Power Lunch - Amazon's Nuclear Investment, Opportunities in Regional Banks 10/16/24

Episode Date: October 16, 2024

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

Welcome to Power Lunch. And look who's here. Hi. The Deboza is here. Thrill to be here. Good to have you here. Glad you make it from the West Coast. I'm Tyler Matheson. Joining us for the hour is Surratt SETI. He's a managing partner at DCLA. Always good to have you with us, Surrott, as well. Markets are higher right now after a pullback yesterday, but the setup is still markets near all-time highs as the Fed is in a cutting cycle. Yes, and Tyler, we are chatting this now. So. Yeah, well. See, I'm here to remind you of these things. They remind me, give me the signpost. Exactly.

And, you know, the big story today, obviously, are the bank earnings, right? We're getting more into it. We're going to have tech later this month. But introducing this idea of a no-landing scenario, which would be quite something, right? The markets just continue to keep going. Economy grows. I think we're in between the soft landing and no-landing. And at this point, the market's still going to go up.

Covering. Just hovering. It's hovering, but earnings are driving the market. Yeah. So you're seeing, at least that's the point. positive part right. Right for now. We'll see what happens. Also, we're going to talk more about that later, but also take a look

at shares of Qualcomm. They are lower today. Following reports, it will wait until after the election to decide whether to pursue a takeover of Intel. Plus, Citigroup with a bearish note on the stock. We will talk to an analyst about that as well. And it says chat chips here. You know

about this. I don't really. I'm going to turn to you. I'm prepared for this too. I have a chart that I want to pull up. It is the IGV, the software ETF versus the SMH. the semi-DF. I mean, we pretty much know what the story has been all years. Chips have been the outperformer software has really been lagging, especially in this AI trade. But look at what's happened over the last three months. It's flipped. Software is actually outperforming the chips. All right, and as we've seen lots of high-profile changes at the top of big companies this year,

Starbucks, Nike, Boeing, to name a few in the CEO suite. We'll talk to the author of a new book on what makes a great CEO. The book is called CEO Excellence. And, Vic Malhotra will be with us to talk about it. It's a topic that fascinates me, as we were just saying, how do some individuals, whether they are CEOs or performers or leaders of sports teams, how do they sustain excellence over decades? And that's what Vic has looked at. And I think what will be really interesting to see is how is the difference between CEOs

two, three decades ago versus what's required of them today. The world is so different. I'm guessing a lot more. Yeah. And what are the qualities that you look at? for today versus what worked in the past? A big topic of discussion where I usually am on the West Coast in Silicon Valley is founders versus managers.

So we're going to talk all of that. But let's begin with the markets. As we mentioned, sentiment seems pretty good right now. That itself could be a problem. Let's get to Bob Pisani at the New York Stock Exchange. Bob, it reminds me of that saying, if something is too good to be true, it's too good to be true. Good point, Dirdre.

Good to see you, as always. The major industries are just shy of historic highs, not surprising. the market sentiment is getting very frothy. Both retail and professional investors have become more bullish in recent weeks, and you can't blame them for getting excited. Look at this list here. The soft landing remains the dominant investing paradigm. The Fed is cutting rates going into a soft landing. That is very unusual. Stock buybacks are at a new record. That's a big support. Stocks are also entering the seasonally strongest period of the year. And finally, there's hopes for political gridlock and or perhaps a Trump win, that also may be boosting some sectors.

Still, there is excited and then there's just downright frothy, and we're starting to get into that frothy territory. The American Association of Individual Investors' Sentiment Survey shows bullishness among retail investors just shy of the highest levels in over a year. Bullish sentiment right now is 49%. That historically is very high. The average is about 37%. The same with professional investors.

The October B of a global fund manager survey, this is a global survey of fund managers, saw the biggest jump in investor optimism since June of 2020. They are allocating much more money to stocks now and less money to bonds and to cash. The relentless rise in stocks is also creating overbought conditions. Several sectors like industrials and financials, like banks, along with roughly 15% of the S&P 500 is now in overbought territory. And if you don't know what that means, what it means simply is when stocks and sectors move up this much so fast, it's historically difficult for them to keep advancing in the immediate future. And guys, at least with financials and some industrials, were there already. Back to you.

All right, Bob, thanks very much. And our next guest says the Goldilocks conditions in the economy could actually lead to more volatility as markets react or maybe overreact to any perceived threat to that delicate balance. Joining us now to discuss is Lauren Goodwin, economist and chief. Chief Market Strategist at New York Life Investments. Why don't you dive in and explain a little bit more about what that introduction just characterized your viewpoint as being? In other words, that we are a little bit spoiled, I guess, or a little bit on knife's edge, and that anything that is seen as adverse to the markets could create an outsized response. Well, Bob's done an amazing job of laying out the reasons why investors are so confident right now

and that a consensus has emerged around a soft or even no landing in the economy. I think the question for investors then becomes, is that a no landing or is it a re-acceleration of economic activity? Because the market pricing we're seeing over the past couple of days really reflects more of a re-accelerating environment. I'm skeptical that that's likely to be the case. We have a very constructive outlook. It's very difficult with profit margins where they are to expect that we'll see much weaker labor market or economic conditions. However, historically, when the Fed has cut even into soft landings, we haven't seen profits re-accelerate or hiring re-accelerate. We've seen stability. And stability, it's good news for the economy, but it might mean more

average equity market returns, average bond returns. That's an environment that after the last couple of years of knockout returns may not feel so good. That was really where I was going to go with my next question, and that is what you're saying leads me to believe that it is unlikely for the returns that we've seen over the last two years to repeat themselves. I think that's the case, and it's not one that investors need be overly concerned about, but it is one that requires a pretty serious call to action for investors. If you have the Fed cutting interest rates, even 25 or 50 basis points from here, it creates meaningful reinvestment risk for investors. And so we're looking to add interest rate or income generating capacity wherever we can.

We really like short duration credit for this reason. And then in the equity markets, good profitability. It's a good place to be invested. We're not necessarily bearish on the semis or chips are part of the market that's performing very well. But we do see valuations and market conditions as an opportunity to rebalance a bit. Some of the sectors that see structural investment even related to AI, like energy, like utilities, these are sectors that benefit from slightly lower interest rates. And so we see an

opportunity to broaden equity exposure in response to these market conditions. When you look under the hood, and I agree with you in terms of where the market is, what other opportunities you mentioned utilities and maybe REITs in there as well? But are the other sectors that you think could benefit, especially now that we're going to do a period where, hey, companies aren't really going to be raising prices. It's going to be much more about cash flow. And probably, cost cutting at this point as well. Yeah, I agree with that perspective. And it's an environment then where we have to

look pretty closely under the hood, again, at income generating opportunities, just as much or maybe even more so than valuation, expansion opportunities. Dividend payers are one of the segments of the market that have been underloved over the last couple of years, but again may benefit from this type of environment.

And then if we look at the U.S. election and the type of sector benefits that we may see from just sustained capital investment from the government, from the private sector. We again see quality brown, low-cost green energy as benefiting from those investment trends, defense, and then infrastructure along the semiconductor supply chain. Again, these are parts of the market that are not only seeing that structural investment, but are also beneficiaries of modestly lower rates. Lauren, what do you think the chances are that markets are being complacent, that maybe

we're not in this Goldilocks or no landing scenario? I take an ASM. from yesterday, right? The accidental earnings release that caused Nvidia to go down and you look, you just mentioned the semiconductor sector. So overbought, what if investors are looking for an excuse to sell and you have an event like an ASML weak outlook and that causes more volatility? Look, I think that the risk is certainly there and it's my view that a sustained downturn in the equity market is one of the bigger risks actually to the economy. As this expansion has moved on and on, we've seen.

seen the U.S. consumer really bifurcate, meaning that high-income consumers are doing quite well where lower-income consumers are not. Those high-income consumers are those that have benefited from the wealth effect of higher equity prices. And so if we see that drawdown, it really can impact confidence consumption, and that can impact business decisions in hiring. The one more constructive thing I can say about this, though, is that typically when we've seen that type of sustained downward trajectory for equities, it's been backed up by weaker corporate profits across the board. And profits today are quite healthy across a number of sectors. And that does provide some ballast to get through some of the chops, frankly, with the

election and other risks in the next couple of months that we might expect to see. Lauren, good balance perspective. Thank you for being with us, Lauren Goodwin, New York Life investments. Well, over the past few weeks, money has been moving into stocks and out of bond, sending those yields higher. But today, the tenure briefly dipping below 4%. Let's get to Rick Santelli at the CME with more. Rick. Absolutely. Thank you, Deidre.

The big story today, well, let's look at a two-day chart. It really does say it all. Yesterday, we started out at 4-10. Today, as Deidre pointed out, very briefly, we traded under 4%. But on the right side of the chart, pretty much all day, we've been hovering right above 4%. Now, think about this. If you look at what has moved the market, nothing moved it more than the big set jobs, jobs, jobs, on October 4th. The next chart starts on October 4th. And whether you're looking at the 10-year,

twos, five, sevens, 20s, 30s, it all looks basically the same. We broke out to the upside heels and we have moved up. Now we're coming back down. So guess what? That jobs report? 254,000 jobs. 4.1% unemployment rate. Well, tomorrow we're going to get retail sales and initial continuing claims. It's very ironic that on a big day of important releases, here we are at that important breakout point. Why is it so important? Retail sales over the last couple of months? Well, tomorrow's going to be September.

If you look at July, the core retail sales was up four tenths of percent. Last month it was up three tenths of percent. These are good numbers. So tomorrow's SEP report is going to be very key. And you talk about outsized market response as we did in that last segment. Definitely tomorrow could be that day.

It either is going to mirror a moonshot back up over 4 percent for tens of percent. particular, or if we get below it on a closing basis on a Friday for the weekly close, the following day, that will be very significant from a technical perspective. Tyler, back to you. Mr. Santelli, thank you very much. As always, Rick Santelli in Chicago. Coming up, Qualcomm reportedly waiting until after the election before deciding whether to launch a takeover of Intel. At the same time, City slashing its estimates on the name ahead of Apple's move away from the chipmaker. We'll speak with the analyst behind back.

call next. And you've heard of Six Sigma, but what about the six mindsets that separate the best CEOs from the rest? McKinsey's former chairman of the Americas and co-author of CEO excellence is here with his take on some of this year's biggest C-suite coups and more. Power Lunch is back after this. Welcome back to Power Lunch. In today's Check Check, we are taking a closer look at Chip City out with a new note launching a negative catalyst watch on Qualcomm, given its expectations of a lowered forecast. But the firm still remains positive on semi-stocks overall. Christopher Dainly is the analyst behind that note. He joins us right now.

Christopher, thanks for being with us. Surat just made this point with Qualcomm and Apple. We've been here before. This should already be baked in, but your thesis has to do with the fact that Apple is going to go away. Yeah, partly, yes. And I would say that I've answered a lot of investor questions on this today. In my experience, following semis for way too long,

The semiconductor company can talk about an event in the future that will drive sales up or down. But when that event actually happens, it still impacts the stock, mostly on a multiple perspective. So we think that this is going to come out. Certainly, they're going to get asked about it during their print in a few weeks. And, yeah, Apple is finally starting to go away after many years of waiting next year. supposedly they're coming out with like an iPhone SE version that's updated and it's not going to feature Qualcomm chips. But you have that. You have a couple of other things.

We think that their sales could be flat to down for the calendar Q4. Remember, they're going from a 14-week quarter in the September quarter to a 13-week border in the December quarter. So that alone usually shaves off 5 or 6 percent of revenue. Right. So these are sort of catalysts or obstacles in the near-term bigger picture, right? There's this whole narrative of will they or won't? try to acquire Intel. And there's a new report saying that Qualcomm is waiting until after the U.S. presidential

election before deciding whether or not to pursue an offer. What do you make of this? Is this something that would really get done? I mean, I can't imagine it would. You know, we have this top 15 rules of semi-investing. Maybe one time I'll post it up on the side. But one of those rules is we call it the city slickers rule. successful semiconductor companies are generally good at one thing.

And if they try and stray from that, the results are mixed at best or they end up destroying shareholder value. So Paulcom is very good at making handset chips, the best. Intel is very good at manufacturing PC processors. Those are two totally separate businesses. And in fact, Paulcom's never even run a fab or a fabrication facility before. They've never actually made a semiconductor. I can't imagine that they would do this. Now, I could see them going after parts of Intel, certainly,

but not the whole kit and caboodle. And then, yeah, you'd obviously have some regulatory issues as well. So it sounds like you're saying that this would be a bad deal on both sides. Who would it be worse for? Great question. Probably worse for Intel, because at the top, you would have a company running Intel that, again, had never done manufacturing before, right?

But I think it would be bad for both companies. I prefer them to stay separate. Again, I can see Paul come going after parts of Intel, but certainly not the whole thing. And on the question of Intel, would there be a natural buyer for Intel, or is it just a time to break it up because of the way their business is running? Yeah, great question. I definitely don't think it's time to break it up. We've been saying this for, you know, the better part of the decade is they're just not good at the foundry business. This is making chips for other folks.

They should just get out of it, shut it down. go away, focus on what they do best, manufacturing microprocessors. We think that if they get out of the foundry business, you have a path to $3 to $4 in earnings for Intel. Everyone's a winner. If they stick with the foundry business, very, very small chance of succeeding. So here's the question, right? One of the things that we're spending as a country are billions of dollars on fabs. So who would then want to, you know, there's no way we're going to let these fabs go to a foreign buyer.

So how does that work then in terms of? of a natural buyer for the fabs? Then you're just wasting money. You know, I think what they should do is the number one foundry out there is TSM, and they literally gain share every year. In our opinion, and we've written about this, what the U.S. government should do is just give it all the TSMC, have them build fabs in the U.S. Otherwise, you're just spinning your wheels.

You're just wasting money. Christopher, isn't the whole point national security, and you don't want a Taiwanese company, to develop your chips? Well, I mean, there's no alternative. If you let Intel do it, you're just going to like, you might as well light the money on fire. So, you know, my opinion, it's never going to work.

Like, never, not never, I can't say never, but very slim chance of working. So just let TSM do. I mean, maybe Samsung is second best, but TSM is really your only hope. And Samsung's Korean, so it doesn't solve that problem. A dire, but maybe a realistic viewpoint.

Christopher Dainley, thanks for being with us. All right, coming up, we are in the midst of the busy earnings week for financials and while Wall Street's squarely focused on the big banks, our market navigator says the real opportunity lies elsewhere. We'll reveal the key names to watch next and as we had to break. Here's a check on stocks at session highs, the Russell 2000 small caps outperforming the major indexes.

We're back after this. Welcome back to Power Lunch. It's time to navigate the markets. The big banks are getting all the earnings headlines this week, but could the better trade be in the smaller regional size banks? our next guest is here to answer that question. So joining us now is Jay Woods, the chief global strategist at Freedom Capital Markets, a man who likes to look at the charts and look for patterns.

Jay, take us through whether or not those big bank earnings are something to pay attention to or are the regional banks the better trade in the coming months? Well, I think you always have to look at the leadership, and that would be in the big banks. You look at what J.P. Morgan continues to do, continues to lead. and then look at Goldman and Wells Fargo did this week on the earnings front. A lot of people concerned about net interest income, but the focus turned to equity trading in Wells Fargo case fees. And these stocks continue to make 52-week highs, continue to break out and continue to lead.

But when I look at the overall picture of financials, I like to look at it more from a basket and then break down that basket. So I look at the BKX, the KBW index. It takes into effect some of the large cap banks, like Goldman and JPMorgan. plus some of the regionals, stocks reporting earnings this week that aren't getting the headlines like a PNC and an MNT that others should. And what I saw in the KBW or the BKX is a major breakout. And we're talking a major breakout on a yearly chart. What you want to do is put in a perspective. Look at it back to 2023, a three-year daily chart. And we are just

breaking above that March 23rd regional banking prices level. As you can see, see on that chart. We have room to run. So I think a clear path is set from a risk reward set up if this was the pullback because it has gotten out a little far right now, I would put money to work now and buy a little bit more on any pullback because I think based on the rate cutting cycle and where the regionals are starting to come back, that a clear path towards new highs around 145, 150 is in the cards. All right. So then Jay, let's go through some of the components of that. You mentioned big banks and smaller banks as part of the index overall. Are there specific names that you think are poised for a better breakout, some of those regional names that you might

think of as potential buying opportunities on pullbacks? Yeah, well, this week we're seeing the breakout right now. PNC Bank broke out last quarter above its March 20203 regional banking crisis level and now is on a run to all-time new highs. So a PNC is pulling back a little bit. If it pulls back to this 185 level, I think that would be a good opportunity to buy because it's still in that nice new uptrend and watch 202. We're seeing new highs every day in this market. PNC hasn't gotten to that all-time new high just above 200. So I think PNC has room to run. Then there's first horizon based out of Memphis, Tennessee. Another stock that has a tremendous run-up this year up about 20 percent, just reported solid earnings, broke above $16-17. The all-time high there is

425 going back before the regional banking crisis. So I think the path is set from a risk-reward point of view. If it breaks down below 16 to get out, and then my favorite M&T bank. They're based in Buffalo. A lot of people think they're based in Baltimore because of the stadium. But major breakout in M&T, a pullback to 180 should be your new floor. Look at this thing on a longer-term basis. I see you have the chart there, so thank you very much. These are stocks you want to own. You want to own these stocks on strength. They've turned for a long way. And what we have now, we're tailways. We have a rate-cutting cycle. So there's going to be more lending. We're going to get through this election. Look for more M&A activity to pick up after the election.

Ipeos that come to the market. And then mortgage rates have stabilized. They're not down to where people are rushing out to get that new mortgage. But this is all the fuel needed for these regional banks to finally catch up to their big brothers in the major banks like D. P. Morgan and Goldman Sachs. All right, there's the big bank versus smaller bank trade. Jay Woods, Freedom Capital Markets. Thank you very much. We'll see you soon, sir. Thank you.

All right. So, Sarat, let's talk about a portfolio manager's perspective versus the technician's perspective. We heard about the charts. Right. He also mentioned some fundamental factors. Do you like the regional banks as opposed to the bigger brothers out there? So if I was going to choose in which I do with actions, which is what we invest, I prefer the bigger banks. And I'll tell you why.

I mean, look, when we went through that March period with the regionals, The biggest question was, what are the balance just looks like? What are the opakness? When you look at the big banks like J.P. Morgan, Morgan Stanley, a lot more transparency. And you look at the earnings that they've come out just in the last week. What they also have is huge tailwinds, right? It's not just the tailwinds of where we have an interest rate cut potentially coming down, which we know will happen. Capital markets activity is really starting to pick up.

That could pick up even more, depending on what administration we have. It was a big theme with JP Morgan City and Bank of America. Okay, so you saw that. Wealth management businesses have really done. done well, and you get interest rates coming down, so you'll get more allocations into equities, alternatives, et cetera. And you've really got, you know, earnings growth and great balance sheets with high dividends. So you've got all that, and I think in a much more diversified business, it's not to say the regionals are bad. I think the opportunity in the bigger banks,

and that's where capital's going to flow as well. Here's a question for you quickly. Do you own the regional banks? I do not own the regional banks. That's a good tagout point there as well. All right. Deirdre, Ty, Sarat does not own any of the regional banks, but there's a case to be made for some of them. I'll send things back back. Good to know. Good discussion. Coming up on the show, McKinsey's senior partner out with a new book on the six mindsets that distinguish the best, the leaders from the rest. After the break, we will ask him what they are and get his take on

what makes an excellent CEO. Power lunch is right back. We've seen several high-profile changes in the C-suite this year from Kelly Ortberg going in at Boeing to Elliott Hill at Nike, Brian Nicol, leaving Chipotle to go over to Starbucks, but all three of them face numerous challenges. And according to our next guest, succeeding in the role of CEO, is key to driving substantial growth in company performance. He's out with a new book on CEO leadership with a couple of co-authors and what makes a good CEO. Vic Malhotra is senior partner at McKinsey and co-author of CEO excellence.

Vic, it is great to see you here with us. So what do great leaders do or have that the merely average ones don't? Well, they do a number of things well. The first is in dealing with their responsibilities, they do all things related to leadership at an excellent level. You know, I always had the assumption that you'd see great leaders who were fabulous at setting the direction, but perhaps less good at managing their board or engaging with their board. The reality is great leaders do all of their six responsibilities, which we highlight in

the book at a truly excellent level. But in that sense, they're a little bit more like Ashton Eaton, who's the world's greatest decathlete to live, and a little less like Michael Jordan, you know, singularly great at once. They may not be excellent sprinters and javelin throwers, but they do all things at an elite level. At a top elite level. Very quickly, because we can't spend too much time on it, what are those six attributes that you, that you highlighted there? Well, the six, the six responsibilities are setting the direction, aligning.

the organization, mobilizing through leaders, engaging the board, connecting with stakeholders, internal and external, and finally, your own personal operating model as a leader. Nothing earth-shattering there, but the fact that they can do all six of an excellent well. Spin the place, keep them spinning. Right, right. And importantly, against, as in doing it, they have audacious vision for where they want to take the institution, truly audacious vision in terms of where they want to take the institution, and are amazing at really being great integrators. As Satya Nadella said to us in his interview for the book, he said, you know, it's an information

to symmetry problem. As a CEO, you see more than anyone else in the organization. And you certainly see more than the 10 or 12 people on the board that you report to. And therefore, if you're going to pursue an audacious vision, you've really got to be an excellent integrator. Do great CEOs need, how important are efficient workforces? There's this idea in tech of founders mode versus manager mode. Founders mode eliminates a lot of those layers, and the argument is that if you're a founder,

you know the business and the product better than anyone else, so you should be in those details. Where do you stand on that, and how do you see founders versus non-founders in managing companies? Yeah. One of the things we talked a lot about in our book, and we can come back to this against all of these six responsibilities I talked about, there are six mindsets that really do differentiate what we see as the excellent CEOs from those that are fine, but not quite at that level of excellence. And when we talk about the individual's personal leadership model, one of the things that we highlight is do what only you can do, right? This is not about do everything. It is about do what only you can do.

Understand what you as the CEO can add uniquely well to the institution. You also have to mobilize through leaders, which means you need to solve for getting a great team in place that provides you not just with great leverage, but also with the ability to get things done that, you know, normally you might dive into as a detail. So you come to the point of view that these great CEOs and great leaders really do very efficiently manage their time, manage their energy, and manage how they kind of think about the way that they lead, right? And so personally, I think you've got to get that balance right between knowing enough about the details, but also being able to elevate yourself and work through others to get things. Let me ask a dumbass question. Is being a CEO a good job or a horrible job? And do people who are in that job, do they love it or do they go, I can't wait for this to be over? You get both types.

You get people who love it and absolutely, you know, completely committed to it. And there are some that love it in the initial phases, but they do hit a wall at some. And some of them go through cycles where they were very efficient in years one and two. And then there's a son of a sophomore slump and then they come back and then they get a fatigue. But can you be good at it if you don't like it? That would be my question. Do you last very long if you're not in? Yeah, the answer is the ones that do last long, the ones who excel,

who deliver excess shareholder value, who contribute to society in many ways through job growth and productivity. They love it, and they do it really well. But it is. The cliche is accurate. It is a famously hard and lonely job. It's a lonely job. And it is absolutely getting hard. Because if you're the head of Americas, as you are, whatever you are at McKinsey, you have peers, okay?

the CEO of a corporation has no peer. Absolutely. And so that's a different thing. You want to ask the question. So how does it work with the CEOs now where you're seeing all this activism and succession? So one of the, you know, the six things that they're really good at,

is that one of the things you have to incorporate because if you're so good at it, when do you know it's time for you to leave or do the succession planning? How does that work in your experience? Yeah. So what we found is that the truly excellent CEOs, you know, by and large,

this is obviously a generalization, will be in place for seven to nine years. There are clearly exceptions. Jamie Diamond would be one who we think is an excellent CEO, who's clearly gone a long, long time. But in general, when they get to the six or seven-year point, they know when it's time. And so they kind of think ahead two years out,

and the succession planning absolutely begins. I think with James Gohmann did at Morgan Stanley, it's actually textbook. Brilliant. Can we talk about the red flags? I mean, I'm all for talking about excellent CEOs, But as you mentioned, Surat, there's a lot of activism. There's a lot of questions about succession plans at major companies.

What do you think that some of these activist investors are seeing that they don't like when they think it's time to push someone out? Yeah. You know, I think some of the red flags that clearly are evident will start with performance, right? You know, they can see the lagging performance. I mean, again. It can take a while. Yes, it can take a while.

But they see that as a marker. they will clearly, they look beyond the CEO often to a team, right? And is the team truly, truly excellent? I mean, this is the other thing we discovered in this whole notion of mobilizing through leaders is great CEOs focus intensely on building a star team, not a team of stars, right? And I think the activists and the investment community are actually pretty good at understanding. Are they really building a star team around them that's going to help help lead the organization? How much, if any, of CEO performance of how we think of CEOs is simply accident.

In other words, the guy was in the right or the woman was in the right place at the right time or in the wrong place at the wrong time. And I'm thinking, Jensen Wong is a brilliant man. He's made a brilliant company. But he has also benefited from the fact that he happens to be at a company that is in the right place at the right time. Right, right, right. So we should differentiate between founders and people who've grown up in corporations and become CEOs. I think the ones that have grown up within institutions or have come to an institution laterally to be a CEO, I personally think that they've learned a lot of the skills along the way.

So they've learned to have bold vision and direction. They've learned to be excellent in resource allocation. They've learned how to shape culture, how to mobilize through teams. There's certain things that they learn then on the job, engaging the board, managing external stakeholders, their own personal operating. That's a little bit learned when they get there. So I think it's more people actually grow up and hopefully groomed for the role rather than just land in it by accident. Really quick last question. One of the most controversial CEOs out there right now is Sam Altman.

What is he doing right? What's he doing wrong? Or what grade would you give him? someone who was kicked out of his company by the board just to return a few days later. You know, Deirdre, I'd love to be able to answer that question. I just don't have enough insight to give you an honest answer on that one. Fair enough. I don't think anyone does actually.

All right, Vic, thank you very much. Here's the book. CEO, Excellence. Take a look. Take a picture of it. Go ahead. Where are you? Come on.

Come on. There we go. There you go. CEO excellence. Vic Mahhotra, thank you very much for being with us, Dan. Thank you for having me. I appreciate it. Appreciate it.

Thank you. Now to Pippa Stevens. for a CNBC News update. Hey, Tyler, President Biden will travel to Germany tomorrow after he postponed the initial visit last week to monitor Hurricane Milton in Florida. The president will not meet with Ukrainian President Voldemir Zelensky on the rescheduled to trip.

The White House says the two will speak by phone today instead. It comes after Zelensky unveiled his victory plan against Russia today. It calls for an unconditional invitation to join NATO and weapon support from allies. A former Las Vegas elected official was sentenced today. to 28 years in prison for killing a journalist who wrote critical articles about his work and exposed an inappropriate relationship with a staffer.

Prosecutors say Robert Tellis waited outside of reporter Jeff Gorman's home and stabbed him to death. Tellis has maintained his innocence and claims he was framed. And the Navy is searching for two aviators whose plane crashed yesterday afternoon during a training flight in Washington State. Navy officials say the EA 18G growler jet went down east of Massachusetts. out rainier. It's not clear yet if the crew members managed to eject before the crash. Deirdre? Pippa, thank you very much. Coming up, Amazon is increasing its investment in the nuclear industry directing more than half a billion dollars to three nuclear projects across the country.

We will hear exclusively from the CEO of AWS next. Power Lunch is back right after this. Amazon, the latest tech giant to make a big investment in nuclear energy in hopes of supplying the power to fuel its AI ambitions. Diana Oleg joins us. Now live from Amazon's HQ2 in Arlington, Virginia. Diana, I was just talking about Google and Kairos. It feels like a revival and, you know, lots of investment into the technology here. Yeah, exactly, Dirdre. Amazon Web Services is investing more than half a billion dollars in nuclear energy

across three different projects. Here in Virginia, home to nearly half of all the data centers in the U.S. AWS signed an agreement with Dominion Energy to explore the development of an SMR or small, modular nuclear reactor near Dominion's existing North Anna nuclear power station. I asked AWS CEO Matt Garman, why the push to nuclear? We're looking forward and we see the need for gigawatts of power in the coming years and there's not going to be enough wind and solar projects to be able to meet the needs. And so nuclear is a great opportunity.

Also, the technology is really advancing to a place with SMRs where there's going to be a new technology that's going to be safe. There's going to be easy to manufacture in a much smaller form factor. SMRs are an advanced kind of nuclear reactor with a smaller physical footprint allowing them to be built closer to the grid. They also have faster build times than traditional reactors. Amazon also announced an agreement with utility company Energy Northwest to invest in the development of SMRs in Washington State.

As part of that, Amazon's Climate Pledge Fund announced it is the lead anchor in a fire $500 million financing round for X Energy, a developer of SMR reactors and fuel, which will provide the parts and nuclear fuel for that project. At the Amazon Presser this morning, Energy Secretary Jennifer Granholm announced $900 million in DOE funding is now available for those looking to deploy SMRs. We want these data centers to be built in the United States for a variety of reasons, including national security reasons. We want these to be built in the United States. And we know we need additional power to be able to do that. And we want that power to be clean power. And as we said, Amazon is just the latest in a line of big tech companies

investing in nuclear energy to power all that AI that we can't stop talking about. Diana, I'm so fascinated with this story. I mean, like we mentioned, it was Google last week. And there's an important distinction here, right? This isn't like what Microsoft is doing at Three Mile Island. This is developing the technology to get nuclear energy in a different way. That's going to take time, right? And this isn't a sure bet?

Well, I wouldn't say it isn't a sure bet. They expect it's a sure bet. They're going to be developing these small reactors, and it'll take about five to 10 years to get them all online for this particular project. The difference between what some of the other tech giants are doing is that Amazon is actually investing in that hardware, in those small nuclear reactors to get them built.

They already have agreements with utility companies, whereas Microsoft, as you said, is looking toward three months. Island, which exists already, and Google is buying nuclear power, not necessarily investing in building these units. So they will come online at some point between, again, Garmin said about five to ten years. Yeah, it could lead to another group of nuclear stocks, too, in the technology side rising. Diana, thank you so much. And speaking of Dominion Energy, Dominion hitting its highest level in nearly two years on the

back of that deal with Amazon. Up next, we'll take a technical look at that name in three stock line. Welcome back. Time for today's three-stock lunch. We are taking a look at some of today's biggest movers. Here with our trades is Tom Martin's senior portfolio manager at global investments. First up, we've got Morgan Stanley higher after beating earnings estimates. Tom, what is your trade here? Well, we own this stock in our strategies, and we continue to like it.

We're overweight it. I think it's important to look at how we look at stocks, and we want companies that are showing good earnings trends and also have good technicals in the here and now. We like concepts and we like stories, but it's got to be backed up by fundamentals that are actually happening, not that are on the come. And that's what you're getting with Morgan Stanley

is this company has been doing that for a while all year. The company was a market performer up until the rotation started happening in July, and this earnings report was just really putting an emphasis on how they're able to beat with the good fundamentals, really across the board in wealth management, particularly in stock trading and in investment banking. That's right. We know you like the stock. How much do you like it?

I do. I like it a lot. It's one of our top holdings. And what I liked really also on this call was the new CEO. You know, when you hand off, and we had talked about before, when you hand off to new CEO, there's always that period of uncertainty. Well, he did a great job. All his team has done well. and you can feel comfortable that it's in good hands. And you still have James Gorman as his chairman for a little while, but the new CEO has done a great job,

and I think this is going to attract new capital to a stock that most people were to show me stock. It wasn't the J.P. Morgans of the world where, hey, Blue Chip, we should put money, but I think this is going to attract more capital. All right, let's move on to Cisco, moving higher after City upgraded the stock from neutral to buy, saying AI, is going to become a bigger part of the business over time.

Tom, what do you think of Cisco, and do you agree with that? Well, it's certainly possible. They're in those businesses, and they seem to have gotten a trough here in the most recent quarter. But here's a company that's been underperforming for quite some time, and they really haven't been able to execute as well. That's been the problem. It looks as though they have the opportunity to do that with their networking and with their

exposure to the data centers, et cetera. they really have to be able to come through with that. So we think that that's a show me stock and continues to be that way. Finally, we've got Dominion Energy, as we mentioned, teaming up with Amazon to develop small-scale nuclear reactors in Virginia hitting a 19-month high today. Tom, what's your take here? Well, you guys did a great job of talking about that earlier today. And, you know, although they are in one of the best areas for data centers, and they have been putting in nine data centers so far this first half and probably 15 by the end of the year. And they do have nuclear and they do have all the hookups that they need to have. Again, this is a story that

is still in the future. And in the meantime, they're going to grow earnings by five to seven percent, which is in line with your average utility. So the stock may be a bit ahead of itself. All right. Well, Sirat, final thought? They're on Dominion? I think he's right. It is a little ahead of itself. You get this halo effect of AI and nuclear now, so these stocks like, you know, just jump on like Cisco. So you're adding billions of market cap with no earnings. Got to leave it there, Sarat. Great to be with you.

Thanks for watching, Power Line.