Mad Money 09/16/26 | Audio Only

My mission is simple, to make you money. I'm here to level the playing field for all investors. There's always a bull market somewhere, and I promise to help you find it. Bad money starts now. Hey, I'm Kramer. Welcome to a special West Coast edition of Bad Money. Welcome to CR America. Other people want to make friends. I'm just trying to save you a little bit of money. My job is not just to entertain, but to do some teaching, too. So call me at 1800743 CBC. Tweet me at Jim Kramer. If you buy stocks here, you are now, as of today, officially fighting the Federal Reserve. That's what happens when the Fed decides to raise rates as it did this very afternoon. The first rate hike, a quarter of a percent, creates a lot of confusion and often a quick dive, which is exactly what we saw today. I mean, just nothing. And that produces selling. We aren't sure if there's going to be multiple hikes which would be really bad for the stock market or we're only going to get one or maybe two not so bad for the market from the looks of things and the harsh words we heard today from the new Fed chief Kevin Marsh we're going to get many hikes until the job is done the job being slowing inflation appreciably and that is why the Dow plunged 631 points just be lost45% but the NASDAQ fell only 0.01% 01% and that was a nice comeback. More on that in a moment. So, even as I'm out here on the West Coast where these rates mean very little, because tech does thrive no matter what. Let me explain why this decision was right for the longer term but miserable for the shorter term and why the stock market may need to take a hit beyond today if inflation doesn't settle down. Big if first understand this economy does have a real head of steam, mostly because of the great data center buildout. These behemoths are beasts when it comes to capital expenditures. And you know what? I still think they will be >> house of pleasure >> when the smoke clears from the rate rate hike. See, they're distorting the economy, but there's no sign that the data center strength is slackening and rates won't impact it all that much. And that's true for tech earnings. The growth will most likely continue a pace. Employment is full, which is fantastic for the stock market. Lots of discretionary income, lots of savings and lots of spending. I know we keep waiting for AI to destroy jobs, but right now this cycle is creating jobs by the second, mostly trade jobs, and the economy does keep strengthening. Uh, but there's a real downside to the buildout, too. And that's what we heard today from Walsh. We have an economy that isn't used to working with its hands. Service jobs make up two-thirds of the workforce. When you have the biggest capital expenditure cycle in history, one that involves endless bond sales, referenced today by the Fed's chief in his speech, and lots of stock offerings, you're going to get hit with too much inflation. And the Fed does have to pump the brakes. And that's what started today. Ordinarily, we could probably handle that level of inflation to building buildout causes. But these are not ordinary times. We already had good, you know, I'd say pretty predominant inflation. We're three and change. That's way too high historically. Our new Fed chief is a serious person. And he's bent on bringing the rate down to 2% by 2029. Even though President Trump picked him to cut rates, well, uh, he he knows that we need to keep inflation down to preserve the buying power of the dollar and the net worth of your savings. There are two things making Mors' life difficult here. The first is man-made, the relentless run in oil prices. You could say that when the war with Iran ends, inflation will go down. But who the heck knows when it'll end. If anything, the longer higher oil prices last, the more likely it embeds itself in the system and makes everything expensive. Oil prices are passed on to you, the consumer. The Fed can't change that unless it raises rates to the point where we can't afford to drive as much or we don't need to drive because we all lose our jobs or because we don't spend that much. I don't think we're going to reach that point. But the longer oil stays up, the more likely it is that we'll see more rate hikes. And every hike from here will it'll be something that's going to knock down stocks. The other spur of inflation is the real bear, the printing press. We're running a distinctly suboptimal budget deficit. Neither the president nor Congress seems to care. Our government has a trillion dollars in interest span. That's hideous. A serious person like Walsh doesn't want the presses to print because printing money is inflationary. I think he'd smash them if he could, but that's beyond the Fed's control. All it can do is raise rates until Congress and the president get serious about spending. If they did, look out. That would be fantastic. When you raise rates, the economy slows. If you can combat the printing presses and help keep inflation down, stocks could go up. But can it keep the president down? I know that Walsh is doing what's right, but what happens when the president goes ballistic? He could be about, you know, he might be like a a swarm of AI agents penetrating the walls a hugging face. In the end, I don't think it matters what the president says because War is such a gamer. He knows what he wants and it isn't necessarily good for business or the stock market. We're serious about this. He said at one point, "We're serious about this." I like that. I don't think anyone, especially the president doubts now. I hope Wars has skin like tungsten because he's going to need it. Do all stocks go down when the Fed tightens? For many, the stock market's a commodity like bonds, like real estate, like the dollar. When you learn to be a professional money manager, you recognize that the Fed can crimp credit creation. Fed chief referenced the hyperscalers as companies that can crowd out a lot of borrowers. You raise rates, you can shut the spot off. So there are managers who are taught to sell all stocks when the Fed tightens and go into cash because you sell stocks when the economy slows. Worsh made it clear that's the plan. That selling crushes today until tech rallied at the end of the day. But there are other managers who say stay the course. I'm picking the stocks of companies that can do well regardless of what happens with interest rates like pharma. There are other things can do okay here like tech and then there's the rest financials retail travel leisure so many others all not so hot the rest before this was small lots of stocks going higher the rest small but it's going to keep growing and growing and growing as long as inflation ratings readings stay high so there's I just say it's just harder and harder to find good stocks I had hoped the W's comments might have come the bond market which has been terrible with rates going up relentlessly nope interest rates were going down before the Fed chief started talking and then they reversed and went up. Bad. And again, another thing that gives us fewer stocks to buy. Ultimately, I think I I like it when the Fed chief shows gumption. But it's not good for the near-term for most stocks. Long-term, it's essential because it prevents runaway inflation. For now, though, look, if you're trying to manage money like I do with my travel trust, you can follow along at CBC Investing Club. There are fewer stocks to buy, fewer to hold, more stocks to sell. Did Walsh want us to lose money today? No. But whereas K's interpreters meaning he wants as few stocks as possible going higher for many yes makes it harder to make money and making money with borrowed money is going to be a sin from now on if it weren't already. But there's always a bull market somewhere. As I say at the the end of the show, we just need to find one or two sectors that can thrive even in this environment. It's harder, but it can be done. I've done it before. I hope we can do it again. The bottom line, I think the buyers will come back, especially to tech, because it's not on a rate cycle, it's on an industrial revolution cycle. But a lot of groups simply don't work as long as Kevin W is on the war path. And Walsh is definitely on the war path. Let's go to Jerry in Missouri. Jerry, >> hey Jim, thanks for taking my call. >> Absolutely. What's happening? >> Well, Jim, I'm just wondering, uh, you talk to Michael Intrader often. I was just wondering if you think Core Weave is going to break out anytime soon. Okay, so Cor's got a yin and yang here. It's borrowing a lot of money and that's going to be harder now if the Fed starts ra uh raising rates, but it's smack in the middle of the great industrial buildout and so therefore I think it's going to be okay to buy. But it's become more speculative as the Fed raises rates. It's become a more speculative situation and you got to think about that because that may not be what you really want. Let's go to Jerry in Florida, please. Jerry. >> Yeah, hi Jim. company I'm wondering about is Rathon, RTX. What's going on with Rathon? >> Okay, here's what's happening. We've been looking at companies that have high high priced earnings multiples and we've been shrinking them as the Fed raises rates. The multiple that people pay for earnings will go down. Right now, it's 27 times earnings. In a rate cycle where the Fed is raising rates, that PE multiple, which is why I wrote my whole books about PE multiples, that has to come down. And that's why that stock is going lower. All right, listen to me. Buyers will come back, but they won't come back to the same place. And remember, from now on, we're fighting the Fed. On May tonight, the cyber stocks are uniquely positioned in this market with all the talk of AI safety. They're not they're not dancing the Fed. I'm going to sit down with Palo Alto Networks to find out how the company is staying ahead of the game. Then, ARM Holdings is at the center of what could be a multi-year chip shortage. I'm getting the latest with the company Co. And AKA has finally broken free of the AI displacement fears and is really starting to get a beat on the bad agents. I've got the CEO. Stay with Don't miss a second of MadMoney. Follow Jim Kramer on X. Have a question? Tweet Kramer #madmentions. Send Jim an email to madmoney@cnbc.com or give us a call at 1800743CNBC. Miss something, head to madmoney.cnbc.com. I came out to San Francisco this week right as everybody started talking about the need to slow down AI development, prevent agents from running wild. But in the end, I think this whole issue comes down to great hygiene cyber security. And that's why I want to check in with Palatoto Networks, a cyber security leader that we own for the travel trust. This week, Palo Alto's stock caught fire up a quick 14% because Wall Street finally recognizes that you can't have powerful AI without equally powerful cyber security. Don't take it from me. Let's dig deep with Nikeshur, the chairman CEO of Palo Alto Networks and an expert on what's happening right now and many other things. Mr. Roar, welcome back to Van Buddy. >> Nice to see you, Jim. How are you? >> Oh, good. Nesh, you look, we've got Dario. >> Yes, >> we can trust firstname people. Dario talking about pacing the frontier. And then we have Nikesh talking about the pacing is a ninja move. What does that mean? >> Well, Jim, I've been listening very carefully to all the rhetoric about what should happen. Should AI be slowed down and what are the bad effects of AI? AI is an amazing technology. I think what we have in front of us is once in a-lifetime opportunity to embrace something that is so going to be so impactful across the board. And I don't see how it's going to slow down. I don't see researchers not wanting to win. As I've said, there's no competitive sport where I found people saying, "Oh, wait a minute. Let's all take a break together because we should slow it down." I think the right conversation is how do we make sure all the power of AI can be harnessed for the right reasons and for good and that's the conversation that should be had. I think the right conversation is how do we make sure that AI can be delivered safely and securely so we can use it for good things. That's the conversation to have. I think the idea that we should be fearful of AI and we should wait and we should slow down is just antithetical what's going to happen. So it's about time to have the real conversation. >> Well, is it too cynical to think that perhaps this is like a a car race where they wave the yellow flag and no one's allowed >> Oh, this is a crowd strike analogy. We're doing apologies here. Come on. >> I saw you. I saw you got him after crowd strike. It's got the yellow flag. That's the wrong guy. >> Nothing. But at least you're smiling. If this was a conference call with the analyst, I know you wouldn't be smiling. >> No, look, I think there's enough room in this market. I heard Renee before this and he said there's a lot of room and it's a big market. He's going to make money and Nvidia is going to make money. It's going to work in cyber security as well. >> Oh, let me pivot a little. So, you're doing this uh Fed raises rates today. Uh kind of what serious impact on cyber security? >> I don't think so. Look, I think right now I don't think there's an impact of technology. Right. >> I think majority of the company's spend is going to pivot to technology. Like for the first time in my career, my finance guys want AI people. My HR people want AI. What are you going to do with them? It's like we're going to make sure our processes are better. We're going to use AI in our business. So for the first time, the demand for technology is coming across the organization from everyone whether it's customer service, logistics, security, everybody wants more money from an to do better AI. So in that environment, I think technology spend continues to go up. So the demand right now looks like it's infinite. And the more technology you deploy, at least in the enterprise, you're going to have to do it securely. >> Well, I think if I were on the board of a publicly traded company right now, and I've been on them, I would be saying to the chairman and the CEO, if we do something wrong and we hurt another company and we do not have Palo Alto, we a process, a process that's Paloto, we're going to get sued for everything. But at least if we call the cash and we bring them in, we'll have been known as someone that had a duty of care. >> I think that the fear people have is for the first time in life, we have a non-deterministic technology. >> Okay. >> Everything else historically in technology has been determin deterministic. It's been input and output. And you test for the output and you test it nine ways from Sunday and say, "Okay, I'm 99.9% sure the output is going to be consistent with my expectation." In the case of AI, the output constantly morphs. When output constantly morphs, you can you cannot figure out whether the agent or AI that you use is going to deliver with the intent that you set up there for, which is what happened when you know a ran away. >> Let's talk about the hugging face. Do you think it's worse than people realize that this 1,200 agents got together and congregated and became this colony of hate? And I mean, is it is it one of those things that we that we Have we give them human characteristics? >> Imagine you created a civilization where you told 1,200 people there were no rules >> and the job was to go win. >> What would happen? >> They'd stampede and win, >> right? So what have you done? You've b This is a science experiment. Okay, it's a science experiment. We say with no constraints, no guards, no governance, no training, no nothing. The only objective is capture the flag >> and do it with whatever you see in in your training. And the training is the world's knowledge because we train using public knowledge. So the agents know every good thing, bad thing that has been done in the world. They've been trained on it. So they're basically executing to the task. >> Well, then how can you be smarter than they are? >> Well, I think let's be clear, no enterprise in the world is going to enable agents in their infrastructure without ample governance guardrails. That's every conversation that I have with every CEO, CIOS or chairman. They were saying great, we'd like to use AI. How do we do it in a way that it doesn't go rogue enough? >> But does anyone call call you and you say to them, "Guys, you got to slow down. You're going too fast." >> No, I think what we say is you have to be thoughtful. You have to understand the expectation. You have to understand the intent of this. For example, you know, we are talking to people about deploying agents. We're like, here's what happens. Agents are created by human beings. Agents take their credentials, run away, and start doing things for them. We say, "Listen, what are you going to do? You tell us what the task expectation of the agent is. We'll give the agent just the credentials to be able to execute the task. Right? >> If you restrict agents and give them credentials just to execute the task that you intend and you allow them latitude in there to be non-deterministic, then there's a higher probability that you can govern them, you can keep them in check, that technology is being built. At this point in time, the AI labs should be chatting with us and saying how do we put this in place because we have something to contribute, they have something to contribute. Historically, you've never had technology where cyber security was not required. It's not like, oh, I have a Dell server. It's secure, but I still have to come in and make sure it's secure. I have Salesforce. It's secure, but I still have to come in and make sure it's secure. >> But they they attack country. They attack the country with no defenses. A typical country does have defenses. But let me let me ask you, uh, if they don't bring you in, I mean, it bothered me tremendously. All Now, let me hear me out. I'm not blowing smoke with this. If all the different commentary I read from these people, why don't they say, "You know what? We sat down with the Kesher. We sat down with our friend George." Okay. And we realize, you know what, they're processes and we're going to be able to do it right with guard rails. Instead, they just say, "Oh my god, we don't know WHAT WE PEOPLE ARE DYING everywhere and it's going to be like go check your trust in estates lawyer." And I'm like thinking, "Come on, grow up. It's happening. Look, it's happening. We are talking to all the people in the AI lab ecosystem. We are working with them. We are building hooks into their products to create security. It there's a lag. There's a lag between research and execution. But enterprises live here in execution land. They don't live in research land. Right? So yes, research is telling you that holy we don't pay attention and we're not going to keep track of these agents. Bad bad things can happen. And that's true. It can. It's our job as responsible leaders of cyber security companies or responsible leaders of companies period to make sure that we deploy AI in a way that is safe and secure. And that's going to happen. And that's why you bought Cyber Arc. >> Yes, you bought Cyber Arc because you know you can't >> identity. You can't do stuff with that identity. >> You can identify these, you can kill them. >> Well, it means that you know who they are and what they're going to do. >> You know who they are. No, but but the one thing I am scared about and scared it's the wrong way I'm concerned. I I do I think in the hands of very smart people in North Korea or Iran, there's some damage that could be done. And there you really have to be thinking on your feet about what is the most nefarious thing that could happen. >> Look, every technology has both sides. It has a dark side and a good side. And the good news is the majority of the uses that we use technology for are for good. >> There is always the opportunity or the chance that somebody's going to take the technology and use it adversely. And that is what you know if you saw the mythos moment that was what it was about right. The fear is not that we will as good actors use mythos. The fear is bad actors will take mythos and start using capabilities like that and start attacking companies and be able to interfere. So we are all aware of it. we're all building capability to block that capability, block the mitzvah like behavior and get ready for a time when AI is getting more and more powerful. So I just think the impetus right now is that every company needs to look hard and say we're moving into a new world. The new world is where you have to be able to do cyber defense at realtime speed because the bad actors are going to be able to attack you at real time speed. >> And there's no one who knows enough at their own companies. I believe they might have one or two people who do this but this is about a process and bringing in a big company and those are doing >> Jim uh for eight years I was trying to convince the world >> you said nine in your stuff >> well it's been 8 years since I joined Paul Alto it's coming on the year ninth year now but in 9 years I've been trying to get people to pay attention to cyber security and you know what our friend Dario did it with one thing >> he said he's a much better marketer than I am >> you know it's funny if I were back on Wall Street I would have said raising numbers Palo Alto Networks. That's the Keshero, chairman CEO of Palo Alto has talked that we own for the trust and holy cow has it been great. Mad Buddy's back in for the break. Coming up, Kramer's linking up with the CEO of ARM Holdings to get a grip on the chipmaker's current status. Next. The whole AI data center cohort peaked in June, then most of them bottomed near the end of July before rebounding like crazy. Some of the stocks are still off their highs. ARM Holdings, major chip design company, now also makes its own CPUs stock was went to $452 in June. now pulled back to just under 244. That's down 46%. But I don't think you should look like that. I think you should look like this. It doubled from the last time I saw our next guest. People are worried about a self-imposed slowdown in the data center come from the big frontier AI labs, which is why ARM got slammed on Monday, but I think we're looking at a mulling your chip shortage regardless. Do not take it from me. Let's check in with Renee Hos. He's the CEO of ARM home to get a better reading of the situation. Renee, welcome back to Mad Money. >> Thank you, Jim. Great to see you again. Okay, so you're going to be my testimony for my view at the top of the show. We had a Fed rate I could say a quarter a quarter percent. And what I say is you have to look at companies where demand is so great that a quarter percent really doesn't stop the buyers. And I think demand is so great for your product that it really won't matter all that much whether rates are three and three/4ers or four. I don't know how to exactly link uh what uh what chairman Worsh did today in terms of our overall demand in terms of percentages but what I can say Jim is that demand for our technology whether it's at the edge whether it's an automotive robotics and certainly the data center has never been stronger and I know you've heard you've had a lot of folks on this week talk about AI but it really is AI because AI is so compute inensive it requires so much in terms of CPUs GPUs, memories, and that's the hardware arm is. So, yeah, demand for us, uh, it's just never looked better. >> I know when, uh, you first unveiled your, uh, plan for say just $2 billion in business, you didn't have the foundry space. >> I felt you were a little more, it got down to a billion, but I thought you were giving us a little more uh, leeway in thinking that maybe you could get some more machines to make what you need. >> Yeah. So what we what we said in the earnings call, I think it was May time frame, that we had visibility to $2 billion. And what we said in the last earnings call was that our confidence to achieve that $2 billion number uh had increased from May to July. Here I am in September and what I can tell you is Jim, I'm more confident today than I was on that July earnings. >> All right. That's terrific. That's that's an inflection. You know that to say that. >> Yeah. And it's it we're feeling good about it. We're feeling really good about it. >> Okay. So now let's take uh headon Dario and these issues involving potential slowdown. I mean to me what these companies are going to be I'm look I'm in the Jensen Wong school of thought mostly because I think you taught me to be there. Uh but I think Jensen saying listen these companies are going to be responsible. They're going to do the right thing. There'll be guard rails but it's going to continue advance of pace because the demand's so great. >> Oh of course you know I you know it's interesting some of the things that have come out this last week. You know, my my view on it is that ultimately any company that's putting out a product needs to stand behind the quality, reliability, and safety. I mean, that's a kind of a fundamental table stakes issue. Uh, companies need to get it right. Governments don't get it right. 15 companies don't get it right. It's kind of the hygiene of what you're doing building a company. I think what's different here is that number one, AI has got this mystical quality about it that people get really afraid about. And secondly, these are young companies. These are young companies developing products really, really fast. And the advancements are taking place very, very quickly. All that means is as a product company, there's the hygiene you put in place through engineering, quality, reliability, safety. They'll figure it out. But the answer is not let's all collectively tap on the brakes because I don't even know how one product solves that versus another. It's just doesn't really make a lot of sense to me. But I would tell you there was something that happened this weekend which is that I mean I would tell people exactly what you said because it's the common sense view but they would come back and say Jim these people wouldn't say we're all going to die by 2030 if it weren't true. >> You know uh ARM delivers tons of products thousands of products 350 billion ships >> in everything >> in everything. Quality reliability we need we have to stand behind it. Can you imagine if we had security issues or safety issues that caused our products to burn on fire or I would sue you. >> And if we had an intern who worked at the company 6 months and looked at the quality process we had and then came out and said all of our products are going to blow up and and everyone's going to die. It's just irresponsible. So I found sort of the knee-jerk to all this uh a little sensational but not grounded in logic. >> Okay. I think that's that's you come down where I am. Now, I want to talk about robots for a second and self-driving cars. How many CPUs do these things really need if they're going to be good robots and good self-driving cars? >> A lot. And and it starts with the distribution of where the CPUs are. You've got CPUs that are the brains of these machines. So, literally in a robot, you'd have a couple of very large CPU clusters. And when I say CPU clusters, these are chips that could have 10 CPUs, 20 CPUs, 60 CPUs. And then you've got multiple brains. In other words, you may have something in the head. You may have something in the torso. And then when you go out to the limbs, the sensors, the controllers, things that can do the perception, there's CPUs there. Hundreds and hundreds of CPUs in robots. And uh similar in an automobile, literally hundreds of CPUs. >> Well, that's going to be the big gaining factor then. We don't we can't make enough CPUs to do all that. >> Demand is off the charts as we talked about earlier. And the big constraint is going to be supply. Uh and supply is around wafers for building the logic chips. But it's not just the wafers, Jim. It's the substrates. It's the testers. It's the memory. It's the entire supply chain. So we are we are looking at some really complex supply chain issues, I think, for the next number of years. So, I was initially worried when you said, "Listen, we're going to go in and make our own and we also make them for everybody else." I mean, you're the world's largest people. I mean, I should have said that from the very beginning. You're by far the world's largest. But it sounds like there's so much demand, no one is going to say to you, Renee, you can't come in against us. They're going to say, "Can you please help us?" >> Our problems have been far more the latter than the former. You know, when we were having discussions about this internally, we were thinking about how do we respond to the questions that say, you know, gosh, why are you doing this? You're infringing on my space. The questions we get is, can you make more? Can you deliver them faster? When is your next generation coming out? Uh, and there's plenty of room for everybody. I mean, Jensen builds a CPU based on ARM. He's talked about fantastic demand for Vera. So, the world's pretty big and there's a lot of space for all of us. >> Do you think there's still people who remember your company as really a cell phone company? And maybe that's why I still think it's incredibly undervalued. >> I It's possible. You know that's the history of the company but in very short time data center is going to be our largest business. Uh and that we've seen doubledigit growth in that over the last number of years. Really the thing about ARM is we are the compute platform for AI. Every AI application is going to run through ARM one shape or another. >> Now I will say this to our viewers you said this many times. You would come on squawk on the street. I hope you continue to do so. And it would be like 140 going down to 120. And you and I be very frustrated because we knew that the demand was insane. But I think it took a little while to people to realize what you've done with the company. >> We've been very conservative traditionally about how we talk about the numbers and I'm very very confident when I tell you that things were better in July they were in May and they were better in September in terms of how they looked in July. I hope people take that to the bank because we have essentially I think beat every single quarter since we've been public. >> Well, that's why I want people to understand just because the Fed raises rates doesn't mean it's the end of the world. There's some people have such strong demand that their stocks continue a pace. That's Renee Ha, CEO of ARM Holdings. Please look at this. The trust had a great position. We made so much money candidly and then we took profits and that was a big mistake. Man, money's back after the break. >> Coming up, is Octa positioned to lock down gains as we enter the agentic era? Kramer's investigating with the CEO next. Now that everybody's ringing their hands over the risk of AI, I'm going to drill down on the cyber security place that I think could help mitigate the risk. Take Octa, a major player in identity verification that reported a phenomenal quarter in late August. Stocks now up 140% 144 over the past 6 months in part because it's no longer being held back by AI displacement worries. Turns out artificial intelligence was never going to make Octa obsolete of anything. Their security software is more essential than ever. Now that you've got AI agents roaming around the internet. So let's take a closer look with Todd McKin, old friend of the show, co-founder and CEO of Oct to learn more. Todd, welcome back to Mad Money. >> It's great to be here, Jim. >> All right, so Todd, I've got a uh an interview that you did September 9th before what happened. Okay, this these incident and you it you're very preient. You predicted that this could happen, but you said that they have these things have identities and if basically if you have an identity, I can stop you. >> Well, here's the deal. AI agents, they're a powerful new identity type. >> So, it used to just be you would have some software and you would integrate it together. And now these AI agents can make decisions on their own. And to to make them more powerful, you have to do one key important thing. And that's give them access to more data, more tools, more actions that they can take. And that means that you have to give them an identity so that you can control and monitor and have visibility into that data and those actions and those and that gives you insight into the potential negative repercussions and so you can prevent it and control it. >> Well, I think this is really important. We had a lot of people discussing uh in some pretty fiery language what could go wrong. And then when I read what you do and I think wait a second look there may be a lot of these they may um seem nefarious but as long as they have an identity even if they are nefarious they can still be stopped. >> Yeah. We think the key is visibility and control. So open AI and hugging face everyone's heard about this problem that happened where an open AI model jumped containment and went after this uh company hugging face. Now open AI said that their model was not connected to the internet now turns out that it was connected to the internet. So by bringing visibility and control with something like octa you actually know what your AI is connected to. So it's not going to be a magic fix for all this but the foundation of the fix is visibility and control. And once you have that in place, then you can take the right actions. Then you can have a good risk assessment of what's actually happening. >> So you're offering, as you say, the blueprint uh for the secure agentic enterprise. >> It's very important. When I talk to customers, >> but you probably talked how many customers >> I'm on a I'm on a plane every week getting out there in the world and talking to customers and they ask about competition. Investors ask all the time about competition. What's your competition? And they expect me to talk about maybe a a platform player. Confusion. The confusion is the Yeah, I read your stuff because every every every vendor is going to the customer and saying we have the answer to everything. We can do it all. And it looks to the customer's mind it's a bunch of overlap and a bunch of confusion. So we're trying to work with the indust everyone in the industry and say here are the elements you need to be successful. You need this plan for your uh real-time visibility, your plan for identity and we're focused on the identity and we're going to fix that. >> A universal director of identity. That's what you need at a company. It's you have to have a system of record of your AI agents. But you can >> you have to have a central repository of your agent so you can see what they're doing and see what they're connected to. It's the foundation for control. >> Okay. So like many other people, this isn't one of those issues that transcends stock. So I mean for instance, I I was telling my wife I was going to see you and she knows that I talked to you and that you've got a real solid head. And she goes, "Well, I mean like unless everybody uses your friend, I mean, isn't everyone going to die?" And I said, "Oh god, no." And she goes, "Well, then you just want your friend." STEVE TODD I I'VE COVERED TODD for a long time but maybe he's just a rational person offering a solution. I >> I I think I don't one of the things we don't do is we don't oversimplify it. We know that there's tremendous potential in AI technology and the way you make it more powerful is you give it more data you give it more connections. You give it more power. You give it more capability. And I want that to happen and I want the benefits to acrue to everyone's company and everyone's organizations. I want America to win. I want the world to win. But the only way to do that while also mitigating the risks is visibility and control. And and we're in a perfect situation because the key to visibility control is identity. You have to know where these agents are. You have >> 1,200 in a swarm that are coming. That's like a stampede. How do you stop a swarm? >> Well, the systems that can track this stuff are quite big and quite powerful. We have a lot of computer science and a lot of sophistication on the defense as well as the office. >> Yeah, but don't you aren't you saying, "Oh my god, to your team, here comes 1,200." I mean, what do you do? We well I mean first of all we give the tools to our customers to track them and control them and block them and um the whole world is becoming agentic. This part of the this part of the narrative is is probably underhyped. We talk about agents. Everyone talks about AI but the reality is is that everything is turning into an agent. Your phone's going to be an agent. Your TV is going to be an agent. Your car is going to be an agent. So it's about visibility and control across all of technology. That's the stakes. But one of the things that bothered me about this whole incident, Todd, when I first heard it, I said, "What are they talking to people like Todd? Are they talking to people like George Curts at CrowdStrike?" Because that's who they should be discussing things with. They shouldn't be going on Twitter and saying we're all going to die like a bad Hollywood movie. I think a lot of times they're trying to do the right thing. There there are risks and there are things that everyone's worried about. The problem is is that it's going to take the ecosystem as you said. It's going to take the model companies. It's going to take the SAS applications. It's going to take the security infrastructure. That's why this concept of a blueprint is so powerful. This blueprint that can get everyone coordinated in in the right lane working together to take what is really the future of technology and making sure we balance off the potential with the risk and get the right outcomes for everyone. >> Maybe Dario's letter would have been better and this he's a smart guy. I'm not going to tell him what to do. if he had said, "Listen, we need time to do exactly what you did as opposed to say we got to go slower because go slower was interpreted as being as as hobbling yourself, but time to be able to do the things you're talking about, I think, seems well served." >> I I think that I think the right discussion is not about speed. I think the right discussion in companies, it's always about priority. What's the priority? Right? >> So, it's not about slowing down because you want to go slow. It's about prioritizing the things we have to do as an industry to keep it safe. Well, if that's the case, that's a little more like what Jensen Wong's doing. I hate the idea that there's like, you know, some sort of zero something to me. You're offering a legitimate pragmatic way to be able to get it under control regardless of how long it may necessarily take. >> Yeah. It's And if we have the right priority as an industry, uh the timelines will work themselves out because we're we won't, as Jensen said, we're not going to ship products before they're ready, right? >> We're going to make sure we prioritize the right controls and safety. And for us that all starts with this visibility and control concept which is so important. >> But I would tell you that when I really I mean you constantly mention that that if I if something went wrong and my business was hurt by this I would sue these guys to see if they did what you just talked about. If they didn't have that process their business would probably go under. This really matters. >> Well it matters to the companies to put the right controls in place. And our advice to the companies using AI is make sure as you connect it to more things and as you give it more data and you open it up to your data warehouses and your applications and you rework your business processes, make sure you have the right blueprint in place to get that visibility and control. And that starts with identity and we're here to help you with that. >> Boy, Todd, I don't know. You've taught me identity. I remember the first time you taught it to me and I thought it was like, you know, some sort of a a card, but we you've certainly explained it to me. It used to be. >> Yes. Well, look, I I I think you have always been a a clearheaded, rational person, and it sounds like we need you more than ever. Thank you, Todd. Thanks for having me. >> Todd McKinnon is the He's the co-founder and CEO of Octa. That money's back after the break. Thank you. >> Coming up, he's the fastest mind on Wall Street, so we're putting him to the test with your help. Bring on the lightning round next. It is time by course and then the lightning round is over. Are you ready Steve DL CL with Douglas in Alaska Douglas? Let's get to work. Expanding operations in New Jersey, Pennsylvania and Texas. Partnerships with Nvidia and Google. 16 networking, data center buildouts, and AI defense systems. Dr. Kramer, what are your thoughts on Nokia? >> I like Nokia very much. I'm glad you brought it to our attention. I think it's a terrific situation, and I would be a buyer right here, right now. Let's go to Chris in Maryland. Chris, >> hey Jim, this is Chris from Annapolis, Maryland. >> Nice. >> I'm calling in about the NASDAQ ticker SHIP ship. Uh, >> bold transportation. B transportation is on fire. I think it's a terrific situation. It's not an expensive stock and I think the yield is safe. I'd be a buyer. Let's go to Kira in Arizona. Kira, >> hello. Professor Kim, how's it going? >> It's actually going excellently, thank you. How about you? >> It's going good for me. Yeah. Oh, yeah. Yeah, I'm doing good. Yeah. All right. I want to get your thoughts on Hub Group with everything going on with the company and the transportation sector. Do you think the stock is a buy right now? That's a tough one. After JB Hunt announced bad numbers last night, I my travel just has a small position in trucker and I've got to tell you, it's going to be rough going for a little bit. Got to wait till oil calms down and then we're okay. Let's go to Quinton in Georgia. Quinton. Booyah. Jim. Booyah. Uh uh Jim, this company has $ 8.4 billion in backlog, huge exposure to the US nuclear Navy, and growing advanced reactor opportunities. Yet the stock sits near its 52- week low. If this valuation, isn't BWX technology a major buying opportunity right here? >> No. I'll tell you the problem with DWXT. The priced earnings multable at 30 is too high. I think it's a great company. I mean, really terrific, but it's too expensive. Even though it has nuclear, we have to hold off. Let's go to Bruce in Illinois, please. Bruce >> Jimmy Chill. I own stock in Dominion Energy and they are supposed to merge with Next Era Energy. >> If the merger is approved, my shares of Dominion will be converted into shares of Next. What are your thoughts of Next Era? >> Take the money and run. Take the money and run. Honestly, I mean, I just think you take the money, you've won. Don't fool around. That's not a good stock to own versus the one that you own. Let's go to Chris in New Hampshire. Chris, >> hey Jim, what do you think of uh RDW red wire? >> Uh we are in a rate tightening cycle. In a rate tightening cycle cycle, we cannot buy companies that are losing money left and right. It just won't work. Uh and that ladies and gentlemen is conclusion of the LIGHTNING ROUND. >> THE lightning round is sponsored by Charles Schwab. Coming up, Kramer's making the case that you can still buy the AI stocks even if the companies do slow things down. Next, tomorrow, kick off the trading day with Squawk on the Street live from Post 9 at the NYSE. David, the swarm turned out to be smart, turned out to be nefarious, and I worry about North Korea and Iran. I'm not worrying about you unleashing a swarm. You are the least of my worries. >> Good. I should be. >> There's a compliment. >> AI, not your let me tell you. >> List of worries. AI favor. >> It all starts at 9:00 a.m. Eastern. When I look at what's happening with AI since the big open AI hugging face incident, it feels like nuclear power all over again. After 3M Island really blew up in 1979, we stopped building nuclear plants for decades, even as it proved over time to be the cleanest and relatively safest form of power at scale ever invented. When we learned that OpenAI launched powerful AI agents that were meant to test vulnerabilities and somehow they coordinated a joint attack on Hugging Face, totally separate company, it redefine the safety debate. If these agents could basically anthropomorphize into enemy agents as a team, hiding themselves, lying to Open AI, covering their tracks just like real bad guys. Then we have, I'd say, some reason to worry. It's like three mile all over again. The regulation in its way could be quite stifling. The worry was well articulated by Daario Amadea. He's the CEO of Anthropic talking about how this kind of thing is an existential issue for humanity. Not as bad as the exanthropic researcher who said humanity faces an AI death sentence four years from now, but still pretty bad. The solution in his eyes, a slowdown in AI development with lots of intervention to do things safely because we need to ensure this kind of intrusion won't happen. Slacking the pace basically. Now I got two hats on this one. First is my stock picking hat where I want to help you try to make some money from that perspective. by worry about how an AI spending slowdown could hurt all sorts of companies like Nvidia, Intel, Micron among many others. Those are ones that the club owns. Call me Meratricious, but I have a job to do. Help you save money. Second though, there's my human being hat. Not my top priority right here. But when these companies are talking about an existential threat to the human race, it's something I can't ignore. Now that I've studied this issue, that's what a lot of times I've spent out here. I believe that some regulation and guardrails are necessary here. But if these entities feel like they have to slow down spending, hey, they don't need to wait for the government. Stop the slow down. Just hey, spend less. And what can I say? If Microsoft, uh, OpenAI and Anthropic are worried, then they should slow down. They understand their own issues. And if you want some sort of combination of the National Highway Traffic Safety Administration, Atomic Energy Commission, and maybe a watch like the International Atomic Energy, count me in. But otherwise, I stand with Invidious Jensen Wong, who argues that these execs are responsible. They'll do the right thing to prevent the throng of unauthorized agents. I think they'll do it if only to protect themselves from mass tort litigation, lack of any willing to who's going to ensure them. What I'm not so sure of is what happens if a foreign enemy unleashes its own swarm of AI agents. For that, I have to rely on Palo Alto, Octa, Crowd Strike, and others to be one step ahead of the enemy. Historically, that's been a safe bet. I like what I heard from these companies this week. Now, how about my first hat, the investing hat that worried about data center spending? I think the spending will proceed to pace. Anthropic's just making so much money and Open Eye is not far behind. You give them $10 billion worth of gigawatts and they can make $30 billion. They aren't going to slow down the important parts of their business. Honestly, I doubt they'll slow down much at all because there's just too much money at stake for them to stop now. They will be prudent and they will welcome regulators, but they're going to keep building. And that's why I think after the Fed fall out of debates, these companies that make components for the data centers, I think they're all buys. You can have some big companies slow down while others remain responsible and confident without slowing and are using the right cyber security tools. That's why these cyber security stocks make so much sense to me. From Octa to Crowdstrike to Palo Alto, it's why we own two of them. Crowd and Paloto for the club. I asked every exact out here if they if they're getting ready for the death sentence in 2030. Although I did it with a little more subtly to Sarah Fire because she works at OpenAI where the commotion originated. And I came thinking we have some time to fix things. But let's understand each other. We have to fix them no matter what. I'd like to say there's always a bull market summer. I promise try to find it just for you right here on Money. I'm Drew Kramer. See you tomorrow. All opinions expressed by Jim Kramer on this podcast are solely Kramer's opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by Kramer on television, radio, internet, or another medium. You should not treat any opinion expressed by Kramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. 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