Transcripts For CNBC Squawk 20240703

Were going to begin with this years biggest ipo, arm pricing its offer at 51. Thats the high end of the projected range and valuing the softbankowned chip designer at 54. 5 billion, fully diluted. Arm, whose customers include apple and nvidia, looking to ride this a. I. Wave, listing on the nasdaq today under arm, and david has this exclusive with renee haas and masa son. My understanding is that they could have gone 52. Thats what i have been told by any number of people, but masa said, lets do 51 with the prospect that that will position it better for some sort of positive open, and thats important here, given the importance of arm to the overall ipo market given the size of the offering, the focus on it, and the fact that we are expecting more to follow. If it doesnt perform well, that might leave not a particularly good taste in investors mouths. The hedge funds been pared back, long only. Sovereign funds and stepped up and converted from what was interest to actual buying power. Well see how it pfrerforms, ji. On the fundamentals, its highly valued. When you look at the last 12 months, its about the future. Its interesting you talk about the long only and obviously these anchor tenants. The anchor tenants themselves are not going to be held to, i paid too high for something. I paid a hundred times versus, say, cadence, and you need that, because remember, if you get it 51, you got to be able to sell it at 58. Theres got to be some upside, and david, even at 51, its expensive. Yeah, its not cheap. But it may very well be the way it trades today is much more about supplydemand than it is about underlying fundamentals, which well sort out over time. Well, you when you speak to rene, i dont think i think rene wants a good deal, the ceo. He does not want a high valuation. He wants people to be rewarded, and i think one of the problems, david, is that the very small float might pop big, and we dont want that. Yeah, you know, you want to sort of leave everybody feeling good but leave something on the table. They just said that. Theres got to be some happy medium. Carl, the bad deals are the ones that open up huge and then retail people get picked off these market orders. What are the key examples that you think of when you look at that scenario . Well, i mean, we didnt know well, first, theres facebook, which, who the heck knew what that was going to be . We had uber, where you had people who really wanted out that we didnt know, and we had individuals who wanted in, and it left a bad taste with everybody. You want to grab that . Im going to grab that. David mentions the underlying fundamentals. The other story is the migration from smart phones to datacenter, and then royalty rates. Royalties are tough, because they tend to go down. I was struggling with whether qualcomm shouldnt be the comp, and thats very low value because theres so much thats cell phone. David, you know this thing has really really has to have a lot of nvidialike business in order to be able to get the higher valuation. Without a doubt. A. I. Is the future that theyve discussed in terms of adding that layer of growth that i think is going to justify not just a price of 51 but perhaps growth from here. As the guys said, of course, we have had a chance to sit down and speak with rene haas and masa son, and i want to play it for you and talk about this is very exciting. The opportunities that mr. Haas sees for this company. Again, priced at 51. Wont begin trading, by the way, most likely, for a few hours from now. Im come back. All right. You come back. Okay, thank you. Take a listen. Arm of 2023, returning to the Public Markets, were a very Different Company than we were in 2016, when we were largely associated, as you said, with mobile. And the important thing to think about arm or remember is that we were born from building a device that was going to run off a battery. So, that sensibility about power efficiency is in the dna of our engineers. So, fast forward to 2023, when you look at the diversification of our markets, cloud datacenter, automotive, everything with ev in automotive, these require extremely power efficient processors or cpus, which is what we do. So, whether its datacenter, obviously around sustainability, you want as low power as possible. Back on these cars running off batteries, its a great place for arm to really grow our business, and thats what we did in the years being private between 2016 and now. We diversified our business. Weve got Significant Growth in the cloud datacenter and in automotive, and then with a. I. , a. I. Runs on arm. Its hard to find an a. I. Device today that isnt armbased. Google amazon alexa, for example, that device, which does voice remem voice recognition, et cetera, thats a. I. You might need more cpus to run more complex a. I. So, we see just huge Growth Opportunities there. What is running generative a. I. , though, is more gpu, and its obviously all produced by nvidia. There is a relationship there. Obviously, you once worked for the company as well. But investors aye spoken to would like to see a lot deeper relationship. Is it your expectation that youre going to sell more to nvidia . Theyre not that large a customer. Nvidia today is doing obviously a lot around a. I. , generative a. I. And training. Their latest product that they announced, the gracehopper super chip, which is their accelerated gpu for a. I. Training, now uses 72 arm cpus as the core cpu in that. Remember, no type of accelerated training for a. I. Can run without a cpu, so now the combination of the arm cpus with nvidia gpus, we think, will be even more Growth Opportunity for us going forward. When investors looked at your s1, for example, or your recent numbers, they didnt see a great deal of growth year over year, and yet youre pointing to much more Significant Growth next year over this year and even after that. Why . The year on year growth was not that great, as you said, but if you look backwards for the last three years as weve pivoted our strategy, were about 15 year over year growth going forward, excuse me, for the last three years, but going forward, again, when you look at these mega trends of efficiency, software, complex a. I. , all having to run off batteries or lowpower devices, this is a huge growth for us. And again, david, grace hopper is a great example of the kind of devices that can only be built on arm. Masa, it wasnt that many years ago that you were selling this company to nvidia. Or at least had plans to sell this company to nvidia. That obviously did not happen. The price tag then was 40 billion. A lot of it was made up of nvidia stock. What has changed between then and now . We did not want to really sell. It was the covid that made me really go into the protective mode. So, i had to go protective mode, and i had to choose the more conservative, careful operation of softbank. So, we were selling to nvidia, but the deal was actually onethird cash, twothirds was exchange of nvidia shares, a combined company of nvidia and arm. I believed in the future of nvidia back then, and it was right, and i believed in the combinations of the power of the two companies would be enormous. I believed in the future of a. I. , and its really now getting proved. And this is the beginning of big a. I. Time, and arm is going to have a big role in that. Were going to share a lot more from that interview. Obviously, including masas belief in a. I. And talk about some of the missteps that have taken place as well. You know, jim, as you know, if that nvidia deal had gone through, they would have benefitted enormously, given the twothirds that would have been the stock. Oh. That said, he bought the stock, if you guys remember, back in 17 and then sold it not that long after. Again, a real opportunity. I would point out one other thing, which is i believe when they bought arm in 2016 for 32 billion, they could have bought all of nvidia for 27 billion. Well, that was the market cap of nvidia at that time. So, when it comes to a. I. And masa and i discussed this, and well share it with everybody. He was talking about it ad nauseam four years ago, five years ago, and yet they havent benefitted from it as much as you might have thought given he certainly had the right viewpoint. It just took a while to get there. Do you think, david, one of the reasons why he may not have benefitted is that theyre so dominant in cell phone that you end up saying, you know what . Theyre doing okay in a. I. , but theyre a cell phone cpu company. And, now, theres some grace hopper performance i know that sounds like a strange name, but this is jensen. You have been talking about grace hopper and so was rene haas. I dont know if you an outfit called ml pert that does these absolute testings, and the grace hopper is by far the fastest. Also, its not hot. But the big win here was when they dislodged intel and dislodged amd, and yet theres intel as an anchor tenant. Interesting, huh . Yeah. Why . Why not get as many anchor tenants as you can . Intel got aced out. They still do a lot. They do. But i just come back and say, look, if we want to make this into an a. I. Company, theres a hundred other companies that we can make into a. I. Companies. When i was out there at salesforce, carl, Everyone Wants to present themselves as an a. I. Company, and you know, when you get into the nittygritty, bank of america is an a. I. Company, and that could be real, because theyre graded on efficiency. In other words, the real win is on gross margin, not on growth. And thats a really important consideration. We all want growth. We dont care as much about gross margin, but so far, a. I. Is about gross margin. Making it cheaper. Find out whos efficient and frankly, attrition on people who are coders. Its interesting. Some of the reaction to certainly oracles quarter and dreamforce today is that the promise is there. The execution part is really cloudy. Very cloudy. Thats one of the reasons jpmorgans take on oracle yesterday, for example. Well, look, i thought we have oracle world next week, so lets see what Larry Ellison says. I had laura albert on last night, williams sonoma. I know it sounds like, wait a second, this is not the retailer. But theyre a Digital First retailer, so they are actually they have the data. They have data worth mining. Most companies dont know what the data is, but the real data use is trying to figure out realtime insurance pricing. And or also, you know, whats it how do you price a beach house . Well, lets just look at all the Beach House Properties in america and find out how to price it, because we dont want an outlier who then wipes out all of our all the, you know, all the savings we have, and thats the kind of prosaic i have to tell you. A. I. Is incredibly boring. Incredibly boring . Whats the use case . Im going to talk to frank slootman, because you know what it is . Its auto finance. Its plastics. Thats the use case. Plastics. Theres a lot of use cases. No, but you want an a. I. Company, we can talk about microsoft, how about that . All right, but its not exciting. Copilot. I was going to say, everybody tells me, jim, it could be your copilot. My wifes the copilot. She doesnt cost me anything. They had a Developers Conference yesterday in new york. My wife . No, microsoft, talking about copilot. Could be available very soon. Oh, really . This is why you said so much is riding on adobe. Oh, my god, tonight is so big. Because oracle was a miss. Adobe has to be a hit. Theres a ton of news to get to as we said earlier. The clock is ticking for the uaw and the d3 as this potential Midnight Strike looms tonight. Plus in the next hour, sara is going to sit down exclusive with citadels ken griffin, talk about everything from markets to the fed to education. Futures have been holding in er en with some of the swirling around on the hot data today. Retail sales, up 0. 6 , looking for 0. 1 . More squawk on the street when we come back. But our Network Connects global businesses across nearly 160 markets. Were not a startup, but our Innovation Labs use new technologies to help keep your information secure. Were not architects, but we help build stronger communities. Were not just any bank. We are citi. sirens [due at target in 5 ] copy that. Make a hard left down the alley. Networks got you covered. [please confirm requesting backup. ] changing route. Go. Roadblock ahead. Back up, back up. Reverse reverse next level moments, were 30 seconds out. Need the next level network. [north corridor, hurry ] coming through or 3, lets go. The network more businesses choose. Transplant received. At t business. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Wow, you get to watch all your favorite stuff. Its to die for. And its all right here. Streaming was never this easy, you know. This is the way. You really went all out didnt you . Um, its called commitment. Could you turn down the volume . Here, you can try. Get way more into what your into when you stream on the xfinity 10g network. Tension until the auto business today, the uaw and detroits big three remain far apart in negotiations. Union is preparing to strike at midnight. This is what the president of the uaw, shawn fain, said last night about the talks. Were making progress at each of the three negotiating tables. But as you just heard, were still very far apart on our key priorities. From job security to ending tiers, from cost of living allowance to wage increases, we do not yet have offers on the table that reflect a sacrifice and contributions our members have made to these companies. To win, were likely going to have to take action. And just as we have approached our negotiations differently than we have in the past, we are preparing to strike these companies in a way theyve never seen before. Oh. Jim, you said ford does have the best offer, i think, at 20. Well, i want to posit something. The man you saw just now, i think, is a paper tiger. Hes coming in and saying, well, theyve never seen anything like it. I think theres a Nuclear Option on the table if hes not careful. That Nuclear Option is a country called mexico. You dont hear about it much. But if you say, were in intransigent and were going to stay at 40 , theres no give, well, you know what . Monterrey, puebla theres the capacity to have that happen. Not overnight, certainly. Mercedes did it in two years. Two years would be a long time. They dont have that much demand. You put that out there, and you say, listen, all the you want to know where the new ones are going to be made . Were going to make the old ones, but puebla has a 55,000person factory for vw, a good educational workforce, 5 an hour, no real push on control rules, thats not to be mentioned. Free health care. You want to play ball . You want to keep doing this . Mexico. Glad to see youre standing up for the American Worker here, jim. Thanks for that. I was a union member twice. One was completely corrupt and i led a wild card strike and was fired. That was not good. You seem to think the automakers have the upper hand. The union you could say theyre way behind, the wages arent the same as his point would be that they have they havent kept up with even base inflation since 2007. So you go to 25 . Is he not satisfied with 25 increase in i think most of america fords the most unionized company in america. It is. What about the way that they say theyre going to strike, which would be not cross the board but stellantis oh, you mean targeted factors . You target the f150 because it makes a lot of money. They can build a hybrid very easily in monterrey. B of a took a crack at that, what theyre calling a standing strike, where you go after individual facilities. Their argument is it would be very difficult and inefficient for any of the operators to coexist with that, so they see likely if it goes that way, makes sense to shut down, lay off the workers, and restart if and when you get a deal. Look, i think this man i would not say that shawn fain is a paper tiger had they you just said he was a paper targ. I wouldnt say if they had raised a lot of money in the strike fund. Their strike fund is five weeks. 600 a week, and then youre out of money. People like to get paid. You cant hold out. I mean, these guys are not, like, running backs. Theyre not like a running back whos going to hold out and get a big deal. Theres no big deal if you hold out. And youve got to put food on the table. Im saying that shawn fain, he sound like hes the president of the United States. No. President of something higher than the United States. Hes not. And he won by a very slim amount, and i have a factory in mexico, let me tell you something. Its fantastic. Well, my wife does. We are going to hear from the president later today on economic policy. That will be interesting. I imagine this might get discussed. When we come back, a lot more of davids exclusive with arms chief rene haas and masa son. To address operations issues . We can help with that. Can we provide health care virtually anywhere . We can help with that, too. Is it possible to survey foot traffic across all of our locations . Yeah absolutely. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. drumroll by lonis, Little League this just in got the keys to what you want and what you need something new Something Sweet moving to a different beat okay now what . can i get a get a drumroll . what . can i get a drumroll drumroll . what . can i get a can i get a drumroll please oohh thats nice yahh ya, can i get a drumroll, can i get a drum thats nice welcome back to squawk on the street. Time for our mad dash. Of course, we have an opening bell about seven minutes from now. Lets talk a little amazon. This Morgan Stanley note basically says, david, were at day one of gap profitability, 5 of earnings per share. This is a note which is basically saying that management has figured out how to make a lot of money again, kind of 2019, on retail. David, you know, this is this thing had a tie yesterday. Jassy is in his prime. Jassys back. Now, jassy got his head beat in by the cowboys, but thats okay. Im an eagles fan. I think hes struggling to deal with that. But hes not struggling to deal with workforce. Hes not struggling to deal with the thing that i most challenged him on, which is, how do you make money with so many hundreds of thousands of people . Theyre doing it. Return to 2019 north american retail margins, exads, would at 12 billion of ebit. This is a remarkable set of numbers of what amazon can do, but it all it really does is explain how this happened. Yeah. Youre talking about a significant move up. Right. Its a justification for the move more than it is, i think, another reason to buy it, because its been up a huge amount. But they do say 20 to 60 upside. Thats a wide range. That is a wide range. And no mention of aws, which is still the profit engine of the company. This is not an aws piece, to be honest. Its about a lower shipping and fulfillment. Its much more boring, david, and not a lot its all about efficiency, and david, no matter what i do, i cant shoot more a. I. Into this. Id love to. Oh, i can. What a. I. Is going to be able to do for robotics in the Distribution Centers is going to be enormous over time. You talk about those hundreds of thousands of employees at amazon . My guess would be over time, to the extent theyre always ruthless. They can replace them, they will. Thats im not saying they did not use a. I. In this, but yeah, thats about replacement. Yeah, yeah. All right, we got an opening bell a few minutes from now. Are we going to have more of the interview with rene haas . Thank you for asking, because, in fact, yes, we got all your bases covered with that ipo. We have more of that exclusive with rene haas as you see him getting ready to ring the ltaing bell at the nasdaq, and wel lk to masa son, of course. Softbank will still own 90 of arm once it begins trading. 10 has been sold. Were back right after this. What do you see on the horizon . Uncertainty . Or opportunity. Whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined Risk Management are needed most. Drawing on deep expertise across the worlds public and private markets in pursuit of longterm returns. Pgim. Our investments shape tomorrow today. Announcer the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. Its going to be a busy open at the nasdaq where arm is getting ready to ring the bell in celebration of its ipo. Biggest of the year. We have talked a bit about the deal the offer this morning, jim, but impact on the broader markets as well. Look, if we get a deal thats done right, as david said, i think that theres a bunch of ipos in the queue. We know instacart, thats a no brainer, and birkenstock. But ifwe got a good deal. I had discord on. This is a disrupter. Look at the cnbc disrupter what the heck is that . Look at all those people. Thats england. Thats the uk. Thats in the uk . Holy cow. Other than what the royal wedding, ive never seen anything like that. I know, i know. Is wilf there . Rene has one key shareholder, that being masa son. Softbank, selling these shares, remember, but still will control the company. They tell me they talk ten times a day. Ten times a day . About what . That was the end of our interview. A lot of times about masas calling rene a lot. Short conversations. I dont know what to say. I havent talked to anyone ten times a day other than my set producer for mad money. Whatd he have to say, like the eighth call, what do you say . Hows it going . Whats happening . Yeah, i dont know. Lets do this. The opening bell. At the nasdaq, as we said, it is arm. Largest ipo of the year. Ukbased chip design company. At the big board, lap corp. Celebrating its investor day as well. Thats the area where i expect most of the deals. We need biotech. Theres been very few biotech deals. We did the horizon. They did okay. We need some ipos, biotech, badly. Thats where the queue is supposed to be longest, lots of companies needing money. David, i think that you ought to put this deal in perspective, about how really big this arm deal is in terms of the history of ipos in the last few years. Listen, at 4. 5 billion plus, 5 billion, its a big offering. We will see how it trades, and again, its not going to trade for some time. Its not going to be open, but they broke in syndicate, and it is well placed is what i understand. Hedge funds, getting cut back, thats usually a good thing because they like to get out of it very quickly, so if you get it into more hands of the sovereign funds, family offices, long onlies, you tend to see it trade less or at least sell less, and maybe theres some buying power behind it. Thats the hope of the underwriters. You see the 54. 5 billion valuation. Weve talked a lot about that. Of course, when you look at this number at the bottom there, 549 million, i mean, thats, you know, last 12 months. That is one hefty multiple. Thats too much. A hundred times. Its too expensive. That said, they are talking about midteens growth now. But synopsis and cadence have faster growth, and theyre nowhere near a hundred times. Right, but thats they say that was depressed to a certain extent as well. It was bad year. Customers that overordered during the course of the year because they thought it was going to be owned by nvidia, and so they were worried that nvidia would start competing with them. And that didnt happen, obviously. There are some of the key investors here. Theyre very happy with that, as you might imagine. But every one of those companies is willing to pay 150 times earnings. It doesnt hurt their performance. No. If youre a longonly fund, you have to have some upside. You cant just pay the price and then have it sit there. The idea is that 51 opens at 58 and then immediately, you say, were up. Or 52 or 53 and then up over time. You want stability. They sopped up a lot of the theres not a lot of all right, let me tell you what im scared of. That people at home see, wow, arm, thats really great. Its a. I. Im willing to pay anything and then next thing you know, you have 60, which i think thats ultimately where you could get for just way too expensive. Well have to wait and see how it performs, and, again, its going to be a few hours, most likely. But these things on the nasdaq tend to wait some time, carl, before they let them start trading. Goldman likes to wait. Well watch it. Obviously, a lot to chap in the meantime. Including the fact that every sector is green in the face of another hike, ten in a row from the ecb. I have to tell you that the big outlier day was i think that we saw some really crazy trading on tuesday, some bad tech. We will be up tomorrow on tech if adobe blows it away, because that is actual eps a. I. , because by the way, when i ask, whos ahead, what really understands it besides like the insurance company, whos actually making money on it . Its adobe. They interfaced with a lot of companies that need to know what interests customers, and a. I. Allows you to figure out whether customers like blue or red. I mean, thats what you know, you have to have have a background, you can change it, and adobe offers this firefly is one of the most you know, i asked my daughter because shes a designer. This thing is incredible. Its miraculous. Thats the miraculous a. I. Is adobe, and i think they can blow it away, but remember, the stock was up 20 in the afterhours and was down the next day. The stock is up 50 in a straight line. The bulls are looking past the warning out of delta today. What is this, the third one in the last two days . Looking past to get to the southwest warning . Vaughn to spirit and aal yesterday, jim, although, itsy, doing extremely well on this catchup from wolf. People have been saying, i guess etsy has lost its way. I dont think it has. This is just a company that did not rebound postcovid the way others did and everyones tired of buying airbnb, so now theyre buying etsy. Its one of these rotations. I dont think that you saw it in industrials, by the way. Everyone was buying eton because it had so much involved with energy save. Come out of the laguna conference, a Morgan Stanley conference, and suddenly, they like honey well and not eton. Its almost as if theres a vicious rotation within sectors about whats hot and whats not. Guys, netflix is down again. It was down late session yesterday. Margins, david. You had the cfo, spencer newman, appearing at the b of a Media Communications and entertainment conference. Again, this was yesterday, and the stockdid end yesterday down. Its bad. You know, some concern about, as you say, margins, about the advertising tier, perhaps, and or their password sharing crackdown. That too. I dont know, jim. Im curious to get your take. My breath was taken away. You took away my 2025 upside. It was a reset. You think it was that significant. I do. Heres why. The cfo is a total hitter. I mean, hes very much involved with every aspect of netflix. And this was a sense for someone whos a really bull on netflix, i said, geez, i got to back down a little. Im reading a summary of some of his other points, though, and a lot of it seems to be quite positive. 90 plus of member growth is outside the u. S. International mix likely to be slightly dilutive overall, but highlights asia pacific, largest growth region. Very bullish on the longterm opportunity of advertising. Big commercial incremental revenue. Profit contributor to the business. You know, dont think its prudent for the company to keep growing at three Percentage Points of margin per year, given that would constrain the business too much on Growth Opportunity. That gets to your concern. Im looking at the truist piece. Average revenue per member, company reiterated arm is unlikely to be a driver of growth in 2023. Might be there in 2024. How about this . This is most important. Where there could be downside to our model, 2025 operating margins. They dont think theyre good. Its like, wow. Netflix has been such a strong performer. Elsewhere in media, you had charter saying that cancellations werent as bad as they had anticipated going into the dispute with disney. And then you got, like, bill maher and Drew Barrymore now restarting their shows, some splintering amongst solidarity on the writers side. Did you find it quizzical that very few people seemed to care that monday night football was monday night football has been on since 1968 or something. Theres an actual number there. Im sorry, meredith, with cosell, but i was just blown away by the numbers. Maybe it really was down to the wire, and both sides knew, we got to have that monday night game on. There was a lot of excitement to it. But what i was blown away i mean, nfl continues to be the thing that people want to see. Lets see the numbers tonight for this is an amazon game . Eaglesvikings . Thursday night games are so awful. I think al is on the half today, is he not . Oh, is he . Al michaels . I think so. Pretty cool, al. All right, our focus, of course, continues to be as well on this enormous ipo thats taking place. Important for softbank, important for arm, but also important, broadly speaking, for the ipo market, which, of course, is coming off a year ago, a year that was just dreadful. I mean, virtually no real Public Offerings of note. Thats changing a bit right now as we get ready as well for instacart very soon. I did have an opportunity to sit down with rene haas, arms ceo, and softbanks masa, who will continue to control 90 of the shares. And by the way, bought back some of those shares from the vision fund at a value of 64 billion. One of the concerns amongst investors is the companys reliance on china. Its about 25 of revenues, and it was a subject of some of our conversation. Take a listen. Our China Business reflects the growth we see in the rest of the world. Were seeing huge growth in the datacenter around cloud computing, also with a. I. , and then evs. Huge growth in china in terms of evs. And china wants a lot of what the rest of the world needs. Power efficiency, software ecosystem, a lot of the same software thats used across the world is used in china. So, what were seeing, david, in terms of our china market growing, is largely around those two areas, datacenter and a automotive. In terms of the broader issues, i think i share the same headaches that just about every tech ceo does these days. We comply, of course, with all the regulations that come down relative to export control if theres something that we need to adhere to, of course, but its really a tricky market to figure out just in general because of all the things that are going to be geopolitically. But broadly speaking, our China Business has been doing very well. I want to get back to the business itself, but masa, softbank owns a significant stake in the joint venture that im describing in china. Youve obviously done business there. You were a very large holder of alibaba for many years. What is your sense in terms of the risk that china poses given the percentage of revenue it comprises for your company, for arm, is quite high. U. S. China is having a very complicated situation now. China has Significant Impact to the economy of the rest of the world, so i think i hope the situation gets better, but who knows . I just am one of the citizens who is wondering, and you know, concerned about the future of chinau. S. And the rest of the world. Yeah. What do you hear . I mean, you have had relationships, deep relationships with many people in the Business Community there. How deep are your concerns . Not just in terms of the back and forth between the u. S. And china, but also in terms of the regime itself and its crackdown, so to speak, on entrepreneurship, if i could call it that . Well, its difficult to comment. Whatever i comment, it goes into all kinds of headlines here and there. So, i have to be careful what i say. But our exposure in china, softbank as a group has reduced significantly, because now, you know, most of the shares in alibaba from softbank is already sold. Just, again, to make the point clear, its really an independent entity that operates in china. Its in the risk factors in the s1 and its obviously a significant one, jim, that investors are certainly, at least, focused on. Theres opportunity there, but as you see, theres a lot to navigate from rene haass perspective in terms of u. S. China, making sure you dont run afoul of any of what continue to be sort of changing rules. Yeah, i know that when you speak with nvidia, they have so much business that right now, its not a problem. But i think, longterm, all these companies are going to go lower multiple if we dont do more business with china. Because chinas been a giant consumer of everything, and i dont i always hear theyll bring it up before you even ask. Look, we are doing great. But if the government decides that we are not supposed to love this in china, we wont, and that will hurt. Very matter of fact. 25 of revenues, roughly speaking, for arm out of china. Not out of line for what, say, tesla gets. No, no, but you cant control it. Softbank does own a significant equity stake in the joint venture that were talking about here, but it operates independently. As we await the opening trade, as david said, its going to take a while. Lets talk with leslie picker at the nasdaq. Lp, what are you watching for this morning . Waiting for those first indications to come through. Obviously, the choice to price at 51 is not something at least in terms of the color that im hearing, not something that was taken lightly for the better part of a week. They were kind of deciding between high end of the range, above the range. Ultimately, that oversubscription, that demand was really centered in the range that they were marketing. So, ultimately, that 51 a share is where they landed, and as you guys have been discussing all morning, its pretty expensive on a relative basis, more than a hundred times last years earnings, which is about double its peers, so thats something investors were, you know, a little concerned about. If you push it and become too aggressive from there, do you still are you still able to orchestrate that decent first day of trading performance . Well, leslie, are you hearing a lot of people who are Retail Investors really want to be in an a. I. Play, and they feel nvidia has moved so therefore theyre going to this one . Yeah. Its an interesting question, jim, and i think thats the big wild card today, and kind of that goes back to the color on where to price it, because the wild card was where would retail fit in here . Because could you price it above the range and then have retail really come in, in a big way, and push it higher from there, especially if investors were balking more at that more aggressive pricing . Thats the question that theyre not so sure about, and since we havent seen too many ipos lately, we dont really know what the retail demand is for ipos at this stage in the cycle. So, that will be really interesting to see how active of a participant retail is in this deal in particular. Leslie, i dont know if youre getting what color youre getting. I heard that hedge funds have been pared back to a certain extent, which would be seen as a positive. Yep. Get more longonlies and more sovereign funds, perhaps their longer term holders. Just curious as to whats going to represent success here, do you think, from the underwriters perspective . Its always about the quality of the book. The quality usually indicates those longonlies, the as particularly the longonlies that tend to hold for a long period of time. They dont get in at the ipo, flip it. Its that long standing relationship, so thats really critical. Also, interesting in this deal, and weve talked about it a few times, is this 735 million worth of float thats been purchased by customers. Thats amd, apple, google, intel, and others that have agreed or expressed indications of interest to purchase at, you know, collectively a 735 million worth of the float. So, all of that is really good as you try and figure out the supplydemand dynamics of these types of deals. Its only about a 9 float for this one, including those strategic investors, so pretty small relative to the overall size of the company on a fully diluted basis, so well see when this starts trading. But there are a lot of risks, as you pointed out, with china, with valuation, with just the future prospects of the income statement and the ability to grow revenue and grow earnings from here as they have been shrinking the First Six Months of the year. Leslie, thanks. Leslie picker, well be chatting all morning long. Jim, we will be following through on this on monday when we get carts pricing and theres a piece in the times today about how its no longer about delivery as much as it is about software and advertising. That made me feel like, please dont go into that deal unless they really price it in the hole. They did take instacart value down dramatically from where it was. But david, keep it in perspective. The last big deal we had was rivian. That was an 11. 93 billion and retail went nuts for that, and they got really hurt. They did. You remember when rivian had over 100 billion market value. Yeah, that was ill advised. That was a different time. You can imagine how that would appeal to people in a way that perhaps this is a little you sound wistful about that time. It was a different time. It was i mean, listen, we can sit here and say, thats not probably a good thing. You can see what were talking about there before 21. Wow. Since then, it has people have too much enthusiasm there. Now its a 22. 4 billion market value, not facing a uaw strike, though. No, thats a very good point. Its really we dont even talk about it enough, the battery factories are on the firing line too. President biden, the battery factories interesting piece about tesla today in this apparent breakthrough they have made in pressing molds together or the front to the rear mold that would allow you to create entire underbodies in evs for very little money compared to the legacies. Its just the battleground for costs between tesla and the other guys, david, it is just you saw musk. I did. I saw the plant. Its an unfair advantage. Theres a lot more margin at tesla. I think thats fair to say, a lot more margin to play with, too, conceivably. Very much so. Well take a break here. Dow is up 150. Just a few points shy of 4,500. Well continue to watch arm. Stay on top of the markets as we continue to juggle some of the ecodata. Central banks, labor disputes that were getting today. Take a look at treasurys today. Actually, some relatively tame behavior with the tenyear still below 4. 25 , and the twoyear, just south of 5 . You know doug, ever since switching to workday youve been a real rock star. Rock star . What do you know about rock stars . Billy idol . I mean wheres the skintight leather . My shoes are leather. Wheres the unnecessary zippers . That thing billy, rock star is just how doug feels when he uses workday. Thanks, rory. Ill show you rock star be a finance and hr rock star. Workday. For a changing world. Billy idol just stole your golf cart weve got your back, road warriors. Because we know youre picking up the pace, steering life at 10 and 2. Youre hitting the road. And were helping you get there with confidence. So skip the counter without missing a beat. Choose any car in the aisle. And be the boss of you. Go national. Go like a pro. You got this. Lets go. Gobble gobble. Ive seen bigger legs on a turkey rude. Who are you . Im an investor in a fund that helps advance innovative sports tech like this Smart Fitness mirror. Im also mr. Leg day. 1989 anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq100 innovations. I go through a lot of pants. Before investing carefully read and consider Fund Investment objectives, risks, charges, expenses and more in prospectus at invesco. Com. Welcome back to squawk on the street. Im sara eisen at Success Academy in midtown, manhattan, part of new yorks largest Charter School system because its a beneficiary of Hedge Fund Titan ken griffen founder of sit ta dell who has donated 35 million here. Hes here with me daantoy d we will talk about that, about the markets, the economy and inflation and much more on the next hour of squawk on the street. Well be back with the dow up triple digits. Across nearly 160 markets. Were not a startup, but our Innovation Labs use new technologies to help keep your information secure. Were not architects, but we help build stronger communities. Were not just any bank. We are citi. mom bringing in a new roommate to save money is that the plan . dad well we gotta find some way to save. We are citi. So say hi to glen. From work. glen hey. Thats my mom. mom i think i have a much better plan. We switch to myplan from verizon. We get exactly what we want and save big. All on the network we can count on. daughter its a good plan dad that is a good plan. Glen looks like were not going to be needing you. So ill see you at work. son later glen. vo this week. New and current customers. Get a free Samsung Galaxy s23. Plus galaxy watch and tab. All three. All on us. Thats a savings of over 1800 offer ends soon. Its your verizon. Your shipping manager left to find themself. leaving you lost. You need to hire. I need indeed. Indeed you do. Indeed instant match instantly delivers quality candidates matching your job description. Visit indeed. Com hire the power goes out and we still have wifi matching your job description. To do our homework. And thats a good thing . Great in my book who are you . No power . No problem. Introducing stormready wifi. Now you can stay reliably connected through Power Outages with unlimited cellular data and up to 4 hours of battery backup to keep you online. Only from xfinity. Home of the xfinity 10g network. Its time for jim and stop trading. Good news for the Business Roundtable and for cisco. Chuck robbins named the chair of the Business Roundtable. Wow. Mary barra. Its not about friends, its always about money. Chuck has done amazing things. I think is well known as being maybe the most gracious Charitable Company led by a guy who is doing its himself. This is the way business should be. Hes a terrific person to run this. Just came out actually no one has it, and im excited for chuck and the Business Roundtable. Great choice. Interesting to see who is speaking for corporates going into an election year. I dont know if hes democrat or republican. Hes a falcon fan. Good luck. The falcons have a good team this year, good running back, good coach. We need a team to surprise on the upside. It will be the falcons and chuck deserves that. How about tonight . Okay. So i got to go on a cruise with no driver and kyle and i just had a great time. Kyle runs cruise. Th this is a piece thats one of the most fun pieces since ive started. You were impressed . Five cities now, ten more cities coming. Its finally happening. I would like to put together a consortium and buy a bunch and use them as ride share. There is going to be an a guy named musk has a similar idea for his automobiles. Its the first time ive been in the same sentence as musk since he called me a hologram. This is an exciting story. Congratulations. Its waymo and cruise in san francisco. Cruise is ive got to tell you theyre everywhere and people dont think of them as special at all. Mine was named nokia. Freak me out. My noke. If youre driving the car. Wait until you see the bus. Theres no steering wheel. Ep. No wheel. Cant wait. See you tonight at 6 00. Mad money. When we come back more of davids exclusive with re ne haas and masa son of arm. Energy leading. Vix almost a 12 handle. Dont go anywhere. Every day, businesses everywhere are asking is it possible . With comcast business. It is. Is it possible to use predictive monitoring to address operations issues . We can help with that. Can we provide health care virtually anywhere . We can help with that, too. Is it possible to survey foot traffic across all of our locations . Yeah absolutely. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. music the walking tree is said to change its entire location in pursuit of sunlight where could reinvention take your business . Accenture. Let there be change. Ever since she was a little ki, all maria wanted to do was bak. Im maria alvarez, owner of marias cakes. And im axel, proud to be her state farm agent. Her baking superpowers have brought sweetness to our community. I make delicious cakes to make special occasions even better. Maria doesnt just bake; she also creates opportunities. Small businesses like marias, open doors for communities to thrive. Support your community. Support small business. Good thursday morning. Welcome to another hour of squawk on the street. Im Carl Quintanilla with david faber at post nine of the new york stock exchange. Along with sara eisen, joining us from one of new york citys Success Academy Charter Schools where in a few moments shes going to talk to citadels chief ken griffin. Sara . Good morning, carl and david. Im here at Success Academy in midtown manhattan, a high school that has 900 kids. It is new yorks largest Charter School, were here because ken griffin, Hedge Fund Titan of citadel, has been a major philanthropist and donated 35 million to this project, part of his bigger education philanthropy. Something well talk about. Hes here with me. Well talk about citadel. Citadel has become the top earning hedge fund of all time, surpassing bridgewater after a record year last year for a lot of these strategies and the funds there. Well talk to him about the markets, the economy, what he expects from the fed, guys. Theres no shortage of topics with a hotter ppi number we got today and, of course, the arm ipo happening this hour. In just a few minutes youll hear from ken at Success Academy. Looking forward to that. Something else were keeping a close eye on is the initial Public Offering of arm. Its being sold, 10 roughly of the company being sold by its owner softbank. 51 a share. 95. 5 million shares. The proceeds going to softbank, and i did have an opportunity to sit down with Ceo Rene Haas of arm and founder and ceo of Softbank Masa son. It wasnt very long ago sthat softbank bought back some of arm and paid a higher price. Massa explains. We, softbank, owns 75 of arm, and to just a few weeks ago, just a few weeks ago we bought back from 75 to 100 from vision fund. We paid even higher price. Im more confident about the fe future. I think the value is going to have a good upside, really long term, and thats why i bought back with the higher price than 51. And i just want to have all the investors have a good time going forward. He wants them to have a good time. Were going to have a lot more from that interview later in this hour as well. Some Important News from masa involving his view of the 90 . That 51, about 54. 5 billion overall value, masa referred to having bought back from the vision fund at a 64 billion value. He is in it for the long term, and the expectation in his mind is that at this price it is going to set up for what is going to be growth in the stock price from here. Of course, we have to wait and see how the stock opens. Yeah. While we wait lets check in with leslie picker and our bob pisani to talk about the ipo and others to come, perhaps. We havent gotten your thoughts this morning. This is really important. The biggest tech ipo the a couple years. The tech enthusiasts are out there, the ipo enthusiasts are chomping at the bit. This needs to be successful. The problem i see theres a natural buyer out there that may have problems, the etf community. They have very strict rules for inclusion in their indexes and a couple things i see thats a problem. Number one the biggest Index Provider is s p 500. They require a company to be domiciled in the United States generally, and, of course, arm is not. Its a british company. Thats a problem for inclusion in any of the s p indexes. The second is the free flow. Most of these etfs require free floats of at least 10 , and as weve been talking about its 9. 3 to 9. 5, depends on how you do it, and that may be a problem for inclusion in a lot of big etfs. The semiconductor etf, smh, the biggest out there, that requires a 10 float. You cant do that right now. One way around this is to get the green chute exercise, 15 over allotment, maybe you can get to 10 on that. One other one the qqq, the nasdaq 100, there is no market capitalization or minimal number here for that one and that may well go into the nasdaq 100 some time this year. Its reconstituted in tedecembe potential offsets to that . Not necessarily offsets but i was thinking aboutthe fact that softbank has about 180day lockup before they continue to sell down more of their stake, and in talking with some investors, that is actually is something theyre looking at, is what happens to this stock at softbank for probably years continues to sell, sell, sell. That adds more supply. You know, if, obviously, if the ipo goes well and they continue to perform after that, that could bode well. The risk there, of course, is that as we introduce more supply into the market, and there is this common trade that hedge funds short the lockup periods because of that additional supply, that could put pressure on the stock and be just that outstanding concern each time they do pair back their holdings in this company now that its about to be public. Leslie, i did ask masa that question, of course, and we will have the answer for our viewers later. I dont think we have it set to go at this moment, but i will say, basically, he did indicate his expectation of holding on to it almost in its entirety. Well see. But to your point, it didnt sound to me, ill let our viewers judge for themselves, that he has any intention of selling even after the lockup expires. Hes in a unique position to do that now that its opened by softbank as opposed to the vision fund. Its a private backed ipo you have a mandate from your lps where you need to return that capital to shareholders. You need to get that exit in liquidity. Ipo is the first step, but then over time, you do have to kind of fully sell down that company into the Public Markets. Softbank, obviously, is in a different category there. His decision to do that, i think, is note worthy and important for investors today. This low float is a problem for a lot of the Retail Investors because it keeps the volatility high and thats an issue down the road. We want this to be a success, Retail Investors. Most ipos start trading down in the days after the ipo. The big pops are on the first day. This has to be a success because its a big leader for the ipo market this year. Low float means much higher volatility and so we got to wait a few weeks to see if this thing stabilizes. Well check in with you all morning long. Leslie picker and bob pisani. Back to sara eisen with citadels ken griffin. Sara . Hi, thank you. I am here with ken griffin, founder of citadel. Good to see you here at Success Academy which you want to talk about. Its great to be here today. Were going to talk about education and why success in a moment, but first, big markets day for us, big ipo day. The folks were talking about arm. Do you look at arm, which is the biggest debut in a couple years, as a sentiment barometer . How do you look at ipos and what they signal about where we are in the market . Clearly the arm transaction is a sentiment barometer. The very fact that the deal is coming to market today, tells you theres a perception that our Capital Markets are reopening for ipos. And i really hope this is a deal that goes off very well today. We need to see all of the vcbacked companies over the last decade have the opportunity go to our Public Markets to raise capital, so that the founders have an opportunity to continue to grow their businesses and grow our economy. The markets and the economy, reflect. What comes next . I would agree. Its been a really good year for the market, particularly with the backdrop of higher real Interest Rates. When look at the yield on the 10year bond, the real yield, for example, in the 5year tips bonds weve a seen be, again, an increase in real rates and nominal rates and yet the stock market has been resilient. Thats a really interesting year to see the resillsy of our stock market against this backdrop that would be very challenging for equities. Think it can continue . Im a bit anxious this rally can continue. Obviously, one of the big drivers of the rally has been the just frenzy over generative a. I. Which has powered many of the big tech stocks. I like to believe that this rally has legs. Im a bit anxious for were sort of the in the seventh or eighth i think in the rally. Part has been the soft landing story. Are you a buyer of that . The fact that we havent gone into recession despite 525 basis points of tightening . It takes about a year to two years for an Interest Rate hike to work its way through the economy. Its not instantaneous. Were now at the point where were going to see the impact of these hikes really start to play out. Were seeing the job market starting to weaken. Theres been a number of news stories in recent weeks about how companies are willing to pull back what theyre paying for starting roles. Were seeing signs consumers have had enough in trms of price increases that theyre starting to walk away from products, trying to push through price increases. Theres signs here that were heading quickly into hopefully the soft landing, potentially a more difficult scenario moving into mid to late last year in terms of a recession. Sounds like thats what youre expecting, recession . Look, my personal view is that the United States economy is enjoying a tremendous amount of unanticipated stimulus from washington still. The federal deficit this year will totally almost 6 of gdp. It is completely unsustainable, but it has been another shot of adrenaline to the economy that our fiscal continues to push the economy forward, leaving it an ever bigger bill for future generations . Also complicates the feds job a little bit. Still getting nithese numbers, t inflation has come down a lot looks to be sticky. Its hes in a nowin situat. Monetary policy can only do so much to offset fiscal stimulus. Hes showing up at a fight with both hands tied behind its back because d. C. Is on a different agenda than he is. He is trying to prudently slow the economy, bring inflation back down, and really engineer the hopeful soft landing and whether its the Inflation Reduction Act or other programs that are spending, we stimulate the economy out of d. C. Do you think those pieces of legislation are a mistake, Inflation Reduction Act, chips act . Arent those helpful for our future . So there are absolutely elements of this legislation that are important. So, for example, if we can successfully bring chip manufacturing back to the United States, that helps us maintain National Security both from a matter of National Defense and economically against shifting geopolitical tides. Thats an important piece of legislation. But if you look at the amount of spending that goes towards that part of the overall legislative agenda, its like a drop in the bucket. Theres been a tremendous amount of spending on a slew of Different Things that dont have the same element, best being in the interest of National Security, economically, and defense. So youre worried about all the fiscal spending. Do you think that market is starting to worry about that . Absolutely. Lets just take a step back. At the start of the year, people thought that deficit was going to be roughly 3 of gdp. And of note its double that. Its 6. Almost 6. Where we have full employment, full employment in this country and things dont get much better, and we still cant keep our fiscal house in order. And now, the cbo has put out the projections for the next several years were going to run deficits of roughly 5 . The fixed income markets are getting nervous. Its an unsustainable path. Do you think theres going to be an issue for demand with all the issuance . Is the rise in real yields weve seen over the last few months to the fed tightening or fiscal . Or the markets fearful about the mageny tied of supply and, to be clear, the possibility of credit risk. We have u. S. Government downgraded by fitch a few months ago. You think that was the right call . If it wakes up our politicians in washington, absolutely the right call. Im not sure its doing that. You have to start somewhere. At some point were talking about it today, right. In fact, youre curious about this. This is the start of how we actually make policy happen in america. We start to talk about the issues. This issue is now coming back front and center. We havent talked about deficits in mark in a very long time. Now to gdp about 120 , near historic highs, with deficit spending that we havent seen before in recent history outside the pandemic, this topic is becoming front and center again in the minds of wall street. Do you think were looking at sort of persistently higher level of yields because of this . Theres no doubt that this will cause us to have higher real yields all else being equal for years to come. No doubt about it. What does that mean . That means less investment in companies. That means that consumers will be hesitant to buy goods and services. Higher real yields crowd out needed investment that we have in our economy. What does it mean for the overall investing landscape for the equity market . For the equity market its a headwind and we spoke about earlier why youre anxious. Are we in the seventh or eighth i think because we have a headwind of higher real yields starting to come through the economy. Even if the Federal Reserve stops raising rates and even starts to cut into next year . I think that, you know, theres a small chance of one more increase later this year. Theyre going to look at data like today and think about this long and hard. We have to raise one more time. Lets say were pretty close to the end of this rate cycle. How fast they can cut rates comes down to how fast inflation breaks. Now, the good news is, is basic facts mean inflation probably comes down over the months ahead. Negative to the story, again, were seeing higher prices at the gasoline pump. Unfortunately, gasoline is one of those things that you buy every week for most american families. When you see higher gasoline prices, inflation becomes better anchored in your mind and thats a problem for the economy. You dont see it coming down to feds target . 2 . No. I well be at 2 if were in a real recession. Which it sounds like you dont expect im hoping not, but if we get to 2 its a bad state of the world right now. You think the fed will have to stay at these levels or even higher into next year . Look, heres the conundrum. The feds publicly said were aiming for 2. Its probably not worth the cost of getting to 2. The fed should stay on its talking points. Its the central bank. It wants to inspire confidence that they are protecting the value of our currency and the purchasing power of the american consumer. But at the same time, you dont want to take the economy off a cliff for the difference between an Interest Rate or inflation rate of 2. 3 and 2. Its not worth the cost. So theyre going to have to walk that fine line. I think well see them talk about a longterm target of 2 more and more, as we head into the mid 2s. In other words theyre going to make it clear theyre going to get to 2, but theyre not going to do it immediately. Theyre going to make that tradeoff, full employment versus hitting their target. They dont want to burn it down. Do you have confidence in powell. I think powell has done a pretty dam good job. Hes had a horrible hand to play, right. Weve had the pandemic, supply chain shocks, massive fiscal stimulus, and hes supposed to try to achieve price stakts. Th stability. There was no course of action he was going to walk out of this looking like they had nailed their job. It wasnt going to happen. History should judge him through the lens of the predicament he was put in, and i think theyre doing a reasonable job in trying to get us to where they need to get to. If i could say one thing to powell, its stay on message. Were going to break the back of inflation. Dont talk about how we might ease. Dont talk about how were data dependent. Stay focused on message. Were going to bring inflation. There is a lot of talk of data dependence. You mentioned a. I. As something that has captivated investors so far this year. Im wondering how youre thinking about how transformative its going to be . I believe that generative a. I. , what people think about today when they say a. I. , is going to have an uneven impact across the economy. In certain areas, for example, call centers, generative a. I. Is going to be transformative. Youll dial a phone number and get a human sounding voice on the other side that can respond to your questions and handle your matters. All done intfrom a data center. No people. No people. No people. Were going to see repetitive activity fully automated by what generative a. I. Will bring to the table. Were going to see real changes in productivity in certain sectors of the economy. In fact, right now, the strike in hollywood revolves around the impact of generative a. I. Has on the number of people that you need to produce a movie. You see it in the same way for Software Engineers. We already use generative a. I. In coding at citadel. Its improved the productivity of our Software Engineers by 5 to 10 . That means we need 5 to 10 fewer Software Engineers. Were growing fast enough and well take that a gain and not have to change head count, but other firms will reduce the size of their Software Engineering team. Were seeing impacts start to ripple through the economy. Big picture, though, most of the economy, this is another productivity tool that simply makes us better at our job. Much like microsoft excel did 20some years ago. Theres no doubt were a more efficient because of email. In fact, its just part of life. And generative a. I. Will have the same part of life aspect for most of us and how we do our work day in and day out. Is it a big investment theme for you . Its a theme for us, but more importantly for us, were thinking of how to use this toolkit to make our firm more productive and more successful. Theres very few public opportunities to invest in generative a. I. In fact, this is one of the challenges that we have today in our public Capital Markets, is there are fewer companies that are publicly traded today than 20 years ago. Theres roughly 1200 unicorns according to cnbc. Those are companies that would usually then become Public Companies, theyre not today. Some of this has been the backdrop, harder environment to go public, but some of this is the backdrop that weve made it less attractive to be public. What do you mean . The sec has over the last 20some years put in place an everincreasing number of burdens and costs on Public Companies. Its making our Public Markets less attractive as a home in which Companies Live and where their shares are owned. I think this is a tragic mistake that were making on behalf of american investors because for the average family they dont have a chance to invest in the startups or Midsized Companies that become the apples of today. I mean, people forget, apple went public at a modest valuation. People have had their entire retirements defined by being an early investor in apple or amazon or microsoft. By making our Public Markets less attractive for issuance, were taking those stories away from the american investor. I know you have strong views, especially on chair genslers regulatory agenda. He was in front of Senate Banking to talk about it. 22 rule changes that hes passed and more than double that in terms of proposal changes. Whats your take . Too busy. Too many rules. Too busy. Too many rules. Too much change, too much haste. Chairman gensler may be coming from a good place on many of these rules, but if you dont do the homework about what are the real problems and how do you effectively solve those problems, you can create an onslaught of legislation that destroys value for the american public, for american corporations, and american investors. And i think, unfortunately, i think were well over that Tipping Point. The sec needs to slow down its haste and take a step back and say what are the real problems we want to address in our Capital Markets. Taking a huge step back, the United States has both the most vibrant Capital Market in the world. Think very carefully before you change the rules in the Great Success story of the world. Which ones are you talking Climate Disclosure . Take climate disclose sure. For a Public Company how are they ever supposed to compile this information . If you compile the information, it turns out you dont have it right, which is often the case with the new rule, how many billions of dollars are they going to spend defending themselves from plaintiff lawyers who will have a field day on the back of this issue . I mean, chairman gensler, i appreciate you have an interest in climate, but advocate for a carbon tax, something thats easy, simple, straightforward, and effective to implement. Dont burden Public Companies with a task thats beyond their reach, beyond their core competency and create a field day for plaintiff lawyers. Have you talked to him about this . I havent talked about Climate Change on that issue, but weve been very actively involved in the regulatory process. We comment on virtually all the rule that impact our Capital Markets and we believe that by running one of the Worlds Largest hedge funds and largest market makers, we have a unique Vantage Point of appreciating how liquidity is created and liquidity is so important because with drivers of our Public Companies, sorry, of our Capital Markets, is capital formation. Right. Thats how we create these incredible stories like nvidia that can raise capital in our Public Markets and they create exits for Venture Capital backed firms which encourages more vc in america. We have a powerful Vantage Point to comment on these rules they allow public comment. He would say they take that into account. Thats what they say. And unfortunately we havent seen that yet. Does that mean youre an nvidia fan since you mentioned it . I have huge admiration for what theyve done at nvidia. What an unbelievable story. The stock is pretty frothy right now. Well see if theyre able to maintain their dominance within the sector of the market. Boy have they exkultsed. Thats an aplus management team. Stay with us. We want to talk to you more and about why were here today at Success Academy with the woman in charge and the founder of this place. Well talk with ken griffin to talk about his philanthropic efforts. Ill send it back to you on arm watch. Okay. Sara, speaking of raising capital, we are awaiting arms open. Returning to the Public Markets on the nasdaq. Indicated around 60 would be about a 17, 18 bounce from the 51 price. As sara says, a lot more with citadels ken griffin in a moment. Welcome back to squawk on the street. Lets bring back in ken griffin and eva, our host today,ed founder and ceo of Charter School Success Academy and author of the book aplus parenting i need to read. First of all, thank you for having us today. Ken is a big believer and fan of your work and what youve built here. For those that arent familiar with Success Academy, tell us about what it is. Sure. We averaged five weeks ago with 21,500 students, kindergarten through 12th grade. 94 of our students are black and brown. 16 are special needs. 82 live below the poverty line. Yet, we are educating them up to a very, very high standard. In fact, our kids outperform kids in the affluent suburbs, on state tests, ap exams. We have a sixyear record of 100 of our graduates goiof fouryear colleges. How did you get involved with success . Ive been involved with robinhood in new york for years. Robinhood has been a big fan of Charter Schools in new york city and of success in particular. Then dan loeb who runs third point, is certainly part of the eva fan club, and he made a real point to make sure that i came to learn more about just literally the miracle that happens here at Success Academy. What are the takeaways more broadly about what youre doing here and how to scale that and broaden that across america where, i mean, youve seen some of these new statistics, its not good, especially postcovid, eighth grade reading at a two decade low, math at a three decade low. What do we take from this . We have to take a step back and fundamentally rethink the service of education. We are not getting the basics right in america, even though we spend more money on education than any country around the globe. Take Something Like reading for 20 years we canceled phonics. Any educator worth their salt knows an evidencebased program is essential. Were not teaching kids to count in kindergarten anymore. Thats a very, very basic. The problem is really one of political will. Its not one of we dont know how to educate children. We do know how to educate children. Were just not giving them what they are entitled to and deserve. I think it has major implications for americas global competitiveness. It is a tremendous drag on our system when we have poorly educated kids, and we dont want a society, i hope not, where we have educational haves and have notes. You said its political will. You spend time fighting the teachers union, for instance, and some of these bigger cities with changing policies, is that what the biggest obstacle is to expanding what youre doing . I think the unions are one important obstacle. They influence all educational policy, and there isnt really another side. Imagine if the kids had a union, things might be a little different. Kids and families dont really have the level of political influence that the unions have. I think it would be unfair to sort of say that is the whole problem. We have Public Policies in this country that make no sense. We have something called cat ta gorcle funding. One of the most important jobs i do as ceo is resource allocation. You cant do that if youre a principal or superintendent. The state determines the can categories of funding and you have no ability to meet the needs of your children in front of you. Enter ken griffin. Youve funded harvard, miamidade, Success Academy. Education is one of your key priorities why . Lets take a huge step back. You and i will spend our days talking about microsoft and nvidia. Thats not the future of america. The future of america is our children. Its our kids. And if we cant education the next generation to be successful, our country is over. We talked earlier about the size of the federal deficit. If we cant profoundly change productivity in america, we cant make the promises that weve made to the baby boomers, our retirees and those who have a hardship in life. We need to radically improve education k through 12 and high school. We spoke about political will. Lets be clear, we need the voter to make this an issue. Its not. Its not. And theyre going to pay the price. When you have 53 schools in the state of illinois and not one student can test at grade level, you dont have a future in a Global Economy as a nation. Is that awhy you left chicag . Its part of the reason i left chicago. We lost the basics on the government. Governments should educate our children, keep our streets safe, create an environment in which businesses can flourish, and which a Civic Community can come together to make for better cities, better towns and better environments. We lost that. We lost the big picture. Im so pleased to support what eva does here at Success Academy because she shows us a different way. She takes kids who come from the sob story that unions use trying to justify their poor results in Public Schools and proves them wrong. Not just a little wrong, enormously wrong. And the kids here, theyre remarkable. And we dont know with start out excellent. We use data to figure out how to improve every day, how to improving the teaching and learning. We think about educational productivity. What is the fastest way to get a kid to read . And those are the kinds of practices that are really missing. In fact, the education establishment is kind of antidata and antiproductivity, antiefficiency, and those are some of the things that allow us to be great. A. I. . Is a. I. Going to be harmful or hurtful for education . In the long run it will be helpful for the same reasons, ken, you mentioned, more the back office. I dont know exactly how helpful it will be on learning per se, but there are so many things in education that humans are doing that are unnecessary, and im really, cited about making our operations even more efficient so that we can put more resources in chess and debate and art and music. Well, its a great test case. Thank you. I do think, though, i cannot emphasize enough, how you hold the children here to extraordinarily high standards. And they rise to the occasion. When you believe in these kids, and you believe in their potential, they step up. Ill share a little story that dan is going to be upset. Dan loeb and i were here a few months ago and we were in the ap classes and dan and i are art collectors and they put up a painting famously. And who painted this and what sort of is the story behind this moment of art history. Dan and i are looking at each other. No idea . I dont know. And then this second painting. The third painting, i know that era. I cant tell you who painted it. To see these kids with that domain expertise, is humbling. Then you walk into the macro economics ap course and theyre going through all the mathematics of macro economics i havent studied since college and its like, theyre serious here. These kids are having a worldclass education here in the heart of new york city. Sounds like their future 19,000 a month interns at citadel. They might be. Thank you for talking us through that. Success academy. Ken griffin, well have a lot more with ken, 8 00 p. M. Special on cnbc on monday evening and were going to hear much more from ken on the political landscape, whether hes still backing ron desantis, i know a lot of people want to know that, ken, well talk more about the growth of the firm as well at citadel which is booming in miami and also here in new york city. For now back to you, david. Sara, great stuff. Very much look forward to the continued conversation. I should add, by the way, i did see a lot of those young kids in their uniforms with sa weeks ago. They must have started way before Public Schools. They started, what, a month ago . Five weeks ago. Yep. Theyre serious here. I did note them. Theyre all so cute in their uniforms. Thank you. Sara eisen. More to come from here with ken griffin. A lot more to come as well right here from our exclusive or my exclusive with the ceo of arm and the founder of softbank. They rang the opening bell earlier today at the nasdaq. We talked about the future of a. I. We also talked about that man rene haas relationship with his biggest shareholder masa son. Take a listen. Rene has, you know, a great chemistry with me. We share the vision completely together. Were talking almost every day. Were chatting with whatsapp and calling all the time. Every day, multiple times, three times, five times, sometimes ten times a day. Please dont go by harry casey, Richard Raymond finch sfx ping please dont go please dont go. Please dont go please dont go dont goooooo dont go away please dont go welcome back. Were keeping a close eye on the opening price for that ipo of arm. Some 95. 5 a million shares. Take a look at the nasdaq. Theyre getting close. 95. 5 million shares. Priced at 51. Thats from softbank. That money goes to them. But it will create a Public Company of arm, a company they bought in 2016 for 32 billion. Almost had it sold to nvidia a number of years later for about 40 billion, but the ftc and antitrust regulators and a number of countries got in the way of that and now softbank, run by masa son, hitting the Public Markets. Were a hearing 58 is the indication. Had been as high as 60. Well keep you apprised. It may change and we may be a ways away from an open. That said, i did have an opportunity to sit down with arms Ceo Rene Haas and, of course, softbanks founder and ceo masa son talking about the company as it stands now and what their hopes are for the future. Whether its data center, obviously, around sustainability you want as much power as possible, back on the cars running off batteries, its a great place for arm to grow our business. Thats what we did in the years being private between 2016 and now. We diversified our business. Weve got Significant Growth in the Cloud Data Center and automotive. Okay. That wasnt what you were supposed to listen to. Although it was very interesting. Carl, were hoping to actually get a much larger chunk of time about the future for chip design for arm, talk to masa about a. I. As well. Sometimes things get a little bit mixed up. Yeah. I mean, managing tape is a skill and an art in many ways. Managing the logistics of this shoot was also as you might imagine as well. The time difference. Masa in san francisco. Okay. Lets take a listen to the conversation we had around a. I. Of course a very important part of the focus of the company in terms of what it says will be the growth ahead, whether helping nvidia in terms of its great chip or other areas. As our viewers may know, masa has been focused on a. I. For quite some period of time, and he continues to be a believer. Take a listen. Im a big believer of a. I. Since i started softbank, i was a big believer of, you know, the micro processors enabling all kinds of technology evolution, starting with pc and then mobile and internet and then now going t into a. I. It is the front end of all the innovation of our industry. Its the core is the micro processor. So arm is now going to become the core of the a. I. Revolution. My belief of the front end of the i. T. Industries revolution is really shifting to a. I. So my focus, my belief, is all centered in a. I. And arm is going to become a core of that. Many of the Vision Fund Portfolio companies that we have about 500 companies, theyre going to be, you know, having a lot of great applications of a. I. And theyre going to be beneficiary of this arm an many other a. I. Technology players. Yeah. I mean, you recently said not that long ago arm is positioned to benefit from a. I. Becoming the, quote, basis for a new society. What does that mean . Well, i think this is the first time that mankind experienced something smarter than mankind itself. Right. Mankind was the smartest animal on the earth. The a. I. Is going to surpass and surpass big time. I think the agi stage is coming. Very soon. Once it comes, it goes so far away, and its a new stage of society that we all have to ask ourselves what is mankind . What is job . What is life . What is the intelligence . Its a new experience completely new society that we are going to face. Masa, if you had been in the meeting with a lot of the leaders in a. I. , which just took place with senator schumer and other members of congress, what would you have shared . You said its going to exceed our own intelligence. There are those frightened by that prospect and worried about the dangers of a. I. Do you share that . Well, if we mishandle it it has a danger. Like Automobile Society. It has a danger of the car accident. If you dont regulate. The Automobile Society is regulated with a traffic light and speed limit and dont drive with alcohol drinking, so a. I. Society should regulate to protect the human kind. However, it has more merits than the demerits. So i think i am a believer, im optimistic that a. I. Is going to solve the issues that mankind couldnt solve in the past like difficult disease, natural disasters, the car accidents, all kinds of other issues that humankind has in the past will be helped by the advancement of a. I. And technology. Rene, youre going to be in the middle of this. You know, youre going to be to provide designs that will help nvidia use create chips powering generative a. I. Do you feel similarly or are you perhaps more concerned . I agree with masa from the standpoint that we are going to see some very profound advancements around a. I. Going forward. The chatgpt moment, if you will, i think was a Tipping Point relative to what the capability of these Large Language Models can do. So on one level, as a ceo of a company that builds a lot of devices basesed on a. I. And an engineer at heart, phenomenal opportunity. I think for us going forward, back to the cpu being of center of everything and you cant run a. I. Without a cpu, its a huge Growth Opportunity for arm. There are a lot of social and ethical type of things to consider, which i think as a society, we have to figure out and were in early days on that. All right. Want to now get back to what we originally planned to show you prior to listening to that conversation about a. I. Obviously, you heard massa, very positive on the prospects for a. I. He does feel artificial general intelligence will be here and exceed human intelligence. There are plenty who have, perhaps, more profound concerns than he did. Here now its about arm and how its going to perform now and in the future. Take a listen talk about that. The core product is the cpu. What is the superpower of the cpu . Its the broad ecosystem around it. We have a ecosystem probably like no architecture probably every invented. Every operating system, ios, android, windows, android linxs, not only do they operate on arm, but theyve been optimized for years, sometimes decades. Risk 5 is a new emerging entity. What we see is they just dont have much traction in the area around software ecosystems. Its not that we dont watch our competition seriously. We obviously do. Theres warroom discussions about how to address that. Broadly speaking the hurdle they have to cross is around the software ecosystem. That is not an easy moat to cross. Why not . The sheer amount of Development Time that goes into it. Ill give you an example. Windows running on arm pcs, i worked on them previously in my previous life back 2009. Here it is 2023, 14 years later, and were just now starting to see growth of arm on windows pcs. It just takes time. Theres a lot of Software Work that needs to be done, Development Time and optimizations. Thats just for pcs. When you think about phones, when you think about the cloud, when you think about automotive, the software gets more and more complex. So, i think over time that is something well continue to invest in and i think its a big path for risk 5 to cross. Speaking of over time, you know, again, you at softbank own 90 of arm, the now Public Company. Are you going to sell any of that . Is it your expectation youll be a holder from here on of that 90 stake or is it something you do see as potentially monetizable over time . Well, i want to keep it as much as possible, as long as possible. Im a longterm believer and so on. Of course, you know, if the next covid comes, who knows. But our intent is to hold as much as possible, as long as possible. I wanted to keep 100 of arm. Only reason we are having ipo and selling is because arm is such an Important Company for the industry. I wanted to have investors opportunity to participate in the upside opportunity of arm. And wanted to become a public it used to be a Public Company, so back into Public Company positions so people will have more transparency of the operation of the companies and so on. And also give the engineers and employees the Stock Options to realize. Right. Youre now a Public Company ceo. You do have one very large shareholder, but does it change how you do your job . As masa said, hes a longterm believer in arm. So, making sure i keep my number one shareholder happy is very important. But at the same time, he and i are very aligned on the longterm vision and view for the company. I believe we are one of the most foundational Companies Inside our industry. The world runs on arm. Its hard to find an end device that doesnt run on arm. And at the same time, i think when we looked at the percentage of the population that uses arm, its probably north of 70 . So, while were thrilled to be public today and im thrilled for all the employees, as i said, and our partners and developers, i really think the best is ahead. Im super excited about the next five to ten years for the company. Is there any scenario in which you would start to not just design chips but design your own chips . I dont want to foreshadow what our product plans might be, but the companys foundational to the Electronics Industry and we have a lot of opportunity for growth. Thats where youre going to leave it, just that, a lot of opportunity for growth . Well get to do interviews in the future, so ill ask you that again. Let me come back to something, rene, a number of investors did mention to me as a potential concern, which is this lawsuit against qualcomm. Never great to be suing somebody that you do business with. Can you give us an update in terms of your expectations and why, perhaps, people should not be concerned . Qualcomm is a great partner. Back to the foundational aspect of what we do, jus there. We got meta, tencent, taking a chance with risk 5. Isnt this the danger of pressing too hard on royalty rates, the idea that they would opt to do something more open source . Yeah, exactly. They seem to think they have a value opportunity to increase price. Price becomes an important component for overall growth for the company. There is that question if tht p price competitor in some way that might drive some customers to it. Fascinating to listen to masa and griffin together talking about the opportd line. Yeah. As hes been for a very long time, very positive on the prospects of what a. I. Will mean for society, i can remember our interview from march of 2019 when he talks similarly about, remember, well all be sitting back getting fanned. Getting fed grapes. You know, well see if thats the case. Fortunately for investors in vision fund, of course, in part, he did not take vaadntage of that viewpoint. The entire interview will be available online. Well let you know. Squawk on the street continues right after this. Your record label is taking off. But so is your sound engineer. You need to hire. I need indeed. Indeed you do. Indeed instant match instantly delivers quality candidates matching your job description. Visit indeed. Com hire you know doug, ever since switching to workday youve been a real rock star. Rock star . What do you know about rock stars . Billy idol . I mean wheres the skintight leather . My shoes are leather. Wheres the unnecessary zippers . That thing billy, rock star is just how doug feels when he uses workday. Thanks, rory. Ill show you rock star be a finance and hr rock star. Workday. For a changing world. Billy idol just stole your golf cart good thursday morning. Im Carl Quintanilla with mike santoli at the new york stock exchange. We are waiting the highly anticipated open of arm. An update from the nasdaq and exclusive sound from masa son. The united autoworkers and detroits big three remain far apart. The implications of what would be an unprecedented strike. At the bottom of the hour, one of the largest pe firms jo