10AM Hour: Less Fed Guidance Ahead? Caterpillar and Palantir Surge, Getting Ready for SpaceX’s First Earnings Report 8/4/26

Good Tuesday morning. Welcome to Squawk on the street. I'm Sarah Eisen with Carl Cantania and David Faber. We are live. It's always from post nine of the near stock exchange. Dow and S&P 500 jumping to record eyes here following Monday's big rally driven in large part by Maggie Captech. We'll talk to noted investor Dan Niles about how long this rally can last. Plus SpaceX higher ahead of its first earnings report as a public company. Those still well below that IPO price will be joined by an analyst who says it's a buy. And we'll get to these huge moves in caterpillar and the next year. We'll be seeing a lot of people who are going to be here. We'll be over $20 billion in sales in a single quarter. Jeffery's writing this morning that cat posted the biggest beat in their industrial coverage. Now that's reflected in the cat's big pop today up about 6% but building on those year to date gains guys of about 40% Carl. - Meantime see a palantir about a two month high. You talk to Carp, what do you take from the quarter? - So he was defined as ever Carl in our conversation with the palantir CEO Alex Carp doubling down on his criticism of the frontier lab saying companies need to protect their data or risk losing their business to the model makers. - We have people trying to drug addict us to a future they believe they control. Now I've spent a lot of time with Dario and the EA crew. They want to tell you, we have to march into a future where we owe nothing, where businesses aren't profitable, where none of us have jobs and where our adversaries win. - You know, andthropic and open AI have said over the last month that customer data is secured, isn't used to train their models yet Carp isn't buying it. He also doesn't think the Chinese models can be blamed for distilling the US large language models when the frontier labs quote he says are distilled all the value of IP everywhere. Now guys, a pivot to open source, it's fueling palantir's commercial business with revenue soaring in the quarter nearly 150% year-over-year gains. And he sees growth remaining strong over the next 18 months which is quieting those analysts who have questioned whether palantir's growth is sustainable, stock up 22% is the best one-day pop since going public. - I mean, time to see a lot more emphasis on US growth where revenue more than doubled. That's now more than 80% of their total. - Yeah, and that was sort of one of the points that Carp made even in our conversation. This is a transition from accompanying that once got, mostly all of its revenue from the US government to one that is really diversifying. And I think the pickup that they're seeing, not just in US, but commercial as a whole, working with companies to add their application layer on top of their stack, the question is just how sustainable that model is over time. Does it gain more momentum in these coming months as this whole debate surrounds continues, right? Around how sustainable the growth that anthropic and open AI is seeing. I told Ashton whether he had thoughts on the evaluation that these companies are running at right now. He said, listen, I'm focused right now on delivering what I can for that US enterprise base. Yeah, both of them will have values above that, a palantir at least it would appear if and when they do come public. Seema, thank you. Seema Modi, let's stick with tech and bring in Niles Investment Management Founder and portfolio manager Dan Niles. Hey, Dan, before we get into some of these stocks just to follow up on that, I mean, do you have a view in terms of open source and what that means and this battle that is really being joined on all sides here in terms of the Chinese models and the threat they pose versus the likes of a carp out there saying this is the only way for corporate America to keep its own data safe and build on it? Yeah, I mean, I think they're two separate issues and they're David. The first one is I think for those who are taking a bigger picture, you look at what happened when anthropic was on the board of FIGG, right? And they stepped off the board and then like a week later they launched competing product. And so I think if companies are looking at that, they know they have to keep their data proprietary. So I 100% agree with that. The second part, which is somewhat separate from the first, you could argue is open source, right? Because you can have, if you have open source, that cuts your cost to produce a lot of these tokens by 90%. And so I think you need to have a viable open source community out there because not every model needs the highest end for an anthropic, open AI, Gemini model out there to solve. You don't need them for what's three plus three. If you want to go ahead and design a data, a new database, then yes, you need their highest end models for that. So I think they're two separate issues and I believe in open source and I believe that companies should try to keep all their proprietary data proprietary and not share it because that's where problems get created. Yeah, all right, well I'm curious. I mean, I know your public's market investor, but you know the private market valuations of both open AI and anthropic, do you think they're overvalued? Well, I mean, I think, let me answer that differently. If you were going to a world where 90% of the companies aren't using the leading edge models, and they're switching to using open source models, then kind of if you're using the right model for the right thing, you don't need a Ferrari to go to the corner store to get milk, right? And so if you're going ahead and you're starting to split the workloads that way, I think over time, my belief is that the model layer becomes more of a community. And if you go ahead and you're on Azure or Google Cloud Platforms or whatever, those services will route whatever you're trying to do to the best model available or the task. And I think in that scenario, yes, then, theropic and open AI become more commoditized over time. And the value of who's the more of the infrastructure players, which includes the Cloud Platforms and semiconductors. So is that at your position and your portfolio to a certain extent? 100% especially after last couple of weeks, because a couple of things have obviously happened, the situational awareness, getting taken out, their public positions, that was a huge deal. That kind of solved my issues with the speed bump, which I saw coming. And when you look at the results, AWS saw revenue growth accelerate 9% from the March quarter to the June quarter, the 37% growth. But more importantly to me is the operating margins also expanded by a percent. You look at Azure, similar situation, where the growth rate of that accelerated by about 4% to 43% and the margins expanded by a percent. The big winner, quite honestly, is Google. Google bad news was they reported about a week before a situational awareness got solved, right? Yep, by up there revenue growth accelerated 19% and the margins expanded by 3%. And so, and by the way, they're going 82%. That's a huge number. And so you're seeing both growth and profitability at that layer. And I really like that. And when you're cranking up the number of tokens you're producing, because now you're running open source models at 10% of the cost, the semiconductor chips that are underneath it. And within that, I like process or vendor, like optical related companies quite a bit. I mean, the market wavers between worrying about all the spending and the CAPEX and then seeing the growth that these companies, do you mention Google, Amazon, Microsoft, are showing. So do you leave those concerns aside, Dan, at this point, because the growth is there? Well, no, I mean, you have to have the concerns, right? Because ultimately, you know this is going to blow up, right? Every great industrial revolution in history, if you recognize that it's going to be that, you could end up with over investment, because you know if you're the last company standing, if you're the meta-google Amazon, that you're going to be worth a tremendous amount of money. So you're going to have over investment. And then ultimately, following over investment, you'll always end up with a bust. So, but I think that bust is probably a year or so, at least from now, because the genetic is a brand new thing, right? That showed up on January 30th with the formalization of OpenClaw. You can look at the token production. And it's gone up by what I saw, at least from the end of January to now, at least six to seven times, just that short period of time because of a genetic. And so I think you still got a pretty long runway of growth. I thought this was a speed bump so far that looks like that was a good call with what happened from June 22nd to July 27th. But, you know, so I think things are going to continue to grow up, but it doesn't mean that you don't get ugly corrections, especially when you have stupid things happening and guys buying stocks on too much leverage, both retail and hedge fund. Yeah. All right, well, speaking of Microsoft has had one heck of a comeback after its earnings, Dan. Now the stock is actually up to 1.5% for the year, not long ago, I can remember seeing that having lost the fifth of its value. Do you believe in the turnabout and the growth that they're citing for Copilot? Yeah, I mean, David, it's a great point. What I'm really focused on is what you just said, which is Copilot, because I'm increasingly coming around as the opinion that corporations, and I know we're going through this internally, which is, OK, we've got all these rules and regulations that we have to comply with. And so you can go through the trouble of saying, OK, I'm going to figure out how to integrate, open AI and then throw up into pie enterprise, or there's 450 million seats being paid for for Microsoft 365. Why don't I go pay the extra? I'll put Copilot in there. And Microsoft just sort of put this into a sandbox. And this is where already the enterprise work is happening. There's only 30 million for that versus the 450 million for Microsoft 365. So I do actually think, especially with my view, that you go to more of the models getting commoditized. Microsoft will route your query to whatever makes sense. They're trying to host open source models as an example of that, which is you could argue against their best interest, because they own 27% of open AI. But I think it shows are being really smooth. and agnostic about we don't care who wins, we just want to participate. And so yeah, I actually, I've been coming around to that for you and being the margins, expand as well as the revenues accelerate, make sure you feel better about that. - Yeah, Dan always appreciate it, thank you. - Thank you. - Coming up after the break, take a look at our roadmap, our markets react into the Treasury Secretary's comments on CMBC this morning about Iran. We do have Brent below 80 for the first time since mid July. - We'll dissect what he said with Muhammad Al-Aryan. - Plus, SpaceX shares they're down about 50% from the peak, of course. The company is getting ready for its first earnings report as a public company. We're gonna talk to one analyst who is still bullish on the name. - And the CEO of Procter and Gamble is with us exclusively. It's his first interview since taking the top job a few months ago. He's here to talk earnings, the consumer and his strategy. Spock on the street will be right back after a quick break. I think there is a chance we may have a deal today or tomorrow to open the straight and it'll move towards a more normalized position in this conflict. I think it would be freedom of movement. And even though things are still a little dicey there over the past few days, we saw quite a few ships coming out even now. So, I'd expect the energy prices to settle back down which as I said will be good for the entire world. - That was Treasury Secretary Besent on Squawk Box Earlier discussing the potential deal to open the straight up or moves as soon as today. Those comments, sending oil prices lower, stocks higher, also Treasury bond yields lower as well. Let's bring in Ali Ann's chief economic advisor, Muhammad Al-Aryan to discuss. So is this the whole trade? Is it what happens to the straight up or moves, Mohammed? - It certainly is important, Sarah. And thank you for having me. And the market loves what it heard from the Secretary this morning about free navigation. The qualification and it's an important one is that all the focus now is simply on the straight. When the war started, the straight wasn't the issue. There was a number of other issues that needed to be resolved. Now they've been put aside and all the focus is on the straight. So it's good news short-term, but there's still all these other issues that still need to be resolved. - Yeah, like the big nuclear issue, which was the whole ball game in the beginning. So Mohammed, how do you look at the curve right now, the bond market that what we saw post-war, last week, what we're seeing now. I mean, do you think we've seen the highs for now on these yields? - I do not. First, I think we're gonna see continued volatility because of the price of oil. And it's been a wild ride in oil. We move $20 in a few days up and a few days down. These are big, big moves. And I feel sorry for those who have to plan on the basis of energy prices. Why do I see it going higher? It's the amount of funding that needs to be done. You know, Sarah, in the old days, we used to do a simple exercise at the beginning of each year. What are the sources of loanable funds? What are the uses of loanable funds? Does it clear at current interest rates? And given the massive increase in the demand for loanable funds, it's hard to see this market being able to meet that unless yields go higher. The one qualification is if we get economic weakness, but as you saw from the corporate earnings report, as you've seen elsewhere, the US economy is proving to be incredibly resilient. - Yeah, I mean, I do wonder how the Fed factors into all of this. I focused on some of the commentary from economists on Wall Street today, Muhammad, about credibility concerns, concerns with the lack of forward guidance, concerns with the lack of the reaction function, and concerns with the gap in Chairman Worsh's stated goal of not tolerating inflation, but also not raising interest rates yet. - So I have totally be fuddled and used by everything you just said in terms of the reaction on the street and by economists. We are in the midst of regime change. Kevin Worsh has made it very clear in his statements going back a while, but people have to read them about what his reaction function is, about how important interest rates are for inflation. He has made that extremely clear, and I think what the market is trying to do is trying to take a reductionist approach to Kevin Worsh, is trying to look for spurious precision. This is a very complicated landscape right now, and it's a little bit like listening, and I'm sorry I'm about to say this, to little children who suddenly are having something taken away from them that was very reassuring, this notion of training wheels, and you hear lots and lots of complaints about it, but the reality is, like the second day said this morning, they have to do the work that they used to do before we got into this paradigm of too much communication, which actually added to confusion, and didn't clarify things. - I think it's less, I mean, yes, agree, that maybe they don't need all the communication they were getting, but it's this notion that, you know, the Fed share was really clear that, like, let the markets do the work in the signaling, but the markets are really just trying to predict what the Fed is going to do, so I'm not sure it's a real clear signal on what should be happening. - And you've got to break this really unhealthy codependencies that evolved and got worse and worse between the Fed and the markets. We saw the markets reverse Fed policy when Fed policy shouldn't have been reversed, fourth quarter of 2018, what the Fed did when it started buying high-eal bonds. Then we see the Fed responding to a market that maybe led more by noise than signals. I think the time has come, and quite a few economists agree on this, that they're to break this really unhealthy codependency that had evolved. It is understandable that it emerged during a time of crisis, but it can't go on forever, and I think it's really good that we finally have a Fed share that understands that this is critical to the good functioning of monetary policy. - But then what happens in the next crisis, then? Let me go right back to it. So if we get to a crisis, I think the paradigm changes, but we haven't been in a crisis. We've been in an environment where the Fed no longer is the only game in town, it should step back. Market should look at things beyond guessing what's gonna happen in four weeks, in six weeks time. There's lots going on in this very complicated situation right now, and this tendency, and I'm really happy, Steve Leesman had a great interview this morning with the Philly Fed president, where she said, where she said, look at this reductionist approach that the market wants. It's a much more complicated economy than simply trying to guess what the Fed is going to do. - I'm thinking of what Master said last week about the reduced level of comms. I don't think it's sustainable. I actually want more from my Fed, and her view, it's a signal that she believes will help her, believe that the Fed knows what it's doing. - What if the Fed is looking at all competing influence just like we are? Let me side a few. What's more important over the next 12 to 18 months, the demand side of AI spending, or the supply side of AI spending? Answer, we don't know. What's gonna be the impact on jobs of AI? What are all these little blowups that are happening? Join intervention in Japan, the leveraging in Puea, the leveraging among a hedge fund here, is this very contained? Is it not contained? We don't know. We can go through the list of things where there's genuine debate, and this notion that the Fed can tell you exactly what it's going to do when there's all this complexity, it's just ridiculous, it would be irresponsible. It's a good thing that he has set up a working group, and everybody I know has praised the people that are on the five task force of the Fed as really serious and thoughtful people, and we're gonna get some insights, but my own instinct is we went way too far with discrimination. - We don't know all those things, Mohammed, but what they do know is that their target, their stated target, has been, that they have missed it, and they've been, we're above it, and we've moved above it even farther this year, and we've been above it for several years. And so if his whole point is we're not gonna tolerate that, doesn't that make the case for raising rates, no matter what, how all these uncertainties result? So sir, I've been a critic of the past Fed leadership, it's ridiculous that we've had over 60 months of inflation above target, it's ridiculous that we had culture issues, that we had confusing communication, I can go on, and we have a Fed chair that came in, and if you look at the five task force, they are meant to address these multiple slippages. I take Kevin Worsh at his word, he does not like inflation above target, he does believe that monetary policy plays a really important role, that inflation is a choice as he puts it, but there are genuine questions about how quickly will the productivity enhancements come? And let's look at core inflation. Core inflation has been incredibly stable. Those of us who had worried at one point, that headline inflation would spill over into core, were wrong, core inflation has been incredibly stable. And the last few readings came below expectation in terms of core inflation. So, It's not as simple as saying, oh, inflation has been above for over five years. It had, and that's the problem of the previous bed, but there's indication that we may get help on the supply side. So I think they're absolutely right to wait. So do you think they go in September or no? The market today has them going at about 58%. I would put a lower probability to that. You would. But believe me, if this Fed share thinks they need to go, he's not going to hesitate. He will try to convince. Well, we don't know if he thinks they're going to need to go. It's very hard to tell what he's going to base that decision off of. Again, look at what he's been saying. Look at what he said in his testimonies. For me, there was a very clear reaction function for Kevin Wosh. That's clarity in what he looks at. What he refuses to do, and I would not do it either, is to put dots there when this is purest accuracy. We simply don't know where these dots are going to be. You have to be open-minded that we're going through many changes in both the domestic and the global economy. Okay, Mohammed, really valuable stuff. Thank you. I mean, there is this interesting debate that's developing about this new strategy under the Fed share of Mohammed Allarian, clarifying. Thank you. Thank you. Coming up, White One Wall Street firms downgrading Nike today actually got a couple of downgrades. All-Mart as well. We'll get you ready for SpaceX's first earnings report and going public. AI, Grok, satellite, and consciousness. Some of the top words that CalShi traders think will be said on this afternoon's call. Stay with us. All right, let's get it. Let's see New Zealand's update. Brandon Gomez has that for us. Brandon. Hey, good morning, David. The US Army has reportedly used virtually all of its stockpile of launch range precision missiles during the five-month war with Iran. Next according to Reuters, which says the missiles involved are the surface-to-surface army tactical missile systems and precision strike missiles. Now, response to White House told Reuters the US has far more munitions than anyone in the world and far more than we need. Authorities in Spokane, Washington have arrested a suspect for allegedly starting the largest of three fires devastating the area. The suspect has a prior conviction for manslaughter. More than 60,000 people are under evacuation orders as more than 700 buildings have been burned in what the governor calls the worst natural disaster in Spokane history. And the Atlanta Falcons reportedly just made Bijan Robinson the highest paid running back in NFL history. According to ESPN, Robinson just signed a three-year extension worth up to $75 million. That would pay him more than 22 million a year, eclipsing the Eagles say Juan Barkley as the highest paid running back. Pretty paid day there, something's back to you guys. Well, they're trying to do a turnaround. Talk to the head of the Falcons last week. Yeah, thank you. Brandon Gomez, after this, what to expect from SpaceX's first results as a public company trading higher this week, but still well below that $135 IPO price. Plus, next hour, Junom is the CEO of Procter & Gamble, his first broadcast interview since taking the job after reporting weaker than expected sales just last week. Stay with us. Getting a news alert on Amazon this morning, let's get to Dominic Chiu. Hey, Dom. All right, so Carl, what we have right now is the state of New Jersey and the attorney general there, Jennifer Davenport, filing a lawsuit that is in essence an antitrust action against Amazon. They have filed this complaint in US District Court for the District of New Jersey. What they are alleging is that Amazon is abusing its power antitrust-wise, unlawfully maintaining its dominant power over delivery service partner drivers. Those are the people that actually make the deliveries to your house contracted by Amazon. They say that they unlawfully maintain their dominant power. They are preventing things like preventing unionization, restricting the companies in the delivery service now from hiring one another's drivers and otherwise limiting competition for their labor. Again, this is a complaint that's being brought. They're saying that they want to hold Amazon accountable for abusing their dominant buying power. We are expecting this lawsuit has now been filed, but we are expecting the attorney general of the state of New Jersey, Jennifer Davenport, to make some public remarks regarding this case later on. In the 11 AM Eastern Time Hour, we'll bring you more details as you know more here, but Carl, we did reach out to Amazon for a comment. We have yet to hear back. If we do, we will bring those comments to you. I'll send things back over to you. All right, Doc. Thanks very much. Let's shift to SpaceX this morning, getting said to report its first earnings results as a public company after the close shares remain below the 135 IPO price, about 50% off the all-time pie. It's been in James Ratzer, a founding partner at New Street Research, has a buy on SpaceX, a target of 165. James, thanks for the help today. Thanks. Great to be here. Is the focus tonight really about Starship as opposed to the current quarter? I think the focus is going to be on a lot. I mean, this is, remember, this is the first time they have really spoken publicly as a company since the IPO. I think as you say, in the near term, a lot of focus will be on Starship. The path towards getting full reusability on Starship, but there's going to be a lot of focus as well on the growth in Starlink subscribers at the moment. Thoughts about how they can maybe develop a direct-to-sell service, kind of timing on some of the long-term ambitions around orbital data centers and computers. I think there's going to be a lot on the agenda for tonight. In the short term, how do you advise clients on how to navigate the lock-up expirations in the medium term? Well, so I kind of think that if I look out over the medium term, I think this to us looks like a great time to come in. I mean, I think it's very hard day-to-day to predict the movement between some of the short-selling we're seeing, the lock-ups at the moment. I think the short-selling is about a quarter of all of the shares that will come off unlock two days after the kind of earnings results. So there's a fair degree short at the moment that could offset some of that lock-up. We're off-seeing, hoping and expecting a lot of those people will still hold on to the shares, as you say, we've got a 165 target at the moment. So we're advising clients to be picking up on current weakness. What is the real opportunity in your opinion for Starlink? Assuming, and I know it's a big assumption, that starship is a success and it is able to start sending up and creating constellations of satellites that are far and excess what we have now. What is Starlink going to be able to do in your opinion, James? Yeah, sure. So I think there are kind of three aspects to that. Firstly, we think it has the capacity to be extremely disruptive in the broadband business. So we think the amount of capacity that they are putting up on the network will grow by over 20 times from where they are today. So first, I think there's a lot of scope for them to be far more disruptive in global broadband than we already see. Secondly, we think there's a path over the medium term to developing a direct-to-cell business with a slightly separate constellation that will be complementary. We think to exist in wireless offerings, but over the longer term, potentially the biggest opportunity is really for terrestrial data centers to move to being orbital. Again, with the separate set of AI constellation satellites, that I think is going to take time to develop where maybe a little bit more conservative there than I think some of the more bullish analysts on the stock. We still think it's a huge opportunity, but that's something looking into the next decade. What about the compute capacity that they're selling now? Isn't that the part of the exciting story here? The AI revenue? Are they going to break that out? Is that a potential needle mover here on the quarter? It is. I mean, we're going to see, I think, that probably almost double quarter on quarter with the near-term deals they have with anthropic and Google, but the key thing for us is, I mean, those are fantastic deals. They're well positioned in cloud in the near term, but that to us is not a longer term driver of revenue growth. That will definitely be hugely supportive over the next few years, but the valuation of SpaceX really relies on that longer-dated valuation on disruption in broadband, growth in direct-to-sell, and then orbital data centers. I think the point you're alluding to is great support in the near term, but less of a meaningful driver longer term. James, appreciate it. We'll see what we get in this inaugural call after the close. Thanks so much, James Ratz, for over a new straight. Still to come. Still to come next hour. The CEO of Energy Company Williams is going to join the show announcing a more than $5 billion acquisition. That's part of it. It's announcing around earnings. Stay with us. Stocks are off to a pretty decent August start, but the month has been more prone to weakness in years past, so how should investors position for what could be a volatile month? One seat chief investment officer is looking at higher quality defensive stocks for some August alpha. Tune into our market navigator segment later on today on Power Lunch for what's on the shopping list. That's 2 p.m. Eastern Time. Welcome back, watching Snap reporting top and bottom line beats. CEO Evan Spiegel saying the company saw improving momentum in the ad business. He also said that it will slightly increase the forecast for infrastructure costs. Stock is rallying nice about 14 and a half percent today. Coming up, the S&P just hitting its first record highs since early June. We're going to look at what the options market is signaling about the rally next. Tomorrow, do not miss an exclusive with Jamie Diamond of JP Morgan Chase. He's going to join Leslie Picker Live in LA. as part of the firm's annual bus tour. That's tomorrow, 4 PM Eastern time. - Welcome back, S&P 7684. First intraday record high and more than two months. Let's get to Oliver Renek and Seabow and Chicago. Look at what the options market is saying today. - Hey Oliver. (whooshing) - Hey Carl, it's been pretty manic down here this morning with a million calls, bought and spy in the first hour of trading alone. Options volume in both SPY and QQQ is trending for about 30% higher than the daily average. Flows around the Big Index products are usually very balanced. But after yesterday's rally in the S&P, simultaneous drop in vix to the lowest and almost a month, we're seeing call buyers dominate the tape this morning. Traders are buying more calls than they're selling and selling more puts than they're buying in both S&P and NASDAQ. We're seeing uniquely high ratios in favor of calls. The Qs are seeing the same as the NASDAQ ramps and leads today. The most popular contracts in both are near the money zero data expere calls. But in the Qs, we see action as high as the 718 strike expiring today, which need Qs to rally another full percentage point before today's bell. This is action that looks like something between a short squeeze and a FOMO style catch up scramble. Usually this pit cools off after the first 20 minutes, but today it's been nonstop high pressure buying all morning. The market was a coiled spring for weeks, and I think this is what it looks like when pressure gets released to the upside. We've blown through all the biggest S&P-Y strikes and the only one ahead that looks like it could provide a little pushback is the 775, which is still another 1.5% away, guys. Yeah, we're going to lean on you as well for some comments later about the VIX. I'm sure, once again, not old enough to drive. That's our olive arena. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium. 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