Transcripts For CNBC Squawk 20240703

Rate decision. Apple also in focus as wall street reacts to its launch event, including a new iphone lineup. Meantime, china insists it has not issued a ban on the companys flagship product. Were going to get into all things a. I. With tech ceos meeting with lawmakers on capitol hill to what Salesforces Marc Benioff told jim about that technology. Lets begin with cpi. Obviously, core, bit of a disappointment to the bulls, jim. Gasoline is more than half of the headline, up 10. Car insurance, up 2. 5, but lodging away from home down 3. I was listening to Steve Liesman break it down, and i agree with what steve was saying, its just empirical. Theres nothing that says that gas and oil and have necessarily trickled into the rest of the combination. We do know ive been talking with major insurers who are using, believe it or not, Artificial Intelligence to actually get prices to where they are lower, and i wonder whether that wont filter in as part of a larger conversation about trying to get the best price for the consumer when it comes to these gigantic Car Insurance and auto finance companies. I suspect those numbers are going to go down because of Artificial Intelligence. Thats not that may not be two years out. That might be next year. Im more sanguine on that. What im less sanguine about is weve got to see numbers from companies go up about a. I. , and we havent seen that other than nvidia, and david, when we talk about a. I. , you know the stocks have all been up as if the numbers are going to be great. The pressure on adobe tomorrow is so gigantic. Someones got to be able to raise numbers on a. I. Besides nvidia. Cant just be nvidia. But isnt it maybe its a bit too early to do that . Isnt it we talk about the products that are really going to come from generative a. I. And the revenues and or the productivity, it just may be a while, jim. Not for banks. Because they have well, we called goldman. They had deadwood. You spoke with david solomon. He was more diplomatic through that. Some firms will start trimming immediately. But theyll do it through attrition. They wont fire. They just wont hire people. In terms of making numbers move up, what i think is most daunting is what happened with oracle. And i wanted to buy oracles got oracle world next week. I think theyre going to lay out a pretty good a. I. Strategy, but they didnt raise, and unless you raise, like nvidia, then its disappointment, and david, that means theres a lot of disappointment ahead. It worries me, particularly in light of what we know about arm holdings and how that stock is going to come in way too hot now. You think its going to come in way too hot . I was hoping for 50 billion. Im hearing 60 billion. I cant get that. I dont know if theyre going to get to that. Really . These anchor tenants. The anchor tenants are strategic. They dont care about valuation, right . Theyre bidding the thing up. David, it cant go north of 50 billion and make sense. Well, listen, they wouldnt be unhappy with that at softbank, for certain, if you got above 60. I mean, he bought back stock at 64 billion, which is roughly twice what they paid for the company quite some time back. True, but coming back to this thesis on a. I. , i mean, nvidias benefitting, of course, because theyre selling all the chips that are helping all these companies create the products for the future, but isnt it a little early, again, to expect those very products to be actually producing revenue or increasing productivity . Its going to take a while. So, arm is a beneficiary of the chip sales that are obviously behind all the new iterations of generative a. I. Or all the new products that are conceivably coming, lets call it a year or two years from now. Okay, so, heres the difficulty with that. Marc benioff, who obviously is a great proselytizer for this, is telling me its going to show up this year, that its that powerful and with the big banks, you will see already their Gross Margins increasing. Carl, it is so prosaic whats really going to do well. It is an Auto Insurance company. It is a Property Casualty insurer. It is a moneycentered bank. They are the guys who are going to put this to work immediately and save money, and those are the winners so far. Im sitting down with laura albert from Williams Sonoma. I saw her last night at a dinner. She can tell you, chapter and verse, how much its helping already. But i think its companies that are very tech savvy or companies that have giant overhead, huge costs up front where people just do the same thing over and over and over again. Carl, those people, when they leave, or if theyre terminated, will not be replaced, and that means Gross Margins going up for as early as q1 of 2024. I guess nearer term, jim, were left with whats happened with prices on the shelf today. Doug mcmillon did talk about this yesterday at the conference, said, were going to see deflation but were not going to get all the way back to deflation and erase some of the price hikes that have happened over the last two years. In the u. S. , things are better than i would have expected them to be when we started the year. I think the employment situation, wage increases, some pockets of disinflation are helping that. I think were in a pretty good spot and customers are going to feel some relief as it relates to pricing. The more disinflation happens and categories like grocery and consumables, the more Discretionary Income they have to buy merchandise, but the spin level hangs into where it is, i would expect the behavior to be about what it is now. And i think holiday is going to be pretty good. I dont go into next year feeling too pessimistic. His comments, jim, about holiday are interesting because this Deloitte Survey or study says were hlooking at holiday growth as the lowest in about five years. Im not so sure about that. I think that a lot of the employment numbers are still very, very strong and that should not lead to that kind of deceleration. It is hit or miss. I think one of the things thats happened coming out of pandemic, walmart is now a loved company to shop at, and i know that when i walk the stores, i think sometimes david and i joke about this, but when you walk the stores, they dont look like walmart. They look like target. Its like they figured out what target looks like. At the same time, the numbers from costco are extraordinary. Carl, i think that youve learned we learned amazon, costco, walmart offer the best bargains, and those are winner take all, and it does almost feel like loser take none. Well see. I mean, he did have this report out of goldman yesterday, jim, looking at q4 potholes. The resumption of student loan payments, Government Shutdown more likely than not. Were going to talk about the uaw strike. Their number for q4 is 1. 3 as opposed to 3. 1 in q3. Thats a deceleration, but remember, if youre the fed, youre looking youre listening to what we just said over the last four minutes. Its good, but cpi, not perfect, but walmart, 200 Million People go there each week. Thats a pretty positive sign. I mean, david, anecdotally, there are enough signs of prices coming down that if we could just get housing to break, in other words, housing is up 40 . Thats the big outlier. If we can get housing to break, which we will know with lennar tomorrow. Giant home builder that tells you exactly a forecast that you have to listen to. We need housing coming down. We need a. I. To come into play to lower prices. Its not even goldilocks. You can just say its f phantasmagorical, but it could happen. Wouldnt you need housing to decline overall so you have a more robust market overall for homes . People like my wife who sell real estate, theres a moment in time where what happens is the rates go so high, and the Home Builders dont seem to realize, and they keep pumping and pumping, and then theres that moment where the buyers step away, and then the Home Builders break price and thats what powell is hoping for, he may get it, david, because we are we havent seen numbers for applications since 1996 this bad. I dont think the Home Builders understood that it could be this bad this fast. Lennar will tell us whether theyre beginning to overbuild. The homebuilding stocks are saying the Home Builders are overbuilding. Thats how you get the price break is a buyer strike. Thats what im counting on to get housing not back to it was up 40 from 2019, youre not getting that back to where it was, but if it could just turn to being, say, down, well back a quarter of that, then the fed is golden. Thats what we want. We want the pressure off the fed. Theres also this interesting survey out of red fin this morning, guys. One in ten sellers are listing because they have been called back to the office. Whoa. Oh, man. I had lyft on last night. He said their business, up 18 , why . Because the commuter is back. Now, david, youve been commuting for years, so it really hasnt directly impacted you, but do you see more people on the subway . A few. Yesterday was very crowded. Yes, i have noted the middle of the week, in particular, tuesday, wednesday, thursday, tends to be busier. And has become even busier postlabor day. I think that is notable. That said, guiys, friday is just thats over. Nobody. Were it. Were it. Us and maybe those few guys at goldmansachs. Im taking a friday morning. And those people. Whats it like . Whats what like . When you take off friday, whats that like . What do you do . I dont know. What do you do . You wouldnt know. Are you going to take the redeye back tomorrow and come to work the next morning . Did they cancel it . Did they cancel my redeye . I dont know. I wore my suit thats kind of a its kind of a pajama suit. It is . Its a brioni 180 pajama suit. It guarantees good sleeping. It doesnt wrinkle. It has feet. Feet pajama suit from brioni. Jim tends not to take travel days on the way back. No, he doesnt. I dont care for them. Unlike some people i know. I took one on friday for the first time. That was brutal. We didnt get in until 3 00 in the morning. I cant do what you do. David was on assignment. 3 00 in the morning, thats good, man. If i can get that, thats good. I go right to the office. Speaking of activity out west, lets get to apple, unveiling its latest products, including the iphone 15, the series 9 apple watch at yesterdays event. All of them coming with this usbc charging port. Some price trimming, discussion about whether these price hikes at the high end are trying to mask the obvious continued revenue declines. Well, look. Theres a reason why we never buy ahead of an apple launch. The nitpickers are first. Theyre the ones that immediately come on and tell you, look, its nothing incremental. Its not a big price increase. Of course, we need to see what verizon and at t are going to pay. But what i thought was interesting was the sum total of things theyre giving you for the watch, for the cord, for the phone in terms of the camera where you can get rid of blur, these are things that dont show up in the numbers instantly, and yet, they become why you buy. And i think that the first people out of the block are the people who say, nothing new. And then when you start using it, you say, wow, i now have a tw device that tells me hotter, hotter, hotter, bingo for where my phone is. Im not going to use my watch as a clock anymore. Im just going to use it to find my phone. This is the solution. Thats why im going to upgrade to the new watch . Its a find my phone that also tells time. Thats what it is. Its changed. Theres a lot of other things, jim. Nobody spent more time talking about the Health Benefits of having that watch than you. Well, a lot of times, im yelling on mad money, and it tells me i got to be careful because its a dangerous sound environment. I dont know. Youve got the vision pro still on practice, jim, for next year. Thats so great. See this . Talk to my little friend. This is whats going everybodys going to be doing senor wences from ed sullivan. Well all be doing it. Right now, im the only one doing it. Next year at this time, all of us will be doing it and say, oh, hes doing that thing. Cramer was first, like with nvidia. Remember when he named his dog nvidia . Hes doing this now. David, theres a use case for a. I. Did you know that . Its going to wipe out humanity. By the way, that hasnt gone away as a concern. Carl, you and i will still be here. Hell be on assignment. Its an absolute possibility. When you get to musk shared it . General intelligence, oh yeah. Im driving in a driverless car today. Its soon, a cruise, and you know what . Cruise one, musk none. Interesting. Im looking forward to that video, jim in the backseat. Speaking of which, were on watch for arrivals at this a. I. Closed door forum on the hill today where zuckerberg, musk, gates and other tech giants are going to attend senator schumers gathering. Thats kicking off at the top of the hour. Well take you live to d. C. Take a look at the premarket here. Can stocks look past cpi this morning . Futures have been waffling back and forth. Well get to two more airlines warning today, the uaw, some news on citi when we come back. 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 you cant buy great conversations or moments that matter, but you can invest in them. At t. Rowe price our strategic investing approach can help you build the future you imagine. T. Rowe price, invest with confidence. The power goes out and we still have wifi 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. Congress holding this a. I. Forum today to explore potential regulations with elon musk, Mark Zuckerberg, bill gates among the confirmed guests. This as salesforce chief marc benioff sat down with jim last night and touted the power of a. I. Why do i want salesforces i einstein to be my copilot . This is probably the greatest Technology Advancement of our lifetime or any lifetime. Of any lifetime. Were going to talk with jim about that in a moment, but first, our Emily Wilkins is down in d. C. With the latest. Morning, emily. Good morning, carl. Well, a. I. Is really getting the red carpet treatment on capitol hill today. You know, capitol hill, home to a lot of meetings, a lot of issues. This is really unique. In less than an hour, at 10 00, right behind me here in the kennedy caucus room, all 100 senators have been invited to meet with elon musk, Mark Zuckerberg, bill gates, a lot of leaders on tech and a. I. As well as leaders from civil rights groups, from unions to really start or rather continue a conversation about a. I. And what congresss role needs to be. Now, this isnt the first hearing. It probably is the most blockbuster hearing with the biggest names, but majority leader Chuck Schumer has said that this is really about educating members. I know a lot of people dont think of senators as the most tech savvy. Senator schumers known for having his little flip phone, but he really wants to make sure that senators are comfortable with their knowledge of a. I. The actual legislation process is already under way in a number of different committees. Yesterday, senator richard blumenthal, senator josh hawley, held a bipartisan hearing on their a. I. Framework that would require certain highrisk a. I. Models to be licensed and to be overseen by an independent agency. Josh hawley told me yesterday that there need to be some bright lines for these a. I. Companies. We cant just allow industry to do what they want to do because theyll maximize their profits. B, i think we need brightline standards that protect kids, that protect workers to make sure this Technology Actually enhances their wages, doesnt destroy it, protects creativity and peoples privacy rights, so i think weve got a long way to go, but were learning a lot. Theres still debates on the details of what a. I. Legislation needs to look like, whether it needs to be one agency, multiple agency, whether open source a. I. Should be encouraged or discouraged. Expect a lot of that to be discussed today in the room behind me. The first threehour session starts in a few minutes. Carl . Emily, thanks. Lets talk about this for a moment with jim. Jim, is this really constructive . Or is this theater . No, i dont think its theater, because these chieftains of tech have not gotten together, and they dont really know. I know that i regard jensen huang as the most important person there, and he is the ceo of nvidia, and he is so proguardrail, and he talked about that before he talks about anything else, but there are others who dont talk about that first, others who are talking about profit. Sam altman, a bit of a wild card, at all times. This group is filled with wild cards. David, you know these guys are not all in one. Altman is proguardrails as well. What im saying is that these guys when i hear the idea that theyre only out for profit, david, do you hear anyone whos just saying that . No. I agree with you, jim. Theyre worried. This is important. This is important. You can imagine what if, knowing what we know now, wed had a forum like this involving social media . Where would we be . What would have happened . What regulations would have been put in place . I think its a good thing. Obviously, the chinese and the russians are not invited to this forum, so my point being, we can do everything we want in terms of putting up guardrails. Nothing says that our enemies or potential enemies arent doing the same. Axis of evil. Look. Today, venezuela, moduro met yesterday with xi. Ronald reagan would say theres an axis of evil going on here. If were going to sit here and think were going to play with one arm tied behind our back and those guys are militarizing instantly . I dont know. I think our guys are trying to be constructive. Our enemies, so to speak, they dont want to do whats constructive. They want to do whats destructive for us. Thats going to be interesting, especially given that schumer is going, i guess, lead a delegation to china, bipartisan delegation, in the coming weeks, we think, which might be interesting. Hes been a pretty big china hawk. Well get cramers mad dash and count down to the opening bell. Well talk about what china said about apple earlier today, take a look at the futures here as we continue to circulate around the flatline postcpi. Back in a minute. At morgan stanley, old school hard work meets bold new thinking. At 87 years old, we still see the world with the wonder of new eyes, helping you discover untapped possibilities and relentlessly working with you to make them real. Old school grit. New world ideas. Morgan stanley. Every day, businesses everywhere are asking new world ideas. 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. You got this. Lets go. Gobble gobble. 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Spirit also cuts the guide, saying theyre seeing more steep discounting for the second half of q3 going into thanksgiving. Well talk more about that in a little bit. Opening bell coming up in about five minutes, and dont forget, you can catch us any time ywreju listen to and follow the squawk on the street opening bell podcast. 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. Announcer the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. Weve been very consistent in our message that september 14th is a deadline, not a reference point, and we expect all three companies to have that agreement. If they dont, then there will be action. So, you know, we can get there, but the Companies Need to get serious and buckle down, and were 48 hours away, so we have a lot of work to do in 48 hours. So shawn fain runs the uaw. You want to talk about ford. I thought it would be good to have his words prior to hearing from you. Absolutely, because u. P. S. Goes from sell to buy. Its a new analyst talking about how this stock, instead of a price target of 11 goes to 15, in part because of the ford pro. They are doubling the numbers that are going to be made. Its a very profitable machine, and remember, its a hybrid. But i think its interesting about what fain says is that he was the the rhetoric was a little bit cooler. He didnt talk about fat cats. He did mention billionaires, but against that, youve got this dual threat from ford, which is, you know what . Dont strike us. Were the most prolabor unit, the most uaw employees, most unionized company in america. However, veiled threats, saying, listen, weve got a lot of money. We can take you on. So, david, i want to watch ford as a barometer of maybe there are people who really do think its going to be stellantis they go after. Fain is opaque on this. They dont have the money to go after everybody. They only have five weeks of strike fund versus five months for ford. I think ford may get a pass here, and maybe thats the analysis. Phil did ask him. He said, were all treating you all equally. You dont believe it . I think that would be a great bargaining stance. Lets see which guy comes in with the most realistic maybe they dont strike him. I dont know. Im just saying that this guys as wild as they get, david. Hes playing it as if hes got a really good hand. Is he bluffing . We dont know. All right, jim. Lets get the opening bell. At the big board, its Software Company s. A. P. Celebrating its 25th listing anniversary. At the nasdaq, its Pharma Company moderna, marking its annual research and development day, jim. Ben cel on squawk earlier today in advance of that. Ron baron saying they have a stake in that as well. Stephan came on because he was very defensive that the stock was not reacting to all the things they had in the pipeline. They are trying to personalize cancer vaccines. He said all the things that i had hoped when the stock was at 12. He did it, and nobody seemed to care that day. Suddenly they care . Maybe its the ron baron impact, but this company is so much more than a covid vaccine. Maybe its going to get some credit. Ive been staying that the stock is very undervalued. I have been wrong, in that the stocks done nothing, but it seems today the tide is turning. To your point, the stock is still down 37 for the year, jim. Look at pfizer. Look at pfizer. Its the curse of covid, david. The companies that did well. They deid well, and we were talking about pfizer finally breaking out of that 20year slump, and now you can go back and do the 20year on pfizer. You know, at t, verizon, pfizer, this is just not a way to create value. Look at that thing. Wow. David, you lumped them in with at t . I dont know. Serial dividend increasers and a dividend cutter . Okay. Good point. And total return to shareholders, which doesnt show up in our charts, is an important point. Pfizers current dividend is 4. 7 . Right. But jim, im still saying, come on. Look at that. Youre right. Youre right. They just versus lilly . David, look at lilly. Theres hardly i was talking to a major what . Im sorry. Isnt it, guys, just a sign of the downside of pull forwards . Pull forwards in demand for vaccines, pull forwards in demand for Broadband Service as we stayed home and got shots . Yeah, in terms of the yes, the covid uptick and then not. But that is reflective of coming up with a spcompletely new thery that is going to conceivably, jim, change health care. You mean science . Are you talking about science . Im talking about science. And im not saying pfizer hasnt done its part. I dont mean to slag them. But lilly, and what we talked about there and the accretion of market value over the last five years as a result of any number of things, but clearly the last year, moderna, is i mean, who knows . Its just beginning. Its just beginning. But david, youre right. When you look at lilly, and i have been speaking to all the packaged food companies, and i mean, all. And david, theyre not worried about wegovy, the drugs that make it so you dont want their snack food. I think its great that they are not worried, but i think theres a group of people who like the taste of snack food right now, probably about five million of them by this point next year, and they wont know the difference between eating cardboard and eating a potato chip. It really does dampen your appetite overall is my understanding. I have not actually used these drugs, but i have spoken to people who have. They arent without certain side effects that make them somewhat distasteful, jim. We should i think america likes to america has not really paid much attention to whats bad for you if they want it. Thats why i thought that smucker did well buying the hostess, but david, you know, General Mills was in there too. And it made me think, wow, maybe the food business, they need growth, maybe theyre going to start doing m a. I dont know how you feel about that. Maybe. I dont know. I think what youre trying to understand is the implications of these weightloss drugs overall, and youre not alone. Ive talked about this as well. I know hedge funds who are wondering about mcdonalds or cocacola, on and on from there. Youve talked about alcohol as well, where they may have an impact in terms of peoples desire for alcohol and what the impact would be there. And then, not to mention what the impact is going to be on the health care system. Ultimately, we hope bringing costs down because, of course, obesity leads to so many other diseases. Its a Blood Pressure drug. Think of it like that. People are just making it i know its a vanity drug, but its a Blood Pressure intractable Blood Pressure is treated by this, and its an alcohol to drink test is what theyre doing. If people two drinks is really bad for you a day, and theres been nothing thats not alcoholism. Thats just two drinks, and theyve discovered thats probably one of the worst things for you. Carl, thats the focus now. Blood pressure and alcohol. Those are the two that people are thinking its really good for. Jim, to your point about ford, second biggest gainer this morning behind moderna. We mentioned ubs does upgrade to buy. They go to 15. B of a with a note here, they do expect the union to follow through, jim. Right. With wages ending up somewhere in the 25 to 30 range over four years. Unlikely it would last a full quarter, given, as you said, a finite strike fund. Yeah. Look. They just dont have the they dont have the cards. Im not seeing what hes got in his hand, but i look at the strike fund, and its depleted after five weeks if you pay employees 600 a week. And that makes it so that people are going to be afraid not to get a deal. I think mary barra, by the way, has been the leader in offering a pretty good package, a bonus, a signing bonus. Look, we look at what the signing bonuses are in sports, and we know the signing bonus here seems like small at 5,000, but you know, carl, 5,000 and a wage increase, thats going to be attractive to some of the members. It was a very split photo to get fain. There are a lot of members who felt like its just important to stay on the good side of the auto companies. Fain represents a different skein. He doesnt have his own group. I dont think he has his own troops as united as we have been portraying in the media. So, are you feeling better about a strike not derailing the economy . Yes. I am. I also think, by the way, im not just influenced by the fact that im going to meet with kyle, who runs cruz. Were going to be cruising through the streets of san francisco, driverless, but i think theres a lot of members of the uaw who recognize, we got to keep our jobs. Theres two tracks of these companies. Theres ev, which they want to be nonunion, include batteries, and then theres regular, and regulars going away. So, i think fain talks a good game if it was 1950, but hes not talking a good game if its 2023. Youre doing a cruise, not doing waymo, right, jim . Cruise. Alphabet is in the justice department. I dont want to be involved. Theres sam alternman. Yep. Changed so much, generative a. I. Walking into this important meeting that we have been discussing. Well keep monitoring arrivals. Guys im so glad you think its important. It is important. Im so glad. Theyre really very theres a little sincerity there. Jensens there. Theres sincerity in these talks. Theyre all in the same room. Zuckerberg and musk are going to be together. I dont know if theyll sit next to each other. Schumer has some gravitas in this. He does. Got some pull. Yes, he does. All right. We looked at a 20year of pfizer. I could be doing a lot of 20years. I think thats interesting. I dont know if you put up a 20year of citi, what that would look like, talking about the bank. Probably not good. Thats what im guessing. No. I mention it because about 25 minutes ago or so, guys, or maybe even more, 30 minutes ago, we got news from the company that it is what it is calling streamlining its organizational structure. Simplifying its operating model, having leaders of citis five interconnected businesses that will now report directly to ceo jane fraser, and be members of the executive management team. Heres a quote from citis ceo, jane fraser, im determined that our bank will deliver to our full potential, and were making bold decisions to meet our commitments to our stakeholders, to all of our stakeholders. She goes on to say, these changes eliminate unnecessary complexity across the bank, increase accountability for delivering excellent client service, and strengthen our ability to benefit from the natural linkages that exist amongst our businesses, all with an eye towards delivering on our mediumterm targets and our transformation. Jim, thoughts . Well, look, i think that theyre trying to look, i think this is more of a consolidation of her power. Im surprised it hasnt happened earlier. You know that offline, all anybody talks about is the tangible book value being so much higher than the stock price, and its the only one thats like that. When you spoke with david solomon, theyre deeply focused on tangible book value, and how great it is. Citi cant focus on how great it is, because its so much greater than the stock price, that we have to wonder whether somehow the fantasytangible book value overstated. How is that possible . Youve talked about this for a long time. Its worrisome. The market has not listened. Its very worrisome, david, makes no sense to me. Were talking about an 80 billion market value here. Its bitesize, citi. Take a look at sam altman. Bitesized . Stopping to take some questions. Can we listen in . There always is changes. I firmly believe there will be far more great new jobs. 300 million jobs are at stake. Could be disrupted. All jobs are at stake im sorry, but do more, do better. Im very optimistic about it, but that doesnt mean there wont be a great deal of rockiness along the way, and i think its important to be up front about that. Sam altman, of course, who helped create, really, the revolution brought on by chatgpt originally, generative a. I. At openai, which he runs. Started with elon musk. Those two dont really get along that well. Be interesting to see what happens in that room, jim. Its hard to hear everything he was saying. But that room alone with jensen in there, musk, zuckerberg, altman, wow. Well, i remember when jensen was telling me, the ceo of nvidia, that he had met with constantly trying to figure out when would someone recognize the value of this product . David, there was no one. Well, i went out there and i named my dog after it, but there was no one, other than altman, who saw the value of it. What a change. Now they have to defend the incredible revolution that didnt exist three years ago. Right. The revolution was not even they had to go to microsoft to get money because these Large Language Models are expensive. The Computing Power is enormous. Weve made that point many times, which does lead to only a very small group of companies that really can provide the underlying technology. Now, that doesnt mean that there arent all sort of products that can then be created, that will be used. Youre looking at many of the companies that can obviously, they can all afford to do it, but not many others. Tesla amongst them as well. You got it. The upfront cost of this, people are angry at nvidia. Theres an interview theres an interview that slootman, from snowflake, was involved with jensen, its available online. It was in snowflakes summit. Slootman openly chafes at how much nvidia is charging, and you know, david, that musk is angry about how much nvidia is charging. But no one else has anything that comes near it. Nvidia spent a fortune developing it. I think its fair that everyone has to pay the fray. Yeah. You got the product. You might as well get paid for it as best you can. The question with nvidia, though, jim, is how long will that be the case . Is amd going to have some sort of competitive product as we take a look at bill gates now entering as well . We have to hear it from lisa su. Lisa su has a very good product, but this grace hopper product, which, you know, david, has an arm holding cpu, not an 86. You know that is the reason why arm holdings is going to be overvalued from the moment it comes public. Theyre partners with nvidia. Whos going to whos leading this discussion amongst these guys, carl, do you know . They need a good moderator in there. Yeah. Is it schumer . I dont its schumer with his flip phone. Yeah, yeah. Im not sure. How do you think we work this thing here . Whats interesting is you have this going on at the same time as the doj suit went under way and according to reports, yesterdays arguments really did settle on allegations of the company repeatedly used exclusivity to limit competition, lot of discussion about the nature of, jim, what a default search setting means and how much friction there is for a consumer to choose otherwise if they wanted to. Its so funny, because its like the amazon fight at the ftc. Theyre picking on the things that we love. One of the things, when many people are saying that what were seeing right now in a. I. Is bigger than search, and therefore, even more valuable than search. Everyone i spoke to is so happy with something that was developed by google, which is the best Search Engine in the world. Happy with amazon. Oh, look, speak of this. Speak of the nondevil. Perfect timing. Coming off that wired interview yesterday where he was asked, so, did nadella make you dance . And pichai says, in cricket, theres a saying, you let the bat do the talking. I keep learning about cricket. Maybe we should get the cricket rights. What did disney do . Does peacock have the cricket rights . Disney lost them from india. I watched it. Its unfathomable. Its like the mets, they try to hit the ball. Speaking of listen, being a new york sports fan is just i cant. Did you see monday night football ratings . Highest on espn ever. Were back. Linears back. Jensen theres your man. No Leather Jacket. Oh my god. Wheres the Leather Jacket . Fully suited. Fully suited up. He doesnt have the jacket. Wow. The net worth alone in that room too. Yeah. Gates, zuckerberg, and musk. Do you think if fain were there from the uaw, hed be happy with that group . Wow. No. No, i dont. Speaking of, by the way, while were on autos there, really quick, jim, this jonas note this morning about his own upgrade of tesla the other day, just pointing out a lot of pushback from investors. He goes on to make the point that if he were valuing it as a car business, equity would be overvalued but we think theres a lot more going on there, and he says add exposure on ev weakness. Yeah. Hes just a good guy. I know i felt terrible when i hit him because hes one of the few analysts that really reads and develops a kind of a counterthesis. Carl, hes nice. There he is. Elon. Our timing is great today. Were like, we dont even know. Were talking tesla, and there he goes. Theyre going to throw the isaacson book at him. Everyones reading it. I just got it last night. Im going to read it. I got the stephen king book, which is better. Holly. Its good. Ron baron on squawk with whats become sort of a familiar conversation, but repeats today. He believes the company will be four to five times bigger in the next seven years. Probably not just on autos. No. Clearly, it would involve more than that. Theres elon talking to sundar, perhaps . And jensen. Hows that, david . What are they saying . Oh, jensen. Oh, bad blood there . Or peace . What are they talking about, jim . Being rich . No. No. They dont talk about that. Theyre humble. Well, i dont know. Jensens humble. Yeah. Humble . Not the word for musk, no. Well, just in general. Hopefully they will be talking about the threats of a. I. I mean, maybe theyll have an actual fruitful discussion with government officials about it, and really and help educate, because they certainly need to be educated, our members of congress, about what these threats are, how they see them and how they can best mitigate them. I try to get them to talk about profitability immediately, and they make me feel like im Michael Douglas in wall street. They dont want to hear it. They want to talk about how were trying to protect people. Its not for show. They dont ill go back and say, thats fine, esg no. Jim, focus on this. This is what were focused on. Well make plenty of money. We got to figure out how to make this so it doesnt hurt people. Its not for sure. I know everybody is saying, give me a break. That was ibm, right . Yeah. David, you need to get in there and moderate. These people are afraid of you after the last few interviews. Theyre afraid of you. Theyre not afraid of me. Elons not afraid of anything. Any time hes ready, im ready to do another interview, thats for sure. You and zuckerberg. Zuckerberg, hes your buddy. When are you going to interview him again . Actually, im going to put the call in today. Thats funny you mentioned it. I think were waiting for him. I actually am. Interesting to see zuck and musk next to each other or sort of i mean, i dont know. You asked the question yesterday. I did. I did. Ari emanuel, whos close to musk, and it looked like ufc might have sponsored a fight, said, not going to happen. Maybe theres peace between musk and zuckerberg as we wait for david, he said it was that hes on the physically unable to perform list. Hes on the p. U. P. List, musk. Right . Yes, hes got shoulder surgery. Yeah, take a listen to ari, what he had to say about the prospects for that cage fight. I dont think thats happening. You dont . No. Did you . I did at the beginning, yes. What happened . Im not really sure. For a while, it looked like it might be ufc sanctioned. For sure. I think elon had a couple surgeries on his shoulder. Remember, hes had a couple surgeries on his neck. Its probably best it doesnt happen. Wow. Our timing has been just amazing. Theres zuckerberg right there. And you heard ari say its not going to happen. By the way, everybodys in a nice suit. They got all dressed up. And theyre going all day. It starts at 10 00 and will go until 5 00. So, long session as we Pay Attention to some of them have offered sort of ad hoc solutions. Remember when musk called for a sixmonth pause . Even though he had he never believed that would happen, and of course it didnt. There is a lot of there is a lot of tension in there. Its not just musk and zuckerberg. Remember, musk is also one of the founders of openai, was the money behind a lot of it, and is certainly not happy, he feels, at least, says that what happened there in terms of the move to for profit. So, sam altman, musk, zuckerberg, its just interesting in terms of the dynamic and the development of, of course, this, as benioff told you, what did he say . In our lifetime . Or maybe you, what did he say in our lifetime or maybe ever, our most Important Technology . He wasnt the only one. I keep trying to get people at a dinner last night, everybody not there was here, and i cant get anyone off their game that this is a 2024 major change that well all look back at this moment right now and cannot believe what our lives were like versus what it was like in september 2024. There wasnt a soul who said it was overhyped. Just incredible. Impenetrable, david, no matter what i did. People just didnt get on board. Pretty powerful narrative. Theres eric schmidt. Whos that . Eric schmidt. Has all sorts of National Security clearances, by the way. Very much involved on that side of things, much more so than any of the other ceos obviously not a ceo any longer. A lot of people in the room wont be, randi winegartner on this back to school, teachers are already grappling with chatgpt. Thats already in front of parents and kids. I think the person we have to listen to that may not come up as much is zuckerberg at meta has been more involved with anyone with jensen at nvidia. Theyre on the firing line because younger people, facebook, instagram, a. I. , something to worry about or watch. Pretty flattish open here. Obviously looking a bit past the warm elements today. Dow up 40. S p up about 5. As we go to break, watch bonds as well. We got to 435 on the ten year, the highest since august 22nd if you can remember what that period was like. Two years circumstanlating arou. We got the big echo print out of the day but watch out tomorrow with ppi and retail sales. Back in a minute. 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. Every day, businesses everywhere are asking tris it possible . Ed. 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We may have had the vmas last night but this is our Business World version of the red carpet as they gather at the senate to talk about a. I. At the closed forum. Well be on watch for headlines all day long. Not any solutions or proposals expected but schumer said he wants the senate body to get educated on this early. Yeah. Its not even that early at this point as all sorts of use cases for generative a. I. , in particular, are being created. And you have them all there. Musk, zuckerberg, jensen wang, and on and on. Hopefully itll actually help because all of these gentlemen and people do believe we need to formulate policies around this. Obviously potentially productive new technology but also dangerous. In the meantime, lets get to jim in stop trading. Theres a split between ininvestment bankss and regionals. Watch key, the stock had a nice move yesterday, no follow through. People want to own j. P. Morgan, citi we talked about the reorg. They want to own wells fargo, bank of america. Thats the negative side. You need to see a bigger move in the financials for this rally to continue to do well. A little worried. I think that this arm deal is going to come in in too hot. We need to see numbers added immediately. I have Williams Sonoma on. We have sofi. And then i have a discord, this is one of our cnbc disrupters. Which one do you think is the disrupter there. How about the one that looks like a disrupter jason citron. See you tonight, jim. Thank. Been an amazing week so far. I got my pajama suit. See you tomorrow. Take a quick break. Dow is up 52. A bit of a defensive stance with utilits the ietop performing sector, along with some consumer names. Back in two. Thank you. Youre a rock s. You are a rock star. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. Meet gold bond healing. A powerhouse lotion that moisturizes, heals, and smooths dry skin. With 7 moisturizers and 3 vitamins, you can pay more but you cant get more. Gold bond. Champion your skin. My name is Josh Sanabria and i am the owner at isla veterinary boutique hospital. I was 5. 6 years of age and i knew i was going to be a vet. Once alexandra called me to let me know that bank of america had approved my loan. It was important to me. We not only just provide the financing piece, we do everything that we can to surround them with the right people. All you need is a perfect, amazing team that will guide you through the right steps to be successful. And thats what bank of america was for me. Good wednesday morning. Welcome to another hour of squawk on the street im sara eisen with Carl Quintanilla and david faber. Were live from post nine at the stock exchange. Data coming in in in line with expectations, a. 6 jump from last month thanks in part to energy cost. The core number coming in if hotter than expected, originally bonds sold off on the move. The s p up. 2 . Utilities, consumer discretionary, health care and staples leading. Materials and energy lagging. Titans of tech on capitol hill this hour to discuss the future of a. I. And how to regulate the fast growing technology, elon musk, Mark Zuckerberg among the ceos in attendance, eamon javers is live on the hill with us. Tell us more. We believe all of the big name tech ceos are in the building now. Obviously the event is just about to get started. This is organized by senator Chuck Schumer, he has two democrats and two republicans who are going to be talking in a round table format with all these tech ceos today about a. I. Innovation. The idea is to gather ideas and look at the landscape ahead of potential a. I. Legislation out of the United States senate. Not clear where thats going to go, but this is a high level meeting we saw elon musk here, Mark Zuckerberg here. I had a very brief chance to have an exchange of sam alt man of chatgpt fame i asked what his message is, he said hes here to answer the senators questions. So we saw a number of others, sin dar pa chew of google is here. I had had a chance to catch up with the former google ceo eric schmidt, i asked him what his message to the senators was, he said hes going to tell them ultimately that a. I. Is a very, very powerful tool and they need to get ready. So a real sense of mission i think you can say on capitol hill as all of the tech ceos who are intense rivals among themselves gathering on the hill as they try to brief the senators and figure out how to get their arm around the technology. When the senators are not the most tech save have you in the world. Its a brainstorming session . Any pledges . At least we got a pledge last time they all signed. Reporter thats right. Well see if theres any document or work product that comes out of it. There is legislation sort of theoretically on the table here. The idea is Congress Might move on regulation a. I. Legislation at some point to come. This is an ideagathering stage right now. Theres been criticism of the meeting because this is not being done in the normal capitol hill format. Its not on television. Its not on cspan its not open to all the senators. The senators can attend but they wont all be able to participate in. Some criticized it as the biggest lobbying meeting in the history of technology because the ceos are here giving input into what legislation should look like and ultimately theyre going to advocate for their own interests, right. You can only imagine thats what theyre going to do. Curious about the format of a meeting like this. I dont know if you know. But theres so much to share. You mention eric schmidt, for example, not a current ceo but the special committee studies project is something that he runs that will make recommendations to strengthen americas longterm Global Competitiveness in terms of Artificial Intelligence, he was obviously, as well, chairman of the department of innovation board. Theres so much to share, how is it going to be done . We know its a ushaped table and theyre going to sit around the ushaped table and discuss. Four senators, two democrats, two republicans will run the things, so you can imagine with the ego and bankroll will run this. We will get pictures, which i expect them to come out shortly but we wont see the entirety of the conversation. Speaking of conversations, david, i think we have a little snippet here of my brief conversation with eric schmidt as he was walking in a short time ago. Take a listen. A. I. Needs to be both promoted as well as regulated. What do you think the reaction is going to be in the room . The senators are not as technically savvy as the rest of you in the room. This is what schumer is trying to do. What do you think its going to tell the senators . T its powerful and we have to get ready. Reporter you heard him say this is powerful and the senators need to get ready. Thats the theme of the day what the senators are trying to do. A vast gulf between the technologists and the senate. Between understanding of the technology, the desire of what it can do, the National Security implications of it, all of that being discussed here today. At least theyre talking about it and trying to understand it, congress that is. Keep us posted if if you hear anything from those walls behind you. You bet. Turning to the broader markets and the reaction to inflation. The markets taking it well, the dow is up 34 points, s p higher, groups solidly in the green and not just the defensive ones. Guys, as it relates to the numbers, a lot of ways to spin it. You can say its inline, worse than expected, you can say the trends are better than expected. You can say the initial reaction to sell bonds and get worried about stocks that comes from the upside surprise to the core cpi. 0. 28 increase from last month, august to july. The expectation was. 2 . You round it up its. 3 . You dont want a surprise on cpi. We know oil prices are firmer and that explains that but its the core number and if you go deeper into what the fed pays attention to. Theres the super core, core services, exshelter and that was firmer than expected as well as 0. 5 bigger jump than july. Why . What did we see in august . Airline prices ticked back up after a decline they had seen. Auto insurance prices spiked a little bit. That was certainly a factor. Shelter continues to be a problem in terms of higher prices for the numbers. But the theory is that is lagging and should come down in the next few months. The bottom line wondering what it means for the market and the fed, no change in the expectation for next weeks meeting. If its not an upside enough surprise they would have to do anything about it. They can still pause, nothing to put a fed rate hike on the table next week. But theres in you have to keep the debate around the need for one more hike in 2023 alive. So right now we look toward november, toward december. And david, its a 50 50 chance on both of those meetings. Clearly not sending the all clear signal. Not the all clear because theres a camp inside the fed that is worried that inflation could flare back up or remain sticky. There are lessons from the 70s inflation paused and came back up. Theres not evidence to show thats a problem right now. And if youre one of those economists who say disinflation is here, you can point to the trends which all show down. We have a live picture now inside the room with congress and the a. I. Discussion. That is a unique assembly of theres eric schmidt. Mark zuckerberg. Mark zuckerberg. Theres satya. Theres majority leader schumer. Theres musk. Thats quite a group. No way around that. Hopefully theyll educate the members of congress theyre speaking to. The fact they all showed up i think shows the importance of the issue and the fact that first of all theyve all shifted their business to focus on a. I. And as patriots have to, i would hope, be concerned about regulating it so it doesnt get out of control and threaten humanity. Theres a difference of opinion to some extent maya wiley to some extent in terms of the dangers it poses. I think you find altman perhaps being more outspoken than some of the other members of that panel in terms of what they see is the potential danger. For example, musk is also going to be fairly outspoken on it. Probably say not an insignificant chance it could wipe out phumanity. What that means is unclear. But it has to be discussed and there are guide rails that could be applied in the Technology Development that will lessen any chance when we get to general intelligence this thing starts to write code and why do we need you around . Looks like the reporters were chased out. The other thing you can hope for when you say guardrails for instance is there a role for congress when it comes to regulating i. P. Around a. I. , is that something the ceos can talk about . You go back to the early days of the internet and section 230, those rules were crafted around ecommerce but ended up creating what some would say was a monster on social media and giving them an unconditional sort of cover for their Business Models. No doubt. I think about those kinds of things and these discussions and who was present at the table, who was all about ecommerce. So its hard to do this for congress. If you can go back 20 years and have something around for social media you can imagine they would be more significant guardrails in any number of areas. In this case its not just about the threat to humanity. Its about so many other use cases and what it means for productivity, jobs going away over time. Im sure that will be part of the conversation as well. Schumer has talked about a conversation he and musk had in the springtime about why Congress Must ask what questions to ask. How to build a consensus for safe innovation. How to detect deep fakes, attacks on infrastructure. Im sure thats all on the agenda as it goes until 5 00 this afternoon. Our next guest recommends energy as his next pick. Adam parker is here. Great to have you back. Thanks for having me. Do you have thoughts on the meeting . I do a lot of work on stocks im going to avoid the politics and humanity part. But stocks, you think about which businesses have sustainably high margin such that if you were a company paying one of those you look to substitute that out. So maybe its some of the s p global or mci, high margin businesses can i do something to replace paying them, im paying a lot for that, i dont like that. Thats one area you try to maybe save money and the second is obviously low net income or revenue dollar per employee. I have lots of employees, can i improve them making them more efficient . People are excited about how fast its going to be to replace them. Some people are like how fast can i replace sara eisen. Not going to happen. Thats not going to happen next week but if you look at businesses, like call centers, that might go away. But more like banks where theres lots of employees. Its very hard to create parallel systems, immediately remove them. A lot of times they invest in productivity it doesnt necessarily mean the stocks go up. Maybe it means inferior experience for the end user. So people are too excited about cost cutting potential in the next three or four years for that. I wouldnt buy stocks thinking they have unproductive employees getting replaced by a. I. I think thats more premature. I think its on the revenue side where you see compute with semis and other things. Some argue Corporate Cash balances are high. Youre seeing companies begin to make choices if you think about things like buy backs and there is liquidity there for cap x if they feel there is return on these things. Does that make sense . Yes. There are themes to be excited about. I think maybe people use the letters a. I. As if its oh were going to a. I. That. Well, kind of. We do a lot you know, we do a lot of language processing of transcripts trying to do generative things to understand real time maybe semiconductor, its not that easy to do and i know what im trying to do. I dont think everything is immediately a. I. Able on the cost side. Its going to take time. Im staying away on purpose theres a lot of other issues there and i focus on the stocks. Economists are watching it related to productivity and the labor market, which we know is tight. And i do wonder how long you think its going to take before it filters into the broader economy . So yeah, im trying to say nice things about economists. But i think the stock market leads the economy. If i think about what happened this past year, you read read the biggest four firms outlooks last september, no one mentioned a. I. We talked about it on this program in march. I think theyve gone the other way. They werent talking about it and now its everything. I think the truth is in between. There are kernels of truth being exaggerated. You start reading economists saying 50 of all employees are going to be replaced. I think thats a little hyperbole at this point. What do you do with stocks at the moment. Theres been a lot of soft landing narrative gold ilocks. Thats where were at. You talk about it on if network of good is bad, bad is good, all that. People dont want it to be too strong for the market. Were in the gol dee goldilocks zone. What i do all day is talk to Institutional Investors so i can tell you thats their view of the world short term negative and end the world higher. Doesnt happen the way people think ps but thats the view. I look at the market and see three or four things im excited about. Both long and short, over weight and under weight. The thing im probably three areas. You mentioned energy, i think youre seeing thats the best performing sector the last three months, nobody is talking about it. Supply demand looks bullish than any longer term view so i like that sector a lot. It wont act great if people really worry about a recession, thats obvious on the demand side. You cant replace the math of low cap x with decent demand. The other two things im excited about is negative on retailers. We spent a lot of time on our Research Side the last few months looking at shrink or stealing the financing arms of those businesses and so many bad things happen to their cost structure. So i dont see how these Dollar Stores and target and those things are going to act well and how they can have reverting profits. So i think its a lot of exciting things for people to avoid. You live in the new york area. You know you dont want to walk into one of those stores where theres product behind glass and someone has to open it for you and the inventory is mismanaged. Theres no will to change that any time soon. So a lot of things happening behind the surface to get me interested about long and short ideas. I think thats where were spending our time. Thats good. I think about the mistakes i made in my career. Like the first explanatory variable would be i confuse cyclical for structural at the wrong time. Another i would be a little worried about is machinery. They have record high inventory, high earnings estimates, cyclical businesses and everyone thinks automation, on shoring, all of this is going to be the next greatest thing. There are elements of that, exaggerated so do i want to buy stocks with high inventory, high expectations, valuations, not really. I think the upsidedown side scene owe looks better. Looks better on the surface. Your supply thesis is backed up today looking at the undersupply. Theyre cyclical we know they are. They cant grow forever. Were hearing people say im negty on the stock market but like industrials as my top sector not a lot of evidence that works. Adam, thanks. Good to see you. As we head to break, heres our road map for the rest of the hour. A. I. Regulation in focus as a number of the big ceos meet with lawmakers on capitol hill. Well bring you the latest as it happens. Just a day away from arms big ipo. What investors need to know. The strike facing ford and gm what it means for the stock . Big show, dont go away. The first time you connected your godaddy website and your store was also the first time you realized. Well, we can do anything. Cheesecake cookies . The chookie manage all your sales from one place with a partner that always puts you first. we did it start today at godaddy. Com 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. Welcome back to squawk on the street. Check out shares of apple lower down 1 on the heels of the new iphone 15 release. Our next guest was at the big event. Joining us is dan eisen. He just raised his price target on apple to 230 as an outperform rating on the stock. What did you learn, dan . Look, my opinion this is still massively underestimated by the street, in terms of what this upgrade cycle is going to be. If you look from a chip perspective, Battery Technology and what is ultimately going to be massive promotions well see from the carries like verizon, its going to be what i view as a mini supercycle and i think the street is going to under estimate estimate. You think users around the world have not updated in four years. We think ultimately about 100 more from an asp perspective. Didnt they not raise prices . They raised prices on the max pro. Look at pro, they kept it the same. The most important thing is the mix. Out of asia checks, seeing 75 roughly are going to be pro and promax. What typically is 60 . A huge uplift for apple. When you look at what the street is calling it, maybe a knee jerk reaction here and maybe not expecting that this is a wow type of launch, i disagree. I think when you see how this all plays out, i think it could actually be iphone units up year over year and the important thing is, in terms of china, weve done a lot of work this week, talking in had and out of beijing, a lot of experts that we talk to, it further confirms my thesis that this is bark a lot worse than the bite. 500,000 units at worse youre talking about the government ban or what we called or what it was reported as. Do you think youre talking to the right people . You have asian supply chain checks. You have government i guess chinese industry contacts but you think youre talking to the right people . These are contacts for us that over the last, seven, eight years with all the black swan events that apple is going into, they navigate well. There could be some scrapes, im not saying this is rosy and rainbows in terms of having the champagne dinner in beijing. But what i do believe is that the fears here are way over blown and i think when you look at huawei, its essentially the equivalent of an iphone 12. If you compare it from the technology perspective. Im not saying there might be, in terms of shot across the bow and sort of warning shots. But overall, in my opinion, this is, i think, ultimately going to be a lot better than the street is anticipating. We believe 45 million iphones will be sold in china, only 500,000 could be impacted there. When do you see revenue impacting year on year, if its not this year, in the middle of the launch, isnt that weird . Yes. December to march you have Services Double digit growth, fx headwind starts to become a tailwind and ultimately you have units that start to uptick, 4, 5 with asp uplift, combine that with where it goes, youre looking at a renaissance of growth for apple. Some argue the valuation, and i get it. But i view it as the services business, that goes to double digits, thats 1. 4 to 1. 5 trillion. Tim cook is not in the room with congress right now. Is there an a. I. Story with apple . We believe its 2025 when they come up with the a. I. App store. I think thats a huge whats going to be the a. I. App store . We believe, this is our view in terms of talking to developers. Vision pro, the start of a new form factor, essentially a new app store theyre starting to build with developers but thats going to go into whats a. I. Apps specifically in the app store for apple. Thats another area of modernization from health to fitness to life sciences. Apple, when you put it together we believe they spent as much as microsoft has on a. I. Theyre not on the outside looking in here. They continue to play the long game and its one where its hard to argue with what apple has done from a success story. Thats a headline, they spent as much as microsoft on a. I. Thats surprising to people. Dan, thank you. Good to talk to you. Dan ives. Still to come, time is running out for detroit automakers to make a deal with the union. We have the latest on the negotiations next. A quick programming note, an interview you do not want to miss monday morning on the show, treasury secretary janet yellen joins us with her outlook for the rkmaet, labor, inflation and more. Dont go anywhere. New projects means new project managers. You need to hire. I need indeed. Indeed you do. When you sponsor a job, you immediately get your shortlist of quality candidates, whose resumes on indeed match your job criteria. Visit indeed. Com hire and get started today. 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. Automakers in detroit, less than 48 hours away from the potential start of a uaw strike. Phil lebeau joins us this morning fresh off the sitdown with the uaw president. Phil . When we talked about with the president of the uaw, he made it clear they plan on going on strike if they cant reach an agreement by 11 59 p. M. Tomorrow night. Heres where things stand. Last night they gave an update to the local union basically saying targeted strikes are likely at different automakers as opposed to to going across the board at one automaker or all three. The issue is wage raise, the automakers offering in in the mid teens, theyre going to come together on that eventually. Here is the president talking about how serious they are about striking if theres no deal. Were consistent in our message that september 14th is a deadline not a reference point. We expect all three companies to have that agreement. If they dont, there will be action. So, you know, so we can get there. But the Companies Need to get serious and buckle down. Were 48 hours away. So we have a lot of work to do in 48 hours. Reporter as you take a look at shares of gm, ford and sfe l stellantis getting a little bit of a bump higher. When ford unveiled the f 150 jim far lee was there and he was asked about the negotiations saying look this is the best offer weve ever made. It is true. Probably the most gm and stellantis have made in terms of offers too. But theyre coming off record profits. From the union perspective, thats great, but we think we should get more. And jim farley said there is a limit. I dont know if theyre there. Well see what happens in the next 37 hours. Phil lebeau, keep us posted. It relates to the inflation data today because the fed has to be watching this. If we get a prolonged strike that could have implications for the supply chain and worry about inflation which theyre just starting to beat down. We know that new and used car prices have been an issue before. Bank of america put out a note saying they dont believe its a problem, any risk to inflation is limited. This is interesting, ghes ik suppldes domestic suppliers have supply so they dont think theres a big impact. They do see it as a hit to gdp as the strike goes on. Theyve talked to all three automaker saying stay at the table. Arm less than a day away from the blockbuster ipo. What investigaors need to know we break down what might be the biggest debut in years. Back in two. 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. Welcome back. Heres your cnbc news update. The two week manhunt for the convicted killer who climbed out of a pennsylvania prison is over. A couple hours ago authorities recaptured Danelo Cavalcante while he was sleeping in tall grass. Police say he will be taken to a State Facility soon to serve out the rest of his life sentence. Officials said today more than 5,000 people were killed by devastating flooding in libyas coastal city of derna, a storm pounded libya on sunday causing two dams to burst. Officials say at one point it was submerged by waves reaching 23 feet high. A bridge connecting ohio and kentucky reopened this morning after Police Received a call from a Man Threatening to blow it up if he didnt receive 400,000. Several agencies checked out the bridge, including Homeland Security and determined the threat was not credible. Carl . Thanks. It could be the ipo of the year. Arm holdings getting set to price shares after the close today in a big moment for the semis and ipo market at large, we break down the action here. Talk to us about what youre hearing about tonight . It should be the biggest ipo of the year, in fact, the biggest in several years. It is a scaled down marketing process from what was initially expected. What im hearing is that the book is currently over subscribed about ten times so that bodes well for pricing and they should be pricing at the high end of the range or above given the demand. So that indicates valuation of about 54. 5 billion or higher. Now that is great news for the psychology of the deal and the obvious strategy surrounding the deal but initially there were reports out there this could be could be valued at 70 billion. So its a discount to what had previously been reported in terms of the targets they were seeking. But none the less, not a bad strategy to go in with a more muted or modest valuation with the hope you get the demand, the book filled, multiple times over hopefully and then you can guarantee or hope to have a pretty decent debut when this thing starts trading tomorrow. We want to bring in Kristina Partsinevelos to talk about not just the Capital Markets element but also the Business Model itself. Which is important because this is a company that provides the architect for so much out there. You have the 54 billion valuation leslie talked about chips and a. I. Setting up the ipo for success but the hype may not be warranted. Think of arm as a coding blueprint for Companies Like nvidia or apple to use to do their own chips. Really what they do is they charge a licensing fee and a royalty on every chip that contains the technology. Which is a great achievement but leaves concern about future growth when penetration levels like 99 in all smart phones is high. Also, arm specializes in coding for cpus, not necessarily those sought after a. I. Graphic processing units, arm calls the gpus its complementary business in the perspective. Other risks include about a quarter of revenues coming from arm china, which operates in a black box as an independent entity. Also has high levels of r d spend and derives revenues from five customers. So theres of course nvidia, ftc in arm and the Balance Sheet is strong but there are risks ahead of the i po and its important to note. What do you hear on the risk factors, leslie . The china risk which weve been talking about in recent days. Are investors looking past it . Yeah. Its been a big concern. And i think thats one of the reasons why the valuation had to be discounted is that you have the customer concentration risk. You have the outsized exposure to china in particular and uncertainly over the Growth Prospects of that market and then, of course, this is a company thats not a major grower right now. Its a controlled company, soft bank will own about 90 of the company after it goes public. All of those risks, especially in light of what were seeing, where we are in the smart phone market, is this a trough or does it stabilize at the lower levels. All of those are concerns that investors are grappling with. If you can get a deal and feel like youre getting a deal and discount in terms of buying shares, perhaps theres an upside. Theres an analyst note out this morning which showed a price target of 59 per share representing about a 15 upside. So, you know, thats thats decent on a oneyear basis. I its nothing to really deliver alpha in ones portfolio if its down but nothing to shy away from. The multiple were talking about there, even with the significant up tick in its growth rate is not insignificant. Yeah. It no. Sorry go ahead. Christina, go ahead. After you. The valuation is not insignificant. Its the the the you just talked about the ratio. But leslie used the word conservative. We have to go back to 2020 when nvidia tried to buy the company at 40 billion, ftc blocked it. Talking about a valuation at 54. 5, possibly more. Its crazy to hear the word conservative with that much amount of growth in three years, especially when soft bank bought the company at 32 billion back in 2016. In terms of just you were talking about price targets everyone is hyped up but only 10 of the float is available to Retail Investors which means theres a lot of clamoring for a small portion of shares when institutional guys already got in. Theres going to be plenty of hedge funds and other institutions that buy the stocks. Exactly. Its a small float, 90 controlled by soft bank. Unsure if they have any intention to sell beyond that. While we have you, leslie, we shared the news on citi, another beat you cover closely for us in terms of at least simplifying the reporting structure. What do we make of these moves by jane frazier . I think this was decently telegraphed there would be structural changes here. A source tells me on background we could expect to see as we would with any organizational shift of this magnitude we could see job cuts as a result of this. We dont know the sides of the job cuts but thats something to keep in mind as well as the financial implications of layoff and restructuring. I know jane fraser is speaking at the barclays financial services, she wasnt originally on the skchedule but she said te changes are most consequential in how citi will be organized and run in 20 years. So theyre creating five businesses, Division Heads report directly to her, which helps her have more of aing like in sight as to what those businesses are doing. Their goal is to streamline and make sure that everything is transparent and operating officially. So well see if theyre able to execute on that front. Leslie, kristina thank you both. Arm less than 24 hours away from beginning trading, we expect. Titans of tech on capitol hill this hour. We watched the arrivals in the 9 30 hour. Theyre meeting with lawmakers behind closed doors talking about the future of a. I. And our next guess said he wishes lawmakers were serious about regulating the technology. Roger macnamy joins us now. At this table you have a lot, do you expect anything out of it . I expect Chuck Schumer to shake these guys down for large contributions. Youre a sin nick. Youre a scynic. Thats how this game is played. If they were serious about regulating tech, the thing would be filled with people from Civil Society and the people who have been pointing out, correctly, theres a lot of hype here and not a lot of substance. Which is not to say that generative a. I. Cannot eventually be a valuable tool but its not one today. The way the thing is set up, the people making money are members of congress who get campaign contributions. And i think microsoft is particularly well positioned because the way the thing is structured, open a. I. Is essentially a sharecropper on the microsoft azure platform. And at the end of the day, most of the profits from whatever gets done by open a. I. Are going to be captured by microsoft. They really have all of the Purse Strings here. And i think, as you look at it, we want to be careful, david, to remember the history of Enterprise Software in the early 90s when a mania was created around specifically s. A. P. What was incredible for investors if you shorted the hundred largest s. A. P. Customers in the 90s that was one of the greatest short plays all the time because the technology was hopelessly overpromised and customers didnt get a good return. Yet s. A. P. Became a valuable company you think the technology is overhyped. Are you not concerned about the dangers it presents to humanity, to the workforce, to deep fakes . So many different things. Oh, no. I i take all that as a given. I dont think the existential risk is real. I think thats a rhetorical trick to make us believe this technology is inevitable. I believe the harms going on to intellectual property, so copyright theft. Peoples privacy, their ability to do their work successfully, for students to actually learn, those things are baked in in, theyre happening already. When you talk to educators about chatgpt, they view it as inevitable so theyre trying to adjust around it, notwithstanding the educational flaws built into it. Again this is a classic example of something sold incredibly effectively but the thing thats sold is not effective. Youve been such a critic of social media for so long and correctly so perhaps. Imagine if a meeting like this had taken place 20 years ago, you think nothing would have come out of that as well . Campaign contributions did come out of it. We didnt know the dangers of social media as much as we know now 20 years ago. Cant you say at least roger theres a recognition here that the development of this technology over time does pose certain threats we can try to mitigate right now if we educate our lawmakers. I only wish that was true. I have spent seven years trying to educate lawmakers about how to think about the culture of technology. The thing here is we had a series of things that began with the Second Generation of social media, went to ride sharing and the gig economy, then to crypto, selfdriving cars, the metaverse and now generative a. I. And each was 0 interest rate, they promised the moon, promised massive market cap by spending billions, losing billions you and creating the illusion of inevit inevitability. Its the same plan back to social media with the same harms. And the thing thats really incredible is we dont learn. Whats wild about this one is microsoft i think stands to profit a lot from this particular spin on the game. And, you know, its a public company, which is, you know, something investors can look at. You said you want more members of Civil Society in the room. The aflcio leader is there. Who else should be in the room . There are five or six what im saying is ratio is whats wrong. We all know what big tech is promising. The spin game has been so effective. Its one of the most Effective Marketing campaigns in history. We know what they want. If you were serious about regulating you would have meetings with just Civil Society and have meetings you said listen what is the thing we need to worry about today . In congress, if a members of congress uses chatgpt, its the level of National Security risk is off the charts because the technology itself, its not just that it gives you bad results, they know whos asking the question, they know what the answer is, and we have no idea which agents of Foreign Intelligence Services are working inside these companies. We know theyre working inside all the Tech Companies so you have to believe theyre inside all of these as well. And the whole idea youre going to do things that touch on the nations security on a platform that is this this insecure, is insane. And yet, thats congress own use. And for members of congress who are fighting for the right to use this technology, despite that risk. I mean, you just keep getting more cynical every single day, roger. Well, david, the problem is ive been around too long. And when it turns out that were wrong about all of this, we should sit down and have a beer and talk about it. But the issues thatim looking at here are not that investors dont have an opportunity to make money. Its that the big money will come from being short the large corporations that invest deeply in this technology. Because i dont think theyre going to get any return for a really long time. Interesting, the investment side of it is something we can continue to discuss in the future as well. Roger, always appreciate it. My pleasure. Track those Campaign Donations now. Just a day away from an exclusive interview you do not want to miss. Citadel founder and ceo ken griffin fresh off the launch of a new philanthropic brand called griffin catalyst, Just Announced today, after having said that hes given away already 2 billion in philanthropy. That interview about that, the markets, the economy, ai, kicks off here tomorrow at 10 00 a. M. Stay with us. This is cynthia suarez, cfo of gogo foodco. , an Online Food Delivery service. Business was steady, until. Gogofoodco. Go check it out. Whaatt . overnight, users tripled. Which meant hiring 20 new employees and buying 20 new laptops. So she used her American Express business card, which gives her more membership rewards points on her business purchases. Somebody ordered some laptops . Cynthia suarez. Cfo. Mvp. Built for cynthias business. Built for your business. Amex business. 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 stocks have improved a little bit here this morning. The s p is up 0. 2 , Technology Stocks are now positive. Its why the nasdaq is up about a quarter of 1 . And all the major averages now higher for the week. This as the market digests the Inflation Numbers today, pretty much coming in in line. Look at the bond market reaction. Thats always where you go first, especially the tenyear in this sort of thing. When the numbers first came out, that core inflation that the fed pays such close attention to came in a little bit hotter than expected thanks to airline fares a little bit, Car Insurance was a little bit of a problem. The bottom line, carl, is, going through some of the reaction, the way the market is taking this, no change, to no its an expectation of no action from the fed next week, but does clearly put november and december still on the table, because we do still have an inflation issue in this country, and thats what the fed is targeting. Is it coming down and improving a lot . Yes. For instance, you didnt ask me about white bread, but were seeing deflation there. Deflation in white and wheat bread. Some of these painful points for the consumers have calmed down a little bit, but still way up. Lodging away from home, at the top of the nine, down three. I see the president just now tweeting about threemonth annualized 2. 4, which is probably the best thing the bulls have going right now. Thats what he should do, 3month, 6month and 12month, all those trends look better. Meanwhile, bitcoin below 25k as consumer headwinds take a pit. Some investors fear the selloff may be beginning. Our kay rooney joins us with some of that story. And some of it involves ftx. Good morning. So ftx holds billions of dollars in cryptocurrency, which needs to be sold in order to get money back to the consumers in its highprofile bankruptcy case that its going through. The threat of what could be a major liquidation event has certainly weighed down prices this week. You mentioned it in the intro, below 25,000. We will get some updates this afternoon when ftx is back in a Delaware Court and set to discuss offloading this stockpile of crypto its got. According to an updated bankruptcy document, 3. 4 billion in various cryptocurrencies have been marshaled by the new management. The bulk of that, roughly 1 billion or so is something called in solano. Half a billion in bitcoin, roughly 200 million or so is in ether. The remaining is in thousands of smaller coins, as well. And if approved, guys, these sells are set to be facilitated by mike novogratzs galaxy. The government holds about 1 of all the outstanding bitcoin through criminal cases and things like asset seizures. Plans to sell about 32,000 bitcoin in three separate tranches. While the government is likely to try to minimize a market impact, doesnt entirely eliminate the possibility that this could add some pressure, downward pressure on prices. They also point to july, when the doj did get a big bitcoin sale, and it did negatively affect prices. Guys, back to you. Kate, thank you. Kate rooney. Squawk on the street continues after this break. Dont go anywhere. 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. Every day, businesses everywhere are asking tris it possible . Ed. 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. Good wednesday morning. Welcome to another hour of squawk on the street. Im Carl Quintanilla with sarah eisen. Vince reinhart with his reaction to the contrpi print. And news street puts its best foot forward initiating a bu