Power Lunch - S&P Watch & Sundar Pich(ai) 2/8/24

Episode Date: February 8, 2024

We’re watching the markets today as the S&P 500 pulls back after getting oh-so-close to the 5,000 level for the first time yesterday. Plus, Google CEO Sundar Pichai is ramping up the company’s AI ambitions. We’ll take a look at some of the companies benefitting from Big Tech’s spending on AI. And that includes Arm Holdings, which is flexing it’s muscles today, up more than 50%.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody, alongside Dominic Chu. I'm Tyler Matheson. Good to have you with us, Dom. We are watching the markets today, S&P 500 flat-ish, after getting oh so close to 5,000 for the first time yesterday. Just a hair. Just a hair. One point.

1.1. 49. Plus, Google CEO Sundar Pichai, ramping up the company's AI ambitions. We're going to take a look at some of the companies benefiting from the big tech spend on AI. And that includes arm holdings, which is flexible. flexing its muscles in a big way today. It's up right now, more than 55% in intraday action time. Whoa, and we're also watching Disney, gaining 12% following its results. So much news out of the company. The past few days, streaming deals. Taylor Swift movie writes, Nick Saban joining College Game Day.

Wow, we are going to dig into the company's video game aspirations, which come on top of a potential huge move by Microsoft to disrupt the industry. But we begin with markets and Mike Santoli. And that big milestone potentially for the S&P 500, obviously pushing against the ceiling a little bit, Mike. Yeah, we are, Tyler, just hesitating here a little bit. Not too unusual when you get to a big, widely watched round number index level, although the 4,000 level, which was first crossed above in 2021, I think, it really just blasted off from there. But other thousand point thresholds in this index have created a little bit of a, you know, you overshoot and then come back to test it. Right now, what's interesting to me is, and slightly ironically,

The reason that we have not crossed above 5,000 is because a lot of the big mega-cap stocks that have gotten us to this precipice are not really doing a whole lot today. So today, the Russell 2000 is outperforming. There's so much scrutiny on whether this rally has been too narrow. To me, the average stock has just been kind of going sideways after a great run last year. It hasn't really done anything wrong to suspect that the next pullback will be the big one. We're embracing pretty positive economic news. Earning season seems like it's good enough to ratify first quarter forecast. So things seem intact, even if the S&P itself is probably not far from the point where it's looking a little stretched and overheated.

All right. So, Mike, stay right there with the S&P on track for a 6% earnings growth number. Our next guess says the fundamental side of the S&P 500 hit in the 5,000 mark answers the why earnings are going crazy part. Let's bring in Mike Bailey. He is the Director of Research with FBB Capital Partners. Mike, this is a scenario where we've been talking so much about this notion. that the markets may or may not be valued fairly based upon the fundamentals, but it sure looks like the fundamentals may actually be justifying the levels that we're at. Absolutely. No, I think when you're looking at levels like this, 5,000, it's certainly a big number.

Mike Sten-tell I mentioned 4,000 a minute ago. It is a moment to reflect. We've had a huge move over the past year, and we just, the markets kind of keep running. Are we going to cross 5,000? It could be. There's certainly a lot of things to make people reflect as you're getting close to that, that big sort of level? Is it behavioral? Sort of, in some ways, it's just a number. It's kind of meaningless. It really, you know, whether it's 49-99 or above, doesn't matter. Some technicals there,

for sure. I think we are hitting some technical levels at some stuff to watch. But I would agree with you. I think our earnings, that is the real kind of long-term driver. That's, I think, what we focus on. I think what long-term investors would be more interested in. And that brings us back. You know, how fast our earnings is going to grow this year? Is it 5 percent? Is it 10 percent or more looks pretty good. It's more than nothing. That's a good thing. And so as earnings continue to grow, unless we see some, you know, big, nasty recession or down cycle, earnings is going to grow. Stocks are going to chase those earnings and we're going to continue moving. Likely well beyond 5,000. I don't know if it's today, tomorrow. As long as earnings grow, we're going to again move

exceedingly beyond that at some point probably this year. So, so, Mike, there are a lot of variables here, but interest rates are probably front and center for this. They not only influence valuations, but they influence the fundamentals behind how profits can flow through for corporations. Just how important is the outlook for the Fed to this earnings growth narrative in the markets right now. It's critical for sure. And I think in some ways, we saw a very interesting test of this last week. So Jay Powell comes out, it pours cold water on everyone's hope for near-term rate cuts. What happens to markets? A few days later, we're still chugging along nicely. So I think in the short term, we may be beyond interest rates as a downside risk factor for markets.

Certainly, that's going to come back. We're going to have another Fed meeting. If Jay Powell does this again, if we get another kind of slap on the wrist, that could certainly be a problem. But investors are okay. You know, we're seeing macros looking pretty good. Inflation is coming down. Jobs are good. Companies are growing earnings.

That's enough. So investors are comfortable with that. Even if, you know, Jay Powell dangling the carrot out there for rate cuts, it's a little bit further out. That's okay with markets, and I think we're going to continue to see some upside here. In the end, Mike Santoli, I guess I've learned over the years that earnings growth is really the fundamental driver of stock market performance. Earnings growth plus dividend yield, plus a speculative premium. That's your return there. So far, the fourth quarter earnings numbers have been pretty good. Can it continue this year? Is that what are you thinking? Yeah, they've been

reasonably good. I mean, I think your beat rates are pretty much in the zone of what you have come to expect. It does seem as if we have the makings of it. I keep pointing out, you know, we entered this year at a something like 6% nominal GDP growth pace. You know, the current tracking for the first quarter seems like another above trend GDP growth quarter, at least in real GDP. Inflation still, well, two to three percent at minimum. So you have the makings of earnings being good. The other piece of it, of course, is that just as the market performance has been quite top-heavy, a lot of the impetus for earnings growth in aggregate has been. been coming from these massive secularly growing companies. So you've been able to rely on that for

a while. The rest of the market struggling with some sales growth margins seem like they're getting preserved. So yeah, you have the makings of at least tilting higher in terms of earnings growth. And when that's the case and when, you know, the Fed is at least not tightening and so far rates remain somewhat benign on the yield levels in the market, it seems like usually the market can stay supported, I'll say at minimum. Mike, let me ask you about the stock that I think so much, so much determined the performance of the S&P 500 in the last year, and that is Invidia. Let me turn this to Mike Bailey, if I might.

What if Nvidia, Mike Bailey, disappoints when it reports on February 22nd? That's a big deal for sure. I mean, I would agree with you. It's a mega cap now, Magnificent 7. It's really been a big driver. It's sort of the poster child of AI. So if you think AI works,

Nvidia, that's really concentrating a lot of that value. If there is some disappointment, we get earnings in a few weeks, that is going to send a sort of end earnings season on a really bad note. So the question is that going to happen? It seems like some of the tea leaves at this point look fairly favorable. Companies that are out there spending a ton of money on these chips, they're still spending a ton of money, they're spending even more money. So I think the trends look pretty good for Nvidia, but absolutely this will be a pretty big catalyst. As kind of a side note for what it's worth of the other sort of AI-related company,

arm holdings mentioned up a lot, not in the S&P 500. If it were, we'd probably be on, past 5,000 today. So kind of interesting. True. All right, Mike Bailey. If it's not NVIDIA, you've got your eyes on there. If it's not NVIDIA, then what are the investments to make right now with the stock market hovering at this kind of 5,000 level?

So I think in some ways you can sort of have your cake and eat it too. You can participate in some of these high growth companies. But if there is any type of correction, I think you can hedge yourself. So Google is an interesting company. A lot of growth, not quite the upside as some of the other Magnificent 7 over the last few weeks. However, it's really the only sort of tech mega cap that's trading below the market in terms of valuation. So a lot of durable growth there. You're not seeing a boom-bust cycle, like in some ways you might be seeing with meta. So more durable growth, very nice valuation

below the market. That's a pretty, a little bit more comfortable way to play that growth theme without really kind of sticking your neck out with something that's perhaps more of a boom-bust cycle. All right. Mike and Mike, thank you very much. Bailey and Santoli. We appreciate it. Thanks, guys. Mark, bond yields moving higher today, helped in part by strong jobless claims data. Rick Centelli is with the traders in Chicago. Rick, I haven't talked to you in a whole hour. I know, I know. I'm going through Tyler withdrawals.

One thing I'm not going through, though, is bull market withdrawals. Whether you look at twos, tens, the S&Ps, yields are up in twos, yields are up in tens, dollar index is up. Now, other than today, the S&P, Dow, these are all. Big moves. How many would have guessed it not that many months ago? As a matter of fact, if you look at what's going on right now with regard to the S&Ps, to think that we are a whisker under 5,000 is the high. Harkens back to when we were a whisker below 5% and tens and couldn't quite get to it, which tells us psychological lovers are huge. And speaking of which, let's go talk

to a trader. Paul? Hey, Rick. How's it going? Good to see you. Okay, let's start right with it. Everybody I'm talking to today has one thing. on their mind. CPI benchmark revisions tomorrow and why? Because it demonstrates that seasonalities are off. Maybe there's a lot of data points that aren't telling us exactly the truth about the economy. Your thoughts? I don't know about the commentary on the accuracy, but I will say that for many weeks we noticed heightened interest in this expiry tomorrow. And that makes sense.

the Fed cares about CPI and anything that might impact CPI, people are in tune with. Have you ever seen this much interest in benchmark revisions on a day where the actual data point isn't even coming out? No, we did have notice in the past some reaction to this, but I would say this is a bigger story on our radar than usual. All right, so granted the S&Ps are down a little today. They're up monstrously like NAS. These markets are really off to the races.

My question to you is, is there anything in this scenario that isn't quite adding up right now? I wouldn't say that. You know, it was a big milestone when we broke through 5,000. One thing I would point out is equities are at the high right now for the year, but the VIX is not. So there's still some interest in owning options, owning some volatility up here. Now, when you say the VIX is not, basically... VIX not at its low. Right, right.

So with the VIX being at low, should be a green light for buying. What do you think is going on under the hood of volatility? Well, we've been rallying people trying to get ahead of the fact that there's expectations of some rate cuts. And like we're seeing, interest in this number tomorrow, because the data is going to end up governing that. And if there's less certainty there's going to be more uncertainty people wanting to deval. Now, yesterday we had a 10-year note auction. Today we had a 30-year bond auction. These long-dated auctions have gone very well.

And my final thought is, many I took. who are very worried about debt, deficit servicing debt. CBO yesterday made many traders a bit nervous. Are any of your clients more interested in some of those metrics of late or not? Your final thought? Well, we don't have any clients, but all of that stuff is part of the discussion and part of the analysis when, you know, seeing what's... Real quickly so people understand.

So you're a group of traders that are all trading together in a house but not necessarily doing customer business. That's correct. Awesome. Paul, thank you for joining me today. Dom Chu, back to you. All right, thank you very much. Rick Santelli with the view from Chicago out there.

Coming up on the show, we've seen multiple tech firms announced layoffs recently, but all that cost cutting does not necessarily mean it will stop spending in general. As a matter of fact, some may actually be ready to ramp up spending, but on what? I'll give you one guess. Plus, further ahead, Disney investing over a billion dollars in Epic Games and Microsoft making a potentially massive pivot with the Xbox, are we witnessing the beginnings of a revolution in the video game space? All that's coming up. All right, welcome back to Power Lunch, everybody.

Shares of Alphabet hired today as CEO Sundar Pichai unveils Gemini, a rebranding of the company's AI assets to better compete against its rivals. There's obviously a lot of competition in the tech space. You know, you're going to have Microsoft put products. We compete with them. You know, we are growing our cloud business. So it is a dynamic moment, but you know, the best way to approach it is stay focused on what you can build for your users. So that's how I think about it.

The AI arms race has been huge for chip companies such as Nvidia and AMD, but there are a lot of other companies that stand to gain money as gain as money continues pouring into AI. And that's where we bring in. Christina Portsonapolis. Hi, Christina. Hi. We have seen just over the last two weeks or so just an increase in promises for CAPExmen. So capital expenditures specifically coming from hyper-scalers like Microsoft, a parent company of Google, meta. All of them are promising to spend billions and billions of dollars building out their AI infrastructure.

So you mentioned AMD and VD. I'm going to try not to focus on those two names for a moment because there are other winners now, given how much money is going into CAPEX. There was one estimate the CAPEX total was going to be about $180 billion this year alone with about half coming from those four companies, Amazon included, that I just named. So that's why you've seen this massive run-up in other chip names, just within the last month or so. Arista networks, for example, their earnings are out next week. They're part of the GPU connectors. So they make that. Then you have, I know you talked about it on this show in particular, but Super Micro, for example. This is just showing you on the screen, the CAPEX estimates for these big hyperscalers.

But Super Micro, that stock is up, what, 150 percent? And that is considered a server manufacturer? And Taiwan Semi, they make, over the last year, Taiwan Semi was pretty flat. But look at it. Just since this year up 28%. Why? Because they're not only making the GPUs, a lot of the chips for the smartphones, but also the advanced packaging. So there are other AI winners and why so many investors right now are hungry for something beyond Nvidia.

Beyond Nvidia. Well, because some are saying they're trimming their portions. I've seen comments, Morgan Stanley. Yes, they put their price target to $750. but they're saying, you know, the bar is so high for NVIDIA that they're going to have to not only beat, guide higher, and then you have to deal with the supply constraints, too, that may restrict that upside in revenue for NVIDIA specifically.

It's not just that. I mean, how many of these companies, the hyperscalers, the big guys out there, right, are saying that they're going to try to do some of this development in-house. Spend the money, yes, alphabet, amongst Open A. Open A.I., among others, you know, out there's saying that they're going to try develop these chips on their own. Open AI may have some type of announcement with Intel, though,

because Open AI, Sam Altman did announce that he'll be going to Intel's Foundry Day, which is coming up soon. I'll be there on February 21st. So maybe there's some type of connection going on there. But yes, to your point, that poses a threat to a lot of these names like AMD and Vida in the, you know, the three to five-year range because they're going to be building their own stuff in-house. Why use these players? Yeah.

All right, Christina, thank you. I didn't get to Arm too. That's soaring as well. Well, you want to talk about Arm? No, please. Because that's one of the big movers today. And underrepresented AI play. Like 48% or something?

Yeah, it was, what, 56%? The last thing I checked, we could probably bring that up. But the reason, and armed for growth, whatever, play on words, pun. But I know. I was told that I need to stay away from military stuff. But growth and royalty revenue, the need for more power efficient AI data centers, Arm is known for the power side. And it's important for our viewers to know that Arm does the blueprints, like the architecture.

The design, exactly. So they're not actually building those chips. Their design is in everything from your smartphones to your car. And so what they showed us is they're actually seeing an increase in licenses and royalties because of this AI push, because people are looking for more power efficient systems, because AI is moving to the edge. And that's why a company like Arm can benefit and why the stock has just soared. And a big winner? Today.

Today. Yeah, today. Just since yesterday after the earnings report last night. And SoftBank owns... Sort of flat for the year until yesterday. Precisely. But that was because it was people were sleepy on this name. They didn't see it as an AI beneficiary.

And then all of a sudden, oh, they realized. Well, India sucks all the energy out of the room. Well, because we talked about a lot. It is the number one for Jeep. Do we talk about it a lot? You don't care? No. You remember what the IPO price was?

51 bucks a share. Which is incredible. Crazy. Where is it now? 600 and something? No, no, no. It's not there yet, but it's definitely in the kind of double-triple range. Isn't that crazy, though?

Invidia tried to buy arm two years ago for 40 billion. In video. Oh, may I get confused? All right, thanks. Good. Glad we got the arms in there. Two arms. All right. Coming up, the Super Bowl, Circa, 2024, some huge money on the line this Sunday. But we are talking off the field and on the books. Further ahead. We'll speak to the CEO of Circa's sports book. We'll be right back. Welcome back to Power Lunch. The U.S. was the world, was the world's biggest exporter of LNG or liquefied natural gas. and Total was the company leading the way. But now the Biden administration is taking steps to limit that export of U.S.LNG. Our Pippa Stevens actually spoke to the company's CEO and talked a little bit about the weird and evolving dynamic around liquefied natural gas.

It was supposed to be a savior in many ways. But what happened? Yeah, Dom, well, it might come as a surprise, but French energy giant Total energies is actually the largest exporter of U.S.LNG. and when I spoke to CEO Patrick Puyane earlier today, I asked him about the impact of the White House pausing LNG approvals. It's a temporary measure which will have no immediate impact. But again, I think trust is fundamental in these big energy transfers. And for Europe, it would be a pity to go from, I would say,

lack of trust from Russian gas to an issue with U.S. energy. He added that ultimately it could be damaging for, security of supply to Europe. Now, since the Moss's October attack on Israel, Brent crude is down 3%. But Puyane said the costs of rerouting ships to avoid the Red Sea is driving up prices in European markets, where diesel is up some 15% this year. Now, Total and other European majors have been more aggressive on investing in renewables, while many U.S. players have doubled down on fossil fuels.

When commodity prices were high, American energy companies soared, while European companies lagged. But Puyanei says that the two-pronged approach sets the company up for the future. Total energy's ambition is to demonstrate that it's, yes, oil and gas and integrated power. It's in fact the energy of today that you need as consumers and preparing the energy for tomorrow.

That's our strategy. And I'm convinced that the market will recognize the value of it. That bet includes offshore wind. And at a time when many projects are, being canceled thanks to surging costs, Total is moving forward, including with one off the coast of New Jersey. Puyanei said TOTO benefitted from a later start, enabling it to lock in more competitive prices relative to the early movers who he called too optimistic. Puyenne also said that funding from the Inflation Reduction Act will help make the project profitable.

But definitely a divide here between what the European players have done and what the U.S. companies are doing. So remind me, when the administration put a pause, they put a pause on the do. development of new facilities, right? Yes, exactly. To export LNG. Exactly. So the current rate of LNG production in the U.S. will remain where it is. That's correct. This pause is not going to impact any of our current LNG exports, and it's actually not going to impact total immediately because the project they have under development right now, the Rio Grande is grandfathered. Is already being constructed? And so this permit is only the, sorry, the White House's approval pause is only, is

only for projects that are in front of FERC right now. So that's only a few projects. But what it does is it creates uncertainty longer term. And what you need with energy contracts, what Puyenna was saying, is that these are very long decade-plus contracts in place. And so if there's any sense of it might not be this way going forward, then foreign players might say, hey, it's not worth it. Exactly. You can't plan. You can't play. You're not going to invest billions. It's billions, exactly. And so you're not going to invest if you don't have that clear. If you think they're going to shut it down. I guess the environmental lobby would say, hey, to the extent that you are continuing to build LNG terminals, even though natural gas is a better, cleaner fuel than coal, it's better and cleaner than lots of things,

it would still mean increasing output of fossil fuels. That's right, because it signals a long-term future, because once again, since these contracts are, you know, multi-year, multi-decade, if you're signaling it's okay to build them, then we're going to have that gas is going to be used. used for years to come. All right, Pippa, thanks. Appreciate it. All right, let's get over to Kate Rogers. CNBC News Update.

Hey, Kate. Hey, Tyler. Oral arguments are over, and court watchers say a majority of Supreme Court justices today seem to indicate deep skepticism that Colorado has the power to remove former President Trump from the ballot because of his actions trying to overturn the 2020 election results. The high court took the case on an expedited basis and a ruling is expected within weeks. The mandatory retirement age for pilots will remain.

at 65, at least for now. The Senate Commerce Committee today voted not to raise it to 67. The committee also approved legislation that increases safety inspector in air traffic control staffing. And a federal judge today denied Peter Navarro's request to stay out of prison while he appeals his conviction on contempt of Congress. The former Trump trade advisor was sentenced to four months in January. The judge said that unless an appeals court steps in, he must report when ordered by the Bureau of of prisons. Back over to you, Tyler. I'll take it over here. Kate, thank you very much for that. In television versus Atari, Atari versus Sega, Sega versus Nintendo, Nintendo versus Sony.

Sony versus Microsoft, you get the picture. The console wars have been raging since the 70s, and while the fronts and everything else and the companies have changed, the fight has remained the same, at least until now. Could the war finally be over on consoles, the hardware for good. That's coming up next. Welcome back, everybody. Usually when you hear the phrase next gen in the gaming world, you're talking about the next big console release. But right now, we might be getting a teaser for the next gen of the entire industry. Disney investing over a billion dollars in Epic Games, one of the most impactful investments from a traditional media firm getting into the

gaming space yet. Is it too little too late? And with that comes, with that money comes Disney's massive library of IP, which can be turned into gaming content. At the same time, evidence growing that the console wars could finally be over, Xbox seemingly giving up on title exclusivity, but could Microsoft just be gearing up for a new war, won over content distribution? Here to discuss all of this is Brandon Ross, media and technology analyst at Lightshed Partners, and our Steve Kovac, also joining us on set. Steve, why don't I start with you?

why don't you take the Disney foray first, put it into context, tell us what they're doing, what this is going to enable them to do, and why they haven't been more forthright or forthcoming in gaming to this point? Yeah, this is a, let me tell your story of two Bob's. Yeah, okay, we have Bob Chaypec who spoke to our Julia Borsden back in 2021 when he was CEO of Disney. Julius very smartly says, what's your metaverse strategy, Mr. Chapeck? His answer was Disney Plus. Let's fast forward to what Mr. Iger said. The other Bob said yesterday.

Well, we see an opportunity in gaming and these interactive environments. We understand that we have this great IP that we're already licensing to gaming companies. We're licensing it to Sony for Spider-Man 2, which is a massively popular game, made tons and gobs of money. We're working with Fortnite, which Epic Games makes, licensing our characters and IP to them. This is just going to expand that and create this kind of fly-of-wheel for, customers to have new ways to experience it, sort of like they experienced it in a theme park, a Disney theme park. You go and experience an IP there. It has this positive flywheel effect. That seems to be what they're going at. One and a half billion dollar investment from Disney,

Chip, I mean, Iger, the second Bob. Bob, Bob number two, said, or who was really the first who was really Bob number one. Anyway, he said, he basically said, look, this is, this is where, you know, this is, we're investing in one and a half billion dollars in this. though, how much Epic Games, which is a private company, is valued at. And I'll also give you one other potential headwind here. They made the point yesterday, Disney did, that three billion gamers in the world. Well, most of those are mobile gamers. And right now, Epic Games is in a massive battle with Apple, where the most lucrative game spend on mobile happens. So the big question becomes now is how Disney plays along with that with Epic effectively out of the app store at the moment.

So there's some questions how this could work on a massive scale. Let's bring in Brandon Ross now to kind of talk a little bit more about the dynamic. I mean, you laid out perfectly, Steve, the state of play right now. Is this going to be, in essence, Brandon, a game changer for Disney? Can this fuel the next leg of growth, growth enough that will get some of these activists involved in the company to say, okay, maybe things are going in the right direction? Look, if you go back to what happened in the streaming wars, Disney was late to compete with the likes of Netflix. And Bob Eiger has realized the mistakes that he's made in the past and wants to move Disney forward. Now, probably with a lot of activist pressure to where media is going.

And that is very clearly a 3D interactive world. We could see what's happening on Roblox, which is putting up, you know, 20,000. 20% year over year compounded growth in users and time spent because younger generations are hanging out and socializing in 3D worlds. And Iger needs to be a part of that. Brandon, we talked to let's switch a little bit to Microsoft in the console wars. You know, Dom set it up, you know, Atari versus this and so on and so forth. What's going on there and what is Microsoft likely to do and why? Yeah, so Microsoft has been getting killed on Xbox by PlayStation.

This has been going on for years, but has been especially evident in this cycle. I think last year, PlayStation sold double the amount of units, then did Xbox. So Xbox has kind of given up and said, look, we want to be, again, like Iger moving to where the puck is going, we want to be ready for the next generation of distribution of this content. They believe that is in subscription, and it's also in the cloud where they're very strong. Unfortunately, subscription really hasn't taken off the way they imagined yet, and they have a lot of first-party IP. So what do they need to do? They need to make money off that.

So putting their games on others' consoles is a way to kickstart that. that and buy them some time and hopefully expose the new players to the IP they have that they could get a good deal on by playing Game Pass. So, Steve, am I intuiting this correctly? And that is that we're going to a platform agnostic world? Yes and no. If Microsoft, as expected this week, also we're running out of week from the denounces, but they said they were going to announce it this week, does what we think they're going to

do and say, you know, we're going to take some of what we're previously talking about. You can only play on Xbox. Now we're going to put them on our competitors' machines. Sure, Sony's not going to do that, though. Sony's the market leader because it has those exclusive tiles. And, oh, by the way, this is, like, one of the core arguments FTC had when they tried to bust up the deal between Microsoft and Activision, saying, Microsoft is just buying Activision, so it could... Call of Duty.

Call of Duty, put Call of Duty, take it away from all these others. Microsoft from day one said, no, we're not going to do that. We're not going to do that. We're not going to do that. FTC, you know, today they would say they weren't really arguing it, but they were. And they said it's about cloud gaming. So let's get, let's get into what they just said about cloud gaming here. That is the idea of Netflix for video games. So it doesn't matter what you have, as long as it's a thing with the screen that can connect to the internet, you're going to be able to access. Buy that title. Or, no, stream it. You pay 20 bucks a month or whatever they end up charging for it. And you can stream it to anything. Subscription. Subscription. Netflix for gaming. That is where they think it's going. But technically, it's not there yet. You can try it now. It's kind of janky. It's slow. It doesn't work as well with gaming yet. It'll get there

eventually. And the belief is it can be beginning of the end of the console wars. You still either need a controller or a VR headset at some point to do all these things. But controllers are 50 bucks, whereas consoles are 500 bucks. All right. Brandon Ross, Steve Kovac, thank you both very much for that conversation. Maybe they're not over just yet, but they're getting perhaps closer. up in the show. We're going all in on Super Bowl 58. We'll head out to Vegas to talk betting ahead of the big game with Circus Sportsbook CEO Derek Stevens. Power Lunch is back after this break. It's time for today's three stock lunch where we take a look at three big movers of the day. And here with our trades is Ava Ados, the chief investment officer of ER shares.

Ava, thanks for being here. First up, we got Wynn Resorts, the casino resort operator, beat profit estimates on improved Las Vegas and Macau operations. Shares of Wynn up about seven percent today. So what does it look like on that front, Eva? Well, it's the seventh biggest performer of the S&P today, but I have it as a whole. The reason is their growth is flat across older assets. Biggest asset is Macau and China that didn't live up to its expectations. Second biggest is Vegas. And third biggest, which many people don't realize is Boston. That's two-thirds of the assets of Vegas. And the reason why they have the same revenues as where they were five years ago, but their profits are less than.

and half of where they were five years ago is online betting. Online betting companies such as Panduel and Drag Kings, which we own, are taking away market share. And it's really hard for these brick and mortar old-fashioned casinos to compete. And they have high capital expenditure. Their markets are coming down in the best case scenario that's a hold. Best case a hold on win. Let's go next to PayPal reporting better than expected fourth quarter results. Disappointing guidance there. Shares down, Ava, about 10% today. Your trade on that one. PayPal. That's a sell. Bad day today. Management said that they're going to have a profit growth pause. They're trying to recalibrate their internal operations and find new growth areas.

Again, I think when it comes to pay tech companies, back during COVID, we built in great expectations for them. It's not just PayPal. It's AD in the European competitors tribe. They're all, none of them met their expectations. And so I think they're now struggling, active users are coming down. Big competitors such as Apple Pay and ShopPay are coming after the big margin areas, which are the branded areas such as Venmo and PayPal. In this case, I have it as itself. Okay.

And finally, Ava, let's turn to high-end fashion, luxury retailer, Ralph Lauren, beats Q3 results, pushing shares up more than you can see there's 17% today. what's the trade on Ralph Lauren, Eva? That's a hold, another hold in this case. I think Ralph Lauren, as we see, their growth is not where it was years ago. Their margins are coming down. I think that's a significant change. They have competition from e-commerce areas.

So overall, in the best case scenario, again, this is a hold. All right. Eva Ados, ER shares with the three-stock lunch. Thank you very much. We'll see you. Soon. All right, still ahead on the show, Olympic winners will get to take home a monumental prize this year. We'll reveal the one-of-a-kind reward and the pictures tell a thousand words. That's up after the break. Well, we've only got about two and a half minutes left in the program

and several more stories you need to know about. The consulting firm McKinsey and Company, beginning with number one, has warned about 3,000 of its staffers that their performance was unsatisfactory. And they will need to improve moving forward. The long wagging finger is in their faces. Employees in this situation are typically given about three months to turn things around. Then a more serious conversation may be in order. It's interesting and ironic because McKinsey is the one who tells companies about how many people they need to get rid of. How they need to have.

But 3,000 employees are putting 3,000 of them on notice. And they're putting out a release saying we put 3,000 on notice? All right. So here's the context. They hired, like many other companies, aggressively over the last few years. so proportionately, they're still kind of up there. All right. Anyway, the 2024 Olympic winners will get to actually take home a little piece of Paris with them.

This year's gold, silver, and bonds medals will be inlaid with a small piece of the Eiffel Tower itself. The pieces were taken from parts that were swapped out of the monument during a past restoration, little bits and pieces. But you can take that and recycle it and make it charming and storyful in a gold or silver or bronze metal. A little piece of the iron from the Eiffel Tower. So that when you watch it on NBC Sports, you can see those medals with the Eiffel Tower. Absolutely. You'll know something that maybe your friends don't. All right, stocks had a solid run in 2023, but that might not be the best news for seniors as retirement funds swelled.

So did minimum required distributions. And since RMDs are taxed like regular income, larger distributions could bump eligible seniors into a higher tax bracket. So get ready for that if you had to take one of those forced distributions from an IRA or a similar program. I guess you could some somewhat say those are first world problems. because you're making more money. Making more money. Yeah. Don't object when you're paying more tax.

No. All right, and New York City may finally start its controversial congestion pricing this summer at a hearing on New Jersey's lawsuit to block the plan. An MTA lawyer said New York is aiming for a mid-June start date, but the suit could push things back even further. We live in the area. We know just how controversial is.

This is going to be a real controversial topic. We will see how that one goes if it goes at all. Thanks for watching Power Lunch, everybody. All right, guys. Closing bell. Scott Walker starts right. Thank you.