10AM Hour: AI Trade Faces More Pain, Interactive Broker’s Thomas Peterffy, Citizen Financial CEO on Earnings 10/16/26

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Sara Eisen (0:51)

Good Friday morning. Welcome to Squawk on the Street. I'm Sara Eisen with Carl Quintanilla and David Faber. We are live as always from Post 9 of the New York Stock Exchange. Stocks are looking for some footing after a wild up and down week of trading, though tech is still sharply lower since Monday's open and CoreWeave is seeing more pressure in early trading. We'll talk to venture capitalist Eric Hippow who just posted about the parallels between this technology build out in the dot-com era of the late 90s. Also ahead, Interactive Brokers Chairman Tomas Pederfi is with us. Fresh off earnings, a read on what he's seeing from customers, retail investors plus this renewed interest in options with volumes hitting levels last seen during the mean craze. As pre-orders for the foldable iPhone begin today, we'll be joined by Tony Fidel who co-created the first iPhone as considered the father of the iPod.

First up though, guys, all the talk is about artificial intelligence, and I've been focusing on the impact on the economy and what it's actually going to mean. I think one of the biggest questions for 2027 is what does the AI build out in AI spending look like? That will underpin earnings and the economy and the credit market. The Fed Chairman, Kevin Warsh, is in Bangkok for the IMF meeting, speaking with the head of the IMF, and he talked a little bit about his expectations around AI and what it means for the economy.

Kevin Warsh (2:14)

We don't know in the next 12 or 18 months its effect on employment.

But if you believe like I believe, which is it will make economies and countries that put it to good use more productive, that it's going to make it so that we will have more wealth, then that has to be a very good thing. But the path from where we are to there is likely to be a very bumpy one.

Sara Eisen (2:40)

We got a taste of what those bumps feel, a feeling of that this week with the bumpiness. But overall, he's pretty optimistic, it sounds like, on the productivity growth side. Also wanted to snapshot some of the anecdotes from the Beige Book. The Fed releases, it's basically reporting from all the different districts around the country, and there was a lot of talk about AI.

From Atlanta, here's a good tidbit, utility contracts describe sustained demand from AI-related infrastructure, including projects that were not expected to become operational until the late 2020s. This is an important indication that the infrastructure buildout could support energy demand for years. Thought that was nice and bullish. Philadelphia Fed reports, manufacturing growth was being driven primarily by data centers, AI and defense-related activity. Also, they say that air freight demand in North America is high due to semiconductor and AI demand. Look, I don't have to tell you it's been such a big driver of the economy of manufacturing. We just got a strong read on industrial production this morning, but it's interesting to hear and see the anecdotes. As we know, this economy is very much underpinned by what's happening in terms of the buildout right now.

Carl Quintanilla (3:48)

Yeah. What did Torsten, Squawk, tell us the other day?

If we're growing roughly two-ish on GDP, maybe without AI, we'd be growing one? Yeah, you said half.

Sara Eisen (3:58)

We have the chart on this. This is the Torsten impact of AI on GDP basically.

It answers the question, where would we be without AI? He looks at the US, South Korea, Germany. Sharp reset in AI expectations could undermine, he says, corporate confidence, trigger pullback in cutbacks, way on GDP. In this scenario, he looks at different scenarios, which assume higher credit spreads, decline in investments, and South Korean exports, basically, to conclude that it's a really bad deal.

Carl Quintanilla (4:32)

That leads you to what Larry Fink told us this week.

Sara Eisen (4:34)

Right. Which basically is that if the politics completely go against, which they're moving against, data centers and AI, that's potentially really damaging for the economy. He even used the recession word. Listen.