11AM Hour: Investing in AI, Tensions with Iran Escalate & Inside Look at America's First Enhanced Geothermal Project 9/2/26

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**Carl Quintanilla** (0:56)
Market moving insight and analysis join Jim Cramer, David Faber and me, Carl Quintanilla on the opening bell hour of CNBC Squawk on the Street.
Good Wednesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Leslie Picker here at Post 9 of the New York Stock Exchange. Sara Eisen is up today. The return of geopolitical risk as the US strikes Iran for the second time in three days. We're going to discuss the path ahead with Richard Haass from the Council on Foreign Relations, who thinks the US has no clear strategy, no definition of success, and no exit strategy.

**Leslie Picker** (1:32)
Plus Open AI, Sam Altman makes the case for stronger AI guardrails. Google aims to snap its AI losing streak, while Dell and Palo Alto see strong demand. We'll dig in to the latest on the AI trade.

**Carl Quintanilla** (1:44)
We'll take you live to the desert in Utah for an inside look at the county's first enhanced geothermal project.

**Leslie Picker** (1:51)
Looking forward to that. But right now, markets somewhat tamed, and the green this morning, the S&P about half a percent higher, the Russell 2000, the leader here up about 0.9% as yields and oil remain somewhat muted today. CNBC Senior Markets commentator Mike Santoli joins us now with a look at the markets. Mike, what are you watching today?

**Mike Santoli** (2:13)
Yeah, Leslie. Well, oil and yields, as you mentioned, they are relatively calm today, clearing the path for equities to bounce modestly. I think the bigger picture is tactically, the S&P 500 kind of held the line that almost everybody was watching, which goes back to the early June highs. We didn't have a violation of that level, pull back modestly to 2, 2.5% from the highs, but did it through, again, one of these kind of mechanical Baroque rotations that we've gotten used to. Apple and healthcare rising, a lot of cyclical lagging. I think it's very notable that the yield move has had its impact on things like equal-weighted consumer discretionary, and equal-weighted industrials. They're both 8% off their highs, getting just a little bit of relief today. But you see the underperformance versus the average stock and the S&P, that's a six-month time span there. So maybe the market has kind of had one of these stealth pullbacks and doesn't need something broader, even if the overall setup remains a little bit tricky, not just because of seasonals, but I think because August was spent by investors, professionals kind of rebuilding their equity exposures after that liquidation of momentum trades in July.
And you still have semis, which I think have a ton to prove. The Semi Index has given back two-thirds of its bounce from the July lows. So I do think that, you know, it's still a little bit like find our way step by step if we're going to make it higher.

**Leslie Picker** (3:34)
Yeah. In the meantime, Citadel Security is writing, and I think you captured this in your newsletter earlier this week, that the upside catalysts are becoming less obvious, downside catalysts are becoming more numerous, and they're recommending that, you know, investors should basically be using this strength to reduce some exposure and add some inexpensive protection at these levels. Are you seeing more and more people kind of coming out and recommending that type of thing?

**Mike Santoli** (4:00)
I think it was pretty common when we did have that real calm period in August for people to say, look, you might as well just take advantage of the fact that you can lock in some downside insurance relatively cheaply. And yes, it does kind of get to what I'm getting at. Look, earnings have been the unadulterated positive in this market. But it's already done. It's kind of baked in at this point. Even Dell, amazing numbers, great guidance. The stock's still down week to date. So the market is just not going to pay up for this huge surge in earnings. There is concern that companies are over earning. Outside of that, that's the denominator of the PE. How much are we going to have valuations go up if yields are going to stay elevated? Even if they're at more normal levels, they're still elevated versus where they were. And you have a little bit of wild card risk when it comes to policy. Obviously, we're two weeks out of a Fed meeting. We don't know what it would mean to be fighting the Fed at this point.