Power Lunch - Earnings Parade 4/28/23

Episode Date: April 28, 2023

Stocks are higher again following yesterday’s monster gains, as the busiest week of earnings season wraps up. We’re digging into all of the big reports, from oil, to tech, to social media and more. Plus, don’t forget about next week’s Fed meeting! We’ll get you set for a big week to come, and tell you all you need to know to be ready. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good day, everybody, and welcome to Power Lunch. Alongside Kelly Evans, I'm Tyler Mathes, and glad you could join us on a Friday. Stocks are higher again after yesterday's monster gains as the busiest week of earning season wraps up. We're digging into all the big reports from big oil to big tech, social media, oh, and Apple reports next week. Plus, we have a Fed meeting for you. We'll get you set up for the big week to come. But first, let's get a check on the markets today. Kelly. Tyler, thanks. Hi, everybody. And we have continued gains today. We're just off session high. charter Mohawk leaning the S&P 500 as we continue to see big stock reactions to earnings. Speaking of which, Amazon shares are lower right now.

They had popped after those initial results last night, but a conference call comment about a slowdown in cloud in April is weighing on the stock, which is now reversed lower by 3.5%. First Republic is also one to watch today. Plummeting again, it's recovered somewhat, but it's below $4 a share right now on reports that receivership is the most likely outcome for this bank. And it's been a while since we've heard about a meme stock, Check out top financial, a Hong Kong-based broker.

It went public last year. Apparently got mentioned at Wall Street bets today and look at it now up, yeah, you know, sevenfold, 610%. Taking the market cap to $6 billion, a little off that right now. And a bad week for Solar continuing today. Now First Solar is dragging on the group after missing on earnings expectations. 16% drop for the week now. Kind of similar to Enphase Big Miss earlier this week as well, down 27% in that period. On that note, let's get to Pippa Stevens, Pippa, the Revenge of the End.

old economy energy names today. Yeah, Kelly, revenge is one word for it because Exxon and Chevron beating top and bottom line estimates during the latest quarter with shares of Exxon surging to a new all-time high today. That company reporting its best start to the year on record, despite the decline in oil and gas prices. Exxon reporting $11.4 billion in profits for Q1, with Chevron posting a $6.6 billion profit. Now, both of those are down sharply from record results a few quarters back when Russia's invasion sent oil above $130. But Q1 results were well above pre-pandemic earnings. Meeting companies can still post a hefty profit even with moderating commodity prices. Shareholders are reaping the rewards of those profits via record dividends

and buybacks. But there's still a lot of cash left over and that's fueling acquisition rumors. Here's what Exxon CEO Darren Woods said this morning on Squackbox. We are always interested in a value acquisition. I think a lot of the speculation has been based on the fact that we are generating a long cash. Frankly, cash generation and cash on the balance sheet doesn't change the strategic fit of an acquisition. This is a value play. This is not a volume play. In terms of prices, he said as summer driving season approaches, inventories could draw,

creating an increasingly tight market with not a lot of levers to pull to increase production in the short term. So in other words, higher prices are on the horizon. but you wouldn't necessarily think of that looking at oil's recent performance. What kinds of companies might be on the list of acquisition targets for an Exxon Mobil? So I think a lot of the focuses on smaller plays in the Permian Basin, because that's a way to grow your output. And there's a lot of fears around declining acreage in the Permian. Oil giants have already tapped their best land. And so if they're trying to keep output steady and grow at 0 to 5 percent year over year,

then you have to have new wells to drill. And so rather than investing all of that in new acreage, it can kind of seem like an easier play to acquire a smaller competitor with maybe acreage that's adjacent. Yeah. And that's adjacent to your existing operations. All right. Thanks you very much. Pipa Stevens.

Appreciate it. All right. Now to the social media stocks, Snap and Pinterest getting hammered today after results, despite that strong report from Meta earlier in the week. For more, let's bring in Julia Borsden. Julia, what happened here? Well, Tyler, Metasord on a stabilizing. ad market and its AI tools really working, but Pinterest and Snap both fell short of second

quarter expectations and look at those stocks plummet. Now, Snap and Pins both more than giving up their gains for the whole year, while in contrast, meta shares have nearly doubled since January. Snap plummeting on its first ever revenue decline and its forecast of a 6% revenue decline in this second quarter. Meanwhile, Pinterest shares are also down dramatically unconcerned about its second quarter revenue guidance, missing estimates, as well as growing operating expenses. Now, that company, Pinterest also announcing that it is opening its ad platform and that its first partner is Amazon to bring its ads onto Pinterest that did prompt some optimism from analysts about Pinterest's long-term shopping potential. But it's worth noting, competition is heating up

for all of these ad players. Amazon, which reported yesterday, is a fast-growing new player in the ad space. saw its ad revenue grow 21% in the quarter. Guys? Wow. All right. Julia, thank you very much. Julia Borsden. All right, now let's move on to Intel, which posted the worst earnings quarter in its history last night, but yet shares are rallying. A pair of upgrades helping today as well. Analysts saying the worst could finally be over for the chipmaker, but last July, CEO Pat Gelsinger essentially said the same thing and called the bottom. It hasn't worked out that way, as Intel shares are more than 20% since Gelsinger made that comment on our air. We will hear from him again later today on closing bell overtime at 4 p.m. Eastern.

You don't want to miss that. But first, let's bring in an analyst who upgraded Intel this morning to neutral from underperform. Matt Bryson is senior vice president and equity research and in equity research and hardware at Wedbush Securities. Why, Matt, such a positive reaction to such a terrible report? I think it's simply, how can things get worse? And obviously, as you said, this question has been asked before. But at this point, there's not a next product that already looks disappointing. It feels like PC builds are finally picking up.

And on the server side of things, just from a market environment, there, I think Q2 really is the bottom. in terms of demand. I find it a little bit ironic and humor so you would say the good news is that there's not a next product that looks disappointing on the horizon. I mean, that is pretty low bar. That's a low bar, Matt. You're absolutely right. So I think the problem stems from the fact that Intel has struggled with manufacturing processes

since long before Pat Gellinger took over. Now, we're two years in. It takes three to four years to shift your process or to get a new process out. And so next year, or end of this year, next year is when we see the first set of products that you really can attribute fully to patent his regime hitting the market. And at this point, it's just unclear where Intel is in its manufacturing. It could really execute. It could completely drop the ball again.

But at this point, I just don't know. You up your rating to neutral. Your price target, I don't know whether you change that, it was 30. The stock is 31. Does the price target stay the same? And does a neutral rating mean basically, you know, we're going to be in this kind of range for a while? So I had been down at 20.

So I did up my price target. I think, again, what you see with the next set of products, Meteor Lake and Sierra Forest, is going to tell you a lot about how Intel executes on its manufacturing transitions. And that's been the struggle. If you can't get manufacturing right, then it's really hard to be competitive in chips. If they get it right with those products, that makes you feel better about 2025 when they're looking to regain parody or even take the lead over Taiwan semi. Just, Matt, give this some context for us.

Obviously, Samsung had a pretty bad report this week as well, so we don't want to put this all on Intel. If it weren't for AI, I would probably be talking a lot more about the semi-slump. How deep is it? How close is it to being over? So I think that things are still undetermined. Certainly entering this year, it felt like you might see a bottoming Q1. I think that bottom got pushed to Q2.

In terms of recovery, I think the recovery in the back half seems shallower than it had seen previously. Having said that a lot of this is about inventory rationalization as opposed to end demand. So end demand is not great, but for instance, we're starting to see PC builds pick up. On the server side, you saw AWS, Google, meta, talk about spending more on servers. So it's just they need to work down the inventory they have versus demand is really getting worse. And so I think Q2 is probably at the bottom. It's just more of a question how much of recovery do we get in Q3, Q4, and then into 2024. Yeah, absolutely. Matt, thanks for joining us today.

We appreciate it. Matt Bryson. Coming up, how AI is shaking up Hollywood from actors' faces on body doubles to reviving to see stars, the tech advancements that could transform movie making as we know it. Plus two steps forward and one step sideways. Amazon initially jumped after beating estimates across the board, but turned lower today after executives mentioned more recent cloud weakness. Our analyst says he would start buying aggressively if shares dip to a key level.

We'll tell you what that is coming up on Power Lunch. Welcome back to Power Lunch, everybody. Time for today's tech check and we've got to talk Amazon. Share is down nearly 4% after executives mentioned in April slowdown in cloud spending, erasing the 11% surge last night after the initial earnings beat. For more on this, joining us here on set, CNBC Steve Kovac. And remotely, Rohit Kolkarni is managing director at Roth MKM. Welcome to you both.

Rohit, I'll just toss it to you. Unduly selling off on these cloud comments. You think Amazon's the only one, they're losing share? I think whether they're losing share or not remains to be seen. seen, but I think the report was, I would say, four and a half stars out of five stars. They beat on a lot of metrics. Profitability is growing. They're curbing their expenses, lowering CAPEX, a lot of good things.

You can't please investors all the time. So, AWS drives a lot of sentiment. So I think that's where we are at. But we would be players. What is the market misweighing here? In my opinion, they are not giving Amazon enough credit for international retail margins, North America retail margins, even AWS margins. AWS for Q1 was not that bad. And then overall, for the third year in a row, they're going

to decline CAPEX. This company did spend a record amount in 21, but then 22 was a step down. 23 is a step down. And that's showing a lot about the cash flow potential that this company might have next couple of years. Steve, what do you think the stock reaction is telling us both the initial surge last night? Because remember, it was up 4% or 5% into the print. So for a second there, it looked like a really impressive day. Now, of course, the fact that they can't kind of overcome this sell-off on that comment. Yeah, the guidance was good, too.

So that was some of the optimism going into that call, too. And look, a lot of it comes on to the AI. Even if you believe AI isn't going to be as big as you think the perception out there is, and they're getting punished for that. But look, I think also what kind of goes underappreciated is, and I don't think they explain it super clearly on the call, is they keep talking about optimization with customers and helping them save money.

But if you're looking at Amazon the long term, that's a good move, isn't it? Because you want to keep those customers. You don't want them to go to Microsoft and start running their AI language models on Microsoft or Google, which, by the way, their cloud turned to profit for the first time. It's just way smaller than the other two. But look, it's still a market share battle,

and there's this perception now that Microsoft can eat even more into Amazon's lead. Rohit, what do I do if I own the stock? What do I do if I don't own the stock? Is this one that is kind of dead money for a while, or is it going to move higher? Both those groups should buy Amazon shares, in my opinion. I think over the next three months probably stays range amount. It's a sentiment black box. I would say there is anything wrong with fundamentals. And if you look back 18 months and look ahead, 18 months, I think I rarely use this word inflection.

I think Amazon is going to show that they're inflecting on profitability and cash flow. The post-COVID digestion period has, I would say, almost ended with how they're thinking about profitability and cash flow generation. And I think over the next 18 months, now is time a good as any to buy Amazon based on how the three segments that they are in, retail, advertising and AWS, all three are going to be more profitable 18 months from now. Not to switch gears, and I don't know if this is switching gears, but to see what Snap and Pinterest have reported and the share price reaction there, I mean, last time they were both down about 20%. And this was after META came out with much better trends. And so, and Julia mentioned this off the top, but Roheed, their AI tools appear to be helping in advertising. So is this an AI story? You know, the bigger using it, they're getting bigger, something like that, or is there something very different going on here?

There is definitely a layer of AI story. But with Pinterest and Snap, I think it's a function of kind of when the advertising fire stops growing, in my opinion, the larger get more market share. So you have Google, Amazon, and Facebook. They are getting more market share as the advertising pie is not growing as much. So their smaller experimental platforms tend to get hurt more. So they tend to lose a little bit of share. And probably that sets them up if I don't have a crystal ball. But if we are in a macro recovery zone in, say, three, six, nine months from now,

that's the day you buy smaller players like Snap and Pinterest. Although, ironically, Steve Snap had that my AI, you know, chatbot thing that went over pretty poorly. So maybe they just applied AI to the wrong dimension here. But also, like, to go off that point on advertising, there's a reason why advertising at Amazon is so special and growing so quickly. It's because they sell stuff. And so you have an immediate intent. When you search for batteries, boom, Duracel can show you a net. Exactly.

Search for toilet paper, Sharp and so on and so forth. But also on the call, what was interesting last night, they're like, we barely started scratching the surface of what we can do in advertising. Keep in mind, they have prime video. They have all these other surfaces, music as well, that they touch, that they haven't really explored in a significant way yet. They're doing a lot of sports programming. There's a lot of advertising opportunity there as well. So it's not over yet. That growth is, there's still a long runway for them to grow.

Eat into Google's market share, by the way, too. Roheed, final thought here. How long does it take? we had a longer duration chart that we had up there a moment or so ago. How long does it take for this stock to get back to the 160 level where it was not so long ago? The price target is below that right now. So in fair disclosure, we don't see that happen in the next six to nine months. But if you have a time horizon beyond that, I feel sometime in 24 is where it kind of starts to go there.

The reason why is next three to six months, we don't know what happens to cloud trends. We still feel that Q2 and Q3 is going to be sub 12, 13, 14 percent. Any outperformance would help the stock. So I think from a sentiment standpoint, kind of cloud drive sentiment, that keeps the stock in a small pocket here. Rohit, thank you. Good clear answers on every question. Thank you. Roheat Koukani of Roth, MKM and Steve Kovac.

Thank you. You had good clear answers too, me. Thank you. I was waiting for you to compliment me. Very well done, very well done, guys. All right, coming up, when straight and narrow is definitely not a good thing. Just four names accounting for two-thirds of the S&P 500's gains so far this year. Why limited stock leadership could be a bad sign of what lies ahead for the broader averages. We'll discuss that and more when Power Lunch returns after this.

Welcome back to Power Lunch, everybody. A stocks are a little off-session highs, up about half a percent for the major averages, a third of a percent for the NASDAQ. And once again, the biggest movers are earnings names with some big surprises in the past 24 hours. Bob Bassani watching the action from the New York Stock Exchange, Bob. And we're halfway through, Kelly. Important thing is the numbers are coming in better than expected. First quarter estimates are rising now. And the second half of the year, well, it's holding in there.

They're not cutting the numbers. That's a good sign for the people who want to believe in the soft landing hypothesis. We talked a lot about earnings today. I just want to show you Mohawk, one of the ones that did have earnings. This is, of course, big carpet flooring company. Their numbers were excellent. They still have pricing power. They have a big commercial business that's remodeling that's doing well.

The residential side is a little bit slower, or the individual side is a little bit slower. But still, the story is still pricing power for them. Energy companies, you saw Exxon. Chevron's doing really well. APA, the old Apache, that's going to be reporting on Monday. But most of the big energy names have had a good month overall and are doing well today. Also important, regional banks have stabilized again, First Republic is down today.

Your Zions, U.S. Bank Corp. Co-America's all doing a little bit better today. And that report in the middle of the day from the Fed on Silicon Valley Bank is really not moving the regional banks. I guess that's probably good news. Last day of April, S&P's up 1.2%. Interesting to see that this is a very still defensive market. We've been talking about how strong consumers. Staples have been in health care.

There's your leadership group. It's a little disconcerting that semiconductors, which were so strong, have been losing energy for a last several weeks, and so have metals and minings. Of course, this figures into the global reopening on China story. That's a little bit of an issue if you want to talk about some weakness. And you can see the gainers, how defensive the gainers are. So you got Merck and you got travelers and McDonald's that are doing well. J.P. Morgan, I think, surprised everybody by pulling off a really good quarter.

And tech is really not in the top group, Micron, one of the few stocks that are moving. Not a lot of new lows anymore, but here's something that's at a new low, the VIX. The CBOV volatility index, that's not just a 12-month low. 16. Look at that. That is a 16-month low. Remember, Tyler, the important thing people keep saying, well, isn't there a recession coming? The VIX only measures 30 days out.

You have to keep repeating that to people. 31 days out, the VIX doesn't measure. So this is not a recession indicator. It's just a short-term volatility indicator. And for the moment, it's indicating Wall Street's not terribly worried about the next 30 days. Tyler, back to you. All right, Bob. Thank you very much.

the Fed's favorite inflation gauge out this morning yields, trading lower as a result. Rick Santelli in Chicago with the details for us. Hi, Rick. Yes, and it wasn't only here, Tyler. Most of the metrics today in the U.S. that had any sort of grab into giving you a better, more accurate image of inflation drifted lower, maybe except for the five to 10-year outlook on University of Michigan, but even at 3 percent, that wasn't so bad. It was higher than expected, and it's qualitative. It isn't a formula-type calculation. If you look towards Europe, they've been looking at their numbers coming down as well.

Today, Germany, various regions, their CPIs were coming down, and that affected interest rates. If you look at a chart today of 10-year notes over two days, what we gained to the upside and yield yesterday, we gave back today. So right now we're down eight basis points. On a two-year, we're down three, but we're down 14 on the week on a two-year. Let's open the tenure to that same one week look. We're down about the same. Down 13 basis points on the week. And as you look towards Europe, as I said, they had a big drop.

They're down 15 basis points as they closed it 2.31% in a 10-year boom. That's a three-week low yield close on the week. They were down 17 basis points and the same dynamic. We have rates too high right now for many businesses, but it doesn't seem to be bringing inflation down quick enough even though it is bringing inflation down. Tyler and Kelly, back to you. Rick, thank you very much and have a great weekend. Meantime, let's get to Seema Modi now for a CNBC News Update. Hey, Seema. Tyler, good afternoon. Here's your CNBC News update at this hour. The GOP-led House voting to repeal President Biden's waiver on solar panel tariffs. The move is aimed

at supporting the domestic supply chain, but solar builders say it will stall clean energy development. It will now be sent to the Democratic-controlled Senate for consideration, but the White House warns that it opposes the legislation saying that President Biden would veto it. Two astronauts at the International Space Station beginning a crucial spacewalk to route power cables and retrieve a communications antenna. The mission is part of a broader effort to boost the station's power channels with new solar equipment. In total, the spacewalk is expected to take about six and a half hours. Wow. An NBA superstar Kevin Durant signing a lifetime deal with Nike. This evolves

their long-running partnership into a lifetime contract. The Sons All-Star joins LeBron James, Michael Jordan, who also inked Lifetime deals with the sports apparel giant. Kelly, that's pretty big news. Lifetime games. He's a very astute businessman, Kevin Durant.

He's got a big CNBC conference now too. Coming up. That's right, the summer, I think. The summer, he's going to be with us. Very astute guy. Ahead on Power Lunch. The picks are in. The 2023 stock draft is in the books and so the actual competition can now begin. Who looks best right out of the gate? We're Friday morning quarterbacking this year's picks in a special three-stock lunch coming up on Power Lunch.

All right, welcome back to Power Lunch. Stocks are higher again today with the Dow headed for its best monthly gain since January. That would mean you'd just eliminate February and March there. So that's like in two months. Best month of gain in two months. Well, I'll take it. All right. S&P poise for a 1.3% bump. Whoever's, we dig a little deeper. Only a few names account for the S&P's gains this year. Ten stocks, mostly mega-cap tech, account for 93% of the gains since January 1. Let's turn to two market gurus. Guru?

No. To tell us what that means for the market from here on out. Richard Bernstein is CEO and Chief Investment Officer of Richard Bernstein Advisors. And Ron Insana is a CNBC senior analyst and commentator and co-head of Contrast Capital Partners. And he was the partner of Tom Bergeron yesterday on our staff. draft. So let's get that clear. Rich, welcome. And I'm not a guru, by the way. You're not a guru. You hate that. I hate that word. Guru. But anyway,

Rich, you can be a guru. You can be a swami. You can be whatever you want. Why is it not a good thing in your view for the market leadership to be as concentrated as it is? I think intuitively we would all understand why. But explain it. Right. So, Tyler, I think what people forget is that when you're at the beginning of a bull market, you have a broad economic advance that favors a lot of companies. A lot of companies benefit from that. As the cycle matures, effectively you go through a very Darwinistic survival of the fittest. So as a cycle gets older and older and older and then as it begins to decelerate, we go into narrower and narrower and narrower leadership because fewer and fewer companies can grow. That would be fine if the earnings

picture wasn't so bad. But the earnings picture is good. In fact, Credit Swiss pointed out today that value stocks are surprising more and higher than growth stocks, but yet we're seeing this very narrow leadership that suggests to us that this is mostly speculative, not fundamentally bigs. How do you react to that, Ron? No, I don't disagree. The one thing about whether or not we're at the end of a cycle, it's very difficult for me to assess which cycle we're in. I mean, it seems like we're at the beginning of the cycle when you look at the Fed coming to the end of its, you know, interest rate increases.

It looks like we're at the middle of a cycle when you look at certain national. aspects of the economy, and it looks as Rich said, like we're at the end of this cycle when it comes to other parts. So this is the strangest cycle I've seen in 39 years of doing this. And so I don't know, you know, exactly where we are and what applies. What's interesting, you know, we're talking about the mega-cap stocks leading here. Everybody on our air has been saying that what led us into the downturn wouldn't lead us out of it. And yet the rally that we had was big cap tech. Yeah.

Right. So I think it makes it just increasingly difficult to make, again, as I've stated before, you know, any uniform statements about where we are. in the cycle and and and and which groups work best at this particular time. And that's Rich why I think it's interesting that you know a lot of people saying, well, look, the market's resilient and it's continually proven the doubters wrong and, you know, you got to be in it, you got to stay in it. And yeah, I just, I ask, where do you go then if, if you're a little bit worried about the concentration of leadership and think that this rally can't last until it broadens out or

that it's not because it's so narrow that it's running on fumes, you know, where do you turn to? Right. So, Kelly, I'm going to speak in hyperbole for a second. You can basically look at anything else. Because the notion that only these 10 or 15 mega cap stocks are the only companies are going to grow in the entire world is such an incredibly bearish outlook on the future of capitalism, on the future of economic growth anywhere in the world. So I'm speaking a little tongue and here, but the menu of opportunities is incredibly broad right now. It's not just those 10 or 15 companies. So if you think about outside the United States, if you think about other sectors in the United States, I would argue there's plenty of places to go. I just don't think, you know, those 10 or 15 companies, the three dominant sectors in the United States, technology, consumer discretionary communications, they just don't appear very attractive to us. But in terms of the menu, it's actually quite broad right now. Ron, what do you think? I don't know. You know, I've always been a little nervous

about going overseas, just for a variety of reasons. You look at Eurozone growth today. It was 0.1% for the quarter. You know, China has its ups and downs and is very opaque. And then you look at EM, and a lot of that if you're a U.S. investor is wildly dependent on whether or not the dollar goes down. The dollar does. And so, you know, the dollars come down and gold has gone up a commensurate amount. So that's one place where you could have made money. And Tom Bergeron talked about that. Yesterday, we discussed it. But I don't know. Look, I mean, I think high quality here is just fine. And we've talked about this before. A 5% three-month T-bill while you're sitting around waiting is not that bad either. And so I'm not sure whether you kind of have to cross the pond to get the types of returns

that you really want. Real quickly, Rich is a last hour of Ahan Jiggin, who shares the view you guys are all talking about, said he was starting to buy small caps because of the underperformance, maybe some value opportunities there. What would you say about that? So, Kelly, I think there's a difference between small caps and smaller caps. If you're ignoring the top 10 or 15, by definition, your portfolio is going to have a smaller cap bias in it. I don't think as we're going into a profits recession, that's the right time to buy small caps per se. But certainly, you know, just avoiding the 10 or 15, you're going to have a small cap bias

in your portfolio. If you look at an interesting chart that Lizanne Saunders put on Twitter from Schwab today, the Russell 2000 versus the S&P is making a new low. Wow. So would you be a buyer of the Russell? No, no, that's not my game, you know, but, you know, smid rather than small if you're going to do it, because I think that, you know, maybe the Russell 1000 is more attractive. Yeah. All right.

A smidge of the Smith. Thank you, Anchor. Thank you, Anchor. Stay classy San Diego. I'll be yodging right after this. All right. Ron and Sana, thanks guys. Ahead on Power Lunch.

We're heading to the cloud. The Cloud ETF, ticker WCLD on pace for its worst month and nearly a year. a year. Even Amazon warning of deceleration. We'll hear from the CEO of a startup trying to shake things up through innovation. Power lunch is back after this. Welcome back. Just because growth is slowing doesn't mean the corporate transition to the cloud is over. Today, John Ford brings us up close with a CEO

whose software enables the transition to the cloud and AI era, John, for their business. That's right, Kelly. Ali Goatsy is the co-founder and CEO of Databricks, a private cloud data software startup, valued at $38 billion a couple of years back when markets were hot. The company helps others centralize and secure their data so they can use it for analysis, things like training AI models. Ollie was born in Iran and his family fled to Sweden.

They moved a lot once they were there and he got used to being an outsider and having to figure out how to thrive in new environments. His family wasn't wealthy, but his knack for problem solving started helping out in his teens as personal computers got popular. I got a computer when I was eight or nine years old. It was a Cumbador 64 and I started programming. on it. And in all those years, that was the revolution of the PC era. Everybody had a personal computer. So, you know, friends and family and other people would have problems with their PCs, and they would always say, oh, that kid, he knows how to fix it. So I would fix their PCs, you know, this is the back in the day with viruses and windows and those kind of things. And I would fix these

and, you know, they would give me 500 Swedish Corona, which is a lot for a kid back then, right? So that slowly I started actually earning quite a bit of money doing that and then eventually writing software. So, you know, while my parents were sort of, and the family was, you know, in a different spot, I soon started actually earning quite a bit of money around the age of 13, 14, 15. And that actually helped significantly. And, you know, it helped you also get confidence. And then I just got into this whole computer programming thing. And then Ali actually became an academic at first, a researcher. He was one of the creators of Apache Spark, a popular open source engine for processing huge amounts of data. Now, it is taking too long to convince

others to adopt it, Gatsy and his co-founders started Databricks. And now, after an assist from investors like Ben Horowitz and an early partnership with Microsoft back in 2016, the company's positioned to compete for an essential position in the AI race. In the last five, six, seven years, we saw leaders saying, you know, well, data is important, cloud is important, we're going to get there. You know, we have a lot of priorities and so on. What's happened is that in November, it was sort of just like we had the pandemic pull forward than everything fast forward five years. We've had an AI fast forward since November,

in which all the leaders are now saying, hey, tell me about what my AI strategy should be. How do I compete in this world? What does it mean for my business? This is moving so fast. I need to understand this. Do you mind talking to my CEO? My board wants to set a strategy for this.

We need to figure out what to do. So somehow it's become now much, much more elevated. And the sense of urgency is sort of tenfolded compared to just, if you wind the clock back to October last year, it would have been a different world. Denderbricks and Stripe are often mentioned in the same breath as a couple of the most valuable startups in tech that could come public at any time. Given the turbulence in the market, Ali isn't focused on that right now. And while some in the software space are getting shy about

growth, he said his company is still growing at record rates and he's leading into the momentum in investing in acquisitions and hiring. Then he needs to IPO because to quote Dan Premack the other day, he said the IPO market won't be back until, I don't mean this about it, a boring B2B enterprise. I saw this, I don't, this, what he does is way over my head. But this is exactly the kind of candidate that would bring a lot of confidence to the marketplace. Well, that one in Stripe. Those are some of the big ones that people have been looking for. He's raised about $3.5 billion.

So this is one that everybody knows could come public. But again, he's leaning into growth in this environment, which is a bit counter what we hear others say. But then on all the earnings calls this week, you know, from Google, from Microsoft, from Amazon, we're counting how many times they say AI. So the time is now. Bingo. John, thanks. Have a great weekend.

Still ahead. AI goes Hollywood. Special effects have had a place in movies for decades, but now new technology has up the ante to a whole new level. And the Screen Actors Guild has something to say about it. That's next. Google CEO Sundar Pichai has warned that AI has the potential to revolutionize everything. And we're already seeing its impact in Hollywood. The industry grappling with both the potential and the potential problems of AI, Julia Borsden has that story for us. is being transformed by artificial intelligence. Deep Voodoo is a visual effects company that specializes in what they call facial replacement AI. What's a funny face I should make? Like, in about 30 minutes, they scanned my every expression to learn my facial movements. And two weeks later, we put the algorithm to the test

with a body double and a live camera. Here we go. Oh my God. Not my hair, but it's totally my way. my face. While visual effects have a long history in Hollywood, Deep Voodoo's precision and live render feature have won over celebrities like Kendrick Lamar, who use their technology to wear the faces of other celebrities. In a traditional VFX scenario, it would be stuck in post, and they wouldn't be able to see it until it was a finished shot. So you can have actors wear the

mask of another actor's face while they're shooting the movie, rather than having to wait until it's all done to do the face swap. Absolutely, yeah. Julie, you don't have to. to show up for work anymore. Deep Voodoo says it's working with studios to put actors' faces on stunt doubles and even to revive deceased movie stars. How much does your technology threaten people's jobs? This enables people to do their jobs quicker, better, and cheaper, but it is a, it's a creative tool and it needs to be operated by creative people. But with all of this new technology, come new concerns. The Screen Actors Guild telling us, quote, our goal is to ensure that our members are protected from unauthorized use of their names, voices, and likenesses.

We intend to expand those protections as AI uses are addressed. On movie sets like this one, AI is not only being used to clone actors' faces and voices, it's also being deployed to do CGI and visual effects faster and easier than ever before. Wonder Dynamics quickly transformed me into these characters. Their AI technology can replace a human actor with a computer-generated figure in hours. It's waving its arms around the way I move my hands when I talk. Actor and company co-founder Ty Sheridan was inspired to improve visual effects after his experience wearing motion capture sensors on Steven Spielberg's Ready Player One.

We always wanted to tell stories that were bigger than our pockets, and that's really kind of what led us to start in this company. Along with his co-founder, Nikola Todorovic, Sheridan is hoping to make premium visual effects easier and more affordable. one-minute scene like this would normally take weeks to render. With our technology, we're really hoping to bring it to a day or a couple of hours, depending on what shot is. So it becomes much faster, but also more cost-efficient. Exactly.

And more accessible because all you need is a browser, web browser and a camera. Wonder Dynamics says hundreds of thousands of users have signed up to try its platform, and productions in the works for Netflix are already using it. Is it going to eliminate the need for actors? Absolutely not. I never put myself out of work. No, I think it's going to, if anything, I think it'll create more opportunities for actors to be in these type of films.

And if it works, what used to be science fiction can become an AI reality. Now, all of this AI technology, of course, brings concerns about what happens if it's used without actors' permission or to manipulate consumers with misleading deepfakes. And in fact, the role of AI and how actors' images can be used will be part of negotiations between the Screen Actors Guild and the studios, their contract does expire in June. And it can even play into the writer's strike, which could start as soon as Monday. Kelly, Tyler? So could I use a five-year younger version of myself on live TV, Julia?

You know what? They do have the ability to do de-aging. So what we could also do is, you know, I scan my face. I could hold onto that face and use that face from me now in 10 or 20 years. So I could just stay the same age for me. I'm going to drop my skin care routine tonight. It's pretty crazy. Why am I sweating all this money? So they can make an image that looks like you.

Can they make an image that sounds like you? In other words, duplicates your voice or inflection. That's a different technology. Yes. But the answer is yes. So that technology that I demonstrated was all about the image. There is a separate set of companies that are working on that speech technology. There's a company called Speechify.

There are several companies that can actually. actually recreate your voice based on just a couple of words. You don't even need to talk for that long so they could even take people who are in the public eye and have their voice out there already and then create recreations of their voice. So this is the technology that's dangerous, right? Potentially that's quite dangerous in a political arena. It could be dangerous. Or any other. I mean, if you think about the potential for deep fakes to mislead people, the fact that you could recreate someone's voice. It's the combination, to me,

what I think is most potentially dangerous, is the combination of voice along with that image. And it sounds like someone and it looks like them. How do you know if it's not really them? Right. But the technology is really amazing. Yeah, I was just going to say, Julie, who needs a new actor if you can, you know, Al Pacino,

like any of these people, if they can continue to act in films, would SAG ever say, well, that kind of puts the next crop of future stars out of work? But it's not actually them acting, right? It's just basically a mask of their face on top of another actor. So that's a question. I mean, don't you want the actual acting skills of those big stars?

It's very complex. Yeah. It's fascinating. Julie, that was an awesome package. Thank you so much. Our Julia Borson reporting. Coming up with some interesting draft prospects still on the board, not NFL, the CNBC stock draft, of course. Our trader reveals the top name.

He thinks our contestants overlooked yesterday. A special stock draft edition of three stock lunch next. All right, time for today's three-stock lunch. We have a post-stock draft menu today. We ask which stock is the best pick from the draft, which is the worst, and which stock was overlooked. And to do that, we welcome our friend Boris Schlossberg, Managing Director of FX Strategy with BKS at Management. Boris, let's start with your estimation of the best pick. So I think Google is the best pick on that list.

And the reason why is because, you know, we're obviously. all focused on search and add and everything else. But I think what people are underestimating is that Google is really could be converted into a very, very powerful AI company. They're fully vertically integrated. They're making chips. They have the cloud. And obviously, they have very, very good AI code.

So it's not at all unrealistic to think maybe five years from now. They're going to be generating a lot of their revenue from subscription, both search and AI, as a possible revenue generator. To me, that's a very interesting prospect going forward with them, especially given their scale and size. So that's your favorite pick. What was one you think might be a little too scary to contemplate? I think, you know, the ultimate aim of falling a catching knife is Peloton at this point. You know, at this point, the whole connected healthcare devices post-pandemic, they're really not working out.

The company is obviously trying to make some money on subscriptions, but it's a chicken and egg thing where you're basically trying to, you can only sell subscriptions if people buy the product, nobody's going to buy the product. and ultimately really every healthcare connected product ends up as a glorified coat rack, in my opinion. So I think, you know, this is a company on its way out, not on this way in. Or it's probably going to be an acquisition. That would be my counterpoint there would be that it possibly gets acquired at some premium price. And in this kind of contest, that might be a win. So it might not be a good investment long term, but in this.

But I wonder if the buyers are just going to wait for more blood to us. spill on the floor. So I think there's more downstate action there. All right, yeah. I'm still using my peloton. It hasn't become a coat rack just yet. Has it no correct yet? No, not yet. Actually, I've stuck with it. It's a pretty compelling product when you do the whole suite of it. But it's not cheap. It's $44 a month for the online action. It isn't. And if you think about it, consumers can rent that experience with $45 by just going to their local, you know, health club and even soul cycle. So I think it's just very, very tough to make a compelling case. All right, here's the one that you think was left on the

wrongly, Exxon Lover. Yeah, an oldie and a goody. I mean, the king of energy at this point, that's something. I can't believe that people aren't really looking at Exxon. Seriously, they just had literally their most profitable quarter to date. Tremendous operational discipline control. And obviously, this is basically a bet on the fact that oil stays 60 to 80 for as far as the eye can see. And if that's the case, you're looking for three to five years.

A very, very good steady cash flows out of the company. I think it's a really good strong bet. really good strong bet. All right. Boris, thank you very much. We appreciate your time today. Thank you guys. Take care. Next week is going to be a busy week. There are lots of companies reporting earnings. You and I will be in Washington on Wednesday for the big Fed decision. We'll give you two hours of pre-fed content. Very excited for that. We've got actually a bunch of good guests lined up already as well. And then the end of the week, the jobs report. So a week and the milken conference and the buffett mania out in uh get your rec nbc thanks for watching power lunch