Power Lunch - The Fed's Next Move, Humanoid Robots & McCormick CEO on Rising Prices 6/27/24

Episode Date: June 27, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good day, everybody, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us. Broader markets, not seeing big moves right now. As you can see, there, sort of very marginal gains for the Big Three index. Holding pattern may be before tomorrow's inflation report. But there is lots of activity in individual stocks. From Walgreens to Levi's and Micron, we'll get the stories from our reporters and the trades from our trader in just a moment. One stock moving higher following its results is McCormick, the Spice Company. How have they done over the past few, years as food at home became an alternative to restaurant inflation. CEO Brendan Foley will join us coming up. But we start with a deluxe version of three-stock lunch. We will get the news first and then the trade and we're focused on those big earnings decliners today. Our trader today is Anthony

Forsyoni. He is a portfolio manager with Rockland Trust. First up, we've got Micron Technology. shares sliding dramatically after revenue forecasts fail to top estimates. As you see, they're down about 6%. Sima Modi has the details in our report. Seema. And Tyler, that's right. It came down to Micron's lackluster guidance. That is what is weighing on shares right now. But it does come after a 65% run in Micron shares this year. Wall Street analysts this morning really focused on Micron's latest high bandwidth memory chips, which are used in NVIDIA's H200 graphic processing unit. CEO Sanjay Mahothra says its latest chip is already sold out for calendar year 2025. Goldman, among the analysts, raising their price target on the stock to $158, citing Micron's role in AI.

And it's not just about chips, though. They're citing the opportunity within storage. Analysts that Goldman believe, as AI continues to be at the forefront, Micron's enterprise solid estate drives, which store the data on electric circuits, will benefit from incremental demand. Right now, we are watching Micron shares trade down by around 6.5%. Invidia is down as well. All right.

All right. Seema, thank you very much. All right, Anthony, you're up. What's your trade on Micron? Good afternoon, yeah. I would continue to hold Micron here. I think we've seen this playbook over and over in recent months with companies that have AI exposure, trading down on earnings or force just because the market really wanted more in the near term. At the end of the day, I think Micron is pretty well positioned from an AI opportunity with their HBM chip. should be continued to generate millions of dollars of revenue. And the important part is that as investors, we've gotten a lot more visibility in the last two or three months in terms of the AI opportunity. I think that's really important. So they continue to be well positioned. They should have the opportunity to generate well over $10 per share in earnings power, perhaps even materially more than that. So the stock is still reasonably valued. So if you still, if you own it,

I'll continue to continue to hold it here. All right. Let's move along. then to one of the big stories of the day. Walgreens' boots on pace for their biggest drop ever after cutting the profit view and planning to potentially shut a lot more stores. Let's get the details from Bertha Coombs. Bertha? Kelly, Walgreens hitting a 26-year low, in fact, after missing on the bottom line and lowering its outlook. The issue is margins at its pharmacies. At the back of the store, there's due to pressure for reimbursements from pharmacy benefit managers or PBMs in front of stores, CEO Tom Wendon. Tim Wentworth told me consumers are still stunned, he says, by the stickiness of high prices,

and then there's theft. The result, a quarter of stores are underperforming and they're looking to close those unprofitable locations, shifting staff to better performing stores. But Wentworth is mindful of the impact in some communities. We know that we are the last company standing in a lot of places. We are the only thing standing between those places and being pharmacy deserts. And our goal is not simply to be the last one to leave. Our goal is to actually find new ways to work together, whether it's with state Medicaid programs,

whether it's a local law enforcement. CVS is facing a lot of the same issues in its stores, but CVS is more diversified than Walgreens with a PBM and Aetna Health Plants, which help offset some of that impact on the brick and mortar. Back over to you. All right, so Anthony, on that news and on the stock now trading down to what we say, almost 20-year lows, maybe more, would you be a little? Would you be a buyer here?

I definitely would not. I would continue to sell the stock. I think Bertha hit on sort of the crux of the issue is that they're really at the crosshairs of potential or continued industry disruption, not only in the front end on the retail part, but certainly on the back end with pharmacy. And I just think there's too much uncertainty in terms of how they're positioned in the industry. So despite a 25% saw off today and the valuation appearing to be. you know, not that demanding. Right.

I think there are just better places to be in the market than sort of fight this battle. Value trap, totally. Okay. All right. Final name on the docket today is Levi Strauss. Shares dropping there as the company sales disappoint, despite the rebounding of denim, Gabriel Fon Rouge, who told us about the popularity of denim. How come Levi's just isn't benefiting while denim is having its moment, Gabriel? I mean, that's exactly right, Tyler.

You and I both know that denim is having its moment with consumers, but you're not really seeing that impact at Levi's. Last night, the company posted sales that narrowly missed expectations, and clearly Wall Street was expecting a bigger beat. This was a small miss, to be clear, but it's an important one because, like we said, denim and Western styles are trending. Levi is the OG of jeans, and if they aren't going to be winning with this trend, why wouldn't they? And even a few months ago, Beyonce named a song after Levi's, and that still wasn't enough to have a major impact on sales. And of course, guidance is another thing weighing on the stock today. The company handily beat earnings estimates, but despite that beat, it only reaffirmed its full-year EPS guidance. It's expecting sales to be up around 2% compared to estimates of up 2.8.

And for the current quarter, it's expecting sales to be up low single digits versus up about five. And now, Tyler, there's something else that could be weighing on the stock here. Levi's is in the midst of a strategy shift where it's selling more directly to consumers through its own websites and stores instead of through partners like department stores, Macy's and Coles. And now, this strategy can be more profitable, but it's one that really hasn't worked out so well for some other retailers. So investors might be concerned about that as well. All right, Gabrielle. Thank you very much. Anthony, your view on Levi's. Yeah, so this is another one where I think the reaction is a little bit too much based on, again, the market. wanting more in the near term. And in the case of a strong quarter in the implied second half

guidance not being as strong as people wanted. And of course, we've heard and read so many data points on the consumer that are clearly mixed at best. So retail feels a little bit like a landmine. But at the end of the day, Levi is a tremendous brand and franchise, arguably one of the top 10 brands in the world. And to the point of what they're doing strategically, by focusing on more direct to the consumer and e-commerce, those trends are still very strong. So I think with this selloff, I would definitely continue to hold the stock here, and the risk reward looks interesting. All right, Anthony, thanks very much.

Anthony Forsyoni, we appreciate it. Thank you. Now, stocks overall are edging higher today as traders await tomorrow's inflation data for any hint of when the Fed could start cutting rates. Our next guest says she's constructive on markets, the disinflation story, start of a Fed rate cut cycle, economic expansion. she's adding risk in portfolios, taking equities further overweight. Let's bring in Megan Chu, head of investment strategy with Wilmington Trust.

What do you see that you like? Megan, welcome. Thank you. Well, I think starting with the economic data, while some of the soft economic data, a lot of that around consumer sentiment and different business surveys is a little bit weak. The hard data continues to be pretty solid. And we are just continued to be very convinced by the disinflation story. And I think we'll get inflation another data point tomorrow. It's really important not to get too swept up in the trees, if you will, of month-to-month data points,

but really keep your eye on the forest, which is a long-term disinflation trend that remains intact and should allow the Fed to begin a rate-cutting cycle in September. And we have about six rate cuts penciled in for the next 12 months, which is an environment that should alleviate some of the pressures on their more indebted companies. and also allow the economic cycle to continue. And in that environment, while fixed income returns should be pretty solid, we think equities will outperform, and that's why we shifted some assets from fixed income to equities. You like consumer discretionary, but it seems like you're selective here because on the one hand you like it.

On the other hand, you say kind of beware of consumer discretionary that is exposed to the lower end consumer, which is feeling some pressure and getting a little choosier. Absolutely. Up until now, what we've seen has been a consumer that's basically been a monolith. Everybody has cash to spend a lot of it going towards services, but also spending on goods across the upper income and lower income price points. And what we expect going forward is that aggregated savings is coming down. And consumers, especially on the lower end, are going to be a little bit more strapped. And so it's really going to be about not only, identifying which pockets might see continued consumer activity. And we think that higher end consumer goods and services should still continue to do well, but also finding those companies that in a disinflation environment will retain pricing power, have good margins, low levels of debt. So really skewing towards higher quality in this environment and looking for companies that can execute. And it's really been a little bit of a touch-and-go market for active management.

especially with the very narrow leadership. But this is an environment where execution and profitability is more important, where stock selection will really have an opportunity to shine. And you're not among those leaning against the outperformers at the top. You're overweight technology, right? And the related kind of basket areas. We are slightly overweight technology. And I think there's a lot of ink spilled over,

can the market continue to do well without this very small basket of stuff? basket of stocks just dramatically outperforming. And we don't have too many data points in history, but historically what we've seen is that periods of very narrow leadership do tend to coincide with very strong markets as we are experiencing right now. But the year after and the subsequent years tend to see more moderate returns, not necessarily sell-offs and corrections, but more trend-like equity returns, which is what we're expecting, and also better participation from the other parts of the market, value, slightly lower volatility, and higher quality, which is also how we're positioning. So it's not an environment where we have a ton of conviction in Magnificent

Seven, for example, versus rest of the market. I think it's really important to be managing risk and keeping exposure across the spectrum. And so that's what we're focused on right now. Why are you bumming on financials? Well, it's still a little bit of a change. challenging environment for financials. We do like parts of the payment space, payment processors. We also like some of the bigger banks. I think the capital requirements and the potential for that to be updated and some of that capital requirement reduced going forward that was hinted at by the Fed, I think could be a help to banks. But we still have a deeply inverted yield curve. We don't even see the yield curve uninverting in the next year, really. And so that continues to be a challenging

environment for lending. And it's going to be really important for banks to be managing loan loss provisions in a slowing economy. We don't have a very high probability recession. So that should be a positive for banks, but we just see some better opportunities elsewhere. Do you think that fixed income, let's say treasuries, that treasuries have seen their highest yields and that yields are going to come down dramatically. That would suggest, well, if I can lock in today's higher yield, I might not only get nicer income for today, but I also might have the chance of a capital gain.

Yeah, so I think we are going to see very solid returns for investment-grade fixed income, given current levels of yields and the dynamic that you're describing. We expect shorter maturity yields to come down, but we don't really expect the tenure to move too much lower from here. And so you're really talking about coupon clipping. And that's one of the reasons why we still, we're neutral. We have a full allocation to investment grade fixed income,

but outside of the recession scenario, I don't think bonds do better than equities. And even though there are plenty of signs that the market might be somewhat overbought in the short term and more susceptible to choppiness going forward, I think if you're willing to look out over 12 months, equities are the better place to be. So going forward, we're leaning into risk. Megan, we have to go, can I ask you a quick personal question?

I need like a five-minute bicep workout. And I'm thinking, like, you might. I'm like, I need these arms, okay? Please enlighten us. Is it, is it these the lateral, like the dumbbell ones? You know, we've got the try. The heavy lifting, she doesn't work with these numbers. It is.

Kids, kids, too. carrying kids around. I know you can relate to that. Yeah, she's got, well. I needed a better answer than that. All right. I'm coming over for a workout. Megan, thank you very much for your time. We appreciate it. Megan, Schu. All right, coming up. Rise of the robots, and boy, do they have arms.

Agility robotics announcing its first ever commercial deployment of humanoid robots. We're going to talk to the CEO when we return and we're going to throw in an arms workout. Just for good. Well, you've seen human like robots do backflips and somersaults, but can they actually do work? Our very own Julia Borsden is at the Aspen Ideas Festival

with Agility Robotics CEO Peggy Johnson. Julia. Thanks so much, Tyler. And I'm joined now by Peggy Johnson, the new CEO of Agility Robotics in your first interview since taking over as CEO in March, previously CEO of Magic Leap. And today you are announcing some big news on our air. Your digit robot, which is a humanoid robot is in a new partnership with GXO logistics. Tell us this news. Yeah, this is big news. It's an industry first. Digit is stepping in and picking up tasks at GXO.

They're a third-party logistics operator just outside of Atlanta. We'll be moving product within their warehouse. This is kind of the dull, repetitive sorts of tasks that's hard to find people to step in and do. But we are on the clock now at GXO. So these robots are. are doing the work that would be done by workers previously. Tell us a little bit about agility. Your valuations over a billion dollars.

You've raised over $100 million. What makes your humanoid robots so different, not just from the other robots that are being deployed in warehouses, but other humanoid robots that we've seen demos of? Right. So we're the first ones being put to work. We are stepping in and operating in those spaces

that humans pre-examines pre-versely. previously operated in. We're different in a couple ways. One is that we have actual data from environments that inside the customer facility. Turns out that's very valuable data to help train AI models that will then teach new skills to Digit. So that'll help open up new markets going forward. So you're talking about teaching Digit. This is obviously AI powered, but how autonomous and independent are these robots? And what do you see them being able to do as AI? technologies continue to advance so quickly. They are.

Digit is fully autonomous. There's no cord behind it. It is still inside of a work cell, so it works in a work cell for safety. You don't want AI at this point in time controlling the robot. So we use traditional methods to control the robot, but we can layer in AI on top of that to help teach it new skills along the way. So here at Aspen Ideas, there's a lot of talk about AI, but there's also a lot of talk about regulation. You talk about how you don't want AI controlling the robot. We've heard people

warn about robots taking over or autonomous robots taking over sort of the worst case scenario of the future of AI. What do you think about regulation? Should AI be regulated? And what would regulation mean to your AI powered robots? It absolutely should be regulated. Particularly in the humanoid space, these are, you know, human-sized, very large devices. And you want to make sure that the human is always top of mind. And so there's a moment in time now as AI and robots merge for governments to work on the proper regulation to make sure that everybody follows the guidelines as these devices are starting to be introduced into our environments. And so you think this is going to happen at a federal level, national level? Do you think

it's going to happen at international level? There's already national standards for certain types of robots, our team is helping and has a voice in the standards for humanoids going forward. So that standard still is being formulated, but now is the time to get it right. So let's talk about scaling your business. Right now, you're making this big partnership and deploying these robots, putting them to work in this logistics company. You mentioned you have a partnership with Amazon. But what's the future? What other industries, types of companies could use your robots maybe to replace workers or certainly to explain workers? Or certainly to accelerate the pace of their growth? Well, there's a lot of tasks, I would say tasks, not the full

job, that are just repetitive, dull, dirty, sometimes backbreaking, a lot of injury-prone tasks that humanoids can step in and take off the plate of the human. And that frees the human up to learn new skills, to actually be the manager of the robots. They can step into a digital job based on that. And so it's really, it's going to change. It's going to change the face of labor going forward. But I wouldn't think of it as taking the job, but as augmenting a human's job. And so which industries do you think are next step to see humanoid robots at work? I think we'll see it quite a bit in the automotive industry, retail, eventually in health care.

And will these robots interact with humans, or do you see them more as being walking around and doing things within a manufacturing facility or a warehouse? They will eventually interact with humans. That's called collaborative safety, and we're working on those protocols and the feature set to allow that to happen going forward. Well, fascinating time in the robot business and exciting to see your robots at work. They do seem very large and powerful. So amazing stuff. Peggy Johnson, thanks so much for joining us here at Aspen Ideas.

Back over to you. Julie and Peggy, thank you both. We really appreciate it. It looks beautiful out there as well. Further ahead, Masa Sun on Alphabet's heels, investing in 10 to 20 million in a source. startup that competes with Google Search. We'll have those details in today's tech check. Power Lunch is back in a moment.

Welcome back to Power Launch, everybody. Stocks are kind of mixed right now, but very slight moves there, about 1 tenth of 1% for the Dow, the S&P, and NASDAQ. Meanwhile, bond yield slightly lower with some key economic data out this morning and more to come tomorrow.

Let's check in with Rick Centelli in Chicago. Rick? Yes, Tyler, you nailed it. Boy, important data today, maybe even more important tomorrow. No matter where you look, there was something important. When you looked at GDP, this was the third time around the block, but yet consumption took a hit and the price indices, they're a bit warmer than expected. Continuing claims definitely warmer than expected.

And then you had the cooler numbers. Yes, if you looked at durable goods, especially the core, down six tenths of a percent, cooler and expected, and right into the ice box when it came to pending homes. But ultimately, look at some charts here. If you look at twos and tens on one chart, yields have dropped dramatically because all the evidence is building of a slowing economy. And if you look at a month-to-day chart, it really jumps out at you how much twos and tens are down since the end of May. And finally, the big story of the last couple of days remains foreign exchange. We talked yesterday about for the first time in 38 years, the dollar yen closed above that 160 level.

Well, it eased back just a bit as you see on this two-day chart of the dollar yen. chart of the dollar yen, but still solidly above 160, still hovering at 38-year highs in favor of the dollar. And it really does underscore that the Bank of Japan has been verbally trying to tell foreign exchange traders to stop, but we'll have to ultimately see because intervention may work for a while, but in the big picture, it never seems to work on a large scale. Kelly, back to you. Rick, thank you very much, 160 for the yen as we watch that key level. Now, BP, which stands or stood for British Petroleum, is reportedly pausing offshore wind projects and instead putting the focus back on oil and gas.

Pippa Stevens here to turn back or turn forward the clock, Pippa. Yeah, so this is a report from Reuters and they said that BP is pausing hiring and then also pausing new offshore wind projects. Now, it's not all that surprising given that BP has booked significant losses on some of its offshore wind projects, including pulling out of one here in the U.S. earlier this year. And they're not the only European major that's hitting the pause on renewable buildout. Shell also rolled back some of their climate targets earlier this year. And one of the key reasons why is because we've seen this ongoing valuation gap between the European and the U.S. majors, we have a chart showing that, which is no doubt very frustrating for the executives. Now, in Europe, these companies have doubled down on renewables and focused on wind and solar.

Exxon and Chevron here in the U.S., they do have their low-carbon divisions, but it's just a fraction of their overall capital spending. And they've also not gone into solar and wind. They've gone into areas where they say they can be leaders like carbon capture and hydrogen. And then earlier this year, we actually had Patrick Puyenay from Totois say that they're now seriously considering moving their listing to the U.S. There is no saying of whether or not the French government would actually approve that. But they've seen their number of European shareholders drop and their U.S. shareholders rise. It's a very much more friendly environment here in the U.S. for oil and gas majors. What is behind this pullback?

They just don't see the profits coming out of wind and solar and so forth. Lower profits and longer term. And now when you have commodity prices at very healthy historical levels and you're minting a lot of money, Exxon on Chevron made a lot more than their European counterparts in the last few years. And so it's just that valuation gap and investors willing to pay more for the companies that are more squarely focused on hydrocarbons versus those that are promising higher future returns from renewables. That's fascinating. Pippa, thanks. Pippa Stevens. Let's get to Kate Rooney now for the CNBC News Update, Kate.

Hi there, Kelly. The Sackler family, who are at the center of the Supreme Court ruling today, that blocked a massive opioid settlement with Purdue Pharma, responded this afternoon with a statement saying, quote, while we are confident that we would prevail in any future litigation given the profound misrepresentations about our families and the opioid crisis, we continue to believe that a swift negotiated agreement to provide billions of dollars for people and communities in need is the best way forward. Meanwhile, a train rather derailed this morning in Madison, Illinois. That's according to authorities.

It is owned by the Canadian National Railway Company. There were no immediate reports of injuries. But officials say they're looking at least one leaking train car. And empty office space could wipe out $250 billion in commercial property value. That's according to a new report for Moody's, which says nearly 25% of U.S. office space will be vacant by 2026 as the work-from-home phenomenon keeps going. employers opt for shorter-term leases and more flexible, co-working arrangements, guys. Back over to you.

All right, Kate, thank you very much. Coming up, paprika's eureka moment, the spikes maker McCormick beating on earnings, getting a boost as consumers opt to cook at home and save some money. We'll talk to the company's CEO next. Welcome back to Power Lunch shares of the spice and convent maker McCormick, jumping on second quarter earnings, which beat on the top and bottom lines.

The company is seeing strong demand for its spice. and seasonings in Europe and the Middle East while benefiting overall for more people cooking at home. Here first on CNBC is Brendan Foley, the president and CEO of McCormick. Mr. Foley, welcome. Good to have you with us. Thank you. I wanted to begin with a somewhat stray question. You're based in Baltimore. I wonder how much, if at all, the collision of that ship with the bridge there on 895 or whatever the road is,

affected your business, your workers, if at all? Well, first of all, let me just say our hearts go out to the families of those lost loved ones as a result of that. And I also want to say one other thing. The state's been remarkable in terms of recovery and getting it done fast. For McCormick, it did have a little bit of an impact. It was mostly just sort of travel-related. Our employees probably have to travel a little bit longer to get to work. And then we just had to make sure that we kind of shifted shipments here and there just to make sure we continue in supply.

But it didn't have that big of an impact. Do you have a number, a percentage of American households that have a McCormick product in them? It must be close to 100%. Close to 100 percent is probably the right way to think about it. We have such a broad product range when you think about herbs and spices and condiments and sauces. Yeah, we're in a lot of households in the United States, but also in other markets too, like in EMEA and Asia Pacific. And that's been a particular growth area, right? It has been.

Recently, EMEA, your Middle East Asia. You know, we just released our earnings today. And we did have a good quarter. We've actually had a really good first half overall. And we're doing what we said we would do, which is really invest more in our business, listen to the consumer, make sure we're reacting there, and putting a lot more focus on innovation.

So we've had a really good start. I wonder at what point people are going to push back on $9 paprika. And maybe that's because I shop at Whole Foods where the spices are too expensive. But the spice PPI, there is one. There's a season, continues to hit new highs. And I have to imagine you're able to pass that along

to consumers because most people bulk a lot less at paying a few extra dollars for something they probably buy once every few months than something they might buy every week. Where are we on that spectrum of passing cost onto consumers and raising prices? Well, first of all, we're growing our consumer business right now, and it's really because I think we're spending a lot of time making sure that we meet consumers with where they are. And a lot of that has to do with everything from innovation, are we thinking about trends and flavor, and also how we think about value on the shelf? We have one of the broadest ranges in the category in terms of how we operate. So that gives us of opportunity to serve the needs of a range of consumers, you know, as we as we think about

overall. I'll tell you, right now what's happening is we're seeing a lot of growth in the perimeter. And what that tells us is probably not as much. The fresh foods. The fresh foods, produce, you know, proteins. And part of that was because those prices started to come down, actually. So consumers were heading back to it. But how much have you raised prices over the past couple years? It's got to be 20, 30, something to that extent? Oh, it's probably less than that. But, you know, over time, that's a compounding impact that we solve inflation. But also we're starting to see prices come down. Right, right.

Overall, what we did a lot, too, is we thought about increased brand marketing to really start to drive volume, increased their innovation. We also took a look at some of our prices on some of the items and said, you know, let's get these into the range that really makes sense for consumers. So are people craving spicier foods today? Oh, they are. This is a great trend. In fact, we're really positioned to win on this.

What I would tell you is heat is more than just hot sauce. Yeah. And it really spans both segments of our business, both on the consumer side and also the flavor Solution side. So we also, I mean, you know our brands. Flavor solutions meaning what? Is that code? Well, that's a part of our business. Is that code for restaurants and? Well, it is a little bit, but it's also, we also have a big business in providing the flavor to a lot of consumer packaged goods companies. Oh, I see. And so we provide flavor to those companies. We also provide flavor to food service and restaurant operators. And then we also have our consumer

segment. So, yeah, Franks Red Hot and Chalula hot sauce, you know, you might initially think about our heat platform. My favorite product is Chalula green pepper. Give it a little bit hotter than original, but if you like heat, you'll love it. I'm an old bay girl, kind of old fashion. That's another one of our great brands. Everything tastes better with that on it, I feel. On the restaurant side of things, we've seen a lot of the numbers kind of stalling out

in the first half of this year. I don't know if that's a discernible impact for you guys, but it's not the strong growth that it once was. And maybe the McDonald's $5 value meal kind of emblematic of that, but again, people are really looking for value. We serve every segment of the food service channel and marketplace. It's a really diverse segment of restaurants and operators. And what I'd tell you is right now we're seeing our branded food service business do really well

and we're growing volume there. And a lot of that is think about when you go to and you see a tabletop and you see Frank's Red Hot in the caddy there, a Chalula hot sauce and McCormick salt or black pepper grinders, we're seeing a lot of growth from that. We're doing a lot of limited time offer partnerships. I mean, a good one for us is, you know, Wendy's just launched the breakfast burrito and they pair it with Chulula hot sauce. These are opportunities for us to really drive share and growth. And so that's a good part of us for.

You got to fend off saracha. Yeah. Well, that's another flavor. You know, when you think about heat, it's very different than what Chalula is like. You might use that on different foods. I would use Franks on something different than I would Chalula. So we're equal opportunity when it comes to hot sauce. What's hot in your business?

What's hot in our business? What's coming? What's the next big thing? We watch trends all the time, Tyler. And this is something that we spend a lot of time. on right now. I mean, if you look at some of the products that we've brought here just to showcase, what starts to kind of hit the tipping point right now and it's really been coming out this year, Dill pickle and everything. Dill pickle. So we're putting in Frank's, you know,

hot sauce, Frank's red hot sauce, where else we got it in like a dill, a creamy mustard with Frenches. We also have seasoning. Chick-Cillet was ahead of the curve on that. Do you partner with influencers? Because I can only imagine the way they might take these products and come up with really creative ways that you'll it only takes one hit to suddenly make dill pickle or what have you be the next hot thing you're right kelly the the chicken wars kind of led into that and so at some point two or three years ago you know that was becoming an emerging trend we watch them and at the right time we go mainstream them you you talked a little bit about inflation you must have a perspective on on the consumer side of the business how are consumers behaving are they

trading down a little bit or are they what where is their position well we like to we consumer businesses performing and it's a good indicator of what we see happening, I think, in the store and how consumers are behaving. There is a lot more value-seeking behavior out there. We definitely see that. For us, because we have such a broad range, we're hitting a lot of different price points and also a lot of different brands, it allows us to serve that consumer. As I mentioned earlier, that perimeter of the store is growing.

I think, you know, what consumers are saying is they're cooking more at home as a result of that. That means growth for our business. And it's really a long-term trend that we're really, you know, looking into right here. But that's also creating a lot of growth in our category. We're a leading brand. We're growing unit volume as a result of that. And so we're really driving a lot of growth because consumers are still eating at home and it remains very strong.

You have to remember, over COVID, it was a four-year cooking class, you know, in a lot of ways. And so that really created an opportunity of the last four years for people to really, you know, become engaged in. Oh, I grew my own oregano and I'd dry it out. I got my basil growing. See, you're good. He's after a few cycles of that. I said, you know what? I think I'm going to go back and buy the spice.

So what was it again, green pepper chalula? Green pepper chalula? Green pepper chalula. Yeah, it's got Pobano and jalapenos in it. Green pepper. You know, this is power lunch after all. Of course. All right, got you.

Thanks so much, Brendan. You're welcome. Thank you. Nice to be with you. Appreciate it. Coming up, SoftBank's latest investment could be taking aim at Google. We'll explain how. Welcome back.

It's another day. So another AI startup is landing a fresh round of funding. This time it's SoftBank, the Japanese tech investor, backing the search startup perplexity tie at a $3 billion valuation. We've both experimented with it. Dear Jibosa is here to break down the details for today's tech check. Deirdrja. Hey, Kelly.

So Bloomberg first reported the details, but a source familiar confirms that South Bank is indeed planning to participate in this round. It shouldn't come as a surprise. Mats Yoshi's son, we've talked about this. And his team has been saying for months now that they are going on the AI offensive. And perplexity is really a darling in the space with the term sheet that already includes Jeff Bezos. NVIDIA. Now, SoftBank's participation, though, it does raise questions about the frothiness of

Gen A.I startups in the ecosystem. Last time SoftBank went on the offense and deployed tens of billions of dollars through the Vision Funds, 1 and 2. It did so largely in late stage rounds, inflating valuations, many of which were ultimately unsustainable. Earlier this week, another buzzy Gen.A.Sartop, Stability.A.I. It has struggled with executive turnover and mounting costs. it was able to find a lifeline from a group of investors, including ex-Facebook executive, Sean Parker, and Co2 management. A crossover fund that, like Sop Bank, many traditional VC investors consider to be Silicon Valley outsiders that is coming in at later stages to inflate those valuations. So this space is as hot as ever, Kelly, and Tyler. And, you know, the real North Star is Open AI, which has, you know, overcome many, many controversies, many leadership challenges.

to sign deals of the major tech companies and is even proving to provide them with some competition, the likes of Microsoft even. I mean, at least here, Deirdre is an example of not just the incumbents winning. Exactly. And I think that's what's so exciting why so much money is being poured into startups. Some of them with little to show for it,

little paths to profitability or even business models. It's this idea, and I'll use perplexity as an example. It does have a business model. It charges a subscription fee for a more advanced version of it. The idea that it can compete with an incumbent like Google, that it's native generative AI and creates a better user interface

than maybe Google is able to, and that's the promise of this company, for example. All right, dear Jor, thank you very much, dear Jorbosa. And still to come, SpaceX valuing itself for around a whopping $210 billion. The latest in the space race is next, and as we had to break, CNBC celebrates Pride Month throughout June.

Here is Brandon Rockwell. Being a proud member of the LGBTQ plus community, I've tried to not let it define me, but be a key part of who I am. In a world where visibility and representation matter, you never know who you could be influencing around you. I am proud of my family and the work that I do every day at PAAF pharma, creating life-saving medications. Welcome back to Power Lunch, everybody. Quick check on the markets, as you see there, the Dow Industrial is ever so slightly lower, as is the S&P, but NASDAQ is a quarter percent. higher. Let's check out shares of Tesla down more than 20% this year, costing Elon Musk billions, but don't worry about him because his holdings in SpaceX are doing just fine. Let's bring in Michael

Sheets, CNBC's Space Reporter. And there's new news here, Michael, about the overall valuation of SpaceX. Who's making that valuation? How'd they arrive at it? So this is SpaceX doing another one of its bi-annual secondary share sales where insiders such as employees can sell stock and what that comes with it is of your typical, you know, valuation, readjustment of what that stock is worth. This lets new investors who want to get in an opportunity to buy SpaceX, which is a private company, while it lets company, you know, people who have been owning the stock for perhaps even more than a decade, get a little bit of liquidity. So this is a semi-anual I mean, we saw it back in December, July before that, December before that.

And it's been a steady increase, really driven a lot by the excitement that investors have around SpaceX's Starlink business and its coming Starship Rocket. And this valuing the company at about $210 billion. When this stock is traded, are these all sort of off-the-radar transactions, private transactions? Yeah, it's your standard secondary share sale where it's being done by the company. with on the private markets through its preferred bookkeepers. So we're talking about something that's really not getting a liquidity out into the public markets quite yet. And for all the talk about whether or not there will be an IPO of SpaceX, maybe a spinoff of Starlink,

we haven't heard any concrete timelines around when that could happen. Everything that I've heard over the last few years is that it's always kind of just a couple of years away. So that seems to be something that's still a ways off. But I think the bottom line here is this steady increase. Now, one of the most privately, one of the most valuable private companies in the world is about, you know, betting on the present with Starlink and then betting on the future with Starship because of the huge customer growth they've seen with their satellite internet business. Although, Michael, I've been thinking about it as we got the news this week that China has beaten the U.S. to, I guess, to the far side of the moon and could potentially kind of be the first colony to be down there where there's more water and ice-rich rocks.

and be part of a colony there in the future that I guess all countries want. Is this partnership model, this public-private partnership between NASA and SpaceX, for instance, is that really bearing fruit? Or does the U.S. need to get more focused if it wants to fend off China? It's a fantastic question. And I think it is bearing fruit already. We're seeing it in low Earth orbit with our transportation systems. Already private industry has taken on new roles that even Chinese,

private industry isn't capable of yet. So we're talking about a transition point for the United States in terms of how we get our astronauts into lower orbit. Now SpaceX is one of those companies leading the charge under NASA's Artemis lunar program. So we have those same ambitions of China in terms of not just exploring the reaches of the moon, but also establishing a presence there. So it's really neck and neck at this point. I think the really important thing is that, you know, China continues to make really steady inroads by just kind of pouring money and the questions about its sustainability continue to be there, whereas we really have an industry-driven aspect on the United States side. Back to SpaceX, we see that it has gotten a contract from NASA for about $850 million to build a craft that will destroy eventually the International Space Station when it's sort of, sort of, sort of, ages out in 2030. What does this craft do? Does it go up and explode the ISS or pull it back into

orbit and make it disintegrate? What? That's highly that's a great question. And what it really is fundamentally is you can think of it as like a tugboat, right? This is a vehicle which we don't, we still have questions about. I don't know what SpaceX is designed for this looks like or whether how they're going to use maybe an existing spacecraft designed to, you know, create this. But But effectively, the plan here is for something that would come up alongside the International Space Station after we've taken all the crew off of it and just kind of guide it back into the really fiery reentry process and make sure it doesn't come down in any areas where we have population.

I mean, the destiny of this space station is ultimately going to be somewhere around the Point Nemo out, way out in the Pacific Ocean. So this is going to be something that there's no people involved, but it's going to bring down what's now a 30, going to be a 30. plus year old space station. Quickly, why not just leave it up there, decommission? That's a great question. And NASA also released a study yesterday when it looked at the alternatives for the space station,

as far as maybe bringing up higher altitudes and just leaving it there or handing it off to another company. Ultimately, all of those were seen as technically infeasible or just economically impossible. So this is the best option that we have as far as what really has served its purpose in just amazing ways with over 3,000 different science and research experiments done over 20 years. All right, Michael, thanks very much. We appreciate your time today. And we appreciate your time as well. Thanks for watching, Power Lunch. Closing bell starts right now.