Power Lunch - Power Lunch 5/12/26

Episode Date: May 12, 2026

CNBC’s Kelly Evans and Brian Sullivan 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.

Stocks cool down a bit on hot inflation. Welcome to Power Lunch. Everybody alongside Kelly, I'm Brian. Markets under a bit of a pressure following a record run. What is going up? The cost of electricity. One company trying to mitigate rising rates, the CEO of Sun Run here exclusively. And while global travel has been pretty resilient, luxury travelers are recalibrating a little bit. That's according to MasterCard chief economist Michelle Meyer.

She'll join us on how the travel economy is adapting to all of this global turbulence at a new report. Plus, CME CEO Terry Duffy, he says compute is the new oil of the 21st century, and the exchange wants to trade it that way. He joins us later on on their plan to launch futures tied to the cost of AI compute. Before all that, we begin with a cooldown in Wall Street's hottest trade. The S&P pulling back from record highs as chip stocks paced for their worst day since October. Christina Partsenevolos has more. Christina? Well, the Philadelphia Semiconductor Index has really stretched as much as six.

60% above its 200-day moving average, a level we haven't seen since the dot-com era. So some profit-taking or cooling isn't too surprising today. Qualcomm, Intel, on semi, some of the worst performers in the S&P 500 today. Qualcomm on pace for its worst day since March 2020. Intel pulling back after more than doubling just in the past month. You can see shares down 9%. Memory names also under pressure. Mike wound on about 8%.

Sand disk, Western Digital, Lumentum, the whole ecosystem. AMD, C-Gate, and yet retail investors are still chasing a lot of the memory complex. New data from Vanda Research shows that Roundhill Memory ETF, ticker DRAM, is rapidly becoming one of the most actively bought securities on their retail flow leaderboard. Cumulative retail net buying has now crossed $200 million in just 27 trading days, faster than any prior retail favorite thematic ETF launched since 2020. That conviction really tracks with the bigger picture. Hedge van Koto projects memory demand, well, 5X over the next five years,

driven by, of course, agentic AI. So, yes, a pullback today, but the AI story is really driving these chips names and it's still very much intact. Overnight, for example, Kelly, you spoke about it in the last hour, South Korea's Cosby, heavily weighted towards memory names like Samsung and S.K. Hanukes fell more than 2%. And a top Korean policymaker said the nation should pay citizens a, dividend using taxes on AI profits, highlighting growing pressure to redistribute gains from a boom

that has directly enriched chipmakers like Samsung and S.K. Hanukes. No formal policy just yet, but as these companies really become the face of AI's economic windfall, expect that conversation to intensify. Today, everybody's taking a breather. Markets can go down. It's fine. Probably healthy. Christina, thank you very much. Yeah. So as we just said, the semi-stocks seeing some selling today by the seashore, said, which means the entire market is likely lower, or at least tech is lower, because it's very difficult for the overall index to go up if big cap tech is down. Here's why we say that. Nearly half the entire NASDAQ 100 ETF is just nine companies. Alphabet has two classes of stock in the top 10, so it kind of counts twice. And it, along with the Vita, Amazon, Microsoft,

and more pretty much run the entire show. And then you layer this on. The spread between the overall S&P 500 and the equal weighted S&P 500 is really, really wide. In fact, since the closing low on March 30th, it is the widest gap in favor of the S&P in a 30-day period going all the way back to the year 2000, meaning just a small group of stocks sends us higher or lower. But I guess here's the real question. Do you care? Should you care? So welcome back in Robin Hood Chief Investment Officer Stephanie Gild, as well as FL put Portfolio Manager Ellen Hayeson, both on set. We love it. Ellen, first, do we care if five stocks make the whole market go up? If they keep going up and I have a 401k or an FL Putnam investment, do I care? Really? It makes the market more fragile. So, on the one hand, this is really being driven by earnings. For many of these stocks, earnings are still going up. Revenies are still going up. Earnings are still going up. And most of them are not that expensive on a forward PE basis.

assuming that the earnings are correct. So in terms of, is this a bubble? Could it deflate? We don't see what we saw in 2000 when those earnings just weren't there and it was all hot air, right? These earnings are there. So do we care? Not from that perspective. On the other hand, anytime you get a market that's more concentrated, it's just that much more fragile. And it requires something smaller to maybe make it be more susceptible because it's such a narrow group of companies. A healthier market is broader, right? A healthier market has strong financial, strong health care, strong utilities, everything. This is a little bit more narrow, no question about it. So it's more fragile, but it is supported by real growth, and those numbers just keep going up. Stephanie?

I actually think it's been a little less broad over the last few weeks, but I actually think if you look back year-to-date, it has been pretty broad, and a lot of these names that are coming down today and we're rising throughout the year have been not the largest names. And so I actually think like you're going to have some underlying shifts and that's sort of what we're going through now. But I agree that I don't think these companies are necessarily expensive, but there's something, Jordi Visser from 22B said, which was that the market will experience speed crashes because we didn't have hockey sticks. We had like literal sticks when you look at some of the charts and you have to have some consolidation and things come down for a period of time.

I thought Gene Munster asked an interesting question last hour when he said, Ellen, you know, Don't ask yourself what happens if, you know, stocks have gotten too far ahead of themselves. Ask yourself what happens if these fundamentals are real and go on for a few more years. What then? If the fundamentals are real and go on for a few more years, these stocks are all going higher because they're not that expensive. Estimates are still going up. Revenues are still going up.

And it really depends on when we begin to run into some kind of gating factor or bottleneck, right? We've talked before about the rotating bottlenecks. First, it was Nvidia chips, and then it was memory chips, and then it was networking. and now it seems to be power generation, right? Your favorite topic. And so as the bottlenecks move around, the companies that do the best are also going to move around with that. But the whole system can grow as fast as the slowest bottleneck, right?

And if the bottlenecks are being addressed through the magic of capitalism and Adam Smith's invisible hand, then you're going to see supply response come in. The bottleneck eases and goes away. And then that growth, which every company you talk to, every conference, call you listen to. The demand for AI compute is insatiable at the moment. And so if you can remove whatever bottlenecks are currently constraining that, then it's going to grow for several years. And even his biggest, you know, his favorite companies right now were those more in the energy space. Yeah, it was interesting. We're going to talk to the CME CEO, by the way, about this whole

idea of compute becoming its own asset class. That's a different interview, by the way. We can all agree, Stephanie, that Tuesday is the worst day of the week, right? We're all tired from the weekend. It stinks. It's horrible. The market's down. Every Tuesday stinks. So let's be optimistic, shall we? Because if these tech stocks keep going up to Ellen's point, and if the rest of the market, to your earlier point, continues to broaden out, not lately, but it has been, I agree, the data is there.

Is that S&P 10,000 in a couple of years? Sure, why not? I'm not as positive on S&P broadly, because I actually think more of the growth is going to come from the companies that are receiving the CAPEX. So if you think about, like, I've been calling them the receivers. I've heard other people say, like, your KEPX is my opportunity. And that's why I think actually you, that's why I think, like, the S&P will certainly rise.

But I think focusing just in largest companies is actually going to leave some opportunity in the table. And they usually call it Turnaround Tuesday, you know. And you do wonder if we're seeing a reversal. Yeah, it was something else Tuesday. And then that became associated with Trump, so we eliminated that. Now it's notcho. Now it's not true. But I guess we're all wondering if we're starting to see this happen in real time right now.

And we've seen corrections and it's not a big deal. It's just I wondered you make a lot of what has happened when the slightest little bit of news. It was the AI tax, no, it's not in Korea. Or it was laptop shipments are down according to Key Bank and people sort of look. The slightest little bit of news is now kind of pushing this trade off. Yeah. I mean, it was the same thing when like the earnings kind of. out. Like, you know, even if you had good earnings, but not spectacular, your suck was down. So I think

we're in that same environment. And now it's just things probably got a little overbought in the near term. And they need to kind of consolidate and reprice a little bit. I'm not saying for the longer term, but I certainly have thought about this market being a place where you don't want to be greedy. And you want to take some chips off the table when you make. What are you, you always have great data on like what the Robin Hood customer base is buying and selling. What are they buying? Over the last week, it's been chips and memory. You see? That's the whole thesis of the top of the show.

I mean, it has. You kind of poo-pooed. You're like, no, no. Well, I actually, I mean, I think that trade will continue, but I do think, like, you know, one of the reasons why it was going up a lot is because there has been so much flow going that way. And I think, you know, temporarily it has to mitigate the sale. On the sales side, they've been trimming Nvidia and Tesla, which... But they love Intel.

Yeah, but that's in the short term. Again, these are the Robin Hood customer base. They could be intraday. These could be intraday trades, right? Like buy in the morning, sell it in the afternoon. Yes, but I'm looking at net bot data on a notion of a basis. Okay. So how long of a time frame would that be, with your net bots and data?

It's on a daily basis looking past over the last week. So it's certainly. But they have loved Intel. Oh, yeah. And I think it's one of the reasons why it's gone up is because they've had so much flow behind it. But that also is a company that has been kind of not been looked at for a long, time. And so if you have like all of a sudden, people are like, oh, this company can be something again, it matters. Where else, Ellen, are you looking right now? Kind of in the either or of do you or don't you with the semis and everything. I mean, where else?

We still love semis, as always. So that hasn't changed. We like Micron. We like AMD. We like Intel. We certainly like Taiwan semiconductors. As we've talked about many times before, we like Broadcom. We like Invita. Beyond semis within the AI trade still, we like some of the engineering, E&C companies that are helping to. to build the data centers. Like an eaten, a floor? More on the engineering and construction services side, so like an MCOR or an ACOM. Oh, the actual builders. Yeah, yeah, because, I mean, they're also seeing enormously positive estimate revisions and positive revenue growth. And when do you get out of the Intel trade?

When do you get out of the chip trade? What data point are you looking for? I think you wait until you begin to see lead time shorten or pricing soften, right? and you might not catch the top, but in chips, there are a number of leading indicators, which is when lead times come down, when pricing softens, when gross margin softens, when you begin to get cancellations, because it turns out that maybe there were some double ordering going on, if you begin to hear that, that is going to be the sign of a temporary reprieve. But the longer term demand, even if the stocks have gotten ahead of themselves and things slow down

a little bit and you want to take them off the table, I think the three to five year outlook is still really, really positive across the space within ships. And then it makes sense to own things outside of that. Diversification, right? Consumer Staples, healthcare, financials, other names. Ellen, Stephanie, real pleasure to have you kick off the show. Thank you very much. Thank you.

Great to be here. All right, we've got some breaking news out of D.C. It's the monthly Treasury statement crossing right now. Maybe some stuff on tariffs and revenues. Going out of Washington with Megan Cassella. Brian, that's exactly right. The U.S. federal budget deficit is down 9% fiscal year to date through April, that's compared to a year ago, but it is still significance coming in at $954 billion.

Now, for the month, April was a surplus month. It often is for tax season. Federal revenue was at an all-time high for the fiscal year to date, but so was federal spending. So some of the biggest categories for spending here, defense military program spending, that's up 4% fiscal year to date, or $22 billion versus last year, starting to see the impact of the Iran more there. Individual tax refunds were up 11%, corporate refunds, up 79%. And gross interest on the public debt is up 7% so far this year. So the U.S. has now spent $734 billion in interest alone. That's also at an all-time high.

Now, on the receipt side, customs revenue is high. $22 billion in net revenue for April. That's on par with March. A treasury official told me that this month's data does not yet reflect the refunds from the tariffs that the Supreme Court knocked down. So we will start to see that impact, guys, in next month's report. All right. A lot of stuff in there, Megan.

and the market taking it pretty much in stride for the time being 446, it looks like on the 10 year after that and the auction that Rick gave a C-minus 2 last hour. Megan, thanks. After the break, April inflation coming in hotter than expected, highest level in three years, what it means for yields and the rate outlook in today's bond report. That's next. Welcome back to the official CPI reading. Coming in hotter than expected, much of that was energy.

It was more than 40% of the headline jump. No surprise there, electricity prices, they've been rising for years, and gasoline prices are now higher on the Iran war. But it's not just happening here. Let's be very clear. In England, inflation remains a huge problem. Bond yields are soaring even higher, and the residents there are dealing with high prices of their own. Rick Santell is in Chicago from the Sibo trading floor, and I'm not just throwing out the UK randomly, Rick. I'm throwing it out because you're looking at bond yields there that are the highest in decades, and now they're calling for potential change again in the prime minister. This bond yield movement, you've been on this story for months, is not just an American thing.

No, it is not just an inflation. It's not just an energy thing. It's kind of another distress moment in the making. The market, their yields are higher for a variety of reasons, not the least of which is, is their economy is slowing. They have inflation like many other countries. They have energy inflation because they haven't procured their energy through multiple supply chains.

And maybe the biggest issue is that they really don't have room for stimulus and their economy is slowing and they have a lot of debt. It is the worst of the worst. And my guess is the market's going to continue to penalize them. If you look at the chart, they're pushing that 510, 511 mark. They're at the highest closing yield since 2008. even boon yields today came within a half a basis point, Brian, of their 311, April 29th, high yield close going back to 2011. They missed a refresher by half a basis point, 310.5 versus

311. And I understand the inflation issues. There's a two-day chart of our tens reflecting the ongoing warmth of CPI. Now, 2.8 year-over-year core. We're much higher last year, but that isn't the point. It's not only what's going on in the Mideast. It's a residue of inflation from that last mile, even before the conflict started. U.S. tends today extending as well. They're looking to close at the highest yields since July 15 of 2025. So no matter where you look, you see very similar dynamics. The one difference is the U.S. economy is definitely in a growth mode, whereas the U.K. and the Eurozone are not.

Back to you. All right, Rick Santelli, thank you very much. Run, Sun Run, Run. The CEO, Mary Powell, joins us next on her outlook of the company, solar, batteries, and more. All right, let's drill down on solar, specifically Sun Run, the company making a big push into battery storage at well. Sunrun reported an earnings beat last week and a 43% jump year-over-year in revenue, though the end of the solar tax credit and tariffs impacting the quarter and as well. Mary Powell is the CEO of Sun Run and joins us now exclusively on set based out in California.

Happy to catch you on your East Coast swing. Glad you are here, Mary. Thank you very much. Good to see you. All right. So it's a little bit. We'll call it WBI, wonky but important. Talk to us about your push away from third-party installers and how you're trying to sort of fundamentally change the business in an environment like we talked about with the tax credits that has changed itself on you. Hey, not wonky at all from my perspective and in fact critically important. As you know, Brian, like the biggest thing we've done in the last few years is really become a storage first company. And the reason that's important is we are providing Americans, particularly now in the backdrop of

escalating energy prices, we are providing Americans with the opportunity for energy independence, the ability to generate and store their own energy, have stable priced power, and to do it in a way that is also providing the biggest distributed power plant so we can export energy back to the grid. So it is that context in which I answer your question because that's the context that is so important because what we have done is we are leading in a more sophisticated product for customers and for the grid. And what that means is that you have to be sure you have the best of the best people selling that product, describing that product, installing that product, installing that product, financing that product because we provide a subscription service for a million of our 1.1 million customers.

So we are an integrated company that does the financing, the sales, the operation, and the care and the service going forward. So the reason, yes, we are moving very strongly into the space of saying, no, we want it to be our direct employees that have that sophisticated understanding of this product that we're selling that can provide an amazing customer experience and that can also set the stage for that very long customer relationship. So I wanted to do this. Who doesn't? I mean, the idea is so appealing to put on the solar panels. One of the first things that I was a stumbling block was realizing you need big batteries. And I'm seeing here, you guys are all over this. But, you know, you only get it. The second that the sun isn't shining, you can't.

You can't power your home with solar panels unless you have batteries, and the batteries only store a couple hours worth of power. More than that. What I looked at it. So I'm curious, you can bring you up to speed. So that was one hurdle. In my case, we might have been two Tesla power wall batteries. And I'm like, is it safe to have two of these mega batteries in my house that can still only maybe power the house for a little? So we, anyways, we have a backup generator.

It can go for five days as it did five years ago. I'm curious how that, how much far that, how that has come along. And the other issue was, and I'm not sure if this is still the case, it wasn't clear that we could sell the power back anymore and actually capture some economic. Yeah. And that is, so first, as we know, you know, the United States has different energy programs, policies all over, right? Because it's very much controlled by the states, not at the federal level. So the answer isn't a one-fit, you know, one solution fits all. And that's another reason, frankly, for why we feel is so important to want to make sure we're owning this. that relationship stem to stern because we can make sure that we understand the sophisticated nuances of your particular market. But yes, I mean, the reality is that is why I actually went with Sun Run way before I became the CEO. And it was because I could get Tesla power walls. I got two, I got, you know, two batteries, I got solar, I got EV charging, I got a smart panel. I did all of

this amazing technology in my home and didn't have to put anything down, didn't have to get a loan, didn't have to pay cash, could do it all through the subscription service. And in the case of outages, when the sun does shine, which it does frequently in many, many parts of America, right, I was able to power through five, six days and still had absolute abundance of energy. So I would say it also really depends on the situation of how much load you want to back up in your home. But, you know, for sure our customers are seeing multiple days of coverage with their solar and their storage. And that is a big, big, important part of why they value what we're doing. And you and I talked about how your new home state of California did something, in my view, really kind of dumb by ending or lowering some of these net media.

How much power we can sell back into the grid. They want solar. They want renewables. And yet they do that. To me, it makes no sense. I think it was a problem. There was too much of it. they were losing money.

So this is the question. So you're exactly right. So this is my question. You came from the utility side. Yes. What is the utilities we think of as like utilities? It's utility. Well, they're for-profit corporations that are mostly regulated, but they're companies.

What is Sun Run and the solar industry's relationship with utilities? Because on one hand, you go together. But on the other hand, they want to sell us power when distributed energy means if you have solar and I have solar and you have solar, we might be, utilities ourselves? What is your relationship with utilities? Well, it's really evolving a lot, Brian, because what is happening is what I felt was going to happen, oh my gosh, over a decade ago, because as a utility CEO, we were the leader in the nation in actually putting, we were encouraging customers to put solar panels on their roof, and we were encouraging, we were the first to get storage into homes. That was way back in 2015. And so we created the first power plant where we were

operating these resources in a way where we were lowering the cost of the grid for all. So I have always believed in this technology because I was always concerned about consumers. Like frankly, I was always concerned about consumers. I just saw the utility model with prices. I saw nothing but prices going up in the future. Climatic events were increasing, which meant you had to spend more. And I saw that prices were going to rise, reliability was going to go down. And we needed a way not just to help Americans power their lives, but frankly to power the grid in a more technologically advanced way. So we are finding, as the leader now, we operate the largest distributed power plant in America.

We have 250,000 homes with storage in them. We have four gigawatt hours of storage, which that's the equivalent of probably a dozen peaking plants. And we are working with utilities to export that energy back. to the grid when it is most needed. And we have, we have to go, but there were so many companies, so many bad actors in this area as well that I think it left consumers generally a little bit skittish about, especially the financing piece about it. I should know if you have a quick comment on that. I, that is why we are so customer obsessed. That is why we are really focusing on ensuring that our employees are the ones that are selling the product, financing the product,

and working with our consumers, because I so believe that is, At the end of the day, that's the most important thing, right? Is that you're ensuring you're giving an amazing experience to those that you serve. Have you ever had people knock on your door from the solar company? Do you get this all the time? I actually got an email yesterday from sort of, I guess, the semi-competitive yours about installing solar on the house. Yeah. It's an aggressive.

Yeah. And you said, well, wait a minute. But that's why Mary, appreciate you kind of breaking it down and explaining where you guys come from on this. And I do like the sun. And again, not to be aggressive, but I'm happy to talk to either one of you about. your home. I do like the sun, because if it's sun goes away, we have bigger problems anyway. I'm not sure that in video, nothing will matter if that happens. Mary Powell, thank you very much. Thank you. We're going to take a quick break. Before we go, we wanted to highlight a notable headline

from the energy information, administration, or EIA. U.S. energy production hitting a fresh all-time high last year, four straight years of growth now, being powered by three key drivers, natural gas, crude, and like we were just talking about, renewables. That will be part of Brian's energy intelligence piece tomorrow. Thank you for not calling in a newsletter. Never. It's called Power Insider to get it delivered straight to your inbox.

Sign up now by heading to CNBC.com or scan the QR code on your screen. We need Arnold Schwarzenegger to do that voice from the movie. It's not a newsletter. You know, from the, I don't know. He was here, you know, last year we could ask him. We should have asked him to do that. Indeed.

We got Krantz to do the Power Lunch stuff. That's right. There you go. Coming up, tensions in the Middle East, rising fuel costs MasterCard's Michelle Meyer on what it all means as the summer season begins next. MasterCard is out with its annual travel report ahead of the busy summer travel season, of course. They're looking at global trends in the wake of the Iran War. We know jet fuel prices have soared over 70% since the start of the conflict. Airlines like British Airways, United Lufthansa, Air Canada, all warning of higher fares and fewer flights this summer.

Michelle Meyer is chief economist and head of the MasterCard. The Economics Institute. Michelle, it's great to see you. Broad takeaways. What are they? I think the takeaway is that the consumer is still out there traveling, but they have to navigate all of these different factors that you talked about. So, of course, there's the cost of travel that is rising in many parts of the country, but it's variable. It's not uniform. You're not seeing the same type of increase. They have to control for the fact that there's different routes, there's different levels of safety in different countries. but they're doing it. It's really a story of a reorientation of travel, which has been the theme throughout the last few years in terms of consumers shifting and changing what they're doing and how they're behaving based off of the external environment. Okay. So what kind of, if reorientation has been going on and maybe this is now accelerating it or changing, what are they moving away from? What are they moving towards? So one thing that we see certainly when you look at just the bookings into the future into the summer travel, which is a critical.

part of the travel season, of course, is what happens in the summer. Europe is still hot. So when we think about U.S. travelers or overall North America travelers, seven of the top 10 destinations are in Europe. So that's still out there. We're still expecting to see a lot of travel and a lot of traffic to the region. We're also seeing, of course, consumers try to figure out how to be as flexible as possible. That's quite important. Terrace is number one still. Taras is number one still. Abu Dhabi is number six, still with everything going on. Yep. So, I mean, obviously that was flight bookings that were up throughout April. So some of those could have been earlier in the year. But one thing that stood out to us, particularly about Abu Dhabi, and more broadly in terms of the Middle East region, big parts of India as well, is how much corporate travel has been moving into those markets. So we created a measure that looked at the percent of corporate travel relative to the amount.

And would you find? Because corporate travels where the money is, Michelle, those are the people paying the big bucks to sit up front. I'm told. Well, that's part of the story. Yeah. But you certainly see a big shift. Abadabia was still high in the list. But India is enough one. Ethiopia was on the list.

It was. Yeah. Because it's the relative change. It's the direction of travel. The momentum that matters. What else are you picking up on? So you're sort of saying there's not a huge... We spoke to the CEO of Wyndham hotels recently.

He said there has been no impact really from fuel prices on the consumer. And I mean, he said, like no big impact. full nothing. And I'm curious if your data kind of echoes that as well. Yeah, I mean, I would say on aggregate, we are still seeing that activity. We're still in that spending, but it's shifting. I do think there is an important point around the reorientation, the reallocation of purchasing power, particularly when it comes to travel. But the other thing that I think is really important that we observed in our report as well is the influence of technology, the influence of AI to help consumers navigate this period of time. So if it's the case that traveling to one market,

doesn't seem comfortable or prices are not allowing for it. Where else can you go? How do you is technology to do that? As someone that travels arguably almost weekly. Yeah. By car and by plane and by train and by bus and by whatever method. Okay, I'm going to say something's a hot take. A lot of people disagree with this.

If gas price increases kill travel, if... It's not the gas prices. And I'll tell you why. Well, gas price increases certainly impact a lot of families, not denying that whatsoever. If you know the price of hotels over the last five, you do more than anybody, Michelle, right? The trends in hotel prices, the trends in food prices, the trends in flight prices, the trends in travel insurance costs, should you buy that? They're all up. To me, if gas prices break the economy, it's because it's the last straw in what's already been a massive inflationary cycle over the last five years, $300 a night for like, you know, an average motel now.

right or wrong. Tell me I'm wrong if I am. Well, I think you have to consider the window of time that you're talking about. Of course, relative to the pre-pandemic period, there's been inflation across the board. We had a price level shock that happened in many categories, including the ones you spoke about. But it also happened in terms of asset prices. It helped in terms of wages and income as well. But then last year or so, a lot of those categories have been seeing disinflation, a considerable slowing in the rate of inflation. The level is still high, but the rate of growth has to be. But it's a lot of But incomes have gone up and that's my point. If those things didn't break the traveler, I don't know if an extra $50 a month, and that's the average number, $50 a month, is going to break the traveler. If the $300 a night hotel room didn't and the $200 average dinner didn't with a couple cocktails thrown in there, I don't know if $50 a month in gas is going to. Well, that's where it goes back to thinking about the fundamentals of consumer spending and what they look like right now. So the labor market, the household balance sheet, they're still supportive. The last two jobs reports were obviously very encouraging. But even if you say, okay, there's a lot of noise, take the moving average. The last six months, moving average of private sector job growth of $6,000 to $8,000 a month. That's pretty good in an economy that has seen some cut back in terms of the supply of labor. So the unemployment rate is 4.3%. Household balance sheets are obviously very supportive of what we're seeing in terms of continued wealth gains. So the consumer, I think, has still purchase. power on aggregate, but also importantly, they have tools to allow them to navigate this so much more than they have in the past. They don't have to be price takers. They can very much

think about where they can get the most amount of value and that I think holds true in a significant way when it comes to travel. No, don't have to be price takers and AI is helping with that. It's interesting. Michelle, thanks. Appreciate it. You got it. Thank you. Well, let's get over to Julia Borsden for a CMEC News Update. I agents have reportedly begun interviewing current and former CIA employees as part of the probe into ex-CIA director, John Brennan. That's according to Reuters. Prosecutors say they're probing whether Brennan made a false statement to Congress in 2023 about the intelligence assessment Russia interfered in the 2016 election to help President Trump. President Trump has long called the assessment a hoax.

Authorities in Denver today identified the person who was struck and killed by Frontier Airlines plane on a Dendron. Denver runway Friday. Police say Michael Mott jumped over the airport's perimeter fence and was hit by the plane as it was taking off. The chief medical examiner ruled it a suicide. A new study by the University of Toronto using phone data suggests a roughly 42% drop in Canadian visits to the U.S. last year. That's much higher than Canada's official statistic that showed a 25% drop amid mounting political and trade tensions. According to the study, Myrtle Beach, South Carolina saw the biggest drop with 65% fewer Canadians visiting the vacation spot. Power Lunch will be right back. All right, welcome back to Power Lunch. I'm Dominic Chu with your market navigator. The performance

gap between chip stocks and software stocks is just about the widest it's been over the last year, and semis are now a record 17% of the S&P 500. Our next guest says we're witnessing a modern-day version of David and Goliath. He's going to be. got a game plan for tackling that great divide. Joining us now is Jeff Kilberg, founder and CEO of KKM Financial and also a CNBC contributor. So, Jeff, let's talk about that big divergence. It's the talk of the town these days on Wall Street. What exactly can we expect more widening or a closing of that gap?

I think we will see a closing of that gap, and it's remarkable. About a 91% dispersion between SOX, SOTX, and IGV, which is a software ETO. And it's been indiscriminate selling. gas, no brakes on semiconductors, and everything in the trash and software. But I think it's time, Dom, to be selective in some of these names. So I want to be a buyer of three different software names. All right, which three are we talking about here and why? Well, think of it as like a cake, a three-layer cake.

And I want to start with Oracle because that's where all the data lives. And secondly, it's ServiceNow. That's the middle layer. And if you think about how work flows between systems and people. And lastly, Salesforce, that's the top layer. That's the customer facing. And I know AI has scared the living life out of everything. everything related to software, but I think AI is now going to demand all three of these layers of

the Kig to work better. Oracle's already bounced back. It's still 40% off its all-time highs. But the other two names, Salesforce and Servers now, down 40% for its all-time high, respectfully. That's the opportunity for them to come back because I think AI ends up strengthening. That's the bullish case now. I've been so walked away from, Dom, that's the bullish case to own these three names. And really quickly, of those momentum upside chip stock names, which ones are the most vulnerable? Well, I think when you see a parabolic move in any of the chip names, but I still think that we're not going to wake up tomorrow

and walk away from the insatiable demand for chips. So even an F1 Formula race car, Dom, has to go in to get more gas. So semiconductors, that race is not over. All right, Jeff Kilber, KKM, thank you very much for that. David versus Goliath Trade. Kelly, I'll send things back over to you. Dom, thanks. Coming up, CME CEO, Terry Duffy joins us on their push to turn compute into a commodity.

Hmm, that's next. Welcome back. U.S. derivatives exchange CME group and the index provider Silicon Data are teaming up to create a futures market for compute. We're joined now by Terry Duffy. He's the chair and CEO of the CME group. Terry, it's great to see you again. Welcome. Thanks, Kelly.

I appreciate it very much. There's a whole macro strand of this, which is that you guys are formalizing an argument that compute is a commodity. And we all have to think about the big seven and the mag seven as commodity producer. and maybe rate them as such, let's leave that, put that out there and put it totally to the side. While you explain why the price, the cost of compute, has become one of the most important data points in the land and what you are now going to offer around it. Well, when you look at the cost of compute, Kelly, I mean, it's just been, it's amazing. So to even buy some of these, you know, the GPU components is so expensive. So all these hyperscalers buy them, they put them in data centers and people go on there and they use them for a

lack of a better term on a one-off basis and they rent them, which it makes it much more efficient to continue to build your own AI project. The problem with that is there's been no risk management tools for either the hypers who are holding these very expensive GPUs. There are new GPUs coming out all the time. They have to keep up with the demand from the people who want to build new AI projects. And so we believe that there's a market there, a natural buyer, which would be the people that are creating the new AI projects, and then, of course, the people that are holding these GPUs and leasing them out. So we think that is a natural buyer, natural seller,

and that'll make a great market going forward and mitigate some of the risks for both sides of the equation. This is something that's not going away. We all know artificial intelligence. You talk about it on your show all the time, Kelly, the different stocks that are involved, whether it's in chips and software, your last argument that you had with the analyst.

I mean, this is continuing to proliferate into our society. So we want to make sure that we are offering the marketplace, a risk management tool. And I think Don Wilson and the folks at DRW and the folks at Silicon Valley with Carmen Lee have really come up with the unique proposal. And we're working together to create these futures contracts that we can help mitigate risk for many years to come. Terry, how important is pricing transparency in what has been arguably a pretty non-transparent market for 99.9% of people? Well, I think that's a really good question, Brian. As we're getting through this right now, I've looked at some of the charts, talked to

done a little bit about that. And we've seen some of the pricing on the rental. I assume that's what you're talking about on the rental of some of these GPUs. And they can be very stagnant, go lower, and all of a sudden you'll have a massive spike with a new innovation coming out. So I think the transparency of pricing is good on any product, Brian. So I think this is something that has gotten so big in the world that we live in, that transparency will help both the people that are creating the products, as I said earlier on AI. the people that are going to sell the products to these folks. So it's really important.

Talk about literally how, no, no, please, how this is all going to work in terms of, you know, forwards and futures and all sorts of different settlement contracts. And this also, we always refer to kind of the benchmark H-100 rental data. Would you be looking to add anything else to the suite? Well, and that's the beauty of it. I think we're working with silicon data, we will have the ability, to be nimble and to put up new products up there, new indices going forward.

You know, say NBIDIA comes out with a new chip, and all of a sudden it's the latest and greatest, and so you need to have those GPUs out there. They have the data to, on their indices, to go ahead and we can list the new futures contract for them in a short order. So we think it's really an exciting time because of what Silicon data has been able to accumulate today,

and what do we'll be able to accumulate going forward in order for us to list new futures contracts quite quickly to bending on what the world needs at that given moment in time. How would you compare and contrast it to the typical kinds of commodities that are most heavily exchanged now and their sort of arrival onto the scene?

Does this remind, is this a big break from the past in that sense? Or is it just continuous with things like, go ahead? That's a great question, Kelly. And you try to get your arms around this as the world continues to evolve. I don't know if there's a product that's been out there listed on an exchange

that remotely comes close. to this. I mean, you can say there's some characteristics between any product than this, but this is so different. We've had such a concentration of risk in the AI world and in the software world versus some of the other commoditized products that we list on CME today where they're dispersed amongst many different participants. So I think this is a different product which will allow it into more hands. So it's a little bit different, Kelly. So I don't know if I have a good analogy to say what it's like on an existing tradable product today. Well, I think I'm not going to answer that question, Terry, for you. But I'll add this in. It's like prediction markets,

but I will. That's what I do, Terry. Prediction markets went from somebody betting on the outcome of an election in the weather or a sports game to a risk management tool as they're growing for companies that want to hedge specific risks. So prediction markets have evolved. Is this kind of the natural same line on the compute side when you look at like Silicon Data and DRW, the companies that you're partnered with that they're trying to turn this one thing into something else, which to your point is the risk management tool, even if somebody is not just a compute trader, if that makes sense. Brian, you know, you summed it up very well, but I will say the difference between prediction markets and this particular market with GPUs I outlined earlier, there is truly a natural

buyer and seller, which makes a better market than some of the prediction markets, I could argue, there are not natural buyers and sellers. There are just people making potentially a bet on something at that given moment in time. So I don't know if I would tie these to the evolution of the prediction markets. As you know, the prediction markets are primarily retail focused markets. I don't know if this would be the same with GPU markets and compute markets. They are more institutional driven by some of the largest companies in the world. So I think it's a bit different than trying to put the correlation with predictions and just retail.

All right. Terry, thanks for joining us on short notice and a big news item there today. Appreciate it. Thanks, Kelly. Thanks, Brian. Terry Duffy. That was the most polite no I've had in a long time. More power lunch after the break.