welcome to "power lunch," everybody. i'm tyler mathisen alongside enkelly evans. two big events to talk about today. first we just heard from fed chair jay powell he says deflationary progress has begun. markets liking the sound of that first we'll break down his comments and the big market future >> in the meantime microsoft holding their big event focused on a.i ceo satya nadella says it's going to reshape everything in the software space it's already reshaping search for them he joins us in a few minutes to talk about this revolution and we have a great panel assembled to talk about both of these big events steve kovach along with oppenheimer analyst tim horan, kate rooney, herb greenberg and jennifer elias will be joining us to talk about microsoft >> and on the fed and the markets we have hear from bill lee and steven denicholo but before we get to them let's get to our own dom chu to see how the markets are reacting

post-powell. >> so a roller coaster that's pretty much what it's been, guys we've seen both sides unchanged so far for the broader s&p 500 we got as low as down 16 points, only to hit highs up 51 as you can see there during fed chair jay powell's session at the economic club of washington and now we're back lower again on the session that trading range has been pretty severe. on the corporate front one of the upside standouts today is du pont this is the specialty materials and solutions company, everything from tyvek building construction wrap to kevlar body armor. it reports better than expected profits and revenues, helped along by their ability to charge higher prices for its goods. it did mention that it sees weakness in consumer electronics for the first half of the year before a rebound later on. those shares up 5%. and we'll end with a check on the move in artificial intelligence a. sxi machine learning-related stocks as you can see there, microsoft, alphabet both up big from mega cap tech baidu on the chinese tech front, after revealing its own chat bot

a.i. driven. it's been a monster move for c3 ai. and watch one of the etfs that tracks all of these names, the ark autonomous and robotics etf. down 1% right now but over the near term it's been a big momentum up side stock guys i'll send things back over to you. >> all right dom thank you very much let's turn back to the fed. talk to a couple of key guests here one of whom says the recent data lowers the probability of both a recession and an early fed rate cut and there's no reason for powell to comment on future rate projections right now. bill lee is chief economist at the milken institute and steven denicholo is portfolio manager at federated hermes welcome to both of you bill, let me start with you. did you hear anything out of the interview between mr. rubenstein and chair powell that surprised you in any way i thought the first question was an interesting one if you'd known what the jobs report says on wednesday, would

you have done the same thing >> what i really liked about chair powell's answer is he really clarified something that the markets didn't really believe, which is that chair powell has a dovish tilt toward data the feds always say we're data dependent but mark's always assuming he's going to chicken out when the unemployment rate stafrts to go bad it's going to start to get these guys to pivot and lower their rates. and i think he made it very clear that we are going be to be evenhanded i think one of the things the fed has really failed to do over time has been to explain how it is that they make decision and how they approach the data as they receive it. how do they interpret the data and not having a reference point is something that's really hurt the fed. and i think today's speech has really made it very clear that the fed is evenhanded. they're not going to have a dovish bias and they're not going to have a hawkish bias >> steven, he did seem to say that what the jobs report is showed was a confirmation of what the fed did in other words, that the jobs report was strong enough to keep

doing what they're doing, keep moving interest rates higher he was hesitant, he bobbed and weaved like muhammad ali on the question of do you have an unemployment rate in mind in the same way that you have a fixed number in mind for what inflation should be. >> right look, i thought it was a great interview and it was interesting to watch the markets spike as he was talking, and people were laughing in the audience and i think it was nervous laughter and maybe people thought he was saying something new or something more dovish but in reality it was the same thing. i mean, look, looking over at the overall macro right now, the landscape is clearly muddied and fluid surrounding the fed's next move and more importantly the next step change at eps growth up or down powell was saying today deflation has begun but it will be bumpy and rates will remain high everything is just getting started. he also said, which i thought was important, he said he's not

looking to surprise people so i think the base case is let's take powell's word for it right now and invest from there. the one thing, tyler, is that supply-driven inflation i think will be stickier than people expect and we're already seeing operating margins contract in many companies but it used to be that the cure for high prices was high prices and new supply would come pouring in but that's just not the case anymore. and powell said we expect deflation in housing and obviously you're starting to see that but let's take a look. i look at companies for a living let's take a look at a company like eagle materials the ticker is exp. they make cement and wallboard a very cyclical, very commodity-driven materials there is no such thing as a new wallboard facility in the u.s. today. there is no such thing as a new cement plant today and so you're not going to see the supply-driven move here and it's going to have to come from demand and lower demand. and i think that's what powell is waiting for. >> bill, do you agree with that? and how does this boil down for

stock investors? do you think they're heading into a bear market trap, so to speak, or is this the start of a rally that can be sustainable? >> the stickiest part of inflation the fed is worried about and investors should worry about is the service sector x housing. demand is really strong because people want to buy these services and as steve just said, we don't have the supply coming out because we don't have the labor coming into these sectors to give us the extra supply look at the lines outside of restaurants that you see in new york and all the major cities. the lines lining up for airplane tickets when there aren't enough pilots so the supply side will be very sticky, but i think chair powell has made it very clear they're going to stay tight until we see the service sector inflation start to come back down again because that's the one we're most afraid of taking away the -- 1980s and '70s style we had such a hard time getting rid of so for investors we should expect the fed to stay tight and

then perhaps even go beyond 5, 5 1/2% if those core prices remain recalcitrant. >> yeah. so much to ponder. so much to digest. a drom dairy, that's what san toel toli told me is one hump bill lee and stephen d de nicihilo. >> now shifting to another key story happening this hour. microsoft, the company holding an event discussing open a.i.'s chatgpt and how microsoft will use it in its products, both enterprise and for consumers just minutes away from a first on cnbc interview with ceo satya nadella. here to discuss are our tech reporter steve kovach along with timothy horan, teng analyst and managing director at oppenheimer. steve, let me begin with you what is microsoft doing with chat api -- chatgpt and ai and

bing >> you'll be forgiven. just forget about chatgpt because -- >> i'm going to call it chat ups i guarantee you. >> let's just talk about bing. that's easier to remember and that's the news today. this technology is being incorporated into bing meaning you can ask more complex quiz to swing and get a simple answer i'll use the same example they used which i gave you earlier which was imagine you have a loveseat and you want to fit it in your car. you could just ask bing if it fits and it will take those resources from across the internet and give you the one answer that's one simple answer if you want to give it a cry, kelly -- >> i was going to ask. >> they just told me it's launching in a very limited preview way. if you go he to -- >> is it bad i'm using the chrome browser >> i won't tell satya nadella when he comes on in a few minutes. this is what google said they want to do as well, tyler, is superpower their search by

incorporating these large language models, the idea it can take different websites and collate all together and different information sources and give you the one answer you need in a very complicated way almost like you're talking to a human. that's the news today. >> let's move to timothy i want to ask you two questions, i guess. one is microsoft will not be the only player in this area, is it? google isn't going to sit down and cede this area to microsoft. and then the other thing is place this chatgpt and ai in the broader context of what's next in the world of computing. i see you say this is going to be as important as the internet. last time i heard that it was that the blockchain was going to be as important as the internet. talk to me a little bit about those ideas. >> great questions well, first of all, you need a hyperscaled massive cloud infrastructure to do ai and

there's really only three companies that have that, google, microsoft, azure, and aws. it takes massive amounts of bandwidth, massive amounts of compute, and this is only going to accelerate at this point. and great question on how important ai is going to be. it remains to be seen but we think it's going to basically be embedded in every single application, every single technology and it will be extremely transformative >> so does that quell your doubts >> i think that's kind of what i expected timothy to say, was that it's going to be everywhere, it is ubiquitous, it's going to be something you're not even going to be conscious of >> right it's under the hood, actuallier. and to the cloud point right there also google in their announcement yesterday we already knew this was a complicated and expensive thing to run in the cloud servers. google has figured out a way to do that cheaper. that's kind of what they're highlighting too we heard from sam altman who's

behind ai and chatgpt, every time you put in a query it costs us three or four cents google is claiming we can do that for much cheaper and much more efficient cost therefore making it more enticing for people -- >> i'm still trying to wrap my head around the loveseat and whether it's going to fit in my car. >> i typed it into bing in chrome and i just got kind of generic -- nothing -- >> it might not activated yet. they said it's coming today but -- >> i did try it in edge just to make sure that -- >> you're the only person in this building using edge i can guarantee that >> i don't think this is yet widely deployed. but of course we're all eager to check it out as i've said, i've used chatgpt. once you use it, you have it make a poem for you, you'll never be the same. if they all have the same -- if microsoft can make bing useful in that sense, if google has technology that's as good, fine. but let's see. >> and not just as good, kelly the foundational technology, what's called a transformer, i told you this last hour, was developed by google in an open source way, what open ai did was

take that technology, expand on it, sell it to muricrosoft, get that investment from microsoft, and now it's being embedded into these microsoft products whereas google's taking everything that's home grown and doing it themselves that's why they were able to turn around on a dime and push out their product. >> timothy, is the money that will be made from integrating ai into all kinds of functions mostly going to be made at the enterprise level or at the consumer level and as you mentioned, there are really only three companies in your view, amazon, google and microsoft, that have the enterprise scale >> everything we've seen the last 25, 30 years in communications, the people who have the infrastructure generally do extremely well. this is going to be a very organic process. we're not going to be really clear what the new killer applications are going to be for quite a long time. but i think very, very early microsoft is going to integrate all their products and services to try to create a digital

assistant, you know, through teams but also linking in with linkedin, linking it in with dynamics, the suite. but you'll also see them go out to every enterprise in the world and say let's look at your data and figure out how we can monetize this data that will all be done on azure initially but ent prooifzs will be able to gain a lot of insights from that and hopefully reduce their expenses, maybe drive some new revenues. but not really, really clear what the new killer apps are going to be. it's very similar to where we were almost 20 years ago before facebook and google really took off. we knew the internet was huge, we knew there was going to be a lot of great applications but we didn't really know what the new consumer killer applications would be >> it is ironic that the whole landscape feels like fool me once shame on me, fool me twice -- we all went through the crypto a couple of years -- >> metaverse are we forgetting that two years ago all we could talk about was metaverse and the promise of metaverse and web 3 >> people have also said self-driving cars. >> but this we can actually see. >> i agree >> we can use it

we can understand the benefit of it metaverse, i don't know. ugly avatars i guess that's what we can see >> you know who's a befsht voice to add to this conversation? herb greenberg he's the editor empire financial research kate rooney is here as well to talk about this craze for everything ai. herb, let's start with you we were just starting to get into this the other day and here we are with this google announcement and now microsoft, and are you sort of like hating all this from an investment point of view or could this be again the beginning of internet 3.0, whatever we're calling it at this point? >> oh, my gosh i think we have the first or second batter up in the first inning i think long term, as everybody has said, is this is going to be in everything we do. and as we all know and we've all been talking about, it's going to create tremendous hype and tremendous crazy bubblesque type things possibly. but i think through that there's going to be some great investments. and i think -- i've spent a

decent amount of time looking at this, spending time on it. and honestly, i think if there was a single, a single company right now, i still think microsoft is the best positioned of all of them not that google isn't, or others won't be but i think from the bigger perspective i think as joe had mentioned, i actually think microsoft. because when you think about it, you think they've been there -- you go back to 2016, their transcripts, their filings, they've been talking about this for a long time. and now it's coming to fruition. only in its infancy because now everybody's just talking about it that's all going to die away it's going to go on. it's going to start to infiltrate and then we'll start seeing waves. and i think we'll get into some real serious investments and some real potential. >> kate, are there companies that you know of in silicon valley or elsewhere that are below the radar screen, that are playing in this space in ways we ought to know about? >> it's interesting, tyler --

>> no. >> no, it's kate i was asking. >> it's interesting on the private market side. i have heard anecdotally from a lot of venture capital investors that have said crypto and blockchain start-ups and some of the other tech companies have sort of slowed down at this point, you've seen what's happened with valuations, there is sort of a freeze on funding they did say that the pitch decks they're seeing, the founders he at their meeting are desperate to put ai really on anything and throw it into a pitch deck and say oh, did we say we were building a financial app? we're also actually using ai it's becoming a little bit of a marketing ploy in the same way we talked about with these publicly traded names anyone with dot ai as dom outlined at the top of the show is doing tremendously well. it's getting this sort of investor bid they have raised a lot of money and now you see venture capitalists getting the same sort of fomo effect that it's just human nature and investing and it's translating to private markets. so there is a little bit more of a lag in private markets we will likely see that play out in the next couple of years.

you don't have the real-time effect of the stock prices because these funding rounds take longer to do. but it is absolutely having an effect here. and the takeaway from some of these private venture capital investors is that ai in the same buzzy way that blockchain got a lot of attention is having the same effect here we'll he see how it plays out. maybe too soon to tell but as you guys talked about and steve outlined it really is tangible i loved kelly's example. i think it was a limerick you did with chatgpt but it's fun you can use it you can really wrap your head around it. whereas some of these other technologies are a little more enigmatic and hard to even picture behind the scenes. it's really only a trading platform blockchain is still yet to find that killer app as they call it. >> herb, one question on this. and this goes back to something you know very, very well, and it's about moats where are the moats? do we know yet for people who want to invest in this if this is the first or second inning of what could be a hugely lucrative thing, where are the moats? how can we be sure they exist?

do you go with kind of niched companies or is it all going to be commoditized and tucked into prevailing cloud offerings and that kind of thing >> i mean, i come back to the likes of microsoft and google from the perspective of those creating it. if you're looking at the picks and shovels, everybody's going to be looking for the different plays. but i don't think you can say specifically who those players will be. so that's why i come back to if you want the longer term, and we're not talking about now. it's like if you want to look at down the road, you're talking two to five years out, that's when these are -- these should be core, if you want ai and you want a portfolio with ai these should be core holdings. and i think that's one way to look at it and then you know that's going to drive the business going forward. and by the way, what i'm looking for right now is an app that i can use, that i think tyler will appreciate this, an app that i can use that will actually scrape chatgpt and bard and all the rest of them so we can be sure of getting the very best answer without human intervention >> you want like a chat bot for all the chat bots?

>> of course >> that sounds dangerous >> we'll get empire working on that, herb >> oh, i am. >> timothy, let me ask you sort of a variation on a question i asked kate are there companies that you've got your eye on in this area beyond the big three that we've mentioned, that are potential winners or are investable at this point by retail investors >> well, i don't follow it formally but all these models are trained on nvidia's chips, gpu chips they have a whole bunch of features on them that make it ideal for training these ai models there's a company equinex which is basically a neutral data center that almost all of this ai traffic is going to flow through their data centers and that's a way we've been playing cloud forever a very long period of time. but you know, i'd focus on those two. >> very interesting. >> kate, i wonder too about

investors who similarly feel they've kind of been burned chasing one thing and another. but again, each company's a slightly different take on this and slightly different offering for the marketplace. >> yeah, there is this muscle memory of people that chase the hype around some of these crypto and blockchain and momentum stocks and i think there is an absolute buyer beware, investor beware when it comes to these names and realizing even the big tech companies talk about this as a long-term play vs. something that's going to pay off in the very near term. so i think it's important to remind investors that just because something has dot ai on it doesn't necessarily mean that it is the leader by any stretch of the imagination so i think that is top of mind for a lot of investors that got into some of these momentum stocks it's also interesting, it might be a sign that some of the froth is returning to the markets. we've seen with meme stocks, with crypto lately that you're just seeing this risk appetite return so that may also be part of the narrative here >> all right

kate, timothy, herb, steve, thank you very much. we've got tons of questions obviously. now we're going to get some answers. our own jon fortt is standing by with ceo satya nadella of microsoft for a first on cnbc interview. jon. >> tyler, thank you. i am here at microsoft headquarters in redmond, washington thank you, satya, nadella, for having me. ceo of microsoft just got done with a presentation that struck me as very different because of the velocity with which you're getting technology to market here but before we get into that, i'm seeing these headlines about the toll of the earthquake in turkey and syria. the death toll topping 7,000 microsoft is a global company. what's your outlook on that and the response >> yeah, first of all, our heart goes out to everyone impacted and in fact our first priority was to ensure even the safety of our own employees in turkey and

syria. and we've activated our disaster response so we can be there for any institution, any organization we can help and we've also activated our philanthropies and giving so we can all support the people of turkey and syria as they go through this in the pacific northwest this is something we think a lot about so really our heart and we'll spare no effort in helping >> absolutely. and i do want to turn to your news of the day, which is pretty monumental in technology today's announcement affecting search, affecting browsing you said it's a new day for search, the race starts today. google rules search and browsing best case, how long is it going to take you to dethrone them >> first of all, you know, to me these paradigm shifts or platform shifts are a great opportunity for us to innovate the first thing that is a

priority for me is not about dethroning anybody it's more a priority for us to say how can we rethink what search was meant to be in the first place? in fact, google's success in the initial days came by reimagining what can be done in search and i think the ai era we're entering gets us to think about it, and that's what we're really motivated by, jon. and what you saw today in terms of really building, not just a new search experience but thinking of it as what's a co-pilot for the web look like in this ai era is what's exciting >> what we saw is a large language model helping to not just compose queries but deliver detailed answers about things like a multiday travel itinerary, information about artists in mexico. pretty deep. people have been playing with chatgpt for a while. you're bringing this to market

now. what's the economic opportunity? >> well, we already have an at-scale search business even though our share as you rightly pointed out is he very, very small. the good news is we start with already a business that is profitable and here's the interesting thing. the most profitable large software business is search. so i look at this and say look, i just have to earn one user at a time in incremental gm i never, ever felt this liberated in terms of opportunity in the days ahead. so i'm very excited about innovating, meeting the needs, knowing that the search category is the most profitable and large category just on bing google makes -- i mean just on windows, google makes more money on windows than all of microsoft so that alone should sort of give us the impetus to really go after this >> i saw a report that some time ago you weren't satisfied with how quickly ai research at

microsoft was translating into product that people could use. is that the case, and was there a point where you turned the corner on that and you were reaching the cadence that got you to where you are today >> i grew up in a company where i was taught not to be satisfied by anything that is happening in this place at any time and so that's just my general persona i would imagine. i was taught well by a lot of other people who came before me on that dimension. but the reality is innovation is an art sometimes you get it right sometimes you don't. i think at microsoft what we're good at is to be able to sort of persist. if i think about even with bing, we have learned so much by being in the bing category that it has helped us. we wouldn't be where we are in azure if it is not for bing and the distributed systems infrastructure we wouldn't even have all the azure cognitive services if it wasn't e.n't for applied ai.

what you're seeing this year in particular is what we've been working toward, jon, for the last three years, to build the partnership with open ai was instrumental but beneath what open ai is putting out as large models, remember, the heavy lifting was done by the azure team to build the compute infrastructure because these workloads are so different than anything that's come before. so we needed to completely rethink even the data center, the infrastructure that first gave us a shot to build the models and now we're translating those models into products >> some people are going to say open ai is not the only ai out there working on these things. microsoft certainly be not the only cloud company we think about amazon right down the road we think about google. how do we measure whether microsoft really has a significant first mover advantage here is it on the pace at which you roll out this ai technology to other microsoft product

categories and services compared to the competition, the quality and usage of those >> yeah, it's a great question because at some level i look at what is it, 48 years after our inception here we are in 2023 as excited about what comes next as we were perhaps back in the day. and i think the only way to keep up with that and being a consequential company as technology platforms shift is to be competitive in each layer so for example -- we're thrilled about open ai's use of the supercomputer. guess what, inception, mustafa's computer is on azure we want to be sure the azure infrastructure is open to everybody. then we want to make sure the foundation models of open ai are available for everybody p. and that's where both open ai will have their apis, we will have it through azure. then comes our own incorporation in our product i kind of look at it and say you should measure us and customers will measure us by looking at how competitive are we in each

layer of this envinnovation >> and so how important is scale and getting to market both quickly and frequently with these updates? because ai learns from usage and so the more usage you get arguably, i think, correct me if i'm wrong here, the faster your platform should be learning and the better it should get compared to the other. >> like all, you know, tech products have network effects, feedback loops are super important. there are certain peculiarities i would say of ai products for example, the pretraining data is not just about more data, it has to have diversity of data. so even when you think about scale you have to think about multiple dimensions, not just scale for scale's sake but that said, yes, it will be very important that's why i think it's important continue to be in the lab. you have to get these things out. safely that's why we think about responsible ai and the safety around it both from the design decisions as well as the technology is first class. you don't think of it later, you think of it right when you're

building the model and then yes, the feedback loop. but every layer of the stack will be important. >> talk to me about the down sides. i know you're a technology optimist my job to try to poke some holes in that. because even -- i mean, the rust belt was created through moments and innovations like this. and maybe the ai rust belt won't be a place maybe it will be a category of worker how much resource are you putting into thinking through those effects and what kinds of mitigations should governments be taking even now to lessen the impact for some workers? >> yeah, it's a great, great point. that's right i mean, whenever you have any type of i'll call it industry revolution, some people talk about this as perhaps the industrial revolution brought to knowledge work even. so displacement is harsh, hard and it impacts people's lives in a generation that's one of the hardest things so i think the first thing is we'll have to probably do some of our he very best work in scaling, rescaling and wage support for a variety of jobs. these are certain things which i

think we as a society in our form of democracies will have to figure this out. but we want to contribute to that but the other thing, i'll just give you one anecdote, though. take what's happening with power platform of ours that's probably the one product of ours which gives me the g greatest pleasure. the reason is because whenever i see someone using it they don't have an i.t. degree. they are working as a frontline person in health care, in retail, in manufacturing, in services they picked this up, learned how to write an app, automate a work flow now with this open ai model built in, which is you can prompt a work flow, and they suddenly start participating in the digital transformation of their org. guess what happens first thing, wage support goes up because they're now considered part of i.t i'm not saying that's the answer but we should also not fall for the lump of labor fallacy. because there be will be new jobs or existing jobs that are now becoming more productive

because of ai, that will get better wage support. and we should tap into all that while being clear-eyed about what we as a society need to do to ensure that any displacement doesn't cause the hardship like we know from industrial england in the 17, 1800s >> very often the workers who end up benefiting from the wage support are not the same workers who got displaced in the first place. i wonder about that. but this announcement is also happening just after microsoft and a lot of other companies are reporting layoffs. we just got layoff news from dell, which of course is one of the companies that uses the windows operating system heavily. how much clarity do you feel you have into the cost structure of microsoft heading further into 2023 is that more a reaction to what has already happened, or is your cost structure now aligned based on what you're pretty sure is going to happen for the rest of the year >> i mean, first of all, any of

these actions around jobs at microsoft is painful for the people who have been impacted, and we're trying to do the best we can to ensure they find their next play. and we also thank them for all the work they've contributed to microsoft. one point i'd make there is if you look at at least the displacement that's happening at microsoft as well as the rest of the tech industry, this is something that we saw even multiple years ago where the number of tech jobs outside of what is considered the tech industry are higher than what is in the tech industry it does require relocation, maybe even adjustment in salaries because tech industrial salaries are different from the auto industrial and the energy sector but that said there is going to be labor market movement here, which in the long run, by the way, is going to be beneficial for the tech industry and everybody else but to your point about our own cost structure, we did have a challenge with our cost structure because the growth did moderate that said, just to put it in perspective, this is one of the things that i think especially our investors should think about

is our last quarter, our commercial clout, constant currency growth was 29%. that's what, ten times u.s. gdp. it's not 40%, but it's ten times u.s. gdp it's the largest business at microsoft. that's the other thing at microsoft, is our largest business is a fast-growing business we want to make sure we invest in it while being disciplined and where we overshot -- quite frankly it's not even about overshooting on demand sometimes you have to take bets in tech which don't work and if they don't work you've got to just fast fail on them and that's what we have to learn and get better at. >> speaking of fast fail, and maybe this isn't the best transition, the activision blizzard acquisition looks to be running into some real headwinds in the uk. how certain are you now compared to where you were that that's going to go through, and how important is that to microsoft >> i saw that bobby was on your network this morning, and i

thought he did a good job of explaining why he and i both are enthused about this combination, because i think it will only bring more competitiveness to the gaming industry. and i think -- look, i look at this and say at the end of the day the regulators around the world have to make the choices and i would only submit to them that if they really seriously think about competition they have to sort of really reflect on is this going to be helpful to bring more competition? think about this, there are people who make more money in gaming who don't even build games today. maybe we should look at that then even if you look at the console market, we should probably look at microsoft's share of the console market in japan. as perhaps a question that somebody should ask. and say oh, wow, i wonder why that is. that's small and maybe they should actually start competing more so i hope that the regulators take an approach that is going to truly be beneficial to gamers, it's going to be beneficial to all publishers and make all of gaming more competitive. >> finally, it was nine years ago this week that you were

named ceo of microsoft where does this ai announcement, and i take it the series of announcements we should expect from you from here, where does that fit in in terms of strategic importance of all the things that have happened in the previous nine years? >> it's a great question, jon. i mean, one of the things i think a lot about is you can only be relevant in technology if you are good enough to see the waves of change and then to reorient your technology and innovation agenda and the business model agenda. so i would say we've gone through some very harsh ones the last one we went through was obviously the mobile and cloud we caught one, we missed one but the cloud transition was very hard. i look around even my senior leadership team, all the veterans of that transition. in fact, even charlie bell, who

came from amazon, is also a part of our team and he was there when a.w.s. was created. so i feel it's kind of like that it's 2007, 2008 cloud. but the one good thing here is the business model side of this, because it builds on the cloud, so one of the foundational things about ai, who knows how it will all reshape, all software categories. this is one of those things time will tell. but i'm much more optimistic in terms of both our capability to lead from day one vs. having to do that catch-up which we've done too in some cases. >> if you're going back 15 years and it's the biggest thing to happen since you've been ceo >> oh, for sure. i've not seen -- i always look at what elite devs are buzzing about as sort of the best early indicator. i have not seen something like this since i would say 2007, 2008 when the cloud was just first coming out >> well, looking forward to seeing how this plays out and to talking to you more about it before too long.

satya nadella, thanks for joining us on cnbc >> thank you >> jon fortt speaking with microsoft ceo satya nadella. quick mention the stock remains not at session highs a little below that level but rallying nonetheless after their event unveiling bing with new capacities along way raft of other products let's bring our panel back in now, steve cove ashe, tim horan microsoft analyst at oppenheimer, kate rooney and cnbc contributor herb greenberg. it's great to see all of ou. tim, i'll give you the first reaction what' your analyst brain going to do with all this new information? >> well, first off, satya's great. he's incredibly aggressive, incredibly competent, and he's obviously very, very excite d. i think what came across is the first mover is very, he very important in this ai battle. clearly that's why google came out yesterday and announced bard half this battle's going to be pr-based but microsoft is great at creating platforms and creating new operating systems. this is probably going to be the uber platform or uber operating system that kind of ties

together their other six platforms. >> steve >> what stuck out to me is there was a lot of discussion about being the first mover. also they have azure so when the second, third, fourth, 100th mover comes in they can benefit from that too by running it on the azure cloud, which again as you said cloud is their biggest business, also their fastest growing business this benefits their cloud business at the same time as benefiting their office products and all that other stuff very reminiscent of the activision deal which also benefits the cloud business on top of just getting into mobile gaming in a more significant way. >> and herb, he said there at the end this is the most excited he's been or the biggest opportunity he has seen since the earliest days of the cloud >> yeah. it seemed very genuine and i want to go back to one thing he did say and steve just mentioned, our largest business is our fastest growing business. that's not something you don't want to hear that's actually something you want to keep an eye on because i

think that gets to the heart of the microsoft story. again, going forward one thing i did think about when they were talking just on the chatgpt, being part of it, what we're going to use is will i change my habits and that's the hardest thing to do you're used to the google search function, and will you make that shift? that i think remains to be seen for many of us because we go for something that gives us the best results. but it was certainly going through any head and i kept thinking on the search side how are you going to make money how's chatgpt -- these are things people still want to know, we don't know the answers to >> herb makes a great point there, kate, is habit change is a sticky thing but i can remember a time when myspace was the biggest thing in the interweb and then quickly

along comes facebook and myspace is gone. >> there's always a flavor of the week jen elias and i were talking about this offline earlier, just the friction in needing to move you are why entire life from maybe google chrome over to bing, we were thinking of some of the flavors of the week in the last couple years. things like clubhouse that took off during the pandemic and the more gimmicky exciting tech availability although satya nadella, the fact he called this the biggest deal really in his 15 years as ceo really stood out to me his point at the end there i thought really hammered home the potential for this and especially this being accretive to microsoft's revenue you think about what the cloud has done for amazon and companies like amazon. they obviously are spending time and resources here the other thing i thought was interesting, the industrial revolution point, the potential disruption to the workforce and how thoughtful he and jon were about what this actually might mean going forward and how

they're going to react to wages. that's more of a macro big picture takeaway but it's something probably to pay attention to in the other industries we cover and talk about. >> i also found myself thinking when they talk about staff reductions my feeling is microsoft will be a bigger company a year from now despite the staff reductions than it is today. because you never can have too much brain power on a topic let's bring in jen elias, cnbc.com tech reporter jennifer, welcome. good to have with us >> yeah, thanks for having me, tyler. >> you're going to contribute now a little bit about bard, which i guess grandly is a reference to shakespeare how do you think google is reacting to what microsoft is doing announcing today >> yeah. i think that they have been reacting since chatgpt came out, and that is urnlt e. urgently -- we cannot let what we call our bread and butter be passed up to

a competitor so that's why you've seen we've reported that ceo sundar pichai has issued a rallying cry to all employees, you need to test this that came out yesterday. and prior to that they were pulling employees out of meetings and saying we need to prioritize this, this is a code red situation. so it's clear that they don't want to get passed up. at the same time they are under a huge microsoft they're already being faced with antitrust allegations, disinformation, they have to really make sure what they put out is sound and responsible. so they have this reputational risk they have to worry about which is what we reported executives set out in an all hands meeting in december. so there are definitely some freakouts going on internally and they're trying to maneuver this as quickly as possible. they definitely wanted to get ahead of the microsoft event happening today, and then we reported last night that they also have their own event in paris tomorrow, which i'm told the search boss there is going

to share some more etails. so it definitely seems like we want to do this quicker than microsoft, we can't let them pass us up and they're under a lot of financial pressure as well >> and herb, just to your point about how is this going to make money, satya did make a comment about how every new user bing gets, because their share is so low, he almost made it sound like it was pure gross margin or something like that. he probably views this as a high margin, even in it's starting from a small base, way to kind of grow that business. and herb, i'm curious as well if you would say where's amazon in this fight now or where's apple and by the way, amazon shares are kind of a weak point in the sex today. but where's apple? they've got siri you have to think, herb, that all these companies are going to have to throw massive resources into this now in order to keep up with one another. >> and let's not forget facebook, whose chief technologist or whoever was saying that open ai was not as great as it appears to be because they've already been there.

everybody's going to be fighting for this, for a piece of this, and will have a piece of this. but again, it's going to spawn in different directions. and by the way, i sit here saying this knowing -- i've just come back to knowing there are going to be some real disasters here as well and even what microsoft is doing will have its -- it won't all be in a straight line that's for certain and i think you always have to remember that. as a skeptic here i have to say that >> you a skeptic you? no >> guys, thank you and by the way, not for nothing. these places are fighting tooth and nail right now microsoft, google. like we were saying earlier -- >> you mentioned apple i'll just say it's earnings season so we're getting a lot of tech executives talking on the earnings call. all you have to do is be a tech executive with a puts right now to be asked about what ai is tim cook's answer for apple? well, it's already embedded in a lot of apple's technology. things like that crash detection on the watch and the iphone, that's all ai. the way the camera processes

your images after you take it, that's all artificial intelligence it's just under the hood meta talked about it too advertising. that's all ai powered, targeting you the right way. so they all are doing ai, just not as visible maybe as this chatgpt, what we're seeing from google too >> i have a feeling it's about to get a lot more visible. >> siri's going to get supersu supercharged, you wait >> thank you, everybody. still ahead on "power lunch" tes l take a check on market afr powell's comments on the economy earlier on dow is hanging on to some gains now we'll be right back. king milliof trips every year? you aren't about to let any cyberattacks slow you down. so you partner with ibm to build a security architecture to keep your data, network, and applications protected. now you can tackle threats so they don't bring you to a grinding halt. and everyone's going places, including you. let's create cybersecurity that keeps your business on track. ibm. let's create

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>> thanks, tyler you know, since jay powell was talking at the economic club of d.c. we have seen fives, sevens, tens, 20s, 30s, their yields move a bit higher. but for all practical purposes a

lot of the volatility that we had right before and after mr. powell is pretty much washed out to levels very near where they were but the big issue continues to be last friday's strong january jobs report. if you look at a june fed fund futures, you can clearly see we had some volatility today but it didn't really move the needle. what moved the needle was the friday jobs report you could clearly see it there as a matter of fact, as we hover close to 9490, realize that the low close is 9486 1/2. you can see just how close all of a sudden we are and if you look at three months to ten-year you can see since the big january strong report we've become less inverted that makes complete sense. it goes along with the notion that three months of tens is a good recessionary indicator because strength of the economy makes it less inverted especially labor market. and if you look at two-year note yields, currently at 4.46, we're

about 26 basis points away from the high yield close early november 4.72. and that is important to keep in mind the further down the curve ub go the more distance there is and finally the dollar index if ever there was a canary in the coal mine for central banks just watch the foreign exchange markets. nearly 2% from thursday's close before the big jobs report because interest rates, of course, have moved higher kelly, back to you >> rick, thank you very much let's turn to oil now. we're seeing a nice rally. >> that's right. oil is closing around its best levels of the day, rising more than 4% after steadily climbing higher throughout the session. now, a couple of key things are supporting prices, including damages out of key turkish ports following those devastating earthquakes. we saw saudi arabia hike its official selling price for its arab light grade of kruld for the first time in six months, which is signaling optimism over a rebound in chinese demand. now, turning to natural gas also

on the move, adding more than 4%, although that is still within the context of a bigger downtrend. today the eia says they see nat gas averaging $3.46 per unit this year, about 50% lower than last year. looking at energy stocks, it is a top group today led by refiners like valero and marathon petroleum and bp jumping 7% after reporting a record profit for 2022 the company also hiked its dividend by 10% and amassed an additional $2.75 billion share buyback. kelly? >> wow and a rollback of sorts in strategy pippa, thank you very much >> lots of record profits in the oil business to report seema mody has our cnbc news update >> the death toll from the earthquakes in syria and turkey have soared past 7,500 rescue teams from around the world have joined the search for

survivors. more than 2,100 deaths happened in syria in a far smaller disaster area. germany, denmark, and the netherlands have announced another shipment of tanks for ukraine. they plan to refurbish many. labor secretary marty walsh is leaving the biden administration he is giving up his position to lead the nhl players association. walsh joins chief of staff and some type biden economic advisers who are stepping down ahead of biden's state of the union address tonight. multiple schools in michigan have received phone calls about active shooters today. lockdowns as dozens of officers responded. schools in ann arbor are among those that received the fake calls. still to come, a downgrade for t-mobile amid growing

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welcome back to "power lunch. our next guest is changing his tune on one of the big three telecom stocks carl moffit is downgrading the stock to market perform yesterday l citing subscriber growth shares are down about 5% in the past month craig joins us with more on this call there's big implications for all of wireless and cable, craig welcome. >> that's right. thank you, kelly there are. look, i mean, the basis of the call is not anything wrong with t-mobile i'm still a big believer in the t-mobile story the problem is the growth rate of the industry is now decelerating quite a bit, and at the same time cable is taking a much larger share of total subscriber growth from the industry so what's left for the big three -- at&t, t-mobile and verizon -- is fighting over is smaller. >> let's talk about that incursion by cable companies including our parent, comcast,

with xfinity mobile. these are services that are sold to theers of broadband, generally, of those cable providers, and they use spectrum that they lease from the bigger players. am i understanding correctly how that works >> yeah. it's not just spectrum, tyler. they lease the service it's essentially a resale of a service. that said, they offload a meaningful amount of traffic from the verizon contract onto their own network when they can to lower their cost of goods sold so they have a competitive cost structure the cable operators are an interesting story because their growth rate has dramatically accelerated. they're taking half of the ads in the industry in the most recent quarter as you said, they're really selling it mostly to the people who take broadband that's about half of the country

are broadband subscribers from comcast and charter. so you could argue they're taking about 100% of the growth in broadband households in america in wireless is now going to the cable operators that's a really, really big sea change competitively, and it tells you how effective cable operators have been in disrupting this industry >> is my better investment then -- looking at the big three you mentioned there -- is my better investment in one of these cable providers? >> i think so. i think that charter is the most interesting name here. and, again, you know, there's this narrative that convergence sort of kills everybody, that is the cable operators are selling wireless, the wireless companies are selling broadband, everybody loses. i don't think that's right i think the convergent story really favors the cable operators. they're the only ones with a matching footprint of wireless

and wireline, and a cost structure that really supports taking market share in both categories their growth engine in broadband has slowed down some but their growth in wireless is going gangbusters, and increasingly they're sold together, that favors the cable operators. >> so fascinating, craig one final question as we kind of think about the fallout. could this ever be considered anti-competitive, especially under this kind of administration >> well, if you ever got any kind of m&a, i think yes i sometimes get the question from clients, could a cable operator be acquired by a wireless operator or vice versa? i think the answer is categorically no from a regulatory perspective there's no way regulators would let this industry consolidate. >> sure, beyond what we've already seen, which, again, might feel like it's becoming sort of circular, trying to look for more options but if it's lowering costs like you said the way they're able to kind of flex, perhaps that is a

good thing it's a big call by you and a hard one too >> after ten years of recommending t-mobile almost continuously, it's hard sometimes to know when to sell the winners. >> i know. >> i still believe in the t-mobile story, but it's harder to see it outperforming from here >> craig, thank you for joining us craig moffett. >> thanks for joining us on "power lunch." >> "closing bell" starts right now. >> the disinflationary process, the from process of getting inflation down as begun and in the good sector, about a quarter of our economy, but its has a long way to go these are the very early stages of disinflation. >> comments from fed chair powell helped boost the market midsession, lifting the dow from a triple-digit loss but stocks pulled back again after he said this >> the reality is we're going to react to the data. if we continue to get, for example, strong labor market reports or higher inat