Power Lunch - AI Spending Concerns, Retail Earnings on Deck, Autonomous AI Boating 8/17/26

Episode Date: August 17, 2026

The major averages are moving lower to start the trading week as investors weigh the growing tensions in the Middle East. Kelly Evans and Robert Frank are joined on set by Pence Capital Management’s Dryden Pence and Fundstrat’s Tom Lee to discuss their takes on the state of the markets and whether hyperscalers should cut back their AI spending ambitions. Later on, retail consultant and former executive, Jan Kniffen, joins the show to give a read on the retail sector as a number of key companies are slated to report quarterly results in the coming days. Meanwhile, CNBC’s Contessa Brewer sits down with Brunswick CEO, David Foulkes, for an exclusive interview on his company’s latest high-tech boat models that can dock themselves with a push of a button. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Stocks are near session lows with Iran tensions and the Fed all looming in the background. Welcome to Power Lunch alongside Robert Frank. Welcome Robert. Great to be here. I'm Kelly Evans. Brian is out today. And Meta is on trial. One of the world's most powerful tech companies facing a major legal test.

Opening arguments begin tomorrow. What's at stake will get you ready for what to expect. And it's a huge week for retail earnings. Home Depot, Lowe's, Target, Walmart, all on deck. Are shoppers still spending? and who is winning the battle for the American Wallet. Retail expert Jan Niffin is going to give us the lowdown and then some serious toys.

Brunswick's CEO will show off a high-tech boat that drives itself. Plus, two Italian supercars making a lot of headlines. The boat drives itself now? Okay. That's what I hear. And we begin with the ever-growing AI tab because the AI spending boom may be far bigger than even the headline cap-x numbers suggest.

According to the Wall Street Journal, nine major tech companies have racked up roughly $3 trillion in off-balance sheet commitments. Much of that tied to data centers, chips, and infrastructure needed to power AI. That's five times the 600 billion or so they've officially reported in capital spending over the past year. And these future obligations, they're growing a lot faster. So is Wall Street underestimating the true cost of the AI arms race and should investors be worried? Joining us now is Pence Capital Management, CIO Dryden Pence, and Fundstrauts, head of research, Tom Lee. It's great to have you both here.

Great to be here. Dryden, kick us off. First of all, what are your thoughts on the Mag 7 type of big tech? I don't like the word hyperscalers, but are these companies that you own or have been avoiding, just so we get a sense for how these commitments might factor into your views on them? Short answer is, yes, we own them. And for a long time, I've been saying, buy chips on dips,

because we think that this is just the infrastructure. structure buildout of AI. And so when we look at all these large numbers, we're recognizing we're going through a transformation for our economy that's as big as a transcontinental railroad. We're spending about two to an half percent of our total GDP on the AI buildout, maybe a little bit more. Well, that's about what we spit on the Transcontinental Railroad from 1850, 1850. Refresh my memory, which were the right railroad stocks to bet on during that time. Not all of them. Not all of them. And that's true. Not everybody is going to knock the cover off the ball. But you have this insatiable desire for being in front of what's really important.

I mean, it only matters if it increases labor productivity. If AI doesn't increase labor productivity, it's just a few game. You don't care if it's 600 billion here or whatever trillion in the future. As long as they're spending on the railroad boom, you're okay owning these stocks. We're spending on the AI boom. And in 2027, we're going to spend more on AI and that boom than we do on the Department of Defense. Here's the thing that, Tom, I wonder about the Wall Street Journal article, because when I see all that off-balance sheet financing, I start to remember Enron and all the off-balance sheet financing. And on top of that, you've got these structures with the private credit funds that have a holding company that's in the JV, and then there's a third

company that actually is issuing the bonds. So in the end, who's holding the bag? And is that more obfuscation than actual good business? And should we be worried about what seems to be a lack of transparency in terms of who's really lending the money and who's going to be stuck with it in the end? It's a great question because I was a tech analyst during the dot-com and fiber boom of the 90s, and the people investing capital at time were not of the same ilk and caliber of the Meg 7. These were companies that were digging up railroad lines and doing those IRUs, you know, which was actually... What's an IRU?

It was a revenue swap between fiber companies. So you could create hundreds of billions of dollars of contractual revenue. And today we have companies with fairly sizable moats and some of the highest profit margins and return on capital history and as the Bezos metric have delivered trillions of dollars of shareholder return that are now directing their investment on building, a new moat around AI. So I have a lot more confidence that these are high-level board, well-reasoned companies investing, but they're eye-popping numbers. But the reality is- Why not do it on balance sheet? Well, one, they could do it on balance sheet, but if they did,

they would be taking up all the capital of the world and all the risk and therefore actually make it harder for any, I would argue that that would make it harder. to democratize. Can I ask an accounting question? We're calling us off. I did get a seat in accounting. I got a C, so I need to ask all of you to make sure I'm understanding this. They have off balance sheet commitments because they're future commitments.

Is that right? They're not hiding anything. They're not on the balance sheet because they don't flow through the balance sheet until the building actually begins. So in other words, are they, this is just a different way to look at. If they say, okay, we're going to spend whatever amount in 2020, 27. Can you explain to me exactly what these commitments are and why they're not on the balance sheet and when they will be? Yeah. Well, I think maybe a good place to start is I think that the revelations from the journal article are actually helpful,

but they're giving people an incomplete picture of how financial systems work. Because if you do the gross obligations of the financial system, it's multiple times the underlying assets. Always or just today? always. In fact, that's why Warren Buffett used to call credit derivatives, you know, the weapons of mass destruction. Are these credit derivatives that we're talking about, though, or these are just future spend commitment? It's the same. Arguably, it's not that different. Because if you did, like, gross exposure of swaps or options, like look at any day, options contracts are multiples of cash underlying. So if someone says, oh, there's a hidden off-balance sheet risk that retail investors

have 20 times the size of the stock market in bets, we'd be like, well, there's the offset. So I would say when we look at these numbers, it's giving a distorted view of the actual risk. Let me just press this analogy one more. In other words, do you think that the spending is representing multiple possibilities of spend that's only going to manifest in one way? I think to me, none of these contracts are going to lead to criminal liability. In other words, a company can decide to cut spending in the future and the contracts will be weak. So, like, the $3 trillion isn't like, you know, people have to like sign over their kidneys to meet these.

And Dryden, how should investors think about this? I mean, should they be worried or should they be encouraged that, wow, it's not just $600 billion. It's actually an additional, you know, $1.4 or up to $3 trillion. And so therefore, that's a good sign about the future of AI. How should investors interpret all this? I think it's a good sign because companies are making a lot of money. free cash flow, and what were they doing before? They were buying back their own stock.

They didn't have anywhere to go with the money that they were making. And so I like it when someone's, no, I'm not going to buy back my stock because I'm going to actually put it into a thing that I do best, which is grow and do these things. So I like that the capital is being redeployed into what these companies do because that's their core business. They're not hedge funds. They need to be out there putting their money to work and what they do. So as a growth investor, I like it.

I like CFOs and I like CEOs and I like boards going like, like this is our fastball. We're Microsoft. And you talked about the productivity litmus test. A lot of this, particularly the bonds, are based on revenue expectations in two to three years that are ginormous compared to what they are today. Do you think we get there based on what you're seeing? I mean, 56% of the companies today have an AI account. But only about 30% of them are, I mean 30% of them say, hey, I'm seeing increased labor productivity. and only 7% say we've fully implemented.

So you have all of these companies that have yet to play. You have all these companies that are just now scratching the surface. We're moving from infrastructure to implementation. We're moving from proof of concept to rapid adoption. And this is an area of time where we think, you know, margins are good. You know, the moats are getting wider? You think that can happen without a dramatic rise in unemployment? Yes.

That those productivity gains. Because productivity gains come in some ways by replacing work. with AI? Well, this is true, but you've seen this every time. I mean, you know, people got upset. The guys who were shoeing horses got upset when the Model T came out. But next thing you know, they got a perfectly good job working in the factory and they were making more money and was over with. So I think that we see this transition, but I think it's positive. This is, it's, it's Jevin's paradox. So it's a J-curb, you don't see the bottom of that J-curve being too severe? No, I don't. No, I don't. And we only need about 30 to 40,000 jobs.

a month to maintain our unemployment right now. Anyway, so the break-even point is less. Yeah. The adoption's more. Labor productivity is greater, and that increases profit margins. I'll end by, I'll just throw another major concern on the table. I mean, why not? Do you, Tom, $40 trillion in the national debt last night?

What is your reaction to or take on that? I mean, it's pretty shocking that we're in a booming economy and the deficits growing. So... Missiles are expensive. Yeah. Interest is expensive. Yeah. Yeah.

Yeah, it seems like there's a lot of, like, outflows. I agree with the folks who think that this is a structural concern. But the bond market today is signaling that it's completely okay with it. So I think as long as it's okay with it, the stock market is fine. So that little blip in the 30-year, we saw those like, oh, oh, the deficit is suddenly an issue that we saw last week with that sale. You don't think that that was really a big move or that that's going to continue. Yeah, I mean, it's a simple. Because as you know, maybe more companies are dependent on the spread to the tenure.

Right. So that's the more important rate to watch. But again, like, I don't think it makes any sense to not be fiscally sound as a nation. So it is trouble. It's really hard to figure out. You know, what's amazing is that 10-year range has been so tight for so long. And, you know, everything tells you that that should be higher, you know, but it's... Here's the crazy part.

It was sub-4. I'm stealing Rick's lines from his mouth. We were below 4% on the 10 year right before the Iran War broke out, and oil prices were... But now the oil prices back down, and the 10 years at 471. Right. And you could argue oil should be higher today and everything else, but it's not. Yeah. Dried in a quick final thought.

Well, the short answer is oil in the 80s, we're fine. At low 80s, we're fine. The economy works fine. And then if you get down into the 70s, we get to $3 gas again. So I think that at some point, this results. Look, you know, economics beats politics every time. How to know about that? And sooner or later, we're going to be able to be in a situation where we'll have better economic.

Dryden, I want to believe you. I will hope to believe you. Tom, thanks so much for joining us, guys. We appreciate it. Dryden Pence and Tom Lee. All right, Goldman Sachs says the bond market is still too hawkish on the Fed. The firm now calls for a September hike very unlikely after a run of safer retail sales and weaker jobs and cooling inflation. Rick Santelli joins us now.

Rick, what's your take? Well, first of all, Robert, I'd like to welcome Goldman to. my side of the equation, I've never thought we'd see a hike this year, especially not in the September meeting. But first of all, let's start out with what the CME is looking like with respect to probabilities on their website. And right now, it's hovering right around 33%. So we're talking about one in three possibility of a hike at the September meeting. But Goldman, well, they're well founded, in my opinion, on their comments today. Let's look at the last three job report, shall we? Non-farming

May was positive $63,000. In June it was $20,000. In July was minus 23. By my math, over three months, our average job creation is $20,000. Now, many would say, well, that's because between immigration and population growth,

positive $20,000 isn't too bad. Well, you know what? Maybe it isn't as we readjust our baseline, but for the moment it is a deterioration. And 3.2 year-over-year, average hourly earnings in the last jobs report was the weakest rate in five years. Now, if you consider that 474 is a high yield close from the last day in July for a 10 year,

Robert, you're right, it has been a compacted range. And even though it has gone from 394 on Feb 27 to where it is today with big jump in nominal rates, the reality is it's been slow going. And percentage-wise, the rise in yield is much more significant than what we're looking. looking at in oil. But maybe it's the rate of change and supply side questions in the Middle East, not so much the price of oil. We were under $70 briefly, and I understand we're not as low on the second chapter of what we're going through in the mid-east, but I think the stickiness of it and the constant barrage by Fed officials and benchmark Fed watchers that the

longer this conflict goes on, the more it's going to hurt the economy and make a situation and inflation more permanent, I think that really explains what's going on. And I think also at 8.30 Eastern, when we had a strong empire, did anybody notice how rates jump? They're becoming much more sensitive to what's going on in the economy as well. All right, Rick, very well said. As always, we appreciate it. We're just getting started here.

Lots more coming for you. How do we regulate AI and at the same time harness its benefits? Also, what do you need to know before this massive week of retail earnings and how does it work when AI takes the helm? Contessa Brewer is going to join us from a self-docking boat later this hour, which I had had that when I had my boat. But first, meta and social media could be facing its big tobacco moment. That's next.

Welcome back. Less than two weeks after a legal loss in New Mexico, Meta now faces an even bigger test this week. A group of state attorneys general, led in part by California, accuses the company of designing its platform to hook kids, downplaying the risks and illegally collecting their data. Let's head over to Julia Borsden. Now, who has more details?

Julia. Well, Robert, this trial is the highest stakes test yet of youth safety allegations against META. California attorney general Rob Bonta is out with a statement ahead of opening arguments tomorrow. He says, quote, exploiting our most vulnerable residents to boost corporate profits is not only morally wrong, it's also illegal. Now, META said in a filing that the damages from this trial could be as high. high is $1.4 trillion, which is close to its market cap. And just as potentially damaging, the states are asking for big changes to meta's algorithm, including eliminating features such as infinite scroll and notifications, asking the court to make meta-prioritized content focused on

well-being instead of engagement. They want meta-in implement age restrictions and time limits for young users. Now, Meta CEO Mark Zuckerberg and Instagram head Adam Osari are both expected to testify at some point during this trial. I just spoke to Harvard Law School professor who said this trial very much raises the stakes for META because it's several stakes, states coming together for a bellwether case in this multi-district litigation. So its outcome has huge implications, she says, not just for the liability in this case, but also what else it could see in related suits that are happening across the country over the next couple of years. Guys? Julia, this is reminding me now of the last major.

lawsuit that they, I believe, lost. It might have been New Mexico. Correct me where I'm wrong. They did lose. There were, I believe, monetary damages associated with it, but we saw the stock actually rise when that verdict came across because it was worse than feared. So I'm just better than feared. It was better than feared. Thank you. Better. Yes, exactly. So they had monetary damages and they had to make some changes to the algorithm in that New Mexico case. But the win for meta is that they don't have to do anything during the period of the appeal. and the changes are not a wholesale overhaul of the algorithm, which many had feared. So in terms of that case, it was better than feared.

But in terms of this case, Kelly, it's a much bigger scope, bigger deal. It was meta who put the $1.4 trillion there with the potential damages. And so that's not a number that actually came from the California AG. But because this is a multi-state case, because they're talking about monetary damages as well as potential changes, there's a lot to pay attention to here. And then the other thing I would just point out, Kelly, is that a lot of parents are watching and we'll see what comes out in the opening arguments tomorrow and in the testimony.

And if that actually ends up impacting the way parents might think about watching what their kids do, maybe with a different eye. And, Julia, to what extent do the states have jurisdiction in this issue? And what is Meta's main argument against these claims right now? Well, so what I would say is important to point out here is that so far, Section 230, which is legislation that protects the platform such as meta, has been focused on the idea that the platform such as Meadow or Snap or YouTube should not be held liable for content that is shared on their platform. So that's why we haven't seen companies like meta get in trouble, if you will, when there is content that shared that has a negative impact on teens or insights, violence, et cetera.

This is something that section 230 is that key piece of this. these lawsuits, not just this lawsuit, but that the two we've seen previously and more that we have coming up, these are a totally different argument. These are about the algorithms themselves, saying it's not about the content shared. It's about whether the design of the algorithm is designed to be addictive and have negative impact on kids in particular. So what they're talking about is features such as Infinite Scroll. The fact that it's easy to keep watching and going down rabbit holes. So that is what's in focus here.

and META says it's doing a lot of work to protect kids and teens. And what the state AGs are arguing is that it's the design itself that's problematic. I'm very helpful. It's interesting because you could argue 230 protects anything on the platform. But these are things that META actually controls and designs. So that's a creative use of the law. It'll be interesting. It gives META full control, you know, over the platform as well.

So I guess that's who the responsibility lies with. Julia, thank you for now. Julia Borset. That trial will be tomorrow. How do we regulate AI while still? harnessing the massive benefits it could bring to the table. That's the question of the moment, and we'll talk to Dan Ives about it next. Welcome back. What once sounded like a sci-fi doomsday scenario is now becoming an everyday real-world concern. It's AI models acting against

human intent, engaging in some deception, and as we saw in the hugging face incident, carrying out attacks. The question now is how the industry responds as these capabilities grow. Well, here's what Open AI President Greg Brockman told us when asked about the risks. It is absolutely true that AI is both changing the sides of attack and defense. It is something that is reshaping how really the whole economy runs with cybersecurity as a specific instance. We definitely provide the most advanced cyber capabilities, and we try to put those in the hands of defenders. We have a trusted access program so that we're able to differentially advantage defenders. So you give it to defender.

If you just give it to everybody, then the bots can put you in. We're so dangerous that we're the only ones that can help you save you from us. Is the industry doing enough to police itself and what other safeguards are needed? Dan, Dan, are you glad you came in for that? Dan Ives, tech analyst, Dan Ives of Yorkville and Ives. It's great to see you, first of all. Great to see you. I don't mean to make you have to kind of take the load of this entire technology on your shoulders,

but the regulation question is the next big one for a lot of these companies. Mark Zuckerberg has sketched out one version of what he thinks that could look like. A lot of people have opinions. What do you think is kind of the best or worst case scenario of where this could be going? Well, and to that point, you can't be like, okay, I'm going to take a test and then I'm going to grade my own test. So part of the problem is that you're going to need self-regulation. But look, government is going to play a role here. And I think the cybersecurity industry is going to play a much more outsized role.

I think part of what you're referring to, too, is that the model companies with the AI Foundation, They can't also just be the ones they're going to regulate from a cybersecurity perspective because then the sci-fi movie Gone Bad becomes a reality. That's why this speaks to the cybersecurity industry, why they become so important, really, what's going to be a golden age for cybersecurity. Zuckerberg talked about kind of embedding, my word's not his, if I'm getting this correct, he talked about embedding regulators in the kind of development process at key moments. Others have talked about a model akin to the federal.

Transportation Commissioner, something where there's kind of, you have to kind of pass your model through these series of safeguards in order for it to be released to the public. What are the implications of going down any of these roads? And what are the implications if we don't go down any of them? Look, it's a tug of war. And the whole thing is a quagmire, because part of the problem is somebody myself has spent so much time in D.C. and talking to politicians, you know, when you think about innovation, what stifles innovation are a lot of times regulatory and politicians. And while these politicians, you know, they're using BlackBerry's. Do you want them necessarily monitoring AI technology?

But on the other hand, you can't just have Silicon Valley being the ones to say, okay, we got this, don't worry about it. It's really more about private, public sort of cooperation. I think you need a lot of industry leaders involved across the board. And I think there's a fine balance because on the other hand, you're going up against China. Right. Because if you slow it down. Because if you slow it down, Beijing's smiling, and they're ultimately the winners. the industry comes back with every single time. Well, you know, China, China's going to beat us if we do anything. And even within the industry, even within companies, there's vast disagreements about exactly what you should regulate, how you should regulate, not to mention your BlackBerry analogy, nobody in government understands how these things are being built, how you should really protect them while continuing innovation. So if you were to sort of say what are the top two priorities, if there were regulation, what would you say it is? Is it the cyber risk that they run?

runoff and do things without being prompted? Or is it copyright? Is it something else? I mean, you can't just put the pause button on AI and development growth because it's happening so fast right now. So what should the priority of government be? Well, I think cybersecurity is number one, because the reality, when it talks about risk and about data to somebody myself has covered tech going back to the nine, that is, I think,

the biggest risk. And then the hearts and lungs of the AI revolution are data centers. So when you, this goes back to the political argument and what's happening now in the midterm elections, I think the data center argument too, and there needs to be, it's really, it's public, private, self-regulation, government involved, but you can't overstep because if you shut that, you cut off the knees in terms of the innovation. That right now is the balancing act for the industry. But the reality is that the tech industry, they create the PR problem themselves because of the negativity,

taking away jobs, going to raise electricity bills. And I think that's part of the problem that you can't put the genie back in the bottom. Kelly, I don't know if you saw that great article in Wall Street Journal about those two women in Kentucky that were offered $26 million for their farmland. And they said, hell no. And it's caused this ruckus in this community in Kentucky. Because they want to build a data center there? Because Meadows building a data center.

And they initially agreed. And then they found out what it was for. And then they said, no way, we're not going to let them build a data center. Just double the price. They'll do it for 50. You've got the small town in Mazeville, Kentucky, where half the people are for, half of they're all fighting each other, sue each other. And what would a national regulation of data centers look like? Should they, Rokane has proposed, not putting a data center in any residential communities?

That might be one way to do, but I don't know how you define that. So what would a good, reasonable regulation of data centers look like, do you think? Or should there even be one? I think a lot of it's going to come down to states and municipalities, but a lot of it's also jobs. Because with the jobs are going to be created from the data centers, you move them from one state to the other. That's where the jobs go. And then initially.

Initially, but then also it goes back to, you know, it's viewed as bad today. But the reality is that in this innovation boom, for the first time in 30 years, the U.S. is headed China when it comes to tech. Yeah. So now you don't want to cut off the oxygen to that on the data center side. And it goes back to the politicians, midterm elections. That's the danger right now, especially in this innovation boom. fourth industrial revolution being led by inviating.

I mean, so much of its local zoning dependent, that even if there was something national, the local community is going to decide in the end anyway. At the end of the day, and a lot of them are saying, no. I don't want a more expensive electricity. I want more expensive water would be polluted. I don't want the land prices to go up, et cetera, et cetera.

I would say a lot of those misconceptions. But I think if there are towns and communities that have benefited from, especially poorer ones, more rural areas where they've with nothing else going on, I think about some of the areas where I grew up, you know, they might say, we're open for business. Well, I'd say for someone myself, it's been around this country so many times. There's so many towns that they went from 75,000 and 20,000.

The factor went to another country. Absolutely. And now, of a sudden, they've had a lot of issues in terms of education. So now of a sudden, this is innovation movement. You could really, and this is, I think, it's going to happen around the country. And that's the danger. When the two or two area code starts talking, the politicalization of it is danger. Right, and not a problem that you have in China.

I'm trying to think of the other area codes. to be more emblematic of, I have some in mind. Dan, thanks very much. Maybe. Maybe not that one. Coming up, we're going to head to the water where Contessa Brewer is on board a boat that can autonomously dock itself. That's my dream boat, Contessa. I mean, this is a Boston whaler here, Robert.

We've moved from a sea radio or Boston railer, bigger boat, bigger screens, bigger tech on board. And I'm going to talk a little bit about Brunswick, which owns Boston Whaler and Mercury engines, this big, massive boatmaker who's betting that it may not be the boats that keep the profits afloat. How do you like them, Apple? All right, we're back right after this on Powerlunch. And let's check on our favorite stock shares of SpaceX. Before we go, those are catching a bid today, up more than 5 percent, and almost back to that $150 mark. Remember, that stock IPO's price was $135 a share, and that was well below much of the last few weeks. This coming after a number of name investors like Peter Thiel, Google, and Nvidia disclose holdings in SpaceX in the recent

filings. Now, we talk a lot about autonomous cars, but that's not the only vehicle that autonomous driving is coming to. Let's get out to Contessa Brewer, who joins us from a boat that can dock itself with a push of the button. Contessa. It's such an amazing experience to be standing at the helm of a boat. I mean, even a boat this size, and I, who do not have a formal captain's license, can dock the boat. With me is the CEO of Brunswick Corp, David, folks, which owns Steve Ray and Boston Whaler and Mercury Engines. What is it? You're the biggest marine tech company in the world. We are the biggest recreational marine company or the biggest marine tech company in the world. As you said, engines, boats, technology, and even shared access models.

Your company just held an investor day a week ago or so, and you made it clear to analysts and investors, you think that accessories, aftermarket add-ons, recurring revenue is really the fuel for growth. No, it really is. Last year, about 60% of our earnings came from our recurring revenue business. Just as you said, parts and accessories, aftermarket, Freedom Book Club, which is a subscription model, so that it underpins our earnings. But we have tremendous share gains with our engines as well. boat brands are doing particularly well, like CRA and Boston Whaler. So lots of room for growth, but always were underpinned by these recurring revenue businesses with super strong cash flow. We went out for squawk on the street and actually demonstrated how the autonomous docking works.

I got to be behind the wheel or at the helm, as you would say, out in New York Harbor today, with the assistance of a lot of really advanced navigation tech. Does that help you sell boats? No, it really does. I mean, what we're trying to do here is not just introduce technology for technology's sake, but introduce technology that really helps the boater, particularly in some stressful situations. We were out and there was a little busy out in the harbor there, but with our radar, we could see everything. With our auto docking capability, you can park up near the dock and the boat will dock itself for you. So we're not trying to remove the boater from the boating experience. We're trying to help them through those more stressful situations.

You mentioned that there's been, you've seen the K-shaped economy coming through the boating industry. Analysts have said that boat sales have been slopping a little bit, but you say it's showing up in a specific segment. It is. It's really value boats. We're seeing a premium boats and what we call our core portfolio being very resilient. It has been for a long time, continues to be this year. What we're seeing is value boats, which are more typically finance or more subject to interest rate pressures. And then, you know, just broader affordability concerns. They're not doing. badly, but they're just not doing as well of some of our more premium products. The good thing for Brunswick is a lot of our profitability is in our premium products. Talk to me a little bit about tariffs and making so much of your product in the United States. It's a great point. We make about

70 to 75 percent of all of our product we make in the U.S. We're an American company. We have a global supply chain, of course, and about 5 percent of our supply chain is in China. We're working to reduce that 5 percent to 2 percent. But in the meantime, of course, we get tariffed on it. But when you think about us being tariffed, all of our competition is foreign. All Japanese, all Europe. So we are the really the only big domestic company and we still get tariff. Now, to be fair, you know, we're advocating constantly to try and make sure that we are treated fairly and we are mitigating ourselves. And you mentioned earlier to me some rebates coming in. One aspect of your company that I think might be new to most of our viewers is

the fact that you're getting into drone boats and now seeing action in the Middle East. Yes. We have a number of systems and full boats that are in that USB unmanned service vessel space. And as you will have seen in the Middle East and even in the Ukraine conflict, those are being used more and more. You see aerial drones. You see on-water drones. We partner with a number of companies in that space. They use our engines, our boats, a lot of our tech, and they introduce the military component of it. And we have sold a number of boats to the Navy. We continue to be in touch with the Navy, the Pentagon, DHS, about the future of autonomous boats for commercial and military applications. David, it's great to see you. Thanks for taking me out.

Thanks for giving me the liberty to be at the helm today. It's been a pleasure. It's been a great day out here. You know, for investors, guys, this is really, it's not just the boats. It's all of the other stuff, the aftermark and the recurring revenue that analysts are sort of excited about. You know, not having been at the helm of a boat myself, I didn't realize, Contessa, how hard it was to dock these things. I mean, that's the most stressful part for anybody who's going to take a boat out for a day. Even if you go rent a pontoon boat, I don't know, because I've done this myself, you take the pontoon boat out and then you go back to the Marine and you're like, oh gosh, and I have to get it right in the slip.

And there's no brakes or gas pedals to work with, Kelly. So there's a learning curve. This takes care of the learning curve. All you got to do is drag your boat where you want it in the little graphic and then press the button, autonomous docking, bada bada bada, boom, you're done. But it's easier also if you have three outboard engines like that versus one inboard. I can tell you that from experience.

I thought you were going to say three martinis. That's true, too. Contessa and David Fulks, thank you so much. Really appreciate it. Let's get over to Frank Holland now for the CNBC News Update. Frank? Good afternoon, Kelly. Russia launch and attack overnight.

Ukraine's port infrastructure in the southern region of Odessa after what is believed to be one of Ukraine's largest aerial attacks on the Kremlin since the start of the war. Russian authorities said that at least six people were killed and more than 1,400 Ukrainian drones were shot down in a 24-hour period. A preliminary investigation into the death of actress Hayden Penitier showed no evidence of foul play or suspicious circumstances, according to local police. In a new statement from the coroner's office, Penitier was in cardiac arrest when first response. partners arrived on the scene on Sunday. An autopsy was completed today, but the cause of death is still unknown. Penitier was just 36 years old. And the credit card issuer for brands like Amazon and

Walmart has announced a new partnership with OpenAI to allow shoppers to buy products directly through chat GPT using store cards. Secreting Financial's deal is one of the first by a major U.S. consumer lender to bring financing, payments, and rewards directly into an AI chatbot. Kelly, back over to you. All right, Robert, thank you very much. Coming up, we have a big week for retail earnings. Is the consumer still out spending even with higher inflation? These reports will be key data points to answer that question next. A full slate of retail earnings are on deck this week with Home Depot kicking things off tomorrow before the markets open, followed by Target, Lowe's, Walmart on Wednesday and BJs, giving investors

a key read on a variety of different parts of the retail sector. Joining us to break it all down is Jan Niffin. He is the CEO of J. Rogers Niffin in his best Steve Jobs look today. It's great to see you. But in all seriousness, I feel sort of at a loss about, quote, unquote, the consumer these days. What can you tell us? What, what letter are we of the alphabet? What's happening out there? It's not that hard. The question you always ask the consumers, do you have a job? Will you keep your job? And if you lost your job, could you get one making just as much or more? And they keep saying yes, yes, and yes. And then you see how high their wages are going up, and it's 3.4%. And if they change a job, it's better.

than that. And that's really all you have to know about the consumer. This is your data or this is just out there for any average Joe? This is the data I've organized over the last zillion years. We ask the consumer that every month. I still ask a group of consumers that every quarter. But the point is they're very healthy right now from those measures. And as long as that's true, unless they're way over levered and their ability to pay back is just as good as 2019, they're not over levered. They're not over levered. therefore they will spend. Here's what I find so remarkable about that.

We just went through the gasoline price spike. We are going through a period of AI anxiety. So asking, do you think you can replace your job? Your consumers are telling you, yes, even with all of this headline risk. So this is a profound moment to see this kind of confidence carrying them through. We've seen already a number of negative pre-announcements and so forth from the retailers. Do you think we're just getting that out of the way? Or could there be some speed bumps?

Well, first of all, they don't have any confidence. When you ask them that, they're very low on the conference scale. What does that tell you? Don't be an incumbent running for office. Means they're spending money in a bad mood. That's what it means. Because it doesn't tell you anything about their spending. As you well know, if the stock market's good, the upper-ins guys spend, right?

If the jobs are good, the middle spins. The bottom quintile, they're really suffering. We know that bottom 20% is hurting, right? But quite honestly, they don't spend, and most of them are also not watching us talk about spending it on CNBC. You're talking about broad spending power. So let's talk about how inflation has changed what people spend on and how much they spend on each category. So, you know, we're looking at depots, BJ, all these companies this week. What kind of patterns do you think we're going to see from those earnings calls, not the numbers, which will probably be strong?

But under the hood, those numbers, what are people spending on? cutting back on. What do you think are the strongest and weakest segments within retail right now? Well, we're clearly seeing at the upper end the consumer continue to spend in the United States. Maybe not in China, maybe not in Japan, maybe not in Europe, but here they are. So that consumer looks at their life and says, things are fine. Stock market's up, I'm good, they're spending. The middle part of the consumer is spending. Ralph Lauren's is really good, right? Tapestry is really good. Those people are below the Louis Vuitton's and the Hermes, but they're pretty high-in.

You know, they're that top 20%. They're doing quite well. But Home Depot is Mass America. That's a different problem. What are we going to see within Home Depot about what are people spending on and what do they cut back on? You think within a Home Depot?

If, in fact, Home Depot sales are up 1% store-for-store will all be thrilled. What does that tell you? That that part of the business isn't that great. We will find out that the do-it-yourself part's not so great. We'll find out that the professionals are still spending because that's still happening. But we need housing turnover, which means lower interest rates for that segment to pick up. But that is not cutting back at Walmart.

Why is Target suddenly doing so well? What are they changed? Well, one thing they've changed is they had negative comps for a year, basically. So now they're up against those. I see. So now they're going to report, we think, maybe a 2% kind of plus comp. We still think Walmart's going to report almost to 4%. comp against really hard numbers last year or four and a half percent? What does that tell you?

It tells you, Target's doing something a little better, and the consumers recognizing that, and they are spending, but they're still losing market share at Walmart. Right. They're not solving their problem. They've got a Walmart problem. They've got a Amazon problem, and Walmart looks like Amazon now, right? They have all those ancillary businesses that are high gross margin businesses, and they're still getting sales out of the store. targets up against that. And after these next two quarters, where they're up against real easy numbers, we're going to find out in early 2027 how good they're really doing.

Walmart's amazing because it does well when their low end is doing well, and when the low end is doing badly, they do even better. They win. They're the best retailer in America. All right. Costco's the second best retailer in America. They're not going to like that you said that. Or you shop.

I know. I get it to lure anyway. Jen, thanks very much. Really good to see you here. Jen Niffin. Jay Rogers Niffin, CEO. All right. The car that was met with sharp criticism in its grand reveal just became the most expensive car ever sold in an auction.

Take that, haters. Well, which car will tell you one and which other record-breaking numbers for Monterey Car Week right after the break. Chow, well, two famous Italian automakers making news of the weekend in Monterey, Ferrari auctioning off the first Lucche to roll off its assembly line. The special model of Ferrari's much-maligned EV was estimated to sell for 1.1 million. million dollars. It sold for 40 million dollars. That's right, four zero. The proceeds go to the charity for the Ferrari Foundation, so the buyer can also get a tax deduction. And $40 million. And at the same time, Lamborghini launched the most powerful, fastest production Lambo ever. It's called

the Revuerto SV. That stands for Superveloche. It has more than 1,050 horsepower, zero to 60, less than 2.4 seconds, all that power coming from an old school V12 engine paired with electric motors. Because it's the best out of two worlds. Now we have the strong internal combustion engines which are not only producing power and sound, but also a lot of emotions. And on the other hand, we have these add-on of the high-performance batteries. So kind of the anti-EV. The starting price for that, $741,000. They're only making 1,963 of them. That's because Lambs. was founded in 1963, so they will likely sell out quickly. Now, for more on that, you can sign up for InsideWealth, InsideCBC.com slash InsideW.

Did we reveal the results of our, I didn't mean to, CBC.com slash Inside Wealth? Yes. I didn't mean to clip the ending of that there. Guys, do we have our poll because we thought we'd have a little fun with this? Okay. And maybe you're good to answer. Which would you rather? The really exciting EV or the Lambo with some EV, you know, so traditional gas powered versus

super EV? Do we have that guys? Okay, well, fine. You know what that means? You have more time on X to go and face your vote. Which would you rather? Which would you rather? I would much rather the Revolto SVey.

Superveloche. I mean, just to be able to say, what kind of card do you have? Well, I have a Reveldo Superveloce. I mean, no, you know, I have a luce. Robert, thanks for joining us today. Thank you. I appreciate it. Thanks everybody for watching.