Power Lunch - Fed Meeting Recap & Nvidia's $3.7M Investment 2/21/24

Episode Date: February 21, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. 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, everybody. I'm Tyler Mathis. I'm glad you could join us on this Wednesday. We are seconds away from the release of the minutes from the Fed's last meeting a few weeks back. And we're going to go right now to Steve Leesman for the detail. Steve. Thank you, Tyler. The minutes from the January meeting show that Fed officials saw the monetary policy rate at likely the peak of this hiking cycle. But these minutes are full of concern about upside risk to inflation. While they saw the monetary policy rate at likely the peak of this hiking cycle. But these minutes are full of concern about upside risk to inflation. While they saw, saw things, the risks moving into better balance, the committee was still more concerned with inflation risk. Important to note, this meeting came before those upside surprises we saw to the inflation numbers, the data we got in February for the month of January. Some were concerned that inflation progress could stall. Most participants emphasized the risks of cutting rates too quickly. Only a couple pointed to downside economic risk from keeping rates restrictive for too long. They thought it was appropriate to begin discussion.

of slowing and ending balance sheet reduction at the next meeting, but no particular timetable for when that might end. A few saw the runoff continuing for some time even after cutting, beginning to cut interest rates. The committee remained concerned that elevated inflation was still harming American households. They noted improvements in inflation, headline encore. Some saw key indicators like housing inflation would fall in the future, but participants saw upside inflation risk in stronger demand. They saw it in loosening financial conditions, along with geopolitical risks and the possibility that the inflation improvement we've seen in some better supply chains could begin to moderate

so that effect of, let's be bringing down inflation could go away. There were a few folks that saw concern or saw pressure on consumers, but that was really not the basis of the discussion. And Tyler, I'll just leave it there except to say, again, before these worse inflation numbers came in January, the Fed still had this bias of concern about inflation, still pointing out its inflation measures had not reached 2 percent. And that was why I think the chair at the meeting had that hawkish tilt and why even the statement itself did. Tyler? So the numbers that came out came out after the meeting and after this, not after this,

after this commentary, I suppose, you would say, do you think the fact that those numbers did come in hotter than normal, hardens the view of these, I will call them inflation hawks for just because it's convenient. Yeah, I think that's a good way to put it, Tyler. I think that they're saying that, you know what, the caution that we had in the January meeting makes sense in light of the numbers. It underpins, it supports our position. You know, you say inflation hawks, Tyler, I'm having a hard time reading these minutes and finding any doves on the committee. Maybe a couple, but not a whole lot. Yeah. And they seem more worried about. about inflation. They see the upside in inflation risk is more worrisome than the other side.

By a long way. And you didn't see any sort of commentary agitating for quicker, more dramatic, a more dramatic pace of rate cuts. The couple throwaway lines, Tyler, like concern about pressure on consumers from elevated delinquencies, perhaps in the buy now, pay later. But it's very interesting, Tyler. They keep saying things are coming in. into better balance, but they clearly don't see it as balance. They clearly see still an upside inflation concern that is evident in these minutes. Is there quickly a possibility of a rate hike this year based on what you're reading there? I don't think so. I think the committee believes at this point it's restrictive and above the restrictive level that probably needs to bring inflation

down. At least that's the feeling of the committee. Now there wasn't any discussion at all in these minutes, haven't really heard it much from other Fed officials, though they have, even the chair has acknowledged the possibility that it could happen. But I think the response to data not coming in the way they want it to, Tyler, is likely to be holding longer at these restricted levels rather than raising again. Very interesting. Steve, thank you very much. Appreciate it. Pleasure. Steve Leesman reporting. Let's talk a little bit more about the possibility maybe of raid hikes. You just heard Steve sort of throw some cold water on that. But in light of last week's CPI and PPI reports.

Let's discuss that and more with Jim Grant, founder and editor of Grant's interest rate observer. No one better to talk interest rates and the Fed than you, Jim. Good to have you with us. You just heard Steve, in response to my question, say that there's nothing in the minutes that he read that indicates that the Fed is inclined to raise interest rates, despite their concern about inflation. What are you hearing?

Well, Steve is in good company in suggesting. the chances are nil of a rate hike this year. If you look at the at the CME's reckoning of the odds of a rate cut or a rate hike, look down the nine FOMC minutes into 2025, and what you see is zero percent each and every meeting. No, I don't know about you, Tyler, but I would assign zero percent to a very, very small group of possible outcomes in the world of finance, maybe 0% that Congress will ever balance the budget, maybe, but I think you have to. So I think the world expects everything except what I deem to be a not improbable thing, which is to say inflation might surprise the upside.

It might persist in surprising. And in those circumstances, the Fed might very well have to raise rates. And indeed, President of the Dallas Fed, Lori Logan, suggested as much in the a speech very little reported, undeservedly little reported speech in early January. What she said was that you shouldn't rule it out. So that's, I think that's now very relevant. So let me just make sure I'm understanding your point of view here. And I get you when you say, you know, the idea of applying a zero percent chance to something

like a Fed rate hike or a Fed rate cut seems a little extreme to you. It's got to be higher than a zero percent chance. But is it your base case that the Fed is likelier than not to raise interest rates rather than cut them? No, I don't think it's my base case, but I think that the chances of it are not negligible. And certainly something to bear in mind. I mean, what would we be surprised if looking back on this episode in four or five years, you say, well, you know, the government was running a budget deficit. I said five or six percent of GDP in 2024 when the unemployment rate was 3.7 percent.

Now, that seems, and the stock market was on the verge of new highs, making new highs, and credit spreads were compressed. And the Chicago Index of Financial Conditions shows that the Fed never has been stringent since it began tightening. In those circumstances, would be surprised by a resurgence of inflation. No, we would not be surprised. So what I'm surprised by is the unanimity of expectation that we are in for a succession of cuts this year. I think that people have been deeply conditioned by the 40 years of declining rates that ended in 2021. And of course, who wouldn't be conditioned?

That's two generations of a successful investing. So I think the world has changed, and I think that inflation is by no means conquered. I would recall the premature assurances of none other than Paul A. Volcker when he was an Undersecretary of the Treasury in 1971 saying that the momentum of inflation has clearly been reversed or halted or contained. I didn't think he was a word contained. But Paul Volcker himself was 10 years early. He himself contained inflation violently with his rate hikes. But, you know, there were three waves of inflation from the late 60s, three. 1980. And every time a wave receded, people say, yeah, it's over.

It's done. Yeah. It's over. I remember it well. And of course, it wasn't done until Volker came in and sprung it out of the system with interest rates that went up into the mid-teens and higher. So what is your, if a rate hike is not your base case, then what is your base case for the direction and intensity, let's say, of interest rate policy this year and into Well, Tyler, so many times around the course have I ran that I have no base case. What I'm looking for is the opportunity to exploit interstices. What I'm looking to do is to see how people are positioned to kind of reckon the odds of that favor position coming to pass.

And if the odds favor a contrary point of view, then to look for things to do in that vein. And I think that there are many things to do in the event that inflation persists, I think it's likely to persist. I guess that's my basic case. I think inflation is likely to persist. I think rates are likely to remain higher for much, much, much, much longer. On the theory that we are embarked on a bear market bombs and trending markets in fixed income tend to persist for not years or fiscal quarters, but decades.

So my base case, then Tyler, is that inflation will surprise with its persistence, that interest rates will surprise by their persistence in being high and going higher, and that the disappointment, that the well-nigh 100% grouping of people expecting a certain number because they may I will be disappointed. I guess that's my, in fact, my base case.

Let me just try one more thought here. I was struck that you used much four times, much, much, much, much higher for longer. How long is much, much, much, much, much? Well, the prior bear market in bonds, 1946 to 81 span 35 years, and the successor of bull market and bonds went for 40, I'm saying, went for, as if it were ended, I say it ended in 2021. But going back to the middle of the 19th century, bare markets and bull markets and bonds have been multi-decade affairs, as fewer as 20 years and as many as 40 years. So again, this is simply pattern recognition, nothing science to its guesswork.

So if past is prologue, it not invariably is, to be sure, witness the historians not being on the Forbes 400 list. but if passed were, in this case, prolog, we'd be looking, not every year rates going up, but we were looking at what happened perhaps in the long, bare market of the 1940s to the early 1980s. Again, nothing says it must happen, but it would be interesting if it did. All right. Jim, always good to see you, sir. Thank you for being with us today. Thank you, Ty. You bet. Jim Grant.

Now, let's see how the bond market reacts to what we just heard from the Fed. For that, we go to Rick Santelli in Chicago. Rick. Hi, Tyler. It certainly seems as though the minutes as important as they are really do align with more of the thought process that investors have had recently, meaning nobody really knows where inflation's going. Nobody's going to be surprised if it isn't linear, especially after last week's CPI and PPI reads. And the 20-year bond auction captured the attention of investors a little bit more aggressively than the minutes to the last meeting. Look at an intraday of 20-year bonds, and you can see that at 1 o'clock Eastern, they popped. That was the 45th offering of 20-year bonds since they were brought back in May of 2020, and the yield at the auction, 4.59.5.

Was over three basis points higher than when the when issued traded. Higher yield, lower price. The government was the seller, and it was not pretty. As a matter of fact, if you look at the rest of the... curve, look at a year-to-date of two years. They're on pace for a fresh high-yield close. The current high-yield close was 466. If you look at the same chart and the pattern is eerily similar, 431's, the current high-yield close of tens. They look like they're going to potentially close higher than that. So what we have right now is twos, tens, 20s, and 30s,

all vying for fresh 20-24 high-yield closes. That's significant, especially on a day, where we hit a record 313 trillion with a T in global debt, while the U.S. has 34 trillion of its own debt. And what, to me, is a big issue is that even though bond funds are a very happy medium to take your, there is no alternative off the board for stocks, it still doesn't mean that there isn't a nervousness about the pressuring higher of yields

in a year they were supposed to be going down. Tyler, back to you. All right, Rick Santelli, speaking out the turf there. Thank you very much. Rick, coming up, a big day for the chips in video reporting after the bell. Intel CEO going on the record. We'll break it all down further ahead when we come back on PowerLine. Welcome back to Power Lunch.

Stocks are lower following the release of the Fed minutes at the top of the hour. But not by all that much. I mean, NASDAQ is down the most, three quarters of 1%. The minutes telling us the Fed is still very concerned about inflation and sees risks in cutting rates too quickly. So let's talk about what that could mean for the stock market with Brian Van Kronkite, portfolio manager with Allspring Global Investments. Brian, welcome. Good to have you.

You heard what Steve Leesman said, how he characterized the meeting, that the Fed folks are really more concerned with inflation risk than not. There was not a lot of clamor for a rate cut, which most people have been expecting. Jim Grant just saying, hey, don't take the possibility of a rate hike off the table. Where do you stand on all of this?

I remain steadfast in my view that the Fed's focus is on inflation first. Recessions are normal, and they're not afraid to trigger recession if it means preventing runaway inflation. So I've been saying for a long time and repetitively that the market continues to try to get ahead of the Fed when the reality is the Fed's in no rush. I think the likelihood is that rates stay higher for much longer than what's being priced in,

and the possibility of a hike is, out there. Again, I think like Mr. Grant that it's probably not likely, not my base case, but it's out there. And so as a result, as investors, we need to respect that. Respect the reality of a recession, potentially being there. And how do we play the market accordingly? So you're basically in the grant camp, which was that rates will stay higher for longer. What does that mean for equity investors who have sort of counted most of them on the idea that rate cuts are coming sometime this year? Not March maybe, but maybe. May, maybe June, maybe whenever.

Yeah, without a doubt, in the back last two months of last year, the market started to embrace that early cycle playbook, especially as he moved down cap into the small and midcats, we saw beta being embraced and why I'd consider low quality being embraced. The market priced that in, essentially, so there's a little upside to that, that cutting dynamic. I think right now we need to be thinking about how to play defense in case bad things do happen, in case the wheels come off and the Fed loses control of the economy. How do we play defense? We're focused on balance sheet strength there. But let's not get up on offense, too. There's a lot of ways to create upside through companies deploying capital and controlling their own destiny.

So today, I have a little balance sheet defense on the field, and I'm looking for upside through what companies can control on their own. Let's talk about some of the opportunities you see in real estate insurance and health care services, CBRE Group, which is real estate, Lab Corp, Arch Capital, among them. I think CBR is really interesting. Going back to what Mr. Grant said, right, you want to go where the market's anticipating trouble when you see something that's different. And what I see with real estate and the public markets especially is the market anticipates a lot of destruction. But CBR is interesting. Not only do they have a grossly under-levered balance sheet with over $3 billion of capital available to spend on acquisitions, on buybacks, etc. They have a big part of their business which is service-based, so high recurring cash flow.

The part the market cares about right now is a transaction-based activity, leasing and sales. If market stabilized here. And even if they don't, you're going to see transactions pick up. And CBR is gaining share throughout the last several years. I think CBRE is interesting in the fact that markets pricing it for trouble when the reality is they have a lot opportunity ahead of them and they're going to win no matter what. It's just a matter of timing. Let's give you one last thought on LabCorp. LabCorp again looking to play offense when you have basically a defensive business model. Very low cost to get lab tests, but really critical to clinical decision making. That will be in demand in perpetuity for as long as I can be an investor.

The opportunity today, though, is that they're consolidating their industry, and they're the best in the business at doing so. Look for them to use their balance sheet to acquire other labs, roll them in at very, very attractive multiples. The synergies there boost the margins. Over time, the market will price that in as cash flows and earnings power grows for the next three to four years. Interesting thesis there on LabCorp. Brian, thank you very much, Brian Van Cronkite. We appreciate it. All right, coming up, Apple says the new Vision pro is.

is only available in the U.S. So why is it being found at retail locations in, of all places, Moscow? That is further ahead. Plus, a gloomy outlook for solar stocks. Solar Edge reporting diving demand. We've got details on that one, down 12% right now over the two days. We'll be right back. Welcome back to Power Launch, everybody. The tan solar ETF, down 3% today. Solar Edge, the big culprit there following its results. Pippa Stevens joining us with the details. This was a bit of a bust. That's right, Tyler. It was a mixed quarter, but it's really the cloudy that's weighing specifically when it comes to revenue and margins. For Q1, Solar Edge sees the revenue midpoint at 200 million, short of estimates,

and well below the nearly 1 billion, just a few quarters ago. That's because demand slowed just as the company shipped more product, meaning there's just too much supply. Now, I spoke to CFO Ronan fire last night, who told me the company is now shipping less to clear the channel, which is why revenue has come down. But while demand in Europe is recovering in the U.S. U.S. it is not, the fire told me. The U.S. market is, quote, broken and that there is no good financial reasoning to put solar on your rooftop. He said that rates have to come down, Tyler, in order for the

market to turn around. Well, when the CEO of a company that's in the solar business says there's no good reason to put solar on your roof right now, that is a pretty telling indictment. Yeah. And so that's for the U.S. market specifically. He said that among other things are infrastructure and just the process is not as mature in Europe. So it's really confirmed. Think about door-to-door salesmen and all those intermediary parties. They all have to be paid, which ultimately means that in the U.S., it's still more expensive. In Europe, they're solar everywhere, so people are more familiar. The guy down the block can install it for you.

It's a much more simplified process, which is why rates is what's so key. The revenue guidance was what? Half of what was expected? Yeah, and so what's important here to remember is that that doesn't indicate what the underlying demand is because they are under shipping. They have some 750 million of this backlog to clear. And so demand is getting better, but their revenue is not going to get better until they clear that backlog. Exactly. And at the end of the year is what they're hoping.

All right, Pippa, thanks. Appreciate it. Well, let's go over to Kate Rooney now for a CNBC news update. Hey, Kate. Hi, there, Tyler. Prominent civil rights attorney Ben Crump accused federal authorities today of withholding evidence of conspiracy and Malcolm X's death. That's on the 59th anniversary of his passing. Crump held a press conference today saying that he has new witness testimony that shows the FBI, and other law enforcement were involved in the leader's assassination.

Crump is leading the $100 million lawsuit on behalf of Malcolm X's family. An Alabama health system, meanwhile, is pausing in vitro fertilization or IVF treatments following the state Supreme Court's controversial ruling that frozen embryos can be considered children under state law. The University of Alabama says it decided to stop the treatments to protect its patients and physicians from potential criminal prosecution or punitive damages. And Tiger Woods' 15-year-old son will compete in a pre-qualifier event to secure a place in a PGA tour event next week. Charlie Woods will play an 18-hole event in Florida.

The PGA Tour website announced this afternoon. While he's never played in a tour event, the Younger Woods has played four times at the PNC Championship with his father. Tyler, back over to you. Like father, like son, could be. Exactly. That will be an epic story if he succeeds on the tour. Kate, thank you. Indeed.

Still to come. Invidia, making a massive investment into an AI firm Soundhound. If the AI chip leader is buying in, should you buy two? We'll speak to the Sound Hound CEO next. A big day for chips. As Invidia reports results after the bell, everybody waiting for that one with high anticipation. Also a big interview in the last hour on CNBC. Christina Parts in Evelace sat down with the Intel CEO Pat Gelsinger. Christina joins us now.

What was your big takeaway there? Well, this is the Intel Foundry event right now. The big takeaway is Intel is opening up its manufacturing capabilities to third parties, with the goal of becoming the second biggest foundry in the world after TSMC, Taiwan Semi, by 2030. So Intel announcing today that Microsoft will become its new foundry customer. So that means using advanced Intel manufacturing to build Microsoft chips. We don't know any details on what kind of chips, but Microsoft is one of several drivers for why Intel increased its foundry pipeline at $15 billion.

dollars, but that doesn't mean a huge flow of revenues just yet. It's going to take a while to ramp up in the IFS, the Intel Foundry business, with Gell Singer warning that they won't see meaningful revenues until 2025. So I asked Pat Galsinger, see if you of Intel, if that meant he would have to change his previous promise of hitting $120 billion in revenue by 2026. Here's his response. I believe that's going to take this a little while longer. Okay, so beyond 2026 then.

But overall, the vision is the same. We are building a substantial foundry business over time, and that's ramping up. So a little behind schedule, you know, the founder business needs to ramp up, and there's also delays at the Ohio plant, with Pat Gelsinger blaming macro conditions for production delays over there. But he did say they expect chipsack funding in the next two weeks, which should bode well for this company as well. Yeah, and they're supposed to get a big slug of money there bigger than was doled out earlier this week. to another company. Let's move on to those in video results that everybody's waiting for. What are investors anxious to hear here? And I've been talking in recent days that if there's

any little knit to pick, it's going to turn into a price drop. And then that's the earnings part is just so high for this company after two blowout quarters. So we are seeing some profit taking today, the share price down almost 4% yesterday, almost 5%. The biggest thing investors will want to see is sustainability of data center revenue demand. And that's beyond this year. So it reassures investors that this AI trend and stock run-up is actually meaningful and is going to last. So there are concerns that GPU, so graphic processing units, lead times are coming down. What that means is that supply is improving, and that means that demand gets filled sooner than expected and leads to a possible slowdown in the near future.

So again, the concern about GPU demand beyond 2025 still remains, followed by, of course, You got some updates on chip pricing, the launch of their next AI chip. And lastly, details on chips for China given export restrictions. That's really important because China contributes 20% of data center revenue. So losing that market is a major concern. The street expecting $20.6 billion bucks. Buy Side Whisper, more higher, $23 billion in revenue. So, Tyler, those are the numbers that we want to look for tonight,

especially with data center revenue coming in, expected at $17 billion. The options market, right now, implying an 11% move in Nvidia shares after the bell implying risks to the downside, but it could be short-lived since Nvidia has its next big AI event, March 18th, and shares tend to move up on that event. All right. Christina, thank you so much. Christina Parts in Evelace.

Thanks. You got it. Plenty of people are betting on Nvidia, but who is Nvidia betting on? Well, filings last week revealed that the chip giant had taken a $3.7 million stake in Soundhound AI, a provider of smart voice assistant software. The announcement sent shares up 66%. And Soundhound shares have more than doubled in the month of February, as you see there, month to date, up 120%.

Joining us now is the happy CEO of SoundHound AI, Kavon Mohajar. Kavon, welcome. Good to have you with us. Thank you for having you. So that little move in the stock must hearten you as the CEO of this company? Well, we are focused on the value creation, the long-term value creation,

but it's great to have the right, the attention that we deserve. We've been at this for almost 20 years and building a lot of foundation, you know, technology. How did this stake by Invidia come about? How does that happen? Do they call you and say, we're going to take a position in your company? Do you, what is the, what is the behind the scenes part of that? If there is. Well, we've known that Nvidia for a number of years, and they've been a great ally and, and shareholder in our company for a number of years. And if you think about it, they are in AI, but they're building the foundation and infrastructure. for AI and SoundHound is putting that infrastructure into really good use with our voice AI and

conversational AI technology. 3.7 million dollars is a lot of money by anybody's standard, but it's not all that much money for AI. How do you use that capital or that kind of wealth creation to make your business stronger? Well, we are a public company and our earnings in our February 29, so we are kind of in in a quiet period. I can't comment on a lot of financial stuff, but if you look at the last four years, we've had amazing, incredible growth, about 50% year-over-year growth on average of a revenue that has sustained for four years.

I want to get to some of the details of what your company does and where I might encounter your products in a moment. Before I leave the stock question, there have been reports confirmed by the Financial Times that trading volume went up rather dramatically in the days before the announcement of the Nvidia stake in your company. That is sometimes an issue that would attract the interest of the Securities and Exchange Commission. Are you at all concerned about the volume increase? Average volume, trading volume, 2.7 million, but 96 million shares traded February 6th,

64 million February 8, 56 million February 7th. That's a lot of trading volume in the stock before an important material announcement. What would you like to say about it? Well, I haven't read the full article, but based on the headline, it seems, like more speculation. If you look at other AI companies, first of all, that kind of volume up and down is not that unusual for our company. If you look at a bigger history. But it's higher than the average daily. It is higher than average daily, but we've had moments like that. But if you look at other AI companies that were not in the video portfolio,

they also had the same experience on the dates that the financial time article report. Have you had any contact from or with the Securities and Exchange Commission or securities regulators regarding that spike in volume. No. Let's get back then to the kinds of products. It's fascinating stuff. Your products are in kind of two areas. One is customer service.

In other words, if I go to a Dunkin' Donuts or a Krispy Cream or whatever, a Jersey mics and there's an outdoor automated ordering thing, it listens to my voice and says I want the number seven with no onions and extra cheese, right? That's what it does. And then the other thing is it enables me in my... automobile, for example, or in my home, to tell an appliance or a car what to do. Am I right on that? Is that what you do?

Yes, tremendous opportunities in AI, but we made at SoundHound, we made two predictions, and we're focusing on those predictions. One is that AI customer service will be as essential for every business as Wi-Fi and electricity. So you create your business, you sign up for a website, you sign it for Wi-Fi, you sign up for electricity, you sign up for AI. And we specialize in that. And then the second prediction is that we will prefer talking to devices than other forms of interfaces. If you tell me that, I'm going to believe and I'm going to hold you to it.

Because often when I talk to my device, the person on the other end, whether it's Siri or whether it's Alexa or it's poor women, I mean, I'm answering all these questions. They don't get it right half the time. You're going to get it brighter? Well, it's changed. In the last year or so, thanks to generative AI, the quality of this, it's so much better. Yes, and people prefer voice if it works, right? If it works, I prefer it. I have a three-year-old daughter.

She knows how to speak, but I still have to teach her to type and use a mouse on the keyboard, but she goes around the house and talks to everything, and not everything talks back to it, right? She talks to the refrigerator. She talks to the dishwasher, whatever. Yes. Well, fortunately for the device makers, they could afford to put a very small, inexpensive microphone, and enable their devices. It doesn't take that much to add voice to their products.

Yeah, yeah. How has generative AI, you sort of hit on it, changed the efficiency, the accuracy, the scope of what your products can do? Step change. It's a step change. So, for example, one of our customers, White Castle is using REI to automate their drive-thrus. We can take orders in less than 60 seconds, which is faster than the human order takers. The quality of the order surpasses the human quality in terms of accuracy. But the good thing is we're not replacing those humans.

We are freeing up those humans to make the food, right? So everyone is happy there. Another example is when you call a restaurant, so our partner, Jersey Mikes, is using RIA to automate their calls. Usually when you call the restaurant, they don't pick up the phone. Or when they do, it's a very noisy,

distracted environment. They're multitasking. Can I put you on hold? Exactly. You don't get a good experience. So they're missing out on orders. They are not giving a good user experience. But with RAI, we don't miss a single call.

We take the order, we answer questions. We put the order on their system. And we are alive in 10,000 locations across multiple brands. Kavon, thank you very much for being with us today. Thank you for having you. Kavon Mohan Jhajor of Soundhound AI. Thank you. All right, coming up, Apple says its new Vision Pro is not available for sale anywhere outside the U.S.

But now the device is being spotted at retail outlets in Moscow. Our own Aiman Javers will give us the story when Power Lounge returns. Be right back. Apple's new Vision Pro headset turned heads in the U.S. when it went on sale a couple of weeks ago. But now the device is making its way around the world to a place, Apple maybe didn't expect or even want. Amon Javvers joining us now with more on this story.

Hi, Amon. Hey there, Tyler. On February 2nd, Apple launched its new Apple Vision Pro at the company's flagship store in New York. The company said the product would only be for sale in the United States. And because Apple paused its sales in Russia to protest the invasion of Ukraine nearly two years ago, you would not expect the Vision Pro to be for sale at all in Russia. The CNBC survey of Russian tech blogs, online sites, and channel checks in Moscow reveals that the Vision Pro was readily available for sale at retail outlets in Moscow

within days of its launch in the United States. The fact that the hottest new American tech product was available with almost no delay in Moscow before it is officially on sale in London, Paris or Munich is a high-profile demonstration of the difficulty of unraveling the global economy, even in an era of war and conflict. Asked about Apple Vision Pro sales in Moscow, an Apple spokesperson emailed CNBC. As you are aware, Apple Vision Pro is only available at Apple retail stores in the U.S. In the Russian capital, that statement may reflect Apple's intent, but it doesn't square

with reality. A retail outlet known as Restore, which was an official Apple reseller before the invasion, is offering the devices for sale now. But prices are high, as much as 50 percent. more than in the U.S. Prominent Russian tech blogger Sergei Romancev recently demoed the device walking through Moscow and says the Vision Pro sells for thousands of dollars more at stores there. Romancev says he actually bought his device by pre-order in New York and had someone fly it

to Moscow so he could demonstrate it immediately after release to his more than one million followers on YouTube. Romancev predicts the high prices in Russia will keep demand down for Vision Pro in that country. sales continue because the Russian government wants them to. In 2022, the Russian Ministry of Industry and Trade issued a document permitting Apple products to be imported to Russia, even when official supplies are banned or suspended by the manufacturer. In Russia, that rerouting of supply chains is known as parallel import, and it's part of the reason why nearly two years after the invasion and Apple's pullout of Russia, Apple products and a wide range of other luxury goods are still

available in stores there, Tyler. Fascinating story on how things can get in where they're not supposed to. Amon Javers, thank you. All right, still ahead. Out with the old and with the new, Amazon's slated to replace Walgreens in the Dow next week. But it's not the only name our three-stock lunch trader says should be added to the index. We'll share his take next. And during February, we celebrate Black Heritage.

Here's Estee Lauder Company's executive vice president and CFO. Tracy Travis sharing her story. In environments where not many people look like you, you will be constantly challenged to prove yourself. So you need to always invest the time to be well prepared. Being a constant learner is what I've loved throughout my life. My incredible mother taught me to always try to treat others the way you would want to be treated and pay it forward, which has certainly influenced my mentorship and sponsorship of others throughout my career. All right, time for today's three-stock lunch.

Today we talk about the Dow Shakeup from yesterday evening here with our trades. Boris Schlossberg, BK Asset Management's Managing Director of FX Strategy, also a CNBC contributor. Up first, Boris, welcome Amazon, replacing Walgreens Boots Alliance in the Dow Jones Industrial Average. That happens next week. What is your trade on Amazon? Well, Amazon, I think, is a very interesting trade. It's basically moving now away from all the gains that's made in AI in its AWS space. and applying all the knowledge now into their retail business space. Andy Jesse said that they've been able to, I think, reduce their cost to serve by 45 cents per unit,

which really increased their margins. Their margins actually went from negative to 6% of 500, five-fold increase over the last couple of quarters. It's very, very impressive. Then they have this new AI chatbot called Rufus. It's going to be essentially a shopping assistant that people seem to really, really like initial reviews. You can imagine the amount of AI and data

they're going to gather on their customers. My view with Amazon, I think it's one of those companies that could create a trillion-dollar business selling services as well as goods, perhaps travel, perhaps health care. So there are markets here that markets haven't even thought about that Amazon is going to enter. And of course, their focus on this one-touch life, which is what they really try to customize for all their customers set, very attractive. And I think that's what puts some, you know, into leaderboard for the future to see.

So this is a buy in your book. Let's move on to, let's move on to, let's, move on to the one that Amazon displaced from the Dow, and that's Walgreens Boots Alliance, booted for Amazon's. Could this be the sign of the bottom in this stock, or what? So it's very tempting to say it's a bottom. A lot of times when stocks get flipped out of the Dow, they actually do very well. Exxon did well. GE did well. The big problem here is that they have a huge amount of debt on their books. It's a three and a half times levered company, and their cash flow is negative. So to me, yes, they've had management changes now. They've cut their

dividends, so they're really trying to stem the bleeding. But the business is more abundant. And I think really for the investors right now, you'd want to see at least one to two quarters of positive cash flow before you want to dip your toe in the water. You don't want to be, you know, buying a sort of a false bargain. You know, this could be a value trap for anybody who gets into it right now. That's a strong caution there. Let's move on to one that, well, maybe some people think ought to be in the Dow, and that would be Eli Lilly. Well, that's my argument. My argument is that, you know, I think the GLP-1 is bigger than GPT-4 right now, at least for the immediate future for our civilization. And the Mujara drug is going to have

massive, massive effect, not just on weight loss, but heart disease, liver disease, perhaps even mental health in terms of controlling impulses. So there are analysts who think, think that Lilly will quintuple their earnings to $50 a share. Now, is a stock overbought? Absolutely. Is it overvalued? I don't think so. And for that reason, I think you have to put it into the Dow, given the fact that it's one of the dominant stocks within the single biggest industry within the U.S. economy, which is health care. And the fact that it's not there, I think every single day is amiss. It will be a huge growth, and it's going to change our lives as we go forward. Strong endorsement for Eli Lilly. Boris, always great to see you, sir.

Thank you. You got it. Boris Schlasper. Still ahead. Apple, betting big on live sports. The Tech Giant just released a free score tracking app. Sign me up as it looks to become a sports content powerhouse. The details are next on Powerline.

All right. We've only got about three minutes or thereabouts left in the show. A couple media stories to talk about. We love the media stories before we get out of here. Apple out with a free iPhone app for tracking sports scores. This is right up my alley, Julia Borsden. What's the details here? Well, it's Apple's brand new. It's a free sports app for the iPhone and specifically designed for tracking sports scores, not for watching games, but for tracking scores.

Now, this is Apple's latest move to bolster its role as a provider of sports content and news. You can start to download it today. Users in the U.S., Canada, and UK can find the app to download today. It's called Apple Sports and you'll be able to see scores from all the major teams and leagues. Now, Apple Services Chief Eddie Q telling CNBC that the app is designed to, to be fast and simple so users can check back frequently. It's not designed to engage them for long sessions. He also said that Apple has the advantage of not being biased by representing a specific team or league. And while this app will show betting odds, it will not allow users to bet through the app and you can turn off that feature.

Now, all of this builds on Apple's investments in sports. It bought rights to Major League Baseball and Major League Soccer. It also added sports journalism to its news app and features sports-related documents. on Apple TV Plus. So now Apple's expected to make a bid for the NBA streaming games when those rights come up for grabs later this year. Certainly a hot category, Tyler. I could imagine. While you say they're not allowing betting through the app right now, that has to be an enticing possibility down the road. I would think. There are a lot of different possibilities, including integrating the ability to watch sports in the app as well, which

doesn't have yet. Well, I'm going to go sign up for it right when I get off air here. All right, Next, sports streaming platform, Fubo is suing Disney, Fox and Warner Brothers Discovery over there recently announced joint venture to access marquee live sports. Julia, what's going on here? Well, we got a no comment from Disney ESPN Fox and Warner Brothers Discovery on this lawsuit from Fubo TV. Its CEO tells us that their new joint venture is bad for consumers and unfair for smaller companies like his own, companies which he says have been forced to pay higher fees. This, to me, is a step in the wrong direction. What you'll see is the typical playbook, which is start with low prices, marginalize competition, and then eventually drive prices higher,

which you've seen across all streaming services over the last 36 months. Fubo is asking the court to either block the launch of this new streaming sports skinny bundle or to make the media giants that are teaming up on it offer Fubo what it considers fair licensing deals. Now, Fubo's stock did fall 75% in the two years before the announcement of this streaming bundle. But Gantler says that the fact that these streamers are now starting to re-bundle validates his approach to this business. It's interesting. The question really is coming to a head. Am I going to end up paying more for these various bundles of streamers than I paid for the cable bundle that everybody sort of reviled and cut? Thanks for watching Power Lunch, everybody.

Thank you, Julia. Closing bell starts right now.