Top Stock Ideas, Growing U.S. Debt, AI & The Restaurant Industry 10/16/26

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1:06Welcome to Power Lunch, everybody. I'm Kelly Evans alongside Dominic Chu. Today, Brian is off. And concerns about AI spending, they're still on. And sending shockwaves through the market. With tech on pace for its worst week in more than a year. And the company at the center of the tech trouble, CoreWeave, losing a quarter of its value this week. Speaking of tech, two of the leading companies in artificial intelligence are being targeted by the Federal Trade Commission, Chairman Andrew Ferguson, in his first interview since issuing subpoenas to OpenAI and Anthropic. All right. And getting an online booking at an in-demand restaurant is proving harder and harder than ever.

1:41And it may not be due solely to popularity. Reservation systems are experiencing a wave of, guess what, AI agents competing with human foodies for that prime table. The CEO of OpenTable, Debbie Hsu, is here, and so is restaurateur extraordinaire and celebrity chef Tyler Florence, on just how to navigate all of the AI in hospitality, Kelly. All right, let's begin with the markets, though, because stocks are lower, and we've really turned throughout the trading session today. It's been a volatile week for tech amid concerns about AI debt. The neoclouds and the memory trades are under some pressure, even after some of them staged a sharp reversal yesterday, while energy, staples, utilities or higher health care hitting another intraday record.

2:23But with just 10 tech-focused names, making up about 40 percent of the S &P 500, what does this rotation mean for the tech-led bull market? For more, let's bring in Marianne Bartels. She's the chief investment strategist at Sanctuary Wealth. And Stephanie Link, the chief investment strategist at Hightower. It's great to have you both here. Marianne, kick things off for us. Did you make any moves this week? Do you have any thoughts about whether Corweave is the canary in the coal mine? I don't think it's the carrot canary in the coal mine. This kind of brings me back to like 97, 98. You can have events.

2:53And for those that don't remember that time period, you had a Thai bot crisis and you had long term capital and the Russia debt crisis. And yet we went on to have the tech bubble. I think these are isolated situations. I don't think we have contagions. I'm not seeing a systemic event. And this is all happening as the MAG7 just recently hit a record all-time high. So I'm staying with the tech trade. I still think semis are also participating. They've been hit. They're oversold. They're into good support. Are you a buyer there or you're just a holder? I'm a buyer. Their valuations are cheap. If you look at the industry group and look at where their valuation is going out to 27, you're below market multiples.

3:36You're at 14 times. Yeah. So, yeah, I'm still a big buyer of tech. Now, the breadth of the market is narrowed, but I don't think that can stop the market from moving higher. All right. Marianne, Stephanie, sit tight for just a second. We have Treasury statement, the budgets. We need some scary music for this. There it is. Steve Leisman has the details. Steve. Scary, but maybe not quite as scary at one point nine nine trillion, the deficit for fiscal year 2026. So not quite, but almost$2 trillion, up$217 billion. That is a 12 % increase. It's not a record in and of itself. The 12 % rise is the highest level since 2021 when we were spending a lot of money around the pandemic.

4:18How did we get there? Well, receipts rose 3%. That was good. But outlays rose 6%, both to record numbers. Individual taxes, they were up by 5%. But corporate taxes, well, they fell 9%. In fact, it's more than that. If you take the corporate revenue, corporate tax revenue, and add it to the refunds, you're actually down 16 % on the corporate side year over year. Another problem, tariff revenue. It was up$318 billion, 57%, but refunds were$145 billion because of the court ruling that the administration had to give that money back. Okay, let's look at the main sources of spending. Social Security,$1.7 trillion.

4:58That was up nearly$90 billion or 5%. Interest on the public debt. There's a big number for you. One point four trillion hundred and forty up one hundred and forty four billion or 12 percent. Medicare up ninety nine billion, eight percent and defense up forty eight billion or six percent. So that's how we got there, Kelly. Not quite two trillion, but almost. All right. Thank you, Steve. Steve Leisman for now. Not a big market reaction to point to. Stephanie, you want to you have any thoughts about. Yeah, I know the deficits. We've been talking about it for three decades. But are we learning this year?

5:29We thought maybe this year this was the driver. Do you think that's really the case now, having watched the bond market action? So you think that the deficits are the sole reason for the bond market rally in yields? No. I actually think it's a high number, 6 % of GDP. But I think that the bond yield backup has something to do with a little bit more inflation, a little bit more debt issuance. The MAG-7s have issued$110 billion in debt issuance. So we know what's going on there. But I think the most important reason why yields are higher is because the growth in the economy is better. I mean, the Atlanta Fed tracker is at 3.6 percent.

6:08In the face of higher rates and higher inflation and the consumer this week, we got retail sales, ex-gasoline up 5.1 percent. Weekly claims are historically low levels. Industrial production is much better than expected. So the economy is holding up very well. Yes, technology had a bad week, down 7 % for the week. But that's why you're having a rotation, because the economy is not collapsing. People are finding elsewhere to go. And it would be very careful to lump in CoreWeave and Oracle, which have huge debt, huge,$50 billion at CoreWeave,$160 billion at Oracle. Wow. That's huge. That is not the case.

6:44At NVIDIA, Broadcom, or Micron, the three names that I own, I would absolutely be inclined to be buying those, because they've been pulling back as well with the rest of the group. But, I mean, I'm looking at NVIDIA,$48 billion last quarter they generated. $300 billion in free cash flow next year is expected. $300 billion in free cash flow. Free cash. Free cash flow, right? And Broadcom, they generate$14 billion a quarter in cash, right? And then Micron, I mean, they have a phenomenal balance sheet. They've reduced their debt by 63 % year over year to$5 billion. So, to me, they're throwing everything out.

7:19I think you want to be careful about doing that. So, there's that. I still think there are opportunities in software because the software stocks are still down year, many of them down year to date, even though they've had a nice rally. ServiceNow comes to mind. IBM comes to mind. Reporting next week. Yes. But I would also say that, yeah, there are other attractive places to be putting your money. And I think the banks are a wonderful place right now because they sold off. And by and large, the numbers were pretty good outside of capital markets and M &A, which we all expected to be soft. But everything else was pretty good.

7:50So I think you're getting looks and chances to buy other things. One of the things that's interesting about to kind of link some of these stories together with the Treasury stuff that's going on right now, rates and everything else. We talk about how when bonds move the way that they have and risk free rates go up to where they are, it dampens valuations because you are now having a higher hurdle rate in order for your investments because you can compete with Treasuries at higher levels as well. My curious part about this is if there is growth in play and inflation is a possible threat, you probably want to be in stocks as opposed to bonds, right?

8:28Because they provide the better longer term returns that can outpace inflation and growth as opposed to being in fixed income where you are now locked in to dealing with inflation and growth that runs away. So, Marianne, I'll start with you with this one. If it's inflation, that's the worry and rates are going higher. Valuation is coming under pressure. Stocks are still a buy even with that. Yes or no? Oh, absolutely. And I think we're in the good spot for inflation. I call it the inflation boost. And we recently just had PPI and CPI. PPI is very correlated to corporate profits. And when companies are able to raise their prices and pass that price through, their revenues and their earnings grow.

9:09And we're in that phase right now. And so I would argue you're in the good phases of inflation where you want to own equities. And if we ever start going through the phases of inflation that are not that great, you definitely want to own equities over fixed income and you definitely don't want cash. Does that sound right, Stephanie? Or am I thinking about this the wrong way? No, no, I think that's right. I mean, I think that, look, a 5 percent tenure, if it were to go to 6, I'm not calling for that, then you're going to get some switchers if they want to hold on to that for the long period of time.

9:38But you're right. You have inflation risk. All that being said, we've already seen multiple contraction year to date in equities, which makes them even more attractive. We went from 22 times in January to 19 times now. And many sectors are trading much cheaper than 19 times forward estimates. So the long-term total return in the S &P 500 is 7.7%. For bonds, it's three. This year, bonds are down five. So there is an attractiveness in terms of if you want to bottom fish, but you have to be careful on duration. Yeah, no, and just want to quickly mention again the moves in oil we've seen since the top of the show.

10:12How much of a risk is oil in the Middle East conflict to what either of you see going on with your investments, Marianne? I just think we're in a new regime of higher energy prices. and it's just something that we have to get used to. But it's great for the energy stocks. And they're supposed to have the best earnings in the quarter, and they had the best earnings last quarter. So that's another sector I'd be looking to own in the market. What about the refiners, some of these trading up at tippy high levels already? So they look a little parabolic. I think Phillips 66 looks less parabolic. We just don't have enough refining capacity.

10:45And as long as we stay in this environment, all the energy stocks are going to pretty much continue to go up. Have you, Steph, talked about what you do? You just cut on the sidelines a little bit? I'm like market weight, which is all of three percent in the S &P 500. But SLB is the name I like. I like the oil services companies. They do benefit significantly from higher oil prices. But I like what they're doing in terms of technology and for their customers, making them more productive, giving them lower costs to drill the stuff out of the ground. So to me, that's the one I like. I also like EQT because I think natural gas is the long term winner in terms of the data center build out.

11:26And that's where we're going to get the power. We have we have plenty of natural gas. We just don't have enough pipelines. And I think that's the place that you also want to be. Can I just follow up, Marianne, with one other sector that I'm just curious to your thoughts on, one that's shifted a lot of narratives in the last 12 to 24 months? Health care, laggard to leader back to kind of laggard again. It keeps moving around. Is health care something you still want to invest in? I think it's trying to bottom on a relative price basis. It really hasn't been a leader within the market, but it's showing signs that it wants to recover.

11:54We've liked the biotech space, but we are seeing some signs that health care could be in a bottoming phase. You may want to nibble. Aren't we at all-time highs for the health care ETF? So when I look in terms of performance, is it leading the market or lagging the market? So on a relative price basis, they've recently started to improve. But if you look over the past year, it has not been the place where you want it to be. But I think we're seeing early signs. So even though the sector's at record all-time highs. But it's chasing. It's trailing. But that's a good time to buy. So especially if it's going to turn.

12:30My sense, it's probably a play for next year, not this year. Do you have any names in there, Steph, you'd recommend? UnitedHealthcare. I actually bought it. They had a really good quarter, beat earnings by 16%. They're going to see revenues up 21 % this year. The CEO has returned to the company from a year ago, bought$25 million of stock back in May of last year. The stock's up 37 percent since then. But it is still down substantially from its highs. So there's still a lot of fixing they have to do. And I think he's the guy to get it done. It's still such a tragic story. Every time we talk about this, it's all I can think about.

13:03Stephanie, Marianne, thanks. Really appreciate it. Thank you both for being here. All right. So let's get down to the bond report. We have yields are higher now, wrapping up a volatile week as investors weigh hotter than expected inflation data and overnight comments from Fed chairman Kevin Warsh at an IMF meeting in Bangkok. Thailand Warsh voiced optimism about the U.S. economy, but gave no signal on a possible interest rate hike this month, saying he does not prejudge meetings. The Fed's next decision is less than two weeks away. And by the way, for the numbers, traders are seeing a more than 80 percent chance of a hold at this month's meeting.

13:38that's according to CME's FedWatch tool, Kelly. All right. A whole lot more still lined up for you this hour. Should you be using an AI agent to snag your restaurant reservations? Believe it or not, OpenTable is embracing this technology and we'll ask the CEO why. Plus, you got our macro view a few moments ago. We'll get some more single stock picks from Stephanie Link. Names she's scooping up, they say, Steph. But first, Federal Trade Commission Chair Andrew Ferguson will join us on why the agency subpoenaed both OpenAI and Anthropic. Like, what are they accusing them of? What are they looking for?

14:10That's next.

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15:33CorPay delivers solutions designed to simplify complexity. CorPay, control more of what your business spends. Visit corpay.com to learn how better visibility can bring more clarity to every payment. Two of the biggest names in the whole world of AI are in the FTC's crosshairs. The agency has subpoenaed Anthropic and OpenAI seeking information about potential consumer protection violations. Joining us now First on CNBC interview is FTC Chair Andrew Ferguson. It's great to have you back, Mr. Chair. Welcome. Thank you. Tell us what specifically you are looking for here. Well, before I get into specifics, let me, you know, sort of explain the big picture here.

16:14There has not been a more important strategic, political or economic imperative for this country since the end of the Cold War than that we win the SI race with China. That is what the president has been focused on, is making sure that American innovation wins the day. And as he said over and over, we don't need a giant raft of new regulations because we have existing guidelines that protect our children, our way of life, our rights and liberties and our status as consumers in the marketplace that all companies have to obey. And look, one of my jobs as FTC chairman and as the vice chairman of the SI force is to make sure that those existing guidelines and guardrails are obeyed and where they're not, that law enforcement can step in to protect American children and American consumers.

17:00And so that's what we're looking at. And it's consistent with what the FTC does every day in every other industry. We want to make sure that companies are accurately telling consumers what their product does, that the product does what they're telling consumers, and that they aren't exposing consumers to injuries that they can't easily avoid. So that is what we're looking for. This is an ordinary consumer protection investigation of the type that we do all the time. And it makes very clear that the guardrails that apply to SI apply to everyone else. And we're going to enforce them just like we enforce with everyone else with SI.

17:36So we've spoken to two state attorneys general in the last two days, both Nebraska and Kansas. They are doing almost the exact same thing, it sounds like to me. I'm not a lawyer. They are going after OpenAI in particular here for, I guess you could call it deceptive marketing practices. My words, not theirs. But effectively saying these products are not accurately being marketed. There is consumer harm taking place. They're analogizing this to kind of the environmental lawsuits of last century. How does what the FTC is going after here differ from what these eight states are going after? It sounds like they're going after the exact same thing.

18:14Well, so look, the attorneys general of Nebraska and Kansas are friends of mine. They are phenomenal protectors of the people of their state. I don't know exactly what they're looking for, but we work with state partners all the time because the states enforce laws that are similar to what the FTC enforces. But one of the things the FTC enforces sort of uniquely is that one of our jobs is to make sure that companies have good data security systems and that they're complying with their data security systems and that they aren't misleading consumers about whether their products are safe and protect data.

18:47And that's one of the things that we want to know, just like we would want to know any time that there's a hack or a breach. We want to make sure that the companies are building products that are safe and that consumers can use and that they've been accurately represented to consumers. And that's our job. We just want consumers to be safe in the SI marketplace no differently than they are in every other marketplace. And that's part of the president's pro-America SI agenda. We have to win against the Chinese, but victory can't be at the cost of American children's safety or our rights as consumers.

19:21And we have existing laws and regulations that do protect America's children and consumers. And that's what the FTC is focused on. Mr. Chairman, it's Dom here. When you speak with with DNI and S.I. Czar, Jay Clayton and all the other folks on your task force, what exactly is the conversation like with regard to balancing those issues? Because this is such a critical race, as you point out, with the likes of China and all these other forces out there who are trying to gain supremacy and an edge here. When it comes to this kind of technology, where is the tilt going to be? It can't be a perfect balance when it comes to this race at an early stage.

20:00Being out in front really does matter. I agree. And I think that the president, as is usually the case, has picked exactly the right people to strike the right balance. Jay Clayton, national security expert, esteemed lawyer, knows that we have to win this race, but that we have to do it in a way that protects the American people and makes them better. Emile Michael at Department of War has done a phenomenal job modernizing the Department of War, including using AI to advance the warfighter mission, but also making sure that America's government infrastructure is safe from AI attacks. And Scott Cooper over at OPM is leading the effort to make sure that our public and private infrastructure can be safe from the technology that bad guys can use within SI to hurt the American infrastructure.

20:46And I think Jay Clayton said it this morning, and he's absolutely right. We have to win this race because the best way to defend against bad guys with SI is with American SI technology. And so that's the balance we want to strike is we want to stay ahead. We want to out innovate our competitions and we want to lead the world on this, but not in a way that requires us to trade off our children's safety or our way of life. And that's what we're focused on is apply the existing guardrails, use existing laws to protect Americans, just like we do in every other marketplace, protect American infrastructure with American AI so that the good guys win this and the American people are made better off by the technological revolution that is super intelligence.

21:29intelligence. All right. So can we put a double line on this, right? If you're the CEO of a company that is looking to either progress with AISI, develop it more forcefully and or deploy it to its customers, the American public, what exactly can those CEOs and these companies expect in terms of a regulatory framework, given this probe that you're opening? It's not yet a full kind of attack on anybody, person or industry, but what kinds of questions do CEOs need to ask themselves, their boards and everyone else to make sure that they are progressing in the right way with regard to this deployment?

22:07Yeah, it's a great question. It's the same questions that the CEOs of companies in any other industry ask every day. Are we being honest with consumers about our product? Are we building products that are safe, that consumers understand? And are we living up to the representations we make to the marketplace? At the end of the day, the FTC is not a grand regulator that requires you to design products one way or the other. What we say is you have to be honest with consumers. You have to live up to the promises you made consumers. And you can't offer products to a consumer that are so unsafe that a consumer can't avoid injuring him or herself by using the products.

22:47But these are just the same questions that CEOs, product designers and lawyers in every other industry have to ask and answer every single day to comply with existing laws. We just want SI to play by the same rules as everyone else that has made the American economy so vibrant and innovative and is why SI has been able to take off here in America in a unique way. All right. Andrew Ferguson, FTC chairman, thank you very much. And please come back and see us again, see you with an update, sir. Thank you. All right. Before we go to the S &P 500, right, we should point out they're near session lows right now, as you can see here.

23:22But coming up, we've got some names that Stephanie Link is scooping up. She's going to come back on set with us, bring us a couple non-AI plays with her picks. So keep it right here.

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25:35All right, welcome back. Time for a power check today. And we've got two consumer names that our next guest is scooping up more of. Let's bring back Hightower chief investment strategist and CNBC contributor Stephanie Link. The first trade, Kelly, is what? Drumroll, please. Steph, Estee Lauder. Let's just get a little backstory on this high flyer to a struggling name. Then it had a big 2025. It's been kind of flat this year. Of all the names in all the world we could talk about, why this one? Well, it's down 71 % from January 2022. Wow. That is a lot. So I know it's had a nice recovery off the lows, but they have a new CEO and he has a game plan called Beauty Reimagined, focusing on innovation quickly, digital execution and profitability.

26:22And why I'm interested in it is because over the last couple of quarters, you could see organic growth starting to accelerate. But what I really love is operating margins are still depressed. That's my favorite kind of story, right? Organic growth is 5%. Operating margins are running at about 7.3%. But prior peak was 15%. So the earnings power, if they can get the operating margins up, is substantial. And so I think this is off the radar screen for everyone because, quite frankly, they lost their way. They really did. They were too dependent on department stores. They totally missed digital and the supply chains were a mess.

26:56So now I think this new CEO has it together and they're slowly executing. Really quickly. How long before it gets back to the COVID pandemic post highs? We knew what the trends were there, right? People stay at home, but they want to look good for their Zooms or whatever else. It was kind of a good thing. I don't know if it ever gets back to its ties, but I do think they're doing a lot of good things with product innovation, smaller brands. And digital is really important. They totally missed the ball on that. So now they're going to focus there. Amazon, they're doing deals with. So I just think it's, again, off the radar screen, and I think they're doing a nice job at the slow recovery.

27:34All right. The other one here is in consumer products as well-ish, food and beverage, Starbucks. Stephanie, you bought in on Brian Nichols' turnaround plan here. Why? So I started buying this last December on Brian Nichols because he has such a great track record at Chipotle, up 700 percent when he was there. Incredible. One of the great runs of all time. Of all time. Right. And unfortunately, I didn't own Chipotle, so I kind of kicked myself. However, he's doing a great job at the turnaround here. Why I added to it two weeks ago was because the stock fell six percent on the rumors that they were going to buy Chipotle.

28:07Which, does that not seem ludicrous to you? I mean, I guess they actually looked at it. I mean, if anyone can do it, it's him because he knows how to, you know, the whole marketing shtick. He knows the execution. He knows the company because he was there for such a long period of time. But they declined that they were involved in any kind of discussion. So in the meantime, I think you're in the fourth or fifth inning of this turn. Same store sales last quarter grew 7.8 percent versus pretty much all of last year, negative mid-single digits. And here, too, earnings are recovering, but operating margins are still very depressed.

28:38At 10.5 percent, prior peak was 18 percent. So I think they have$4 a share in earnings power. All right. It's been, you know, it's better than Nike. I mean, it's gone reasonably well. It should be way better than Nike. Yeah. Way better. All right. Stephanie, thanks. Again, Stephanie Link of Hightower. Coming up, struggling to get an open reservation or an open table? Maybe it's time to have your AI agent do it for you. Paging News. We'll ask the CEO of OpenTable how they're changing dining and embracing these AI agents right after the break.

29:19Welcome back with the rise of artificial intelligence. Also comes the rise of dining out for Americans. Overall, U.S. restaurant and bar sales are up 7 % year on year, according to OpenTable. 44 % of Americans also plan to use AI for dining discovery this year. So can your agent help you with making dinner reservations and really have an impact on the broader restaurant industry? And what kind of impact are we talking about? Here to discuss is OpenTable CEO Debbie Hsu. Debbie, it's great to have you here. Great to be here. Thank you. All right. We're just going to have to cut right to the chase.

29:51And you can kind of weave the whole backstory into this. How did you decide to be, if I'm not mistaken, more of a friend than a foe to agents? You see all the other big e-commerce platforms. Some of them are slamming their doors shut. Why do you feel you should be going the other way? At OpenTable, our first mission is to be in service of restaurants, right? We power their front of house with our software. And one of the key value propositions that we provide is that we can fill their dining rooms with guests, right, with our diner network. We need to be where diners are. And we've always had lots of different channels for diner demand.

30:26You could book on OpenTable. You could call the restaurant. You could walk in. You could book on a host of all other sites. So we view agentic commerce or agentic booking as yet another channel. And what we've seen by opening up and being very forward and leaning in with these AI players is that with the recent launch of Muse and our formal partnership with them, we're seeing some very interesting stats. a lot of the diners that are booking on news have never been to the restaurant before that they're booking on. 30 % of those diners are incremental and have not used OpenTable and have not used OpenTable ever or in the last 12 months.

31:05These diners have higher spending capabilities, so they're spending about 20 % more. So we're seeing that these are really great diners that are discovering and booking at these restaurants. And again, for us, this isn't anything that's that new, right? Our job is to provide as many demand sources to the restaurants as we can. And this is one source. Hey, Debbie, it's Dom. One of the big arguments for and against AI when it comes to dining is about whether or not it provides more access to diners to those food experiences, or if it creates more of a gap between those who have AI agents or the faster, better ones versus the ones who don't.

31:47Do you feel as though this particular new paradigm of AI agents making your reservations for you is going to be something that provides more exclusivity or opens up the experience to other people and people who didn't have access to those experiences? I haven't been able to get a hot reservation at a restaurant for a long time, and I think I'm pretty well placed. I can't imagine what it's like for a lot of other people who want that same reservation. I actually think this right now, as we see it, it actually democratizes access more than before, because as you all know, the agents right now are largely free.

32:24Right. Muse, you can download instinct, by the way. We just signed our partnership with them yesterday. So that's forthcoming. Anyone can really download these tools and get access and use them. So I actually think it's better for access to certain types of restaurants. Now, Dom, you're in a specific case, right, where you're probably looking at in New York City, probably five to 10 restaurants that are notoriously hard to get into. And for sure, getting reservations at those restaurants has become a contact sport. I think having one of these agents could help. Setting a notify me on OpenTable could help.

33:00I'll give you my number. You can text me. I can also help you personally. But I think this is one of a lot of different ways we can be using to snag reservations. And I do think that because these tools can be or are already ubiquitous and access is available to everyone who has a phone or a computer, I do think it actually helps with that issue of access. Debbie, can you give us any data about, you know, some people say the Internet is going to be all agents. You know, when you talk to kind of CrowdStrike, they say the traffic could be tremendous. Can you give us any insight into, are you already seeing a meaningful impact of agents on your platform?

33:40we're seeing uh it's still very early days in terms of volume so the volume is actually quite low but just to give you a sense um this year year today we're seeing a 17x increase in agentic bookings versus 2025 so coming out of the gates we're seeing a lot of activity and it's growing very quickly but currently as it stands the volume is is quite low and i would say that you know for For those who are saying, like, is it all going to be agents? You know, for sites and companies like OpenTable, right, we want to be partnering and connected up with the agents that people are using. But the onus is also on us as a company to make our diner consumer experience as compelling as possible.

34:22We know a lot about you, right? We know your dining habits. So it's on me to make sure that we're providing an agent of our own that knows you very well, that we've trained and you've trained to go out and get the reservation that you want. So we're all in this ecosystem competing. And I think, again, because we're here to serve restaurants, we don't really care if the demand is coming from somewhere else, if it's coming from OpenTable, if it's a walk-in or a phone-in. We just want our restaurant customers to be full. And one more point here, the further and further we go down this agentic path, the more and more cybersecurity becomes an issue.

35:00Agents interacting with agents become very much a point of intrusion all over the place. You're not a bank. You're not a law firm. You're not a hospital. But you are still someplace that is vulnerable to cyber. What are you doing about it? We take this very, very seriously, Dom, because, yes, we're not a bank or a hospital, but we certainly have access to consumers and diners information, also restaurant information. That's why we've leaned in so hard on these formal partnerships. We block unsanctioned scraping activity unequivocally. We have teams of people that are working on this daily. We've had to ramp those teams up because of the influx of scraping and unauthorized activity.

35:42And so for us, you know, we lean in on partnerships, integrations that our engineers are working with, with their engineers. But if it's unsanctioned, if we don't know where it's coming from, we block it unequivocally. All right. Debbie Hsu, a great conversation. Please come back and see us again soon. All right. Let's get over to Frank Holland for a CNBC News update. Good afternoon, Dom. Katie Zachariah is leaving her role as the White House press secretary less than a week after President Trump appointed her. That's according to MS Now. Her departure follows a rocky first briefing and some questions about her legal credentials.

36:17Zachariah acknowledged she did not pass the California bar exam. American photojournalist Heidi Levine is hospitalized after being attacked by masked Israeli settlers while covering a Palestinian olive harvest in the West Bank. A video shows Levine being pushed to the ground and beaten with her camera equipment taken. Several Palestinians were also injured. Israel's military says it is now reviewing that incident. And the NBA is telling authorized sportsbook to stop offering several types of bets this offseason, this upcoming season, I should say. The ban includes wagers on the opening tip or the first basket, along with unders on players expected to play fewer than 12 minutes.

36:53Sportsbooks also cannot combine multiple unders on the same player in a parlay. Dom, back over to you. All right. Thank you very much, Frank Holland, for the news update there. Coming up, we're going to dig deeper into that dining story. Food Network celebrity chef and restaurateur Tyler Florence, you can see him right there, is in the building. He's going to join us on set with the latest read on restaurants, maybe a little tech and AI, favorite recipe even. Keep it right here.

37:23Welcome back to Power Lunch. Apple is seeing extraordinary demand for that flip phone, foldable phone. It's debuting the iPhone Duo. Reports that new phones are sold out during pre-orders. Apple says it's working to get the duo into customers' hands as quickly as possible. And the phones are already showing up in the resale market. One eBay buyer paid$5 ,000, Dom, for one already. The share is, by the way, fractionally lower. By the way, just an aside, I did price one out pre-order-wise just out of curiosity. It was still available this morning. But you didn't pull the trigger. I did not pull the trigger yet.

37:54I'm not a first mover on these things. We'll see what happens. Anyway, let's get back to food. Tyler Florence has spent three decades turning his love of food into a multi-platform, multimedia brand, from his Emmy-nominated show on the Food Network to running two highly acclaimed restaurants as well. Celebrity chef, restaurateur, entrepreneur, add all kinds of titles and accolades. Tyler Florence is in the building right here. Thank you so much for the time and being here with us right now on Power Lunch. What an absolute pleasure it is to be here. CNBC is on in my house and in my office every single day, and I am thrilled this is a moment.

38:26So let's talk about let's get right into this conversation. Then if CNBC is on all the time, it must mean that you have an eye towards the business side and the food side of any particular enterprise you do. What's been the biggest thing that you've noticed trend wise as the business of restaurants has evolved? Let's say since the pandemic and then over the last 10, 15 years. Well, to break that down, there's lots of sub subjects we could jump into with that particular thought. But I think you've got to pay attention. Restaurants are about minutes and nickels. And I think with margins that kind of hover somewhere between, you know, 8 to 12 percent, if you're lucky, I think watching every single element of your business without sacrificing one second of hospitality, I think, is the real goal.

39:10It's all about producing really great food and a great product and then being very business savvy when it comes along with it. And also, I think having CNBC on in my office every day, it gives me something to really jump in and talk to our clients about just because I feel like I'm aware. Yeah, you're kind of up to date. So you mentioned 8 % to 12 % margins. And you do a lot of luxury high-end steakhouses. I don't know if you remember the article. It was a year or two ago in the Wall Street Journal. And it was something like this. They said, you know, this$500 steak dinner, the restaurant's still not making money on it.

39:42I don't know if that was exactly the experience that you've had, but you'd think these prices are so ludicrous that people must be minting money. No. Has it gotten any better? Has there been some relief with, you know, food inflation and labor and all of that or no? Well, the USDA said that in 2026, beef and veal prices were up nine and a half percent in 2026. Those are real numbers that you could see at the grocery store for sure. But at the restaurant, Miller & Lux, our award-winning steakhouse at the Chase Center in San Francisco, also at the Four Seasons Huala Lai in Hawaii. We are locked in with boutique ranchers in South Dakota and Southern California and Australia and Japan.

40:25And we're buying basically futures of beef. We have long-term commitments with really great ranchers and great suppliers. And we're seeing some really great value of just sort of locking in and committing to some fantastic programs. And the proof is in the pudding. our steaks are phenomenal. How have you seen that kind of customer evolve their tastes over time? Has it been pretty consistent, the American diner, with regard to what kinds of foods they consume? Are steaks still popular, even places like California and Hawaii, as opposed to places like Texas and Florida? And if so, do you think that's going to stay that way over the course of the next, say, five, ten years?

41:03Well, there's some really interesting cross-reference points, data points to think through, like GLP-1s are having a real effect in the restaurant world. right now and everyone's very committed to protein. Super high protein diet, I do for sure. I try to get a super high protein diet starting with my first bowl of... How many grams of protein every day? I shoot for 90. 90 grams of protein every day. You're shooting for 90? That's pretty big. I'm trying to get 140. My husband goes for 200. Really? 90 is good for me. I'm happy with that. It's a really good Greek yogurt in the morning with protein powder and all kinds of fun stuff.

41:35But we're in the protein game. We're in the protein business. And so we're very friendly to a lot of people that like beef. And to me, when people ask me, I get this question a lot, like, what's your favorite thing to eat? And it's got to be beef. Honestly, it has been ever since I was a little kid. The first time I tasted filet mignon wrapped in bacon, you know what I mean? It changes your life forever. And I love the steakhouse genre. I love the steakhouse experience. The Golden State Warriors have been really fabulous partners with us building a dream restaurant for the city of San Francisco.

42:05The Four Seasons Group has been amazing with us. And you're in San Francisco. I mean, are you seeing this huge clientele from, not to be crass, but like the AI boom? As we hear the home prices and everything going on in that city, big difference from a few years ago. We share a campus with OpenAI. They've taken over 500 ,000 square feet of office space in one of the four Uber towers in front of the Chase Center. And so we're seeing lots of really great foot traffic that walks into the restaurant that are very sophisticated, very savvy. You're an indicator. I want to know what your restaurant looks like on their IPO night or if it ever comes.

42:36But they literally I mean, that's that's what the New York you have a New York place as well. But people used to talk about the steakhouse indicator. Are people ordering steak tonight or are they trading down? Exactly. And I think we're trading up. We've had the best year since 2019. I have two restaurants in the city of San Francisco. We also have Wayfair Tavern celebrating 16 years in the financial district in San Francisco. And we're producing, you know, more top line revenue for our partners. And also, you know, Miller and Lux is having us best year yet. So we're very excited about it. We're seeing a very bullish market.

43:06when it comes to high-end dining and not just luxury but ultra-luxury experiences. And that's the market we're finding a lot of headwind in. Debbie Sue at OpenTable embraces AI. That's right. Do you embrace AI? AI is getting really interesting because it's doing more things than just advanced search. So right now, Toast, which is our point-of-sale service, they have a really fully integrated agent called Toast IQ. And this is mind-blowing technology because it's basically your business partner in your pocket. Not only does it produce just fantastic reports because you need to analyze not only what you did last night, but what we did last week.

43:47It's your partner anticipating what a slow service could look like next week. Let's say there's some bad weather. Let's just say for some crazy reason you're starting to see a slowdown turn. It helps you predict really great opportunities for your schedule. that doesn't interrupt one second of service, but wear minutes and nickels, right? Minutes and nickels. That's the game of the restaurant business, minutes and nickels, right? So it helps you predict really great opportunities for your menu from a sales perspective to help you order smarter, and then also to help you schedule smarter that doesn't affect service for one bit.

44:21Minutes and nickels would be a great book. I know you've written 17 books, but you need to write, people need to understand. You don't get to where you are without being an incredible businessman on top of reinventing yourself so much. Tyler, you heard it here first. Minutes and nickels. Minutes and nickels. I love that. Tyler Florence, chef and restaurateur. We really appreciate it. Thank you so much. Let's get a quick check on the NASDAQ as we're at fresh session lows, down 2.3 percent today. We're now down 5 percent on the week, pretty much having the worst week since June. So kind of a dour note to end things on.

44:48More Power Lunch after the break. All right. Welcome back. Harvard doesn't just make the grade in the classroom. Its endowment is also beating the market handily. Take a look at this. Harvard's endowment grew 27.1 percent in fiscal 2026, beating the S &P 500, which notched a 22.3 percent gain total return in that same period. That's Harvard's strongest return in five years, pushing the endowment to now around 68 billion dollars in size. A filing with the SEC shows Harvard has a 2.2 billion dollar stake in SpaceX. That's the endowment's largest single holding by value. Number two is Taiwan Semiconductor at$350 million.

45:25So you talk about powering these gains. And by the way, we're all just waiting for an ETF, Kelly, that tracks the Harvard Endowment. Well, there's been an evolution as well. I mean, you went from the Yale model heavily reliant on kind of private and alternatives to something like this, which is more early stage in venture. Are they just lucky or is it a strategy others can follow? A ticker for you to look up, UCBG. State Street just launched an ETF that tracks the UC system, University of California's pension model. UCBG. Interesting one. We'll see if Harvard gets one soon. We have a market flash, friends.

45:56The S &P is hitting session lows. The Dow's down 300 points right now. The Nasdaq is down 2%. One of the culprits could be oil, WTI topping$101 a barrel as Iran escalates attacks reportedly in the Strait of Hormuz. You can see that happening kind of throughout the session today. It is pushing the energy sector to a new all-time high. Diamondback, EOG, EQT, which Stephanie Link called out earlier, all in that territory. Interesting moves for sure there in a sea of green and an otherwise bigger ocean of red. Thanks for watching Power Lunch, everybody. All right. Have a nice weekend, guys. Closing Bell starts right now.

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