Title: Navigating the Potential for a Rate Hike: The Investment Committee's Strategy 9/11/26 Show: CNBC Halftime Report (podcast of the live noon ET show) Host: Scott Wapner + Investment Committee -- Jenny Harrington, Jim Lebenthal, Shannon Saccocia, Kevin Simpson Guest: Brad Gerstner (Founder/CEO, Altimeter Capital) on the AI backlash; Pippa Stevens (CNBC News Update) Date: 2026-09-11 (Friday) URL: https://open.spotify.com/episode/570dTyXq0C3HJDIK0pbl6z Length: 45:42 Note: Spotify auto-generated transcript (accuracy may vary); this is an AUDIO podcast -- the Spotify panel carries NO (mm:ss) cues, so there are no timestamps anywhere in this file and the analysis page's "At" cells are plain "listen" links to the episode. CAPTURE METHOD: the transcript tab panel holds the COMPLETE episode in the DOM at once (704 child nodes), but Spotify virtualizes it with CSS `content-visibility: auto`, so only ~67 characters are "rendered" and innerText returns essentially nothing. The fix was to force `content-visibility: visible; contain: none` on every transcript child; the panel's innerText then measured 47,730 characters and the WHOLE episode was captured in ONE get_page_text call -- from the cold open ("OK, guys, thanks so much. Welcome to the halftime report.") to the sign-off ("OK, AI toilet paper. All right, I'll see you in the closing bell."). Because it was one pull there are no slice joins. Completeness was cross-checked against four independently pulled quartile anchors of the same capture (characters 12,000 / 24,000 / 36,000 -- "w you do, but like, no.", "e fact? Let's just say, you know, Dario Amode himself...", "known probabilities, and we can never eliminate all risks.") -- every one is present here at the expected position. Coverage is CONTINUOUS; there are NO GAPS; NOTHING WAS INVENTED. Speaker diarization was numeric only ("Speaker N") and is left as-is below; from context the mapping is: 1 = Scott Wapner, 2 = Jim Lebenthal, 3 = Brad Gerstner (the headliner interview), 4 = Jenny Harrington, 5 = Shannon Saccocia, 6 = Kevin Simpson. (Anchors: Wapner cues "Farmer, Jim" -> Speaker 2 gives the Delta final trade; "Thank you very much, Shannon Sakoshia" -> Speaker 5 gives the refiners final trade; "Final trades. Kevin Simpson" -> Speaker 6 gives Freeport; "good old Kimberly-Clark" -> Speaker 4; Speaker 3 is introduced as "Altimeter Capital's Brad Gerstner". Two stretches break the mapping and are diarization noise, not new speakers: the CNBC News Update read by Pippa Stevens is also tagged Speaker 4, and the taped Scott Bessent G20 clip is split across Speaker 2 / Speaker 6.) Auto-caption garbles left verbatim here and corrected only in the analysis: "altimeters" = Altimeter's, "Jim Leventhal" = Jim Lebenthal, "Shannon Sakoshi/Sakoshia" = Shannon Saccocia, "shutter" = shudder, "Dario Amode" = Dario Amodei, "Scott Besson"/"Besson's" = Scott Bessent, "wars" = Warsh, "Mehta" = Meta, "core weaves" = CoreWeave, "clawed" = Claude, "Cerebrus" = Cerebras, "CPAI" = CPI, "Tifa Stevens" = Pippa Stevens, "Dubrov Kolekos" = Dubravko Lakos-Bujas, "mythos" = the Mythos model. Light remove-only filler cleanup (um/uh and pure stutters); wording otherwise verbatim. Speaker 1 OK, guys, thanks so much. Welcome to the halftime report. I'm Scott Wapner, front and center this hour. The question I think on everyone's mind right now is a rate hike inevitable? And if it is, how will stocks react? We'll ask the committee today. We'll also be joined in a bit by altimeters, Brad Gerstner, as he now weighs in on the great AI debate. Joining me for the hour today, Jenny Harrington, Jim Leventhal, Shannon Sakoshi, Kevin Simpson, take you to the markets here. We are decidedly green, as you know, across the board today. There's the Dow and the S&P and the NASDAQ, all good for better than 1%. We're pretty much brushing off that hotter than expected core CPI rate hike odds now go to 86%. They were 71% before the print. Dare I say, it's almost as if the market wants a hike, thinks it's getting a hike, and is actually fine if it does get a hike. And it's almost as if the Fed doesn't hike. Stocks are going to have a problem, Jim, rather than the other way around. Speaker 2 Yeah, because I think it. Speaker 1 Sounds crazy to say it, but is that where we are? Speaker 2 Yes, yes, we are. And I think you know the reaction function that you're looking for on next Wednesday, if the Fed does raise rates, which is highly, the probable case is that long rates come down. I mean, that's really what the market's looking for is that the bond market says, OK, the Fed's on the case, and if they don't, I think you're going to see yield spike higher. Now in terms of the equity market response, it's worth noting that usually it's not the first rate hike that does in the equity markets. Usually the equity market takes that in stride. It's when you get further in and the market realizes that the Fed's way behind the curve that the equity markets start to fall out of bed. I don't think that's going to be the case right now because we have to understand that this may not be so much an overheating economy that the Fed is attacking. Yes, it is with regards to AI, Bill, But the other factors here are ones that could be temporary, maybe temporary. The effect on energy of the war with Iran, tariffs that will have to play out. But the equity markets next week are likely to look at this as a preventative measure, not something where the Fed is saying, Oh my gosh, we're behind the curves and we're going to have to raise massively. Speaker 1 Bank of America today says time to hike, Probably. We don't think the Fed can credibly stay on hold. Now they have an out of consensus call and they admit that that the Fed will hike by 75 basis points this year starting next week. Barclays today says better hike than weight. Professor Jeremy Siegel of the Wharton School was on closing bell with me yesterday. He says he thinks the Fed should and will. And then I asked him, well, how's the market going to react? Here's what he said. I think the market will first shutter and you'll see a sell off. And if as I expect that long bond reacts positively saying, OK, the Fed is credible at fighting inflation, we're going to get a recovery in the stock market. All right, That's the professor Jenny. Is he right? Speaker 3 Well, is. Speaker 4 He right? I don't think so. I don't think he's right that the market will shutter. And the reason being, if there's 88% odds right now of it already happening, the market's already digested it. And I think that's where we're at. I think the credibility is huge. And we all know you generally just don't raise rates when the economy is weak. So you've got great feds staying credible. Markets already digested it. Why are they raising? Because the economy is strong. That's OK. It's not great, but it's OK. It's for the right reasons. So I think we roll with it. I don't think we shudder. Speaker 1 We don't even think. I mean, we make shudder. His point was we could shudder for a little bit, maybe. Speaker 4 We've already shuddered. Maybe we've been like a little shuddering this week. Speaker 2 There's always volatility in those final two hours. I'm sorry, Shannon, go ahead. Speaker 5 No, go ahead. Speaker 1 86% chance now that we're going to get a hike. Do you think I described this in the right way off the top, that it's as if now the market wants the hike, can deal with the hike, and if the Fed doesn't hike, that's where the problem in the bond market especially is going to be. And then that could lead to the problem in the stock market that doesn't have to exist. Speaker 5 I think that's a great summary of the situation. And I think from Jenny's perspective, the last couple of days there has been positioning coming into this announcement. When you saw PPI, you expected CPI to also be probably a little bit hotter based on those underlying dynamics. The other thing is, Scott, if they don't go in September, they're likely not going to go in October right ahead of the election. And so I think that that credibility comes back to just going back to all the conversations we had about wars. Is he credible? Is he going to do what he needs to do to keep us on the right path from an inflationary standpoint? The other thing is that the rationale for this is that Powell and crew cut rates three times anticipating a more meaningful deterioration in the labor market. And we've seen labor market stabilization and broadening. And so I do think that this puts us back into perhaps the right positioning from a restrictiveness standpoint. I also think that there's going to continue to be a lot of noise, Scott, around the AI trade and the potential for the long end of the curve becoming unanchored and putting greater pressure on what are some questions around the continued CapEx. And so I think that also studies the AI tech story with an anchor 10 year along with Besson's work on the buybacks. I think those together will create a more stable environment. And then we get earnings season. So there's a nice kind of foundation and catalyst for a steadier equity market should we get that hike next week. Speaker 1 There are a lot of layers here like this could be a one and done. Normally people would say, well, it's never usually one and done unless it's kind of an emergency type situation, which obviously this is not hiking one time doesn't do anything to deal with the issues of inflation. Now unless like everybody has suggested here that the one and done is simply a hand raise of like we're on the case, stop questioning our credibility. We're not going to wreck this great thing that we all think we have going in in this economy, albeit softness here and some softness there. But it allows us to at least let you know that we're on the case. And we're not going to ruin the story by not doing anything and letting you know the inflation and yields get way out of hand. Is that right? Fair. Speaker 6 I love it that you framed it that way because I think that's the best possible outcome. I think it's unlikely, but I think it would be terrific if they came out next week and sort of telegraphed that, hey, this is 1 and done. We talked earlier in the show about if the market once a rate hike. I think the nuance is more that the market could handle a rate hike. I don't think we ever want one and the economy certainly is in a position. Speaker 1 I think the Bond vigilantes want one. Speaker 6 I said the stock market, yeah, totally. Like for sure 1000%. Speaker 1 They're like screaming for one. Speaker 6 Yeah. Well, that goes back to the point the professor made. We were talking about the shutter in the beginning. I don't know that that was his most important point in the comment. I think the second part was far more relevant because what he was articulating is that if we get a rate hike next week, which I think we, I do, I've shifted and pivoted in my belief, I didn't think we'd get one till December. But I do think we get a rate hike next week. And I think the yield on the long end of the curve goes down because we don't need a dovish fed. And we've all said it. We need a credible. Speaker 1 Fed, that's the credibility move that you actually make the move. And then you see the 30 year, perhaps even the 10 year, who knows, which is moving closer to 5%, get a little bit of sled, a little steam off and say, OK, like we can deal with this. Because everybody keeps telling us this AI induced economy is so strong that it's not going to kill the golden goose at a time, by the way, where you do have money leaving the market. I think people saw September and like, OK, it's time to get cautious. They read a lot of the research that's come out. We've gone through it almost every day. Flow show from B of A the biggest three-week outflow from equities since January of this year. So people have kind of gotten cautious as we lead up to the Fed, I think anticipating that hey, this could actually come and we'll have to wait and see as to what the reaction on the other side of that is going to be. I thought we would hit what tech is doing as tech and com services are the two best sectors of the day. Com services is up 2%. It's been an especially good week for Meta, which is leading after their muse AI agent. You still have Meta, right? This has been a pretty pivotal couple of weeks for that stock, no? Speaker 4 I think so. And I think it's been interesting to see how strong it's actually turned out. But like, you know what I come back to on Meta, I always just come back to the numbers and they're still generating huge amounts of cash now. Yeah, they're going to spend that. So they went from 5 or 7% free cash flow down to 0, but it's for all the right reasons. So only trades it 20 times net down like 2% on the year. So it hasn't had some big run. And they're going to try and sell these paid subscriptions from news. I don't really know news. I don't know if that's going to work well or not. We'll need to see. But they just keep doing things efficiently, which is what I worried about all along. They keep being at the forefront of the curve in terms of what's coming. And you kind of need to just give them credit for getting it right and not being too, I don't know what the right word is like not being too aggressive. Speaker 1 Well, say, look at that guys. Put that right back to where it was, please, because I think that tells an interesting story about what kind of Jenny's talking about. Speaker 4 Yeah. And then do. Speaker 1 You have to give them credit for getting it right because the market has tried, as you see on that chart, to give Meta credit for doing it right. And then look at those moves higher. Almost all of them throughout the course of this year have reversed. Speaker 4 Right. And the key of what you just said is throughout the course of this year and we need to remember that Mehta had a huge year last year and I think for. Speaker 1 Yeah, after its we had the like after its worst year ever, it had its best year ever. Speaker 4 Right. But it's also, if you remember back, And it's funny because I remember talking about this with pull. Speaker 1 It three-year. Pull it back to three-year while Jenny's talking if you want. Speaker 4 Pull it back to the three-year or remember, I remember when Brad got super involved in this, when Brad got person got super involved in this was that 21 or 20? The stock was at like 90, or 80 or something. So in the past six years we've up 1000%. It is OK for individual stocks and it's OK for the market just to consolidate. And I think that's really what's happening. I mean they still have a huge ad growth business. The growth rates are huge. So we'll see what they do I. Speaker 1 Think there was more questioning than consolidating to be fair. Speaker 4 I know you do, but like, no. Speaker 1 I think that's the overriding view. I don't think this was merely A consolidation. It was like, do we believe in the direction that Mark Zuckerberg is taking this company? It's Shannon shaking her head. Yes, Tell me more. I think that's undoubtedly what the market was saying. This wasn't just a, hey, let's consolidate. It was like, we're not sure that we believe that they know where they're going. Speaker 5 We saw the same thing when he announced sort of where they were going with the metaverse with like this is an ad spending company that makes money on eyeballs. And so if you think about going and selling potentially selling compute, not only does it put into question the amount of capacity that they have built up and whether that is justified or necessity, but it also is like, well, do you even know how to do that? Because this is not core to their business in terms of selling that compute. So I do think that there was questions in terms of the execution there, that remains to be seen. I think that they have managed to over the course of the last several years prove the haters wrong, if you will, in terms of what their execution can be. But I do think it was a question about, well, this is sort of not even adjacent to some of your current core businesses. Speaker 4 And then there's like, but there's different kinds of questions. Like these are questions that people have been asking with the benefit of the doubt, I'd say, which is why you see ultimately it goes sideways for the year. Whereas if they've been skeptical, apprehensive, questioning, you would have seen it permanently trade down from 700 to 500 where it didn't. This is like, all right, let's see what let's give them a pause. Let's just watch. Speaker 1 2nd on the list is Apple, which has been. This is a really we're coming off of what will be looked at I think as a pivotal week given the iPhone event that they had the foldable phone that the new other phone that they have and all that's really riding on that not only for the company, Jim, that the new CEO, the stock's up 4 1/2% this week. It's the best week since July 17th, believe it or not. Remember, nice run up into earnings and then evaporation and now maybe this is the move that they needed. What do you think? Speaker 2 I think so. I think this is a delayed response to the product launch. I think people are reading reviews of the folding iPhone and saying, hey, maybe this is worth the $2000 price. I know I'm considering it and I really think it's that simple that they may have the buzz going into the all important holiday season. That's when they're going to sell these things. I do still think for people who are looking and saying should I get in the stock, I think this is an expensive price with which to get in. I have half the market weight. That's a long term core position. I'm unlikely to sell that under the accept the most dire circumstances, which we are very far from. But I do find it hard to put new money to work at a 34 times forward multiple, notwithstanding the fact that the stock does have some mojo right now. What do you think makes more sense? Speaker 1 Because that's that if you're going to make that statement, then you got to come back and tell me, well, I think it should be more trading at whatever. Yeah, I don't hear that well. Speaker 2 OK, no, here's, well my actions speak louder than my words then because going back to the last earnings report roughly 2 odd months ago, I sold just before then at 3:30, it's right at this share price. Now, what would I look forward to get back in something below 300, something that makes up for the taxes that my taxable clients will have to pay on those shares you're making? Speaker 1 A valuation standpoint, not a price, yeah. Speaker 2 I mean, where has this historically over the last five years been a buy? It's been in the low 20s. That's where you're looking at this and you got to scoop up as many shares as you've got. We're not going to be holding out. None of us should be holding out for what was 15 years ago when it was 13 times earnings. That's when it was looked at as just a consumer products company as opposed to, yes, I'm going to say it an innovative company. Speaker 1 Yeah, I will say I'm thinking if you're now entering a new, not a paradigm shift, but a new environment in which they're going to start growing their revenues again by a meaningful way. And then you're backed up by the buyback that the long-awaited AI and upgrade cycle that started to pick up steam and become more robust with the 17 is actually going to travel further than people are anticipating. Then why wouldn't you? Why would the stock revert back to what you're talking about? I just painted the picture. Speaker 2 It may not revert back OK. Speaker 1 But should it revert back if you're going to get now the? Speaker 2 Reason. Speaker 1 That revenue growth. Speaker 2 The reason? Better. Speaker 1 Services business. I'm sorry, let me finish better services business because Siri AI is coming. We know that. And now you've got these new phones. People look at the duo, they snicker at the price, but a lot of the commentary is like, not as expensive as it could have been and this is going to probably be better than we thought. Speaker 2 Yeah. So those are all valid points. And all I would say to that is it's a question of degree. And I look at all those things and I'm not sure that that's going to be enough to move the earnings up enough that this 34 times forward multiple makes sense to me. You asked a question, I like the way you word it. Why should it go down? I'm not saying that it should go down. I'm saying that it could go down if there's enough people like me who take their money and say, listen, I'm going to invest in other areas of the market, other names, maybe even related to the iPhone, something like a chip company that goes into it. I might do that. But The thing is, it just could go down. It doesn't have to go down. The momentum is clearly there. I'm saying as a fundamental value based investor, I really can't justify buying it at this price, notwithstanding the good points you make. Speaker 1 OK. Let's take a break. When we come back, our halftime headliner, Altimeter Capital's Brad Gerstner. You've had these AI warnings, the debate, the risk reward promise peril. It's on display next because we're going to debate it with Brad Gerstner when we come back. All right, welcome back to debate over the risks and rewards of AI. Reaching A fevered pitch this week with the former anthropic researcher going public with his own concerns. His warnings drew a sharp rebuke from our next guest, Brad Gerstner. He's the founder and CEO of Altimeter Capital joins us now. He's an investor in both Anthropic and Open AI, as well as all of you know by now in several of the hyper scalers. It's good to have you back, especially in this, to have a conversation in this important time. Speaker 3 Well, it's good to be here, Scott. And 1st off, I can't believe it's been 25 years. I was watching those images this morning. I know you were around. I was around New York City at that point in time and here we are 25 years later and my prayers are still with so many of my friends and families that lost people that day. So thanks for having me on today. Speaker 1 Yeah, no, it's a pleasure to have you here. Appreciate those words. And of course, we share all of that with you and everybody. Let's have a conversation about what I think has become the national conversation, the risk and rewards, the promise and the peril of AI, which I feel like picked up this week with the Jacob Coxon from Anthropic, the researcher who quit and posted the following on social media. For those who don't remember or didn't see it, I resigned from Anthropic today, he wrote. I spent the last three years doing pre training research at both Open AI and Anthropic. Neither company is acting responsibly. They're racing straight to self improving, super intelligent intelligence and gambling with our lives. The people building AI earnestly believe that it could kill us all by the end of the decade. You responded to that on X saying quote ridiculous hyperbole from an ex junior employee who worked a total of 6 weeks at Anthropic. Now calls for regulatory intervention? No thanks. And a couple of emojis after that. I can understand why those in and around the AI ecosystem would want to both discredit and disparage this person for saying what he did, but he is not the only one who has either posted or written about concerns about AI, especially self improving. I'm sure you saw the Paul Tudor Jones bed from the Wall Street Journal where he said that AI may become the third superpower. Quote. The threat is real. What are the chances that very soon an AI model reinventing itself thousands of times over makes one mistake that is harmful if not devastating to humanity? Now multiply that risk by 10s of thousands of users. How would you respond to all that? Speaker 3 Well, first, Scott, I would say that we should always have open debate about the risks, the reward of technology. And this discussion has been going on for a decade. There was nothing new this week. In fact, I've not talked to a single person in AI who says full steam ahead, disregard safety. It turns out we all care about kids. We all care about the future of the country. We know the massive benefits it offers, but we also want to take the extra time to make sure that we do this safely. But what I didn't like this week is these hyperbolic scare tactics which I think are hiding behind a political agenda. And we ignored all of the extraordinary steps already being taken, unlike in the age of the Internet, unlike with social media to get ahead of these downsides. So let me just share a few #1 the companies themselves are investing a massive amount of money and compute in making sure that we build sophisticated safety systems. They're deeply coordinated with the national security apparatus of the federal government to make sure that we secure our national security and other safety issues. And they're issuing transparency reports like we saw out of Anthropic yesterday. Second, the Treasury and Commerce Department this year already took the unprecedented step. Shutting down mythos because they were concerned about potential cybersecurity hacks so they hardened the systems and forced them to put it on the shelf until they re released it. They also had an EO around the model release framework, which is effectively A regulatory scrutiny that occurs before any frontier model is released. In fact, there was a lot of celebration this week about the model that cracked Navier Stokes, right? That is an Astra plus one model working inside of open AI. Ask yourself, why doesn't the public have access to this model? Because it's undergoing scrutiny by the lab and by the government. They're not just going to release these models. Mythos was completed at the end of January and just now is rolling out to the broader public. So we're taking a lot of time. And then finally, broader industry is coming together. Jamie Dimon, Michael Dell, myself, many others, dozens of CE OS coming together to make sure that we're coordinated around our critical industries and making sure that we're taking safety very seriously. So I don't think we've invested this much time and energy and safety before a new technology in my 25 years in Silicon Valley. And if you listen to the echo chamber this week, you would think that we were hurtling ahead with total disregard to safety. And it's simply not true. Speaker 1 But how would you then respond to the fact? Let's just say, Dario Amode himself back in January posting writings about the warnings of AI. Those who are leading us into the future with the models they're building are also seemingly raising the warnings that they think exist and questioning whether we're doing enough to deal with it. Sam Altman just recently said that he's telling staff that open AI is open to slowing AI development, that he's pushing for mandatory national AI safety requirements in the US, citing concerns that advanced AI systems could accelerate its own development. That says to me that he. Speaker 3 Scott, doesn't that make you feel great? Doesn't it make you feel great? Did you ever hear that out of Mark Zuckerberg about social media? Did you ever hear him saying that? I'm so concerned about what this might do to America's kids. I think it should make you feel good that America's leader, starting with Elon Musk back in 2016, said this will be the most positive thing that we can ever build for humanity, but we have to do it safely. We've been having this conversation in Silicon Valley for a decade. The conversation continues. It's an important conversation to have, but to go on national television in a highly coordinated way and sit in the living room on NBC, on ABC, on CBS, on Fox, and have a single researcher who spent six weeks at Anthropic tell the moms and dads of America that this can kill all of humanity in the next three years without any countervailing conversation is deeply irresponsible. Look at what people said about it. Jensen Huang yesterday called it deeply untrue. Andrew Feldman, the founder of Cerebrus, who spent decades studying this, called it utter horseshit. Elon himself, right, who's concerned about safety, said it was a coordinated psyop. So my only concern here is that we have a balanced conversation. This week has not been a balanced conversation. Everybody who's invested in AI, everybody who's leading these companies, the government takes AI safety very seriously. That should make everybody at home feel very comfortable about. Let me say one other thing. We act like there's no risk in the alternative. So I would ask these folks who are causing this alarm, what would they like us to do, right? What is the alternative? What are the things that we're not doing that they want to see happening? My sense is they don't have a very good understanding of all the things that are happening in government, all the things that are happening in the labs. But if the idea here is that we need to unilaterally disregard to all of our potential adversaries around the world who, by the way, are not going to slow down or stop, right? Roll the clock back 70 years. We may not have wanted to pursue the Manhattan Project, but we knew our adversaries would. Whether or not we did, this is a matter of national economic security. It's a matter of national security. We have great track records despite the hyperbolic claims. Remember all the claims around nuclear that it was going to kill all the kids, that Ralph Nader, that it would wipe out the city of Cleveland? Not a single person in this country died or was injured by nuclear energy. But we shut down 67 nuclear reactors, we unilaterally disarmed while China's building 100 fission reactors. Why did we do that? Because of alarmist activists that went uncountered. And all I'm asking here is for a balanced conversation that looks at both the risk and the rewards of AI. And I think we're moving forward safely. Speaker 1 I understand. But when you're in an environment where if you look at the polling and they suggest one after another that a growing number of Americans don't want data centers in their backyard, so to speak, don't trust the technology. Certainly they're not all fools who don't understand where all of this may be going. They see an industry that's racing ahead, they hear us talk about IPOs, they see people getting rich, they worry about this technology that's coming into their backyards and they think causing their water bills, their electricity bills to go up and God forbid, take my job. And that's why there's this growing level of and so. Speaker 3 And correct, correct. And by the way, we need to do a much better job in a very reasoned and fact based way of explaining what in fact is happening, right? The Economist is out with a story just this week that despite all the dumors who said 10% of all jobs would have gone away by now, in fact AI has created a million new jobs in America, right? We learned that all of this catastrophizing about data centers may in fact have had support from the CCP, right. So I want a little investigation. Who is behind all of this negativity? Is it coordinated, right? Where is the money coming from? I don't see anybody who's saying, Scott, like you did, full steam ahead, disregard safety, etcetera. I think it's a false narrative. I think it's a straw man argument. It's simply not true. Every single person in Silicon Valley has kids. We take this very seriously. We want to usher in a safe world of AI, but that doesn't mean that we need to stop, shut down, over regulate because of the fears, the hyperbolic fears of a few who have their own political agenda. We've seen this in every technological revolution, right? And like I said before, we've shut down really important industries, giving up massive upside to humanity before it even takes flight. Speaker 1 I want to address the role that some suggest that technology, the industry has played in getting to the point where we're having this national conversation and where this level of distrust, I think we can both agree, seems to be only on the rise. I want you to listen to what the Treasury Secretary had to say at the G20 recently, and we can react to that on the other side, here's Scott Besson. I think that the. Speaker 2 AI companies, whether it is the builders of the data centers, whether it is the labs themselves, have done a horrendous job. Horrendous job. Speaker 6 Of explaining themselves to the American people. And I think we need a big reset on this. They're going to have to take some of the blame and they are going to have to convince the American people that all the benefits will not accrue to a small group. Speaker 1 How do you respond to that? Speaker 3 I totally agree with them. Listen, it brings up a totally separate issue, Scott, which I think may be behind some of the distrust and behind some of the discontent, frankly, with AI, which is this idea that we have this ever expanding wealth gap. The benefits are going to a small group and they're stuck with the anxiety that maybe their kid won't be able to get a job. The answer to that, as you know, what I've been working on for a long period of time here, is we have to get everybody into the game of capitalism. They all have to share in the upside of AI. We haven't done a good enough job, but stay tuned. We've created 9 million capital accounts for kids across the country. As you saw, Michael Dell, 6.25 billion. I think all the AI labs will make huge contributions to this. I think we'll expand it to include all 70 million kids under the age of 18. That's an important step to make people feel like they have skin in the game, they're aligned with the upside of America. It's not the only step, but we need to take concrete actions to address these concerns. One of the concerns is an economic concern. Another concern and anxiety is about their kids and jobs. So we need to make sure that we're doing job retraining. We need to make sure that they know and understand a million new jobs have been created. There are a shortage of trades workers all around this country because we have this massive building boom going on with data centers across the country. Electricians in Texas and Wyoming are making $250,000 a year because we don't have enough to build the capabilities that will power the next wave of economic growth in this country. So I agree with Scott we need to do a lot better job, but that is a very different argument. Like I said, then going on national TV this week with a very coordinated effort to say that AI is going to kill everybody in three years. By the way, who pushed back on them? Explain how that is going to happen. Bill Gurley posted something about the five whys, walk us logically, link that together. They are lost in a scientific future, a sci-fi future, while we're facing real and present challenges today. And so I'm not saying that there aren't real risks there. There are, like with any new technology, but I think there's a lot more being done around those risks than we've done in the prior super cycles and I want people to be aware of it. Speaker 1 The threats to some aren't going to sound that hyperbolic that have been articulated this week when you read what Anthropic itself put out just yesterday, 154 pages detailing instances and efforts to misuse AI. They said they blocked possible efforts to build biological weapons that a group in Yemen used clawed to try and develop missiles. That doesn't sound like a politically motivated hyperbolic threat. That sounds like hold on, let me finish. I'll give it to you. Speaker 3 Give it to. Speaker 1 You. That sounds to me like wholly, what do we fully as a society, as humanity, understand what is possible and capable of AI and how do we deal with that, both on a governmental standpoint and an individual standpoint? Speaker 3 Well, first, I hope you know and understand that these same efforts have been going on with Google for 25 years. Don't you think that our adversaries looked up on Google how to make a bomb, how to better target rockets, how to do all these things? Of course they did. This has been going on for a long period of time, and before Google, they were using other mechanisms. So am I surprised that adversaries are doing adversarial things, trying to use these technologies? I'm not surprised at all. Does it make me feel great that the company has safety systems that identified them, that the company has the transparency systems that opens them to the public for scrutiny? Those things should give us deep comfort. But let me take on one of the things they highlighted in the report specifically, and this is Alibaba undertaking one of the largest distillation, industrial scale distillation. They weren't the only one, right, But massive distillation going on. I think if we could do one additional thing right, that the government ought to be focused on when they're looking at these frontier models. I do worry of these massive distillation efforts because I don't believe the Chinese are going to scrutinize themselves to the same safety standards that the United States is going. And I don't want to hand our adversaries capabilities that we shut down ourselves, right? This is a world that has all sorts of risks. Yes, there are risks that AIS can get out of sandboxes. Yes, there are risks that AIS can jailbreak. But there are also risks that if we allow our adversaries to develop AI that is far more capable than our AI, that our kids die on battlefields in the Middle East or around the world. And so this is about balancing those different risks, being responsible about them. And I take comfort from the fact that this company has such sophisticated systems that they identified those potential hacks, they stopped them, and then they had the confidence to share them with all of. Speaker 1 Us and you don't have any doubts going forward, for example, that Anthropic and others are going to continue to have the ability to block what they say they just did as the technology continues to evolve and get even smarter than it is today. Speaker 3 Of course, I have concern, Scott. Right. The future is a distribution of unknown probabilities, and we can never eliminate all risks. We haven't, right? Remember when we split the atom, we were told for 50 years that it was going to wipe out humanity. I grew up climbing under my grade school desk Because we're going to have a thermonuclear attack that was going to wipe out the country. OK. We live in a world of inherent risk. I do not believe that standing down on AI, unilaterally withdrawing from the world of AI I don't think that makes any sense. And when we have activists that go out with these scare tactics, that's the danger. I don't believe he understands how Washington works. Look at the calls in Washington this week in response to somebody who worked at Anthropic for six weeks, right? Look at the calls for a moratorium to shut down AI and all of this regulation, which we all know the government has a very poor track record of, right? Just because you have an FAA doesn't mean that you don't have plane crashes, right? Just because you have a nuclear Regulatory agency doesn't mean you don't have a three mile island. And so for me, I want balanced regulation. I think we have incredible regulation. I mentioned the frontier model framework that we have that's already scrutinizing the models. That's why Mythos was in fact shut down. So I just want to have a balanced approach. I didn't think the conversation this week was particularly balanced, so I want to come on here today and offer the other side. I want to give people comfort that the labs themselves take it seriously. All the hyperscalers take it seriously, Everybody building the silicon takes it seriously, everybody in government takes it seriously. The broader industry, I'm talking to people who run our airlines, the people who run our infrastructure, the people who want our financial services industry. They are all talking and coordinating in a way I haven't seen before. It can be even better. I'm working every day to help them make it even better. But mom and dad at home, my sister and brother who called me after seeing this on the nightly news and we're worried about this. I told them the same thing I told everybody else. I think it's deeply irresponsible, very hyperbolic. His goal and aim may have been to get people's attention, but he did it in a way that I think is dangerous and wasn't needed. Speaker 1 I'm glad we had the conversation. I know we'll have more like this in the future. I appreciate the time very much, Brad. Thanks so much. Speaker 3 Thanks for having me on, Scott. Speaker 1 That's Brad Gerstner of Altimeter. Coming up, we break down the moves we're seeing in the markets. Oracle, Big Story, Adobe as well. Kevin's got a new move to tell you about. We'll do it when we come back. Speaker 4 Welcome back to Halftime Report. I'm Tifa Stevens with your CNBC NEWS UPDATE. The Iranian backed Houthi rebels captured A strategic island at the southern entrance to the Red Sea, tightening their control of a vital shipping route. Yemeni government sources confirmed the development to Reuters. US ally Saudi Arabia has relied on the route since the conflict with Iran effectively closed the Strait of Hormuz. UK lawmakers rejected legislation today that would allow adults with terminal illnesses in England and Wales to end their own lives. The vote ends a nearly two year debate on legalizing the practice. It would have allowed adults with less than six months to live to apply for assisted death with the approval of an expert panel. And the House will consider a sweeping Russian sanctions bill next week that was backed by the late Senator Lindsey Graham. The measure already passed in the Senate. The bill would allow the president to impose tariffs of up to 100% on goods from the biggest customers of Russian oil and natural gas. Speaker 1 Scott, back to you. All right, Pippa, I appreciate that. Thank you. That's Pippa Stevens. Take a look at Oracle. Shares are now red. So stock was green, Jimmy, wasn't it? Yeah, a little. Speaker 2 Bit. Speaker 1 So what's the story following the earnings? What was your big take away? Why is the turn? Speaker 2 Yeah, Let me answer the second question last. The big takeaways are #1 they got the top line revenue growth that we were looking for, 30%, three, 0%. That's a lot #2 free cash flow a little better than expected, actually a lot better than expected. The reason I said a little is because it's still negative, but it was expected -10 billion, It was -5 billion. I mean, yeah, it's negative free cash flow because they're investing in the business. I would also point out that they did not announce any more CapEx plans than what are already in place, no new fundraising plans. And if I look at the credit default swaps on their five year paper, they're actually starting to come in and it's actually starting to make a difference. A few weeks ago they were up at 215 basis points, now they're at 181 basis points. So there's a lot of things to like here. Now to the second question, why is the stock down? It's a good question. I think the answer is simply that interest rates have gone up and today they've gone up, yesterday they've gone up. And people are looking at a company that has 80 odd billion going probably over the next two years to 150 billion in debt and saying, what interest expense is going to go up. To me, this is a buying opportunity to me, this is a name you can add new money to right now, unless you think the AI thing is all a bubble and that it's all going to come crashing down. I don't. Speaker 1 I mean, there is concerns about the spend, yes. The free cash flow negative, not maybe as bad as feared. That's going to be, to me, feels like an overhang around this story for the foreseeable future, no? Speaker 2 I think, well, number one, it has been an overhang that's unquestionable. The question is how long will that overhang outweigh the positives of what I mentioned the revenue growth, the idea that by the way their continuing performance obligations went up by another $30 billion. Now I get Scott, this is also part of the negative narrative. I get that people are saying, hey, too much of that is open AI. Well, as they continue to add to this backlog with non open AI business, this is coming up on $700 billion of backlog and that's a lot. They don't need all of that to come through, by the way, for this to be a massively undervalued stock. Speaker 4 Yeah, I don't think you need AI to come crashing down to have a problem. And it might be the Oracle shares have already adjusted for it. But I think the challenge right now is that you could have AI contract at the margin. And there's a lot of fluff and a lot of froth and a lot of stocks out there. And I think of like the core weaves more than I think of the oracles. But I think there's risk where even if at the margin. Speaker 2 Things contract. Listen, I think that's a valid point. But I would say to you, and you've said this, but this is not a frothy stock, not at this valuation, not at the price. Speaker 4 Decline, I think not, but given how big their debt load is and how they frankly don't have experience managing a debt load, that's different. Whereas if you look at the energy companies and the real estate companies, they've lived through huge debt loads, super long dated, laddered out forever. They know how to deal with it. Speaker 2 Know how you solve it, by the way, if what you're suggesting on the margins AI comes in, you don't spend as much and that's just a decision not to. Speaker 4 Right. But I'll be curious once we see the S ones from Open AI and Anthropic, I'll be curious to see how the market reacts to that. And what if there's a little bit of pullback? I think the trickle from a marginal pullback would be pretty painful. Speaker 1 Let's talk Palantir for a minute. Target goes to 250 from 200. DA Davidson reiterates it a buy. You have that name. Speaker 6 I mean, that's a huge price increase, Scott. This stock's trading around one 66167. If you look at the multiple, it's stretched. The valuation is certainly demanding. But having said all that, I think they are the place to go, especially for AI sovereignty, A sovereign sovereignty and deployment. So this is a government contract, a consumer contract. This is a platform that I think everyone is gravitating towards. And I think more and more people, portfolio managers will be adding this to the portfolio. Speaker 1 OK, we'll take a break. Kevin's going to get ready and tell you about his new move. It's a big name. We'll do it next. All right, welcome back. Let's do this move that Kevin Simpson has made. You bought United Health. Why now? Why that? Speaker 6 This is a stock, Scott, that we've owned off and on for the past 15 years. Most recently, we were stopped out of it early in 2025. We exited the position around 355, 360 average cost. Ultimately, it got down to about 2:35 and finally the stock has come back to the point where we feel like the earnings are closer to a through than a peep. This last quarterly report 112 billions adjusted earnings per share was $6.38. But more importantly, we saw analysts guide up and the guide themselves from the management is close to $20 per share. So this is a name we love. We sold it for relative underperformance. We redeployed capital here later. A year later we're coming back into the name. Speaker 1 What do you think? Speaker 5 Yeah, managed care, I mean, UNH and others have gotten their medical loss ratios under control. There's potentially some earnings improvement. And we're not even talking about what could happen after the midterms. And so I think you can look at this just merely as a current earnings story. Speaker 1 By the way, Healthcare is having its worst week since March. Space been doing it's pretty good. Speaker 4 Yeah. I mean, it's another one where I think it's OK to take a break. It's had a pretty good year, I think. I think Healthcare is one of those industries that's only helped by AI. There's no version of AI that's going to make research harder and it'll make it easier to make it more efficient. New drugs will come. So I think maybe have an opportunity here taking a pause, get in now if you didn't get in before. Speaker 1 All right, we'll take a break. We'll do finals coming up close the week at 3:00 today on closing BELL. JP Morgan's Dubrov Kolekos is back. Look forward to that. Stephanie Link, Kevin Gordon, Doug Clinton and Richard Fisher, the former Dallas Fed president. Is it a foregone conclusion what's going to happen next week? He'll tell us what he thinks. Final trades. Kevin Simpson. Speaker 6 I would use the recent pullback in Copper to initiate a position in Freeport Mcmoran. Speaker 1 Thank you very much, Shannon Sakoshia. Speaker 5 We haven't talked about it today, but even though energy's off the boil a little bit today, if you look at refiners within the energy complex, still some good opportunities there. Speaker 1 Farmer, Jim. Speaker 2 Yeah, it feels like the correction in Delta Airlines is over. Airports are packed. We see in the CPAI that airline tickets are up. Seems like a good time to add to it. Speaker 1 Stock up 2% on that and good old Kimberly-Clark. Speaker 4 Kimberly-Clark drifted down by about 10% in last month. Nothing company specific. So you're back up to over a 5% dividend yield and you have 0 threat from AI Ah. Speaker 1 OK, AI toilet paper. All right, I'll see you in the closing bell.