AI Deals Go Round and Round & Cava’s CEO 8/12/26

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1:22Bring in show music, please. them. They help raise the debt. They find the sites. It's vendor financing. Then the salmonella and cyclospora outbreaks hitting restaurants. CAVA CEO Brett Shulman has his eye on consumer confidence.

1:35Dr. Scott Gottlieb:Our ingredients weren't sourced from any of the impacted areas of the food safety outbreaks. We did see broader consumer concerns around leafy green consumption, fresh produce consumption. And in other health news, President Trump has signed an executive order to change childhood vaccines. Former FDA Commissioner Scott Gottlieb on what's to come. You're going to see an effort to go state by state by some of the anti-vaccine groups to put pressure on state legislators to do away with those school entrance requirements. All that today with special guests in our anchor chairs. It is Wednesday, August 12, 2026.

2:11Squawk Pod begins right now.

2:19First up today on the podcast, the business news story of the week. Chipmaker NVIDIA struck a deal with six of the largest Wall Street firms for$500 billion. That's half a trillion dollars to fund the massive build out of artificial intelligence to meet seemingly endless demand. CEO Jensen Huang calls it a big concept and he got buyers. Huang was on CNBC earlier this week. We're talking about an extraordinarily significant infrastructure build. With a very hefty price tag. It's a hefty price tag. Each gigawatt is something like$50-60 billion. And so there's energy involved, there's land power and shell involved, and of course there's the computing part of it.

2:57Jensen Wong believes AI, the power of computing, is the newest asset class, as valuable as stocks, commodities, other investment vehicles.

3:08We'll get into this with our anchors the rest of this week, Leslie Picker, Mike Santoli and Brian Sullivan.

3:14Dr. Scott Gottlieb:Good morning, by the way. Leslie, Michael, good morning. And if this deal, historic in nature, is all good news, the details matter. What types of borrowers will emerge? What will rates look like? Where are these factories going to be built? NVIDIA and the partnering companies say it's time to move forward into the future. The AI market is huge and getting larger. So we talked to a critic of the whole deal. We'll get started with Leslie Picker here, sitting in on Squawk Box. Our next guest says the new initiative is vendor financing by proxy. Ed Zitron is the CEO of Easy Primary Research and host of the Better Offline podcast.

3:51Ed, good to see you. Good to be here. So you don't think this alleviates the concerns about circular financing? No, this fund, which is, by the way, still a memorandum of understanding. We do not actually have contracts. It's just vendor financing. NVIDIA is raising the funding. They're finding the customers. They're the vendor. They're the customer, in some cases, with CoreWeave. They're a large customer with Lambda. They basically pay people to rent back the GPUs that they sell them. They help raise the debt. They find the sites. It's vendor financing. But they've been smarter than the Cisco's and the Lucent's in the past by not actually becoming a bank.

4:26Well, and that's, I think that's an important part in that the financiers that they're working with are the ones who are going to determine what the interest rate is that they lend on, as opposed to NVIDIA removing itself from that process, which creates more of a, you know, traditional kind of lender-borrower dynamic in such that, you know, we will lend to you, but here's the price by which it will cost for you to actually borrow this money. But the trick that NVIDIA does is they lend their credit to companies by not actually lending their credit. With Lambda and CoreWeave, I think they pay them$1.3 billion or more in these four-year-long contracts.

5:02These contracts are then taken to financiers and they say, hey, look, we have a customer. Even though that customer is also the vendor, NVIDIA also propped up CoreWeave's IPO. They invested over$2 billion in them and I think in IRON as well, post-IPO. They are propping up these companies. They are helping them get funding. And they're backstopping deals as a means of, well, funneling money to themselves. And they found a way around actually doing the financing themselves while basically getting all the benefits. Whatever the machinations of how they're getting the capital, lending it, deploying it, what you hear is from somebody in Corweave's position, from any of the hyperscalers, from anybody along the food chain is we are responding to demand signals that cannot be denied.

5:43There is more demand than supply. There is a scarcity trade we need to build in order to find out, you know, where the clearing level is for supply and demand. So I guess NVIDIA's point is you just have to get it out there. And, you know, the demand will take care of those issues. But the thing is, the demand is mostly open AI and anthropic. So Bloomberg actually reported a few days ago that 70 % of Microsoft's AI revenue in fiscal year 26 was OpenAI, which also suggests that Microsoft 365 Copilot and Compute is a single-digit billion business. All of the demand from CoreWeave is OpenAI, Anthropic, Microsoft for OpenAI, and of course, Google for OpenAI, and then OpenAI for itself.

6:24These companies are basically just compute fronts for two unsustainable, unprofitable AI labs that are basically the only growth engine for hyperscalers at this point. Everybody's propping up what is really the end of the era of hyper growth. How can you say they're unsustainable? Well, I mean, they burn tens of billions of dollars a year and have no proof that they will ever find profitability. There is this mythology that inference is profitable. There is no actual proof of this. This is something Dario Amadei said once as a stylized fact in an interview with Dwakesh Patel. No, nobody has actually proven this.

7:00Dr. Scott Gottlieb:Google Gemini. So Sundar Pichai of Google, yes, or Alphabet yesterday said one billion users. I don't know how many of those are layered on top of Gmail. Gmail automatically sort of integrates Gemini. It'll summarize your emails. Copilot, it's sort of automatically, unless you opt out, integrated into Outlook. Do we have any idea, Ed, how much organic use there is of AI, meaning people who just choose to use AI and pay for it, independent of other products like an Outlook, Gmail, etc.? Do we have any idea what that demand case is? Well, yes, we do. So the thing I mentioned with Bloomberg, 70 percent of Microsoft's fiscal year 2026 revenue for AI was from open AI.

7:40So about thirty four billion dollars total. That's co-pilot. So just to be clear, though, ten point three billion dollars of that was everything that wasn't open AI, which means that Microsoft 365 co-pilot is making single digit billions of dollars of revenue. That's pathetic. $261 billion of CapEx Microsoft has spent since the beginning of 2022 for a teeny tiny business. And I know billions sound like a lot of money, but not when you're building data centers. It does it in this case. You're right.

8:08Dr. Scott Gottlieb:And by the way, when we talk about energy demand, I'm actually starting to see the word quadrillion. I'm not joking. Thrown around quintillion, quadrillion, over trillion. So I would imagine you've got two options. Grow the user base massively or raise prices. massively, or some combination of the two to make back up that money. What's the answer? So the problem is, is Sam Altman himself said when they moved all of their enterprise customers and OpenAI and Anthropic over to per million token basis, paying for the actual cost of AI. And within one month or two, I think Uber blew through their entire annual token budget in a single quarter.

8:46You had everybody screaming like they were being pecked to death by birds about. And Sam Altman said, yeah, this is a huge problem. This is the man who's meant to be the head of the biggest startup of all time. And his answer was, yeah, people don't like that. And the thing is, people really don't. And we have this misalignment with the price of AI, the cost of running AI, and, well, actual consumer demand. And the problem is that large language models are not consistent products. They don't have consistent return on investment, and they don't have consistent costs, which makes them a nightmare to scale for businesses.

9:16And so there's really no opportunity to raise prices at this point, because we've already seen what happens. Customers protest. How does the debate over open source versus closed factor into that business model, and especially the moats that seem to be a little bit dubious at this point? Well, here's the funny thing. Dario Amadei position of Anthropic, he positions open source as anti-American, that we let the Chinese models take over. Well, that's anti-American. I can think of nothing more American than having competition in the large language model arena. They're terrified because people have found a cheaper, though not confirmed as profitable, way of doing much the same thing of beating them on benchmarks or matching them on benchmarks.

9:57So they're scared of China because they know that China is operating with less GPUs, though they do have access to Blackwell, and operating with less money, and yet doing about the same thing. And they'll say it's distillation. They'll say all of these things. But what they're actually afraid of isn't China, it's competition. If the IPOs of OpenAI and Anthropic get done as expected, let's say whether it's the next year or so, that would seem to capitalize them to a point where they can run this experiment for quite a long time. So what are the, I don't know, I guess investment implications of all this?

10:29So, an analyst that UBS found about a month ago, they estimate that 48 % of Google Cloud's entire revenue next year will come from Anthropic and OpenAI. That is over$124 billion, and that's on top of tens of billions of dollars with CoreWeave, Aira, Microsoft, and all sorts of others. Point I'm making is, if they go public, and it is an if at this point, especially for OpenAI, they will have to raise$100 billion,$200 billion each every year in perpetuity. The Wall Street Journal's and Nisa Gardizi reported the other day that OpenAI plans to spend$750 billion on compute by the end of 2030. That's less than three and a half years away.

11:10I just don't see how it's possible. That's more than the hyperscalers are racing to build the data centers. Yeah, the numbers are so eye-popping. Ed, thank you. Thank you. Appreciate your time this morning. Cheese will be next. Coming up on SquawkPod, fast casual chain Kava may not have been directly affected by recent salmonella or cyclospora outbreaks. That's a relief. But CEO Brett Shulman is prepared just in case.

11:36Dr. Scott Gottlieb:We've been proactive and taken measures over the years to invest ahead of our growth in food safety, doing things like standing up an external food safety council or investing in food traceability software so that if there were an issue to arise, that we could identify it and address it very quickly. Keeping your sad desk lunch safe right after this. trading at schwab is now powered by ameritrade bringing you an expanding library of education with even more ways to sharpen your trading skills access new online courses insightful webcasts articles engaging videos and more all curated just for traders plus guided learning paths with content designed to fit your unique interests and no sifting to find exactly what you need so you can spend your time learning to trade brilliantly learn more at schwab.com Looking for a little extra fun?

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13:28Welcome back to Squawk Pod. It's time for lunch. Fast casual restaurant Kava reported a boost in profit from this time last year. In the second quarter, the Mediterranean chain found an uptick in traffic, despite a broader dip related to the outbreaks of foodborne illness that shook consumer confidence in produce. CEO and co-founder of Kava, Brett Shulman, sat down with our Leslie Picker, Mike Santoli, and Brian Sullivan this morning. Here's Mike. It's good to see you, Brett. Yeah, thanks for having me. Coming in. So obviously, pretty good comps, traffic. Talk about the way the quarter unfolded.

14:04Obviously, it featured the Cyclospora news and maybe customer reaction to that.

14:09Dr. Scott Gottlieb:Yeah, so we had a really strong quarter. I want to give a shout out to our 15 ,000 strong team members who deliver heart, health, and humanity every day. It's just a reflection of the great work they're doing. As we exited the second quarter, while we weren't connected or our ingredients weren't sourced from any of the impacted areas of the food safety outbreaks, we did see broader consumer concerns around leafy green consumption, fresh produce consumption that did impact our near-term sales trends, but we've since seen those trends begin to rebound. There was some, I guess, commentary. You know, you beat in the quarter relative to the latest estimates, but maintain guidance.

14:44Yeah. So what are you seeing or projecting that has people saying maybe it's a little conservative.

14:49Dr. Scott Gottlieb:Well, just given the broader uncertainty around the food safety outbreaks, combined with the fluid macroeconomic and geopolitical situation, as well as potential persistent inflationary pressures on the consumer, we thought it was prudent to maintain our current guidance. So you're not a lettuce, I can't believe I'm going to say these words, lettuce-heavy restaurant. Well, that's the beautiful thing about our - Right, so you're not, I don't think of like shaved lettuce when I think about kava. So how much, in fact, I went there Monday. I didn't know you were on, obviously, whatever. I just went there for lunch.

15:16Dr. Scott Gottlieb:It was delicious. My shirt loved it, too, by the way. Is there a way in which maybe you're helped by that? Because I don't think of you guys necessarily as like a like a shaved lettuce type restaurant. Well, we are definitely produce forward. So there's definitely some concerns around that, I think. But the beauty about our Mediterranean cuisine and our our menu is 17.4 billion combinations, a broad variety of ingredients that you can opt into shift into green bowls and pitas. so you can have a meal that you feel really comfortable in no matter what the situation is. How do you think about supply chain safety?

15:50You know, I was reading about how lettuce is one of the most difficult and least regulated types of produce that, you know, comes across the border and it's difficult to patrol for safety. But as a business owner, how do you assess your supply chain and make sure that it is operating with the highest standards and so you won't be embroiled in all of this?

16:12Dr. Scott Gottlieb:Yeah, food safety is foundational to the relationship with our guests and frankly, for any restaurant and their guests, which is why we've been proactive and taken measures over the years to invest ahead of our growth in food safety, doing things like standing up an external food safety council of industry leading experts like Dr. James Marsden, Dr. David Atchison, or investing in food traceability software so that if there were an issue to arise, that we could identify it and address it very quickly. You mentioned, you know, at least in the air, the consumers maybe being a little bit hesitant at certain income tiers and things like that, not necessarily eager to spend more.

16:51You're kind of absorbing most of the inflation. What are you doing in terms of list price?

16:56Dr. Scott Gottlieb:Yeah, it's been a very intentional strategy for us for a number of years now. We've talked in the past, we've underpriced CPI by over 10 percent in recent years, taken less than half the price increases of the average restaurant company. Even when you look at 2026, we took about 1.5 % menu price adjustment at the beginning of the year with no current plans to take additional price when CPI is running about 3.1%. So less than half, really trying to work on behalf of our guests, invest in our guests, invest in our teams, which is driving that sustainable traffic growth. People grouse about price, but I don't know if they actually do anything about it.

17:28I mean, the lines at your places are, I don't say long, but they're good.

17:34Dr. Scott Gottlieb:I mean, there's customers that are in there. Who are you taking market share from? It's not going to be a net ad, right? There's only seven days in the week. Who then are you taking the customer from? I think we're seeing people trade into Cava from all different places, whether that's limited service, full service grocery. I think our difficult is our food is difficult to recreate at home. It's very unique. And I think what's really encouraging is that we see across all income strata. We see strength in our markets and we see strength even in our lower median household incomes, where we're seeing those guests actually opt into higher premium attachments.

18:12Dr. Scott Gottlieb:So they feel like they can trade up into our new pomegranate glazed salmon or our harissa honey chicken and still feel like they're getting a great value and it fits within their budget. Yeah, that was surprising to me. I saw that in your report that it was the lower income consumers that were actually doing more of the adding on. Is that unique to this environment or is that something that you've seen historically as well? I ask because there's all this debate over the K-shaped economy and what consumers are doing. We've seen that grow over the years, as I talked about how we've tried to improve our relative value proposition each and every year under pricing inflation, making our food more accessible to communities across the country and welcoming more people to the Kava table.

18:51Kava was sort of, you know, instrumental in getting out in front of the Mediterranean cuisine trend, making it more accessible. Are you looking over your shoulder for the next thing in terms of like whether there's a certain fashion element and, you know, customers like to try new things? Is there anything you're looking to incorporate or that you see as on the come?

19:11Dr. Scott Gottlieb:We're always trying to evolve our menu within our Mediterranean lens, within our identity. So a lot of times I think restaurants can start to evolve outside their identity. We want to evolve within our identity and stay true to our Mediterranean essence. Is there an international opportunity for you guys? I think down the road we're focused on domestic growth. We think we have significant white space opportunity across the country. What is white space opportunity? Right. I'm not my lingo. You're a former banker, FBR, right? Friedman, Billings, Ramsey. And Alex Brown back in the day. And back in the day.