Power Lunch - Dow gains as traders shake off tariff developments 7/10/25

Episode Date: July 10, 2025

The Dow rose on Thursday, as traders shook off trade tariff turmoil. We’ll cover all of the angles for you. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch alongside Kelly Evans. I'm John Fortfront and center this hour. Investors are watching closely as tensions rise between the U.S. and its key trading partners, raising fresh concerns about supply chains, corporate profits, and the global growth outlook. So what does the uncertainty mean for your money and where are the markets headed next? The next test for the rally is earnings. Kickoff next week as we start to get quarterly results from all major companies. Not just the numbers that matter. Of course, it's the commentary, the guidance.

what are CEOs saying about inflation and the outlook for the second half of the year? That's already driving investor sentiment and shaping market direction. But right now it's shaping it in a very positive way with the major averages at or near all-time highs. Indeed. And let's start today in Washington where trade rhetoric is heating up both at home and abroad. Megan Kisela joins us now. Megan. Hey, John, that's absolutely right. Just in the last few minutes, Brazil's president Lula, standing strong against President Trump's threat to impose 50% tariffs on Brazil.

imports, warning that if the U.S. moves forward, then Brazil will respond in kind with 50% tariffs of their own. The threat from President Trump came in the form of a letter as he's been sending all week. But guys, this one was strikingly different, most notably, because Brazil was not until now facing a reciprocal tariff. The U.S. runs a rare trade surplus with Brazil, so there's no deficit to fix here. Instead, President Trump saying in the letter that these tariffs are explicitly for political reasons, he says, due in part to Brazil's treatment of the former Brazilian president, Bolsonaro, which Trump called a witch hunt. Trump also blamed what he called insidious attacks on free elections and the free speech rights of Americans.

And the other thing now to keep in mind is how close Brazil has been getting with China. Beijing has been investing heavily in Brazil in recent years as a look to de-risk away from the U.S. since the first Trump term. It's become Brazil's largest trading partner. You can see here about 28 percent, some $94 billion of Brazil's exports go to China versus about 12 percent. going to the U.S. So now with this move, there's a question of whether this could push those two further together, leaving the U.S. sort of the odd man out. Guys? Well, Megan, is it even a question? I mean, China's certainly looking for places to land, to use a kinder word, the EVs, that it's making in great abundance. And Brazil is part of this BRICS consortium that investors are used to

thinking about that at the moment seems to have drawn the ire of. of the president? Absolutely. The president calling it anti-American, really not liking the BRIC summit that he saw. I think it was just last weekend

those leaders getting together. And over the last six months, even, we've seen a number of meetings between Lula and Chinese president Xi Jinping. It works both ways. Brazil, a worthy customer for a lot of those Chinese goods,

as you mentioned. And China also taking a lot from Brazil as well. Brazil sending 12%, as I said, to the U.S. each year, someone needs to pick up the slack if these exports, if these tariffs, I should say,

go into place. and China can be the one to do it, just bringing them even closer together. Meantime, Megan, more headlines on the Fed chair? Yes, that's right. Just in the last few minutes as I was coming to sit here, guys, the OMB director, Russ Vought, posted this letter on social media that he sent to Jerome Powell, saying the president is extremely troubled by what they call the management of the Federal Reserve system, specifically because of this ongoing renovation of the Federal Reserve buildings,

which are now going late and over budget. and so VOT saying that the OMB now has to get involved. Powell's recent testimony to Congress, he wrote on social media, has led to serious questions that now require additional oversight from OMB. He also said Chairman Jerome Powell has grossly mismanaged the Fed. Now, guys, remember, the Fed does not take funding from Congress. It's still an independent agency in that way. But the OMB now saying they're going to look at least into this renovation.

We'll see where it goes next. Right. I think they still report to Congress in that sense. Megan, this all comes down to this, renovation, which has been expensive when the Fed chair was asked on Capitol Hill about it. I believe he kind of dismissed the idea that it was grandiose. And I use some phrase like, you know, there are no bees. There are no gardens or something to that extent.

But then there's questions about to, well, what are the plans on the rooftop? I mean, this is the level we're getting to in terms of granularity for the buildout of this. And now we're going to have to, I think, hear both Chair Powell address at the Fed itself. And then DC officials, everybody kind of trying to. to figure out what was approved and how much the project has kind of overrun the original vision and everything like that. Absolutely. And how does it get this far over budget?

There are some specifics laid out here, VOT saying that the new project will result in an average of 512 square feet per employee when the OMB recommendation is 150 square feet per employee. There's all sorts of things, as you mentioned about gardens and fountains. It is a number of buildings. It's not just one building, but the estimate currently coming in now for $2.5 billion for that renovation, Votte says in his tweet that the Palace of Versailles would have cost about that amount in today's dollars. And so it shouldn't have to be that much for the Federal Reserve system. So I think we're going to learn a lot more about all of this coming up as the OMB asked the Fed chair to testify on what exactly he's doing. All right, Megan, thanks. We appreciate it for now. Megan Kisla.

Let's get back to tariffs where our next guest says the latest moves, the new letters, the new rate, signal some concerns about where the trade war is. is heading. Tobin Marcus is head of U.S. policy and politics at Wolf Research. Tobin, what are you gleaning from this? Because markets are now, I think we can say, shrugging this off, right? Absolutely. I think the fact that nothing is actually happening for several more weeks is all the explanation that you need for markets continuing to ignore this. For now, we've had enough twists in terms in the tariff saga that I think anything that's not actually taking effect is going to continue being treated by investors as essentially a hypothetical future prospect. But as we try and look ahead, look around the corner, I do think that the

pattern of actions that we're seeing from President Trump this week suggests he's getting ready to keep pressing. There is a bit of a chicken and an egg issue where, you know, market reaction to big things he has done on tariffs is the main thing that seems to have restrained him so far. That's certainly what put the bottom in in early April. And insofar as we're seeing a lot of market and economic stabilization, I think that gives him permission to keep pressing, you know, to the accept that he wants to, and I do think he wants to keep pressing. So it seems like he's running out of patience with some of these talks. I think the Wall Street Journal reporting earlier this week that Besson had to kind of make the case to him for an extension, make the case that we can get some

more deals in the next few weeks if we just allow a little more time and apply a little more pressure. You know, hopefully it works out that way. But I do think that the president is probably feeling like he has room to press on some of these countries if he wants to. Well, Tobin, you just said chicken or the egg, and chicken we've learned is the president's least favorite market word these days, to what extent do you think he might feel the need to show that he means business? And that's what these letters are about. And perhaps he's going to be determined to press this further than he did last time. Yeah, I think that he wants outcomes in these talks. I don't think that he is going to be happy with just sort of 10 percent forever, no concessions,

no, you know, nothing he can label as a win in these bilateral negotiations. And the negotiations have been slow so far. And I think he is probably feeling like he may need to make an example of someone at some point in order to get the breakthroughs that he wants. So I would not be surprised to see some of these rates actually take effect on August 1st. I think also in terms of the extent of risk that he perceives from moving forward here, you know, if China is not part of this next wave of actions, if the EU gets dealt with separately as it seems somewhat likely will happen. And if Canada and Mexico, of course, are kind of in a separate category, having never faced reciprocal tariffs, I don't think he necessarily feels like hitting the Asian export complex hard is going to cause some big market-wide calamity. And I think that's probably true.

So I think, again, if he wants to press, if he feels like he needs more from these countries than he's been seeing, I think he has that maneuverability. Still, I'll be curious if and when, at what point do we really see a bigger market rate? And we've seen it in some areas. Look at copper. You know, it was up 10 percent the other day. whatever might be happening. So sector by sector, Tobin, it does feel like there's an effect. I just wonder, you add it all up. And what's happening with NVIDIA on the eye front, for instance, is more compelling. Of course, even there, there's a market restriction issue that Jensen Wong is

apparently working on right now. But in other words, it's not as if there's no effect or no fallout, but it's just not adding up to something top level right now. I think that's right. I don't think tariff headlines are going to cause another violent market-wide sell-off, like we saw in early April. I think that what we should be looking for are, on the one hand, sectoral effects, you know, if we lock in something with Japan and there's no relief whatsoever granted on auto tariffs, which would be my expectation. That's been one of the big sticking points. Are these 25% auto tariffs going to stick?

If so, that matters to Toyota, to Nissan, to anyone who's exporting cars from Japan. You know, and again, we've already seen some of that with these sectoral tariffs. And then I think the other one is when we actually start to see the effects show up if we get hotter inflation prints over the summer, if we start to see margin pressure from companies that are finally deciding to pass through prices as this drags on and on and on, then that'll start to matter in a more concrete earnings-driven way. As the world watches President Trump and tries to read him, I wonder if this Brazil move today might be a game changer in that this clearly is not about trade fairness. The president didn't even try to frame it that way. And there are a number of trading partners, particularly in Southeast Asia, who are determined to balance their treatment of China and the U.S.

U.S. and have feared being forced into a position where they have to choose. I wonder if this Brazil situation, how it plays out, perhaps, to what extent Brazil keeps its firm position here, will have global implications, especially for trading partners, for example, in Asia. Yeah, I think Brazil, you know, in some ways bears some resemblance to the initial terrorist that with Mexico. I mean, we have seen the president using tariffs for explicitly non-economics economic purposes, in that case on migration and fentanyl earlier in this administration before we even got to Liberation Day. So I think it's not unprecedented in that sense.

But I absolutely agree that Southeast Asia is one of the big battlegrounds here. We've always thought that they would be very, very, very hard-grressed to address either of the main concerns being raised by the U.S. side, which are on the one hand balancing trade, which is not really realistic in most of these cases. And on the other hand, extricating their supply chains from China, which they also, I think, have both economic and geostrategic reasons not to do. So I think that's why, you know, we saw the Vietnam trade deal lock in a higher rate. Still very unclear exactly how that's going to work.

Certainly how the 40% trans-ship in tariffs are going to work. There are no details on that at all. We've always thought that the tariff rates would probably be heading up over time in Southeast Asia, given that they can't fully satisfy the U.S. And they're torn between the U.S. and China. Do you see then market impacts for the Asian indices, perhaps coming down the line later in the year? Yeah, I think that's very plausible. And then even for U.S. companies, um,

you know, the sort of Vietnam exposed softline companies, you know, were mostly constructive reactions to the Vietnam deal last week. Again, there are still some questions about how that's going to work. There's been a very active debate in markets about whether or not they really mean 20 percent as the new number for everything across the board, or my interpretation would be that they mean taking the previous 10 percent incremental baseline tariff up to 20 percent, which would mean significantly higher tariffs on some specific categories like apparel, like footwear, that have tariffs that predate the traffic administration. You know, in the absence of clarity about that, which we won't have until we actually get text on that deal.

It's a little bit unclear how good or how bad it is for U.S. retail names that have supply chains running through there. But, yeah, absolutely. I think as those numbers drift higher, like the market reaction we've seen this week suggested people are not taking it to the bank, the Thailand, Malaysia, and so forth. They're actually going to see these higher numbers. Trump's articulating. All right.

Tobin Marcus of Wolf Research. Thank you. Now let's check in on the bond market, a 30-year auction out in the last hour. yesterday's 10-year went smoothly, but interest rates still skewing higher overall. Rick Santali, what do you see in in treasuries? You know, it's amazing how after $119 billion in coupon supply, 3s, tens and 30s, after the last auction rates slip. Now, let's look at a three-day chart of 30-year bonds, the longest maturity on the yield curve.

You can see on Tuesday, we came very close intraday to 5%. Now, if you look at a chart starting in May, you can see the high yield close for the year for a 30-year bonds was at 509. And if you pair that up, if you pair that up with a tenure, it's interesting because the tenure made its high yield close in January. January. So why am I showing you the difference there? Because we see a widening out of the maturities. Look at the difference between a 30-year and a 10-year. They call this the knob spread.

The knob spread began the year with a difference in 10 and 30 year yields of 20 basis points. That difference today is in the low 50s. It's more than double. That explains many of the reasons why interest rates on longer maturities have rocketed higher, whether it's just a notion of we have to have a bigger distance in between each maturity or the fact that longer dated treasury yields are moving out higher because of the debt and deficit issues, the short end is paying more attention to the pressure being put on the Fed to lower interest rates. Now, consider, we had 227,000 initial claims today.

That's really good. That's the smallest amount of initial claims since mid-May. So many of the metrics for the economy might not be at their best levels, but they're certainly not losing it in any aggressive way, which really makes sense then that the yield curve is going to have long maturity is a little higher, short maturity's a little bit lower, and that dynamic might put the long end in a trading range. For 30-year bonds, that range would probably be about 4.6% to just under 5%. For a 10-year note, you're looking for the recent range in the future from 4.5% from 4.5% John, back to you. All right, Rick Santelli, thank you. Well, we've got a lot more to come. First, OPEC bullish on renewables, plus Tim Cook.

in the hot seat, kind of, and some exclusive comments from the president of Microsoft on AI and your job. Power Lunch. We'll be right back. Welcome back to Power Lunch. Today is the last day of OPEC's international seminar where energy leaders gathered to discuss the future of oil production. Our Brian Sullivan has been there in person, bringing us the latest from Vienna the whole time, right? Yeah, John, and today was also the day that OPEC released its world oil outlook, Basically, it's annual look at energy markets about 350 pages long. We read it so you don't have to. Let's pluck out some of the key findings.

Number one, OPEC, along with others, by the way, sees huge energy growth coming over the next 25 years. Energy demand up 23%. Why? Because populations growing, they see almost 10 billion people on the planet in 25 years. That's going to jack up global economic growth. Somebody call Steve Leesman, 378, whatever trillion dollars, whatever the number is, all from 171 trillion.

That's going to help drive all forms of energy demand. But here's what's surprising. OPEC is very bullish, as you said before the break, on renewables. Yes, the organization for petroleum exporting countries also bullish, not just on oil and gas, but on wind, solar and hydrogen. In fact, look at this graphic, the far right. That is other renewables. OPEC, the oil group, sees more growth in renewables than any other form of energy singular.

the next 25 years. Earlier today, we chatted with the CEO Baker Hughes, Lorenzo Seminelli, and I asked him about Baker Hughes's opportunity in hydrogen. We play a critical role in providing compressors, turbines, and the equipment that's required for hydrogen. In fact, today, we already have a hydrogen-ready gas turbine. We already have compression that's utilized in facilities such as Neom, which is a hydrogen facility. And we see hydrogen being part of the energy mix going forward. And you heard from Saudi Arabia, they're investing heavily. And we see Saudi Arabia playing a big role in hydrogen expansion in the future. Now, Simonelli being here is one reason we are here. Listen, we understand there's a lot of strong

views about OPEC. There's been no OPEC bills floating around the U.S. Congress for decades. We understand it. There's a lot of strong opinions. One of the reasons we're here is to try to bring OPEC a little bit more into the light, if you will. The CEOs are here, try to figure out what this group is really all about. And Bob McNally, who is at Rapidan. He's a known guest on an oil, an energy person on CNBC. Bob McNally explained that the oil markets would actually be a lot more volatile if it wasn't for this group. Listen. The only thing worse than OPEC managing the oil market is OPEC not managing the oil market. Why is that? Because when there's no swing producer, you get wild boom-bust price volatility. Did Americans enjoy $143 a barrel in 2008? I don't think so. We ran out of spare capacity, as we did in 1972. Did the shale oil industry enjoy negative $37 in May of 2020? I don't think they did. President Trump did.

President Trump did, didn't. President Trump abdicated decades of hatred and loathing of OPEC to become an OPEC Achievement Award winner that year by begging OPEC, plus to cut production to save shale. So when you don't have a swing producer, you get oil price volatility, and that oil price volatility is unbearable, not only for consumers, for producers, and for government salient. So you can have your views on OPEC.

I certainly get it. But what you can't have a view, view on is that energy demand is not going to grow. You can disagree John and Kelly on how much it's going to grow. OPEC obviously sees a lot of energy demand growth, much of that, yes, coming from oil and gas. But guys, I know that we talk about AI and John, Amazon Web Services, hyper-scalers, AI demand growth, certainly also part of that whole scenario, which is use it all, except for coal, by the way, which they see declining rapidly over the next 25 years. You're getting some good access, Brian. We don't have to get into it. But the fact that you're there and able to talk

to us about it and kind of give us a feel for everything that's going on, you know, might be more and more difficult to do. Yeah, it might be more and more difficult to do. And, you know, I get it. There's a lot of views on OPEC, certainly in the media and here as well. But I think at least from our point of view, we're here. We cover the CEOs. We cover the oil groups. We want to get to figure out who these people are that are making these decisions, sort of pull them out of that back room. kind of got this idea. It's like, you know, in a back room, chomping on a cigar, decided to, you know, put a hotel on Baltic Avenue or whatever it might be, Kelly, but this idea to kind of bring them out into the sunlight and say, look, this is who these people are, this is what

these countries are all about, this is what they want. We don't always have to like it. We don't always have to disagree with it. And they don't certainly have to like all the journalists that cover it, which I think is what you're getting at. But at the same time, I think it is important, at least to be here and sort of try to figure it all out. Why do I get the sense, Brian, from what you're saying that at OPEC, there isn't this backlash against renewables and global warming. Is this kind of like a portfolio hedge for them? And are they watching the science in particular or just hedging their bets against the possibilities in the future? Yeah, I don't know. It's a really good question, John. I don't know. And I'm not being coy

about it. I actually don't know. I would say the word most used second probably to oil or energy or so third would be transition. And OPEC will sort of remind people that Saudi Arabia has invested tens of billion dollars in solar. Of course, they have a lot of sun, a lot of desert. It's hot. As well as hydrogen, other countries as well. Again, I get it. There's going to be this point of view where it's like, well, they're just saying that to hedge their bets. But these are countries that a lot of them are putting their money where their energy is. And if you're, if you're saying it, it's one thing. If you're putting money to it. It's another.

And I, what's that? I'm going to screw it up, guys, because it's been a long couple days. But there's a saying, it's like, what's the difference between, like, commitment and a contract, a check? I know it's like an old saying, and I probably botched it. But if the money is flowing there, maybe that's, Dave, that's where the puck is headed. I'm mixing a lot of metaphors here for a long couple days. I was totally tracking. Brian, it looks beautiful there.

Thanks for all the work you're doing. We really appreciate it. Safe travels back. Brian Sullivan. Thank you. All right. Up next, AI has been driving some wild runs in the tech space, specifically in Vida. But should you be chasing these names as they climb to new records, market navigator explores that next. Welcome back to Power Lunch. Our next guest sees a shifting landscape in Mega Cap Tech, where the leaders of your are not necessarily the winners of tomorrow, although there are still some that have staying power. Joining us now is Thomas Martin,

senior portfolio manager at Global Alt Investments. Thomas, it's great to see. see you. Let's start with a name like Netflix and a few others that you think are popping up as those that will become the leaders in the, I guess we're calling it the AI race. Right. Well, thanks for having me on your program. Yeah, so the Mag 7 a while ago did move a lot similarly, but now there's really a difference between those companies. And there are those that are doing well and those that aren't doing well. And Netflix is one of those that is, continuing to do well and to have strong earnings growth and strong underlying fundamentals with their viewers. So we like them as they continue to introduce new products and gain share.

But you think names like Tesla and Apple, those could really be out of the leadership position for some time now? Well, they have been and they are struggling. It would make sense that they would be able to get back in. But they're going to going to have to overcome some of these issues. I mean, with Apple, it's the whole, how are they going to be able to take advantage of AI on the phone, which is, you know, a great opportunity, but they just haven't been able to really execute on that. And that's hurt their sales of their phones. And with Tesla, you know, their core business in the EVs has been struggling. And that only accounts for a part of the valuation of the company. You really need to have the automatic

self-driving and the robo-taxies and the robots to be able to work. And so far, that's been the slow go for them. We're showing your five favorites. Microsoft, Netflix, has mentioned, NVIDIA, Amazon, and META, whereas Alphabet is one you're more negative on. So you think they are going to be more a victim than a winner in AI? Well, they can win. It's just that there's a lot of competition and the competitive environment is changing. So they have, I think, successfully answered in their AI search, you know, search with AI product. But, you know, when you go from a market share in search that is huge, and you have a change in the paradigm from just plain old search to AI search, and you have a couple of announcements recently from OpenAI and from perplexments,

etc. that they're going to be having their own browsers. That puts a fair amount of pressure on that very high level of market share. Yeah, we also showed the kind of underappreciative ones you think could be advertive, which is down today on some competitive questions. You like it still. You like Vistra, Quanta. So those are some other names where people can look beyond mega cap tech. Thomas, for now, appreciate it. Thanks for joining us today. Thanks. Thanks very much for having me on. Thomas Martin, we're in the navigator cap. Over to you, John. All right, Kelly. Well, coming up, AI is reshaving the tech industry and more as we speak. It's a tough race.

One thing is clear, though, if you're not first, well, you're not first. Apple seems to be falling behind. Some critics are saying it should cost Tim Cook his job as CEO. We'll discuss that next. Welcome back to Power Lunch. Apple, once the poster child of American ingenuity, is arguably falling behind its peers in the AI arms race. It's not going unnoticed on Wall Street. The stock is the second worst performer among the MAG 7 this year, with only Tesla fearing worse.

And now analysts at Lightshed partners calling on the company to replace CEO, Tim Cook, writing Apple now needs a product-focused CEO, not once centered on logistics. The stock has skyrocketed almost 1,500 percent since Tim Cook took the helm back in 2011. Yesterday, we discussed how one of the CEO candidates seen as a potential, candidate in the future, chief operating officer Jeff Williams is going to soon transition out of that role to retire later this year. So back here with us to continue the discussion about Apple's succession plans, the CNBC's technology correspondent, Steve Kovac. Steve, I have limited patience for the kind of calling for CEOs heads. When people are looking at stuff

outside the company, and I think seem to have very little historical context for how this company, how this company works. And you and I have covered this company for many years, and we've seen this before. Like when Tim Cook first took over from Steve Jobs, that was literally the same criticism that he got, right? Oh my God, we're losing this product genius at the helm, and now we have this operations dork running everything instead. And then we saw that play out throughout his tenure multiple times. I mean, and it seems like every time you see Apple slip back a little bit, everyone starts questioning. This happened when Johnny Ive left six years ago. This happened when Samsung was kind of innovating on phone designs and making these big screens and getting people

excited about different kinds of phones outside the iPhone. Cook managed his way through all of those challenges. Yes, artificial intelligence is different. Yes, it's also still early days, right? And he has made some changes among the leadership ranks to potentially fix this problem. And we'll see if they can do it. Now, if they can't do it, if they missed their second shot at this, okay, then maybe the conversation can get started again. But look at look at what we're we're starting here. I mean, these are huge products that Apple has launched under Tim Cook, and this idea that nothing has ever happened under him, seems crazy. Walk around any city in the country, and you're going to see everyone wearing AirPods. You can see everyone wearing an Apple

watch. Apple TV shows are so many smash hits there. I mean, sure, it's like a marketing thing, but at the same time, he has the track record. Yeah. So, I mean, it doesn't mean in the future won't happen, but boy, has he proven the naysayer's wrong every single time. culturally, under Steve Jobs, had a history of missing software-driven shifts. iTunes was a catch-up move after Steve Jobs was focused on iMovie and DVD burning instead of CD burning. And then they caught up. And then you can go to the Apple Maps debacle where people are saying, oh my goodness, how will they ever do without-I use Apple Maps, but sure. Mobile Me, Ping, all these things software-driven, social media driven, where it's not exactly an Apple

wheelhouse, but they seem to manage to partner up with somebody while developing their own, and then they manage to come out ahead. And that's exactly what we're hearing about the AI, on the AI front. It seems like Bloomberg reported a couple of days ago that they might just give up on doing their own LLM and do exactly what they did with Google Search and have a partnership, a very lucrative partnership, by the way, for both sides, and leverage that technology and build on top of it. And so they kind of have this backup or insurance, or what have you to get this out the door next year. Now, again, if it's not, if they missed their second chance at this, sure, there's some real

questions of whether or not they're ready to meet this AI moment. But right now, are we seeing people ditching their phones to start using? I mean, what are they using chat cheap E.T on? They're using it on their iPhone. They're not using it on a Samsung device. I wonder if the thornier problem is we were talking a little bit last hour, you know, to get the book, Apple and China. You know, Tim Cook being the operations guy,

this being a whole supply chain thing, you know, are they going to bring in somebody who's really directionally moving more of the supply chain to India with all of the... They're already doing that, though. Yes. And it would be to do it much more so, I don't... Who's going to make that call? Who's going to figure that out? But how could they do it more?

I know the thesis of this book is kind of Tim Cook, you know, kind of dug himself into this hole and he should have foreseen this and that the tariffs would happen and to rely on China and so on and so forth. But they started their India journey over a decade ago. You've got to keep that in mind. He planted a – Tim Cook planted a flag down in India over a decade ago. He started talking about this kind of stuff and saying, we see a potential here. It kind of died down, the chatter around India and producing in India.

And then it renewed again even just right after COVID. I think this also makes a point that it's almost like nowhere else could Apple have actually done this. I mean, China was just this unique market where they could, like he said, build eight-lane highways and mobilize an entire rural workforce. And if Tim were sitting here right now, Now he would literally say the same thing. Yeah, so I understand the decision making that went into that. What I'm curious about is what do they do about it now? Do they just say, this is what it is for better or for worse, but now it's become a whole

geopolitical thing? So who's going to make those decisions that I don't know what the right move is. They step on the gas and keep doing India. Takes a long time. Also, I would encourage investors to remember when you're vertically integrated like Apple is, you can't afford to just fail fast and try stuff out and sweep it across your entire product line. You really have to take the time to get it right because it's not. not just the software that you're putting on there.

You're tuning the chip designs to that and the phone features and the camera features and all that. This is not Elon Musk turning Grock to Mecca Hitler. This is something totally different. Steve Kovak, we're going to see a lot more on this today, including on overtime later in the days. Thanks. In the meantime, let's get over to Pippa Stevens now for the CNBC News Update, Pippa. Hey, Kelly, after a second straight night of Russian drone attacks on Kiev, Ukrainian President Volmier Zelenskyy said today at a meeting in Rome that he's received what he called

all the necessary political signals for U.S. military aid to resume after what he described as constructive talks with President Trump. His comments come after the latest shipment was temporarily paused last week in a surprise move by the Pentagon that caught many in Washington off guard. Ford is recalling 850,000 vehicles from model years 2021 to 2023 due to issues with the fuel pump. Safety regulators say low pressure fuel pumps could fail, increasing the risk the engine. will stall. The recall impacts Broncos, Mustangs, and F-Series trucks, as well as the Lincoln

Aviator and Navigator. And the first ever Burkin bag just sold at auction in Paris for $8.2 million. According to Sotheby's, that crushed the previous $500,000 record for a handbag. The original Burkin from Air Mess is named after

the end made for the French actress, singer and fashion icon Jane Birkin. Wow, Kelly, 8.2 million. That is insane. I guess. The Birkin bag. I guess. Tip up.

Thank you very much. Coming up, North Carolina takes the crown as this year's top state for business, but it was a pretty tight competition, apparently. Scott Cohn will be here to discuss. And as we head to break, be sure to join the CNBC Small Business Playbook Virtual Event on Wednesday, August 6th at 2. Hey, 2 p.m. Come on.

You'll get essential strategies for entrepreneurs to adapt, grow, and thrive in today's economy. register for free just by scanning that QR code or head over to cnbc events.com forward slash small biz. We'll be right back. Crypto watch is sponsored by crypto.com. Crypto.com is America's premier crypto platform. Welcome back. We faced a lot of economic uncertainty this year, which sets an interesting backdrop for our annual ranking of the top state for business. North Carolina did take the crown, but other states faced some bigger setbacks. CNBC Scott Cohn is in North Carolina with that part of the story.

Hi again, Scott. Hi, Kelly. One of those states is your home state of Virginia, which was, of course, our top state in 2024. It slips to number four this year. It doesn't take a rocket science to figure out why. And if that rocket scientist worked for the federal government, he or she may be out of work or about to be. And that's the issue in Virginia, a state that is so dependent on every big decision coming from across the Potomac. 144,000 federal jobs in Virginia, and that doesn't include government contractors or people

who commute to federal jobs in D.C. or Maryland. University of Virginia economist Eric Scorsoni says cuts in that workforce are going to leave a mark. Hard to say where we're going to end this year, but certainly it looks like a much, you know, unfortunately a worse year than last year. But don't tell that to Governor Glenn Yunkin, who's launched a website. Virginia has jobs to link those displaced federal workers to their next gig. We have 250,000 open jobs posted that are unfilled. And so there's a great opportunity for folks to find a new, new opportunity, new job,

new career. But Scorsoni says it's not nearly that simple. The jobs that are open are often in things like health care or maybe retail and maybe not in the sectors that these people necessarily have the skills and background. So there is going to be a mismatch in many. cases. After our rankings came out this morning, Governor Yonkin was out, he was so happy with his last year, he came out with a tweet saying that CNBC's new methodology this year is thrown off by a new subjective metric that mistakenly ascribes substantial risk to Virginia from the

federal government's presence in the Commonwealth. So let's take that apart a little bit. Yeah, it is not a subjective metric. We used an objective metric in terms of the federal workforce as a percentage of the state's total workforce. And the governor himself in that CNBC appearance in April said that he expects that the state will lose jobs. Eric Scorsoni from the University of Virginia is out with a forecast that says about 30-some thousand jobs that the state could lose this year. Now, that could change. And let's also keep this from perspective. Virginia is still a business powerhouse, still number one for education.

It's in the top five for infrastructure. It is a very, very strong state. But if we're going to look at economy, as we did this year, it seemed appropriate to take the top state from last year down a few packs. Kelly? All right. Scott, thank you again for now. We appreciate it. Our Scott Cohn. Well, AI is changing the business landscape as we know it. Even the biggest players are having to adapt to this new reality, and we'll get more into that next. Welcome back to Power Lunch.

The AI Revolution threatens to transform the global workforce, and Microsoft has just launched a new initiative to reskill millions of workers for that future. It's $4 billion over five years, a major investment in education and opportunity, and it comes as Microsoft itself has laid off employees and restructured. The message is clear AI is coming, and even the biggest players are having to adapt in real time. I spoke with Microsoft's president, Brad Smith, about why educators need to rethink how they approach AI. For example, as a research assistant, you know, to help people start to write and draft something. But we should never encourage people to use AI in ways that cause them to stop engaging in their own critical thinking. And that's why the time to have this conversation is now, before the technology is even more powerful and pervasive,

and let's engage teachers and professors with tech companies in really thinking this through. This is a major theme, Callie, in our conversation, about 20 minutes where we need to use AI to think more, not less. We don't need that engagement to atrophy, but question. And you can only question if you've done some of the work yourself, not if you're getting all of your inbound data and information from the AI. So I know people have some questions about co-pilot and the extent to which it's being used when you have tools like chatchipT and all these others readily available on any browser or whatever, what have you at work. the people I know who are using AI tools or using them. Gemini even came up the other day, ChadGBT, BT. So I'm curious where Microsoft's own tools stand. They were early to roll them out. That was all the excitement around them. But I wonder, from a user point of view, where are we now?

There are so many tools that Microsoft has in various portions of a suite. For example, Microsoft has teams, and that's the sort of video conferencing. There are very often tools within teams within in Zoom to summarize what's happened in a given call, give a readout, here are the action items. Similar to what Adobe has within PDFs, where it's giving you a summary of that document, right? But then you can also use AI to ask questions and get more information about something, or to create content, to get an image to go with a document, a chart, or at least a starting point, to start to illustrate things, as you know well, to start writing an email or a document, and then you can revise it.

So depending on the piece of software, haven't even gotten to Excel in the numbers part, or the code assistance. There's so many different modes, and not all of them are easily accessible in different competitors. For example, to do a lot of code stuff in OpenAI, you've got to go outside of just that browser interface. Oh, for sure. I think people are, I'm not a coder, but the names that I hear thrown around are very, very different. No, look, Microsoft's Market Cap being where it is, number two in this race tells you that they have a lot of staying power. And does it displace employees or does it make them more productive? I'm in the ladder camp.

Both. Yes, that's probably true. A lot of people are going to get displaced. I think an entry-level thing, do you think that's real? Yeah. Yeah. I don't know what you do about that. You've got kids almost college age.

Very close. Yeah. Think critically. Play an instrument. Right. Learn to deal with people. Yeah. Because AI's not good at that.

But that stuff's so hard. All right, John, thanks. This mystery stock is soaring on news that the federal government is taking a huge position in the company will reveal the name next. And as we head to break, be sure to follow and download the Power Lunch podcast so you can catch audio versions of the show anytime you want, and we'll be right back. Welcome back before we go. I'm sure you could guess it.

What other stock is up 51% today? It's MP Materials. Absolutely soaring on news that the Pentagon is buying $400 million of preferred stock and the rare earth miner now makes the Pentagon of the U.S. government the largest shareholder. MP Materials, of course, owns the only operational rare earth mine. in the U.S. and this, John, is its best day ever. Between this and U.S. Steel, one wonders if we're entering a new era in the U.S. government picking winners and how that's going to go for investors going forward.

And we see models like this in some other countries, and there's long been the argument, oh, well, you want to keep the government out, right? Right. of the capitalist arena, certainly from regulation, but maybe even from this level of investment, but this is nationally very important. It's in, what is the term, industrial policy, kind of at work here as we're seeing it.

You know, they're saying like the CEO, because you did this interview today, he said, this is not nationalization, or remain a thriving public company, we have a great new partner. Look, look at Palantir. Look at the gain some of these companies. There's been so much discussion

about how tech has turned from kind of shying away from partnering with the government to obviously being very close partners with it. And now the same is true to your point for steel and all these other commodities and important parts of the supply chain. And Morgan Brennan had the interview this morning on Squawk on the street.

We'll see more of this, certainly, an overtime coming up when I'm with her. But the question is how much involvement from the government is healthy? Do you want them being a controlling shareholder? Or just do you want them cheering for you from the sidelines? No, you do wonder down the road, but at least for now, there you have it.

John, thanks for joining us today. Let's do it again. All right. Close the bell starts right now. Thanks for watching, Power.