welcome to another hour of "squawk on the street. i'm carl quintanilla along with morgan brennan tony dwyer on why he says earnings estimates still too high >> plus, one quarter after reopening its economy, is china on track for a big rebound, or is a recovery far from certain we'll ask leyland miller and why one says there is a lot more pain to come. topping the tape for us,

another weaker than expected inflation number sending stocks higher in early trading. we are already off those levels. the dow is up 120 points the s&p remains pretty range bound here, 4116, up transports lagging you're seeing airlines pop the attention, though, this afternoon will turn to earnings with q1 season officially beginning tomorrow morning with jpmorgan and citi and other financial firms. the street is looking for s&p earnings to decline 6.6% year over year following the contraction in q4. eps estimates were cut 6%, so far this year. bank of america saying today q1 isn't really about q1 but it's all about the guidance, and they expect big cuts for the full year >> yeah. certainly not what we heard from delta and, again, a small sample so far you have a miss on the top line.

you have a miss on the bottom line yet they say we're going to kill it in the quarter to come. >> yeah. hefty note from bank ofamerica this morning here is what popped out at me. the comparisons to post-2000, so the tech bubble bursting, quarterly eps cut five quarters by 12% on average ahead of each season and that post rate financial crisis six quarters in a row by 20% on average. just the fact bofa is making those comparisons to economic points in time over the past 20-plus year is telling about the thoughts around recession, of course, coming on the heels of the fed minutes >> it is interesting really the drop-off in volatility, the vix can't get back above 19. closer to 18 this morning. dollar weakness is one to watch, dollar index low since early february, down for five straight weeks. so that tells you a lot about where mood sentiment is. >> the euro is strengthening pretty strongly against the dollar, too, given the fact we've had more hawkish

commentary out of ecb members. >> and yet 4,100 is a pretty steady floor let's continue the conversation with our next guest who believes that earnings estimates are too high for '23 still expects a recession moving forward. joining us canaccord's tony dwyer. isn't it curious that we have all these calls for recession and, like you, people say estimates are too high, and yet we've had pretty good s&p performance for the last three earnings seasons and we're going into this one pretty hot >> carl, thanks for having me. of course i'm not unique in the idea we're going to have earnings that are too high ultimately this whole thing has always come down to a recession call and historically if you look back, because you're using so much leverage each cycle and the cash economy is bigger than you think it is, it takes longer once you do invert the yield curve and have those lending

indicators go sideways, it takes a lot longer remember, when you look for recession now we're in real time when you look at it historically it's using revised data and it happens pretty quickly i think this is nothing -- there's nothing here different than prior cycles except magnitude. >> right now the bulls would counter by saying companies are getting cost discipline early, corporate dynamism is at work. inventories are cleaner, supply chain is cleaner can you knock all of those down? >> as the great philosopher mike tyson said, everybody has a plan until you get punched in the face the punch in the face in a recession is revenues. typically and from a macro level it's not when costs are going up that doesn't cause the major market compression you can't cut costs fast enough when revenues go down. and i think even those that had not expected a recession or the mystical soft landing, you can't

disprove that until you're actually in a recession. so now even the fed has joined the recession parade and, in addition, there's a not widely followed leading employment index that also joined the recession parade earlier this week on monday >> tony, are we talking enough about the plunge in money supply i guess, how meaningful is that to this entire conversation and what the potential ripple effects could be >> morgan, it's a great question we have so many formulas and great programs and algorithms and other silliness in the business i like to think of it as common sense. how does the dwyer family or dwyer business get money we either get it from the financial markets. you create it that way you get it from lending or borrowing, or you get it from your earnings. the money supply is a function of the fed historically dropping rates. people would say, well, of course it's going negative look at how much it went up before and the answer to that is, yeah,

we spent it. that's what we do. so that's what created the inflation. it's not all sitting there or household debt wouldn't be at a new record high and credit card wouldn't be at a record high when you have over 20% interest rates. we've spent that money, but to create growth, to be on the look through the coming weakness you have to have a better outlook for money. we're already at full employment so that's not going to be the case the money supply data hasn't changed because the fed is not lowering interest rates, and the financial markets, believe it or not, they're the same price they were a week ago. they're the same price they were in february, and they're the same price they were in last may. so from the s&p 500. that hasn't given you a lot of extra cash you have to have new money to be able to spend money. the outlook for money hasn't improved especially given the data everybody is quoting from last week. >> and i think it raises the question about the health of the consumer yes, we've seen confidence waning, consumers start to spend

more on their credit cards, start to trade down when it comes to retail goods and tighten belts. the consumer is such a big part of the u.s. economy and has continued to hang on look no further than the comments from delta's ceo on cnbc about how resilient the travel season is going into spring and summer and those bookings at what point does that actually get -- does that catch up to the consumer and catch up to the data that we look at every day >> well, morgan, we slow our spending when we're worried about our job, we stop our spending when we lose it again, it comes down to how are you going to get increased money if you're levered up on your credit cards and are at full employment with the likelihood of not getting certainly as good a rate as you got last year or even before. you've got to find that way to get new money. so what causes a real slowdown if you look at the unemployment rate historically, it goes down on an escalator and up on an elevator it happens very quickly because

all of a sudden something happens like the silicon valley bank issues that cause the lending and leasing data to be the worst two week performance in march in history. when you think about the employment data, it goes bad quickly. so we came up actually putting out a notice, probably out at this very moment, how the employment trends index, and something put out by the conference board that looks at leading indicators for employment, anytime it's hit the current level minus one or below, you've been in a very close proximity of a recession and as you know, morgan, from prior times that we'veer made te a recession even began it doesn't -- listen, none an economic problem or the beginning of a bear market it's toward the tail end but we want to look to add into that next move lower which we think is coming. >> i guess the only thing, tony, the idea we're seeing input

prices, and today is the great example, falling faster than prices at the consumer level, and wouldn't that mean at least some room for margin -- maybe not expansion but for it to be sustained in an environment where maybe you get another quarter or two of upside profit surprise >> well, it's lesser inflation, carl, it's not negative inflation, so the answer is yes. but, again, as i said before, inflation is not our problem in an economic slowdown, inflation is not the problem it comes down to the outlook for money in a recession in a recession when the revenue drops, statistically, no matter how much material costs come down, just think about labor when somebody gets laid off they don't get laid off and all of a sudden that cost goes away you typically have to pay for them for x number of weeks or months or years based upon how long they've been there. so just statistically companies can't cut their costs as fast.

this entire thing has always been about a recession and it comes down to when is the unemployment rate going to really pick up and that's where we quote this conference board employment trends index which has just hit that kind of level >> we're going to see. obviously we've seen layoffs year on year certainly skyrocket. whether that means the unemployment rate goes up markedly higher i guess time will tell us tony, good to talk to you. talk soon. tony dwyer >> thanks a lot, carl. still to come this hour, a massive shift in capital happening overseas we're going to tell you why investors are pulling their money from one key market and where that cash is now ending up emerging markets outperform the s&p over the last week and speaking of opportunitiesle. stay with us

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welcome back seeing a big shift in sentiment when it comes to emerging markets, and there's one area that's losing investor enthusiasm our seema mody has more on where investors are seeing some opportunity. hi, seema. we've seen net inflows into latin america with hedge funds staying long $90 billion in assets under management telling cnbc he's bullish on brazil. that is on the cusp of cutting rates and a government that is not as left as wall street may

think. also betting brazil will benefit from stimulus measures currently its largest trading partner. the current president da silva is in shanghai leading a two-day visit along with business leaders with plans to sign $20 billion worth of bilateral investment deals speaking of china, chinese stocks have had a rough start to the month ahead of next week's gdp release. retail sales evercore expecting them to come in around 4%, guys clearly some level of change in sentiment ahead of that release. >> how does it speak to, i guess, the fundamentals about investing in brazil? you did see that stock market plunge are we seeing this oversold bounce right now, or is there actual meaningful green shoots of economic strength that make it compelling? >> the minute da silva came into office there was this concern you have a left government in charge

we'll be seeing more spending and less focus on growth here is the story so far at the central bank one of the first to raise rates in 2021. it went from 2% and now we're current lip at 13.75%. the central bank has held rates steady for five consecutive policy meetings and now the expectation is that they will cut. so that alone is being seen as bullish for brazilian stocks which are still trading at a discount to not only the s&p 500 but broader emerging markets as well so we'll see how that plays into it again, as jane told us, the china story. he sees the reopening helping fuel exports in helping brazil overall. >> all right we're going to tug on that thread seema mody, thanks let's dig a little deeper into that story. our next guest is out with new data showing that rolling back the zero covid policy actually had less of an impact on china's economy than the markets expected tracking national metrics showing a significant rebound from a brutal q4 but no

improvement year on year joining us now china beige book ceo leland miller. leland, we've been getting a lot of choppy data i think about the consumer inflation data out of china earlier this week around this reopening and how it's taking shape. what are you seeing? >> well, the economy is a glass half full, and if you're looking at the quarter on quarter story, everything is better from the fourth quarter of last year. if you're looking at the year on year story, everything is worse. so you could make a case on bullish to bearish first quarter data, however you want but i think the most important thing to do is to look forward to the second quarter, what are we going to see? everyone thought that when the covid band-aid was pulled off there would be a reopening of the economy, yeah, it reopened but the economy did not reactivate what we're seeing now you could see in the february to march data improvement is an economy starting to reactivate, tbd on the level of intensity of the

improvement, but you're going to see a much better second quarter. i think things will be improving. that's what is to focus on, the improvement seeing in march to april data >> lvmh shares, the luxury company that owns so many different brands basically saying they're seeing a big rebound in chinese consumer appetite is the expectation that we're going to see a similar trajectory in terms of this reopening and what it's going to mean for demand for different products and then eventually services in china, that it will be similar to what we've seen in the u.s. and other places ahead of it? >> no, i don't think so. the united states is a consumption engine china is a savings engine. but if you look at simply what's happening, i think that you can look at the trends there may be some measure of a return to consumer spending, travel will heat up. some other things. look, the dynamic here is you're

going to have to see a stronger three months or so period of consumers returning to spending habits firms are getting going with investing and borrowing and hiring again so you're going to see better numbers particularly off a very low 2022, but this is not the united states. this is not a heavily subsidized household situation where consumers are just looking to spend their stimulus checks. it's much more restrained in china and any consumption bump will be much shorter lived >> yeah, that was sort of the read we got early in the reopening is that especially, say, youth unemployment, much higher than it is in this country and that was going to lead to a delayed reaction function on the reopening. do you think that's what's playing out right now? >> well, in part, but back in december when everyone got so excited about the reopening, look, december and january and february have to play out because everybody is sick with covid, and covid zero, the structures have to be dismantled in order to get the economy going. you saw little bumps in things

like travel around the lunar new year january and february were never going to be big times for firms getting back into it on the hiring front consumer spending outside of some travel. i think the expectation was this bounce would come too early. we were always saying march at the earliest, probably april that's starting to pan out in the data we'll have to see how intense the second quarter improvement is, but it's going to be a much improved second quarter. i think markets are a little bit too glum on china prospects for the second quarter >> leland, how do you balance this against what are some geopolitical risks, and i think about warren buffett on our air saying he sold out of berkshire, out of a majority of its taiwan semistake in part because of geopolitical tensions plus you have supply chains, apple is in focus today, shifting -- increasingly shifting out of china or diversifying away from china, how should an investor navigate that versus the tail

end of reopening >> well, look the tail end of reopening will create a cyclical bounceback it will still be within the context of a long-term structural slowdown so you have to understand that any bounce you get, you could have an elevated growth for two to four quarters it's going to be a bit of a head fake in 2023 in terms of china's future prospects there is going to be much slower growth going forward when you evaluate things, you have to look by sector, what the trajectory of specific companies are. the china growth story itself is going to be much weaker than people have understood in the past there are sectors that are particularly good opportunities. there are ones that are becoming dangerous like in technologies the old way of china investing used to be throw your money at china, good things will happen with tech companies, with the consumer brands. that's not the story anymore you have to be much more specific in terms of your investment thesis in order to have it work in china right now. >> yeah. the final question for you, china does seem to be making big

moves on the world stage in real time as well striking a partnership with the saudis, russia and trying to or saying it's trying to broker a deal with ukraine, getting closer to brazil we're seeing lng sales price to france's total energies. a number of other developments along these lines. is this something wre should be talking more about for power moving forward on the world stage? >> we should be talking about it, but we shouldn't be overhyping it. china has been essentially dormant diplomatically fora number of years. now they're getting back, starting a goodwill tour with europe they would like to splinter the coalition in terms of advanced technology crackdowns on china, but at the same time everyone is making all this hype about the yuan rising. it's a very small part of

currency exchanges in forex. that's the dollar and the dollar will be dominant for many years to come. >> okay. leland miller with some context there. thanks for joining us. >> thanks, morgan. coming up later this hour, one consumer discretionary name has hit an all-time high nearly every trading day this month one wall street firm says this is the beginning of a longer bull run we'll break down that call in a few moments with the xly up. speaking of discretionary, shares of draftkings getting a pop today. bnp paribas. what do you get from the morgan stanley client experience? listening more than talking, and a personalized plan ♪ to guide you through a changing world. ♪

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welcome back we are about two hours into the trading so let's go post to post

with bob pisani for a look at what's moving. >> reporter: we're still trying to get decisively over the 4100 level. i want to show you how tough i think earnings season will be. delta missed on the bottom line but their full-year guidance was excellent. the second quarter was good. they talked about strong bookings overall this has been all over the place this morning it was as low as $32 that's a lot and that's a sign of cluelessness. there's a lot of different opinions if you want something interesting that's not terribly exciting, health care has been great. it was 119 this has been steadily moving up and rallying in the last few weeks some of the subsectors out there. all of those have been doing

really well recently speaking of earnings, i know everybody will be fixated on jpmorgan tomorrow, pnc is a big super regional and they will be reporting tomorrow as well it is now up a little bit. earlier at 118 that would be a 52-week low on an intraday. remember, these banks, these regionals have been trading to the lower end of their recent trading range. when you see that break to a low, that's a warning sign and just keep an eye on the trading ranges because the technical parts become important you trade on technicals. >> the intraday range 4120 here. bob, a news update with seema

mody heavy rainfall and flash flooding across south florida forcing the fort lauderdale airport to shut down stranding thousands of travelers nearby towns affecting by flooding with many roadways under water after more than a foot of rainfall hit some coastal areas. actor jamie foxx is communicative again after he was hospitalized tuesday morning the 55-year-old oscar winner is in atlanta working on his latest movie. his daughter releasing a statement that her father is already on the road to recovery but declined to provide any further information about what caused foxx's medical complication president biden continuing his trip to ireland today. the commander in chief met with irish president michael higgins in dublin where he inspected the military guard, signed the visitor's book, planted an oak tree and rang the bell of peace. he will deliver a speech later today and attend a banquet at the castle in dublin tonight morgan, back to you. seema mody, thank you.

after the break, apple continues to shift its supply chain out of china. is that a reason to buy the stock? plus, is there time to buy mcdonald's after hitting another all-time high? oppenheimer thinks so. (cecily) you're looking pleased with yourself. (seth) not to brag, but i just switched to verizon. (cecily) so you got an awesome network... (seth) and when i switched, i got to choose the phone i wanted. for free. not bragging. (cecily) you're bragging. (neighbor) oh, he's bragging. (seth) who, me? never. oh, excuse me. hello, your royal highness, sir... (cecily) okay, that's a brag. (seth) hey, mom. i gotta call you back. (vo) switch and choose the phone you want, like the incredible iphone 14, on us. (cecily) on the network worth bragging about. (vo) verizon

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grabbing our attention this morning. one will be mcdonald's record high after record high up nearly 10% this month alone. oppenheimer notes it's a rare name in the restaurant coverage with upside to the street's epi outlook and that's not a shock given the massive year-to-date gains. chi chipotle, shake shack up by double digits. let's bring in our own kate rogers and talk about as an industry why it has gotten so much play the last couple of months >> reporter: thanks, carl. i think a lot of these names and the words used in this note about mcdonald's in particular battle tested. if you're looking at a recession and every analyst you talk to right now mentions that mcdonald's in particular has performed well in past recessions and will be the beneficiary from any tradedown consumers are moving away from higher cost options like casual

names and moving into a mcdonald's am we saw the company see an increase in traffic due to that exact scenario the u.s. consumer was holding up better than the company anticipated. maybe a mild to moderate recession, a steamer downturn in europe, but consumers were coming in more even if they were ordering less which is good for traffic. chipotle is another name you mentioned. that one has a lot of brand loyalty. you're seeing the same thing with a shake shack though they may be a more expensive price point for consumers. >> on cnbc earlier, this idea consumers are trading down we've seen that in other area where goods are concerned. it would make sense in the fast food and restaurant world as well mcdonald's, we had those reports last week, is tightening its belt, right, we have reports of layoffs. how does that speak to how the company is thinking about a recessionary environment do we know >> on the layoffs when they were

first hinted at back in january, they called the structure at mcdonald's outdated. the layoffs, remember, under 1,000, in the hundreds according to a source familiar with the situation. we talked about this last week not like the big tech layoffs we've been covering here at cnbc the company is seeming to aim to remove those silos it's accelerating its growth, something wall street firms are looking at, to add 400 new locations. a lot of them in the u.s also making some changes to field offices for the franchisees operating under a more centralized field office, support for teams there. i think like the ceo has talked about, like what the layoffs seem to be, it's more removing silos, moving forward more thoughtfully and still growing, which i think is the big takeaway >> the other thing -- thank you, kate the other thing that cramer has talked about has been the power of incumbency if, in fact, credit conditions tighten, it's harder for a mom and pop or an

upstart to put, say, a breakfast shop down the streetoes to the like mcdonald's. >> it's such a key point, the power of scale, in an uncertain time food prices are coming down but still so elevated. it's worth noting another company that has just ripped higher is krispy kreme we have the ceo on "closing bell overtime" tomorrow there you go let's turn our attention now to apple credit suisse and canaccord raising their estimates. improving china demand but that comes as the company pulls back on production in the country bloomberg reporting that apple assembled more than $7 billion worth last year and jpmorgan estimates 25% of apple products will be manufactured outside of china by 2025. let's bring in cnbc technology correspondent steve kovach steve, that's a big jump, 25% outside of china i've spoo

analysts at least before today were very skeptical that you could see that type of production shift that quickly. but here we go >> reporter: india is the key, morgan this is what we've been seeing the last year or so as we saw all the snarls in china last year and the year before where else can we buy iphones at that rate? and it's india it has the labor force it has the infrastructure needed and fox con and other suppliers for apple are moving in there to ramp up that production. we've been seeing it left and right. also, next week apple will open up its first retail stores in india. the first one will be in mumbai on the 18th and on the 20th in the capital of delhi they're going after two ends on the manufacturing side alleviating the pressure that they felt in china and then on the consumer side they're opening up retail stores and starting to sell directly to the

indian consumer. that's a really interesting thing to look at as they talk about their growth story there tim cook said last earnings call that india is like china was in the early days about a decade ago when apple was just moving into there so you can see a long runway that tim cook sees there >> steve, we've seen some activity with apple in vietnam and now these reports of tie la thailand how much can they do in terms migrating? >> that's the tricky balance we don't hear too much publicly from apple about its dealings in china. tim cook was there just a few days ago -- a couple weeks ago, rather, and basically did a listening tour he stopped by a retail store in beijing. also was at a conference hosted by the chinese government where he honestly didn't say much and that's kind of his job now is to not anger the chinese government as they go into these other countries and try to alleviate

the pressure keep in mind, they're still using a lot of the same suppliers, carl, so these are all their traditional manufacturing suppliers just in a different location with the hopes that if things get more tense in china they have something to fall back on. >> yeah, and of course it speaks to how they potentially could stand up production in other parts of the world as quick ly a it would appear they are steve kovach, thank you. i think it's pretty interesting given the fact we did see delays around the holiday season. how much of the numbers we're going to get for this quarter that just passed are going to be tied to the delays there >> not to mention the unit figures we got on industry q1 pc shipments apple is at the low end of that range. we'll see how much of that bleeds over into the phone business billionaire real estate investor patrick carroll thinks we're nowhere near the bottom.

he will join us next we're watching amazon today. the stock seeing a nice pop higher up a solid 20% year to date andy jassy saying it's been a time of reprioritization as costs grew >> i think it's a pretty streamline of costs. we looked at where we had our resources allocated and which things we had conviction we'll have good returns for customers and for the business and we made some reprioritization i think it's a pretty good balance. ur constitution and the hope that liberty and justice is for all people. but here's the truth. attacks on our constitutional rights, yours and mine are greater than they've ever been. the right for all to vote. reproductive rights. the rights of immigrant families. the right to equal justice for black, brown and lgbtq+

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and make the unnecessary, unnecessary. welcome back since the collapse of silicon valley bank uncovered weakness in the banking sector, the banking fallout could likely lead to a housing armageddon and believes the bottom in real estate is not in yet joining us today founder and ceo, manages more than 30,000 multifamily units, patrick, good to have you. those are big words. talk about what needs to crack in order for us to get to that end point. >> unfortunately, in this situation we're in things have to bottom out. they haven't yet i was reading there's $1.5 trillion of debt maturing on commercial real estate by 2025 so sellers are not realizing how much their properties have lost

value. and they're not willing to dump their properties yet they haven't felt enough pain. they're about to start feeling pain the lenders are spooked. there's no lending going on. there's no transactions going on and it's going to be ugly. it's going to be at least as bad as '08-'09 downturns are always worse than the one before and upturns are better i rode the wave of price appreciation, rent growth, things like that since 2011. the party is over, unfortunately, it's going to be okay in multifamily but the office market will be destroyed. hotels will be destroyed it's going to be ugly. >> well, now you mentioned '08-'09 when we really were talking about residential exposure it will be different in the respect you're looking at cre, right? >> yeah, but when people start handing the keys back on their mortgages because they can't pay the interest, you see your neighbor get his house foreclosed on, you see your

neighbor sell for 20% less than they bought the property for, people start walking away from their houses it happened in '08-'09 that's what caused the downturn. people thought the housing market was too big to fail well, we saw people give their keys back. if you lose your job and you can't pay your mortgage, you're going to walk away especially if you're under water >> patrick, a lot of focus in particular to the wall street notes and where regional notes are concerned has been on office space and retail space and this idea of a rerating or need for those values and those prices to fall the fact that you're in multifamily, are you seeing signs of weakness right now whether it's renters or whether it's buyers of your units, or is this still a shoe to drop way far out? what are you seeing? >> well, i talked to one of the biggest landlords in the world yesterday, a good friend, a

mentor, and his phrase was -- what he's telling everybody is stay alive until '25 based off that, it feels like right now our fundamentals are great. people are paying rent the market is healthy. what you have is a liquidity crisis you have no transactions there's no debt available. cap rates have expanded over 5%. a year ago they were at 3% if you do the math, that's almost 40% drop in value, no lender is willing to lend because they don't know where interest rates are going and no one knows how to value these properties because no one knows where real estate valuations will end up. it's based on interest rates office is a double whammy. the fundamentals are terrible. after covid people worked from home the workweek is now tuesday to thursday people are taking less office space. no one wants to lend on it it's a disaster. at least in multifamily, the fundamentals are strong. i think they will continue to be

strong >> that's the one thing about this cycle that makes you think maybe it doesn't rhyme with prayers, right, this idea that look at the jpmorgan memo asking managing directors to come back for five days a week how much of the total problem in office, how much would you assign to this notion that you never really return to full office capacity? >> i mean, at least 75% of the problem, right once you allow people to work from home, they're never going back and they can send out emails, they can do whatever people are not going to go sit in an office it's a flawed strategy people can work from home especially back office jobs like accounting, et cetera. i think it's here to stay. it's a disaster. developers will have to figure out how to repurpose office buildings. it's here to stay. >> so what does that mean in terms of the frozen real estate mark that you're talking about right now? what would need to happen to

thaw it out and, i guess, what happens to some of these properties if developers are trying to send them back to the banks and the banks don't want them >> well, to open the market back up, the fed needs to drop interest rates back to where they were and people will jump back in the market immediately until that, no one knows, again, how to borrow, how to value real estate assets, stocks, any type of assets, all predicated on interest rates so what will happen the lenders will have to suck it up. i think you'll have local municipalities -- like new york will have to figure out the office problem it's the biggest market in the world and probably 80% of those buildings don't make sense anymore. and so i think you're going to have to see citi step in and incentivize affordable housing or some better use >> yeah, well, a lot of apartments in new york city are former factories, so the city does know how to repurpose but it takes a lot of time and it's

a long multidecade process patrick, we'll talk more next time i hope you'll come back. thank you. patrick carroll. >> thank you after the break, ai is being used to create ads, and it could change the game when it comes to creating returns that's next on today's "tech check. plus, keeping our eye on harley-davidson down after the company announced its cfo would be leaving for another opportunity at the end of april. we can see those shares are off by about 4%. (vo) this is more than just a building. it's billion-dollar views. perfectly located. an inspiration. and enough space to start an empire. loopnet. the most popular place to find a space. [office sounds]

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welcome back it is time for today's "tech check. the growth of ai has threatened to reshape countless industries, but maybe none more so than advertising. platforms have long used complicated machine learning to target ads, but now technology like chatgpt is being used to create ads, create new custom creative julia boorstin took a deep dive into how it could reshape the economics of the business. >> reporter: the future of advertising is here thanks to generative artificial intelligence >> the models that are generated here are not real people this is a fully ai-generated model >> reporter: you don't need to hire the model you don't need to hire the cameraman. that is what is offered to marketing agencies and brands. alex wang of scale ai, a startup valued at over $7 billion, says his tools blow up the bottleneck

that slows down advertising teams by enabling them to use their clients' data sets to instantly customize ad images with generative ai, to test what drives the highest return on ad investment >> you can just generate tens of thousands, hundreds of thousands, millions of different possible ads to then test and you can use some of these app platforms to immediately take the generative ai ads, test them and see what drives clicks, what drives a response from their audience >> reporter: other startups such as chatgpt drival jasper offer ai software to accelerate ad content creation >> you can create eye-catching marketing and advertising copy in seconds >> reporter: and meta says it's working on the ability for brands to use generative ai to create ads for now it offers ai tools to ab test ads and quickly improve and while google has integrated ai into ad creation and targeting for years, it hasn't yet launched generative ai

options. but we can expect this next generation technology to proliferate delivering instantly customized ads and for brands likely better results. >> you can see this car on these icy roads in the middle of -- >> reporter: looks lick a car is driving on the road. >> exactly >> reporter: this type of ai ad innovation is not without controversy. levi's announcement that it would be creating ads using ai in order to create more diverse models, that drew backlash critics saying they should simply hire more models of color, but, morgan, in many instances, consumers may never notice the ads they're seeing were made with no camera, no models involved. >> what could possibly go wrong with generative ai and video and voices this raises the whole question about deep fakes, for better or worse.

>> reporter: yeah, look, in this case this is advertising that is specifically being made to target consumers and show them the product they might be interested in in the format most compelling as possible, but there's a whole other conversation of ad deep fakes. people might say this wasn't even a real photograph how do i know this is really the real product but i think it's really a complex issue, morgan, and there's no question that this is the beginning of a real transformation not just of the advertising industry with ai but every industry is going to be impacted by ai >> you have to imagine anybody who is involved, julia, in writing ads, copy writing, shooting ads, being in ads, has to be taking this stuff pretty seriously. i know you mentioned meta, but this will be another play, say, for adobe and i wonder the impact on the ad agency business >> reporter: it's interesting because talking to people in the ad industry about this, a lot of them say that ai is a really

useful brain storming tool it's not going to entirely replace the creative process, but it's a great brain storming partner, if you will, or in the case of generating all these images, it dramatically accelerates the pace of iteration and innovation which otherwise would take a lot of time remember the images, imagine sending out a photographer to get all of those very different shots? so the question is which are the jobs that are replaced and how can the human component be more valuable to either curate or to ask for those prompts or to figure out a message that will maybe break through all the ai noise. >> yeah. it's going to be fascinate to go see how all of this evolves and what the rules of the road from a corporate and advertising standpoint look like and key point about adobe given their announcement julia boorstin, great reporting. thanks for bringing it to us up next, "time" magazine puts a little magic on its list he attoiapelentl op

weavth sry next.

let's get a look at what's

buzzing today. bob iger making the cover of "time's" annual list of the 100 most influential people. iger's return to disney comes as the street turns towards the next shift in the streaming business from adding subs to turning profits. goldman is still a netflix bear. they reiterate their sell today while naming wbd as a top pick morgan stanley calls itself the diplomatic with a hold but disney and amazon will remain the winners and, of course, andy jassy did speak on the company's streaming strategy today on "squawk." >> we're trying to build the best destination and the best collection of streaming video content anywhere and a lot of that will be our own content, and you mentioned "thursday night football," which we're really excited about i think it was a good first year, and we're appreciative of the partnership we have with the nfl there. >> by the way, other partnerships, did you see, elon

musk, sam altman >> sam altman should be there. >> and secretary raimondo. >> in the meantime, communication services is the best performing sectors in the s&p and even warner bros. discovery reversing course and turning higher after getting hit hard on the max news yesterday >> we'll see if we get a 17 handle on vix. let's get to "the half." carl, thanks so much welcome to "the halftime report." i'm scott wapner front and center this hour the state of the tech trade. it's been unsteady lately. it's among the worst performers this month but the best of the year is it teetering or just taking a break? we debate that with the investment committee joining me right here we do have rob sechan, bryn talkington and josh brown another good read on inflation means the dow is higher by near