Power Lunch - Jackson Hole, Nvidia’s Blowout Quarter 8/24/23

Episode Date: August 24, 2023

Investors looking for insights into Fed Chair Jerome Powell’s process are being well “fed” this week, with the Jackson Hole summit now underway. We’ll tell you all you need to know.Plus, Nvidia’s earnings blew well past expectations, briefly sending the stock to record highs as it dominates the AI chip race. Can it keep up this momentum? We’ll debate. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch, literally alongside Kelly Evans. I really am alongside Kelly Evans. I'm Tyler Math, so we're glad you could join us today. Two huge stories to talk about the Fed's big meeting at Jackson Hole, which seems to be weighing on the markets right now, or at least that's one interpretation. But let's start with NVIDIA's blowout quarter from yesterday afternoon. The stock higher today, though off its best levels of the session and down from where it was after hours late yesterday afternoon. For more on that, let's bring in, Christina Ports and Evelyn. Christina. Well, if you're a CNBC viewer, you know in video earnings blew past expectations yesterday. And like you mentioned, Tyler, the stock is coming off earlier highs. You got two reasons for that. First, there's been roughly 50% jump just in the last three months. It opened at a record high this morning.

In other words, those who wanted in got in. Secondly, as Goldman Sachs point out, points out, there has been limited institutional demand after hours yesterday and today, whereas last quarter you had all the big hedge funds, scrambling to add exposure. Again, those who wanted in, got in. The sell-side brokerage firms are racing to increase their price targets and increase estimates, which helps with the Ford PE ratio, which is a pretty much a great barometer for investor optimism on NVIDIA's future growth. It's around 56 times right now and is still lower than the 80 times we saw in May. Hence the, quote, Nvidia is cheap narrative that I seem to be milling about in some of these

analyst notes. But out of all of the data, research analysts I've spoken to, I've narrowed it down to about three themes. Firstly, it's not all hype. AI is bringing in the money exemplified by this past quarter and NVIDIA's guidance. Secondly, Nvidia's CEO and CFOs say they have supply visibility into next year, calming fears about constraints, especially with TSMC. Lastly, China, still contributing roughly 20 to 25% of data center revenues. That's with US export restrictions and a more watered down AI chip. So this investing frenzy over artificial intelligence shows there's no signs of stopping. Indeed, I guess we should say.

Christina, thank you very much. NVIDIA is dominating the AI chip race, but can they keep it up? Is there enough demand for any other companies to enter the race? Let's bring in CNBC's John Ford as well as Steve Kovac. Also joining us, Jean Munster is managing partner with Deepwater Asset Management. Welcome to all of you. Steve Kovac, I'll just start with you. I think we should point out, look, the stock's off the highs,

it's been on this incredible run, is all the good news that it could possibly achieve from now on this point finally priced it? At least for the next, what, year or so, they said, you know, we're going to see this kind of run going on, I don't know, through calendar 24, maybe even beyond. I think our friend Gene Munster is going to talk a little bit about that. But then the question is, does it run out? I'm thinking back to the other big tech earnings that we covered this earnings season, Microsoft, you know, getting punished because they failed to show any real meaningful revenue on

the horizon from all this AI stuff. But guess who's one of NVIDIA's customers here? It's Microsoft. It's meta. It's Google. As they build out all this stuff, Nvidia is the only game in town that they're turning to to build all these applications, these AI applications that we keep talking about. So right now they're the customers.

Eventually then, when does that turn into sales? I think that becomes the next question as you look at the software companies. versus NVIDIA. John, does NVIDIA have all the capacity it needs to meet all the demand it has? Well, it's not clear, Tyler, exactly what the nature of this demand is. I mean, remember toilet paper? During the pandemic, of course, we all do. There was a run on toilet paper. People were buying more of it than they needed for a couple of weeks. And in a way, that's part of what's happening with AI chips right now. As a matter of fact, I spoke with Frank Sluteman, the CEO of Snowflake. they also reported after the bell data-driven software company.

He said he's stockpiling Nvidia's AI chips buying more than he immediately needs because of that shortage. And I asked him about the nature of this demand and the business models behind AI. Here's what he said. AI is not going to be cheap. I mean, somebody is paying for these wonderful Nvidia results. There needs to be a business model that's associated with the technology. One of the great things about search when it showed up was not only that search was great technology, but they also had a business model to pay for it, right?

We need that here as well. Otherwise, it's fun and game and just an expensive hobby. And that's not going to last. You know, we're going to get dissolution very, very quickly. So all these things are going to have to get sorted, and we are going to sort of super confident that we will. And I think that last part is key. We're going to have more, by the way, from Frank Slutman in overtime, my conversation with him. But it doesn't necessarily mean that this buying of excess chips right now is going to result in a supply overhang.

Maybe demand into 2024 will continue so strong that that will get eaten up and then continue. But there's some real questions here about the nature and durability of this demand, and therefore the size of the opportunity for chip players not named NVIDIA. Gene, let's bring you into the conversation and maybe kind of answer the question that both Stephen John have posed, which is could Nvidia's shortages, let's call them today, become gluts tomorrow? Or is there enough demand in the pipeline to justify these multiples and market cap for some time now? Well, I guess you have, there's this catch-22 whenever you hear about supply constraints. There's the question about how much demand is being pulled forward.

At the end of the day, I go back to the simple equation around accelerated computing. This is a theme that Infinity has been talking about for years, but I ultimately, based on our own research, believe that this is true, that there is a shift going on from CPUs to GPUs. CPUs do one thing exceptionally well. That's not what AI needs. It needs parallel computing that does smaller computation side by side. That's what GPUs do well. And so right now, Nvidia has talked about 20% of the data centers, just the data centers, are now GPU enabled. Eventually, that's going to be 60, 80 percent.

That doesn't include cloud providers or some of the big other hyperscalers like Azure and Google Cloud and AWS. And so, Kelly, I think the answer is that what we saw is now two quarters of the role of exceptional fundamentals. I've been investing in tech for over 30 years. And what I've seen over the last two quarters is unlike anything I've ever witnessed. and that means that something bigger is going on. And ultimately, I think that when I boil this all the way down to the pressure point,

this comes down to what is NVIDIA's growth in calendar 25. That's what the market's thinking about today. The market's thinking it's going to be 20 percent. I'll take the over on it, and I think it will be comfortably over that 40 percent plus growth. So, Gene, is effectively, for all intents and purposes, is NVIDIA the only game in town? And if it is true, what is their moat and how long? can they hang on to that primacy? It is the only game in town, and how long can they hold on to it?

One of the reasons why is they also have basically a modeling language that goes along with the chips. This is think about what Apple and Tesla have done so well, vertical integrations. This isn't just a chip company. There's effectively a coding language around it. And I think that that is one of the reasons why developers want to develop on NVIDIA GPUs. They're great, and they know how to develop on them.

And then how sustainable is this? We talked about what the curve is. As far as what the disruption is, we think that there could be some disruption. If we think three, five years out, Deepwater's invested in a company called rain.a.I. It's one of a handful of companies that are building next generation chips that help to create

what we think is 100 to 1,000 X cost savings around energy with this. So eventually, NVIDIA is gonna have to make that shift to more efficient chips because these current pricing environment isn't sustainable for five, 10 years down the road. There's going to be other competition that's going to come in. Steve, you were nodding there when Gene was talking about the competitive advantage they have, which is their own kind of programming language. It's that software.

And to further Gene's point, that software is it transferable? So we know AMD, they've talked about it. They're going to have their own rival chips. It's supposed to be cheaper, potentially, better, potentially. that doesn't matter because this language everyone's using to code everything can't transfer over to AMD. And on top of that, what Gene was saying, you know, if you want to go out a couple more years. It's a walled garden. It's a walled garden, exactly, just like Apple.

And then you want to stretch it out a couple years. What other competitors can come in? Well, we know Amazon, for example, they're making their own chips, Microsoft working on their own chips. But it's going to take a while for that to play out. The biggest customers for these are, it's not just these startups that we keep hearing, raising tons of cash, and then putting that cash right into Nvidia chips, it's Facebook, it's meta, or Facebook and meta, it's Google, it's Apple. These are big companies buying these chips to make their AI applications happen.

Microsoft said in their earnings report, we're going to spend a ton of money on CAPX. And to me, that screams a ton of money to Nvidia. John, I guess let's just put a point on it in terms of Chinese demand. You know, one of the questions is how much stockpiling there is there of the chips that they can get access to, especially if there were ever any, additional further clampdowns on what China can access. And the company tried to say there wasn't Chinese revenue out of proportion with history and that they would have this

pipeline sufficient even without Chinese demand going forward. Yeah, I think in a way right now because this Chinese issue, this geopolitical issue, reared its head right as in video was having this surge. It's not like there has to be a bunch of recalibration here. But I'm going to say, Invidia might lock all this up in the AI market, but it doesn't have it all locked up yet. I'm going to disagree with Gene and maybe Steve on that point. I think that's the work that Jensen and his team are doing now in these partnerships that they're going out, trying to do their version of this vertical integration that makes them the premium name in AI, despite AMD, despite Amazon, despite Intel coming on with their own AI products.

It's going to take a while to see if they actually can pull that off, maintain margins, if not at 71% high 60s while continuing to grow enormous revenue. I mean, what they pulled off the past couple quarters shows that they're on their way to perhaps doing that, but I do not think it's a foregone conclusion. Fascinating. Well, there's Nvidia shares up 3%. Nothing near where they were. They were over 500. Still just an impressive... In the after hours, yeah, they certainly were. They wanted like 513, 514. Yeah, the whole NASDAQ has turned around with them as well.

We'll leave it there, gentlemen. Thank you all. John Ford, Steve Kovac and Gene Munster. And for more on the competition emerging in this space, let's bring in Deirdre Bosa for today's tech check. Hi, Dee. Guys, great conversation. So I just want to follow on to it. Gene just said that Nvidia is the only game in town for now. So let's dive further into what is at least starting to emerge on the competition front, even if that is some years off.

Now, on the software level, you guys spoke about this a little bit, but let me break it down. a number of startups, they are working on tools that they say reduce the cost of training and running machine learning models compared with Nvidia products. Others are targeting alternative software that would work outside of the Nvidia system, thus bring up developers to use different chips. Now, one such startup is modular. It just received $100 million in new funding from general catalysts, Google Ventures, among others. Now, I spoke to the CEO yesterday.

He said there's thousands of companies that want to use their product. Remember, it's not that easy to get a hold of these Nvidia chips, but he couldn't name even one of them are safe. Anyone is actually paying for it yet. So this is a sign perhaps of optimism in this space. We need different solutions, but also how far there still is to go, how big that mode is that Nvidia has on the hardware front, high costs, technical complexities that gives Nvidia's mode.

Many startups have tried here and they have failed, but it's really going to be the big tech companies like AMD, Google, and Amazon that are making the biggest inroads. Now, a shift in the cycle as well, that could help out such competitors. generative AI, it's going from something called training to inference. Training is building a model like chat GPT and feeding it all of the data, training it, making it better. Developers, they need huge compute power for that. And Nvidia H100s, that's what you need.

But inference is the next phase. When the model starts thinking for itself and it's able to answer your questions, that can be developed, that can be built using other chips. Now, Nvidia is working specifically on this part, but it doesn't already have that huge lead that it has had in training, and it's already facing competition from those well-capitalized rivals that are, and this is really key, guys, developing their own AI ecosystems. What NVIDIA has that others don't is not just the physical hardware, the chip itself, but a whole ecosystem that you guys were talking about that relies on the computing language,

on the software, et cetera, et cetera. All right, Deirdre, thank you very much. Deirdre, both are reporting for us. And folks, coming up, investors. Looking for insights into Jay Powell's process are being well fed this week with Jackson Hole underway, though maybe not for the better. The Fed Chair's comments today sending stocks lower. And has she any new deal for the fast fashion brand Shee in? Details further ahead.

Power Lunch will be back with more puns after this. Welcome back to Power Lunch. Time now for the other big story of the day. The Fed Summit is. in Jackson Hole. We'll hear from the Fed chair himself, Jay Powell, tomorrow. But first, let's hear from Rick Santelli in Chicago as bond yields back on the rise a little bit today, Rick. Yes, but some significant differences, especially in long maturities. Let's look at these charts starting on Tuesday. You can see that three-day charts that we had our extremes from an

intradate perspective. We had 505 on a two-year, which is currently hovering right at 501. So very close to that. What's notable here is, is that the high yield close for the entire move, which was in early March at 507, we have not been able to close above it, even though we've been toying with 5%. That makes traders a bit nervous because the long end did trade above theirs. Look at their spike high at 436. That indeed took out that 4.5 high yield close. Previously, that was established last October, and from 436 to where we're currently. trading, we've lost a little bit more than the short end. So the real key is it's a game of chicken. They're keeping a very close eye on which side of 507 we close at as Jackson Hole becomes

the news of the day. And they're monitoring how far below four and a quarter, the tens go. And if you look at the difference between tens and boons, it's the widest it's been since early December. That is a very important metric to pay attention to, because what's going on in Europe is not at all like what's going on in the U.S. economy. and the dollar index is telling us, no matter what the Fed does, the Europeans are going to probably take their foot off the raising rate pedal pretty quick here. And finally, all of this continues to feed into the dollar index in a very positive way on pace for a two and a half month high close. By the way, the markets are lining up.

It certainly seems to me that many are expecting more hawkishness this weekend than dovishness. Back to you, Tyler. All right, Rick, thank you very much. As an investors wait for Fed Chair Powell tomorrow, stocks are sliding throughout the day and near the lows of the session, down three quarters of a point on the Dow, as you can see there. Here with more on what to expect and the impact on the economy is Seth Carpenter, Global Chief Economist at Morgan Stanley. Seth, welcome. I don't mean to be critical of you and economists in general, but it seems to me that Jackson Hole is to economists what the Cannes Film Festival is to filmmakers and stars. Sort of a wonderful event for geeks like you.

I'd love to be able to deny that, but I think you've got to stop on that. You're very gracious. So, you know, Chair Powell has a history of making news sometimes intentionally, maybe sometimes inadvertently, inadvertently at these events. What do you think you'll do tomorrow? And should we stand by for news or something much less than that? Yeah, I mean, so the history of Jackson Hole, there have definitely been. times where the Fed chair at the time made real big news, really recharting the path for monetary policy in a way that everyone had to pay attention to. But that is not always the case. And I think

right now, if we think about where the Fed is, where the internal debates are going, they're trying to sort out just how far they have to go in terms of hiking rates. They're also now you can hear the debate shifting from the peak to how long they're going to hold rates at the peak. All of which to me says that Powell's, if he thinks about risk reward, what is he trying to achieve here? He's got to keep markets believing that they're going to drive inflation down over time. He's got to keep markets believing that if things turn out worse than they expect, higher inflation, stronger growth, they'll hike some more. But boy, it's not really clear, especially given over the past year and a half how many times they've said some things and had to reverse course,

that he wants to be overly explicit about the precise policy choices are going to make. So I think it's about tone. I think it's about striking that hawkish tone that we're going to keep at this job until it's done. But I don't know that he's going to want to lay down the next level of detail, i.e., here's what we're going to do at the next one or two meetings. Yeah, it seems to me, if I'm recalling correctly that last year's remarks were perceived to be quite hawkish, quite, you know, we are prosecuting a war on inflation, and we're not going to quit until we are done. That message has been received, delivered. and internalized, I think, by the markets.

And so maybe tomorrow there's a kind of different tonality in the remarks here. What is the worry about recession going into this meeting? Or is there much? I think there, you know, when I spent 15 years of my life at the Fed and I had a boss at one point who referred to the Federal Open Market Committee as 19 people that don't agree on the color of an orange. So I think there's a huge amount of disagree. agreement there. Here at Morgan Stanley, we have said from the beginning of this hiking cycle that we did not expect a recession. I think that view is becoming more common across markets. I think it's probably getting more traction within the committee. So I think the recessionary outlook is probably not top of mind right now. In fact, there have been some recent data points that have been on the strong side of things. The retail sales report was pretty strong. And so I do think they are having a fierce internal debate. Have we done enough? Are we seeing real slowing?

you look at inflation coming down. If you look at payrolls coming down, there's lots of evidence to say they're going in the right direction. But boy, some of the spending data are still hanging in there. The durable goods report, if you strip out aircraft, you know, didn't seem like they were slumping either. And so I think that's where we are right now. They have to take things on a meeting by meeting basis. Anything that would surprise you, Seth? So I think a few things. One is, like I said before, specificity. If he actually said something like, you know, we're going to be debating whether we need to do one or two more hikes. Anything that precise would seem to me a real stunner that markets really should pay attention to.

And then similarly, right now in markets, there's a lot of discussion, debate, narrative about is our star, the equilibrium rate, has that gone up or not? Again, there, I think he might allude to the debates, allude to the questions, but if he got into any sort of specifics, if he took a stand on that specific debate, that would surprise me as well. Very interesting. Seth, thank you very much. We'll be watching along with you tomorrow. I didn't know you'd spent that much time at the Fed.

What did you do? And where were you? By the time I left, I was deputy director of the Division of Monetary Affairs. And so I did exactly what we're talking about. I did strategy for monetary policy. I did nuts and bolts implementation of monetary policy and everywhere in between. That's fascinating. Thanks very much.

We'll have you back again soon. Seth Carpenter with Morgan Stanley. Thank you. And coming up, we'll take a look at some hard-hit names. that could use a little technical support. Power Lunch will be right back. Welcome back to Power Lunch. Utilities are the worst performing sector of the S&P so far.

And it kind of makes sense. With rates up, Uts are down, down about 10% compared with the 15% gain for the broader index, but could sentiment be starting to turn around for these names? Pippa Stevens is looking at the setup for us, Pippa. Yeah, it's been pretty bleak here, and the utility sector is actually now the cheapest that's been in more than three years.

And this year's underperformance is largely, due to interest rate sensitivity. Utilities typically have quite a bit of debt, given how capital intensive the industry is, meaning when rates go up, their costs rise. The sector is also viewed as a bond proxy or a relatively safe place for income-seeking investors to park their money.

But when rates go up, those dividends look less attractive relative to treasuries. Now, this comes at a time of change for our electric grid as more renewables are added to the system. Plus, increasingly frequent extreme weather events fueled by climate change are wreaking havoc on dated infrastructure. For example, more than 70% of transformers are at least 25 years old, and only about 20% of wires are underground.

So the bottom line here is that that means utilities need to spend a lot more, and so bad news for consumer bills, but maybe good news from the investment standpoint. So, Pippa, what do you think of Nvidia? Is there a utility play to power? Is there a utility place? It's not as cool. It's not as sexy as NVIDIA. The utility sector is incredibly important, and, you know, it is a place where investors look for dividends.

More important to me than Nvidia, I'll tell you, because my power depends on it. I mean, I have to use it. So does the utility sector need interest rates to come down in order to flourish? Yeah, so they definitely do. That is definitely helpful because usually their regulators stipulate that about 50% of their balance sheet is in debt versus equity. And so they are very sensitive to those higher rates. And then also, you know, speaking of Navidia, there are just so many other areas of the market right now that look a lot better that draw a lot more excitement. And utilities can be seen as a little bit snoozy.

And so when there is yield to be had, when there's more excitement elsewhere, we certainly see investors rotate out of it. But you didn't let it be snoozy. It is not snoozy. You did not. We need lights. We need power. You know, it underpins everything. All right, Pippa, thanks very much.

Let's get to Bertha Cooms for a CNBC News update. Hi, Tyler. Here's what's happening at this hour. Fulton County DA Fannie Willis asked in a court filing today for an October trial date for Donald Trump and his other 18 co-defendants in the case. Willis initially asked for a March 2024 trial, but that changed after a request from one of the co-defendants. Kenneth Cheesboro filed a request yesterday for a speedy trial. Wall Street Journal correspondent Evan Gerskovich will be in a Russian jail for at least another. three months. That's from a Russian court making that decision today. He was arrested during a

reporting trip in March and charged with espionage. Both Gerskovich and the journal deny those allegations. The U.S. government has declared him wrongfully detained. And Manhattan is the most expensive place to live in the United States, with living costs 122 percent higher than average. That's according to new data from the Council for Community and Economic. research, which says Honolulu and San Francisco round out the top three most expensive cities. One big reason for Manhattan's top spot, housing, which costs almost five times the national average. We all certainly feel it. Yeah, you can say that again. Bertha, thanks very much. Ahead on power launch, three key retail headlines. She ends shiny new deal, a wide gap for Gap's new

CEO and Nike's kicks getting kicked around. We'll take you through all three of those stories in a retail rundown next. It has been a busy week for retail. Lots of topics to talk about. So let's bring in Courtney Reagan. First topic, China's fast fashion retailer Sheehan joining forces with Forever 21. What's the story here? It's funny. Sheen would probably shut her a little bit when we call them a Chinese fast fashion retailer because yes, they were started there, but they have no revenue in that area, actually. Just their production is there. E-commerce, fast fashion seller Sheehan, though, is partnering, as Tyler said, with Forever 21 owner Spark Group. So Spark remember, is the joint venture between authentic brands group and Simon Property Group.

So this partnership ties up experts in stores, e-commerce, and branding. There's a little bit of benefit, then, for all three partners. If you dig into it and think about it, Sheehan gets expertise in physical stores selling fast fashion in the United States, which is really important to it right now is it potentially looks to IPO. Forever 21 gets Sheehan's global e-commerce expertise and faster fashion. on responding to trends in an on-demand small batch way, something they don't quite do right now. And Spark hopes to then use the partnership to expand Forever 21's business in a variety of ways. Sheehan gets a third of the interest in Spark Group.

Spark Group becomes a minority shareholder in Sheehan, which has been rumored to be exploring an IPO, as I mentioned there. So any expertise here in the country is helpful. So is Sheehan a retailer or a manufacturer or both? Both, but they're only an e-commerce retailer. And they do manufacturer, so it's their own goods. but they also have expanded into some marketplace goods as well. Okay.

It's amazing. I mean, we were all talking about, you know, how this was the end of globalization and the end of all this. And then like, here comes she and selling $4 stuff through an app at the same time we're cracking down on TikTok. And now it's going to be in the middle of Forever 21 and the shopping mall. Yeah, exactly. There's a lot more to come on this one. So stay tuned, I'm sure. Oh, yes.

Well, let's talk meanwhile about the latest chapter at Gap. A new CEO, listen, our heart goes out to him or her. What are the details are here? Yeah, exactly. So Gap, obviously, very challenged business has been for some time. They've been without a permanent CEO since last July. Richard Dixon is actually joining, and he's been on the board of Gap since November. And those that I've spoken to suggest that it's possible he was actually identified as the next CEO a while ago.

But he was this chief operating officer of Mattel and co-executive producer of the Blockbuster Barbie movie. So he had to see that through the box office before leaving, if you notice his names in the credits. A source familiar with Dixon's work experience does tell me he's an influencer. He isn't fearful, but he has a healthy risk curve. He has creative vision in spades and also great financial literacy. Dixon doesn't hide in an office. He's empathetic from what I understand and surrounds himself with great people. He's also competitive.

He loves playing tennis. And I'm told that Dixon was one of the first to combine multiple brands under one retailer online while he was at Estee Lauder. He was brought into Jones Group to liven it up, that of course, apparel. And Dixon was at Bloomingdale's during what many referred to as the Gloria. days under Michael Gould. Dixon did put Barbie on the runway during fashion week. He led Barbie's rebranding with those new body shapes and abilities in 2016, if you remember that. He sounds like exactly what the gap needs. He sounds exactly what the gap is. I think that's what they're hoping. And we'll see, you know, hopefully the board gives them a little bit of space to do that, because

to Kelly's point, they have been struggling for a while. Sometimes things get a little worse before they get better in these companies when they're going through major transformations. So I sort of hope for the sake of seeing a vision through that he gets a little bit of runway to do that. Totally. You know, it's going to take a couple of years probably just even figure out if it will work this time around. Yeah, it's a complicated business. Yeah, fascinating stuff. All right, last topic is Nike down for an 11th straight session. That's even longer losing streak than the Yankees have had. Dragged down by reports we heard this week from Foot Locker, Dick Sporting Goods, among other things. Yeah, so that's such an interesting wrinkle because Nike shares, as you point out, have been under pressure.

They've had these worries about growth in China slowing, a really important market for them. Even despite strong brand sales at U.S. retailers that are reported in recent days. So hear me out. So Dick's sporting goods and coals actually called out its Nike product as among the strongest sellers in the quarter. Macy's called out Nike's return in the fall as a positive driver. Now, just under two-thirds of footlocker sales are Nike branded goods. And Jeffries thinks that strong sales of Nike actually helped footlocker sales outperform footlockers other brands in the quarter, though generally, yes, footlock at a very disappointing

quarter. Obviously, Dix was disappointing too, but the Nike part of the business was really strong, also at Coles. And J.P. Morgan's Matthew Boss tells clients that Nike clarified that these wholesale partnerships were talking about, like returning to Macy's and DSW return, along with its business at Foot Locker, remain immaterial to Nike's overall topline assumptions, and the Nike still really focused on that direct-to-consumer business. But they're coming back. So what? Why? Why? people down on Nike? I think this 11-day stretch has more to do with worries about if Nike can overcome the slowing growth in China, because that's a really, really important market for Nike.

And there's been some worries about innovation at Nike. Do they still have cool stuff? I mean, that's what's all important in retail these days. And because the share started to fall, to be fair, before these retailers reported. And then they also called out that Nike was really strong for their business. But Nike says, yeah, that's great, but it's still relatively immaterial for our total My son is still a big Nike guy. I mean, that's what he wants. Teens, it's the number one brand for teens, women and men. But there are, as you notice, as you look around, if you look at people's feet, there are lots of other sneakers out there now.

There really are. Hoka and Skechers and On. On. On is really coming in? Yeah. Yeah. Yeah. And I have some ons. Yeah. Yeah. See, you're hip. Yeah. Right. But so it's, they still are the big dog in the. Definitely. And brand power is really, really important. And they hold that both with older generations and the teens. I mean, Piper Jaffreys is now Piper Sandler does this teen survey every twice a year. And I'm going to get this wrong. But like, let's say a decade or more running, Nike has been number one, the top apparel and the top footwear brand for both men and women teens. And obviously the teens become not teens and then a new crop of teens come in and they still love Nike. Yeah, it's extraordinary. But we Anytime you get a run like this, it's never had 10 down days and now it's going to be an 11th. You just have to sit up and take notice. I know. I wonder what Carter Worth, of Worth charting, would say about this. We should ask him. I think you should.

I feel like he might have an answer. Maybe we will. Okay. All right. Thanks, Court. Thank you. Good to see you. Coming up next, we'll get some technical support.

Carter Worth is checking the charts on some hard hit stocks that could be due to break out. Is Nike on his list? We will ask when Power Lunch returns. Welcome back to Power Lunch. We've called in the Geek Squad because it's time for some technical support. And we're looking at some extreme stock sell-offs that could actually present opportunity. Here to chart those names is Carter Worth of Worth charting. A pleasure, Carter, first of all, thank you for joining us.

And we're going to start in a perhaps unexpected place with Hershey. That's right. So we have three stocks. They're all staples, actually. But let's look at them and try to figure out the way forward. So you'll see the annotations that are currently on the chart. Hershey is down 22% from its high. And at this point, yes, we have something that is,

just because you're at a 52-week low, it doesn't mean you have to bounce. But the sequencing would call for some sort of countertrend. We're in a clear downtrend. We're down-trent. We're down 22% from the high. And what I'm thinking here is that we get some kind of bounce and we move above this downtrend line and you get an arrow about like that. So we shall see, but 22% of unrelenting downtrendent,

two well-defined level play for the bounce. That's the thing. And I'm interested in the fact that all of these bounces are kind of consumer-y, consumer staples and try to think through what the market might be doing in the background. But the next one is one that's really got in front and center lately. Estee Lauder. What's going on here? It's a mess. I mean, look at Eremaz and other sort of very premium brands, always expensive, probably a 40-pe. But what's incredible here is that reference point, that's the COVID low. So you're talking about a stock that's lost 60% of its value and is down to an epic low in terms of markets. And also, if you look at all sequencing, dropping 60% without much of a bounce, if you can see here, we get a bounce,

you're due for some sort of countertrend. Again, just a trade, but I think that's a better place to be right now day to day than the market. Is it fair to say for Hershey, for Estee Lauder, the kind of countertrend move you're talking about could be something less than 10%, 10 to 20%? These don't sound like 200 baggers here. Right. But again, something that, is not only absolute, maybe four to seven, up to 10, but is a relative performer, even as the market continues lower, likely to outperform. Fair enough, that four to seven looks a little bit more attractive if we're down, you know, three at the same time broadly.

Okay, so that brings us to General Mills. It's down 25% from its highs. That's right. So also a staple, and again, just as you noted there, and that different setup here, there are no 52-week lows or the COVID low to sort of single out. But it's a well-defined uptrend. Those are mathematically parallel lines. And my thinking here is just as you bounced off the low before, that you'll get some sort of sequential bounce.

So it is nothing to do whether these are cheap or not. This, for instance, is trading in a 15 multiple. Estes at a 40. Hershey's in a market multiple. Whether they're growth or not. It's just that at this point, the nature of the sell-offs are such that one can, I think, play for a counter-trend move. They're all in downtrends that are fairly substantial. All right.

So three possible counter-trend ideas. does Nike, which we were just discussing with Courtney, 11-day losing streak. It's never had that before. Here's a chart. It doesn't exactly have your lines on it. But what do you think? Yes. And so the thing about a number of days down in a row, that's sort of, it's data mining, right? It's a factoid. Because it could be 13, irrelevant in the sense that it is a lot. And yes, you can break that trend by having an update. But it's not the same setup, I think, as these others, obviously not a consumer staple, for starters, but also. So it's been a stock that's been weak and its group is out of favor. Other Adidas, others are in trouble, foot locker, a seller of sneakers.

And so my hunch is to, this is weakness to stay away from versus the other's weakness to take advantage of. You don't do this kind of fundamental, you know, pontificating. But could we pontificate this is because people are not wearing ath leisure anymore. And they're turning to those, you know, that occasion wear and those fancier types of clothing options once again. I wonder, and yet I see people in suits just like this, but they're wearing sneakers. Right. Hard to know. I'm chew.

Have you meant Dom? Hoka said everything else we were just discussing. All right, Carter Worth, Charterworth, there we have it. Thank you so much for coming in today. We appreciate it. Makes it simple every time Carter does. All right. Still ahead.

Swimming into third place, the Olympic swimmer Erica Sullivan, climbing up on our stock draft rankings. Thanks to her picks of Amazon and General Electric. She's up 18% overall. all so far in the competition. We will check in with Erica about the stock draft and more when Power Lunch returns. Welcome back to Power Lunch, everybody. InVIDIA helping Charlotte Flares team take a commanding lead in our 2023 stock draft so far. That stock up nearly 80% since the draft back on April 27. But there's still several months to go in the competition. You don't know how

things are going to shake out. We're roughly halfway through, maybe a little less. Currently sitting in third place is U.S. Olympic swimmer, Erica Sullivan. Her team is Sully's superstars. It is up almost 18 percent, thanks to Amazon and General Electric. And she joins us now. You must be happy, Erica, with your stock picks. You're in third place. That's within striking distance, for sure. Yeah, I can't complain. I did come in as to win. And so I felt like I really didn't know what I was doing and kind of picking random stocks. So third place is good. I'll take it. Neither of us know what we're doing. That's okay. We're all in the same boat here. Let's talk about the life of a swimmer as you get ready for the Pan American Games. How many hours a day do you spend in the pool? Yeah, I average around four hours a day, and then three times a week I'm in the wait room for around an hour and a half. So in a couple hours, actually, I'm about to go to my practice, and I usually don't leave campus. So I get here in the morning.

I lift. You're at Texas, Austin, as I understand it. So what time do you get up in the morning to go to the pool to work out? Oh, God. Early mornings, probably around 6 a.m., sleeping mornings are around 7. Well, that's not as bad as I thought. I thought it was really, really early. But that's still plenty early. I'm not up with you there at 6 a.m. most days myself. Pan Am Games, where are they? When do they start? What are they like? And then obviously you must be pointing to Paris, 24, which will have been, I guess it would be almost over by this time a year from now. Yeah, we're less than a year away. So I'll be going to the Pan American Games in Santiago, Chile in October, mid-October. I'll leave on the 16th and I'll be gone for two weeks. And I think it's just another opportunity to wear the American flag on your cap and represent

the nation. Eric, I also understand your bit of a film buff. And maybe you can explain Barbie to tie. Oh man, I love Barbie. I am a film major here studying right now. And it's a great movie. Gerwig is a great director. She directed Lady Bird and Little Woman. And this is her third feature film. And I do think it's good, not as good as Lady Bird. That's my all-time personal favorite. But it's a fun movie. It's about camaraderie. It's technically a coming of age. But great movie. Definitely go check it out. Yeah, I just had trouble following the plot a little bit for some reason. I'm embarrassed to say. I don't know why. It was just a little over my head. I'm not kidding. I just had a little hard time.

I was going to ask if you had to make some stock picks, you know, we obviously did this back in April, Erica, long before Barbie's smashing success. And I don't know if, you know, if that would now, if we had to kind of start from scratch today. Exactly. Mattel, I mean, they had a ton of retail partners. They really, they did a 360 on this one. Yeah, it's funny you say that. I actually bought Mattel stock back in April.

And so I was kind of ahead of the trend there. And it's been really fun to see that. stock doing well. If you had had, I forget what draft order you had, was there a stock you would, you were second? So did you have any, were you happy with the stocks you picked or did you want one that got away from you first? I am happy with my Amazon pick. I did want meta, but meta was just taken pretty early. So I think I'd probably switch General Electric for meta. For meta. Okay, good answer. Okay, cool. And maybe, Erica, you can tell us, is Nike still as cool as it once was?

I mean, that stock is down 11 days in a row, and we're trying to figure out what's plaguing it. You know, we love Nike. Texas is a Nike school, big fan of it. I just think there's more trendy athleisure wear now. I think there's just higher end. My little sister works at a fashion line called Viori. She loves it. Allo is on the up-and-coming. Lulu Lemon.

I just think there's different forms of athlete you're where now, and I think there's just rankings in that. Yeah, I like the Viori stuff is really good. I think you're right on that. Let me ask you one personal question. Do you or other athletes on the swim team have NILs? Yes, I do have NIL. I actually have an agent that helped me work out this gig.

And luckily, I don't know if you know this, but Texas Longhorns are one of the leading brands in college athletics. And so we have classes that we could take. throughout the semester to kind of build our brand or not to pay taxes, how to invest, and all that stuff. So it's a great program. I just heard about Boston College women's lacrosse players who are driving cars they got from the local dealership, Erica, stuff like that going on in Texas. Oh, yeah. You got Bijon Robinson who had a sponsorship from Lamborghini Austin last year.

She's driving around in a Lamborghini? Oh, yeah. I mean, especially the higher-end athletes, they get their cars leased, and then they get it for a year and then they give it back. Yeah. It's a different world. It's a, no, we're not judging, but it's a different world from when we grew up. Erica, good luck to you in the Pan American Games and beyond, and good luck to you in the stock draft. Thank you so much. Erica Sullivan, Olympic star. We appreciate your time.

Oh, it's changing fast. Changing fast. That's driving around in the Lambo. If your office fell short staff today, it's not your imagination. More people call out sick on August 24 than any other day of the year. That and more stories. and Power Lunch returns. Welcome back with about 90 seconds. Let's squeeze in a couple more stories you need to know about today.

Wasting no time to tell you that if you're working today, you may have noticed fewer of your coworkers in the office. And researchers claim that today, August 24th, Happy Birthday, Mom, is the date that Americans call out sick the most, according to management firm Flamingo, which analyzed sick leave data over the past five years. Second sickest day of the year is February 13th, Valentine's Day, and the Super Bowl. This one, Tyler, apparently would be a day. I was going to guess the Super Bowl.

If you had to ask me, I would guess at the Super Bowl Monday. Do you buy it that today is the most called out day of the year? It seems random. Well, it seems random, but there are a lot of people out today. They are. I'll tell you, there are a lot of people. Short line at the cafe. And they have a, yeah, right?

Short line at the cafe. And if you feel like you're being nickel and dined these days, things that used to be free now come with the cost. And late checkout at the hotel is one of them. A lot of chains are now charging for the privilege to stay that extra hour. Yeah, $50 for an hour. hundred for two. I mean, if you get there early and the room is available, I don't think

you should have to pay a fee. Like if you get there at 2 o'clock and the check-in time is 4 o'clock, why should you have to pay a fee? For extending your day, passing 11 a.m. checkout, I guess I kind of get it. I mean, it takes a while to clean all those rooms, but it's still a pain. All right, thanks for watching, Paramount. Have a great

rest of the days. This is Friday? No. See you later. Closing bell starts right now.