good wednesday morning i'm sara eisen with carl quintanilla. president biden expected to speak momentarily with the ongoing talks. kevin mccarthy telling cnbc that the u.s. won't have a debt default. >> jeff solman joins us on why he thinks the market has not priced in the worst. busy week for the media as well. we have hulu's future on the air for netflix ads and new numbers

on the cost of the strike. nbc's former entertainment chair ben silverman will join us to break down the winners and losers >> tesla stock higher following some explosive exclusive sound from elon musk with our own david faber last night musk praisy kathy woods, saying she was spot-on. we'll talk to an ark analyst about those comments and tesla's trajectory, straight ahead >> meantime, still in the range. s&p up about 16 here, as we balance the macro balance points some of the retail numbers, mike, where there continues to be a debate about what it says about the consumer >> for sure. i mean, i feel like the macro debate is all about a recession when, not if and we've seen some data that the economists is overanticipated and keep pushing it ahead a few months. the retail numbers, i think you can read them either way obviously, there's a little bit of a moderation hunkering down, but we knew it, so we're trying to pull out the pandemic effects and the credit effects because it does seem as if it was a weak end to the first quarter. >> i think the regional bank

news also helping set the tone today. western alliance comes out, says deposits are up quarter to date. the whole group rallies and rallies pretty hard. >> we had this two days ago, as well it's one of those times when the market answers the criticisms that it's only been a half dozen stocks that have been working this year. it still to me remains almost the only debate in the market. what does it mean that we've had such a narrowing of leadership and you've had the majority of stocks that have languished. and to me, it's a matter of, well, people say it's not how bull markets act that's one thing you can kind of say. that's valid typically, a bull market that's sustainable will be broader. but if you tell me that it's only been a half dozen stocks that have been working, the equal-weighted s&p is flat for the year we've still been up from the october lows we've still been saying maybe there's a chance that that was a durable low. and we're trying to figure out how the macro and the fed breaks from here. the other final point i'll say is people often say, only a handful of stocks are working, and also, the s&p is too

expensive. the expensiveness also comes from the half dozen stocks, mostly it's not the same thing. the s&p is diverging from what the credit market is telling you. the half-dozen stocks are diverging from credit -- it's kind of that decide what you want to complain about and final point is, the street is busy tracking all of this stuff and kind of persuading clients that it's okay that you're underperforming the s&p this year because it just means that you didn't own enough apple, nvidia, and meta >> so those under the bench mark get a break. >> they do and by the way, this week, apple is down 1%, the s&p is flat. just as small caps maybe get oversold, those big stocks need a break. that would be the absolute benign scenario where you just rotate as opposed to fall apart. >> as you say, all about the fed and the economic outlook and i do wonder, something i just raised a few minutes ago, whether the data is coming in too strong for a fed that is

trying to squash inflation and inject a little pain into the economy to do it we saw construction numbers today, higher than expected. home builder sentiment, even retail sales, you can make a case for better. and then that drove up the second quarter gdp forecast. again, not what the fed has been trying to engineer >> i think it's why, while we -- i think, assume for the most part the likeliest path is a pause by the fed, we're not 100% sure and fed officials don't want you to become 100% sure. and we still have more numbers to come before the next meeting in late june >> june hike, odds now about 1 in 3ish. we were in the 15% range a few days ago i think it was b of a last week who said maybe the biggest risk to june is a hike and not the debt ceiling would you go along that. >> it feels as if the debt ceiling is this thing where we're all kind of -- it's a watched pot. is it going to boil or not even if it does, it won't be a surprise potentially, yes i'm not willing to say that the market is right or wrong on the one in three

obviously, the numbers that are going to come from here will tell us that story but then you have the market saying that by september, you're getting cut. so i think it just shows you more indecision at a macro potential inflection point than it tells you, all right, we know how this will play >> mike, well said mike santoli of course, the markets are closely following the showdown with president biden expected to speak any minute on those talks. senate majority leader chuck schumer meeting with the heads of jpmorgan chase, citigroup, and other big banks to address the debt limit here to discuss, td cowen president, jeffrey solomon it's good to have you back you think the market is mispricing this risk >> i think the market is sort of looking over it, right and saying that this is going to get worked out and i think that's probably the -- that is the -- i would say, the majority case, raises 80 to 85% probability that things do get worked out, because they always have i'm always someone who looks at, what happens if it doesn't, and

what's the pain associated with that and you know, market's not pricing that in today at all and i think, you know, there's a possibility that they don't get it done or don't get it done in time and so, you know, a lot of work to be done, still. >> so where do you want to be right now if you have to hedge that risk? how do you position? >> i think you just -- you have to have some liquidity available. you need to be in a position where if there is a dislocation in the market or if this gets extended, which is kind of our base case at td cowen, they probably can't get it all worked out and this is just about the budget going forward and deficit reduction going forward, which are two big issues that can't get worked out in a matter of weeks, so the base case we have is this gets kicked until october, where you have a much broader conversation about how you're going to deal with those bigger issues coming into the presidential election year if that's the case, we're going to have a summer where we're just going to sit here and talk about it for a long time, pros, cons, puts, takes, tax hikes or

spending cuts. and the last time this happened in 2011, the market was down like 17% when we got anything sort of close to that situation. and i just don't think that's great for equity you've got to prepare for that eventuality, too, if it doesn't all get worked out here to raise the limit beyond sort of october. >> although, some also say, what if we do get a deal and the market has to wrestle with the austerity that less government support brings to the economy. and what happens to the markets in that case >> i think there should be less stimulus coming. we just came off the greatest stimulus in the history of st stimulus by the way, i was onboard with that i think we needed to be able to do that certainly at the beginning of the pandemic to tie people over, but maybe we did a little too much and got inflation. maybe rates were a little too low, too long, and we got inflation. and the fed has to deal with that, we have to deal with that. so at the end of the day, if we end up with discretionary spending a little lower, that's

probably not a bad thing the delta, by the way, is really interesting. people don't focus on this, but 89% of the federal budget is not being really hotly debated entitlement programs are not being debated. defend spending is not being debated. it's the 11% of the market that -- 11% of the budget that is sort of really being debated as discretionary spending. you know, republicans want to cut 50%, i think that's really not reasonable that's in real terms the democrats want to increase it by 4% again, there's a trade to be done in there. and i think we shouldn't, because the risk is too great to bear >> hopefully, maybe we'll get some guidance from the president on that in a few moments as for the banks, i wonder if you think, they have effectively rerated. and if now we can stop talking about a ban on short selling and maybe, maybe even end the discussion about fdic insurance and this western alliance update

with more frequency seems to be comforting how you feeling about that >> look, i think there's a few people who think that maybe is regional banking model is broken i don't know it's too early to say that what i will say, it's definitely a dampner on the economy if you're running an asset liability committee, you're definitely a little more concerned about going out on the liquidity spectrum or the duration spectrum, particularly if we just learned that deposits have shorter durations generally speaking, i think it's going to be a dampner as credit comes in from some of these places, at least until things get worked through so, you know, it's too early to say. i don't -- i don't think we've seen the end of regional banking or community banking it's way too valuable to main street and from a political standpoint, i don't know that anybody here has the intestinal fortitude to see that go away. i think we feed to understand

exactly how the federal government feels about it. and so, you know, people will adjust their business models, but in the near term, i think it's a definite dampner on economics. and by the way, okay with that, right? because we've got to make sure that inflation doesn't get away from us. >> really quickly, jeff, i wanted to get your take on the ftc's move to block the amgen therapeutics deal. it seems like if they're able to succeed here in politicblocking that sets a pretty big precedent and has big implications for biotech deals, investments, you name it. >> that's a very complicated situation and i don't think it's necessarily surprising that with this ftc, that they would do this i think it could be litigated. and i think there's a number of people that would like to see amgen pick up and do some things to maybe challenge the legal tenant to this and so you have some volatility around that, right, if amgen ends up winning, if they sue and they win, that has a lot to say about how things will be

consolidated there's some real nuances to this particular acquisition. so it's hard to get a read through, other than to say, wow, you know, the ftc is a being a little bit more aggressive here. hard to say that that will be a readthrough. because the bifurcation of the biotech market -- horizon is not -- horizon is a really big company, relative to many biotechs and while it's been an innovator, it's not an early science innovator. so i think the readthrough on this is actually, big pharma might actually look to smaller acquisitions and smaller biotech as a potential readthrough here, if, in fact, there's a problem again, as always is the case with biotech and with health care, like, one size doesn't fit all. it's hard to get a singular event like this as a total readthrough on the entire landscape or in the entire ecosystem. >> that's interesting. i was going to ask if you as a banker expect now a chill in deal activity in the space, especially from the big

companies that might be afraid to make any acquisitions in this regulatory environment >> yeah, listen, this is not new news everyone has been trying to figure out how to navigate the ftc, right i don't -- i don't know if anybody had a view on this particular trade in particular we're not involved, so i don't know but i will say, if you're doing a meaningful acquisition and it's potentially transformative, you have to think about what it means to the ftc and maybe you're trying to get a readthrough in general on what their definitions are and it's pretty safe to say that for this ftc, bigger is not necessarily better and you've got to be thinking about that but as far as smaller m&a, the places where we generally play at td cowan, i'm not seeing this particular deal or ftc action throw a big chill on things. because for the most part, they're really focusing on really big transactions and we're focused more on middle market in our business >> hey, jeff, i don't know if

you saw david with elon musk last night, but musk did go to town a bit on the fed, criticized them for acting with what he called latency, meaning, basically stale data and today, goldman comes out and says the response rate to jolts is down 30 points since the beginning of the pandemic. now just 30% i mean, this was one of the numbers that powell would trot out at his pressers, as being a key metric and i wonder if you think that we're looking at numbers that are not giving us a real view of at least the labor market? >> you know, i don't argue with the fed, ever. i think they've got the best data that you can get. they see it from places that you and i wish we could see it from. so i'm not in a position to ever criticize the decisions that are made there they have better -- they have better information than we do. and so, you know, what they do with that information, how they foster that information, i'm a big believer -- it just shows you, over time, if you follow the fed and listen carefully,

like, this is alan greenspan reinvented the way communication was done at the fed. i think this fed share does his level-headed best to give you as much information as he possibly can to help you make the best investment decisions you can >> jeff, we'll cut you off, sorry, we've got to go to washington and hear from the president. president biden on the debt ceiling. >> -- helicopter, andrews. anyway, and to meet with the leaders of g-7 america's role in the world is vital, especially right now, as we've worked together with other countries to support ukraine and take on the challenges that demand international cooperation, and from tackling the climate crisis to strengthening the global economy. and before i leave, i wanted to save a word about the status of negotiations with the congressional leaders. we had a productive meeting yesterday with all four leaders of the congress. it was civil and respectful and everyone came to me in good faith. i'm confident that we'll get the

agreement on the budget that america will not default and every leader in the room understands the consequences if we fail to pay our bills and it would be catastrophic for the american economy and the american people if we didn't pay our bills. and i'm confident everyone in the room agreed with the speaker, from the speaker to the majority leader to the majority in the house and the senate, excuse me, the majority of the senate, the minority leader in the senate as well as the leader -- the democratic leader in the house we're going to come together, because there's no alternative to do the right thing for the country. we have to move on and to be clear, this negotiation is about the outlines of what the budget will look like, not about whether or not we're going to in fact pay our debts. the leaders have all agreed that we will not default. every leader has said that i'm proud of the progress my administration has made. we reduced the deficit in the first two years by $1.7 trillion

in the first two years and i propose the budget will reduce another $3 trillion in the next decade. that includes more revenue by asking the wealthy and large corporations to begin to pay their fair share and cutting subsidies as exist in the law now to big oil and big pharma. yesterday, we all agreed that both the speaker mccarthy and i would designate senior members that we would negotiate to give our authority, so we narrowed the group. we narrowed the group to meet and hammer out our differences and we've done that. in fact, they met last night and they're going to be meeting again today. and be in touch with speaker mccarthy and other leaders as well what i have dope in anticipation that we won't get it all done until i'm back is that i cut my trip short in order to meet for

the final negotiations and sign a deal with the majority leader. i made it clear and i'll say it again, america is not a deadbeat nation we pay our bills the nation has never defaulted on this debt and it never will we're going to continue these discussions with congressional leaders in coming days until we reach an agreement and i'll have more to say about that on sunday and i'll have a press conference on this issue. as it stands now, tmy intention is to go to the g-7, be back here on sunday with a press conference and in the meantime, i've spoken to australian leader albanese and i'll be seeing him at the g-7, he'll be there as well along with the indian prime minister and along with the japanese as well so the quad members will be there. we'll get a chance to talk separately at the meeting.

but it's unlikely that i'll be going on to australia. so thank you very much >> mr. president, what about work requirements specifically are you still considering? it sounds like it's still on the table and you haven't ruled it out. which would you be willing to accept >> well, i'm not -- i'm not going to accept any work requirements that's going to impact on medical health needs of people. i'm not going to accept any work requirements that go much beyond what is already -- but i voted years ago for the work requirements that exist. but it's impossible that there could be a few other, but not anything of any consequence. thank you. >> what message does this send to xi and australia? i know it was important for you to focus on this trip. but is that almost a win for china? >> no. no, was we're still meeting and we still have four good allies

>> -- meet with president xi soon, sir? >> soon enough we will be meeting >> you will be meeting or speaking >> all right think he's out brief statement there from president biden as he gets ready to go to japan for a g-7 meeting saying that there are negotiations still ongoing on the debt ceiling, that we're going to come together because there's no alternative let's bring in eamon javers from washington with a little more on what we just got from the president, eamon, which i think for investors who are nervous about a debt default was encouraging. echoing the house speaker this morning, kevin mccarthy, on cnbc, saying, we're not going to default. and sort of outlining the contours of what a deal might look like. >> and a valiant effort by the reporters in the room trying to pin the president down on xi jinping, and whether he's going to meet or speak with dxi jinpig anytime soon from an investor's perspective, what you heard here is a lot of

positive noise and not a lot of positive specifics, right? and that's what we heard emerging from that negotiation yesterday. all of the leaders, republican and democrat, seem to be on the same page in terms of positive talking points this was a meeting with good decorum. nobody is screaming at anybody, nobody is pointing at anybody, nobody is ripping anything up. that is encouraging, if you want a deal here. what we're not hearing is a lot of specifics on what's going to be in this deal that the president expects to sign when he comes back from his trip. you heard the president there talking about revenue in the deal that's tax increases that's something that republicans have said they don't want to see in this deal so that's clearly, you know, something that's going to be a point of contention, to say the least, in these negotiations we'll wait and see what the other specifics are. he seemed to show a little bit of wiggle room on this idea of work requirements. he said some work requirements possibly could be included, but nothing of real consequence. that might be farther than his democratic colleagues want him to go on that issue. but we'll see.

right now, though, we're not getting a whole lot of detail on what potentially could be in this deal, sarah >> jeff solomon, eamon's points a good one, a few days ago, the easy stuff appeared to be unspent covid money and -- but not work requirements. and i wonder if you think directionally, there is some progress there >> i think there is. you know, they weren't really speaking much, and when i heard -- i talked to a few members of congress, a few -- actually last week, and a lot of them were talking about 14th amendment, and we should just go to the 14th amendment, which i think is really counterproductive and not helpful. and so if they're engaged, the president will come back early, that is really, really strong signal that there is positive mu movement what that is and what that looks like, as i've said before, there's an opportunity here to close the gap. and i think that's a really, really favorable thing much of the partnership for new york city wrote a letter last week really detailing the complications here to both congress and the president, who is well known, that if they

don't get a solution here, it's bad for the economy in a meaningful way >> eamon, i thought one notable hint that the president offered, which stood out to me, he said, these talks are about the outline of the budget. and to me, that was a strong signal about how this deal might come together. president biden might not want to negotiate over the debt ceiling. so it seems like what this deal is, is some broad strokes that the president would agree to in terms of the budget outline. and we immediate to pass the debt ceiling and the president gets his way, too. >> right, and it's a little bit of a way for the president to finesse this idea that he caved in on negotiations, right? the president is saying, no negotiations, no negotiations, no negotiations. and what are we in well, we're in a negotiation the president's finessing that here by saying, well, i'm not negotiating about the debt ceiling. that has to be raised. we're negotiating about the budget that's an entirely different -- d dewe just happen to be negotiating at the exact same

time the debt ceiling deadline is happening those are two totally different things that's politics to you for some degree it gives you a sense of the scope of what's on the table here in these discussions. and what they have to do is figure out, what are they actually going to haggle on and what things have to be left for a separate debate some other time, when they're not facing this deadline staring them this the face the way they are with the debt ceiling >> it feels like they can both claim a win if they can get there. >> that's the kind of deal, right? everyone gets a win. >> everyone gets a spin, that's for sure >> well, that's for sure eamon javers >> and our thanks to jeff sol m. solmon, as well. >> it's been a couple of weeks since the writer's strike started. we're starting to see more of its impact we talked about this more with julia boorstin and she's back at post nine today. >> the wga is now putting an estimated dollar value on its proposal to pay writers more for streaming in particular. the wga is saying that their proposed contract would cost

about $429 million, saying that $3343 million of that cost would go to the major studios that are part of the amptp, the organization that the wga is negotiating with they note that 19 billion will be spent on original content for streaming services this year that these costs could be far less than the cost of an ongoing strike now, the wga breaks out costs by studio, estimating $75 million for disney and $68 million for netflix. of course, much smaller than the total costs they're spending on streaming. we reached out of amptp. they are not responding to questions about these particular estimates, but the organization has disagreed with the wga's estimates about the cost of the strike and potential cofst of these terms in the past. netflix is feeling a sting from the strike it canceled its first up-front ads presentation it was set to go live at the paris theater, and it canceled

that and turned it into a video stream this after yesterday, jpmorgan raised concerns that the strike will delay the rollout of paid sharing and also potentially slow down or hurt netflix's add-supported service. meanwhile, youtube, which does not rely on wga writers, could be a big beneficiary of the strike news street research out with a note today saying the strike could give youtube its biggest-ever leverage this up-front season, calling its parent alphabet a top pick now, youtube is hosting its up-front is this evening at 7:00 p.m. here in new york. >> what a week for these two things to converge, julia, stay with us. for more on the strike and the impact, netflix's first ever presentation today and the upgrade of hulu, let's bring in ben silverman, the former cochair of nbc entertainment great to have to have you back i wonder who you think is chipping away in the way of leverage, whether or not these pickets at the up-fronts are making room or whether or not the studios are looking at the

cost savings of incorporating things like ai, for instance >> i mean, clearly, both sides are entrenched and there are real issues from both sides. the macro economic environment isn't helping this negotiation, because of the streamers having to deal with real issues, you know, this up-front as an example, which seems to be by large a negative in terms of the amount of money that everyone thought would be coming into their market place and into their environments and then on the other side, the writers have been locked in a kind of downward cycle, where they're working more and making less, year on year and so the relative fight is a really warranted one this time and when you did look at that pricing that julia just shared, i think a concern who it's accurate or, you know, off by 10 to 15%, whatever the numbers are, you then have to multiply it by the directors and the negotiation their going to have coming up and the actors and the

negotiation they're going to have coming up so you have to look at that in the context that this is just one of the three joins that truly impact the money that's invested in content. >> yeah, it's so interesting, ben. i was just looking at this estimate of how many subscribers does this ad-supported service have enough that the ad-supported business is small, so far, compared to some of these other players. certainly expected to grow dramatically, but it seems like the timing of this year's up-front with the strike is really tough for netflix and i'm curious what your outlook is on the potential for netflix to be maybe stealing market share from some of the traditional players, since they're all suffering from the same rissues in terms of the macro economic pressures on advertising but also the issues with the strike. is netflix better positioned, because it has so much international content? >> it's a combination of things going on i totally do believe that about

the original content that they're putting on and it's easy for disney and other players to name offshoot derivative original content on characters we've never heard of from these universes and i wonder when that gets tired and old, whereas netflix has to rely on all of this original new content i think it's resonating when they get to make it. shows like the diplomat, shows like rough diamond, an israel dutch co-production, not even something that emanates from the original hollywood world, not regulated by any guilds or union conversations, but those original content that netflix uniquely is now hyperinvented in, because they don't own lucas film and marvel comics and don't own d.c. and don't have a history and library to remake and rebuild off of but are finding amazing audiences with this new stuff is going to be heard. it's going to be heard in the

english language they do have this incredible amount of international content that should support them in this interim moment but if this strike goes on for a very long time, it's going to be extremely hard for them to have the original unscripted content coming out they are, on the other side, making a ton of documentaries, an amazing amount of non-scripted they have this international content, but they just don't have the sport to underpin it in the way that, you know, espn, disney, and nbc, peacock, and others do, which will still be a driver and draw of the big advertising clients. >> yeah. >> the strike-proof slate. that's the phrase of the week. pretty remarkable. i'm sure we'll talk soon thanks so much ben silverman and our own julia boorstin >> european markets set to close in just a minute another session overshadowed by u.s. debt ceiling posturing. but the story abroad this

morning has to be japan. strong gdp numbers markets boosting the market there today coming against the backdrop of the company's other benchmark index, the topix, hitting its 33-year high, now at the highest level since 1990 for this year, the topix has outperformed both the s&p and the european stock 600, and that surge has lrargely been driven b overseas interest. international traders bought nearly $16 billion worth of japanese stocks just last month. that's the most inflows the country has seen since october of 2017. not just warren buffett, although that certainly adds to the shine, carl. there's been so much interest in the japanese market. there's a lot of talk about the rebalancing of corporate priorities and a more shareholder-friendly vibe by japanese companies, better governance the growth numbers today were good and showed an increase in consumer spending, but there seems to be a lot of -- a lot to like about japan

>> although it was interesting yesterday, we talked about who's going to be first to cut numbers in china it's funny, the ft mentions in the japan story that one of the reasons that japan is benefiting is that it's considered a safe alternative to china exposure picking up, but not with the geopolitical risks in china. that stock market has lagged this year. >> confidence there, just not picking up there when we come back, lelon musk weighing in on one of the stock's largest supporters that's kathy wd.oo arc invest's lead analyst on tesla will react to that in a minute

this is a gigantic -- it will be like selling cars for software margins, because, in fact, it is software so instead of effectively having, say, a 25 cent margins, it might be 70, 70% or more. and i mean, the free cash flow

would be a truly staggering amount the best analysis i've seen so far about this was from kathy woods from ark invest. >> we know kathy well. >> i would assume you would like her. she's been a huge proponent of your stock for many years. was right, by the way, from early on >> she was right so i thought she was being optimistic, but she turned out to be, in fact, almost spot-on >> that was elon musk praising kathy woods' bet on tesla after first buying into the company in 2016 tesla remains ark's top holding, making up more than 7% of all of ark's etf buy rate joining us now is ark's co-lead of ark's venture, will summerland a nice little shout-out there. and i wonder whether or not his comments last night in aggregate made you more or less confident about your tesla thesis? >> yeah, the way we approach investing and research broadly is through first principles. we really spend a lot of time trying to understand how a new technology is evolving and

develop conviction based on that and when we look atartificial intelligence, we've spent a lot of time on cost declines, looking at the cost to deliver declines over time and ai has declined over twice the rate of moore's law. it's a 65% cost decline from 2012 to 2020 it's actually accelerated from 65% to 70% from 2020 to 2023 and so as we look at the technology and study the capabilities, we develop conviction and hearing remarks from elon, directionally, about where they're headed certainly increases that confidence. >> does it -- we've talked with kathy about this at length, not just regarding tesla, but all things battery and robotics and ai do you think we are finally on the downward slide where this technology starts to feed deflation? and if so, what inning would you say we're in >> yeah, well, if you look at just the capabilities of artificial intelligence and the context of tesla, using

self-driving car is five times safer than a human operator, already. so we're already approaching a point where ai is utperforming humans fsd is running about a million miles a day if autonomous mode i think we're already seeing the technology fully capable of doing a task better than a human. we also see this in the context of knowledge work. if we step back for a second, human knowledge workers are paid about $32 trillion a year to write code, review legal agreements, et cetera. and we're rapidly approaching a point where domain-specific models can outperform humans at a variety of tasks we're seeing this in the context of software engineering as a leading indicator. so in software engineering, get hub put out a study recently showing that software engineers using an ai assistant are more than twice as productive than software engineers without an ai assistant. we also invested in the private side in a company called rep let and 20 million users that were using this capability to

generate lots of useful code for websites, apps, et cetera. they're seeing some developers with as much as 80% of their code generated by ai i think we're rapidly approaching this point where ai is capable of automating most tasks that humans do in the context of knowledge work. and that will certainly be deflationary >> i wonder, you know, traditionally, i think of ark as high-growth tech, cutting edge tech kind of companies, innovators and that fits in with the ai theme, but if ai can truly disrupt all of the industries and all the companies and get productivity and efficiency and old-school companies as well, whether you're taking a look there, too. a bank, for instance >> yeah, we're investing in companies that are really at the cutting edge of developing this technology and when we think about the value accrual that will occur through ai, we think most of it will occur at the application layer. the companies who are developing these ai applications. and again, knowledge workers make $32 trillion a year and we're already seeing knowledge workers double or triple their

productivity using ai assistants, so the companies that are developing the applications that enable that productivity we think will capture quite a lot of value we think in our base case forecast, by 2030, the market for ai software will reach about $14 trillion annually. just to put that in context. companies currently spend about $1 trillion on enterprise software we think that's where the majority of value accrual will occur and that's where we're investing. >> last night, musk also talked about the non-zero chance that ai does harm humanity. sam altman on the hill this week said that's one of their biggest fears. you must model that out somehow, right? you maust be baking in some downside risk, not just for a trade, but for the human race. >> yeah, i mean, throughout history, anytime there's a new technological innovation or new technological super cycle, everybody goes on fearmongering and says, this is going to destroy humanity, this will lead to mass unemployment and historically, that's never

occurred the reverse has actually occurred in the industrial revolution, we saw the average standard of living increase and the labor force grew if we look at farming, the tractor actually increased the productivity of phafarms 17-fol from pure human labor. and the laborerers who were just picking bearies on the farm were earning more humans are very good at adapting to new technological capabilities and finding ways to be creative. i certainly think this will be beneficial to all of humanity and will increase the standard of living across the board when it comes to regulation, there's a lot of talk about regulation and whether ai should be regulated, how it should be regulated. i think there's a great risk of regulatory capture occurring where a small number of companies essentially get licenses from the government to develop and release ai models. and i think that would be bad for america. we're certainly in a position where we need to compete geopolitically on the ai front

it's important for capitalism, important for our defense, important for our sovereignty. and i don't think we should hamper ourselves by over-regulates ai. there's a great fear >> well, our mood shifts depending on the use case that we hear about, that's for sure, will but early days appreciate the insight today in the wake of that interview thanks so much >> thanks for having me. an up round in a down market cybersecurity firm wiz, which counts salesforce, morgan stanley as clients now valued at more than $10 billion. the ceo is next. and check out wynn today, upgraded to overweight over at barclays they say the rally is just getting started. target 135 they cite the continued recovery, at least in macao, and that new target does imply upside of 30%. n'gowa dot ay.

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the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪ start-up it brings in $200 million in annual recurring revenue, all of this occurring in a market where fund-raising has been a struggle and getting tougher as the banking woes continue to play out. how are they doing it? joining us here at post nine, wiz ceo and cofounder, as.aath rapport, also named number five disrupter on the list just out

>> thank you for having me >> where's the growth coming from >> i would say the biggest opportunity is the market opportunity. we're basically all talking about organization moving to the cloud. and that's kind of digital transformation but i think behind the scenes, what we have is the security teams. the cloud security team. that enable us to move that fast to the cloud and this digital transformation is happening and also during recession, during a downturn economy, this kind of thing continues to happen and that's kind of where our growth comes from. >> when you say the market, you mean the fact that everybody has shifted all the data into the cloud and now it needs to be protected. >> so interesting enough, only let's say, less than even 10% has moved to the cloud definitely, that's where we're seeing and covid, for example, in the last, let's say, three years, was significant and remote work was part of that in terms of transportation is here to say and still growing. >> cybersecurity is a little crowded. what do you do that some of the

others don't, because we've seen tremendous growth from the z-scalers in palo altos as well. >> this has paved the way for us i think what we're doing different. and we focus on how do we make developers, def ops, and security teams working together to solve the problems. >> i've heard that quantum computing changes the game, where encryption means nothing and i heard that quantum computing is grossly overstated. >> like any technologies we say, including ai it's kind of overestimate the impact in the short-term and you probably underestimate the impact in the long-term. definitely that poses, any technology that we see poses new risk to the business, but also -- >> but isn't that terrifying when you think about how much

services, you name it. >> the way we think about security, i see it as more of an enabler. think about cars, for example. the one thing that enabled cars to move from 10 miles per hour to 100 miles per hour is not only the engine, it's not only the infrastructure for the words, it's also the seat belt that enables to us to not only drive fast, but drive fast without killing ourselves. this part of it. any technology poses risk, but also opportunities >> what is the level of cyber/crime happening in the world right now? >> look, so people tend to think that, hey, recession, and downturn economy might change the things we see actually the opposite we see that the insider threats might be -- might go higher, you know, where you have lots of layoffs or potential layoffs the insider threat is growing. and unfortunately, i think recession doesn't impact the adversaries. this is something that -- >> so it's high. >> it's high and also geopolitics it's kind of, in the most

sensitive. and we're seeing nation attacks against not only companies zpli mentioned the fund-raising at the top and wanted to ask you about that in particular you have howard schultz as an investor and what that's been like at a time where start-up funding has been rough >> yeah, so it's rough and it's a rough market for all of us i must not, but when you're looking at cybersecurity, it means cybersecurity, you're looking at cloud security, it's a super fast-growing market. and we're kind of leading this market it's a great opportunity and i think that's what investors are saying at wiz, despite all the things that we're seeing outside of the economy, this is a real opportunity to continue to grow. and as we mentioned, it's only less than 10% of the data is in the cloud. so potential very, very high >> you want to go public >> yeah, definitely. that's why we're here. >> but do you see a window of opportunity? >> look, it's two things when you look at the company, first, you need to be ipo ready

in a way that's the kind of things that they're working on unfortunately, that's not enough and you need market conditions to be right. we raised enough money, so we can basically choose the best timing for us to go and become a political company. >> we'll keep an eye on that keep us posted, i guess. assaf rapport from wiz coming up after the break, elon musk on microsoft and these competing ai visions when "squawk on the street" comes back (vo) this is more than just a building. it's an ai-powered investment firm with billion-dollar views. a cutting-edge data-security enterprise. yes, with a slide. a perfect location for the world's first one-hour delivery. an inspiration for the next workout cult. and enough space for a pecan-based nutrition bar empire. it could happen. because there's space for any dream on loopnet. the most popular place to find a space.

elon musk claiming last night the reason open ai exists after a $50 million investment but was vocal about the issue he has with that company. deirdre bosa is digging into that on "tech check. hey, dee lots to peel from that interview which you have been doing all morning. what stood out to some in the tech world were his comments on microsoft and open ai. >> i do worry that microsoft may be more in control than, say, the leadership team at open ai realizes microsoft, as part of the microsoft investment, they have rights to all of the software, all of the model weights, and everything around the system >> nadella said that's not factually correct but it essentially allowed microsoft to

bypass the license and a powerful engine to go head-to-head with google which had the lead in generative ai which brings up this decade old question in tech, will the big players ultimately eat the lunch of incumbents. one venture capitalist put it to me this way. the problem with the space, it's really expensive to play you could build a website back in the '90s easily and just play you can't really do that in this space unless you have billions of dollars, at least not until costs come all the way down. he's referring to cloud or computing costs to run generative ai models like chatgpt, which are very expensive. that may be what powers the next leg of this big tech rally the s&p's 7% gain has been driven by eight stocks, apple, microsoft, nvidia, meta, amazon, google, tesla and amd. they are not strictly ai companies but are definitely in the conversation >> no, the ai saves the market has been one of the themes here.

deirdre, you got me thinking about who owns these companies, who runs these companies, and just whether there should be more scrutiny on that or if it's the data inputs because at some point something will go wrong with ai. we've been hearing all the warnings, and then what? who do we blame? who do we turn to? >> you're touching on open source versus close source and there is this thinking if government entities have sensety information that is held by companies are going to be run through the generative models, it better be an open source system because they have to protect it if you have a close source system from a microsoft or google, they could have access to that information. this is going to be negotiated, open ai, despite its name, is close source and said they would look at being open source but there are younger companies, incumbents that are trying to be open source. again, you get back to that question, though, do they have the money to actually run these models, because it takes so much in terms of computing power and

chips. so that will be a key question how can you make it possible to be open sourced if that's going to protect privacy best if it requires billions of dollars in cloud computing. >> dee, thanks for that. a conversation we'll have a lot more of. deirdre bosa, thanks wall street buzzing about work from home as black rock and on&t call folks back el musk has some interesting words to say about it as well. from big cities, to small towns, and on main streets across the us, you'll find pnc bank. helping businesses both large and small, communities and the people who live and work there grow and thrive. we're proud to call these places home too. they're where we put down roots, and where together, we work to help move everyone's financial goals forward. pnc bank.

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living in lala land, you can't -- look at the cars. are people working from home here of course not. so servicing the cars, building houses, fixing houses, making the food, making all the things that people consume, it's messed up to assume they have to go to work but you don't it's not just -- i think it's

morally wrong. >> the street, of course, buzzing about cnbc's exclusive interview with elon musk work from home certainly one of the hot topics with musk calling the policy morally wrong yesterday blackrock asked its employees back to the office four days a week at&t announcing it's calling managers back to the office. the trend is moving in favor of back to the office i do think the moral argument is interesting and i get what he's saying about inequality and frontline workers have to come, so why shouldn't you on the other hand, child care affordability is a really big moral issue we have in this country and it has skyrocketed and if it's -- work from home allows flexibility for women in particular who always have to shoulder the cost of child care and the burden of that, then perhaps there's some moral imperative to it as well >> and then you have to think about the employer's motivation as well, right if they can find some kind of balance where productivity doesn't take a huge hit and sublease a third of their space,

you'll see the pull that we mentioned, blackrock and at&t. >> there's productivity, but i still think the best argument for not working from home is that it's hard to groom future leaders and to have upward mobility in companies when you're sitting on zoom all the time >> especially in trading and financial services we're up 200 on the dow maybe making another run at 4150 let's get to the judge carl, thank you very much. welcome to "the halftime report." i'm scott wapner front and center this hour what a debt limit deal could actually mean for stocks as some suggest an agreement might not be that far away we'll discuss with the investment committee cyclical stocks getting a bid today. joining me, kari firestone, joe terranova, steve weiss let's check the markets. we, as carl said, we're higher the dow jones industrial average good for better than 200 points. there's the s&p 500, 0.50% we're green across the board i guess my question to you, steve weiss,