9am Hour: CoreWeave Whipsaw, Tesla’s Roadster Unveil, Netflix C-Suite Shuffle 10/16/26

0:02At Janice Henderson Investors, we believe working together is the way to work better. Like combining your portfolio plans and our in-depth strategy, your valued assets and our valuable insights, your vision and our mission, working in harmony to seek the right investment opportunities. Janice Henderson Investors, investing in a brighter future together. Tired of the same old game night? Switch things up with Chumba Casino. Play over 200 free online social casino games. From classic slots and blackjack to exclusive in-house favorites you won't find anywhere else. However long you got, you can play your way.

0:47Anytime, anywhere. Make your next chill night a little more fun with Chumba Casino. Only available in permitted states. No purchase necessary. See terms and conditions for details. VGW route void where prohibited by Log 21+. Market insight and analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

1:11Good Friday morning. Welcome to Squawk on the Street. I'm Carl Cantanillo with David Faber, Sarah Eisen at Post 9 of the New York Stock Exchange. Kramer has the morning off. S &P pretty steady pre-market and the index actually has a shot at breaking even for this topsy-turvy week at 78.11. Some renewed weakness in CoreWeave today. Micron, Oracle, 10-year, 5.1. Brent's near 106, but our Bob futures close to a six-week low today. Our roadmap begins with more volatility for CoreWeave under pressure ahead of the open after staging that major comeback in yesterday's session. Plus, we'll have a closer look at Tesla's next-generation Roadster taking flight in last night's demonstration.

1:49And Netflix shaking up its leadership group, replacing the chief content officer ahead of earnings next week. Let's get right to the markets following this wild week of volatility. Dow's on pace for its best week since August. The Nasdaq's trying to avoid its worst week since July. Had some high-flying names get crushed this week. It can see some of the week-to-date losses. If you look at drawdowns, plenty of those are down 30 percent plus. But we did have the best breadth yesterday, Sarah, since June 12th, as a lot of rotation happened. Yeah, I mean, defensive stocks have been working this week.

2:22Dividend stocks have been working this week. What you saw was a drop in Treasury yields, which made, I think, things easier to rally that were not technology related to the specific concerns around AI data centers and credit concerns around CoreWeave. So you got that kind of nicer rally and finally relief on bonds. And I do think, David, that's kind of what's underpinning all of this is just the rising cost of capital. Last week, it was France we were all worried about. This week, it's CoreWeave. It's kind of related, though, which is credit risk rises when rates rise. And by the way, I've heard also anecdotally, like in the commercial real estate market, for instance, there's starting to be some pain there.

3:03That's what happens when you have a big backup in yields. And the best cure for that is things get so worrisome that treasuries rally and yields come down. And that's what we saw this week. You know, we got CPI and PPI that were both hot. And normally that would have caused a sell off in rates and because inflation concerns. But they went the other way because things are starting to get a little bit more worrisome, I guess, in the broader picture on AI. Yes, we are obviously below five percent now in the 10 year. To your point, there is this overall concern that when you get a move up the way we did, particularly in the longer end, things start to break.

3:41Not sure where. Obviously, we've seen it in this growing concern. And this is not going to go away. The growing concern in terms of how dear capital is going to be for the continued build out of AI around our country and around the globe. And the lesser of the names in terms of their credit quality have been getting hit the most, of course. No surprise there. And so the unsecured debt of a core weaver. We talked a lot about this yesterday. Carl, Jim, and myself, of course, trading it as much as 15 percent in terms of the yield given the drop in price of those bonds. That's only about 20 percent of their debt stack is unsecured.

4:16But raising the question as to just the cost of capital, again, we saw a rebound yesterday, a significant one. Not interestingly in shares of Dell, for example, but in share of Corweave, yes. After Carl, I think also one of their largest investors, Jensen Wong, came out and said some very positive things. It's not really about the demand picture as much as it will continue to be around these questions about how dear capital is going to ultimately be. Although, interestingly, Jensen's comment wasn't about backlog or demand. It was about their financing costs, he argues, coming down rather than going up.

4:54Which had been the case. And Intrader pointed that out in interviews with us any number of times. Yep, yep. Meantime, the CDS, though, still implies a 50 %-plus chance of default in five years. Today, the tape's about the three founders and their stock sales,$3.3 billion in cash-outs,$2.4 billion this year alone. So that's always been part of the narrative around the stock. Right, and you pointed that out as well yesterday, and certainly people are aware of it. The other big, you know, AI-related news we got this week was the$16.8 billion third quarter number from Anthropic, which, to be clear, was not what investors had expected to a certain extent.

5:38They thought it would be a higher number and would point to a higher recurring rate of revenues. That said, the bulls in the name, so to speak, many of their investors are pointing to next year and a reacceleration and the fact that they lost revenues as a result of cutting back on and or eliminating the distillation by Chinese models of their model. But it wasn't a great number, Sarah. And, you know, again, as we await the S1 from this company and an expected IPO, let's call it within the next month, perhaps, it is going to be interesting to see how investors digest that and try to understand what the real revenue number looks like there as they tried to determine a valuation for Anthropic, which there had been some hope would be as high as$2 trillion.

6:25And some will still argue they'll end next year at at least the$200 billion average revenue run rate. That said, maybe it's not going to be near that number. I know, but it's such an odd one where expectations are so high before the company even goes public. And also there was disappointment around some of OpenAI's leaked numbers as well. Right, last week, right? numbers. So this probably compounded that. I do wonder, though, whether the tone just gets negative when things are negative. And the AI trade this week was around four weeks and was around the credit risk. And I think that that sort of raised more questions about all the things that could go wrong here, right?

7:03The data center moratoriums. And every single day when you look, there's some politician that is raising a new idea of a moratorium, either temporary or permanent. Now, this time, they're looking at it in Virginia. Virginia was the home to the entire data center build-out in this country. They were the poster child for that. So I think there's concerns about that. But what was notable to me, Carl, you mentioned the core wave stock, just to bring it back to the equity for a second, is how many analysts stepped out and said, this is a buying opportunity for this name. I mean, Dan Ives, for instance, you know he's always bullish on the AI trade.

7:39There's no demand signal here that's weakened. It's about credit risk, and we think the market has it wrong. Kanner was especially bullish overnight. You know, they have a$176 price target. We believe this is one of the most attractive times to add or enter into a core-weave position as we think the market is getting it wrong. Yeah, no one is questioning demand, whether it was ASML this week, whether it was TSMC, whether it was Michael Dell earlier this week in conversation with us, and on from there, Carl. It's not a demand question. That will be a very bad day if we truly get that headline where we suddenly see, oh, no, we don't want any more in terms of buying all this stuff.

8:15Yes. But the ability to buy it and actually get a return that is going to make sense for you is much more in question. Right. Because so much of it is relying on financing. Yeah. As a look at Jeffrey's maintaining 150, I mean, stock's been defended at 60 a couple times now this year. that appears for the moment to be a pretty durable floor. As you said, a lot of commentary about the strength of the equity. It's about the ability to finance the CapEx, not the demand. That's the whole thing. It's not the backlog, it's the financing. To meet the demand. And, you know, look, Ives compared it to the saspocalypse, basically, where this is the new narrative, right, of who's in trouble with the AI trade.

9:00And he said, like the Sascop Philips, I mean, he thinks it's going to get proven to be a big buying opportunity. Santoli's been sort of over. Remember, David, the Citrini note about software came out right as the IGV was close to the lows in February. So there is this view that maybe the Gartner report on Neoclouds is Citrini, Sascop Philips 2.0. It may be. And, you know, we did see a bit of a reversal, of course, as we say yesterday. But importantly, we're going to keep an eye on it. We come back to CoreWeave not because it's the only stock, but it is reflective in terms of the credit quality.

9:33It's enormous need for capital, obviously, to continue to fuel this is also reflective of so many others. But it is different than the Amazons, the Metas, the Microsofts, and the Alphabets of the world, which are still amongst the most profitable companies we've ever seen, even if they have gone to negative free cash flow to help fund this build-up as well. That's why it was interesting the server stocks sold off so hard this week. I know. The HPQ and the Dell, just, I guess, on the idea that if there are questions about financing of data centers, they're in the crosshairs. There will be less demand, ultimately, even though we've seen no let-up.

10:07I mean, this note from B of A sort of wraps it up as well. It's all about the economics of the AI built out. Is it Savita today? Yeah, I believe it was, yes. So great, where she says 90 % of our meetings are about AI. Right, and 10 % everything else. It's everything else, 90 % AI, and then goes on to say, you know, it's all about the cost of capital. It's the only question that matters. So I don't feel bad about us spending the last nine minutes talking about it. Yeah, no, we should do that, nine to one AI. We could go longer, always. But I do wonder if— Well, you could always go longer. So could you, please.

10:40The NVIDIA comments, you know, I know—I'm not sure Jensen told us anything new, But I do wonder if, you know, him stepping out and talking about on that day led people to speculate. Like, they could be a source of capital if things got tighter, David, on the financing, right? NVIDIA is in there. It's like a more than 10 % shareholder of CoreWeave. Yes. And they have a very close and integrated relationship when it comes to selling their chips. And ultimately, NVIDIA could step in if it has to. Yes. I think that's the leap maybe that people make. The National Bank of NVIDIA. Exactly. In many ways.

11:15All right, let's move on to Tesla, because that company unveiled its long awaited new Roadster model. It was flying in last night's demonstration. You kind of see it there. Phil Lebeau joins us. He's got a lot more on a long awaited, long awaited model. Phil. David, they put on a show. They said it would be something we had never seen before. It would wow us. They were not exaggerating. In fact, the pictures say it all. There were two demonstrations that really stand out about the next generation Roadster, and they involve the rocket technology that was incorporated into the rocket version of the next generation Roadster.

11:54Essentially, it is able to have, because of cold gas thrusters that were incorporated, built at SpaceX and then incorporated into the vehicle, it allows the vehicle to, there you see it coming off of a ramp where it was briefly almost upside down, and then you see the thrusters there as it landed, and also here as they do a little Evel Knievel jump over a lineup of Tesla vehicles. Zero to 60, they say in 0.81 seconds, less than a second. All of this brings up the question with all of this technology in there, how much of it is really technology we might ultimately see in the roaster? Here's Elon Musk talking about some of that last night.

12:35an actual benefit on the track or just driving where the downforce of the car means you can corner incredibly well and yes i've talked with people in fact i talked with a friend who lives in texas uh who races cars and said boy that downforce that they're talking about essentially i'm being very basic calling it a suction system keeps the the center of gravity even lower so that it handles in the future, theoretically, on a racetrack, the one version of the roadster that they were describing, it should set some track records. Bottom line is this, guys. This was a show to say, you want to see what we can do with a vehicle?

13:18We're going to show you. Are we going to see this out on a road someday where you will see a vehicle take off like this? No. There's no way. Regulators would never allow this to be out on a road. Now, you take something like this out to the Bonneville Salt Flats, a private area. Yeah, that's a different story. Maybe you could do it out there, but you're not gonna see it on the roads. Doesn't matter. The point last night was to say, you wanna see what we can do? This is what we can do. And they put on a heck of a show. Don't forget, as you take a look at shares of Tesla, we get the Q3 results after the bell yesterday or after the bell next week, I should say.

13:51That's when we will hear from Elon Musk during the analyst conference call. And you can bet a lot of the questions will center around SpaceX and the potential to buy Tesla. Not sure he's going to say anything that will move the needle in terms of expectations, but we should point out that on Kelsey, the odds right now, more than 50 % that there will be SpaceX combining with Tesla in early 2027, or at least the mention or the movement towards that in 2027. So bottom line, guys, heck of a show last night. Very interesting. Doesn't have a lot of applications to the real world here and now, but it was fun to watch.

14:34Yeah, those odds are probably decent. 20-27, just everything I hear. Again, I don't know that they're actually talking, but they're working towards it in certain ways. I would be so scared to be in that going upside down. SpaceX and Tesla. Is this the merger of this technology? I mean, it is kind of interesting, right? They did use stuff from SpaceX to obviously create those thrusters.

15:01Yeah, look, it did what they said it would do in terms of you want to see a car fly. In theory, we can show you how a car can fly thanks to these thrusters. So there's no doubt that this show last night will make you say, wow, what is possible? The reality of this, and I've had a couple of people who have emailed or texted me this morning and they said, do you think we could ever see something like this? No way. no way you will ever see this out on a street. There is a street-legal version of the next-generation Tesla Roadster that they are offering. It does not include those rocket thrusters.

15:37It's a heck of a car in terms of what they're planning to build, but it does not include the rocket thrusters. Pretty fascinating, Phil. We'll talk a lot more about it, I'm sure, in the days to come. Phil LeBeau staying up for the Roadster last night. Still to come, we'll have Netflix shaking up its leadership group ahead of next week's earnings. We'll talk about some of the challenges ahead there as their churn continues to increase. We'll get to Apple, Meta. There's some news on Pepsi, J.B. Hunt, Strategy. Wicked sell-off in Indonesia overnight, all when we return. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture.

16:18Vantage Score is changing that by modernizing credit scoring. Vantage Score uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments. Vantage Score safely broadens access to the credit economy and brings 5 million mortgage-ready borrowers into the market. That's why top lenders like Rocket Mortgage, as well as nine of the top 10 banks, rely on Vantage Score 4.0. With higher predictability and greater access to credit, everybody wins. Get started at VantageScore.com. At Jared Jewelers, we know it's about more than fine jewelry.

16:58It's the moment they open the box. That smile they can't hide. Knowing you chose exactly right. Because the right gift can bring a lifetime of meaning. A promise. A milestone. A memory in the making. Make every moment unforgettable. Find great gifts starting at$250. Jared, make the holiday last forever. Shop Jared Jewelers.

17:49Edition for details, VGW Group or were prohibited by Log 21+. One last batch of eco data to end the week. We got import prices, now some industrial production. Let's get to Steve Leisman. Hey, Steve. Good morning, Carl. Industrial production rising 0.7 % in October, in September versus an upwardly revised 0.1 % in August. And that comes with good gains in consumer goods up 0.7 percent, non-industrial supplies, construction supplies also up 1 percent. A little disappointing on the motor vehicle parts down 3 percent on the month. And also the vehicle assembly rate also declined. Capacity utilization also an upside surprise, 76.9 versus an estimate I have here of 76.5.

18:39As you mentioned, import prices this morning, Carl, the third in a series of inflation reports this week. That's surprise to the upside, 1.1 percent on the strength of non-petroleum imports as well as petroleum import prices rising. And some questions, of course, about what Kevin Wors said last night and what he meant and what it means for future red eyes. You do have bonds, though, under a little bit of pressure this morning. 512, though, is way better than it has been. Steve, October odds, haven't they gone from above 50 down to, what, 13 this morning? You overstayed it just slightly, my friend, 15.

19:17But you're right in both direction and the level being way down from what it was. That's what I have is 15. It could be 13, of course, on the CME. This is the LSEG number. The story here, Carl, is that people heard Warsh and he said, well, things are evolving pretty much as expected. Well, what does that mean? It means essentially that the market or the Fed was forecasting one additional rate hike this year. It's already looking for 3.4 percent on core PCE. The estimates now it comes in at 3.1 for October. So the inference there is that Warsh was not surprised by these inflation reports. So no need to push the button on a rate hike in October.

20:01I will say there are people who disagree with him on that, people who think that the Fed ought to be hiking here because of the pipeline pressure we saw in yesterday's PPI, seeing in the import prices today and some of the business surveys that show businesses plan to raise prices. OK, Steve. Thank you. Steve Leisman. And I would say also, Carl, that while the odds of October have gone down to 15 percent, the odds of December have gone up to 90 percent, right, that they will ultimately move, as Steve just said, because, you know, we're getting still inflationary data, though, you know, there is a debate still about whether they should move and how much they should go, even though inflation looks high on the headline number, particularly, you know, the places where the high rates impact the most are housing, which is not overheated, it's actually hurting, consumer, which has been in pretty good shape, but doesn't appear to be a big source of inflation.

20:52And the inflation is supply. It's oil and it's AI. And it's hard for the Fed using its blunt instrument of interest rates to get at that. Still, we know Warsh wants to sort of come in and say we're tough on inflation, preserve the credibility of the Federal Reserve and its inflation target. And so that's why the market thinks we'll get one in December. B of A today looks at food at home. And they say, given what diesel's done and given what commodities are doing and what wages might start to be doing, maybe food at home goes to 10 % in the next six months. And we've had a lot of worries about a coming food crisis for early 27.

21:28I mean, the latest CPI report actually showed a little bit softer on the month where the grocery prices versus the restaurant prices. But yeah, I mean, people will feel that. And that's certainly a problem. And part of the Fed's predicament here about why they might ultimately continue you to raise rates. Yeah, that's painful. Yeah, that happens. That's not ugly. Take another look at futures here as we count you down to the opening bells in just a few moments. We are seeing some nice stabilization a little bit. S &P futures up 13 after a rocky week, although NASDAQ futures down 149. So some pressure on tech continues.

22:02We'll be right back. Hi, I'm Roman Mars, host of 99 % Invisible. It's a podcast about all the thought that goes into the things most people don't even think about. You're going to see stories everywhere. Follow and listen to 99 % Invisible wherever you get your podcasts.

22:40789-7777. MA, call 800-327-5050. NY, call 877-8HOPE-NY. MD, visit mdgamblinghelp.org. Offer not available in all states. Terms apply. See Fanatic app for details. At Jared Jewelers, we know it's about more than fine jewelry. It's the moment they open the box. That smile they can't hide. Knowing you chose exactly right. Because the right gift can bring a lifetime of meaning. A promise. A milestone. A memory in the making. Make every moment unforgettable. Find great gifts starting at$250. Jared, make the holiday last forever. Shop Jared Jewelers.

23:22As we count you down to the opening bells, let's bring in senior markets commentator Mike Santoli, also co-anchor of Closing Bell Overtime. AI trade, Mike, is still a little weaker this morning, even though some people look to the South Korean market, the cost speed. Sometimes it's a leader, sometimes a follower. It did rebound today, 2%. It did. But it's been down, what, 20 % in seven trading days? Yes. So that group got blasted. Yesterday's intraday partial recovery in semis seems like it was a little bit of enough for now. This group has gotten really obliterated. It looked very oversold. It was an intraday call that, in fact, maybe it's gotten extreme in the short term.

24:00So we did get that bounce. But it's not holding this morning. If you look at Micron, it's not going to go to yesterday's lows at the open. But it's still going to pull back. So I think it's very unsettled. We have this clash between, you know, AI people in the business who are building it, keep saying it's early. The markets are saying it feels kind of late cycle in certain respects in terms of how the capital markets are digesting all of this. You know, yields had a bid. You've been talking about how we got two unfriendly inflation numbers. It's kind of like when an oversold stock bounces on bad news.

24:32That's really what was going on in the bond market. Sometimes there's good information content there. Buyers have showed up in tens around 530. That's allowed the average stock to actually recover this week and outperform the S &P in a week when you have the NASDAQ 100 off 3 percent. So I still think it's very unsettled below the surface. And honestly, it's the bond market going to dictate whether we have to worry or whether earnings can bail out the tape going into the next couple of weeks. Let's get the opening bell here. The big board on Wall Street. It is hedge-eye. IFC-listed EPS. Athenized back in Palm Square.

25:09City Therapeutics. The biosec developed an RNA interference therapeutic celebrating an IPO. And at SIBO in Chicago, it is the SIBO internal floor operations team. Not quite to break even for the week here, Mike. No. You'd need a tad above 7 ,800. Yeah, we're down like, you know, 0.8 % on the S &P. But as I mentioned, the average stock has come back. Coming into the week, I think the whole storyline was if the bond market calms down, the underperforming parts of this market, like cyclicals, consumer, all the rest of it, maybe can get a bit of a bounce relative to MAG-7. Well, take a look at NASDAQ 100 relative to the equal weight S &P 500.

25:51You have had a little bit of convergence there, but it's very contingent. It very much seems like only on days when Treasury yields back off can you get that. And it's interesting because yesterday was much better breath. In other words, the majority of stocks were up. You actually had most of tech able to rally aside from some of the hard hit semis. And you had old economy stuff able to work. I doubt that equation continues. I think it's much more going to be a lot of push. But there also were signs of some heavy liquidation type activity in the levered part of the market, the AI trade, whether that was in stocks or bonds after this core we've dumped.

26:28And so maybe we got some of that cleaned out going into the weekend. Also a chicken and the egg thing with bonds, with treasuries and with the AI trade. It's like, why did treasuries rally this week? Because maybe they looked like good value. For sure. After looking at some of these high yield, you know, securities like the core weed bonds. I think that's been the story, which I think it goes back two or three weeks. I was writing about this. Everyone was so worried about, oh, no, if I buy tens at 5%, what if it goes to five and a quarter? Like, don't worry about it. You now have a yield cushion as an offset to equity risk.

26:59not to switch everything from stocks into bonds, but it's actually doing its job to some degree. And in fact, you look at the hard net B of A data today, flows into treasuries has been strong for weeks now because the mechanical rebalancing thrust of investors collectively would tell you to do that. You've had a four-year bull market, massive outperformance of stocks over bonds. So that part of it's doing its job. I think the interesting part is corporate credit and how that layers on top of it. So if you look at the high yield index, the effective yield on high yield debt has gotten, I wouldn't say into a danger zone, but you're now above 8 percent again.

27:36And you're not that far from where you were in the spring of 2025. That, of course, was Liberation Day panic. And you're above where you were, you know, let's say the early part of this year after the Iraq, Iran war began. So that's a break on activity. This is financial conditions being more restraining of activity. And it's also an answer to everybody. you guys were talking about. Oh, the Fed really can't affect AI spend. Well, guess what? From the date of the last Fed meeting and from Jackson Hole, financial conditions have tightened a lot because government yields are up, corporate spreads are higher, treasury volatility is a lot higher.

28:13This is the pushback to the notion that AI is immune. I mean, if we're immune, you wouldn't see tech CDS blowing out the way it is. So part of the AI buildout is not immune. And that's why the whole kind of theme in the market this week is, do you consume capital? Do you need outside credit? We're selling your stocks. Do you produce capital? Are you self-financing? We'll buy you. It's a quality trade over momentum. Yeah, except that NVIDIA generated$50 billion free cash flow in the first quarter. That is true, yes. But I'm not sure how to view it, because at the end, all roads seem to lead back to it in many ways.

28:51I mean, the GPUs that are, you know, that are being financed to a certain extent and so much of the demand that it is helping to create as a result of the money that it's put in. Isn't CoreWeave alone like 8 % of NVIDIA GPU? It may very well be. Yeah. I don't know the specific numbers, but that certainly sounds. I think that is the issue. This idea that if the whole thing gets slowed down a little bit or you have some hiccups. You know, NVIDIA also already had a$5.2 trillion market cap. Like, how much more credit are you going to give for this last thing? I think that's the story behind the memory trade, too.

29:25All those stocks look dirt cheap. But this notion that in the out years you're getting more capacity, it's just too much. That said, Invidia has a great deal of firepower. I mean, they have$150 billion buyback in place now. If they want to, like, say, you know what, we'd actually rather put that money into the ecosystem, they can do it. The other part of it, which I think is really an interesting part of the story that's going to emerge, is the Alphabets and the Amazons, you know, people are talking about going back to free cash flow positive at the second half of next year. Alphabet is projected to have 20 plus percent top line growth next year on top of a half trillion dollar revenue.

30:02I mean, that's a lot of money incrementally. And so a lot of it does fall into EBIT and they can do with it what they want. So that's the part of the trade. That's what the neoclods don't have. That's exactly what they don't have. And this is the whole argument is ultimately, once we get to a certain phase when AI is more has scaled, where are the economics going to sit? Who's actually going to get profits off of this? And I think, David, that you brought up the anthropic disappointment, disappointment, but that ties into the sort of related fear, which is, are the revenues going to be there enough to justify the capital spending, which is also sort of one of the related questions being asked.

30:37Without a doubt. That's where much of it comes from. And then we get into sort of a different conversation about the competition from open models, whether they be Chinese or maybe here in the U.S., but in general, NVIDIA, of course, has been embracing the open model concept and how much of enterprises use open models, which come much more cheaply, than use the frontier models and that whole debate. Yeah, there's an enormous amount that is being wagered, so to speak, or invested as a result of the expectations for the revenue generation for these companies. If Octan's right about a casino, wager might be the right first.

31:11Those comments, you mentioned them a number of times. They definitely were around a lot this week. But wasn't he, was he not referring to the context? Yes, the context. I think Bloomberg exaggerated that. Investors who sell on Newsday Don't Understand as opposed to buy. Right, right, right. You mentioned memory. John Ternus has this remarkable interview in Time in which he says the memory shortage is a crisis, in his words. Although, talk about a flight to safety and the whole thing you're talking about. Completely, yeah. Apple today. Well, Apple is basically this market sort of dictates how they characterize the stock and Apple is anti semis.

31:49It's anti, you know, CapEx excess and everything. And that's the way the stock trades. It's also at a record valuation because of that, because it has that defensiveness. It trades on a valuation like Walmart does for same similar reasons. But I do think that that is a massive issue. I mean, the defense industry is talking about the lack of memory to everybody is in this scarcity mode. And, you know, I don't know if just, hey, you know, we're going to incentivize new capacity by gouging current customers and rationing the supply is an answer. I just find it fascinating the way, you know, Micron, you had this peak in June of the bottleneck trade, the kind of pre-SpaceX AI is going to do everything for us trade.

32:31And that was the risk appetite crescendo that we got. And a lot of things have been just sort of trading off since then. And even the S &P 500 has not really gotten escape velocity off of those levels so much. So, I mean, arguably, we're doing fine on an index level, kind of absorbing a lot of that. But that was a$1 ,200 stock in June. I know. And between Micron and NVIDIA, that's a third of Q3 earnings expectations. And that's exactly the issue, which is the area of the S &P 500 that's producing most of the earnings and the fastest earnings growth are the parts that the market is unwilling to pay up for because they're worried about a cliff down the road or at least a deceleration that's going to be a little jarring.

33:11Well, you want to talk about the hottest part of the market this week? My beloved consumer staples, where people only go when things are not going well overall in the market. But they are the best performers this week. Just wanted to hit briefly on Pepsi because there's a lot of chatter around this. With KFC in the U.S., switching to Coke from Pepsi. I think this got especially a lot of attention because Pepsi used to own KFC. Remember, this goes back to 1986, where they owned it. And then in the 90s or the late 90s, they spun it off into Yum! brands with KFC and Taco Bell. But it's a big deal from that perspective.

33:49Financially, not the biggest deal. We are getting some analyst commentary around it. Bank of America, for instance, has about$500 million annually. They're extrapolating basically how much KFC U.S. is part of KFC, which is about 10 percent, and then how much beverages basically is driven as a result of KFC. So they say maybe a 3 percent hit to Pepsi beverages North America, which is not nothing, but more of a sense of pride and also will lead investors to question what Coke is doing to win these kind of food service customers. We've always seen a back and forth between Coke and Pepsi. Remember, Pepsi was actually a big winner in 24.

34:29It got the Subway account. Subway has a lot of restaurants in the U.S. So they go back and forth. And I would say that I can tell you that Pepsi did just re-up a 10-year deal with Taco Bell. And the Taco Bell one is considered more of a driver when it comes to PepsiCo. You know, the Mountain Dew, the Baja Blast, all of that. They've done some interesting innovations. But still, you know, it's a loss. And it comes at a time where it's kicking Pepsi when it's down, at least when you look at the market share performance, the stock performance, and the financial performance of Pepsi versus Coke. But is that divergence between Coke and Pepsi not a little more about snacks for PepsiCo?

35:05In other words, that's a disadvantaged part of the food market right now. Well, what had been benefiting Pepsi for so many years was the snack portfolio and why it was a now performer. And yes, there's been a loss of momentum in North America for Pepsi, for Frito-Lay, But also at a time where Pepsi Beverages North America has also lost share. So they're kind of both happening at the same time. But, yes, the discussion around Pepsi right now has a lot to do with GLP-1s. Is that changing the way we snack, for instance? And are we seeing enough innovation and enough protein and enough on-trend food when it comes to those Frito-Lay snacks?

35:42I mean, just as a result of that, not that it's the whole story, but PepsiCo now is like a 4.5 % dividend yield. and it's like twice what Coke's is. And Coke used to be kind of the cash cow on the dividend side. So it depends if we're in an environment where I said, you know, this week, dividend, safety, like that was what investors wanted. Quality is, yeah, exactly. Quality is the way I would put it. Even within all the sectors, the quality dynamics are winning. And we'll see if that even carries through. Sometimes that's just kind of like a little bit of an interlude before everybody gets aggressive again.

36:15Because I do think sentiment has become a little more subdued. Positioning is not out of hand. Everyone has in mind that there could be a lot of noise around the lead up to the election and everything else. So I don't think the market's going to be blindsided by not great news. Sorry, Carl. After a difficult week, we are seeing a significant rebound in the bank stocks this morning, which is worth a quick mention. J.P. Morgan up over 2 percent. Citi, the same. Goldman, Morgan, Wells Fargo. all of them actually significantly in the green. After a difficult week, after we heard from earnings from all of those big banks, and generally speaking, a negative review.

36:54Now, obviously, part of this may have been due to concerns about net interest income, margin, rising rates, obviously, the fall of it in the 10-year may be, I guess, benefiting, but also concerns around capital markets activity. You never know, like low rates or high rates are good for the banks. It's the sharp moves, right? Tommy Show was on from KBW, He was telling us when you see a big backup like that in rates, then you start to get worried about, remember with Silicon Valley Bank, like what mismatch in the bond portfolios. Right. Well, you wonder about the longer term bond portfolios and how much they've got to mark them down, even though they aren't necessarily going to need to sell them at any point.

37:29But we saw that with Bank of America back in 23 around concerns there with their long bond portfolio being completely mismarked. But the refund earnings was mostly good. I mean, the credit quality continues to be good, right? from the credit card spending continues to be strong. Charge-offs are the best in years. Delinquencies aren't showing any signs of problems, according to Wells Fargo. So overall, pretty clean, healthy read. And also with the capital markets. I mean, even if there's some bumps in the market right now, and we did see that in some of the fixed-income trading shops. What did Diamond say?

38:02Yeah, what did Diamond say? Like there's still IPOs and M &A. That stuff will be delayed. And they're still raising enormous quantities of debt, by the way. Hundreds and hundreds of billions in debt. for the build-out as well. How about health care all-time highs yesterday? XLVs, really, I mean, talk about the midterms. They're not reflecting any concerns about Democratic House or Senate. If we're talking about quality, defensiveness, and sort of non-AI-reliant mega caps, like Lilly was the biggest upside contributor yesterday, and it's taken on that role of basically being source of capital. Now, I think it's maybe a tricky spot now because six months ago, The easy case for health care was it's under-owned.

38:42Nobody cares. Everybody's obsessed with tech. Now that's different. I do think there's a little bit more kind of momentum, and everybody's on board with this idea that you have to own a slug of companies that do offset your AI exposures. And I think that health care is right there. There have been pretty positive news flow in general. Look at Moderna alone. Merck is one of the best now. It just feels like you're in an accelerated moment for approvals and, you know, a little more product innovation. So that's at least a good halo effect. David, you want to touch on Netflix, Bella Baharia leaving as chief content officer?

39:17I know she's been in that job for 10 years. Yeah, a long period of time. Don't really have much to share in terms of understanding exactly what may be behind it. Obviously, we reported on the layoff news the other day as well at the company. Stock is down. You know, what we've come back to time and again there is sort of the question overall for Netflix, given, and I've said this so many times, but it's still something that resonates with shareholders. Talking about stocks down 24 % this year, it wasn't a particularly good year last year when they decided that they conceivably needed to own Warner.

39:52Now, they didn't need to own it enough to compete ultimately at$31 a share, but the shareholder base there has been questioning, I think, ever since. Like, what is the longer-term strategy? Does it include acquisitions that we hadn't necessarily thought about as a real strategic part of their future? And what's still to come? Yeah, we, Aptopia this week did a look at churn at Netflix, and I think we built the chart. I mean, this most recent quarter, U.S. churn in double digits. You can see that blue column. And that might be one reason they're bringing in Peter Rice, former Disney guy, to run content.

40:30If you look at a... Peter Rice was... Yeah, sorry, go ahead. No, I was going to say a five-year chart of Netflix is pretty interesting because the pandemic peak when everybody was obsessed with the stay-at-home was$70, basically. November of 2021, I think, as we did kind of get there. So you've kind of round-tripped back to that area. What happened with Netflix? Just engagement? Is that the issue? Well, we don't get the submetrics anymore, right? They don't actually give us, but yes, engagement. I mean, there's what happened. Listen, it's still the dominant provider in many ways. YouTube obviously has the most in terms of, I think, at this point, all the metrics in terms of hours and everything else spent.

41:11It's thought it down to more than 20 % this year. Yeah. Yeah, again, I think there's questions about their ability to continue to grow and to grow organically as opposed to without perhaps some form of consolidation where they bring in another significant direct-to-consumer platform, as they were very close to doing in buying Warner Brothers and consolidating, obviously, the studio and HBO Max, which would have been the case there. Not the cable networks. Remember, that was going to be spun off separately. Obviously, all of that now is owned by Skydance. Shares of which have recovered a bit this week.

41:46Not even recovered. That's the wrong way to put it. Actually, it may be up when you add in the value of the warrant that everybody got there. Strike price 12 goes up to, it does cap at 30, and it's a 10-year warrant. But it has a value of, let's call it$2.40 or so. I haven't looked at exactly where it's trading. I think we put it in there. So you add that together, you actually get a higher stock price, I think, on the week. Do you take issue with this variety piece that says the market cap of Skydance now is much less than where Warner and Paramount were trading in market cap prior to the deal?

42:23Do I take issue with it? Is it a fact? I assume it is, right? No. But maybe does the warrant alter that math? Not really. The warrant, you know, because it only went to 471. It's only applicable to 471 million shares. So it's not that large because, remember, it's the new equity that came in. It's the 47, let's call it roughly billion dollars that came from Larry Ellison, the Ellison Family Trust, I should say, Redbird, and then all of those investors in the Mideast as well. That's the key here. They bought their stock at 12. So the minute they bought it, they were underwater, and they continue to be.

42:58But the question will be, can you deliver on all of those synergies that they're talking about? It's got to be at least$6 billion. and they got to do it fast. All right, before we head to break, let's give you a bond report. Check out how treasuries are faring this week. Again, the story of the week has been the buying in bonds with yields lower. That's reversing a little bit this morning where you're seeing the 10-year yield above that 5%. It's cooled off again from where we were in the past few weeks. 30-year yield, 5.4-ish percent. Odds decreasing that the Fed lifts interest rates in October.

43:31That's the week after next, but increasing for December. We'll be right back. We mentioned Apple a moment ago. Pre-sales for the duo began today, but you'll now have to wait until next year to get it. A lot of delivery dates getting pushed back to late January. Kramer, we know, has been enthusiastic about getting one. Five. Didn't he say five yesterday? Five months? Five of them. Yeah. You know, Jim. As Apple is holding almost$3.44 today. Stay with us. The long-awaited Elizabeth Holmes documentary, you can see everything, is now out in theaters. Rotten Tomatoes, strong early reviews, I think some 100 percent.

44:1099? Mike, you've seen it. I've seen it. I saw it a couple weeks ago. Yeah, I mean, look, it's pretty unnerving. And, you know, if, like me, you thought, I'm up on the details of this case. I followed it along the way. I know about the investigation. I know about the court case. It's not really about that. And it is much more about a person who still seems to believe her story for what happened and how she did nothing wrong. And then I think what I really drew out of it, because she and her husband are both kind of tech founder types, is that whole line that a Silicon Valley founder has between determination and just self-delusion.

44:49And because they're trying to reboot a version of Theranos while this movie is happening, while she's about to go to prison. And then there's a kind of a, you know, it's almost three hours long, but it doesn't quite feel that long because there's a sort of narrative reframing along the way, and it kind of looks at things from a surprising other angle. Anyway, it's pretty unsettling. Wall Street Journal said that it's her part, is she married to him? It's her partner that is actually the star. I believe they're married, 100%. The father of the kids, and he's pulling all the strings as she's in prison.

45:20That is the revelation is his role in a lot of this. What are his what's his agenda? Are they playing each other somehow? Are they playing Nathan Fielder and Lance Oppenheim, the filmmakers? Are they kind of just putting on this show? And I mean, beyond that, it's inherently dramatic that whatever you think of what she did and whether she deserves a sentence, she's the mother of two young kids who's going to prison very soon. And it's a very, you know, you know, it's kind of moving on that level. Yeah, the journal called it Ingenious, Intricate, and Involving. That's going to be a watch, David.

45:53Sounds like it. I've got to add it to my list. Sure, you want to go? Let's do this. You and I have never been to the movies together. I still want to know about the flowers at 2 a.m. with Jim. I'm still feeling very left out. If you invite me, then I'll bring popcorn. Oh, you? Oh, I forgot about you. Oh, you don't just go buy the popcorn and leave and not watch the movie? I do. I've done that. I know that. Because I love movie popcorn more than anything. Mike, thanks. I'll see you in a bit. Mike Santoli. Still to come, Interactive Brokers founder and chairman Tomas Pederfi on the company's latest earnings.

46:20And a look at how traders are playing this tech volatility this week in three minutes. You've been listening to the opening hour of CNBC's Squawk on the Street. 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.

46:50Such 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. At Jared Jewelers, we know it's about more than fine jewelry. It's the moment they open the box. That smile they can't hide. Knowing you chose exactly right. Because the right gift can bring a lifetime of meaning. A promise. A milestone. A memory in the making.

47:25Make every moment unforgettable. Find great gifts starting at$250. Jared. Make the holiday last forever. Shop Jared Jewelers. Thank you.