Power Lunch - Nasdaq rallies to end week 5/1/26

Episode Date: May 1, 2026

How is the market digesting big tech earnings? Crude oil prices tick lower.   And Axis Capital CEO Vincent Tizzio joins to discuss the global insurance industry.   Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Markets and your money on pace for a fifth straight week of gains and more record highs for the big indexes. Happy Friday. Welcome to Power Lunch, more hope for an end of the Iran war, sending oil down and stocks up. But what is the real state of the straight? A rare, an exclusive interview with one of the biggest ship insurers in the world. Look forward to his perspective on that and the economic impact of elevated oil prices. J.P. Morgan says this kind of sustained disruption could drive Brent to 150. And that's a shock bigger than the Ukraine conflict in 2022 and more in line with the crises of 1979.

Scenario that keeps global recession risk elevated at more than 30%. The firm's chief economist Bruce Kasman is here. Let's get to the market setup. Investors find themselves at we are coming off the second best April for the S&P since 1950. Thank you Ryan Dietrich for that one. And of course, that brings us to May, where the old sell-in-may adage and go away may may or may not be relevant, given that nine of the last 10 Mays have been positive. So if you're going to stay in, where should you be putting your money to work?

Let's ask that question to our friends on set here. One point BFG wealth partners chief investment officer Peter Bookvar and ER shares chief investment strategist, Ava Ados. Welcome to both of you. Thank you. Peter, the rally is so strong that this is the thing about the stock market. Either you go, well, you know, I'm waiting for an entry point, waiting for a pullback, And then, yeah, you wait, you miss it.

Or you have these rallies. You go, well, now it looks like it's overextended. I mean, just describe what you think is going on here. Well, the data center construction trade has been unbelievable. I looked at Caterpillar today. It's trading 50-50% above its 200-day moving average. Wow. People were talking about the semiconductor index when it was 45% above its 200-day moving average.

Just to highlight and quantify the extraordinary extent at which these stocks have rallied. But a lot of the other parts of the market are just being left for dead. So it is very narrow. Who's being left for debt? Because I've heard a lot now about all of the positive. The small caps are positive. The earnings revisions are positive. Who is where who's being left behind? Bank stocks are beginning to lag. The consumer staple stocks, no one cares about. There's nothing exciting about that when you can buy a tech stock. So and also. Yeah. average stocks 13% below its high. Yeah. And if you look at the number of stocks above, it's 200-day moving average, it's lag. But hey, you know, the tech stocks dominate the indices,

and when they're strong, the market's going to appear to be strong. And the question of chasing it or not, yeah, that's always very difficult. I think that's it. I think what we've learned, right or wrong, and our viewers can disagree with this, Ava. They can hate what I'm about to say. But the AI trade spending is superseding for now the costs and risks around. the Iran war. Fair or not? Fair. And the question is, and the puzzle is, last year, four hyperscalers made on Microsoft, Amazon and Google, invested $443 billion in AI CAPX. This year, they're projected to invest $680 billion. The question to us is, where is the ROI in AI? We saw what happened with Open

AI, and the Mr. Targets, and we're looking for that ROI. And today we'll discuss later, we think we have three companies. I call it the AAA basket where we can find this ROI. So it's a company by company basis. And you should look at the company's financials to find that. And I think that spending, that $480 whatever billion you referenced, that spending is going to go to jobs, it's going to go to construction, it's going to go to earnings. And the market is more focused on that than the effect of high gasoline prices. Right or wrong. I'm not saying it's good or bad, but that's what's happening. So what we are analyzing is the investment in AI infrastructure.

So what we're seeing, on the one hand, you have the war, and we're all concerned with the war, but we do see strong earnings. And the reason why we see strong earnings is because the AI has allowed many companies, not every company, but many companies to widen their margins in an unprecedented way. So the way that we see that is on a company-by-company basis, looking at the company's financials, and there's many examples of companies that all this CAPEX investment has materialized. But also there's other headline names that we're looking at that we haven't seen that being translating in margins being wide enough to prove that AI has been used.

Peter, jump in here. So what's very interesting is the market actually, in terms of the tech trade, has been a little bit differentiating in terms of the spenders of the almost $700 billion and those that are receiving that spend. Those that are receiving that spend, those are the stocks that are really just driving everything, where the spenders, being the hypers, the market is being much more critical of. And you look at even meta, meta's free cash for the last year was about $45 billion, except. It's expected to go to four this year. Wow. That stock is punished. Oracle, negative free cash flow.

The stock is punished. Google, their business is off the charts. They're making up for everything, even though they also have shrinking cash flows. So it's an interesting differentiation, but because of the strength in everything else as part of that trade, it's taking everything with it. If you look at GDP yesterday, you know, three quarters of the growth was data center construction and spending on intellectual property and equipment. saw that in the GDP number. In the GDP number. So we're so heavily reliant on this part, in addition to, of course, upper income spending,

but it's being reflected in where the growth is and what the stock market is. But also liquidity in the stock market has been trash. It's not been good at all, right? So you've got this lack of liquidity. You've got a few people buying a few stocks with a couple billion, trillion, whatever, zillion dollars, and that's going to bring everything up. You had referenced Ava the AAA. Yes.

All right. So let's get into one of them, Arista networks. because we talk about meta and Microsoft and all the big names. Well, those data centers require a lot of stuff from a lot of companies. Right. Arista is one of them. Yes, this is more of a front-end CAPEX capture, AI CAPEX capture, because when hyperscaler invest in AI infrastructure,

that flows directly into the AAA that we're going to mention, and one of them is Arista. So any time a hyperscaler invests in their AI, training infrastructure that flows to Arista switches, for example. So what we'd like about this company, and we've been long-term owners of it, holders of it, in our ex-OVRETF, is that it's been very

consistent, and who doesn't like a consistent player? Their revenue growth has been consistent year-over-year about 27% to 29%. And their margins are holding their ground to, which for a company, which is a $200 billion company plus, And it's growing its revenues. It's very rare to see margins being so stable.

So the gross margin is 64%. The operating, the EBIDA margin is 46%. And they've been consistent, not exactly, but very close to that, which is what we like. And one detail of them, a lot of the market doesn't know, is that they are partners with Amazon. So when Amazon... Is everything in A? We have access capital later in the show. Amazon Alphabet.

Today's show is brought to you by. the letter A. Yeah. So there is a $6.5 billion warrant agreement with Amazon, and every time Amazon buys their infrastructure, then that vests through that warrants, and that will vest through 2003. So Amazon has an economic incentive to see Arista succeed. I mean, also on here, we have Astero Labs, which is an infrastructure layer. The one that surprises me is App Loven. That's the one where I didn't, I didn't see that one coming. Yes. So this is an indirect play.

We've been our own holders of this for many years, and I've been a fan of this company for many years. Market hasn't been, Ava. I don't want your mom is here, so I'm trying to be nice, but the market is not like that blood in the last this year. In the last three years, I'm sorry to your mom. In the last three years, the company is up 1,500%. Wow. Obviously, there's the SEC overhang, and there's the question with data, security and everything,

but we need to recognize but when a company goes up 1,500 it attracts short-seller interest. And I'm not saying that we should invest or we should be negligent to the data that has come out and the questions, but until that's proven,

the numbers that are uploving and showing are tremendous high. So we're speaking about revenue growth of 70%. We're speaking about SGNA costs coming down from 11% to 7% and EBITDA margins going from 67 to 77%. These are amazing numbers.

This is a company that made a cookware company scale from $4 million in revenue to $80 million in revenue. And that was through the app-loving Exxon platform. It's crazy. It's how AI works. I think of Peter is more of a C-Gy guy, not like a C-student, but as a lover of all that commodities.

Old school. Copper, old-school. Consumer staples. Maybe not those. So no, yes. Yes. So one of the stocks that I really like, and I'm going to bore everyone watching this, then there are 22 analysts that cover it, and there's one buy, and that's Kraft Heinz. Wow, really? And I'm going to put people to sleep, but there's a new CEO, who's the prior CEO of Kellogg's.

It's trading at about 10 times earnings. They've lost market share for 10 straight years. He was the architect of the brilliant Kellogg-Kelanova strategy. Yes, and that's what I think he's going to bring. And they're finally now investing in their brands. and it's got a 7% dividend yield that is well covered. Everyone, it's left for, that's one of the stocks. Wait, 22 analysts, one buy.

One buy. On Kraft Hines. So what does Wall Street have to do to catch up? I love that. Situation like that just has to get less bad, and you're going to get a nice move on the stock. It is surprising because he has such a good track record. Well, you're going to start to see it because they're spending $600 million investing in their brands in terms of advertising and marketing and packaging and quality

and so forth. And do you like the staples more broadly? Because when you made the comment about them selling off, I mean, I thought about Coke, which had that nice pop on earnings. You don't usually see a 5% move, but that's maybe a one-off. So far it is because the rest of the group it hasn't been able to lift. It lifted Pepsi a bit on that day. But it's a group that it's just not exciting for anybody

when you can buy anything touching Gen AI. Well, and also when our analyst last hour said, you sort of see a three-to-six-month lag before things like an oil pop really hit the consumer. So you do wonder a little bit about what could be coming. I'm wondering if we're going to start to hear stuff about the consumer within the next couple weeks. The price of gasoline is of 30 cents this week. Yeah. Outside of six months in 2020, still lower than 2022, though. Right. Within six months. People are not, you know, the media, whatever. And I don't blame the media part of the story, but, you know, context is key.

So I looked at that. Six months within 2022, it was higher than it is today. But outside of that six months, it's never been higher than it is today. And of course, on real terms, it's less, incomes have grown, so it may not have the same impact as it did in 2022. But the rapidity of the rising gasoline prices really actually took me by surprise this week. Yeah, no, I think that's a great point, especially into the summer season. And, you know, did book far just give Kraft-Times a little pop there? Show the Andrews stock chart again. Did it move?

I mean, it looks like it moved a little bit off the low. See if your picks ultimately if this one cuts the mustard. I don't know. Look at that. Peter. Come on. Tell me, look at that. Yeah, it's less negative.

The bookvar bump. Thank you both. appreciate it for being here. Peter Bookvar, Ava Ados of ER shares. All right, let's get a check now on the bond market because guess what? Again, we keep talking about rate cuts. Bond market's not paying attention. Ten year yields at 4.36%.

Like, we're seeing moves in Japan. Japan's very important in the United States. Ten year yield there, trading above two and a half. I know we'd love to have two and a half. But that in Japan is the highest level for that debt since 19. 97. That's like their 5% basically reflects inflationary concerns and the cost. Energy rise. The U.S. dollar, by the way, hitting its lowest level against the yen since the end of February. So if you're at a party tonight, Kelly, I know you're a big partier. And someone says,

where are we in the yen dollar trade? You're going to say it's the lowest level since February. No, no. Do you know I wanted to go on a whole tangent about the intervention with the yen and everything that's been going on? We have Peter Bookvar here. Put aside five minutes, friends, and we could really get into whether it's a preview of more to come. We'll save it for next week, maybe, Peter. It's the busiest week of earnings. We do have some big movers to get to. Like another A, Atlassian, the software name soaring on strong cloud and data center growth best day since 2017. And then the three R's. Reddit, 69% jump in revenue. Roku, 52-week high today after it reported 22% revenue growth. And the big laggard Roblox, the company slashed its full year guidance,

said its new child safety features are weighing on booking numbers. So from all A's to all ours. That's right. It's kind of like my report card. After the break, we're going to hone in on another bucket of stocks reporting earnings today. And that'll be brought to you by the letter E because it's all about energy. We'll talk about that. And could we have a $150 oil here and soon?

Paul Sanky with his take and thoughts coming up. All right, ExxonMobil and Chevron, both out. with earnings this morning, both beating major Wall Street estimates, although both stocks are just a little bit lower profits actually down compared with the same period last year, despite surging oil prices due to the Iran War, although only one month of the three-month quarter. Oil right now above $100 a barrel, but where could we go if this goes on and maybe gets worse? Paul Sankey is president and lead analyst at Sankey Research, and Paul, I want to be optimistic. Markets are at record highs.

oil's down a little bit today. We've got some positive developments, maybe, from Iran or on the peace talks. That said, I heard Darren Woods and Mike Worth this morning on CNBC both expressing concern about supply disruptions long term. Those guys know what they're talking about, so I have to listen. What's your take? Yeah, there's a major problem, obviously, in Asia, and I think that the supply chain aspects of it is going to be petrochemicals.

And in fact, in Exxon's results today, you saw a very negative petrochemical margins as well, which was interesting. And I think that's going to last because, of course, Exxon's using natural gas here in the U.S. to make their chemicals available for export. But in Asia, there's a crisis that's going to start rolling right through that whole chain. And then, of course, you just have the lack of oil, which also is eating really rapidly into inventories, as you know. Yeah, and so that's, I think. And if I'm wrong, Paul, I'm sure you'll tell me.

But is that the big oil question right now, which is how long can the inventories, the storage in China, the SPR here and in Europe, how long can that hold out? And then what happens if this goes on longer than that holds out? Yeah, that's right. So basically you're in a situation where, for example, there's 400 million barrels about left in the SPR. Obviously, you're just hitting a million barrels a day of withdrawal right now and you're probably going to a million and a half. So you can see right there that you have approximately, let's say, 300 days, which is only a year. What's extraordinary about the current situation, as you know, is we've been in it now for 60 days plus

and we think it'll be at least three days to recover. This is a number that Valero gave yesterday. For every day out, you need three days to recover. So the situation is now basically guaranteed to last through to November 26th this year. So, you know, it's, we are going to test inventories and how low we can go before prices go crazy. Can you, can you kind of hold these energy stocks here? Paul, I know you're a fan of Exxon and Chevron Valero and BP, even if we don't go to 150, even if we, you know, let's say we're 90 or 80s, you know, there's a, there's a positive turn here.

Because I agree with you, obviously, about, you know, it seems pretty dire. But if there's a positive turn, can you still feel comfortable holding these energy stocks? I think so, because I think we have raised the terminal back. of them based on their oil reserves and, you know, the fact that we do have a much more challenged Middle East now, you know, we're still blocked after all, but I think it'll be very long before you get major growth investment in the Middle East. And, you know, as a result, I think we're going to have a structurally high oil price. And as a result, you know, I think these companies, you know, you can buy them absolutely. And certainly there's going to be a lot

of excess profit this year based, a lot of it based on refining margins as much as very high oil prices. Yeah, we only had one month of higher costs in the first quarter, obviously March. The war effectively began at the beginning of March. Now we're at the end of April, so one month out of three, let's assume that oil stays higher or maybe around where it is now for three months. Talk to us about what that means for earnings. And then, Paul, you're one of the few analysts out there that I've actually seen it in OPEC meeting. You actually get on a plane and you go, and that's a huge compliment to you because it's a long way. But what do you make of the UAE's departure?

How will that affect oil markets longer term? Well, I think OPEC will continue, but, you know, it's really the Saudi organization now, because, as you know, UAE and Saudi were really the absolute remaining core of OPEC. And so the fact that UAE is going in its own direction, I'm not sure we will ever attend another OPEC meeting again, actually, Brian, to be honest with you. Wow. So there's that, yeah. Go back to the first question. Sorry, Brian, what was he?

No, how much will, if we stay high for this entire quarter, not one month, like in the first quarter, Foyle prices stay around this level for the entire quarter. What might that mean for the earnings of some of these companies that you follow? Well, as you know, I mean, for example, Valero just recorded a huge beat with $4 at the moment. The streets are $8 for Q2. So, you know, basically double it. And that's pretty much a lot for Q2 because, you know, we know the crisis is going to continue through the whole of the next two months. And then, you know, beyond that, yes, we do think that the futures curve is undervalued for oil. We think that it needs to reflect what's going on here. And as you know, up to now, it simply hasn't. I think everybody who's counting barrels has looked at the past week's data from the government here in the U.S. and gone, wow, it's really happening. You know, you've seen all the inventories, as you know, Brian, go through the bottom of the range. At the same time, we've seen all-time record demand for oil in the U.S., which is quite remarkable when you think about $4 a gallon and almost $6 a gallon diesel.

So, you know, you have a booming economy here, which is another really fascinating aspect of this whole crisis. I think that what you just said is straight. breaking Paul, you think you may never go to an OPEC meeting again? Yeah, afraid not. We used to love them. But, you know, it's difficult to see what the – the organization had become somewhat irrelevant over the past two years, and we'd completely lost track of quotas and everything else.

And as you know, with 30 million barrels of black oil under debate with the OPEC call, we'd stop looking at the call on OPEC. We'd do something called the call on U.S. supply. Cusp is the way we look at the oil market where we take the whole 105 million barrels. a day and work out where the demand is. And on that basis, the U.S. needs to double its oil production right now, believe it or not. That's the level of call that there is at the 10 million barrel a day mark. You know, literally the market's calling for 10 million barrels a day, more U.S. oil.

And at the moment, we just, as you know, hit record exports here over 13 million barrels a day, which is another amazing number. Well, it'd be great if we can marshal, you know, on a war footing practically to try to double oil exports. That's a tough order. Paul, appreciate your time today. Thanks for making it. Paul Sanky with Sanky research. I'm sure Paul will be in my weekly intelligence piece.

I don't like the term newsletter. You know that. I don't like it. I don't like it. Missive. but AAA gasoline prices are at about 440 nationwide, GDP holding up somewhat amid that, as you can see there. Bruce Kasman is the chief economist at J.P. Morgan.

And Bruce, we want to bring you into talk about you're seeing some more potential fallout for the global economy from these energy shocks. Well, we think there's a real tug of war going on right now. I think the global economy is actually showing a healthy amount of momentum as we make our way through the first quarter. U.S. growth, as you noted, was okay. but there's really strong tech demand, and that's driving growth in a lot of other places, particularly across Asia.

I also think there is a sentiment lift that's been taking place on the business sector side that's starting to lift labor demand. And I do think we're going to see U.S. job growth get back above $100,000 a month in the next few months. But that's coming against the back of a building energy price drag and a real tension here, because as we continue to keep the straight closed, we're starting to draw down inventories. we're starting to potentially run into some physical constraints in places like Asia. And perhaps most importantly, at some point, if we don't feel that this conflict is going to get

resolved, there's a risk of a scramble for oil, which is going to start to create nonlinear price increases. Right. So we think the global economy is at a crossroads right now. And we had Darren Woods on this morning, the CEO of Exxon. He warned that we could see an increasing impact on price. Well, that's the point. I think most oil price shocks we've seen in the past, the first thing that happens is people

scramble for oil. This has been really unusual in that supply has come down, and we're drawing inventories down. People are expecting this to be resolved very quickly. But that creates attention. If expectations start to shift, if we continue to linger with the straight closed, you do run the risk that something shifts behaviorally that creates nonlinear moves on price. When you say nonlinear, I think about Japan, who I was teasing about this a little bit earlier on, but they're having to defend the currency. We're seeing global bond yields back up. sent interest rate policy a little bit askew? What should the Federal Reserve do here? I think the Federal Reserve is doing the right thing. It's expressing patience. And I think the Fed will

continue to in the context of two-sided risk. I think there's more concern that other central banks, I think the ECB, perhaps at the top of the list, starts to get nervous. They have more concern about their inflation targets, and they begin to move right rates up. But the Fed is an anchor here. And I do want to emphasize it's an anchor for a lot of other central banks. It's an anchor for what you're seeing in the equity markets. I don't think the Fed is going to break from that, but I do think we should understand that if we get through this, we're going to be sitting with energy prices more elevated. We're going to be sitting with 3% inflation as a more persistent part of the environment. And probably if we're right, that labor markets start to improve,

the weakness in supply suggests that the unemployment rate is going to start to drift down. So in our forecast, the Fed is a very important support right now. But looking forward six or nine months in the constructive scenario, the Fed's going to have pressure to hike rates. I follow Jim Paulson's work still. You probably know him well, Bruce, from over the years. But he recently was kind of jumping on the bandwagon of saying, look, yes, we have 3% inflation. But if we keep rates where they are, if they're somewhat restrictive, if you were to perceive these as, you know, kind of price shocks, we could be holding back the U.S. economy. Would you be sympathetic to the idea that even against those scary headlines, 3%

because this is acting as a drag on the consumer and ultimately maybe something bigger, would looser rates be appropriate? No, I don't think so right now. I think we have an environment in which the economy is doing okay. It's got imbalances in terms of the components of demand, but it's doing okay. I think we're starting to see some cyclical lift in hiring. It's not going to be dramatic. But the problem is we have a very weak labor supply with tightness there.

And we have persistent 3% inflation. I think the right thing is for the Fed to stay on hold now, balance the risks. But I do think the pressure, if we do not have a more serious energy price shock to deal with, is that the pressure is going to lean in the direction of the Fed having to think about raising rates. All right. Bruce, thanks for joining us. Difficult, a macro environment for sure. Thank you so much.

Thank you. with J.P. Morgan. All right. Up next, the Iran War entering now, it's third month. Shipping traffic in the Strait of Hormuz, still not what it was before the war began. So what's the real state of the strait? One of the leading marine insurers in the world, access capital, live, rare, and exclusive interview. Next. All right, before the break, we focused on the role that oil plays in shaping the global economy. Now we're going to turn to the fast-moving developments around the Strait of Hormuz and in the Persian Gulf. Two months now, entering our third in the war, shipping traffic through the waterway, as you can see on that live marine traffic map.

Still, not at a standstill, but it's close. Even as uncertainty grips the region, some insurers continue to underwrite ships through the critical waterway, but there are a lot of specifics around that. Your next guest company is a leading specialty insurance provider, including in regions of war and conflict. Joining us now in an exclusive interview is Vince Tizio. He is the CEO of Axis Capital Vince. Good to have you on set.

Perfect timing. Nice to be with you both. So straight, direct question. If I'm a shipowner and I want to get an insurance policy to go through this trade of four moves, right now, can I get one? You can. It'll be selective in terms of the companies that you're seeking the coverage from quite selective. Access has been in the marine market for more than 25 years. We're celebrating our 25th year.

The answer directly is, yes, it'll be selective. It'll cost more than it did before the conflict. And the terms and conditions may be modified. How much might it cost relative to just the normal insurance? Well, in terms of the coverage itself, I think you're pointing to the Marine War exposure, which is the coverage that would be drawn upon when you're going through the strait, it could cost as much as a third more than the traditional policy that you buy now. How do you measure your industry, not just access, but your industry,

how do you measure risk now? Because we don't really even know who's running parts of Iran. Yeah, that's part of the challenge. So the uncertainty that is existing in all forms of insurance coverage, whether it be energy-related assets or otherwise, accounts for the uncertainty. How do we account for it? Well, obviously, we have to know, in the case of Marine, the origin of the ship, the vessel, the captain, the crew, what's on the cargo?

How old is the ship? What is the pathway that they're seeking to go through? How long will they go through it are just a number of the factors we will account for? Vince, if we can jump in for just a moment, stay right there. We have some breaking news out of Washington. Amen Jabbers bringing the details. Amen. Kelly, President Trump has sent letters to Congress,

informing them that in his view, the hostilities with Iran have ended. Now, he sends this on the 60th day of hostilities, and that's a significant threshold because the War Powers Act requires the president to get Congress's approval for any conflict that lasts longer. That, an official declaration of war. What the president is arguing in these letters

that he's sent both to Chuck Grassley on Capitol Hill and to the Speaker of the House, Mike Johnson, is that the ceasefire that he put in place on April 7th ends the hostilities. He says on April 7, 2026, I ordered a two-week ceasefire. The ceasefire has since been extended. There has been no exchange of fire between the United States forces and Iran

since April 7, 2026. The hostilities that began on February 28, 26, have terminated. He goes on to say that there remains a significant elevated threat from the country of Iran and U.S. forces continue to adjust their posture accordingly. So by implication, the war could resume at some future date. But what he's suggesting here is that the hostilities were finite. They began. They ended. There was no need for a war power's resolution. And if they were to begin again, that would in effect be another new period of hostility between the United States in Iran, a separate war, if you will, and that would not require congressional authorization

or a declaration of war. So some legal maneuvering here around what this ceasefire means in terms of the president's authority to continue to conduct combat operations in Iran in the future. But, Amin, in other words, they faced a May 1 deadline to get that 60 days from the start of, he sent the letter 60 days ago saying we're beginning, you know, this war. And so this was the day it had to be, well, are we asking for approval or ending it? And so the president is saying, we've ended it because of the ceasefire. The president's saying we've ended it. And effectively, he's arguing here that he could restart the clock.

Right. If he has another military incursion into Iran, he could say, this is an entirely different war. Therefore, I've got another 60-day period to work with. So what he's saying here is that he doesn't want Congress sticking its nose in the Iranian business. And he'll keep them updated as things develop. All right. Amen, thank you very much, Damon Jabbers. So, Vince, hi.

You're one of the world's leading war risk providers. Is the war over? The uncertainty that we have today will remain the same tomorrow, notwithstanding what we just heard. I think it's way to see. Why is that? The president, I think what he said. Do these technicalities.

Is the war over? Is that what they just said? I don't know. I was trying to understand. The escalation of risk still exists, certainly in this Marine underwriter point of view. And so I think that we're going to have to wait for more facts and circumstances and take decisions accordingly. Nonetheless, listen, this is an area that is still facing hostility.

And in the last three months, 34-odd ships have been impacted, 19 of which have had substantial harm and two have sunk. And so we'll have to take this announcement in measure. Certainly we'll watch as the ships start to progress through the strait and elsewhere within the Persian Gulf. And we'll assume our risks in a measured way. I think one thing you could say about this is, however, the president is technically categorizing it. Iran is still in charge of the straight, more or less. Is that right? Yeah. And also, marine ships still have to have insurance coverage. And so we're going to continue to honor our obligation to our insureds. We'll selectively write new business for ships

that want to go through any of those passageways. But before we were listening to the president's announcement, we were talking about two things. One, we were talking about specialized coverage called Marine War, which is tailored in war-conflicted areas. And we were talking about marine insurance generally. And I think the notion of having marine insurance today remains the same with or without any conflict. The only change is whether or not the coverage of war is triggered in our policies. Does the insurance market generally be, how much does the insurance market generally be impacted by this in terms of things like terror risk? Because even if the, quote, war, I'm trying to use my words carefully, the war is over,

it doesn't mean that some hoothy rebel with an RPG on his shoulder in a boat isn't going to fire at somebody in the Red Sea. So how does this mess with the market for months or years to come? It has broad implication. And you pointed to one of the more topical areas today, the political war, political violence and terror market. It's a large market. it's what most of us have been commenting on in our first quarter earnings releases,

those of us that have exposures to the Middle East. So it will have continued impact. In terms of the marine exposure, again, the marine exposure will be heightened, not with setting a war. You point to hooties. There'll be other forms of aggression that come out, whether it's pirates, whether it's the hooties, or if it's some of the Iranians themselves. And so I think we will have a wait and see. We'll continue to honor obligation to our existing insureds and stay the course.

But if I came to you and said, I'm going to make a go-for-it. You would extend me that coverage at a price. For our existing insureds, we've extended that. For a new insured, we would have to underwrite it and understand a whole range of factors, some of which I talk about before the break. Right. So I think it's also this being the case that you can get coverage if you want to make go-for-it. Someone last hour said, one of the problems perhaps with the market is that we see more memes

than we see facts about what's happening in the straits. So even hearing you relay the number. of ships that have been sunk or targeted. I mean, we don't see a lot of this news day by day. And do you expect that situation to improve that of the proportion who are trying to make it through that fewer of them are targeted or sunk? I think it'll improve over time. And as more access is permitted, as more confidence in the waterways is assured, you'll continue to get more real-time information. Today, it's spotty, it's inconsistent, and you have to corroborate it often.

I would imagine that in the last couple of years, for many reasons, with COVID, with the pandemic, with this war, with what ends, climate emergency, whatever you want to call it, that your market, access capital, reinsurance, insurance has changed dramatically in the last few years, correct? For sure. For sure. I think the macro, the interconnectedness of the global economy, whether it's born out of climate-related issues, cyber, goods and services being transported differently than they had been in. in the past, the notion of an interconnected global economy and the provision of specialty products that we bring to the global economy has changed. And the speed and the velocity of change is particularly the challenge to make certain that our policies are responsive to the needs of our insureds. Ms. Tizio, Access Capital, really appreciate you coming on and kind of rolling with the breaking news right in the middle, despite the fact that I've never seen you before, so I appreciate

you coming on. There you go. Thank you. Thank you for having me. Let's get to Angelica Peoples now for the CNBC News Update. Angelica? Hey, Kelly. Well, United Airlines says it is preparing to support Spirit Airlines customers and staff in the event of a shutdown. The statement comes after a Wall Street Journal report today that the budget airline is preparing to seize operations after a federal government deal fell through. President Trump confirmed earlier this afternoon that the two are still in negotiations and that he has hopes that something will materialize today or tomorrow. The Archdiocese of New York has offered a settlement payment of 8.

million to 1,300 sexual abuse survivors. According to reports, documents related to abusers in the church would also be released. The offer follows an $880 million settlement by the Archdiocese of Los Angeles in 2024. And Oscar winner Pavel Talonkin will have his trophy returned to him after it was confiscated by airport security who confused it with a weapon. Talonkin won best documentary for his film, Mr. Nobody Against Putin. His co-director, David Boren, Orinstein posted yesterday on social media that the Oscar was missing. The airline Lufthansa said it has apologized to Toulonkin for the inconvenience. That is certainly one notable mix-up, Kelly.

Back over to you. Glad he got it back. Angelica, thanks. The Pentagon is moving deeper into AI, signing a deal with seven major tech companies, although one major player is missing, and that's Anthropic. Defense Department chief technology officer said on CNBC that Anthropic remains a supply chain risk, but that mythos, its powerful AI model, is a separate issue. We have to make sure that our networks are hardened up because that model has capabilities

that are particular to finding cyber vulnerabilities and patching them. Anthropics says the model can identify and even exploit weaknesses across nearly every major operating system and web browser. Let's bring in Jen Easterly. She's the former director of the cybersecurity and infrastructure security agency. She's also the CEO of RSC, which is one of the biggest cybersecurity conferences in the world. Jen, it's great to see you. And I've seen, you know, some who say, you know, we have to be really careful about mythos and others who say it's this bit of marketing.

Maybe there are other chatbots out there who have just as sophisticated capabilities. And if that's the case, you certainly would hope that companies are making sure their defenses are up. Yeah, well, it's great to be with you. So it's good to step back just a little bit because I think something has gotten lost in. and the hype, the messaging around all of this, I think it's important to understand that at the end of the day, every modern business runs on software, right?

Banks or hospitals, energy companies, government services. And the problem is that the vast majority of that software has been built over several decades and delivered with flaws and defects. We call them vulnerabilities. Mr. Michael referred to them in his comments. And we have those vulnerabilities because of incentives that have led to speed to market and features and convenience and cost all prioritized over security. So I often say we don't actually have a cybersecurity problem.

We have a software quality problem. So what is most significant about this period of time in these class of AI-enabled cyber capabilities, whether it's mythos or we will very likely see additional classes of very powerful capabilities? is that they may finally actually give cyber defenders the ability to find and fix those flaws in software at a speed and a scale that was never previously possible. So that's the very optimistic part of the story. Right. But at the same time, as you alluded to, these are capabilities that can also be used by criminals and hostile nations to actually find and exploit and potentially cause enormous damage. And that's why I fundamentally believe that this moment has to be treated as a national security inflection point that requires, you know, whole of nation, public, private, collaborative efforts to drive the identification and remediation of these vulnerabilities before these tools become more widely available for use by our adversaries and end up doing enormous damage.

Sure. Jump in here. So your role was CISA, the director of cybersecurity and information. infrastructure, this agency, which, you know, this was under Biden. The fact that we have one at all suggests this is the post that should do exactly what you described. Is there funding attached? And there's one thing when corporate America has to put up its defenses, they can spend out of earnings, presumably. What about state and local governments? Yeah, I mean, you're exactly right. Look, government itself has a critical role, and you're seeing

this and discussions happening at the Pentagon at the White House in coordinating and to some extent constraining the responsible deployment of these very powerful AI capabilities so that they're first used to secure critical systems, not simply released broadly before defenders are ready. So that is exactly, as you just said, the kind of moment that SISA was created for, right, created in the first Trump administration to serve as America's cyber defense agency and as the national coordinator for critical infrastructure, resilience, and security. So this is a moment where SISA, in the Department of, of Homeland Security has to be empowered and, frankly, resource to coordinate with the frontier

AI labs, all of them, not just anthropic, because other labs are going to get these tools and release these tools very quickly, coordinate with cloud providers and software vendors, cybersecurity companies, all of the owners of critical infrastructure to be able to identify the most important exposures and then drive remediation before we see enormous chaos created by adversaries using these tools. Quickly, Jen, before we let you go, if you, based on your direct experience in this role, what would you say are the top three or four or five? Maybe I shouldn't ask you to name them on national television areas of vulnerability.

Quickly. Well, look, at the end of the day, these vulnerabilities are in software widely. I mean, that's what led to trillions of dollars of ransomware attacks and cybercrime. I think the key question is, for any business, any business, any business, business needs to look at this not as an IT issue, but a fundamental business resilience issue and understand their dependencies within their infrastructure so they can identify where there's vulnerabilities are before adversaries take advantage of them for massive disruption or data theft or an ability to really create outages. So at the end of the day, it's all about

identifying those vulnerabilities and patching them before, in fact, adversaries can take advantage of that. All right. Jen Eastern Lee, thanks. Important conversation happening. Appreciate your time. Thanks so much. Thanks so much. You bet. All right, coming up, this stock, once left for dead, staging a stunning comeback. Your mystery chart answer. Next. All right, we do it at the end of the show every Friday are stocks of the week. All right, Kelly, I'm so boring this week. No, this is a great story. No, they're taking chips out of the garbage. I know, but it's a boring pick because Intel has been rocking record high. below out quarter last week, now on track for back-to-back 20% gains and it's an RBI.

Intel coming off its best month ever and creeping back close to $100 a share. I think Jim said there's no bare case for Intel anymore. It feels that way. For me, it's Caterpillar. It also hit a record high after its earnings. They raise their full-year revenue outlook driven by strength in the power equipment business. And with the AI boom going on, everywhere you look, Caterpillar's well positioned. The company's more efficient.

They have a new CEO now, and they are coming off their best month since 2020. It's a data center played because I know we think of them as tractors, but they're taking the giant engines, basically turbines, converting them to push natural gas into the data centers. Great story. More power lunch after the break. All right, big week ahead. We're going to be live at the Milken Conference Monday and Tuesday. Got a full CNBC lineup.

Here's ours. Deena DeLorenzo, Guggenheim Investments, actor and entrepreneur, Brian Cranston. That's right. Breaking Bads, Brian Cranston, on Power Lunch. Fortness, Fortress co-CEO, he said. Florida Governor Ron DeSantis, Mike Sable of Venture Global, David Gross of Bain and Doug Kimmelman,

maybe not a household name, Kelly, but he just made billions. His firm did on the sale, cowpine to Constellation, maybe the greatest energy investor right now that we're not hearing about. But you will. I love it.

Can't wait. It's going to be awesome. And it wouldn't be power lunch without a little food talk. A menu item at this weekend's Miami Grand Prix is turning heads. It's called the food god hot dog. It's an Australian waggues sausage topped with crem fresh, caviar, and edible

gold. You can get all of that for a cool $150. Okay. As a long time race fan, everybody knows this. I will say this. Somebody get Fonzie, put him on some water skis because he's going to jump that shark. And all I would say is it's not the outrage over a $150 a hot dog.

It's every time you go out to dinner. I was at Chipotle the other day. Two people, $50. What? What did you get? The gold burrito? It's all about the protein these days. And that is pricey. So, you know, at least with the gold hot dog, you feel like you're really getting something.

When you just walk out of a typical restaurant, you're like, what, what? I don't know. It looks gross. Anyway, maybe you like it. Thanks for watching Power Lunch. And closing bell starts right now.