Bring in show music, please. Hi, I'm CNBC producer Ryan Anastasio. Today on SquawkPod, growing anticipation ahead of Anthropic's potential blockbuster IPO. Investor Brad Gerstner on the state of the AI trade.
We're at the brink of the singularity. We're entering super intelligence. And whoever has the most scale, capital, compute, and data wins the game of super intelligence.
United slashes its profit outlook as fuel costs continue to bite. CEO Scott Kirby on things up in the air.
Six continuous airlines going to lose money this year, and you're coming off of the COVID low. So while airfares are up a lot this year, they're still down in real terms compared to 2019.
Plus, SpaceX reports earnings, and Elon Musk confirms he's exploring a merger of that business with Tesla.
Did you ever think you'd live to see the most exciting stock, something called space exploration?
It's Elon's world right now. You have one individual who really does have power over the whole world. I mean, there's really no other competition right now.
It's Wednesday, October 21st. SquawkPod begins right now.
Stand by in three, two, one. Q. Andrew.
Good morning. Welcome to Squawk Box right here on CNBC. We're live at the NASDAQ MarketSite in Times Square. I'm Andrew Ross Sorkin, along with Joe Kernen. Becky's off today, but so much to talk about given everything that's happened just in the past 24 hours, maybe less. But Joe, you've got the story of the day, the week, the month. Here it is.
Did you ever think you'd live to see the most exciting stock, something called space exploration? And that's it. SpaceX shares higher after third-quarter results. The company reported its first-ever profit, saw more than a 160% jump in revenue versus last year. Its AI business grew ninefold. On the earnings call, CEO Elon Musk said SpaceX and Tesla have in fact formed special committees to discuss the possibility of a merger.
I think some people out there assume that a SpaceX and Tesla merger is a certainty, and I think that would be overstating it. Do I think it would be a good idea? Yes. But at the end of the day, the shareholders have to be supportive of this, and particularly on the Tesla side, we will need a 50% vote of all shares, not just those who vote, but of all shareholders. And that's quite a high hurdle to try to achieve.
Tesla is scheduled to report third-quarter results after the bell today. SpaceX's CFO cited increased visibility into the company's compute contract pipeline for a first-quarter 2027 revenue projection of between $33 and $37 billion. That's well above the $22 billion average analyst estimate. Most of SpaceX's profit, though, comes from Starlink. In the third quarter, Starlink subscribers grew to 13.6 million, up from 12 million in the prior quarter.
And we'll talk more about that, but just seeing a profitable business emerge from space travel in a relatively short lifetime. It starts with John Glenn and Alan Shepard and those funny-looking capsules landing in the ocean, and it goes through the moon landing, and then goes through space shuttles. And it always seemed like it was only something the government could do, really NASA, and there'd be no reason for the private sector to do it because there was no money to be made. But heralding in the age of satellites that do so many things commercially — suddenly it's a really good business, and maybe the biggest business ever.
Because it's a vertical business, though.
Well, a lot. I mean, not just vertical like you're going to space — vertical meaning...
Well, all the other things that they do.
Right. The real business that's making money right now is satellites and AI and data centers. I mean, that is the—
That's something we never even thought of.
Right. The data center piece is very much on the ground, and it's largely, when you start to look at it, could completely outpace—
So not the data centers — just what they're doing.
Just what they're doing on the ground is — I mean—
When do we put it in space?
I don't know, but I think the bigger question — the bigger thing that I focus on is this guy is just such a remarkable physics engineer. I mean, it's an engineering—
Good people working for him.
No, I know. But I'm saying it's an engineering challenge. The idea that he's building the data centers on the ground as quickly as he is compared to everybody else is a function of his insights and ability to understand how to move physical stuff around at scale, and to understand how to use energy at scale. I mean, that's to me the magic of what he's put together. And then Starlink. But what's interesting is here we always thought that space travel unto itself — we'll see whether he's making extraordinary amounts of money off of payloads, you know, putting other people's stuff into space. He's figured out a way to put his own stuff into space and to make that the business. And that's what's so interesting about it.
Eventually, I mean, depending on what we do, obviously, everybody's going to need to send things up there, right, to do things. And—
But by then, it's going to be interesting. And I think you will want this. You want more competition, right?
You want more competition in space. By the way, one of the reasons you want more competition in space — I'll give you the prime example — is the story we're about to talk about right now, which is Elon Musk reportedly behind SpaceX's decision to slow down connection speeds for Ukraine's military. The Wall Street Journal reported, saying that Musk spoke to President Trump about the slowdown in Starlink speeds last week, soon after the news became public. One source told the Journal the two men talked before the throttling took place. The connection lag severely crippled the ability of Ukraine's drones to operate effectively. After the slowdown became public, Musk posted on X: 'Any limits on speed or usage are decided by the US military and ultimately POTUS.' But I think we should actually probably show — can we go, guys? Can we go get the full tweet? Because that was not really the full tweet. I think there's more to it. And the reason I'm mentioning this is he goes on to talk about how Starlink itself, not Star Shield, but Starlink is a commercial service that can't be used for aggressive maneuvers or the like.
And I was looking at it last night over and over again, thinking, okay, what is he saying here? Is it possible that he did throttle it, but he throttled it under the terms of service of customers, including potentially Ukraine, not just using Star Shield, but using Starlink for offensive purposes.
I thought that they also were unable to intercept things coming in as well. That would be for defense.
For defensive purposes, but perhaps the claim will be made — and I don't know. And I'm imagining, by the way — do we have this? I think maybe the producers, they're getting it right now. I think when you look at it, you might say to yourself, maybe that's going to be the rationale for this. By the way, if the House goes Democrat or the Senate goes Democrat, there are going to be hearings, and probably should be hearings, no matter what the politics of it are, on this very issue. And the reason I mentioned competition in space is ultimately, right now, you have one individual who really does have power over the whole world. I mean, there's really no other competition right now.
What's the story behind the story on Elon Musk's political views on Ukraine, and on whether Zelensky attacks energy sites, and is it aligned with President Trump because they just want the killing to stop, or is there some other—
Here? Why don't we — we actually have the tweet now. So let's read it, because I think there is a nuance to it maybe. 'Star Shield systems are owned and controlled by the US government. Any limits on speed or usage are decided by the US military and ultimately POTUS.' Okay, stop there. And that's where most people stopped focusing on anything, because it seemed like he was trying to suggest that POTUS was the one who did this. The next part, though, says this: 'Starlink is a commercial service owned and controlled by SpaceX. Usage of Starlink is limited to civilian or defensive activities and cannot be used for offensive military action, as doing so would be inappropriate for a commercial company.' I don't think that anybody that I know was focused on the second paragraph of that in the past week. Everybody read the first paragraph, said he's basically saying POTUS told him to do this, and that was that. Now, if you read these reports — and I don't know if they're right or wrong — there's even a suggestion that at some point somebody from SpaceX called up the White House. I don't know if you saw this, and said effectively, 'Let's get our story straight together — let's get aligned on what we're telling the public.' And then you had Pete Hegseth go out there and say, 'Well, it wasn't our decision, but it might have had something to do with terms of service.' That was actually one of the reasons I started to look into some of the language here.
So, it's to me it's interesting that — I guess for a communications company, you'd say no offensive uses because you can't — can you imagine any other defense contractor saying only defensive, not offense? I mean, we make offensive weapons. That's the business we're in. It's not — we don't just make Patriots. We make — so, it's a little weird. It's a little weird that that would even be in the—
Right. But it's a different — it's not a defense specifically. It's a communication.
Starlink is not a defense company.
Star Shield is the US government's wholly controlled version of it.
Well, you would then think that you could use it offensively. Well, we don't know. I mean, if Russia or China had it, they would be using it offensively.
Well, what we don't know is whether Ukraine is running its system fully off of Star Shield or runs some of its operations off of Starlink. And it's possible they run off of both. And so it's possible that one piece of it gets degraded and the other doesn't, for example. I think there's going to be a lot more to the story now that we are starting to get bits and pieces. It all plays into just the whole sort of new approach that the Trump administration is taking to the whole situation — the trilateral meeting excluding Zelensky with Putin and Xi. And I just, like I said, I think it's interesting that Elon Musk has such strong feelings — like the other day when he tweeted that, when there was an attack, another Ukrainian attack on Russia, he said, 'Not good.' I've been talking to Elon about Ukraine for years. And he's been pretty public for the most part. He has a relatively dim view of the way Zelensky has approached this war. That's been his view. He's been consistent with that view.
Is he a Russian apologist? Or I mean, for people on the left, it's hard to imagine any scenario where you wouldn't be 100% behind Ukraine. Every person that sends in something with a Ukrainian flag — I know what they're going to say. There's Ukrainian flags in Short Hills, right, on people's lawns. I know who they are.
You could agree or disagree with the perspective I'm about to offer. I think it's the perspective of Elon, which is — I don't want to put words in his mouth. I think he always talks about sort of first principles, and he'd sort of say, 'Well, where does this go? How does this end?' And he would say, 'It doesn't end well. It's not going to end. Therefore, if this is just the state of affairs and people are going to die, yeah, let's try to get to the endpoint as quickly as humanly possible.'
Ukraine can't win. Now, there's obviously another side to that, which is if Ukraine can't win, it means that Russia will continue to win, not just against Ukraine, but other parts of Europe. I don't know where Elon Musk stands or thinks, or how he thinks about the next-order effect of if you don't defend. I don't discount the — I mean, the domino theory never worked in Southeast Asia, but in this case it sure worked in World War II. We should have been scared, and maybe we should be scared at this point.
Is it too simplistic to say there's two kinds of people in the world — people who have the Ukrainian flag in their yard, people who have the Israeli flag in their yard? Why does it seem to go down political?
Why is it like that right now? I don't know, but I would take it a different way related to this — which is that, if you have a Ukrainian flag and you—
don't have an Israeli flag, then?
No, you probably need to have an Israeli flag.
And if you have an Israeli flag, you probably need to have a Ukrainian flag. So why is there a divide?
Shocking disconnect. I know — that's what I'm pointing out. No, no, I think you're 100% right on that, because you know where I am. If you believe that Israel has the right to protect itself against Iran, that democracy in the Middle East is our strongest ally, and therefore if you also believe that Ukraine has the right to defend itself against Russian aggression, right—
You should be in the same place.
And I don't think — unless you only back winners. I mean, it's tough to see a way out for Ukraine.
And that may be Elon Musk's argument. But by the way, Elon Musk, I believe, is a relative defender of Israel. I haven't actually spoken to him about that at great length.
Coming up on SquawkPod, Altimeter Capital's Brad Gerstner on the AI trade, SpaceX earnings, and how Elon Musk could give every kid in America a share in SpaceX through Trump accounts.
I think we've created the most disruptive charitable platform, direct charitable platform, in the history of the country. We're going to see trillions of dollars of bequests and other things flow through this platform, because the reality is America is the most giving country on the planet. People want to give. It was just too hard to give.
This is SquawkPod. Stand by, Joe. Here's Mike. Q.
You're watching Squawk Box on CNBC. I'm Joe Kernen along with Andrew Ross Sorkin. Among today's top stories, Elon Musk reportedly drove SpaceX's decision to slow Starlink speed for Ukraine's military. Is it Starlink? What do we decide? Starlink.
Starlink, not Star Shield — the defensive one.
The Wall Street Journal says that Musk spoke with President Trump before the slowdown, which hampered Ukrainian drone operations. After the slowdown became public, Musk posted that the president ultimately controlled Ukraine's access speeds.
Join us right now, and we're thrilled to have him in an exclusive, wide-ranging interview. Brad Gerstner is here. He's the founder and CEO of Altimeter Capital, a founder of Invest America, also now known as Trump accounts. Want to talk to you about that, and all the conversations you've had with Elon Musk, who just announced his plans to donate one share of SpaceX to every single child in America in 2027, which is a remarkable, remarkable thing. We've talked about this for quite some time, and I know it's been a lot of work on your side to get this done. But before we even get into all of that, I'm just so curious — we all watched the SpaceX earnings last night.
Extraordinary. I'm curious, what was the biggest thing you pulled out of that? And also want to get into what you feel, or how you feel, about a potential Tesla deal.
Yeah, so it's great to be here. It was an extraordinary earnings call. I mean, I think the biggest debate in the market today is: do we have enough capital? Do we have enough manpower to build out the data centers across the United States? So think about the magnitude of what he announced last night. He said they're standing up 200,000 GB300s per month. Just a few months ago, that was what we were doing in a year. He says he's going to do that every single month. By the end of the year, 3 gigawatts. He says they're going to stand up 10 gigawatts of compute next year. It's unheard of. The forecast for next year for total compute being stood up in the United States is 43 gigawatts. So SpaceX alone is going to put up 25% of the total gigawatts going up in the United States.
The capital required to achieve this — that's like $400 billion that's going to have to be raised to build out that compute infrastructure. But it makes very clear Elon understands we're at the brink of the singularity. We're entering super intelligence, and whoever has the most scale, capital, compute, and data wins the game of super intelligence.
So he's going to have to raise an extraordinary amount of capital at this point. I mean, how does he do that?
Well, I think at the end of the day, he has better access. We see the gyrations in the market for the subscale neoclouds. CoreWeave is an extraordinary company run by a great CEO, a great team at execution. The problem is they're subscale relative to SpaceX. And then if you put SpaceX and Tesla together, I think one of the main motivations behind the merger — as somebody who owns shares in both companies — is he wants to get scale now. He wants to accelerate scale now, because if you have scale around capital, and if you put the companies together, it's easier to borrow money, right? It's easier to raise money cheaper, etc. And you're going to need to raise cheap capital to build out all this capex.
Okay. On the Tesla front, I'm going to make you a member of the special committee. What kind of premium do you want for your shares of Tesla?
Right. I think — listen, if you look at a control premium, it's generally 20 to 30%. You would want that in these situations, but I think here—
I think it's just do it. I don't — you think it's going to be less. I actually don't think you need any premium. And the question is whether there's a premium already built into the stock.
Of course, there is. There's always a control premium. There's always a premium built into the stock. That's always taken under consideration. But I actually have a slightly different view here. If I'm on the special committee of Tesla, I have a unique fiduciary duty because he's involved in both companies, right? In order to make sure this is fair for Tesla shareholders, I actually think they'll err on the side of higher than 30%, a higher change of control here, because they need to make sure — they want to guard against the lawsuits that invariably come, and they want to make sure that they have it. So if you go above the market rate, if you're above 30%, it really does insulate you, I think, from a lot of those things. And it doesn't have to be from today's price, because part of the change of control is already built in — the merger premium is already built in. But I think you're going to see something between, you know, 420 bucks a share and let's call it 520 or 550 bucks a share. That's my best guess as we sit here.
Three or four shares of SpaceX.
I just want to go back. You mentioned CoreWeave, and we've been talking about these neoclouds, and there's been lots of question marks even in the past week or two about what's happening there. When you listen to Elon Musk last night, you'd think to yourself, 'Oh my goodness, the demand is so out of control, we shouldn't be worried at all.' And yet the market doesn't seem to necessarily share that view.
Right. Well, remember when people make comments about demand, it's spot pricing. It's the demand that exists in the world today. But the market — when I'm loaning you money or I'm investing in your equity, I have to apply a discount rate to what I think is going to happen in the future. And the reality is nobody knows what the demand is going to be in 12 months. Most of us who are in the game are saying this is accelerating; we're forecasting that demand is going to accelerate. But of course there's a distribution of future unknown probabilities. It might accelerate, or there are other versions of things that can happen in the world where that demand would decelerate. And so people need to get paid a risk premium for making that. And when you're investing in somebody who doesn't have a lot to collateralize other than the GPUs — and let's be clear, Jensen understands the fungibility of his GPU. It's a lot easier to underwrite a GPU coming out of Nvidia because a lot of people can use that GPU; custom ASIC, much harder to underwrite the financing on that. So depending on what's going into CoreWeave's data centers — and Elon's almost exclusively on Nvidia, again an easier financing GPU.
Let me ask you, from a policy perspective: we keep talking about this country is going to spend a trillion dollars potentially a year to keep this going, and that's extraordinary. And most of the spoils of that are going to the suppliers. The margins at Nvidia, 75% last quarter. You look at Micron, you're talking about 86% margins. This is not normal. And that's a result of a shortage. I'm not suggesting that there's gouging taking place. I'm just wondering — when you look at the competitive landscape, typically when you see margins like that, that's like a siren call for competitors to come into the space to try to bring down the cost.
Good question. That by the way, that siren has been going off since 2023, and we're still here.
That's right. So, how quickly do you see a shift there?
Yeah. I mean, like, listen, I've been doing this podcast, BG2, with Bill Gurley over the course of the last couple of years, and that was the question we asked for two years: when does the supply shortage turn into a glut? So the people who've called the glut over the last two years, they've all been wrong, and they've all missed the opportunity to the upside. At some point they'll be right. But I would stipulate they missed a lot more money to the upside. Remember, Nvidia over the course of the last three years is up 18x. You missed all of that because you were panicked two and a half years ago that there was going to be a glut. I actually think you have a natural constraint here. There's only so fast in terms of production of wafers in this country. It's only so fast that we can bring power on. So it's very different than what we saw in 2000. In 2000, we had constrained demand because we only had 30 million people on the internet. Today we have unconstrained demand for super intelligence, and we have limited supply because we have physical constraints in how quickly we can bring the supply on board.
