Power Lunch - 2024 Megadonor Scorecard, Carvana CEO on Used Car Market & Tesla's "EV Winter" 6/5/24

Episode Date: June 5, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us on this day. Stocks are higher across the board. The Dow up 50 points, but the NASDAQ up more than 1.5% and hitting a new record high. So far this year, the Dow is up just 2%. But the NASDAQ higher by 14%. And driving the NASDAQ higher today and this year is what else? Invidia, hitting a record high of its own above $1,200 a share right now with the 4% gain. And it's market cap. Are you ready for this? Crossing $2.9 trillion. Look at Nvidia's market cap.

It is just inches away from being a $3 trillion company. And it trails Apple by just, what do we call that, $150 million? Crazy. Let's check the 10-year yield as well. Slightly lower now, 4.3% down sharply over the past week. We dip below 430 this morning, despite the stronger data. For more and what all this means for the markets, as we head into Friday's Big Jobs Report.

We turn, of course, to Michael Santoli. Mike, what are you thinking? Well, Kelly, you lay it out right there that this is a market that essentially has been running in parallel. You have the AI-driven market, obviously crystallized in Nvidia's share price. It seems somewhat impervious to the macro concerns. It's been a support to the indexes. It's been an offset to some pullbacks in the broader tape. Today's a day, though, where you have other things working.

The market coming into today was craving reassurance that the economy was still plugging along. Okay. There's been some sensitivity to some softer data. Treasury yields down pretty sharply over a couple days. The kind of stocks that usually do well when that happens were not doing well, home builders, banks, small caps. They actually were lagging. That sort of got a relief trade today when we did get the ISM services number.

So for a day, you have a little bit of a broader rally, not particularly broad, but it really does remain kind of the NASDAQ as the engine and other things following along with varying lags or maybe even pulling the other direction. And it's suppressing volatility. I think this is a key point here. When you have lots of things moving on their own in different directions within the index, it sort of keeps the overall index volatility lower, and the VIX is down by around 13 again.

And that, in a weird way, emboldens big institutions to own more because their models say it's safer when volatility is lower to actually at least stay in and stay exposed. S&P, by the way, already is also on track for a closing high at this point. Wow. Mike, stay there. As our next guest says, if the economic slowdown is real, it will likely allow the rate-cutting cycle to begin. It also raises concerns about earnings growth, though.

This is exactly the conversation to have. What's it mean for your portfolio? Let's bring in Jim Tierney. He's the CIO-concentrated U.S. growth with Alliance Bernstein. Jim, I think you summed it up aptly. So which way are we headed here? I think we have to see earnings start to slow. The market's cheering slower economic growth that will ultimately have an impact on earnings estimates.

the growth numbers this year and next are double digits. And I think that's just too high for the overall market in terms of earnings growth. So if that's the key, let's put differently when I spoke last hour with one of our Margie Patel investors, she said, look, if we can just muddle through with one and a half percent real GDP growth like we've done probably in the first half of this year, stocks can still go up in that environment. Why do you disagree? I don't disagree that stocks can go up. What I would say is that overall earnings estimates that have been incredibly robust that haven't revised down at all this year probably have some downward revisions.

Those that have bigger revisions probably don't go up. Those that don't go down quite as much or don't go down at all keep on going higher in terms of their stock prices. So it would appear to me, if I deduce correctly from your thesis there, Jim, that the kinds of companies I ought to invest in are very stable companies with very stable. if modestly growing income streams and maybe a dividend. What do you say and what names would you mention? I guess I'd tweak that a little bit. I want to see robust secular growth. But in that world, I think Zoet is a great example.

It is animal health where we have more companion animals. We are eating more protein around the world. They treat both classes of animals. So that's a stable grower, but really a robust grower. and their PE has come down, their relative multiple, has come down quite a bit. Another example would be American Tower. We're not going to be using our cell phones less, if anything, we're going to be using more data. That's a company that's been pressured by higher rates.

If rates come down a little bit here, I think you get a multiple expansion or re-rating there. That's a company that's 35% below its five-year average PE. And then Cooper companies, they reported last week. Great quarter, they revised their full-year guidance. higher and the stock really didn't do a whole lot. Some of the headwinds have been the strong dollar and certainly higher rates, but the underlying business fundamentals are beautiful there. And again, another double-digit grower. So I don't think you have to compromise on growth. I think there are plenty of examples of companies that have been hurt by higher rates.

And if rates roll over a little bit here, they get a tailwind in addition to their great underlying fundamentals. Mike Santoli, do you think the market is moving towards pricing in much greater odds of a rate cut in the near term? And if so, what is that likely to mean? To go back to the Michael Hartnett expression of typically, as investors, you want to sell the first cut, but a lot of people think this time might be different. Yeah, I think the market is incrementally more confident after, let's say, the last two or three days of numbers that we will get perhaps a better chance of, let's say, two rate cuts this year. That's what you're seeing in the September rate cut pricing.

I don't know if it's as simple as saying, you know, you like to enjoy the pause between, you know, the rate hikes and the cuts, but you sell the first cut. I go back to 1995. You didn't want to sell that first cut. There were only, I think, two that year, maybe three. And it was spread out very far. Nobody really cared because it wasn't seen to be the driver of things. So I think there are enough exceptions if we're going to enjoy, if we're going to be in that fairway of soft landing where, you know, inflation and growth both remain in these tolerable areas, then I don't think that it's some kind of a magic contrary signal at the Fed cuts. I do think, though, that, Kelly, the market this week was evidencing some concern that the Fed had its eye off the ball and was going to sort of be a little bit too cute about it and end up being late.

I don't know that today the services numbers, you know, fit with that thesis that things are falling apart in the economy. Jim, what do you think? We had someone on last week who said the question really is, which cracks first, the economy or inflation? I think they're both coming down, quite frankly. They're relatively well-behaved and to a degree fairly tied. I do think that you're going to have to differentiate between what companies in a slower growth nominal GDP environment can still grow at the expected levels. And it's not going to be everybody. Investors haven't been quite as discerning about earnings growth this year. I think that's going to be the second half story. Bond yields have been coming down, I guess, basically, in the past few weeks.

Are those yields pulling the Fed in that direction? I think the inflation data moderating a little bit, economic growth, importantly moderating a little bit, is going to allow the Fed to cut. The worry was that we weren't going to have any cut. So I think it's all interrelated, but I think what's driving it is a little bit slower economic growth across the board. Jim Tierney, always good to hear from you. Thank you. Mike Santoli, great to see you as well. All right.

For more on what the bond market, which we just talked about, is telling us about the economy and perhaps the direction of what the Fed will do. go to Chicago and Rick Santelli. Rick. Hi, Tyler. Indeed, I'm on the floor of the CBOE. And as you look at the following charts, consider the whole thing is a three-legged stool. We have growth, which seems to be slowing. And that's evident by GDP and some of the revisions that we've had. Of course, we have the labor market.

Everybody's looking at things like jolt. And we have inflation. And today's prices paid might go to that end. It's a combination of those two things that's going to decide a lot in the future. We're on pace for the fifth consecutive. lower yield close in tens, and each of those five days traded below the previous session's lows, that builds momentum. And we're on pace for the lowest yield close in tens since the end of March. And all that at a time, we're still not near the 2% target. Let's go see what traders think.

Hey, Paul. Hey, Rick. Okay. It looks as though the ECB may cut tomorrow. That's what's built in. We had the Swiss cut in March, but today Bank of Canada, the first of the big G7 economy. He's cut a quarter to 475. What do you think is going on with regard to equities and how is all that playing into what may or may not happen from the Fed? Well, you can see equities pretty much on the all-time highs.

Everyone's well aware we got next week, CPI and the Fed meeting. Also, auctions next week is going to be an interesting one. And some of those have been more interesting lately. Two weeks ago, we had the low in the VIX. there yet. So even with equities on the highs, VIX has a little bit of upward pressure. We have seen some big hedges come into the market. Not unusual with equities at this level. Now, if I look at the notion that we're trading, what, just a bit under 13 with regard to the big VIX, how does that play into whether it's green light or red light for certain directional trades?

Is it hedged? I mean, hedging is cheaper when the VIX is less. Well, that's a good point. So volatility is lower. You can do more, and the kind of feedback loop extra careful kind of gets tossed away. Aren't traders more aggressive? I wouldn't put it in that term necessarily. People have less of a reason to not be hedged. If you have a big portfolio with upside exposure and they're letting you hedge it for cheaper. what do you think the biggest aspect in front of us is that could actually make the market and volatility exceed some of the parameters that traders are keeping it tied into? Is it the ECB or would it be the Fed or the CPI next week? I think more eyes are on the Fed next week than the ECB.

I think the ECB is pretty much baked into the pricing right now. Anytime Jerome gets a chance to share his thoughts on the market, people are definitely paying attention. Well, I hope they don't pay too close of attention because a lot of the thoughts Jerome has shared haven't actually worked out very well. One final notion. It seems to me that prices paid was lower in March

than it was today, even though today was lower than last month. Do you guys pay a lot of attention to prices paid? There was it more about kind of a CPI-P-I environment? We pay attention to everything, Rick. That's what we're doing here. I agree with your assessment of that. It doesn't seem like it's going to, force their hand in either direction. I got you. Paul, always a pleasure. Thank you for joining me

today. Tyler, back to you, and it's going to be an exciting morning with the ECB tomorrow. Certainly will be. Rick, thank you very much, Paul. Thank you as well. We are a week away, as was referenced there, from what could be the most important Fed decision in many, many months, with only a few meetings left in the year to make an interest rate cut. Now, one of the criticisms of the Fed is it's run only by economists. So what if business owners, market investors, and Economists all had a say in monetary policy. So we're going to answer that question next Tuesday. We've got a mock Fed board set up that's going to vote on whether to cut or hold based on their unique perspectives of where the economy is, where inflation is, and what should be next.

There you see the members of our mock Fed. Be sure to tune in. That's on Tuesday. Look at that lineup. It's a good group. I can't wait. Coming up, the AI boom, creating a divergence in the tech space. While artificial intelligence benefits semis, it could be fueling an anti-software trade.

We'll dig into that story when Power Lunch returns. Welcome back to Power Lunch, everybody. We mentioned just a moment ago another all-time high for Nvidia today. AI has been, of course, a huge boost for that stock and more broadly for the chip sector, the SMH semiconductor ETF, 44% higher so far this year. But the IGV software ETF is actually lower. For more on why software is getting left behind in the AI boom, let's bring in Christina Parts in Avalis.

Christina. Tyler, there's quite a divergence. Even if you look at the IGV today, there is a little bit of a stock bump led by crowd strikes, earnings, beat, and guide rays. It doesn't necessarily mean that divergence you just highlighted between booming semiconductor stocks and battered software will necessarily shrink over the next little while. There's actually growing concern. I'm calling it the anti-software trade actually continues into the second half of the

this year. The obvious first reason, spend has shifted from software to AI projects in an environment where budgets are already getting cut. You're hearing about headcount shrinking. Salesforce, for example, warned of high levels of budget scrutiny in their latest earnings report. MongoDB said, we're not seeing AI apps in production at scale. Data Dog, and this is an important one, warned the revenue jumps you might see from cloud providers might relate to supply of GPUs coming online. Those typically won't generate a lot. lot of new usage for us. And then another, I was reading an analyst note from Jeffries,

they said they had 20 meetings, group meetings with companies, and there was, quote, virtually no discussion around AI and any associated revenues becoming tailwinds in the second half of this year. So that means investors are understanding, they have a better understanding of risk for software and may hesitate to actually buy the dip until they actually see how bad this slowdown

is going to be in this next earnings cycle. So think maybe closer towards end of July. Plus, I know it's weird to say this, but all the spending during COVID is still working its way out. So you're starting to still see some weakness there. The next catalyst, though, Tyler and Kelly is Oracle's earnings out next week. And if Workday and Sales Firsts are a barometer, it may not be ideal. And we could see some further weakness in the entire sector, despite the strength that we're seen today because of crowd strike. I guess it sort of surprises me that software, which is such a big part of the AI revolution,

is such a laggard here. Is it really part of the AI revolution when you think of all the hardware that is necessary and the software is built on top of that and we actually haven't got to that point yet where we need to utilize all of these various software applications? Often when I was talking about the revenue monetization and the big concern on our eye going forward

is what is going to be that killer app that's actually going to get people to buy all of these AI PCs to keep spending money two years down the line. So yes, there's this rush towards hardware, but there's still a big question as to what kind of software is going to be utilized later on down the line, especially when you have the likes of Nvidia and AMD Intel, all of them moving up the stack and providing the entire ecosystem.

So we could see some more consolidation in the space, and that's why there's a lot of red flags, because money's just shifting towards the hardware right now. All righty. Yeah. It's one of those kind of unexpected consequences so far. Christina, thanks very much, Christina Price and Avelas. After the break, EV sales continue to start.

slow. Barclays out with a new note laying out some of the causes of this EV winter. That analyst joins us next. Welcome back to Power Launch controversy, continuing to swirl around Tesla from the diversion of Nvidia chips to one of Elon Musk's other companies to debate over Musk's pay package. Here's what longtime Tesla shareholder Ron Barron said about whether shareholders should approve Musk's pay demands. You're buying into a company where you have one of the most exceptional, maybe the most exceptional, you know, executive in this country in the world running your business. Do you really want to not treat him properly? Well, there may be even bigger problems for Tesla as it reports cooling sales and the overall

EV market is slowing down or showing signs of it. While annual EV sales do continue to grow, the growth rate is dipping, according to Cox Automotive. It says first quarter sales rose 2.6% year over year, but that was far below the 46% growth seen in 2023. My next guest sees a few themes at play here, including China, hybrids, pricing, in what he is calling an EV winter. Joining us now for more is Dan Levy, senior auto's analyst at Berkeley. Dan, welcome. Good to have you with us.

Is the EV market globally too beholden to government policy, in other words, subsidies on the one hand and penalties on the, other for cars that don't live up to certain emissions or mileage standards. Tyler, thank you so much for having me. Look, when we think about what's driving EV penetration, the analogy we've used is, you know, carrot sticks and tambourines, right? How do you get a donkey to move, carrot sticks and tambourines? How do you drive EV penetration, carrot sticks and tambourines?

The carrots and the sticks are government. And so for the foreseeable future, government is going to. to play a very critical role in driving that uptake, certainly from the carrots, whatever, incentive subsidies, but also from the regulations. And that's just not going away. Even if it's slowing or it gets pushed out, there is still a regulatory mandate in places like the U.S. and Europe especially. Do you expect that some of those regulatory mandates having to do with the kinds of cars that will, new cars that can or will be sold in this country by 2035 will be changed? It's hard for me to believe that ultimately no internal combustion engine automobiles, new ones, will be sold in this country in 10 years.

The regulations are definitely fluid, right? We saw that already with EPA plans that were initially put out last year and already revised modestly lower earlier this year. We know that if in November, Trump is elected, those regulations probably get softened as well. And certainly anything beyond 2030 is more aspirational more than anything else. So it's going to be fluid. There's a balance between pushing for decarbonization, but also recognizing where consumers are and where automakers are in this journey and the cost considerations for them. I just want to talk for a moment, Dan, about Tesla losing share.

You're seeing it in China. You're seeing it in Europe. You're even seeing it in the U.S. Where does that leave the stock? Yeah, you know, the fundamentals for Tesla are in a tricky position right now. We generally expect negative revisions. And part of that is the volume of help look has certainly come down. We're at flat volume this year.

And even that, you know, some people would say is going to be tough to achieve. And next year, it's modest volume growth. I think part of the challenge here is that they are relying very heavily on Model 3 and Y. And as good product as they are, there is a model concentration challenge. The U.S., it's natural that they're going to see some share erosion, just given how strong a share position they're at, roughly half the market. That's just a function of lack of competition. But Europe and especially China are very competitive.

So they'll remain a leader on the EV front, but the competition. is tougher and they have a bit of a model concentration challenge. So behind that, does Tesla need to bring to market newer, fresher models or at least refresh the models that they have out there? Yeah, new models are going to be critical. And so if you look in our model, you know, we have Tesla volume by 2030 growing to 5 million units versus the roughly 1.8 million units that they're doing this year. that assumes that there's going to be some sort of a low-cost model that's going to be introduced. Now, we know that all of that is under review right now. What was referred to as Model 2 was either scrapped or put on ice.

There is going to be a lower-cost model that they are planning for sometime early next year. So there's going to be variants of these models that will help. But it's about having a range of models at a range of price points that helped to drive some volume growth. All right, Dan, thank you very much for your analysis here. We appreciate it. See you again soon, I hope. Thanks, Kelly and Tyler. Dan Levy from Barclays.

From EVs to oil crude is bouncing back a bit today, sitting around $74 a barrel. Pippa Stevens is here with more. Now what, Pippa? Yeah, so bouncing back today, but still down about 4% on the week after the OPEC production cut unwind and then also some concerns around demand. We did get a little bit of a bearish inventory report today. Stockpiles were up by about a million barrels since last week, and then also supplied gasoline is down about 1% over the last four weeks relative to low.

last year. And so there is some weakness there on the road. Now, Adam Parker over at Trivariate research noted that for the last two years, crude has basically done nothing at this point, but that over that time period, energy companies have actually meaningfully improved. And so he said that now when the firm screens for their high quality names, there are more energy stocks in the highest quartile than in the lowest for the first time ever. And so that's meaningful because for a long time these companies were kind of thrown out as having a lot of debt and not making any money. And then not returning anything to shareholders. So quality does refer to different types of things, but it's things like ROI, stable earnings growth, that kind of factor. And, you know, the sector is

still down. It did hit an all-time high back in April, finally taking out its record that stood for a decade. Wow. But down about 10 percent since it's just really hard to get excited about energy when growth is what's been working. You know, not to put it quite this way, but Altria was a pretty good performer after, you know, in the 2000s and 20-inch companies that have to kind of improve and have become in some ways left for dead might not be the worst stewards of capital. I'm not saying they're the new Nvidia, but it's been an interesting cleaning of house, shall we say, by the sector. Pippa thanks.

We appreciate it. Pippa Stevens. Meanwhile, eBay dropping Amex as a payment option over high fees. For more on that corporate spat, let's bring in Kate Rooney. Kate, what's the latest? Hey, Kelly. Yeah, so eBay is really drawing the line here on. fees, it's no longer going to accept American Express as a payment option. This is effective August 17th.

It all comes down to this battle over swipe fees. eBay calls Amex's fees, quote, unacceptably high, saying in a statement at a time when payment processing costs should be declining because of technological advancements and investments in fraud capabilities and other customer protections by merchants. Like eBay, they say credit card transaction fees continue to rise unabated because of a, quote, lack of meaningful competition. Amex for its part says it's, quote, disappointed by the decision eBay will, quote, limit customer payment choices and then take away the service, security and rewards. Also argues here that their fees are comparable to other card networks, Visa and MasterCard, for example, they call the choice inconsistent with eBay's stated

desire to increase competition at the point of sale. And they also point out that the average Amex spender tends to spend pretty much double. The transaction sizes are double if you compare it to the other card networks out there. So Amex tends to have those higher spenders. KBW, though, putting out a note on all of this this morning, they say they agree with Amex's stance not to budge here. They say it would be a slippery slope if Amex sacrificed on price. They point out this is the reason American Express backed out of its Costco relationship. If you remember that one, they also estimate eBay represents about 0.5% of Amex's worldwide build business volume, guys. Back to you. All right, Kate, thank you very much. Kate Rooney reporting. Let's get over to Sima Modi now for a CNBC news update.

Sima. Tyler, here is the update. Russian President Vladimir Putin said today relations between Moscow and the U.S. will remain the same regardless of who was elected president in November. The comments came as he took questions from international journalists for the first time since his inauguration. in early May. He also called former President Donald Trump's felony charges politically motivated. Police arresting 13 pro-Palestinian protesters occupying Stanford University's president's office today. The school said some were immediately suspended from the school, adding there was extensive damage both inside and outside of the building. The takeover began around 5.30 this morning on the last day of classes, the protesters joined a wave of demonstrations on college campuses across the country demanding schools divest from Israel amid its war with Hamas.

And the NHL will feature live deaf broadcasters in a first for any major sports league. The league says viewers can expect play-by-play and color commentary in American Sign Language for each game of the series between the Florida Panthers and Edmonton Oilers, the game won on Saturday. Taylor and Kelly. Boy, that's a, that is a tough game to call. if you are a person who can speak and hear normally. At that speed, I can't imagine how good a translator has to be.

Anyhow, be interesting and a good move by the NHL. Seema, thanks. Ahead on Power Lunch, Carvana's stock was once left for dead, but after a massive turnaround, it's now up more than 500% in a year. Benefitting greatly from the demand for used cars. We'll speak to the CEO next. Welcome back to Power Lunch. Shares of Carvana are on a tear this year of more than 95% fueled in part by strong demand for used cars.

The online car retailers also up over 30% since Mentalist O's Perlman picked it in our stock draft on April 25th. His team O's knows currently in second place, trailing only former NFL star Eddie George. Take a listen to why Team O's knows bet on Carvana. Always need an ace up my sleeve, Tyler. And this one went under the radar, Carvana gang. I see a huge upside peaked at 350 bucks about three years ago. There were some missteps. I think management's got some strong backing right now from Apollo.

They don't like to lose money. Here for a Power Lunch exclusive on that note. Ernie Garcia is CEO and co-founder of Carvanna. He joins us from the William Blair Growth Stock Conference in Chicago. Ernie, it's great to have you here. Welcome. Hey, thanks for having us. What are you doing to borrow Ouse's phrase to avoid losing money,

especially as the company returns to growth? and that certainly has investors excited this year. Yeah, we appreciate the endorsement. So owes does knows. We very much appreciate that. I think the company's been on a great trajectory. The team's done an incredible. I think, you know, we went through some tough times a couple of years ago.

We've been on a great run since. We've put together an incredible plan. We've got an offering customers love. We're in a huge market. You know, we did well enough last quarter with the most profitable automotive retailer as measured by EBDA margin last quarter. So we're on a great run. We've got to keep it going.

Things are good. Did the meme stock traders help keep your company? alive or was that just a coincidence? I'm not sure that we were ever really too Mimi, but that's hard to know who the actual investors are. I suppose you guys are better positioned to guess of that than we are, but definitely not on the keeping alive point. I think the company was always much stronger than the stories that were sometimes told.

I think, you know, what matters in a business is you've got to have something that customers love. You've got to execute really well. You've got to build a business model that can make money. We've done all those things. We've executed great. So, you know, we've been on a much better path than many perceived, and I think that's becoming clearer now.

So what do you think accounts for the fact that used cars, which were hard to get a couple of years ago, are now suddenly what is demand up? Are units more available? Why is that the transactions are now supporting a much healthier position for the company? You know, I think the used car market is reasonably stable. It's about flat to last year. It's still down versus where it was pre-pandemic in terms of total volume. Car prices are down quite a bit, but they're still much higher than they were.

pre-pandemic. So I don't think this is really a macro story. I think, you know, consumers love buying cars online. They love having a broad selection. They love saving money. And, you know, we're very well positioned to deliver those things. But we've got to execute. We had to build a big business with a bunch of fixed expense and a bunch of fixed investment. And I think when the world turned on us and car price went way up in in late 21, you know, that was a tough transition for us. We were expecting a different world than we found ourselves in. But we've adjusted incredibly well. And I think that the story is really about what consumers want and the team doing a great job executing on that. You've mentioned three times in just in that last sentence, the word execute.

We had to execute. We had to execute. What was it in the turnaround that was most important for you to execute? And how did you do it? And what do you have left to execute? You know, I think the error of entrepreneurs, I think, is to be ambitious and aggressive. I think it's an error that serves you well in general. and it's an error that you will likely always make to some degree. But I think the other side of that coin is making sure that you're focused and that you execute really well.

And I think that over the last couple of years, we found a gear of execution that we never had before. And I think it's been incredible. You've got to do all the little things right. There are thousands of little things. There's tens of thousands of decisions you have to make right every single day. You have to have people that care all throughout the chain that are making sure they deliver great experiences to customers. And I think our execution has been very strong. I think that we've always been very well positioned.

It's always made a ton of sense. Our vertical integration has always been a big economic advantage, but we've executed very well over the last couple of years. And I think that we've learned how to quit in our goal is to continue. Do you sell many used electric vehicles? And if so, what percentage of the sales are they? We do. Evis make up a meaningful portion of our sales.

We sell disproportionately high levels of EVEs. We do sell to the entire mix of customers, whether it's age or income or any kind of demographic mix that you look at, but we do skew a little bit younger, a little more affluent, and so we tend to skew a little bit EV. So we have many customers that buy EVs, and we're making investments there to make sure those experiences are great as well. Can you make Tyler an offer? That's not what I was looking for, but we'll talk later. Well, give us a call. We'll figure it out. Thanks, Ernie. Appreciate it.

Ernie Garcia. Ernie Garcia. All right, the 2024 presidential election. Have you heard about it? It's right around the corner when it comes to cash. Donald Trump is real and in the big bucks. We'll discuss the mega donors backing the former president's campaign when Power Lunch returns. Welcome back. The presidential battle for those big donations from billionaire donors is on full display this week, with some signs indicating Trump may have the edge.

Megan Kisela with the details. Megan? Kelly, that's exactly right. Donald Trump is winning the race for those big money political donations. Open Secrets data shows us that Trump and the Republican National Committee have raised more than $42 million from billionaire donors through the month of April. That compares with about 35 and a half million for Biden and the Democrats, and it puts Trump at a $7 million advantage despite receiving funding from about half as many billionaires. Now, Trump's top donors have been

spending big Vince and Linda McMahon of WWE fame and Ike Perlmutter from Marvel have both given more than $10 million as of April. And on Biden's side, Reid Hoffman of LinkedIn leads the way with just under 10 million in donations, followed by Michael Moritz of Sequoia and the philanthropist Deborah Simon. Now, one big question from here is what other mega donors might get in off the sidelines, especially as a growing number of tech and finance leaders who had distanced themselves from Trump after 2020 are coming back to support him. So that includes Steve Schwartzman of Blackstone, Doug Leone of Sequoia, and the venture capitalist David Sachs. And others who had supported Democrats in the past are warming now to Trump. That includes both Elon and

Musk and Bill Ackman. And guys, I also spoke yesterday with Ken Goldman. He's formerly of Eric Schmidt's family office. He says he's seeing a rise in quiet support out in Silicon Valley for Trump. He says it's not as much pro-Trump as it is anti-Biden, but the momentum, he says, is shifting. Guys. I thought Biden had an early lead in this area. What has happened that has turned those big donors in Trump's direction?

You're right. He did have the lead. He still leads in terms. of the amount of money left in the bank, at least as of the most recent data. But the tide seems to be shifting. I would say it's a couple of things. I mean, Goldman talked about just a concern about another four years of Biden. There's most of the concerns when I asked him about this were about regulation, about the reality that corporate tax heights will likely increase, as we talked a little bit about yesterday. And it also was interesting in that the verdict,

the guilty verdict on 34 counts last week, seems to have actually riled up Trump's base. And many of these supporters as well, that some of these venture capitalists came out right after that verdict last week and said, now I've decided to support Donald Trump. So there's a number of things there that's actually getting them to actually turn their support and throw some money behind Donald Trump. Very interesting. Megan, an interesting year ahead. I know you'll be all over it for us. Thank you, Megan Kassella. All right, still ahead. Strong guidance and a Q2 beat has sent HPE shares soaring today. Our three-stock lunch trader will tell us how he's playing this S&P leader next.

All right, time for today's three stock launch, folks. Here with our trades is our friend Boris Sloshberg. He is managing director of FX Strategy at BK Asset Management. He is also, by the way, a CNBC contributor. First up, Boris Hewlett-Packard Enterprise stock on track. Best Day in Years. After the company, top second quarter earnings and revenue estimates, your trade on HPE.

Yeah, you know, cheap stock with improving fundamentals. There's very little not to like here. It's essentially really an inexpensive way to play AI. They improve because their server businesses really, really improved because they were able to finally fulfill a lot of the AI demand they had there. It trades it nine times versus 19 Dell and 40 SMCI. So there's a tremendous amount of discrepancy data I think is very favorable to it. And generally, I think, you know, as it goes forward, the stock looks quite attractive. It's a slow and steady stock, but it could really have as much as 50% upside in the next two to three years.

And for conservative investors, the interesting play here is you can sell the 20 December 24 calls for a 22 and a half percent yield plus a 2 and a half percent dividend as far as the trade goes. I think it's just a generally good quality stock at this point because they're going to ride that AI wave hopefully to more profitability. Up 16 percent this year. Let's move on to Campbell's Soup. A totally different segment here. I don't think there's an AI play yet with Campbell's that I've heard about. But they did beat earnings and revenue, said the snack business. is facing pressure from a pullback in consumer spending. The shares are mostly flat and they're

actually down 14% over the past year. What do you think of this one, Boris? It's, I think it's a grandma's stock. You know, Campbell soup isn't going anywhere. Internals are actually better than the industry. So for example, industry margin is around 5%. Their margin is 8.5%. They can just make the snack business grow a little bit. Or actually, they just expanded a little bit. They bought Stavos Foods, which owns very popular Rale-Raeo's pasta sauces and pastas. And if you can grow that business, maybe acquire something else that has a little better growth, they should be quite okay. Again, this is, I think, it's sort of a similar stock where you can sell the 47 calls for Jan 25. That's a 17% total

yield, plus a very nice 3.5% dividend. As I said, it's pretty much a, you know, a widows and orphans kind of a stock. And at this point, having flattened out and looking, you know, looking better on its free cash flow, it should be a pretty good play going forward. Let's move on to Lulu Le Mans on deck to report its first quarter results this afternoon. The company has been faced with some slowing sales growth and concerns over growing competition in athleisure. Shares it down about a percent today. What's your trade here on Lulu Lemon and the enduring appeal of leggings? Yes.

So not a stock that I want to own right now. I'm neutral on it. It's not that I don't like it, but I'm neutral on it. The bare case here is that Lulu Levin could become. like under armor, essentially irrelevant going forward. I don't think that's the case. There's a tremendous amount of loyalty, and if I go by my wife alone,

there's a tremendous amount of loyalty amongst the female consumer base. But I think the big story with Lulu Lemon is, can they expand overseas, can they convince female consumers in Europe in East Asia, for example, that aphleisure is a respectable wear, you know, clothing. If they can expand those markets,

if they can leap that cultural gap, I think big growth can really go forward. But that's something I'd like to see in the next two quarters of going forward before I would come in any capital to it. Right now, I'd like to just stay away. It's interesting, too. I mean, we had a segment last week on the return of denim of all things and very wide-flaired denim pants, which is exactly the opposite of stretch tight leggings.

I mean, so you wonder whether that day we've reached peak legging. Maybe. You know, Tyler, I'm just waiting for the big sideburns to come back. I'm old enough to remember those too. What do you think of the market right here? We've got a Fed meeting next week. Is the market likely between now and election day to sort of tread water? You know, it's the consensus view.

It's my view, but it's been the terminator market. I mean, it just keeps going up and up and up. And, you know, I assume today, surprise to the upside. I think everybody's looking for the economy to roll over and die, and it just refuses to do so. So the easy call is to say, yes, we're probably going to roll over. But the hard call is actually to stay long and strong at this point as it keeps going up. So I have been chastised by the market for sure.

All right. Well, we've all been schooled by Mr. Market at one time or another. Boris, thanks. Boris Schlossberg. We appreciate it. Remember, you can always hear us on our podcast, including our comments on leggings. Be sure to follow and listen to Power Lunch wherever you go. We'll be right back.

Welcome back. Take a look at the Dow up 117 points near session highs. The NASDAQ up nearly 2% now and hitting another all-time high today, believe it or not. And Nvidia, a big driver there. It's now up around 5%. Also a record high over $1,200. Remember, it's going to split soon. And it's very close to being the next $3 trillion company trailing Microsoft and Apple, but not by much.

Market cap. If you squint, you can see it there, 2.996T. Wow, that's just amazing. Yeah, we have about two and a half minutes left in the show. Several more stories you need to know about. get right to it. New York City is putting congestion pricing on pause. Governor Kathy Hokel has indefinitely postponed the implementation of the program, which had been scheduled to begin at the end of the munch. This timing isn't right. Businesses are still recovering from the pandemic.

There's been a slew of political issues as well. I fail to see how it could be good for New York City in the long run to make it that much more expensive. Well, listen, I don't drive into the city all that off and I happen to be going the next couple of nights, but you have to go across the bridge, which is $15. You've got to pull. park, which in Midtown is probably $50. Add $15 to this. It's a serious disincentive, a serious piece of inflation for people who are coming in from out of town or want to come in for an evening.

I just wouldn't do it. Sure. And she's just saying it's a delay for now, but there has been a lot of pushback. And the people who get hurt the most, that's a regressive kind of tax. If you get hurt the most are the people who have the least to spend on that kind of discretionary expenditure. Moving on, let's talk about diamonds. They may be forever, but demand isn't. Prices of the precious gems are down nearly 6% so far this year and a whopping 30% since 2022.

According to Ziminski's rough diamond index, what's behind the decline is dwindling demand in China and a growing preference for lab-grown stones. And people, of course, there are fewer people getting married. The age of marriage is later and maybe not so much demand for diamonds. That's true. I'm so curious. people who got their diamonds back in the day. What I want to know is do they, do they upgrade, let's call it, to a lab-grown one that might be much bigger and flashy? Because when the younger generation, that's what they have and the older generation, you know, so what's going to happen to the, you know, mine diamond trade altogether? I have many that will be curious to see.

Boeing launched its first Starliner flight. Two astronauts aboard this morning took a 10.52 a.m. launch from Cape Canaveral, Florida. About 15 minutes afterwards, the rocket released the starliner capsule in orbit as planned. The flight going as expected, according to mission control. We're carrying astronauts to the space station for the first time on a Boeing craft, if I'm recalling correctly. That'll do it for power lunch. Thanks everybody for watching. We appreciate it. Time for the launch of closing bell. Right now.