Power Lunch - Record Highs, Big-Box Battle 7/10/24

Episode Date: July 10, 2024

Stocks are higher today, with the S&P 500 and Nasdaq once again hitting all-time highs. Both averages are on pace for their 7th-straight day of gains. We’ll dive into the record rally and what it means for your money.Plus, Walmart shares are higher, while rival Target is lower. We’ll speak to an analyst who’s initiating coverage on both, though is more bullish on $WMT. What does that say about his view on the economy? We’ll discuss. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lounge alongside Kelly Evans. I'm John Ford. Stocks right now are high on your session highs. S&P 500, NASDAQ, once again, touching all-time highs, both averages on pace for their seventh straight day of gains. All that said, Walmart is slightly higher while Target is heading lower. Today we'll talk to an analyst who's initiating coverage on both. More bullish on Walmart, but what does that say about his view on the economy? And we've also got a long list of AI chip related topics to hit this hour. Let's start with. the latest numbers from Taiwan Semi. Sima Modi has those. Sima. And John, the world's largest chip maker revealing strong sales numbers for the month of June, up 33% year-over-year versus the 30% growth it saw in the month of May,

as demand for its high-performance AI chips remain strong, so strong, John, that Brady Wang, a counterpoint research, expects Taiwan Semi to raise prices on its advanced three-nanometer product, no doubt, a key topic when TSM reports full earnings next week. Analyst are expecting a beat and a raise. And one of its biggest customers, Nvidia, close to hitting yet another record high for the first time since June. Amid this recent rotation out of software and into semis, it follows yet another price target hike. This time from City this morning, which just hosted its AI summit. Panels there are talking about their use of Nvidia's H-100 for not only training but inference.

Their price target is 150. It also follows the report from the information that venture capitalists and Driesen Horowitz is buying thousands of Nvidia's H-100 trips and leasing them out to startups in exchange for equity. Analysts we spoke to say this is a bullish sign as the market awaits NVIDIA's Blackwell to be released later this year. Look at NVIDIA at $134 in change, guys. Yeah, Sima, the semiconductor trade had been a bit choppy, but really had a strong start to the week.

I mean, even Intel had a particularly strong stock kind of bouncing off that $30 level. I guess a question is, will that be sustainable, right? For sure. I think there have been a flurry of price target raises on the likes of Nvidia, Micron, among others. So that excitement coinciding with these moves that we've seen into semiconductors at a time where we're also seeing money coming out of software stocks is certainly interesting as well, John.

All right, Seema, thanks very much. Seema Modi. While the use has been spending billions of dollars on factories to build chips, a new problem is emerging. They don't have enough people trained to work in them. Emily Wilkins is looking at efforts to find a solution, Emily. Hey, Kelly. Well, yeah, you know, Congress made that big push a couple of years ago to have more semiconductor facilities in the U.S. And now they want to make sure there are enough American workers to run that these facilities.

So a new bipartisan bill just introduced today. It would spend more than $11 billion on ensuring that those jobs are filled. Now, most of the funding will go to the National Semiconductor Technology Center. That will be used for research and development. But the bill also creates a 200 million grant program used to. the funds allocated in that chips law. This would allow industries, community colleges, career and technical education programs to establish or expand microelectronics programs. Senator Mark Kelly of Arizona, one of the sponsors of the Bell, whose state is home to several

of the new facilities, said there is a lot of demand for the jobs right now and a lot of need for said jobs, but not enough training. We got to expand the middle of the pipe, you know, to get people through. We got people that want to get in there. We got the demand on the other side. There's a bottleneck in the middle, and that's the training. An estimated 67,000 jobs related to chip manufacturing risk going unfilled by 2030. That's according to the Semiconductor Industry Association.

That group is backing the bill along with community colleges. The measure could be included on one of the larger must-pass bills that Congress is working to piece together over the next few months. And guys, of course, will be keeping a very close eye on any developments. any developments. I mean, it's pretty impressive to hear. We spoke with the CEO of Wyndham Hotels last hour, Emily, and he basically said they're seeing a massive boom in people's travel and extended stay, all going back to infrastructure build

out, chip build out across the country. And he says a lot of these projects haven't even started, but hotel developers are building ahead of them. No, there's absolutely an awareness for the need that's going to be coming. I mean, a lot of these facilities, yeah, a lot of them are just planned. A lot of them are under construction. So a lot of folks are looking kind of down the road several years and saying, okay, here's what we have now.

Here's what we're going to actually need and try and make sure that they are prepared and ready for that. Of course, they want to make sure that these are American jobs. And as Senator Kelly told me today, you know, these are good paying jobs. These are the kind of jobs that you can sustain a family on and really the kind of things that you want Americans to be able to have, at least if you're the senator from Arizona. All right. Emily, thank you.

And our Sima Modi was just mentioned. to get Nvidia's chips in such demand, one of Silicon Valley's most prolific VCs are among the firm's stockpiling them. Why? Well, Deirdrebosa will explain in today's tech check. D. GPs are the new currency in the age of AI. So, Andresen Horowitz, it's amassing tens of thousands of them to gain an edge in dealmaking. This according to the information, the idea here is that Andresen can offer access to Nvidia chips in exchange for equity in the most promising Gen. That is because GPU access can be harder to secure than cash and to build an AI business, founders need compute power, access to the most advanced infrastructure most critically in that building.

So what Andresen is doing, it's not new, but it is likely the most aggressive GPU for equity strategy from a VC firm, and it's likely costing them hundreds of millions of dollars. It is also essentially how the mega caps have been building stakes in Gen.A.I. companies like OpenAI and Anthropic rather than investing all cash. Amazon, Microsoft, Google, they've been investing by offering access to their cloud infrastructure through credits. They get double benefit. Equity in a promising AI startup that could go up. And they also get revenue back in the door through their cloud businesses through those credits. For VC funds like Andresen, though, there's more risk involved. They're spending hundreds of millions of dollars,

likely of LP money to rent or buy GPUs and then offering it to, startups at the very early stages. Many of them with still unproven business models. In the past, chip prices have come down very quickly. It's a very cyclical industry, leading to gluts that happen quickly. If that happens because, say, AMD or the mega caps themselves develop NVIDIA GPU alternatives, VCs could be stuck with those stockpiles of GPUs that are also less valuable.

But in a way, Dee, this is one of the least risky things that VCs do. I mean, they're going for like, one in a thousand type shots here. And we know these things are in demand right now. And they're looking for deal flow. They're looking for that little bit of edge that's going to get them attention from that promising founder who's looking for an investor, right? Right. And the founder in many cases, if they're developing a native Gen. A.I company, they need that compute power. And GPUs are difficult to secure. That's why the mega caps are buying so many of them because if you buy in bulk, then maybe you can get some more, but still

risky, right? Because if we do see prices decrease, that these GPUs aren't as valuable as they are right now because, you know, the Nvidia monopoly opens up. VCs have foot the bill. They hold on to long-term leases potentially in renting that GPU space, renting them out to startups that may not need it as much or may have gone bust or may have found alternatives. I think you're right, John, this is fascinating. What else does it tell us about either the power shift in Silicon Valley or just the evolution of the VC business model or the uniqueness of AI? But this is one of the most extraordinary stories. The idea that they're the ones buying these massive pieces of technology. And then, I don't know. It is quite a departure. Yeah, go ahead, Deirdre.

It's such a good question. What does this tell us about the space? That it is incredibly competitive. I mean, years ago, in 2020, 2021, when we saw the Tiger Globals and the SoftBank comes in with billions and billions of dollars, they were the ones that had to convince founders to take their money. In generative AI, the space is so hot that you need to offer something different than just capital. You need to offer GPU access in order to get in on term sheets. So it tells us that there may be a bubble building, but at least the space is extremely, extremely hot. What a story. Dearie, thank you very much.

Deerja Bosa. Turning now to more news on the pharmacy benefit managers, a group we've been watching very closely here on Power Lunch. Angelica peoples with the details. Angelica, what's happening? Yeah, Kelly, the Wall Street Journal just now reporting that the FTC is preparing to sue the three largest pharmacy benefit managers over insulin prices. Now, those three companies are United Health's OptumrX, Cigna's Express Scripts, and CBS Health's care mark. Now, remember, these companies manage prescription benefits and the FTC just yesterday publishing the findings from their years-long investigation into the PBM practices. Now,

the Wall Street Journal citing a person familiar with the matter saying that the suits will be in regards to rebates with these pharmaceutical manufacturers. Now, these rebates are discounts, essentially, that the PBMs negotiate with drug makers. And the FTC yesterday saying that they believe that these PBMs steer people towards drugs that might be more expensive and that PBMs drive up costs. Now, of course, the company is in question denied those allegations, but we're going to stay on top of this and keep you up to date with what else we find out. Kelly. Angelica, thank you very much. You can see share prices there moving, although not too much in reaction, Angelica Peebles.

Coming up, it's the chatbot boom. Every company, it seems like, now has some form of a chatbot on their app or website, but they're not all created equal. the investment and who's got the best of the bots. We'll discuss with some industry insiders when Power Lunch return. Welcome back to Power Lunch. From online retailers to search engines to your personal banking app, chatbots now seem to be everywhere offering users help. In fact, more than two-thirds of U.S. companies have invested in chatbots already with many interested or planning to do so in the near future, according to research by Forrester. But the same study found that users actually don't like them, with only a small fraction, turning to chatbots

for assistance on a regular basis. Joining us now is David Troeg, Vice President and Principal Analyst at Forrester, who conducted the research, and Nikki Katz is head of digital at Bank of America. She's in charge of development of its virtual assistant Erica. Get it? Bank of America. That's actually well liked, allegedly, by users. David, I wonder, this depends, doesn't it?

like whether a chat bot is good or not, who has to interact with a chat bot? It seems like a lot lately, it's actually a customer service person, either in store or in a call center, who's getting smarter off of a chat bot and the customer never has to interact with them. But sometimes customers do.

What's the difference in outcomes there? You're right. Those are two different ways of doing it, either the customer service agent using the bot or an actual end customer using the bot directly. It tends to be a little safer if it's an agent using the bot because they can kind of, you know, run interference.

And if the bot goes in a wrong direction, they can mitigate that and speak to the user in terms that the user understands. On the other hand, what companies want to do is save money by taking the agent out of the picture and have customers interact directly with bots. And if you can do that successfully, it can be very effective. Nikki, I've never met a bot that I like. Now, I am a Bank of America customer. I will say I've seen, you know, Erica, the little thing, Papa, never used.

it, but it always feels to me not so much that it's not going to be helpful, but it's unaccountable. I can't follow up with a chat bot if there's some kind of problem. And that's what really annoys me is I want companies to be in with me for the long haul if this problem doesn't go away with the first fix. So how do you address that? Yeah, I think, John, the way we think about it is that Erica is just one piece of our high-tech, high-touch strategy. It's not meant to be your end-all, BL, what we're trying to do is when you do need help with your finances, we want to make it really easy. You can go in. Customers are asking Erica really easy questions at times like, what's my account number or help me pay a bill? At other times, Erica is coming to our customers

proactively and giving them information about their spending patterns and things like that. So, really it's about making the client's lives easier. And for us, it's really proven out. We have over two billion client interactions with Erica since we launched and 42 million of our clients. customers are using Erica. And I think the thing that when you think about Erica as part of a continuum, what's important is if you can't get your answer right there, exactly to your point around accountability, we want to make it really easy to get your help. So Erica can help actually authenticate our clients and get them to either a live chat agent or to the right associate via phone. So making it quicker to channel them to the help that they need. David, are chatbots

the past or the future? I mean, how is AI going to alter the experience, make it far more widespread, make it better to John's point that can remember our previous interactions or make them obsolete somehow? Well, a lot of the chatbots out there today that have been rolling out over the past 10 years do have some AI in them. The big change right now is that generative AI is making the headlines, of course, and is much, much more fluent in terms of, you know, interacting with people in language that really makes a lot more sense than traditional chatbots. The problem is that they sometimes make errors, these generative AI-based chatbots. So we're really at an inflection point where companies are experimenting with, including

Genive AI in their bots, but it's a risky thing to be doing right now. But it's absolutely the future. You know, we're very bullish about the future of chatbots, but we're really at the beginning right now. A lot of people are dissatisfied with chatbots, a lot of users, I mean. And it's understandable because a lot of them are not that great. but we're really just at the first or second floor of, you know, a hundred-story skyscraper, and Genevayae is eventually going to make that much, much better.

But there are risks right now with Genevaya. Nikki, I wonder how you see efforts from the likes of meta. They've got Facebook Messenger and WhatsApp. Apple's got IMessage. Increasingly, they're trying to get these more general messengers into the stream for businesses, small businesses and large businesses, to have that kind of chatbot interaction with customers. Is that something that you don't want to do because you want to really own the customer experience and the data associated with it?

Or do you see it as a way to potentially expand your customer base? Yeah. In terms of the way that our customers interact with Erica today, you know, it's Erica is part of our overall digital platform and like I said, part of the overall servicing continuum. And that's where we're focused. And I think also in terms of the general nature of the equation, you know, we're very specific. Our goal with Erica is to help our clients make their financial lives better. And so as long as we stick to those rails and those guard rails essentially, we're able

to be very specific about the kind of answers that Erica is able to provide and really take the time to focus on using advanced technology to understand what clients are asking about and map them to specific answers. And again, I gave the examples of inquiries around routing numbers, et cetera, recurring subscriptions, that's where our focus is. Okay. Sounds like B of A is in an exclusive chatbot relationship with Erica. Nikki, thank you. David

Trug, thank you as well. The S&P 500, breaking about 5,600 today for the first time ever. We'll get a check on the index components for our power check today. CarMax on the plus side, higher after Oppenheimer initiated the shares outperform, saying moderating used car prices will continue to be a boon.

On the negative side, Decker's the maker of footwear brands like Ugs and Hoka, calling on a cautious note from M Science, noting a deceleration in sales of this high flyer. Shares are down 5.5%. We'll be right back. Welcome back to Power Lunch. Stocks are still near session highs. You can see there, the S&P up about 7 tenths of a percent. The Dow up about half a percent, which translates into a little over 200 points.

The NASDAQ, highest of all, up almost a full percent. Check out shares of Intuit. They are down. Let's see. Let's get the latest number. About 3%. Intuit CEO Sasan Gaddazi this morning announcing a 10% cut to the workforce affecting 1,800 people. Goddardsey says this cut isn't about reducing costs. It's about spending differently in the AI era. He says after the cut, the company's actually going to hire about 1,800 new people in engineering, product, and go-to-market roles. Now, when Intuit reported earnings a month and a half ago, I asked Goderzi, about whether and how he'd be looking at the workforce differently, and here's what he said.

I'll give you three examples, actually, the areas that we're looking at. You know, one is, although we're going to be adding to engineering, our engineers are actually far more productive now with all of the AI capabilities that they are using. So we'll be shifting engineering off of certain work where AI is not going to do the work to more important work. Another area is our investments that we've made with AI across our customer success operations, we're able to have AI do a lot more of the work and reduce the manual entry for our customer success folks. And so therefore, we'll be able to do more with less investments. And then the other, I would just say, is content generation. We're leveraging a lot of

our AI capabilities to generate content internally that others would have to manually write. And so those are areas where, based on investments, we're going to be more efficient, more productive, and move the dollars. This is kind of qualitative, Kelly. But to me, this is, the other side of the job openings and labor turnover survey, right? Remember the great resignation long time ago? Now, in some cases, people are staying longer than companies want. And as they seek to invest differently, they're looking to lay off while also hiring. We see Microsoft and some others doing this as well. This is fascinating. This is the way AI is already, is it too much of a stretch to say this is a direct consequence of AI and the tools that's now providing?

It's not too much of a stretch to say that, but I will say also that this tends to happen with big technological shifts and companies, you know, part of a CEO's job is to be a little paranoid. Am I out of position? Do I have exactly the right people to deal with this shift? Whether it's AI or not, and therefore, how quickly can I turn my workforce over to purchase the right talent without spending a whole lot more money? Because for those who see the headline that it's falling on job cuts, as you mentioned, he did talk about adding 1,800 positions and engineering and so forth. So are the shares down because they're cutting jobs? Are they down because they're adding perhaps more expensive

roles? Well, we can't assume that the shares are down for a good reason. Right. Or for anything related to them. Sometimes the algos just do stuff. The AI. We'll have to see. John, thanks very much. Into it as mentioned, down 3% today. Let's turn to the bond market for a look at how yields are reacting. Today, two of Chair Powell's congressional testimony. Rick Santelli, what do you make of it? Well, there wasn't much volatility based on the chairman today or really yesterday. As a matter of fact, let's go back to last Friday. The day after the closure for the 4th of July. And look at 10-year note yields. Boy, they've really hung up. They're compressing, consolidating, and in front of inflation data, that shouldn't be shocking.

And if you look at a two year, very similar. So tens finding support above that four and a quarter level. Two's finding good support over the last several sessions, right above that four-60 level. Now, when we consider that equities are all green in front of inflation data and treasuries are basically hovering close to unchanged, it's pretty interesting. There doesn't seem to be a lot of fear in equity land of a high- inflation numbers. As a matter of fact, some of that partying going on in equities is probably due to the notion that whether you believe the percentages in Fed fund futures or not, they're certainly moving higher in terms of possibility of rate cuts.

And finally, if we look towards the foreign exchange part of the equation, the yen continues to be weak. As a matter of fact, if you look at a year-to-date of the dollar yen, and remember, the yen is 13.6% of the dollar index, the second heaviest weighting, the biggest weighting is the Euroj, just shy of 58%. Having said that, the dollar is up almost 15, 1, 5% against the yen

since the end of last year. That is a staggering percentage, and it really underscores that that export economy has weak currency, and at some point, they're going to have to most likely put more pressure on rates to the upside. John Fort, back to you.

We'll keep an eye on that. Rick Santelli, thank you. Now let's go to Contessa Brewer. She's got a CNBC News update. Contessa. John, Hollywood star and prolific Democratic fundraiser, George Clooney's joining calls for President Biden to drop out of the presidential race because of concerns over his age. Clooney made that plea today in a New York Times guest essay just weeks after co-hosting a multi-million dollar fundraiser for the president. Clooney wrote that the Joe Biden he was with last month was not the Joe Biden he knew in 2020. Police have arrested a man wanted in a crossbow

attack that killed the wife and two daughters of a BBC commentator. It took a serious manhunt to get him, though. Officers discovered the three victims at their home outside London last night. Police said they all died at the scene and that they think the man was known to the three women, but they've not released any other details. New York Congresswoman Alexandria Ocasio-Cortez officially introduced articles of impeachment today against conservative Supreme Court justices Clarence Thomas and Samuel Alito. She accuses the justices, of unchecked corruption that she says pose a threat to the American rule of law. Those articles, however, are extremely unlikely to make it out of the GOP controlled chamber.

That's the update. John, I'll send it back to you. Contessa, thank you. And still ahead. Battle of the Big Box Chains. Piper Sandler is bullish on one retail giant and not so much on the other. We will speak to the analyst behind those calls when Power Lunch returns. Welcome back to Power Lunch. We're talking retail halves and have-nots. Piper Sandler assuming coverage on Target with a neutral rating while having an overweight on Walmart.

Walmart, they say, is in the early stages of sustainable profit growth acceleration. Let's bring in Peter Keith, senior research analysts covering hard lines and leisure at Piper, and CBC retail reporter Melissa Repco, welcome to both of you. Peter, are you new on the Target beat, so to speak? I am, yeah. I grew up in Minnesota, but it's my first time covering Minnesota-based company in Target. Oh, that's so funny. And so what made you kind of look at this and call it a neutral, which I think was a break from the previous coverage of a little bit more positive?

Yeah, I mean, the target's kind of intriguing. The valuations fair at 15 times earnings. They've had kind of a tough go-out of the last two years. So it's kind of intriguing, but we just couldn't find that strong accelerant to earnings growth. And then even if we look out to 2025, we think they're a little bit disproportionately exposed to potential for tariffs. And then the CEO, Brian Cornell, has done a terrific job. He's been there over 10 years. Very likely to go through a CEO succession plan sometime in 2025. So that's an upcoming change. It just presents some uncertainty. And meanwhile, you're overweight on Walmart, which seems like a consensus call.

But I feel like with Walmart, the question is always why. You know, is it a consumer slowdown and trade-down story? Is it a story of advertising growth and accelerating, you know, profit opportunities in those kinds of areas? What do you think is the catalyst, right? Walmart. Well, no doubt they're very well positioned in the current economy. They're taking a lot of markets here. They're even attracting upper income consumers with some store remodels and the Omnichannel offering that they have that provides convenience. The thing that we focused on, however, is they are becoming more of a technology company, and they've developed five really

intriguing new revenue streams that are exceptionally high margin. In many ways, these are kind of comparable to what Amazon does when you think about supplier advertising or third-party market. marketplace. And so as these revenue drivers grow over the next five to 10 years, we think these are real accelerants to Walmart's growth outlook. Melissa, often when a company like Target is going through one of these tough periods where people have thought, oh, they're great, and then people think, oh, they're really not. People overestimate the weaknesses. Could that be happening here? That could be happening. I mean, I think it's been a tough period for Target, and they are, as Peter mentioned looking for that growth accelerant, it's not as obvious as it used to be. But for so long,

they were known for their Tarje magic, and they still are very good merchants. So if they come out with some fresh lines of discretionary merchandise as we get into back to school, the holiday season, their outlook could change quickly. Because I think about what Helen of Troy, Melissa was just saying, I mean, that stock way down. And those areas where Helen of Troy operates are very much the core target type stuff. And it makes me wonder, could this negative story be bottoming? It could be, but one thing that's important to remember is that they are behind when it comes to their grocery business. And Walmart's been stepping up its game, not only remodeling stores, but they also launched a new private label brand. And the brand looks an awful lot like targets.

And so Target really needs to come up with reasons to drive foot traffic and website traffic. And that hasn't been happening as consistently. Peter, what would you say about the rest of your coverage space as it relates to those two names? Well, certainly there's some signs of consumer slowing. What we think is happening is you've had this wallet share shift that's been pretty dramatic the last two years, last four years even. 2020 and 2021, everyone stayed home spent on goods. 22 and 23, everyone went out to restaurants and traveled. So I think there's a little bit of wallet share normalization that's happening, and that's where you're seeing some slowdown and some of the service-related spend.

Yeah, absolutely. It'll be an interesting period of time in the months to come for sure. Peter, thanks so much, Peter Keith. And Melissa, he mentioned how Walmart's looking in some ways more like Amazon. And you got a little glimpse of this. Yes, I did. So Walmart has been, Walmart is turning to robotics to get groceries and stores to stores and customers faster. The retailer said Wednesday that it will open five automated distribution centers for fresh food across the country. So far, it's open two of them in California and in Texas. I recently visited the retailer's new facility near Dallas. Inside, chilled and frozen items like strawberries and frozen chicken nuggets traveled on conveyor belts.

Machinery built dense pallets of products needed for stores, similar to a real-life jenga game, putting items like eggs that are fragile at the top. David Guzina, EVP of Walmart's supply chain, told me automation will help Walmart keep up as shoppers order more groceries online. He said the higher-tech facilities have twice as much storage and can handle more than two times the volume of traditional ones. This is all part of a broad automation push by the nation's largest retailer. Walmart's been adding its tech to fulfillment centers and some to the back of stores too. This is scary if you're looking at the economy of the Midwest and what a Walmart

distribution center can do for an entire county or even an entire network of counties. How many people did you see when you visited this place? Not that many. And they really have a completely different role. Dave Guzina of Walmart, who oversees their supply chain was saying, you know, in the past, they relied on what he called industrial athletes, people who picked up giant cases, walked multiple miles a day, and they're switching to people who have more tech-related jobs. They're dealing with a tablet. They're overseeing machinery.

It's a very different type of role, but worth noting, machines are doing a lot of the work rather than people. Industrial athletes. That's an expression to coin. Melissa, thanks very much. Thank you. Melissa Repco. Well, shares of HubSpot sinking intraday after Google reportedly giving up interest in bidding for the company.

Dea Jrabosa's back on the phone with more on the story. Hey, John, that's right. HubSpot shares, they're sinking down more than 10% on that Bloomberg report that Google Parade Alphabet has abandoned plans to purchase the company. The report says that the two companies never reached a point of detailed talks around due diligence, sites people familiar with the matter. We've reached out of Alphabet, I haven't heard back yet, potential acquisition talks, they started up in around April, confirmed later by CNBC, this would have been Google's largest acquisition ever at more than $30 billion, boosted its ability to compete against Microsoft

and offering cloud-based applications to customers. I would note, though, John and Kelly, that the stock didn't see a huge rise on those speculations that it could, that Google could acquire Hussbaugh, partly because of the regulatory environment. There was some skepticism that a deal could be done. And now we have this report that Google. has abandoned those plans back to you. Dear Drew, thanks very much. Dear Drewbosa, a hub spot down 11%. Coming up, the value of live sports.

We'll head to Sun Valley to hear from one of the biggest players in the media landscape about streaming rights, the Paris Olympics, and so much more. Power Lunch is back in a moment. Welcome back to Power Lunch. Some of the biggest names in tech and media getting together in Sun Valley, Idaho. We've got some news on NBA TV rights. According to the Athletic, NBA is finalizing TV. deals with ESPN, NBC, and Amazon, but TNT could still match.

Now are Julia Borsden sitting down with some of the big names and got one right now. Hey, Julia. Hey, John, that's right. I'm joined now by Casey Wasserman. He is chair of Olympics 2028, which is in my hometown of Los Angeles. Also, founder and CEO of Wasserman, which is a sports and media agency, long history in sports, also more recently in the business of music and entertainment as well. We have so much ground to cover, but I want to start first with his headline about the NBA.

Will Warner Discovery match the offers from Amazon or CNBC's parent company NBCUniversal? Where do you see these NBA rights going? And is it good or bad for the business? I think the deals are incredible for the business. The commissioner deserves a lot of credit for creating a set of partners to really triple the revenue for the league, to create a level of consistency and stability, access for customers and consumers of sports. where they want to see them, how they want to see them today. So I think that is a win.

Look, I'm not a lawyer, and I'm not going to pretend to decide what Warner Brothers' discovery is going to do. Two years ago, they said they didn't need the NBA. A match would be a very different message, and that's the decision they have to make. They certainly had a period of time like all the incumbents did to do a deal, and it didn't happen, and that creates opportunity for others to be competitive, and the NBA is a really desirable property. So for your athletes, you represent a lot of NBA athletes, Is it good to have some of these rights switch into Amazon?

Is the movement? Is the shift into streaming with some of these new streamers like venue launching this fall? Is that good or bad? Or it's the fragmentation confusing? Both. It's good from a revenue standpoint because obviously athletes participate in the gross of revenue of a league. It's hard because one of the things we've lost as consumers is the guide. You know, when you had a cable box or antenna or whatever, you knew where to find things.

And it's really challenging to find things. And I think it's one of the things the NBA is going to try and solve really through its property. How do you use the NBA app as the place to start your viewing experience? You end up at an NBC or an ESPN or an Amazon. But how do they become the guide, if you will, for all things NBA? And I think it's one of the things they're going to try and do really well as they move into this new deal. Fascinating. John, you want to jump in here?

I do. Thanks, Julia. Casey, I want to take a quick left turn here at college sports. And I know you've said a bit your thoughts about college football and the new. economy that's growing up around that, you know, it's a second most popular and most valuable sport out there. How is that, and the name image likeness deals that we've seen emerge over the past couple years changing the economics of this business? Well, the economics of college football are quite staggering, frankly, and the scale that they've grown in, and the speed of which

they've gone over the last three or four years. The name and image is likeness is actually a pretty small piece of it, just the consolidation of these conferences. But the real question, I think it's existential for college sports and as someone in charge of the Olympics in LA for American athletes, is college football state part of the system and actually use the incremental revenue that's generated by the excitement and the passion for college football to lift everybody else up, or does it break away and essentially keep all the revenue for itself? And we're at that inflection point. And look, I think there's a lot that's gotten better in college sports and a lot that's gotten worse. And the problem is there isn't someone with total control to fix all the problems.

And once you open Pandora's box, you better be careful. And so that's kind of where we are today. College football is incredibly powerful. I think it's got a lot more value than it's actually being paid for today. And I think that value can solve a lot of problems or create a lot of new problems that no one's thought about. Kelly? Very well said. Just a quick one, Casey, feel free to bat it away.

You are an influential fundraiser. and we just saw George Clutie saying that maybe President Biden needs to rethink the campaign. Just kind of give us the sense out there amongst the people that you talk to, is how do you think this gets resolved or what should take place here? Well, look, if you just think about human nature, telling someone they can't do something isn't usually a way to get them to do something. And so I start with that perspective. And the second thing I would say is, look, the president knows how to run a campaign,

knows what it takes to get elected, and knows what it takes to be. president and the burden is on him to say he to show that he can do that or he can't is not for anybody to tell him whether he's capable of that or not and so I think I think the campaign understands that they're clearly in the mindset today where they're going to try and show that he is capable of doing what he needs to do to run an effective campaign and give himself the chance to compete and win in November and continue as president and if he can do that he deserves the right and if he can't do that I'm sure he'd be the first to acknowledge it but I don't think it's because people are telling him what to do and when to do it but Casey the voices of

people, whether it's Nancy Pelosi or George Clooney, there's now more and more voices coming out and asking him to reconsider. You've hosted high-profile fundraisers. You've donated a lot of money. What is your message to him? Look, my message is the burden is on him. He's got to show that he's got what it takes. He knows. None of us have ever run or been president. He knows what it takes. And I think certainly there's a lot of noise. But if you kind of break through all the noise, I think a lot of is coming from fear. If you're a Democrat, you're fearful of losing and you want your best chance of winning. That doesn't mean we know what the answer is,

but it means we're fearful. I think the real question is, and I think the campaign understands us, the burden is on them to show he's capable of doing this. And I really do believe that if he didn't think he could, he will not do it. And if he thinks he can, he will stick in it. Well, certainly, an important one to watch this week

among a lot of conversations here in Sun Valley. Before we run out of time, we have to ask you about the Olympics. What are your expectations for the Paris Olympics? I know you're heading over there soon, and you're watching it as you prepare for your own Olympics. Do you think all the political unrest and upheaval in France right now is going to be problematic for the games? I hope not.

You know, the Olympics at its core is about bringing people together on a common playing field under a common set of rules, and frankly, for at least two weeks, putting all that to the side. And I hope the people of France embrace that. I hope the whole world embraces that. I hope Israeli and Iranian athletes compete. I hope Ukrainian and Russian athletes compete against each other. I hope we really show what the best of the world can be.

It's a complicated world and politics sit in the center of these things. And when you have an event as big as the Olympics, it's a great platform for politics to come in. But I certainly hope the people of France know that this is a good thing for the country. And whatever they think about their elections, the future of their country, that for these two weeks, it's about a much bigger thing than just that. We're out of time. The Olympics are big and costly. Are we ready for LA 2028?

L.A. 2020 is ready and excited. And, you know, we go from the batters deck to the home plate August 12th. Well, we'll be watching. Thanks so much. Casey Wasserman. Really appreciate your insight, especially with all this breaking news on the NBA. Guys, back over to you. We're going to try to go to that one.

The husband was an L.A. 84 guy. That's who's born. So maybe we can get back out there, bring it full circle. Anyway, we've got a lot of time between now and that. Julia, thanks for bringing that to us. Casey Wasserman, thank you as well. I hear watching on NBC is even better than being there. That's the real experience. Shares of Carvana are up more than 2,800% in the past months, 18 months, 2,800%. It's one of the biggest stock turnaround stories we've seen. And Needham says it's bullish on its potential to ride even higher from here, that and more, in three-stock lunch.

Next. Welcome back, time for three-stock lunch, and today we have three-stocks on the move on analyst calls. Here with our trades as David Wagner, portfolio manager and aptist capital advisors. Dave, welcome back. And let's start with MasterCard, getting a downgrade from B of A to neutral from by today. And it's on pace for its lowest close since January, a bit of a stumble lately for these two. I won't call them the duopoly. Anyway, what would you do with MasterCard? Yeah, hey, Kelly.

Even though the downgrade that happened to A, I'm still positive on the network's, you know, MasterCard and Visa. Because I'll tell you this, like Visa and MasterCard, they're basically just different flavors of vanilla. And for both these names, I'm really just focusing on growth over the next three to five years, but I still need to hear a lot from the management teams to remain convicted in these names, you know, moving into the future. Obviously, MasterCard has benefited from the cashed card conversion cycle, but we all know that that cycles in the later inning. So what's the growth driver really into the future? And it's probably to come from the value-aditive services side like identity theft, security, and analytical pieces. But investors just are unsure of the margins.

in this vertical. And more importantly, does it have the moat like the core card network had in their previous business? And that's what I want to hear from the manager teams to get more comfortable. And if this, you know, long-term mid-team growth that we've been accustomed to is going to be viable in the future. But obviously, I'm long here. So I do believe in the story. Next up, Carvana getting an upgrade from Needham from Hold to Buy, calling the company a secular growth story, shares of Carvana on the rise today, up nearly 150 percent this year. What's your trade, David, on Carvana? I mean, John, like, what an absolute wild turnaround story here.

I mean, just a year ago, people were calling for the company to go bankrupt. Saleside had price targets of $1. But not only that, fundamentally, like the company wasn't buying cars. They weren't spending money on advertising. So there's a big question about growth moving forward in the future, but also their ability to meet their debt obligations. Well, fast forward a year to today, like they're increasing the supply of their cars to meet demand. and then they just turned the water spigot back on from an advertising perspective.

I mean, they've just grown over the last year in more of a cost-conscious manner. I mean, they're focusing on maintaining levels of EBITDA and adjusted gross profit per unit. And the market absolutely loves it. That's why it's up 144% this year. And that, you know, with that growth means that, you know, debt really isn't a worry anymore. But if you listen to the earnings call, like Ernie Garcia, the CEO, like, he's absolutely juiced up right now. And I can't blame them, given the progress that the company's had over the last.

last year, like $1 billion of free cash flow. But as juiced up as I am right now, I'm on the sidelines given the year to date run and the valuation. Juiced up. Dave, thanks. We appreciate it. Dave, Wagner. We'll be right back. Welcome back. Let's get you a quick check on markets. What's the saying stocks go up? That's the mood lately. It's not only the S&P and NASDAQ, which continue to hit record highs day after day. Today, the Dow is participating up 237 points. Apple's part of that story. It's been hire every day in July of seven straight days, John, seven straight record closes if it holds in the green today. Remember when Nvidia was ahead of, it's just a horse race there at the three

plus trillion dollar. It's hard for me to say, trillion dollar level, but lots of questions on what sustains this market. Software's been having a hard time semiconductors X, Nvidia, AMD, Broadcom has been a mixed bag. Right. And the consumer weakness that we've been talking about, But nevertheless, the Fed rate cuts may be helping propel that next leg. Steve Off at Federate Hermits just sent me his outlook. He's moving back to maybe, you know, lean out of some of those big market cap names. Rates go down maybe now. Thanks for watching Power Lunch.

We'll see in a little bit. Closing bell starts right now.