Power Lunch - Stocks rise as traders bet on lower tariffs before Aug. 1 7/14/25

Episode Date: July 14, 2025

Stocks climbed higher Monday, even after President Trump threatened high tariffs on more countries over the weekend. Losses were kept in check as investors bet those duties will eventually be negotiated down and looked ahead to a busy week for second-quarter earnings season. We’ll tell you all that you need to know. 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 on this Monday afternoon. Happy Monday all. I'm Dominic Chu. That's Kelly Evans. We are watching the markets as the NASDAQ hits a new record high. The index crossing that record level just moments ago. The growth trade is front and center as Bitcoin crosses above. Get this, the $123,000 mark, Kelly, for the first time ever.

And key for the markets, a trio of major catalyst. Fresh tariff threats out of Washington, the kickoff to earnings season, and a key inflation report that could shape the first. path, the Fed policy, all of those we still have to contend with. Of course, now the markets are unrecognizable from the uncertainty and the bearishness that we saw just a few months ago. We've come a long way since then. Not only have they recovered the losses from April at the lows, investors seem ready to gamble and risk on is the name of the game. And crypto is the poster child for speculative investors. And it's soaring as Bitcoin crosses

123,000. It's shot up by 10K in just a matter of days. And AI still driving the rally over in tech with Nvidia and others hitting fresh historic highs. And it's not only tech that we're seeing a valuation debate brew in the financial space as well coming up. The big six bank stocks are all up around 30 percent just over the last three months alone, leading to some asking whether things have gotten just a bit too frothy, not just in tech, but maybe also in financials as well. Yeah, let's dig in to all of this starting on the crypto front. CNBC Crypto Reporter McKenzie Segalos has more on why we're seeing now, Mac, this wild rally in Bitcoin. Hey, Kelly.

So a lot of the story has to do with technical and macro catalysts, which are playing a major role in this recent breakout. So you have the expiration of options at the end of June. And that really helped to clear out lingering cell pressure, which unleashed volatility that had been pinned up by large open interest. So essentially what was happening was that short sellers were building up around that 110K to 120K level. And then they were forced to cover as Bitcoin broke to new highs. And that's a move that really echoes what we saw in late 2024 when Bitcoin jumped from 70K to 90K in just a few weeks. And if you're looking at a similar 30% breakout from here, like if you're going from a base of 110K, that would suggest upside toward $140,000.

And you guys hit this off the top of the show. So it's worth noting that after decoupling during the ETF-driven run-up, Bitcoin is now very much trading and lockstep with the resurgent NASDAQ. And so we have some of those events you mentioned, Matt, we have crypto, all these things. What else are you hearing from the community? We often talk about this, but even as the price is shooting up, who are the buyers who are coming in here, not the ones who have been holding it for five or 10 years, but kind of the new money coming into the space?

Well, that's exactly it. It's the acceleration of structural demand as Bitcoin becomes a mainstream macro allocation. So those spot Bitcoin ETS now hold over $155 billion up from zero, just 18 months ago when they launched. BlackRock is the big winner here, their Ibit fund, nearing $90 billion. It's already one of the top 20 ETS in the U.S. And this isn't just about flows. It definitely reflects a broader shift. You've got everything from pension funds and sovereign wealth funds to corporate treasurer.

that are now allocating to Bitcoin, especially after the Department of Labor cleared the way for crypto exposure in 401K plans this May. On the Bitcoin Treasury side, you've got companies like GameStop and even Trump media that are following the Michael Saylor playbook, treating Bitcoin as a strategic asset on their balance sheet. Trump media plans require $2.5 billion worth of BTC. And according to BitWise, those corporate treasury holdings jumped 23% last quarter, We're topping $91 billion by the end of Q2. And at the same time, in terms of what we're seeing in the markets, you've got this

wave of reverse mergers that are turning dormant public companies into public treasuries. And with names like SoftBank and Cantor banking backing these projects, we're looking at this new army of purpose-built publicly traded vehicles designed to hold Bitcoin at scale. And that's really showing up in the price action we're seeing. Now, Mac, Mac, how much of this is also fundamentally driven by the excitement. that's being generated around this kind of so-called crypto week that's developing in Washington, D.C. There's going to be a lot of activity happening on the legislative front with regard to debating just how much we can regulate cryptocurrencies in the coming months and years.

Yeah, it's a great point. The policy environment around crypto is shifting fast with the House taking up three major crypto bills this week and what Republicans have dubbed crypto week. And they are three different distinct efforts that are in the United States. mix. There's legislation to establish stable coin oversight, a market infrastructure bill that would define jurisdiction between the SEC and CFTC, among other things. And then a third piece of legislation designed to block the Federal Reserve from issuing its own digital currency, which has long been seen as a combatant to the crypto industry. And even though this week's crypto legislation

centers more on stable coins and market structure and a lot of the alt coins, the broader backdrop keeps reinforcing Bitcoin's role, no longer as a contrarian bet, but part of the institutional consensus here. And on that front, Mac, you'd think that if there were going to be a huge beneficiary of the stable coin legislation, maybe we can show three-month T-bills, you know, that they might be one of them. This would allow it and make it easier for stable coins to grow, the more they grow, probably the more treasury supply they're going to hold in coming year.

So it's kind of a win-win from that point of view, although ironically, it's then kind of fueling the very problem that crypto was meant to fix. Well, precisely. I mean, it's been fascinating to see Tether become one of the U.S.'s biggest creditors. They were the seventh biggest buyer of American debt last year, acclipsing countries like Germany. So it's been this fascinating power shift with respect to crypto being a big player and helping and trine U.S. dollar dominance. Do you ever hear some of the early holders, you know, the real believers, but those people are going, you know what, this is all becoming too mainstream, too crazy for me? or is there nothing like that?

Like anybody out there just who thinks it's overextended or no? I think that people are grateful for the price momentum that comes with Wall Street wrapping decentralized products in very familiar or institutional frames. And so even though there is this effort to mainstream it, make it more accessible to a Wall Street trader, at the end of the day, this is still decentralized technology underpinning it, where there is no central bank

or government that controls the flow of these funds. And I think that that's what a lot of people from the community continue to appreciate about this industry, that even as governments adopted, or, I mean, if the U.S. passes some of these bills into law that will certainly help to swell adoption, swell momentum, while these tech, these technologies still maintain their underepending of decentralization, which is the core tenet of this entire industry. All right. McKenzie, for now, thanks. Appreciate it.

Mackenzie Sagalos, following the story for us. Now to the key sector reporting earnings this coming week, the kickoff. Six major U.S. banks will release their quarterly results over the next couple of days, beginning with J.P. Morgan tomorrow morning. So our own Leslie Picker is here with a closer look at these financial institutions, and they are kind of like this rhythmic movement in terms of earnings season, right? They always kick things off. We always focus so intently on JPM, Bank of America, City Group and others.

What exactly can we expect to see this time around? vis-a-vis the performance we've already seen for the past three months. Well, it's no surprise, Don, they're coming at this earning season in a position of strength. The question is whether or not that strength is going to be beneficial for them or if a lot of the good news has already been priced in. For example, just over the last three months alone, they've gone up 33% on average for the big six, which is just a huge upside for these firms. the reason being this deregulatory wave that everybody is expecting, which could lead to looser capital requirements. How do you deploy that excess capital? Well, potentially buybacks, potentially MNA and potentially more lending.

Many of that, you know, depending on the decisions made, could be a nice bull case for some of these banks. There's also been a revival of capital markets. We've seen announced deals up 25 percent in the first half of the year, announced M&A. Now, that won't filter through to the revenue because there's a bit of a lag. They book that revenue when those deals close, but it's a good indicator of what's to come in these firms. And then loan growth is also expected to rise, which could portend nicely for net interest income, which is the profitability metric for loanmaking. So the bull case is there. The question is how much of that has already been reflected, how much of that has already been priced into these valuations, which are trading for these big six firms at an average of 27 percent.

of a premium relative to their 10-year averages. So definitely a pretty lofty valuation. That's optimism. That is. Paul Hickey had a nice stat last hour. He said that this has been like the best stretch for Goldman into an earnings season since its IPO. I mean, it's up a lot.

Now, but part of this is the starting point because it just happens to coincide with really bad period going into it. So the question is, okay, are they going to earn it and prove it this quarter or not? And, you know, even if there's an adjustment, you know, a period, okay, they didn't quite deliver. on whatever we were expecting.

It doesn't feel like anything that would really undermine the entire basis for owning them or having exposure here. No, you wouldn't think so. I mean, the numbers themselves, the EPS estimates have actually come down, at least for the three that have been reporting that are reporting tomorrow.

So it is a slightly lower base that they have to be tomorrow just relative to where those estimates were a few months ago. So that's one thing. And then the real risks that people talk about are just, is there some sort of inflation that is kind of,

you know, hiding behind, you know, these numbers. Is there some sort of credit quality issues we should be concerned about? It wasn't necessarily reflected in the stress test that we saw. So, you know, everything kind of looks like all systems go. But they're definitely, you know, pretty lofty valuation. By the way, there's nothing out there data-wise on the macro or microfront that suggests that there's any kind of credit stress that's being brought to bear. You're not seeing anything in the bond market, the high-yield market, anything like that. that. You're not seeing anything with delinquencies in real estate or anything like, or even home mortgage people, you know, people borrowing for their homes and not being able to pay on a timely

fashion. None of that data is there. So is it as much about proving it because they probably will as opposed to how they can keep it going in the future. But what exactly is the catalyst there if everything is as good as it can really be? Yeah, I think, you know, there's maybe a little bit of weakness in credit cards, especially for that lower income strata that people look at. But other than that, it's really looked like, and especially the estimates for some of the net chargeoffs this quarter, look really strong, continue to be strong. Everyone talks about normalization from COVID levels. I think it's really kind of this capital markets, more Wall Street-style engine turning on. I mean, treating has done remarkable the last few quarters,

and they're expected to benefit once again from that April volatility that we saw, especially with equities trading. So that should. continue to catalyze, you know, these numbers to the upside potentially. And then it's M&A. Because, you know, you mentioned that statistic about Goldman, which is truly remarkable, considering, yes, M&A is higher. Yes, IPO volume is higher. A lot of that is based on big deals, which Goldman tends to benefit from. But no one would look at, you know, the current environment and say, wow, this is like 2020, 2021. All systems go. Like we are, you know, lever to benefit from this. Maybe, to your point, maybe that means there's more runway or...

Exactly. 2026, we start getting those deals when you really start to worry like, I'm not sure this one makes sense. Right now, it's kind of small and piecemeal and getting a little bit bigger with each passing week. And the investment banks, too, would the smaller ones we don't talk about as much, would presumably benefit from that. Yeah, exactly. You bring up the key point here, which is that it's the expectation that things will really turn on in a big way,

that private equity will come back into the mix and start, you know, really doing deals. We've seen some indications of this, but how much do they, really turn that deal engine on because of real necessity at this point in the cycle, they would be a key beneficiary of that. So those are the types of things people will look for from the numbers as well as the call, how the pipeline looks. The point of this is because the big banks are in focus right now. But I wonder if at some point you don't look for tea leaves in the regional banks just to see

whether or not there is any kind of a possible leading indicator at that front, because that's kind of where all the big banking issues have happened in the past five or six years has been on the smaller to regional-sized banks side, I think. Well, and you've seen in a lot of these analyst reports that have come out ahead of earnings, if anyone is downgrading the big banks, chances are they're upgrading the super-reginals or the regional banks, because that's where they see a pretty sizable gap in terms of valuation. And they say, look, if, you know, the economy looks good and is reflected well in terms of credit quality and other types of things, lending, turning on in the bigger banks, that should

bode well for regionals, too. and they're kind of more of a pure play on just this whole idea that the economy is so far pretty stable here. And the regional banks are holding up fine, just trading at a discount. And we always like hearing from Jamie Diamond. It's always so funny when they put up amazing results and all this trouble is coming, but it seems like he's been striking a little bit more constructive tone lately. Definitely. And then you can also look at kind of how are they reserving?

Are they worried about some sort of rainy day? You know, are they setting aside more for losses that's not necessarily expected? this quarter. All right. Leslie, thanks. Thank you. Going to be a busy one. Oh, yeah. Leslie Picker.

Lots more show to come. We'll dive deeper into the risk on trade. Should investors proceed with a bit more caution? Plus, the boss is back. Elon Musk making some waves at Tesla and the AI land grab as tech tries to out buy their competition. Power Lunch will be right back. Welcome back to Power Lunch.

It's been a big week so far and a big week again coming for the markets and your money with second quarter earnings season ramping up. this week. Several big banks are reporting starting tomorrow, followed by some other bellwethers in health care and technology as well. All of this as the tariff uncertainty weighs on investors and sentiments. Here with more on what to expect and how to position is Ellen Hazen, the chief market strategist and portfolio manager at FL Putnam Investment Management. Ellen, thank you very much for being here. There's no doubt it's been a very busy time for somebody in your position. As you talk about the way the story is developed in the markets with clients. What exactly is the biggest concern

out there right now? The tariff uncertainty seems to be more of a certainty because we've been dealing with it for so long at this point. I think the biggest concern that clients have is what is the tariff uncertainty going to settle out at? We know it's going to be much bigger. Last year, tariffs were only two and a half percent, and now they're looking like high single digits, maybe even higher than that on average across the whole economy. And then what will that do to our growth rate, our economic growth rate, and what will that do to economic growth in other countries? So, you know, the international trade has been a big trade this year. But if those countries start having slower corporate earnings growth because demand for their goods and services

goes down because of tariffs, then that's a question they're asking too. So I think even though we know tariffs are going to be bigger, multiples bigger, we don't know the magnitude and we don't know how it's going to play out throughout the economy yet. We've already, the tariff, full force of tariffs have not been put into place yet. It's probably the reason why we aren't seeing as much corporate, I guess, headwind from some of these tariff policies in place now. When are we going to see them? Because it seems as though the markets as a discounting mechanism should have now been lower than all-time highs, given the fact that you are forecasting this to happen, yet the market keeps going higher to these record levels. What exactly is the optimism all about other than the fact

that the economy is still holding up pretty well? The economy is holding up pretty well. You can see that in the labor market, and you can see it so far in the inflation data. However, I think the inflation numbers are going to start to show up in the July and August readings, which we won't see until the middle of August, middle September,

and they really won't accelerate until later in the year. So I do think the Fed will end up staying on hold at the July meeting, and potentially for the following meeting as well, because I think it'll be too soon to make a final determination about what's happening to inflation. I think that corporate earnings are going to show up.

Second quarter are probably likely to beat because you're looking at expectations of only 2 to 3 percent earnings growth in the second quarter very low, and the tariffs really haven't hit yet. So I think second quarter earnings, which, as you mentioned, are going to come out starting tomorrow. Those are going to be okay. I think third quarter is when we're going to hear

much more hand-wringing from companies about how they're going to cope with the tariffs. And we'll see what the tariffs look like in October, when we're getting those third quarter reports. Could be. Crypto, Bitcoin. Do you have a point of view on it? Do you have any exposure to it?

It runs through your mind as you watch the price action lately? So I think crypto and Bitcoin are really a play on inflation and on the US dollar. I think of them as a currency. And so I think if you're concerned about inflation and the dollar, then they can deserve a place in a portfolio. But they're kind of like gold in the sense that they don't pay a dividend or pay any cash flows. So it becomes a hedge against that. And I'm a DCF person, always have been.

So that is a little bit. Exactly, exactly. So that makes it a little bit thorny. But I do think that we are seeing some uncertainty with the dollar and with the treasuries. Having said that, though, I think you can own a company like Coinbase, right, which is going to make money regardless of whether or not Bitcoin goes up or down. What do you think elsewhere besides, say, technology and financial technology? We mentioned the big banks before as well. You know, Kelly mentioned crypto.

So is there any real hope for a real expansion of that so-called kind of broadening out trade? Well, we see health care and what we see industrials and consumer staples, participate, utilities, real estate, all the sectors we don't talk that much about? There have been so many headfakes on the broadening out front outside of the magnificent. Including now, by the way. Over the last several years. And we saw it for most of the first half of this year. And then now it's reversing again. And as we all talk about so often, those companies, particularly the AI companies, generate so much cash flow.

Their free cash flow margins are so high and their growth rates are so high that it's really difficult to bet against them. So I don't know if the broadening out is going to happen or not. I do think you want to find names carefully that maybe are lower beta and that you can own in case the broadening out doesn't happen and in case the market takes a breather. Like where and what names? So, for example, you could look at a Darden restaurant's, right? That's growing 5%. Earnings are growing over 10%. And that's a company that dominates in the restaurant space with Olive Garden and Capital Grill,

and you all know the names, but two and a half percent yield, even a little bit higher than that. And it's growing and it's a reasonable valuation. Your beta is under 0.7. So that's a name that can hold up even if we see some volatility in the overall markets. All right. Coinbase and Darden, two very different names. Helen Hazen, thank you so much for joining us. Thanks for having me. It's great to see you.

Good to see you again. Up next, Elon Musk getting back to business, something investors might be happy to hear, but some executives might not be so thrilled about it. We'll explain why next. CryptoWatch is sponsored by Crypto.com. Crypto.com is America's premier crypto platform. Welcome back to Power Lunch, although he technically never left the helm of Tesla. Safe to say Elon Musk has now returned to his post as the billionaire entrepreneur with an active role and a watchful eye over all of his enterprises.

Wall Street Journal columnist Tim Higgins is out with a new article stating that the renewed executive churn we're suddenly seeing is a sign that Elon is back to work and more focused on his business empire now that his doge role has come to an end. And joining us further to discuss all things Musk is Tim Higgins himself. So let's start with some of the executive departures. Of course, Linda Yaccarino probably being the most high profile. But who else, Tim? Well, we saw Linda, of course, that's a big one for the X world. But in the Tesla side, one of the big names to see was the guy who is in charge of manufacturing and sales in North America and Europe, not a household name like Elon Musk or some of his

previous executives, but a very key fixer over the years. We've seen some others. It gets into this idea that we've seen from the Musk world in recent years that there tends to be some churn, a high churn, especially in the sales area. people in charge of those areas, kind of getting at this idea that sometimes Musk is the best salesman of his vision, but he seems to maybe not stick to the traditional sales methods out there. And there was also one of the executives, I believe, in charge for European sales and so forth, with this idea that Musk himself, maybe that's what you're already referring to,

was going to kind of take that back on again. Then I saw yesterday he was teasing, you know, some big announcements coming, things like that, a very bread and butter type of thing for him. What should we expect now, Tim, in the months to come? As this turnover happens and things start to settle down again, or as he kind of reiterates his vision for the company, what should that look like? You know, in some ways, it's not surprising to see people leave because I think there are a lot of folks we're expecting once he gets back in the mix.

The sun, if you will, he being the sun, is directly on some of these folks, and it becomes very hot. We kind of anticipating constant kind of expansion of that driverless taxi server in Austin. We saw some of that. Remember, this started off very small. He has talked about how this is going to grow over time, perhaps hundreds of thousands by the end of next year. There's also that roadster that's hanging out there that he's talked about for many, many years and kind of teasing yet again that maybe we'll see something on that by the end of the year. Kind of getting back to the core part of Tesla building excitement in this company. That's probably job number one in the

your term. Tim, it's Dom. One of the big, I guess, critiques of Elon Musk over the, at least near to medium term, has been that involvement with the government that is no longer as much of a heart of his world now. A lot of folks thought it distracted him from running Tesla. It seems as though a lot of this hands-on and maybe friction and conflict that's developing within Tesla is because he is now focused more on Tesla. So are shareholders in your mind to be thankful for the fact that he's scrutinizing as much and perhaps even micromanaging a little bit more than he was before because it does mean he's focused a little bit or a lot more on Tesla itself. Well, maybe. And I say maybe because how long is he going to be focused on these companies?

If you look over the last few weeks, I think investors got very excited at the end of May when it looked like he was going back to business when he was moving out of the DC world. But then he keeps kind of stepping back in that world. talking about creating a third party to go after Republicans in the midterm. So it's not yet clear exactly where his head in focus is. If he's 100% focused on all of his companies, I think investors get super excited about that. But if he's going to continue trying to dabble in politics, that is worrying to some investors because they've seen a lot of chaos in the last six months, the last two years, if you include his acquisition of Twitter.

It's without a doubt, a lot of Tesla investors would like to see him buckle down and really focus on getting driverless cars out there because it's such a huge bet that can transform the company, and they've been real patient for a while. And finally, Tim, how do you think the politics of all this will shake out? Do we know yet? I mean, if they're in any kind of real, under any real scrutiny in terms of full self-driving, robotaxies, and all the rest of it? That's the challenge here is that in the robot taxi space and autonomous car space, there is politics in this.

It's the local level in the cities. You've got state regulations. And then you've got the national level as well. It requires some finesse. And that was one of the benefits of being so closely associated with the White House. It's yet to be determined how that's going to play out here in the months to come as the Tesla and other self-driving car companies interact with the government. Tim, thanks. So we appreciate it today. Tesla shares positive. Wall Street Journal columnist and CNBC contributor, Tim Higgins.

All right, as we head out to break, a quick power check on the negative side of things in the S&P 500, lab equipment maker Waters Group. Beckton Dickinson's biosciences and diagnostic solutions business will combine with waters in a deal of value at around $17.5 billion. That's the reason why the negative there. On the positive side of things, Autodesk reports it has ended its plans to potentially buy out soft. for PTC. That's the reason for that move. Those are some of the big stock moves of the day. After the break, we'll take a look at this bond market as well and the dynamics there. So keep it right here. Power Lunch is back after this break. Welcome back to Power Lunch. Let's get over to Contessa Brewer now for a CNBC news update. Good afternoon, Contessa. Hello there, Dom. 24 states in Washington, D.C., sued the Trump administration today over its decision to withhold roughly $7 billion from schools. The states argue the White House move is unconstitutional.

Congress had already approved the funding for K through 12 schools, and that includes programs for the education of migrant farm workers and their children, English proficiency learning, and after-school summer programs. Former New York Governor Andrew Cuomo reportedly is staying in the New York City mayoral race. He will run as an independent after conceding to state assemblymen Zoran Mamdani in the Democratic primary, according to the New York Times, which reports Cuomo will drop out if he's not at the top of the polls in September. And an industry group says dozens of U.S. ice cream producers plan to remove artificial colors from their products by 2028. According to the International Dairy Foods Association, the producers make 90% of ice cream sold in the U.S.

They're the latest companies to remove dyes since Health Secretary Robert F. Kennedy Jr. announced plans to phase them out of the federal food supply and has urged industries to take that action ASAP. Kelly? They are a big offender. Yeah. A weird ultra-process book. Contessa, thanks. Contessa Brewer. Let's get to the bond report with global yields on the climb as investors reassess the path of rates and brace for a wave of inflation data this week. Trade tensions are also fueling some of the sell-off as renewed tariff threats between the U.S. and key trading partners are stoking some concern about higher costs and stickier inflation. Look at the latest consumer and producer inflation. inflation data later this week. 442 on the 10-year, it's approaching its highest level since

mid-June, so it has been kind of quietly but steadily climbing. The 30-year getting back towards 5%. We're right now at 497 and look abroad as part of the culprit here. The dramatic backup in Japanese yields continues. Their 30-year approaching multi-year. Just look at that chart for a second. We're at 317. Go back to 2020. We were effectively at zero. Yep. That's like an infinite amount of multiplication. In Europe, German yields at their highest level in nearly two years. You can see 325 there for their 30-year bond. Similarly, French 30-year yields rising to their highest level.

Get this, in more than a decade, it had 423. For investors, higher yields can be more attractive income from bonds, but they also raise the bar for equities and tighten financial conditions and maybe contribute to the attractiveness of Bitcoin. There you go. All right, so ahead on the show here, the battle for AI supremacy is continuing to heat up and the race for top-tier talent is absolutely scorching millions and hundreds of millions of dollars. Even more. We'll get the story when Power Lunch returns after this break.

All right, welcome back to Power Lunch. Meta is making some headlines again recently after CEO Mark Zuckerberg went after top talent for its AI intelligence lab operation. His hires include Scale AIs Alexander Wang, Daniel Gross, the former CEO of Safe Super Intelligence Inc. Nat Friedman of GitHub and additional recruits from rival firms like OpenAI, like Alphabet, and like Apple itself. Now, Google is getting in on the race as well, poaching the CEO and top talent of coding startup windsurf right after OpenAI called off its $3 billion acquisition of Windsurf. So joining us now for more as our own tech check anchor,

Dear Drubosa, to break down this M&A AI acquisition, talent slash everything else war that's developing with people who have trillions of dollars in balance sheet? I mean, the twists and turns can be hard to keep track of. We made up on Tech Check this sort of Mount Rushmore of AI talent. Meta's been the most aggressive recently, but I mean, you go back to Google acquiring deep mind and getting Demis Hasabas. That was a huge move before the paychecks were in the hundreds of millions of dollars.

This latest move, though, Google going back into the world. isn't getting quite aggressive with windsurf. I mean, the twists in terms of wind surf itself is just remarkable. As of last week, everyone thought that OpenAI's $3 billion acquisition of windsurf was a done deal. And then late Friday, Google swoops in and takes the CEO and a bunch of key developers for $2.4 billion. And, you know, I had heard that Microsoft as OpenAI's partner, Looned Large, it was reported that WinSurf didn't want to have to hand over all of its technology to Microsoft, which competes on AI coding with co-pilot. So the dynamics are shifting in real-time, Dom. You've got Zuckerberg poaching from all the different top AI labs. And you've got Google now in this. And, you know, the dynamics are shifting

very, very quickly. And a lot of this, I should be, I should say, is not happening through traditional M&A. We call them kind of pseudo-aquitiers, right? Because you're leaving behind sort of a shell of a company and just taking out the founders, CEOs, key engineers, and leaving sort of the startups. You can see them on the bottom line of this image that you're looking at character AI adept and flexion. And now you have windsurf. And an interesting twist yet again, Dom, you have cognition and other AI startup getting what's left of windsurf. So this is all moving very quickly.

Not just that, dear job, but everything you've laid out on the talent front makes this new story from the New York Times all the more interesting just crossed a few moments ago. But they said the new superintelligence lab is discussing major AI strategy changes, namely that Christopher Wayne, I think you said, the new. new chief AI officer discussed abandoning their most powerful open source AI model called behemoth in favor of maybe doing something more closed source. So I can't tell you how big a deal this is to people who work in tech, who work in AI, who really see this at its core as an open versus closed source AI arms race.

Open source, remember, burst on the scene first with Lama. META was one of the greatest advocates of open source. And then Deep Sea came along and sort of changed everything. American companies like OpenAI and Google, they've tended to work more on the closed source side, but the appeal of open sources that you can own the ecosystem. In many ways, it can be more efficient, it can be cheaper, it's transparent. And so the idea, too, is that, you know, a deep sea created such a great open source model that that is now being adopted in a big way globally at the expense maybe of OpenAIs, Chad, GBT,

different models because they're more expensive to run. They're closer, so you're going to have to take them as they are. So this would be a very, very big deal. I was actually just speaking before I got on TV with you guys to the Perplexity CEO, Arvin Srinivas. And I asked him if it looked like meta was moving away from open source. He said he didn't think so just yet. And that tracks with a lot of the other people I talked to.

So this piece of reporting from the New York Times is a big deal. It would mean that perhaps the U.S. is giving up its lead in open source and a very important player. And all the while, Chinese AI labs are full steam ahead on open source. models. Dear Cher, that's an important point here, because if this is going to be the trajectory, and if this tug of war plays out between the proponents of open source modeling for AI versus those who want to kind of close things off and keep things more proprietary in order to perhaps capitalize from a profitability standpoint on those developments, what does that do to the trajectory of AI development overall and does it draw the talent away, perhaps, from the

United States into those other parts? You made the point that it could be China, but it could be elsewhere as well. It's a difficult question, right? Because you're right, the monetization piece, it may be a little, it may be very more straightforward in terms of close source, right? You can charge customers, enterprise customers for APIs, and they get access to those models. But open source, right, you own the ecosystem.

That is sort of a further away, bigger picture proposition that isn't just instantly monetizable. Does that draw people away? That's an interesting question, because what I hear, what the talent wars revolve around, at least here in the U.S. is mission, right? And the mission is superintelligence, even though that is a very vague phrase, or AGI.

That is when the artificial intelligence systems are even better than humans. That's what a lot of the top researchers want to work on. And you bring in sort of Mark Zuckerberg's announcement this morning that they're going to have the most compute power potentially. So everything that these top AI researchers need to get to super intelligence, that is, you know, heavy, that is an appealing proposition for them.

And, you know, to keep it close source might be worth it if they can get to that point first. Big development there for sure on the AI arms race. Thank you very much, Deerzo, our tech check anchor for that. We'll see you soon. Thanks. And speaking of AI, a major American city is making a huge investment in the technology. We'll have a live report on that when Power Lunch returns. Welcome back.

We were just discussing the big tech AI talent wars, but the widespread adoption of AI is certainly not limited to the private sector. In fact, moments ago, the city of Sanford's. Francisco announced it's rolling out Microsoft's co-pilot to its 30,000 employees, making it the largest U.S. city yet to deploy the tech. Kate Rogers has more. She sat down with San Francisco's mayor, Daniel Lurie, to discuss the move. Kate, very interesting. Yeah, Kelly, so the initiative will see Microsoft 365 copilot chat powered by Open AIs, GPT, offered as a resource for city employees, including nurses and social workers to improve city services. Co-pilot will be made across its departments to tackle administrative work, including data analytics, drafting reports, and more giving workers more time to respond to residents. The move comes after a test that ran for six months with more than 2,000 city workers,

which showed generative AI gave them productivity gains of up to five hours weekly. Here's how Mayor Lurie says it'll be used. When you were running for mayor, we sat down, we talked about some of the response times for 311 and police. Do you foresee these tools speeding up response times for residents here in the city? Absolutely. 311 is a test case for us that we use during that six-month pilot. It's going to allow us to use LLMs and produce faster response times to clean up trash on the street, to deal with encampments. So that was a huge one.

Another one, language translation. We have over 42 languages spoken here in San Francisco. We don't always have enough translator. to do all that. Mayor Lurie also said this won't replace workers. Instead, he says it's streamlining their day-to-day and taking away mundane tasks. When you have Open AI, when you have Anthropic,

when you have Salesforce, we're actually generating jobs here in San Francisco because of this technology. And so I want us leaning in as a city delivering for the people of San Francisco. That's what co-pilot chat. will allow us to do. Mayor Lurie also said he plans to lean on this technology to better integrate departments. For example, he said homelessness response has nine different departments, and so co-pilot will help bring the data from those nine different departments

all together into one place, guys. Back over to you. All right, Kate, you know, Mayor Lurie reeled off a small list of other AI-related companies there. How exactly did San Francisco select Microsoft's co-pilot product to use? as its citywide kind of project? So the city had an existing contract with Microsoft, and the addition of co-pilot came with no additional cost, the city says here. I did ask Mayor Lurie to, of course, OpenAI Sam Altman was on his transition team. I said, did you consult with him on this?

He said, not on this, but he's been a great partner in consulting in different business matters within the city. As Mayor Lurie stepped, of course, from the private sector into this role in City Hall, as a government outsider, quite frankly, and now he's in the role for six months and was also guys really touting some of the progress. He feels he's made on downtown. There's been obviously large businesses that have left Union Square.

He's talking about some of them that are now coming back. Nintendo being one of them. Pop Mart selling loboos he mentioned is something that people are very excited about. So, yeah, he's definitely feeling the momentum and feels proud of the work he's done so far, but definitely acknowledged a lot more to come. All right. And Kate, in a separate but somewhat related topic here, Robotaxies and autonomous driving.

San Francisco's been one of those municipalities closely associated with that technology. How does that future look for San Francisco as well? Yeah, so I asked Mayor Lori about that too because Elon Musk, of course, has said that robotaxy pending regulatory approval will be coming to San Francisco in the future. The mayor said that that is being regulated at a state level, but he did talk about the nice tourism boost that things like Waymo have brought to the city. and he's been a big proponent of that. He also said he's in talks with Dara from Uber about their autonomous driving vehicles. And, you know, if you come to San Francisco,

every tourist you see guys is either riding in a Waymo, taking pictures of you in a Waymo. It certainly has become a big tourist attraction here. So you can see the government pending, of course, all these safety regulations, you know, welcoming this with open arms. I'm a Bay Area native myself, ladies. I just want to say this,

and I'm still not yet ready to get into a robot. taxi just yet. Anyway, you got to try it, Dom. All right, I will at your request. Thank you very much, Kate Rogers for that. Still to come here on the show, it's not a bird, it's not a plane, it's the latest Superman movie soaring towards the top of the domestic box office. We're going to dive into Hollywood's latest hit. That story is next. Before we go, a huge win for Warner Brothers this weekend. Superman soared into theaters and delivered. The domestic hall of Superman, the movie ranks as the best performance of a solo-built Superman film ever, Dom,

outpacing 2013's Superman Man of Steel, which took in $116 million during its first three days in theaters. As this, according to Comscore Data, take a look at shares of Warner Brothers Discovery, the owner, the studio maker of the film. They're up about 2.5% today and actually about 13% this year. This is a huge litmusist,

because when they brought in James Gunn to kind of revitalize this DC universe, one of the big deals was how you were going to kind of set the stage, and this movie was supposed to set the stage for it. Now, for me, I will admit, I have not yet watched the movie. I plan on watching this movie. I do have a lot of things going on. I probably have two children who probably aren't of age to appreciate this movie just yet, but this is one of those movies I would actively go and pay money to see in a movie theater

because I love the fantasy of it. I love the special effects. And if this is going to be the reset that a lot of DC universe fans are looking for, this could be the launching point. IMAX shares are also up 3% today. Let's quote our producer, Ginoho, I consider it be my cultural touchstone. He said it made him want to go maybe check out other DC movies. He's seen it now multiple times.

That's right. That's what he says. A lot of people had fatigue with these. The Marvel movies. There was some feedback negative-wise about how that was going to work out. But, you know, I think for me, I would love to see movies like this. succeed because there's part of me that does like that willing suspension of disbelief. And the theater working again as well. Exactly. It's like it's like back to normal again.

A little bit. All right. Well, very much. Thanks for watching Power Lunch guys. We'll see you later. Don, thank you. Closing bell starts right now.