Power Lunch - Boeing Pleads Guilty, Hurricane Beryl Makes Landfall 7/8/24

Episode Date: July 8, 2024

Boeing just made a deal with the Department of Justice to please guilty to criminal charges relating to safety issues. We’ll discuss the fallout, including what lies ahead for the company.Plus, Beryl made landfall in Texas this morning as a category 1 hurricane, causing power outages for millions of homes and businesses there and snarling air travel to. We’ll get a live report from the ground. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everyone, and welcome to Power Lunch, alongside Kelly Evans. I'm Tyler Matheson, glad you could join us. Stocks have been losing ground throughout today. Right out of the gate, the S&P 500 and NASAC hit record highs. Look good. But now off those best levels. Those record highs were driven by what else, Big Tech, Amazon, Apple, and Meta, all hitting new record highs earlier in the session. Two of them are down fractionally at the moment Apple hanging on to the gains. But the Big Tech mover today and lately has been Tesla restaking its claim among them. magnificent seven on pace to be higher for the ninth session in a row of nearly 40% in that span. But let's begin today with Boeing, making a deal with the Justice Department to plead guilty to criminal charges. Let's get more on this story from Phil LaBelle. Phil. Tyler, I think the reason we see shares of Boeing moving a little bit higher is because this is

potentially removing one of the unknowns that has really been weighing on shares of Boeing. And we'll talk about that in just a little bit. But let's first go over the plea of between Boeing and the DOJ. It is a felony fraud charge that Boeing will be pleading guilty to. They'll pay a fine of just over $243 million. Commit to spending $455 million on investments in things like compliance, safety protocols. Independent corporate monitor will be appointed by the judge to oversee that Boeing is doing what it's supposed to be doing over the next three years. If you look at this case, a lot of people are saying, is this all because of Alaska Air? No, actually what it is is it's going back to the investigation into the two 737 max crashes in 2018 and 2019.

There was a deferred prosecution agreement that Boeing agreed to in 2021, but they did not meet the terms of that and they violated it with the Alaska Air Door Plug blowout. So as a result, they are now going to be into a court appearance where they're going to plead guilty to this felony fraud charge. So if you were a Boeing investor, is this good news or is this one of those? It's one more thing that we've taken care of. Potentially good news. Obviously, you don't want to see a company pleading guilty, and it may impact their bids for defense contracts or government contracts in the future, but it does remove one of the unknowns that is out there once it's finalized.

There's the CEO search. That should be wrapped up sometime in the next several months. Remember, Dave Calhoun leaves at the end of this year. I would imagine we see an acceleration in the CEO search over the next two to three months. And then you have the 737 max production ramp. It is gradually moving higher, but the key word there being gradually. I think the production right now is estimated to be about 24-737 maxes per month. Nowhere close to the cap of 38 per month.

We will get the production and delivery numbers tomorrow for Boeing for the month of June. And again, the estimate there, that's coming from Sheila Kuyula at Jeffrey saying, what about 24 a month? The June deliveries will come tomorrow. And don't forget that at the end of the month, guys, we get the Q2 results. from Boeing. So again, if you're an investor, you're looking at this saying, all right, we're slowly getting there, building the bottom, getting through the unknowns, and then you can see what the potential is for Boeing to grow over the next couple of years.

I think one of our next guests fundamentally agrees with you there, Phil, on the fact that this takes one level of uncertainty out of the equation, and he would be Tony Bancroft, a Boeing shareholder and portfolio manager at Gebelly Funds. Tony, welcome back. We'll get to you in a moment. Danny Savalos is a criminal defense attorney and a legal analyst for NBC News and MSNBC. Danny, you've been spending a lot of time covering political cases. This is not one of those, but this is a fraud case. It is a criminal case.

What does it mean when a corporation pleads guilty to a charge of criminal fraud? It's a lot different than when a human pleads guilty to corporate fraud or any other kind of fraud. In reality, in many ways, when corporations plead guilty or are found guilty in federal court, It looks a lot more like an accelerated civil case with the government as a plaintiff rather than the victims themselves. Because after all, you can't put a corporation in prison. And prison time is usually the most important consequence of a federal conviction, with the vast majority of federal convictions resulting in prison time.

You don't do that to a corporation. So, in essence, because most of these end up in guilty pleas, they really end up having corporations' pay. massive civil fines which inured to the benefit of the government and the government does get the benefit of having the corporation do what the government thinks is best for safety and you see that here in the massive investments that Boeing's going to have to make in safety and compliance programs but of course there's going to be a fine which the government will partake in and that's why you have a lot of victims groups here and their attorneys concerned about the speed at which and the terms under which this agreement

Before we turn to Tony, Danny, is there anything that prevents the federal government, the Justice Department, from charging individuals for fraud or malpractice, malfeasance here? And could that happen all the way up to potentially the CEO of a corporation? So far, I don't see anything in the terms of this particular plea agreement that is kind of a global resolution in the sense that no one else could or would be charged. But of course, that's always a concern that there may be individuals within the corporation that are going to be charged. But as of right now, it appears this is just an agreement for the company itself to plead guilty with at least no immediate individual consequences for any humans in that corporation. Although that doesn't rule it out.

There could be some liability down the line that we just don't know about. But a lot of the facts have been known for some time now. So, Tony, the interesting thing about that is, are there going to be any real ramifications for Boeing as a company or from shareholders point of view? I mean, they're rallying slightly today. So, I mean, is this just going to be kind of a shoulder shrug and the company moves on? I think it was generally expected that Boeing was going to plead guilty. You know, it's the most logical conclusion to this. They get it behind them and then start moving forward and go to the next step, which Phil alluded to, getting a new CEO and then getting the,

the 737 production ramp. But it's not as if the government said the CEO has to go. The CEO told us he was going to step down at the end of the year, kind of as a result of everything that's happening. Well, I just meant just getting rid of uncertainty of not having, knowing who the next CEO is going to be. I think it's going to be a big part of the, you know, Boeing story is who's the CEO is going to be, what they feel he's going to be able to accomplish in his tenure.

What about the fact that with the government contracts that they are under, the guilty plea could potentially affect the way that they might win those or be able to compete for those. Is that true? So I think that's a risk and speculation again is that you know Boeing does about 30 plus billion in defense revenues annually and last year they won almost 20 billion or so in defense contracts. So they're a big large global I mean they're number two or three globally in in the defense industry. I just don't see them you know the Department of Defense in this global climate this global tension is going on right now, them cutting off Boeing.

Even if the laws of the regulations say, you cannot, Mr. Government, you cannot do business with a, quote, convicted fraudster, which the corporation is. I mean, I'll defer obviously any legal advice to our expert. But, you know, just from whom I've spoken with, there are waverable, right? So if you're a convicted felon, you're able to waver it depending upon the situation. And that's why Phil, I don't mean to, you know, sort of make this sound like it's nothing. I mean, it is a guilty plea, but you wonder, what is the real consequence for Boeing at this point? Okay, they pay a little bit of money.

There's an independent, you know, observer in the building. But I don't know. It doesn't sound like, my guess is for most people this might not even make their news flow today. Oh, I think it makes the news flow. And look, I know a lot of people will sit there and say, well, this is a slap on the wrist. Boeing is going to have to spend about $455 million on safety and compliance programs. And the outside corporate monitor appointed by the court, you can bet that the outside corporate monitor will be scrutinized.

And so it's not going to be somebody who Boeing picks and he rubber stamps everything that they do. There's going to be a level of scrutiny that will make Boeing as it grows its production ramp under the new CEO, whoever that is. They're not going to be able to run right away. That's going to be a more cautious approach, at least initially, as they make sure that they're doing everything. Look, they're already doing that right now. Look at how slow the production rate is at 24 per month. They're nowhere close to 38.

Might get there by the end of the year. But at this point, they're already paying a price, and they will continue to pay a price in terms of production and the ability to ramp up 737 max deliveries. So, Danny, let's go back to that question of the government contracts. Maybe you can fill us in a little bit about the law. there and whether the government contracts, either existing ones or the ability of Boeing and the government to enter into future contracts could be jeopardized here. And question number two, can you think of other cases like this one where a company has pled guilty to criminal fraud charges? And what's happened then? Yeah, on the first one, absolutely right. There is a waiver

process. And likely the waiver will be pursued because this is a major corporation that does business with the government. So even that normal disqualifier, that collateral consequence of a felony conviction may not end up hurting Boeing the way it might some regular guy who's a government contractor who supplies goods and services to the government. Again, one of many ways in that corporate criminal prosecutions really don't feel like prosecutions, especially when you're a criminal defense attorney and you have humans who are your clients and they end up going to prison. That's not what's going to happen here. So really, what you're saying is Boeing's too big to fail in this case, right?

Well, every corporation that pleads guilty to a federal crime in a sense is too big. Yeah, they're too big in the sense that they will get waivers because they're a major, major part of government contracts. Yes. And also for every corporation, even a small corporation that pleads guilty to a crime, nobody's going to go to prison unless an individual is charged with the crime. And actually, I've covered a number of these cases dating back at least a decade. peanut butter companies, other companies, and what you find is they almost all end up pleading guilty, because what this really is is a civil case with the government as a plaintiff.

It's really not a prosecution, even though you call it a prosecution. It's silly to think that Boeing, the company, will have to report to a probation officer the way an actual offender does after they're out of prison and they have a probation tale. It's just not the same. The company's not going to call up and say, hey, when do I have to come? in for my drug test. It's just not the same thing. We can call it a criminal prosecution, but look already at all the exceptions we're seeing. They're going to get waivers. They're going to continue to do business with the government. They're not going to be under a disqualification

in the sense that they can't own a firearm and can't vote. And I'm not being glib here, but we have a system where we've crowbarred the idea of corporate prosecution into a particular basket, which is criminal prosecution. And we can call it that, but that's not really what it is. So quick sort of follow up to that, Tony, is that Boeing itself is already also making some moves that would potentially undo what got them into this mess. In other words, taking back spirit aerosystems, which is one of their suppliers that it spun out. In so doing, it might have contributed to some of the loss of quality control it had over this process. You almost think a government could have said, we're going to make you buy them, but they're going ahead and buying them anyway, which is also tacitly admitting maybe we were pursuing the wrong moves for the last couple of decades. Yeah, I think that's exactly right.

And I think there probably was maybe a little bit of strong arming from the FAA and maybe not directly saying by spirit. But, you know, all roads led to spirit had some issues. And the best course of action is take your critical supplier back in-house, I think. Phil, quick question. Are there civil cases brought by the families of the victims of the two crashes of the 737s that really are at issue here? Are those – and where do those stand? They're in process when they actually go to trial or go through the system. That's going to take some time to work out.

But yes, there are cases there. And let's be clear, the families of the victims of the 346 people who were killed in these two max crashes, they are furious about this. They believe that Boeing should be in court, that there should be a trial, there should be a hearing where everything is put out for the public to see in this case. DOJ clearly, as Danny has alluded to, they want to see, let's get to the resolution that is most expeditious in this case. That's the plea agreement. And there's not going to be a trial here. But the civil cases, yeah, they will play out. And I think some have already been settled, if I'm remembering correctly. But as you say, there are many more that are still in process.

Phil LeBoe, Danny, as follows, Tony. Thank you very much for being with us. As always, good to be with you. And as we had to break, let's get a quick power check on markets. On the positive side is Intel today, up 5%. The top performer on the NASDAQ after Melius Research called it a top AI winner for the second half of the year. We'll trade Intel ahead in our three-stock lunge. On the negative side, Paramount Global, down 4% on news it finally agreed to merge with Skydance, ending a month's long negotiation and also the Redstone family era of control over the legendary movie and media empire. That's your power check. We'll be right back.

Welcome back to Power Lunch. The S&P hitting another new record today as key inflation and earnings data from major financial and consumer companies are on this week's agenda. Our next guest doesn't think the Fed's 2% inflation goal will be met without an extended period of subpart economic growth. But are we there yet? Let's ask Richard Bernstein, CEO and chief investment officer of Richard Bernstein. I'm always trying to pin you down, Rich. I appreciate you meet him. Is he bullish? Is he bearish? And I thought it was interesting that Piper dropped coverage of the S&P 500. And I thought, is everyone just getting frustrated with this market. Are you amongst them? Like, does it stack up against historical experience, or are we experiencing something very different? So, Kelly, you know, I saw stats today that showed the year to date through July 5th that only 21% of the companies in the S&P 500 have

actually outperformed the index so far this year. That is now narrower. If this were the end of the year, it would be narrower than during the tech bubble. So you can understand why people are getting so frustrated. You know, I've used the seesaw analogy with you many times that the seesaw is bent in a rather precarious position. And the opportunities have to be on the other side of the seesaw. You know, like, who doesn't know about the seven stocks? But, you know, people's knowledge of the other 493 is probably woefully inadequate. Why do the opportunities have to be on the other end of the seaset?

Why don't I want to invest in the secular, miraculous innovation? Why wouldn't I rather stick with what's working, you know, what has 30% earnings growth than go to what has 5%. Well, Kelly, by the end of the year, the Magnificent Seven earnings growth is supposed to be, according to analyst forecast, it's supposed to be lower than what you're going to get in the Russell tooth, slower than what you're going to get in the Russell 2000 and slower earnings growth than what you're going to get in emerging markets. So I think this notion did, and right now there's about 160 companies growing earnings, just in the S&P growing earnings 25% or more. So I think people are really overlooking opportunities.

It's not that the Magnificent Seven are bad companies or anything like that, but are they unique. And the answer to that is clearly, no, they are not unique. They do not deserve the amount of tension, the valuations are getting and everything else relative to the growth that you can get in other areas of the global equity market that are similar, if not better, with much cheaper valuations. You're arguing strongly there for smaller companies and for international companies, emerging market companies. But I want to turn, correct me if I'm wrong on that, but I want to turn to something that stood out to me.

And that is your assertion that we're entering as an economy. The United States is entering a time when, A, de-globalization is the governing trend, not globalization. And second, that the U.S. is going to be forced to regain its economic independence. because of, in part, that de-globalization and tensions, trade tensions around the world. Explain to me what the investment implications of those two things are, what kinds of stocks I'm going to want to look at. Sure. So there's two things that I think investors should take away from that.

Number one is that we would argue, at my firm, Richard Bernstein Advisors, we would argue that the number one reason, not the sole reason, but the number one reason that we had secular disinflation was globalization, that what globalization did was a consistently increased competition, and we everybody knows that when you increase competition, you get downward pressure on prices. That's now called secular disinflation. As we change from globalization to de-globalization, our mindset should start changing from secular disinflation to secular inflation. That doesn't mean 8% inflation, but instead of a forecast of two to two and a half, probably three to three and a half or maybe four percent inflation is a realistic number. Second thing is that

globalization did exactly what your textbook said it should do, Tyler. It sent production to where it was, it sent production to where it was most efficient, where it was most productive. Unfortunately, that was not in the United States. So the end result is the United States runs a massive trade deficit, which was no big deal as long as globalization was expanding. But when globalization contracts, you run a massive trade deficit. Look, here's the way to think about it. Why does everybody understand the national security implications of being dependent on the rest of the world for semiconductors,

but we don't understand the risk being dependent on the rest of the world for everything, everything we are dependent on the rest of the world? So we think that capital markets are going to be smart enough to understand this risk and to reallocate capital to where it's needed. Where is that? I would say the number one sector is the industrial sector, followed by energy and materials. Very interesting.

Rich Bernstein, thanks very much. Always good to hear from you. And thanks for that elaboration. Appreciate it. Sure, thanks. You got it. All right, Hurricane Barrel making landfall in Texas as a Cat 1 hurricane. Heavy rains, powerful winds, knocking out power for millions of homes and businesses.

We'll get a live report from the ground when Power Lunch continues. Hurricane Barrel. All right, welcome back to Power Lunch, everybody. Let's give you a quick check on the markets. The Dow is the only one negative. but only by about a tenth of a percent. The other two, S&P and NASDAQ, are higher here again by very, very small percentages, as you can see, almost flat in the S&P's case. Hurricane Barrel making landfall on the east coast of Texas today.

NBC's Jay Gray is live in Rosenberg, Texas. Hi, Jay. Yeah, this area took quite a hit. In fact, I'm going to get out of the way and show you right now what's going on. They brought out the heavy equipment. Rain's been over for about 20, 30 minutes, and they're already working to clean things. up. So they got a double punch here. They got the wind which ripped down this country and so many trees across this area and the water, which caused some heavy flash flooding in the area.

In fact, they had to rescue at least two people from their cars who were stuck in that water. And that was going on as the rain continued. So now with a bit of a break in the conditions, the wind's dropped off as well. They're allowing these crews to get out, assess the situation and begin what's going to be a long and difficult cleanup here. But you can see they've got the right tools for the job here. So they're just trying to clear away the roadway. Talk to some of these guys. What they told me was they had separate crews that were working all night.

And then those guys just went home as the rain begins again here. And they've got two more crews, two three-man crews, that are now coming through and continuing the work here. Again, the issue has been two-fold. wind and rain that wind bringing down power lines, trees, more than 2 million people without power at the height of this storm, and then the flooding, which continues to be pretty bad in several of the areas. Now it is cleared up here, thankfully, but it's only cleared up so they can get the work done.

That's what they're going to be doing for a while. Trees get a little close, guys. I'm going to step back just a little bit, but there you go. They're moving it. So, Jay, I don't know the territory there very well. How far are you from Houston and how hard did this storm hit the Houston metro area? Yeah, in Houston, we're about 180, 200 miles away from Houston proper. The issue in Houston was the water, and it's always the water there in Houston.

It's far enough removed from the coast that the winds aren't as severe as they could be once the storm makes its way to Houston. But the flooding is intense. We've seen entire roadways. just swallowed by the floodwaters. They had about six inches of rain before the storm hit, and then the storm moved in and carried another, you know, in some areas, four to six inches of rain, and so they've been dealing with that.

And that's something that's been familiar in Houston. What's good about this storm, if there's anything, is the fact that it was moving at a pretty good clip, 10 miles an hour. So unlike Harvey, which stayed for a couple of days and continued to dump water, this storm, it moved through the area and is continuing, but again, not without causing some serious problems. All right, Jay, thank you very much. Jay Gray reporting from the storm zone of barrel.

And let's take a look at the impact the storm is having across the energy markets. For that, we turn to Pippa Stevens, of course, and it was said to be heading right for some key infrastructure. Yeah, so the storm has not yet run its full course, but energy prices are falling today as markets bet the worst of the damage was avoided. Sitka reduced runs at its Corpus Christi refinery over the weekend, but today said that now that the storm has blown through, it's in the process of returning to normal operations, while Exxon said operations are stable at all of its Gulf Coast sites. Still across Texas, as Jay said, more than 2.7 million customers are without power, and there still could be refinery damages amid the high winds and flooding. The Gulf Coast accounts for more than 40 percent of U.S. refining capacity, with the Houston area representing about 15 percent of the total. Now, in terms of oil production, there's been really a minimal impact. Shell shut down one platform that produces about 100,000 barrels per day. But where the storm has had an impact as energy flows between the U.S. and Mexico, after a number of port closures, including Corpus Christi and Galveston.

The U.S. imports about 400,000 barrels of oil per day from Mexico, while Mexico imports about 1 million barrels per day of refined products from the U.S. Now, even if barrels' impact on energy prices proves muted, it was the earliest Atlantic storm on record to reach. Category 5, and NOAA is forecasting this above-average hurricane season, and so we could be getting our sea storm before too long. Earliest to reach Category 5, much warmer than usual sea temperature. I mean, there's a lot of things about the storm that are worth kind of noting. Yeah, to have one this big and fast in July. Yeah, and then also look at the heat wave that's in the west.

Also, there's a number of wildfires in Canada that's threatening some oil infrastructure up there, oil, sands. And so you have kind of all these extreme weather events happening at once. And yes, it's earlier and earlier, which means there's many. more months for there to be a big, you know, storm in the Gulf Coast that could, that could hit refining operations. Solar Stocks having a big day. Yeah, so SolarRedge is up after an upgrade at Bank of America.

Now, it was only to neutral, but when you've been so out of favor, any little bit of optimism will help. So they basically said that shares are trading under a worst-case scenario in terms of inventory write-downs and then liquidity crunches. And they said they didn't go all out with saying that it's a buy opportunity. They held it neutral, saying they want confirmation of margins and cash flow before they They go all in. It's only down 71%.

Yeah. So. Bipper, thanks. Thank you. All right, let's get to Contessa Brewer now for a news update. Penta, Contessa. Tyler, the powerful committee that screens foreign investments for national security risks could see its oversight expanded. The Treasury Department proposed a rule today that significantly changes the jurisdiction over land near national security sites for the Committee of Foreign Investment or Sipheus.

It would add more than 50 military installations across 30 states to the existing, list where Sipheus has authority. New Jersey gambling regulators hit Draft Kings with a $100,000 fine for reporting inaccurate sports betting to the state. The state calls it unacceptable conduct and said those errors, which involved overstating wagers, demonstrated weakness in the company's business abilities. Draft Kings told the state the inaccuracies came from a coding error. And Yukon men's basketball coach Dan Hurley just agreed to a $50 million contract to stay with the team through the 2029, 2030 season. Hurley had turned down a $70 million offer to coach the Los Angeles Lakers last month. His deal with Yukons based on performance-based incentives after he led the Huskies

to back-to-back national championships. And now he's seeing the big jackpot at the end of the rainbow, so to speak, Tyler. Very interesting. Yeah. And I guess part of that is that 70 million in California gets cut by taxes a lot more than it would get cut in Connecticut. And maybe he's got some. some loyalty to the Huskies. Maybe team loyalty plays a role. I would much prefer to be a college coach, I think, than a pro coach. Anyhow, thank you, Contessa. Sure. Still ahead. But nobody's asking me to be a coach of anything. Maybe they will now. Yeah. All juiced up, shares of Tesla have come roaring back, now positive on the year. But has it earned its spot back in the magnificent seven? We'll discuss that when power lunch returns.

A monster rally for shares of Tesla over the past month, enough to turn them positive on the year and make the case, it's even earned its way back into the Mag 7. Deerja Bosa taking a closer look at what's changed on the fundamental side of things, Deirdre, for today's tech check. Kelly, huge surge in stock price, but the fundamentals, they haven't changed much at all. In fact, revenue and earnings growth in the current quarter is expected well below the other six mega caps, even if it is back in the magnificent seven of the seven Tesla is the only one expected to see revenue growth shrink in the current quarter and earnings growth even more dire here, expected to decrease 30. But fundamentals, of course, they're rarely the driver of Tesla shares.

It is momentum and the promise of technological breakthroughs that only Musk is capable of. And now that momentum seems to be back on Tesla's side, the stakes are high for the company to lay out its AI strategy, and in particular, Invidia's role when it reports on July 23rd. Now, the company has bought and deployed tens of thousands of Nvidia GPUs over the last few years to build powerful AI infrastructure for Tesla. Last month, though, Musk confirmed our own Loricalod. He's reporting that he redirected a Tesla batch of those GPUs to X and XAI, two of his private companies. So if, as Musk claims, Tesla is fundamentally an AI company versus a car company, he will no doubt make that case again on the earnings call.

Investors, though, they're going to be looking for more for updates on how the AI strategy is progressing and that GPU deployment. We're now one month away from the Robotox event on August 8th, which Wed Bush sees as, quote, laying the yellow brick road to full self. driving and an autonomous future. And really, that's what separates the bears and bulls on the stock, Kelly and Tyler, is that the bear see it as a car company and the bulls see it as an AI company. But increasingly, Musk and Co are going to have to show how it's an AI company and what they're doing with all those GPUs. But you think fundamentally there wasn't, you know, maybe it was flows.

You always think, you know, could have something to do even with the overhang from his big pay package or something, right? Something changed. Yeah. And you know what it was? It was last week's deliveries, right? That surprised on the upside, even though they're still declining. But again, it doesn't justify the kind of valuation with those kinds of growth numbers, right?

Especially just when you compare them to some of the other mega caps. So it really is kind of still a show me story. But the stock going up like that has raised the stakes for those earnings in just a few weeks. Perhaps some anticipation as well for that August event where we'll maybe learn more about these ambitions. Big time. Yeah. Deirda, thank you very much. We appreciate it.

Deirdre Beauda. All right. Coming up, cement production is one of the world's biggest climate offenders. Who knew? But new technologies are aiming to change that. We'll get the stone cold facts. My power lunch return. A little known fact. Welcome back, everybody. After water, concrete is the most commonly used material on Earth. But its prime ingredient, cement is not kind to the planet, least in how it's traditionally made. But new technologies are quickly transforming the industry.

Diana Oleg joins us with the latest in her continuing series on climate startups. Hi, Dye. Hi, Ty. Yeah, so globally, the cement production industry accounts for about 8% of carbon emissions annually. That's because it's usually made by heating limestone, which is a carbonate rock, and using fossil fuel-fired kilns. Now, that's a double whammy of CO2 emissions, but there may be a better way. In the race to decarbonize the $410 billion global cement industry, scientists are coming up with new ways to produce it, and startups like Brimstone, Fortera, and Massachusetts-based Sublime Systems

are putting those new methods to work. Our process doesn't emit CO2. It avoids all CO2 emissions, both from the fossil fuel and from the limestones. That's because Sublime uses chemicals instead of heat and other minerals instead of limestone. By decomposing minerals at ambient temperature using electric chemistry, it actually allows us to use minerals that contain calcium for cement

that aren't limestone. And that's what makes us true zero as opposed to net zero. As with other new technologies, it is more expensive. But climate forward companies like WS development in Boston seem willing to pay. It's one wharf row will be the largest net zero office building in the city with sublime cement in the ground floor public space. walk through this building on a day-to-day basis, they'll be able to interact with the product and learn more about a net zero carbon future in the built environment. Sublime just got an $87 million award from the U.S. Department of Energy that would cover half the cost of its first commercial plant in the state. Its VC backers are lower carbon capital, engine ventures, energy impact partners,

Prime Impact Fund, Siam Cement Group, and MCJ Collective. Total VC funding so far, $45 million. Ellis says they have tested the durability of the product and expect at scale to be competitive with traditional Portland cement. Now, once the new plant is up and running, it is expected to produce 30,000 tons of clean cement per year. For perspective, about 90 million tons are produced for a year in the U.S. But hey, guys, it is a start. These are always the tougher steel and cement and the really energy intensive, the really big, big ones. These are the the hardest ones to crack and in many ways the most consequential.

Yeah, absolutely, because as we said, I mean, who knew that it was the second most used material on earth after water? But when you think of all the construction, what's going on globally, and how much more construction is happening, we use it in roads, we use it in buildings, we use it in all of our infrastructure. Time to make it clean. All right, Diana Olik, thank you very much. We appreciate it. Meantime, shares of Corning are surging on a beaten raise first quarter report. The maker of glass for big screen TVs and smartphones will there's an AI angle. It expects its optical fiber products to see a big boost from the technology.

We'll get the trade on that and more in Three Stock Lunch after this. Welcome back. It's time for Three Stock Lunch. Here with our trades today is Malcolm Etheridge. She's CIC wealth executive vice president and a CNBC contributor. That's great to have you back, Malcolm. Let's start with shares of Intel, which are actually doing a nice job popping today after companies linked to any AI chip booms seem to be doing quite nicely on pace for its largest percent increase in November 11th. last year up 5%. But we talked to Stacey Razgun last hour, who still isn't too impressed by its prospects. What would you do with the stock? Yeah, Kelly, I'm calling this one a hold.

I think Intel is a bit of a catch-22, right? Long-term, they'll definitely benefit from the increased spending on data centers that's expected to continue throughout the rest of this decade at least, right? And right now they actually generate, I think, more revenue from data center spending than AMD does still. But I'm expecting the semi-trade to take. a breather near term. So as investors start to digest, you know, Q2 earnings and assess whether these aggressive valuations companies are currently trading are still worth it, even if the accelerator that Intel's hyping right now does do what they think it will, they're a distant third behind Nvidia and AMD. So I'm not sure they'll be able to reverse the narrative

anytime soon. Well, I guess I just have to then ask, would you be a buyer of Nvidia or one of the others in the chip race or are you sort of on the sidelines to watch it all play out? I'm on the sidelines for all of them right now. I have concerns that the semiconductor trade is actually about to lose a little bit of steam. And I think as we get through a couple of these others, you'll see where it starts to broaden. Let's move on to the next stock, which is Corning, another stock higher today that is linked to AI, shares up nearly 10%. After the company raised second quarter sales and profit guidance. This following, following a strong performance for its new optical connectivity products for generative AI.

What's your trade on Corning and how big a deal is its connection to generative AI? If you put that in your name or close to it, it seems like you get kind of halo effect. I think you said it perfectly, Tyler. I consider this one a buy, and I think that similar to what I was talking about with the trade on the semis broadening, this is an area where as long as you put AI into the conversation, investors, showing that they are still hungry for anything AI right now, right? This company ran into trouble toward the end of last year when they built up excess inventory, which led to them disappointing the street and their shares got whacked for it.

But now, as demand for data centers, again, is growing on top of all things AI. Companies like Corning that supply, you know, the types of infrastructure that data centers need to build out, I think that increased spending among the mega caps specifically is going to benefit a name like Corning. Yeah, it was fascinating to hear the CEO this morning, say he thinks they're in the first quarter of a three-year growth plan. So investors are excited for sure. What about ServiceNow, which is falling after Guggenheim cut its rating to sell from neutral on potential risks into the back half? You share those concerns? Yeah, so I think that one thing that's interesting about Service Now, a lot of the conversation we've been having to this point regarding AI has been about the companies that are building the tools themselves, not so much implementation.

Service Now is one of the few companies that is actually helping on the implementation side. So as small and mid-sized companies look to automate their workflows and incorporate AI into their tech stacks, I do see Service Now as a beneficiary of that trend. So I have it as a buy, I would also imagine that a Service Now, as a company, incorporates AI itself. It only helps to improve their bottom line and increase those revenues, which, by the way, are already north of 20% year over year today. Yeah, down 40 share today, but you still have it as a buy. We've got earnings that begin later this week. What's your sort of outlook for the markets as we move into earnings season?

Yes, similar to what we've been talking about. I look for the AI narrative to continue, but I also look forward to broaden away from just the semis and away from just the big three, you know, Apple, Microsoft, and Nvidia that have powered the market to this point. So you think it will broaden out and not just be an AI market, but AI is certainly going to be a helpful force for those that have AI in their recipe. Precisely.

All right. Malcolm, thanks. Appreciate it. Malcolm Etheridge. All right, remember, just think about this. Let this linger in your brain for a little while. You can always hear us on our podcast. Be sure to follow and listen to Power Lunch, not just where you are now, but wherever you go. We'll be right back. Let's give you a quick check on the markets on a day where the market.

are nowhere near as hot as the temperature. Down 40 now for the Dow, about one-tenth of 1%. The other barometers had been basically around the flatline, NASDAQ and S&P 500. NASDAQ doing a little bit better than the S&P 500, which was last I checked up by about one-tenth of 1%. I think the spoke used to have a, or recently tweeted out, something about the correlation

between weather and the stock market for what it's worth. Yeah, they need to resurface that. People are too hot to trade, I guess. There you go. There's the NASDAQ up two-tenths of 1%, or 39 points. at this hour. About three minutes left in the show, several more stories to hit. Earlier we talked about the big move in Tesla's share price, but here's another eye-popping number. Seven billion dollars is now what the lawyers for the shareholder who sued over Musk's pay package are asking

for. Since they've won the case, Tesla has to pay legal bills, but now other shareholders are asking the judge to reject this record legal fee, which would amount to a $370,000 hourly rate. So these are lawyers for one of the plaintiffs? Yes, Richard Tornetta, the investor. Yeah, and they want to get paid for... Evidently, for $7 billion because he ultimately prevailed. Yeah, who knows why another shareholder said the legal fees appear exceedingly disproportionate and outlandish. Of course, they wrote this to the Delaware Chancellor Kathleen. There's a lot that seems exceedingly disproportionate in this whole story, including the legal fees.

Why not shoot for the moon in this case? Yeah, when there's a big pot of money, go for it, grab for it. All right. An alert for Target Shoppers, folks. The retail giant says it's going to stop taking checks, personal checks, as payment beginning later this month. The company says it's due to, quote, extremely low volumes of such payments. Who pays me with a check anymore? However, it will still accept cash.

That's a benefit. Imagine that. They're going to accept cash. Credit and debit cards and digital payment options, among others. But no checks. We still occasionally use a personal check at home in the store. who wants to stop and fill that out. And then people behind you in the line start snarling at you.

It used to be the way. Do you remember? I remember even 20 years ago with my parents 30 years ago, and people writing the checkout, you know, take forever. It used to be regarded as one of the best ways to curb your own spending because the very act of taking out your checkbook and writing and filling in an amount. I feel that way of that. Made you really think, do I want to buy this? Do I really want this item? Even with cash now, you often feel the same way.

Yeah. Parting with cash is harder than parting with a credit card. Oh, isn't it, though. Yeah. Can the length of your socks show your age? According to the Wall Street Journal, Gen Z says, oh, yes, higher lengths are in while low-cut or no-show socks are out of touch. And so if you have those, you're likely in the 30-plus. Oh, my goodness. Data supports this, Tyler. Haynes says sales of socks above the ankle. You are style. You always have been.

Well, above the ankle is up 6% since 2021, while low-cut sales are down 4%. Even Bomba says the socks that show make up 42% of their total business. from 33% of your socks that show. Socks that show. You don't want shocks that don't show. Proudly display those socks. I used to wear really high ones because I hated when my trouser leg displayed, you know, it was just too much. Yeah, you don't like that little peak. But they're harder to find. Not anymore, I guess. All right. That's about it. That's the sock indicator. On that note, we're going to say thanks for watching Powerline. Closing bell starts right now.