Squawk on the Street 10/19/26

0:00This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and 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. Something amazing is happening in networking. Organizations are scaling with less stress. That's because CDW is designing and implementing intelligent HPE Aruba networking solutions that simplify and secure operations.

0:45With automation at the center of your data center, growing pains can be a thing of the past. HPE Aruba Networking and CDW. Make amazing happen. Learn more at cdw.com slash aruba. Market moving insight and analysis. Join Jim Cramer, David Faber and me, Carl Quintanilla, on the opening bell hour of CNBC's Squawk on the Street. Good Monday morning. Welcome to Squawk on the Street. I'm David Faber with Jim Cramer. We are at post nine of the New York Stock Exchange. Carl has the morning off. Let's give you a look at futures as we get ready to start the trading week. One half hour from now, we are set up for a higher open, in particular the NASDAQ and some of those names that were beaten down last week.

1:25And that is where our roadmap begins. Bit of a tech turnaround. AI-related names rallying in the pre-market. That does follow significant losses, fairly significant at least on Friday, for example, and Wednesday. Plus, Anthropik and Elon Musk, both pledging separate public donations in a sense. We'll give you details there. And JPMorgan upgrades one major chip stock, saying their confidence is building in that name. And those shares also higher in the pre-market. Just cover your short there, huh? Yeah. All right. Let's get right to the markets following. One of the worst weeks for the S &P and the Nasdaq, at least since June, CoreWeave shares, which we focused on a lot last week, are rebounding.

2:08It was down more than 20 percent last week. And it's not alone. It leads that pack. But, I mean, Dell shares, it's funny. I talked to Michael on, what was it, on Tuesday. And that stock just went down significantly because of concerns, Jim. Of course, not about financing for data centers. It's not in that business, but it is in the business of putting stuff in those data centers. And so if there are fewer of them getting built, well, there might be less demand for that. And on from there, HP, of course, same business. What's the setup this week? Well, I think that we've been very linked to the Cosby.

2:44We've been very linked to Samsung, SK Hynix. SK Hynix up last night. That really helped the group. There's a little knee-jerk analysis there. I think that we're all in a situation where we're worried about whether there's going to be overbuilding of data centers, meaning that the spec guys, the Nebiuses come forward, the Irens come forward, and they keep building, versus the idea that if Corrie was running out of capital, can't buy any capital because rates are up, those guys are really in trouble. I come back and say that there's tremendous demand and there's also an inability to build. CoreWeave knows how to build.

3:29I think we're forgetting the fact that not all builders are equal. And the reason why CoreWeave has been able to get such a break is that everybody trusts how they build. I mean, even I think Elon Musk does, but the fact is Elon Musk's yikes last week. the yikes that he said on October 13th in reaction to the bond yields. To the bonds. The unsecured bonds accord we've, during the course of last week, traded at a yield as high as 15%. Now, they're only about 20 % of their overall debt stack is that unsecured. But it did point to the cost of capital. But I will come back to you and say, all right, Jim, but it's not as though the potentially higher cost of capital or the ability to get it is not going to continue to be an issue going forward.

4:16We haven't dealt with this and said, okay, that's done. We care more about power. We know that there's – Microsoft is a big – they're a very big in-trader house. They're a very big core. Microsoft's going to continue to build this. Who's going to continue to build? Do you know what I think may determine on this? The earnings that we're about to get. and the commitments to CapEx and the notion of whether this stuff can be built or not. Right. I mean, look, I could build a thesis that if you think that Corweave is in trouble and you think that Oracle is in trouble using CDSs, right, then what is happening with Iran and what is happening with Nebius?

4:56You would have to, if there are hedge funds out there, you would be shorting Urban and Nebius or you would sell those and at least recognize that if Oracle can't do what it says, Nebius is not going to have the business that it needs. All true. But again, I do want to make the distinction between the demand side, which, I mean, we're going to hear from Meta later this week. That's why I say community earnings. CapEx, right, they were$145 billion. I mean, nobody expects that that's going down, only going one way. Right. Particularly given the comments we got from Zuckerberg during the interview he gave to Patrick Collison a couple of weeks ago.

5:33Correct. The Cheeky Pint podcast and things like that. But it doesn't mean that the expense that will be incurred by the core weeps of the world that have to continue to issue debt won't be higher than it might otherwise have been and therefore impact their potential returns. And components have gone up in price. They're not going down in price. Aren't we even bothering to mention the election and what it means for data center construction? Yeah. Yeah, that's another overhang. But, I mean, when you come back, I come back to, you know, I'm reading Jonas's note because he puts a note out every day now.

6:09Adam Jonas from Morgan Stanley, the man who follows only one company, and that is SpaceX. That's the future. But we agree with that because it's$2.2 trillion. But we have no choice. It is the most important. It's equal to$2 ,200 billion companies. Well, I could have a SpaceX station. Yeah. And I would be able to. I'd kill it. I would kill it. I'd go right against CBC with it. But, see, I'm signed up as me. Huh. Now, SpaceX has got mind share like I've never seen. It does. But I wanted to mention it. I don't want to just get stuck on the Jonas covers. One company, Dan Ives covers, I don't know, the entire world.

6:45But Penn State was this weekend. 49 companies. In it, he notes that one of the, and he's positive on SpaceX, as you know. But he says, listen, we're modeling$60 billion,$80 billion, and$90 billion of issuance in 27, 28, and 29. Well, that crowds out. We expect vanilla investment grade at this time, but SpaceX has a range of options at its disposal. This is the biggest risk to our model, and we don't want to downplay it. That's what we are dealing with, Jim. That's what we're dealing with. The enormous need for capital from all of these companies, including SpaceX, which, of course, is committed eventually to orbital data centers and is being considered now a hyperscaler.

7:25Obviously, you've got so many different parts of its business. And it's a vicious competitor to a lot of companies, including CoreWeb. Now, it's not as though we haven't operated in scenarios where we had a 6 % 10-year treasury and things were fine. Right. But I guess it's just the but. The ROI, I mean, you have to have the other thing is that I think that you and I would disagree on. What is the worth of an H100? That's the basic Nvidia. Right. Let alone Vera Rubin. What is the worth out six years? Because remember, Corey depreciates out six years. So on the seventh year, it's free to trade. Is that free compute?

8:00And then do we wrap up the compute? Look, Larry Fink last week said here that the next mortgage back is going to be compute. Yes. Yet no one that I know has actually gone to step forward and bundled compute or made compute two-way market. Not yet, but I mean this effort to securitize chips and GPUs is going to be very important because conceivably it would lower the overall cost of capital. That it is going to happen. Yeah, because if you create a securitized market that is collateral, of which is GPUs, you conceivably lower the overall cost of capital, right? Totally agree. And that's what I'm waiting for, but I'm not getting it.

8:38It's going to take a while. No, but it's going to take a while. These markets don't happen overnight. No, absolutely. What you're talking about, a pretty significant effort that involves a lot of data and a commoditization in effect. because if you're creating this, I don't even know the answer to some of the questions. For example, if you've got a GPU sitting in a server rack somewhere here, is it the same as the one that sits here? We don't know. You just drew a distinction between CoreWeave, what they do, and maybe what some of the other neoclads do. Is it the same or not? No, but don't you think that Morgan Stanley would have mentioned it on its call, that Goldman would have mentioned it on its call?

9:19I don't know. Maybe they weren't asked about it. We asked Larry Fink about it last week, and he gave an answer. He talked about how they're putting all the data together right now, and they're working on this. Let's make a two-way market. You know, these guys come out and say, listen, the market's wide open. Where's that? Why weren't they ready? For heaven's sake, their earnings needed. I think the opening was with Becky when they all sat around the table and talked about the half a trillion dollar opportunity there. Well, I can sit around the table with you. It's not sit around the table and I want a two-way market.

9:51All right, but that was really not very long ago. You're being very impatient. Impatient? Yes. I'd say that it should have been done yesterday. You're being very impatient. Let's get back to, let's get back to, yes. Is it the right focus? I happen to think that everything we're talking about is the right focus right now, because that part of the market was a get-out-now part of the market on Friday. I mean, if you don't look at it on Friday, I think you're just gravely mistaken. Will the bounce last? All right. Will the bounce last? I mean, this morning we've got a lot of people defending Corrieve, including Goldman Sachs, which upgrades the stock to a buy.

10:25They talk about its annual run rate on revenues per megawatt and its unlevered internal rate of return and, you know, any number of other things saying they believe it's differentiated from other neoclouds in its performance slash cost metrics and its ability to execute on ramping new supply. Okay, but keep coming back to execute. People just think that everybody executes equally. When I met Michael Lynch the first time I talked to him, he said, look, we know how to build because we built for Bitcoin. Now, first I said, OK, oh, that's just too dandy. Listen, but Jim, you put the question to me.

11:01I'll put it back to you. But it's a tough one to answer. Is this is this a real bounce or are these kinds of concerns going to dog these shares for quite some time to come? I'll throw it back to you and say, tell me where rates are going. All right. I don't know. I mean, they're down over the last few days. The flight to quality end made me feel that Corweave is doing better. Now, you look at the Corweave debt. There's that Corweave non-public debt trade that looks like it's at par. I think there's a fabulous piece out by Barclays saying, listen, the SVB redux that you thought about, there's the SVB, that it could be collapsed like 23, not going to happen.

11:35Now, I read that and I say, I didn't even think it was going to be a collapse like 23. Oh, my God, he's defending something I hadn't even thought was going to happen. The SVB redux, what is this? It's going to be that this is going to, well, no, if I put it in your head, you're going to be like, this is the collapse that we saw in 23. Could Corweave cause a collapse? Oh, my God. I know. I mean, well, it's just a fabulous piece because it throws a straw man out there. And then he says no. No. Yeah, but meanwhile, it's going to still scare people more likely. Of course. I was scared. That's it. I hadn't even thought of that.

12:04No, look, Corweave, looking at Corweave, can that, Corweave is in quiet period. I know. It's funny how many days we started the show talking about Corweave. But we do it for the reason it is that it is reflective of so much more in terms of the access to capital and the cost of capital. It's not just about this one company. But don't you think people at home are saying, why are they talking about, Corey, why aren't they talking about how Microsoft is doing well or the Amazon upgrade? Why are we trying for that? I know. And I think Ben Horowitz on the All In podcast saying AWS is killing it. That's me sort of saying, crushing it.

12:35I don't know. I know. Right. And I feel like, well, let's not get too caught up because there are other areas of the market. I happen to think that Meta could have a good quarter. Yeah. Meta could have a good quarter. Well, we're going to find out. We're going to find out soon. Everyone's just kind of, remember the war? Yes. Yes, there's two of them. Well, there's the one where they're going to go to Munich and they get peace in our time, but they're not going to invite the Czechoslovak. Oh, I'm sorry. They're not going to invite Ukrainians in order to get peace in our time. Yeah. That's very good.

13:03That's what you do. You absolutely repeat what happened in Munich, but you pretend that it's not Munich. You're making deep historical references. Obviously, you read a lot of history, but we're talking about Chamberlain here, right? They cut out Czechoslovakia. Yes, and he said, yep, I looked Hitler in the eyes, and it's all good. Yeah, and I don't want that because we learned in school, like many of the things that we learned in school that have been defrocked, so to speak, that we learned in school that that was the turning point for Hitler. Now, you're never supposed to mention Hitler, but I don't know.

13:37He may be in play if you do another Munich. If we could just sit here and not talk about him and not mention Munich, I think that we're raising Munich. Because we can get peace. We can get peace, suddenly get peace. And maybe peace would mean a lot more oil, and then oil goes down, and the Republicans win the election. They don't have to sue everybody who wins, you know, every time who wins. These are the people. When you talk about what people say, they say, Jim, the election's all that matters, not Corwee. Come on. I mean, really good guys. Like, my best guy. My best guy. It may be. The midterms are not unimportant.

14:11We know that. Well, they're not unimportant. And particularly even for the conversation we were just having around data centers and things like that. Did the Democrats have their lawyers ready for when the Republicans say? For when they say that everything was not on the up and up. I don't know. You know what? Let's turn up kind of a nice story. What do you have? Anthropic. Oh, yeah. Yeah, that's good. The$50 billion, or at least it might be as much as$50 billion. What the company actually announced is that it's going to commit 5 % of its shares to a new public benefit fund, saying that fund could support nonprofits, address AI's impact on workers.

14:43That's really where their focus is, given what they also say, of course, is the potential dislocation that will take place as a result of the technology that they are at the forefront of. Separately, Elon Musk posted on X that next year he's going to give one of his SpaceX shares to every kid in America. No follow-up there in terms of what a kid is. Is that everybody under the age of 18? Is it something to do with the Invest America accounts? Although the way Michael Dell has given away$6.25 billion to kids in the poorest zip codes in the country and added to their Invest America accounts. No follow-up there at all.

15:18But Anthropic is interesting as much because, okay, if at$2 trillion, this thing could be a very large number, as we know,$100 billion. dollars. And then it also has pointed to the trust, the public benefit corporation setup that they have and will have. By the way, so is OpenAI. These are two public benefit corporations that eventually will both be public companies. Anthropic most likely sooner. Anthropic has this trust that has the right to replace directors. We don't have a lot of visibility on it. And then this also, there is this public benefit aspect where they're going to put aside shares to just benefit the public in general.

16:04Maybe we should step back on this one and say, this is just value judgment good, that these companies make a lot of money. This could be terrific for the public. I mean, Elon Musk would give away a share. I first saw it and I said, I was cynical. And I said, why are you cynical? Why not just think that's terrific? You're the richest man in the world. And you're like John D. Rockefeller, but you're not giving out dimes. You're actually giving out shares. It shows me that he is doing it. But again, I'd like a little more granularity as to what that means and what the plan is. But if, in fact, it happens, that would be a positive, as would conceivably, again, depending on where anthropic is valued.

16:42Does it matter? Is this a new form of capitalism? I don't know. I mean, Anthropic is more specific because they do talk about the potential dislocations that are going to take place as a result of their technology and trying to do things to at least ameliorate some of the distress that occurs as a result. Right. I mean, they were talking about on Squawk Box how our country historically has not been good to help displaced workers. By the way, the OpenAI Foundation, remember, I mean, that's going to own 26, 27 percent of OpenAI. Well, it's going to free the government. The government doesn't have enough money to do these things.

17:15Right? Our government does not have that money to this. No, we don't. Wow. We, in fact, are running a$2 trillion budget deficit as we speak. Right. That's why when I sit and get up every morning, I see Bitcoin, right? Yeah. And you say to yourself, well, wait a second. I guess all the younger people recognize that Ethereum has more full-fated credit than the Treasury. Still to come, we're going to take a closer look at energy prices. We do have WTI. It's up double digits this month, but I think a little bit lower today. Last time I looked. Let's give you a look at futures, by the way, speaking of.

17:52We get started with trading here in 13 minutes or so. We are expecting a nice pop at the open. More squawk on the street straight ahead. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture. Vantage Score is changing that by modernizing credit scoring. Vantage Score uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments. Vantage Score safely broadens access to the credit economy and brings 5 million mortgage-ready borrowers into the market.

18:32That's why top lenders like Rocket Mortgage, as well as nine of the top 10 banks, rely on Vantage Score 4.0. With higher predictability and greater access to credit, everybody wins. Get started at VantageScore.com. At Fanatic Sportsbook, we're talking real fan cash on every bet. Spend it on jerseys, tickets, collectibles, and more. Rewards hit different here. New customers can bet and get up to$1 ,000 in fan cash over 10 days. Fanatics, the only sportsbook to reward every bet. Must be 21 plus. Gambling problem? Call 1-800-GAMBLER or 1-800-MY-RESEP. CT, call 888-789-7777.

19:15Hmm. Interesting. Something amazing is happening when teams brainstorm ideas. Devices are keeping the energy flowing. That's because CDW is building modern workplaces with Acer devices. Built-in security, uncompromising processing power, and fast connectivity help fuel collaboration so your team can innovate quickly. Wait, guys, that's a great idea. Acer and CDW make amazing happen. Learn more at cdw.com slash Acer. Let's give you a look again at where we stand. We're going to have a nice rally potentially in the NASDAQ. Let it come in. Let it come in. Don't buy it at the front. Don't buy it at 935.

19:58Don't buy that NASDAQ. Let it come in. Okay. Let it come in. Okay. And the S &P also looks like it will be higher. But plenty of names beyond just some of these names we've been focused on on tech have been suffering of late. Even the likes of a cat. Oh, my God. Or G.E. Vrnova. Team utilization of these. Some of them have been coming down of late. We're going to get to all of that when we come back. Take a quick break. We'll be right back. At Fanatic Sportsbook, we're talking real fan cash on every bet. Spend it on jerseys, tickets, collectibles, and more. Rewards hit different here. New customers can bet and get up to$1 ,000 in fan cash over 10 days.

20:40Fanatics, the only sports book to reward every bet. Must be 21 plus. Gambling problem? Call 1-800-GAMBLER or 1-800-MY-RESET. CT, call 888-789-7777. MA, call 800-327-5050. NY, call 877-8HOPE-NY. MD, visit mdgamblinghelp.org. Offer not available in all states. Terms apply. See Fanatics app for details. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading.

21:16Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.

21:57All right, we're going to get the first opening bell of the week. Let's start off, though, with the first mad dash of the week. Intel is another name, Jim, that has not surprisingly been down of late. And now we've got a bit of a rebound coming. Now, this is CPUs, which are supposed to be going to be very short supply, which I think is absolutely true, because Taiwan Semi can't make all the ones that they have. Intel building a foundry. J.P. Morgan had been one of the bears on Intel. and really vociferous about it. They go from a sell to a neutral, saying it's almost at their price target, and they actually hope that Lip Boutin, the CEO, is going to be able to build the fountain correctly and they'll be able to be very much a part of this.

22:40Now, you could say, well, he fought it, but I would say, you know what? Not bad. Look what he did. You know, here he waited until it went all the way down and fell apart last week. This was a good opportunity to upgrade, and if it goes down anymore, I think you'll go from hold to buy. So Harlan, sir, congratulations. I know you've been a voice saying it's not coming together, but you also made people money in the last few weeks if they were short or you helped them avoid a collapse. Yeah. Big position for the Travel Trust. Yeah, you've been a believer in this. You were a believer all. I mean, obviously you were a believer here and way back.

23:16So I want to give you your credit because it's been a great call. But I was a believer here. I was a believer here. You know what that's called when you're a believer here? What? Being wrong. but I am being made right, but that's not. So if you're one of our investors in the club, I think you'd say, but you were right before you were wrong. Thank you. You were right for more than you were wrong. I appreciate that. Thank you very much. All right. We got Intel along with this broader rebound. We're seeing, of course, keeping a close eye on the Nasdaq. We'll get to the opening of trading about four and a half minutes from now.

23:46Don't go anywhere. If you look underneath the hood in the numbers, The core inflation has been very flat before this month. It had been down for four months in a row. So core inflation is down. The food is below the Fed's targets. The prescription drugs have had the biggest decrease in history. Rents are down. So this is an energy shock. We will get to the other side of the Iran conflict, and those prices will come down. That was the Treasury Secretary on Meet the Press. A little very bullish. His view is very bullish. I don't see that happening. I think inflation means the number one problem in our country.

24:27And I think that I count on the Fed chairman to stop it. And I think he will. I think he'll lower. Yes. You think worse will continue to raise rates? Oh, I don't think he's going to stop until... I think he's going to let this one percolate. Because remember, we did get the... He moved. I would say he moved the third year. But I would say that he's the person who is the adult. And he wants inflation down. because it hurts the working person, and I salute him. You hear the tears building here at the New York Stock Exchange. Let's get to the opening bells this morning. Here at the big board, it's going to be the Season D Coleman Foundation in recognition of Personal Breast Cancer Awareness Month.

25:09Doing the honors right now. At the Manifest in Times Square,

25:28Well, David, I think that maybe we have to look just a little quickly at Cleveland Cliffs. Because Cleveland Cliffs is up dramatically on a percentage basis. and a lot of this good quarter. Congratulations to the team there. And I think that it's working because of tariffs. This is a chart. If you look at Cleveland Coast chart, that's a chart of the success of tariffs. The success of keeping China's steel out of Canada and United States. And if you think it's anything else, you're gravely mistaken. They're also going to be a real attempt to be able to cut the debt there. If you go back a couple of years on CLF, it has not been pretty picture.

26:09No, it's not. At all. They were obviously a big competitor for, I ran into them a lot, as you know, on the battle for U.S. Steel. There's a five-year. We didn't get much of a look at it there. And obviously they lost that battle. So, yeah, this has not been anything to want to have owned for the last five years, Jim. That said, to your point, trying to keep Steel out of this country, illegal dumping, things like that is a benefit. And Mr. Gonsalves, he has done a lot to be able to rally the administration to the cause of certain kinds of steel. The only reason I really mention it is because this is a company that a lot of people feel never was going to get its debt down.

26:51And that's wrong. They're going to get their debt down. I do prefer Nucor. I know Mr. Gonsalves wishes that were the case. He's a very competitive guy, and I do love him. But you know what? But if you really want to get into steel, you buy, you know, well, I mean, like, I have to tell you, Nucor is so much better than everybody else. It is. Yeah. Yeah. Well, I mean, the five years show it, don't they? Yeah. Take a look. Sometimes the trucks speak louder than words. And that's a nice move there. And remember, a lot of that is just commercial construction. Right. Auto. But you'd have to believe a lot of it's data center.

27:29Yeah. There we go. That puts it in some perspective there as to what you would have wanted to own during that period of time. Now, in terms of the ability of the semiconductors to continue to rally, I continue to believe that you must stay in touch with SK Hynix more than any other. And there I have a semiconductor cell-off. I wish sometimes we could put these up. This is a semiconductor cell-off and a core weave timeline. Yes. And you can see that last week was just the destruction of both core weave and the semis. So any sort of comeback, I think, is going to be tested again. But there were a lot of things that got hit beyond that.

28:06I mean, we were just talking about steel, sort of the industrials. But, you know, the likes, I mentioned this before we went to the Mad Dash, CAT, GE Vernova, Vertiv, anything that has benefited from the overall growth of data centers, had a rough week or two. I mean, by the way, yes, these stocks have been still what you wanted to own this year, but they came off the high significantly. True, but do you think it matters that Vertiv has a good order book? I don't know. I mean, Core Weave will tell you they have a great order book, so to speak. We can be very negative, or we can say, look, if rates don't go up, it may not be the end of the line here.

28:54I do think, by the way, that when we hear again the company's report, we're going to know that they may need CoreWave for more compute. We also know that Trader knows how to build plants and knows the problem that we have with electricity. And he's rather a bit of a wizard, even as we look at the bonds and think he overstepped. David, the issues are compute, electricity, Jensen what? Compute electricity and Jensen what? Well, because Jensen's chips, so to speak, have much more life than we realize. And everyone's saying that. Larry Feig was saying. And you talked about it. And Michael Dell mentioned it as well.

29:34Yes, he did. The H100, which was the question before we went public, was how are you depreciating those GPUs? In other words, how often are you going to have to replace them? Right. Because it's not enough when you build a data center, right? Let's call it a one gigawatt costs you, I don't know, just to put up the powered shell costs you 15 billion, maybe more dollars. And you got to spend another 30, 35 billion putting all the stuff in it. Right. If you're Oracle or if you're Core Weaver. And the question is, in five years, you'd have to replace it all. Well, OK. And so the answer may be no. Don't you think that Musk feels that that's not an issue?

30:12Because, I mean, here he is being paid. They're renting out their, right, their GPUs. And they're renting them out at such far higher levels than might have been anticipated. And that's really important. They did the deals both with Anthropic, which, of course, is compute-starved, and with Alphabet for Memphis, what they had there in spare capacity that wasn't being used by their own chatbot, Brock, their own model. Yeah, the numbers were enormous. Enormous. Enormous. and it helped boost shares of SpaceX and put it on this trajectory of being viewed as a hyperscale. Right. Look, I think that Musk was someone who, when he said, yikes, about Corweave's debt, and that was on the 13th, that really—and Chamath, too, late-posting Corweave Spanios.

31:03Yeah. That that was, you could argue, self-serving to Musk. Could have been. They are, in some ways, I guess, competitors. I mean, look, I am reluctant to criticize Musk. I think he's pulling everything off. He also had some funny, I think a funny tweet about compute. Basically, I say this all the time because all the reporting shows that. There's been nobody who said there's a diminution in demand. Exactly right. And demand continues. Right. All of those who are building this compute continue to build it as quickly as they can. Right, and the blockages, zoning is a problem, and power is a problem.

31:42And let's not forget, it's not like Jensen-Wang can get all of the chips that he needs out of Taiwan Semi. Just like Intel's having a problem. You could say that ARM is having a supply problem. Really? Yes, well, they can't get what they need. Yeah. So, I mean, NVIDIA was up four about a half hour ago. Yes. And this is what I was worrying about. This is that retest that I think you have to have. Four down to, you have to bring out these sellers, you have to clean them out. We have to find out whether there were some hedge funds that had overextended themselves. Perhaps that was part of the problem.

32:18We don't know. We don't know. Last week, there were any number of, as you typically see, sort of some rumors around. Wasn't able to, not situational awareness, which really still doesn't have a public book of equities. I did report on them buying options some time back. But some other names, some other funds that had similar trades on, were they suffering last week? Of course they were. Were they getting taken out? No. I heard nothing of that. Look, people have to realize this. What is the definition of a skittish market? Okay. Vertiv was up 4. At one point, it opened at 214, and it's at 208. I mean, buying that open makes you feel like, I don't want anything to do with stocks anymore.

32:59That's what I'm trying to prevent. Verted shares, which for the year are still up 20 percent. The stock is down 28 percent over the last three months. No, it's just we're trying to figure out whether it's a correction or whether it's the end. And I'm saying it's a correction, but I can't tell you when it's going to end. There you go. I like those. I like that. Thank you. Well, I mean, Caterpillar. That gives me something. Look, everyone got very excited because Caterpillar, the way to be able to get power very quickly is to put together a lot of Caterpillar turbines. They can do that. And hedge funds have done that.

33:28And then suddenly all we cared about, again, was rates. Because if rates went up, then we have to believe that a lot of spec proposals aren't going to go up. And you don't buy Caterpillar when the Fed is raising rates. What was kind of weird about last week was the 10-year hit 5.3 on, what was it, Wednesday? And then came down. I know. I know, but it came down for the wrong reasons. It came down for the wrong reasons. And here we are, you know, sort of pushing down closer to almost having a 4. Yeah, but at what point do we say, you know, they're going down because inflation is under control or going down because they still have quality and there is a plate to quality.

34:05When I saw that, let's just use the Caterpillar as the analog. Like Caterpillar doing incredibly well. Why? Because there was a lot of construction and we also used the turbines to create power. Then rates go up and no one really realizes it. But, you know, what's happened is the stock got crushed as if it had nothing to do with the data center because rates still trump everything. And that's what we can't forget, that Warsh is trying to slow this economy down and be able to make it so that there's less inflation. And we're seeing it across the board. That's why Philip Warsh had an unbelievable week.

34:38That's why Coca-Cola is having an extraordinary moment. Yes. You don't buy Coca-Cola when the economy is boring. No, Coca-Cola shares are, I know, up 34 percent. Now, think about that. Think about that. Far outshining its competitor, Pepsi, which reported last week, and is certainly the subject of some scrutiny. Well, that's GOP-1, no matter what they do. And they raise the price repeatedly for potato chips. There's no really price discovery of what a potato chip's worth. But I would say that Coca-Cola, which is a very well-run company, a Buffett company, by the way, is on its way to an incredible year.

35:1534 % for a soft drink company? Well, they're just well run. It's very well run. That can help. It can really help. Yes, I think Henry K. Braun is going to follow the tradition of James Quincy of just excellence. I really believe that. You know, you mentioned rates. I want to come back to that for a moment if I can. Because, you know, and again, I mentioned this earlier. During the dot-com boom, we had rates that were above where we are right now. Yes, we did. And it wasn't a gating issue. We have to get used to it, perhaps. Because I remember 6-7 was not yielded. A lot of the spend there may have been as a result of equity that was being raised by companies that had no business raising anything because their business models were completely flawed, as opposed to now where we have the biggest companies in the world and once the most profitable companies in the world that are willing to go to free cash flow negative and issue debt, even though their balance sheets are still strong, are willing to finance this thing.

36:12If you want, the analog of the bears is that Lucid, Rich McGinn, that Jensen is Rich McGinn. And I'm just, I rebel at that. Jensen Wong is a visionary who is seeding a lot of different companies because otherwise they wouldn't have the capital. He knows that fiber is the way. He does like$50 billion in free cash flow in a quarter. Well, he's not throwing the money away. He's not putting in an incinerator. He's giving the companies. If he wanted, he can just turn off his$150 billion buyback. What's he going to buy back? $150 billion over the next 18 months? I've been calling for half trillion. We'll throw some money this way.

36:48I've been calling for half trillion. I mean, it is the National Bank of NVIDIA. Yes, it is. But the National Bank of NVIDIA was up four now as only one because people were too excited. My question about NVIDIA, Jim, is how long can they maintain those incredible margins? When are competitors going to really come for them? Well, look, I'm a big believer in Lisa Su. I think she does a remarkable job. There was a rumor this weekend that she's having the GPU prices going down. I think that rumor is completely false. But it doesn't matter because there are so many people who are nonbelievers right now.

37:19And you couple them with the incredible amount of money going against it. Here's a little one. 99.7 % of the dollars spent in this election are campaigns critical of data centers. 99%. Is it time to stand up in the data center and maybe take the other side a little bit? Some people have been, or at least been trying, but yeah. Me. I know it's not. Data centers can be the secret. You have to just bargain with them. I would argue, Jim, it's not about the physical data center itself as much in some ways now as it is the physical manifestation that the data center represents for AI. Right. and all of the anxiety that is brought about AI involving jobs, involving society, involving so many different things that we are not going to have control over that are going to change.

38:10Well, the Luddites did destroy the looms, but they couldn't in the end win. There were too many railroads built, so we had a lot of bankruptcies. The ICC got involved. I do think that the negative side of every industrial revolution is going to be met four or five years later by a positive side, but not insulin. Right. And so therefore, I think that what's going to happen is it going to be a little bit like fracking. You know, New York State doesn't allow fracking, even though the southern tier has a huge amount of natural gas. I know. That's unfortunate. They can block fracking. They can block data centers.

38:45That's unfortunate because we're bringing the price of natural gas down because we have pipelines that don't go to New England, you've taught me, which makes no sense. Well, people, flaring is bad. I think they wouldn't flare. I know. Meanwhile, I do want to come back to this AI and data centers and this Anthropic. It's not a donation. What they announced is they're going to commit 5 % of their equity to a newly established Anthropic public benefit fund that will be subject to shareholder approval and receive an additional 2 % of company shares at the board's discretion. each time Anthropics valuation goes 50 % above some baseline that also hasn't been disclosed.

39:28But what's interesting, Jim, back to this other discussion, of course, is it will support nonprofits, direct payments to particular populations and efforts to address AI's effect on employment. And so it is things like that that are part of what I think you could argue the electorate is concerned about, perhaps, when it comes to the opposition to data science. But I think it might— The data centers, not just the data centers themselves. But I think Michael Dell and Brad Gershner have been at the forefront of a movement battle. It's a battle of the soul of ownership society versus, say, Europe, where I don't really know what Europe's doing.

40:03I get all that, but that's not about what I'm talking about. No, no, I'm saying it's two-track. I'm talking about worries about employment. No, absolutely. It's two-track. I think it's a double down on capitalism. I think the worries about employment should be addressed. Yeah. Same as the worries about security. I was with a very smart person who shocked me this weekend. Very smart person? Well, okay. Are you typically not with very smart people? Yeah, I'm not very smart. Do you know the very smart people you're with over the not that smart people you're with? Do you actually make that public?

40:31Do you say you're a very smart person, but you're not that smart? I used to. You didn't do that. Then you throw a phone at them. Well, I made mistakes in my cooter. I was a hothead, but I was glad. Tell me what the very smart person said. He said, look, I'm so frightened about the machines. And I found myself talking about George Kurtz and Nick Cash Aurora, CrowdStrike, Palo Alto, things that are being done. And he just said, those people don't know what's going on. And I said, no, actually, I think that they do know what's going on. There are a lot of people who are very afraid of what's coming.

41:08And there are others who obviously talk about the benefits, significant benefits that will accrue to us as a result of the advance of AI. You're a rich person and you come on our network. Here's what you say. You say, look, I'm very worried. The budget deficit. I'm scared. I think people should stay away from the market. And then you have people who have no money who listen to that, and they're never going to get a stock that makes them a millionaire. Yeah. Which of which we know there are many, many, and they're in front of us, including Apple. I will only respond on this, and this is a discussion we continue to have.

41:42When Elon Musk, I think he was standing next to the president a couple of weeks back and talking about AI, he said, I don't think we're going to have universal basic income. He said, I think we're going to have universal high income. I'm focused on the universal. Well, what does that mean? Does that mean that, in fact, everybody's going to have high income? And by the way, the societal changes that will take place as a result of moving from capitalism to universality of income. Well, the politics of guaranteed income was something that Moynihan believed in. Daniel Patrick Moynihan? That was his idea.

42:17And he convinced Nixon to do that. Now, Nixon, while he's discredited, I'm not trying to back. But that was the politics. Because Nixon felt that there should be a level that everybody makes. Because Nixon, there were. Because Nixon was a socialist? I don't have a word about Nixon. But Nixon believed that there should be some floor that everyone should have. And then that went out of the—that was really Moynihan, who I thought was a great man. I studied with him. I thought he was a genius. He was. By the way, he's a smart man. You know where he went to undergraduate? Yeah. He went to Tufts. He went to Tufts?

42:52Yeah. I mean, he taught at Harvard, of course. I loved him. But we'll claim him DPA. So great. Benign neglect. Remember that? Okay. Well, it's not everything he did was great. All right. Look it up. Before we head to break, let's give you a look at bonds. We talked about a treasury, of course, which have backed well off 5.3 percent or not well off, but we're hanging around 5.1 percent right now. You see it there, although moving a bit higher on yields as we speak. Jim's been talking a lot about inflation and worse this morning. And Apple's now them. Apple. Darn it. Apple computer. Apple. You know what they call it?

43:25It's not Apple computer anymore. That was about 17 years ago. What do I know? I'm living in the past. What can I tell you? You're smart, man. I'm very nostalgic. We'll be right back. Coming up later this morning, Gartner predicting that 80 % of neocloud companies will cease operations by 2030. This was last week. This was last week, but to read it again, the shorts are going to just go nuts. Well, the reason I'm mentioning it, Jim, is because the forecaster behind the report is going to join us in the 11 a.m. The forecast is the forecast. Well, John Lovelock wrecked these stocks, and I bet John Lovelock is going to wreck them again.

43:57All right? Good work, John. Good work. Sink up. He's going to be our guest. Sink up. I'm looking forward to hearing what he has to say. Very rigorous. And I'm looking forward to hearing what you have to say for Stop Trading. So get ready for that. So bye-bye. All right, it's time for Stop Trading. He didn't tell me what it's going to be, so it's going to be a surprise for me, too. It's going to be Sandisk because Sandisk and Western Digital really didn't lead us down. Those are considered to be two commodity plays that have not added a lot of capacity to the data center. And if there really is going to be fewer data centers, they are the worst stocks to own.

44:29And here we go. They're doing well today. I do come back to the fact that every one of these charts looks the same. And unfortunately, they look a lot like K2. We did not mention Elizabeth Holmes, but... I haven't seen the documentary, the Elizabeth Holmes documentary, yet. Jeff Morrison, my office, said we must see it. He won't even give... He says we can't give anything away. It's kind of like slow horses or something. Wow. I know. Actually, I've got to do the last couple episodes of that show. Season 4. Did it? Yeah, it got too violent. It was kind of violent. All right, what do you got on your show tonight?

45:00I have paychecks, and John Gibson is, so the Fed, by the way, is advisory. I want to find out how things are going, small-medium-sized businesses. You know I'm completely transfixed by small-medium-sized businesses, who are the biggest beneficiaries of the data center. But you know what? We've got to throw them under the bus because we've got to stop the data center. That's what these politicians do. Stop. I think they should go get everything you can out of someone who builds a data center. Go get$50 ,000 bonuses for teachers. Go get police to be refunded. Just do what's right. get the money, let them build.

45:31There. It's about as political as I'm going to get. Oh, no, you're going to get more political than that. But I enjoyed that. Thank you. I'm against the Munich conference. You are. And by the way, that's Putin saying, let's have China, let's have Russia, let's have the United States decide what happens to Ukraine. And that seems very much like Munich. There it is. OK, read about it. 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.

46:08You 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. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

46:38Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast or find Schwab Market Update wherever you get your podcasts.