Power Lunch - Chips In The Middle, Musk vs. Scandinavia 12/6/23

Episode Date: December 6, 2023

AMD just unveiled a new AI chip, in a direct challenge to rival Nvidia. We’ll bring you the details.Plus, striking Swedish mechanics are getting an assist from their neighbors in a labor dispute with Tesla. We’ll discuss. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch alongside Kelly Evans. I am John Ford. Coming up, A&D, pushing its chips to the middle of the table in the AI race, holding a big event this afternoon on how it's going to compete with InVIDIA. We will get a live report from that event. Plus, Norway and Denmark joining Sweden's fight with Tesla. Elon Musk has called the Swedish labor strike insane, but it could have far-reaching consequences for the company. We'll explain.

First, it's good a check on markets, though. As the Dow Jones Industrial Average clinging onto a 50-point gain, the S&P's back in positive. territory. The NASDAX down five. All of them have softened since early morning levels. Running to stand still and two Dow components with business updates today. ExxonMobil says it expects to increase oil output through 2027. It's continuing to explore opportunities in lithium. And it's going to buy back $20 billion in shares per year. Yeah, interesting to watch that one, especially with crude down sharply today. And McDonald's

announcing an aggressive expansion plan targeting 50,000 restaurants worldwide by 2020. 27 up from a little more than 41,000 today. The shares are fractionally lower. Let's begin with that big AMD event in San Jose. CEO Lisa Sue speaking in the last hour. Christina Partsenevolous is live from the advancing AI event. Christina. Well, Kelly, AMD launching its highly anticipated MI300 AI chip.

So there's two versions. You got the X that I'm holding right here for cloud users and then the A for supercomputers. Another big launch, too, today is they are launching a next generation of their open-source software. AMD's Lisa Sue, the CEO, taking to the stage, showing confidence that this market is growing much faster than previously thought, which is why they are increasing their total addressable market for just the MI-300 chip from $150 billion to now $400 billion by 2027. So that's about a 70% average annual growth rate. And given the supply issues we saw with NVIDIA's chips, Sue assured the crowd that they would have the capacity. capacity to satisfy that demand.

Sue, also making direct comparisons of their AI chip with Nvidia, something she doesn't normally do at these types of events. And according to AMD, their chip has more memory capacity and bandwidth, which makes it more suitable for inferencing within the large language models. They didn't talk about pricing, but the assumption is that if a chip can provide more memory, then you don't need as many chips,

and then eventually that means it's a little bit cheaper for inferencing. But with a new product, you need customers. And as expected, Microsoft took to the stage. AMD provides AI chips to the Microsoft co-pilot. Oracle, so this is new, Oracle and META also announcing their MI300X partnerships with AMD, that's important because Oracle and META already have strong partnerships with NVIDIA. So it shows that pie is growing and that big players are entering and considering AMD now.

Christina, stick around for more on the AI chips race. Let's bring in our next guest, who is at the AMD event. as well, joining us, Dan Newman, CEO of Futurum Group. So the total adjustable market bigger, in a way that's not a surprise, because we've seen that reflected in the stocks of Nvidia and AMD this year. I guess the question is partly supply and how much of a share of the market AMD is going to be able to get as we had into 24. Yeah, John, it's a very exciting moment. AMD has been building up to this for a couple of years. And so the fact that they were able to show really competitive products with

Nvidia should have been expected. The multi-billion dollar opportunity that Lisa Sue has been referring to over the past few quarters may not surprise anyone, but seeing the biggest companies in the world, meta, Microsoft, up on stage, talking about how they plan to collaborate more closely with AMD is a really big deal. And this isn't a zero-sum game, John. The idea is it's not just about Nvidia. It's about having multiple options. It's about having choice.

We saw the IBM Meta AI Alliance announced yesterday. The world wants to have more options when it comes to processing. It wants more options when it comes to open source and development because the AI journey is really in its earliest stages. I wonder if investors should think about the breakdown in AI chips, the way we've looked at graphics chips in consumer PCs in the past, right? Because we saw AWS and Microsoft both say they've got their own AI accelerators. Are those kind of like integrated graphics back in the day? So yeah, they can do the job

to do some basics, but they're not going to run the latest and greatest games. These accelerator ships from Nvidia from AMD that are coming out are really the big horsepower in the accelerators race? I don't necessarily think that's how it's going to end up, John. I think that these cloud hyperscalers are looking at being able to really offer a very competitive piece of silicon. You look last week at AWS, the Neutranium 2 chip. You talked about Trillion Parameter. models that could be trained on it. There's some really good economics. We heard Lisa talk about economics. I mean, this is going to be a big part of the conversation is how efficient can we train these models. But you also look at Microsoft is coming to market. They are in their infancy. And of course,

Google today with its Gemini announcement, TPU5, the new version of it, that's going to train its newest multimodal model. So I actually think that we are seeing a new era for the semiconductor space. And there will be a lot of collaboration between the big chipmakers, Intel and AMD, and NVIDIA, and all these hyper-scalers and OEMs. Having said that, though, they're vertically integrating. And we've seen it be successful at Apple in their business, and we're going to see it be successful at AWS and Microsoft as well. Christine, I just want to go back to kind of what's been going on regulatory-wise, where Gina Romander reportedly has been very tough, maybe without quite naming them on Nvidia or companies who are kind of really getting around any restrictions the U.S. is trying to impose on these, sending these, these chips to China. How do we expect NVIDIA, AMD, to continue to, is it an opportunity for

AMD to maybe be friendlier? Do they both need to just be super clever here to keep as big a market share as possible? Just how much is that a factor as we look at some of their forward sales projections? It's more of a factor for NVIDIA, given that they get roughly 20 to 25 percent of their data center revenue from China. That's why NVIDIA was very quick to create a workaround chip for China, and that's where that threat came from Gina Romando. However, having said that, Nvidia knows that they're not going to get that chip blocked just right away. The government has to follow a protocol.

Jensen Wong took to the stage in Singapore early, early this morning, saying that they are working closely with the U.S. government. So going forward, I can only assume there's going to be more restrictions for a lot of these chips. So companies need to be cautious and maybe start pivoting their attention elsewhere. So AMD, we're not expecting any comments specifically about China. China on stage, that's just because their market is smaller than NVIDias. However, NVIDIA did say that there would be a significant impact in their Q4 revenue.

So that's something to keep of note for NVIDIA. But Daniel brought up a really interesting point, too, just about the market share. I think the big conversation here today is the fact that the market is still really big. Invita has a stronghold right now. AMD is slowly coming in. There's still room for both players. So for investors, they're looking like, which stock should I buy? There's still an opportunity, especially because AMD would play more in the inferencing world of the large language model.

But in the future, that's where I get a little concerned when you have all of this competition from the hyperscalers coming in. Oh, yeah, the hyperscalers are going to play a really significant role. They're going to be playing the part of building the software stacks top to bottom. But you can see, I mean, Microsoft is here today. Oracle was here today as a hyperscaler talking about how they're going to be deploying the MI-300. They are working on their own stuff. They are working on their own stuff. But exactly for the reason you and I talked about it, it's because the market is.

so big. They're going to address everything from power consumption requirements to cost requirements. People need different silicon for different workloads. And that's a smart company is going to address all those different needs. All right. We thank you both very much. Daniel Newman, Christina, Parts the Nevelas on a big afternoon. Wouldn't you say, John, for AMD? Yes, indeed. And it's going to continue to get bigger. Christina's coming back with AMD CEO Lisa Sue on overtime. Very good. Around 4.30 p.m. Eastern. In Washington, today, some of the biggest CEOs in banking are testifying in front of the Senate trying to push back on new rules they say would harm the economy. Leslie Picker has the latest from Washington. Leslie? Hey, Kelly, yeah, the bulk of

today's hearing encompassed Basel 3 endgame. That's a proposal that would hike capital requirements for the nation's largest banks. While all eight CEOs raise their hands when asked if they had the capital to comply with the new rules, many use their prepared testimonies as a chance to highlight what they see are the pitfalls. And Republican lawmakers prodded the issue further by asking the executives how Basel might impact Main Street. Here's Goldman Sachs' CEO, David Sullivan. A wholesale increase of 25% capital on the largest banks

with lots of individual provisions that affect different activities, I think is ultimately punitive to economic growth and doesn't strike the right cost-benefit analysis. We, of course, need to make the system secure. The system is in good. shape. We've seen that under stress. That doesn't mean there aren't things that can be done at the margin. But this is a wholesale change that leads to problems. Also making headlines from the hearings, J.P. Morgan's CEO, Jamie Diamond, admonishing crypto once again in this exchange with

Senator Elizabeth Warren. Mr. Diamond, you've been CEO of J.P. Morgan for almost two decades. Can you explain why crypto is such an attractive financial tool for terrorism? drug traffickers and rogue nations. I've always been deeply opposed to crypto, Bitcoin, et cetera. You pointed out the only true use case for it is criminals, drug traffickers, anti-money, tax avoidance, and that is a use case, because it is somewhat anonymous, not fully, and because you can move money instantaneously, and because it doesn't go through, as you mentioned, all these systems have built up over many years, know your customers,

sanctions, OFAC, they can get bypass all of that. If I was the government, I'd close it down. Close it down. Overall, though, this was a fairly civil hearing. No major, major fireworks. Kel? Remind me, Leslie, J.P. Morgan, I mean, would we say they're in the crypto business at this point? I know that we're at a moment where we're going to see many more Bitcoin ETFs and such.

But, you know, his comments are quite straight. We always know how he feels strongly about it. I just wasn't sure if it's kind of a no-go zone for the whole firm or not. No, I mean, tangentially, he said in the past that he supports blockchain in particular, but he's also called Bitcoin a pet rock or has no value other than essentially being a pet rock. So today's comments saying if he were the government, he would shut it down, kind of echo previous, you know, less favorable, shall we say, sentiment that Jamie Diamond in particular has had with crypto.

So no, not a major, at any kind of business for them whatsoever. Yeah, I know he's been pretty clear. I think Warren asked the wrong person, maybe. But what do you think about crypto? There's his answer. Ban it. Leslie, thank you very much, our Leslie Picker. Speaking of crypto, the price of Bitcoin above $40,000, almost hit $45 today. Many are arguing the rally is different this time. Jamie Diamond, cover your ears. We'll discuss. Plus, Tesla CEO Elon Musk scuffling in Scandinavia. Danish dock workers joining a sympathy strike with Swedish mechanics against to the EV maker. We have that story when Power Lunch return. Welcome back to Power Lunch. The Dow and the S&P are trying to move higher today. The S&P's down about three points right now.

They're all lower for the week, though, and on pace to snap a five-week winning streak. Our next guest sees a soft landing ahead, but thinks slowing growth might make earnings hard to live up to, the expectations, that is. Michael O'Roney is chief investment strategist at State Street Global with over $3 trillion in assets under management. Michael, this is really the crux of things because those who, think earnings are looking good for next year can kind of shrug off everything else happening and say it's time to embrace it and then others aren't so sure. So you have some confidence here or no? Well, Kelly, I think it's interesting. As you said, earlier this year, it was all about beating very low expectations when it came to earnings. So we have this earnings

recession. Yep, markets rallied anyway because results were much better than anticipated. So my concern is the setup for 2024 is that now we're expecting earnings growth for S&P 500 companies of more than 11%. So I do think that the risk of disappointment has grown, even though earnings are likely to be pretty good, I'm not sure they're going to live up to those higher expectations. And how the market reacts to that does concern me. Michael, is 24 finally going to be the year for bonds? I'm not so sure. I do think that bonds are more attractive, John. So when we look at kind of the yield that you're receiving for the interest rate risk that you're taking, that duration that you're

taking. It's more imbalanced than it has been since 2009. So it is a much more attractive picture for bonds, but we still see most investors barbell. So very conservative on the short end of the curve with treasury bills and short maturities, while balancing that a little bit with things like investment-grade corporate bonds, for example, where I'm taking on a little bit more credit risk, a little bit more interest rate risk, but I'm not taking on too much. And yet those yields are commensurate or similar to what's on the short side of the fixed income portfolio. So that seems to be the right kind of balance, if you will, for fixed income allocations as we head to 2024.

How much danger is there, though, for the retail investor in watching the price of bonds themselves too closely and not thinking long term about the yields? Because so many retail investors have tilted much more towards stocks, toward equities, over the past couple of decades and are way out of that traditional balance. It's true, but they've been rewarded, at least over the long term, for taking on that additional equity risk. And I do think that the setup is for that to continue over the longer term. But, John, you're right.

In terms of the opportunity for bonds, it's certainly more compelling now than it was over the last decade or so in terms of income and total return. So we are seeing fixed-incorrable. allocations creep up. I think one of the more interesting things is that when income was scarce, it forced investors to take a lot of risk in fixed income that they may or may not have been comfortable with. Now, with income more plentiful, the allocations to fix income continue to remain challenging. Most folks have gotten that interest rate call wrong this year as rates

continued to back up. That's why we think stable income is kind of the way to go and that balance, that barbell between kind of conservative fixed income on the short end and to your point, adding some maturities, adding some fixed income in terms of the intermediate part of the curve, we think makes some sense. So amazing to look at 411 there on the 10 year and how far it's fallen in such a very quick period of time. So you're interested in hedging against a lot of these risks with gold. So the outperformance of gold lately, is that partly what's driving your interest?

or does that kind of make logical sense to you and you think it keeps going? I think what's been fascinating about gold this year, Kelly, is that interest rates have climbed. Certainly they're off of their highs since the end of October, but interest rates are up kind of this year. The dollar has strengthened somewhat unexpectedly this year, again, up until recently. These are two traditional headwinds for gold, yet the spot price of gold is up in the teens. So it's overcome those headwinds. And now all of a sudden, yields are falling, as you point out, on 10-year treasury yields. The dollar is likely to weaken, particularly as the Fed ends its tightening cycle.

That's starting to happen. And now you all of a sudden have a much more attractive backdrop for gold at a time when the outcomes across a wide range of things are wider than normal, geopolitical risk, the economy, the Fed, inflation, earnings like we talked about up front. So we think hedging a lot of these risks with a small gold allocation. Makes sense. In 2022, spot price of gold was flat while stocks and bonds were down. This year, golds remained competitive with stocks, even though they're up considerably. We think the backdrop remains attractive in 2024. All right. Michael O'Roney, thank you. Now coming up, it's been a

mixed bag for the IPO market, Birkenstock tripping at its debut. Instacart initially rolling in its first day, then losing those gains soon after arm out wrestling expectations. So what's the formula for a successful IPO look in the year ahead? We are going to discuss next in tech check. Welcome back to Power Lunch. Bond yields are just as volatile stocks today, which is to say not much. The ADP report, the latest sign of a cooling jobs market. We get the government jobs data on Friday.

Let's get to Rick Santelli now in Chicago for more. Yes, John. If you look at an ADP jobs chart starting in July, of 21, and I picked that month because that was the high watermark, 938,000 jobs, you can see we have definitely seen a drop in job creation. And I fully suspect we'll see the same thing from the Bureau of Labor Statistics on the big November jobs report on Friday that, as you referenced, will include government hiring.

Let's look at twos and tens on one chart, shall we? You know, at 815 Easter, when that data hit, and by the way, 103,000 is the second smallest job creation amount in ADP going all the way back, yes, all the way back to the July, excuse me, second lowest since July 21 and two-year no yields made their lows right on that number. But look at tenure, how it keeps going lower. And when you expand the charts to a two-day chart, it really jumps out at you how much the curve has been re-inverting.

Even right now, a 459 yield on 3.5. two's were basically near unchanged up a basis point, whereas tens hovering at 412 or down five basis points. This dynamic really finally is reflecting the slowing of the U.S. economy. And many have talked about the dollar index. Have you looked at it lately? It's basically near unchanged on the year. And European yields on twos and tens, they're lower on the year than they were at the end of

last year. Our yields are approaching those settlements, but still, a bit higher as the world handicaps, how small a growth swap down we're going to see for 2024. Kelly, back to you. Rick, thank you very much. Bigger move today might be the price of oil below $70 for the first time since June. Pippa Stevens has more on this big drop. Yeah, we're not below 70 and there's just really nothing to like here in this market. We did get the latest inventory report which showed a draw on U.S. stockpiles, but the market is overlooking that. And of course, there's just not a lot of belief in

OPEC and its allies' ability to cut their output with those voluntary cuts. Officials in both Saudi Arabia and Russia came out trying to kind of assure the market that it's going to happen. But as brokerage, PVM put it, it's basically just fallen on deaf ears. Saudi Arabia also cut its official selling prices for all grades of its crude starting in January, which once again is pointing to weak demand. And so today is not a good day if you're an energy company to announce an update with oil falling below 70.

But of course, Exxon did this morning and that stock is lower. So a couple of things here. they did increase their buyback to $20 billion next year up from $17.5 billion per year once the deal with Pioneer closes. But they also raise their capital spending. So this year and next year, it's pretty steady. We have a chart showing that you can see it is still well below the pre-COVID era. But looking forward in 2025, they expect the range to be as high as $27 billion.

Now, a lot of that is thanks to an increase in spending for their low-carbon solutions business. They've bumped that up from $17 billion to $20 billion. And the street just really does not believe that that's going to be profitable for Exxon. RBC, they said they have to convince investors on the merits of the low carbon spending. JPM said the market is skeptical of returns on low capital investment. So it does seem to be that that's hitting the stock here. Wow. And I mean, you could say, if anything, that Exxon's outperforming crude.

You know, it could be, and maybe that's what all of those moves they're taking underline. That's the other thing that, you know, energy was the top sector for the last two years, and no sector has ever been the best sector for three straight years. And so if you did very well in the stock, you are probably going to be taking some profits there. They're still paying a very healthy dividend. They're buying backstock. And also their expectations for both the Pioneer and the Denberry, peg, peg Brent, at 60 bucks.

So they still have some wiggle room before they have to meaningfully revise any estimates. Great point. PIPPA. Thanks. Tomorrow we're going to hear from Exxon Mobil CEO, Darren Woods. That's 9 a.m. Eastern. on Squawk on the street. Now let's get to Bertha Coombs for a CNBC News update. Bertha.

Hi, John. Senate Republicans blocked efforts by their Democratic counterparts to pass an assault weapons ban. The motion put forward by Senate Majority Leader Chuck Schumer would have reauthorized the previous ban that first passed in 1994 and expired a decade later. The action came as the United States broke the record this past weekend for the most mass shootings in a single year, according to. to a tracker run by the Associated Press, USA Today and Northeastern University.

Israel's military confirmed its forces are in the heart of Khan Yunus for the first time. The area is thought to house Hamas leaders, but is also crowded with civilians. Many of them fled there at Israel's urging to avoid bombardment and battles in the north. A life-sized chocolate Willy Wonka made a day. debut today in London's Trafalgar Square. It's in the likeness of actor Timothy Chalame, who is reprising the role of the candy factory boss in the upcoming Wonka film. It opens in the U.S. in December 15th, the statue sculptor says it took her and her team more than five weeks to complete. Sweet. John, back to you. A lot of people would like to have a bite, Bertha. Thank you.

Ahead on power lunge, the price of Bitcoin up 25% in just a month, more than doubled, up 158% in a year. Does this rally have staying power? We will discuss next. Swedish mechanics on strike getting an assist from their neighbors in a labor battle with Tesla. Elon Musk has been staunchly anti-union, but this latest fight could have big implications. Phil LeBoe, why could this situation blow up? Well, it could blow up, John, because right now you've got... Just this one group of mechanics in Sweden who are asking Tesla to recognize their right to organize as a union.

They're not even getting to the part where demands are part of what they're asking from Tesla. Tesla is not even acknowledging that at this point. And now you have other labor unions in sympathy with their counterparts in Sweden who are saying, you know what? Maybe we won't deliver Tesla models to Sweden that are scheduled for transportation there. That's the development today that there are. Norway transport workers who are saying later this month, they may stop transporting Tesla models to Sweden. Now look, in the whole grand scheme of things, those are two very small markets.

They're important markets in Europe, but they're still very small in terms of volume. But this could blow up into a bigger issue, John, because Tesla has the only non-union final assembly plant. It's in Germany, and there's no sense that it's going to organize soon. But if this continues to mushroom and it gets more and more support from other labor unions. You know how this could go. How does it not go there in Scandinavia? Well, look, one way is that Tesla could say to the mechanics in Sweden, okay, we recognize your right to organize. Now, Elon Musk has been clear. He does not believe that labor unions are in the best interest of the company, nor in the best interests of some of the workers. He points out that Tesla has given their workers better pay through

stock options, et cetera, and that there's no reason to be a part of a union. So let's say they do recognize the mechanics in Sweden. This could all blow over, and that could be the end of it. The flip side of this is that if they don't recognize the right of that union to organize, what you see in Norway could happen in other countries, and then it starts to spread from there. How big of a blow would it be if parts or all of its German workforce unionized? It depends. You know, ultimately, they're not going to be uncompetitive. But Elon Musk believes that a unionized workforce is not as competitive and not as helpful to the bottom line as what they currently have in Germany.

So if they organize and then they have to negotiate a contract and the costs go up from there, well, then Tesla could argue, look, we are not as competitive within a moment. market that, by the way, guys, is becoming brutally competitive in terms of electric vehicles as the Chinese EVs are starting to flood into that market. And that's really changing the dynamic in terms of electric vehicles. This might be a ridiculous question, but sometimes I wonder why would Musk run such a high risk in the first place of putting the gigafactory in Germany, which has historically had, you know, stronger labor unions, or at least Europe more broadly? Well, Europe overall. They're the only non-U. Look, anywhere in Europe, he was going to run into this issue eventually, because all auto plants are unionized in Europe. So it's not that he could have avoided this by putting

the plant in a different country other than Germany. And look, Germany is the largest auto market in Europe. Evis are growing very quickly there. Yeah, this, the, the, the, uh, the gigafactory outside of Berlin has been very successful for Tesla. It was a smart move for Elon Musk and Tesla to put a plant there. Eventually, everybody knew that this is one of those situations that might ultimately develop. Yeah. And here we are perhaps at the beginning of it and perhaps not. It depends on how the Scandinavian things go, I suppose. Phil for now, thank you very much, our Philobo reporting. Meantime, another 52-week high for Bitcoin today, hitting almost 45,000.

As with previous rallies, it seems that everyone wants a piece. Bob Bassani joins us with a look at how people are trying to get in on the action. But first, let's begin with Kate Rooney for more on what's driving this rally. Kate? Hey, Kelly, so it's been a lot of excitement around a Bitcoin ETF or a spot ETF. It would track the actual price of Bitcoin versus the futures price. There has been a lot of hype, a lot of speculation that the SEC is going to prove this. There's nine or so applications out there from everyone from Black Rock to Fidelity. So the excitement here is around the biggest asset managers in the world getting involved.

So it's seen as this stamp of legitimacy and stamp of approval. and then it would also theoretically expand access to cryptocurrencies, Bitcoin in particular. And then there's another dynamic. So that kind of lit the fuse, Kelly. And that's what got some of the price movements above, you know, 30,000, for example. But then there's another dynamic here, which is leverage. So especially in these markets in Asia, I'm told you get what amounts to sort of a short squeeze. People had bet against Bitcoin in this case.

Then you see these massive liquidations and these massive positions get wiped out. that is most likely what we're seeing in the last couple weeks or so. You saw the price climbing to 40,000 and then just this massive spike to almost 45,000. So that is more likely one of these big, what you would call whales in these markets, liquidating a position versus just retail interest. So you saw about $90 million, for example, of liquidations yesterday alone. That indicates that it's some of the bigger institutional players in these markets versus retail interest, which has still been pretty muted. It's risen, you know, in the last month, or so, but it's still far below what we saw in the height of 2021 and even last year, Kelly.

Yeah. All right. Thanks, Kate. Now, Bob, how do you see it? Well, look, number one, there's no doubt that interest in the Bitcoin ETF is what's driving these right now up. Here's the problem. We have seen this phenomenon before.

So, for example, companies going in the S&P 500, their prices often go up in anticipation they're going in. Whenever you have the idea that there might be an expansive new market, People tend to try to front run the price and move it up a little bit. We sold this with ETFs. Cybersecurity ETFs were hot four or five years ago. They drove up the price of cybersecurity stocks and subsequently underperforms. So I'm wondering whether or not they're sort of now, this is the demand phase of this,

and we'll see what happens once the Bitcoin ETF. And I agree with Kate, it's probably inevitable. We'll get a Bitcoin ETF. What's happening here that's interesting is if you look at Grayscale, they have funds out there that are essentially closed-end funds that are trading. at premiums and discounts to various crypto assets that's been trading at a discount to Bitcoin recently. But what's interesting here is that there's only a very limited amount of Bitcoin in these funds here, in the Bitcoin fund itself, $640,000. They don't change that number. And

so people who are piling into that, the price has to change, but the trades at a discount or a premium to Bitcoin. And this is the problem with some of these funds that are out there right now, and why you want to have a Bitcoin ETF? Because if you have one, then you can adjust how much Bitcoin you actually have in the fund and have it track the price of Bitcoin accurately. And that's a, if there's any reason to finally figure out a way to get this Bitcoin ETF going, it's to eliminate these problems with discounts and premiums for some of these closed-end type funds that exist out there. Real quickly, Kate, we also see shares of Robin Hood popping. So this seems to be a, again, back to the future.

It's 2021 all over again. Anytime Bitcoin coins up, Robin Hood's up too. Yeah, it feels that way, Kelly. So one of the things that's helping Robin Hood, they had a disclosure this week that showed 75% volume growth in terms of crypto volume, at least on their platform. One of the things analysts are pointing out is that something like a Bitcoin ETF would disproportionately benefit Robinhood.

They've got that younger group of traders. They've got this crypto offering, and they've got equities alongside that. So if there's a Bitcoin ETF, you've got to trade it on a platform, a brokerage platform versus a Coinbase, for example. If you compare those two charts, Robin Hood's been up about 9% today. Mizzuho estimated that Coinbase, yes, they've seen some trading volume growth, but it's only around 60% versus 75% from Robin Hood. And Coinbase is listed on a partner here as sort of the custody provider. But anything that would threaten their trading volume, anything that would threaten that retail trading, that they get about 3% of a fee on that is not seen as good news for Coinbase.

So the shares pretty much flat there, but Robin Hood getting a boost. And remember, Robin Hood gets paid on payment for order flow, so they would benefit because these would change. These ETS would trade on exchange, obviously. Great point. All right. Bob, Kate, thank you. Thanks, guys. Google today unveiling details around its largest and most powerful AI language model ever. We will get a live report ahead in Tech Chat.

PowerLunch is back in tune. Welcome back. Google unveiling long-awaited new details about its large language model, Gemini, not to be confused with the crypto Gemini, ramping up the race against rivals like, Microsoft and OpenAI. Dio Trabosa has the story for today's tech check, Dee. Hey, John, so rather than tell you how Gemini works, I thought it would be better to just show our audience. Have a look.

See pink and green yarn. How about a dragon fruit? Or how about a green cake with a pink heart? Okay, how about these colors? And maybe show me some animals. Okay, now I see blue and pink yarn. How about a pig with blue ears or an octopus? You get the idea.

This is Google's next iteration of generative AI. Gemini is multimodal, which means that it recognizes not just text, but images and sounds and video as well. And that's what helped build this model as well. Now, it's also a version that OpenAI has already been offering for months, though Google says theirs is more powerful than any other AI system currently on the market. Six months ago, Google's announcement guides might have moved the stock. Today, it hasn't done much. Even at Barclay's TMT summit down the street here in San Francisco,

attendees were more focused on AI applications than the latest advancements. I asked Barkley's Global Head of Tech Investment Bank, Kristen Roth de Clark, if Gemini was generating buzz. Here's what she said. So far, I think the biggest topic at our conference so far this morning has been on what are the applications of AI and what's the real investable impact. The two biggest things that we're hearing are where does AI really drive efficiency and where does AI drive in acceleration and innovation?

And that's true across not just technology companies, but how it's impacting everything in every vertical healthcare education, you name it. And that really stands in contrast to earlier this year. I was at Google I.O. when they announced Search Labs, which wasn't even launched yet, but just the idea that search could encapsulate so much more, that sent Google shares up some 4%. And guys, I heard your conversation with Christina at the start of the show at the top of the hour around A&D's announcements and its massive step up and TAM total addressable market.

Again, the AI halo effect that might have given the stock a bump earlier in the year, but it could also be telling us now that in 2024 next year, investors are going to be looking for more in their AI announcements, and it's going to take more to move the stocks of these companies. Yeah, there's a lot built in. I mean, Alphabet, Google stock, up almost 50% since the start of the year. It was, you know, around 90, and now it's 130. I wonder how much Google is talking about the ecosystem around these models. So much of what A&D and, well, especially Nvidia has been saying lately, is these partnerships, right, that are building buzz and economic activity around their technology.

Right. And you'll notice that every sort of AI announcement from the hypers this year has included Jensen Huang, right, of Nvidia. They've had him sort of on hand, and that's no different from Google earlier this year. this time, certainly a nod to the ecosystem. They talked a lot about their TPU chips, which Google is developing as sort of this alternative to the NVIDIA ones. So in terms of that ecosystem, they're all trying to do something similar, and that has worked with the different layers of generative AI. So today wasn't any different. All right, Deirdre, thank you very much. We appreciate it. Dear Jerbosa, still ahead, Home Sweet Home. Shares of Toll Brothers climbing on an earnings beat for Q4 as mortgage rates pull back from 20-year highs. We'll trade it,

and other earnings movers in three-stock lunch when we return. It's time for today's three-stock lunch, where we look at three big movers of the day, and it's all about earnings this time. Here with our trades is Brian Vendig, president of MJP Wealth Advisors. Brian, welcome to you. And let's start with Campbell's Soup.

They had lower sales and profit last quarter, but the shares are up nicely today. The company said they may outpace estimates for 2024 earnings per share. What would you do with the stock? Yeah, hi, Kelly. I think this is a stock. that's getting a little bit of a bounce because the price increases that Campbell's passed through

improved profitability. But this is one I think I'm a little bit skeptical about because when we dig into the quality of earnings, we've seen that volumes were down about 5% because consumers were sensitive to price. And also the company is increasing its marketing efforts to capture share, which gives us some pause regarding the concerns about profitability moving forward and maintaining these levels. So I think there might be some better opportunities outside of Campbell's Soup right now. Well, maybe Toll Brothers shares are higher on a Q4 earnings and revenue beat. The Home Builder forecast solid demand for next year. It's encouraged by lower mortgage rates. So can you buy it or is consumer demand just too uncertain? Yeah, John, unfortunately, I think there's still a lot

of uncertainties in the space. So we're a little bearish on this one as well, at least in the short term. So when you think about the push pull between demand and supply, we know Toll Brothers brings luxury homes to market at a pretty reasonable price point, but we know construction costs are higher, but we also know consumers' household savings have dwindled, and at the same point in time are very fickle on mortgage rates. So we know rates tick down today, which is boosting the stock and some of these expectations, but we still think there's a lot of uncertainty regarding rates next year and consumer spending. think there's better opportunities, John, outside of the home builder's sector. And the shares have doubled pretty much this year already. So that's an interesting one. All right, let's move along to Sentinel One then. Having I think it's best day ever, it's soaring after its earnings top estimates. They raise their annual revenue forecast on robust cybersecurity spending.

17% pop here for S. What would you do, Brian? Well, this one, I am not going to be a complete grinch for the holidays. This is actually a sector that we like in the cybersecurity space. And Sentinel has a very competitive cybersecurity product that focuses primarily on enterprises and businesses while it's still trying to increase its penetration to the consumer. And as you mentioned, the dynamics of earnings today were really encouraging. We actually saw the margins improve 8% year over year reaching a new company record of 79%. And I think that's a favorable sign moving forward. And also, the other thing to mention, on a price-to-sales perspective, it trades at around 7.7 times, which is quite a discount to its rival crowd strike, for example, from a valuation point of view.

So when you think about the headwinds, I'm sorry, the tailwinds that are there for the space, cybersecurity, generative AI, these are products that this company is bringing to market and talking about how it's going to improve the efficiency and effectiveness in analyzing threats and improving its profitability. moving forward. So for us, the cybersecurity sector is definitely an allocation that we'd consider for someone's growth portfolio. So give us a couple of the filters that you're using to evaluate tech stocks. Beginning of the year, there are a lot of people saying, stay away from tech entirely. That was wrong. So heading into next year, how do you decide what's worth buying? That's a great point, John. I think you definitely have to be selective at these valuations. I think it's a combination of looking at the momentum of what's happening, regarding demand for a service or a product that one of these tech companies are bringing to market.

I think you do have to be cognizant of price to earnings on a forward PE perspective. And to my point, just using Sentinel example, a company that is narrowing its losses. You have to take a look at sometimes things from a price to sales point of view, just to make sure that you're not overpaying for growth, John. All right. Brian Vendig, thank you. Thank you. Coming up, below the belt, Amazon cutting fees for merchants selling lower-priced apparel. Is this a shot at Chinese upstart chien or acknowledgement of a threat to its e-commerce empire?

We will discuss the power which return. We've got a list in three minutes left in the show. Several more stories you need to know. Let's get right to it. The Supreme Court is hearing a case on the legality of attacks targeting owners of foreign corporations. But the issue at the heart of the case is what counts as in. income, this decision could very well change tax law as we know it. And of course, it comes as there's a push to tax the ultra-rich on their wealth, even on unrealized gains. And Kelly, to me, income is what you actually have. It's not like your home equity. Although it doesn't seem like the Supreme Court is leaning towards anything too broad in their statements here. Just based on how the questioning went yesterday, we'll see what comes down on the decision. But maybe they do something kind of narrow here and leave that question up to be answered still. As you and I know, inevitably, it will have to be. Yeah, we can avoid it.

Apple's iMessage, meanwhile, has reportedly dodged a major regulatory setback in the European Union. According to Bloomberg, EU lawmakers have found the service does not fall under its new Digital Markets Act, which would require IMessage to be compatible with rival services like WhatsApp or Facebook. Pardon me while my head explodes, John. They were the poster child of what this law was supposed to be all about. Why are they suddenly going to be exempt from it? I think the EU regulators were so happy that they got USBC from Apple, that they were like, all right, well, you can keep I message.

That's why. I truly will see if this is confirmed and if this happens, but it seems to undermine half of the point of why they were doing it in the first place. It's just strange. European regulators were just about to make sense. Amazon is cutting fees for online merchants selling clothing priced below 20 bucks. Maybe a direct challenge to Chinese fast fashion company,

Sheehan, which just filed the IPO here in the States. I mean, this just affects how much money the sellers get to keep in this transaction. They're going to have to do something. They're obviously losing share. And I think the real question is whether regulators ever step in and try to change the way that Cheyenne's been dodging some of these import duties and things that have enabled it to sell cheaply. That's probably the space to watch.

It makes sense Amazon's trying to keep up. And do not miss Amazon CEO Andy Jassy on a special mad money in Seattle tonight. That's at 6 p.m. Eastern. And Taylor Swift is Times 2023 person of the year. She also earned the title of most intriguing person of the year from people and was number one on Forbes's list. of most powerful women in media and entertainment. Her heiress tour had taken in billions of dollars in ticket sales.

This might be the first time lately. I sort of vehemently agree with their pick here. Yeah, I agree, but they had to pass over Sam Altman. They had to pass over. Or as we saw Michelle Cruz Cabrere here earlier today, she said it could have been chat GPT. That would have been a clever pick. It would have been clever, but there's also a war going on in the Middle East. They have many things if they wanted to be high-minded to go for,

but Taylor Swift certainly very powerful. It is her world and we're just living in it. That's going to stage two. Yeah, that's right. Thanks for watching Power Lunch, everybody. Closing bell starts now.