Kelly Evans (3:28)

Last year we were all stunned. You know, the question was, you know, how much will the cap this year though, I kind of take the point, look at what's happened with the infrastructure trades. These companies are overwhelmed and in many cases they are booked out for years. So if Amazon could say we're doing 500 in capex, but at some point the question is can they literally deliver on that? And if not, can they or will they or any of the other players have to pull back their, their capex guides not because they don't want to do more, but because they're not sure they can bring all that supply online.

Interviewer/Host (4:03)

Right, Right.

John Blackledge (4:04)

Yeah. The notion that there's a finite amount of supplies to fulfill these capex spend as everyone is, you know, building out these massive infrastructures, I think it goes back to, and that's why I actually don't think they're going to raise, you know, at least at this quarter. And if they do raise as we get through the year, I don't think it'll be of big size because of what you mentioned, but I think what is important and the other big question as it relates to, we'll just take Amazon for example is revenue growth and Google Cloud revenue growth. I mean these are two big questions from investors. And I'll just, I'll just take US for example, AWS investors are looking for high 20s to low 30% revenue growth. There's a pretty big acceleration they reported 24% revenue growth in 4Q. And if you look at CEO Jassy's shareholder letter from a couple of weeks ago, he was very bullish on AI revenue growth at US. I think he called out like $15 billion air revenue growth at US. That was a run rate in the first quarter driven by their chips business and their model layer. They call it bedrock where the companies plug into anthropics, cloud and other leading models. But I just thought we've modeled out their stack and in the number that he gave was, was you know, very impressive and so should see really good acceleration at us and even Google Cloud and which is firing on all cylinders, expect very strong growth there as well.

Kelly Evans (5:31)

Do you want to rank them? You know we lumped the Mag 7 together. No one's really talking about Tesla which already reported. So kind of Google has been a standout, a breakout obviously because of Gemini and its own chip. So do you want to rank them in terms of kind of highest to lowest conviction or how you feel going into earnings or whatever metric you choose?

John Blackledge (5:48)

Yeah, 100% and I cover three of the mag seven so I'll just, I'll just rank the three of them in. For us it's Amazon, Alphabet and then Metta. And the reason is in Amazon is our top mega cap Internet pick this year was the relative underperformance to Alphabet over the last 12 months and the thinking that AWS revenue growth we'd start to see the acceleration which I think we're going to see. And Jassy shareholder letter from a couple of weeks ago really, really got the stock moving and it's on a year to date basis. It's the returns are a bit above Alphabet and Metta. Alphabet's in great shape. Google Cloud is killing it. Search is doing great. They seem to stave off that negative sentiment around search. Traditional search going away as they put in as they have Gemini, a leading foundation model and, and incorporated certain aspects of AI into search. And then Metta is three of three for us just because like they're a little bit behind in AI. I know they released the model and they're investing like they have a cloud business, but they don't and you know they're a lot of the investment in AI is for their core business and you are seeing it there but just on a relative basis that's how we're ranking these three going into earnings on Wednesday night.

Kelly Evans (7:06)

Understood. And then finally anything else you're going to be listening for or watching in particular

John Blackledge (7:12)

the communication like we're going to get, we're going to get all the, we're going to get the press releases, we're going to get the metrics, we're going to look at some big numbers first. But then how they talk about the demand environment, how they talk about the return environment, whether that's Sundar Pichai or Andy Jassy or Mark Zuckerberg, is very, it's very critical because this is a moment, you know, obviously we're talking about this historic spend and so and look at it, you know, either good or bad, you know, but, but that's something just the communication, how they're talking about the go forward is really important.

Kelly Evans (7:44)

All right, John, really appreciate it kicking us off this week. Thanks so much.

Interviewer/Host (7:47)

Thank you.

Kelly Evans (7:48)

John Blackledge, those Mag 7 names, the three he mentioned, plus the four others playing a crucial role in pushing stocks to new highs since those March 30 lows. For a broader perspective on this, let's bring in Nancy Tangler. She's the CEO and CIO of Laffer Tangler Investments. Great to have you here, Nancy. First of all, do you want to build on disagree with anything that he just said in terms of, you know, the importance of those Internet names in particular?

Nancy Tangler (8:11)

Oh, yeah, no, I think he's 100% right. We were, we were calling for a bottom at April 4th. We thought we were there. So we went in and made a number of purchases, software and hardware in on April 7th. And, and we like those investments that, that we made. We think that they are the right places to be. The software AI is eating. Software narrative we think has seen some validity, but not entirely. So we added to some of the software names as well and Amazon was our top pick coming into the year. So I think, I think he's right. John is and I think you want to own these names for the long term.

Kelly Evans (8:46)

Why have they been so strong since the lows? Do they just get as guests were putting a month ago, stupid, cheap or was it was it it just got too far to one side and why did that happen and what now it's not just them but so describe from your point of view what's driven us the past month or so.

Nancy Tangler (9:04)

Well, I mean, I think we've had some lift in the fog of war. So, so that's one element. But earnings estimates continue to be revised up and at the end of the day that is what stocks trade on or at least for long term investors. So if you go back to deep seek, I was on the air with you that day and it was one of those periods where we stepped in and made a number of purchases. Some of them felt not so good initially, but, but great six months later. That's how you make money in the market. And that's what we do day in and day out in our large cap portfolios and in our ETF tjlr.

Kelly Evans (9:36)

So what kind of put this in the broader market context then? Do you feel bullish kind of for the remainder of the year? Do you look at sectors like energy and you know, which is interesting because some like it with oil still sticky and others would say, you know, just stick with tech, not so fast and. Or are there just kind of specific names or ideas that you're more interested in?

Nancy Tangler (9:56)

Yeah, so we were trimming our energy holdings about three weeks ago, a month ago last I was in New York and we were putting the money to work in housing and in Microsoft that, that particular set of trades. I think you want to be long technology for the duration. I thought Kevin Warsh's comments on productivity were particularly encouraging. As somebody who managed money in the 90s page out of the Alan Greenspan book, you, you have to be in that trade and you have to be in some of the other themes like robotics space, which we run in our thematic portfolios. So I do think you want to have that exposure. The right names, of course. So we exited Adobe. I don't think you necessarily want to chase Adobe or Salesforce here, but also the hardware names. That's going to continue talking to one of my analysts and he was saying, well, you know, the software may be permanently damaged. And I said it may be. But we also thought that about memory. So you really can't underestimate how trends move. And as an analyst we sit on all the calls. I totally agree with John. You want to hear the change in tone from manager, from management and how the analysts are asking the questions. So we've also added to infrastructure, ge, Vernova, Quantum Services and a number of consumer discretionary names. That's where we're making our bets and our portfolios.

Kelly Evans (11:14)

So finally we have the Wash news. We have the Fed meeting this week and you mentioned the 90s and I'm just curious. Back in the 2000, the 90s had become almost like a bad reference because it ended with the dot com bubble and there were these questions about whether Greenspan should have leaned more against it. So can we repeat the good part of the 90s without getting kind of the blow off top and crash that came with that or do you think that to some extent. Look, cycles like that are endemic to innovation and the kind of the creative destruction.

Nancy Tangler (11:45)

It's a great point you raised because he should have leaned in more. Of course in hindsight, easy to say but in the initial part of the run up from 95 to 99, he was letting in, he wasn't worried about inflationary growth because he understood what productivity brought to the table which was disinflationary growth. I think cycles are somewhat inevitable but I think we're in the early stages of this cycle. When you look at the way technology is changing the way we live. I've joked a lot about, you know, my home health care solution is going to be Optimus, but you know, my kids aren't going to have to take the keys away because I can just hop in a cyber cab. And so I think as you expand the productivity that we're going to get out of these technologies, you can afford to stay long this trade for a bit longer.

Kelly Evans (12:28)

Well, how do you feel about Tesla? And final question since you mentioned it, especially with Space X IPO coming.

Nancy Tangler (12:33)

Yeah, I think, listen, it's a name you have to own. It's a narrative name. I mean this time they delivered or beat on on autos or EVs and earnings and no one cared. So you have to step away and say how long? What am I owning this stock for? We, we got in for the battery storage business. I mean we understood the car business but that wasn't really where our focus was. You have to be in space I think in the coming years. And this is the premier AI space company. So, so we've been adding, we added last year in deep seat, it was 240 a share. So it doesn't, it doesn't feel so bad even with the recent pullback in the name. And again that's how you make money in the stock market. You got to be ahead of it.

Kelly Evans (13:15)

There it is at 375 even amidst, like you said, it's so ironic they finally have a decent autos quarter and that. Yeah, who cares. Nancy, thanks. Appreciate it. Today, Nancy Tangler. Coming up, the high stakes trial between speaking of Elon Musk and Sam Altman is kicking off. We'll look at what's at stake for the tech world and for the AI trade and we'll speak with one of the most respected voices in tech, Roger McNamee, who says open air looks like a bubble that's about to burst. Plus the Senate Banking Committee is set to vote on Kevin Warshaw's confirmation as Fed Chair this week. Are rate cuts still in the cards for a wash led Fed that debate? Coming up on the Exchange.

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Kelly Evans (15:33)

Welcome back. It's day one for the court case of Elon Musk versus Sam Altman, a trial that could decide the future of OpenAI and will have massive implications for the tech landscape. Kate Rooney is outside the courthouse with more in today's tech check. Hi Kate.

Kate Rooney (15:50)

Hey Kelly. So jury selection is underway behind us in the Elon Musk versus Sam Altman trial. Altman is inside. We did catch a glimpse of him and the judge right now saying that she's looking for jurors with an open mind. We are already Kelly, hearing inside the courtroom that some potential jurors would struggle with that based on their views, they say, of AI and of Elon Musk. Musk is suing Open Eyes CEO Sam Altman as well as President Greg Brockman. Microsoft, also a co defendant in this case. Musk was a co founder of OpenAI. He alleges he was deceived into funding the company under the guise of a nonprofit mission. Musk's lawyers claim a move to a for profit structure and then a deal with Microsoft a couple of years ago does violate the original charitable trust. So Musk's legal team recently dropped the fraud charges. There are now two claims remaining. First one is breach of charitable trust that I mentioned. Musk's team says the promise at the time was to keep OpenAI as an open source nonprofit and that was to really prevent any sort of tech giant, including Microsoft, Google at the time was the big one, from monopolizing this technology. The second claim we're talking about is unjust enrichment. So Musk alleges that Altman and Greg Brockman, the president of the company, used his funding and his prestige to build OpenAI into what is now an $800 billion company that they allegedly profit from personally. Musk is looking and for damages we're looking at $134 billion is the number he's put out there, which he says he would donate back to the open air charity. Plus the removal of Sam Altman and Greg Brockman from leadership. Also the unwinding of a recent restructuring that happened in the fall open, the same time dismissing these claims, calling them baseless. In a social media post this morning, the latest we got from the company, calling it a jealous bid to derail a competitor, companies argued that Musk at times actually supported the for profit pivot or a merger with Tesla at certain points. We do expect opening arguments tomorrow and then we are going to start to hear from witnesses including Elon Musk himself. Sam Altman has been called, Greg Brockman and Microsoft CEO Satya Nadella.

Kelly Evans (17:55)

Kelly and Kate appreciate it very much. We talk more about this with our next guest, Kate Rooney, who says billionaires, both billionaires, are preparing their companies to go public at this point, meaning Musk with Space X and Altman of course with OpenAI. And he says OpenAI is looking like a bubble about to burst. Roger McNamee is co founder of Elevation Partners. Roger, it's great to have you here. And before we get into that and the, the IPOs, I just want to actually ask a broader question, which is the extent to which this trial will shed light on the whole idea of the LLM. And you know, how much of these, of this technology is built on information that these companies have a right to use and how much of it is still not based on that right? In the past three years or four years almost since OpenAI came on the scene, where would you say we stand on that question?

Roger McNamee (18:50)

So, Kelly, I think the big issue with this trial is that on the face of it, it's Two billionaires, or really three billionaires having a fight that feels like a cat fight. And it probably wouldn't be a real case and certainly wouldn't be going to, to a jury were it not for the fact that Brockman, Greg Brockman, had entries in his diary that seemed to support Musk's position. And the judge said, hey, this is really important for this case. And I think what's going on here is a really simple thing. Both of these companies want to go public, and in the case of Space X, they want to get the highest valuation of any company that's ever gone public, like a trillion and a half dollars or more. That number on the face fit is ridiculous. It's 60 times revenue or more. And, you know, that is not a normal thing. Now, obviously, the market can choose what it wants to value and, but. And it's obviously a real business, but in my opinion, it's so expensive, I don't know how as investors, people are going to get the stomach to step up. And what's really strange is the way the deal is organized. It's going to go into NASDAQ in a way that will force index funds to buy the stock. So it's got this skew built into it. So it could get really crazy, tiny float, people having to put a lot of money into it that obviously creates upward lift in the stock. What did you know?

Kelly Evans (20:25)

What did Greg's diary entries say, Roger? And so for you. And again, a lot of this will come down to whether OpenAI was a nonprofit claiming to be a research enterprise, and then kind of did a bait and switch and said, nope, actually, here's this chat bot and we're going to monetize it.

Roger McNamee (20:43)

So the two key entries, I'm going to read these so I get them right? He goes, I cannot believe that we committed to nonprofit. If three months later we were going to be doing B Corp, then it was a lie. And then there's a second entry that says, this is the only chance we have to get out from Elon. Now, I mean, who knows what the jury is going to think of this, right? But if you are Elon Musk, and if you win this case, you're going to severely damage a major competitor in this market.

Kelly Evans (21:18)

Because what I'm not sure that versus if Musk 100.

Roger McNamee (21:22)

He's asked for 134. He's asked for $134 billion. I mean, that is. I don't care who you are. That's huge money. And, you know, again, it's A jury trial, who knows where it's going to come down. But at the same time, I think that this thing shows how crazy the markets for AI are right now. Let's, let's just review. You asked about kind of the facts in LLMs. The key things to me are LLMs are basically statistical models based on historical data. And the industry is claiming you can apply them to any application in the economy, health care, finance, the whole works. And the reality is when you're looking at historical data and you're creating averages, trying to guess the next word, the next pixel, the next sound, the real limits to where you can apply that successfully and that we have seen in the field. You know, obviously Amazon tried to use it to run its store and had two very substantial crashes of its whole store that were triggered by the AI. Microsoft has had huge problems with the latest upgrades to Windows and Outlook. You know, they sent Outlook into space and had it crash on the astronauts. And the similar thing has happened at Google with Search where they've tried to embed AI in the search with really negative results. And so I think what we're looking at here is a technology that it's useful and I think over time it's going to get a lot better. But they've spent $1 trillion, which is roughly equal to all the money invested in technology before this industry over like 60 years. And you know, to me that's just a massive misallocation of capital. And that's not to suggest you can't create something valuable from it. You just aren't going to get a good return on that trillion dollar and

Kelly Evans (23:11)

your concerns about OpenAI. And remember, we've had Sebastian Mallaby, he was a well respected author, write a piece in the New York Times a year ago warning that he thought OpenAI was going to go bankrupt, it would ultimately be bought by Microsoft or somebody else. Because while Google can use the rest of its business model to subsidize the compute to make Gemini open, AI is no such option. Now layer on top of that, the lawsuit. So basically what you're saying is that on top of questions about the sustainability of its business model into the ipo, if they end up having to pay musk anything up to, you know, $134 billion, you think it's a substantial hit for the business.

Roger McNamee (23:44)

They have, they have commitments outstanding for more than half a trillion dollars for new data centers and those depend on increasing energy production. Lilly new energy production that's equivalent to all of Germany and that's over three or four years, that is just not going to happen. And again, this is a marketplace where There are roughly 10 competitors who have products that use the same architecture, the same data, and they're going after the same applications, the same customers. That is a prescription for a commodity business. And, you know, they've invested $1 trillion. And again, I'm not suggesting you can't get something valuable out of this. I'm really suggesting from a stock market point of view, the smart money, I think, is going to be looking at this and saying, you know, we'll let somebody else take that risk.

Kelly Evans (24:35)

And finally, Roger, do you think that theft is ultimately going to be found at the heart of the ChatGPT, Gemini, any of these LLMs? And if so, is it going to be to an extent that it undermines their usage or creates a change in their financial capability?

Roger McNamee (24:53)

Kelly, here's the problem. I think the. The product that is best priced sells for a third of what it actually costs to deliver. Some of them sell for less than 10% of what it costs to deliver them. So, you know, we have no idea what real demand is because people aren't paying the actual cost of doing this. And worse yet, with chat bots, there's huge evidence that they cause cognitive impairment. So if you use it, if you're a child and use it for schoolwork, you're not getting the mental exercise, the brain exercise necessary to develop as a human being. And, you know, that is obviously a terrible thing, and the notion that we're letting this anywhere near schools.

Nancy Tangler (25:33)

Right.

Roger McNamee (25:33)

Just strikes me as crazy. But, you know, you can't tell people what to want. And right now they want AI and they want it in spite of evidence that they shouldn't.

Kelly Evans (25:43)

My neighbor was frustrated that her daughter wanted to use it for her chemistry homework. And she said, no, we have to go through this, make sure that you're learning this. She's almost in high school now, and her daughter said, come on, everyone else is using it. If I don't use it, I'm going to fall behind. But my last question, Roger, is Elon Musk has also said he wants Sam Altman to be ousted from the company as part of all of this. What would happen in that case? Does OpenAI need Sam Altman?

Roger McNamee (26:08)

You know, it's really funny. It depends whether you think their job is to raise money, which he's obviously very good at, or whether you think his job is to run the company, which he's obviously not very good at. And, you know, if the company can get enough money to stay alive, then they don't need him because other people are going to be better at running the place than he is. But right now they need to raise a prodigious amount of capital and they need somebody who can somehow persuade investors that, you know, white is black and black is white.

Angelica Peebles (26:41)

Right.

Roger McNamee (26:41)

That, that the reality of what you see around LLMs isn't really what's going on. And you know, he's been really amazing at that. You know, I just, he's really in a sense a force of nature as all of these guys in air because, you know, they've raised $1 trillion and the total industry had revenues, I think a little under. Well, depends who you ask. Between 40 and 60 billion against a trillion invested over three years with a depreciable life of, say, two to three years. I mean, those numbers just don't work.

Kelly Evans (27:13)

Well, my programming friends, I think they see the revenue. We know where it's headed. By the way, the tech sector is about to turn positive this afternoon. RO as we discuss all these cross currents. We'll leave it there. Thank you for making the time and hope to bring you back soon as we follow the trial.

Roger McNamee (27:28)

Kelly, it's great to be on. Thanks so much for having me.

Kelly Evans (27:30)

Roger McNamee with Elevation Partners. Coming up, a possible government bailout for Spirit Airlines now that reportedly has other low cost carriers asking for financial assistance. Has Pandora's box been opened? We'll have the latest ahead.

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Kelly Evans (28:03)

Look, she's right there. She's three minutes away.

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Dr. Guy Winch (28:47)

their mental health at some of the highest rates we've ever seen, but most aren't getting the support they need. And that needs to change. I'm Dr. Guy Winch, your host for season three of the Visibility Gap, presented by Cigna Healthcare. This season we're focusing on men's mental health, bringing together real stories and expert insight to explore the primary pressures men face every day and why opening up can feel so difficult. Join us for the new season wherever you stream your podcasts.

Kelly Evans (29:18)

Welcome back. The S and P and the Nasdaq hit new all time highs just a few moments ago. The Dow is slightly in the red today. As you can see, small caps are fractionally higher. All of this coming ahead of a big week of tech earnings and the Fed meeting. In the meantime, a new set of drugs aimed at preventing heart attacks is coming from the likes of Novartis, Amgen and Eli Lilly. And the companies hope this will be a new multibillion dollar market. Angelica Peebles is here with more. Angelica, welcome. And how does this work?

Angelica Peebles (29:45)

Thanks, Kelly. Well, the question here is if these drugs will work, and that is the big unknown. So the three companies you mentioned, Novartis, Amgen and Eli Lilly, are all in late stage trials with drugs designed to target a particularly bad form of cholesterol. So it's estimated that one in five people worldwide have high levels of what's called lp, and that's a genetically driven form of bad cholesterol that doubles a person's risk of a heart attack. So think of families with a history of premature cardiovascular problems and no explanation. And because it's genetically driven, you can't change your number with lifestyle changes like you can with other types of cholesterol. And that's why drug makers see such a big opportunity here. Now, no one has actually proven that lowering LP can prevent heart attacks. And Novartis could be the first company to do this. So their phase three trial results are expected around the middle of the year. And if that drug meaningfully reduces the risk in other drugs, drugs in the pipeline pan out. This could become a more than $5 billion market. And the true size of this market is up for debate, though, because one of the problems, few people actually know what LP is and few doctors even test for it. So right now, less than 1% of adults are screened for that type of cholesterol, even though it's a routine blood test like other cholesterol screenings. That could change. We have new guidelines that recommend every adult get tested once in their lifetime. And you might start to see more of these doctors test if we have drugs for it. But again, this is a hotly debated area, even if it is a potentially big opportunity.

Kelly Evans (31:14)

Kelly, those hurdles seem easy to overcome. You just flood the zone with marketing and can't they just send people out to doctor's offices and kind of get that, you know, to become more common? I'm sure if you raise awareness, patient, if 20% of people have this condition and it makes it that much more likely, you'd get a heart attack. That's pretty serious stuff.

Angelica Peebles (31:31)

You would think so. And even though right now we know that there's this genetic data that shows that if you have an elevated level, you have, you know, you're at twofold risk of a heart attack, there's still debate within the cardiology community about whether, you know, this really matters, whether people should be tested. So when you talk to doctors that are involved in these trials who obviously feel very strongly that this is an area worthy of exploration, they'll say that it's frustrating for them because they go to these conferences and, and they have these debates where people say, you know, what, if I can't do anything about it, I'm not going to treat it. And they look back to the example of ldl, right, with the statins, where even that we think of these drugs as mainstays. Now, it took time to convince people to actually start testing and to start caring about this. So, yes, it is possible and, you know, surely you can think that people would want to know. But there is a tremendous debate over how quickly you'll start to see that change.

Kelly Evans (32:22)

And this is something genetic. In other words, you're born with it. There's nothing lifestyle or food and exercise can help address. You mentioned those three companies. Look, Eli Lilly should spread the love. First of all, you know, they've got some successful things going on, but what are the potential differences in what they're bringing to market?

Megan Costello (32:37)

Right.

Angelica Peebles (32:37)

So these drugs, essentially the three drugs that are in the late stages right now, they all try to actually stop your body from producing lp. And two of them, there's three different drugs. Two are the similar, more similar, and then the one from Novartis is a little bit different. And that one doesn't look to be as potent as the ones from Amgen and Lilly. And so that's why, even though this is the first phase three readout on the horizon, and people say this will be really important for helping especially investors and doctors understand the opportunity, it's not necessarily make or break because it looks like it wasn't quite as potent. So potentially, you know, it might not read through perfectly to the other two. And all of these trials are designed a little bit differently. And that's also one of the complexities here is that they're looking at different, different populations, so different levels of lp and also what they are trying to do. So Novartis, the first trial we're going to see, it's designed to help prevent people from having that next heart attack. So you already have heart disease and now we're trying to make sure that you don't have another one. And Lilly, even though they are the furthest out with that result in 2029, what's interesting is that they are the ones who are going to look at first at whether you can prevent that first heart attack. And so again, they're all a little bit different. And so that's why it's hard to see apples to apples here with all.

Kelly Evans (33:55)

Well, it's the first I've heard of L.P. little A. And I'm already thinking, you know, my grandfather had a few heart attacks. I wonder if I should get tested.

Angelica Peebles (34:00)

So the doctors I talked to would say you should, but that's I'm not

Kelly Evans (34:03)

a doctor, so it's not so many things to know about Angelica. Thanks. And this is a good example of how it already will kind of bring into people's minds Angelica peoples. Appreciate it. Let's get to Julia Boorstin now for the CNBC News Update.

Julia Boorstin (34:14)

Julia Kelly, the Supreme Court is set to hear arguments today today in a case that could lead to the dismissal of thousands of lawsuits against Bayer, the manufacturer of the weed killer Roundup. The lawsuits accused Bayer of failing to warn users that the active ingredient in Roundup causes cancer. Bayer says the EPA has repeatedly found that the active ingredient does not cause cancer and approved its labels without a warning. The Democratic Republic of Congo will create a paramilitary unit to police its mines. With $100 million in funding from the US and UAE, Congo is a major supplier of coltan, which contains a rare metal used to produce phones, computers and aircraft engines. The goal is to deploy 20,000, 20,000 mining guards around the country by 2028. And backers of a California billionaire tax say they've received enough signatures to add the measure to the state's November ballot. The group says it has collected more than 1.5 million signatures, which is double the amount needed. Revenue from the tax would fund health care, food assistance and education programs. Back over to you, Kelly.

Kelly Evans (35:20)

Hotly contested one Julia thanks very much. We've got some breaking news out of the White House. Megan Costello, what's happening?

Megan Costello (35:28)

Kelly, we just heard from White House Press Secretary Caroline Levitt for a briefing that was primarily focused on security, presidential security following the incident at the White House Correspondents Dinner on Saturday night. But I also asked her about the latest on Kevin Warsh, given the news that Senator Thom Tillis is willing to drop his block of his nomination. She did not completely close the door, Kelly, on this idea of whether the president would still be interested in digging into the Fed's building renovations even after the inspector general concludes its investigation. Take a listen to exactly what she said. Will the president be satisfied once the Fed's inspector general finishes that investigation each, even if it finds no evidence of wrongdoing?

White House Press Secretary (36:03)

Ms. Well, that's a hypothetical question. I'll let the president speak on it when we see the results. It's obviously far too early to say.

Megan Costello (36:08)

And relatedly, as a follow up, now that it looks like Warsh will be confirmed by the end of Jay Powell's term, does the president is he still considering firing Jay Powell if he stays on as a governor after that?

Kelly Evans (36:17)

Ms.

White House Press Secretary (36:18)

I haven't talked to him about it specifically, but I think the president will be satisfied once Kevin Warsh is confirmed as the Fed chair, which he should

Kelly Evans (36:24)

be

Megan Costello (36:27)

suggesting there at the end, Kelly, that the president will be satisfied that Powell will be able to keep his seat, his board seat, I should say, once Kevin Warch is confirmed as chairman. Now, on one other topic, she was also asked about reports this morning that Iran offered through the Pakistanis to the US Today that it's willing to mutually open the Strait of Hormuz. That is, the Iranians would reopen the strait as long as the US Lifts its blockade, a mutual reopening of this strait and then they would push nuclear talks further down the road. She was asked about this and she didn't want to commit to any sort of answer, but she did confirm that there was a meeting between the president and his national security team earlier today. She said it might even still be ongoing and she said she wouldn't say that they're considering this offer. Acknowledging the president's red line has always been on the nuclear talks, but she says she would say there was discussion this morning and that we might hear more directly from the president very soon.

Kelly Evans (37:19)

Kelly all right, Megan, thanks for bringing that to us. Appreciate it. Megan casella, Coming up, not just a big week for the Fed. We have the banks of Japan, England, Canada and the European Central Bank Also making rate decisions. We'll look at what to expect and the impact that will have across global markets when the exchange comes right back. This Wednesday is a big day for the Fed. It's very likely to be Jay Powell's last rate decision as Fed chair. And now that the criminal probe into Powell has been dropped, the Senate Banking Committee will also vote on Kevin Warsh as his successor on Wednesday. Joining us to discuss is Nancy Lazar, chief global economist at Piper Sandler, and CNBC senior economics reporter Steve Liesman. Welcome to you both. Steve, as I understand it, this would be the quickest ever turnaround from a confirmation vote to him taking the chairmanship. What do we expect to be the sequence of events on Wednesday?

Interviewer/Host (38:14)

Well, that's just the Senate Banking Committee. I don't know. Unless you do, Kelly. I'm trying to figure out when the Senate might actually have a full vote on it. Powell's last day is May 15th. I assume the Senate can get that 4 vote done. I know they have some kind of May vacation built in, but I think they could get it done. They should have the votes for it. And it would be a pretty quick turnaround from the confirmation hearing to actual approval for Kevin Wash. Nancy, you want

Kelly Evans (38:43)

to jump in on that?

Nancy Lazar (38:45)

Well, at the end of the day, it will remove a lot of uncertainty for the economy. Despite this uncertainty, the economy has continued to move, to move ahead. So let's just hope it happens sooner rather than later.

Kelly Evans (38:57)

Nancy, what are the implications for Fed policy?

Nancy Lazar (39:01)

Well, at the end of the day, the economy spine there was a little bit of a soft patch in the first quarter, GDP, say around 2%. We'll know that later. Later this week, consumer spending was probably less than 2%. But as we started the second quarter, there are actually signs of an acceleration. The manufacturing indices we've seen from the regional Fed have been all pretty much on the stronger side. Our composite suggests that the national Assam for the month of April will be actually higher, say by about 2 points. Our daily consumer confidence survey, after going down some in the month of March, has actually stabilized, improved here in April. And so the economy seems to be doing just fine. The Fed has already cut rates, there's fiscal support. So at the end of the day, we don't think the Fed really needs to to do much of anything.

Kelly Evans (39:44)

Steve, the only analysis I've seen that I thought was maybe pertinent for this week is Jarrett Seberg over at Cowan questioning whether Trump really wants to speed this along. Because if the Supreme Court were to rule in his favor and from oral hearings sounded like that wasn't likely. But if they ruled in his favor on Lisa Cook, then he could have potentially he could keep Myron and replace Cook with Warsh instead of replacing Myron with War. So in other words, he'd get two instead of one.

Interviewer/Host (40:14)

I mean, if that's true, I think President Trump is overthinking it. Right? He's going to either get the Lisa Cook spot or he's not. And we'll see if Powell comes in. But the bigger story, I think, Kelly, is not the personnel but the underlying data and the trajectory of the economy. Take in Nancy's idea that the economy is doing fine. Our Fed survey, I'll tell you tomorrow, looks at about trend growth or so for this year and next year, not much change. The unemployment rate, no reason to cut. And then add to that the idea that the oil price is elevated. You're going to have an impulse of inflation coming through the system. So there really shouldn't be any hurry. The way to cut rates in the right way, I think is to have a consensus on the committee. And that committee is born of a copy consensus of what's in the markets. And you're seeing there what's in the markets. And there is decidedly no cut in the market. What you're looking at is the probability that the Fed does Nothing and it's 57% all the way to July 27th. I think the market is a little underestimating what Warsh is going to do and be able to do. I think he will be able to cut rates, but not anytime soon here. Kelly.

Kelly Evans (41:26)

In fact, Nancy, Ray Dalio on our air earlier said he would lose credibility if he did, if he cut.

Nancy Lazar (41:33)

Don't forget he's one member on where there are 12 other people. And so it's certainly not at all clear. He alone obviously cannot cut cut rates. But I would again echo, the economy is doing just fine. The Fed has already cut rates. I think that's one of the biggest misperceptions that the Fed has cut rates 175 basis points, money supply is accelerating, bank loans are accelerating, banks have incrementally eased lending standards. And then we have this important fiscal support through capex incentives, full capex depreciat tax refunds. Looks like we'll get some tariff refunds. And so GDP we think is actually going to be stronger than consensus. We're using 3% for here in, in 2026. So economy is doing just fine based on the stimulus that's already happened and it might be healthier for a more prolonged modest expansion if we don't get another sugar high from the cutting rates to to aggressively bond market seems quite complacent with the level of rates. Bond yields have been basically unchanged for almost three years, either not suggesting the Fed is being too tight or too or too easy. So steady as she goes, I think is a pretty good outlook for the next at least for the next nine to 12 months.

Kelly Evans (42:44)

All right, Nancy.

Interviewer/Host (42:45)

Steve, thank you.

Kelly Evans (42:47)

For now it's four seconds. Steve.

Interviewer/Host (42:51)

81% of respondents to the Fed survey don't think that the Fed should front run productivity. They think they should wait till it's in the data. That undercuts a major reason why Warsh wants to cut rates. But the bulk of the economic community does not agree with him, which is

Nancy Lazar (43:07)

perfectly activity is already accelerating. So I will stop there.

Kelly Evans (43:10)

Maybe we'll bring you back to do a productivity specific one to what Nancy Tangler told us at the top of the show about how Greenspan handled that in the 90s as well. And can we avoid the bubble outcome at the end? To be continued. Thank you both, Nancy Lazar, Steve Liesman. Coming up, the Barclays airline analyst told us right here on the exchange last week that the potential government bailout of Spirit would touch off moral hazard issues. And now a group of budget airlines is pitching a multibillion dollar relief plan. We have those details next. A group of US Budget airlines, including Frontier, is reportedly seeking billions in government assistance to stay afloat. Phil LeBeau is here with the details. Phil.

Phil LeBeau (43:58)

You know, Kelly, this was first reported by the Wall Street Journal yesterday and essentially it comes down to this. You've got an association of what they call value airlines, the low cost carriers. We're talking about Avelo, Frontier, Allegiance, Sun Country. They are essentially because of the cost of jet fuel, which has essentially doubled in the first quarter and remains elevated at this point. They want the federal government to offer them assistance. If they are going to be stepping in and offering assistance to Spirit Airlines, here's what they're looking for, $2.5 billion in federal aid. In exchange, the government would take ownership stakes. This is just a broad outline. There are not specific details in terms of how much of the ownership stake the government would take if they agreed to this. Keep in mind that Frontier, of these airlines is the only one that's publicly traded right now. They will be reporting their Q1 results on May 5th. The bottom line is this, Kelly. This is what people are concerned about within the airline industry and in business in general. You help out Spirit. Now you have other airlines saying, well, help us out as well. And I guarantee you this, Kelly, you help out the low cost airlines, it's only a matter of time before the other airlines, JetBlue, Alaska, Delta, United, American, if everybody else is getting help, they're going to say why shouldn't we get help as well?

Kelly Evans (45:14)

I'd almost rather see them subsidize jet fuel and then still let people kind of do what, let the businesses do what they may with that if it's really just this issue or if there's actually bigger ones to tackle. But we'll tackle that another time. Phil, thanks very much. Philippeau. Coming up, the CEO of a regional bank may have what he called a quote first in the history of public earnings calls, what it was and the new era it could usher in.

Megan Costello (45:37)

Next.

Kelly Evans (45:43)

Customers bank CEO Sam Sidhu used AI to deliver his prepared remarks at the top of the bank's recent earnings call. He did take analyst questions himself after that. But this underscores a broader shift at customers which has signed a multi year partnership with drumroll, please. OpenAI here to discuss his banking reporter Hugh sun, who spoke with the CEO and wrote about it today on CNBC.com and here you just told me something fascinating, which is he's not the only one.

Hugh Son (46:09)

So after the publication of the story, turns out there are a few other public companies who've done this. However, they are the first bank to have done this.

Kelly Evans (46:15)

But okay, so okay, let's back up for a second. He used AI to deliver the prepared remarks part. Meaning what exactly?

Hugh Son (46:23)

Meaning the first 10 or 15 minutes of what can sometimes be a sort of robotic kind of, you know, remarks, you know, just standard one way remarks was through this chat bot who sounded remarkably like it did fool the analysts on the call, by the way.

Kelly Evans (46:38)

So he spoke to the chat bot. So the chat bot knows his voice voice. And then he just tells the chat bot, read this transcript it did.

Hugh Son (46:43)

And then the CFO tosses back to Sudhu and he says, hey, by the way guys, that wasn't me, that was an AI clone. And this is to underscore kind of the big project we have here underway at Customers Bank.

Kelly Evans (46:54)

So my reaction to this is why on earth are we going through this, this preamble is that really if it's so kind of boilerplate that it can be a prerecorded thing that a CEO just has, do we really need to read it at all? I mean it just makes me wonder.

Hugh Son (47:10)

Yeah, I mean my preference would that they would just post some remarks and you read them and then you go straight to Q and A, which is what a lot of people want. Now the important thing, and the interesting thing about this I think is remarkable is that so OpenAI is actually embedding their own engineers into this little bank, customers bank. And so the solutions they come to co create over time they can turn around and sell those to other firms. I'm talking about open air. Open air. And that's why they want to do this part.

Kelly Evans (47:33)

All I know is and we have to go there, unfortunately. But there should definitely be disclosure now whether this is being used or not. Then we can all decide what to do about it. But at a minimum, and this I have to say, but some sort of asterisk or part of the presentation, you know, this was delivered by. I didn't know we were already at that point, Hugh. So thank you. We're here for bringing it to our attention. Hugh Son again. Read more on CNBC.com in the meantime, that's it for us. Thank you for watching the Exchange and I'll join Brian Sullivan for Power Lunch after this.

Angelica Peebles (47:58)

Thank you.

Kelly Evans (48:02)

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Dr. Guy Winch (48:09)

Men are struggling with their mental health at some of the highest rates we've ever seen, but most aren't getting the support they need. And that needs to change. I'm Dr. Guy Winch, your host for season three of the Visibility Gap, presented by Cigna Healthcare. This season, we're focusing on men's mental health, bringing together real stories and expert insight to explore the pressures men face every day and why opening up can feel so difficult. Join us for the new season wherever you stream your podcasts.