Power Lunch - Power Lunch 8/10/26

Episode Date: August 10, 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 a little bit under pressure as oil rises back above 80. Welcome to Power Lunch, everybody, with Kelly. I am Brian. The markets right now down just a little bit. But remember, coming off, one of the biggest and best weeks of the year, yields, though, they are up back above 4.7 percent. That despite the strategic petroleum reserve falling below, what some view is a very important level of 300 million barrels.

Some bosses in Iran dispute. They are speaking with the White House. Palima Croft is here to make sense of it all. Plus, as multi-billion-dollar cap-backs faces more scrutiny, the market is shifting its focus from raw compute infrastructure to monetization and deployment. Goldman's co-head of public tech investing, Sung Cho, says the next week of our performance won't just belong to the chipmakers and the market is telling us that already. I'll talk to him about that coming up.

And the bullish signals are piling up. Goldman data from last week showing hedge funds are heading back into single stocks. The July 31 through August 6th period was the first week of net buy. of single stocks for the first time in a month. And you have J.P. Morgan raising its S&P year-end target to $8,000 from $7,800 earlier today. So should you be similarly bullish here on set with us as Seaport Research Chief Equity Strategist Jonathan Gallup and Sanctuary Walth Chief Investment Strategist Marianne Bartels? It's great to have you both here.

Marianne, where do we begin? I mean, we did, by the way, have a disappointment with the jobs number last Friday. We still have yields on the rise. I mean, you could still point to a few factors that are kind of casting a shadow here. But again, the performance of this market. Iran oil, it just keeps grinding higher. Isn't it a wonderful thing? Wonderful for investors. And it's all about earnings. Earnings have just come in shockingly above estimates, so almost 30% above what analysts were expecting. And earnings are up almost 50% year on year. Take out alphabet and take out Amazon. They're up 30%, but they're just staggering numbers.

So the market is really focused on earnings as it should be, and that's why we've been able to power higher. Yeah, Jonathan, I mean, the number, look, here they are. We're up 51% from a year ago. Some of that, you know, they say it's worn off in special factors, but you make a good investment in a well-performing company. I think that should count, 8% above expectations. Revenue, so forget how we get to earnings.

Revenue is up 15% from last year. What is this telling us? I mean, first, you have to break it. down and there's a bunch of stories. I mean, number one, the tech thing is on fire with semi is leading that. But energy earnings are up well over 100 percent because of the war and the damage to the consumer and industrial sector is nowhere near as much as the benefit from that. And financials, I mean, all this AI build out and data centers has to be financed and the financials have crushed it. So it's really, really broad. It's interesting, too, because some energy earnings are

five and six hundred percent. No one thinks that level is sustainable, especially because you've got to lap it next year. We understand that. But to your point, earnings up, but the hit on the consumer not up as much, that is pure profit. Are you buying into it? I know, Marian, you like Exxon mobile. Yeah, I mean, and companies are just so good right now being able to pass pricing on. So whether it's roofing on a home or materials of any kind, companies are doing great job of increasing margins. If you look across all the major groups, cyclicals, non-cyclicals, their margins are basically at peaks in a period where inflation is pushing it and oil prices are high. The story is really strong. So what I think is really important is there are three phases to inflation that we've highlighted.

And in the early phase of inflation, you get a boost, right? You're raising prices. And that's actually good, right? Companies have the stronger revenues. And, you know, it goes down to the bottom line. So I do think we've switched from a deflation environment to an inflationary environment, but this is the really good cycle for inflation. And the consumer's been able to handle it because the stock market has been going up,

so you have the wealth effect. So I don't think it gets much better than this. Well, that's a scary thought because it's got to keep getting better than this, right? This can't be as good as it gets. No, because my target for the S&P out to the end of the decade is $10,000 to 13,000. So I still see a lot of upside. And a lot of this is driven by AI with the leadership and semiconductors. And what was shocking to me when I was doing my research over the weekend,

semiconductors are actually less expensive than the market. This sell-off with their earnings power has actually put the P.E. multiple below market. I would say there's a fourth level of inflation, which is just resignation because I was just in the upper Midwest and prices are up and people are spending and they don't like it. They complain about the prices of everything, but then they spend the money. It's like they're resigned to the higher price. You like ExxonMobil. You're not afraid of the fact that that is a higher stock price than it was a year ago. Absolutely not.

So we're bullish commodities because we're in an inflation. cycle, and part of that commodity cycle is energy. And if you look at WTI crude oil, it's really been trading in a band of moving averages between 76 to 90. And, you know, today we're around 80 or above that. Oil prices are not going down. I'm not in the camp where oil's going to 40. I think maybe eventually if we can resolve what's happening with Iran will settle in around the high 70s, and that is extremely bullish for the energy companies. What do you think, Jonathan? You agree? I do. First of all, I think this belief that we're going to quickly get out of the Middle East is, you know, it's... Speaking of resignation, that is one category where everybody seems to be acknowledging, all right, maybe it's just the...

Whatever we call this status quo here, and the market's marching high, I mean, I'm not trying to make nothing of the fact that we're down today, but broadly, it doesn't seem to be a problem. Right. So one is, how much of a problem is this for the economy and the markets? We are an oil exporter. So all as being equal, higher oil is not necessarily a huge problem. But there's absolutely risk to the upside in oil. I like the energy sector here. And if you think about it, let's assume this thing magically resolves itself. Oil is what, $10 less a barrel?

If this thing, if we remain stuck in the region, oil could be a much, much higher number than we're seeing right. And the consumer is able to deal with that as well. Also, it's not just oil. You know, you talk about commodities. You said you like the Marianne. You look at copper. You look at things like that. These are also commodities making new highs.

Is that part of the bullish thesis you have behind Freeport Macbrand? Yes, absolutely, 100%. So we've been strong bulls on gold and silver. You certainly saw them correct. Burl-Lives trade. That's bottomed out. And the industrial metals, because of this build-out with the hyperscalers, and you can't get a lot of supply of copper.

We're also very bullish on copper. We think the metals remain in a major secular bull market. Well, I mean, at the end of the day, we have a really strong backdrop. The unemployment rate just dipped down from 4.2 to 4.1. That's because a couple million people are leaving the workforce. There is that negative side. Are they aging out or they giving up? They're very different things.

Right now, I mean, demand for, I mean, demand for, I mean, demand. for labor is high. The economy is super strong. If you look at final sales, which is a better read than GDP, grew 3.9 percent last quarter. This is the kind of numbers you see when you're leaving a recession

and you have a V-shaped balance. And so it makes sense that you'd have strong demand for industrial commodities. And to your point, and again, I'm just coming off a week in the Upper Midwest, it's not just the stock owners that I think are doing well.

And I know there's a lot of people out there that aren't, but I want to be clear. Airports full. Airplanes full. Restaurants full. Grocery stores full. Parking lots of discretionary items full. This is just anecdotal stuff. I get it.

So maybe it's garbage and the people out there could say this is not true. But I could tell you, Jonathan, that there are people out there that are feeling better because even if they're wage earners, they're not stock owners, they are doing okay. They're making more money. So, yes, things cost more. but I think hourly wages are above the rate of inflation. And that, I think, goes to your underlying economic strength theory. Sure. Yes or no?

100%. But it's also, when things are going great, you have to ask yourself the question, what's not perfect and what could go wrong? What cost you? Well, the 10-year bond yield going up as much as it has. And you see all this chatter from Bessent about the 10-year bond yield and trying to talk it down. That's pushed multiples down. Marianne was mentioning a little while ago, the stock market is way cheaper now than it was at the beginning of the year. Why? Because the cost of capital is high. And I'm also going to say this, not to just be everything in a certain region that I was in, which is a little bit off the grid. Guess what wasn't off the grid? Amazon. Amazon was there and Amazon has changed the game. It used to be if you wanted something, you had to go to the store and get it. Now, Amazon delivers everywhere and at prices, I think, Marianne, that has changed the game. It used to be if you wanted something, you had to go to the store and get it. Now, Amazon delivers everywhere. And at prices, I think, Marianne, that has,

mitigated, and I'm not complimenting Amazon, but mitigated some of the inflationary damage that may have been done. And that's another stock that you like. That's another one I like. And again, based on earnings, that multiple has plummeted where Amazon, especially relative to history, is a cheap stock, especially to its earnings growth rate. So, you know, that, when you look at Mag 7, Mag 7 is not dead yet. So I think that's very important. to understand that even though we're concerned about the hyperscalers and the capbacks that they're spending, I think in the long run it's going to continue to fuel their earnings power. What do we call them when they go away?

That's a good. Gag seven? People were saying the lag seven for a while. Lag seven. Well, you know, there was something about how at the end of the movie there were only three, only three survived or so it actually is kind of the perfect anyway analogy. Mary Ann, thank you. Jonathan, thank you as well. Marian Bartels and Jonathan Gallup.

All right, so we just talked about it just a little bit. Let's go from stocks to the bond markets. Reports of a $500 billion AI financing deal. The FT were writing that Apollo, Blackstone, Goldman Sachs, they're among the companies working with Nvidia to raise capital for their AI infrastructure development. The partnership underscores Nvidia's growing efforts to raise capital for itself and its clients continue to assemble the chips,

the power, the production, the data centers at the heart of the day. AI boom. And by the way, $500 billion, all that money, a lot of that money, going down to the people, the men and women who build the concrete, putting electronics, hire the trucks, everything. All right. We are just getting fired up here on Power Lunch. Still ahead. Two conflicts, two energy fronts. One big question.

Leema Croft is here to weigh in. Plus, AI, powering an investment boom. But is it making America and you more productive? We're going to separate some of the fact from the fiction with Barkley. Senior economist, Jonathan Malar, next. All right, welcome back. We just talked a little bit about those debt levels. The major tech spenders, they're expected to spend hundreds of billions of dollars on AI this year alone.

Look at some of these numbers on your screen. If you're on the radio, Amazon, 220 billion, alphabet, maybe 205 billion. Microsoft, 175 billion and meta up to 145 billion. Do the math, carry the one, four, six, what is that, about 800? or so billion dollars. So what is the ultimate impact going to be then on the economy, on productivity and maybe on stock prices? Your next guest says, while more industries are adopting AI, they are not necessarily showing faster productivity growth yet.

And yet is the key. It's bringing Jonathan Malar. He is senior U.S. economy, U.S. economist at Barclays, read your most recent note, loved it. Thanks for coming on, Jonathan. How long does it take? Because everybody wants everything now. I want it now. How long does it take for major technology improvements or changes to get through the economy to where we see it in productivity?

Yes, I mean, this has been a question that economists have been asking themselves for ages. Really, one thing to keep in mind always is that spending on CAPEX is not the same thing as productivity. And there's a lot that comes in between in that process of actually making that new capital productive. so that you've got lots of organizational changes. You've got lots of skills that have to be obtained by workers. And then there's a whole process of creative destruction that we would call, that where industries reorganize themselves. And really, the lessons from economic research is that this takes quite a while.

And really that the existence of the technology itself is just the tip. Wild speculation, I know, but like how long? Typically it plays out over the course of years. So if you remember the experience from the IT boom, we had computers, say, in the 1980s, we were seeing lots of imprints from it on the stock market, on investment, and so forth. But it really wasn't affecting productivity, and it took quite more than a decade for that, really, to show up in the numbers. And we think that we may be in a cycle that looks like that at this point. Oh, that's pretty hard to tell.

It would be great if we, I mean, you point out in here that you show that industries adopting AI more rapidly are not yet experiencing. measurably faster growth, but that's not unusual. I think the concern is this industry, and this is probably true of all new industries. Like, let's think back, the invention of the car, there were people who were concerned about it, the invention of the internet, people, there are a lot of people concerned about AI because of the behavior of the AI agents who will just go and cancel someone else's reservation so you can get a gym class or whatever. And I think that is generating a lot of backlash. I don't know if it's more than usual. I think this might be about the usual backlash that new innovations generate. So making the positive case,

for it becomes all the more important. If there is a positive case to be made. Well, I think there certainly is a positive case to be made. And it's hard to imagine that all of this money goes for naught. All of this investment goes for not. And we're all using AI in our lives. And I think that there's a lot of potential for it to really increase the production of the economy. The problem is that it's not occurring right now.

And I think that we see lots of evidence from that looking at survey data. certainly lots of people who are taking up and trying AI. We've seen that steady increase in the share of the population that has tried AI, but really in terms of the depth of the usage, daily usage. It's not mattering, is it? It's mattering, but not perhaps as much as you'd think. Well, I think this is in your report. I think this would be the headline that a lot of CEOs are watching right now.

This is the sort of the in-bold part that I would read them. Industries adopting AI more rapidly do not. appear to be experiencing faster productivity growth. That's shocking. Well, I think it'd be shocking perhaps in the finance world, but not so much in the economics world. So what we show is using industry-level data and comparing it to survey measures of adoption, that you just don't find much of a relationship there. To the extent that you do see a relationship is that you industries, it's certainly true that industries that have higher adoption have higher productivity, but really it's a chicken the egg kind of problem. So it's basically, are they adopting AI because they're more inclined

to innovate and to take on new technologies, or is it because the AI is actually causing the higher productivity? But basically what we find is that these companies that are having high rates of adoption were ones that already... Yes, and isn't that so true? The areas that are already productive and efficient, of course they're going to jump on it and implement it, whereas I don't want to name names, but sectors that are not so innovative and they're not, what does this tell you about what Chairman Warsh should do? Does this mean he can leave rates alone? Do we have to rate? What are the implications for the economy and for monetary policy? So the challenge for monetary policy. So first, Chairman Warsh is very optimistic. He said this time and again that productivity

can be a force of disinflation in the economy, and that's a hopeful sign that they can perhaps get away with not potentially having to tighten the economy here. The counter-argumentary. is that you need those productivity gains now in order for that argument to be valid. And our research basically says that that's probably not the case at this point. The problem is that everybody thinks there's going to be strong productivity gains, as you talked about in the prior segment, this feeds consumer spending. It's also feeding, we know, directly AI-related CAPEX. So it's feeding demand in the economy today.

It's not giving us those productivity gains. And that's really an argument that interest rates should, in principle, be higher today. So it's really, they've got this higher. Yes, higher today. So potentially... You would have already raised rates. If it were up to Chairman Millar, I think that we probably would have raised rates or perhaps not brought them down last fall. But that said, our call for the Fed is actually that they're likely to be on hold. But we do see upside risks as is being communicated by a lot of members of the committee at this point. All right, Jonathan, great to have you here. To be continued, Jonathan Millar of Barclays. Coming up, geopolitics,

Political tensions are heating up on two fronts with energy markets caught in the middle. So from Iran to the Ukraine, what could escalating risks mean for the next move and a barrel of oil? We'll talk about that next. Welcome back. It appears the geopolitics back in the driver's seat for oil of the market watching two major fronts. Obviously Iran just last week, President Trump rejected confidence that a deal with Tehran could be close. Now the strategy appears to be waiting. The president reportedly prepared to let Iran's economic pressure build, telling Axios, quote, he is low-keying it that the U.S. is only semi-negotiating with Tehran. Just hours ago, another sign of how far apart the two sides remain.

President Trump asking U.S. negotiators to seek compensation from Iran after Tehran demanded compensation of its own for damage sustained during the conflict. In the meantime, Ukraine continues to pound Russia's energy infrastructure, another wave of long-range, drone attacks, hitting a key Russian oil hub today, home of two refineries and a petrochemical plant. Let's bring in Halimacroft, global head of commodity strategy at RBC capital markets. Iran's been going on now for months. I feel like, and I put, yes, it's insane. I feel like, though, and I posted this a bit earlier today, that the Russia-Ukraine story may be the big story that we're not paying enough attention to. I mean, underappreciated when it comes to product markets. And we think about going into fall. What are we worried about?

about diesel shortages. We're also worried about gasoline shortages. The ongoing attacks on these Russian refineries, that is going to cause deeper problems in the product market. We can talk about additional supplies of oil. There's no spare capacity for refineries out there right now. There's no spare capacity. And yet, so here's what's so fascinating about this. You go, okay, and yes, there's pressure on the gasoline price and yes, on diesel and pursuant. But there, as the CNBC retail spending data showed, consumers were still spending throughout all. In other words, where's the pressure point going to come from? Well, I think at this oil price,

I think there's a deficit of urgency. I think at this price point, there's a view you can muddle through. If we were at $110, $120 oil, I think we would have maybe a different conversation. I think this current price environment is almost a muddle through environment. Yeah, it's high, it's annoying, it hurts lower income people and people who commute a long way.

100%. But the numbers, my opinion, the data seems like this number is relatively sustainable, we shall see, by the way. The question is, the price sustainable? Well, also, what about natural gas? Because you look at what happened with Qatar in the Persian Gulf, but also with Russia. Okay. And when you sat down, you said the Black Sea, maybe not the Persian Gulf or the Red Sea, the Black Sea,

maybe the most dangerous waterway in the world right now. We were on a call with Lloyd's analysts, and they talked about that, that the Black Sea is the most dangerous waterway at the moment. And natural gas. That's saying something. That is saying a lot. And we have to really pay attention to the natural gas story for Europe because we're going into winter with lower storage levels in Europe. And yes, we have Qatar, LNG primarily going to Asia and the U.S. cargos have been going

to Europe. But there's going to be competition for the cargoes that are not contracted long term. There's going to be a bidding more between American spot cargoes between Asia and Europe if we don't get a resolution, if we do not get the Qatari tankers moving. Is the president or the U.S. policy to some extent trying to look past a bit of what is the outcome here in Iran? Because we have to be nimble if we have to do something further with Russian Ukraine, we know munitions are in some cases low. There's only so much, I don't know what the U.S. role or response might be to that conflict, but is that part of what's going on here? I just think there's a question of like, what is your least bad option?

And the problem is, is that the Iranians are like, yeah, if you want to exit, we're getting a cash settlement for it. We're not only going to be in charge of Hormuz. You're going to give us sanctions relief. You're going to give us billions in, you know, unfrozen accounts. We want this big reconstruction fund. So the question is like, is the White House prepared to make this type of settlement to Iran? And they keep saying, and other observers confirm that this is the case, that the sanctions are destroying their economy. And they brought Iran to the table the first time around.

So it has to be true that if we're blockading their oil and they're not getting those revenues, unless they're finding a way around that. Well, there's a question of, like, what's duration? Like, what is the point at which the IRGC cannot pay their forces? What is the point where you actually have, like, a revolt in the security forces? The question is, like, are we really there yet? Can the Iranian regime, which got a measure of relief, frankly, with the NEO? Who is the Iranian regime?

Well, that is the awesome issue as well. I keep bringing it up. I don't know some of the viewers, like, you keep saying the same thing. No, this is a doubt. Nobody knows. Well, I think the question... Somebody says one thing one day. The next day there's somebody else

that sort of counters what that person said. It's clear that you have a situation where you have the foreign minister and basically negotiating with the U.S., but then it doesn't get through because the Supreme Leader and the IRC officials around him say no. And that contributes to the paralysis that we see.

We've been told... We've been told... Brian keeps this saying, and this is another great point, what's going on with the Strategic Petroleum Reserve? Oh, we're under 300 million. Are we under, you got back and now we're under 300, which this becomes. I had nothing to do with it.

It's more like a- From Wisconsin and all of a sudden we hit this threshold. But guess what? As I, that 300 million, as your buddy, Amos Hoxstein has said, right? And he was one of the architects the original sale under the Biden administration. That 300 million might be a level at which some of these salt caves start giving us problems. Because they've never been, we don't know. We've never been this empty since it was filled.

Right. So they just don't know if the straw. drinking the milkshake is going to work. We don't really know what the residual capacity you need for operational integrity. So that is that we are in uncharted waters all over this conflict. Right. And that is just what, is there anything else that you would add based on, I was going to say, you're reporting, which is a version of what you're doing here, but about either the prospects

of a better resolution to the Iran conflict or, I mean, I guess. The question is, are they almost commingled at this? point. We had, you know, the Ukrainians attacking an Iranian vessel in July. We have the Russians supplying the Iranians with munitions. Like, at what point does it almost merge into one conflict? I'm going to add one last thing. And it goes to the previous points that we made. And we've been reporting on Europe's. There's a video of me on with you a couple years ago from Germany talking about the gas levels. They've had three pretty mild winters, which has helped. Now it's super hot. so they're trying to use some air conditioning with the little that they have.

Europe relies more on Russian liquefied natural gas than ever before. I mean, the Nord Stream pipeline got blown up, but LNG by ship is at a record high. If one of those ships or some of those ships were to have problems, what happens to Europe? Is that the point at which, Alima, that maybe Europe enters this fray? I mean, do you have conversations then between European leaders and Ukraine saying we may need to go back? Or Tehran.

Well, again, I think it's really interesting on the question of Ukraine because in the Biden administration, there was this sort of dialogue with Ukrainian government saying don't hit energy infrastructure. And then we've pulled back our support for Ukraine. And Ukraine is like, look, we need to defund the Russian ATM. At what point is there a conversation about having some type of truce when it comes to energy facilities? in that conflict. Which, again, doveish for the markets, but, I mean, in order to get to that point. We don't even look like we're there yet. Exactly, exactly.

It almost have to get worse, a lot worse before it gets better. Halima, thanks. Thank you for having me. Really appreciate it. Halema Croft. Let's get over to Julia Borson now for the CNBC News Update. Julia? Kelly, the death toll continues to climb in Columbia this afternoon.

After magnitude 7.4 quakes struck the western part of the country, Columbia's president tells Reuters at least 111 people were killed. An untold number of people remain trapped under debris from collapsed buildings. Columbia's Pacific region lies among the so-called ring of fire, a line of seismic fault circling the Pacific where most of the world's earthquakes hit. A federal appeals court today ruled that thousands of lawsuits can continue against meta, Google, TikTok, and other social media companies alleging their products were designed to addict young users.

The San Francisco-based Ninth Circuit rejected the company's bid to reverse a lower court that ordered them to face more than 3,000 such lawsuits, concluding the appeal came too early in the litigation. And the State Department said today that it has revoked more than 175,000 visas from foreign nationals during President Trump's second term as the administration continues its immigration crackdown. The State Department says most visas were revoked following what it says were, quote, law enforcement encounters. Brian, back over to you. All right, Julie Borson, Julia, thank you. All right, still ahead. Chips, they have powered the AI rally, or at least part of it, but can that run continue? Goldman Sachs, co-head of tech investing, shares his top picks for the tech trade and maybe your money should go from here.

Chips and memory have been the engine of the AI rally, but is the market shifting gears? The SOX semi-ETF is up 80% year-to-date, but it's 20% below its 52-week highs. Our next guest notes that AI is moving from training to inference, which is creating a new class of leaders across two different ecosystems. Let's bring in Sancho. He's the co-head of public technology investing at Goldman Sachs Asset Management. It's great to see you. Great to see you as well. Give us the playbook.

What is going on here? What do you see? Like you said, one of the most important trends that we're seeing in the market today is the ship from AI inference driving most of the compute, from AI training driving most of the compute. And underneath that architecture is a completely different set of architecture, completely set of. a different set of chips, optical equipment. And so the leadership is going to evolve and change as this transition happens. And one of the areas that we really like right now is the optical space. So like Lumentum.

Lumentum, coherent, Siena. Some of these names are going to continue to beat work, we think, because think about how much fiber we need. As you go into inference, you need a lot more data centers that are closer to the customers that they're serving. You do? Closer to the customers that they're serving. As a result, we're just going to have to connect a lot of data centers. What happens if none of these towns and states are going to let them build a data center anywhere near where the customers are? I think that's more of the exception versus the rule, but like there are going to be smaller data centers that happen distributed all over the place.

And not only that, but also inside of the data center, what's happening is that compute speeds, the processor speeds are no longer the bottleneck. What the bottleneck is is actually the ability to be able to have chip-to-chip communication, server-to-server communication. And right now a lot of those connections are happening via copper, and that's going to be replaced by optical as well. well. So you not only have this kind of structural, cyclical theme of like data centers connecting, getting connected by fiber, but also inside of the data center, more and more copper is going to get replaced by fiber. Does the market know that already? And here's why I ask, because this is my broader thesis, the Kelly thesis that we can all chuckle about because what do I know? But it does feel like we've moved from the phase of invidia is the bottleneck, its share sore, to chips with

the bottleneck, now their share sore, to memory is the bottleneck, its share sore. Now it feels like we are moving on. Lumentum has done really well. Don't get me wrong. But is that narrative already kind of in the market? And is it going to all give way? Now the next bottleneck sounds like it's dealing with AI agent traffic. So networking, identification, cybersecurity. So certainly memory has been talked about as a bottleneck for several years now. That hasn't stopped the memory stocks from almost tripling over the last couple of years.

And so, you know, it's not only a matter of which stocks you want to choose, but also the duration that is going to last. And I think one of the unique aspects of optical is that it's extremely hard to bring new capacity online. And so the demand for optical and fiber is moving at an accelerating rate as a result of this transition. But the ability for the industry to book capacity online is going to be somewhat limited and keep that duration of that trade. These companies, they sound fancy, optical and all the fans, but they just make stuff. They make wiring effective. I'm being very general.

I understand that. If you're buying a semiconductor and you may have a great, by the way, you had a great call on Nvidia last time you were on. People listened. They made a lot of money. So thank you for that. Thank you for asking for lately. maybe they're picking between Nvidia and AMD. There's a lot of competition.

You mentioned Lumenum, coherent, these other ones. How much do they compete with each other? In other words, are they going to kill each other or are they going to all be in there? So even if you guess wrong on the semiconductors, you can't guess wrong on these because they all go into everything. Yeah, no, absolutely. And so, you know, this is a completely different ecosystem of the processor ecosystem. What I'm talking about is that the next phase of AI is likely to be networking, bottlenecks, not necessarily compute bottlenecks. And so they play in a completely different

ecosystem. So invidia can work at the same time as Lamentum and coherent can work as well. And do we have to worry about Chinese competition upstarts in the space? I mean, look, what's happening in memory, CXMT has kind of taken a little bit of a bite out of that narrative. Yeah. So I think there's a couple of things about China. First of all, is there's a lot of concern about Chinese open source models. But what the market fails to appreciate is that Chinese open source models are actually really, really good for AI compute and AI CapEx. Because the model layer is completely different than the compute layer. If the model layer is getting cheaper, it's going to drive more adoption,

and it's going to drive more adoption to the compute layer. And so we think that Chinese open source models are actually a really good thing and a positive tailwind. Now, from a semiconductor perspective, you know, there are a couple of areas where China is starting to regain some competitiveness. Memory is probably the area that they're going to tackle first. But there are other areas like analog semiconductors where they're starting to get a lot more positive. but in the digital semiconductor side, they're still far away behind. You got an investment hot take on SpaceX.

I believe it's back above its IP. I'm sure none of your clients have asked you on SpaceX. They might not. It's a big retail holding. I mean, I do wonder how much. Look, I think SpaceX is really largely a bet on Elon and like the size of the addressable market of space over a very long period of time. Well, it's an AI play.

The issue that it has right now, though, is that right now the cost to be able to deliver their services is still a little bit too high. And the reason why is the bottom part of the rocket is landing, but the top part of the rocket is not reusable yet. If they ever get to the point where they could have heavier rockets where the bottom part lands, but also the top part lands, that significantly draws down, cuts their cost profile. And they can start delivering cell services, satellite services, for a lot more competitive price than the rest of the market. And so that's what we're looking for. Look, they did the first part in the first place. Maybe they can tackle the next piece. But at the same time, look at Tesla.

They finally kind of go to deliver what the market wants more. And then the markets moved on. It doesn't care. So I do wonder how slippery the narrative is around SpaceX, what people really want, what they're really pushing for. Look, it's a terminal value asset. And when the tail is what holds most of the value, sentiment is going to drive things in the near term

until we get some real proof points. And I think that's what's going to continue to beat first ASX as well. Lumentum, coherent, AMN. MD arm. One other stock you want to throw on there is four. Make it even five. I'm joking. Yeah, yeah. I think those are plenty. I'll save the next ones for the next show. Are there any on the cybersecurity? I mean, is that really an area you would be looking at as well? Because that's what's now kind of in the leadership.

I think software has been talked about very, very monolithically. And I think what's getting disrupted right now and where valuations have gotten really crashed is really in the application layer of software. In the security layer, the market is starting to differentiate that actually the rise of AI agents that you talked about might actually be driving on growth in their addressable market, not necessarily a shrinking of their addressable market. Because Goldman Sachs, I don't know if you ever heard about them, Goldman Sachs said that software right now is that a, quote, inflection. Yeah. Well, I think once again, we're talking about very monolithic, you know, topic of software. We like, we're in the media. We like to lump things

all together if they're unrelated. Like we said, like there's certain pockets of semis that we like better than others. There's also, you've got to be discriminant in terms of which software companies you're liking. And I think we was generally still a way, tend to avoid the application ecosystem. And we like the infrastructure software companies. All right. Sung, thank you so much. It's great to see you. Thanks for coming in, Sung Cho. All right. Coming up, shares of Archer aviation taken off. They made a new deal with Boeing. But it's today's lift, really the start of a big move higher. We'll talk about that and the deal they just made next. A big deal in aerospace today. Boeing taking a stake in Archer Aviation as it buys.

companies that Boeing, I guess, used to own. Philo Boe joining us now with more. It's kind of a deal and a deal. And it's a win-win situation. I'm hesitant to use win-win because often you look at deals and you say, yeah, one company made out better than the other. But in this case, this makes sense for both Archer and for Boeing. Look at what Archer gets with this.

It's buying three Boeing subsidiaries, two of them related to the Evital industry, Wisk Arrow, which was primarily focused on autonomous. EVTol development. And then they've got Skygrid, which is about air traffic management. In situ, that's a money-making business. High-altitude drones. It's been part of Boeing's portfolio for 20 years. Not a big moneymaker, but a moneymaker, especially on the defense side. Look at it from Boeing's perspective. None of these businesses move the needle in terms of what investors are looking at. They're not bad businesses, but they're not moving the needle in a company the size of Boeing. So they get 19.5% of the Class A shares at Archer.

They can get another $200 million in warrants, a seat on the Archer board. More importantly, they get a flyer on whether or not the Evitae business takes off. Because Archer is really, along with Joby and a couple other companies, if it ultimately develops the way many believe it will years down the road, Boeing is sitting pretty in that regard. and it also feeds into the whole idea that Kelly O'Rourke has laid out since he became Boeing CEO. Focus on the core business. Focus on commercial airplanes, defense, and space. Nothing against these three subsidiaries. They were not core to the primary objective at Boeing.

And therefore, from Boeing's perspective, this is a smart move to make. You know, Phil, we were talking about how EV Tall is still this, what is that term, right? How would you describe it? And how close? Kelly, electric? It's electric. That's key. Vertical takeoff in landing.

Right. It's not going down a runway like a traditional airplane. Do not call them airplanes, by the way. I call it like a helicopter. It's not going off like that. But I said drone and it's not a drone. Similar to a helicopter. I actually had this conversation a couple days ago and they called this.

The person, the woman I spoke with who's in the business that call it verticraft. I like that. Verticraft. Yeah, you can call it that too. You can call it that too. And it's going to be primarily used for short hauled. routes. They believe that Archer and Joby, they believe that you will see an urban air taxi network ultimately develop. Look, we're still away from that happening. The FAA hasn't certified

any of these aircraft, let alone laid out the groundwork for these guys to do commercial operations, let's say on a flight from Burbank to L-A-X or suburban Chicago to O'Hare. I could see Boeing offloading to Archer, for sure. It surprised me that they also retained a 20 percent stake. And maybe they go, that's, it's just play money. I mean, it does say there is a vote of. Kelly, you have to remember that market will develop in a couple of areas. The commercial one is probably the furthest down the road. The military applications, Archer's already working with Anderrell,

and it's got other ideas in terms of what it's going to pursue for military uses of EVTALs. So that market is developing. And then when you look at other markets, let's say health care, transplant organs need to be transferred from one hospital to another. that market is developing, cargo is developing. There's a lot of areas where you might look back 10 years from now, and it's a vibrant EV-Tal market that is in operation. So Archer, did they want or did they need, or both maybe fill, parts and the intellectual property of the three companies that they are basically buying, that then Boeing is getting a stake

in Archer? Right. I don't know they necessarily need it as in, boy, if we don't have this, we can't survive, but it sure is a lot easier to develop these markets when you can acquire that as opposed to doing it on your own. So it makes sense in that regard. And to a certain extent now, they've got a partner in Boeing. I mean, Boeing has a vested interest in making sure that Archer succeeds, so they can tap that expertise in the future. And look, WISC and Skygrid immediately factor into the development of EVTALs at a critical time when they're moving towards certification. And ultimately, commercial flights. Phil, it is a fascinating

development today and congrats to Archer. I'm sure they're pretty excited about it. Phila Bo, thank you so much. Coming up, Apple, getting a rare downgrade. Why is Jeffries souring on the stock? And should investors get worried? It's down 2% today. We'll dive into that next. Jeffries, yes,

has turned sour on Apple, downgrading the iPhone maker to underweight today. They say supply chain indicators point to the 20th anniversary all-glass iPhone being canceled. old. And they say that cast out on the company's ability to sell higher priced products and pass along those higher memory prices without hurting margins. They also highlighted some limited advancements in Apple intelligence and lowered their price target by $200, no, to $200.

They get in low, by $264, which is about 16% downside the shares. Brian are down a little less than 2% today, but they're still up 13% this year. Is the all-glass iPhone going to be built? That's, I think, the thesis behind the Jeffrey's call. Who are they testing that with? I wonder how do they come up with that market information that this was tested and being pulled? Who's out there getting a taste, for instance? And how did they see it if it was all glass?

There's more power lunch after this break. The World Cup may be behind us, but one billionaire still appears to have soccer fever. Jeff Bezos is reportedly part of a consortium to buy a one-third stake in Liverpool Football Club. The English soccer group is currently owned by Fenway Sports Group, yes, owner of the Boston Red Sox. Bezos will participate in the investor group alongside Eduardo Savarin, one of the co-founders of Facebook,

and it's unclear, Brian, how much the deal will be worked. I don't think Bezos cares about soccer at all, but what he does care about probably are assets that are generational trophies, I'm guessing, and sports teams just keep every year they go up by a billion dollars. Not a bad gig. Has Jeff Bezos ever talked about soccer? Football? I don't think so. I don't know. When Tillman Fertito was on this program, when we were asking him about ownership or I can't remember which franchise at the time.

And he said, you know, these prices are getting so high. Us middle class billionaires can't afford him anymore. I know. By the way, I think I'm the only person that's ever interviewed Eduardo Savoran. I'm not sure. I met him in Singapore a number of years ago. Nice guy. Should we check the archives?

I think there's a video. I don't know. But if there was, the show's over, now there's no time to run it. Thanks for watching, Power Lunch, everybody. Dow's down 144 points. We're heading back towards session loads. See tomorrow. Closing down.