Power Lunch - Datadog leads software stocks higher 5/7/26

Episode Date: May 7, 2026

Former Bridgewater Associates Chief Investment Strategist Rebecca Patterson gives her outlook on the AI trade and broader market. Hut 8 CEO Asher Genoot joins in an exclusive to discuss the company's new $10B data center deal.  And could ChatGPT manage your portfolio? 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. I'm Kelly Evans, and markets are reversing their early gains after hitting record intraday highs. As investors weigh the latest on those peace negotiations with Iran, Rebecca Patterson is here to discuss the markets, geopolitical risk, and more. And Kelly, I'm Brian Sullivan here in our Los Angeles Bureau. We've got another big interview coming up for you in just a couple of minutes. Hutt 8 CEO, Asher Ganoot. The share may be down today, but guess what, it's up 700% in the past year. going to ask Kim about the $10 billion data center deal. They just made much more an AI demand, how much more power they can produce, and a lot, lot more. Asher Ganoot, your guest, in just a couple of minutes. We begin, though, with the markets turning a little bit lower off their record highs yesterday, the S&P 500 of the NASDAQ, backing off those record levels they hit yesterday.

There are some more headlines out of the Middle East. Let's get more details now with Amon Javvers in Washington, D.C. Amen. Yeah, Brian, that's right. There's a lot of moving parts. A couple of media reports are shaping our understanding of what's going on in Iran right now. The Wall Street Journal reporting that a senior Iranian official says Iran won't allow the United States to reopen the Strait of Hormuz with an unrealistic plan or to exit the war without paying reparations for all the damage the U.S. has inflicted on Iran. So that gives us a sense of their public position as the back-and-forth exchange of private proposals is ongoing.

Now, the journal also reports that Saudi Arabia and Kuwait are lifting restrictions on U.S. military access to bases and airspace in the region, which opens the door for President Trump to restart his project freedom effort to secure shipping in the Strait of Hormuz. Remember, he launched that effort earlier this week and then abruptly stopped it after objections from countries in the region. We do know, guys, that President Trump is meeting with the president of Brazil today at the White House, and we may see the two leaders on camera this afternoon in the Oval Office. That could be an opportunity to learn more in terms of updates on the president's thinking on what's happening in Iran, guys. All right. So, Amin, you're not on a different topic.

You're not the only one heading to China ahead of the Trump Xi summit. Who else is going? And I assume the trip is still on for everybody. The trip is still on, as far as we know, for everybody, despite what's happening in the straight of Hormuz. and we've been able to confirm a couple of CEOs are going to the CEO of City Group. We are told we'll be going, the CEO of Boeing.

We are told we'll be going on this trip with the president. So that Boeing news sort of rallying the stock earlier today, as people calculated that it might indicate that there could be a deliverable here about the Chinese buying Boeing aircraft, which they haven't done for quite some time now. They've been relying on Airbus, and Boeing wants very much so to get back into that market.

So we'll watch for other CEOs. sense is, Brian, that this is going to be a relatively small list of CEOs traveling with the president to China next week because of the sensitivity around doing business with China right now and because President Trump, of course, has sort of pitched his entire public persona about getting companies out of China and back into the United States. It's kind of a tricky straddle for them politically. So we'll see some CEOs, but not as many as you might have seen on trips to other regions. All right, Aymann, thank you for that.

Appreciate it. Amen, Javvers. I'm joined now by Rebecca Patterson. She's the former Bridgewater Associates Chief Investment Strategist and a senior fellow at the Council on Foreign Relations. Anything you want to address there in terms of the latest developments we've heard now in Washington's approach to this war? I mean, the major thing is that we have a finite amount of time before we feel the pain

of the war a lot more acutely. There's about three to four weeks estimate of oil buffers left before the inventory, those strategic reserves, all of that was released, is gone. And once that's gone, if the straight is still closed, we could be at risk of prices spiking a lot further than we've seen so far. And that's going to feed through the whole system, whether we're talking diesel, jet fuel, et cetera, et cetera. And I understand those products, they have to kind of come out of the straight,

sometimes go to Asia and get refined and then come back. So already we're seeing, you know, the price of gasoline high, but that's one of the questions for consumers. Is that going to creep higher? It really hasn't caused too much damage at this point. No, in the United States, we've had an additional buffer, which was the tax refunds. So in addition to having the physical oil or energy buffer in the U.S., because we had those tax refunds coming out just before the war began, a lot of lower income and middle income consumers had an additional kind of paycheck buffer to get them through this.

And those are running out as well, right? That is a one-time payment, and they usually get spent. So once those are spent, then people are going to feel the brinketheaval. brunt of that higher inflation more. And we're already seeing that. The New York Fed's research that came out this week that you all have been talking about on air, I think in a great way, really showed that, you know, the wealthy right now, consumers are being held up by the equity gains. The lower income consumers don't have as much of that equity wealth, and they're more susceptible to higher inflation and things like food and energy. So that K-shaped economy that we

talk about so much is worsening through the war. And they'll feel that even more. It is. Hey, Rebecca, it's Brian Sullivan in Los Angeles here. I know you've been to the Milken Conference, obviously, a lot of high-level discussions the last couple of days. And while certainly painful, the average American family uses about 50 gallons of gas per car per person. So, you know, two family, two drivers, it's about 100 gallons. So a dollar extra, it'll be $100 a month. It's not nothing. Certainly it's going to impact people on the lower end of the spectrum. But do you believe that ultimately, if we stay where we are and don't go too much higher, that because those tax refunds you just mentioned, maybe AI, hopefully some AI investment-related gains as far as

incomes, whatever, that that $50 to $100 a month is manageable and will not totally crash most consumer spending in the economy? Look, if the straight of Hormoutes can open before these oil buffers, and I'm just using that term loosely, are exhausted, then I think we probably can get through this. We know there's going to be a long tail. There's going to be scarring from the war. It's going to take weeks to normalize shipping. It's going to take months to get oil prices back down at some reasonable level. And it's going to take years to really fix all the damaged infrastructure in the Gulf region. So all of those things are going to keep prices a little higher.

But the good news for the United States is that our labor market, while it's not flying off the handle, it's not hot, but it's stable, right? And we've seen that in the data this week. You don't see a lot of hiring, but you also don't see a lot of firing. And even tomorrow, there's some optimism that we might see a smidge more hiring. So as long as people have those jobs and they have those incomes, you know, maybe they're having to spend a little less or trade down on the sorts of things they buy. But they're getting through. Yeah, the expectation is for 65,000 jobs at it. That's a pretty terrible number.

We're not seeing, though, to your point, a lot of layoffs. So it's kind of like this weird, stagnating job market, right? We're not growing, but we're not trying to find a new job is garbage. It's very, very hard, particularly for new college graduates. But if you're in the labor force, you're hopefully okay. How does that balance out economically, Rebecca? You know, all of this, I wrote a piece, I think at the beginning of this year, and I compared America to a game of jenga.

I think we probably spoke about this on your show at one point. And this is where we are, right? The stock market right now is being held up primarily by a handful of companies in that AI, ecosystem, and the economy is being held up by a subset of U.S. consumers, the wealthier consumers who benefit the most from the equity gains. And so what that means is we could be fine. But if anything happens to undermine the AI narrative or the high-end consumer narrative, there's not many other cushions to keep us from seeing that jenga tower of the economy fallen over. Does tax policy become a threat to the high-income consumer? There are, I mean,

Fred Page reports on the New York Post about people leaving New York or where they're taking jobs or, you know, flight out of California because of a wealth tax that may be coming. You know, I think what that is doing already, and we've seen this and you report on it quite a bit, is migration within the country. But you haven't seen it so far, so far hurting job growth. But it's something certainly to keep watching. On the point about how much AI is kind of holding up this economy, billionaire hedge fund manager, Paul Tudor Jones. was on Squawk Box this morning, probably saw it. But on the big question, they asked him, here's his answer to how long he thinks the AI-fueled rally will last.

If I had to pick a period, we've got another year two to run. If you look at multiples and earnings and everything, we're kind of where we were in October, November of 99. October, November of 99, a year or two to run. I've heard other projections think this is going to go on a whole lot longer. Where do you fall? I mean, we just don't know. No one knows.

I mean, Paul Tudor Jones, so much respect for him, and a crazy smart man, very accomplished, but no one knows for sure. What if there's a new technology tomorrow that completely upsets the Apple Car? We don't need as many data centers or we have a new type of technology. What if there's a funding gap?

I wrote a piece earlier this week, Gulf Capital, they're not getting revenue because they're not selling as much oil, and they're not getting the non-energy revenue right now. What if they stop making the same amount of investments in the U.S. right now because they need to keep that capital at home? Then you see the AI companies having to borrow more debt. And we saw what happened to meta last October when they had to issue a lot of debt. Their stock fell.

So, look, Paul could be absolutely right. So you would be on the shorter end of the one or two years ago. I just think you have to be extremely cautious right now. At the current valuations with everybody in these small handful of stocks, if anything goes pear-shaped with this war, If anything goes pear-shaped with the money these AI companies need to keep the party going, you could see some pretty significant profit taking. I think, Rebecca, there is a small chance, and I know I'm out here in L.A., so I'm kind of a sort of a homer for the area right now. I think there is a small chance of a supply shock here for gasoline.

And let me just quickly tell you why, which is that California, because they've cut off a lot of their oil drilling, obviously. They've closed a bunch of refineries. they're importing a lot of oil and refined fuels from the Middle East. In fact, the ship off the coast of Long Beach, we highlighted it yesterday called the New Corolla, coming in from Iraq. You've got a ship coming in from Algeria to the San Francisco Bay. If those ships slow because of what's happening in the Strait of Hormuz, there's not a 0% chance that will wake up to a headline one day where parts of California are running short or are short of gasoline. even if it's just a small blip, is that going to affect how American consumers see things? Because I think it could happen.

I think there's a real chance it's going to happen. And that's the kind of headline that spooks people. I agree with you. I mean, look, California is very idiosyncratic in terms of importing that much and kind of the regulatory environment that's created that. So there could be a lot of interesting political headlines around that, too, in both directions. At the same time, I agree with you, Brian. I think it would be a headline that would make people.

nervous that the crisis is coming here. Just like the pandemic slowly traveled around the world from region to region, we haven't felt the brunt of it yet. When the oil buffers run out or when we see a headline like the one you're describing as a hypothetical, that could be the thing that sets people off and you start to see more fear in these markets than we've seen so far. Rebecca Patterson, really appreciate that. Rebecca, scary stuff. I think you're exactly right. I think it will happen. Rebecca, thank you. All right. Staying on bonds and debt because borrowing costs, Keep staying stubbornly high, but tomorrow, a big day for the markets of the economy and maybe your money, because as Rebecca just talked about, the monthly jobs number is out. Consensus estimate is not good right now. Just 65,000 job ads expected. When that number is out tomorrow, 8.30 a.m. Eastern Time.

So even a beat, Kelly wouldn't necessarily be a great beat because over 65 is still historically pretty low. All right. Coming up, who let the data dogs out? With all due respect to the Baja men, we'll tell you why it's more than just a single stock story for software, he said, after the break. Some more good news in what has been a big market rally the last few weeks. The beaten up software sector has been showing signs of life. And if you're keeping score at home, that software sector is now on track for its fourth straight week of gains. That would be the longest since last September. and one company in particular, really popping today. Let's get that story and more with Sima Motors.

Hey, Brian, we're looking at Datadog. This report really showing us that AI winners are starting to emerge. If you're wondering what cloud infrastructure is, think about a hospital where you need to be monitoring inside oxygen levels, heart rate, all the activity to make sure your hospital is functioning properly. That's exactly what Data Dog does for all the big, large language models. OpenAI happens to be its biggest customer. It will ensure that the servers are running up.

to speed. And it also has a GPU monitor that tracks the performance of chips. So that's really what led field earnings this quarter. Strong outlook as well. The company also revealing two new hyperscaler customers, and the stock is surging over 29%. It's sort of a similar story to what we saw from Twilio, which is a communications AI company reported earnings last week. But it had its investor day just last night. I spoke to the CEO, Kazimei Shipplander, who talked about how their creating AI agents and also creating a network that allows them to communicate more effectively. Kelly, just one use case here is, you know, when you call United Airlines and you speak to an agent and then the call drops, and then once again you have to call again and update them with your issue,

in this case, they're arming these agents with memory. So they can track your profile real time. That way when you call back, you don't have to update. They already know what you're calling about. It's these small things that the CEO says will help improve customer service dramatically. So the stock is up again and now up about 50% just in the past month. Pretty impressive when you take a look at how it's done in comparison to the broader IGV software ETF. So I think these two reports, plus you've got to look at Fortinette, a cybersecurity company,

which raised its outlook much higher than expected. The magnitude of the beat was really what the street is looking at right now with that stock up about double digits right now as well. I think the takeaway here for software is that, first of all, there are places you can win. And what these companies are certainly doing is they're being able to deploy AI-native solutions that is resonating with not just customers, but with Wall Street as well. And they're also able to show that they can be a partner to the big, large language models and not get displaced by them. So Katie Stockton just a couple of days ago had said in our shows that she thought software

could be a leadership sector. And I thought to myself, well, you know, maybe off the lows. And we're 25% off the lows at this point. But when you're describing what's going on is the first time the light bulb was going on in my head of, oh, if the narrative is we're using AI to accelerate business, then why couldn't they be in a leadership position, or at least some of the names there, like we've seen other parts of kind of the AI stack? Totally.

And when you take a look at all the money that's going into these two big companies like OpenAI and Anthropic, and I think there is certainly a valid question. What is stopping them from doing what their customer, their partner, their partner, Datadog is doing? Well, they clearly want their engineers to focus on building the AI models. When it comes to data infrastructure, they're still working with a partner to do that end. So I think that tells you there's still a great runway for companies like a Twilio, a data, a snowflake that also competes in this space. Right.

Although when you mentioned with Datadog that OpenAI is its biggest customer, go back to last week when we were concerned about OpenAI's existential risk and how it's going to compete in the long run, if they had to pull back, for instance, is there any risk around that name in particular because of that exposure? That's really interesting. That was a big concern back in 2025, and one of the reasons these data infrastructure companies, like a snowflake and Dat, DATA, dog, underperform because of their over-reliance on the large language models. But I think now with the fundraising rounds going exceptionally well, growth targets continuing to be pushed higher,

the expectation is that these companies that live in their ecosystem will be doing fine. And also, I would point out that even with Datadog, they reveal that they have two new big, hyperscalar customers that are using them for training and inferencing as well. So they're diversifying the pipeline, which is also, I think, Wall Street wants to see. But that is going to be a key risk going forward, is differentiation. The dog is wagging the tail or something. It's off to the races. Nevertheless, Sima really appreciated. Thanks, Sima Modi. Coming up, the CEO of a company that just signed a $10 billion data center lease down in Texas and how his company is helping to power the AI

revolution. The street loves it. As you can see, that's coming up after the break. All right, time now for another big interview here on Power Lunch because investors lately have been raising the roof on Hut 8. The stock up 80% of the past month, soaring over 600% in the past year. Hut 8 is an energy infrastructure company. They provide power. It started really focused on Bitcoin in crypto, but has added a bunch of AI power needs to its customer base. And yesterday, HUD 8 signed a nearly $10 billion data center deal in Texas and watched its stock pop over 30%. If you remember, we spoke with the CEO a few months ago and asked him then, about power demand. Here's what he said.

We have a ton of demand from AI infrastructure primarily today. Everyone in the world is looking for more power, power at scale, power faster, and we're lucky that we've built a company that has done exactly that over the years. Joining us now in another exclusive interview is Asher Gnude. He is the CEO of HUD-Aid. I mean, you said power demand. I'm not sure anybody foresaw $9.8 billion in data center leases, Asher. Congratulations to you and your team on that.

How much still demand are you seeing from customers saying, hey, you got any power for us? We think we're just getting started. The amount of demand on capacity is incredible. Over the last six months, we've announced almost $17 billion in data center leases and transactions across our data centers in Louisiana and in Texas. And so we're very excited. We're continuing to focus on scale and growth and really building the foundation to be a trusted partner to scale, scale AI data centers for our and users of compute. All right. So you've successfully pivoted from what power production you bought before a high demand exploded. You did it for crypto. Now AI is coming. How much more power now and do you expect in quarters and years ahead? Do you have left to sell? So what is unique is both of these sites that drove the $17 billion

in capacity, our new sites we've developed. for AI. None of them were sites that we had for crypto. We actually kept all of those facilities, and they continue to be facilities that we run for American Bitcoin, which is another company that we spun out in this public as well. So both of these sites are sites that we developed in our development pipeline, and we have about another 9 gigawatts of sites. And so these two sites equate to about 600 megawatts of IT capacity, about 800 megawatts of utility, and we have another 9,000 megawatts of capacity we're working through our development pipeline. So neither of the these were crypto sites. They were purpose built for data centers. Yeah, because I don't need to tell you,

I think you know better than I do, that at the beginning of this story, a couple years ago, there was some investor skepticism. Oh, Bitcoin to AI power switch. No way not going to happen. Those people have gotten their faces ripped off. Do you think that the investor skepticism over that Bitcoin to AI power story is over? I think so. Our institutional ownership went from sub 10% to over 70% today. We have some of the largest investors. in the world who are investors in the company today. We recently just launched and announced an over $3 billion bond financing, and it's some of the most blue-chip, long-only insurance, deep investors that you'll see in the world. And so I think we're very excited for the

investors that I've come and joined, and obviously the stock speaks for itself. This is the part of the interview, Asher, where feel free to break some news right here on C&BC because you have a large investment-grade tenant in Corpus Christi, Texas. Some people I said, talk to you said, maybe it's Amazon, maybe it's meta, maybe Microsoft. You're going to break some news on maybe who these tenants are, these mystery tenant? So there are only a couple of large-scale tenants out there with investment grade credits, and that can take on sizes of these contracts over $10 billion. And so I think those are the names that you've all heard of.

The reason why we've decided to no longer disclose tenant names for specific data centers is, as we disclose the terms of these data centers, they're confidential and they're unique to specific negotiations that we have. And so we'll share overall tenants that we have across a broader set of data centers in the future on our website rather than on a deal-by-deal basis. Just as long as investors know, this is really great tenants with really strong investment-grade profiles and have the ability to pay those leases. Yeah, and so that's critical that, by the way, I told you know I had to ask, Ash, I mean, come on.

That's part of the whole thing. The investment grade part is critical because I did a panel on this actually just yesterday at the Milken Conference here in L.A. about AI financing. And how critical is it? Explain to our audience and your investors or potential investors right now, how critical it is to sort of use some of those tenants balance sheets in getting your deals done, if at all. They're absolutely critical. Not only investment grade, but we actually said high investment grade, which is double A minus or higher. And so, So that's really important because in order to finance these data centers, investors have that the conviction that people will pay the leases in their long-term 15-year leases for these data centers. And so making sure that you have counterparties that have the financial wherewithal of the balance sheets to be able to support those commitments. And that's exactly what we do.

So both of our deals that we announced, both Louisiana and Texas, have investment-grade counterparties that are high-investment grade that stand behind those commitments. And again, as I mentioned, over almost $17 billion in commitments on the initial 15-year term. And if they sign up for additional 15-year extensions, that's almost over $40 billion of contract value. Wow. Yeah, because those balance sheets are the ones that, to your point, the investors and financiers are going to look at and say, okay, you kind of got the good customer over here with the spotless balance sheet. That is certainly a critical aspect of it.

There is a narrative out there, Asher, a little bit, that a lot of these data centers are just not going to be built, that maybe people are just kind of getting in line in the power queue because they want to have a spot in line, but they may never actually do the data center. They just don't want to be last. How much of the data center growth that's out there right now macro-wise, not just for HUD-8, do you expect will happen or won't happen? It's important to look at what developers actually have the balance sheets and the development program to develop these data centers. A lot of the markets that we're working in, specifically, for example, in Texas and AirCod, they're trying to put in more regulation to be able to differentiate who's a real developer and can actually build these versus just the demand.

You might have 60 gigawatts of demand, but really only 20 or 30 percent of that is real demand. And other folks are speculative folks who are trying to ask for that power. And so what we think will be a trend is that you'll have developers with balance sheets, have to put down real commitments in order to lock in power. And really importantly, is to make sure that as you develop a data center, you're actually helping decrease the cost of energy for the local rate payers and also helping increase their taxes and with their livelihoods. And so the community impact we see as a bigger and bigger part of the discussion. But historically, you've had everyone from small to large folks trying to go and lock up

power. I think moving forward, execution is what's going to matter. And a lot of that noise is going to leave the system with more and more regulatory regime. Yeah, we'll see what that. Listen, Loudoun County, Virginia, capital of data centers, property costs, property, taxes and electricity costs have actually come down because they've been so subsidized. We'll see, listen, stock down a little bit today after a 30% pop yesterday, up 700% off the lows of a year ago. Asher Ganoot, really appreciate your time today. Congratulations. Thank you again. Thanks for having me on. All right, you're very welcome. All right, speaking of hot stocks, check out the sun run. Sun Run, solar panel company, up 9.6%. Best day in more than a month.

That stock also been up, not doubled in a year, but not far off it. On the other side of that story today anyway, LNG company Schneer, that stock down about 5%. They flagged some shipping disruptions due to the Iran war. Remember, a couple of days ago here in LA, we asked the CEO of LNG competitor Venture Global about some of those shipping. He said, we don't have a lot of LNG ships in the Srodo Hamoos and maybe Kelly, they would not feel safe still going through there today. All right. Let's get to McKenzie Sagalos now for the CNBC News Update. McKenzie. Hey, Kelly. So a three-judge federal appeals court panel today appeared skeptical of the

Pentagon's effort to censure Democratic Senator Mark Kelly and demote him to a lower rank after participating in a video telling U.S. service members not to obey illegal orders. Kelly, a retired Navy captain, sued over the move back in January. In February, a federal judge initially blocked the Pentagon's efforts, calling it unconstitutionally retaliatory. A mayor. A mayor, The man accused of a Molotov cocktail attack that killed one person and injured dozens last year, pleading guilty to state charges today in Colorado. He faces life without parole. The man attacked a demonstration in support of Israeli hostages in Gaza last year in Boulder.

He could still face the death penalty in a federal case. And President Trump today told the New York Post he didn't know that tickets to the U.S. home opener in the World Cup were going for $1,000 and says he wouldn't pay it either. FIFA President Gianfentino yesterday placed some of the blame for high prices on ticket resellers. The current price on Ticketmaster to attend the final $18,000. Kelly, I won't be there and not sure about you. You know, I'm this close to boycotty. I told my kids we should start a driving business.

You know, they're going to charge $150 to use News Jersey Transit. So I said, we'll charge 90. We can just drive people to Meadowlands. Good idea. All right. McKenzie Banks. Coming up, are we going to see consumers spending less due to getting pinched at the gas pump? We'll get into that with our market navigator guest next.

As a deal in Iran looks increasingly likely, many investors are looking ahead to what happens after the war officially ends. One AI platform is monitoring early signs of that reversion trade. Jan Szilaghi is CEO and co-founder of reflexivity. Jan, what are you seeing in terms of some of the consumer trades and moves elsewhere? Yeah. Thanks for having me on. What was interesting for us as we kind of did the analysis with reflexivity was that obviously some of the defense names had already underperformed. So that wasn't really a place to look. But consumer discretionary names, particularly airlines, autos and e-commerce names, stood out as being the most direct transmission of that compression of the oil

premium that you'd probably see if this becomes a permanent truth. Tell me more about the consumer because this is an area that's been under pressure, there's still a lot of skepticism. It's kind of unchanged year-to-date. Where should we be looking? Yeah, so let's start, for example, with just the travel and airlines. If you look at a company like Delta Airlines, you know, a very large part of their revenue effectively goes towards fuel,

and every dollar of WTI decline maps directly to margin expansion. So you could have a bullcase EPS revision of about, 30% if you saw WTI oil price drop to something like $70. So that's probably the most obvious way to really position for a more permanent, and again, I would call it bullish case of resolution of the conflict. Any implications for the absolutely rip-roaring tech trade here? I think that's going to be less. I mean, you know, one of the things that did stand out for us,

but it was mostly because it has the e-commerce component is Amazon. because it obviously is something that is very hot from an AI cloud structural growth perspective, but it does also benefit tremendously from both the logistical and consumer spending recovery. So on the consumer spending recovery, a drop in oil prices of the amount that I mentioned would add really, really quite a lot to disposal income, probably something on the order of 0.4%. And would directly translate into higher spending. then at the same time also logistically, that would be quite a big boom for them. And it would be nice if we could get to that phase for the economy and for that conflict.

Jan, thanks very much, kind of looking ahead to what may be coming, Brian. Glass half full over here down the pike. All right. You know what else? Also may be coming, Kelly? Maybe chat GPT ready to manage your investment portfolio. Can it really do it? We ask Gunjin Banerji, who put it to the test.

And she is your guest next. Would you use artificial intelligence for financial advice? It's something more people are embracing these days. In fact, the brokerage E. Thorough surveyed 1,000 individual investors. Around 30% of them said they are using AI with their portfolios. Your next guest tried it out for herself, specifically using chat GPT, and she wrote it up in her recent story in the Wall Street Journal. Gunjan Banerjee is the lead writer for Markets Live at the Wall Street Journal

and a CNBC contributing. waiting for it to fill in. Gunjan, it's great to have you back. So, and I understand people might use chat GPT to kind of ask a lot of questions about what if I, but you really made it your portfolio manager. Is that right? I did. I designed a prompt and I told chat GBT, hey, I'm in my 30s. I have a million dollars to invest. This is my risk tolerance on a scale from one to three. This is a taxable account. And a few other details. Very importantly, I said I wanted to act as a fiduciary, right? That means that it's required. to act in my best interests.

And I've been toying with it for several months, and I asked real financial advisors to weigh in on the advice. What kind of advice is Chad GPT generally giving? So to start off, financial advisors I chat with said that it started with some pretty good advice, you know, off the bat. It said, here's a broadly diversified portfolio, 50% in U.S. stocks and broad index funds, 20% in international stocks. It said, you know, buy some bonds, keep.

some money in cash. So it was a broadly diversified portfolio that financial advisor said made a lot of sense. What happened later on in the experiment got a little wacky. What got wacky? Well, I asked it to, you know, how to manage the trade war, how to manage the war with Iran. It suggested some stocks that might perform well during the trade war. It had some thoughts on leveraged ETF. So I found that we ended up going down some rabbit holes. So it turned you from a patient investor to a day trader, basically of leveraged ETFs? Well, it probably had a sense of what I wanted to hear, right? Here I was someone who was asking about how to position.

It was like, this is what I think Gunjin wants to hear. Importantly, since I started the experiment, chat GPT has launched tools that allow you to personalize the tone and style, as I'm sure you're aware. So you can set it on a candid setting. I don't really find that it works. This Mark Andreessen prompt is making the rounds, and I've tried it.

I find it's a little bit different at the margin, but not very much so. Right. If you went to a real financial advisor and said, hey, I'm worried about the trade war. I'm worried about the government shutdown. They should hang up on you, right? Especially if you're in your 30s with the – you don't have to tell me too much, but a million dollars to – I mean, they'd say, listen, what do you mean? Why don't even ignore it? I would think what financial advisor on the planet would have you even react to that. They should stay long. The S&P don't worry about it. And I got down some real rabbit holes, and particularly around the leveraged ETFs, which, as you know, are quite risky.

Of course, it started with a warning. Stay away from these. But once I pressed it and I said, I'm interested in these. It suggested three for me to trade. It came up with a trading strategy on how to position based on what bond yields were doing, what stocks were doing after an upcoming jobs report. So some of the advice got really interesting. And it touches on this broader point of people are really bullish on these tools. But right now I think you have to take them with a grain of salt. Did it try to push you into Bitcoin or gold or anything like that?

It really felt like whatever I asked it about. It was like, hey, sure. Put a little bit. Like, it was like, I think she wants to invest in gold. I think she wants to invest in crypto. It was like, how about a small allocation? You picked up on the broader problem with these. This is exactly right.

Whatever you ask, it becomes kind of enabling for it versus it on its own consulting, you know, the literature, whatever it could. This is what tells me we need a CNBC version of this and give people better advice. You also have asked it to kind of just generally make stock recommendations. And a basket of stocks from mid-October underperforming the market. It did. interesting though, because this was during the height of the trade war when these levies were increasing by the day. And I said, how do I position during a trade war? It spat out a list of around 11 stocks that it thought might outperform, including stocks like Duke Energy, defense stocks,

Lockheed Martin, Kroger. And, you know, in the following weeks, I did notice that the basket was outperforming. But going back to why should a retail investor be doing this? As of now, the basket is underperforming the S&P. And there are some ways, you know, Jim Kramer in his latest book writes about this. He says, it's okay if you're trying to build a portfolio of five to eight growth stocks that you think can really kind of be, you know, the pillars of growing your wealth over the next few decades. He said, use these as a tool. Absolutely. Ask it to kind of help you with some financial statements, double check, you know, margins and grow. Like, he said, in that sense, it's actually, it can be helpful. But that's totally

different than what you're describing. So, you know, I'm sure financial advisors, but that's why you need us. Well, also, I want to point out that Chachibati made some pretty human errors. It made an arithmetic error pretty early on when I asked it how to actually slice and dice as $1 million and the exact amounts to put in ETFs. It ended up keeping more of my money in cash than I asked it to, which I didn't catch until later on. So you need to give your AI allocations an extra check before you deploy them. You're still not that good at math. Very human, actually. Gungentgen, thanks very much. Really appreciate it. Gungeon Banerjee, you can read more of her piece in the Wall Street Journal. That is a fascinating piece. We'll check it out. All right on deck here at Power Lunch.

We'll tell you why the company behind that mystery chart is the best performing big bank of the year and also one of your next guest's top stock picks. Can you guess the chart? We'll reveal it next. All right. One sector that has largely sat out the recent market rally to record highs are the financials. Financial is the worst performing sector in the S&P 500 over the past six months. The group down about six percent. It's the beginning of the year. Only health care this year has actually done. worst, despite that or maybe because of it, your next guest believes the banking sector is still in an overall solid spot, joining us to explain why. Dory Wiley, president and CEO of Commerce

Street Holdings. I know a couple months, Dory doesn't make a trend and you want to buy low, not sell high. Why are you macro bullish on some of the banks and the financials? Sure. Well, hello, Brian. Well, first of all, the banks have been sold off, I think, partly because of private credit fear. So they're trading there way below. average on price of tangible book and earning. You can get plenty of banks at 10 or 11 or even single digits in the community banks on the forward PEs. But the banks are doing well and they're having record growth in their tangible book value per share. It's slowing down the M&A activity because this pricing is coming down. But if you look at earnings growth, banks are the third

leading sector. So I think there's some real value here that needs to be looked at. Do you want to get real specific about it? You know, I mean, in this sense, a lot of people People think about this in sectors and do they buy the financial ZTF, that kind of thing. But would you recommend going more company specific? Well, we look at companies, so yes, I would. Yeah. Yeah. So let's start with the money centers.

You know, Citibank looks like a great value compared to the other money centers. You know, today was really interesting. They have their investor day and their stock was off. Well, it was off this morning. Then it was up this afternoon once the market figured it out. And what they figured out was the CEO. came out and said, we're going to have, Frazier said, we're going to have 15% return on equity about 2031.

Well, the market's expecting that in 2027, so the stock sold off. But they did 13.1% in the first quarter. And then when you look at their earnings growth, which is 30 to 40%, which is two to three times what anyone else is doing in the sector, then the market kind of figured it out, hey, this is a buy. And this stock is a buy going forward. It's got a peg ratio, price to, you know, earnings to growth of two to three times under what, you know, all the other money centers are. So I like Citigroup and the money. Are there any others of the big banks you feel as strongly about?

Yeah. Well, I mean, J.B. Morgan's a quality bank and whatnot. But I think right now, if you're going to play there, why not focus and take Citigroup because you'll outperform the others? And in a regional play, I think I like U.S. Bank Corp right now. They're growing their tangible book value per share at 15 percent. stocks close to two times book. So you're growing in value at 30% a year in a rock solid company. Dory, how much do interest rates matter to some of the companies that you own and follow? I mean, interest rates been kind of the same for about two years. But if we were to get some

meaningful move, let's say lower, we're being optimistic, 4% in the 10 year. Is that going to set the regional banks on fire in a good way? Well, I think the market will perceive that it will, but it's probably overblown. Banks manage their asset liability management and their net interest income risk to changes and rates very well. Proof of that was that a 500 basis point change. Banks got hurt, but not bad.

You know, the ones that got hurt are the ones that bet on long-term securities. You know, we had the failures in March of 23. But for the most part, everyone knows what we're doing. Well, you take that same scenario in the 80s and you have a whole sector blow up like the SNL crisis. So banks know what they're doing and rate changes, and that doesn't bother me too much.

The fact that it's stable right now has been very, very good for banks. Is there anything, you know, we are talking about how private credit has, it's kind of a shadow banking, if we can call that area, where it has a lot of exposure to software stocks. Is there any concern like that in the regional banks or the larger banking space? Great question. And yes, there is a concern. We want to watch the lender finance business units in the big regionals and in the money centers

because that's where it's going to show up. It won't show up in the community banks, but if it shows up, that's where it's going to see. show up. Is it a reason to stay away from some of those names? Or, you know, because otherwise you might think, all right, they've got, you know, the story U.S. Bank, they've got good stories to tell. They've got strong earnings growth. I'm sure they've detailed, for instance, their exposures or lack thereof. I don't think so yet. We don't see enough damage coming from that. We, we, you can, you can kind of pinpoint where the, you know, the BDCs and the more aggressive lending,

the software sector, that's where it's hit right now. And it may spread. But I don't think it's to hit the banks as hard as everyone thinks it will, and it's already priced in the stocks. Another reason, if you're right, to the upside. Dory, thanks very much. Appreciate it coming in today. Thank you. Dory Wiley, Commerce Street, Capital, President, and CEO. And don't miss Leslie Picker's exclusive interview. Speaking of Jane Frazier, she'll have the city CEO tomorrow morning at 1130 a.m. Eastern. More power lunch after this. Welcome back. McDonald's shares are flat near about a 15-month low, despite beating earnings's expectations, while Shake Shack is on track for its worst day ever. down 28% after results. Could it get even worse for the burger chains? Take a look at this chart

that Liz Ann Saunders highlighted. Burger prices are heating up as we head into prime grilling season. Brian, the cost of ground beef is now 670 per pound. Everybody's focused on gasoline prices. I get it. We need gasoline. Don't have to have hamburgers, though some people might disagree. Maybe they do. That's an insane chart and not going down anytime soon, Kelly. I'll see you on Monday. It's been fun. I appreciate your warnings too about what's going on in the energy situation out West. Brian and I enjoy tomorrow. We'll see you back here on Monday. Well, I'll be here tomorrow. But closing bell starts right now.