9AM HOUR: SpaceX Surges on Q3 Beat and Musk Comments on Potential Tesla Merger, Netflix Slides 10/21/26

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0:38Fidelity Brokerage Services, LLC. Member NYSE SIPC. Market insight and analysis. You're listening to the opening bell of CNBC's Squawk on the Street. Good Wednesday morning. Welcome to Squawk on the Street. I'm Carl Quintanillo with David Faber, Mike Santoli here at Post 9 of the New York Stock Exchange. Kramer has the morning off. Bulls trying to chop their way higher after Tuesday's gains, and the bullish guides from SpaceX and Supermicro are certainly going to help. Kospi's up 3 % overnight. Dow's having its best month since April. Yield's pretty steady, 10-year near 5.1. Brent does get to 1.10 this morning, although AAA gasoline's back to 4.26.

1:13Our roadmap begins with the SpaceX revenue surge, posting its first profitable quarter as a public company, and the stock rallying after Musk confirms the company has begun considering a potential merger with Tesla. Plus new details from a leaked draft S1 from Anthropic. This is ahead, of course, of a planned IPO. The AI giant reportedly logged a net loss of more than$80 billion in just the first half of this year. And shares of Netflix under pressure after Q4 revenue forecast fell a bit short. Let's begin with SpaceX, though, sharply higher on this quarterly beat, revenue up more than 160 percent, fueled by some data center deals.

1:54This is Musk talking about the sales picture last night on the call. In a nutshell, what this implies for SpaceX annual recurring revenue by the end of 27 is somewhere between 500 billion and a trillion. A bunch of issues to work through on the story today, Mike. One is, of course, Starlink, Tesla, Starship frequency. But J.P. Morgan today had a 240 target. They take it to 500. Yes. And really, it's all about things other than Starlink and rockets. It's really about the data center computing, how fast they're adding it, how fast they claim they're going to add it. This idea of exiting next year at a 500 billion to trillion dollar revenue run rate.

2:45Look, the stock will be up a lot more than it is if anybody thought that was what was going to happen. A 500 billion dollar range of a forecast is obviously just sort of, you know, aspirational, let's say. But they keep claiming that they are going to continue to add much faster than people thought. To me, this is giving a jolt to the whole kind of CapEx AI food chain type stocks, which have been, you know, in the, you know, kind of in the in the bullseye for the last several months. I think it's going to be interesting to see how much we can get off of that in terms of those stocks recovering.

3:20So that's that's the bigger picture market implications, obviously, for for SpaceX. It's it's essentially the fact that they swallowed XAI in February of 2026 is the whole story. Yeah, really, in terms of how this company is now value. Yeah. And by the way, one of the largest deals of all time at the time. We're going to get to a moment what would be the largest deal by far of all time, given Elon Musk's comments about SpaceX potentially buying Tesla or merging with it, if you want to call it that. But to come back to the compute side of this, because you can remember when they first signed that deal to sell some of the compute they had in Memphis to Anthropic, a company, of course, in desperate need of compute.

4:01And then they also did a deal with Alphabet. These were levels far above what you're talking about that kind of was going on in the market. I mean, when Oracle is building a data center that OpenAI is going to be the customer for, you know, they're talking at least the ones I'm aware of, maybe a billion dollars a month for a gigawatt or more. Here, you're talking $50 billion per gigawatt. It's multiples of what some of the other companies have been getting. I don't know how long that's going to remain the case, but the numbers they are able to get on what are much shorter term leases, by the way, have been extraordinary, have been a key reason why revenues have gone up so dramatically and why you can get to some of these numbers in terms of ARR exiting 2027 that you kind of find almost hard to imagine.

4:49Sure. That said, they also come with enormous CapEx associated with right and the CapEx that this company is going to have to ramp up to. I mean, they all they already. What are they? They they they talked about a fourth quarter CapEx got a thirty five to forty billion, which is so far above where people were. But a build out of their terrestrial network if they want to compete in cellular orbital data centers just start there. Yeah. Get rockets. I mean, my God, it didn't even come up on the call. The orbital data center thing is the kind of out there stretch goal. We'll see if it happens. But you had to believe that it was the reason that it made sense to be putting these companies together because of the launch capacity and all the rest of it.

5:29Also, how much you're spending, how fast you're spending for data centers on Earth relative to what you think you could eventually do down the road. So, you know, I don't know what to make of it except to say it's the biggest neocloud out there. They are better capitalized or at least have the capacity to raise more capital. I'd be scared if I was another one of these, you know, smaller subscale credit dependent neoclouds. Now, they are getting a little bit of a boost. Maybe the pie is growing so fast. Doesn't matter. There's going to be enough demand for that for now for anybody. But I think what the market has been expressing is skepticism that by the time this stuff gets built for, you know, the narrowly focused neoclouds, who knows what the landscape is going to look like.

6:10Are we going to be on cheap open source? Are we going to actually still be paying a premium? And so what does it mean for the return expectations? It's almost like it's put it in a too hard pile. I'd rather own something else. Well, the AI business, revenue-wise, is now bigger than space and connectivity together, growing, what, 9x? And I think at 1.7 gigawatts, going to 10? Yeah, talking about going to 10. Well, they were talking about going to 10, but I'm not talking about 13. Well, yeah, I mean, I know there's so many different numbers here. It's hard to keep track. But, yes, I think as high as that, Carl.

6:43to that's a year and 27. Yeah, yeah, that's amazing. And the numbers are enormous. And by the way, again, the CapEx associated with it, which gets back to, of course, the debate that we've been having here endlessly in terms of the return on invested capital and whether to your point, Mike, over time, or in the same way, we've seen the need for compute so significant that companies like Anthropic and Alphabet and others are willing to pay enormous amounts for it. Will If it does, what is that going to mean to all the CapEx that's going to be spent? Not to mention when you're starting to put these things in space.

7:16I can't imagine that's going to be cheap. I don't think SpaceX spoke about, you know, raising more capital necessarily on the call. They may or may not. It's not urgent necessarily, perhaps, for them after they've done the deal. But they also do have share lockups expiring. They have existing investors. I think it's another 1.3 billion shares. Or 1.8, you know, coming up this week. Yeah. So there's just going to be a lot of demand for people to soak up supply. Not to say everyone's going to sell it once the lockup goes away. But it is something that, you know, the capital markets continue to be sort of challenged to fund everything and absorb all this.

7:53Yeah. Barclays has a note out today about Oracle and their view how the IG market might be closed to them for a while. And if that remains the situation, they argue maybe the equity mix needs to be firmer. Sure. Or CapEx gets reined in. But as a reminder, I mean, you know, Oracle is investment grade, right? That's what the credit ratings say. But they don't trade very much like they're. Right. That's their point with long end at eight and a half. Yeah. Yes. They're closer to junk. Yeah. I mean, some of these CapEx numbers, just to come back to that for a minute, are astounding. Am I reading this right?

8:28Wells Fargo sees CapEx of$466 billion in 2027. That's right. Don't forget. The consensus is$160 billion. And don't forget, they reported Anthropic as one at 750 over the coming years. Over the coming years. This is just one year for us. So these numbers are astronomical, which I guess is appropriate. But if you think about it, though, even, I mean, however we want to frame or caveat the 500 billion to trillion dollars, like literally where is it going to come from? That is certainly one of the questions. And so these deals better get done. Anthropic better get done because they're kind of one of the bigger buyers on the other end of it.

9:10And I just really want to get back to what the kind of follow-on action is in the stocks. The stocks are not taking this news and running with it. Supermicro had a really big upside pre-announcement of guidance yesterday. It was step function above where it was. Now, this stock did get Dell moving on that news. But Supermicro is a stock that is down 20 % month to date. It's going to get half of that. You know what I mean? So this is where we're starting from with a lot of this. So I still think there's an overlay of skepticism in terms of how long it lasts. It's nothing but net positive in terms of, you know, ultimate demand and how much people are going to spend to try and meet the demand.

9:50But the market is finished kind of just generously capitalizing these hopes. Guys, I did want to take a moment to also focus on the other important thing that came out of the conference call, which is, of course, must giving voice to what we've been talking about here for some time, which is SpaceX. I'm going to call it buying Tesla because, I mean, we can call it a merger, but ultimately they would be the buying party. It would, to the conversation we were just having, be an all stock transaction. I think we can all agree there's not going to be any cash involved here. So it would be a ratio of SpaceX shares that would be offered for Tesla shares.

10:25But there are a lot of things to get through. Now, on the call, Musk, who did call himself a conflicted party in this, said that both companies have established special committees to try to begin negotiations with each other around a ratio that they might then agree to that would allow SpaceX to potentially move forward with an acquisition of Tesla. He also said on the call that Tesla shareholders would have to vote in favor of said deal, if in fact they're presented with it, to the tune of 50 percent of the outstanding shares would have to vote in favor. Now, this raised another question that I don't have an exact answer to, but I'm going to make an assumption.

11:07He owns 19.8 percent of Tesla shares. My assumption is based on what he said on the call. And I don't know, although, unfortunately, I just got a call back from somebody that might help clarify it. so we'll clarify if we can. My belief is he would be voting his shares as well. Sometimes we see to try and avoid as much litigation as possible, a shareholder of that size step aside and say it will only be a vote of the unaffiliated party, so to speak, or the non. He's not a control holder here, though. And in fact, when it came to buying SolarCity, I think the argument was made he wasn't a control holder, and therefore he was allowed to vote his shares in favor of that deal.

11:43That's the expectation here. We've seen it in other deals. Think Endeavor when it went public and Silver Lake was a significant holder. They voted. They allowed their shares to be allowed to be part of the vote. So 50 % of the outstanding shares need to vote in favor. That's still a pretty significant hurdle, but it does appear at least until I hear otherwise. And based on what he said, that the 19.8 % of Tesla shares he owns would also be part of that 50%. Now, there's other things. You got SpaceX DoD. Significant supplier. They control space, right? Very important as you might imagine to the future defense of the country as well.

12:22They have a lot of stuff in China. And how's that going to play with DoD and what they see? Now, obviously... Thank you. Tesla has a lot of stuff. Basically the Shanghai Gigafactory. Chinese approval also here could be, you never know, potentially problematic. The Journal had reported a month or so ago on their headline was Tesla Way sale of China business to pay way for potential SpaceX merger. But then Musk came out, of course, and said he dismissed the report of Tesla's potential China business sale. It's an issue and something people need to keep an eye on. So any number of things, we all know Mr.

13:02Musk's ability to get things done, whether to say it's very difficult and or near impossible, and he gets it done. I'm not saying that that's anywhere near the case here, but there are certainly some gating issues. For sure. And, you know, I do think it is all about, you know, kind of what that ratio looks like to try and get the vote over the line for Tesla. He obviously is a control voter in SpaceX. So that's the determining factor. He's a control voter in SpaceX. My understanding is it's not there's no they he would just vote in favor and that would be it. So shareholder run on the SpaceX side is meaningless.

13:34Exactly. The key is the Tesla side. And the other secondary question is, so together at today's prices, this is$3.6 trillion of value. Right. Right. And it would be by far the largest transaction we've ever seen in history. Any investment bank a part of it when it comes to the league tables? I mean, you just want to be a part of it because you'll never be able to recover if you're not. Exactly. And what was interesting, too, was Musk actually being somewhat conscientious about his wording on the call last night when it came to this committee, this exploratory committee. Take a listen to this piece of sound.

14:11This is definitely the kind of question where I feel like I'm tap dancing through a minefield.

14:17But so I have to be thoughtful about what I say here. I think so both SpaceX and Tesla have formed special committees to discuss this idea at the request of shareholders. I don't think we should necessarily assume that... I think some people out there assume that a SpaceX and Tesla merger is a certainty, and I think that would be overstating it.

14:49Do I think it would be a good idea? Yes. But at the end of the day, the shareholders have to be supportive of this, And particularly on the Tesla side, we will need a 50 percent vote of all shares, not just those who vote, but of all shareholders. And that's quite a high hurdle to try to achieve. To your point, David, about some of the barriers here. Right. Now, again, if he's able to vote his 19.8 or 20 percent stake, that makes it easier to get that. But as he went on to say as well, there's no terms that have been reached. I would also point out you may have some SpaceX shareholders who say, I don't want you buying Tesla.

15:28You may say Tesla shareholders will say, well, it's not enough for the premium, but there's also going to be overlap. Think of Ron Barron, for example, and any number of others who are so supportive of whatever Musk does. And to me, I was about to say$3.6 trillion. I think it'll be fascinating to see how much the combined company would hold that value. Because so much of the value of both companies is all this science fiction. It's all in the comp. It's not in the businesses. And so how much do you give credit for both companies building the magical future as opposed to what the businesses are today?

16:00Right. And there's nobody better at making you believe in that vision. But his stocks do best when the businesses are a smaller percentage of the whole. That's how they've done that. Oh, yes. Oh, yeah. We've talked about Tesla's underperformance in these last few years. We will get to NVIDIA, AT &T, Netflix, United, Capital One, eBay. Get you set up for Meta after a short break. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more.

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17:50Welcome back. We did get a journal story yesterday afternoon where they got a look at a draft prospectus from Anthropoc. Of course, we are eagerly awaiting the S1, as we call it, the filing that will have voluminous information about the company for those who would consider buying its stock when it does go public. From what I continue to hear, and I know other reporters here at CNBC as well, we are still expecting this company to potentially go public, let's call it, the week prior to Thanksgiving. If you want to try and put a specific date on it, but we'll see. And again, this is a draft. This is not the S1.

18:29That said, we certainly learned a few things. You know, a little over$16 billion in first half revenues from the company. That said, we most recently learned that it did$16.8 billion in revenues for the third quarter. Remember, its revenues have been going like this. So, yes, its third quarter equaled its first half. But even that wasn't good enough to satisfy the expectations of many who already own the shares privately and or have hopes and dreams for when it comes public that it could achieve as much as a$2 trillion valuation. $80 billion in spend, or I should say in net loss. But a lot of that was from accounting charges tied to changes in the value of convertible notes and other things that it issued to help with its funding.

19:16And, of course, that funding goes towards compute. It comes back to what we were just talking about involving SpaceX, the enormous amount of money that Anthropik needs to spend to gain the compute it needs, to continue to build its models, train its models, provide inference for everybody using its models, and on and on from there, Mike. For sure. And, you know, I think there was some focus on if you get rid of the accounting charge, which really is just on paper cosmetic stuff. Some people impressed with, you know, you could see your way toward, you know, operating profit if you can slow down on some of the space.

19:52So, you know, in other words, the model would work at these growth rates. But it really is still about what your assumptions are about the cost to deliver all the compute you think is going to be demanded and getting the capacity. But it's just the same equation everywhere. I really think the market needs this deal to come out. I don't think the stock of Anthropic has to do great when it comes out. But I think the market needs to believe that you can refresh this ecosystem with new capital in this way. And so even though you'll find people say, look, this is all going to be sort of a base layer commodity thing, it kind of doesn't matter initially.

20:31Right now, I think the next step is you want to see the market receptive to making this kind of a bet so that all of these obligations, this long chain of the order books that are filling up on the industrial power companies and the chip makers and everybody else, they're going to be good for it. Yeah. To your point about it doesn't have to do great. I mean, the Journal did that great graphic of their expenses and their revenue, questions about their 10 % operating margin, that big chunk of operating expenses. Like other expenses. Yeah, exactly. Sure, sure. That said, they claim that roughly a third of the draft prospectus was dedicated to risk factors.

21:10We, again, have discussed this many times at this desk. That is going to be an interesting read. Opposition to data centers, for example, being a risk factor. Safety being a key risk factor. reliability. Dario Moday, the company's CEO, actually, I'm told, just posting yet again on social media a fairly voluminous post around AI safety. We'll get a look at that. So we're waiting. We're getting some sense of what we may see. There's a little bit about it, you know, what he's talking about in terms of mistakes, I guess, and what they're doing to try to counter any concerns around safety that they have a lot of and that they have had a lot of throughout.

21:50The reason that company was born was because of the concerns that he and his other founders had when they were working at OpenAI. Meantime here, pre-market pretty steady here as we'll try to work our way further into the 7700s on the S &P. More Squawk in the Street in just a minute. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right Get into the premium versions of Gmail, Docs, Sheets, and more. No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow.

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23:17and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. Take a look at some S &P winners pre-market here. If the argument is that CapEx expectations are a pillar of the market overall, you could argue SpaceX is one step in the right direction. Maybe Meta gives us another later on. We'll talk about that. We'll get the opening bell in just about four minutes. Don't go anywhere. There's a non-zero possibility.

23:54Maybe it's a small possibility at this point, if it's not zero, of SpaceX having over 20 gigawatts of superintelligence compute online next year. A small possibility, but it used to be zero. It's not zero anymore. SpaceX's Elon Musk talking about compute capacity on last night's call. We talked about 10. We talked about 13. We didn't talk about 20. We could spend all day talking about things where there's a non-zero possibility of something happening. I mean, obviously, he's just going to keep pushing and pushing to get these numbers bigger. All the metal in the world is going to be forged into these data centers.

24:31Yes. We'll get to more on that in just a moment. Let's get the opening bell here this morning at the Big Board on Wall Street. It is Simplified Asset Management, celebrating the Simplified Managed Futures ETF at the NASDAQ and Times Square, USC and Snowboard, the national governing body for Olympic and Paralympic ski and snowboard sports. And at Seabo in Chicago, it's Money Habitudes, a creator of card games and tools to help professionals understand their clients' financial habits and behaviors. Again, Mike, in this range here between, I don't know,$7 ,650,$7 ,800. Yeah. I mean, we've kind of held up, I think is the way to put it.

25:12And, you know, outside of big tech, outside the oversold parts of semis, you've seen a much more defensive tone, but a broader base of things that are supporting the index. So I think that's been the tradeoff. It's like, yeah, you want a broader market, But the message it's sending with things like health care and staples working is maybe not what you were hoping for. I really that's why I'm focused on exactly whether we get a good response, a very strong response from the hardware food chain. The leading stocks so far, Supermicro, Dell, Bloom Energy, Vertiv are up there. So people want to say we can get some relief in those areas.

25:53If you look at the core weaves, if you look at the other neoclouds, they're bouncing. but I would argue tepid bounces. They're not really that aggressive relative to where these stocks have come from very recently. So I think that's part of the equation, is to figure out if the stuff that's oversold enough that it really ought to be bouncing does so. If not, what are we relying on to get to the next step? Obviously, you have things like hyperscale. You've got meta earnings tonight. There are other places the market can look. But I think it's been kind of getting away a little bit easy in terms of the index level because of all the damage below the surface.

26:27But that's been the case for months. Yeah. A nice, give us like a five or 10 day of core weave to Mike's point. And this would be, at this moment, would be the third consecutive day in which it was unable to bounce above the prior day's intraday high. Yeah, yeah. That's the kind of thing you're saying, right? That's exactly what I'm saying. Every bid is exit liquidity kind of thing? Yeah, that's the way it's been acting. And obviously the credit is really dictating the terms here, and that's not really calmed down too much in this isolated instance. But even something like a micron, you know, it's up 3 percent, it's down to 13 percent this month, that kind of thing where it's sort of baby steps.

27:01I would say just elsewhere, I have been noticing things like homebuilders up yesterday on wretched housing data. They're trying to hold the lows. We'll see if that means there's a turn coming. Banks had a good response yesterday around a level that seemed to matter. So I do think you're seeing that stuff that already took its punishment is getting a bit of reprieve. Speaking of punishment, not that much punishment being meted out to shares of Netflix, but it's not a good day, not a good start to the trading session. The stock is down about 4.5%. We haven't got to it yet, but of course, it wasn't necessarily the revenue number up 12 % year over year, 11 % when you X out any impact from foreign exchange.

27:45Operating income of 4.5 billion was up 37 % year over year. The margin, 34.6 % against 28.2 % the year-ago quarter. But it was the guidance, guys. In particular, I guess it's the revenue guide change. The figure now is 0.2 % below the midpoint of the prior range. But, Mike, I guess that's enough to have the stock, and it may be some other things, but have the stock open down this morning. For sure. This is a company that definitely lost the benefit of the doubt in terms of pricing power, The ad business, it's not early anymore. People keep saying it's early. It's just not getting that much traction.

28:24It's not early. And it's not that big a piece of the pot. And the ad business, again, to point out, was cut. So they expect ad revenue now of$2.7 billion. And to Mike's point, analysts have been expecting$3 billion. But when you go back a couple of years ago, you know, I think you had an analyst on the other day, Laura Martin. I think I was watching. Who downgrades today. Yeah, who was talking about she thought it would be, I don't know,$4 or$5 billion by now. And if you think about what a trivial number that is relative to digital advertising in general, right? You look at Alphabet and Meta and you see what the size of the pie is.

28:54They're just not harvesting that much. But maybe that doesn't matter that much for the overall story. It really is about subscriptions and lower churn and things like that. I do think what's interesting is everybody's got a theory on what they have to do on the content side. And they're going to shuffle the leadership. I think that what you really want, if you want to look to be owning this thing, is where it doesn't matter. where just the business, because of the cash flow it's throwing off, because it's reached a point of stability and maturity, that it's okay. I did have a chart of Netflix's free cash flow yield relative to the NASDAQ 100.

29:25You were never talking that much about Netflix as having a higher free cash flow yield, but there it is. It's, you know, almost 5%. So it's 20 times free cash flow relative to 3 % for the NASDAQ 100. By the way, the overall S &P 500 is only 3.3 % or something. We're 30 times free cash flow here. way, way more expensive than the PEs make it look because we're spending so much. So at some point, does it get to be known as a little more of a stable defensive cash cow? Maybe. Maybe it has to get even cheaper for that. This is more than a two-year low on Netflix. Give us a five-year. I think it's dead money over five years now.

29:59Netflix. Yeah, it is. Well, it was. It was one of the. Exactly dead money. Yeah. It was one of the pandemic, you know, beneficiaries. You have to remember that. And 2021, you know, that was peak for all of those kind of digital stay-at-home plays. And it's been working off that for a while. I did like Tom Rogers' point this morning on Squawk, David, where he said because of what AI is able to do in content creation and because those costs are so low that having a big content budget right now kind of doesn't mean you're going to be a star. No, it doesn't necessarily. Now, of course, he's talking his own book because he is involved in AI, I believe, in terms of content creation.

30:38And that's excluding sports, obviously. That said, that does get you to YouTube, which, of course, is by far the giant when it comes to even engagement at this point. Not to mention on the cost side, so much of its content is user-generated. Yeah. And so it's not paying, to your point, Carl, enormous amounts of money for, you know, another year of Bridgerton. Or I watched The Diplomat last night. Along with everybody else. The first episode. Oh, my gosh. You're in for a wild ride. Am I? That's got to cost a fortune. Yeah. I mean, I don't know where they're doing it, but those are real places in the UK, aren't they?

31:13That costs a fortune. To your point. Yes. Didn't Netflix say that they're really not going to play the game in a more aggressive way in terms of user generated algorithmic content, lower cost type stuff that they obviously do believe that their that their core is is scripted. and it's premium content. And at the same time, we're talking about what TikTok and YouTube get. Look at the box office, okay? People are spending, if you have something that costs a lot of money and people think it's worth it, and that's part of the Netflix story, too, because they do whatever they have in terms of a film slate, you know, releasing them in theaters, at least for a little while, is, you know, money you're going to be grabbing off the table that was sitting there.

32:00I do wonder when it comes to engagement, though, whether they ramp up even more in sports and live. And potentially even in news, which have not really been to me. And if they're going to be the new bundle, I think they have to be organized more like a new bundle, right? Where you have like categories and this and that, not just like one big mass of stuff. Right. That it thinks it knows what you want to watch next. Yeah, Netflix, the biggest S &P loser at the moment. We talked about SpaceX at the top of the show, David. It's kind of interesting how even though there's such a new public company, you could draw lines from them straight to Legacy Telecom today.

32:35or straight to the airlines even today. The airlines, because United is a user of Starlink, right? But the T quarter is very interesting. Yeah, AT &T and John Stanky. I saw him at the Goldman Sachs conference back at the beginning of September. We had a conversation around Starlink and its impact as a competitor for the likes of AT &T. It appears to have been a pretty good quarter for AT &T. Just forgive me here while I grab some of my notes. He's got a lot of them today. Yeah, 65 cents. Revenue up as much as 5%. Adjusted EBITDA also$12.5 billion, up 5.4%. Kind of all on target, free cash flow targets, certainly, I think as many expected.

33:15You know,$18 billion plus this year, $19 plus next, up to$21 billion plus in free cash flow in 2028, with capital investment of around$23 to$24 billion. I can remember when, by the way, those were the largest numbers you'd from AT &T being$23 billion. Now, somebody spends that in a month. It's just incredible. But that said, to Carl's point, it may be this continued question around Starlink and its ambitions for a terrestrial cell phone network. Remember the spectrum it bought very recently from that company, Grain, and on from there that may be having a bit of an impact. We do have some sound from Stanky.

33:56No, we don't have it. All right. But he was asked on the calls, you might imagine, really around broadband, where we talked about Starlink as a key competitor for quite some time. He sort of is indicating, you know, listen, in a rural area, sure, but 90 plus percent of their, actually 99 percent of their fiber and everything is in urban and suburban areas at AT &T. And they just don't see it being able to compete as much with the combination of what they can offer for a wireless and fiber to the customer as they continue to grow their footprint. Talking about getting to, I talked to the CFO this morning, 60 million fiber locations by the end of the decade.

34:35Yeah, it's a huge gap between, you know, even what Starlink thinks they can do, they're buying Spectrum. And, you know, they're going to, this story that they're going to be able to deliver it to handsets and local, it's just such a long, a long way. It is a long road, and it's still very much unclear whether there's ways to leapfrog what would be an enormous amount of time and money to get everything set up terrestrially to really deliver. For sure. And, you know, I also, then you have to make the next step of saying, you know, AT &T and Verizon, they trade at, like, single-digit multiples. Like, this is the business you're attacking.

35:08Do you really want to get into this? How exciting is it, really? How much margin are you going after? Yeah. Stay in space, man. Oh, exactly. Yeah, you're alone up there. You're the only one who can get stuff up there. It's getting crowded up there, too. It is. But they kind of still have a monopoly, don't they? I mean, basically, the U.S. government relies on SpaceX to send everything up. Actually, a lot of governments rely on Starlink. And that gets us to the geopolitical angle on all of this. Let's get to Eamon Jabbers with some of that. Morning, Eamon. Yeah. Good morning to you, Carl. The Wall Street Journal is reporting that Elon Musk ordered the slowdown of a military grade version of Starlink that was relied upon by Ukraine last week.

35:46They're citing people familiar with the matter. The journal said Musk capped the speeds at which Ukrainian hardware could stay connected to the satellite-based network, rendering some offensive drones and interceptor drones virtually useless. But the paper also reported that one person said Musk and President Trump discussed the matter before the decision was made, and multiple officials said they discussed it again after the decision became public. Now, President Trump said he didn't order the slowdown, but he would like to know who did. And Elon Musk said last week that Starlink's systems for governments, which are known as Starshield, are, quote, owned and controlled by the U.S.

36:28government. Any limits on speed or usage are decided by the U.S. military and ultimately POTUS, the president of the United States. But both Secretary of State Marco Rubio and Secretary of Defense Pete Hegseth publicly pointed the finger at Musk's company. Here's Rubio. The important point is we cannot direct a private company as to the decisions they make or not make. What I can tell you with certainty is the president of the United States, nor anyone in our system ever requested that any changes to that system be made. And that's what we said repeatedly. Now, Secretary of Defense Pete Hegseth said the U.S.

37:07hasn't made any directives towards Starling. So, guys, the question comes down to exactly what President Trump may have said to Elon Musk before the service was throttled. Was it a directive? Did he express a preference at all? At this point, it's still a mystery. Back over to you. Given that whole controversy, Eamon, and even when you consider what Musk said about Ed Bastian over at Delta, I just wondered, does SpaceX or Starlink develop a reputation for being either an unreliable or at least a combative vendor? Well, I think if you're in business and you're dealing with SpaceX, there's always sort of this Elon Musk asterisk around it.

37:46You just don't know. He's kind of a wild card. You don't know what he's going to do, whether that's going to attract positive or negative attention in any given day. Right. He is really out there as far as CEOs go. And I think politically there's an overlay here, Carl. Remember, Musk is spending millions and millions of dollars in these elections in November trying to elect Republicans. And you've seen the White House publicly distance itself from this decision. The White House clearly feels that the decision to throttle Starlink and possibly Star Shield is a politically toxic decision. So if Musk wants to blame the White House for that decision, can he, given that it would be bad politics?

38:25And at the same time, Musk is trying to elect Republicans in Congress. So there's a lot of layers to this, and Musk and the U.S. government are sorting them out. But we're dealing with a figure as powerful in the private sector as maybe we've ever seen in American history. And that presents a whole conundrum and series of dilemmas for the Pentagon, for the State Department, and of course for Musk's business partners and rivals. I'm so glad you ended on that because I think he is unique not just in being the wealthiest man in the world, but also the power that he derives from basically, to your point, control of Starlink and, again, launch capacity to put up so much in space that the U.S.

39:06government relies on and to cross point other governments around the world. Not to mention, back to the other story we were following around SpaceX, which is a potential tie up with Tesla. But the Chinese have to be watching this kind of stuff closely. And, Eamon, they're going to have to approve any deal if it were to happen where SpaceX would buy Tesla. I mean, you know, countries around the world have to be watching this as well, don't they? Yeah, and that makes Elon Musk almost a nation state unto himself, right? He's got his own foreign policy objectives that are independent of the U.S. government.

39:39He's got his own financial and business objectives in these two different companies that are different companies for now, but are they going to be in the future? And so there are layers to this that are new in the history of American capitalism. You know, you think, you know, the Rockefellers or, you know, previous generations, you know, Howard Hughes might be a similar type figure, but he had nowhere near the influence that Elon Musk has today. And, you know, you struggle to think of figures in the past in American history who had this kind of power, maybe Hearst or somebody like that. But Elon, because he's got access to space, he's got media through X, he's got AI through SpaceX, he's got his finger in so many different pots.

40:27He's probably more influential than any of those figures and maybe all of them put together. Eamon, appreciate that. Really interesting. Eamon Javris covering all things SpaceX. To your point earlier about CoreWeave and the NeoClouds, Mike, back to 60 on this one. Yeah, already kind of lost that little gain. You know, even Micron is back under 900. So that group is definitely kind of guilty until proven innocent for the moment. But the rest of the market, you know, the majority of stocks are up and they're trying to kind of rotate away from, you know, from the blast radius. Yeah, I do wonder how if we're going to watch now Tesla trade in some way with SpaceX, because I know Tesla shares are up.

41:08We don't know what the ratio may end up being, but you do wonder if it's up. Will Tesla be up in some way and vice versa? Yeah, and even watching how Tesla trades off of earnings later to see if there really is much of it. I mean, a lot of times Tesla doesn't trade that dramatically off the numbers because you already know the deliveries and you're not really sure what else it's supposed to trade on. But it is interesting. And I'll just point out again, Meta, you know, I mean, the way that stock just sort of raced up to the precipice of 800 all the way back down below 700. It happens so fast, but, you know, we'll see.

41:40That's a key to tell their cost of delivery from Muse and what their payback assumptions are and all the rest. Although 10 million downloads now on Muse. I did take note of the Evercore desk yesterday. Biggest question is the potential of a meta equity offering. Seems like a foregone conclusion. Folks seem comfortable that$30 billion in vanilla equity is doable, maybe$50 with an anchor. Yeah, that's, I mean, I've been talking about, that's been around for some time. Of course, Oracle came into that conversation until we learned they'd already done the at the market for$20 billion some time back.

42:12But that remains top of the list in terms of meta expectations. And they pull forward their earnings report, which is kind of the reason. It's going to be a big number. It's not going to be the 80 plus billion, the 80 billion that we got from Alphabet last spring, but it's not going to be nothing. So with that, Dow's up 100. Watch bonds today. Mortgage apps were down. Again, that's, I think, seven straight weeks of declines in mortgage apps. And this particular week was very weak, the worst since July. That said, 10-year hovering not too far south of 5.1. Stay with us. Watch the airlines today.

42:49United actually had a shortfall in Q3 EPS. 254 misses 261, although revenue was up 17. Fuel expense up 62%, although maybe some of the airlines trading a little bit better today as Brent is back below 109. Take a short break. We're back after this. The most important thing is we have to make sure that the agent is secure. The agent is autonomous. And it's an autonomous system that has access to files, has access to resources, networks, access to tools. And we need to make sure that the privileges that we provide this autonomous system is minimal and that we constantly monitor it. We have to create extremely secure technology to make sure that we could develop these agents and deploy these agents safely.

43:41That was Jensen Wong earlier today in Berlin doing GTC Berlin, showing off some new plug and play. Vera Rubin racks, stocks back above 219. Yeah, you know, sort of faintly participating with everything going on, certainly acting defensively, too, versus some of the other names. It would be nice to know how we're supposed to insure all those things that he said. In other words, does it mean slowing down? Does it mean, you know, adding boundaries and complexity? Who knows, you know, what it all actually implies for what we're supposed to do. Some of these days when the kind of hardcore CapEx plays are for sale, you'll see the AI disruption basket perform pretty well, like the Gartners and all these other kind of quasi-software businesses that will get a bounce.

44:27So it's kind of interesting that the market is sort of thinking if we slow down there, that maybe that they have their life extended a bit. I was going to ask you, if we look at like a six-month SMH, that level that we keep testing at around 550, did we hold it a third time here over the last few months? I think in SOX terms, and it's more like 500 on the SOX. And, you know, just under that was the lows. So the general story has been one I keep talking about, which is May, June was the speculative peak in this area. We may never see it again. We may never see it again in the valuations. I'm not saying the prices, but in terms of the angle of ascent and the frenzy and all the rest of it.

45:05So it is kind of staying on this plateau to a fair degree. You see that the July puke in the end of the liquidation of situational awareness and everything. So it's hanging in there. It should bounce. Everyone keeps saying that it should bounce. History says we should get this bounce. If it doesn't, probably not great. And if it does, be suspect of it until it really gets us to the skate velocity. Interesting takes on what chips are doing. 77.40 are awfully close to it this morning. Nice little gain in industrials, up more than 1%. IT, almost 1%. You've been listening to the opening hour of CNBC's Squawk on the Street.

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