11AM HOUR: Squawk on the Street 10/15/26

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Sara Eisen (0:52)

Good Thursday morning. Welcome to Squawk on the Street. This is Sara Eisen with Carl Quintanilla live from Post 9 of the New York Stock Exchange. Today, spreading AI debt fears, putting the NASDAQ on pace now for its worst week since June. We'll tell you what's driving the tech sell off.

Carl Quintanilla (1:05)

CEO and co-founder, Defense Tech Startup and Jarl is with us. The company giving employees a chance to sell stock through this tender that would value it at roughly $90 billion.

Sara Eisen (1:15)

And on the heels of today's inflation data, are companies still optimistic about the economic picture? KPMG out with a new survey of 400 top executives. I want to dig into the results with the firm's CEO.

Carl Quintanilla (1:26)

As for the markets, really interesting spread here between the Nasdaq and the Dow. You can see the difference. Although S&P has gone green, Russell benefiting from some of this downtrend in rates. We're not quite to session lows, but 507 is a lot better than 531

Sara Eisen (1:42)

It has been interesting to see the bid for treasuries maybe as a safe haven with some of these credit concerns around AI, which has been the main driver of the market lately. And there you see across the curve, buying with yields lower.

As you mentioned, most sectors in the S&P are higher, but not energy, not technology, and not industrials. Another tough session for tech here as fears grow around the debt loads tied to the AI buildout. Sima Modi has been tracking the action. Sima.

Seema Modi (2:08)

Well, Sara, Corrieve story has gotten worse this morning with its 2032 bond remaining above 15 percent. That's considered by the credit market as distressed debt levels. I spoke to a few credit firms this morning who say they are receiving more inbound calls from their colleagues who track the equity to better understand Corrieve's financing options. The key concern being how much more debt can it raise and will lenders demand stricter terms, can it refinance the existing debt? Mike Orter, the CEO of Corrieve in a memo to employees yesterday, attempting to calm those worries pointing to its strong backlog, additional financing options like raising equity should it need to.

But you could argue a tough environment to do an equity offering given the volatility we've been seeing in the stock. However, it would substitute high price debt. Worth noting though, a number of analysts coming out defending Corrieve's business model in the past few hours, Bank of America writing that long-term contracts with large hyperscalers and the AI labs provides a high degree of revenue visibility. Remember, Corrieve does have deals with the likes of Microsoft, Nvidia and Metta, which is expected to report earnings next week. That's seen as the next crucial read that we'll get on CapEx and just in general on the AI build out, guys.

Carl Quintanilla (3:26)

A couple of things really dented the space yesterday, Seema. One was this podcast with DA Davidson's Gil Luria, who we talked to all the time, who did suggest that if the AI trade falters, Corrieve in his words, would be the first to go. Then that report out of Gardner that suggested that in a few years, some 80 percent of neoclouds might have to stop independent operations.

Seema Modi (3:46)

Yeah, it's important to note that as we look at the different stakeholders in the AI ecosystem, every company has a very different business model and some have been relying and resorting to leverage and the credit market more so than others.

Companies like Ennebius and Corrieve have a different credit rating than the likes of Ameda and Google. They're all participating in this AI infrastructure build out, but their credit profile is so different. I think to what Gil Luria was talking about when it comes to these neoclouds, their business model is essentially buying loads of GPUs and then leasing them out to the hyperscalers, the frontier labs. But in order to support this big financing measure, they've been leaning more on the debt market. I think what the CEO did yesterday was significant, coming out midday with that internal memo to employees, trying to calm concerns and also saying, we have flexibility on the borrowing side, but also other measures like equity if they need to.