9AM HOUR: Markets and the Trump-Xi Summit, Oracle Slides, Meta's New Products and "Muse-Mania" 9/24/26

0:00I'm Mike McNerney, Equity Investment Strategist. Markets move fast. My mission is to provide market insights to our clients that help turn uncertainty into opportunity. Janice Henderson, investing in a brighter future together. 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 discover.com slash 5 for details.

0:41It's Jim Cramer here. You're listening to the opening bell of CNBC's Squawk on the Street. Don't miss a minute of the action.

0:54Good Thursday morning. Welcome to Squawk on the Street. I'm Carl Quintanillo with David Faber. Morgan Brennan's with us at Post 9 of the New York Stock Exchange. Kramer has the morning off. Pre-markets on the back foot after yesterday's selling as bond yields come off their biggest one-day rise in over a year. Ten-year gets to 5.15 today. That's the highest in almost two decades. Long bond gets to 544. Even the five-year had its third worst day yesterday in half a decade. Our roadmap begins with that rise in yields pushing higher once again, long-term yields hitting the highest level since 2004.

1:26Oracle share is also under pressure this morning. It's amongst the biggest laggards of the morning so far. There are some reports or a report from Bloomberg. The company sent a forced major notice to the developer of its New Mexico data center project. We'll have more on this. And chips, AI trade, Iran, all expected to be key topics, as President Trump and Chinese leader Xi Jinping meet in Washington this morning. We began with the markets on track to extend yesterday's losses as yields do rise and the world watches developments surrounding the U.S.-China summit. We'll get some welcoming remarks this morning around 10 a.m., a bilateral in the Oval, an expanded bilateral in the Cabinet room later on with the president of China.

2:09But this global bond sell-off is really interesting. We've got a great piece up on our website today looking at the amount of interest that advanced economies are paying on their government bonds. 3.3 trillion last year. That's more than governments around the world are spending on AI. It's more than they're spending on defense. It's more than they're spending on climate. And that explains what yields have done, not just here, David, but in Japan, France, Germany, you name it. Yes, worldwide. Obviously, when you're dealing with over$40 trillion in national debt, as we are, as we pointed out so many times, every time you're going to see a move up, interest costs are going to go up as a percent of the budget as well.

2:46It's going to become a bigger part of it. In trying to talk to a number of people this morning, at least, to see how concerned they were, I'm kind of surprised. I wouldn't call it in any way sort of any panic. I'm not hearing about sort of significant disruption, Morgan, so far. You know, we obviously, I think many of us would go immediately and look to the financing market, given how incredibly robust it's been for the build out of AI, broadly speaking. Is anything in danger there? We'll talk about this Bloomberg story involving this Oracle and New Mexico data center. It involves Blue Owl in a minute.

3:26But that's sort of a separate issue having to do with delays. But when it comes to financing, I'm not hearing right now certainly any huge disruption. Doesn't mean it won't happen. Or if you're at this level for a long period of time, it's not going to have an impact. But, you know, you do look for, given the move we had yesterday, it was pretty dramatic in terms of move up yesterday. You do look for sort of those kinds of moments. It's not just the level with us trading at multi-decade highs across the Treasury yield curve right now. To your point, it's also the velocity of the move. but now you need to see the market digested.

3:59What has been really interesting in the takeaways here has been, yes, we've seen a downdraft, and that continues here pre-market this morning in the equity market, but to your point, it's been pretty orderly here. Perhaps one of the biggest questions that I'm hearing investors and strategists work through right now is actually not this idea of disorderly or disruption, but rather what this now does to make the bond market a more compelling investment, a dollar that strengthens pretty markedly this week as well, too, versus equities that have so far this year had a pretty good run until now. And now, based on a number of metrics, actually look either fairly or even overvalued, depending on what you're looking at, especially when it comes to the AI side of the ledger here.

4:41The two areas I would point out, though, when it comes to the bond market, the first is the TLT, record low is where it closed yesterday. So you are seeing some pain there around the ETFs, particularly in the long end. And then the other thing to watch, and Matt Maley pointed this out to me overnight, HYG, high yield. You've seen a divergence, and that's continuing to play out here. Some technicals working out here with HYG, too, in the last 24 hours. But if you pull up this chart, look at this. Well, maybe this chart doesn't show it very well. But in general, what you typically see and what Maley typically points out is that the S &P and the HYG tend to trend together in terms of direction.

5:23And just recently, what you've seen is a divergence. And the HYG all year has been underperforming the S &P 500. And that seems to be blowing out further here. If history is any indicator, unless you see high yield start to catch a bid here, you're probably going to see the S &P take a leg lower. Yeah, that's a 52-week low on the HYG. The other good one yesterday out of BTIG was a look. There you go. Yeah, that's better. Yeah, you needed it. Year to date. Near term. Yeah. The other one was BTIG looking at triple C spreads against bees. I know this gets a little wonky, but you would expect in a higher rate environment for the weakest rated names to start to struggle.

6:02And that spread is widening out. I don't know if you saw office delinquency on office CMBS now surpassing the 08 crisis highs. So this is what we would expect in a higher rate environment. Things are going, some are going to suffer. There's a look at the Cs. And certainly in real estate, you can start to see the impact again if we hang around these levels or even go higher from here over a period of time. There is certainly a thought that if things in Iran change and that becomes less of a threat to the oil market and everything else involved with that and prices start to come down, we're going to start to see some relief when it comes to yields.

6:39So, you know, again, how widespread or how long term this is going to be is a key. All that said, you know, SoftBank did raise$11 billion in a high yield offering globally. Yeah. They did pay 9.75 % at the highest end. So not insignificant. But nonetheless, and it gets back to sort of this larger question of the return on invested capital. In part, they're borrowing some of that to take out debt they'd already taken on for the money they put into OpenAI. So there is, as we see reports in the journal, I guess, or some, they're citing somebody, Carl, where, you know, it is the largest portion of GDP that we've ever seen since the spending on the rails in the late 1800s.

7:18Great graphic out of the journal, more than telecom, more than the rails, more than the highways as a percent of GDP. Your point about SoftBank's a good one, though, because demand was pretty good. It was. But the headline out of Bloomberg is the easy money is done for data centers. And, you know, if you've raised previously, you're very happy to have done that. But as we say, the needs will continue. And, again, if we stay at this level longer, I certainly think we all try to quantify, well, the CapEx numbers we know from these four largest hyperscalers, and then we add Oracle in there. But it's beyond that.

7:54It's residual value guarantees. It's SPVs that don't actually fully show what the indebtedness is or that are issuing separately from the underlying. It's the leases. You know, there's so much more involved in this entire ecosystem when it comes to the hundreds and hundreds of billions of dollars that have been borrowed. Yeah. And you see, I don't think there's a weekend that goes by. And I obviously take a crack at this on morning call first thing every Monday morning. So it's, you know, fresh and top of mind coming out of the weekends. But every weekend you have these reports, you have these articles, to your point, about, you know, speculation and scrutiny of this, including some of the off-balance debt that's associated with some of the hyperscalers.

8:31It's not just about raising capital, though, for them with this AI infrastructure build out in the debt markets, either. Keep an eye on what's happening in the IPO pipeline, too, because we've seen a number of companies, some larger, some smaller. Obviously, Anthropik's very much in focus on what's going to happen with an S1 drop and ultimately that IPO before the end of this year, too. But you're seeing a number of companies that are pulling their offerings right now because of market conditions that are tied or levered either directly or indirectly to AI and this infrastructure build out. And if they don't feel comfortable coming to market and putting more supply online, that's going to be another, I think, dent against the AI bulls, at least in the near term.

9:12And against that backdrop, we should come back to what I read there at the beginning of the show, which it's a Bloomberg story. Oracle citing force majeure to shield itself on a controversial what they're calling data center. And this is a huge project, part of the Stargate build out. It's in New Mexico. We're talking eventually about a campus that would be designed to handle as much as 2.45 gigawatts. So that's a big one. 1.8 million homes could be powered by the 2.45 gigawatts, to put it in perspective. $18 billion loan from 20 banks. What Bloomberg is reporting is that Oracle has sent the project's developer, which is a unit of Blue Owl, hence why you're looking at that stock as well, a notice citing force majeure.

9:55Now, they're not looking to walk away, but they are invoking it perhaps to at least have to not pay if the project fails to come online as planned in 2028. You know, against the backdrop that we're discussing, you can imagine a story like that also just sort of foments even more concern. Obviously, we've talked a lot about Oracle, its own balance sheet, everything related to it when it comes to the credit markets. The loans back in this project already have been trading well off par recently as well. The delays have to do with power, have to do with getting permits in New Mexico and things of that nature.

10:33Yeah, a lot of things out of their control. But you saw what Bloom Energy is doing pre-market. It's all actually extending to GEV and Vertiv and some other names that would be in that halo. Yeah, I mean, I also think just the higher rates and the question as to whether you're going to still see the same level of spending or whether you're going to see any pullback. I've seen, I've heard nothing. It's obviously very early, but I've heard nothing that indicates that at this point. But that certainly would have to be a continued concern of a higher rate environment if it were to continue for one period of time.

11:02Yeah, and there's nothing to watch. We keep talking about coming into midterm elections, too. Increasing discussion around a blue wave coming out of the midterms. And one of the things that I think corporate America is starting to factor in and take a look at, investors are going to have to start to do the same, is going to be what that means in terms of oversight, what that means in terms of regulation, what that means in terms of things like deals that involve equity stakes and companies that support the supply chain, including for the AI infrastructure build-out, when January comes if you have a new composition around Congress, too.

11:31So there is a political risk premium, potentially, that has to start pricing into some of these companies that have seen their stocks trade rather frothy this year and have raised a lot of debt and are levered to this big AI build-out and story, too. So that's going to be something to watch. That's also something to keep an eye on when you're talking about something like rare earths and critical minerals, given the Trump-Xi meeting that is currently underway here as well. Because once again, rare earths are in focus ahead of this when we do talk about supply chain resilience and a decoupling between the two countries.

12:06So with that, let's get to more on the U.S.-China summit. Eunice Yun is in Beijing with the latest and what we're hearing from China right now. Eunice, it's good to see you. it's good to hear from you too morgan a state media has been blanketed with images of their leader meeting and being greeted by president trump very warmly at the airport and what the communist party paper the global times described as a reception that is unprecedented in a written speech president xi delivered a message to president trump arguing that china is a partner not a rival, that the two had agreed back in May to constructive strategic stability for their relationship.

12:50And repeating that he believed that this trip was going to be very fruitful. He said that he was confident that it would bear fruitful results. And from the Chinese perspective, President Xi is already winning. The U.S. pageantry feeds directly into Beijing's own messaging that it likes to promote to its people here, as well as to everyone around the world, that China is the world leader, that President Xi is the statesman who is responsible as well as reliable. The concept of the strategic stability, also from the Chinese perspective, translates into U.S. inaction for some of the Chinese Chinese attempts to pursue their own economic as well as technological policies.

13:38In other words, that means that the U.S. would put very little pressure on, say, for example, excess capacity, which the Chinese have been accused of dumping into other countries around the world, affecting industries, that there would be little pressure on Russia, on the Ukraine invasion. The Chinese did confirm, though, that their trade negotiator, Hu Li Feng, did have a conversation about AI with the U.S. side. They also hinted at a trade extension. However, they did not confirm the notification mechanism that Secretary Besant had mentioned, the concept of this AI hotline. And they also did not confirm the two-month extension that Secretary Besant had flagged right before President Xi and President Trump are supposed to be sitting down.

14:35So that, I think, suggests that from the Chinese perspective, these elements could be still up for negotiation. One other interesting development here was that in the state media, there was a lot of playing up of an interview that was done by Elon Musk. Elon Musk granted an interview to CCTV, the state broadcaster, and he described President Xi as a visionary leader. And, of course, Elon Musk is going to be one of those CEOs who's going to be attending the state dinner later today. Eunice, there's a lot of focus on this idea of stability, and you just sort of touched on it, this idea of an extension of this trade truce, this Busan agreement, things like that on the U.S.

15:15side. But if I just put if I just put a pointed question to it, what specifically is China hoping to get out of this?

15:26I think I actually think that the broader thing that China wants is that they want that stability. They want the stability because from their perspective, it means that the U.S. isn't going to be poking them in the eye, that the U.S. isn't going to be bothering them to be able to pursue their own economic goals. For example, I think the big one is the idea that the Chinese are constantly being accused by trading partners in Europe, by the U.S., as well as, you know, in other parts of the world, that they're dumping too much of their excess capacity on the rest of the market and that they need to be able to change their own economic model to rely more on the consumer here.

16:05So with stability, the Chinese think that they won't get that extra pressure. So that's one thing. And of course, the Chinese, as you and I were talking about even yesterday or the day before, that the Chinese are always hoping to get some movement on Taiwan. And just from the messaging that we've been hearing over the past couple of days, the Chinese are hoping to be able to get possibly the arms sales that the U.S. is supposed to be giving to Taiwan at some point delayed even further. Eunice, thanks for that. A lot. We'll learn a lot today through the course of the evening and into that dinner tonight.

16:44That's our Eunice Yoon in Beijing. When we come back, Meta, big day yesterday, unveiling those new products. We'll hear what Zuckerberg is saying about the launch of the Muse charm. We'll get to a bunch of corporate news. There's MGM. There's Darden, Starbucks, Lilly, Merck. Talk about Micron next week with Futures in the Red. Stay with us. with the discovered cashback card it's payback time when you earn cash back on everyday purchases activate and earn five percent cash back at different categories each quarter on up to fifteen hundred dollars in purchases that's five percent 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 five for details.

17:29Your financial life rarely fits between nine and five, and the questions shaping your future don't follow a schedule. That's why Citi created Citi Sky, a secure AI member of your Citi wealth team built with the Gemini platform on Google Cloud. Whether expanding your portfolio or planning your future, you'll be able to access tailored wealth guidance on your time. Start building with Gemini at cloud.google.com slash AI. Citi wealth investment products and services are provided by Citigroup Global Markets, Inc., member FINRA, and SIPC. You know, Kevin, sometimes I feel like computers are the only thing around here that are getting smarter.

18:03Yeah, my model hasn't had an update in a while. But that changes now. We think that we can smarten these listeners up about all things related to this crazy new future. Welcome to Machine Gods, a new NPR podcast that will be your guide to the AI future. Twice a week, we're going to help you get smarter about AI so you know what's real, what's hype, and what you should probably install on your phone. Listen to Machine Gods from NPR on the NPR app or wherever you get your podcasts.

18:34Shares of Meta, what a run they've been on, but pulling back in the pre-market, still up sharply for the week on these developments surrounding its AI agent, Muse. Yesterday at MetaConnect, Mark Zuckerberg unveiled new VR glasses with a$1 ,299 price tag, along with this handheld device called Muse Charm that allows users to access Muse. This is what he said on the podcast, New Things with Joanna Stern. With the Muse launch that we just did, we had a version of it that was quite good a few months ago. And we wanted to make sure that we really nailed all the privacy and security parts of it. Because part of this is that if you're building a product, people aren't going to want to use it if it doesn't do what they want.

19:15We want to get to a world where everyone can benefit from this. And it's just not going to happen. then people aren't going to adopt it if they don't trust it. We held Muse back for a few months because we wanted it to be a better product for people. That wasn't like a sacrifice that we made. It was the right thing for people, and it was the right thing for Meta. And I think that doing that kind of thing is also going to be the right type of thing for other companies that are building this too. It's being characterized as the first big push into physical AI on the consumer front, and of course implications for whatever offering open AI may have on that front.

19:49It's an interesting moment right now in terms of these personal agents and success, early success of Muse. To soon be joined, we would imagine. Well, obviously, instincts out there have mentioned that one a number of times. And to soon be joined by, we would expect something from OpenAI and perhaps others. The amount of compute that this is going to require as well as we start to keep. If you are a believer in this, you believe that this will be adopted rather rapidly over, let's call it the next year to two years. Yeah. And that people will start using these agents. Again, you know, I've been talking to Sarah about this, Morgan, but you've also got three kids, right?

20:23I mean, you can imagine how it could help your life in terms of just, and I've talked to people every day now who are using these things. I have not yet really begun to. Giving them access to their Gmail, giving them access to various things, and they are sending you updates all the time about things that you should either do or that they will do for you that conceivably is going to make you a lot more productive. Yeah, restaurant reservations are very nifty. Yeah, I mean, it's happening. It's happening in real time right now. And it's not happening to a huge extent in my house where my kids specifically are concerned.

20:58But this is this is the future now. This is what a lot of these, you know, AI entrepreneurs have talked about that. It's all about. And by the way, it's not just on the consumer side either. You see this on, you know, the defense and industrial side, too. It's all about building the hardware to house the AI to realize the full potential around it. But to your point, it takes a lot of compute powder. The other piece I don't think it's talked about enough is how much data these bots need to consume versus humans right now at this stage, this iteration, to be able to do all of these tasks as well.

21:27But news is important because obviously it's free and it speaks to the commodification we're seeing as these agents start to hit the market. Safety and security, Carl, will obviously be a key gating issue here. Yeah. Yeah. Speaking of which, we'll broaden that discussion to include OpenAI in this Australian Medicare file breach, not to mention Altman's comments to the U.N. and Jensen Wong speaking out once again on how some of these worries are irresponsible. Take a look at the pre-market here. More Squawk on the Streets back in a minute. With the Discover Cashback Card, it's payback time when you earn cash back on everyday purchases.

22:05Activate 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. Your financial life rarely fits between nine and five, and the questions shaping your future don't follow a schedule. That's why Citi created Citi Sky, a secure AI member of your Citi Wealth team, built with the Gemini platform on Google Cloud. Whether expanding your portfolio or planning your future, you'll be able to access tailored wealth guidance on your time.

22:44Start building with Gemini at cloud.google.com. Citi Wealth investment products and services are provided by Citigroup Global Markets, Inc., member FINRA, and SIPC. Computers are getting smarter, Silicon Valley's getting weirder, and AI is taking over. At least that's what everyone keeps telling us. Welcome to Machine Gods, a new NPR podcast that will be your field guide to the AI-powered future. We're veteran tech journalists with front row seats to the industry. And twice a week, we'll make sure you get smarter about AI so you know what's real, what's hype, and what might come next. Listen to Machine Gods from NPR on the NPR app or wherever you get your podcasts.

23:50closing bell overtime co-anchor Mike Santoli. Great chart out of Jeffries today. 10-year yields higher for seven months in a row. If you include September, that would tie for the highest streak, the longest streak in 50 years. And that's the persistence of this move. Actually, that five-year chart of the 10-year yield showed that. The previous times we made these runs at 5 percent, it was kind of this panicky burst higher and it created a spike on the chart. Here you see it's much more kind of a gradual grind. Now, that said, yesterday's move was very aggressive. I think you guys were talking about the speed of it.

24:20It definitely got a little bit more disorderly, a little bit more looking like you had urgent selling in bonds. So the question is whether that means we're having a short-term moment where you have a crescendo of selling. And interesting that people were trying to, again, explain exactly what the catalysts were. And I think there are several of them. But it wasn't just PMIs. It wasn't just oil. It wasn't just Fed. It's kind of everything building together. Mike, stick around. Let's get this opening bell and the session underway at the big board on Wall Street. It's the Prime Minister of Thailand here to the UN General Assembly and the President of the Stock Exchange of Thailand at the 9th-second Times Square.

24:59One nuclear energy celebrating the completion of its merger of the SPAC and its SIBO in Chicago, its swap doing the honors. Your reaction to how equities reacted to yields yesterday? In a very varied way. And I think that remains the story. I think there's a very big picture where you could say, is this S &P 500 not noticing what's going on with yields? That we've repriced the cost of credit and government bonds so dramatically? It is noticing. Small caps are 7.5 % off the highs. Consumer cyclicals as a group really broke down. I mean, they're like 13 % down on an equal weighted basis. Banks have struggled.

25:42So, in other words, it's allocating the pain. The question really is, is that going to be enough? And I keep saying this because for weeks it's been true. We've had this internal pullback. The average stock has definitely suffered. You're actually seeing a lot of these kind of below-the-surface measures look like the market has already been oversold. And yet the S &P kind of hangs in there. Goldman Sachs pointing out we have a record number of stocks within the S &P 500 that now move on a typical day, opposite direction of the index itself. So we know the concentration, we know the AI theme is sort of impervious to a lot of the macro.

26:16And that's the world that we're kind of going through September in right now. So I think it's really an eye of the beholder type situation because a lot of the same conditions I just described could also say, well, that's what a market top looks like, as opposed to just sort of this internal kind of gathering itself and burning off of some of the excesses. Yeah. I mean, midterms factors into we know that there's a historical pattern that plays out coming into that and then coming out of that year as well. So that's got to be factored in here. And wow, I was just going to say something else. Yeah, no, but it is true that that it looks like the market is kind of defying the midterm pattern a little bit.

27:00It's outperforming. But if you looked at the typical stock, it's not. And so I think it's everything is in that direction. Now, utilities got super washed out. And maybe that's going to matter. I have this look at sort of a modified Dow theory. S &P 500 relative to transports and relative to utilities. Utilities have been weak for a while. It's purely a rate thing. I don't really think it's the AI story. And you see how weak they've been right there year to date. And then breakdowns in transports for obvious reasons, because of the persistence, again of oil being up at these levels, not necessarily the absolute move in price higher.

27:35And then the S &P kind of hanging in there because we know what largely drives the S &P. I think part of the conversation now is what could happen to kind of have the fever break in rates and oil and the whole interplay and the feedback loop there. And, you know, David, you said earlier, if something changes in the situation with Iran, if the combination of the midterms and the pressure on diesel and everything else causes some kind of, look, let's just get it open any way we can, that would probably represent some relief trade. The other side of it is, you hear people say, look how good the global economy has held up in the face of the oil shack.

28:12That in itself explains why yields are higher, higher neutral rate, and maybe there's going to be kind of a more active central bank hiking internal cycle going out years. Well, and to that point, Fed speak has been, you know, decidedly hawkish, as you'd expect this morning, including Williams this morning. And it does seem like after what was almost a week of risk on rally post-Fed hike, that's starting to correct itself here amid that, too, as the market reprices for hikes through the end of the year. Yeah, I mean, the market for September of next year is at like 475 for Fed funds, right? So it's like three more, maybe a little more than three.

28:48And it thinks the direction of surprise is higher, not lower. And, you know, Carl, you mentioned in the lower grade credits, the tide is definitely going out on parts of this. And you hear a lot of folks say, why would the Fed be aggressive? Right. They can't reopen the strait before moves. They can't really control AI CapEx. I went back to 2022. Elizabeth Warren had an op-ed in The Wall Street Journal saying, why is the Fed hiking? You know, she's going to cost two million jobs. Ukraine, right? It's true. Can't end a war in Ukraine. Can't fix supply chain screwed up by the pandemic. But you had to be hiking.

29:22You have to get to the right spot and hope that conditions help you out. Obviously, inflation is not as high as it was back then. They're not chasing it in the same way. But what the Fed can do is you could hurt the stock market. You bring the stock market down 10 percent. All of a sudden, the wealth effect stuff and the resilience of the spend, that story changed. It's funny you mention that because I wonder if we have we had a chart built from JP Morgan. They call it the consumer cash pile. This is all of your checking, all of your savings, all of your money markets. It finally, after eight quarters, had a sequential decline.

29:56And you can see the bottom cohort way at the bottom. But overall, it's been an amazing run for two years. It has. And look, full employment, wages were largely keeping pace. But yeah, there has been a spend down and savings rates declining in aggregate. I think people are very encouraged by the overall household balance sheet, but it is because stocks have been so strong. Homes are a smaller piece of the pie. And yeah, and obviously, you know, it's not distributed evenly. And so the aggregates look OK, but that doesn't mean you don't struggle. And I think that's the explanation for equal weighted consumer cyclicals really breaking up.

30:36In fact, if you look at the RSPD, that is the equal weight S &P consumer discretionary. It's back below levels of November 2021, right? That was, to me, that was like peak pandemic, full fiscal, full demand boom, full risk appetites. And now you're kind of circled back to that. Because we've been mentioning this Bloomberg story involving a very large data center campus in New Mexico and what Bloomberg has reported as a claim of force majeure by Oracle, not to get out of the lease, but to delay potential payments that might be due, at least until the project is completed. It is having an impact on Oracle shares and Blue Owl, which is the equity in the project.

31:20Leslie Picker joins us now, of course, covers Blue Owl closely and has some reporting for us on the phone as well. Leslie. Hey, David. Yeah, I was making some calls on this this morning. And what I can tell you, according to a source familiar with the matter, just to reiterate kind of what you were saying there, basically, that they are stuck in the lease. It just makes it a longer lease. The source couldn't get into more detail quite yet because of the confidentiality of the lease agreement. But I do have a spokesperson on the record saying, quote, this notice does not change the financial commitments to this multi-year project.

31:57As you mentioned, Blue Owl taking those shares taking a hit on this news. I'm hoping to get a little bit more information a little bit, but I wanted to share with you what I've gotten so far. Okay. Thank you, Leslie. Leslie Picker. Of course, we should point out the debt for this project has already been trading down a bit as well. But this is not about, as Lee just indicated as well, about financing. This is delays having to do with permits for power and things of that nature in New Mexico that conceivably are having a delay on the actual build of the powered shell that eventually will house a campus as much as 2.45 gigawatts of power that will be needed for the compute.

32:40and Oracle perhaps not wanting to step into that and start making payments until the thing is up and running. Oracle, we do have a statement from as well, saying Project Jupiter remains on their planned schedule. They're fully committed to New Mexico and confident in their path forward. And they point out the significant economic community and philanthropic investments they've made in the state, including, they say, reimagining Project Jupiter's power plan as part of the long term commitment they've made to be a good neighbor to the residents of the county in which the campus is located. That is Viasima Modi, who covers Oracle for us as well, guys.

33:20We'll keep an eye on those shares. Again, Oracle down about 4 percent. You'll see it right now. How about this? I know you were noticing the Times piece on Google dipping their toe in the water on orbital compute. Suncatcher. Project Suncatcher. The stars belong to SpaceX. Yeah, this is the mashup, the partnership between Google and Planet Labs, which is also publicly traded. And as soon as next week, they're going to start launching their prototype satellites for the beginnings of AI compute from space. So the Orbital Data Center conversation continues here. That's going to be one to watch there as the worlds of not just terrestrial power and terrestrial capability and AI compute merge, But now space and AI merge, too.

34:06And at some point, the economics on that start to look a little more compelling. We're maybe still a few years away, but that depends on who you speak to, whether it's Elon Musk or others, including the CEO of Planet Labs, about where we are in terms of orbital data centers. But that is, again, going to be one to watch there. You guys keep an eye on shares of MGM. We followed it this morning. I think Dom was reporting on it on Squawk Box as well. Well, it's not about 10 % this after Barry Diller abandons attempts to buy what they don't already, what he doesn't already own of the gaming company.

34:43Just a bit of background here. I've been not actually reported on it in the sense we've talked about it on air, but I have been trying to follow it as well. And all along, what I have heard and ultimately does seem to have been one of the key gating issues was that while there was financing available for this transaction, It was at a level of total debt that Diller was simply not comfortable with, being somewhat conservative in his approach. He didn't want to put a capital structure on the company that would leverage it very significantly. And so that meant looking for other opportunities to raise equity, things like MGM China, for example, and some of the other partnerships they might have had.

35:24But it became a very difficult process, in particular on MGM China, where there was a hope to potentially issue a good amount of equity. You would have needed, I am told at least, approval from the Chinese. It wasn't forthcoming. And so that was a key gating issue as well. So not wanting to put enormous amounts of debt on the company, trying to find other sources for equity amongst various efforts it had underway and not being able to sort to come up with a solution there, put this thing on the no-go route. And you can see, I guess it was around 10 % in the stock price. We're looking for a potential deal there.

36:03This has been going on for quite some time. Mike, you mentioned consumer environments. We talked a lot about McDonald's yesterday and General Mills and Ryanair and just sort of inflationary fears. Today, Darden with a double miss. And Starbucks closing, I think, 1 % of underperforming stores in North America. That's a couple hundred stores. Yeah, it feels like, you know, it's sort of a slow motion reckoning with, OK, I guess this is where we are in terms of if you want to preserve margins, you know, you can't just wait for costs to go down. And it's not necessarily cyclical. Who knows if that gets in the market's head to about, you know, where bonds are trading at this point.

36:39But it does seem as if even though, again, the aggregates are fine, even some of the travel stuff has softened up. Obviously, some of that is Muse going after the booking type companies and then fuel with the cruise lines. But it just feels as if there's just less conviction that you have the makings of a momentum turn for the better for a lot of those companies. But so many of them are so cheap. And I keep pointing out consumer discretionary ex-Amazon and Tesla is less than 4 % of the S &P 500 right now. Well, that really says it all, doesn't it? I mean, look, we talk about how the consumer is stretched under pressure and feeling the impacts of inflation.

37:18But, I mean, you look at some of these companies and they're seeing it in terms of their own input costs as well. It's really war and weather. And it's a one-two punch here in terms of the impact on inflation. We talk about oil and energy prices, record diesel prices. But if you look at what's happened in agricultural prices and futures as well, too, I mean, wheat has shot higher in large part because of the escalation of the war in Ukraine. and then you've obviously seen a number of other soft commodities that have moved to some of them tied to weather here but i just if i if i stick with the war piece of this for a moment i circle back on aerospace and defense um this might be a counterintuitive move for you but if you take a look at the ita this is the aerospace and defense etf um when we pull that chart up it's actually you have a number of very large components many of them defense players they're actually trading now in bear market territory.

38:09And some of the biggest moves lower that we've seen have been since the start of the Iran war. Why are you seeing that? Not because they're not seeing huge amounts of demand and not because they're trying to produce as quickly as they can. But under the hood, business models are starting to shift and change and they're investing more of their own money up front to be able to ramp things like Patriot missile production. But investors are pricing in here the fact that we still don't know what the budget's going to look like for fiscal 27, the details around appropriations for that, what that's going to mean in terms of supplementals here in the U.S., what that's going to mean in terms of another reconciliation bill.

38:42What it's going to mean globally, too, is we do talk about this big bond sell-off and the fiscal strain that developed countries are under right now. This is something to watch going into aerospace and defense earnings, too, because I had this conversation with Tom Karako from CSIS on my show earlier today, but there's some IOU-esque risk activity going on in terms of some of these orders and some of these contracts are getting that are getting struck right now. So there is a big transformation afoot here, plus defense tech coming in in a bigger way, too. But that is what is happening in aerospace and defense.

39:17And thus, it's showing up in the stocks right now as well. And then, of course, on the commercial aerospace side, I mean, names like Boeing, big question marks about whether you're going to see a deal between the U.S. and China, probably not here with this Xi summit. Yeah, I mean, the defense contractors. It's pretty fascinating. On the one hand, it looks like a typical pre-midterm election jitters, and then it would be kind of a sell the rumor by the news if you get, you know, Democratic gains. But they're just not as favored by the administration. The core legacy defense contract, right? The scrutiny of the buybacks, this idea that these contract structures are not to the advantage of the Pentagon, and then the exploration of all these alternative defense tech-type companies that seem like they are more in favor.

40:01Guys, I did want to come back to meta. We've obviously spent a lot of time on it in the last couple of days for good reason. The stock has been a rocket, up 36 % over the last three months, not far from a 52-week high. Of course, this is a company whose stock price had been flat to down much of the recent period, well, much of the year, I should say, until recently. And now it's outperforming Amazon, it's outperforming Microsoft, it's outperforming Alphabet as well, not quite outperforming. I'm sure it's Apple when you look at sort of the big seven or eight or wherever we are these days. Of course, the continued excitement around their introduction of the personal assistant Muse.

40:39You saw Zuckerberg yesterday in terms of the introduction as well of a device to which you can use Muse on your... A Tamagotchi-esque device. Yes, I guess around your neck is what it would hang around your neck. But the idea of personal assistance overall has certainly taken many investors or taken them down the road of belief here that this is going to be a new wave, whether there is a lot of competition to come or not, that they are going to be a key beneficiary of what has already been an incredibly successful product launch for them. Just a ton of skepticism around the stock, and people felt it was really safe not to own it.

41:18I mean, I think that's just part of what you're seeing in terms of how strong the move has been in response to all this. I also go back to the fact that I think Threads has like half a billion monthly users. Nobody talks about it. Because the size of the user base of Meta, they kind of force it out there. Reels gets out there. So even though people are saying everyone's going to have one of these agents, assistants, Muse is not special. Maybe it's got a slight first mover. It's going to get used. And it's going to scrape a lot of data. And it's going to make other products better for Meta, et cetera.

41:50So, you know, I think the market's maybe at least having to price some of that in here. One last thing. It's really interesting. Memory is not doing well. No. And there's some interviews on the tape, Raspberry Pi, saying that maybe the pace of price increases for memory is at its peak or are getting close. And so today, Western Dig, Micron next week, all will work. Yes. Well, I also think anything that seems like New Mexico means involuntary slowdowns of spend is not great for those names. But look, I mean, Micron topped about 1 ,200 bucks in June, right? It hasn't been up above 1 ,000 before that.

42:24Market's kind of gotten there, I thought. Mike, thanks. As we go to break, watch bonds. We've been talking about it, obviously, all week long. More hawkish Fed speak today out of Barkin and Williams and now Hammock. We will get new homes in a few minutes. And claims were strong. Once again, 197. Stay with us. Who knows if it's concerns about data centers in the wake of this Oracle report. But Goldman at 920 a few moments ago would be the lowest since Cinco de Mayo. Of course, this was a name in the 1100 range in midsummer. We'll keep an eye on that. Obviously, a lot of other things at work, including the curve and jitters about the IPO pipeline.

43:04For now, Dow's down 200. Stay with us. Elizabeth Holmes, the founder of the blood testing startup Theranos, who was convicted of fraud in 22 and sentenced to 11 years behind bars, has been approved for transfer to a halfway house next August, according to published reports. Meantime, this new trailer for the documentary, You Can See Everything, it's about Holmes, comes out next month. And he did embed, I think, with her for a month. Yeah, just such an interesting choice on her part as well. Him, you know, who's very talented, obviously. Yeah. I'm looking forward to watching it. Me too. I think it's pretty long, too.

43:40It's a few hours. Yeah. Yeah. It's a commitment. And we'll see. And A24 has obviously had an amazing successful summer with some indie films that have popped into the zeitgeist and made a fair amount of money. We didn't really cover Disney and the price hikes yesterday for Disney+. No. Which I think someone has run the numbers since 19 when a membership was, a subscription was$7. Yeah, they started at$6.99 when they introduced it. It has gone up dramatically. Like so many other things, Carl. Indeed. AI agents are going to help you decide what you want to keep and what you want to lose. They are.

44:18Actually, it really could represent a bit of a threat for some of these companies when your AI agent is constantly looking at your subscriptions and saying, no, no, you don't need that one. Consumer inertia trade. Yes. We'll get some new homes sales data in a moment, and we'll keep our eyes on the White House and Xi's arrival. Stay with us. You've been listening to the opening bell on 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.

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