Power Lunch - Power Lunch 9/12/23

Episode Date: September 12, 2023

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

Good afternoon, everybody, and welcome to Power Lunch. Alongside Kelly Evans, I'm Tyler Matheson. Coming up, Apple's big event is still going on. Unveiling the iPhone 15, can you believe it? We'll bring you all the latest announcements as they happen. Plus, the government taking on big technology, the antitrust trial against Google kicking off, a Senate hearing on regulating AI and Senator Elizabeth Warren continuing her feud with Elon Musk. A lot to talk about, Kelly.

And we will get to that, but first a check on the markets. Tyler, shares of UP, I'm sorry, before I get to that, a check on the market shows the Dow is up 65 points today, trying to cling on to these gains, which are looking to evaporate somewhat as we move throughout the afternoon. The S&P is now down a third of 1%. The NASDAQ is down 8 tenths of 1%. Some declines notably in Oracle, some declines in Adobe as a result, all weighing on that average. Now, I mentioned UPS, and those shares keep an eye on this one, are lower today and on track for their lowest closed since February of 2021. saying it's a deal with the Teamsters will raise costs by more than 3%. Several analysts cutting their price targets on the stock as a result.

Shares are now down 3% 1% over the past three years, I should say. And as Tyler mentioned, Apple is the stock of the day. It was up a little bit. Now it's back around session lows down 1.7%, 6% drop in the past week or so. Their iPhone launch event has been going on for about an hour now. We're starting to get the real meat of it. Steve Kovac is here with what we've heard so far. Steve?

Yeah, and that meat, that's the iPhone 15, Kelly. So they just announced, finished up, wrapping up that part of the event. These are the two regular models of the iPhones, the base model of the iPhone 15 Pro. They're going to start at 799 for the smaller screen version and the plus version with a larger screen that's going to start at 899. Not a date yet, but I think it's going to go on sale on the 22nd, just like the watches were. And the big change here is at the bottom of the phone is going to have that new USBC port,

As we expected, this is of course a response to the new EU regulations that require devices to use this more standardized plug. Apple also introducing the iPhone 15 Pro line. Still going over the features for that, but it does have a titanium casing. And on the side, they're announcing a new feature called the action button. So you're probably used to, Kelly, that little switch on the side for when you want to mute your phone. That is now a physical button that you press in.

You can make it mute your phone or do other. features like launch the flashlight or start recording a video Kelly and then we have also the new Apple watches that's the series nine not a huge change here same pricing as last year starting at three hundred ninety nine dollars and that is going to feature a new chip on the inside that all certain new features including this new thing called tap where you can whatever wrist you're wearing your watch on instead of touching the screen or touching the dial on the side you can select things just by tapping your thumb and index finger

together and that's how you select things now. Apple crediting that new silicon processor inside of the Apple watch for those new features. But the big thing we're waiting for is the pricing, of course, Kelly, on these pro lines of phones that they're talking over right now. We'll see if that price increase actually happens, Kelly. No, it's fascinating. And is it, I don't know if you know offhand, Steve, if Samsung had similar features on that Galaxy watch, that little kind of, you know, use your fingers to make stuff happen. Is this another case of them saying, well, all right, We can be maybe not first with the news, but roll it out to the biggest market. Yeah, I'm not exactly sure the mechanics of the Samsung version of that, but this is, you know,

maybe in the similar vein. And I think they're trying to solve that problem of so many of us, if you're juggling a lot of things or you're carrying stuff and you get a call or a text or something, you don't want to dismiss it or answer it or what have you. The main action button is now going to be replaced by that gesture instead. I'll also note it's the same gesture you're going to be using on the Vision Pro. headset. They're using that same little tap to select. All right. Steve, come back with us with more of that pricing info as you get it as we watch. We're good with hand gestures in the New York market.

Oh, yes. They could come up with a few more to try. We've got a lot of hand gestures here. All right, Apple stock down 7% in the past week on News China might ban the use of iPhones for government workers and workers at government-backed companies. Despite the anticipated arrival of the iPhone 15, it's also down about 2% today, 1.6%. So will any of today's announcements be a catalyst for the stock as we move ahead into the fall and winter months? Let's ask Daniel Newman. He is the CEO of tech advisory and research firm, the Futurum Group. Daniel, welcome.

Good to have you with us. Are the changes announced today on the iPhone, the kind of thing that will get people off their couches and into the stores? I mean, recognizing that generally whenever Apple announces a new product, people do just that. Well, Tyler, I think they're hoping that we're going to be able to tap our fingers and just run over to the store and pick up the newest device and not think about the incrementalism. Are we making a big enough improvement in the battery life? Are we improving the feature set enough? Is it processing faster that you're like, oh my gosh, I've got to run out? Now, a lot of people question this and have questioned this from generation to generation.

But like you said, Tyler, they continue to go out and buy these devices. So far as a technology analyst, I'm not super impressed with what I'm seeing from generation to generation. generation. But having said that, Apple's faithful tend to show up, and this is a big moment for the company. It does feel, whether it's Apple you're talking about or a Samsung model or a Google model, that we're, that the kind of improvements are really small incremental improvements as opposed to anything else. I mean, the camera is getting better. Maybe the processor is a little faster and so on and so forth. But let's talk about this USB mini plug. Is that in any sense a game change? Does that make it a more convenient phone to use because now you can use other plugs?

Yeah, I don't know if it should excite you or concern you that so far the biggest announcement to me is the USBC. I think this is a big moment, one, to show that the European Commission and its regulatory and policy can drive real change within big tech. But secondly, I don't know about you. But I've got drawers full of these lightning cables, and part of me is frustrated because they're very expensive. And as I upgrade, and I always do, I will have to rid myself of all of those. But at the same time, I have many other devices that benefit from USBC. And to me, it just makes sense to have a standard there. It's good for us.

It's more sustainable. It's good for consumers and spend. I can't tell you how many times I can't find that lightning plug when I need it. I always have a USBC charger. That's fascinating. So for you, what does this boil down to as you watch shares of the company? And it's not the only company, you know, big tech company in the news. They've got Google.

We've got Oracle shares way down. I mean, there's a lot going on here. Yeah, I think the macro economy is one of those things, Kelly, that people are watching it. And we're sort of saying, are we going to have this soft landing? And is it all smooth? And are people going to run out to the store and spend $800 on a watch because they can tap their fingers and use it? And, of course, there's other features. Or are people going to become a bit more conservative?

We're seeing credit crunches on the outskirts. We're seeing, of course, you know, interest rates higher for longer. We're looking at the inflation data. And I just still don't understand if I had the 14, what is that thing that's going to compel me to run out? And that's what Apple investors need to be worried about. And I think that's what's driven the recent pressure on the company's stock. Let's talk a little bit about the possibility that China is going to, in some way, restrict the use of iPhones among government workers or maybe state-owned enterprises.

what kind of effect is that possibly going to have on Apple and its stock? Well, of course, it's limited to that subset of workers, but less devices can certainly influence. And, of course, the concerns about China and the overarching concerns about China are substantial. We saw what these announcements did last week to Apple, to Qualcomm. And of course, it isn't all founded for certain that it's going to spread and be a contagion for Apple. But at the same time, if Apple can't be competitive and succeed in China, there's no way it has as much tam as it's looking for. And so as long as it's constrained by concerns in China, we're seeing this impact the whole market.

We're all worried about China. We're all worried about Taiwan. And until we feel more settled on that, there's always going to be some overarching lingering concern for the companies that have the biggest market in China. On that note, Daniel, we leave it. Thank you, Daniel Newman. We appreciate it of the Futurum Group. Thanks, Dollar. And let's get to that other big tech story today.

Sharp dropping shares of Oracle, Dom Chu, who brings us the latest, Dom. All right, so with those shares of Oracle, Kelly, which are having a way worse time right now than other tech stocks out there. You can see they're down about 15%. Worse than Apple, worse than the product reveal that's happening with them,

alphabet with their government antitrust case starting up. So it's on pace right now for its worst day going all the way back to March of 2002. That's after the business software, cloud services, cloud computing provider reported actually better than expected profits, but revenues missed the mark, as did its forecast for current quarter revenue growth. Now, one positive for Oracle was the 66% year-over-year growth at Oracle's cloud infrastructure or OCI unit. But that was down from the 76% growth that we saw just last quarter, leading to some concerns and questions about maybe

slowing momentum and demand for artificial intelligence-related spending. Now, some of the ETFs that have bigger weightings towards Oracle like the I-Share software ETF, ticker IGV. Also, the first trust cloud computing ETF, ticker SKYY. They are also underperforming because of that 15% drop in Oracle. Kelly, Tyler, I'll send things back over to you. Absolutely. We got an Adobe coming up on Thursday with its own report. Don, thank you very much.

Stocks are mixed today, lower in September so far. But as more and more people will get optimistic about the possibility of avoiding recession, our next guest is worried the consumer won't be able to keep the economy. economy afloat. Plus, UFC and WWE merging into a new company called TKO Group. Will the stock be a knockout for investors or will they get body slammed? Our trader weighs in on Power Lunch. Welcome back to Power Lunch. Forecasts have been getting more and more optimistic about the economy this summer, the Atlanta Fed's GDP Now model, estimating a blowout third quarter GDP number still, but our next guest is seeing weakness in the consumer and is worried about what

it means for the economy. Let's bring in Jim Tierney, Alliance Bernstein Chief Investment Officer for concentrated U.S. growth. It's good to see you, Jim. So you're not buying all the soft landing excitement? I think we could have a soft landing, but at the end of the day, the number of new jobs are slowing. The job openings are starting to fall. Wage increases are declining. And all that pent-up savings is being spent down. So I think the next couple of years are going to be way tougher for the consumer than the last couple. I think that was highlighted to extent. The last couple of days, we've gotten a series of figures out about real incomes, how they've been declining for three years, how the poverty rate was up sharply in the past

year. So yes, we know that consumers still have more cash than they might have pre-pandemic, but we're starting to really get a sense of the challenge that we have been in and that we face, I think. And we're certainly seeing a bifurcation in terms of the lower end and what you're hearing out of Walmart in terms of groceries being the standout or the dollar stores where consumers are turning to food items and the absolute must-bys. So the low end in particular is really stretched right now. What about economic growth overall? Some forecasts are pretty high for this quarter.

The GDP now number is fantastic. I'm a little bit surprised because you look at consumer sentiment or sentiment about the broader United States. It's really negative. The overall sentiment here is not as positive as a 5.5% GDP quarter would seem to suggest. So how do you explain that? Is it as easy as okay, I'm okay, but you're not? In other words, that people often say that their mood is not as good as what they ultimately turn out to do,

or they are their neighbors. They always say, oh, I'm going to spend less on Christmas this year, and rarely do they. That's certainly an issue. I think when you look at some of the numbers, it may be some inventory or rebuild, and certainly the consumer is not seeing that. the political discussion on our country is not helping sentiment either. But as I look at company by company results and the huge disappointment at Dix and the huge disappointment at Fultlocker, the overall consumer doesn't feel as healthy as the underlying GDP numbers suggest. And so there's a lot of names. Maybe you just mentioned some that you'd be,

or maybe the whole space you'd be cautious about, but it's not to say you'd avoid everything. Some of your favorites are familiar names here that we hear a lot of bullishness about, like, TJX. You also like Constellation. brands. We talked about that one the other day as well. Amazon is up there. So, I mean, there are some place here that you think can still kind of weather the storm. Sure. Coming out of the second quarter, I was really excited about what we heard from Amazon. Your cost to deliver each package went down materially because they're handling it less and driving fewer miles, coupled with one-day delivery means basket completion rates are up significantly. So you're having this positive flywheel

of lower cost and higher revenue growth. That's really exciting. And I think operating margins at the retail business in the U.S. really could surprise for a number of years there. So that's what I like. You mentioned TJX. The consumer is looking for value, and TJX is providing that, and the buys that they're getting from manufacturers is just fantastic. So again, that positive flywheel keeps on spinning. And Constellation, you like in part because of a couple of new board members there. Sure, the knock on constellation in the last few years really has been around their capital allocation policies, and certainly billions of dollars have been wasted. Two new board members, both with CFO backgrounds, are now on the board. You have Elliott as an activist investor.

I think the company the last few years has been saying, we're not going to do anything stupid. And these two new board members, plus the involvement of Elliott, really guarantees that. So what we're left with is a really good secular volume growth story and better capital management over the next few years with a depressed PE. So I think you went on the earning side and you went on the valuation side there. Can you hang on to these? You know, when you talk about the consumer broadly, 60, whatever we say, 66% of GDP. If you're really cautious about it, shouldn't you kind of be cautious about the whole market? Even the stocks you like, maybe you get them cheaper if you wait. I think it's very hard to time the market, and you have to find the secular winners.

The three companies that we discussed today, I think are real secular winners, taking market share from the competitors. So the best house in the neighborhood, so to speak. Understood. Jim, thanks so much. We appreciate your time today. Thank you. Jim Tierney. Further ahead, Senator Elizabeth Warren, demanding an investigation into SpaceX over recent revelations regarding Starlink and the Ukraine-Ukraine-Rudder.

Russia war. We will explain when Power Lunch return. Welcome back to Power Lunch, everybody. Let's get now to Chicago and check the bond market ahead of tomorrow's CPI report. Rick Santelli has the details. Hi, Rick. Hi, Tyler, indeed. Many of these traders are very excited for tomorrow's big data, and it doesn't end tomorrow. We have a whole week of important data. PPI, retail sales. And as you look at an intradate chart, look at that range. Look at how we've come a bit higher after the auction. Pair it up with yesterday, and it's almost a exact duplicate, which makes sense. A lot of consolidation in front of big numbers.

Let's open the chart up to the early August, because our last CPI read was the 10th of July, 10th of July, which came, 10th of August, that was the July read. The reason I bring that up is because year over year core has not been below 4% since May of 21. I find that very important to pay attention to. And Dave Miso. What do you got, Rick? All right, brother.

So tomorrow's C. How are you or any of the traders that you rub shoulders with in the pits up in the office looking towards tomorrow's CPI in the following day's PPI? It's kind of a non-event, to be honest with you, because the Fed just telegraphs everything. So we'll wait to find out what they're going to telegraph next, and then we'll go from there. But these numbers, I don't know, there's not much movement off of them, to be honest with you. No, and that makes perfect sense if you look at the charts. But I would have to say that those are some pretty big.

brave traders because of tomorrow, whether it's the year-over-year headline or year-over-year core, if they remain as sticky as they have been, we could definitely see a large response. Does there any feeling about some of the stickiness to certain aspects of inflation? Well, I mean, it seems like it's there for a while, right? It's been around for a while, and it's not really slowing down. And the Fed comes out and they kind of manipulated so that, oh, it's not so bad. And it's going to be a soft land and we'll be okay. But there's really no numbers that have come out.

so far that have made you believe that. Well, from an inflation standpoint, it's hard to disagree with that. And even from a durable goods retail sales standpoint, we've seen some pretty lofty numbers along with weaker numbers like BMI's. So there's definitely a split decision on whether the economy's going up or going down. Do you think global forces are slowing is going to have a dramatic effect in the U.S.? It has to, right? I mean, don't you think it would have to?

I mean, some of the banking news that's coming out of Europe and stuff, I think that should, that is a big, that's very important. And I think the ECB this week is even more important because they've announced they're going to stop paying interest on reserves on the 20th of September. And I think that's important for a variety of reasons, not the least of which is it's kind of a tricky form of QE. They're forcing banks and institutions to hold onto that without any type of compensation like our bank. That's a great point. I mean, and you should be compensated and they're not. And they just...

Although the other argument is maybe the U.S. should stop compensating, maybe some of that money will move back into. towards the economy. All right, on a whole other issue. We see that the equity markets today have a similar pattern. We see two out of three have been a little sticky on the indices. We see the dollars had some green. Do you think that the equity markets or the interest rate markets are at an important pivot? Many say, this is it. This is the highest part of interest rates you're going to go down. That would be very bullish for stocks. What are your thoughts? I think that is the case, but I think we're at the top of the range. I really do. It feels like It feels heavy here.

I don't see much more room on the upside. You know, I find that interesting, and I totally disagree. We're going to have to revisit that, Dave, Meese. Tyler, back to you. All right, gentlemen, thank you very much. And meantime, let's go back to Steve Kovac now at the Apple event because we have pricing on the iPhone now. Steve.

Yeah, that's right, Tyler. Now, these are the iPhone pro models that staying the same prices as they were last year. a lot of analysts going into this event thought Apple was going to raise prices a hundred bucks per phone but they are starting at 999 for the smaller screen version and 1200 bucks 1199 for the bigger screen max version some other features in here that include a new zoom on the max model it can go up to 5x optical zoom last year that was a 3x zoom and some other great features that for camera enthusiasts

including for filmmakers and so forth, being able to plug your phone directly into your Mac for quick editing and things of that nature. But again, I want to reiterate the pricing is remaining the same as it was last year. The regular iPhone 15 model, $7.99 and $8.99 for the larger one. And then the pro versions, $999 and $11.99 for the larger one there, Tyler. All right, Steve, thank you very much. Steve Kovac reporting from the Apple event. Let's get to Bertha Coombs now for a CNBC News Update. Hi, Bertha.

Hi, Tyler. Five Memphis police officers have been indicted for their alleged involvement in the January arrest and beating of Tyree Nichols. That led to his death a few days later. The officers are facing three different counts, including excessive force and failure to intervene. We're expected to get more details on the indictment during a press conference later this afternoon. President Biden said today the U.S. is sending help to Libya as that country deals with capital. catastrophic, deadly flooding. The U.S. is sending emergency funds to relief organizations and is coordinating with Libyan authorities and the United Nations to provide support. As many as 10,000 people are feared dead in the country after a storm slammed into Libya, unleashing a devastating surge of floodwaters. And a former NFL network reporter is suing the League and its cable channel for racial discrimination.

Jim Trotter filed the complaint. in Manhattan. The complaint claims his contract was not renewed because he repeatedly spoke about the league's diversity issues, including a lack of black coaches. The NFL issued a statement saying it takes Trotter's concerns seriously, but strongly disputes his specific allegations. Tyler? All right, Bertha, thank you very much. And ahead on Power Lunch, the U.S. Department of Justice beginning to make its case that Google achieved its 90% market share in Internet search by breaking the law and squelching competition. Details on the tech trial of this century so far when we return.

Welcome back, the Department of Justice's landmark trial against Alphabet kicking off today, marking its first antitrust case against a big tech company in more than two decades. And our Aman Jabbers is on the scene. Amen? Hey there, Kelly. Well, the Department of Justice has just called its first witness and it's Google's chief economist, Halvaryan. And they've been grilling him this hour about the advice that he gave to the company on antitrust issues. And what's fascinating here is that we're hearing direct echoes of the legendary Microsoft antitrust case of the late 1990s.

The Department of Justice has been grilling very and about warnings he sent in emails as far back as 20 years ago to Google executives. In the messages, he warned executives against using incendiary rhetoric in public or in private saying phrases like, quote, cutting off their air supply should not be used to refer to competitors. Now, that's because Microsoft Steve Balmer allegedly used the same phrase about his competitors, and it came back to haunt Microsoft in their battle back in the 1990s. So you have Google executives 20 years ago analyzing how the DOJ prosecuted the Microsoft case back then, and now the DOJ of today in this courtroom here, surfacing that advice in its case about Google. So what goes around comes around.

Now, the DOJ, State Attorneys General in this case and Google have all concluded their opening statements this morning. So we're getting really into the heart of the case already here on day one. And one quick piece of color, Kelly, I can tell you that on the first floor of the courthouse here, the same time they're arguing about the Microsoft case in the courtroom. There's literally a museum exhibit about the history of the Microsoft case and its significance in antitrust history. So history in the display case here and history in the courtroom as well, Kelly. You say the opening statements went to sort of the heart of the case. In simple terms, what is the heart of the case? Why is the Justice Department prosecuting Google or alphabet?

Well, it's two, as you can imagine, two very distinct arguments, right? The Department of Justice is saying that Google got to 90% dominance in online search by breaking the law. And they're focusing really on these payments to companies like Apple that Google has made over the years billions of dollars of payments in, order to become the default search engine on all these devices across the whole universe of devices that people use. The Department of Justice is saying that flood of cash really kept other competitors out of the search business and was anti-competitive. What Google is saying here is exactly the opposite, as you can imagine. They're saying, hey, the reason we're so dominant is our product is so good. We built a great product. People seek us out. They don't want to use Bing and other competitors

nearly as much as they want to use us, and we didn't do anything inappropriately. All of the parsing of these 20-year-old emails that we've seen so far today, all of this is going to tease out the situation of who's right here. Ultimately, they don't have to prove it before a jury here, Tyler. This is a bench trial, so it's all going to be in front of Judge Amit Mehta, and it's going to be up to him to make the ultimate decision here. So no jury to impress. That means that the arguments can get a little bit more technical because Mehta has been steeped in this stuff for a long time. You don't have to assume a level of knowledge in a jury pool. You have to assume a level of knowledge here with a juror, with a judge in this case who's been overseeing this case for a long

time and very, very steeped in the details, Tyler. How long is this case expected to go on? Well, we think until late October, maybe spill over into early November by the time we're done with everybody presenting their cases, then META will take some time to figure out where he's going to stand on this. And we don't expect an ultimate ruling until some time in 2024. And Tyler, that's just the first part of it. That's just the part of it. That's just the part to determine liability. If the judge here says that Google does have liability under antitrust law, well, then they go into another phase of the trial in which they have to prove exactly what the remedy should be for that. So what is the fix here that Google would be ordered by the court to do

in order to solve whatever problem they find here? That's only if the Department of Justice prevails in this first part of the case that they go to that remedy piece. So we can be talking well into 2024 before we have any resolution where you see what kind of impact. this has ultimately on Google's business. Will remedies include fines? It's not clear. Both sides have been very careful not to talk to us at all

about what the remedies might be. They don't want to go there. They're very focused right now on just whether or not this issue of liability exists or not, Tyler. Thank you, Eamon. Amon Javers, reporting from the courthouse. Artificial Intelligence,

also a big focus in Washington today at this hour, the Senate, holding a hearing on the need for transparency in AI. This is ahead of the first. the first Senate AI Insight Forum. That is tomorrow. It's going to be led by Majority Leader Chuck Schumer, tech titans, including Elon Musk, Mark Zuckerberg, Bill Gates, all expected to be in attendance. Here with more on what's at stake and a look at some of the stocks that

could be affected is Fred Havermeyer, senior software analyst at Macquarie. Fred, welcome. Good to have you with us. Let's take the first thing first, and that is the Senate Commerce Committee hearing on AI. Is this sort of a perfunctory hearing or is it really? really substantive? I think what we've consistently seen is that the U.S. federal government at many different agencies and many different levels is presently considering how can one appropriately regulate AI and what are the steps that need to be taken to regulate AI? I think within this context, it's appropriate to be having conversations at all levels here.

And we certainly see this heating up, of course, with the AI Insights Forum occurring tomorrow. What needs to be regulated about AI? Give us a bit, just level set us here. What are we talking about? So there's many different takes on this topic right now. Within the U.S. government, there's a lot of debate about how we can navigate the national security landscape, the risk for misinformation that's generated by generative AI and artificial intelligence models, and also how to combat potentially China being the steward and the leader that sets the standard for AI regulation, which certainly is not necessarily the case, as we've seen the EU with its AI Act, is also pushing forward quite quickly to develop a risk-based framework. But I think the question at the very heart of the debate right now, is what are the powers of these new generative AI models? Do they have the risk to potentially disrupt society?

And also, what is the potential advantage here? Because fundamentally, we think that this is a moment where the United States and other nations, but particularly the US with our technical leadership, can really accelerate innovation and drive many, many, many further discoveries and advances in artificial intelligence if we properly regulate and also invest into cultivating an AI ecosystem in the United States. States. Yeah, I don't know what that looks like exactly. I just hope we don't handicap anyone too much at this point. Maybe I'm on the wrong side as, you know, I just, so let me, let me ask you,

Fred, about something that feels a little bit more, you know, hits a little closer to home, at least for right now. You think that China may be poised to disrupt the AI chipset market if, if it's new, advanced domestic fab capabilities are proved out. Can you talk a little bit more about that? What are the implications? Because it's a huge debate right now over, you know, whether they have this kind of leading edge chip tech or not? Oh, absolutely. I think the heart of the debate right now centers around how can you train artificial intelligence models. Typically, those are run on very, very large GPU clusters, a very high-end GPU compute, which presently is primarily something that Nvidia has been dominating. So if there are other entrants into the market that can offer competitive

chipsets, which certainly AMD has been trying to do, we think that it could change the way that AI training workloads are actually performed. I think also quite critically here, this is not simply a hardware problem. This is also a software problem, and one where if there's more accessible and easy to use software offered by competitive vendors to be able to train AI workloads and AI models, then potentially the landscape could open up further. I think one interesting thing we've seen consistently here is that smaller researchers, you know, those researchers that we hope regulators will not potentially regulate away, have been making substantial innovations here to make the inference workload, that is, the models predicting something when given an input, making

you work on even commodity hardware. For example, I saw one recently where a very large 180 billion parameter model, and that's one of the larger ones, was running on a piece of commercial Mac hardware, is running on an M2 Ultra Mac. So I think a lot of optimizations going on, and I think the whole field is potentially one that could see a lot of innovation. Though presently, NVIDIA's tech remains the stack that startups, enterprises never and are using to train up AI workloads. I'm going to hit you. I'm going to ask for a quick answer here on a hard question. Obviously, in terms of AI regulation, you want to enable the innovation and the positives, but you also want to restrict mischief makers, whether from Russia, Iran, China, North Korea, or others, from that disinformation.

or misinformation that you talked about before. How do you do that if the U.S. Congress and the administration can really only govern what takes place here in the United States? I mean, I suppose you can build firewalls to block the mischief makers from those countries I mentioned. But how do you do that? I mean, you're really cutting to a deeper problem here, which is the one of trust.

And what do we each trust nowadays? I have to say that I can't come to you with a very good conclusion of what to do with the moment. I can certainly say, however, that the cat is out of the bag, and many of the models that are open source are now available for anyone to download. You can train your own model at home. In fact, I do that in my spare time. I'm learning how to build this tech myself. It's very easy to do, and I think regulation will help us to understand how we can establish trust.

I hope that regulation, as it's developed, will focus on that trust, and it's a very difficult problem to solve. Fred, thank you for your insights today. We really appreciate it. Fred Havermeyer of Macquarie. And a fight is brewing between Elon Musk and Elizabeth Warren over SpaceX's Starlink satellite. We'll get details on that story next on PowerFash. It was one Friday night. I had been with him for a while, but I was back at home in New Orleans watching a high school football game. And I got a message from him and we started communicating

that the Ukrainians were using Starlink to get drone submarines to do a sneak Pearl Harbor like a on the Russian fleet in Crimea. And he said, but we're not allowing Starlink to work within 100 kilometers of the coast. I thought, mistakenly, that he had made that decision that night later after there was a publication. They said, oh, no, that's been the policy for a while. We geo-fenced Crimea, so it couldn't be used, so there couldn't be an attack on Crimea using Starlink.

Well, that was Walter Isaacson on Squawkbox this morning. explaining a controversial part of his new book on Elon Musk, Musk reportedly deciding he didn't want Starlink to be used in a way, which could possibly start a nuclear war. But now Senator Elizabeth Warren is calling for an investigation. Others are disputing the details of this claim, the claim about Musk, that is, and joining us to help make sense of it all as Amanda Macias, CNBC's national security reporter. Amanda, welcome. What's the latest on this? What are you hearing?

Hey, Kelly and Tyler. You know, I have to say that I'm not surprised that Senator Warren is asking for this probe because that portion of Isaacson's book sent shockwaves not only here in D.C. But also the Ukrainian capital and obviously with NATO allies who are helping to finance Starlink. Now, Isaacson explained a little bit of the details, but I'm happy to rehash. Essentially in his book, he alleges that Elon Musk told him that he had secretly turned off Starlink satellite systems once he was made aware that the Ukrainians were going to launch a mini Pearl Harbor attack on Russia's Black Sea Fleet that stationed near Crimea. Now, Isaacson on our air today obviously said that that had not been a game day decision

that Musk had previously had a policy in place that the Starlink system would not work in Ukraine throughout the conflict. Now, this calls into question why the United States military doesn't already own something, a militarized version of Starlink, where U.S. presidents or Western governments can make these types of calls. And so, Isaacson says that really what happened was that there was an existing policy. How, why did, that prevented Starlink from being used by the Ukrainians or anybody else to launch such attacks in that geo-fenced area around Crimea, or so he says. How come the Ukrainians had not complained about that previous to this book coming out?

Why hadn't we heard about this? Right. So there is an assumption that the Ukrainians believed that once Starlink reached the country, which, by the way, was in the days after Russian troops poured over Ukrainian borders. They had assumed that Starlink was operable throughout the country, and they had access to it at all points in all regions. And Elon Musk said that that actually wasn't the case. And in fact, he made that decision well in advance of this because he was worried about triggering a nuclear war.

And as it's understood, the United States alongside Russia, they own the world's nuclear weapons. And so nuclear saber-rattling has been a constant concern throughout Europe and obviously here in the United States. And Elon Musk thought that he was doing this activity in the best interest for the globe in terms of not ratcheting up the conflict even further. I thought Musk was claiming that Starlink was not turned on in Crimea because of sanctions. It's a constant back and forth here, and that does get to the bigger question that Senator Warren is trying to ask, as well as other Democrats who are seated on the Senate Armed Services Committee as they look at appropriations to figure out how much more money they're going to help finance for Ukraine, that why is Elon Musk the point person on foreign policy? That's what Senator Warren asked today. And Senator Dick Chairman Durbin, who's the chairman of the Senate Armed Services Committee, also asking why is Elon Musk calling the shots on their terms? comes to national security matters. So that does get to a bigger statement that I reached out

to the Pentagon earlier today, and I just want to read this really quickly. The Pentagon says we are aware of the coverage and interest in this topic. And as we stated previously, the department does contract with Starlink for satellite communication services in support of our Ukrainian partners. However, do the critical nature of these systems and for reasons of operational security, We have not released additional information regarding their specific capabilities or other operational details. They end this statement by saying, beyond that, we do not have any additional information to provide, guys. All right. Amanda, thank you very much. It raises all kinds of very interesting questions about the ability of a business to cease doing business or stop selling or covering an area if they feel that it is a dangerous thing to continue doing business in that area.

I think this one is going to be one. We're going to come back to. Absolutely. And I just want to add that the story is up on CNBC.com. You can read excerpts from the book as well. And we're going to have a whole tech team. Musk is going to be in the Capitol tomorrow along with a bunch of other tech executives. We'll be watching.

Thanks, Amanda. Bye-bye. UPS lower today as details emerge around the actual cost of the Teamsters contract. We will trade that name in three-stock lunch next. All right, time for today's three-stock lunch. We're going to trade some of the day's biggest movers. and we're going to start with UPS. Shares down more than 2.5% today on track for its lowest close since February of 21.

The CEO saying the new labor deal with the Teamsters is going to cost less than $30 billion. Here with our trades is Ryan Belanger, managing principal and founder of Claro Advisors. Ryan, what's the trade on UPS? Yeah, hi, good afternoon. I like UPS. I know the market doesn't like it today. It's had a tough year. Valuation perspective.

It's trading at a below market multiple. It yields a nice dividend end around 4%. And from a catalyst perspective, who's buying less online? More and more consumers are buying things online. It's a huge barrier to entry business. UPS is the main player in that. And I think the stock has a lot going forward. And I think it should be something that people consider, you know, heading into next year.

Sticking your neck out. All right. Let's see what you'll do with Casey's then. That stock is up more than 10% today on a big earning. speed. Q1 earnings were above expectations while sales declined, but RBC is raising their price target. We don't talk a lot about Casey's. The consumer is in a real questionable position right now. Ryan, what would you do with this one? Yeah, this is a smaller company, obviously. It's got 2,500 convenience stores, mostly in the Midwest, so not a lot of people have heard of this one. It's growing,

though. It's adding about 150 stores, so that's a strong catalyst. And I think the consumer when they're out on the roads and they're thirsty or hungry, they're going to stop and buy food. I mean, you know, that's just the reality of it. They're going to slow their spending in other ways. But for those necessities, I think they're still going to spend money. I think this stock could benefit from that. The multiple's okay. It's not really cheap or expensive. It's kind of in line with the market multiple. But I think the catalyst here is growth for this one.

All right. Let's go finally to TKO Group Holdings, newly formed company from the merger of WWE. and UFC, shares of TKO started trading on the NYSC today with Ari Emanuel as its CEO. Ryan, what's the trade here? This is a complicated corporate marriage. It really is, but what a marriage. I mean, talk about businesses that can sell stories and deliver marketing blitzes and campaigns. I mean, you know, this is a really strong marriage of different businesses, but that's what they do. They sell stories and to marry it with a, to a, with a Hollywood agency, I think, is so apropos. From a consumer's perspective, even though we might slip into a recession here, as evidenced by the strong blockbuster concert that we had this summer,

the series we had this summer with Taylor Swift and others, consumers are still going to spend on live entertainment. I think this stock, TKO, provides a lot of live entertainment that consumers want. And so I think I like the stock. The Hollywood agency that you referred to that is involved here is, and are they the owner of these two brands or what? Yeah, so you get the UFC combining with the WWE. And so I think that from that perspective, you're getting two really nice businesses that for generation,

you know, those are generational businesses. I mean, I grew up watching wrestling, and I'm sure my kids will watch it at some point. And, you know, the UFC is growing like crazy around the world. So I think it's just something that's very interesting. I think live entertainment like sports is very popular. And I would just, I would be a buy. of those types of businesses.

Ari Emanuel as the CEO of Endeavor, which of course combine the two of them together. Speaking of characters, quite a pairing. Yeah. Ryan, thank you. I agree. Brian Bellinger. Closing time is next.

Everybody, don't go anywhere. Welcome back, everybody. 90 seconds left and several more stories to get through. Let's get right to it. Starting with the world at the beginning of the end of fossil fuel use, according to Energy Watchdog, the IEA. They're projecting that the consumption of the three major fossil fuels will all start to decline this decade because of the rapid growth of renewables,

the spread of eBs. And we should just mention that while this may happen in the very near term, as we watch oil prices ramp up, there's still high demand for the fuels we still run off of. We've heard things like this many, many times before, and fossil fuel continues. It disincentivizes more fossil fuel expansion. What are the three major fossil fuels? Coal, oil. Natural gas.

I can't imagine. Maybe it's natural gas. If it's natural gas, that would be more key because that's a bridge fuel. All right. China is set to become the world's biggest car exporter this year overtaking Japan. This would mark the end of decades of dominance by European, American, and Japanese, South Korean groups, Chinese factories simply producing way more vehicles than local demand needs, resulting in massive overcapacity.

Watch that space. Watching the market. And we all feel bad for Aaron Rogers. I had the same injury last year. Let me give him this piece of advice. Lose the crutches, go with the scooter. That's the way to get around when you recover. And Jets fans, at least you pulled off a win somehow in spite of every.

Thank you. Thanks for watching, Power Lunch, closing bell right.