Nvidia’s Security Push, Consumer Conundrum, and the Diesel Divide 9/28/26

0:00I'm Mike McNerney, equity investment strategist. Markets move fast. My mission is to provide market insights to our clients that help turn uncertainty into opportunity. Janice Henderson, investing in a brighter future together. At Jared Jewelers, we know it's about more than fine jewelry. It's the moment they open the box. That smile they can't hide. Knowing you chose exactly right. Because the right gift can bring a lifetime of meaning. A promise, a milestone, a memory in the making. Make every moment unforgettable. Find great gifts starting at$250. Jared, make the holiday last forever. Shop Jared Jewelers.

0:48Thank you very much, Scott. We are watching Oil, the 10-year and shares of NVIDIA this afternoon. The company announcing a record buyback and a platform to rein in AI agents. I'm Kelly Evans, and welcome to The Exchange. You can see pressure across the board there for stocks of down about half a percent as we see more upward pressure with Treasury yields today. The 10-year at 525. I just can't get over it. The 30-year, 557. The two-year, 492. We're getting a bit of a bounce, though, in the past half hour as oil turns lower on reports. The president is willing to give Iran some sanctions relief and release frozen funds.

1:23Again, willing to. We'll bring you any updates on that story if it actually advances. crude up less than a buck right now at 93. Tech, the biggest decliner today, believe it or not, with the Nasdaq down nearly a percent. The chip stocks outside of NVIDIA are weighing on sentiment. The Sox down 2 % after a 7 % pop last week. Micron, the next big test for that group, its earnings are out on Wednesday. Memory and software names also under some pressure. SanDisk down 4, ServiceNow down 3. But let's begin with the outlier today and to some extent this year. Nvidia up 2.5 % on a record-breaking share buyback and a new software platform to stop AI agents from misbehaving.

2:02Does come as we're learning of new open AI agent breakouts meddling with U.S. government sites, while Florida's AG is asking for an emergency order to halt chat GBT development. Let's start with Seema Modi with more details, Seema, on this ever-developing story. Absolutely, Kelly. So NVIDIA is basically saying its enhanced security platform is designed to quarantine suspicious AI agents in a matter of milliseconds if the agent tries to cross a boundary or get out of the sandbox and prevents the types of breaches that impacted hugging face. It's seen as yet another example of CEO Jensen Wong adding urgency to the growing cybersecurity concerns while also pushing the industry to self-police versus rely on Washington to provide the guardrails.

2:43Listen in. And so we want to accelerate the advancement of AI. And today we're putting forth this new technology, OpenShell and NVIDIA Sentry, that these two technologies make it possible for us to contain and to monitor. But it takes a lot of technology to make this possible. But what's getting an even bigger reaction on Wall Street is NVIDIA's eye-popping buyback. $150 billion announced this morning, the largest in history, four months after adding$80 billion to its program. And just as the stock has lagged its peers in the month of September, its price-to-earnings ratio, by the way, has fallen from about 66 times forward earnings five years ago to 18 times.

3:22Bottom line, its valuation has come down, likely a motivating factor in today's announcement, Kelly. But it also underscores NVIDIA's sort of expanding use of capital beyond GPUs, now invested in 13 public companies, over 200 private ones, beefing up its investments in software with its new security tools as well. How would it stop agents from going rogue? They're saying they have this new open source platform that sits on top of a company and communicates with whatever AI model you're using to intercept any agents that try to go beyond the sandbox. Now, it's different than what a CrowdStrike provides, which basically provides the overall security solution for a server.

4:01This is NVIDIA saying it helps control what gets to the server and provides that interception between a company and the AI model. Yeah. Again, we'll see if it works, but I like when the markets try to come up with solutions to all of these problems. Seema, for now, thanks. Appreciate it. Seema Modi there. Our next guest owns NVIDIA. It's his largest holding right now. And he says those fears of rogue AI agents are just creating some great buying opportunities. Michael Sancatera is the chief investment officer at Sylvan Capital Management. We're used to seeing you, but you're here on set with me today, so I appreciate that.

4:30Good to see you. And to talk some NVIDIA, which continues to be the largest position. What could this new line of business represent and how does it defend them in a way? Yeah, I think it's good conscience right here. I think you're going to see a little bit of security across the board from hardware, from software, from services, all through the AI stack. It's good to see NVIDIA trying to lead the way. There's no question that I think some of the concerns around some of these frontier models getting out of their sandbox has got AI investors spooked. So the first thing you need to see is the leader step up.

5:02And that's what I think NVIDIA is doing today. Exactly how it works, we're going to have to find out. I haven't seen any details yet, so we'll see if it does. But I think that's how you do security in AI. It can't just be one player. It's got to be all the players, hardware, software, etc. Do you, let's think about Kathy Wood, who was on last week. And, you know, notoriously when Tesla was her biggest position, she would always trim it back to 10%. And do you trim back your NVIDIA position or do you just let it ride? No, we do. We do. So in the focus growth strategy that Sullivan manages, 5 % active is as large as we can ever be.

5:34So anytime we get to 5 % above the index weight, now the index weight of NVIDIA is 15%. So you're never going to see us beyond 20%. But the reality is 2023, 2024, 2025, when this was a new story and new ideas and hyper growth that was surprising everybody, sure, we'd let it run up 400, 500 basis points active. Nowadays, it's closer to 200, 300 basis points. Yeah, I just, you know, it's one of the great wealth generating opportunities of the past few years. And so it's just an interesting question. What do you do now? Right. It's easy to write the story in hindsight. But what do the next couple of years look like?

6:08Yeah, that's really the question of free cash flow, hence the buyback. Right. If you believe that they can continue to grow free cash, they've done that something like one hundred and ninety percent for the last three years. And the forecast for next year is seventy five percent growth of free cash. So fast forward three years, five years, if you think it can be even 20, 25 percent CAG or in that window, you're talking about trillions of dollars of market cap. So you you can still buy NVIDIA. It may not feel fun because you wish you'd bought it earlier. But I think a lot of investors are saying, look, this is still the number one name doing the most with the free cash flow, generating a lot of revenue.

6:43There's a reason why they're five point five trillion dollar market cap. Well, I just think about, you know, Buffett, some of those great, I mean, they would never trim a position. I mean, they would certainly change it maybe right size over the years, but they tended to just let these things ride. Yeah, I can't do that. No, I think our investors expect diligence when it comes to risk control. We know that trees don't grow to the sky, to use the old adage. So you've got to be smart about taking profits when it makes sense. You'll see us do that with all the stocks we own in the portfolio, multiple sectors, multiple trimming.

7:13So that kind of out of the way, you know, and it is a fascinating story today, obviously. And it's nice to see what they're doing to try to keep this whole AI trade going because they know the regulatory crackdown that could be coming if we keep hearing about these incidents puts the whole thing at risk. Right. So possibly an important move in that direction. What about the 10 year? What about Treasury? Does it matter? Not to NVIDIA. No, I mean, if they're buying back this many shares, you know that there's no issue with cash. Them going to the market with debt, them going to the market really sort of in that obtuse way of investing in some of their customers as well as their suppliers, they can do whatever they want with their cash flow.

7:54The cost of debt to NVIDIA is insignificant. Who does it matter to? Banks, all the financials, right, all the interest rate sensitive folks. The net interest margins on the largest banks have been better in the last few quarters. And the consumer does not seem to be, you know, too far out on their skis as far as loans are concerned. But that spread is going to get harder to manage, right? You're seeing interest rate pressure makes all the interest rate sensitive guys a little bit less profitable. Yeah. So does that, I know you're not kind of big, that worried about the performance of the financials.

8:27But when we see the Nasdaq, for instance, the worst performer today because of rates to some extent, as people argue, they're long duration assets. A lot of their earnings growth is in the future. You discount that forward with higher yields and it's maybe worth a little bit less now. Does that matter? It does. It does from interest rate sensitive companies, right? Yes, you absolutely are trying to figure out how much you should discount everything back. That's the same problem NVIDIA has. But just, again, instead of being against interest rates, it's against free cash flow, right? Same idea. How much should we pay for it now versus three years from now, five years from now?

9:00And what will the growth rate look like? I think the problem with banks really is they're not the only lender in town, too. Right. We've seen private credit. We've seen lots and lots of private investments in other places other than standard bank capital. The market's gotten more competitive. They still do a great job. There's still a market for them, of course. But, you know, I think they're getting squeezed. There's money to be had in other places. Quick final question, other than NVIDIA. We showed a few of your other picks on there, the likes of Lumentum, Meta as well. Are you positive across the board because you just think that kind of AI trade keeps going?

9:32Or are there some really specific things in here that you draw our attention to? Yeah, no, definitely specific things. I'm never positive across the board. Too many broken pieces. But no, Lumentum is sitting in this optical circuit switch business that no one else, I think, can really touch. Essentially what's happening there is you see copper being brought to the limit as far as processing is concerned. So you're going to see more and more copper, both inside circuits, outside networks. Google's championing this whole process, and Lumentum is the best position to replace that copper transfer with lasers.

10:05They are laser-focused on lasers. Meta, we really like, a totally different reason. Actually, we think Muse is a fantastic start, an actual tool people are using, people are excited about. We haven't seen an AI killer app yet. This is as close as we've seen. This is first mover advantage from you. We're excited to see how much that can do. I don't know if you use it yourself or friends, colleagues, family do. Now they're making a big enterprise move today as well, maybe to try to recapture some of the chutzpah they went into the consumer space with and say, now we're going to go after enterprise.

10:34Yeah, why not? I mean, they've been spending all this money on CapEx, and this has been the question. What are you going to do with it? You're not a hyperscaler. You're not like an AWS or a Microsoft Azure. What are you going to do with it? The answer has been answered. We're going to build it for consumers. We're going to build it for enterprise. We're going to see how well we can make the tool. Yeah. Building is my love language. I think that was the shirt that Mark Zuckerberg is. Is that what it was? I think it was something like that. Michael, thanks. Good to see you. I think investing is your lovely.

10:59Yeah. Something like that. Something like that. Michael Sanzatera. Appreciate it today. Oil may have lost some of its gains, but higher yields do continue to weigh on the markets to start the week. For context, the S &P is still up more than two percent this quarter, defying the typical Q3 weakness in midterm election years. As we head into Q4, our next guest says investors may want to stick with this quarter's leaders. Sam Stovall is the chief investment strategist at CFRA. This is kind of, Sam, an issue we come back to a lot here, which is throughout an entire bull market, should you always stick with the leaders?

11:28You know, is the idea of rotating over played? So you're saying at least for this phase, you think that's a wise move, which means what? Stick with tech? Stick with AI? Hey, Kelly. Yeah, what's interesting is that typically we see the second and third quarters of midterm election years post pretty dismal results. And this quarter, however, the S &P was up more than 3 % through last Friday. So I think investors are sort of scratching their heads saying, gee, did we borrow from Q4? And the answer actually is no, that traditionally we end up with about a 5.5 % gain in the fourth quarter of midterm election years rising 75 percent of the time after a positive Q3.

12:11And you're right about letting your winners ride because following a strong Q3, you want to let your winners ride. If Q3 had been lower, you want to take the reverse and actually buy the three worst performing sectors in Q3. And that would have added about three to 500 basis points of performance in the following quarter. And where would you then, so this is this kind of bucking the typical pattern, you know, what does it tell you about the duration of this rally, the strength of it, kind of the areas where people might, you know, still find the most opportunity? Well, it certainly indicates that tech is the primary driver.

12:51We're looking at a sector that represents almost 40 percent of the market cap of the S &P 500. Add another 10 percent with communication services, and that's half of the market. But what's also interesting is that with rising interest rates, the question is, where can I invest and have lesser exposure, lesser vulnerability to rising rates? And basically, those sectors with the lowest net debt to EBITDA ratios are those that held up the best in the third quarter. Energy, healthcare, tech, communication services were the ones that held up the best because investors were worried about rising rates and therefore rotated into that space.

13:35And unless we get some near-term relief, this pattern might continue into Q4. I like that a lot, Sam. I'm just jotting that down. We may say for people to get if they missed it. We talk a lot about energy. Oh, it's an oil play. But you're saying, no, the leadership is actually those sectors that have the lowest net debt to earnings or to EBITDA, energy communication services, I think you said a third. And those are really, that's why we're seeing strength there. It's not just the oil price per se. It's that as rates go up, they're the ones who are at least affected by that. Exactly. So tech is the lowest at 0.39.

14:13You've got energy at one. The S &P 500 is at 1.15. and then close behind are communication services and health care, with the worst ones being industrials, real estate and utilities. And that real estate and utilities would face that headwind, you know, as we as we know from rising rates. But because of those debt levels and industrials, too, I mean, that's been a really strong part of the build out. So to what extent has this move in rates spoiled the narrative, if at all? Right. Like, would we be telling a different story if the 10 year were still at three point nine nine percent like it was in late FAP?

14:50Well, a different story would imply that tech and communication services would not be among the leaders. Energy would probably still be among the leaders because higher oil prices do tend to benefit the the mega cap behemoths like Exxon, Chevron, etc., because, you know, proven reserves have to be counted. And so the higher the oil price, the more their assets are worth. So I would tend to say that we got a pretty good idea of what the year was going to be like based on first quarter returns, implying that inflation and interest rates, along with oil prices, were going to be a concern for quite some time.

15:30So then the last question is we've had these back and forth. So the very, very beginning of the year, international was super strong. Gold, precious metals were flying. We were talking about kind of the sell America trade that maybe goes back even a little bit more so. And then that all kind of pivoted after the Iran war. So where are we now and where do you expect us to be going into 27? Well, as we head into the end of this year with the interest rate picture still likely to be higher, the Fed has traditionally raised or lowered interest rates very close to a midterm election, maybe because the economy needed it or because they wanted to prove their independence.

16:08So I think with the possibility of higher rates in October and possibly again in December, that's going to continue to put pressure on gold, but at the same time international, because you'll find that there's probably strength in the dollar as international investors seek higher yields over here. Yeah, absolutely. All right. Kind of very different. I don't want to call it a tale of two halves of the year, but certainly a pretty different picture now than than what we thought we might have had back in Jan and Feb. Sam, thanks so much. Really appreciate it today. Always a pleasure. Sam Stovall of CFRA.

16:42Coming up, McDonald's closing out its worst month since the pandemic hit in March of 2000 and riding its longest weekly losing streak in a dozen years. It's one of the latest names calling out inflation as a headwind. Will we see any relief in this week's PCE and consumer spending data? We'll talk about that next. Plus, we're only 35 days away from the midterms. And one political strategist mourns high yields and higher energy prices are a pretty big problem for the GOP. We'll dig into that ahead on The Exchange. This is The Exchange on CNBC.

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18:51Welcome back. We are set to get the latest read on the consumer this week. Retail sales tomorrow. PCE, the Fed's preferred inflation gauge on Wednesday. Last week, we heard from several consumer companies saying inflation is an issue. The McDonald's CEO telling CNBC they're still seeing sticky inflation. Costco, General Mills echoing the same sentiment on their earnings calls. Our next guest, however, says she's still seeing signs of strong consumer spending. For more, let's bring in Liz Everett-Krisburg, head of the Bank of America Institute. And Liz, you're the one. You know, I've been a little dubious about the whole rate hike thing.

19:25But if I eventually get on board, you're the one who I should have known this was coming. Because back in the spring, when we first had the oil price and the fuel price shock, your data was resilient. And it was resilient with lower income Americans. So bring us up to speed. Is that still the story that we're seeing now as this has, you know, now it's dragging on? And I have to imagine the cumulative effect is having more of an impact. Not that I want to be boring on your show at any time, but I would tell you that the story is remarkably consistent. And we are continuing to see that spending growth continue.

20:00So that has not changed. The other thing that hasn't changed is the thing that's driving our spending growth is discretionary and discretionary services in particular. But what we are starting to see within the consumer behavior is they're starting to be a bit more value conscious. So not pulling back, continuing to be resilient, but there is definitely more of a value in the consumer's mind and what we're seeing in the data. Just want to go over the headlines here. Total card spending for August was up four and a half percent. X gas. So, yes, there was a little bit of gas in that, but X gas up three point seven percent year on year.

20:35Can you break that down among income cohorts? Yeah, well, a couple things I'd say. One is that consumer spending in August actually was eased a little bit from where it was in July, but that 4.5 % is still four times more than it was a year ago. In terms of by spending cohort, by income cohort, we're actually seeing big resilience within lower income consumers and particularly lower income consumer discretionary spending. So, again, we're seeing strength. We're continuing to see this consumer spend. But some of that spending is being influenced by pricing, by inflation. And so if you break it down by category, looking at airlines, which, in fact, was the strongest sector within our growth, that was up more than 10 percent.

21:19But if you look at the number of airlines transactions, that actually came down. So what that suggests to us is, at least within airlines, you're seeing a lot of that spending growth being driven by price, not by volume. On the flip side, when we look at our restaurant numbers, those spending growth was also high, not as high as airlines, but their transactions also increased. So in that category, what we're seeing is the growth is not just because of pricing. It's also because people are eating out more. Yeah. So, again, it's not a clear picture of weakness. It's to some extent a consistent picture.

21:52I don't know if strength is overstating it, but, you know, if I gave you a seat on the Fed, you know, what does your beige book look like? I mean, what does it say? Does it say, hey, even the lower income consumer is strong and resilient to these inflation shocks? And yes, we need to to kind of slow down the economy. I mean, is that the story? Well, I think the two things that I would be looking at are, one, what's going on in the labor market. And what we're seeing in the labor market is we're seeing continued wage growth, particularly for the lowest income consumers. And, you know, we were talking about beginning in the first half of the year, we talked about the K-shaped economy.

22:29Well, that has really come together. And for the past two months, we've actually seen lower income wage growth exceed higher income wage growth. So up 4.7 versus up 3.5 percent. So lower income consumer is being supported. But again, I go back to what's driving the spending. So people are being smart. Yes, they're making more money, but they're also being thoughtful around where they are spending their money. And there is this focus, again, on value. And we saw this, you know, in back-to-school shopping. So back-to-school, the season was still relatively strong, but we were seeing people spend their back-to-school money, not traditionally at children's and teen clothing retailers, but they were actually doing more of that spending in general merchandise and big-box stores.

23:07So the consumer is making adjustments. They're making it, you know, they're adapting in order to to continue to grow their spending and continue to do what what they want to be doing. It's fascinating. We'll see if it holds up next year as the impact of higher rates starts to ripple through the economy. Just want to mention as well, you guys also launched a business checkpoint, which is important because even though it's kind of boring to talk about, in a sense, the small business, all those dynamics. A, that's where all the hiring comes from, new businesses, smaller ones. B, that's where the impact of higher rates is really going to be felt.

23:36So this is an important data set, I think, to watch. And what's it showing so far? So this is a new data set, an expanded data set. We'd always publish the small business checkpoint, which looked at companies that went up to$5 million in revenues. Now we've expanded to include midsize up to$50 million in revenues. And what we're seeing there is, again, a consistent story, somewhat similar to what we're seeing with the consumer. So we're still seeing some strength. We're still seeing profitability, even as prices, or not prices, cost pressure continues. But what we're also seeing is that the small businesses, medium-sized businesses are adapting.

24:10So they're making investments. They're still making an investment in payrolls, but they're also making investments in technology, in AI, up almost 20 percent for these small and medium businesses, mid-sized businesses. And so that, to me, sends a message that says, here are companies who are looking to continue to not just to come up with productivity enhancements. So they're still investing in payrolls. They're investing in AI and technology to get these productivity enhancements to allow them to deal with the cost pressures and some of the other headwinds in the economy. Yeah, I just want to call these out.

24:42I don't have a lot of time to get into it, but the subscription economy was still strong of 7.7 % year on year. I want to see if there's a muse effect there in the next couple of months. And the stuff you have on online betting is so, I mean, you said again, you don't know how much people are winning, but customers got back typically less than 75 cents for every dollar they put in. And the median balance of those who are online betting was less than 60 percent of those who don't participate. So I just wanted to call that out. Yeah, no, it is. It is definitely obviously we can't tell if people are winning or losing their bets because they may leave some of their winnings on the platforms.

25:17But we see what we call the cash return ratio is about 75 percent of what people are putting into these online betting platforms versus what they're getting back. So it's really interesting. It's also really interesting to look at the numbers in terms of what younger generations are doing and how many of them are actually betting on a daily or weekly basis relative to older generations. But let's just say it's a it's a lot. Well, more than half. Yeah, it's a lot. Well, more than half. Exactly. Good way to put it. Liz, thanks so much. Appreciate the time. Good to see you again. Of course. Great to see you.

25:49Liz Everett Crisberg from Bank of America. Not Liz Tyler. Coming up, MongoDB shares plunging after the CEO left abruptly ahead of tomorrow's highly anticipated investor day to go enjoy in meta. Shares of both companies down, but Mongo down 17 percent. Did the AI talent war just hit another level? We'll tackle that ahead. And as we head to break, check out the metals, which are moving lower. Gold having its worst day since June 24th. Copper, palladium set to close out their first negative month in three. Silver, its third negative month, I'm sorry, in four. Again, you heard Sam Stovall talking about the impact of higher rates here.

26:26We'll have more big movers when we come back.

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28:01Welcome back. We do see stocks lower across the board. The S &P and Nasdaq coming off their best week in over a month, but we're down about half a percent today. Barrage of headlines and rumors, especially about Iran hitting the tape all day. We'll get to Eamon Javers for an update on that in just a bit. Let's get to Brandon Gomez in the meantime for the CNBC News update. Hey there, Kelly. The New York City Council issuing a rare subpoena to force Elon Musk to testify at a hearing it's planning next week on the dangers of AI. The New York Daily News reports that the council said other AI firms, including Anthropic, OpenAI, Google and Meta, agreed to testify after being threatened with subpoenas.

28:35Musk has yet to comment. The Congo Ebola outbreak now growing to more than 8000 cases. That's according to Africa CDC, which says the country is running out of health workers to contain the deadly disease. The current strain has no known treatment or vaccine and has a fatality rate of nearly 50 percent. More than 3 ,900 deaths have been recorded. And ESPN is reporting that the Minnesota Vikings are trading back quarterback J.J. McCarthy to the New York Giants. The Giants lost starting quarterback Jackson Dart to a potentially season-ending injury in Week 2. McCarthy, who was the 10th overall pick for the Vikings in the 2024 draft, was third on their depth chart.

29:14Kelly, something's back to you. All right. Some interesting moves there, Brandon. Thanks. Coming up, a volatile day for oil prices amid a slew of Iran headlines. We will bring you the latest. And President Trump still reportedly considering a diesel ban as prices sit just below record highs. Could it spell more pain at the pump for consumers, though? We'll explain that next on The Exchange.

29:50Welcome back to The Exchange. President Trump has been saying for more than two weeks now he doesn't expect an Iran deal before the midterms. Now, Iran is echoing that sentiment. Eamon Javers joins us from Washington with the latest, even as we seem to be getting more positive news flow or, I don't know, signs of progress on the wires or social media rumor wires, I should say. Yeah, a lot of stuff swirling around out there, Kelly. But Iranian state media reported this morning that there will be a meeting today between the Iranian foreign minister and mediators to discuss recent developments in the conflict with the United States.

30:24That comes after a weekend in which President Trump said he rejected an Iranian truce proposal but expected additional negotiations with the Iranian side to come this week. The problem, though, remains that Washington wants something that Tehran has so far been unwilling to give, meaningful concessions on their nuclear program. The president has suggested, as you say, that he doesn't see the prospect for a significant deal until after the midterm elections because the Iranians believe they can use the leverage of the election calendar against him. And while the president has said that he doesn't pay attention to the political calculus here, it does seem clear that the Iranians hope they can force enough political pain onto the administration to make Trump more eager for a deal.

31:06And President Trump said yesterday that he believes that record amounts of oil are transiting the Strait of Hormuz, which, if that's true, lowers Iranian leverage over him. And that's one reason why investors should be cautious about reacting to these reports that we're seeing today of meetings and negotiations this week. Most of the principles involved in these talks are suggesting that the deal to end the war could still be months away, Kelly. Despite all the static that we're seeing, talks, meetings, negotiations, all of that, the fundamental key issues really haven't moved. Yeah. Eamon, thank you.

31:39Appreciate that for now, Eamon Javers. President Trump also saying this weekend that the White House is still very, very seriously considering a diesel export ban as prices sit near record highs. Let's bring in Patrick DeHaan. He's head of petroleum analysis at GasBuddy. One of the most popular people on social media, I think, Patrick, is people, A, want to know what the gas price is. B, you want to separate fact from fiction in terms of how high are things, are there shortages, whatever. C, to understand what the ramifications of a ban would be. And so, you know, this is a moment to really, for all of us to try to understand the dynamics here.

32:13So what impact would a diesel export ban have? Would it raise gasoline prices? Well, I think that's certainly one of the risks. It's not a guarantee. It just depends on how refiners respond. It depends on what this policy looks like. We've been talking about this now for a couple of weeks, this possible diesel export ban. It certainly wouldn't be good news. It would give incentives to refiners to basically run less hard than they have been. And look, it's been a summer of tremendous utilization rates. Refineries haven't run this hard in 27 years. This is the worst potential time to say, don't produce as much diesel because we're going to flood the market.

32:50That in turn would then likely cause refineries to slow down how much oil they're refining. And that feeds into the exact problem where we are today. There's no levers that the president has that is significant. Even if there is a diesel export ban, it will incrementally lower diesel prices at the expense of a surge in oil prices, excuse me, in diesel prices globally. And it could certainly backfire, contributing to higher gas prices. Of course, if you produce less diesel because of an export ban, you're also going to be exporting or, excuse me, producing less gasoline and jet fuel. So certainly some ramifications here for the president to consider.

33:27All right. So if I came to you and I said, I want us to produce, you know, because we understand the global situation with refineries, the Russian outages and everything else. It's tight. I understand that. Can't really bring one online that quickly. So you're stuck. So if I said to you, how do I get the diesel price down in a way that doesn't backfire? Is there anything you would propose? I think at this point, really the only thing left that the president hasn't really done that could help incrementally. Again, this is another Band-Aid solution. But the renewable fuel standard is something that there is an obligation refineries have to producing biofuels.

34:02That is an impact. Although right now it's going to hit farmers if you do that. So there's really no winners here. And again, as you pointed out, you can't build a refinery overnight. We're just kind of stuck here until those geopolitical tensions that have inflamed the situation start to resolve. There's no magic bullet here ahead of the midterms to the president. I actually asked the CEO of Agco about that a week or two back. He said he thought, if anything, things were going the other way, where he wouldn't be surprised to see a year round ethanol mandate in the near future because the ag lab or the agricultural companies in this country have been hard hit by the Canadian tariffs and other issues.

34:39So he said he thought it was very unlikely that they would relax the ethanol mandate. In fact, we could be headed into a world where it's year-round. Well, certainly, and I think we are moving into that world. But there still is an obligation that refineries have to meet, and that is still costing them something. That is why the Trump administration approved some small refinery exemptions this year. So there is a cost, but to your point, California also just signed on for a year-round E15. So there's something to be said that right now there still is an obligation. It's not as significant as it was, but it's still a very small lever that the president could employ at a time that he's desperately looking for just about anything that he can do to reduce the price.

35:21How much would it lower diesel prices? And I would note that according to AAA, the high for diesel was about a week ago on September 22nd. So is the worst behind us now? Well, it might provide incremental relief. Again, these are band-aids to a huge problem, maybe 10 or 20 cents a gallon. it could be a little bit higher. In terms of diesel prices falling off now, it's important to understand that why we got to diesel at$6.51 a gallon was in part due to 70 to 90 cent a gallon diesel increases that we saw in the Great Lakes after a major diesel producer outside Chicago unexpectedly tripped offline due to a power failure.

35:58Now with that refinery back online, you're seeing diesel prices that will start to roll back significantly in the Midwest. That's where a lot of farmers are going to notice it, but that is going to take a little bit more time and momentum to push prices down. But I think, subject to all the developments you've been talking about on the program, any one of these headlines could move the needle. So for now, diesel prices should continue to back off slightly, but all it takes is one headline, and then we could see the market go right back the other way. Right, or God forbid, a refinery outage, but still, that's a good point.

36:30I'm glad you made it about the, it was a refinery issue that pushed up Midwest prices, especially kind of around that peak. So that's why we love checking in with you at a time like now to get the facts, not the fiction. Patrick, thanks. Appreciate it. Thank you. Patrick DeHaan of GasBuddy. Coming up, the odds of a Democratic sweep in both chambers of Congress have been on the rise. But is that the best outcome for the business world? Here's what Jamie Dimon told Squawk Box Asia about his hopes for the midterms. Sometimes divided government works better for people. They have to meet in the middle, try to solve some issues.

37:04I'm hoping that that happens. That's what the president does with the Congress. Let's resolve some big, thorny issues that we resolve would be good for growth and inflation.

37:17Welcome back. Prediction markets are now forecasting a Democratic majority in both chambers of Congress, not just the House. Kalshi-Better is giving Democrats a 62 percent chance of flipping the Senate in the midterms. And our next guest says a blue wave in November could become a title one. Let's bring in Chris Krueger. He's Washington Research Group strategist at TD Cowan. It's good to see. I don't know if this is part of the pendulum swing, Chris, where we go from it's not going to happen to it's going to be a title wave and then we settle somewhere in the middle. But what are you seeing? I think that's about right.

37:49I think one thing to keep in mind, though, is that, you know, the election is in 36 days, but that's when voting ends. Voting is underway in numerous states. A lot of big states, you know, come online. with early voting next week. So, you know, having a big pivot in terms of the narrative going into these elections, it feels kind of like on that pendulum swing, we're out of time. When you think about the affordability issue, which remains, you know, the issue in American politics, you know, the political economy in the U.S. runs on three things, cheap gas, cheap food, and cheap groceries. And all three are, you know, are getting at record highs.

38:31Yeah, that said, we just talked to Liz Everett-Crisburg of Bank of America. I don't know if you caught that. They have granular data, 70 million households, and has shown since the spring and even now that lower income wage growth is outpacing higher income wage growth. Lower income spending has been surprisingly resilient this whole time through. So maybe we have to keep in mind that in real terms, these fuel prices are not at record highs?

38:59Could be. I mean, I filled up this morning. I could feel it. But I mean, it's diesel. It's record ground beef, you know, 30 year at seven. But, you know, at the end of the day, it's a huge country. And a lot of these races have, you know, have regional nuances. But what we have also seen in the past week is three Republican Senate candidates have come out, you know, in direct opposition to the White House, either on either on ICE deportations or on the war with Iran. And if, you know, if those candidates felt like they were in good, you know, in in a good sense of sort of political gravity in their states, it doesn't seem likely that they would they would risk the White House's anger.

39:47I wonder if the market would be stressed out. I mean, to the point that Jamie Dimon made just before the break, I don't know if you caught that. You know, he said there is a sense in which gridlock is good. And we see this now, especially the way that the system keeps evolving, where it feels like some of the safeguards that were in place to slow down politics are getting chipped away one by one. And so when you get a red wave, you have policy jerks to the right. And when you get a blue wave, you have policy jerk to the left. And I think it gives a lot of businesses whiplash. So what would happen, practically speaking, if there were a blue wave?

40:18What would be the policy implications of that? I mean, candidly, not a ton, just because, you know, President Trump has basically locked in his legislative agenda for the remainder of his term. Tax policy is on autopilot. The bank deregulation rules under the Fed are going to happen regardless. President Trump has said, he's not going to sign any type of federal law that would hurt AI. And, you know, we're still very much sort of in an AI we trust type market. So when you look at what's on autopilot, it's all a pretty positive narrative, probably an M &A wave, you know, starting in 37 days. If you are a corporation thinking about anything on that side, this is probably the window for that.

41:13You do have the debt ceiling. You might have some government shutdown risk. But on a lot of the big macro policy issues, President Trump remains commander in chief. So in other words, whether there's a blue wave or whether there's split, because it all to you is still going to effectively mean some version of gridlock. What would be the most kind of outcome-oriented situation if, I don't know, absurd situations where Republicans keep both houses? I mean, what are the possibilities of pieces of legislation actually moving? Or is it literally, in your mind, kind of a wash? Nothing's going to happen for the next two years.

41:53Well, I mean, you are going to. So when they come back, you know, in 40 days, are you going to fund the government past December 11th? Are you going to do that via an omnibus. If Republicans have lost the Senate, does that increase the chances of sort of a lightning reconciliation bill to fund the Iran war or maybe some of the other, you know, Pentagon priorities? What do you do with the debt ceiling? If the Senate does flip, will you see a lot of cabinet changes in that lame duck period to, you know, lock in regulators or cabinet officials that share President Trump's, you know, vision. So, I mean, I think the Senate will matter in that short-term lame duck period.

42:39But then once we get past that, you know, 2028 starts in 37 days. So it is going to be a lot of posturing, and we will be in the presidential election in 37 days. You still have a highway bill to deal with next year. You have numerous outstanding trade issues, trade treaties. You still have the war in Iran, obviously. So there's a lot on the plate. But in terms of what Congress can actually do without President Trump's signature, it does sound a lot like policy and fiscal gridlock. All right. Well, it's so easy to get drawn into the seat by seat. I mean, I don't want to say enjoy it, but I follow it like anybody.

43:26And so thank you for kind of giving the bigger picture really of what's at stake here. Chris, thanks. Good to see you today. You too, Kellen. Chris Kruger of TD Cowan. Coming up, shares of MongoDB are on pace for their worst day since early March after Meta poached its CEO less than a year into his tenure. MDB is down 17%. We'll have more on that story, including what it's telling us about Meta's AI strategy. Stay with us.

43:58Another salvo and a major one fired in the war for AI talent. Meta again, this time hiring MongoDB's CEO to head its newly formed enterprise platform for businesses. Julia Borson, everything that Zuckerberg does, Julia, has like another Hollywood movie waiting to happen. And to me, this one, this is the, what do you call the third one in a series? They had the social network and then it's what, the next one? And then this is some future one about how they got into AI. This is going to be a crazy series of scenes. Anyway, over to you. How they got into AI and now enterprise AI. Shares of both MongoDB and Meta following today on news of Meta hiring the CEO of MongoDB to run its new enterprise platform, which they announced this morning.

44:40MongoDB shares down about 20 percent, while Meta shares are down about 4 percent today. Some profit taking. Meta shares, though, still are up dramatically over the past month, up about 25 percent in the past month on the rollout of its Muse AI agent, which last week topped ChatGPT in the App Store. Meta's hiring MongoDB CEO solidifies Meta's commitment to the enterprise software space, where it hopes to capitalize on the millions of businesses that use its platforms and to justify its up to$145 billion in AI-focused capital expenditures this year. Mark Zuckerberg saying that the enterprise platform is the next major pillar of Meta's business will quote, use our strengths that few other companies have advanced models, leading agents, large scale infrastructure and years of working closely with many businesses.

45:32Baird with an outperform in the stock, writing, quote, we see this as another step towards commercializing products and business relationships Meta already has, potentially adding billions of incremental high margin revenues. But one reason the stock might be down, Meta has tried unsuccessfully to sell enterprise software before, and now it's going head to head with established giants from Microsoft to Anthropic. Kelly? The word enterprise always kind of makes my eyes glaze up. But, you know, so let me make sure I'm following this. They are trying to do for businesses what they just did for consumers.

46:03Is that kind of right? Or is business a whole different animal than just, you know, a cute little chat bot named Muse or whatever? Well, yes, you have to remember that Meta has coding tools. They have advertising tools. If they can bundle it all together for businesses, both small, medium and large, and sell them access to those tools, they have an advantage in that they're already selling most companies advertising. You know, if they have maybe 200 million small businesses on the platform and then maybe they have 10 million advertisers to say you're buying ads, also buy these AI tools that are going to make it easier for you to operate.

46:44So maybe bring together different parts of their business and different parts of those business tools. This might be a way that Meta can really expand what it's selling to these businesses that already buy ads. I've never written a screenplay, but with the help of AI, no. Julia, thanks very much. Really appreciate it. Fascinating story today. And that's it for us. Thank you for watching The Exchange. I'll join Brian Sullivan for Power Lunch right after this break.

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