Power Lunch 9/25/26

0:00I'm Mike McNerney, Equity Investment Strategist. Markets move fast. My mission is to provide market insights to our clients that help turn uncertainty into opportunity. Janice Henderson, investing in a brighter future together. The quarter pound of a cheese is made with 100 % fresh beef cooked when you order it. Then comes the melted cheese, the slivered onions, the pickles, the ketchup, and the mustard. Add hot crispy fries and an ice cold Coke, all for$8. And if things go well, one loose fry at the bottom of the bag. The quarter pounder with cheese meal, now$8. Ba-da-ba-ba-ba.

0:51Stocks trying to close out the week on a high note. Welcome to Power Lunch, everybody. I am Brian alongside Contessa Brewer. Kelly will be back on Monday. The sell-off in bonds continues. The 10-year borrowing costs earlier today, 5.23 percent, highest in 19 years. But stocks, they don't seem to care. We're just 1 or 2 percent from record highs. Will the bond vigilantes really kill this rally? Will us? And you're dead. So many market Pollyannas. What else? Energy remains one of this market's most powerful trades. Oil is up 60 percent this year, while the energy sector has surged nearly 40 percent there.

1:23You're seeing WTI at 92.08. And look at energy up or down rather 1.3 percent. Investors are really weighing here. Tight supplies, geopolitical risk and the inflation implications of higher fuel costs. After such a sharp run, where's the next opportunity? Our guest has three energy stocks to put on your watch list. All right, folks, there is a lot to do today. And it's just a pleasure to have you here. Well, Brian, it's great to be here. Stocks higher today and for the week capping an eventful week in what's been an eventful month. Texting red hot. Take a look at these winners this week. You've got Everpure.

1:56The CEO was on with us yesterday and it's up 22 percent week today. Datadog up 18 percent. Cadence design up 15 percent. You're just seeing all of these stocks that we're listing here. Qualcomm, AMD, Meta, all pacing here for double digit gains this week. And Microsoft catching a bit today. It's up a little more than 3%. Big question here. Is the market piling too far into tech or do the fundamentals support it? Let's ask a portfolio manager. Ellen Hazen of FL Putnam Investment Management is here with us on set. She's also the chief market strategist. Boy, you're seeing a lot of optimism around what was sort of the dirty dogs just a bit ago.

2:35Well, I think that as we look forward into next year, there's no question that the hyperscaler CapEx is slowing. And the big question for me is what is going to happen to stock valuations as that second derivative turns negative. So the numbers are huge, trillion dollars in terms of hyperscaler CapEx and increasing next year. But if that growth rate slows, either because they just aren't going to spend as much or because of permitting, because of supply chain shortages, et cetera, then what's going to happen to the multiples? It's such a big if. It's bigger than what if oil goes up or whatever, the impact here.

3:10So what steps are you taking now to position for the if that happens? We're looking much more carefully at valuation than we did six and 12 months ago. So as you look at calendar 25 and earlier this year, Contessa and Brian, you could put your money in anything related to artificial intelligence and the stock was going to go up. You could put your money into anything related to storage like memory or Seagate, et cetera, and the stock was going to go up. And now I think you need to be much more evaluation sensitive and you need to look for companies that are a little bit outside the core of those traditional AI plays.

3:41Well, I love having you here. And by the way, good luck getting home to Boston tonight. Thank you. A little storm coming. You and me both. And I love the fact you're bringing in a stock that I don't think I have heard recommended in like 20 years. And it's a river in Finland. Nokia. Nokia. Yeah. Really? What year is this? It's really interesting. I cut my teeth during the tech bubble, and a lot of the last couple of years has been like deja vu all over again. And with Nokia, it's the exact same thing. BlackBerry's been hot, too, by the way. Your CEO was just on CNBC. There you go. There you go.

4:16So with Nokia, they are a sleepy company on the surface with wireless telecom infrastructure. But if you look underneath, so much of the growth opportunity in AI hyperscaler CapEx is related to the networking and particularly the optical networking. And if you look at Nokia's second quarter earnings, the optical networking was growing strong double digits. And they're looking for that to accelerate going forward. They have a really strong position. I feel like Corning-esque in a way, right? You're talking about a company that has been around forever. Everybody knows their names, like the Cheers.

4:48Right. Another Boston reference. But yet has evolved their business to where what we thought they were, right? We know the handsets from the phones back before you were born, Contest. Thank you. phones. Now it's a whole different company. They've always had a strong optical presence, but it hasn't been as important as it is now. When again, you're looking at scale up, scale across within the data center universe. And that really requires a lot more networking and more optical. You're also looking at MCOR as one of your picks. But the confusing thing is, I mean, this is a specialized construction company that's capable of going in, building the data center, and then also has a role in maintaining it.

5:26If the CapEx is starting to be rolled back, why is MCOR still one of your picks? I think that you need to have a balance because we don't know if the CapEx is going to be rolled back or if it will just slow down or maybe it will continue accelerating. And so this one is definitely more exposed to the thesis of AI CapEx continuing to accelerate. And I think I don't want the whole portfolio made up of companies like that, but a couple names, I think that's fine. It's an inexpensive stock. And certainly you need the engineering and construction to build the data center. Is it FOMO the reason why these stocks have had such bullish believers?

6:01There's just a fear of missing out. We've seen the markets. We've seen NVIDIA. We've seen AMD go skyrocket. And even if you think macro economics, geopolitical concerns, the rising rate could stop the cheap availability of money and disrupt this incredible forward progress, that I don't want to miss out in case it continues. So I think that forecasting earnings is one thing. That's difficult enough. And we do a lot of that with our spreadsheets. But forecasting multiples is what you're talking about, right? And ultimately, investing, if you go back hundreds of years and you study history, it's about human behavior.

6:40And I think what you're describing, Contessa, in terms of FOMO and investors worrying they're going to miss out, that's exactly right. At the same time, if you look at how concentrated the indexes are and where the growth is, then you can justify some of these stocks. I hope you get home on your plane tonight. If you end up on the Amtrak as you're driving, taking the train back to Boston, you're going to go through a little state with the longest name, Rhode Island and the Providence Plantation. It's a very small state. And in that state, there's a company called CVS. You're going to pass Woonsocket.

7:10You're going to look over and see CVS's headquarters. That's another one of these stocks that you like because people look at Rite Aid and they say, well, that company, you know, was in big trouble. We know what's happening. We saw what happened to Walgreen. Is that the CVS's benefit? So CVS is definitely a value play. It's not an AI play. It's not an anti-AI play. Some might say it's a deep value play. It could be a deep value play. But you have a 2.7 % dividend yield while you wait. And estimates have stopped going down, which they had been going down for a few years. And you know how I am about looking at earnings estimate revisions.

7:43And so if you look at CVS, it's 10 times earnings. They're going to grow earnings, you know, high single digits, low double digits, and you get paid while you wait. So I think it's a decent chance, a decent stock to tuck away. Apple is one of your top holdings. I'm just curious how you're factoring in the run up with Meta, the glasses, the Muse, and all of the hardware that Meta is putting out that potentially could compete with Apple. And how much money have you made in your Meta position? We've done pretty well with Meta. It's been up and down. It didn't look so hot several months ago, but now it looks a lot better.

8:20The thing about Meta is that they are looking, it looks like that$130 billion this year,$200 billion next year in CapEx. is beginning to be monetized. You're seeing it in their ad lift. You're seeing it in what the advertisers are saying about the effectiveness of the ads. And you're seeing it in the revenue growth. Some analysts are forecasting 20 % plus revenue growth for the next four or five years for Meta. And so I think that as you look at that company, it's a risk, right? They don't have their own LLM in the same competitive field as the Frontier Labs, but they're able to monetize it demonstrably.

8:52Will that work in the long run? We'll have to see. And yes, is it a threat to Apple? Yes, it is. MetaShare is down 3.5 % right now. Ellen Hazen of FL Putnam Investment Management Company. It's great to have you with us. Thanks for coming in. Glad to be here. And safe travels. Thank you. You're very welcome. All right, we are just getting started here on Power Lunch. Ed Yarden is here. He'll weigh in on the markets. Bonds, yield, and when or if higher rates ever hit the stock market. But after the break, energy bringing up the heat, up nearly 40 % this year. Is this the golden age of energy investing?

9:25We put that question to Real Power Insider, David Crane, and you'll hear it next.

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10:39There's a fire inside you you can't ignore. You've got competition to outrun, momentum to build on, and your own high standards to meet. Stop now? Not a chance. At Capella University, we help you catch what you're chasing because you've always had the drive. Now, go earn the degree. Capella University. What can't you do? Visit capella.edu to learn more. All right. Good time for a Power Insider segment. And few know more about all forms of energy than David Crane. David Crane was the former CEO of power producer NRG. He served in the Biden White House as one of the top energy officials. And now he's running Generate Capital, an investment firm focused on energy assets.

11:20We had the chance to sit down with David this week in a more informal setting. And I asked him if this really is the golden age of energy investing. The golden age. Well, I just I saw an article last week that said, you know, number of companies that had new 52 week low. And there were on 30 companies on the 52 of seven of them were energy companies, electricity companies. So it seems like electricity companies are still trading as they historically have done with interest rates. And high interest rates are bad for power companies because they carry a lot of debt. But so the market might be, you know, I'm not a market picker, but the market, it seems weird to me that when we're seeing the greatest demand pulled opportunity that's ever existed in our site, we have seven companies in our sectors that are at 52 week lows.

12:10That would seem like an opportunity, though, for the CNBC viewer and Power Insider reader and listener. Like, if you want to buy low, unless the company's going to zero. Yeah, I mean, but that's... I mean, and there are companies that go to zero. Oh, these companies are not going to go to zero. I promise there's no risk. I mean, these are solid. I mean, a few of them are... So what do people... One of the seven is our utility in the state of New Jersey, PSE &G. And so... Because they can't raise rates or they don't... You know, people go crazy. Politicians go nuts. They're regulated. Yeah. But then they also, we want resilient cedar and sandy.

12:41We don't want a 75-year-old power line. In places like California, where I grew up as a child, you don't want fires. And they've got to spend a lot of money cleaning that dry brush. Otherwise, you're going to have fires because old power lines break and they can start fires. Yeah, yeah. So I'm not making any stock selections, but it does seem unusual that electricity companies, because interest rates are important in our space, but this opportunity that exists is not something I've seen in my 35 years in this industry. I'll wrap it up with this. Would lower rates help, or do they matter that much to your industry?

13:20They matter, but they matter. But they've gone from primary, the first three things that matter to below what you can achieve. you know, if you can serve this demand. All right, that was just a short clip from our longer interview with David Crane, where we talked about the cost of power, why he loves solar, and why nuclear power may take a lot longer than many people and the markets. By the way, think the full interview, about 20 minutes, is live on our website. You can scan the QR code on your screen now at cbc.com forward slash power insider, which is also the name of my newsletter. It's not happenstance, Contessa, that the newsletter and that segment had the same name.

14:04That's not random. No, you did that on purpose. We did that. You're a marketing genius. That's just genius. All right, let's stick with energy and get some more picks from your next guest, who is also named David. His name is David Anderson. He is Senior Equity Analyst with Barclays, and he joins us on set. David, welcome. Thank you for having me. David Crane sort of implied that for a lot of stocks, they're trading well below where he thinks they should be. He didn't name any names. It's not his job, but it is your job. So what has value right now? Well, what I think we're on the verge of is the next major upstream spending cycle.

14:37It's just around the corner here. What's going on right now in the Strait of Hormuz is really changing energy markets structurally. What we think is really happening here, look, this is the biggest oil supply shock in history. And we think this is going to reverberate for many years. First, it's going to be energy security. It's going to be diversity of supply. It's going to be refilling SPRs. So we think that's going to trigger the next major upstream spending cycle just around the corner. What happens if Trump puts a diesel export ban in place? What happens to some of these energy companies?

15:08Like what happens, do you think, to the price of diesel? The price of diesel, it depends on what we're talking about. What we've been seeing recently, they're talking about a 90-day temporary curtailment of exports. I think if it's a permanent export ban, that's going to be a real problem for the whole system. But I think what you potentially could see is some minor relief in the near term on the diesel side. But really, in terms of upstream markets, it really shouldn't affect it too much longer term. So can you name some names where, at this point, with the potential for negotiations with Iran to continue, perhaps that helps affect the shutdown in oil, who stands to benefit?

15:44Well, it's a very tricky setup for investors right here. So you're seeing right now in the news potentially a straight-up-harmu is getting solved. I'm hopeful but skeptical. But we did see a preview of that. That's correct. But you did see you did see a previous back in June when the MOU was signed. So what did we see? We saw oil prices came down, oil prices corrected. Stocks all came down after that. We're expecting something similar. But that's the playbook. That's the playbook because that's when you really want to own the group. I think the best name to own after all this said and done is Halliburton.

16:12Halliburton, because, you know, I was just in Venezuela and I can tell you, Halliburton will go a lot of places. They'll go anywhere there's oil. Halliburton's going to go, and they're going to help you get it out of the ground. Well, the reason you own it is because it's a pure play on upstream spending. So a lot of the other companies in our – That's my point. You don't care where it is. Exactly. They're going to get paid whether it's in Venezuela or the Permian Basin or wherever. Or the Middle East rebuild or a deep water inflection we see. But the real near-term opportunity for them is Argentina.

16:41That's what we think is going to be the big story in 27. Venezuela absolutely is being discussed. I think that's more of a 28 story. But right now, I think it's Argentina to me is the most upside. And then another company like, which I've heard of, and I'm not going to lie, I don't know a lot about it, but I clearly need to because you're the second person I've heard talk about Solaris Energy Infrastructure. But is this more of a fund or more of a company with just kind of an odd name? Oh, no, no. This is a story. This is distributed power. So this is the largest publicly traded distributed power company.

17:13And what is distributed power? So this is how all the hyperscalers are going to be powering over the near term. Large-scale turbines, we all know they're all on order. Those aren't being delivered until 2030, 31. Then we have to hook them up to the grid. This is a whole new sector which has really been developed over the last really 12, 18 months. It's feeding right into it. This is all behind the meter. Solaris is unique. They have three long-term contracts with major hyperscalers. This has nothing to do with permitting or NIMBYism. This is all going ahead today. You also like Technip FMC. Technip FMC, yes.

17:44Okay. So, clearly, I need to learn more about it. Don't worry. I did a little research. Technip. Offshore? Yes. Okay. What's appealing about that? Well, what's appealing about this is we think in a world where energy security really matters, I believe offshore is going to be the big winner. It is the most secure barrel, if you think about it, of where it's located, much less geopolitical risks. It's also the lowest cost incremental barrel. A lot of people have not realized that. It was the high cost in 2014 is now the low cost. A big reason why is Technip FMC. They provide subsea infrastructure.

18:15So this is really how you produce all of this. So we already see all this. We see all the backlog. It's all coming. It's all going forward in the next couple of years. It's a remarkable company that just keeps getting better. And then finally, kind of to follow up on Contessa's macro point at the top, if we were to see, and we all hope for peace, okay, I'm skeptical. But if we get peace and oil prices do fall, does that change your investment angle on Halliburton, on technique? Absolutely not. It just makes me go forward. This is what we're waiting for. Investors need to see the all-clear signal.

18:46I mean, this is the reason why the generalist is out here. They're looking. They're trying to figure out what to own. They just don't know when. But once you get this clearing signal. Well, they've been, can you, by the way, can you blame them? No. Oil investors, and I love you all out there, by the way, they keep getting burned. Every time they buy stuff, oil goes down, stocks go down. Oil energy stocks are now 4.5 % of the S &P 500, the lowest, almost the lowest percentage ever. It used to be 14%. And I don't mean used to be like back in the 30s. I mean, like 10 years ago. So you can't blame energy investors for being a little skeptical.

19:18No, but I think they're starting to recognize there's been a major structural changes in energy markets. And I think they realize they need to own this group. They need to own energy overall. So, look, if we go from 4 % to just 6%, my gosh, most of my stocks are probably doubles here. David, thank you for joining us. Appreciate that. Still ahead, it's not just the mega caps moving higher this week. AI is lifting a new group of software names, some up double digits. Seema Modi brings us the big winners. That's next. Ever notice how every new AI tool asks you to explain your business to it all over again?

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21:07Book your scan at prenuvo.com. That's P-R-E-N-U-V-O dot com. Welcome back. The AI trade is expanding from models to the mission-critical software that makes them useful and secure and compliant. One of those stocks is up nearly 20 % this week. Seema Modi has been tracking that stock. What is it, Seema? It's data dog, Contessa. There's been this growing belief that as AI governance gains traction and becomes a bigger topic of conversation in the AI ecosystem, that companies like OpenAI and Anthropic that both work with Datadog will continue to lean on the cloud infrastructure player. What this company essentially does is it houses and organizes all sorts of data that is then used by both Frontier Labs.

21:54It also helps companies that are using open-weight models to organize and aggregate data and make that data more actionable. So you've seen some interesting notes in recent days about just growing conviction and not just Datadog, but Snowflake. Those are sort of the two cloud infrastructure names within software. Speaking of software, guys, the other big story that remains so topical right now is cybersecurity. This whole idea that if AI safety becomes a bigger topic of discussion and a priority, as both leaders last night discussed, President Xi and President Trump, you're going to need third parties to help securitize data.

22:33And that's why the cybersecurity rally has really picked up in recent weeks. Just take a look at the cybersecurity bug ETF. It's not only up this week, but up about 20 percent in the month in the third quarter. that's following a 50 % gain in the prior quarter. And of course, the standout name has been CrowdStrike. It is the larger cybersecurity company that is sort of benefiting from the growing customer adoption. And again, this demand for more cybersecurity tools. You know, of course, this has raised the whole topic of valuation, Brian and Contessa with CrowdStrike now trading, I think at around 181 times forward earnings.

23:10You compare that with software, which is at around 25. So that's something to keep in mind. And you also wonder, I mean, I'm thinking about it from a cyber insurance perspective as well, that that you have way more exposure now to intrusions and AI powered situations. And combine that with the fact that a lot of people think regulation around AI is coming and what that might do, Seema, for the stock. For sure, Contessa, especially if we, you know, companies cannot rely on Washington to provide the guardrails. Then the idea is you focus on the companies that can and have those cybersecurity tools.

23:47And, you know, what's interesting to see is the sort of broadening of the cybersecurity ecosystem. It hasn't just been CrowdStrike, but Palo Alto, Fortinet, which focuses on providing security for agents, Cloudflare, which does something very similar, Sentinel One. So many other companies, too. And by the way, I had a story earlier this week about just the private companies in the cyber world. They're also now trying to monetize this opportunity. Bain Capital, the venture fund, raising a specific cyber fund that will invest just in the private world that has security startups. So this is one area that is certainly gaining more momentum.

24:21Yeah, where there are headwinds, there's also opportunity. Seema, thank you. Right. Thanks. All right. Coming up. Are you confused about the markets? The S &P 500 near a record high, heading for a winning week, even as the 10-year yield is at 5.2%. How? Ed Yardini knows, and he's up next. All right. Earlier today, it looked like it was going to be kind of a flat Friday of trading. But after an unconfirmed, and that's key, report that I nor CNBC has verified that the U.S. and Iran have entered the, quote, technical stage of their talks, Oil fell, yields fell a little bit, and stocks popped. Iran and yields specifically have been a big market concern for your next guest so much so that he lowered his price target from$8 ,400 to$7 ,900 this year, although still bullish and still bullish in the medium and longer term.

25:10He's nodding his head, so I'm going to stop talking. Let's bring in Ed Yardeni. He is the president of Yardeni Research. My question in the one also, because Kelly's off today, was basically the same that I'll ask you, which is people thought 5 % might kneecap the market. It clearly did not. The Nasdaq is up this month in the worst month of the year historically for the equity markets. What's going on? I think what's going on is, first and foremost, the economic indicators have been remarkably strong, which means that the earnings momentum that we've seen in the first half of the year, which has been absolutely fabulous, continues into the second half of the year.

25:48So this has definitely been an earnings-led bull market. I'm not changing my outlook for earnings, which remains very positive. The tricky part is the valuation multiple. The valuation multiple has actually declined since the beginning of the year. Stocks have actually gotten cheaper as the year has progressed because earnings have increased faster than the S &P 500. I think that we may need to continue to focus on the valuation multiple. On a short-term basis, yeah, my concern has been the Middle East situation, and maybe that is about to be resolved. But as you said, that's unconfirmed, and we've kind of been there, done it before.

26:27So we'll see if that plays out. That would be wonderful, obviously. The bond yield at 5.2 percent, I don't think that's going to kneecap the stock market or the economy. The economy has been growing very strongly despite all sorts of stress tests, and it's passed them all. What would what what would the yield have to hit before we start to see a cracking in the equities? Yeah, that's that's a very good question. I think everybody's kind of wondering, is there some bond yield at which this thing starts to fall apart? I mean, there's always a possibility that something cracks in the credit markets.

27:03It's usually higher interest rates that cause something to break in the financial markets, at least a credit crunch, which then causes a recession. So I don't think we're in that business cycle mode right now. But I would say, you know, we'd all start to get concerned if we got as high as six. But I would point out that nominal GDP is 6.6 percent year over year in the second quarter. And I think as long as the bond yield stays below nominal GDP growth, we're OK. I think the economy will continue to grow. Ed, speaking of yields, The Wall Street Journal's James McIntosh writing that bond traders maybe are just too focused on elevated oil prices.

27:45That is our bond report today. Do you think that people are, you agree, we're too focused on oil? No, I don't think it's just oil. I think it's also the concerns about the federal deficit, the amount of AI corporate bonds. I think it's, I think that the big issue for me, and I think for the markets over the past few weeks, has been that the oil price rebounded back to$100 a barrel. And so we all came to the conclusion at the same time that it's going to be higher for longer oil prices. And again, this is a pretty tricky environment. Things can change pretty rapidly. But if, in fact, it's going to be higher for longer oil prices, that means that inflation stays sticky, means that the Fed's got at least a couple more rate hikes to do, and it pushes the bond yield over 5%, as we've seen.

28:32Those are all my concerns in mid-September. They've kind of played out. And I think I didn't really call for a correction in the market. I'm still using 8 ,400, but by the middle of next year, I don't mind if it happens sooner. I'm curious. I mean, we've seen all of this concentration in the S &P 500 in the top two stocks. Does that make the market right now more vulnerable to rate shocks? Well, I think the reason the market is concentrated again is because people feel very comfortable, particularly in the Magnificent Seven, when things get a little bit unsettled. In the past, they haven't been all that interest rate sensitive.

29:21You would think they'd be more interest rate sensitive now because they're raising money in the corporate bond market. But they remain powerhouses, and that's where people kind of gravitate. Look, I think the market will broaden out again once we get this Middle East situation resolved peacefully towards peace and low oil prices. I think the market will broaden out again. I mean, we have seen a sell-off in the Russell 2000, the small caps. That's usually a sign of concern about the economic outlook. But I have no concerns about the economic outlook. Look, I think Russell 2000 will make a nice comeback here.

29:59I think they're still in an upward trend. And the market, you know, it's true. It's kind of concentrated back into tech and communication services. But it's the other companies that are going to benefit from AI. It's like the shortest, like for like two months, software stocks, they're all going bankrupt. And then now they're back to some new highs. But, you know, at the top of the show, you say so many interesting things, Contessa, But something she said really caught my ear, both of them, actually, which was we're sort of in that taxi cab moment in the markets, Ed, where like, you know, where the taxi cab driver's like, are you a contestant?

30:34But we're like, I just bought this stock because it's going to go up 20 percent. And people are just throwing darts and hitting winners. And there's been part of this market that I know I'm just getting old and crotchety. But it kind of makes me think, like, were we at that? Are we at that moment where it's like not dumb because I want people to make money, but that there's this thought that everybody's going to win? Is everybody going to win? The market's kind of acting like that. I mean, in AI, not like restaurants and stuff. Well, I think people that have been in the stock market have won quite a bit, not just this year, but over the past several years.

31:12This bull market started back in October of 2022, and it's created a lot of wealth. As a matter of fact, household net worth is up to$180 trillion, and a significant part of that has been the stock market. So we've had a very positive wealth effect on consumption, which explains the resilience of consumer spending. So a stock market going up, even if for people who aren't in it, is a very big positive for the overall economy. Ed Yardini, Yardini Research. Great stuff as always, Ed. Have a great weekend. Be well. Thank you. You too. Let's get to Brandon Gomez now for a CNBC News update. Brandon?

31:54Hi there, Contessa. A New Mexico jury found Facebook owner Meta misled users about how their data would be shared with third-party platforms. The trial stemmed from allegations that consulting firm Cambridge Analytica obtained data from millions of Facebook users and then used it to serve them political ads. Meta wrote in a statement that it disagrees with the verdict and will keep defending itself against efforts to distort the record. The judge has yet to award damages. A powerful nor 'easter is expected to batter the East Coast this weekend with strong winds, heavy rain and coastal flooding.

32:25The impacts are expected to be felt from North Carolina all the way to New England, with the Outer Banks, Cape Cod, Southern New Jersey, Boston and New York City receiving the brunt of the storm. And the English Premier League's Manchester City was reportedly found guilty on all but one of 115 charges relating to breaches of the league's financial regulations. The team was charged over accusations that failed to provide accurate player financial information and details of payments between 2009 and 2018. Man City denies the allegations. That's your news update. And Tessa, send things back to you.

32:57All right, rough. Thanks, Brandon. Coming up, will AI take your job? Young Americans increasingly think it will. Next, a student journalist hearing those fears firsthand. Young workers increasingly are wary of the threat AI poses for their job prospects. A Pew survey this past summer indicated 73 percent of U.S. adults younger than 30 believe AI will lead to fewer jobs. The number of people who believe that is up 12 percent from just two years ago. According to the New York Fed, the unemployment rate for young college grads has jumped one percent in the past two years. And this past spring, the Seton Hall University newspaper asked students about their fears and difficulties entering the job market.

33:37John Ford is exploring these issues in his new special Innovation Lab, which airs tomorrow at 4 p.m. Eastern. And John joins us to discuss as well. John? Thank you, Contessa. I've got Michaela DiLorenzo, the author of that article at the Seatonian, and our own Steve Leisman, who is in the Innovation Lab special. Thank you for that, Steve. It's going to be great. Michaela, I want to start with you here because you are the young worker, soon to be, that we are talking about here. Tell me, I believe you started college right around the time when AI was gaining steam. It probably really burst onto the scene end of high school for you.

34:16How much is this driving the conversation right now as we're looking at Muse and all these things that are able to do jobs? How much of a concern for younger workers? Yeah, thank you so much for having me. I think AI is really just changing the motivation that students have going into the job market. It's changing the hiring process, how people are formatting their resumes and just overall how students are approaching life postgrad. Well, Walter Isaacson, who's a famed biographer and student of technology, as well as professor of innovation, is part of this special as well. Here's what he had to say about what's perhaps not going to change with this wave.

34:56Take a look. This new wave of innovation will disrupt the way we work. But I am convinced that like every other wave of innovation and technology, it will not actually reduce the number of jobs. It will not destroy jobs in the aggregate. It'll just change the nature of the way we work. Because, you know, John, technology increases productivity by definition. And if you increase productivity, you have more wealth per capita. You have more demand. You'll have more demand for things to be done. Walter, in a way, Steve, ecuing your blob thesis of the economy and how it's not zero sum, even in this case.

35:39case, how is this economy perhaps different from some other cycles that you've seen and watched, maybe even as the Internet was coming into vote? Well, first of all, Walter's a super smart guy, but I wish I had the confidence in his conclusions that he has. I don't think that's manifestly true for every job. When you look back at the history of technological innovation, some jobs are wiped out. You know, we can look at the horse and buggy. We have a piece coming out next week about AI and women in the workforce. And there were telephone switch operators that used to go Murray Hill 3421. Guess what?

36:17There was a little thing that happened that they didn't need anymore. Tens of thousands of women lost their jobs. He didn't say the same jobs are going to be around, just that there will be more. Right. There could be more of them, but they may be different. And the problem you have for some people is that they're not trained for those next jobs. And so So a group of people could lose their livelihoods now. And then the next generation will train for them and be capable. But there are also people for whom right now they're able to do a certain set of skills. AI takes the lousy ones away. They have higher value added jobs.

36:50What happens? Their actual value goes up in the workforce. Michaela, to us, this is all theory. We've got jobs, at least at the moment, at least today. So to you, this is a really pressing issue. why I went out and did this special. And I actually even talked to a guru about this. You'll see that in the special, who's like dismissing the whole idea that we should be focusing so much on just work and jobs as part of fulfillment. How is the process, you think, different now for how you're thinking about value, what classes you take, how you even get to know people to network instead of expecting that LinkedIn or an email sent out is going to do the job?

37:33Yeah, well, I think, first of all, like going with classes and internships and the normal steps that you would take to get a job after college, that's just completely changed. A lot of the students that I spoke to for my article said that they were even having trouble just getting internships because of the way that AI has kind of taken over the hiring process and reviewing, you know, resumes and applications. So it's really just changed how motivated students are going into life post-grad. And I think a lot of students are taking, you know, extra steps in college to try to set themselves up for success after, you know, they graduate.

38:08Well, now you're inside the doors of CNBC. You're not just, that's just the number. You can run around a little bit, you know, meet Brian Sullivan and see if you can get a leg. Well, you're sitting next to Steve Leisman. So to go back, Steve, to the economic angle on this right now, economic mobility, job changing is really, it's pretty stagnant. When you look at job openings, when you look at people leaving versus coming in, with interest rates going up the way they are, and that pinch happening for people. In part because of AI and all that investment. Yeah. Look, it's a very uncertain time, and I do not blame 20-somethings for being anxious about the future.

38:51I also think they should be hopeful, right? Because there were times when the world looks like it's a very uncertain place and it ends up being a beautiful and magical place and there are incredible opportunities. I think business might be making a mistake to be leaving hungry, smart, ambitious, and energetic 20-somethings without jobs and outside of their companies because you know what? They're going to be outside their companies competing with those companies. And you may not want to see what they do outside of your company because you may be eating. They may be eating your lunch before too long.

39:28There's a lot. I've met a bunch of 20 somethings who I do not who I think will be. I'll be working for someday if I'm still hanging around. And there are executives who very much agree with you who are hiring more young people. That's smart. Michaela. Thank you. Best of luck, Michaela. It's all going to be good. If you're interested in these stories like Michaela's and how AI is reshaping the labor market and society, you can tune in tomorrow, 4 p.m. Eastern, for our new one-hour special, CNBC's Innovation Lab. I will set the alarm. Thank you, John. Thank you, Steve. Thank you, Michaela. Coming up, our Stocks of the Week, two names that caught our eye and maybe should be on your radar.

40:05Welcome back. Got an update on the negotiations or reported negotiations between the United States and Iran. Iranian state media refuting the report that talks between America and Iran have entered a technical stage. Now, when that report first came out, stocks did pop, oil prices fell, but they are not really reacting. But again, people inside of Iran, as I've said ad nauseum, and folks, I know you're sick of me saying it and sick of me posting it, but the reality is there are multiple parties inside of Iran vying for control. Some people are saying one thing. Others are saying something else.

40:41And that's basically what happened apparently again today because ultimately Contessa in Iran, the people that have the weapons, the money, the power, they're going to be the ones that have the negotiating authority. So we're back where we were to wait and see what's actually happening in terms of negotiations, ending the conflict, and reopening for real. Well, putting, I can just say this, speaking with Gulf officials this week, A lot of them are in town for the United Nations. No names, but I will say that every leader in that region to a person is frustrated that the United States put anything about the Strait of Hormuz in the memorandum of understanding because they believe it gave Iran, and Iran believes this, implied power over something it has no power over.

41:24Well, let's make a turn here and look at some of the stocks of the week. The eyes on insurance right now. Look here. You've got week today, Neptune insurance down 7 percent. This is a flood insurer, the biggest after the federal government. All states down eight and a half percent. And look at goosehead insurance. It's down almost 17 percent. Inclement weather, of course, doesn't help the sentiment of investors. You've got a couple massive storms, hurricanes heading for Hawaii and then the nor 'easter this weekend. But what's really weighing on some of these stocks is, will AI actually undercut and help people shop around, especially for car insurance and home insurance?

42:05Will it help them shop for better rates? And when that happens, you enter a soft market where the insurers are competing with each other. Because the bots, like we talked about, they can haggle for you. That's right. Lower my car insurance rate. And a writer for the New York Times talked about using it for dental insurance. Business Insider has someone who's using it for car insurance and saving on car insurance. In travel insurance, you have this, you know, you can go to Square Mouth and compare rates and coverage while you should. Well, listen, Nor 'easter is a big storm. Hawaii, thinking about you.

42:34But I will say this on a positive note. Did you know, first time, and I'm going to jinx it, I know it. First time in 112 years, there's been no Atlantic Ocean hurricanes. And the season isn't over. It doesn't end until November. I know, but up until now, we've never had a year since 1914 with no Atlantic Ocean hurricanes. And you know what makes up for that? All of the tornadoes and the hail throughout the country. It's a very significant cost for insurance. I'm just trying to be positive. Okay. Just trying to, like, say something good. Our friends in Florida, this is good news for them. More power lunch right after this break.

43:11I'm going to wrap up the show with our stocks of the week and some other commentary. And my stock of the week is Moderna. Moderna has really been kind of a quiet rocket. OK, Moderna today hitting a new 52-week high. It's up 29 % this week. It's up 41 % this month. And it's up almost 800 % from its lows. It was at$24 a share in November of last year, not even 12 months ago. Now it's at$198. A lot of hope and optimism around an experimental cancer vaccine. Put the term vaccine and cancer together. You got my attention. You've got investors' attention. Moderna, mRNA, the ticker, soaring, best performer in the S &P this week.

43:55I want to take a look at gaming stocks now. You've got DraftKings and Flutter, which have been, I mean, they're up today, but under pressure. Like quarter to date down, Flutter's down 20%. DraftKings is off 15%. And there have been these headlines coming through the New York Times reports that DraftKings is using AI to target gamblers likeliest to lose. Look, I talked to the company today. They said this is just a misnomer. It's not true. The Massachusetts Gaming Commission is reviewing it. They want to talk to DraftKings and figure out what's going on. But here's what DraftKings tells me. Look, do we use AI?

44:29Yes. In fact, I talked to Jason Robbins about that for the CNBC Sport podcast. But what they say is it's like what happens in Marketing 101. If you only bet on the Packers during the football season, we're not going to serve you. Why do you got to bring that up? You know I got destroyed last night. Let me finish this thought. We're not going to serve you a hockey promo. That doesn't make sense. Do you want your customers to use your product more? Yes. Do you want more customers to use your product? That is the business. They're in the business of keeping people engaged. I will defend the industry.

45:01I will not defend the Packers. who I got destroyed on last night. My high school football team could have put 31 on that defense. Anyway, I'm all worked up now. I'm still with you, Packer. She's a Packer fan. They're my second team behind the Chargers who are even worse. Anyway, don't most gamblers lose? I mean. That's why these companies exist. So if you're targeting, you're just targeting all gamblers. It was sort of like, you know, do you target marketing to people who may lose their bet? Yeah. Yeah. Like anything having to do with the Packers last night. At any rate, we may see more of this coming up.

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