AI Boom & Easing Oil Fears, Lumen Tech CEO on AI Buildout 5/6/26

 Closing in on a P-steel, I'm Morgan Brennan, and this is your morning call.
 All right, we've got some breaking news to bring you here with US stock futures popping this
 morning. Remember the S&P and the NASDAQ both sitting at record highs after gains for the major
 averages yesterday, but taking a leg higher this morning as treasury yields move lower as well,
 and as crude oil takes another leg lower as well with WTI now back below 99. Look at that,
 back below 95 dollars in barrel. We're now down 7 percent in WTI futures. Brent is also down
 6.5 percent right now at about 103 dollars per barrel. Really everything across the energy complex.
 Here's why Dan Murphy is going to bring us the latest as we get these breaking news headlines
 regarding this conflict in Iran, Dan. Morgan, good morning to you, a major reversal underway
 right now in oil. According to Axios, the White House believes it is close to a one-page
 memorandum of understanding with Iran that could end the war and set the stage for broader negotiations.
 Now, according to Axios, officials say Iran is expected to respond on some key points within
 the next 48 hours, and while nothing is final at this stage, this is said to be the closest the
 two sides have come to a deal since the conflict began. Now, inside the Axios report, it describes this
 proposed framework that would include Iran agreeing to a moratorium on nuclear enrichment, while
 the US in exchange would begin lifting sanctions and releasing billions in frozen Iranian funds.
 Now, both sides would also ease restrictions in the state of Hormuz under this current proposal.
 That is absolutely critical given that global shipping route has been at the center of this
 conflict. Also, under this current plan, the memo would declare an end to active hostilities
 and trigger a 30-day window for negotiators to hammer out a more detailed, more comprehensive
 agreement. And again, according to Axios, during that period, shipping restrictions in US
 naval blockades inside the state of Hormuz would be gradually rolled back. But of course,
 there are some major caveats here as well. The report suggests that if these talks collapse,
 the US forces could re-impose the blockade or resume military action as well, which of course
 leaves open the risk of a return to conflict. And as we track the pullback in crude oil off the back
 of this Axios report, it's important to remember that the timing here is really critical as well.
 President Trump saying this US effort to escort commercial ships through the
 Strait of Hormuz is over now, at least for now, citing what he called great progress
 in talks with Iran. We're now getting more clarity on exactly what the president meant
 when he said that. That move has marked a sharp reversal, and it also came just hours after
 senior US officials basically described that operation as a matter of life or death for thousands
 of civilians stuck on the water. And interestingly as well, behind the scenes, Iran has taken
 somewhat of a victory lap here, and is framing that pause very differently. State media there
 today calling it a climb down, and also claiming that US forces failed to secure safe passage
 without Iran's permission. In fact, one Iranian lawmaker even called it a humiliating defeat
 for Washington. So, as we see this report continuing to filter into the market, it is important
 to remember that the commentary that we're hearing from both sides still suggests that we could
 be far apart from a deal, but this Axios report is no doubt encouraging suggesting that we could
 also see some diplomatic progress now underway, and of course markets are reacting fast as a result.
 Morgan? Yeah, Dan, as you're talking, we're seeing Dow features up about 270 points right now,
 Nasdaq, absolutely surging up about 300 points on these reports as crude oil moves
 markedly lower here, certainly promising if all of this is actually in fact true and comes to
 fruition. The other piece of this, I'm curious about your intel on it, is the fact that we're getting
 this, these details as Iran's foreign minister Ergachi is in China, meeting with officials there,
 and we do know, or we do suspect, that an end to the conflict is part of what's being
 hatched out here ahead of President Trump and President Xi's meeting in China next week.
 This comes at a really critical moment, and it's important to flag this as well, Morgan.
 We have seen Iran's foreign minister touching down in Beijing, meeting with his Chinese counterpart
 Wang Yi, essentially holding talks here with the top buyer of Iranian crude. Of course, the US
 also calling on China to push the Iranians to try and ease up on some of the requests that they
 have when it comes to finding a diplomatic off-ramp here, and the role of China could be absolutely
 critical given the fact that it holds the majority of Iran's purse strings. So we're watching
 and waiting to see exactly what comes out of that meeting, but again, the timing also really
 important here because President Trump is expected to touch down in China as soon as the next few days,
 and of course, the backdrop here for that conversation will be very closely watched by the markets,
 not just given the fact that China could have somewhat of an influence on the trajectory of this
 conflict, but also given the broader US-China relationship. Of course, markets will be hanging in the
 balance and watching every single word. All right, Dan Murphy, thank you with WTI crew to trading
 about $95.80 a barrel right now down more than a 6%. And of course, this is a report that is moving
 markets globally. So let's get to Karen Cho in Europe in London for more on the action we're seeing
 there. Karen. Morgan, good morning to you. We just heard a lot of color there from Dan about what
 still could go wrong from here, but markets are buying stocks, asking questions later,
 a very firm day of trade playing out. Already, we were much stronger, roughly one and a half to 1.7%
 on boards. As that access report crossed, we popped in the indices up well over 2% on the back of
 that. So the algorithm is kicking in very quickly and pushing this market high, and nobody wanted
 to be wrong-footed on this Middle East conflict. And you can see just how these boards have raised
 ahead. Don't forget, as US markets have been bought up in recent weeks, European markets have
 largely been left behind. So that catch-up trade happening very quickly over the course of this
 week. And particularly today, 2.1% up on the FTSE 100, the Zetro DAX 2.2% similar ranges for French
 stocks and the Italian market 1.9% higher. In terms of the sectors that have been bought, it is
 all about the cyclical trade. For instance, basic resources. This morning, when they opened up for
 the trading session, up roughly just over 2%. Now up about 4.5%. So you can see where investors are
 piling into the European market. Autos as well have very much beaten up trade of late concerns
 around the purchase of big-ticket items that is much stronger, travel leisure as well. We've
 been talking at length in recent days around a jet fuel crisis for Europe and cancellations
 by certain airlines of certain routes. Given the capacity constraints, 4% up, banking names to 3.7%
 don't forget they've been hit by concerns around any further impairments to from the
 Middle East conflict. And as they report of this week, there were concerns about their very strong
 growth story being impacted by the Middle East situation. You mentioned the oil price too as you
 took a look at the reaction. 5 to 6% pullback in the commodity prices. It's been reflected in some
 of the sectors as well. If you look at the oil and gas sector, that has been down this morning,
 roughly 1% now ramping up down to more than 2% reflecting that spot price. So a bit more
 contained in terms of that sector versus the spot price. But clearly, having some wash-up
 for the stocks in the basket as markets, you're at very quickly to the effect here. In terms of
 Asia today, don't forget that we're shut as the market is now seeing that Axia's report across.
 But they were much higher today. President Trump earlier had touted progress towards the final
 agreement with Iran's South Korea's Cosby hit the 7000 mark for the first time. And of course,
 powering ahead up more than 6%. Back to you, Morgan. All right, Karen, thank you. I see you and I
 addressed appropriately for the day and all the green on the screen at least for now.
 Yes, we did. Appreciate the reporting. Thank you. Well, let's take a look at shares of AMD because
 those are soaring as well. Even before this report, first quarter results, companies guide and
 speed forecast data center revenue jumping nearly 60% on continued strong demand for chips used
 to power AI workloads, CEO Lisa Sucing. That business is now the primary driver of sales and
 earnings growth. She expects server growth to accelerate as they scale production to meet the
 demand. And it's not just AMD that's popping today. Intel, it's up another 5% in extended trading.
 Now it's up 7%. After rising 13% to a record high yesterday, this is on reports that Apple is
 considering Intel and Samsung to make chips to power devices. Mike Ron's market cap is also zooming
 past $700 billion for the first time as memory stocks continue to rally. This is a $70 stock
 a little over a year ago. Put that into perspective. And Samsung jumping 14% in South Korea pushing
 its market cap above $1 trillion. It's only the second Asian company after Taiwan semi to top
 that mark. Well, let's talk more about AMD and just the surge we are seeing in semis and
 this build out of AI and the AI trade, Paul Meeks head of tech research at Freedom Capital
 markets. Paul, it's great to have you on. I think we've got to start with AMD because there was
 a lot to like in this report. You're take away. So I'm very bullish. I'm not necessarily bullish on
 the valuation. I prefer Nvidia. Believe it or not. But yes, the data center revenues are booming
 and there's a couple of things going on with AMD. Not only are they, I wouldn't say necessary
 closing the gap fully within video, but there'll be a strong number two in the race for GPUs,
 but there's also been a renaissance in the data center of their CPU business, which in the past
 had been essentially the brains for the laptops and desktops. And it was a pretty mature market.
 And now again, an acceleration of growth in traditional CPUs. And so things are going well. I've
 taken my numbers up significantly for 26. I'll be reflected in the shares today. But even with
 my higher numbers for AMD, I value the stock now at over 50 times earnings where Nvidia off of a
 much bigger base is going to grow faster. And it's only trading at 24 times earnings. And that's
 more or less a S&P 500 market multiple. So prefer Nvidia. Before I move on to some of the other names
 that have just been powering semis and broader markets higher here, I just want to take a step back
 on an AMD specifically because this earnings report was very similar in nature. And in terms of
 growth trajectories to the one we got with the last earnings report, AMD sold off so hard on that.
 And now we're seeing it surge. And we saw a rally in the stock coming into this. And I'm just in
 terms of semis, what has changed here with the investor sentiment?
 So that's an excellent question Morgan here. Here's the deal. Of course, for several years,
 since the release of chat GPT in November of 22, this has been the driver. However, as we got to
 the summer of 2025, and this really essentially lasted until just a couple of months ago here in
 2026, they rumors really control the narrative for the AI infrastructure build out and started to
 worry about all the things that we worry about. Will these big expenditures ever lead to adequate
 ROI? Open AI is responsible for a lot of these spending plans. Are they going to be able to fund
 those plans? And so we did have a drawdown where actually stocks were going down on good news.
 But now, last couple of weeks, particularly through this earnings season, you have a situation where
 the narrative has gone back to building, they will come very positive on all the players in the AI
 infrastructure ecosystem. And so the risk is back on because the narrative, the theme has changed.
 Yeah. Is that what's propelling Intel here? Intel is interesting because
 they have a couple of drivers. Here's a company that was down and out. They really have never had a
 problem designing chips, but they've had a problem for about 20 years of making them. And so they
 get the government investment. They get the investment from other marquee players. But Intel to be
 successful in the Foundry business is going to be very tough. And I think the stock is way,
 way ahead of itself, given the fact that I will believe it when I see it because here's a company
 that is going on a spree to manufacture chips for their Foundry. And they've tried this before
 and they've really been bad at execution. So I think Intel, one more getting is one that's way
 ahead of itself. Okay. Paul Meeks, great to have you on to kick off the hour. Thank you.
 Thank you. With all the semis stocks surging right now, including Intel, which is up seven percent
 again, pre-market, we're going to hear more from AMD's CEO, Lisa Sue, on these results. And what
 we're seeing with this AI propelled demand, that's going to be exclusively at 9 AM Eastern today.
 Don't want to miss that in the meantime. Don't want to miss what we have coming up here on Morning
 Call either. The countdown to Disney results before the market opened. The morning call crew is
 going to weigh in ahead of the tape. Plus aside from Nvidia, we are tracking other big winners in the
 global AI infrastructure build out, not the chip names. Names that might not even be on your radar,
 but they should after you hear from us today. And later, a, ha, strategy shift at strategy as Bitcoin
 hits a five month high. We'll continue to watch US equity futures this morning as well, bring you
 any breaking news and headlines developments as we get them tied to this war in Iran and what could
 be potentially a path to conflict resolution. Futures are higher right now. We'll be right back.
 Welcome back to Morning Call. Let's get another check on US stock futures, which are popping.
 This morning, you can see right there on your screen on a new report on the Iran War potential
 off ramp that is materializing supposedly. Axios citing officials reporting the US and Iran are
 closing in on a one page memo to end the war. This is also sending energy prices lower. Take a look
 at your screen. You've got WTI crew down about 7% right now trading below $96 a barrel and ice
 Brent also down 6% trading around $103 per barrel. Natural gas is under a bit of pressure.
 Some of the other refined energy product prices are also lower on this this morning. And oh,
 by the way, Treasury yields also taking a breather here. So joining me now is Ben Emman's founder and
 CIO at FedWatch. Advisors, great to have you on Ben. I want to get your reaction to this. If
 we're actually seeing an off-ramp materialized to this conflict, what does it mean for markets for
 asset classes? Hi, good morning, Morgan. This is kind of an exciting day because that memo is
 really getting credibility in the markets because this is what we were looking for. The good scenario,
 I guess, is outlined in that memo. And importantly, the China is involved somehow in the background
 during this negotiation. I think that's what triggered the reaction because now we're going to get
 the energy relief through the markets so we have to swallow this dislocation of straight
 or most being close off. So if you're getting all the commodities declining in price,
 yeah, no wonder that you're getting the lift of markets a yields lower because it takes the
 inflation risk scenario to table. It takes baby rate high scenario to table two. So I think
 that's how to interpret it this morning and Morgan, it's a firm risk on reaction to something that
 still has to be ironed out, but it seems to be credible. Certainly, we've seen the effects of this
 and we're seeing them right now in real time with US stock futures, for example, here in the American
 market. But this economy has been holding up better relative than many other parts of the world
 in part because we are a net energy exporter and we are a little more insulated with this AI
 infrastructure build out. So is this a situation where you see a conflict resolution and other parts
 the world rally even harder? I mean, I think about Japan with officials just in the last couple of
 days intervening in the yen. I think it's a fair point because you have me to have the curve
 in the conflict because of our economy being so specific with my AI investment.
 The strategy to put the statement out yesterday that it's third of our growth,
 during the system by that, the AI investment and it's coming from four or two and you can see
 in the trade balance of all this importing of equipment. But if you think of a place like Japan
 that's so tied into the state of our moves developments because of its trade balance and energy
 imports, that's why the big relief will take place in the NICA, I think it outperforms S&P here
 temporarily at least as this relief continues. And the same is being played out in Europe because
 of all the shortages of debt fuel and actually shortage of energy in itself that had to get from US
 now reverses, perhaps if this scenario plays out obviously because it still has to be negotiated.
 But I think that's the way to go for me to get a bit of a foreign outperforms US outperforms.
 Nonetheless, I think the reaction in NICA is telling too that this is a relief rally in
 NICA is where the growth is, where the opportunity is. So don't think in NICA will stay much
 behind. Expect the four markets to see some outperforms.
 Yeah, I mean, if we do look at the US specifically, the economic data, we talked a little bit about
 this on the show yesterday. This has been an investment led economy based on all of the data we've
 been getting. And before this war, we were in a good position, the US was in terms of economic growth
 as well. So just want to get your thoughts on this data we've been getting. And what is
 buoying the economy, especially since you did point out defense spending. We don't always
 talk about it very much, but this is a covert form of fiscal stimulus.
 Yeah, totally. You know, the data came out starting last week in durable goods and capital goods
 and some of the data came out early this week, effective orders that can put a defense spending
 up huge. There's like 18% or something. And then related to that, you get all those other
 equipment and software and hardware spending as well. That's all showing up in that data.
 And I think the markets were in so focused on this prepared of time because of the,
 I guess the headline whipsawing that we saw from this conflict, but the economy itself is not
 an incredible robust path here. And I put a graph in that note last night, if you're seeing the
 cumulative growth rates of some of these particular items is showing up and traded and hard data,
 that's, that's incredible. So I think the economy is actually maybe having for some sort of a
 5% GDP level for a period of time here, maybe even good overheat for that matter because it's
 such a strong investment, that stewardship coming, seeing coming through. All right, Ben Emmons,
 great to have you on. Thank you. We'll see how today goes by. We haven't called it out. I'm going to
 call it out now for the control room to throw up. And that is the moves we're seeing in metals
 on this report this morning as well, precious metals surging, goals up 3%, silver's up 5%,
 and industrial metals like copper are also higher. As we had to break though, we're also watching
 shares of contract manufacturer Flex out with strong numbers after the close last night. Investors
 also cheering the announcement to spin off the cloud and power business. You could see,
 look at those shares. They're flexing right now, up 20%. We're back after this.
 Welcome back to morning call. We're going to turn now to the AI infrastructure build at dig a
 little deeper. It's not just hyper scalers and chip makers that are fueling stock market gains
 in booing the US economy, industrial players and companies focused on this physical build out of
 compute capacity are also riding big gains. Take caterpillar. It's sitting on a record backlog
 for its power generation and backup equipment. This is thanks to AI Data Center demands.
 Cat leadership expects power generation equipment sales to triple by 2030 from 2024 levels. You
 heard that right. Sales of its construction machinery, increasingly AI enabled as well,
 have also been strong since you need bulldozers and excavators to get all that construction going.
 Cat's up more than 180% 188% over the past year. It's sitting at an all time high. Other industrial
 names tied to the power generation demands, GE Vernova, Cummins, which boosted guidance yesterday
 on power generation equipment, Generac, Quant Power Services. These are all up between 120 and 175%
 in a year with even bigger gains over the past three years. It's been tracking this.
 Another name to watch, Vernova, sitting at a record high up more than 260% in 12 months,
 2200% in three years. Vernova works with Nvidia on data center power, heat management, liquid
 cooling among others. Other names to watch, AI switch provider, Arista networks, which reported
 first quarter beat, and issued positive guidance last night, though the stock is down this morning.
 It's still down about seven and a half eight percent. As investors may have been responding to a
 lower forecasted adjusted operating margin, but the networking equipment maker has seen shares
 surge. As you could see right there, up 355% over the past three years. Other names to watch,
 carrier and train on the HVAC and cooling side, electrical equipment maker,
 invent, Schneider electric. Also, utility stocks, which have had a big re-rating here in the
 last couple of years, independent power producers like Vistra and Tallinn as well. These are all
 favorites across Wall Street. But one stock that has not been getting some of the same love,
 but playing just as critical of a role in the midst of a big transformation is Lumen technologies.
 The company just reported first quarter results and shares are more than 100% in the past year.
 It's known for its legacy copper and fiber optic business and residential and enterprise
 customers, which still makes up more than half its annual revenue. But the company is using that
 cash to make the AI shift, creating custom built networks, digital services for the AI era,
 servicing hyper-scalers like Amazon, Alphabet, Meta, Microsoft, all in the back of that robust
 fiber optic network. Stronger verticals means faster speeds, less latency for customers.
 And the street appears to be in a show-me state with more than 70% of analysts covering
 keeping their holds ratings for now. But joining me to dig into all of this a little bit deeper
 is Lumen technologies at CEO Kate Johnson right here on set. It is great to have you.
 And we've been talking about this for a couple of years now, but Lumen is in the midst of a transformation.
 You've sold one part of the business and last night you announced acquisition as well. So where are
 we at within this transformation process? So we're doubling down on helping enterprises get the
 most out of AI. And last night's announcement that we intend to acquire software platform
 Alcura is all about solving what I think is a really, really complex problem for companies. AI
 does not operate in one place. It operates in data centers in clouds at millions of edge points
 and it requires data in all of those places to move around in a non-deterministic way in real time.
 And the only way you can do that is with two things. A huge physical fiber platform. And that's
 what Lumen has. And a software layer for intelligence that can control and coordinate and orchestrate
 data flow. And that's what Alcura has. And so better together, we're creating the central nervous
 system for the AI economy. How quickly can this be realized in a big and meaningful way from an
 infrastructure buildout standpoint? So I think infrastructure buildout is about establishing the supply
 side of the economy. And we've all seen those huge contracts. I think what we're starting to see
 now is enterprises need to take advantage of that supply and to actually consume these services
 to transform their businesses. And their networks today, they're just not big enough fast enough,
 secure enough or intelligent enough. And so what we're doing is we're going after that side of the
 market. And it's great for Lumen and our shareholders because it's a software business. And
 software businesses, as we know, they have margin expansion compared to old telecom. And they're
 less capital intense, which is great. How big is the addressable market around that? And around
 connectivity, I guess, in general, which is where you play? So we see a $70 billion total available
 market. And I think the really cool part about this is we were playing in one part of it,
 around the 20, 25 billion side. But Alcura opens up markets internationally for us and also allows
 us to play in the data center interconnect space, which is just a massive expansion in terms
 of where we can play. How much of this is US driven versus other parts of the world? So that's
 the cool thing is that in the old days in telecom, you expanded wherever you could lay your fiber.
 And so international expansion was really, you know, sort of like guardrailed by your capital
 expenditures, but not anymore. With this platform, we have the physical density in the United States.
 And we're supporting multinational companies here. But we can expand internationally and support
 them wherever they do business without having, you know, to do the capital outlay, because this
 platform is carrier and cloud agnostic. So it grows wherever our customers need data to flow.
 Yeah. And last night checked, I mean, stocks under a bit of pressure this morning pre-market.
 What do investors need to know or understand as this plays out, especially given the fact that
 I do believe you beat earnings estimates last night. Yeah, we do. So the market's metabolizing,
 you know, what the heck does this mean? And I mean, it's a great time for Lumen where we're entering
 a growth phase. And this phase is a bit of an inflection, you know, the tough times are behind us.
 And it's really all about upside. It's about driving revenue growth. We're turning EBITDA
 around this year. And we have on the horizon a pivot to revenue growth for the first time
 more than a decade. And it's all driven by really high quality, high margin revenues in our mix.
 So that's the takeaway is that we've got to play in a really bright future.
 Yeah. And just I guess if I step back a bigger, more macro question for you. I mean, there is
 this debate about whether this AI build out is a little bit bubbly or frothy. The more executives
 I speak to, at the more companies I speak to who are on the front lines of this build out,
 the clearer it becomes to me that this is just the tip of the iceberg. How do you see it?
 How sustainable is all of this, especially when last night I think it was the information
 put out a report saying, you know, two trillion dollar backlog, half of that is powered by OpenAI
 and Anthropic. Yeah. So what we see is a very bright future. Even just inside of Lumen,
 we're just starting to use AI to transform our business. I think a lot of companies are playing
 at the edges, driving efficiency and productivity. But what we need to do is reimagine business workflows.
 How does a digital network services company serve an agenteic retailer, an agenteic pharmaceutical
 company, an agenteic manufacturing company? And the interesting part is we're just in the early
 innings of starting to adopt AI and yet 51% of the traffic on the internet is driven by AI agents
 and bots, autonomous workers. And if you think about that, that's, you know, just this much penetration
 and yet it's more than half of the internet traffic. So we really see a huge data workload proliferation
 on the horizon for our business that's fabulous. Obviously it represents an enormous growth
 opportunity because we monetize packet flow. All right, Kate Johnson of Lumen, it's great to have
 you here on set. Thank you. Good to be here. All right, well still on deck. Meta looks to take
 speaking a box. Take a look at page from OpenAI's OpenClaw Playbook and unphropic reportedly
 increased $200 billion deal with Google as CEO Dario Modi warns of what he's calling a quote cyber
 moment of danger plus two stocks were watching this morning. After years of signaling, it would never
 sell any events nearly $70 billion in Bitcoin holding. That's what it is now. Strategy executives
 are saying they'd consider sales if that improved the company's capital structure or increased
 Bitcoin per share. This is a metric used to market the stock to investors.
 And take a look at shares of Super Micro. Those are soaring as the third quarter profit
 beat forecast. Although revenue missed, revenue guidance also topping estimates. You can see those
 shares are popping 17%. This has been a roller coaster of a ride. The Super Micro in the last
 call. I don't know, year, maybe year and a half. Morning call. We'll be right back.
 I'm Morgan Brennan. Welcome back to Morning Call. Let's get a check on futures on the back of
 that XCO's report that the US and Ron are closing in on a one-page memo to end the war. You can see
 futures are at session highs right now. With all the major averages poised for big gains at the
 open, inverse relationship to energy. As we see, those prices come under pressure here pretty
 significantly so on this report as well with crew down almost 8% right now trading below $95 per
 barrel. That's for WTI and Brent trading just below $102 per barrel down 7% are bug gas lean futures
 are down 5% natural gas is down 2% here in the US. Well outside also treasury yields are lower
 but outside of the Iran headlines we are also keeping eye on AMD. That is soaring as first quarter
 results in the company's guidance beat forecast. You can see shares are up 18.5% right now. It's a
 big move for this stock. Data center revenue jumping nearly 60% on continued strong demand for
 chips used power AI workloads. And it's not just AMD either. That's popping. Check out some of the
 other semiconductor names too. You can see microns up about 6.5% Intel up another 6.5% that stocks
 been basically parabolic and other names like Broadcom and Taiwan semi higher in the pre market as well.
 Let's turn out anthropic. We've got a new warning from its CEO of what he calls a cyber moment of
 danger. Speaking alongside JP Morgan CEO Jamie Diamond at an event in New York yesterday to
 unveil these new AI agents that are focused on financial services. He said it's creating a narrow
 window for the world's tech firms governments and banks to fix tens of thousands of software
 vulnerabilities that have been exposed by his company's latest model mythos. Now a number of
 financial services stocks getting hit on the back of the events and news of these 10 new products
 that are being released to the market. You can see down between 1 and nearly 9% yesterday depending
 on the stock but for example five serve looks like down almost 9%. This morning though working
 to recover some of those losses everything is higher pre market. Let's bring in XIE CEO of
 Malocento which works with companies on all things AI X it's great to have you back on the show.
 There was a lot that came out of that event with anthropic yesterday but I do want to focus
 specifically on security vulnerabilities and what this means when Dario Moda talks about six to
 12 months to basically patch all of these vulnerabilities and get ahead of arrival like China.
 Well first and foremost thank you for having me back. Anthropic is the first AI company brave enough
 to build a business model off of its own warning label. What we're seeing with this
 cybersecurity incidents and the need to patch them and the models that are being built to be able
 to discover them is this tension between the business models of cybersecurity and AI colliding
 with the old security models of the internet. The commercial pitch is that AI agents can do more work
 with less friction but the cybersecurity warning attached to that is that attackers can do more with
 less human expertise. So both of these statements are true at the same time and the market implications
 won a lot wider than security. Anthropic is sitting on a very large IPO and a very large valuation
 headed into a potential IPO which does position them as a leader and in a position to potentially
 significantly benefit from people adopting this AI to help solve these issues and these operating
 systems. So on the one hand you do have the fact that attackers are now more enabled because they
 have this automated intelligence to power their attacks and on the other hand you do have the fact
 that Anthropic profits from having a dangerous model that can create those attacks. It's also
 interesting to note that in the system card for Mythos the technical report that was released
 on Anthropic's website there was an instance in its own alignment testing where when it was
 instructed to go and find security bugs inside of a codebase it inserted them and then reported back
 as if it had been there all along. So we do have to as these new technologies come out also discern
 between what are the real valid risks and what element is sales and marketing to know where everything
 should sit. I want to go back to what you just said about inserting them because I've had a couple
 of these conversations now with a couple different executives that a couple different companies that
 are on the forefront of this AI revolution, this inserting piece of it. I mean is this an example
 of bots that are going rogue and if so helping of a risk is that too when you're talking about
 trying to deploy some of these capabilities to counter the cyber threats that bots warms are
 going to represent. I mean I think when it comes to cyber security specifically in these models we
 have two different threats that pose different risks to how we are able to manage the way AI turns
 up in human life. The first is how these models get used so people are able to develop and exploit
 bugs at an exponential rate they're able to hack things much faster but the second and kind of like
 the more important element of it is that we also have, excuse me what we also have is these
 models being given roles and responsibilities to audit and monitor themselves and we in order for
 that to be successful have to maintain our ability to audit these systems so that report that anthropic
 put out the mythos system card show that in their own security testing it was complying more often
 than not with malicious requests it wouldn't start malicious hacking requests but when it was dropped
 in the middle of them it was 68% likely to complete the malicious requests so it wouldn't hack something
 if you asked it but if you dropped it in the middle of a hacking task and asked it to complete it it would
 something else concerning that came out in that system report is that it talked about how the
 models are now starting to ask themselves if they're being evaluated they found that around 20 something
 percent of the time and mythos testing that it was checking itself in its reasoning traces to see
 if it was being evaluated we have no way to know if it changed its behavior there um and
thropic specifically said that mythos had saturated the benchmarks for cybersecurity which means
 that we've lost our ability to see it so on one hand we know these things are going to be dangerous
 in the hands of the wrong people but we also have to make sure that we maintain our ability to measure
 how they perform and how dangerous they are wow there's I mean I can just do another hour talking
 to you about this maybe one day we will I appreciate it excited thank you thank you for having
 we got a lot more to come here on morning call including high gas prices and a hit to McDonald's
 bottom line a little potential hit the pain at the pump may deliver to the fast food giants earnings
 especially as we see a number of these restaurant chains reporting this week morning call is
 back after this
 welcome back to morning call McDonald's a set to report tomorrow morning giving us the latest
 taste of consumer earnings the results will come with a backdrop of war and rising energy prices
 a gallon of regular gas officially crossing past the four four four dollars fifty cent mark this morning
 it's up thirty cents from a week ago it's up from three dollars fifteen cents a year ago so more
 than forty percent jump in a year those higher gas prices expected to take a bite out of McDonald's
 numbers in fact there's a distinct inverse relationship between gas prices and McDonald's sales
 as gas prices rise consumers have less disposable income and are more likely to cut back on
 discretionary spending such as eating out which is historically pressured sales from McDonald's and
 actually you can see that somewhat right here on the screen in terms of the chart between the two
 McDonald's stock is down more than sixteen percent since the war began and by the way it's not
 alone the names that we've heard report so far everyone from Chipotle to Wingstop to Domino's have
 mentioned the impact of gas prices on consumer behavior so we'll continue to track that morning
 call back after this time now for your call sheet where we look at the topics driving the
 trading day ahead the crew members today Jeff Kilburg founder and CEO at KKM financial Stephanie
 Link chief investment strategist at a high tower both CBC contributors and Matt Powers managing
 partner powers advisory group I mean we got to start with with this report guys about a possible
 breakthrough um between the U.S. and Iran here and unclear whether it's actually going to happen
 and and and be realized but certainly moving markets this morning Stephanie I'll start with you
 I mean it's it would be great news but in the face of all of this uncertainty Morgan we are
 coming off the best markets in in April since 2020 and a lot of that is because the economy continues
 to chug along despite all of this uncertainty the Atlanta Fed trackers at 3.7 percent the consumer
 continues to consume the AI boom you talked about it earlier on your show anything that has to do
 with AI and the food chain data center grade power and that's leading to better than expected earnings
 earnings right now are running up about 28 percent sales up about 11 and margins are expanding
 yeah Matt Powers what's a you yeah you know I kind of I'd echo a little bit of that you know we're
 oils elevated you know we're obviously we've had serious disruption risk through one of the most
 important shipping lanes in the world and that's that's not news clearly but equities just don't
 seem that concerned right now you know the the markets basically saying this doesn't turn into a
 prolonged supply shock and you know even the rhetoric out of at a Washington it's kind of gotten
 a little more aggressive but investors are largely ignoring it and you know I think we're looking
 for any kind of a ceasefire or mediation it sounds like we could be there but there's a clear bias
 toward believing there's an off ramp here so where I think that's gets more interesting is if
 that assumption is actually wrong you know because right now oils high but it's manageable and if
 hormones stays constrained and kind of stays this way for a little while you'll get another leg
 higher and crude and and that's that's when it starts to be in a headline risk and actually
 starts feeding directly into inflation and earnings so so I think the markets comfortable with the
 situation but it's also pretty dependent on on things not getting worse from here yeah I mean leaning
 towards the maintenance of a ceasefire and possible resolution of a conflict does seem to be where
 both parties are are tilting here uh in terms of the rhetoric Jeff I mean look no further than the
 Pentagon press briefing yesterday to get a sense of that want to get your thoughts on that also
 want to get your thoughts on what Stephanie just touched on and that is this AI and tech trade
 and specifically the surge we're seeing in semis that just continues well good morning Morgan
 yes Stephanie if we were playing darts right now she just threw a bullseye on that dartboard because
 we talk about earnings and the profits on the marketplace the 10-year average Morgan you're over
 a year growth the 10-year average is about eight and a half percent we're three times almost four
 times that up and 27% so to see these companies the profit look at the balance and I know
 balance here is down here as they but look at the profit we're seeing in some of these names look
 at AMD up 20% so I get excited and when I look at crude oil down almost 10% that's a big
 all clear as we continue to try and navigate this off ramp and I ran I don't see the all clear
 in oil until we're under 80 dollars but I'll take the fact that the 10-year note is down five basis
 points you're seeing the vicks going down lower and again we're at all time highs in the S&P 500
 up 56 handles at the moment so I have optimism I'm excited about today um Stephanie I don't know if
 you saw my gift to you this morning where we focus on industrials in this AI infrastructure build out
 room to run are you kidding I was like I was I was watching with eyes wide open Morgan it was
 an awesome segment yeah I mean I I mean honestly it is anything that is tied to building
 out the infrastructure to support this all of this capex from the mag sevens they will benefit
 I mean it is you name them all I own Quanta G Evernova eaten yesterday was a gift down two and a half
 percent on a great quarter um a lot of names out there and then of course it is the semis it's
 utilities it's the power companies we don't have enough power so I still like that theme very much
 okay we got less than 90 seconds I think we can do it here and get two more questions in
 Matt consumer earnings also in focus we just talked about the inverse relationship
 between McDonald's and gas prices I'd love to throw that chart back up there but what are you
 watching yes far as McDonald's goes you know it's it's not a company we heavily followed but I do
 you know obviously stock price down I think the valuation for McDonald's right there is about
 exactly where it should be you know but I think you know what we're looking at right now we got back
 to highs from techie and so regardless the consumer I think we'll default back to that group when
 we need to see performance and probably fine in the short term but not necessarily the most durable
 setup yeah I mean door dash Instacart Uber Marriott craft times and of course Jeff Kilberg Disney
 thoughts Disney interesting it's been down 10% year to date maybe there's a trade here on the
 earnings implied volatility we're expecting about a six and a half percent move so a seven dollar
 move here but bigger picture you want to own Netflix on a three and five year perspective because
 Netflix has beaten the brinks off of Disney from a margin perspective wow we still got 40 seconds
 Stephanie like Disney Disney uh no but I do like Netflix so I agree with Jeff very much and that's
 a fairly new position for me um because I think that the company is growing much more than Disney
 Disney has a show me story they've got to prove that they can grow double digits in the second half
 of the year that's the big task at hand today all right uh thank you to our morning call crew great
 to have you all here look at that we just covered quite a bit I'm very proud of us uh as we do take a
 look at U.S. stock futures which are trading at highs this morning we've seen this surge on potential
 for a conflict resolution between the U.S. and Iran crude is lower treasurer yields are lower