10AM Hour: Irrational Exuberance: Then and Now. SpaceX Pulls Back Again, Apollo’s President on AI Funding Boom 6/22/26

Sara Eisen (0:06)

Good Monday 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. Coming up this hour, SpaceX shares under pressure again to start the week, coming off of two negative sessions in a row, but still up sharply from the IPO. We'll talk to an analyst who just raised his price target, says the stock is a buy. Plus, a big exclusive interview ahead with the Apollo Global Management President, Jim Zelter, with his thoughts on funding the AI infrastructure build out. We'll of course get to the latest on Iran, as the US authorizes a temporary license for Iranian oil sales.

But guys, in honor of the maestro, Alan Greenspan, who passed away at the age of 100, I wanted to talk about his most famous quote, which is irrational exuberance. Remember in 1996, he warned of the markets basically getting ahead of themselves, potentially from the fundamentals. Here was the speech that really made history. How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy? We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs and price stability, but we should not underestimate or become complacent about the complexity of the interactions of asset markets and the economy, thus evaluating shifts in balance sheets generally and in asset prices particularly must be an integral part of the development of monetary policy. I read it in full because I think it's relevant to what we are going through today. And a lot of people, you know, if he gave this speech today, I think a lot of people would be wondering if the AI trade is a rational exuberance. Now, of course, when Greenspan warned of this, there were still another few years of market strength.

About 400% worth.

David Faber (1:58)

Much, much stronger, yeah.

Sara Eisen (1:59)

Yeah, on the S&P 500 So he was early but not wrong, of course, when it comes to the tech bubble and burst. And that's what the S&P did from the beginning, you know, of his tenure through the end, ultimately. There was the bust in the middle of that. But his tenure was marked by a pretty unprecedented spurt of steady growth and low inflation. We can take a look, guys, at the AI trade versus the internet trade, you know, the irrational exuberance right now, because there are a lot of similarities. And here's one chart where the similarities are there, and that's in the concentration. Market concentration, basically, as a percent of market cap of the AI stocks right now, on the end, versus other periods of time, where we saw, you know, the nifty 50, the railroads, of course, that was a huge period of growth and strong capital spending in this economy in there. And that's, you know.

David Faber (2:52)

Sara, I don't mean to, I'm just curious, what constitutes an AI stock, is an interest to me in this kind of a chart. I just.

Sara Eisen (2:59)

This one's from Bank of America. I think they're looking at.

David Faber (3:02)

Because I know what a railroad is.

Sara Eisen (3:03)

They're looking at the Big Ten, which is the Magnificent Seven, plus Broadcom, AMD, and Micron.

David Faber (3:08)

Okay, just those ten.

Sara Eisen (3:09)

Just those ten. So, I mean, look, NVIDIA's in there.

David Faber (3:11)

Because you can make an argument, of course, that so many other companies are centrally, if not certainly tangentially, higher involved. That would be a large, much larger percentage.

Sara Eisen (3:20)

And Caterpillar.

David Faber (3:21)

Correct.

Sara Eisen (3:22)

But I'm glad that Micron's in there, and Broadcom's in there, and AMD is in there. Because those, to me, those are, you know, back then it was what? Cisco and Intel, and during the internet boom, it was just like concentrated stocks.

David Faber (3:34)

I remember it well.

Sara Eisen (3:34)

You remember it. Yes, I do.

David Faber (3:36)

I remember those comments in 96, covering them on air.

Sara Eisen (3:39)

So that's one, I think, hallmark and feature where there's a lot of parallels. However, there's a big difference. And I think this is what, you know, we hear from analysts and economists that's worth noting, which is the profit picture and the forward earnings. And so here, you know, we can look at profit versus multiples back in the 1990s. Remember those crazy PEs and the valuations where you see it on the top? And then you can look at where we are right now. And you can see that this one, some of the big winners, the NVIDIAs and the Alphabets and the AMDs, they, you know, pretty decent cash flows and earnings.