Power Lunch - Rally Rolls On, China Means Business 11/15/23

Episode Date: November 15, 2023

Stocks are higher once again today, following yesterday’s big rally. The Nasdaq is already up 10% in November, and we’re only halfway through the month. Should investors prepare for a market reversal, or for a very happy holiday season? We’ll tell you all you need to know.Plus, President Biden and China’s President Xi are meeting in San Francisco. No major policy changes are expected, but could talks be enough to get China to soften its stance toward U.S. businesses? We’ll explore. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Oh, you wouldn't believe the 10 seconds before Power Lunch begins. But welcome everybody to Power Lunch. It's going to be a great day alongside Kelly Evans. I'm Tyler Matheson. Stocks are higher once again today after yesterday's big rally. NASDAQ up 10% already in November. You're richer. And we're only halfway through the month.

Should investors prepare for a reversal or a happy holiday? Plus, President's Biden and Xi meeting in San Francisco. No major policy change is expected. But our talks enough to get China to soften. its stance toward U.S. businesses, Kelly. These guys in here would really put the NASCAR pit crews to shame. Let's get a check on the markets, which are pretty much at session highs, with the Dow up 176 points, the S&P of 13 and the NASDAQ up 32.

So Monster runs the NASDAQ up 10% this month. The S&P's up 10% from its intraday lows just at the end of October. The big mover today is Target. The stock soaring after a big earnings beat. You can see it up almost 18%. Now, interestingly enough, though, the stock is still down 12%. this year and the earnings beat came from cost controls, not sales improvement. Same store sales fell nearly 5% in the quarter, but the CEO is crediting disciplined inventory management for the very

strong bottom line beat, Tyler. All righty. So as stocks continue to build on yesterday's strong rally, can we expect this to continue? Our next guest says now is the time to move to a bull market portfolio. Just remember to preserve some defense while you do so. Let's bring in Hugh Johnson, Chairman and Head of Investment Strategy with Hugh Johnson advisors. You know, generally, Hugh, the market looks ahead. And right now, the last few weeks, let's say, from the middle of October forward, it seems to be looking ahead to better days. Is that, are those better days going to be characterized by lower interest rates or an improving economy or what?

We may have the best of all possible worlds. I keep telling people that we're headed towards the configuration, which is about perfect. In cycles, you don't get very often that you get everything going in the right direction. So I think really, bottom line is the bad news might be that the economy might have a soft landing, maybe a hard landing, talking about the current quarter, first or second quarter. But what that's going to usher in is, first of all, obviously, the Federal Reserve is not going to raise interest rates further. When we get to the third or fourth quarter, they're probably going to be lowering interest rates. If the Fed lowers interest rates, that means that a longer-term interest rates, the yield on a 10-year treasury is going to come down.

Look for numbers like 4.40% on a 10-year treasury, down to 3.5% as we get to the end of 2005. So good news on the bond side of things. And, of course, in response to that stock market, the stock market will do very well. The only problem I have now is that we've been eating away at the potential return for the, the current quarter. We've been eating away a little bit at what we have as a return possibility for 2024 and eating away from a 2025 move up in stock prices. So we're using a little bit up, but other than that, you can't ask for a better configuration, and there's still some left. So let me make sure I understood you correctly. On the 10-year note, you see interest rates,

which are now about 4.5, 4.4%, moving lower to what level by? when? Well, I think they may move a little bit higher in the remainder of what we have. We're a little ahead of ourselves, the remainder of what we have in in 2023. So if they got up to 4.85 percent, I'm not going to be worried because I know what the Fed's going to be doing. Then we're talking about the end of 2024, 4.40 percent. And the end of 2025, we're looking at 3.5 percent. And And again, that's on the back of a lot of reductions in the federal funds rate target by the Federal Reserve starting in the second half of 2024. Hugh, what would you say in terms of what happens with bond yields here?

What's the significance of that going to be? Well, there's not going to be much significance other than the fact that the bond market really has been playing out or really what we expect for Federal Reserve policy. And right now, the case is so very, very strong, obviously with the inflation. numbers that we saw this week. Inflation is not, I don't want to say it's a thing of the past, but let's just say inflation will continue to go down. The economy will slow.

And the real key right now on longer term rates, and it's still going to be the key, is going to be what's the Fed going to do? There's going to be debate. There's going to be ons and offs, one step forward, one step back. But I think what we're headed towards is obviously the Fed is going to be reducing rates. What it really means, though, Kelly, and you don't get this very often. is you can make money. There'll be returns, positive returns from the fixed income markets,

so you can extend duration. Don't extend it by a lot, extend duration. And you'll also get positive returns from the equity markets. There's still some left in this, which is sometimes hard to believe, given what we've had. But there is some left. We've had the opposite. I think for a lot of people that say I'm losing in bonds and I'm losing in stocks. But maybe we'll see how the year pans out.

You like NVIDIA. You like JPMorgan. You like Amazon. On the Nvidia front, you worried at all that Microsoft's coming into their turf? You worry a lot about it, but Nvidia's got such a big lead on everybody else. You know, what they're doing is so special. And it's really going to take a lot of time to try to repeat what they're doing to get on top of what they're doing in the world of chips. I've been following Nvidia since 2017, and I've watched them increase or improve their chip technology continuously.

since then, and they're not done yet. So I think they've got enough of a lead. They can hold that lead. And you bet I'm very concerned about the move we've had to the upside in NVIDIA. I'm very worried a little bit about valuation. But I think they can hold us. I think we've got further to go, particularly because we're looking at the beginning of a new cycle, a new cycle, which will consist of an improvement in the stock market, followed by an improvement in the economy, followed eventually by a rise in some inflation and some interest rates, but that's down the road. So as you say, put on your bullpants right now because the good times are coming, that doesn't mean that you're going to go all in on equities.

What would a typical solid portfolio construction look like for you right now? Well, you have to have, I think, you've got to tip your hand towards the equity markets. So if you've got a target of, say, 50% in stocks and a balance. portfolio, 50 in stocks, 50 in bonds. I'd get that 50 up to 60% and remain in fixed income on the following 40%. And then in the equity component of a portfolio, I'd have mostly offense, in other words, bull market sectors such as consumer cyclicals or discretionary stocks, technology stocks. I'd put those at the top of the list. And I would also have or keep some staples and maybe even some utilities to have a little bit of defense in the portfolio.

but I'd definitely be leaning towards the bull market sectors. And then in the fixed income component, I mentioned extending duration some, because again, we're going to have good bond market, a good stock market, in cycles going back to 1890, you have very brief periods of good stock markets, good bond markets, and we're there now. And so everybody has to realize this great configuration of events that we've got facing us now. It's not going to last forever. I'm in a much better mood now, Hugh.

I'm just in a better mood. Hugh Johnson, thank you, my friend. You bet. Can it extend to what Rick Santelli says? Stocks have been rallying. Yields have been falling. That's reversing a little bit today. Let's check in with Mr. Santelli in Chicago.

Rick? You know, it is an important day for us because we have managing director here, Jerome Snyder from Timco. Jerome, I couldn't think of a better time. Let's set the table here. Yesterday, we have a really, really good CPI. We see huge drops in yields.

We had a low yield of what? 442 and a 10, 481 and a 2. And yesterday, the open interest in Treasury futures reached 20 million, which means game afoot. We're fully packed with players. What do you see that's different today with a pool PPI where rates have actually jumped up a bit? Simply, investors are trying to take a rational approach

to all the data that they've seen over the past few days. Inflation metrics are a one direction, growth is clearly on people's mind. Even geopolitics are coming into the equation. And they're trying to rationalize that in the context of perhaps the soft landing that many risk assets, including equities, are having within the current market context. What we're ultimately finding is the long open interest is simply symbolic of a rationalization that income, fixed income, perhaps has a bigger place in people's portfolio at this point in time.

And as a result, we should expect this rationalization to come back to the direction of larger open interest, of larger risk appetites, to de-risk exposure to devise. volatility in the broader marketplace. Next income does that. That makes perfect sense because there's also this kind of notion that stocks have to be going higher here, that the soft landings already embedded into the picture, it's on the menu, and it's done. I'm not sure I agree with it, but we have to trade the market that's in front of us. So let's handicap all the moving parts.

We have trying to handicap growth, trying to handicap inflation versus disinflation, and on the other hand, you have servicing the debt or supply, and you have the term premium that has been expanding and took a little pause. Put all that together. Well, we clearly see growth declining. We expect at PIMCO, 0 to 1% growth outlook for the course of 2024. And you couple that with a variety of factors, including the uncertainty of new supply coming into the marketplace, but counteract that with the Fed policy, while restrictive at this point,

might actually stay restricted for a little bit longer than the market expects. We expect that at PIMCO that the recession probabilities are a little bit higher than the market expects, too. So these are things that are creating this confluence of monitoring the market, monitoring the data, all the while the Fed is clearly trying to get to the point where the easing, or rather the tightening of financial conditions, leads to not necessarily to tighten monetary policy anymore. Yeah, we believe that the federal will remain on hold for December, but clearly the outcome and what happens to inflation, specifically wage inflation, wage pressures, as we get into 2024, should become front and center for the debate at the Fed as well as the market.

How do you bring in international forces? You know, Germany used to be, you know, German engineering, but that auto industry has changed. Germany's numbers do not look good. I don't see an engine of growth emerging out of Europe. The Japanese, their currency is basically at 33-year lows against the dollar, and yet their export numbers are moving the wrong way because their trading partners' economies are slowing.

How is all that going to affect the U.S.? Yeah, clearly the calibration from an economic point of view something that will put a weight on growth as we get under 2004. From a fundamental perspective, we like the front of the yield curve because it's generally immune to a lot of these factors. Yes, the Federal Reserve will come in play, but a lot of the premiums, term premiums, supply, other factors that might be persistent out of the yield curve, might actually be more insular at the front of the yield curve.

Again, it's an income story as opposed to a capital appreciation story that you might find in many risk assets at this point in time. That theme is prevalent throughout the global economy. So stick with the shorter maturities, but what's the cost of? that asterisk, yields made me moving a bit higher despite some of the better news on inflation slowing, but maybe slowing a bit too slow. Jerome, thank you. Tyler, back to you. As always, good to see you, Jerome. Rick Santelli, thank you as well. Meantime, coming up, G's California Dream. China G meeting with President Biden out in San Francisco,

will bring that to you as soon as it happens. Plus tech's growing bag of chips, Microsoft developing its own semis, following the likes of Apple. Ahead, we actually have a rare inside look at one of Apple's factories. And the inside track, Sarah Eisen jumping into the driver's seat of Formula One, Power Lunch will broom right back. Welcome back to Power Lunch as we await the official meeting between President Biden and President Xi Jinping. It's about to get underway out in San Francisco or nearby. As you can see, they're actually in Woodside, California.

The last time the two met face-to-face was in Bali, Indonesia last year. Later tonight, she will be attending a dinner with U.S. CEOs. Let's talk a little bit more about the importance of these meetings. Dennis Uncovic is here. He's a partner at Meyer Uncovic and Scott. He advises companies doing business in China. And Dennis, before we get into that, just in terms of the meeting between these two leaders, there's so much that goes into every little move of their muscles.

Who approaches whom and whose hand is on top and all the rest of it. It's like an intricate dance. And I think this time the U.S. is in a little better position to negotiate with the Chinese than they were in the past. Because, you know, C hasn't been to the U.S. since 2017, and a lot has happened since then. Yeah. We're, you know, this all being the case and the way that that the rhetoric has quickly warmed up around the relationship, would you all of a sudden expect to go from advising companies on how to get out of China, as you said, had kind of been more of the work in recent months, to once again talking to them about how to get in.

I am still very reluctant to encourage companies to go into China, or at least if they're in China, I think it's better for them to sort of spread the risk to outsource things that they have in China. For example, this Q3, which we just finished, China had a deficit of inbound foreign investment of about $11.8 billion. That's the first time in memory that I think people have not been investing in China. And if I were Xi Jinping, that would really be. concerned me. Let's take in a little bit of the scene here. Dennis, as President Xi of China exits his automobile. Marine guards doing so, the President and Xi greeting one another with a seemingly warm handshake. And now they turn to move into the venue where some of their discussions will

take place. Obviously, no comments at this point. They stand. They wave. They smile. All rather obligatory, I suppose, for these kinds of circumstances. This is the first time in, I believe it is six years that President G. has been on U.S. soil, Dennis. There have been encounters with U.S. presidents at other, along the sidelines of other APEC summits, like this one. What is, as they go behind closed doors, what is the best outcome, the single best thing that could happen from these talks. I think there are five red line problems that I see, but the one that's most concerning to me individually is that when Nancy Pelosi went to Taiwan and Xi Jinping said, don't go and she went, at that point, the military relationship between the Chinese military and the U.S. military was

cut off by Xi Jinping. Since then, if there was an emergency, of whatever kind, there's no real way that I know of or that this can come back together. I mean, you and I are old enough to remember the crisis of what happened in Cuba, you know, under Kennedy. And as a result, we need better communications. And so if there's one thing that came out of this, and this is a geopolitical issue, not an economic issue, I think that the militaries have to be able to pick up the phone and say, this is a problem or this is not a problem. That would be the best possible outcome, Tyler. In other words, those communications, those linkages that existed pre the Pelosi visit have been severed now. And there is effectively, if something went on in the South China Sea, there would be a difficulty at communicating between the two countries.

Yeah. In the last two years, Tyler, there have been about 200. They call them incidents. I don't know what you want to call them. But when the Chinese aircraft or the Chinese Navy interdicts or somehow makes it difficult for the. the U.S. and its allies, Canada, too, to go through there. I'm really worried. I think that the hottest spot in the world, other than maybe North Korea, is the South China Sea.

So you're absolutely right. Let's talk a little bit about the U.S. business relationship with China. How awkward is it, basically, for U.S. businessmen and women to be sitting down and having dinner with a geopolitical adversary like Xi Jinping and not just a geopolitical adversary, but a business adversary like Xi Jinping. In other words, China is competing directly with Tesla. They have Tesla factory in China, but they are competing for a EV superiority with Tesla in a very big way.

Well, Tim Cook's not going to be there tonight, according to published reports. About 20 to 25 percent of what Apple's. sells, not just to China, but in the region, is there. Somebody like him has to be extremely concerned because he outsources a lot of his products coming back to him. But you have somebody like Darren Woods, who is the CEO of Exxon. Exxon just signed a multi-billion dollar contract in Guangdong province, which is in southern China, to put in a factory that produces plastics because Exxon wants to sell a lot of plastics to the Chinese in the future. He, Exxon, has a direct interest in making sure that the relationship between China and the United States is

better. And then you have Elon Musk, a lot of what, you mentioned just a minute ago, a lot of what he has is sourced out of China. So there are those U.S. companies which really heavily depend on China now. Any break would hurt them financially. And others have to say, do I really want to go in? And correspondingly, doesn't Xi have a strong incentive to accommodate is too strong a word, but work constructively with American businesses insofar as they are investing there, they are employing there, and China does have an unemployment problem, particularly among the young. You're absolutely right. Their unemployment with the under 25 workers is about 21%.

anywhere in the world that's a problem. But for someone who wants to have total economic control and political control over his economy, that has to really, really concern Z. And I think that he'll want to make nice and he'll want to say to these leaders at the dinner tonight, please help me with the president. But the U.S., as you see, has raised the level of national security to a higher level. You know, the best example are the chips in the AI technology. So it's really going to be a delicate dance today. Dennis, we always value your insight and analysis, particularly on a day like this. Dennis Unkovic, thank you.

Thank you both. And after the break, an elective procedure following years of claiming a hard line against fake news. Meta is allowing ads alleging the 2020 election was rigged. So what led to this policy change? Plus, Camry joining the electric company, sort of. America's most popular sedan going all hybrid. We will discuss this when power lunch continues. Yes, we will.

President G and President Biden getting right down to work already at the table, making welcoming remarks to one another in Woodside, California. This eagerly anticipated bilateral summit on the sidelines of the APEC meeting is really the highlight of that meeting for many. And let's listen in. Demand our joint efforts. So I look forward to beginning this discussion, and I welcome you and the floor is yours, Mr. President.

And again, welcome back. Mr. President, good morning. Coming here, I thought of, I think of your trip to China. When I was the vice president of China, we had a meeting. it was 12 years ago I still remember our interactions very vividly and it always gives me a lot of thoughts last time we met in Bali you said it was a year and a day ago

a lot has happened since then the world has emerged from the COVID pandemic but it's still a under its tremendous impacts. The global economy is recovering, but its momentum remains sluggish. Industrial and supply chains are still under the threat of interruption and protectionism is rising. All these are grave problems. The China-U.S. relationship, which is the most important bilateral relationship in the world, should be perceived and envisioned in a broad context of the accelerating global transition

transformations unseen in a century. It should develop in a way that benefits our two peoples and fulfills our responsibility for human progress. China-U.S. relationship has never been smooth sailing over the past 50 years and more, and it always faces problems of one kind or another, yet it has kept moving forward amid twists and turns. For two large countries like China and the United States, turning their back on each other is not an option. It is unrealistic for one side to remodel the other, and conflict and confrontation has unbearable consequences for both sides. I'm still of the view that major country competition is not the prevailing trend of current times and cannot solve the problems facing China and the United States or the world at large.

Planet Earth is big enough for the two countries to succeed, and one country's success is an opportunity for the other. It is an objective fact that China and the United States are different in history, culture, social system and development path. However, as long as they respect each other, coexist in peace and pursue wing-ling cooperation, they will be fully capable of rising above differences and find the right way for the two major countries to get along with each other. I firmly believe in the promising future of the bilateral relationship. Mr. President, you and I, we are at the helm of the world. of China-U.S. relations. We shoulder heavy responsibilities for the two peoples, for the world and for history. I look forward to having an in-depth exchange of views and reach

new understanding with you on strategic and overarching issues critical to the direction of China-U.S. relations and on major issues affecting world peace and development. I wish to thank you for your thoughtful arrangements for our meeting today and for our participation at the APEC meeting. Thank you. He, Xi said that the world is emerging from COVID, but the economic momentum remains sluggish and protectionism is rising. And basically making sort of very conciliatory noises about the bilateral arrangements or relationships between the U.S. that confrontation has unbearable consequences, he says, and the earth is big enough for both countries to succeed. Let's go to Amin Javers, who is on the scene this evening in San Francisco, monitoring this bilateral summit. Go ahead, Aiman.

Tyler, fascinating body language between the two leaders as we saw them greet each other, both in the standing handshake portion of this and in the seated remarks. I agree with you, Tyler. I feel like those were sort of de-escalatory remarks from Xi Jinping there, talking about planet Earth being big enough for the two countries, even though the relationship has had its ups and downs over the past 50 years that the two biggest countries in the world can't afford to turn their backs on each other. I also think I caught a bit of a smile from Joe Biden there to Xi Jinping as the press began shouting questions at the end of the remarks, as we always do, trying to get an answer from these world leaders. Of course, neither one was going to engage in that particular moment. I think I saw that smile reciprocated by Xi Jinping, so maybe just a little bit of common ground in terms of their annoyance at the press yelling at them at the end of that meeting.

But I think this is the start that both the White House and Beijing wanted to this meeting between these two leaders. This whole meeting is about putting a floor under the relationship between the United States and China, so it doesn't get any worse. All of this has been choreographed to a fairly well. I even noticed that when they did the handshake, each man put his hand on top of the clasp hands of the handshake, almost as if that had been worked out. We'll try to report that out and see if we can get the question. choreography on the handshakes, but they really did do the elaborate greeting that you might think of from a formal state visit, even though this is just a meeting on the sidelines of the APEC summit. So much to watch for here. One other note, Tyler, you look at who was next to the president, of course, his secretary of state, Anthony Blinken, but also Janet Yellen, the Secretary of Treasury. We saw the Commerce Secretary Gina Romando, and we also saw John Kerry down the table the climate envoy from this administration. I think that gives you a sense of what the priorities are on that side of the U.S. side of the table. Its economy, it's commerce, and its climate very much in this summit, as well as the foreign policy.

Kelly and I were just saying what a month Anthony Blinken has had, considering all the travel he has been doing. I thought there was a tone of real politic and reality when Xi said that the relationship between the United States and China has, quote, never been smooth sailing, has kept moving forward amid twists and turns. And that sort of sums it up, I think, and probably speaks accurately to where things are today, that maybe the goal here is to keep moving forward without antagonism amid what will inevitably be twists and turns of two highly competitive global powers. Absolutely. This is the muddle through summit, right?

We're not going to get a major breakthrough here, but this is just how do we keep relationship going and not getting any worse, right? We want to prevent any accidental military confrontation between the two sides. You've seen the pictures of Chinese planes getting very close to American planes over the Pacific. Chinese naval vessels and U.S. naval vessels coming in very close proximity with one another. Any one of those situations could turn into a flashpoint, and that's why the biggest takeaway of this summit is expected to be the resumption of military-to-military direct communications with the goal of de-escalating any of those moments. Those communications were shut down in the wake of Nancy Pelosi's visit as Speaker of the House

to Taiwan in 22. The expectation is that they will be able to resume those after this meeting today with a goal of making sure that there's at least not an accidental confrontation between these two countries, that everything that happens between these two nations is very measured and thought through. And that's why I think you saw a very measured and thought through summit beginning there on camera, Tyler. All right. And, Amon, you will be in the room where it happens tonight, I understand, when the business leaders meet with Xi and the Chinese delegation. We'll look forward to your reporting.

Thank you very much, Amin Javers. Power launch of return after that. Welcome back. Democracy in Action, I guess. Meta loosening its strict rules regarding election ads ahead of what is expected to be, of course, a highly contentious presidential election. in 2024. The most surprising part, they did so quietly around a year ago. And Julia, no one seemed to notice. Julia Borsden now with more on the policy. When did they do this and why hasn't anybody picked up on it? Well, there has been a slow conversation about Mehta's changes to its political ad rules.

So last year, Meta made this decision that political advertisers can say on its platforms, including Instagram and Facebook, that past elections were rigged or stolen. With this change in focus now in a story that was out in the Wall Street Journal, Meta says it is preventing political ads from questioning the legitimacy of ongoing or future elections. So when I asked Meta if they were concerned that undermining the legitimacy of past elections and spreading disinformation could actually undermine confidence in the electoral process or could spark violence like it did with January 6th, they pointed me to blog posts explaining that

the company is focused on preserving free speech, including one post which says, quote, we remove misinformation where it is likely to directly contribute to the risk of imminent physical harm. We also remove content that is likely to directly contribute to interference with the functioning of the political process. Now, all of this comes after Meta announced in April that it would reduce unpaid political content, just regular political content shared by its users, by taking some steps so people won't see several posts, about politics in a row. But this minimization of users' political posts

can be seen as placing more of a focus on political ads. And all of this comes after back in September, a nonprofit called Media Matters found that META is violating its own advertising policies and failing to appropriately label right-wing content targeting kids. Tyler Kelly? It's heating up. Julia, thank you very much, our Julia Borsden. Still to come, start your engines.

Formula One hits the track in Las Vegas. this weekend. One of the most anticipated sporting events since the Super Bowl will get a live report on how that's going when Power Lunch returns. Welcome back to Power Lunch. Check out shares of Liberty Media C, better known as Formula One. And it's a big weekend for the company as they stage the Las Vegas Grand Prix shows it down about 2% right now. Before the big race, check out CNBC's documentary Inside Track, The Business of Formula One. It airs tomorrow night at 8 Eastern. Here's a preview. So tell me about the million dollar package.

The million dollar package. So it's designed for a group of six. It has a pit lane walk where you get up close and personal with cars and the teams and all that good stuff. It has access to the Wind Grid Club, an invitation to the opening night ceremony and red carpet viewing. And importantly, it has a hot lap. Wynn's competitors are also upping the ante. Caesar's Palace is offering a $5 million package. And the Bellagio is building an exceptional.

exclusive viewing stand over its iconic fountains. And in fact, joining us now with more Sarah Eisen, live from Las Vegas and so much hype, Sarah. Can it live up to the hype? I'm curious kind of both this weekend, but also what's the longer term significance of hosting something like this? Kelly, the hype is part of the strategy. And certainly F1 parent company Liberty Media is hoping it can live up. It's part of what they're going for, which is. a bigger, bolder Formula One to grow the fan base in North America in the United States. That's what Liberty has brought to the sport when they acquired it about six years ago.

They did that by adding a Miami race last year, and now Vegas is new this year. They did that by signing a deal with Netflix to do Drive to Survive back in 2019 when we were about to go lockdown and look for shows to binge, and everybody got into Drive to Survive because the drivers were able to take their helmets off and show us their personalities and the drama that went, with it. Ever since then, the sport has seen this big growth spurt in terms of viewers and in terms of ticket holders in the United States. And Vegas is that ultimate bet. So Liberty has invested a fortune here, more than $500 million to buy the land, build a paddock building, which is the structure

that goes over the garages and where the highest ticket holders, highest price ticket holders, get a seat, overlooks the starting grid. And it's going to be a permanent building to your question, Kelly. And they're hoping that it can be a permanent activation site for Formula One in Vegas going forward. It's also a 10-year deal. So expect a race here every year. Wow. A race every year for the next decade? Yep. Well, it's just one of many. Formula One has 24 races in a season, Kelly. So this is sort of the end of the season. We do this one and then Abu Dhabi. But it's huge. And Craig Billings, who you saw there, the CEO of Win Resorts, told me it's going to be the biggest bigger than new years bigger than the super bowl for

Vegas in fact the estimates are that formula one is going to bring in one point two billion dollars to the las vegas economy double the super bowl which is also happening here in february so it's obviously a huge coup for las vegas and that's why all the casinos win mgm and caesars have signed on wow it's uh it's they're on the scene they're on the scene and and more ways than one, no matter what happens this weekend. Sarah, thank you very much. And for being there, very cool as well. Sarah Eisen reporting. We look forward to the documentary tomorrow night. And still ahead, join the club. Microsoft introducing its own AI computing chips, joining other techs giants like Apple in bringing their technologies in-house. Is this the new

way of the industry? We'll discuss in a moment. Welcome back, a big interview last hour. We heard from Microsoft CEO Satya Nadella as Microsoft becomes the latest big company. to start making its own chips, something Apple has done as well. Joining us now from San Francisco with CnBC.com's Katie Tarasov, along with our own Steve Kovac. Welcome to both of you. And Steve, let's just start with these announcements from Microsoft. And Nvidia shares moving lower, Intel moving higher. How significant is it?

And AMD a little lower, too, because keep in mind they're about to have their own AI chip that Microsoft is taking. But look, what the news here today was two big announcements. One is this new AI chip that Microsoft is going to start using in its servers to help push this AI, all these AI models that they're using for their new co-pilot things. That was the other announcement today, by the way. Co-pilot is getting some new features. This is the product they sell to enterprises for $30 per user per month.

We've been talking about this for ages. So sweetening the pot a little bit there. But look, the real story is why we're seeing Nvidia go lower because of this idea that companies that bring their chip design inside, they're less reliant on third parties. Microsoft's case is going to be less reliant on Nvidia. And as we're about to talk here with Katie, what does co-pilot do? Co-pilot is your super smart assistant

that can help you with everything. And, you know, whether that means reading your emails and telling you what you missed, transcribing teams meetings that you have and telling you, you know, action items from that. So there's a whole suite of things that could do that could be here all day. But, you know, Apple is a really good example

of another company that's successfully done this, winged itself off these Intel chips and started producing them in-house to great benefit. And the Microsoft Intel relationship goes back decades, literally. Katie, you got a rare look inside the chip making operations of Apple earlier. What can you tell us? That's right. I went to Cooper Tino, California, yesterday,

and we actually were the first journalists to be allowed to film inside of an Apple chip lab. So they have thousands of engineers working on their custom silicon, and we went inside their thermal chip lab, one of mini labs. I couldn't get an answer for exactly how many. And here you see me with Johnny Serugi. He's the head of Apple Silicon, and I'll get to what he told us a little bit later. But we went inside the Chip Lab where we saw the M3 Chip, which is their newest custom silicon. It's being used on MacBooks, MacBooks, IMAX, helping them differentiate themselves with some new features, things like 22-hour battery life on the MacBooks.

And they were testing in that lab on about 250 machines that we saw. They were running them through really high temperatures, really low temperatures to see how they do. And, you know, they test these chips on a variety of other machines in other environments at a bunch of chip labs elsewhere. They've also got some chip labs in Austin, in Israel, in Germany. And like I said, thousands of engineers working on this. We also got to see some of their A-series chips. These are the chips that go into the new iPhone 15. Specifically, they are three nanometer chips.

This is an extremely advanced type of chip. It's the first three-nanometer chip that we've seen shipped at scale. And so yeah, we got to sit down with Johnny Sruji, who you just saw me with there, and he gave us a rare chance to talk about what the silicon does. I asked him about why Apple is prioritizing this really expensive, difficult process of chip design in-house, and here's what he had to say. We get to design the chips ahead of time, working with our partners from John's team and software and OS, to exactly and precisely build chips that are going to be targeted for those products and only for those products.

So we work together very closely as one team. Really important, guys, because look, this is what Microsoft is doing right now with AI, bringing this in-house. They're able to have more capabilities on the AI front. And we've seen Apple do this already. When they don't have to rely on a third party to fulfill the vision they have for a product, they can just do it all in-house, talk to the teams internally, don't have to wait for problems to express themselves from Intel and other places. So we're seeing that. We've seen Apple successfully pull this off, and now we're seeing Microsoft get into it on this AI front. So it's super interesting and interesting timing that we got this now. It's really the frontier of this business. Thanks very much. Steve and Katie, we appreciate your time today.

All righty coming up, talking turkey while your Thanksgiving dinner could be a bit cheaper this year. Power loads to be back. Welcome back. I mean, you plan on celebrating Thanksgiving. Your turkey dinner might come with a side of deflating. this year, Jane Wells, live at a turkey farm with some important news on consumer prices. Jane. Tyler, probably the best news about cooling inflation is the Thanksgiving turkey, but don't tell the turkey. Turkey prices have been falling because we went from a shortage of birds last year due to a devastating avian flu to an oversupply this year because farmers raised more birds. They were afraid the flu was going to come back so far.

It hasn't. So the American Farm Bureau Federation says the average Thanksgiving dinner for 10 this year is going to cost a little over. over 61 bucks down more than 4% from last year's record, but still a lot higher than pre-pandemic. And turkey prices, which shot up almost 50% over the last few years are down about 6%. Though, still way up from 2019. Will your revenues this year top 2019? The revenues probably will top 2019 because we've continued with price increases. Margin contribution, though, will not.

Yeah, margins are eroding. a higher cost, especially laborer and Ronnie Lee of Lee's turkey farm in New Jersey, also is afraid that consumer may not be ready to buy a big bird yet. This year, we started our turkeys later and we've ever started them before, because I am predicting that the size is just going to be a little smaller than last year. Well, I'm going big. I'm getting almost a 20-pounder. Don't tell them, guys.

I love how these turkeys seem to cheer you, Jane. In unison. They all seem to come together with a cheer for you. Well, these are all Tom's. So you do that, they don't like that. And it goes like wildfire. But these are really big birds. These will be 24, 26 pounds by the time next week.

Do you, Jane, have any tips? So I have to do 16 pounds this year. I'm afraid I need to start at like 8 a.m. And any tips? Oh, my gosh. The hubbinator does the turkey. He's going to start brining it on Monday. He puts it in a big green egg.

It is the most moist, delicious turkey. I'll have him get in touch with you, Kelly. I make signs. I hope you're wearing good shoes. Jane, to put a rude question delicately, how much longer do these turkeys have? Not long. They're full grown.

I'm sorry, guys. But Ronnie Lee in New Jersey, one interesting thing about him is he said he's having these smaller birds this year. But that actually helps because he's paying so much more for labor. And there is still a bit of handling. I'm not going to get into specifics. But when you get down to the end, it's nicer birds that you're moving along.

Bless their gobbling little hearts. Jane Wells, you too. Thank you very much. And thanks for watching Power Lunch. I think she just ruined my appetite. Closing bell starts right now.