11AM Hour: Renaissance Macro's Neil Dutta, Nvidia Shares Pop & SpaceX's Historic Launch 9/28/26

0:00At Janice Henderson, we strive to deliver better outcomes through insight-led investing, innovation for clients, and a partnership approach that's core to our identity. I'm Jessica Lianzini, Head of Fixed Income Client Portfolio Management. I'm passionate about my role in investments. It allows me to partner with our clients, simplify fixed income, and support them in achieving better outcomes for their clients. Janice Henderson, investing in a brighter future together. You know, Kevin, sometimes I feel like computers are the only thing around here that are getting smarter. Yeah, my model hasn't had an update in a while.

0:36But that changes now. We think that we can smarten these listeners up about all things related to this crazy new future. Welcome to Machine Gods, a new NPR podcast that will be your guide to the AI future. Twice a week, we're going to help you get smarter about AI so you know what's real, what's hype, and what you should probably install on your phone. Listen to Machine Gods from NPR on the NPR app or wherever you get your podcasts. Good Monday morning. Welcome back to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla, live from Post 9 of the New York Stock Exchange. Today, the Federal Reserve's rate path with inflation data and the jobs report both on deck this week.

1:14Renaissance Macros' Neil Duda joins us to make his case for why the central bank will keep hiking. Meta's enterprise push, the company poaching yet another top tech executive as it seeks to monetize its AI spend. by selling more tools and services to business customers. An AI safety PR problem going mainstream, getting the SNL treatment over the weekend. This says OpenAI and Anthropic reportedly probed thousands of security incidents. As for markets, we did take a bit of a leg lower here. Dow's down almost 400 points, lost that 7 ,700 level. We're thinking about whether this is related to that 10-year, which is now at session highs 527.

1:52seven. A lot of data is on the way, though, through the course of the week, including jolts tomorrow, ADP Wednesday and a jobs number Friday. And PCE in between. That's the Fed's preferred inflation measure, which is what they're so worried about, which is why they've been raising interest rates. For more on today's market action, let's bring in chief investment strategist at Schwab Center for Financial Research Lizanne Saunders. Lizanne, does a 10-year now surpassing five and a quarter change your view on on equities at all? No, not specific to the level. I think when you hit these round number levels, in this case, five and a quarter, I think there might be a psychological component that filters in.

2:30But so far, the move up has been more than justified by the fundamentals, not least being the expected path of Fed policy, nominal GDP growth and expectations around inflation. And it's been orderly so far, you haven't seen a tremendous amount of volatility. I think where any continued move higher to become a bit more disorderly or disconnected from fundamentals, then I think equities struggle a little bit more. Yeah. And that's ultimately what Secretary Besant was worried about, sort of disorderly or speed of the moves here when it comes to the backup in rates. So what would be the strategy on a day like today where the market, and this is a familiar you're feeling, is spooked by the combo of higher oil prices and higher rates?

3:10I think this is an environment within the equity portion of the portfolio where you want to stay up in quality. We've had bouts even at brief periods this year where you go down that sort of quality spectrum and you start to see better performance by areas like non-profitable tech. But I think this is an environment where you want to lean into quality. And that's everything from a factor perspective that's kind of Garpe-like. You want to look for that positive earnings growth on a forward-looking basis, stability, if not growth in profit margins, but you don't want to pay exorbitant valuations for it.

3:45I think balance sheet strength is important to look for the kinds of stocks that have high interest coverage in an environment of higher yields. So we may not be seeing in the aggregate a huge impact on the market in terms of yields, but all you have to do is peel a layer of the onion back and you see it's those more interest-sensitive areas, utilities and REITs and financials that have gotten hurt. And I think that type of backdrop is likely to persist, where you look at the move in yields and you might not see it at the cap-weighted index level, but you're going to see it under the surface. Yeah, well, we've been, like, it seems increasingly, Lizanne, putting up charts of triple C spreads versus Bs, or maybe some office CMBS delinquencies.

4:28Certainly mortgage apps have been no good. You think that's what this first inning feels like in a dramatically higher rate environment? Yeah, but I think it's very pointed where you are seeing that weakness. Carl, you pointed out rightly so some of these segments. You know, the broader good news is that an environment where the government sector has clearly leveraged up and is likely to continue, given the need to finance 6-7 % deficits, is you've had a good chunk of the private sector, particularly large corporations, been in this multi-year deleveraging process. So that's why I think the move higher in yields can be absorbed certainly by the higher quality, higher credit rating companies out there.

5:13How do you follow the shifting narrative around AI? You know, from CapEx to safety concerns, to overbuild concerns, to regulatory concerns, all at the same time where demand has never been higher. Like, how do you how do you make sense of that when it comes to recommending the market and the stocks that are underpinning this revolution? Well, I think the the A.I. story has clearly come a lot broader than just what was initially the case, the hyperscalers and then in private markets, the frontier companies. And so we're in the third of the three C's, as we've been describing the framework, which is the create phase.

5:51Everybody knows what that was. The catalyze phase, which as the build-out of the infrastructure, that's arguably still ongoing, and now the cascade phase. And we're trying to figure out who are the winners and losers, both on the provision of AI, but also the use cases of AI. And I think you're seeing it across industries and across sectors that the focus now is particularly the larger-scale companies that have embedded profit margins and have a relatively decent moats around them, how disruptive is AI going to be? So I think that this cascade phase is going to be the most interesting one. But I think people are looking for opportunities outside of that initial core group of perceived winners.

6:38Like what? What would you recommend? Well, I don't cover individual stocks, But that goes back to the factor analysis. I think you want to look for where companies are using AI to disrupt themselves to either bring costs down or improve productivity or boost profit margins. I think high interest coverage and that profitability sort of forecast that outlook, positive earnings revisions, positive earnings surprises, especially as we go into third quarter reporting season. And those types of screening tools, I think, are more important than any kind of monolithic investment decision making around things like just traditional sector analysis.

7:18How do you screen for a company that's using AI and benefiting from AI for real? Because everybody's saying that, right? But how do you separate which ones are actually seeing the return on investment? You have to do it somewhat indirectly because there's no screening tool for companies and how they're using AI successfully. So you've got to look at the spread between top line and bottom line, the commentary. I think even more important than usual is the commentary from coming coming from companies during reporting season, the conference calls and listening to not just the number of mentions, which is often tracked in a Google search.

7:58But whether they're finally starting to put meat on the bone of the cost of capital versus return on capital, the return on investment. So you sort of cobble together a series of factors and commentary from the companies to sort of differentiate the winners and the losers from a use case standpoint as it relates to AI. Lizanne, when you think about, I mean, I don't know how many times we've covered Nike and their travails. And last week it was McDonald's, Campbell's, some of these very cheap consumer names. What connotes value at this point, given some of the dramatic drawdowns over years in some cases?

8:40Well, I think value, frankly, I've always thought value should be a combination of not just what's on the valuation side of the factor array, but the growth side of it, too. You know, there's value traps where you get reasonable valuation. If that's all you're screening for, you run the risk that you don't have any potential on the growth side of the equation. That's why I think that old school acronym of GARP is coming back into the necessary language in this environment, is you want to look for a blend of those growth characteristics as well as reasonable valuation. You don't want to sacrifice the growth side.

9:17And that's the problem with some of these growth and value indexes. The creation of some of them simply categorize high valuation stocks as growth stocks. just because you're trading at a rich multiple doesn't mean you're a growth stock. It just means you're expensive. So I think investing based on the characteristics of growth and value, as opposed to some predefined label or index determination of what is growth and value is the right way to approach this market. Growth at a reasonable price. That's what you mean by GARP, right? Where it's kind of like you're finding a growth stock at a value price?

9:52Yeah, you want reasonable valuations, but you don't want to sacrifice the growth piece of it. And there is such a thing as a combination of both. It's one of the reasons why the Russell indexes have that overlap. And the traditional growth and value index that S &P do, not their pure growth and pure value, but their standard growth and value index, there's overlap there is two. And I think you want to look for that combination. Okay, Lizanne Saunders, a good way to kick off the week with you. Thank you very much. I appreciate it. From Schwab. Good to see you. Turning to the latest headlines on AI, OpenAI, expanding its review of AI behavior following that recent string of rogue attacks.

10:29As Anthropics Chief Dario Amode met with the president last night, our Kate Rooney has the latest. We didn't even mention SNL this morning, Kate. Good to see you. Carl, good to see you. We will get to SNL in a second. There has been some new fallout, though, from the AI industry's recent safety issues. We'll start here with OpenAI, the AI giant expanding an internal review after a string of new incidents involving its AI agents. OpenAI said on Friday that it's now conducting an extensive review after the high-profile hugging face attack, where agents, if you remember, broke out of a controlled environment onto the open Internet.

11:05OpenAI also disclosed a handful of other cases of what they called unexpected or concerning model behavior. The New York Times also reporting that in some of these cases, agents accessed publicly available information from government sites that included the SEC and Census Bureau. CEO Sam Altman said that OpenAI notified these third parties and does plan to be as transparent as it can. But it's ultimately up to these third parties to actually disclose what happened. The news does come as this company is set to host its developer day here in San Francisco tomorrow. We will be there on the ground.

11:37But in the meantime, when we talk about Anthropic, a source confirmed that Anthropic CEO Dario Amadei did have dinner at the White House last night on Sunday. It was a private dinner with the president and their first one on one meeting from what we're hearing. Amadei was notice noticeably absent from the state dinner with Chinese President Xi Jinping and other industry leaders last week. Anthropic has been at the center of this entire safety debate, calling for industry and international standards and for U.S. regulation as well. But ahead of this dinner, the president has also made his stance extremely clear.

12:10He's talked about no more new regulation, doesn't want the U.S. to slow down or risk losing out to China. Anthropics relationship with this administration has also been fraught after the Anthropic was labeled a supply chain risk. And finally, this safety discussion. Carl, you mentioned it. SNL, it's spilling into the mainstream. SNL did parody Amadei's warnings about AI doomsday risks on weekend update. You can see a split screen there. How are they supposed to IPO amid amid all of this? I mean, this is really like the narrative. You know, the narrative really matters, right, when it comes to marketing and IPO.

12:49And it feels like, you know, between the Pentagon getting the D.C. appeals court on Friday, right, to side with them against Anthropic and him becoming a poster child for all of the negative warnings that he has made, both about jobs and safety on AI. Like, what do you do with that as an investor and with an IPO? Yeah, it's a it's a great point. I mean, that is the backdrop of all this, Sarah. Both of these companies really have filed confidentially to go public. We talk about how these companies are unprecedented. And one of the things that's unprecedented about these listings is the safety debate and the narrative, especially when you think about retail investors.

13:27You have the SNL moment where the safety debate is spilling so far into the mainstream that it is the central topic of weekend update. But at the same time, you talk to investors who have participated in some of the private funding rounds leading up to a potential IPO. They have said that safety and these things are so top of mind and so central in the fundraising discussions that you expect it to come up in the S1, but it is sort of this company's brand is what some have criticized the company for, which is talking about safety, talking about the worst case scenario risk here. And it is expected to be central in the S1, although the headline risk is especially central when you talk about retail investors.

14:07If they end up allocating a pretty large portion to retail, it's not clear that AI is a particularly popular technology at this point. I just think if they want to be painted as the responsible actor here with AI, then they shouldn't be so negative about it, right? That's been the criticism. Yeah. I would also say NVIDIA, we heard from NVIDIA this morning, and their sort of safety software that they came up with. I mean, Jensen Wong has made the point that this is an engineering problem, and it's actually up to the companies themselves to protect against any sort of worst case scenario risk, which I think SNL also got it too.

14:41I mean, the framing, and again, this is this satirical extreme version of it, but saying, you know, we want to be regulated and we're afraid of what we are actually capable of. They sort of got to the spirit of the criticism of these AI companies is they're the ones controlling the technology. They're the ones creating it, yet they're the ones ringing alarm bells. And so they called out some of what others have called hypocrisy. The companies have also said, you know, Dari Amadei has argued that he has been balanced about the risk and benefit. But I would say Jensen Wong's software platform that they came up with this morning is the counter to that, saying you can actually solve this with engineering and there's technology that you can implement to ease some of these fears.

15:19Yes, we hope it's engineering, as he said. If not, it's a not solvable problem. Kate, thanks so much. Busy week ahead, Kate Rooney. When we come back, will speak to a top analyst about NVIDIA's new safety software that they announced today, how that release fits into the broader strategy. Neil Dutta of RedMAC will join us. His expectations for inflation and monetary policy in the coming months with the Dow down 375. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture. Vantage Score is changing that by modernizing credit scoring.

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17:14Welcome back. Take a look at NVIDIA today. 230 rising as it announces an additional$150 billion buyback authorization this morning. The tech giant now expecting to complete$235 billion of buybacks by fiscal 28. Also unveiled a new line of security software meant to prevent those AI agents from going rogue and misbehaving. Let's bring in Gil Lauria, managing director of DA Davidson, has a buy rating on the stock,$300 target. Gil, it's good to see you this morning. A lot of news. I guess I'll do your dealer's choice here. What's more important, the buyback or the software? It's the same story. So Jensen Wang sees his job as making sure the AI ecosystem can thrive, that the whole market can thrive.

17:58If the market thrives, there's a lot of supply, demand will materialize and AI will continue to grow. So when he needed to support the model companies, he invested in OpenAI. When he needed more clouds, he invested in NeoCloud. More optical, he invested in optical. When open source became the most important thing, he invested in Nemotron and then Hugging Face. And now what he's realizing is the most important thing to make people feel better is to invest in security. And he's in a position to get everybody to the table to coordinate about how we now defend our infrastructure from these malicious models, using those very same models on the defense, not just on the offense.

18:38When there's cash left, which is what's happening here, as much as he's investing, there's a lot of cash left. He goes to Colette Crest and says, Colette, buy as much share as you want. The stock's trading at 18 times earnings. It's a great return on investment. Now, there is some space between your target and the street high, for example. Are there elements of caution that you folded into your model? I would say that NVIDIA is a complex story because it's so big that it can only grow so fast. That's held people back. They've been focused on other sectors. But realistically speaking, it's at the center of the trade.

19:15If you believe AI will continue to thrive, there is no way that NVIDIA does not benefit from that. If we are continuing to deploy AI compute, NVIDIA will still and consistently be the biggest profit pool of all the profit pools. Having said that, it's very big, so it can only grow so much. But no, there's no signaling on my end that it's being cautious. It's more me saying 300 is a step towards the 10 trillion mark that they'll get within a few years. You know, this report that that open AI rogue agents have access U.S. administration websites in unexpected ways. It's just the latest chapter in the in the safety concerns, right, of these new models.

19:59How do you marry that, Gil, with what's happening with all the optimism and enthusiasm around around these consumer chatbots? I've been playing with the with Muse basically since last week. Like, oh, my God, like it's a game changer. It is so useful. And I now understand why the stock went up so much last week on it. But how do you take all of the concerns and put it with some of the promises around the productivity and the game changing aspects of this technology that we're seeing? They're both a result of the same thing. The models are getting very, very powerful. So on the scary side, that means they can hack into any system.

20:36and we now need to turn our attention to making sure that all of our infrastructure, our software infrastructure is hardened. We need to use those models to find the flaws before some bad actor takes those same models and attacks. That's because the models are powerful. The models are powerful, are also so powerful that a company like Meta that has a really good sense for how to build user interface, user experience, can now give us views and all of a sudden it unlocks all these uses that consumers didn't realize they could use AI for. Same reason. The models are powerful. And by the way, we're not even using the most powerful models because OpenAI and Anthropic haven't even released the most powerful models.

21:16When those are released, there'll be more uses like this. The assistants will get better. And by the way, Google, Apple, OpenAI will also have assistants that should be as good, if not better, than Muse. Have you changed your view on Meta after the release of Muse and after playing with it? because I think you're still at 700 buy, which we've now surpassed that target. Yeah, yeah, I said that target when the stock was about$500 after earnings. If you remember just a few weeks ago. That was a good call, but now what? No, Mark Zuckerberg said, hey, we have plans for AI. We're going to have a personal assistant.

21:48We're going to have an enterprise strategy, but was completely nonspecific. And here we are, and we can see what he was plotting. Muse is a huge success, and now he's starting an enterprise business, really a competitor to the hyperskill was to Amazon, Microsoft, and Google, and he hired the CEO of MongoDB. He's not messing around. He hired somebody that has a lot of credibility in the enterprise software space to lead this business. So it turned from a very amorphous plan on earnings that got the stock punished to a very concrete plan around both consumer and enterprise that's going to help the stock rally.

22:26Yeah, enjoying its best month in over a decade. I can see why There might be a little chop toward the end of the month. Gil, fascinating. Appreciate the time. We'll talk soon. Gil Loria. Thank you. Still ahead on the show, Neil Dutta of Renaissance Macro joins us. We'll discuss the recent rise in yields and his outlook for the economy. SpaceX launching its Starship rocket into orbit for the first time. We'll get you details of that historic test flight in just a minute. Hi, I'm Roman Mars, host of 99 % Invisible. It's a podcast about all the thought that goes into things most people don't even think about.

23:01You're going to see stories everywhere. Follow and listen to 99 % Invisible wherever you get your podcasts. 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. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required.

23:36Jimmy Conrad here, and I have something to put on your radar. The core short from Viore. Because after getting my first pair, I was hooked. They work for everything that I like doing. Soccer, tennis, hoops, and lifting weights to name a few. And they're unbelievably comfortable, which is why I wear them doing everything else. They are designed to work for whatever your day throws at you. For our listeners, they're offering 20 % off your first purchase. So head to viori.com slash footy. That's V-U-O-R-I dot com slash F-O-O-T-Y. Exclusions apply. Visit the site for full details. Welcome back with the 10-year treasury yield hitting its highest level since 2007, making new highs this morning, and the 30-year hitting its highest since 2004.

24:16The economic picture is getting a little more complicated as we await PCE, the inflation report and the big jobs report later this week. Joining us to make sense of all of it is Renaissance Macro head of economic research, Neil Dutta. And you've been writing about yields this morning, like everybody else. What do you think is ahead? Well, I think the backup and interest rates, Sarah, thanks for having me on, is already having some effects on the economy. I mean, you can see that in kind of weekly housing data, right? Like, So pending sales are going down, cancellations are going up. So the areas of the economy that are most sensitive to interest rates are already starting to feel it.

24:54And that's going to weigh on things like residential investment. But I think the important thing is that I don't think the rates backing up is having that much of an effect on the area of the economy that's juicing growth the most, which is primarily a kind of information processing equipment. So, you know, to the extent that financial conditions matter for the Fed's reaction function, in my mind, it just means that they have to get even tighter from here. Yeah, I know I highlighted your chart this morning showing that the places that feel it most acutely and soonest are not the ones that need it.

25:33Housing and autos and other sort of consumers furnishings. So but but you're arguing that that makes it more likely that the Fed will hike rates more. Wouldn't they hike rates less if it's actually starting to really hurt the real economy, even if it's not, you know, helping soften conditions because AI is so powerful? Well, why is this? I mean, to me, it's really a function of what's going on in the equity markets. Why is the equity market up? The equity market is up primarily not because of these sectors, frankly, which are already broken. Right. Like so these cyclical sectors that you're showing are already quite depressed.

26:06So depressing them more is going to have how much of an effect on growth. On the flip side, information processing equipment, tech, is doing really well and continues to do well. That's putting upward pressure on growth and keeping the stock market elevated. So if the Fed is having a financial conditions framework, breaking the equity market ultimately means having to break this part of the economy. And so that's going to probably require much higher interest rates than investors currently anticipate. Neil, there are a couple notes out today looking at what some call a vicious cycle between deficits and interest expense on the government's part and yields and whether or not it's feeding into one another.

26:49I think the whole curve now is above CBO's terminal rate of interest expense, like three nine or something. Is that is that something you're looking at? I mean, we're all looking at it, Carl, but I don't think that that's the primary driver of why interest rates are going up. No, not suggesting that. And I don't even know that it's really that relevant. I mean, to me, interest rates are going up because monetary policy is tightening and global growth is resilient. And monetary policy is tightening everywhere. So longer term interest rates are essentially expectations of future short term interest rates.

27:24And so that's, to me, what's going on. And if you look at the relationship between something like interest payments, net interest payments relative to GDP, and the movement in yields year to date, I mean, it's basically a flat line. There's no rhyme or reason to it. It's not like the countries with the biggest interest payments are seeing the biggest increases or, you know, most negative total return and then a longer term bond. So I don't really see much there there, though it does make for a good story. You mentioned housing, and we talked about technology, but what about the consumer, which is ultimately the driver of this economy?

27:58You know, most economists, I think, would say that overall consumer's been resilient. How resilient now that we're talking about oil prices sustained above$100 and treasury yields going up this high? Well, I mean, consumers are resilient. I would just say that it's probably, I mean, consumer spending, at least in terms of GDP, GDP probably moderates from here. I mean, we probably hit the high watermark for the year. So, you know, food and energy prices, for example, probably go up. That weighs on real income growth. That weighs on consumer spending. We won't be talking about tax refunds for the rest of the year.

28:32Right. So that fiscal tailwind that people felt in the first half probably isn't with us anymore. So there's reasons to be cautious on the consumer. And going back to our earlier discussion, Sarah, the equity markets reflect that, right? I mean, it's not like consumer discretionary stocks or consumer staple stocks have been doing well in this market environment, but that hasn't kept financial conditions from remaining relatively accommodative. So this goes back to this idea that you're breaking the areas of the economy that are relatively depressed as it is, even more so, to kind of take a shot at the thing that's very resilient.

29:08So higher rates, that's what you think is going to happen, whether that's the solution or not? Well, I mean, I think people need to, I mean, to me, I think we need to get around to the idea that how does monetary policy ultimately work? It works not by sort of picking winners and losers, but by trying to equilibrate demand with supply. And the Fed's only tool is using interest rates. So that means that demand will have to come down. But ultimately, weaker demand, I think, is the solution to bring inflation to the Fed's target, which we're still way above. I mean, let's see what the administration announces.

29:44Secretary Besson has teased budget. You know, he told us in an interview a few weeks ago that he thinks the deficit has peaked and that there is going to be action, that he's working with the OMB. We're kind of still waiting to see what the contours of that look like. But it does feel like a good time for them to, I know there's never a good time politically, but to start looking at the, you know, at the government fiscal finances and start cutting. Wasn't that what Doge was about? Yeah. Right, but that didn't, it wasn't able to last. They could do it again. I mean, if he really wants to, if he wants to prevent yields from continuing to rise at a time where the economy is in good shape, it feels like that would be a good time.

30:25I mean, who has the power of the purse there? Is it Congress or is it the government? Right. So, I mean, that's ultimately, that's where the action is going to have to be. If you want to pass some kind of law, so good luck with expecting the fiscal situation to improve, to bring interest rates down. The only way to get interest rates down is for people to reset their expectations over the economic outlook. And that increasingly depends on what you think is going to happen with the AI CapEx boot. So call me when that slows down. OK, Neil, thank you very much for joining us on the topic du jour.

30:59Neil Dada from Renaissance Macro. With that 10 year above five and a quarter stocks near session lows. Let's get a news update with Pippa Stevens. Hey, Pippa. Good morning, Carl. The Transportation Department this morning finalized new lower fuel economy standards as part of the push to reverse Biden-era policies that sought to build more fuel-efficient vehicles. According to the DOT's estimates, automaco costs will decline by about$1 ,289 per vehicle through 2031, while fuel consumption and carbon dioxide emissions will increase for decades. Trump administration officials say the U.S. has no plans to sell weapons to China.

31:34That comes after U.S. ambassador to China David Perdue said on Fox News Sunday that President Trump asked China's President Xi Jinping if he would like to buy some. A U.S. official tells The Wall Street Journal that there are no plans for such a sale. And a second official noted that weapon sales to China are illegal. And the co-deputy director of the FBI announced he's leaving the bureau to spend more time with his family. Andrew Bailey was appointed co-deputy director alongside Dan Bogingo, who left and returned to podcasting. Bailey was overseeing election-related matters at the FBI. Sarah, back to you.

32:11OK, thank you, Pippa. Coming up, former Commerce Secretary and U.S. Ambassador to China, Gary Locke, will join us. His reaction to the latest U.S.-China trade talks. We're back in a moment. Welcome back. The U.S. and China agreeing to tariff cuts on$60 billion worth of goods on the back of last week's state visit. Can the trade truce last, especially with some key issues like AI still unresolved? Joining us this morning is Gary Locke, former ambassador to China, secretary of commerce under the Obama administration. Mr. Ambassador, good to have you back. Thanks for the help today. It's a pleasure to be with you.

32:43So we got some of this relief on nonsensitive goods. We got the extension of Busan through January. How does that fit with your expectations going into the state visit? Well, I think everyone had very low expectations for the state visit. no major announcements. Of course, the announcement today by the trade representative of a reduction of tariffs on some items between both countries is good news. It means that American consumers will pay a little bit less. We don't know exactly how much the tariffs are being reduced, but it's certainly good news if you're going to buy sporting goods and maybe some Christmas ornaments.

33:19On the other side, on the Chinese side, it means that American products, commodities like agricultural products and medical equipment will be less expensive and therefore more attractive against commodities coming from Latin America or from Europe. So that's good for American companies. How are you thinking about trade, whether that's China, whether that's the EU, whether it's Canada, and sort of whether relationships are being reformed, changed around, and what that churn does to the economic activity here? Well, I think American consumers and American businesses are still suffering massively from the tariffs imposed not just on Chinese goods coming into the United States, but goods from all around the world.

34:06And other countries have therefore retaliated against American products and services. And so that has really hurt both the American consumer as well as American businesses. American consumers right now are paying almost$1 ,000 more per year. Each household is paying almost$1 ,000 more per year because of these tariffs. And, of course, the announcement today came from the so-called Board of Trade, which was formed several months ago. And today's announcement is partial good news. We don't know how far back the tariffs are being rolled back. But another thing is that there was an announcement just before the summit that the trade truce, the trade war truce, is being extended through January.

34:50That's really important because when we had the huge blowup between the United States and China, when President Trump imposed these massive tariffs on Chinese goods, China retaliated with tariffs on American goods. But more importantly, they suspended any deliveries, any sales of heavy rare earths to the United States. And what are these heavy rare earths? These are things that are needed in our missiles, our jet fighters, our satellites, our submarines, and even automobiles. And so that restriction on the sale of rare earths that our defense industry and our automotive industry needs was suspended, but only until November, and then just a few days ago it was announced that it was going to be further suspended until January.

35:38We really need to watch that very, very carefully. What happens in January? Well, there wasn't much in terms of, as you said, tangible takeaways or policy changes as a result of the meeting. I do wonder, Ambassador, how important it is that there's mutual respect. That was clear. A good personal relationship. I think that obviously President Trump treated him very well, gave them a sort of grand pomp and circumstance. How important is that when you have these countries on opposite sides of the Iran war, the Ukraine war, competing for AI, and China's considered one of our biggest military threats and adversaries?

36:20Like, how important is that personal relationship? Because that is something that's very different in this administration, say, than the last. I think it's very important to have these summits, even if not much occurs, just to continue to establish that personal relationship so that if emergency situations arise, that there's ability to talk to each other, that there's less suspicion toward each other. Mind you, China and the United States are huge competitors. China wants to dominate in terms of AI, especially with their open source models. They are leading the world in terms of electric automobiles, robotics, and even biopharmaceutical discoveries and patents.

37:04So it's really important that we continue to have a stable relationship, even if it is fraught with danger and a lot of disagreement. Finally, I think Peter Navarro was on a podcast, I think Steve Bannon's podcast, where he suggested we might get rare earth independent. and he argued 6, 12, 18 months. I think Bannon's reply was that's impossible. I would imagine you would agree with that. That's impossible. We have very limited mines that produce rare earths, but we also need the processing equipment. And unfortunately, part of that prohibition that was imposed by China, which was then suspended, says that there cannot be any sale of processing equipment to the United States.

37:50And China produces, processes 99 percent of all the rare earths that we need, as well as the processing equipment. So it would take many, many, many years to find substitutes, to bring these mines online and to be able to process them in a safe manner. A lot of moving pieces, Ambassador. It's going to take years to get clarity on some of them. Please come back soon. Thank you. My pleasure. Thank you. Ambassador Gary Locke. Still ahead, SpaceX launching its Starship rocket into orbit for the first time this morning. We're going to bring you the details of this historic launch right after the break.

38:26Welcome back. SpaceX launching its Starship rocket into orbit for the first time today. Morgan Brennan with the details, Morgan, of how significant of a moment this is. And it is significant, Sarah. Overall successful mission for SpaceX, Starship, lifting off from Texas at 848 a.m. Eastern this morning, marking Flight 14. It's the most powerful rocket system ever flown. And this is Starship's first orbital flight and the first commercial one with 26 next gen V3 Starlink satellites deployed to low Earth orbit. Now, it wasn't without some nail biting, though. And we are go for orbit. About three minutes.

39:12we should be lighting one of those raptors to send starship into orbit

39:22engines on the starship vehicle spacex completing orbital insertion burn to huge applause at starbase which you just saw right there on your screen spacex also soft landing the super heavy booster off the texas coast and now as i speak it's cutting the nearly 10 hour mission short because of that engine loss to attempt an orderly landing in the Pacific Ocean. So we'll be continuing to monitor that. Why it all matters. Starship is key to SpaceX's future for AI with orbital data centers, ultimately for life beyond Earth, first on the moon in partnership with NASA and then eventually on Mars. But to get there, Starship is needed for the new Starlink satellites as well, which represents a roughly tenfold increase in download capacity over the V2s.

40:08These were the first V3s, operational V3s that were deployed today. Now, as First Principles Group managing partner Rob Maurer points out, with today's single Starship launch, SpaceX added more Starlink capacity this morning than the first one and a half years of Starlink launches, and that the next launch will cover another full year. So that gives you a sense of just how much we see a ramp up now with Starship coming online. Nonetheless, shares of SpaceX are lower today. Carl? Yeah, I actually wanted to ask you about, Morgan, because all of these are obviously very historic and monumental, as you describe it.

40:43But now we've got a public stock, right? And we were talking with Mike Santoli earlier about just how much is embedded in expectations around what might happen next and just how much they have to scale all of this. It's a great question. To be honest, I'm a little surprised you see the stock trading lower this morning, down eight-tenths of one percent because this mission was so successful and it was very ambitious. That being said, obviously, we're seeing a broader downtdown draft in the market. Anything growthier or momentum related is getting hit in particular today. So perhaps some of that is weighing on SpaceX.

41:18Nonetheless, overall, if you believe in this thesis of this convergence of space and AI and the role that SpaceX is going to play in all of this, then today was a milestone moment. And by the way, it's not just investors in SpaceX that are watching this closely. It is also government. I mentioned NASA as one example and industry, too. because the expectation here is that Starship, a lot of Starship capacity is going to SpaceX's own in-house endeavors. And there are a lot of other companies out there, including Rocket Labs, Stokespace, Firefly, Blue Origin, which is out there raising money from outside investors right now, that see this as a big opportunity to go out and get more business because there is so much demand to launch so much in the coming years.

42:01There's also been big promises, I think, of it, too, which has probably helped sort of drive expectations up, Morgan, right, of them doing this so much, like every hour, right, and putting up these data centers. We got a little ways to go here. But, yes, this keeps us on track towards that. But got a ways to go. Yeah. We'll look forward to Super Heavy Flight 15 in the meantime, Morgan. Thank you. I'm Morgan Brennan watching SpaceX today. Still ahead, analysts estimate LeBron James' first season with the Sixers could generate up to$430 million in economic activity. Get more on that and the business of LeBron after the break.

42:40Welcome back. The Sixers hosting their media day today. Our Alex Sherman is there now and joins us with more on the business impact of LeBron James. Morning, Alex. Yeah, Carl, you know, let's be honest. I probably wouldn't be here at Philadelphia 76ers Media Day for CNBC. if not for the fact that LeBron James is now part of the team. His business impact can be seen both on the city of Philadelphia and on the team itself. Let's start with ticket sales. I'm just going to throw out some statistics at you. They're pretty staggering. Philadelphia 76ers ticket sales are up 585 % this year. Last year, the 76ers were the 22nd most popular team in terms of overall ticket sales.

43:24This year, number one. I can throw out another stat at you. From July 1st, LeBron signed in July to September 22nd, 38 % of all searches for NBA ticket sales have been for the Philadelphia 76ers. Compare that to last year. That was 4%. Let's talk apparel. Those numbers were from StubHub that I just gave you for ticket sales. These numbers from Fanatics. Talk about jersey sales. In the first 48 hours since LeBron joined the 76ers, he sold more jerseys than any athlete joining a new team in the history of Fanatics' database, topping Shohei Otani joining the Dodgers in 2023 from the Angels, his previous team.

44:10Another stat I can throw at you from apparel. LeBron sold more jerseys in a month than he has ever sold in any other month in July at any point in his career. I can even talk about partnerships and sponsorships just today. The 76ers signed a deal with Bloom Energy, a deal that I'm told is a top two deal in the league in terms of annual revenue. Told it's over$30 million a year, a multi-year partnership. As the 76ers start to get more and more inbound requests for new partnerships, LeBron just finished up speaking at Media Day. and he talked a little bit about adjusting to his new life in Philadelphia.

44:53Take a listen to what he said. Still settling in. You know, it's still fresh for me. I'm learning new streets, learning new people. You know, so it's been eight years since I've been on this side of the country. You know, so, you know, just getting back to the weather, things of that nature. So there's also the business impact on the city itself. You said in the tease, one study from the Boyd Company estimating that$430 million of economic activity coming to the city of Philadelphia. That, of course, is an estimate. But there's actual real empirical data you can look at from LeBron's previous stops.

45:35The Harvard Kennedy School of Government did a study about this several years ago, looking at Cleveland and Miami and LeBron's impact on economic activity there, particularly with bars and restaurants. And what they found was that there were 13 % more bars and restaurants that opened up within a mile of the stadium, and that had an effect on employment, raising it almost 25%. Wow. Remarkable story, Alex. And then maybe we'll have future conversations about how much is riding on his ability to still perform on the court, but you put his legendary status in a sports-crazy town like Philly, and some of the numbers you gave us definitely make sense.

46:10at Sir Alex Sherman at Media Day with the Sixers. Crazy, right? I was trying to figure out how much he gets of it, but I guess he's got a net worth of a billion dollars, so he'll be fine, but the halo effect from him on the town is amazing. Unbelievable. So we're watching rates here, and the S &P just south of 7 ,700. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion.

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