Power Lunch - SEC AI Ruling & NTSB Findings for Boeing 737 2/6/24

Episode Date: February 6, 2024

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

Hey, welcome to Power Lunch, everybody, alongside Courtney Reagan. Hello, I am Brian Sullivan coming up. AI is everything to everyone everywhere. We're talking about it in Washington and Silicon Valley and maybe soon at your local electricity company. We'll explain all that. Plus, as earnings continue to roll in, we're adding guac to today's three-stock lunch. We'll get the details on Chipotle, Eli, Lilly, and Spotify,

and then ask our traders, our trader, for her take on each. And yeah, we know gux extra. But first, let's give you a quick check. On the markets right now, the Dow is higher about just by 3 tenths of a percent. The SB 500 just about flat. And the NASDAQ is down here slightly just by a hair. Brian? All right.

Shares of Palantir, probably the big single stock story of the day. And we say that because the stock is up 29%. It's after reporting results, which are mostly in line with expectations. What's boosting the stock is the company's comments about commercial demand, non-government, commercial demand for its AI products, which is surging. The company is hiring aggressively to meet that demand, Pallantir up 29.4%. It is everywhere. AI and how to deal with its rapid growth is becoming a key issue for just about every industry as we've gone through here briefly. We've got three reporters on three seemingly unrelated stories that have one common bond

preparing for our AI future. Emily Wilkins on what Washington is doing, Julia Borson, on Facebook, trying to manage AI fakes and Pippa Stevens on the impact on the electric grid. Emily Wilkins and D.C. kick us off. Well, hey, Courtney. Well, yeah, federal regulators, they're only just beginning now to set down guardrails around AI, but they're already beginning to face pushback from lawmakers. A new bill would kill a yet-to-be-finished SEC regulation on how financial advisors use AI. Now, this rule would require firms to ensure that any predictive technology that they're using is free of conflicts of interest and that it puts the client first.

But Republican senators Ted Cruz and Bill Haggerty said that the rule goes too far and would be so costly that it would prevent any new technology from being used by advisors. Listen to what Bill Haggerty told Squawk Box this morning. It would encompass anything from a small calculator on a website to a spreadsheet. It's not just focused on AI. And the impact of this would be increased compliance cost, increased liability, and therefore it will lessen the access of retail investors to the marketplace because the companies that are involved in this will just stop offering technological innovation.

While the bill doesn't have any Democratic support at the moment, Republicans might not need it. They could potentially take the rule down on their own if they can hold onto the House and win the Senate and then the White House this November. If so, they can overturn recently finalized rules from the Biden administration with a simple majority and we'll be keeping a very close eye on those elections, those regulations, and how it all pans out. Emily Wilkins, by the way, we have Ted Cruz on last call tonight, 7 p.m. I had to get that in. That's what I'm being paid. It's just to tease the show. 7 p.m. will have Cruz on. Emily, can you, you know, to talk about AI and maybe some other things, Emily, you're in D.C. I want to look good.

Can you give me like a really smart question that I should ask Senator Cruz about AI? Because you know more about it than I do. Well, one thing that we've heard a lot from Majority Leader Chuck Schumer, and I know that's a different party, but he's really touted this bipartisan working together for on AI legislation. You remember we had Elon Musk, we had Mark Zuckerberg, come up to the hill, talk with senators. And so I'd really love to hear a sense from Senator Cruz on where legislation is at on AI. If he thinks that might actually be a possibility this year, I mean, we're already seeing the Senate struggle with things like passing the supplemental funding, getting stuff on the border done. They certainly have other major must-dos this year. And I think it's a very valid question if they're going to have time.

for AI. AI just seems so far ahead of so many people's understanding. I just don't know how you can possibly regulate it as well when it's changing so rapidly. Maybe they can get AI to regulate itself. Oh my God. Right some good regulation, AI. I command you. And it'll happen. And it probably could, right?

It probably already has. Emily Wilkins, thank you very much. All right, next up, efforts by social media companies to stop the spread of fake images like the Taylor Swift fakes, which burned up the internet for a short time. Julia Borson is here now with some new steps that meta is trying to take to combat fakes, Julia. Well, Brian, right now, meta labels AI content that's created using its own AI tools.

But the company will soon begin using metadata to detect and label AI images posted to his platforms from Google, open AI, mid-jurney, and shutterstock. Meta's saying that this is the first time a company has been able to label AI that is not its own AI. Now, Meta's president of Global Affairs, Nick Clegg, writing in a blog post that they are, working with industry partners to create common technical standards for identifying AI content, saying, quote, we're working hard to develop classifiers that can help us to automatically detect AI generated content, even if the content lacks invisible markers. At the same time, we're looking for ways to make it more difficult to remove or alter invisible watermarks. Clegg's saying they are building out this capability now and will start applying labels in

all languages that they support through the next year when there are going to be a number of important elections happening, but it says it's hoping to lead an industry-wide initiative so that nothing can fall through the cracks, especially when the risks of AI manipulation of elections could have such massive implications. That was exactly what I was going to ask, Julian. Of course, you went right for it. I mean, that seems to be the big worry, right? Is these AI generated contents of any form, I guess, video still images or otherwise percolating on social media during an election time? I mean, I understood what you're saying about the metadata and trying to identify that. And then label that as AI, even if it was generated on another platform, would that potentially then work

the same in these political campaigns if they're AI generated? Exactly. That's really what this is targeting here. I mean, I think what's so important to acknowledge is that there are still just a handful of companies that are making really compelling deepfakes. And we're talking not just about still images or video, but also audio. And there's a lot of research showing that audio deepfakes can sometimes be the most convincing because it can sound great and you don't maybe see that the video doesn't match exactly. So what this would do is be able to identify if these major platforms where you could create deep fakes are being uploaded and shared on, say, Instagram or Facebook, etc.

So the opportunity to be able to identify, detect label AI, no matter where it's created, would really be a game changer in helping to protect the integrity of elections and to avoid manipulation. And so I guess then to that point, I mean, use the word label, which is, I think, how you described it when they're using the metadata. But if it is AI-generated content and it has to do with an election, would they simply just label it as AI as opposed to going so far as to removing it entirely? Well, I think that all comes down to the sort of nuances of what the rules are on meta. And for instance, they have rules saying you can't have content that's designed to incite violence.

So there are some questions about that. And who knows what kind of deepfakes would be created either in a video form, or a sort of still photo form. So I think that really depends on whether or not the content adheres to the rules of meta. I think if you can label something and say this is a fake image, then that's very different than trying to say, hey, look at what's happening here. Look, there's a polling place that's on fire. Don't go vote.

And I think that's really the risk, people being discouraged to vote or perhaps push to vote for one person or another based on fake content. Got it. Fascinating stuff, Julia. I know you're going to continue to follow this. I'm sure you saw when Brian talked to himself as AI Brian. That was pretty crazy when you did that. That was eye-opening.

It was creepy to me, too. I was like, do I really look like? That guy's more handsome than I was. It was annoying. But yeah, it was really weird. The voice, too, was also, I mean, simulating. Yeah, and that was like the, that was like last year. That was the early day.

We should rerun that, by the way. People don't know what they're talking about. I'll repost it or something. But it was pretty wild. It was really wild. It kind of scary about the implications of what's going to happen. And it really opened my eyes to what potentially could happen, too, with us in news. Just to see an example like that.

Like calling people up on a robocall in New Hampshire telling them not to vote? Like that just happens? Yeah. Terrible stuff. Anyway, thank you so much, Julia. So AI replacing Bitcoin mining as the new energy hog. Pippa Stevens has a look at whether the energy grid is strong enough to keep up with this increase in demand. Just something else to strain this grid, Pippa.

Yeah, that's right, Courtney. When you think AI, big tech and chips are probably what come to mind, but those chips are used in data centers and those data centers need a whole lot of power. Electricity consumption from data centers could more than double in the next two years, topping 1,000 terawatt hours by 2026, according to the IEA. Now, to put that in perspective, it's equivalent to all of Japan's power consumption. And for the U.S. specifically, BCG estimates that by the end of the decade, data centers will use as much power as 40 million households each year. That's going to require new power sources and updates to existing infrastructure,

with Morgan Stanley saying the rapid power demand growth from Gen AI is not well understood and not priced into a number of stocks. Power providers AES and Nextera Energy are two names they cite, with Nextera is saying in its latest earnings report that growth is, quote, explosive at this point. Then there are the electrical equipment makers like Prismian, Eaton, and Hubble, as well as power management providers like Schneider Electric and Aspen Tech. So Brian and Courtney, the bottom line here is that this. opportunity goes well beyond just the big tech and the chip names when it comes to Gen A.I.

And it's amazing, Pippa, because so much of these data centers are outside of D.C., Loudoun County, Virginia, sort of that area. It's like the data center hog. That's on the PJM Interconnect, which is the grid system, the grid operator that runs all that. And PJM itself, less than a year ago on a Friday night dump, came out with a report and said, basically, we don't think we're going to have enough power and electricity within seven years because we're not building anything new. I've got to imagine all these layers of data centers and AI centers, Pippa, to your point, where is the power coming from? Yeah, that's right, Brian.

And, of course, this comes as we are already stressing out the grid with more things going electric from electric vehicles to heat pumps. And then to your point about PGM, and actually a third of worldwide data centers are in the U.S. with that concentration outside D.C., as you noted, this comes as the interconnection queue has now grown to more than five years in some places with all of these new projects waiting to come online, but it's just such a slow process. And so when you have this demand growth from data centers combined with some regulatory hurdles, it just seems like at a certain point we might come up short. And what does that mean for consumers and their power prices?

Pippa Stevens, an important story there. The grid op, Pippa, thank you. Courtney, the grid operator on a Friday night sort of dump on PR dump, came out of the report and said, not sure we're going to have the capacity to make enough electricity to power 13 states. Ohio, Pennsylvania. Oops. Just don't have, may not have it. And yet we keep adding demand.

It's, it's, and we're not adding supply. Yeah, the grid feels like a really big problem. You have been warned. You've been, you're being warned and no one's doing anything about it. It's unbelievable. All right up next. Subscriber significance, whether it is TV or music, streaming user numbers, remain the all important metrics. Spotify, seeing that firsthand, that and more, and three-stock lunch.

Plus, this is a crazy story. We work founder Adam Newman trying to buy back his old company he had a bankruptcy. Many say he was part of the problem. He got booted from his own company. So would anybody actually give him the money? Gierre Bosa will tell you, yeah, in tech check. All right, time for today's three stock lunch. Three names on the move today, and they are Eli Lilly, Spotify, and Chipotle. There we go. We got food. a weight loss drug, and you can listen to the music while you take the weight loss drug. Here with our trades is CNBC contributor, Courtney Garcia, Senior Wealth Advisor with Payne Capital Management.

Courtney, welcome. Let's have some fun. Let's start with Eli Lilly. Bertha Coombs covering that name, and Bertha, this is like a company's going to be bigger than NVIDIA soon. It's unbelievable. Could be part of the magnificent seven soon. This morning, market cap topped over $700 billion. Share is coming off that fresh record high this morning.

Eli Lilly's diabetes and weight loss drugs help deliver beat on the top and the bottom line for the fourth quarter with total sales coming in at $9.35 billion for the quarter. More than one fourth of that driven by new product revenue led by Lilly's Diabetes, GLP1 treatment, Monjaro, which topped $2.2 billion. That's up more than 50% sequentially, even with what the company's called intermittent delays for some doses. The new weight loss version, Zepbound, just approved in November, notched over $175 million in sales. Of course, insurance coverage is key for these drugs. On the call, the company said that Zepbound already has about 35% access on commercial plans. They're working to boost that.

And Lilly did raise its full year guidance for 2024, but says it expects demand for its GLP ones to continue to exceed supply, even as it looks to boost production. Brian? All right, Bertha Coombs. Bertha, thank you very much. Yeah, unbelievable story, Courtney. It's made people a lot of money.

So what is the trade now on Eli Lilly? Yeah, and I'm actually optimistic on the healthcare space. I would be a buyer here at Eli Lilly. They really beat expectations. And I think one thing you want to look at that's a trouble in this space is the fact that a lot of their competitors are facing patent cliffs. Yet Eli Lilly has a really positive pipeline moving forward. And that's going to really help their further growth. The really good example of that was when you saw Zep found that those sales are about 100 million more than expectation just to show the kind of growth that they have going forward here.

And I think my only hesitation with this would be that it is at a really high valuation a lot more than its competitors and how much of that optimism may are to be priced in. And that's where as an investor, I take a look at something like the IYH. Eli Lili is the largest holding there about 10% of that. But you can also get a lot of those other lower cost competitors as well, especially if there's MNA space and activity. You want to make sure you're owning a plethora of name. Very interesting. I find all of these biotech names, pharma names, just so compelling, especially right now with everything going on in the Bible. Also, she said plethora. I like that word. That's my wordal opening word. That's not true. I was going to say that's way too many letters for Whirl. That's the joke. Oh, gosh. Okay. Now over to Spotify, the digital music streaming company posting Q4 earnings that beat expectations.

Julie Borson is covering that one for us. What do you got on Spotify, Julia? Hey, Courtney, well, Spotify shares surging higher. They were up a lot. lot more. Now they're up about 3% today. Stock trading around an all-time high. This is on strong guidance and a surprise profit, 37 cents in adjusted earnings per share rather than the 21 cent per share loss that analysts had anticipated. This follows the company laying off 17% of its staff in December. Spotify reporting strong user growth, including a 15% increase in paying subscribers ahead of expectations. Thus, despite increased subscription prices, earlier this year. So that all adds up to higher average revenue per user. Spotify CEO,

Daniel Eck telling me this morning, quote, we believe that the acceleration of revenue growth will continue in 2024. We believe that the more efficient Spotify on the cost structure side will also continue. He went on to say that that means you will see a consistently profitable Spotify in 2024. Eck also saying that for podcasting, they will continue to invest in things that are working, such as Joe Rogan, and he does see big potential upside to use AI to improve advertising. Courtney? Look at that. It all comes back to AI every time. Julia, thank you, with a double dose of Julia Borsden today. So what's the trade on Spotify, Courtney? Yeah, actually, I'm also optimistic here on Spotify. I think really when it comes to earnings, you want to make

sure that these companies are profitable, and it's finally looking realistic here with Spotify, that they're going to be profitable, and their cost-cutting measures, and especially as they're focusing on some of their podcasting is really paying out. And their monthly active user growth has been very impressive. But I think what's more impressive is the fact they're actually increasing revenue per user. They've really had to incentivize people coming on with promotions and lower tier pricing. But again, now you're actually starting to see those price increases come in. They still have a lot of room to grow, especially when you look in emerging markets. And so I think that's likely going to be a further growth story for Spotify.

We've got a final name. Chipotle reporting after the bell. Kate Rogers is tracking the action for us there. Hi, Kate. Hey, court analysts are looking for EPS of $9.75 on revenues of $2.48 billion for the fourth quarter. Comps expected to climb 7.1%. That compares to the company's guidance of climbing mid-to-high single digits for the quarter. Food inflation, of course, and price hikes will be in focus. The company raised its prices last fall for the first time in a year, but it's seen a very stable and loyal consumer base so far. McDonald's yesterday spoke to lower-income consumers, starting to pull back. as grocery prices fall, so we'll see if Chipotle's seeing the same trends, fast food wages. Remember, in California, will hit $20 an hour in April, so prices will likely be going up this spring here in the state.

Piper Sandler, which has a neutral rating on the stock, said in a recent note, quote, CMG is well positioned for the future, and investors know it, adding that the only debate on the stock at the moment is its valuation. The stock was among 2023's best in the sector up over 65%. It's up over 40% in the last year, guys. Back over to you. Rogers. Kate, thank you very much. All right, Courtney, what is your view on Chipotle? I don't have a lot of bad to say about Chipotle. It does look good compared to a lot of its competitors, especially when you look at the customers coming into their stores. Their foot traffic

is impressive. But is that valuation, which you pointed out, that I think is going to be a little bit problematic where it's basically priced to perfection. So we are seeing over the restaurant space in general. Consumers are pulling back. That's one of the fastest things that people pull back on is they're going to cook more at home, eat out less. So I think if there is any sort of women in earnings, but more importantly, when you look at further forward guidance, if Chipotle is pulling back at all, just given what's happening in the bigger space, that likely is going to expect their impact their pricing. So I would proceed with a little caution here as we go into earnings. A little bit of caution on CMG. Courtney Garcia, thank you very much.

Really appreciate it. Three stock lunch. Thank you for happening. Well, China's president, meeting with stock regulators in the hopes of regulating the markets and shares of Chinese stocks higher. Those details are coming up next. The U.S. National Transportation Safety Board just released its preliminary report on the Boeing Mac and Boeing 737 Max 9, Alaska blowout. Phil Leboe is standing by with the details. Phil, what have we learned now? Courtney, the preliminary conclusion, according to the National Transportation Safety Board, is that the door plug in question that was ripped off the Alaska Airlines flight in mid-flight, they didn't have bolts holding that door in place. I'll read the one conclusive sentence from the NTSB. It says four bolts that prevent upward

movement of the door plug were missing before the plug moved. They weren't there. Why? Well, it turns out back in September of 2023, there were five damaged rivets on the doorframe of the door plug. So Boeing went about removing the door plug in order to fix those rivets. And they were not replaced, apparently, because they were not there when they were ripped off the Alaska Airlines flight. We are waiting for a statement from Boeing. Not a lot of movement in shares of Boeing. mainly because this came out about a week ago. It was leaked out that there was likely going to be a, there was likely to be a conclusion that bolts were not in the door,

and that's what we have from the NTSB, a preliminary conclusion that the Alaska Airlines door plug, which was ripped off in mid-flight, was missing four bolts. That was the primary reason why it was ripped off mid-flight. Guys, back to you. Phil, amazing. I'll ask it just as a frequent flyer. like yourself.

In some weird way, I take that, and I was on a max nine Sunday night, I take that as good news in a weird way because I feel like it sounds like this might have just been a one plane issue. This one plane needed maintenance. They screwed up. Let's be clear. It sounds like somebody made a joke. No, no, no.

Wasn't that the plane needed maintenance. This is Boeing working on it in September 23 before they delivered it in November. So it may be a one-off, but the disturbing part of this is. this, Brian, is if you are Alaska or United or any other customer, you do not expect that a plane is delivered to you. No, of course not. Missing bolts on the door plug. Of course not. So, yeah, I mean, you could mention, you'd mention the rivets were bad. So in my head, what that got me thinking is they were damaged. So this one single plane had an issue that needed to be fixed. It was fixed incorrectly. Let's be very clear by Boeing. But in some weird way, I felt like that because that

rivet issue unless that is a pervasive problem on others, and maybe it is, it felt like this might have been a one-off thing. You know, there are tens of thousands of rivets on these aircraft. And part of the job, as they are moving through the line, is to make sure that they all are in conformance. And in this case, they saw some that were damaged, needed to be fixed. So they took off the door plug in order to have access to the door frame to fix those rivets. And according to the NTSB report when they put the door plug back in place. There are four bolts that hold it to keep it from moving up and out. They weren't put back in because they weren't there when the accident took place, when the incident took place, midair and the pressurization forced the door plug just to be

ripped off of the plane. Wow. It was fascinating stuff, a little scary, but I'm glad that we know more. Hopefully the same mistakes won't be repeated and we won't have new ones either. Thank you very much, Phil. You bet. Well, Brian, we want to welcome Eunice, our friend Eunice? Gailas, welcome back. Well, by the way, welcome back to Power Lunch, I guess. Chinese stocks are getting a boost today. President Xi Jinping plans to talk about the stock market with regulators,

a stock market that has been in a slow-moving or fast-moving collapse. For more on what is moving in why, let us bring in Eunice, Yun, who is live from Beijing. Eunice, good to see you. Hey, Brian. Well, that rally is really across the board for anything that is China-related, when it comes to some of the biggest and most valuable Chinese companies. A lot of that is because they had been pummeled so terribly since the end of last year. Alibaba and Tencent lost a combined

market cap of $31 billion. And this is coming as Amazon and Meta in the same period gained $510 billion. So that gives you some context. But Chinese authorities are now apparently trying to restore market confidence. The country's regulator unveiled new curb. on what they described as malicious short-selling. A state fund expanded purchases of the ETFs of onshore stocks. And the authorities here have also vowed to guide, they said, institutional investors to buy more shares. In the past year, the stock markets that are China-related had a terrible time. Shanghai was down in double digits.

14 percent. Hong Kong, 24 percent, Shenzhen, 30 percent. speculation, though, is now that we could potentially see more action on the market or on the economy. Because of those reports that President C. would be getting a debrief from financial regulators, potentially sometime this week on the stock market. Not very clear, though, as to whether or not that would result in concrete measures. And there definitely seems as though there's a need to address some of this market pessimism. In fact, just to give you a sense of how frustrated people are. In the past couple of days, a lot of China investors have been going to the U.S. Embassy website

to comment on a social media post on giraffes, random. But the reason for that is because they just don't really have any other place to complain here or very few outlets. So a lot of those comments have been about the stock markets, the economy, their frustration with it, and a lot of others liking those comments, guys. Giraffes? Because that's just where they can go. I know, random. What was the post about giraffes?

I don't want to make light of this. It was about, no, I know. It's about conservation, totally unrelated. But again, it goes to show just how a few places there are where people can actually voice some of their frustration. I understand it. The Chinese public. Because of surveillance.

Instead. Had to post about giraffes because they were afraid to stick their neck out. Otherwise, I get that. Country garden. Country garden. That's for you, Eunice. Country garden and Evergrand. Don't make that.

I can see you. I got that joke this time. Eunice's best line. Every time I see your face, I laugh. I was not to try to bring it back. Okay. It's true. On a serious note.

My favorite Eunish Yunn reports are when Eunice Yunn reports about Eunice and you did so much great stuff during COVID, which we can. can't even imagine. So you're out and about, right? We get all this anecdotal data. And I'm sorry, I'm not sure I trust all the data. What do you see? Are people optimistic? Are the restaurants full? Like, you're there? No. I mean, it's just, it's one of the biggest changes that I've seen in the past several years here in China, where almost every conversation in the past has been about, well, things will get better. And then right after, during COVID, it was rough. But then right after COVID, people were still really pessimistic. And a lot of the conversations that I have today are

about, what am I going to do? You know, even after like the lunar new year, or the job's really going to be there. You know, if you go to the restaurants, they're pretty empty still. There are, I mean, some places, they could be kind of busy, but it's, it's, it's a lot of restaurants that used to have really long lines are, or have reduced their size. They have smaller spaces. So it's, it's just, it's just a very different feel here compared to before. See, that's, that's, she's in there. Why look at data when we've got Eunice, who actually lives there and knows what's going on.

And that Eunishun is the best unit, Eunice, thank you. Appreciate it. Let's get over to Leslie Picker for a CNBC news update. Hi, Les. Hey, court. Jennifer Crumbly, whose son killed four in a Michigan school shooting rampage in 2024 found guilty today of four counts of involuntary manslaughter in an unprecedented case of a parent.

being held criminally responsible in a school shooting. Her husband faces a separate trial on the same charges. She faces up to 15 years in prison for each of the four counts. Qatar's prime minister said this afternoon that officials have received the first response from Hamas on a hostage deal framework and that the terror group is open to negotiations. Secretary Blinken confirmed he would discuss the latest proposal with Tel Aviv tomorrow, but that, quote, there's still a lot of work to be done. And climate change is causing scientists to rethink how they categorize hurricanes with a new study in a journal from the National Academy of Sciences suggesting adding category six to the current system.

It now tops out at category five indicating winds of 158 miles per hour or higher, but they are considering bumping up the category to account for higher wins, guys. Well, Leslie Picker, thank you very much. Category 6. Category 5 was strong enough. That's enough. Stay at five. We don't want to go to six. All right. So let's talk engines, big engines, because engine maker Cummins falling short of some expectations.

The stock, though, is moving higher. We're going to find out what's going on. The CEO will join us on Power Lunch coming up. All right, welcome back to Power Lunch. Take a closer look at a company that could signal a lot about where the economy is headed. It is Engine Manufacturer Cummins. They are trading higher today. They had record full year revenue.

There are still some concerns. about slowing demand in some key markets this year. But let's find out what is really going on. Here for a Power Lunch exclusive is Jennifer Romsey, CEO of Cummins. Jennifer, good to have you on Power Lunch. Let's talk about the future of the engine because my simple question is, does the engine have a future? Yeah, well, the reality is the engine has a future. We had a strong, 2023. Cummins had record revenue that we announced earlier today of $34.1 billion. dollars and also record operating performance and cash flow of four billion dollars and you know a big part of that is also continuing to invest in our strategy which includes engines we have a dual path strategy we call destination zero to decarbonize our industry and while we're selling lots of engines today to meet our customer global needs we're also investing in zero emissions technologies for the future at our accelerates business and we expect to continue to see growth in both parts of our business i know j Jennifer, that you anticipate demand will slow in North America for the heavy-duty truck market. But what about China? I understand you have a very high exposure there, at least relative

to the rest of the sector. And we just had a reporter Eunice Yunnan sort of talking about everything that China is still very much in the thick of. Yes, if you look at our last year performance, we saw strength in a lot of our markets. And as you noted, we're projecting some softening. So overall, for the company for 2024, we're projecting revenue to be down 2 to 5 percent, and most significantly within that is the North America heavy-duty truck market, which, you know, despite some leading market indicators like freight rate has held up pretty well for us because there's a lot of pent-up demand and back order because of supply constraints that have existed here over the last few years. Contrast that with China, which has coming off of a very weak,

2022, and we saw some improvement. Last year, we expect to see some continued low growth rate there in 2024, we're really based on truck replacement as well as strong demand for our natural gas product. And, you know, our success in China enables us as a global business to grow and create jobs here in the U.S. as well. You know, we talk about big engines, Jennifer. And I don't think anybody does that as well as you guys do. And we had an old RV one back in the day, and it was a diesel pusher is what they call it. And you fill it up.

And I can go 1,200 miles without stopping. Now I had to stop, obviously, but at 1,200 miles on that engine. engine, but it was spewing nasty, disgusting, you know, emitting diesel fumes. We talk about electric semis, but people I know in the industry say that could be tough because short haul is fine, but long-haul trucking is the backbone of commerce in this country, as are trains. And I'm just wondering, what is the blend going to be between electrification and the hydrocarbon, whether it's renewable natural gas, soybeans or whatever?

Yeah, great questions. And as you noted, our customers, commercial trucks, trains, industrial equipment, they're really at the heart of the U.S. economy, and they're doing real work, and our customers are making economic buying decisions. You know, I'm proud that we've done a lot of work in my 25 years that come as to reduce emissions from diesel engines. So the diesel engines that we're producing today are much cleaner than the previous generation. And we believe that in order to really help our industry decarbonize and start now, we have to continue to improve efficiency of diesel engines. engines, which we're doing. At the same time, we need to invest and move to true zero carbon solutions. And that's going to be bumpy. It's going to take time because the diesel engine from a reliability, from an efficiency and cost is so great. But we're investing in these zero

emission solutions and really bringing them out to markets that are starting to adopt early, like bus. So we've, with Bluebird, put 1,500 electric school buses out into the market so far and continue to bring more of those products in the market. We announced last year a really really big deal for us that we're partnering with Petcar and Daimler truck and buses to localize battery cell production for commercial vehicles here in the U.S. And so these investments and some of the incentives that are now available will enable adoption, scaling up, bringing down the cost, advancing the capability to the solutions. And that's why I talked about our dual path approach with our destination zero strategy, because

we feel strongly. We have to start today and improve the products that are out there today while we also focus on advancing these new solutions. Jennifer, we do have to go, but very quickly, I know that Walmart is actually rolling out a field test with some of your low carbon engines here in a couple weeks. Very quickly, what are your expectations there with that partnership? Yeah, so we're launching this year our X-15 natural gas engine, Walmart, along with Werner and others, has been one of our partners, and that will be in the market later this year. Natural gas is a great way to reduce carbon, and improve efficiency and get some of these alternate lower emission solutions out into the market.

And we're excited to be doing that with them and our launch partner, Pat Carr, and then with other OEMs over time. Jennifer Romsey, CEO Cummins. Thank you very much for joining us. And thank you to our colleague, Sima Modi, to help us bring this interview to you all. Well, coming up, the WeWorks saga continues. Adam Newman is reportedly trying to buy back the bankrupt real estate company. We'll dive into the brand's second chance for life when Power Lunch returns. Adam Newman, the founder of WeWork outsted from the company in 2019, might now be trying to buy it back. Deer Druposa has some exclusive reporting for today's tech check. I can't wait to hear this one day. You know, Courtney, this story will never not be interesting and it might never end either.

Here is the latest. Adam Newman's lawyers, they sent WeWork a letter last night saying that Newman's latest venture, real estate company called Flow Global, and suggesting that it had financing support from Dan Loeb's hedge fund third point for a bid, But he said that the letter says that Newman is being shut down by WeWork itself. Quickly, though, there was another twist. I called up third point, and they told me that the meeting was very preliminary. Another source familiar told me that, in fact, it was just one meeting last fall between Loeb and Newman, and there were soft bank executives there, but the third point hasn't made any commitment, which, Courtney, could mean that the chances of a Newman return aren't exactly imminent,

but I have a feeling this doesn't mean that the saga's over. Can you make it make sense, dear Joe, okay? I mean, I can't. Listen, I've read books and podcasts about him. He's like a cult of personality. Like, I get it, but I don't get it. Help. Yeah.

You know, okay, let me try and help. Okay. So we work as a company. I mean, it's the poster child of the zero interest rate era, right? When SoftBank came in, they gave Adam Newman billions and billions of dollars and said, grow faster, don't worry about losing money. And that's exactly what he did. I know we work from the early days, and I understand why Adam Newman has his fans.

I understand how Adreason Horowitz poured hundreds of millions of dollars into his new venture, because he is extremely charismatic, and he did build something that was very compelling and interesting, which is the co-working space that just really got out of hand, and you could argue it wasn't a very good business model to begin with. His new venture, called Flow, buys up real estate. So you wouldn't have the same problem, the same business model fiasco of WeWork, long-term leases renting out for the short term. It was never going to work. So this could be an interesting idea, but again, it kind of just undermines it because the letter from the lawyers

implied that Dan Loeb was committed to sort of a bid, and that just wasn't the case. I'm just saying that's what the letter kind of implied, and it turns out that that wasn't it. So I don't know. I don't know who's going to help Newman finance this thing. I don't know what the future is. What I'm saying is that many people still use WeWork. It's a great office space. What does it look like in its next iteration. I do know there's people who would like to see Newman go back. I just don't know if that's a realistic possibility. Wow. It's just wild. It's wild. I feel like I've talked myself in circles again. I mean, Brian and I were just looking at each other. Like, do you have any questions? Yeah, I have a lot of questions, but I think we're out of time.

Dee, thank you so much. Keep following this for us. We'll do. Still ahead, the war on DEI, Black representation on Wall Street has jumped over the past few years, but some worry the progress may be in danger. Our Frank Holland will give us that story next. And during February, we're celebrating Black Heritage. Here is Intel Chief Legal Officer April Miller Boys on her story. My maternal grandmother was one of six sisters, and they came from Columbia, South Carolina, and we called them the Lewis Girls, and they were fiercely independent women. And I really, because of them, grew up believing that I could be anything that I wanted to be. So having that foundation was really incredibly important.

DEI campaigns were designed to improve diversity at companies, but now some of those programs are under fire, even among public billionaires. Mark Cuban and Elon Musk have been swiping at each other on X, formerly known as Twitter. Musk has said that DEI must die. Cuban has said that when done well, DEI will make companies better and more profitable. Let's bring in Frank Holland now for a look at how the backlash is starting to impact the movement. Frank. Hey, Brian, you know, the impact may be a bit surprising, but first I want to focus on some of the data.

So we have seen some progress, an increase in black senior managers and employees over. all on Wall Street since 2019. But the so-called War on DEI is impacting some programs that help to fuel that increase. Companies are also trying to figure out their legal risk. In August, activists Edward Blum fought a lawsuit against the Fearless Fund, his claim, the VC that focuses on black female startups is guilty of racial discrimination. No, we've already seen the financial impact of this lawsuit on us. We have had somewhere upwards of eight figures of potential commitments being removed just due to litigation. People have dropped out left and right.

So the concerns over legal risk are certainly a real thing. Also, the Supreme Court decision against affirmative action is just another factor. The Black Economic Alliance released a legal toolkit to help companies evaluate their DEI strategy. Co-chair Charles Phillips says CEOs, they're not eliminating DEI, but some are recalibrating and rebranding. But right now, people feel like let me step back a second and reassess. Not everybody. There are some CEOs who have called us and said, we're going to keep plow on the head. We may talk about it differently.

Some of them want to reassure us because they'd make commitments to us. And I said, fine, however you have to do it, as long as the work is getting done, you can call it what you want to call it. I've spoken with a number of pipeline programs, including MLT, one of the biggest. They tell me they have seen a change in enthusiasm, but last year, MLT saw a 60% increase in student placements from Wall Street, banks to other big companies, including Apple and Nike. So, Frank, if you say that they're doing some recalibrating, what exactly can you give us some

specifics of how they're looking at this now as opposed to in the past? Well, I just want to be clear. Charles Phillips, others have told me that companies that have been committed to DEI, they remain committed to DEI. Some have looked for opportunities to maybe pull back on their efforts. So with that said, the companies that remain committed, sometimes they just have to call it something else. Maybe it's not so much focused on rates, or ethnicity or gender, but there's some other factor. But the general idea here is that there's many companies believe that there's untapped talent out there, and if they create programs, they can tap into it, and that will help their

company increase profits, increase leads, just increase things overall to their benefit. Okay, I got it. Frank, thank you very much. Thanks for bringing us. That's an important issue. Well, Stella had Coles shares are popping midday. We'll tell you why. That's coming up next. So Coles, is that the highs of the session right now, is Reuters reports. activist hedge fund Vision One management is pushing the company to sell itself. The activists are also asking for representation on the retailers board.

This is according to this Reuters report, we've reached out to Coles and the activists. We will keep you updated as we learn more. But Brian Courtney Mather, who is the CEO of this previously, worked with Icon Capital, Goldman Sachs. Also, chairman is the former Canadian Prime Minister, Stephen Harper. Wow. Interesting fun. Yeah. I'm sure you'll have more on it.

Thank you. Hey, folks. Thank you for watching, Power Lynch. I'll see you on last call tonight at 7.