Power Lunch - Losing Steam, On The Defense 12/4/23

Episode Date: December 4, 2023

Markets are the story today, with stocks heading lower. Is this just a normal pull back in the midst of a larger rally, or a sign markets came too far, too fast? We’ll explore. Plus, shares of SAIC are hitting an all-time high after its latest results and improved guidance. The company does IT for the Department of Defense. We’ll speak to the CEO. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good Monday afternoon, everybody, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us for a Monday. The markets are the big story today. Stock's heading lower than NASDAQ in particular, getting hit hard down more than 1%. So is this just a normal pullback in the midst of a larger rally or a sign that markets maybe have come too far too fast, Kelly? And on that note, what does the rise in gold and Bitcoin say about what's happening here? Gold hitting a new all-time high today. It's over $22,000 an ounce. Bitcoin back above 40,000 hit 42 earlier. Levels not seen since April of 2022. And shares of SAIC hitting all-time highs after that company's results and improved guidance. The company does IT for the Defense Department. We'll talk to the CEO coming up.

Plus, shares of Uber are higher after being added to the S&P 500, as we thought it might. The stock has doubled this year, but analysts seem to think it can still go higher in 2024. We'll get some technical support a little later. All righty. Let's begin, though, with the market. as the soft landing thesis, which has basically been working for the past month, is being maybe a little bit tested today. Some of the big tech names in the Magnificent Seven are leading us lower today. Invidia and Alphabet, both down 5% over the past week. Let's bring in Mike Santoli for more.

Is the soft landing thesis still intact, Mike? Yeah, Tyler, I actually think that the market is increasingly embracing it correctly or not. They are. And in fact, I think that weakness on a relative basis in the large mega-cap tech stocks, which is now favoring things like banks up 1% today, transports up 1% small caps outperforming. That reflects greater comfort in the idea that the economy can remain resilient as inflation comes down and maybe yields are going to be more benign. So in a sense, this rotation we're seeing, and the big cap indexes, without a doubt, have come far in a hurry, five weeks, 12% in the S&P 500.

Plenty of room for that to cool off. The way it's doing it right now is rotating into more. cyclical laggard areas. Not saying this is going to be a lasting leadership shift. There's been many false starts in this direction. Most recently, in June and July, the last time the S&P 500 ramped up to 4,600 as we have just recently. And back then, I also think it reflected a very broad consensus that the soft landing scenario looked more likely. I don't think it could be disputed, but there's not going to be a moment in time in the next four months or something where we say, ah, we achieved that soft landing here. It's just going to be an ongoing reevaluation.

of whether we're tracking in that direction. All right, Michael, stay right there. Let's keep the conversation going. While the odds of a soft landing are higher than they were, our next guest says that doesn't mean we can escape a recession. So how should you position here? Let's bring in David Smith. He's Chief Investment Officer with Rockland Trust.

David, welcome to you. Talk a little bit more about that and what you just heard Mike say. I agree with Mike 100%. I think we're not going to know for sure until we get ultimately through the other side of this thing. It's been months and months and months of people expecting to discussing the soft landing idea. And I think ultimately we won't know until after it's kind of begun to recover whether or not we actually got the soft landing. So it's very, very difficult for us to sort of look forward and say, for sure, you're going to get it. But I will say that the likelihood of a soft landing seems to be now higher than it has been in my 30-year career of 21.

It's actually kind of magnificent that they were able to manage to the outcome that we've seen so far. It doesn't make you, since you have that 30-year career, doesn't make you nervous to say that to declare mission accomplished? Yeah, I don't want to say it's mission accomplished by any means, but it feels like there's a reasonable chance of a really good outcome here, meaning that we do get inflation under control without a real pullback in GDP, which is an incredibly difficult and challenging thing to do, particularly after the Fed was a little late in getting started. You know, I think you pointed out in your note that if you strip out the magnificent seven, the market is actually fairly close to its historic forward PE. With that said, are there particular stocks, David, that you favor right now that would be well, well valued, I guess it would be a way to put it.

Yeah, to Mike's point earlier. I think, you know, the market's broadening out a little bit, which is good for us to see. You know, we tend to be diversified and don't concentrate our client portfolios at Rockland Trust. in four or five big technology-oriented companies. So it's nice to see some broadening out. So we like Exxon in here, a great deal of companies trading at a little over 10 times its forward earnings, a really nice dividend yield of over 3%. And a deal that they've announced that we think they'll get done that is going to be

really, I think, constructive for them going forward with real deep explosion to Permian Basin. We also like Chuck a great deal. Again, kind of out of favor in financial company. But there's a real hard market happening right now in property cash. insurance. And Chubb is, we believe, the best in class property casualty insurance company on the planet. And we're happy to be involved with that one again at about a little north of 10 times. But they don't have Jake from Steak Farm, David.

No, no, no. Well, Patrick Mahomes. Yeah, they don't advertise as much. They tend to focus on a hiring client who's a little bit more stable when it comes to premium increases and probably is more able to take those on and be able to, you know, continue to have the coverage that they wanted. Whereas some of the lower-end folks are going to probably deal with people pulling back on their coverages. So I think they're very well positioned with this hard market to continue to do very well. You also like Google, are you concerned that the Magnificent Seven has been underperforming? Does that tell you anything, David? Yeah, so we, again, want to be exposed to some of the Magnificent Seven.

We don't own all seven companies. We tend to have a valuation discipline here at Rockland Trust. When we like Google a great deal, I mean, there's a company that's earnings are growing probably two X out of the S&P 500 at a multiple that's a slight premium to the S&P 500, where historically it's traded at about a 25% premium. So in our minds, we have a 25% earnings growth trajectory on top of the potential of a multiple expansion in here. So we're very constructive on Google, my alphabet. Mike, let me ask you a question that I was reading something this morning where, as is often the case, when cash begins to pile up in money market funds or in treasuries or in other

repositories of cash, the argument is always made. Well, there's a, the rocket fuel that's going to keep the market moving higher. That money's going to come out of cash and it's going to go into the market and it's going to lift everything higher and so forth. I wonder whether that's true because here, for the first time in a decade and a half, cash is actually paying a return and maybe the people who have put money into cash and are now collecting 5% or more like the idea of having cash making 5%. And it ain't going to go into the market. No, there's no doubt about it. And I think that that probably is one added reason why that is not cash that is somehow poised to enter stocks. But I'm generally skeptical of this idea that there's this bucket of cash here and it moves into the market. And by the way, when the money market holders buy stocks from somebody else that turns into cash, what are those people who sold stocks do with the cash? You can't really make the constant argument that it's just about these discrete piles of capital. What you can say is that I don't think right now, even though, we've seen some speculative fraud and some of the trading activity has gotten a little bit frisky

here in terms of short term chasing of momentum and low-quality stocks, I don't think in general we have massive imbalances and people are way out over their skis in terms of equity risk. So that's one thing I would say. In terms of the aggregate amount of money market assets, though, it pales in comparison to how much it had piled up relative to equity market cap in 08 or 09. Right now, it's the drop in the bucket. A lot of it's replacing bank deposits. I don't necessarily see it as a key swing factor.

All right, gentlemen, thank you very much. David Smith, Mike Santoli, thanks very much. And we will, David, we'll give you a pass there on Chubb and not having Patrick Mahomes. They don't even have flow, but that's okay. We'll let it go. Really much. Thanks, my master. All right, thank you.

You, he said. What is that? You? Yeah, me. All right. Let's get to the bond market and its take on the moves we've seen in gold and Bitcoin. Rick Santelli's with the traders in Chicago. I'm fired up today, Rick.

Yes, fired up. Everybody's fired up today. Now, if you look at interest rates, they're moving to the upside. But that's after testing some levels we haven't seen in over a decade. Of course, those were the intracycloas that we had on Friday. But maybe the big story today, obviously what's going on in gold and Bitcoin. And you know what? When did the Dow make their all-time high, which are very close to right now in early 2020?

So let's start the charts in January of 2020. Remember, it's always about location, location, location. Well, look at that chart and look at the spikes. Now, look at gold. How many clothes have we had over 2000? See those spikes? See where we're at relative to the Dow? Gold's up here making new highs.

What about Bitcoin? Same thing. When was the last time was over 40,000? When was the last time was over 45,000? Beginning of 2022. It's all about investors willing to take more risk on and why? Think the Fed here. to a trader. Hey Dave. Hold on. You got to make it some sweet trades. Rick, what's happening?

Okay, so the big story today, Bitcoin, gold making, gold making all time highs, Bitcoin back above 40,000. Even though these markets reversed, what do you think's going on there? Well, it's kind of a risk on trade. There's panic in the air. Gold traded the all-time high this morning. Came in now, it's down two and a half percent. Weird fluctuation. Well, I don't know. We really say it's a panic. I mean, stocks have been on a tear. The Dow is within striking distance, forgetting what's going on today with regard to its all-time high made in early 2022. It seems like there is no alternatives or stocks, but stocks are an alternative, and there's a whole variety of other alternatives. There is a lot, a big variety, and there's a, I think the 10-year note, I think that's kind of hanging on there right there,

and I think there's something to that. Yes, well, interest rates have reversed off that magical 5%, you could argue that their whole, around 4 and a quarter percent. But ultimately, if you had to decide what you think the drift is going to be for equities for the rest of the year and the beginning of next year, should we be looking to welcome Santa Claus with milk cookies and our investment dollars? Possibly, because I think the interest rate is starting to get, the tendency is going to be to come off a little bit. And I think then we're going to go higher if that's the case. You know, for my vantage point after talking to so many traders looking at so many charts, it certainly seems, though, the big mantra for everybody to pay attention,

to is A, is the Fed done raising rates? And B, the second part, many expect they're going to ease rates. And last comment, if the Fed doesn't ease rates, the markets we've just described, do these end up being basically tops to reverse from? You'd think, you'd think there's a risk on trade there. And I think, yeah, I think that we might go back. All right. Thank you. Dave, we send it back to Tyler and Kelly. All right, Rick. Dave, thank you very much. Coming up, shares of SAIC higher today. reporting results. The company does IT for the Defense Department. The CEO will join us next and a big deal in the airline industry and big stock moves as a result. Alaska and Hawaii teaming up the

the 29th and 50 estates. More on that as Power Lunch rolls on. Welcome back to Power Lunch. AI has been a hot topic for markets all year long with practically every company trying to stay ahead of the competition. Same is true of countries, which are trying to avoid falling behind their rivals. Morgan Brennan joins us now just back from the National Defense Forum with more about all that. That's right. This is the Reagan National Defense Forum. It takes place every year. The Defense Department is not just focusing on restocking weapons piles, but also how it's adopting new technologies like artificial intelligence. So I asked U.S. Air Force Secretary Frank Kendall how he focused, as he focuses on the pacing threat, that's China, how AI will be deployed on the battlefield and how it

won't. There will always be human involved. The question is the degree of direct connection to the decision-making process. And I think our key question here is to figure out how, as we apply these technologies, we are still able to hold human beings accountable for their performance. We've had autonomous seekers on missiles on weapons systems for a long time on munitions. My hawk air defense system in the 70s had an automatic mode I could have turned on. But what What we need to do at the end of the day is ensure that people are responsible and accountable for the performance of the systems. So AI is being used for everything from intelligence surveillance and reconnaissance to drones,

missile defense. There's a big autonomy push across DOD called Replicator. And for the Air Force specifically, a high profile example is the collaborative combat aircraft. This is the loyal wingman that will fly autonomously and more affordably alongside Air Force's 6th-gen fighter jet that's being developed in secrecy right now. now. In addition to the primes, companies like Palantir and rural industries, C3 AI, AeroVirman, a flurry of startups are working on military AI applications. But while there's been some degree

of machine learning and autonomy, as was just hinted at by Secretary Kendall, within the force for decades now, these new capabilities, these dual-use capabilities, are really where the future is headed. Is AI for the U.S. military, the development of AI, both offensive and defensive? defensive? Yes. In other words, are we, we're trying to play both sides there. We're going to use AI to be a more lethal, potent threat, or to defend our national interests, but also to protect our national interests against incursions by AI from other countries. Yes, I would say all of the above. I mean, just about a month ago, the DOD released an AI adoption strategy. I think to use a, to use an industry term here, I think I think the takeaway here is,

that the U.S., including the military, are going to be very ethics-driven in terms of how they use the technology, how they deploy the technology, and where it falls within the so-called kill chain, meaning that there will always be some sort of human involved in the kill chain. So this idea of AGI, Terminator-style. Yeah, and- To strike a certain house in a certain country based on AI that says a terrorist- So I'll give you an example of how it's being, about how it's being developed and how it, you know, is potentially being reused or could be used in real time.

I was with Palmer Lucky from Andral Industries. This is a well-known unicorn defense tech startup last week. They just unveiled a new, it's a reusable, we'll call it missile or interceptor or jet power drone, all of the above because it's going to have different types of mission sets and can be tasked for such. They've built the hardware, but the hardware centers around the software, which is AI-driven. So the idea being that this particular interceptor could be launched, once it is into the air, once it has its mission set, it can go out and do what it needs to do accordingly

without a human having to say, like control from a joystick from somewhere far away and can also come back and be, you know, relanded and reused at a future date. All of this driven by AI. And was he the Oculus guy? Yes. Paul, so now he's working on this.

Wow. impressive. And like you said, raises some issues as well. But yeah, that's a great example of it. All right. Thank you, Morgan. Nice to have you back. Good. All right. Speaking of defense, our next guest runs SAIC, which provides IT services through the Department of Defense and other top government agencies. Shares of SAIC hitting an all-time high after reporting strong third quarter results that beat on the top and bottom lines. Joining us now, Tony Towns-Wittley, the CEO of SAIC. Ms. Towns-Wittley, welcome to you. Welcome and congratulations. Congratulations on your new appointment. How's it going so far? You've been on the job two months. Two months in and great Q3 earnings, super proud of the team. It's been a wonderful step in.

As I said to people, when I first was announced, I've heard from SAIC alumni and military government leaders around the world. They've all said, hey, you've joined a national asset, and I'm learning why that is so here at SAIC. So for those who don't know what SAIC is, what it does, And with all due respect, I know there's a lot, you can't tell us that you do. What do you do? Look, SAIC for over 50 years, SAIC has used some deep scientific, engineering, technical expertise that they've gained with all of our military services, across our commands, across the intelligence community, and parts of our civilian government. And we basically integrate. Think of ourselves as a mission integrator.

So when we think about emerging technology, which was just the topic that you were just discussing, these emerging technologies and data, edge computing, AI, multi-level security, we are the group that helps the military and all other forms of a national security organization integrate that in a very open architecture so that you can plug and play from many different types of products and software and innovation that are being created and drive the mission outcome rapidly, real time at the core. And what does the strong financial performance in the quarter and the stock performance state? What does that tell you or should it tell us about the strength of demand there? Well, look, it speaks to a couple things. If I can just initially say that as an organization,

we beat our quarter, beat our call 11 quarters in a row. So some of this is around the momentum happening in this company, as we are, if you will, getting more and more refined in our differentiation and capability, as well as our ability to drive sustainable growth. On the demand side of the equation for our customers, absolutely, we see the growth as they're looking to integrate more and more commercial technology from providers from all sectors. They need integrators that can make that happen in a secure way and very complex real-time mission space. And so we see growth across our entire footprint, including our national defense work,

and we believe that growth is going to continue. I'm going to ask you an odd question. Well, maybe it's not so odd. From where do you recruit your talent? And are you having a hard time finding talent? You know, it's been a great year on talent acquisition here at SAIC. We are over all of our targets in terms of the number of individuals we've brought in to the organization, how we are retaining our talent. We've been beating our expectations quarter over quarter in that regard as well. But there is absolutely a war on talent. We are looking for computer scientists, of course, data scientist, engineers, those who understand evolving and emerging technologies around digital engineering and cloud computing. We go to the same types of talent at universities across the different parts of the market to gain that talent. But we also have a unique flavor. We are looking for individuals that want to be front at the mission, meaning they want to be integrating into very real mission. environments, not necessarily academic, esoteric innovation, but true applied innovation at a mission

level in some of the most important missions that this country has. That's interesting. It's kind of reassuring as well. But I'm also surprised the stock has done so well and that your demand has been so consistent when we've been through a year of multiple potential government shutdowns and debt ceilings and all the rest of it. How does that affect your billings process or their customer acquisition process when there are sometimes giant question marks around budgets not only next year, but maybe next year.

week? No, it's a fair question. We're tracking this all the time. We've obviously, you're aware that the budget environment, as well as the labor market, are all super sensitive in this part of the world relative to what's happening in our macro factors. We've had a phenomenal year in being able to both attract talent to drive on contract growth in the contracts that we have. We've had some uplift and some of the ramps on different contracts that we've won early in the year.

All of that's been contributing to our favorable performance. And quite frankly, we're getting demand signals based on unique differentiators in our portfolio that we think will carry us into the next few years. What do, for lack of a better word, crises like the one in Ukraine and like the one in Gaza, what does that do to your business and the kinds of demands that are placed on it? There were kind of requests that are made to it. What does it change for you? Well, I can say uniquely relative to the most two recent crises that you mentioned, we haven't seen a direct correlation in terms of a shift in our business demand and supply metrics.

However, as a, you know, we are two-thirds Department of Defense and Intel sector versus our third in our civilian business. And look, as a sector, the sector obviously responds to initial threat anytime the threat level increases. the demand shifts, and particularly the demand for integrating technology in the information space. IT, decision support, artificial intelligence, all of that demand goes up, and that's where we happen to be positioned across the DOD and Intel communities particularly. Well, Ms. Towns-Wittly, thank you very much, and congratulations on your new appointment. Appointment continued. Good luck. And if I inadvertently said Whitney, when I first introduced you, I apologize.

It is Whitley. Thank you very much. Appreciate it. Thank you, sir. You bet. I was going to ask who's done better her or her college roommate, but if I'm not mistaken, that was Michelle Obama. So congratulations to both of them. Shares of meta are lower today, but have nearly tripled in 2023 and on pace for their best year ever. Is it too late to buy into the rally? We'll check the charts ahead and technical support. Power Lodge is back in a moment. Our oil prices are lower today, despite missiles hitting three commercial ships in the Red Sea. is back and joins us now with more. Welcome home. Thank you so much. And oil is once again lower today posting six straight negative weeks for the first time in more than two years, which really does

speak to this lingering disappointment, skepticism in the market over whether the OPEC plus production cuts can actually come to fruition. They are, of course, voluntary, which means they're harder to enforce. And Rebecca Babin at CIBC private wealth said that for so long the market had really believed in the so-called OPEC put, but that increasingly the market is worried about OPEC's ability to stabilize. And so the market is very much overlooking any potentially bullish headwinds, sorry, tailwinds, including over the weekend when we saw three commercial vessels come under attack in the South Red Sea. The Yemen military group, the Houthis, claimed responsibility for that. A USS carrier ship also shot down several drones in the region. And so usually this would have, you

know, maybe a bullish effect for oil. But the fact that it's not, and with the U.S. saying that Iran is behind this, the fact that it's not having any sort of impact just tells us. you, there's really no conviction in this market right now. And people are still, I think, kind of sorting through what the administration's plans are with the Strategic Petroleum Reserve and wondering if they're choosing the refill now in order to sop up excess supply from the market, maybe another bearer signal. Yeah, and it's at that price range, but any action is going to be, you know, very slow at best. I mean, we still have 180 million barrels to refill, and there are some constraints around

how fast that can be done, given the availability of the caverns. And so that is very slow. That has been a sort of providing a floor to a certain degree in the market. But I think the pace of that is really slow. And what's happening now is that the demand outlook for next year is being revised to the downside. And so while there's been so much focus on the supply side and, you know, what OPEC can do, there's only so much they can do if demand is falling. And so that's what the market's focused on right now. Absolutely.

Well, Pippa, welcome back. Thank you. Pippa Stevens. Let's get to Courtney Reagan now for a CNBC News Update. Courtney? Hi, Kelly. As Israel expands its military campaign across the Gaza Strip, 218 Americans and U.S. dual nationals crossed the border into Egypt. According to the Egyptian Red Crescent, a total of 600 foreign or dual nationals evacuated amid the renewed ground and air assault. It comes as Gazans say there is no reliably safe place to go.

Meanwhile, the White House joined in the condemnation of a group of protesters in Philadelphia who demonstrated Sunday night in front of an Israeli-style falafel shop. A spokesman called the protest anti-Semitic and said it's completely unjustifiable to target restaurants that serve Israeli food over disagreements with Israeli policy. And the Treasury Department announced a new strike force today aimed at keeping fentanyl out of the U.S. The department says the group will collaborate on strategies to keep the potent opioid and drug-making materials from being trafficked into the country. The crackdown comes after President Biden and Chinese President Xi Jinping agreed to stem the tide of illegal fentanyl, following a meeting in California. Tell me, back over to you. All right, Courtney, thank you very much.

Ahead on Power Lunch, just the ticket. Alaska Air agreeing to buy rival Hawaiian in a $1.9 billion deal. The second proposed merger between rival airlines in less than two years. We'll get details and a live report when Power Lunch returns. Welcome back to Power Lunch, everybody.

A big merger in the airline business. Alaska buying Hawaiian. Let's get to Phil LeBoe for the impact of this deal and a discussion about whether the antitrust folks are going to let it go through. That's the big question, Tyler. Will this go through? On paper, the deal makes sense,

especially if you talk with the people at Alaska and Hawaii. Of course, they wouldn't do the deal if they didn't think it made sense. $1.9 billion is how much Alaska is paying in order to acquire Hawaiian and about 900 a million of its debt. Also, both brands will remain. They continue to fly. That's important here under the corporate umbrella that will be run by Alaska. They expect approval in 12 to 18.

months. And when we talked with the Alaska CEO earlier this morning, he gave this explanation when I asked him about whether or not the DOJ would push back on this deal. When you think about that expanded domestic footprint, that expanded international footprint, we will become a bigger, stronger character to compete against the big four that control 80% of the domestic market share. So we feel that we check both those boxes and we're hopeful that it'll be seen in a positive light. They have agreed to pay Hawaiian shareholders $18 a share. That's why you see a Hawaiian moving up as much as it has those.

Not all the way back up to 18. Plenty of skepticism out there about whether or not the DOJ will approve this deal. We did reach out to the Department of Justice. As you would expect, they said we have no comment initially. We will be obviously weighing in on this if there is an issue in the future. And a lot of people expect that there will be some type of pushback from the DOJ. Too early to say for sure. Guys, back to you.

Let's switch to your other area of many, among many, areas of expertise. Ford sales out this morning, talking a lot about demand for hybrids. What did we hear from Ford? We found out that hybrids remain red hot. Tyler, we have talked about this for some time. This is not a market where ice models are selling like they used to sell. Take a look at the overall sales from Ford down just under 1%. Ice models, though, down 6.5%.

Look at the hybrid sales, up 75.2%. compared to November of last year. Ford as compared with GM and Stalantis has done this pivot and has already had a strong portfolio in hybrids. That's reflected in the sales. It also had a strong month in terms of in its EV portfolio. The Lightning is most notable here. Best monthly sales ever for the Lightning, though still coming off of a small base, but still they are ramping up to sales as they have increased their production. As you take a look at shares of Ford, Keep in mind that what we have talked about for some time is what we are seeing play out. Hybrids are in demand, and that's the reason why you see more and more people moving in that direction,

as opposed to moving quickly to EVs. As you instructed me last week, and you're exactly right, Ford has had the lead among the domestic automakers in hybrids. I think of another, the other would be Toyota would be a big player in hybrids. why haven't the other U.S. automakers been as adaptive of hybrids as Ford? Well, Ford always had a little bit stronger portfolio of hybrid offerings compared to GM and Stalantis. What GM has started doing a couple of years ago in Ford and obviously Stalantis is doing as well is they really went hard into the infrastructure for electric vehicles. And Ford did as well. But remember, when they started to see things falling short of expectations, you might say, a couple of quarters ago, Jim Farley did not wait.

He said, you know what? We clearly see the demand increasing for hybrids. We're going to pivot that way. They're not giving up on EVs, still investing there, but they are putting greater resources into hybrids. And so GM just has never put in as much resources into hybrids. Neither has Stalantis. And right now, Ford is benefiting. Phil, let me take you back to the Hawaiian Alaska deal. Why is Alaska paying such a premium? One of the biggest premiums we've seen for any deal of this size ever. And it would seem that, if anything, you could get a deal on buying a rival airline right now. Why are they paying so much? And is that why their shares are down so much on this news? Their shares are down on this. Their shares are down on two things. One, it's a nice premium that they're paying here.

I mean, where was Hawaiian shares on Friday? 480, 5.5. $5 a share, and now they're going to be, if this deal goes through at $18 a share. So one reason they're down is because of that premium. The other reason that they're down is because there's a lot of skepticism that there won't be, that the DOJ will sign off on this guys. Most people are looking at the Biden administration and saying, you know what? They fought the JetBlue deal, their alliance with American. They're fighting the JetBlue Spirit merger.

And they're going to fight this as well. At least that's the thought process for a number of people. And so there's a fair amount of skepticism out there. Maybe we can show the year-to-date chart, but to pay $18 a share for a company trading at four or five, I don't understand why. Ultimately, Kelly, it's the premium you think you need to get in order for Hawaiian shareholders to approve it. And they've been talking about this for some time. When we talked with Alaska and Hawaiian CEOs, their discussions were happening, and I think they finally had to get it over the finish line. 18 is where they came in at.

And as we showed the year-to-date chart, that does take them more back to the territory we saw in Jen and. Feb. Well, in any case, good deal for Hawaiian if it goes through. Phil, thank you very much. We appreciate it today. Our Phil Leboe reporting. Coming up, cashing in their chips. Shares of NVIDIA have more than tripled this year. It's the best performing stock in the S&P. So why are corporate insiders unloading their shares? We'll get the key details when Power Lunch returns. Welcome back. Time for today's tech check and shares of NVIDIA have rallied a stunning 210% this year. It's the best performing stock in the S&P. Now company insiders are unloading their shares.

Christina Partsenevelis joins us now with some of the implications and speculation about that, Christina. Well, with that kind of rally that you just mentioned, there's no wonder insiders are looking to cash in. So this, according to the Washington Service, Nvidia executives and directors, filed paperwork with the intent to sell 370,000 shares of Nvidia. That's worth maybe about 180 million at the time that they filed. If all of them followed through at the sale, it would be the biggest month. monthly stock dump from insiders in six years. Shares though of NVIDIA have been steadily falling actually since mid-November, November 20th to be exact, and are also down today.

So a few reasons you got insider selling that may play a role. There's rotation into risk away from the Magnificent Seven, which includes NVIDIA, along with comments from Commerce Secretary Gina Romando over the weekend who said she's keeping a close eye on NVIDIA's new AI chips destined for China. So this happened on a defense forum over the weekend. Rommando said, quote, if you design a chip around a particular cut line that enables them to do AI, I'm going to control it the very next day. Well, NVIDIA has designed chips specifically for China that fall within U.S. export controls. Those new chips are set to launch in Q1 of next year, but Rommando's comments have some analysts worried right now in investors that the new workaround chips for China could actually get blocked, further impacting NVIDIA sales.

NVIDIA's management also warned on its latest earnings call that the export controls would, quote, significantly impact revenues in Q4, and that's because China contributes 20 to 25% of total data center revenue. I reached out to NVIDIA and they said, quote, they are engaged with the U.S. government and, quote, are working to offer compliant data center solutions. So that was a response specifically to Secretary Romando's comments. InVidia GPUs, we know, the hottest ticket in town, but competition could be ramping up. This Wednesday, competitor AMD will be launching its own AI chip. That would be the MI-300X. I'll be at that event, and that's why I'm here in California. And I'll be interviewing CEO Lisa Sue at 3.30 p.m. Eastern on Wednesday.

And then you also have Intel with its own AI event, less a chip thing, but that'll happen on December 14th next week. So there's going to be definitely some more movement in the chip space over the coming weeks. You know, Christina, I was at a family dinner last night, and my nephew was asked. asking me about Invidia because he happens to own some of it. And I said to him, and I'm happy to hear you sort of confirm it, I said, Nvidia is the hot ticket right now, but don't think they're going to have, they're not going to have competition coming down the line. Excellent point.

Even my 19-year-old cousin in Vancouver was asking me about Nvidia and whether he should be buying it. The reason it's the hottest ticket in town is it because it provides the GPUs for, in order for companies to train large language models. But the second portion of that equation is inferencing. So spitting out the answers to your questions. And that's where AMD could play a role in the near future. Their memory that they're going to provide and their new chip also compete. So there is some competition.

And don't forget, hyperscalers are creating all of their own chips. You have these smaller startups too. So competition will ramp up. All right. Yeah, it reminded me back of the year 2020 or 1999 when we were all talking about the Internet stocks, whether it was CMGI or whatever it was. But anyhow. But then we saw what happened to them, right?

And we saw what happened to them. Exactly. And you were in second grade. I was here. No. Maybe second grade, yeah. I see you. Thanks.

We were going to ask you another question, but we don't have time. But that's okay. We'll get to it next time. Still ahead. Some technical support. We'll check the charts on some high flying stocks that have doubled this year and are yet still below their average target price on the street. Power launch will be right back. All right.

Welcome back to Power launch. Time for some technical support. Today we are pulling out three names from a C&D. ABC stock screener looking at stocks that have doubled this year, but are still below the average target price. Here to chart is Erie Wald. He is managing director and head of technical analysis at Oppenheimer. First up, Airy, is Uber slated to join the S&P 500, up about 142% this year. The screener shows the average price target implies about a 5% upside. What is your take? Draw me some pictures.

Sure thing. I'm going to call out a study. Our analyst, Jason, Health, theme, put out this. morning on when stocks are added to the S&P 500, as Uber was today. Typically, all the gains come in the first day. Over the next two weeks, you typically see strength subside. This is probably a near-term top in Uber. With that said, it's a stock both Jason and I have liked, and we continue to like over the coming months to even quarter. So here's what you're looking for. Near-term overbought, look for a little bit of consolidation. The big level's $50. That was the prior breakout level. I don't think it makes it all the way back down there, but you're looking for a time correction. Move sideways, consolidate the moving averages, catch up the price, then the upturn takes over,

and that takes off again. What's that blue line there? What's that blue line? What's that showing? I'm highlighting the prior breakout above the summertime peak. Very often, prior resistance become support. I don't think it makes it all the way down. You don't think it goes back to that line, that blue line.

Let's move on to meta. The shares are down today as the CEO Mark Zuckerberg sells his first meta shares in two years. It's rallied. 164% this year. Company continuing to cut cost. Your take, sir, on META. Again, balancing the time horizon. Some near-term concerns, the rotation out of some of these mega-caps into small caps.

You had a point where META pushed above a key level dating back to where it was really started to break down at around 327. You broke out. It couldn't hold it. It moved back within a range. That's called a failed breakout. indicates there's more time that might be needed. Listen, I'm a trend guy.

Trend is higher. As long as you're above 275, again, it's another one where I think it just needs some time to correct before moving higher again. Is it captured in this area here, or is it likely to break above there at some point? What do you think? I think, well, now you're back in the range.

So I think it's range-bound for now. As far as which way it breaks, go with the trend. Go with the trend. Corrections ultimately break higher. All right. Finally, let's go to one that has nothing to do with the prior to. Royal Caribbean shares up about 130% this year. Your take on RCL, sir. Beta trade. It's starting to move higher to the upside. I don't think this is a broad theme in cruise lines. Very mixed action in that group. With that said, if you want to own one, this is the one to own, this is best of the group. If you're looking for a long, short pair, long this one, short maybe one of the others. What is to note is that after moving above in the second quarter, its prior highs from 21, it came back in, tested that level, tested the 200 day. Moving back up to the upside, not very much resistance to point to until you get to 135. That seems to be the next stopping point for Royal Caribbean.

So is it one you would be comfortable owning? I like it. It works a lot. I don't like the theme. In terms of pecking order, not a top idea, but it rates positive for me. But in that space, this is the one you like. It's working. Good to see you, sir.

Erie Wohl. Kelly. Thank you both. So many headlines to get to still, but so little time. will power through as many as we can in closing time next. Welcome back little less than four minutes in the show and several more headlines to get through. So let's start with Beyonce, now Queen B of the box office, with her Renaissance tour movie taking in $21 million over the weekend.

Second concert movie distributed by AMC after Taylor Swift's Aeros tour opened back in October. Tyler, I needed the context here because at first I thought, okay, it's decent. No, it turns out for this particular weekend, that's one of the highest box office totals ever. It's the weekend after Thanksgiving. Thanksgiving movies typically come out then, but then there's a lull, I guess, in the pre-Christmas window. This didn't do anywhere near what Taylor Swift did, but pretty good for that day. Yeah, and a difficult time to be opening as well. It was also a couple dollars more each for the tickets, I believe. Let's talk about Spotify. Hire today after announcing it's going to lay off 17% of its workforce. Third round of layoffs this year, CEO Daniel X says the company will focus on a leaner structure to let it be more strategic.

about reinvesting profits in the business. I guess Wall Street liking the sound of price of, excuse me, workforce cuts up 8% today. And this one, it's such an interesting sign of the times. He talks about how the liquidity in 2020 and 2021, they have possibly overhired. Now they're right-sizing for leaner time. So even as we talk about a soft landing,

I think you do have to keep your eye on stories like these to make sure that these people who are laid off can quickly find new work. Because especially in tech, the headlines are filing up. How many of those are U.S. job losses as opposed to Europe? That's a European control company. Yeah, a Scandinavian. Yeah, something, I know it's a great question. But again, they're talking about 6% of the workforce at the start of year than 2% and now this. Shares of Virgin Galactic are plunging after founder Richard Branson ruled out any further investment in the company.

He told the Financial Times, his business empire no longer has the deepest pockets post-COVID. It sounds like what we were just discussing and that Virgin Galactic should have sufficient funds to function on its own. own. I wonder whether this is also a tacit recognition that Virgin Galactic is not the strongest player in this commercial space race. Right. And that Amazon is ahead of them and Musk and SpaceX are ahead of them. And there may be others that are in Europe or elsewhere that are ahead of them. And that this is a tacit recognition. And listen, if you're Jeff Bezos, maybe you don't mind funding your company up the wazoo because you have billions and billions to spend. And if I'm not, if I'm not mistaken, they were basically a space tourism launch, not a

space cargo launch. That's right. Yes. And so some investors have literally said should they pivot and just offer faster, you know, global flights here with that technology instead. All right. From space to taking up less space, Roche is the latest pharma giant to enter the weight loss drug race set to announce an obesity drug developer, Karmat Therapeutics, in a 2.7,

I guess they're going to do an acquisition there, a $2.7 billion deal. Carmont currently has a weekly injectable in Phase 1 trial. And it's probably not going to be available with patients until 2030 at the earliest, but that's late. Not just that. It's late to be entering this. And look at what just happened with Pfizer. I mean, halfway through that trial, they had to stop. They pulled up because of the side effects on it.

So presumably they're in phase one right now, presumably it will go better, but it shows this is not without its, you know, potential of stumbling blocks. And maybe looking the part really can help you land that job. I know it's what our parents told us. A new study from the Harvard Business School found certain accessories or something. physical features gave job candidates an edge in landing certain roles. Even if the interviews are on Zoom, they found. So, I mean, you can just wear a nice suit and jacket and tie. I've worked with people and wear your gym shorts.

But doing interviews said, tweak your background, know your plant, move it over here. It looks like it's coming out of your head. Yeah. All right, folks. Thanks for watching Power Lunch for a Monday.