Alphabet’s AI Search Selloff, Market Risk Signals and Power Demand 10/29/26

0:29Weren't agents supposed to take things off your plate? An original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast. Or find Schwab Market Update wherever you get your podcasts. You're listening to The Exchange. age. Here's today's show.

1:06I'm happy to keep talking about the Brewers. Congrats, the Brewers and all my Milwaukee fam. Congrats, Liz Thomas and everybody else. Welcome to the exchange, everybody. Don't turn your dial. I am not Kelly. I am Brian. Thanks for joining us. Overall stocks, they're under pressure this hour. You've got Alphabet and Caterpillar leading the declines. The Dow is showing down, but get this, the Dow would actually be up if it wasn't for Caterpillar. We'll get more on that in a bit. The AI trade weaker again. The big reason, the one we just mentioned, that is Alphabet stock down 12 percent. That's actually on pace for its worst day ever.

1:38It follows a revenue miss and disappointing search metrics. Alphabet about to lose about 500 billion in market cap just on today's move. And Microsoft giving up earlier gains despite strong cloud growth, lower than expected capital spending. So there is a lot to talk about. I'd like to talk about the brewers, but let's get back to the markets and your money and talk about what all of this may say about the health of the AI trade, or maybe not, as we set up for tonight's report from Amazon. That is after the bell. Ken Gorelski is Wells Fargo's senior intranet analyst, covers Google. Alphabet covers Amazon, covers more.

2:16Ken, we got a lot to talk to you about. We are glad that you're kicking things off. First up, your reaction to Alphabet's numbers. Alphabet's quarter and the Alphabet stock reaction. Do you think that investors are overreacting? Yeah, thank you so much for having us, for having me here. Look, it was definitely a disappointing quarter. Search in particular, you know, there was this search bear case go back a couple of years ago. It's kind of back on again. But I think this time is different because I actually think this is more self-inflicted. This is AI, a move to AI search, because engagement is still really strong, but make no mistake about it.

2:57Plus 12 was not the number that investors were looking for last night in search growth. Really, they were looking for at least 14 or 15. It's a significant decel. And also the company called out fourth quarter, again, tougher comps, suggesting that it could get even weaker still. So we understand the reaction. I mean, in market cap basis, it's just a tremendous move for sure. But I do understand the disappointment here. What do you mean by self-inflicted? Are you talking about how Google now has the AI results at the top? If you search for something before you get to that first link, you get sort of the Google summary at the top.

3:37And I've got to imagine there's a huge number of people for them. That's enough. That's right. That's right. And look, in a complicated world, this is pretty simple, which is to say before you go search your term and you get 10 blue links and you click on one of those and you go find your information and off you go. And that was the way Google search worked. Now you search your term and it now comes up with AIO reviews, sentences or information about your search term. And then there are links in there. But like but many, many users are finding it very helpful just to read the AIO reviews and don't feel the need to click.

4:19So it should not come as a huge surprise that you're seeing fewer clicks and fewer link outs. So, Paul, can you explain why that is a negative? Because I would imagine for the viewer, for the reader, the Googler, right, you look at it and that's enough. For the company that's bidding on keywords, they're going to say, I'm going to bid less money. Why would I bid more money when a lot of my links aren't being clicked on because nobody's clicking through because they're getting all the information they need from some sort of web scraped AI result at the top? Absolutely. So you're seeing great engagement.

4:53Actually, the company talked about the best query growth they've ever seen, meaning the best engagement they've ever seen in search growth. So that's the fantastic part. The not-so-fantastic part is that fewer of those users are clicking on links and going out, and that's the monetization event. That's the revenue event, both for the advertisers and for Google. So that's where we see the disconnect. And we actually see a widening gap between the amount of users searching and the amount of users clicking. They call that pay clicks. That's the metric they use. But we're seeing a widening of that gap between the two.

5:34And that is likely to continue into the fourth quarter. Okay. You still have a$371. You cut your price target recently. You still got a$371 target. Stock's at$295. So you're still bullish on Alphabet. I want to make that very, very clear. There's still a lot of upside from your price target, the current price to the price target. But is that trend that we just talked about, Ken, is that going to change or can they make up that any loss in search revenue on the 20 bucks a month or whatever they're charging the people for Gemini? Yeah, absolutely. So, look, there are multiple parts to the Google business, but let's stick on search.

6:10On the search front, again, the most important thing here is that users are using search, are engaging in search more than they have ever done before. And I think that's the best. That's the starting point. From there, we have a monetization problem, and we've got a transition to AI search, which will take some time. We think by the middle of next year, we will start to see some improvement in the revenue trend. But investors may have to be patient for a couple quarters. Very quickly, Amazon, you cover that. I know you've got a busy night tonight. The numbers are out. What are you most closely watching on Amazon, Ken?

6:48Yeah, I mean, everyone's really glued to the AWS revenue growth figure, right? We're looking for a number in the low 40s. I think investors 43%, 44 % revenue growth on AWS. And what we're really talking about here is a trajectory of the low 50s. If you go back 12, 18 months ago, the debate was whether they could grow low 20s, 18, 22. And here we are, you know, in the low 40s, talking about heading to the low 50s by early next year. So this is a name we really like here. This is a strict capacity play. These guys are resellers of compute capacity. And we think this is the play. It's really an infrastructure company if you think about the compute side.

7:34Ken Gorelski, great coverage there on Alphabet and Amazon. A lot more to talk about, but we'll get you on next time to do it. Ken, thank you very much. Have a great day. Thank you. All right. So let's broaden this out. Talk more about the markets, AI jitters, these stocks, the Fed, and what it all means for your money. Richard Bernstein is global head of macro at Janice Henderson Investors, and he joins us now. Richard, I don't want to make too much. Listen, I don't want to make too much over one day. Google's down 12%. That's a bad day, but the stock has still soared over the last couple of years.

8:06So maybe people taking a little bit of profits. Are you reading more into these moves vis-a-vis the macro market or these company specific events? So, Brian, it's great to be with you. Look, throughout my entire career, I've tried to describe risk as not being a single event. The risk is like popcorn popping in a microwave. Right. You hear one pop or another pop. And they're very disparate events and people treat them as one offs. But then the one offs start occurring faster and faster and faster and more closely together. And then eventually it's bing, bing, bing, bing, bing, bing, bing all over the place.

8:47And that's when people panic. But that they're using the popcorn analogy. That's when it's time to take the popcorn out of the microwave and actually enjoy it. That's when the big opportunities exist. So think about what's going on. We're getting what analysts are calling disparate events. They have nothing to do with each other, but we're getting a little risk here, a little risk there, a little risk here, a little risk there. That's the popcorn popping in a microwave. It's the early warning radar beginning to ping. And that's the sign that you should begin to diversify. Of course, nobody wants to because they're worried about missing out on the potential upside.

9:21Well, respectful. I'll take the other side. By the way, personally, not that it matters. I agree with you. I've been tweeting out for a couple of weeks. The market feels a little bit fragile as vis-a-vis these big moves. You know, you see big stocks moving 10 and 12 percent. That to me is a little bit odd. But you said sort of the warning signal. What are they warning about? So I think if you look at how portfolios are so concentrated right now, if you look at how even the indices are so concentrated and everybody knows this, This is nothing unique that I'm saying, but I think that there's risk in that one theme that everybody has piled into, and that's all that people want to talk about.

10:01AI, tech, that sort of thing. But I think what that also, if you turn that around, you say, well, everybody's focused on this one tiny little area, and that's where the risk is. That also suggests that there may be a historic opportunity in everything else. So I love when people say to me, you sound so bearish because you don't like tech and you don't like AI. And my attitude is, you've got to be kidding me. There is a historic range of opportunities here that people are not looking at. You've never been paid so well to diversify as right now. OK, where? Where am I? Where am I being paid to diversify, Richard?

10:40What am I buying? Right. So, Brian, we just released a whole report that actually I think came out today that talks about dividends and the compounding of dividends and how over the last 26 years the S &P Dividend Aristocrat Index has outperformed the S &P Growth Index. I'm going to guess not one person watching us right now knew that, but that is true. Compounding dividends is one of the easiest ways to build wealth through time. Right now, we're in a market environment where nobody cares about dividends. I would argue dividends are very, very cheap. Number two, if you're looking for super growth companies, so we would define super growth as companies that are forecasted to grow their earnings 25 % or more over the next five years.

11:26There are now over 200 companies around the world that have earnings growth trajectories like that. And here's the kicker. Seventy five percent of them, roughly 75 percent of them are outside the United States. So do you think people have been a little myopic about where growth is and ignoring that there's huge growth opportunities outside the United States? Well, the growth has been here, although I to your point, Richard, you look at like the German market, even the French market. We know all the problems the country of France is having, but the stock market has actually done reasonably well.

11:59So are you saying you're bullish on international stocks? Yeah. So Brian, our group at Janice Henderson right now has the largest non-U.S. overweight we've ever had in the history of our portfolios. That goes back 15, 16 years. You go back 15, 16 years ago, we were dramatically, almost entirely overweight the United States and nothing else. And now we've started to switch that. Wow. Also, let's talk very quickly, Richard. I want to talk about the Federal Reserve. Kelly and I were in D.C. yesterday. No change. Kevin Warsh making sort of these short terse statements. But you believe that he may be making a policy mistake and that may lead to opportunity for your clients.

12:44Correct. I think, Brian, I think the message that I would take from yesterday is that the Fed is now officially willing to accept more inflation. because the inflation numbers have been hot. Everybody knows that. The economic numbers have been hot. The Fed's own research shows that companies are desperately trying to raise prices and in a lot of cases are being very successful in doing that. That's the Fed's own research. So if they're clearly not data dependent right now, they're clearly hoping that inflation goes away, but they are willing to tolerate more inflation rather than less. I think that's a sea change in Fed policy.

13:27Richard Bernstein of Janus Henderson Investors. Richard, really appreciate your time. Very interesting. You may not be bullish on AI, but I will not be one of these people that says you are not bullish on something. It's international stocks in the short end of the curve. Richard, thank you. Thank you. All right. Take care. All right. On deck. Another record quarter for Raymond James. They're on a hot streak. And the CEO joins us here on set to talk about it next. Plus, Caterpillar scaring investors a bit today, but the CEO of Next Power says things are good in the picks and shovels of AI. And he is here to tell you why.

14:02The Exchange, back after this. With the Discovered Cashback Card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to Discover. Terms apply. See discover.com slash 5 for details. Hey, Fidelity. Can I get a second opinion on stocks in the Fidelity app? With Fidelity, it's easy to get an outside opinion from independent experts in a single score. And then? When you're ready, trade U.S.

14:45stocks and ETFs with no commissions. That's right. I am always right. Investing involves risk, including risk of loss. Zero dollar commission does not apply to customers designated by Fidelity as a professional equity trader. A limited number of ETFs are subject to a service fee of$100. See details at Fidelity.com slash commissions. Fidelity Brokerage Services, LLC, member NYSE SIPC. I've given my blood, my sweat, my tears to this island. What happened here? We came here seeking a great treasure. We've been out here for 14 years. After centuries of mystery. You have to hold the proof in your hands.

15:16The lifelong quest. Time to go get it. Whoa, what the heck? Has finally paid off. You found that in the money pit. This is what we've spent our entire lives searching for. The Curse of Oak Island. New season, Tuesday at 9. Only on History. All right, welcome back. Let's talk Tampa. And no, not for baseball, but for St. Petersburg-based Raymond James. That stock is higher after reporting record revenue for the fourth quarter. In fact, this is the sixth straight year, and I believe more than 150th plus quarter of growth. Let's talk about it all with Raymond James CEO, Paul Shukri, who joins us on set.

15:56Paul, welcome. Did I get that right? 150 quarters? 155 quarters. I shortchanged you by five. Yep. But six years in a row. Six years. Where is that growth coming from? Well, primarily from the private client group business. That represents over 70 % of our revenues. We have around 9000 advisors overseeing around two trillion dollars of client assets in the U.S., Canada and the U.K. OK, so you've got the investment banking side. You've got the advisory side. Are both sides right now growing? And if so, why? And do you see that continuing? Well, yeah, in the private client group business, advisory assets are growing 15 percent year over year, largely driven by net new asset growth, which hit a record up 88 % over last year with$98 billion.

16:45In the capital markets business, investment banking finished the year very strong. The pipeline has been strong for a couple of years now, but it really was taking a while for that to get realized with some of the uncertainty in the market, but really finished the fiscal year. And we're optimistic about the last quarter of the calendar year and entering into 2027 with our pipelines. Well, you know, as you might imagine, in this job, Paul, I have quite a number of friends and contacts that are financial advisors, registered investment advisors. And we kind of joke that sometimes they feel as much of like a psychiatrist or a family friend as they do an advisor.

17:22Today, Google's down 12 percent, not making that much of it. But you look on a day like the Liberation Day with tariffs or the markets crashed or COVID hits, whatever it might be. How important is it to have that buffer, that human being between you and selling stock where you want somebody to call and be like, I'm scared. And they're like, calm down. It's going to be OK. It matters, right? Absolutely. The human matters. Absolutely. We call it the power of personal at Raymond James. And having that human financial advisor, as you said, be a friend in many cases, a psychiatrist, really just a trusted advisor.

17:59Liberation Day is a perfect example where so many do-it-yourselfers maybe have emotionally in a knee-jerk way sold out of the markets on that day. Our financial advisors, we had almost record levels of rebalancing saying, hey, let's remember about your 10, 20, 30-year goal. It's so people have learned if you make emotional reactions to the headlines or social media posts, you almost always regret it. So financial advisor helps their clients stay the course and stay consistent with their long-term plan. Because you also may lose on both ends. And what I mean by that, and by the way, I want to be clear with the viewers, like the market may fall 10, 15, 20 percent in the months or years ahead.

18:37It probably will because it historically does. I mean, that's why stocks make a return, because you have to absorb some of the risk. But if you're selling into weakness, you will often mistime it on the way up as well and miss the best days, which historically are the days you make your long term returns. are they not? Absolutely. I mean, if you try to time the market day to day or try to time when to exit, also when to enter, you're almost always going to be wrong. I mean, we're almost 16 years into a bull market. And anyone who made major sales in the last 16 years, a lot of those people regret it because the markets have continued to be constructive over that period of time.

19:15So we just say, hey, focus on your long-term goals, have a diversified portfolio that's aligned with your risk tolerance, and stay the course despite the short-term noise. You brought up Google. Google's down a little bit today or a lot today. But if you look over the last two years, they're up 80 percent. So things are still going well. And if you look at the economy, whether it's the strong employment numbers that were reported this morning, the strong GDP, relatively contained inflation, a little bit high, but still relatively contained, we're pretty optimistic about the markets and the economy.

19:45Yeah, we're in our, listen, you know, we're, I'll admit it, we're in our little bubble here in New York, New Jersey area. This is not the rest of America, but I spent a lot of time and rural Wisconsin, a lot of time in your home state of Florida as well. Not 51 percent of my time, which is what would be better for taxes. But that aside, so you have a view from the ground where you are. Do you see a strong economy? Do your advisors, all over the country, do they report a strong economy? We had a conference earlier this week with a lot of our advisors from around the country down in Tampa, Florida.

20:19And I spoke to the advisors, or say, what are you seeing in the communities that you live in across the country? What are your clients saying? And I would say overwhelmingly that the sentiment is positive across the board. I mean, there's some concerns with the geopolitical risk and other things, but the investors and the advisors remain bullish and optimistic about the economy and the way things are headed. So we just talked about the power of personal, humans, but you have an AI agent. It's called Raymond with an AI. Very cute, by the way. Marketing people need a raise. R-A-I-M-O-N-D, very nice.

20:51What does that do? Does that replace humans? Because a lot of humans, not just at your company, all companies, are nervous about what AI may do to them or for them. Yeah, we are kind of contrarian in that view. We don't think that AI will dilute the human relationship. We think that AI will actually be synergistic and improve the human relationship. So what Raymond really does is help advisors, their teams, save time on the administrative task. so they can spend more time in front of their clients and their prospects developing those deeply personal relationships. So we look at AI as a real tailwind and fortifying the relationship, not diluting the relationship.

21:31Yeah, it does matter. So it sounds like AI, at least for Raymond James, is going to be able to free up some of the garbage time that none of us, even we all hear a lot of times doing administrative stuff, expenses, whatever it might be, stuff that doesn't generate interest or revenue, this will free people up to do more of the revenue generating, maybe more of the fun stuff, things that get them paid. Absolutely. And then that's what we're hearing from our advisors. Again, last week I spoke to advisors saying that they save six to eight hours a week with what we call meeting manager, which allows them to go through their workflow with the help of technology and AI to prepare for a meeting, to summarize a meeting, to come up with next steps.

22:11And that's all being empowered and enabled by AI so they could spend more time on the things that matter. Paul Shukri, Raymond James, it matters that you're here with us on set. Don't be a – it's a quick flight from Tampa. We appreciate it. Absolutely. Glad to be here. Thank you very much. Thanks for coming on. All right. Coming up, CNBC got an inside look at the country's only surviving state-owned and state-operated bank. Can you guess the state this bank is in? Is it in California? Is it in Hawaii? Is it somewhere else? We're going to tell you the answer ahead. Plus, as we head to break, want to look at two stocks.

22:46Marvell. Marvell Technologies, that's down 12%. Why? Because there's rumors or reports that the company may be in talks to buy AI company Lumentum Hold 'ems. Lumentum, its stock is soaring right now. Marvell is down. It's worst day since June. One stock up, one stock down on deal chatter. The Exchange, back right after this. With the Discovered Cashback Card, it's payback time when you earn cash back on everyday purchases. activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants.

23:27It pays to discover. Terms apply. See discover.com slash five for details. Hey, Fidelity, can I get a second opinion on stocks in the Fidelity app? With Fidelity, It's easy to get an outside opinion from independent experts in a single score. And then? When you're ready, trade U.S. stocks and ETFs with no commissions. That's right. I am always right. Investing involves risk, including risk of loss. Zero dollar commission does not apply to customers designated by Fidelity as a professional equity trader. A limited number of ETFs are subject to a service fee of$100. See details at Fidelity.com slash commissions.

24:01Fidelity Brokerage Services, LLC, member NYSE SIPC. I've given my blood, my sweat, my tears to this island. What happened here? We came here seeking a great treasure. We've been out here for 14 years. After centuries of mystery. You have to hold the proof in your hands. The lifelong quest. Time to go get it. Whoa, what the heck? Has finally paid off. You found that in the money pit. This is what we've spent our entire lives searching for. The Curse of Oak Island. New season, Tuesday at 9. Only on History. What a wild week it's been. Some of those stocks up big. Other stocks down about 30 percent right now.

24:41Here's how your macro markets look. You've got the Dow down about four tenths of one percent. But that's really misleading because actually, if you start, I know it's weird to say take out this stock. But yes, if you took out Caterpillar, the Dow would actually be higher. Caterpillar is having such a bad day that is dragging the entire Dow down. Sort of the AI complex is getting whacked a bit today. You can see Caterpillar down about eight percent, one of the worst days in a year. The company had an earnings beat, maintaining full year guidance. but saying it expects only moderate sales growth in the fourth quarter.

25:11By the way, ServiceNow, the software company, is the biggest decliner in the S &P 500. ServiceNow, that is not a misquote. ServiceNow is down 26%. It's now on pace for its worst day ever. ServiceNow posting weaker than expected results. Citigroup saying investors are worried about the immediate payoff for the company's, you guessed it, AI investments. Will they make that money back? Investors today saying maybe not. Now, elsewhere, shares of cybersecurity firm Fortinet, they're also down 22.5%. Again, an earnings beat, but gross margins came in below expectations. Could also be some profit taking.

25:50Keep in mind that Fortinet has more than doubled since January, heading into last night's results. But it does just go to show how sort of nervous parts of this market may be. Forget about AI. Let's talk about plastic sandals. Crocs having its best day in six years. Highest level since June of 2024. They posted an earnings beat. They raised their full year revenue growth. And by the way, we're not just randomly mentioning Crocs, but the Crocs CEO will join us, Contessa and I, because Kelly's out today, in the next hour on Power Lunch. We'll talk about Crocs. In the meantime, shares of trucking and logistics company XPO, They're slightly down, about 4%.

26:30The company's saying they are operating, though, more efficiently thanks to AI. And they've said in the past that they actually benefit from higher fuel costs. How is that the case? We don't know. But Frank Holland does. He spoke with the CEO, and he joins us now with the highlights. Frank. Hey, Brian, thank you very much. As you mentioned, XBO shares are pulling back on a slight miss when it comes to revenue. The company does see, as you just talked about, a revenue boost from higher diesel prices. But, of course, they also face higher costs from those higher diesel prices. XBO accounts many large industrial manufacturing companies as customers, including the aforementioned Caterpillar, also Ford and 3M.

27:04I asked the CEO, Mario Harik, about those customers and those sectors and how they're impacted by the volatility and higher cost of diesel. If you think of areas like machinery or heavy equipment or equipment for the agriculture industry or oil and gas or chemicals, all of these have been positive on a year-on-year basis here in the back half, Frank. And similarly, we've seen manufacturing pick up from an overall demand perspective. Now, we still have other sectors. Auto is a good example of that, where we have seen it be down on a year-on-year basis. And we also asked Harik about the AI build-out.

27:39XBL moves smaller electronic components they use in data centers and also other industrial equipment that's used in the build-out. We have seen that sector of the business be positive on a year-on-year basis. It's roughly the electrical component side of the business. It's called in the mid to high single digit on a percentage basis of total. And we're seeing that rapidly growing here over the last few years. So Harakad, are they seeing growth in both nearshoring to Mexico and onshoring back here in the U.S.? Big tailwind for LTL Trucking. After the bell, we get the last of the four major players to report their earnings.

28:10That's FedEx Freight. LTL, the old less than truckload, I believe that stands for. So diesel fuel. Obviously, I talk about it a lot. You talk about it a lot, Frank. You hit on it a little bit, but go into a little more. How is diesel affecting all this stuff? Well, first and foremost, you've done great coverage on just kind of the volatility in diesel and the real price versus the paper contract price. So when it comes to the paper contracts, at least the fuel surcharge for a lot of these trucking companies, it's jumped up more than 60 % year over year, according to data from Evercore ISI. So if you're a company like XPO, yes, you get to charge people more, but you have to handle the volatility.

28:46And sometimes you might be on the wrong side of it. More importantly, what does it mean for customers? Harak told me they're still moving goods. He's seeing demand that's still stable, especially in the back half of the year as we've hit new records. So I think that's a pretty good sign of a strong economy. The question is, when is the breaking point? He doesn't know. I'm not sure. I don't think you're sure either. No, I'm not sure of anything at this point, Frank. But it sounds like one thing I am sure of is that if you've got a management team that's good at managing the financials and hedging the diesel and being smart about the commodity side, That's going to be a huge win for investors, I think.

29:18I would think so. I agree with you. One other thing we talked about, we didn't have time to show this part of the interview. He said, if diesel prices just moderate a bit, that's going to be a huge tailwind for his business. Because, of course, the volatility impacts a lot of these different companies, like a Ford, like a 3M, like a Caterpillar that you were talking about. Because they have to not only deal with it for their business, their customers have to deal with it. And you can imagine a lot of customers might be pulling back because of higher diesel costs or just a higher cost overall for trucking, which is a totally separate issue.

29:45And then you wonder if they will lower prices when diesel goes down, which, you know, because prices always come down. They always go down. Here's the thing. The surcharge will be lower. But the question is, when the surcharge goes lower, that makes the overall rate lower. So does that increase demand, which also pushes up the rates? The higher the demand, the higher the rates are. So it's like that old thing. What's the cure for higher oil prices, Brian? Higher oil prices. There we go. It's like a throwback to our old 5 a.m. days right here. Except we're both more rested. We look better. We feel better, Frank Holland.

30:16Thank you very much. Appreciate it. All right, now let's get to Julia Boorstin with a CNBC news update. Brian, Defense Secretary Pete Hegseth reportedly fired the Pentagon's top military planner. CBS News reports that Army Lieutenant General Brett Sylvia was accused of allegedly leaking classified info related to the Iran war and the Russia-Ukraine war. The firing comes as President Trump says he's weighing the resumption of strikes on Iran after the midterms. Hungary's new Prime Minister Peter Magyar said today that appointing his predecessor, Viktor Orban, as UN Secretary General would mean the end of the organization.

30:52The current PM was responding to a Wall Street Journal editorial citing unnamed sources saying the Trump administration is pushing for Orban's appointment. Venezuela's acting president, Delce Rodriguez, said today that the country will hold elections, although a date still hasn't been set. The move comes after opposition leader Maria Machado returned to the country, putting new pressure on the interim government. Machado is expected to make her first public remarks since returning this weekend. Back over to you. All right, Julie Boorstin. Julia, thank you very much. All right, coming up here on The Exchange, an exclusive interview with the CEO of NextPower.

31:28They're an energy infrastructure and tech firm working, you guessed it, on the data center buildup. But as we head to breaks, with the markets down, guess what? There are some big-name stocks hitting all-time highs today. Lilly up nearly 6%. MasterCard up for Amgen Utility Con Ed. Pharmaceutical company Avvy all at record highs. There's always a bull market somewhere. I've heard that said. We're back right after this. All right, welcome back. Let's talk energy and power because NextPower reporting records, second quarter revenue and quarterly bookings. NextPower makes equipment software for large utility scale solar farms, battery storage and more.

32:11And earlier this year, it acquired battery storage provider Prevalon Energy expanding into the AI data center power market. Let's talk more about the company and bring in NextPower CEO Dan Sugar in a CNBC exclusive. Dan, it's good to have you on the program. Everything is going up. People have a little concern about margins. I'll get to that in a minute. Storage is going up. Batteries are going up. Demand for power is going up. How do we get your stock moving up? Well, Brian, we're really pleased about, you know, we're in the middle of an energy super cycle and solar and storage have been contributing about 80 percent of the power brought online in the country in the last year.

32:52And our backlog has tripled since our IPO four years ago. And what is really amazing is that these technologies can do things to help customers get online that the grid can't and a rotating machine can't. And so we're excited about our growth, our backlog, and we're going to keep building out with helping customers get on with these battery and solar with power electronics. Because demand for power, demand for storage, demand for a way to get that solar power to the end customer, that's only growing, right? So how do we get margins at your company? How do we get them growing as well, Dan? Yeah, well, we've been delivering.

33:37We focus on operating our business on an annual basis, and we've beat our plan year after year. We're on track. We've just raised our guidance on an annualized basis. What's exciting is we just brought on a new battery storage unit that the first quarter out of the block delivered$100 million of revenue and over$20 million of profit. And what's exciting is that what we're serving is a tier one plus hyperscaler with our hybrid power stabilizer product. And that sounds complicated because it is. And what it does is it essentially allows a customer to come on and use the grid and get their facility on quicker.

34:23And so that's very important for there's a lot of value for the customer. And as we build this business out, we expect continued growth in revenue, profitability as we keep beating our plan year on year. Well, speed to market is something we've talked about a lot with all the energy CEOs, utility CEOs and power company CEOs that come on CNBC. see, we just showed part of that operation. So Dan, so how much faster can your equipment and software help get something built and up and powered? Yeah, well, let's just talk about scale. So our company, since we founded it, we've delivered about 180 gigawatts.

35:04Now, by way of, that's as much power as Texas and California put together in the middle of the day. So These systems are at huge scale, and we're shipping upwards of a gigawatt a week. I mean, just huge amounts of volume. So we're definitely growing. As mentioned, we just had record bookings, backlog. We're continuing to grow. And what we've done is transitioned from a single product company to a platform company doing all things in battery and solar and power electronics to help these companies get on faster. We're seeing very strong demand, customer appetite to get these systems so they can get their facilities on faster.

35:49And it's not just data centers. It's also, for example, semiconductor and chip manufacturing facilities. We have operating up in Idaho, one of the largest systems in the state, where it's helping the utilities there actually serve these chip manufacturing facilities. And so I'm an electrical engineer by training. I worked at a large utility. It's just hard to build new transmission lines. So the grid we have is a grid we're going to be living with. What's great about new technologies with the battery, power electronics, and solar is we can basically help the grid and existing power generation like gas serve these customers.

36:31That's why solar and battery has been the largest source of new power in the grid for multiple years in a row. Next power is we've had national leadership here in the U.S. for 11 years and also overseas. We're serving 50 countries. So we're seeing this not just in the U.S., but overseas, Brian. It's fascinating what you just said, Dan. So go back into your previous life then. You said we've got to live with this grid. How hard is it to build or repair a new grid, to add new power lines? I've heard five - and ten-year delays on labor, aluminum, copper, all the things that go in the wires. How hard is it?

37:08Yeah, no, you're absolutely right. A new power line could take upwards of ten years. But the battery project I just mentioned, which is operating in Boise, from beginning to end, that project was one year. So in one year we were able to get this battery on. That helps utilities serve this huge customer and the existing customers on the line. What it also does is it helps absorb low-cost solar power, which is being generated in the middle of the day, and then use that solar panel well after the sun goes down. So now you have a two-for-win, okay? Customer can get online. Power is firm and reliable.

37:45But costs are lower because you're able to use low-cost renewable power, which is also clean, that's generating in the middle of the day. That's why we've seen the demand growing so strongly and why our company keeps meeting and beating expectations. You know, you're a smart guy, Dan. I was driving home last night from D.C., and yes, I drove. And I'm looking up. There's this giant orb in the sky. It's called the moon. It was so bright, it almost looked like the sun. And I thought, when are we going to start talking about moon power? And then I realized probably never. But it was a thought. Dan Sugar, CEO of Next Power, talking about the sun, which we like the sun.

38:21Dan, thank you very much. Thanks for having us on the program, Brian. You're very welcome. Did you notice the moon last night, folks, on the East Coast? It was real and it was spectacular. All right, coming up. We asked you earlier, can you name the state that is operating the only American state-owned bank? Where would you imagine that a socialist bank is located? We'll name that state coming up. By the way, got to mention the deal of the day. DoorDash is buying the parent company of Instacart, which for some reason is called Maple Bear. I don't know. They're paying$65 a share in cash and stock.

38:59That's an 11 % premium. It's interesting because Maple Bear stock is actually down. It's not moving. even though DoorDash is going to buy it. Maybe we'll find out a little more about why. We've got more on the exchange coming up next. Stick around. All right, so earlier in the show, a couple times we gave you a trivia question. In which state would you find a state-owned bank, effectively a socialist bank? North Dakota is the surprising answer. North Dakota is the country's only state-owned and operated bank. And if that surprises you, this might even more, It is a rather socialist concept, not just being embraced in the deep red state of North Dakota.

39:40It's also gaining new interest in the midterm elections. CNBC's politics and policy reporter Garrett Downs spoke exclusively with the CEO of the Bank of North Dakota and joins us now. I did not have North Dakota on my state-owned bank bingo card, Garrett. Yeah, I certainly didn't either, Brian. But North Dakota has had this state bank for over 100 years. And we went out there and got pretty exclusive access to the bank. They don't often allow national media to come in and talk with them. And we found a bank that is really popular with the Republicans of this state. You know, the governor of the state, Kelly Armstrong, a Republican, said, yeah, it's a little weird that they have this state owned hundred year old sort of socialist bank.

40:21But he's really glad the state has it. And, you know, Brian, it's a unique concept. It's spreading around as the midterms come up. And we've seen some candidates out there. Zohra Mamdani had a bill when he was an assembly member in New York to establish a state bank in New York. So we're seeing this idea spread, and they're all using the Bank of North Dakota as their model. Although I'd be careful because there's as many people on a block in New York City as there is in the entire state of North Dakota, and I say that as a compliment. How did this end up in North Dakota, though, Garrett? Like, why North Dakota?

40:54Well, yeah, Brian, it was really part of 100 years ago, the sort of socialist leaning farmer labor movement. They called it the Nonpartisan League in North Dakota. And they set out to set up state institutions because they felt like they were being taken advantage of by the sort of robber barons of the day in Minneapolis and Chicago. And they won power in the state. And two things they set up were this state bank and a state mill and elevator. And the bank and the mill and elevator actually both survive today and serve as an example of public banking that other folks are now trying to follow. Who are their customers?

41:28Like, where do they get their deposits? Yeah, so the Bank of North Dakota is the primary depository for state funds. So they don't have this sort of brick and mortar customer thing. They actually discourage that because they don't want to compete with the other states, with the state's other community banks. But, you know, they take in state funds. They make some nice revenues on those. Sometimes they deposit them back into the state. Other times they use them for investment, for critical infrastructure. Like we went out and visited a coal plant that the bank had a big role in financing that was about to go belly up.

42:00So the bank could do a lot. Socialist bank in North Dakota that's investing in coal. Every day I learn something, Garrett Downs, and I love it. That's what I love about this job. Garrett Downs, great story up on CNBC.com. Garrett, thank you very much. Thanks, Brian. All right. Take care. Coming up, AI is starting to cannibalize Google search a bit. So could the same happen to Reddit and Pinterest? Those stocks are down right now. But let's check out the Russell 2000. It's actually not down. It's the only major index that's up today. And the Russell 1000 value ETF. So value small cap stocks hitting an all time high today.

42:44First all-time high for that ETF since August. You've got ADT, Gen Digital, Norwegian Cruise Lines. Oh, and by the way, Crocs up 25%. And the Crocs CEO will join us on Power Lunch in about 20 minutes time. Their stock's making new highs. Markets are down overall. We're back right after this. All right, welcome back to The Exchange. Let's talk about Alphabet. It is the worst single day ever for the stock. Now, it's on a few things. But sort of the big theme is that AI may be starting to eat into Google's all-important search engine revenue. Julia Boorstin has a lot more in today's Tech Chat. Well, Brian, amid the rise of AI agents like Meta's Muse, investors are looking to understand just how much consumers want to engage with the human side of the Internet on Reddit and Pinterest.

43:31Reddit shares are down 28 % since its last quarterly earnings, in which it said that Google referrals were choppy. Now, amid concerns of Google summaries and the like cannibalizing Reddit's traffic, we're watching Reddit's thesis that there's increasing value to human-generated recommendations like those on Reddit's platform. Evercore writing, quote, decelerating and single digit U.S. daily active user growth over the last several quarters remain a key focal point. And we believe investors will want to see evidence that improvements in retention, onboarding feed quality and web to app conversion can offset continued search referral volatility.

44:11Now, for Pinterest, its stock is down 15 percent since its last earnings on expectations of slowing revenue growth. Pinterest has talked about how its AI investments are improving user engagement and advertising results. But Jeffrey says investors are likely to focus on user numbers, with its measure of web traffic declining in the quarter, saying, quote, that creates risk that strong financial results could be overshadowed by weaker engagement trends. With Meta's Muse AI agent launching in September, we'll have to see if Pinterest says all that activity on Muse is impacting the engagement of Pinterest users on its platform.

44:51So you mentioned Muse. So dive into that a little bit more. Do we have enough information, Julia, to know how much the Muse, and Muse is new, it's the AI agent for Facebook, how much Muse is starting to really sort of impact kind of everything? Well, we don't know yet. And you're right, Brian, that it is still very early days. But in Meta's most recent earnings, Mark Zuckerberg announced that Muse has over 10 million users and that the percentage of those that are making purchases through Muse are spending quite a bit of money. The average price point was$200. So the fact that people are clearly using Muse to shop and people often go to Pinterest with intention, they're trying to look for something to buy, something that they have their eye on, that there is similar use cases in terms of searching for something on Pinterest.

45:40Perhaps we'll see if there's a similar use case searching on Muse. So we're going to be listening very carefully to that earnings call to see if there's any sense that just in the past couple of months, they're seeing different user trends. Yeah, Alphabet down almost 13 percent, but meta platforms, it's higher today. Julia Borson, thank you very much. All right, so speaking of Alphabet, Alphabet, you know it's down. We've showed it to you all day long. Alphabet, it's on pace for its worst single day ever. And if you're looking at the technicals, it's now forming what some technicians would call a death cross.

46:12The ominous name implies that the 50-day moving average goes below the 200-day moving average. That's that blue line breaking through the orangish-yellow line there on the right. All right. We'll talk more about Alphabet. We'll talk more about AI and all of this on the other side of the break. Thanks for watching The Exchange. You've been listening to The Exchange. Make sure you're subscribed to get each episode every day, same time, same place. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S.

46:53and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts.