OpenAI’s Dev Day and A Shift for College Sports? 9/29/26

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0:45And welcome to The Exchange. I'm in for Kelly today, and let's chat because OpenAI's Developer Day is underway. You just heard from Sam Allman, but a ton of tech CEOs also meeting at the White House. All as Anthropics sends out a new warning of AI-related risks in its pre-IPO documents. Oh, and speaking of IPOs, smart ringmaker Aura making a big U-turn. We'll talk about that and more. There is much ahead. The markets, they are all slightly down, even as oil moves a bit lower, but bond yields, they move just a bit higher. The Russell 2000 down about three-tenths of 1%, and NASDAQ off one-quarter of 1%.

1:24There is a lot to do over the next two hours, but let us begin right at the top. And that is with Kate Rooney, fresh off her interview with OpenAI CEO Sam Altman, where he is about to take the stage for his keynote. Kate, there is a lot to unpack here. That's right, Brian. Well, we are outside of where the keynote is happening. We're at the developer day for OpenAI here in San Francisco. The big theme in the backdrop is safety. At the same time, they have been pitching developers. They want the startups out here in Silicon Valley, sort of the next generation of big companies using their technology.

1:59That is going to be the pitch that Sam Altman is making today on stage. So we'll bring you the news as we get it. I can hear the music going. It's just kicking off right now. So that's the backdrop here there, Brian. They're trying to convince companies that this technology is safe. And we did report last night, confirmed that OpenAI has held back at least one of their models due to safety concerns. Here's what Sam Altman told us about walking that tightrope. Everybody wants great models. Well, actually, not everybody. Many people want great models. We want great models. But we have to do these in a way where we can make very confident safety cases and claims so that people don't have a bunch of anxiety and can rely on us for the models we're putting out into the world.

2:40And Brian, another thing we talked about was liability. He talked about the auto industry as one analogy and auto parts being faulty. That would be the fault of the automaker. But if somebody does something malicious or drives drunk, that is on them. And so there is this open question about liability. He said he thinks there's going to be a framework to figure it out. We, of course, asked him about the IPO timeline. He had previously said that it would be ill-advised to go this year. He said once they figure out some of the safety stuff and trust, his words exactly were, once we run a few safety cases and feel like we understand how to contend with this level of AI and do it safely, thinks they could go public, but it's looking more like a 2027 listing.

3:21Brian, we didn't get any exact timeline, but that was his response on the big question on a lot of people's minds. You pressed him. It was a great interview. We saw Kate Rooney. So, you know, listen, I'm sure there are some of our viewers that are thinking, why are we covering OpenAI so much? They're a private company for now. What does it matter? Well, I'm guessing, Kate Rooney, you're going to tell us it matters a lot because there are hundreds of billions of dollars at stake, trillions with AI in total. But for open AI, I have got to imagine that the halo of money around that company is easily in the hundreds of billions.

4:00Oh, easily, Brian. The reason to cover this company is they are a key man in the entire stock market. I mean, tech companies in general have poured tens of billions of dollars. Think of NVIDIA invested$30 billion into OpenAI. Amazon, I think it was$50 billion last we checked. I mean, the just gains on paper for their OpenAI investments, Anthropic would be in the same category. Anything OpenAI does has an impact on the stock market, given how big of a story for the market mood tech and AI has been. And they are the biggest spenders. They're the biggest customers for a lot of these big chip names.

4:37So they are really at the center of all of this. They're at the center of politics. You know, we talked to Sam Altman about President Trump and what he might think about. They're kind of pausing. Is that something that the president is going to be OK with? And Altman, I mentioned the tightrope on safety. He's walking a tightrope on politics, too, because he's got to roll out products that don't get him sued and that he's safe from a liability perspective, that he's able to say, hey, we're launching these products on the right timeline. We're slowing down when we need to. But the president at the same time is saying, we don't want you to slow down.

5:07We don't want to lose that to China. And so he has needed to be almost diplomatic in his messaging, knowing that Washington is very much paying attention on top of all the investors that are paying attention to what all. But I feel like it's like Kate Rooney. And I know we're going to go to the guests in a second. But I feel like we're in a car and there's a driver and we're late for an important event. But the roads are crowded and dangerous. It's been raining all night. And somebody's saying, speed up. We're going to be late. The other person's like, no, no, slow down. we just want to get there.

5:35We're going to be late, but we don't want to crash on the way to get there. It kind of feels like that's where we are with AI right now. No, it's the perfect analogy. I actually haven't heard that one, Sully. I just made it up right now, literally. It is true because you want to get there. No, it's great. It's great. You want to get there safely, but also you've got your kids in the back. You've got your kids in the car seat. You know, we're talking about the worst case scenario risk that's come up more lately is something that worries a lot of average people. I mean, there are so much money tied up in these companies, but also when people hear about human extinction through Iris Perkup.

6:06And that's something that Sam Altman has been the face of. I mean, I asked him about Dario Amadei on SNL and Weekend Update, and the idea that they are the face of this entire industry at a time when the average person might not trust that they're doing this safely. Right now, because there's no regulation and there is no sign that this is going to be an issue out of D.C., it's going to be up to the companies to do this safely. And it is really in the hands of Sam Altman and Dario Amadei, the two biggest companies in this space, the two leaders. And you've got to at some point trust that when they say they see something that causes them to slow down and, you know, in your analogy, put on the brakes, maybe drive a little slower.

6:42That is really the state of things. And from what I'm hearing is going to be the state of things going forward, because it's not going to be coming out of D.C. based on what the administration has talked about. Yeah, no, it's truly a watershed moment. We're going to look back in 10, 20, 50 years and be like, that was history. We were living in it. We maybe just didn't realize it at the time. And Kate Rooney, if I have car seats in the back, it's probably grandkids at this point. Kate, thank you very much. I appreciate it. All right, let's bring in Erica Brescia, Managing Director at Red Point Ventures.

7:10They are an investor in OpenAI. Erica, obviously, listen, you're an investor, so you want OpenAI and Sam Allman and team to do well. Was there anything that you heard that troubled you in any way? Not so far. I think one thing that's really important to touch on here is I think the labs are doing the right thing. They're taking responsibility. They're slowing down model releases when they don't feel like they have a handle on things. That's exactly how this should work. And, you know, there was this conversation earlier about, hey, should they slow down? Should Should they not slow down? I think it's more about like who is controlling the pace.

7:53It should be the people that are closest to the work that are controlling the pace and others in the industry that are giving the tools that we need to secure models when we're looking to go into production. And so I actually think the right things are happening here from an AI safety perspective. Model vendors need to take responsibility for the products that they're putting out, and that's exactly what's happening. Are they taking enough responsibility now? You heard Kate make the point sort of about where that liability may lie. And it's a huge question because at the end of the day, whether it's driverless cars or whatever technology it may be, the lawyers, you know this, the lawyers are going to get involved.

8:38Responsibility, liability is going to be a big issue. Do you feel like the liability, as far as we know, is where it needs to be or does it shift at some point? Yeah, I think there are a lot of open questions about some of the messaging in the market and how much it might be used as posturing to push liability off of the companies. Look, I think that the companies need to take responsibility for putting appropriate safeguards in place based on what they know about what their technology is capable of. And they should try to put guardrails around it. We've seen these agents jailbreaking and training.

9:19They need to be putting safeguards in place for that, as well as in the models that they're putting out in the world and what they're capable of doing. And I think there are varying perspectives on this, but I am a fan of model vendors putting responsible guardrails in place. And then at the same time, there is some limit to the amount of liability that you can place on these companies. You know, you have Chinese model vendors that are distilling their models and putting out open weight models and people might do other, you know, do nefarious things with those models. And that's obviously outside the scope of what the model vendors can control.

9:53And so, you know, again, I think that the liability right now needs to be squarely with the vendors in terms of what they're putting out. But then there needs to be some sensible approach to this over time. The auto industry is a really good example. You can't control what a drunk driver does with the vehicle, right? No, but, you know, I was thinking about the auto industry in a different light. And I don't know where you live or what your airport may be, Erica. And bear with me here because sometimes I just go off on these weird tangents. But there's basically four major airlines, five or six, but four big ones in America, right?

10:27You've got Delta, United, American, and Southwest. There are others, of course, too. And where you live sort of depends on who you use. But the point is they all operate together. They're all kind of succeeding in their own right. But AI right now, as I see it, is OpenAI, Anthropic, Muse from Meta, and Gemini. Maybe there's, and perplexity, again, there's some other ones on the fringe. Is it a four-horse race right now? And can, kind of like car makers or airlines, can four companies all succeed? Or is this literally one winner, like one ring to rule them all? I think more than four can succeed.

11:07And I think that's best for our nation as well. I think we're still really early in the rise of open weight models. We already see a transition in the enterprise to enterprises wanting to take and in some cases fine tune open weight models for, you know, their own needs. We like to say you don't always need a Ferrari. You don't need the frontier model to do a lot of work that can bring tremendous value to the enterprise. And I think we've seen really interesting moves from NVIDIA and from Meta on that front. I think both will emerge as open weight model leaders in the West. I think that will bring a huge amount of value and democratization of AI into our economy.

11:50I think that will be great for everyone. And so I don't think it will just be, you know, open AI and anthropic. I think we'll continue to look to those vendors to push the frontier. And there may be others who catch up, especially in different domains or different model approaches like world models, which are now coming onto the scene. And I think that's really healthy for the economy and and for enterprises trying to adopt AI. Yeah, there's a lot more than four airlines. I just kind of highlighted the big four, but there's plenty that do well and operate. It sounds like you believe that there can be four or more that all do succeed.

12:28It's a trillion-dollar game right now. Erica Brescia, really appreciate your time. Thank you very much. Thank you. By the way, staying on this topic, do not miss a first on CNBC interview with OpenAI CFO Sarah Fryer. That is later today. You heard from Sam Allman in the last hour. Sarah Fryer, the CFO, on around 3.15 p.m. Eastern, 12.15 out west on Closing Bell. Erica, actually, we're not going to let you go. I thought we were, but they want me to go back to you and talk about Aura for a second. Aura, O-U-R-A, smart ring maker. I'm holding one in my hands. I've had it for over six years. I think I was one of the first out there with one there, postponing their IPO, citing market uncertainty.

13:12What's your take? Is this a read on the market or a read on Aura? I think it probably is a read in the market. You see a lot of trepidation here and, you know, OpenAI starting to reframe, reposition their potential IPO date. Same thing with Anthropic. I think this is happening quite a bit. And, you know, OpenAI might be talking about it being about safety, but these are two totally separate issues to me. There is a tremendous amount of value to be captured from the models that these vendors are already shipping. So trying to hold back an IPO for safety reasons really doesn't make sense to me. They can continue this incredible growth that we're seeing in the frontier labs without releasing new models.

13:57There's plenty of revenue to be captured there. And so I think they're pulling back for other reasons, and it's likely the same reason that Aura is as well. I think the market has been, you know, hotly anticipating the IPOs of the Frontier Labs in particular. And when you take a step back and you look at everything that's happening in the macro, you have the midterm elections coming up, you have inflation concerns, you have debt concerns, you have private credit concerns. You know, there are a lot of factors figuring into how these IPOs might perform. And I think these companies and I believe Aura is profitable.

14:33I might be mistaken there. I'm not an expert on that one. But, you know, if you have control over when you IPO, you're going to wait until you have very high confidence that it's going to go well. And I think there are a lot of macro questions that lead people to believe that now might not be the right time. All right, Erica Brescia, now we are going to actually say goodbye. Erica, thank you very much. Appreciate that. Red Point Ventures. All right, OpenAI President Greg Brockman is not at the company's development day-to-day event. He is in Washington, D.C. right now and apparently having lunch with President Trump, House Speaker Mike Johnson and a number of other tech CEOs.

15:11So what else may be on the agenda? What else might be on the menu? Eamon Javers is at the White House. Eamon, do we have a rough idea of how many tech executives are actually in the room behind you? There's a lot of them, Brian. We don't know what's on the menu, but we do think that lunch has probably already been served. This event started about 40 minutes ago, and some of the top tech CEOs in Silicon Valley are here to talk to the president at this luncheon session about AI and the future of technology in America. We saw some of the biggest names in the business arriving here at this gate of the White House just a short time ago.

15:46I had a chance to catch up with Alex Karp, the CEO of Palantir. He was very, we'll say, high energy in his approach to this meeting. He was the only one who would stop and talk to us at all. And he didn't want any of our questions. He wanted to kind of ask himself his own questions. And he said that he had a message for us. Here's what he said. Do you think I'm the village idiot? I'm asking you the question, right? So you can answer it however you want to answer it. No, no, I gave you a question that was... So this is a question I could answer. All right. What do you believe about AI? Let's do that.

16:17What do you believe about AI? AI has to work for the warfighter, has to work for enterprises. It has to be safe, has to be powerful. And there's only one country in the world that has this kind of AI stack, both the people and the products. Palantir and other companies are leading on the battlefield and leading. And the questions Americans have are, does it work for me? Is it just a bunch of unpleasant people getting rich?

16:43So take a look at the seating chart that we got from the White House just before the meeting actually commenced. And what you see is, you know, proximity is power here, Brian. And you see Jensen Wang of NVIDIA seated right next to President Trump. And I think that is a sign that those two are politically and sort of ideologically on AI joined at the hip. The president said earlier today that he does not think we need to take any measures to slow down AI development. He wants to go full speed ahead because, in his view, it really is a zero-sum game. He said today that there will be one winner and maybe a lot of losers and probably no one in second place in the AI race.

17:20And that's because whoever gets there first is going to just have an enormous advantage over everybody else. So we'll see on the way out if any of the CEOs want to talk to us. Those who have a different view, like Dario Amodi, who arrived here earlier, are going to have, I think, maybe a difficult time convincing the president because he's pretty public and pretty firm in his position on where he stands on AI. So if you want to push him to your view, if you're a Dario Amodi, that could be a challenge. He's seated, by the way, kind of to the president's right and toward the end of the table, not at the very end of the table, but pretty far away from the president at this lunch.

17:54So a couple of things to watch for. One is what they say on the way out. And two is whether the president calls the pool in and we'll be able to see some of this event, which started, like I say, about 40 minutes ago. If we see any of it live and we'll, of course, bring you that if we do see it. Brian. I need to put on my binoculars or monocle or something for that for that seating chart. But, you know, I mean, you said one winner. OK, in the pre. I don't know if you heard the previous interview where I said, can there be four winners? A little bit, yeah. Yeah, and Erika Brescia actually said there could be more than four.

18:24To clarify, when they say one winner, do they mean one company or like one country, like the U.S. versus China? Or is it literally people you're talking to say one winner, one company is going to run everything? Yeah, I mean, when the president said it today, the context I took from him was he was talking about the U.S.-China competition, right? So he was saying we can't afford to slow down because whoever gets to AGI first is going to have an enormous advantage over the other powers. And therefore, they might not be able to get there at all because it'll accelerate so quickly from that point.

18:54So he's saying that this is a national security issue, that we need to accelerate the growth of this technology. And, of course, for the economy. Right. The president doesn't want to prick this bubble. He doesn't want an economic catastrophe and a meltdown of the AI market on his watch. So his view is accelerate, accelerate, accelerate. Other people in this room feel differently, and we'll see if they get a chance to air those views and if they are persuasive with the president. Yeah, and you know what we never talk about? We never talk about Europe, Eamon. It's always the United States versus China and Europe, which has a combined economy about the same size as the United States or China.

19:29It's never in the conversation at all, but Eamon Javers, appreciate it. And, yeah, you know, CARP, always high energy. Eamon, thank you very much. All right. Yeah. Speaking of AI, do not miss our second annual CNBC AI Forum. It is tomorrow. It is in Dallas, Texas, where leaders, entrepreneurs, and some CNBCers are going to share their take on AI, the market, how the world is adopting to learn more, or maybe go. You can scan the QR code on the screen. Go to CNBCevents.com slash AI. All right. We've got a lot more to do. And on deck, Ariel Investments, Charlie Babrinskoy on the big market risks right now.

20:13Plus, have we officially hit peak money in college sports? Or will the millions turn into billions and tens of billions? We'll hit the college sports and money story coming up. This is The Exchange on CNBC.

20:38Hi, I'm Roman Mars, host of 99 % Invisible. It's a podcast about all the thought that goes into things most people don't even think about. You're going to see stories everywhere. Follow and listen to 99 % Invisible wherever you get your podcasts. With the Discover Cashback Card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to Discover. Terms apply. See discover.com slash 5 for details.

21:18If your workday happens in two languages, this one's for you. Whisperflow is a voice-to-text app. You talk, it types, and any app in more than 100 languages. The email in English, the text to your mom in Spanish, The client note in Portuguese, and it switches languages as you do, with the ums and typos gone four times faster than typing. Whisperflow is free. Get it at whisperflow.ai. That's W-I-S-P-R-flow.ai. All right. Welcome back to The Exchange. Kelly will be back tomorrow. Markets overall, they're down a little bit right now. The Dow is off six-tenths of 1%, about 310 points, and kind of a bit of an unusual day.

22:01Oil is lower, but bond yields are moving back higher. And your next guest says kind of in the middle of an interesting rate cycle due to inflation, but one he does not expect to end quickly. Joining us now to talk about that and more, Charlie Bobrinskoy, he is vice chairman of Aerial Investments. I guess, Charlie, the question everybody sort of has is the non-AI question is how high are rates going to go? yeah that is the question and the reason is the question is because investors who are in their 40s or 50s have never seen a rising interest rate environment we had 40 straight years from 1981 until 2020 of declining interest rates and every 10 year period if you started picked any date in those 40 years 10 years later interest rates were lower and that has enormous implications for investing.

22:58It favors leveraged companies. It favors, frankly, long-duration tech companies. It favors LBOs. But now we've got a reversal going on. And it's a whole new world when rates are going up. My general view on this is that there are a lot of things in place structurally for inflation that are pushing rates higher. And we can talk about the specifics of that. But interest rates are fundamentally driven by inflation, inflationary expectations, And those are headed higher. I'll talk about that. But I'm more interested to hear about this new world that you just referred to, Charlie. What do you think is the new world?

23:34And does it mean that our viewers and listeners and your clients should be investing in a new world? Yeah, I mean, I think one analogy I would make to this is if you were somebody that was in the business of shipping goods from North America to Europe and you had a sailboat, You always had prevailing winds at your back, and that helped your business. It helped your boat get across the ocean fast. That's what we've had for 40 years with declining interest rates. If you do an Excel spreadsheet, just a discounted cash flow analysis, and you drop the interest rate that you're discounting earnings by about 1%, you get a 16 % increase in the value of your stock portfolio.

24:17And that has happened time and time again over the last 40 years. Now it's reversing. We got down to an unsupportable level of interest rate, 0.65 % in 2020. And now we're heading the other way. And it's going to hit certain kinds of investments harder than others. Like what? What's it going to hit? So my thesis on this is that the leveraged buyout industry and alternative asset management has been unrecognizably or unappreciatedly helped by falling rates. Falling rates help leverage companies. falling rates, increased multiples, and that's been a big driver of private equity returns over the last 40 years.

24:57It helps long-duration assets. Growth stocks have their cash flows out in the future. And so if interest rates fall, it makes those distant cash flows worth more. That's been a wonderful tailwind for long-duration growth stocks. Real estate has been helped by dropping interest rates, and that's now going to change. So I think a higher interest rate environment. Can I, John, I'm sorry to interrupt you, Charlie, but I love this train of thought, and I'm going to say something that's going to offend probably a bulk of the audience. So I apologize to them in advance, which is low rates. It sounds like what you're saying is shorter, Charlie, but Brinscoy, low rates made everybody seem smarter, right?

25:40Bro, I bought a house for 200, now it's worth five. Any investment you bought, you throw a dart, the stock went up. You threw a dart, the house went up. You're a private equity executive, right? Every investment you made made money, and everybody thinks they're a genius. And I'm sure there's a lot of geniuses out there, right? What did Garrison Keillor said? 85 % of people are above average. That's obviously a joke. Is it going to be a lot harder the next few years? That's the point. You're going to need to actually be smarter. It's going to be harder. and throwing a dart at everything and having it go up is not going to be the way it's going to go for the next few years with rates where they are.

26:19I very much agree with what you just said with one caveat, and that is what's important is the change in rates. It's OK to have a 5.27 percent 10-year if it stays there. But what we had for 40 years was dropping rates, and that caused multiple expansion, and it helped leverage companies. So now if we have increasing rates from 5.27, that's going to have the opposite effect. So it's the first derivative that matters here, the change in rates, because that changes multiples. It changes valuations and it changes the financing cost of running real estate and leverage portfolios. Yeah, and I appreciate I'm not saying it wasn't great that everybody did well.

27:02But I think your point is that with this rate change, the tide's going to go out and we may find out who, unfortunately, was swimming without a bathing suit on. Charlie, have a break score? Very good. That's exactly right. Or just a smaller bathing suit. Charlie, thank you very much. Aerial Investments do appreciate that. All right. Still ahead. Slow Ventures. Sam Lesson will weigh in on the headlines from OpenAI's Development Day. What we just talked about with the market, what rates may mean. anything we want to talk about with Sam, we will. And you'll be a part of it. Next.

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28:23Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to discover. Terms apply. See discover.com slash 5 for details. If your workday happens in two languages, this one's for you. Whisperflow is a voice-to-text app. You talk, it types, and any app in more than 100 languages. The email in English. The text to your mom in Spanish. The client note in Portuguese, and it switches languages as you do, with the ums and typos gone four times faster than typing.

29:07Whisperflow is free. Get it at whisperflow.ai. That's W-I-S-P-R-flow.ai. All right, welcome back. Your big breaking news is OpenAI's Developer Day, and there's been a lot of headlines that have been coming fast and furious from the event, which is where we find our Kay Rooney. Kay, what's fast and furious about it? What's happening? Well, Brian, we've got quite a few headlines to bring you. As Sam Altman said, we are expecting more than 20 announcements from this keynote. The first one is an AI agent called Dots. So it's this always-on AI agent that runs in the background. Altman on stage described this as something that can basically, he says, handle anything you can think of.

29:52This was during the keynote. He said it brings AI into a whole new form factor to work and give you more time and attention to do the things that you actually care about. So users can give their dot a name. If this sounds familiar, this is what Muse has also done from Mark Zuckerberg's meta. They allow you to sort of name your Muse. And I believe meta shares are a bit lower on this OpenAI news as well. Altman, I want to give you one last quote on this dot news. He does say, finally feels like I've gotten my attention back and no longer feels as addicted to his phone in the same way. So says this is the way he has always wanted to work with AI.

30:28Very much moving into this agent arena, which has been just such a big theme after what Mark Zuckerberg announced. Also announcing an upgraded model. They had just released a version of this model last week. And now they're saying they've got 6.1 soul, which is a slight increase to the model that they just rolled out. At the same time, as we talked about, Brian, earlier, they are trying to toe the line between shipping things quickly, but also making sure all of this is safe. We also have news of a$500 plan, including access to ultra fast processing. And then finally, some new numbers on ChatGPT.

31:02They have 1.2 billion users worldwide. So this consumer side of the business still growing at a pretty fast clip here, despite some of their interest in enterprise, which is a lot of what we talk about when we talk about the business. It's a higher margin side. But ChachiBT, more than a billion users here. Do we know if it's a billion unique users or a billion people using it in total over a week? Do we have any idea? I don't know. I was going to look because usually they'll do something called weekly active or monthly active. That's like one of every eight people in the world, Kate. Yeah, how many people in the world?

31:34It's like eight billion total. Like eight billion and seven billion adults? I would say a lot of these people don't pay. That's why they're doing advertising, because a lot of these, you know, 1.2 billion people are not paid users. They also haven't announced that. But the other number that we got, I'm going to see if I can find it in the headlines here, about the amount of people using codex. Oh, here it is. 35 million building with chat GPT work and codex every week. So those are the power users. Those are the ones that are using it to build their own companies, to code. And that's an arena that they really care about.

32:07It's also the group that's here today. These are developers. These are people that are really using these AI agents to automate a lot more versus just using the chatbot on a daily basis. But Altman giving a little bit, kind of moving into Zuckerberg's territory here. I mean, he said earlier with us on air that he wasn't worried. But clearly, they've got this dot offering that is an agent. It's something to work on your behalf behind the scenes. And that's the direction that we're moving here versus just chatbots. Having these things, these agents that, Brian, you could say, all right, you're live right now.

32:37You're on air, but your agent, your dot, is working in the background. So that's sort of the future we're working towards. But you've got to make sure you can trust your dot. Am I live? That's the latest. We'll bring you more of that. Is this really me? I feel like we're getting a headline every minute here. You don't know. We don't know at this point. Who knows? Kate Rooney, you know. Thank you very much. See you in a bit. All right, let's get out of Frank Holland with a CNBC News update. Good afternoon, Brian. Pete Hexeth is reportedly preparing to announce an overhaul of Pentagon leadership.

33:03According to Fox News, the defense secretary will share plans to reduce the number of positions reserved to generals and admirals by 20 percent during a state of the force address on Wednesday. The move would double last year's target of a 10 percent reduction. The changes are expected to take effect at the beginning of next year. Dutch police announced the arrest today of a man suspected to be a member of the Shiny Hunters hacker group. Police say the 24 year old man is also accused of trying to arrange two murders. Shiny Hunters is the group that claimed to have breached the FBI's jobs website last week.

33:34They said it stole very sensitive data belonging to thousands of agents and applicants. And California Governor Gavin Newsom signed a law today that bans local, state, and federal law enforcement officers from using gloves that can deliver electric shocks. It comes after U.S. Immigration and Customs Enforcement awarded the agency a nearly$17 million contract last month to buy 6 ,000 pairs. That ban will last until 2030. Brian, back over to you. All right, Frank Collin. Frank, thank you very much. All right, coming up here on The Exchange, Congress can't agree on a lot of things, but they can agree, apparently, on trying to fix college sports.

34:11So what are we exactly doing about the millions and billions of dollars going into college sports? We'll talk about that coming up.

34:21All right, welcome back. The U.S. Senate just passing a bill aimed at regulating what's called the Name, Image, and Likeness Deals, NIL in college sports. The Protect College Sports Act would also codify student athletes' rights to earn money, but also tighten transfer and eligibility rules. The bill also gives the NCAA conferences and schools an antitrust exemption to enforce certain rules and regulations. The legislation is now on its way to the House, where it is already facing some opposition. So this may never actually become law. But let's talk about this total issue and bring in Steve Denton.

34:54He is the CEO of Open Doors. Open Doors is an NIL deal platform for athletes, connecting them with colleges, supporters, and advertisers to try to monetize their brand. So, Steve, listen, you're talking to the parent of a D1 athlete. So I'm right there. I missed the money by a couple years, apparently. But we want the athletes to be taken care of and get paid. It's getting a little bonkers. Where are we right now in money in college sports? Is this the Wild West? oh well it's the wild west and open doors is a share right so uh it's uh i mean this year the nil market's going to be about 4.3 billion dollars going to college athletes and um that's a combination of rev share dollars coming from the schools as part of the cap and then third-party nil deals so college athletes are earning more money than they've ever earned um but you know with this legislation, it's trying to put, um, raising the cap.

35:53I think that's actually a good thing. I think the$21 million cap that was on it isn't even enough to fund a football program in P4 schools right now. So I think it's an artificial cap. So I liked it. We're raising the cap. And I also like that it's putting, it's allowing companies like mine, which focuses on real NIL getting real third-party deals for athletes based with real brands, it allows athletes to continue to monetize that and doesn't cap that. So, you know, more legislation here is good for companies that are playing above the board. Yeah. And I'm worried about Title IX, you know, father of a female D1 athlete.

36:32And, you know, you want the Title IX was great to make sure that women got the same amount of money as men. And what I worry about is that it's one thing if you're endorsing a product like you guys help do, right? So open indoors, you could have somebody who's a volleyball player in a team, and they get an endorsement from something. And that's great because they're just making the deal, to your point, a third party. It's totally different when, say, the quarterback of the team is getting just a$10 million check and half the team is getting zero. Is this going to, if we don't do something, will it damage the Title IX protections for women in sports?

37:07Well, I think Title IX protects the scholarships, right? So you've got to set the NIL money aside for a minute because the money that the school pays is red share. So Title IX protects the scholarships, and that's not part of this. As a parent of a D1 athlete, you'll be happy to know, Brian, that when you strip out what the schools pay and you look at what the brands pay, when you look at brand dollars, female student athletes actually earn 55 cents on every dollar spent by real brands on real deals because they're actually just really good at it. So that's the best media buying sports right now, female college athletes.

37:43I'll just throw that in as a plug. Um, what I love about the new legislation that still has to go to the house, right? I mean, just passed the Senate last night is there is, you know, you've got the$21 million that is for, uh, acquire new athletes. You've got the retention pool, and then you've got another $5 million that is set aside for female student athletes and Olympic sports. So you've got money set aside for that because without it, but 75 % of all of the dollars that are getting paid out by the schools as part of the current rev share cap is going to the football team. Yeah. Yeah. And by the way, I get it.

38:20Football is where the money is. You know, I do wonder, Steve, is there like a case, and I think this is what you guys do well, is there a case like where these players, a lot of them transfer every year? Some of these we say, oh, the kids. Okay. Some of these are like 26-year-old men playing college sports. If somebody called me a kid at 26, I might punch them in the face. Who knows? is it good if the kids the players stay in the towns they transfer maybe just once because then because think about this like a local car dealership right if you're a known name on a team for three four whatever years you become part of that community you're more likely to get the nil deal it's not going to be 10 million but the car dealer comes to open doors and says hey player we're going to give you some money if you come out twice a year and help us sell cars because everybody in this town knows who you are.

39:09They don't if you change schools every year. You don't live on campus. You may not even go to class. OK, well, the kids not going to class. That's a different program. But well, they've graduated already. We've had players say that on TV. Yeah. Yeah. Well, here's there's a couple of points on that. One, everybody loves to talk about the unicorns, right? Everyone loves to talk about the big money deals. But the average NIL deal is$1 ,700. And it is exactly what you're talking about. It's the kid in town promoting a local pizza joint, doing six Instagram posts and a TikTok reel. And they're talking about a local pizza joint.

39:47And they're going there for an appearance. Or they're going to their local grocery store for an in-store appearance. And you know what? In a local community, there is no one who connects better with an 18 to 24-year-old than a college athlete. And that's why that fandom exists. And they're just fanatical about it. And they're great at that. But if they transfer every year for four or five years, nobody even knows who they are. Right. They don't. And what's interesting is this year in the NBA draft, there was the fewest number of players that declared for the NBA draft. I think it was 78 or 81.

40:28And it was the fewest college athletes that declared for the NBA draft this year in the history of 25 years. Because if you're not a first or second round draft pick now, you're not coming out of college. You're staying in college because you can make more money playing college basketball. And I don't know if them staying in college, Brian, is a bad thing. I think staying in school longer is a good thing if you're not going to be a number one or second round draft pick. I do not disagree at all, as long as you are actually in college and not just living around the college. Steve Denton of Open Doors, I love the work you're doing.

41:05I poked around on my school and some of the other schools to check it out. So appreciate it. Thank you. Appreciate you. All right. Very welcome. All right. Let's go back to AI and OpenAI's Developers Day. Joining us now is Slow Ventures co-founder Sam Lesson. Sam, don't worry. We're not going to go down the NIL road with you. Oh, we can talk NIO. I know we can. Let's do it. I'm kidding. The tentpole today is AI and open AI. You've been listening to some of the developer stuff. Anything that's really stuck out to you? Look, I mean, there's the obvious reaction to Muse, which everyone knew would come.

41:39You know, the idea that it's actually CPU and agents that can work for you, not just the AI interface, as the future is clearly right. You know, Muse is amazing. Obviously, they're going to respond. The big story is liability. We all know this. I think this is the big thing, which is these AI labs, forget the AGI god story. Very practically, hugging face, canary in the coal mine, everything's going to get hacked. And the question is, who's going to foot the bill? And one version of the world is that if you're running an AI service and you're hacking a bunch of people, that's an almost unlimited liability that you should be supporting.

42:14And that has to be factored into the financing and things like that. I think it's a huge, huge deal and really changes AI lab economics. But, you know, that's the big story of the moment. Yeah. Do you think people want long term these agents? We got headlines now about opening the dots. It's kind of kind of people amuse. I know agents are confusing word for a lot of audience. Basically, it's automated systems that are going to do a lot of stuff for you. We see all the people online that are like, I got an agent and it lowered my car bills. That's great. Like once. Right. But longer term, do people.

42:46Yes, it's cool. But do people want that long term, Sam? Absolutely. Look, I come on this show frequently. We talk about this stuff. And there's this stuff that I am incredibly skeptical of. Do the AI labs make any sense as businesses? Are their liabilities far greater than their equity value in the future? These are things that I'm probably pretty cynical on and have strong viewpoints on. Do you have an agent or set of agents? The question is whether you have one or many that are doing your bidding on the internet and getting things done. Absolutely. And the Muse launch, I think, is a great example of this where you're seeing, you know, I've done this for a year plus.

43:17Plus, I have incredible stuff that does this for me. But you see average people waking up and be like, oh, my God, this is amazing. You know, my wife started using Muse so that every morning our kids' schedules get auto-printed on our printer perfectly for each of them throughout the day on a piece of paper. These types of little shims, making grocery orders, et cetera, you know, sayonara, Internet. This is the future. All right. Speaking of Muse, Sam Lesson, listen to what Sam Altman told our Kate Rooney about MothMeta and Mark Zuckerberg. What do you make of Muse? Have you tried it at all? I've tried it.

43:52It seems like a nice product. Are you threatened by Zuckerberg at all? No. Not at all? Well, I mean, he's like a very impressive person and that company has like great resources, but I feel very good about it. Should he feel so good about the roadmap, Sam Lesson? What do you think he's going to tell you on air? I don't know. I know. It's terrible. We're doomed. No, look. I mean, Muse, it's a great product. If you haven't used it, you will soon. It was an excellent launch by Meta. And look, what they really did is they consumerized it. You know, the difference is people open up a chat box and say, what am I supposed to do with this?

44:24I can ask a Google question. It's hard. People are with Muse really very quickly figuring out the power of how to use this stuff in a consumer way. And it's going great. So, again, look, as a superpower user of this that has built, you know, I spend thousands of dollars a month on infrastructure alone to run my agent universe. But even I, like using Muse, I'm like, this is a great consumer application. I think Facebook's doing amazingly with it. Yeah, is there something that, you know, we talked earlier with Erica Brescia and I asked her, you know, can four or five or three, whatever the number is, open AI companies or AI companies all win?

44:59And she said yes, maybe more than four. Do you agree? So I think there's two ways to look at this, and they're very different types of games. One is at effectively the premium token layer, which is right now you have open source, which is getting better very, very rapidly. And then you have a small number of labs that effectively sell at a premium AI intelligence. Do you think that collapses? Does it all commodify the implications there? I think there we're looking at an open source future by default, and I think it's going to be incredibly hard to make money. So I think actually probably no one wins in a premium token market.

45:28It's going to be like energy, an analogy they use all the time. and it's going to be pretty low margin and global. Then there's the question of agents you interact with and the way consumers and businesses interact with different AI products. I think it's going to be everywhere. That doesn't mean that you aren't using something mildly more than another, but every app is effectively going to turn into an agent. It's going to be a network of agents. And again, it's going to be great consumer surplus. There's a lot of benefits to this stuff, set aside the risks and hacking of it. But there's no way there's going to be one single agent to rule them all.

46:02That's pretty big. Set that aside. I do worry. Listen, I do worry about it. You open the door to your house. Come on in. You just hope everybody's doing the right thing. But Sam, we'll leave it there. Get you back on soon. Sam Lesson, Slow Ventures. Thank you very much. Thanks for having me. Speaking of AI, Meta President and Vice Chair, Dina Powell-McCormick sat down with Jim to talk about AI safety, data centers, and more. You can watch that full interview tonight on Mad Money at 6 p.m. Eastern time. But we're not done yet. Coming up, household net worth here in the U.S. touching a record high last quarter.

46:35Gains in housing, gains in the stock market. We'll dig into more and the numbers next.

46:44All right, welcome back. Home equity hitting new records, but homeowners, they're not tapping it. Diana Oka is here to tell us why not. It's part of this week's Property Play. Diana. Well, Brian, in the second quarter of this year, there was a collective$11.5 trillion in so-called tappable home equity, according to Cotality. That is the amount borrowers could take out in debt while still leaving enough in the home to satisfy lenders. So that comes out to$199 ,000 per borrower. While homeowners did originate nearly 20 % more second mortgages or home equity lines of credit, we call them HELOCs, compared with the first quarter, it still represented less than 0.1 % of the total tappable equity they could have used.

47:31They're just not pulling out the cash. Okay, why not? Well, take a look. The prime lending rate, which is what home equity lines follow, you can see it is now heading where? Straight up. It had been coming down, but also remember that borrowers with the most housing wealth are really those who have very low mortgage rates and therefore strong cash flow already. You can see here the 30-year fixed, which by the way, hit 7.58 % today, according to Mortgage News Daily. It hit several record lows in the first years of the pandemic, prompting a massive refi boom. Even now, just over half of borrowers with mortgages have rates at or below 4%, according to ICE mortgage data.

48:12So just from an emotional standpoint, borrowers might be looking at a second loan at more than twice their primary mortgage rate. Do they want that? No. The loss here, of course, is to the overall economy because all of that wealth is just sitting dormant in homes. Now, this was all in today's free Property Play newsletter, plus a link to my videocast with legendary developer Richard LaFrac. Make sure you're getting it straight to your inbox, cnbc.com forward slash property play. Brian. Diana, do we know how many people during the COVID rate lows took out, they refied into a 30-year versus maybe a five or seven-year arm?

48:49Because for those people, if they tried to save a few bucks. They did not do arms. Well, if anybody did that, they're in big trouble. No. So five or 10-year arm during the first years of the pandemic, that was around 2 % to 3 % share of total mortgage applications. Very, very low compared with today. Last week, the share of ARM applications, adjustable rates, was 10 percent. So five times what they were doing in those first years. You didn't need an ARM loan because you could get the 30-year fix so incredibly cheap. It's really the people who took out an ARM maybe two or three years ago, and maybe it was a five-year ARM, and they're looking at a reset coming up at higher rates.

49:28So, you know, that's where it is. Yeah, I was just wondering if anybody took out a seven-year ARM 2020, 2021. now time is up, but I guess not. You'd have no reason to. You'd absolutely have no reason to because the rate would really be no different than a 30-year fixed at that time. Okay, let's hope nobody did it. Diana Olick, thank you very much. Appreciate that. And folks, as always, thank you for watching The Exchange. I will join Seema Modi for Power Lunch, where our coverage of OpenAI's Developers Day continues right after this quick break. See you in about two and a half minutes.

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