Power Lunch - Media Mania, Back-To-School 8/9/23

Episode Date: August 9, 2023

We got some huge headlines in the media sector today. ESPN is diving head first into sports betting, inking a deal with Penn Entertainment. And that comes ahead of much-anticipated earnings from Disney. We’ll discuss.Plus, it’s back-to-school season again. And this fall, students, parents and teachers are facing a wave of issues, from inflation to AI. We’ll take a deep dive into each of them this week. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. Alongside Kelly Evans, I'm Tyler Matheson. Coming up, we've got a little bit of media mania. Some huge headlines in that space today. ESPN diving head first, finally into sports betting, inking a deal with Penn Entertainment. All ahead of much anticipated earnings from ESPN's parent company, Disney, later this afternoon. Plus the business of back to school, rapidly approaching that time of year again. Some school districts heading back maybe later this week next week. And this fall, students, parents, and teachers are facing a wave of issues, including inflation and artificial intelligence. We're going to take a dive into some of those issues over the next few days. Kelly, take it away. It's more complicated going back to school than it used to be.

That's for sure, Tyler. Thanks. We're also getting more complicated trading where the markets continue to be under pressure, although well-off session lows, Dow's down 64, S&P down a third of a percent. NASDAQ, once again, the underperformer down 101 at the moment. And some huge earnings moves to mention RoBox is plummeting 21% today. It's back below $30 a share. Missed on the top and bottom lines, wider loss than expected.

We will have more on that in just a moment. Carvana also lower by 3%. Results are pretty positive, but of course we had this, oh, 800% run up this year, even with today's pullback. Still one of the most incredible runs we've seen of $42 a share. We'll have more on this chart, in fact, in just a little while. And as Tyler mentioned, a huge deal in the media and gaming space, Penn Entertainment rebranding its online sportsbook to ESPN bet, paying up for the rights and hoping to bring its betting brand to millions more people. Let's get some details now from Contessa Brewer. Well, Kelly Penn CEO, Jay Snowden believes this strategic alliance with ESPN can get Penn's interactive segment to between half a billion to a billion dollars in adjusted EBITA.

That's the crucial earnings metric in gaming. They anticipate the deal could help them getting licensed in different states. For example, right now they're not licensed in New York, and they think getting this deal could pave the way for that. Snowden said on the call, he thinks the power of the ESPN brand is so great that his applications to regulators would be looked upon favorably. In fact, the industry insiders I spoke with think this could be good for sports gambling overall because being embraced by Disney, by ESPN, this, you know, stellar brand. in sports world just normalizes gambling on the call. They also clarified that November is the target for relaunching this app smack dab in the middle of the NFL season. In the meantime, because of marketing costs ramping up, Penn is unlikely to hit profitability in the last half of the

year. And that's a change from what we heard from predictions from the company previously. The strategy with a media partner is something, though, that Penn really believes in it. They believed in it with Barstool. But that doesn't. deal didn't work out, but of course, Barstool is a different beast than ESPN. Jay Snowden really believes in this particular strategy, but with this elevated partner. And I'm going to be speaking with Penn Entertainment CEO, Jay Snowden, later today alongside Jim Kramer on Mad Money Guys. Go ahead. I mean, well, there's so many different questions that I actually have about this, Contessa, but one of them, just to back up for a second, is to ask, what do we think ESPN's

fortunes will be with launching this ESPN bet? I mean, it's such a saturated. Yes, Draft Kings is down today, but it is such a saturated space. I'm just curious how big they think this could get. So one, like Jason Noden was asked on the call today, are you late to the party? You've done this. You're doing this now more than five years after PASPA was overturned that allowed states to legalize gambling. And he said, no, look, I don't think that that's the case at all.

We were accused of being late to the party when we bought Barstool. They got a pop from Barstle. They got some younger gamblers out of that. They think that they can retain those younger gamblers and now be exposed to not older gamblers, but just gamblers in general. Then the question, are the people who are using ESPN who are inclined to gamble, aren't they already betting? And again, he said, no, he doesn't think so. If they've got 300 million followers on social altogether, he thinks that there's a real opportunity here,

and not just with legalizing in more states, but in more exposure and retaining those better. Plus, and we've heard this from Draft Kings, we heard it from this morning from Fandul Parent Flutter, we heard it from Cesar's. They said product matters. When they relaunch the tech stack into something new and invigorated, when they're making use of these player parlays and in-game parlays, they are getting such more engagement and more money from the people who are betting on the apps. And Penn's pointing out they've just brought their tech in-house. Wow. I like to watch sports, okay?

I like to watch sports. I watch a lot of ESPN. I'll tell you the thing that will infuriate me here is if the sports broadcasts become secondary to the gambling product on air. In other words, that at every juncture, I am confronted by an opportunity to place an in-game prop bet. Will Aaron Rogers' next pass be caught or dropped by Randall Cobb or whatever?

That will just ruin the experience for me. I hope they don't do that. I'm not in charge of that, Tyler. It's a different office. No, but I do think that they know they're walking a fine line. And in fact, they were quick to point out today about responsible gambling that ESPN has already been working in conjunction with Penn to try and make sure that their responsible gaming initiatives are front and center.

So how do you use ESPN personalities in a way that is still responsible and respectful and and keeps it out of the hands of underage sports enthusiasts. I mean, my point editorializing here is that ESPN and the sports broadcast need to be a sports broadcast, not a betting broadcast. I'm sure they're listening. I hope they are. Listen, I agree for what it's worth. That makes at least two of us.

There's two for purity in sports. Contessa, thank you very much. All right, let's continue to gnaw in this. Get angry, get furiated. Get, oh, my glass one over there. All right, for more of the deal, let's bring in Barton Crock, and he's a Disney and media analyst with Rosenblatt Securities. And David Katz covers Penn and the gambling stocks at Jeffreys.

Barton, let me ask you, why does ESPN choose Penn here and not a half dozen others that might be just as good or better? Look, I think it's the brand. I think what we're looking at is a battle of the. brands. So all of the bigger players in sports betting online in this country are big brands that aren't going to play second fiddle easily to ESPN. Fandle, Draft Kings, well-established, the casinos MGM. And then you get down to bar stool. And you can get rid of barstool and replace it with ESPN and it makes sense. I think that what Disney is eyeing here is the future of

of culture and media consumption. And I think what they're seeing is that the new generation is kind of fine sports betting additive to the experience. And they want to lean into it and have their brand front and center. You know, we just saw the opposite with Fox where, you know, their Fox spec kind of deal, you know, was unwound. And part of that, I think, was, you know, tension. And, you know, I think that, you know, the partner there didn't want to make Fox bet the

preeminent brand. They wanted to lean into Fandul. And so, you know, here they have a partner that's small enough that they'll let ESPN lead. And I think Disney likes that. So Disney likes the idea that they are going to be the undisputed senior partner in this deal. David, let me turn to you. Why do you think this is good for Penn? What do they get out of it? And sort of answer what Barton just talked about. Why Penn and why does Disney choose them over Fandul or Caesars or or whomever. Well, part of the answer, Tyler, is that those other entities are all set, you know, with their enterprise and have been added for quite some time.

The way we've looked at sports betting from the beginning is the requirements are market entry, a brand, tech, content, and technology, right? And so ESPN, you know, clearly is bringing you a brand. Penn brings them market entry, given the distribution that they have around states and across the U.S. The questions that we have, you know, that were discussed on the call this morning are around the technology platform. We know that Penn acquired the score media for $2 billion, and that tech platform is being rolled out now across the U.S. And, you know, we will see how well it performs. The content, as Contessa was talking about earlier, the parlay's in the

endgame, and the breadth has been winning. And I think that that's one of the questions investors, are asking, discussed on the call this morning, is how Welp will pan in this new app be able to deliver content that engages and retains players over time? But you can see part of it, but part is still to come, Tyler. I am curious Barton and what Tyler mentioned earlier, which is does ESPN risk alienating its core viewer at this point? Or how do you expect them to integrate this experience in the coming years? Look, I think that generationally, it's changing, right? So it was kryptonite 20 years ago to be associated with gambling. Now it's becoming kryptonite not to have some tie into that. It has to be part of your media offering. You know, the survey data is pretty clear.

The younger generation wants gamification. They want some access to this. So I think what Disney has done is they're actually leaning into the future of how people want to consume sports and how they want to engage with it. Very hands-on kind of experience that I think they'll be able to provide with this deal that the other media company sports players may not be able to do because they're not going to be the leading brand. They might be a funnel, but they're not going to be the leading brand for the experience. David, why does ESPN have to own the betting platform and how are the economics of that business? In other words, they benefit from sports betting, broadly speaking, parlay's whatever. It's more engagement, more interest in all of their broadcasts. Is the model

for ESPN bet a better model than the current ESPN business model? And if not, Why not just say, hey, we don't need to, like, it's a totally different line of business. Economically, does it make sense for them to own it? Yeah, and I think it'd be interesting to have Barton weigh on that for the depth of their business model. But presumably, they're in it to make money, right? And I think what's been proven so far by the others, Draft Kings and Fandul in particular, is that it's possible to make money. And I think that that was a discussion point earlier on in the evolution of this business in the U.S.

Was anyone ever going to turn a profit? And at this moment, what we're seeing is companies are turning a profit. My presumption is that ESPN is in it to make money. Yeah. Barton, very quick final question here. Does this deal make it more likely that eventually Disney spins off ESPN? It could. It could.

You could see deeper integration with betting. I don't think Iger's there today. but this kind of lays a path to go there if he changes his mind. Yeah, it just occurred to me that you have here then an integrated sports betting and sports franchise that could be very easily cleaved off at high enterprise value from the parent company, Disney, which is kind of in a different business these days. Barton Crockett, David, thank you very much. We appreciate it. Let's get over now to a different gaming space.

the big results in the video game market, where Roblox is sinking more than 20% after a wider than expected loss. Take two missed estimates, but touted a powerful release schedule and the shares are up 1%. And Sony seeing some disappointment with PS5 sales as well within its movie division.

Those shares down 7%. Steve Kovac is here to help us make sense of it. Is there any unifying theme here, Steve? I wish I could. I wish there was. I guess if you tried to pick one, it would be we went through this really tough 18 months in the video gaming world, tough compares to the pandemic when we're all stuck inside.

Sure. Kids playing more video games. We saw hyper growth from Roblox. They IPOed in the thick of the pandemic, for example. PlayStation 5 and also their rival Xbox, they literally couldn't make the systems because of all their supply chain issues. The supply is finally cut up to demand. You can walk into a store and buy one of those consoles now.

And then take two, same thing as Roblox, huge boost during the pandemic. What we saw from Roblox, though, is, you know, they had to spend a ton of money, guys. in order to maintain all those new users they are getting during the pandemic. That's infrastructure costs. That's hiring new people. They're starting to dial that back. I spoke to the company CFO about this on the results. You know, what they're really projecting here,

and this was a huge discussion point on the earnings call this morning. You know, you guys are spending so much. Margins aren't getting great. You know, losses continue. They're saying it's going to get better next year. We're spending what we need to spend now to keep up with all the demand that we had, all the personnel we need to maintain. that's going to ease back into next year.

So that's the story around Roblox. With PlayStation, again, catching up to supply. There's a little bonus story here in the Sony thing. I'll divert from video games, though. They make the cameras for so many of these smartphones that we use, especially Apple, and they warned the image sensor in here. They're not going to see smartphone demand

really pick up until next year. So that's an interesting warning sign for Apple, Samsung, all the other mobile players. And then who am I missing here? Oh, take two. This is the fun one, because even though they're reaffirming their guidances, know, middling guidance for the current quarter, but full-year guidance.

Look, they're guiding already towards 2025 because if you want to listen to Strauss-Dell-Nex CEO on Squawk on the Street today, he kind of hinted that new Grand Theft Auto game is going to come out in their fiscal 2025. That's calendar 2024. That is the most profitable entertainment property in history. Wow. And they're going to have the next version of it coming soon. So that is going to be a huge catalyst for that. Maybe think better than a one-and-half percent catalyst. It should be. But it's a few years out. But look, I mean, they're saying, you know, they did, for example, I have the numbers here.

They did a little over $5 billion in net bookings in their fiscal 2023. They're saying that's going to go up to $8 billion in fiscal 2025, most likely, not just because of the GTA, but some of their other games. Fiscal 2025, which is literally calendar. Calendar 24. So you can look at starting second half of calendar next year. They're already looking out to that. Exactly. Right.

They just started there. And not to mention hanging over the whole space is, oh, Microsoft Activision. Yes. So, you know, how does the share, how does the acquisition price of Activision look in retrospect now in that company? Too expensive. Too expensive. It's been like that. That's been the story for such a long time because they, you know, made that offer for Activision right before we saw what happened. The markets last year. Yeah. Exactly. But look, I mean, Strauss Zelnik was, again, he was on our air earlier today saying, this is good for the industry of the Activision deal. He's not worried about it. He's an independent studio. It's good for EA. And but if and when,

that deal gets buttoned up, expect to see a lot more M&A chatter in that industry. You'd have to think. Get it through. So electronic arts, take two. He's like, this could be great for us. We'd be soft. Keep an eye on them. Yeah, exactly. All right, Steve, good to be with you. Thank you. Thank you. All right, Steve Kovac. Coming up, China's challenges continue, a deepening slowdown in the world's second largest economic power, raising fears of deflation. All this, as reports emerged at the White House is planning to restrict U.S. investments in China, even more. Plus, we'll get some technical support. For some of our headlines and earnings movers

we're seeing across the market today, Power Lunch will be right back. I'm still fired up. I'm with you. Welcome back to Power Lunch, everybody. The White House expected to put more pressure on U.S. investments in China with an official executive order later this afternoon. The plans are reportedly aimed at preventing U.S. capital from helping develop technologies that would support China's military modernization. But this couldn't come at a worse time for China's economy, which is showing signs of a deepening slowdown. Let's get some insight from Dennis Unkavik, partner at Meyer Unkavik and Scott. His firm works with U.S. companies that do business in China. Dennis, welcome back. Let's talk about the Chinese economy and how much distress it is in right now.

It looks like it is in deflation, which is never really a good sign at all. I'm not sure it's quite there yet, Tyler, but last year, 2022, the Chinese economy grew, if you believe the statistics, at about 3%. This year, the economy is growing really even less than that. And in fact, in Q2, which we've just finished, the GDP grew 0.8%. And I really wonder if that's even a real statistic. Let's talk a little bit about this potential executive order. What will, it do and how would it likely affect American businesses that want to do business in China, but certainly don't want to do anything to damage American national security interests? We have a law called Siphyas, a committee for foreign investment in U.S.

For years, Tyler, what it did is it prevented inbound investment that we thought would hurt the U.S. Now Biden has expanded the Sipheus to make sure if you're outbound, if you're an investment, or if you're a company, that it's going to be much more difficult for you to do that. The question is why? I think the close line between what is militarily application and what is not is what's driving this. I think there are three areas that the Biden administration will look at, semiconductors, which, as you know, they've already done.

Secondly, quantum computing, but then the hot topic today is AI. Is AI. And so this would be an extension. or has it already been put in place about that kind of outbound investment? Because Sipheus, when I think of it, is can a foreign company come in and buy a port operation in the United States or something like that? Is it already in place this outbound restriction that's for Sipheus? Great question. In short, as far as semiconductors go, the Biden administration a year ago started to put this outbound in effect.

What's happening now, Tyler, is that I think the Biden administration is going to essentially make Sipheus not just inbound, but outbound. And that's a real change. Is the Biden administration tougher on China than the Trump administration? Honestly, I see very little different between the Trump administration and the Biden administration in dealing with China. In a certain respect, I think Biden might be slightly tougher, but you remember the tariffs that Trump put on in 2018? They're still And I don't think the Biden administration is going to remove them. Lastly, Dennis, I was just wondering, this will mostly, it sounds like, affect private equity and venture capital firms.

Have they been actively trying to push back against this? Are there, you know, or are they just going to look elsewhere? And how much of the capital for developing artificial intelligence and the rest of it in China, are they really providing? It has to be a single digit percentage. It's not a major amount that I can see coming from the U.S. into China. But the Chinese have something called their cyber space administration. And it's now cutting down on AI within China. In other words, something like ChatGBT, GBT.

They're making it more difficult in China to have that there. But in the long run, do I think that American companies are going to want to continue and invest there? I think the answer is yes. Do I think it's going to be much more difficult? It's going to be much, much more difficult. All right, Dennis, as always, it's great to see you. Our friend Dennis Unkovic, we appreciate your time today.

Thank you. Further ahead, a chip industry talent tug of war. Following the Chips Act, companies promised to hire thousands of workers. But the labor market is making that difficult. And also check out the Dowland Jones Industrial Average, which just briefly turned positive to erase a couple hundred point drop earlier this afternoon. Back down by eight points. The power lunch is back after this. All right, welcome back.

Hi, Kelly. How are you? Oh, hello. There you go. Oh, hi. I didn't see if she was. She's right there. Let's get to the bond market. Rick Santelli's tracking the action. Yes, Tyler. I'll tell you, it's been a very interesting session, especially considering how every trader and every source I have, of course, is trying to decide how to go into tomorrow's CPI, jobless claims, and Friday's PPI. And believe me, there's nothing that could have a bigger effect on the yield curve, interest rates in general and equities than some big moves in consumer price index or, producer price index over the next couple of days. Let's look at a short intraday of tens and realize at 1 o'clock Eastern we had a pretty good auction.

You see, that's when we made the low yield of the session. It has turned around just a bit, and as it sits right now at 401, we are still down a basis point or two on the session, whereas two-year note yields are up five at 480, which means that the steepening of the yield curve that was taking the inversion away to some extent might have run its course, and it's very interesting. it right before CPI, so the bear steepener may be over for now. If you look at a Jobs Friday chart of tens, you could see we had an intraday of 420, we are down from that, toying with 4%, a very psychological level, basically right where

the auction hit just a whisker below 4% of 3.999.999. And if you look at the Tuesday 10 spread and think like a technician, midpoints, easy things. If you look at the recent range from April to now, you're basically looking at a midpoint around the early to mids minus 70s, which is kind of exactly where it held. Pay attention to that if we start to see more of a return to more negative and more inversion in the yield curve. And finally, everybody should pay attention to the relationship, not only the dollar yen, not only of the euro versus the dollar, but the euro yen.

Right now, it is very close to retesting 15-year highs in favor of the euro at a time the Japanese are supposedly going to tighten up rates. Holly, back to you. Rick, the Euro yen might be too wonky even for me. It's up to watch. All right, if you say so. Let's turn to the oil market now with Pippa Stevens. Keep it simple, Pippa. Well, okay, there's a lot going on today in energy markets broadly. So let's here start with oil. It hit 8465 today. That is the highest of the year going back to last November. So Rebecca Babin over at CIBC Private Wealth told me this is, you know, thanks to a few things, the ones we've been talking about.

The Saudi production cuts are now actually starting to live. lead to tighter physical markets. We've got demand holding up and projections calling for more. And then also just that the product side demand has been very strong as well. So that's all contributing to that boost WTI at 8439. NAC gas topping $3 per M&BTO today for the first time since March. That, of course, as these record temperatures extend and production is coming down. And then take a look at European natural gas. We have a chart there that it is up 30% today. What? And that is, yeah.

So that is thanks to fears around a strike at an LNG plant in Australia. So European storage is very healthy. There is definitely not any type of fear about a shortfall right now. But the fact that it could rally this much on an Australian LNG plant potentially being sidelined does still demonstrate that these markets are very fragile worldwide. Now finally, energy stocks, the best group today after that bounce in oil and gas. Marathon Petroleum hitting a record high, PSX and SLB at multi-year high. I have one for PIPA. What is it?

It's about the wind business. Okay. Speaking of coming out of left field, evidently it's not going so well these days. Yes, so wind is tricky because some of the utilities in this earning season have been flagging that speeds haven't been as high as they were slated to be. Wind speeds? Yes, and so that's very tricky because climate scientists don't completely understand why wind levels vary from year to year. And so it's hard to predict sometimes. You know, we also saw that last year in Europe,

and that was part of what drove those TTF levels up, you know, over 300 euros per megawatt hour because wind speeds were slow for some reason. And so it hasn't been, you know, producing as much as some people would have thought. And so it can be hard to predict. It's a little bit of a black hole area. And costs are going up, so there's a bunch of new project delays for an area we just assume knee jerk is going. And also the tech is always iterating. So things like if the blades are getting bigger, then you need bigger trucks and bigger ships.

And so every two years, if there are development, it can be hard to keep up. And so the costs have been elevated on the producer side. All right. All right. Thank you, Pippa. Pippa's demons. Let's get to Leslie Picker now for the CNBC News Update. Leslie.

Thank you, Tyler. Maui's airport is sheltering nearly 2,000 people as wildfires rage across the Hawaiian Island. The state is asking travelers to stay away as the fire spread, and the county has closed all roads to the historic town of Lahaina, where the flames tore through a local shopping district. popular with tourists. The state's lieutenant governor told CNN local hospitals are overwhelmed with burn and smoke inhalation victims. New York City's migrant crisis could run up a bill of $12 billion. That's according to Mayor Eric Adams, who said nearly 100,000 asylum seekers have

come to the city in just the past three years. He made another plea today to the federal government for more resources. He also called on the White House to give the migrant's work authorization so they aren't so reliant on government resources. The Pentagon is offering millions of dollars to AI experts who can help stop hackers. The cash prizes are part of a two-year competition challenging these experts to come up with ways to bolster cybersecurity. The awards which total $18.5 million will be given out at the 2025 DeathCon Hacker Conference in Vegas. So two years, but quite a prize at the end of that deadline type. That is a big prize. Thank you very much, Leslie Picker.

Ahead on Power Lunch. A little technical support for some of the key earnings and headline movers. We'll be right back with that on PowerLuck. See you back. Welcome back, everybody. A lot to break down in this market, which has been kind of breaking down lately. So we need a little technical support. For that, we turn to Jay Woods, Chief Global Strategist with Freedom Capital Markets.

I feel like we're reunited. It's nice to see you. It's so nice. Wrong location. I like the stock. You change a little better. Oh, come on. Keep a link this guy.

We have three stocks, three great charts to get through. Let's start with the gambling space has been very newsy with that ESPN pen deal. CNBC Pro actually built a screener of some of Wall Street's most popular gambling names. Why are you looking at Caesars? Well, we're looking at Caesars on two levels. I back this out. Sometimes, you know, if we went a year, we'd be focused on this area right in here. And it's kind of been consolidating.

But what I like about Caesars is over the long term. It broke a major downtrend. Okay, so one, it stopped going down. So let's erase that. And now it's been consolidating. consolidating here. But, you know, let me draw a little nicer. These lines aren't so perfect on this little wonky iPad. But this 55 area has been very interesting to me. It's been an area that has struggled to get above again and again again. So it's resistance here, resistance,

all of a sudden something changed. It broke out. It retested old resistance, which became support, which in technical analysis, this is exactly the textbook you want to see. So it has the potential to basically go higher. It has a lot to reverse here. So the setup is nice. The space is acting great, and it's leading its peers over the last year in Las Vegas Sands and Win. So of the three, this is the one I like right now. Right, with pressure on the likes of Draft Kings today, Cesar's is one you think could have moved to the upside.

Let's move on to Carvana, which, I mean, how can we not show the chart of a stock that was up 800% this year? They just had earnings, boosted forecast. I think they're taking some profits, maybe down two, three percent. Yeah, up 800 percent. There's a lot going on here, and I would love to back this out because you would see where it can. from. But right now it looks fantastic. A nice little rounded bottom with a cup and handle. I'm not calling that. In fact, I'm watching this area very closely. Today, this stock gaped up. It traded higher on positive news like it did a couple weeks ago when they released

the earnings early. And it is now trading on the lows of the day. This has me a concern. Okay. Let's watch this 3940 area right in here and see if it holds. What we don't see on this chart here is a nice, bearish engulfing candle. If it closes on the low, and it does break this 39 level. The 50-day moving average, which kind of trails like right around here at 32. This is an area where we could see some consolidation. This is a stock you really have to buckle up for. It's a vehicle I wouldn't be in technically because it's a day trader's thing.

If I was trading down on the floor, let's have some fun with Carvana. The long-term investor, I want to see this above 60 for a couple days before I get in because it does have a lot to reverse. But short-term, I think it's going to be part. here, and it could break down this 3940 level. It makes sense. Listen, fundamentally it makes sense, but it's interesting that you see that aligning as well with this kind of amazing chart we rarely get to see. So let's then pivot totally different.

Talk about oil. It actually had been a pretty crowded trade lately. We saw it had a great month. This is the XLE Spider ETF. There's the chart, the 50 day, the 200 day. What do you think? Correct. Well, let's just look at what's happened here.

It's been consolidating. It's had a nice little descending triangle, and it broke out. So what we've seen here is a breakout. Now, the ETF itself is 23 stocks. 39% of those stocks are 2. 39% of the index. It's Chevron. It's ExxonMobil.

Of those 23 stocks, 100% are above the 50-day moving average. So that's healthy. 91% all but three are above the 200-day. Chevron is one of those stocks, not above it. ExxonMobil just broke above today. These are the leaders. They're starting to join the party. So what I'm looking for is what we see recently,

If we were to zoom in, we see a nice little rounded base, and we have a breakout. Now, like I said, it's a little wonky iPad. These aren't the greatest charts in the world. But what we have today is a breakout, not only in the XLE. Exxon Mobil is above its 200-day moving average. Chevron, let's go. Let's catch up a little bit. I'm interested to hear you say that and not to say that this is kind of gone too far or too over-it skis, so to speak.

No, not at all. In fact, this was the leading sector in 2021, 2021, 2022, and it's been lagging. but over the last four months, it's up 12%, 7% last month. It's starting to catch a bit, and then look at, Pippa just talked about it. With crude, 83.5 is a very key level. It's trading right there. We see a breakout, and then you throw in hurricane season. Right.

I just dip my toe in the Florida waters. It's kind of warm. Let's see what happens there. It might be good news. One hurricane in the Gulf, and the price of crude is going to rally. The setup is there. If Chevron can join the party with Exxon, as it's doing today, we can see a nice run up to 52 week.

if not all-time highs in New York. Very, very good to know. Jay, great stuff. Thank you so much. Appreciate you coming over, Jay Woods. All right, Jay, thank you. And coming up, a tug of war for talent. Chip companies competing to fill crucial roles

before a labor shortage takes hold. We will bring you the key details when power lunch returned. Welcome back following the passage of the so-called Chips Act. Companies like Wolfspeed and Intel are promising to fill thousands of jobs. But with a tight labor market, this could lead to a tug of war for talent. Christina Ports and Evellas has more. Christina. Well, $231 billion is coming to the chip sector in the next few years or so.

And you have companies that are expanding, building out, and realizing just how difficult it is to find talent, like lap technicians that would come to this clean room and then go do R&D in there. What we're seeing is a prime example with Taiwan Semiconductor. They were the first company to publicly announce they were delaying the production of their plant in Arizona to 2025 due to a lack of skilled U.S.

workers. They are actually bringing in Taiwanese workers to help work with some of that more advanced equipment. So I caught up with the president of TSM, Arizona to ask them they really had to do with cheap labor. It actually is more expensive to bring the worker from Taiwan, pay them a fair U.S. salary while they're in the U.S. and pay for all their relocation and housing and support. It actually makes them more expensive. The chip industry is expected to add 115,000 jobs by 20,000. But over half of those are expected to go unfulfilled due to the lack of talent and training here in the United States. And some companies like Intel are definitely taking notice.

We do see that skilled labor, right, in the constructions as well as skilled labor for our fabs is something we got to work on. Companies are working on that by, you know, competing with each other. There's that tug of war that's going on. And we are seeing a slew of new job postings in Texas, North Carolina, where I am right now. as well as New York. And I have to say, the Chips Act is making some progress. There's about 50 community colleges now that offer some type of semiconductor program. There's $13 billion going to the workforce training.

But overall, these programs take a while, and it's going to be even longer until they churn out qualified employees. Guys? All right, Christina, thank you very much. Christina, Ports in Avelas. Still ahead, it's back to school time, and this could be the first school year to feature AI tools prominently in the classroom. We'll explore the benefits and the pitfall. when power lunch return. Welcome back. It's peak back to school season.

And while we typically focus on, you know, backpacks and shopping, today we want to home in on a key challenge that students and teachers are going to face, the rise of artificial intelligence in education. And a recent survey by Clever, about half of teachers said they're concerned. Programs like ChatGPT will make their jobs more difficult in the next three years. So will it? What should teachers and students and parents and technology companies do? Here to discuss are Alex Katran, the CEO of the AI Education Project.

He's here on set with us. And Sheneid Bovel is a futurist and founder of way. Sheenaid, it's great to have you back with us as well today. Alex, let's start with you. You've been working for a couple of years to really bring awareness and education about AI into the classroom. So you're firmly, it sounds like in the philosophy of, you know, AI is here to say, let's learn and partner with these tools instead of trying to keep them out of the educational system. Is that right? Yeah, that's right.

I mean, you know, the fact is that companies are not waiting to decide whether or not AI is a tool that they're going to use. Like, they've moved past the question of should, and now they're focusing on how. So how do we use language models like chatGBT to increase productivity? And they're moving fast, and it's actually a race. Like the company that figures this out is going to have a huge advantage. And so what that means for schools is if students don't have the skills to thrive in those companies and to actually add value to companies that are looking at. looking for AI augmented workers, they're going to be left behind. In other words, if you don't embrace it for students, those students are going to be a disadvantage

in the employment market or in the secondary education market and so forth. Yeah, that's right. I mean, you know, Steve Jobs talks about, talked about the computer being a bicycle for the mind. ChatGBTGPT is like a sports car. And so if you graduate high school and you're trying to race against people in a sports car on a bike, you're going to lose. So, Chenade, a lot of the concern about the use and deployment of artificial intelligence, and I'm not sure yet what a large language model is or whether I really even need to know what that is,

but it's there. But that AI is a tool that students can use to cheat, in other words, to use AI as a replacement for actual learning. What do you think about that? And I don't know whether you have children or not. if you did, how would you regulate the use of AI in the home so that your children are not using it to cheat? Yes, so I don't have children, so I'm not speaking from the perspective as a parent, but as a futurist is someone who works in the world of technology. And as Alex had stated, the world of tomorrow is what education is about. You're supposed to be preparing students for what's about to come in the economy, in the workforce.

and AI is going to be a big part of that. So if we are treating AI like a tool we don't want to use, and instead we're banning it and we call it cheating when a student does engage with it, I think we're moving in the wrong direction, right? So I think we have the calculator to lean on for an example. We adapted our school curriculums to incorporate the calculator, and that meant school actually got harder. We all had to deal with things like algebra and calculus as a result. So instead of gripping to curriculums of the past and saying AI no longer fits, we need to update these curriculums for the modern age, which means using AI. In fact, there are some professors that expect AI to be used and as a result have raised the bar on what they expect from students to come into

class with. Alex, one of the things that I think we have to keep in mind is that education is also meant to teach people how to think, right? And when I use these AI platforms, usually I'm comparing the answer with, okay, they're giving me this answer, but I know kind of this is true, or I'm going to other internet resources to do it. Like, there's not a lot of transparency about where those data sources are coming from, and it took me probably 30 years of both education and being out there as a consumer of media to understand you have to know what the source is and what their biases might be and how to filter that through. How are people who are five, six, seven, eight years old supposed to do that. They can't really. So how should they be using these tools?

So that is a really good question. And I think it's yet unanswered. We don't have research that shows what age is too early to introduce something like chat, GBT. Because you're right, there is metacognitive skills development that may be stunted if you introduce something so powerful and effective that it could become a crutch. Or in a very simple way. What if it's wrong? You know, how, we're relying on something to give us answers that are sometimes wrong because this is new technology. So it feels like, you know, the worst that could happen if someone tries to cheat and they get the answer wrong. But really the worst that could happen is that this tool is what, not use? I mean, how would someone even know whether the information they're getting is correct?

Well, I think to be able to know whether the information is right or wrong, you have to also know what type of information does it tend to get wrong. And it's much easier to learn that by using the tool and identifying and seeing that like it's called hallucinations, but effectively just sort of make stuff up. But that's something you need to learn by doing. It's really hard to talk about that conceptually. And so, again, we're not advocating for every student to be using Chad GPT in the classroom today. In fact, I think very few AI advocates are even pushing for that. But what we are pushing for is we need to figure out when and how to introduce these tools and build those baseline competencies. which include the ability to identify what are the appropriate uses of AI and also where are the limitations and where does it not make sense?

Sheneid, how do you use artificial intelligence so that it helps narrow the digital divide between affluent families and less affluent families, families that have computer facilities and resources and those that don't? How do you do that, especially when some of these services, I assume, are going to be for subscription and paid models? Yeah, it's a really great question. And it's why it's so critical that AI access and teaching and learning is a part of curriculums because we know that there are a lot of students who don't have the same opportunities at home. So if we can level the playing field in schools, it's a really important start. In fact, I think it was last year when the New York State Public School Board banned ChatGBT in Schools.

However, there were some private schools in New York that not only started to teach AI, they hired what are called prompt engineers, people that really understand. understand how to get the most out of an AI system to teach students. So that's a prime example of kind of further disenfranchising people by not giving them access. So I think school is a really important place to start and a good equalizer, hopefully, when it comes to content and curriculums. I did find it notable that Sal Khan, when we first asked him about the arrival of this technology, immediately was like, I think this is great. It's going to be a whole new way of learning, almost with a one-on-one tutor and that kind of thing. So we'll watch to see what he does

and what the rest of the school system does as well to keep up. All right, Alex, Chenet, thank you very much. We appreciate your time today. Yeah, thanks for having me. Awesome. Really good. All right, coming up, we've only got a little time left, but we've got a lot to give you some other stories we want to talk about.

Closing time is next. All right, we've got about 90 seconds left in our program and a bunch more stories you need to know about. Let's get right to it. We just wrapped up our back-to-school segment on the role of AI and education. According to a new poll, 82% of Americans, do not trust AI companies to regulate themselves fairly. On the other hand, the survey from UGov found that 56% support creating a federal agency

to regulate AI compared with 14% who don't. I thought people weren't trusting the federal agencies very much, but clearly in this, they don't trust the AI companies even more. Even though they're going to be providing our education based on the last segment, it sounds like. Let's talk housing quickly, homeowner equity in the U.S. U.S. hit $10.5 trillion in June. It's a fourth highest monthly total on record, according to new data from Black Knight. That means the average mortgage holder had $199,000 in equity. You could tap it,

but it's expensive. Expensive to do it now with the interest rates where they are, but it's a good sign of household balance sheets. All right, and speaking of homes, you may notice that houses are, yes, getting smaller for a change. As real estate prices continue to rise, builders say they are scaling down the size of new homes, in some cases by its money. much as 10%. Shocking. Wow. A report from John Burns real estate consulting found a third of new homes detached are expected to be less than 2,000 square feet. Wow. That is that. Energy efficient. All right. Thanks for watching Power Lunch. Closing bell starts right now.