Morning Call 8/10/26

 This message comes from Viking committed to exploring the world in comfort, journey through
 the heart of Europe on an elegant Viking longship with thoughtful service, destination-focused
 dining, and cultural enrichment on board and on shore, and every Viking voyage is all
 inclusive with no children and no casinos, discover more at Viking.com.
 It made you confident that you could do something that hadn't been done before.
 I have no fear of failure.
 Trailblazing women, changing the game.
 One of my favorite pieces of advice, think about what your boss's boss needs.
 Leadership can look in many, many different forms.
 It really does come down to just trusting yourself, like the short, and you just gotta think
 big, to accomplish big things.
 Julia Boerston hosts CMBC Changemakers and Powerplayers.
 New episodes every Tuesday, wherever you get your podcasts.
 I'm Dominic Chouin from Morgan, Brendan, and this is your morning call.
 All right, good morning to you.
 We'll be seeing Morgan in just a few moments here, but first, take a look at what's happening
 with US equity futures, US stock futures with the S&P 500, by the way, sitting at an all-time
 high and the major averages coming off their best week since mid-April.
 Right now we can kind of see futures slightly bid, but tell Helping both the book loads gains.
 Let's send it right out to Ben Boulos across the Atlantic for a check on some of the
 market action going on out there.
 Ben?
 Yes, if you wanted clarity of equities, I'm afraid you come to the wrong place.
 It's a somewhat muted start to the week for European equities after Friday's strong session.
 Trade is really trying to digest all those latest twists and turns, those developments
 from the Middle East where there aren't tying the reopening of the Strait of Hormuz
 to a whole series of conditions and concessions from the United States.
 This is the picture across the main benchmarks.
 As I say, really seeking some direction there, it's just the German tax that is above the
 flatline.
 Trade is also looking ahead to the remaining European blue chips that are due to report
 this week as earning season winds down and Wednesday's CPI print, of course, for clues
 on the Fed's rate path ahead.
 That is the picture on European equities as things stand, but I want to focus in particularly
 on one sector.
 Guess which one?
 Of course, European tech stocks are outperforming in early trade currently.
 It is the best performing basket of stocks.
 They are following their peers in Asia into the green.
 We are seeing strong gains right across the sector led by Infinion.
 Look at that.
 Again, of more than 4% sending it towards the top of the climbers on the Pan-European
 Stock 600.
 Some of these other chip names also following suit.
 Let's see if that follows when we'll straight train and get some of the way later.
 Don't lie to you.
 Ben Boulos, thank you very much for the market action out across the Atlantic, turning
 out of Washington, D.C. and what will be a can't miss conversation less than 30 minutes
 time.
 Morgan Brennan is here with what's on deck in Morgan.
 Where are you?
 What can we expect?
 Yeah, Dom.
 It's great to see you on the anchor desk this morning.
 I am here in Washington, D.C. and over the past two weeks you've had hack attacks.
 AI hack attacks from the likes of open AI andthropic meta.
 Even on the Chinese side, moonshot AI with disclosures on a Friday.
 Think bots going rogue.
 Experts are calling this a new era for cyber security.
 And Booz Allen Hamilton, CEO, Horacio Rizanski, has been sounding the alarm on this for
 a number of months and has been very focused on this.
 The company has been very focused on this for quite some time now.
 So we are here at the Helix Innovation Center.
 This is the company's innovation center in Washington, D.C.
 And we're going to dive deep into this conversation about this new era of cyber security.
 What it takes to develop defenses against a new type of offense, what it means from a
 timing perspective.
 When you're talking about botswarms and agentic AI in a new way where the timeline compresses
 from days or months to conduct some of these sophisticated hack attacks down to seconds
 and minutes.
 Booz Allen is the largest provider of AI and AI services to the federal government.
 It's also the largest provider of cyber security to the federal government.
 They work with a number of companies, everybody from AWS to Nvidia to some of the defense
 tech players.
 Also open AI, they're part of Anthropic's project Glasswing.
 So what Horacio Rizanski has to say carries quite a bit of weight here.
 And that's what we're going to focus on.
 We're going to focus on what this means for the federal government.
 Amid heightened geopolitical tensions, what it means for corporate America, what it means
 for policy and regulation as we do move forward here.
 And it is a conversation you do not want to miss, especially as this technology continues
 to evolve and develop here, Dom, going to be a very important conversation coming up
 in just a little bit later in the hour.
 All right.
 Morgan Brennan, we're looking very forward to that conversation.
 We'll see in just about maybe 20, 30 minutes time here.
 We appreciate that.
 Let's go back to the US markets right now.
 Equity futures are slightly higher with the S&P 500 sitting at an all time high.
 And the major averages coming off their best weeks since mid-April.
 Now the technology trade as it has been for a while, driving a bulk of those gains.
 The sector is coming off its best week, by the way, since April, you can kind of see
 there what's happening.
 The Dow is slightly lower.
 After two intense weeks, though, Wall Street is getting a little bit of a reprieve, a
 respite before it heats up again with retailers and another round of big technology earnings
 reports hitting later on this month.
 This week, though, we're going to get Cisco systems core weave, cerebrus, applied material
 amongst others as big catalysts for the earnings calendar.
 Now from earnings to economics, we get the July CPI Wednesday, the PPI on Thursday,
 and a check of yields, maybe just moving ahead of that.
 We can see a little bit of a move in some of those interest rate products, right?
 There we go.
 We can kind of see the 10-year note yields slightly lower to a 4.65 percent in terms of yield.
 The two-year note yield slightly higher to 4.21 percent in the 30-year long bond, just
 about 4.21 percent.
 And then of course, energy prices.
 As we monitor the latest between the Iran and US war, we got much more on that coming
 up as well, so keep an eye on that.
 Now we've got a big morning for big money movers ahead of this trading today.
 We're starting with Berkshire Hathaway out with earnings over the weekend.
 Profits doubling from a year ago, thanks mostly to a nearly $13 billion investment gain.
 But the real story was CEO Greg Abel putting Berkshire's serious cash pile to work, ending
 a more than three-year selling streak.
 Among the big buys there, Berkshire bought up about $10 billion in alphabet shares and
 $4.5 billion of its own stock.
 Google is now ranking among the top five largest holdings in the Berkshire portfolio.
 Taiwan's semiconductor says sales in July jumped 45 percent from a year ago period to $14.5
 billion in a sign of continued demand for AI hardware despite recent market volatility.
 For the year, the go-to chipmaker for people like Nvidia and Apple expects sales to grow
 slightly above 40 percent.
 And Apple has reportedly been testing memory chips from China's CXMT for the iPhone
 and MacBook products.
 The Wall Street Journal says Apple held talks with China's largest memory chipmaker about
 supply parts with the goal of using them in some devices sold in that local market in China.
 And the Senate Saturday moved to advance a major crypto bill that would create a regulatory
 framework for that sector.
 If passed, it would make a huge victory for the president and the crypto lobby as well.
 The move sets up a key procedural vote when the Senate returns from its August recess
 in mid-September, potentially paving the way for a full floor vote on the bill.
 You can kind of see right now crypto stocks in the extended session so far today, up roughly
 one to one and a half percent.
 We're talking names like Coinbase, Strategy, Riot platforms, Mara holdings, and of course
 the grayscale Bitcoin ETF trust as well.
 Well to the overnight action in Asia, now let's get out to our Lisa Kim out in Singapore
 for the wrap up there.
 Good evening Lisa.
 Hey Dominic, so Asian stocks kicked off the week in the green though on a more subdued
 note compared to some of the recent big swings that we've seen.
 Let's go over to Japan.
 Sony Group and Taiwan's TSMC are considering investing around one trillion yen or six
 billion U.S. to produce next generation microchips used in image sensors as according
 to the Japanese newspaper, Nikkei Shimbun.
 The two have reportedly formed a joint venture to make image sensors in Japan from 2029 and
 supply them for Apple's iPhones.
 But the report says that the JV's long-term aim is to strengthen its capacity for physical
 AI.
 Over in China, over the weekend, the country released inflation data for July, the
 producer price index and consumer price index both east more than expected, reflecting
 lower oil prices and weakening domestic demand.
 Many economists wrote in a note that deflation risks in China could be rising again.
 Back to you.
 Lisa Kim with the latest out of Singapore, thank you very much for that.
 Sticking with the action overseas and new developments in the Middle East as Iran throws
 cold water on any hope of a near-term deal between Tehran and Washington DC, according
 to reports Iranians foreign minister said that he says his country and the U.S. are not
 currently in direct talks with an end to – with a goal to end the war or reopen the
 straight-of-war moves.
 In addition, Iran is now asking the U.S. for compensation and an end to the port blockade
 as two of six envisions to reopen the straight-of-war moves.
 According to the Central Command, as of yesterday, the U.S. has redirected 55 commercial
 ships, disabled two of them, and boarded two more as part of its Iran port blockade.
 Now sticking with the Middle East from Iran to Yemen, Houthi rebels are continuing their
 aggression against regional neighbors with Iran's support, including attacking a Saudi
 Iran-co-owned facility in Saudi Arabia.
 Turning now to what all of this means for you and your money ahead of this critical
 week of trading, let's bring in Storm Uru, co-head of the Global Innovation Team at
 Lion Trust asset management with more than $26 billion in assets under management and
 advisement.
 Storm, we've mentioned a lot of different catalysts right now, but the market still sit
 at or near record highs.
 How exactly does a fund manager justify their holdings and what exactly is the expectation
 as these earnings continue to pour in?
 Yeah, Don, there's no doubt you've covered a lot of new news this morning, and just
 like the beginning of this year, through the middle of this year, and what we experience
 in July, we think, without doubt, when you allocate capital across different markets
 and across different geographies, the price you pay is just so important.
 And so for us, the earnings season has just concluded, well, just staying to conclude
 here in the US, S&P 500 is about 86%, have reported so far, what really matters for
 us is the fundamentals of these companies continue to improve.
 And so you've got top line growth of 15% on average with most of the S&P 500 companies.
 What that means for us is that after the reset, and particularly technology companies in
 July, it creates a very opportunity with key companies going forward.
 So we've actually turned quite positive in key areas in the market, even though headline
 level S&P 500 and so forth do look expensive, when we see many opportunities across the ecosystem
 at the moment.
 All right, because you open the door, where are those opportunities, Storm?
 What types of companies are you looking at?
 What are you adding to your portfolio?
 Yes, what was really important for us during this earnings season was that the hyper-scalers
 can really underwrite the capital expenditures they're making, and what we've heard from
 all four really is that they're achieving quite high returns on Capix that are applying
 today.
 From Microsoft Azure to AWS to Google Cloud, the results really are quite astounding.
 What that means is that if you are a supplier into that capital expenditure, you've got a bottle
 and you've got pricing power, and that's exactly where we saw the damage in July with stock
 prices with companies like Sandisk, Estera Labs, Memory Networking, these are the key sub-sectors
 that would be now getting capital in the last two weeks.
 And we continue to see quite a significant value opportunity at this point.
 If you look at the way things have shaped up from the price action, the NASDAQ did dip,
 the tech trade did dip, certain key parts of the market did dip more than others.
 But generally, from an index level, investors seem to pour right in even with the kind of
 mini-sell-off that we've seen.
 Those sell-offs have gotten shorter in duration and less, I guess, shallower and less deep
 in nature as well.
 Is that sentiment something that's going to continue for the coming quarters?
 Yeah, we expect because the yield curve has moved up significantly, but particularly
 the longer end over the last 18, 24 months, it's introduced the level of volatility into
 the market which gives active firm managers and retail investors opportunities during periods
 of significant dislocation.
 What it also means is that at the index level, you just can't sort of, you know,
 just buy at any particular moment because you are overpaying for some company.
 So for us, active becomes very key, the price you're paying for these companies becomes
 really important.
 But also, when you see price dislocations to the downside, you need to take advantage
 of those particular opportunities and also take money off the table when you see dislocations
 to the upside like we saw in May and June.
 All right.
 Storm, ooh, with the outlook there on tech stocks overall.
 Thank you very much.
 We appreciate it.
 We'll see you again soon, sir.
 All right.
 Our morning call including text next big test with the bulk of earnings now in the rear
 view mirror.
 We asked Dan Ives, what could fuel the next leg of the sector's big rally after its
 best weeks since April plus angst in the ranks of the Republican Party ahead of the midterm
 election cycle and why I's are now turning to a key seat in Ohio.
 And then later on, how paramount is trying to sweeten the pot to get its Warner Brothers
 deal over the finish line.
 We got a very busy hour still ahead when morning call returns after this commercial break.
 This message comes from Viking committed to exploring the world in comfort journey through
 the heart of Europe on an elegant Viking long ship with thoughtful service destination
 focused dining and cultural enrichment on board and on shore and every Viking voyage
 is all inclusive with no children and no casinos discover more at Viking.com.
 It made you confident that you could do something that hadn't been done before.
 I have no fear of failure.
 Trailblazing women changing the game.
 One of my favorite pieces of advice.
 Think about what your boss's boss needs.
 Leadership can look in many many different forms.
 It really does come down to just trusting yourself like a short and you just gotta think
 big to accomplish big things.
 Julia Bourston hosts CNBC Changemakers and Powerplayers.
 New episodes every Tuesday wherever you get your podcasts.
 All right, welcome back to morning call.
 The US markets are coming off their best week since April with the NASDAQ closing above
 its 50 and 200 day moving averages on Friday technology was the best performing sector
 up more than 7% powered largely by shockingly Nvidia, which gained more than 11%.
 Investors will look to a few earnings this week for a check on the tech sector and AI trade
 overall with names like core weave, Cisco systems, cerebris, and applied materials set
 to report their results.
 Joining me now for this conversation is Dan Ives, partner and senior managing director
 at Yorkville Ives.
 Dan, it's fair to say that you've got your fingers on the pulse of tech and trying to
 figure out what's going on.
 It is your job to understand what's going on here.
 How has the tech trade and the price action shaped up against the fundamental earning stories
 and outlooks that you've seen so far?
 Is it one where investors can still be generally more optimistic about that kind of price improvement
 going forward?
 Yeah, I think this time, I mean earnings is almost caught up to valuations.
 I mean, if you think about tech earnings, what you saw with the hyperscalers, Microsoft
 in particular, I think that was for the wow moment for investors because now, when
 you think this week, Cisco and you look at core weave, it's a piece of a puzzle and it's
 all starting to come together where demand is accelerating and I think you see that
 from the hyperscalers to chips to Palantir and others and I think that is why you continue
 to see tech stocks move higher.
 It's not that we haven't focused on things like cash flow ever, but there's been a
 hyper focus on cash flows in this quarter that just reported or that is reporting right
 now and maybe the last one or two.
 We saw the juxtaposition of alphabet and their kind of cash flow commentary and then
 Microsoft and their cash flow commentary.
 It seems to me that Microsoft understood the assignment after seeing what happened to
 the alphabet.
 How exactly do fundamental analysts now look at that cash flow generation against what's
 happening with the stock price movements, PE ratios or PE ratios, but cash flow is a huge
 focus more these days.
 Yeah, I think Palantir would be a great example.
 I mean, look at that from a cash flow perspective.
 I think on the catbacks to monetization, the reason the Microsoft quarter was so important
 for just broader tech, it shows and I think they laid out perfectly is that the monetization
 starting to happen.
 Look, catbacks, it requires patience and you can see when it comes to alphabet, you
 can look what happened with meta, but the reality now it's starting across.
 Where now you're starting to see the monetization.
 I think as an investor, investors need to look out not over six months, but over 12, 18,
 24 months to what that cash flow is going to look like.
 And I think that's why we're starting to see that in flexion point, happening in tech.
 And catalyst wise, I mentioned a number of companies that are going to be reporting
 results, Cisco systems, cerebrists, names like that core weave.
 Are there any of those this week that are reporting that you think will be a bigger driver
 of the story for investor sentiment around tech and AI in the coming couple weeks?
 Yeah, and this is all the appetizer to the main event being the Godfather of Agents in
 Venice.
 We get to later in the month.
 But I think core weave on a neocloud, extremely important, you can say nebias as another example.
 And then Cisco, look, they have a great sort of cappered seat relative to what's happening
 overall in terms of demand, tech infrastructure.
 Look, this is all a jenga puzzle.
 You're all starting to put it together.
 I think investors as they continue to get these data points, it makes you more bullish
 for the broader AI revolution, true rather than less, because now you're actually starting
 to see it show up.
 But Dan, I will say this before we go, the thing about jenga, you pull out the wrong
 piece and the whole thing can top a little bit.
 And that's what the bears are always waiting for.
 I'm just saying.
 All right, we'll see you later on.
 Thank you.
 All right, thank you very much, Dan, for that.
 I will see you later on this hour.
 Straight ahead on this show here, Wild Weather in Asia's Typhoon Dolphin makes landfall
 in eastern China after slamming through Japan over the weekend, with 100 mile an hour
 winds knocking out power to more than 50,000 buildings you're seeing some of the images
 right now.
 We'll have the latest in just a moment here, but first, a check on shares of the aforementioned
 Palantir that stock is rising 10% on Friday and posting its best weeks since November of
 2024 on the back of its blowout earnings results and outlook up nearly 40%.
 Morning call is back after this.
 This message comes from Viking committed to exploring the world in comfort.
 Learning through the heart of Europe on an elegant Viking longship with thoughtful service,
 destination focused dining and cultural enrichment, on board and on shore, and every Viking
 voyage is all inclusive with no children and no casinos.
 Discover more at Viking.com.
 What made you confident that you could do something that hadn't been done before?
 I have no fear of failure.
 Trailblazing women changing the game.
 One of my favorite pieces of advice.
 Think about what your boss's boss needs.
 Leadership can look in many, many different forms.
 It really does come down to just trusting yourself, life is short, and you just gotta think
 big to accomplish big things.
 Julia Boursten hosts CMBC Changemakers and Powerplayers.
 New episodes every Tuesday, wherever you get your podcasts.
 And welcome back to Morning Call of Chicken.
 Some of this morning's latest headlines.
 The Senate confirming Todd Blanche for Attorney General in a 50-49 vote, lawmakers working
 through the night, Friday into Saturday to get it done before their summer recess.
 That narrow vote for Blanche is the closest margin of any Attorney General nominee in recent
 memory.
 Ohio Congressman Max Miller says he is staying on the ballot as Republican nominee ahead
 of the midterm elections despite growing calls from his own party to step aside.
 Miller is facing allegations by his ex-wife that he abused her and their young daughter,
 a claim that Miller does deny.
 Taylor Farm says it's recalling prepared food items containing jalapenos over concerns
 of a potential salmonella contamination.
 This coming just a few weeks after another voluntary recall for let us tie to the cyclospora
 parasite, among the items being removed from store shelves include salsa and guacamole
 products.
 Republican A.I. says it can't rule out that its upcoming A.I. model dubbed Astra has quote
 critical cybersecurity capabilities, meaning it may be able to autonomously identify and
 exploit severe real-world software vulnerabilities.
 Open A.I. says it's pausing some internal development on the agent and triggering some safety
 protocols as well.
 Paramount Skydan says it's signing contracts with major theater chains guaranteeing it will
 release 30 movies a year in cinemas if it acquires Warner Bros. discovery.
 The deal also requires Paramount to release the films exclusively in theaters for at least
 45 days and then waiting at least 90 days before making them available for streaming platforms.
 And Typhoon Dolphin making landfall in eastern China overnight, you're seeing some of the
 videos just now here, marking the most powerful tropical cyclone to hit the mainland this year.
 Those warning the storm could trigger mass flooding and landslides as it moves towards
 the west, where it's expected to weaken and slow down.
 The storm already swept through Japan, injuring six people and cutting power to more than 50,000
 buildings.
 We'll still on deck for the show here, Morgan's exclusive conversation with the CEO of Booz
 Alan Hamilton, talking the A.I. arms race, cyber threats and so much more, Morgan call his
 back after this.
 I'm Dominic Chouin from Morgan Brennan who will be we will be seeing in just a few moments
 here.
 Welcome back to morning call.
 Now, US equity futures are moving somewhat mixed here with the S&P sitting at an all-time
 high and the major average is coming off their best weeks since mid-April.
 Right now you can see the Dow is implied modestly lower down by about roughly 50 points.
 The S&P higher by just about one or two points and that tech heavier Nasdaq trade seen the
 best relative gains in the pre-market trade that Nas 100 up about 101 implied points
 at the opening bell.
 Technology, as part of that story, is helping to drive a bulk of those gains as sectors
 coming off by the week.
 It's best week since April and right now you can see with that kind of S&P technology
 sector trade, just about 7% higher between August 2nd and August 8th.
 After two intense week, Wall Street will be getting a little bit of respite before
 it heats up yet again with retail companies and another round of tech companies hitting
 their earnings reports later on this month.
 This week though, we get Cisco systems, core weave, cerebris and applied materials among
 some of the others as you can see on this calendar.
 Now from earnings to the econ story, we're going to get July consumer price index data
 on Wednesday and then the producer price index data on Thursday ahead of those two key inflation
 reports.
 Right now yields are modestly lower for the benchmark 10-year note yield, 4.65% there
 so bond price is higher, and then on the two-year note side of things, 4.21%, the 30-year
 long bond, 5.20%.
 And then energy prices, as we monitor the latest between Iran and the United States,
 right now US benchmark West Texas Intermediate, up about almost a one-full percent, $78.83, about
 a one-percent advance for ice-print crude futures, the world benchmark age, $84.35 the last
 trade there.
 Now, we've got a news alert, and in the wake of a string of AI-related cyber breaches,
 Democratic senators Adam Schiff and Amy Klobuchar are unveiling a new bill this morning, one
 that could and would strengthen federal oversight by the EPA, provide critical funding for local
 utilities and safeguard drinking water and wastewater sources from cyber attacks.
 Cyber is something that's a top of mind for our friends at the global management and tech
 consulting firm Booz Allen Hamilton, and that's what we find, of course, our own Morgan
 Brennan with a very special guest, Morgan.
 Hi, down that's right, a very special guest indeed.
 I'm inside Booz Allen's Helix Innovation Center here in Washington right now.
 I'm joined exclusively by Booz Allen's CEO, Horacea Rizanski.
 It's great to be here with you.
 Just a little bit of context for our viewers, Booz Allen, largest provider of AI services
 to the federal government, largest provider of cybersecurity as well.
 And you have a growing commercial business on the cybersecurity side, too.
 You have partnerships with NVIDIA and AWS, number of the defense tech players, open AI
 a part of Anthropics Project Glass Wing.
 And when we see some of these AI hack disclosures that we have over the last couple of weeks, whether
 it's open AI or meta, or Anthropic, or even on the China side, Moonshot AI on Friday,
 new era of cybersecurity, is that how you see it?
 Absolutely.
 First of all, welcome.
 We're so glad you're here, and you're totally right.
 So we began tracking this a couple of years ago because of our work at the intersection
 of AI and cyber, and we've been watching this curve, and it was simmering.
 And around the middle of last year, we began to see the acceleration, and we now believe
 we're in this vertical part of the curve, where the cyber AI threat is real.
 It's here right now.
 This is not something we're going to talk about in the future.
 It's just going to intensify as the technology gets more widespread and more powerful.
 And our job at Booz Allen is to mount the cyber defenses that are going to help companies
 and our customers in the federal government fight this, stay ahead of the threat, and manage
 through it in an environment where the attacker has to be right once, and the defender
 has to be right all the time.
 And that is really the nature of this challenge, and it's a really humbling challenge for all
 of us to work in this field.
 You know, the Black Hat Conference was going on in Vegas last week, and you saw some more
 details and disclosures around some of these bots going rogue at some of these companies
 with some of these frontier models.
 I mean, examples, I think, on the open AI side with a hugging face hack of bots that were
 creating messaging boards to orchestrate some of these attacks.
 You had another disclosure regarding mythos, an outside company talking about bots creating
 fake identities to trick the humans.
 I mean, it could go down the list here.
 How do you defend against that?
 How different is that threat than anything we've seen before?
 So if you go back to, you say, how is AI changing cyber?
 It's changing it in two ways.
 First of all, the speed of the attack.
 What used to take days, not take seconds.
 Second, the economics, I mean, for a financial audience, the economics of the attack.
 It used to be that to mount a very sophisticated attack, to hold the target at risk, you had
 to spend millions of dollars.
 Now you can do it for thousands, and even less, and as the Chinese models begin to catch
 up to our frontier models in this area, it's going to get even cheaper and more widespread.
 Now how do you defend against it?
 In our view, three things, and we're investing heavily in all three of them.
 First of all, zero trust.
 You have to make sure that your network is segmented in a way that every single transaction is authenticated
 because that slows down the attack so where you can catch it and reverse it.
 Second, agentic everything when it comes to cyber, and we're moving that direction.
 This is not about, let's take the way we used to do it, and now power it with AI.
 We have to do it in different ways.
 And then you have to counter AI with AI, with completely asymmetric projects.
 We have something that we're beginning to work with with a couple of selected customers
 and their own network that actually has proven in the lab to defeat the most sophisticated
 AI models, 95% of the time.
 So it can be done, it just has to be done very fast, and you have to be very nimble.
 When we hear about bots escaping sandboxes, is that a secondary risk when you talk about
 deploying AI against AI?
 You know, the challenge, as these models become more sophisticated, one of the things that
 makes it more sophisticated, it's not just how many parameters, it's the trillion parameters
 or more, is how big is the context window?
 How much information can they hold at once to mount an attack?
 The challenge is the larger the context window, the less governable the model becomes because
 it now begins to make decisions about how to reach the objective, or even in some cases
 what the actual objective should be.
 As we test all of these models, the other thing that is we're beginning to see in a couple
 of the models, they actually know when they're being tested, and they alter their behavior.
 And so even the testing has to become more sophisticated.
 Again, I mean, this is not, it's a bit to sound the alarm, to say this is real, it's
 right now, and it needs to be addressed.
 But it is also to say there's ways to work it, you just have to be very smart, very sophisticated
 and very focused on it.
 You know, as you were having this conversation from a geopolitical standpoint, I mean,
 this sort of strikes right at the heart of this idea of this being a global AI arms race.
 So how does policy and regulation factor into this, especially when you see executive
 orders about, you know, about nonmandatory reviews of new models before they go out to the
 public in the U.S. or you've got AI kill switch legislation.
 We'll get to some of the water infrastructure legislation that was presented over the weekend
 as well.
 I think that's a different piece of this cybersecurity puzzle.
 But how does it speak to the role that policy and regulation can play when you're talking
 about a U.S.-China arms race?
 So it totally is a race.
 And it's a race that's driven by two things, innovation, and then adoption.
 And in some ways adoption becomes more important than innovation, because a lesser model that
 is used by everybody is more powerful than a very good model that is used by a few people.
 And if you think about the adoption curve, three things, right?
 The quality of the model, how expensive it is to use and how much do you trust it?
 And this is where China can get an edge if we over-regulate this field.
 But in my mind, regulation is important and it needs to play a role, but it needs to balance
 those three things so that U.S. models become available, accessible, and adopted worldwide
 before the Chinese models get.
 So is the way to think about this at the threat landscape isn't evolving as much as it's
 expanding?
 I asked that because in the last couple of weeks, for example, we've seen dozens of
 water infrastructure companies, utilities, have been targeted.
 The U.S. government has not come out and said this is Iran, but five weeks into the conflict
 with Iran, you did have federal agencies release a very detailed report warning that you
 could see attacks such as what we are seeing at water utilities by the likes of Iran or
 actors tied to Iran.
 We're talking about attacks on infrastructure that is digitally connected.
 Right.
 So, first of all, nobody is immune.
 For the most sophisticated companies to the least sophisticated institutions, everybody
 is under attack.
 And to your point, when a smaller or perhaps less sophisticated player is attacked, that
 has two sets of ripples.
 One is, of course, to the community that is affected.
 But second, if it's connected to the broader infrastructure, imagine the grid, imagine
 what happened in colonial pipeline and the way the our ability to move energy across
 the country.
 They're going to be looking for the softest target.
 And in lots of cases, the softest target is going to be the smaller player.
 You know, it's not going to be the money center bank, maybe a regional bank or a small
 community bank, that then becomes the entry point and a larger attack vector.
 That's why we've been investing on productizing a lot of what we do and launching products
 at an accelerated rate because at the end of the day, we believe we can launch products
 at a cost in a way that they can become more pervasive and give access to the less sophisticated
 players, the smaller players that can't spend money to build a thousand-person sock operation
 center.
 Let's give them access to the technology that's going to help defend them.
 Yeah.
 And so I mentioned it when we came into this conversation, but you are partnered with
 quite a few folks across the tech ecosystem and landscape.
 You're also part of Anthropics Project Glass Wing.
 How to think about, especially at a time where more broadly, you look at something
 talked about in services as a whole, stocks, including Booz Allen have sold off this year
 because there's this narrative of AI disruption, but you're in the AI ecosystem overall.
 So what do investors need to understand about Booz's role and all of this moving forward?
 So because we've been investing in AI for over a decade, we actually have an opportunity
 to turn all of these needs into new revenue streams, new opportunities for us.
 Again, we haven't productized our IP around cybersecurity until now, but our AI-driven,
 agentic cybersecurity products are so compelling that what was going to take two years to bring
 to market we're doing in six months.
 So that's the kind of opportunity we see.
 There's opportunities for savings, there's opportunities for efficiency if we're going
 after those as well.
 But the real opportunity for us is to expand our revenue streams both with our commercial
 customers and across the federal government by taking all of these IP and making the
 available much faster.
 All right.
 So in light of that, just to wrap all of this up, what does that mean in terms of cybersecurity
 as we talk about and evolving and expanding risk and then creating those defenses to counter
 it?
 So at the end of the day, I think you said it exactly right.
 This is not an evolution of the threat as much as it is an expansion.
 We have to be mindful of what we're already doing and do it better.
 We have to build the agentic systems.
 We have to implement zero trust and we have to invest in all of these new models beginning
 with the places where they're most needed against the crown jewels or the company of an institution
 and of the country.
 I think we're in a good direction on this, we're in a good vector.
 It's simply a moment that is so hard because the attacker has the time advantage and again
 the advantage that they can be wrong 99% of the time and you have to be right 100% of
 the time.
 All right.
 Karasya Rizanski, CEO of Booz Allen, it's great to sit here with you, have this conversation
 and appreciate you having us here at the Helix Center.
 Dom, we're going to continue to have this conversation.
 We're going to bring more coverage and dive even deeper into the technology, into the
 threat, into what it's going to take to counter all of this and the investments associated
 with it throughout the day on a CNBC as well.
 I'll send it back to you in the studio in the meantime.
 All right.
 Thank you very much, Morgan Brennan and Horasio Rizanski as well for that conversation.
 Big one for sure.
 Let's now turn back to Dan Ives.
 You heard the conversation with Horasio Rizanski over at Booz Allen, big government contractor
 for sure.
 Cybersecurity is going to be a key theme for the coming years, maybe even decades.
 What companies are best positioned right now in your mind to be the ones we still talk
 about in the next 5, 10, 15 years?
 Yeah.
 Now is a phenomenal interview.
 Look, I think it speaks to our view, cybersecurity budgets, they're going to double over
 in the next two, three years because the agents are going to continue to expand.
 I think when you look, crowd strike, pow out though, I think those are really ones that
 are sort of leading the cybersecurity industry, there's many others, you're in checkpoint
 among others.
 But I think this just speaks to our view, like these cybersecurity is going to be one of
 the core second derivatives of the AI revolution.
 All right.
 Cyber a huge focus for sure there.
 Thank you very much, Dan.
 We'll see you in just a couple of minutes here.
 We got the morning call crew assembling just later on and just the next maybe 10 or so
 minutes to react to Morgan's interview and some of the big news of the day as well.
 Keep it right here.
 Morning call is back after this commercial break.
 Welcome back to morning call.
 Here's what to watch in the week ahead.
 We get data on existing home sales, inflation with both the July consumer and producer
 price index, jobless claims, July retail sales, all amongst those reports coming out.
 The pace of earnings is a bit slower this week, but we still get some notable names including
 CoreWe, Cisco systems, applied materials, and Kaba, an interesting selection there.
 Morning call is back after this.
 All right.
 Welcome back.
 It's time for your call sheet where we look at the topics driving the trading day ahead.
 The crew members assemble today are Dan Ives of Yorkville Ives, Stephanie Roth of Wolf
 Research and Callie Cox of Ritholz Wealth Management.
 Thank you all for being here with us.
 Let's start with our first topic, which is the markets at or near record highs right
 now.
 And Dan, tech has been a big driver of that trade.
 Is that momentum here to last?
 Oh, I mean, I continue to think it's third inning.
 You could argue maybe even second inning in the AI revolution because it's not just the
 cap X-thawers, it's about the monetization, and now that spreads from industrials to energy
 and everything else, it's continues to be get the popcorn out as we go through the next
 few months.
 And the bears continue to watch us from a hibernation mood.
 And a follow up to that given the slate of earnings reports coming out from tech companies,
 including some AI related names, how much do you have to scrutinize those earnings reports
 for that continued momentum?
 Pieces of the puzzle, core weave, Cisco across there.
 It's just going to give investors more and more information, the build up, when we hear
 from Godfather, VI, Jensen, Lair this month.
 All right, Callie, from an overall markets perspective, how does that tech trade operate
 within the broader markets vis-a-vis the broadening out trade?
 Is the momentum trade still there?
 Is it going to gain footing again?
 How exactly is that price action playing out from the markets overall?
 Well, I think it's hard to say where the momentum trade is heading because it really depends
 on the headlines we see from day to day.
 But what I can tell you, and I agree with Dan, by the way, AI is a compelling story.
 But what I'm seeing is more of a thematic rotation going on.
 There's looking for the value and the quality within the AI trade.
 And I think you could see that through the earnings season.
 The fact that tech has done exceptionally well has beaten a high bar.
 But the reactions to tech earnings have been relatively muted, and in some cases pretty
 bad.
 Stephanie, the overall AI trade has been a massive impact on the economy, just because
 of not what's already been spent, but what people are going to spend in the coming quarters
 and years.
 But what point do you as an economist start to kind of have to adapt your models for
 the changing nature of what's really driving the US economy, and by extension, the global
 economy?
 We've already had to, to some extent, I mean, over the past two years, you've seen AI
 driving about a quarter of GDP growth.
 And that's, you know, a tremendous change from where it's been, where it grew from,
 you know, roughly 0% of GDP to 2% of GDP.
 The growth rates are running at around 40% annualized.
 So yeah, this is something that we've already had to account for, and the drivers of growth
 now are really just a combination of the consumer and the AI trade, and that's really what's
 going to keep things moving from here.
 And if either falters, then you start to have a bit of a problem.
 And our expectation right now is that both things are in pretty good footing despite Friday
 as sort of messy payrolls report, and the economy and markets can just continue to do fairly
 well from here.
 All right, so speaking of the markets and the economy, one thing that might throttle things
 just a little bit sentiment wise, and maybe even more so, is the Iran-US conflict in
 the Middle East.
 Kali, I'll turn to you for this one here.
 The markets are at record highs, despite an ongoing war involving the US in the Middle
 East.
 How exactly can that happen?
 And what exactly is the possibility this could all be derailed, market-wise, by a new
 development in the Middle East?
 Yeah, so I think this is a story about sentiment.
 We saw the ghost back in March when the war started.
 We saw the worst-case scenario in oil prices.
 Now our expectations have been tempered, and I say, we, I mean the royal, we hear the
 markets.
 And I think what you're looking for here is economic damage.
 Some signs that these high oil prices are weighing heavily on consumer spending and
 on business spending.
 Obviously, business spending is an AI story.
 But consumers are still contending with gas prices, about $4 a gallon.
 So I think the longer this goes on, the greater the chance of economic damage.
 Inflation expectations are quite low right now, but given the developments, if we do see
 oil prices spike, then inflation and growth could both be risk stories that investors need
 to watch.
 Stephanie, does that kind of reconcile with what you're seeing in the data that you've
 seen so far, both the backward-looking and more of the forward-looking sentiment data?
 Are we starting to see some of those effects that might have more of an impact than the early
 stages of the war, where things seem to be so resilient?
 Yeah, I mean, early in the war, you also had the stimulus from one big, beautiful bell
 helping to support the consumer.
 That certainly helped.
 You also had a bit of a sort of bounce back from a 2025 that was kind of weak.
 So from here, the economy will probably be a little bit more sensitive.
 That said, with Brent in the mid-80s, I don't think that will be that big of a deal.
 I think it's really if we start to move well above 100, that consumer starts to really
 feel the effects.
 And as of now, that's not happening.
 If we were to see a shock where oil moves notably above 100 and stays there, then yeah,
 you'll start to see the sentiment channel and the consumer will start to weaken a bit.
 And now we realize that the labor market is slightly less firm or footing than everyone
 had thought earlier in the year.
 All right, so that's the perfect segue into our third topic of the day, which is what's
 going to happen with the inflation data we'll see, the sales and consumer data we'll see.
 We hit July CPI, we could July PPI all out.
 So Stephanie, I'll go to you with this one.
 What are the key things that you'll be watching and just how much do we have to scrutinize
 this particular month in terms of inflation, or is this kind of more of that transition
 before we start to see some of the other bigger order effects play either through or maybe
 ratchet down a little bit.
 So before Friday's payroll support, which was soft and therefore it kind of makes today's
 this week's inflation data slightly less important, just because now the bar to hike is a little
 bit higher.
 But that said, everyone's going to be scrutinizing every basis point from the combination
 of CPI and PPI because they're going to be translating those two reports into a core
 PCE reading.
 Core PCE readings in the next two prints are notably above 0.25 percent that really adds
 some fuel to the fire in terms of whether the Fed is actually going to be hiking in September.
 Our expectation is you'll see inflation look a little bit on the softer side.
 We have seasonals putting down a pressure.
 A lot of the sort of one off things are going to fade.
 But if that doesn't play out, then the Fed is going to be hiking in September and every
 basis point matters here.
 All right.
 If every basis point matters, Cali, then the markets have to scrutinize whether those
 rates will be an issue in terms of valuations, in terms of borrowing costs and everything else
 is the market equipped to handle a rise in rates and to what level do we have to start worrying.
 I think the market is equipped to handle, you know, possibly one, possibly two 25 basis
 point hikes.
 In fact, it's already priced in if you look at Fed fund futures in the bond market.
 I think where things get tricky is that this is a less transparent Fed.
 Kevin Warsh has proven time and time again that he's a man of few words.
 And while that's certainly his choice, it conveys a less to markets about how the Fed is
 thinking about rates and what could happen next.
 So I think any surprises here could be tough and consequential and, you know, thinking
 about the inflation data too, I'm not sure the CPI, the CPI, print we see this week is
 going to change minds either way.
 Financial problem, services inflation, which the Fed cares about is still quite high.
 Goods inflation is inflationary, which is a change from what we've seen over the past decade.
 And it seems like the Fed needs to maybe, you know, make a move or have some action here
 to contend that.
 All right.
 Stephanie Roth, Kelly Cox, Dan Ives, thank you guys very much for the conversation.
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