Power Lunch - Plant-Based Pet Food, Supermicro's Massive Rally & Elon Musk's Future at Tesla 2/5/24

Episode Date: February 5, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. ���Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch, everybody, alongside the amazing. Contessa Brewer, I am Brian Sullivan. Stocks are not amazing. They're falling. Is J. Powell reining in market expectations for interest rates cut? We'll talk about that. Also coming up, more disturbing reports about Elon Musk, his alleged drug use and Tesla's board. How big, if at all, is this a problem for the company?

We'll speak with an unhappy shareholder. Plus, it is apparently Contested the finance trend going viral. It's called Loud Budgeting. Yes. Loud budgeting. Perfect for us. But for the two of us, more people are living on a budget and they want everyone to know about it. We'll talk to somebody who gave the trend a kickstart and a CNBC colleague, it's not Brian, who's been doing it for years.

But first, let's check on the markets right now. As Brian said, looking a little scary out there. You've got the down industrials off by 0.64%. The S&P 500 down a third of a percent. And the NASDAQ composite has dropped a quarter of a percent. Fed Chair Jay Powell reinforcing what we heard him say Wednesday afternoon. rate cuts may not be coming as quickly or as frequently as what the market seem to expect. Is today's drop another test for an already battle-tested bull market?

Let's bring in Mike Santoli for more. Mike, what are you watching? Yeah, contest. I would argue we're in the latest phase of an ongoing test of this bull market premised on the economy being resilient and the Fed pivoting toward easier policy. Now, we've had some complications along that front. It's maybe not as soft a landing as people thought. So the first test, and it was very evident on Friday as well as today, is can this market embrace good economic news?

If the economy is even stronger than expected, and it means that the Fed is going to be slower for a first rate hike and maybe shallower in terms of the rate hike campaign, can we deal with that? I would argue you can if this current data is not a complete head fake. So this is the question. Now, earnings is another piece of this. Can earnings come through led by the very largest growth stocks mostly and support? what are already acknowledged to be very full valuations in this market. I would say a tentative yes so far, but more remains to be seen. It's by no means an inexpensive market.

And it is also an uneven one. So one of the ways this market has been passing this test so far is because you do have the leadership of these very large stocks. And it isn't just the six mega cap NASDAQ stocks. It's also today, Berkshire Hathaway and GE and Caterpillar and Chipotle at an all-time high on Berkshire Hathaway. but it is a select group of stocks. So so far you'd have to give it. You know, it's an incomplete, but so far a passing grade. Are you seeing a trend in terms of earnings beats matching a stock lift?

Yes, but it's not that tight a linkage necessarily. You're definitely seeing misses getting punished. So if you don't make the numbers, if you're in the minority of companies that are falling short, you're definitely getting punished. And I do think you're seeing more like the routine level of, you know, strong stock reaction to earnings beats. I think we've gotten very complacent, assuming, you know, 65, 70, 80 percent of companies are going to beat. We're pretty much on track for that. The aggregate growth numbers are not looking that wonderful, but they are positive at this point

on a year-over-year basis. What that means is, at least for now, the second quarter of last year was the trough for this earnings path. Mike, great to talk to you. Thank you for kicking us off. All right. Now to shares of Tesla, which are under a lot of pressure, not only to start the week, but have been for the year. Of course, 2024, not a great year so far for Tesla investors, though had a massive run last year. The Wall Street Journal out with an exclusive article over the weekend titled The Money and Drugs that tie Elon Musk to some Tesla direction, directors rather. This follows a story earlier this year about concerns over Musk's apparent illegal drug use. Stick deeper into this and talk about why Tesla's board is not doing anything

about it. Kristen Hull is the CIO. of NIA impact capital. She removed Tesla from her core portfolio last January, but does maintain a small position. Now, and I want to be clear, Kristen, right? Like, there's reports about what Musk may or may not be doing, but I want to make it very clear that he has said he has passed all drug tests.

And of course, talking about cannabis. Cannabis is legal in so many states anyway. So what do we know and how do you come at it as a shareholder? Thanks, Brian. And thanks for having me back on NBC. CNBC, this company continues to present concerns for investors. So I'll just say a little bit about where we are with this current concern as far as drug use. And one is just really coming to the job of the board. What is the board as far as ensuring that the CEO is able to do and perform its job

duties? In the case of Tesla, there's actually a very clear drug-free workplace. Their code of contact actually prohibits all employees, including executives, from using drugs, even outside the workplace. And so we're looking to see whether the board is actually doing its job, both looking at reputational risk as well as financial risk to Tesla. You know, I mean, it's hard to follow. I don't know, Mr. Musk. I know what he tweets out or exes out, you know, that he's passed all these drug tests.

What, and there are a lot of reports and sometimes he's, you know, tweeting from all hours the night, but that's his own, who knows where he is in the world, by the way. What do we know for certain, if anything? Oh, do we know whether he's actually using drugs? No, that's not something that I know. It's more that this issue, you know, I think some have said his erotic behavior comes from his genius or his creativity. Some of these outlandish tweets are perhaps part of the genius. We are, you know, there is some concern what is happening. I think it's really up to the board, though, to see can he both stick with the policies and code of conduct that Tesla has set, and then also can he do his job as the CEO?

And that's really for the board to step in and step up and figure this out, and then communicate out to investors, just what is going on. How much of your concern, then, is really about the alleged drug use, and how much of your concern is the oversight of the board of directors or the lack thereof? Thanks, Contessa. is a great question. What we're really concerned is, can the CEO do the job of reigning Tesla, bringing it to its next stage, can it attract and retain top talent? You know, they've had a significant issue with human capital management in general. And so this does point to the board as far

as being able to help reduce risk for Tesla. You know, they are being sued for environmental hazards. They are being sued for racial discrimination. And can we have the brand as well as the financial interest that investors need to see? Do you think what, you know, he made headlines going back to the board and saying, I need to have at least 25% of the stock in order for me to feel like I should really be investing my brain power here. Is this a company that needs Elon Musk? You know, that is the question of the hour. Thank you for asking it. There would be those that say the founders really important. And I think that he, you know, he, no one, you know, love him or hate him.

No one is arguing that he and Tesla haven't disrupted the entire automobile industry, as we know it. We're certainly interested in that battery play as well as connecting to the grid with the solar, as well as everything they're thinking about for robotics moving forward. Do and does Tesla need Elon to move forward? in some way possibly. Does it need to be the CEO figurehead? Could he move to being president or just founder in many ways? That is, again, the work of the board to figure this out as what is his highest use, what is his best use?

And then also, how can we reduce the risk that some of these issues have been posing? Let me ask you a question. You may not want to touch. But listen, Mr. Musk obviously is a very polarizing figure in many ways. And since he bought Twitter, he's become even in more polarizing, Kristen. But you talked about all the things that are going on at Tesla. He just lost this pay package case at a Delaware court. They're kind of going after him on the Twitter side.

Do you feel that Elon Musk generates, and we know he generates an inordinate amount, shall we say, of government attention, but do you think it's fair? Or do you think he is that people just, they want to go after him? Because he's Elon Musk, and he's richer than everybody. So, Brian, that's a great question. I would say in the case of the grievances, he's actually not achieving. enough attention. Yes, he creates a lot of attention on his own platform, whether he should have that platform, whether that should have been taken private. That's a whole other discussion. And yet we as investors really do need to see the board reining him in and they have, in our

opinion, failed to do so thus far. And so we want to see the attention happening. You know, the pay package was deemed egregious and excessive. And could that or should that happen in any company in corporate America or beyond, no. You know, and so the court is saying no. And of course, you think they have the right? I mean, the court can do it at once, but I mean, this was approved by 80-some percent of the shareholders, his pay package. He took a massive risk.

Although. And he hit the goals. Although the court in Delaware decided with the investor who said, we didn't have all the information in front of us when we voted in favor of the pay package. Well, who does? I made a lot of decisions 10 years ago that I didn't have all the information in front of me, you know? But the judge decided.

that that was enough to side with the plaintiff in that case. So, I mean, this is an ongoing saga. Kristen, thank you for that. The interesting thing is the parallels it brings up for me about the crisis that Wynn Resorts went through when its founder was accused of a slew decades of bad behavior. And the failure of the board to oversee that and to intervene. But this was just a pay package fight, right?

They just said the pay package is excessive. No, no, no. I think even now, the questions that are being raised, about how much oversight the board has at Tesla are for shareholders concerning. And we've seen this in other companies. We saw it with wind resorts and what happened then. And they had a big board shakeup after that. All right, on deck.

The big new viral financial trend taking America by storm. It's called, you want to do it loud? Loud budgeting. We'll let you know what it is and why more people, especially young people, are doing it. Plus a mid-cap stock up more than 600% because of what else? Artificial Intelligence will bring you the stock and the bold bear points on it. As we head to break, check out the markets and your money.

We're seeing a slew of red out there. We'll bet more on those moves lower. Will you bet on it? No. Okay. When we return. Shares of super microcomputer are on a massive run. Look at that, up almost 14%, up 680% in a year,

130% since the start of 2024, and then just powering right up higher today. Can Super Micro climb higher or shares destined to crash and burn? We have an analyst on both side of this name. Nahal Chokshi is the Northland Securities, one of the many of the bulls on this name. Let's get to him in a second, but let's start with one of the lonely bears on the street with a cell rating and a price target of just $250. Our next guest expects Super Micro to fall more than 60% over the coming months. Here to explain his stance, Susquehanna, senior equity research analyst, Medi Hesani.

Great to see you, Medi. All right, explain to me why you are so down on this stock. Sure. Thank you for opportunity. There are a couple of reasons. But when you look at the unit economics, I think, is unfavorable to Super Micro, even if you think about AI and hype. A couple of reasons for inferior unit economics.

First, there is no leverage in a model. This is pretty much a unit-driven business model with a significant working capital requirement. Gross margins have already started to decline. Despite the fact that the company reported 70% Q over Q increase in revenue, gross margins are actually down about 150 basis point. We do expect gross margin erosion to intensify, especially since memory and storage costs is going to increase at a faster rate. And this is something that, in our opinion, super micro will not be able to pass into the customer.

And then lastly, it's cash flows. The company actually burned about $600 million of free cash flow for the reported December quarter. And the net income was much lower. And we expect the cash burn to intensify, especially as a company, is expected to build working capital to support multiple new product by customers. Medi, how much does competition play a role in your thesis? The competition is a factor, especially in a long term. If you look at this AI supply chain, there are key Taiwan-based companies like Foxcon that are involved in the early part of the supply chain. They have a better margin profile, and they're expected to use that superior margin to move down the stream.

And I think this is going to be a factor when you look into like nine, 12 months out from here. Maddie, obviously it was a small company. I mean, maybe we should change the name to super macro. I mean, because the stock is not micro anymore is tiny. How much is a share count and just sort of the, I don't want to say lack of liquidity, but it is much smaller company. How does that play into this gigantic run that it's had? Because I've seen this kind of story before.

Yes, and I think you and I have been around to remember the hype cycles of the past 20-some years, or the company name should be more of a. a super height. But you look at where the company's position, they obviously have key partnership with Nvidia, AMD, and even to some extent Intel. So early in the cycle, they are a key partner. But as a cycle gains momentum, the economic value at or lack of economic value at is going to impact. And we went through the same thing a couple of years ago. In the cloud cycle of 2016 through 18, the company had significant growth trajectory. And then what was, you know, not able to recognize that. I think in this early part of an AI cycle, obviously, investors want

to identify key winners. I think the hype and expectation that as a company at capacity, that's going to translate to revenue growth is something that is not well understood, and he just has to play out. Medi Hussein, it's great of you to join us. Thank you. Again, Parts Taggo 250, Brian. All right. So now the other side of that stock story, this SMCI Bull has been following Super Micro for a long time. And he has had a buy rating on the stock for nearly five years going back to February of 2019 and shares were under $20. So obviously this has been a great, great call. If you listen to Nehal Chakshi, who joins us now, managing director of infrastructure and application software at Northland Security. Nahal, first off, great call. What, and you can respond to? to what the previous guest just said, but what did you see in Super Micro that apparently a lot of other people missed? Yeah, great. Thank you for having me on this show. I guess, first of all, the thing that I've seen in Super Micro is a decades-long durable differentiation in that they owned a motherboard design, the power supply design, chassis design. That enables to give customers superior power efficiency at volume price economics.

And the industry bifurcated the responsibilities of manufacturing and marketing decades ago. And Super Micro has stepped in with this unique business model that cannot be replicated because there's bifurcation of the responsibilities. And you see this durable differentiation in terms of return on investment capital. You can go and look at the gross version and say, oh, it's less, 20%, there's no IP there. Look at the return on investment capital, 25 plus percent. How can you have a 25 plus percent return on investment capital without significant IP? And that significant IP is that building block architecture. So that's what we see. It's been decades long.

Now, what's happened over the past two years, and we started calling this a top pick well before the chat GPT mobile in May of 2022. And that's because a new CFO came in. And he brought a significantly better field discipline. He was sitting on the other site for years at HP Enterprise looking at Super Micro, being afraid of it, because they know that they have better quality, better servers. And when he came into Super Micro, it became to CFO. He brought better discipline. You started to see Martians increase. And when we saw that, we knew that this was going to be a barn burger.

We didn't know about the chat GPT moment at that point in time. But once the chat GPD moment happened, and we saw that they are indeed a leader in Gen. A.I. Rackscale servers. Well, that completely changed the story as well. And we can talk about, you know, what is the opportunity for Super Micro with respect to that. But that's what we have been seeing here on Super Micro is adorable decades-long differentiation that we do not see being eroded. Okay, so Medi had brought up two points here, the declining margin and the increased competition.

How do you factor that into your bulkcase? Okay, so the declining gross margin over the past one quarter has been a result of getting larger customers. When you get larger customers, they have more pricing power. And therefore, your gross margin gets eroded. Look at Arrusted networks versus Cisco. A rest of the network says 60% gross margin. Cisco has 80% gross margins.

It's a result because a rest of networks serves the Facebook's of the world. But they get it back in terms of lower effects. And oh, by the way, if you look at the operating margin for supermarket on a Q to Q to basis, it was actually up Q to Q to Q. Because of that operating leverage that they're getting by serving these larger customers. So I don't really see merit today. argument. Okay, so you had a price target of 625. We're watching the stock right now. It's at 655. Are you going to raise your PT again? Well, so let's look at this here. Right now,

it's trading at about 25x fiscal year 25 earnings, which is a premium to S&P 500. I think we can all agree that given their differentiation, their growth profile, it should earn a premium. The question is how much of a premium. So we usually utilize a DCF valuation framework to evaluate high growth companies such as Super Micro. And we look at what is the market size, market share, margins in the terminal period. Right now, what's underpinning our $625 price target is that the server market grows about 10% per year for the next five years. Supermarket is going to go 20% per year. Their market share is going to go from 12% to 16%. Now, we did a capstone piece about a year ago in June 2023, talking about the Gen AI market. We think the Gen AI market is

going to triple the size of the IT software, hardware, and semi-market. Exactly. What's that time frame? We don't know. Probably 10 years, maybe 20 years. Whatever the case is, this is a once in a lifetime, once in a 100-year opportunity in terms of what Gen AIA value is going to create. So could we take up our, you know, estimates in terms of TAM size, in terms of super microgrowth

rate? Yeah, we probably could. can it support a higher price target? Yes, it probably can. You know, in our most recent note, we noted that there is that room there, exactly where things fall out. You know, we don't know, but there's definitely room there. Hey, it's great to talk to you, Nahal. I mean, if you're right, there's a lot of money to be made there. Thank you for sharing your thesis with us. Absolutely. Thank you very much. Coming up, a new customer base for plant-based. We'll take a look at one startup aiming to make pet food better for both you, your furry friend, and

the planet. I was going to say you, but it's only if you eat the pel. I'm pretty, I can be very good. That's a heading clean start. Okay, here we go. Power check on the positive side of the S&P. S. Day, Lauder soaring 12% on the back of earnings and job cuts. On the negative side, air products and chemicals missing on earnings, seeing a sales lump down 14%. That is your power check. And we will be right back. All right, welcome back to Power Lunch. I'm Brian Sullivan. She is Contessa Brewer. Stocks are down today as Jay Powell continues to She's Contessa Brewer. That's generally the cue for show them on the camera.

There we go. Hi. Stocks continue to rain in market expectations about rate cuts, but the same factors dragging stocks down or pushing bond yields up. Let's get out of Rick Santelli for the bond market action. And Rick, we're going to do this on my show tonight. By the way, 7 p.m. Eastern 6th Central. There's like $10 trillion of debt coming to maturity this year.

$10 trillion. Do we have enough buyers for that? That is the. the big question. And this year it's 10 trillion. Next year, you're going to see the same scenario as we have many different securities throughout the system that are going to be, of course, maturing. And you have to reload and reloading at higher interest rates. Well, we're not exactly sure how that's going to treat the businesses. And we're not exactly sure how investors are going to respond to the need for businesses to issue more for the expiring paper. Now, if you

look at today, we had some big data points out. ISM, PMIs, headline number at 53.4. Well, you have to go to August of last summer to find a better number, but it really was more about the prices paid component. Prices paid comes in at 64. And remember, if you look at June 30th of last year, we reached a three-year bottom-up prices paid going all the way back to the beginning of COVID. This reverses that, puts prices paid at a one-year high. And what was the reaction in the market? Swift, Brian. If you look at an intraday of two-year note yields,

you can clearly see at 10 o'clock Eastern the way they pop. And not only that, look at a two day of tens. Today's trade is trading higher than Friday's high yields. That's true of everything from two, threes, five, sevens, tens, 20s and 30s. The entire maturity curve of treasuries is seeing that strength, more selling, pushing yields up. And finally, the dollar index continues to respond

to higher interest rates and potentially few, rate cuts in 2024. It's on pace for the best close in nearly three months. Back to you. All right. Thank you for that, Rick. Let's get over to Courtney Reagan now for a CNBC news update. Hey, Cort. Hi, Contessa. The Senate released its bipartisan border bill late yesterday, and now we have a response from Republicans in the House. Speaker Johnson, along with other GOP leaders, released a joint statement this afternoon, saying the bill is, quote, dead on arrival in the House. And as the border bill languishes, President Biden will condemn the push to impeachians. against Homeland Secretary Alejandro Mayorkas.

That's according to a statement from the White House, which calls the charges an unprecedented and unconstitutional political attack. A GOP leadership aide tells NBC News, the House will vote tomorrow on impeachment. And Gap Inc announced a new creative director for the company and its old Navy brand today, fashion designer, Zach Posen. Posen is one of several new executives at the company, under recently appointed CEO Richard Dixon,

who came there from Mattel, as the company looks to redefine itself. Brian, back over to you. All right, Courtney, thank you very much. All right, coming up after the break, apparently it is the newest financial trend out there. People are budgeting, and like everything else, they want to share it with you.

We're going to explain what loud budgeting is with Sharon Epperson coming up. Welcome back to Power Lunch, while social media is filled with posts of people flaunting their wealth, or at least they want you to think so. A new viral trend, popular with Gen Z, is calling for them to speak openly about their money or the lack thereof.

Loud budgeting is a new concept I'm introducing for 2024. It's the opposite of quiet luxury. But if you know any rich people... Well, how does loud budgeting work on and offline and what are the benefits of opening up about your finances to the world? Let's bring in Lucas Battle, comedian and TikTok influencer who coined that term. And Sharon Epison, Senior Personal Finance Corps. correspondent. Lucas, we saw you on the clip there. Why did you think that this should be

loud budgeting, something that kids embrace? Well, I think that it was coming off the heels of quiet luxury, which was a huge trend last year. And I think loud budgeting, which is quite literally the inverse of quiet luxury, is just kind of a timely trend to have now, especially in the economy. And how do you put that into action? Oh, I put it in action a lot of ways. I've been grocery shopping more. I've been doing dinner parties. I didn't get my shirt. steamed for this TV show. So just kind of cutting corners everywhere. Okay. So if it's a little wrinkly, that's all right. You're saving money. Exactly. Because it's cool, I would imagine, right?

But you know what? The hardest thing to say, and I found it freeing, Sharon, when I finally realized I could say, I can't afford it. Or it's just none of my butt. And it's so freeing to say that. I'm sorry, I can't go to Vegas for Dead & Co. I can't afford it. I can't do it. Or I wish I had a connection in Vegas. When people start the year, they have these resolutions. I'm going to stop spending as much. but how are you actually going to do that? You need to have the goals and figure out how you're going to do it, but then you need someone to hold you accountable to stick to it.

That's what Lucas has kind of figured out. Have the whole landscape of social media help you stick to it by saying this is what I'm going to do, and then people commenting saying, I'm doing the same thing or do it this way, and that will help you stick to your goals. So it's kind of like reinforcing the accountability of whatever you set your mind to do. But Sharon, you've been out there preaching about personal finance for a long time. Is that something that people your age just discount that there's lots of information out there

about how to make your personal finances work for you? I don't think they discount it. I actually think that there's a lot of information available online like TikTok for younger people to gain financial information. I mean, I feel like you leave high school and you don't know how to fill out a check. You can search on TikTok how to do this stuff. Isn't that amazing? Yeah, it's great.

The information's there, but again, sticking to doing it, actually doing it, You can find the information, but then are you going to say, no, I can't go out for drinks tonight because I actually don't have the money. I get paid next week, maybe next Friday, or at my house because I don't want to go out and pay for this. Maybe you're just fishing for one of your wealthier friends to pay if that's the case. I'm sorry I can't join you out there because I don't have a plane. Lucas, so there's a good peer pressure that we think about peer pressure is bad, right? Peer pressure, don't do this. But there's good peer pressure.

And it's like dry January, right? Like, if those people that do dry, I don't know who they are, but I've dropped, I've dropped, my wet January was fantastic. But dry January, and they say it on social media, and then you see them out and they maybe want to order a drink and you could say to them, hey, you know, I thought you were doing dry January. Stick to your goals. Yeah.

Right. You can do it. Like, hang out. Hang tough. Yeah, I think that's the exact same thing. I think it's being transparent with your friends saying, hey, I don't want to spend money right now. And the term can be used to kind of avoid the awkwardness because it's now a part of a larger bit or

joke. What has been the reaction to you talking about loud budgeting? I feel like it's been positive. I think people feel a little bit of relief. There's a lot of pressure to spend, especially when you're seeing so many products being advertised to you all the time or lifestyles, they're not very attainable. What I want to see is instead of saying what you're saying no to, what are you saying yes to? So no to eating out so much, no to drinking so much, no to spending so much on that. No to destination weddings. You just ruined everything, Sheriff. But yes, but wait, no, but yes to saving more. Yes, to being able to, if something happens with your job, being able to afford your expenses so that you're not using credit card debt, you know, or going into credit card debt, saying yes to the things

that are going to empower you, I think, is very important. Can I ask you, Lucas? Yeah. And you can tell me to go somewhere. Maybe. How old are you? I'm 26. So, and that's perfect, because you guys, a lot of people your age, really bore the brunt of the lockdowns, right? And the pandemic. Yes. And so when it came out of it, I think there was probably this, we're, let's just go crazy. right? All the trips you couldn't take, all the meals you couldn't eat, depending on where you lived. Do you feel like that's rolling over now? Because I feel like a lot of people your age might have gotten themselves in a lot of serious debt because it was kind of that screw it. I'm going to live for the moment. And you didn't have to pay student loans either all that time. Yeah, that's true. But I feel like honestly coming off the pandemic with the price, the price is still being inflated and student loan repayments are now back in.

Yeah, back in. I actually feel like it's more been of a lockdown. And that's why the story is kind of taken hold. One more. Yes. We cover every day companies that depend on spending for their bottom line. If loud budgeting really takes off, do you think that we're going to start to see a hit to the bottom line of Starbucks, Chipotle, Ulta, those kinds of companies? The Venetian, because I can't afford to go to Denzel.

I think that of anyone they can take a hit. I think the younger people that are kind of moving into the workforce should keep their money for right now. Where do you live? I live in New York. How do you afford it? I don't know. I'm a comedian. How do I do it? You laugh your way through it. I just laugh my way through it.

Look at this bill. A smiley face on the mirror. Yeah. It's insane. I don't know how you guys do it. It's impossible. It's crazy. It is impossible. I really don't know how we do it. But I think the whole purpose of loud budgeting is choosing what you want to spend your money on. I'm not

saying skip the coffee a day. You'll be a millionaire. It's budget your time and your money to what you're passionate about and what you want to do and don't be roped into anything else. I think that's great advice. And watch people like Lucas. Don't watch the Kardashians to think that's what everybody's doing. Right? People are, no, no, they're figuring it out. I wanted a solid goal together. Can we figure it out together? Lucas, thank you. Sharon, thank you for coming in. Appreciate it. All right, still ahead. From Impossible Burgers to M. Paw, Paul, Sybil Kibble, PAW. It's a dog,

It's so good. It's also my last time ever on television. Diana Oleg will, I'm a dad, and it's a joke. Diana Olic will give us a look at one brand serving a plant-based pet food. All right, despite a lot of hype, a lot of hope, and a strong launch, the plant-based meat market faltered quickly because plant-based meat. All amid high prices and negativity about taste and potential health benefits or lack thereof. But that's for us humans. What about pets?

Diana Olin, joining us in her continuing series on climate-related startups. Diana. Well, Brian, look, it's pretty well known that meat and the production of it is harmful to the environment. Cows are a major source of methane emissions. But what is lesser known is that pet foods account for at least 25% of the meat consumed. Who knew? So just as for humans, plant-based pet food is becoming big business. But will it have the same headwinds?

Pet parents are a particular breed, so it's no surprise that the idea of pet food that is not only healthier for their canines, but also for the planet, is gaining in popularity. Companies like Natural Balance, Halo, Nestle's Purina, and a four-year-old startup called Wild Earth are finding plant-based pet food profitable. Over the next five years, we think this market could be anywhere between 10 to 50 percent of the U.S. market, either plant-forward or fully-ploid. plant-based products for our pets. Bethincourt says his company focused on nutrition and noted that dogs are omnivores and can survive, like humans, on plant-based protein. We developed it together with veterinarians

and nutritionary vet's to make sure it had all the essential proteins, the fats, the carbohydrates, the vitamins and minerals. He noted studies that have shown plant-based pets may be even healthier, but all that comes at a premium. Wild Earth food is up to 20% more expensive than meat-based products. Bethincourt says once they scale and the market grows, prices should come down. And that is attractive to investors like At One Ventures.

Our firm doesn't want anybody to have to go trade off the quality of their lives in order to go help the planet. And when you go find an investment where this is much better for your pets, it's much better for the planet. And therefore, you know, it's a thing that's improving your life, then, we get really excited about it. In addition to At 1 Ventures, Wild Earth is backed by VegInvest, Felisus Ventures, Mark Cuban's radical investments, and Mars's pet care fund. Total funding so far, $37 million. Wild Earth is also now testing plant-based cat food. Now, cats are not omnivores, they're carnivores, but Wild Earth CEO says they've also developed this with veterinarians and veterinary nutritionists

and supplemented it with all the essential nutrients that cats need to survive and to thrive. The question guys, of course, is will they like it? If they're hungry enough, they'll eat it. That was my theory, raising children. If they're hungry enough, whatever you bring up. That's your theory of raising children? If they're hungry enough, they'll eat it. Good.

That among many things. But, you know, the interesting thing is, so they're doing this because they think it's going to make a dent environmentally. Yes, I mean, when we talk about meat, like, why do we have the plant-based meat market? It's not just because of health. It's because of the environment. We've done the stories on the cow emissions. I'm not going to go back to that. It is a major, major problem for the environment.

So going plant-based is better for emissions. And then, of course, there is a health side. And as they said, they believe that this is healthier for your pets. And pet parents want that. I am not a pet parent. Full disclosure. Yeah, no, no, no. Listen, how many dogs you have?

My dog, little olive, passed away a year ago. Thank you for reminding me. But here's the thing that you should know. Somebody's got to give me a heads up on that. before I asked about her dog, and the dog died. It's okay. It's okay. I have two dogs, by the way. And they would just walk away.

And you spoil them, right? No, you don't know that. I pet them. This is why they don't let us send you go to. My one dog, the female, I walk in and she just does flips in the air because I'm awesome. But I don't know if they're plant-based food. You know, if we get it, like I would try it, like the dog food. You know what I mean?

Just you want to know what you're giving your dogs. You would try the dog food? Pet execs used to do it. Diana Olegs looking to me like, what in the world is going to be there. No, I didn't try it. I didn't try it. Sorry, not going to. Didn't try. What's plant-based? Must be good. Turns on the plants.

Coming up, we're drilling down on big oil. Tyler just talked energy prices with APA Corp CEO, John Christman. He'll give us the details live from the Smead Investor Oasis when Power Lunch returns. Welcome back to Power Lunch. If you're wondering why Brian and I are sitting here today, sometimes we wonder the same thing. What have we done with Tyler? Well, don't worry. He's safe and he's sound and he's warm. He's at the Smead Investor Oasis in Phoenix.

Hello, Tyler. Hello, Contessa. It's great out here. It's about 70 degrees. Very nice. You see, I'm in a kind of Mediterranean setting here at the Smead Investor Oasis, which has been a very interesting morning. Heavily tilted toward hearing from the CEOs of energy-related companies,

something that I wish Brian were here to enjoy and teach me about because he knows so much more about energy than I do. but it's been a good lesson talking to Vicki Hollab of Occidental Petroleum, and John Christman of APA, also known as Apache, earlier today. You might know, Brian certainly would, that they recently bought Callan Petroleum, a large provider or production company in the Permian Basin, where so much activity has been taking place, and so much of the consolidation activity in recent years has taken place.

This was their first big deal in a long time. $4.5 billion increases their footprint, gives them more resources to deal with. I asked Mr. Christman where he sees oil prices, and he had an interesting answer that bears on the political situation in America. Let's listen. I think we're in a world today where, you know, clearly it's an election year. Historically, election years have been hard. There's a lot of battle to try to keep prices down, everything there. But I, you know, like I said, we think that, Inventories in a pretty good place.

You get to the back half of this year. We'll see some draws. We're very constructive on oil. A little bit constructive on oil in the long term. As he said there, which is interesting, political years tend to be hard in the oil business. Hard for the oil business may mean good for the consumers of gasoline because politicians tend to like to keep a lid on oil and gasoline prices in election years. We'll see if that pressure keeps prices where they're going to be.

they are last week, a rough week for oil prices, the roughest week since October. A lot of the oil companies down in the stock market on the year, including APA, down 14% year-to-day, 21% over the past six months as the oil prices have fallen back. So it's a very interesting conference here. A lot of talk about energy with oxypetroleum. A lot of talk about carbon capture, which is basically taking the gas out of the atmosphere, pumping it back into the rock where it is stored permanently, and it helps through the sale of carbon credits to create a net zero position for companies like airline businesses, logistics businesses, companies with large fleets of trucks. So folks, that's it from the Smead Investor Oasis. I'll see you tomorrow.

Fantastic stuff, Tyler. I was just out there, and I didn't want to come back. It is just perfect out there this time of year. Great time of year out here. Really fantastic, beautiful place. Camelback is right to my left up there. Up the hill. I'd like to go. You hiked it? I want to hike it, but I've always said want to.

I've never done it. I did it. I've done it. And I'll tell you what. For some reason, it gets harder. Every time I get fatter, it gets harder. That's what happens, my friend. That's what happens.

It's a legit hike. Be careful. Thanks, guys. All right, Tyler, thank you very much. It's amazing. Just extra mass. Yeah. Up is harder.

be stronger to hold up. Physics. It's the science contestant. Coming up, Dartmouth just pulled a 180. The Ivy League says it will reinstate SAT requirements for next year's class of applicants. We'll break down the details next. 90 seconds left in the show. Several more stories you need to know. A severe storm system began moving through California yesterday, marking the start of what's expected to be days worth of heavy rain and snow, wind. More than 500,000 California customers don't have power as of this morning. And the National Weather Service says that storm could be potentially historic. And here's what's really interesting.

Fewer than 2% of Californians have flood insurance. And only half of those in high risk areas. So we'll have to see what the impact is there. It's a year's with the rain in a day. And the reservoirs, many of them were already nearly full. All right, they get over top. Social media company snapped, saying Monday will lay off 10% of its global workforce, around 500 employees in part to promote in-person collaboration.

I guess you get laid off, you don't come to the office. It marks nearly 32,000 job cuts across 122 tech companies already this year. The pink slips keep coming. And Dartmouth College reinstating SAT requirements for next year's class of applicants, making it the first Ivy League to reverse course on test optional policies. The school says standardized test scores helped predict first year college performances even better than high school grades do. So sorry, you're back to filling in the bubbles.

There you go. back to the future. By the way, tune in, tune in tonight, he said. There we go. Last call, Kyle Bass and many more. We'll talk about China's slow-worlding collapse.