Power Lunch - Banking Crisis Continues, and AI Ambitions 5/2/23

Episode Date: May 2, 2023

Regional bank stocks are getting crushed again, dragging down the broader averages with them. The rescue of First Republic not stopping the slide. We’ll tell you all you need to know.Plus, Ashton Kutcher’s venture capital fund just raised $240 million to invest in AI. He’ll join us to talk about that, the Hollywood Writers’ strike and more. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch with Kelly Evans. I'm Tyler Matheson, and we are having a big market day right now. It is lower, as you will see there, by about 1% on the Dow. But it was worse earlier. Roughly 1% declines as well for the S&P 500 and NASDA. Yeah, once again, we're watching those regional banks. They're getting crushed again. The First Republic Rescue not stopping the slide. Meanwhile, education company Chegg getting hit hard on the threat from AI to its business, and oil down nearly 5% hurt, at least in part, by the likelihood of another Fed rate hike tomorrow. We'll hit all those market-moving stories. First to Leslie Picker for the latest leg of the bank slide, Leslie.

Hey, Kelly, yeah, regional banks in focus once again today as the market digests the fallout of the First Republic failure and sale to J.P. Morgan. The KRE Regional Bank ETF down a little more than 6% PAC West, Western Alliance, Comerica, Zions, and Key Corp, leading the industry to the downside today. The sell-off is a combination of each bank's commercial real estate exposure, level of uninsured deposits, a lot of various factors and variables that are causing them to sell off. The bearish thesis stems from the fact that First Republic's bondholders and stockholders were wiped out in yesterday's season's sale to J.P. Morgan and the market is essentially revaluing its downside risk in the event that another regional sees the same fate.

The deal also highlighted the power of the big bank balance sheet, preferred by the the FDIC in this case to acquire the failed bank out of receivership due to cost concerns. In a world of potential industry consolidation, though, this calls into question regional's ability to compete. The timing is kind of unfortunate, too, coming up the heels of better than expected Q1 earnings last week, but right ahead of tomorrow's Fed meeting and amid the debt ceiling debacle. In a Goldman note to clients out a short while ago, the firm notes that this morning sell-off was driven largely by hedge funds, specifically short pressure. The firm notes that the lack of a relief rally yesterday when the J.P. Morgan First Republic

News was announced sent a bearish signal to the market, guys. All right, let's dig a little deeper here. You mentioned one thing, and that is the level of uninsured deposits that some of these regional banks have. Why is that such a sore point? Are investors worried that that money is not sticky money? might flee to money market funds or other higher yielding alternatives. Uninsured deposits, that's exactly right, Tyler, are seen as riskier forms of deposits because people look at what's going on, they feel the jitters, they start to have the concern that, you know, there could be some sort of failure here. Uninsured deposits would be the ones

most vulnerable. And so those are the ones that tend to be, to leave the bank first. So could bankers, regional bankers, ameliorate that problem? by paying more on deposits. In other words, if I make more money on my deposit at your bank, I will be less inclined to flee to another kind of product. So that's one response, but I think it depends on the risk calculation that each individual depositor is looking at, because they may pay more, but if the bank fails, that amount is worthless because you have the risk of losing all your capital if it's uninsured at that particular bank. And that's why the FDC, we talked about this yesterday, that's why the FDC is looking at potential reforms to make people feel like their money is safe in these institutions and they're not going to pull them out.

The risk of pulling out these uninsured deposits is that it affects the asset side of the balance sheet. There's a mismatch that's created. And that's the concern that the market has with regard to some of the flightiness of the uninsured deposits. Fascinating answer. Leslie, Leslie, thank you very much. Leslie Picker. Appreciate it. All right, beyond those growing concerns about the regional banks, we're also seeing fears rise over tech and AI. Two companies reporting an impact already from artificial intelligence. Chegg saying the technology is hurting growth.

IBM says it may use it to replace some workers. Dear Jabosa has more in today's tech check, Deirdre. So Kelly, Teg is the first public company to blame AI and chat GPT for slower user growth, and it is probably not the last. We're just starting to see the flip side of this AI boom. Yes, Microsoft, Nvidia, Alphabet, meta, they are the tech giants with billions of dollars to pour into this platform shift and so much to gain. But for the littler guys,

it is going to be a whole lot more complicated. Chegg's CEO Dan Rosenzwegg says that he will fight chat TPT with chat GPT to ultimately make a better product. You hear similar arguments, especially in cybersecurity, AI will both be a threat and an opportunity. But very quickly, as it turns out, they're having to figure out if this is a net positive or negative for companies like Chegg and entire industries like EdTech, which business models are going to be eviscerated. Where does the value flow?

We're only at the beginning of this. But take a look at Duolingo. That is today's collateral. Shares are down in sympathy with Chegg because of fears of how its business model could be affected. IBM, you mentioned, already quantifying the impact on jobs, pausing back office hiring and saying that around 30% of jobs could be, quote, easily replaced by AI. in five years, and that, again, is just the tip of the iceberg. Goldman Sachs estimates that 25% of all employment could be automated by AI. That is a quarter of all jobs in America and Europe.

And I haven't even mentioned, guys, the writer's strike and AI concerns there, or AI, aka fake Selena Gomez at the MetGala last night. This is all happening very, very quickly, as we were warned, but maybe even quicker than many expected. Yeah. All right, dear, to stay right there as we talk more. about the long-term implications of AI for business, but also for society. With us now as CNBC's Steve Kovac, along with a futurist and tech entrepreneur,

Sheneid Beauvel. Steve, let's start with you. This is a broad question, and I think the answer is it's different depending on what the corporation does and is. How will AI affect the corporate landscape broadly? And which industries will it hit the most, the hardest, or the best? Yeah, that's a really tough question because it is. specific, Tyler, to the different industries. But let's talk about what's going, what we're seeing

in education, for example. I want to see the grades of these kids who are choosing Chegg or Chat GPT over Chegg's products that we know are right. We already know that these things can get wrong. So as we see industries like Hollywood get affected, as we see industries like IBM and, you know, HR work get affected, how good is chat GPT and these large language models at replacing? I'm less confident in that based of what I've seen and how. how good they are at giving appropriate answers. And look, there's a reason why, to Deirdre's point, that big tech is investing more in this than ever,

there's a reason why Microsoft hasn't put these products into education yet. Just a couple months ago, they announced a bunch of cool AI tools for office apps, but they're not selling that to education yet because they don't know if it's going to be helpful for students or if it could be like a cheating tool or what. They need to get those answers, right, Tyler. So I'm going to give you a little anecdotal evidence.

I was at a table that included my son about a month ago and two other students. One, at a university, I will not name it. The other, a classmate of my sons in high school. And I asked them, have you ever used chat GPT for anything? And they kind of sheepishly all at once looked down at their asparagus and looked away. And I said, so what do you know about? I said, yeah, we've used it. And the college student was the most forthcoming.

He said, yeah, I used it to write an essay for me. and I got a 98 on it. Wow. Wow. So and this is, there you go. There's no Trump University either. You're in trouble. I'm in trouble.

Oh, I am out of here, man. I'm getting out of the top tick. Sheney, let me turn to you with that bit of evidence in mind. I suppose the overriding question is on balance. Is AI going to be good for society or bad for society? And why? That's a really great question and one with a lot of stakes. I will say at this point in time, if we can steer it correctly, putting in the right guard

rails and safety measures in place, I think we can have quite an optimistic future with this technology. However, there are a lot of things contingent on that and a lot of decisions that need to be made ahead of that to kind of reach that overall scenario. I will say what is guaranteed over the next decade is a lot of change. and a lot of disruption. And we need to be in an environment where we can absorb that and harden our institutions for that,

which involves things like a lot more foresight. We had mentioned here, education being a little bit disrupted. Large language models like chat GPT and these systems, research papers have existed on these systems for years. So we do have time to prepare. We just need to lean a lot more into the future. We need a lot more cohesion between public and private sectors. so we're not always caught off guard kind of scrambling to adapt to these technologies.

Why do you say that the pluses will outweigh the minuses? Quickly. I think if we look at the historical trend of technology, overall, it's led to net more jobs. It's created new industries. And we've largely been better off as technology has advanced. So if we look at that as our data points, artificial intelligence is going to be far more powerful that some say. than electricity or the wheel. So Deirdre, Shanade says, look to the past and take heart for the future.

I could never answer that question. I mean, that is the conversation here in the Bay Area among everyone right now. Is it going to be a net positive or a net negative? If anyone thinks I can answer it, I just, they can't. There's no way for us to know right now. People who are in technology, they say, yes, it will be used to figure it out. The Chegg CEO says that he's going to use it to make a better problem. but we just don't know.

When we talk about the ramifications happening over the next decade, they're happening right now. They're happening in the stock market like we see with IBM, with Chegg, with many companies to follow. So this is all being negotiated, and there's just no way for us to know. I'm using the stuff every single day. And a lot of these answers from chat, GBT, and BART,

they sound right like maybe your son's friend who you just threw under the bus, Tyler, but does it stand up to scrutiny? I don't know. You've got to be really careful. And I think that's, you know, the tact that an alphabet's taking. Yeah. Steve, I was just going to say on the IBM front, they expect to pause hiring for roles as 7,800 jobs could be replaced by AI in the coming years.

This is probably, you know, the first very tangible example of AI coming to kind of the white collar workplace. Are you surprised at how quickly this has happened? And do you think that this off the hand sort of off the cuff comment he will walk back from? or do you think we will see more companies quickly following suit? He hasn't walked back yet. And in fact, his predecessor talked about this. Ginny Remedy talked about this all the time. And look, I think he's just saying the quiet part out loud,

Arvin Krishna, the CEO of IBM, when he says that these kind of jobs, they're basically very easily copied over to an AI chatbot, for example. Think of customer service. That's just a low-hanging fruit kind of job that can be replaced by these. And this is something people want. as we talk about efficiency all this year, especially within tech companies, what's more efficient, I guess, than getting rid of a human or not hiring a human and having software do it instead? That sounds awful and scary, of course, because that's jobs a human is not getting. But for the company at large, maybe it's a good thing. It protects margins. And it makes the entire organization run more efficiently. So I really think everyone is thinking like Mr. Christian is thinking. They're just not saying it yet because, you know, look, we're talking about it now. Right. Sheneid, final question to you.

What is the one area of AI, or is there a particular piece or part of AI that frightens you more than any other? I get all the hard ones today. I think the uncertainty, we obviously can't plan for a breakthrough and how capable and advance these systems get. I think is a bit challenging, but to be completely honest, I'm a little bit less worried about AI and more worried about our social political and our social environment to absorb the changes from artificial intelligence. So I think our foundation is a little bit cracked. And so that, I think is what alarms me a little bit more. I think I agree with you. I think I agree with you strongly. I think that's what worries me about this. Is the potential for Mississippi.

use. It's always the unintended consequences that get you, right? I think we can agree on that. All right, Sheney, thank you very much. Steve Kovac, Deirdre Bosa. Thank you as well. Good conversation. Appreciate it. Really appreciate everybody. Still to come a huge day for the markets today and tomorrow. The Fed is said to make what could be the most important interest rate decision yet. Why? Investors is still dealing with the after effects of the bank crisis. They're desperate for any sign of a pause or a pivot. How will Powell and company respond? Plus, we will speak to Pfizer CEO Albert Borla. The company beating results, beating estimates, I should say, the catalyst, revenue from its COVID-19 vaccine and antiviral. The company's outlooks for sales remaining strong, despite some worry from analysts.

And finally, live from Milken, we'll speak with Ashton Coutcher. The Hollywood star and investor will weigh in on AI streaming as well as Hollywood's latest writer's strike. Power Lunch will be right back. Welcome back to Power Launch, everybody. Stock's heading lower today. Those regional bank fears have been lingering around, particularly, ahead of tomorrow's Fed meeting. Let's get out to Chicago meantime to see how those two major stories are playing out for bonds. Rick Centelli live with the traders at Sebo. Rick.

Yes, it's the old one-two punch. The first punch, job openings and labor turnover. Joltz. Joltz drops under nine and a half million. The second part of the punch, regional banks under pressure again, whether it's Pact West and big option trades. It is proliferating. As you consider intradays of twos, huge drop, Fed Fund futures for January skyrocketing, and you see that KBW index there. The lowest level should have closed here since October 2020. Let's go talk to a trader. Chem, what a day.

You have a minute? Of course. When we look at 50,000 puts today on Pack West, what did that do to volatility? How does that figure into the one-two punch of a Fed tomorrow and regional bank nervousness? It gives a short pot for a little bit, but we're going right here into the Fed meeting. There's an event ball sticking out there. This is Well Telegraph. If you look at hedge fund positioning, it's pretty short right now.

Cross the board, I would say it had only a blip effect for that time. Jamie Diamond was out yesterday saying, okay, you know, we can all take a breath now. And he is one of the best bankers in the world. Is he a little early? Is he incorrect or is there just too much odds in front of a Fed meeting? The reality is it's a self-fulfilling process. If there's a run, there's a run. It can keep ongoing. Banks at the end of the day have a tail on them. And particularly the regional banks who have 70% of their exposure in commercial real estate as that starts to decay.

So it's a function of time. It can get ugly, right? But at the end of the day, if the Fed is going to keep stepping in, backstopping these things, we'll have a rally back again. Now, between you and me, don't listen out there, people. You think the Fed's going to really do anything after tomorrow's quarter point? Seriously? I think they're going to keep it stickier than people think. Oh, no. Stickier, I agree. They could leave it up. But once again, I use the thermometer, okay, or the thermostat. Just because you're at 60 degrees and you put the setting at 85, you're going to have to go 51, 52, through all of it. So leave it up there and let it do its work higher rates.

I agree. There's a lag pushing through the economy. They got to wait. They got to take a look. I think that's what they're going to do. But they're not bringing it down. Oh, no. That's what the market is. I agree on. I agree with you on that. They're not bringing it down. Let's leave it with this. The slow, unexpected issues and effects of fast-moving rate hike cycle. Got to watch out for those moguls, right? Absolutely. It takes a little bit longer. Thanks, Jim. Tyler, Kelly, back to you. Thank you very much, Rick. For more on what to expect from the Fed tomorrow,

it's bring in Brian Smedley. He's chief economist and head of macroeconomic and investment research at Guggenheim Investments. He's a new face to CNBC, and he joins us from the very loud, very crowded, Institute Global Conference in Beverly Hills. Brian, it's great to see you. If I tell you, I think they're going to break things if they hike rates tomorrow. Do you disagree? Thanks, Kelly. It's great to be with you.

I disagree that tomorrow's decision is going to make or break the economy. Our sense is that the economy is already headed for a recession in the second half of this year, and that reflects the cumulative monetary policy tightening that's already occurred over the course of the last year. I think from here what's important is the Fed's efforts to convince the broader public that it's committed to fighting inflation and doing what it takes to finish the job. Brian, by the end of the year, will the Fed be loosening money or sort of paused? Yeah, Tyler, I think if we look at the two major tools the Fed is using on interest rates,

they're likely to hold rates steady in the second half of the year and potentially start easing in the first quarter of 2024. but that's only if the unemployment rate rises on the order of a percentage point the way the Fed is projecting as of their March economic projections. And that's a pretty ugly scenario for the economy and for investors in our view. In terms of the balance sheet, the Fed is likely to keep shrinking his portfolio of securities, also known as quantitative tightening. And we think that'll continue also at least into the first part of 2024. Brian, curious as someone who worked at the New York Fed, which is kind of the market's leadership, position we'll say within the Fed. What do you think they think when they look at the board today

and see the regional bank ETF down seven and a half percent? I mean, are they making calls to the FDIC? I just, I don't know. Just take me inside this decision-making process 24 hours before their next rate hike decision. Yeah, without a doubt they're watching closely the price action across markets and particularly distress in regional bank shares. I think what that demonstrates to me, the signal is that this policy of a significantly inverted yield curve is going to continue to put funding strain on regional banks, and quantitative tightening will continue to draw deposits out of the system. And so that's going to increase funding costs for banks in general, but particularly for the smaller and mid-sized banks, who also, it sounds like you're going to be facing additional

regulatory pressure and a lot of supervisory scrutiny. And so the Fed is going to take that on board and consider the implications for the availability of credit and the cost of credit to the real economy. We heard Chair Powell talk about that at his press conference in mid-March, where he said that a tightening of bank credit conditions, which has been underway for more than a year, but will likely continue in the wake of these bank failures. That could very well take the place of alternatively rate hikes that the Fed might have needed to do in lieu of the stress in the banking sucker. Final question. You say recession is your base case for the second half of the years. be a little baby recession like Anna Delvey and your little baby feelings, or is it going to be

something deeper and more prolonged? Yeah, Tyler, I think the concern is that the Fed is committed to fighting inflation, and there are significant underlying inflation pressures to deal with. So the Fed is going to be intentionally late in addressing a slowdown in the economy and an increase in the unemployment rate. In the past, they've had the luxury of being proactive because inflation was well contained. This time, I think we face the situation where the Fed will, again, be very late in reacting, and at that point, investors will have to mark down expectations for earnings and probably PE ratios. So on the fiscal side, I think that's where it also gets interesting. We have a debt limit. We'll be watching closely to see if fiscal policy tightening comes out of that

process. But the lack of fiscal and monetary policy support in this recession, as we expect, could prolong the process. But I do want to emphasize that we see a lot of the policy. We see a lot of significant fundamental strengths on consumers and the business sector, which should help keep this a more mild recession on balance. All right. Thank you, Brian Smedley, Guggenheim. Appreciate it, sir. Thank you.

Thank you. And a quick programming note and reminder. Both the Exchange and Power Lunch will be live from Washington for coverage of the Fed's interest rate decision tomorrow. It begins at 1 p.m. Eastern. We've got a great lineup. Yes, we absolutely do. Senator Elizabeth Warren.

Senator John Kennedy of Louisiana will be with us. Both sides of the aisle represented there. Still to come. is the pen mightier than the sword. Hollywood writers going on strike, demanding compensation for their part in the streaming boom, as well as seeking protection against AI. The investor and actor, Ashton Coucher, will weigh in.

But first, oil prices down 5%. Energy stock, some of the biggest losers today in the S&P 500. We will wrap all the moves up for you. Welcome back to Power Lunch, everybody. We're continuing to watch a down market today. Dow was down more than 600 at the low. We're down 454 at the moment, about 1.3%. 4111 for the S&P and the NASDAQ down a little less about 1.2% today.

Regional banks, that's where the focus is, getting hit hard again today, even after JPMorgan's rescue, a First Republic. Even after Jamie Diamond said this part of the crisis is over. We've also had multiple trading halts. Pack West down 25%, Western Alliance 18%, even KKorp down 9%. And the KRE regional banking ETF falling to a new banking crisis low, beneath 40 for the first time since October 2020. even below 39 at the moment. And it's not just banks sliding today. The energy markets are as well,

and Pippa Stevens is looking at it. Yeah, hey, well, oil is getting killed today down more than 5%. It's kind of a triple header here. We have weak demand data out of, weak manufacturing, I should say, data out of China. We've got the Fed decision tomorrow. We've also got questions about this possible freight recession.

So with all of this, I think it just begs the question of no one really wants to be in the market. It feels like there are no positive upcoming catalysts. and with all these potential demand destruction events, people are saying, I don't want to make a bet right here. And so we are seeing pretty thin trading volume despite this big decline. And it feels like until we get some sort of positive data, whether that be from China or the state of the global economy,

there's not really going to be all that much of a turnaround. Do these prices make another production cut, more probable? A production cut from OPEC? I mean, we'll see. It does become the wild card. They are meeting again in June. and we've seen that they have been much more active than in prior years in terms of anticipating production cuts. Am I wrong?

Didn't they cut? Yes. So they cut at the beginning of April. But, you know, people have basically forgotten that at this point because prices are well below. We were at $76 the Friday before that cut was announced on the Sunday. And now we're at 72, I believe, on WTI last I checked. So that's all but been a race at this point. And we have seen that they are much more proactive than in years past.

But I also do wonder if there might be some kind of a growing tension. there, and this is more speculation, but given that Russia is sending record amounts of oil now to China and India, does that begin to alienate some other members of OPEC because those are seen as the key growth markets for countries like Saudi Arabia? So, you know, longer term, can they hold on to this policy of these production cuts if some producers are benefiting more than others? Or running around them. Yeah, yeah. And I mean, there's no indication of that yet, but there has been tensions between

Saudi Arabia and Russia specifically in the past. And so, you know, when they do have these cuts implemented, we've seen this reorder of global oil flows. At a certain point, you got to wonder if maybe they'll change their tune a little bit. Yeah, great point. Thank you, Pippa, Pippa Stevens. Still ahead on Power Lunch, Pfizer's earnings results showing the drug maker leaning heavily on its COVID drugs. But analysts aren't thrilled about that to drive growth.

The stock is down 24 percent so far on the year. We'll speak to the CEO next. Welcome back. I'm Courtney Reagan. Here is your CNBC News Update at this hour. The Biden administration will send over. over a thousand troops to the U.S.-Mexico border ahead of an expected migrant surge following the end of a coronavirus pandemic error restrictions. Now, the military personnel will do data

entry and other administrative tasks so that customs and border protection can focus on fieldwork. The troops will be sent down for roughly 90 days, though their presence can be extended if necessary. Interstate 55 reopened in Illinois following a 70-car pile-up that left multiple dead and more than 30 others injured. The pile-up came after a dust storm, reduced visibility in the area. State police say excessive winds blew dirt from farm fields across the interstate. And some like it hot, leading the way in this year's Tony Award nominations, the musical, pulling in 13 nominations, including a nod for best musical. Three other musicals got nine nominations. Kelly, I haven't seen any of them. Back over to you. I'm with you. I'm trying to keep,

Tony is Broadway. Yeah, Tony is Broadway. Yes. Got it. Last one I saw was a beautiful noise that Neil Diamond play. I loved it. I did. I did. You know, the Carol King one I thought was probably years ago now. All right, I am, I said. All right, Pfizer topping expectations this morning with a beat on earnings and revenue, despite a decline in sales driven by lower demand for the COVID vaccine. But as the world transitions into a new phase of managing the virus, the company expects growth to be driven by a large number of product launches in the coming year.

The stock down 24% this year, one of the worst performing non-financials on the S&P 500, And on that cheery note, let's bring in Pfizer CEO, Albert Borla. Mr. Borla, welcome back. Good to have you with us. Thank you very much for having me. How's the business going? Now that COVID feels like it is less of a menace

and your revenues in COVID vaccine products are down. Yes, they were down. They were way ahead of what the analysts were expecting, but they were down. The non-COVID business grew 5%, which is a very strong growth. And as you said, introduction comments. As we are moving in the post-COVID crisis era, we expect that COVID

would not be anymore the epicenter of what we do. Still, the COVID products will remain two of the largest products that we have. But we are having many other products. And we are about to launch 19 new products in the next 18 months, 19 new products. So that's something that no one has ever done before, according to my knowledge. But we are up to the challenge to bring those products to those medicines to the patients that they need. You've grown your pipeline both by internal research and also by acquisition. I assume you're going to continue to do that. As the company maybe reorients away from the tight focus on COVID, what areas of the business

will be the growth engine? Will it be vaccines? Will it be oncology? Will it be antivirals and anti-infectives? Pfizer is a big play. So you need many, multiple engines to fly. But to respond to your question, I think that our next moonsault is on cancer.

As you know, we have invested $43 billion in proposed acquisition of Sijan. Sezen has a technology which is called ADC. ADC, it is what MRNA is for vaccines, ADC is for cancer. We think that we can take on cancer with this technology and accelerate even further the work that Sijan people have done. which was tremendous. But in our capabilities of manufacturing,

clinical development, and commercialization, who can bring those products to patients that they really need them. So the two areas in Farma more broadly, Albert, that people seem pretty excited about, are Alzheimer's and weight loss. Are either of those areas

where Pfizer is going to be, you know, involved in a big way? We are involved in a big way in weight loss. Right now, we have an oral program of a category that's called ZLP1. We have two candidates that we are investigating, and by the end of the year, we'll select the winner,

and we'll move it very quickly to Phase 3 studies. We are very excited about that profile. With Alzheimer's, we have outsourced a lot of our access that we had, so we participate with 25% equity in a company that is working on Alzheimer's. I'm also curious to go. back to COVID for just a second. I thought I saw some commentary about your EU deal that would make you essentially the only provider of COVID vaccines in Europe going forward. Is that true? We are negotiating with EU as we speak in very good faith and we are discussing with all member

states. So I don't want to make any comments because this is still ongoing. Once this is concluded, then we will disclose all the details. Back to the weight loss drug, the idea of an oral medicine certainly has its advantages over an injection, which some of the weight. of these other products, Lily's products, among others, are. How I'm going to ask you to go out on a limb here, and it may be too uncomfortable, but let's try. I'll hold your hand if you'll hold mine. How big a drug could this weight loss drug be? And what would the pricing look like if you've gotten that far? I've gotten, no, we haven't decided what the price could be, but in general, based on the current price, more the injectable product and the projected use,

we think that this will be likely the largest category. So we expect that that could be as big as a category, not our product, as a category, close to $90 billion. And I think maybe one-third of that could be the Orals. So in this is the area that we plan to plan, it will be two or three ends. All right. Albert Borla, great to see you, sir. Thank you again for coming by, stopping by CNBC. Thank you very, very much for having me. We're very grateful to you.

Another name moving on earnings today is Uber on pace for its best day of the year after smashing estimates for Q1. More of today's movers coming up. There's Uber up 11% now this afternoon as the market tone tries to improve somewhat. And as we head to break, CNBC is also celebrating Asian American and Pacific Islander heritage throughout May. Sharing stories of business leaders in their community. Here is Open Table CEO, Debbie Sue. I'm proud to be Asian American because of my ability to straddle two different worlds. I grew up in a very much Chinese, Taiwanese household with very different cultural norms

than when I was at school or with my friends. And I think that belonging to two different worlds has served me really well, both personally and professionally. I have depth of knowledge across different cultures. And that richness and fabric that it provides in my life, I wouldn't trade it for anything. Welcome back to Power Lunch. Want to get you caught up on these markets. We're looking better.

Now, maybe a little worse again. Let's get to Dom Choo, down 443 for the Dow Dom. But there's no doubt right now. A quick reset of what's happening with the stocks on the move. There's no doubt where it is. It's the regional banks, arguably the story of the day so far. You've got Pack West and Western Alliance all down big, about 17 to 25%. Two regionals that have been halted for trading multiple times today because of volatility.

The overall negative sentiment is also working its way through other lenders, as you can see as well. Bank of Hawaii is. buy-ons, even the bank ETFs. Then you've got ride sharing and food delivery giant Uber, which is up big, near session highs right now, after reporting a smaller than expected loss on better than expected revenues, helped in large part by a big jump in people just taking more rides and more trips. And then we're going to end on a drop in shares of ERISA networks down despite an earnings and revenue beat and what's being viewed as actually strong guidance. But they did comment that the company sees a cool off in spending from larger cloud computing customers, cloud titans, so to speak.

So there's Arista shares down 14%. Tyler Kelly, I'll send things back over to you. Tom Chu, thank you very much. Coming up, Ashton Couther's AI ambitions, the actor's venture capital fundraising, hundreds of millions of dollars to invest in the next tech frontier. We'll hear from Ashton himself about that, the Hollywood Riders Strike, and more when Power Lunch returns. All right, everyone's talking about AI and the role it will play in the future of business and work and humankind. It's a huge topic at the Milken Global Summit in Beverly Hills. The actor and investor, Ashton Coocher, announcing that his Sound Ventures just raised $240 million to invest in AI. He and his partner at Sound Ventures, Effie Epstein, join our Julia Borsden from Milken. Hi, Julia.

Thanks so much, Tyler. I'm so excited now to be joined by Asha Couture and Effie Epstein, both general partners. At Sound Ventures, you just made this big announcement, $240 million focused on AI and announced three key investments, including OpenAI. from chat GPT, as well as stability and anthropic, two other big players in this space. What is your thesis and what's your plan for this fund? Do you want to... Yes, absolutely, of course.

So for this fund, it is really focused on the foundational model layer within AI. We believe there will really only be a handful of players that ultimately emerge because so few companies have first the technical talent, the capital, and the access to data and compute. Now, sounds it's in a very unique space because we're actually able to invest, in competitors. That is very rare within venture. So we're essentially taking an ecosystem bet with our investments in open stability and anthropic to say, we know a model will emerge. We want to be in all the players that are likely to be that winner. Now, Ashton, you were on my panel here at Milken yesterday.

There was a lot of talk about the potential for AI. But here there's also a lot of talk about the valuations being very high. Are you concerned about the valuations being high at this point? So I think that this looks a lot more like Web 1 when you had Google, Yahoo, ask Jeeves, and 12 other search engines. I think a lot of these large transformer models are very reinforcing. And I think the likelihood that one, two, or maybe three of these models become the pervasive models is really, really high. With that being the case, I think it's the way.

there's not really a valuation that you would look at, that you would, you would bulk at relative to revenues. I mean, none of these companies have really even started capturing revenues yet. And so everybody likes to mark a company relative to its revenues or mark a company relative to its public comp. These companies, A, have no public comp because we've never seen anything like this before. I think every company in the next five, ten years is going to be an AI company in the same way that if you look at commerce and you're, a commerce company 10 years ago and you weren't invested in e-commerce as a solution, you're probably not a company anymore. So I think every company is about to become an AI model. And if there are

two to three companies that are at the base layer or the foundational layer of that, the TAM is so large that marking the value of a company based on anything other than the potential would be wrong. Now, notably, in the last mobile wave of the internet, you invested in Uber, Airbnb, Spotify, among many others, which really turned out to be applications that defined that sort of mobile era of the internet. I'm curious how you see this era of AI evolving, especially from a consumer standpoint. I think we're looking at the exact same kind of platform shift that we saw in 2008, 2009, which was interesting because we were actually coming out of a recessionary environment. there were a lot of people that got wiped out in like the late Web 1O, you know, scenario.

And all of a sudden there were this extraordinary emergency, this new platform that enabled things that were never possible before. We all had GPS in our pocket. We all had cameras in our pocket. And we were all able to build companies that never could have existed before. The same thing is happening now. We're going into a recessionary environment. We have a massive platform ship taking place. If the last wave of software disrupted unskilled labor, this wave is going to disrupt skilled labor.

And it's happening right now, which actually is a beautiful thing because it democratizes access to skills that people, not everybody can get a hold of a lawyer at an affordable price today. Not everybody can get a hold of a doctor at an affordable rate, a pediatrician, a tutor. these skills and that intelligence layer is now being democratized, which is going to unleash brand new business models that never existed before. And we're only at the very beginning of that right now. And this next wave of applications is going to be massive. And I think it's happening right now, right before very up. Kelly, you want to jump in here?

Yeah, that's a fascinating point. And Ashton, this is for you first and then Effie. Can you both just weigh in on social media? Ashton, obviously, you were the big Twitter guy way back in the day. Are you on blue sky now? Do you even care about social media? And then I'd be curious for Effie to answer that too. But first to you, where are you socially active these days?

What has the new potential, or is the whole space kind of boring? Oh, social media. So I still utilize social media. I think social media is really valuable. And I truly do believe in the pieces of democratizing access. to information. And I think that that is what social media provides. It provides environments for great debates. It provides environments for access to information that most people don't have. It provides access to cultural trends. And I think all of that is incredibly valuable. I think it's about to be

disrupted by generative AI. Suddenly the biggest question on social media is going to be, is that human, or is that a robot? And I think that that is the mass transition that's about to take place. I still use all the... I mean, I still use Twitter. I still use LinkedIn. I still use Instagram.

I use these tools, but I think I use them in a very different way than I used to use them. And I think that that is only going to continue to evolve over time. I completely agree. I actually think there's a really interesting use case for AI around companionship.

And when you think about having your best friend in your pocket or your tutor in your pocket or your pediatrician in your pocket, there will be, I think, always a place for social media, but it will evolve. And the way that people leverage it will evolve because of this best friend you have in your pocket. I think one more point on that front that's really important to consider is that when these social media companies were growing, they didn't really think about the secondary and tertiary side effects of what social media could create with misinformation, with toxicity. and I think one of the things that's really promising about this new generative AI boom is the founders of those companies are really thinking about those things. I have a nonprofit Thorne and we identified child sexual abuse material,

help report it, help remove it from the Internet. And these generative AI companies are being extraordinarily forward-thinking about that. They're being forward-thinking about how their platforms can contribute to misinformation. They're being forward-thinking about, like, a lot of the secondary and tertiary elements and utilization of the tools that they're building and how they can mitigate those and actually utilize safety by design in the creation of their companies. And I think that's really promising in a way that some social media companies still aren't addressing. Yeah, and it's interesting how AI both could play into that misinformation and also catching some of these

dangerous things online. Another area where there's a lot of concern about AI here in California is in terms of AI replacing jobs both for writers and for actors. The writers strike just started today, and I know both the writers and the Screen Actors Guild have raised concerns about the role that AI might play in reducing employment. What's your take on this action? As an actor yourself? I'm fully prepared to be replaced. No, look, we're not at general intelligence. Like, I think it's a big misnomer, and there's such a fear that we're at a place where we're at general intelligence and the artificial general intelligence. And I think that that comes with a lot of risks that have to be highly considered.

We're not there yet. We have generative AI. It can produce an output. But entertainment is a human-consumed entity. And we'll always need human beings in the process to actually understand the emotionality of the content. That's the value of it. We need directors that understand the value of the...

We have directors that... We have actors that voice animated films. Because there's an emotional level, there's emotional content, and understanding that nuance is extraordinarily important. We're going to increase the volume of content that's created drastically. We're going to be able to personalize the content that has created. I have a friend who's a writer, and he's written six books.

He fed ChatGPD4, his six books, and said, write my next book. And it gave him a decent output. And he sent it to me and said, read this book. Or you can wait two weeks and I'll send you the personalized copy of this book. That personalization is only possible regenerative AI.

So the writers that embrace the technology are going to love it and utilize it and make themselves better. And the writers that don't won't and might not have work. Well, it'll be fascinating to see how this all plays out. I am so sorry we're out of time. I can keep going with this conversation much longer. Effie and Ashton, thank you so much for talking to us today here at the very noisy

Milken Conference. Kelly and Tyler back over to you. It is a buzzy place out there. Thank you very much, Julia. We will be right back. Welcome back, everybody. Dow was down about 615 at the lows today. We're down a little less than 400 points right now. All right, folks, you know what tomorrow is.

It is the big Fed Day. Quick reminder. Tune in tomorrow for our CNBC special. Next to the stock draft, this is a big thing. Power lunch and the exchange will be live from one. Washington starting at 1 p.m. Thanks for watching Powerline. Closing bell starts right now.