Power Lunch - AI’s Regulation Situation, A ‘Beyoncé Boost’ For Boot Barn? 6/6/24

Episode Date: June 6, 2024

The FTC and DOJ are set to open antitrust investigations into Microsoft, OpenAI and Nvidia, examining the companies’ influence on AI, a source familiar confirmed to CNBC. We’ll get the key details.Plus, shares of Boot Barn are up 65% this year thanks in part to a boost to western culture from Beyoncé’s new country-inspired album. We’ll talk to the CEO about that and more. 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 be with us today. Stocks are moving, well, a little bit higher on the Dow, a little bit lower on NASDAQ and S&P, as you see there. And when I say a little bit, I do mean a little bit on the Dow. 9-100s of 1% Kelly. And the 10-year Treasury yield below 4.3% on those global rate cuts. A day after passing Apple and the $3 trillion market camp level, NVIDIA, now the target of regulators. Antitrust investigations have been opened into the two biggest companies in the world. Invita and Microsoft as well as Open AI. We've got our reporters all over these varied stories.

Amon Javers looking at how the deal came together. Megan Casella has Treasury Secretary Janet Yellen's stance on AI regulation. Steve Kovac is here with what it means for the companies involved, and Deer-Dibosa is in San Francisco with the Silicon Valley reaction. Amen, let's start with you. Set it up for us. Hey there, Tyler. Multiple sources familiar. confirmed to CNBC that the Department of Justice and the Federal Trade Commission are in now the final stages of a deal to divide up antitrust inquiries into Nvidia, Microsoft, and Open AI, several of the most dominant players in the rapidly emerging AI space.

The deal was first reported by the New York Times this morning. It largely covers investigations into the behavior of the companies, companies, I'm told, not necessarily the mergers and acquisitions by the companies. I'm also told that the Department of Justice will look at Taiwanese chipmaker TSM in any upcoming investigation if it comes. That's according to a source familiar with the matter because TSM has operations in the United States. It comes under the Department of Justice's jurisdiction even though it's based in Taiwan. Now that signals that the U.S. government investigative effort will be focused on the

hardware and chip piece of the industry as well as the software and large language model side of the industry. So according to the terms under decisive. discussion in this deal, DOJ will take the lead on investigating whether NVIDIA has violated any antitrust laws, and the FTC will lead examinations of OpenAI and Microsoft. Now, what's still unknown in all this is what evidence, if any, the federal government would be able to produce to suggest any violations of the law. All of that work still a long way off at this point. This is dividing up the turf here between the regulators and the law

enforcement side. In the case of NVIDIA, I mean, I guess they would. defend themselves by saying, well, we just had a better product. Yeah, I mean, that's the typical defense in antitrust cases. We got to the top because we're the best, and you're penalizing us for being so good at what we do, at what the government will look at here is anti-competitive behaviors designed to block or squash competitors along the way to getting to that dominant position. Sometimes with discovery and all the investigative tools they have, they can pull out some embarrassing, detailed emails, contracts, that kind of thing that go back.

to some alleged crimes, but we have to wait. That is all very, very far down the line. We have to wait for any investigation and then any evidence that that might present. All right. Thanks very much. Amon Javrish reporting. Treasury Secretary Yellen is also weighing in on the AI regulation debate. Megan Kissela has those details. Megan. Kelly, Treasury Secretary Yellen is warning about what she calls significant risks associated with the use of AI by financial companies. So in remarks just a few minutes ago, Yellen was talking really in detail for the first time about what she sees as vulnerabilities stemming from using AI in finance. She says while there are tremendous opportunities with AI in the financial sector,

she worries about risks in a few different areas. She listed concerns around too much concentration among key players, on the complexity of AI models, on inadequate risk management frameworks, and on the idea that insufficient or faulty data could lead to bias in AI-driven decision-making. Yelan also said that Treasury is in regular communication, with federal financial regulators on AI, and she highlighted that the agency just this morning began asking the financial services sector for its input on uses and risks of AI in the industry.

It's a formal request for information, and it marks the first step toward regulation around AI and finance. The agency says part of what it's looking for here are recommendations on how rules around the use of AI in finance could be made stronger. And guys, that's really only the very first step in a very long regulatory process, but with so little action in Congress surrounding AI right now, federal regulation like this is the most likely way that Washington will begin to reign in the use of AI.

Megan, what is she pointing to when she says, in your paraphrase, I suppose, that AI could be used to produce decisions that are unfair or biased? What is she pointing at there? She's looking at things like approving a loan, for example, or deciding who might have access to a bigger credit line. These are the kinds of things that banks and other financial institutions could start to use AI for. They might be screening applicants. And she worries that I think her wording was that it could either perpetuate or introduce new biases. So I think the Treasury Department in an ideal world would love to know what are they basing those models on what are they using to train them. She wants to ensure that they're not perpetuating like she says or introducing any sorts of new biases that could make it less of a level playing field could make it harder for some people to get loans or access to credit.

All right. Megan Casella, thank you very much. So there's the Washington perspective on these various probes. But what does it all mean for the companies that are being discussed here and potentially their bottom lines, Steve Kovac here with a closer look? It is a real tangle of the A-Lister's in AI. Yeah, and not just the A-Lister's in Microsoft's case and in VDIA's case, the two most valuable companies in the world now.

Let's talk about Microsoft, though, because this is what I follow the closest, and what we know, this FTC and DOJ, the kind of things they've gone. after before. One thing they may be looking at is this deal Microsoft did earlier this spring with a startup called Inflection. They basically hired the entire staff of inflection, including its CEO, Mustafa Suleiman, made him the CEO of a new group within Microsoft called Microsoft AI. He reports directly to Satya Nadella. That was seen as an acquisition without actually buying the company. They effectively gutted the entire company and left it a shell of what it used to be. Now, they say it's still going to operate, it's still going to run an Azure Cloud and so

and so forth. But at the end of the day, almost no one is working there anymore. They're all Microsoft employees now. So you can definitely see the FTC taking a look at that. There's another thing on the cloud front. Where is Microsoft's advantage in artificial intelligence? It's in the cloud. It's in the Azure Cloud service. Its relationship with Open AI means all of Open AI's activity has to run in the cloud. On top of that. On Azure? On Azure, correct. On top of that it's making so many deals with so many other companies, other AI startups. A number of them were announced at their Big Build Developers Conference last week. What we've seen this FTC and DOJ do is kind of talk about this bifurcation of an established market. We saw with the Apple DOJ case

where they said there's a high-end smartphone market that the iPhone plays in, and then there's everyone else the low end. We saw the FTC do it with video games when they were trying to block the Activision Microsoft deal. They said there's a high-end console market that's Sony and Microsoft, and then there's a low end with the Nintendo and everyone else. Court did not buy that argument. We'll see if they buy the argument for Microsoft or with the Apple case. I can totally see them looking at it and say there's the AI cloud, and then there's the regular cloud.

And Microsoft is snapping up all these deals, making these huge investments all over the world, giving themselves an unfair. I'm not saying it's the right argument. Sure. I can say, based on what we know from the FTC, this is the kinds of things they'd be looking at. Here's what I think about, though. Is it illegal to sell your company?

Of course not. But if you, so the deal they did with the small startup, which is called inflection, was done to avoid regulatory scrutiny. Because they knew they would get hammered right away. And we always look at these deals from the buyer side. Well, Microsoft's getting both. Well, what about the company that started up wants to sell itself for $600 million, what have you? And are they not allowed to sell? Are those employees, are those founders not allowed to cash in on the tremendous value they've created if they,

They decide we want to sell to Microsoft or big tech. This would be a massive success for them or for any similar firm. So I'm just saying at some point, I understand that they are trying to go this other route in order to get this done and they did it a different way. But why can't they do what they want to do? They could, they could try, but it would just come with, look what they went through with the Activision deal. It was, what, 20 months of just nonstop back and forth with the FECC?

I mean they as the target, not as Microsoft. You mean inflection. Why can't inflection do what they want to do? No one's pressure. They can take the money if they want to take the money. I agree. And they would agree, too. I think they had well over a billion dollar evaluation. So you add a multiple on top of that. And boy, you know, a couple billion dollars Microsoft would have had to spend to buy that entire company. But they don't want to go through the whole mess. And so they're stuck in this weird point where, okay, we're just going to acquire all the talent and bring them in and do this kind of fake acquisition. Now Microsoft tells me they believe they're in compliance with all the laws about disclosures to the FTC and so forth with this because, hey, we just hired a bunch of employees. We didn't actually. buy the company, the company still exists. But that's your point.

And I think this FTC would rather a company like inflection just, you know, become public. On the NVIDIA, let's talk about the NVIDIA side of this, because Advidio tried to buy Arm, if you remember, and that got knocked down. And so the FDC and DOJ can point to that deal, say, we blocked that deal, now RM became IPOed on its own. It was a very successful IPO, it brought this new player to the market, so on and so forth. that appears to be what these regulators like to see versus what you just described. They'd rather inflection grow up on its own to get acquired by someone.

But again, if they want to sell, they should, you know, who's to say that they can't sell themselves? Right. Yeah. Interesting point. It's pretty wild. No further questions you're on. Got it. Thank you, Steve. The Biden administration's targeting a big tech is not going to help sentiment out in Silicon Valley,

where a growing number of high-profile venture capitalists are throwing their support behind former President Trump. Billionaire investors David Sacks and Chmoth Pala Hapitia are hosting a fundraiser alongside the former president tonight in the heart of San Francisco. DeRigbosa is outside that event with more for today's tech check. Deirdre. Hey, Kelly, this is really an example of how support for Trump once vilified you here in San Francisco, but now it can glorify you. $5,000 a ticket, $30,000 for one with VIP perks. The fundraiser is set to take place behind me tonight at David Sacks Mansion in Pacific Heights. is sold out. It's expected to raise more than $12 million for the former president's campaign. And really what a change eight years make. Back in 2016, the then Intel CEO was set to host a

fundraiser for candidate Trump, but he quickly scrapped it after media got wind and started asking questions. Today, the event is expensive. It is flashy. It is in the heart of San Francisco, but it's also just as divisive. Another high profile VC, Reid Hoffman, he just published an op-ed in the economist warning American business should not empower a criminal. There are plenty of others on his side. We're also on the lookout today for the Trump chicken in the bay. That is a 33-foot inflatable chicken that resembles the former president. It's being set up by his opponents to greet him when he gets here in San Francisco. A few years ago, support was more in the shadows is really my point here. Now we're seeing the shift because Republican policies, or at least part of it, they're seen as

more friendly or at least less hostile to tech. Look at President Trump's last term. We saw corporate tax cuts that would boost the balance sheets of mega caps. He got tough on China while carving out exceptions to protect tech companies from those tariffs. Government contracts, they went to defense startups like Palantir and his attacks on social media. They would actually prove toothless. Meanwhile, look at what you've seen from President Biden's term. His regulators have been a lot tougher on any number of tech issues from mega cap lawsuits to crypto to gig economy. You guys were just talking about AI. That is still an open question. It's also a bipartisan issue. But those latest anti-trust probes that we're hearing about today suggest that Biden's

regulators are taking a hard stance here as well. And you know, what David Sachs, the host of the fundraiser tonight says is that he hopes this event will help others who feel this way but don't want to admit it come out in support of Trump. We'll see if that happens. It's very interesting. I guess in Silicon Valley, it's gone from sort of one VC person, Peter Thiel, to now maybe dozens, maybe even more of that because of policy differences that the community has. If you were to characterize, however, the overall electoral viewpoint of people in Silicon Valley, which way would it lean? Overwhelmingly democratic still. I think it's just so rare that you hear these voices, come out in the open. I was talking to someone who works in policy earlier this week, and he said that, you know, you used to not be invited to kids' birthday parties if you were a known

Republican. But that's changing. So in a way, that diversity of thought is more welcome here, but it's also divisive, as we are seeing, setting up a lot of VCs on either side. A lot of the public CEOs, though, they're kind of reserving because they probably want to see what's going to happen. But it is a change. Remember eight years ago when President Trump was elected and he had all of the Mega Cap CEOs to that summit in Washington. They were all very uncomfortable. A bunch of them had, you know, departed from presidential councils a little later. It's definitely a different feel here and just more polarized. Yeah, absolutely. All right, thanks very much. Deirdre Bosa, we appreciate it. Shares of Hertz are falling more than 10% after Bloomberg reported that

the car rental company is considering selling at least $700 worth of debt and convertible bonds. The debt-ridden company, already debt-ridden, has been looking for ways. to raise capital as it tries to recover from a failed attempt to stake its future on electric rental vehicles. Teslas, that is. Coming up, they say a rising tide lifts all boats. Shares of the Westernware giant boot barn up 65% this year, thanks in part to a boost from Beyonce's hit album, Cowboy Carter. We'll speak to the CEO of Boot about that and more. Plus the Walmart effect, the retail giants hometown of Bentonville, Arkansas, booming with economic activity. We'll get a live report. And NVIDIA's record rally helping fuel the NASDAQ to record high. Stock's cooling a bit

today. We'll key into all of that and more when Power Lunch continues. All indexes, major ones, in the red, slightly right now. Welcome back to Power Lunch. Shares of Invidia, pulling back just a bit after topping a $3 trillion valuation for the first time ever, NVIDIA's recent rally, helping propel, excuse me, the S&P and NASDAQ to record highs. Now investors turn their attention to tomorrow's jobs report. Here to talk about all of it is Bryant Van Kronkite, portfolio manager with all spring global investments.

Bryant, welcome. Good to have you with us. Let's start at the top and work back. You say that this is a time for investors to begin to rotate toward value stocks, why and where do you find them? It's a day the market's very narrow in its breadth, and markets get narrow for one of two reasons, in my opinion. One is fear, and two is greed. And my concern today is that from these emotional points we are today, I think greed, the exuberance

of the AI trade is driving S&P right now. We get to these elevated levels, eventually that emotion fades, and the market rotates, and typically from these levels, value takes over from growth. And so what I see today is an underappreciation for the value categories. The companies that have true control of their own destinies outside of the broader economy, outside of the AI trade, are being underappreciated today. And eventually investors will care about that. And as the emotion fades, fundamentals will pick up,

and we'll see your investors rotate back into the value trade, where a lot of amazing businesses exist today at very discounted evaluations. You mentioned three stocks that I assume you consider all from the value category. They don't seem to have much in common. maybe perhaps only that they are, quote, value stocks, which is to say they're not AI, they're not high-tech, they're not a particularly huge capitalization company. On the surface, they might have nothing in common, but under the covers, they have everything in common. They each have unique competitive advantages based on a unique asset base.

They all are going to throw off tremendously stable free cash flow despite the economy and the direction we go through. And importantly, they all have fortress-like balance sheets. they can use to drive their own destiny. So, as an example, Air Cap is the largest airplane leasing company in the world. Through an acquisition of GE's business in the same space, they now are the dominant player. They're going to see tremendous demand stability as the supply of new airplanes continues to fade. They're going to be the biggest buyer at the lowest prices and have the most supply to provide to their clients at much higher prices. And along the way, they'll optimize their asset base by selling planes today that are below,

book value on their balance sheets, which they can recycle back into buybacks at great prices. That will drive ROE and a much higher valuation. It's a great business, completely underappreciated at today's valuation. Brian, I just want to quibble a little bit with the idea of rotating into value stocks, because it's been a trade that has done so poorly that there are very few value fund managers really even left. Many who had great track records maybe prior to the last 15 years, some who have more of a natural resource has been and that kind of thing. Value was starting to work right before chat GPT came on the scene. And now, of course, we've been back to kind of the growth and momentum trade again. There are many who think the sun has literally set

on the U.S. value trade. It has set. It is over. It is history. How do you respond to that? Well, we're honored to be one of the last one standing, I guess, in the value can't, but number two, I think there's different ways to think about value. Like the quote-unquote old-school way of value investing, which is just buying cheap PE stocks, that's basically dead. doesn't work anymore. There's no reversion trade anymore. We think about value as how does the company use a stable cash flow stream and an underappreciated balance sheet to drive their own destiny. It's not about buying cheap. It's about buying great businesses when they have a unique way to drive a different destiny. Let's talk about another company like graphic packaging,

for example. And otherwise sleepy, boring container packaging, they're a leader in paperboard. Over the last five to 10 years, that industry has consolidated down further and further to a point today where graphic packaging is a dominant player in their space, and they've made some choices around which assets to sell, which ones to keep, that have moved them up the quality curve. They now have a much more stable cash flow stream. They have a strategic decision around pricing, which is very different. They've eliminated their commodity exposures. And they're using their balance sheet to optimize their asset base, which will make them

the lowest cost producer, and they're innovating to create higher demand, higher uniqueness in their products. That's a unique situation in an undervalued stock. But I'm not worried about the P.E. I'm worried about the value they're going to create. That's misprice today. You know, that that stock is trading around 27. It's been a steady performer. You know, it was at 12 back in 2020. And do you think it's kind of the tortoise in the hair? If you have stocks like, you know, GPK in your portfolio, do you think investors are going to be okay, picking up 3, 4% a year? And maybe it's more than that in fairness to them. Do you think that's going to still work?

Look, we're not a lot of fun at cocktail parties. No one's going to want to hear. about GPK and their paperboard business. But the end of the day, when you think about how to compound value, we want to own businesses that are going to drive value creation through a cycle, not in this moment in time. The key to our investing is not to think about how do I win today and then change my stripes to win tomorrow. It's compounding value through a cycle by owning businesses that can get on that flywheel of creating cash, loading the balance sheet, and redeploying in the future. I do think investors value this kind of cash flow stream, and they value what we do as value investors.

You know, I would seek you out at that cocktail party. I would say, I want to hear more. I would take, get the cheese and the wine and I'd say, what are the paperboard packaging? We'll be alone. We'll be alone in the corner talking about stocks. I tell you that. Right. Thank very much for your time today.

Brian Van Cronkite. Coming up, speaking of kind of the opposite as space, solar stocks have been left for dead, but a new report shows the industry still could see some big business. We'll discuss. And, ah, GameStop has resumed trading after being halted. last hour. Shares spiked as high as 44 bucks after Roaring Kitty trader Keith Gill scheduled a YouTube

live stream for tomorrow at noon Eastern. The shares are about 25% right now to just below 40. Excuse me, something to get out of bed for. Doesn't it though? Yeah. And the shares are up 70% since Monday on pace for their best week in three years. We'll be right back.

Welcome back. Yields are largely holding steady ahead of tomorrow's jobs report. Let's get to Rick Santelli with a check on the bond market. Thought it was notable the 10 is back below 430, Rick. Yeah, I'll tell you, it really is amazing. We're hovering near unchanged in pretty much every maturity on a very significant day. Yes, it's the day before the May jobs, jobs, jobs report, but the EU, of course, the ECB cut rates today, big news.

And I think what's also big news is today they cut rates just happens to be the first day of voting for parliamentary elections. Boy, I thought there'd be a lot more notice of that. It seems to be under the radar screen to some extent. Let's look at our tenure, shall we? It's hovering at the lowest yields since the end of March. And if we look at the difference between our tens and the European tens, considering the ease today, and we're not expected to ease until September, although I always draw caution on reading too much in the Fed Fund futures that far in advance, the difference is the tightest it's been in four months.

That's important. And if we look at the euro versus the dollar on top of a chart of the dollar index, they're inverse related. I understand that. But on a day where the ECB cut and they're saying a hawkish cut, we shall see, I find it interesting that the euro currency is still near the highest levels in two and a half months in the dollar index is still at the lowest level in nearly two and a half months. Tomorrow's jobs report would be quite important.

And I think that the biggest issue is which side of 4% that unemployment rate shows up at. Tyler, back to you. Mr. Santelli, thank you. We'll all be watching tomorrow 8.30 in the morning. First solar shares fractionally higher following last month's 54% rally. That is good for its second best month ever. And new numbers show that while the industry as a whole is growing at a record pace, a key part of the solar market is underperforming.

And Pippa Stevens knows which one. Yeah, so we talk a lot about how these stocks are doing so poorly and how the industry has been head hard by supply chain issues and higher rates. But projects are still being built. So a new report today from CN Wood McKenzie showed that the U.S. added 11.8 gigawatts of solar during the first quarter. That was the best first quarter on record in the second best quarter overall. To put that in perspective, that's more than we added in all of 2018. However, while the top line is still strong, residential continues to really struggle here. They had their worst quarter in two years and installations were down 25.

percent year over year as higher rates really do weigh. Now, the report also showed that the U.S. is meaningfully increasing domestic manufacturing, and they say that once all these factories are online, it would be able to meet about 70 percent of our needs. However, that is a big if because there is, you know, the potential that some of these projects won't actually end up being built. And for the time being, we are still very reliant on foreign imports. Imports are right around our record, and we get about 90 percent of our panels from four countries. Southeast Asia. And then quickly, just in the background of all of this, is that AD-CVD case. The two-year pause on tariffs that Biden administration implemented expires today. And then tomorrow,

the ITC is voting on whether to take up an expanded probe. And so there could be a lot more turmoil in the utility scale sector looking forward. Interesting. All right, Pippa, thanks. Pippa, Steve. Appreciate it. Let's get over to Kate Rogers now for a CNBC News update. Kate. Hi, Kelly. The U.S. State Department said this afternoon it has called on Israel to be fully transparent on its findings into an overnight strike on a school in Gaza. Local officials say the bombing killed 40 people, including children, in the compound where about 6,000 people were taking refuge. The Israeli military said earlier today it was a targeted attack on 30 Hamas fighters embedded

inside the school. The Kansas City Chiefs canceled team activities today after defensive lineman BJ Thompson reportedly suffered a seizure and went into cardiac arrest. ESPN reports Thompson is in stable condition. now after he was taken to a local hospital by an ambulance. And more than 1.2 million rechargeable lights have been recalled in the U.S. and Canada after someone died from a fire started by the product. According to the U.S. Consumer Product Safety Commission, the Good Earth branded light bars have batteries that can overheat. They were sold both in stores and online at major retailers,

including Lowe's and Amazon. Good Earth says it is investigating the incidents and remove the lights from the market in January. Kelly, back over to you. All right. Kate, thank you very much. Coming up, Boot Barn up more than 60% this year nearing record highs. Western culture getting a seeming boost from Queen Bee's new country-inspired album. We'll speak to CEO Jim Conroy about that on the other side of this break. Welcome back to Power Lunch. Shares of Boot Barn are jumping more than 65% this year, due in part to Beyonce's country album,

which has helped boost Western Culture. Boot is also up nearly 20% since MTV's Neve Sholdman picked it in our stock draft back on April 25th. He's currently in third place trailing former NFL star Eddie George and mentalist O's Perlman. Take a listen to why team market fish bet on boot barn. I'm very excited to choose boot barn for my pick. Oh, and why? You like their boots or what? I'll tell you why.

With climate change, obviously a major factor, inclement weather is on the rise. So we're going to need boots. And, you know, companies come and go, trends come and go. but feet and hard work are here to stay. Joining us now is Jim Conroy. He is CEO of Boot Barn. Jim, it's great to have you here. Welcome.

Good afternoon. Thanks for having me on the show. I appreciate it. So which of those? Is it Beyonce? Is it climate change? Or is it hard work that is driving your sales this year? Well, let's say they all can take some credit.

Our core customer, we often say, feeds America, builds America, and protects America. So our business was very solid for a long period of time. It's had a dozen years of revenue growth. And it's nice to now have some more focus on it from pop culture. And perhaps that will continue to add a layer of growth on top of what the business has been doing thus far. Talk to us about the rest of the year and into 2025, expanding into more locations, different parts of the world, excitement or lack thereof around profit margins, depending on how inflation trends. Sure, absolutely. Well, we're a high-growth retailer. We're opening 15% new units each year. So our fiscal year that just started a couple of months ago, we have set plans to open 60 stores this year. And that'll get us to about 460 stores on our way to 1,000 in the United States. Perhaps someday soon we'll start looking internationally, perhaps to Canada, maybe someday to Australia. But in the, in the short term, we're going to continue to focus on taking a very solid working model and just spreading

it across the communities across the 48 contiguous states. You know, the stock market performance of the stock speaks for itself up 65 percent year-to-date, 76 percent over the past year. I do want to give you the opportunity to respond to Ben Axler of Spruce Capital, a short-seller who came on our air last month. And not only was critical of the business strategy that you have articulated, but also was personally critical, frankly, of you personally and of your team. Let's listen to part of what he said, and then I'll give you a chance to respond. We have problems with the business strategy and model. This is a specialty retailer that focuses on Westernware and is making a national movement.

And in that process, we think that the store economics are declining. We think that they've alienated their core customer, which is traditionally a male farm worker, cowboy, Now they're taking on much more fashion risk, moving into geographies where they're just as less demand for Westernware. So what do you say to him? Yeah, well, to your, to the setup of the question, you know, when you're a public company CEO, you're in the public eye, and there are people that like you and there are people that are critical to you, and that's fine.

That's what makes the world go around. Yeah, we're going to just continue to focus on growing our business. The results sort of speak for themselves, right? We are opening up stores. They are a large format. They're 12,000 square feet. They also pay back 60% return on cash in the first year. So it's an incredibly solid investment.

We have 406 stores around the country. Every single one of them is profitable. I think the question really becomes, can you accelerate growth, not are we following the wrong strategy? The strategy that's taking us to this point, just in the last four years, sales have doubled and EPS have tripled. So we'll always have critical feedback, but for the time being, the strategy is working for us,

and we continue to just focus on the future growth and taking sales and earnings forward. As you expand your store count, and as you expand presumably the kinds of merchandise that you carry, is there any legitimacy to the idea that maybe you are expanding outsourcing? side of your core market, which has been the working person in the United States, the Western wear, really the Western wear aficionado, and are becoming more fashion-driven or fashion-led. Is that a fair characterization or not really? I think there's a layer of fashion. I would not say fashion-driven or fashion-led. So we have a number of stores in central or upstate New York. There's a piece of that business that is fashion,

but there's also a tremendously large number of blue collar workers, dairy farmers that are wearing cowboy boots because they're working on a ranch or a farm. They're wearing cowboy hats to keep the sun off their face. And then if there's also an additional customer that comes in that wants to wear something a little bit more fashionable, that's just plus business for us. But regardless of the market that we open in, whether that's Western in geography or Eastern in geography or even closer to urban centers, our core customers buying functional product that they tend to be working in, they wear through, and when they do so, they need another pair, and they come back to us. So if you think about the fashion risk of most retailers,

for Boot Barn, we've heard this story before. We launched a great line by Miranda Lambert in 2018, that was a time when everybody thought the fashion risk was going to change for us, and we were going to have a lot more markdowns. And since then, our merchandise margin has grown by 100 basis points a year every single year since 2018. So I think we've been able to deflect that concern. I've got a great pair of Ariot boots. I know you carry that line. They're hardworking boots. Thank you very much for being with us today. James Jim Conroy of Boot Barn. Appreciate it. Thanks for having me. You got it. All right, coming up. We are traveling to Boomtown USA.

It's not just Walmart's stock seeing a record run. Its hometown is getting a big boost, too. We'll take you there when we return. Welcome back, everybody. Walmart hitting a record high on the heels of its annual shareholders meeting coming off its best month in seven years. But it's not just the stock that's hitting new highs. A new piece on CNBC.com tracks the exponential growth

that is happening in Walmart's hometown of Bentonville, Arkansas. and, oh, by the way, in nearby Little Rock as well. The reporter behind the story, Melissa Repco, took a closer look. I thought never in a million years would I move to Arkansas. Tracy Robinson lived in New York, Washington, D.C., and Miami before moving to Bentonville in 2022 for a job at Walmart headquarters. I had this vision of a really poor rural community and maybe a little backwards and a little conservative. Instead, Tracy found a boomtown trying to maintain its size. small town feel while providing big city amenities. It's kind of if I envisioned my my perfect life.

The population is exploding from 36,000 in 2010 to 58,000 in 2022, with expectations of reaching 200,000 by 2050. That explains why Bentonville has more cranes per capita than any other U.S. city, according to Cushman and Wakefield's stage partners. Every time I go to town now, there's new construction. Gill and Sue Currant moved here in 1971. The population was about 6,000 and Walmart was in its infancy. Now it's building a new 350-acre headquarters. I don't believe anybody had the vision that it's going to take over the world. Walmart drawing its vendors to open offices here and with the area's population growing by 36 people per day, housing, restaurants, hotels, museums, and even a medical school are being built. All the people that were coming into town were not from here,

Chef Matthew Cooper owns Conifer, one of a number of high-end restaurants in downtown Bentonville. The dishes and prices rival something you'd expect to find in New York or San Francisco. They were from places where those prices were already prevalent. And so it really hasn't been that much of a fight. But Bentonville's boom also brings its challenges. A shortage of housing, for instance, is pricing many people out of the market. Ten years ago, we had 14 homes that sold over a million dollars. Last year, 2023, we had 244.

We don't have $150,000 homes. That market is obsolete. There's always going to be unintended consequences of growth. But on the positive side and what this has been able to bring to people's property values, what it brings in terms of amenities, the education system we have here, it's far beyond any of the negatives. One of the reasons why those upscale restaurants is doing so well is the median income in Bentonville is about $99,000 a year versus about $75,000 in the rest of the country.

Those amenities and this new campus underway behind me is helping Walmart attract talent from cities around the country and tech companies too, Kelly. Actually, I'll pick up here. How much Melissa has Walmart and the Walton family directly driven all of these upscale changes? Tyler, they've been a driving force. A lot of amenities that have come to town, for example, the restaurants, The Walton family is behind. So Tom and Stuart Walton have a real estate company.

They have a restaurant group. And they've also been one of the reasons why the town has become a mountain biking destination. They enjoy the sport and they've helped develop more than 250 miles of biking trails in the area. Sign me up. Sounds good. Melissa, thanks very much. Appreciate it. Sign me up.

Coming up, a fresh three-stock lunch. We're back in two. Don't go anywhere. Welcome back time for today's three-stock lunch. With our trades today is Adil Zaman, partner at Wollstone. Alliance Group. Great to have you here. Adil, welcome. And we'll start with Tesla, the Board of Directors, continuing support of Elon Musk's pay package. In fact, Chair Robin Denholm told CNBC, it's not about the compensation. Take a listen. It's not about the dollars. It's actually about

someone who took a huge risk from a pay perspective. No compensation would have been awarded had he not hit the milestones. And so for me, that that risk, reward is very important in corporate America. And Tesla shares are up about a percent today. Of course, they've been under pressure so far this year. Adil, what's your trade here? Yeah, we would be, it would be a buy, and we would 100% agree with those comments. You know, the stocks down more than 29% year to date.

At times like this, this is when you see buying opportunities in a company like Tesla. And although, you know, their vehicle sales and have suffered due to a softening in demand, we see a lot of potential in the self-driving software, which could potentially lead to new revenue streams for the company. You know, potentially it could lead to, you know, when you sell a car, you can only sell it once, but when you get a software, once you've developed it, you can sell it unlimited number of times. And this could potentially lead to recurring subscription revenues for the company as well.

So for us, this would be a buy. All right. Let's move on, Adil, to Robin Hood, buying the crypto exchange bit stamp in a $200 million deal, the CEO Vlad Tenive, discussed what he makes of the deal and all that's been happening. Take a listen. I think for us, it's an opportunity to show how much we've grown since 2021, since the first of the meme stock frenzy incidents. And I think the really interesting thing is that these events have really been starting in the overnight sessions.

So Sunday night where pretty much the only game in town is Robin Hood if you want to trade stocks. Shares of Robin Hood, incidentally, up 7% today. Adil, your thoughts? So Tyler, when I was on the show earlier, we called this as a sell. And since then, they've had a strong. first quarter, but our outlook remains unchanged. You know, this would still be a sell for us. There are a lot of other competitors in this space,

like Fidelity and Schwab that are stronger. You know, if you look at their revenues, more than 40% of their revenues are coming from net interest income. And going into a rate cut cycle, that's very vulnerable. And the recent Wells notice also makes them vulnerable to regulatory pressures as well. So for us, this would still be a sell. All right, let's get to CrowdStrike then.

They just reported a beat and Ray's quarter. The CEO telling CNBC about the value of their AI technology. Take a listen. With our generative AI technology, we call Charlotte, we can take eight hours of work and turn it into 10 minutes of work because Charlotte is doing heavy lifting on behalf of our customers. And we're seeing a 90% win rate when people actually pilot Charlotte in their environment. CrowdStrike shares trying to build on yesterday's game.

Would you buy it? We would not buy it, but we are constructive on this space because we feel that, you know, as businesses are getting more evolved with artificial intelligence in cloud, so are cyber criminals. So we think a crowd strike, a company like crowd strike could do well. But given the recent rally, we would be in the camp where we would hold and wait for a more attractive entry point. Oh, great. There you have it. Adil, thanks to your time.

We appreciate it. Adil Zaman. Power lunch will be right back. Welcome back. Dow went briefly negative top of the hour, but it's returned to an 88 point gain. One also mentioned shares of GameStop today. Watch the $40 level, as Daniel She told us last hour. That's the level she thinks the short-squeeased trade is on. That's about a 30% gain now. All in this news, Tyler, that Keith Gail, Roaring Kitty will be having a YouTube live tomorrow at 12 p.m. Eastern. Very interesting. And before we go, according to the California Business and Industrial Alliance, nearly 10,000 jobs have been cut across the industry since the State Institute at its

$20 an hour fast food minimum wage. Trade Group also claims the law has led to increased prices, trimming back of employee hours and store closures. So they say that's their opinion on that one. I've heard people say it's like the end of fast food in California. I don't know if that's true or not. In and out burger. Good stuff.

Thanks for watching. Amish. Everybody. Closing bell starts right now.