Power Lunch - Market waits for Big Tech earnings this week 4/27/26

Episode Date: April 27, 2026

Five megacap tech companies report earnings this week. Fundstrat's Tom Lee joins with his market outlook.  And Goldman Sachs' Neil Mehta joins for an energy earnings preview.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

It is a huge week for your money on deck. Welcome to Power Lunch, everybody alongside Kelly. I am Brian. Okay, with all this going on, what do you watch this week? Well, you got five of the Mag 7 reporting their earnings. Apple, Amazon, Alphabet, Meta, and Microsoft, those companies making up more than 20% of the S&P 500. You've got the Fed's call on interest rates on Wednesday. And by the way, Jerome Powell's final meeting as Fed chair, this is the last major obstacle to Kevin

Warsh's confirmation has been removed. And for big returns, you've got to think small, the Russell 2000, up more than 12% already this year. The great. Tom Lee here with that and more. And a major reset in AI's most important alliance. Microsoft and AI are ending their exclusive relationship, giving both companies new strategic freedom as OpenAI gains access to other cloud partners and moves closer to a potential IPO. And of course, the timing is crucial. as the jury trial begins today in Oakland, California,

and Elon Musk's legal fight against Sam Altman, where key executives are expected to take the stand. We're going live outside the courthouse with the latest. That is a big one. All right, there is a lot going on today and all week. Hope you had a great weekend, by the way. Let's start with the state of the markets, because right now the major averages, they are little changed.

Yes, geopolitical tensions, Iran, straight to Hormuz, still front and center, It's kind of in a holding pattern all ahead of this busy week. In the meantime, crypto price is easing off a little bit of their recent highs. Bitcoin back below the 77,000 mark and ether dropping below 2,300. The digital assets, though, still on a respectable run over the past couple of months. In fact, outpacing metals like silver and gold by more than 25%. So with all of this and more happening, where should you, dear investor,

viewer be positioning your money. Joining us on set is Tom Lee, the head of research and managing partner at FundStrat Global Advisors and a CNBC contributor. I did hear in my ear that there may be some break. Okay. So we, Tom, it was a hell of an intro. Yes. We've got some breaking news at a D.C. We'll get you in just one second. We have some breaking news in D.C. with Amen Jabbers. Brian, that's right. Prosecutors are arraining Cole Allen at this. hour here in Washington, D.C. And they've just charged him with three counts, according to our reporter in the room. He's been a charge with an attempt to assassinate the president of the United States. He's also been charged with transportation of a firearm or ammunition in interstate

commerce. And he's been charged with discharging of a firearm during a crime of violence. And what we also know from our reporter, Garrett Downs, who's in the room right now, or on site right now, I should say, is that prosecutors are arguing for pretrial detention for Allen. They say he attempted to assassinate the president of the United States, Donald J. Trump, and that is an enumerated crime of terrorism. This is an ongoing hearing, so we'll update you with any more. But those are the three charges now that prosecutors have just filed against Cole Allen in an ongoing arraignment, guys.

Back over to you. All right, Amon Javors in D.C., serious stuff there. And by the way, just glad that everybody ultimately, was okay. Tom Lee, let's get back to the markets. Obviously, a lot going on outside of the markets, but the market itself does seem to be kind of looking past the war in Iran, looking past any political event. What is the market the most closely looking at right now? Well, I think the market at the start of this year maybe had three risks it had to get comfortable with. One is Iran and a war, potential escalation. A second was private credit, and the third is a new Fed share. And what we've seen,

I think, is that we've come out the other side of this Iran war with the economy showing remarkable strength. In fact, earnings estimates have been going up. So I think we passed that test. And I think the underwriting for the private credit looks better than expected. I think that's why IGV is rebounding. And so I think the... What is IGB? Oh, sorry, the software ETF. Okay. Because that fell all the way down to 72. It's back to 85. And so private, a lot of private credit loans were tied to software. I think that that is looking less of a structural problem. And so to me, this means, I think for stocks for the year, the upside case is strengthening. I think S&P above 7,700 is very probable. What other are the kind of planks that

feet into or build into that? Well, I think one is earnings estimates are higher. And now we're seeing AI, I think, deliver productivity. And, you know, earlier on CBC, Torsten was talking about how there is the positive case for AI, which is, you know, business growth and company formation. And I think risk premium later this year drops, because if we settle the issue in the Middle East, You know, you're taking out, you know, hostile oil premium that's been priced in oil for a long time. So I think that allows markets to lift higher. Oil is still at $95. I think, I tweeted out this morning that the market was kind of in the settle in mode.

I think that oil hasn't moved really in a week or two. We're kind of now in this sort of stasis, if you will, with regards to that, because I think you said on this program a couple weeks ago that the war was the most important thing in the short term. What are the two possible outcomes for the markets vis-a-vis Iran? Best case, worst case. Yeah, and these are pretty big... Yes, they are. It's on two very far sides. I think one is an extended war, and therefore it's a mirage that oil prices are low,

because now we're going to have a drawdown in inventory and lost production, and so I think price for all petroleum products jumps dramatically. And then that puts a lot of global growth at risk. The other side is the war is resolved quickly, and that's through all the combination of pressures. I think the market is betting on a shorter war at the moment. So a lot of the times, recent years we've talked about stocks and bonds, but the strong performance of commodities has Michael Harton, at Bank of America's chief investment strategist saying a better portfolio positioning right now would be what he calls the sleep like a baby portfolio. he says it's an equal weight allocation across stocks, bonds, cash, and commodities.

According to Hartnett, this four-way split is having its best year since 1933 and delivering one of its largest relative wins ever versus the traditional 60-40. Now, we all know every strategy can have a good year. It's like a broken clock, right? But is this a working clock that people should think about this kind of allocation and sticking with it? I mean, there's a lot of logic to that because one, We know that gold's been a really good total return performer,

and so I think gold should sit in portfolios, which probably sits in commodities along with crypto. And then I did hear someone earlier this year point out, NASDAQ and oil are actually good counter-hages. So in some ways, a 25, that portfolio does make a lot of sense. In fact, technology and energy have kind of been these, you know, two sides of a balance. You know, you'll have a decade where energy does really well,

And then a decade where technology does really well back and forth. And what's interesting right now is that both of them are kind of doing well. And again, maybe your point is, you don't have to pick. Just own a little bit of all of them. Yeah, AI is pulling both of those together anyways, right? Exactly, exactly. And kind of changing a little bit. You know, we spoke with Roger McNamee last hour.

He expressed some concerns about what's happening with these AI models because the open AI in particular doesn't have the revenue to justify its CAPEX right now. And we're about to go into tech earnings where all the focus is going to be on CAPEX. Do you have any concerns that there isn't going to be a pot of gold at the end of this Cappex rainbow? Yeah, I mean, it can play out several ways. You know, of course, there could be some breakthrough where power consumption drops. But as you know, we are consuming every piece of compute.

So to me, it does seem too early to worry about that as well. Let's put that model asleep like a baby portfolio back up. Because my first thought looking at that was, I mean, that's, you could name it kind of a scaredy cat portfolio, too, I think, right? If I see 25% stock. Yeah, and 25% cash, right? I mean, sleep like a baby or cry in the corner. I don't know which one that would be. Is that too conservative of a portfolio for Tom Lee?

I mean, it looks like. 25% cash, 25% bonds. That's 50%, I think. Right? Not doing much. Well, yeah. So that's, it is an Armageddon portfolio because if you were saying like, hey, you know, the internet's going to go down. You might want to own something that looks like this.

But it also makes sense in the sense that total return for any portfolio, as you know, comes from outliers. Like whether it's a handful of days that drive returns or a handful of stocks. And so I think that portfolio isn't such a crazy portfolio. Okay. Because 25% cash is a lot of cash. Yeah, and cash is paying. Or I guess if you're 90 years old or you want to make sure your money doesn't go anywhere, although with cash you're losing the real return because of inflation.

Yeah, well, yeah, cash. You can either do money market or, as you know, there's some products that are high-yield cash, like micro-strategy's stretch product. I don't think that's the sleep like a baby idea. That's right. Put your cash in micro-strategy, but I take your point. But I think, yeah, your return's not coming from that 25%. Right.

But at least it gives you a little bit of return versus the last decade. All right, Tom, thanks very much. Quickly then before you go, you're positive about what we're about to hear on the big tech earnings front? It's just full steam ahead. Yeah. I mean, it's so far so good. Usually the first part of earnings reflects the rest of the season. You know, more than 89% are beating, and the magnitude is over 1,200 basis points.

So it's a great earnings season so far. Wow. All right. Tom, thanks. Good to see you. Tom Lee with Fundstract Global Advisors and a CMC contributor. All right, time now for the bond report because you got Ray Dalio now weighing in on interest rates in an earlier interview today. Dahlio said it would be a mistake for Fed Chair nominee Kevin Warsh to cut interest rates.

Well, because of the issues of the issues that are here in terms of a more immediate inflation, farther from the target in terms of inflation target. Dahlia also warned the economy is showing signs of stagflation. Rick Santelli joining us now. Rick, what do you make of these comments? Well, I don't know that Mr. Warsh has been on record saying that he's going to blindly take the job in lower rates. So I think the conventional wisdom that Mr. Dahlio seems to be subscribing to, I disagree with the baseline of that premise.

I think that Mr. Warsh obviously sees all the newest trends, and I don't believe I've heard him say anything that would result in lowering rates at a time where they aren't warranted. There are a lot of plates up in the air, and I'm pretty sure he's highly aware of that. If we look at the Treasury today, Brian, they issued $139 billion of supply already today tomorrow, $44,000.7s. You look at that five-year chart.

We see that some of that supply was weighing on the markets right around one eastern when the results came out. But if you overlay oil once again, it's hard to tell if it was just a mediocre auction pushing yields up or if it's following crude oil. And if you follow everything around the globe, it isn't just U.S. rates going up. JGBB rates 29-year high. Boone's near a 15-year high. Gilt's in the U.K. near an 18-year high. So we see all global long sovereign rates seem to be headed higher. Back to you, Kelly. All right, Rick, thank you very much.

Rick Santelli. After the break, two of the most powerful people in tech, Elon Musk and Sam Altman are about to face off in court. What's at stake as both Starlink and Open AI, I have public debuts later this year. I think SpaceX is what we meant to say there. We'll dive in next. A high-stakes legal battle is unfolding right now. between two of the tech world's most powerful billionaires. Jury selection is underway and the showdown between Elon Musk and OpenAI CEO Sam Altman.

Kate Rooney is live outside the Oakland courthouse with the very latest. Hi, Kate. Hi, Kelly. So jury selection, as you mentioned, is underway. One challenge that we are seeing play out right now in the judge is addressing, we're hearing from some potential jurors talk about why they would actually have trouble being impartial in this case based on negative opinions of AI. in general and of Elon Musk. Musk as a backdrop here is suing OpenAI, the CEO, Sam Altman

as well. President Greg Brockman and Microsoft is a co-defendant in this case. Musk is a co-founder of Open AI, among other things he's done, but alleges now that he was deceived into funding the company under the guise of a non-profit mission. We've got two claims in this case that are in focus. The first is a breach of a charitable trust, which is what Musk alleges. This team says the promise was to really keep open AI, an open source nonprofit company, prevent any sort of tech giant Google at the time or Microsoft from monopolizing the technology, and then a move towards, rather, a for-profit and its deal with Microsoft, according to Musk, compromised that goal. The second is unjust enrichment. So Musk claims that Altman and Brockman used some of Musk's funding and connections

to build what is now an $800 billion company and then personally profit from that. Musk is also looking for up to $134 billion in damages and the removal of Altman from his leadership position. Also the unwinding of a recent restructuring that happened in the fall. Open AI at the same time dismissing those claims as baseless calling it in a social media post this morning a jealous bid to derail a competitor. We do expect opening arguments to kick off tomorrow after jury has been selected. Then we are going to get that high profile list of witnesses. It includes Elon Musk himself, Sam Altman, Greg Brockman, who are inside the courtroom today, And then Microsoft CEO, Zatia and Adela, Kelly.

So much to come. And as you say, quite a bit at stake here as well. Kate, thank you very much. We appreciate it. Kate Rooney. All right. Now, for reaction to the legal showdown, let's bring in Alex Cantowitz. He is big tech founder, CNBC contributor.

Certainly bold-faced names here, Alex. I mean, this is pretty unbelievable. We also had some, I think, pretty big headlines between Microsoft and Open AI today, but they're not getting attention because of this case. What's your hot take on? OpenAI and Sam Altman because they were running the show, do they still? Well, the competition has definitely heated up, especially when it comes to the models that you see put out by Anthropic and Google. And in a way, OpenAI is chasing a little bit on the

product front right now. Anthropic, of course, got ahead with Claude and Claude Co-work, and now OpenAI is building this super app with its Codex backbone behind it. So it once was OpenAI's world and everybody else was following, and now the competition has heated up and it's neck and neck. If Open AI were to stumble, I'm not saying they will. I want to be clear, or Anthropic were to stumble. I'm just anybody, insert major AI player here, Anthropic and Open AI are both private companies, so it's a little bit harder to see the numbers versus a Google or a meta or something like this. If one of them were to have a significant hiccup, could be a little bit more than a number, Can the market, the overall stock market, get through that even though they're private because they contribute so much to a lot of these capital spending plans for the publicly traded companies?

Absolutely. I think the market will tolerate it well. And the one thing to understand about this technology is both companies are building upon each other's innovations, right? So OpenAI started reasoning with their models, Anthropic, then started to reason with its models. Anthropic built code. Open AI built Codex. So they build on top of each other's innovations and the demand is out there for the market. So would one hiccup, we're going to be okay. If both hiccup and progress stalls out, that's a problem. But it just doesn't seem likely right now at all. The OpenAI has had a number of critics.

We can add Roger McNamee to Sebastian Maliby and others who say that the company, McNamee called it a bubble. And Maliby said it was probably going to go out of business. And today there's reports they're teaming up with Qualcomm to make smartphone chips. Do we read that as a move of strategy or desperation? This to me seems like strategy, although I wonder about the strategy because the company is on this moment or having this moment where it doesn't want to do side quests anymore, right? The focus is all on these text GPT models. We just saw they came out with GPT 5.5, their latest model, and it's a big one.

And folks are saying that it's impressive. But they're still focused on this device. And these are the device, the series of devices that Sam Altman and Johnny Ive are developing together. To me, that's how I read this Qualcomm partnership. We've known Qualcomm is working with OpenAI for months now. I don't think there's anything new on that front. But the fact that those talks are continuing shows that they're still pursuing the device or family of devices, and that's going to be core to their strategy. We can quickly show shares of Apple.

Do Apple shareholders have any reason to be concerned? Potentially. I mean, I think the iPhone is in great position. We've seen that with the strength of the 17. We're going to see, I think, really strong earnings this week from Apple on the back of that phone. And they also have other models that are in the pipeline, including the fold. And I think that's going to do really well. But the question with these AI devices is, does it cut off growth?

Like, for instance, AirPods is a growth area for Apple. You know, if they miss the next AirPods, what's going to happen to the company? That, to me, is where these questions come in. but I think Apple is making some good moves on the eye front, especially as it partners with Google. All right, and there are the shares down about 2% in the session again today. Alex, thanks very much. Appreciate it.

Thank you. Alex Cantorwitz. And they're going to report on Thursday as the busiest week of earning season is here. We'll hear from five of the Mag 7 with four of them on Wednesday. Can they deliver or will expectations short circuit? Morgan Stanley's Brian Noak is here next. All right. It is a massive, massive week for your money.

And a big reason for that is big tech earnings. This week, you get the numbers out of meta, Microsoft, Amazon, and Alphabet. They all report on Wednesday. Should we just take it off? I think it's a Fed meeting, too. It is. Kelly and I are both going to be out on Wednesday. Thursday, we get Apple's numbers.

And if you need more convincing on why these companies matter, just take a look at how much of the S&P 500, those companies. Five companies are nearly 25% of the S&P 500, which I think actually has about 503 stocks in it. Five companies, one-fourth of the entire index. The big question, when we pull back that AI curtain, will you the investor, see the road to return on your investment? Let's not forget that pre-Irault war, lots of big tech stocks, we're actually struggling. Joining us now is Morgan Stanley's senior internet analyst. Brian Noak, he covers Meta, Amazon, and Alphabet. You're not sleeping this week, Brian, but I don't need to tell you that.

What are some of the key themes that you are going to be watching for with your companies this week? Yeah, good to see you, Brian. It should be a super Wednesday. You know, I think there's a handful of themes you really want to focus on. The first one is the first signal on return on invested capital from all of this CAPEX is revenue. You're really going to want to see revenue acceleration from the important KPIs from each company. For Google search, it means accelerating search growth. For Amazon and for Google, it means accelerating hyperscale or Amazon Web Services and Google Cloud growth.

On meta, you want to see their overall advertising business accelerate too. So there's a handful of factors. But the cleanest trump card in assessing whether or not these companies are seeing good signal on their investment is going to be the top line and what we see in top line results from all of these leading tech companies. Brian, it's Kelly here. Do you think that these companies will be able to meet all of their CAPEX projections? Can they literally bring online all of the, you know, all of the compute that they've promised investors? Yeah, I think so. we're staying on top of any shortages or setbacks in the pace of data center opening.

But as of now, there's nothing that we've picked up on that is a risk to this year. 27 and 28, obviously they have a lot more uncertainty and variability around them. But as of right now, we still think that in the near term, the key data center square feet for all these companies, they are opening. With that said, there's also likely some inflation going on and some of the key components around, you know, DRAM memory and some of the other costs of building these data centers. I think a lot of these hyperscalers, they are the price taker. In some cases, they are paying more to bring on these data centers and light up these gigawatts to realize this revenue. But as of right now, we don't think there's a real sign of any setbacks in the pace of the data center openings this year that's going to hold back results in one queue

or two queue. You know, this is a weird question. Does Amazon's retail business matter at all? I mean, we talk about is getting all these deliveries at home every day. But whenever we talk about the stock, the company of Amazon, we talk about AWS, Amazon Web Services, and data centers. I don't think we ever mention, like, the core, I'm going to deliver something to your house business. Does that matter for Amazon at all, Brian? Yes. Yeah, it is the most underappreciated generative AI winning business in this. entire coverage group. Their algorithms about how to determine what items to show you at what

moment are getting better. Their advertising business is seeing a lot of the similar benefits that Google search or meta are seeing. The way in which they are rolling out robotics across their warehouse footprint is only going to make them more efficient overtime. And ultimately, they are set to be a winner when it comes to agenda commerce. My guess is, sorry to interrupt, Brian, but if Google knows Alphabet knows everything about us because of what we search for, right? We just put into Google search.

Amazon may know the most about us of all, right? I mean, Amazon knows what we buy, which means it knows who we are, how many kids we might have, no doubt obviously basic things like where we live, what we like, maybe how much free cash flow or disposable income we have.

Yeah, I think that one of the differences from an e-commerce perspective too is Amazon has you in the purchase mindset. You are going there to shop for items on a regular basis. In some cases, the subscribe and save, they have their hooks in you so deep that they're automatically shipping you your consumer package goods. And so the idea of realizing the long-term opportunity around agentic shopping and agentic commerce, I would argue that Amazon and even Walmart, which is covered by Samin Gutman for us, these retailers almost are better positioned to drive long-term agentic shopping

than Google or any of the other companies because they already have you shopping on the platform. They have all your data and they have the infrastructure to get you the items as fast as possible. And yet I still got the wrong kind of paper towels yesterday. I'm just saying they were Viva multi-purpose wipes or something instead of, you know, when this big pack comes.

And I'm like, you've got to be kidding me. I'm not going to go return it anyway. That just shows they have more upside. I think it makes your point perfectly, actually, Brian. Thank you. And we'd hope to circle back as we start to hear from all of them. Appreciate the time. Thanks, Kelly. Thanks, Brian. Brian Noak with Morgan Stanley. Earnings of this magnitude can prompt some big action and the

options markets. For more on that, let's bring in CNBC's new options reporter Oliver Renick, reporting live from the floor of the CBO. Hi, Oliver. Hi, Kelly. Thanks so much for having me, guys. It's bullish across the board heading into a big Wednesday. Of course, we got four of the mag seven names. Call volumes outpace puts by at least two to one in each of those stocks right now. and traders are not afraid to pay up for bullish premiums. The dollar amount spent on upside exposure right now dwarfs that being spent on puts by a multiple of two to six times, depending on the name. Let's go to the year-to-date leader first.

Amazon is up 17% and right now it has some of the most bullish action with three times calls versus puts, five times more premium being spent on calls. And in this case, traders are braced for a slightly bigger move than average. options markets are pricing in about a 7% move versus about 6% on average for Amazon. If you look at meta on the other hand, this is more about the size of the move than the direction. Options aren't quite as bullish there, but they are looking for a 9% move on average, but this time only 7%.

So those options look a little bit cheap compared to usual. But of course, if any of these stocks are priced at the upside, it's going to be a huge catalyst to the broad market. There's a lot to discuss with options, Oliver. We have not met in person. meeting, but I've got the most important question that you've been asked, no doubt, in the last two or three minutes, because this is important for Kelly and I. You ready for this one, Kelly? Uh-oh. A little birdie told me, Oliver, are you from Virginia?

Ooh. That is correct, sir, and I believe we have some of that in common. What town did you go to high school in? I went to high school at careful with the pronunciation. Falkier. High School. I also got to say it, we moved there in 2000, so technically I'm not Virginia bread as it might sound. But yeah, when you go to school up north, suddenly you're the Virginia boy. Is that coal pepper? Because you've got, you've got Lexington. It's pretty close.

Where up north did you move from Oliver? Well, boy, it's about a six-stop trip, guys. California, Washington, Colorado, then Virginia, then New York. And now Chicago, as of this month, longest I've ever lived anywhere, eight and a half years here in Shightown in Illinois. Well, I tell you, sounds like us. And by the way, welcome to C&BC because you've got a Lexington Virginia High School graduate.

You got a Winchester Virginia High School graduate. In fact, we played Falkier County High School in football, and I believe our friend Alexis O'Hanian also went to Falkier County High School. We will pronounce it correctly because of that. All right you're with us. Oliver, thanks for great to have you on the team. Really look forward to doing a lot of cool stuff in Chicago. Tell all the CBO folks there that we said hi.

Thank you. Great to have them on board. Can't go wrong. A couple of Virginians here. We're all good. Where's Tyler? All right, coming up, our investors being too complacent about big energy and earnings, Goldman Sachs' Neil Meda thinks so. He's here with Y and some names ahead.

I welcome back. Oil prices. They're up a touch today. Progress appears stalled a bit with the Iran talks. All this, though, as the team at Goldman Sachs upgrading its oil price forecast, they now see crude oil here in the States averaging about $83 by the end of the year. It's also a huge week for energy earnings. Conoco Phillips on Thursday and the Biggie's Chevrofts. on an ExxonMobil on Friday morning. Welcome back in Neil Meta, head of North American Natural Resources, Equity Research, at Goldman Sachs. Neil, good to have you back on.

Thank you, Brian. We appreciate that week. Let's dig in a little more of these earnings. Conoco's out on Thursday. Conoco, not only a big deal, you've got a buy rating, but also it's on your conviction list. What about COP is so special?

Ultimately, it's about free cash flow per share. When we look at Conoco, 25 to 2030, it's going to compound its free cash flow per share at a 25% cager if Brent stayed flat at $75 a barrel. There's a high probability Brent is higher than that. And the key project that's going to enable that turbocharging of growth is the Willow project in Alaska, which as CAPEX rolls off, 27, 28, and that project comes into service, 29 and 2030, is going to drive a unique uplift in terms of the profitability of the business. Stock hasn't been doing as well, in part because people are looking out and and 29's pretty far away. Our point is, it's not that far away, especially if you believe that

we have another good decade ahead in the oil price. So this is a hugely important question. You and I have talked about it. I know you and Kelly talked about it last week as well. We had one month in the first quarter of the Iran War. So oil prices were kind of 65 bucks. Next thing you know, they were $100, but for only one month. We're now at the end of the second month, but one month into the second quarter. Any clear view on how much estimates may be off or need to go up if oil prices remain somewhere around this area? It's a great question. So I'd say in Q1, when you look at these numbers and these revisions, they're not going to be that meaningful. Because to your point, there's a time lag on when the conflict happened to ultimately when it

shows up in profitability. There are lags on contracts, including for, uh, liquefied natural gas. It will absolutely show up in the second quarter in two different ways. One is the higher oil price, but the other component of it is the higher refining margins. While oil prices are up $40 a barrel, jet fuel prices are up $100 barrel. Diesel prices are up $75 barrel, and I think that's where you're going to see the translation of profitability in the second quarter. We'll hold that thought, Neil, for just a second. We have a news alert on private credit right now. Let's turn over to Leslie Picker. Leslie, for those details. What's happening? Hey, Kelly, yeah, this is an update on the tender offer that Saba Capital and Cox engaged with Blue Owl. Remember, they were tendering shares of some of these semi-liquid vehicles at about a 30% discount.

Well, I've been speaking with sources close to this one, close to the results here. And it appears that in the tender offers for both Blue Owl Capital Corporation 2, that's known as OBDC2, as well as SRET, that's a Starwood real estate income trust, that about 10 million worth. of face value across 190 separate trades were tendered, and substantially all of those were from S-Reed. So what this suggests, guys, is that even though there have been illiquidity concerns surrounding many of these funds, there were redemptions requested that weren't honored, that the tender offers at a 30% discount were not enough to coax a large amount of investors to actually tender their shares and get that liquidity. So you could see shares of, Blue Owl Capital, currently down about 1.2%. I'll send it back to you. In other words, Leslie, a bit of a sigh of relief there for the fund managers?

I would say so. I would say this is certainly will read as a sigh of relief for Blue Owl because it suggests that the investors who were capped in their redemptions are not so, I guess, for lack of a better word, desperate to get out that they would do so at a 30% discount. However, it is expected that Saba will engage in more of these tender offers, more of these strategies. It is also possibly fund specific what those redemption requests will look like and what those liquidity needs will be and at what price point I think is important here too. All right. Leslie, thank you for bringing that to us. Leslie Picker with an update there and one of the key funds in the middle of the storm for private credit. Turn back to Neil Meadow. We were just

discussing, Neil Medo. We were just discussing, Neil Energy investing kind of broadly. It's been one of the hotspots. Big debate, though, over whether people should invest because you have these sticky high oil prices, which makes the companies more profitable or not. what would be, why isn't this a slam dunk? Is it just because the stocks have run so much? Well, we've seen strong revisions on the 26th story. And one of the things that Kelly, you and I were talking about, and Brian and I were talking about, is 27 and 28 have not seen those positive revisions yet.

In part because the oil curve is relatively backwardated. When you look at the back end of the oil curve, now we're talking 29, it's still in the low 70s sprint. And so what we need to see is the back end of the oil curve move higher. when we look at our top projects modeling, our modeling of 400 to 450 oil projects, and we look at equilibrium pricing, it does feel like that 70 to 75 price that we've been living in needs to move to 75 to 80. I see.

And that's ultimately going to drive the revisions in the stocks. And for these long-cycle businesses, the back end is more important than the front. Why neutral on ExxonMobil? Just because it's already had such an amazing run or just the product mix? Yeah. We love Exxon's refining. business. Their upstream business is impacted by what's happening in the Middle East, especially in Qatar right now. But when we think about where value is across the large-cap

oils, it's in ConocoFillips, it's in Chevron, and then the Canadian oils. I think Canada is something that's still underappreciated by the market, the depth of inventory that exists in Canada, the nature of the barrels, which are close to end market, and those are the integrated oils that we're most excited. This is a critical point you're making. Okay, not only do we have a shell deal buying ARC for $16 billion today up in Canada. But when you look at oil risk, energy risk right now, I think that's been the watchword for the last two months. Who's right next to us?

Who is, you know, we have some disagreements over some things and tariffs and hockey. But overall, they are a trusted partner. They are a friend. They are right there. The oil's a little different, though. It's a little thicker, sludgier, a little more diesel fuel, but there's pipelines. why do we perpetually undervalue Canadian oil? I think Canadian oils had...

You're welcome, Canada. Canadian oils had two issues. First, you had to build these projects, right? You had to go from 2 million barrels a day to 6 million barrels a day, which was capital-intensive. And then you had the ESG issue, right? But I think if you look at the world right now, what do we need? We need medium barrels and we need heavy barrels, those lower API crudes that make diesel and jet fuel. Who has it Canada, which is part of the reason we like Snowvis, Suncor, and Canadian natural resources?

Any parting comment for those who say, okay, well, you know, you're talking about how the stocks reflect the oil price kind of where it is now. But if you want to get really excited about the energy names, you need to see the oil price coming up by 2029, 2030. Yeah. I mean, at some level, nobody wants that. Yeah. But it's possible that this conflict kind of stays in the stalemate position. Maybe you just don't feel comfortable taking a view on it. And therefore, investors say, well, I'll kind of move to the sidelines because I don't want to have to be smarter than the job.

geopolitical folks, and I mean, who knows what we're going to be talking about by then? So I think the best message is to follow the cost curve. This has been the Goldman Sachs formula for the last 20 years. The forward curve is inherently going to be wrong. But I think the cost curve tends to be right. And the cost curve is moving higher. And that points to the back end moving higher. Why is the cost curve moving higher? Ultimately, it's U.S. shale's getting more mature. In my career, I've seen U.S. shale go from 5 million barrels a day to 14 million barrels a day. And ultimately, we're going to have a tougher time to grow that. And we need to go more to a more expensive places. Do you think we will grow that? I know that there's been exports out of the

United States for fine products, record highs. A lot of ships coming here to load up with stuff to go around the world because the other stuff's offline. A lot of it is offline. Can we go above? Will we go above 14 million barrels per day macro in the United States? Based on the technology we have right now, I think we could plateau around here for a while, but we will have less beta. to exit coming out of the 2016 New Oil Order crisis was 14% for U.S. oil growth. In 2023, coming out of the Ukraine war, we grow about 9%. I think going forward, coming out of this crisis, will grow 2%. So we're entering a period of maturity. We need to go to more expensive places in the world, and that means oil ultimately needs to be higher. Is there any, look, innovation

unleashed the shale boom in the first place. Is there anything, we can't predict innovation, but is there anything else that we could try to uncover some lower cost or use to, different technology. So Jeff Curry taught us a long time ago, don't bet against the U.S. engineer. Right. And ultimately, there are some really cool things that are being tried out right now. For example, Exxon's using lightweight propit to ultimately improve recovery rates. The application of AI for drilling, machine learning, and agentic for the completion side of the equation, I ultimately think that the death of U.S. oil has been very much overstated, but to grow from this base. For a low cost source as well.

Just just run out of, like, people. I mean, that's the other thing. It's like we can do it. The oil's there, but you run out of trucks and drivers and electricians. I mean, there's all these things that you don't think about that are like, well, we do it, but we have a three-year wait for a insert skilled trade here. Well, I think Halliburton reported last week, one of the key takeaways from that is we're running out of white space. That means the pressure pumping equipment is operating a much higher utilization than it was.

And labor is also going to get tighter than it was. So, again, not to be alarmed, nothing to be alarmed about, but we're getting to points of maturity, and we need our companies to invest back into their stories once again. Power lunch live from Mozambique soon. By the way, Mozambique is a big growth area. I didn't just randomly pull that one out. All right. We get FID this year.

It did. Neil Mehta, Goldman Sachs. Great stuff, as always. Good to have you back on. Great to see you. Thank you. All right, folks, just a reminder. Speaking of energy, Neil was actually referenced in last week's Power Insider.

newsletter. You want to sign up for that. Get a lot more. It comes out every Wednesday. There's your QR code. Hit that. And sign up. Thank you. Looking forward to more of that. Neil, thanks as well. Let's get to Julia Borsden for the CNBC News Update. Hi, Julia. Hi, Kelly. President Trump is demanding ABC and Disney immediately fire late night host Jimmy Kimmel. First Lady Melania Trump urged ABC earlier today to take a stand against Jimmy Kimmel after he made a joke referring to her as a, quote, expectant widow days before the attack at the White House Correspondence Dinner. ABC and Disney have yet to comment. The National Trust for Historic Preservation, which is suing President Trump over the ballroom

construction at the White House, rejecting a demand from the Department of Justice to drop its case in the wake of the shooting incident at the White House Correspondence Dinner. A DOJ attorney said the lawsuit puts the lives of the president, his family, and staff at great risk. The trust calls the assertion, quote, incorrect and irresponsible. Florida Governor Ron DeSantis just proposed a new Florida election map, which could give Republicans four additional seats in the midterms this November. It's the latest in a series of state actions to redraw maps mid-decade to gain an advantage in November. Kelly, back over to you.

So much of this map warfare, Julia, thanks very much. Bill Ackman taking his biggest bet to market, his Pershing Square IPO. is set to raise about $5 billion and it's seeing strong institutional demand. What to know about the debut as the dear deal nears the finish line. That's next. Welcome back. Bill Ackman is making a major move

to reshape his investment empire. He's taking Pershing Square public in a multi-billion dollar debut. The order books are closing in just over an hour when the markets close at 4 p.m. Let's bring back Leslie Picker, who joins us here on set. We're just from scoop to IPO. Leslie, I know it's a busy afternoon.

As it relates to Pershing Square, I mean, he has had a publicly traded vehicle in London, has he not? But maybe that was a different animal? It is. What do we know about this big idea? No, you're right there. That is PSH, which is listed in London. And they say in their roadshow video that basically that vehicle couldn't be marketed to U.S. retail investors. U.S. retail investors were restricted from owning it, couldn't market it to U.S. institutional investors.

So this is their first fund listed on the New York Stock Exchange. And they're actually going to have two. They have something called PSUS, which is Pershing Square USA. This is a new fund. This is the first to be listed on the NYSC. It already has a net asset value of $50 per share. So that price is set. And now what we do know today is that they have raised about $5 billion through this IPO,

and they're aiming for about a billion-dollar green shoe. Now, that was at the kind of minimum of what they were expecting. They were going to cap it at $10, but they got five oversubscribed at about $5 billion. Now, for investors who buy into that fund, that PSUS, every five shares of that gets you one share of Pershing Square, Inc., which is the parent company, it's the owner. So one thing that they kind of analogized on their roadshow video, they said they weren't trying to become a fidelity, but think of it kind of like a fidelity where you have all these funds underneath, and that is the alternative asset manager that is going to be essentially managing. all of these funds. So the upside in that stock will be the launching of more of these closed-end vehicles. You said it was oversubscribed. So I know Bill's taken on a little bit of a political tone. You know, if you're on X, you've seen that he gets into things, right? So it doesn't

sound like anybody cares because he's oversubscribed, or at least it's fun. I don't know it's not all him. There's other people there. Yeah. And then you had a scoop about 15 minutes ago on Blue Owl, speaking of animals. And it seemed like I didn't fully get as you came in, we were talking, It seemed like good news for Blue Al that the market needs to maybe pay more attention to. It's good news for Blue Al. Yeah, and I think this is a natural tie-in because what you get from the Pershing Square IPO is they don't charge incentive fees. It's just management fees. And they say that their kind of perpetual capital vehicle distinguishes them from their alternative asset manager peers

because they don't need to deal with things like redemptions and all of this headline risk and things. of that nature. Now you ask about Blue Owl, which is, of course, become one of the poster children, perhaps the poster child of the redemption risks, particularly as it pertains to private credit. One of the key issues that they've seen lately is that there have been an outsized amount of redemption requests from their semi-liquid funds, and they've capped those back at about 5%. Other hedge fund managers named Saba and Cox have come in and they've said, hey, this is a market opportunity. You've got these investors who wanted liquidity. They can't get it. We'll offer it to them for a 30% discount. So they went through this tender offer process and talked to investors.

And kind of surprisingly, at least to me, they didn't have as much success. It was below their own expectations. And they were able to only get about 1% of what they were seeking. Wow. So basically, investors said we'd rather be a liquid than take a 30% haircut here. They think there's a better chance they're going to make their money back. Yeah, exactly. Down the road. Down the road. So that is a validation for the semi-liquid strategy, you know, given this one kind of case study that we've been looking at.

One thing that I just find a little odd about the Pershing Square thing as well is I thought their London fund always traded it as a discount net asset value. Perhaps that fund had different holdings. We know, obviously, Bill has been a big fan of companies like Howard Hughes for a long time. He's positioned himself as a kind of mini Berkshire Hathaway, but the most recent investment I saw as well was in meta. Is there anything else that they're playing up in the road show that in terms of his ideas that investors would have access to here? Yeah, no, they're playing up their hedging strategy, which has been an outperformer. In addition to just getting that whether it's 12 large cap tech holding or large holdings, you're also getting access to their hedges, which have been really successful.

Leslie, thank you. Good story there. Thanks for watching. Power Lunch, everybody. We'll see you tomorrow.