Power Lunch - Inflation Situation?, Nvidia On Deck 5/22/24

Episode Date: May 22, 2024

Federal Reserve officials grew more concerned at their most recent meeting about inflation, with members indicating they lacked the confidence to move forward on interest rate cuts. We’ll break down what that means for markets and your money.Plus, Nvidia reports earnings after the closing bell. And while analysts expect results to “wow,” it could also be the chip maker’s last great earnings beat for quite some time. We’ll explain why. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch alongside Kelly Evans. I'm Dominic Shoe. Stacks right now near session lows. Now let's take a look at what's happening. Get right out to Steve Leasman for the release of the highly anticipated Fed Minutes. Don, before I read the headlines from these minutes, I wonder about to understand. These were minutes from after three months of lousy inflation data and before a month of somewhat better inflation data. So they make maybe a little bit outdatedly hawkish, but I will tell you what these headlines are. the Fed discussed keeping rates higher for longer if inflation did not move sustainably towards the Fed's 2% target. They continue to expect, however, that inflation would, in the medium term, edged down towards that target. Recent data at the time suggested the disinflation process would take longer than they had previously expected,

and the readings did not increase the confidence for cutting interest rates. Though the funds rate was seen as restrictive overall, many were sort of uncertain about how restricting. the fund's rate actually was. They discussed the possibility that the neutral rate may be higher and that higher rates may be less effective at slowing the economy they had been in the past. They saw the lack of further progress on inflation significantly increasing both goods and service prices across the board. Now, there was a debate. Some saw it as residual seasonality and issue. We've discussed a lot here. Others saw the increases as broad base. Now, there was also somewhat of a Dovesh discussion there where they said the easing of the labor market would be seen reducing

inflation in the coming months. And they did discuss cutting rates if the labor market weakened unexpectedly. Productivity increases could have been helpful inflation. A number saw consumption growth slowing and household finances weakening. But once again, guys, this was after three lousy inflation readings before the most recent April 1 that was somewhat more helpful and some other easing of demand. but you could see sort of how they were processing this, sort of doubting whether or not they were restrictive enough, talking about higher for longer. I still think they're there, but with a little of the, what would you say, just a little bit of the boil coming off right there.

All right. It appears as though the markets are reading it the same way, Steve. So we'll kind of put that in context as well. Steve, please stay right there. For more on this story, the economy, the market impact. Let's now bring in Ken Stern, president of Lido Advisors, and Stephanie Roth, the chief economist. over at Wolf Research. Thank you both for being here. Ken, we'll start with you because you're sitting right in front of me right now. Yes. And this whole idea that we are trying to put context

around this particular Fed minutes, given the bad inflation prints that we saw going into it, and then the kind of decent one that we got since then. Sure. The markets are reacting a little bit more measuredly to this, which is probably the right thing. Do you feel as though this is a situation where the Fed is on the right path? I do. I mean, the fact is, is let's take a victory lap for a minute. We had 11 rate hikes. There's wars going on. We're in an election year. We had bank failures within the last 12 months. And here we are at all-time highs. I mean, this is really a resilient climbing the wall of worry story here. So do I think rates are going higher as the probability? No. Do I think rates stay the same or go lower? Yeah, that's the probability. Let's go find opportunity because there's, I think, quite a bit to like in this market today. Stephanie, this is also an interesting point as well because this is an environment where there is uncertainty, not just right now, but in the back half of the year as well. All of that plays into the backdrop for how the Fed has to view its future path on rates. Do we feel as though the Fed is

doing the right thing by holding Pat for the time being? Yeah, I mean, it makes sense given the they're looking for 0.2% month on month and core PC. That's kind of the threshold that they would make them feel comfortable cutting rates. We haven't been there. That said, the April data we're encouraging, so it makes sense for them to watch the next couple of prints. Our base case is that the next couple of data releases will show core PCE running fairly close to that point two percent, in which case they can be cutting by September. But they're committed to a 2% inflation target, something 3% or above is just not acceptable, and they have to maintain their credibility. The good news is we're starting to get some better data from an inflation perspective,

and there's starting to be some signs that economic data are softening a bit, such that they can feel comfortable cutting rates. And Waller talked about that yesterday. Ken, I was thinking about the victory lap comment because the Fed has certainly kind of painted it that way, at least the end of last year. But you do wonder, are we living on a little bit of borrowed time here to use an expression from the guest last hour who was worried that a lot of the price increases that we're seeing and so forth, kind of the flip side of the deficit? The deficit has kept the economy strong. It's kept rates higher than the otherwise would be. Is that going to taper off at some point? And then the weakness comes forward and, you know, kind of more of the malaise appears than we might think is out there.

Yeah, Kelly, I like your approach. I think it's time to be a little bit cautious going in here. But don't forget, a lot of money is lost waiting for the bear market, maybe even more than in the bare market. Probably more, yeah. So when you think about it, this is a good time to look for opportunity. I do think that there is opportunity in the market. However, I do agree with you. I think that there's a little bit of hedging that we should think about right now.

What does that look like? So if you think about the volatility index, nobody thinks the market's going down right now. There's not a lot of vol going on. It's cheap. It's just say it. It's very cheap right now. And again, look at your portfolio, talk to your advisors, but you could buy a hedge. You could buy a put, you know, on the S&P at a pretty cheap price right now, comparative, you know, when the market thinks it's going to go down.

It's not right now. That looks good. If you take the MAG out, there's many, many stocks that are trading at pretty good values. aren't we looking at this more of a stock pickers market and less of an index market? Now, Steve, I know that you're still with us right now. When you've had a chance now to digest some of these headlines coming out of these Fed minutes, do you feel as though if you were in the room? And obviously, we know that there's been a lot of Fed speaking out there.

If you were in the room, do you feel as though the Fed feels as though there is enough cover if inflation and economic data in general, jobs data comes in on the same trajectory that we've seen over the course of the last month or so, that there would be rate cuts later on this year. The closer we get to an election, the more people talk about the political influences that are maybe brought to bear or not brought to bear on that discussion.

Yeah, so that's a good question I wanted to go there. Don, first of all, let's be clear, if I were in the room, I would have been kicked out because I wasn't supposed to be in the room. Let's just be clear about that. But I'll go on. There's an interesting reading of this. if you sort of read between and among the lines.

Look at what the story is here. They were meeting amid higher than expected inflation, and what was their response? Their response was higher for longer. Go down a little bit further to the end of the minute section where they talk about this, and they say, what's their response to an unexpected weakening of the labor market?

It is rate cuts. That's an asymmetry. The response to higher than expected inflation is not rate hikes. but it is to unexpected weakening of the labor market. What does that tell you? It answers your question, I think, Dominic, by saying that essentially the bias is to cut rates once they get the go-ahead from the inflation data.

But if the inflation data does not cooperate up to a point, because remember there was that discussion about how restrictive the Fed is, but if the data does not cooperate up to a point, the response is higher for longer at the current rate. It tells you there is essentially an unspoken bias to cut rates. And Stephanie, you think we're still potentially going to see that cut in September? Yeah, our base case is that you should. April was indicative of the non-seasonally impacted inflation data, and it was looking a lot better. In our base cases, you'll have financial services inflation slow down.

That was driven in part by lagged effects of really strong markets in the past couple of months. In OER or rent inflation should continue to soften. and some of the seasonality that impacted things like recreation goods that very much kept it high in Q1 should continue to slow down. So for all those factors, you should see inflation running close to that 0.2%. We might be in for some downside inflation surprises, which would very much feel different from the peacockiness that we saw in Q1 of this year. And Ken, we're going to give the last word to you. We have a very big earnings report coming up after the closing bill today. One people say could be setting the tone.

for the rest of the market, that's NVIDIA. If you look at that report that we are anticipating and put it in context of the inflation and jobs data that we've gotten and the Fed Minutes we've heard, should investors still feel comfortable about the market going into an election cycle and beyond? I think the election cycle is the big what-if, and it's the big on Nome, why I'm a big hedger.

But if NVIDIA comes out poorly, and again, I'm not an analyst for NVIDIA, the last time it had a 100-point swoon, it was a great opportunity. NVIDIA is one of those, you know, there's a lot of hype with AI, but that's one of those core holdings I would think people that would ought to be looking at right now. And for the market more broadly, same thing.

If you saw a pullback here? Long term, I think the slope is really, really positive. And I think every entry point, whether it's discretionary, whether it's health care, there's some really good opportunities in here to pick out. I just think it's more stock picker and less market as a whole. All right. Thank you all. We really appreciate it.

Ken Stern, Stephanie Roth, and of course, our Steve Leasman. Coming up, Nvidia earnings are after the bell, and while analysts are expecting results to wow, could it be their last insanely great earnings beat for a while? We'll explain that next. And as we had to break, here's your power check. First solar is popping 17% now after UBS declares the solar name actually in the AI race, since computing uses 10 times more power than a typical Google search, and it's the only U.S. provider of solar anyway, on the negative side target, down as much as 10% earlier on, tumbling. After reporting consumers are buying fewer everyday items like groceries and home goods, down 7.5% this afternoon.

That's your power check, and Power Lunch will be right back. Welcome back to Power Lunch. Shares of Nvidia are slightly lower today ahead of its results down 1.5% but they're coming off a 200% rally over the past year. Go out five years, it's up 2400%. What can it possibly do or say to match these lofty expectations? Let's ask Christina Parts in Evel. She's here on set with us, along with Daniel Newman.

He's CEO of the Future. I'm group, welcome to you both. Yeah, Christina, it feels like this is one where people want to stay positive because this is just one of the most transformative companies we've ever seen. The near-term reaction after earnings, though, you know, who knows? Coin flip. Who knows because maybe last summer there was a negative reaction, even though they blew it out of the park.

But on average, the last four quarters in 20, 23, they surpassed revenue estimates by 20%. The expectation this time around is at least $2 billion more than the $24 billion that we're expecting. So that number, anywhere between $24 to $26 billion, I think would probably move the stock. And there's a lot of drivers.

The four drivers that I've outlined would be CAPX spending, which we talk about it, but I think it's important for our audience to know that 50% of data center revenue for NVIDIA and Q4 came from the cloud hyperscalers. That's why we talk about it so much. The second thing, AMD, increased their AI, revenue estimate, so that's a good sign, and their earnings are first. The third part we don't

talk about is Taiwan. Taiwan exports 90% of data center servers, and they had a great, just recent quarter, so that highly correlates with NVIDIA, and then I just threw in Tesla on the board, too, because it's a little bit different, another bigger customer. But, and I'm sure Daniel can wading on this, too, it's, we talk about, people are like, why are they always talking about just this one particular quarter, given how transformative this company is? But unfortunately, if they don't beat to the same magnitude, you would start to see an immediate sell-off just to take off some of that risk.

But so many people are in this name that I still think that any type of sell-off would cause a buy-the-dip mentality, especially ahead of CompuTechs in early June. Yeah, Daniel, I guess the whole market's watching it because the whole market wants to know if it's fairly valued. This is the only real game in town

in terms of, you know, all right, maybe the weight-loss drugs. But this is the action. This is the heartbeat. Yeah, the whole market's really on stilts waiting to see what happens. happens here. And the problem is, is they've set this expectation that a beat is just ordinary. It has to be a massive beat with a huge guide and a really positive outlook towards the future.

You know, Nvidia is really setting the pace of the entire market. And the market sort of sets the pace of the entire economy. So of course, we're looking at what's going on in data center and what's going on in AI and GPUs and then even the AIPC. We're all going to be excited to hear. The transition to Blackwell, we're going to want to hear about that. But overall, the market is basically right now looking at this and saying, is all the exuberance, these all times highs that we're seeing, is this warranted? And Nvidia is the name everyone is looking at. I mean, so, Daniel, this is one of those situations where the markets are maybe even getting a little bit more, I guess, comfortable with the idea that it's not going to be such a big deal

for Nvidia, given the ramp up that we've seen, because traders are already predicting a less volatile earnings report this time around than even the last eight quarters. Does that make you feel more comfortable about this idea that maybe Nvidia can beat the way it has and the stock doesn't have to react so positively for things to be held maybe even status quo? Yeah, we're all kind of wondering how much pullback could happen if they don't blow it out of the park. And then we're wondering how much has been baked in. Look, when it was at $150 in July of 22, I came on and I said, that Nvidia will be the most transformative company on the planet over the next handful of years.

Now it's at 900. And if it pauses and rests for a minute, would investors say this is not a great opportunity? Absolutely not. I don't see any situation in which you can't look at this name and say, I want to be in this for the long haul because I believe that AI is going to grow in so many different capacities from the devices that we're seeing launched this week by Dell and Microsoft and others to, to, of course, the data center, which is going to transform every industry. The only question-

Large models, small models, et cetera. Yeah, and I certainly wouldn't quibble with the valuation. I mean, you could argue it's a steal. You honestly could. It was 38 times, you know, or Christine, I'll direct this to you. I mean, it's just the size. The market cap is around a trillion dollars, you know, plus or minus. And so we two point three trillion.

Is it two point? Yeah. And then last year at this time, it was 755 before their earnings report in Q3. So the point only being, if it's possible that you get in on the stock now and it has so much further to grow, how big in terms of. Are we talking $3 trillion? The market's already priced in. I mean, the expectation for the forecast is if this current quarter comes in line with analyst expectations, this is a company that will have doubled revenue in one year.

Or even triple. So this is the idea here that the market cap is there because of those expectations. But it doesn't have to surpass it by that much for it to feel like it's not going to drop, hypothetically, 5, 10, 20%, you're not going to see that kind of volatility. you're not going to see that kind of volatility. Right, right. And I think you were referring to that even yesterday when you're talking about the options action, volatility, $200 billion,

could swing either way. For valuation, the five-year average is 36 times, so 38 times, a little bit higher, but still pretty decent. I think just a concern on the risk side, maybe priced in, estimates have moved a little bit higher. There's demand lull that we keep talking about ahead of the next iteration of the chip, China restrictions, and just gross margins

that are going to peak this quarter, So they're not going to come down. They'll probably be around 77, but they're going to go down to about 75. That's what the company already warned. So if that gets a little worse, that's concerning. They're showing exactly what you said there. The market cap is $2.3 trillion. So Daniel, quickly, how much bigger can Nvidia get?

If you're right, and if the share price is justified those, and you get in now on this, are we talking about a $4.5 trillion dollar, $5 trillion company? It seems like an impossible thing to contemplate. The pathways there are every company on the planet, you know, Microsoft, ServiceNow, IBM, Dell, all the companies I'm with this week, all of them building on Nvidia. It's hard to bet against. Competition will come. Margins will impact this business, but it's hard to bet against because AI is the megatrend,

transforming every business right now. All right. Great stuff. Thank you both. Really appreciate it. Daniel Newman, Christina, Parts and Avelace. All right. Further ahead on the show, more and more cars are on the road in the twilight years of their lives,

with vehicles made before 2008 remaining wildly popular. High prices proved to be a key reason, but there could be other factors as well. that story when Power Lunch returns, and I do own a 2005 car killing. Welcome back to Power Lunch. Steve warned us. The markets were going to hear something a little hawkish in those minutes. They certainly did after those came out and hit the tape. The Dow's now down 240 points. About 6 tenths of a percent, similar declines for the S&P and the NASDAQ. Let's get more analysis from Rick Santelli out in Chicago. Rick. Hi, Kelly, indeed. You know what's fascinating here? You said Steve warned us. it was going to happen this way.

Many believed that it wasn't going to happen this way, no matter what the minute said, because of the last batch of inflation data that we received. It wasn't any market improvement, but in many ways we saw that it didn't worsen, at least on CPI. Well, the way the market's reading the minutes, maybe that isn't the correct interpretation.

If you look at a two-day of two-year, and this is key, short maturities are most closely associated with, and trade, very important. aggressively based on anything that has to do with the Fed. As you see on the two-day chart, not only are we significantly above yesterday's range, we're making new high yields. And as you did point out, Kelly, stocks since the minutes released are making new lows on the session. And if you look at longer maturities like the 10-year, what jumps out at you is we had a good 20-year note auction. So you can see at one Eastern, we basically double bottom right there at 441,

but not nearly as much important movement to the upside. challenging pre-existing trading yield highs earlier like the short maturities. Curve inverted more. Why did all that happen? Well, my sources say, you know, when you look at way markets constantly reprised on every new bit of data. Every day we have a new high, low, very rarely do we close at exactly the same spot. But when traders look toward the Federal Reserve, they expect more certainty, a deeper understanding, less change. And that shouldn't be the interpretation. And I think especially the uncertainty

and the shifting from a base case that the Fed chairman has always said would be an ease, well, maybe that's under review. You really need to pay attention to which side of the 490 to your note yields close that over the next several days to really see how much these minutes may alter investor impressions

of what may lie ahead with regard to rates. Dom, back to you. All right, Rick, Sanelli with the latest side of Chicago. Thank you very much for the bond report there. Still to come on the show. While AI risks have long been discussed, open AI's recent clash with Scarlett Johansson could be a final straw opening the door to calls for stronger regulation. We'll debate that topic coming up next. Welcome back. I'm Julia Borsden with your CNBC News update. Most of the families of the victims in the Uvaldi Elementary School shooting reached a settlement with the city over the 2022 massacre. To avoid a

lawsuit, the city agreed to pay families of the 17 of the 19 victims $2 million and pledged to overhaul the police force and create a permanent memorial to the victims. It comes after a Justice Department report earlier this year, found authorities waited more than 70 minutes to engage the gunmen in the school. And the mysterious lender that tried to auction off Elvis's Graceland estate says it will no longer move forward with its foreclosure claim. It came hours after judge halted a scheduled auction of the property. The company alleged Elvis's daughter put the estate up as collateral for a $4 million loan she failed to pay. But the late singer's granddaughter called the sale attempted fraud, a claim which the judge said she could likely prove. And NASCAR fined Ricky Stenhouse

Jr. $75,000 for punching fellow driver Kyle Bush in a brawl. The fight happened after Sunday's All-Star race in North Carolina, where Bush bumped Stenhouse. knocking him out of the race. In addition to the fine, two of Stenhouse Jr.'s crew members were suspended. Back over to you. Julia Borson, thank you very much for the news update there. Welcome back. The headlines surrounding AI this week are huge in its potential power as well.

But as the AI software expands, concerns over security and privacy are obviously being raised. This week, Microsoft unveiled its AI optimized co-pilot product plus PCs, which will include the chatbot, remembering everything that uses. is done on the computer. Doesn't sound ominous at all. But actress Scarlett Johansson threatened to take legal action against Open AI after alleging the company's new voice assistant sounds just like her. And just in the previous hour, we heard from Commerce Secretary Gina Raimondo on efforts to form a global AI safety network with key allies. Let's bring in and panel it up. Joining us again, Daniel Newman, CEO and principal analyst at the Futurum Group,

also Chen A Beauvel. She's a futurist and the founder of Way as well. Thank you very much for being here. I will send it to Chen A to you first. We had a lot to unpack there. There are many concerns about this emerging technology that's now seemingly going to go everywhere. Just how concerned do regulators and we as consumers need to be about the coming months and years? Yeah, thanks for having me. And I think we do have to proceed with caution because it's the end of the day, these companies have fiduciary duties to shareholders, not to the general public. And it's not as if any of these companies are trying to cause harm in intentional ways, but they are moving at a pace that's prioritizing market announcements and market

expectations with safety and due diligence, perhaps taking a back seat. We're seeing some ethical, ethically concerning or concerned decision making when it comes to the recent Scarlett Johansson versus Open AI scandal, when it comes to Microsoft's recent announcements, I think the program is called recall, where it stores everything that you've done on your computer, and you can kind of pull that up at any point, but it would include things like passwords and things that are sensitive. So I do think that is where regulators come in. Market demands are where companies put their interest, and regulators help guide and ensure the incentives are in line with society and humanity more broadly. Daniel, it doesn't seem out of the realm of reason for us as human beings and as consumers to react more negatively now, but then gradually become more comfortable with the idea of having AI as a bigger presence in our lives.

I'm not going to set off everybody's home devices, but you know the ones I'm talking about from, Amazon and from Google and everything else. We didn't want them in our houses before, but now many houses just come almost by default with them, or we put them in actively. How long does it take before we just get used to the idea of AI? Dominic, this is like every other proliferated tech trend of the past few decades. We will eventually completely not pay attention at all to the fact that we are giving all of our data, all of our privacy. That's not exactly what tech counts on. Tech is trying to drive an experience, but they need the data to do it. And over time, we basically have given everything up from a privacy standpoint in order to

create these amazing experiences. And the tradeoffs are always, you know, what people have to consider. But whether it's been social media, whether it's been mobile and iOS, whether it's been these new co-pilot plus PCs, which are going to be amazing, people are looking at the risk and saying, well, I've already given everything to Facebook or meta. I've given it to Instagram. And I've given it to, you know, you pick the app. I've given it.

And so I also think this is going to drive a huge trend in the environment. which I saw all week long here at IBM, at Dell, towards private AI. Enterprises are going to have to figure out the balance between doing AI and prem and protecting people's data and basically launching this at the pace that the market wants in order to deliver to the shareholders, as the other guest suggested. Shadda, I want to sort of ask it in the following way. Whose side are you on? Scarlett Johansons or Sam Holman's in chat, GBC?

And my point is, you know, she's furious that they asked her to use her voice and it kind of sounds like tried to do it without her permission. But from their point of view, you could almost see it's flattering that they would ask her at all. Couldn't they just go create something, you know, they could use AI and say, give me something that sounds friendly and warm and unassuming and almost kind of sexy and make that, you know, the voice of this. So where do you come down on this whole back and forth? What does it tell us?

Yeah, I think to me it really shines a light on the lack of judgment and ethical decision-making that's happening at OpenAI. I'm not sure where it will net out in terms of the legalities. They did seem to hire another actor, but Open AI is also one of the most well-funded AI startups. So I highly doubt they didn't seek at least some legal counsel on this, meaning they probably knew they could get away with this legally, but just because something's legally okay,

it doesn't mean it ethically checks out. So I put it to the public, do we think that they have our best interest at hand when they're making these types of decisions. And this one raises a lot of ethical red flags to me. I think it could have easily been avoided. And as you had mentioned, all of the voices that could be chosen, when Scarlett said no, why would you make a decision that ends you in this situation to begin with?

So I question the judgment and I question the decision making. And this is one of the most significant AI companies of our time. So I don't take that lightly that these are the types of decisions and tradeoffs that they're making. a little bit concerned there. Chenet, this is also an environment because you open the door by asking or talking about the funding of some of these AI companies, specifically Open AI. Big technology are the balance sheets that are ultimately going to fund many, if not all, of these operations.

How exactly do you view the relationship between big tech government legislators and ourselves as the ultimate users of these products? how exactly then do we have to coexist and how active do regulators have to be given it is big tech? Right. I think at least we have the hindsight of past technologies where we didn't really do enough. And on the one hand, government, we can see

they're not just taking into consideration the interests of citizens and of society. There's also bigger geopolitical implications of the decisions that they're making. So this is a really tough time, but an important time for regulators. At the end of the day, we know companies, they have the fiduciary interest of shareholders at heart. Regulators are there to guide incentives and to ensure incentives align with the public and align with society's best interest.

And we hope that that nets out here today. I don't know if things are moving quick enough. I think we can move a little bit faster on things. But I will say we do know governments or at least having the conversations about regulating AI. Something that didn't happen when it comes to the intranet or sociopolit. media until decades after. Daniel, we got to go. You taking Scarjov side? I don't think there's any chance the regulators are going to be able to deal with this. She has to take care of herself. It's going to be tricky, but it's going to move way too fast.

Are you taking Chat Chepti's side? No, I think she's doing the right thing. I just don't think anyone has a chance to beat the speed that Big Tech is going to keep innovating. So I think Chat Chepti will keep going. And if it's not Scarlett Johansson, it's going to be someone else. But the regulators have a big challenge in front of them. All right. And it sounds like they are trying to grapple with it. Thank you both for your time today. We appreciate it. Daniel Newman and Sheneid Beauvel. Let's continue this discussion with more. And another aspect of the technology that tends to make people a little uncomfortable, the profit motive. Dear Jabosa is looking at which companies are charging and which ones are still

giving the AI away for free to get us hooked. Deirdre? So, Kelly, you guys talked a lot about tradeoffs with that panel. That's also true when it comes to these companies that are deciding between monetizing or growing all of these new products. And the profit picture, it's still very unclear for everyone that isn't Nvidia, but over the last week between Google I.O., Microsoft Build, Open AI, Spring Update, Kate Rooney's great Amazon scoop, we can start to piece it together. The tradeoff here is growth at all costs versus discipline in charging for models that are still very, very expensive to build.

Amazon seems to be going the latter path, reportedly looking to charge a monthly subscription for AI and its home devices. And that would really be a departure from where much of the rest of the industry is heading, which is the latter, growth at all costs. Now, the major chatbot players have free and premium tiers, but more recently, Gen AI features are being made available at no charge. Take Open AI Spring Update, GPT40, more products, it's faster, more features. You also got Google's AI overviews, which is being rolled out this year to a billion users.

voice assistance and home devices, that represents a new front. And Amazon may have just fired the first alvo by requiring a subscription. Another factor to consider, though, is the cost to these companies themselves. Who can afford to give away Gen AI products for free? When I asked CEO Sundar Pichai about the costs of AI overviews and search, he said that they've made their models 80 times more efficient, so they're not much more expensive than a traditional search query. So if he can bring that kind of efficiency to Gen AI, Gen AI on home devices, offer a free upgrade, that could be their edge in this battles.

Guys, it just remains that the picture is so complicated. You've got costs. The margins are narrower than for typical SaaS companies because you need so much compute power, which requires charging something for it. No, absolutely. I think that's a great point. One of the more interesting angles to this. Deirdre, thank you very much, Deirdre Bosa. Still to come, America's aging cars, rising costs, limiting costs, limit.

In limited inventory, the pinch of inflation, it's all leading us to hang on to our vehicles for longer than ever before. In fact, we'll bring you the data on that. Sell your stocks, buy a used car. New data out this morning shows the average age of a vehicle in the U.S. is at an all-time high. Is that because they're better made? And simply, yes, they are and last longer, or because people can't afford to replace their aging clunkers. But you would not part with your clunker if you had, Philibault, bring us the numbers, sir, if you would.

The numbers validate both of what those reasons were that you gave there. Let me show you this chart. I love this chart because this is a reflection of what America drives. The average age for a vehicle in the U.S., 12.6 years. Go back to 2002, and it was 9.6 years. So it's increased by three years over the last 22 years. What's the reason behind this? Well, obviously, reliability is a big part of it.

You go back to the late 90s, early 2000s. That's really when the auto industry turned the corner. And you see this when you go to auto auctions, the wholesale auctions where dealers are buying vehicles, use vehicles from other dealers. The autos are lasting longer and as a result, there's greater demand for some of those older models. People know that. That's why they keep driving them. Also, new vehicle loan payments continue to rise. They now top $700. The cost of new vehicles continue to climb. And it makes it more challenging for people to buy new vehicles, especially with interest rates and the inflation that we've been dealing with over the past few years. All right. So here are the total numbers here. You've got 286 million

registered vehicles in the U.S. And we're not talking about semis, delivery trucks, delivery vans, none of that. We're just talking about the vehicles that you and I are driving. There are 95 million that are at least 16 years old. And think about this. There are 24 million that were built before the year 2000. That's the reason when you look at the auto parts retailers, and specifically here, what we're showing you are O'Reilly and AutoZone. When you look at those stocks, yes, they are not at their 52-week highs, but it's been a nice move higher here because people will have to spend more to keep their vehicles going, unless they have to take it in for a major repair. Bottom line is this, guys, we will continue to see the average age rise at least for a few more

years. People are saying, if I, if I don't have to buy new, if I don't have to take on a $700 payment, for example, why should I? Yes, I don't have the bells and whistles. Yes, it's an older model. Yes, the mileage is not as good, but it's still pretty darn good. I have many comments on this, but we have a limited amount of time. So I'm just going to ask this. The car insurance aspect of this whole cost of ownership thing has been front and center because of all the inflation data over the course of the last year. How much do you feel as though the car insurance factor factors into the narrative around new cars versus used cars and everything else as well? It's hard to say how much it factors into it, Don, but it's certainly one of the costs that when you talk with people and they're in the market for a new vehicle, and I don't talk to a ton of people, but when people stop me or I'm in the airport and somebody says, I'm thinking about buying this car, one of the things they will bring up are two things.

the price. Two, the cost of financing because auto loan interest rates are so high. And three, the cost of insurance. But keep in mind, insurance rates are going up for all vehicles. It's not just that they're high for new vehicles. All right. How old is yours now? I have one. So it's not the only car I have. I have a 2005. And those people who follow me on social media, I have a 2005 Infinity G35X that's got 222-odd thousand miles on it. Phil, real quickly, well, one of I think is nine years old, but the Honda dealership just offered to buy back my two-year-old minivan. What do you think that's all about? Oh, they've been, look, there is still massive demand out there, whether you've got a two-year-old

minivan or a 10-year-old minivan. It's in demand right now. Minivans are in demand in general, and a lot of different models are. So the automakers know this. They will ask to buy it from you, and then they'll turn around and probably sell it at a nice profit. That's what they're in the business of doing. They're not new vehicles, getting. a lot of attention. It's the used market where they really make their money. Kelly has been, I've seen you. You look good in that mini-band. Make me an offer, people. I'll get rid of it. I'll unload it tomorrow. All right, Phila-Bo. Thank you very much for the conversation on used cars now. Stocks here near session lows right now. Coming up on the show,

we're going to check the charts on three key names with very different types of momentum behind them. We'll get some technical support from our chartist, Jay Woods coming up. And as we head out to break, we're celebrating Asian-American, Native Hawaiian, and Pacific Islander Heritage Month. Here is Jenny Ming, CEO of Rothies. Too often the AAPI community are seen as model minority. Quiet, hardworking, good student. But that also means that we are often forgotten. It took me years to find my voice, to advocate for myself in the workplace. Remember, a diverse viewpoint is important and ultimately benefit. it's the bottom line.

Welcome back to Power Lunch. It's time now for some technical support. We have three stocks making some technical moves to bring it into focus. And our chart us today is Jay Woods. He's Freedom Capital Markets, Chief Global Strategist. It's great to see you again. Great to see you. Welcome back. So let's start obviously with Nvidia. They're reporting after the bell. Streets expecting revenue growth upwards of 200% for a third straight quarter.

Most importantly, what do the charts tell you? We're looking back two years. I mean, everyone's talking about it. What's it done? This is classical, classical technical announcement. When you go back two years. Here you have an inverted head and shoulders 80 points from the head to the neckline. What did it do? One up 85 points. What happened after that? It gaped. This is what we're going to focus on in earnings. We've had three major gaps now of course I'm a little wonky, but let's focus on this one and let's focus on the last one in February. Every time it has gaped up after earnings, you have to watch how it trades the next 30 minutes to the next hour the next few days. It has held and it's gone on to a new leg two of these times. There is one time I want to focus on, which was this neutral trend, the last half of last year. It was up 240% last year. It did nothing for five months.

It had a 20% correction because it gapped after hours in August. And what did it do? It closed up a dime. That's a bearish engulfing candle, very negative. So let me take us back to that for a second. So it gapped which way after hours? It gapped up after hours, the 520, opened it 502. closed at 480 up a dime on the day.

So you want to watch that price action. And what did it do? It channeled. So this is what we want to watch now. We have a potential channel. We're trading at all-time highs. This is fantastic. It's closed over 952 times.

If it can gap up, which we believe the earnings are going to be fantastic, the guidance should be good. Watch how it closes. Watch how it trades after. Great. You could have a setup for a trap and then it trades in a neutral range. It'd be great buying opportunity because long term, let's focus on long term. And it doesn't sound like you see a lot of bearish outcome here.

It's more channel or upwards. Exactly. But for the traders, you've got to watch it. For the long-term investors, like my mom, I just stay in the stock. It's going to be there for the long term. All right. Let's go through the next couple a little bit more quickly. Robin Hood's up 60% this year.

We haven't talked as much about that one. You think the trend here is changed for the better. It's changed. What do we've seen? We've seen a series of higher lows over a long period of time. We've had a breakout above this area here. and now we're trending higher. We stalled a little bit.

They had a Wells notice, but what did it do? It held the 50-day moving average. Fundamentally, they're doing great things. This 401K program's bringing in older investors to get... It's expensive, though. I mean, we'll get into that. It's expensive, but let's look back. In IPO to 38, it's now broken out above 16.

16 is your stop. Yes, the risk-reward setup isn't ideal, but it can slowly trend back towards 30 over 6 to 9 months. So it's a place. place, you know, stop at 20, a stop at 16 if your risk is a little greater. But the trend has changed and it's worth noting here. Very interesting. Finally, the last stock, Pfizer, before we get to that, just want to take a look at all the vaccine stocks today up across the board and reaction these bird flu headlines thinking maybe they can do something for the livestock if it's human to

human. Curevac is up 20%. Moderna's up 10% Pfizer up 2%. And that company also announced a billion and a half in cost cuts. Takes us to the chart. Yeah, and Moderna is one that is already broken out. What I see in Pfizer is opportunity. Boring stock, no offense, but long-term risk reward, the setup is favorable. We had a long intermediate downtrend. It broke above its 50-day moving average, and now it tested its 200-day, it's pulling back. I think this pullback is an opportunity to buy with a 50-day stop, 50-day moving average as a stop. And then the upside, tremendous possible reversal.

We can go 35 to 40, and it goes slowly, you get a 5.8% dividend to kind of. to put you to sleep at night as it's really not doing anything. And then people forget about C-Gen. That deal closed in December, $43 billion deal. The pipeline on the oncology side is tremendous. So expect news to happen because this quarter, things turned around. Their guidance was solid. So I think we're starting to see price turnaround, favorable risk reward over the long term. Trying to look around these corners. Tonight will be fun with Nvidia. Jay, thank you so much for your time. Appreciate it. Jay Woods. We'll be right back with more on the markets. Welcome back to Power Launch.

We want to call attention to this notion here that the stock market is just hovering above session lows right now. The Dow's down about 270 points. It was down more than 300 at the lows of the session just this past hour. So the S&P is off one-half of one percent. 52-94 is the level of NASDAQ composite off one-half of one percent as well. So it's shifted, Kelly, from a wait-and-see for Nvidia to the Fed Minutes, maybe doing some heavy damage here just before. I don't know if that's also contributing to the homebuilder declines.

we're seeing existing home sales were also down in April, and rates are backing up a little bit after the minutes. You've got toll now down 8.5%. I think they also had earnings. Linar down 4%, similar for D.R. and Pulte. So those home builders key to that story for the interest rate picture as well. And of course, NVIDIA coming up and maybe just a little over an hour right now. There's a lot of eyes on this. $2.3 trillion company. You are bullish. You have to bet that number keeps growing. There you go. You have to do it. All right. All right. So thanks for watching Power Lunch. We know what the judge will be watching. Closing bell starts right now.