Power Lunch - Apple’s AI Unveiling 6/10/24

Episode Date: June 10, 2024

Apple’s annual Worldwide Developer’s Conference keynote just wrapped up. The company had a lot of news, the biggest of which was its push into AI, called ‘Apple Intelligence.’It also announced that users can tap into OpenAI’s ChatGPT when using Siri, but only if a user wants to. We’ll bring you the key highlights from the event.Plus, you can’t talk about AI without addressing demand for chips. Nvidia began trading on a split-adjusted basis today, while rival AMD is one of today’s worst performers. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good day, everyone, welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us. The markets right now, as you see, the Dow is, well, a little bit higher by 8-1-100s of 1%. The S&P 500 and NASDAQ just a handful of points from record highs. But today is all about Apple and AI, the company's Worldwide Developers Conference underway. It's seen as Apple's big chance to show off its plans for AI, which we haven't hurt yet. Yes, we can't wait to.

And you can't talk about AI without addressing. the demand for chips from Nvidia and others. Invidia, look at the share price now trading on a split-adjusted basis today, just 122, but actually slightly higher, and that's helping the broad markets. And its chief rival, AMD, well, that's one of the worst performers in the S&P after Morgan Stanley downgraded the stocks, saying investors are too bullish on its outlook for AI chips. AmD shares are down almost 4%. Let's transition back, however, to Apple as it continues its worldwide developer conference keynote address, where we are still waiting for updates on artificial intelligence where a lot of people think Apple has been on the back foot.

Live on the scene in Cupertino is our very own Steve Kovac, and we're also joined by Tim Higgins, Wall Street Journal columnist and a CNBC contributor. Gentlemen, let's start with you. What are the stakes here, Tim, for Apple? Big, huge. Some people think this is most important since the iPhone was first revealed, really trying to sell the idea that Apple is going to be part of this new wave of, technology going forward, that it's going to be part of the AI future, but it's little yet

unclear what that means for Apple. And I think that's why everybody is tuning in trying to see what's that taste going to be. Steve, does Apple need, I mean, it's one thing to say, as I believe Apple has, that we're all about AI. It's been part of our DNA, part of what we do in every product we make for a long time. And I buy that. But do they need some sort of sex? separate product or separate identifier in this area to get them sort of the kind of momentum that I suspect they seek. Yeah. So there's a different kind of answer to that question, Tyler, because like you said, if you had asked them over the years, are you using artificial intelligence? The folks at Apple would say, absolutely we are using artificial intelligence. You just don't maybe know you're using artificial intelligence. And that's true for so many other companies as well. A lot of stuff happening behind the scenes. What we've seen at Apple, though, over the last 18 months or so, is that kind of conversation around artificial intelligence

evolve. In fact, they wouldn't even call it artificial intelligence until very, very recently. They preferred the term machine learning. Now they're saying this is going to be their breakout moment in artificial intelligence. Tim Cook did, for the record, tease that those announcements are coming today. I know we're an hour into this thing, and we haven't heard from it yet. Maybe when I'm done talking, they will. Because right now they're just talking about the platforms. They're talking about iPhone. Right now they're wrapping up the Mac portion, and I anticipate artificial intelligence has come next.

And then, yeah, it comes down to what are these user-facing features, Tyler, that people are going to want to use that may be playing catch-up to what Samsung and Google have done on their smartphones, to what we've seen at OpenAI. By the way, a partnership with Open AI expected to be announced. We saw CEO Sam Altman here on campus at Kevin Cooperino. So any minute now, we're going to get the answer to your question from, Apple itself, but I agree they do need to show that they have this user-facing generative AI product to match what their competitors are doing. So, Tim, that's kind of the question I have.

Is it as simple as, quote, fixing Siri with which a lot of consumers have problems or issues or find it difficult to use and sort of unhelpful in some cases? Or is it something else? I mean, in other words, I guess the question is, what does Apple have to do here? where I, a consumer, I'm going to say, boy, this changed my life. This changed my experience of their products. Well, I think you're really getting at the core issue here. And a lot of ways today is a tale of two stories. There is a story for Wall Street and investors to get them excited about Apple's potential,

but also more importantly is to show how their products can appeal to consumers. It's still not clear exactly out there that iPhone buyers are excited or even kind of care about this new technology. It hasn't really put and put into kind of the physical yet. And that is kind of where the potential is and also the potential for kind of shrugging, right? Yeah. Tim, do you think it's strange that they're kind of burying the lead here to this extent?

Or what? Classic Apple. They saved the good stuff for the last part of it. Though there had been some teases of AI in the products. They just, as Steve was mentioning, they don't talk about it as AI. Just think about the potential of what the, updates they're making to the headphone, to block out noise. That's all AI in the background. And in some of the

challenge of the culture around Apple for years, they want to focus on what the product does for the consumer and not the inner workings behind the scenes. But right now, we're in an era where investors want to be excited by what's under the hood. Yeah. So, Steve, sum it all up for us here. I asked Tim what the stakes are. Do you agree that they couldn't be higher for Apple? this time around? They are for investors, Tyler, because, I mean, look at how much the stock has lagged behind its peers. So, I mean, we've seen meta just up enormously this year.

InVity, I don't even have to tell you what it's been doing. Microsoft overtaking Apple as the most valuable company in the world earlier this year. And so on down the line, all those companies, we know what their strategy is. We know how they plan to make money if they're not making money already. And Apple just doesn't have that direct monetization story around. artificial intelligence, just the whiz-bang product stuff that we've seen from in the last few weeks from Microsoft and OpenAI and Google. It is Apple's turn now to round out this what we're called this developers conference season, what I've been calling the summer of artificial intelligence.

Apple's going to put a capstone and a button on this whole conversation and give us their take. But at the end of the day, Tyler, the most important thing you need to watch for is not the features, not how cool it is, not if they're catching up to the competition. It's whether or not it's good enough to convince people to upgrade their phones and whether or not they kind of box out some of the older iPhone models on some of these features in order to get that sort of FOMO effect and get people upgrading when the next model comes out this fall, Tyler. You know, Tim, we're told they've just started some of the AI stuff, so we'll, I guess, get some reports from inside the presentation momentarily, maybe within time for you to react to

it. But I guess one question I would have is, you know, people have been critical of Apple's stock because it isn't Nvidia's stock. But isn't Apple's stock trading quite near to an all-time high? True, but you know, Steve kind of hits this point. Microsoft has seen much more dramatic

gains this year than Apple has. Yes, Apple's near that record, but they haven't seen the kind of growth that those people who have, those companies that really embrace the AI technology, at least publicly, have received. So really the concern here is that

If they don't get on that bandwagon, what does it happen to the stock, you know, after that fact, right? We've seen the run up ahead of this. If it doesn't impress Wall Street, that could be a problem. All right, Apple shares are heading towards session highs. As Tim Cook himself has just spoken about AI, let's take a quick listen. The outcome reflects the principles at the core of our products. It has to be powerful enough to help with the things that matter most to you. It has to be intuitive and easy to use.

It has to be deeply integrated into your product experiences. Most importantly, it has to understand you and be grounded in your personal context, like your routine, your relationships, your communications, and more. And of course, it has to be built with privacy from the ground up. Together, all of this goes beyond artificial intelligence. It's personal intelligence, and it's the next big thing. step for Apple. I was curious where the space journey was going to take us.

There it is. Apple intelligence. AI. Exactly. At long last, Tim Cook himself revealing kind of this new moniker, Steve, we're going to hear so much about Apple intelligence. What's the significance? Oh, this is very much Apple branding at work here. Just the way Tim Cook just talked about it, again, privacy and so forth being

taking account. something we don't always hear from the leaders in artificial intelligence. Microsoft, for example, just went through a privacy concern over some of the products that announced a couple weeks ago. But this is Apple saying, we got it right. We're going to make it private. And also, not calling it AI. They're calling it Apple Intelligence, just like they call it the Apple Watch or the Apple TV,

putting their own branding spin on it. The real question is what we're going to see here in the next couple minutes over the hour or so, Kelly, is whether or not this is above and beyond what we've seen from those competitors, what we've seen from Microsoft, but we already stopped from Google in the previous week. So this is setting the stage right now for that. But we do know the marketing spin right now, private, on-device, Apple intelligence, Kelly. Tim, any final thoughts here to sew it up? Yeah, absolutely. Talking about the user experience, not necessarily hanging on the idea of AI, AI, right? This is about the product and what your user experience will

be like, classic Apple. Yeah. All right. Thanks, guys. Steve. Kovac, Tim Higgins, we appreciate your time today. I'm sure we're going to have a little bit more from Apple soon. Yeah, the shares are down about 1%. Coming up, massive shift to the right in this weekend's EU votes. What does it mean for international stocks? We will lay it out. Plus, as we head to break, let's get a quick power check. On the negative side today, Huntington Bank, lower after the CFO shared a light earnings warning at a Morgan Stanley conference. On the positive side, Southwest, climbing on reports that Elliott Management has built a stake in the company. We'll be right back on Power Lodge. Welcome back. All three major averages are inching higher today as Wall Street awaits Wednesday's Fed decision.

Our next guest is not expecting any rate changes this year and continues to hold major positions in AI, security, and select medicals. Let's bring in Peter Anderson. He's Chief Investment Officer with Anderson Capital Management. Peter, did Open AI save the stock market? Well, it certainly has propelled us, hasn't it, through the past year to date? and I still think there's a lot of fuel left in the tank. We just have to be very careful, Kelly, about when this party might end. You know, I'm a great supporter of AI, but I would say I'm a rational supporter. So we're all in this theater, right, watching a great movie.

We know at some point somebody's going to yell fire. And the point is, how do we determine when enough is enough we're at the market top? That's the big question. That's very hard to do. What do you think your answer is? Because I see when you're saying, look, looking at your AI positions now, it's time to define the cell triggers. What are they? It is overdue, actually. And so, you know, normally I pick cell triggers that are financially based, based on the individual stocks, but I'm not doing it this time. I'm using two very simple

cell triggers. The first one is what you might call the better mouse trap theory. So in other words, we're all down this road, the entire internet has been uploaded, and we're waiting to see if this is going to work. What if somebody comes along with a totally different model of how the brain works, and it uses off-the-shelf components? That would blow all the traditional AI that we're following now totally out of the water. Do I think that's possible? Yes, I do, but it's going to take some time. And then the second cell trigger, I would say, is when you become aware of, say, this great disillusionment, for instance, what if a very much a strong influencer comes onto the media and says, you know everybody, I've been thinking about this buildout, and it isn't all

what it's cracked up to be. There is some cracks in the future of AI, and maybe it's time to call it quits. That could also happen, and that's very serious if that does. Interesting. Peter, you have a very concentrated portfolio, as I recall, and I remember specifically that you do. You've added a new name in the portfolio, which is something you don't do all that often. What is it and why? So, well, the good news is, Tyler, one of the other stocks has been acquired, Shockwave

Medical, so that created a vacancy. And I do have a deep bench of candidates. And so the newest name I've added is a medical instrumentation company called insulate. The ticker is P-O-D-D, and it is a remarkable technology that automatically delivers insulin to diabetic patients. You put it on your arm. It stays there for 72 hours. It's waterproof, and you don't have to do any finger sticks to test your blood level, your chemistry, nor do you have to inject any insulin on your own. It automatically injects it, and it keeps it out a much more constant level, which doctors love. How does it different?

from existing, aren't there existing insulin patches or technologies? It actually works with them. The patch that you are probably referring to that we see is a patch that monitors your blood chemistry, but it does not deliver the insulin.

I see. Correct. Yes. Very interesting. How many stocks are in your portfolio and you say you have a deep bench? Do you have a fixed number that you stick with and what is that number? And would you ever go, do you go above it? I say, I can't. keep 22 stocks, why wouldn't you go to 25 if you got three other great ones?

The way I've done this is I say it kind of tongue-in-cheek, Tyler, but I try to find stocks that simply are going to go up. And a lot of people complicate their strategy and they will go on telling you about certain quantitative metrics. But the only thing I also do is I come from the bond world. So I look at the fixed income perspective of things. And I try to identify stocks that have done very well from a bondholder's perspective. And in terms of concentration, this is the most concentrated. I've been 12 stocks. Occasionally, I've been up to 20.

But, you know, you don't have to, it's not a hammer looking for a nail all the time. I'm just trying to find stocks that I really think are immune to today's worries. I mean, today's worries, interest rates, when AI is going to crash, all those things come into play. And so it kind of leads me to a portfolio currently of 12 stocks. I do not have a predetermined number. The number comes out as a result of finding the stocks I like. Okay. Peter, thanks very much.

Peter Anderson, we appreciate it. Oh, welcome. Good as always to see you. We want to check stocks over in Europe as elections over the weekend may signal a change. Right-leaning parties winning seats in the European Parliament at the expense of the left-leaning or green parties. Sima Modi joins us now with more on the market reaction. And it has been especially acute, I think, Sima, in France. That's exactly right, Tyler.

A big showing for Europe's far right, winning more seats than expected in France, prompting President Emmanuel Macron to call for a snap parliamentary election on June 30th. We immediately saw stocks in France sell off the CAC 40 trading at its lowest level since February, underperforming the other European indices, and major banks from credit agrocol, SOCGen, B&P, leading the declines by around 4 to 7% while we saw the 10-year in France hit its highest level of the year. Far-right nationalist did put up a bigger showing in Germany as well, Greece and Italy, which sent the euro, the currency, down to 107 against the dollar, now at its lowest level in one month. Investors at Deutsche Bank write that the outcome of the legislative elections in France might lead to a government less likely to easily comply with EU fiscal rules either intentionally or as a result of a potential weak political alliance.

Other European strategists write that it could push European leaders to focus a bit more on tighter investment. immigration policies, a big push from the right, and less so on the economy. So a busy few weeks ahead with France's snap election at the end of the month. And then there's that UK election on July 4th, the confirmation of Europe's commission president on July 18th, the busy summer ahead, Cal. Indeed. Sema, thank you very much. Sima Modi.

New tech like AI relying pretty heavily on old energy, especially as it becomes more clear that renewables alone can't meet the high power demand of AI. That's next on Powerline. Welcome back, everybody. Roche, one of the world's largest biotech companies, is warning that dangerous counterfeits of his diabetes medical devices ended up for sale on Amazon to be bought by patients across the United States. The company is suing manufacturers and distributors in India where it discovered the counterfeit products were being shipped from. Kate Rooney has the details. Hi, Kate. Hi there, Tyler. So we obtained a copy of the lawsuit, which was unsealed on Friday and originally filed in a U.S. District Court. In Brooklyn, Roche's

Acu-Chic medical devices were being sent from India to Amazon warehouses and then being sold on the e-commerce platform. The devices include blood glucose test strips and lansets. You can see an image here of what a real Rocheque box looks like. And then you're gonna see a fake one. You can see what it looks like.

The name and the product name is misspelled. This fake, meanwhile, has a made-up serial number on the box. You can see multiple serial numbers there. The complaint doesn't say how long these products had been sold on Amazon, but a judge last month did order those sales to be halted and stopped in the U.S. Roach declined to comment, as well as the defendants, which are four Indian companies and their four executives. An Amazon spokesperson telling CNBC it has, quote, zero tolerance for counterfeit products and take swift action to block them and block accounts.

It adds that it also has measures to prevent counterfeits from being listed, guys. Back over to you. Wow. Kate, thank you very much. I hope everyone got those details. Make sure they're not getting the wrong products. And in reminder, as well, as more supply chains move to India, some of the risks there, Kate Rooney. Natural gas, meanwhile, topping $3 for the first time since January today amid sizzling summer temperatures, like you're 96 next week. But looking forward, the weather isn't the only thing driving natural gas demand. Let's get more from PIPPA, Stephen. PIPA. We're talking, of course, about data centers, and energy is the backbone here with McKinsey forecasting.

The power consumption from data centers in the U.S. alone will more than double by 2030. Now, experts say that all this new demand cannot be met by renewables alone, at least for the time being, meeting potential upside for energy and utility stocks, or as well as Fargo put it, quote, gas to the rescue. Now, location is important here since companies closest to demand growth centers could have the most upside. Drillers like Antaro, Cotera, EQT, and range resources all have operations in the northeast, while Williams, Kinder Morgan, and Enbridge own pipelines that traverse Virginia and the Southeast, where data center, buildouts are concentrated. And then there's the utility responsible for supplying power to the data center. Dominion operates in Northern Virginia. Duke is in the Carolinas and Southern Company is in Georgia, with J.P. Morgan saying low rates and speed to market should attract data centers to these areas. And this, of course, all comes amid electrification, reshoring,

and the domestic manufacturing boom. So just bottom line here is a lot of stress on the grid and maybe upside for Nat Gas. Kelly and I both spent lots of our youth in Virginia. And if you've drive through Northern Virginia today. All you see are data centers in Loudoun County. Yeah, data center alley as it's known. Whoa, crazy, man. All right, Pippa, thanks. Let's get to Contessa Brewer now for a CNBC news update. Contessa. Tyler, the Supreme Court agreed today to hear Mehta's bid to dismiss a class action lawsuit brought by investors. It centers on claims that Facebook's parent company failed to disclose how personal user information would be misused by Cambridge Analytica, the consulting firm

that supported Donald Trump's successful 2016 campaign. The investors say shares of meta dropped significantly when the scandal became public in 2018. The high court will hear arguments this fall. The vice president of Malawi is missing, along with nine others who took off on a military plane today. He was heading to the funeral of a former cabinet minister. The president's office says that plane was supposed to land 45 minutes after takeoff, but it fell off the radar and hasn't been seen since. And a stranded kite surfer was rescued yesterday after spelling out help with rocks on a remote beach in California.

A private helicopter spotted his plea for assistance and alerted first responders. It's not clear how long the man was down there or how he ended up on the beach. But local officials say he did not require any medical attention. That's some good thinking right there and a sharp eagle eye from the proper. Yeah, very good. All right, Tentessa, thanks very much. Still to come, J.P. Morgan upgrading Walmart. highlighting its initiatives and innovations amid the current consumer backdrop.

We'll dive deeper into that call and some of the biggest bets from Bentonville after this break. Welcome back. Walmart has been making some big bets to maintain its competitive edge amid a shifting consumer, namely in the grocery and food space. Our Melissa Repco is here to discuss you got to sample some of these new offerings, I understand. Yes, it was definitely one of the most interesting and memorable parts of the trip. We went to the Culinary Innovation Center, which is where Walmart develops a lot of these different food items, and it's come out with a brand new brand called Better Goods. It's a little bit more premium, has a lot of chef-driven items, but 70% of those items are $5 or less.

So some of the items we tried are like creamy jalapeno corn chowder. We tried a raspberry cardamom jam that they put on a sourdough cracker, and they put a little prosciutto on it. They were trying to show us how you can get creative with these cheaper type items, and that you can have more interesting flavors for less. Do you like them? You know, I was pleasantly surprised. It was, of course, a beautiful presentation, and so it was interesting to see how they kind of mixed and matched different items.

And it comes at a time where when the CFO has been talking about how people are looking for cheaper alternatives to fast food. And so one of the things they were trying to show is how they're trying to make it very convenient and easy. Easy. I'm thinking easy. I'm thinking that's what I'm thinking. Look at that. Is this the typical fast food customer? I mean, why not just say we've got $4 fries and a hamburger or something?

It's an interesting twist. Well, this was a more elevated type thing they showed. Of course, the caprice salad is something that you might see on a menu of a fancier restaurant. But what they were trying to show off was the vinegar, the balsamic vinegar on top and the truffle salt on top. And the truffle salt is actually $7, a little under $7. And the balsamic vinegar is a little under $3. And most of these items we tried are not yet available in stores, but are rolling out in the coming weeks, and they expect to have about 300 items by October. This is a private label of theirs that they're pushing here.

Yes. And while it's a fun thing to show off to the analysts and the media who attended like me, it's mission critical for their business because you'll remember about 70 or sorry, about 60% of Walmart U.S.'s revenue comes from grocery. So as they see players like Aldi and Lidl trying to grow, they have to. get more creative. Even some of the flavors reminded me of what you see from Trader Joe's. You know, some of these like creative types of spread and things like that. It feels a little like a foray into the turf that has been owned by Trader Joe's or Liddle or all the way. There's a big emphasis on store brand as opposed to national brand. And the advantage of private brand here, of course, is that you offer flavors you can't find

somewhere else. So the more creative you are, the more competitive you can be in kind of making that person come for their favorite child snacks or their favorite meal solution. One of the interesting things they showed off is we tried a bunch of different appetizers. Think like, you know, game day snacks. And all of the different frozen appetizers cook at the same temperature with the idea being if you're busy and you're preparing for a party or a child's birthday, you want it to be as easy as possible. So they develop that as part of it. So everything is at 375 or whatever. Exactly. Exactly. Because those little headaches can make such a difference when you're short on time. Oh yes. Oh, yeah, you know about that?

We've got a party coming up Friday afternoon. Oh, do we? Fully outsourced. I'll be there. I'll be there. Great. If you could just bring a few apps, that would be great. Melissa, we'll take some Walmart offerings too.

Are you going to stick around for this next segment? Walmart is trading higher after getting an upgrade to overweight from neutral over at JP Morgan. The firm saying the retail giant adds a strong balance of defense and offense on both the top and bottom lines in a soft consumer backdrop. The analyst behind the call is Chris Horvers. Welcome, Chris. Good to have you with us. Thank you for having me. think this stock has a great pairing of offense and defense. Explain that reasoning and how it manifests

itself in what it's doing. Well, it wins championships. At the end of the day, we're seeing some signs that the consumer is getting weaker. A lot of my companies have discretionary goods that should be rebounding in the back half of the year, and that's the way most of the street is modeled if you think about a Target, a Home Depot, and a Best Buy. You know, we're You're looking for a name that has self-help in terms of taking share on the top line and on the margin side so that you can see continued upward earnings revisions. You think that this is going, this stock may go on a multi-year double-digit earnings per share growth rate.

And so you see profitability improving as well as sales, I guess. Yeah, that's right. So if you think about Walmart's mix, it's about 60% grocery and about 30% general merchandise. Walmart is gaining share on both sides. On the grocery side, it's innovation like that former bit that you just did, designed to continue to grow share with that middle income plus consumer. They're growing through great price investment and assortment upgrades, but also now the vendors are coming in behind it because they need to drive units. and Walmart's the biggest player for them. So we expect continued gains on the consumable side of the business. But that 30% that's general merchandise, that's where they're competing with Amazon.

And what was on displays last week was they're improving the assortment and they're speeding up the delivery and they're starting to grow that business 20, 30%, and it's just becoming more significant. One of the interesting things to build on what Chris is saying is that they're able to bulk up their assortment on the general merchandise side without taking on the same amount of risk. As they rely more on sellers for the third party, they can get into more edgy, more, you know, fashion forward or trendy types of offerings, but they don't own the inventory. And that makes a difference on a profitability side as well.

They're also getting into businesses that pair well with the marketplace. They're selling ads as they get more into the business that Amazon's in. Not only do they add that seller, they're then telling the seller, you know, you can get to the top of this list when someone searches for an item like. the one you're selling. So Chris, you mentioned earlier that you see some slowing in the consumer area. What are you seeing precisely? Yeah, you know, a lot of the general merchandise businesses, when we're all sort of stuck at home in early COVID, we pulled forward a lot of demand. Over the past two years, that share of while it was going back in the other direction. Earlier this

year, we start to see green shoots that some early COVID-winning categories were starting to improve, you know, it's a little bit of a stop start now, and it seems like slowing wage growth, some persistent inflation, not easing in the consumer wallet, that general merchandise isn't really coming back as quickly as we would hope. And as we look, stare at the second quarter coming here for most retailers, I think you're going to see some risk that retailers may have to cut the back half of the year. You know, a target might be a good example there where you're getting squeeze with Walmart and Amazon gaining share in both consumables and general merchandise, and that consumer is not looking to this sort of expansive shop.

They want the best value and the best price, and they're going to go to Walmart or Amazon. Melissa, final thought? I think I would echo what Chris said is that, you know, as Amazon and Walmart both grow, a lot of analysts have commented that they're seeing a lot of oxygen sucked out of the room, and that's leaving little room for the players like Target, and it's making it a lot harder for the specialty retailers all around. Very interesting. Chris Horvors, thank you very much. Melissa, great to see you. Thank you. Welcome back

from Bentonville. Thank you. All right, good. Coming up, a cruel summer ahead for home buying. We'll get the latest read on housing sentiment. Power lunch is back in a moment. Welcome back, everybody. Apple is continuing its AI reveal announcing a major partnership in Steve Kovac has the detail. Steve. Hey there, Tyler. That chat GPT slash open eye partnership is official now. Apple just announcing that chat GPT from OpenAI will be integrated into iPhone, iPad, and Mac software. This is going to be more of an optional feature, though.

So the example they gave is if you ask Syria a question and maybe Siri doesn't totally understand or can't accomplish what you want to accomplish, it may pop up and suggest, hey, do you want to ask ChatGPT? And you can go ahead and do that. In fact, Craig Federigi, who is Apple's head of software, called it the best AI model that that's out there right now and the market leader. A few people would probably argue with that other than the folks at Google, et cetera. And by the way, speaking of Google, they, Craig Federigi also said that they're open to other partnerships as well. So while the initial one's going to be open AI and chat cheap E.T, on top of that, we can expect to see other models. Of course,

with the approval of Apple and whatever deal they cut, that will be part of it as well. The event is just now wrapping up, Tyler, but just a few other things that are going on. that they announced on the AI front, it's largely catching up to what we've seen from competitors of Microsoft and the like. For example, if you're familiar with Microsoft's co-pilot product, a lot of what Apple announced is very similar to that. You can ask you questions, like, show me all the emails that Tyler has sent me in the last month or so, you know, and you can send you that kind of thing. So nothing groundbreaking there, some image generating things. The key difference here is the privacy angle that they're

talking about Tyler. And we don't hear that so much from competitors, the AI front, but of course, this is Apple. They always make that a feature. They're trying to put as much of the AI on device as they can, meaning servers won't see it. And when they do have to send it to the server for what they call more intelligence, that is done in what they're claiming is a more private way than competitors can already do. So that seems to be the key differentiator here. I'm not seeing too much new that we haven't seen from competitors before. So if I'm understanding correctly and clarify if I'm not, Siri would still be the default. option for my queries if I want to know, hey, Siri, what's the weather today in Indianapolis?

Correct. But is there a way that I could make ChatGPT my default search? They didn't mention about making it the default. What they showed was two things. First, they showed it could suggest saying, hey, Tyler, we can't answer that question for you or that's, we might, you might want to check ChatGPT instead. That's one thing it can do. Or ChatGPT is already built in there. So it can help you do things like write creative notes and things like that.

If you have a chat chbt account, they said you can log in and use all those features. But if you don't have a chat chvety account or you don't want to have a chat chpt account, there will be a slimmer version of it for free for you to use as well. All right, Steve. Thanks very much. No for the question. Still ahead, we will trade some key movers of the day in a fresh three-stock lunch. And as we head to break, CNBC celebrates Pride Month throughout June.

here is Matthias Krauss of Deutsche Bank. As I entered the banking industry, I was struggling with my coming out because I did not see visible senior leadership at the top of the house. And I realized that people can advance despite their sexual orientation. And hence for me, I also came to the conclusion that for me it is important to speak out and to be visible now as a leader to inspire the same in people. who are just starting at the workplace. Let's get on to today's three-stock launch, shall we? Here with our trades is James Demert, Chief Investment Officer with Main Street Research.

Up first, Adobe stock getting a downgrade to hold from buy from Melius Research. The company, due to report earnings this week, shares are down more than a percent today. James, your trade on this one. Yeah, my trade here is a buy, Tyler. This is a stock that investors just have lost their patience with, and I think that they need to regain it. Thursday, they report. They've beat revenue and earnings the last four quarters in a row. They're just sort of the second tier of the semiconductor revenue. It's going to go into Adobe and salesports and all these other second tier companies.

Investors need to stick around here. Look for those digital media numbers on Thursday, creative cloud numbers. We think they're going to beat again, and the stock's down 25, 26 percent for the year. 25 times earnings, great for a portfolio. I'm very curious about how they evolve in this environment, James. Let's move on to shares at Southwest. Soaring on this news that the activist, Elliott Management, is taking nearly a $2 billion stake, trying to oust the CEO and chair.

The shares are up, call it almost 8% on the news. Would you be a buyer here? Yeah, Kelly, we would have said this is a stock you want to sell on Friday unless Superman comes to the rescue. And that's who Paul Singer is at Elliott Management, I mean, they're going to come in. They take it an 8% stake for $2 billion, really to try to change the management, which has been a problem. You know, the Boeing supply issues have been a problem.

The stock's down 50% in the last three years. So we buy this stock for the trade. I'm not so sure I'd own this for a long term. But Elliot's going to come in there. He's got great track record. I think he's going to make a difference, and the stock needs him. And finally, let's have some donuts. Krispy Cream getting an upgrade from Truist.

to a buy on hopes for a deal with McDonald's. Shares are higher by more than 6%. Is this a stock you would consume? Yeah, it was up 9% at one point, Tyler, this morning. And, you know, I think this is a stock you definitely sell into strength. And there's a few reasons. I mean, I see the upgrade based on the partnership with McDonald's. They can go global.

But let's face it, consumers are really trending towards a much more healthy diet. I think these new generations are forcing us that way. We've got GLP 1, which is, the Novo Nordis, we're an ozempic type of drug, which we are a buy on the Novo Nordus. But we're a sell here. I also think, in our view, is the novelty is worn off on the Krispy Kreme brand. And that's a problem for these types of companies. So we're a seller. All right. James, thank you very much. No to the donuts. No. All right. Remember, you can always hear us on our podcast. Listen and follow Power Lunch, wherever you go,

wherever you listen. And we'll be right back after this. Let's give you a quick market check as we round out the hour. The Dow industrials are higher by 52 points, 38,852. That's a nice little gain there, a little bit of a move higher today, Kelly. Speaking of a move, higher mortgage rates are on the rise again today. As a new report suggests the summer housing market could be pretty bleak. Let's see more from Diana Oleg. Diana, what are we learning?

Well, Kelly, high mortgage rates combined with high home prices and throw in a very little supply of homes for sale. It all has a record share of consumers now down on home buying. 86% of consumers surveyed in May said now is a bad time to buy a home. That according to a monthly survey from Fannie Mae. And it's the highest share in the survey's history, which goes back to 2010. Now, the share of consumers saying it's a good time to sell dropped from 67% to 64, but that is still a majority. Mortgage rates had fallen back to the 6% range to start this year, but then shot up in April. They are now rising again, taking a big jump Friday after the stronger than expected monthly jobs report. The average on the 30-year fix rose again today to 7.17 percent, and the

next big move could come on Wednesday in reaction to the monthly release of the Consumer Price Index. Now, very few consumers, however, said they think mortgage rates will go down this year. More said they will go up, but most in the survey said they expected them to stay the same. Interesting, though, more consumers reported their household income has gone up and 75% said they're not concerned about losing their jobs, which guys would make you think they'd be more bullish on home buying. Yeah, so usually job strength is a key indicator, job growth, job strength, incomes is a key indicator of resilience in the housing market. But here, I guess it's just people are frozen in place with those rates at 7%. Yeah, I think it's just affordability, plain and simple, even if some people can't afford.

it, they're looking at this market saying it's just too expensive. Just too expensive. Are there any pockets of the country where the market is much more healthy and brisk than others? Well, parts of the formerly very hot pandemic markets are starting to ease up price-wise. That's Austin, Texas, parts of Phoenix, and a little bit more in the south. But again, in the west, in the north, in the northeast, on the east coast, price is still rising nationwide, and the gains are still very strong. Yeah, and people getting a lot more than they're asking price in certainly the areas around New York City. Diana, thank you, as always.

Great to have you here. All right, we've only got two minutes left in the program and several more stories. You need to know. So let's get right to it. Shares of many Japanese automakers plunged in the past week after the nation's transport ministry uncovered false data used to certify certain models. Toyota, Japan's largest car maker, lost nearly six. $16 billion in market value last week alone. Japanese officials also found irregularities in certification applications from Honda, Mazda, Suzuki, and Yamaha. They claim the companies either submitted false test data or falsified the vehicles used in the crash tests.

Some of the auto companies say, though, however, that they were actually applying more stringent standards, believe it or not, than the government required here. nevertheless, Toyota, which is largely regarded as the good boy in Japan's manufacturing area, taking a really hard hit. Well, speaking of production, gold miners are struggling to sustain production growth as deposits are becoming harder and harder to find. The World Gold Council says production growth has largely plateaued in the past decade, including just half a percent from 2022 to 2023. Maybe you can feel better about owning some in that supply shortage. And a controversial decision which could have a big business impact. USA basketball leaving Caitlin Clark off the Olympic team.

According to reports, the committee was worried about the potential reaction if Clark was selected but didn't get much playing time. There's been a long history of so-called rookie players being chosen for the Olympic team, both men and women. And often those players do not get much playing time. I'd love to know more about why this decision was made or can it be changed. That wasn't the only big basketball news. If you haven't heard already. No. Connecticut coach Dan Hurley is stay. Oh, he's going to stay. Oh, yes. He turned down the six-year, $70 million contract to coach the Lakers, so he will instead pursue his third straight NCAA title on his current contract of $32 million over six years, which he signed last year. But the governor of Connecticut said he'd make him the highest paid coach if he stuck around. Well, I'll tell you, I think he made the right choice. I'd much rather be a coach at the college level. I don't know.

Than the pro level. Thanks for watching Power Launch, everybody. Closing bell starts right now. Thank you.