Power Lunch - Rising Global Bond Yields, New Apple CEO, Memory Trade’s Momentum 9/1/26

Episode Date: September 1, 2026

Stocks are falling to begin September as inflation worries and elevated oil prices lift bond yields in the U.S. and abroad. Dominic Chu and Kelly Evans sit down with Northern Trust Asset Management’s Joe Tanious to break down the move in global bond yields and whether it will influence the Federal Reserve to raise interest rates at this month’s meeting. After more than 15 years at the helm, Tim Cook is stepping down as Apple’s CEO and John Ternus is succeeding him in the role. Patrick McGee, author of “Apple in China,” joins the program to recap some of the key milestones from Cook’s tenure and lay out his predictions for Ternus’ era. Later on, Roundhill Investment’s Drew Pettit comes on to discuss the memory trade’s recent run and what the rest of the year might have in store for semiconductor investors. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Bond market volatility is weighing today as tensions re-escalate in Iran. Welcome to Power Lunch. I'm Kelly Evans alongside Dominic Chu. Brian Sullivan is on assignment. The question for investors can strong earnings and the resurgence of the tech trade overcome some of these market headwinds. We'll ask Northern Trust's chief investment officer Joe Tanya. Sitting right to my left right now. Plus a new era at Apple, John Ternis, takes over as CEO succeeding Tim Cook

after a transformative 15-year run. What will investors demand from Apple's next leader? And earnings, of course, on deck. Dell and Palo Alto networks both reporting with both stocks up triple digits over the past six months. Those expectations, believe it or not, yes, they are high, and we've got you covered from all angles. Kelly. Let's begin with this Treasury market scare. Stocks are lower as global yields jump just 13 days after Treasury stepped in to support the bond market or try to cap those longer-term rates.

The U.S. 10-year hitting its highest level since January of 2025. And yes, this move in part is happening and spreading and prompted by these moves overseas. Italian and Spanish yields, three-year highs. Japan's tenure touched 3% for the first time. That's the highest level since 1996. Our next guest isn't panicking yet. He still likes risk assets, says investors should keep buying. Joining us now is Joe Tannius, the chief investment officer at Northern Trust Asset Management.

Joe, it's good to see you. Great to be there. We were talking to Barry Knapp last hour who thinks that Warsh is going to hike in September. He thinks that would be a mistake and that this could all now cascade into this typical September kind of swoon that we often experience. So with all of this in mind, how would you be thinking about things? Well, let's just separate a couple things. There's what we believe Warsh might do, right? And there's what we believe Warsh and the FOMC should do, because those are not necessarily one and the same. You know, we've heard very clearly from Warsh. We kind of want to

move away from Fed guidance, forward guidance, focus on the data. He also talked quite a bit, about inflation focusing on that 2% target right for PCE. And the market has interpreted that as being somewhat hawkish, understandably. Now you're faced with a bit of a credibility issue. Let me start with the, and I know you're going with this, but so do you think he is going to hike? I think right now it's a coin toss. It's 50-50. I think the market has that right as far as what's priced in.

Because if he doesn't, it's a credibility issue. It's a credibility issue. Unless you get some really encouraging inflationary data between now and the next Fed meeting, I think they're effectively being pushed into hiking. Now, should they actually hike is a whole other conversation. Let's talk about that piece. And I know this is not where you wear your hat. But I do want to know what do you think they should do right now?

What would be appropriate? I think my perspective, I would be on hold. Think about the inflationary pressure that we're seeing today. Let's be clear. It is a little sticky, right? We know this. We know this. Long-term inflation expectations, fortunately, remain anchored.

But what's been driving this inflationary pressure? It's been tariffs, which are rolling off. And of course, it's been higher energy prices. And we continue to believe the worst of that shock is behind us. So ask yourself, what is hiking interest rates? What is tightening monetary policy going to do in this environment? What is it potentially going to do to the housing market? What is it going to do to the consumer, which is already facing a bit of an affordability issue?

I'm just not so sure it makes sense, especially when you think about inflation expectations. You think about the forecast for inflation in 2027, consensus is really expecting that to come back down. I'm not so sure it makes a lot of sense. You know, it's interesting as well because, you know, I got a message from a hedge fund source of mine, and he says that there's all this increasing chatter to your point, coin toss about whether they go, you know, a raise, 25 basis points, one quarter of 1%. But he goes, he's also hearing more chatter that if they go 25, there's equally amount of, equally amount of chatter about them going 50. If they're going to raise, just do it by 50 and not necessarily the 25. I wonder if that's something that you think the markets may be coming more around towards at this point.

I don't think that's going to happen if I'm really just taking what Kevin Warsh has been saying at face value. He's saying, don't listen to the Fed. Look at the data. If I were interpreting his messaging, I would believe perhaps they hike 25 basis points and just see what happens with inflation and with inflation expectations. Now, to the extent the next meeting comes around and they don't believe that inflation is contained, then perhaps they hike another 25 basis points. But again, I ask to what point? What good is that actually going to do? Yeah, go ahead.

Yeah, I was going to say, let's bring in Rick Santelli because I know he's probably got some thoughts on this right now with our bond report. Rick, you're hearing this conversation with Joe Tanya and Kelly and I. The rate hike isn't really a coin toss? And if so, how exactly are we going to play things out with regard to whether or not the markets have it right right now? Well, I think with regard to the markets, they always have it right, Dom, because if you close out your position, you do get a check for exactly the price you closed it out at. In terms of a coin toss, if it was today, the CME is. 65 and a half percent, 66 percent, they would go, they would do a quarter today if the meeting was today. In my opinion, not a coin toss. And the reason I feel so confident about that is with no

forward guidance and with the notion that the best way to keep up with what the Fed may or may not do is to watch the data, pay attention to the market, and listen to wars. It might not be forward guidance, but there will be some form of communication just like in Jackson Hole. And, in my opinion, going against the 66% he is going to sever one of the only linkages that is really top drawer with regard to the Fed in the market

and that's Fed Fund Futures probabilities. They're pretty much always spot on. They always dovetail with what the Fed does and there's kind of a back and forth between the markets and the Fed. Without guidance this is going to be a bit different. That's why I don't think they go against it. Now if it's

50% or 55% or lower on the day of the meeting, then I really do think it's a coin toss. In terms of what the market's doing, the last word I would use is panicking. Just because they're going up fast doesn't mean it's a panic. You know what I think? I think that in the U.S., our rates are tame compared to where they should be based on history. This is a normalization from a highly manipulated decade where we were at zero interest rates in countries, negative interest rates in countries, and we kept ours at virtually zero way, way, way too long. To think we're still under 5% with the debt and deficits we have,

to me, is kind of amazing. And the worst behind us, $90 oil in Chapter 2 that I ran conflict. Right now, to me, and I'm always an optimist, it looks like I can't see any good end in sight the way I could when we're on Chapter 1 in the Gulf crisis. So to me, there's a lot of of moving parts here. And I think that interest rates are going to continue to go up. And when it comes to mortgages, we have the best mortgage reporter in the business in the form of Diana. But I would question the notion that even though these rates are high, because the government screwed things up, keeping them too low and basically souring the well on the housing market, there have been decades in the past where these rates weren't that horrible.

The biggest issue is affordability. Rick, the manipulation is happening now. Correct me if I'm wrong about this timeline. How, how, how, how is it manipulated now? Let's go back to October of 20. With the repurchase, okay, October of 23, we hit 5% on the 10 year, and Yellen announces they're going to start doing these repurchases, okay? We're now going back to 5%.

Besson has doubled down on her repurchases, and the market's completely... Double down? Yes, he's doubled the size of her repurchases. Double down? Their programs were bigger. He literally is doubling it the size. To what effect? Why are we spending this money for no...

So would the tenure be higher now and the 30-year higher if he hadn't made this announcement? You know what? I give the Treasury Secretary credit for trying anything to help what the Fed is screwed up with regard to the 10-year yield, long-term yields, and housing. We all want housing to come back. The Treasury Secretary's putting his best foot forward. Believe me, in the category of manipulation, he's a disqualification. he's a distant fourth place based on all his predecessors.

We're rising the charts. I don't know why. We're going to look at Japan and go look at everything they did and all of these ill-fated moves to try to keep yields low that are blowing up in their face now. And we go, you know, why don't we try the same thing? Forget trying to actually fix the deficits, you know. We're not trying anything near the same thing.

It's not even, we're not even in the same zip code as what's going on in Japan. They're like 240% of debt to GDP. You know, if we take it. public debt and move the categories here, we're either at 100% or 120% which isn't good. And to take it a step farther, the Japanese have a unique situation. Most of their debt was owned internally. They didn't have other countries holding their debt.

We are heading that way. We are literally 20 years behind. We are the exact same way. We used to have foreign ownership of our debt. If we're the exact same way, why are we at 479? We should be at 779. That's the worry. The markets are orderly.

They're going up because they've been going up because debt's going up. To put a panic stamp on this is wrong. Joe jumped in here. Okay, all right. So I can't necessarily. Jump in, Joe. I'm jumping in. I'm jumping in.

I'm going to agree that I'm not going to criticize Bess. I'm not going to criticize Warsh. I don't believe either the Treasury Secretary or the chair of the Fed can have a meaningful impact on the level of interest rates. I think interest rates today, if you look at the bond market, are driven by the underlying fundamentals. It's happening around the world. They could have done nothing.

They could have done nothing. Just wait for investors to buy it as it goes to five or five and a half. But they're the ones who panic. But I guess I don't know that any of their comments, any of that narrative is really going to change the outcome. This is happening around the world as a result of a fragmented global economy, increased defense spending, more onshoreing, which is creating some inflationary pressure.

You now have the private sector, think of all this AI CAPEX that is competing if you will, with the public sector in terms of access for that same pool of capital. That is pushing up interest rates. And just take a look at our deficit and take a look at debt levels in the United States if we just focus in on the U.S. Interest spending today on our debt takes up a greater share of our budget than defense spending. And when you look at the Congressional Budget Office's forecast, it doesn't appear to be changing. All of these fundamentals suggest that interest rates are probably going to keep moving a little bit higher,

regardless of what worse. And they clearly don't like that. They're panicking. So we've now heard Besson directly intervening to try and bring long-term rates down. And as Barry suggested last hour, Warsh is going to hike to try to get long-term rates down, both of which might be policy errors. I'm not going to call those panics. I'm going to call those reactions to what they're seeing take place and they're doing what they can within their power. I do, however, continue to believe that as investors, if you focus on the underlying fundamentals, even if interest rates move up a little bit higher, it's not necessarily going to stop the earnings. it's not going to stop economic growth, at least not at these levels.

And it hasn't. And it hasn't, right? To Rick's point, we've seen this kind of, I would call it gradual. I mean, yes, it's a big move to go half a percent higher in the course of these past several months, but it's still 425 to 475, 480 in not some crazy roller coaster fashion. And by the way, if it was, we are not seeing any kind of real fall through, follow through from the equity markets or any other markets. That's why I'm saying it's the Treasury who panic. The markets actually, yes, it's going higher, but it was orderly.

It's not a big deal. I just think it's interesting because for somebody who doesn't want forward guidance in the Fed markets right now, the Treasury Secretary is giving a lot of forward guidance on what they're going to do on the executive branch side of things. Rick, last word. Yeah, Treasury Secretary didn't say anything about forward guidance. What he says has had no bearing. If there was no announcement by Besson on the 18th, the market would be exactly where it is, in my opinion. And Kelly, if you really, really want an antagonist to point your finger at, why don't you pick any one of the 435 people that are in Congress or the other 100 that are in the Senate or the two that are in the White House because this is a fiscal issue that's spending. It isn't Besson's fault.

But Rick, let me put it this way. Do you and I both agree that the level of yields here is not actually that? No, the level is not that big of a deal. They're the ones who are panicking. That's what I'm saying. I don't see where you get the word panic. Why did Besson panic? He just doubled his intervention in the markets with a press release. He's the Treasury Secretary. He's awake, unlike previous secretaries.

I think it's fine what he's doing. He is telling us he's paying attention. And as our guests pointed out, if that announcement is enough to make you panic, it's not enough to move the needle in the treasuries so it doesn't relate. I don't want to go the way of Japan. Anyway, Rick, thank you. appreciate it. Thank you as well.

Joe, thank you as well. Appreciate you being here. All right, guys, we're just getting started. Really, we're just getting started here on Power Lunch. We've got a big hour still ahead, full of more conversations. Maybe not as much controversy. But the Bank of America analysts who just hiked Microsoft's price target, 20% is coming up. Plus, remembering the memory trade.

Those names hit hard lately, but having some massive years. So where does the memory trade go next? But first, it's John Turnis's. Turn. First day is Apple CEO, how will that handoff go from Tim Cook to Mr. Turnus? All of those things and more coming up. Stay with us. We're back after this break. All right. So welcome back. A new era for Apple and a high stakes handoff for investors as well. John Turnus takes the reins over from Tim Cook, who leaves behind a remarkable 2,300% gain in Apple shares over the 15-year tenure he had his chief executive. But the next CEO inherits a very different set of challenges.

We're talking about things like China exposure, a more fragmented and expensive supply chain, and the race to prove that Apple can actually lead in artificial intelligence. Our next guest is the author of the New York Times bestseller, Apple in China, the capture of the world's greatest company. We are speaking to Patrick McGee. He joins us now from San Francisco with the story on Apple. Patrick, thank you so much for being with us here. This story between Cook to Ternis is one that may or may not be,

that much more similar to Steve Jobs to Tim Cook? In what ways will they be similar? And in what ways could they really be very different from each other? I think wildly different to the point of contrasting them is the only thing you could do. I don't know that there's much comparison. I mean, you know, Steve Jobs was probably the greatest product visionary of the last hundred years. When he passed away and Tim Cook had to take over, I mean, share price went down. nobody really had any hopes that Tim Cook could fill his shoes.

And in a certain sense, in the narrow way that people were thinking of, he didn't. He's not a product guy. Instead, he took Apple in a different direction, and I think it's the direction that Steve Jobs set out for him, which was to become an operational powerhouse to distribute iPhones and other products to something like 160 countries around the world and really expand Apple's presence everywhere. And after a few years, he then expanded into services. So Apple became a predictable company, you know, a dependable company. company. It's sort of a utility in a certain sense, right? I mean, it's pretty obvious that people

with iPhones are going to replace them after two or three years. So he very much de-risked the company while making it much, much larger. I think John Turnus has an incredibly different set of challenges. Trying to risk was one, and we can talk about it. And of course, AI, to what extent Apple's ahead, to what extent they're behind, is going to be a major, major story. But just to put one fine point on it, I think this is going to be a really smooth transition. Tim Cook hasn't died, right? He's going to be the executive chairman. So the one thing that we don't know about John Ternis is that he's really untested as a CEO. He spent half of his life, 25 years at Apple, but he's not sort of doing a trial by fire experiment. Tim Cook is going to be guiding him whenever

he needs it. It's no doubt that hardware continues to be the driving force behind kind of Apple's monetary and financial results. But there are those who will argue, and some effectively, that Tim Cook's lasting mark on Apple will be that growth of the services business, as you point out, to kind of better diversify the portfolio. Tim Cook remains as executive chairman. John Ternis is a hardware guy. Is the product portfolio evolving in the right way that can maybe position itself

to sustain some of those challenges on the China front, on the supply chain front, in the coming quarters? Let me carve out China. I would say, take the China thing out of the equation and I would be wildly bullish about Apple, just in the sense that our generation is basically 50-50 split between Android

and iOS, if you talk to high schoolers or look at surveys of high schoolers, it's more like eight at a ten, nine out of ten in favor of iOS. I think when those kids go to college, it's not going to be thinking what kind of headphones should I get. It's going to be what kind of AirPods should I get. They're not thinking what sort of computer should I get. It's going to be what kind of Mac, what kind of laptop, or sorry, what kind of MacBook, right? So I sort of see Apple stealing a march in multiple geographies over and over again, sort of taking share away from Android or or Windows. And so, you know, Apple's this predictable, steady accretion company. And once you're in the Apple ecosystem, you basically don't leave. What John Turnus could hopefully bring to the table

is a little more product pizzazz. And maybe he'll get that chance next week with the iPhone folds next, I think what's that Wednesday? You know, Apple in good ways has been de-risked, but it's also been de-risk in kind of bad ways. When was the last time a sort of really sexy products came out that really took a chance on something. I suppose you could say the Vision Pro, but unfortunately it's a failure. And the Apple car was 10 years in the making and then it got abandoned. I have to say, I do like Tim Cook's quote on that, which is we like to fail internally. But I want to see Apple take chances in a way that they really didn't do under Tim Cook. What is that, you know, it's funny because that might make people nervous, Patrick, to say,

well, yeah, those are exactly, yeah, quick last word. Well, I want Apple to be a company that makes people nervous with what they do. Right? Like, there's something good about unpredictability. And that's just not Tim Cook. I'm not saying that's a bad thing. It's just that, like, if you're a journalist or an Apple fan, you sort of want to be odd and surprised, right? The whole Steve Jobs era was one more thing.

And then he would sort of, you know, boggle your mind with what Apple had been doing over the last three years that nobody knew about. I think we've lost a little bit of that magic at Apple under Tim Cook. and I would love to see it come back under John Turnus. The Colombo move. Who doesn't love that? Well, I guess if you were the guy he's interrogating. Patrick, thanks very much. Good to see you today.

Thanks, Kelly. Patrick McGee. Speaking of Apple, we're seeing some options action, not just because the company has a new CEO, of course. Oliver Reddick joins us live from Chicago. Oliver, what are you seeing? Some stuff that actually dovetails perfectly into both those conversations, Apple as a utility and also maybe a replacement to bonds, guys.

It's been doing something interesting over the last. last several months, which has been the opposite, basically, of what the broader tech trade does. That's been happening since mid-July, and the stock's correlation to the NASDAQ 100 flipped from positive to negative, and is right now at a correlation of negative.8 with the cues. That creates a lot of unique trading opportunities, and the options the market is saying it's sustainable. Today, more than twice as many calls are trading than puts in Apple, with traders buying over 475,000 calls versus just 170,000 puts. and it's happening on twice the average 30-day volume.

Apple's trading more options than any other stock today with over $650 million in premium and almost $300 million of that initiated by call buyers. Some of the most aggressive action we see is in the 330 strike call expiring tomorrow. Traders there are taking out 75 cent bets that Apple can post a back-to-back 2% rally tomorrow. Nice session for them today, that's for sure.

Oliver, thanks. Major momentum coming from Microsoft. We'll talk to the analyst who raised his price target to 600 today. It's at 501 right now. And why he thinks this mega cap is getting ready to run. It's been a bumpy few months for the mega cap names, like Alphabet, the stock coming off its fourth straight monthly decline, which is its longest losing streak since 2015. And it's not the only one. Invidia, Amazon, Meta, and Tesla have also been kind of dead money over the past three months.

Apple has been a bright spot up 6% over the same stretch. But one Mag 7 name has pulled ahead. It's Microsoft, the group's top performer over the past three months, up about 8 or 9%. Still, it's up just 3% for the year, and it's lagging the broader S&P. Our next guest just raises price target to $600, 20% upside from here. Taliani is the senior software analyst at Bank of America. Tal, it's great to have you here. Why the upgrade today?

I increase the price objective because I think investors are still or are slowly getting into the understanding of how Microsoft is differentiating itself in the space of AI. Early in the year, they thought they're competing with Anthropic or OpenAI. And we've been saying and we continue to say that Microsoft is innovating on top of Anthropic and Open AI. Microsoft is providing customers with a unique service that cannot be provided by others. So you're focusing on kind of the cloud aspect, I get, because on the more product side, I consider myself to be entering my agentic era, Tile.

I don't know if you've messed around with AI agents. I'm dabbling with things like Gemini Spark. Copilot can't match that for my functionality. I actually wish that I could set up Outlook with the same kinds of commands and prompts, but I did as much as I could with it. I can't get it to go anywhere. So does that matter? It matters, but I'm going to, with a smile, I'm going to tell you you're wrong with a comparison.

Microsoft is not trying to replace Anthropic, Chad, ChiPT, Gemma, and I. It is trying to provide enterprises with a very secure and control environment to deploy AI. Think about it this way. Number one, you want the service to be controlled. You don't want it to be the Wild Wide West. And Microsoft is providing the platform, the architecture for a controlled service. Number two, you don't need to use the most expensive service. Tokens are expensive. And if for every task you're going to use the most expensive service, you're going to run out of token budgets very quickly. What Microsoft is offering is basically an orchestration layer. It's a platform, co-pilot is a platform, that beneath it you have either Microsoft's own AI applications or

external applications. And take, for example, the Microsoft Code 1, it reduces the cost. It can reduce the cost by as much as 85% for specific tasks. So if you're staying within the framework of Excel and PowerPoint and Dynamics 365 and the Microsoft application, you know, it's a lot of, you applications, the value of Microsoft is not by providing the most expensive and the most advanced platform. The value is providing exactly what you need for substantial cost versus the competition. Tal, it's Dom here. The way I've heard it also described is that it's almost like Microsoft is a Michelin-starred restaurant. They're able to take all of these different ingredients, all of these different inputs that they either grow themselves or get from elsewhere,

combine them for something palatable and saleable to customers. Is there a reason why, though, that stock has not exactly been the performer that it has been over the course of the past year? It's pretty much flat. What are investors not appreciating that you are saying that they now should appreciate and will to the tune of $600 per share? Yes, that has been the case throughout the software industry, enterprise software industry. 2025 was the trade of AI.

Stocks went up, Microsoft went up because it was providing an access or a window into OpenAI. 26, we started with a big concern that the AI modules, the independent anthropics and the chat GPTs of the world, will replace enterprise software and Microsoft traded down with it. Investors thought that it is competing head-on with the Open AIs and Anthropics of the world. The back end of this year, meaning the last few months, you see growing understanding of Microsoft strategy, and this is why we're increasing the price objective. This is why the stock has been working over the last few weeks, because if you look at the numbers, just the numbers they're reported, 84% increase in RPO, doubling the co-pilot seats,

quarter of a quarter. The growth is accelerating. Azure growth was 39% last quarter, 43% this. quarter and they're guiding to 45%. So there is growing understanding, and that has been the case of the last few weeks. There is growing understanding that Microsoft is not competing with the other AI labs. It is actually providing unique service within the office environment. Okay. Tal Liani, at Bank of America with a new $600 price objective on Microsoft shares. Thank you very much. We'll see you soon, sir. Thank you. All right. Well, here's something that caught our eye today. Dyson, the vacuum

cleaner company, just unveiled an AI, yes, AI powered toothbrush. That's what you're seeing right there. It uses a camera to target the spaces in between your teeth, blasting them with water, water pick style, as you brush. In other words, it's designed to do the flossing for you while you are brushing. But the cost is $499 per piece. So would you actually buy it at $500? That's the question we ask in today's power pole, scan that QR's code on your screen or go to the power lunch account on X to vote. We'll reveal those results at the end of this show. And it's one of the most volatile, but also one of the most profitable trades in the

market right now. That's the memory side of things. The state of NAND and DRAM coming up next. Keep it right here. Welcome back to Power Lunch. Names like Sandisk, Micron, Western Digital, and Seagate have all more than doubled so far this year. Sandisk is even up more than 500 percent.

But lots of those memory names are. in bare market territory now, a wild ride. Let's bring in Drew Pettit. He's the chief investment strategist at Round Hill Investments. They run the DRAM, the DRAM, the DRAM, which is doubled since its inception in April, but is now down 30% from its record high since inception. So, Drew, what exactly in your mind is the state of that DRAM memory trade overall right now? And is it something that investors can still buy into or feel like they need to wait for a real flush out?

Look, I think you're starting to see a lot of stabilization in the price action of late, which is healthy, because we've had a really aggressive sentiment reset for a lot of high beta trades, not just memory. And then when you think about the state fundamentally, I would say it's actually better than it was at the peak before. We still have contract prices moving higher. Estimates, I would say, for compute looking out to 2030 and the revenue there, you're looking at 3x where we are now. So fundamentally set up's better. we've had a pullback in stabilization, it's a good time to put some money to work in secular themes. Is there something that investors should be more wary of, given the dynamic, not just in the U.S. players,

but increasingly so with some of the external players across the Pacific, especially in South Korea. There's a fear maybe that overcapacity in the coming years could be an issue. Many of these stocks still trade at very small relative price to earnings multiples compared with other semiconductor stocks. They're wondering if it's justified or not. So let's get away from the P.E.'s a little bit. It gets a bit messy because we've had such a big move in the E. When you look at what the group is really pricing in, you're looking at earnings estimates or, I would say,

embedded growth expectations that are about 30% for the next five years, annualized, so compounding. When you look at the street estimates, the fundamental side of it, we think we can hit 35 plus percent. So the valuation, forget the PE, when we think about the DCF, it actually makes a lot of sense right here. I would think about the trade that way, and then the multiples will really just follow suit as long as we can hit those long-run growth estimates. I mean, broadly, Drew, what does that mean for seasonally September 1, not off to a great start for a tricky month here? It's a really good time to add to these on pullbacks.

At the end of the day, as long as long run estimates for earnings keep moving higher, which they have for the Korea names, for the U.S. names big and small. As long as they keep pushing higher, that fundamental setup is supportive for a longer term kind of bull market, especially in the growth trades. It's not these cyclical concerns around rates, which you definitely had to argue at the beginning of the show, that are going to hurt the earnings estimates here. I think it's a really good place to hide out, especially if you want to. want to buy some risk. Now, thematically, Roundhill is known for deploying thematic ETFs. DRAM is a theme within semiconductors. From a strategist standpoint, is it the real theme that's going to have the most upside or are there other themes that you're tracking right now that could be poised for some outperformance relative to what you're seeing even from a DRAM?

I would say the general theme outside of just memory is going to be bottlenecks in the AI supply chain. So you see that in Neocloud, you can see that in photonics, you can see that in a few different places. But the key to buying the bottlenecks is knowing that end demand is still there. I think Nvidia commentary last week was huge. They basically told you, yeah, we know these bottlenecks exist. It kind of hurts how much we can deliver, but it's still there. It's not killing demand.

So as long as demand for an end theme is still strong, you can buy the bottlenecks where there's pricing power. Real quickly then, Drew, where do you come down on? I mean, and how much is that part of the market narrative here? Look, I think it's massive. It's funny, I would say, oil got headlines yesterday. You can talk about oil volatility moving higher as well. But at the end of the day, rates are the biggest risk to risk assets right now.

I think the sensitivity is relatively high. And when you look at the hedging for higher rates, that's priced into something like move, it's still pretty low. So there's some surprise risk there. I don't think the market is fully prepared for rates to break extremely higher, and that's not good for high beta. So short term, a little bit of a headwind on rates, but longer term, you get the tailwind in the fundamentals. All right, Drew Pettit, good to see you. Thanks today. Roundhill investments now.

Let's get over to Contessa Brewer for the CNBC News Update. Contessa? Hi there, Kelly. The House of Representatives this afternoon passed a continuing resolution to keep the government funded through the midterm elections. The Senate passed the legislation last month. If approved, the bill funds the government until December 11th, but of course the president has to sign that. The German government today blamed Russia from an attempted attack at the Leipzig airport last month. A drone filled with explosives was found near a Ukrainian plane but was later diffused.

But as a result of the allegations, the German government says, it's closing the Russian consulate in Bonn and shutting down a Russian cultural center in Berlin. And Republicans are reportedly planning to raise millions during their midterm convention in doubt. Dallas next week. According to invitations to two fundraising events seen by the Wall Street Journal, the Republican National Committee is offering up a roundtable with the president at a cost of $250,000 per person and a photo op with him for more than $88,000. A lot of money. Kelly. $250K for direct access. $88,000 for a photo. Yeah, I might have thought it was higher. Contessa, thank you. Palo Alto Networks reports after the And Bell and our next guest has a trade to protect against some short-term turmoil he's expecting in that stock.

That's next. Welcome back to Power Lunch with markets now at the Dow. And session lows off 483 points. Our market navigator segment today is all about quarterly results from Palo Alto networks after the closing belt. The company has beaten analyst estimates for revenue for 11 straight quarters, but the stock has dropped after four of its last five earnings reports. So what should traders and investors expect today? joining us now from the CBO is Brian Stutland. He's portfolio manager at Equity Armour Investments. Let's talk about Palo Alto networks and the price section that we've seen.

Cybersecurity has been a hot trade for the last few months right now, but Palo Alto could be a big test. What are you expecting? Yeah, that trade has been hot. Crowdstrike, when they reported earnings, the stock moved to all-time highs. We're seeing that back off today as well. But certainly some heightened levels of volatility as we head into their earnings play. We saw traders actually sort of trading a big wing risk move after earnings for Palo Alto here. Normally it moves about 8% after earnings, but traders playing for like a 10 or 11% move. So I have some concerns.

You saw the chart how well it's moved to the upside. I have a little bit of concern that I would want to be protecting some of my downside risk here. I own the stock for clients, and certainly I like it. I'm still trading the momentum to the upside to all the cybersecurity here. But certainly some downside risk might exist as we get out of this earnings. call later tonight. It sure sounds like with that downside risk, you want to protect some of those client positions. So how exactly would you use options and their relative prices and values right now to your advantage in buying that downside insurance? Yeah, I mean, option prices are always

kind of elevated into earnings. And so I'm going to use a put spread to sort of limit my outlay of capital here. Buying the 350 put, 340 put expiring in September in a couple weeks, September 18th and selling the 315 put. I only net earlier today was trading for about $7. That might be a little bit higher now. But my reward here is if the stock does go down, I pay out three to one profitability here of $18 on the trade because this is a $25-wide put spread.

It gives me some level of protection in case things aren't so rosy on this earnings call here on Palo Alto. But certainly I still like owning the stock. This has been a great trade for me on some of these techy kind of names when I look at a trend channel like you're seeing here. where maybe it kind of could break that trend channel. I get my protection by the put spread, but I get to continue to hold my long stock position for clients

and still get to play to the upside. Just be a little bit cautious ahead of this earnings. It's, you know, PE multiples here, over 90 for this stock. It's got you a little concern. We got to, they got a hit big time tonight. All right, so buying some downside protection for cheaper. Brian Stutland, thank you very much for that. We appreciate it.

And be sure to tune into Mad Money tonight where Palo Alto's network CEO, Nikesha Rora, will join our own Jim Kramer for an extended conversation on the heels of its earnings report, Kelly. Dom, thank you very much. Coming up, dude, you're getting the Dell. Earnings report, after the bell, that is. One of the most bullish analysts on the street joins us after the break with what to watch for as the shares sell off about 6% in its anticipation.

We'll be right back. Dell reports after the bell tonight after climbing nearly 250% this year. investors will certainly be watching closely. Let's bring in Medi Hussaini. He's the senior analyst at Susquehanna with the highest price target on the street, Medi. It's good to see you. $700 for Dell. How do you get there?

Yes, simple. It's two times enterprise value based on revenue estimates in fiscal year 28. Keep in mind, Dell dominates enterprise and neoclass service providers. And as we go from AI training to AI inferencing, these customers have no choice but to pay a premium for Dell's servers and storage as they deploy AI on-prem for inferencing. So you have no concern. The shares are selling off today about 6%. They kept on a little bit more sideways the past couple of months. I mean, this is on a little bit, still higher. Why do you think investors are concerned? Just profit-taking? Yeah, right now, bad news is good news or bad news is in favor.

or in fashion, look at the semi, semis are down a lot. In the previous segment, you're talking about DRM index, is down 30-some percent. And I think that has more to do with, is summer, is negativity, it's commonplace, and nobody is really building new position. So as we roll into the post-Labor Day, I think earning power for some of these key enableers like Dell would be more focused. And I think names like Dell should be able to output. continue to outperform.

Maybe it's Dom, if you take a look at the reasons why we care so much about this Dell dynamic, it is because it has become one of the more direct plays on artificial intelligence. But is it, in your mind, the best way to play that kind of neocloud trend that we are seeing? Are there other places that prevent better value given the price action? Dell's been decently high over the course of the last several months? I think Dell is definitely a bellwether and a key enabler for these. enterprises and new class service providers that invest for inferencing and we're talking about this with Kelly a couple of months ago and I said let's wait for

till late summer actually memory or micro could also be very interesting micron has a pricing power they sell more expensive DRAM to Dell and Dell turns around and sell more expensive as storage and server to enterprise customers so you have these two players that well positioned into the post-lab and they both offer attractive rich reward profile. All right. Medi Hoseini of Susquehanna, thank you very much. We appreciate it. We'll see you soon, sir.

Thank you. And again, make sure you tune into Mad Money tonight to hear from David Kennedy, Dell's chief financial officers. So big interviews for both Palo Alto networks and Dell on Mad Money with Jim Kramer later on tonight at 6 p.m. Eastern Time. Well, coming up on the show, the big reveal of our poll on whether you'd be a buyer of Dyson's new AI toothbrush. I guess toothbrush and water pick and one.

We'll be right back. All right, I'm a Niners fan, but we'll talk Stan Cronkey. The sports empire that Stan Cronky has just got bigger. Moments ago, the billionaire agreed to buy the controlling stake of the Los Angeles Angels from Artie Marino. The purchase is expected to be completed by the first quarter of next year. Stan Cronky already has the most valuable sports portfolio out there, which includes, amongst other things, the Los Angeles Rams, the Denver Nuggets, the Colorado Rapps, in Major League Soccer and, of course, Arsenal Football Club out in the UK. So this is an interesting one here.

If you take a look at the way these sports deals have heated up. We've spoken for the last few years about it becoming so much more of an investable class. But these transactions are for a lot of money. And you can see why some of these minority interests are going for a lot if the majority interests are going for this kind of money. So true. And speaking of sports, the U.S. Open is in full swing. And so is demand to see one of tennis's brightest young stars. Resale prices for tonight's session featuring Alexandra.

How do I say this, Dom? Ayala. Ayala, thank you. Have doubled in just the past few days. Last month, she became the first player from the Philippines to win a WTA singles title. The get-in price tonight has climbed as high as $468. This is just the opening round. And the prediction market, they like her chances, 79% on Kalshi for her to advance to the next round.

This tells me, I've fallen off. I need to get back on the tennis fanwagon. I mean, I like tennis. I don't play it as much. Obviously, I'm a big golfer, but the U.S. Open tennis is something special. Having been there a few times in my life, it's something to kind of... You can't go. You know, ticket prices are too high. I'm not going because of those ticket prices. people who are paying high ticket. Because to me, if you're worried about the price of going to the U.S. Open, you're already, that's like a wealthy thing to be worried about. Like the average, they're not worried about it. Nobody can afford it in the real world. Anyway, I'm not going to rant about that. It's also New York prices, New York market. So anyway. Anyway, now it's time to reveal the results of our power poll. Earlier, we asked you whether you'd buy a Dyson AI

powered toothbrush. Survey says, no, 57% say you would not buy it. Forty-three percent said that they would. I'm not sure how much of it is the concept. Kelly of the AI toothbrush or the $499 price tag on those. Right. $500, I don't know. At least they're trying. That's why I say at least they take everyday household products and try to drive some innovation there.

I would just say if a toothbrush, if it's proven, first of all, I'm not a first adopter of these things, but if it really were to show over time that it does do a better job of just brushing alone, I might be it. Can you use your wage works, your FSA? Maybe Sonic there or anything else. Anyway, thanks guys very much for watching Power Lunch. Closing bell starts right now.