11AM Hour: Mondelez CEO, Looking Ahead to the Midterms & Apple Earnings on Deck 11/2/26

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1:03Good Monday morning. Welcome to Squawk on the Street. I'm Carl Quintanillo with Sarah Eisen, live at Post 9 of the New York Stock Exchange. Today, Anthropic filing an amended S1 ahead of its IPO amid this rising tech anxiety. OpenAI slashing its latest funding goals. We'll talk about what it all says about the state of the AI trade. Plus, the CEO of snack giant Mondelez is with us. U.S. profit and sales rising in the quarter. We'll discuss the company's outlook, pricing and the current state of the consumer. Former IMF First Deputy Manager Director Gita Gopinath will join us to discuss the role that affordability, inflation and record level debt is playing in this year's midterm elections.

1:40First up in the markets, getting a little bit of a rebound after a brutal day on Friday and a week and a month really of October as we kick off November here in the green. The S &P 500 is up about seven tenths of one percent. The Nasdaq comes back by one percent. The Nasdaq bore the brunt of the pain with the A.I. trade really falling apart. And it was bad at the end of last week. There is still buying in treasuries with a 10 year yield below five percent. It's around four point nine percent. And small caps are rebounding as well. We'll get a lot of economic data this week. We got construction.

2:11We got manufacturing numbers, which were better than expected. The big jobs reports on Friday and then a ton of earnings in between, not to mention the midterm elections. Let's begin, though, with the Anthropic filing, this amended S-1 today. Leslie Picker joins us and can tell us a little bit with what we learned, if anything, today, LP. Hey, Carl. Yeah, Anthropic did update its prospectus to include those Q3 numbers this morning. On the top line, Anthropic generating about$17 billion. That was an 1100 % jump year over year, but 47 percent higher quarter over quarter. Operating income was positive during the second quarter, but that flipped into losses during Q3 as the cost for compute and infrastructure nearly doubled to about$9.9 billion in the three months through September.

3:00Adjusted net income coming in at about$2.46 billion, which excluded the change in fair value for certain securities, essentially an accounting charge. That's the adjusted figure there. That was up about 16 % quarter over quarter, and it swung to an adjusted profit from losses during the same period a year ago. The amount of cash and short-term investments is still basically the same from what we saw last week, about$132 billion. However, the company did update the amount of capex and lease commitments they have as of September 30th, that number amounting to about$895.4 billion. The company broke out how much of that is owed per year, which jumps from about$5 billion this year to$29 billion next year and$44 billion in 2028 and so on and so on.

3:53So you can see that costs will start to really ramp up from here, guys. They still have about as much cash as what, Microsoft, Apple, Amazon combined? Yeah, exactly. Yeah, it's one of the most cash-rich companies that's out there, outside of Alphabet and Berkshire Hathaway. That said, if you look at it, and, you know, really grateful that this has been filled in now in this amended S-1, you start to see that commitment schedule really start to ramp up because they did have that adjusted profitability, of course, you know, and they had an operating income as well. But as you start to see those commitments start to really filter through and those expenses are calculated essentially as that capacity gets utilized, that is something that you'll start to see ramp up in the forthcoming year.

4:43So the question is really how they see that revenue keep pace with that, how they see that profit keep pace with that, as well as the potential for fundraising, you know, depending on how much they raise in the IPO, that cash hoard could soar. Then do they go on and tap the debt markets? Do they go on and really ramp up profitability to be able to hopefully pay for that? But, of course, that depends on what you see with the top line as well. So what do you hear, Leslie, as these disclosures come out as far as demand and whether you think it's going to do well? I think the key question, Sarah, is what the pricing looks like.

5:18Obviously, the backdrop has been very, very difficult for IPOs lately. We saw the market, of course, sell off on Friday. It's been a little volatile as it pertains to just the AI trade in general. So basically what I've heard is kind of what that means for how this type of company is priced. A lot of IPOs have polled. I don't get any indication that this one is planning to do so. But you have the midterm elections, of course, tomorrow. We'll see what happens with the market between now and when they start to launch their roadshow. So and then we'll get a sense of pricing at that point in time when they set a range and an implied valuation from that range that could indicate how much investors would be willing to pay within that within that price range.

6:02And, you know, we'll start to get a sense of how that market backdrop has impacted pricing, if at all. OK, Leslie, thank you very much. Keep us posted on all that. Now let's get to OpenAI, the company scaling back its fundraising ambitions as investors scrutinize the AI boom. Kate Rooney joins us with more. Kate. Hey, Sarah. So we are hearing that OpenAI is now dialing back its fundraising target amid some of this tech market volatility you guys were talking about. Sources now tell me the chat GPT maker is looking to raise up to$20 billion. So that is a change. That is down from an earlier target that we reported, which was up to$30 billion.

6:40I'm hearing that they are still looking at a$1.25 trillion valuation. That is before this new capital. So that's known as pre-money, but it is still a jump in valuation. The last pre-money valuation was around$750 billion. We did report previously that CO2 and the UAE are going to be leading this round, or Sovind Roth from the UAE. The round has not closed yet. A person directly familiar with these deal talks tells me that the numbers could change. So we'll keep you posted. The FT first reported the lower target, saying that some investors have cut their allocations. OpenAI, if you remember, last raised$122 billion back in March.

7:18Sources have described this as an opportunistic bridge round ahead of a financing event, an IPO, of course, in 2027, which is what we're hearing on their timing. The timing overall, though, is key. So recent AI jitters do appear to be spilling into private markets. Last week, we had tech earnings. Investors were starting to question whether this entire AI build out. And the returns were good enough, at least in the near term, for OpenAI. The round is still bringing in significant capital ahead of an IPO, tens of billions. They have filed confidentially. And again, from what I'm hearing, it's going to be 2027 on that IPO.

7:52But any sort of weaker demand signals in private markets, it does put a bit more pressure on these companies to tap public markets. And it does come as Anthropic, you guys were talking about, looks to debut in last week, at least, in what was a very choppy market. So there are implications for these AI rivals and for Anthropic. I wonder, Kate, is it AI financing fatigue overall and what we've seen in the market? Or is there something specific around OpenAI? Partially, Sarah. One of the factors here is that so many private market investors already have exposure to OpenAI. So the question is, you know, why double down and get more exposure at a time when the volatility in public markets is making some investors nervous.

8:36That's what I'm hearing. And then you also have the idea that OpenAI is going to go public. So there's that. And there's just volatility around it in general. So that's pretty much the factor going into this is if you've already got exposure. I would also say private markets used to sort of be their own thing that was immune in the near term from a lot of times what was going on in public markets. You have so many crossover funds that are now investing in both public and private companies. The T-Rose, Altimeter, you have these late-stage funds that do both. So any sort of jitters and volatility in public markets really does directly affect some of the names that would be sort of the typical buyers in a late-stage round here.

9:17Yeah, and it is the definition of worlds colliding between public and private these days. Kate, thank you. Kate Rooney. For more on the markets, the tech trade, and how we should all be thinking about AI, we're joined here at Post 9 by Roundhill Chief Investment Strategist, Drew Pettit. Drew, welcome back. It's good to have you. Yeah, thanks, Carl. Sarah, great to see both of you. I love the line that you have, and that is that investors usually don't like a thesis that is in transition. Is that what is happening right now? Yeah, it's funny. It happened in memory. And you saw everyone kind of chasing the big revision story at the beginning of the year, and that was great.

9:51but then they started talking about durability through cycle. Okay, you should buy us for revisions. Oh, but hey, you should also buy us for this. There's a different type of investor that wants to own those types of stories. You kind of have to flush out the growth investor to get the long-term investor in. So you're seeing that in AI. We have a lot of hyper-growth momentum types of investors in there, a lot of fast money. We're trying to build that ownership base right now. That's why you see volatility. So where is that growth constituency moving to? It's funny. I think. No, actually, it's funny.

10:25It's probably a lot of de-grossing on the hedge fund side. I would say building up cash for, well, guess what, these IPOs that are coming. So if anything is not perfect in growth right now, you sell first, build up your cash stake, figure out how much of Anthropics IPO you're going to get. And then you think about where I'm going to actually put this to work after that. So you actually think it's bullish for Anthropics IPO? I think it's risking that we're seeing in tech. I think we saw it kind of with SpaceX. It traded better early and then came down. And I get that. But we heard the talk about people trying to find capital into that.

11:03Like these are mega IPOs. It's not like a drip and you got to sell and trim a couple positions here and there. You have to sell actually big liquid things. And that's why we think you're seeing some softness in like the mags trade right now. You don't think it has to do with the fundamentals of just rising rates, making it harder to capitalize this entire investment boom? That I think is fair to again to be a good bull. You should probably understand the bear case, right? That's completely fair. But I don't think rates at five percent really break that. Our kind of number in our head is like five and a half on the way to six is where you really break it.

11:40the credit stories, I would say, are more isolated. But I do think the big story is, can we get enough capital to buy this comfortably, work it into the market, and then get out the other side and really focus on the fundamentals? You think the credit stories are isolated? What do you mean? Like with the neoclouds? Even the neoclouds. It's funny, the credit stories has to be plural, because we talk a lot about how Corweave's bonds look terrible. They're down 20%. The stock should be down 40%, 45 % on that. But the loans are above par. So two things can be true. You can feel like there's going to be guppy level death in the credit corner, but the underlying assets that the loan market really prices off matter.

12:24So compute is still in short, I would say in demand, in short supply. So two things can be true. The credit market is telling you both of that. You're referring to unsecured core weave, right? The ones that are trading yielding 15. Yeah, that looks terrible. The secured stuff looks fine. Again, credit markets, different stories, credit problems on one side, isolated. There's still value in the underlying assets on the other side. Earnings to you have been fine, but not good enough? Is that fair? Blah. Yeah, blah. Or 30 % year on year. It's not about the growth rate. I don't even think the bears care about the growth rate.

13:03The bull should neither, to be honest with you. It's all priced in. Everyone wants to keep talking about, oh, the forward multiples down, that's really good for stocks. Oh, the market's getting cheaper even though it's up. It's not getting cheaper. Growth expectations are still near 10-year highs. We do the old school reverse DCF, how much growth do I need to make the price make sense today? That has not come down a whole lot. So expectations are high. When expectations are high, you don't need good earnings. You need great earnings and follow-through. So when you get blah, this is the proper reaction.

13:37Is the rush to defensive sectors, I mean, some of the percentage gains off the lows for Best Buy and Under Armour are insane. I mean, is that a positive or is that something that we see in front of bubbles? I wouldn't even call those defensive. Those are cyclicals. Those are a different type of risk. So we don't really like a whole lot of the action in staples. I don't think you want to bid up Walmart past 40 times, but happy to buy different types of risk. So it's funny, we talk about the mags trade and wanting like high quality growth right now and liquidity to manage through this mess. On the other side, we talk about LoHa, one of our ETFs that's all halo stocks.

14:15Hard assets, those cyclical names have a ton of risk and volatility. It's just a different type of risk. And that I think is a great hedge, a great like pair. So again, like we don't want the defensives. We don't think people need to play defense with low beta. you can play defense with different types of uncorrelated risk in this market. Where's the hottest retail sentiment now that you guys see? Honestly, forget retail. I think, like, on the cyclical side, I want to talk about refiners. I want to talk about midstream. I want to talk about energy. You can really say, like, are we buying energy at a top with Brent at these levels?

14:50But I think that is still the place to be, and I'd rather buy those on pullbacks. Yeah, we'll get Marathon this week and some others, maybe some after Chevron and Exxon on Friday. Drew, good stuff. Thanks for coming in. Yeah, love to be on set. Thanks, guys. When we come back, CEO of Snackmaker Mondeliz will join us. We'll discuss the recent earnings beat and new majority investment in undercover snacks. That's the ones they hand out on planes sometimes, the little chocolate quinoa crisps. Later on, we'll speak to a former deputy managing director at the IMF, how she's looking at the midterms and their impact on the economy.

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16:03With higher predictability and greater access to credit, everybody wins. Get started at VantageScore.com. Building a portfolio with Fidelity Basket Portfolios is kind of like making a sandwich. It's as simple as picking your stocks and ETFs, sort of like your meats and other topics, and managing it as one big juicy investment. Now that's pretty good. Learn more at fidelity.com slash baskets. Investing involves risk, including risk of loss. Fidelity Brokers Services, LLC. Member NYSC SIPC. Hmm. Interesting. Something amazing is happening when teams brainstorm ideas. Devices are keeping the energy flowing.

16:49That's because CDW is building modern workplaces with Acer devices. Built-in security, uncompromising processing power, and fast connectivity help fuel collaboration so your team can innovate quickly. Wait, guys, that's a great idea. Acer and CDW make amazing happen. Learn more at cdw.com slash Acer. Welcome back. Apple set to report earnings after the bell today. Mackenzie Sagalos joins us with what to expect. Mackenzie. Hey, Sarah. So CEO John Ternus answers to Wall Street solo this quarter. When Apple reports later today, he has been everywhere since taking over in September, launching the duo, greeting customers on launch days, landing the cover of Time magazine.

17:32But this will be his first time leading the call. And Apple's fiscal Q4 should be solid. We're looking at year-over-year revenue growth expected at 10 % and that iPhone segment up in the mid-teens, despite it only including eight days of iPhone 18 sales. It's a new playbook for Apple. No base 18 model this fall, a foldable coming a month later, plus touchscreen MacBooks and HomeView, all of these new categories to sell into the holidays. But the number that matters most for the stock is the December guide. That's the first full quarter of iPhone 18 in duo sales and the first real test against last year's blockbuster iPhone 17 super cycle.

18:10The streets modeling for modest revenue growth. Well, Bank of America actually sees sales falling from a year ago in that December quarter. Then their services, its highest margin business growth there is slowing. And that missed last quarter really rattled investors. Meantime, memory prices have smartphones headed for their worst year on record. And while that's actually been part of what's dragging down Apple's margin outlook, the company has shown that it has resilience through this. It's actually taking market share year to date. Now, the new Apple chief also likely to face questions over display issues on some duos and how fast Apple can ramp production of its first foldable.

18:48That is a lot riding on the best performing Mag 7 stock this year, which closed Friday as the world's most valuable company before NVIDIA took that top spot back this morning. Guys? So where's the market on, you know, we were talking with Laura Martin earlier about how it's been sort of insulated from the big tech AI sell-off because it's not spending like some of the other MAG-7 names in terms of building out CapEx. But where is it on AI capability and its ability to sort of still capture the upside and the value on the AI boom? Right. So this is a stock that, while it's bucked the trend of the wider MAG7 cohort, it's trading at a very high multiple in that range of 35 to 40 times forward earnings.

19:32And a lot of that is a credit to being the anti-CapEx AI trade, not spending so heavily for this AI buildout. But the concern, of course, is that Siri AI isn't keeping pace with its peers. That's really going to be laid bare when we have some of these home devices coming to market. So the HomePod Mini went on HomePod Mini 2 went on sale on Friday. It will be equipped with Siri AI later this fall. We're going to get the HomeView. These are conversational experiences with the device that really put Siri AI to the test. Now, it's not been under that microscope before. A lot of people who use the phone cite the fact that Siri AI makes the user experience move a little bit more slowly.

20:06So they bypass it altogether. That hasn't been a headwind to iPhone sales to this point. But in terms of being any sort of tailwind to their strategy, it hasn't proven out yet. So that's certainly something that will come up. There's also this question of relationships with other AI model makers. So you've got Gemini as their chief partner for this rebooted Siri AI that is still disappointed. You've got Apple in a courtroom with OpenAI, which was its first flagship partner on this front, working with Baidu and Alibaba in China. So there's a question of when do we start to see more of this model agnostic approach so that we can see the capabilities catch up a bit faster?

20:44Indeed. And as you point out, they have been awfully busy on the product front as well with new form factors and all the rest. We'll see what we get tonight. Mac, thank you. I'm Mackenzie Sigalos. Still ahead, the CEO of Mondelēz joins us on their recent earnings beat. We'll talk some pricing, inflation and the consumer. Plus, we're a day away from the midterm elections. We'll discuss the latest twist in the Michigan Senate race when we come back.

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22:40Take a look at shares of Mondelez International, up double digits in 2026, pacing for their best yearly performance since 2019. The company posting strong profit and sales growth in Q3, pointing to particular strength in emerging markets. Company also making moves on the M &A front. Joining us to talk about all of this in a CNBC exclusive is Mondelez CEO, Dirk Vandeput. Dirk, welcome back to the show. I know we have you on the phone because of connectivity. It's good to talk to you. Yes. Hi. Good to talk to you, Sarah. Thanks for having me. Thanks for being here. So broadly, tell us about the state of snacking around the world right now, where it's strong, where it's not so much.

23:18Yeah. So I would say snacking overall is resilient. We still see a little bit of volume growth in today's world. That's pretty good. Where it's clearly strong is in emerging markets. the Indias, the Brazils, and so obviously some very good growth. If I look at the developed markets, we had a bit of a slowdown in the previous year. That seems to be settling in and getting a little bit better. So overall, I would say a resilient category, but clearly carried by emerging markets at the moment, but improvement in developing markets, sorry, in developed markets. What does the U.S. look like? You know, we debate all the time the state of the U.S.

24:04consumer because consumer confidence numbers haven't been great. We know gas prices are high and yet overall spending numbers look pretty solid. What do you see? Yeah, I think there's a difference between what we see in the economy and what the consumer is feeling. Consumers in general, and then we have a case shaped economy, as you well know, 90 percent of consumers feel the pressure from inflation. Have to be very careful on how they spend their money. things haven't gotten worse, but they also haven't gotten better recently. And they are very selective in how they buy. So the name of the game is really to find a way to connect with them through innovation, good activations, good communications and things like that.

24:45And we've been able to do that in this quarter. And overall, things are going quite well for us in the U.S., I would say. What about the trends? You know, everybody is now craving, wanting protein. I mean, there are just certain health trends that are becoming more entrenched. And we talk about with snacking companies. Do you see that in your portfolio? Yeah, we do see that. I would say there's still a very big space for indulgent snacks. It's not that consumers are completely abandoning them. There's still good growth there. But yes, there's a bigger trend towards protein, cyber at the moment.

25:24And that's driven also partially by GLP-1s and those consumers that are on the drug. They want to eat more protein, and that is affecting this overall trend. But I would say the whole snacking category is still quite balanced with a little bit higher growth in everything that is protein related. I don't know. Can you can you jam in some protein and fiber into a pack of Oreos somehow? You could, but I don't think that's the best thing to do. We have particularly dedicated or specifically dedicated products like Builder's Bar or Perfect Snacks. Those are more fitted to carry some good protein, and that's our strategy.

26:05You know, for the last few years, for a lot of the packaged food companies, including yours, the growth has been in pricing, right? You guys have had a lot of pricing power and limited volume. I feel like we've switched and inflected, particularly for you, there's some volume growth and pricing has come down. Does that mean that Americans overall or world consumers are paying less now? What does inflation look like? Well, unfortunately, inflation going forward with the oil prices and so on, how that gets reflected in consumer goods, in packaging, fertilizer and things like that, there's still inflation going on.

26:45So if we look at next year, we have a mixed bag. We have some better cocoa prices, but we have other goods where there is inflation. So we're still able to manage that. We are not necessarily seeing that we have to increase prices, but it's a narrow margin at the moment. So I am not I can't talk for other companies. But unfortunately, inflation is not gone in our input costs. Dirk, there's I'm thinking of one example today. Estee Lauder is on the tape arguing that they're going to try to rely less on promotions going into this holiday and next year. Is that a common view among retailers? It's not necessarily retailers, but it's also a little bit our view that if you do promotions, it needs to be meaningful.

27:31It needs to be attractive. Just the price promotion, that for almost over a year now or almost two years, does not really work with the consumer. I said they're very selective. They think through what they want to buy. It needs to be interesting. So, yeah, I can I can get into that argument that there is a more intelligent way to do things. And for us, that has been working quite well, in fact. I wanted to ask about your about your new deal, acquiring undercover snacks. I referenced like if you fly United in economy, you get you know what these are, the little chocolate quinoa crisps. I get why it's on trend right now.

28:07Right. There's some health benefits and good value here. How does it fit in with your strategy? Yeah, yes. Yeah, it is right on trend. I think it's a good product, very tasty. It has healthy ingredients, natural ingredients. But at the same time, it's what we call permissible indulgence. Permissible meaning it's healthy indulgence. So it's a great product. We do think over time that this part of the snacking market will develop more and more. We're positioning ourselves gradually with our portfolio to benefit from that trend. And we're very excited about the acquisition and what it can mean for the future.

28:48We see heavy growth in distribution and new products and things like that. So, yeah, I think you will see more of those moves from our side, gradually balancing things between indulgent and health and wellness. But also kind of jobs with your strategy, which you've been talking about for a while, the bolt-on acquisitions. Everyone's always looking at consumer staples and wondering if there's going to be any bigger ones, bigger consolidation and deals coming. What do you say? Not necessarily our priority. I mean, I can never say never. But our view is that we, through bolt-on acquisitions in the right segments, in the right geographies, We can build a nice portfolio that is well positioned for the future at reasonable investments with good returns.

29:36For us, that is working. If you're going to go to bigger acquisitions, there's always a part of it that you don't really like. The integration and the impact on the business is massive for a few years. So we would only consider it and do it if it really makes an incredible amount of sense to us. But at the moment, we're going to continue with the bolt-on strategy. Dirk, we like to sprinkle in the occasional question about technology and AI and to the degree to which that's helping you on supply chain or logistics or even things like procurement and packaging. Is 27 going to be an inflection year from that standpoint?

30:15Yes, yes, for sure. We are going quite fast in that area. You have to think, if you think about supply chain forecasting being taken over by AI, what we call demand fulfillment, whereby you have to imagine a group of factories with so many different lines all being planned and organized by AI. And hopefully, through all that, delivering a higher level of service. And yes, 27 is a critical year for us. We're trying to adopt and integrate it as fast as we possibly can. Finally, I'm just looking at these volume numbers on emerging markets, which we didn't really dive into, but obviously is a big chunk for you.

31:00I mean, five and a half percent volume growth in Asia, Middle East and Africa and flat in North America. Why is there such a big gap? Well, first of all, the consumer penetration and the amount of product that consumers eat in emerging markets is still very low. So the headway in front of it is very big. Second, they don't necessarily feel the inflation as much as the U.S. consumer does. In those countries, there's always inflation. The consumer is used to it. Wages tend to rise faster. So there's more of a balancing effect taking place. And I would say the third one is that we are pushing very hard on our presence in the market through more distribution, through new launches.

31:47We have more opportunity to do that in emerging markets than in developed markets. And because of all those reasons, you will see going forward, and that's a big part of our strategy, higher growth in emerging markets for us. And finally, just with the midterms, I'm not sure big food is necessarily one of the big issues, but obviously there has been increased pushback against processed ingredients. I know you're transitioning away from artificial dyes. How much of a factor is this regulation or Washington policy and how you think about the portfolio and some of the new innovations? Well, yes, I would say it does impact us.

32:27Obviously, I think we can manage the changes that we that we need to implement. And it's like getting rid of artificial dyes, I think, is the right thing to do. So we wholeheartedly subscribe to that and we're making all the necessary moves. We see a consumer who is becoming more conscious of health and wellness, and that's driven through policy, through the discussions that are taking place. So that obliges us, as I was explaining, to adapt our portfolio to where the consumer wants to go. So, yes, it does impact us. I think we are keeping up really well with that trend and it's going to give us future growth.

33:09So, yeah, it's something that we embrace. OK, Dirk, thank you very much for joining us talking about the state of the business. It's always good to hear from you. Thanks for having me. Dirk Vandeput, the CEO of Mondelez. Still ahead, we are a day away from the midterms. We'll take a closer look at how a divided Washington might impact policy. Plus, we'll speak to a former deputy managing director at the IMF, Geeta Gopinath, how she's looking at the economy going forward. We'll be right back. This week between the midterms, the jobs number, the data, the earnings. But for now, trying to repair some of what we lost on Friday.

33:42In order to get back that gap, you'd have to get to S &P, say, 77-17 would be Thursday's close. But we're making some progress today. Yeah, I mean, we've got two sectors down, actually three now, energy, healthcare, and information technology. Some of the big losers from Friday are not rebounding, like Intel I was looking at, you know, after it got slammed on Friday down another three and a half percent today, maybe weighing on the tech trade as well. Amazon, SpaceX, Tesla, NVIDIA, those are all higher. But the memory names, Micron, AMD, those are lower as well. So is Apple ahead of earnings. Let's get to a news update.

34:17Frank Holland has it for us. Morning, Frank. Hey, good morning to you, Sarah. SpaceX reportedly in talks to buy Boost Mobile from parent company Echo Star or gain access to its wireless network, which the prepaid service leases from AT &T and T-Mobile. The Washington Post reports SpaceX has had discussions with Echo Star in recent months about launching its own wireless service through a deal with the company as it looks to build a mobile network through Starlink to challenge the traditional telecom companies. A federal judge this morning tossed out charges against two former FBI agents accused of lying to Congress about the Hunter Biden laptop investigation.

34:49The judge strongly criticized the Department of Justice's prosecution, calling it a slapdash job that presented no evidence to the court that the agent's statements were knowingly false. Mercedes F1 driver Kim Antonelli made history Sunday, becoming the youngest champion in Formula One history. The 20-year-old also became the first Italian to win the title since 1953. Antonelli finished third in the race, but that gave him enough points to secure the driver's championship. Carl and Sarah, back over to you. That is so, it was so exciting. And so this guy was like a rookie last year, replacing Lewis Hamilton on Mercedes.

35:23It's an amazing story of a young, I think generational talent. I'm not kidding. 20? 20 years old. 20. Yeah. I mean, he's been they start young. Yes. In Formula 1, but he's had an incredible, incredible season. Yeah. And it's been fun to watch. You know, F1 got a lot of heat for having Max Verstappen always winning, you know, it being boring. Well, guess what? McLaren's driver won last year, the championship. Lando and now Kenny. That's good. Good to spread the wealth. Frank, thanks. Frank Holland. I could just go on and on it. I know. When we come back, Marvell Carl's mega deal with Lumentum is how the deal is fitting into the broader NVIDIA ecosystem.

36:02Light is the worst S &P year at the moment. Stay with us. Welcome back. We're a day away from the midterm elections. How might a divided Washington impact policy? Our Megan Casella joins us with more on that today. Morning, Megan. Carl, good morning. So brinkmanship and gridlock are expected to dominate next year, but there are some areas where the parties will need to work together. So first, the basics. The Democratic House will gain investigative power, and a Democratic Senate would have the power to confirm or reject nominations, including, most notably, to the Supreme Court and the Federal Reserve.

36:31President Trump then will be exercising his veto power and likely leaning more on executive orders. Democrats, though, have been clear about their day-one priorities. They say they'll be focused on reversing Medicaid cuts, extending Affordable Care Act tax credits, ending the Iran war and limiting the president's tariff authority. There could be some room for deal-making here. Republicans have been asking, for example, for tens of billions more in Iran war funding, Democrats could trade that for a win on health care. And there are also some pressure points on the calendar where we will have to see some deals.

37:01So December 11th is the current deadline to pass a budget. Lawmakers may sign just a short-term extension. That would set the new Congress up for a possible shutdown soon after getting seated. And the second deadline is the debt ceiling. The government is expected to hit that sometime next summer. We've seen this movie before, guys. That could lead to some short-term instability, but also a deal where both sides could notch some wins. Now, all of that said, while Democrats are heavily favored to take at least one chamber in tomorrow's elections, there has been a lot of last minute action in key races and most notably in Michigan.

37:35Democratic Congresswoman Haley Stevens, who lost her party's primary in August, over the weekend she turned against the Democratic candidate Abdul El-Sayed and endorsed the Republican Senate candidate Mike Rogers. It's very much an open question, guys, whether that will ultimately change any votes, but it has brought extra scrutiny to what was already a very close and very critical race. Guys. Okay, Megan, thank you. Megan Casella. For more on the midterms and how the economy could impact voters' choices at the polls, let's bring in Gita Gopinath, former first deputy managing director of the International Monetary Fund, now a professor at Harvard and founding director of the Global Economics Lab.

38:10Gita, it's great to have you back. Welcome. Great to see you, Sarah. How do you look at the state of the American voter right now economically? Because as I mentioned at the top of the show, there's some conflicting reports. Yes, gas prices are high and grocery prices are high and people feel that. But at the same time, unemployment rate is low and consumer spending is done well. How do you see it? You're right, Sarah. In terms of economic activity, the U.S. economy is strong. I mean, consumer spending is still very strong, despite all the concerns about affordability. and corporate sector is also spending a lot.

38:48There's very high levels of investment happening. So with 3.4 % growth, that's a strong economy in terms of economic activity. That said, inflation is a problem. And yes, the prices at the gas pump are concerning. We're seeing households dipping into their savings. Savings have dropped down to now 4 % rate. So that's very low. So you do see households dipping into their savings. You also see that when it comes to housing, it's a bit of a stuck market, right? I mean, people aren't able to get their homes. Mortgage rates are very high. So the concerns about affordability more broadly, including in terms of health care expenses, is still very salient.

39:28Yeah. Well, we'll see how that all that all manifests. I am curious to ask you about rising rates, borrowing costs. They've definitely come off the boil, but it does feel like, you know, a lot of the whether it's the fiscal situation or monetary with the Fed still potentially raising rates. Things are pointing to higher rates for longer. How do you see that shaking out? And what do you think are the key drivers? Given the recent data that we've gotten of our inflation, everything points to the need for tighter monetary policy. I mean, what's being priced in is 125 BIPs increase in December. But I expect that there will be more needed if this continues.

40:09Now, a lot is still hanging out there, the elections, the outcome of it. More importantly, what's going to happen in the Middle East? Is there going to be a diplomatic solution or is there going to be an escalation of the war? I mean, that could make things a whole lot worse on the inflationary front and also dampen economic activity. And then there's the AI boom. And we saw wobbles last week. You mentioned several of them that still have to recover. So there is a large amount of uncertainty going ahead in terms of the exact path for interest rates. But if we have this current outlook that we have right now, that's going to involve interest rates going up and staying higher for longer.

40:47Gita, when Kevin Warsh took over as Fed chair, there was a lot of market chatter about that if he lasted through the entire term, he would be chair at the point in which entitlements, mandatory outlays, interest finally exceed federal tax revenues. I wonder, are you struck that it hasn't really been an issue, at least in this midterm cycle? It is remarkable that pretty much across the aisle, across the different parties, nobody seems to be concerned about the deficit. And I think one thing that we can predict after the midterms is that regardless of what the shape of Congress looks like, that there will not be enough action taken to put the fiscal deficit on a more durable trajectory.

41:32There's going to be haggling about where you spend more and maybe where you spend a little less. But overall, it's all in the direction of greater spending without having enough social revenue. So the big bet is that U.S. growth will move up on a much more durable basis to 3.5 % or 4 % thanks to AI, and that will do the needful. Now, that is a very risky strategy. But as of now, there are no takers for any kind of fiscal decision. Yeah, I mean, do you think that you think U.S. continues to be the engine of global growth? And what do you think happens in places like Europe, like France, dealing with all sorts of fiscal crises?

42:11Europe is in trouble. There is no more giving them a free pass when it comes to their debt because of the fact that if you look at growth prospects, you're much less optimistic about growth in Europe than you're in the U.S. That's the big difference between Europe and U.S. at this time. In addition, you have very complicated politics. You have elections now coming up in France next year. Spain has elections very soon. Italy will have elections next year. So there's a lot of uncertainty over there in terms of the tilt of policy. And that's another part of the world where there is a huge amount of government spending that's spoken for, large amounts of pension spending that's required, and without the revenue to truly fund it.

42:51So just a stream of borrowing that's going to be needed. Europe also has the additional problem of energy. I mean, again, it's going to be a difficult winter, especially if it's colder than the previous ones. you could have much more of a spike, further spike in gas prices. And that, again, dampens economic activity much more there than in the U.S., which on net benefits, in a sense, from the economy as a whole from the higher fuel prices. Right. And we also get the growth from AI that they're not getting. Do you buy the idea that the massive promise of productivity and growth can help us get out of our fiscal situation?

43:32our debt problem? So what you wrote said was right. I mean, there is the promise. I mean, there is the possibility that that can happen. And yes, I mean, the technology is really, you know, kind of phenomenal when you use it and you see the productivity gains in your own personal use. But as of now, it's not the kind of intensive economy-wide adoption that we would expect would be needed to get much higher levels of productivity growth in the country. So that is a possible path. But between now and getting there, we're going to have to deal with the big questions of data centers, push back to civil society, what could happen to jobs, cyber attacks.

44:13I mean, that's another unknown at this moment. So a lot of those could derail the ultimate adoption of AI at a scale that delivers on that very high level of productivity growth. All right, Gita, a lot there. Thank you very much for joining us. We appreciate it. We'll have you back soon. Thank you, Sarah. Gita Gopinath, who is the former deputy managing director at the IMF, now at Harvard. When we come back, Marvell, to acquire Lumentum, one of the biggest tech deals of the year. We'll discuss how that fits into the broader NVIDIA ecosystem after a short break. Welcome back. Marvell buying Lumentum today in one of the biggest deals of the year, the deal expanding Marvell's push into optical connectivity for data centers.

44:54And we talked to Marvell's Matt Murphy and Lumentum's chief Michael Hurlston earlier this morning. This is what Marvell CEO said about how the deal could benefit NVIDIA. This is a double down on supporting NVIDIA, who is the ecosystem leader in this area. We're very committed to that partnership. And I think having two of the key suppliers come together that support that ecosystem is going to be a big benefit for them and then the NVIDIA ecosystem around it. Both of the stocks lowered this morning after the announcement. We mentioned that Lumentum is the worst S &P at the moment. A lot of that surrounding, I think, as Faber got to the questioning about regulatory clearance and the extended window for closing, that kind of thing.

45:38Yeah, I mean, what's interesting is Marvell down sharply as well and was down when these deal talks were first reported last week. I mean, I'm going through some of the analyst notes, lots to question here, everything from the premium and the price that they're putting on it to the timing of where this is and what it signals about the investment cycle, right, at a time where people are questioning, you know, just how much revenue is going to be on the other side. They're paying this big, very high price. There are also, you know, questions about Marvell's own business models, right? It's a fabulous semiconductor designer.

46:06Lumentum is capital intensive manufacturing operations. So perhaps, you know, Rosenblatt Securities, I think, was adding whether that, you know, does create economic value. We'll continue to look at this as just another, you know, sort of litmus test of the overall sentiment around AI trade, which is split today. Memory stocks are down. Intel continues to be down. But then Amazon, for instance, is rebounding. So is SpaceX. Amazon was the best down name at the open of 4 percent. You mentioned Intel, which I think would be a fresh low going back to about mid-April or so now in the low 60s. Oracle's under pressure as they're going to raise$10 billion in equity,$10 billion in debt, a lot sooner than they had suggested just a few days ago at the investor meeting.

46:46Yeah, I mean, I guess we watch yields because, interestingly, Treasury yields are lower today. We're seeing some buying demand. We'll get a lot more economic data to test that out. We got good manufacturing numbers. We'll see what the jobs report shows at the end of the week, job openings tomorrow. And then, you know, more, I guess, on tangentially related AI plays like Palantir, for instance, which reports after the bell today. You know, So Palantir has been knocked around as a software stock, but they continue to see explosive growth around some of their AI business. Yeah, implied vol there, I think 13%.

47:16We'll see what we get. 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. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

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