Power Lunch - A Tech Turnaround? 4/11/24

Episode Date: April 11, 2024

Stocks rose Thursday as tech shares climbed higher, managing to rebound from an earlier pullback over concerns of persistent inflation.Technology stocks lifted the S&P 500 and Nasdaq Composite into positive territory midday, as investors bought into the dip from earlier in the week.We’ll break down what it all means for you and your money. 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 Contessa Brewer. I'm Tyler Matheson. Glad you could join us. Markets are higher today. Maybe not surprising, given the mixed inflation data, a little bit better this morning. Today's producer price index coming in lower than expected. Much needed relief for the markets after consumer prices jumped more than expected yesterday. Isn't it funny what a little bit of green on the board will do for you? You just need a day in red to make you appreciate a little bit of green. Dow just turning positive. It's been down seven of the past eight sessions, then translates, or that translates rather, to a 4% drop so far in April. NASDA getting a boost today from Nvidia higher for the second straight day after getting another positive analyst note. Briefly, it had dipped into correction, meaning down 10% from the recent high of $974 a share. That was March 8, Tyler.

All right, let's take a quick detour here and go to Rick Santelli with more on the PPC. and the bond market. Rick Santelli. You know, Tyler, today's bond market was mostly in short maturities that most closely are aligned with the Fed. Yields were a bit lower. That's a good thing. And if you look at an intraday chart of tens, you can clearly see that the 10 years side of the equation yields were higher. And not only were they higher today, if you look at a two-day chart, they're building on what was yesterday's CPI. But the short maturity has really paid most attention to the month-over-month data, which reversed on headline especially, that huge up 6-10% from last month.

So on a month-over-month basis, you can extrapolate and annualize. We've played that game before. It didn't work out so well with other inflation metrics. So three month-over-month data points, all a bit lower. But the three-year-over-year data points, as you see on the charts, headline, 2.1 versus 1.6. strip out food and energy. 2.4 versus 2.1.

Strip out food energy and trade, up 2.8 versus 2.7. Now, here's the biggest issue of all. Whether you're looking at CNBC write-ups or you look at BLS themselves. Gasoline? A lot of traders talking about gasoline and the seasonal adjustments going on. And yesterday's CPI report, they show gasoline prices up a little over 1%.

The actual month-over-month-data, gasoline prices were up about 5 and 3 quarters. percent. What did today's PPI show? It showed up five and three quarter-ish percent because it's seasonally adjusted. Seasonal adjustments, whether it's in claims data,

jobs data, or inflation data really makes traders wonder what the post world COVID world looks like in reality versus the seasonal adjustments. Deirdre, back to you. Actually, it's Tyler and Contessa today, but let me ask you

a question, Rick. Where inflation is now, does the Fed need to merely be patient and assume that keeping rates where they are for a little longer, a little higher, is going to ring those last drops out of inflation, or does the Fed need to raise rates? Well, I think the whole hypothesis of ringing the last few drops out is where the flaw is. How do we know it's not going to stabilize close to 2%, but not at 2%, and move higher down the road? There's a lot of issues where it's sticky, whether it's home insurance, car insurance. I know my premiums have gone up. Do you really think they're going to be going back down? So I guess to answer your question, I'm not going to guess what the Fed's going to do.

I'm not going to play that game. And Fed fund futures, they're only really accurate for the next meeting. What should the Fed do? Hey, 2% is their target. I understand that. But the big issue here is even if inflation gets close to that, they're going to have to be careful. I think inflation is going to be bumpy versus the way it was flatlining pre-COVID. All right, Rick Santelli, thanks very much. Appreciate it.

Well, if we turn from inflation to another big issue for the market here, earnings. Bank earnings kickoff tomorrow. We'll hear from J.P. Morgan, Wells Fargo. City Group, Leslie Picker, joins us with more on what you're expecting to hear from the big banks. Yeah, and this is a perfect segue, I think, for what you were just discussing with Rick, because rates is in focus, as these banks report, because there's been a huge shift in expectations around the Fed funds rates since the banks last reported in January. Guys, remember at that time, traders expected five cuts starting in March.

Now the market is favoring two cuts no sooner than September. For banks, higher for longer rates can be somewhat of a mixed bag. On one hand, investors are hopeful that will mean the more asset-sensitive firms. Those with shorter duration loans on their books will increase guidance on net interest income. That's the profitability metric for loanmaking. Morgan Stanley analysts say Bank of America, well, Fargo and JPMorgan are among the names most likely to benefit from fewer rate cuts. However, higher rates can pose problems for banks in other ways.

For example, it makes debt service more expensive, which can be a headwind for credit quality, and it may deter activity in certain corners of capital markets, which were otherwise ripe for a rebound. How these pipelines are building for M&A, IPOs, debt issuance, and so forth will be a key topic of conversation on the analyst calls beginning tomorrow. So, too, will be dividends. buybacks as banks have been stashing away capital to comply with the Basel three rules proposed last summer. Now, the sense is that those will be watered down somewhat and the banks can return more capital to shareholders, but we will be covering it all with JPMorgan, Wells Fargo, and Citigroup

reporting tomorrow morning. It's such a busy day for you. When we're looking at the unexpected inflation readings today, how does that end up translating not just to what we saw last quarter for the banks, but in the color they're likely to give in the earnings calls. Well, we will definitely be hearing kind of these macro pictures. And why that is important is that the banks have done reasonably well throughout this cycle. And that is partially thanks to the fact that the economy has been holding up. Regardless of kind of what inflation is doing, the higher interest rates have been okay for credit quality because the economy has been so strong.

The second that that starts to deteriorate is when that high debt service combined with the weakening economy makes for some more troubled situations, and that's where banks start to really feel the brunt of the impact. We have heard from other experts that the labor market is part of a huge puzzle piece in why we're seeing the soft landing, why the rising rates have not been so problematic for banks in terms of defaults and things like that. But it seems like it's a sweet spot. It's interesting to watch if there's any wobble, what happens.

Well, I think loan growth, too, is something to pay attention. to on that front, kind of what consumer loans look like, what commercial loans look like. The analysts I speak to, say, expect kind of a shrinking of the balance sheet, just given the state of where we're in and the uncertainty. You don't big rise in defaults, is there? No, there's not a big rise. And in fact, a lot of the issues that we've seen are kind of compared to pre-pandemic levels. I mean, it's nothing catastrophic that we've seen so far.

That said, if there are cracks that do start to really appear in the economy, that whole picture can shift very quickly. Yeah. Leslie, thank you. Thanks. All right, inflation data, bank earnings, what does it all mean for the market and your money? Let's bring in Brent Shuddy. He's chief investment officer with Northwestern Mutual Both Management.

Brent, welcome. Good to have you back. As we talk here, and I believe one of your thesis is that it may be difficult for the Fed to cut rates maybe at all this year. I love to hear you elaborate on that. But so we're in this hire for longer phase. Was the mistake here that the... that the Fed didn't go even higher?

I don't think so. I just don't think inflation is dead yet, and that's why we've had this consistent belief for the past few months, despite the narrative to the opposite, that inflation is not coming down. It's actually re-accelerating, and you're seeing that across various segments. I think the market has ignored it

because they want to latch onto the soft landing, and Chair Fed, or Chair Powell has ignored it just a bit too because I think he wants to latch under that also. Look, nearly every inflation measure over the past few months is moving up, not down. The longer rates stay elevated, the more they work their way into the economy. I think the mistake we all made, or at least a lot of us made, was that we thought because there was a quicker tightening cycle, the economy would fall more quickly into a recession.

That's not been the case because the consumer has had excess savings. A lot of consumer debt is in fixed rate mortgages, which haven't repriced. But you're seeing it start to impact lower consumers. You're seeing it start to pile up on auto loans, corporate, or I'm sorry, auto loans, credit card debt. You're seeing increased delinquencies there. And so to me, the inflation narrative is the most important narrative. And I don't think the Fed is going to be able to cut aggressively enough to lower rates. And again, the longer rates stay higher, the more the economy reprises. And we're only two years into this post the original tightening. On average, it's taken

10 or two and a half years with the longest being four. So let me come back to you. cutting rates is not a strategy for tightening down on inflation. The opposite would be true. So what do you recommend for the Fed? If the Fed is hell-bent on getting inflation down very close to 2 percent, what is their next best step? I think right now to stay the course and not lower rates. Look, I think the bar is high for them to raise. They've made some mistakes in the past. I doubt they want to have an egg on their face and actually start tightening rates, especially before an election. And they have also said, they've said expressly that they believe that the peak in this rate cycle has been hit.

100%. And so I think the bar is high for them to tighten. We'll see. Look, I think the bottom line, and I keep coming back to this, is we're late in the economic cycle. We can all try to guess the timing of a recession. But I think we can all agree the unemployment rate is low. The wages are high. They've come down, but they've stalled out at 4%, which has historically been the top of what the Fed likes. The Fed likes that at 3 to 3.5%. I don't think there are a ton of new people to come back into the labor market. And inflation is stickier in that scenario. And so as an investor, you need to think end of economic cycle, not going out and taking a bunch of risk or at a minimum, just making sure that you're taking risk that you're comfortable with. Okay, so you lead me to our next question. Let's get to the news you can use. If you're an investor and you want to make some hay in this volatile time, some rocky road in getting inflation down and the guessing game around interest rates. rates, hikes or cuts. How do you invest right now? And who benefits? I think the key word is investor.

Are you a short-term investor or are you a long-term investor? Look, days like yesterday could continue. You saw the market falter. You saw bonds falter quite a bit. But bonds today yield four and a half, or four point five-five, I think you saw in the introduction of the 10-year. The Barclays, our Bloomberg aggregate index, yields over 5%. I think any investor should be happy moving into fixed income in these environments because the yield is high and who knows what the next three, five, seven years bring. I think the Fed will be able to cut rates aggressively once we do see kind of that last inflationary impulse burn off. The other thing, unfortunately, is I think people are being drawn to the mega cap story. So if you think about it, the commentary goes, these are

economically insensitive, they're longer term, their higher quality, and therefore you should invest in them. And on days like yesterday, they outperform. The question you have to ask yourself is, how much do you pay for that quality? And the other economically sensitive stuff, how well have they not already done because people have been not buying them on days like that? I think that narrative shifts. And so I think about investing through and on the other side. And I think small and midcap, while not an instant gratification trade, I think if you're an investor, you will be happy you were buying those during this time period in the next two, three, five years, as well as even equal weighted S&P or things that are more broad in nature because the market advance has been pretty

narrow. Things like small and mid have not been bid up. They're still below their all-time highs, and they traded historically low valuations, just given the fact that people are aware of this, but they're gravitating towards those mega-caps, which are economically insensitive, which I think will become economically sensitive, and then people will wonder, why did I pay this much for those? Brent Shudy, thank you so much for joining us with your perspective and your advice. Appreciate that. Coming up, the gold rush. Gold prices up 13 percent this year as investors look for a safe place to put their money. Is there still? Time to buy in. We'll talk about that. As we had to break a quick power check. On the positive side, you have shares of chipmaker Broadcom. Among the S&P leaders, after Goldman Sachs named it a top tactical trade for the earning season. On the negative side, Carmack sinking. After posting a big Q4 miss, we'll trade that ahead in the three-stock lunch segment of this power lunch. That's still ahead.

Welcome back to Power Lunch. Gold back in positive territory a day after slipping from record levels following the hot inflation data. The commodity is up more than 13 percent so far this year here with more on the recent rally in gold. The stocks to watch, Chris Mancini, associate portfolio manager of the Gabli Gold Fund, which is up nearly 10 percent in just the last month. Chris, we're seeing noticeable outflows in gold-backed ETFs. So what's driving the price higher? Right. That's a great question. So given these outflows in the ETFs, normally what we see is the price of gold fluctuates very closely with flows into and out of ETFs because the ETFs are the marginal buyer or seller of gold.

And what we've seen now is gold's gone up, notwithstanding these outflows that you mentioned. So what that points to is there must be physical buyers of gold that we aren't able to see. We don't know where they're coming from. We know specifically that central banks are buying, so China has bought, but they've bought consistently over the last few months or last actually year and a half. But we don't know exactly where the other physical buyers are coming from. So it could be high net worth individuals. It could be Chinese retail, but there is some good momentum behind the physical buyers, but

you mean physical gold people are buying. I mean, we saw the headlines about Costco doing all this business, selling gold bars. Is this what you mean? Yeah. Yeah, things like that, exactly. So Costco, we know, is selling lots of physical gold. It could be, again, high net worth Americans, Chinese, buying physical gold, putting it in a vault. What does the demand say to you?

In other words, why are people doing this? Whether it's a central bank or an individual or a family office? What is it expressing? Central banks, what we know is that when Russia invaded Ukraine, the United States and European governments essentially confiscated Russians' foreign exchange. reserves, around $500 billion. And so China has $3 trillion of foreign exchange reserves. They don't want that to be confiscated.

So they're diversifying out of dollars and into gold and other central banks around the world are doing that as well because gold, you know, obviously cannot be digitally seized or confiscated like U.S. treasuries or... So they're taking dollars and selling dollars and buying physical gold and storing it because you can't get to my vault. Exactly, exactly. You can freeze my account. Exactly.

You can do whatever you want through the banking system, but you can't come get my... Exactly. So that's a huge trend that's going on globally amongst global central banks. That's one big driver of the gold price. The other might be that individuals in China, for example, are seeing a faltering real estate market. That's where they've held their savings. Now they're saying, okay, real estate's going down. What we want to do is diversify into something that's a hard asset that we can store and hold

for a very long time, hand to our grandchildren, something like that, and sock it away, so they're buying physical gold. When we saw prices of gold going up, like, if you see it going up, say, 16% over the last year, prices of gold stocks, the shares have gone up 30%. So outpacing gold, give us a sense of the companies that you like that represent shares of gold. Right. So the biggest holding in the fund is Agniko Eagle Mine.

So Agniko is a large Canadian-based producer, around 3.5 million ounces of gold per year. They have a huge presence in the Abbey-Tibbe Gold Belt, which is in northern Quebec. So very safe jurisdiction. There's a great mining jurisdiction. There's a town nearby called Valdoor. So lots of good gold production, relatively low cost, generates lots of free cash flow. So that's like a solid core holding in the portfolio, pays a dividend. Take me through very quickly, if you might.

the arguments for the different ways individuals should buy gold. Should they buy a fund like yours that invests in minors? Should they buy an ETF that holds physical gold? Should they buy physical gold and store it? Right. I mean, I think what a fund like ours provides is it provides leverage to the price of gold now. So like Contessa was saying, in this past month, when the price of gold's rally from 2000 to 2300, our funds up a lot more than that.

And the reason is that you have operating leverage in the gold miners. So if you want some juice, essentially, some beta, you should buy our fund, the gold mining stocks. If you want to just sock it away and hold it again like a Chinese retail or someone like that, I would recommend buying physical and just putting it in your sock drawer, putting in a vault or wherever, and just holding that and being a store value. Giving it to Senator Menendez, maybe. Well, he... Maybe not.

Not like him exactly. Maybe not. Maybe. But, you know, right. But maybe something along those lines, yeah. Chris, thank you. Appreciate you coming in. I'm just teasing.

All right, join us for the first ever CNBC ChangeMakers event. It's in New York City next week, April 18th. You'll hear from some of this year's honorees that are reshaping business and redefining leadership, including the actress and talk show host Drew Barrymore, WNBA, Commissioner Kathy Engleberg. Scan the QR code on your screen or visit cnBCEvents.com slash changemakers. to learn more. We will be right back. There's a Morgan Stanley taking a turn lower this afternoon. Leslie Picker joins us now with those details. Hi, Leslie again. Hey, Tyler. Yeah, shares currently down about 4.2% on headlines

from the Wall Street Journal showing a wider probe into the vetting of clients in Morgan Stanley's wealth management. Last November, there was a report done by the Wall Street Journal showing that the Federal Reserve had been looking into some issues as to how Morgan Stanley was vetting clients who were at risk of money laundering. And today's headlines show, and they cite people familiar with the matter, that that probe has been expanded to encompass the SEC, the Office of the Comptroller of the Currency and other Treasury Department officials. The issue, according to the Wall Street Journal sources, that regulators are looking at boil down to whether Morgan Stanley has been sufficiently investigating the identities of prospective clients is from the journal and where

their wealth comes from as well as how it monitors its client's financial activity. Some of those probes are focused on the bank's international clients, according to the Wall Street Journal. I have put out a call to Morgan Stanley for comment. I have not yet heard back, but you can see their shares now down about 4.6% on this news, guys. Leslie, thank you for that. Let's get back to the big story of the day. This morning's read on inflation, which seems to be sending different signals than yesterday's consumer inflation number and how are traders digesting the news and interpreting what it means for the Fed? Rick Santelli in Chicago, and he rejoins us. Hi, Rick.

Hi, definitely. We need to talk to a trader. Let's see what the people in the middle of this are thinking, especially after yesterday's hotter CPI and potentially cooler PPI. Mike Palmer. How are you? You saw the numbers yesterday. You saw the numbers today. What's your thoughts? I think inflation is the clearest catalyst we have in the market right now. We came in with a hot CPI number yesterday and we sold the market sell off. Today the PPI number was a little less hot, so we saw the market rally. But inflation is being the event that moves the market, and everything else is really secondary to that. Now, as such, we've seen the chance of the Fed cutting.

That's what we've been talking about all year. We talked about it being in March. There was a chance. It seemed like a big chance was going to be in June. Now it's looking about 50-50. It'll be in the late July Fed meeting. That's still a big chance we cut before the. the year is out. In fact, if you go all the way the end of the year, you're almost at 100% chance we cut.

So the market still has a positive event out there. So we're not seeing huge moves on these inflation numbers, but it is notable that they are coming in hot. You know, what about the VIX? The VIX has been up above 16 briefly onto an intraday base, not today, but in the last couple of days. So it's hovering near five-month highs. It's come off a bit today. Your thoughts on volatility in general in the equity space? I think in the lead-up to CPI that we had yesterday, even last week, you saw volatility kind of come into the marketplace. You saw a lot of people buying protection. That made people also nervous about other catalysts that could be in the market.

For the most part, it was inflation. I think in the lead up to the next CPI, that's like May 15th, I believe. The lead up to the next May, I think that people are going to want protection then, too, and be scared of these inflation numbers. In personal income and spending and all those numbers. All right, let's go into a very hot topic, especially the last 24 hours. Seasonality. Now, seasonality is the adjustment process built in the next.

every number that tries to take advantage of things that happen on a perpetual basis, whether you shut down automotive industry for maintenance or things like that. But I guess the real question is, do you think seasonality is different post-COVID? I think it is an interesting thought. I mean, right now, again, we're looking at inflation. And we only have these CPI numbers eight times a year, whatever the number is, 10 times year. These are now all little events, all the little seasonal adjustments. Everybody's looking at all of them. They're wondering how accurate the numbers are in that moment in time. They're getting adjusted up. They're getting adjusted up. They're all

catalysts. People care. It's hard for me to say exactly how accurate they are at all times and what the seasonality does. I do think that if they were off, we would see an opportunity in trading. As it seems now, the market's absorbing this inflation without really having big moves. Excellent.

Real quickly, we have 20 seconds left. Real quick answer. Fed Fund Futures, are we going to finally retrain people to understand you can't look eight meetings down the road to a Fed Fund Futures contract and things? there's going to be something accurate there really. That's exactly right. Anything beyond six weeks, you're really guessing right there. Thank you. That's what traders think. Tyler, back to you.

Rick Santelli, thank you very much. Meantime, natural gas down about 6% today. Inventory concerns being cited here. And Pip Stevens with the details. Hi, Pip. Hey, Tyler. Well, Nat gas is hovering around to four-year low after today's report showed a larger than expected build with stockpiles 38% above the five-year-old. average. We've now switched from withdrawal to injection season, meaning inventories are forecast to build even more looking forward. The IA now forecast prices staying below $2 this quarter before increasing slightly next quarter. And by the time November withdrawal season comes around, the agency anticipates the U.S. having the most natural gas in storage on record. As you see on that chart, not only is current inventory above the five-year average, it's also above the

entire five-year range. Now, after outperforming yesterday, energy stocks are in the red today with the natural gas producers leading the losses. That's APA, Cotter, and EQT. Not gas, though, could help offset some of the inflationary pressures that we're seeing from oil and copper. All right, Pippa, thank you for joining us on that. Let's get to Julia Borson now for a CNBC news update. Hi, Julia. Hi, Contessa. Well, federal prosecutors charged the former interpreter for the Dodgers star, Shohei Otani, with bank fraud today. They say Ipe Mizum. Hura impersonated Otani to get his bank to improve large wire transfers for illegal sports betting. In all, they say, he stole around $16 million.

Prosecutors emphasized today that they believe Otani is a victim. They say there is no evidence he was involved. Four railroads are trying to get an appeals court to throw out a Biden administration's safety rule. The rule announced last week requires two-person crews in most circumstances. The railroads filed identical suits in different courts this week. They called the new rule arbitrary. And the Coast Guard says palm leaves, spelling out the word help, led rescuers to three men stranded on a remote Pacific island earlier this week.

The search began after their niece reported they experienced mariners as missing. A Navy aircraft spotted the message, and a short time later, they were successfully rescued and returned home. The island is about 100 miles northwest of where they were. they live. Contessa is such a wild story. Wow. I mean, you know, you just have to have such intention and resources, like the ability to think that far ahead so that you can get help and the fact that it got spotted is amazing. Thank you, Julia. Coming up, Andy Jassy's Balancing Act, the Amazon CEO vowing to double down on growth initiatives like AI. At the same time,

pledging to curb the company's costs, we'll discuss when Power Lunch returns. shares of Amazon hitting an all-time high as CEO Andy Jassy releases his annual letter to shareholders. He says generative AI could be the largest technology transformation since the Internet, and he's committed to investing in it, but he's also committed to cutting costs. Kate Rooney joins us with a look at the state of Amazon for today's tech check. Hi, Kate. Hi, Contessa. Yeah, so the state of Amazon is really about that balance.

CEO, Andy Jassy, is walking this tightrope of managing profitable, mature business and then spending big to keep up in AI. He describes the artificial intelligence strategy as co-opposition. For example, they're using Nvidia chips while also building their own and then they're partnering with Open AI competitor Anthropic, while at the same time building Amazon's own competing models. Here's what Jassy told Andrew Ross Orkin on Squawk earlier. This is going to transform virtually every experience we know as a gigantic spin. and they're going to be a lot of very successful players in it. And if you go talk to enterprises or companies that are using generative AI, they are very excited about what we're building,

and more and more customers are moving to our services. And, you know, we're going to have partnerships. We have a very deep partnership with Anthropic. Claude 3, which they released just a few weeks ago, is the best model on the planet right now with the best performance, and it runs best on top of AWS. At the same time, we have a lot of experience. building models at the company.

Amazon's $4 billion strategic investment in Anthropic is another balancing act. It has this minority stake with no board seat, but it has run into issues when outright trying to buy a startup. Jassy, for example, called EU regulators blocking its iRobot acquisition, a, quote, sad story. And in a nod to its commitment to AI, Amazon also announced today Andrew Eng will join its board. He is a pioneer in the space who led Google Brain at one point, guys.

Back over to you. All right. So, Kate, the stock is hitting an all-time high. How much of it has to do with all the excitement around AI? There has certainly been a lot of buzz. It's interesting, Contessa. There has been a lot of notes lately and calls from Wall Street saleside analysts talking about Amazon being their top pick, especially in tech.

It has very little to do with AI. It's more about sort of the North American margins, some of the profitability improvement, cost-cutting, things like prime and advertising, which Jassie also. said in his annual letter, it could be profitable as its own standalone business. So sort of the sum of the parts where AI comes in is more on Amazon Web Services and its cloud business. Mark Mahaney, for example, from Evercore had a note out this morning talking about that being one catalyst for the stock. But he also talked about some of the dislocation and where Amazon is trading compared to where it was before COVID. He says at least it's about 30% below the average

of where it was trading. So part of it is a dislocation, people seem, potentially more value here. and then just that cost cutting. That's really what Wall Street wants to see. Or the Silicon Valley perspective is typically, oh, you want growth, you want that moonshot bet with AI. He's really got a balance that staying ahead and staying relevant in AI, not losing out, but also really serving what Wall Street is looking for, which is the cost cutting and the discipline he's been able to implement.

All right. Kate Rooney, thank you very much. And still ahead, Open AI CEO Sam Altman. Speaking exclusively with CNBC today, we'll tell you what he's telling global leaders and potential investors and what he needs for his grand vision for a global chip industry. Stocks rising now to session highs, the NASDAQ up nearly 2%. We will be back in two minutes, Dow up 0.3%. A Sam Altman's siting on Capitol Hill today second only to the eclipse,

the CEO of OpenAI meeting with lawmakers there to lay out his case for what's needed to build a global chip industry as leaders around the world try to wrap their heads around the impact of AI. Our cameras caught Altman. as he was exiting one of those meetings. So what does he say we need? It's more than just money. Funding is obviously part of it, but there's a very complex supply chain.

There's a thing that we'll need to figure out about how we're going to do security and policy for this. So it was a conversation like we've had in many other countries around the world about what it takes to do this as a global effort. All right, so here to tell us what happens when Silicon Valley meets Capitol Hill and the uphill battle Altman may face are our own Emily Wilkins and Steve Kovac. What was he pushing for? What did the people on the hill want to hear from him? Well, it's always interesting when Sam Altman comes up to the hill.

And certainly he is no stranger to being around lawmakers talking about policy with them. What I think was really interesting about this particular time is that it wasn't just necessarily about AI, which of course kind of really associate with Sam Altman. But he's also about chips. It was also about semiconductors. And the lawmaker that he met with that Karen Sloan asked him all those great questions coming out of was Todd Young. And a couple of interesting things about the senator from Indiana. He is one of four who's a part of the Senate working group on AI.

They're supposed to be coming out with this AI report soon that will really guide how the Senate moves from a political way. Plus, his state also just got an investment in a semiconductor facility that's going to be coming to Lafayette. And so kind of on both of those items then, they have this potential opportunity for, for a conversation about moving forward on national security issues on semiconductors and on AI. You know, Steve, it's interesting because while you have a lot of tech companies pushing back against more regulation of their processes, here you've got Sam Altman saying, no, no, no, we need more of it. How's that likely to play with other CEOs who are trying to get? I mean, we heard Andy Jassy saying AI is a big future business venture.

I have a more cynical answer to this. And Emily knows what I'm going to say, because we were talking about this before this, segment started, our Congress can't even get it right when it comes to protecting little girls on Instagram from feeling suicidal or depressed or something like that. So forgive me for being a little cynical that they can't even figure out, they're not going to be able to figure out the next generation thing. So we had Sam Altman on the Hill about a year ago. I was there. I was in the room telling senators saying, please, please regulate us. The senators in that committee were astonished to have a big tech executive for once they're begging for regulation.

At the same time, these people have to know the appetite for actually passing something in our Congress right now is next to nothing. We've seen this since the 2016 election and Ford. So many ideas, so many bills. Representative Adam Schiff just yesterday proposed yet another AI bill saying we need to be transparent if you're training these AIs on copyrighted material. Good luck seeing that do anything. So my point, I know I sound cynical, but they've given me. Let me add to your cynicism because I'm cynical too. Whenever I hear a company or an industry say, we welcome sensible regulation.

It's what they think. The operative word is sensible. We welcome regulation that we welcome. Right. And I'll give you a really good example of that in Europe, they're trying to pass laws that kind of give a deeper look into how these models are trained, more transparency. And in general, not specific, but in general, companies like Google and Microsoft and OpenAI

are more resistant to that. So basically regulate us, but regulate us the way we want to be. regulated. Emily, how much does the appetite of the lawmakers to move forward on this have to do with how much money they're getting in campaign donations? I mean, you can never not ignore the fact that all of these big tech companies have been pouring millions of dollars into lobbying on the hill that they have connections in some cases to various staffers. They have staffers who go on to be lobbyists. I mean, there's all a very interconnected inner system here. But I think at the same point, and I don't want to sort of negate some good points that Steve are making, but part of it's

just the timeline. I mean, they spent six months trying to fund the government and that deserves its own analysis and criticism, but it's simply that needed to be done before anything on AI could be done. Do they have the basic understanding that needed to even start establishing a framework? I think there

is the basic understanding there. I think it's a process, right? I mean, this is why a lot of legislation takes long time to pass, because lawmakers have to become educated on an issue and comfortable on what they're voting for. And what they're really doing, I mean, this first next step, is going to be sort of giving the lay of the land, saying, okay, Senate Commerce Committee,

here's your bucket of stuff, Senate Intelligence Committee, here's your bucket, Senate Homeland Security, here's your bucket, Senate Judiciary. But then it's really going to be up to the chairs of those committees. And you have already seen, at least for the Commerce Committee, Maria Cantwell, she did came out with a bill about data privacy, data security. It is bipartisan, it is bicameral. But of course, it's still a working draft. And the clock is ticking. There's just so many things that Congress needs to get done that it's really difficult for them to, find the time to move these big major bills that don't either have a deadline attached to it or an emergency attached to it. And we got to talk about the money here because part of the reason why

Altman was in the Middle East this week before this meeting on Capitol Hill was to court governments and investors out there for this vision. You might remember I was on with you guys a couple of back in February where this report came out that he wanted to raise seven trillion, trillion with the T dollars for this chip supply chain vision he has. It's kind of nebulous what it is. And like he told our Karen Sloan just now on Capitol Hill, it's about more than the money, though. It's about the supply chain. It's also about this enormous energy usage that these data centers need to use that brings up climate change. That brings up all these.

Where does that energy come from and other issues related to. To Emily's point, how many committees need to be involved when you're talking about drafting legislation. Thank you both for joining us, Emily and Steve. All right, still ahead. We'll trade some big earnings movers in a fresh three-stock lunch back in two. Welcome back, everybody. Time for today's three-stock lunch. Earning season almost here. We're going to start really tomorrow. We're going to look at a couple of names that just reported, and one that is on deck with our trades is New Constructs CEO, David Traynor.

David, welcome. First up this afternoon, we have CarMax dropping after missing earnings and revenue estimates for the fourth quarter. Is now, David, the time to buy a stock that is down 10% today? We think so. I think. Carmex is going to be one of the winners in the used car industry. I think Carvana is running out of capital. It's a broken business. It's actually one of our zombie stocks. And so we think CarMax has got better economics, better scale.

And an Omni-Channel strategy is going to make all the difference. And we think, yes, now is a great time to buy that stock. Next up, you have consolation brands, shares of the beer and spirits maker briefly touching at all-time high. The company beat estimates on top and bottom lines. David, would you drink it or stick with water? You know, everybody loves liquor and booze. It's been a super popular stock, and a super successful stock, we think now is the time to sell. We think the whole COVID experience was a huge tailwind for all the liquor and alcoholic beverage stocks, and we think that they peaked out.

So, dump it. All right. All right, let's go to the final name. We asked you to pick a bank stock you're watching, and you chose Zion's Bank Corp. Why do you like this one? rate underwriting. You know, they've never been in the commercial real estate, very high returns on invested capital, very profitable business, and still very cheap.

We think this is a regional bank stock that's kind of been one of the babies thrown out with a bathwater and all of the sort of bank, regional bank flare-ups. And we think this is a diamond in the rough. It's been a great performer for us already. We think it's going to continue to be a great performer. We think the stock's got 50, 60, 100 percent upside. I don't know whether you follow Wells, J.P. Morgan, and the others that will be reporting tomorrow. But if you do or even if you don't, what would you be looking for there?

I'd be looking for sustained profitability. How are their margins holding up in what's become a tougher rate environment? J.P. Morgan has been one of our favorite stocks for a long time. It's a focusless stock. It's something that I own personally. I think it's a best in breed. Wells Fargo and City, you know, they're also rants. but city's been so cheap here recently that I think people have gotten bullish with it.

All right. David, thank you very much. We appreciate it for your quick and concise answers. New construct, CEO. Still ahead. Golf's most iconic event, the Masters Tournament, teeing off in Augusta, Georgia. We'll get to the key things to watch when we return. Welcome back to Power Lunch. A little rain cannot stop golf's most iconic event. The Masters Tournament officially underway. Dominic Chu is here with us in studio. Not out in beautiful, Georgia.

No. Okay, so give me a sense of how we are looking at the masters. Well, right now, first of all, we should know because a lot of people are focused on Tiger Woods. He will tee off at 354 this afternoon, which pretty much guarantees that he will not finish his first round. They didn't start until well into the 10 o'clock hour Eastern time this time around. But right now, right now, right now, through 11 holes. Bryson Deschambo is at minus 4 through 13, so they're your leaders right now as things stand. But if you take a look at the way things are shaping it.

The reason why it's so important is because this is really the unofficial, and you should just make it the official kickoff event to the golf season. The most highly watched golf event by not even a factor. You can't even count the second place compared to what the Masters does in terms of viewership. Now, some of the economic stats are pretty interesting as well. This is a boom for the local economy in Augusta, Georgia. If you look at the way things are shaping up, first of all, the impact has been estimated at around $120 million for the local.

economy. The Mastercard Economic Institute actually shows an 85% bump in spending in Augusta on day one of the masters compared to what it was beforehand. That's how much of a big deal it is. And then merchandise sales, there's no official numbers. Some people estimate it's about $70 million for the week. And Flight Aware tracks over 1,500 private jets that are going in and out of the area. I know you've been there. Have you been to that store? The merchandise The merchant said that must do tens of millions of dollars of volume during this week. Well, some of the estimates say $70 million. What's curious, I mean, even when I was there, I'm not going to tell you the exact amount,

but because I was there and I don't know when the next time I will be there, I spent a lot of money. I did too. I spent a lot of money there. I mean, you should just disclose it. We're into transparency and authenticity. I should just say. You don't want your white to know. Let's just say I bought a lot of polo shirts, sweaters, hats, belts, and dog collars as well and everything else.

So Deschambeau is he? a live golfer? Dishambo is a live golfer, one of the poster children for Liv. Is there still a controversy between the Live and the PGA players and would the live players just live to win here?

You know, I think it's interesting only because the people who've done well in the past here, people like Phil Mickelson, Livgolson, Brooks Kepka, Livgolfer, right? I mean, so there is... Rom is now a live golfer, and he was last year's chairman. Yeah, exactly. Scotty Shephler is the favorite right now, but let's put it this way.

Rory McElroy, about a week or so ago ahead of this master's talked about this idea that it was unsustainable, this current path, between the split between Lid and the H-R. And look at the odds on Tiger Woods winning here. 50 plus 50, you bet 100 to get 15,000, right? So let's see. Like that would be a pretty good, that'd be a pretty good take away. Scotty Sheffler, though, you can see all the money's flowing that way, right? Only 4.50.

Yeah. But bet 100 to win 450. He's been the best for several years. And he's the number one golfer in the world for a reason. Tom, thank you. You got it, guys. Thank you for watching Power Lunch. Imagine if Caitlin Carpoole.

All right. Closing bell starts right now.