Morgan Stanley at Milken

David: Welcome back to Squawk on the street live at the Milken Institute Global conference. Joining us now for a first time CNBC interview Morgan Stanley’s co-president Dan Simkowitz. He oversees the firm’s institutional securities business that includes investment banking and trading. Nice to have you here.

Dan: Great to be here David, thank you.

David: You know it’s funny, John Grey joined me, Jim Selter. Mike Erigedy. We ended up of course,  talking, to a certain extent, about AI and the enormous capital needs of companies. You’ve been around for a while, you look like you might be close to my vintage.

Dan: Yes.

David: Have you ever seen anything that quite approaches this period that we’re in, in terms of the money being spent and raised?

Dan: Well, I think it’s transformative. And we’ve talked about this for the last couple of years. We think we’re pretty early with this. We had OpenAI at our board meeting in May 2022. Jensen hosted our board meeting in the summer of ’24.

So, it is transforming all businesses. I think every client that we talk to is thinking about how do I re‑underwrite my business model to use these tools to deliver value to customers and clients. And so Jensen, in an interview I did back in March, said, “intelligence equals compute, intelligence equals revenue.”

That creates a very big TAM. And in that context, we’ve got to finance it. And what’s remarkable is it’s all getting financed in the U.S. privately, in incredibly varied forms. We’re doing GPU‑backed financings. We’re doing Google TPU financings. At the end of these leases are four great LLM companies—xAI, Anthropic, OpenAI, and Gemini.

So you’ve got these great partners in that context. And the capital markets—I think you heard it from the prior guests—are stepping up. That’s equity capital markets, structured investment grade, public investment grade, and some forms of private credit, both investment grade and non‑investment grade. So it’s quite broad. And then you’ll have IPOs.

David: And you will. And I want to talk about that. But one of the big questions investors have is where and when we’re going to start to see the return on this invested capital. And if we don’t, we have some big problems. I’m curious how you see it, particularly given—you pointed out—you were with Jensen Huang, the CEO of NVIDIA, at your tech conference in March. Are you confident?

Dan: Well, I think what we’re seeing is a revenue ramp here in the first part of this year is the proof. We were at an event last night—one of your colleagues, Andrew Sorkin, hosted a panel. We’re seeing a revenue ramp in the first four to six months of this year that is really remarkable.

You saw that in the earnings last week at Google. You see that in the incredible cash flow at NVIDIA. You’re seeing it in some of the private companies, which are having the fastest ramp in revenue in the history of capitalism, as an example.

So in that sense, the revenue is showing up, and that has taken the ability to finance these chips, or the actual compute, and allowed a lot of varied sources to deliver.

David: So yeah, I mean, of course, Anthropic’s revenue run rate—the likes of which went from $9 billion to $30 billion in the space of 30 days—is truly remarkable.

Dan: Yeah.

David: And Google earnings last week—really impressive.

Dan: They were very impressive. But it doesn’t mean that this thing is being diffused through the enterprise, or that we really have any true answers in terms of how efficient it’s going to make everybody and what it’s going to do ultimately to margins.

David: Well, I think we would say it’s starting to come out. We run baskets of adopters versus non‑adopters out of our research company. The adopters’ return on equity, the adopters’ margin improvement, the adopters’ stock price—way outperforming the baskets we create versus non‑adopters.

So you’re starting to see this, David, play through in the economy with real results. And I would say, at the personal level, I think we’re all seeing productivity gains.

Dan: Are you seeing them yourself?

David: Yeah, we’re seeing it ourselves. The research just coming in here, the ability—I was able to get some of the summaries done on your prior interviews just from this morning really quickly off of what we now have at the desktop.

Dan: They were good, and they’re great interviews.

David: You’re amazing. Yeah. No, I appreciate that, Dan. Thank you.

All right. Well, raising money obviously is one of the key things you do there. I know you can’t talk about the potential Space X IPO, where you guys are thought to be very involved. But give me some sense as to whether—and how—you, broadly speaking, what may be an incredible run of IPOs over the next 12 months, whether it’s Space, Anthropic, or OpenAI, and how you see the reception those giant deals may get.

Dan: Yeah. I think again what you’re seeing over the last year or so is a healing, and then a really robust IPO market starting to develop after a really slow 2022–2023 and most of 2024.

So largest private equity IPO in history with Medline in December, and then they came back to the market. So they were able to do that. A company called Galderma in Europe sold the entire company in the equity capital markets over two years.

Now you’ll start to have a series of, I think, very important offerings in the growth sector as well. We’re seeing great receptivity. You’re seeing both private capital raises in some of these companies, as well as when they do come public, they do well.

We took a company, CoreWeave, public about a year ago at this conference—

David: Which is a regular on our air.

Dan: —as an example. And now that company is doing phenomenally well as part of that revenue ramp we’ve talked about.

The demand seems to be there and it’ll come from various forms. It’ll come from the traditional mutual funds, sovereign wealth funds. It'll come from family offices. It'll come from the hedge fund community that's tech oriented, and then you'll have wealth management be a big contributor. I would say the investor audience over the last decade is broadening at an important time.

David: Although the private markets have exploded, as we well know. I mean, the amount of money, $122 billion, was raised by OpenAI, we’ve never seen anything like it. I don't think anybody necessarily has. Do you share that concern overall for the public markets, that so much of the growth cycle of these companies is actually only available to those that invest in the private markets?

Dan: I think we are big believers in trying to democratize some elements of the equity market. I think the SEC and elements of the Treasury Department are very focused on creating a more ease-of-path to being public.

And so I think now versus maybe even a year ago when we spoke at the conference, it’s cooler to be public than it was a year ago. And so I think you are going to see more plays in that.

We would argue the growth potential in some of these companies that will come over the next couple of years across all the sectors, there’s still a lot of growth in front of them in that context. But you’re also seeing some of these companies do offerings in the private world to a broader investor set.

David: Yeah, I think that’s out there. That world where the private almost equals public.

Dan: Yeah. And OpenAI had big strategic investors as an example. But I think we’re confident that there are returns to be made around good, high-quality fundamental investing throughout the life cycle.

David: Finally, let me end with my old favorite, M&A. And I’m just curious. It’s been fine this year. I don’t know what the exact numbers are. I assume we’re up.

Dan: Yeah, we’re up.

David: But we haven’t seen blockbusters that perhaps some have promised. What does the second half of this year look like from the backlog you guys have?

Dan: No, I think it’s still strong. It didn’t blow out like I think some people hoped. I think that’s geopolitical in its sort of background.

But we have seen some big deals. We announced McCormick and Unilever. You know, it’s $40 or $50 billion all around. Didn’t get a great reception with a lot of complexity. But over time, complexity in that context.

But there are big deals out there. I think there’s a regulatory environment that is still conducive.

David: It is conducive.

Dan: There is a credit market that’s conducive. There are equities at all-time highs. And there is a backlog, both a boardroom backlog as well as a private equity backlog. But you have to put geopolitics over that.

David: Alright.

Dan: So context.

David: All right. Yeah. Let’s end on geopolitics. I mean, how are you viewing, broadly speaking, what’s going on in the world right now, the Strait of Hormuz, the inability, obviously, of Europe and Asia to potentially get enough natural gas to operate key parts of their economies?

Dan: Well, right now, I think complexity is driving the market. It’s sort of driving our business to a degree. There’s complexity that will drive some volatility. The AI world is driving growth. It’s driving dispersion on investing. And it’s all interconnected, whether it’s regions interconnected, equities connected to credit in various forms.

And so in that sense, it’s as complex as we’ve seen. But there are very powerful growth forces still that are sort of countering the fear around geopolitics, including what you said in the supply chain in petrochemicals.

David: Yeah. And we see it today with the S&P up yet again and the Nasdaq as well. Dan, thank you.

Dan: Thank you, David. Dan Simkowitz from Morgan Stanley.

Host: Let's turn now to our next guest, who's worked on Wall Street for decades, Dan Simkowitz. He joined Morgan Stanley back in 1990, doing business in New York, Tokyo, and Hong Kong. He was on the front lines with the firm's assignments with the U.S. government during the financial crisis, and Dan is now the co-president of the entire bank. He joins us right here at Milken.

Host: Dan, it's great to see you.

Dan Simkowitz: Nice to be here, Katie, Romaine. Thank you very much.

Host: I do want to start with dealmaking because you think about the first quarter of 2026: it was the best start to a year ever for dealmaking, with a global tally of about $1.3 trillion. But we know that the world changed at the end of February, at the start of March. So I wonder, where you're sitting now in May, how do your expectations for how 2026 is going to play out stand relative to where they were at the beginning of January?

Dan Simkowitz: Yeah, I think backlogs are still very strong, and you saw even in March a series of M&A announcements. So I think the backdrop around dealmaking is still pretty solid. In that context, corporate boardrooms didn't do a lot of M&A in '22, '23, or '24, so there's pent-up demand around pursuing strategic action. There's a rationale to do that: AI spend, the focus on scale. You've got a regulatory environment that's pretty conducive to mergers, and then you've got the markets. You guys were just talking about it.

Host: Mm-hmm.

Dan Simkowitz: You have credit markets that are still functioning exceptionally well, investment grade and non-investment grade, with liquidity. And then the last thing is the S&P is at a pretty good price in that context. Now, all of that is balanced against geopolitics and some uncertainty around the disruptive and transformative part of AI. But the backdrop over the balance of '26, and we would argue into '27, around the resurgence in M&A is still there.

Host: And it's interesting you bring up AI, and that's the other big disruptive force that I wanted to talk about because we've had a lot of conversations here and over the past few weeks about how this is playing out in private credit. The big overarching concern is that software businesses that looked like sure bets in 2021 and 2022 may be not so sure now. So outside of private credit, how is that impacting the IPO pipeline and the dealmaking trajectory?

Dan Simkowitz: Yeah. And I can get back to AI finance, which has been the big activity for us in the last eight weeks or so, and throughout last year. You know, software equities are down. Some of the concerns around AI disruption are there. The IPO pipeline in software is relatively modest. I think over time you'll see consolidation, and winners and losers being picked around the software industry, and it's not going away. So firms will adapt, and that will create capital-raising opportunities, but it'll also create some level of either consolidation or changes of ownership. But it's a relatively small part of the overall wallet for dealmaking, as you said, so we haven't seen it really play through in any meaningful economic way for dealmakers.

Host: Is there a certain sector that you look at right now as potentially being the primary driver of M&A activity, or is it going to be a little bit more dispersed?

Dan Simkowitz: No, I think it's quite broad-based.

Host: Yeah.

Dan Simkowitz: I think when we look at our pipeline and where we deploy resources, you've got technology—away from the software sector—where there's still a lot of economies of scale and people trying to buy, merge, and create synergies in that business. Healthcare is still extremely active. Industrial companies are trying to understand how the world's supply chains work and how the flow of capital and energy works. But even on consumer, we announced a very large deal where McCormick and Unilever put their businesses together. So I think it's quite broad-based. And then you do have that regulatory overlay, which is pretty broad-based in terms of a willingness to allow some consolidation. I would add financial services is in that category as well. So it's quite broad-based, and it's broad-based not just in the U.S.—global M&A is up as well.

Host: Are you finding that clients are doing these deals because they want to or because they have to?

Dan Simkowitz: I would say the majority are doing them because they want to. I think the buyers are looking for ways to grow their business, to take advantage of their relative competitive advantage, and find opportunities for growth. And then I think private equity is a two-way market, right? They both have enormous dry powder, but they also have portfolios that are starting to age, and so you see an inducement there to act. But there's very little distressed M&A in the marketplace this year and probably for the rest of this year.

Host: Let's go back to AI financing, something that you mentioned. Morgan Stanley is doing a lot of it right now. Talk to us about the momentum because that's been the story for a while now when you think about the markets overall. You're still seeing that continued demand, though?

Dan Simkowitz: Yeah. There's very strong demand, and I think this is a great U.S. story. So you have all this AI deployment. The big LLMs are here. The big hyperscalers are here. The CapEx is very large. It's all being raised, in essence, in the capital markets one way or another, or through the cash flows from these very large companies. And we're seeing real, large, diversified pools of capital be deployed. So you're seeing that in the equity raises that some of these companies are doing, both publicly and privately, with strategic and financial investors. But in the credit markets, we're doing big unsecured bond deals for the hyperscalers like Meta, Google, or Amazon. We're seeing delayed-draw term loans for a company like CoreWeave, where we did it with the private credit market, but then they're out now with a chip-based, GPU-based financing that's going to the public term loan market. So there's real diversification in the credit markets supplying some of that capital. And then you've got these great balance sheets—NVIDIA, Alphabet, Meta, Amazon, Microsoft as well—providing some real support to what we think is a transformative technology that needs to get financed. And I think Jensen is speaking later today, but he talks about compute equals intelligence, and intelligence equals revenue. We're seeing that in the real world around companies deploying and revenue ramps for some of these infrastructure companies.

Host: All right, Dan. Have to leave it there. Really appreciate you taking the time for us.

Dan Simkowitz: Thank you so much.

Host: We'll let you get back to it.

Dan Simkowitz: Thank you.

Host: Dan Simkowitz, co-president of Morgan Stanley.