>> she has 20 years at goldman >> i still have my stock that tells you something >> sheila, thank you >> thank you >> we'll take a quick, you know, rather talk to her there's not much happening, except the dow has cut its premarket gains in half, now up only 46 points still green, but a long way to 4:00 it's been a good month for the s&p, and it's been such a great day. join us tomorrow she'll be back >> see you at 5:00 >> and she'll be on at 5:00. "squawk on the street" is next ♪ good thursday morning, welcome to "squawk on the street," aisle carl quintanilla with david faber, mike santoli at the new york stock exchange cramer has the morning off got some news flow on this thursday, big reskvisions higher to q1 gdp. micron is moving some chips. banks pass the stress test and an important day for ipos. our road map begins with the return of the ipo. three new listings set to debut

here plus shares of micron are rallying in the premarket. the chip maker delivered a bullish forecast but does warn the full impact of a china chip ban, well, that remains unknown. disney got a downgrade at keybanc due to meaningful uncertainty around that media giant. we'll talk about that. nba rights, espn, you know, what else, carl let's begin the big thursday for the ipo market thrift shop operate savers value village, kodiak, the three ipos combined failed to hit the $1 billion mark with savers being the only one to exceed its projected price range. don't miss our interviews with the ceos of savers and kodiak coming after the opening bell. some discussion this morning about how the pricing hasn't been ebullient >> buyers pretty discerning about it, not feeling they have to be too aggressive on the bid side in some ways, textbook, the way

the ipo market reopens after being dormant for a long time. six or or eight months after a market lull, you got stability in interest rates. the deals that were stacked up get out and test the market. in these cases, too, you have private equity owners or larger companies or sovereign wealth fund owners that just want to monetize these assets, so the sellers want to have a deal done, and so, you know, it's not necessarily the case where everyone is assuming you can flip them for a huge gain. i think it's healthy on balance. we'll see how they trade, and the fact that we're talking about three shows that the kind of machinery is cranking forward, but slowly enough to where you're not, like, losing yourself in all the tickers that are being thrown at you, so it seems, again, a pretty rational environment. i think i would also say the history of deals that get done in the early part of a reopened ipo cycle often do benefit the buyers more than the sellers so, you get rationally valued deals. i mean, if you wanted to look at

extreme examples, visa coming public, that was more of a distress sale in '08 by the banks. even google, it was not a traditional ipo. but it happened at the early edge of when things were reopening after the tech crash >> those were enormous deals >> i'm just saying -- >> visa was the biggest ipo of all time >> absolutely. and therefore, the sellers needed to have it happen, and so, in retrospect, it was a really good entry point. i'm not suggesting this is what's going on right now. what i'm saying is, it's a little more of a balanced market as opposed to, if you want shares on this deal, you have to pay up, and it goes to the benefit of the issuer, not the buyer. >> there's a look atavist, of course, which we do remark on in terms of its market cap, although it hasn't done much in a little bit, interestingly. sorted of hung in there now. sorry about that >> got pretty expensive, and has been shopping sideways for quite some time. >> there's also the notion, tom on "squawk" this morning raised the idea that spacs, in his view, at least, set the market

back five years. >> i don't know if that's the case >> introduced an element of toxicity to the whole thing. >> perhaps i don't know seems like -- i don't know why you would say traditionally underwritten ipo where you're actually, you know, you know what the financials are, you're not kind of giving somebody just a pool of capital, i don't know. i do think that there was certainly a once bitten, twice shy type of response from buyers, but you're also not seeing a lot of inflows into small cap growth funds it's not as if there's already that fever built up to where you have this craving out there for every new deal so, you know, it has to happen it's a process it's not a moment. >> and when it comes to spacs, listen, inflated, obviously, the size of the ipo market in a significant way and the size of the m&a market, because remember, every time they did one of these as well, it was counted as a transaction >> sure. >> that's not coming back as we talk so often, and to mike's point, and again the distinction, in this case, the

companies are beholden, at least, to the numbers they're putting in those s 1s as opposed to those crazy projections you saw time after time that we would talk about endlessly that came from the spacs because they were very different in terms of what they were required to actually do in terms of standing by some of those numbers >> bigger picture, the kind of supply-demand dynamic for equities in aggregate has been pretty favorable, because you still do have lots of buybacks going on even though flows have been hit or miss, you didn't have any issuance against it, and now, in the last few months, both secondaries and ipos are starting up again, so that will, you know, perhaps bring things more into balance, so it's not just the fact that you have this persistent bid out there going after a finite amount of equity. >> we'll watch that. banks are the other story this morning, getting a lift after 23 of them do pass the stress test as expected. aims to ensure that the large banks are sufficiently capitalized. some of the models they were looking at were, say, decline in housing prices of 38%, 40% on

c cre. capital one made some news with the highest losses in this scenario >> might need to top up capital. i know jpmorgan downgraded citizens financial on that rationale as well, the idea that they have to recruit more capital, but in general, first of all, it's an incredibly onerous test you're talking about just a huge crash in gdp and asset prices, and it seems as if more or less, most of these banks cleared it reasonably well. seems like a removal of just a modest overhang. we'll see what it means for share buybacks, the plans might be trickling out i do wonder if the sort of regulatory aggression that's expected to follow svb is going to keep folks a little more hesitant to get aggressive on the capital return, but you know, we'll see there. i mean, obviously, the valuations have been crunched in the last few months.

>> some of the trade groups arguing, don't raise our capital requirements now, and we'll see. i guess the thinking is we might start to get some buyback dividend plans beginning tomorrow night >> yeah. >> looks like we will. and i guess, you know, they're being pencilled in, in terms of incremental change in that i guess citi was one that also is going to probably have to be a little more careful and let capital build up a little bit longer, and they had gone back into repurchasing shares not too long ago so, you know, it's a back-and-forth i think it's, you know, you clear this as a little bit of an overhang psychologically, but i'm not sure it changed the story. we came out of the svb episode feeling like the stress tested global large banks were the rel relative haven we weren't too worried about them now, the stress test says you still don't have to worry about them i don't know if it's something more than that at this point >> i think the continued focus is the one we talk about so often, not necessarily the

stress test, but the willingness of so many of these banks to lend, their inability to put new capital out there given the con constraints they have on their deposit-based side and their net interest margin being compressed so much and then commercial real estate, awhich, for certain bans in certain places, is definitely going to be an issue >> the stress test did try to put some numbers around that maybe that's helpful to have people feel like it's a slow-moving problem. >> it is >> but it's still going to be a problem for certain areas, yeah. >> as much about new construction loans and/or being able to fund things of that nature as it is restructuring existing financing for buildings and their landlords, which is certainly going to have to be restructured to some extent, but many of the banks don't want -- they don't want to take buildings back, so they're going to give leniency to the extent they can, but it will require a writedown of some kind, and then the question becomes, do you start to have that same asset

quality question and/or reduction in assets that brought about that deposit flight that we saw in the spring >> yeah. it seems like a drag as opposed to -- but again, you're talking about negotiated terms and are we going to extend more credit do we have to take, you know, reserves and losses as opposed to, you know, people bought trillions of dollars worth of securities backed by an eroding asset value like in the financial crisis, and we need to sell them now. that's not what's happening. >> in this case, residential, there's even more chatter about housing going into a -- even if it were a shallow recovery would be accretive to gdp. >> it's all of a sudden no longer a drag, and pricing, it's very -- it's just very noisy affordability is bad you know, even mortgage finance on the higher end is getting tighter, and yet, you have so many cash buyers and so little supply that it's just changing the overall dynamic, and now activity really is rising. >> by the way, just gives us a quick moment to talk about gdp

this morning there was a revision on q1, but we were looking for one for -- they rise up 0.7 consumer comes to the rescue with 4-plus. >> i think in large part it ratifies where the market has been, in terms of cyclicals, especially housing and travel. the bond market noticed these numbers today, gdp, coming after we easily absorbed the hawkish central bank speak yesterday about, oh, the fed may need to go two more times. now you have this gdp head of steam up to some degree, and i guess the tracking is in the high 1s, maybe 2% range. the two-year note is not that far below the pre-svb levels, so this is something that has to be digested all we have in the s&p coming into this was an adorable little 2.5%, 3%, pullback, and then we got a rally off that, so i think

you're in a position for the market to sort of notice that there's a potential headwind that arises from the stronger than anticipated economy that's been working through the numbers. >> you used so many different adjectives to describe markets adorable do you think you've ever used that one that a first >> i think it was. it's like when sports reporters use verbs. >> i haven't used -- i haven't initiated the use of an adjective in ten years i'm always plagiarizing. >> you've got the same -- >> i like it when you say, boom goes the dynamite. >> adorable pullback >> it's just like everyone saying, the market's overheated, we have to pull back, it's a little bit of a correction, and then it was just sort of -- here's another little data point. the dow down seven of eight sessions into yesterday. the total loss is like 1.6% over the seven loss-making days, so it just shows you that it was a sort of grudging decline, and i think, in its own way, adorable.

>> i do wonder yesterday, data track looked at the percentage of buy ratings climbing these searches on google for recession have been cut in half since the beginning of the year, lowest since april of last year. i mean, is the street getting too bulled up too quick? >> i think it just gets to the point where, okay, everybody has more or less come to the side that says, you know, recession's not right ahead of us. i don't know that it means that all of a sudden, everyone expects great things out of the economy. it's more that you're burning off that pessimism that had built up about where we were headed, but yeah, i've been saying for a few days now, it seems like a much more even trade. it just doesn't feel as if you can just shoot against this negative consensus and say things are going to be better than feared and that's going to be enough. we need to have the earnings come through and all the rest of the things as opposed to just the absence of a negative. >> it's going to be interesting. we didn't even mention claims at 239. >> also better than expected >> powell talked about it yesterday. still to come, we'll get to chips, obviously, and some movers,including disney, getting

hit with a downgrade out of key. pfizer is in the mix as well netflix. rh take a look at the premarket here "squawk on the street" is back in just a moment ♪ opportunity is using data to create a competitive advantage. ♪ it's raising capital to help companies change the world. ♪ opportunity is making the dream of home ownership a reality. ♪ ...and driving the world forward to a greener energy future. [applause]

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that's what i thought. introducing the next generation 10g network. only from xfinity. micron is up in the premarket. chip maker posted a quarterly beat, they did cite the a.i. boom this is what sanjay mehrotra had to say on the call last night. >> some of the customers, given the low prices that exists in

the industry today, and before prices begin to increase sp substantially, some of the customers may be looking at purchasing additional volumes at this time, but the trajectory is continuing improvement in their inventory levels, end to end, across the supply chain. >> only fly in the ointment was this characterization of legacy datacenter as "lackluster," which sort of took the shine off last night's guidance. >> the recent acceleration and the adoption of generative a.i., though, driving higher than expected industry demand, they say, but to your point, on the call, they did point to mainstream datacenter applications continuing to be lackluster they pointed out, mike, you know, a.i. servers have six to eight times the d.r.a.m. content of a regular server and say some customers are deploying a.i.

compute capability with substantially higher memory content. for example, nvidia, gh-200 super cluster, and therefore, they say they're going to be a beneficiary of the explosion in computing power needed to -- for generative a.i >> the pie just getting bigger is the story with micron everybody wanting to say, we're part of this as well there's an investment boom, and we have something to sell into it and it makes sense it did seem as if the inventory commentary and the idea that the overall market is cleared and pricing should firm up was the catalyst for a little bit of the stock performance after hours. i mean, i think the broader context is stock traded almost at $100 in january of '22, looked super cheap then. now we're louising money, but that's when you want to look to see if the turn is in. bottomed at 50 it gained back a third of what it lost. it's in that middle zone where

expectations aren't super high and it's rebuilding confidence that the cycle's in a more friendly spot. >> a stabilization of the market is what they're saying >> i think that's what they're indicating they did try to, in some rough way, quantify the exposure to china in these areas that may have some restrictions applied to them. it's significant so, it seems like the market isn't immediately going to that spot to say we have to sort of assume those revenues away >> low double-digit percentage is what they said, and of course, nvidia, yesterday, said no material impact at the same time, you got ellison saying we're spending billions on nvidia chips, and then crm with $4 billion investment in the uk over five years. obviously, driven in large part by a.i >> yeah. and on nvidia, i mean, being -- having that chip or continued potential bans of certain of their products in china, there has to be some concern about that doesn't there? >> you would think so. i mean, the market barely

flinched at it it was like a 3% dip the stock's up 180% this year. i guess the theory is they're operating -- they're racing to meet demand. >> right right now, they don't have enough >> in a sense, it's not as if this stuff's going to pile up, but i just -- >> perhaps they could come up with yet again another sort of lower-end version that will meet the expectations of the u.s. >> like an ad tier for chips >> yeah. right. sort of, you know, this won't kill us all. the chinese won't be able to use this to develop weapons of mass destruction. i don't know >> no, it's definitely hard to know it did remind me, and i actually showed a chart not that long ago, of -- i think i told you this, enc in the late '90s where it was just, companies said, we have no choice but to pay you for this equipment we need the data storage we have to do it the chart was absolutely wild for ten years, really, but the last three was absurd. and the buyers were not willing and happy buyers of the product.

they just felt they had to and that's where we are, maybe, with nvidia right now. with a smarter product, of course, than raw storage >> we talked about this in light of what car dealers did during covid, charging over msrp and not generating good will over the long-term. >> i'm not saying nvidia's in that position. the capabilities are unique in terms of their products, but it does seem like there is that feeding frenzy by necessity among the buyers >> we'll watch it. obviously, huge dynamic for the market we're on ipo watch as well as we said, we'll talk to the ceos of savers value village and kodiak gas services, two of the three companies going public today. one more look at the premarket as we get this opening bell under way in under ten minutes

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we mentioned the banks a few moments ago, and in fact, you'll see a bunch of them on the s&p premarket gainer list. there's -- you'll see bny, schwab, zions, but even goldman, morgan stanley, all up 1%-plus wells up almost 2% opening bell coming up in seven minutes.

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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. disney shares, we'll take a look, i think they may be moving a bit lower in the premarket this morning, keybanc downgraded the stock, saying it's got five good reasons to step aside theme park expectations too high, espn moving to streaming, that's "materially harder than we initially thought." i gave this a little bit more focus here, just my read of it they say -- you know, everybody's trying to figure out if espn goes full streaming, what do you need in terms of subscribers to meet or exceed

what the linear network currently makes? so, these guys come up with, let's assume, 30% of their content budget, of the $30 billion content budget goes to sports. break even would be 25 million subscribers at 33 bucks a month, and they seem to think that arpu is highly unlikely to gain a great deal of traction, and that makes them cautious on the cash cow that may have a worse future in streaming versus linear than originally anticipated >> citing survey work about willingness to pay among consumers. what is that, a third of cable households >> 25 million, not quite, but a lot. >> it's a lot at $33 a month >> yeah. over 360 bucks a year. that's a pretty big number >> i did like how he said, you know, this note might call the bottom but we don't think so. >> we have our doubts.

>> always good when analyst is calling their own. >> self-awareness. >> not in the direction of, look, it's been a weak stock, we thought things would turn, it's trading at levels we saw eight or nine years ago, and you know, maybe sentiment's been washed up, but honestly, 75% buy rating still on the street. people do like it just in terms of quality within the sector, i think, is essentially the takeaway, and then the valuation is neither here nor there. i mean, you look at, you know, the enterprise value to cash flow and it's just kind of where it traded before the pandemic, and -- >> right around 12 times fiscal year ebitda, which is not cheap but not overly expensive >> exactly $40 billion in net debt. it's all that kind of give and take >> it is >> maybe the more interesting line is about parks where they argue attendance has been softer than consensus in april and in may, and margins may come under pressure as they've got some stuff to deal with in terms of

their employees and comp, which doesn't sound at all like an environment where the consumer is just traveling like mad >> it doesn't. i do think maybe kind of putting it up against the complacency about how theme parks are not the thing you have to be concerned about at all, really, though, also streaming churn is a big theme of the call as well. just this idea that disney plus and hulu have not necessarily had a much better churn experience it seems like, you know, in total, subs kind of stalling out, sub growth stalling out, so not a lot that we didn't, i think, you know, know in a sense that was surrounding the company, but definitely bundled all together, it sort of gives you this takeaway of probably no rush to buy it here, i think, is the message. >> it does contrast nicely with the city, positive catalyst watch on fnetflix. i think they go to 500, based on the ad tier optimism >> the buy side loves the netflix story, this soft traded

at almost 700. earnings going up for all the reasons the analysts are citing, and still 19 nonbuy ratings on the street, so every analyst can say, i'm not going to be the last one to capitulate >> cnbc realtime exchange, at the big board, it is fidelis celebrating its ipo today, one of three on the floor. we'll talk about them a lot this morning. at the nasdaq, beloved arise, a national youth organization. we haven't really touched on oil, even as goldman yesterday trimmed some of their brent forecast, and of course, buffett continues to pile into oxy yes, bout some more oxy. i view his approach to this stock as really a quasi-arbitrage because the warrants that he holds to buy $5 billion additional shares of oxy are stuck at like $59.62 every time the shares trade below that, there's an incentive

to buy it below that price, and it reduces your overall aggregate cost so, you know, we can kind of try to divine some grand intentions around this. owning the whole company, he says, no, we have no intention to do that it seems just the math gets him to -- gets berkshire to bid at those levels, and really more points up how the whole group has traded -- >> give me the numbers again on the warrants >> i think it struck at $59.62 so, in theory, you know, if it trades below that, you know, and you still think that the overall fundamental value long-term is intact, and you're willing to exercise those warrants at some point, it makes sense, i guess, to just buy a little bit i guess that's the logic >> understood. guys, i want to -- there's berkshire. there's the headline, of course. and as mike said, and you were there, he's not going to buy the whole company, because that was the speculation.

>> some have pointed out that didn't he have a similar size stake in burlington northern santa fe before acquiring the company? something would have to happen to make him want to bid for everything, but it's not as if he's building with a goal of owning the whole company, it seems. >> company he owns the most dollar-wise, we know well, and we're continuing to focus on it, because it's near that $3 trillion number what is it, 190-something? we're getting very close 19 $190.73 for apple. that's what i'm talking about here berkshire's largest holding by far. >> $190.73, that's the price it would have to get to based on the share count that we think we know and all the rest of it, and it brings up the fact that you're kind of pointing to this spot in empty space to say that this is the moment it gets there. you know, it's double the market cap in three years, so got to

$1.5 trillion in june of 2020, and so -- and the stock has done even better than that, of course, because they keep reducing the share flow, and it represents a huge chunk of berkshire's overall public portfolio at this point. in fact, if you look at the stock, berkshire hathaway against apple over multiyear periods has tracked -- >> have they tracked >> not exactly but if you did that, blended with some insurance and consumer take staples, it gets you right there. >> we forget berkshire's berkshire's up there as well with its own market value. where are we on multiples in terms of apple right now are we getting towards a high point, mike? >> yeah, i mean, it's getting toward 30 if it's not there exactly. i think it's -- call it 25 times free cash flow i mean, most of the earnings are free cash flow so, it's not close to being, you know, the most expensive company among the huge nasdaq stocks, of course you have to go to nvidia and

amazon and the rest to look for that but it's certainly at the upper end of apple's own history where it has traded. so, you know, it's getting stretched, and i keep pointing out the incredibly orderly, linear climb that that chart implies right there, that just shows it's kind of -- >> meta's kind of the same >> yes meta, same way, although meta, way below the all-time highs, so it's doing that as a comeback, but you're absolutely right. people just have locked into the fundamental stories and the balance sheets they feel like, you know, they're not going to get fired for owning more of >> we've been comparing the $3 trillion to various economies or countries or gdps today, goldman says it's actually bigger than five entire market cap sectors, not combined, but bigger than reits, bigger than materials, utes, energy and staples as determined by goldman >> exactly which is, by the way, a more relevant comparison than gdp, which is just the amount of output in a given year for a

country. that's arbitrary but look, it's at $100 billion in net income this year. so, i'm not sure any of those sectors have that and growing in future years so, you can argue it back and forth a lot of ways. i do think there's a chance that, you know, the markets -- you're kind of emptying the tank of willing buying power in that category of stock before too long what's interesting to me here is the way that treasury yields have gotten noticed and they're going higher it's not necessarily hurting the nasdaq that relationship has loosened up, but just in general, giving -- keeping the market from just celebrating the great economic numbers because of what could come next in terms of policy >> guys, i didn't think that i would revisit the ev toll market any time soon. >> i knew you were watching jovy >> it takes me back to that time of spacs where hope was everywhere and these things were rising

substantially. and business plans got funded that perhaps shouldn't have. that said, joby and archer, remember the two of them joby is now distinguishing itself to a certain extent look at yesterday and today. why? its production launch, it received a permit to fly the first aircraft built on a production line. this was news out yesterday. aircraft expected to become the first ev toll aircraft to be delivered to a customer. production line and aircraft built in close collaboration with toyota, and this is in california but expected to become the first aircraft to be delivered when it moves to edwards air force base in 2024 to be operated by joby as part of the company's agility prime contract with the u.s. air force. this is what we used to characterize as flying cars. they're not. what they are is all-electric small planes that eventually may be autonomous and that are thought to create a new world of

mobility, and of course, it always brings me back to that morgan stanley report, which said $9 trillion but by 2050. >> we got time >> to be fair, we still have 27 or so years. but yes,that was their -- that was their median case. their bull case was $18 trillion >> nice. that's a lot of flying around. >> $18 trillion total adjustable market so, basically, the entire world will change completely i should say that, you know, if things don't go well, they have a lower t.a.m., but yes, $9 trillion globally >> they also added the toyota north american ceo to the board. so, toyota's, by the way, which just had, i think, may global sales up ten you're dealing with a very -- someone who knows how to operate at scale >> well, for sure. it doesn't hurt to have that one there. but you know, we have -- >> back above its spac price, by the way. >> i was going to say. we have joby, we have a virgin

galactic launch and three other ipos we're back it's happening again >> you want a spac you got any ideas? >> no. no >> you mentioned sort of how rates are not necessarily colliding with equities. it reminds me of powell yesterday where sara gave him the chance to jawbone the markets a bit, and she said, they're fighting the fed, does that bother you? and i think his words were something along the lines of, that's not how i think about it, and there are some pieces written this morning about how he could have used that to put the markets in their place, and he took a pass >> 11 months ago, he more or less did use it at jackson hole. not that far from these levels but i think it's very consistent with his general sense out there of, we've done a lot, we're going to let time do some of the work at this point in terms of having higher rates, restrain

the economy and inflation. we don't have to target outright job losses we don't have to target asset prices we think this is going to work its way through the system or at least we're going to try and see if it does data dependency was the overall message, i think, that was meant to be conveyed and more or less got there but now you get better data we got pce coming tomorrow, so you have an edgy bond market, so there ten-year note yield at the upper end of its range, certainly of its post-svb range. >> now some headlines out of brainard, reason to believe we can get near 2% inflation before the election >> yeah. >> okay. >> november. >> which is not what powell was saying yesterday >> no, but that's also, i mean, a year and a few months away, right? so, again, you don't know if it's going to be a straight line down to that point but you know, powell yesterday also granting the fact that things like shelter costs are going to be easing so kind of

using some of the forward-looking indicators of inflation as opposed to if you go back to last year, he didn't want to talk about it. remember his line, this is not a time for a particularly nuanced view of inflation. he was so far behind, inflation so off our target, let's not even try to get subtle about it. now, it's different. they're close enough, they're in the zone of where they want to be, and they're kind of working around the edges of policy seems to me. >> by the way, micron is the biggest loser in the s&p right now. >> oh, it turned around. >> it's down almost 3% i don't know if that was just a quick sell the news, you know, a chance to get out when nothing much changed in the quarter. just a note. >> that's a good note. >> and the banks are at the top. >> i did want to hit, guys, my daily quick review of the continued trial in san francisco. ftc versus microsoft microsoft continues to obviously try to win this case, prevent an injunction that would stop the

deal yesterday, you had video depositions. you had satya nadella get on the stand and direct, obviously, in a cross-examination, a redirect, bobby kotick, the same there's some cool sketches hard to characterize a lot of it as you might expect, nadella, once again, sort of making it very clear that we are not going to, in any way, consider making "call of duty," for example, exclusive to the xbox platform and bobby kotic as well, saying, you'd alien players. you'd have a revolt if you removed the game from one platform gamers are incredibly passionate you get invested in the experience it's like a sport. government may have scored a couple of points in its redirect of microsoft's expert witness.

you know -- and today, it's over today, you get final arguments, closing arguments. amazingly enough next day, findings of fact and law are due. and again, as i said yesterday, there's a possibility we could hear from the judge as soon as next week. we'll see. most observers believe that the ftc has not been able to fully make a case, not clear that even with the -- what was the fairly aggressive cross yesterday of microsoft's expert witness, that they were able to do that. but we'll reserve judgment here, and we'll sort of see what today brings, but this was remarkable in the speed that they got to a trial and the speed of the trial itself, and then the expectation that you could see a ruling from the judge in record time as well all of which would take place before the july 18th deadline in terms of the termination right now for the agreement, but as we

said many times, there's still an expectation given the appeals process under way in the uk of the cma decision, the antitrust regulator there, that microsoft will have to extend that agreement with activision, and of course, that will cost them, cost them per share, maybe more, you know, cost them in other ways, perhaps. i don't know if you increase the termination fee, which does go up on a quarterly basis, but that's a report for another day. >> is that the expectation the extension would involve an actual higher price? >> oh, absolutely. because there's a belief that activision would be worth more were you to say, i want to buy you today. the premium would be above -- yeah and then its bausiness has improved, which goes to the point where when you see there are significant doubts as to whether the deal will get to the finish line, given the objection in the uk. there is a belief that the overall fundamentals of the business -- >> the downside is not that great. >> yeah. >> interesting

>> we don't know what that negotiation will look like or whether this -- there's some plan microsoft has to somehow keep activision separate, close the deal and say to the cma, we'll continue the appeals process. i don't want to get into the speculation. >> got you finally, pay chex. we talked about jobless claims a moment ago, but they did come in ahead of expectations. this is the first peek above the 200-day since the beginning of the year on payx if you're paying attention to the labor market right now pretty decent tone to start this thursday dow is up. when we come back, thrift store operator savers value village among three companies jumping into the public markets today. we'll talk to the ceo here at post nine. as we go to break, still a little more data on deck, pending homes. don't forget tomorrow, of course, the all-important pce. by the way, nike also tonight, but that ten-year back to 4.87%. don't go anywhere.

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one of three ipos begin to trade today, savers value vision will trade under svv, priced at 18 above the range mark walshe saver values village ceo joins us congratulations. >> thank you very much it's an exciting day for our 21,000 team members. our mission is to make secondhand second nature we're proud of what we do and how we do it. >> i want to talk about the business, but you've been used in part as a tell for the ipo market in general. we were talking during the break how you thought about this process a while ago, right >> we started the test the waters meetings in late '21, early '22. we educated the investor community during that time, kept our s1 fresh during that period

and it's worked out to be a great benefit as we got through this process on the road show. investor community really excited about what we do and how we do it profitability metrics are strong and we've got some great secular tailwinds behind us to make this from an investment standpoint attractive. >> we've seen some takes it's somehow a framework to play on the economy that gets softer, perhaps, but maybe there are sort of generational dynamics that make it timeless. how do you think about that? >> it's interesting you ask because there are generational aspects that make it timeless. what we're seeing especially today are new customers are skug much younger and if you walked into a story on a saturday or friday, you would see a great cross-section of age and demographics if those environments you talk about resiliency of the business over the last 15 years take out the covid year, positive

same-store sales comps it's a pretty good track record over the last 15 years over multiple economic cycles. >> yeah. i mean, just in terms of it being the prevailing mode, i have teen ages daughters and what they do is thrift and secondhand is it a risk it's, therefore, a fashion phase, to look in that direction, as opposed to something that's actually going to be enduring >> no. i think it is enduring i think what we see in canada, you know, we typically have when we talk to our executives in canada, they see the canadian market five to seven years ahead in terms of the market thrift as a mainstream retail environment, so we're not worried about that for us it's about making the experience contemporary. 80% of consumers that we survey indicate they've touched thrift as a shop, donor or both 90% of the 80% indicate they're going to interact with thifts on

an ongoing basis in the years to come we're bullish on the future. >> proceeds from today i think going to be used to pay down debt, that is correct? >> principally to pay down debt. the upsize will be a secondary to our private equity partner areas. >> as for ares, they will control the company what are their plans? >> they've been a tremendous partner. i don't think it's appropriate for me to speak on their behalf as to their disposition strategy, but i couldn't be happier with the partnership we have had with ares over the last four years during my tenure. >> shareholders want to know if they're going to be dumping more shares because it will have an impact any plan on their part that you can share? >> i can't share that at this time i think we're going through the process, obviously, this is the first secondary. what would make sense and how ares positions it, they're invested in the business they want to make sure that business continues to perform strongly,

both operationally and a public markets perspective. >> you mentioned canada being a few years ahead. is the growth, is it a north american story and if it's about increasing density in north america, why is canada -- why do they think of this differently than we do in the states >> interesting, our unaided brand awareness in canada is 93%. it's a powerful and mainstream part of the canadian retail segment. we have still a twice go we have -- ways to go. we have 71 stores in ontario we're opening up two or three more in the coming years we're very excited about our prospects in canada as well. i think the stores ramp up in canada faster given the brand awareness. >> does this market lend itself more to an in-person experience and therefore online won't be as strong >> i think that's a great question two things we did a lot of work around should we pursue the on-line

category at $5 aurs, it's uneconomical and not a smart use of our investors' capital on the flip side of that, we do, again, survey data 70% of thrifters much prefer the brick and mortar experience. you get to touch it. it's about the thrill of the treasure hunt. we put 33,000 items, new items n a store on average per week, and we turn 15 times a year. the average the best of our customers coming in once a month every time they come into the environment, it's fresh, it's new. it's really super exciting for them. >> it's fascinating. i can't wait to hear more about it and see how the stock trades. thank you for coming in. >> thank you very much appreciate the time. great to see you. >> more to come on the ipo thursday we will talk with the ceo of kodiak gas services about his public's debut in a bit. do you up 120. don't go anywhere.

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good thursday morning. welcome to another hour of "squawk on the street. i'm carl quintanilla with david faber and leslie pick her live at post nine something for everyone today marks cro with gdp and claims, industry news, chips and micron, the banks and the stress tests, oil and oxy. dow up 145 to start the day. >> busy thursday morning we are 30 minutes into the trading session but here are three big movers we're watching today. micron is one of those that company reported they're arguing chips pricing has hit a bottom we'll break down those numbers later this hour, but shares are down about 5% right now. plus, citi opening a positive catalyst watch on netflix raising its price target to $500 a share there. the firm saying they're bullish heading into earnings in mid-july stock up about 0.6%. and finally a number of banks on the move this morning. largely higher as the street works through the results from the fed's latest stress tests.

we're on the key takeaways there in a moment's time. >> little more data on deck, pending homes. let's get to diana olick. >> hi, carl. pending home sales dropped 2.7% in may from april. that is a deeper drop than expected sales down just over 22% year over year. this count is based on signed contract on existing homes during the month not closing and may was a mixed bag on mortgage rates. shot up over 7% in the second half pendings are counted the same way of newly built homes which shot higher in may we're seeing the growing divide between to market. that's all due to supply the realtors said even as sales drop there were on average three offers for each listing, meaning competition demand is still very high regionally sales fell everywhere month to month except in the northeast but the northeast has the fewest homes for sale so it tends to be volatile

sails down across the nation compared with may of last year one more thing on the supply issue, realtor.com put out the june housing report showing new listings in june, down 25% from a year ago that is not going to help. guys >> not going to help prices at all. diana, thank you so much for that really appreciate it guys, we kind of teased up this idea that the stress tests were sending bank stocks higher but there is this bifurcation, as we dig through the results of yesterday, this bifurcation of the largest banks really still showing up very well capitalized in the best position to return capital if they so choose to do so the regional banks, the super region als that were tested this is an off year where regionals writ large were not tested but super regionals did seem to see kind of the most effect from these tests which were tougher in previous years. capital one, citizens, truist

and how that impacts their ability to return capital to shareholder. of course, this is only a pit stop on the regulatory road this summer when we're expecting, you know, revisions to bassle 3, more down the pike, as a result of what happened in march from vice chair michael barr in terms of additional capital requirements there so lots to look forward to, but tomorrow is the date that we're talking about with regard to capital return announcements >> what do you make of the hot takes today that be careful about what you wish for in terms of how much capital return maybe be a little more cautious than some think? >> i think that's a good warning to the market right now because there's uncertainty with regard to the economy still, regulatory uncertainty, and interestingly, as we saw in march, it was during the crisis that those banks that were the best capitalized, have kind of come out of this and have been in the best position to succeed jpmorgan is a name that comes to mind for everybody they, obviously, were in a prime position to use their balance

sheet to capitalize on the receivership of first republic, so it's a kind of situation where those that were in their words, not mine, over regulated, came out stronger than those who weren't subject to the same regulations and that's going to be the case that regulators make in increasing the amount of regulation that some of the smaller banks, especially in the $100 billion in assets to $250 billion in assets window that they face. >> did we learn anything about the asset quality of some of these regional banks in particular and, obviously, the continued concern about commercial real estate exposure, particularly to office buildings and the like >> interestingly, commercial real estate was a pretty big component of the test. they stressed for 40% decline in commercial real estate, but when you look at the amount of losses as a result of that, about $100 billion of it comes from commercial real estate a large proportion comes from credit card losses a large proportion actually

comes from cni loans which was a surprise to me president extent to which cni could be -- could face tu moil that's not something we talk about. >> under a stress situation where we're having a recession of some significance, i guess. >> a recession, some significance and unemployment rate of 10%. and these scenarios were actually set in february, conveniently enough. these tests actually stress for a lower interest rate environment, not a higher interest rate environment. i asked fed officials, you know, do you feel like this test adequately represents the current environment and basically they said that usually banks perform better when interest rates are higher which is why the stress tests usually incorporate lower interest rates, not higher. they're trying to create an environment that would be as friendly for banks higher interest rates can have the other side of the coin for certain banks as well. >> financials helping to lead the market this morning as we're

at session highs here. dow up 175 our next guest remains convicted that u.s. equity returns are inclined to be below average and sees commodities as well as japanese and emerging markets as good hedges for a peaking dollar morgan stanley wealth manager and chief investment officer lisa shallette joins us this morning. >> good to see you, karl. >> we've been looking for signs that this run up would cause morgan stanley's house view to pivot. you have been quite resolute >> we're highly convicted that ultimately we may be have been early, but we're still not convinced that we're wrong that earnings achievability and the hockey stick earnings forecast that are baked in for 2024 are just too optimistic and they're really based on people believing, not just in the resilience of the economy, but the sustainability of profit margin levels that were really enhanced bay pull forward in

demand and very high prices and pricing power. even the data this morning that we saw, you know, with positive revises to real gdp, suggest that, you know, in the first quarter while companies did, quote, unquote, beat the expectations, they had a tailwind of 7% nominal top line growth, which is 2% real, plus 5% inflation so we're still running a very, very hot economy that nominal gdp at 7% is well above where the fed is right now. interestingly, what we're looking at right now is not just, you know, the achievability of earnings which has been the focus of people pointing the finger saying you're going to be wrong, we're now looking at multiples and price earnings multiples and variable we're looking at this morning is the 10-year real rate, which has really busted up through 1.6%

that 10-year real rate typically is pretty well correlated with the price to earnings ratios of the nasdaq. >> does that - >> go ahead. >> i'm sorry i was going to say does that mean or imply that you could raise your earnings target of 185, but yet keep your overall view on equities for the year? >> yeah. i think that that's the right interpretation of what i'm saying, is that one way or the other, we think we're going to hit a wall here with markets if it's not earnings that disappoint, it's the higher but longer interest rates that actually pressure valuation multiples down closer to something around, you know, 17, 18 times and not 20 times. >> why do you think it's the higher for longer narrative that will ultimately be the catalyst for pressure to the downside the reason i ask is because at the beginning of this cycle, we heard so much about it was, you know, the velocity of rate increases and that's going to be the damper for companies that

have yet to turn profit. you know, now that we have or once we do have some clarity into kind of where interest rates are, won't that help, you know, at least modeling for some people out there >> look, i think understanding and having some clarity about the direction of fed policy certainly helps us understand, you know, how the fed is thinking and, you know, but it also helps us set levels if you look at most people's models and you look at what a 20 times forward price earnings valuation implies, it implies that most people are assuming that the current level of interest rates is absolutely temporary and that we're returning to a 10-year treasury that over the long term hovers around 2, 2.5% if that needs to get reset in everyone's models for the long duration assets which are what secular growth stocks are, long duration assets and you have to

discount those future cash flows at 3.5% or 4% because that's the new long-term interest rate, that's a material change to your valuation multiple and things look a lot more normal like a 17 times market, into the 20 times market >> we're going to dig into the cfo council survey next hour, but kind of as a preview to that, 32% of the cfos from our council that were surveyed in mid june still expect a recession in the second half of the year another 36% expect a recession in the first half of next year so cfos seem to still think a recession is on the table within the next year or so. why do you think there's such a disconnect between the sentiment in the c-suite and what's going on in the markets? >> what's absolutely fascinating is that ceos, ceo confidence, the ceo confidence as you cite, has been extraordinarily negative, actually, for about

seven to nine months yet, corporate guidance, okay, what corporate executives are actually saying, is not translating into, you know, the south side bottom up or top down estimates. so right now, the market consensus is looking for 2024 earnings to be up somewhere between, you know, 10 and 13% off of a 2023 year that looks up slightly on 2022 and 2022 was an all-time high year so, you know, it's interesting that, you know, in private and in anonymous survey, everybody is negative, but when they stand in front of their analysts, they say they can make the numbers. >> lisa, if nothing else, you're definitely giving the bulls opportunities to get gut-checks and that's a value we'll see you next time. >> always good to see you, carl.

we have breaking news from the supreme court. let's get to emily wilkins in d.c. she brings that to us. >> david, a major ruling of the supreme court today. they have effectively outlawed consideration of race when it comes to college admissions. this reverse affirmative action, decades of precedent the court's six conservative justices voting for, three liberal dissenting and found that in two cases for harvard university as well as the university of north carolina, are currently illegally using race in their admissions programs this is going to have huge impacts for selective colleges and elite universities, many of them have used affirmative action to make sure their campuses have the diversity they want to see, argue is good for students, and what we have seen is that for universities that have tried to go to race neutral admissions it's been difficult for them to recruit a diverse

student body you've seen numbers of black students and hispanic students drop it's a huge question for a lot of these colleges how do they go forward with admissions in a way that still brings forward diversity now that affirmative action is illegal? >> huge decision we'll watch that closely thanks so much for the guidance on that. joining us from d.c. mean time getting indications on today's ipos at the nyse savers value indicated 20 to 22 as you know priced at 18, upsized and above the range. kodiak gas services priced at 16, indicated now 16.25 to 16.75. we will continue to monitor both of those this morning as well as fidelis. >> ceo of kodiak will join us later in this hour as we head to break, a road map for the rest of the hour a number of companies making their public debut look at this and, in fact, one of them will be kodiak sgas services >> commercial real estate risks

a bit growing warnings from the street where one asset manager sees value here. >> finally, "squawk on the street" heads to truth or consequences, new mexico, for a milestone in commercial space flight and virgin ga lastic with morgan brennan as the big show continues. don't go away.

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estimates but after a pop last night shares firmly in the red down nearly 5% right now kristina partsinevelos joins us

now with the breakdown on what's been a very busy week for chip stocks. >> yeah. i want to start with micron and say it feels like a battleground stock. positive earnings yesterday with the bulls calling for a bottom in memory pricing and now the stock is down 5% with the pulse pointing to continued -- with the bears pointing to continued weak guidance. pc smartphones came in a bit worse and non-a.i. chips are taking longer to normalize but the memory chipmaker improved inventory there's the bull narrative piper sandler saying the stock has bottomed consensus is that micron is on this path to recovery, but there remains a major overhead china's ban on micron products leaving a fluid environment and according to micron's ceo would slow down its recovery plan. micron's seen as a proxy in the chinese-u.s. trade war recall last october, on your left, the u.s. imposed

restrictions on certain a.i. chips exported to china. china retaliated doing a security review of micron products and then called for a ban just last month. the latest reports now saying the u.s. is looking at further restrictions on a.i. chips exported to china. we talked about that yesterday and even nvidia's cfo saying it wouldn't have an immediate material impact to financial results but the key word there is immediate as for micron, it did reiterate the impact of the chinese revenue and said it would be a low double digital percentage, approximately half of china headquartered customer revenue it's not a small portion which is why micron is focusing now on nonchina customers to maintain market share adding further headwinds to its so-called recovery. >> it's amazing how this, the chips world, is really just becoming split between those who do business with china and those who do business with the u.s now that you've kind of heard this commentary from the calls and various players, where do

you kind of see the biggest challenges arising on this geopolitical front and where do you think certain chip makers can weather the storm and muddle through it. >> much of the argument from say nvidia or a.i. stock right now is that there's so much demand for their product it's going to offset weakness in revenue from china. that's the argument that cfo of nvidia made yesterday, they don't have enough supply specifically for certain a.i., gpu chips. with micron's case, they're not at the forefront necessarily with the memory chips used for those a.i.-gpus. that's a setback for them and the fact that the memory market is still taking a little bit of time to recover and normalize. prices have been continuously decreasing samsung is cutting production. but overall it's a different situation and there is a concern, no doubt about china, and the united states adding further restrictions >> yeah. although micron does say it's going to benefit from generative a.i. they spent the conference call

talking about that. >> how many companies did that, right, said they're going to benefit and with micron's case they have a particular chip that is geared towards more advanced a.i. computing, but that chip is not as advanced as let's say others in terms of production. >> yeah. we've made note of the turnaround in the reversal this morning. micron down 4. interesting story right now. yeah thanks still ahead, the ceo of kodiak gas services as they make their debut here at the new york stock exchange current indications 16.25 to 16.75. the ceo will break down the business in a moment

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welcome to a new era of flight. we're awaiting kodiak gas services's first trade it's one of three companies going public today we're joined by kodiak gas services ceo mickey mckee. good to have you and congrats on going public first off, i guess, why are you going public you still have and will have a majority owner after the deal but why the need or desire to? >> well, thanks for having me this morning

i appreciate being on the show this morning it's been a long time coming, something we've been working on for a long time, about 100% of the proceeds of the ipo will be going towards paying down debt and right sizing our balance sheet to take advantage of a tremendous amount of growth opportunities going forward. >> yeah. tell me about those growth opportunities at this point? your revenue is up 13% i can see here, for the three months ended march 31st, 2022 to '23, revenue up 17% but, you know, you lost money. i think. from what i'm reading here what are the growth initiatives under way? i know specifically you guys are in the permian >> yeah. absolutely i mean, you know, we continue to grow all the time. we're really excited about the opportunities to add to compression infrastructure in the united states, specifically in the permian basin, looking at the continued build out of lng export capacity that's being

built on the gulf coast right now. it all needs to be supported by compression infrastructure that will be put in place to get permian natural gas that's clean burning and affordable to the gulf coast where it can be liquified and shipped world wide for secure energy for the world. >> yeah. 3,033 revenue compression units. you know, i've spent some time in the permian with exxon in particular, and, you know, they want to electrify their operations there in a certain amount of time, which would mean, i assume, running, for example, some of your equipment as well in that way. is that something you guys are thinking about, getting ready for? does it require, you know, different equipment? >> a little bit. i mean, there's a time and a place in the permian basin for

electrification of horsepower. it's a difficult time right now to do that because the grid infrastructure just isn't there to support a wholesale switch over to electrification, but we've got -- we've done some pilot programs where we've worked on electric compression and have a high level of expertise there and great people that can run that for us, so we've partnered with some of our customers to provide that right now. it's just a -- it's a kind of regional specific type of a switch out cost there. i mean, it's just the grid just doesn't support that kind of electric load right now in the permian basin. we're positioned to take advantage of it if the market does shift that direction. >> mickey, i'm curious about your customer concentration because according to the s1 you've got about 38% of your revenue coming from just four customers. are they under long-term contracts? how long when do those roll off are you looking to diversify your customer base

>> you can say that we have a customer concentration issues there, but all four of those customers are all investment grade rated, permian operators, with our largest only being 13% of our revenues from last year it's not a concentration issue i'm worried about. if i'm going to be concentrated with anybody, i like those customers to be the ones i'm concentrated with. we have long-term contracts with them, with a weighted average remaining contract term of about 30 months left on those contracts and as they roll off, we have a high degree of renewal success on those contracts some of those early -- some of the early equipment we set in the permian basin in the 2012 time frame have been recontracted two or three times over now in this business once on location and you have a contract with a customer, it's very difficult to displace and you have a high level of renewal

success. >> what are your expectations in terms of production from the permian overall, given there are those who say it's getting tougher and tougher to sort of increase production in terms of the wells at this point and their productivity >> yeah. i mean, you know, what we benefit from in the permian basin is that we are compressing associated gas with oil directed drilling, so oil production is only growing at 2 or 3% right now, but actually, gas production in the permian is growing at a much faster rate than that due to increased gas to oil ratios in the permian basin wells and that benefits us because we just continue to need more horsepower as well as that infrastructure is just continues to grow and the demand for our service is very, very high we expect that to remain very high for a multidecade sort of runway >> understood. good luck today.

we'll be watching. >> we appreciate it. thank you very much. i just want to add one thing at the end of this, we have over 800 employees that work for kodiak right now and as of them right now every one of them is a shareholder in kodiak right now and that's something i'm really proud of and something that i just want to thank every kodiak employee for helping make this happen very proud to be a part of it. >> thanks for being with us. >> thank you virgin galactic kicking off its first fully commercial spaceship 2 mission today. morgan brennan is live in new mexico with more good morning. >> hi, carl. this is a major milestone for virgin galactic because this space flight starts commercial service for the company and it is a monthly pace that is expected to be established here today of these revenue generating trips to the edge of space. now behind me you can see it right there on your screen, that is the carrier aircraft. that is vmse taxiing or getting ready to taxi on the runway.

if you look closely between the twin fuselages you will see the rocket-powered space plane, vss unit you crew of six inside that space plane including three paying customers, members of the italian air force. you have two company pilots and one company astronaut instructor here's what's going to happen. when that mothership starts taxiing, it's going to take off. it's going to -- you can hear the cheers there it goes. it's taking off on the runway behind me here and it's in the air. what's going to happen if all goes according to plan here is that that mother ship, that carrier aircraft is going fly to an altitude of 45,000 feet it's going to release that unity spaceship. the spaceship is going to power its rocket engines and hurdle at three times the speed of sound to the edge of space, fly just above or about 50 miles which is

the u.s. government specifically defined start to space there's going to be a few minutes of weightlessness and that crew is going to conduct a flurry of suborbital science experiments, stuff like materials being tested in micro gravity. they're going to then strap back in and that space plane is going to glide back to earth and reland here on this runway now why this matters for investors? this has been nearly two decades in the making for the company that was founded by sir richard branson. this begins the journey to it being -- becoming a truly revenue generating enterprise. as i mentioned flights are expected to be monthly at least for some time and galactic is going begin to work through its 800 person backlog future astronauts that have paid between 200 and $450,000 for a seat on one of these future flight profitability, though, guys,

that's still years out and going to require more spaceships that are currently under development and won't come online doing much more frequent flights, but overall, this establishes that path, that financial path, assuming everything goes according to plan. you can see the stock chart right there. what's amazing about this, carl, is the fact that this is a pure play human space flight company that is publicly traded. stock lower right now, up 36% on the month, however down dramatically more than 90% since the all-time high back in early 2021 >> had a bit of a run in the last few days, giving a little bit back now, morgan talk about what kind of frequency, if all goes well today, we might expect in the months and quarters ahead? >> grurg to be seeing monthly -- you're going to be seeing monthly space flights, assuming this all goes according to plan. you're going to see monthly flights from here on the ship.

the carrier aircraft can carry out. that's the capacity level. the fleet right now is just -- there is a second spaceship within the spaceship 2 model under development but the real focus and the focus particularly on wall street and for investors and analysts is this next gen class of spaceship called delta under development is expected to come to service probably more like 2026. those are flights that you're going to see start to become quickly and longer term if all goes according to plan, you know, you may see more build outs of other space ports around the country and around the world. but there is a lot hinging on this moment today and to be very clear, carl, we've never seen that type of frequency for human space flights before so there is a very high bar to hurdle here in the coming years. >> wow morgan, i'll pick this up, you are going to be quite busy, i am sure thank you so much for being on the ground to cover it for us

today. morgan brennan. let's take a look at markets one hour into trading. dow, the standout up about half a percentage point .3e russell up 1%. more "squawk on the street" after this somebody would ask her something and she would just walk right past them. she didn't know they were talking to her. i just could not hear. i was hesitant to get the hearing aids because of my short hair. but nobody even sees them. our nearly invisible hearing aids are just one reason we've been the brand leader for over 75 years. when i finally could hear

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welcome back to "squawk on the street." big banks, commercial real estate portfolios withstanding the federal reserve's stress tests with hypothetical losses declining slightly on last year. the 23 banks hold 20% of office and downtown real commercial real estate loans. our next guest says the current environment is nothing like 2009 and he would know, it's blackstone's head of real estate in the americas. blackstone, the largest owner of real estate globally, i believe, is that right? >> we are indeed thanks for having me, leslie. >> so we are really excited to have you here because commercial real estate in particular has gotten a scarlet letter in the wake it was march banking turmoil that kind of revealed

essentially what balance sheet looks like, their exposure to commercial real estate do you think that is deserved? >> look, the interesting thing today about the commercial real estate space is there is such a big bifurcation across asset classes and more than ever, you can't paint the sector with a broad brush. in many areas of real estate what we see today is unprecedented strength i'll give you one example. take the industrial business which today represents 40% of blackstone's global real estate portfolio. what we see on the ground today is record low vacancy, only 3% we also see rent growth in the first quarter that was in the high teens now this is driven by e-commerce, this is driven by the onshoring of manufacturing, and it's not just the fundamentals this results in investor demand for these types of assets. if you look at our announcement earlier this week, we announced the sale of a 3 be there portfolio of warehouses to pro

logis. not only was this a terrific outcome for our investors but it really demonstrates that thoughtful, well capitalized investors want to own the right assets today in the right sectors. contrast that with office which is in the headlines. you know, u.s. office today is around 1.5% of our global portfolio, so it's small, but what we see there is real challenges vacancy rates north of 20% in the u.s., rents are under pressure, values are under pressure, and so more than ever, the thing to understand is where you invest really does matter. and our job as investors is really to understand how technology demographics, how people live, work, and play and how that impacts hard assets and really invest accordingly. >> it's 1.5% of the $585 biglobl real estate portfolio that blackstone has in 2007 the figure was 60% as you look at the challenges in office, has it gotten cheap enough to the point where you would get back in and increase

your exposure at this stage or it's essentially a lost cause? >> a little bit of history on how we've looked at the office business we saw even before covid the sector was facing challenges what we saw was that capital expenditures were actually growing much faster than rents and so as you point out, we took office which was 61% of our business in 2007, and we brought it down to today 1.5%, u.s. office as we look forward, the sector continues to face real challenges and some of those are for obvious reasons, remote work, now a tech pullback, and while there are certain markets like miami and dallas which are better than san francisco today or while newer buildings are better than older buildings, we are quite cautious on the space. ultimately, you know, we may dip our toe back in, but it will take time and we're going to be very selective about how we do it. >> do you think it has the recipe for crisis? do you see that unfolding? we just had the stress tests

that looked at gruesome scenarios. >> we don't see that the reason is a few fold first of all, just to contextualize this, people conflate office with real estate office is less than 20% of u.s. commercial real estate that's number one. number two, heading into this environment, leverage levels were lower than prior cycles, so what we saw was that average office building was around 55% leveraged, which means that the value would have to go down by more than 45% for a lender or bank to incur a loss the last piece of the equation is bank balance sheets only have 3% of exposure to office not to say it won't be painful for office, it will, but we don't see it as being systemic. >> given your track record, i think we'll all be watching closely if you start to buy some office buildings again but data centers and industrial, how long can that play out for i mean, does at some point that get to be a bit of a tired play

as well? >> look, on the data center space in particular, we're seeing the opposite. what we're seeing is once in a generation demand growth driven by this a.i. revolution. what's happening is, you had a demand driver which was the cloud streaming, gaming, which was supporting data centers but more recently there's this a.i. arms race happening amongst the big technology companies and what they've said is that they're going to commit a trillion dollars over the next five years to their digital infrastructure much of that is going to go into data centers and we took a view in 2021 that, you know, this was an emerging trend. we privatized a company qts data centers. we've seen that vacancy rates have fallen to 3% and represents in rents were up 25%. we think industrials still has a lot of room to run because we all see how we shop. we expect two-hour delivery not

two-day delivery that drives demand for warehouses the other thing that people don't talk about enough in our view is new construction new construction in the warehouse space is down 50%. >> right you also reference construction spending among manufacturers and there's a lot of critics of industrial policy who argue it's an affront tomarket efficiency is there a sense that the incentives we're providing to onshore will result in too much capacity can the government get this right? >> look, what we see, if you take a step back, is that the warehouse business certainly benefits from e-commerce penetration growing and the onshorg of manufacturing, and we see it in our own portfolio. we're signing leases with manufacturers and suppliers who need more warehouse space, and, you know, the way the market works is, you build it, if the market demands it, and the market is in balance and the thing we look at is vacancy rates which are only 3% today within u.s. industrial. >> and yet, you've been a seller as you mentioned

you referenced the $3 billion deal with prologis earlier, also in the hotel space, reports about potentially selling your stake in bellagio and other hotel properties that you've been selling do you think it is a seller's market in real estate slowdown in. >> if you own the right assets in desirable markets then absolutely today is an opportune moment and we have capitalized on really interesting exit opportunities including the $3 billion sale of warehouses, the sale of an $800 million hotel we sold three weeks ago outside of austin, texas, a market we know is booming i would actually just point out there, that that's in sharp contrast to that same week, the news we read, about a big hotel owner in san francisco handing back assets where values are down 50% it speaks to this point that where you invest matters and it's a function of geography and asset class. we continue to deploy capital in the space. we've acquired over $5 billion

of warehouses just this year so we're not just a seller. we're also actively buying. >> we spent a lot of time talking about b read this year your boss joined me a couple times. where do things stand in terms of redemption, how you view the portfolio and where there's inflows? >> our focus from day one has been singular. it's about delivering performance to our investors and we're proud of what we've done we've delivered almost a 12% net annualized return since inception 6 1/2 years ago. and it's become, as you know, david, we own assets that are mostly in the sun belt, mostly rental housing and ware houses in the first quarter b read had same store growth and we see supply coming down and long rates have stabilized and sets us up for future performance. >> the marks are appropriate at this point there had been concern you were lagging in terms of marking things appropriately and that

that was one reason there were redemptions and people wanted to get out ahead of a decline in that asset value >> our marks are stel reflective of private market value and what's happened over the last 18 months if you take a step back is that we've had enormous cash flow growth in our portfolio that's enabled us to really widen exit cap rates in our models and valuations, increase discount rates, and the best evidence of the reasonableness of our valuations is that we've sold $10 billion of real estate out of b reit to those marks. >> we talked about industrial silos but is there a metro area, msa, in america right now where you can say it's under valued or over valued? are there extremes >> our view at the moment, and this is a theme that we had been investing around even before the pandemic, is that it makes a lot of sense to overconcentrate in

the sun belt if you look at where some of the hottest industrial fundamentals are it's in a place like miami if you look at a place like dallas it's accelerating so we continue to focus as much as we can. that's not to say we won't invest in new york city. it's recovered really well post-pandemic, but the sun belt is a place where we've over weighted and where i think we've done well. >> needs a new headquarters in new york city, come on, get on it >> talk to john about that. >> talk to the boss. >> talk to the boss. we appreciate it head of real estate america for blackstone, thanks for being here. >> thanks so much. still ahead, the latest from the floor amidst a flurry of public debuts this hour. let's give you indications savers value now 22 to 24 bucks a share. fidelis, that priced at 14, now indicating 14 to 15. and kodiak gas services holding steady there, 16.25, to 16.75.

what investors need to know next "squawk on the street" coming right back

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let's get over to bob pisani and get more from the floor. a lot of ipos, i know, you're tracking, bob. >> we're waiting for all three to open. let me give you an update. saver value village, $24 to $26. that price of $18, it's been moving throughout the morning. kodiak was $19 to $22. surprised at $16 we have $16.25 to $16.75 right now. fidelis insurance, $14 price there. right now $13.50 to $14.50 let's talk to the guy in charge down here, the head of nyse market makers at citadel securities big day for you and the ipo

market give us an indication on the big one, savers market. >> we're in the process of building the book. this is the third indication we put up so far. the first indication started $20.22 and drew in more demand then we went $22-24, saw more demand now we're up at $24-26, still seeing the book build, seeing demands come in. this will play out over time and the goal is to get the price right. i think the timing is less important than getting the price right. >> in the next hour? >> my guess is some time in the next hour. >> we've had one well price above, two below it's a mixed opening the ipo market seems to be opening up but slowly. what's your assessment >> you've seen some green chutes in the ipo market. you're probably seeing more companies now thinking about going public than you did three months ago i think that's positive to see what we have to look at in the

markets is not something necessarily pricing below, it's the ability for companies to come to the public markets, use public capital and build their company from there. >> savers value village is the largest for-profit thrift operator pete brought along some looks here i like your soho loft look savers value hits all the right talking points profitable, growing, thrift is cool, has an ecology angle, data analytics, efficient at pricing and has the recession angle that does well in any kind of economy but it does really well even if there's a recession. it's understandable why there's an upsized demand here. >> without a doubt we're still seeing that demand come in. when we see indications come in, that's the ability for us to be transparent and draw volume if every time we put that out, we've seen more demand come in. >> what about the big guys, what about all the unicorns sitting

out there, the reddits of the world. your thoughts, any idea that july might actually see some openings or are you more cautious >> i think there's ebbs and flows to this. there's green chutes to the market i think there's a long way to go a lot of things that can potentially happen it's good to see three ipos on the new york stock exchange and our ability to be dbm for all in one day. >> july, normally an august dead for ipos even some lower prices that we'll see activity in july, that's not an idea that's going to happen, we'll see movement? >> the odds of seeing activity now in july more so than three months ago is definitely higher. that's a fair assessment. >> i'll be here. we think this is probably going to open in the next hour, i'll be here assessing what's going on and talking with some people down here about where we might be going i saw lynn martin, the president

of the nyse walking by, the ceo of ice standing over there maybe we can grab them and talk about the future of the ipo. >> don't be tempted to put on soho -- what did you call it >> 1980's loft. >> insignia on the thing there all right. bob pisani, obviously, focused on that window for ipos that is opening, at least a crack. we'll be monitoring all three of those public offerings and the broader markets when "squawk on the street" comes back right after this

this is ge vernova, helping generate and move the energy that our world needs. ♪ welcome to a new era of energy. welcome to another hour of "squawk on the street. i'm carl quintanilla with leslie picker the new york stock floor is buzzing. three ipo hitting the market we'll follow all that action. mark mobius, his bullish take on india and opportunities he sees in china on the back of the recent russian turmoil. the ceo of sarept therapeutics. first, let's take a look at the markets right now.

a mixed