11AM Hour: Senator Richard Blumenthal on AI, Early Facebook Investor Roger McNamee & Clarity Act Fails to Advance 9/16/26

0:00With the Discover Cashback Card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to Discover. Terms apply. See discover.com slash 5 for details. 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.

0:39and 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 market update podcast or find Schwab Market Update wherever you get your podcasts. Good Wednesday morning and welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla, live from post-night of the New York Stock Exchange. Today, the AI safety debate. Connecticut Senator Richard Blumenthal warning that, quote, we're dealing with real peril, not science fiction. And the senator will join us to discuss his call on Congress to deal with AI legislation before taking any breaks.

1:15Plus, early Facebook and Google Investor Roger McNamee is with us while he argues the AI game is about to end and thinks this recent fear factor is an attempt to scare the government into saving them. And Bitcoin trading near four week lows here after a major crypto regulation bill suffered a defeat in the Senate. We'll discuss the path ahead for the crypto sector. Meantime, pretty tight range as we await the Fed decision in a couple of hours. Dow is only down about 30 points. S &P hanging on to 76.14. See, the 10-year has backed off of five by a few points, even with a very strong retail sales number, whether that was on headline, X-autos or X-autos and gas.

1:50Meantime, the growing debate around AI safety. Mark Zuckerberg, the latest to chime in, siding with NVIDIA's Jensen Wong. Our Kate Rooney has some details. What a week we're having, Kate. It really is, Carl. So we did hear from Meta's CEO pushing back on this growing crowd of AI leaders now arguing for an industry-coordinated slowdown amid some of the safety concerns that we've been talking about. Mark Zuckerberg chiming in, saying competition and the threat of liability already gives AI companies enough incentive to build the tech safely and that each lab has an individual responsibility to slow itself down if necessary.

2:27Zuckerberg did point to Meta recently delaying its Muse AI agent for months, he said, over security concerns. Other labs, should note, have done the same, notably Anthropic with Fable and its model. The comments, though, very much put Zuckerberg on the other side of a few of his industry peers here. Anthropic CEO Darya Amadei did kick all of this off over the weekend. He called on the entire industry to, quote, pace the frontier and argued that some of the rapidly improving AI out there could create catastrophic risk. without more time for testing. OpenAI CEO Sam Altman quickly agreed over the weekend saying OpenAI is now discussing its own need to pace the development internally and wants to work with others.

3:08Also, Elon Musk on board for some of the industry coordination. He backed Amadei's idea here, floated the idea, though, of companies sort of grading each other's homework instead of grading their own. And there is now a clear counter here with Zuckerberg and NVIDIA CEO Jensen Wong, he was on Mad Money last night with Jim. The fact that we need new laws, new antitrust laws or new regulations so that these companies could do their fundamental engineering and do do it properly before they release products, that is just completely unnecessary. And I think that that's what the president is saying, that we don't need new laws.

3:47We don't need. Yeah, we don't need. We got plenty of laws. We have plenty of regulations. And guys, the biggest open question now is about global coordination. We've talked a lot about what the CEOs think, but it's very unclear if China would agree with any sort of slowdown. A lot of CEOs suggesting that's not the case. And obviously, President Trump weighing in on that as well. Kate, people say, well, we don't trust Exxon to regulate their own carbon emissions. Meta had to be taken to court to do some content moderation. When Jensen Wang says there are plenty of laws, what is he talking about?

4:23The most cynical take I've heard on that, Carl, is the tobacco industry suggesting that they self-regulate. I mean, some have talked about, and Elon Musk brought this up, the movie industry, which has done its own form of self-regulation. Others have talked about the FDA, which, of course, is federal, FAA, as part of this. But the problem is that there's not consensus on what each company is agreeing to. So when Zuckerberg says each company is responsible, that also implies that each company is going to agree and act on the behalf of all of us and really not take too much risk in sort of giving up any sort of profit here.

5:01I mean, the underlying factor here as well as most of these AI companies, the big ones, at least Anthropic and OpenAI, are also trying to grow revenue at a time when they're about to go public. So that's making a lot of people nervous. I will also say you have these big tech companies, but there are smaller players who also don't want the big giants in Silicon Valley making the rules. We talked to Cohere CEO yesterday, Aiden Gomez, who's based in Toronto and said, wait a minute. He called the tech companies here a cartel. And he said that he's very much with some of the smaller players saying we agree on safety, but we don't want the biggest players being the ones that come up with the rules here.

5:36But unclear if there will be rules as we talk about all this. Yeah, that's the whole regulatory capture argument. that has sparked some criticism around all this as well. Kate, thank you. Kate Rooney, much more on AI coming up this hour when we speak with Senator Richard Blumenthal and early Google and Facebook investor Roger McNamee. And then tomorrow, we've got Palantir CEO Alex Karp here on the show to talk about all of this. That's at 11 a.m. Eastern. The other big story today is the Fed decision. And our next guest warns the Fed could be facing a slippery slope if it does decide to hike today.

6:11Joining us now is Rosenberg Research founder and president David Rosenberg. So you're in the camp that says they shouldn't do it. I don't think that they should do it, but I think that they will do it. And I don't think there'll be any dissents. The key is going to be really, you know, although Kevin Worsh doesn't like to give guidance, he does give body language and tone. However, I think what's going to be more important really is what the dot plots show. if they're going to ratify the aggressive tightening that's priced in right now in the next year. But no, I'm never really a fan of a central bank tightening into a supply shock because this isn't about an overheated economy, demand-led inflation.

6:57You know, they talk about how core inflation has been above target for five years, but I don't know what makes sense about, you know, tightening policy based on what's happened in the past five years. That's in the rearview mirror. So I guess they could argue that beyond just that inflation is above target, that, you know, there's evidence it's seeping through the AI build out, for instance, pretty inflationary. And there's not much out there that shows that their policy is restrictive, I think, outside of the housing market. I mean, if you look at some of the consumer data, the employment data, I think that they could feel confident that there's more risk on the inflation side than on the job side.

7:44Well, if you actually did this exercise, which I did, which you add up the interest-sensitive sectors, the sickly-sensitive sectors of the economy, which is cyclical consumer services, durable goods spending, housing, non-residential construction, year-over-year it's now running flat. So I would say that there's a lot of evidence that the economy, beneath the veneer, is responding to policy that actually is on the restrictive side. I would never make the claim that policy is not restrictive. I would say that I don't see anything out there attacking the Fed's credibility. The dollar is not crapping out.

8:29Market-based inflation expectations are really within the range they've been in the past five years. And we're going to be getting, you know, Kevin Morsh is talking about inflation data that And he already told us he doesn't even trust, which is why he's got these task forces. And one of them is on inflation to come up with a better barometer. So even when he talks about the share of the PC deflator doing this against that, it's ironic that that's based on the same indicator that he doesn't even have faith in. So I think outside of oil, you mentioned the AI impact on memory chips, so on and so forth.

9:09But you know, I did a bottom-up count of the last CPI number that came out last week. Out of all the subcomponents, because Warsh likes to talk about breadth. So this is the August CPI number. Did you know that 45 % of the components were flatter down? And historically, in any given month, that number is 40%. So there's a lot of things out there, Sarah, that are actually disinflating or deflating. That don't get a lot of mention. No, we've been presenting this argument. Yeah, I mean, we just got NAHB today where, David, I think, what, 38 % of builders cut price up from 35%. Average cut 6 % for six straight months.

9:56Yes, 100%. Look at median new home prices, negative 0.8 % year over year. I guess Sarah believes in the$162 ,000 non-farm payroll number for August that we all know are going to get revised. If you look at the 12-month trend in households or payrolls, it's roughly flat. I guess that's the no-hire, no-fire economy. Stability means no growth in employment. But are we getting inflation out of the labour market? I mean, the year-over-year trend in average early earnings is barely more than 3 % instead of five-year low. So everybody's got inflation on the brain. It's as if you have an industry of professionals out there and the people that you interview that have inflation on the brain because of oil.

10:43You know, but there's no inflation out of housing, no. Inflation out of the labor market, no. Is there monetary inflation with 5 % plus M2 growth with money velocity having rolled over since March? Answer is no. None of this, I mean, you could argue that it's real, oil is real, but it's not, it's just, it doesn't have any sustainability to it. I do think that the Fed raises rates today, and I think there's going to be bars or more several months from now. So I was just going to say, so no matter what you think, if they go today, what ultimately happens? How damaging do you think it'll be, and how will that show up?

11:21it'll show up in the sense that it's not about the action today that's baked in the cake. And today's retail sales number is going to make anybody on the FOMC, the voting class, comfortable to raise rates. I don't think there'll be any dissents. I'm not saying that I agree with it. They have their reasons. But if they ratify what's priced into the futures curve, that's a bit of a problem. It means that this is not like one and done or two and through. They're going to be tightening into next year. And the problem I have about the economy is this, because there's lags. Is that, you know, 90 % of this run-up in Treasury yields has not even been inflation expectations.

12:02It's been the real rate for a variety of reasons. It's one thing to have the real rate go up as much as it has into an environment of accelerating real growth. But that's not happening. At the margin, real growth is actually going down. It's not contracting. But we've had a real shock here. Layered on top of the oil shock is a real interest rate shock. So I don't know, is the Fed going to ratify what's priced in? To me, that's going to be what's important. Because the markets have gone, I mean, a lot of the reason why treasury yields have gone up, there's been this massive reset of the Fed, and the Fed's let it happen.

12:40So the question is, what does he do today, Mr. No Guidance, to sort of say to the market, you know, you may have overlapped what our intentions are going to be down the road. Yeah. Really quick, before we let you go, David, I got to get you on Canada. Two headlines in the Times. One is world economy becoming wary of the U.S. and the other is about von der Leyen offering this associate membership to the EU. You think that flies where you are? I think there's really broad support for what Mark Carney is doing across the board and his popularity is very high but you know let's face facts what canada's share of trade with europe is like five percent uh with asia it's like ten percent so we're talking about you know a full diversification away from the u.s it's next to impossible because that's where all the supply chains are connected but you know at the margin at the margin i think he's doing the the right thing to protect the economy here uh but you know canada's trade ties with the united states are They're always going to be inextricably linked.

13:46We'll be able to walk away from that. But at the margin, I think there's things he can do to cushion the blow. And one of them is to diversify our trading relationships. But is it going to spin the dial in a major way? No. Okay. David Rosenberg, thank you for joining us with the opinion, the critique on this Fed Day. We appreciate it from Rosenberg Research. Still ahead this morning, Senator Richard Blumenthal is with us. We'll talk about how he's looking at regulating AI right now. Plus, early Google and Facebook investor Roger McNamee joins us while he says AI companies are trying to scare the government into saving them.

14:19We're back in a moment. With the Discover Cashback card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to discover. Terms apply. See discovery.com slash five for details.

15:11Limited number of ETFs are subject to a service fee of$100. See details at fidelity.com slash commissions. Fidelity Brokerage Services, LLC, member NYSE SIPC. From the producers of The Traders, The Circle returns with bigger twists and higher stakes. Contestants compete for popularity without ever meeting. Some are celebrities, some are regular people, and some are catfishing the competition. And now audience voting will influence the game. You decide who has what it takes to win in The Circle. Watch the Hulu original series The Circle on November 17th, streaming on Hulu and on Hulu on Disney Plus for bundle subscribers.

15:46Terms apply. Welcome back to Squawk on the Street. Calls for federal AI regulation intensifying, following multiple warnings from insiders. Last hour, we spoke with the Defense Department's chief technology officer, who says that AI companies need to learn to regulate themselves. Listen. Let's hope they do the right thing and become a normal company with normal companies, with normal products, with normal safety standards that they test and spend money on just like every good company does when they mature. These companies are three, four years old. They need a little more time to season, in my view, to understand how business really works.

16:22Our next guest says, however, that one path forward could be to establish an agency like the FDA, but for AI companies. And joining us now first on CNBC from Capitol Hill is Connecticut Senator Richard Blumenthal. Why would Congress or the government know more about how to control the safety issues here than the companies themselves, Senator? It isn't a question of who knows more. It's a question of who has an interest in protecting all of us ordinary, everyday people in the world from the potential dangers of AI. We are becoming more and more aware of what those dangers are. But in fact, we started having hearings three years ago, Senator Hawley, Republican of Missouri, and myself with Sam Altman, hardly a household word at the time.

17:17and all of the other AI leaders who said then, we need some oversight, standards, government scrutiny. And analogously to the FDA, which regulates pharmaceutical drugs and medical devices, those are well-established, mature companies, but we've decided that there ought to be review for whether or not these products are safe and effective. Not a slowdown, not a pause, not excessive government intrusion, but simply expertise and experience through a group of scientists that decide whether or not these kinds of drugs or medical devices ought to be put on the market. Same idea here. Before these products, new technology are deployed, there ought to be some objective review.

18:11And we should learn, by the way, from our experience with social media, where the horse is out of the barn, algorithms are driving toxic content at kids, and we're still trying to catch up. Do you not worry, though, about potential harm to innovation and global competitiveness, which are the primary warnings against over-regulating this? That's a great question. Of course, I do worry about it. we have to remain competitive. China is understanding that it needs to regulate AI because it could be a threat to their regime. In fact, even more so to their kind of autocratic rule than it would be to the United States.

18:57And it has to be international in scope. It has to avoid stifling innovation and invention or entrenching the kind of monopolistic control that we see in social media and now more and more in AI. And let's face it, AI is pervasive in our lives already. We need to make sure that the benefits are accomplished without the dangers. And that's the reason why the Artificial Intelligence Risk Evaluation Act, a bipartisan measure, I think has a lot of promise. I think a lot of people look to Europe and they say, look what regulation does. Regulation stifles innovation. There's a reason they don't have any big AI players and they're nowhere in this race.

19:45And that's because of the regulatory state. Nobody wants a regulatory state. What we want is, in effect, some scrutiny to prevent the autonomous robots out of the sandbox, infiltrating sites without the control of the developers who were responsible for them. And I'm just done with, trust me, that's what the industry says. It has said it for years and we've seen the results in social media. It's the reason why the Kids Online Safety Act has attracted such strong bipartisan support. Senator Blackburn and I proposed it a number of years ago. It passed the Senate by a 91 to 3 vote. It was stymied in the House because of big tech's opposition, its armies of lawyers and lobbyists.

20:45We need to make sure that democracy works, that we get things done. And part of it is to make sure we protect people against the dangers that are out there. So if we're to go down this road on this FDA sort of like metaphor, I mean, certainly we regulate drug discovery and no one would argue we're not number one in drug discovery. But would this look like a new model in a phase three trial when it gets reviewed? How do you see that pipeline working? Well, part of what Congress needs to do is avoid heavy handed or intrusive intervention. And we need to give the agency, whether it's the Department of Energy or some new agency, the flexibility and freedom to make sure that the process targets potential evils and does it in the most expeditious way.

21:43So the answer to your question is I think we need to delegate some of this responsibility to the experts. We are hardly experts in Congress on AI. And I think we need to understand our own limitations in this area where a highly complex and challenging technology is involved. Where we want to be at the tip of the spear. We want to be at the forefront. America should be, just as we are in development of new medicines and medical devices. And I think there is a balance here to be struck. But the point is that right now we're on the verge of losing control completely. Yeah, I mean, there's another risk with that that, you know, critics warn, which is, you know, as you say, it's not Congress that are the experts, that there's this regulatory capture that basically the agency gets captured by the industry and the dominant players when it comes to a fast moving industry like AI, because they understand what's going on.

22:46And that ultimately will stifle competition. and upstarts and just give the power to the hands of the few. And we ought to learn from the FDA that regulatory capture is indeed a danger and that there are failings that we've recognized in the FDA process, sometimes stymieing the flow of new products to be available to people who want to use them. And the FDA has revised its process, learning from experience. So the FDA is far from perfect, but it does provide a model for looking at new products, whether they are safe and effective, safe and effective. Do you have an idea of what capabilities basically would become dangerous enough that the model shouldn't be able to be released?

23:41We've seen some of the dangers insofar as the bots or agents can be out of control. The idea of RIS, the self-improvement, recursive self-improvement, the misaligned agents, you know, all of these terms apply to, in effect, development that no longer is within the oversight of control of human beings. That's one area where I think people are very concerned. But, you know, in a broader sense, we've been working on this issue for a number of years, three years. Senator Hawley and I came up with a framework for making sure there are export controls, assuring that there is safety, other kinds of review.

24:35and we've been proposing legislation that requires, for example, in the Guard Act, that the bots disclose that they are not human when they're talking to people, that there be age verification. There are a set of protective measures that I think are ideas whose time has come. I'm glad to see the rising awareness here after we have been doing it for three years, and I'm hoping that we can get some measure across the finish line. But I think very importantly, there's bipartisan awareness and support. Well, there certainly is awareness now. And we thank you for coming out to talk about some of the ideas here.

25:17Appreciate it. Keep us posted. Senator Richard Blumenthal. Still to come this morning, early Google and Facebook investor Roger McNamee will join us. Why he says what's going on right now in AI is ridiculous. Plus, the Clarity Act failing to advance in the Senate yesterday. We'll discuss what that means for the future of the crypto industry. Back in a moment. With the Discover Cashback card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants.

25:56It pays to Discover. Terms apply. See discovery.com slash five for details.

26:29Details at Fidelity.com slash commissions. Fidelity Brokerage Services, LLC. Member NYSE SIPC. This holiday, all plans, even unlimited, are just$15 a month. A holiday deal this good obviously deserves an enormously expensive holiday song. Like, all I want. Right. Okay, we can afford that. You know what? Forget the music budget. We're going to stick with whatever's in the public domain. Give it a try at mintmobile.com slash switch. Upfront payment of$45 for three months,$90 for six months, or$180 for a 12-month plan required. $15 per month equivalent. Taxes and fees extra. New customer offer for initial plan term only.

27:01Greater than 50 gigabytes may slow when network is busy. See terms. Welcome back. Fed Day. S &P slightly higher this morning as we await the decision this afternoon. We do have some names in tech like Coherent, Dell once again, Marvell, all top gainers. J.B. Hunt's the biggest lagger today. Stock is tumbling after the trucking company did warn of an earnings drop between 5 % and 10%. Kind of notable since they're not classic guidance givers to begin with. But diesel certainly hurting transports today. We're hearing from some airlines, too, also at Morgan Stanley Conference. That's the story, right?

27:34High diesel, high fuel prices. That's really going to hurt truckers. And also Norfolk Southern talking about gaining market share from the truckers because of it. Time now for a news update. Julia Boorstin has it for us this morning. Julia. Sarah, the House today is expected to vote on a new sanctions bill aimed at increasing economic pressure on Russia. The bill named after the late Senator Lindsey Graham passed the Senate last month. The legislation would target Russian defense and energy industries and the shadow fleet of tankers evading current sanctions. President Trump is expected to sign the bill into law if it passes.

28:06Amazon announced today it's raising the minimum hourly pay for eligible operations workers by$1 to$20 an hour, including the value of a new benefits package. The company says total compensation for those full-time employees will now exceed$32 per hour. And travelers are apparently happier with their experience at the airport, even as record number of people are flying. J.D. Power's annual survey finds overall satisfaction with airports increased significantly from last year, in part because of newer gates and terminals. The top airports on the list, Minneapolis-St. Paul, Detroit, Phoenix, New York's LaGuardia, and Harry Reid International in Las Vegas.

28:45Back over to you. LaGuardia. Who would have thought? It's been such a big upgrade lately. They rebuilt it. And the food choices are so good. I think that's very important. Thank you, Julia. Julia Borson. Still ahead, early Google and Facebook investor Roger McNamee joins us. Why he says AI companies are trying to scare the government into saving them. SK Hynix reportedly in talks with Intel to manufacture memory chips in the U.S. for the first time. Get some details on that story when we come right back. Welcome back to Squawk on the Street. Our next guest out with a bold call saying that the same AI leaders who are now calling for a slowdown ultimately picked, quote, a dead-end technology that cannot do what they want it to do.

29:24Let's bring in Elevation Partners co-founder Roger McNamee, of course, an early investor in Facebook and Google, as well as a former advisor to Mark Zuckerberg. Roger, it's great to have you. It does sound like you think these guys are up against the wall on open source competition, and they are pulling any lever they can pull. Yeah, so the issue, Carl, I think is this. You know, Anthropic wants to go public next month. And if I were an investor today, I would be really thoughtful about the risk factors that really exist here. And the first of those is the one you just mentioned, which is that LLMs appear to be a dead-end technology.

30:02That for all intents and purposes, we put, you know, trillion dollars plus into this whole thing to produce a technology that has error rates 10 to 25 percent, which means you can't really apply it to high-value stuff. The second problem they have is they went with a general purpose product architecture. And you guys remember, the last thing that worked with general purpose architecture was SAP with its ERP product in 1993. And I'm not sure anybody ever got a positive ROI from that because it's too expensive for corporations to implement general purpose architectures. They like you to solve a problem with a quick payback.

30:40These things do not do that. The third problem is they spent almost a trillion and a half dollars on capital equipment without commoditizing the hardware first. I mean, that is absolutely nuts. And, you know, we think back to the Internet. By the time Google came along, six years into the Internet, they had taken three orders of magnitude of cost out of the infrastructure. Right. And we still have rising unit costs here. And then the fourth thing is there are 10 guys competing for what, two slots? So a lot of guys are going to get hurt no matter what. The final point here is that there's not one customer out there that's paying more for their AI than it costs the AI vendor to deliver it.

31:22And that's not a sustainable model. So what should the response be to their complaints? Well, I think the core issue here as investors, we should be sitting there and going, you must be kidding. cannot take a company public when, you know, they're sitting there saying we have 80 % gross margins as long as you exclude all of our operating costs. And I'm sitting there going, I'm sorry, that's not how markets work. That's not how accounting works. And, you know, there is potential to all of this stuff. But the problem that they face is that they made a bet. The bet hasn't worked. The open source guys are eating their lunch.

31:58They've just had a disastrous PR cycle with data centers and a disastrous PR cycle with hugging face. And now they're sitting there going, we are screwed. The markets don't want to give us more money. We need the government to bail us out. So we're going to ask the government. We're still getting news, though, of pre-IPO funding rounds, at least on the open AI side. That's just today. Right. No, no. Hang on. This is the great thing about markets. You know, there are lots of people who disagree with me. I'm just saying before you put your money to work, you should do the analysis. Look at the five points I just gave you there and ask yourself objectively in any other context, what would you pay for companies with those facing those issues?

32:39And, you know, again, there are lots of people who paid big money for WeWork right up till it blew up. There were people who paid real money for Enron before it blew up. And, you know, FTX, same thing. You know, I just, markets have manias. This is a mania. And, you know, the key question is not, will this be a big deal someday? The question is, can you make money from the valuation you're paying today? And my argument is that's going to take a miracle. And I think what these guys are signaling is they want the government to force a slowdown and they want to force it away that blocks open source AIs from coming to market and where they get bailed out by the government for the delay.

33:22To be clear, you mean your comparisons to Enron and FTX, I mean, those are illegalities. We're not talking about that stuff. Well, actually, Carl, I would tell you, if Anthropik's way of describing its revenues is the way they're going to bring this thing public, you're going to have to explain to me how this is different than Enron. Why? Because you think that revenues are not real? Well, they're excluding their costs. Yeah, they want to exclude the cost of training. They want to exclude all these really basic costs. They're trying to treat stuff that they received as an investment from Microsoft as though it's revenue.

33:59I mean, that's not how revenue works. Again, we haven't seen the hard data, right? But we've heard what they've said about the hard data. Here's the thing. I don't think that most people would agree with you with your whole premise that LLMs are a dead end. I mean, they have shown measurable, scalable progress. They're being enabled into all sorts of new functionalities and capabilities, and they remain central to AI research and how we're interacting with it. I'm not suggesting there isn't interesting stuff going on. I'm merely saying they've spent a trillion and a half dollars. They have three trillion in commitments on their balance sheets right now.

34:42We're talking about the big tech guys. And so far, the industry's aggregate revenues are under$200 billion, cumulatively. I mean, the math just doesn't work. So you're suggesting they're just overvalued? Grossly overvalued. But the point is, we're talking about markets. We're talking about an anthropic IPO. So the valuation is actually a really important thing to talk about here. Roger, does this mean that you don't believe them when they say that there's 10 % risk of extinction? or even whatever, whatever incremental risk to humanity there is? No, I think that's all a game that they play. These guys come from, you know, the whole world of effective altruism, which believes in kind of the replacement of humans by machines.

35:29And so they have some philosophical things that go to that extinction risk argument. But no, I think it's total nonsense. You look at this, I mean, the products that went into hugging face were programmed to hack into other companies. That's actually a crime, right? That's a felony. They were programmed to do that. They were put into a so-called sandbox that was not architected properly. But all the controls were stripped off by open AI. And I'm sitting there and saying, you know, that is not, you know, an indication of extinction risk. That's an indication of incompetent software development and really bad security practices.

36:12And I look at this, I go, that stuff didn't go rogue. It didn't think. It didn't conspire. It was programmed and it did exactly what it was programmed to do. It's just it was programmed by people who either failed to understand how to manage a sandbox or they did something that was blatantly illegal. So do you think there's vulnerability for the vendors who are expecting, counting on revenue from these guys? Of course, don't you? I mean, do you expect, I mean, I just don't expect$10 trillion, which is, I think, the most recent forecast we've seen out of NVIDIA and Anthropic about kind of the long-term investment dollars.

36:58right those kind of numbers require this thing to make the world a better place that's not what we're seeing and you know what progress you're seeing here is against benchmarks that aren't real world they're things created to evaluate a product that you're trying to sell and so my only point here is that no matter how confident you are in the underlying technology for the long term putting a trillion dollar valuation on one of these companies is not going to lead to happy endings. Do you think that regulation is some sort of solve or fix here when it comes to some of these risks? Well, I think the first thing you do is you apply just basic liability laws.

37:42I think if these guys hacked and there's some evidence that they constructively created a situation where companies like Hugging Face were hacked, that can be prosecuted. Hacking is a felony. There's also product liability things that can be applied here. We don't need new laws. These guys are breaking existing laws. We need to just recognize that there's nothing abnormal about this technology. It's just the latest hype machine and we can manage it in the existing framework. We just have to have a little bit of - When you say they're breaking existing laws, what do you mean they're breaking existing laws?

38:22I'm saying there's a law against hacking. You can go to prison for hacking another company. And they set up experiments that were designed to do precisely that. How is that not a violation of the law? Yeah, well, the report out of Reuters today that some of these agents were probing the site for vulnerabilities for nearly two months before being detected. That's a new wrinkle out of Reuters. Roger, next time, maybe we can talk about how you're positioning around all of this. Interesting thesis, though. We always love hearing from you. I'm sure I'll get a lot of blowback for it, but I will tell everybody out there that, you know, I don't need you to agree with me.

39:00I'm just trying to help you think about this in a way that saves your net worth just in case things go wrong. Roger McNamee, thanks. By the way, do not miss CNBC's second annual AI Forum in Dallas on October 1. We're going to try to tackle some of these issues here from top business leaders, entrepreneurs. For that, you can scan the QR code or just go to CNBC events dot com slash A.I. to learn more. Still ahead, the Senate failing to pass the Clarity Act yesterday. We're going to break down what that means for the future of crypto when we come right back. At this point, I don't think we can wait on Congress and the Senate.

39:36It's in our interest at this point to go work directly with the SEC and the CFTC. And chairs Atkins and Selig at the SEC and CFTC have made it clear that they have under their existing authority all the tools they need to go publish clear rules for crypto. They've even said publicly, I think, their intention to go out there and start the rulemaking process right away. That was Coinbase CEO Brian Armstrong speaking to CNBC's Garrett Downs yesterday after the Clarity Act failed to advance. Garrett joins us with more on what is next here for the industry, Garrett. it. Yeah, Sarah, well, you heard Brian Armstrong there, and basically he's saying they're going to be looking to the White House now to regulate crypto.

40:17You know, this long-awaited bill to finally regulate crypto through legislation has now seemingly failed. So they're looking to the White House, they're looking to the SEC and the CFTC and the Trump administration, which has been an ally to crypto, to regulate them now. So what would that look like? Can the White House actually put in place any kind of regulation or legislation on this front? Well, they can't put in place legislation or anything like that, but they can do rulemakings. They can do executive rulemakings, and those are less durable than legislation. So another administration could come in and undo some of those.

40:54But it could, in the meantime, allow crypto to get at least some rules of the road if the White House does come in and act. Why did it fail? You know, Sarah, they just couldn't get to a point where Democrats felt comfortable supporting this because of this ethics part. Democrats had a big problem with the money that President Donald Trump and his family have made on crypto. And they wanted clear cut restrictions that the president wouldn't be able to trade in crypto, wouldn't be able to continue profiting on crypto into the law of the land. Now, there was a lot of back and forth going on about this.

41:31last minute exchanging of papers, but they just couldn't get to a point where Democrats felt comfortable supporting it. You also had them lose a couple of Republicans too. How about the timing on all this, Garrett, coming within, what, 46 days of the midterms? What does that mean? Yeah, so look, everyone's now sort of looking at what the crypto pacts do. These groups like Fairshake that spent a lot of money in the prior election in 2024 and actually had some impact in those races. So everyone's sort of looking. Armstrong said he would be surprised if these crypto packs were not looking at yesterday's vote as an indicator of where they should spend.

42:09So we're all going to be keeping an eye on that. Fairshake yesterday told me they have no news to share yet, but I'm sure they will be looking at some races where they can spend in and hopefully get a more crypto friendly Congress. Yeah, certainly some of the comments, at least on the wires out of Thune today, suggest maybe this could be reconstructed or revisited. Really interesting, Garrett. Certainly Bitcoin has suffered a bit because of it. Appreciate that. Garrett Downs. Still ahead, SK Hynix and Intel jumping today on reports that they're in talks to maybe manufacture some memory chips in the U.S.

42:40for the first time. We'll get you details after a short break. Got some action in the chips today. SK Hynix reportedly in talks with Intel to manufacture memory chips in the U.S. for the first time. Christina Parts Nevelos watching that story this morning. Hey, KP. Hi, Carl. Well, the fab at the center of this is one Intel started building in Ohio years ago. Still hasn't finished. Two options that are on the table. SK Hynix could simply lease part of that particular plant or maybe the more ambitious path, a joint venture with Intel and cloud giants building out AI data centers that are essentially starved for memory right now.

43:11And by helping fund the plant, they would lock in their own supply. SK Hynix isn't denying any of this. The company says only that it's exploring options with nothing final. They even told me this when they had their U.S. listing here at the Nasdaq. So why actually believe all of these headlines? It's politics and demand. Korea is on the hook for roughly a$350 billion investment pledge in the United States, the price of keeping its tariffs down. And Washington really keeps pushing to see more of it built on American soil. SK Hynix risks being singled out if it stays on the sidelines and doesn't actually commit to building on U.S.

43:47soil. And of course, demand, we know this, Carl, is white hot. Intel's own CEO just yesterday at a conference said that memory prices have jumped five to seven times and suppliers don't see relief until 2028. That's the pressure pushing cloud companies to back a plant of their own. For Intel, this helps maybe fix an expensive mistake. The company spent billions starting, maybe I shouldn't say mistake, just an expensive endeavor. The company spent billions starting the Ohio plant, then stalled construction because they didn't have enough customers to fill it. They changed CEOs. SK Hynix could be that customer paying to use space Intel already planned to build.

44:21Investors definitely like the idea. That's why shares are up 5%. and there's already a relationship between the two firms. Intel sold its own memory business to SK Hynix back in 2020 and now it may actually rent the floor from them. The hard part is high bandwidth memory, the high-end memory behind the AI trade. South Korea guards it as a national core technology and making it abroad means a government review. And with that fab not set to open until 2030, 2031, a signed deal could still be years from its first chip. But nonetheless, the market is reacting positively. And speaking of chips, in closing bell, over time, I'll have an exclusive interview with OnSemi's CEO after their investment day.

44:58Hard pivot, but in the world of chips, guys. I was going to ask you about the geopolitical issues here and what led to a potential deal. You know, Intel now considered more of a national champion, SK Hynix for Korea. Just I don't know how it relates to some of the geopolitical and trade conversations. Well, the thing that I had to mention in the story is that the Seoul Economic Daily Times is reporting today that they're putting on hold their$350 billion investment in the United States. They were going to announce it tomorrow on the 18th, or 17th, I should say, and then announce it here in the United States.

45:34So things are already getting delayed on their end. That's why politics plays a big part in it, because the U.S. is threatening to add more tariffs on companies like S.K. Heinex and Samsung. And so they need to say that they're going to be investing here on American soil in a big way and specifically building chips. And many of these firms haven't done so to that extent. So perhaps it'll be used as leverage. But this is South Korea, not China, which we know is a whole other conversation starting on September 24th. Yeah, it's been a huge source of irritation to commerce. The fact that the Koreans have been, I don't know, a little bit of rope-a-dope, a little bit of dragging feet on some initial promises to deal with as well.

46:13Christina, thank you. Christina Parts and Evelist. Stock market is holding in there with the S &P 500 higher ahead of the Fed. And I think a few things to watch today. First of all, will they hike? The bond market is baking it in with more than 90 % odds. What do the dots look like? Do they matter? Because Kevin Warsh himself, the chairman, hasn't participated in the dots. But how hawkish do they get if there is a hike? Are there more hikes baked in for the rest of the year? And then, obviously, his news conference, even though he says he doesn't want to do forward, guidance, the market moved a lot after his Jackson Hole speech in a more hawkish direction.

46:47Yeah, and we were joking about the word hike in the first few graphs. Who knows whether he wanted the algos to read that, but we'll know more in a couple hours. 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.

47:16Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer. Introducing Fidelity Trader Plus. With customizable tools and charts you can access across all your devices. Try our most powerful trading platform yet at fidelity.com slash trader plus investing involves risk, including risk of loss. Fidelity brokerage services, LLC member NYSE SIPC.