11AM Hour: Self-Driving Through Texas, Schneider CEO on Diesel at Record Highs & Chip Stocks Surge 9/21/26

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

0:35Phil LeBeau: Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.

1:06Jim Filter: Good Monday morning. Welcome to Squawk in the Street. I'm Carl Quintanilla with Kelly Evans here at Post 9 to the New York Stock Exchange. Sarah Eisen has the morning off. Today, record diesel prices taking a toll on the transports. Fuel prices proving a major headwind, threatening to reignite inflation. Just how is the industry managing? We'll be joined by the CEO of Trucking Heavyweight Schneider.

1:26Phil LeBeau: Plus, Google's Gemini becoming the latest AI lab with a model to break out and hack other computer systems. We'll explain.

1:33Jim Filter: And check out shares of McDonald's tumbling nearly 28 % from the year's high. We're going to break down what the street will be looking for from the fast food giant's high stakes investor day later this week. As for markets, nice little bounce here to start the week. S &P up almost 1%. The queues are up almost 2%. Some strength in communication services of almost three. Energy down two is going to be very helpful, along with yields backing off a little bit here.

1:59Phil LeBeau: We were just showing AMD shares hitting the trillion dollar market cap line for the first time ever. AMD, Carl, I mean, this was the little sister. This was the catch-up company to NVIDIA and Jensen Wong. I don't need to tell viewers of these shows how important Lisa Su and everything she's done there has been. But an incredible move up almost 10 % today. Now, you might ask why. Intel's up 9%, 10 % as well. Is it our friend Muse? Is it? You know, we ask because this is a little consumer app. You're all probably familiar with it from Meta. Actually, maybe a lot of people still aren't. You see it hitting the zeitgeist.

2:31Phil LeBeau: No idea if that's why. This is a Monday. Otherwise, you might have expected we'd wake up. We'd be reacting to headlines from Friday night about Anthropics IPO. Where is it? More of those kinds of fear-mongering types of moves. But no, we are rip-roaring out of the gate today.

2:44Jim Filter: I mean, Meta with a seven-handle for the first time since February. Wow. To your point about it, sort of catching, getting some traction on the overall atmosphere and implications for telcos and chips, you name it.

2:57Phil LeBeau: That's fascinating to see the telco move there as well. This week, we also have President Trump set to meet with Chinese President Xi Jinping. And ahead of that meeting, Treasury Secretary Scott Bessent just met with China's vice premier. Let's get over to Megan Casella with those details. Megan? Kelly, good morning. That's right. It was Besant and U.S. Trade Representative Jameson Greer meeting with their Chinese counterparts this weekend in New York City. And Besant told CNBC this morning that the focus for those meetings was really on trade and on AI. So first on this board of trade, the two sides first launched this back in May when the president was visiting China.

3:28Phil LeBeau: And Besant said that they're working to reduce tariffs on around$30 billion in non-critical items on both sides. So that would allow the U.S. to sell more energy and agriculture and bring in more consumer goods, low-tech items at those lower tariff levels. And then Besson spoke about establishing this U.S.-China AI dialogue. Here's how he described it. We want to open a communications line, an incident line, so that we have constant communications, especially in the event of some kind of an incident. And then we want to start discussing protocols for what are, so both sides can agree on what the leading AI dangers are, whether it's uncontrollable agents, whether it's non-state actors and cyber non-state actors in bioweapons.

4:17Phil LeBeau: Now, Besant said that on AI, quote, the important thing was just to start talking. Now, guys, Sunday's meeting was sort of to hash out the policy details, but any announcement of bigger deliverables, that's going to come after the two presidents meet set for Thursday. So an extension possibly of the Busan trade truce that was established last November. That's one of the things at the top of the list to watch there. I'm also watching to see if we'll get any more announcements of purchases, Chinese purchases of Boeing aircraft or maybe of agricultural goods. And we might see some more meat put on the bones of this Board of Trade as well as on this AI dialogue once the festivities get underway later this week.

4:51Phil LeBeau: Guys.

4:52Jim Filter: Megan, thanks for that. Yep, definitely watching the wires today over the next few days as we look for some policy deliverables. Also in Washington, CNN, MSNOW and Politico suing the president over his media ban. Our Eamon Javers has been tracking that this morning. Hi again, Eamon. Carl, that's right. That lawsuit filed this morning. And then here is this unprecedented statement we have now from the network TV pool today. Suspending pool coverage of the president until the ban of certain outlets from the White House grounds is resolved. The Fox News producer in charge today writes this is to advise that effective today, the TV pool will not be covering events designated as pool coverage of the president.

5:30Jim Filter: This follows the White House's position preventing CNN from fulfilling its assigned pool duties. there will be no replacement pool put in place. All other pool coverage will continue as normal, including Congress VIPs and selected events in Washington and around the country. We will provide updates as this situation develops. So there has been continuous television pool coverage of the president since all the way back in the Kennedy administration. And today will be the first day that I know of that the networks have been unable to cover the president in all of that time. The reason is that CNN, which is one of the five members of the television pool, was banned by the president from the White House grounds on Friday.

6:11Jim Filter: CNN was scheduled to provide pool coverage today, meaning they would be the network that would film any events the president has and his trip to New York this afternoon. Normally, all of that video is fed out to the other networks and aired to the public. But today, and as long as that dispute is unresolved, that's not going to happen. Vice President Vance, who is being covered by a pool today, told reporters a short time ago that this is about what the White House believes is negative coverage.

6:38Stacy Rasgon: He's not banning media outlets. What he's doing is saying we're not going to give you special access to the White House if you engage in what is effectively propaganda. We have to remember those three outlets account. About 92 percent of the stories that they have on the president of the United States, on the administration, are negative. That's not representative of the American people.

6:56Jim Filter: Now, the president posted on social media earlier today calling out the three outlets that were banned from the White House grounds, that being, of course, CNN, MSNOW and Politico. He called them a cancer on America. We should also note that MSNOW is owned by the same parent company as CNBC, which is called Versant Media. Back over to you guys. Eamon, just to clarify, this applies to video pool, right? Well, they'll still have still photographers, maybe radio? That's correct. Yeah, I think what you're going to see this afternoon is no video pool of the president's events. And I think a lot of television networks are simply not going to bring cameras to the president's events.

7:32Jim Filter: But there will be reporters there to ask him questions. So you will probably hear the results of those questions, the answers that the president gives, if he gives any, as the reporters describe those, and maybe in audio. But we'll see exactly the format that this takes. This is unprecedented, so we're not used to operating that way here at the White House. But what the other networks are saying is not only will they not fill in for CNN on CNN's assigned pool days, but they're not going to pool any events either until this is resolved. And I think the president really values having access to the White House television pool.

8:07Jim Filter: To be able to call them in and to broadcast to all of the networks simultaneously is one of the real superpowers of the American presidency. I've heard this group of tents where I'm standing now, where the media broadcast from and that television pool described as the biggest megaphone in human history. Presidents always have access to that. But today, this president will not because he banned CNN from the grounds of the White House.

8:31Phil LeBeau: Eamon, thank you very much for now. We appreciate that. Our Eamon Javers at the White House. The major averages are meantime holding on to their gains so far as we move throughout the session. For more on the market, let's bring in co-founder and CEO at Unlimited, Bob Elliott. Bob, it's good to see you. Some strong action right out of the gate here. The semis, certain chip stocks, the Nasdaq, like Carl said, 1.5 percent gain today. What do you think is driving all this?

8:53Stacy Rasgon: Well, I think it really all starts with oil. And I think the fact that the markets have been driven day to day by the machinations in the oil market is what we're seeing today. You get a little bit of a sell off in oil as there's some hopes that supply is going to come online a little faster than was expected over the course of the last couple of days. and what you get is you get a little bit of a pop both in stocks and bonds. And that really highlights the fact that the Iran war is really the centerpiece of what's driving the macroeconomic environment right now.

9:25Phil LeBeau: So for you, a lot of this is really the unwind in oil prices.

9:29Stacy Rasgon: Yeah, that's right. And I think in a short-term perspective, we've seen oil come back a little bit. I like to focus on what we're seeing out the curve a little bit. So if you look at oil prices into next year, say June 27, Brent, what you see is very little relief on oil prices and continuing to be at the highs from the Iran war. And what that highlights is that there's still a lot of question about whether the conflict is going to be sufficiently resolved. We're going to start to get enough oil flowing through. Of course, it's been a bit better than expected over the course of the last couple weeks through the Persia Gulf and through the Strait of Hormuz.

10:11Stacy Rasgon: But it's still a gap of about 10 million, 10 to 14 million barrels a day that sits in the market. And until that gets resolved, we're going to continue to see elevated oil prices in the market.

10:23Jim Filter: Kelly was reminding us of the correlation between energy and treasuries, Bob, earlier this morning. Besant was on our morning show, talked about the buyback, said it was an effort to move toward equilibrium, not an outright price. With the long end here still pinned around 5.3. I wonder if you think it's working against him or for him.

10:45Stacy Rasgon: Well, I think the practical reality is that he doesn't have really much impact on the Treasury market at all, particularly at the long end of the curve. That's determined by market prices. And the idea that it's vastly off of some fundamental understanding is totally wrong. If you look at the strength of nominal GDP, look at the inflation pressures in the market, you look at the borrowing that's going into the market in order to support the variety of AI CapEx that's happening, all of that points to higher yields. And so until you see either a meaningful disinflation coming from the resolution of the Iran war, or you see a cooling off of the magnitude of the positive nominal growth that you see in the economy, pressure is going to exist on bond yields to go higher.

11:31Stacy Rasgon: And Besson's rhetoric, you know, might move the yield around a little bit here or there. But the reality is his efforts are not going to matter to a hill of beans in terms of actually controlling the yield relative to the fundamental conditions.

11:45Phil LeBeau: And where does that leave you on yields? You know, because not to reopen the debate over whether they should have hiked or not. But if is this really all about oil prices? I mean, that's the question. They're down today. Maybe you could say the Treasury yield should be down a little bit more if that's the major force driving it. We're down a couple of basis points. Be nice to be down 10.

12:05Stacy Rasgon: Yeah, I mean, I think what it highlights is that there's really two dynamics that are going on here. There's the oil prices, which are flowing through to inflation pressures across the economy. And it's not, of course, just the oil prices, but it's also the various product prices that are up even more than oil prices specifically. But then there's also just the strength of the economy from a nominal growth perspective that hasn't been cooled sufficiently. And, you know, look, the Fed can hike 25 basis points, 50 basis points. It's not going to matter much. If you look at things like traditional Taylor rule measures, short rates should be up 100 or 200 basis points from here.

12:41Stacy Rasgon: That's how far we are from where monetary policy is today relative to where it should be given conditions. And until that gets resolved, you're going to see strength in hard assets and weakness in bonds until there's sufficient monetary tightening that actually starts to turn the economy. And we're not there yet.

12:59Phil LeBeau: All right, Bob, great to check in with you this morning. Thanks so much. Thanks, Ryan.

13:04Jim Filter: Still to come this morning, the CEO of trucking company Schneider will join us. We'll discuss the impact of these record high diesel prices on the business.

13:12Phil LeBeau: And Google's Gemini, the latest AI agent to carry out rogue hacks. We'll bring you those latest details and discuss what it means for the future of AI. Squawk on the street. We'll be right back. Welcome to the circle. In this game, you never meet the other players. Your goal is simple, become the most popular. But should you play as yourself or catfish as someone else? With the new host, celebrity contestants, and this time, audience voting will influence the game, you decide who has what it takes to win. Watch the Hulu original series, The Circle, on November 17th, streaming on Hulu and Hulu on Disney Plus for bundle subscribers.

13:51Phil LeBeau: Terms apply. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. It's the holiday season at House of Burrell, which means that it's the perfect moment to review some key rules.

14:27Phil LeBeau: Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.

14:54Phil LeBeau: Welcome back. And for possibly the last time this morning, let's get over to Phil LeBeau, who's crossing Texas as part of an autonomous trucking run that is evidently legal. Phil, you are almost, we believe, at your destination, making good time despite going the speed limit. This is a Green Bay-based company, too. What are they doing down in Texas with these self-driving trucks?

15:15Stacy Rasgon: Well, Aurora Innovation, Chris Urmson, we'll talk with him in just a little bit, the founder and CEO, who's done this entire three-and-a-half-hour ride with me. They have been developing autonomous trucking down here for some time. And this three-and-a-half-hour run from Houston to Palmer, and we're only about a mile outside of the destination, the point of this is that this is the first or one of the first true commercial paid customer runs without a safety driver behind the wheel. Look over here. There's nobody here. There hasn't been anybody here. Before this, there would always be a safety monitor.

15:50Stacy Rasgon: We are beginning to see this now within the trucking industry where autonomous trucking, autonomous rides, this will be happening more and more. Chris, as we get ready to pull into the distribution center, you're going to have about 20 of these trucks doing runs over the next couple of months. How does it grow from there?

16:11Jim Filter: Yeah, so we have a handful now. We'll have 20 in the not-distant future. By the end of the year, expect we'll have 200-plus. and then next year we'll be going to a thousand plus trucks so really exciting moment for us.

16:22Stacy Rasgon: And we can't stress this enough the point of this is not hey it's gee whiz technology the point is for a trucking company a shipping operator the cost and the efficiency is far greater than what it would be with a driver correct?

16:35Jim Filter: That's right it complements the people they have driving today it adds it makes the road safer makes it more fuel efficient and allows them to glue goods quicker because they don't have to wait for the hours of service limits that they have today. How much lower would the cost be? Well, we expect a pricey Aurora driver at about 85 cents a mile, and today we think it costs about$1.18 to have a person drive that truck.

16:57Stacy Rasgon: And you guys, I mean, you don't have to be a mathematician. You extrapolate that over a run of 1 ,000 miles or 1 ,500. You obviously see the savings for the trucking and the shipping operators. I've gotten a couple of people who have texted me. First of all, they're like, wait a second, where are you in Texas? What are you doing? And then they would say two questions. One, what happens when you have to stop and get gas?

17:19Jim Filter: So the truck will call ahead. It'll let the gas station know that it's coming in. It'll let the person there come out, the attendant, come out and put the gas in the truck and then kick it on off its way.

17:30Stacy Rasgon: And so eventually, could you see that right now you'll have to have an attendant? Is the day coming where you could have robotics in terms of fueling up the truck? I imagine it could be, but people are pretty generally useful.

17:45Jim Filter: So I think having a person out there to help out is a great idea.

17:48Stacy Rasgon: And then the other question that I've had people say is, what happens if you blow a tire? What happens if there's a bad accident up ahead and you've got to pull over to the side? What does the truck do?

17:57Jim Filter: So every second, the truck is checking thousands of variables to make sure everything's okay, including the tire. And if something like a tire blows up, it'll do just what a truck driver does today. It'll notice it, it'll start to slow down, it'll pull the shoulder and stop.

18:11Stacy Rasgon: And then obviously wait for the requisite people. Just like a truck driver does today. As we pull off, guys, the distribution center is here in Palmer, which is just south of Dallas. Kelly, you remarked earlier, well, you're getting there even though you're doing the speed limit. Let's remind people that's part of how you get more efficiency in your trucking. It's not that you want your truck driver speeding from southern Texas to northern Texas. Well, you may say burn that oil, but that's part of the sell that Aurora and other autonomous trucking companies are using with shipping operators is that it can be more efficient and it's easier on the engine overall over the life of a class 8 semi-truck.

18:53Phil LeBeau: We're too impatient as drivers you know we can't just sit there.

18:56Stacy Rasgon: Well yeah exactly and now as we're pulling up here and we've got another crew that is going to be meeting us here at the distribution center you know it's it's this has been an uneventful ride. I've had a few people text me and say well what does it feel like? I I was going up and then I was getting off somewhere. That's just the way. Are these LiDAR? Are they camera systems, Phil?

19:22Phil LeBeau: How is it driving? So it's like Waymo, not like Tesla, if I'm getting that correct. Which means it's extreme. If Waymo's are$400 ,000, how much is a LiDAR-driven autonomous truck? Millions?

19:37Stacy Rasgon: Well, Chris has not gotten into the pricing with us. They have their investor day coming later this day. Now, look, you can take the other live shot. You'll see the truck. It's moving in here. I don't know. Maybe the truck's going to drive up to our other camera here. They are not talking pricing at this point, Kelly. Chris is optimistic about the customers that they have lined up from a number of the shipping and trucking firms. But the point is, you will start to see this more often, not just with Aurora, but with other companies as well. And that's it. We're at the end of the run. We'll let you guys go.

20:11Stacy Rasgon: Fascinating, Phil.

20:11Jim Filter: Phil, really quick. Let's say you were making a delivery into an urban area, right? I mean, downtown somewhere. At what point are you legally required for a human to take the wheel?

20:24Stacy Rasgon: Good question from Carl. I'm going to put you on the spot here. You're making a delivery into a more urban area or someplace where you might want a driver to take over. At what point are you required legally to do that?

20:37Jim Filter: So legally, there isn't a prohibition. So we drive into Houston, where we came from today. It's about five miles from where our terminal there is to the freeway. The place we're really focused on is driving to distribution centers. So we're not going to go to the store. We're not going to go to the restaurant. There, the driver has this other really important role to play, right? They're the customer service rep. They're the face of the company. But when we're moving between distribution centers, it's really about safely and efficiently getting the goods from A to B.

21:04Stacy Rasgon: And that's what the Aurora driver can do. And most of those distribution centers are off highways or close to highways.

21:09Jim Filter: Yeah, because they're places for big trucks to get to, and it's not convenient for a big truck to drive all the way downtown. So we put the distribution centers, these industrial parks, around the edges of the city near the freeway.

21:20Stacy Rasgon: To answer, one last thing, Carl. I've talked with, as we were getting ready to do this, I've talked with shipping operators, shipping CEOs, and almost all of them say the same thing. They believe that autonomous trucking will take off at some point, but there's still going to be a need for truck drivers because you still have urban areas. You will still have tricky loading docks. You will have areas where you want a human interacting with the people who are taking the shipment for whatever reason. So while this is the future and a glimpse of the future, it doesn't mean that tomorrow you will not see truck drivers.

21:51Jim Filter: I don't know, Phil. We've talked about this as a theory for so long now, and to watch you do it really feels historic. Just an amazing series of live shots this morning. That's our Phil LeBeau. Phil, thanks. Talk in a bit. Let's stick with trucking. Our next guest, Trucking Fleet, covers more than 9.6 million freight miles a day and has been exposed to the rapid rise in diesel prices. Joining us this morning is the CEO of Schneider, Jim Filter. Jim, welcome. It's good to have you. I want to get you on fuel, but can I just get you to tag on to this autonomous thing and ask you whether or not you think it is the future?

22:25Phil LeBeau: Yeah, so first of all, thank you for having me here. And, you know, Schneider's been a leader in innovation, especially technology innovation for decades. And so not surprising that we'd see an opportunity like this. And we've been testing for a number of years. And we're getting closer to the spot that I believe we're going to move from testing to deployment. Obviously, you're seeing I've been in that terminal before. So we're getting closer to that spot where we're ready for deployment. And this isn't to replace the human driver, really to augment the human driver, because I believe we have an opportunity in the coming years to invest both with Aurora and at least one of their competitors to build out these fleets.

23:08Phil LeBeau: 92 percent of the fleets on the road have less than five trucks. Very difficult for them to be able to scale. So I believe that there's an opportunity that you can really see consolidation in this industry. And I believe that we'll actually have more drivers at the end after we deploy autonomous trucks than we have today. Right.

23:27Jim Filter: Fascinating. Long term trend to watch. We did have some remarkable corporate commentary at conferences last week out of JBHT. I think it was the CFO of Norfolk Southern saying that what's happening in fuel is something out of science fiction. I think were his words. Is that view broadly held within among your colleagues and yourself? Yeah.

23:48Phil LeBeau: So, you know, we've had fuel surcharge programs for decades in this industry. And at this point, I'd say they are efficient in terms of the way that they operate. But when there are sharp rises or fall in diesel prices, there's up to a one-week leg. And so it can have a headwind or a tailwind on the profitability of a trucking organization. But, you know, we have a very broad portfolio of services. And so when fuel rates go up, it can be a headwind to over-the-road operations. but at the same time it provides a benefit to our intermobile services which are extremely fuel efficient and so across a broad portfolio over a long period of time it tends to even out for the carrier but obviously it puts some pressure on our shippers.

24:36Phil LeBeau: Jim you guys as I understand it actually have electric semis is that right? How expensive are these? How fuel efficient are these? And is that, you know, fuel prices being what they are, a moment where it's more kind of in the customer's interest or in your interest to increase that fleet? Yeah, so we've had 100 battery electric vehicles for a couple of years now. And what made those possible were grants, specifically in the state of California. And, you know, you really couldn't build a business case just to go 100 percent electric across your entire fleet. Unless you knew that fuel prices were going to remain at this level, we really don't have that level of certainty right now.

25:19Phil LeBeau: But clearly in a high diesel rates right now makes the battery electric vehicles very efficient for us. And to your point, there is no fuel cost for our BEB. Sure, but there is a cost, I would imagine. Explain that a little bit, kind of apples to apples. If you can choose between doing a traditional truck run or one on an electric truck, how far can it go? How long does it take to recharge? Yeah, there's a range. The first generation, we had a range of about 250 miles. Some of the newer tractors that are coming out have a longer extended range, which we're interested in. But primarily, we're using these in configurations like intermodal and dedicated, where the drivers are getting home every single day.

26:05Phil LeBeau: And so they come back, they charge, and then they're able to hand that truck off to the next person that's available. Yeah. And then I guess finally, with diesel prices being where they are, what has that meant for the typical cost of delivery? And how are you guys absorbing it or passing it through? Yeah. And, you know, as we were talking about, our fuel surcharge programs are very efficient. So they immediately pass that cost back to the shipper. Now, there can be a little bit of a leg up to a week. And so there can be some impact there. But that's the value of having this broad portfolio because there's parts of the organization where we have a headwind for rising fuel costs.

26:48Phil LeBeau: And then there's other parts of it where it is a tailwind for the organization.

26:52Jim Filter: Finally, Jim, we were talking a moment ago about the back end of the at least the oil curve. And I guess looking to some degree at diesel futures, are you are are corporate starting to price in these kinds of prices into year end? Yeah.

27:08Phil LeBeau: And our shippers are looking at this and believing that, you know, there's a fundamental change here with fuel costs. And so specifically, they're looking at what they can do to mitigate those costs, identifying opportunities like intermodal, where, you know, we're using less than half of the fuel on an intermodal shipment where we utilize the railroads. compared to where we're operating over the road. And so I believe our shippers are making changes because when they make these switches, generally they're making those for at least one full year. And we've never seen this type of demand for our internal services.

27:42Jim Filter: Jim, really helpful, interesting, covering all kinds of ground, whether that was the autonomous element or certainly what's happening in energy. Please come back soon. All right, thank you. Jim Filter over at Schneider.

27:53Phil LeBeau: And coming up, Google's Gemini, the latest AI model to carry out a series of rogue hacks. We'll bring you those new details next.

28:01Jim Filter: McDonald's hosting its investor day this week. Can the company turn the stock around down almost 19 % for the year? We'll discuss in just a minute.

28:10Stacy Rasgon: Hey, Fidelity. How can I remember to invest every month?

28:15Phil LeBeau: With the Fidelity app, you can choose a schedule and set up recurring investments in stocks and ETFs.

28:22Stacy Rasgon: Oh, that sounds easier than I thought.

28:24Phil LeBeau: You got this.

28:25Stacy Rasgon: Yeah, I do. Now, where did I put my keys?

28:29Phil LeBeau: You will find them where you left them.

28:33Stacy Rasgon: Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC. Member NYSE SIPC.

28:40Phil LeBeau: Welcome to the circle. In this game, you never meet the other players. Your goal is simple. Become the most popular. But should you play as yourself or catfish as someone else? With the new host, celebrity contestants, and this time, audience voting will influence the game, you decide who has what it takes to win. Watch the Hulu original series The Circle on November 17th, streaming on Hulu and Hulu on Disney Plus for bundle subscribers. Terms apply. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration.

29:19Phil LeBeau: Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.

29:41Phil LeBeau: Welcome back. Google's Gemini independently hacking into three companies' private computer systems, But I'm not anthropomorphizing, am I? Mackenzie Sigalos, who is here with all of those details. Good morning to you. Hey, good morning, Kelly. So Google telling me that one of its Gemini models autonomously gained access to real world systems without permission. The first time that Alphabet has disclosed an incident like this involving one of its models. Now, this happened back in May during a capture the flag exercise, essentially a test of how good Gemini is at hacking. A flaw in that test environment gave Gemini access to the open Internet, where it guessed one password and found other credentials online, ultimately getting into three companies.

30:23Phil LeBeau: For weeks now, we have been hearing about similar incidents involving OpenAI, Anthropic, and Meta, and these breaches have almost become a marker of just how powerful a frontier model is, even something of a PR flex, especially for labs on the road to an IPO. But up to this point, Google's largely stayed out of this conversation. Now we know that Gemini had also escaped a testing sandbox and broken into real-world systems, though with one key difference. Internet access had accidentally been left open, and Google says once Gemini realized that it had reached real companies, it stopped on its own.

30:57Phil LeBeau: Compare that with OpenAI's attack on Hugging Face, where the models found their own way out and kept going, or Claude being used to breach OpenAI just last week. Google says Gemini stopping itself shows that its safety measures worked. But the broader question now, especially this week, as the U.S. and China discuss whether they should alert each other to serious AI incidents, is what the companies building these models should be required to disclose when something goes wrong. Guys? Mackenzie, we were talking earlier about whether intent should be a part of the conversation or not. But when you say that they were told to practice hacking, you say, well, I'm not sure what other intent there could be for that kind of instruction to be training these models on.

31:39Phil LeBeau: No, precisely. And I mean, part of the nuance of this test in particular was that the name of the company they were meant to breach in the context of this testing sandbox was the same as a real world organization and that the guardrails kicked in once they realized that they had breached an actual enterprise. And what I will say is that Gemini has notably been completely absent from this conversation of powerful agents that are capable of carrying something like this out. And they are the I mean, they're the more mature adults in the room here. Right. Like I even though Google wrote the transformer paper that underpins all of this tech, they've been seen as somewhat on the back foot, especially in the last nine or so months.

32:18Phil LeBeau: We haven't really seen much of a step change since Gemini 3. So this is almost a flex for them, too. But they chose to stay out of this conversation. They were notified back in July that this was an issue. And here we are in September 1st learning about the breach.

32:30Jim Filter: Yeah, a big debate about whether they even want to play in the frontier race and whether or not it's possible that OpenAI and Anthropoc could stress test each other, as some reports suggest this morning.

32:41Phil LeBeau: Well, the thing about Google, which is interesting, it's the one agent, Mac, that I've experimented with because I with Spark, you know, it's already there, Carl. So, you know, if you already have a Google plan, you get access to Gemini, you also get access to its agent and it feels a little bit more comfortable to give it. But the first time my inbox has ever crashed, by the way, is after it started messing with it. And you know what? We've been waiting. Thank you.

33:04Jim Filter: Mackenzie Sagalos. Still to come this morning, the AI trade leading to some big moves in the chips today. Intel AMD among the top gainers. And Kelly already mentioned AMD at a trillion dollar market cap for the first time, riding a five-day win streak. We're back in a minute.

33:18Phil LeBeau: Plus, shares of Novo are tumbling today. We'll have more details about that slide right after the break.

33:24Jim Filter: Welcome back. Chip stocks get a boost today. Intel up double digits. AMD, as we said earlier, topping a trillion dollar market cap for the first time. Our next guest says it's all about agentic AI, especially on the back of Meta's new Muse model. Joining us this morning, Bernstein senior U.S. Semiconductors analyst Stacey Rasgun. Stacey, welcome home. Good to have you back. Good to be here. I always, you ever track his travel? I mean, I feel like I know whenever he flies because of a social media account. Stacey, walk us through why Muse is important, because we've been talking about it a lot.

33:56Stacy Rasgon: Yeah, yeah, you bet. So, I mean, agentic AI has sort of been the name of the game for the last probably several months, maybe even longer. The whole idea of agentic AI is it's not just using GPUs, but it's using CPUs to actually perform tasks. I think up to this point, most of the agentic use cases have not really been for normal people. It's been things like agentic coding, Anthropics Clod, for example. And that all of a sudden, even by itself, has driven a tremendous shortage in CPUs. Now you've got Meta's Muse and other agents out there that are starting to maybe get more potential for more broad-based adoption.

34:30Stacy Rasgon: Muse actually looks pretty good. I think Meta's up today pretty decently on this as well. And if you could actually start to get the normies using agentic AI, using agents, I mean, I think that it's being read as having the potential, I think, to put the CPU shortage and CPU demand into overdrive. And we're seeing all the CPU names today run, Intel and AMD and ARM. And I mean, even Qualcomm's catching a bid today probably on the back.

34:55Jim Filter: So if a tool like that for the normies does get traction and empowers you from a pricing standpoint against a retailer or a vendor, Does the corporate have to respond as well in order to fight that agentic power?

35:10Stacy Rasgon: I don't know. That starts to get above my pay grade, maybe. There are probably a lot of secondary and tertiary effects that I think people across the supply chain are probably going to have to think about. For my guys, though, it means, you know, demand has already been up and to the right on the back of AI for years. It probably means that it continues.

35:30Phil LeBeau: It's, Stacey, something that people say is equivalent to the iPhone. and maybe we're making too much of it, but I messed around with it when it was first available. I didn't give it a lot of power, but I was immediately struck by the simplicity, the elegance, how quick it was. And you could just tell that it felt like using chat GPT for the first time. I think the barrier is how much people are actually willing to give over. It's one thing for people to experiment and say, sure, but again, I have reservations about this. I'm worried about telling AI agents that can be notoriously unpredictable.

36:00Phil LeBeau: Hey, here's my personal information. Here's access to all of my apps and all of my accounts. So I just wonder, will this be a passing fad or do you think it's a lasting phenomenon?

36:09Stacy Rasgon: I mean, at the end of the day, I wonder how much people really care about privacy. They care about security. I don't know how much they care about privacy. I think the concerns you raise are legitimate. And, you know, it'll you know, it'll it'll take time for people to get comfortable. But I mean, the genie may be out of the bottle at some point if it can be shown that that it is secure. And over time, things will get more and more secure. And we deal with things every day, even today on the Internet where we have issues. People deal with that stuff. You can get the simplicity and the ease of use there, and people can start to see what these sorts of agents can do for them.

36:44Stacy Rasgon: And you know what's weird about it, Stacey?

36:47Phil LeBeau: So a lot of people have had a relationship with Meta, a.k.a. Facebook, for a long time. You probably have a Facebook page or an Instagram account. It might be among your most used apps. And yet I've heard those who immediately said to Muse, what do you know about me? And it says nothing. So here's my Facebook page. Here's my Instagram. It says I can't read that. So I don't know why Facebook or Meta has chosen to ring fence all of this. But if it ever said, you know, no, we can kind of talk across the portfolio. I mean, think about the power that that would really have.

37:14Stacy Rasgon: And again, that sort of thing is maybe out of my area. I guess, you know, just speculating, it probably makes sense for Meta to sort of, you know, stress the privacy aspect of this at first. Maybe it's not a great marketing strategy to let people know how much they know about them right off the bat. I don't know. Eventually, that sort of thing, I bet, will come. And I'm not even talking med here. I think more broadly. That's the thing about it. As these things get more information about you and get to know you better, they become more useful. That's going to be a very interesting interplay, this whole security and privacy concern on the one end, which is legitimate, versus the usability on the other side.

37:54Jim Filter: We'll see how it plays out. I don't know. As for price action within the Chip, Stacey, the Sox, the SMH, you know, they've wrestled with the 50-day a few times here. But this feels like a cleaner breakout than we've seen all summer.

38:09Stacy Rasgon: Yeah, maybe. You know, things have been a little bit in the doldrums broadly in the space for a while. You know, the semis had a massive run through mid-year, and then a lot of the names are well off the peak. Although I'd say, you know, the space as of last Friday was still up close to 70 % year-to-date. So actually, it's been a very strong year for semis, although quite volatile. So we'll see if this is, as you say, a clean breakout or if it's just a return to some of the volatility. I'll be honest, I don't like seeing a lot of these names moving 10 or 15 percent a day. It starts to give me heartburn.

38:43Stacy Rasgon: But the general drivers behind this seem real. And as I've been saying all along, I think the fundamentals in the space have been getting better all year, not worse. All of the performance in the stocks has been earnings driven. the multiples of the things that have been quite volatile. But the earnings support, as far as I can see, at least right now, looks sustainable. The fundamentals seem like they're getting better.

39:05Jim Filter: We put up a graphic just now. I noticed your market perform on Intel. You have been skeptical for this run. Has any of that changed?

39:14Stacy Rasgon: Well, you know, I've even written it. I feel better about Intel now than I have in a long time, which admittedly is a low bar. I think I've made my career being negative on it. That being said, they've got some things working for them. You know, the server CPU demand on the back of this is very real. They are benefiting. And they've gotten a little bit lucky here. Their products, by their own admission, are not terribly competitive, but it doesn't really matter. Customers right now are buying anything that they can get, so that helps. I don't think the narrative has been going their way. You know, there's all this, like, worries about capacity is very tight and, you know, geopolitics in China.

39:49Stacy Rasgon: And so they have a foundry business that is still very nascent and losing money. But to the extent that customers might be giving them a harder look because of some of these things, I think that's really, even though I think it's going to take quite a bit of time before that becomes meaningful. But if you've got like the market going their way, and God only knows they were due for a break. So take lucky over good any day of the week. The market's going their way. The narrative is going their way. Like I don't hate Intel at this point. I feel better, which is new for me, which is new. But I don't hate it.

40:19Stacy Rasgon: is I'd feel better about it than I have in a long time. Yes.

40:21Jim Filter: Yeah, 18 bucks from a high. We'll see how far it can get, Stacey. But to your point about these intraday moves, pretty amazing. Talk soon. Stacey Rasgott over at Bernstein. You bet.

40:32Phil LeBeau: Coming up, McDonald's Investor Day is on deck this week. We'll discuss what to expect with the stock down about 30 % from its 52-week high. We're back in just a moment.

40:41Jim Filter: Welcome back. McDonald's set to host its Investor Day this Wednesday. Our Brandon Gomez joins us here at Post 9 to talk about what to expect for a stock that's been challenged.

40:50Stacy Rasgon: Yeah, yeah, and the street's going to have to process what comes out of Wednesday's meeting. But shares are down 27 % since their March high. And Wall Street is waiting for evidence McDonald's can fix its biggest market here in the United States. McDonald's U.S. same-store sales grew just eight-tenths of a percent last quarter, trailing competition like Burger King and Shake Shack. And the company has acknowledged its value messaging and execution have been uneven. Now, the brand that has long defined affordable fast food now has to restore that perception. And they need to do it without asking franchisees franchisees to absorb unsustainable discounts.

41:20Stacy Rasgon: Now, that is the balance CEO Chris Kamchinsky and new U.S. President Sky Anderson need to explain on Wednesday. They'll be laying out McDonald's next, the company's new strategy built around food, better food marketing, restaurant tech, remodels and improved service. Analysts I've spoken to have said they're looking for a few key details. First, how it plans to bridge promotions and personalized digital offers that maintain its value narrative. They're looking for a longer term plan for food innovation with particular focus on chicken and beverage offerings, how it will simplify operations and oversee store remodels.

41:53Stacy Rasgon: There is a real growth test here. McDonald's pushed its 50 ,000 restaurant goal to 2028, and investors want to know what next will cost and whether those investments can still deliver the free cash flow and returns that the stock is built on. And specifically, guys, the question is going to be when? When are we going to see the results turn around in the stock?

42:10Jim Filter: Meantime, QSR, Burger King reinvented the Whopper. Now they're marketing on chicken, Right.

42:15Stacy Rasgon: And you see same store sales. They were up seven percent compared to McDonald's, you know, less than a percent in the last quarter. So there's obviously some operational changes that are leading there.

42:24Phil LeBeau: Yeah. They've got that competition to fend off. And by the way, with Wendy's. So there's such an interesting landscape right now. You've got those who are thriving and those who are struggling. Is it cyclical? Is it company specific? I mean, what's going on here? Wendy's just had a big bankruptcy. Yeah.

42:37Stacy Rasgon: And, you know, you'll hear McDonald's say, too, the macro is, of course, impacting the input costs. And so that's there. But it does come down to the specifics of how these companies are operating. In the case of Wendy's, new CEO, new leadership, suspended guidance, wants to take a backseat to view. You also have the activist investor angle there, too, with Nelson Peltz. So there is a case-by-case scenario, but, of course, the macro is affecting across the board.

42:56Jim Filter: Yeah. Key week for a Dow component. Brandon, thanks so much. Brandon Gomez. By the way, do not miss our interview with the CEO of McDonald's. We'll bring that to you Wednesday at 10 a.m. Eastern time right here on Squawk on the Street.

43:08Phil LeBeau: Welcome back, shares of Novo. I think we call it Novo now or soon. They are under pressure this morning after the company unveiled a new growth plan that somewhat failed to impress investors. Novo is planning to launch more than five drugs with, quote, multi-blockbuster potential by 2030. And they expect to generate more than$23 billion in pipeline sales by 2035. Also, they're saying they expect revenue growth from 2026 to 2030 to be in line with industry peers. After all of that, the shares are falling about 8 percent today. The updates, Carl, to some extent failed to reassure investors about whether the next generation of treatments will command premium prices after semaglutide, the main ingredient, and WeGoViano's Empic loses its major patent protection.

43:50Jim Filter: Yeah, I mean, it's an innovation game. It's a production game. It's a marketing game. So far, man, it's really tilted Lily's way. That's for sure.

43:58Phil LeBeau: Right. They've had, obviously, the orals now coming on top of the pills. You also have a lot of the cheaper, what they call formulations, where people can kind of get the efficacy but without paying top dollar.

44:10Jim Filter: Meantime, market's been very impressive here. We talked about some of the chip strength. 77.35, VIX below 15, going into a week where typically moments like this, high-level meetings, they want to give the streets something rather than take away.

44:23Phil LeBeau: Not just that. We have the back half of September now to contend with. So if you believe in, who knows, it could just be, you know, Wall Street lore. But this is typically the toughest part of the toughest month. So this is an incredible start. And maybe it is all because of our friendly chatbot muse that people are now messing around with. Right.

44:40Jim Filter: Energy, of course, huge tailwind for equities. WTI below 96. Big drop today.

44:45Phil LeBeau: Interesting to see that pick up speed as well. And as many have pointed out, you might have thought there'd be a bigger drop in, for instance, the 10-year Treasury yield today. The product prices are still high. We talked about diesel a lot. We talked about gasoline. So until that feeds through, you might not see much more kind of relief on the long end.

45:00Jim Filter: Yeah, we talk about the correlation. It's really the correlation between the 10-year and diesel spreads, crack spreads. Wow. Two ETFs we love to watch. One is ticker CRAK, which is the refiners and all. And then BWET, B-W-E-T, is shipping tanker rates. Right. We were talking about that on Friday as well.

45:20Phil LeBeau: I mean, those rates, now you're getting that inflation. You're getting people realizing that even when this fever breaks, some of those high input costs are going to take a few months. are still going to show up and end prices. And that's kind of the concern. I think that's what's keeping yields a little bit sticky here.

45:34Jim Filter: That's been the stubborn thesis at J.P. Morgan about food, food at home, that we haven't really seen that yet. And that's going to manifest itself in 27. They're talking like five to six.

45:44Phil LeBeau: And look at the pushback you're seeing now in the grocery stores between some stores who are saying, and this is a small example with the case of Red Bull, and I think it is Kroger who's saying, we're pushing back, we're not accepting these price likes anymore. Right.

45:54Jim Filter: Really interesting. We'll see what happens. And we'll keep our eye, obviously, on the U.N., which really gets underway tomorrow. And then, of course, expectations for the China summit on Wednesday.

46:03Phil LeBeau: All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

46:34Phil LeBeau: To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.