Power Lunch - Power Lunch 10/28/22

Episode Date: October 28, 2022

CNBC’s Tyler Mathisen, Melissa Lee and Kelly Evans take you through the heart of the business day bringing you the latest dev elopments 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 https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. I'm Contessa Brewer. Here's what's ahead. A Friday rally, Wall Street investors cheering new data that points to slowing inflation and a solid consumer. Does that raise the stakes here for the Fed's upcoming meeting? Plus Apple, the loan star of this week's mega-cap tech wreck, punctuating the $3.6 trillion in market cap lost in a single year. Well, is this the biggest sale ever for tech stocks or is the start of the decade of dead money? We're going to ask that question, Tyler. All right. Thanks very much. Contessa, a big finish to a big week, and we do mean big. Stocks are on pace for a huge month. We're right near session highs, as you see right there, up 750 points or thereabouts. The Dow up more than 700, higher for a six straight day. If it is a 14% gain for the month holds, folks. It'll be the best monthly performance for the Dow since 1976 the year I graduated from college. All right, the S&P 500, NASDAQ, on track to end the week higher, even as some of the biggest names in the sector slide. Intel, Apple, Verizon, they are among the best performing Dow members today. There you see them.

Look at Apple, up 8 percent. Intel, up 9 percent on a major cost-cutting program. Apple going along for the day as well, a bulwark of consumer capitalism. Consumer discretionary, the only S&P sector that is down today, dragging that sector lower. Amazon, Etsy, and Newell Brands, growth outpacing value stocks today, but not for the week. The shares of the value ETF up 5% for the week, I shares growth, ETF, Contessa, up 2%. Tyler, we want to turn now to the big story of the day. Is this the week the tech markets broke?

We started Tuesday with disappointing results from Microsoft and Alphabet. Those stocks fell marginally this week, up stronger today than Meta Wednesday, plummeting on news that the company is doubling down on its Metaverse bet, shares down more than 20% this week, and then Amazon tanked 16% at its lows. Apple, though, has managed to salvage the tech sell-off, beating earnings, and up 6% this week, 8% today alone, all told these five companies have lost $3 trillion in market cap over the past year, gains going back many years, wiped out. So what does that mean for tech? sell-off mean valuations are where they should be. Let's bring in Alan Patrickoff,

chairperson and co-founder of primetime partners. It's nice to see you today, Alan. You were an early investor in Apple. Do you think that there's something that Apple is doing to navigate uncertainty, macroeconomic volatility and the like that Amazon and medas of the world are not? Apple has always had magic. I mean, as far as I'm concerned, they, Since the day I invested, which is a long, long time ago, they seem to come out with newer products, newer variations of products. Service business keeps going up and just go to any one of their retail stores and see the lines outside. You'll get an idea of just how vibrant it is. And I think that it just has demonstrated that it's a company that one wants to be involved in forever and have proven it year after year.

So it's had interim fluctuations, but I think on a long-term basis, it only seems to go up. What do you make of these tech valuations now? One, does it mean that growth at any cost is just over? There's no more patience for that. Well, I think that that's a very appropriate comment. You know, there's just so much growth you can have whereby pouring in money to spend, for example, in meta, what they're spending on this meta, meta platforms in the whole AR, VR area is really astounding when you see the decline that's happened in that company, which frankly is a direct reflection of the decision that Mark Zuckerberg made to plow into this. I mean, I invested in the first virtual reality company, which was backed by Jaron Lanier, believe it or not, in 1984.

when the concept was just concept, but just originated. And here we are, what, 30, 40 years later, and it's now a commercial product, hopefully. And I don't think that the metaverse has really proven itself yet. And I think we have to see what's happening. But isn't that the idea? I mean, like, when you're talking about the metaverse,

it's a concept that Mark Zuckerberg clearly thinks is worth investing in and building and and letting some people play around with it. Isn't that how big concepts that change the world happen? Yeah, but just think of what the cost is. He's plowed into this. And it's all based on a concept that is, that's what I was pointing out, has been around a long, long time. And he is now betting the farm, frankly, on the success of this concept, which involves

a whole new way of looking at, at. services and products and, you know, from medicine to education to, of course, content. And I think that it's a bet. If he wins, it's going to take a while to recover the kind of cost that have gone in to develop this. And what the decline has resulted in the value of the stock, which is, I mean, rather scary. 75% of the value of the company is going down in, what, just the last year?

Yeah. Yeah, Mr. Patrickoff, welcome. We're glad to have you with us. you've had a lifetime of experience in the markets. You're 87. You say you're going to live to what? 117. I wouldn't bet it.

140. 114. I beg your pardon there. I wouldn't bet it. I had a birthday this week and I was 88. Oh, wow. Well, then we're out of date. Happy birthday.

And I wouldn't bet against you. As you observe the markets recently, what has your lifetime of experience taught you that you are seeing today that you think would help our audience the most? Be a better investor. I actually am prepared to give you a very direct response to that. I have been through so many cycles, and the markets just don't go in one direction. They have a habit of just going up and at some point correcting, and we're in a period of a correction now.

What concerns me is that a very large percentage of the people who are investing, particularly in the area I'm in venture capital, didn't live through the last big, setback, which I would say around the time of the bubble in 2000, 2001, 2002, and it took a long time to recover. And so you have people who are dealing with a period of time in the last 20 years, except for the blip in 2008, I admit that. But it's gone straight up, and they can only see things in a positive way that, you know, the markets are going to go up, the valuations are going to go higher. And I think that this is a good time to have discipline and to understand that there are corrections and we're going through one now. And the question is how long that correction and how deep that correction is going to go.

You know, we largely pay attention to publicly traded companies because we like to see what the stock is doing from day to day and minute to minute. I'm curious, in private equity, do you think that the valuations that private companies are seeing right now are about right? Let me differentiate between venture capital and private equity. Private equity more refers to companies at a later stage that are dealing with larger sums for the most part. In the venture business, you're talking about early stage, young companies that are at growth stage where, frankly, to be honest, inflation, interest rates, politics, what's happening to Ukraine, really don't affect the day-to-day operations of companies that are in the early stage of the growth because they're operating on a set of dynamics that are independent of almost all these issues.

Even if they wanted to, they couldn't borrow money. So interest rates really don't have a factor. So they're all equity supported. In the later stage, in the private equity, in the companies that were supposedly pre-public that were buying people-bought companies where they expected them to go out in the market in a short period of time. I think there has been some excess, some considerable excess in pricing. And a lot of those investments are going to be much longer term holdings than were anticipated when they first made the investment. So they're going to have to carry these companies longer. They're going to need

more capital to support them. And when the IPO market does return, who knows what valuation levels will be at. I mean, we've had a reset in during the last six or nine months of what these values are. Are you going to do the marathon again? I'm doing it. I'm unfortunately walking it next Sunday. The last time I did it, I ran it five times,

but this time I think I have to be more realistic. And 26 miles and seven or eight hours is a long, it's a long walk. That's a long walk on the paper of New York City. I may talk a bit of it if I get some energy. Good for you. We'll be cheering for you. you, Alan, thank you. Thanks for inviting me. You bet. So if you are looking to put some cash to work,

do you buy the pullback in tech or look elsewhere? I think you'd go talk to Alan is what you do for me. David Traynor is CEO of New Constructs and Investment Research firm. David, welcome. Good to have you with us. Thank you. So what do you think? Where should I focus my investing interest these days? I have a lot of agreement with Alan. I think, Tyler, look, the focus these days has got to be on stocks that actually generate real cash flows. And excessive valuations that have chased these momentum growth stocks are coming back to Earth. And you need to get out of those quickly and move into companies that are able to generate real cash flow. And the market's, I think the market's been signaling that for a while and it's getting more and more severe. So go where the money is being

made, basically, right? Yeah, it sounds trivial, but it's true because there's been a lot of money that you taste a lot of really unprofitable companies. And, you know, those are the zombie stocks that we talked about in the past, those are all really getting crushed these days. And you know, and just even in the vignette you had earlier today where Apple was the only one, only stock of all those tech stocks that saw a good gain this week, it's because they're really making real cash flow. And they've got a sustainable return on invest in capital, a sustainable mode around the business that means cash flow growth for longer. And the market cares about that these days, more than it has in a long time.

All right. So you're actually encouraging investors to stay away from these expensive, as you call them, mega cap tech stocks. Do you think they're still expensive even after this week? It depends on which ones we're talking about, right? You know, like, so, you know, we think Microsoft is starting to look pretty cheap. Apple is, you know, after its losses, it's starting to look cheaper. But we'd still stay away from Amazon. We'd stay away from Netflix. We stay away from Tesla. We think there's still a lot of risk in some of those things. You like Qualcomm, Tyson, and Dow. Tell me why. I mean, a lot of it's because they're so cheap. These stocks all have valuations that imply that their current cash flows are going to permanently decline by anywhere from 10 to 50 percent. Right. And so we like stocks these days where the risk is lower. And the risk is lower because the valuations imply that cash flows are going to go down, not grow excessively dramatically, which is what we see in a lot of the valuation. of some of these high-flying zombie stocks and other stocks these days. And all these stocks also generate a ton of cash flow already, right? So we're seeing a disconnect.

Expectations for cash flows to go away or go down, even while cash flows are going up. And that's the opposite of a zombie stock, where cash flows are negative and looking terrible, where the market price implies cash flows will go through the moon. And we've seen that, too, but just now that's in total reversal. David Traynor, good to talk to you. Thanks for sharing your ideas.

Thanks for having me. Coming up, inflation may be peaking, but a Fed pivot is premature. That's the call from a veteran market watcher. What's at stake if the central bank gets it wrong? Plus, AMD, Marriott, Draft King, scheduled to report earnings next week. Which of these are buys, which are sales ahead of results? Plus, before the break, a look at some of the consumer-related stocks hitting new 52-week highs in today's session, including Campbell's Soup, General Mills, and Hershey. Power Lunch is back in two.

A key inflation gauge that the Fed follows closely shows that inflation in September was elevated, but mostly within expectations. So what does that mean for the Fed and its statement when it meets next? Let's talk about this and more with CNBC senior analyst and commentator Ron Insana. Ron, welcome. Thank you. Well, you are welcome. You're welcome to be here. Always glad to have you here.

Got a new op-ed. you're not expecting the Fed to pause on Tuesday. Are you expecting some rhetorical change or what? Well, you know, I wrote this piece, Tyler, largely to rebut one notion that was going around yesterday that the Fed would include pivoting in its language next week. I think that's a little aggressive. I would imagine that the Fed could hold out the possibility of a pause or a stop look and listen moment after it raises rates by three quarters of a point as expected next week,

maybe even guide to another half and quarter point hike down the road as expected, with a nod to the notion that we're starting to see inflation roll over. I mean, when you look at most of the inflation data, they peaked in June. Some of the core data, little stickier because housing prices and rents haven't yet been fully reflected in that, nor have the kind of leveling out and wage increases. But I think they might hint at a pause, but not remotely yet at a pivot. Yeah, go ahead. Well, you know, it's interesting because I was listening to Chubb's earnings call this week, which were pretty impressive. Evan Greenberg, the CEO, said he thinks the Fed is going to stay higher and longer than what the markets are pricing in. And I thought, okay, well, that's notable from a guy who's in the business of assessing risk in a global economy here.

So if Jerome Powell comes out and he's, you know, is he going to be a dove? Is he going to be a hawk? Or is it going to be more like he's a Canadian goose? And everybody on Capitol Hill is aiming to bring him down. Well, first of all, I wish that Senator Hickenlooper and Senator Sherrod would stop talking about this and asking the Fed to stop. Because if indeed at some point they pause in the near future, it'll look like they're succumbing to political pressure rather than economic reality. So I wish they'd stop saying that. Listen, I mean, Mr. Greenberg's point of view is one person's opinion.

You know, when you start looking through all the data, we've seen a rollover, a decided rollover in headline inflation, particularly when you look at the PCE numbers. They came out yesterday. They came out again today. You've seen CPI peak already. And again, there'll be some lagged effect on because of housing and wages that won't show up for several months hence. But the markets are telling us something.

important. And you don't get a rally like this in equities, a 14% move in the Dow and a big drop in interest rates without some smart people making bets that were coming closer to the end of the tightening process than we are in the middle of it. Yeah, we started to hear that one of our guests last hour sort of basically said the same thing, that maybe we're getting into the later innings of this inflation surge. We had a guest on yesterday of from of all places wing stop, who said chicken wing prices have come. I saw that. Yeah. Way way way down. Now that's good for chicken wings. It's not good for the chickens. Yeah, it's great. Under no circumstances is this good for the chickens. But at any rate, you get the idea. So when do you think the Fed will take its foot off the breaks?

I mean, we're certainly going to get a 75 next Tuesday. Then they meet again in December. Then they meet again, what, end of January? Yeah. I mean, I still think Tyler we may get the 50 and 25, you know, and it's not my cup of tea. I do think the Fed may be a little too far out in front of inflation. I do think it's rolling over, as you well know, we've talked about this quite a bit. But I would take the Fed at its word that it's probably going to move forward with 7550, 25, and then hopefully pause and look around because you've got an inverted yield curve, you've got inventories building, you've got companies making statements that the economy is slowing. And so I think all those things taken together along, again, with the actual rolling over of inflation numbers that the Fed may want to take a look around and see what's going

Maybe a pause come March. That would be my best guess. You know, if you were in an offshore illegal, unregulated site, you could probably put a bet on that. I can put a bet on that now. Ron, let me just ask you, though, when you're talking about the pressure that the Fed is under to get this right, to avoid a 1970s-style inflation crisis versus a very deep recession that also hurts Americans, it's no wonder that you've got lawmakers, you know, in Washington, D.C., they're especially ahead of a midterm election that's pivotal, trying to pin the blame on anybody but their party of

choice. Do you think that there is, do you think that the pressure is effective? Do you think that the Fed actually? Go ahead. No. I mean, I don't, look, I mean, if the Fed succumb to that kind of pressure from a couple of senators who, you know, again, they may not be running themselves. but are concerned about the midterms. But it's not just lawmakers, right? There's a lot of really smart money men who are criticizing the Fed moves.

Well, I've been reasonably critical in the sense that, and I don't know that I'm really smart money man, but I mean, I'm a big critical of their process insofar as I don't agree with a whole lot of folks, whether it's Larry Summers or others, that this is a replay of the 1970s. To me, this still looks much more like a post-war environment in which supplies were disrupted, demand came back faster. And that in 15 months into it, relative to the 15-year experience that we had from 1965 to 1980, this is just a different beast all the way around.

And so I think the desire to avoid being a Arthur Burns or a G. William Miller and be more like Paul Volker is misplaced because I don't think it's the same type of environment. And so, yeah, a lot of people are talking about it. And I think the Fed probably may have gotten a little out over its skis and the inflation has rolled over the yield curve has inverted. I think we've got enough data to suggest that they may well have reached their objective already. Ron, smart money man and sauna. Thank you. Appreciate it.

Thank you. Thanks, good. Up next, read them and weep. Even though the big casinos are struggling at least where their stocks are concerned, their landlords are holding strong. A lot of casino reits, although there's not that many. Casino reeds are actually outperforming the operators themselves this year. Details next.

Plus further ahead. to the biggest week of earnings for Wall Street. We'll trade some of the key names to watch at today's three stock lunch. There you're seeing Advanced Micro-Draft Kings and Marriott International all up on the day. Welcome back. Let's take a look at Vichy and Gaming and Leisure properties and how their shares are doing today. Both reported earnings that beat expectations on the top and the bottom lines. And as you can see, Vichie's up 2.5%. You've got GLP up 3.5%. These are supported by dependable rents. Now, GLPI was the first gaming rate. And look at its year-to-date performance. Up a percent, compared to Penn Entertainment, its biggest tenant, down 38 percent over the same

timeframe. Look at the stock performance year-to-date of Vici, up 5 percent versus Caesars, its biggest tenant, down 55 percent year-to-date. And Vichie's growth is remarkable, considering it was born in 2016 out of the mess of Caesar's bankruptcy. Now its market cap of $30 billion outranks, not only Cesar's, but even Las Vegas Sands and MGM resorts and all the other casino companies. GLP comes in ahead of its tenants as well. And get this, Vichy will actually see a big boost to its bottom line because of inflation. Caesar's master lease is tied to the CPI. So when it goes up, so does the amount of rent Cesar's pays to Vichy.

That's a nice little piece of vigor. Is that amazing? And here's another piece. They are not talking about just staying in gaming. Vichy has made deals with Cabot Golf, with Canyon Ranch, with Chelsea Pears in Manhattan. Chelsea Peers, you were mentioning. They're looking at athletic training facilities. This is a company that is on a growth trajectory and, like its counterpart, GLP, they have

started financing deals for their tenants, lending them money and making money that way, too. So it's a very... 30 billion in market value, a company that is little known, really. Born in 2016 and has a tiny corporate staff manages costs in a very effective way. Interesting. Interesting story. All right, thanks, Contessa. Shall we go to Simomodi now? Yes, we shall.

She's got a CNBC News update. Let's do it. Hey, Tyler, here's what's happening at this hour. In Oklahoma, the deaths of eight people found in a burning home are now being investigated as a murder-suicide. The victims include six children aged 1 to 13. Authorities say the two adults who died are considered suspects. The local fire chief says none of the aid appeared to have died because of the fire. The police chief says guns were recovered from the home.

The pandemic shutdown set back students in some U.S. school systems by more than a year. This according to an analysis of school data by the Associated Press. AP found that the average American student lost half a school year's worth of learning. in math and a quarter of a year in reading. And rock and roll pioneer, Jerry Lou Lewis has died. He helped to find rock and roll songs with great balls of fire and a whole lot of shaking going on. He was the last of a generation of performers that included Elvis Presley, Chuck Berry, and Little Richard. Jerry Lee Lewis was 87 years old.

I mean, that is a long and illustrious career. I just had showed my kids a YouTube video, Seema, of him playing piano. playing piano. Not long ago. He just did it like nobody else did. Right. Standing up and a lot of passion and yeah. Yeah. Yeah. I mean, you can see his controversy. His, kind controversy, his, his musical roots, they go right down through Elton John and a whole lot of others. Yeah. There you go. All right. Ahead on Power Lunch, pending home sales, pending, falling 10% in September, much worse than expected as rates continue to climb. Plus, as the paint chips on the housing, the same goes for the semis. We're going to talk to one of the biggest chip makers.

about what's ahead as the sector tries to decouple from China. Power lunch is back in two minutes. Well, 88 minutes left in the trading day. Let's get you caught up here on your stocks, bonds, commodities, and the latest housing data. Let's begin with Bob Pisani. Dow on pace for its best month since January 1987. Bearer of good news today, Bob.

In fact, if it gets above 13.8% contest, it'll be the best month since 1976, January 7,000. Believe it or not. We're up 14% right now. That is pretty remarkable. And if you wonder what did it, I'm sorry, it wasn't tech, folks. It's a lot of what we call value stuff. So Caterpillar, Chevron, the energy stocks, some financial names like J.P. Morgan and some of the pharmaceutical things like Honeywell and Merck. You put up some of the Dow leaders there for the month of October. Those are all up 20, 30% or so for the month of October. Elsewhere on the earnings front, it's very nice to see. tech earnings leading the way for the day. There's the month, but put up the earnings for today here. So Apple, Intel, even T-Mobile is among the top five, six, seven stocks on the S&P 500. That hasn't happened in a long time. We haven't seen that in a while here. But don't kid yourself. I want to emphasize this. Value is really ruling. If you look at the new high list, it's essentially energy stocks like Exxon, which is historic high, Chevron, and a lot of healthcare names like

Humana and a few industrial names like Lockheed Martin. These are traditionally associated with the value camp. So we're seeing some rotation here, and that is evident on some of the earnings pictures, which we'll talk about a little bit on Monday. So people are saying Exxon's the new Fang. That was like a big thing to say this week on some of the trading desks. And you can see that because the outperformance has been so noticeable. Energy stocks up 23% this month, industrial is up 12%. Health care up 9%. Put that board up there. And tech and communication services, which is what we call growth sectors, have been noticeably lagging. So contested the bottom line here is we're starting to see some shift in the earnings picture.

And maybe this will result in a more balanced S&P 500. Maybe we don't necessarily need to have technology 25 or 30 percent of the S&P. Wouldn't that be nice? That hasn't happened in a while to see a little shift in the value versus growth story. Exxon, the new fang. All right. Got it. Thanks, Bob.

Have a good weekend. to the bond market, Rick Santelli, tracking the action as the yields are on the rise. Once again, hi, Rick. Hi, indeed. Yields are on the rise. Two-year note yields up 14 on the day. 10. Well, tens are up about 10 on the day.

But here's what's interesting. They're down 20 on the week. Hey, everybody's talking about the three-month to 10-year inversion. But they shouldn't have been shocked. I'll show you why. Here's an October 1st chart of a three-month table. They auctioned them every week. And they're going to keep going up because the Fed's going to do most likely 75.

And even if they didn't, they're going to do 50. T bills keep going up. You see that chart? Now look at a tenure for the same period. Any questions? That's why, and it's going to keep happening. Tenure has buyers coming in, a variety of issues. T bills are just going to keep running up every auction every week.

Now, if you look at the three months to tens, last time it closed the week, inverted. Yes, was March of 2020. Now, the euro currency, everybody's talking about the dollar. The dollar's having a little bit of an update, but it's down big time on the week. One of the reasons there was improvement in the euro didn't last long. On Wednesday, it closed above parity for the first time since September 19. Then the ECB meeting back down again. Contessa, back to you.

Wow, remarkable. Rick, thank you for that oil closing the day down slightly, but still up 10% this month. Pippa Stevens is at the commodity desk. Now, hi, Pippa. Hey, Contessa, China tightening its anti-COVID measures is weighing on oil today with U.S. oil down more than 1%. For the week, though, both WTI and. Brent are in the green. Natural gas also higher on the week on track to snap nine straight weeks

of losses. EBW analytics saying this continues to be a weather-driven market for NAC gas and if temperatures remain mild then it could be stuck in a trading range. Now energy stocks are mixed today, but Exxon and Chevron as Bob was noting are notable movers. Both stocks hitting all-time highs following strong third quarter results from the oil giants. Exxon's net income nearly tripling year over year, hitting a record $19.7 billion. Chevron posting 11.2 billion in profits, second only to the second quarter's 11.6 billion. Both stocks up sharply this year with Exxon, Contessa, up more than 81%. Back to you. Pippa, thank you for that. Let's get the latest read on housing where higher interest rates really are taking a toll. Diana Oleg has that data for us. Hi,

Diana. Hey, Contessa, yeah, we saw this brief reprieve in rising mortgage rates in August and some not so terrible home sales, but clearly that ended in September. Pending home sales dropped a much wider than expected 10.2% month to month, according to the National Association of Realtors. Sales were down 31% year over year, and excluding a brief drop at the start of the pandemic, that is the slowest pace since 2010. Pending sales measure signed contracts during the month, so that's the future indicator of closed sales. It reflects buyers out shopping during the month, and that's when the average rate on the 30-year fixed first crossed 7%. Remember, we started this year at 3%. Rates are still over 7% today at 7.08. That's according to Mortgage News Daily. Now, for potential buyers

looking at the median priced home, their monthly payment is now closing in on $1,000 more than it would have been in January for the same house. I got a text this morning from a real estate agent in D.C., who said he was out with an appraiser who's usually impossible to book. Well, that appraiser's schedule now, he said, wide open. Back to you. Just amazing. Thank you very much, Diana. We appreciate it. After the break, chip stocks struggling this year, how are companies navigating America's China chip ban? We'll speak to the CEO of the semi-manufacturer Global Foundries next. And as we head to the break, check out these shares. Those are Pinterest bucking the trend of slumping social media stocks, the platform's

Shopping feature boosting results. We'll be right back. The stock of 11% today. Chip stocks rallying today, along with everything else. Intel up nearly 10%. How about that? Despite reporting a rocky quarter and planning cost cuts, this comes as a battle over chips taking place

between the U.S. and China. The U.S. enacting new export controls, but the chip makers doing business in both countries are caught in the middle. Christina Partsen-Evelis joins us now with the CEO of one of those. companies global foundries. Christina? Thank you. I'm joined by Tom Caulfield right now, and I have to say

congrats, right? It's been a year since you went public. And if you just look at the three-month chart for the Sox, which is down, 17%. You got Intel. We just talked about it. Maybe up today, but still down over the same time frame, 27%. And you guys are up 20%. What gives? What's the magic sauce? Well, first, thank you for having me. And I think our performance, this doesn't happen. We have 15,000 amazing colleagues around the world. We work three, 365 days a year, seven days a week because that's what our business takes. So it's really a testimony to the team we have around the world. We're quite proud of the stock performances. We can't really talk about financials,

right, because we're in a quiet period right now. So I want to talk about expansion, and that's been a big theme right now, you know, expanding in the United States, bringing back manufacturing here, decoupling from China. You just recently announced expansion for advanced notes, right? And so you're getting funding. If we were to just talk about that for a second and the financing for that,

it's really tough to put a price tag on how much pain would cost, but Goldman Sachs did it, and they say that for those companies that are going to be building more in the United States, it's going to end up costing 44% more. So are we underestimating the future price of chips? Are we going to see a skyrocket?

if we're bringing it all back to the U.S.? So a lot to unpack that. I know, I know. It's a loaded question, but just know, are we underestimating the price of chips in the near term? I think we're an inflationary industry in the world. Not including inflation. So first of all, we don't do, we call leading edge or single-digit nanometer chips. That represents 30% of the market.

We play in the other 70%, which is we add features. We call it feature rich. We add embedded memory for security applications. We add high voltage for display. We add RF and low power for connectivity. So that's where we play. And there's a fair amount of investment needs to be made there as well. So the second part is a little bit, how are we going to fund all this capacity?

It's a big bill. Well, it starts with the Chips Bill. The Chips Bill, you think about it's $52 billion, 37 of which will be for manufacturing. But remember, that's not the whole package. That'll probably cover it the third. So that $37 billion will unleash $120 billion. 20 billion of funding for semiconductor manufacturing capacity. But it's also spread out over several years and split amongst many companies.

Yes, but it's all going to add capacity. And it's one of these things. You just couldn't spend it all in one day if you wanted to. Think about the lead time for equipment, to build facilities, to even house the equipment. It takes time to put capacity on. What about, so I just brought up China before. So there are initiatives, right, the export controls. Do you feel like maybe given your experience in the field and you seem to know

everyone within the chip space. Do you feel like the timing is difficult, given the market conditions for a lot of chip companies? Do you think it's the right move? Well, first, why are they doing the move? You finally, I think society, the industry, realize how critical semiconductors are to the world economy. Probably the most critical ingredient. You have a situation where supply around the world is way out of balance. 70% of the founder, business that, you know, there's five foundry players or so 70% of that capacity is in Taiwan. So when you think about economic security, supply chain security, national security, this imbalance needs to be fixed.

And so you're seeing in funding and what you're seeing in some of these trade or restrictions, it's all about creating that better balance of supply. But are we underestimating the corporate cost of that? Should there be retaliation? And I say this because S.K. Heinex, for example, in their earnings, they said, and this is the first time, they said they are making contingency plans for an extreme situation. It's not often you hear a company say that. So are we underestimating the cost of this? I don't think so. I think we need to get better balance. What's the other cost? We have such concentration for such a key ingredient for economic security. So this is what happens when things are inconvenient. It's which one's worse for you.

So nothing comes without pain. Nothing comes without inconvenience. And you have to arbitrage. between that risk reward. Last question just about Intel. So Intel announced that they're going to be changing their foundry model. And you think of it like a contract chipmaker, so they're now going to be servicing external clients. Media tech, both of your customers. It's competition for you in the long term, no?

I think by and large, patch strategy is to service that high-speed digital compute market, which is single-digit nanometer, you know, 7, 5, 3-nometer. We participate in and we target technologies that. that are 12 nanometer and higher. So we'll very seldom intersect one another. But there may be some overlap here and there, and the world needs good competition. All right, I guess I'll leave it on that note.

Competition, unless Tyler or contests have any questions, I want to thank you then. And I guess they don't, so I'll throw it back to them in the studio. Thank you for having it. Thank you both very much, Christina and Thomas. We thank you. We're grateful for your time. All righty.

Still to come, trading the week ahead. We'll preview big earnings on deck. And today's, there we are, three-stock lunch. Dow up more than 800 points as we head into the close. Let's get three-stock lunch under our belts and a look ahead to the busiest week of earning season. More than 30% of the S&P 500 set to report. And among the biggest names, AMD after the bell Tuesday, Marriott before the bell Thursday, and draft kings before the bell on Friday.

Here to help us trade them all is Scott Nations. He's president and CIO of Nation shares. Scott, good to talk to you and let's kick things off with AMD. Would you buy it? Well, this one's really interesting. So this is a good one to kick off with. They pre-announced results on October 6th and it was an unmitigated disaster. They got it everything lower. Margins, EPS and revenue. And the stock took a 13.8% hit, almost 14% hit because of that. But since then, it's been sideways, which is good because it's still down 57% year to date. The most interesting thing about AMD, though, is going to be this earnings announcement on Tuesday.

Why? It's because the, well, we'll call it consensus EPS is for a profit of 68 cents a share. But they're all over the road. The low estimate is 53 cents. The high estimate is more than double that at a dollar seven. And so what's really going to matter here is the commentary. Investors are going to want to hear from leadership about what they're going to do as far as scaling back production or canceling CAPEX that is canceling. If there's any upside here, it's that meta is going to continue to spend a ton of money, and that's the only thing that's going to help AMD right now. Let's move on to Marriott, Scott. Check in, check out. I buy it. I like Marriott. Big rebound in travel, and it's not just a big rebounded volume. It's the fact that they have tremendous pricing power. That's reflected in the fact that the stock is

down less than 5 percent year-to-date. The issue for Marriott, though, is, going to be debt. They have $1.5 billion due in the next 14 months. That's actually about what they raised during the pandemic. But the companies focused on debt. They say they want to reduce it. If they can manage to do that, it would be very, very impressive. With a forward PE of nearly 22, it's not cheap. And with a beta of 1.57, it's generally the broad market on steroids. But again, if they can cut debt, good for them. How would they cut it? Would they pay it? off or would they roll it? No, they want to pay off

what is due over the next 14 months and then they want to buy back some longer term debt that's due after that. All right, our final name and just as the World Series is kicking off, Draft Kings, would you bet on it? No, in fact, I would bet against it. I think Draft Kings is like

being in a car crash while you're on your way to a train wreck. The company is expected to lose $2.5 a share this year. The competition in the space is just incredible. It's insane. Unless there are some failures or some consolidation, I think this entire space is just going to be lost money and why. Well, a big part of that is the customer acquisition costs, which are outrageous. So estimates of anywhere between $700 and $1,000 per

customer for acquisition costs for all these online sports books. This is just a place to stay away from until there's a little consolidation. All right, Scott Nations, thanks for bringing us to your picks. Have a great weekend. We are seeing some confusion over what's happening inside Twitter. Let's go back to Deirdre Bosa in San Francisco now. Deirdre, what do you have? Well, Contessa, earlier today reported that a team of data engineers was laid off at Twitter.

I spoke to two people outside of headquarters. However, we have not been able to verify that they are, in fact, Twitter employees. Back to you. All right, Deirdre, thank you. All righty, up next to look at the biggest movers on the session. There you are. As stocks get set to close out and upweek, we've got more power lunch next. Mattress Mac, the Houston Furniture Store mogul, could possibly set a mind-boggling record for the biggest win from a legal sports bet in U.S. history. In total, he bet $10 million on the Astros to win the World Series.

He made a $3 million bet in May driving across the Texas border to Louisiana where it's legal, logged on to Caesar's Sportsbook mobile app. For four hours, he told me he made consecutive. executive wagers at 10 to 1 odds. He got 12 to 1 at win bet and various other operators took in the 7 million in bets. If the Astros win, Jim McInvail, his real name, will get $75 million, though he will also shell out big money for the promotion he's running in Texas. Spend more than $3,000. You get your mattress for free if the Astros win. And I asked Mack how his wife feels about him becoming the most famous sports better in America. I have a great wife. She understands that. I don't.

don't have a gambling problem. I have a promotions problem. So we're running lots of promotions and we're running the World Series right now to win the $75 million and get paid back for our great customers who invest in this promotion. Then on to the World Cup and we'll see what happens there. I mean, you don't often hear people talking about soccer, but here it is. Max says he never gambles on offshore illegal sites. He says all Americans live close enough to a state where it's legal that they should bet legally, just drive there to do so like he does. But he says also, and this is interesting, The legal sports books, Tyler, he says, should not discriminate against gamblers who know their sports. They know to wager.

They do well at it. The so-called sharps. He says when sports books don't let them place their wagers, it just sends them to these offshore sites. And that's something that the industry is. So they'll clamp down on the guys who they think, no. He sat there and kept placing bets until he got up to 10 minutes. Not only that. He flew to Iowa.

He flies all over the place so that he can make his bets legally. Cesar, by the way, told us that they have. They have lots of players who play six figure bets. Wow. But he's special. That's a lot of mattresses, man. That's a lot of mattresses. All right, let's take you through the markets right now,

because I'm noticing that the Dow is up 805 points. We're going to finish one of the best weeks for the Dow in years and one of the best months for the Dow since what was it? 1887? Was that the number that's in my head or 86? I thought he said maybe even 76. Yeah. 76.

Yeah, that's how we began. 76. It keeps getting farther and farther. Thank you all so much for watching Power Lunch today. We appreciate your time.