Power Lunch - Boeing’s Shake-Up, Big Tech Probe 3/25/24

Episode Date: March 25, 2024

Boeing CEO Dave Calhoun is set to step down at the end of the year, amid a very tumultuous time for the aerospace giant. We’ll break down what it all means for the company’s future.Plus, the EU is launching its first official investigations under its new competition law, the Digital Markets Act. That includes inquiries into tech giants like apple, Google and Meta. We’ll bring you the key details. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody, and welcome to Power Lunch. Look who's here, Julia Borson, alongside Julia. I'm Tyler Matheson. Glad to have you in town. It's great to be here. Great to have you here. Wilford Frost's last hour. It's a week of special guests. Lots of news from around the world to tell you about, starting with the Dow. Right now, it is down about 4 tenths of a percent, about 156 points, around 39,318, the S&P 500, and the NASDAQ also lower. Intel weighing a little bit on the Dow. It is lower after charging. China may want to ban its chips. And AMD also potentially affected, but that stock has turned around and now is higher. More on all of this, Julia, a little later. And in Europe, Apple, Alphabet and Meta, all facing an investigation into their compliance with new laws. More on that in Tech Check. But we begin with Boeing and the news that its CEO will step down at the end of this year.

Let's get an analyst's take now on Boeing's shakeup in the company's future. Jason Gersky is a senior analyst covering aerospace and defense at City. he's maintaining his buy rating on Boeing and has a $263 price target. Jason, how does today's news change your perspective on the stock? It doesn't, really, right? I think there was an expectation amongst the investment community that we would likely see, you know, some changes in management here at Boeing over time in light of what's going on. I think the approach that they're taking here is pretty sound.

It provides the company plenty of opportunity to make a smooth transition. It gives Dave Calhoun, current CEO, some time to de-risk the company as he hands off the reins to the next leader of the company. Yeah, and certainly some time here for transition, the question of whether they'll bring in an outsider or not. But as you look at the various areas of execution risk, what do you think the biggest challenges are right now, given that they've just announced this executive shakeup? Well, the biggest area of risk, of course, is what's going on with the production facilities, both with their suppliers as well as what's going on there in Renton up near Seattle. Obviously, the FAA is involved here, wanting to make sure that we've got solid quality that comes out of that factory. So I think the biggest risk or issue that the thing that needs to get dealt with here, right, is producing quality aircraft.

out of both Boeing's factory floors and the floors of their suppliers in managing this process with the FAA so that they can increase production rates here over time. And what's your outlook on the labor issue right now? I understand Boeing's largest labor union is seeking a board seat, and that union have started talks to have the first renegotiation of a new union contract in 16 years. What do you think will come of that? Well, let's see. On the board side of things, I don't think this is an unprecedented ask,

So it's not clear to me exactly how that plays out. There might be opportunities for new board members, obviously, right, with this part of the management shakeup today is that you've got an independent director that will not stand for re-election. So there's an opportunity for a new board member to come on. I don't know that that's going to happen in time for somebody, a union-nominated board member to come on board. But I don't think it's an unprecedented ask at this point.

time will tell how the board and shareholders react to that. And I'm sorry, I forgot the second part of your question. No, I think that's that. And Tyler, you want to step in here? Yeah, I do. It's good to see you again, Jason. Let me ask you, it's clear that Boeing, or at least it seems to be clear, that Boeing has angered regulators.

It seems it clear that they have angered some of their customers who now are having to wait longer to receive planes because of production slowdowns. The assembly line isn't producing as many aircraft, so they've had to adjust their schedules. They've had to take planes out of service multiple times. And I gather they're going to be meeting soon with executives from some of the airlines with which they do business. How damaged is the relationship of Boeing with these major customers

and how do you repair it? Oh, look, I think, you know, this is a doopoly kind of situation, right? So, you know, obviously customers do have alternatives. There tend to be, you know, Airbus-only customers, Boeing, only customers and then, you know, I don't call it a small number, but, you know, there's a chunk in the middle that have mixed fleets. And those are obviously the ones that have been pretty vocal and have opportunities to switch and where there could be lasting damage for Boeing to the extent that, you know, they're not being transparent with customers and not being reactive to their needs.

I don't think that that's the case. I think that they are being transparent and they're trying to do the best that they can. But look, I think from a shared perspective, there's not a tremendous amount of risk because both Boeing and Airbus have backlogs that go out well into the 2030s at this point. It's really going to be really hard for customers to go get a hold of what we described as a lift

or new aircraft from an alternative supplier at this point. So Boeing's just got to put its head down, be transparent with its customers, be transparent with the FAA, work with its suppliers, and get this manufacturing issue corrected. But Jason, even if they don't have other options, realistically, do you think that these airlines are going to be able to secure concessions from Boeing as these issues play out?

Yeah, for sure. There's lots of precedent for that, right? Certainly going back to the days of the 787, there were lots of customer concessions on that. The aircraft that have been delivered here of recently on the 737 have been incorporating pricing concessions given the delay. after the crashes back in 2018 and 2019 that led to the grounding of the fleet for a couple of years. And then most recently here, the CFO at Boeing at an investor conference last week talked about the financial impact of the Alaska Air incident, right, and the amount of cash that they expect to consume here in the first quarter, pointing to $4.5 billion of cash consumption in the quarter alone, in part driven. by some of these concessions that they're going to have to offer up to the airline.

So I think we in the investment community, you know, have a pretty good understanding of what those concessions are going to look like and have already put those into our models. All right, Jason, thank you very much. We appreciate it. Jason Gerski. Thanks. Well, let's get to Phil LeBow now. He spoke to Boeing's outgoing CEO, Dave Calhoun, this morning. Hi, Phil. Hey, Tyler, really three positions that we're going to focus on here, the three changes that were announced today, starting first with Dave Calhoun. He is going to be leaving the company at the end of the year, retiring, saying it's 100% his decision. And then there's Stephanie Pope. Who is Stephanie Pope?

She was the C-O-O-O-O here at Boeing, long-time leader of Boeing's Global Services Division. She now moves into the position of CEO of Boeing Commercial Airplanes. Her top priority, and that's the, division that does the manufacturing, her top priority, stabilizing 737 max production. Here's Dave Calhoun talking about that this morning. What the FAA wants, and way more importantly, what I want is I want a production system that's under control every step of the way. Whether it's 38 or 52 or 16, doesn't matter. It will be under control. We will not travel work to anywhere near the level that it's been traveled,

and we will let this supply chain catch up to the demand. And that's the way we have to behave. And the last person I want to talk about Steve Mollenkoff. He has been on the Boeing board since 2020. Why is he important? He now moves into the position immediately as chairman of the board. He will lead the search for a new CEO at the company. And they're expecting this to take several months. It's not going to be an overnight decision. They will look at candidates internally as well as externally. As you take a look at shares of Boeing and Airbus over the last year, remember that max deliveries, that's the bread and butter for Boeing. They are way behind Airbus's A320s in terms of the competitor, the narrow body market.

They've only delivered 42 this year, but that's by design. They are purposely slowing down production. They can build and produce up to 38 a month. They're nowhere close to that, guys. May not be close to that until the end of this year. Job number one for Stephanie Pope and the people and Boeing commercial airplanes, stabilized production, put the quality controls in place. Guys, back to you.

What is the early line? Is Stephanie Pope the front runner? or will it be more likely that they'll go outside to find a CEO? I wouldn't call her a frontrunner. I would say she will be looked at. I mean, she's just now moving into the BCA president position. So she has a chance here to show the board, look, I have what it takes. And she's well known within the company.

But they will look externally as well, Tyler. This is not going to be what we've seen over the last couple of CEO selections here at Boeing, where it is definitely an internal person. It could be an external candidate as well. All right, Phil, thank you very much. Phil LeBoe reporting. Our next guest says Boeing's problems

extend well beyond Dave Calhoun and the company is in need of an entire overhaul. Herb Greenberg is editor of Herb Greenberg's on the street and a CNBC contributor. Herb, always good to see you. So your view is that Dave Calhoun, who will be leaving, this is not really his mess, is it? It predated his or the seeds were planted before he came in.

What a mess. This thing has been going on mismanagement of this company, you could say goes back at least 20 years, probably more than that. Because remember, you've had a revolving door of CEOs here for 20 years. And during that time, which was actually a cleanup from Isle 5 over there when the company acquired McDonald-Douglas, you know, this is a company that at some point, and I would say if you go back and you look about 2005 when James McNerty came in, he was the former CEO of 3M, he was there for 10 years. People love the company during that period of time, and you can see it in the stock, but you can also see it. There's a chart I actually put up on Substack where I write, and you can actually see the amount of money they started just throwing at shareholders, trying to create shareholder returns, so they were paid to wait as opposed to the money they put back into the business.

And you could see during the time the stock went up. Shareholders were happy, but what happened? We started running into some of these other issues. So I would argue that, you know, going forward, whoever they picked is not going to be able to sit here and try to appease shareholders by making them feel good. I don't know how that's going to shake out. But you go back over 20 years. I keep coming to this point. CEO after CEO after CEO, misstep after misstep after misstep after misstep.

So what you're really saying, Herb, is that you think shareholders have been prioritized to a fault. If that's the case, then what is your prescription for? what you think needs to be a cultural overhaul? This is a company, as one of my friends pointed out, used to be known for overengineering their planes. That was a good thing. But once they did the deal with McDonnell Douglas many years ago, they came in and wanted to start saving money.

You can't come in and just start cheapening this company and running it like another, any other business. This isn't one of those you can just cut not just the fat, but now you're cutting the muscle. This is not a cost-cutting story. And that's what it was, and that's what investors love. So they're going to have to pour money back into this business every which way. They're going to have to put employees first, which obviously there's been a lot of stress there.

They're going to have put safety first, obviously. That all comes at a cost. So from a shareholder perspective, I think where you wanted to sit even a few weeks ago and say, this might be an interesting idea. You have to think, what are they going to do for me? And how long is it going to take? Mr. McNerney, whom you mentioned a moment ago, was an outsider. He had grown up at General Electric, then he went to 3M, and then he came in as the head of another industrial company.

But he was new to the aerospace industry. Are they better off looking outside for a person to remake this company culturally? Or are they better off looking either inside within Boeing or within the aerospace industry, which is a particular kind of creature. Well, look, didn't Dennis, what was in Mullenberg? He was from the company. He had been there a long time. He lasted a very short amount of time as CEO.

So, you know, who do you bring in? And you're asking the right question. I don't know that there's a right answer because it's not just going to be the CEO. It's going to be the CFO and this whole approach of how do you run this business. But you can't come in and say, oh, I'm going to shake it up and do it a different way. This is the aviation industry,

and it is not like every other industry. And as we all now know so painfully, and sadly, in some cases, there's a higher cost. And you just can't say, you know, with a public company, it's always about the shareholders, right? And now it's also about stakeholders. And those stakeholders are a much bigger component at, say, Boeing than I could say most other companies you look at. Yeah, I mean, but if you look at this sort of timeline they've laid out for a CEO transition, the fact that you have Stephanie Pope is a contender, but they're also looking externally, what are the systems that you would advocate that they put in place to really shift the entire culture?

And of course, there's a top-down impact here, but the stakes are high, as you mentioned. The stakes are high, and Julia, it's also going to come down to compensation. Whoever takes this job isn't going to be able to get the kind of rich pay structure that some of the former CEOs received. There's going to be everyone's going to have to take a hit here, including whoever that new CEO is. And the entire compensation structure of the company is probably going to have to change. The incentive structure, I should say, is going to have to change to tilt this away from all the spotlights that are on it right now, from every direction. From every direction. Now we see Boeing shares up just over 1%.

Irb Greenberg, thanks so much for joining us. Sure, Julia. And coming up, big tech's big problems continue. European regulators launching a probe into Apple, meta, and alphabet. Details and tech check next. Plus, just as U.S. tech CEOs are set to meet Chinese president, Beijing is reportedly blocking chips made by AMD and Intel from being used in government computers. Details further ahead.

We'll be right back. The European Union now launching its first official investigations under its sweeping new competition law, the Digital Markets Act. Among the probes, inquiries into Apple and Google's app stores, and meta's ad-free subscription model in Europe. Our dear Jibosa and Steve Kovac, join us now for today's tech check. Steve, I'm going to talk about this with you. First, we've been talking about the DMA for months, for years.

At the end of the day, what does this mean for Apple? I know they've been preparing for this, but what we're actually seeing now, what is it going to mean at the end of the day? If you're an Apple investor, there's a lot of stuff that you're going to be looking at here, but the most important one is the EU is looking into what's called Apple's new core technology fee.

Now, because of this law, Apple has to let other app stores onto the iPhone for the very first time. You can download software outside of Apple's Apples App Store for the very first time. But if you're a developer and want to take advantage of that and kind of evade some of the fees that have been historically in the Apples Store, Apple's Apples Apples App Store and do it through another app store or straight from the web, Apple's going to charge you 50 cents in euros every time someone downloads your app. That puts people in a position where if I'm a developer of maybe a free game that's supported by advertising or something, where I actually owe Apple more money than I'm making through my app. And so that is just really angered a lot of app

developers. That is something the European Commission's looking at now. Is this right under the law? Because the criticism is it puts a chilling effect on people using these alternative app stores, which is not what the EC wants. And also for Apple, it protects their profits and their business modeling. So other than eliminating that, what are some other changes Apple might have to make? Yeah, there's the other one that they're looking at here is choosing default systems, especially the web browser. This one is a little confusing to me, actually, because Apple did make a significant change here. So if you're in the EU, you open the Safari browser for a first time, you're going to get a big honkin pop-up window that says, well, maybe you want to use Chrome or something else as your default browser.

The EC says that might not be good enough. So it's unclear how they can do better than giving you a big pop-up window asking you to choose. And as you can see here, behind us, there's other stuff here. Google meta, that's a really interesting one. I'm sure you're going to talk about. For Google, it's self-preferencing. Yeah. Yeah, Deirdre, tell us about that.

How do you see Google being forced to change as a result of this? I know they've also been preparing this for years. And how do you see the actual investigation differing from maybe what people anticipated? So self-preferencing means that when you do Google search, it's going to give you their options first, whether that be for shopping or for flights. And this is something that has sort of long followed Google Long. But I want to make the broader point, though, that this is just scrutiny on so many different fronts. We know that here in the United States, the regulators are probing its ad tech acquisitions.

In Europe, it's the walled garden. And I think the fear for investors for any of these companies is that right now is such a critical moment. They're all so involved in this rush to develop generative AI products, yet they're dealing with issues of their core existing business or in the past that's still. needs to get sorted and will that be a distraction? For investors, should they be so worried about this? I'm not sure. It's an open question because let's take for example, Google has received the biggest fine of any mega cap from the European regulators. This is from years ago, $5 billion, which when you consider their entire sales for the year isn't as much, certainly not as much as this DMA could enact, but they're still appealing it. So I think that's the

other thing to keep an eye on here is that even though the European regulators are looking into these businesses for the mega caps, it takes a lot of time, even if they are moving faster and becoming more nimble. What is this steering? What does steering mean in this context, Julia? I mean, Deirdre. Well, it's steering. I believe it means that they're steering you towards their own products, this idea of conflict of interest and the idea that if you are using Google search, it is by far the dominant search engine, right, with 90% of the market, they can feed you certain results and they can self-preference. They can give you their own results, their own tools that they have there.

And, you know, the regulators say that that's not fair. What do you, how does that give other rivals, smaller companies, a chance to get ahead when you have this behemoth, Google, direct you towards products that they also benefit from? No, Deirdre, I think you raised the key point here, which is that they're going to be able to appeal these different rulings. This is going to be something that's going to go on for years in the courts. But at the end of the day, the real question is whether this is a really bad time for the distraction, right? Now, we saw what happened with Microsoft and it's antitrust suit. People saying that that's why Microsoft missed the moment to pursue the mobile ecosystem. And the question now is, what's really at risk here?

Maybe it's not just these potential fines, these potential changes these are going to have to make. But what happens to these companies, these American tech giants, in light of the AI innovation revolution? So which of these companies do you think is most at risk, Deirdre, for being distracted right now? Exactly. It's this idea, right? that they're all so busy playing defense, when do they have time to play offense and really move forward on the generative AI front, which is supposed to be the most important platform shift since the mobile air, since the internet, go back even further. Who's most vulnerable?

That's an interesting question. I wonder if you would agree with me on this, Julia, that it might be Google and meta because of their history of acquisitions. You think about an Apple hasn't been quite as aggressive. Their biggest acquisition, I believe, was Beats. Didn't really fit into their core, core business. But you have Google, right, with its ad tech acquisitions, that even the DOJ here in the U.S. says that that helped them create this monopoly. And, of course, meta's acquisitions over the years, right? They've just become behemous, whether you're talking about WhatsApp or Instagram. Apple is not going to sit idly by and watch this happen. They are very aggressive.

They're worried about their music franchise. I'm sure they're going to say that, well, golly, the EU, surprise, surprise, is favoring Spotify, a European domicile, a European domicile. A European domicile company. Yeah, and that's also, what's also happening here is you have, Apple getting a they got an update from Spotify. You talk about that that kind of complies with these EU laws. Apple hasn't approved or declined that update yet. So that is like another issue here. They're dragging their heels here.

I can see them making some changes to the browser default thing. That's kind of an easy one for them to do. But it's the App Store stuff that really hits their business hard, that new fees that they are introducing here that kind of chills people away from using their current App Store model. That is what seems to be really upsetting the regulators in the EC. It's not a fair playing field according to them. Apple, of course, says we are in compliance.

We believe we're in compliance. By the way, all four companies that we mentioned that we showed that big graphic, they all said we believe we're in compliance, but it's not really up to them to design if they're in compliance. So it's going to be really interesting. I think we got six months to find out the results of this investigation. Steve, thank you very much. Deirdre, thank you as well.

And further ahead, one company offering a litmus test for lithium batteries. details in today's clean start. We'll be back in two minutes. All right, welcome back to Power Launch, everybody. Time for a check on the bond market, and you know what that means. Rick Santelli in Chicago. Hi, Rick. Hi, Tyler, indeed.

Well, today was a big day. Tomorrow's going to be a big day as well. Record size at these auctions. Today, 66 billion two-year, and the demand was slightly above average. Tomorrow, 67 billion five years, never had an auction that big. But then again, you know, the government's a lot bigger. than pre-pandemic. So issuance is nearly doubled since pre-pandemic levels. And if you look at the amount of issuance last year for 2023, as Wall Street Journal pointed out, $23 trillion. So these

auctions are going to be center stage. Maybe the canary in the coal mine as to whether demand, both nationally and internationally, will keep up with issuance. Now, as you look at twos and 30s, the shortest and longest coupon maturity on the yield curve, you can't, you can see that we came off a little bit during that auction results at one Eastern, but the tens and the 30s keep making the higher yields as the session progresses. On a month to date, the longer maturity 30-year hugging up very close to its high yield closes for the month of March. And finally, we all know that whether you're looking at the CRB Food Stuffs Index, looking at some of the break-evens, inflation isn't going hog-wild, but it's going up. It

certainly isn't going down by most metrics. So interest rates and how that pushes through to the currency while the dollar index is coming off its best close since Valentine's Day, well up on the month, well up on the year. Julia, back to you. Thanks so much, Rick. Now let's get over to Contessa Brewer for a CNBC News Update. Hi, Julia. A Florida governor, Ron DeSantis signed into law today, one of the most restrictive social media bans in the United States for minors. It's almost certain to face multiple legal challenges, but the bill bans accounts for kids younger than 14 and requires parental permission for 15 and 16-year-olds. Baseball superstar Shohei Atani is scheduled to give a statement to the media later today. This will be the first time he has publicly spoken since allegations

erupted of illegal gambling and theft involving his interpreter through the Dodgers. The Dodgers fired the interpreter last week after Otani's lawyers claimed that the interpreter had stolen money from the baseball player and spent it with an illegal bookie. The team says Otani will not take questions. And there is more than $2 billion up for grabs this week. Tonight's Powerball drawing worth an estimated $800 million. Tomorrow's mega millions drawing estimated to be $1.1 billion. The jackpot's so big because nobody's won Mega Million since December or Powerball since New Year's Day.

And you know what? The chances of you winning are miniscuous. but you definitely will not win if you don't play. That is a matter of statistics, Julia. That's just truth and fact. But also minuscule chances. I'm sure everyone's out there buying their tickets, which makes the chances even lower.

I'm going to stop on my way home. Coming up, semis continuously used as a battleground in U.S.-China tensions. Beijing reportedly blocking chips made by AMD and Intel from being used on government computers. What this means for the space, that's next. Welcome back to Power Launch, everybody. Watching shares of Intel and AMD today following a report, China will restrict their chips in government computers. Eunice Yunus Yun is live in Beijing with more. Hi, Eunice.

Hey, Tyler. Well, self-sufficiency is stated policy here, but the specifics are new. There are reports that the government is pushing its newly revised government procurement guidelines for hardware and software. And in effect, that means that these revisions would excise Intel, AMD, as well as Microsoft from its government computers, because the only companies that are allowed to be used in these types of products are domestic brands. Those are ones that have passed China's safety and reliability evaluations. Now, at least five out of the six approved CPU providers are on the U.S. Commerce Department's entity list. Meanwhile, AMD CEO has been in the country for a Beijing-backed forum that is meant to show the international business community that their investment is welcome here. Guys?

So let's talk about a little bit about this forum. Who's there among the U.S. CEOs? We just see Tim Cook there, and this is just playing nice with each other, I suppose. Yeah, absolutely playing nice, at least on the surface. there are over 30 American CEOs who have been taking part. The Americans actually had one of the biggest delegations. You mentioned Tim Cook. Also, the heads of, as I mentioned, AMD, Pfizer, Starbucks.

There were a lot more Americans this year than last year when the U.S. and China tensions were really, really high after an alleged spy balloon had disrupted the relationship even more than people had than before. So one thing, though, that has been interesting is that there has been discussion now that President Xi Jinping may be meeting some of these CEOs on Wednesday. The delegates had told me, or like many of the delegates,

had said that there is this expectation because companies have been approached by the government. Still, though, people are kind of concerned and confused by all the messaging. On the one hand, people are saying that this is encouraging that the president would be interested in talking to them. On the other hand, people are saying it's not necessarily good sign because usually this forum would have the premier meeting CEOs. But now if the president is meeting them,

it could indicate that increasingly all the decision making is under President Xi Jinping. All right, Eunice Yunn, thank you very much. We appreciate it. Meantime, shares of AMD turning positive for the session. Intel down more than a percent. guest says Intel would likely be more impacted from a move by China to ban its chips, but he's not changed his models or targets on either Intel or advanced micro, rating both market perform. Let's welcome Stacey Ragsson, semiconductor analyst with Bernstein and Christina Parts and Evellis, who follows this industry for us.

Christina, let me begin with you, if I might. Is this simply a case of, in the case of banning these chips in government computers, of the Chinese government doing what the U.S. government has done to certain. Chinese companies like TikTok, like cell phone platform. Micron is another example. Apple, you know, banning Apple iPhones from government or employees. So it seems like it is a tit-for-tat situation. You can argue that maybe China hasn't retaliated as much as the United States

since these export controls have been in place since 2019. The Chips Act here in the United States is undergoing, but China also has their own version with a lot more money to spend. The reason specifically with the stock reaction, I know Stacey Woodway on this as well is that Intel has more exposure to China. If we just look at the 2020-2020, about 27% came from China for AMD. It was about 15%. So there seems to be a little bit more exposure there.

Even though I reached out to both companies, they won't comment, but we know in the past AMD has told me that the export controls are minimal. They're not as exposed to, let's say, InVIDIA, where Nvidia's data center revenue was 20% or more from China and dropped to low single digits, because of the export controls put in place in the United States, restricting them from shipping to China. So yes. Those are U.S. controls, not the Chinese blocking.

But there's just a tip for tat, and it shows that, you know, there could be an impact going forward. So, Stacey, as you digest what Christina just said, talk to me about why you haven't changed either your models or your price target forecast on these stocks. Do you agree with what apparently some of the executives has told, Christina, that it's really, my word, not theirs immaterial?

Well, that's not what Christina said. She was talking more about the export controls, right? This may be different or incremental. We don't know yet. You can look at the exposures and you sort of talked about the Intel 27%, 80, 15%. That's not exactly the right number, though. Those are sales into China. It doesn't necessarily reflect actual consumption in China.

Just like a lot of PCs, for example, are put together in China. That all show up as Chinese revenue. If you look at the end market shipments, PCs and services, servers. China's responsible for maybe 15% of total PC consumption. Non-consumers, two-thirds of that, so it'd be about 10% of the world's PCs go into like non-consumer stuff into China. Government's a portion of that. It's probably low single digits would potentially be impacted over time if this actually comes to play. Servers, about 30% of servers ship into China. And again, like government usage of servers

in China, it's probably fairly small. You can roll that through the numbers for both Intel on AMD and we did that. It's probably low single digit percentage of revenue, probably worst case, I think, for both of them. It is Intel's earnings worse because they're less profitable. And so if you take a similar chunk off of both of them, it actually hits Intel worse. But there's nothing to change yet, if that's what you're asking. We saw this announce. Apparently these rules were actually put in place in December. They may be actually starting on the procurement process to engage those rules now. It's probably not anything like there's a cliff. like it probably takes, you know, like it'll happen over time, assuming it happens at all.

And there are other issues, I think, right now that are going on with both stocks that, you know, are probably, you know, bigger or like more near-term things to worry about than this anyway. So there's nothing to change yet. We'll just see how things go, I think, as things progress over time. But Stacey, nothing to change yet. But do you see this impacting the trade wars and all the other conflicts? And do you think that could escalate the way these stocks or these products are treated in terms of Chinese exports? I mean, look, so you look at the magnitude of this versus what the U.S. has done for export controls, and certainly the U.S. efforts are a lot bigger.

You have to remember, that's by design. China doesn't really have a lot of leadership in any of these areas. Like what China can do to push back specifically in semiconductors is very, very limited. They don't have any leadership in those positions. The U.S. is kind of holding the cards. We'll see if there's broader escalations around the trade wars and the prior tariffs and the export controls and everything. China's got other elements that they could use that maybe you're not in semiconductor. There's other materials that they drive. There's things like M&A approvals.

And we've actually seen some of that, right, in some other areas. But I think within semis, they're doing what they can, you know, maybe to send a message, if nothing else. But the actual, like, impact they can have on this is not that big relative to what the U.S. can bring to bear. Stacey, just your point really quickly, you talked about the percentage and all that. And I know I mentioned, you know, 27 percent and 15 percent. It seems like a similar narrative that the companies are bringing up.

and saying, you know, these tips are just coming through our country. It doesn't necessarily represent consumption. But this is an opportunity to strengthen Huawei, right? We haven't really spoken about it. It was mentioned briefly with Eunice. But that Huawei or arm processors, too, given that they got the green light and they have armed China, a presence over there as well. Yeah, maybe, right? So Huawei, you know, they were put on the entity list.

They started to do their own smartphone chips, for example, leveraging Smick, which is a Chinese semiconductor, or a foundry manufacturer. You know, the parts are not as good. They can't rely on sort of the bleeding edge equipment and technologies. But I mean, if you don't really care about cost and performance, you can do all kinds of stuff to sort of get around that. And they're doing that on smartphones. Maybe they start doing it on PCs.

There are other vendors. I think you put the list up on the screen earlier. Some of those are armed vendors. You had Haigon on there as well, which actually does X86 in China. It's the remnant of a JV that A&D had had. with a Chinese entity like years ago that SIFI has shut down, but that IP is already over there. And Higone is actually making X86 server chips in China today. So there are alternatives that you can bring to bear.

And we'll see how big that can get. Yeah, it's going to be a fascinating one to watch. Christina Partsenevolo, Stacey Raskin, thank you both so much for joining us. And coming up, we'll get a charged-up cling start highlighting a startup gauging the value of EV batteries on the used car market. We'll be right back. Welcome back. The used car market is more than twice the size of the new car market and EVs are fast becoming a part of it. But it presents a challenge when it comes to valuing cars which runs strictly on batteries. Diana Oleg explains in our continuing series on climate startups. Diana?

Well, Julia, the market for used EVs is still small, but it's growing fast. And shoppers for these cars have fundamentally different questions, especially when it comes to the battery life. Some of that is based on their experience with smartphone battery life. So now one startup aims to answer them. The battery is by far the biggest component of an electric vehicle, especially as the car ages, because the cost of replacing it can actually exceed the value of the car itself. So how to used EV buyers and sellers gauge value?

Enter Seattle-based startup recurrent. We help used EV buyers understand what they're getting when it comes to vehicle range, and how that changes in different weather conditions, and how that changes over time. Recurrent uses no hardware, just the software that streams out of thousands of cars daily. It can talk to a car over and over again,

normalizing things like weather, driving, and charging style in order to compare two similar vehicles and show which has a healthier battery and a higher value. It's similar to how everyone in the used car ecosystem needs to know the odometer of a used combustion engine car. Everyone needs to have a common currency to be able to value these vehicles. EV owners can connect to recurrent through things like OnStar or a Tesla account. Dealerships can also use recurrent through a special system and show comparisons to buyers,

potentially driving up the sales price for healthier EVs. As the used EV market grows, this technology, which so far has no U.S. competition, is attractive to investors. We're thinking about this massive transition, which is sort of a once-in-a-lifetime. opportunity where you're seeing the entire global auto market shift from gas cars to EVEs. And the bulk of that's going to happen in the next decade. In addition to Wireframe Ventures, Recurrent is backed by ArcTurn Ventures, Powerhouse Ventures, and Entertech Capital. Total funding so far, $19.5 million. Recurrent now has about 20,000 drivers on its platform since it started last June,

and Kay says the company has tripled its revenue in the last year. Now, we also want to bring you some news on another one of our Clean Start companies. Today, the U.S. Department of Energy announced up to $6 billion in IRA funding for 33 projects to decarbonize energy-intensive industries like cement. And Brimstone, which we profiled here on Clean Start, won $189 million of it. Brimstone makes carbon-negative Portland cement. Today's announcement, Brimstone said, will turbocharge our path to commercialization. Back to you guys. Thanks, Tanya.

stuff. And as we head to break, we're celebrating Women's Heritage Month and sharing stories of our newly named CNBC Changemakers. Here is Mayn-Cohen, Hello Heart, co-founder and CEO. Female CEOs are about 10% of CEOs. And in the startup space, we actually get less to 2% of dollars from VC funding. And we have to celebrate women. Women tend to actually be more behind the scenes. We prefer to focus on building companies than to be in the spotlight. But little girls won't be able to know that they can become CEOs and founders and executives and anything else that they want to be unless they see us and they see what they could become. All right, time for today's three-stock clutch here with our trades.

Victoria Green, she's the CIO of G-squared private wealth and a CNBC contributor. First up, we're going to go guess where, Victoria, Boeing higher after the company said Dave Calhoun's going to step down at the end of the year. What's your trade here? It's a buy for me, but it is a long-term buy. complete restructuring of the company because there's so much built in demand. I look at Boeing as too big to fail. They have so much backlog and so much demand for their airplanes that even if they finally get this turned around, they may have a few more stumbles, but this company is

extremely valuable. They've already disclosed their $4.4.5 billion cash burn they have in Q1. So I think so much bad news is priced in. For me, they're slowing down new leadership, turn around story. I like it as a long-term buy. Next up, United Chair is falling as the FAA says it will step up scrutiny in light of recent safety incidents. Victoria, what's your take here? For me, United's a cell here. Look, they have had serious problems and not that the FAA is likely going to shut down new routes,

which is going to suffer for their summer travel season. They really wanted to expand. They had some very, very aggressive expansion growth goals. They set in 2021. And I just see it that United is going to struggle. The only way they make more money is either they sell more seats, they sell more miles, or they charge people more per flight. And they're not going to be able to really expand the number of seats

that they're flying, so they likely can't really expand how much they're charging for seat, so I don't see their revenue growth there, and fuel costs, which is their second largest cost, likely creeping up on them. For me, I just don't like United here. I think they have problems and potentially more bad news coming down the pipe. Let's go to the last one, and that would be about as far away from airlines and aerospace as you can get. Foot Locker, Higher, Evercore, upgrading shares to outperform, remains impressed with the upside here. What do you say? I agree with Evercore. I see Footlocker as a buy. I've seen sporting goods.

Really? Yeah, I see that. They have a lot priced in. They had to do a lot of discounting that really cut into their margins. They moved a lot of inventory last quarter. So their inventory backlog gone. They're discounting gone. This night partnership, Nike's coming back saying, hey, we want to move back to this wholesale model.

That's great for Foot Locker. And they're expanding their customer loyalty programs. They're expanding their digital presence, making it more omnichannel. I see a lot of growth in Foot Locker, and they've had some momentum. I think we're on the sixth straight update trading-wise. And we could see the stock continue to creep up as the consumer has remained strong and they're getting better partnership from Nike. That's great for Fitlocker. All right.

Thanks, Victoria. We appreciate it. Absolutely. See you next time. We'll be right back. Welcome back. More moves today in Triand's proxy battle with Disney, Nelson Peltz,'s tryan withholding its votes for CEO Bob Eiger's reelection to the board. But that contradicts the company's proxy recommendations and also Nelson Peltz's comments about wanting to work with Iger and Disney's.

management if he is elected to the board. He told the financial times, I'm not trying to fire Bob Eiger. I want to help him. Tryan issuing a press release this morning saying the election contest is about board oversight, not about Bob Eiger. We are now 10 days out from the shareholder meeting, which is coming up on April 3rd Tyler. So the company didn't want him to not vote for Eiger? So Tryan said that they wanted Bob Eiger to be elected, but they wanted Pelt and Jay Rosullo to be on the board as well. I see. And that's why he withheld. Just to make a point. make a point. All right, Julia. Nice to have you here. We'll have you all week, right? Good. Thank you everybody for watching Power Lunch. We appreciate you being with us.

Hosing Bell starts right.