Power Lunch - Mag 7 pulls markets down again; Google unveils new phone 8/20/25

Episode Date: August 20, 2025

Stocks slid on Wednesday as markets wait for Chair Powell words on Friday. Google unveiled a new phone, and Target announced a new CEO. Everything you need to know here on Power Lunch. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

So is the great rotation out of technology finally here or is what we're seeing in the market another head fake? Welcome to Power Lunch everybody. I'm Brian Sullivan. Kelly Evans off today. The NASDAQ setting up for its worst two-day drop since April. Not a big deal, but some of the stocks that let us hire are now leading us lower in the past week. Names like Palantir, AMD, Marvell, all down double digits. We'll talk a little more about why. Plus a big call. today on energy and the only stocks that one leading analyst says you need to buy right now. In fact, there's actually only one oil and gas company that he likes. That name is all ahead. Thanks for joining us, everybody. Happy Wednesday.

It's about 68 degrees in rain, so hopefully you're just sitting there comfortable. Let's start off with macro because we've got a bit of a technology selloff, not a big one, but we do have a little one happening right now. NASDAQ's down a little bit less than 1%. But combined with the worst that we saw today, the two-day drop is the worst in a couple of months. And your first guest today here on Power Lunch says, you got to stay focused. And he adds, don't sleep on the little guys either. There's the small cap stocks as their recent breakout should keep going.

A lot to talk about. So let's get to it. Joining us now with his best ideas and all this. Matt Orton, he is chief market strategist at Raymond James Investment Management. man, I'm not going to sit up here and make too big of a deal about a half percent decline in the NASDAQ. It's summer volumes are light. But you have to admit, there's been this like everybody's been kind of waiting for this rollover, broadening out, rotation, whatever you want to call it.

And every time we see a move, we ask if this is it. What say you? Hey, Brian, it's always great to join. And I think this rotation that we're starting to see is probably, another head fake. It doesn't mean that breadth and balance in portfolios isn't working because it absolutely is. It's just a lot of the themes are related to the big, longer term, durable growth themes like we've talked about before, leaning into artificial intelligence, kind of the industrial exposure to it, how utilities are exposed to it. What we're seeing in technology

right now, I think, is a little bit of exhaustion. Perhaps some of the crowded names like a core weave that disappointed on earnings were the start of some profit taking, heading into Labor day. This is also a seasonally weak period in the market. And frankly, a lot of investors have been waiting for an opportunity to redeploy some capital into these names. So I encourage all of our clients to really use this downside opportunistically to lean into those higher quality, strong, secular growth names that are going to be durable going forward because these mega caps have a ton of cash. Like what? Give me an example of what you would, listen, no one ever says, we want to own only low-quality companies.

Oh, high-quality. So what does high-quality mean to you and your team, Matt? Yes, so quality to me means you've got to be generating free cash flow. You've got to be growing both your top and bottom line. And so a mega-cap that looks incredibly attractive right now is Alphabet. You've been talking about it in the previous segment about some of the technology they're releasing. But quite frankly, here's a name that's valued less than the S&P 500 with tremendous top and bottom-line growth. a rock-solid balance sheet and a lot of different growth drivers, not just an artificial intelligence,

but in traditional search where everyone, quarter after quarter, is saying their search engine is going to be eaten because of AI. It hasn't happened yet, and I don't think it's going to happen. So this pullback makes it an even more attractive opportunity to get into a strong name like alphabet going forward. Why are you so confident that the death of Google search is not going to happen? Because we're all trained. I mean, Brian, where do you go when you want to search something? Most of our first instincts are, we're just going to Google it. You put it into Google.

It's integrated into our browsers, into our phones. And frankly, we're so used to doing so when the results are high quality. But the ad revenue they get from that, integrating it into YouTube, putting Gemini into those search functions, I think all of that just creates a very well-rounded system that people continue to utilize no matter what everyone says is going to eat that lunch. It might happen over the longer term, but we're not seeing that in any of the data and their earnings results continue to be very, very strong. So I would lean into the fact and what we're actually seeing happen with the company and how

they're able to use all of this new technology to their advantage. Not a lot of companies become verbs. To your point, Matt, here's a new name that you like. Frisia. I kind of know what they do. software, healthcare, that's about the limit of my knowledge on Frisia. I'm not going to set if I'm pretend that I'm some expert in a company. It's not a small cap, but it's kind of a mid-cap-ish. Who is Frisia? Why do you like them? Yeah, it's a great question. It fits into me also liking

smaller companies right now. We're seeing good earnings growth and top-line growth finally starting to improve down market cap. Friza is a great example. It's a health tech company. Basically, they create software that you're able to use to log into your medical appointments. They also create a payment system for a lot of your doctors, some of the smaller processors to help encourage people to pay on time. So it's a subscription-based revenue service, which is great because it's visible revenue and cash flow. And then they also have add-on services that companies can use to help them better integrate patient data. So the company looks very attractive because, again, they're free cash flow positive, and they're expanding their margins because they're able to retain 90% of their clients

and continue to build on that base with more upsells. So when you think of durable growth themes, more and more people are going to the doctor. We've got to find a way to integrate technology into what we do. So we're not all clicking on the iPads every single time we go into the doctor. This is one way to help get around it. And they're seeing a lot of good retention. And that's what I like to see in a company in order to keep growing their margins. Okay.

I don't often buy high opt-op. deep space surveillance telescopes, but if I were to buy one, I would probably go to L3 Harris. And then I would ask my friend and colleague Morgan Brennan, what do they do? Another name that's not something we talk about every day, but one that has managed to pop up on your screens, Matt. Absolutely. And Brian, we've talked in the past about the importance of defense as one of those long-term, durable growth themes. No matter what happens with Ukraine and Russia or what's happening in Israel and Gaza, the need for more investment.

and smarter defense technology, particularly with respect to aerials, drones, communication equipment to help our systems all talk to one another. That's what L3 Harris does incredibly well. And with some of the acquisitions they've made in the past, they're finally starting to integrate and realize synergies in that company. And so I like it because that's the future of defense. And by the way, we have a $150 billion carve out from the one big beautiful bill act that's going to go to increase defense spending, and L3 Harris has leveraged

since some of the key priorities of the Department of Defense and the EU, like the Golden Dome, like drones. So it's leaned into a lot of those durable growth themes that I think will continue to go forward. Matt Orton, Raymond James Investment Management, Alphabet, Frisia, L3 Harris, great stuff. Some new names in there, Matt. Really appreciate it. Have a great day. You too.

All right. We've also got some breaking news out of Washington, D.C. the Federal Reserve, just releasing the minutes from its last meeting. And really, aside from what they said about the economy going forward, Damon Jabbers, maybe there's a little drama on people, you know, not agreeing with Fed Chair Jay Powell. That's right, Brian. The Fed Minutes indicate a somewhat divided open market committee here.

Here's what they say from this July meeting. Participants generally pointed to risks to both sides of the committee's dual mandate. A majority, they say, of participants judged the upside risk to inflation as the greater of the two risks. Remember, it's inflation versus jobs for the Fed. Several participants, however, viewed the two risks as roughly balanced. And a couple of participants consider downside risk to employment to be the more salient risk. So choose your own adventure here on the Fed in terms of what's the biggest threat out there.

In terms of the fundamentals, they say, inflation somewhat above the 2% goal, unemployment rate remains low, employment at or near estimates of maximum employment. Remember, this is before. that big jobs revision that we saw a little bit after this meeting in July. Uncertainty about economic outlook remains elevated here. And some participants mentioned indicators could suggest a softening in labor demand. So maybe they saw some of that data that indicated the revisions were on their way. The Fed also said they expect inflation to increase in the near term.

Tariff effects, they say, are becoming more apparent. They say a few participants note that tariff-related factors could lead to stubbornly elevating. inflation and they say that evidence suggests that domestic businesses, consumers are predominantly bearing the tariff costs. Now that puts the Fed at odds with the White House, which has said that the tariff costs are being absorbed by foreign countries. The Fed here saying evidence suggests that domestic businesses and consumers are the ones predominantly bearing those costs. Also they say participants observed that growth of economic activity slowed in the first half of the year and for the second half of the year they say

several participants expect growth to remain slow for the second half. Two interesting notes here, Brian. One is a decline in immigration, they say, is lowering both actual and potential output growth. And also on AI, they say the risk that increased use of AI in the workplace may lower employment going forward. So two things to watch for in the dynamic in the workplace is decreased immigration and increased use of AI. Brian. Back over to you. Remember the old Greek tragedy? I think it was, was it Ulysses or Jason, you know, where the Zillah and Carybdis, right? The rock and the hard place. Rock and the hard place. And they're going to do this. It feels like the Federal Reserve is that way because on one hand,

you said that they see inflation going up tariffs. So that would imply no rate cuts, right? That would actually might, maybe you imply a rate hike. But then at the same time, you said immigration and AI might indicate the jobs are going down. So between lower jobs and higher inflation, that really makes it a lot stickier for the Fed. Yeah, it does. And the language here is interesting, Brian, just this idea that you've got a majority of the participants saying that inflation is the greater of the two risks. So at least as of the end of July, the majority of the participants were looking at inflation as the problem. That indicates, you know, if you thought that was the problem, you might not want to cut.

You might want higher interest rates. several said it was equally balanced and then a couple, the minority, a couple of participants considered downside risk to employment to be the more salient risk. And if you're worried about jobs, then you might want to cut interest rates. So it sounds like, you know, you've got a minority of folks there in that employment concern basket, at least in this snapshot in time that we're looking at here. And they're supposed to treat each kind of equally. So it is going to be fascinating to watch, do they balance more out on the job side or do they overweight the inflation side because you could make the case, as I kind of just said, if you're on the inflation fighting part

of the story, Aeman, I don't know how you cut rates at all this year. Yeah. If you see tariffs are coming through and causing elevated inflation and potentially stubbornly elevated inflation, then you might want to sit tight, right? So that's, one thing to look at here. But then if you see, if you're concerned about the job market and you say, hey, wait a second, now we've seen these revisions from the BLS, which came out after this snapshot in time that we're looking at here. Well, maybe that changes your mind. So slightly moving targets all the time.

But clearly there's two camps in the Fed, one the majority for now, one the minority. It was Homer and the Strait of Messina. Ah, okay. I did have to read The Odyssey freshman year, but it's been a while. I was more of an Iliad guy, but that's why we sometimes. I can see that. Philly, New York. It just doesn't.

Amon Javers, thank you very much. Appreciate that. All right, we've got a lot more to come here on Power Lunch. Don't worry, no more Greek tragedies. But we will talk energy. Widely watched analyst James West on the one oil stock. He says you need to buy now. Plus, the read on retail, why Target has been off target.

And made by Google. A sneak peek at some cool new gadgets and software. Google is rolling out. CryptoWatch is sponsored by Crypto.com. Crypto.com is America's premier crypto platform. All right, let's talk energy. The introduction, adoption, and acceleration of artificial intelligence has transformed both the energy and power sectors

due to the massive energy demand needed to power data centers and tech infrastructure. We've talked about that a billion times. But analysts at Mellius Research see this as a, quote, acute opportunity to try to reinvent some of their coverage. And they are out with a new report initiating 18 companies in energy and power, both oil and gas and renewables. Joining us out of breakdowns of his topics is James West, managing director and head of energy and power at Mellius. James, great to have you back on the program. Let's start with sort of the more traditional.

you got holds on pretty much all the big cap oil and gas except BP. What is it about BP that's so interesting? Well, BP, on the first hand, it's a cheap stock because of some of the mistakes they've had in the recent past in execution. And we also think that there's potential under the new leadership team to see one better execution, two potentially asset sales and a refocus on oil and gas, or three, the company could be up for sale. Yeah, well, there were reports about Shell and BP population. be tying up. I kind of threw some cold water on those and later on, others were like maybe not. But you don't think the BP being sold or sold off story is over?

No, I think it's certainly still on the table. And I think if Shell did take a look and maybe through cold water on it, others are going to take a look as well. And certainly BP is probably looking at all their options, especially with activists, investors involved. Okay, on the services side, you kind of got a full house here. You got buy ratings on Baker, Halliburton, S&S. LB, formerly known as Schlumberzei, and Weatherford. So how do we sort of square the holds on a lot of big cap oil and gas, but the buys on the services side? Well, I think we've underinvested significantly in oil and gas exploration and production over the last really five years. And we're at really low levels right now. Reserve replacement ratios are low. And we're going to need to see increased

drilling activity probably picking up in the international and offshore markets in the second half of next year. And so the big cap service companies, the ones you mentioned, are, primed, especially for the offshore and the deep water activity that's coming our way as we reprinted our coffers, as we come to the conclusion that OPEC can produce that quotas and all their productions online, and North American shale is in decline. Now let's go on more of the renewable side, something you and I have talked about a lot, and you're one of the top, if not the top, on the street, about really diving in to these names. And we like to lump them together, but they all do different things.

Let's start with next era. Biggest renewable generator in the United States. but also has a huge gas, natural gas power presentation, as their CEO has talked about many times. Next, Eric, kind of got crushed. Some people questioned its corporate structure, kind of almost two stocks. You have a buy rating on NEE.

Yes, I think their regulated business is a great business. It grows. It's healthy. It's decent return of business. They put a lot of capital into it, and it's basically green. We think their IPP business is also very attractive. We think the IPPs in general are extremely attractive

because power markets are only going up into the right because of demand from data centers. What is, I'm sorry, I shouldn't. It's hard to sit up. It's hard to, I'll thank you. It's hard to get up on this side of the camera. I don't know what that means, but I'm not going to lie to the audience. Independent power producers? Right.

So I'd be also like a talent, TLN, which you have a buy on? We have a buy on town. We'll buy on Constellation as well. Yeah, those are companies, I guess when you say that, they're the ones selling, they're making the power, and they're selling them largely to other people. Right, into the grid? Or into the wholesale markets, that's right. So where are some of the better opportunities?

Is everybody going to win because the Googles of the world are just going to pay whatever it takes to get that power? Quite frankly, we think everybody's going to win here, although I think Constellation is probably the best position because there's going to be a premium for nuclear, and they have the largest nuclear fleet in the United States. Yeah, they do. And I guess we call it the Crane Energy Center. It used to be called Three Mile Island, and then it was TMI, which has its own meaning, I suppose. So let's stick with Cray and Energy Center. It's got to get all these approvals from FERC and everything else. Do you anticipate that?

I mean, in your coverage, is that coming online? Or is that just going to be kind of a cherry on top? Because they're going to get paid a lot of money for that power if it comes back online. Yeah, we see it coming back online. I think FERC approval is going to be fairly easy here. We think we have a U.S. government that is poised to drive a serious nuclear renaissance. And the first part of that is just, restarting the nukes we already have. Yeah. And if there's any side of that, James,

there are people who said, listen, nuclear had its day. We don't have the people anymore. It's too expensive on the front end. It's probably the levelized cost of energy is probably cheaper, you know, over 80 years, but the front end cost is super high. Are we overestimating nuclear at all? I don't think at this point. I think a lot of the problems were the timing. I think the permitting process is going to be sped up. I think we're getting approvals very rapidly. I think We've got a lot of advanced technology coming into the market now in terms of small-scale nuclear reactors. And so, in our opinion, we think this renaissance is real. It's big.

We have the technology. We know that we have the prowess. We need to reskills some people. That's a fair point. But we think we've been done. All right. Got the buy rating on BP holds on most of the other big cap oil and gas. But James, we really appreciate you coming on Power Lunch and CNBC.

Have a great day. Thank you. Good to see you, Brian. All right. Good to see you as well. All right. Up next, another day, another call right on Target here on Power Lunch. This company needs to figure out who it wants to be, and they have a potential CEO transitioning coming down the pipe that could be very crucial for their direction.

I mean, look at what happened with Starbucks with the new CEO. It could happen. I'm just not expecting great earnings. That was Victoria Green right here on Power Lunch yesterday with her call on Target saying she didn't like the stock. And new numbers out last night show sales are still falling. But that may not be the big reason that Target's stock is down 6.5% today. Target saying its current CEO is stepping down in a few months. And the new CEO is going to be a longtime insider at the company. In fact, somebody that's only done their career at Target.

So let's talk more about that and maybe retail earnings as well with our friend, Jan Rogers Niffin, president and founder of J. Rogers Niffin worldwide. Jan, I don't know the new guy at all. You probably do. Market doesn't seem to like him. the right move? Well, I think they were expecting something different. I mean, think about it. Michael Fidelke, in my opinion, is no Doug McMillan. So they would have liked to have seen someone that was going to transition, target into something stronger than what they've been recently.

And Brian Carnell is just stepping up as opposed to stepping out. And if Brian was the problem, then the street's saying, well, why is he staying? And then we think a big part of the problem is operations, the stores don't look as good. They've got stockouts. The cleanness is not as good. This looks like they don't have enough help or the help they've got is not doing enough, but something's happening inside the store. So if a big part of the problem is operations, the street says, why are we promoting the CEO? Oh, he's the operations guy. Ergo, stock is down a lot. What, six bucks last time I looked? I think it was 10 for a while. Yeah. And I, you know, again, I don't know the guy, and maybe he's got his own views. I go back to AT&T.

So ATD, which we'll talk about at the end of the show, they had a CEO, the market didn't like him, he left. His number two became the CEO, and now the company and the stock have done much, much better. So are we being too hard on the new guy? Yeah, probably. We always are. But, you know, if they had brought somebody in totally from the outside, we would have gone, what does this guy know about Target? Can he really do this?

But I do think this is not what the street was looking for. And when that happens, there's disappointment. Maybe we're not being fair. He may do a fabulous job. He may be the second coming, and we may get a big improvement in the way target operates. But when you have somebody that came all the way up through and then need to make the changes, you're just unconfensed that's going to happen. Well, and if he is the second coming, that means he's being hamstrung right now because he would have all these great ideas. He just not allowed to implement them.

How about this, Jan? And I was talking about it with my lovely bride this morning. You know, she worked to consume her products for 30 years. What is Target? I know what Costco is. Costco said, we're this, and this is what we are. Walmart kind of stayed out of everything because Walmart's like low prices, low prices, low prices. Target went kind of hard one way, then tried to pivot back hard the other way.

Did that hurt them? Now you've got the real problem. Okay. Target was Targe. My third question. Here we go. 2006. That's when they were targe. And it started to slip. And so they started looking for that silver bullet to make everything better. And they went into P-Fresh Grocery, which I said, oh yeah, let's go compete

directly with Walmart. That's a good idea. Wasn't a good idea. I didn't think then. I still don't think it was. If they were going to go to the grocery, they needed to be Trader Joe's, not like Walmart. And so I think that's got them closer to Walmart, not farther away. And then they went into Canada. That was a big mistake. Brian got him out of that. credit to him. Then they went in and really knocked the cover off the ball during COVID because they perfected curbside pickup and in-store pickup, which they weren't really good at before. But you can do that with brute force during COVID because there is no competition and there was no pressure on pricing at all. People would pay whatever they would for whatever they wanted.

And so that looked great at the time, but it isn't working well enough now to keep that going and to operate efficiently without cost. And so they're looking for places to save the cost. And I think it's hurting their performance inside. Well, okay, then that, because to your point, it used to be Tarje, which is kind of high-end, lower end, like people would go there because they had unique items, Massimo and some other things. And it was kind of a fancier Walmart. And I'm sure many people watching right now in the Nicolette Mall and their headquarters would agree that that's what they still are. The market. Disaccompli, is there anything that you would advise them to do, maybe to get back to where they were, or is it too late?

I personally think it's too late. But when they were Tarje, I used to say Target is the best retailer in the country. Today, the best retailer in the country is Walmart. Seconds Costco, third's Home Depot. Fourth is Dick's sporting goods. Fifth is TJX. Who's conspicuously absent from that? Target. They're not operating well. And they're up against the very, very best we've ever seen in retailing Walmart. And they're up against Amazon, who 20 years ago was sort of just a twinkle in the eye of Jeff Bezos. I think you nailed it there with the Amazon stuff. If you want to like buy Desert Rose Fabriz, you're probably going to do it on, I think it's a sting song, not a flavor.

But what, you know what my point is you can get it online. You mentioned Home Depot? Home Depot's numbers weren't great, but you still think they're that well run? They're the third best retail operator in America. Wow. They are significantly better than Lowe's, who also turned in a decent number today. Home Depot turned in a decent number. Interest rates are too high for housing, and short-term interest rates are too high to use your home equity loan to do cool stuff to your house.

And so they're just operating in a really tough environment. but they're as good at operating a business as anybody. And they're always going to be better than Lois as an operator. They have better locations. They are better operators inside the store, and nobody's ever going to take professional away from them. Quickly. Okay, quickly on TJX, because my super smart producer, Patty Martel,

and I'm not stealing credit from anybody, I didn't know TGX in an all-time high today. So you throw up TJX, which is a parent company, of T.J. Max and home goods. There's a home goods near my house, and I got to tell you, Jan, people go, they love that store because they go in and they're like, I don't even know what I'm looking for. Maybe it's a lamp. Maybe it's a fake plant.

Maybe it's a painting. And they come out with a cart full of stuff. TJX, only roll in it at what, number five on your list? Well, okay. You know, my list is malleable, but they're one of the best retailers in the country. And the other players, Burlington's a pretty good operator. Ross is a pretty good operator, but they're not TJX. And the space 20 years ago was fresh and new,

and there's plenty people to take market share from. Today, that's not true. The space is overstored. So who wins in that condition? TJX, the best operator of all. I describe it as now they have to start to eat their young, and the mama bear is TJX. Well, now it gets interesting, I guess then.

Very interesting. Not on this segment because it's over. But we'll get you back on soon, James. Appreciate it. That's great. Thank you. That was good stuff. All right.

Coming up, Google, showing off some cool new toys, and you will get a sneak peek, but only if you stick around. Well, Doris' singer Jim Morrison may have saying that the West is the best, but he clearly wasn't talking about technology, at least not today, because the eyes of much of big tech are here in the east, Brooklyn, New York, to be specific, where Google is rolling out some new products, it hopes are hits. Steve Kovac is at the event,

and I know that Steve, last time you were on, which is like, you know, 30 minutes ago, you said you didn't want to talk that much about hardware. It was more about the AI and software part of the Google story. Yeah, that's right. We know what smartphones are now, Brian, including this one. This is the foldable version of the Pixel 10 phone that Google just announced here in Brooklyn.

But again, like you said, let's talk about artificial intelligence. We know what phones do. We know how Android works. This one comes packed with Google Gemini. That's the same assistant that you can actually download on your iPhone or pretty much any other device. But it does have some unique tricks. One of them is called Magic Q.

And actually, Brian, this is very similar to what Apple tried and failed to do with Siri over the past year. So Magic Q, what it can do is understand what's going on in your phone, bubble up context. The example that Google likes to give is if you call an airline for information about your delayed flight or something, something, the phone will go into your settings and figure out that information and bring it up for you so you don't have to go hunting for it. That's one example of many, some photo editing

tools and things like that. And look, we've seen some attempts at artificial intelligence hardware just dedicated to AI. Those metabreband glasses are perhaps the most successful and best example. But so much AI is still happening on the phone if you're expecting this to disrupt the smartphone in a significant way. The hardware technology, just isn't there. It's what these companies are doing on the device to make them more appealing to users. Right now, we have not seen any of them create some kind of AI feature that's a true breakout because, like I said, Brian, you can pretty much download this software on any other device. They also have the Pixel Watch. So they really are, is like Apple, you're either in one

ecosystem, Google, Android, or you're in the other. Like, is it possible to switch back and for Steve. There's times that I get frustrated. Apple changed the I photo. I can't stand it. Can't find anything, but I'm so locked in and Google's got problems too. And I know some people are there. They want to, does anybody switch back and forth or is you're in one ecosystem or you're not and that's it? We don't see switching in a significant way. Every time I talk to Apple, they love to brag about Android users switching over to iPhone. This phone actually, Brian, it makes it easy to, for you. If you're curious, you want to get out of the Apple, ecosystem, you literally buy one of these devices, take a plug, plug it in the bottom of this

phone, plug it into the bottom of your iPhone. It pulls all your stuff over, all your contacts over, and things like that, so you're good to go. And then they also made a big deal of this today. The text messaging, the green bubble versus blue bubble, we've talked about that. You know what I mean. But with this new texting technology that's been out for a couple years that Apple finally adopted, you have that smoother texting experience between devices too. So that has gone away as well, it's easier than ever to make the switch if you want to. Easier than ever. All right, good stuff there, fun stuff.

I'm going to post to X a poll to see if anybody out there has ever switched and what they think. We'll get you back on soon. Maybe Steve, you'll talk about that. There's a few people out there. Steve Kovac, thank you very much. Thank you. Well, your next guest has Alphabet Google as his number one large cap pick and says that its underperformance really is a buying opportunity.

Joining us now Evercore ISI's head of internet research. Mark Mahaney, Mark, you obviously just heard Steve. you know what they rolled out at the made by Google event is a change your view on Alphabet at all. No, I'm sorry, it doesn't. But there is the point I think that Steve was making it. And I think correctly is that the play here really is Gen A.I. And whether Google is roadkill or whatever the opposite of roadkill is.

And I think they're the opposite of roadkill. I think that's been the issue on the stock. And I think they're going to be able to prove that, in fact, they're one of the best beneficiaries, largest derivatives of the growth in Gen. I think you're seeing that in their search results. I think you're seeing that that have been consistently double-digit despite all of the focus on the rise of chat GPT. I think you've seen that in YouTube, and you're certainly seeing it and maybe the best physical manifestation of AI out there. It's probably not the smartphone. It's the car with Waymo. So look, we've had a big rally in Google stock. It's up 25% over the last

last couple of months. But valuation is still, I think, very attractive at 18, 19 times earnings. I think this thing will continue to rewrite. You also have a major catalyst, hopefully, coming up in the next week or two with the judge's decision on the future of Google. So that's where we're kind of on pins and needles waiting for. Okay, waiting for that. Let's move on. You recently sort of swapped out your top pick to Expedia, replacing Uber. Is that just because Uber is done so well or some other reason. Well, that's always part of it. You know, the risk reward. Uber was our best idea at the beginning of the year when it says 60 and the stock moves up, whatever, 50%. So, yeah, the margin becomes a little less attractive. I still like Uber as a long. I'm intrigued by what's

happening at Expedia. So I think online travel just as an investing space is actually a really nice space for GARP investors or even value investors to step into. I mean, they generate, you know, kind of solid, high double digit, maybe low double digit revenue growth, nice margins, tons of free cash flow dividends, share buybacks. I mean, it's really a great garb value area to look at. But here's this company, Expedia, which trades at a material discount to the other two players, yet its growth rate is converged with that of the two leaders in the space, Airbnb and booking. And I think it's a nice way to play the recovery that's sort of occurring now in

U.S. domestic leisure travel. It's new management here, both the CEO and the CFO, but I think there have been a trade-up for the company that needed it. And I like Expedia here, 14 times earnings. I think this thing could re-rate, you know, maybe to 18 times earning something like that, which is a lot of juice to the stock from here. So that's why we bumped it up. It's a number three pick. Okay.

And I'm looking at Snap, which is the parent company of Snapchat's down today. It seems like it's close to breaking below seven. I think, and somebody can at me if I'm wrong, I think this is an all-time low or just off it for Snapchat. They've still got our Snap. They've still got a huge user base. The stock just keeps going down. What's wrong?

It's below its IPO price. What's wrong with SNAP? No growth in their user base. So you're right. They've got a core user base, but it's been kind of sticking around at this, you know, high 90s, 100 million in the U.S. And it probably doesn't rise from there.

And then they've had a lot of innovation on the user side, but just not on the advertiser side. And I've forgotten the numbers off the top of my head, but they're doing like low single digit percent, you know, growth in ad revenue. that in an environment where you can do for, I don't know, 10 times the size, you can get Google, which will give you 15% close to 15% ad revenue growth, or for eight times the size, you can go meta, which is giving you 20% ad revenue growth.

Like, where's SNAP? Just lack of innovation on the advertiser side, no growth in their core user base. And, yeah, I think that's a good reason to stay away from SNAP. How does the story get written then? Does SNAP just continue to plow on like it is, or they've got a lot of users? with a lot of data. I got to imagine there might be at some point value in some kind of takeout or takeover. Possibly. They're also making a big pitch now or a big bet. Not too dissimilar from what you're just hearing from Google today on new Gen AI hardware devices. Now, they're going to with

Snap Spectacles. It's the same thing that Zuckerberg is doing, by the way. He's making a big bet that that the Gen.E. that the AI compute device that we're all going to carry around with us is not going to be our phones. It's going to be headsets. It's going to be eyeglasses, sorry. And that's the pitch that Zuckerberg is making and Evan Spiegel is making too. I'm not sure. And I think the market's sort of skeptical of that for good reasons, because that really would be a pretty big paradigm shift, if you will.

And so, yeah, it's hard to see what the option value is on SNAP. But, you know, at the same time, they are generating positive free cash flow. If they can get a turn or two, if they can start much better, offering much better ad solutions for marketers. You know, there's a lot of upside opportunity here. It's just that I've been waiting for this for a couple of years. I haven't seen it yet. They have innovation, but I need to see it on the advertiser side. Until we see that, we can't, we're not recommending the stock.

Do you think the hardware, forget about watches, a lot of people have the watch, pixel watch, Apple Watch, Garmin, whatever, smart watches. Google Glass didn't work, but do you think it will round two? The meta-rayband glasses? As somebody who's used all of these glasses when they've come out, and I've got Meta-Ray bands, and I still have my Google Glass at home, along with my Amazon Firephone. I've got it all there. Ooh, you got a Zoom, too?

I'm not sure that I just don't know about whether glasses work or not. We are so now habituated to our smartphone devices that just get more and more powerful, the application of Jenny I within those devices just allows us to do so much more than we did in the past. That's a very hard hill for smart glasses to climb. So my guess is at the end of the day, they don't. But there'll be an interesting niche market for smart glasses, but it won't be anywhere near as big as what you have with smartphones.

We need like that eye patch from number two, Dr. Evil, you know, where he could see through the cards when he's playing blackjack. You give me an x-rays monocle or whatever. We're in. You're on to something. I'm on, you know, just 30 years behind. Mark Mahaney, Vevercourt, ISI. Great stuff. Appreciate it. Thank you.

Thanks, Brian. All right, let's get over to Julia Borsden for a CBC News Update. Hi, Brian. A federal judge turned down the Justice Department's request to unsealed records from the grand jury that indicted the late Jeffrey Epstein on sex trafficking charges. The judge said in his ruling that the release could pose a possible threat to victim's safety and privacy. He also had strong words for the government, saying it's, 100,000 pages of files quote dwarf the 70-odd pages of Epstein grand jury materials. Right now, the Texas House is debating new congressional maps that could give Republicans a chance to pick up five new seats in next year's midterm elections. Democrats fled the state just over two weeks ago to deny a vote on the maps, but returned earlier this week after Texas's governor initiated a second special session.

And the Federal Trade Commission sued the parent company of L.A. Fitness today over allegations the company makes it too hard to cancel gym memberships. In the lawsuit, the FTC says California-based Fitness International forced members to use complicated methods to end their contracts, such as requiring they speak to specific managers who are often unavailable. Brian, back over to you. All right, Julia, Boorston, Julia, thank you very much. All right, well, all of Wall Street turning its eye to Wyoming. But we're going to turn ours to Chicago and Rick Santelli to help read the bond market tea leaves and also what might be ahead for the Fed. All right, welcome back to July. Federal Reserve Minutes setting a little bit of light into the committee's conversations about where interest rates might go.

Two members calling for cuts. And now the focus, of course, shifting to Federal Reserve Chairman Jerome Powell's speech in Jackson Hole, Wyoming. Rick Santelli joining us now. Rick, you put out a note to us internally about this. On one hand, they're talking about inflation, and on the other hand, they're talking about weaker jobs. That's a tough combo. It is. It's a tough combo, but I really do think that the market has an opinion here.

If you look at how all the market's interest rates lined up after the big negative job, job jobs report we had a couple of weeks ago, you will see that markets haven't recovered fully because the onus of a Fed ease, or at least the onus of what's going on in the economy, from the perspective of the markets and the yield curve and all the information we can glean in the Treasury complex certainly seems to lean that the weakness in the labor market got bigger moves than some of the inflation numbers like CPI and PPI. It's really quite clear.

Now, I'm not saying the Fed's right or wrong, but I'm saying the market's half an opinion. And when you move beyond that and look what happened today, today you see the intraday charts. Now it's washed out a bit and you have to make a lot out of a little because the ranges have been small. But we did see two years lead the move. You see that blue line kind of shifted briefly, but everything's kind of caught up. The curve flattened initially, two-year note yields rose almost to unchange while the 10 year didn't move much. But we're only splitting basis points here.

For all practical purposes, hovering around 4.30 and a 10. hovering around 375 in a two year, we're really going nowhere fast. Maybe the most important thing I see today is called the knob spread. It's 30s minus tens. Nobody's probably going to trade it there. It's not something that a lot of outsider retail trade, but insiders love to monitor it for one reason. The wider it gets, and it's the widest it's been in four years, the wider it gets that usually sets up the notion that longer duration treasury yields will be stubbornly high compared to the rest of the curve. So that's why we watch it. And I continue to believe that I'd like to see the Fed ease a quarter point set, Brian, because I'd love to see what the yield

curve does. My guess, if they cut 25, the yield curve steepens 12 basis points. Back to you. Cut 25 yield curve, steepens 12 basis points. On the record, Rick Santelli, but we wouldn't have it any other way. Rick, thank you very much. All right, still ahead. Hold the phone. Bank of America bullish on this mystery stock. It's already up 50% in the past year. The name and rationale ahead. All right, welcome back to do a quick hit on AT&T because Bank of America today adding the stock to its US one list. That's kind of its list of most love stocks. AT&T already up 25% this year and more than 50% in the last year. Beyond the gains, by the way, AT&T pays out a pretty decent yield. It's about a 4% dividend yield. Now, Verizon has risen this year, but only by about 12%. AT&T is outperformed. B of A

A loves AT&T. All right. Stocks may be under pressure, but there are still some under the radar sectors hitting new highs. Those names and sectors next. All right, let's quickly end on this natural gas. of the year. $2.75. It's been a cooler summer for much of America. It's 67 degrees in raining here in the middle of August of New Jersey. Anyway, I'll see on fast money tonight. 5 p.m. Eastern. Tune in. We'll see otherwise tomorrow. Closing bell starts right now.