. We're showing 160 % since Liputon came over as CEO, but getting shellacked today. Patrick, thank you for joining us. Thank you.

8:52The other big tech earnings mover today is Amazon. Kate Rooney joins us with more on a name, Kate, that is basically flat on almost two years. Yeah, Carl, no, the stock chart tells you the story. And a lot of this comes down to expectations. But cloud growth for Amazon, at least last night, was not nearly enough to offset a miss on its core retail business and then much bigger cash burn. When you look at AWS specifically, it was pretty strong. Growth was fastest in five years. It technically beat consensus on year-over-year growth. But I mentioned expectations. Those climbed after Microsoft's blockbuster print just a day before.

9:30The bogey, as RBC put it, was about 41%, even higher for some, despite the actual analyst estimates being closer to 38. CEO Andy Jassy did say AWS could be a trillion-dollar business, talked about 40 % growth in the coming years. The backlog was strong. It was up almost 190%. And Jassy had some bullish commentary about the semiconductor business. Amazon plans to now sell chips externally to other companies in 2027. CapEx was unchanged. It was$220 billion. But Andy Jassy and Amazon management said that they do plan to spend meaningfully more next year. Free cash flow, also negative. That dropped by another$42 billion roughly in the quarter.

10:12That is a more than 300 % swing from a year ago. And then I mentioned retail. So it was a miss on sales. They talked about this being partially due to Prime Day shifting and that timing having an impact. E-commerce, though, still makes up a majority of revenue. Even though it's not the fast-growing cloud business, it's still important for Amazon. And for the current quarter, right now in Q4, Amazon missed operating income and sales guidance, which also weighed on the stock. You also had advertising growth decelerating. As Bernstein put it in the guide, they say, it leaves a lot to the imagination.

10:45Talked about the trajectory of retail and advertising implies little room for further AWS acceleration against tougher comps. but perhaps a reset of expectations, they say, is exactly what the company needs right now. Street's still pretty optimistic on the long term for Amazon, at least this morning. Barclays writing stock performance and sentiment remain in the doghouse, but setting up for a significant move higher. And then Morgan Stanley put it this way, their headline, tricky today, but trillions on the way, guys. All right. A lot of analysts defending their bullish calls on Amazon, on Intel on Alphabet this week.

11:19Thank you, Kate Rooney. We're getting some new developments right now on Binance. Mackenzie Cagallus with the story. Mackenzie. So, Sarah, we're hearing from Binance CEO Richard Tang. He says that withdrawals could resume within about 40 hours as the exchange essentially rebuilds its internal system following that record$6.3 billion hack. Now, Tang says Binance will not turn that withdrawal system back on until the new system passes rigorous testing, but that the company is now hopeful that users will regain access to withdrawals before its Sunday deadline. At this point, the exchange did re-enable deposits earlier today.

11:54He also says that Binance plans to publish a full proof of reserves by Monday, if not earlier. Tang adding that the company has reserved its own funds to cover the stolen assets, including about$5 billion already held in the same tokens that were taken. We're also getting more detail on how that attack actually happened. Binance initially pointed to a compromised employee laptop, but Tang now says that the investigation has uncovered additional breach points. The Binance chief reiterating that the attackers found a way to get access to its hot wallet to approve transactions without going through the company's normal security checks.

12:28But importantly, Binance really reiterating the fact that the hackers did not steal the wallet's private keys. And we heard from the FBI telling CNBC in a statement that it's aware of the incident. It is engaged with relevant public and private partners to understand the scope of the activity and that it's coordinating the appropriate investigative steps. Sarah? Okay, thank you, Mackenzie. Mackenzie Segalos. And we're going to have much more on those steps when CFTC Chairman Michael Selig joins us the next hour. Coming up, shares of Twilio getting crushed on the heels of some disappointing guidance.

12:59CEO is going to join us next to discuss as markets try to find a way out of this weak session, but still close to session lows, 76.13 S &P. 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. Vantage Score safely broadens access to the credit economy and brings 5 million mortgage-ready borrowers into the market.

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14:24This 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. Welcome back. Take a look at shares of Twilio today, down 17. Despite reporting a beat on the top and the bottom line in Q3 and raising guidance into year-end, they do point to consumer AI agents as a tailwind for the business.

15:07Joining us this morning in a CNBC exclusive is Twilio CEO Kozima Ship-Chandler. Kozima, welcome back. I was going to say the guidance really looks fine relative to consensus, but there is this notion that you're being prudent ahead of Q4 because sometimes usage gets a little bit squirrely. Is that true? Yeah, more or less. I mean, we had a great quarter, as you said, a second ago. It was a clean beat across the board. 16 % of the top line, 18 % gross profit growth, and record cash flow and profitability. So we feel pretty good about the results, actually. To what degree are you being cautious?

15:42I mean, it's a usage-based business model. So there's always, like, some degree of inherent conservatism in terms of the way that we think about things. I think the long-term and very secular tailwinds here are intact. I mean, voice AI, if you think about it, is 1 % penetrated in terms of, like, voice interactions that customers are having. Consumer AI basically just got started a few weeks ago. I think both of those represent longer-term structural tailwinds, and that's a great setup for Twilio long-term. Can you explain in simple language why agents are a longer-term tailwind? Yeah, I mean, if you think about like voice interactions today, okay, so as I said a second ago, like the percentage of voice AI interactions that take place, it's about 1 % of the total number of voice minutes that get consumed.

16:34What every one of these companies that's in the voice AI space is putting out there is these AI agents who end up interacting with consumers. To be able to do that vis-a-vis Twilio, they need voice infrastructure, programmable voice software capabilities to be able to deliver that experience. That's what creates an opportunity for us. And the great thing about that is, like, we supply everybody. So we don't participate at the application layer. We participate at the infrastructure layer. that creates a lot of opportunity. It's kind of the same thing in the consumer space. Obviously the nature of what happens there is a little bit different, but if you think about like these different consumer agent companies, there's all sorts of different companies that have put products out in the last few weeks.

17:18They're gonna require voice infrastructure, they'll require email infrastructure and messages. That will provide tailwind for us as well. Yeah, I mean, I always think, I don't know if this is exactly a good application, But when you use some of these personal AI agents, the one thing they can't do now is they can't make calls for you and they can't wait and they can't wait for, you know, to get your Verizon customer service on the line. And they can't wait to negotiate on the line. I don't know, insurance questions and claims. So is that is that a big new market? Yeah, I mean, I think you're you hit the nail on the head there.

17:53I mean, I think there's there's two dynamics based on what you said. One is, is that businesses are blocking this stuff. Right. So it's going to take some time in terms of the adoption cycle for businesses to actually accept agents on the other side, being able to call them to those businesses. The other dynamic, though, is like the regulated industries, especially insurance, health care, financial services. My suspicion is, is that they'll be the last to go. Obviously, the stakes are pretty high. But again, for Twilio, like that's a big opportunity on the come. And it's kind of underscored also by this idea around identity, where we also just launched a recent product into private beta to be able to use all of these different capabilities.

18:36You've got to know who the consumer is. That's being represented by an agent on the other side. And so we think that's exciting, too. But is it your model? Is it your AI model, voice model? It's not our AI models. It's our AI infrastructure that sits below that. And the beauty of that is we can be a neutral participant. Every one of these other companies that's participating at the application layer, they'll come to use Twilio, use our infrastructure to be able to put their applications out there. Is that like an 11 labs and a deep gram? Some of the analysts were asking about your relationship with them and why you wouldn't just acquire them if they're the ones doing the AI voice labs.

19:16I'm not going to get into M &A, but it's those kinds of companies. Exactly. I mean, those are the kinds of companies that sit at that application layer that need voice infrastructure underneath. They come to Twilio to provide that capability. So the identity product, you mentioned private beta, becomes generally available next year? Does it move the needle on metrics? Next year sometime. I don't think it's going to be like a significant revenue contributor next year. But again, with the advent of all of these different agents that are out there, I think we will benefit naturally from the structural tailwinds that are out here.

19:52And that's very exciting for us as we build towards it. So just to be clear, how big of a is an opportunity consumer voice, like I mentioned with Muse or Instinct versus Enterprise, which is really where you where you play? I think the bigger opportunity in the near term is really going to be around voice. I mean, so many of the interactions that our customers want to put out there are voice interactive. There's a kind of a threefold benefit that goes with that. Our customers are seeing higher revenue. They're seeing lower cost. And it's a better consumer experience, especially if it uses a context layer, because it's solving a customer's problem.

20:30I think consumer AI is very much on the come. Again, like a lot of things have got to get figured out in terms of businesses accepting consumer AI. The technology is very cool, to be sure, but I think it's going to take some time. But again, like these are two structural tailwinds that exist. Twilio will be a major beneficiary of both of them going forward. Yeah, it's definitely permeating a lot of our conversations with financials and retailers who have to establish some protocols before this gets broader. Kazima, appreciate it. Stocks moving around, but we appreciate you coming on. Thanks. Thanks, guys.

21:04Kazima Shipchandler over at Twilio. When we come back, CEO of Digital Realty Trust joins us. That stock now heading lower despite the data center operator raising guidance. Later on, DWS Group's David Bianca will be with us. Why he sees today's tech sell-off as a buying opportunity as Squawk on the Street continues on this Friday. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow.

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22:20This 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. The market here is an interesting tussle between some of the bears and the bulls. We are off session lows, although the S &P about 10 points away from a 7 ,500 handle.

23:01Amazon actually is 10 bucks off the lows of the session within a percent of going green. That would be interesting because their guidance really wasn't that much to be concerned about. No, and we spoke with John Blackledge and some of the other analyst notes are saying this was not a Google quarter where there was some sort of disruption in the core business around AI. A lot of analysts out defending that one. Time now for news update. Leslie Picker has it for us. Leslie. Hey, Sarah. Secretary of State Marco Rubio hosting top diplomats from the G20 nations at meetings in Atlanta today. But the Associated Press reports the U.S.

23:36canceled the traditional group photo because European representatives objected to standing beside Russia. This two-day meeting is meant to set the stage for December's G20 Leaders Summit at the President's Miami Golf Club. Investigators in Scotland said today they are conducting inquiries into former Prince Andrew, the time that he spent with late sex offender Jeffrey Epstein and Ghislaine Maxwell at the King's private estate in Balmoral. Police say the probe is in its very early stage. The Justice Department released images earlier this year appearing to show the former prince on a shooting trip with Epstein at the estate.

24:13Lawyers for former FBI Director James Comey in court today as they seek dismissal of the third criminal case brought against him in the last year. Prosecutors are alleging he violated the Espionage Act by leaking info in connection to a 2016 New York Times article. Comey's lawyers say he, quote, steadfastly maintains his innocence. Back to you. Leslie, thanks. Coming up after the break, CFTC Chair Michael Selig is with us while he is defending prediction markets platform CalShea after Utah filed these criminal charges against the company. Plus, we'll get his take on this massive Binance hack affecting an estimated$6 billion.

24:51We're back in a moment. Welcome back to Squawk on the Street. The fight over prediction market regulation intensifying this week after the Commodity Futures Trading Commission, the CFTC, announced it would sue Utah in an effort to stop the state's own lawsuit against CalShea. The CFTC arguing that federal law gives the agency exclusive authority over prediction market platforms. Utah arguing in its lawsuit against Calci that engaging in predictions markets is gambling, which is prohibited under its state constitution. We should also note that CNBC has a commercial partnership with Calci and uses the company's market data across its broadcast and digital platforms.

25:26Joining us now in a CNBC exclusive is CFTC chairman Michael Selig. Chair Selig, it's great to have you. We've got a lot to get to today. Glad to be here. So this is really, I mean, I said intensifying, 14 criminal charges against both founders of Calci, including 13 felony counts against the founders here. They allege that the company violated Utah's strict anti-gambling laws by allowing residents to place bets on sports and elections and other events through its online platform. What was your reaction to this? This is exactly why we've now sued 10 states across the country. The Congress was very clear when they established the Commodity Futures Trading Commission as the exclusive federal regulator for commodity derivatives markets.

26:11They intended for a national uniform system of regulation. Whether I place a trade in Washington state or Florida or New York, we need the same controls that we have in that state as any other state. And so my broker is regulated under a federal scheme. The exchange is regulated under a federal scheme. And when states start to bring criminal prosecutions, and this is no joke, this is serious jail time, I believe up to 15 years in prison against the two executives of this company, that is really serious stuff. And, of course, there's technical legal questions here as to whether a derivative of the sports underlying is a contract that is subject to our federal regulatory framework for the states, as Utah has alleged here.

26:53But this is something for the courts to work out. We're going to argue it up to the Supreme Court, and we believe we're right on the law here. But it's not really something that states should be throwing criminal penalties at founders over. This is really, you know, going too far. I mean, a federal judge has already ruled that Utah's gambling law is applied to Calshi. So doesn't that make this harder for you? We believe that Congress entrusted us with federal regulatory oversight of these markets. When you go and register in exchange with the Commodity Futures Trading Commission, You have a federal regulatory scheme that is intended to cover comprehensively these markets.

27:30Right. You can't have conflicting state laws. As I said, if I'm trading in the state of Florida, you know, with somebody in the state of New York, I can't have two conflicting sets of laws in Florida, New York. I need a federal uniform system of regulation. That's exactly what Congress created. That's exactly what we enforce. And this is going to threaten to undermine our financial markets. I'd be very concerned, you know, if you think about the products in our markets today, virtually every major exchange has sports products. Whether you're the New York Stock Exchange with exchange traded products that have, you know, sports underlying contracts or other products in them, or you're the CME with futures based on sports index products.

28:09You know, this is a threat to every major CEO that they're going to be thrown in prison for up to 15 years for offering a derivatives contract that is lawfully offered under a CFTC regulated platform. But what do you do with a state that has explicitly banned gambling? I mean, it's in their constitution. We've seen since the 1800s states litigate this issue of what's gambling. They first went after the grain futures traders, and they said that their grain futures contracts were gambling, right? The Supreme Court has dealt with this issue. The courts have dealt with this issue in multiple states.

28:46The Commodity Exchange Act created a federal regulatory scheme for these contracts. So we now have two parallel schemes. We have state gambling regimes and federal derivatives regulation. They don't mix. It's like the Ghostbusters line. The streams don't cross, right? These are not mutually exclusive regimes. You can have something that's a gambling contract offered under a valid state casino. And we've carved that out out of our jurisdiction. We put out a rule saying that's not stuff we regulate. But when you offer it on a derivatives exchange, that's exclusively within our domain. But in practical purposes, what is the difference between, just to help us understand, me putting$100 on the Bengals winning on DraftKings and then betting on that very same outcome on CalShane?

29:32We, of course, have different types of economic activities that you can engage in. When you're giving funds to a casino, to a bookie to place a wager, you're not actually purchasing a derivatives contract that can trade on a regulated market. So that arrangement between you and your bookie might have a similar outcome. Maybe you can get similar economic exposure. You don't have the same rights that you carry when you purchase a derivatives contract. And it's not subject to the same comprehensive scheme where you're purchasing a contract that's sold on an order book. So you're trading against other individuals in the market, and then it can be sold back and forth between those persons.

30:05So you can sell your contract back into the market. It also goes through central clearing. When you go into a casino, you have none of those protections. You have none of the rights that you're obtaining when you purchase a derivatives contract. You effectively just have an arrangement with a bookie. It's not a financial instrument. So do you include this and you have said repeatedly on this show and other times that you want to bring this to the Supreme Court? So this would be included in that case? We'll absolutely take this all the way up to the Supreme Court. We believe our jurisdiction is very clear in the statute.

30:36The text of the statute says the CFTC has exclusive jurisdiction over commodity derivatives markets. Sports are validly a commodity under our statute. And so, of course, we'll take it all the way to the Supreme Court. I want to get you on Binance. Huge news today. World's biggest crypto exchange has had now a$6.3 billion hack, the biggest ever. How is this possible in an industry that is supposed to be maturing and increasingly regulated? Is there a regulatory hole? Well, this proves our exact point in proposing regulations for crypto markets earlier this month. The real issue here is that these are unregulated offshore exchanges, and they don't have the same sorts of safeguards that we have in our financial markets here in the United States.

31:18We want to offer a federal option to these exchanges to come and register with the CFTC, and they would be subject to the same sorts of cyber security safeguards that we have in our markets today. So our regulations are designed to protect these sorts of things. It's very concerning that we've seen several cyber incidents in crypto, but they're largely targeting the non-crypto infrastructure. What they're targeting, you know, in this case, for example, was was not the blockchain itself or the contracts in the blockchain. But it was a vulnerability here introduced from, I believe, someone's laptop, actually.

31:52So these are instances that we would see in our traditional markets as well as these blockchain based markets. But with crypto, of course, the funds can move much more quickly. And there's ways to move the assets through things like tornado cash, which I believe was used here to obfuscate where the funds have gone or where they come from. But of course, we have the ability to trace all this in the blockchain. I think the blockchain, the fact that we can trace transactions on chain, even when some of these technologies are used to obfuscate that, gives us a lot of potential as a regulator to be really cop on the beat here.

32:24We do exactly that, the CFTC. And in this case, we'd welcome any of these exchanges to come in and register with us so that customers can be sure that there are cybersecurity safeguards in place. You think we can find out where this money went? I do believe that the blockchain gives us a very good shot. You know, I've heard some allegations and rumors as to where it could have gone. So we're, of course, going to work with law enforcement to assist however we can. We, of course, have broad anti-fraud and anti-manipulation authority in these markets. So we utilize our surveillance tools to track these types of things on a regular basis and we'll assist in whatever capacity we can.

32:58But I do believe the blockchain gives us a lot more ability to track this sort of stuff than, for example, if we had a bank robbery. You know, you had some of the same sorts of instances where you're tracking somebody that stole funds. You know, it's not too hard to look on the blockchain and you have a record of everything that's occurred and where the funds typically move. We had a brief discussion this morning about whether this particular episode is reflective of the evolution of AI tools. Some argue it's not necessarily in that bucket. You know, I think here, of course, AI and superintelligence offer both offensive and defensive capabilities.

33:38So we're able to now work together with the exchanges under our remit to utilize superintelligence to better defend against these types of threats. But here, you can't defend against a wrench attack, right, where somebody attacks somebody with a wrench in physical space or steals someone's computer or gains unauthorized access. Of course, we've got lots of capabilities to bolster the technology and the systems themselves. But there's always going to be vulnerabilities as long as there's physical space around us. And so we're, of course, working with firms to make sure that data is protected, that these types of attacks don't happen.

34:14But we're never going to be 100%. We've got to do everything we can to protect. And that's exactly what our regulations are designed to do. Finally, I want to ask you about the perpetual futures, which we've talked about before and are launching here. You know, on a day like today, if you look at Intel stock, it's down 27 percent this morning. Do you think it's responsible to now allow and have retail traders being able to offer six times leverage on volatile tech stocks like this in these perpetual futures? It's launching next week. Well, of course, we've had security options and all sorts of products that are derivatives under the SEC and CFTC's framework for many years now.

34:56We've, of course, had security futures as well for a long time. They have not been as successful in many of the recent years, but we've now seen a resurgence in the product. We're not a merit-based regulator. We don't tell people that they can trade this product and not that one. We require all products to comply with the same sorts of safeguards and regulations that are very stringent. You know, you mentioned 6x or 7x leverage. You know, these products aren't subject to the same type of leverage, even as some of the products, of course, you see offshore. But even some of the products that are are similar.

35:29But but, you know, I've been trading for some time now, like security options we mentioned. So I do believe it's responsible. We're, of course, going to take our responsibilities as a regulator very seriously and make sure all the controls are in place. But people are going to trade what they want to trade. We're not here to stop them from trading products that are legal and valid. We're here to make sure the controls are in place so that sorts of manipulation, fraud and other types of bad activity are not happening in our markets. But even if that's dangerous for, I mean, and sort of a problem for people to do, what would happen today on a day like today?

36:04Again, we're not here to say that a particular product is going to be dangerous per se. I would, of course, look at the product and evaluate it. There are issues around, for example, how much margin or leverage you should be able to take out on a position, what sorts of controls should be in place when someone's trading. But many of these products, again, have been around since the 80s. They're not dangerous products per se. You know, I'd be curious as to what particular the danger that you're referencing is. But again, these are financial products. Heavily leveraged positions. Well, our derivatives markets have a ton of leverage in them as it is.

36:42You know, I'm not going to say that a credit default swap is safer than a perpetual contract on NVIDIA. You know, I think we're looking at each product and determining what sorts of controls and what sorts of margin and leverage are reasonable. And of course, the brokers in our markets are also evaluating the customers for the ability to trade these products. And so they're the ones accepting the margin and then passing that on to the clearinghouse. So there's a lot of regulation that's interposed here that makes sure that our markets are safe for traders every day. OK, understood. Thanks for thanks for coming on and explaining everything that you're doing.

37:16We appreciate it. Michael Selig, the CFTC chairman. We'll get a lot more on today's tech sell-off when DWS Group's David Bianco joins us. Still bullish on the hyperscalers, he says. We're back in just a minute. Welcome back to Squawk on the Street. Let's get a quick check on the market as the Nasdaq paces for its second losing session in a row, now tracking for its third straight negative week. And we're down 2.6 percent. Pretty brutal. Interesting that treasuries are also in demand. That's been a story all week as well with the tech sell-off. Here with us at Post 9 is DWS Group America's CIO David Bianco.

37:49Welcome. It's good to have you. So do you think that what we've gotten out of earnings, which has been primarily the catalyst this week, disrupts anything in the overall market and the AI trade? It's a small disruption. It's bringing back just the what's the return on capital going to be and how you're going to finance it. Is it going to be equity capital? Is it going to be debt capital? Some companies are doing this more easily than others. I welcome the opportunity to nibble on a bunch of tech equipment and even some of the leading hyperscaler names that we've liked and always wanted to get them at a bit of a better valuation to build a little bit more significant overweights.

38:26So you don't see any fundamental shift here? I see the story as largely the same, just more sensitivity around can you fund it? Can you be disciplined on the budgets? But there is a real shift in who's got credibility to fund and get these projects done and have a reasonable return on capital outlook over the coming years versus smaller players that are more unlikely to achieve it. NeoCloud players, but even the fourth or fifth. But can you do that? Can you really just say, like, the better capitalized versus, you know, leave the NeoClouds over there? because everything has been so circular in terms of the financing, their clients, they're invested in from, like, they're all tied together.

39:08So isn't it ultimately one big trade? It's a big ecosystem. And we've always argued that there's a lot of estimates out there, just the magnitude of CapEx to come from all these players on chips and data centers. And some of these CapEx forecasts are too high. But the CapEx outlook that I'm working with, I can defend and feel comfortable with just with what I expect from the leading three hyperscalers next year. So I think the U.S. economy and all the recipients of this CapEx, and this is why I would be nibbling more on the certain chip designers and certain tech equipment companies. I'm comfortable that they're going to have two, three hundred billion more of CapEx next year versus this year on data centers.

39:48Still, it sounds like you don't think the rate backdrop is going to get more friendly anytime soon. And that, I believe, is not as much of a concern for the largest players versus the smaller ones. It's interesting how interest rates might seep into all kinds of things, maybe make people think more about the risks they're taking more carefully. But I don't think that this higher cost of capital that you see among certain players in the AI data center space is really about the Fed hike, you know, what's happened to even tenure yields over the past couple of months. So you don't think it's company specific.

40:22You don't think the CDS spreads, for example, are a function of what's happening to rates overall? No, I think they're more company-specific at the weaker players that I mentioned, smaller and the not top three players in hyperscalers. You would have hiked, though, this week? Absolutely. I didn't expect them to. But what I think is interesting, they're taking October out of play in general. So no October. Nobody likes making big decisions in October this year and in future year, apparently. But I think what's important is that Chair Warsh earned the credibility and the patience of the bond market.

40:58And that's what's allowed them to take a little bit more time. I think they're being a little risk adverse. I think inflation is still a greater risk than sudden deterioration in the economy or employment. But I think Warsh's clear messages and the action they took in September is allow them, the bond market, to be patient. But I think they're going to hike in December. All right, David, thank you for joining us. Latest thoughts on the week. David Bianco, DWS Group Americas. Still ahead this morning, the CEO of data center operator Digital Realty Trust will join us after raising guidance. Back in a minute.

41:28Welcome back. Take a look at shares of Digital Realty. The company owns and operates more than 300 data centers with partners, including NVIDIA, Microsoft, Google Cloud, and AWS. Lower this morning, despite reporting a beat across the board in Q3 and raising guidance into year-end. And joining us in exclusive this morning is Digital Realty CEO Andy Power. Andy, good to have you. Appreciate it. It's good to get a picture from you on the level of demand, even with these questions about credit quality and state races in the midterms. Overall, how's the trajectory going to change, if at all, next year?

42:02Hey, Carl. Nice to see you again. I'll be at a dreary day in the market. Hope our story brings a little sunshine. We just came off a record earnings call just last night. We're seeing robust demand those partners and customers you mentioned are supporting a massive backlog record two and a half billion dollars 40 growth we drew double digit last year we're going to do 13 or more this year and we see that growth continuing for 27 and beyond is the picture getting any more cloudy given the financing or even power concerns i know there's a lot of noise around moats to business who's got capital who's going to execute i can tell you a digital realty has all those things.

42:41We're in the places where our customers need us to be. That's a span of 6 ,000 customers, 155 new this quarter. We've got the capital base, a strong BBB plus investment rate rating, 20 billion liquidity, and we've got a 20-year tracker of executing on the ground for our customers. Are you getting incrementally more selective about your customer base? Listen, we've always been the model of curating the customer base. We want all of our customers to grow and scale on Digital Realty and our platform. But as you see, our top customers are very much aligned to those strong investor-grade hyperscale customers.

43:16We have very little, call it less than 2 % exposure to some of the noise and names that people are worried about. So I don't have to remind you what Elon Musk said about some of the neoclouds and companies. I know you're a REIT, not a neocloud, but essentially highly levered in building the infrastructure of the AI data center build out. I mean, he said that some would die a guppy death. How do you make sure that that's not you? Well, we make sure that by making sure we don't have any overexposure to those types of names, right? So that goes back to that less than 2 % exposure, that category. That's making sure that we're supporting the likes of those top hyperscalers that are strong, investment-grade, that want to grow with us in the locations where that data needs to reside.

44:02So that's how we make sure we don't follow those perils that Elon's mentioned. But what has the tightening debt market mean for a company like yours that does have to borrow to fund all this? Listen, that and the Nibia's topic made what we offer more valuable. We've got 300 plus data centers, three gigawatts. We're building 1.5 and we got a runway of 10 in total to go. And it's become more and more valuable and the cost and access and they call it the wheat and the shaft are being separated here with those who can truly execute, those who have the capital and those who have a track record. So are the neoclods a big part of your business?

44:40Like how do you, what factor do you consider here? You said you make sure you don't get into business with them before signing a lease with a customer. We do support the neoclods, but that exposure is less than 2 % of our business, including our backlog. So that's what being big and having scale, make sure that we're focused on a wide diversity of customers. We're supporting digital transformation for the enterprise, cloud computing, And certainly these early days of AI have been a big boost for record signings just this last quarter. Is the footprint size of data centers, is it adjusting to some of the pushback from voters and politicians?

45:20I mean, I just wonder, are they getting smaller and more local to avoid some of the big presence that appears to be unpopular in some areas? This is not a monolithic asset class. We've got data centers that are in a handful of megawatts. We've got data centers that are 100 megawatts, and we've got campuses that are gigawatts. We have basically made sure that folks on the ground know that we can deliver localized wind. That's jobs for construction workers, electricians, engineers, plumbers, pipe fitters. We make sure we do it the right way, open our door, be transparent to the community. We're obviously giving back a lot of tremendous resources.

45:58We need to give the best roads, schools. So we're making sure that we're listing at every step of the way and we're a thriving contributor to folks on the ground. Andy, appreciate you coming on and giving some color behind the corner. Always good to see you. Thanks so much. Thanks so much. Andy Power, Digital Realty. I mean, it is brutal and ugly for tech investors. And one catalyst today is Intel. I think that's the stock of the morning. Hasn't seen much relief down. It's actually getting worse, down 29 percent or so today. You know, we've got another member of Catalyst next week. There's a big Citigroup TMT conference that I always attend in Pebble Beach on Friday, and I will be speaking with Lip Bhutan, the CEO of Intel, as part of that coverage.

46:39So you can look forward to that next week. VIX beginning to knock on the door 20 once again, and we'll see if we lose 7 ,600. Have a good weekend. Let's get to the judge. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion.

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