Power Lunch - Dow rises to kick off May as Microsoft, Meta rekindle AI trade 5/1/25

Episode Date: May 1, 2025

Stocks are rising after strong quarterly results from two Big Tech players eased concerns that AI progress would slow amid economic turmoil. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

It is a big day for big tech and your money. Meta and Microsoft jumping and powering the entire market higher. Coming up, Apple and Amazon results both on deck tonight. Could those two give you even another big buy day? Welcome to Power Lunch, everybody, alongside Kelly. I am Brian. This is increasingly rare. This time of year, you're going to be in one place and I'm going to be in another.

You're going to be buying a sprinter van for your family. That's a different show. That's true. Let's check the markets which are higher across the board. The NASDAQ up nearly 2% right now, as Microsoft and META are helping to fuel that run. Amazon is also higher ahead of its results up nearly 3% today. Apple is flat. We'll have more on that coming up.

And we are one day and one month into the second quarter. But check out the round trip that the S&P 500 has made from the intraday low of 4835 on April 7th. We are up 16%. One of the biggest turnarounds in such a short time in history. I think some would say, Brian, it's random, but interesting. and important. Yeah, WBI, RBI. I love it all. All right. We're going to get to all of that, but let us start with Apple. There's a lot to get through today. We're about two hours away from Apple reporting their numbers tonight. Big focus, of course, will be on the potential tariff impact,

but that is not all that is going on. It may have escaped your notice, but Apple also dealing with a huge legal issue. A judge saying in a court filing yesterday that Apple did violate a 2021 injunction that had to do with competition. It's very complicated. You can go online, read it for yourself. But the bottom line is that it's potentially a big loss for Apple. It has to do with the App Store. And the company says it will be appealing. All of this ahead of earnings tonight and a big question mark about what, if any,

warning or guidance that Apple might provide because of the tariffs. There is a lot to talk about on one of the world's biggest companies and most important stocks. So let's jump right in. We got Steve Kovack out west. Wall Street, Donald's Tim Higgins. He's got a new book, by the way, coming. out on this exact topic. It is called I-Wore. And MAI Capital Manager, Chief Market Strategist, Chris Gissanti is here on set. Steve, let's start with you. You're out West and Cupertino.

Got the numbers tonight. I'm sure tariffs are going to be an issue. We'll see if they go into it at all. But like in layman's terms, what is this legal case and does it matter that much? Yeah, Brian, it does matter. It matters enormously because the judge ruled yesterday that Apple was in contempt of her order to allow other apps, including Epic's Fortnite, which is the one who originally brought this lawsuit, to guide their users outside of the app store to make payments and therefore skipping that so-called Apple tax that Apple takes. A lot of allegations with throughout this filing that we got yesterday. But among some, claiming an Apple exec lied on the stand saying that he did not know about some internal discussion. going on with an Apple that actually did turn out to be mapping. She also says Apple withheld evidence that the company was talking about ways to skirt around her injunction when they did not disclose

that information to the judge and just a number of other things. But at the end of the day here, this case has now been referred to for potential criminal contempt charges, not just against the executive who the judge says perjured on the stand during this, but also against Apple itself. Now Apple tells us they are going to comply with the order. That means pretty soon, and we might start seeing some apps, issue updates that allow them to skirt around those apps for payments, therefore putting that lucrative app store business at risk. By the way, Brian, in the filings, how much money is at risk? Billions. That is what Apple's own notes from these internal meetings that were disclosed yesterday in this court order show that Apple did the math here and said, if we let this, if we followed this judge's order, we could potentially lose out on bill.

billions of dollars and they found a different way to kind of skirt around it. And the judge is not happy with them and saying, no, you have to listen to us. You appealed this all the way of Supreme Court. Supreme Court kicked it back down to me. You have to listen to me. In her words, this is not a negotiation, Brian. Steve, just stay there for a moment. Chris, I'm curious if you have any thoughts on Apple here. You know, the stock on a recent winning streak, but faces this challenge potentially to the app store, has all these questions about tariff supply chain. maybe it has to raise prices. What do you think about it? You know, I think Steve is right. There is a large revenue component, but I think it's even worse than that. And Brian, you probably

remember from law school. You mean, judges are judicious, but she was not judicious, even though over the five years of this case, she's been very even-handed and handed Apple a bunch of wins on this case, and now she's really angry. And it's not only a revenue issue, it's a public relations issue. She's referring for criminal prosecution, and she specifies the one guy who she said lied outright. And so it's a big black eye for Apple. The revenue will be important, but it's another brick in the wall. The market doesn't care, Chris. The market stocks up right now. And I want to be clear, and I haven't read the case, I probably should, but the criminal complaint might be about the perjury of the individual, not about Apple's behavior. I make that extremely clear, because I don't

feel like going to court. It might be, but she says in the ruling that Tim Cook made the wrong choice by trying to go down this road of kind of denying and not obeying her injunction. So this is a pretty big deal. I think it's more important, though, Brian, it's not so much a stock on the day issue. It's more that it's one more piece of evidence, whether it's Google, whether it's Apple, whether it's Amazon, that the complaints are piling up about anti-competitive behavior. And I'm afraid this will lower multiples generally in that group. It's so interesting that you bring that up because yesterday we spoke with a guy, Brian, while you weren't here, it was Center for Progress.

He said I was a tech Democrat who started the group four years ago because I was frustrated with Biden's approach to the sector, found it heavy-handed and so forth. Well, now we have a Trump administration that in many ways is continuing those very policies. I don't know if it's a political overlay, Chris, on what you're talking about for the big tech stocks, but does it just add to this idea that they're going to be under threat? They're not going to get a reprieve here. Now, in Apple's case, it's maybe judge-specific, but more broadly, they're continuing a lot of these antitrust suits against all of the major companies and showing no signs of

really doing them any favor. And these are all the buddies that were up on the stage with him at inauguration. So if that doesn't buy any help, it's a real problem. So you're absolutely right, Kelly. We expected this under Lena Con and Biden, and now we're still getting it under Trump, and it's a real question. Tim Higgins, your new book is called Eye War. See, that was the second plug.

What do you think? What is the war? What exactly is the battle? I obviously haven't read it. It's not out yet. What is the battle that you're referring to? Does it have anything to do with sort of what we're talking about? Because these are big kids stakes right now. Absolutely. Ten years ago, I think it would have been hard to have Apple in a bigger conversation about the dangers of big tech. It was, in a lot of ways, able to skip the conversation about antitrust and monopoly. But what the epic case really did was highlight some of these practices and bring attention on a global scale and help fuel some of these fights in Brussels, in Europe, the UK, in Japan, in South Korea. just the way that Apple and also Google with its own version of the App Store, how they control that digital ecosystem, that digital empires that they created and ruled with a pretty iron fist

collecting their percentage of sales within the app for digital services, which they argued was fair, that they created the world and that they should benefit from it. The question has been, were they going too far? Right? And the judge in this case originally was seemingly, to rule in Apple's favor, mostly, except for this key issue of steering. Could a developer steer their customers out of that app world into their website to buy things? And that's something that was prohibited under the old way. And Apple, according to these court records, according to the testimony that I went over over the last year or so, clearly making efforts to keep that

digital commerce within their walled garden. And the judge was not happy. So, and this is, okay, So now we're kind of getting to the meat of like the investing part of you. Chris will go back to you. But Steve, I want to go back out to you. Because as you, as we've talked about on this and other programs, Apple's services business, meaning ICloud, the music, the apps, whatever it is. That is their second business. Obviously selling the iPhone is their primary business. Apple's second business is bigger in terms of sales than almost every major company's primary business. If Apple spun off services, it would be like a top 25 company in the S&P 500. So that aside, Steve, how much, I know we don't know how much is at risk. But to your point earlier, I got to imagine these are billions or tens of billions of potential dollars that investors need to be aware might either go away or at least be shaved.

Yeah, that's exactly right, Brian. And let me take it a step further because we're now entering a scenario where one with, Google losing its search case against the DOJ, that monopoly case, that also puts the risk that Google pays those payments, up to $20 billion a year. That all goes into the services business, basically free money for Apple to make Google the default search engine. That is at risk now. If the remedies in the case, the judge decides that that has to go away, that puts Apple in a $20 billion hole, so to speak, in the services business. And then on top of that, yes, the App Store. If this does happen the way it's laid out in the court order, at least in the United States, that means you're going to see a lot more apps start taking advantage of this new payment system.

So they don't have to pay that 15 to 30 percent rake to Apple. So we're really entering this scenario where the app stores that threat here in the United States, business model, the business models that threat in Europe because of the Digital Markets Act, which forces Apple to do a lot of the same things. we're talking about here in the United States now, and then those Google payments. So the services business is under pressure in a way it has not been in so long. Again, a high margin business. It's also the business that's growing the fastest, picking up a lot of the slack that we've seen from these slagging hardware sales, especially the slagging iPhone sales, especially in China as well.

So this is a real thing that they're going to have to work through. They say they're going to appeal. It's not really clear how much room they have to appeal, though. But in the meantime, they tell us they are complying, which means pretty soon, including with Fortnite next week, they said they're going to do it, you're going to start seeing these apps take advantage of these new rules. That means less money to Apple and more money into the pocket of the developers to develop on the iPhone. Real quick. To Brian's point, not only are they going to lose that revenue, but it is great revenue. The margins on the service are almost 100% because it costs them no extra money to do it. And wouldn't Steve Jobs, wouldn't Tim Cook have been so much

smarter to pull Epic aside, cut a quiet deal, waste a billion dollars or two, and this all went away. Unless he had to then cut a lot of side deals that way. That's why you keep it quiet, right? Because Fortnight was a big deal. No, it's a great point. Yeah, really, really big discussion there. Why don't we pivot now to Tesla if we can, and I'm sure we can. Kelly, Tesla, also a big story. Last night, the Wall Street Journal reporting that the board looked into finding a successor for Elon Musk, a CEO. This was about a month ago. They go on to say the present status of the search isn't known. Tesla has strongly refuted the story. The chairman did so on X. Musk has posted several times shooting down the report as well. Tesla shares are down more than 30 percent since

Trump came into office, but of course they ran up into that. And they've struggled since Musk began heading Doge, as mentioned Tim Higgins, Chris Grissontier, are with us. So Tim, is it the board due diligence here to look for successors once people are protesting Musk, protesting the dealerships, you know, the interest in the brand has fallen precipitously? Well, you know, if you're a board member and you're watching your CEO who's spending essentially all of his time at another job in Washington, D.C., I mean, he's talked about working 120 hours a week, which doesn't leave a lot of time for anything else. You've got to kind of say, you know, what other steps might you need to take? Well, you've got to be prepared, right? So you can imagine that kind of conversation.

conversation in a boardroom. What's unique is you can't really imagine it at Tesla because Tesla and Elon Musk are so intertwined as a brand and as like a person that has been the case for so many years. The board has been seen as very friendly to Musk. He's got friends on there and also family. And so just the fact that it got to that point really suggests there was some concern. Yeah. And Chris, we've talked to, you know, in the past about Tesla's high valuation and so and so forth. what do you think of the shares now and what do you think of the idea of replacing Musk as CEO?

Well, I don't think Musk will be replaced as CEO. He's too much identified with the company. And I think he has great affection for it. It can still control that. But I would stay away for three reasons. One is that, you know, EVs as a whole are not selling very well right now. Two is their product lineup is stale and kind of old.

And finally, and this is the worst, is that he has become kryptonite for the brand. And so the progressive folks, at least in the United States, who like to buy EVs, are, you know, deserting him in droves. And so I think there's just a real problem. So the number is going to be a bigger. Chris, I'm sorry to jump in. I know there's a lot of Paul. We all live in this area.

I was going to show you the bumper sticker of the car that I was behind. Anti-Elon Tesla Club. A white Tesla. I don't know if we can see this. If we zoom in, I probably should have sent it to the production team. Don't show the license plate number, yeah. The license plate number is on there. It says anti-Elon.

I think you can see it there. Tesla Club. I see stickers. Oh, they say you can't see it. All right. I've seen license plates that say, I'm here for the zero emissions, not Elon and Elon thing.

But they're not going to be buying a new one probably. Let's be clear. We are not America. Right. I mean, we are, but we're not. Okay, New York, New Jersey, San Francisco. It's Lexington, Virginia, and Winchester, Virginia, where we went to high school, it's a different world.

I think the bigger risk to Tesla and everybody else is $2.50 a gallon gas. Sure. Right? If it's four bucks and seven in California, it's going to push people more to the EV or at least look at them

and maybe fall in love with them. Headwin number four, Brian. I don't disagree with you at all. But I just, the numbers don't add up. The run-up after the earnings last week was to me a poster boy for the market as a whole, which is going up on news that I can't describe as good. They were up like 30% last week too.

But do you think that was actually because the bigger story, this week had been that it sounds like Musk is winding down his time at the White House. So whether or not this story has any merit, if he is doing that and going back, kind of stepping back from the really polarizing stuff, could we see some of the anti-t regiment? It would have to be something like that because it sure wasn't the numbers. Right, right, that we saw in the earnings. Jim, you quickly wrote a book on him.

You think when he leaves the White House? I don't think that the brouhaha is going to go away. I mean, people. No. John must generate strong emotions either way. Absolutely. Good or bad. Also, it's hard to imagine him just giving up on that Trump administration. He's talked about how he's still going to put in, on average, a couple days a week.

You know, how that works out, we'll see. But he's not, that politics part of him isn't going away anytime soon. To your point, he's very polarizing at this point. But the bigger issue at Tesla is he needs to execute on this new strategy for robots, humanoid robots, and driverless cars. That stuff is super complicated, and he's seen us a little bit behind compared to the likes of Waymo. Tim McGins, the Wall Street Journal, Chris Grissanti of M-A-I Capital Management. Big discussion there.

Apple, Tesla, just a couple of stocks, you know. And we'll talk more stocks with Chris a little bit. Good. And in fact, after the break, we're going to talk about another, I would call this a pretty important stock. They've had three money losing weeks in a row. It's a mystery chart for tomorrow. start a new run. That's kind of your hint. We're back with the mystery chart reveal and story ahead. Welcome back. Strong results from META and Microsoft are reinvigorating the AI trade today as we await a couple more names after the bell, including Amazon.

That was our mystery chart from the T's. The stock is hired today, but down 20% from its record close of 242 in February. It's actually down about half a trillion dollars in market value since then. But our next guest is bullish, saying cloud adoption is at an inflexion. point. For more, joining us now is Brian Noak. He's senior internet analyst at Morgan Stanley. So Brian, some strong data points on AI investment from meta and from Microsoft last night. Amazon's a little bit of a different story and a big tariff overlay here. That's right. Noah, thanks for having me, Kelly, as always, you know, I think that one of the things that really sort of stands out from meta and even to a certain extent, Microsoft, which is covered by Keith Weiss on our software team, the companies that are really delivering

material, incremental revenue, or really ROIC from these early Gen AI investments are being rewarded by investors. In the case of meta, what we're seeing is they're rolling out larger models across their platform engagement is growing. The performance of their advertising business is improving. The ad business is proving more durable through a lot of macro uncertainty. And so the market is saying, yeah, they're still investing in CAPEX. They're still building out more generative AI.

data centers, but we're actually getting a lot of return from it, and it's coming through the models and through the cash flow as soon as 2025. All right. So if Amazon is in that kind of strong position, what does it do now with all the political backlash? And a lot of people, even on the right, saying, hey, I'd love you to tell me how much of this is tariffs. Why don't you tell me which of my products are made in America and so forth, so it doesn't feel

like this issue is going away? No, I think, you know, the generative. AI aspect of Amazon, I feel pretty confident in sort of how we think about the reasonable range of outcomes for AWS growth and all the improvements that they're making the core retail business. That part is actually a little bit easier, in air quotes, to sort of put guardrails around. The tariff pieces are the more important parts that we're looking for more color tonight out of Amazon management. I think it's important that the management team talks about what steps are you taking to

proactively manage the business, manage your industry. inventory, manage your sellers just to ensure that you have enough supply and you have the right inventory to have a successful Prime Day, to have a successful Thanksgiving, and to have a successful holiday season. So, you know, the guidance and sort of the numbers for the second quarter are going to be one factor tonight. But really, I think from an Amazon perspective, for the market to feel more comfortable in what 2025 earnings and 2026 earnings can look like, the management team sort of needs to help us understand what steps they are taking to. proactively manage their global network to sort of manage through tariff uncertainty.

Well, the top story on Tuesday was this, I'll call it Amazon Gate, where basically, you know the story came out that they were thinking about putting sort of a price increase notification to some customers on the bulk side or whatever it might be. They quickly, very quickly, walk that back, Brian. I'm not asking you to dig into that story, but does that kind of show you the political pressure and risk that Amazon is constantly under being as big as it is. It does speak to all of the multiple moving parts behind Amazon's global network. As one example, by our estimates, we think that about 30% of Amazon's third-party sellers

have some China-based cost exposure. They matter to the overall. inventories available on the platform. They matter to the advertising business, which is a very high margin business for Amazon. So there are a lot of moving pieces around this business that Amazon sort of has to help us better understand, just in order to help us better understand how do we think about the cost of continuing to grow and take share with any commerce through this period of uncertainty? Because I think they will end up taking share. Just the question is, what's the cost going to be? How much pre-buying of inventory have they been doing will they have to do? How much moving around of inventory globally from Europe to perhaps the U.S. will they have to partake in?

You're exactly right, Brian, that sort of, I thought that story was just one example of how there is a lot of uncertainty about how they're going to manage this. And tonight, we're just sort of looking for a little clarity about sort of some of the rules of the road on the retail business over the rest of the year. All right. Brian, thanks so much. We appreciate it today. Thank you both. All right, on deck, with President Trump about to visit the Middle East or oil price is about to go even lower? Or will the Iran issue pop the commodity? Oil sitting below 60 in Halima Croft, who's in the Middle East? We'll join us next.

Welcome back, a couple of breaking stories out of Washington, including the president nominating a new top diplomat to the U.N. Megan Kassela with the details, Megan. Hey, Kelly, a pair of back-to-back, pretty newsy post from the president on true social just in the last few minutes. And the first one, as you mentioned, is a big personnel move, really in the first big shakeup of the president's top leadership team. He is nominating his current national security advisor. That's Mike Walts to be the new U.S. ambassador to the United Nations. Now, this post had been empty after the Congresswoman Elise Stefaniq had to return to Congress rather than take up that nomination. So it will require Senate confirmation for Mike Walts.

This comes after reports that he was being sidelined from NSA or removed from NSA after he was the one that started that signal group chat just over a month. This president also says that the current secretary of state, Marco Rubio, will in the interim also be taking on the roles of national security advisors. So doing two roles in the interim until the president settles on a new national security advisor. Now, Kelly, the other piece of news a little bit different here, the president also saying that he's announcing secondary sanctions on any buyers of Iranian oil. So he says here that all purchases of Iranian oil or petrochemical products must stop

now. So any country that buys any amount of either of those. products from Iran will not be allowed to do any business with the United States of America in any way, shape or form. Now this is mostly a shot guys at Beijing, China being one of the top buyers of Iranian oil. And it does build on a number of sanctions the US has leveled in the past few weeks, past couple of months, on individual Chinese entities that have been buying Iranian oil. I will caution, though, that just one true social post does not make policy.

So we will wait to see if there's any executive order or something more formal signed on this. And it does sound familiar to the move that the president did make against Venezuela, buyers of Venezuelan oil. Earlier in this term, we're meant to face a 25% tariff. That executive order has been signed, but guys, I'll also caution, it is not yet in place. So we'll have to watch to see how this one is implemented. Guys. Megan, Selle, Megan, thank you very much.

We had an intro plan, but let's bypass the intro. Just go right now to Halima Croft. Oils on the move. Yeah, it should be on the move because guess who buys almost all Iranian oil? China. China. Hey, Halima Croft knows. There she is.

She's in Dubai. There's IMF meetings. We're going to talk about all this stuff. So this is interesting. I don't know what secondary sanctions is, Halima. But if you're going to do that on a country that buys Iranian oil and China pretty much buys most, and India buys some. No, it's essentially China is the almost sole purchaser of Iranian barrels at this point.

Now, Malaysia is a site where Iranian barrels go and then turn into some other countries' barrels. So will they be targeting Malaysia as well? Because that is potentially a laundry map for Iranian barrels. But if they are to impose secondary sanctions on China and essentially say, you can do business with Iran or you can do business with the United States, that would be a very, you know, onerous, you know, new sanction. That's said, there is significant sanctions architecture already in place when it comes to Iran. oil exports, the issue has largely been one of sanctions enforcement. And some are arguing that China is simply not going to play along. If the U.S. doesn't have the capacity to really drive down Iranian exports at this stage. But again, we really have to see whether there is a very

concerted effort to go after these barrels. And again, I would look to potentially targeting a country like Malaysia where these barrels do show up in significant numbers. Well, that's, and that's you're exactly right. That's the hard part. We've got a segment later on in the show about maybe semiconductors going to China and they get through other countries, they're sort of whatever. That happens with oil too, right? Iran will sell to somebody. Then they literally, in like the dead of night, switch the oil from one boat to another, turn off their transponder, and then they go and sell that out. Is, and I know I'm asking you to kind of speculate, is being able to sanction that kind of behavior even possible?

Well, again, I think it's just raising the stakes with China. Like, if you're looking to have some type of off ramp in this trade war, you know, are you potentially signaling to China? Like, let's see some more progress on reducing Iranian barrels as part of a deal. And again, I think it also could be a signal to countries that are seen as, again, serving as something at a laundromat for Iranian barrels. There was an act in Congress called the Ship Act that was essentially going to sanction. any foreign port that takes Iranian barrels to really go after these countries. So again, it is primarily aimed at China, but could also be deployed against countries that take those initial barrels before they become labeled as somebody else's barrels. Helima, oil is up about

2% on this, 59, not quite 60 a barrel. So it's been so low, this would seem an opportunistic time to jump in and do something that might create upward price pressure. But is this about the extent of the upward pressure you to expect? I think everyone is going to be really watching what comes on Monday. We have a very important OPEC meeting. The eight countries that are making this additional voluntary cut on top of the collective group cut, you know, there's a real question about are we going to see an increase and output from those countries? We had this surprise, you know, triple-decker announcement that came one day after Tariff Liberation Day.

Everyone was caught surprised by the 400,000-plus increase that was announced for May. Are we going to get another blockbuster increase? Are we going to get a pause for now? Could we just get a single month increase? There's been a lot of speculation about what action these OPEC countries are going to take on Monday.

So I do think that people are going to be potentially holding some of their firepower until they see what happens with that important decision. Halema Croft, RBC Capital Markets. I know it's like one in the morning there in Dubai. Thanks for wrong with the breaking news as well, Halima, but you're the best. That's probably have you on. Thank you. Her night's just getting started.

She's on a plane. I don't know how she did. She always looks so good. Well, there's four. There's four Halema. It's a quadruples. Leslie Picker joins us now for the CNBC News Update. Hi, Leslie. Hey, Kelly, President Trump's signing an executive order in the White House's Rose Garden this afternoon establishing

a religious liberty commission. The signing came during a national day of prayer event. The commission includes TV talk show host Phil McGrath. Texas Lieutenant Governor Dan Patrick and former housing secretary Ben Carson. Meanwhile, the Transportation Department announcing a new push today to boost air traffic controller retention amid concerns about air safety in the U.S. The FAA says it will offer retirement-eligible controllers a lump sum payment of 20% of their basic pay for each year they continue to work until their mandatory retirement age of 56. And Shark Ninja is recalling 1.8 million of its popular food eye pressure cookers after receiving

more than 100 reports of burn injuries because of issues with the lid coming off. According to the recall, 50 of the injuries included serious second or third-degree burns that have led to more than two dozen lawsuits. The affected pressure cookers have a 6.5 port capacity and were sold at a number of large retailers, including Walmart and Costco. It sounds like the plot line of This Is Us. Do you remember that show? I heard all about that with the Kroc, the killer crock pot. Yes.

Every time with the Instapont that I use it, I know I'm like, I'm playing with fire. Yeah, literally. Scary stuff. By the way, the air traffic shortage, legit. I was at Newark for six hours Monday night. Yes, they had a massive meltdown. I was there. For 12 hours in some cases.

Anything that can be done, don't you think? Major issue. Anything. Please. If only we didn't lose so many people, 20, What happened? Don't answer that. What?

There were vaccine? No, okay. Finding growth in a slowdown. The economy is officially shrinking. So what should your first move be? We'll talk about that in Market Navigator next. All right. Here's the markets.

The NASDA composite, Dom Chu is up 2%. The S&B is up 1.2%. I know it's May. It's May 1st. Welcome to May, by the way. May day. Here's the thing. It was pointed out to me, I think, by Michael Antonelli of RW Baird, that if the market would have gone positive in April,

it would have been the biggest reversal turnaround in history. We didn't get it yesterday, but we got it one day later. In 31 days, the S&P went from up to down 11% to back positive. Sometimes you wonder whether or not the traders that are out there are doing it just to mess with the rest of the market, right, to just give you what you want, but not at the time that you want. Because there were all kinds of superlatives that could have happened if we would have that multi, multi, multi-day winning street to close out the month.

Like you said, the getting back the 10, 11% that we saw declined. We got it back. And got it back. But just a day later, right? It's pretty incredible. We're still down on the year. But the fact that we have round-tripped 11%. And I think it goes, and you're a fund manager, an ex-fund manager, it goes to the story of, what do they say?

It's not timing the market. It's time in the market. markets. There you go. And that's one to grow on. Well, here's, and that's one to grow on. Here's where we're going to go, right? Because when we talk about the economy slipping into contraction last quarter, right, it's raising some fears for investors, but how worried exactly should you be? Where's the best place for the money in this environment, given the backdrop that Brian just laid out? So to help us through the economic uncertainty, we're going to join, we're going to be joined now by Katarina, the senior vice president and private wealth advisor

at Morgan Stanley. And Katarina, it's interesting because over the past, kind of month or so period, two of the best performing sectors out there have been utilities and staples, which are maybe not surprising, given the uncertainty, but also technology. Crazy little dichotomy going on there. So let's talk about the defensive trade and what you make of it. Well, utilities has definitely been a standout sector among the three that you've mentioned. It's up 18% this year. And we believe that there is more growth to come. As you look at this negative GDP environment, which is the one that we are in, the name of the game is income and cash flows. And no other sector is quite as well positioned regarding this

to characteristics as utility sectors. I mean, these are companies that produce steady cash flows. They benefit from a friendly regulatory environment. They're profitable, they're competitive, and they pay good dividends. So we absolutely, encourage investors that are distraught by the numbers that they're seeing, that are concerned about the volatility, to consider use the dips in the market to increase exposure to utilities within their portfolios. Katerina, though conventional wisdom had been for years, even decades at this point, that utilities were there as a defensive play, that paid you the dividend income.

But more recently in the last year, Brian and I have talked about it before, it's become this AI play, right? This grab for power and everything else. How then do you reconcile the kind of role that utilities plays in that environment? Well, you're making an excellent point. Within utilities, there are two areas that particularly stand out. And one is electric utilities. These are companies that produce electricity, transport electricity, store electricity,

because with development of AI and this coattails on your comment about technology, we see data centers popping up all over the country. And so demand for electricity has never been higher. But on the other side of the spectrum of utilities are actually a natural gas company. We have an abundance of natural gas supply in this country, unutilized, underutilized natural gas supply. So when we're speaking about the need for clean energy, more energy, we have this wonderful natural resource here. And so the natural gas producing companies are absolutely standing to benefit from this environment. All right.

be a defensive. All right, Katerina Seminetti at Morgan Stanley Private. Well, thank you very much. We'll see you soon. Brian, she tugged your hydrocarbon strings, your heartstrings, if you will. It's all energy, but I will say that we've got, it's dovetail. We got next week we'll be at the Milk and Global Conference. Got a guy named Doug Kempelman on.

Doug Kempelman, not a household name, energy capital partners, helping to sell cow pine to consulate an energy. He's going to make a fortune off it. He's already rich, but it's one of the greatest, if not the greatest energy deals of all time. We've got an interview with him, and Doug will lay it out very plainly, that electricity used to be boring. Now it's the key to all of our AI dreams. You can build a data center, but if there is no power to run it, do you really have a data center? Kelly, that's why of saying, tune in for the Milco Global Global and Go Conno.

Easy for you to say the Milco, I'm going to the Milco. It's separate. It's a separate conference. I am very much looking forward to it. Milco. Milco, that's off. I go Milko. There you go. Gentlemen, thank. Coming up, a tech to. for TAT. Two of the biggest players in the AI world sparring a war of words. We'll get the details next. Welcome back to Power Lunge. Invitya is firing back today to a rival's accusations. The AI Firm Anthropic in a lengthy post saying export controls on advanced AI chips in part calling chip smuggling into China a major threat saying smugglers are using creative methods like hiding processors in prosthetic baby bumps and packing GPUs alongside live lobsters.

Now, they didn't mention Nvidia by name, but this caught the company's attention. And Christina Parts the Nevelas is here with their reaction. Christina. This is a rare public feud, and it's erupted, like you said, between two tech giants over AI chips and national security. So, Nvidia today blasted Anthropic after the Amazon-backed AI startup called for tighter export controls on advanced semiconductors. That's really what got Invidia angry. You mentioned those claims about smugglers hiding chips in prosthetic baby bumps and shipping them alongside live lobsters. Those are allegations that NVIDIA dismissed as tall tails. At issue, though,

are Biden-era restrictions called the AI diffusion rule, which should take effect May 15. These controls aim to prevent China from gaining ground in AI by limiting exports of advanced chips, as well as AI models. President Trump is reportedly considering updating these restrictions, adding further uncertainty to an already contentious policy. Anthropic depends heavily on NVIDIA hardware, so there's the irony, but argues that, quote, maintaining America's compute advantage through export controls is essential for national security. So they want lower export threshold and increased enforcement funding. And that could mean fewer NVIDIA chips sent abroad. Invidia fired back saying, quote, that America cannot manipulate

regulators to capture victory in AI, arguing that victory should come through AI company's innovation, not by restricting the flow of chips. InVdia really finds itself in a tough spot, trying to help grow America's AI supremacy while also continuing to sell their chips to other countries. But this clash really highlights the complex balance between innovation, competition, and national security as America's tech giants really navigate this increasingly competitive global AI landscape guys. I mean, it's complicated.

Not the smuggling part. That part, I understand, although creative, just complicated to see the fight emerge between these two. Christina, thanks. Christina Parts and have less. Yeah, I guess hiding stuff, pretending you look pregnant? Right. We knew there was luggage. We've heard some of these different anecdotes. I'm not high, I want to be clear, I'm not hiding anything. This is all natural. This is all

real. Yeah, likewise. It takes a lot of pork roll to get here. But it's still just, so, you know, it's one thing if this is a media report, it's one thing if this comes up through the, to have it come from Anthropic is super interesting and I think those anecdotes are going to be especially memorable. All right, as we head to break a quick programming note, as we just said, we're going to be at the Milken or Milko

Global Conference next week. That is Monday and Tuesday. That is just a skimming of our lineup. We got more than that, some big surprises. We're going to be in Power Lunch, but I hope to dip in to your show a little bit. Kelly, we'll see what happens. Just do it. Let's make it happen.

All right. Both days coming up. Welcome back and let's close things out with three stock lunch today. Chris Grisanti is back with us with the three names he thinks investors should be buying, well, I mean, or selling right now. Let's see one of them is a sell, two or a buy. And let's start with Abbbee, which is one of them. It's up 8% over the past week. Familiar because Nancy Tangler also chose the stock as one of her buys on Tuesday's three stock lunch. Chris, why do you like it? Well, Kelly, let me first say that the three stocks I have today, if you think the market's going to keep going like it's going, ignore me. Do the opposite. Meaning up or down? Well, either way, what I mean is that my stocks are for when the market gets more difficult again. Okay. So in that case, I like health care. I like AbbVie. They've done a great job of replacing Humera, which is the largest selling drug ever in the history of the world.

And they've got a great management there. They're mixing up the product line. And so that should be real strong. It was down almost 20 percent. It's come back. But it's still got a ways to go. All right. Then United Health, which is a controversial one.

It's also been a real, even yesterday, when was it on the, And the earnings, who was it? They're down again. So they're down 20% over the past. Yeah, I always like recommending stocks that can't buy an uptick, Kelly. So what we have here is something that I think is in the penalty box for good reason. They really missed earnings a couple weeks ago. And it's down 30% because of that.

I think this is a very rare chance to get this stock, which is great management, terrific 20-year growth profile at a cheap valuation. All right. The one that you're not recommending is booking holdings. Right. And again, so this goes back to my thesis that the tariffs are going to hit. And they're coming like a wave. Everything's calm, but they're going to hit earnings starting in the summer.

Travel is about the most discretionary category we have. They had terrific earnings just two days ago. It's a great company. But I don't want to be owning it if we're sliding towards a recession. But you think the market's going to keep its act together, at least for the near term, or you think watch out it's... No, I think this rally has been a gift horse, and we shouldn't look it in the mouth, and we should take advantage of it to sell some things. that are volatile or economically sensitive and move them into more defensive areas. All right.

Put up that QR code, people. That's where you can find every three-stock lunch if you want to catch the recommendations. Yeah, good stuff. Chris, and we appreciate you hanging out. It's been a crazy, been a 72-day last 30 days. Thanks, Chris Prasanti. And thank you all for watching Power Lunch.