Power Lunch - Meta Lawsuit, Snap Judgment 10/24/23

Episode Date: October 24, 2023

Meta Platforms is facing a new lawsuit over its alleged impact on kids and teens. The suit claims Meta’s services are designed to be addictive, and the company lied about it. We’ll speak to the Attorney General of Washington, D.C.Plus, our contrarian week continues with a look at fellow social media stock, Snap Inc. 38 analysts cover it, but only 3 rate the shares as a “buy.” We’ll speak to one of those brave bulls about why he likes the stock. 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 alongside Dominic Chu. I'm Kelly Evans. Coming up, Meta facing a new lawsuit over its alleged impact on kids and teens. The suit alleges Meta's services are designed to be addictive, and the company has lied about it. We'll speak to the Attorney General of Washington, D.C. Speaking of social media, our contrarian week continues with a look at Snap. 38 analysts cover the stock, but only three rate it a buy. We'll talk to one of those brave bowls. All right, but first to check here on the markets overall. Earnings are certainly in focus this week with the Dow Industrials now actually trending higher up about 133.33.039, the last trade there. With regard to some of the big movers that you are seeing, earnings related, a couple Dow components in 3M, Coca-Cola as well. RTX in the mix up about 7% due in large part to a $10 billion stock buyback program there overall. The former Raytheon, of course, higher after those results. to hear from those CEOs and get the traders take on some of those names, specifically those

names coming up in our three-stock launch. Now, we are also looking ahead to some key results after the closing bell today, namely tech giants, Microsoft and Alphabet, I guess though technically it's communication services. Still, though, you get the point. Two companies with immense influence on the overall market. And by the way, if shares of TransUnion hit a six-year low, right now on pace for its worst day ever, trans union stock. The company getting its guidance cut due to weakening macro environments, saying that lenders are tightening credit on concerns over the job market. So right now, trans union shares have lost roughly a quarter of their value, Kelly,

just so far intraday today. That feels like a pertinent development for the markets, but they're shrugging it off largely. We begin with trouble developing for meta. Today, more than 40 attorneys general filing suit against the company. the main allegation that META designed its products, Facebook and Instagram, to be addictive to younger users. The suits also claim META has misled the public about those dangers. With us now is Brian Schwalb, Attorney General for Washington, D.C. Thank you for joining us. Welcome.

Appreciate you having me. What does the success of this lawsuit hinge on? Well, the lawsuit that we filed in the D.C. Superior Court here in Washington, D.C., alleges deceptive and unfair trade practices under our consumer practices. Protection Act. We are seeking to hold META accountable for engaging in deceptive and dangerous business practices, putting out an addictive product designed to hook young people into spending more time on their screens and creating massive amounts of harm. Our lawsuit will seek monetary redress as well as injunctive relief to make sure that META changes its practices

that are otherwise causing great harm to residents here in the District of Columbia and across the country. You know, meta would probably, I don't know what they would say, but there are a number of social media apps parents are concerned about where they see these behaviors. Why not go after Apple? The iPhone seems to be the portal to everything. Look, we have a tremendous amount of evidence and information that's been developed that shows that meta knowingly has designed its products in a way to maximize its ad revenue by addicting young teenagers onto its product. It wants to keep eyeballs on its platforms for longer periods of time. And it does that in a variety of addictive ways. And all of that is in furtherance of putting profits over people. And because we have the

evidence to demonstrate that META has done this, I, along with Attorneys General across the country, in a bipartisan way, have filed lawsuits to hold META accountable. Brian, it's Dom here. I wonder, META has said that it's, has taken steps that has put remedies in place around, I think they said 30 of them, application type adjustments or alterations that are there to help safeguard against those things that you are suing over. In your mind, what exactly would be success on your front and the other attorneys general about this? What would META have to do other than what they claim they have already done to protect younger adults and teenagers? Well, we know that META for many, many

years has known full well what type of adverse impact its apps have had its social media platforms have had on young people and has exploited the addictive nature of those apps to generate additional profits. And so part of what meta is going to have to do is going to have to compensate for the harms its behavior, its knowing behavior has created. More importantly, though, is the injunctive relief worth seeking. We need the meta to change the way it's rolling. out an addictive product to young people who are particularly susceptible. The teenage brain developing as it is is particularly susceptible to addiction. And we hear time and time again that teenagers wish they could get off of their screens. They wish they could get off the social media

platform, but like an addiction, they can't. The algorithms are designed to keep them on for as long as possible, and when they're off to lure them back as quickly as possible. And we need that type of behavior to change. Do you think a successful defense could be one that says, you know, yes, we designed our products from maximum engagement, but it's ultimately up to the parents or to the individual to, you know, self-regulate? I don't think that's going to be a successful defense. We have seen how dangerous addictive products in the course of our country have been ultimately regulated and made sort of obsolete by virtue of the fact that lawsuits sometimes in regulation puts those dangerous products out of business or makes them much more difficult for people to use. And you can

think about whether it's jewel and vaping or cigarettes. We know that addictive products by themselves hook people, and it's not always about young people or their parents being able to keep them away from the addictive enticement of social media platforms. And if what would satisfy the harms done here, could this be a financial settlement of some kind that is paid out for mental services and support and that kind of thing. Do you want changes to the product? Do you want differences in the age of people who can access it and how that's verified? What are the remedies you're seeking here? So we are certainly seeking monetary remedies to redress the harms that have been caused, but most importantly, we're seeking injunctive relief to cause meta to change its business model that

preys upon young people through addictive technologies. And that can be through a variety of changes to the business model. Certainly, there needs to be better, clear disclosure to consumers about the risks and harms that META has known about. But there are also changes to what is essentially an unfair business practice of hooking teenagers, a very valuable market onto their social media platforms simply to generate more long-term ad revenue. And before we let you go, there's a fine line, competitively speaking. We know that the Chinese copy Communist Party is dealing with the same kind of issues with their social media companies. We're dealing with similar issues here. But in the end, we have a competitive landscape to navigate as well.

So how exactly then do you kind of tow that line between holding firms accountable, yet making sure that they maintain their competitive edge in a global marketplace, especially in technology? Well, I believe that great companies can do well, can make money and employ lots of people without putting teenagers at risk. And successful business models do not depend upon praying and seizing upon the vulnerabilities of young people to addict them to your product. So I'm confident that companies can remain competitive and follow the law. And all companies that are taking advantage of consumers should be on notice that I, as the Attorney General in the District of Columbia, and a lot of my colleagues around the country have our eyes on them. Would that include Snap, TikTok?

I could probably name 10 others. Well, I don't want to divulge ongoing investigations, but I think anybody who is relying on a business plan that causes people to be addicted and that doesn't fully disclose the risks associated with their product should be on notice that that type of behavior is not acceptable. All right, so not ruling it out. Mr. Attorney General, Brian Schwalb from Washington, D.C.,

thank you for joining us this afternoon. Appreciate your time. Meta did release a statement saying it's committed to providing teens with safe, positive experiences online, but also going on to say we're disappointed that instead of working productively with companies across the industry to create clear age-appropriate standards for the many apps teens use, the attorneys general have chosen this path. All right, well, let's get a check on bonds right now. Yields are holding relatively steady after yesterday's wild price action. The 10-year no-eal dropped top 5% yesterday, but then pulled back sharp.

some attributing the reversal to a tweet from Bill Ackman saying that he had covered his short position in some of those longer-term bonds. Right now, the 10-year note yield currently you can see here ticking slightly higher to 4.85 percent or just shy of that level. So bond prices falling. The two-year note yield, remember, we had just had an auction around 1 p.m. Eastern time today, ticking higher to 5.095%. So, again, lower prices, higher yields. And we've got a flood of strong earnings pushing stocks higher today as the Treasury yield seemed to stabilize. Our next guest is blaming the uncertainty of the long-term effectiveness of Fed policy on the volatility in those fixed income markets and is still finding opportunities in stocks. So let's bring in David Smith, the chief investment officer with Rockland Trust.

David, this has been a tough environment to navigate because so many investors on both the bond and the stock side feel like we're, in this no man's land. It could go up or down dramatically. So how exactly do you find value in that kind of environment? Well, it's challenging. Good afternoon, Don. It's been very challenging to, obviously, to figure out the direction here of the markets with the volatility and the interest rate rise that we've experienced over the last couple of years unprecedented in many respects. And the interesting shape of the yield curve, and the volatility of that shape over the last couple of years has also been remarkable. So it's a little challenging to kind of see. a pathway forward for either the stock of the bond market, given all that change.

If that's the case, there are certain places that you say are better positioned from a longer term perspective, and that would be worth kind of getting into, maybe lagging into position by position, what types of names go on that kind of shopping list? So at Rockland Trust, we're big investors in really high-quality companies, and one of the companies that sort of is focal point for us today is ExxonMobil. The recent deal announcement, cost of stock to kind of pull back a little bit. We feel very constructive about the transaction and the outlook for oil prices over the coming quarters and years. We think the commodity is going to be in demand for a long time to come.

And this particular deal gives them a real focus on one of the premier basins in this country, the Permian. And we think it's a fantastic deal, really compelling cash flows in the future and a very attractive dividend yield of about 3.3% right now. So we like that one a great deal. In addition to that, we like a couple of growth-oriented companies. We're highlighting Visa. Today, it's a great company with a price of earnings multiple that looks a little bit rich on its core. But when you compare it to itself over history, it's actually reasonably compelling relative to its historical multiple. And the other one is Viva Technologies, which is a company that creates software for the healthcare space,

full suite of products helping primarily in the drug and medical device discovery areas. It's a really interesting growth trajectory. and, again, a multiple that's well high, about 36 times earnings, looks compelling relative to where it's traded historically, kind of out of favor at the moment. So we like the potential of both of those last two companies to have multiple expansion and solid earnings growth. Yeah, I go back to TransUnion, which Dom mentioned off the top, David, and a big drop in that stock as they're talking about consumer weakness.

Correct me if I'm wrong, Dom, and maybe some labor market weakness as well. David, if we're heading into a more challenged macro environment, I can actually see the for growth stocks in that kind of period. You've got to go to where the growth is. But we're also heading into one with high interest rates, or at least higher than we had during the 2010s. Where else, what other kinds of stocks do you think such a landscape would favor? Well, I think you really have to focus on companies that are quality companies that generate cash flow. At the end of the day, to us, that's the most important thing. And it gives you the staying power to kind of ride the volatility that's embedded in an environment like the one that we're in at the

moment where it's not really clear the pathway out. say all the time to our clients, you know, this would have been one of the most forecasted recessions that never happened, at least hasn't happened so far. So it's unclear of the trajectory of the economy. In the kind of period like that, you want to have a rock solid balance sheet. You have to have companies that understand the debt structure they have on the balance sheet that are not exposed to a near-term refunding that's going to cause a lot of pain from their cash flows perspective. And if you do that, you can ride through these challenging times and come out the other side in a really strong position.

All right, David Smith at Rockland Trust. Thank you very much, sir. We'll see you soon. Thanks for having me, Don. Coming up, one-way Wall Street, analysts covering some of the big names reporting this week, seem to be pretty in step with each other, whether it's collectively bullish or bearish. It's pretty hard to find a contrarian, but that's what we're looking for this week, anyone who's trading against the tide. We've got one idea. We'll talk about Snap next. Welcome back to Power Lunch. It's time now for our contrarian call of the day. and we're taking a closer look at Snap,

the Snapchat parent, up about 3% ahead of its third quarter earnings, which will be out in just a couple of hours. Company was hit hard by declining ad budgets amid high inflation and interest rates. It's lost to 80% of its value in the past two years, and it hasn't seen the recovery witnessed at larger peers like, yes, meta this year. The street not too optimistic about its performance, either 24 analysts rated a hold, 5 a sell, and just 3 a buy, according to fact set.

Our next guest is among the few bullish on the stock, He sees 40% upside from here. Rob Sanderson is a senior internet analyst at Loop Capital Markets. Rob, welcome. Hi, thanks for having me. I always kind of chuckle a little bit calling Bulls' contrarian because we're so used to. It's harder to find people bearish on these stocks, usually not in the case of Snap. Why does everybody hate it?

Oh, well, they've had a lot of struggles. I mean, they've been underperforming in terms of ad monetization. Much of this has to do with changes that they've been forced to make to their advertising technology stack. And this is in response to the user tracking changes that Apple implemented late last year. And they've really struggled to get back on track here. And it's been quite disappointing. Management offered very bullish outlook before we had started entering this period of elevated inflation. And that proved to be really misguided and credibility is and issues.

So there's a lot of reasons why people are skeptical about where the company's position is. And that's where we land today with the stock. Well, you're not among them, or maybe you are, but you kind of see more value here. You have a $14 price target. We were just speaking to the Attorney General of Washington, D.C. I don't know if you caught that about how they're going after meta for addictive apps for children. Now, I asked if Snap would be next, and he didn't rule out the possibility. Yeah, not something that we spent a lot of time sort of digging into behind the top line sort of headlines on that issue.

So it's not something that I can offer much of an opinion on, unfortunately, but, always something to watch, you know, regulators have a responsibility to keep people safe and, you know, something that should be expected with the entire space. Is this, Rob, it's, it's Dom here. I'm sorry. Rob, is this a situation where Snap is the, in your opinion, the best one to capitalize on this? You mentioned kind of the macro trends. I remember earlier this week, analysts over at Stiefel have upgraded Pinterest to a buy from a kind of hold rating. And one of the things that they cited was this better.

macro environment for digital advertising. So is it just that Snap is going to be better positioned from a valuation perspective or from an execution one or a little bit of both? It's more of a turnaround on. So they've been like I said struggling for for some time. But if you look at social media networks, the lifeblood, the thing that really keeps them going is user engagement and user growth. And at Snap, you know, these appear to be very solid. And you know, in the recent internal letter that they offered for employees, and the company understands that these things are going to get into the public domain, you know, they offered pretty robust outlook for user growth. We have to infer from that that trends continue. Now, the advertising technology is something

that can be fixed. You can improve monetization. It might take a little longer than investors we're hoping for, but it's a lot more difficult to turn around engagement. That's the lifeblood. You know, that's what that keeps us interested in the stock. And that's really what's going to lead a turnaround is building off a base of highly engaged users, improving monetization and improving their technology stack. And so that's what you'd be listening for as they report, Rob. What would be kind of the entry point? Obviously, it sounds like maybe now is that one, but also the fundamentals that would make you feel confident in this buy rating.

Yeah, it's got to turn into accelerated revenue. growth. And it doesn't sound like the near-tierment is all that robust, to be honest. So it sounds like they're still having some issues. They're maybe making some progress, but it's not as quickly as some may have hoped at the beginning of the year. But there are some green shoots under that. So it we'll be looking for is those green shoots. How have they been performing on direct response? That's really the core issue for them. There's some other interesting components behind the scenes here, too. The subscription service, Snapchat Plus, this is, They've reportedly passed 5 million users in September.

This is incremental to advertising revenue. It's very high margin. They're targeting 14 million users for next year. It could add up to $500 million of recurring revenue. Their AI service is interesting, implementation of Gen AI. Users seem to like it. Engagement's growing on that product. And also their leadership in augmented reality.

They've been very far ahead of the industry. It's sort of the problem because advertisers don't get the reach or scale in that ad media. on just Snapchat alone. But now both meta and Apple seem to be making more of a focus around AR is more ahead of their longer term ambitions in VR. So a lot of things seem to be coming together in the longer term perspective. Maybe this isn't the quarter where it becomes more clear and more obvious. But it feels like a number of items are building and progress is moving in the right direction.

Hey, Rob, I mean, a single-digit stock price like Snap always lend you to think that there might be way more upside there. But you mentioned size and scale. And when I think size and scale in digital commerce and marketing, there's one name that pops into my mind and that's Alphabet and Google. They're due to report their results.

What are the thoughts there? Are they going to be the bellwether for this entire tailwind that could be there for social media? Yeah, combined that with the report from Meta Tomorrow. And those are obviously the one and two in the advertising,

internet advertising space. I think it sounds like Google search is solid, once again, this quarter. YouTube sounds actually very strong this quarter. A lot of that's related to the NFL. But Google's likely to report a pretty decent advertising revenue quarter to kick us off. So that's what we're looking for out of Google tomorrow. Sorry, tonight.

Meta, similar tomorrow. I think meta's probably a little better than Google even. And, yeah, it should be a good start to the earning season from the Internet advertising stalwart here. And a quick word as we go on your enthusiasm for trade desk. Yeah, that's one we initiated with this morning. This is a very interesting long-term story. There's a great need, I think, for an intermediary in this advertising sector. We talked about Google and meta and Amazon, and you can throw TikTok or a few other massive platforms in there.

They take about 85% of the revenue from the Internet advertising sector, but only something like a third of the total time spent. So the trade desk really serves that remaining sort of quadrant or sort of two-thirds, more than a quadrant. And I think there's a great need for this. It's sort of like supplying advertising technology and data targeting and AI to those that don't have the spending capacity of the Googles and the Amazon's and the meadows of the world. So I think it's a very intriguing story. All right. One of your top or the top pick. Rob, thanks so much for all your time today.

We appreciate it. Thank you. Rob Sanderson. Every time I think trade desk. I think of capital markets, but it's digital advertising. Not what you think. I think of architects. There you go.

All right, coming up for the show, California is suspending permits for some driverless robotaxies. We've got details and tech check coming up and we come back after this break. Welcome back to the show. As you can see, their oil is down another 2% today, down 8% just so far this month in October. Pippa Stevens is here with more on that price action. And Kelly and I were talking about this. We thought that crude oil had a PhD in global economics like copper did back in the day. But is that the case?

Are we telling a story in crude oil prices right now? Well, it feels like the war risk premium has certainly now evaporated from the story. It is about 2% higher since October 7th. But as we've discussed, neither Israel nor Gaza is a major oil producer. And so I think that after the initial knee-jerk reaction, traders are now saying, unless this extends to the broader Middle East, it's really not going to have any sort of disruption on production. Then also today we got weak data out of the Eurozone. And then also China is looking better, but you do have to look a little bit under the hood

because their property sector is still a little bit under pressure. And also just because China's looking better doesn't necessarily mean we're going to see a huge jump in imports, given that when prices were lower, they imported a lot, and so they can work down their inventories, which can offset some of the demand. Now, two movers to highlight today. The first being Halliburton, so they reported earnings. They are under pressure with slightly missing results on the top line. But the CEO was, of course, asked what the Exxon Chevron deals mean for his business,

the thought being that if there's more consolidation, there are fewer parties for him to work with, and so that's not good. However, he said that he ultimately thinks it's better and that it will bring stability to the North American market. It also highlights the important of fossil fuels. Then Next Era and Next Era Energy Partners, both of those are up today as well. Of course, these have been massive underperformers, but they are surging after earning. so Next Era did point to strong deal origination, meaning that they can still build these projects, even if rates are high. But they're still both sharply lower this month.

Yeah, it's been a really rough patch for them. I think we probably need even more rate relief maybe than what we've seen so far. Pippa thanks. Pippa Stevens. Let's get to Bertha Kuhm's now for a CNBC news update. Bertha? Hi, Kelly. The UN Secretary General is getting criticism from Israel this afternoon.

After he said during today's UN Security Council meeting that the Hamas terror attack in Israel did not happen in a vacuum. Israel's foreign minister canceled a meeting with Antonio Gutierrez roughly an hour after the comments, saying there is no place for a balanced approach in this conflict. And a group formed to represent the hostages and missing people from the attack called his statements outrageous. Donald Trump's former attorney Michael Cohen has taken the stand in Trump's $250 million civil fraud trial in Manhattan. Cohen accused the former president of arbitrarily setting his net worth numbers and said he left it up to Cohen and the former CFO of the Trump organization to make the numbers work. The off-duty Alaska Airlines pilot accused of trying to cut the engines on a jet mid-flight may have been taking psychedelic mushrooms for the first time, according to a new federal court filing.

In addition to state charges that include 83 counts of attempted murder. Joseph Emerson now faces a federal court charge of interference with a flight crew. Kelly, I think this makes the case for keeping two pilots in the cockpit at all. I think they're talking about going to one. I'm like, maybe not. Maybe not. Bertha thanks. We appreciate it.

Bertha Coombs. Still to come on Power Lunch, CEOs are sounding off today on CNBC. Up next, you'll hear from Raytheon, Coke, and 3M, and then we'll trade the stocks in our three-stock lunch. We're back after this. Welcome back time for today's three-stock lunch. We are taking a look at some of the movers of the day, all of them reporting earnings before the opening bell, and what the CEOs had to say on the record on our air.

First up, you've got RTX, the company formerly known as Raytheon or United Technologies, after posting a quarterly beat and announcing a $10 billion stock buyback program. That stock is up 7%. So here's what RTX CEO, Greg Hayes, said earlier about what the current state, of the world means for his company? The geopolitical landscape is as muddled as I can remember in the last 30 years. The fact is there is unprecedented demand for munitions and for defense spending, just generally speaking.

And we've seen that already in our business as we ended the quarter with the backlog in our defense business of about $75 billion. And we know there's more to come. So here with the trade is Sylvia Jablonsky, the CEO. and Chief Investment Officer of Defiance ETFs. So Sylvia, what's the take on RTX? Hi, Dom. Great to see you.

Well, RTX, I think, is positioned to be a buy. I'm very much interested in this stock. I just think that there's, you know, sort of a tailwind here because of a lot of the geopolitical issues that we're seeing. You heard the CEO unprecedented historical demand because of Israel,

Hamas, Russia, Ukraine. And the company is really, you know, place to compete there. It's also very much a value play. So, you know, their forward PE is about 13 as compared to a Boeing at 33. They beat on earnings came in about 3% higher than expected 19 billion of revenue. And their Collins' arrow defense business grew 22% to about 903 million. So, you know, between the, the lithium space missiles, the spacecrafts and the avionics, I think the company is poised to do well, for unfortunate reasons, but poised to do well in the coming quarters. There's a link that some people make for

RTX with somebody like Boeing, that the aerospace and the defense side could be big drivers of their business. But in defense, is there another alternative or do we think that RTX is going to be the one that really outperforms? Yeah, I mean, I think that RTX in terms of potential price movement can outperform. There's a projected compound and you'll go through it about 13 percent there. Of course, you have all the major players in the space. You have Lockheed needs. You have Boeing. but I do think that they're going to be in, you know, kind of the top five performers in the space here. Let's move on to Coca-Cola, Sylvia, which is higher after it beat Street estimates on the top and bottom lines, and typed its full year outlook.

We've heard a lot of speculation about the popularity of weight loss drugs curbing demand for food companies. Here's what Coke CEO James Quincy said about that potential threat. We in particular have been on a journey for those people who want to consume less calories to provide, you know, zero-calorie drinks, to have innovation, to take down the calories in other drinks, and have smaller package sizes. So we think an environment where people are looking to consume less calories, we can absolutely, we have the portfolio that will fit for that, that sort of environment. And in the end, you know, if you want to consume less calories, you can eat less food, but from a hydration point of view, you're going to have all the liquid or largely have all liquid.

So we believe we can provide the low calorie options for those people who are looking for that. So we don't see at this stage a structural issue of any large scale for the beverages. I don't know if you want to wait into the weight loss debate itself, Sylvia, but would you buy the shares here? Yeah, the weight loss debate is super interesting. You only want to drink and not eat is what I think from that, a little bit of that. But yeah, I would buy the shares. I mean, I think you can hold Coke forever. The CEO does make a great point.

You know, they've had growth in Coke Zero. They've had growth in sparkling waters and teas and other kind of, you know, non-high-calorie caffeinated beverages. And overall, you know, the company is just essentially poised to do quite well. They pay out a nice dividend, you know, forward yield is about 3.4% on this. They're kind of your steady, eddy, stable, cash flow quality name. You know, it's kind of a long-term hold. And I don't think there's anything wrong with holding this in a portfolio.

Maybe you get single-digit growth on the equity side, another 3% on the dividend. That's a pretty sound trade, in my opinion. All right. Let's move on the shares of 3M, which are up about 5% after that earnings beat. And after raising their full-year profit forecast, saying efforts to improve performance and control costs are working, 3MCO, Mike Roman was talking about those recent legal settlements they reached as well earlier on Squawk on the street. Listen, the two settlements that we announced, the public water supplier settlement that we announced in second quarter and then the combat arm settlement we announced in third quarter. They're important agreements to move forward. We're working with and aligned with all the parties and the courts to complete and finalize both

of those agreements. Those are very important. That's been a big thesis for many bulls and bears with 3M, Sylvia. The legal hurdles, whether or not those risks are kind of done and dusted, the spinoffs and everything else, the corporate restructurings, is 3M now well positioned going forward? Well, so I think they had a great quarter. You know, this earnings call was a good one. They'd beat by 33 cents, 33 cents on EPS, and they beat by about 280 million on the revenue side. They have more operating cash flow. They've done a great job cutting costs, you know, that that kind of growth isn't coming organically necessarily. It seems to be cut from cutting costs and some efficiencies there. I like that they're, you know, going to hitch their wagon onto the AI trade. They're talking about investing in these higher margin businesses like electrification of, you know, of driving, you know, industrial digitalization, things like this. That's a, you know, a growing business. But the two reasons that I'm sort of going to just watch this stock for the next two

quarters is because of these lawsuits, right? They have about $6 billion in cash, $1 billion in stock to pay off on the Earplugs lawsuit. And then another right after, you know, right before that came that the 10 billion that they're paying for forever chemicals to the public water companies. You know, the investment in an AI has to come to see the growth and revenues there. I don't know that they're going to pay out that dividend and that they're promising. So this is very much a wait and see. I'm not sour on the stock. It was a great quarter for them, but it's a wait and see before I'm going to jump in. All right. And Sylvia, before we let you go, those are three stock-specific, very corporate headline-driven stories. I wonder, from an ETF manager's perspective,

we've asked some of our other guests, is this a good place to be in the market right now? Do you see kind of flows to some of your ETFs that indicate more bullishness or general bearishness? How exactly are the fund flow shaping up for you? I think that there are enough investors on the sidelines that we're happy with kind of their 5%. And they're starting to see that the Fed is becoming a little more dovish. Potentially we get some rate cuts next year. You know, perhaps they stay a little higher for longer, but it is going to eventually go the other way. There's a lot of, you know, kind of political turmoil, uncertainty in the economy.

me. And I think, you know, you think back to October, everybody kind of ran for the hills, left the market, and then you got 20, 30 percent NASDAQ rally. We've lost a good amount of that. So we actually see a good amount of flows coming into the, you know, QQQQY, kind of the NASDAQ-centric tech-type trade on our side. But just in general, you know, I think you were showing trade flows over the last two shows or so, you know, you kind of see a lot of investors coming back into ETFs and equities now. So that FOMO is real. I think that, you know, this is a good entry point when you've gotten these like five to 10% corrections on some of the big names that investors like. Sylvia Jablonsky with a view there from the top.

Thank you very much. We appreciate it. Kelly, we haven't talked about FOMO in a long time. No, we haven't. No, we haven't. No, no. They don't have it in Bitcoin today. That's a question.

Still ahead following the money trail, the first sustainable battery recycling facility in the U.S. is set to open thanks to hundreds of millions of federal infrastructure funds. We'll get key details when power lunch returns. Welcome back. A startup is turning $480 million in federal funding into the nation's first sustainable battery recycling plant. It's underway in Kentucky, and Diana Oleg is there to bring us the details. Hi, Diana. Hi, Kelly. That's right. Going up behind me is nearly one million square feet of production facilities to recycle EV battery materials, ultimately enough to power 750,000 batteries per day. year. Deep in Kentucky farm country, a green economy is taking root. Evie battery recycling company Ascend Elements is investing about a billion dollars, building a half million square foot manufacturing plant, North America's first sustainable battery cathode production facility. It's urban mining, in effect, that we're collecting batteries from the field,

bringing the back in and making new battery materials out of them. Construction started sooner than expected when Ascend received two grants totaling $480 million from the bipartisan infrastructure law. The facility will employ up to 400 people and, according to Ascend, generate up to $4.4 billion in economic impact to Kentucky over the construction period and the first 10 years. The fact that we are getting a certain amount of government support in building a facility like this has really also helped catalyze some of the investors, the private money that is coming in. Last month, Ascend announced it had raised $542 million of new funding. One of the largest

U.S. Clean Tech private equity raises this year. It was led by decarbonization partners. Make no mistake, these are heavy lifts. And to finance companies like Ascendelam, it's going to take all kinds of capital. Now, in addition to infrastructure funding, there is also money in the Inflation Reduction Act, the IRA, that is a tax credit to automakers who use recycled batteries if those batteries are made in the U.S. So guys, this is what you call technically a government funding double whammy. Yep, big deal for automakers who want to qualify for subsidies and also a big deal for the surrounding area, isn't it? Yeah, absolutely. I spoke with the Area Chamber of Commerce and he called this quote a game changer. He said not just the jobs coming in, but the

upgrade to area roads and utilities, childcare, etc. So it's really going to change this whole area. And I also wanted to mention that we profile the send elements in our Clean Start series right here on Power Lunch. A year and a half ago, back then, it was a $95 million company. Now, over a billion. It is our first Clean Start Unicorn, Kelly. Wow. Diana, thank you so much.

We appreciate bringing that to us today, Diana Oleg. All right, coming up for the show, Golden Gate Keeping California's DMV. suspends permits for cruises driverless robotaxies will get a live report when power lunch returns after this. There's a major development just crossing in the last hour or so in the battle over driverless cars in San Francisco. And of course, Deer Drubosa has that story for today's edition of Tech Check. This was the Holy Grail for me. If they could get this down, I could go to bed in New York and wake up in Washington, D.C. in my own car. but it's not going to happen anytime soon in California.

Yeah, the companies will certainly tell you that there's major safety implications. This is, you know, the next technological breakthrough, but we're still ways from there. And today's major setback for Cruz, California's DMV has suspended Cruises, driverless taxis here in San Francisco, effective immediately. Now, the notice from the DMV says that the vehicles aren't safe for public operation and that Cruz has misrepresented information relating to safety. In a statement on X, formerly known as Twitter, Cruz says the DMV is investigating an incident involving a pedestrian that was caught under a vehicle.

Cruz says that it shared information with several regulatory agencies and will continue to cooperate. But this is a huge blow to Cruz, which is owned by General Motors. The San Francisco streets, they are key testing ground for driverless cars. But cruise vehicles have been involved in a number of incidents that have turned public safety agencies like the fire department against them. It's also led to more calls from public officials to suspend the program. Now, Cruz is also trying to catch up with Google-owned Waymo in the space, the other leading player in the race to develop autonomous vehicle technology. Both are expanding to more cities. And this suspension from California's DMV, that could have implications for cruises pilot programs elsewhere, widening that gap with Waymo even further.

Now, we've been working on a larger piece about this topic here in San Francisco with our digital team. And I recently, just a few weeks ago, rode in a driverless cruise and Waymo Robo taxisies. Here is some footage from my cruise ride. It didn't know what to do when another car was trying to back into a parking spot. So what you're seeing here is the driver got out of his car. He's very agitated. He spat on the vehicle and then he kicked it. The steering wheel, as you can see here, it moved, but the car didn't go anywhere.

And this was, I got to say, guys, an incredibly stressful situation that made me as the rider feel like this wasn't really ready for prime time. Of course, I'm just one rider, and this program has been in operation for a few months now. But by contrast, guys, I also rode in a self-driving Waymo Robotaxie. It was a lot smoother and far less eventful, and that program is still on here in San Francisco. Deirdre, what exactly is it going to take? California, Arizona are arguably kind of more at the forefront of this autonomous driver revolution. What is it going to take for these companies to demonstrate for regulators? that these cars can actually be used in roadworthy situations?

I think put simply, it's going to take many, many more miles, right? That's the only way that this technology improves. That's what the autonomous vehicle companies will tell you is that they need to be able to test on the streets without a safety driver in real-life situations in order to improve. But there's drawbacks to that as well, right? Some of the public safety agencies like the fire department

says that we don't really want you to. use our streets as a testing ground, especially after all these incidents that have come up. I mean, you've had vehicles in the way of ambulances, of fire trucks, in the way of crime scenes. So the technology, at least some people say, is not there yet, not ready for prime time. And that's essentially what the DMV is saying now. But it's kind of a catch-22. If they can't test on the streets, they can't get better.

However, I'll say that this is just here in San Francisco. As you said, Dom, they're testing in other places like Arizona. They're looking to the streets of Miami, L.A. to do more of this. So they could continue to test there. But certainly a setback. All right, dear Drubosa with the latest update on driverless cars, thank you very much. Kelly, I would love to be able to, like I said, get into my car at 8 p.m. at night, fall asleep, wake up in Pinehurst, North Carolina, make a 9 o'clock tea time, and then get back in my car the next evening and just have it wake up at home. That might be easier than traveling San Francisco.

By the way, no tweets yet from Kyle Vought. Cruz, who is, of course, probably the most vocal proponent of his technology and the whole industries. But a big setback for them, and honestly, it never really seemed ready for prime time. That's just my opinion. Coming up, dropping on a dime. Thieves trying to rob a U.S. Mint, taking off with thousands of dollars but left behind tons of spare change. We'll bring you those details and much more when Power Lunch returns. Welcome back. Two minutes left. Let's hit several more stories you need to know about. starting with Bitcoin, which hit $35,000 today for the first time since last May.

Shocking upward climb up more than 100 percent so far this year. Could be Bitcoin ETF hopes. Dom, it could even be Tom Emmer, who was actually seen as crypto supportive if he becomes House Speaker. We'll see that's a big if. Stocks in the crypto universe like Coinbase seeing some pretty huge gains this week. And it's not just that. If you take a look at the way Bitcoin is traded, there's always been this case to be made, that it's always trading on technicals, the chart patterns, kind of the historical way it's done in the past.

All of a sudden, you're interjecting what might be fundamental catalysts, right? Regulatory type situations, legal situations, flows into mutual funds and that sort of thing. So it's something to keep an eye on. Absolutely. All right. Yep. Auto loan defaults. They've risen to their highest level in 29 years as interest rates and borrowing costs priced many Americans out of the market.

Wow. This is a big deal because could it be? the canary in the coal mine. It's trans-union. It's experienced. Some of these, the companies facing this segment of the market are crying uncle. The real question is just how did this spread to what degree? And at what point do the cost for cars go lower because of the demand?

Yeah, use car prices already down 18% from the highs. A new survey from resume builder, resume builder finds a third of Gen Z has made career-related decisions on advice from TikTok. And 88% say those decisions made a positive impact on their life. I get this. makes total sense. I don't do career advice on TikTok or Instagram. I would much rather learn how to clean my kitchen with safe materials. Yes. I like that too. And four men charged in the theft of two million dimes from the U.S. Mint in Philadelphia earlier this year. If you're keeping

score, that's $234,000 worth of dimes that weigh two tons. And they didn't even get it all the times were strewn across the parking lot. It's just a heavy, heavy take for sure. All right, guys. Thanks for watching Power Lunch. quarters closing bell starts right now