Squawk Pod: It’s all one trade: Steve Eisman’s AI market play- 07/27/26 | Audio Only

Bring in show music, please. >> Hi, I'm CNBC producer Katie Kramer. Today on the Squawk Pod, a pause in strikes on Iran sends markets on a bounceback journey. Our Dan Murphy in Abu Dhabi on the latest in the Middle East conflict. >> The real signal is exactly what we see coming out of the meeting between Trump and Netanyahu this week. If the Israelis push the US to try and perhaps return to the conflict here >> and oil prices falling, Haley Croft on global energy. >> Do I think oil is a barometer for the the pressure building in the Middle East? No, I think it's a broken barometer. >> The market's rise boosted by enthusiasm in one key technology. We turn to veteran Wall Street watcher Steve Eisman. >> Oh, I think it's all one trade. It's AI. who is reducing his exposure to artificial intelligence, including trimming his stake in long-held stock Alphabet. >> What scares me is that it's all one trade, so it better succeed. >> Plus, a pill to treat Alzheimer's. >> We think our drug is creating this resilience. >> Stanford neurologist Frank Longo on the breakthrough in clinical trials that he wants to get into patients. >> This is a drug right here. It's a pill. It can be taken orally. It is Monday, July 27th. Squawk Pod begins right now. >> Stand back by in three, two, one. Q, please. >> Good morning everybody. Welcome to Squawkbox right here on CNBC. We are live from the NASDAQ market site in Times Square. I'm Becky Quick along with Joe Kernan. Andrew is off today. A third week in a row of declines for the Dow last week, but if you're looking at the Dow and the S&P 500, they're less than 3% from all-time highs. It's the NASDAQ that people are watching a little more closely, the technology names there. The NASDAQ is more than 8% from its all-time high. But the gains that we're seeing this morning soundly because of what we've seen with energy prices dropping rapidly over the course of the weekend. You'll see that at this point if you check out WTI, it is down by close to 8%. 8235 is the last trade for WTI. And Joe, it's interesting. Last week, WTI was up by about eight and a quarter percent. So, we've seen it give it all back. over the course of this weekend. Basically, >> I just had the I don't know the the overall feeling that it seems heavy to me and we'll have Helma Croft on it. We'll talk to her about it. I don't know what I don't know what the spot price looks like, but the futures seem like the even a glimmer of anything and they immediately I mean we talked about it was the frog boiling because it the the grudgingly going up. I mean there was it was a kinetic war. There was they were attack they were you know foraya back and forth every night and it was going up like a dollar a dollar a dollar a dollar launching attack >> almost like resisting to go up I think that the market might be well supplied or so I don't know we're we'll talk to Haleim about it but my feeling was >> you know it's ready to go back to 80 in just the drop of a hat uh which which it did and it's all good for for for everything I mean I'm glad it's not 130 uh or or something like that but with the Red Sea involved now and the straight closed >> in Yemen um yeah launching attacks on on Saudi Arabia getting out I think it they've been getting out maybe 7% >> well that's part of the problem >> the daily oil usage through the Red Sea >> Hale is going to make the case that you know don't don't uh don't be complacent don't think that it's over and don't think that the straight if it does reopen suddenly everything goes back to normal I don't know it just seems maybe not heavy but it just seems it's never gone where it could have gone. >> No, it seems like a riskoff position where anytime talks open up, people think that this can change pretty rapidly for the better without those attacks taking place. >> And the future's kind of similar, too. Uh they they seem to want to to go high, but so many people uh think that it's the most expensive market that we've ever seen and you know that that that AI uh has inflated the bubble so much and it's so much like 1999. I think the hardest thing to do right now would be to to buy in in to buy at these at these levels. And if it's the hardest thing, that's usually the right thing. But let's talk about >> Steve Eisman's going to join us today. He's going to talk a little bit about the AI trade. >> His point is that it's impossible to get diversification at this point because everything's an AI trade. Even the banks, he says, are AI trade at this point because they're doing so much financing for AI trade deals that are out there. So, either it's going to be a huge win or everything's going to collapse. It's a it's a bilateral way of looking at all of these markets today, too. >> I read something I I and I shouldn't and I and I shouldn't I probably shouldn't >> voice my but I read David Fox who built like one of the largest law firms in the country now says AI is the is the profession's future. And I was just thinking what if there were no lawyers? Well, okay. Can I just tell you I had a conversation. >> What if it was all the way up? What a wonderful world world it would be. >> Except I had a conversation in the hallway with Walter Isacson on Thursday after the show because we we'd been talking about this idea >> or I I'm sorry, was it Friday? Yeah, Thursday I think it must have been when he was on. >> We had been talking on air about what you do with a situation like an open AI where its bot gets loose. It goes and hacks into places. How do you stop without regulatory oversight, which is going to be pretty hard to get anybody on agreement on regulatory oversight? How do you stop that kind of outrageous behavior and force the AI companies, the big the big you need lawyers to do that? >> Yeah. Basically, he said that's what you might be able to use lawyers for because they're all over the place. >> Why can't you use AI lawyers to do it? >> Use bots to do had another road trip, you know, six hour trip. every billboard are these shyer personal injury types. >> Yeah. And and >> and they all have different they all have these parasites. They all have different >> Walter's point was maybe those parasites could do something useful for society. >> Well, that would be a switch. >> Yes. >> That would be and I said to She goes, you know, a lot of people need those those people and you need to advertise to get your name out. And I go, they have magnetic business cards as they ambulances are driving by. call me. You know, hoping for another whatever that horrible >> Walter's point was that they've been a little too aggressive down in New Orleans with some of the cases they've taken down there. But maybe they could do some good for society by trying clamps on a >> See, you got I really wish I hadn't gone down this path at all. I'm going to hear from from some of these. In fact, they might sue me for saying these things because they are looking for a reason. >> And a pause in fighting between the United States and Iran. That's what we've been talking about this morning. It's reflected in the price of oil. Our Dan Murphy joins us right now with more from Abu Dhabi. And Dan, what's the the feeling on the ground there? >> Becky, Joe, good morning. Well, the pause is in and the war premium coming out. As you've just flagged, a huge reversal for Brent right now and oil prices pulling lower. There have been no US strikes on Iran since Thursday night. Crude on a heavy roll back as a result. and Brent actually snapping what was a 3-week rally after trading above 100 USD last week. Analysts at ING putting it pretty plainly this morning, saying the price action in oil this morning clearly reflects the market's desperation for positive news. ING also calling this the first tangible signal of deescalation. Now, we don't know what prompted this halt or how long it might last. The US ambassador to the UN, Mike Wald, speaking to Fox News at the weekend, saying President Trump has paused attacks on Iran to give diplomacy more time. At the same time, Axios reports today that Sentcom's own commander, Admiral Brad Cooper, told the White House that 13 rounds of strikes had reached the limit of what US air power could achieve. His message to Trump was either return to full war or stop. And President Trump has chosen to stop. At the same time, Yemen's Houthis claimed they struck Saudi oil facilities on the Red Sea coast. Aramco and the Saudi Energy Ministry have not commented yet, and traffic through Babel Mandeb fell again on Sunday, according to Kepler data. And there's a third supply risk that's emerging as well. Ukraine saying it hit several Russian oil sites and an Iranian merchant vessel in the Caspian. Iran says one sailor was killed and is now demanding a US respon, a UN response, I should say. So the next signal that we're watching is actually going to come from Washington. Benjamin Netanyahu and Vladimir Zalinski due to meet President Trump tomorrow. So for oil, the question is whether this pause becomes a real deescalation moment or whether any one of these flash points puts that war premium straight back in the price. With that, it's back over to you. >> All right. Um Dan, just the feeling of what's been happening with the Red Sea 2. How has that changed the feeling on the ground just the ide with the renewed attacks on on some of the US allies at this point too? >> Well, we're trying to get clarity on exactly what's happening inside the Babel Mandeb right now. For weeks, for months in fact, we've been talking about the block inside the straight of Hormuz. Obviously, that's been material for oil prices. But at the same time, the Houthis have been threatening vessels inside that critical Red Sea waterway. It means oil out of Saudi Arabia either has to move south and attempt to pass through the Babel Mandeb or alternatively move north through the Suez Canal. Shipments according to Kepler data that I've been monitoring have been pretty slow at this point. So it seems as if there is a hesitation on the ground to actually get those ships moving and of course moving through the sewers instead of going through Babel Mandeb of course adds to the time and adds to the cost. So there's an extra impetus there to not make that journey. All of that should be a catalyst for a higher oil price, but that's not necessarily happening right now. The mood on the ground here, I can say, is one of cautious optimism right now. Obviously, the markets certainly taking this pause in their stride right now. We're watching and waiting to see exactly what happens next and whether or not we will see a resumption of hostilities. I think the real signal is exactly what we see coming out of the meeting between Trump and Netanyahu this week. If the Israelis push the US to try and perhaps return to the conflict here to ensure that Iran can never have a nuclear weapon and to maybe end this once and for all or if the president decides to do what he has done now and continue to put the brakes on and push for a diplomatic track. Uh either way, markets watching very closely to see which way this goes next. >> All right, Dan, thank you very much. It's good to see you this morning. >> Meanwhile, UN Ambassador Mike Waltz uh gave a round of interviews at a Sunday news shows and address reports the US is running low on air defenses in the Middle East. The US military, and I've verified this every which way, uh, has everything that it needs to conduct this campaign as effectively as it needs to be. And I have to tell you, the people that are leaking this nonsense deserve to be in jail. >> NBC News reporting late last week that the military is letting some attacks through in order to preserve weapons uh, that are used to intercept incoming uh, projectiles. Joining us now is Helima Croft, global head of commodity strategy at RBC Capital Markets and a CNBC contributor. Helma, I was I was talking about just trying to summarize your overall feelings that uh you know, don't get too complacent here uh about a pause because it's still going to be a while before anything normalizes. But then I was making the point that it just seems like we're fairly well supplied because the minute you get any indication of a pause, it seems like the the bottom drops out. It took a long time, 13 trading days to get back from 68 or 69 back up to uh to where we were up near 90. Why does the market seem like it doesn't want to go to 120? Because in the old days, if you even said there's a possibility the straight's going to be closed, you'd go to 140 or something like that. Why? Why isn't it like that? >> Is that basically a lot of people in the market are still pricing endgame? And so anytime you have a pause, then we move to how quickly can we get ships moving through the straight of horm. So I do think we're getting ahead of ourselves in terms of normalization. But when you bring up the issue of being well supplied, I think the China factor is still so paramount. The fact that the Chinese made the decision to slash imports by four to 5 million barrels a day, like that was really consequential in terms of market balances. Now, we also really did run down our reserves. Our inventories have really been run down. But the China factor I think has been really critical in terms of why we're not at 200 despite the fact that we have very little traffic through straight of Hormuz. Now we have issues in the Red Sea and Ukraine is still hitting Russian energy targets >> because the futures they should be reflecting your fears in in your angst I think because it's not going to be easy, right? What what spot right now approximately? What are people paying? What's the highest people are paying anywhere right now? >> Well, I think the key thing is like if you're China, we did see them like really starting to try to source Russian barrels again because if you're trying to actually buy the barrel, that's different than the price that you see on the screen. And one thing I'll tell you early on in this conflict, like we heard from Middle Eastern national oil companies that in March, you know, Asian customers were paying $175 for their barrels. Now, so there was always this discrepancy. The key factor though is going to be Joe as we get into fall, do we see any type of normalization in terms of flows and does China come back as a buyer into the market? >> If there's another formal uh ceasefire that that they say and who knows how long it lasts or what Iran does is 70 are we headed back there near term >> again? Are we going to have a this kind of stalemate where you have these periodic, you know, two weeks of bombing, ships attacked, then we have a pause? Does the pause turn into something that's durable? I mean, we also have to get the mines just cleared out of the straight. I mean, we talk about the attacks on actual vessels. The middle corridor of the straight is, you know, pretty heavily mined. And so, again, to get this key transit point open is going to take a while. We certainly need to see a stable security environment. >> I mean, there have been times through this whole conflict where people that market watchers are actually saying that oil's getting it wrong. It's like it's funny when when people do that. I don't I don't know how well they they understand markets, but there are times where they say, "Well, it's obvious that that I I think they attribute it to individual traders or something, not the collective wisdom of of of the of the marketplace." Has oil been right about things or I think in your view you think oil is is underestimating the true risk of the conflict staying or >> do I think oil do I think oil is a barometer for the the pressure building in the Middle East? No, I think it's a broken barometer. But again, if China is going to scale back their imports by four to five million barrels a day, that plays a big role in terms of balancing the market as well as running down our inventory buffers. So again, what are we looking for oil to tell us? Are we looking for oil to tell us how stable the security situation is? I don't think oil I don't think oil I don't think oil is a leading indicator of how stable the security environment is in the Middle East. when you have essentially China becoming China's now the swing consumer. So when China decides they're going to pair back their imports and we can run down our reserves like that allows us to get through a crisis with that $200 oil. It doesn't mean though >> people that know what they're doing should have been should have been factoring in what China I mean it's it's a global marketplace. If that's what was going to happen we should have known that. Were you predicting much higher prices or something? Is that why you're you're you you keep saying well if it wasn't for China then I would have been right. Is that is that where this is coming from or >> No, I think you have to be humble a little bit and saying like what did you not anticipate and certainly we thought the scale of the disruption was so much bigger than we saw in Russia Ukraine and we should have been at those price points but again like if China if China's going to if China's going to change their purchasing policy if we are going to run down our reserves I mean I do think you end up in a different place again if you ask me what I did not anticipate at the start of the conflict. I did not anticipate China playing such a big swing factor in terms of scaling back imports. So again, it's a little bit of humility in terms of where the market is right now. >> Where did we get in at the beginning of of the Ukraine war? What what was the peak? >> I mean, we took out like $128 and so we we never got close to that in terms of Brent pricing. And again, we never had a significant supply disruption in Russia Ukraine. That was driven by a fear of a 3 million barrel day disruption. You know, at one point in during this war, we had over 10 million barrels being disrupted out of Hormuz. So, the scale of the disruption was much larger this time around. It's still much larger, >> but the the price response has been more muted. So, again, I think we have to look at other factors in the market. >> That's what's weird. You expect these the the futures to go absolutely crazy. And and your point is that it it it didn't happen because of because of China. So, we'll we we're gonna take that to the bank because I don't know 80 just just seems like the markup must be wrong or something. Anyway, Helma, thank thank you. >> Thank you. >> Cheese will be next. >> Coming up on Squawk Pod, investor Steve Eisman, made famous by the bets he made in 2008, immortalized in the big short. He's not shorting the market now, but he's being cautious about big tech's reliance on artificial intelligence. >> So, if this is a binary situation where AI succeeds and the market continues to push higher and higher, what happens if AI doesn't succeed? >> I think we have a big correction. >> How big? >> Now, now that's a hard question. >> Eisman's take on this AI everything market right after this break. This is SquawkPod. >> Stand by. Joe, his mic Q. You're >> watching Squawkbox on CNBC. I'm Joe Kernel along with Becky Quick. Nvidia is in talks to provide a $250 billion backs stop for Open AI as part of a large data center project. This is a Wall Street Journal report that says that the guarant guarantees uh from Nvidia would help OpenAI lease a 10 gawatt project in southern Ohio that's being developed by a soft bank subsidiary and then Vidia's Nvidia's backing will help the data center developer raise debt at more favorable terms that it could without a financial backer and since it's not rated um since OpenAI doesn't have an investment uh grade credit rating as an UNP profitable private company. Terms have not been finalized and the deal could still fall apart. Anthropic, Microsoft, and Alphabet have also expressed interest uh in the site. >> And joining us right now to talk about what's really moving the markets is Steve Eisman. He is the host of the Real Eisman Playbook podcast and former senior portfolio manager at Newberger Burman. Obviously, somebody who understands when markets get inflated at times and has done very well um by poking holes in some of those things in the past. Steve, we we we've got a Fed meeting that's happening this week. We've got the busiest week of earnings, but you're really looking at this as an all AI market at this point. >> Oh, I think it's all one trade. >> It's uh it's AI. Either it'll succeed or it won't. But um I mean, I just take for example uh you know, the investment banks all reported. The numbers were really great. But you know, why were they great? They were great because they're doing a lot of AI financing. So, it's not like, you know, if you bought Goldman Sachs, you're diversifying your portfolio away from AI. Um, I I I think the biggest news is that a year, if we were sitting here literally a year ago, the entire debate on AI would be it's all it's all great, rah, you know, let's spend money. You know, every time one of the companies would increase their capital expenditures, the stock would go up. >> It's much more complicated now. Um, that doesn't mean it's all negative, but it's much more complicated. So you've got it's it's become very capital intensive. It's questionable whether any of the LLM models have any moes around their businesses. And the Chinese um AI models are a lot cheaper. So is there going to be a price war? Um I don't know the answer to a lot of those questions, but I don't think anybody else does either. And that's why, you know, for example, last week when Google reported the stock went down, >> right? Not because they didn't beat expectations numbers still coming through, >> but the increased right they increased the capex from 190 billion to 205. People are freaking out. >> You know, we were asking the question earlier today, what would happen if some of those big hyperscalers actually cut their capex? How would the market react to that? >> I think the market would go straight down. >> I think so, too. To me, it's it's your damned if you do, damned if you don't situation almost. I mean in the end of the day it all boils down in a sense to Nvidia. Nvidia I think when they reported last quarter had 85% revenue growth. So if the hyperscalers cut it would be 85%. And you know maybe that would be healthy for the long term but I think the market would go straight down on that news. There's the front page story today in the Wall Street Journal that says Nvidia's in talks to back open AI on a $250 billion financing basically for for a data hub, right? >> Um that could wind up costing half a trillion dollars um in the long run on some of these things. Nvidia has been involved with backing a lot of these deals. And if you ask Jensen Wang why, he would say because they are looking for the bottlenecks that are preventing AI from moving forward. And they want to make sure they clear those bottlenecks. It's a sound strategy, but what do you think as as somebody who watches the markets in terms of what this means? >> Look, I have questions about the health of anthropic and open AI long term. I mean, this is great for Nvidia long term, but you know, Enthropic and Open AI the cost of their models is about five times more than Chinese models. So I think one of the one of the one of the bottlenecks is what's the future health of anthropic and open AI in the face of models that are much cheaper. I don't know the answer to that question but I don't think anybody else does either. >> Why are Chinese models so much cheaper? >> Oh because they're open source and anthropic and open AI are closed source and for whatever reason the the the closed source models are just much more expensive. >> So what do you do overall? It's more complicated, but you wouldn't necessarily short this market at this point, would you? >> I would not. I I've lightened up. I've taken, you know, I'll give you an example. I I sold my Google a couple of months ago. Um, I've owned Google. I can't even tell you how long I've owned Google. Um, but I felt I wanted to reduce my exposure to AI. I haven't bought anything to replace it because, you know, buying something defensive or staply is kind of a waste of time. >> Why? >> That doesn't go up. They don't go up. They, you know, people either want to buy AI or they don't want to buy AI, but they don't want to shift out of it to buy Clorox. >> So, if this is a binary situation where AI succeeds and the market continues to push higher and higher, >> correct? What happens if AI doesn't succeed? >> I think we have a big correction. >> How big? >> Oh, now that's a hard question. I don't know. But I mean, it's all one trade. It's just literally one. I mean, even people who who think they're diversified because they own 60% stocks and 40% bonds are missing the fact that they're actually not diversified. because of their 60% more than 50% is of it is is tech and AI related and of the 40% of bonds most of the new issuance of bonds is AI related. So even people who think they're diversified because they they own bonds are not really that diversified. It's it what's what scares me is that it's all one trade. So it better succeed. >> What are you doing if you've sold Google? What else? I mean, if you sold Alphabet, what else have you done? >> I'm just sitting in, you know, I've got cash >> until I can try and figure out what to do. >> What would it take to get you to deploy that cash? >> I don't know yet. I really don't. I mean, I don't think this debate's going to get settled within the next two weeks. >> We talk all the time about the Middle East because you can say AI is driving everything, but you could also say oil prices are driving everything right now, too. Um, >> oil prices are down 8%. You see the markets up >> right >> significantly. How much does that factor into it? To tariffs factor into it? >> I think it factors it to a degree. I don't think this war is going to be over anytime soon. I I don't think I mean I think President Trump wants the Iranians to give up their their nuclear uh fuel and the Iranians are not going to give up their nuclear fuel. So I don't think there's much to talk about. So you know we get these lols but then it doesn't do anything. But you're not worried about oil prices at this point. >> I think actually there's an over supply. You >> that's why the um Al Lima who was a guest on my show too um you you know pointed out that China has basically stopped buying oil which is why oil prices haven't gone up that much. You know you would have thought oil prices would be 150 at this point but they're not because there's actually an over over production. And I also think some of these um these pipelines that are going to be able to avoid um the straight are pretty close to being finished. >> Yeah. Next year, I think maybe 2027. Yep. >> Is when you hear from >> and that's why I I'm not really all that worried about oil prices. >> I mean AI is going to be something. I I like you. I'm not sure what. Does the for lack of a better term the bubble popping does it does it come from people slowing down on the buildout or does it come with the promise of what it's supposed to do disappointing people >> I don't necessarily think the latter >> it's it's going to be amazing >> it's going to be it's going to be something something really good um that doesn't mean that everybody succeeds >> yeah That doesn't mean that >> these circular deals, the latest Nvidia deal, like you got to read it and it's like >> they're going to, you know, back this, but then they're going to provide money for opening eye to buy their chips and it's so uh incestous. >> It's convoluted. >> It's totally convoluted. You don't know if there's any, >> you know, you don't know if there's any real profitability in in any of of the machinations that you find eventually. >> There probably is for Nvidia. He was saying probably >> Well, there is. Yes, for Nvidia. They're not doing it for free. >> But look, I I again, I think one of the bottlenecks is that Enthropic and AI and Open AI are responsible for a lot of the spending that people are doing, >> right? >> And anthropic and AI have models that are now much more expensive than the competition. And I think that is a potential bottleneck. >> I am a much better cook because of AI. And and and >> you are. >> Yes. >> And griller. >> Okay. when I grill things on much I mean far better everything is juicier tastes better I do it a totally different way I'm using the grill that has different zones >> and you don't pay anybody for any of that >> no I use just I don't I don't pay for free >> right >> but he's very very nice to me in >> feed him into submission >> maybe so no Claude is like so how was your you know how was your boneless breast of chicken was unbelievable cla Thanks was any anytime. I kind of like that stuff. Very friendly. >> Steve, you we've got a Fed meeting this week, too. Um, you basically think that's just noise. >> Completely irrelevant. I mean, look, if inflation gets worse, they'll raise rates, and inflation gets better, they'll cut rates. And and so I I don't understand why people get so exercised about it. >> Doesn't make much difference to you one way or the other, right? >> Not really. >> Yeah. I mean, look, if the Fed starts to raise rates very aggressively, that would be important, but I don't see that. So, you know, it's good to talk about on television, but it doesn't really interest me that much, >> Steve. Thank you for joining us today. It's good to see you. >> Thank you. >> Still to come, a potential game changer for the millions of Americans impacted by Alzheimer's disease. Stanford neurologist Frank Longo has spent decades developing a pill to counteract the worst of the brain degeneration. >> The problem with Alzheimer's is we're losing the synaptic connections between the neurons. >> Getting this potential drug to patients next on Squawk Pod. >> Welcome back. You're listening to SquawkPod from CNBC >> and Becky Q. More than 7 million Americans are living with Alzheimer's disease. And while there are treatments on the market, there is currently no cure. One new drug currently in clinical trials is offering hope for many though. It is called LM11A31 or compound 31, and it approaches treatment very differently from existing Alzheimer's therapies. Joining us right now to talk about it is Dr. Frank Longo. He's a Stamford University professor who actually headed up the neurology department there for 18 years. He's also the co-founder of Pharmatrophics. That's the company that has created this new drug. Dr. Longo, thank you for being with us this morning. It's good to see you. >> It's great to be here. >> Let's talk a little bit about how this drug is different from what exists on the market today. Those drugs that try and target amaloid plaques, >> right? So, the drug's different in a number of ways. So the problem with Alzheimer's is we're losing the synaptic connections between the neurons and there are multiple forces causing those uh connections to degenerate. There's the amaloid that accumulates in the brain. They're toxic forms of the tow protein or damages the synapses and inflammation. And the on the market today there are drugs that go after the amaloid but not the other two. Um and so our drug deals with all three. So that that's how it's different. you you don't think the amalloid um drugs are all that effective at this point? >> Well, they're the important start. I mean, they help a little bit, but they they slow the the loss of cognition, you know, by just a small amount. So, we you know, it's a good start, but we need something much more powerful. >> You've completed phase 2 and phase 2a trials. What did compound 31 show in those trials? >> Sure. In the phase 2 trials in mild to moderate Alzheimer patients, we did brain scans, we did spinal taps, we did blood tests. So, we looked at those patients very thoroughly and all three of those measures indicate that we significantly slowed down the degeneration of the brain. We slowed down the loss of those synaptic connections. So, we're very excited about that. >> How many patients were involved in that study? >> About 240. So, we had about 80 on placebo, 80 on a low dose, and about 80 on a higher dose. >> You also sent the results of that study out to Indiana University to confirm what you had found. I think we're looking at some some uh graphics of what you found on that on that. Why don't you talk us through what we're looking at? >> Sure. We we took uh one of the forms of brain scans from that trial and we uh coded the data. So the Indiana University group would be blinded and they have a new technique where they could measure network function in the brains of the patients in our trial. And what they found was that there was a a uh not much effect on the placebo group, but in the patients on the drug, they're able to reverse the degeneration of the networks. And what that image is showing uh in red is where we're gaining function of the uh network and the connections that are lost in Alzheimer's. The red is actually showing the drug effect reversing that loss versus the placebo. And Indiana University was able to say, "Hey, we know who was on the placebo, who was on the low dose, who was on the high dose based on what they saw in that." >> And we're excited about that because it's an independent group that was, you know, blind blinded to the data. >> The the age-old question is whether amalloid plaques actually cause Alzheimer's or or result from from what's happening with Alzheimer's. And and we still don't know. A and if you found a a a family that has amalloid plaques everywhere but doesn't get dementia that strongly argues that it's not necessarily just stopping amaloid plaques that that would cure Alzheimer >> that that remains a controversial question in the field. How much is amalloid contributing? I think most people think it's at least one important contributor. I think it's one important contributor. Uh but the an amazing observation is there are people whose brains are filled with amalloid even the toxic tow and they don't get demented they live into their 70s and 80s >> and their synapses are what see they're they're still intact that's what seems to be the key >> exactly and we we the key word there is resilience we call that resilience and we think our drug is is creating this resilience is tapped into this resilience mechanism >> and it's based somewhat on on some gene that that is either mutated in these this this family that that or the this line of where in Colombia or something >> right there's a family in Colombia that has a very strong gene that if you have that mutated gene you for sure will get Alzheimer's and there was a patient the those families generally have dementia starting at about age 40 and there was a patient there who made it into his 70s who's perfectly well his brain was filled with amaloid and he's demonstrating resilience now he's lucky that he had resilience and the goal with our drug is so that everyone one can be resilient. >> How did you come up with this drug to begin with? I know this was 20 years in the making. >> Yeah. Well, this this drug has been a 20-year uh journey and the the the started off in my academic labs, you know, supported by funding from the NIH, the Alzheimer's Association, the Alzheimer Drug Development Foundation, the Estee Lauder family started that here in New York. And then once we finished testing in mice, we wanted to move it to people. So, my wife Anne Longo and I started our company Pharmatrophics. She's a co-founder and the initial CEO and we started the company to do the clinical trials and manage the commercial development and and so that's where how we've done the human trials. >> The phase three trials cost can cost millions and millions maybe hundreds of millions of dollars. Where do you stand right now with a phase three trial at this point? >> Right. Well, where we stand with the phase three trial, we're ready to go. Uh we scaled up production of the drug so we have enough drugs to cause phase to do a phase three trial. This is the um this is the the drug right here. Um it's a pill. It can be taken orally. The existing treatments are intravenous or or injection. Um and they do have some important side effects, brain swelling or or brain hemorrhage. Uh this drug doesn't cause either one of those side effects and it can be taken orally. So we think this will be accessible to a a lot more uh people. This is a medication we've scaled up production. So we think once we have the funding uh we could enroll the first patients within about six months. >> Wow. The interesting part about this is you have done these studies with Alzheimer's but you think that drug can work in a lot of other applications including traumatic brain injury Huntington's disease. I I want to say Louis body diseody Parkinson's too. >> Yeah. This drug because it makes the syninnapsees resilient and that's the key word here resilience. It's a fundamental mechanism that can be applied to a number of brain disorders. So for example, there's a a rare form of dementia called progressive supernuclear palsy or PSP. Uh that's where too much tow accumulates in the brain. Uh patients will start enrolling in a trial taking this drug this summer. Uh the NIH is funding that trial and this drug was selected for that trial. They'll be enrolling this summer. So 86 billion neurons in the brain supposedly hundreds of trillions of synapses. So AI, when do we get sentient AI? Is it ever possible? When you think about that, >> with that many synapses, uh, I think it could ways to go >> compete well with AI. That's a human AI right there. >> I mean, we see green and smell smell perfume and have memories and feelings and I mean, it's all and it's all mediated by synapses. >> It is. Um, I'm a neurologist. I'm biased for the human brain. But hey, how about how about a genome that can have the blueprint to set up? I mean, how how mind-boggling is that? Almost almost godlike. >> Yes. Yes. I mean, we're still in the early days of understanding how the genome translates into setting up the brain and how all this wire >> I mean, a lot of it is uh obviously as things are happening, it's developing, >> right? Right. it it's feedback that that does it but there must be an unbelievable blueprint to start with. You would think I >> I think there is an unbelievable blueprint and I think that's why the basic science remains important. That's what's helping us figure out how we get from genes to this beautiful organ in our body. The basic science is telling that we need a combination of the basic science and then translating and then good human trials >> because it's also binary. All everything that happens somehow is just that either the neuron either fires or it doesn't fire right? >> Yeah. Yeah, that's right. >> One or the other. Well, we can we can modulate those connections. So, when you learn something, you're making the synaptic connection stronger than it was before you learned that. So, it's why it's important to keep learning things. >> Uh, Dr. Longo, very quickly, I know that you got into this because of a very personal reason. Do you want to explain why you're a neurologist? >> Sure. Um, I've been interested in the brain since I was a child. I have a sister, my sister Patty, who's one year younger than me, and she was born prematurely and suffered brain damage at birth. It's called cerebral palsy. And so she was cognitively impaired and she was in a wheelchair. So as a child I went to the doctor visits that my mother was taking her to. And I asked why the doctors couldn't make my sister Patty walk. And my mother who was a nurse and therefore a medical authority said you can't fix the brain. There are no treatments for the brain. And that just stuck with me. So when I got to medical school I looked for mentors that would help me train in how to make treatments for the brain. And that's what I'm still doing. >> It's very exciting work. We really appreciate you stopping by to talk to us about it and we'd love to hear more about your progress with this drug, too. >> Oh, well, thank you. It's my pleasure and we're looking forward to getting this phase three trial going. We We want to get this drug to patients. >> Dr. Longo, thank you. >> And by the way, folks, for a deeper dive on everything happening in the rare disease space, you can visit cnbc.com/cures and there you can join thousands of people by signing up for the CNBC cures newsletter to sign up for the latest in the rare disease community. Alzheimer's is not rare, but this drug could work on some rare diseases potentially as well. It >> definitely could. >> Yeah. >> We should mention here that you can see video of our segments on CNBC's website. Head to cnbc.com/curers to see Dr. Longo's Alzheimer's pill right there, as well as images of brain scans from pharmatrophics clinical trials. And that is SquawkPod for today. We've come to the end. Squawkbox is hosted by Joe Kernin, Becky Quick, and Andrew Ross Sorcin. Tune in weekday mornings on CNBC at 6 Eastern. To get the smartest takes and analysis from our TV show right into your ears, follow SquawkPod wherever you get your podcasts. We'll meet you right back here tomorrow. >> We are clear. Thanks, guys. Thank you guys so much.