from election day to the first 100 days and beyond, ey brings you insights on the issues that matter. we're prioritizing, finding out where it's most important for us to engage and a strategy to do it. regulation of ai, the fate of billions in tax credits, global trade impacts on your supply chain. now is time for us to do modeling, assess legislation and understand the impact on organizations. no matter the policy shifts, ey helps business and government leaders navigate the geopolitical and economic landscape with confidence. >> and welcome to power lunch. >> it is prime time for big tech and your money because you may be invested in some, or maybe all of the big tech market moving stocks, but we have got

somebody who says you just might be a little crazy. is it crazy to let your car drive you? especially in texas, the tesla plans you've got to hear. and one of america's premier real estate developer says the fed has got it all wrong. he's here to explain why. >> looking forward to that. let's check on the markets higher this afternoon. in fact the nasdaq eking out a small gain. now the s&p up half a percent. the dow leading the way up a little bit more than that. and a lot of big earnings movers. let's check on a few of them. namely who would have thought the star of big tech earnings last night would be ibm coming in with a 12% gain. it's held that since the results crossed, i angle here the latest name in old tech to become sexy again. thanks to that, we've already mentioned oracle and cisco in that crowd as well. this is a record high for ibm shares at 256 here that i business. their actual sales and bookings hit more than $5 billion. going the other way is comcast the parent of this network hit by consumer losses in broadband. and peacock's flat

subscriber growth, down 12%, could be the stock's worst day since 2008. even worse for whirlpool, though, which is getting crushed after predicting weaker than expected earnings for next year. they're very dependent on the housing market. we saw those numbers this morning, the cfo saying he's not seeing green shoots or anything to indicate a recovery. brian is around the corner. >> yeah, it's a lot to hit. all right. so we've got a lot to do kelly. but let's start at the top and focus on big tech valuations because there is some growing concern that you may be paying or not be paying, paid enough to take on the growing market risk, the so-called equity risk premium, what you're paying for growth stocks over the risk free rate of u.s. government bonds is now close to levels not seen since the.com era, but these kinds of warnings aren't new. you've heard it for a few years, and big tech has, for the most part, just kept going up. the nasdaq 100 has nearly doubled in just two years, but so-called value stocks are up only about one

third or maybe one fourth in that time. but they've also started to take off a little bit lately as one of the growthy names of all. nvidia hasn't made you a dime if you bought nvidia last june and get this this call this w.b. kelly wonky but important. nvidia is actually just the 140th best performer in the s&p 500 over the past six months. let's talk about all of this together. joining us now to kick it off, gmo co-head of asset allocation ben inker. he says that you as an investor need to be cautious of an overly concentrated market. you know, ben, even reese i knew nvidia hadn't done well, but i even surprised myself finding that data that nvidia, for all the hype it's getting, has really been a spectacularly average stock for about nine months. are are so-called value stocks finally in love again?

>> well, i'd say for. >> one thing, nvidia. >> a lot. >> of nvidia's tougher time really has come this week. and it does speak to the fact that when you have a company where the vast majority of its value is based on growth expectations for the future, that there's a vulnerability there. if people change their mind about what they think the future is going to be. so nvidia is a very high quality company. they have an amazing franchise. the reason why they have been vulnerable is because people have assumed that the world is just going to continue to want more and more and more of those chips at extraordinarily high gross margins for them. and suddenly that may not be so true. it is a tricky problem. you've got an amazing company with amazing products. they might not be an amazing investment because that valuation is high. >> fair enough. and we're not picking on nvidia here. i want

to be clear. it's just kind of been the poster child. it's made people a lot of money. i hope a lot of our viewers and listeners have become super rich owning nvidia stock. but to kelly's point, at the top of the show, look who's up 12% today. it's ibm. i mean, ibm is a company that honestly, ben and i mean this with love and affection for all my friends that work at ibm. i have no idea what they do. i got some sort of consulting business. they do cloud, they do database data centers. but but i couldn't really explain in plain english what ibm does. i'm sure i'll get a nice note from ibm pr for saying that, but you get my point is that sometimes as an investor, you got to look for the names that maybe you're not thinking about or that, let's be clear, are not being mentioned in the financial media every day. >> absolutely. there are some wonderful investment opportunities out there in names that just don't get that much interest, because they're not

going to make you rich this year, right? there's plenty of stocks out there that are trading at decent valuations. they're pretty good quality companies giving you a nice dividend yield. maybe you're going to get 10% out of them this year. and hey 10% is pretty good. it's kind of at least in line with the long term return to equities. but the thing is, my god, people maybe not who invest invested in june in nvidia, but the people who invested in 23 or 22 or you know, luckily enough, in, you know, 2004, in nvidia have made fortunes from it. and the thing is, for most stocks, you're not going to make a fortune. but that's okay, right? the way you make money in the long run is compounding. and the stories we get that that that really resonate are the companies who have done something very abnormal. >> ben, is it true that the gmo us value etf is up 3% over the

past year? i maybe 3.6? >> well, to be clear, it launched in november. okay, okay. >> i see that. >> yes i see that. got you, got you. okay. so then this is not going to be. so then this is my larger question for all the investors. and many of us are at heart value people. right. we've we've read the ben graham and we understand why. so but the performance and what is the missing factor that value as, as a factor is, is not the most important thing. right? is it all does it all for you come down to valuations? i feel like munger and buffett are always good examples of this. like it's not always it doesn't have to be a cigarette butt, right to be a good investment. so what are some examples of companies that you think you know people should be owning right now? >> yeah, i mean, we think, you know, in the us there are plenty of companies trading at kind of non-scary valuations that are pretty good companies. we like a bunch of the big financials

where the pes are fine. these are strong franchises. they're spinning off a lot of cash within pharmaceuticals. you know, i mean there's a couple of high fliers there who have made a lot of money from the glp ones. the rest of that of that group of large pharma are really actually pretty cheap. they're cheaper than they look because the accounting gets it wrong. the accounting doesn't understand how these companies do their investment, that a lot of stuff gets expensed that should be capitalized. they're cheaper than they look. and then there's a bunch of manufacturers, right. the auto companies are a little bit scary, but really cheap and spinning off a bunch of cash. you can see in resource companies. again, these are not companies that are going to double in the next year, but they're really quite cheap. the world needs what they produce, and we think there's really good expected returns from a lot of these less exciting seeming companies. >> so but i remember having this

discussion with bill miller, probably seven, eight, nine, ten years ago, and i asked him because ford and gm had been under some pressure, and i said, come on, bill. i mean, because he is also a value investor at heart. i said, don't you look at ford and gm at some point and think, you know, this is it's gotten cheap enough. i mean, ben, those stocks since then, as you i don't have to tell you look at gm on earnings the other day down another 9%. meanwhile tesla has grown its market cap. how many times over. so i think investors in this space have just. >> been. burned so many times. >> tesla is a weird case because they've grown their market cap, not because they sold more cars. or we found out last night made more money off of them. tesla i it's weird, but it is not the case that they are $1 trillion company because they are so awesome at making and selling cars and gm yes, they had a tough move after earnings, but they're actually up a lot over the last year because they generate so much cash. so i

would say it's not that these companies don't have challenges. and it's not that some of them won't have problems, right? ibm is at this point within tech very much a value stock. had a good day. you know comcast is also a value type stock having a bad day on earnings. but one of the things i can say about these companies is the risks tend to be more asymmetric to the upside. it's not that bad things can't happen to them, but they're valued in a way that when the bad things happen, hey, the fundamentals are worse than i thought, so i'm going to keep it at the same pe but on a lower earnings. the problem when you buy that high flying growth stock and that growth doesn't come in is not just, oh well, it was trading at 40 times my estimate for this year's earnings. and my estimate for this year's earnings have come down somewhat. it's well, wait a minute. maybe this thing shouldn't be trading at 40 times earnings because they're not as growthy as i thought. so we do think that the value stocks

these days have the skew of risk in their favor. the tricky thing with growth is the valuation almost doesn't matter until they disappoint. >> yeah. no i take your point. and look gm is up 32% over the past year. so there you go. that's a win for the value community ben thanks. appreciate your time today and having this little debate ben inker of gm. oh well hot takes and powerful points of view. still to come. don peebles, who says the feds persistent pause is a mistake. he joins us next. and further ahead, bernstein says rivian is on the road to ruin. the shares are down more than 80% since going public, and even still, they would need to hit all time lows to match their new price target. he joins us to explain. don't go anywhere. >> crypto watch is sponsored by crypto.com.

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and comfort. use code tv for 20% off sitewide at collars and co com. >> welcome back to power lunch. the federal reserve kept rates on hold yesterday as expected, but our next guest is saying that is a big mistake. he once again. well, i don't know if always the only member, don, but definitely yesterday the only member of our fed to vote for a rate cut and he wanted 50. a half point cut as well. don peebles is here on set with us. he's chairman and ceo of the peebles corporation. welcome. thank you. you know, don, you're a real estate developer. of course you want lower interest rates. give us the broad economic rationale. >> the broad. >> economic rationale is it's high interest rates have created tremendous stress in local and regional banks. >> local and regional. >> banks are the. primary lenders to small businesses. >> and they're not making loans anymore. and what has happened. is that the local lenders. >> are stressed.

>> because of the large. portfolio of commercial. >> real estate. >> that they own and apartment buildings, and they are generally the development lenders or the bridge lenders for commercial office buildings. >> but let me stop you there and be again, put my populist hat on and say, i don't care. i don't. why do i care what happens to the banks? right? what about. what about the. what about everybody else i don't know. >> well, we do care about the banks because they're fueling the economy. and small businesses create the vast majority of the jobs in this country. and local and regional banks are the primary lenders for those industries. and then, of course, the housing market. we have a housing shortage in every major city in the country. there's a significant shortage of rental housing and for sale housing. and what's happening now is housing affordability has been the lowest that it's ever been since they've been keeping statistics. so most americans cannot afford to buy a home, and they have to spend a disproportionate amount of their income to pay for one. it's all driven by interest rates. >> this is very complicated. and so it's tough to do right here. in his interview yesterday with

scott wapner. great interview as normal, jeff gundlach said something fascinating, which was that in parts of the commercial loan market, they're starting to rate some of these big loans that we were talking about re tranche them because of higher rates or whatever. it's a very complicated story. but what i heard, i think jeff say was that bubbling under the surface way deep but starting to bubble are bigger problems in commercial real estate because of rates than we may think. what do you think about that? >> absolutely. i think there's been this attitude with most lenders, including in the cmbs market, the special servicers, is to give these buildings a little bit more breathing room in terms of making debt service payments and the like, with the hope that interest rates would decline. that now is a foregone conclusion that they won't decline anytime in the foreseeable future. and so therefore, you've got

significant stress in that sector. and also what was an eight tranche is no longer an eight tranche. >> so that's and that's what i think jeff gundlach got to. but it's when you say tranche your mind goes back to 2006, 2007, in sort of plain ish english. what does that mean when they say re re tranche? >> well basically it's simple. if you have a loan and you look at it as a stack of pyramid here, or, you know, a building block, the top building block is the a tranche. and that would be the premier tranche super credit. no risk of default, no risk of default, etc. and it's a small portion of the loan. maybe it's the top 10%. so and then you have here the bottom the worst portion the highest risk the loss first. so if a loan's a 100 million bucks and you have the d tranche if you will, and that tranche is, you know, $10 million, then that's the first loss. so if the loan goes down to or the property declines in

value from 100 million to 50 million, then there's a $50 million loss there. so that works its way up the different tranches. and what's happening is getting dangerously close to the mid level, to the upper portion of the tranches that are supposed to be risk free. and as a result, those are going to have to get repriced for investors because the risk is greater, otherwise they can't trade them. >> right. but is that why people in that space are going to say, we'd love lower interest rates, give us some breathing room, right. what about people who say but inflation, you know that it's going to be persistent. it's going to be sticky. if we lower rates here that we're never going to conquer or vanquish it. >> but the hidden inflation is what americans spend the vast majority of their money on. they spend it on housing and automobiles. those are the top two purchases. both are interest rate sensitive and without attractive interest rates, they can't afford to buy either one. and what happens when they buy fewer homes and fewer cars? then jobs are lost. and so there's a double impact there. and what

you're seeing now in many sectors now are job cuts are beginning to take place now, and more are going to start happening and they're going to be in banking, they're going to be in real estate, they're going to be in construction. and, you know, and unless we see a change in policy, i think we're going to we could be dangerously close to. >> can the fed. can the fed change that policy. because the fed cut rates last year and the bond market went in a completely different direction, basically thumbing its nose, at least for now at the fed. >> right. well, i think the bond market didn't take the fed seriously. they were they were. that's a problem. they were. >> but that is a real what you just said is a massive statement i think. >> yeah. but they but the reality is, is that the fed should have cut made bigger cuts. they should have been 50 basis points at a minimum every time. and they should have been there should have been at least a 100 basis point cut in that process. and now to make these minimal cuts and then to do

nothing and look all around you, every sector that's affected by interest rates has gotten worse. and in fact, mortgage rates actually went up. home mortgage rates actually went up. and that's because of the bond market, because they're not taking the fed seriously, because now the market is pricing in that these these,he g to cut rates anytime soon. and i think that is going to have have a big impact in terms of commercial real estate mortgages and the losses that are associated with them, because they're going to start coming now because the lenders are going to have no choice. >> for sure. we will see more of this coming the longer that we're at these levels. don, always a pleasure. thank you. really appreciate it. don peebles of the peebles corporation. >> well, speaking of the fed and rates, let's go now to rick santelli who's in chicago. and rick, yeah, there's stuff you're looking at here with the economic data. but you got to respond to what don just said, which is the bond market is not taking the fed seriously. that is a gigantic statement.

>> it is. >> and listen. >> mr. peebles is a genius. hugely successful businessman. >> who am i to. >> go against that? i will just throw this out there. >> the fed. >> cut 50 in september. the ten year was at 365. so i think that the fed's not taking the bond market serious. we're done with that conversation now. today we had gdp our first look at fourth quarter. and even though you could say 2.3 was a little light, it was a good report. consumption was off the charts at 4.2%. and as you look at this two day chart on the right side, you see all those lows. we were trading under 4.5%. well after the gdp data the market reversed. now, even though ten year yields are a basis point and a half lower than they closed yesterday, they reversed higher after that report. that's an important issue to pay attention to. now if you look at where the ten year closed yesterday and the way they're hovering right now, they're on pace for the lowest yield. close going all the way back to

mid-december. and let's keep with the notion of central banks here. so the ecb cuts 25 their fifth cut in a row. and what's really fascinating is look at our ten year, as i pointed out 365 when we cut in september. here we sit at four and a half. same thing with the ecb. when they did their first cut in june, june 12th. i believe the ten year bond was at 262. today it's hovering around 251. it was down seven basis points after the quarter point cut. but the point is the same. the markets are pushing back against central banks. and in both cases, whether it's the bond yield curve or the us treasury yield curve, they've remarkably steepened. so even though that bond yields are about where it was okay, their two year is significantly lower in yield like our two year. and the reason this is important is the yield difference between our tans and european tans. the bonds yesterday closed at 195

basis points, the closest it's been since mid november. that's an economy in europe that has a boatload of problems, lots of debt. the us economy is cooking and greece by comparison. so our rate structure really does represent in some ways the stronger economy. in addition to both countries or both entities needing to issue a lot of debt. brian, back to you. >> rick, thank you very much, tom. besides the fact that you're handsome and a genius and super rich, do you want to comment on anything that rick just said? >> well, i agree with all of that. >> of course you do. >> but look, i do. look, our economy is doing well on the surface, but it's got some major issues and headwinds ahead. and those are driven by interest rates that are way too high. and we rely heavily on on construction to create jobs and economic activity in most of our major cities. so we've got to bring these rates down. and that

will propel the economy and we'll see greater growth. >> all right. well appreciate it don. thank you. >> yeah. appreciate it all of your time today. one more. >> you are very handsome i should say that. but you know i've had some eye issues lately so i don't trust me. all right. up next, are you banking wink, wink on some tech weakness? one trader says it might be time to turn to where the money is. that's a hint. market navigator. next. >> contribute to a. >> health savings account to pay for medical expenses with tax free money. if you're enrolled in a high deductible health plan, you can put up to $4,150 for yourself or 8300 for your family into an hsa by april 15th, and your contribution will be tax deductible for cnbc. i'm sharon epperson. >> the bond report is brought to you by pimco, a global leader in active fixed income.

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...with a perfect name, a great logo, and a beautiful website. just start with a domain, a few clicks, and you're in business. make now the future at godaddy.com/airo >> apple earnings after the bell china fears overdone crucial insight for investors. plus, the latest on apple's ai strategy john fort morgan brennan closing bell overtime today four eastern cnbc. >> welcome back to power lunch with stocks picking up some steam this afternoon. dom chu is here from market navigator. >> all right. so let's kelly talk a little bit about 2025.

it's a great start for the financials. right now. it follows up on a 2024 where it also had a strong year and beat out technology. it's up more than 32% by the way the sector in just the past 12 months. and it's worth noting financials just they continue to outperform even over the tech sector again this year. so is betting on the banks a sustainable strategy for outperformance in 2025. our next guest is overweight financials and says it's not too late to get in on the action. joining us now is caterina simonetti, a private wealth advisor over at morgan stanley. and caterina. the bank trade had been talked about as being the catch up trade for years. it finally came to fruition in 2024 and 2025. so what makes it so that it has legs? >> well, john, thank you for having me. >> on the show. >> and of course, we've been talking about financials for a while, but one of the most striking features about the market volatility over the last week, it's not just rotation out of tech, but specifically

rotation out of tech into financials that have outperformed tech this week, this month, and for the entire year that we just had. and as you said, you know, we've seen the 32% growth in financials over the last 12 months. and because all the focus was on tech, on tech. but we don't believe that it's too late for investors who are underweight the sector to go into financials and increase exposure in their portfolios. >> caterina, financials are more than just banks. they're the driving force of it, there's no doubt about it. but there was one point over the past couple of years that the story was all about the insurance companies. we know that they're under pressure right now given some of the natural disasters, wildfires in la and whatnot. so when it comes to financials, is it the big banks, the little banks, the medium sized banks, the insurance companies? what exactly you think is the driving force for 2025? >> well, john, we have to take the entire picture into consideration. financials as a whole stand to benefit from the deregulation, as the policy of

the new trump administration heightened m&a activity that is going to come as a result of the admin of this deregulation or the lower potentially decrease in the corporate tax rates, and also the fact that we might be in the higher interest rate environment for longer, which includes the higher rates on mortgages and car loans for the lower side of the financial sector. and, and we've seen that the rates in these sectors stayed high despite of the couple of rate cuts that we have seen already. so banks are the pulse of the economy. it's as plain and simple. you know, what we saw over the years is when investors are bullish on financial sectors and are bullish on banks, they're generally bullish on the economy. so on some level, it's the indicator of the health of the economy and investors as they view, you know, the economy and, you know, potential for the economic for where we are in this economic cycle. >> all right. caterina

simonetti, private wealth advisor at morgan stanley, thank you very much. we'll see you again soon. thank you very much for the thoughts there on financials. now, kelly, what's interesting about this? remember there was a time when people used financials as income plays. they bought them for the dividends. then all of the restraints came in on share buybacks and dividends. you wonder the deregulation. does it lead to more capital deployment to shareholders. that's going to be. >> a. >> big question. >> making cycle could benefit some of the smaller companies from that appreciation or the whole sector over time if it's coming. so we'll see. there you go, tom. thanks very much, brian, over to you. >> all right. thanks, guys. still to come on a much more serious note, the very latest on the crash in washington, dc, what we know so far and what we still don't know what's next. >> market navigator is sponsored >> market navigator is sponsored by knock, knock. #1 broker here for the #1 hit maker. thanks for swingin' by, carl. no problem. so, what are all of those for? ah, this one lets me adjust the bass. add more guitar. maybe some drums. wow, so many choices. yeah. like schwab.

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air traffic control system around the country. somewhere down the line, once they have drawn an official conclusion. from what result? what caused this crash, this midair collision between a u.s. army helicopter and an american airlines regional jet? let me bring you up to speed in terms of where things stand with the investigation right now. the ntsb, the national traffic safety board or transportation safety board, it will be giving an update in about 15 minutes. in terms of where they stand, they lead the investigation, by the way. meanwhile, the new york times is reporting that the air traffic control tower at reagan national. when the incident happened, the staffing was not normal. the article from the new york times, which was posted in the last hour, basically says there's usually two control atc control operators in there, one dealing with civilian aircraft, one dealing with military aircraft, but there was only one at the time of this incident. and finally, reagan national, it has reopened. let me show you the map here, because i've had a number of people ask me, well,

how exactly did this happen? you see the potomac river there? the runway you want to focus on is the one at the top there. that is runway 33. that is the runway that the american airlines jet was coming in on. final approach. that's when it was in a collision with the us army helicopter, which was on a training flight. and it's not unusual that you see black hawk helicopters flying in that corridor around reagan national. if you fly into there, you know that you see a lot of those flights. meanwhile, for the acting administrator, who has just been named for the faa, remember the previous acting administrator resigned right before president trump was inaugurated. chris rushlow is his name. he's a longtime faa presence executive, if you will. he used to lead their accident investigations. left briefly. now is back. and he is the acting administrator. and he inherits a situation that, according to the head of the transportation department, the new secretary of transportation will include a real thorough

analysis of what exactly happened. so it doesn't happen again. here's what he had to say. >> we will not accept excuses. >> we will not accept passing. >> the buck. we are going. >> to take responsibility. >> at the department of transportation and the faa to. >> make sure we have the reforms. >> that have been dictated by president trump in place to make sure that these mistakes do not happen again. >> and again, we still don't know the true root cause of this collision. there are some theories that have been bouncing around. the new york times report is certainly going to fuel a lot of discussion about air traffic control. the tower, if it was not properly staffed. we will learn probably more from the ntsb, probably in about 15 minutes when they give their first briefing. that's just going to be an initial one, guys, where they say, here's where we are. have we gotten the black boxes? have we, you know, are we able to start doing some analysis in terms of what happened? by the way, i should

also point out that new york times report is based on a preliminary preliminary safety report based on this incident that the faa put together, that the new york times says that it saw. >> but but, but but a big deal. we got to go, phil. but a big deal if accurate because you don't want to fly into o'hare. we don't want to fly into newark. if there are not enough controllers on the job, that's it. >> and if they're doing if they're doing two jobs, if one person is doing two jobs instead of two separate people, that's a huge issue. >> yeah. phil thank. >> you phil. thanks phil lebeau we appreciate it. let's get to contessa brewer now for the cnbc news update. >> contessa kelly, three of president trump's nominees for cabinet positions are facing tough questions on capitol hill today at their confirmation hearings. president trump's nominee for director of national intelligence, tulsi gabbard, was grilled by democrats and republicans about positions she has declared in the past. several republicans specifically questioned her on her support for intelligence leaker edward snowden and her shifting views

on the legality of electronic surveillance programs. kash patel, the nominee to be fbi director, has been asked about his allegiance to president trump, and he pushed back on assertions that he might go after political opponents or pursue a so-called enemies list, a group where dozens, he alleged, were part of the deep state. in a 2023 book, patel said it was an enemies list, but that calling it that was a mischaracterization. robert kennedy jr was back for day two of his confirmation hearing, this time in front of a different senate committee. and again, he faced questions about his anti-vaccine activism. he also stumbled in defining the different aspects of medicare, a program which he ultimately would oversee as secretary of health and human services. so that's all happening in d.c. as we speak. kelly. >> very busy. contessa. thanks. and tesla shares are revving up despite missing estimates for the fourth quarter last night. the stock up around 3.5%. we'll dive further into the ev

industry next. >> most power players. >> on. >> wall street rate. >> nvidia a strong buy today. yet why, then, are so many legendary investors quietly ignoring that advice and instead selling the stock hand over fist? every billionaire on your screen has recently sold nvidia. some have offloaded millions of shares. and mark my words, this is bigger than nvidia. hedge funds are quietly selling all of their tech stocks at the fastest rate we've seen since 2016. it begs the question what do they know that you don't? my name is mark chaikin. i help build three

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for big potential gains from this moment on. to get its name and ticker 100% free, simply visit the website below. >> want to apply to be on cnbc's disruptor 50 list? is your startup disrupting the status quo? scan this code or go to cnbc.com. slash disruptors to apply before february 10th. >> welcome back. we have a news alert on open ai. always busy

over there. kate rooney what's the latest. >> hi, kelly. yeah. so i'm being told by a source that openai is now in talks for a mega funding round led by softbank that may value the company at around $340 billion. just an eye popping number, roughly double where it's currently valued in private markets. a source telling me softbank is going to be leading this. we reported earlier that softbank is expected to invest between 15 and $25 billion. again, these numbers could change. this deal is ongoing. the source asked to be not to be named because the deal is still confidential, and openai as well as softbank, did decline to comment. the wall street journal first to report this new valuation number, but it is a record breaking number, making openai now one of the most valuable private companies in the world. if you think about the context here, bytedance, the parent company of tiktok, is around $225 billion spacex $200 billion. so this is just a massive cash pile for openai to build out computing. as we've

been talking about stargate as well, i'm told that this funding round could be used to also help fund that stargate joint venture, which sam altman was here in dc talking about just a week ago, guys. but that is the latest from openai. >> well, kate rooney, i thought deep seat was going to, you know, six hamsters and a guy on a bike and a wheel. and then you've got i thought it was going to do the same thing. apparently investors aren't that worried about the valuation of openai vis a vis deep sea. >> yeah, no, it's a good point. i mean, flash forward was it thursday? but monday we were talking about how this was going to undercut prices. there were so many questions around the economics. sam altman was on stage here in dc earlier talking to lawmakers, trump administration officials saying essentially, there's never been a more important time for computing power. i talked to kevin wheel as well, the chief product officer. the message from both of them was, this does not change the equation for how much money we're going to need. we still need to build out these data centers. and the takeaways from silicon valley that i'm hearing now is that because of

the ip issues, the deep sea, the cost is actually not as low as we originally thought. and that may have been an overreaction. but the other takeaway is that they are still able to raise this prolific amount of money. i mean, these are record breaking numbers. it's just unbelievable. a $40 billion private financing. this is not an ipo we're talking about. >> yeah, we'll see if it changes. but for now, the concern maybe not there. kate rooney, glad you're there in d.c. thank you. all right. now let's talk cars. electric cars, because there are a few big stories that are happening right now. first up, tesla ceo elon musk jumping on the earnings call last night and saying, yeah, robotaxis are coming to austin, texas. it's full self-driving is ready for prime time planning to launch its robotaxis in june in austin. that stock already red hot and up another 3.5% today. the flip side is rivian and rivian. they may be gorgeous suvs, at least i think so. but bernstein analyst says that does not make it a

gorgeous stock. and bernstein is beginning coverage on rivian with an underperform and a price target of $6.10 a share. you could see folks that's less than half of where rivian is right now. let's talk about both daniel ruska heads the us automotive research team at bernstein. they're suspended with coverage on tesla. so you can talk macro but not price. but let's start with rivian. rivian. great looking cars i may or may not know somebody that owned an suv. i'm winking at the camera, but how'd you get the 610? that's awfully low. >> hey, brian, we looked at what this company can achieve in the next 5 to 10 years, and we looked at what we think sales can be in 2030. gave that a good multiple and discounted it back. and we were very surprised to find kind of three big misconceptions within consensus. consensus is wildly overestimating the addressable market for these cars they're going to do. it's not recognizing the capex they have

to spend to get to that point. and for some reason, everybody's forgotten about the volkswagen joint venture that will dilute this equity by 20 to 40%. >> daniel, i thought i was struck i'm a consumer reports subscriber, which means i've now reached full adulthood or something. but i was glancing through the other day their quality rankings, and just out of curiosity, rivian was at the very, very bottom. now, interestingly enough, the owner satisfaction scores were actually pretty high. but yeah, i don't know what to make of that. but look, this company just doesn't have scale right now. >> no, it doesn't have scale. look, last year they made 55,000 cars. that's like three and a half ferraris. and it's like six to porsche. and so they don't have scale. the next car, the r2 that has to come. and i think brian you mentioned kind of our low target price. but i don't think we're being unfair in our forecasts. we're actually assuming they're going to do everything they told us they would do. we're not giving them a discount on any of their plans, but it's just not enough

to make this a compelling equity. >> i would just say that they could lighten the suspension a little bit, maybe change or eliminate the one pedal driving. but i'm just going to say that as a random dude, not as a tv news anchor. daniel i'll add this though. so let's say they outperform your expectations, right? and you have to change it. would that get you above $6.10 if they sold 20% more cars than even they say? >> yeah, as you can imagine, we've talked to a load of investors in the past two days. i think there are three big buckets of upside, but making more cars is not it? because to make more cars, you will need to spend more capex, build more factories, and that just doesn't give you the return you need. you could start selling fsd like technology like tesla. maybe they get to that point, rj teased. hands off, eyes off driving the other year, the other week, and maybe they can start selling software to other oems. but both of those opportunities are maybe a dollar, maybe $2 on our share

price. and so we don't think there is a clear road to really outperforming at this point. and the chart you just had up really shows how much cash they've burned so far. by the time we get to cash flow break even in our model tesla, tesla will have done that with 23 billion less in cash burn. so by the time rivian gets to ten years, they will have burned 23 billion more than tesla at. >> that point. wow. and some have asked, you know, can they go hybrid. try to tap into that market which seems to be more successful in the us. but because you teased it, daniel, i know you don't cover tesla specifically, but i mean, do you think that that is i still don't know how to ask this question the way you can maybe answer it does its market, is its market cap justified, given the opportunity it has vis a vis the rest of its ev competitors right now? >> yeah. so, i mean, what we can definitely say, if you look at that, and that's also the question i asked elon yesterday evening as the first one on the call said, look, you know, what

you got to do to kind of justify that high market cap or in his view, even supposedly higher market cap going forward. and he clearly pointed to two things that do not relate to building cars. right? it's fsd, full self-driving, unsupervised, getting those robotaxis on the road. and the team was very excited about the optimus robot. i mean, on both accounts, you kind of have some questions, right? fsd unsupervised has been in the cards for long, and i'm really glad if we get close, because then my commute gets easier, my wife's life gets easier, our family life gets easier. that's great, but i'm just not sure how close we really are to have regulators agree to that. and on optimus, you have to say that there are like 25 different robot companies out there that are trying to do exactly that, and tesla is one of them. i don't think success is guaranteed at this point. >> it's a fascinating point you make that you're separating the technology from the regulation. i've talked to regulators. i've talked to car insurance executives about this on and off

the record. and the reality is, daniel, even if you build the technology, whether it's allowed or can be insured is a very different animal, is it not? >> absolutely, brian. and i mean, i've covered the european space and i covered the us space. i know the regulators fairly well. the way this eventually gets kind of the crux will be the insurance, as you say, right. because regulators ultimately will not be able to audit the end to end foundational model. it's going to be impossible. and so they're going to say, okay, we kind of understand we think we understand what you've been doing, but you take the risk. and that's really also the question for us is, is it real hands off self-driving. right. does the oem does the manufacturer of the car take the risk? and of course, the manufacturer of the car only takes the risk if there's an insurance on the other end that backs them. the only oem globally doing that right now in any form is mercedes. that's the only car that actually takes liability when it's engaged in

autopilot and has a crash. >> and that's your i would think that's wacky and interesting today daniel. appreciate it. thank you very much for joining us. >> thank you i. yeah i like that. but to answer your question, how can somebody pay a lot and have a low score? i think if somebody pays 90 grand for a car and you ask them what they think of what they spent, 90 grand and they're going to say it's. >> good. >> they're going to say. >> they're going to say it's good, because what are you going to say, no, i'm stupid and i shouldn't have spent the money. >> probably not. tech stocks have been moving markets all week up and down. we'll highlight some of the biggest names in the news in three stocks. lunch next. >> this tiny home trend is. >> not for me. now this is more like it. the same goes. >> for my footwork. >> so i went hands free. >> with wide fit skechers. >> slip ins. just step in and go without bending down or. >> touching my shoes. why fit? hands free skechers slip ins. >> in a world of uncertainty and disruption, how will your investments stay resilient? we've been navigating change for

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you look back at where we were 10 years ago and we are in a completely different place today, and it's because of how we need to care for our communities and our customers. i hope that's true. [joe] that's my commitment. [ambient noise] change. see if glp one are right for you. start today@forhours.com. >> welcome back! it's a big tech edition of three stock lunch today. and so we turn to gil luria for some trades. he's an analyst at d.a. davidson. gil, i still remember your call. about 40 market cap. who would get there first and how everyone couldn't all get there at the same time. and let's let that hang over this conversation and start with microsoft. it's down 6% after that. revenue missed last night or the guidance. what do you make of it? >> well, microsoft is investing more and more and getting less and less growth. the decelerating azure business is a concern, especially since they're indicating some of it is

company specific issues. they've invested so much in ai, they've taken their eye off the ball in terms of their other businesses that are now decelerating. and yet they're still increasing their spend. that's a concern. free cash flow is down 29%. margins will be down for the next couple of years. >> where are their customers going? their azure customers. >> aws and google cloud have caught up. let's not forget microsoft had a big lead in ai a year or two ago, but that's no longer the case. aws and google have caught up. they have a full ai offering, and they've been ramping their baseline cloud business in a much better way over the last couple of quarters. we expect to hear an acceleration from them next week. >> very interesting okay let's talk. apple earnings are out tonight. are you a fan of the stock. >> absolutely. >> we're in the best place possible which is long term. expectations are good because apple will be the leader in providing consumer ai. short short term expectations are low.

people don't expect iphone sales to grow very much. the expectations are about 2%. they did 5.5% last quarter without ai, so any contribution from ai should make the expectations doable today. and more importantly, we learned this week models are getting a lot smaller. they'll fit on a phone, whether it's a chinese company that does it or american companies that do it. small models on the phone is where this is headed. we're going to be doing ai on the handset and apple's going to be doing that. >> and that brings us to nvidia. where does it leave them, by the way? those shares, which are down 15% this week on the deep sea news, actually got a little bit of a fill up kind of on the this news of openai's latest funding massive funding round, which is interesting. it's down about 1% today. what do you do with it? >> well, at some point microsoft is going to stop wanting to overspend on data centers. and so that's going to have to come out of nvidia's pocket. there will still be customers for nvidia, the ones that want to build the greatest data center

ever. the vanity driven investors like elon and zuckerberg and masa, they're the ones driving the spend right now. increasingly the bigger customers, which is microsoft, amazon and google, are going to moderate their spend and use more of their own chips and their data centers. so it's going to be hard for nvidia to keep anything close to the current growth rate. >> apple sounds like your favorite of the three. apple, microsoft, and nvidia. gil, thanks for your time as always. gil luria of d.a. davidson. >> all right, before we go, we're going to call this the rbi. random but interesting. it's coffee prices. i don't know if you're a coffee drinker. i drink way more than i should. love it. coffee hitting another record high. it's doubled in a year. it's a weird crop. it's very sensitive crop. coffee prices now at their highest level. kelly. since the 1970s, a drought in brazil. the preeminent reason. but if you're going to buy coffee, just note it will get more expensive. >> yeah. i mean, this is one of

those little things that makes people feel like inflation is still going up, up up up up up, up. this is kind of, you know, egg prices, right? we talk about the breakfast index and how like that goes higher. you feel like you're starting your day already on an inflationary note. >> who can afford breakfast. >> well fancy. >> i know. get some chickens. >> kelly thank you. >> and thank you for watching power lunch. >> closing bell starts right now. >> all right guys, thanks so much. welcome to closing. bell i'm scott wapner live from. post nine here at the new york stock exchange. this make or break hour begins with what might be a make or break moment for apple. >> shares earnings. >> a little more. >> than an hour. >> away now. >> as questions about the iphone and i continue to swirl the stock up. nicely this week into the print, even as it's been hit with more downgrades, we will ask two shareholders coming up what they need to see tonight. in the meantime, let's show you the scorecard here with 60 to go in regulation. mostly green though the unevenness in. >> tech. >> today is weighing a bit on the nasdaq. it's still up but not quite as m