Power Lunch - The Intelligence in AI, and Countdown to the Stock Draft 4/21/23

Episode Date: April 21, 2023

AI is the hottest segment of technology right now. We’ll explore how different AI tools get so smart in the first place, plus AI’s impact on culture, music and even the economy.Plus, we’re less than a week away from the 2023 CNBC Stock Draft. Can the MNTN Goats, led by Ryan Reynolds, repeat as champions? We’ll draw this year’s draft order live. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch on this Friday alongside Kelly Evans. I'm Dominic Chu. Coming up on the show, putting the intelligence in artificial intelligence. We'll explore how different AI tools gets so smart in the first place and then look at the impact on things like culture, on music, on education, and even Kel, the economy. I'm very excited for this. Plus, we're less than a week away from the 2023 CNBC stock draft. So today we draw the draft order. Can the Mountain Goats, led by Ryan Reynolds, go back to back. Lots of big names coming for his crown this year. First, let's get a check on the markets, though, which are on track to break a winning streak, I believe. But we've turned green on this session.

Dow's up about 19 points right now. All right. Let's get now to Christina Parts of Nevelas for more on today's big action and movers, Christina. Well, let's start with Lyft confirming that it would significantly reduce its headcount next week. This, according to an email from the CEO, the Wall Street Journal putting that number at 1,200 employees, and that's driving shares up 5.5% higher right now. The looming layoffs represent a big chunk of their workforce. Roughly 30% could lose their jobs just next week.

Important to note that Lyft doesn't count its drivers, though, as employees. A Lyft spokesperson tells CNBC, quote, this is a hard decision, and one we're not making lightly, but the results will be a far stronger and more competitive lift. Shares are down almost 70% just in the last year. Customers weren't phased by the price hikes on tide detergent and bounty paper towels. Procter and Gamble beating on the top and bottom line in large part to a 10% jump in prices.

A saving grace considering volumes fell 3% in the quarter, and that was the second quarter in a row. They hike prices by double digits and help the company raise its full year guidance. Shares are almost 4% higher right now. And being on time pays off. CSX transportation posted higher Q1 revenue and profits thanks to record on time performance for car load shipments,

volume grew in merchandise and especially coal, higher fuel surcharges and pricing, also helped. CSX shares are almost 4% higher and one of the best performers on the Nasdaq today. Dom. All right, Christina, parts of Nubbles, thank you very much for that. Thanks. Like it or not, it's become increasingly hard to ignore AI. It's found its way into things like big tech, health care, and now even the music business. But just how did it get so smart? Our next guest dug into the black box of websites, big tech names are using to train their artificial intelligence software and some of the resources might actually surprise you.

With us now is Natasha Tiku. She's a tech culture reporter for the Washington Post, alongside our very own Steve Kovac as well. This is a fascinating panel and one that I know Kelly is super excited to talk about here because it's so amazing just how quickly. We don't even have to say artificial intelligence anymore because everyone just knows what AI is. Steve, take us through maybe a little bit about the trajectory.

and how quickly we've gotten here. It seems like just yesterday we were talking about Microsoft's investment in Open AI and Yeah, and that was just a couple years ago. And what, see, a lot of this stuff has really been bubbling on the surface, Dom, because there's a reason why Google was able to follow so quickly. Alibabaabu is able to follow so quickly. These large language models, as Natasha is about to tell you, have been trained for years on massive amounts of data.

And we just now hit that inflection point where they feel confident putting it out. And of course, we know it gets wrong answers. and it hallucinates and all that kind of stuff. But it's just now at that point where it's good enough for the public to at least play around with. And so it's been in the works for a long time. But again, we're talking about that

training data and there's some problems there. So Natasha, it's one thing to have training and the massive amounts of data, but the rollout has been very, very fast right now. It seems like it's been a domino effect. How quickly do you think it will permeate into just about every aspect

of our lives? Can you take us through where it's already becoming more and more evident. Yeah, I mean, I think everything kind of accelerated, right, with the launch of chat GPT in November 30th. It's crazy to think it's only been about four months, right? And as Steve said, you know, these companies have been working on these large language models. And in fact, they have been deploying them internally. Like we have been kind of subjected to them or, you know, gotten the benefits of them already because Google has been using them inside its search engine.

You know, this is what has been powering auto-complete in your emails. This is what has been powering content moderation on social networks. But it hasn't really been deployed as a consumer tool. You know, we haven't been able to play around with the technology to see how far AI has come. and Open AI really let the floodgates open by saying, you know, we know that there's flaws with this technology. We know that it hallucinates, as Steve said. We know that there are problems, but we're going to push it out anyways. And that just left all of the other big tech companies scrambling.

So, yeah, I think we'll see it proliferate. Natasha, I love the reporting that you guys did here because I think for the first time it really pulls the curtain back. You have Google's dataset. for instance, but to help us understand when we type something in and magically it appears what exactly these answers are coming from. And when two of the biggest sources, I don't think anybody saw Google patents coming. That's great. I mean, very sophisticated. Okay, that's fine. Now we know why it's so literate in some of these arcane areas. But Wikipedia is a very problematic resource. And this is one of the primary ones that informs these responses. I think it still has my birthplace wrong.

And I'm a very minor example. You can go and edit that, you know. But I feel like why. Because in the past, it did. really matter. It's like, okay, we all know if it comes from Wikipedia, okay, we don't know. You take it with a grain of salt. Exactly. Natasha, now we don't know when we get these answers if it's based off Wikipedia or the New York Times.com, which is seen as somewhat more reliable. Or, you know, so there's a lot of oversampling problems going on here. And the veracity, I guess we'd call it, of Wikipedia itself becomes a huge problem. Yes. So the data set that we analyzed was 15 million websites from this nonprofit,

common crawl, which is used by a ton of the AI companies. And this is, you know, I think when people hear common crawl, now that we are all talking about AI all the time, they think it is representative of the entire internet, right? Oftentimes we hear, okay, it reflects the wisdom of the internet or all of humanity's knowledge. It's not. It is a snapshot of the internet at a moment in time. And this was actually taken from 2019, and tech companies are still using this data set. Facebook's Lama, which just came out recently, this new model called Red Pajama, rhymes with Lama, is also using C4 data set. And for context, OpenAIs GPT3, which was one of the last times they gave us any information about what was in their data sets, it used 41 times. the data set that we just dug into plus all of English language Wikipedia, plus 23 million links

that were highly rated by Redditors. So, you know, it's not like a database where we know where it's going to look up information. Right. Way these models work is... There's not a lot of footnotes. No, no footnotes. Give me the footnotes. So it's okay, looking up stuff and finding things out, asking about the weather on Alexa, asking the Bing search engine, to say, hey, what's the weather going to be like in Austin, Texas, next week? That's one thing. We're now at a point where, apparently, and it's just gone viral, it's coming up with its own music, writing lyrics, putting tunes together.

We're talking about people submitting photos and artwork and them mashing them together and making their own unique artwork out of this whole thing. What exactly then does culture look like going forward? And what exactly does regulation look like with regard to intellectual property rights and everything else? Who owns the content if AI makes sense? And should Drake get a cut if there's a Drake sound on a music, Natasha, that sounds plausibly like it could be Drake and someone would throw in their playlist and actually defund him while trying to support him?

Right. Well, that's why I am hoping for more transparency in this process of how this training process works. Because you're saying, you know, it puts together a, you know, a unique song. Well, where is it getting that creativity? where is it getting this information from? How does it put this stuff together? It makes massive, you know, associations

between all of the music that it's ingested. It is, in a way, reflecting human ingenuity, our creativity, back at us. And does that warrant a different look at our existing copyright definitions? Does that warrant a different look at what consent means in scraping public data from the internet?

I think, you know, this is one area where companies could be a lot more transparent. So that's why I'm hoping we're having this better understanding right now while regulators are thinking about the rules. In the EU, they're already, you know, kind of analyzing this in China. They've already issued some regulations. And now is the time, I think, to push for more transparency at the least. Yeah. I mean, Steve, again, we saw with the Internet. At first, the Internet was free.

Right. And people like Rupert Murdoch and News Corp said no. And now the internet. And they were right, by the way. They were right. And now it's not free. So just because we have these tools now, as soon as we've seen Universal Music Group, we've seen others, major publishers jumping in and saying, no, we're going to be

competent. Can you imagine Taylor Swift? All she has to do is say, no, you're not using, you know, my likeness for some of I will be compensated. These can have a reversal where all the sudden they have to start from scratch. Kind of like Sam Lesson was saying, should all these models be reset? Absolutely. And Taylor Swift is really good at dictating tech policy.

Yes. So with the streaming thing, but look, Natasha made a really important point about transparency. What really struck me about her reporting was one site called Kiwi Farms was part of this data set. Kiwi Farms is a very famous anti-trans site. It's kind of a site where people use to target and harass people. The fact that that was even allowed there in the first place is alarming. And we're having, you know, Google and Microsoft coming out here saying, we want to be regulated while they keep pushing forward, knowing good and well that our Congress does not have an appellation.

tight to regulate tech and they're going to move forward anyway. Facebook, Twitter, I believe those were not scrappable, at least for Google. No, Facebook definitely not. Important repositories of info. Facebook's probably more reliable about people's personal information or LinkedIn than Wikipedia, you know? Natasha, we appreciate it. It's great reporting.

Thanks for joining us today. Thanks for the article. Thanks for having me. All right, let's stay on topic, but shifted a little bit more into our lane, if you want to put it that way. Talk about the impact across investing. And for that, let's bring in senior analyst and co-CEO of Contrast Capital, partners, Ron and Sana. Ron, you're working on AI in finance. Talk about the implications here,

both for that and broader society. Well, I think, you know, getting away from some of the cultural implications that you spoke about and whether or not artificial intelligence can draw inspiration from our creative works, I think it's also, if everyone else is right about its ultimate uses in replacing workers or enhancing productivity, it's also ultimately deflationary, which is something the Fed may not be thinking about with respect to its current policy setting regime. And so I think that given the speed with which it's being adopted, and you see this, as you've just discussed,

across a wide variety of industries. And don't forget, knockoffs are also cheaper than the original. If you're talking about Drake or Taylor Swift, this is something that at the end of the day, people should start taking seriously. I know Kathy Woods talked about it and others, if it is the type of transformational technology that Larry Summers and Bill Gates and others

have suggested it would be more important than any other technological development in history, as has been stated so far in this argument. But the only problem, Ron, is we can't invest in OpenAI. Well, I mean, but here's this. Or you can invest in Amazon, right? I mean, one of the things that people said about the deflationary effect, and Kathy Wood and others in that camp have said that Amazon is the example for how you've seen the deflationary effect on things like the labor force, on consumer goods and

everything else. How much is Amazon a quasi-iron blueprint for what we can expect from deflationary pressures, hypothetically, in the future? I think it's not just the only one, Dom. I think you have to look across the entire economy where we know in manufacturing. And I would expand, you know, the definition here a little bit to include not just AI, but machine learning, natural language processing, robotics, all of these things that are coming so fast and furious at us are ultimately going to replace people and drive.

down the cost of labor in a relatively short period of time if again this proceeds as expected and if you look at the adoption rates right now they're vertical right when you look at the chart of the acceptance of the internet and other technological tools that have come before us they've effectively been you know a diagonal line this is going straight up with the speed of adoption and so i think it does ultimately affect not just the likes of amazon and retailing but manufacturing advanced manufacturing and really just about any other endeavor. I mean, will we be writing our own commentaries for CNBC.com or will we plug in an idea that just gets fed out? Will we be replaced ultimately as Max Headroom to date myself a little bit, going to be a thing of the future in the

news business where, you know, you put a deep fake up and it actually programs the news for you. I think serious questions. Steve BuzzFeed this week, everyone goes, oh, they start using AI and then they lay off the newsstack. Insider as well, yeah. Right. That's part of it. Fifteen percent Right, it's not exactly what's happening. But also, as we heard on the show last week, you know, the need for, for instance, investigative reporting, that which can differentiate you from everything else that's out there actually grows and makes people even more valuable. But just a final comment maybe on kind of some of the investing implications around this as well.

Just look at what Microsoft is doing here. So you want to talk about it's not necessarily job replacement or displacement. They call it a co-pilot, meaning it's an assistant. So what they're putting in Office 365 right now, Microsoft Word, Outlook, all those is a co-pilot. So let's say you're in a meeting, a video chat meeting on Teams. You miss the meeting. Oh, no. What do I do?

You go in, the co-pilot can just co-olate everything was saying. The action items. Kelly, Dom, here's what was discussed about you. That is useful. That saves time. That makes you more efficient. Doesn't Slack have this capability? A little bit, but not as good.

But look, it doesn't replace Kelly's job. It doesn't replace Tom's job. but it doesn't replace Steve's job. I can skip more meetings. Skip more meetings. It helps us do our jobs better. And I think that's what the companies who are really making this and are serious about. That's what they're putting out there in the world.

That's what they want us to try. And I think that's a good thing. I believe her name was Cortana. Cortana. That's what it was. There will be companies, though, that take this farther. Oh, of course. There will be companies that won't stop there.

And I think that's the implication that some of the deflationists look at, which is how much labor saving and productivity and, enhancement will come from this development. And what will that mean to things like inflation, like growth down the road? And the comeuppance for white collar jobs in particular after what's been, you know, a generation of outsourcing blue collar work and now reshoring that. Ron, thanks. Rod, we really appreciate it. And our Steve Co-back. Yeah. All right. So here's what's coming up on power lunch. We're hitting the wall, then climbing right over it. Walmart bed big on e-commerce, spending lots of cash on acquisitions, the bulk of its direct-to-consumer, that DTC business.

But now with tougher times on the horizon and the pandemic era online boom in the rearview mirror, the company is cutting back, we'll discuss. Plus, as we head out to break, check out Al-Demarle, trading at new 52-week lows following headlines that Chile will nationalize the lithium industry there. We'll trade that name in today's three-stock lunch coming up. Keep it right here. Welcome back to Power Lunch for the fur a third time this year. Walmart is selling an e-commerce brand it bought during an M&A spree. This says the company is seemingly making a big shift to automation, efficiency, and more profits,

and investors like that up 7% in one month you can see for the stock. Courtney Reagan is here to discuss. It's another brand in the offing. What is it now? Yeah, exactly. So you might remember back in 2017, 2018, Mark Lorry, who was then Walmart's head of e-commerce, was buying up all of these niche digitally native direct-consumer brands, like bonobos, like modcloth, like Eloquy.

And many of them are being sold. So the latest is Eloquy today. They are selling it off to a company called Full Beauty Brands, which is a plus-sized digital mall, so it makes sense for their portfolio. And why is Walmart doing this? Well, I think when it was buying all of these brands under Mark Lurie, the idea was to learn from these players that were niche that had very loyal audiences. How did they capture a consumer online? This was when Mark Lurie was really trying to build out what he called the long tail of product assortment, especially in apparel which has higher margin rates than some of those consumable.

goods that Walmart sells so much of. And so I think Walmart really got a lot out of these acquisitions as far as learning from the talent there, learning how they attract these players, how they merchandise. But over time, do they really need to hang on to them? And so that's why they're selling them. That would be Walmart's argument. And they've been gone to different players, of course. So Bonobo is being bought by W.HP and Express. So it was sort of a merchant and a licenser. And then, of course, this one is going to a fully digital online. platform that has other very similar brands. So we used to scrutinize those online digital commerce numbers so much over the last few years under the Mark Lurie regime. And now even since then,

what exactly do we scrutinize with Walmart now if all of those hypergrowth engines are maybe not as part as the pictures they used to? Right. So as I mentioned, Mark Lurie was trying to build out this assortment, making sure that Walmart really was the everything store when you went on Walmart.com, that there was something there for everyone. And now Walmart feels as if they've done They went from 70 million products to now something like hundreds of millions of products online. And now they're focusing on making that engine much more profitable. It is very expensive to grow at the rates that Walmart was growing online. They feel like they sort of check that box.

And now it's about improving that operating margin, making sure that this makes a little bit more sense for investors, making what they built more efficient and sort of getting rid of the pieces that they've learned from, time to close the chapter and move on a little bit. And I will say that the stock price under Mark Lurie up 96%. He's no longer with the company. Wow. Between the years that he was there, he left in 2021. Walmart is outperforming the broader retail index so far year to date, but up about 7%.

Well, and maybe I misunderstood. I mean, the conclusion to me seemed like, well, that didn't work. And instead it's like, no, that works great. We took what we need. You know, we're hitting the road. So it's just, that's a fascinating. Yeah. And I think when those purchases were made, a lot of people looked at it and said,

these are aqua hires. This is a purchase in a way to like buy the brain. talent of those people that help build those brands into what they were. Very interesting. Courtney, thanks. Thank you. Good to see you, Courtney Reagan. Further ahead on the show, building a new future. We'll look at building an engineering software firm taking a step toward AI, plus just capital releasing its annual climate report.

Diane Oleg has a look at which companies made the list and how their stocks match up to those left off. Power Lunge, back in a moment. Welcome back to Power Lunge, everybody, with crude trading with oil closing for the day and for the week, it's up half a percent, but down more than 5 percent since Monday. And we've seen more than half a billion dollars of net outflows from oil and energy ETFs in the past week. That's according to our partners that track Insight, as you'd expect, some big names in the space

trading lower along with crude, the equities suffering as well. We have more information on the F.T. Wilshire ETF Hub. All right. Now to the bond market. Rick Santelli is tracking the action for us on this Friday. Hi, Rick. Hi, yes, it's been an interesting week. you think back to all the economic releases, Empire, well, it was super weak. We had housing starts

and permits. Permits were down nearly 9%. Existing home sales were weak, initial, and especially continuing claims were much higher. But yet, as you look at a one-week chart of 10-year note yields, we're up three on the day and we're up four on the week. Why is that? Well, look at that chart closely on the last day, today at 9.45 a.m. Eastern. S&P Global PMI's were stronger. That really changed the week. We're going to be heading under three and a half percent. And why is that important? Well, look at this mid-March chart of tens. It certainly seems though we hit a temporary resistance level bringing yields back down. The data really didn't confirm all the strength that we should see to push rates higher. But we see the weakness

definitely didn't help stocks. And finally, the culprit certainly seems to be the next chart. January Fed Fund futures for next year. They're down 10 on the week. base points, which means they're building in a bit more Fed. On a week where the data really wasn't very aggressive outside of the S&P global PMIs, the guidance really has stuck and the driving force sticks. You know, the UK seems to be the comp, even though we saw a PPI in Germany drop two and a half percent month over month. It's all about inflation fighting and the unknown aggressiveness of the Fed.

It certainly seems though recession, well, you might not like it, but the Fed certainly doesn't seem completely against the chance. of that helping out its mission. Kelly, back to you. Rick, thank you. Rick Santelli. Does it pay to go green? Just capital releasing its annual climate report and rankings? How do the best stack up against the rest? Diana Oleg has the details. Diana? Well, Kelly, the Inflation Reduction Act is channeling close to $370 billion into funding the clean energy transition, among other climate items, but government can only do so much. So more is falling to corporate America. Now, the vast majority, 88% of Americans say large companies have a responsibility to reduce their environmental impact.

And nearly as many say corporate disclosure on climate is key that according to that recent survey by Just Capital. Now the organization has ranked this year's top 10 greenest companies in the Russell 1000. A majority of the top 10 companies for the environment have a verified 1.5 degree warming science-based target. less than 10% of all Russell 1000s have done this. On average, the top 10 emit nearly five times less greenhouse gases than their peers and use two and a half times more renewable energy. Now, Just Capital has also created what it calls index concepts. These show the returns of the climate performers so we can compare them to the overall Russell 1000. In the Just Capital Climate Index, you can see over the long term that the top 20% of companies in Just rankings that

actively employ strategies to mitigate climate risks, including reducing greenhouse gas emissions and committing to net zero by 2050, among other things, are actually outperforming the broader Russell 1000. So yes, companies can still make money while reducing their carbon footprints and investors can still make money choosing greener companies. Back to you guys. That was what over the past 18 months or so, Diana? Was there a longer time period? Yes. It's there when it was their 2023. They did again last year. Got it. Understood. Diana, thanks so much. We appreciate it. Diana Oleg with the very

latest. All right, let's get down to Seema Modi for the CNBC News Update. Hi, Seema. Here's a news update at this hour. A North Carolina man accused of shooting a six-year-old girl appearing before a judge in Tampa this morning. According to neighbors, the man began shooting after a basketball rolled into his yard.

Officials said the suspect turned himself in after a manhunt that began on Tuesday. Connecticut's state police saying injuries were reported after a fuel tanker rolled over and caused a large fire on a bridge on Interstate 95 in Grattan. Authorities said buildings below the bridge were also on fire and that power lines were down. Police are telling motorists to avoid the area. And the Texas Senate approving a bill to ban countrywide voting on Election Day,

the bill passed on a party-line vote would require people to vote at their assigned precinct. Republican Senator Bob Hall said the legislation would boost election security, while opponents said it would make voting more deadly. difficult for people in large counties. Don, that's the latest back to you. All right. Thank you very much, see, Momodi. Ahead on Power Lunch, the first couple of weeks of earnings season off to a rougher start. While only 18% of companies have reported, earnings performance is down 4.7% from the same time a year ago.

Is there more downside ahead? We'll answer that question. At least try. We'll be right back. Welcome back to Power Lunch. 90 minutes left in the trading day. Markets are trying to stay positive, but we're down for the week. Let's get to Bob Bassani with more.

Hi, Bob. Kelly, there has been several attempts to drop the market this week, and they've all been unsuccessful. It's kind of flattish for the week, but we had several gap downs right at the open this morning. Right after the open, the PMIs were hot and unexpected. Market dropped, but it's struggling to come back. They don't really want to sell the market. It's that simple. And we are hitting some new highs, but only on a very small group of defensive consumer-oriented names.

So new highs today on Hershey, on Clorox, some of the pharmaceutical and healthcare names like, Lily and HCA Holdings are at new highs. So we've been talking for two weeks about McDonald's every day hitting new highs. It's a real juggernaut, a big topic of conversation. But yum, some of the small auto retailers, O'Reilly Auto, at another 52-week high. So none of these are tech names. Nothing in the tech group is close to that. And nothing in cyclicals are close to that.

But it's a sign of how defense of the market is becoming. And yet we don't drop much. everything else is just kind of holding up. Now, the regional banks have been all over this week. The bottom line is the numbers came out. They were okay, not great. Most of the regional banks are flat to slightly up. A few of them are down. Today, Regents financial miss and it was down. But remember, there was a big story earlier on that the regional banks are likely going to be facing more stringent regulation. And I think that dropped the whole group very early on. But most of these stocks are flat to slightly up for the week. And just bottoming would be a lot.

a good thing, just not falling more on earnings after being down 20, 25% in the last month. That's a victory. And I think that's a good reason to say it's been a pretty good week overall for them. So where are we? We've got about, oh, 20% of the S&P 500 that's been reporting. I'm just calling it no April showers. So we're flat for the S&P this week. April is up 0.7%. It is traditionally an up month. And in fact, traditionally one of the best up months for the Dow Jones Industrial average and year to date up 7.7 percent. Kelly, the only thing doing better is Europe. And we're going to talk about that on Monday. The European stock market is just killing it, just dramatically outperforming for the first time in a decade. And we'll talk about why that's happening on Monday.

Guys, back to you and have a good weekend. All right, same to you. Bob Bassani, thank you very much for that. As the bulk of the S&P 500 return is being driven by just a handful of companies, our next guest thinks there is still more downside ahead to large-cap growth and technology. Let's bring in Megan Horniman, Chief Investment Officer at Verdun's Capital Advisors. Megan, thank you very much for being here. Bob laid out an interesting story with regard to the market dynamic. Why is there a reason for that pessimism heading for the next few weeks? I think what you've seen, especially in the large-cap growth and technology sector,

that it's been really driven by a couple of things. Interest rates is one of them. And you're seeing even today the interest rates rising a little bit and you're getting some weakness in that tech side of the market. The other thing is if you look at the Fed balance sheet as well, so the Fed balance sheet expanded for a period of time during the banking crisis, and you saw the technology companies do well. Now it's contracting again, and you're seeing some weakness there. So I think that tech and large cap growth are very, very sensitive to the interest rates that we're seeing, and we don't think that the rise in interest rates is over. We think that the market's gotten a little ahead of itself pricing in a doveish Fed. All right.

So can you take us through the balance, Megan, of that micro-economic narrative? We know that the macroeconomy, big picture, affects the company-specific stuff in the firm, the fundamentals there get changed. How much should we be scrutinizing the earnings season right now and how much is the macro factor versus how it's going to affect the firm, so to speak? I think we're not, we haven't really seen those macro headwinds yet. So we want to get more clarity around what companies are expecting for the rest of this year. I mean, we haven't gotten to the recession.

We're still looking at positive GDP. So I think it's going to be much more challenging earnings environment in the second half of this year when the economy really does start to slow. That's what we want to see. What are companies doing now? What are they preparing for? Are they taking any steps now in preparation of what's going to be a pretty challenging economic environment? And, Megan, before we let you go, what's your favorite part of the market, given some of that increased pessimism? Honestly, right now it doesn't hurt to hold cash.

We still do like on the equity side, the international market. This was mentioned before. We think there's still room for the international market to catch up to the U.S. market. And honestly, holding some cash, getting some yield now finally, and then being able to put that money to work when these opportunities do arise. And we think that they will. Megan Hortemann calls it calling it for dry powder. Thank you very much, Megan.

Coming up, the moment you've all been waiting for. The 2023 CNBC stock draft is less than a week away. we have 10 teams competing for investing domination, and we'll pick our draft order live. That and more when we come back, dows down two points. Welcome back. The economy is slowing. Capital is more scarce, but a tech shift continues in the way businesses design and complete major projects. Today, John Ford brings us up close with a risk-taking CEO whose software makes digital blueprints, John.

Kelly, yeah, Andrew Anagnost is CEO of Autodesk, the $41 billion market cap provider. of design and collaboration software for engineering, construction, manufacturing, entertainment. He's navigating through a shift right now where higher rates are pressing customers to be more efficient, but they also need digital tools to stay relevant. Anagnos is an aeronautical engineer by training. He worked on projects for Lockheed Martin and NASA. But before that, he was a troubled teen with a reckless streak. It took a nearly tragic high-speed car chase in high school to scare him straight.

I was already on probation at that time too. And it just, it was kind of a wake-up call when I just said, I got to do something. I got to fix my life. And it went back to, you know, the heroes in your life or sometimes the people that say things to you, you need to hear, not what you want to hear. And I remember the teacher. And it was, believe it or not, I'll tell you, in the moment when I was, when the car was spinning and, you know, and things were going bad. This teacher's voice came into my brain. The guy who leaned into my face in my algebra two class and said,

you know what, you can ruin your life all you want, but I won't let you ruin these other people's lives. And I remembered that because I had people in the car with me. And I, from that day on, from that night forward, I was straight as an arrow. Cal State Northridge, then a master's and PhD from Stanford, now a CEO, pretty straight. Andrew's challenge now is taking Autodesk's successful cloud buildout, which he's led as CEO for the past six years and adapting it for this dawning era of artificial

intelligence and even deeper collaboration through the supply chain. This is an incredibly disruptive time we're in right now. Probably the most disruptive time we're going to see in our world of technology for a long time. And I'm fortunate in that Autodesk as a company has been preparing itself for the cloud for over a decade. So we already have a mentality around the cloud. So the guess that we're making right now is that everything in design is going to be hyper-connected. AI is going to be arbitrating decisions

between designers, engineers, and construction professionals, or designers, engineers, and manufacturing professionals in ways that it just doesn't do today. And that is a significant world that is going to allow us to do amazing things for our customers. The stock did drop a bit after earnings a few weeks ago, mostly because Autodesk is transitioning from up front to subscription billing. Anagnos says demand is strong and he's driving the company forward quickly, but carefully. Adobe-esque, if he pulls it off. And when they made that transition,

that gave way to a decade plus of impressive gains. But what an incredible life story. And to all teachers out there, everybody, just remember the impact you can have. I mean, turning someone's life around. Yeah, he was always precocious and focused on everything. Like when he was young, the moon landing happened, and that awakened his love for space and engineering. But it just took the right life circumstances to get him on the rails. What exactly, I mean, because we've spent a good amount of time on this show in this hour talking about AI and the sprawl effects there. When it comes to design and manufacturing, what exactly could the vision look like for what it ultimately does? Could we be in a world where literally people don't design buildings or machinery anymore?

and it's all just done by a massive computer that kind of just knows what to do itself. Probably not that, but here's an example. If I can step back, Notre Dame, tragic fire four years ago. It just so happened that there were people doing an independent project kind of taking images of the inside. They were able to use that to develop a digital twin of Notre Dame that now is helping them to renovate it specifically to how it was before. And they're able to see, Andrew was telling me, using Autodesk software, where the walls are perhaps bowed out in ways that they weren't before. For Notre Dame specifically. Yes, for Notre Dame specifically.

So you could actually make it better than it was before. Or you can also find the points in the design that have changed more quickly than if a human being had to do it. If you're running AI on top of that with images, the digital twin and then the construction work that you're doing. But he was even talking about automating certain needs for checks between suppliers on the chain of doing construction. If you can speed up a process like that by days, you can save a lot of money. That's incredible. John always brings us these great stories. John Ford, we appreciate it.

All right, thanks, John. Still ahead on the show, Procter & Gamble, the best performer in the Dow, following a beaten race for its fiscal third quarter. We'll trade P&G and other movers in three-stock launch. Power lunch is back in two. Welcome back, everybody. Time for three stock lunge on our menu. Procter and Gamble of three and a half percent on an earnings beat and raising its yearly guidance. HCA, also reporting a big beat, saying admissions and emergency room visits all jumped in the quarter. The stock is up 4%. And going the other way, AlbaMarle, the lithium miner, down 10% after Chile unveiled plans to nationalize its industry. They have the world's largest reserves of the medal, a crucial component in EVs. Elon Musk was just asking for some. Let's bring in Danielle Shea. She's VP of Options at Simper. trading. Great to see you, Danielle. Let's start with P&G. Do you like the stock? Yes, Kelly, I like the stock. I think the macroeconomic conditions right now are really powerful

for this company. And I do think that they're going to continue trading higher. I have an overall price target of about 177 on the stock longer term. However, I will say that when you see a stock gap up like this post earnings, what I really want to see if I'm going to try to trade it for a post earnings continuation move is I really need to see. it hot, go out on the highs of the day. And so right now, it's a little bit lackluster, so I can't say it looks perfect for continuation going into next week. But in the longer term, I do like the company in the stock and it's a buy for me. All right, Danielle, let's talk about HCA healthcare, hospital operator, facilities, that

sort of thing. What do we think about HCA? So when you look at this stock, I like it. I really like the earnings report. I especially like the move. But I'll say the same. thing that I did about Procter and Gamble. When you see a gap up like that and specifically the high on the day is within the first 15 minute bar, generally that means that it's not good for continuation into the following week because we're seeing a wick at the top of this daily candle, which means we have profit takers coming in here. So when I'm looking at it for a short-term trade, it's a little bit lackluster. However, I do like the longer-term chart

and I like the possibility of it trading up into the $300 price point. I wonder if it means inflation's gotten better. I still remember that big miss from a couple quarters ago. Daniel, finally, AlbaMarl, what a shocker this is. Yes, so when you look at this one, I mean, we've really seen a shift in trend overall. And specifically today with a high volume break, we've broken some pretty key support zones. So with that, when we have a volume, a high volume break like this, post earnings, and we've broken some critical support zones, I think it's good for continued downside. When you look at the lower levels of support that

it could possibly trade into, it would be targeting first about 165 and then about down to about 150. Wow. Okay. Got to ask you, Danielle, it's not technically part of three-star stock lunch, but we'll talk about being shaken or stirred. The VIX below 17 today, what do you make of it? Well, Kelly, when you're looking at the VIX below 17, I think it really opens up the possibility for the market to continue rallying here, especially when you look at the way that the market reacted to Netflix and Tesla earnings. Normally when you see those big tech stocks fall on earnings in the way that they did, you'd see the NASDAQ fall. But I would say that the NASDAQ is incredibly resilient here. We're still seeing a lot of consolidation. And because the VIX is so low, I think that we

have the potential for positive reactions to earnings, especially going into Google and Microsoft coming up. So I'm looking at the possibility that you're going to you. you know, earnings won't be as bad as feared and we can still see the NASDAQ continuing to climb higher. And Danielle, what do you what do you say in response to those people who say that the VIX being as low as it is, volatility as low as it is, means that it's a good time to pick up some of those insurance policies for a downside move in the market? You know, certainly that is possible. But when I look at the VIX chart, as of right now, I'm not seeing any sign that it's going to spike up. I will say that going into May, that is a time.

that I typically do like to short the market. And so it is certainly possible that we can get through earnings season and we get into the sell in May timeframe. You know, during that timeframe, I do like to come in and short the QQQs specifically trade some downside after we have a run up into earnings and then trade that lower after the fact. But from what I'm seeing, that would just be a short-term trade at this time. It doesn't really look to me like the market is setting up for a major, downside move. All right. Danielle Shea, thank you very much. We appreciate it. Have a nice weekend.

Thank you. You too. All right. Coming up on the show, the 2023 CNBC stock draft is now less than one week away. Ten teams, 20 stock picks. We'll pick this year's draft order live here on set when power lunch returns after this commercial break. Welcome back, everybody. Draft Day is coming up next Thursday. So here at CNBC, Dom, that means CNBC Stock Draft Day, too. It's one of the most times of the year for me. And we are going to do the actual draft order right here, right now live, 10 teams this year, a lot of fun names, a bunch of big athletes this year in particular. Here's the, here we have it behind us. Most of these are one person teams, some of them are two. But let's not, you know, let's not keep chatting around. Let's get this party going.

Yeah, let's do it. So we're going to start with who's picking first or who's picking 10. We're going to start with who's picking 10. Okay. And then move all the way to first. All right. So, okay. Drum roll, please. Drum roll. Hit the first, or number 10, I should say. The first pick, and the number 10 spot goes to the Flynamic duo, Diamond DeShields and Gina Sanchez from Chantico Global. Very exciting.

The WNBA star, a new face to the stock draft this year. And so if she's in 10th, does she pick? She picks last. Right. All right. All right. So the ninth spot now goes to, oh, this is rough. Our defending champions, the mountain goats, Ryan Reynolds.

So keep on that. And Mark Douglas. I know Mark, he's always got these good stock picks. I know he's already thinking about this. All right. The number eight spot goes to the mic drop himself, Tom Bergeron. Oh, fun. There we go.

So he's here. If you guys missed it, we had Tom on a little while back, and he was an absolute delight. Okay. So now we got Tom Bergeron on the board. And now our next pick goes to Tori Dunlap and the Financial Feminists. Very good. Where is she? Over here.

Awesome. Okay. All right. So then moving on, our next one is the Scarlet Knights, Rutgers Investment Club. Always love having the college presence. Remember we had the peacocks after that big run? Remember the cheerleaders were here last year, too. That was always a kind of fun thing.

And then own not loan receiver, D.K. Metcalfe from the NFL. There we go. We have a couple of big names like that. There we go. And then moving on here. It's not the only pro athlete of the bunch. No, not at all. Some of them are still out there.

ELE investment, C.J. Mosley from the New York. Jets right there as well. The Jets fans in here are cheering. And then we have House of Kings and Domicong Sioux. Wow. Is that number two? That's number three. Only two left here.

This is number two is Erica Sullivan, Sully Superstars, which means, of course, by process of elimination, who is it? Number one is, who, Charlotte Flair. Nice, the WWE Superstar is gonna kick off this live event on Thursday, Domit. That was great. Thank you for being here today. Have a great weekend.

Closing bell starts right now.