Power Lunch - India’s Prime Minister at the White House, Amazon’s AI plans and the big business of sports 6/22/23

Episode Date: June 22, 2023

Indias Prime Minister Narendra Mody continues his U.S. visit, meeting with President Biden as well as big name tech CEOs.  Amazon unveils its plan to catch up with Google and Microsoft in the AI race.  Plus which companies are poised to getting a bigger chunk of the huge revenue around sports. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch, everybody, alongside Kelly Evans. I'm Aiman Javers in today for Tyler Matheson. Coming up, India's prime minister, visiting the White House today. And we'll also sit down with some of the biggest names in technology. Are those companies ready to diversify their manufacturing out of China and into India? We're going to discuss the investment opportunities there. Plus, sports absolutely crucial for media companies because you need to watch them live. But can sports also be AI-proof?

We'll talk to an analyst who has been. bullish on sports about the companies that could capitalize. But first, let's get a check on the markets. Thank you, Aman. Shares of Boeing are dragging down the Dow, which is 23 points in the red, while the S&P is now up 7, and the NASDAQ is up 2 thirds of 1%. So keep an eye here as we head into the back half of the trading day. And also Boeing, as I mentioned, down because of a potential strike at Spirit Aerosystems. They had to close a main facility due to a strike which could impact Boeing the longer it drags on. That has Spirit shares down 8%, Boeing down 2%.

And check out shares of Okado. The stock soaring on rumors that Amazon could make a bid for the British online grocery company. Okado up 31% today, although it's about $14.5 stock and Amazon up 3.5% for its part. They're also making some AI-related announcements today. Investing $100 million in an innovation center. We'll have more details coming up in Tech Check. And we begin now with India's Prime Minister Modi visiting Washington today. It's a significant meeting as well as a rare state dinner being held by the White House tonight.

But business is on the menu as the CEOs of Apple, Google, and Microsoft are among the big names expected to attend the dinner as well as a tech business roundtable in Washington on Friday. Our Sima Modi has been digging into the corporate guest list and is live at the White House now with more. Hey there, Sima. And Aiman, President Biden and Prime Minister Modi speaking in the east room of the White House, making comments about the relationship. Biden himself saying the relationship between the United States and India has never been stronger. boat leaders also touting the significant deals that we're seeing in the defense space and in the semiconductor industry as well. Take a listen. Well, I will just paraphrase what was said. Modi talking about the significant investments from Micron and applied materials to companies today that announced that they will be investing in new chip factories in India,

specifically in the home state of Modi, a clear sign or a reflection of how these executives are doing what they can to appease the leader as they look to diversify away from China. At the same time, we do have that state dinner tonight where it is the who's who of corporate America from Apple CEO Tim Cook, Google CEO Sundar Pachai, Sgtindadeh of Microsoft will all make their way to the White House for the state dinner. I'm told then many of these leaders will then join Modi tomorrow at a tech roundtable where they will not only discuss the opportunity, but the challenges that they're facing and expanding into the country at a time when Modi is looking to pass a bill that would increase government oversight over data, something that these tech companies do not want or will certainly

make it an uphill battle for them to expand into the country. Now, another CEO who will be in attendance tonight is FedEx CEO, Rod Sumanium. He'll be in attendance and he tells CNBC, quote, we appreciate the Indiana government's many initiatives underway to develop a world-class logistics infrastructure and supply chain ecosystem. And we look forward to helping bring Prime Minister Modi's vision to life. So as much as tech and defense, is on the agenda, guys. We know logistics and infrastructure, clearly an area of opportunity as well. Sima, we just saw a live look in there to that news conference underway at the White House. And I wonder, as you look at Narendra Modi standing side by side with the President of the United States,

he's not a guy who does a lot of news conferences, right? That's sort of not his thing as a leader of India. They got him to agree to do this one. I guess they're not officially calling it a press conference just an availability or changing the terminology around that somewhat. How far out of his Do you think Narendra Modi is on this trip in order to attract some of these big business leaders at this meeting at the White House? I think the fact that both leaders may be far out of their comfort zone by taking these questions tells you just how important the relationship is. They know they need to communicate this message in a clear and articulate way to reporters here in the United States, but also the massive number of Indian reporters who are in town as well to tell the story back, tell the story clearly to Indians back home. in India as well. So they are taking those questions and we'll be sure to get you those announcements

soon. Seema, stay right there. Let's talk more about the investment opportunities here and potential risks of investing in India. Let's bring in Rajiv Jane. He's of GQG partners. And right now he's bullish on India and Latin America, but bearish on China. So Rajiv, if you're an investor and you're watching this spectacle at the White House with a state dinner, the pomp and circumstance, the big business names, and you like this vibe, How do you invest that? Where do you put your money? I think as you know, some of these events get a lot of press. The short-term implications are not as significant, longer-term implications are.

I think this clearly shows that there's a big drive on the part of this administration, both Mori and Biden administration, to shift supply chains away from China. So I think the opposite is that is big to invest in some of those areas from an foreign direct investment perspective, less from FBI perspective because there I think there's a study different opposites that we believe one of the things I wonder is I watch this big push by India to sort of capitalize on some of the frustration with what's going on in China is you know you can call it off their authoritarian investment risk in

China that we saw with Xi Jinping and sort of the the moves that an authoritarian leader can make that push investment out of the country I wonder though given that Narendra Modi has been accused of cracking down on his own opposition in India. Do you see some level of authoritarian investment risk in India? And how should investors here think about that problem? Yeah, we actually don't believe those are too comparable because a comparable situation. Because in case of India, there's a lot of checks and balances. There's a court system. I mean, there's plenty of history of companies going against the government or seeing the government

if they intervene. So I think those are two different, two different animals while in case of China, a long history of government intervening in in in both for public as well as private sector to to reduce sort of monopolistic practices that has not been the case in case of India Rajee we know this government in New Delhi has put significant amount of money towards infrastructure across India yet you saw that train crash that took place just a few weeks ago killing hundreds of Indians and you got to wonder what kind of opportunity could there be to invest in infrastructure in the coming years? And what are some of the publicly listed names

that you think could be the best to own? So I think that was obviously tragic and unfortunate, but I think that from an, it just shows the need for infrastructure so it doesn't change the story as such. And we feel that infrastructure is probably the best part of Indian story, not the IT services, not consumer staples,

but vast majority, including us that have focused on historical. So, I mean, obviously, like the Adani group as such, we have significant investment there but there are other companies which are involved in that space which are either on the construction activities cement and so and so forth which we are quite upbeat on because because the the pace of growth is quite significant I don't believe that's fully appreciated we're looking at 5x the run rate expenditure today versus five six years ago so I think I think and that's still ramping up so it like China early 2000s you've been adding to your positions in India

billion dollars now of india holdings in your in your portfolio is it because of modi's economic agenda or is it more because china is just sort of a no touch uh... investment for you right now no actually nothing to be china it's more to do with bottom up sort in india and obviously this uh... morey administration i think i think i think uh... in my opinion uh... the the moody administration doesn't get a fair shake there's too much focus on what happened twenty years ago yes that's relevant but it's not relevant terms of what's happening here and now

because I think I think if you look at their delivery on the economic agenda is actually the most powerful that we've seen since independence. And I think from investment perspective, that's what really matters. Rajiv, I wonder if you look at this in terms of the timing, right? It took so many years to build up manufacturing capacity in China and all the U.S. investment in that country. And you wonder now with this recent spike intentions, as companies look to divest or at least move some of their manufacturing out of China, into India, how quickly can that happen, right? I mean, these are enormous investments, large manufacturing facilities,

a lot of supply chain constraints around that. How soon will we know if India is really able to capitalize on this moment of sort of Western anxiety about what's going on in China? So, I mean, having lived through the Chinese growth story in the 90s and early 2000, one couldn't have predicted what happened in China, because it happens slowly and then happens

fast because once you have the critical mass, then it actually sort of, you know, it snowballs quickly. And I think I think we are in early stages of that snowballing in India because, for example, I don't think so, we would have predicted that Apple would have as big of a manufacturing facility in India within three years. And they do now, right? So that's helping sort of catalyze the whole ecosystem. And without that ecosystem is hard to sort of have the snowballing effect. So I think, I think we are in early stages. But look, there's always ifs and. and two step forward, one step back, like any democracy. So I think direction is good, that the pace will accelerate on a go-forward basis we feel.

Direction is good, but early stages. Rajiv Jane, thank you so much for your insight. Sima Modi, great to see you at the White House today. Thank you as well. Kelly? The housing market still stuck in the mud. Well, at least, you know, exist. Not the home builders, obviously, but existing home sales rising 0.2% in May amid higher prices and rates.

But as mentioned, those builders are up significant. for the year. We'll dive into that next. Plus, Alphabet and Microsoft are the frontrunners in the AI race, and many are asking, where's Amazon? The company now going on the offensive. Stock is popping nicely today as a result, although basically all of the mega caps are. We've got details in tech checks. Stay with us. Welcome back to Power Lunch. It was a slow spring market for housing, broadly speaking, the National Association of Realtors saying home sales, inch tire in May from April, but high rates, inflated prices, tight supply, all impacting the market. Meantime, KB Holmes reporting second quarter earnings that beat expectations.

That stock going to an all-time high again today. Our next guest raising his price target on KB to 65 from 48. UBS Home Builder and building products analyst John Lavallo in the studio, in the house really would be more appropriate. In the house. I see what you did there. In the house. It's really great to have you here. And your phone just must be ringing off the hook with people going, how did I miss this trade?

It's been busy. It's been busy for sure. I mean, and if you went back a few months ago and asked, you know, with 7% interest rates, would we expect this? The answer for most people would say is absolutely not. Right. And yet it turns out that the most inflationary thing that rate hikes have done is keep everyone from wanting to sell their home. So there's no existing inventory on the market because people have to go somewhere. They don't want to pay these rents.

They don't want to, you know, pay up for a new mortgage. And so therefore the homebuilders are off to the races. But how much further can it really go? We think it has quite a bit of legs, to be honest with you. I mean, it is a great time to be a public home builder. And if you think about it, to your point, there is zero existing home supply, three months, to be exact. The private builders, which are 60% of the market on the new home sale side, can't get land, can't get labor, can't get materials, right? And so all of a sudden, the demand that's out there, which, oh, by the way, is improving, is all being channeled towards these public home builders that can offer financing.

So no one's paying 7%. They're paying 6% or 5.5%. And it's all sort of being funneled up to them. Yeah. So they're grabbing the market share while existing homeowners are sitting tight. looking at mortgage rates and saying, well, I can't afford to take a new mortgage on. I'm at 3% now. So I guess my question for you is, how does that change, right? Do we have to wait until rates come down at some point in the maybe distant future at this point?

Or is this like a psychological thing where the existing homeowners just kind of have to come to terms with it and go through the seven stages of grief and realize if they want to move, they're going to have to pay a higher rate? That's a great question, Aeman. And I think you hit it at the latter portion of that. It's exactly what's going to happen. It's an adjustment period. And we saw the same thing on the new home sales side where folks, you know, rates went to 7%, everyone stepped back. And then, you know, adjusted over time.

And that's exactly what's going to happen on the existing homes. How long does that take for people to process that? And you think some of these people who are sitting in their homes now are going to get off the sideline and get into the market? Well, for the public home builders, we hope it takes a little bit of time. You hope. Yeah, you want some running room. But I think, you know, the amount of time, it's hard to say. We haven't seen this kind of sharp moves and rates in a very long time.

So I would say, you know, give it some times, give it, give it six months maybe, and I think folks will start getting a little bit more accustomed to the higher-interest rate environment. And in the meantime, there's going to be a lot of new homes built between now and then. 100%. Enough. I mean, do we at some point start talking about gluts maybe on the new home side, maybe because we're just catching up with the underbuilding from the past decade? On the multifamily side, where we've seen a lot more construction. Would that have an impact overall on the housing market?

Definitely more units coming on the multifamily side. So that's something to keep an eye on over the next year or two. But on the single family side, one of the beautiful things about this environment is that there just can't be overbuilding. There's just the capacity is not out there to do it. Even with zoning changes, things like that? It's making it tougher. And so I think getting it tougher. They're not getting looser.

No. Really? In fact, getting a piece of land, you know, ready to build upon is just a very tedious process, which has just gotten worse and worse. And what about labor? I mean, we look at the jobs report every month. Obviously, you know, labor market's doing great if you're a worker, but maybe not if you're a, a home builder looking to hire people. Labor is very tough to come by, skilled labor in particular. That's why the public home builders of size have the ability to sort of, you know,

attract and retain this labor, which is a huge advantage because there's just not much out there. Is that because they're not doing project to project? They just keep people on staff over a long period of time and they don't have to staff up for a project and staffed down at the end of it? Exactly right. Builders or contractors can come in and line build across a community of 200 homes. that sort of visibility is incredibly attractive to a contract. My first job in high school was light construction, and we were just trying to catch on each project, if we could. I was 14 years old, and all they had me doing was knocking down drywall with a sledgehammer,

and I thought it was the greatest thing in the world. Child labor. Knocking down drywall with a sledgehammer when you're 14 is pretty much. That's pretty cool. That's the pinnacle right there. Let me just ask you in the coverage universe. Who are you most excited about in terms of who can appreciate from here? And is there anyone who you think is fully valued or maybe is going to face a little more different.

So we like the group at large still, and we think there's a lot of room for all the stocks. Our topic is DR Horton, ticker DHA, DHA. You know, largest builder by volume by a margin of 20 percent, focus on what we think is the right part of the market, which is this entry level first time, really kind of a need-based buyer driven by life events, whether it's, you know, marriage, child rearing, things of that nature, things that necessitate more space. So that coupled with their size and scale really gives them a tremendous advantage in our opinion. in our opinion. Anyone on the flip side who doesn't rise to the same level of excitement? Right now we like the group at large. So honestly, you know, I would say there is some differentiation with some, you know, higher-end builders and middle sort of mid-tier builders, but, and we like the

entry level best, but we like them all right now. Quick final question. You cover some building products as well. I don't know if that encompasses the likes of Home Depot, but there's been some outperformers in that group, some underperformers. Explain the dynamics there. Sure. On the building product side, so we don't cover Home Depot. That's going to covered by my friend Michael Lasser at UBS.S. Oh, yeah. But we cover a bunch of the other product names. Our top pick is Masco, which has the bare brand of paint and Delta brand of plumbing.

Our view is that smaller ticket, you know, sort of R&R-focused jobs, are really best positioned regardless of what the economy does. And so if we do see the consumers sort of pull back a bit in the second half, that kind of project still gets done. All right. Fascinating. A rising tide lifts all boats, I guess. We'll see. Yeah.

John, thanks so much. John Laval, joining us today from UBS. And coming up, the big business of sports, only getting bigger, the global industry creating around 355 billion in 2021. And that number is expected to be over 700 billion by 2026. That's according to Statista. And that revenue has the potential to trickle down to multiple sectors and stocks. Power Lunch back in two. And welcome back to Power Lunch.

Bond yields higher today, reversing a move lower this morning after the jobless claims came out. Rick Santelli joins us now from Chicago. to explain, Rick, what's going on out there? Yeah, Aeman, there's a lot of moving parts. So let's start at the beginning. Here's an intro of two-year note yields. And we could clearly see at 8.30 Eastern what you referenced, the highest levels since October of 21 on initial claims, 264,000.

We saw rates go down, but it was short-lived. Matter of fact, if you look at a two-year note yield chart, bigger chart now, we're on pace for the highest yield close since March. And what's important about that is a couple of days. before that, what we're comping to now, was the high for this cycle move, which was 5.07%, so we have to pay attention. Tuesday 10 yield curve. There's a three-day chart. You know, going all the way back to 1981, there's only been three closes of minus 100 or more inverted. Today, we're on pace potentially for the fourth. We want to really watch this chart. And finally, one of the main reasons for the reversal,

as I was calling all around, was that nervousness about the UK. The UK raised rates again, 50 basis points, they're aggressive, and this whole conversation about the similarities of global inflation coming under review. Well, let me weigh in here. Here's a chart of UK inflation. Their last number, a couple of sessions go, CPI for May, year over year core was 7.1% the highest in 31 years. What was ours when it came out last week?

It was 5.3%. Its peak was September at 6.6. Where was UK inflation in September? It was at 6.5. There are some similarities, but not all of them. And maybe this core gives us a reason to think we have different speeds in economies, and we certainly have different speeds on inflation. Kelly, back to you.

Different speeds everywhere. Rick, thank you. And where does that leave oil? Today, is it down 5% today? Almost 5% and below 70 again. That $7 level has really kind of been the sticking point. It's been oscillating above and below that. So it really is all about the larger than expected hike from the Bank of England.

Wow. Coupled with Powell's comments yesterday and just the fear that moves by central banks around the world are going to lead to this big demand drop off in oil. But one thing I did want to take a look at today is a brewing bottleneck down at the Panama Canal. So they are experiencing an unprecedented drought, as they called it. their driest year in a decades. And so that, of course, is impacting the Panama Canal through which so many goods are shipped. And so they've implemented some measures, including depth restrictions. Now, LNG, one of the things that goes through there, and it's actually not really having all

that much of an impact on prices yet. And that's partially because the majority of U.S. cargoes are now going to Europe. So back in 2020, about 30% of U.S. LNG went through the canal going over to Asia. That was down to 14% last year and 12% so far this year, according to Kepler. And that is because Europe needs our LNG much more so than in prior years. So not having that much of an impact quite yet, there's not a huge bottleneck of ships. But Panama is in its rainy season now. And so if they don't get enough rain, this could be, you know, the Suez Canal blockage 2.0 potentially because it is such a key waterway. That's so interesting.

You know, if you've ever been down to the Panama Canal, I was down there on a story a couple of years ago, you just get this physical sense of the, you know, the blockage that can happen there. I mean, the canal is so small when you stand next to it. feel like you could jump across it, right? And it's this huge bottleneck for all global commerce. It's incredible that we're still dependent on these physical things from, you know, the 19th century. Well, increasingly so as well, because even as you've reported that in energy, we're sending more to Europe, a lot of the goods that were coming into those West Coast ports have lost share to the East Coast ports in recent years. So I have to imagine actually more trade is being affected by its closure than might have 10 years ago. Yeah, and they are well aware of this. And they spend

billions and billions of dollars in order to expand it in order to accept a larger tank. but they can't battle what's happening with climate change. And so the port operator said that these really dry kind of anomaly years used to be once maybe every five years. Now it's, you know, once every three years. And so they have a very finite timeline in which they can really try to expand their operations in order to keep operating if they don't get that same rainfall that they used to. Can people go down around, what is it called Cape Fear, Cape Horn?

What's the southern tip of south? Yeah. I mean, you can, you can, but it's much more expensive. And so, you know. It's rough. It is rough. Yeah. And you can also go through the Suez Canal.

And so that is an option to reroute, but it adds time, it adds money. And, you know, shipping does tend to find the most efficient route. And so that is something that they take into consideration. But, you know, ads on goods, supply chain. That's got to be someone's next reporting trip. Down to the tip. Exactly, all the way down. Rough waters, yeah.

Pipa, thank you, Pippa. Let's get to Contessa Brewer now for the CNBC News Update. Contessa. Kelly, first responders are searching through the rubble for a missing person following a large explosion yesterday afternoon in central Paris. Local officials say the blast injured nearly 40 people, including four who are in critical condition today. The explosion ripped through the city's Latin quarter, which is popular among foreign students, and is home to the Paris American Academy Design School. The cause of the blast has not yet been released or determined.

The state of Florida is suing the Biden administration and the U.S. Department of Education over a federal accreditation law. It requires colleges and universities to submit to private accreditation. creditors in order to qualify for federal funding, while Florida Governor Ron DeSantis accuses the accreditors of being able to veto his whole state, even as he works to leave his own stamp on Florida schools. And the FDA sent a warning to nearly 200 retailers today to stop selling fruit and candy-flavored disposable e-cigarettes. That warning includes the current best-selling brand, Elfbar. The FDA has not authorized any of these products, which the agency claims appeal to teenagers with flavors like cotton candy and strawberry kiwi.

Kelly, Amen. Contessa, thanks. Ahead on Power Lunch, Amazon betting on AI investing $100 million in a program to help cloud customers enter the AI space on their own. We'll hear from AWS Chief Adams-Lipski in Tech Check. Coming up next. Welcome back to Power Lunch. Shares of Amazon are up about 3.5% today.

they announced they're investing $100 million to beef up cloud with generative AI. Dear Jibosa spoke with the head of AWS, and she joins us in studio for what some are describing as kind of a big catch-up play here to what we've already heard from Microsoft and Google. Right, or maybe it's Amazon going on the offensive, right? They're perceived by Wall Street as sort of lagging behind in the generative AI race. We know that Amazon has been in AI for many years. They've incorporated it across many of their businesses. But what this focuses on is bringing generative AI tools, models, et cetera, to their cloud customers.

So I sat down with the AWS CEO Adam Sziltsky yesterday in San Francisco, and I asked him, sort of, is this meant to sort of catch you up? Do you care what Wall Street thinks? Where is Amazon in its generative AI strategy? Have a listen. The reality of it is that Amazon has been working on artificial intelligence, as I mentioned earlier, for longer than almost any of these companies. And we have long accumulated experience.

We have many, many experts, thousands of practitioners of different kinds inside the company. Many of those experts are now working specifically on generative AI. If you look at the full, nobody else has the full stack of capabilities that we're putting together.

So if you take the chips that we talked about, we're designing our own really price-performance, machine learning, AI-specific chips. And then on top of that, we have a managed service for accessing the most important models in the world, both Amazon's, which will come out later this year, the Titan models, as well as a whole slate of really important other models that startups and others have developed. And then on top of that, we're going to build some really exciting applications and solutions.

And you don't think that's something that Microsoft and Google are working on also, that sort of full stack of infrastructure and applications? Well, honestly, we focus way more on customers at Amazon than we do on... You said no one else up there. But to my knowledge, nobody including those companies is working on, certainly have not announced that they're working on those full, that full suite of capabilities, bottom into top of the stack, no. Then I wonder, what is Wall Street missing? Is it that Microsoft and Google have sort of this product that has captured the mainstream? I think you said earlier, taking the consumer by storm.

Does Amazon need something like that? Does it matter that you're not being recognized on Wall Street? There's an expression on Amazon, which is pioneers need to be willing to be misunderstood for long periods of time. And I think Amazon has had many examples in its history where it said, we're going to focus on customers and have a steadfast belief in that we're going to work with customers. We're not going to build what they want. And if people want to perceive us in a certain way, if we're misunderstood, that's okay, as long as customers understand where we're going.

And so what we're doing is trying to stay laser focused on building what our customers need in this space. And as I mentioned, there's not one customer need. The world does not, I think chat applications are amazing, but it's only one of many, many things that the world needs in generative AI. So we need Gen. AI in order to discover drugs better. We needed to monitor industrial equipment better. We needed to create autonomous driving systems and vehicles. We need it to make media and entertainment better. We need it really for every sector of the economy, every application.

So, guys, the key here is that AWS is giving their customers options, right? It's not just a chat, GPT, or Bard, that, you know, catches on in the mainstream. But it was interesting when we look back at this AI race this year, right? Remember the narrative earlier was Microsoft is going to eat Google's lunch and kind of over the longer term, only six months. Stocks are pretty in tandem. And even Amazon is starting to catch up now. And there was a note this morning talking about the importance of the data that it has saying that they are poised to be a winner in the space. It's just such an interesting moment in AI right now because all these big companies out there saying, you know, we've been doing a lot on this for years and it's all secret and you can't see it, but we're the best.

And we're eventually going to roll it out. And if you're an investor, how do you sort through all those claims and say, okay, well, I believe what he's selling here? One word, monetization, which is what NVIDIA showed us a few weeks ago. Remember, previous to that incredible quarterly report, it was sort of this secular change that was in some distance, right? What Envidia says is we're monetizing this right now, and that's probably what investors are going to look to from the mega cap, the other mega cap tech giants out there to start doing. And that'll show through an AWS revenue, which, by the way, is slowing also because of enterprise spend. So ignore the big words, focus on the big profits. Yeah, the numbers, numbers and sense.

Makes sense. Deirdre, thanks. As we had to break Juno's Pride Month, CNBC celebrating all month long, sharing stories of corporate leaders. Here is Tara Bunch, Airbnb's Global Head of Operations. The next generation of LGBTQ plus talent is looking to us to provide leadership. When I had my very first child, I remember realizing how important it was for me to be a role model for her. I never wanted my daughter to ever see me not show up as proud and calm. confident because I felt like if I show up that way for her, she will ultimately feel that way

about herself. And so being that role model to your children, to your employees, to your colleagues, and showing up for them each and every day, I think, is essential as a leader. Welcome back, Sirepta Therapeutics, getting accelerated approval from the FDA for its gene therapy for Dushane muscular dystrophy. The approval is for children aged four and five years old. The stock was halted ahead of the news, but has since resumed not moving a whole heck of a lot on this, though, Kelly. Yeah, still big move for them. News, I should say. Time for today's three-stock lunch and so many different names to get through.

But let's start with KB Home. After reporting upbeat results for the second quarter, they raised their guidance for the fiscal year. And the stock down about half a percent right now. Here with our trades is David Traynor. He is CEO of New Constructs. David, it's great to have you here today. The home builders have been on an incredible run. taking some profits, or is that the start of something bigger to the downside?

I think with KB. Homes, we've still got a lot of upside. Look, the current valuation implies that profits will permanently decline by 50%. And we all know the underlying economics and tailwinds for the housing industry are really strong. I think people are overreacting to the interest rate thing. You know, back in the 80s, people were buying homes at 7 and 8% mortgage rates. So, you know, the rise that we've seen relatively to a longer history is really not that bad. these businesses, a lot of these home builders are still super cheap. And next up, his shares of Bud after Deutsche Bank upgraded the stock to buy despite recent headwinds in the political firestorm. And David, I wonder in this case, do you think that

bud is going to sort of melt up to where it was pre-controversy and sort of erase all that damage? Or is there some lasting damage in this stock? Amen, exactly. I do think that this damage is going to prove to be somewhat short-lived. Listen, it was all self-inflicted. And so I think they will get past this, unforced error. And I think, look, the underlying business still really remains strong. It's still attractive rated in our model. And you can't really argue with the distribution prowess and the barriers to entry in the Budweiser business, the Budweiser franchise globally. It's just, it's an impressive machine.

And look, as long as people still like to drink, I think they're going to do fine. So you think there's still some room to run up here? Absolutely. Absolutely, yeah. I don't mean to interrupt it, but I'm just bullish on two for two so far. I feel like I hardly know you. But let's go to Expedia and maybe we'll break the streak. Those shares are up today after B. Riley issued a buy rating just ahead of the summer travel season. What would you do with this name?

You know, we're going to break the streak here, Kelly. Yes, we don't like this. It's an unattractive rating. It's too expensive. Look, I think all of the good news around the sort of summer travel boom, the return to travel. I think most of that growth has peaked. And so we're looking at a business that doesn't really have a lot of incremental growth opportunity. And it's really become a commodity. I mean, these online travel services, you know, they're down a dozen these days. And they're all competing on price because there's relatively little differentiation. That's not a good sign. We think the valuation here at Expedia is really nosebleed high. And there's a lot of risk in the stock. We recommend people sell it. I was joking. You're teasing you a little bit, David, because often you've been cautious on the markets, although I mean, my memory might go back literally 10 years at this point. What is your current view, given the kind of top-loaded run that we've had so far this year? I definitely think the markets are too high. It's overheated. There's been just, you know, it seems like there's one fad or one hype cycle after another. They keep stacking on top of each other, including the idea that the Fed is done raising rates and they're going to start going down.

And the market just seems so driven by narrative and very little attention being paid to underlying fundamentals. And we just think that's a dangerous place to be. That said, as we just talked about here today, Kelly and Aman, there's a lot of still really good stocks out there. And we think that's going to, you know, that's going to be part of a function of a rotation out of the sexy fad-driven sectors like technology back into things like basic materials, financials, and energy, the things that make the country work, that make the world work.

We've forgotten about those things as we've been obsessed with AI and things that should do everything automatically for us. So I think there's a lot of risk, but there's still plenty of opportunity. Homebuilders too. David Traynor, thank you, sir. We appreciate it. Thank you. After the break, we know the sports business brings huge revenues to leagues and to owners, but which stocks benefit the most from this massive industry. Morgan Stanley out with a new note highlighting the opportunities and risks for sports right owners, broadcasters, and streamers. The full rundown is next.

Welcome back to Power Lunch from the legalization of sports betting to the rise of streaming and the growth of social media. The sports landscape is changing. And our next guest sees a compelling case for investing in sports assets right now saying it offers the most attractive value across his entire media and entertainment coverage. He lays out the key reasons why in a new note called, of course, Moneyball. Ben Swinburne is managing director and head of U.S. Media Research at Morgan Stanley. Ben, I'm a huge soccer guy, so I want to ask you a question about Leonel Messi coming to the United States. Obviously, the Major League Soccer is what, like the fourth or fifth biggest sports league in the country? But they've now got a 10th.

No, you're being anti-socer, aren't you? But obviously they've now got the number one star on the planet, arguably, coming to their league. How transformational will that be? And then I want to get your thoughts on the impact on Apple, which has an exclusive streaming deal with major league soccer and now they've got a global property that they didn't think they would have when they sign that deal. Well, thanks for having me. And of course, normally I love to agree with Kelly on everything, but I would say that she's underestimating the value of soccer or the call in the rest of the world football. There you go. One of the things we point out in the report is that if you look at the most popular teams in the United States on Instagram, the Warriors are number one.

at about 30 million followers. Real Madrid and Barcelona are at 140 million and 120 million each. So we're talking order of magnitude, more popularity. Messi's been massive for MLS. I think it's something that I'm sure Apple is thrilled about. I think what it tells you, though, about Apple is that they have real ambitions in sports that probably go beyond MLS. And one of the things we really focus on in the report is this idea that we're at a real fork in the road

on the future of streaming and really where who will win in sports is going to be one of the most fascinating things to watch over the next couple of years. I don't think MLS is the end of Apple's ambitions in sports. Yeah, no, I think that they got this huge bonus with Messi landing in their lap. But to me, I watch that Apple coverage. Like I said, big soccer guy. I watch that all the time. I watch that Apple coverage.

And it looks like sort of a petri dish or a lab where they're kind of experimenting with what sports on Apple will be in the future. and you could just see them settling in a formula and then rolling out after the NFL or rolling out after the NBA and going for some of the big leagues. Yeah, absolutely. I mean, one of the things we point out again in this piece that you mentioned is by 2029, every major U.S. sport will have its rights come back to market if we assume the NFL opts out a little bit early, which is probably not a crazy expectation. And the big focus we have today is really on the NBA. The NBA is the only major U.S. sport coming up soon. Their deals up in a couple of years, but our expectation is that those discussions are happening right now. And the thing that makes Apple and the NBA really interesting is that the NBA, we believe,

has the ability to sell their rights globally the way MLS did. And Apple, of course, I think, loves the idea of a global offering given their massive global install. days. So I would not be surprised at all if we saw Apple come away with part of the NBA packages as we look ahead to 25, 26 for the NBA. Because I'm a big bandwagon jumper. Like there's no one, you know, did I follow the Warriors? Absolutely. Am I going to follow Messi? Sure, if I can figure it out. And so when I said actually to my husband, how would I watch these games? He's like, I don't know. And he's a sports guy. So if it's on Apple, do I have, what product do I pay to access and do I, do I have access to it? Then this, I think, gets to the heart of the question about,

who's best positioned stock-wise over the next couple of years as a result of sports? And Apple, all these big tech companies, you know, they've got a lot of other things going on as well. Sure, yeah. We spent a lot of time, Kelly, in this report, looking at two things. One, why is sports different? Why are these unique parts of the media ecosystem that we think will continue to grow with consumers, with fans, and in value? But also, what's the future of sports on TV and on streaming? And look, there's no question that with court cutting, the legacy broadcasters, ESPN, Fox, CBS,

they, in our view, really need to figure out how to move sports out of the bundle, which is clearly shrinking, to something else. And we take a stab at that something else in our report, thinking about sort of a streaming sports bundle. We think Disney's ESPN is best positioned to put that together. That doesn't mean it's going to happen. And if it doesn't happen, I think what we're looking at three or four years from now is the major sports networks in the future will be Apple, Amazon, YouTube, et cetera. And for the consumer, my two cents, I'm sort of with your husband on this.

I'd love to see a bundle where I only pay one service. Totally. I get all the sports. And I don't have to spend 20 minutes every night trying to figure out where the Yankee game is. Yep, 100%. And I know ESPN has, you know, talked about wanting to maybe be that portal. But, yeah, Ben, if you had to just quickly pick one stock that you think is most underpriced relative to the value you see in sports?

And any of it from any part of your thesis, which one would it be? Sure, yeah. We really like Endeavour, Tickr, EDR, because they own the UFC, which is one of the most profitable, highest return-on capital businesses that we cover, and certainly in the sports business, it's a global business. They are about to merge with WWE and create a new company, call it with the ticker named TKO later this year. And they also have a talent agency business where they're exposed to sports by representing

athletes. And one of the things we really found is that social media has turned athletes and teams into brands with real value. And so they get to benefit from sort of these sports trends in a number of different businesses. Yep. No, I'm familiar with them. Watch them all. Ben, thanks very much. It's great to see you. Thanks so much. Ben Swinburne with Morgan Stanley. CNBC and Boardroom are meanwhile teaming up on game plan, bringing together influential leaders across the sports landscape from athletes to owners and investors talk about sports and business. Kevin Durant, Travis Scott, among the big names, July 25 in Los Angeles

is the event. You can get your tickets at CNBC Events.com slash game plan. And coming up is Paul Krugman, a Swifty, a swift lover. We'll discuss that and other key stories, other key stories in closing time. Welcome back. Time is running out.

Just under three minutes left and a lot more stories you need to know. So let's get right to it. Starting with the sea change in salaries on Wall Street. Bankers used to be the highest paid multiples of what those lawyers made, but now lawyers are zooming ahead, thanks to stagnant banker pay for all but the very top performers. Managing directors who aren't in high-ranking leadership roles at banks make only about $1 and $2 million most years. Equity partners at top law firms, meanwhile, can make $3 million or more. What about reporters?

When are they going to be zooming to the top of this list? Close. I'm waiting for that. Getting close. Next up, Paul Krugman, columnist, economic expert, Swifty. In an op-ed, Krugman says, ticket sales for each of Swift's Taylor Swift. that is, concerts, are expected to be $11 million to $12 million. That's a couple of lawyers' worth.

Krugman wonders why she isn't making even more. After all, Swift is filling stadiums that hold 50,000 or more people and should be able to charge what she wants. How many lawyers is Taylor Swift worth? Kelly. And if she ever did a big media deal with the likes of Netflix to kind of film that tour, just imagine. Just bafo, box office.

Yeah, absolutely. The U.S. population is getting older. The country's median age is now almost 39 years old, the highest it's ever been, according to census. Ancient. The median age in 2000 was 35. In 1980, it was 30. The birth rate, population growth, hot topics of conversation, older populations need

younger workers. We could see more labor shortages, inflation, strikes, unrest. I mean, look at what's happening even with Boeing suppliers. Yeah, demographics are destiny, right? I mean, it really affects the whole structure of the economy, the whole structure of politics. I don't think you should take your eye off that story. No. I'm joking about 38 being super old.

It's a much older than me, of course. Look at what bad shape the government's in already. The best thing that we can do is try to lower that age as much as possible. And who knows? Yeah, and you need energy powering your economy, right? You need those young people coming into the workforce. And we're talking housing, right? New ideas, form new companies.

Family formation, buying houses, all that stuff drives the economy. Exactly. You want to sell your home for more later on? Got to have someone to sell it to. And diamond prices down 18% from their all-time high. Speaking of family formation, from their all-time highs in February 2020, and our lower 6.5% year-to-date, according to one global rough diamond price index, one potential reason.

An increasing amount of consumers are turning to lab-grown diamonds. I didn't even know that was a thing. No, is AJ on our team just, well, I don't want to say anything. Don't say anything. Anyway, you know what, I'm just not going to say anything, but they're beautiful. I've seen them. Did you know that diamond rings as engagement presence were not a thing until like the 1930s? And it was a De Beers advertising campaign.

And also, diamonds don't really hold their value? Diamonds are not a girl's best. Thanks for watching Power Lunch, everybody. That's right. Closing bell, David, thank you. Closing bell starts right now. Great to hear.