Closing Bell - Closing Bell Overtime: Markets Face a New September Test 9/1/26

Episode Date: September 1, 2026

Rising global yields put pressure on markets as investors head into September. BlackRock’s Kristy Akullian breaks down the market setup and what higher rates could mean for stocks. Evercore’s Amit Daryanani reacts to Dell earnings. Barclays analyst Saket Kalia digs into Palo Alto Networks’ results and what they signal for cybersecurity spending. Our Leslie Picker examines whether the data center boom is beginning to hit financing limits before Morgan Stanley’s Ariana Salvatore discusses the growing public pushback and what it could mean for the future of the industry. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The bells bringing it end to the trading day at the NYC A10 networks ringing the bell and at the NASDAQ, Legents, doing the honors. Welcome to closing bell overtime live from the Studio B at the NASDAQ market site. I'm Mike Santoli. Melissa Lee is off today. Stocks solidly lower today. The Dow losing 400 points. The S&P 500 down about three quarters of 1%. The NASDAQ composite and NASDAQ 100, both down more than 1%.

Oil and bonds leading the dance today. Oil getting back to $90 a barrel on new strikes on Iran and bond yields higher as well, the 10-year, getting to 4.79 at some point touched 4.8 percent. Global yields rising as well. More on all of that coming up. So what worked today, energy was the top sector as oil jumped, and the traditional defensive groups, staples, and utilities, they also gained. Among the worst performers in tech today were software and cybernames, Crowdstrike and Oracle, and you can see Palo Alto and Dell among the bigger decliners down more than 5%. Both of those companies are expected to report results momentarily. We'll have those numbers for you as soon as they cross.

We begin, though, with those big moves in the bond market. Rick Santelli live in Chicago with more. Hello, Rick. Yes, what a wild day. And no matter where you look, the advanced economies of the world are all in a very similar straight. Now, if you look at our 10-year, this chart goes back. to October of 23, because we usurped that 479, that of course was in January 25. We've been comping to.

We're a bit above that, not much, but we're a bit above that for what will be a new cycle, high yield close. But honestly, it is all about oil today. And it's big move. As a matter of fact, we are now in the October futures contract very near the highs that were established in what? May on round one of the Gulf War, getting. very close. There's tens and oil. You could see how they are dancing together. Mike, as you

pointed out, but it isn't only the U.S. As a matter of fact, the percentages on the U.S. are small compared to, let's add the U.K., the EU, and the French. This is all from the 2nd of March, which is the first business day after the war began on February 28th. It's pretty hard to argue with that. Now, we could all talk about debt and deficits. We could talk about all the variables that are part of the brigade that is pushing up interest rates. But truly, looking at that chart and seeing how all the major sovereign debts and those economies are moving the same, it is what's going on with energy, supply shocks, confusion with long-lasting inflation, how it's going to end up. Nobody knows. But I can tell you one thing, Mike, there's a whole

lot more concern lately on the war than there ever was before the memorandum of understanding. chapter of the Middle East. Back to you. Yeah, sure. It seems markets are at least bracing for the possibility of just this kind of open-ended situation does not quickly get fixed and obviously get to those oil prices coming down. Rick, at the same time, whether it's the right response or not, it seems if central banks are going to be hiking, not just here. I mean, at least we think here, the market thinks there's going to be some hikes here into this inflationary move in oil. I guess The question is how longer term yields respond to that because yields have been going up on the longer run, even as the hike probabilities have climbed. So even if we get the curve flattening, maybe it doesn't mean that dramatic a flattening.

Yeah, no, this is going to be a super interesting meaning in September. Politics aside, midterms aside, I honestly think that if I was in the seat, I wouldn't raise rates. However, if the probabilities are significantly above 50%, it's going to put Mr. Washington Committee in a real bind if they don't answer the request of the marketplace. Yeah, for sure. Obviously, you got some pretty significant numbers coming between now and then. We'll see if that changes the story. Rick, thank you. Here's the market set up as we start September. Oil, as we said, rising back to $90 a barrel on WTI, the 10-year yield at 20-month highs, but the S&P 500 still only about 2, 2.2% from its all-time high. So are the long-term trends around AI-driven growth

still intact or a rising oil prices and bond yields a threat to the bullish trend. With me now to discuss it all is Christy Akulian. She's BlackRock head of I-share's investment strategy for the Americas. Christy, it's good to see you. It's interesting because as much as we can point to the pressure coming from higher interest rates, the possibility of Fed rate hikes, what's happening with oil, there's also some questioning evident in the market on that AI theme. You know, semiconductors, they've given back two-thirds of their recent bounce from from the summertime lows. AI baskets such as the ones in your funds have also, you know, come down about 20%. So how do we evaluate that big driver of the bull market?

Yeah, absolutely. And thanks for having me. It's great to be here today. You know, I think I'll just start by kind of reinforcing our belief in the AI theme. I think that what we saw from Q2 earnings was really important in terms of seeing that some of that, you know, enormous amounts of CAPEX that we have seen put into the AI trade, are actually translating to revenues. I think it's also, you know, a good sign that we saw, you know, that broadening out as well. You know, we don't think that the AI story is necessarily one

that's becoming more zero sum. It's becoming broader. So I think that what we saw from Q2 earnings gave us a huge amount of confidence that this is a longer lasting trend. And then it really wasn't rewarded to your point. You know, we haven't seen prices rise as much as fundamentals. So even though it may feel like an uncomfortable time to allocate, we're actually seeing valuations relatively low and even a bit lower today.

So I think that it's important and we still think that that is the number one source of growth, both in your portfolio and in the economy. But I think what we learn from days like today is also how important diversification is. And I think diversification comes both within your equity sleeve as well as kind of at the whole portfolio level, as we're certainly seeing stocks and bonds move together today. For sure. And I definitely want to get to that notion of diversification. Christy, hang on just a minute.

We want to get some big earnings. Dell numbers are out. McKenzie Segalo's has them for us. So, Mike, we got Dell beating expectations across the board, sending those shares two and a half percent higher in after hours trading. Adjusted EPS came in at $7.4. That is well ahead of estimates for $4.92. Revenue was $46.97 billion, topping expectations of $44.92 billion.

AI optimized server revenue that came in ahead of M.E. expectations at $16.4 billion, up 27% year-over-year, even against what was a very tough comp after last year's blowout growth. And then Dell is raising its full-year AI server revenue target yet again, now to $74 billion up from $60 billion. The strength also showed up across the broader infrastructure business with ISG revenue. That is the division of Dell that sells enterprise hardware coming in ahead of estimates, while growth and operating margins were both well above expectations. And then looking ahead, Dell is delivering a sizable, both beat and raise for the full year, backed by a strong Q3 forecast. Dell now sees $192 billion

in revenue up from $167 billion previously, and $2550, an adjusted EPS versus the street at just shy of $19. A conference call kicking off in about 25 minutes from now, bringing headlines as we get them. And for now, shares up close to 6 percent, Mike. Yeah, absolutely, Max. Those are some pretty big guidance raises on revenue and earnings for this year. I appreciate that. Palo Alto Network's earnings are also out. Brandon Gomez has them for us. Hey there, Mike.

Yeah, looks like shares are popping about 4%. Now, a beat on the top and bottom line for the quarter. Adjusted EPS coming in at $1.2 versus the 98 cents expected revenue of $3.14 billion ahead of the 3.35. Now, next gen security, annual recurring revenue was a metric the street was waiting for, up 63% year over year to $9.1 billion ahead of the 8%. 1.9.1 expected. Outlook also coming in better than expected for the current quarter and fiscal year 27. EPS for Q1 expected between 96 and 98 cents on revenue of around 3.3 billion fiscal year 27 revenue expected between 14.1 and 14.2 billion. That's also ahead of expectations.

One more bit of news in here too, Mike, the company announcing the acquisition of console. That's an AI-native platform that enables agentic workflows across enterprise operations. Now Palo Alto is saying console will expand the role of its cortex platform across the broader enterprise agentic transformation. Shares you can see now up about 4.5%, Mike. Yeah, not quite actually regaining what was lost in the regular session for Palo Alto. We'll see how it goes from here once the call starts. Brandon, thank you. Don't miss Jim Kramer's exclusive interview with Palo Alto's CEO.

That's coming up at 6 p.m. Eastern on Mad Money. Christy Akulian still with us, Christy. Thanks for hanging on there. You were mentioning that, you know, on a day like today, stocks and bonds going the same direction, kind of accentuates the need to find ways to diversify a portfolio. What's the solution? Yeah, I think there's two approaches that investors should take right now. One is diversifying within your equity sleeve, you know, as much as we see strong earnings growth out of AI.

There's other parts of the market to like right now as well. I think, you know, we've focused a little bit on dividends, so something like HDV, which is our I share's high dividend fund. You know, we've actually seen that be pretty negatively correlated to something like the SOX, the SACs, the Semiconductors index. And I think it makes sense, you know, if you think about, you know, just being able to prioritize some of those near-term cash flows can be a really important counterbalance to some of the longer-term expectations that are embedded in that AI trade. So the more your portfolio and the more some of the indices look a little bit more concentrated in AI, the more we see an opportunity to offset some of that with different drivers.

different sources of risk and return. So, you know, we certainly like dividends for that. I think that, you know, today is another day where as yields move higher, we lean higher quality as well in the equity market. So something like Q-U-A-L, which is our high-quality factor fund, that can filter for, you know, strong balance sheets for low variability of earnings. It's set up to perform better when interest rates are higher. You know, I think the other side of it is portfolio diversification. We certainly see the case for ALTS again, kind of on a day like today where we're seeing stocks and bombs both sell off simultaneously, something like AIALT there. It's hedge fund style strategies in an ETF wrapper. The ability to go both long and short in an environment like this where AI is

really creating winners and losers, it lets you capture it and really benefit from some of the dispersion in the market rather than just the direction. So again, really unique, really different drivers of risk and return. They can provide a little more. diversification in your portfolio. And just quickly, would those alternative-type strategies take the place of part of a fixed-income allocation? Yeah. I mean, we certainly see, you know, room for fixed income.

We see, you know, higher opportunity and some of higher yields, but we're reliant less upon it for the ballast that maybe it used to provide in the past. So, so, yes, I think that that's fair to say that it can take the place of some of fixed income. Still love fixed income for the income properties, but I think leaning into some of those alts within a portfolio makes sense for diversification, particularly. More income available from fixed income every day, it seems. All right. Christy, thanks so much. Great to have you. Christy Okulian. Well, let's get back to those earnings from Dell. A big beat on earnings and significant increases to guidance as well. The stock moving higher in after I was trading up about

8.7 percent of Khorai. Senior managing director, Amit Daryanani. Here to react. Obviously, pretty clear beat across the board. What Moe stands out to you? Yeah, I mean, listen, this is the second or third quarter in a row where Dell's almost putting in the shock and on numbers into the power of AI's deep. I think, listen, there are a couple of things that really stand out here. The absolute numbers going up, $18.00 EP is under $2550, very impressive. But I think the part that really should stand out to folks is the diversity of growth

over here. While AI is the story and AI revenues are up 100% in the quarter, you actually starting to see the traditional business servers and for example, up a 122% and then storage, I would call out, accelerated pretty dramatically to up 26% versus up eight last quarter. So you're suddenly to see diversity of growth. It's not just AI, the traditional neoclout stuff, but actually starting to become more and more enterprise driven, which carries a lot better margin profile, a lot better precastle profile for Dell as you go forward. And what seems to be behind that sort of non-AI, more traditional demand at this point?

Is it, you know, people trying to get ahead of price increases or is there just a general spend cycle? You know, I'm sure there's an element, a small element, I would argue that's of price increases and you want to get ahead of it. I think a bigger narrative that's taking hold that you've seen this at Dell, at Cisco, at PURS and a bunch of companies is, I think enterprises are actively looking at their token costs and saying, unless I want to go bankrupt, I really can't keep spending this kind of money on-pure tokens. And so I have to repeat, create workloads back to on-prem and build out my compute, my network, my storage infrastructure on-premise because it's way cheaper to do it that way than running everything on a front of your model. I think you're seeing the start of that. And really what I think this means is you're seeing the entire hardware stack get decommodized

over time. So, I mean, in that sense, I suppose that revenue is also adjacent to AI, or at least the general kind of adoption of AI on some level at the... at the enterprise tier. What are you most going to want to drill down on when it comes to the call here? I know there's been some questions about, you know, customer concentration and sort of exactly which buyers are behind a lot of this demand. And I guess the financing as part of that.

Yeah, absolutely. I think your point is fair, which is it's all AI driven. Maybe the nuance should be it's not just AI neocloud driven. It's actually driven by AI for enterprises. And so to your point, customers are not just close. overview in SpaceX is actually the traditional Fortune 100, Fortune 500 companies now. I think what people will care about on this call is these numbers are phenomenal. What is the durability of this, right?

Is this a cyclical peak number or is this the start of a new era where you can sustain this kind of growth? Let's see durability of growth, supply chain component availability are kind of the thing that we would be focused on in this call. Got you. And just to get you on Apple, of course, we've been talking about the CEO transition. We have the product rollout coming next week. and the stock behaving as, you know, this complete counterweight to a lot of the highly levered

AI trades. Is that kind of juiced its valuation? How are you viewing it set up here? Yeah. I think on the near term, it is the way you framed it. It's almost a anti-semitter, anti-AI stock, right? So when semis and AI sell off applicants and workers, it is the de facto cash position, I think, for a lot of investors. It's as good as cash right now. I think eventually what will matter is how does product innovation look like for Apple? And I think the big focus for John as the incoming CEO will be, how do you kind of use AI into an Apple ecosystem advantage over time, not just to make new products that are differentiated, but also how do you scale AI into services to enable higher margin services growth? I think that really will be the

focus, which is how do you translate AI into a personal, usable consumer product that Apple can monetize over time. Yeah. Hopefully we get some clues pretty soon on all of that. Thanks so much. Appreciate you coming on. Thank you. Up next, more on those numbers from Palo Alto networks that we just saw. The stock hit hard in the regular session right now getting back some of those losses in after I was trading. And we want to show you Zach's investment management ringing the closing bell at Cebo in Chicago, ending the regular trading day or options. You're watching closing bell overtime, live from the NASDAQ market.

We have a news alert now from OpenAI. Kate Rooney has the story from Stanford. Francisco. Kate. Hey, Mike, open AI, just announcing that one of its AI models, Astra has crossed what they called a new threshold in cybersecurity. It comes as this is an increasingly important topic in corporate America. When we talk about AI, company just saying that Astra is the first model.

It's designated as having, quote, critical cyber capabilities. It means essentially with the right tools and access, it can find unknown security flaws that were previously unknown without any sort of human intervention. It's basically a new level of cyber capability. They say in testing, it scored a 100% on certain benchmarks. Also discovered two previously unknown zero-day vulnerabilities. And these are some of the vulnerabilities that are out there that were undiscovered before this. As a result, they say they are going to be putting some new guardrails around this model.

They have also delayed part of this development and the release. They say while they strengthen some of the protections behind the scenes. They also say that they beefed up protections in the wake of the hugging faces. incident where one of the AI models from OpenAI hacked into another startup that got a lot of buzz. They have also paused some of the frontier training around this. They say it's going to be available soon this Asthma Model, but initially limiting this to a small group of testers. And it does also come as a lot of these companies need to balance safety, rolling some of these back and gating some of these models while also competing and driving revenue comes as also OpenAI

has filed confidentially to go public, so has rival Anthropic. But it's an issue that a lot of these AI companies are dealing with Mike. Yeah, for sure. I have to keep it on a leash, I guess, for the time being. Kate, thank you. Palo Alto Networks reporting strong numbers across the board just moments ago, including its Q1 and full year guidance. Management noting in its release, our profitable growth framework continues to scale effectively, reinforcing our confidence in achieving 40% adjusted free cash flow margin in fiscal year 28. Joining me now to dig deeper into the numbers is Sackett, Kalia. He is Barclay. He is Barclay. Equity Research Analyst, he has an overweight call on the stock at $370 for Palo Alto

networks. So Sacka, tell us exactly what's most relevant here. I was mentioning the stock did get hit hard in the regular session. It's coming back a little bit now, but also, I guess, has been more in favor relative to some other software along the way. It has. Thanks for having me. So security's absolutely been in favor over the last couple months here, especially since early April when Anthropics Mythos model was made public and the project last thing was announced. I think the story that that created for names like Palo and Crowdstrike and others in the security space has been security will be a net beneficiary of AI, right? AI only expands the attack surface. And I think we've seen that in numbers from multiple security

vendors, but particularly here for Palo, I mean, not, you know, I mean, just a little over 900 million in that new AAR. I mean, that is well ahead of our, about our 800 million estimate. And the guide for next year, a little over 11.1 billion, almost 11.1 billion, well ahead of some upside expectations as well. So I think that that thesis of AI becoming a beneficiary, right, for cybersecurity, is showing through in the numbers. Yeah, I mean, we obviously just got that report that Open AI has this model that seems

to be good at identifying security vulnerabilities. How does that, I guess, feed into corporate demand for, you know, cybersecurity services like those from Palo Alto Network? Do they want to wait and see if you have the antidote? Or is it just, you know, lead them to say, let's just get reinforced across the board? I think it's more the latter. And the reason for that is not only can AI models find vulnerabilities faster, but they can help hackers take advantage of them faster as well. So previously, hackers would operate at human speed. Now they're going to be operating at machine speed. And so, you know, I ran into a C-SO recently that said, hey, I moved my monthly meeting with my CEO from once a month to now three times a week, right? And I think that just shows the urgency

that mythos and other models are creating around just the broader attack surface. We heard the company kind of reiterate its free cash flow margin goal going out to fiscal 28. Certainly not an inexpensive stock, but where do you think it can get to based on the current valuation? Yeah, listen, I mean, security has had a really nice run. The multiples are really at multi-year highs. You know, I think we're seeing upside to numbers, and that's certainly going to help. But, you know, as long as we've got this AI beneficiary narrative around these names, I still think they can work.

I mean, listen, there is, again, there isn't a lot more room left for the multiple. And we're talking about, you know, a 45 to 50 times free cash a multiple here on Palo. But I think that that path to 40 percent free cash from margin is a really important part of the story. And knowing this team, you know, let's see if they can reach that a little bit earlier. But feel really good about just the starting point that Palo has here for the year. Wouldn't be surprised to see these numbers marched up, just given that backtrack that we have for, that AI is created with the attack surface. Yeah, for sure. All right. We'll hear what the company has to say.

I know the call's going to start soon. Sackett, Kalia, thanks so much. Appreciate it. Thanks for having me. All right, oil hired today and weighing on stocks following the president's latest comments on Iran. We'll have the latest from the White House next on overtime. Energy stocks, today's top performing group is oil rallies back to $90 a barrel. The XLE sector spider hitting an all-time high and also closing at a new record. Among the energy names hitting all-time highs today, Conoco Phillips,

Valero, Marathon Petroleum, and Phillips 66. While those refinery stocks are soaring to records, President Trump meeting with refiners today to discuss high gas prices. He's also had some strong words for Iran, helping to contribute to oil's gains. Let's bring in Amos now for more. Hi, Hyman. Yeah, Mike, we're getting reports now from Iran's Fars News Agency that the Iranians have begun retaliatory strikes, responding to U.S. strikes that began. at about noon eastern this afternoon. The Iranians said that their missiles and drones have been launched toward what they call enemy positions, presumably U.S. and Israeli positions. That may be why we are seeing this security alert from the U.S. State Department, for Americans in the region to be

aware of potential security incidents over the coming hours. And it all comes after we saw the president saying on social media earlier today that he had authorized these strikes. He said the strikes are large and powerful and in retaliation for Iranians, failed attempt at adding sea mines to the strait, which currently has no mines. He's also said that the Iranians shot down eight missiles, all of which were successfully knocked down by the United States at a military base in Jordan. He went on to threaten if the failed nation of Iran retaliates for this very justified attack. They will be hit again at a much harder and higher level, but it will not be the biggest attack of them. All that is waiting in the wings.

And when it is over, there will be very little left of the Islamic Republic of Iran. So we also got a confirmation from CENTCOM of the U.S. strikes on Iranian targets that began, as I say, about four hours ago, Mike. So the president said if the Iranians retaliate, he will retaliate bigger. The Iranians have now done that. We'll see what the United States decides to do. Back will be. For sure.

Now, Amin, this comes, I guess last week, the emphasis was about, you know, kind of extreme. economic sanctions that were meant to, I guess, force the issue and bring around back to the table and talk about some kind of resolution. Now it feels like today's rhetoric from the president gets us back to where we were six months ago in terms of how he was, you know, threatening. Yeah, I mean, you're sort of in this, you know, try one thing, try the other thing mode where, you know, if economic sanctions don't work, try the military option. If the military option doesn't work, try the economic sanctions option, both of them putting pressure on the Iranian regime to be sure. But what we haven't seen is any real capitulation by Tehran to the U.S.

pressure here over the past six months. The question is, you know, what new and different can the United States do here that will force that kind of capitulation from the Iranians? The challenge is just geography and strategy, right? I mean, the Iranians have that overwatch position over the Strait of War. Moose. It's very difficult to eradicate all the missile sites and all they need to do, as we saw last night, is hit a tanker from time to time in order to keep insurance rates very high and the economics of tanker transit through the Strait of Hormuz upside down. That does what they want to do, which is force a strategic problem on the United States in the West. Yeah, and I guess it's hard to

say who has time on their side, given the realities there. Time and the ability to tolerate pain, exactly. Yeah, for sure. Always a big factor. Well, time for a CNBC News update with Contessa Brewer, Contessa. Just more to add on that story here, Mike. At a security summit in Kyrgyzstan today, Russian President Vladimir Putin pledged ongoing support to Iran. He said the Kremlin is supplying Tehran with essential goods. Iran's president had met with Putin and praised the cooperation with Moscow, saying that together the two nations are standing up to the United States. The man accused of killing conservative activist Charlie Kirk back in a year, Utah courtroom today for closing arguments in his preliminary hearing. The judge will decide whether

Tyler Robinson will then stand trial. Prosecutors argue they presented overwhelming evidence that Robinson fired the fatal shot at the Utah Valley University last September. Robinson has entered, pardon me, he has not entered a plea. The aggravated murder charge carries a possible death sentence. And tropical storm Edward made landfall this afternoon along the Texas, Louisiana coast. It brought a lot of rain. Storm surged up to five feet. According to forecasters, as much as nine inches of rain actually could fall in some areas with Houston expected to see some heavy flooding. That storm could reach as far as Dallas before it starts dissipating by Thursday. That's the news now, Michael. Send it back to you. All right, Katessa, thank you. Bond yields have been

surging over the last week, sending the 10-year yield to its highest level since January of 2025. Up next, we'll discuss the outlook for rates and whether bonds may be. be starting to look attractive here. Plus, why one early data center investor worries the industry may be entering a top-esque moment. Closing Bell Overtime. We'll be right back. Welcome back to closing bell overtime live from the NASDAQ market site. Stocks closing the day in the red, the Dow losing 419 points, the S&P 500 down 7 tenths of a percent, the NASDAQ composite and the NASDAQ 100 both lost more than 1%. Oil's 6% gain a big drag on stocks, as was the ensuing move in bond. The 10-year yield climbing higher into right around 4.8 percent levels we have not seen since January of 2025.

A big gain for Dell after hours. A huge beat on earning $7.4 a share. That was more than $2 ahead of expectations. Guidance also very strong. Well, bond yields, as we say, continuing their march higher as renewed Middle East tensions drive oil prices higher, revive concerns around inflation. The 10-year yield hit its highest level since January of 2025. there. Global bond yields also moving higher. Japan's 10-year bond yield rising more than six basis

points, yields on the UK's 10-year guilt up more than nine basis points. Joining us now is Wellington Management, Fixed Income Portfolio Manager, Bridge Karana. Bridge is good to see. Of course, didn't even mention, you know, all of the corporate bond issuance, the sort of heavy demand for new debt. It seems to be another pressure point. I guess I'll ask you for that. Like, what are the forces principally driving this move? And I guess we'll, we'll, they continue in this direction? Yeah, I think you hit the nail in the head. So, I mean, you have close to $2.3 trillion of IG corporate bonds coming this year, largely related to the hyperscalers. And so this is really a global phenomenon where there's a decision to demand for debt

that's pushing all yields higher, whether or not it's Treasury, mortgages, or corporate bonds. And so I think that's the most important driver of the fact that yields are moving higher. To me, the second is certainly just the continued pressure on oil and the fact that central banks are probably going to have to keep yields and rates higher for longer, and that's just putting pressure on the front end of yield curves as well. Yeah, obviously we are digesting Kevin Warsh's speech, and you mentioned other central banks are pointed in a similar direction. What is your, I guess, working assumption about what's going to happen with the Fed next month or even just for the remainder of this year?

And, you know, does the market have it right there? Yeah, so if you look what's priced in for the next year, it's about 60 basis points of I mean, that seems pretty reasonable to me. My sense from Jackson Hole was that certainly Kevin Warsh is moving towards hikes, but somewhat he is very optimistic about the disinflation that can come from AI. And so to me, these are almost like insurance hikes, which typically mean about 75 basis points of hikes. So we're pretty much priced in. I think for September, right now the market's pricing in about 70% chance that they raise rates by 25 basis points. At this point, I almost think they have to because if they don't, then they could lose control.

of the long end of the yield curve. And so I think at this point, the market's forcing his hand to raise rates, even if he may not want to. Right. Yeah, I mean, I suppose you could get some super-dubbish data, maybe changes the probabilities a little bit in there. And those, you know, the idea of, let's say, 70 by five basis points of insurance hikes would essentially just be undoing the 75 basis points of insurance cuts we got last year, right?

Not necessarily, you know, kind of a huge chase against, inflation. From a bond investor standpoint, then, what do you prefer to do? You got a lot of paper to choose from. What most attracts you? Yeah, I mean, I think there's what's been interesting to me over the last few years, is that, or the last few months, rather, is that the 30-year yield, as much as it gets a lot of press, has actually been very stable. We've been in this kind of five to five-and-a-quarter percent range. And what has really happened is, is the front end of the yield curve has really reprised substantially. And so what you're seeing is, is tips, inflation securities, you know, five-year real yields trading it currently around 2.2% real yields.

So you get that and then you get inflation protection as well. And so to us, that's a much better risk reward right now than long bonds. And so we've been selling long duration, securities, moving more into five-year real yields and other securities like that. Also interested that you don't particularly see much value in investment-grade corporates. I mean, spreads are obviously tight, but a lot of people think it's worth it to get the yield pickup. Yeah, as I mentioned, I mean, you're looking at record issuance. You know, in IG and high yield, and you're looking at spreads that are closest, you know, tightest levels. And so there are good opportunities in high-quality fixed income.

I would point to agency mortgages. You know, currently they yield about 5.75 percent. And you also, if spreads move too much, obviously housing is a big priority of this administration. And they have said that Fannie and Freddie could use their balance sheets. So to us, if you're looking for high-quality fixed income with really good ratings and shorter duration, you know, I think more agency mortgages are much better than corporates right here. All right. Good thought, Bridge. I really appreciate you coming on, talking to this through it. Bridge, Corana from Wellington. At a programming note, don't miss an exclusive interview with New York Fed President John Williams.

That's tomorrow at 8.15 a.m. on Squawk Box. Data Center backlash could play a role in this year's midterm elections. Up next, we'll look at how those results in November could impact the entire AI industry in the U.S. Closing Bill overtime. We'll be right back. Let's get another check of some earnings movers this hour. a big gain for Dell after soundly beating estimates and raising guidance. Stock up 9%. And MongoDB getting crushed after hour despite strong numbers beating on the top and bottom lines.

Third quarter numbers seen ahead of expectations as well. Nothing too obvious in the report that would be causing this big drop, it seems, but the stock has gained nearly 30% in the past month. Shares backing off by 13% right now. GitLab reporting earnings of 24 cents a share. The estimate was 18 cents. Revenue also better than expected. And third quarter guidance seen narrowly ahead of the current consensus.

That stock also up 30% in a month and looking to add to those gains tomorrow. Well, tech giants are pouring billions into developing AI data centers, even as public backlash against their construction grows. And now one early data center investor is raising a red flag. Leslie Picker has the details. Let's. Hey, Mike. Yeah, Mark Gansy, who has been investing in data centers decades before they were in vogue,

C signs that market may be climbing too high too fast. I think we're definitely in a top-y-esque moment. I think it feels, in a way, very similar to the late 90s in the sense that when you start seeing capital structures get stretched and you see loan-to-value ratios moving from, we're typically 45 percent levered across all our businesses. But when I begin to hear people are levering businesses to 70-80 percent loan to value, I get altitude sickness is what I call it. Gansy is the CEO of Digital Bridge, a 30-year-old firm with $121 billion in asset center management

focused specifically on digital infrastructure. In December, Digital Bridge agreed to be sold to SoftBank Group for $4 billion as part of the Japanese firm's AI stack. In our interview, Gansy said he's not concerned about the data center market backed by investment-grade tenants with long-term contracts. He calls those, quote, islands of safety. His fear lies with newer operators that don't have credit ratings at all and are seeking to finance their buildouts using more aggressive private structures. I asked him what he thought about NVIDIA's $500 billion plan to bring together a group of six alternative asset managers to help provide credit to those who couldn't otherwise afford the chips.

And Gansi said that the capital that's backing that Nvidia endeavor is, quote, priced to perfection. For more from Gansy and other alternative asset managers, please subscribe. to our newsletter inside alt using that QR code that you see on your screen right there, Mike. All right, Leslie, great stuff. Thank you. Well, while the financing behind the buildout is one worry, potentially lurking in the shadows. Another big risk is out in the open. Public opposition is the backlash. Just talk or will it result in actually slowing down the AI buildout? Joining me now is Ariana Salvatore. She is Morgan Stanley's head of U.S. public policy research, and it's out with a new note today on this topic. Good to see.

Thanks for having. Thanks for coming in. So it's remarkable how quickly the public opposition to data centers has become powerful, bipartisan, and politicians are listening. So in practical terms, what might be the impact on the pace of the buildout? Absolutely. Just to maybe back up and level set where we're seeing the opposition, it's coming from a number of different sources. So on the one hand, you're seeing consumers push back against their utility bills going up in price. That's one. The second is on environmental concerns. Water usage is a big complaint. among local communities. And the third is just quality of life. No one likes to see large-scale construction in their neighborhoods. So that's kind of the three main themes that we see driving the opposition. Now, what does that mean for the build-out? We think it's likely that the Cappex story is still intact. We're still very constructive. We have over a trillion dollars in CAP-X from the hyperscalers next year. We just think it's more likely to be conditional. So that means in certain regions, maybe it takes longer. There's timing delays, geographical dispersion.

The overall story, we think, is pretty robust. Yeah. So maybe the question is on the Dura of it or maybe how much it'll cost to give a unit of computing capacity, build a new data center. I noted today, Renaissance macro plotted the sort of AI leverage stocks, seeming to move somewhat in concert with the polymarket probabilities of the Republicans holding the Senate. So this idea that even though politicians of both parties are saying, we hear you, we want to maybe slow things down, there's a market perception that Democrats might be more hostile to actually the data center build process. Look, what you're seeing is across the board,

the politics of this are very messy. We said scrambled before. You are seeing these sorts of policy restrictions in both Democrat-held states and also Republican-held states. We think that's probably the likely story from here, especially into the midterm elections. You saw governors, even Abbott and Shapiro

are two notable examples where there's been a pivot, right? And that, to your point, is really, in our view, a hat tip to the magnitude of this opposition and just how real it is. Now, when we zoom out and look at the midterm elections, we think this matters much more so on a local and state level than federal. So you have this opposition debate in Senate races in Ohio, for example. The much more relevant seats we think are the governorships.

And which governorships in particular are in play that would matter? A few just quick examples would be Ohio, right? Texas, Pennsylvania. New York, less relevant just given the total capacity in the state. But those are really the few that I would highlight. On a more general view, in terms of the stakes of the midterms at this point, you know, we always talk about this sort of classical pattern. Oh, we have some market weakness around midterm elections. There's just uncertainty.

Is there perceived to be any particular policy agenda by the Republicans, which now have kind of a triple play in terms of control that's at risk if they, you know, if the Senate goes or if, you know, either House of Congress goes Democrat? I think it depends the answer to that question, if you're a fixed income investor or an equity investor. When we look at this from a more macro perspective, we think the fiscal trajectory is largely intact, regardless of the election outcome. That's because many of the large tax cuts and changes that Republicans wanted to do, they did when Trump was first elected, right? So that's really kind of cleared the docket. Now, when we look ahead and what could potentially change, we do think there's some scope for Democrats in the right circumstances for the party to push back on some of the impending snap and Medicaid cuts. That would affect

consumers and that would affect health care stocks. So the answer to your question is really, it depends on what specific policies we're talking about. So we're not necessarily looking at divided government means gridlock, means fiscal restraint necessarily? Not necessarily. One other really important thing here is to mention what is still in President Trump's control, right? And so we've seen the president utilize things like tariffs, immigration restrictions, the deregulation agenda. These are all things that I think are perceived to be at risk with the midterm elections. In our view, those are things that are going to continue pretty much unabated because his authorities there are not really going to shift. Gotcha. Good perspective. Thanks so much.

Thanks for having me. Good to see you. There's been radio silence from YouTube and TikTok in response to Meta's call for its rivals to adopt new teen social media protections. Up next, we'll look at the potential risks to those companies if they don't take action. Closing about overtime, live in the NASDAQ market site. We'll be right back. Dell making a big move after hours following its earnings report. McKenzie Sigalo is joining us now with details from the conference call. Matt. So, Mike, I'm just jumping off of that earnings call.

And we just heard from COO Jeff Clark. He says that AI demand is still accelerating with a record $60.9 billion in orders in their fiscal Q2 and a record $95 billion backlog. And that even after converting nearly $132 billion into orders of the past year, he says that Dell's pipeline is still multiples of that backlog with management pointing to demand, broadening beyond those big cloud players, it into sovereigns and enterprises. It now has more than 6,500 AI customers. And finally, Mike, the CEO really making a point of saying that these aren't just commodity server deployments.

Clark saying that some require more than 50 unique designs around performance, power, and cooling that complexity, he says, plays directly to Dell. Strengths, part of why you're seeing shares up more than 8% after hours. Yep, everyone wants to say they're playing in the high-value ad part of the food chain. That's a pretty dramatic move. Mack, thank you. Let's get you up to speed with tomorrow's trade today. Broadcom is the big name on the earnings calendar after the bell, but we'll also get results from Snowflake, C3 AI, Hewlett-Packard Enterprise, and five below.

Well, a week ago, META settled a lawsuit with 48 state AGs over protections for teens on social media and urge rivals YouTube and TikTok to do the same. But so far, there's been no response from those companies. Julia Borson has all the details, Julia. Mike, that's right. Radio silence from YouTube and TikTok, and we have reached out multiple times to both companies. But no comment from them on Meda's call for YouTube and TikTok

to join in adopting protections for teens, including a one-hour time limit and also for them to pay $5.3 billion each to the states. Now, YouTube and TikTok would be more impacted by restrictions than meta because teens simply spend more time on those platforms. Now, teens in the U.S. spend an estimated hour and 31 minutes on TikTok, 37 minutes on YouTube, followed by 34 minutes on Instagram, 26 minutes on Snap, and 14 minutes on Facebook. That's according to e-marketer. Morgan Stanley writing, quote, we believe youth engagement ceilings like these would actually be a larger headwind to YouTube. than Meta going on to say we believe youth adoption of YouTube is higher than Facebook,

Instagram. We also believe revenue from teens represents only 1% of Meta's revenue. Now, there are no official numbers about the revenue for teens for TikTok and YouTube, but a 2023 Harvard study estimated that TikTok received 35% and YouTube 27% of their U.S. ad revenue from users under age 18. Meta telling us, quote, we know that when TIEC, are restricted from one app, they simply move to another. Back over to you, Mike. All right. Yeah, important context, Julia. Thank you very much. That is going to do it for overtime tonight. Fast money begins after this break.