Power Lunch - D.C. Drama, Retail Details 10/17/23

Episode Date: October 17, 2023

The drama in Washington continues, as a vote for House Speaker ends with Jim Jordan failing to get enough votes. While President Biden is heading to Israel for a high-stakes trip. We’ll tell you all you need to know.Plus, markets are reacting to a stronger-than-expected retail sales number. Can the consumer keep holding up the economy? Or will a strong economy give the Fed cause to raise rates one more time? We’ll explore. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everyone, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Coming up, D.C. drama continuing as the House remains in limbo. A vote for speaker ending a short time ago with Jim Jordan, the Republican nominee, failing to get enough votes and not by a little. Meantime, President Biden heads to Israel for a high-stakes trip. Plus, markets reacting to a stronger-than-expected retail sales number. Can the consumer hold up the economy, or will a strong economy give the Fed cause to raise rates one more time. Kelly. That is the question. Let's get a check on markets, Tyler, because we've changed direction once again, perhaps because of that concern about another Fed hike now. The Dow's down 77, the S&P 11, those are both quarter percent drops. The NASDAQ under a bit more pressure down half a percent. Is it rates or is it the fact that the chips have been one of the weakest trades today? Shares of Nvidia are falling after the U.S. puts new trade restrictions on chips exported to China.

It specifically targets some of NVIDIA's most cutting edge products. Those shares are down 5% today. We'll have more on that in just a moment. And activists are getting more active. Today, VF Corp shares are popping on news that engaged capital has built a stake in the company. They're up 13%. It's been a tough year. They're down 33%.

And Wyndham Hotels says it's rejecting a takeover offer from choice hotels. Wyndham saying the deal involves significant business risks and is not in the best interest of shareholders. Still, Wyndham shares up 8% on hopes that, something will come through here while choice is down 5% Tyler. All right, thanks, Kelly. Ohio's Jim Jordan fails to get enough votes to become the next speaker of the House. Emily Wilkins is live in Washington covering it all for a second by second. Emily.

That's all, Tyler, round one is done. And Jim Jordan has 20 Republicans who decided to vote for someone other than him. That is a far cry. Really, Jordan can only afford to lose four Republicans if he wants to be able to win the gavel, which means that he still has a good bit of work to do. Right now, the House is in recess. They haven't yet called for a potential second vote on speaker, but a lot of the concerns seems to be coming from some more moderate Republicans.

And these are Republicans of many of them who either flip seats and help the Republicans get their current majority. A lot of them need to appeal to independence, and a lot of them are worried that they're going to struggle to do that with Jim Jordan in the Speaker's chair. Remember, Jordan is a hardliner. He helped form the Freedom Caucus, and he's one of the folks who really, push back against certifying the 2020 election for Biden. All of those things are concerns. And you know, for these 20 members who voted against, this really reminds a lot of folks of what happened in January,

with McCarthy and when he had to go 15 rounds. That's absolutely something that Republicans don't want to do right now. They want to be unified. They want to show they're all working together. And so now it's a question of whether Jordan is going to be able to get more support on a potential second or third ballot. And if not, if that means that either A, another, Republican is going to step up and try and get 217.

Or B, Republicans could start looking more seriously at giving powers to Speaker Pro Tem, Patrick McHenry, and allow him to be able to pass legislation, things like A to Israel, a potential stopgap measure for funding the government. Both of those things are expected to come up in the next month, and Republicans really cannot go on too much longer without a speaker. If Representative Jordan fails to peel away enough, And he seems to be peeling sort of one by one a number of votes or has in recent days. People who said on Friday they were incontrovertibly opposed to his candidacy on Monday had flipped over to support him.

But if he's not able to do it, what about Patrick McHenry? Why doesn't he step up? He seems to be at least semi-acceptable to most of the caucus. I mean, Tyler, I think there's a sense that Republicans, they want to elect a speaker. They don't want to give powers to a temporary speaker. They want to actually put forward a candidate and be able to unite behind them. But you know, you're absolutely right. There is discussion, I think, growing discussion about potentially giving Patrick McHenry some longer-term powers

just to be able to move some legislation. I've heard about 60 days, 90 days about giving him these powers for a temporary amount of time. But I think at this point, we're a little bit yet off from that. I think the sentiment is that they want to see if Jordan can get more members to flip. We've already heard from a couple members who say, hey, the way I voted on the first ballot won't be the way I vote on the second ballot. So you could definitely see those numbers shifts. I think just a lot of unanswered questions in D.C. right now and we'll definitely keep you informed when we have that second vote for speaker. Sounds like the sorting hat at Hogwarts.

Anyhow, Emily, thank you very much. Appreciate it. For more on the, let's call it, chaos in Congress and what happens next in the House Speaker race, if there is no resolution today or over the For the next couple of days, let's bring in Kim Wallace, head of Washington Policy at 22V Research and Brian Schwartz, political finance reporter for CNBC.com. Kim, let me start with you. I guess what stands out to me here is that this deliberative body is being ruled by what I would call the tyranny of the minority. It took place in January, and it is taking place again now. Am I right or wrong?

Oh, Tyler, I think you're right. and I think the simple math proves it out, both in January and just a half hour ago. This has been a building condition in the House of Representatives Republican Conference, not just this year, but I'd say over the last four or five years. What's at stake in the eyes of many members is ideological control of the party via the House conference that's in the majority, not so much about fiscal policy or any other policy debates. How about that, Brian? I mean, that's a very interesting point.

This is all about ideological control more than it's about policy. Well, that might be true, but it's still very much controlling the policy that is not getting done in Congress. That's all accurate, but there's a pivot to this where every minute... Ideology is policy. It's right. Because every minute, every hour, and every day that this isn't solved, that they don't pick a speaker, is another minute, an hour and day that Israel, for instance, doesn't see any congressional aid passed. and given down to them as they fight Hamas.

Every minute this passes, we don't get things done with the budget to determine what the next CR potentially is going to be, continuing resolution of the months that continue to drag this on about spending bills or a spending bill. It's a problem. This lack of a decision of who's going to be the next speaker, whether it's Jim Jordan or somebody else, has really kneecapped Washington and Congress in particular,

and it's a problem, and it's a problem for policy in particular, and an ideology at this point is in a need. So, Kim, I always tend to be a little circumspect about these things and think that does it just reflect the divide of the country? In other words, we elected a split Congress. This is more split than ever. There's gridlock because people are split on what exactly needs to get done. It sounds like Israel might be one of the few things that they can move forward on, even with, for instance, McHenry in the leadership. Kelly, I think that's right.

And back to Brian's point, the request for supplemental war spending is going to come from the president. My best suspicion is it comes after he returns from Israel. That gives House four, maybe five days to figure out the speakership question. After that, you're going to have a joining of geopolitics and U.S. domestic politics in a way that becomes really the main story, interestingly, in a world full of macro risks. Just dwell on that, Kim, for one more second. Does that extend beyond Israel? I mean, because Ukraine aid was already one of the main sticking points amongst. the GOP? Yes, it does. That's why I said war spending and not just spending for Israel. There is still in the minds of a lot of members on both sides of the aisle in Congress and House and Senate that the next supplement that comes through will carry money for Israel

and money for Ukraine. Working through that, for example, to split the vote for Ukraine and Israel will take monumental legislative effort, the kind of which we will. haven't seen on display in the House this year. Brian, let's talk about the president's trip to Israel. I can see why he's doing it. Are there risks? I mean, I think there's some risks in the context of maybe he's not directly in Washington

as some of this chaos goes through. But I think at the end of the day, he's really been hammering home the need for the U.S. to be allied with Israel. And I think that's really given him a boost in many republic, even in some Republican circles. And he has needed some form of a boost in the public polling. He's been struggling even to get in some public polls versus Donald Trump, the Republican frontrunner right now. So I think it's a – the trip is a boost to Biden, especially as Congress is in the House is fighting over who's going to be the next speaker. There's the president going forward.

Functioning while Congress is not. That's correct. Through his administration. Meanwhile, in the Senate, they're just waiting to figure out what's going to happen with the House for on a variety of points and policy initiatives. So be well, though the president and his administration are kind of just running through the gauntlet. they're going to go to Israel, and the president's going to Israel, and he's going to put a good face on for the administration. Yeah, you know, just want to point out that there's also implications for some of the biggest

stocks in the market, some of the big tech stocks in particular. If it's Jordan, probably even if it's McHenry, in other words, if there's not a strong majority leader in Congress right now. Yeah, you're right. I mean, gridlock sometimes can be helpful for the markets. I mean, investors can look at that and say this could be good. We might not see too much regulation coming on to certain companies and stocks. We reported yesterday that, you know, big tech may see reprieve from antitrust if Jim Jordan becomes speaker.

So, you know, you could see kind of some wiggle room in the markets themselves, but in terms of things getting done right now, particularly through the House, just things are at a standstill at the moment. And one of the point I just want to make, you know, I was talking to some before I came on here about the next round of voting for the speakership for Jim Jordan. You know, I don't think it's going to get much easier for him. The person I spoke to who's been in the room trying to cobble. together votes, it says this is going to be the next round, it's going to be an uphill battle,

the exact words I was told before I came on here, for him to get enough votes, Jim Jordan, to become Speaker in the next round. That is support mighty road. He is for sure a polarizing person, not only in Washington, but in his own conference. That's right. I mean, he co-founded the House Freedom Caucus, which is the most conservative element of the Republican Party, especially within the House. They have not been always known to play ball with much of the rest of their party. So that's where he's been coming from from all these years. And it's a tricky spot from now being to try to be the guy who's going to try to unite

the conference as the House Speaker. We have to leave it there. Kim Wallace, thank you very much for being with us. Brian Schwartz, great to see you. Another activist firm taking a stake in a company and pushing for changes. Julia Borson has the details in this market flash. Hi, Julia. Hi, well, the market flash here

is for Frontier Communications. That stock jumping on news and activist investment. activist investment firm, Jana Partners, had built a new position in this telecom company and is calling for this broadband provider to sell itself. So the stock is now up 2%. It was up as much as about 6% earlier. This news was announced today by Jana's managing partner, Scott Ostfeld, at the active passive investor summit. Today, I'm saying this is a depressed valuation and an attractive asset for wireless carriers and private equity-owned assets in the sector,

as well as for infrastructure and private equity funds. So that is the argument here. And just for context here, this is, frontier communications is the third largest fiber broadband provider in the U.S. shares now up 3%. Back over to you. Wow. So much activity all of a sudden. Julia, thank you very much.

Back to the geopolitical space, the U.S. government tightening restrictions on what chips U.S. companies can export. to China. It's having a big name on a big impact on NVIDIA. Let's get to Christina Parts and Evelas at the NASDAQ for more shares are still down 5% Christina. Yeah, they are, but they've come back from earlier lows. But let's talk about the Commerce Department. They want to cut back on China's ability to access AI chips like you mentioned. And the restrictions put in place last year just weren't cutting it, which is why today they're expanding those controls to include even more advanced computing chips and close

any loopholes through third-party countries. Companies that want to export AI chips to China or other embargoed regions, and there's about 40 regions on that list, they're going to have to notify the U.S. government before doing so. Additional chip equipment will be restricted, so that could impact names like KLA as well as applied materials, which is now rebounded, so it's in the positive right now, KLA down almost 2%. But the big news, a lot of people are focusing on today, Nvidia.

Invidia is A-800 and H-800, acronyms for chips, but really that's just versions made specifically for China. Those chips are now restricted. The stock, though, as you can see on your screen right now, making somewhat of a comeback from earlier lows, the stock is still down almost 5%. And the reason that comeback is because of an statement they issued, saying that they don't expect a near-term meaningful impact on their financial results. Piper Sandler agrees, saying that the impact is insignificant and points out demand this year has primarily come from the United States. But it's important to keep in mind.

In video, it gets about 20% of its data center revenues from China. So there are concerns about the long-term impact on company earnings. Mizzouho, for example, flagged the potential for a 6% drag on NVIDIA's full year earnings per share estimates if we assume that at least 3.5 billion in AI sales go to China. Equipment Maker ASML, another name right now. They admitted the measures would hit, quote, our system sales in the medium to long term. So there's that time frame that is a concern for a lot of investors. And it's not just NVIDIA.

Intel makes China-only chips. and AMD has been working with Chinese hyperscalers. Both are at risk. They weren't named specifically by the senior officials on the call, but they are at risk, and that's why you're seeing their share price, for example, Intel down almost 2%. Although their AI chip exposure to China remains a little bit lower than Nvidia, so it's positive for those names.

All right, for now. Christina, thank you. We appreciated Christina Parts in Avelas, and again, those putting pressure on the NASDAQ today. Coming up, the cloud was a centerpiece of big tech over the last decade, now AI could be ushering in a new era and in evolution into cloud 2.0, so which companies will dominate, plus the consumer getting more and more complex. Every time we hear signs of a crack, they are immediately sealed. Despite growing uncertainty, retail sales coming up strong this morning, we've got more when Power Lunch return.

Welcome back to Power Lunch. Reports of another deal in the energy space, take a look at Reuters reporting that Chesapeake has explored buying Southwestern Energy, whose shares are up 6% now. If the two companies merged, they would take over EQT as the largest NatGas-focused exploration and production company in the U.S. EQTs coming off a pretty nice year, its shares are up about 31%. Chesapeake, down half a percent on the news. Hotter than expected retail sales data is also pushing Treasury yields higher today,

with the 10-year back to its highest since those early October highs. Joining us now to talk about the fallout of that. Let's bring in Jason Drejo, UBS, head of assets. Allocation, Americas, and Michael Farr of Hightower advisors and a CNBC contributor. Welcome to both of you. Jason, asset allocation is usually kind of a ho-hung business, you know? Okay, maybe it's 61-39, you know, instead of 60-40, but not these days. People are coming out with all sorts of completely innovative in different ways that they

think investors should position for this high-rate environment. Where is your head at? Well, we definitely have to kind of reassess the way to think about asset allocation. But if we think about the markets this year, we've oscillated a lot with range trading, with equities, with treasuries, and even so the overall market view for soft landing. So I think because things are moving so quickly, if you're really taking a long-term strategy, you don't really want to overreact any of this information, kind of still have that kind of standard core allocation of equity's fixed income and alternate asset classes is still the right way to go. And then it's looking for dislocations to the market, where do they kind of present opportunities? So I think you don't really want to overreact to this information. So when you hear people who say, you know, the 6040 portfolio is dead, you've got to be 25, 25, 25, and include commodities or real assets or I hear people make the case for getting into private credit now, which is interesting.

Or Howard Marks, who says, just go all in on high yield, including with the defaults that he foresees. Do you think all of that is an overreaction then? Well, if we just take the 6040, you know, what works so well for many years is that, you know, bonds were a fantastic asset class. high returns, low volatility, and they diversified, you know, with equities. They had a negative correlation. In an environment where inflation could stay elevated or you get inflation shocks, that kind of negative correlation may not persist. So really what you need is, again, other asset classes that can help diversify some of that equity exposure.

We like different aspects of alternative asset classes. Because these are long-term allocations, they're also not someone you want to be sort of too tactical law and saying we like it now versus other terms. It's really about sort of building that long-term allocation. But I think as you think about that, the macro environment really is requiring us to think, We have to add different things in the portfolio because what worked before probably weren't work in this macro environment going forward. Michael, if I had asked you a year 16 months ago, the following question, if interest rates

on the 10-year note were at 4.86 pressing 5, would you ever have believed that stocks would be where they are at 4,400 or bareabouts? Oh, no, Tyler, no way. And we would have yet one more example of far being wrong over the past. 20 some odd years on CNBC. I've gotten some things right. You know, I think it's an important question because your expectations, right, go to Kelly's previous conversation about asset allocation. Your expectations and where you think things are going to go can't matter. Can't matter. It has to be really what your discipline tells you. And there are two guidelines

for asset allocation. You can have one for an institution, for a not-for-profit, for instance. Then you have Fred and Ethel who are in their 60s and we have to think about them for the long term. So the 60-40, you don't change that asset allocation just because one asset class does well or not. You build that because it's what Fred and Ethel need or it's what the institution needs. And it's sticking with those disciplines over time because you can be so profoundly wrong about things like this that will protect you over the long term. So let's get to the meat of the matter here. And that, Michael, would be the kinds of stocks. feel free to name names, feel free to name sectors, that you think in the current environment

have an edge. Okay, I'm going to qualify one more time, Tyler, short-term edge or long-term edge. If you're looking for a short-term edge, you go with those big seven and you just buy them and pray that the momentum continues. If you're looking as a more disciplined investor, a long-term investor, then I think you look at the things that have gotten beaten up, that have really gotten killed that are down 20 and 30 percent. And I think you look for companies. Real estate utilities, what? Well, I wouldn't even go. I don't think you have to go there. I think, for instance, you can look at at Disney. You can look at Medtronic. You can look at any number of different industries, whether it's health care. Look, all the consumer stocks have gotten killed.

But I think that there are still value there. You're not going to see the pop, I don't think, by the end of the fourth quarter. But a few years from now to buy stocks, with those kind of balance sheets, 30 and 40% off of their highs, I think you're happy there. Jason, a parting comment. Do you think this move in rates is behind us now? I think we're going to chop around in rates at these kind of levels until there's some conviction in the marketplace that growth is actually slowing. So when we get retail sales like we did today, that isn't sort of going to give confidence in that view. But also then the Fed is kind of signal we're probably done. This may start to materialize after the FMC on November 1st.

And if we start getting October data, it looks like it's slowing down. I think that will provide some sort of ballast for rates to go lower. But I think that's the key things. We need to see signs of the economy slowing down. For investors to kind of want to step in and buy at these levels, not fearful that rates are going to go much higher than they already are. Yeah, absolutely. Jason, thanks so much, Jason Drejo.

And Michael Farr, we'll see you in a bit for three-stock lunch. All righty. Further ahead, details around the largest government Bitcoin seizure, totaling more than $3 billion, the culprit, a 32-year-old from Georgia. CNBC investigates when we return. Bond yields jumping after that stronger than expected retail sales, Mark. Let's go to Rick Santelli in Chicago for more.

Hey, Rick. Hi, Tyler, indeed. It wasn't only the September reeds that were much warmer than expected. There was also positive revisions all along the data points for August as well. And if you look at the charts with a two-year-and-tenth, tenure on top of each other, you could clearly see once the two years saw those warm data points for the consumer, it was basically a 45 degree line up. Why? Well, potentially, as Kelly's been talking about, maybe many are looking for the Fed to be a little bit more active. That isn't

personally my call. I think the market is most active all by itself. Now, this is definitely something to pay attention to from a global standpoint. So let's look at debt and global rates all moving up together. U.S. debt to GDP, roughly 120%. UK, about 100%. This is a chart going back to August. Look at both of those rates. Now let's pair tens up with boons.

The Eurozone, about 90% debt to GDP. Now let's pair it off against JGB 10-year. In Japan, they're pretty much the leader of the large economies, around 224% debt to GDP. And as many have been pointing out, Japan in many ways is going to end up ultimately allowing the market to breathe on interest rates. And when that happens and everything's fungible globally,

that could be a real catalyst for even higher rates. So we want to pay attention here. And by the way, two years are now on pace for a new fresh high yield close going back to 06. So are tens back to 06. 30 years need to close it 498 or higher. They're a little bit shy. Tyler, Kelly, back to you.

Thank you, Rick. We appreciate it, Rick Santelli. Now over to Contessa Brewer for a CNBC News update. Contessa? Kelly, a senior Hamas official told NBC News the group is willing to release all hostages in one hour if Israel stops its bombing of Gaza. The group is said to be holding as many as 200 civilians.

In just the past couple hours, Gaza officials said between 200 and 300 people were killed in strikes at a hospital, and UN officials said six were killed at a school serving as a shelter in a Gaza refugee camp. New Mexico prosecutors may recharge actor Alec Baldwin with involuntary manslaughter and connection to the deadly 2021 shooting on the set of the film Rust. Two sources familiar with the matter tell NBC News the case will go before a grand jury in mid-November. Authorities say the film's cinematographer died when Baldwin's prop gun fired a live round of ammunition. And casino workers in Detroit walked off the job today in a strike

that's hit MGM Grand, Penn's Hollywood Casino at Greek Town, and Motor City Casino. Some 3,700 people, including dealers, valets, and food and beverage staff are represented by five different unions, including the UAW. They're asking for better pay and benefits after they accepted a modest three percent pay increases in the last contract in 2020 to help the casino stay afloat during the COVID-19 pandemic. And of course, the casinos in Las Vegas facing a threatened strike of their own. It's been authorized, Kelly, but has not yet been called. Wow. Contessa, thank you very much. Contessa Brewer. Still to come on Power Lunch, with the emergence of the cloud, Amazon dominated the early space. Now AI is ushering in something new, Cloud 2.0.

Has Amazon already fallen behind? And if so, who's the leader? We'll discuss that next. Welcome back to Power Lunge. For the past 15 years, Amazon's AWS has been the undisputed leader in the cloud space, now making up for about a third of the total market. Its clients include big names, like Netflix and Disney. Don't get much bigger than that that use the service to store their content. But with the rise of generative AI, companies need the cloud to do even more to create the text, the images, the videos.

It's become famous for requiring massive computing powers. in this race for the so-called cloud 2.0, does Amazon still have the upper hand? Joining us now to discuss is Sakeen Deb Dugel, co-founder and CEO of Builder.AI, and Daniel Newman is CEO and principal at the Fultram Group. Daniel, let me begin with you. Is Amazon faltering in Cloud 2.0, and is someone catching up with them? Tyler, I think there's a couple of different ways of looking at this. When the LLM craze took place, Microsoft got out to a head start, and Google had an initial

launch, and it faltered a little bit. And everyone kind of deemed that Microsoft was going to be the ultimate winner, and Google was in big trouble. A matter of just a few months later, we saw Google make massive strides and got its groove back in the LLM game. I think we have some of that here with the NVIDIA-AWS race. NVIDIA is certainly the leader in training and has a pretty big advantage on the developer side with Kuda. But AWS has a massive advantage in terms of data under management, the number of enterprises depending on its workloads, already building on it.

And I don't necessarily seeing them falling off. But I do think we're seeing signs of competition that should make the next wave of innovation more interesting. Sartan, he mentioned Kuda. I need you to explain what Kuda is for those who don't know. and what advantage it confers on invidia. And whether invidia, which to my thinking is mostly a chip company, can make the pivot or has made the pivot into the kind of storage neighborhood that the cloud requires, I should point out that Amazon was a retailer that made the pivot into storage.

And Microsoft was a software company that made the pivot into the cloud. So, you know, I think they're obviously starting with the initial question, Kuda is an architecture type, compute unified device architecture. And really think about it as a different way of building a GPUs are what a lot of the generative technology is running on these days. You obviously have different sort of structures. Invidia has Kuda toolkits that have been around for a while so that developers can build upon it. But I think, you know, taking a step back, when you think about the world of AI and what's happening on the generative side, and AI more broadly, you have to look at it as an iceberg.

And so what we're seeing on the AI side is the upper end of the iceberg. But what's underneath is more than just GPU compute. You've got the connectivity between machines, you've got data storage, you've got normal sort of density of compute capabilities. And in the 2.0 world, whilst the additional features around GPUs

and being able to run models and being able to do generative AI, important. I think what's also really important is to recognize that these hyperscalers have sort of a really strong critical mass of distributed compute globally, all the storage, all the connectivity that allows them to do more than just a generative piece. And they'll always go hand in hand. Sotchen, it's interesting because, as Tyler was saying, the companies that came to the rise of the cloud kind of did so backwards or by accident or then hurrying to catch up. A lot of people think startups, I ask you because you have, you know, sort of one of them, but that they can't really

try to own Cloud 2.0, even if they see the opportunity, because the incumbents are simply too big, too acquisitive, too innovative, if you will, and can too easily just maintain their leadership instead of seating it to new players. You know, and there's a really common thread between all of the counterparties that you'd mention that have sort of come into Cloud. You know, Amazon came into Cloud or AWS because of Amazon's. Amazon.com sort of just volume of usage of compute. So effectively, the Amazon.com consumption in itself fortified the need for large-scale infrastructure. You had the same thing with Microsoft.

You had the same thing with Google with search. And so for them to allow then excess capacity to, what started off as excess capacity to be sold made a lot of sense. So as new folks are coming in to build that volume of demand and then the distributed infrastructure you need for cloud to be really prevalent globally. It's not a short order. And, you know, it's a really expensive exercise. And I know Nvidia has its own sort of cloud environment, specifically designed for the upper end enterprise. I think it's hard to make that comparison between, you know, is it ahead or behind of AWS? Because ultimately,

Nvidia is a chip manufacturer. It doesn't have critical mass of cloud infrastructure. It's obviously opening up cloud infrastructure for very specialized use cases. But that's a very different route to how all the others got into the space. Yeah, it's interesting. It was kind of, you kind of went at the question I asked there earlier about, you know, I think of Nvidia as a chip company, chip manufacturer that's moving into something else. So, Daniel, if I have $100,000 to invest here in cloud 2.0, how would you sliver it up as among the companies we've been talking about or others? Yeah. So if I was an investor, I'd be looking at where the market is going.

I think Nvidia got a little ahead of itself. And I wrote a piece in op-ed over three years ago that said Nvidia would be the next trillion-dollar market cap company. Our intelligence at FutureM is basically saying that 60% of the 2027 revenue opportunity for AI is going to be in the cloud. So the companies that haven't benefited as much, but are still really big and exciting names

that people can get behind investors, both large investors and personal investors, names like Microsoft and Google. They look very strong. Then I also like the application layer because businesses running Oracle, SAP, Salesforce, they're going to have to implement generative capabilities into these apps that are very powerful, and they're going to be at a low cost. So this is going to drive productivity and efficiency into the business.

So I feel like the chipmakers got the early credit, especially in VIDIA. And the only other thing I would say is that I don't rule out AMD and Intel. They're making the big investments. They're going to come in late. but they're going to be able to take advantage of the margin compression. They're going to be able to take advantage of a certain part of the market that maybe didn't get the attention from Nvidia. And they're building some really interesting technology

that I've been able to see that I think is going to be exciting to the market in the near future. Very interesting conversation. Sachin, thank you very much. Daniel, thank you as well. Really helpful. And I think you help viewers there understand this new field better than perhaps they did before. Thanks again, guys. Thank you so much.

And coming up, we'll get a very much. preview of the new CNBC documentary, Crypto-911, exposing a Bitcoin billionaire. With a never-before seen look into a $3 billion Bitcoin heist, power lunch will be right back. Welcome back. For nearly a decade, it was one of the biggest mysteries in crypto, 50,000 Bitcoin stolen from a site on the dark web, which would one day be worth more than $3 billion. The case went unsolved, until the man behind the crime made a critical error. Now a new CNBC documentary, provides a look into one of the biggest heists in history. Amon Javers has the story.

Jimmy, how do you feel after this today? Jimmy, you feel like the judge was fair today? Why'd you steal the money, Jimmy? A spectacular crimes. This is going to be a huge case, and there's a lot more money that we don't know about. In a small town. Shocked. I was shocked.

I was so surprised. A 28-year-old secret Bitcoin billionaire, his private jets, wild parties, and dark secret. It was just a surreal feeling and with Jimmy there were no limits. This is the story of one of the biggest crypto heists of all time. He's living this party monster lifestyle and with no visible means of support. Right. With clues dating back to the earliest days of Bitcoin itself. In a story that reveals a dark truth about the hackers and coders who created cryptocurrency in the first place.

A huge amount of Bitcoin is leaking out of the system and you have no idea where it's going. It's a huge question. And the man who could have gotten away with him, except for one phone call that led to an abrupt end to a nearly decade-long manhunt. Card counting, 911. What is your name, sir? It's Jimmy Wong, V-H-O-N-G. And that's just a sneak peek in this documentary IRS criminal investigation. The agency that investigated the case takes us behind the scenes and shows us how they cracked the mystery here.

We also get a detailed look into their interactions with Zon. and a look into his bizarre life. You can check it all out on CNBC.com, or if you take a look at the QR code there in the right hand corner of your screen, you can scan that and get the link directly to the documentary now, Kelly. It was a very good tease.

Now I want to know what happened on that phone call. We do. We're going to find a way to... Yes. You've got to watch it. Amon, what drew you to the story in the first place? Well, look, this was one of those stories that was like, you know, the classic tale

of unpealing an onion. You know, the more we'd, dove into it, the more we found all these intriguing little bits and pieces about how this story came together. It starts with that 911 call. This is in Athens, Georgia. It's a college town. It's not known for big-time crime. And yet sitting right there in that bungalow off campus was a guy who had stolen $3 billion in cryptocurrency. It's a fascinating story of how he thought it would change his life. And then in the end, it really didn't change his life the way he experienced. necessarily. Page Torturelli, our producer on this, spent months and months on it and really

did fine work in uncovering the exclusive body cam video and other details here that really have never been seen before. Can you tell us where he is now? He is in prison now. He was sentenced to a year and a day, not to give away too many spoilers, but Jimmy Zong started making that 911 call because somebody had stolen from him. But in the documentary, we reveal that those were stolen assets themselves. He was sitting on allegedly $3 billion worth of stolen cryptocurrency at a time when he called the police to report a theft of much less than that. And when the police got there, their big question was, where did you get all this Bitcoin

from in the first place? And that started to unravel the whole mystery. Can you tell us, Amon, how much the Bitcoin was worth when he first stole it, or do we have to watch to find out? You have to watch to find out. It was 50,000 bitcoins when he stole it back in 2012. So it was worth almost nothing compared to the $3 billion that ultimately ended up being worth. And there's some real interesting comments online already on the YouTube video.

There are a lot of people here watching this and coming away very sympathetic to Jimmy himself, who's the thief in this case, and very critical of the IRS. And then some other people who say, you know, the IRS is just doing their job here. They have to go after cases like these. All right. Amen, it's going to be fascinating. We'll watch. Thank you very much.

You bet. Coming up, dollars, discounts, drugs. We'll get the trade on Goldman Sachs, Dollar Tree. And Johnson and Johnson, there's a fresh three. stock lunch on the other side of this break. All righty, everybody, time for today's three stock lunch, and we are going to take a look at three big movers here with our trades. CNBC's senior contributor Michael Farr, chief market strategist at Hightower Advisors. Up first, let's go to Johnson and Johnson topping quarterly earnings and revenue estimates. The company also hiking its outlook as MedTech

pharmaceutical sales surge. J&J's first quarterly results since the company completed the separation from its consumer health spin off called Kenview. The stock down almost 2% today and has dropped about 12% this year. We're throwing you some red meat here, Michael. What's your take on J&J? Well, you know, I'm very unfamiliar with this company, Tyler. I've only talked to you about it for, again, 20 years would go back.

First, I can't wait to see this crypto 9-11. Amon Javors is so good, but this guy got one year and one day or something like that for $3 billion? I mean, one year and one day for $3 billion. We need to talk about that later. Johnson and Johnson. Okay, this was not an awful quarter. The numbers were okay.

The talc liability is still hanging as kind of a cloud above this stock. The pharma had outperformance. The oncology and immunology had outperformance. Oncology, sadly, is a very robust area for any company in the pharma business. The devices were down a little bit, but I think, you know, 15 times earnings, and it's up, I guess, down 13% year today, 3% dividend, and growing earnings at 9% over the next five years. That's probably going to be higher than the S&P's growing those earnings, and you're able to buy it at a discount on a P multiple to the S&P 500. I like it, as you know, a AAA balance sheet. I've owned it for years and years, but I would add to it at these levels. It's a buy.

Michael, they're going to kill me. Kenview, give me a quick line on Kenview. Are you happy they spun it off? You don't want to own it? Are you happy to own it? You're not worried about its underperformance real quickly? I think the spinoff was probably wise. I've sold mine off. I'll take a look at the company once I get a better sense of their financials for the longer term. All right. Appreciate that. Let's go to Goldman Sachs then because they're reporting in the morning. I'm sorry, this morning. Topping estimates on stronger than experience. bond trading. The stock is trading, you know, somewhat under pressure down about 2% today. Is that just the market? You know, is it better than expected all things considered? What would you

do here? They beat a lowered estimate, Kelly, at Goldman Sachs. And I'm happy that they're getting out of that consumer business. I mean, Goldman has not had a, has not had a great year. I mean, they're down on the year about 10%. But you compare it to Citigroup down 21% or Bank of America down 26 percent, not awful, right? Not awful. So it's right now Goldman Sachs is one times book value. One times book value. Now, one of the things I've always sort of said tongue and cheek, but not really, is, you know, sometimes the customers make money at Goldman Sachs and sometimes they lose money at Goldman Sachs, but Goldman Sachs always makes money. I like this company for the long term. And when things are volatile, and they haven't been volatile, when things are volatile,

these guys make even more money. So it's tough time for banks, rising interest rate environment, all of them have been under pressure. This one's going to be one of my buys. I would buy it here, not aggressively, but I'm comfortable adding to it here. All right, let's see what you think of Dollar Tree. Shares the discount retailer up more than 4%.

The company getting an upgrade from the aforementioned Goldman Sachs to buy from neutral, strong earnings growth potential. What do you think of Dollar Tree? This is where I wish I could sort of really do a good Joan Rivers imitation of the, Oh, oh, yeah. You know, she was so good at that. No is the answer to Dollar Tree. Now, Goldman likes it.

They've got four times debt to EBITDA at Dollar Tree. And even though they've outperformed, I mean, you know, so they're down 20% for the year, Dollar General's down 52% for the year. We've seen consumers spending and retail sales today. You guys have been talking about it. We're strong. At some point, this consumer is running out a wallet. We've seen the credit card bills start to mount over a trillion dollar.

in credit card debt now. This is low-end consumer stuff. I don't like the debt. Sales were up 9% and yet earnings are down 40%. So they're not able to pass the cost structure along and with four times EBITDA debt as those interest rates go up, that's going to really eat into margins and hurt those earnings going forward. I'm on the sidelines when it comes to dollar tree. Absolutely. So that's a yuck from Michael Ford. Yuck. Yuck. There you go. The John Rivers, yuck. All right.

Thank you, Michael. Good to see you. Nice to see you. It's closing time after the break. Welcome back. 90 seconds left. Let's get through as many stories as we can. And we'll start with this Lending Tree survey,

finding 51% of American adults think they're better off financially than their parents were at their age. Numbers 57% for Gen Z. So they're feeling better. We're really teeing up the next story because wait for this one. Here we go. This next story must apply to the other half. of Gen Z, according to Redfin.

38% of recent home buyers under age 30 received money from their family to help with a down payment, giving rise to the term nepo homebuyers. Nepotism, I guess, is the route there. It's unavoidable. This actually widens, you know, income and wealth

inequality because it's great to be able to draw on those resources if you have them, but for people who can't, good luck. Yeah, you're locked out. And one of the top cellists in the world is getting the Taylor Swift treatment tickets for Yo-Yo Ma's, upcoming. concert in Hong Kong are fetching more than $2,200 a piece on the resale market, similar in price to Swift's upcoming ERAs tour show in Argentina.

That is nine times the highest price of a ticket sold by the concert organizer. The Yo-Yo Ma film. Should I see it? No, you should see it. Well, I will just say, we always get our Taylor Swift in news in here. And I love the fact that this is Yo-Yo Ma coming in hot. And I wonder who he'll be dating. We'll see.

They're both on the market. Thanks for watching, Palo. Closing bell starts right now.