Power Lunch - Countdown To The Fed, Chip Check 3/19/24

Episode Date: March 19, 2024

We’re just 24 hours away from the latest Fed decision on interest rates. What will they do? And when will they do it? We’ll ask our experts for their opinion.Plus, we’ll get a live report from the second day of Nvidia’s AI developer’s conference. And we’ll speak exclusively to the CEO of Teradyne about it’s partnership with $NVDA. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch alongside Leslie Picker. I'm Tyler Matheson. Nice to have you with us today and nice to have you with us today. Once again, two big stories dominating the market. That would be Invidia and the Fed. But let's start with a check on the markets right now. They are higher across the board. The Dow getting a boost from Home Depot, which was initiated at buy at Mazuho. McDonald's, hired by nearly 2%. After announcing CEO Chris Kempinski was going to add the chairman title to his accolades. Despite the excitement surrounding Nvidia, the stock up less than 1% today. And other chip stocks are lower, including a big drop in Super Micro as it plans to sell more shares. And a big jump in fusion pharmaceuticals up nearly 100% today. AstraZeneca offering to buy the company for $2 billion plus another $400 million. If milestones are achieved, Fusion is working on new ways to target cancer cells. And with just 24 hours until we hear from the Fed, that is where we're going to start today. So what will the Fed do and when will they do it?

The latest CNBC survey showing the economist, strategists and fund managers polled, expect three rate cuts this year with the first coming in June. Our next guest is in that three cut camp, but with a possibility of only two. Let's bring in Stephen Stanley chief. You just saw him come in there, didn't you? You saw him shadow. You saw the shadow of Stephen Stanley, Chief Economist with Santander. Welcome, Stephen. Good to have you with us.

Nice entrance. Thank you. Really well done. Smooth. That was like a soft landing, I feel like. There we go. We got to have a soft landing? Just giving you a little administration.

Yeah, that's how you do it. We're going to have one? I think so, yeah. It looks like the Fed so far so good. I mean, I think we still have a ways to go on inflation. So it's too soon to declare victory, but I don't think we're going to have a recession. And where were you a year ago? Were you in the camp that believed that a recession was likely either in 23 or in 24?

And have you changed? No, I was always a soft landing guy. I think I would say. He's taken me as a harder landing guy. I think I would say that we've had better luck with inflation than I thought. I thought inflation might be even higher than what we've seen. Of course, as I said, we've still got a ways to go. But I think we've made, you know, the Fed's made a lot of ground on that front.

Do you think the Fed is going to? to cut rates aggressively this year or modestly this year? In other words, I would call three or more cuts aggressive, fewer than three modestly. Yeah, so I think their plan is probably still going to be three. You know, when we get the dot projections tomorrow, I think that they're going to stick at three for the year. I actually, I have the moving later than where most people think. I don't think they get started until November. So I only have two this year, but then, you know, quite a number next year.

I think they will cut pretty steadily next year. Do you think that those cuts coincide with potentially reduction in their quantitative tightening program in terms of just the magnitude by which they're rolling off that balance sheet? Yeah, I think if it does, it'll be a coincidence. I think that they're trying to run those two on separate tracks. They've said it's very possible that they could continue to cut the balance sheet at the same time that they're easing, even though those two things seem to be at odds with each other. So I think the balance sheet will be determined by their view about how much, you know, where bank reserves are relative to where they need to be.

And as long as there's excess liquidity in the system, I think they'll keep going with quantitative tightening. How much do other forms of credit versus the traditional banking system play into that? I ask because coinciding with this tightening campaign, we've seen this huge rise in private credit, you know, does that kind of do a disservice to the efforts that they are making? in terms of quantitative tightening? Well, I think it makes the Fed's job a lot harder. And I guess in some ways it's not altogether surprising that we saw a big crackdown in terms of banking regulation after the financial crisis, as you would expect,

and what happens more of the credit universe has moved outside of that tight regulatory environment. Are you worried at all, you said earlier, that inflation has come down maybe more pleasantly than you had expected initially? Are you at all worried about that? all worried about some of the recent inflation numbers that indicate maybe it's not a straight line down to 2%.

Yeah, I think people got a little ahead of themselves or a lot of people did in terms of inflation. We did have some low numbers in the core inflation of figures late last year. I think what we're seeing is more of a normalization to where the trend is. I think the trend is probably, you know, three, three and a half. And on its way down, but we, you know, we maybe felt like we were, I think people got a little ahead of where we actually were last year. Do you think corporate profits are going to be strong enough to support a market that may not

have the aggressive rate cuts that some had anticipated? Yeah, I mean, that's been the big surprise, right? The economy has done very well. Very good economic performance last year, and that's been accompanied by solid profits. So every quarter, you know, equity analysts get worried about the earnings numbers, and then the earnings always seem to exceed expectations. Stephen, thank you very much. That's great. Appreciate it. Stephen Stanley. He's a soft landing guy. Both metaphorically and physically. So as Wall Street tries to predict what the Fed will do next,

how should you position your portfolio? Let's bring in Jim Tierney, CIO, concentrated U.S. growth within Alliance Bernstein. Thanks for being here. So let's start there. How should you be positioning your portfolio? If we do believe in higher for longer and a stronger economy, I think you have to start thinking outside of AI, who can benefit from that reality. And there are a bunch of companies that are benefiting from it and will continue, and they really haven't been recognized in the market yet. So I think there's a real opportunity. Like what?

One is ADP. When you look at ADP, a significant portion of their growth over the next couple of years will come from float income. With an average duration of their portfolio over three years, it takes time for that portfolio to reprice high. in terms of the securities. And when that happens, that's almost 100% margin dollars that fall to the bottom line. So that's a great opportunity. In terms of, you know, the potential risks to that, you know, as you look at the more momentum-based trades versus those that may be unappreciated right now, how do you see the risk-reward payoff looking, say, over the next six months, as we may see some production in rates, a different picture on the monetary policy backdrop?

Does that dynamic shift at all in your thinking of kind of where you see under appreciation in the market? I think earnings are going to be incredibly important in 2024. They weren't quite as much in 2023. Certainly there was a huge spread between the Magnificent Seven and everything else. As that spread narrows, I think investors are going to start looking for what are the companies that have great earnings prospects? And you look at ADP growing 14 or 15 percent last year, around 13 percent this year. I think that's a great opportunity. You look at a company like Cooper companies that makes contact lenses.

They grew 10% last year, probably grew up 12% this year. That's really strong growth well above what the market's doing. And a couple of these companies have just been ignored so far. So to me, that's the opportunity. A third company you like is Constellation Brands there. I guess there's some skepticism that they're going to be able to match their growth numbers from last year. But you disagree with that. I don't think they saw quite the benefit from the Bud Light share loss that everybody pins on it.

Constellation has been benefiting from a trend of consumers buying more Mexican beer for well more than a decade. And I think that continues. The knock on the company for years has been their capital allocation. The fact that there are now some guardrails with a couple of new board members and an activist investor involved, I think means very positive things for capital return to shareholders, particularly as they have now de-levered the balance sheet. As we look ahead to the Fed, I know that you're focused on financials and specifically credit quality against this balance. backdrop of hire for longer. At what point do you see things deteriorating to the point where the Fed may need to call an audible with regard to its tightening conditions? It's a great question. And if you look at some of the credit statistics, we've seen some worsening of conditions, yet it hasn't become a full-fledged panic. And I think that's one of the

things that the Fed has to be monitoring in terms of do we cut to preempt any kind of worsening. How are you thinking about the AI-related sector or the AI companies, anything that has AI in its name, seems to be attracting a lot of money? Are you chasing that trend or not? We don't love to chase anything. We certainly have some names in our portfolio that are exposed to that. Microsoft would be an example. Amphanol would be another example, and Eaton would be an example, in terms of they're all involved in one way or another, and seeing really nice benefits from that exposure. I think the rubber is going to hit the road later on this year when investors ask who really will see an earnings benefit as opposed to just an exposure. And certainly,

I think some of the disappointment last week with a company like Adobe in terms of not seeing that benefit immediately, I think more of that's going to happen in the market as investors become a little bit more critical. As you examined what we've taken to refer to as the magnificent seven, are there any of the seven that you would absolutely stay away from? I wouldn't say that I'd absolutely stay away from anything, but I do think we're starting to see more of an earnings dispersion between the seven and a differential in performance. And you look at the performance of Nvidia and meta, which are both spectacular this year, and then you look at the apples and the alphabets and the Teslas, which aren't quite as good.

As a high active share investor, I like dispersion because you can pick winners and pick losers. So I'm much more pleased with the environment in 2024 than what we saw in 2023 where all boats were rising. Yeah, have to be choosy in that category, certainly, and elsewhere in the market. Jim Tierney, thank you very much. We appreciate it. And coming up, speaking of, Invidia holding an AI conference in California, do you hear about that? Laying out its plans for the future to investors, we will share some key takeaways in Tech Check. More power lunch coming up next. Welcome back. Shares of Invidia turned around and are upsets.

slightly today, the second day of its hotly watched AI developers conference. Dear Jrabosa joins us live from the conference for today's tech check. Hey, Dee. Hey, Leslie. So day one, it was all about Jensen's keynote. Day two, we're hearing from key players throughout the Nvidia ecosystem, and there are many. If you look at the things that we do, we build the chips, the systems, the networking, and so on and so forth, the entire data center practically.

all the software that goes into it. And then we sell it in parts. The reason why we sell, and that is what confuses people, they think that Nvidia is a chip company because we sell everything in parts. Right. The reason we do that is so that our customers could integrate Nvidia's technology

into their data centers however they like. So attendees here, they range from the buzziest gen AI startups to the cloud hyperscalers to the academic pioneers of AI. Really living up to its title is the Woodstock of AI. There's a panel tomorrow that was the brainchild of Jensen Huang himself that he will also moderate. It brings together key figures in the Gen AI space that co-authored a seminal academic paper years ago and then went on to found current darlings like cohere and character.a.i. I just left a session with OpenAI, COO, Brad Lightcap, on the future of AI.

He ended it by saying that 10 years from now, if you hand a kid a laptop from our current era, he or she will try to talk at it. Kind of like how kids in the iPad era try to swipe on any screen that they see. So yes, the big announcement here of GTC is the efficiency and power of NVIDIA's Blackwell platform, but perhaps just as important are the startups and the companies and the individuals that are here that will be building and developing using it. That said, guys, everyone wants a piece of that Nvidia halo, which has become so powerful. It makes sense to have a presence here at GTC.

One essential ingredient that is very clear is the talent. and getting the right researchers, engineers, data scientists. Some of these panels, they operate almost as recruiting tools. Guys, another reminder of how important that is today with that big move to Microsoft hiring a DeepMind co-founder as its head of AI. And I'm sure at this point in time, there's probably nascent availability of people who are experts in this area

because the technology itself is so nascent. That's interesting that it serves as a kind of recruiting platform there. And also interesting, and it's the perfect, kind of microcosm of just the flywheel effect that we're seeing from this AI rising tide, lifting all boats. How much discussion is there, though, about protections, having in place a sense of guardrails for this industry? Has that been a key topic at all? You know what? I would say this is more of a developer conference. While that is close to the top of many people's mind here, there was a little bit of that in the open AI session. They talked about

building for the good of all humanity, which is, of course, the open AI mission. But kind of, this is very a technologist conference, right? There's a lot of developers here that are just optimistic and eager to start building. I made the comparison to Apple's WWDC, right? When the App Store was becoming the behemoth and just this critical tool that it is now for developers, that's sort of what's happening here. You see developers and companies from all different industries, just focus on what is going to be the killer application or hardware or whatever it is, but certainly in the background, there is sort of the ethical questions that many will have to confront and are confronting now.

All right, Deider, thank you very much. We appreciate it. Deider, Bosa, reporting from California. All right, Nvidia's stock up today, pairing earlier losses, as it says investors seem to shrug off the launch of its new Blackwell GPU. Our next guest, too, is not convinced the chip will boost sales enough for the company to maintain growth. His price target of $620 is the lowest on the street and is more than 30% below Nvidia's current price. Let's welcome Gil Luria, senior software analyst at DA Davidson. Gil, welcome.

Good to have you with us. Why do you think this stock could go from where it is today in the high 800s down to 620? What's the problem? I have a lot of cognitive dissonance around Nvidia. This year they are going to have a fantastic year. if you talk to their customers, then they really only have five big customers that represent more than two-thirds of their revenue. They'll tell you they're going to buy a lot more GPUs this year, whether the existing generation or the Blackwell. This year is going to be great. That's why NVIDIA can have so much confidence guiding one quarter at a time. Our numbers for 2006, however, are lower than they are for this year. And if revenue peaks this year or next and starts declining from there, the stock won't be able to hold.

on to these multiples. So these multiples right now make a lot of sense if you're just looking at this year and where that trajectory is, if you start looking at where we're going to be in a couple of years, it gets a lot trickier justifying these types of valuations. When you say 20, at 2026, are you talking about their fiscal year or the calendar year? In other words, is it two years until we start to see what you think will be a slowdown? The slowdown is probably going to start in the next four to six quarters, but it is two years from now that we expect revenue to be down. While this generation of GPUs and the next generation of GPUs is the key to generating all this AI activity, which is why this has been such a celebration of AI at this conference, the technology

is moving very fast. I'll break some news for you. Microsoft just released a research paper that says they think they can build a one-bit LLM, which is to say they can build an LLM that is an order of magnitude more efficient. What that means is we may be running inference on CPUs in a couple of years or on custom chips in a couple of years. These are not Nvidia's markets. And so if things are moving that fast and the direction they're headed is far more efficient

models, it's very hard to have visibility two years out for this company. So they may be able to build a large language model that operates. on a simpler, less invidia dependent chip structure? Exactly. In fact, it's probably going to run on our device, on a handset or a PC, where Nvidia's market share is far lower, and the cost of the chips is far lower. And that's where we're going to really get the interesting tools.

You know, we've talked about Apple. The distance between us, where we are right now with Apple, and Apple having a full-on assistant in our phone, is the ability to do inference on the phone, on the handset, and that's where the technology is headed. And Nvidia's role in that world is much smaller. So is that where you see the revenue decline stemming from competition, not, say, manufacturing capacity, macroeconomic forces, like a potential recession?

It's purely this competition idea. It's purely talking to their customers. If you listen to their customers, they'll tell you we're going to buy as many GPUs as we can. year, we're going to stock up on them because we have a lot of demand for what they're doing for us right now. But going forward, we want to diversify away from Nvidia. We want to make our own chips that we can rely on. And we're going to develop the technology, the LLM engines and the generative AI engines that require far less compute so we can do a lot more applications and do them at the edge on the device. Now, are these conversations taking place before this week's

announcement before Blackwell, or is it kind of expected with the new iteration of products that NVIDIA has been announcing? Now, these conversations have been happening because this is such a big exploding market and Nvidia's customers are so large and have so many resources, they've been working towards those goals for several months now. And let's not forget that as far as they're concerned, if Blackwell can produce five 500% more compute and costs only 50% more, they're going to get compute for a lot cheaper as well. So of course they're happy with the new generation of products, but they're also working on making

their models more efficient, so they need less and less compute over time. So let me come back to something that would occur to me, and that is, you just use the phrase, this is an exploding market. There's just a hunger for invidious chips today, and it is not merely, as you said, a huge percentage of their market is represented by five buyers, but there are lots of others who are going to start buying or are coming on stream and presumably will buy. You believe that that sort of mega trend will be more than offset by some other changes in the dynamics of this market, so their growth must therefore slow. Am I understanding? Yes. Yes. Yeah, absolutely, Tyler. But beyond that, the five buyers that are buying these

now are the five deepest pockets. The smaller companies and even individual governments don't have as much money as Amazon, Apple, Microsoft, Google, and meta. Those are very deep pockets, and those are buyers that know they can get the return on investment right now because everybody's testing new AI tools and playing in the playground of developing these applications. Once that activity settles down and we start getting on the more gradual assent of generative AI, then the demand is going to fall for them, and it's going to take a lot of other customers to replace that demand, which isn't to say that generative AI isn't going to be transformational and a huge revolution and the biggest improvement of productivity since the Internet. It's just that that's going to

take time. And right now we're going through this phase of experimentation. Once that's over and we get into a phase of more gradual building, we may not need as many, there may not be as many customers and certainly not customers with as deep pockets as the ones that are stocking up right now. So I want to go back to your price target of 620 per share. You see it's currently trading around 900. So that represents significant downside. But you're telling investors to hold. So do you think that it's going to reach your price target in 12 months? Or is it something where you just kind of think investors are more prudent to hang on and see what happens. Yeah, again, there's kind of a short and long-term bifurcation here. If all you care about is this

year, you're going to get great results out of Nvidia. They're going to exceed expectations next quarter, and they're going to exceed expectations the quarter after that. That's why the current valuation makes sense if you're applying it to this year's earnings. If you're looking at the two, three, five-year time frame, then you may be looking at an earnings number that's, considerably smaller than what it's going to be this year, in which case you're going to want to pay a much lower multiple. So somewhere in the middle between those two timeframes is where we sit right now, and we obviously have to revisit that based on what we're learning. All right, Gil, you've given us a lot to think about. Gil Luria, we thank you.

Appreciate it. Thank you. And a quick programming note, Jim Kramer. We'll sit down with NVIDIA's CEO Jensen Wong for an exclusive interview on Mad Money. That's tonight at 6 p.m. Eastern Time. You don't want to miss that. That will be an intelligent conversation. Absolutely. And further ahead, the first major Chips Act award package set to be rolled out this week. But for the companies that won the big prize, how much did they spend on lobbying? We'll take a look at that ROI when Power Lunch returns. Welcome back. Gilden ActiveWare is currently halted for news pending after a big jump. You see up 10% there. to session highs as Canada's Globe and Mail reports, the apparel giant has put itself up for sale after receiving interest from private equity funds.

We've reached out to the company and we'll keep you updated as we know more. All right. In meantime, Bitcoin pulling back a bit today, trading at about 64,000 or 10,000 below the all-time high it hit just last week. That means volatility. And now the cryptocurrency may be a key player in the Senate race in Ohio, which could pit a crypto bull. Get that pit, a bull, pit bull versus a longtime crypto credit. I don't know where they intended that. Emily Wilkins is in Ohio with more on the crypto candidates. Emily. Hey, Tyler. Well, yeah, I'm in Ohio, which is, of course, a key battleground state that could decide which party controls the Senate next year. Now, the voters behind me are deciding which Republican is going to be going up against Democratic Senator Sherrod Brown, the head of the banking committee

who has pushed for restrictions on crypto. And that has, has been. put them in the crosshairs of three crypto-backed packs, which have raised 85 million. Now, this is from Coinbase, from Ripple, Genomei, Anderson Horowitz, and they're planning to play a big role in the 2024 election. Now, these packs have yet to spend money in Ohio, but a Coinbase-backed advocacy group called Stand With Crypto gave Sherr Brown an F rating. Meanwhile, one of the Republicans on the ballot today, tech executive and blockchain evangelist Bernie Moreno has an A rating.

And if he wins today, he tells me that crypto will be on the ballot in the Ohio Senate race. This will be an issue. You mark right words. You talk about 1.2 million people that own crypto here in Ohio, and they look at a guy like Shera Brown, this tired career politician that thinks he knows best, this will be an issue that we're going to use against him in this campaign. Ohio's race will help determine whether Republicans control the Senate next year, and Brown is not the only Democrat in a key state who could be told. targeted by these crypto groups.

Stan with Crypto has also given an F rating to Montana Senator John Tester and Michigan Congresswoman Alyssa Slokkin to other states that are going to be very critical in determining the balance of the Senate. Guys? All right, Emily, thank you very much. Emily Wilkins reporting. After the break and under the radar semi-in industry play, Terradine down 5% for the year, but with Nvidia and AI transforming the chip space, could they be in a position to grow?

We'll speak with the CEO next. Welcome back to Power Lunch. As we discussed earlier this hour, NVIDIA holding an AI conference in California, sharing some of its new plans and partnerships, one of which is a new collaboration with Terradine's universal robots. Joining us now with more is Terradine CEO, Greg Smith. Greg, thanks for being here.

So maybe we can just kick this off by you sharing some details from this collaboration and how it will work. Yeah, so there's two parts to our collaboration. Part of the collaboration is with our universal robots unit, and another part is actually with our mobile industrial robots unit. The universal robots, Nvidia has announced a package of software and hardware accelerator that allows our customers to create solutions for the universal robot much, much more easily, and for those solutions to run 50 to 80 times. faster than the solutions did before. And these are tasks that our robots can do, but this is really making it much easier for them to do it and to do it for a wide variety of solutions. For MIR, we've actually built NVIDIA IP into our robots for a new product called the MIR-1200 pallet jack.

And the AI application in that is really cool, because in the world, when you're trying to move around things, it's very difficult to sort of understand how irregular things can be, how broken palates can be. We've actually trained this robot on millions of images of palettes, and then we're using AI for it to decide what a valid palette looks like and pick it up. And so we think that that's going to allow us to deliver much better performance than similar types of robots in the past. So we're really excited about the applications. This is going to make robots faster in industrial applications, I assume. You mentioned pallets, which I assume is in a warehouse.

Give me another example of how this collaboration would be used in a commercial setting. Sure. So the example that's being shown at the AI conference right now is an inspection application where the robot can be taught very quickly to look for what's good and what's bad in a particular part. And because of the AI, it's able to adjust to the normal variations and zoom in on the things that are wrong. So it's much quicker to set up, and it allows our customers to achieve much higher quality. What does this mean for kind of the labor force implications? Are these jobs that a human would have done historically, but now these robots are more sophisticated from a technology standpoint?

Or is it something that the robots were doing just not as well as perhaps? this new technology would enable? So it's definitely jobs that robots have been doing before, but the real thing that's limiting the growth of robots is how much work it takes to actually program a new solution. And AI is going to allow us to do that kind of work much more quickly, which means that there are more types of these jobs that can be done. Now, about the labor implications, that's really interesting,

because in the United States right now, there's over 500,000 open jobs in manufacturing and logistics that people just can't find workers that want to do the job. So there's this almost unsatiable demand for automation to try and address that. So we're not putting people out of work. We're actually helping to grow industry by doing jobs that they can't find people to do. And when I hear AI and robots coming together, it kind of reminds me of a sci-fi movie, What do you think the future of this looks like both from a safety standpoint as well as an ultimate potential standpoint? Oh, I think the safety aspect is really interesting because our robots, both our mobile robots from Mir and the universal robots, they have a built-in safety system.

And that safety system is completely separate from the AI stuff that goes on in the robot. So we're able to prove and certify that those robots are safe in a production environment. As we go forward, we'll eventually have to develop those kinds of standards for like the humanoid robots that people are working on. But this is proven technology, and we have a really good way to bring AI into manufacturing in a very safe way. What about, I guess in testing, you mentioned that as a moment ago, that a robot and you're going to be able to enhance a robot's ability to look at a part and find and detect a flaw in that

part. That's a huge advancement, I would assume, for industries that use your robots or use robots generally. Well, the field of computer inspection has been around for decades, and there are a lot of conventional algorithms to try to support that. What AI really allows you to do is to, use computer inspection on a much broader range of things and make those practical for, like, it's easier to implement. So you're able to use it in more places and achieve higher quality for a broader range of parts. It was recently reported that you moved production about a billion dollars worth from China due to U.S. export controls, particularly involving the semiconductor industry. You did have emergency authorization to continue this activity. So I'm just

curious, is we trying to distill what's going on with geopolitics right now, why you made the decision to pull manufacturing from that region? So I want to make sure that people understand how deeply Terradine is committed to the customers that we have in China. We have 600 people in China. We have, you know, about 15% of our business in China. And we value those customers and those customer relationships. From a production perspective, we have, supply chains that are in China and will stay in China. The only thing that we moved was the final assembly of some of our products. And we did that because we need to make sure that we're able to produce those products in multiple locations. We have a commitment to our customers. They rely on us

to be able to supply equipment under, you know, and meet their biggest demand ramps. And in order to do that, we really needed to qualify additional production locations. And we also needed to make sure that we were assured of being able to supply that independent of what happened with geopolitical concerns. Have you decided where you're moving that to yet? Oh, yeah, it's complete. We've moved it to other locations in Asia. Interesting. Greg Smith, thank you very much, wide-ranging discussion, AI, China, robots, the future. I learned a lot. Yes, absolutely. Coming up, thank you again. Coming up, chips on the table, funds from the Groundbreaking Chips Act are rolling out this week. We revealed the players who spent the most on lobbying for their piece of the prize when power lunch returns in two minutes.

Well, the rise of AI has helped spur a chip revolution. We've been talking about it a lot today, led by Invidia, and at least partly funded by the government, which has been and will continue to hand out billions as part of the Chips Act designed to boost the U.S. semiconductor industry. Megan Kassela joins us now with a look at how much that free money is costing companies. A lot of lobbying involved here, Megan. sure is. So where there is federal money to be had, there will be lobbying, right? We've seen a sharp increase in lobbying spending as companies have competed for these awards over the past couple of years. So take a look at Intel first. They're on track to get the first multi-billion dollar award set for tomorrow. They spent around $8 million on lobbying in the two years just

before the Chips Act was passed. But as Chips was being negotiated and then implemented in the two years after that, they spent nearly $14 million. So we've seen an 80% jump there. Also in line for a big award, we've got Samsung. Their lobbying has been up more than 70% in the same period. And we've seen this really across the board with a bunch of these companies. Now, these figures are total spend, but their lobbying disclosure forms do show us that chipsack funding and implementation has been a top issue. Now, guys, we are expecting Intel to get roughly $10 billion in grants and loans tomorrow. That doesn't leave too much on the table for the other companies. That's partly why we're starting to hear Gina Raimondo and others talking about a chipsact round two.

So it's a lot of money, but you were mentioning, as we went to break, that return on investment could be pretty good here. You get $10 billion for spending $8 million, or whatever it was. You spend an extra $6 million and you win $10 billion. It seems like that's going to be worth it. I mean, there are strings attached to a lot of this money. There are other things, other hurdles that companies have to roll through, but they've clearly made the gamble that this is going to be worth it for them.

No money is free. Right. No free lunch. No free lunch, exactly. For the future now, now that a lot of this is being implemented, you're going to, you're expect to see a big drop off in spending on lobbying, or do you think as it gets implemented, the spending will continue as they look to push for more and more? That's going to be the interesting thing to watch, because like I mentioned, we don't know

that this is the only thing that they've been spending on, a company like Intel lobbies on all sorts of issues, but we have reason to expect it should drop off. You know, maybe they'll save some money as they then start spending on building a new manufacturing plan and finding new suppliers in the U.S. and that sort of thing. So this is one step that they had to get through, but we expect that it should drop off based on this trend, right? As they've now successfully won their award. Yeah, certainly seems like it's paid off.

Megan, thanks for being here in person, nonetheless. Yeah, nice to have you in the big house. Thank you. Good to see you. Come back. Coming up, some polarizing picks, CNBC Pro, highlighting stocks that Wall Street has very divided opinions on. We'll ask our trader to take a stance on some of these in Restock Lunch.

And as we head to break, we're celebrating Women's Heritage Month, sharing the stories of some of our newly named CBC changemakers. Here is Priscilla Alma DeVar. Fannie Mae, CEO. To me, a change maker is someone who sees an opportunity to make things better. I've also been told that for real change, you have to accept that it doesn't have to be perfect, but don't let perfection be the enemy of the good. And I remind myself that life is fleeting, and when you get the chance to affect change, you should move with real urgency.

It's time now for a special edition of three-stock lunch. Today we're diving into three of the most divisive names for analysts. CNBC screened the entire Russell 1000 and is out with a new article listing 25 Battleground stocks. They have at least 20% buy and 20% sell ratings from analysts. Scott Nation's president at Nations Indexes joins us now with three names from that list. Thank you for being here. First up is IBM. That one doesn't surprise me as being divisive here. Shares are up more than 55% over the past year, but 20% of analysts think this is the time to sell the stocks. Scott, do you agree with them? No, I think they're wrong. IBM is a buy. It's finally found its way out of the wilderness after 10 years, and that's largely because consulting and cloud businesses are robust. This is not your parents IBM for every $1 and $1.5.5.

hardware revenue, they're going to do $3 to $5 in software revenue and double that again in services revenue, still reasonably priced despite that big run-up, forward PE of 19, 3.5% annual dividend yield. The only question for IBM is how much AI is going to be able to add. Up 50% in almost four months. That's quite a rise for a stock that has been, as you say, in the doldrums a long time. Next up, we have Mohawk industry, a stock that may be flying on. Under the radar shares of the Georgia-based flooring manufacturer are up 50% since the start of November, like IBM.

But analysts are split between whether to buy or sell it. So, Scott, have shares of this flooring maker hit their ceiling? Ooh. Not yet, Tyler. This is a buy. Mohawk Industries is a buy. It's the sort of boring company that makes investors rich. If they can hold it for a long time, having bought it at a good price.

And let's talk about price forward PE is just 12 and a half. EPS forecast for the next three years are robust, expected to increase well over those next three years, still well below the $220 high during the rehab boom in 2021. And we are not going to stop buying flooring products. You're putting the floor under that stock there. And finally, we have SOFI Technologies. The most beaten down name out of the three shares are down double digits over the past month, nearly 30% since the start of the year. Speaking of 30%, that's the percentage of both

the buy and sell ratings for the stock on Wall Street. Scott analysts may be split on SoFi. What's your take? I'm not sold. This is a sell. It's a purely online financial services company. Nobody has made that work. And despite the decrease in price, it's still expensive. The price to book is 1.3, which is more than Bank of America, and double. what city is going for. Customer acquisition costs in this space are enormous, and there's nothing that SOFI can do that the big banks can't do. You know, the company is also paying 10% of its market cap for that NFL stadium naming rights deal in Southern California. Yes, it's already down 30% year-to-date, 17% in the last 30 days, but that does not mean it cannot go lower. Well, thank you, Scott

nations. And for the full list of battleground stocks, check out the CNBC pro article at CNBC.com. We'll be right back. We only have 90 seconds left in the program. Several more stories we'd like to tell you about. Shares of Nordstrom, surging on a report that department store chain is

attempting to go private. Reuters reporting the retailer's founding family is working with Morgan Stanley and Investment Bank's center view partners to gauge interest in a potential deal from private equity firms. A previous effort to take Nordstrom private. It's been down this path a couple of times before, Leslie, failed back in most recently

2018. Yeah, and that was an $8 billion valuation that they rejected. So we'll see what this one yields. Unilever shares higher after announcing plans to spin off its ice cream unit, which includes Ben and Jerry's and the Magnum brand. It's part of a restructuring effort. Unilever says will affect 7,500 jobs and should deliver cost savings of over $800 million. Unilever expects to complete the spinoff by the end of 2025. Why don't we get a... it together. It's like $8 billion. They have telennie. All right, hate exerciser could soon be a pill for that. Scientists from the Washington School of Medicine in St. Louis, Wash U. Say they created a new compound that mimics the physical benefits of a workout in rodent cell. Researchers say it could one day be the

foundation of a supplement that could replicate some physical benefits of exercise in humans might help people who have muscle atrophy from aging or indolence or disease. Amazing. It might be possible. Thanks for watching, Caroline. Closing bell starts right now.