Power Lunch - Searching for Answers, and Lyft Needs A Lift 2/10/23

Episode Date: February 10, 2023

Google is “searching” for answers, as Alphabet shares have lost roughly $150 billion in value this week. We’ll hear from an analyst who still thinks the stock is a “buy” from here, despite its botched AI rollout.Plus, Lyft is getting crushed after missing estimates and issuing weak guidance, losing a third of its value. We’ll dig into its quarter, and get our trader’s take on whether the stock looks attractive at a 35% discount. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody, and welcome to Power Lunch, along with Kelly Evans. I'm Tyler Matheson. Coming up, we got Google searching for answers. Alphabet stock losing roughly $150 billion worth of market value this week alone. We will hear from an analyst who says the company panicked and botched its AI rollout, but thinks the stock is a buy from here. And speaking of disasters, Lyft getting crushed today, losing more than a third of its value. We'll dig into the quarter what happened and get our traders' take on whether the stock. looks attractive at this big discount. But first, let's check on the markets.

The Dow and the S&P close to break-even, but the NASDAQ taking a hit as interest rates continue to rise. All right, Christina, parts of nevertheless. Dom Chu, looking at all the big movers for us. Dom, take it away. All right, we're going to keep a close eye, Tyler, on shares of Newell brands, which are now kind of moving to the upside here, up by 10 cents.

It's up of two-thirds of 1% off the lows of the session by far. At one point, it was down nearly 8% after the consumer goods company. behind everything from Rubbermaid storage to Coleman camping gear and Sharpie markers. Topped analyst estimates for quarterly results but gave a more disappointing current quarter and full year forecast. Watch those shares. Now positive. It's been a rough week for three of the most important sectors in the S&P 500. Communication services, the worst performer down nearly 6% on the week so far. You can see there. The consumer discretionary side down two to three percent. And technology down between one and two percent. Those three sectors

make up nearly half the entire S&P 500. But it's not all bad. Rising oil prices have made the week a good one for the energy sector. It's the only positive performing sector so far this week. Oil prices continuing to climb right now, as you can see, after Russia said it will cut oil production by half a million barrels a day starting in March. That's likely part of the reason why one of the stocks that's trading at fresh record highs today is ExxonMobil. Check out that stock. It's right up around session highs.

You can see they're up about 6 percent just in this week alone. Keep an eye on that record change in ExxonMobil. Let's turn to Christina Parts and Nevelace down to the NASDAQ. What are we watching there from you, Christina? We are seeing a lot of big movers in all directions, and that's driving the NASDAQ lower today, almost 1% lower. Dexcom is the biggest NAS 100 winner, up almost 12% after topping estimates. It's actually its best day since last October.

But Lyft is the one getting a lot of Wall Street attention. At least nine downgrades that I got in my inbox this morning after posting week Q1 guidance, despite signs of a recovery in the ride chair market. It also plans to cut prices to attract customers. Obviously, that's not good for margins. The stock, though, in freefall, down 36%. That's the biggest single-day drop for the company. And it's also down about 85% since its IPO on March 28th in 2019, if I recall correctly, yes.

And since Wedbush, for example, said out of the 1,000 or thousands of conference calls they've listened to over the years, Lyft's call was the top three worst call. And they say that it faced an Everest-like uphill climb to show growth. Meanwhile, competitor right now that you're seeing on your screen, Uber, down only 4%. Guys? Wow. Christina, thank you very much. It's also been a terrible, horrible, no good, very bad week for Google.

The tech giant has lost over $166 billion in market value since its new chatbot shared in an accurate answer in a demo on Wednesday. The alphabet shares are now down over 9% for the week. Google off to a rough start in the Battle of the Bots. But our next guest says we shouldn't write them off just yet. With us now is Jason Helfstein. He's head of internet research at Oppenheimer, and he's here with our very own Steve Kovac. It's great to see you both. Jason, I'll begin with you.

And a lot of investors are quick to jump to kind of the same conclusion here, saying, wait a minute, they're the dominant player. They have a lot of time to catch up. In some ways, they pioneered this technology. How did they get this so wrong, though? And why do you think they can still write the ship here without major changes? We think they've been focused from an AI perspective on how they can use it for their enterprise clients. So effectively, building these AI models that their plan was to make available to enterprise clients

who take their first-party data, layered into AI, use that to replace human functions. We can come up with plenty of examples for you. And then ultimately say you need to be a Google Cloud customer to use this AI. We think that was they were focused. Clearly, Microsoft is kind of going in this consumer direction, and Google's Alphabet's AI just was not trained to be able to do that. It doesn't mean they can't do that. So why, Jason?

They obviously need more time. Jason, why did they rush it to market in this really awkward fumble of a rollout if it was never meant to have that functionality anyway? I mean, they should have listened to their own knowledge about it then and handled the situation completely differently. And they look vulnerable and weak because they rushed it to market, didn't seem ready, didn't have a great response when that went wrong. There's people saying the CEO should go, like, major overhaul.

This is a major disaster for them. I cannot explain why they rushed it to market. I mean, you know, clearly you laid it out. Historically, they've made major announcements at their Google I.O. Developer conference last year that was in May. perhaps that was the original timeline, and they rushed it to try perhaps to appease investors, and this is now what we're looking at. How unnerved is Google, Steve?

It's, well, we know what's going on internally right now. In fact, our own Jennifer Elias just put out a report saying on internal Google message boards, employees are firing back, and they're devastated over how this rollout went. I'll just read you one quote from an employee that's being widely read on this message board. barred to market in a panic validated the market sphere about us. So basically saying, we rushed this out. Everyone thought we were behind and we just basically prove them right that we are behind. And that's what they're saying right now. And look, we also know reading the tea leaves here, New York Times reported a couple weeks ago that Larry Page and Sergey Brin, the founders of the

company kind of had to swoop in and tell Sudhir Pichai, the CEO, we're getting our lunch eating here. We need to do something now. So there is, from the founder level, you have that pressure, the investor level you have that pressure. You just have to wonder if they didn't rush it out and got it right first, as it sounded like Sundar Prachar wanted to do, would shares be as bad as they were? So you think the current CEO wanted to go a little bit slow? He said that internally. I'll point back to Jen's wonderful reporting again. Internally, he was telling employees, we want to wait until we get it right. We want to perfect it. We're not going to rush anything out. Then they did, and look what happened. Do you think he was overruled by Sergei and Larry? That's hard to say,

but we definitely do know at least Sergey and Larry did come in to have some kind of influence here and, you know, step on the gas for sure. Jason, what's next for Google Alphabet? What do they have to do to get back on track and regain, I guess, the momentum or the upper hand here? I think the realistic expectation is they're just going to need to take their time and show us what their AI can do at their I-L event. that obviously they're not going to rush the next version of this. And also, I think it would help the stock is to talk about what the business model is. I mean, what I started with this idea, you know, if they really do have the best AI technology, and the plan is to make that

available to enterprise customers for their own data, training AI is kind of really what we're talking about, right? That open AI trained their AI to think about kind of, of like, what would a consumer ask AI looking at the open internet, right? And perhaps just Google wasn't focused on it. So I would like to see them talk more about the business applications of AI, help people understand what, and again, they posted blog posts about the technological developments and papers they've published in these breakthroughs, but just talk more about the business application of it.

And ultimately, you know, most people aren't talking about what is the business application of Bard or kind of the chat. at GBT, right? It's get excited about the technology behind it. So I would like to see that, but my guess is we're going to have to wait for probably the IO event. Yeah, it's, it's really, as you, we were talking a couple of producers and I were talking before the program about the implications for customer service of using AI. Is it going to make customer service better or worse? More frustrating, less frustrating. I don't know. Time will tell. We will see. Steve, final thought, quick. Well, to your customer service point, Google has demonstrated exactly

that, you can talk to a chat bot and make a reservation and things like that. They've been toying around with this for a while. They just haven't really released it in a broader, significant way. And that's why Microsoft has, and that's why we're seeing the shine around Bing all the sudden, and Google looks way behind. Thought leader, but not the bot leader. Exactly. All right, Jason Helfstein and Steve Kovac, thanks. While Microsoft and Google do battle for AI supremacy, Chinese companies are getting in on it as well. Eunice Yun, Yun, Yun, joins us from Beijing with more. Eunice, how far along are these Chinese companies compared with Google and Microsoft? Well, Baidu is probably the furthest along. It already announced that it's going to be launching their own AI bot next month.

And this would be based on Baidu's search engine technology. But then there are other big tech names that are jumping in as well. Alibaba said that they're going to be, that they've been testing a chat GPT like a tool. Also, Tencent, Netis, JD have all made announcements saying that they're experimenting with the technology, either trying to advance their own research for this type of tool, or they're looking at ways to incorporate it into other areas of their business. So you could see that the motivation is there. However, some of the smaller companies, AI companies that have also been tinkering in this technology, have already admitted that they're generations behind Open AI.

In fact, a state media today, the Securities Times, had an interesting editorial where they were actually lamenting the fact that Chinese tech companies were lagging behind. They've been calling on the Chinese to bridge the gap with the U.S. saying that some of the challenges that Chinese companies face is that they haven't been focusing on large-scale modeling or language models in the same way that the Americans have been. and also that they face other challenges such as weaker chip computing, power, as well as a lack of training and investment. So a lot of challenges for the Chinese companies, even though they want to be there and catch up and compete. I guess, Mike, one of the questions I might have, Eunice, about using a Chinese-based AI interface of this sort is how unbiased and pure could I ever expect the end? answers to be. If I'm asking. Yes, exactly.

And that, right. No, you're absolutely correct to have that kind of a concern. And in fact, a lot of the private entrepreneurs who are in AI would say that that is a huge obstacle for them if they look to move beyond these borders. So right now, the experimentation has been, what can we do in the China market? What would we be able to do in the global market? because there is that trust gap. And what was interesting is that I mentioned the state media report today.

But yesterday, the state media was warning investors for jumping into the stocks of a lot of these companies, especially the local ones, calling it hype. They said that, you know, you shouldn't be investing in these companies because they, you know, they may or may not be able to produce anything firm. And, in fact, those companies were saying, oh, actually, you're right, don't invest in us. We have, you know, we're having some issues. There's no revenue generated. So when you see that hand of the government jumping in so often in private business, it raises questions about state control and censorship.

Sure does. Eunice, Yuni, always fascinating to talk to you. Thank you for being with us. Appreciate it. All righty, coming up, I'm going to turn around here. There we go. How was that? You know, the Fed can pivot, but I can pivot too, baby.

All right. Are the markets fed up with Jay Powell and the Fed? Now that Powell has signaled, deflation is starting, will investors turn their focus to something else? Will earnings take center stage? Plus, the stock draft season coming to a close. It's our contest. The stunning rise in Netflix shares staking the actor Ryan Reynolds to a huge lead with only two hours left in the contest. We will break down the winners and the sinners as we prepare to crown a champion

in today. Power luncher. Be right back. Welcome back, everybody. The major averages on track now for a losing week. Investors trying to make sense of the most recent interest rate hike, the latest batch of earnings and economic data. So what's going to influence this market the most going forward? Let's bring in CNBC, senior analyst Ron Insana, co-CEO of Contrast Capital Partners, and Mike Aroni, chief investment strategist with State Street Global Advisors. Ron, we've been focused for the last year on the Fed and what it's going to do. There's various times lots of suspense. Some of the suspense air seems to have gone out of that balloon, at least right now. I don't know about that. You don't think we kind of know what they're going to do? Well, you know, the market's getting a little

jittery again about a resurgence in inflation. If you heard Larry Summers in an interview this morning, he changed his tune from a week ago where he said the Fed should not necessarily commit to a future rate hike or rate change in policy. And now he's saying we could see a resurgence. in inflation and that they may have to do more than is currently thought by Wall Street. So listen, the Fed's calling the two no matter what earnings play a role, individual stock performance. I think the markets writ large are still focused on what the Fed's going to do and what the inflation numbers look like going forward. Do you agree with that, Mike? Actually, I have a bit of a difference of opinion. I do think now that Powell has declared

that the disinflationary process has started and inflation measures are rolling over, I think investors will quickly turn their attention to the impact of all these rate hikes on the economy, earnings, and the labor market. And, Tyler, I think the biggest challenge for the stock market going forward is that margins are getting crushed. So now the net profit margin for S&P 500 companies is below the five-year average and well off of its peaks from just a couple years ago. So now that inflation is falling, there's a limit to how many price increase. is companies can pass on to their customers, yet their cost remain elevated and their margins are falling. So I think the key here going forward for markets is which companies, which

sectors and companies can expand those net profit margins, which ones are growing. I think that's going to be the key. And there's only four of 11 sectors that are currently in line to increase their net profit margins year over year. Mike, would you say the business cycle is rolling over? And if so, what does that imply for if the Fed should continue to tighten? and policy here? Well, I do think that's one of the biggest risks to markets, Kelly. And Ron highlighted it. I think that the market anticipates the Fed to raise rates a couple more times. If they have to do that more than expected, I do think that poses some more volatility and more downside risk for markets. And in that case, you're more likely to want to own your defensive positions. The problem is

those are a bit expensive at this point, and a lot of their fundamentals are beginning to roll over. So I'd prefer to be a bit more cyclically oriented in areas that can expand their profit margins, energy, real estate, industrials. Those are three of the four sectors that are increasing net profit margins year over year. Ron, I'm watching your body language. You don't seem persuaded. No, I just don't know. Honestly, for the first time in a while, I have absolutely nothing new to say.

I just really, you know, there's just something out there right now. Take the rest of the day off, Ron. It's all good. You know, I've been complaining that the fed's being too aggressive. I've argued that inflation's rolling over. You know, I don't know that there's much else to say at this junction. You look at Atlanta's GDP now. Estimate it's up to 2.2% from 0.7%.

So as much as we've been worried about risk of recession, obviously the employment numbers, the strength in the labor market, suggests maybe a soft landing's possible. So to me, we're going to chop around here both in market terms and intellectually for a while until we get some better answers and some better data. I think it's really tough here. The scuttle butt on Twitter is, hey, did you know you can get almost 5% on a six-month? You don't have to pay state income tax.

I mean, that's where people are looking. They go, like, to your point, they're like, this outlook that we're heading into, earnings recession, questionable economy, pockets of strength. Maybe that, you know, treasury market looks a little better right now. It's the first time in 14 years that you could get a decent yield. You can get decent yield on cash. As long as we don't default, by the way. Well, that's a six-month bill is the higher risk.

Because of the one-year bill is the lesser risk, but they're only a basis point apart, $4.92 and $4.9. 33% and 4.93% on one year. Ron, we'll have you back in a couple months when you have something to say. Wake up. It is a difficult environment where you can make this point all you want until you're blue in the face and it doesn't

mean that anybody's going to necessarily at the Fed in particular is going to agree with you. Ron, thanks very much. Michael Roney, thank you as well. Everyday technology advances and the online tools and consumer hands grow, but one aspect always seems two steps behind. Tyler mentioned it. It's customer service. We've got one company using this emerging

technology to try and make better chat bots. That's today's working lunch. Stay with us. Welcome back to Power Lunch, everybody. The Dow hanging on to 100 point gains today. What you're seeing is the mirror image of what's happened so far this year. Is it a more lasting reversal here? Who knows? But the NASDAX down 100 points as the 10-year yield has snapped up to 3.73 percent. Pretty extraordinary. Over in the oil market, we're seeing gains today and this week, up 2 percent today after Russia said they'll cut output by half a million barrels a day. And again, strength in the energy sector for the week. It's a notable standout. Now let's head to the bond pits in Chicago. Rick Santelli standing by, Rick. What is going on with yield?

You know, yields, and we've been monitoring technicals really since the jobs report. And once we had the jobs report, everything changed. 10-year no yields, probably next major resistance is around 380. But what I'm interested in is, look at a two-year for the week. It's up over 20 basis points, and it was instantly responsive after the jobs report. But if you look at the VIX, it's didn't wake up until yesterday. As a matter of fact, if you look at a November 1st of both of them together, the yields gave you an early warning sign on the VIX moving higher. And to that end, Paul Aronson, can you talk? All right, Rick. Paul, we're basically looking at the VIX, was rather sleepy after the big jobs report last Friday. It didn't really wake up. Two year no yields,

and the entire complex of treasuries popped immediately. Why the lag and how are we looking for next week's big inflation data. So what I think we're seeing right now is the markets finally are saying it knows what it doesn't know. After the big jobs number gave the Fed a lot more leeway and how they're going to take this rate path. And over the course of this week, we're seeing the VIX telling us the market needs to pay attention to what's going on, particularly Tuesday, as you mentioned. Yes, CPI's coming out Tuesday. And what's fascinating there is we had the benchmark revisions. They didn't change much year over year, but they made sense. Some of the numbers hotter, especially core, and core is probably going to be quite important.

Core will be important, and even this morning we saw a little bit higher than expected in the Michigan sentiment numbers. Any heat in these numbers on Tuesday would really give the Fed impetus to possibly exceed our expectations on the rate hikes. Yes, and Fed Fund Futures as September, which is now the Folkrum. Looks like it's on a new low close. Every new low close brings in more Fed. Thank you, Paul. And back to you, Tyler. All right, thank you very much, Rick Santelli.

Let's get now to Simomodi for the CNBC News Update. Hi, Tyler. Good afternoon. Here's what's happening at this hour. The first police officer to confront Tyree Nichols before he was severely beaten was reportedly accused of brutality some seven years ago. The Associated Press says Demetrius Haley was accused of taking part in a savage beating

of an inmate in 2015. The assault was so disturbing that 34 other inmates, everyone in the cell block, signed a letter to the corrections director. Florida Governor DeSantis has been granted effective control over the district where Disney World operates. The state legislature passing a bill giving DeSantis the authority to appoint all five supervisors of the district. Support for the bill came together amid DeSantis' ongoing feud with Disney as he cracks down on the company for being what he says too woke. And federal regulators are seeking to lower power and water consumption by household appliances.

New rules proposed by the energy deputies. Department would save Americans and estimated $3.5 billion per year and reduce greenhouse gas emissions. The rules would affect refrigerators and washing machines. Tyler back to you. All right, Seema, thank you very much. Sima Modi. Ahead on Power Lunch, the Business of the Bowl, there's more than just a championship on the line this week. Billions of dollars, of course, surround this big game, whether it's ads, gambling, tickets, food. We'll break that down for you. But luckily for those of you watching from home, you might pay a little less for snacks and wings.

and you did this time last year. Jane Wells has that story. Hi, Jane. Hey, Tyler, it's another reason to party. Wing prices down. What about the flu? Avocados under a buck a piece? What year is this?

We'll have that story and why I have an Eagles quarterback Jalen Hertz fathead behind me when we come back. Welcome back to Power Lunch, everybody. Super Bowl 57, if you can believe it, between the Philadelphia Eagles, Jim Kramer's favorite team, and the Kansas City Chiefs. Just two days away, it is expected to be a record-breaking one when it comes to gambling with more than 50 million people expected to bet $16 billion on the big game. Here with more on what's at stake is Patrick Rish, Director of the Sports Business Program at Wash University in St. Louis.

Patrick, welcome. Good to have you with us. Let's talk about the effect of gambling not on this game, but on television ratings. Would you expect to see the fact that gambling has risen over the past few years flow through to higher viewership? Absolutely, Tyler, and thanks for having me on. We already saw it last year where last year's game had 112 million viewers, which was just shy of the record viewership of the 2015 Super Bowl between the Patriots and the Seahawks. And the dynamics is very simple. The more people that are betting on these things, they are more likely to watch.

I think the American Gaming Institute had some statistics that basically said that millennials and Gen Zs in particular, over 55% of them are more likely to watch the Super Bowl if they've placed a bet. So there's no question that when you bet on something, you have more stake in the game, more engagement, and you're going to watch. Yeah, and who's going to, for example, all the parlayes, who's going to score the first touchdown? It's going to be Travis Kelsey. I'm telling you that right now. But at any rate, let's a good bet. Let's move on. I'm interested in ads.

They're sold out again. I think it's seven and a half million per 30 second spot. That is an astronomical number. But I wonder whether the ad value and novelty of the ads is the same as it was a decade ago. When we spent the week ahead previewing what was the best ad, I don't know that people seem to care quite so much anymore. You know, Tyler, there's not the same shock factor. I think you're alluding to because now people are releasing the ads a little bit sooner. But there might be method to that madness.

me explain is one of the things that like last year, SOFI, they got 74 seconds of visibility during the actual Super Bowl itself, but that is minimal compared to all of the amplified effects that they get with tweet post and Instagram post and pregame shows and post game shows the week leading up after the game. So we have to realize there are a lot of amplified opportunities on social media and other television where these brands are getting a lot more exposure. So I think they're still getting their money's worth even at that price point. Although I think the data shows, Patrick, that the ones who get the most bang for their buck are the ones who do it consistently. To your point,

Tyler, like no one remembers the one-offs, although except for their foibles. Like, we all remember how bad it was for crypto after those advertisements last year. It's almost like if you're the one-off guy, everyone goes, well, wait a minute, why is this company so desperate throwing so much money at this? But the Pepsi's, the, you know, the Budwisers, these are the pizza huts, even I think of from back the day. Those are the advertisers we remember over time. And that gets really expensive to be doing that year after year after year. Yeah, there's no question. And by the way, even though Fox sold out their Super Bowl inventory, they did it a lot later than normal. And part of it, as you mentioned, where the cryptos had a big role last year because of the bankruptcies that have

taken place, they have gone away. There's also more uncertainty about the economy that kept some of them away. And lastly, supplier chain issues. Some of these companies, they had new product lines that they wanted to promote, but they couldn't because the supply chain was behind. So Fox still saw out their inventory, but it was a little bit slower than usual. Patrick, fantastic to see you again. We really appreciate your time. Patrick Rish from Wash U, which is one hot school these days. Everybody wants to go to Wash U. They really do. You're in the thick of it right now. Why not? Why not? And I got to tell you, we're at St. Louis is a great town. We're one of the best schools in the country and one of the best sports business programs in the country, too.

All right, which is what my son is interested in. We'll talk, Patrick. We'll talk. Give me a call. All right, thanks, man. Turning from the Super Bowl game to the Super Bowl party, we've had a lot of inflation since the Rams beat the Bengals last year. How's it playing out with some of those staple foods and entertainment items?

Jane Wells joins us from Los Angeles with some surprising news on that front. Jane? Hi, Kelly. First, let me explain. I wanted to make this live shot special, so I ordered some things. My fat head of Jalen Hertz arrived. My full-size cut out of Patrick Mahomes from Party City isn't getting here to 7 o'clock tonight. I'm not, I'm not taking sides in this game. All right. Moving on to food. Food is up

7% from a year ago because of inflation, but some foods are cheaper. So let's take a look at your Super Bowl spread. First, speaking of cheap, cheap, chicken wing prices are down 39% in a year at the retail level. They're down 64% at the wholesale level. And the National Chicken Council, which is a thing, predicts that Americans are going to gobble up a record 1.45 billion wings this weekend. Now, what about the bird flu? Well, of the 58 million chickens that have caught the flu over the last year, three out of four were at egg laying operations. That's why eggs are so expensive.

Only 5% were for poultry raised for meat. One reason maybe that these birds were younger than egg laying hens and therefore they're less susceptible to the food, plus to the flu. Tyson says we've got a meat glut, beef, pork, and chicken driving down prices. More amazing to me what's happening with avocados. Always expensive.

But this year, they're down 23% from a year ago because of a bumper crop in Mexico. Thank you to that. Gwok lovers are going to be happy. As for the tortilla chips, well, corn prices, the futures are off. They're really high prices from last spring, but they're still elevated. And so corn chips could be, the tortilla chips could be a little bit more expensive. Also higher cheese for the pizza, up 23% from a year ago. And hold on to your six pack.

Americans may be drinking less beer, which almost seems an American, but beer prices just in January are up 7% according to Bump Williams consulting. Malt liquor prices are up 9% from here ago. This King Cobra cost me $4. For that, I could get four avocados. It's crazy. This is madness, guys. Well, Jane, one of the things, so many places, but just to bring it back to our audience, someone, why is it? Why is there a meat glut? Is that telling us something about how all these shortages in the pandemic have turned into gluts? Well, things do kind of do boom and bust, but particularly with beef. Ranchers weren't making all that money during the pandemic because they couldn't even get their cattle to the processing plants because they were shut down. So they were not, they were losing money.

Then they have the drought. Then they have higher feed costs. So what they've been doing and they've warned they would do this, they are sending cattle to slaughter. earlier, some of them, and that has created the glut right now. It'll work itself out eventually, as it always does, but that's why Tyson was caught off guard. There's just too much meat, and that'll help you in the grocery store. Is that a 40-ounce King Cobre you got there, Jane? Is that a 40? It's a 32. I have never had malt liquor in my whole life. I remember those crazy Colt 45 ads when I was growing up. Schlitz malt liquor. I remember. I remember.

for a really bad evening with that. Yeah. I just really wanted to see you hold it again. That's all right. Give it to Jalen Hertz over there. Take us. All right. Thanks, Jane.

Still to come. John Ford bringing us his interview with the CEO of an AI customer service startup. Working Lunch is next. Welcome back to Power Lunch. I'm Dominic Chui. We want to call your attention to some breaking news we have out of Washington, D.C.,

where the Department of Defense right now says that it was tracking a high-altitude object over Alaskan U.S. airspace in the last 24 hours and that the object was flying at about 40,000 feet. President Biden had ordered the military to shoot down this particular object. The object was flying again at 40,000 feet. It posed a reasonable threat, says the Pentagon, and says the Biden administration, a threat to the safety of civilian flight out of an abundance of caution. And at the recommendation of the Pentagon, the military was ordered to down the object. some more color on this. It is unclear. They are calling this an object because that's the best

description that they currently have right now. They do not know who owns it, whether it was state-owned or private-owned, corporate-owned, or otherwise, where exactly it came from, or whether or not it was a balloon. Of course, all of this comes amid the news just this past week or so where the U.S. has shot down what was alleged to be a Chinese spy-type balloon. So we're keeping a close eye on all of this right now. Those are the headlines. This is a developing story right now, Tyler Kelly, but that's what we have. The briefing continues. We'll bring you more as we know more.

But those are some of the headlines right now, Tyler Kelly, back over to you guys. All right, Dom, thank you very much. Interesting story. I'm sure we'll follow it throughout the hour and the afternoon. It's been a big week, of course, for artificial intelligence with Microsoft, announcing it is taking on Google in search with an open AI-powered version of Bing. Today, John Ford brings us up close with a startup CEO who's company is building on top of open AI tools, and who knows what it's like to be an underdog.

John. Yeah, Tyler. Dionne Nicholas is co-founder and CEO of Four Thoughts, a company bringing together deeper AI into customer service. The Series C startup has raised more than $90 million in funding, and this week made G2's list of the best analytics and AI products. Dion grew up in Toronto and showed talent in both basketball and computers. Eventually, in high school, he had to decide which one to pour himself into, chose tech.

The early going was rough, though. As one of the only black kids in his classes, he wondered if he belonged. And when he first started doing computer programming competitions, he lost a lot. You have contests every single week, and I'm usually doing pretty poorly. Like, I'm getting beat down every single day that I do a contest. I'm not, you know, in the top one or top two. There's 100 people. I'm in 75, right?

And so each of those moments are actually pretty painful. And then eventually, you know, you have one big contest. another big contest, another big contest. And then all of a sudden, when you look back, you're like, okay, I did it. I'm 13th in the world at the Olympics of computer programming, right? And so that was, I've had many moments where, you know, I felt I couldn't do it. I caught up with Dion last week to talk about the surging interest in AI technology and what it means for forethought. He told me he sees big opportunities for companies prepared to build industry-specific products on top of platforms like the one Microsoft and OpenAI are offering.

He hopes to be the leader in AI-driven customer support. We've seen that with writer AI. We've seen that with Jasper AI in the marketing world. We believe, and when we looked around, we were actually the first generative AI company in customer support automation, because we've actually been applying some of these models since GPT2. And so we believe that the future is actually leveraging these technologies, abstracting away all the complexity, and then building systems and products on top that learn from your

specific data. And that is a key piece. It's one thing for these large language models to be good at general conversation. Companies need them to be good at talking about their business and their industry. And that's why there's going to be room for a lot of smaller winners in the AI era of enterprise software guys. Amazing. Remarkable on a number of fronts. Yeah, we were, as I said earlier, we were chatting offline. A couple of the producers and I were chatting offline. One of the things that frustrates me is not being able to get a human being on the line when I call customer service. inevitably give me a menu of about nine items, none of which ever, ever, precisely hit on what I want to know. Is AI going to be able to do that?

And as, as Gino, one of our producers said, are they going to be able to troubleshoot my problem the way a human could? That is the promise of things like chat GPT, which knows how to talk well. It knows how to talk well. But about what? Very general. So what is able to scrape up on the Internet, what you feed it. challenge is to know how to train it to talk about airline policy, right, if you're an airline, and to know exactly what your history is as a customer at that airline. So who's going to be

skilled enough company-wise to target airline industry, teach it those terms, feed it the data from a particular airline so that it can talk to you, Tyler. That's where the race is right now. But it's brilliant because once you have the tools that can generate language and you all you need to do is give it your business model, for instance, and then it can help be more communicative. I mean, you can see this working across a number of business, not just customer service, but even something like CNBC, if I'm up there and I'm typing in there with all the data that we have our access to, and it's able to give me on the fly concept, what's the 10 year doing right now? Okay, give me the, you know, what are the break, you know, and it's more

of a conversation. You can see this being, taking data in enterprise and wrapping it with AI, you can see this powering the whole next generation of startups. Absolutely. And right now is a balance between book smarts, which is one thing that you can teach something to talk generally, and then street smarts of knowing about particular subject areas, the nuances of them, and how to feel natural

and actually educate or inform in conversation. That's a challenge. I was just talking to the CEO of FreshWorks a few minutes ago, right? They had earnings a few days, and they're also in customer support. And he said that this moment for technology is similar to an iPhone moment

or a browser moment when it comes to air. AI, and he and his team are at work right now trying to do exactly the sorts of things. And by the way, how impressive is Dion Nicholas himself? I mean, that's what he did have. A study in persistence, you know? Absolutely. Just an persistence. Thank you, John. We appreciate it. John Ford. Let's turn to shares of Lyft getting crushed today down 36 percent, but is now the time to hit your ride with the stock. We have three stock lunch on that and more next. Welcome back and time now for three stock lunch. We're treating some of the big

movers to the downside today, such as Lyft on pace for its worst day ever after that weaker than expected Q1 guidance, Expedia on its worst day since May after poor weather hurt fourth quarter results, and UPS flat today, but on pace for its worst week since December. Here to help us trade them all is Shelby McFadden. She's senior analysts at Motley Fool asset management. Shelby, it's good to see you. Let's start with Lyft. Is this a discount or a well-deserved trim, shall we say?

Yeah, sure. So in my opinion, you know, I'm beholding, I'd be looking at Lyft as a business. sort of a hold. And the reason being is that I'd need some more time to see a little bit of proof from management on their capital allocation and their strategy to continue to deliver some sort of value proposition to allow them to maintain demand and to compete with their primary competitor, and that's Uber. So, you know, with one quarter of underperformance, however severe, it's still, you know, I'm still willing to give them a little bit of room and say, all right, I'll wait and see, but what can you really deliver in this environment? Can you gain back some share?

is management making the right decisions to leverage costs and to meet demand where it is? Or are we going to continue to see some sort of misallocation of capital and strategy that's going to say, okay, you know what, maybe it's time to let go of that optimism and downgrade from bold. Well, I get your hold there because if you said sell, I would have said, well, why don't you tell me this on Tuesday? Because some help. It's gone down 36% today. Let's move on to Expedia. Fourth quarter results missed. They blame the weather. Is that a legitimate excuse for Expedia?

And what do you think of it? You know, I think especially when we're looking on an immediate term on a one-quarter basis, I think it's important to go ahead and look through that sort of top-line shrinkage a bit because weather really is out of management's control. However, the reason I'd keep it out of hold is because, once again, I want to give a few quarters to see whether or not they're able to catch up on volumes? Can they catch up to their competitor? Are they able to prove themselves when conditions are optimal? So can control the weather, but are they controlling what they can control? Can they catch up

on market share? And can they do that in such a way that the return of travel continues to work in their favor? Are they aptly positioned to capture a return of demand for travel? And what can we expect from management in terms of leveraging the bottom line if that sort of return, that sort of recoup is not actually in the cards in the future for them. Right. So you're kind of a cautious until you get more on Lyft and Expedia, but I know UPS you feel a little bit more strongly about Shelby, and which way would you go with these shares? For me, UPS would be a buy. And UPS is absolutely a story of excellent management, capital allocation, and delivering a value proposition to their customers. In making their tactical shift away from quantity of volumes and towards quality

of volumes, finding clients that can meet them where they are, where they can impose pricing, has been very important to the fundamental performance of the company. That said, we still have to consider the fact that consumer discretionary will play in a bit because of the proportion of business-to-consumer volumes for UPS. And, you know, we're continuing to wait and see on how the Teamster negotiations will go. But so far, management has shown me that they've really been in control. I'm feeling very positive of their ability to come out of these negotiations with positives for everyone. And they're continuing to deliver value and be able to give pricing in a way that makes me for really good about their competitive advantage in market share going forward.

Shelby, thank you so much for being with us today. I don't know that I've met you before. Nice to have you with us. Thank you. It's been a pleasure. Shelby McFadden of Motley Fool. I like what people say, welcome to the show. or something like that. After this weekend, speaking of shows, we will have a new champion. We're not talking about the Super Bowl champion. It's our stock draft coming to an end.

We always go from draft date to the Super Bowl. We'll tell you who's winning, who's losing, where everybody falls. We'll break down the rankings next. Oh, it's a big day. We're an hour from the end of the 2022-23 stock draft competition. Dom Chu, looking at the big movers from this year's contest. only an hour left to go.

Tell us who's leading the way. It's basically become a two-horse race, given the bloodbath and markets that we've seen over the course of the last 12 months. And by the way, maybe no surprise here that the two people who are vying for that spot, it's pretty much down to one. Are the Mountain Goats, that's Ryan Reynolds,

Ryan Reynolds and the Mountain Goats, or the in-fashioned favorites, which is former Macy's CEO, Terry Lundgren. So those, by the way, are the only two teams that even had positive returns during that span. So when I say two horse race, it really is. But look at the performance gap, 30% versus 14. So a factor of two there, pretty much this is Ryan Reynolds win.

He's in. He's done. He's done. Unless Netflix somehow hypothetically does something crazy in the last couple of hours here. Ryan rounds needs a win, you know. He doesn't have enough going for him. I mean, just look at this. The mountain goats are 30% versus the S&P during that span, which is down five.

But even Terry Lundgren, very respectable. Any hedge fund manager want this kind of outperformance. Take a look at this particular one. Mountain votes, but that was Ford and Netflix. That's right. And we will show that in just one moment here. Yeah, yeah, got you. So if you take a look at this overall, this is Netflix,

which is the best performing stock in the Ryan Reynolds portfolio, that in Ford. It didn't matter what Ford did because during that span, Netflix is up a whopping 75%. So it's perfectly bottomed it. It doesn't exactly. It was a bottom tick. And we kind of knew why Ryan Reynolds picked it, right?

There were three movies he said at that point. Red Notice, the Adam Project. You had six underground going on. So that was huge. And then, by the way, check out some of the other ones. Chewy was the best performing stock for the Terry Lundgren portfolio. That was up 41%. So a very highly respectable turnout there.

And again, for a two-stock portfolio, not too shabby. But take a look at this. It's not all about the winning that happens right here. There are some rough ones here. including Seymour Alpha, Tim Seymour. Oh my. It was a rough one down 23%. And then Candy and the Gang down about 23% as well.

What were the culprits here stockwise? So if you take a look at the overall picture for some of the downsides for the stocks, it does come down to whether or not, I'm not sure exactly what Seymour Alphas was or Candy in the Gang. But if you take a look at the picture for why some of these things happened, almost every asset that was picked was somehow down in value. It's just, it comes down to Netflix. Talk about bottom ticking the whole thing.

Seymour had PayPal and Dash. And look who's going to be with us on Monday, 2 p.m. Ryan Reynolds will be accepting his award. Accepting his award. Major award. Thanks for watching Power Lunch, everybody. Enjoy the Super Bowl. Yes, we'll see you Monday.

Closing bell starts right now.