Power Lunch - Tech’s AI Tailwind, and a Big Box Bull Fight 5/18/23

Episode Date: May 18, 2023

Everyone’s talking about AI right now: its impact on society, markets and the world. And 7 stocks are driving all of the market’s gains, with most of them knee-deep in the AI boom. We’ll discuss.Plus, retail results are coming in. We’ve heard from Walmart and Target so far. But which stock is the better buy here? We’ll ask our analysts to duke it out in an old-fashioned “bull fight.” Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. Alongside Kelly Evans, actually across the room from Kelly Evans. I'm Tyler Matheson. Everybody is talking about AI, its impact on society and the markets. Seven stocks driving the games, most of them knee-deep in the AI boom. Plus, retail results coming in. We've heard from Walmart, from Target. Which is the better buy right now?

Sounds like the recipe, Kelly, for a bull fight. Indeed, indeed. Just wait, everybody. Quick check on the markets. Tyler, thank you. Mixed picture. Dow's near session lows down 187 right now, while the S&P hanging on to a two-point gain 4161, the NASDAQ up about 0.6%. By the way, the NASDAQ highest level since August, absolutely

worth bearing in mind that these gains have taken us to some potentially significant levels. And AI optimism is a big reason for that. A lot of AI in tech news to talk about today. Steve Kovac in the house, Julia Borsden as well. Perfect. I mean, from now on it's always me a perfect week, Julia, but seriously, so much to get to. Let's start with. Dear Deer Jabosa, though, to break down just the latest news that we're getting Deirdre. Yes, it doesn't stop, Kelly, just an hour ago. OpenAI said that it's introducing its chat GPT app to iOS and iPhones, and that'll open the door to more users, more headlines as we're getting used to. Also, today, there's Snowflake and a potential AI adjacent acquisition.

There's Dinah Trace, a price target increase that points to it as a clear leader in the broader AI market segment. What else do we have? What about the entire S&P gains this year that has been driven by eight stocks, the beneficiaries of what else artificial intelligence. But guys, dare I say it, is there too much AI news? Rather than go through all of these individual items, let's talk about AI washing. That is a phrase that I'm hearing more often in tech circles and that investors should be aware of us. We get all of these headlines. I spoke to Ramp CEO, Eric Glyman yesterday about this idea. His fintech startup ramp was last valued at $8 billion and it's backed by the likes of Satcha Nadella, Open AI board member, Adam DeAngelo, and Stanford, Professor Chris Ree, all of whom are deeply involved in building AI-based products.

Here is what Gleman said about AI washing. I think there's a lot of companies out there slapping a chat bot on their site and saying, hey, look, we're using AI and solving customer problems. And I think it's sad because it misses the potential to really use this new software to deeply embed it. in your products. Now, TBD, if Ramp can successfully take part and capitalize on this AI boom, but his point is a good one for investors to keep in mind as the headlines continue to roll in. For now, the consensus seems to be that big tech will be a beneficiary.

We've talked about this before, Big Tech versus the incumbents. And Amazon, speaking of, your next guest, I know, calls it a strong AI opportunity because of its, quote, data exhaust. And that's in a lot of cases what it comes down to, how much data they have to create. French for these models. AI washing data exhaust. Boy, we've got all kinds of new phrases here. Deirdre, thanks very much.

And for more on that Amazon call and AI, we have Brent Phil, analysts at Jeffries, as well as Stephen Julia. Brent, let me begin with you. Where is, I mean, we hear a lot about chat GPT, open AI, Microsoft, Google. Where's Amazon in this race? Hey, Tyler, Amazon's in a fantastic position. If you look at the enterprise, they are the cloud leader. They own a $85 billion run rate with AWS with the majority line share of the cloud market.

Microsoft being number two, Google being number three. So when you have that data, you have an advantage. Today, they have over 20 different AI services. They were the last ones to join the PR party, but we think that ultimately behind the scenes, they have an incredible technology advantage because they have the data and have the users on the enterprise side. And then if you look at the consumer, they have all the data, what we've ordered, what we've not ordered, what's our delivery preferences for advertisers.

Advertisers now have access to this information, and the advertising platform is far superior than Walmart or Target. You start to layer in things like Prime Video. There's an incredible opportunity. We were having, we had an Amazon day this week with our clients and seven experts. And one expert said, even their investment in autonomous, the acquisition of Zooks, imagine a car that picks you up. You forgot to get whatever the item is. Amazon can load it in the car. You get in the car.

You can have CNBC in the backseat of the car. And it understands you watch CNBC. You don't watch ESPN during the day. And so this whole concept of tying all these signals together and all the products they're providing, it's not here yet. But you can point to the future of what this is going to look like. And it's an incredible opportunity for the company. Steve, I'm struck by your comment in the past that Amazon's trying to be a little bit like Switzerland to sort of say, you know, we don't want to have to choose sides too quickly and alienate potential customers as the customers themselves try to figure out who their friend and partner or not is. Yeah, and that's particularly on the cloud side, though.

So they're taking a different approach in what we've seen from Microsoft and Google's saying, if you want to develop these AI tools, come to. to us. We have the cloud. We're the biggest cloud provider. I will point out, though, there is a risk here because so much of it does hinge on AWS. By the way, the FTC is about to sue Amazon on antitrust grounds, and AWS is going to be one of the targets. Stuff like what we're talking about that. The fact that they're in so many different lines of business. Exactly, and that they own the pipes and the marketplaces and all that together makes them an antitrust target for sure. So this could be a risk to them with all this AI stuff, for sure. But just think about all the ways, they do have pipes into us. I mean, he mentioned advertising. And look at advertising as this

huge growth opportunity for Amazon. They've been growing so much faster than some of the other players, and they could really use AI to better target ads and even come up with ads. And this is something we're hearing some of the other ad players talk about as well. But Facebook talks about that a lot. But also, think about Alexa. Right now, my kids ask Alexa, tell me a joke. The jokes are not that great. But in the future, they'll be able to say, Alexa, tell me a knock, knock joke about this that and it might be really funny because I think that you're going to have this pipeline into people's homes and all of those Alexa devices ultimately will be an interface for people to interact with AI. I couldn't agree with you more, Julia, and Brent, I want to get your thought on this.

If I think, and this is opinion, not really fact. I think of the two software services that are indispensable to me. One is Google, but I'm telling you, Amazon probably is even more indispensable to me because of Amazon Prime and everything I can do and hook to it, including going to Whole Foods, including buying whatever I want whenever I want, including watching TV, including listening to all kinds of radio stations on my Amazon Echo. And I think that those interactions will become a lot more natural using those natural language, large language models. And so you're going to be able to have a conversation with your Alexa about what it is you want to buy, what you want to do without ever having to look at a screen. And Amazon's been talking about this for

ages since Alexa first came on the scene. That's the ultimate vision. They want that Star Trek computer that can do everything for you. They haven't really made much progress there. Maybe now they'll supercharge it. Brent, give us a last word and a last thought on the stock price and where it can go from here. We still think the stock's trending to 135 plus. It's had a huge move. It's all performed every other name and large capital we cover this year quietly, even while Microsoft's having attention. But they're getting their costs under control on the supply chain. EWS will rebound in the back half of the year into 24. We think margins continue to move slightly higher.

Again, they're getting a lot of these issues under control that they've been headwinds. And so we think we're at a point, hopefully we can stop cutting numbers, numbers have stabilized, and hopefully numbers can start to go up, especially on the bottom line. All right, Brent, thank you very much. Brent, Phil. We appreciate your time with Jeffries. You know, I'm struck by all the antitrust moves that are coming, even as technology shifting so quickly. And actually on that note, another key tech story.

So it's taking place out in Montana. The governor signing the first outright ban of TikTok in the U.S. The new law paves the way for a legal fight that could determine the fate of a nationwide ban that's reportedly under consideration in Washington. You know, kind of a sign of the times. Steve, let's start with the implementation here. I guess if you live in Montana, you wouldn't be able to download this from the app store. This one kind of broke my brain, Kelly, because it just completely misunderstands how the app stores work.

So this law would find basically Apple and Google, because they own the app stores, 10 grand a day for every day they keep the TikTok app app app store in the app store in Montana. The problem is that's not how the app store works. They cannot ban on a state-by-state level. They can do country-by-country, of course. You go to the app store in China. You're not going to be able to get Facebook, for example, right? Is that because we don't have state-by-state IP addresses?

The app stores are nationwide. Exactly. It's a nation-it's country-by-country, not state-by-state. So what the better solution would have been, if they really wanted to do this and really make a point, they would do with the gambling apps. Do you have a geo-fence thing? So as soon as you cross the Montana border, boom, TikTok goes dark. And they can ask TikTok to do that.

And what's so interesting. And Steve and I were talking about this before is that it's so hard to regulate these things on a state-by-state basis. And it doesn't seem like anyone thinks this is actually going to happen because it doesn't go into effect until January. And before then, it's certainly going to be challenged in the course. And ACLU is ready to sue the pants off of Montana for this. courts and there's a lot that's going to have to happen legally between now and January 1st. Logistically, so if you already had the app and you tried to open it in Montana, what would happen? And I ask also because look at what's happening in Utah, where they're trying to, I think the

word is ban kids from using social media from a certain hour at night and beyond. So we're seeing a ton of these moves to rein in tech one way or the other. Maybe because it's TikTok and where it's from, maybe it's just the use of tech generally with kids. What is the technology by which they're going to be able to do this or not? In what sense? like figure out where you are, how old you are. Geofensing. Geofensing seems to be the answer, but that's not the answer they're choosing. And that just shows the misunderstanding that they have of how these apps work. Maybe they don't want, I mean, my cynical theory here is they don't want

to say, we took TikTok away from you. They're still saying in Montana, you can use TikTok, you just new people can't download it. And that's just not going to work. So what's the point then? If you can still use it there. Very good question, Tyler. Its growth. 150 million people are already using TikTok in the U.S. There's 150 million users in the United States. And like five people of in Montana. And there are a million people in all of Montana. A lot of Easterners are moving there.

Okay, I got you. All right. It's a nice place. Big sky is a gorgeous place. But it's not going to dent TikTok at all. This is a theoretical battle here. It's going to be fought over in the courts. And I think this is really important and interesting because it could help determine what

ends up happening on a federal level. Will we have a national, nationwide ban on TikTok? Will TikTok be prohibited from operating here in the U.S.? And this is a great test of that. I almost wonder if the difficulty in implementing it becomes part of the concern about them, right? If the idea is, well, you can't regulate them. We literally don't have the tools to do so, make people go, maybe we need to be able to.

You can't prevent the app stores from selling it simply or allowing people to download it simply in a certain state. I think what Steve is saying is that you really have to focus this regulation on what the app itself is doing, rather than on the app stores, which are kind of these open platforms. Does Apple need to play a role here? Apple knows where you are and could be a gatekeeper. It could be, and the app store does have location features, but that's just not how it's designed right now. And again, I just go back to the gambling apps.

If they really wanted to do this, that is the perfect example. Online gambling is banned in certain states. You can still download Fandle and so forth, but they won't work when you're in that state. That's how they should have done it if they were really serious. All right, let's move on. And with Disney here, shares are popping on reports that ESPN plans to stream its main ESPN channels programming, something that is not currently available on ESPN Plus.

Julia, you understand all things Disney probably better than anybody. What are they proposing to do here? And would it mean that if I am a cable subscriber, that I would not receive ESPN or would I still get? I know you're not cutting the cord, Tyler. I know you're going to remain a cable subscriber. But you will be able to keep watching Disney. Now, this is something that Bob Eiger has been talking about for a while, as is Jimmy Pitaro, who runs ESPN for Disney.

Now, what they're saying is that they understand that it is an inevitability that they will be offering ESPN content direct-to-consumer. And that's because there are so many cord cutters and so many cord nevers, people who have never paid for a TV bundle. So what they're trying to figure out is the right moment to take that content direct-to-consumer. And they also have to make deals with the cable companies, the distributors. So Disney is talking to Comcast and Tartor and all these other cable distributors to make sure that they have the rights to take that content that was previously via a TV bundle

and take it direct-a-counter the numbers work, because as I understand it, as part of my cable bill, I am paying $8.15 and $15 a month to receive my ESPN. Worth every penny to me. Whether you watch it or not. Worth it to me. May not be worth it to somebody else who doesn't give a hoot about sports. Almost said something else. But so how do the numbers then work for all of the people who then drop the cable? How do they make up for the $8.15? Well, so right now you can subscribe to ESPN Plus, and it has additional content. But it does not have the same live sports. It may have different sports rights.

So what Disney has to figure out right now is at one point it's financially advantageous to take that content additionally direct to consumer. Disney may earn less money from the cable providers if they're effectively making that bundle less effective. One thing that we talk about in the media business is that sports are the glue that holds the cable bundle together. People like you are always going to pay for the cable bundle because they need their live sports. But the more we see sports move on to other platforms like Google or Amazon are getting these NFL games or MLB games, once sports is not just unique to the pay TV bundle, then maybe it's worth it. for Disney to say, hey, maybe we'll make less money from the pay TV bundle if we can get other

people who aren't currently even paying for cable TV to pay directly for ESPN Plus. Do we know, I mean, if anything, this is happening a little sooner than expected, because without maybe we're still a few people's up. Do we know? It's a few years away. Yeah. We don't know exactly. That makes it happen tomorrow. This is a long process. They have $40 a month. I mean, I don't think it'll be that much. I mean, Tyler almost fell in his chair. I like ESPN. I like it $40 a month, but So that's the thing is that a lot of people pay for ESPN now who don't watch it because not everyone is an avid sports viewer like Tyler. So what they have to figure out is how many people will subscribe direct to consumer and what is the right price point? This is a big process.

And the fact that there was this new headline out from the Wall Street Journal just indicates that it's continuing to accelerate in terms of when they're trying to figure out the timeline. But Bob Eiger has been very clear he knows this is going to happen. It's just a question of when, what the price point is and how they're going to work things out with their pay TV partners that are selling. the cable fund. And the news on Disney keeps coming at this very moment, in fact. What Julia is happening now? Well, Disney is announcing today that it is canceling its plans to build a new campus in central Florida. And it is no longer asking the 2,000 employees in its parks experiences and products division, employees that had previously asked to relocate to Florida, it is no longer asking them to do so. Disney Parks, Chief Josh DeMorrow, saying that this was due to, quote, new leadership and

changing business conditions and that he, quote, remains optimistic about the direction of the Disney World business and his plans to invest $17 billion and create 13,000 jobs in Florida over the next 10 years. Tomorrow is saying in his note to employees, quote, I hope we are able to do so. Of course, this all comes amid Disney's battle with Florida Governor Ron DeSantis. And on Disney's earnings called us last week, Bob Iger reiterated his frustration calling the state anti-business. So is there any way to read this other than a slapback at Florida? Oh, 100%. Come on. I mean, look, Disney was going to, yes, this is a slap back at Florida. But also, Bob Eiger said it very

clearly on the call last week. He said, why are we investing so much if this is not going to be a state that's going to, yeah. And so they had a couple years ago announced they were moving 2,000 employees from Southern California to Florida. They were going to build this whole new campus for them. So this is an investment on many levels. They're building physical information. They're asking people to uproot their lives. And now they're saying, why are we doing this? This is not a state. We want to get even more into business with than they already are.

And they even said in this note to employees that was just released that they, if people had already moved to Florida in anticipation of this happening, they would talk to them about helping them relocate. This is escalation. Yeah. And DeSantis is going to announce next week he's running. This is his key issue. He's known as the anti-dizzy candidate for some reason.

Yeah. Guys, thank you. We really appreciate it today. Julia Borson and Steve Kovac. All right. Coming up, a tale of two retailers, Walmart and Target, both reporting results. Target painting a grim picture of the economy, flashing recession signs, raising an alarm on theft. Meanwhile, Walmart raising full-year guidance. Groceries offsetting the clothing slowdown that also hit Target.

So which name is the better bet? We will have a bullfight. Welcome back to Power Lunch. Target and Walmart both reporting earnings this week. The big name box stores, each posting a beat on the top and bottom lines, but still saw consumers skipping over those non-essentials. Excuse me, shares of both Target and Walmart are down about 2% so far this week. Walmart beating Target year-to-date, so which one here is the better buy? With the bull case for Target, Repesh Perich joins us.

He's managing director and senior analyst at Oppenheimer. With the bull case for Walmart is Michael Baker, D.A. Davidson's managing director and senior research analysts. Welcome to both of you. A Rupesh Target discretionary, if things. tightened from here? Are you sure this is a place you want to be? Yeah, so we do have outperforms about Walmart and Target. We think over a 12 to 18-month horizon, Target has more upside potential. So I think right now, Target is given as large discretionary mix, it's just more exposed to consumers pulling back in discretionary. But as we look at the Target story, you know,

if you look from last year and then, you know, going forward, we think there's a much bigger earnings recovery story here. So last year, Target earned around $6. We see they're earning $10 next year. So, you know, that's our enthusiasm around Target, is you have a big. big earnings recovery story. And then discretionary at some point will pick up and target over the last couple of years that's gained significant share in discretionary categories. So I think you could supercharge on recovery next year if discretionary does pick up again. Michael, kind of a similar question to you. When does Walmart typically do better during times, during heady times or during belt tightening times? Well, we're seeing it right now. I think the answer is certainly

during belt tightening times. I mean, the 7% comp they put up this morning is going to be better that most retailers is certainly better than overall retail sales, and that's because their mix is well suited to what consumers are shopping for now, which is needs, not wants. And they're seeing a trade down from higher-end consumers trading into the Walmart ecosystem. So this is the time for Walmart really to shine, and we've sort of been, you know, seeing that over the last few months, and sales have weakened throughout the economy. They've got growth, Michael. How much of that growth is coming from groceries and how much of that grocery growth is coming from simple inflation? Well, the answer to the first, well, the answer to both questions,

really in some ways is all. You know, the general merchandise sales were negative. Their growth is coming from groceries and wealth and health and wellness. So not all, but certainly those needs rather than wants. And their unit growth has been flat to maybe up slightly. Most of the growth is coming from pricing. As strong as the growth has been, and it was up 7% this quarter, it did decelerate a little bit from 8 and change last quarter on a U.S. comp basis, and that deceleration is largely because inflation is still high, but it's starting to moderate a little bit. Repesh, talk to me about Target sells groceries, but are they competitive with Walmart in that

area, or they don't have the scale, the size, the selection? What is it? Yeah, so Target does sell groceries, much smaller part of their business, about 20% of sales. So Target's just one, so grocery is just one part of Target's entire offering. So it is a focus, but consumers do not go to Target just to buy groceries. They go to buy multiple categories with home, consumer electronics, sporting goods, etc. So I think that's what's unique about Target versus Walmart. Is there multiple ways to drive people into stores? And yes, I would acknowledge right now, given grocery consumers are focusing on essentials, Walmart is better positioned your terms to get that traffic.

But over time, you know, when consumers go back to these other categories, I think that's when you start to see the traffic inflect higher again for Target. Just a quick final answer here. To get so that the viewer is clear, nod your heads. You both like both stocks, correct? That's true. Yeah. And one of your likes Target a little more. And Michael, you like Walmart a little bit more.

Thanks, gentlemen. Appreciate it. Ruppesh Parik and Michael Baker. Well, the semispace making huge gains this year, the SMH-E-T-F, that's Schmet. Up more than 30%. But beyond the monetary, it's also seeing strides in equity and inclusion. Asian Americans are underrepresented in corporate sea suites, but see outsized representation and success when it comes to climbing the ranks in the semiconductor industry.

We'll discuss that when Power Lunch returns. Welcome back to Power Launch, everybody. Let's go to Chicago for a check on the bond market. Rick Santelli is standing by. Hi, Rick. Hi, Tyler. Today, it's all about crunching the numbers, so let's start doing that. Philly Fed for May, down nine consecutive months in a row. Leading economic indicators for April, down 13 months in a row. Treasury yields on pace for its fifth consecutive higher yield close. Let's go to the charts. Two's and tens one week, you could see the climbing interest rates there.

And, of course, it's altering the landscape of Fed Fund futures, which is always right on any given moment, but every next moment may change. It's getting ever, ever closer to a quarter point tightening at the next meeting. And if we look at what's going on in two years in general, well, you see that. If you start the chart in early March, you could see 507s to high yield close. So even though we've come up, it's really still a long way from its peak. And should we get above four and a quarter today on a closing basis, it'll be a two-month high-year close. Tens are already there, two-month high-year close.

And if you look at what's going on in tens, yes, rates have come up dramatically, but still a way. from 4 and a quarter, its high yield closed all the way back in October of last year, and finally the dollar index. Boy, it has really been fired up lately. We've cleared the 103 handle, and it's going to close again at a fresh two-month high close. Tyler, back to you. Mr. Santelli, thank you very much.

Energy futures closing for the day. Oil prices lower today after jumping yesterday on hopes for a debt-sealing deal. But the real action today, natural gas. Price is soaring there as much as 10%. Traders watching some key technical levels, including the $3 mark there at $258 right now. West Texas, down a little bit. Let's get to Bertha Coombs now for a CNBC News update.

Hi, Bertha. Hi, Tyler. Here's what's happening at this hour. House Speaker Kevin McCarthy striking a more optimistic tone about debt-sealing negotiations, saying the House could vote on a deal as soon as next week. California Republicans said he thinks things are in a better place today than they were a week ago and that he sees a path to an agreement.

Other Republicans, however, have said negotiations are not close to being done. That comes as some conservatives are pushing for a border bill to be added to debt-sealing negotiations. On Thursday morning, members of the Conservatives Republican Study Committee sent a letter to congressional leadership and the negotiations for both sides calling for the border to be included in negotiations. It was unclear if this late request will hamper the 11th hour dealmaking. And Rafael Nadal announcing today that he will miss this year's French Open due to a lingering hip injury. The 37-year-old tennis grade also said he expects 2024 to be the last year of his career. Nadal is a 22-time Grand Slam champion, including an unprecedented 14 wins at the

French Open. I can't imagine it without Ratha anymore. No, huge Nadal fans. I agree, and he seems to be a terrifically nice guy, a good guy, charitable, and he's only 37. We've been so blessed when you think about it to watch Nadal and

Federer and joke of it. Three of the greatest players of all time, each competing head-to-head, setting records in the Grand Slam events. Thanks, Bertha. Still ahead on Power Lunch, the rising tech tide, lifting all stocks. Apple, Microsoft, Nvidia, Amazon, Mehta, Google, and Tesla account for close to all of the S&Ps year-to-date gain.

We'll discuss the market imbalance next. Welcome back to Power Lunch, the NASDAQ leading the way higher today. Again, continuing a trend where the concentration in a handful of tech stocks is really leading the market. And that has some people worried, looking for alternatives even. Bob Bassani joins us now from the New York Stock Exchange. Or do they just pile in and see how long they can ride this one out, Well, some are, but others are now arguing that big cap tech is so disproportionately big in the S&P 500 that people should consider equal weight S&P 500. So just look how much these big cap tech stocks.

Here's the five biggest stocks in the S&P. Look at these numbers, 110% for NVIDIA, Amazon, Alphabet, Apple, Microsoft. These are the top five stocks. These gains are so big that they literally are moving the whole 500 stocks in the S&P 500, the whole S&P 500 here. So if you look, the average stock in the S&P 500 has gone nowhere this year. There's the RSP. That's that orange line on the bottom. And there's the S&P, the white line on the top here.

The S&P 500 itself, market cap weighted, up 8%. The RSP equal weighted, that's the average stock. Everything is the same weight, all 500. It's flat on the year. So that's a problem. A lot of people say too much risk right now in the S&P 500 in the market cap weighted. So equal weighted has gotten proponents now who are pushing it. Here's the main arguments for an equal weight.

The top 10 stocks in the S&P are now 30% of the market cap of the S&P. That's the highest in decades. People say there's too much risk here. It's too concentrated in tech. We could have a big problem if things go down like we had in 2000. And parts of 2020, too. The thing about equal weight everybody pushes is that it gives more balance to the market. Small and mid-cap stocks have the same influence as the big-cap stocks.

Okay, here's the problem. Most investors are not convinced about equal weighted. Market cap weighted have adherence for a very simple reason, and this is the main reason. It's the purest form of indexing that you could have. Essentially, it's the public voting. The investing public decides who's winning and losing because they decide what's the most valuable stocks.

And if Apple is a lot more valuable than international paper and the investing public has voted that way, the S&P is going to reflect that. Tyler, what you got in equal weight is every quarter, they rebounds. They sell the winners and they buy the losers. So it's essentially a value mid-cap play that may work in certain times and has worked in certain times in the past, Tyler. But a lot of people are saying, you know, it's a winner-take-all mentality.

And that's why the majority of money is still in market cap. Still big, big debate about this right now, more than I've seen in many, many years. That's where most of the investing money is. And that's where most of the money is, as you have pointed out. Bob Bazani, thank you. Social investors look for diversification intake, in case tech. takes a turn or why fight the tape. Let's ask Mona Mahajan, senior investment strategist at Edward Jones. And she's here actually on a day that's not a Fed day. So it's good to see you.

We let you out even on non-fed days. So Mona, let me go back to what Bob was just talking about. Does the S&P 500, which is market value weighted, does it give you really the best view of the market or is it a skewed view of the market? Yeah. You know, it's a great point that Bob brings up. in the near term, we do think that this tech trade could persist. It probably does have some legs. And there's a couple of reasons for that. One, of course, when you look at the breakdown by sector, there's only three sectors that are outperforming the broader S&P 500. Those are, of course, comm services, technology, and consumer discretionary. Two of those are back in full market

territory, so up 20% plus. So when you look at the technical picture, in fact, those growth tech parts of the market are above their 200-day moving averages, for the most part, the sectors. are driven by technical momentum. And so there is some support, especially in the near term. The other factor we'd point to, if you look at what investors are doing now, they really do have an alternative to equities. They can sit in these cash-like instruments that are offering 4 to 5 percent yield. And what would drive them back into the market?

Well, they really have to see interesting opportunities. Perhaps it's AI that's motivating them. Perhaps it's proven business models, strong cash flows. A lot of those large-cap tech names this earning season announced another set of big buyback program. So they're returning value to shareholders. So we do think that this trend can persist, especially as the Fed keeps rates elevated and elevated for an extended period of time.

And the final factor I'd mentioned briefly is that usually what happens is during, after an economy goes through a downturn, and as we enter recovery phase, that's when we see broader participation, small caps, cyclical parts of the market, even international and longer duration bonds. We haven't gone through that process yet. So there is some room to run, we think, for this trade. But as we look six to 12 months down the road, keep in mind the broader participation we do think comes back to some extent. Let's talk about what's been happening in the past few weeks. The major market indexes have been down for four out of the past five or five out of the past six, whatever it is.

And in the past couple of days, those indexes have turned a little bit, presumably on hopes of a budget deal. What do you expect the major market indexes to do as we move from spring into summer, into the fall? Yeah, you know, look, I think if we do go through an economic downturn, and our base case continues to be for a mild recessionary environment that is now a consensus view, we don't think markets can completely ignore that. In fact, we probably will get bouts of volatility. We do think more recently, you know, better optimistic views on the debt ceiling, better news overall in the banking crisis has supported markets. But if we start to see an economic downturn, markets can't ignore that. But keep in mind what we went through last year and really over the last 16 months, S&P drawdown of 25%. We've been in this bare market territory.

Markets will start to look forward. In fact, market cycles and economic cycles are different. So if the economy is moving downward, markets can move upward in advance of a recovery. And so that's what we think happens. We do think period of volatility is that opportunity to position for a recovery phase. And that recovery phase, we think, will be broader, led by broader-based leadership as well. Mona Mahajan, Edward Jones. Thanks very much.

We appreciate it. Thank you, Tyler. Coming up as part of our celebration of Asian American and Pacific Islander Heritage this month, we're looking at the C-suite where Asian-Americans are well-represented in tech, particularly semiconductors and software, the heads of Microsoft and Google, for example, but also Raj Subramanium at FedEx and Loxman-Narrison at Starbucks are rare examples in other, or maybe not so rare examples anymore of other areas of the economy where we see that leadership. And as we had to break here is Osman Ansari, CNBC's Senior VP of Business Transformation and Corporate Affairs.

I want to talk about some career advice I received early in my career that really spoke to me as an Asian-American in the workforce. And it centered around two things. The first was finding the activities that you're good at. What are your natural strengths, the things that you will build your career and your craft around? And the second was finding the natural complementary activities that create commercial value for those. And when you overlay the two together, you find a sweet spot of things that provide value to an employer that you will get paid for doing and you can build a career around. Welcome back. Asian Americans are underrepresented in corporate C-suits overall, but they've seen some,

big success is so far in the semiconductor industry. Christina Parts Nevelis joins us with more, Christina. Thanks, Kelly. Well, of the 10 largest U.S. chip makers found in the SOX ETIP, which we often use as a barometer, 40% are led by Asian Americans with familiar names like Lisa Sue at AMD, Jensen Wong, from NVIDIA, Hawk 10, Broadcom, Sanjay Marotra, at Micron. And their tenures tend to be a little bit longer than non-Asian chip leaders, and they happen to see higher stock returns as well, even when we remove NVIDIA, because we know that's stock has searched so much since it went public under Wong's tenure. Its market cap is actually now larger than Berkshire Hathaway's at the moment. But Asian American chip leaders saw their average

stock returns increase 2,000 percent over their ten years, substantially higher than other non-Asian American executives, specifically within the chip space. But when we move beyond the chip space, their representation actually diminishes. Less than 5 percent of Fortune 500 companies are run by Asian American CEOs, as it becomes more important. difficult for Asian American leaders to actually climb up the ladder. Representation drops 41% from the corporate entry level to the C-suite, all while inequality grows. And they may be overrepresented in tech and software-related jobs. We talk about many of these leaders on our network, but McKinsey found that they also are

overrepresented with the lower-paying jobs in America, and that creates a divergence. There is much greater than population share within a number of low-wage occupations. as well, some personal care occupations, for instance. And in fact, that the majority of ethnicities in the Asian American population have higher than the average rate of poverty in the United States. So the large variance of wages between these occupations cluster, the occupation cluster actually means Asian Americans have the highest income inequality among races in the U.S. And that's just because they're concentrated at the top and concentrated at the bottom. Come on over, Christina. So where else sort of do we look for? Is there a angle here with

women leaders as well? We know this just generally with women, but specifically for Asian-American women, they struggle to go from just an entry-level position to the C-suite. So I mentioned that 41 percent stat for men and how difficult it is. It drops off 41 percent. For women, Asian women, it actually drops off 70 percent. And earlier this week, I heard Citibank, the head of private banking, Ida Lou actually call it the glass ceiling and the bamboo ceiling, which I thought was a creative way to take on it. So when you say 41%, explain that number to me. In other words, they are 41% underrepresented compared with entry-level people? No, compared to white males. White males. They are 41% underrepresented. And so it's interesting if we're going to expand it out to even women now, and I know we were talking about Asian leaders, but with women earlier,

In April, they're filing more female CEOs than CEOs named John on the S&P 500. So coming a long way since 2015 when the New York Times was actually the first to publish that comparison, that there are more Johns out there running S&P 500 companies than females. A random but delicious little tidbit. Good with that. Christine. Thanks. Good to see you.

Thanks. All righty coming up, take two interactive, the top performer in the S&P. After posting a big beat for its fiscal fourth quarter, we'll trade it in another movement. of the day in three-stock lunch after this break. All right, time for today's three-stock lunch. We have some movers on the menu today. First up will be Netflix. The company says their ad-supported tier

is beginning to show some signs of life with 5 million monthly active users. Netflix is, however, still battling an ongoing writer's strike and facing a backlash surrounding its password-sharing crackdown. Here with our trades, Courtney Garcia. Courtney, what's your take on Netflix? Netflix. In Netflix, I would actually be a seller on here.

I think it's probably a time to take some profits off the table. It's doing fantastic today. Last day I looked, it was up about 9% off of this. Really great news. They had about 5 million subscribers already to their ad-supported tier, which is great. But realistically, they are going to continue to face increased competition. And they're going to have to continue to have those high costs in order to create new content to keep their current subscribers, let alone get new ones. And ultimately, this is a company that's seeing slowing growth.

They had revenue growth about 6.5% last year, which is as slow it's ever. And it is not trading cheap by any means of 33 times next year's earnings. So you're essentially paying a premium for a slower growing company, which I don't think is a recipe for success. So it's doing fantastic, but maybe time to take some profits. Big surge today. What about Baba, Baba, Black Sheep? You know, they're going to do the cloud spin out. They just think they're not getting any credit.

Bye, bye, Baba. Yeah, not giving a lot of credit at all, which actually I would, the opposite is happening here. Where stock is down today, I think it's a wonderful buying. opportunity to take advantage of. And really, they have continued to suffer where the Chinese economy has not opened as fast as everybody expected it to. And that has really been a headwind for them. But I think that is going to likely turn into a tailwind, especially when you look at later this or early next. And none of that optimism has been priced in. And I would not discount the Chinese economy eventually recovering here. And I think they're going to be a beneficiary of that.

And this is a company that's trading of essentially dirt cheap valuations. And they have about $55 billion on their balance sheet, which also puts a lot of room for them to invest in A.S. which they brought out. Out on top of that, they're spinning off some of their businesses, which I think is a great long-term story. So this is definitely something I will look at as an opportunity. Courtney says, bye-bye, Baba. I like it. All right, finally, take two interactive. Shares are up big, 52-week highs on earnings beat. The video gaming company shared a weaker than expected outlook, however, but signaled a strong future gaming slate. What do you think about this one? Take two. Yeah, this also is doing really good on some excitement over their earnings. So we saw that

both PC and gaming sales really actually did a lot better than people expected. And their mobile advertising was about 2% quarter over quarter, which is great news. But I think this is excitement over the recent earnings that just came out. But even though they did beat on their earnings, they are still trading in it, their earnings really are so deeply negative. And I think essentially you're going to see some of this excitement go away. And Wall Street will eventually focus on their return to profitability, which isn't expected to at least 2025 fiscal year at the earliest. And I just don't think that that's really what you want to be jumping into at the moment. So I would actually avoid this for the time being. All right. Very clear. Good case. Courtney,

Courtney, thank you very much. Courtney Garcia, Payne Capital Management. Don't go anywhere. Still ahead. Home prices see their largest decline in more than a decade and a huge week for one of our favorite CNBC colleagues. It's nearly closing time when Power Lunch return. Welcome back. Three minutes left in the show. A bunch more stories you need to know. So let's not waste any time. We'll start with home prices, which just saw their biggest drop in more than 11 years. Granted, it was only a 1.7% year-on-year decline in April, but that was still the biggest since January 2012. Median price for a home now, Tyler, stands at just under $389,000, down from the record of $414,000 back in June 2022. I suppose you'd have to say that this must reflect in some way the bite of higher interest rates,

because it's like a bond. When the rate goes up, the price goes down. For sure, between that and higher mortgage costs. I mean, the cost of a home had, monthly carrying costs is almost doubled in the last few years. It's crazy. Boy, they're still selling really well where I live. Agreed. I don't know. All right, chairs of the Western Ware retailer Boot Barns sinking after mixed fourth quarter results,

including a 10% drop in e-commerce sales year over year. The dip in boot shares not helping the Rutgers Investment Club, who picked it in the second round of this year's stock draft. Boots need some resouling. These boots weren't made for walking at least today. I just want to point out boot, and we were talking earlier about Bolero, which is also down about 18% today. These were two very popular, very consensus trades,

both of which are moving the other way today. Both of which began with the letter B. That too. And we won't get into bed, bath, and buy-bye. And all of the rest of it. No time to drive your kids around. Let Uber do it. Starting next week, teens can start requesting Uber rides

or ordering food on Uber Eats. Wait a minute. Is this new for teens? Don't they already do this? The service will be available in select metro areas across the U.S. and Canada requires a central family account for payment and verification.

You previously had to be 18 or older, but they acknowledge a lot of people ignored that, or I guess just use the parents anyway. All right. Well, there you go. I thought they were doing it. I also thought that Uber is now unveiling the option to use a phone number to call and book rides, which really would be kind of a back. As opposed to using your app.

For those who don't have, totally. Check me on that, but I think so. All right, here's one for you. Corporate drug testing revealing a surge in marijuana use as more and more states legalize the consumption of weed. the number of workers testing positive reaches a 25-year record, accommodation in food services, as well as the floor crew here. No, I'm kidding, where the industry had the highest positive growth rates, positive rates for marijuana.

Are we surprised? I mean, of course. Yeah, if you're going to legalize it and sell it, why not? Let's move on. You're having a good week when the second most exciting thing that you do is scoring an interview with Elon Musk. Yes, we are talking about our own David Faber, just back from that huge interview in office.

Austin, David just throughout the first pitch at City Field this afternoon before the Mets game. Was it a strike? A bounce one. They're going to have the full video on Squawk on the street tomorrow, but he did tweet a little teaser say, I can't remember that. What was the term he said? He said, I did not bring the heat. He did not bring the heat today. All right. It's like, David, you are bringing the heat every time we turn around. Not everybody gets to throw one out at a Mets game. Thanks for watching. Fabulous.