11AM Hour: NVIDIA Succession, AI Credit Risk and Beauty Turnaround

0:00I'm Mike McNerney, Equity Investment Strategist. Markets move fast. My mission is to provide market insights to our clients that help turn uncertainty into opportunity. Janice Henderson, investing in a brighter future together.

0:41other. Good Friday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla, live from Post 9 of the New York Stock Exchange. Today, a read on the AI trade. Shares of chip maker Cerebris jumping after raising its full-year outlook and reporting a revenue surge. The CEO, Andrew Feldman, joins us here first on CNBC in just a few. Ahead of Anthropics' massive IPO next week, CEO Dario Mode will be speaking with investors at JPM today alongside Jamie Dimon. We'll get you some developments. Had an exclusive interview with the CEO of Estee Lauder, his first since taking the job in 2025.

1:13Hear what he has to say about the state of the global consumer as well as demand. Some mild losses here. Dow's down about 111. S &P still with a winning week, but down 68 points. You got yields a little bit elevated as Williams came out, a little bit hawkish. B of A adds a third hike from here for a total of four. We'll see what we get as PPI was in line, but still the biggest headline year on year in about four years. Let's begin with the latest on NVIDIA following Jensen Wong's resignation. We turn to our Seema Modi on that. Morning, Seema. Good morning, Carl. Guys, the board meeting that came together last minute on Wednesday afternoon involved what we're told was a tense exchange between members of the board and Jensen Wong, ultimately leading to Wong's resignation.

1:56Interim CEO Colette Kress held her first meeting as interim CEO on Thursday morning with high-level executives. the same executives that previously reported directly to Wong. We're told by a person familiar that one of the topics discussed was earnings, how to convey that message to the street. Speaking to analysts who cover the stock, there is now clear interest in better understanding two specific points. One is regional sales across Asia, given allegations that NVIDIA may have circumvented export controls and sold advanced chips to China. And then two is leadership, how long the board is expected to take to name a permanent successor, whether they are leaning towards an internal or external candidate.

2:34A report from Bloomberg indicates arm-holding CEO Renee Haas has come up in discussions we've reported around internal candidate Ian Buck. In addition to earnings, Crest plans to hold an all-hands meeting on November 18th, where she will likely face pointed questions from staff. Separately, Congress taking aim at Wong directly. Senate banking has asked him to appear on December 3rd in a public hearing. Additionally, three House committees are looking to hear from the ousted CEO, the chairs of the House Committees on Foreign Affairs. Intelligence and China have given him by 8 p.m. tonight to respond to a request to appear in a closed-door interview on December 1st.

3:11The House chairs say if they do not hear from Wong by tonight's deadline, they will begin issuing subpoenas. Guys. All of this and the company reports earnings next week. Seema, what's the message that you're getting from analysts and investors you talk to? beyond earnings, about just how material this ultimately is for the company and the stock. Yeah, so The Street is expecting, Sarah, for quarterly sales to double. But in addition to the numbers, great interest in understanding just how they articulate the message around leadership and continuity. Joseph Moore from Morgan Stanley, The Street's sort of been waiting for him to publish on NVIDIA because he's been following the stock for so many years.

3:49We're told he also knows Jensen Wong very well. He's writing this morning that Wong's technical vision, rapid decisions and supply chain execution will be difficult to replace and that Crest can manage the transition, he says, but that the interim status could actually complicate customer commitment. So again, I think that's why the timeline on how quickly the board can move to name a permanent successor is very much top of mind, Sarah. OK, thank you, Seema. Seema Modi, keep us posted on that search. Let's get more on the broader market and the credit space around all this AI news. Steve Tannenbaum joins us, Chief Investment Officer and Founding Partner at Golden Tree Asset Management.

4:26Welcome back. It's great to be back. Good to see you. You know, judging by it's been a week, it's been a week, it's been a couple weeks around the AI trade. First, the midterms, now Jensen. What is the credit market telling you about the health of the infrastructure trade and around AI? So, first, very concerned about the supply. Still skeptical. It's pretty much unchanged since the Jensen news. It already was pretty much already corrected. And it's an opportunity. I think that when you look at that, you can buy the debt of some of the largest companies in the world that have diversified revenue streams at rates that are almost approximate the long term return of equities.

5:09And the debt is about 10 percent of the market cap or less. You're talking about hyperscalers? Yes, the hyperscalers. So that's an attractive credit opportunity. Why do you think so much concern got reflected? I think it's supply. It's just the amount. People have never, I've never seen so much debt offered for a strategy. And so if you look away from credit, or excuse me, if you look away from technology, the rest of the market's actually pretty tight. Right. I mean, Oracle is a good poster child. Just sold 10 billion bonds, coupons as high as, what, 8.65%. Yeah. Is that a good buy? I think there's a lot going on there.

5:48I like the more diversified, outside-of-software plays, like call it Meta and SpaceX. But Oracle is fine. I just think the other ones, to me, are easier. Because of the additional sort of non-AI-related cache machine? Yeah. Is that what you're looking for? Exactly. Yeah. Because it's still—the verdict's out whether software is cyclical, which is my guess, and will adapt to AI or whether there's some structural or secular obsolescence. So you don't think that question got resolved this year after the summer? You know, it's great. The equity market clearly is set as cyclical. In fact, the equity market's been very strong.

6:29But if you look on the credit markets, it's been down. So the credit markets have a different perspective. If I were to guess or if I were to vote, I'd vote that the equity market's right. But it's certainly unresolved. Do you think supply next year overshoots consensus or undershoots? You tell me where spreads are, and I'll tell you what a supply is. So in other words, if spreads widen out, it will undershoot because there just won't be issuers. But if spreads tighten, people will fund as much as the market will give them. What about neoclouds? Are you touching those? That's really high yields there.

7:02It is, but, you know, it's complicated. And my fund, when it's unclear, stick with easy and straightforward. And the neoclouds, you know, they have this business plan where it's very on the come, unclear how it's going to be funded. And also, what are the residual rates? You know, they have these contracts. And then so what happens after three to five years? So I think it's just harder to bet on at this point. Do you buy the idea that all the supply from all these AI companies, that all the debt they're having to raise is crowding out buyers and treasuries? I'm catching not pitching on that one.

7:42It seems as if it's impacting somewhat, whether it's, you know, five or 10 basis points or 25, I can't tell. It does seem like it's impacting it. What about AI spending? I mean, one of the risks, obviously, is that CapEx slows, whether it's 27 or 28. Would you have thoughts on that? And where would that show up, that stress first? Sure. I believe the market is underestimating the knock-on effect of AI spending. And when people look at, well, a lot of the spending is on chips that are made offshore, et cetera. I think that there has been a call 25 to 30 percent of our growth has been tied to AI.

8:24And by the way, every upswing is tied to something. So it's not, you know, it isn't as if this is the only one. You know, if you look at other cycles, you have what's been expanding and its lever to that. And certainly if you look at housing, there's a good argument to say that housing can pick up the slack if there's a downturn in AI spending. But it does seem as if it's going to impact. And if you have a slowing economy, you're going to have, in fact, that's the biggest risk in the credit markets is a slowing economy. Because of any kind of slowdown in CapEx? um well yes if capex is driving construction of data centers and the implementation of ai then yes it's going to have a domino effect are you do do you think cds is a reliable tell at the moment are they giving us a true picture of where risk is because we put up the charts all the time yeah um it's a specialist market i like you know i think cash to me is um it's a specialist market So I'd look at it's certainly something I'd look at, but not the only thing I'd look at.

9:28And also, when you're getting out of CDS, you're selling to other specialists. It's not like retail by CDS. So it's very much of a of an institutional market. It's kind of like wonky. Steve, you you and I spoke, I think it was over the summer, right? When the sasspocalypse fears were really heightened. We did an NYU event together and you said you were nibbling or buying some of the beaten down software credits. credits. That, I would think, has turned out to be a good winning trade, right? No, it's worked, but I think it's in the early innings of working. If you focus on high net retention, which means customers find the product essential, growing revenue, and you can create these companies at 70 % discounts to where they were purchased just a few years ago, that's still, I think, very reasonable value.

10:16But you have to understand which ones are not going to be disrupted or replaced. Well, if they have high net retention, that's a good place to start in growing revenue. Like what? Do you have any examples? Or you can't talk about it? You know what? There's one that's public. IDERA seems very reasonable. IDERA? Yeah. Because they have high retention rates in terms of their customers. Is there still a lot of opportunity in software? Yeah. You said earlier. Actually, I like it. It's a neighborhood that I think is very reasonably priced. Do you think search? I mean, we've been around the block a couple of times on existential risks to search.

10:49I mean, through the lens of Alphabet. But where are we, do you think, on that question right now? It seems to me as if it's converging. And certainly when you look at the, yeah, it seems to me to be converging. And it certainly, the good news is we're benefiting from better search and less noise in our searches. You know, so I think it's a better product. Where do you think we are on private credit? I mean, you closed an oversubscribed private credit fund in July. How easy is it right now to raise money for private credit, especially, you know, versus where we were a year or two ago? You know what?

11:24The good managers, you know, the managers who've done well have been. I think the market's still very much open. We're finding still very good opportunities in private credit and corporates and asset backs in real estate. It's yeah, I think it's fine. I think that some of the BDCs and some at some pockets have had issues. But broadly speaking, we think it's fine. Are you seeing large dispersions in thematics between the U.S. and Europe or the U.S. and Asia at the moment? Asia doesn't have a large below investment grade market. In Europe, it's been actually coming back. It's really following. I think it's the issues that are weak in Europe, whether it's software or telecom, you know, are the same sectors that are weak here.

12:12And the areas that are strong there are strong here. So I think it's been pretty similar. It's interesting. The stock's 600 narrowly outpacing the S &P for the year now. I just wonder if something's turning in Europe or not. There's been a lot of hope in Europe, and hopefully it'll be realized. But we feel pretty good broadly about our European portfolio and how it's performing. You mentioned earlier that the bottom market, I mean, spreads were tight beyond some of these AI trades. So high yield credit is what, like 300 basis points or so above Treasury? In the mid-300s, yeah. Is that not reflecting risks that are out there?

12:50It's a great question. Usually when you're mid-cycle, it's tight. So growth is good. Growth is perceived to be called in the mid to low twos and tight spreads. Because returns through the year are pretty much zero, just barely above zero, You've had the starting place where spreads contract, yields are higher. So, excuse me, spreads are actually wider, yields are higher. So it's a better starting place. So right now, the valuations look much better than in the beginning of the year. They're not attractive enough where if you have a slowdown in the economy, it's going to create a buffer. But if the economy does what people expect, I think you're fine here.

13:33So what else is mispriced? Hyperscaler, software. You see opportunities there. Anything else? I think telecom. I think some of the cable companies distressed. I think that that would be my short list. There's certainly some idiosyncratic opportunities, but those would be the sectors. They've been beating that too hard? Oh, go ahead. I was going to say, what about the impact from orbital compute over time to legacy telecom? So you look at legacy telecom, you look at cable. And the issue is, is Starlink or broadband build out going to take enough subscribers? And right now you have cable is at record low valuations and they're losing subscribers.

14:11If they lose subscribers of one to two percent, it's very cheap here. If that accelerates to five to six to seven percent, it's not cheap. But it's certainly priced provocatively. You're saying it's priced worse than it is. It's priced as if they're losing five to six percent. But right now it's only one to two percent. When you look at the product, it looks very competitive. Love the window into credit. Always with you, Steve. Thank you so much for coming in. It's great to be back. We really appreciate it. Steve Tannenbaum, founding partner of Golden Tree. In a moment, shares of Cerebris with us after the company reported a surprise profit.

14:44Shares up better than 7 % this morning. Stocks rallying. Plus, our exclusive sit-down with the CEO of Estee Lauder coming up. Yes, we've sampled some cents, talked about the turnaround strategy and how that's taking shape. We're back in just a minute. The quarter pounder with cheese is made with 100 % fresh beef cooked when you order it. Then comes the melted cheese, the slivered onions, the pickles, the ketchup, and the mustard. Add hot crispy fries and an ice cold Coke, all for$8. And if things go well, one loose fry at the bottom of the bag. The Quarter Pounder with Cheese meal, now$8. Ba-da-ba-ba-ba.

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16:12Whether expanding your portfolio or planning your future, you'll be able to access tailored wealth guidance on your time. Start building with Gemini at cloud.google.com slash AI. CitiWealth Investment products and services are provided by Citigroup Global Markets, Inc., member FINRA and SIPC. Welcome back. Take a look at shares of Cerebra Systems, the chipmaker hired this morning after reporting a beat on the top and the bottom line in Q3, raising guidance into year-end and then announcing this new cloud deal with Microsoft. Joining us this morning in a first on CNBC interview is Cerebra Systems co-founder and CEO, Andrew Feldman.

16:46Andrew, welcome back. Thanks for the time. Thanks for having us back. It's good to see you. Yes, under much brighter circumstances. In fact, everyone's buzzing about the Microsoft angle. Is there any detail or granularity you can give us on it? We'd love to give you detail, but unfortunately, we can't at this time. I think we will have all sorts of exciting stuff to talk about in the first part of the year. What does the quarter tell us about the trajectory of the business at the moment then? I think it tells you a fair bit. I think there is big momentum in AI compute. I think there's particular momentum around the part of the market we service, which is fast inference, which is delivering the results from your queries quickly.

17:33And what we're seeing is that our customers who deliver this to the users, they're able to charge more when it's fast. And that premium is expanding. Looks like there's some, we're definitely, we mentioned Microsoft, but Oracle, too, is a part of the puzzle, right? Yeah, we've had a pretty good six-month run. We added three hyperscalers over that time. So AWS, Oracle, and Microsoft, I think you'll see that in our numbers next year as those deployments roll out. That's a pretty good run for a company in six months. What about OpenAI, since we're going through some of the partners here and delay here in building data centers?

18:20What can you tell us for OpenAI? Boy, I think data centers are unfortunately delayed across the industry, and we're no exception. I think these are enormous construction projects. There's tremendous energy and drive to build them out and get them on time. Like others in the industry, ours are late. The others are late. It's obviously no excuse for us, but our builders are doing their best to execute and deliver on time. We are we are behind schedule and that is a challenge to our partners. Is it had they canceled any capacity? Could any of the contract be at risk from it? Nothing's been canceled at this time.

19:00One of the things we said on our earnings call is the contract does permit, if we are late, that there be service credits accrue. We have the same relationship with our data center builders. And if we're super late, both sides have opportunity to cancel tranches, which are delivery units of capacity. We spent a lot of the week talking about NVIDIA. I'm not sure how much you want to dive into it, but to what degree might their travails act as a tailwind for you? Well, first, I think you have to tip your hat to Jensen and his run as CEO, one of the great entrepreneurs in our industry and probably the greatest CEO of the first quarter of our century, right?

19:49That's number one. Number two, they are an extraordinary company and they have tremendous bench strength. I don't think it will change that. I think if a world-class leader steps down, there has to be some loss. On the other hand, their bench is extraordinary. Their products are really good. They're a formidable and sort of adversary. And so we look forward to continuing competing with them in the months and years ahead. I don't think it says anything about the broader issues. These were idiosyncratic, obviously. And the market for AI is enormous. It's growing extremely quickly. And increasingly, we're solving important problems.

20:37And so I think those changes will be the continued growth will continue to benefit. We'll continue to benefit from it. Does a change at the top of these companies change how and what customers buy? or is their lead just so entrenched? I don't think we've ever seen anything like this. So we don't know. So we don't know, ultimately. We don't know. I mean, have customers called you this week? I think everybody's digested. I mean, I don't have, you know, everybody is sort of surprised and digesting over the week. Everybody is trying to get their arms around the situation. I think that's true for competitors and I think that's true for customers.

21:22I remember when just after your IPO, you came on, you brought us, you showed us the chip, the size of the dinner plate. How do you think innovation is trending? And not to delve too much to NVIDIA, but do you think innovation, their sort of tip of the spear level of innovation slows down that process for the industry? No, I don't think so. I think what NVIDIA's sort of extraordinary run over the last 10 or 15 years has done, and others like, say, Astera or Credo and a little bit of us, has sort of brought back to venture capital the idea that you could build semis. And so what we're seeing is a proliferation of interesting semiconductor companies at the startup level.

22:11Great PowerPoint. Some of these ideas will pan out. Others won't. But what we're seeing is a period, a sort of Cambrian explosion of interesting hardware ideas. And I think that's good for the market and good for the customer. Yes, that's what we're increasingly talking about, the customer end of it. That is for sure. Andrew, please come back. Congratulations on the quarter. Appreciate the time, as always. Hey, thanks for having us. Be well now. Andrew Feldman over at Cerebris. When we come back, how one of AI's biggest doomers is set to make millions from Anthropics IPO. Plus, take two, releasing the highlight at the highly anticipated GTA 6 game next week.

22:53We're going to take a look at the companies that will stand to benefit from that. We're back in a minute. The quarter pounder with cheese is made with 100 % fresh beef cooked when you order it. Add hot crispy fries and an ice cold Coke and hopefully a lot of napkins. all for$8. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow.

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24:13Nasdaq declines. Not crazy, given the wild action we've had last couple of weeks, down about a percent and a half, although breadth is roughly two to one negative on the Nasdaq and S &P down almost 70 points. Still up 1.6 percent on the week. But again, this was supposed to be the big bounce back week after a big sell off last week. Time now for news update. Contessa Brewer has it for us. Contessa. Sarah, the doctor to Congress has resigned. Real Rear Admiral Brian Monahan is the attending physician to Congress, and he's under investigation by an inspector general over allegations of misconduct.

24:46There are accusations of a toxic work environment and dispensing medications without prescriptions, according to The Wall Street Journal. Neither Monahan nor the Pentagon has commented. Six more women have now accused actor Russell Brand of sexual misconduct, The Times and Sunday Times of London report. Last week, Russell Brand was convicted and sentenced to 10 and a half years for rape and sexual assault. The additional women accused the comedian of misconduct between 2005 and 2015. The news outlets held the story until after the trial because of British contempt of court laws. And BMW is recalling more than 700 ,000 vehicles because of a fire risk when they're parked or turned off.

25:27Those vehicles were previously recalled in 2024 for a water pump issue and have to be repaired again. This applies to several vehicles in the 2012 to 2016 model years. And the National Transportation Safety Board is warning people you should park outside and away from other vehicles and buildings until the problem's fixed or, you know, risk your garage, I guess, Sarah. Yeah. OK, thank you, Contessa. After the break, we'll bring an exclusive interview with the CEO of Estee Lauder, how their turnaround strategy is taking shape, plus what the CEO is seeing when it comes to the consumer right now.

26:00We'll be right back. Welcome back to Squawk on the Street. While questions about consumer spending remain, One category still seeing real strength is beauty and fragrance. That said, it hasn't helped shares of one of the biggest names in the industry, Estee Lauder, nearly 60 % off their 2021 all-time highs. But the new CEO, Stéphane Delafavri, has big plans for a multi-year turnaround and laid them out with me in an exclusive interview. They're already taking shape. They've seen five quarters of growth. This is the first time on CNBC since taking the role. Listen. I think what I saw when I began, I've been in the company for over a decade, is I knew we had strong brands.

26:35We have a beautiful portfolio of brands from the Estela there to Mac to Joe Malone here, the ordinary today. But we were not agile. We were not fast enough to react like, you know, to the trend and to the speed that the consumer were. So we need to make some change and to reignite the entrepreneurial spirit on which this company has been built for so many years. So what's giving you the confidence now to raise guidance? What do you see from the consumer? First, what you said, like five quarters in a row of growth, especially the last two quarters have been very strong, much more balanced growth around the world, like, you know, from east to west.

27:06I think, you know, obviously we have had always very strong position in the east with like, you know, China, Japan, like, you know, Korea, where we continue to gain market share. But now we're accelerating our trend also in the U.S., Latin America and in Europe and in the emerging markets. So we're seeing a lot more agility, a lot more speed. We're seeing an organization also that is moving, that is much more, that is bolder, more ambitious. And more importantly, we're seeing a lot of our innovation and our brands working in many places around the world. I wanted to ask about prestige in particular because some parts of the luxury market are not holding up as well as prestige beauty.

27:44Why is that? Well, I think for us, generally speaking, what we see in beauty is a strong resilience. I think around the world, I just come back from Asia and here in the US, the resilience of the beauty consumer is very strong. It is part of like little luxuries that people want to have access every day. Remember, beauty is anywhere of this brand, like the ordinary between an average of$10 and$12 price point, all the way to brand like La Mer or Le Labo that are$200. So it's still what I would call an accessible luxury and prestige. So this category is very resilient for multiple things. One, because lifespan is expanding, consumers are starting younger, and staying older also.

28:25People are living older. So this concept of longevity and people wants to take care of themselves. And there is also the phenomenon of new emerging consumers around the world. We're seeing between now and 2030 more than doubling the number of emerging consumers around the world that comes into the middle class. Usually when consumer comes in the middle class, they tend to go to the beauty category first. I was going to ask about AI and agentic commerce because I can just type in what's the best skincare routine for me. How do you make sure your brands stand out in that environment? I think it's just like it's the same.

28:58We need to be in the different touch points. Today, we are using creators around the world. You know, we are 80 years young as a company. I love to see it. We started at the counter with Beauty Advisor. Beauty Advisor was the ultimate influencer for the brand. Today, it's no longer just a Beauty Advisor. is anybody in the street that wants to talk and engage with our brand. So we're engaging with tens of thousands of creators around the world in every market. So they talk about our brand in their own voice. And it's very authentic. And the more authentic it is, the more the LLM platforms picks up on this language.

29:33And the more you like, you know, they create demand and variety behind the box. I mean, how much has your marketing budget changed in terms of going toward these influencers on TikTok and these authentic users versus where it was. Yeah, fundamentally. Celebrities. I think, you know, the marketing budget has always been about performance marketing and equity, but how you're using the network of creators around the world is critical today. So, because consumer wants an authentic discussion with the brand. It's no longer a one-way street where the brand tells the consumer what to do and what to wear or, you know, what product to use.

30:06It is a two-way conversation. So the marketing budget has fundamentally flow. And today, one of the reasons why we've completely restructured our P &L is to be able to fuel back the consumer facing. And we've been now on seven consecutive quarters of increased investment, not only to build equity, but also to just engage with this larger. How do you compete with the indie brands that, you know, can sometimes cost less? They're very close to the consumer. They're good at social media and they catch on to the trends. Yeah. But so today competing, here is the perfect example. We're sitting at the ordinary store, like in Seoul.

30:43The ordinary is actually the ultimate, like, you know, Indie brand. So when we acquired the SIEM, which is the house of which we're like the ordinary part of, we kept them as an Indie. And what we're doing is today, we are learning from the Indie mindset while leveraging the scale of the company. So what the ordinary is benefiting is the scale of the Estella company that operates in 150 countries around the world, manufacturing network, distribution network, you name it. But at the same time, the rest of the portfolio of the Estella company is learning from how do you get on the trend? How do you launch product faster?

31:17Because one of the things that I said as increasing innovation is not only increasing innovation, it's increasing the speed at which we are bringing innovation to market. This is a brand that can bring any product in less than a year, sometimes six months to market. And so this is like the spirit of what we are learning from an Esteele-Oder brand that just turned 80 years old that has the scale and at the same time an ordinary that has the agility. My role with the team is to bring everybody under the same model. You mentioned China. Obviously, that's been key for the stock and the performance.

31:51You've called it a mature market. Yes. So how do you win in China and sustain this kind of growth? Yeah. So China being the second largest beauty market in the world, when I say it's no longer an emerging market, it's a mature market, still growing mid-single digit is a lot of additional business. It's a lot of new consumers that are coming. What we're seeing in China is the same phenomenon we're seeing everywhere around the world. You have an aging population, but you still have a young population coming and also a growing emerging consumer. Remember, there's 1.4 billion people in China, but only today, I would say 700 to 800 million people have access to regular consumption, including beauty.

32:32So, still new consumers, lifespan is expanding also in China. So we've been in China for more than 30 years. We've built capabilities there from an innovation, from a fulfillment center, but also bringing product for China. 30 % of our global innovation today is developed in China today because of the Chinese need. In China for China. In China for China and China for the world. Because we're also bringing some of this innovation. Think of things like Cushion Compact. There's been something very successful in Asia. Asian consumers tend not to use as much liquid foundation. They more use touch-up throughout the day with Cushion Compact.

33:08It's not been the way that consumers have done it. But now we're seeing the trend coming to this part of the world. So it allows us to just be China for China, China for the world. But we have very strong position. Now it's seven quarters in a row that we're getting market share. What is your economic read of the Chinese consumer right now? Because that's also been sort of frustration for a lot of global brands, the lack of spending. I just come back from China where we did our capital de market. And we showed, one, the operation and the quality of the operation of what we've done, but also the resilience of the beauty consumer.

33:41While there may be some discussion about the overall consumer sentiment in China, the beauty consumer is still very strong. And we are in an industry that is growing mid-single digit. We are growing above the market, and we've done it for seven consecutive quarters, and we intend to continue to do it. So I'm very bullish on the future of China. But importantly for us, part of our beauty reimagining is a balanced growth around the world. So while we may have been too dependent on the East in the past, today my number one mission is continue to drive the growth that we have in the East, including China, but also re-accelerate everything that we're doing with great innovation, great consumer coverage here in the US, but also in Europe and throughout the emerging markets.

34:24What about the US consumer? What do you see right now in terms of value-seeking behavior and the fact that there are affordability challenges with gas prices and groceries? Where does that leave the consumer and how they view their beauty budgets? One of the things I've learned after over 20 years in New York and more of that in the U.S., never bet against the American consumer. They're very strong and very resilient. Beauty is part of their regimen. And today we're seeing here in the U.S., the same phenomenon we're seeing everywhere around the world, the famous K economy. The luxury consumer is extremely resilient.

34:57La Mer, Le Labo, a very, very strong brand and growing very strongly. But here today we're sitting at The Ordinary, which is a brand that has been four consecutive quarter in double-digit growth. And this brand is knocking on the door of the billion-dollar club with the rest of our brand. So we think today the portfolio of this company is perfectly designed from the most affluent luxury consumer to the prestige, to the entry prestige consumer, to be able to sustain the demand. And while I cannot control the macroeconomic environment, I can react with the brands and the price point and innovation.

35:32Well, on the price points, what are you seeing in terms of cost inflation right now with everything that we've seen, tariffs and higher gas and transportation prices? What's happening on cost? And then does that result in higher consumer prices? The beauty of our network is that now we have nine manufacturing sites around the world. So I've been able to just like, you know, navigate some external disruption that came from like tariffs or inflation. And this network was always designed to be close to the consumer. So we source where we make. So it allows us to be just like cut a lot of costs. We have not passed, you know, increase to the consumer over the past year, we have barely increased its price.

36:12So the consumer within any of these other company brands have not seen price increase. But what we're doing is reinvesting in our brands to really make sure that, again, we're creating the desirability that is needed. CEO of Estee Lauder, by the way, stock is up 50 percent since he has taken over as CEO. And there are definitely signs that the turnaround plan just eliminating layers and making the company much more agile is working. Carl, but interestingly, Fragrance is doing a lot of the heavy lifting. He took me on sort of a tour in Soho. They have a bunch of different stores all on Prince Street in New York City.

36:47This is Killian. This is one of their fastest growing fragrance brands. I mean, fragrance grew 20 % last quarter. It's driving almost 60 % of the sales growth right now. Why? Gen Z does not use signature fragrances. Like we used to, you know, in college, I would have like one fragrance for four years. He said that they change their fragrances like outfits, that they're much more moody. They buy a lot of them. And that's part of the reason that it has been so successful. And then the other factor that's really helped is China, as he mentioned, is growing back to 9 percent growth there. And that's certainly been one of the overhangs on the stock long term.

37:25I'm chuckling because my teenage daughters are obsessed with Joe Malone. Yes. It is expensive. The forward P.E. 33 is more than Procter, more than Ulta. I mean, the stock's a double off of April. Well, they're seeing better growth. Organic sales were 6 % in the quarter. So that's one of the factors. It's a global story, and it had come down so much. Remember, this was such a beaten down stock. The top beauty trend right now, longevity. Everyone wants to be younger. So it's serums, it's anything you can do, peptide creams, anything to make yourself, and that's kind of a global phenomenon. Yes, we talk about that off camera sometimes.

38:04still ahead. I share my routines with my tips. The highly anticipated release of GTA 6 on deck for next week. We'll take a look at the companies that might benefit when we're back in just a minute. Welcome back. Take two's highly anticipated release of Grand Theft Auto 6 slated for next Thursday. Our Julia Boorstin has details. I can't believe we're finally getting it, JB. Well, Carl, GTA 6 launching next week could be the biggest entertainment launch of all time. New Zoo projects the game could gross more than$5 billion in its first week alone, with Morgan Stanley projecting 40 million copies sold by the end of the first quarter of next year.

38:44But it's not just Take-Two and its rock star game studio that will benefit from this launch. Its ripple effects could be far-reaching. PwC came out with a report recently forecasting gameplay could pull viewing hours away from other entertainment, such as streaming and sports. On the flip side, the game could drive an increase in Spotify streams of in-game music, engagement on social media, along with a spike in food delivery for gamers hunkering down to play. Not only is it going to have this broader economic impact, but there's a cultural impact here. There are, you know, behaviors on what people are doing.

39:23And to us, it's so different than anything else that we've seen when we've gone back over the last, you know, like, you know, five or 10 years. We spoke to content creators across the streaming landscape who told us that this game has a massive opportunity enabling them to increase their reach with both increased subscription as well as ad revenue across Amazon's Twitch, as well as YouTube, TikTok, and Instagram. One streamer even told us he sees how this game could turn a lot of smaller creators who are playing a lot of GTA 6 into millionaires next year. Guys? What are the financial stakes for Take-Two now that this has been so highly anticipated?

40:08Highly anticipated. The estimated budget over a billion dollars. Strauss Zelnick, who's the CEO of Take-Two, he was very cautious, saying they're cautiously optimistic, but he didn't want to make any projections. It is expected to be very financially beneficial for them. But what's really interesting here, Sarah, is it's not just the upfront game sales. It's the way they continue to monetize the game for years to come. But we'll have to see how gamers like it. We haven't seen the reviews yet. Development costs are a billion dollars. I feel like I could do it for less. That's right. It is crazy.

40:45Yeah, over a billion dollars in years and multiple delays. That's why the stakes are so high here. Gamers and investors have been waiting for this for years. It is an incredibly high stakes moment for Grand Theft Auto. And the expectations are so high, we'll have to see if it lives up to those heightened expectations. OK, thank you, Julia. When we come back, Anthropics CEO Dario Amode and JPMorgan CEO Jamie Dimon hosting a Fireside Chat in just a few moments. We're going to discuss what to discuss after the break, what to expect. Welcome back. Anthropic CEO Dario Amadei and JPMorgan CEO Jamie Dimon hosting a fireside chat in just a few moments.

41:21Kate Rooney has the details as part of the roadshow. Yeah, well, so Jamie Dimon is going to be sitting down with Anthropic CEO Dario Amadei in a couple minutes here. We're expecting this around noon Eastern in New York today, and it will be live streamed. Anthropic just confirmed that. They put out a tweet with the link. It's going to be on X. And JP Morgan and Jamie Dimon ran this play back in June. Dimon interviewed Elon Musk during the SpaceX Roadshow, and that conversation also streamed on X. This time, JP Morgan is one of the firms leading the U.S. retail push for Anthropic, which is, of course, the company behind Claude.

41:58And that chatbot, Anthropic, could, from what we're hearing, make as much of a fifth of the offering available to individual investors, retail investors, through brokerages. You've got Robinhood, Fidelity, E-Trade, for example, that will be part of the offering. It gives them a shot of buying at the IPO price before the stock is going to start trading. There's also some early signs that we've seen of retail interest. So Vanda Research tracks this one closely. They say trading and some of the more speculative contracts tied to anthropic ahead of the IPO suggest that first-day retail buying could even top SpaceX.

42:28The test does come when that stock opens, of course, but that is expected, guys, next Thursday. We're going to see how much Main Street interest there is, how much they actually buy. And Leslie Picker has reported that institutional interest for this deal has been quite strong. So we'll see how that translates to sort of the average Main Street investor, as I said. But Jamie Dimon will put that on display today. We'll see what they say, guys. Yeah, I mean, good they're live streaming it if they're trying to sell it to retail investors. But, Kate, you know, just to connect the two big stories with the Anthropic IPO and then the Jensen Huang exit, A lot of people are saying that, you know, Jensen's exit from NVIDIA marginally benefits these companies, the Anthropics and the OpenAI, the Frontier models, because he was he was the spokesperson for the open weight models, which sort of goes against their business model.

43:15No, it's a really good point. We should also say NVIDIA is an investor anthropic. So there's a sort of tangled web of interest here. But at the same time, Dario Amadei has been among the more hawkish when it comes to China, has really said that he wants tighter export controls and sort of has been in some ways on the opposite side of Jensen, Jensen Wong. But they also do have competing interests. I mean, NVIDIA was supporting open source. That is the opposite and damaging potentially to their business model. They wrote about it in the risk factors in the S1 saying open source is cheaper. It is a risk to their business.

43:49We'll see how they dance around that topic today if Jamie Dimon asks him about NVIDIA. We'll see. Yeah. And of course, when we got the prospectus not long ago, Kate, a big part of our discussions were about their shift to the enterprise. Then today you bring us this OpenAI chat GPT wallet idea. And I think people will start to talk about where the strength really is in enterprise or consumer. It's a great question. and OpenAI might want to lean on that in their own roadshow. They're expected to go out next year. And the fact that they have sort of this hedge, if enterprise doesn't look as good in a year, maybe they start to monetize consumer in a better way.

44:24And payments are a big way to do that. Yeah. And I showed that chart earlier that it's an increasing part of consumer AI spending. Anthrop has gone to almost 30 percent of that AI spending budget. Kate Rooney, thank you very much. The other thing is that Dario has been more of a, I don't know, doomer strong, but, you know, a warning of the dangers around AI, stealing jobs and existential risk. And NVIDIA, Jensen, has been quite the opposite. Yes. I mean, he's been one of the big optimists and cheerleaders on AI. So a little bit of maybe a change there in terms of the dynamic. That's going to be the thing to watch next week.

44:57It will be. And along with NVIDIA earnings, we'll have deal book. We'll get retail sales, ton of earnings, Disney, NVIDIA, Walmart, Home Depot. Yeah. And it's not just that. I mean, Nike has an investor day as well. I'll be headed there to cover that one. Obviously, a big, you know, underperformer in the Dow Jones Industrial Average. So we'll see what they have to say to investors about the turnaround plan there. And then there are other tech conferences, too. Tomorrow X is a big conference in Austin that I'll be covering. Jensen was supposed to be speaking there at NVIDIA. And a lot of folks there.

45:26It's hosted by, you know, Gavin Baker and Antonio Gracias. And they have been big defenders of Jensen and criticizing the board for potentially reacting too soon here. There was a GTC planned for next week. I mean, you reminded just how visible he was on a daily basis. And to not have him around, it's going to feel different. I don't understand how he fit it all in. That was the title of the Bernstein report. Where did he find the time? Where did he find the time? You know, affairs, conferences, trips to Asia, trips to the White House. It really is pretty remarkable. Finally, keep an eye on the 10-year.

46:03This will be the biggest weekly increase for the 10-year. I think going back to Liberation Week. Yes. As we got into the 4.8s and now back to 5.16. Yeah, we got the inflation number today, wholesale inflation. Came in a little bit light, but still speaks about the inflation aspect. And then the other thing that hasn't been discussed as much, dollar index is at the highest level in 19 months. Strong. Have a good weekend. Rest up. 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.

46:36You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Squawk on the Street disclaimer, please visit CNBC.com forward slash Squawk on the Street disclaimer. What happens when you combine a cozy night in with the whole family in matching Old Navy jingle jammies?

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