Power Lunch - Tech Turmoil 11/20/23

Episode Date: November 20, 2023

One story is dominating the business world today: the dramatic events at OpenAI. Founder Sam Altman is heading to Microsoft after being ousted by OpenAI’s board.And now hundreds of OpenAI employees are threatening to leave the company and potentially follow Altman to Microsoft if the board doesn’t resign.We’ll break down everything that’s at stake, and what it means for you and your money. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody, and welcome to Power Lunch. I'm Tyler Matheson, literally alongside Kelly Evans, sitting, I don't think we've ever been closer. Markets are higher right now, but there is one story dominating the business world today, and that is the dramatic events at OpenAI that took place over the weekend. OpenAI founder Sam Altman is going to Microsoft, taking his talents to Seattle after being ousted by OpenAI's board late Friday. Now hundreds of OpenAI employees are threatening to leave the company and potentially follow him to Microsoft, the board doesn't resign and the board standing by its decision to oust Altman, but did apologize for the way it all happened. So much to break down on this story. And we have the perfect panel to do it. Here on set with us, Steve Kovac, our tech reporter, Dan Ives, managing director and senior equity analyst at Wed Bush Securities. Inafried, Chief Technology

correspondent at Axios, welcome to all of you. All right, Steve, I'll start with you. Anything since the news last hour that now 700 of the 770 employees are threatening to resign? Not much movement there, but I will say the conversation has kind of shifted. And we touched on this a little bit last hour at the top of your show. The conversation has kind of shifted to this disbelief that Altman is even ever going to join Microsoft. It's kind of this idea that with so many employees threatening to walk out the door, there's nothing, there's no company left to manage. So the board may have no alternative but to invite Altman back under those conditions he was requesting over the weekend. What were those conditions? Unclear, but basically no more board members.

I know Brett Taylor has been the former. Salesforce COCO in that letter was named by name as someone they want to be a director on the board. I believe that was also being tossed around over the weekend as well as part of conditions are coming back, some kind of voting power perhaps. But look, if he doesn't join Microsoft, then Microsoft kind of has an egg on its face after making this big announcement early in the morning before markets open saying, we're bringing Sam in and his team and his group of close confidence to do this. Although arguably it'd be better from Microsoft for Open AI to be something of what it was a week ago versus the shell of a company it could remain.

Or the other thing that we've been talking about is are they getting a company, are they acquiring a company for basically next to nothing? I know we talk a lot about how much Microsoft has invested in Open AI, 10 billion, $13 billion. They haven't paid all that money. And a lot of that value is tied up in things like credits for using their cloud service. So it's not like Microsoft has written a check and owns this big stake. There's still a lot more money kind of influx around there, too.

You know, what do we know about how this all sorts? spun out of control and got so out of round? Yeah, I mean, you know, it's pretty unprecedented. I've spent the weekend reporting on it and no one's seen anything like it. You know, it's very clear that there were a lot of things that weren't taken into account when these decisions were made by the board, just looking at the communications and not consulting as we broke on Friday. They gave Microsoft their biggest partner and investor one minute.

notice. So it was clear from the moment that this was going to be a bigger deal than they anticipated. This isn't just like, oh, we'll replace the CEO. Again, it's unprecedented. It's hard to think of adjectives. Dan, who owns Open AI and who's going to own it? Look, I mean, this was a clown show by the OpenAI board. And ultimately, it's really now Microsoft and Adela that are going to own Open AI in terms of Altman, Brockman, everyone that's at Microsoft. And now Open AI, for all intents of purposes, is almost a shell company. I mean, everyone now really goes to Microsoft.

I'd argue Microsoft is in a stronger position today than they were in a Twilight Zone scenario than they weren't before this all started on Friday. And I just think, Tyler, I think it's an example of this board were like eight-year-olds playing checkers. And Nadella, the Grandmaster chess player, ultimately is really the one that came in, swooped in, and now it's really Microsoft's for the victim. The only question I have about that, Dan, and I think absolutely Microsoft has done everything it can to kind of smooth this over. What about the chat GPT product? It's still an open AI product. This company is now in complete disarray, and there's clients who are trying to figure out, because they have to use it today

and tomorrow and the next day, do they need to quickly go find a substitute or not? And that's a great point. To that point, the software has already been fully integrated. So in terms like, and Steve knows, there's like that's key where the technology is. So my, Microsoft felt that they were in a position of strength to do this as well. And look, their back was against the wall when this all started. Right now, it's not just about technology. They're going to have all those developers, Altman and Brockman in-house. And I think this could ultimately start for them to even focus on chips in terms of where it goes.

And you're asking who owns ChatGBT, GBT? It almost doesn't really matter because what we saw Microsoft do in January of this year was take that foundational technology that opening I made, integrate it into Bing. They have Bing Chat. They have Bing Chat Enterprise, which in a way kind of competes with ChatGBT.T. Microsoft is selling that product to businesses. You can use it to code or do whatever you would with ChatGBT.T. So again, if Open AI like disappears by the end of today, that product will still exist, still operate fine. Microsoft can still sell it. You know, what does happen to Open AI, the company? Does it cease to exist? Well, there's two scenarios right now. One is that, you know, Microsoft,

They do indeed most of the company decamps to Microsoft, and then there isn't open AI as we know it. The other, and I think we should point out, this is probably certainly a likely scenario, if not, is as likely, is that ultimately under this much pressure, the board does relent, resigns, and we go back to having an open AI. I think either way Microsoft is in a stronger position, I totally agree with Dan. You know, either they have more control of open AI than they did before or Open AI employees work for Microsoft. I think the point about developers is important. There are a lot of people, startups that have built their company that don't have the position Microsoft does that do rely on Open API's APIs that rely on their technology. And there's a lot of concern about that. Open AI, everything's working today as it should be and probably can for the short term.

But I think a lot of companies that built their business depending on Open AI are certainly wondering about that choice. Am I right, Dan, that Microsoft owned some 49% of OpenAI? Who owned 51%? So 49. And then there were other investors in terms of, if you think about the way this structure, Microsoft did not have a board seat. But the best way to think about it is that 10 or 13 billion that they ultimately paid, they're now, let's call it 90 billion in terms of valuation.

They got 90 billion for 13 billion because it's almost like... Not even 13. They didn't even pay all that. Yeah. So they really, they bought, they bought a thing about like one room in a house and now own the house. Yeah. And it also in a way that go ahead, Ena. Well, it's more complicated than that even still because they owned 51% of this for-profit entity.

But what makes this totally unusual is they still didn't, that board, not only did they not have a seat, but that board wasn't a traditional board. It was a non-profit board. So they owned 51% of subsidiary. Other venture investors also invested. They own a portion of this for-profit subsidiary, but this nonprofit board that's not at all accountable whose fiduciary duty is not to those investors or the company or the stockholders, but rather to protecting humanity. So there's a lot of very strange dynamics at play here.

It's going to be hard to see how we can turn back the clock at this point, Steve. The only option seemed to be to move forward with whatever's left of Open AI at this point. Maybe it just becomes this kind of 501C3 kind of going back to its original mission. Or you really try to put the genie back in the bottle or the toothpaste back in the two, whatever analogy you want to use. And you put Sam back in charge and you let him do what he wants to do. And you mentioned the chips. What would you be watching on that front? Yeah.

This is also coming. We've got to keep in mind it was just five days ago that Microsoft had its big Ignite conference where it also introduced its first chip that's going to compete with Invidia, keep it. So Microsoft doesn't have to spend as much money on Vindia. I know all these reports came out over the weekend that Altman was thinking about doing a chip startup or integrating some kind of chip thing into open AI. That almost doesn't matter at this point. Like if they do join Microsoft, maybe he can re-invigorate that project. But really right now, what they need is the stability of the product itself, the chat GPT. Like I think it was Dan saying all these and, you know, all these open, all these startups that are relying on the technology that are paying.

The information had a story that there's already a panic in that community. calling Anthropic, calling Google. Who can we get to fill in the gap here? Kind of forgetting that Microsoft is still there with all these tools anyway. And you have a board member that was key in the firing of Altman apologizing today saying that wishes and never happened.

That would be like burning someone's house down and in the morning bringing a hallmark card saying I'm sorry. Dan, what does it mean for Google? You've talked about how you think this is very bullish for Microsoft as it appears to be playing out. But if this does push Google and Anthropic closer together

or something like that, what are the implications? I think for Google as well as Jassy and Amazon, they're going to go after this air pocket. They're going to look to get developers, engineers. We'll see that next week. Yeah, ultimately look at it as an opportunity because before it was viewed as this is really,

they had an iron fist sort of stronghold. Now there will be an air pocket that could be positive for Google or Amazon, but ultimately, Nadella had to make sure that Altman ended up in Redmond and nowhere else. True. Yeah. Final thoughts?

I mean, I do think keep watching. I don't think we know, you know, I'll believe, you know, that Altman and Craig Brockman and the rest of the team are going to Microsoft when it happens. I do think Microsoft is stronger, and I do think there is an information gap that the competitors will seize on, but I think long-term Microsoft probably comes out of this better either way. All righty. Thanks to all of you.

And please do stick around because we got more coming up here. So much more. We have misadventures in the world of Elon Musk following that backlash hitting him. Linda Yakorino is now facing growing calls to step down as CEO of X after failing to keep him in check. We'll get more details on that. Let's also get a quick check on the markets, which are up near session highs, the Dow gaining 193. Tech a big winner today, that NASDAQ trade in particular, the triple Q's highest level since Jan of 22. Microsoft having the biggest positive point impact on the group, followed by Al.

Plus a quick power check, Paramount on the positive side, up 7% today. They're selling a majority stake in Bellator to the Saudi-backed professional fighters league. On the negative side, Bristol-Myers squibbed down 4% on news that buyers halting the late-strage trial for a cardiovascular disease treatment. B.M.Y working on something similar, and that has investors unnerved. That's your power check, and Power Lunch will be right back. Welcome back to Power Lunch. And now to the other big tech story, the continued fallout from Elon Musk's post. on X. Advertisers continuing to leave the platform and they may not be alone. Let's bring in Julia

Borsten for more details now. Julia, what do we know? Well, Kelly, ex-CEO, Lindy Akrino, standing by the company in the face of reports that ad industry leaders were calling upon her to resign this drama unfolding while she was at her daughter's wedding over the weekend. She tweeted out this morning, quote, when you're this consequential, there will be detractors and fabricated distractions, but were unwavering in our mission. This comes as major advertisers including Apple, IBM, Disney, Paramount Global Lionsgate, and Comcast, that CNBC's parent company, continue to pause their spending on X. Their boycotts started late last week after X's ad revenue was already on track to fall by 55% this year from last year,

according to an October estimate by insider intelligence. Its principal analyst warning of Musk's anti-Semitic comments and other offensive posts on X, saying, quote, the damage to X's ad business will be severe. A big name advertiser Exodus will inspire other advertisers to follow suit. And there is already likely a long tail of less vocal advertisers that have pulled spending. So right now we're waiting to see if Elon Musk files what he said would be a, quote, thermonuclear lawsuit against media matters for its report showing X placed ads alongside pro-Nazi content. Kelly?

Julie, I stick around as we bring our panel. back, our own Steve Kovac, Dan Ives, managing director and senior equity analyst at Wedbush, and Ina, Fried, Chief Technology correspondent at Axios. I'll start with you. Where do we go from here? You know, I think that the dam has opened up, and we're probably going to see a lot more advertisers. You know, we'd seen a bunch of big-name advertisers pause in the wake of the acquisition, and then kind of everyone quietly came back.

But this time, you have Apple and others. I think Apple was one that a lot of people were looking to. We broke the story on Friday that they were pausing their advertising, and then we saw most of Hollywood follow suit. I think advertising is still where Twitter gets X, sorry, gets almost all of its revenue. And despite subscriptions and effort to build a lot of other products, the business is built on the back of advertising.

And a lot of the advertisers I talk to are really worried about what their content appears next to, as well as what the company says and the way it's structured its business. How much, Steve, of the advertiser, Exodus is attributed to what ENA just talked about, and that is the proximity of advertisements to hate speech. Right. It's more that than Elon. Yeah, as compared with what Eon said. It's baked in. Musk is going to say crazy stuff on the platform. That's kind of baked in and understood, even as they kind of, X was able to kind of court

some advertisers back. What this Media Matters report found out, and we'll get to these lawsuits in a second, or these threats of lawsuits in a second, it points out it's showing up next to. This is after X came out with, I believe it was back in August saying, we've partnered with this great group, Integralad Science. They have this great technology that's going to ensure you, Mr. advertiser. This, what just happened is not going to happen, meaning we have this technology to make sure the ads don't appear next to it. They failed on that promise. That's why you're seeing it. Julia, what took the advertisers so long to figure out that their content, that their ads were being placed in proximity to neo-Nazi or extremist rhetoric of one sort or another? And why aren't the people at those companies that place those ads being called to account for this?

Well, so Media Matters came out with this report last week, and this is, I would call it almost a watchdog group that has published several. reports about the failures of X to adequately police the platform for offensive content. Now, X has been consistently focused on the importance of free speech. What Media Matter says is that this offensive content, this pro-Nazi content, is not only on the platform, but that ads are placed alongside it. The reason why Musk threatened this thermonuclear lawsuit is he's saying that this was effectively manipulated, that someone from Media Matters went on, created a new account and then tried to get ads to show up alongside this content.

But I think at the end of the day, if ads were ever to show up alongside pro-Nazi content, that that is a problem for X. And I think this report really shines a spotlight on this concern about brand safety. And I think that's really what it's about at the end of the day. So I do think it's worth noting that if you have a broader brand safety concern and then you have Elon Musk himself sharing and retweeting content that many people would think is offensive, that I think the combination of those two things is really meaningful for a lot of these brands that are very concerned about the content. Why did it take somebody else's study?

This has been the story of social media for years. Why did it take somebody else's study? I mean, why wasn't someone at Comcast or IBM or Apple or wherever looking to see where their advertisements were appearing on the platform X? why didn't somebody do that? I mean, I'm saying with it. I don't know. I would also say that Julie, Julie, God.

Oh, no, I was just going to say that it's one of these situations where it's constantly fluid, right? I mean, whether you're meta or whether you're or whether you're X or whether you're TikTok, it's not like a TV spot where you know that you're scheduled to run next to the neo-Nazi content. It doesn't work that way. It's not that simple. The more people follow neo-Nazi content, the more traffic there is effectively where those types of ads might show up. What the issue is here is that Linda Yaccarino has promised advertisers that their ads will not appear next to that neo-Nazi content. And so I think that's the problem here is that what is the traffic on the site that's generating the eyeballs or the ad impressions, as they call it, for ads to be placed next to it. So it's more complex the traditional, say, TV advertising. Dan?

I would just add the elephant in the room, it's Musk. I mean, you know, if you look at last week what happened there, that's the biggest issue. It's another black eye for Musk. And that's really what advertisers are just so dismayed at in terms of what we're seeing. And I think no doubt what happened with IBM and that was front and center. But, I mean, the Musk tweets. So is his damage control enough, you think, to save the Exodus? And is Linda Yakorino's job really on the line?

I mean, right now, you can't but Jeannie B. back in the bottle. And what we've seen over the last week, it's just a cascade of advertisers leaving. I do think from a brand perspective, I mean, Tesla right now, it's contained in terms of the impact. But this is part, as you've talked about for many months, it's the $44 billion nightmare where I believe Twitter right now, X, if you look at the valuation, $5 to $10 billion at most. Wow. And you've been saying, Dan, for months, that this is a real problem for Tesla in terms of share performance. Maybe we haven't seen it just yet, but what is the risk you see in the next 12 or Look, I think for now it's kind of cordoned off.

I don't necessarily see it as much impacting Tesla, but it's about brand. When you buy a Tesla, it's Elon Musk. It's a brand. And I think part of the frustration, more than frustrated, just the agonizing, you know, pain here for investors, it's the last thing you want to see here. You want must be focused on Tesla, SpaceX. Instead, he's, you know, he's replying back to someone with 1,400 followers. And I think that sort of cascaded this whole issue.

you. Ina, thoughts? Yeah, if we take a step back, I think whether it's big brands or someone buying a Tesla or the U.S. government, which has contracts with SpaceX, I think everyone is sort of weighing what are the big benefits of what Elon's products are delivering versus how much can I stomach? And I think one of the reasons that brands all hopped in together is I think they've all been sort of weighing this. It's not like Elon Musk has changed his stripes overnight. I think advertisers have been struggling with this decision for quite a while, knowing that their customers are still there to some degree. There's still a meaningful audience to be reached at the same time. What are they willing to stomach in terms of doing it?

And I think that's the same decision Tesla customers and shareholders are wondering. And again, I think at some point we also have to have a conversation about the U.S. government, which is highly dependent on SpaceX and it's Starlink. Exactly. No, but I think that it also speaks to the fact that each of these three, companies are still in many ways essential. Dan, I guess the question there, you mentioned maybe Twitter's market value now would only be in the neighborhood of $5 or $10 billion. If it is a figure that low, or if it is losing traffic, which remains an open question, who wins from that? Who benefits? I mean, you could say other social media in terms of SNAP and

others, but I think right now, you know, maybe meta, but it's really who the losers are here. And, you know, this continues to be, you know, probably the most overpriced tech acquisition history. Now, again and again, it's the last thing you want to see as an investor, just brand destruction. I think that's the frustration at such a tense geopolitical time. Julia, let me squeeze you and then I'll go to Steve for a final thought. Julia. I would just say it's notable that some of those advertisers typically spend a lot during the holiday season. Apple typically spends a lot to promote its products for holiday shopping.

You have the entertainment companies. They're not only usually around this time of year promoting their big holiday movies, but also their streaming services that they want people to give to each other. So those tend to be big holiday advertisers. I would also say that they're all facing their own economic pressure and are all looking places to cut back. So if the X ads aren't working very well,

if they're concerned about the brand safety, then it would make sense for them to say, hey, where can we move our money right now? Or maybe we just pause this permanently while we focus on other ad areas because they don't want to be overspending on advertising right now. Steve, what does he do? What does he do? What does Musk do? He doesn't do apologies well. No, he doesn't. Where right now, his posture is I'm going to file this thermonuclear lawsuit, which, last I checked, the courts opened a few hours ago on the West Coast.

So that might have been a lie that he plans to sue him. It wouldn't be the first time he's threatened a lawsuit. Second of all, it's telling that the reaction is not we're sorry we're going to fix it. Yes. The reaction is, you guys are the bad guys. The people reporting on this is the bad. guys. You can say whatever you want about media matters. You can say they're out there to get Elon Musk, to bring him down, to, you know, send him to the poor house, whatever. That doesn't make what they found any less true. And so to sue over that just seems like a huge distraction when you should be courting those advertisers back. So I don't know what the lawsuit or a potential lawsuit

or complaining about these companies pulling their ads does, except, you know, help his ego and help them feel better about it, but it doesn't bring business back. Oh, we have to leave it there, but I'm sure we have not heard the last of this particular story. It's famously silent guy. Or suite of stories. Yes, exactly. Steve, Dan, and Ena, thank you. And Julia, thank you as well.

Further ahead on the program, Cruise CEO, Kyle Voth, resigns from the GM-owned Robo Taxi Unit. This following a string of missteps for the company, we're going to dig deeper in tech check. I thought we should just keep the full panel around. We got more tech to check. We'll be right back. Welcome back to Power Launch.

Bond yields hired today. for a bit of a change, and we did just have a big auction a short time ago. Let's get out to Chicago and Rick Santelli for the details. Hi, Rick. Hi, Tyler, indeed. As a matter of fact, depending on where you look on the yield curve, you can find some yields a bit higher, some yields a bit lower. Some yields a bit lower. And the reason?

Well, the next chart, an intraday of 20-year bond yields. Yes, look at what happened at 1 o'clock Eastern. A big drop. The reason? 16 billion of those bouncing baby 20 years found new homes. And it was a very solid auction. And many still probably are thinking about a week and a half ago on a Thursday, November 9th, 30-year bond auction, ICBC, Industrial Commercial Bank of China,

not a primary dealer, but a big player in the auctions was hacked, had a problem. And that in turn affected the auction, which already was a weak auction, and it turned into an auction disaster. I gave it a greater D-minus. But this long-dated auction went much better. And as you look around the yield curve, everything changed after that auction. Look at a two day of tens after the auction.

You saw that yields made new lows on the session or new high prices, and that entire mid-long end of the treasury curve moved into the green as prices moved higher. But if you looked at the short maturities, look at a two day of twos, you could see, A, how tight the ranges are, B, the fact that yields have held up more firmly, and the fact is that twos, threes, and fives are still higher in yield

and lower in price than yesterday. So, yes, we've seen more inversions in the curve since that long-dated auction. And there was something else today that really is worth mentioning. Leading economic indicators for October, down eight-tenths of a percent, was the 19th, 19th, 19 consecutive negative month-over-month change in a row. Now, many don't have LEI as their main strategy variable in how they're going to trade,

but it really is worth noting that this is the longest negative run outside of the April of 07 to March of 2009 run when it was down 24 consecutive months in a row. Tyler Kelly, back to you. Yeah, you don't want to be in that company. Rick, thank you very much, Rick Santelli. Let's get to Contessa Brewer now for the CNBC News Update. Contessa? Kelly, a federal appeals court issued a ruling today that could weaken the 1965 Voting Rights Act.

The court found only the federal government can bring a legal challenge under the section of the law that prohibits discrimination based on race and elections. Now, if the ruling stands, it would prevent private citizens and civil rights groups from taking action, which is one of the main paths for enforcing the landmark law. Toyota's credit business is facing a $60 million fine from the federal government. The Consumer Financial Protection Bureau accused the automakers credit arm of tricking customers into purchasing unnecessary products and then making it unreasonably hard to cancel them. Toyota did not admit any wrongdoing as part of the settlement. And ahead of the holidays, you can order four more free COVID-19 at-home tests. The Biden administration brought back the free test program in September during a start. spike in cases and said it'll do the same again now because more people will be gathering indoors

and potentially spreading the virus. You can put your order in at COVIDtests.gov. Welcome to Thanksgiving dinner. Here's your COVID test. Kelly? Thank you, Contessa. Ahead on Power Lunch. We'll dive deeper into markets. Around 20 new names are hitting new 52-week highs in today's session. A lot of them tech-related. Microsoft and Meta are on the list. Power Lunch will be right back. Welcome back. Welcome back. to power lunch, everybody. It is a shortened holiday week on Wall Street, and stocks are looking to extend last week's gains. Our next guest feels that last week's inflation data support the year-end rally and expects the broadening to continue. Let's bring in our friend Stephanie Link, Chief Investment Strategist and Portfolio Manager at Hightower, as well as a CNBC contributor. So you think, Stephanie, that the rally has some legs, at least through the end of the year, based on the data?

Definitely, Tyler, good to see you. It is the inflation data. Certainly, that's one of the catalyst, but there's a couple of other things. The economy is continuing to see expansion. We're going to see 2% to 2.5% growth. That's what we're tracking right now for the fourth quarter. I think the Fed is done because of the inflation coming down and you've seen a peak in rates and then just throw in seasonality for good measure. And I think all of these things combined will lead to market. continuing to do well into the end of the year and probably a little bit of chasing as well. What sectors do you like the most? Well, I think you have to have kind of a diversified strategy.

I think there's nothing wrong with technology. Even the Magnificent Seven, I own a few for sure, but and I think they will continue to do well. It's hard not to get excited about the total addressable markets in AI, in cloud, in security, etc. That being said, it's a big piece of the overall market at 35% in terms of weighting I think you also want to have some exposure on the industrial side. You and I have talked about onshoreing and reshoring all year long. I think that is a 10-year theme. And I think it's going to continue to be strong, and we saw it last quarter.

And I think anything tied to aerospace is also doing well. Look at the Boeing upgrade, for an example, today. I do think energy can play a little bit of catch-up. It's kind of frustrating, as are the financial sectors in general. But I do think you can find some pockets of really good ideas in those two sectors as well. Wald was talking about some stocks last hour and mentioned kind of in passing that he thinks we've moved past the mid cycle correction phase into a next leg or maybe a final leg of the bull market. And then with a little couple extra seconds afterwards, I asked him, well, you know,

how long can that keep going? And he said, you know, maybe until the first Fed cut, which, as we know, could be who knows what time next year. Does that feel like it's right to you? Like that's the kind of stage that we're in right now? It's hard to, it's hard to tell because there's just so much underlying stimulus in the economy, Kelly, right? I mean, like, we just grew 4.9% in GDP last quarter alone. And I actually expected us to slow down substantially from that. I think 2% is pretty respectable. And I think we're going to continue because you do still have a lot of infrastructure stimulus in the economy

that hasn't even entered into the economy. It always takes a delayed amount of time. And so I think that's going to be a nice stimulus. I think we have to watch for jobs. jobs continue to be really good in terms of the strength, wages. And I think the consumer, just if I listened to what all of the retailer said last week, the consumer is not dying. The consumer is picky and choosy. And they are doing things in services. They are doing things in goods. I think you have to be a stock picker. But by the way, I was very impressed with the

profitability of these companies in the face of some of the headwinds on the demand side. So I think that as long as a consumer hangs in and then you have some of these tailwinds from the industrial part of the economy, that's a big part of the overall economy. And that should lead to pretty decent earnings, especially when you add on the technology movement as well. Speaking of adding on, you've added on to your holdings in Target just today. Yes. Yes. Yes. Yeah. So I think they did a really good job in terms of controlling what they can, meaning execution, meaning cost cutting. We beat operating margins, Tyler, by 120 basis points this past quarter, then expectations. They beat gross margins by 273 basis points relative to expectations. That's really remarkable.

So their operating margin came in at 5.2 percent, and everyone was expecting four. And their goal is to get to six. And if they can get to six, you're looking at $10 an earning, $9.50 to $10 in earnings power. And I think that's really an attractive valuation at 13 times. get the demand that comes back, you're going to have massive, more massive operating leverage to the bottom line. And another one you like is, I think my wife's favorite store is home goods, which is owned by TJX. Yes, I know it's your wife's favorites. Mine too. Yeah, I mean, this was a stellar report. They beating same store sales. They beat in revenues and earnings.

And again, a nice margin tailwind as well. And they cited lower, over, over. All both companies cited lower all macro inventory. So lower inventories, but they're still elevated. And so T.J. is going to benefit from the elevated inventories. They have pricing power. They're doing great on both segments, Marmax and home goods. And I just think the stock fell 4% on the day. I thought that was really silly. And just letting the dust settle before I buy more of that. This is like a dream for the off price retail sector. And so you want to pick your spots within that group. Looks like he did some nice holiday decorating over the weekend. I know what you were doing.

Putting up that tree. By going to home goods, Stephanie Link. Thank you. Good to see you. Yes. Thank you. Good to see you. Coming up, cruise control, the CEO of GM's Robotaxi unit, resigning abruptly, leaving a leadership

void at the top. We'll get the latest details on this saga, including who's set to take control now when Power Lunch returns. Welcome back to Power Lunch. Let's get now to that resignation of the high-profile CEO of. of a tech startup, but it's not Open AI. It's Cruz we're talking about now. Deirdre Bosa joins us with more on this saga.

And what a saga it is as well, Deirdre. Yeah, not the first saga we're talking about today. Top executives, that at the door, a larger company trying to exert control, locked in fierce competition with Google. Doesn't just describe Sam Altman and Open AI today. Cruise, the self-driving car startup owned by GM, lost its CEO Kyle Vote over the weekend. And his second co-founder, Dan Kahn, also, announced his resignation today.

Now, Cruz, of course, has had a number of recent missteps. The California DMV suspended its license. It then suspended all operations on public roads, issued a voluntary recall of nearly 1,000 cars, and it was involved in a high-profile accident with a pedestrian here in San Francisco. Regulators have accused the company of not being completely transparent.

GM bought the company in 2016 and had huge ambitions for the startup, but since then, Waymo, which is owned by Google, has taken the early lead and it continues to operate on the streets here. In its last earnings report, GM revealed that it has lost roughly $2 billion on crews just so far this year, including $732 million in the third quarter alone. So this is a lot of cash burn for a project which is now in doubt. Kyle Vote says he plans to spend time with family and explore some new ideas.

The company's EVP of engineering will now take the role of president and CTO along with the general counsel. And really, Kelly, like AI, self-driving technology, it costs a lot of money. It's fraught with regulation. And now executive changes at the top. You know, Robotaxies, one of the most promising technologies along with generative AI here in San Francisco in the Valley thrown into doubt today as well. And I think, Deirdre, this one feels almost more impactful. I understand people say that, you know, AI is going to, you know, kill off humanity. But Cruz was involved literally in fatal accidents.

So we there still feels like there's still needs to be more details about this partnership and the, you know, wisdom of San Francisco regulators and letting them have their way on the streets. And so where do we go next for those who would like to see autonomous driving down the road? I mean, the whole point of autonomous driving, right, is to make the roads safer. You don't have drivers who get tired. You don't have drivers who drink and drive. You know, have drivers that are sleepy. But regulators, and we spoke with a number of them, say, that there's not enough transparency.

They need more information to see how these things are actually operating on the street. And that's really central to this case of Cruz suspending its operations. The regulators accuse them of not being totally transparent. And, you know, that goes back to Kyle Vote when I sat down with him. Not long ago, just a few months ago, he said that that was sort of the pinnacle of what they were trying to do. But the regulators don't feel that way. So Waymo will continue, maybe get the edge here.

But there are some concerns justified that. But robotaxies are moving too quickly. They need to take a pause, then make sure that they develop safely. And indeed. Deirdre, thank you very much, our dear Robosa. And still ahead, defense, drugs, and donuts. We'll get the trade on Boeing, Bristolmeyer, Squibb, and Krispy Cream. There's a fresh three-stock lunch after the break.

Welcome back, everybody. Time for today's three-stock lunch. We take a look at three big movers in today's session. Here with our trade, Sylvia Jablonsky, CEO and CIO of Defiance ETFs. First up, Sylvia, is Boeing. Those shares up 4% today, an upgrade to buy from Hull, from Deutsche Bank. Boeing says Boeing can expand airplane deliveries going forward as supply chain issues ease your take, Sylvia, on Boeing. Good afternoon, and thanks for having me.

So I think Boeing for me is a buy. I really like the story here. It looks like they're recovering. They're going back to 2018 levels. You know, they delivered about 400 planes and 22. It's up to 520 for 23, you know, 600, 700, 800 for the years to come. So they're increasing, you know, the amount of aircraft that they're delivering, which means free cash flow is increasing, which means revenues are increasing.

Recent deals with Ethiopia, about 70 aircrafts there. They're coming into the Middle East with another 80 aircrafts there through Emirates. So I just think that they're, you know, fixing supply chain issues, delivering on airplanes and the revenues are going to come in. They're projecting 10 billion of free cash flow, actually, by next year, is, you know, astounding. So I do like this stock, and I agree with that upgrade. All right. And again, investors seem excited, too. What about Bristol Myers? Let's see going the other way, down 4% after those negative drug trial results for buyer, which could have implications

for a treatment they're working on. And buyer shares are even down more sharply overseas. Would this be a buying opportunity for you, Sylvia? Well, I think, you know, I might consider looking at it a year from now, but probably not in the near term. You know, I think they have a lot going on. So the gene therapy drug got pushed out. They can't, you know, sort of get approved on December 16th. That's going to advisory review for multiple myeloma treatments. Then they had, you know, the competitive drug with the Bayer trial, which just stopped. So they kind of lost there. They've lost on another one of their major profit, you know, cancer fighting drugs because of generics kind of winning out there. So, you know, I just think that they have a little bit of a rough go of it right now.

but where it plays out in the future is that, you know, they have the Marotti acquisition in which, you know, they're going to have a lot of R&D, a lot of cancer drugs that could essentially play out. So I think that, you know, the future could be brighter. We'll sort of see what happens with this trial in the gene therapy. If it does get approved, you know, that's kind of a game changer for them. But they have a deep bench, aging, you know, baby booming population, defensive stock in the future could be interesting, but probably not looking at it right now. All right. Finally, we've got crispy cream. That's lower, downgrade, P Morgan to neutral from overweight, you've got to love a donut maker that's rated overweight.

Sylvia, what's your take on Krispy Cream? Yeah, the problem is that nobody else will be rated overweight, right? With all of these drugs coming out that are going to make everybody stop eating, supposedly. So, you know, I think the biggest sufferers of the weight loss movement are going to be companies like Krispy Cream. You know, I saw on the notes the downgrade cane because of a lot of mismanagement, you know, the ability to kind of turn over the fresh package within 20. 24 hours. I think the company, you know, they've opened up so many new installations, places you can get the donuts, but sales only really grew up about 8%. So it's had a perfectly fine year, but I just think the future is kind of going towards, you know, kind of like healthier

eating, a lot of this OZUMPIC overhang. And I think that, you know, they're going to have a tough go of it too. So I'm a seller of this one. It's had a good run, though. You know, good for that 24% year to date. All right, Sylvia. Thanks very much. Have a great Thanksgiving. Thank you. You too. Happy Thanksgiving. Sylvia Jablonski. think of a way to work crispy cream into my Thanksgiving. But no, there's no way. So many headlines to get to, so little time. We'll power through as many as we can in closing time next.

Welcome back. We only have three minutes left in the show and several more stories to flag. So let's get right to it. Starting with the latest in the AI Wars, let's call it. Amazon reportedly launching a free program to train millions of workers in AI skills as they try to keep up in the race for talent with Microsoft and Google. According to the Wall Street Journal, Amazon plans to train at least two million people and basic to advanced AI skills by 2025.

This is basically eight online courses focused on generative AI, which would target folks with tech or tech adjacent roles. And, yeah, maybe they see this as a way of getting people interested. I think this, I would sign up for such a course. I was going to see this thing. I would sign up for such a course because I just don't know enough to even be artificially intelligent. Are we potential Amazon employees, though?

How does this help them in the war for AI talent? You and I are not about to go work there. But we would take the course. I would take their course. I would too. For sure. All right, say, who says money can't buy happiness? A new Empower survey.

Respondents with a median salary of 65,000 a year said a bump to a median income of 95,000 would make them happy and less stressed. For higher income workers making a median of 250 grand, the number to achieve happiness was 350,000 a year. So that would be basically a little less in that second case of a 50% raise would make you happy. News flash. Mo money, no problem. More money. You never got enough. You always need a little bit more.

Speaking of which, Colombian pop star, Shakira, settling her tax evasion suit with Spanish authorities and avoiding potential jail time and a trial that was asslated to begin today. As part of the deal, she will pay $19 million in back taxes plus interest and an additional $8 million fine. They alleged she had paid to pay personal income and wealth tax between 2012 and 2014 of around $15.5 million. Very interesting.

He puts this one aside. But she really is. She risked going to jail, and I think she got a three-year suspended sentence. You always wondered, was she going to end up behind bars or something? That would be quite something to contemplate. An ankle bracelet would. Yeah, right. All right.

The NFL now has more than a billion dollars in combined quarterback contracts lost for the season to injuries. It started opening night for the Jets and Aaron Rogers and the Vikings Kirk Cousins, both of them out with torn Achilles. least tendons, something I had a year ago. A knee injury to the Giants Daniel Jones, followed by a shoulder injury to the Browns Deshawn Watson, and a hand injury to the Bengals Joe Burrow, all stars of their franchises and the league and money, along with Super Bowl hopes potentially down the tubes. We shall see. I think it's guaranteed contracts. I think in these cases partially so.

Not like in baseball, though. Right. A little sad to me that part of the reason people are so obsessed with whether Joe Burroughs risk was reported or whatever, it's all because of the gambling. You know, it almost feels like that's now calling the shots. Gotta leave it there, folks. Thanks for watching Power Lunch.