9AM HOUR: Markets' Post-Fed Hike Rally, Oil Pulls Back, OpenAI's "Concerning" Disclosure 9/17/26

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0:35Watch the Hulu original series The Circle on November 17th, streaming on Hulu and on Hulu on Disney Plus for bundle subscribers. Terms apply. Market insight and analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

0:55Good Thursday morning. Welcome to Squawk on the Street. I'm Carl Cantoneo with Sarah Eisen and David Faber live at Post 9 to the New York Stock Exchange. Kramer's on assignment. Stocks will try to reclaim those post-Fed losses of yesterday. Pre-markets up more than 1 percent, 10-year back below 5, even as Goldman and some others switch their view, forecasting an additional hike next month. Oil's near a one-week low, although AAA prices do spike to 4.44 now. That's about 12 cents from the wartime high. Our roadmap begins with buying the Fed dip. Stocks on track to surge at the open as oil retreats and the street worries over the Fed inflation fight ease.

1:32Plus those mounting public fears about the dangers of AI. This is OpenAI discloses six new so-called concerning rogue AI agent behaviors. It also unveils plans for how it's going to report safety incidents going forward. And oil extending losses as Saudi Arabia reportedly offers ship-to-ship crude transfers following attacks on a key east-west pipeline. Let's begin with the markets looking to rebound from those losses in reaction to the Fed rate hike. This is Chairman Warsh making the case for that decision at the news conference yesterday. The plain fact is that inflation is too high and has been for too long.

2:13This summer's inflation readings do not tell me that underlying trends have meaningfully improved. The phrase dose of accommodation getting tons of play this morning, part of that Goldman call this morning. Yeah, he said we removed a dose of accommodation three times and people viewed that as hawkish. Look, the rate hike was expected, but I think what wasn't expected and was reflected in the market reaction was kind of a more hawkish meeting than people thought going in. And that was reflected in a number of ways. Yes, removing a dose of accommodation multiple times. The fact that it was a unanimous decision, so now everybody was on board with the rate hike.

2:51The fact that there was a majority, 16 to 2, according to the dots, expecting another rate hike this year. And just some of the phrasing that the chairman used. He didn't want to go into forward guidance again, not pre-committing to any further moves, but definitely made it clear he's very focused on inflation. And they also see growth as better. I mean, the revisions to growth were pretty strong across the board, and they don't see a return to the target on inflation until 2020 now. Now, that's just the dots in the forecast, so I think you can discount that a little bit. But overall, it was a Fed that embarked on a hiking cycle.

3:30What kind of hiking cycle? We don't know. There's now a little bit more than a 50 percent chance in the market that they go in October, but almost a 90 percent chance that they go in December. October's is like a week before the midterm elections. So I think the thinking is that if there's one more left this year, December's a better bet. Markets pricing in a little more than 100 bps of hikes in the next 12 months. That would include yesterday's meeting. Deutsche has got an interesting chart where they look at starting points where CPI is when a hike cycle begins. They argue that correlation would argue for maybe 200 bips of hikes in the next 12 months.

4:07I mean, a lot depends on what happens with the war in Iran, right? Because I don't think, I think everyone can agree a lot of this is supply-side inflation driven higher by oil prices, which is now seeping in to different parts of the economy. The best case for hiking yesterday and how the research economists reacted in the research is that credibility, right? that Warsh did what he said he was going to do. He talked tough on inflation, and then he backed it up by doing a rate hike. They said they don't want to tolerate inflation. Well, guess what? We got the rate hike. That was credible. Also, it was credible in the face of the White House continuing to say that it does not want interest rate hikes.

4:47And actually, President Trump addressed this last night. You know, when he was talking to reporters, they pressed him on it. Do you still have confidence in Kevin Warsh? He said yes, and actually also intimated that they had a conversation about this before the rate hike. We have the sound from President Trump. Let's listen. I talked to Kevin and I said, you might as well vote with the board because it's not going to matter. The board is very hostile. They're very political. They're doing the wrong thing. They're a bunch of politicians or people put on by politicians. No, I spoke. No, I didn't convince him.

5:19I said, do what you want. I said, do what you want because it doesn't matter because he doesn't have the votes. No matter how good a job, he's a good man. It sounds like he gave his permission, at least importantly, backs him and did not berate him like he did with Fed chair Powell. In another scenario, you might have expected a number of social media posts with some very vituperative language around the Fed's decision. That said, he's still talking about it being completely politicized and questioning its independence. I'm blaming the board. Are we in a period where the president and the Fed chair kind of consult on what his vote's going to be prior to the meeting?

5:56I don't know. I mean, that's how it seemed, I think, from that, which is unusual. Yeah. It's unusual. But I think that the message from the Fed that the market got is that we're independent. And that's something that Warsh himself said and did. I followed through with action. I mean, it wasn't just talk. It was action. Question is, are they going to continue to hike interest rates? Will there be a need? Will there be? Will it help anything? I mean, we're already seeing mortgage rates back at 7%, right? Right. That's that's the part of the market that does not need rate hikes. No. But to your point and the one that Morsh made as well, I mean, a lot of it depends on things completely outside their control, of course, which is the war in Iran.

6:36What's going on in the Strait of Hormuz, what the Saudi pipeline is looking like in the pumping stations and how quickly they can get things back on. What Chinese demand is going to be for oil and on and on from there. I mean, that is an important component of the overall story. as we take a look at WTI at$100, which is down, obviously, from where it was just a couple of days ago. No, you're right. But it's not the only story. I think the other question... And diesel being a key part of it, by the way. Yeah, diesel driving up prices, making it hard for... No, I'm not saying it's the whole story.

7:04I'm just saying it's not something that can be... No, it's a wild card. And that will determine, I think, what they ultimately do and what inflation looks like. But also, you know, there is this question of where we are in the economic cycle and how much inflation is being produced by straight-up demand, which demand has been strong. There's also the AI story, which we've talked about, and just how inflationary that is, and whether it's widespread. You know, it really shows up, David, in pockets of inflation where you see it in memory chips and in computer prices, and it's not necessarily widespread.

7:35But obviously we know that's a huge force on the economy right now and could ultimately be disinflationary. But is it inflationary before it's disinflationary? I think these are things that they just don't know. And these are questions about whether these rate hikes will ultimately drive down inflation. Another important part of it, by the way, when it comes to AI, is if you have the risk-free rate at 10 years, roughly at 5%, what does that mean for all the borrowing going on? Now, we talk a lot about Microsoft and Amazon and Alphabet and Meta, which can generate an enormous amount of cash to fund the build-out.

8:09But there are plenty of other companies out there that are more reliant. And those, by the way, are still also reliant, but even more so reliant on the financing markets for this buildout, whether it's the neoclouds and on and on from there, you know, and the data center builders themselves and Oracle. I mean, you just go on and on. And that's not an unimportant component of the story either in terms of where the long end is right now. I mean, so now and that it's a global move, too. I would also just point out what happens with rates. It's a global move. I'm just talking about it more in terms of what it means for the return on invested capital for what we've been talking about now and importantly so for years.

8:46Yeah, but to that point, it matters what everyone else is doing. There's four moves expected from Australian central bank, three from the European central bank, more from the Bank of Japan, two from the Fed. I mean, so whether it's a price shock or supply shock that they should look through or not, central bankers are moving. I think Canada is sort of the lone dovish one on the global stage. Yeah, B of E did hold today, 6-3, although they did say that if the Mideast conflict continues, that they could revisit that. Interesting piece out of the FT this morning. They quote PGIM. Our assessment is that Chairman Warsh is the most hawkish person on the FOMC or is at least tied for that position.

9:28And we know classically he has been hawkish going back to his early days in the Fed. But he wasn't hawkish going into his appointment as Federal Reserve Chairman. Of course not. you know, speaking very publicly about how rates should be lower. I don't know. I have trouble knowing what Kevin Warsh thinks and what, you know, how hawkish he is or how dovish she is. It's it's he's he if his mission is to not communicate his view on the economy and where rates should be, I think he's successful. I think it's hard to figure it out, which is maybe why the market took what he said is hawkish, because it definitely emphasized the risks on inflation over the risks on growth and employment.

10:10My biggest question is, what would lead them to pause again? You know, if they weren't satisfied from some of the disinflation that we've seen, certainly in core CPI, then what is it going to take to lead them to pause and to think, OK, we really are seeing a credible disinflationary trend that we can feel comfortable going on pause and not removing accommodation, as he says. I think that's sort of the question. They probably don't have an answer to that right now. No. I mean, the core has gone from, what, 2.8 to 3.4, now back to 3.3. I mean, you'd want to see some of that gap filled, I assume.

10:48Yeah, you want to see it go down, right, get closer. And, like, his view is basically we've been above target for too long, and we're not going to tolerate it. How about the number of participants who saw downside risks to GDP? Zero. Yeah, they're all very, they're bullish on the economy. Which, another question is, will the rate hikes hurt the economy, right? Yes, we'll see higher mortgage rates, higher credit card rates. I mean, traditionally, rate hikes slow down the economy. That's the whole point of how they work, right? To calm down inflation and overheating. Will they get in the way? Because we are saying, what, where's the 10-year this morning?

11:27We're still around 5%. We're going 4.95, although we've had lots of conversations on how stocks and yields can coexist. They can. We've seen it before during periods of boom as well, even speculative boom. Well, I think it depends on the financial tightening that we saw in the wake of this rate hike, if that continues. Strong dollar, weak stocks, higher yields, whether that will start to be a constraint on growth. We'll pivot to AI safety today, talk about this new disclosure from OpenAI last night. Several more examples of what they're calling misalignment between human intention and the computer's intention.

12:01Pre-market, though, awfully solid. We'll try to get back to yesterday's highs of about 76.25. Stay with us. We believe in starting with your financial goals, not a formula. At Oppenheimer, we put the full strength of our longstanding expertise to work, understanding your life and your ambitions, and designing the precise strategies that build and protect your wealth with confidence across this generation and the next. Put the power of Oppenheimer thinking to work for you. Wealth Management, Capital Markets, Investment Banking.

12:59pays to discover. Terms apply. See discover.com slash five for details. From the producers of The Traders, The Circle returns with bigger twists and higher stakes. Contestants compete for popularity without ever meeting. Some are celebrities, some are regular people, and some are catfishing the competition. And now audience voting will influence the game. You decide who has what it takes to win in The Circle. Watch the Hulu original series The Circle on November 17th, streaming on Hulu and on Hulu on Disney Plus for bundle subscribers. Terms apply. The debate over AI safety continues to intensify.

13:41OpenAI out with a blog post. It was last night. It disclosed six new instances of what it calls unexpected or concerning behavior in its AI models. The company also releasing a framework for reporting when its systems go wrong. A couple of key things from the actual blog post, and I have one here that I thought was perhaps the headline. We do not believe that the AI industry has solved alignment monitoring to a sufficient degree to continue responsibly scaling at maximum speed for much longer. Now, of course, that's similar to what we heard from Dario Moday over the weekend with his call for pacing the models.

14:27There's the latest. It does go into some detail about any number of different summaries in which it talks about unreleased models that inserted instructions into its own task summaries telling later instances to disregard normal constraints or future instances to conceal mistakes, invent missing historical data and hide source mismatches or exposing an API key in a public repository, using it without authorization, and then fabricating the requested data when it couldn't retrieve the information. I mean, it does read like stuff from science fiction. I think the word of the week is misalignment.

15:06Yeah. That really, I think, summarizes the fear here. And just to quote a Gemini definition, it's basically when AI optimizes for something different than what people actually want. So it's not human intentions. It's AI. And that, I think, is the risk of what you're describing here, right? When they go out and do things on their own that people don't tell them to do or control them, right? Right. And that is a challenge. And I guess it's like what we're hearing is a cry for help from Sam and Dario of like, how should we do this? Well, everybody who's training the models who sees what's happening in terms of their behavior and is realizing that they are misaligned, that they're not doing what they're supposed to.

15:50In fact, they're doing the opposite oftentimes of what they are supposed to. But the harder thing is, what do you do about it? Is it a regulatory response? Is it from Congress? Is it from the administration? They don't want it on it. We heard your guest yesterday, our guest, Neil Michaels, and David Sachs, obviously. There's an interesting, I think it's a journal story today, about other members of the administration who are trying to get the president to focus on this and perhaps take more seriously the real risks of it, including Susie Wiles and Scott Besson. Right now, the hands-off approach continues, Carl.

16:23Yeah, nice piece. I think it's the journal today looking at the president's advisors and how they're trying to... That's what I was just saying. Yeah, on the guardrails. Two things that are fallout elements. One is this pulled IPO from Holtec, would have been the largest nuclear power IPO of the year. That gets pulled. The CEO is blaming it on what he calls a perfect storm when it comes to AI sentiment. And then the other is Loudoun County, Virginia, sort of known as the heart of data center alley. They advance a motion that would put a pause on new applications for data centers by up to 12 months.

16:58We talked to Mark Warner just the other day from Virginia. There's no doubt there is a growing chorus of politicians, local and at the federal level, who want to pause on data center construction. I mean, yesterday, Senator Elizabeth Warren joined the crowd that says we should pause on developing AI. But that's also a dangerous posture because we know we're in a race with China and that we cannot let them win. And we cannot slow down innovation when it comes to AI and let our adversaries have a leg up. So what then do you do? I think it's responsible to find some sort of middle ground. You know, Mark Zuckerberg, and I know you guys talked about this yesterday, but I think it's worth repeating what he said that he's done.

17:45He says every lab has the responsibility and incentive to move at the pace required to train its models safely and the ability to make its own actions to ensure that happens. Yes, it's a little bit of the trust us and it's a little bit of what we've been hearing from Jensen Wong. But regulation in this sector is also. Well, I'll tell you what it also means, though, if you're going to really do that, it means you're going to slow the pace. You have to because it's going to take longer. I mean, I'm just looking at a list here of things you might have to actually deploy for autonomous agents. Sandboxing, identity management, least privilege access, transaction approval, continuous monitoring, immutable logs.

18:18I mean, and on from there, the things that will be necessary. And it could actually slow the pace of releases. And then you get to, well, all right, what is that going to mean for the revenue run rate at Anthropic and OpenAI, which is what investors are focused on. Obviously, they're both private companies right now. We're still waiting for that S1 potentially very soon from Anthropic. Haven't heard anything about a real delay here in terms of the expected IPO, which is still expected this year. But that could change. Who knows? I don't know at all. But nonetheless, it's like, OK, what's OpenAI's run rate?

18:49Well, it was 45 billion. Has it gone up because of Astra? Or is it now going to slow because of this pacing? I know. What does pacing mean for revenue growth and for CapEx? But it also is why I think there's been some skepticism poured on some of these executives as contradictory, because at the same time they're marketing these IPOs. And there was a report yesterday that OpenAI is going to raise more money before they're warning about safety and societal implications. It's a weird place to be. Well, a lot of it's weird in general. Yeah. I mean, do you read this stuff? No, I know. It's scary stuff.

19:24It's surreal. I'd like to hear from the business community on this. I think there's BRT, there's all these business councils or whatever, because they're also on the forefront of experimenting here with AI. And I think that it's hard not to take these concerns seriously. Yeah, there is some reporting this morning on at least some companies and their willingness to pay for token use among various employees. Take a look at the pre-market. We'll dive into the energy markets as well, talk about why we're getting a little bit of relief today. with WTI briefly back below 100. Don't go anywhere. This holiday, all plans, even unlimited, are just$15 a month.

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20:36The IPA margin in the NHL is right there with the NBA. Official NHL team valuations. Revealed Friday in Squawk Box on CNBC. Take a look at some pre-market winners. You got some enthusiasm around the AI trade. You got Glow Worm up better than 5%. But Generac's going to be the leader today as they announce this long-term deal with Amazon to supply generators for what else? Their data centers. Opening bell in a couple of minutes. You can catch us anytime, anywhere. Just listen to and follow the Squawk on the Street opening bell podcast. I would be hard-pressed to describe broad financial conditions as restrictive.

21:14This view was widely shared by the committee. So we removed a dose of accommodation. Fed Chairman Kevin Warsh at his news conference yesterday afternoon talking about the quarter point rate hike from the Fed. Let's bring in co-anchor Closing Bell Overtime and senior markets commentator Mike Santoli. Well, he proved he's not he wasn't a sock puppet that Elizabeth Warren thought he was. Oh, for sure. I mean, and by the way, I think that that was should have been clear that the White House's influence over Kevin Warsh peaked the day he was confirmed. And also, since the Jackson Hole speech, the market was able to price this ultimate outcome.

21:54What he just said there, though, about removing a dose of accommodation was relevant. And I think the market had to kind of work through that a little bit and still is going to have to. I'm reading between the lines. He's basically saying that the Powell Fed gave us three doses of accommodation last year. We got 75 basis points of cuts from September. The insurance cuts. Through the rest of the year, the insurance cuts. Well, what was the setup to those insurance cuts? Core PCE inflation had been below 3 % for several months. The unemployment rate had gone from 3.7 % up to 4.4%. Where are we now?

22:28Core PCE well above 3%. Unemployment back down to 4.1%. Jobs look OK. It looks like it was a growth scare for labor back then. We don't have it now. So all we've done is we've boosted rates up to a level that is still half a percentage point below where we were a year ago. So I think the market can handle that. I do think it's going to be measured from here. The lack of specific forward guidance means the timeliness, as he said, when inflation comes back down toward target, is going to be the benchmark that we're going by here. And so we don't have specifics about what speed we're thinking about.

23:02But look, I do think you have the post-statement, post-Fed conference, press conference noise. You always have the unwind trade. Very often, as we always say and said yesterday, you get to rethink the next day. Most of today, though, the rally, I would say half of it is oil going down. Right? So it's like half of it was, OK, we're probably fine. We priced this outcome. And half of it is you got downside in oil. You have a little bit of a nudge lower in 10-year yield. And I think that's pretty comfortable as a spot for a market that has been correcting internally for months now. That's a good point on crude.

23:37I think Jim weighed in online this morning and said it's a lot about what he's doing here. He's got WTI back to 99 and change for a few months. Stick around. Let's get the opening bell here at the big board on Wall Street. It's the New York Times. He's been waiting 175 years. After that, back in Times Square, it's Bill Martin, who helps him to release the divisor for each other in his pen. And as he goes in Chicago, it is the Seabour for operations team. We did get, yesterday, Mike, for the first time since COVID, percent of S &P years under the 200-day, or above the 200-day, less than half, when the S &P is still within 4 % of an all-time high.

24:23Exactly. So that's BTIG, which does say the recipe is for more pain. So I think that that's the ingredients. The recipe can vary depending on who's doing the baking. I think that's an interesting debate right now. It came into the week saying this. Are we going to be satisfied with the fact that there's been isolated pockets of reset in the market? If you just take a look at consumer discretionary industrials and health care over the last six months, industrials and consumer cyclicals have noticed what's been going on with oil and rates. They have actually been very deep underperformers. The question is, is that, you know, enough from here on out, as we also have this crisis of faith in the tech trade?

25:02There's definitely been a benefit to the fact that the market's narrowed back out. The heavyweights have been holding up the index to a fair degree. So, yeah, Krinsky at BTIG is of the camp that says this needs to be resolved with more of a comprehensive flush than a downside. The S &P 500 remains vulnerable. And, you know, it's either the beholder stuff. I mean, I know it's unsatisfying to say, but, you know, a stealth pullback looks the same as a topping pattern. Like in the moment, until you see where it goes from here, it's just hard to make that distinction. I think you can say there's no fat pitch.

25:36The market did not create tremendous amounts of oversold conditions and cheap, cheap stocks or anything like that. But you often don't need it, you know, in a bull market. I mean, the other big thing this week, obviously, is just how much sentiment has changed around AI and all of these safety fears and how that's had an impact on the market. You know, we've had AI scares before, like DeepSeek, for instance, and other sort of CapEx fears. One difference, Mike, that I think a lot of the research notes bring up today, there's a Citadel note about this, is that the positioning is different. It's healthier, it's cleaner, it's less frothy.

26:11And especially if you look at the socks, for instance, the semiconductor ETF, that's where you see it. But also in some of these AI stocks as well, a lot of the enthusiasm has already been taken out. Yes. And so maybe that's why we're seeing such a nice bounce back. No doubt. July was an absolute washout for the AI momentum trade, the AI infrastructure trade. And now the question is, I don't think it's logical to expect that we quickly rebuild those excesses and get back to the highs and have the positioning be really crowded and extreme again. But, you know, the market can kind of heal itself and earnings can come through and they can participate.

26:47I do think one of the interesting ones, we were just showing GE Vernova, which bounced yesterday. the company said, look, we see no change in the order. That's where the sensitivity is going to be, I think, is in the AI levered industrials, because what matters for them and for their valuations is 20, 28, 9, 30 and beyond, because that's where their order books go out to. And that's what the valuations are hinging on as opposed to, and they're not going to be the first to know. If people are going to slow down, if they're going to tighten up their spending plans, Those guys will know later. And I think that's the bear case on them is that, you know, sure, it looks like they're sold out forever.

27:24But, you know, we are going to bounce again today. And you see that chart trying to hang in there in the, you know, let's say on a six-month range that we've been in for a little while. Yeah, that was an interesting, got to some interesting levels on the trend, G.I. Vranova. Yeah. And Cat, too, rebounding a bit today, back to 8.10. Sure. Yeah, still down. You know, it's in like a 20 % drawdown still. So I think a lot of them have been kind of rinsed a little bit, and you can see if that is enough. And then the other piece of it, and they were strong going into this phase, which is the big banks.

27:55I think you guys would have talked about that. But the B of A comments, the Goldman comments this week of, hey, maybe this quarter is not going to necessarily hold up to what we saw last quarter on the trading and investment banking side. That was an adjustment. I think those stocks have come in a little bit, but they were in a better position. heading into this period. Yeah, we did hear from Capital One this week, Mike, about consumer. We're always really interested in their take. Those have come in. You know what else? AXP. Yeah, yesterday. Yeah. Really interesting. Almost a two-month low. Yes.

28:28And, you know, again, it's conference comments, a little bit about some spend and, you know, margin issues that are going to be in there. I think there's a big question within AXP about, you know, how heavily they have to spend on the incentive side, the membership awards type stuff. It isn't really, you know, credit quality souring. It's much more about the cost to compete for higher level spenders. Just to come back to a moment, you guys were talking about Caterpillar and GE Vranova, obviously very important in the powering of data centers. Did we want to come to this Generac story involving Amazon because the stock is up sharply?

29:04I think off some of the highs that we saw in the pre-market. But it was last night, they disclosed what I guess is a long-term agreement essentially to supply the backup generators for any number of data centers that Amazon has. As much as, I think,$2.4 billion in potential deliveries for 27 and 28. To put that in perspective, we're talking about a company that only does about$4-plus billion in overall annual revenues. Could go up from there. There were some warrants involved as well, I think, in around$201 a share, some of which vest,$308 ,000 of which vest immediately for 1.69 million total shares,$308 ,000 of which vest immediately for Amazon.

29:50But you can see what's happening to that stock. Companies around$11,$12 billion market cap. Yeah, I mean, on paper, the warrants kind of paid whatever Amazon's going to spend to buy the generators, I mean, at least in part. They're already at$20 a share on, yeah, on 1.69 million. So, yeah, very helpful. Generac is one of those companies where it's kind of, you know, people have wondered about the total size of the market beyond what they've already penetrated in residential and elsewhere. And anything that seems like it's part of the, you know, part of the solution for data center energy is the love.

30:26Yeah, and this is backup power, but just to remind people, you can't let your GPUs go down. It introduces all sorts of complexity into the system that could result in those things not working. And so you don't want service interruptions if you can avoid it. And that's why we do see these generators being an important component overall of so many of the data centers. Which, of course, is CAT, too. I mean, CAT makes the generators. Exactly. So it's always AI winners and losers. And today, Salesforce is on the other side. It's been a big winner lately as a sort of anti-AI sentiment has taken over.

31:03But there's news today, and that was basically they updated their financials. Revenue, they say, took to top $63 billion in this fiscal year 2030, which is actually ahead of where Wall Street was expecting. They had been projected to hit annual revenue of$60.6 billion by that time, according to some of the forecast and a lot of the analysts are raising their price targets. Citi goes to 263 from 233. Stifo goes to 300 from 275. Look, they continue to, I think, push back against the SaaS apocalypse narrative, both Salesforce and ServiceNow, and they're doing it in their results. Stock down two and a half percent.

31:45I mean, that could just be a reversal of what we've seen. Yeah. When the AI trade works, you know, these stocks don't work as well. No, but they have come back dramatically, of course, is worth pointing out. The IGV overall and so many of the software stocks are far, far off the lows in Salesforce itself. A reflection of that. While we're on the subject of software, I did want to come to a name that actually saw a boost in part around takeover speculation, and that's Workday, because I do have some updates there. It was back in mid-August that I think it was Reuters first reported that Silver Lake was in talks.

32:23I actually confirmed that as well that morning. It was an interesting reminder that as cheap as these stocks got, there might actually be, even at their size, some interest in private equity and perhaps providing a bit of a floor. Surprisingly, despite, and we can go back a little bit more, what has been a move up in the stock price, certainly not of late. You can see it over the last month. they're still at it and making progress. In fact, from what I understand from people close to the situation, this is a very large deal we're talking about, right? A company with a market cap of, let's call it$45 plus billion.

32:59We're talking about an equity check that would probably be $25 billion or more, far more than you'd expect Silver Lake itself to be providing, obviously, on its own from its funds or even from raising funds outside of its available capital. But alternative sources of capital, the possibility that certain investors would roll in. Remember, you've got a somewhat concentrated investor group there, both sort of the public investors, but also the founders, David Duffield and Neil Busseri, who's back running the company. And so I am hearing a bit more optimism around the possibility that this thing is still might get, might happen.

33:38I'm a reserved judgment on that because of a deal of this size in this kind of a market. We shall wait and see. But that said, there does seem, again, according to a number of people, financing packages are being provided out there. Equity is continuing to be raised in a significant way for an unexpected outcome, I would say, still, you'd have to say, but nonetheless, one that is moving forward, and that is a potential take private of Workday, guys. And that's been another one that really, I mean, the narrative has shifted a little bit. Remember, they were kind of like the poster child at the beginning of the software sell-off of who's going to get hurt because AI can do all this stuff, like the software names.

34:20And then Workday pushed back, and they don't have the data, they don't have the expertise when it comes to HR management and all the years of experience. The different services that they provide. They don't necessarily charge that much for each of them, but it's sort of the interconnectedness of so many companies. And I'm not sure about the level of complexity in terms of the actual services, Sarah, that they provide. There might be a case to be made that you could recreate those things. But what I'm hearing is they're much more interconnected than you might have anticipated. And there's also some other, well, some things that haven't been made clear to me in terms of potential synergies that might actually accrue in a go-private.

34:56trying to understand that, but haven't gotten to that yet. Yeah. Yeah. I mean, obviously, if that happens, it's an endorsement of the durability of the cash flows in the business model for certain parts of SaaS. Looking back at the whole cadence of the software sell-off and recovery this year, the Citrini report in February was way closer to putting in a low than it was to actually kicking off, you know, a new downside phase, because you had already had the panic when Claude released the sort of legal tool that was going to allow it to replace a lot of applications. And, you know, so it sort of was that last almost capitulation, which lasted for, you know, a couple of months.

35:35But we're well up off those Cetrini lows for February. Right. So Trini said basically that AI is going to kill like white collar dogs. Yeah, exactly. I mean, which was funny because they were intentionally giving you the extreme what if case that they didn't fully endorse. But nonetheless, it had the effect because people were so nervous about that. We did get some commentary from Goldman yesterday about FIC in the current quarter. Solomon said a bit softer on a relative basis, but that equities continue to be strong. You know, Goldman, it's going to be the lowest print here since the beginning of May, let's say, or mid-May.

36:09Yeah, I mean, I do think you have to have it in your head that second quarter levels of activity in general for trading and investment banking. You had the SpaceX deal, second quarter levels, really of overall earnings growth in terms of the rate of change. You probably saw a peak there, too. So this is something the market's going to have to sort through, is exactly to what degree we pulled into the halfway market this year with guns blazing, everything working, and it's going to be a bit of a hangover effect for a while from there. You mentioned consumer discretionary. The list of consumer names in a 20 % plus drawdown is almost too long to mention.

36:45And that's not like the Lulu's and the Nikes. No. I mean, it's a lot of the cruise lines. But Costco is interesting because it's almost down 19 from the high. This would be about an eight-month low on cost. And even some of the hotel and leisure stuff cracked a little bit. They've obviously been the relative better performers. But, yeah, I do think it's this funny split between overall retail spending levels, as we saw yesterday, remain strong in nominal terms. it's tough for the individual companies to exploit that and preserve margins and everything else. People using tariff refunds to fight the price wars and things like that.

37:23So again, that's one of those parts of the market that if you wanted to argue has already taken its medicine and is looking more washed out, you would probably look there. It would have a lot of upside to any relief in terms of overall macro. Now, what's interesting is because the Fed and Walsh were so aggressively optimistic about the economic outlook and how much momentum there is and how the CapEx boom is going to have no quit and therefore there's going to be room to hike more. You know, it's going to make the market susceptible to any individual softening evidence. And there is a case out there.

37:55And I think one of the reasons for the confused response after the market yesterday is, yes, we priced a 95 % chance we're getting a hike, but there was so much chatter about it's going to be a mistake if they do it or it could be one and done. One and done doesn't really exist. You don't do one if you think it's only going to be one. And then also the idea that, who, maybe it'll even surprise us and not move to show, you know, that he doesn't want to be led around by the markets. None of that really looks true right now, but now the economy has to live up to their outlook for it. So we'll see.

38:23Yeah, I mean, definitely they don't see evidence that the job market is cooling. We saw claims today. Claims continue to be really strong, but I think there's some discussion around, you know, how solid the labor market is at this stage. So that will be just a lagged effect of the fact that we've had oil up here. We've had rates rise in the first half of this year and see if that matters for, you know. Mike, you know, there is a notable move in what we call sort of the AI ecosystem, whether it's Arm or Intel or NVIDIA, Broadcom, SpaceX on from there. They're all having a significant two to three percent moves higher.

39:00Is that I don't know? Relief. Is that relief even with the open AI latest? The weather changes every day. We need to be worried. No, I do think that's, I think there's a case to be made that nothing that any of the companies, the actual key players have said, has changed the known spending intentions into next year. No, we have yet to hear anything that indicates anybody pulling back in any way from their plans to add compute, period. The question has been, has the sector been cheapened enough, been de-risked enough, that we're going to get those multiples back based on extrapolating that beyond next year.

39:35So I think you still have that back and forth. But on a given day, it's just like, it's mood changes, honestly. Well, oil is a big mood driver, I feel like. And we are seeing oil prices come down, energy is weaker today. Trump said Wednesday he hoped an end of the war with Iran would be soon. Also, there was this Axios report that he's going to be meeting on the sidelines with some Gulf leaders of the U.N. General Assembly to discuss the conflict and that Saudi Arabia is making moves to try to circumvent the east-west pipeline. Yesterday, that was the headline that actually took oil back a little bit.

40:11Yeah, I mean, amazing pictures out of Syria. The Times has this piece about fuel prices in Indonesia, the Middle East, sparking quite a bit of violence and protests at gas stations all around the world. I think we did stack some of the video where people are ironically lighting things on fire in Syria. Here's a good example of how this might move political needles in countries all around the world. The other bit of video we're getting is from NVIDIA, Jensen Wang, who, by the way, is going to be at the state dinner with the U.S. and China today, meeting with King Charles as the king sort of is rolling out some ideas, some platforms, frameworks for thinking about AI.

40:55As he said to some of the executives, there seems to be some urgency in adequately considering the existential dangers of this technology falling into the wrong hands. I mean, everybody wants to do an AI framework. President Obama wants to have the Democrats do an AI framework, and Kamala Harris wants to have the Democrats do an AI framework. Yeah, I mean, there's definitely, I think, a need for trying to figure out. And it's good when it goes cross-country, right? But the biggest question will be the U.S. and China and whether there can be any agreement. I did see a headline yesterday that there was— Besson said that there was some openness to at least bringing up the subject— Shared risks.

41:31—about the shared risks. I'm not sure you could see some sort of coordination there, because we're also in this race against them for supremacy. Yeah, it's really interesting about the whole race. And I know you have, like, OpenAI and Anthropic who feel like the Chinese model is just still theirs. And so if we slow down, they're going to, by definition, slow down. Yeah, I mean, but there's even debate around distillation. You'll hear it as well because it's not as though the Chinese don't have a lot of computer scientists who are very talented. They do. And, in fact, the numbers far exceed our own.

42:00I heard the quote, though, there, 10 % of the compute that the U.S. has. Yeah. They're doing a lot more with that much. They're doing more and less. They've got a lot more computer scientists, though. I don't know what that looks like percentage-wise. Yeah, right. Mike, thanks. See you in a bit. Mike Santoli. As we go to break, watch bonds. We are getting some of that expected relief at the long end. Ten-year back below 4.95. Long bond to 5.3531. Nice open here. About 5 to 1 up volume at the open. Interestingly, all those days where energy was the only sector up, today it's the only sector down.

42:37Stay with us. Watch Snowflake. Back in May, it was down almost 50 % for the year. Today it's up 55 % for the year. Jim's got them tonight as he makes his way back to the East Coast. You'll see him on Mad Money, 6 p.m. Eastern time. Steady open here. Dow's up 3.07. Don't go anywhere. Welcome back. Keeping an eye on shares of Warner Brothers Discovery. We haven't mentioned, of course, the continued litigation around Paramount's acquisition of Warner Brothers and the opposition, of course, from the 11 state attorney generals. Not slated to go to trial until April. We, of course, had AG from California, Rob Bonta, as a guest on the show a couple of times as well, talked about it.

43:17The latest headlines, you've got deadlines saying Paramount is setting a California exit plan as a result of the antitrust battle. you know will they really exit we'll see investors trying to understand are there settlement talks going on are they real will they reach some sort of a potential deal prior to the ticking fee beginning which is only about 13 days away october 1 that starts and mounts and obviously every day from there uh which will cost them more money but a potential divestiture as well of some cable networks at a very low multiple when they're in fact being relied on to provide the cash flow to pay down some of the debt, well, that could be expensive also.

44:00So tough choices here. Unclear what Mr. Bonta wants, even though he has been encouraged by people such as current Governor Gavin Newsom of California to potentially settle as well. And the jobs at stake, obviously, if they were to move guys the headquarters and maybe even, you know, is it possible they would want to try and sell the lots at some point to a real estate? I don't know. Add them to the list. They could raise a lot of money selling the Paramount Warner Brothers lots or the Paramount lot. Help them pay down debt. And some of the estimates of job losses to the state are huge. They are big.

44:3758 ,000, according to the Los Angeles County Economic Development. Wish I had more of a substantive update on the settlement talks to the extent that they're occurring. But I don't. Go do that. I'm trying. Don't be vituperative. I can be frituperative with you. Taught me a new word today. We've been learning new words today. When we come back, NBA superstar Steph Curry, live from Bethpage Black, talking about his foray into golf as we got almost exactly back to the highs of yesterday at 7620. Don't go anywhere. 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.

45:27You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash squawk on the street disclaimer. Which NHL teams are scoring big off the ice? CNBC Sports' Michael Ozanian has the numbers.

45:58If a dive margin in the NHL is right there with the NBA. Official NHL team valuations revealed Friday in Squawk Box on CNBC.