Power Lunch - Biden-omics, and Not So Fast 6/28/23

Episode Date: June 28, 2023

President Biden gave a major speech on the economy today, laying out “Bidenomics” as he tries to convince Americans to let him handle the economy for 4 more years. We’ll break down what it means for your money and the markets. Plus, Tesla shares have more than doubled this year, and analysts are starting to say it’s gone too far, too fast. We’ll talk to Toni Sacconaghi, whose price target is more than $100 per share below Tesla’s current price. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch alongside Kelly Evans. I am John Fort. And coming up, President Biden given a major speech on the economy, laying out Bidenomics as he tries to convince Americans to let him handle the economy for four more years. We will break down what it means for your money and the market. Plus, Tesla shares have more than doubled this year, and analysts are starting to say it's gone too far too fast. We will talk to Todin Sakanagi, whose price target is more than $100 below Tesla's current price. Looking forward to that.

Hi, John. Hi, everyone. Let's get a check on the markets first, which we're headed somewhat back towards session lows, bouncing off that. The Dow is down 124. Right now, the S&P is down two-tenths of a percent, and the NASDAQ is still up just nine points. Shares of General Mills are lower and dragging down the entire packaged food sector. Revenue at the company falling as they raise prices due to inflation. The shares are down almost 5 percent. The CEO is about to join us. Crew stocks are higher again today.

All three of the major names among the top gainers in the S&P Carnival up 8 percent. has been quite a volatile name lately similar move for Norwegian. These stocks are also first, second, and fourth on the index for the entire month of June on big gains, as hopes bookings will remain strong. We are also watching Apple, getting close to that $3 trillion market cap again, first got there in January of 2022. Interestingly enough, the stock is at a new all-time high at almost 190. It's 190, 70 or so where we'll hit $3 trillion. But the market cap is not at an all-time high because buybacks have so vastly reduced the share count.

All right. Well, President Biden, as we mentioned, taking his economic philosophy or Bidenomics on the road today, the president laying out his plan for investing in America. For a reaction, let's bring in Richard Bernstein, CEO and chief investment officer of Richard Bernstein advisors and Courtney Rosenberger, managing director policy research with Stratigas. Courtney, why has the president gotten so little credit for the good things in the economy and so much heat for the bad things, including those spiking gals? house prices from several quarters ago? Yeah, I mean, the administration thinks that they need to sell their accomplishments better, which was kind of the impetus for the speech. Similarly, we saw this done in the State of the Union and in Biden's budget, but we kind of view this as the shoe anything or shoot anything that flies,

take credit for anything that falls strategy that the White House is doing right now, where they're just trying to showcase regardless whether or not their policies resulted in these things coming through with inflation coming down, consumers' incomes going up, gas prices going down, them trying to get credit, show it to the voter ahead of 2024, and more importantly, which I think we saw consistently throughout Biden's speech today, contrast with Republican policies. Well, it comes back, Rich, doesn't it, to that classic question, are you better off than you were four years ago? But it's a complicated one where the economy is concerned because

people might have fears that feel like they're not better off. They might in some ways be better off financially, but oh my goodness, the consumer certainly is stretched. How does one answer that question about the American voter right now? So, John, I think as long as the labor market remains as healthy as it is right now, it will be easier through time to say that households are better off. I think if the labor market starts easing up and we start seeing unemployment rate, you know, heading towards 5% by the time you get to the election next year, I think that'll make it more difficult. But if the, if the labor market stays high and wage gains continue, I think I think I'll have a reasonable shot of convincing people they're better off. Rich, on that note, just how bullish are you on

the market? I sort of want to put this carefully on the idea that we can avoid recession, but kind of where do we go from here? Yeah, Kelly, the first thing is, I think, you know, the word recession pops up every two seconds these days. And, you know, this has to be the most widely forecast a recession that's never occurred. Consider for a second now that early cycle sectors like housing and home improvement, those stocks are starting to break out big time. After the Fed has raised rates, 500 basis points, this is not in anybody's textbook. This is not what's supposed to happen. And so I think the message here is that the Fed is going to be raising rates for a lot longer than people anticipate probably longer than they anticipate right now if the stock market is right in some of these early cycle sectors.

So I don't think we want to start talking about recession prematurely. Has the economy slowed down? Has the labor market slowed down? Of course it has. But there's a difference between a slowdown and a full recession. And right now that recession is still out there somewhere. But who knows where? It's not here now. Courtney, is it because of Bidonics, because of all this fiscal spending and investment that we continue to see? I mean, we did have massive fiscal stimulus not at the same time that we saw Treasury and the Fed still engaging in monetary easing. But that is starting to reverse. We're just urging some caution, you know, on our front, looking at the fact that we do have liquidity reversal and that's going to be continuing for the next several weeks to months.

And we're starting to see kind of the first signs of that taking the tool in the market with communication state. services underperforming industrials. And we anticipate that to continue into kind of the growth versus value trade. And then you also have other concerns going on with the economy where we're starting to see cracks in labor, capbacks, and with the consumer. So we are just urging some caution with that some of these conditions that led to the surge in kind of the Biden economics are starting to reverse. Well, Courtney, they say all politics is local. So to what degree should we be looking at economic conditions in battleground states and even in states where different parties need a particular level of turnout for a signal on which way things are headed?

So we actually look at economic conditions from the macro front. One of our favorite indicators to watch for if a president is going to be reelected is whether or not there's a recession in the two years leading up to their re-election. This indicator has worked since 1912. So that's one of our favorite indicators to watch. And that's why we're, you know, looking at the fact that Biden betting on Bidenomics, tying his name with the economy, could be a potentially risky strategy going into his election because voters are going to conflate anything that happens with the economy into his reelection in 2024. We also watch real per capita disposable income growth.

Currently, that indicator is working in the president's favor. But that's a huge indicator that we also watch going into the election. election where presidents typically have to have real per capita disposable income growth above 1% heading into their re-election. And Rich, that's what makes this so curious because all of the risks that Courtney and others, granted, have been warning about for some time, could come to a head in 2024. I don't know if we've ever had a recession in an election year. I have to admit, I can't remember either. I think we probably have. But I think, look, the interesting thing is going to be not so much the market, the way people talk about it.

And I think if we're in a situation where 20 stocks are still leading the market, I think it's going to be pretty hard for the president to win because that's going to mean that the economy is a lot weaker than people think. Remember, narrow leadership reflects a dire economic outcome. However, if the market broadens, I think that says the president will probably have an easier time being reelected because it would say the economic growth is broadening in the economy. The overall number of companies that are doing well would increase, which would mean their hiring would increase, which would mean everything else.

Of course, it probably means that the Fed is raising rates as well. But I think that's a situation that's probably preferable than one where everything's weakening and the Fed is easing. Yeah, and obviously 2008, but that felt a little different because we knew it was a two-term presidency about to end. So this one with a re-election on the line, you know, feels a little bit different. We'll leave it there. Thank you both. Appreciate it. Rich Bernstein and Courtney Rosenberger today.

One aspect of Biden's economic policy keeping the U.S. ahead of China, especially in the AI chip race. Here's a look at Nvidia, some of the other key chip stocks on reports that further crackdown might be coming. Christina Parts at Evelace has the details. Well, let's start with NVIDIA's CFO Colette Krasse, who just spoke at a webinar maybe about two hours ago and said new chip export restrictions won't have an immediate material impact to financial earnings given the strength of their products worldwide. That's pretty much the consensus from analysts as well, which is why we saw NVIDIA's share price really bounced back from earlier lows. InVidia's GPUs we know have been talking about they're part of the AI high and they're in such high demand that they're, The company believes they would more than offset a drop from China. It seems like analysts are believing this too because the bull narrative continues with all of these notes.

Even if China contributes, and this was said by the CFO, roughly 20 to 25 percent of total data center revenues. These restrictions, keep in mind, initially came into place October 7, so that's the left side of your screen right now, after which China retaliated launching a review on micron and then actually banned some micron chips just this past May. NVIDIA is now a target, is a target, has since created a less capable, let's call it a workaround chip, which could now be a target of those controls. We still don't know because NVIDIA is not commenting. MD, though, is a little different as their AI chip. The MI-300 is just getting off the ground later this year, so the impact from the ban may be less, especially when you offset that from customers like Microsoft, META and a new customer, AWS. The Department of Commerce, though, won't comment on any of this news.

right now, but my chip sources have told me previously that they were expecting further export controls this summer. So maybe that changes, maybe it does it. Should the U.S. Titan restrictions on AI chips further demand and shipments to China, they're not going to disappear, as China is still using older models. They've been told to be stockpiling. But as NVIDIA, CEO, Jensen Wong, warned just last month to the FT, the U.S. risk enormous damage to its tech sector, as it would encourage China to build its AI chips domestically. And I mean, Invidia, and so they knew this was coming. I guess the A-H-100 are the top of the line, but they had done the 800s just for China.

So that's that watered-down version, the H-800. So if we're doing like back, I was literally doing some back-of-the-math, napkin math. And it's estimated both of those chips. The higher one, A-800, H-800 contributes roughly $1.5 million in revenue. So if we're anticipating a 7% hit, it's, or, yeah, roughly 7% would be about $105 million. For now, but it's so growing so fast. Wait, we know Nvidia has previously warned that when the first set of restrictions came in, it was going to be a $400 million impact in that quarter.

Now, with the GPU demand, maybe they'll say it's a little bit less, maybe not necessarily the case because China has been stockpiling and really anticipating this. And this could go beyond just chips. One other interesting angle that's been speculated on is whether there will actually be an effort to cut down access to Chinese players using cloud and those kind of AI. Which is a new angle, a new part to this, which would affect other people. All the major tech players potential.

I mean, I don't know if we've seen that, yeah, but, you know, if it's, when there's smoke, there's fire with some of these moves, you know? And the industry is very bad at forecasting the financial impact of these kinds of things. Exactly, which is why if I'm, you know, citing these analysts reports, it doesn't hold that much value just yet, because no one really knows, which is why you even saw that the dip in the stock, people are taking, you know, processing this information, and then literally all of the 10 reports that came up, all bullish still. It's like, InVideo can't do any harm, which is fine, which is true.

But the shares are we're leaving down today. I mean, it does tell you. Christina, thank you. I appreciate it. Hero until you're a goat. All right, the importance of the chip space for the U.S. front is front and center of this year's top states for business. While many industries are scaling back in the state of the economy, the semiconductor business is full speed ahead. Scott Cohn has details on the key battleground for the top states.

Scott. Hey, John. We're here at Micron Technologies Office in Silicon Valley. As you heard, this company has a lot riding on artificial intelligence. You know who else does? The state of New York, which is giving Micron some $5.5 billion in tax credits to build a $100 billion plant on a site near Syracuse. That is on top of the billions of micron stands to rake in under the Federal Ships and Science Act.

States are doling out huge sums of money on top of the federal money to get under this action. but New York Governor Kathy Hockel makes no apologies. This is a company that's bringing in about $30 billion in revenue a year. Why are the taxpayers of New York getting a good deal with all of that going out to this one company? It's real simple. 50,000 jobs. This is the largest private sector investment in America today. Micron's head of global operations told me that those subsidies in New York were essential to making that decision,

along with the great site and the great talent. Nonetheless, these critics are saying that these states should be doing more to just make their economies competitive in the first place without having to deal out these subsidies. It's a big deal in America's Top States for Business this year, which we will unveil in just a couple of weeks. You can read more about it. Here are our full interview with Governor Kathy Hokel at topstates.cnbc.com. Scott, what is the risk that these subsidies don't pay off?

and how does the kind of economy effect of chips reflect that, the number of additional jobs that this kind of a fab project brings versus other things? Yeah, you know, we interviewed as part of this story, Ben Walsh, who's the mayor of Syracuse, and he said, look, we remember Carrier, we remember GE, we remember Rockwell, we'll believe all of this when we see it. At the same time, there is an awful lot of money that's going into this, and as the governor says, a huge ripple effect. But the chip companies will tell you that at the end of the day,

they're looking at demand. They're going to calibrate these things based on semiconductor demand. So will it happen as fast as people are expecting? We'll have to see what happens. There is a whole lot of money behind this effort, though. Scott, thanks. Our Scott Cohn reporting, there's a whole lot more to come on the top states front. As we had to break, let's get a quick power check on the S&P 500.

It's Tesla and General Mills. two stocks recovering further ahead on the show. I was going to say GM. General Mills, GIS, down 4% after boosting their dividend by just over 9%. Not enough to excite investors after those underwhelming sales. We will speak to the CEO next. On the positive side, Tesla up 2%. Bernstein's Tony Sackenagi pretty negative on the EB giant,

saying in the short term, there are worries. We'll explore more of those concerns that Tesla's shaking off coming up on Power Lunch. Welcome back to Power Lunch. Shares of General Mills under pressure today. Despite a fourth quarter earnings beat, they forecast a softer than expected outlook due to ongoing inflation. Operating profit last quarter was down 19 percent. Revenue also missed estimates. Here to explain and to update us on the state of the consumer in a first on CNBC interview is Jeff Harmoning, chairman and CEO of General Mills. It's a real pleasure to have you here. Jeff, welcome.

It's great to be here. Thanks for having me on the show. So what jumped out to most people is the fact that prices were up, maybe double digits, volumes were down significant. is this the end of the road for you guys in terms of price hikes? One of the things we're most proud about is this past year, we eclips $20 billion in sales for the first time and grew sales 10% and earnings per share, 10%. So we just had a great year. As we look ahead, it's very clear that inflation will still be with us. It's also clear inflation is decelerating.

And so this past year, the cost for goods were up 13%. Next year is going to be about five. And so the good news for consumers is that inflation is decelerating. accelerating, but it's also not going to be a deflationary environment. So, Jeff, what about the supply chain and the state of that versus where we've been? It was a difficult time during the pandemic itself. We saw some different patterns from consumers right now. How prepared are you operationally to deal with potential slowdown in consumer spending?

Yeah, John, I'm thrilled your ask. The supply chain itself has gotten a lot healthier over the past three months. the number of disruptions we have is now similar to pre-pandemic and our service levels are back into the 90-plus percent range. And what that allows us to do is get back to more normal operating environment, which allows us to innovate for consumers, which allows us to turn our marketing on and which allows us to go back to the productivity savings we had had before. And so we're actually looking forward to this new environment and we're confident we can drive demand for consumers. So circling back then, if you don't think the inflationary

environment is over. Does that mean you'll continue to pass through some price hikes? And are you worried that consumers seem to be responding by choosing other products? Maybe it's generic products. Maybe they're just skipping occasions. You know, consumer, what's the most remarkable thing about consumers has been how resilient they've been over the course of time. And they should be because unemployment is very low, as we well know. Savings rates are high. And so the consumer's been relatively resilient. Having said that, they're also nervous about what lies ahead with regard to inflation. And so given the backdrop of everything that consumers have had to deal with, we're quite pleased that the sales have held up as they have been. As we look ahead, one of the most important things is going to be what our consumer is going to do eating away from home versus eating at home.

And usually when they get nervous about prices, they come to eating at home because the price of eating at home was about three times less than eating out. And so we think that that has driven demand in our categories. We think that will continue to drive demand in our categories. Jeff, how sticky are some of the changes that you saw in consumer behavior during the pandemic? I was hearing about like a revolution in cereal, right? Like people rediscovering cereal because they were at home. I mean, have you seen slippage on that? Are there certain tastes that people are leading more into or less?

Do people care about sugar anymore? You know, we have seen demand for food at home remain really sticky. In fact, about 86% of food occasions are at home. And that's about three or four points higher than it was before the pandemic. So we have really seen demand really be sticky. That includes breakfast cereal. And we've done really well in the cereal category. We've got some great new innovations coming this summer,

including a mini version of Lucky Charms. So we feel good about our prospects there as well as many of our other categories like pet food and Nature Valley granola bars. And so we see demand continuing and consumer to continue to eat at home. As long as it's not shrinkflation with the Lucky Charms. You know, the marshmallows will be smaller, but there'd be a lot more of them. So more magically delicious is really a good thing. So let me ask, you have so many different brands.

I mean, everything from Dunkeroos, the cereal genres referencing, Annie's, the mac and cheese. You know, when the mac and cheese for me is over $4 a box, and this is at Whole Foods, granted, you know, if my kids are barely going to eat half of it, I mean, I have noticed, I'll do trade down and I'll say, I'll get craft what's really the difference or, you know, the cheaper box, the blue box, what have you. So even within your brands, can you kind of tell us where you're seeing strength, maybe where you might be seeing some weakness and what that's telling you? Yeah, so as we look across our portfolio, consumers deal with inflation in a variety of ways. I talked about eating at home versus away from home, but they also, where do they shop? Do they buy bigger packages or smaller packages? Do they shop at value retailers versus others?

So they have a variety of coping mechanisms. you know, one of the things that that we see, consumers still love our brands. And General Mills has $9 billion brands. And, you know, when they start to, when consumers start to struggle a little bit financially, they still want to reward their family and they still want to give them the things that their families love. And that could be something as simple as cinnamon toast crunch. It could be on-the-go treats for your pets.

It could be old El Paso tacos on Taco Night. And so what we see in an environment like this, consumers really want to make sure that they're feeding their family things that they're. love, and that's important because what they can't afford to do is waste food. And as a point of personal privilege, I just have to give a shout out to DePaul University, where Jeff and I both went to school. We weren't in the same class. You get free products there or anything as a result, you know.

At DePaul? I do. I get free mugs. I have to imagine the dining hall has to have some kind of General Mills featured to it. Maybe I'm wrong. It does. Thanks for that shout out and go tigers. Jeff Harmony, thank you.

We appreciate it. Further ahead on the show, Pinteresting partnership. Wells Fargo upgrading Pinterest around the company's new deal with Amazon, saying it's going to drive shares higher. We will trade that name and others in today's three-stock lunch.

Welcome back to Power Lunch. I'm Simam Modi with your CNBC News update. The debris from the tourist submarine that the Coast Guard says imploded while on a mission to explore the wreckage of the Titanic is now back on land. Pieces of the mangled craft could be seen wrapped in a white tarp as crews unloaded the debris from a Canadian ship.

The recovery comes nearly a week after authorities say remotely operated vehicles detected remnants of the sub, about 1,600 feet from the bow of the sunken Titanic. The U.S. Marine veteran accused of killing a fellow New York City subway rider pleaded not guilty in court today. Daniel Penny is facing charges of second-degree manslaughter and criminally negligent homicide in the May death of Jordan Neely. Witnesses said, Neely was she was shouting and begging for money when Penny pinned him to the floor and held him in a chokehold with the help of two other passengers. Kevin Spacey's UK trial on a dozen sexual assault charges began today in London.

Four men accused Spacey of assault over a 14-year period dating back to 2001. Spacey, who said in acquittal in this case could be the restart of his career, denies the men's claims. The trial is expected to last at least four weeks. John, back to you. Seema, thank you. Now let's get a check on the bond market following some hawkish comments from Chair Powell in Portugal, saying he wouldn't take back-to-back hikes off the table. Rick Santelli, watching the action from Chicago, Rick. Yes, John, not only was our chairman, hawkish, but all three of the other central bankers from Japan, from the UK, from the Eurozone were also hawkish.

But did their hawkishness hit the mark? Well, you tell me. Here's intradays of two year and 10 year as they continue to move to some of the lowest yields of the day. And nowhere in there can I pick out around 10 o'clock Eastern, 1030 Eastern, where there was any pops. So not to dismiss any Prince songs, but they certainly did not make the doves cry today. As a matter of fact, maybe the most important thing today that really moved the markets was a seven-year note auction. Super aggressive. they really flocked to buy those $35 billion. And if you look at the 10-year, and I've showed this chart a lot,

going back to the cycle-high yield in the fall at 4-a-quarter, you can see that we have lots of congestion on the right, but each high is lower. So no matter how much the Fed seems to scream and guide, the markets, especially longer maturities, seem to ignore. But it isn't only here. Here's a boon. The boon is almost half a point, almost 50 bases.

points lower than its early March cycle high closing yield of 275 as it hovers, like I said, about 45 basis points lower on today's close. And finally, the UK is the only economy that I know of, of the biggies, who had their year-over-year core CPI actually create a new cycle high at 7.1 percent. So they hiked 50 basis points. You can see on this chart, their cycle high yield close was 4.5 percent, and that was back in September. They were very close and they may test it, but the dynamics of the UK aren't exactly the same,

but Mr. Bailey certainly seemed to be every bit as hawkish as Chairman Powell. John Ford, back to you. Rick, thanks, Kelly. I guess those charts are what it looks like when doves cry. Everyone except WADA, at least. He continued to coup, I think we would say. As we had to break, let's get a quick power check with Tesla, one of the best performing stocks of the S&P, up 2.5% as they're expected to hit record sales in China.

Even though some analysts worry about the U.S. growth in the short term, we'll have more next. Welcome back to Power Lunch. A slew of EV manufacturers announcing a move to the North American charging standard over the coming years, giving EV users access to Tesla's charging stations, but how much value could it drive for Tesla? My next guest says not so much, maintaining an underperform rating on the EV giant. Joining me now, Tony Sakanagi, Bernstein's senior research analyst. Tony, you've got, what, I think a 150? price target on Tesla. It was close to there two months ago, but it's over 250 now. What makes you think

it goes back down? Good afternoon, John. Look, I think Tesla stock is very difficult to predict in the short term. Our perspective is that, you know, upcoming numbers won't be great. I think there's limited chance that Tesla will eclipse contentious expectations in terms of deliveries this quarter, I think margins will be down sequentially because they took incremental price cuts in the quarter. And I think, you know, most importantly, when we look forward, Tesla's continuing to try and grow at very aggressive rates, you know, 30% plus this year, 30% plus next year. And it has no new product offerings. And so how do you create incremental demand when you don't have anything new per se. And that's Tesla's challenge over the next, you know, four to six quarters before we have

some new lower price model. So that's our concern is that Tesla will either ultimately fall short on deliveries at some point over the next four to six quarters or that we're going to see continued price cuts to be able to drive that growth. How much does that matter, though, when there are all these headlines that kind of feel like the rest of the EV industry throwing in the towel and admitting that Tesla, is king of the hill with this charging standard, and that Elon Musk was visionary in building out these stations. I mean, if you want to believe in Tesla, even if they have some near-term misses, it sort of seems like this charging narrative helps you. Well, I think it's certainly an admission

by competitors that Tesla has a really good network, and they want their cars to be able to use it. I think competitors have admitted that, you know, Tesla has a cost advantage that Tesla's been a pioneer in EV. So, you know, clearly there are many positives about Tesla. It's just fully reflected in its valuation. It has an $800 million, a billion dollar valuation, which is essentially the valuation of the entire auto industry, even though they'll make less than two million cars this year. And the auto industry outside of Tesla will make about 78 million cars. So I don't think this is a question of, you know, Tesla's not known as a leader per se.

I think it's really a question of what you want to pay. And to your point about the network, you know, the charging standard for Tesla will become the standard in North America with all these OEMs signing up for it. But right now, Tesla has about 80% of the EV installed base in the U.S. So adding an extra 20% of cars that can use that network is not a big deal. And Tesla's supercharging revenues last year were about $600 million, which is less than 1%. And again, when we think about, oh, how many more EVs are going to be able to charge on Tesla's network, right now it's pretty small. It's only about 20% on top of the existing 80% of the EV fleet that Tesla has in North America.

It almost feels unfair to sort of ask about the fundamental drivers of a stock that seems so liquidity and momentum and kind of trading driven for lack of a better phrase, Tony. I'm still curious, you know, as you look ahead, kind of weigh the opportunities that they might have with more of these charging stations and whatnot. How big a risk is it that regulators, you know, more fully cracked down on full self-driving? Do you think that's coming at some point? Look, I don't know if they'll crack down per se. I think they'll have to be higher disclosures. I mean, certainly regulators are not endorsing full self-driving. And Tesla has, you know, somewhat indirectly been pressured to, you know, put alerts on its cars for,

drivers to keep their hands in the wheel every 30 or 45 seconds. So I think, you know, regulators have been relatively cautious. I mean, we have approval in a couple of states for early level three autonomous driving from Mercedes. But beyond that, regulators have been cautious. Now, will Tesla be reprimanded in terms of false advertising or something more onerous that, then that, look, it's a potential wildcard. I'm not sure in the near term that makes that much of a difference to the stocks. Sure, it would be, you know, kind of emotionally or headline-wise, a negative for Tesla. But full style of driving revenues for Tesla are very small today. You only have, on average, about 5% of vehicles purchasing it when they purchase a car today. All right. 256.

what's been a big run so far this year. Tony, thanks for joining us with a note of caution. We appreciate it. Thanks for having me. Tony Sakanagi. Still ahead, IP No. The tech rally we were just talking about, fueling the NASDAQ to a 30% gain this year,

the best of the major averages. So why are we seeing more tech startups chasing that and going public this year? We'll ask. Plus, Generac, one of the best performers on the S&P today, its rally continues. After the CEO said they're seeing a big sales boost down in Texas,

their power grid getting pushed to the max amid record-setting heat waves with temps again hovering in the triple digits. This has been going on for days. We will trade Generac and other movers and three-stop lunch coming up next. Welcome back to Power Lunch. With all the attention on AI, you might have expected to see a wave of those companies going public. But while the IPO freeze we've been in for over a year has thought a little, it's mostly restaurants.

We haven't really seen tech get involved. Let's bring in Dear Jabosa. Now for today's Tech Check, where are the startups, Deirdra? Where are they? You're right, Kelly. Tech remains on the sidelines. And we have been waiting for some very big names for years even. But there are a few signs that they're ready to test these IPO waters anytime soon.

Instacart, Stripe, Reddit. These are what I might call the dinosaur unicorns and that they've been living in startup land for longer than we might ever expect private companies of their size to do so. And in the meantime, the list of smaller unicorns that is companies worth a billion dollars or more. That's growing thanks to this generative AI hype cycle. I just spoke to a few worth. And, you know, billion dollars, public investors, they can't get enough of the few companies that are already public as well, as we have seen very much in the markets this year. So the big question, why isn't tech jumping on this opportunity? One reason is that a lot of startups raised money back in 2021, the peak, when interest rates were still low and the funding environment was red hot.

Then when the landscapes cooled, they also cut their operating costs. So that actually increased their existing runway, and thus the need to raise more money was eliminated. Another reason is that we haven't seen the full effect of the so-called great reset. Many startups, they remember those boom times of 2021, and they'd rather wait and see how other IPOs perform, see whether valuations have really settled or will continue to come back. So a bit of hedging here going on, Kelly, but some reasons why you may not see them come back anytime too soon. Arm could be the big one, though. Arm still, wasn't that supposed to be by now already or no?

Well, the timeline is ticking. They said they would go this year, and there's nothing. that tells me that they won't do so. We know Masa San is devoting all of his time to get this out the door. That could be the big one that really blows open the gates. And it's interesting because there's sort of this need. They need to get arm out more so, not because they need the funding, but because Masa son has said so. So that could be the one that blows the doors open.

All right. Deirdre, thanks. And meanwhile, there's a lot of M&A taking place, which you saw earlier this week of data and AI-related startups, IBM, etc. Snowflake actually did an acquisition, not long. go, speaking of, shares of cloud data company Snowflake getting a boost today and yesterday, following the company's investor, well, their Snowflake Summit, where they announced an AI partnership with Invidia, also with Microsoft, expanded investment in that partnership.

I spoke with Snowflake CEO Frank Sluppan earlier today about that Microsoft news. Take a listen. First of all, we know we literally doubled the commitment to Microsoft, and Microsoft is a big relationships. It's growing the fastest of all our platforms. But we took this opportunity to also have to create better alignment in the field. I mean, obviously, my relationship with Sotnyna is great, but when you get 14 layers down in the organization at street level, you know, the dynamic is a little bit different. And that's so interesting here, Kelly, the go-to-market has shifted with AI and in this tougher economic environment, the need to show quicker time to value for software

purchases. Over the past couple years during the pandemic, if it was new and seemed to kind of work, companies were buying it. But now they want vendor consolidation. They want simplicity. Maybe they want some cost savings to come with any new software adoption. So you got to pencil it out. And so a partnership like this, Snowflake and Microsoft saying, hey, Microsoft, we're actually going to grow consumption on Azure. This is good for you. That becomes really important. And to your earlier point, is some of this acquisitive behavior why we haven't seen more actual IPOs? Not that there was an IPO candidate in maybe this particular case, but in general. Absolutely. I mean, look at Databricks buying Mosaic ML for $1.3 billion. That company's only a couple years old, has around

60 employees. So when you're thinking about, do I want to go through all the trouble of going through the IPO process, maybe when my revenue isn't quite, you know, still a little lumpy because we just got out of a pandemic, whatnot, or do I want to just get acquired by somebody who already has scale? Even if you are a pretty decent-sized AI startup, maybe you don't want to go through that right now. So there is a bit of that going on. Of course, here on Power Lunch with Working Lunch, we just had Ariel Cohen from Navon talking about

SaaS companies still not getting the kind of valuation that they want to see based on how much they've raised. It's fascinating. You'd think it would be the opposite in this environment. Or maybe not after the last couple of years. As we had to break, Judas Pride Month, CNBC is celebrating by sharing stories of corporate leaders. Here is Nikki Katz, head of digital

at Bank of America. You never know what someone that morning before they showed up to work or what they're dealing with in their personal life. So when we all show up to work, we should do so with grace and with compassion for one another. Even now in 2023, the struggle for our LGBTQ plus teammates, family members, and friends continues to be very real. It's important to take a moment during Pride Month, but frankly, all year around, to celebrate the victories and show our support for the ongoing struggle.

Welcome back, everybody, and it's time for three-stock lunch. We've got some big movers on the menu today, and we'll start with Regeneron, whose shares fell 9% Tuesday after the FDA declined to approve a higher-dose version of their blockbuster eye disease treatment. Shares off of another 2% or so today. Let's trade this name and a few more with Lee Munson. He's president and CIO of portfolio wealth advisors. Lee, very busy time in biotech and pharma these days. Where does regeneron fit in? So they have 86% of their revenues that they get from products come from this one drug.

Basically, it's sort of like a getting old drug. It's macular degeneration that's age-related. You know, a lot of us are going to go through this. The problem is that they were the first on the block. And the issue is that you need to get your eyeball stuck with a needle six times a year for the treatment. But then Roche, on the other hand, has a product that's cheaper. It's a slightly more per unit, but you only have to do it three. times a year. So we call it, it's less burdensome for treatment, right? And so the issue was

regenerance is no problem. We're going to do a higher dose. There's no issues. And then we'll be down to like three a year and we'll be able to compete head to head with Roche. Problem is the FDA said, nope, we need another six months at least to check out your third party manufacturing. And remember a few months ago, we had issues with, you know, eye drops and all that stuff. So the bottom line is, I don't think Regeneron is going to make it here because Roche is going to have six months to eat their lunch. And if that happens, then those sales can fall. And again, with Regeneron, that's the only real product that they have. Whereas Roche, you know, it's 4%.

It could double triple quadruple. So I'm not saying go out and buy Roche, but I'm definitely saying Regeneron needs to be a pass. Well, let's see what you think about this. Pinterest shares rising 6% on the heels of an upgrade from Wells Fargo. The firm's saying its Amazon partnership is going to be a strong catalyst for the stock. Will it really? Because that was what was supposed to happen for a firm, and it didn't last. I know. Put it this way. They've got a new CEO. It seems like a nice guy. He's going in there with a hatchet. He's cutting costs. He's dealing with the issues. But I see this as more of a speculative catch-up play. And I think that's where you've seen a lot of momentum.

You know, it's not, it's up half as much as the NASDAQ is this year. So I think if you're just looking for a a little summer fun, maybe 5, 10, 15% pop on some good feelings with the hope that Amazon is going to bring them sales because people on Pinterest want to buy stuff. I think the problem is when you go through the actual numbers, you're also going to have to put in ad sales, which is not something that we necessarily have a grasp on. So I think if you're looking for a summer trade, again, anything that's social media tech that has not gone up as much of the NASDAQ, traders are going to look for that and they're going to see what the mind wants to see.

So I think short term, take it for a flyer. But honestly, I wouldn't want to wait around until Christmas season to see if those sales really come in or not. All right. What about a quick buyseller hold on Generac? It's having a monster month, but they are still down significantly from the 415 highs in late 2021 Lee. Very quick.

I would say that with Regeneron, they already control generators. It's already been priced in over the last week. So I think the real problem that people don't know, 2019, they bought PICA, battery storage, lots of lawsuits, big black eye. I think the moves already happened. Let's wait another three to six months and see if they can't get past the lawsuits with the PICA acquisition. Those inverters, pointing fingers, big issue for what we consider, you know, the Coleman of camping. That's regener on. I mean, that's this company for Generators.

So it's a great company, but they have some problems with battery storage where they're really. real growth is longer term. Munson, not in the buying mood today. Not in the, not slurping down these drinks. Lee Munson, thanks for joining us. We appreciate it. Thank you. Summer fling, though, with a stock.

I didn't know you could do that. All right, still to come. In the rough, residents reportedly going to great lengths to try and keep top golf from coming to their community in Colorado. That and much, much more when Power Lunch returns. Welcome back. Two and a half minutes. We can do that.

Plenty of time. A lot more stories to get through. So let's start with New, data showing Airbnb's revenue falling dramatically in some key vacation markets. Stoking fears, there could be a broader housing oversupply. According to all the rooms, Airbnb revenue in Phoenix and Austin are down 50% year-on-year. Other cities down 30% or more. At real estate experts morning, people could start selling off those rental properties and droves. That would be a big impact potentially on the market because people haven't been selling. Speaking of homes, apparently

turnkey is key. The Wall Street Journal saying cash-strapped buyers are avoiding fixer-upper right now because they're expensive and contractors are hard to find. Maybe the beginning of some pricing softness. Yeah, we started to see this as soon as rates went up. This is the first area of impact. All of this, you're thinking through the inventory implications. Meanwhile, shares of TopGulf are down today after residents of a Colorado town voted to effectively ban the company from opening a location. Voters in Tynmouth passed a measure prohibiting fences and netting from being 65 feet or higher. Pretty niche requirement here. Topgolf usually requires nets 150 feet. high at its locations. The concern is that those high nets would interfere with eagles and other birds,

potentially trapping them. I've also heard eyesore complaints and traffic concerns. Sounds like the neighbors are pretty teed off. All right. For any worker, the assumption is make more money be happy, right? Well, that might not be the case, new data suggesting having power over when and how much you work might be more important. About three quarters of independent workers, freelancers and consultants surveyed by payroll services provider ADP earlier this year. said they felt they were paid fairly compared with 70% of part-time employees and 68% of full-time staffers. This tussle over work from home is so far from being over. Pulling people back to the office is not going to be the end of the story.

Yeah, where you dragged back? I never really left. I know. Yeah, Joyce here. And we talked about the cruise stock recovery, but one potential threat is looming. The CDC reporting 13 outbreaks of norovirus on cruise ships so far this year, affecting nearly 2,000 passengers and crew. That's just a hiccup now, right?

Have you been on a cruise? Not since all this started, but it used to be when somebody sneezed, you were like, get out of my side. But now we're kind of like, all right. If I ever take one, I know I'm going to be on one where there's a norovirus out. I just know. Maybe if you haven't, but I hope not.