Power Lunch - China’s Impact, You Musk Be Kidding! 01/16/24

Episode Date: January 16, 2024

All eyes are on China, as voters in Taiwan re-elected its ruling party despite warnings from the regime in Beijing. We’ll discuss the fallout for markets, geopolitics and the global economy.Plus, another controversial tweet from Elon Musk. He says he wants more voting control over Tesla, or else he’ll take his great ideas elsewhere. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. Nice to have Contessa Brewer here. Thank you for joining us. I'm Tyler Matheson. Coming up, all eyes on China this weekend, as Taiwanese voters reelect the ruling party despite China's warnings. Plus China's shadow all over the markets today impacting the dollar, Apple, NVIDIA. And another controversial tweet from Elon Musk saying he wants more voting control over Tesla. He's going to take his great ideas elsewhere. We'll get to that. First, let's get a check here on the market. So Dow, down eight-tenths of a price. You've got the S&P 500 off half a percent and then ASDAQ composite off half a percent as well. And Boeing shares also falling today. Look at this. They're down 23 percent year to date and off 8 percent today. It accounts for a huge chunk of the Dow's losses. The company says the 737 max jets will require additional quality inspections.

Wells Fargo downgrading this stock this morning, Tyler. All right. Apple also lower and hurting. the major averages, it is cutting prices on the iPhone and other devices in China amid more competition. Concerns about demand in China also weighing on the stock there. So let's begin with China and the fallout from the elections in Taiwan, which went the exact opposite way Beijing would have wanted. Eunice Yunus Yunn joins us live from China right now with more. Hi, Eunice. Hey, Tyler. Well, the person who Beijing despises Lai Ching-Doh or will you,

Lai won, but he didn't win in a crushing landslide. It was a three-way race. He got most of the votes, but not a majority. And his party, the DPP, actually lost ground in the legislature. Now, this didn't change the overall picture of what we see here in the relationship between China and Taiwan. Beijing is still very much fixated on Lai and the DPP, which they appear to be convinced to want to declare independent. from China. Lai has said, though, that he has no plans to do this. And the government here has responded to the election this way, saying that the DPP doesn't represent mainstream

public opinion in Taiwan. They said that the DPP win doesn't change the trend of the motherland eventually being unified. And the state media went a little bit further, saying that the DPP must accept the inevitable trend of what they describe as reunification with China. China. The Communist Party, of course, argues that Taiwan is very much a part of China. Now, for investors, this likely means more of what we've seen in terms of the relationship and the approach that China has taken towards a Taiwan under the DPP. This likely means no dialogue that we're going to see between Beijing and the DPP, also likely military intimidation, hostile rhetoric. And then And there could very much be more economic steps to take it against Taiwan as retribution for the risk result.

Guys? So do you think that whatever China does they may begin to do in the short term? Because Mr. Lai is not sworn in until I believe sometime in the mid-spring, maybe May. I don't know. You'll be able to tell me. Do you expect them to start doing whatever it is they're going to do now? or wait until he's actually in office? It's difficult to say.

A lot of people are saying that there is a waiting game until May 20th when William Lye is going to be sworn in. So people are kind of watching to see whether or not Beijing is going to take any action. There's been some discussion if the losses that the DPP had in the legislature could change the dynamic in any way because that means that the party, the KMT, that's seen as friendlier to China, might have more sway. But even that is very much unclear because what we could see is the DPP brokering

with the third party, the one that could be a little bit of a spoiler and that they could act as some sort of coalition government and then Lai could still be able to have more control over his government. Is it significant, Eunice, that Lai has not uttered the word independence, apparently, that being a triggering word to Beijing? Not really, because, I mean, the Chinese government just seems very fixated, some would say obsessed with Lai and with his predecessor, Tai Nguyen, and especially with Lai, he even himself had said that

in the past that he has been very much in favor of some form of independence. in the past. So they've described him as an independence worker. They've framed the whole election as peace and war. And so because of that, it doesn't really make much of a difference whether or not he says independence at this point, or if he doesn't say independence, it's just that the Chinese government very much dislikes him. Yeah, they know what he stands for and the words he is used in the past. Unis Yun, thank you very much. We appreciate it. Appreciate your staying up for. Our next guest says, although China's reaction to the Taiwan election has been calm so far, there is still, as Yunus said, the potential for military activities in the near term.

And he warns there are uncertainties for companies that rely on China. DeWardwick McNeil is managing director and senior policy analyst at Longview Global. He's also a CNBC contributor. DeWardric, good to talk to you. What does this mean in the near term you think for this delicate balance that the United States has set up? with China, especially because we've already seen today, China is pushing back, giving a slapdown to, say, Philippines president because he congratulated the new winner of the Taiwan election. Thanks for having me, Katessa.

Look, I think what you are seeing here is that the risk, the geopolitical risk in the region remains high. I think we can all read a little bit of a sigh of relief here in the near term that China's actions, although not it's rhetoric. has remained moderate and somewhat measured. But as you pointed out, there's still a lot of risk here in the Taiwan Strait, but also in the South China Sea more generally with respect to the Philippines and the actions that's happening there.

But I think China's going to have to be very careful here, Contessa. We are also in an election here in the U.S. And if things were to derail, if there were any missteps like the balloon incident from last year, there's not going to be any time to recover and repair this relationship like we had at the end of 2023. Meaning what, that whoever would come into office next would do so having to crack down, but very publicly against China? Well, I think you're going to immediately have a situation where China inserts itself into the U.S.

elections in a way that's not advantageous to China. It will force the Biden administration to really move away from the spirit of San Francisco. as I call it, this commitment to open dialogue, to high-level meetings. And so if China is smart here, they would tread very carefully as we move through the U.S. elections here. And so far, to their credit, their actions have been moderate. The rhetoric is overheated, but we can all breathe a near-term thigh of relief. But over the long term, businesses should still be concerned about the risk of a U.S.-China conflict or incident, particularly in the Taiwan straight. It's interesting because when I speak to high-level insurance CEOs who have businesses

all around the world and they're keeping close tabs on it, the geopolitical instability is a worry for them. And what they say is you cannot disregard what's happening in the Far East, that what China is doing to set up its dominance in the world, the way it pays off. other countries so that they will disregard any claim to independence from Taiwan, that they will sever diplomatic ties with Taiwan, that it should not be disregarded. And at the same time, then you have China's premiere in Davos telling the crowd of global businesses there. Look, we're on track for, they said, 5.2 percent growth for 2023. That's the estimate that they're coming

out with. Basically, trying to reassure all of these global business leaders that China is a great place to find business opportunities. Is it? Well, look, it's a mixed message for sure. And Li Chong has certainly been the one deputized to carry the message that China is open for business. Look, what I say to companies all the time is you have to try and manage for these risks. You have to think about contingencies. I know de-risking is complex. It's hard. It may not be popular, but they should continue to try because these risks are very real. And finally, contestant, I think, you know, what I say is at least have a way in which you've thought about all of the possible contingencies and how this could go wrong.

And I'm finding even some resistance from companies to even having contingency plans. And I think that's very dangerous to be quite honest. You're nibbling around the area I wanted to get your advice on. And that is what would you advise CEOs of American businesses or global businesses to do if they are manufacturing in China, if they are selling, and China is a major market of theirs. What is the posture? What is the footing that they should have? And when you say de-risk, there are lots of ways to de-risk. What are you describing there? Well, it's a good, it's a good question, Ty. Listen, I think to the degree that you, if you're

dependent on China for any major part of your supply chain, you have to start now. Take the space that we have now, the peace that we have now, to try and put in place ways in which you're not solely dependent, that China is your single point of failure in terms of your supply chain. For companies that rely on China as their market, this is a little tougher. But for companies that have China in their supply chain, they should start now. But Tyler, here's the thing that's important to point out to American businesses. Chinese businesses are doing the same thing. They are finding ways to duplicate and move things to Southeast Asia and other places because they also fear what may happen in the long term in this relationship. So I say to U.S.

businesses, just look at what your competitors in China are doing. They're also moving some duplicate capacity in other places south of China. Well, it's like the farmer's wives used to say, you don't put all your eggs in one basket. Yeah. DeWiard Neal, thank you. Appreciate it. Good to see you. All right, the dollar hitting a two-month high against Chinese yuan. For more on that, let's get to Rick Santelli in Virginia, Chicago. Rick? Yes, Tyler, whether you call it the yuan or the Rinnebbi, both onshore and offshore yuan are at two-month lows versus the greenback. You can see the chart there. And it isn't only relegated to that Asian currency. Let's look at the dollar yen. The dollar right now is

at a six-week high versus the yen. Now, with respect to the yen, the bank of Japan missed a few chapters in the tightening cycle and it doesn't look like they're going to enter it at all potentially. And with respect to China, we all just heard the guess. There's a lot of issues there that are keeping pressure on their currency. The elections being the most recent, which had a dramatic effect on the pricing between where it was and where it is today. Now, if we look at interest rates in general, we have double-digit gains from twos all the way out the 30s. Now, as you look at a 30-year bond, that's a two-week. chart. We've broken out to the upside. 30-year bond right now is up nearly 14 basis points

on the session. And if you look at tens and thirties, they're both hovering right now at five-week-high yield closes. And the dollar index is hovering at a five-week high as well. And finally, two's ten spread. Now it's flattened, become less inverted by about four basis points today. It's hovering at minus 16. the last time it closed in positive territory, well, that was in July. But right now, it's the least inverted since Halloween. Tyler, back to you. All right, Rick, thank you very much.

Contessa. We saw a big stock reaction a short time ago as a judge moved to block the JetBlue Spirit Airlines deal. We have more news coming out on that. Let's bring in Phil LeBow now. Phil, what do you have? What you have is a deal that many thought was going to face high chances of being blocked, actually being blocked. The judge ruling in favor of the DOJ, take a look at shares of spirit because this is where we're seeing the most reaction today.

Shares down, what, 60%, 50%, I should say, as the judge blocks the spirit deal, take a look at shares of JetBlue. The DOJ winning this case, by the way, this is two straight wins for the DOJ when it comes to blocking either airline alliances or in this case an airline merger. And the cost here for JetBlue could be significant, even though the stock is up. This is going to be a costly decision depending on whether or not they appeal this and ultimately can reverse this at some point in the future. 3.8 billion dollar deal with a breakup fee when they agreed to this in July of 22 of $70 million. That would be what JetBlue would have to pay as a breakup fee. And Spirit shareholders at the time were also going to get $400 million minus whatever payments were happening between July of 22 and today if the merger was. blocked. So it could be very costly for JetBlue. The airlines releasing a joint statement saying,

we disagree with the U.S. District Court's ruling. We continue to believe that our combination is the best opportunity to increase much-needed competition and choice by bringing low fares and great service to more customers in more markets while enhancing our ability to compete with the dominant U.S. carriers. JetBlue's termination of the Northeast Alliance and commitment to significant divestitures have removed any reasonable anti-competitive concerns that the Department of Justice raised. We are reviewing the court's decision and are evaluating our next steps as part of the legal process. Take a look at the airline index. Why is it down? Do you think anything's going to change in the airline industry, at least under the Biden administration? They've made it pretty clear.

They're not going to approve any mergers if somebody wants to step up to the plate. and propose a deal. So that's one factor in addition to some other headwinds that are out there for the airline industry right now. Bottom line is this, guys, this is a big win for the DOJ. And again, the second time the DOJ has prevailed, they also prevailed in forcing JetBlue and American to unwind their Northeast Alliance. And so now they have that win, along with this win, blocking the Spirit and JetBlue merger. All right, Phil. Thank you very much. Phil LeBoe, reporter. for us. Coming up the Goldman Standard, Goldman Sachs, blowing away earnings estimates, we will break

down the numbers next. Plus top executives weighing in across the network today. We will recap the key takeaways in three stock lunch, power lunch. We'll be right back. Welcome back to Power Lunch. Earning season heating up today with results from more big banks. Let's bring in Leslie Picker for more on Goldman Sachs and Morgan Stanley. Hi, Leslie. Hey, Contessa. Yeah, Morgan Stanley results weighing on the stock today, currently down a little more than 5%. Most analysts have described the quarter as effectively just okay, and the stock reaction is reflective of that. There was a slowdown in net new assets into wealth management leading to flat revenue

in that division during the quarter. Here's the title of a note from Evercore ISI. They described Morgan Stanley's quarter as, quote, similar to the Cowboys and Eagles. The potential is much better than how they ended the year. This, of course, was CEO Ted Pick's first earnings call. Having taken over that role from James Gorman just two weeks ago, Pick was asked how he would describe his leadership style, to which he replied that he and Gorman are much more similar than not,

noting that Gorman brings a, quote, positive mojo to the business. Investment banking revenue was up 5%. And CFO's Sharonia Shia tells me that the backlog is a, quote, bright spot as they look forward. optimism around so-called green shoots bolstered Goldman Sachs shares for most of the trading day, although they recently turned back into the red down 0.3% right now, and that's despite declines of 12% in their investment banking division during the fourth quarter. Goldman CEO David Solomon said, though, on the call that the, quote, level of strategic dialogue has definitely increased.

Asset and wealth management at Goldman was a driver of the top line there with a 23% jump in the fourth quarter to a record 2.8 trillion in assets under supervision, guys. So, Leslie, we've heard optimism before about an increase in IPO and M&A activity. What's different this time? Yeah, I think it was James Gorman who said, you know, if we did have green shoots throughout the course of 2023, someone forgot to water them. So the question is, why is it that we've been hearing so much about, you know, this pent-up activity and all of these discussions that are taking place,

across corporate America, but we haven't seen that real pickup and activity after several years now of depressed activity, at least relative to historical standards. One of the key reasons is, of course, the rising interest rate environment. Once rates start to level off, sources say that we'll start to see kind of that activity really start to filter through. Additionally, you've got a situation where people were worried throughout the course, at least of the first half of the year in particular, that we were going into a recession. So you don't want to do that. do a big deal if you're about to go into this big downturn in the economy. It just, it's hard to come up with a good price by which to transact. And so a lot of the CEOs have been kind of sitting

these deals on ice waiting for a better opportunity when the outlook looks a little bit clearer. Now, you know, all these calls have encompassed CEO comments about uncertainty that's out there. There's the geopolitics. There's what's going on with the Fed. So we'll see if there's enough clarity for more of those transactions to occur in 2024. as the CEOs have alluded to this earnings season. Leslie Picker, thank you. Appreciate that. All right, our next guest is expecting a second consecutive quarter of earnings gains

and says the stock market needs growing corporate earnings to do the heavy lifting this year. Let's bring in Mark Lushini, chief investment strategist at Janie Montgomery Scott. Mark, welcome. Good to have you with us. Let's pick up where Leslie left off, and that was in a discussion of the banks, particularly the big banks.

How do you look at their earnings reports? and analyze them. And do you think that banks, and maybe especially the big money center banks, are a target of opportunity this year, something they weren't last year? Yeah, Tyler. I mean, I think you see a little bit of a dichotomy between what we saw reported on Friday by the big money center banks and that which Leslie was just reporting on with regard to kind of the investment banks, banks, just because of the composition of

their portfolios overall. But turning back to the money center banks, I read it to be somewhat encouraging. Now, obviously, so much is going to depend on the evolution of the economy as to whether we see any uptick and loan demand, which remains relatively subdued at this juncture. But clearly, the Money Center banks benefited from a continued impressive numbers coming out on their net interest margins as a consequence of the deposit flows that went into the Money Center banks after the banking aftermath in March of last year. And obviously, still quite healthy spreads over that, which they are lending money out at. And so as a consequence, I like them from the standpoint of them

being great global franchises with healthy dividend yields and maybe yields that can continue to go up. But in the meantime, less than favorable toward them overall, just given the fact that I think economic conditions are going to remain rather docile here in the United States, at least for the foreseeable future, with a non-trivial risk that we do dip into a mild risk. recession, perhaps, in the second half of this year. Last year, it seems to me, was the year of two things. One was the magnificent seven and their outperformance as a group. Number two was multiple expansion, the speculative premium that people are willing to pay for

a share of stock. This year, you think it's going to be driven by earnings, and you think the earnings are going to come from the likes of industrials because of infrastructure spending, industrials like which? Well, to name and name, health care is a sector we also like, but Caterpillar in the industrial sector. I mean, obviously, an iconic company that is a real bellwether on global infrastructure and industrial activity. Not that we expect a big reacceleration of global economic growth for the foreseeable future, but nonetheless, there's obviously a pretty significant impulse permeating the U.S. economy by way the infrastructure spending on the IRA, as well, well as the Chips Act and even fiscally being underpinned in Europe for many of the same reasons, decarbonization, electrification, and so on, I think is a secular theme that is going to benefit

the build out of onshoreing, reshoring, and activity around energy transition to clean energy that is going to be a tailwind to Caterpillar for likely some time to come. So an opportunity to pick up a great industrial brand at a relatively inexpensive mid-teens kind of multiple vis-a-vis is kind of parts in both the industrial space and the market overall. But I do think earnings are going to have to do the heavy lifting because at 19 and change forward on 2024 earnings, the multiple expansion story of 2023 may be a little more elusive in 2024. All right, Mark, we have to leave it there.

Thank you very much. Mark Lushini. We appreciate it. You're welcome, Tom. Thank you. Just ahead. Elon Musk playing hardball. The CEO says he wants a massive stock award from the Tesla board.

Or else, he'll build his AI products somewhere else. Power lunch will be right back. Oh, it was frigid across most of the country. It was so cold. But you would think that that would boost natural gas prices. Not so. Pippa Stevens joins us now with more. Why not?

So much of these gains actually came last week. So it's an issue of a, you know, buy the rumors, sell the news type event. And so now we are past the peak of cold weather. And so we are, according to the meteorologist, is very much in flux. But they say that we are past the hump of the cold. This is now behind us. And so, I mean, tonight's still very cold, but then things start to get better tomorrow. Don't quote me on that.

Wait, I feel like you should have, shouldn't she have a weather map right now? With that yellow jacket, with the sunshine. What's going to happen is that the cold weather is going to blow through New York. And so Contessa will keep complaining about the cold weather. Yeah, well, the sun will come out tomorrow, which is why I'm in this jacket, supposedly. And so we are seeing prices down about 12 percent today. Now, we were in a mild winter, and not just us. Europe, too, has had a much milder winter. And we talked, what, around New Year or Christmas, we were talking about the fact that, oh, Nat Gas isn't really in use.

And the prices that consumers are paying are lower because what's not really in use? Is that going to change? So you bring up a very good point. So we did see a huge volatility last week on the front month Nat Gas contract. That was up 15%. But we're not seeing longer-term optimism. And that is because, to your point, the fall was very well. warm, December especially, very warm.

And so there was a lot of injection into storage when typically you start to see withdrawals from storage. And so what happened is that now storage is sitting about 13% above the five-year high. And so that's why while we saw the front month contract surge above that $3 per M&BTU, we didn't see further out any type of meaningful gains because inventory levels are still very high. Production is at record levels. And then also a big game changer here is LNG and demand from LNG, but we've seen a

number of those new terminals pushed further out into 2025. And so that's why prices haven't responded. Now, for consumers, once a utility bill goes up, as Tyler has famously said, and it never seems to come down. And so we are still working through when prices surged above $10 a year ago. And so those increases are felt over a number of periods. So that's why we don't see an immediate one-to-one change in our utility bill. It actually sparked a conversation with my 10-year-old twins where they were like, do we have natural gas? Do we use natural gas? How much are we paying for natural gas? Which then unloaded a whole bunch of other economic. It was a very great learning opportunity.

Thank you, Pippa. Next time I'm going to have me to call you. Yeah, I'd love to come. All righty. Let's get to Bertha Coombs now for a CNBC News update. Hey, Bertha. Hi, Tyler. The president has called the top congressional leaders

for a meeting at the White House tomorrow. Sources tell NBC News, he invited House Speaker Mike Johnson, Senate Majority and Minority Leaders, Chuck Schumer and Mitch McConnell, as well as House Minority Leader Hakeem Jeffries to discuss the national security supplemental funding. It includes money for Ukraine and Israel,

but Republicans have held it up as they push for more immigration policy change. A federal judge has rejected former Trump advisor Peter Navarro's bid for a new contempt of Congress trial. Navarro claimed protesters outside of the courthouse last year prejudiced the jurors. But today, a federal judge said his legal, team failed to prove that claim in their filing. And the world's most popular video creator,

Mr. Beast, is pitting YouTube against X. He re-uploaded a video he posted on YouTube in September to X so he can compare ad revenue between the sites. Mr. Beast says he'll share the results next week. The move comms after X announced that it would try to court creators and media personalities to the platform. And I will tell you that he's gotten over 64 million views, although he has 10 times as many subscribers on YouTube as on X. But one of the folks who reposted his post was none other than Elon Musk. Wow, very interesting.

I would think that YouTube would have an edge there because it's so familiar to... And their users, Mr. B. subscribers on YouTube, I have... have no, I'm just going off of what I watch in my home. I would think that, people in your home watch it. The 10 year old twins are watching Mr. Beast on YouTube, not on X. Not on X. Not on X. I'd never heard of him until today, but he has over 230 million subscribers, and he's only 25.

An amazing business at only 25 years old. I'm with you, brother. I'd never heard of him. Oh, Mr. O. Oh, yeah. It's like, you know, it's. You've got to have the kids. Yeah, a very specific audience is what we're talking about here.

That's the only ways that I know modern music is because the children introduce me to it. Like otherwise I'd be, these kids. Okay. Keeping us fresh. Bertha, thank you. Coming up, Boeing going all in. The aircraft maker ramping up its quality inspections, bringing in an outside assessment firm. We'll tell you about that next.

Time for today's three-stock launch, maybe a little earlier than normal. Lots of big-name CEOs on CNBC today from Davos. So let's hear what they had to say and then get the trades on the stocks. Here with our trades is Malcolm Etheridge, CIC, Wealth Executive Vice President and a CNBC contributor. Up first is Intel. Here's CEO Pat Gelsinger on where the company stands in its turnaround with the stock up more than 50% in the past year. Listen in. Part of the optimism in the stock for Intel has been we're getting the process technology back.

You know, we said five nodes, four years, this audacious plan. to get back to leadership. And as it's coming to life, people who might have been skeptics are saying, wow, they're making it happen. And I think with that, it's sort of like the products get better. Malcolm, first off, welcome. Glad to have you with us. What do you think of Intel? Yeah, Tyler, I'm actually surprised he didn't manage to get AI everywhere into every single soundbite. You guys might clip because that is, I think, the slogan that's going to bring investors who had turned away from this name, frankly, in the last few years, simply because they weren't really a part of the AI conversation, I do think their approach to try and incorporate artificial intelligence into just about everything that

we as consumers touch will actually bear some fruit for them this year and going into the future. Well, and to that point then, Malcolm, up next Accenture, the company's CEO, Julie Sweet, on how the company is gearing up for AI. We'll train 250,000 people this year in Gen AI. And since 2019, I've trained every person at Accenture, about 600,000, because obviously people coming in, on AI. So in 2019, I became the CEO. And I said, every person, you work in the mailroom, HR, or a strategist, you need to

know six things. Now it's 11. And they take assessments. So one of the things that I'm most passionate about is that AI can be great and we have to bring our people along. What's the trade on Accenture then? Yeah, so Accenture is actually a hold for me. This company has long been seen as a Piction Shovel's approach in investing in whatever the macro trend is in business and technology.

And at the moment, it's generative artificial intelligence. But Accenture doesn't actually create any of the products and services that are leading the wave. And so my concern is that Microsoft or an Amazon who's actually building those tools could start to offer consulting and just roll it into all of the other features they're offering their interest. surprise clients, thus taking that market share away from Accenture. All right. Let's go Malcolm to Chevron, the CEO there, Mike Worth, on the delicate balance. Energy companies have to strike these days. There are three things that really matter when it comes to energy. It's affordability, it's reliability, and that's the impact on the environment.

And you have to take all three of those into consideration. As you talk about energy as a part of our economy. And we've certainly seen in Europe when reliable, supply is threatened. Prices respond, and the economy feels it. Chevron down about 2% today, Malcolm. What's your trade here? Yeah, so I understand interest based on the recent sell-off and energy, right? It certainly seems like a buying opportunity, but I would consider this one a sell. I have concerns about the situation in Guyana and whether President Maduro, Venezuela might try and create too much volatility around the annexation of the land in

Guyana that he's after, which probably causes the deal with Hess to at least stall, if not potentially sack it. And so I just think that's too much of a headwind to try and catch that trade in energy that was created by the recent sell-off, as I mentioned. Maybe an Exxon would be a little bit of a safer bet. And these Guyanese properties are at the heart of Hess's, of the attractiveness of Hess. It's the crown jewel of the whole, yeah. Interesting. Malcolm, thank you so much for your insight today. Appreciate it. Still ahead. Elon Musk says, He wants a massive stock award from Tesla's board or he's taking his bright ideas elsewhere. We'll get the key details when Power Lunch returns.

Welcome back to Power Lunch. Shares of Boeing lower today taking a big chunk out of the Dow. Let's bring in Phil LeBow now to explain why. Phil. It's about figuring out how deep will the assessment and the audits of Boeing's quality controls go. And what will be the ultimate outcome in terms of changes that will be made? So there are a number of different entities, both Boeing as well as others who are looking at Boeing's quality control. Here's what Boeing announced yesterday. The company is saying that it would be doing more quality checks on the max nine production lines, including adding independent inspectors. As part of that, the question also comes up, well, wait a second, is this going to slow down ultimately plans to ramp up max production? That's one reason why Wells Fargo out with a note today, downgrading the Boeing stock saying,

given Boeing's BA's track record, I should say, and great incentive for the FAA to find problems. Remember, the FAA is doing an audit of Boeing's production line as well. We think the odds of a clean audit are low. That's Matthew Acres from Wells Fargo. That is at the heart of why he downgraded the stock today. Also, take a look at shares of Alaska Airlines. Why? Because Alaska announced over the weekend that it was going to check max-9 work of aircraft before they take delivery in the future. Alaska has 65 max-nines. They are grounded right now as the FAA assesses if this is a bigger problem than just that one aircraft that had the door plug ripped off the fuselage.

And as you take a look at shares of Boeing, keep in mind that the company today announced that it is naming essentially a quality assessment advisor. This will be an advisor who reports to CEO Dave Calhoun. We're talking about Admiral Kirkland Donald. He is the current chair of Huntington Ingalls Industries. And again, he will report what he finds to CEO Dave Calhoun. As Boeing is moving quickly to try to say not only to advisors and Wall Street, but also to others who are looking at the company regulators in Washington, we are doing a deep dive quickly in terms of where our quality is and what needs to change. So that's the latest on Boeing and the Max 9 investigation. Guys, back to you.

Seems like there's going to be a lot more news coming out on that front. There's so much news in your world today, Phil. I wanted to ask you about this tweet from Elon Musk over the weekend that reads in part, I'm uncomfortable growing Tesla to be a leader in AI and robotics without having approximately 25% voting control, enough to be influential, but not so much that I can't be overturned. Emphasis, mine. Unless that is the case I would prefer to build primary. products outside of Tesla. I mean, a lot of people see this as throwing down the gauntlet for the

board. Publicly negotiating, he wants more, and he's got the leverage to do it. Contessa, that's why he's doing this. And look, he's enough of a maverick that you can't dismiss this. Let's take for example, one of his chief competitors, Mary Barra, if she said to GM, you know what, I need this, or I'm going to take my ideas and I'm going to walk. I don't think anybody would buy that. First of all, Mary Barr would never say that. I doubt she would ever say that. I doubt most CEOs would ever say this. But Elon Musk, he's enough of a maverick that you have to take what he says and not dismiss it, not say, well, there's no way he would do that. Really? You don't think he possibly would do that? Ultimately, they're going to work this out with the

board. But he's publicly negotiating because he has the leverage. He is the key man risk, the biggest key man risk that is out there in the market. And he knows that. And that's why he's doing what he's doing? Well, if they want to keep his big brain in house, they don't want him to take a... What is his stake in the company now? Do you know? He wants 25%. I think it's about 16, 18%. Remember, he had to liquidate a number of his shares when he was purchasing Twitter. Mm-hmm. Well. Thank you, Phil. Shares of Nvidia hitting an all-time high. Thanks to bullish optimism for AI-powered chips. We get key details after a quick break. Crypto Watch is sponsored by Grayscale.

Crypto investing begins with Grayscale. Invidia shares bucking today's downtrend, thanks to a bullish note from KeyBank, despite looming export control threats. Christina Parts-Nevilis has more. Hi, Christina. Hi, Contessa. Well, let's start with those threats.

Chinese military and Chinese state researchers have reportedly purchased Nvidia AI chips despite a U.S. ban. This according to Reuters. Separately, the Financial Times reporting that because of those same U.S. export bans that have been put in place since 2020, 22, Chinese companies are resorting to stripping

Nvidia gaming chips down to their actual core components before being installed on new circuit boards. Both of these examples showcase how China is using workarounds to tackle their lack of high-end AI chips and actually highlights a looming risk for Nvidia. Further export controls from the U.S., especially since 20% of its data center revenue actually comes from China.

Nvidia has repeatedly told me they are working with the government to supply compliant. chips. And yet, investors don't seem phased by these China concerns at all. The stock is up, what, 14% year-to-date, positive today. It's helping the Vanek SMH on pace for its third straight monthly gain. And then you have Key Bank, bumping its price target for Nvidia to $740 from $6.50. Bank of America today says Nvidia is one of the most mispriced stock, saying the stock is moving less upwards than the drop in its earnings multiple. So why is everyone's, you know, so darn bullish.

Nvidia CFO said just last week, they have data center revenue visibility well past this year. So that's bullish. They believe software revenues will continue to jump this year. They're launching a new AI chip in Q2, and they're working on supply,

suggesting lead times would come down from order to delivery. All reasons why this name remains an AI darling, despite last year's 240% stock run up. I'd be happy with the 240% I'd take that go go retire that sounds good to me Christina thank you thank all right still ahead a generation gap in American's housing picture we will reveal the cohort

or group that's got the biggest share of the country's largest homes and what it means for buyers still on the outside looking in our lunch is back in two all right we've got three minutes left in the program and several more stories we need to tell you about let's get right to it corporate jets are taking flight in a big way according to a Wall Street Journal analysis, S&P 500 companies spent $65 million on corporate jets for personal use of their executives in 2022. A 50% jump from pre-pandemic levels. And early signs suggest that that trend continued in 2023. We're not suggesting here that there's anything untidy because most of the use of these private jets by corporate execs is stipulated in their contracts.

And they may indeed be reimbursing. But I think the point is that some shareholders, and especially those who want to see the return to shareholders improve with the focus on efficiency might say that is an inefficient use of our capital. Yeah. Why are we having all these jets if they're going largely or in part to serve the private interests of the CEO? Exactly. Yeah, exactly.

But it's good for the private jet companies. No, good for them. Jeffries is doubling down on draft kings, reiterating the shares at a buy, despite a pair of negative football weekends during the November. quarter, the firm just shrugged off any short-term weakness as a buying opportunity. But you can see today it's up more than a percent. Basically, they're saying that those sports books should continue to see growth from the expansion of digital gaming around the nation, especially, and I think this is important. California and Texas remain the super states with massive population centers

that still have not expanded sports. Yeah. But California is under massive pressure in terms of tax revenue. So how long do they remain on the sidelines with this? And also the tribes coming to the table and revisiting. We'll have to see. All right, according to Redfin, empty nest baby boomers now own twice as many large homes as millennials with kids. Boomers own and occupy 28% of the three-bedroom plus homes compared to just 14% from millennials. Redfin notes that the split was just about even a decade ago. I was shocked at the tiny little fraction that Jen Xers get. Yeah. Gen Xers with kids.

Yes, exactly. A lot of people say they're going to downside and they end up in a bigger house. Because it's cheaper if it's paid off. All right. Now for the news you've all been waiting for, there is no news just yet, but there is a baby cam, ladies and gentlemen, and we're going to go to the baby cam now for a live report from Kelly Evans an undisclosed location in North. How's it going, Kel?

It's really great. No, it's been, I'm really glad that I'm here spending quality time with everybody on the snow day. Yeah. Yeah. It's been real piece of cake. You like your stress in concentrated doses, I take it. Yeah, so, you know, Tyler, you can imagine earlier, I saw Waddler. I saw Bond yields.

You know, I saw the market and I saw the airlines. And I just thought, you know, yeah, I'll just, I'll just meanwhile, try not to slip and break something here. Look at those kids. They are great, man. Is that three out of the four? Lamingia. Good. All right.

And a fifth soon to come. Scott Walker. Kelly, great to see you. Thanks for watching Power Lunch. Top that.