Power Lunch - Apple’s Texas Manufacturing Site, Energy Power Picks, State of Software 8/13/26

Episode Date: August 13, 2026

The S&P 500 and Russell 2000 rose to new all-time highs on Thursday following more encouraging inflation data.  Brian Sullivan and Kelly Evans sit down with Tortoise Capital’s Rob Thummel to break down his latest energy stock picks and which sectors he believes will outperform in the coming months.  CNBC’s MacKenzie Sigalos also joins the show to report on the new manufacturing site Apple is opening in Houston, Texas, as part of its $600 billion U.S. investment push. The anchors also speak with Jefferies analyst, Brent Thill, on the latest software outperformers as well as the breaking headlines that private equity firm Silver Lake is in talks to buy the human resources software maker. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The markets. Ed Records and some big names hit new all-time highs. Welcome to Power Lunch, everybody with Kelly. I am Brian. Leading the markets once again. What else? Tech and the AI trade, a big event happening right now in Houston, Texas. Apple, expanding its manufacturing. CEO Tim Cook speaking live at this hour. Plus, refiners are, well, on fire. The energy stocks are back in focus. But the real heat is in this trade. Look at these refining gains here to date. Tight fuel supplies, resilient demand, and stronger crack spray. as they're known, are lifting profit expectations for the group. The question now, can they keep running if crude stays volatile? Our energy playbook is coming up. But let's begin with some breaking news this hour. Apple opening a new manufacturing site down in Houston, Texas. Mackenzie Segalos is here with all the details. So, Cal, what we're looking at is a Houston facility expanding.

We're basically doubling the footprint of what Apple already has set up there. So they make AI servers now. They're going to be starting to make the Mac. minis. This is more of a consumer-facing product, and they're opening something called this American manufacturing facility that's essentially going to be a training ground for new talent. And then we should emphasize, Apple has built out, I don't know if you still have that map, but they've built out quite a bit of U.S. manufacturing locations. This is just the latest. But this push, this is not the first one. They are now trying to do something here at scale and

with a product that is pretty recognizable. And it all goes toward that bigger $600 billion number of what they're going to invest in the U.S. and they've also said that all the refunds that they got from tariffs will go into U.S. manufacturing. So we're talking about Texas, but we're also talking about investments in Arizona and Utah and Michigan. And part of that is just in the supply chain, but it's also in some of these first party construction sites.

But what's different here, because in Austin, you've got the MAC pros, but that's a $6,000 plus product. This is consumer facing. That's not all that's different here. Why are we leading the show by talking about Apple? We'll go back to that video. We're leading the show by talking about Apple because it's not just Apple. Commerce Secretary Howard Lutnik is on site.

This is a big White House push as well. Is it not? Like, this is... Tim Cook is going to be there with Commerce Secretary Lutnik in Houston. This has got to be one of those things that I'm guessing. The White House is probably also going to talk about. Absolutely. This is basically Apple's.

showing that Trump, President Trump's big push to bring more manufacturing back on shore is working. And so that's why you've got Howard Lutnik speaking. You've got Tim Cook speaking, which, by the way, we are in his final days as CEO. So this is something that Tim Cook is known for, supply chain, appeasing the White House. This is really a masterclass in keeping the White House happy. And also, what's going on at the same time is that Apple is trying to get commerce to allow them to use Chinese memory chips. You know who's in charge of that? Howard Lutnik. That's a great point. And here's, by the way, the map showing some of it. other U.S. manufacturing investments.

You can rattle off these states, Mac. It's certainly not just Texas at this point. Definitely not. And part of this is, you know, TSMC's Fab in Arizona and getting some of these chips made with Texas instruments, so it's more on the supplier side. But this is a really great way for the Trump administration to say a device that you're using every day.

The Mac Mini, that's used for AI agents run at home. That's made here because Trump is one of the iPhone made in America for a while. Apple's not going to be able to do that. They did shift, what, one and four iPhones now made in India, so they've shifted it away from China. But this is a really big win for the White House. So your name is McKenzie, but I think when you talk about Apple,

we should just call you Mac. I just feel like that. It's ironic. Mac on Mac. That somehow fits. And what you just said caught my sizable ears, which is so Apple wants something that the Commerce Secretary,

I keep saying Treasury, it's been a long day, Commerce Secretary could possibly provide. Exactly. So CXMT, that is the biggest D. RAM supplier in China. It just went public in Shanghai. It is now the most valuable company in that country. Apple wants, reportedly, is already testing their chips, both for the Mac and the iPhone, but they need the blessing of the White House in order to actually use it. Now, this company is on the

Pentagon's 1260 list. Now, that basically says that there are ties to the Chinese government, but the list that has teeth is from commerce. That is the entity list. And if they get the blessing of Howard Lutnik to be able to use it, that opens doors for them. So they're not just confined to three main memory suppliers. They could diversify it a Chinese supply. And what's really key about getting U.S. buying is they can customize the chips, not just buy them off the shelf. Game changer. Well, it's a game changer, I think, also for Houston. Houston, obviously, a city close to my heart. It's something everybody thinks about with oil and gas. Now we're looking at a city that not only has a vibrant medical and medical arts community,

but also is now adding some commercial manufacturing for technology. I've got to imagine, if I'm say it, because I know you will. $600 billion total U.S. commitment across Apple, there's some jobs coming with that, I would hope? Well, this is exactly what I want to find out. One, how many jobs are going to be a part of this Houston expansion if they're doubling

the site to now make Mac minis? What percentage of overall Mac Mini production is coming back to the U.S.? Those are questions they are not answering at this point. But part of Apple's argument has been we don't have the trained workforce to be able to build up more of the supply chain in the U.S. And that's what this whole groundbreaking, this

ribbon cutting they're doing today is all about training up American technicians to be able to fill in some of these gaps for them. So looking to get that answer when they speak. I will hear from Cook within the hour. Yes. And while this is about Apple. Lutnik, I think yesterday was also involved with the Ford announcement that they're bringing back Lincoln production to this country, which is going to be in maybe Kentucky and Chicago. So while this event today is about Apple and it's obviously much bigger, probably a lot more at stake there. There's many companies involved in this reshoring effort. And I imagine that this is also just a preview of what Tim Cook's new role is going to look like as he looks to facilitate these relationships with not just the White House, but a lot of these international

players. He's actually done a great job of navigating Beijing, cutting specific deals for them with respect to Apple app store fees. And so kind of bring this back to your point, though, Kelly, this big manufacturing push. This is what the White House has wanted to hear. This is what Tim Cook has navigated so well as he evolves what the supply chain is capable of for making Apple products. All right. Mackenzie, we'll see you again as we get more from this event, this launch McKenzie for now, thanks. McKenzie Segalos.

All right. In the meantime, let's try to help make you some money as we are near overall record highs because everyone has been trying to figure out which is the non-obvious company or companies that are actually AI plays in disguise. What are we talking about? Well, let's take a case in point, Caterpill. The market figured out that Kat has a big equipment business that can help power plants that power data centers. That's powerful.

But what other companies may be AI plays in disguise. Here to help us answer that question is Bernstein, senior analyst covering machinery and electrical infrastructure, Chad. Diller, Chad, welcome to power lunch. Good to have you on. Thank you for having me on. Okay. So Caterpillar, people figured out big engines, they can kind of push gas through those big pipes. Are there other companies that you follow and rate that are AI plays in disguise?

Yeah, absolutely. And I think we need to focus on what the bottlenecks are, right? It's power and labor. On the power side, like you just said, you know, Caterpillar, it's an obvious one power generation. But there's also another way to improve power, and that's by raising the voltage. And I'm talking about high voltage transmission lines. I'm talking about raising the voltage in data centers. It'll massively...

Sounds like that's a quantum services type business. PWR, they do power lines? So, yeah, it's Quadet Services. You like the stock? They're an 800-pound gorilla, basically, in the room. But you've also got Eden as well. They're going to be really well positioned on 800-volt side. That's an opportunity for them to increase their wall chair and tan.

What's the kind of just backing out for a second here? How would you describe this category? Sort of say under the radar AI machinery plays. Are they on everyone's radar now? I mean, to Brian's point, isn't everyone just desperate for any little angle or play on this? And is there any risk that data? center construction could be slowed down? Yeah, no, definitely.

So I think, you know, in terms of like what's under the radar, I think folks, you know, get the fact that there's, you know, a labor shortage, but there's many other opportunities to find a solution. So, for example, modular fabrication, this is an emerging technology in the construction job site. You're taking the work from the field over to the manufacturing facilities. This actually expands the opportunity for the companies like Eaton. There's a company, Legents, that does a lot of the engineering.

procurement, construction, the fabrication. These are some of the names that aren't really appreciated under the radar, and you don't necessarily think it's going to be there. And just to go back to this larger question, does it impact these businesses in an material way right now at all, that there have been, Texas, moratorium on new power hookups, New York moratorium for one year? I mean, we're seeing a little bit of momentum around those trying to hold rapid construction of data centers.

Yeah, that's a great question. So I think we need to take a zoom out and really think about the fact that the pipeline of projects have increased by 3x for data centers, just to put some numbers around it. 300 gigawatts, that's as much power as almost as much power as the U.S. consumes. Wow. And so if you think about the amount of delays and cancellations, obviously they go up when you have your pipeline going up. And we track this.

You know, it's been about 11% of stranding capacity that's, you know, been existing over the last, you know, a couple of months. That really hasn't changed. So no change in terms of kind of projects being called off, just what you would expect from overall increase. Exactly. I mean, the quantum of opportunity is absolutely massive. And we're still, you know, short labor. We're still short power. And a lot of these companies, you know, solve that problem. And you want to be where the bottlenecks are. Okay. I think to Kelly's point, there is also a school of thought that some of these projects, 300 gigawatts.

I mean, literally, as you said, almost the entire consumption of electricity for the United States being basically doubled. I mean, lack of a better term, how much of this may not get built? I mean, I think that's, to Kelly's point, the worry that a lot of these things, you're sort of put in a queue to get built, but then may not get built, but that people want to be in the line in case they need to do it. Yeah, absolutely.

So going back to that 300, actually, 380 gigawatts worth of a pipeline, even if you cut that by two-thirds, that's 130 gigawatts worth of work, and those are high-quality projects. And so we're building, you know, probably around 10, 12 gigawatts per year right now. Wow.

And so over the next five years, there's still a lot of room in the pipeline to see a lot of that work, maintain and continue. We just saw this big announcement by NVIDIA this week to line up half a trillion in financing commitments to kind of roll out more compute as an asset class, get more investors involved. And they talked about, I think it was Larry Think who said it's 50 or $60 billion per gigawatt hour. So when you're saying we're bringing online that much, I mean, that's a lot. It's really expensive. And can you just kind of rattle through all the companies you've started to mention a few of them that you think can be beneficiaries of this spend? Yeah, absolutely. I mean, of course, you know, Caterpillar and Cummins and those guys, you know, benefit from the power generation side. But then if you think about, okay, well, you need, when you build a data center, you need to power it, obviously, but you need to actually cool it as well. And so companies like Eaton do that. You've got the component manufacturers like Hubble, who actually, you know, are the nuts and bolts that actually stitch all the stuff together.

You've got the labor guys. You've got the, you know, the Qantas services that built the long-haul transmission lines, but also go in the data centers to fit all the stuff together. You've got the allegiances of the world, which do the engineering, they do the procurement, they do the fabrication, they do the actual construction and installation. What about S.U.? Now talking about Syracuse University, Schneider. Yeah, absolutely. How could I forget Schneider?

So Schneider, you know, there's a group of like the power distribution companies, you know, Eaton, Schneider, ABB, Siemens. Those are kind of like the big four guys that are going to be really well positioned. When I talk about, you know, more vertical integration that's going to be happening, these guys are the ones that are going to be really well positioned because they're the ones that can actually bring a turnkey system in rather than going from one vendor to the next vendor, getting all the different components.

It's way more efficient, and that's why the wallet share is going to increase for these guys. And so it's almost, if I were to sum this up, I'd say headline risk notwithstanding, it's full steam ahead for a lot of these players. I mean, no pun intended, but meaning that there's no sign for you that this is slowing down. Nope, it doesn't seem like.

I mean, I think if you look at utility cap-ex on a multi-year basis, up 20%, and that compares to a couple years ago, up 10%. We're doubling the rate. It seems like there's a lot of room to run. All right. Great to have you here. Thanks so much. Appreciate it. Thanks. Chad Dillard of Bernstein. And we're just getting started.

Still ahead, the S&P and the Russell 2000s hitting new record highs. With industrials, financials and health care sectors all doing the same. Is rotation, like Lizanne said, the new momentum trade. Lisa Shalot of Morgan Stanley weighs in on that. But after the break, refiners are running red hot, hitting fresh records again today as well. Is there more fuel in their investment tanks? We will describe that. Talk about it next here on Power Launch, though going anywhere.

All right, if you are a regular power lunch viewer or listener, and we certainly hope you are, you know that energy has been one of the big money-making sectors this year. But if we dig in a little bit more than we even just did, there is one other corner of the market that has been hotter than hot. We're finers. Look at these monster gains. Marathon Petroleum, Valero, Phillips 66, all three hitting new record highs again today. The question is, with these gains, can you still make any money? Let's ask Rob Thummel.

He is senior portfolio manager Tortus Capital, Rob. Listen, it's not just them. It's PBF and delicate. Some of the smaller ones as well. Can you still own and make money in these refiners? No, thanks, Brian. And Tortish, you know, we look at all the energy sector and the entire energy sector.

And I know you remember also that, you know, the refiners have had the golden age of refining a couple times. And I think we're back in the golden age of refining. So the answer is, yes, you can still make money in refiners. You know, what investors are looking for? and what refiners provide is free cash flow. As you know, the refining system and the refining inventories for gasoline, diesel, jet fuel are all low, very, very low right now. So the refining margins are actually a bit higher.

And so the current estimates are not really reflecting the current refining margins. And so we just see this as an opportunity for refiners to continue to generate free cash flow and return that to shareholders. in the form of higher dividends, as well as stock buybacks. Well, I think, Rob, to your point, people have been burned, right? Because these companies live and die by what they call the crack spread. They live and die by the difference of what they buy oil at and where they can sell it. And that moves all the time.

Why are you confident? Yeah, the durability. You're right. The durability of the refining margins has been something that has kept investors away from this particular sector. What we like to look at it toward us is, you know, where's there an undersupplied market? And if you think about what's going on in refining right now, it's undersupplied. We don't have enough refiners, right? We're really fortunate that during COVID and during some capital discipline that our U.S. existing refining fleet actually went out and did the work they needed to do to maintain their facilities so that now, when we are short refining capacity, right, that our refiners in the U.S. can actually produce.

at over 100% utilization rates. And so that will continue for an extended period of time because globally, refining capacity is short. It certainly is. Any names in particular, Rob, that you like right now? Yeah, well, MPC, Marathon Patrol, or MPC's one. Valero's another. MPC's got a really large pre-cash flow yield

and continues to do a fantastic job of managing that company. Valero, we like as well. primarily because of its export potential as well, as well as its ability to generate a lot of free cash flow. But the U.S. actually is providing, like it does for a lot of energy products, a lot of the gasoline, diesel, jet fuel for the rest of the world. So refined product exports, like LNG exports, like oil exports, are at record highs because the U.S. has become really important to not only just domestically but globally into supplying. you know, the global refining market. Rob, while we have you, the Wall Street Journal today, was highlighting how Elon Musk is turning to natural gas to help power's new chip facility.

I mean, that's a big deal, isn't it? What does it mean for both the, you know, price of the commodity and for the producers? Yeah, huge, Kelly. So, you know, Tornets, we've been talking about this for a while that, you know, you need a lot of electricity, right? Electricity is going to be the new oil. Well, what's our largest supply source for electricity? It's natural gas.

And so Elon Musk, we would agree with it. Elon Musk, you need a lot more natural gas. And so you need a lot more natural gas produced. You need a lot more natural gas stored. You need a lot more natural gas transported. And so there are a lot of opportunities there. And we know, we capture a lot of those and a lot of our funds that we focus on because that we think natural gas is the future. And it will become a much bigger piece and maybe even larger than oil in the next couple decades as, you know, AI is the next industrial revolution. Yeah, I can certainly imagine that. Rob, thanks very much. Really appreciate it today. Here's a great, here's a great, I got to say this, great trivia question. So the refiners, they've all done well. We think most refiners are based in Texas, right? There's one stock that's up 179% this year. Wow. In which state is this refiner based?

Wisconsin. No. The other one. New Jersey. Correct. Wait, what? PbF Energy based in Parsipini, New Jersey is the number one performing refining stock in America this year. Why are they based in New Jersey?

I don't know. Are there operations in New Jersey? New Jersey has everything good. Has the shore. A quick look at how... Has us now. It has us. Has us.

Let's look at how much we're paying at the pump right now. We're just talking about the low price of natural gas. A little different story for gasoline. 4.07 a gallon right now, according to Gas Buddy. And guess what? That is its highest level ever this late in the calendar year. Gas prices have never been above $4 a gallon at this point. Brian.

Adjusted for inflation. I'm wondering about that too. Yeah, no, that's not correct. They were $4, five or six years ago, which means that's... But do you think they... Is it possible they rolled over by this time of year? I don't know. Let's find out.

I pay... So, speaking of Wisconsin, I paid $5.70 a gallon in Ohio, Indiana, Michigan, and Wisconsin in August of 2020. Right. So you'd say... I know because I write it down. The nasty. You write it down. Because I'm a loser.

You are. something else. I know. I just want to know. Who writes down the gas. Me. All right, coming up, call it a memory lapse. Maybe I just had one. One of the years' hottest ETFs down 30% from its high is now the time to buy the dip. We'll navigate the markets next. All right, this snazzy animation and graphic give it away. It's time for your market navigator segment. Let's talk about technology. Some DRAM stocks. Memory. I've had a bumpy ride this summer. But is the sell-off actually a warning or maybe a buying opportunity? Your guest says this may seem like a crash, but context always matters. Todd Gordon is founder of Inside Edge Capital.

He is a CNBC contributor. He's got a sweet beard and today he's wearing a tie. Why does context matter here, Todd? Hey, Brian. Thanks for having me. So, okay, yeah, we're off 45%, which seems catastrophic, but we're up, say, 200% since this ETF, DRAM, which we're talking about, came onto the scene. So, you know, as you said, in this summer, there's been a lot of rotation out of technology into cyclicals, financials, and, you know, sort of energy with geopolitics and health care. But what I would say is also within technology, we're seeing software kind of come up here in June and July against semis in memory, but that right now is starting to end. And again, with DRAM, I want to focus on the South Korean aspect of this.

two names you know obviously Samsung and SK. Hynix. I'll just throw Brian, if you can, a little macro tailwind. I did an article on CBC Pro about this. There's all this talk about the Fed raising rates, right? Well, if you look at the two-year yield relative to Fed funds, right now it's about 40 basis point spread. Historically, over the last 30 years, you're not going to see the Fed go on a tightening cycle until it gets to about 80 basis points. And that's going back to the mid-90s. So I think from a macro point of view, the lack of a stronger dollar higher rate should give that South Korea stocks the bid as well as this overdone memory sell off. Any in particular, Todd?

Sure. I mean, you've got to love Samsung. You've got to love SK Heinix. And I think even with bring it back here, Micron and, you know, Sandys, not as much, but the Ford valuation that some of these memory stocks are priced at, they're still cyclical, that there's a finite demand. Like, even let's go to Micron, if you don't mind. 2025 Micron, they made $8.29. I'm sorry to read my, I got to commit these figures to memory.

In 2026 made $73. In 2027, we're expected to make $155 per share. In 20208, probably, they're only looking to go 169. So into 2028, they're pricing that finite, cyclical nature of memory out. What happens if it's not finite and secular and the AI trade is not going to fall up the cliff as demand comes off and CAPEX is the problem. So these stocks are such good value. I feel like we have to look to buy. I just pullback into support in DRAM. I own it already in the growth portfolio, but I'm going to look to add to it. All right, Todd, Gordon, founder of Inside Edge Capital and a CNBC contributor, Todd, I'm going to tell you and everybody else. If you didn't know, by the way, there is actually an SK Heinex deep dive inside, rare look at the new plant on CNBC.com right now as of today. How's that for timing?

Works out. Let's go. Let's go. Todd, thank you. Thanks, guys. Let's get over to Kate Rooney now for the CNBC News Update. Kate? Hi, Kelly. In a new look at the cost of the Iran War, the Washington Post reporting that the U.S. military has lost roughly 25 percent of its fleet of Reaper drones. The drones used for surveillance and targeted strikes can cost between $30 and $50 million each. Military

officials telling the Post that at least 45 of these drones have been lost so far. Republican Congressman, meanwhile, Max Miller of Ohio, is being sued by his ex-wife amid an ongoing custody battle. The suit is filed on behalf of the couple's two-year-old daughter after Miller and his attorney included a nude photo of the girl in documents Miller made public as he denied allegations of abuse. The suit is seeking $150,000 in damages for each time that photo was downloaded. And finally, the future of the Kennedy Center up in the air again after the Board of Performing Arts Center voted once again to temporarily close for renovations. That is according to the York Times, the board also voting to add the inscription restored and renovated by President Donald

J. Trump to that building. The decision will be reviewed by a federal judge who originally ordered the president's name to be removed. Kelly, back over to you. All right, Kate, thank you very much. Still to come, a widening rally with stocks at record highs. Memory is hot again, but so are industrials, financials, and health care. Is rotation the new momentum trade? Lisa Shalett weighs in next. Cisco shares are now plunging almost 10% today after their fourth quarter earnings, after their annual revenue forecasts weren't quite able to meet Wall Street's lofty expectations. The stock is the worst performer in the Dow, which it's weighing on. The NASDAQ 100.

It's the second worst in the S&P today. Tapestry is worse, by the way. That's down 16%. Still not enough to slow down the broader markets, though, because as you can see, the Russell all-time highs today. S&P went over 7,800 for the first time. NASDAQ still flying. So can anything get in the way of this market?

Joining us to lay out some of her, well, let's just lay out. You can lay out the risks, Lisa. But we also, Lisa Shalett is the CIO at Morgan Stanley Wealth Management. Does this make sense to you? Well, how would you broadly describe the kind of trading activity, market activity that we've seen this year? Well, that's a big question, right? So I think what we've seen this year is a market that's gone through a couple of phases, right? The first half of the year was kind of lots of anxiety about the AI trade, a repricing of risk, a return of risk premiums, kind of in the May to July time frame.

We had the mania around semiconductor stocks in there, and we've had the huge rotations underneath the surface of the market. I fundamentally believe as we came into August, I was the most constructive that I had been the whole year. Really? Why? And the reason really comes down to the fact that we were able to really look at what happened with second quarter earnings. I mean, second quarter earnings off the charts.

Yeah, up 50 percent. And the key for me was breadth, right? So never before in the last 20 years have we seen 88 percent. of the companies that are reporting beating. And we're not just talking about the AI ecosystem beating. We had financials beating. We had health care beating, right? And so to me, that broadening of the market

at the same time that you had some of the valuations improve, right? The P ratio on this market has come down from 22 to 20. We've had a little bit of deconcentration, right? Remember in the beginning of the year, those top 10%. 10, people were coming in and talking about, you know, 41, 43% of the market cap is in the top 10 names. Okay, we're down to 38, right? Not gangbusters, but we are deconcentrating the market. And this is a market when you take a step back is hitting new all-time highs on record, record

earnings in the face of higher oil prices, in the face of higher interest rates, in the face of high uncertainty around a new Fed chair. This is a resilient market. It's very well put. Why? So I think a lot of it has to do with the fact that we've got a lot more stimulus in this economy than we're really acknowledging. Like from where? Well, this is the part that doesn't make me feel so good because we have to talk about the deficit.

It's not, yeah. It makes you think of a sugar high. It's not just the one big beautiful bill, although that certainly has. helped. But we've got a lot more monetary stimulus in this economy than people think. If you look at M2 growth, right, you look at the liquidity. Every time we talk about it, I know, I know, I know. You Milton Friedman died. I know. Yes, I know. But you're looking at bank lending, right, is up annualizing in about 8% per year. And what I remind people of is just look at some of the ratios here. We have real GDP has been growing at 1.5%. We have nominal GDP growing at about

seven. We have S&P 500, top line growth this past quarter growing at 17 at driving bottom line of 30. So you're making the case. So look, we're growing earnings in this economy, literally 15 times, right, real GDP growth. How often has that? How often has that? happened? Not often. Does that mean the Fed should be, so it's so interesting you raise this because Nancy Lazar was talking about the paper. Yes, yes. She said the same thing. She said, I think there's too much liquidity in the system. She talked about bank lending. Obviously, the deficit plays a role. So should the Fed spoil the party here? I don't think the Fed will spoil a party. I don't want to say what they should do. I just, I'm going to tell you what my guess is that

they're going to do. I don't think he's going to spoil the party. And I think enough of the data is going to cooperate with him. But if you take a step back, for the largest companies and for this market, the stimulus is hot. There is a lot of liquidity. There's a lot of pricing power, right? And there's a lot of profit. How long do you think it's going to last, Lisa? So this is the key thing. It's really about looking at where the pricing power is, because it's the pricing power, I think, which is the thing that can go away. Productivity is going to be much more sustainable. Where are we seeing productivity? We're seeing productivity in parts of tech. We're seeing it in health care. We're seeing it in financials. We're seeing it in energy. Where we're not seeing it is

semiconductors. Semiconductors is all priced to us. And one of the things that we have to remember is through this whole AI ecosystem, that pricing pressure, the scarcity, the bottlenecks, that is getting passed on. So then a last quick question, and this point has been made, and you're right to raise it, if pricing turns, if it softens and all of a sudden, watch out below for some of these semi-names. Does a broad investor, like me, at 401K, S&PVFAR. Do I have to worry about that? Can this rotation that we've talked about continue to kind of carry the markets forward?

Or are we probably going to see more of a breakdown if that key leadership group cracks? So if you are an index investor, if you're an active investor, you're going to be fine. You're going to be just as good as you were from May to the end of July when unbelievable things were happening under the surface and it just felt meh and flattish and we couldn't get out of 7500, right? So I think we're going to be fine because I think that there's beneficiaries to lower semiconductor prices. And some of those beneficiaries are going to be the hyperscalers. That's a great point. And so I'll leave you with that one idea is that, you know, I know you've covered a lot of AI. Can we still call them the Mag 7?

Nope, nope. So I want to be super specific. I want to say, you know, the old cloud guys who are the hyperscalers. So you know who they are. I'd be owning those guys because I think they're in it for the long run. And right now, they're absorbing. Even meta? No, nope.

Nope. They're new. Or no cloud. Nope. Neal cloud. So just Google. Cisco. Amazon.

Cisco? Cisco? No. No? No. old two? Yes. It means I'm super old. Come on, Lisa.

How old are we talking about? We're talking about the traditional cloud providers. Genesee and Wyoming Railroad. I'm going to say the top three. Bell Labs. I'll still have my job with my compliance people. The top three. Okay.

You know who they are. Very fun. Lisa, thanks. Absolutely. Lisa Shalett, Morgan Stanley, wealth management, CIO. All right. So in the meantime, as we showed you right at the top of the program,

we are looking at a live shot in Houston. Texas. You might recognize that gentleman. That is Apple CEO Tim Cook. He is speaking live in Houston. This is an Apple Texas campus expansion that will double Apple's manufacturing footprint in the state with Mac Mini production, marking a first for U.S. Assembly of the product line. Obviously, if Tim Cook or Commerce Secretary Howard Lutnik, who is also there, it's a big event. They make any headlines that are either noteworthy for Apple or the AI trade or, or commerce or jobs, we will bring those to you. Let's get to the bond markets now. Another cool inflation report helping to push down yields today. Rick Santelli joins us now for more. Hi, Rick.

Hi, indeed, Kelly. And you know, looking at that report, we had three monthly numbers and only one was tied with last month. The other two were a bit higher, but they're all close to expectations. The year over year were sequentially lower on all three metrics. And the reason I point that out, I'm not so sure that we could say it was a cool report, but it was definitely as expected with no negative surprises. How did the market react? Ten years a good candidate. There's a 12-hour chart. We could see the big move downward, and that happened, of course, right around 8.30 Eastern.

But look at the way it came back. It shouldn't be surprising the catalyst. Oil. Overlay oil on that, and there you go. That took the air out of the sales of buying that was pushing Treasury yields down. Now, still, they're down on the session. 463 right now in a 10 year. That's down seven basis points. Four-13 and a two-year is also down seven basis points. But there's an interesting dynamic on the two-year and the 10-year. Let's look at a

one-month chart of the two-year. And what you can see is, is that that's the 10-year, excuse me, the 10-year yields are down, but they're only down about 10 base points from their 474 high. But look at that two-year. It's going to close at a one-month low-yield close. It's twice the distance. 20 basis points from its 435 high. And that is significant because we've had a bigger move off the highs in the short end, which is more closely tied to Fed Funds and the Federal Reserve. And those percentages now are about 34% of a tightening that would occur at the September meeting. Rick, thank you very much.

Rick Santelli, a couple of key days for inflation data, Brian, rate hikes looking less likely. It certainly has been. You know what else is key for? Software. Coming up, software, gotten hot again. Up next, Jeffrey Software in us, Brent Phil, with some software stocks you may want to consider. Welcome back. Don't know if you caught that blip higher in the software chart. Workday is moving. Contessa Brewer has more. Contessa, what can you tell us? Actually, it's not right now because it's halted. We've seen trading halted, Kelly, three times in the last few minutes here on news that Silver Lake, the private equity firm,

is in talks to acquire Workday, which is an HR and financial. management software company. They're in talks to acquire this for $43 billion, according to Reuters. These are sources who have remained anonymous. They say they don't have the authority to speak on this matter. But of course, we've seen software under a lot of pressure. Investors skating away from it because of the threat from AI. Clearly here's Silver Lake going in and having some interest.

As you can see, those shares, up 26 percent. This was before they were halted for five minutes. So what's been happening is it comes out. of the trading stop, it starts trading higher. We've seen it first up 6%, then up 15%, now up 26%. We'll take a look at it and see what happens when the halt is lifted again in trading resumes for workday at this point. And also what this means for the other software names in the space. Absolutely. Contessa, thanks very much. We happen to have the perfect person here to talk about it. Brent, Bill, covers Root Workday along with the rest of the space. Brent, it's great to have you

here, this would make a lot of sense on its surface. The five-year high price for workday was 311. So even with today's gain, you're getting this at two-thirds the price it went for in the past from a firm that specializes in technology. Are shareholders going to miss out here? I don't think they're missing out when you look at the stock and what Workday is doing right now. And it would make sense because the Neil Bushery, the CEO, and Egon from Silver Lake, know each other well through many connections. We think certainly this can make sense. And I think this goes back to how badly hit software's been,

that the fact that private equity is looking at this magnitude just tells you, we think there's a lot more value in software, high recurring revenue, high margins. Right. Yes, there's a threat to AI. But if they went private, they could effectively remake the entire portfolio AI first and then come back public at some point down the road. So I think this would be a great pit stop. It would make sense. Certainly don't know if it's going to happen, but it would make sense.

Well, and that's exactly why. So when I see our shareholders are going to miss out, most people look at the chart, they go it's up 25%, but it's exactly that question of long-term value. If it goes private, by the way, I don't know if they would load it up with debt. Maybe that makes it a little bit less attractive on the margin. But what you're saying operationally makes sense. And frankly, I wonder if these private equity firms have never had more capital to put to work. and here are these companies, they probably know more about than anybody, that the public markets are not. So could there be more to come?

We're in the classic part of the cycle where public investors have given up on software. I've seen this the last year, the excuses of what's going to happen, what AI is going to do. Some of the stuff's crazy. Some of it's true, but 90% of it's, like, way out of bounds. And so I think what private equity is saying is, like, look, if we can buy this in three, in three, four years, we can take this back public if we do the right things to this company. There's incredible value for long-term shareholders for private equity. But yeah, I mean, suffer right now.

The multiples are massively depressed. So if you're in private equity, this is your dream. This is the time that you, this is go time for P.E. Brent, I know I'm going to ask you to speculate here. Anil Bushery, the CEO, he's a co-founder of the company. He came back to workday in February. Do you think he came back specifically to potentially sell or, take private the company?

No, I don't think he came back. I mean, he could have done that from where he was sitting, and I have a lot of admiration for Anil. And Neil doesn't need to be the CEO, or he could, he can be involved. Like, that's not, I don't think that's what he did. He came back because Carl O'Shebach, who was the former CEO, did a phenomenal job operationally putting the foundation in, and I think it was time for workday, among all the other staffs companies, move towards AI. They weren't moving quick enough. So as he calls it, it's a brain, new chapter. They needed a new leader to unveil that chapter. And I think, you know, Neil is, again, back in. And I don't think this had anything to do with him coming back.

Last quick question, Brent, because you mentioned kind of the unique nature of these two men, they know each other. But are there others in your head who you think would be natural candidates? If a shop is sitting there going, wow, you know, they're making a move. Maybe we should make a move too. Who else would stand out to you? Yeah. I mean, if you look at infrastructure, right, IBM has a portfolio of like 30 plus billion they could put to work. We've talked a lot about elastic and infrastructure, ESTC. If you look at Dinah Trace, DT, there's a lot of infrastructure companies. IBM has been acquiring many of those on the infrastructure side, right?

Cyber, there's probably too many cyber vendors to go after this. We just saw another deal this morning, DT buying a rise, private company for almost a billion dollars. You're seeing a lot of M&A happening. Even sales force has been very active. But I look at, and I think there's a handful of companies, a DT, elastic, handful of other stories that makes sense. I think the Workday transaction makes sense as well. All right, Brent, great thoughts. I know you're juggling a lot right now.

Really appreciate you making the time, Brent Thill of Jeffreys. Workday, by the way, back open for trade up about 23%. Still ahead. We'll talk about some records beyond tech, the S&P, the Russell, the other stocks hitting fresh highs right after this. Apparently 13, like Taylor Swift, is also the lucky number for the stock. market, a number of big names hitting new one-year all-time highs today. You know some of the tech stocks. Look at these records. JPMorgan Chase, Bank of America, U.S. Bank and Schwab, some consumer names, Starbucks, Target, Darden restaurants, and Live Nation. And don't worry, have not forgotten

about tech. You've also got some big names like Dell, Intel, Corning, and AMD, all newer all-time highs. 19 different S&B 500 stocks now up over 100% this year. But do you know what the best of the best stock is this year. The top S&P 500 performer, 560% gain, Sandisk. You're welcome. Still incredible. More power lunch right after this. All right. Got some breaking news. It just really happened in the last hour and a half. I think it's a big deal, Kelly. I think you agree. Another top executive is leaving Open AI. This one, Chief Revenue Officer Denise Holland Dresser, departing after less than a year at the company, saying she's stepping down to pursue other opportunities, thanking her team as a LinkedIn post, Kate Rooney, who covers it, comment on it.

But this is another top executive leaving the parent company at ChatGPT. This seems like a big deal. So what's fascinating is she had just been given the duties to take over from Brad Lightcap, who was who had kind of co-founded the company with Altman or was there way back in the day. And he announced that he was leaving earlier this week. So she will be replaced by an executive from Wiz, which was taken over by Google. The Lightcap also said he's leaving this week? Yes. So two top executives in a week leaving a company that's going to go public soon and make everybody generationally rich. And it was generationally wealthy. Maybe in the last couple of weeks at Fiji, Simo said she was also

leaving. Remember, she's had, I think she said, some medical problems. And back in April, you had three executives leaving as well. Seems like a really big deal. But what do I know? And also, the show's over. Thanks for watching. Power Lunch, everybody. Closing Bell starts right now.