Power Lunch - Speaker Pelosi’s Visit to Taiwan Rattles Markets 8/2/22

Episode Date: August 2, 2022

China reacts harshly to Speaker Nancy Pelosi’s visit to Taiwan. We look at the market reaction. Plus Congress finally passes the CHIPS act. Will it help semiconductor manufacturers in the US? And Chesapeake Energy is up 40% this year. We’ll hear from an analyst who says the stock is still a top pick. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I'm Contessa Brewer, along with Tyler Matheson, and here's what's ahead. Stocks lower right now, bond yields rising. Markets, though, worrying about potential fallout from Speaker Nancy Pelosi's meeting with Taiwanese officials. China has some tough warnings for Pelosi. And we'll examine what another U.S. China spat could mean for the markets. Plus chip stocks having their worst year since 2008, but Congress finally passing the Chips Act, will it be enough to boost chip manufacturing in the U.S.? And add to that, AMD reporting results after the bill. We have a lot to talk about here, Tyler.

Oh, we do, Contessa, welcome to you and everyone. Welcome to Power Lunch. Stocks are lower today. But they are off the worst levels of the session. The Dow had been down 376 points. Not so much right now. Big moves driven by earnings to tell you about. Uber, the big winner.

It is up 15%. Pinterest up 10% as numbers were not as bad as feared. We'll talk more about those names coming up in three stock. lunch in just a little while. Aflack, also a gainer as well. But there are some losers too. Molson Coors among them. Worst day for that stock in more than two years. Sales fell short of expectations, you could call them flat. Zebra technologies and sealed air also falling following their earnings reports. Moving on, U.S. Speaker Pelosi landing in Taiwan today, the highest level U.S. official to visit that country in a quarter century. The move, a bold one, and it could

damage the already tense relations between the U.S. and China. The country has strongly objected to the visit, China, that is, and has issued numerous warnings. Many of them sounding very military, saying it severely impacts the China-U.S. Foundation, violates the one-China principle, seriously damages peace and stability in the Taiwan Strait. Chinese government officials have also warned the visit could lead to a, quote, very serious and grave, serious situation and grave consequences. And this could be the first sign of potential reaction. C-A-T-L, a Chinese battery maker, reportedly pausing an announcement on its plan to build a factory in the United States. So economy as a weapon here, potentially. The plan intended to supply Tesla and Ford. Both those

stocks turned lower intraday when these reports came out. With us now is CNBC contributor DeWordwick McNeil. He's a managing director and senior policy analysts with Longview Capital. Mr. McNeil, welcome. Good to have you with us. Good to be here, Tyler. What is, we can see some of the downsides of the Pelosi visit. What is the potential upside? What is the best case that comes out of this for Speaker Pelosi and the United States? Well, Tyler, it's a very good question. I think it's important to look at the Speaker's trip in the context of what has been going on for the last decade since Xi Jinping took power. And that's increasing pressure on Taiwan economically, diplomatically, and militarily. And so many people believe that the Speaker's trip is an attempt to reassure Taiwan to push back on this behavior and show support for the Taiwan Relations Act, for Taiwan's democracy, and to ensure. sure that Taiwan understands that the U.S. will not allow for its future to be unilaterally determined

by Beijing. And I think for the speaker, she has seen over her time in Congress how walking on eggshells, trying to do things that allow China to dictate when, how and where we engage Taiwan, is no longer something that she's willing to do to allow China to set the terms of engagement. So, again, I do not believe that much will change, but certainly there will be a stronger signal sent of support for Taiwan. So, Dr. Warwick, why now, and is there any connection to what's going on in Ukraine? Why now? That's number one. And number two is, why do it if the administration and the military are at the very most lukewarm on this at this moment?

Yeah, that's a fair question, Tyler. Look, there are a lot of people who say, why now, why this, and why her? But from experience, I will tell you, Tyler, that there will never be a good time, never be a good way, or for that matter, a good person to show support for Taiwan and Beijing guys. And I think the speaker has made a calculation that the long-term cost of going far outweighs a short-term risk of not going. And you raise Ukraine. It's an interesting case, Tyler, because I think most people will say that it is time for strategic clarity around Taiwan, not what we've seen in the past, which is strategic ambiguity, and that this clarity perhaps will help to establish what the U.S. is prepared and not prepared

to accept in terms of setting conditions towards Taiwan. Although what we've seen, you know, when President Trump decided to use tariffs in the spat back and forth with China, is that U.S. companies often pay the price. We saw this with Raytheon and Lockheed earlier this year because there are non-military tools that China then uses to punish the United States in my universe covering casinos. You've got three U.S. casinos that are in the last. licensing process right now. They need their licenses renewed. They have till the end of the year to do that. And my sense is that any sort of tension with China complicates those negotiations.

So how do the U.S. companies that do business and depend on China think about navigating whatever comes next? Contessa, you hit the nail on the head in terms of what we, particularly our viewers, should be focused on. A lot of us are looking at military responses to this trip. But as you will point out, there are a number of non-military responses that China has in this toolkit. You guys will recall that China passed an anti-foreign sanctions law. So we should be prepared to see China use its economy, its market, as a way to push back on this trip. You know, the speaker is not in Taiwan alone. There are other members from Congress on this delegation.

So we could see China looking at businesses in those districts and targeting those businesses for some sort of retaliation. So I think it's an important point that our viewers should be aware of and they should be on the lookout for some sort of economic response to this as well. I know this isn't your area particularly, but set aside whether you want to invest in China and Chinese stocks right now. What about owning stocks based in Taiwan, including Taiwan semiconductor? Is that something that you'd feel comfortable with, more comfortable with today than you did yesterday?

What? Well, it's a good question. Investments are not in my area. National Security is. And I will tell you, though, that the semiconductor space is such a strategic hot button issue for Taiwan, for the U.S. and China in that relationship. I suspect that these activities will make those investments a bit more risky. but the U.S. is certainly determined to continue with its investments in this space. And I think Taiwan will as well.

But this is complicating all sorts of things with respect to China at the moment. Mr. McNeil, great to get your perspectives on all of it, including stocks. I knew it was an area where it's not your native space. But thank you for your response nonetheless. Thank you, Tyler. You know, I find it very interesting, Contessa, that I believe the last high-ranking, U.S. dignitary to go to Taiwan was Newt Gingrich. And I can't think of two people more opposite than Nancy Pelosi and Newt Gingrich.

But really using their power as Speaker. Doing the same thing. Yes. And you have to wonder what are the conversations going on between the White House and the Speaker's office that would, because as you know, foreign policy truly belongs to the executive branch. It does not belong to the legislative branch. midterms are coming up. What's the calculus here for the White House and where it concerns Nancy Pelosi? And the White House seems to be saying a lot, saying a lot, well, this is a separation of powers issue here. We cannot Bigfoot Nancy Pelosi. Well, I'm not so. That seems like a little bit of excessive politess. This feels like I'm going back to my old days talking about politics and foreign policy here.

But you heard Duardric bring up, though, the semiconductors and the world's most valiantactors. And the world's most valuable semiconductor manufacturer warns that an invasion of Taiwan, Tyler, would have a catastrophic impact on chip production. In fact, the chairman of TSM tells CNN, if China were to invade Taiwan, it would render the TSM factory, quote, non-operable. He says you can't take it by force. A number of semiconductors are under pressure today. But one outlier is AMD, which is trading higher ahead of its second quarter report after the

The chip ETF, SMH, is down more than 20% this year on pace for its worst year since 2008. So how important are semiconductors to the broader markets performance? Can markets even rally if the chips don't participate? Let's bring in Vijay, Rakesh managing director at MZuo Securities. Vijay, good to talk to you today. Is there an immediate impact because we've already seen such incredible pressure on this industry with supply chain and logistics? what happens as an immediate result of Nancy Pelosi's visit? Thanks for having me on, Contessa.

So I think, you know, definitely it ratchets up the tension quite a bit because, as you mentioned, TSM, which is for us covered by Kevin Wong out of Hong Kong, they are almost 50 to 60 percent of foundry capacity in the world. So they obviously make us on the leading semiconductor suppliers like Qualcomm, AMD, NVIDIA, you know, microchip, NXPI. So you name they are the leaders in the space. And so it obviously becomes a big overhang for that supply chain. In the near term, I don't see much impact unless the situation escalates.

But it also underscores the need of the Chips Act, right, of bringing on-shoring strategic supply, having onshore, you know, supply for all these, for the data center side, for the GPU, computing side, etc. So it just underscores the time-sensitive nature, the strategic nature of having onshore manufacturing for semiconductor supply. Well, and there you have the president and Congress, you know, now it looks like Nancy Pelosi putting the money where the mouth of Congress and the Biden administration was in terms of supporting some anti-competitive efforts in the United States. I'm just curious, this all comes at a time when we're hoping to see, and a lot of U.S. companies are that China reopens in the wake of these COVID lockdown. So that would be, what,

another tailwind for the chip sector if we end up seeing China reopening in spite of the tension with the U.S.? Yeah, I think, you know, it's funny. Economics is always a two-way street. I mean, China has a big market for semiconductors. But on the flip side, you know, some of these geopolitical tensions also mean some of the cross-border investments are getting restricted, right? you can see export restrictions being put on the semi-cap equipment side. But on the flip side, you have a reopening in China helping many of the other chip suppliers. On the flip side, you talked about how some of the investments from China into the US in terms of battery investments are getting might be put on a pause.

So there are all these cost disruptions in the space, not something that investors really like. But overall, I would say definitely China is a huge, huge market is definitely a green field for many of the U.S. chip suppliers. But definitely underscores also the need that we need to have our own supply here because there's major manufacturing hubs on PCs and servers in China and also foundry capacity in Taiwan that are susceptible to these disruptions. I learned years ago from the great late Jack Bogle that there are three things that determine a stock's total return. One is a earnings growth, two is dividends, and three is the PE ratio or the speculative premium that people

are willing to pay for the value of the stream of earnings. If you look at the great companies, the great companies in semiconductors, and I would include AMD in there, I would include Micron, I would include Nvidia in there. Their earnings are still growing very nicely, aren't they, VJ? To the extent that they have dividends, they're still paying them, aren't they? And And what has changed is that speculative premium. Over time, do you not expect that investors are willing, are going to want to pay more for that dependable stream of earnings for those quality companies? Yeah, most definitely. And thanks for that question, Tyler.

I think definitely the investment paradigm, paradigm, and landscape has changed quite a bit. I think from the times of Jack Bogle. But I think, you know, what investors definitely look for is the longer term technology road. especially in semiconductors, right? So the names you mentioned, AMD, NVIDIA, Qualcomm, Broadcom, and, Credo, these are all leaders in their space, and these are names that investors really flock to. And so I think once that disruptive technology roadmap, the strength of, you know, product portfolio is there, that long-term roadmap is there, then investors go down and look at valuations,

etc., to support that. And so I think I do agree that once we get through some of these stuff, some of the outlook, weaker outlooks are in these stocks. Investors definitely look to add these names in the long term. Count me among the flockers, okay, because I'll flock to those guys. Vijay Rakesh of Mizuho, thank you very much, sir. We appreciate it. Usually when someone says you flocker, it has a totally different meaning. Meet the flockers, right? All right, coming up, China tensions, giving the market something new to worry about. So what about the old worries up next? We'll hear from a market veteran who says inflation is peaking.

but the economy could be weak for a while, and he's got names to buy right now. Chesapeake Energy is out of bankruptcy, soaring this year, 40% higher. We'll hear from an analyst who says the company has cash, it's got gas, it's got potential. In fact, it's the energy to stop with the most generous return on capital. He'll join us when Power Lunch returns. Welcome back to Power Lunch. Stocks off the session lows, but the Dow's still lower by 250 points. investors keeping a close eye on inflation as they search for opportunities in the market. Our next guest says that while there are signs of inflation rolling over, it's not necessarily

for a good thing for all companies. Let's bring in Jim Tierney now. He's the CEO of U.S. concentrated growth at Alliance Bernstein. Alliance Bernstein. Hey, it's good to see you here, Jim. Talk to me about why inflation rolling over doesn't benefit everybody. I think when you look at companies and what they've sold over the last couple of years, they've sold almost everything they could get at full price.

You're now going to have a heck of a lot more discounting. We've heard that from Target. We've heard that from Walmart. And margins are going to be impacted. So great for the consumer, not so good for someone that's trying to sell goods or stuff at full prices. We know that there are a lot of companies that have talked about trying to whittle down on stuff. that they have in their warehouses and they just don't need anymore. What does the discounting do for them? Like we've heard it from Walmart. I think when you look at the consumer, the

consumer is going in two different directions. They are paying for gas. They're paying for groceries, which are costing a lot more. But they're also going on vacation because they want to make up for those experiences that they've missed out on the last two years. So the big middle where most of the spending was the last couple years, it could be a long period of time before the consumer goes back to that. And we heard that from Weber, we heard that from Best Buy. So I think this is going to be more prolonged than the market things. What about the auto industry in particular? What impact do you think this has there? And again, one of my specialty coverage area is insurance, we've seen the inflationary pressures of autos, then translating to inflationary pressures

on the auto insurers as well. So there are a couple of things going on with the auto market. You just can't get enough cars because of that, the discount to MSRP has all but evaporated. And in many cases, you're paying a premium. As supply comes back into the market, my guess is prices are going to normalize over the second half of this year and into 2023. And that will probably bring down insurance prices as well. But we've been waiting a long time for those auto inventories to come back. I mean, they were saying this a year ago. without a doubt it's three years of global auto production in the 75 to 80 million car range.

We were producing more than 90 million cars a year back in 17 and 18. So it has been year after year. It's been excuse after excuse. But when you look at chip shortages, when you look at COVID issues, when you look at war in Ukraine, all of those have conspired to reduce production. It will come back on because the need is there. Can I guarantee that it'll be 85 or 90 million? No, but we're headed in that direction. As you look into the winter, both here and in Europe, what do you see and how do you think consumers are going to be affected by whatever happens with gasoline is one thing? But what happens with the heating price that you pay for your house is quite another, and it could be a real jolt this winter.

When you look at the inflation and the impact that it has, particularly on the lower end consumer, it's devastating. And that's why I think you have to look for companies that have real secular growth, that have real tailwinds, that have products and services that are necessities as opposed to nice to have. I think Amazon's in a good place because AWS is the driver of that company. And you look at the retail side, they're shrinking into resumed profitability. And that's a good thing. And quite frankly, what we're hearing about Prime Day was that they moved a lot of units. So it feels like that's back on the right track. MasterCard.

We talked about people wanting to have experiences, wanted to go on vacation. When you cross a border and use your MasterCard, that's a very profitable transaction for them. So those are two companies that I think are less exposed to some of these worries. Jim, it's good to see you. Thank you for the advice. Thank you. All right, a pin win situation, Pinterest's ad business, getting attention from analysts and one very big name investor. We will trade that and more in today's three stock lunch plus sunny skies for solar stocks.

Those moves are next. Welcome back to Power Lunch. It's sunny skies for the solar stocks today led by shares of Sunpower. The company beat on earnings and added a record number of customers, including an all-time high. for new home installs. The positive news lifting the rest of the sector with Sun Run, N-phase, and array among the winners. Sun-run moving higher despite noted short-seller Carson Block

saying he's betting against the company, Contessa. All right, let's get to Bertha Coombs now for the CNBC News Update. Hi, Bertha. Hi, Contessa. It's a first legal action since the Supreme Court overturned Roe v. Wade. The Justice Department is suing Idaho, arguing the state's near total ban on abortion forces doctors to violate the federal emergency medical treatment and labor act by denying treatment to an endangered pregnant woman.

It does not matter what state a hospital subject to Amtala operates in. If a patient comes into the emergency room with a medical emergency jeopardizing the patient's life or health, the hospital must provide the treatment necessary to stabilize that patient. This includes abortion when that is the necessary treatment. The NFL is suspending Miami Dolphins owner Stephen Ross for the first six weeks of the 2022 season and fining him $1.5 million for having what it calls, quote, impermissible communications with former Saints coach Sean Payton and Buccaneers quarterback Tom Brady about joining the team. And 97-year-old Art McNally will be the first on-field official indebted.

into the Pro Football Hall of Fame. McNally had a nine-year career on the field and remained involved with the NFL as director of officiating until retiring in 2015. Contessa. Oh, that's nice to see. They're so important to the game. Bertha, thanks. A head on Power Lunch, Peak Energy, BP and Devin, both reporting strong profits plus a bullish call on Chesapeake. But as oil prices fall from the highs, can these gains last much longer?

We'll be right back. 90 minutes left in the trading day. We want to get caught up on the market, stocks, bonds, commodities, and what could be a big winner in the energy space? Let's begin with Bob Pisani as markets have turned around from those early losses. Hello, Bob. And the bottom line here, Contessa, is that the markets are getting smacked around by two things. A lot of Fed speak and some nervousness over Taiwan.

Very hard to figure out the impact of Taiwan on the markets, but the sense of nervousness is out there. Just take a look at the S&P 500. You see we were up during the day. Then in the middle of the day, we had some comments from Loretta Mester over at the Cleveland Federal Reserve about the markets here. Put up these comments here because I think this was important in the middle of the day. The Fed officials are furiously trying to talk down this idea that they're done with the rate hike cycle towards the end of the year. And somehow they're going to start cutting rates in 2023. This is the Fed pivot idea. They don't like this idea. It's in the market. They're trying to talk it down.

So Loretta Mester was saying they had a lot more work to do on inflation. Mary Daly from San Francisco Fed said the Fed is not winding down their rate hikes. These don't indicate that we're actually done right now or in any way. Mr. Evans over the Chicago Fed said he might be okay with 75 basis points in September. You get the idea. We're not done. We're going to keep going here. And they're trying to talk this down.

That moved the markets down a little bit in the middle of the day. And the bottom line here is the bond yields have moved up throughout the day. that's putting some pressure on some interest rate sensitive sectors like home builders, for example. So some of the big downside movers today are Pulte, D.R. Horton, Linar, all notably weaker here in the middle of the day. And then there's how far you can push this bullish story. We're up 9% in the S&P in the last 12 or so 13 trading sessions. Even good earnings stories are hard to push forward. Simon Property Group had amazing comments this morning about the consumer occupancy levels were up in their malls,

tenant termination levels are at record lows, not moving up. They're at record lows. The rents are rising. They raise their dividend. They're buying back more stock. And yet the stocks had a nice rally in the last couple of weeks. This was generally a fantastic earnings report. You see it's down about 1.5%.

Finally, the good news is the big mega-cap tech stocks continuing to hold up pretty well. Apple's down fractionally, but Micron, NVIDIA, Alphabet, all positive today. Contessa, back to you. Bob, thank you for that to the bond market. And Bob mentioned it. Yields moving higher. Rick Santelli joining us now. What's playing here?

More in the market or the trip by Pelosi? You know what? It's that and it's technicals. It's a three-for-day contest. Look at a two-day-of-toes, okay? And realize yesterday's high yield was around 292.5. The second today's trade took that level out, the entire curve sold off, pushing yields up.

And as you look at it intraday of tens, What you need to notice is that right around 1130 Eastern, you could definitely see the Pelosi effect as rates moved up. As a matter of fact, let's put a face on this. Yesterday, 10-year note yields closed at a four-month low. So we have all the Fed speakers trying to talk rates up. It was ripe for that. They're good at pushing things down mountains. And definitely the momentum was on their side, reversing some of the flight to safety trade and a lot of really rotten data.

this morning, you know, it's hard to say jolts was rotten, but it's four months running, that job openings are moving lower, lowest in September of last year. And trust me, everybody's putting so much faith that no way can you say we're in a recession with job creation. It just makes Friday's number that much more monumentally important. And if you look at three months to 10, the real recession spread. A wild day. Oh, my God, a 22 basis point range from 30.

down to 08, back up to 29. Listen, if that thing inverts, you're going to watch markets get crazy, just like that spread was today, ultimately, and the dollar versus the end, you can see right there that some of the flight to safety on the Pelosi trade coming out as the dollar moves a bit higher. Contessa, back to you. With energy to spare, Rick Santelli, thank you very much. Oil closing the day.

Pippa Stevens has those numbers for us. Hi, Pippa. Hey, contest, we saw a little bit of a midday reversal for oil as the market looks ahead to that key OPEC meeting. Now, it's so important because the historic production cuts implemented by the group in 2020, which took nearly 10 million barrels per day of oil off the table, expire at the end of this month.

So at tomorrow's meeting, the question of what to do in September and beyond will be raised. And this, of course, follows President Biden's trip to Saudi Arabia last month. With that in mind, WTI is up half of a percent at 94, 33, Brent crude up a quarter of 1% at 131. U.S. gas, though, down almost 7% while over in Europe. It's holding right around 200 euros per megawatt hour. And remember, that's roughly $60 per MMBTU. Now, we did hear from Marathon Petroleum this morning.

The company earned and adjusted 10.61 per share. That's up from 67 cents in the same quarter last year. Still, the company is saying the chances of increasing its refinement. footprint are not high. The stock and Tessa up about 3.6%. Wow, an attention getting EPS there. Pippa, thank you. While crude prices appear to have peaked, benchmark says there is plenty of room to run in shale producer Chesapeake Energy. The firm just initiated shares at a buy ahead of that earnings after the bell today and sees more than a 50% upside as it offers, quote, the most generous return on capital in the energy sector. Let's welcome in the analyst behind that bold call. Joining us now

is Sue Bass Chandra, a senior equity analyst at Benchmark. It's good to see you. It's attention getting. It made headlines. What's behind it? Why do you think there's so much upside? Well, you know, it begins with we're gas bulls. And Chesapeake is a 90% gas once they've digested, you know, some very significant transactions. They're largely on hedge next year, about two-thirds on hedge. But we really like the rebirth of Chesape I think they recognized early on what the energy investor now wants, which is return of capital. And they executed accordingly, made some $5 billion worth of active transactions to gain the longevity and the running room to deliver those capital returns over a long period of time.

And as it turns out, they did it at a point in time when prices were relatively low. So that sort of benefits them today. And so the management here is going to give us outsized capital returns, cash in the pocket, share buybacks. And, you know, I think they typify that, right? In fact, they probably are probably top, as we see, the top return of capital company in the E&P list, give or take. And then finally, you know, a big discount in the multiple, discount. the energy sector, discount to other gas stocks. And I think that's where the opportunity is, is to close that discount and to get that 50% upside to our price started.

This company has quite a history, to put it mildly, Subas, how and who has turned it around? Yeah, right. So it does have history. Maybe that's holding the multiple back somewhat. But it was a different time. It was a time when investors embraced growth, Chesapeake embraced growth. Investors and companies embraced it to own excess in sort of Chesapeake. They paid the price. They went into bankruptcy. That bankruptcy allowed them to shed billions of dollars of debt, equitize it,

and also reduce billions of dollars of very expensive, a mystery or pipeline contract. So they get all that. But when they're using the net effect of it to deliver the highest cash. returns to shareholders, right? They're not doing it to reload, to grow again, to build an empire, and that's the difference. So who did it? Well, at that point in time, you know, the board has a very strong board. But there is continuity in the prior CFO, who's now the CEO, who knows that company better than anyone. And I think that continuity and a very strong board is why it's been

able to reinvent themselves so successful. Is it your number one pick in this area? So in terms of just upside, Southwestern SWN has a greatest upside to our price start. However, Southwestern does not have as much free cash flow, and they don't really have a return of capital program today. Chesapeake trades at the same multiple, even though they have tremendous base yield, very well-yield, insured byback program. That's the mystery. That's what I think, where I think the opportunity is.

So I think Southwestern next year is an excellent performer. P. should close the gap in performance this year. All right. Fantastic. Subash, thank you very much. Shabash Chandra, we appreciate it. And coming up, John Fort sits down for an AI with an AI firm, helping companies break down data. He will join us next.

There's so many cameras moving right here, I can't follow it. Let's talk about gross stock, shall we? Mostly above their lows from early May, but they are far from the heights of late 2021. This week, John Ford brings us up close with a serial entrepreneur who's used to battling back from a tough situation. John. Tyler, Tom Siebel started Siebel Systems 30 years ago, sold it to Oracle for nearly $6 billion.

These days, he's co-founder and CEO of C3AI, a public company that helps customers use artificial intelligence to solve business problems. C3AI stock has plummeted in the recent market turbulence, but Siebel isn't too rattled by a metaphorical beating. On safari in 2009, he was literally pummeled by an elephant and nearly died. This is five tons of elephant. And to this minute, I can see it. I can smell it. I can see the tusk, the hair follicle, the hoof, the eyeball. And so I'm standing my ground, and it was like, you know, we had a little metal exchange.

I was, okay, what are we going to do now? And then the... I mean, I know it probably seems like five minutes, but how long was it? that pause, you think? Maybe three seconds, three seconds. And it's very surreal because you don't really have a place in your brain to put an elephant, okay? There's not a, you know, there's no context for that.

So you're off in a, it's a very surreal space and things move very slowly. And then the elephant proceeds to knock me to the ground and roll me and punch me and I took a tusk through one leg and the elephant stepped on my other leg and my foot came off and meanwhile I'm just kind of holding my head while I be rolled and pushed and basically attacked by this raging elephant which was you know not my best day puts stock volatility into perspective Tom was told he wouldn't walk again but he took an unusual rehab path it's quite a story now with C3 AI Tom faces the challenge of building a growth company in the buzzy artificial intelligence area just as investor sentiment has

turned against younger public companies that aren't yet profitable. While he's expecting an ugly macro environment to get worse in tech, he said C3 is positioned to weather it. When you're running an 80% gross margin business, it's not that difficult to run a cash-positive business. So we can expect to see that. So our business looks pretty good. That being said, we're seeing substantial, and I suspect way overdue correction in tech

markets and in equity markets, I think this correction is overdue. I think it is going to be breathtaking. And I think we're going to see a lot of information technology companies really struggle. And those who do not have a lot of cash or kind of generate cash will likely go out of business. And when it's all, this is a standard plain vanilla tech correction like we saw in 1989, like we saw in 1990, like we saw in 2000, 2002, 2008. He's got about a billion dollars in cash, by the way. C3AI, such an interesting company to watch because it's the type that 10 years ago people were lamenting you couldn't find in the public market anymore, market cap under $2 billion, growing pretty quickly, tech forward.

A lot of people betting against Tom Siebel at the moment, though, guys. I have such admiration for entrepreneurs like Tom, who I remember interviewing. way back when, 25 years ago, when he was with Siebel Systems. He, as you said, he sold out pocket and now he's doing it again. It's that serial entrepreneur spirit that I find fascinating in individuals like he. You know, it's funny. He's got a picture of an elephant behind his desk in his office. I bet he does.

And he's got a big, like, life-sized almost mural down a floor below of the actual scene where it happened to him. as a reminder that he sticks it out. You know, John, I'm just interested, first of all, that it was in a very compelling interview. But when you've had that sort of near-death experience, has it changed the way he sees risk? Because once you literally face down death,

not just failure, but death itself, it seems like you would have to, like all of the recalibrations are different from that moment on. I think the interesting thing to me, most interesting thing, aside from the attack on his story, was how the conventional wisdom was he wasn't going to walk again. And doctor after doctor, he said, told him, we're going to have to take that leg off, actually. It's not going to. And he said, okay, you're fine. I'm going to find the person who actually developed the equipment that goes to rehab this. And that person said,

okay, here's the path where you could possibly get the best result. And he actually is, of course, walking again, sailing again against those odds. So it has more to do, I think. with going away from conventional wisdom and pursuing a methodical path to potential success. Did he lose his foot or was it reattached or what? It was hanging by a bit. So when he said his foot came off, it didn't completely detach,

but it nearly did. They were able to reattach it. Amazing. John Ford, thank you. That was great. Yeah. I mean, a tusk through your leg. It's a good story to tell.

Still to come, today's big movers in our three-stock lunch. We're back in two. Time for today's three-stock lunch. mention we're looking at the biggest movers of the day, Caterpillar Uber and Pinterest. Caterpillar shares falling nearly 5%. Its earnings beat forecast, but revenue slightly short. Uber reported a quarterly loss, but revenue was better than it expected, turning cash flow positive for the first time in history. And Pinterest shares soaring nearly 20% following its earnings and activist investor

Elliott management saying it's now the largest shareholder of that stock. Let's bring in to trade. Todd Gordon, CNBC contributor and co-founder of New Age wealth advisors. Good to see you today. Todd, first, Caterpillar. Yeah, thanks for having me. Caterpillar's in a sort of a challenged environment right here. Industrials are not so much in favor as we're seeing the rotation back in. The number specifically to cat, we're solid. As they said, we're in a strengthening dollar environment, which is impacting so many multinationals.

It's a very interest rate sensitive stock. The revenues were short by about 100 million margins are slightly under pressure. I don't personally own cat, Contessa. I actually prefer John Deere. Their margins are both running about 29 percent, the gross margin, but John Deere runs a little bit better operating margin at 3 percent, showing better five-year average revenue growth compared to the slower mover cat. So if you want to play in the industrial space, I would say go there.

I'm a no touch on cat. All right, no touch on cat. How about Uber? Uber? I like it, Tyler. It's a lot of things going on here. It's been basings I just mentioned. As we're seeing this rotation back into growth.

It was setting up here in July. If we can break a little bit higher, the real test house is going to be about 31.5. If you could buy it closer to that break at about 25, that'd be great. I'd entertain it for a trade. You know, so look, look, I mean, they were expected to, to lose 27 cents. They lost like $1.30, not a great quarter. Their margins, EBITDA margins of percent of gross bookings were increasing. They also showed in the presentation that their rides as a percent of U.S. Their U.S. rides was increasing. So we're seeing people kind of reemerge

from the pandemic going out and using Ubers. But I'm worried longer term. You know, they have 29 billion in gross bookings. It's up year every year. They're only making 8 billion a revenue. A lot of that guys goes to the drivers. Drivers are a huge cost. It's hard to attract drivers. And unless Uber can move into the autonomous, into the self-driving, I have a hard time looking at this longer term for a trade. I like the action, good rotation up. If you want to play it for a 5% or 10% move, but longer term, I don't know how they can compete. All right. And what about Pinterest? We've got Pinterest here with an activist investor joining up? Yeah. Yeah, it's super. Yeah, it's a, you know, it's a hard activist position with

Elliott, new CEO in place. You know, the revenues were solid. The revenue growth is 9% quarter over quarter, pretty good. They're expected to make about 88 cents, so it's 26 times next year. You know, the problem here is they're, they've only made about 10% or sorry, 10 cents so far this year. They're looking to make about 80 cents. So in order to justify these forward valuations, they're really going to have to fire in all cylinders. Their EBITDA margin went down from 29% to like 15%. And given the guidance that they put forward here, it's going to be hard to keep that. So I would expect further compression in margins. It's going to be hard to deliver on this. Again, if you want to play the rotation up and play

a quick trade, fine. But longer term, I think there's too much competition from Instagram. They have a billion and a half users. Pinterest is only 450 million. They have a long way to go. Well, there you have it, folks. Todd Gordon, not a big fan of Caterpillar Uber or Pinterest. Thank you very much, Todd. Appreciate it. A lukewarm three-stock lunch. Yeah, they've been sitting out for a while. The drinks have been on the bar for a while there. But he drained them nonetheless. If you look right there, as we're seeing, they're all empty, those glasses. Okay, we're going to put some key stories under the microscope next. All right, welcome back to Power Lunch. It's time now to put a few other

stories we saw under the Microsoft's scope, starting with a new read on the labor market, the super hot labor market, 10.7 million job openings in June. That's according to the so-called Joltz report, but that's down 600,000 and at the lowest level since September, I guess, of last year, but it's still 1.8 openings for every available worker. I think what we're seeing here, Contessa, may be the first sign that companies are starting to slow hiring, They're pulling in just a little bit, just as we've heard, not big layoffs coming, but maybe a slowing of hiring. Well, and when they announce that they're going to slow the pace of hiring, then that gets a lot of headlines because we haven't seen that in the past. We've seen companies throwing money and benefits and perks trying to win over new workers.

And so to start to see a reversal of that makes people set up and take notice. But I think the fact that there are still more jobs open than there are available workers is noteworthy. and still says something about where we are in this economic cycle. I think overall you have to say the labor market is extremely solid, and it's one of the reasons that those who study such things don't believe the economy is in a recession now, may not get there, but this would be one of those signs that might suggest that, well, labor's falling back just a little bit, we'll see,

and also rising unemployment claims, as we've seen in the past couple of weeks. Thank you for watching, Power Lund.