Power Lunch - Brent Falls Back Below $100, Duke Energy CEO Interview, Insuring Ships in the Middle East 7/24/26

Episode Date: July 24, 2026

Markets are mixed to end the week as investors assess the latest developments regarding the ongoing conflict in the Middle East. Brian Sullivan and Contessa Brewer are joined by DWS Americas’ David Bianco and Schawb Center for Financial Research’s Collin Martin to evaluate the state of the markets ahead of next week’s Federal Reserve meeting. Meanwhile, Duke Energy CEO, Harry Sideris, joins for an exclusive interview to discuss his company’s role in the data center utility pledge with the White House. Later in the show, the anchors chat with Marsh’s Marcus Baker to hear his take on the rising geopolitical risks for global insurers as the premiums for ships travelling through the Middle East continue to soar. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

All right, here we go again. Hopes for U.S. are on talks. They are back. Some stocks moving higher. Oil is moving lower. Welcome to Power Lunch, everybody. With Contessa, I am Brian. Data Centers, expected to use four times more electricity by 2035, but a new pledge from utilities says they will keep power prices in check for you. One of those companies, Duke Energy, their CEO, here exclusively on power demand, data centers, and what it all means for you. truly is a power lunch here. As geopolitical risks mount, so does the cost of protecting global trade. How do you ensure tankers that need to go through the Middle East or the Black Sea? We're going to ask Marsh's Marcus Baker. You won't want to miss that first. Let's get right into the markets. They're jumping to end the week as oil falls. The NASDAQ still, though, on pace for a weekly loss of more than 1%.

And we could be heading for some choppiness ahead. Bank of America points out since 1928, August to October is the weekend. three-month period for the S&P 500. And next week, of course, is the busiest week of earnings, plus we have the Fed's decision on interest rates. So how should you position the portfolio for the week ahead? David Bianco is CIO of DWS Americas, and Colin Martin is head of fixed income research and strategy at the Schwab Center for Financial Research. David, let me start with you. Why are we seeing equities so optimistic when we're seeing yields moving higher? Well, it's earnings season. And it's earnings season. The peak is next week. As you said, and the results are coming in great. It looks like we'll do $340, $345 of earnings this year or $85 this quarter, another quarter of about 25% year-on-year earnings growth.

But also, the estimates for next year keep going up as well. They're over $400. I'm not that high. I'm closer to $375. But we're watching earnings go up, even though yields are going up. And I'm not ignoring that. We're trying to fine-tune our cost of equity and our terminal PE estimates. But worry season will come later after earning season. It looks like a lot of the magnificent seven is maybe not coming off so magnificently to investors. We saw Alphabet this week reporting great earnings. The stock sank anyway. When you're looking at fixed income, do you see cause for concern about some of their corporate bonds? Well, maybe there's some long run concerns when we look at the corporate bond market. When we have a big picture view of credit investment-grade corporate bonds, high-heal bonds. We're generally

comfortable, and we're suggesting our clients that Schwab can take a little risk in their portfolios. But when we think about the MAG-7, the big hypers, these tech companies, there is a lot of risk there, really for two reasons. One is just supply and demand. We're seeing billions of dollars in issuance. The numbers are truly staggering. And if there isn't enough demand there that can pull the yields up a little bit as investors demand higher yields to lend to these companies, and that can pull the price a little bit lower. And the second risk is what is the long-run profitability? What's the return on these investments? So right now, it's a very unknown risk. We're not ringing the alarm bells right now. We're still very

comfortable taking some risk in investment-grade corporate bonds. But I think it's important to look at your allocations, look at your sector weights. Are you too overexposed to technology bonds? We'd prefer a more diversified approach. Colin, follow up on that. If oil stays kind of where it is, Doesn't spike back to buck 25 or something like this. Do we hit 5% on the 10-year? We could. If we do that- A lot of people say that's the level that sort of kneecaps,

because you said knee-cap yesterday, knee-caps technology because the borrowing costs go up so much. So we think 5% could be some sort of soft ceiling. We've seen that over the years, and I go back to supply and demand as well there. I think it's a psychological number for investors. But if you're not just a tech company, any company, This rise in interest rates can pose a problem.

So specifically ones who've issued a lot of debt recently, maybe the most indebted, because if we go back one, two, three years, and we look ahead, markets were expecting a lower Fed funds rate and probably a gradual decline, assuming the Fed would be easing after that aggressive rate hike cycle. That happened to a degree, but if you look across the curve, different maturities, yields are still very elevated right now and maybe might even rise.

So that is a risk down the road. We're paying attention to the same issues. Fixed incomes thinking about interest. demonstrates equity investors are thinking about the cost of capital, even for tech stocks. Earnings yield. But for tech companies, it's the return on capital. That's the much bigger debate, all that CAP-X, what's the return on capital going to be at those hyperscalators than the cost of capital? Whether the 10-year yield is 5% or goes back down to 4%.

That's not really going to influence the outcome as to whether this is economic profits. Some of these big spenders, like an alphabet this week, let's get over it. It's a huge company, and they're making huge investments, and this company's got a great track record for growing profits as they are now. They've gone from gathering intelligence to – they've gone from gathering information to organizing knowledge, and now they're just delivering intelligence. And I think that's a wonderful investment to be making. So those tech companies, I think, should be the least concerned about rising tenure yields.

The more mere mortal businesses may be more sensitive. Well, Alphabet may be lending the U.S. government money at some point for less than $5. I'm losing sleep. They're not losing sleep on their back. It's interesting. We've got news today from Qualcomm saying that it's prepared to raise its prices for customers, perhaps as much as double-digit percentages. We're watching shares of Intel coming lower today despite really strong earnings.

I know you don't want to speak to specific companies and specific stocks, but what would this scenario indicate to you for earnings ahead and the strength of the AI trade, David? We've advocated selectivity. within the magnificent 7, 8, 9, 10 for a while, and some we like very much, like the one I just mentioned. Others, they have a lot more to prove, and they're making investments to catch up or making investments to relieve the United States from foreign manufacturing, much bigger challenges ahead. But I think the U.S. economy is doing well. The profit boom is raging, and we've seen oil prices not so long ago at these levels. Forget before the financial crisis, from 2010,

to 2014, we had oil prices $90, $100, $110 a dollar. And really, the American public kind of just got used to it. We just started to factor it into our daily lives. But when you go back to paying $250, $2.50, all of a sudden, $450. Get over it. I mean, it is straight talk, but it's hard. I like your point. The average American use about 50 gallons of gas a month.

So if you go up a buck, it's $50. It's annoying to some. It's painful to others. But it's not going to bring down the American economy writ large, period, it's not going to happen. Oil doesn't matter, and I shouldn't say this, being a very person, oil doesn't matter for drivers like it used to. Guys, sit tight. We're not letting you go yet. I know you want to start your weekend, but not yet. The 10-year yield is lower today, but kind of again, sort of stuck at that 4.67, 4.7-ish level, the cycle high

close of May 19th of the week. The benchmark yield up double digits on that. So Rick Santell, I gave a lot of numbers. 647. What does all of that mean? Well, I think, you know, I'm going to have to slightly disagree with our very smart guests. You know, when it comes to corporates and the relationship with treasuries and how yields move, it's always fine and it never matters until it does. And there's usually very little warning. Consider this. The spreads the add-ons, meaning you have treasury yields, the highest credit, you know, sovereign debt, and then corporate securities, you add a certain

amount of yield onto that to be compensated for the added risk. And those spreads have been very well behaved. But the numbers are large. And should we start to see the spreads widen a little bit, what tends to happen is those that bought those corporate securities at yields that are not juicy enough should the spreads change usually start to sell them a bit. And you have to be very careful because that's something that usually gains momentum, just like what happened this week. If you look at how oil and 10 years traded the entire week, honestly, they were literally on top of each other. And that 19th, that 467 you reference, you can see it on the next chart. The left side of that chart, which starts in mid-May, that's the 467 high-yield close that went back to January of 25.

Now, yesterday was the first time we settled above it, and right now we're literally sitting on top of it. And as an old technician, I will tell you this, the week. closes the highest priority when it comes to if it closes what triggers your technical analysis. So a yield above that, in my opinion, is going to make markets like the NASDAQ nervous before we get to 5%. Because many believe once you start to get much higher from these levels, the next 25 or 30 basis points may come rather quickly. All right, Rick, thank you for that. Let's bring back in our panel for some reaction there. I mean, he's disagreeing with you a bit.

What's your take? I don't think he's actually disagreeing with me. We see risks there. If you're a highly leveraged company and yields stay elevated or increase, that's going to be a problem. And we're actually starting to see some cracks under the surface. So Rick was talking about spreads. It's something that we focus a lot on when we talk about opportunities for investors. The spreads, the extra yield you earn as an investor to lend to a corporation.

If you look at the high yield markets, those are sub-investment-grade issuers, the spread on average hasn't moved much. But the lowest rated bonds, triple C and below, the most likely to default, they've increased a lot. So there are concerns out there, and we think that can weigh on the market. We just think that the share of those lowest rated companies isn't big enough to really have an overflow effect to the broader market. And these yields, and especially from here and if they go higher, they're a challenge to housing mortgage rates. They're a challenge to leverage companies. But they're not high.

I understand if our viewers are young and they've been in the markets like seven years, like five percent is doom, right? Bring up a 30-year chart or a 50-year. year chart. But this is an average. Back in the old days. It's a bigger challenge to parts of the economy and the stock market than I think it is to tech. I used to ride a coal-powered whale to the office back in the day.

But back then, rates were 27% for a mortgage. Okay. But people think 5%'s high. I guess the point of trying to make David and Colin respond to this, we could sit at 4.5% or 5% for years, could we not? Everyone's kind of waiting for a move. We've been at 4.5%, 4%, 4%, 5%. for years now. We could sit there for years more. I wouldn't disagree with that, Colin,

I mean, I would just simply say it does seem as if we've moved out of the regime from the financial crisis to the pandemic of those very low interest rates for a lot of reasons, reasons that go well beyond oil, a lot of secular reasons there. And I think it was brilliant and wise of Warsh to basically ask markets, what do you think rates should be without being tainted by the Fed's view or his view? So markets are speaking. We're in a different interest rate world. I don't know where we're going. Well, I'll add, I mean, I think we've seen that consumers and businesses alike

have learned to live with the level of interest rates we're seeing. I mean, the pain that many were expecting, that Fed Chair, former Fed Chair Powell mentioned when they first started hiking rates aggressively was that we might see some pain for households and businesses. It never really came. And I'm in agreement that markets are generally or businesses are dealing with them, but there could be cracks in the service. Not everyone's going to do well.

but generally speaking, we think that businesses and companies are doing well, and I'll finish with this. Kevin Warsh alluded to this in his first press conference. Aside from the housing market, he doesn't really see much restriction in the overall economy. Well, we wait and see what happens at the Fed meeting next week. Colin. When does that meeting happen? Wednesday. Yes.

During what show? Power lunch. This one. And where are you going to be? Washington, as I now call it Washington. Well done, Brian. Which some people say anyway, if you're like from Baltimore, you kind of say it like that. It's like a thing.

It's kind of like a dad joke except at CNBC. So gentlemen, thank you very much. I am a dad. Clearly. All right, guys, thank you. We still have a very big hour ahead. As the AI boom drives huge capital spending investment for the hyperscalers, we'll look at some of the lesser known winners,

some of the infrastructure players enabling the data center buildout. One there you see right on your screen. Who is invent? Well, we're going to introduce you to them. Plus, President Trump doubling down on his push to keep AI from driving up your electric bill. And Duke Energy, one of the biggest utilities in America, is signing on. And we'll talk about that and more with CEO Harry Sedaris. Next.

All right, welcome back to Power Lunch amid the growing backlash by some over AI and data centers. Major utilities are signing on to a pledge. Keep power bills as affordable as possible for everyone. Duke Energy, one of the biggest players. in the United States. And its CEO says the data center boom could deliver billions of dollars in benefit for customers. Joining us now for a power lunch exclusive is Duke Energy President and CEO Harry. Sideras, Harry, it's good to have you back on list. It's a critical issue. It's growing around the country. When you listen to a lot of the political talk, we get it on both sides.

To be fair, what are some of the one or two things you hear the most that are misleading or simply not true or confusing to the customer and the public? Yeah, absolutely. It's a top of mind issue. And it's great to be with you again, Brian, to talk about this. I had the pleasure of going to the White House event yesterday. We're President Trump, and we really are appreciative of President Trump and Secretary Wright and the rest of the administration from bringing everybody together to tackle this critical issue. Data centers are important for national security. We want to win the AI race, but we have to protect our customers from the expenses that it takes to serve these customers.

And this pledge, along with the work that Duke Energy and others have been doing for over a year and a half now, does that, making sure that they pay for the infrastructure that's going to serve them, making sure that over time it's actually going to cut the cost to the customer by spreading the revenue that they're going to produce over the fixed costs of our system. In North Carolina, we're estimating $3.6 billion of savings over the data center contracts that we have signed to date over the next 15 years. And that's important for our customers because they're struggling with inflation, with prices on housing, medicine, health care, gasoline. So doing everything that we can to keep low customers cost as low as possible, something that we've done for over 125 years and we continue to find ways to do that. Duke Energy, Florida, lowering residential bills, that's going to take effect.

I think the next quarter, you can correct me if I'm wrong on the exact timing, but the bills are going to go down. At least the per kilowatt rate is going to go down, Harry. A lot of people you understand are going to be skeptical of these claims. You're going to say, no way, it's just utilities sort of talking their book. Put it in practice. How does it work? Microsoft or an Amazon or whoever it may be pays a giant chunk of money. And what, that goes into the pool, which is then the same.

sort of spread out among the residential base? How does it work in practice? Yes. So our customer protection pledge that we made yesterday make sure it focuses on three things, protecting reliability for the customers so that the data centers, when they show up, that the system stays reliable, that they're paying for their infrastructure. So their rate that they're signing up for 15 years is going to produce revenue. And then that revenue is spread over the fixed costs of the system, which lowers the rates to the rest of the customers. And it also spreads the cost of storm recovery when we have a storm, when fuel costs increase. So those are the ways that that benefits the broader base of customers.

So having that additional revenue spread over that fixed cost is how you do that. Now, the math is complicated. We're trying to simplify that for folks with this pledge so that they can trust that we're doing everything that we can and that these data centers are paying their way and providing these benefits for everyone. Harry, I have two questions for you. First is that North Carolina's governor has asked you to have this commitment be legally enforceable, legally binding.

Have you done that? Will you do that? Yeah, so the pledge, I was voluntary at the federal level. Like I said, we've issued our own pledge. We are governed by the commissions, the regulatory commissions, and we're driven internally. Our 26,000 employees have always focused on doing everything that we can to make sure our customers are taking advantage of the lowest cost power and most reliable power that we can provide.

So we agree with the governor and the attorney general that we must make sure that we protect the customers from this, and we're open to having discussions of how we can make that more clear to everybody. But we are fully committed and our regulators hold us accountable to that. As the insurance correspondent, I pay a lot of attention to weather and climate risk. And if anything, the winter storms a couple years ago in Texas really brought into sharp focus, the danger, the real life and death danger when the grid is overwhelmed, overburdened. In a case where you have, a gigawatt data center. Do you think that the data center should be asked to reduce its energy consumption first before residential properties are asked to reduce theirs?

Yeah, so being a vertically integrated utility at Duke Energy, we make sure we plan the transmission and the generation to make sure that we rarely get into those situations that there's a crunch, but it does happen. What we've done in our data center contracts, we've offered them a way to actually reduce their load for 50 to 100 hours a year at those critical times that you mentioned. We aim to not have to use that in our system and our investments are geared towards that, but we do have that in our contracts with the data centers to be able to curtail their usage during that time.

And they can do that by being on their backup generators so they don't lose any of their productivity or they can adjust their models. They can run training or inference, which uses different amount of powers at those times. I want to ask you sort of to follow up on that if we can about renewables, about solar in particular. Renewables, they've been off the front pages a lot lately. They were on the front pages two years ago. They're not anymore. But I don't see any slowdown, particularly in solar.

Harry, do you? Solar power just seems to be continued to add to the grid in a big way, but we're not talking about it. What is Duke doing with renewables and solar in particular? Yeah. At Duke, we've always had an all-of-the-above strategy. We need every electron that we can get our hands on. We're building 14 gigawatts over the next five years. A lot of that's gas, but it also includes solar and batteries

because those are quick resources that can be built and brought online in less than a year. We're also looking at uprating our current plants, getting more out of our current assets, both our nuclear facilities as well as our gas facilities. So we're looking at all the electrons. So solar plays an important part of that. In Florida, we are adding 300 megawatts of solar a year. That helps us reduce the cost to the customers. You mentioned earlier the reduction, $50 a month in Florida.

Some of that's coming from the lower fuel costs that the solar facilities are producing down there. So it's an important part as we move forward, just like all the resources are. Harry, Sederer, CEO of Duke Energy. Harry, really appreciate you coming on the program today. Thank you very much. Have a great day and a good weekend. Thank you, you too. Thank you.

We're watching some breaking news now out of Washington, D.C. Amon. Javvers joins us. What are you learning, Amon? Contessa, a lawsuit just dropped in trade court. We've been talking about these new Trump tariffs all morning and whether they would be challenged in court. Well, now they are being challenged in court.

The plaintiff here is a company called Burlap and Barrel, and they are making the argument that these new tariffs imposed by the Trump administration overnight exceed the 301 authority that they have because, ultimately these new tariffs are not really based on a concern about foreign forced labor. They're really about a need to impose generalized tariffs. And therefore, this is sort of a boiling down this argument maybe too much, but this is sort of a pretext for what the administration wants to do, and therefore they've overstepped their bounds.

So we'll see this fought out in trade court for now. We'll see how the U.S. government responds. But we are seeing now the first lawsuit challenging the U.S. tariffs that went into place at 12.01 a.m. this morning, guys. And replacing those 10% tariffs that had already been put into place. So in essence, raising it slightly, but in replacement. Amen, I know you're following all of the details there. Thank you for that. Coming up the battle for AI's future, open source versus closed models, Silicon Valley's biggest names are just drawing a line in the sand. We'll have the details next. Washington's ban to, or push to ban Chinese

AI models is running into some growing resistance from Silicon Valley. Today, some of the biggest names in tech are just rallying behind open source AI, making the tech freely downloadable and usable. Kate Rooney has more. Why does it matter to them, Kate? Contessa, well, we're hearing from two of the biggest, excuse me, two dozen, I should say, of the biggest names in tech that signed this open letter, arguing for open source AI, and then really encouraging competition, even if it comes out of China, CEOs from all. all over the place. You had Microsoft, Nvidia, among them, supporting now open-weight AI models. So that is essentially where developers can go in, modify some of the technology, and then run

the tech themselves. They say that version of this is as important to the future of technology as open-source software was in the early internet. It does come as these open-source models out of China really make ways. You've maybe heard of Kimmy's K-3 model, which has got a lot of buzz. It's now almost on par with Anthropic and Open-I, Alibaba's version. version, Quinn is also starting to take some market share in the U.S. Meanwhile, in Washington, Open AI Ananthropic, the two big American AI labs have been ringing alarm bells about the risk, they say, is posed from some of the Chinese open source versions, and they've been lobbying for some tighter restrictions around those.

The letter also takes aim at one of the biggest debates in AI right now, which is known as distillation. So that is essentially using AI models to improve other models. Open AI Ananthropic have complained that these Chinese labs are. illegally ripping off their models. The letter, though, argues that that has been used in technology for decades. They warn policymakers of conflating competition with intellectual property theft guys. Well, I mean, one, if it's open source, then the intellectual property part of it, I don't know how you argue that. But more importantly, to the security part of this,

when we just see these mythic breaking out and getting to the internet when it's not supposed to, Are the concerns really about national security, or is it more that the Chinese technology, we don't know what the guardrails are? So when it comes to cybersecurity, that is one risk. We should mention the breakout was from open AI, not necessarily anthropic and mythos. This was a specific case where they gave it a task. It went out in order to solve the answer to a test, basically. It went and hacked into another company.

But that has really underlined how important it is to make sure that these models are used correctly, especially in cybersecurity settings. So that has been one reason why some of the closed source AI model and labs have said, we don't want to make this open source. We want to make sure we can have some more oversight of it. And basically, if they made it open source, the argument against it has been Chinese, any of our adversaries could use it for a cybersecurity and things. Not just Chinese, but I mean, you know, any rogue operator anywhere.

Exactly. And so that's been, that has been the knock against it. But the counterpoint on what a lot of CEOs are now arguing is that if it is open source, you have a group of people working on these bugs. It's a little bit more transparent. The worry is that you're just putting the power in the hands of some of the most powerful companies, and the knock on them has been they are arguing for regulatory capture, as they call it. They're arguing for less competition so that they can maintain their mode.

Now, the companies would argue against that. But that has been the knock and the criticism of these companies that, hey, allow competition. It's really an argument over capitalism saying, allow the best model to win. It may be too late to keep these out of the hands of foreign adversaries regardless. And therefore, let's let America, let's let the U.S. compete on our merits, not necessarily by forcing less competition. And that has really been the Silicon Valley groundswell that we're seeing, especially with this letter. Kate, Rooney, great stuff. Interesting story.

Kate, thank you very much. Thanks. Let's get out of Sima Modi with a CNBC News update. Brian, here's what we're watching at this hour. South Carolina has been selected to lead off the Democratic Party's 2028 presidential nominating calendar. The move would keep Iowa from returning to the top spot and continue Democrats push to elevate more diverse states. The full DNC still needs to approve the plan in August. Senator Gary Peters is demanding

answers about ISIS purchase of a powerful spyware tool called graphite. Peters say that technology can access phone messages, photos, location data, cameras, and microphones without a user's knowledge. He's asking DHS what safeguards are in place. And the White House wanting more veterans to become truck drivers after a crackdown pulled tens of thousands of immigrant drivers off the road. A new Freedom Hallers campaign will promote training for commercial drivers, licenses, and programs that let some veterans skip the skills test. Brian, I'll send it back to you.

All right, Sima Modi, Sima, thank you very much. All right, coming up, we're going to take a look at some of the lesser-known winners of the AI boom. Some of the infrastructure stocks you may not know. Maybe some you've never heard of. Maybe some we've never heard of, but we will right after this. All right. Welcome back. The AI boom, certainly creating some big winners. I mean, you know the names, the chip names, right? The Nvidia's, broadcoms, alphabets, metas, and many of the hypers as well. The company's building out the data center boom. But since you're watching Power Lunch, you've also heard us talk about the Bitcoin miners that pivoted more into AI infrastructure.

names like HUD-8, Terawolf, Cypher Digital, and more. And your next guest says some of the biggest opportunities may still be flying under your radar. Not anymore. It's bringing Luke Junkie, a senior research analyst at Baird. I love it. New names, Luke. Welcome to the program. I'm not going to lie.

I've heard the names. I don't know who they are or what they do. Who is Forgent? You got an outperform and a $55 target on the stock. Yeah, Brian and Contessa, thanks to have me on today. Who is Forgent? Forgent is a supplier of the electrical equipment that's bringing that power from the grid. They're stepping down the power and then bringing it into the back of the data center.

This is a company that is structurally important in the industry for a couple of reasons, Brian. The first reason is this is an area with a huge amount of bottlenecks right now. So if we look at electrical equipment, there's somewhere between and a lot of products a year or even two years in terms of lead times. This is a company that's coming into the market. They've got lead times as a weapon. They have a lot of capacity that they want to fill up. That is a weapon, and they are vertically integrated,

so they are in control of their own destiny in that respect as well. That sock is down 8% today. Would you consider that a buying opportunity? Yeah, Contessa, this is an area, certainly, that has been subject to some of this rotation trade and the risk off posture that we've seen in the market. We like this to step into as an opportunity. This is a stock that we're going to get an earnings report for the company.

And early to mid-August, we think that is going to be a strong update. In fact, if you look at the most recent thing we've heard from them, they disclosed in late June that their backlog currently sits at $2.4 billion. This is a company coming into their fiscal 25. Their backlog is less than a billion dollars. So stock that's off its highs, we like the risk reward of current levels and are absolutely. buyers. Luke, you've also initiated coverage on Invent, an outperform rating, a $188 price target. Talk to us a little bit about this company. So power and cooling, these topics are interrelated. As we know, the actual power infrastructure, of course, there's a huge amount of

demand for power in total. But I think what's maybe underappreciated is if we go inside the data center, you're having racks that are more dense, in other words, more GPUs, more TPS, use on the rack. You have increasing wattage for the chips themselves. And what that means is, in absolute terms, more power. And what it means is we get closer to the rack that sells, we have to dissipate power more efficiently. So who is Envent? So Envent, maybe not a household name, but the company they actually spun off from in 2018 is a household name. So this company used to be part of Pentair, where they play in data center two key places. First is in liquid cooling. So data center is a billion dollar business for the company. Liquid cooling, we think,

is about $600 million or more of that billion dollars. And this is about cooling more efficiently, and importantly, lowering the power bill for a hyperskiller. So if you go in the data center, if you're putting liquid cooling and you're actually getting better energy efficiency, that's the first piece of this stock. The second piece, they actually have a $600 million power utility's business as well. Some of that is going right into data. The big play that we like here is they have a substation leverage business. So if you think bringing in a lot of power off high power transmission lines or even companies doing behind the meter and setting up power generation on site, you have to step down that

power in a way that the substation is leaning into. Is there any support that these companies get from the government saying, okay, we want you to 100% supply the energy that you need? And is there any headwind to the not in my backyard backlash that data centers are generally getting when they're trying to build across the nation? Yeah, Contest, I'll take that second question first. I mean, one of the biggest NIMBY factors here currently is clearly water consumption. And if we look at the evolving technologies and the fact that there's just simply a huge amount of innovation going around data centers and AI infrastructure, broadly speaking, right now, certainly liquid cooling is one of the key unlocks in that respect.

And if we look at the superior water efficiency of liquid cooling, I think that's something that is under the radar in terms of an AI-specific driver and something that certainly is going to cut down on some of that nimbism. In terms of government mandates for good hookups or whatnot, that's all good news. If we look out to 2030, there's been a consistent increase in the expectations for What is the actual increase in power demand going to be as we look out to sort of peak grid performance 2030 plus? We were even looking at some data earlier today that said if you look out to 2035, the grid is going to be, you know, about 20% of the demand could be data center related. That really cries out for hooking these companies into the grid.

And that is a great story for Envent in that as you're bringing companies onto the grid, that's going to be a very direct driver of that substation business I mentioned. And vent down 4% right now. Luke, thank you so much for bringing us. Those names. Appreciate that. Luke Junk at Baird. Coming up, the rising price of passage, Marsh's global head of marine and cargo on what higher shipping insurance costs in the Strait of Hormuz and more broadly mean for the global oil flows. Don't go anywhere. U.S. missiles hitting targets across Iran now for the 13th consecutive day. Kuwaiti air defenses intercepting hostile drone attacks. The Strait of Hormuz is at a virtual standstill, and China is now calling for restraint in the Red Sea after the Houthis attacked Saudi ships.

The rising danger in the region is causing shipping insurance for the Persian Gulf and the Red Sea to soar. Marcus Baker is a busy man. He heads up marine cargo and logistics for the world's biggest insurance broker, Marsh. It's good to see you today, Marcus, give me a sense of what's happening with insurance. If a ship wants to traverse the Strait of Hormuz, can it get insurance and how much more

expensive will it be? Well, thank you very much for having me back on again. Look, it's been the most fascinating period of perhaps my career over the course of the last few months as this has unfolded. And what we've seen is a bit of a seesawing of rates, as we know once after February 28th. the rating environment escalated pretty significantly up to somewhere around about 10% on the value of the ship trading through the region. After the C-spire was announced, the Memorand of Understanding came out. That really supported a reduction in the rates and they came down pretty significantly. But in the last, frankly, the last sort of three or four days, what we've started to see is a very significant escalation in the rates back up again to somewhere between 8 and 10% on the value. the ship, sometimes even more for spot rates. And what that tends to do is it gets us to a position

where it almost becomes uncommercial to do it. Plus, what it's also saying to the crew and owner of that vessel is the perception amongst the insuring community is that this is a pretty dangerous thing to do. If you're minded to do it, we can help. But if not, probably not a good idea. And then we have now the issue of ratcheting up of danger in the Red Sea with the Houthi attacks. Are you seeing commensurate issues with the rates rising there? Yeah, so we've seen the rates in the last few days double. Now, that might sound dramatic, but to put that into context, those rates are now hovering around about between between 1% and 2% for transiting the Red Sea.

If we start to see more vessels hit in the region, I suspect that's going to escalate further. But the main change and the main difference, I suppose, with the Red Sea right now is that, there is a, I suppose, a concentration on Saudi interested and Saudi-Sahdi-interested ships, so Saudi flagships, vessels that have visited Saudi. So there is a bit more of a concern around vessels that have that kind of background and touchpoint to them. Marcus, is there any demand for insurance in the region right now? I mean, there's rates you can get cover, but is there demand? Well, let's again put that into context, Brian.

I think what we've got in the Red Sea is demand. What we're seeing in the Arabian Gulf is probably less demand. And less demand, if any, demand for the ships going through. We were tracking ships yesterday. In fact, the tracking that we were using suggested there were no ships that came through, but I've subsequently seen a handful that have come through. So if we put that into context, Under normal circumstances, we're looking at up to 150 ships a day, transiting the straight of

Hormuz. That's now down to a trickle. So the demand, and it's on one of these sort of, one of my colleagues summed it up really nicely the other day when he talked about a sort of broken feedback loop. And by that, you know, we're seeing, we're seeing less ships. So there's a lack of confidence in the market to provide cover. And so they're not providing cover at rates that make sense for the ships. and so the long day weighs on.

And that just leads to a lack of confidence in the insurance market. So we're not seeing as much demand certainly as we're used to. That's for sure. You mentioned how rates necessarily needed to come down after that memorandum of understanding. But I was hearing behind the scenes from multiple insurance sources that there was a lot of trepidation on the part of insurers who just thought, you know, you can have that memorandum of understanding. But we're not confident that the situation is,

suitably calm to lessen the cost of the risk, for us to assume more of the cost of the risk, so to speak. What would it take for things to revert back to norm? I think there's a fairly simple answer to that one, and that is just a ceasefire that everybody, a sustained ceasefire that people could believe in. And if we start to see that happening, I'm sure that rates will start to adjust pretty quickly. Does that mean, sorry, Marcus, but does that mean one month without incidents? Does that mean three months? Does that mean you need to do two years without seeing attacks on ships? So, as I said, I mean, the market's pretty dynamic. And it is, it is a marketplace. It's a vibrant marketplace. So I can't give you a time scale because I don't know. But our job as brokers at Marsh, is obviously, apart from advising our clients on risk, is to find ways to make sure that those rates come down to a level that makes sense for our shipping clients. and that's exactly what we would try to do.

I can't give you a time frame. But, you know, we've experienced this once before. We had a period of two weeks when it was okay, and rates started to come down. So there will be a nervousness amongst the insuring community about actually taking things on again until they start to see some period of sustained seats fire. Marcus Baker, Marsh Global Head of Marine Cargo and Logistics.

It's so great to see you. Thank you for coming on and sharing your expertise. Could I, sorry, I know you were on a time frame, But there's one other issue that I have to mention, as we're talking about, and that's the Black Sea. I was going to ask you about this, but we ran out of time. There's been a lot of attacks on ships there, too. A Turkish cargo ship got hit yesterday leaving Russia.

No one's talking about the Black Sea. I talked about it this morning on a different program. Okay, Brian, I'll give you one minute. Okay, so look, at the end of the day, we had a situation where Russia was attacking Ukrainian infrastructure. In the last three or four weeks, Ukraine has managed to target about 180 Russian ships, so the ability to get grain out of the Black Sea is becoming really strangled. Now, Ukraine and Russia between them produce about 25% of the world's grain, export about 25% of the world's grain. If this cargo doesn't start to get out during a growing season, East Africa is going to have a problem,

and I suspect the Middle East will have a food shortage problem. So, you know, we worry about oil, but frankly, I would suspect that bread and grain is going to be a more important issue in the weeks and months to come. Do you think that the issue there is insurance, or, again, is there about the safety of the crew and the ships being stuck because of the safety of the crew? Correct. It's safety of the crew, and insurance is available at this time, but how much longer for if Russia continue to attack will be questionable. Running out of food is a lot worse than paying a little more for the price of gasoline. Thank you for that additional commentary, Marcus, appreciate that. Yeah, an important story. And by the way, one that we, I did mention on Spark on the Street this

morning because what's going on in the Black Sea has nothing to do with Iran and Hormuz, but it's still a huge deal. And I'm glad that he brought it up. It's a, that whole sort of general region is in turmoil. All right, you know what else is? SpaceX stock. If you bought it after the IPL, you've probably lost money, but Elon Musk may be ready to reignite retail interest. I'll tell you why. Next. Don't hate the message. What? Yeah, blame her. SpaceX losing more than 40% of its value from the June high. So if you bought the stock after the IPO, you've probably lost money. But as SpaceX heads toward its third negative week, here's Elon Musk showing a little bit of love for retail investors. If you take a long-term view, and there are investors, we have many investors that do take a long-term view. In fact, I'm a big fan of the retail investors. In fact, if I find our retail investors on balance, they're very insightful.

and have very long-term views. But more investors apparently are betting against SpaceX. According to S3 partners, 35% of SpaceX's float is currently sold short, meaning people are betting it's going to go down to roughly 217 million shares. What did I say that didn't make sense? Oh, boy, more power lunch after this short break. Before we go, let's take a look at some of the top performers of the week. There you have them at the number one spot, SMC.

It's up 25% digital realty and Westinghouse Airbreak Roundout. those top three. You got to insurer legion and then Wabtech, which a lot of people don't know random but interesting. Katessa, use this tonight at one of your parties. Westinghouse airbreak. I'm going to really wow the train break company. I mean, what could be more interesting? I think train breaks are fascinating, but the show's over so we can't talk more. Thanks for watching, Power Lunch, everybody. Well, let's get the closing bell right now.