Tech Earnings Preview, Top Analyst Calls, Digital Realty CEO Interview 7/27/26

[MUSIC] It is a big week for your money and it's starting out though with a bit of a whimper. Welcome to Power Lunch everybody. This week, the busiest week for earnings, also a big test for the tech trade. There we go. As four mega cab companies show off their numbers, we'll tell them how many billions they're spending on AI. Tom Lee is here on that and more plus oil down as the U.S. that are on pause more strikes at least for now. Goldman Sachs, Neil Metta is here with stock picks through all of it. And the data center read that just raised its full year guidance coming off its best week in nearly four years and partnering with Nvidia, Amazon and Microsoft, Alphabet, sorry, and Alphabet I should say, Digital Realty CEO and your power is here exclusively looking forward to that. But let's begin with this big week is more than $10 trillion in market value are set to report earnings. That includes Metta, Microsoft, Apple and Amazon. Others aren't just watching the main numbers. They're also listening for any change in AI spending plans and that's just the start. The Fed kicks off its two day meeting ahead of Wednesday's rate decision. Policy makers are widely expected to be steady, but the odds of a hike have climbed to about one in three, 33% out from just 16% a week ago. Joining us now, fun strats head of research, Tom Lee. He's also the chairman of Bitmind and a CMBC contributor, Tom. Welcome. Would you take that prediction market that's so to speak? Is there any real chance the Fed hikes rates this year this week? I think that the prediction markets and funds want a hedge on a binary event. That's why you got the 30% because someone needs to hedge something. But I'd say the probability is low. I mean, I wouldn't expect them to raise rates. What about at any point in the future? As you know, they're going to see how the data unfolds. I don't think it's stated dependence but a data responsiveness. To us, I think the underlying inflation story has really weak and because shelter is really weak and we'll see it tomorrow with K-Shiller. And if wages aren't pressure, then the real pipeline of underlying inflation that we're seeing now is just tariffs and oil, which aren't. Things the Fed has to nestly embark on a hiking cycle for. Because they're potentially, I don't want to use the bad word of transitory, potentially temporary, right? Yes. Oil is down right now because there's some talks and, by the way, tomorrow could be up again. We have no idea what's going to happen depends on the talks. But the point is if and when there is lasting sort of peace, oil will likely go back down. The market seems to want to push it back down. That's got to impact the Fed's thinking. Yeah, because then they just have to see this little bubble that they have to kind of manage through. I mean, I think in some ways they might just shrink the balance sheet instead of doing a policy rate change. A quantitative tightening? Correct. That's a better way to titrate. What they might say is like, hey, let's try to put some pressure on growth, but not to deliberately slow the economy. Is that any kind of thing that can really upset the stock market? You know, the stock market is going to ultimately see the idea that, hey, the Fed shrinks the balance sheet. And then that means they can cut rates. And so then they'll see the rate cuts is actually positive. So I think it's going to pave the way for future rate cuts, actually. So if the Fed is not the number one most important thing for the equity markets right now, what is? Well, I think that the AI trade remains the still the most important story. And people, of course, are having longevity doubts. But if someone goes back to '94 to 2000, there were many times when the internet story, and even stocks like Cisco, came under question whether there was durability. And I think we're in that questioning its durability at this moment, but I think it's still in very good shape. And I think the second big story out there is that margin debt is still needs to work off that high level of growth, just like what happened in Korea, which had a sort of a margin call. And I think that's why stocks are stalling here. But to me, I think AI still works strongly through your end. Perfect. Segway, we had this morning Steve Eisman was on Squawk Box morning, the famed investor. Here's what he had to say when he was asked the major question of the earnings season, which is what happens if big tech starts cutting its AI catbacks. In video, I think when they reported last quarter, had 85% revenue growth. So if the hyperscalers cut, it wouldn't be 85%. And maybe that would be healthy for the long term. But I think the market would go straight down on that news. Just curious for your thoughts, reaction to that. And whether you think that's even likely or discussing at this point versus what Google did, which was raised and still get punished. Yeah. Well, so on the one level, I'd say, I think Steve's logic, there's some logic to it. But the fact that many people are saying that is a sign that we're not at a top because people are questioning the longevity of the cycle. So I think that's actually a bullish thing. The second is, is it probable? That there would be the cuts because these companies still have access to the bond market and the bond market isn't denying them capital. So as you know, CFOs raise money when they can, not when they need to. So I think the spending visibility is going to be very strong. Whether it's even if they're debt funded, you're saying that's just another way that they're going to keep investing and the longer they keep investing, the longer this cycle goes on basic. Correct. The day CDS markets deny them capital is when then Steve's comments come into play. Well, how would we know would be the trigger? We've already seen credit default swaps and Oracle, for example, go up, Oracle's its own. And by the way, they're not high. They're just higher than they were. Want to make that clear. Oracle's its own thing. What else would you watch as kind of a tip off to that? I think if you start to see concession, so I think that all of these bond raises have had been very oversubscribed because we know there's a lot of cash on the sidelines and these are really good yields and they're offering good return. When the bond market is not willing to fund and then you see concessions, that's going to be assigned. And you'll probably see it in the brokers trading weekly, very weak. So I think it's not so almost watch the brokers stocks as an early potential to tell on the AI story. Because I imagine if you wait for the CEO or the CFO of the AI company to say it on the earnings call, by then the smart money will have already made the trade. Correct. Yes. So the brokers are, as you know, transaction sensitive. I do know that. Yeah. Of course you know what else is transaction sensitive, Tom? Crypto. Yes. And what's been happening lately is fascinating. Let's lift up that hood of the stock market look under it. Crypto ether, for example, I think you've heard about that. Yes, I have. And Bitcoin, they've been coming up. Semiconductor stocks have been going down. The dispersion between the two is the widest in years, if not ever. But correlation is not causation. Are those two things related or is it random but interesting? Yeah. Well, the price of crypto is not following what people expect. Because they're saying, hey, the Fed could be hawkish. So crypto should be down. Oil prices are high. Crypto should be down. And of course, AI's trade is still healthy, but crypto is actually rising. I think that it is a sign of a couple things happening. One is that I think the crypto market probably has bottomed. The price ratio of Ethereum to Bitcoin has been going up even though the Clarity Act looks like it's really being stalled. You know, the odds of passage this year have dropped to in the 30% range. Do you want one more time ask why the Clarity Act needs to be passed? What does it do? Yeah, the Clarity Act creates a national body to govern crypto in the US. So a singular entity, which will be the CFTC. It's a big deal because if you're, as you know, the big banks and the asset managers are tokenizing assets and want to build stablecoin rails, if they have to be subject to state regulations or local regulators, it is going to give a lot of people cold. And are they for it or they're against it? It's many of the asset managers are for it. Charles Schwab, Franklin, Digital. Because this is a, and I forgive me if I have my years exactly right, I believe the SEC was created in 1934 think-ish. This is a 1934 type moment and the reason the SEC was created is because state regulators, you might have one rule in Indiana and another rule in Virginia and investors like I can't manage both these rules. Bitcoin is having all crypto is having that 1934 type moment, right? Exactly. And in addition, crypto is because it's turning money into software, a lot of things can turn into money, loyalty points, reputation. Then you want a governing body to oversee all this. Now Japan, Russia, Europe are actually passing Clarity Act like Bill. So the US is risking getting behind. That's why I think crypto is recovering because outside of US it's being embraced. Even though you say you actually think look they had what a few legislative days left before the midterms, could this be a lame duck kind of move do you think? Well, I believe there's still many people who are hopeful that something can be offered. But it does sound like that a lot of concessions were given, but that those who oppose the bill still want to extract something else. And so, anything could happen. All right. Tom Lee, really appreciate your time as always, my friend. Thank you very much. All right. So oil is down and bond yields are down. And as Kelly said, we're two days away from the Fed decision on interest rates. And noted the market strategy, Ed Yardini says, the chance the Fed raises rates this week are actually rising. Rick Sandtelly will talk about that and more in today's bond report. Rick? Yeah, I'll tell you, I like what Mr. Lee said because I completely agree. There's a lot of hedging aspects that go into the inner workings of how Fed fund futures and probabilities work. You have the futures, the options, obviously you have the fixed income markets. But I think that the chances are much lower than the one in three probabilities that are on the CME websites now. Now if you look at a 12 hour of two year, which jump out at you as, wow, rates look like they're going up. Well they're going up, but they're still down versus Friday and it's a one to punch. We had a very solid two year auction at 11.30. We had a really weak five year auction that button up at one Easter. And you can see the two way punch and you can really see it when you pair up oil against the two year tracking, tracking, tracking, and boom results come out at one o'clock for the week five year. You could see the divergence there and it makes sense. Matter of fact, not only is it diverging, but consider the two years most sensitive to the Fed and the two years down about one basis point. Now the 10 years down about three and a half, it was almost matched earlier. So you see that we see a little bit more flattening that makes sense. There's a certain nervousness about the meeting, even though most don't expect a rate increase. They're not sure exactly how the press conference is going to go. Now if you look at a May 1st chart of tenure, it's all right there. We took out the May 19th high, this kind of the left of the screen on the right of the screen. 469's a fresh high yield close going back to January of 2025. However, today we did get up to the at 467. We tested the breakout, we're coming down, and even though yields are down today, we want to monitor that 467 is a pivot. There's still a propensity for these yields to act firm. And finally, these Fed fund futures. Okay, that's a two week chart. You see how it went down, down, down, down, when it goes down, it raises probabilities. Well, the last three or four days, it's sideways. So even though oil's down, Fed fund futures aren't really reacting to that, and that's something to pay attention to. Sully, Kelly, back to you. Thank you, Rick. We appreciate it, Rick Santelli. Let's get a quick check on shares of SpaceX hitting an all time low today below 110. The IPO price, remember, was 135. We'd like you to weigh in. Our power poll today is Will SpaceX shares a dip below $100 this year. Just scan that QR code on your screen to cast your vote. We'll reveal those results later in the show. I wonder which way would I go? I don't think it's going below 100. So feel free to challenge me, folks. After the break, we have a whole lot more coming for you. And exclusive with the digital real TCEO, Walmart getting named a top pick at Mizzouho and some key calls in the car industry today. But first, the big things before the oil companies report with Goldman's head of North American natural resources, we're looking forward to that right after this. Welcome back to Power Lunch Oil, dropping about 7% right now, crude here and overseas, saying it's biggest drop in two months. The U.S. and some Iranian leaders agreeing to pause fighting to try to really accomplish something with the peace talks. Keep in mind, based on what we've seen the last couple of weeks and months, fighting could resume at any time and send oil higher again. But right now, today, there is some hope for lower prices. And with that, maybe a little relief at the gas pump soon. We know the gasoline prices probably near you have been rising a bit. With this oil move today, prices should tick down a little bit in the coming weeks. While oil itself has moved higher the last couple of weeks, the refining stocks have made investors even more money. Names like Valera, Philip 66, Marathon Petroleum. And HF Sin Clare, Dino, are all at or near record highs. Let's talk about all of this and bring in Neil Metta of Goldman Sachs. He's been positive on the refiner's. Andy has been right. He is head of North America, natural resources, equity research and joins us now, Neil. A lot to talk about, big earnings out later on this week. Marathon Petroleum. Yeah. Mary Ann Mann and I know you're out there. You got to come on the show. Jersey Girl, by the way. New highs almost every day. You're still seem to not have the love they should for some of these refiner's you have. You've been right. What are some investors missing? I've covered the space for a long time, Brian, and I've learned through making mistakes of doubting the refiner's. These stocks tend to climb a wall of worry. At the end of the day, calling commodities is more about the supply side than the demand side. And there's very limited new capacity ads in the refining system over the next couple of years. Not tremendous demand growth for oil, but what there is is very limited new additions in the world. And so the market is very tight. So the value of refined products, most of our viewers don't buy a barrel of oil. Maybe some of you do. But you probably do by gasoline. You probably do use jet fuel. You probably do use bunker fuel for ships in some ways. Those, that's what you're talking about. Those are record highs. And so you think about the global system. will normalize over time, but just to a higher mid-cycle margin. So you think about what a crack spread is, it's the premium over the price of oil. The 10-year average has been about $15 a barrel. We think the new normal is going to be somewhere closer to $25 a barrel. We've been living in a pricing closer to $60 a barrel. But even if you go from $60 to $25, you still got these stocks trading close to a 10% free cash flow yield in many of the cases. And so we think there is a path for sustained profitability. Just let's hope now that these type of margin levels, I think as you think about the price of the pump, we're about $4 for US gasoline. We are at the maximum summer driving season right now. By the time you get to winter, you get winter butane blending in the system. People drive a little bit less in the winter as well. You will seasonally see gasoline prices move lower, all else equal. So you see refining margins going down. But you're still, you have a buy on Sinclair, you have a buy on marathon, you have a buy on Valero. So even with the lower margins, you're optimistic on the equities. Again, you explained it a little bit, but square it a little bit more. Because the curve is in backwardation, Brian. So while the front is very elevated, the backs of the refining curves are already reflecting some degree of normalization. But most importantly, from my seat as an equities guy, these stocks are discounting below what I would characterize as our new mid cycle for crack spreads. The stocks are discounting low 20s for a crack spread in New York Harbor. We think the new normal is in the mid 20s. And so that arbitrage creates about a 20% opportunity for an investor who is willing to look a year up. We have Chevron and Exxon earnings on Friday, so you won't be sleeping for now until the end of the year. And then we've got Conoco and Marathon next week. Shell, I think, is on Thursday. How big are these earnings going to be? Yeah, the incredible degree of profitability in the second quarter. We averaged $100 a barrel and refining margins were extraordinary. I think what's important is to get strategic updates from each of these organizations. For Exxon, the big focus for them is the Permian, where they have an unbelievable machine. They're at 1.8 million barrels a day. We want them to get closer to 2.5 million barrels a day by 2030. They've got a very good growth path. One of the key questions for Darren Woods and that leadership team is what they want to do from an M&A perspective, as they think about consolidating the Permian because Pioneer was such a tremendous success story. And for Chevron, therefore, big assets performed very well last quarter. There was a little bit of volatility that you reported on, Brian, at the CPC pipeline in Ukraine. But I think, as a result of some of the attacks, but ultimately, I think those four assets perform well and I think they'll show up a good quarter. Now I'm going to ask you all the big, fun questions that are very difficult to answer, which is, can we get around the straight-of-form moves? Can we just disintermediate it? Can we have more Venezuela's crude and what's happening on that front? Can we have more US crude, you mentioned? You think Exxon can actually increase its output by almost a million barrels by 2030? How much more can we do to kind of dramatically change the map like we were talking with Dan? You're going to about the map of global oil energy flows if this choke point issue is not soon going to be resolved. Yeah, I think an important exit point has to be the Red Sea, especially if you're going to get FIAL CTs. That doesn't make me feel better. And this last week was a step back. Yeah. Ultimately, there is enough supply to meet the marginal unit of demand. Oil will find a way to flow. I do think the marginal price that we will move to is $75 Brent, $70 WTI. Do we have to get those bear? I mean, I'm asking a really silly question. It's not silly at all. It's a great question. Can I answer it? If they don't have oil flowing also, the country goes bust. They run out of money, food and electricity. They're done. point. So they need, so I think that's your point about oil will find, they're going to find, the market is suggesting that. Yeah, and certainly when we look at the things that matter to us from the equity community, the 2028 curve, it's down close to that mid-cycle price, it's $73, $74 a barrel. So the market is implying some normalization, but as we think about the long term, there's some pluses and minuses that will come out of the conflict. I think the fun plus side from price, higher strategic petroleum reserves for sure, and buying. Higher reserves, like record lows right now. In terms of strategic stockpiling will come back again. And I do think that we have to put a higher geopolitical risk premium and inventories are lower. The key products were on average 7% below the five-year average here in the United States for inventories. But on the other side, UAE is now out of OPEC, so I think that's going to add more barrels into the market. I think we're also seeing the flexibility of Chinese demand. So we came into this conflict thinking $75 was the right long term price. We come out of this conflict still thinking $75 right now. UAE was at 3.1 million barrels a day when they just left OPEC. I spoke to somebody in the know, no names, and I said, UAE is probably going to go to four, and they looked at me and they said, "Or five." Yeah. Million barrels a day. Yeah. What's your estimate? I think the capacity is there for them to grow over time towards five-four. I think we know the fields that can get them to four. Quickly. It is needed to make sure that they have a way to get it out, and that's why they're building that second pipeline. Absolutely. But from four to five, we'll have to see what happens in terms of onshore shale, concessions and development. One of the important developments that we'll get over the next couple of months is from EOG, who's leading a lot of that exploration work in UAE, and from what we hear, the opportunity could be very promising. EOG and other one of these companies, they don't do a lot of media, but EOG and Marathon, I want you both to know that you're welcome on Power Lunch with Kelly and I anytime. Love it. We'll get Neal on. We'll just do like a whole thing and we won't even have cameras on, or maybe we will. Neal Metta of Goldman Sachs always appreciate you coming on. Appreciate you. Thank you. Thanks. Thanks, Kelly. Thanks so much. All right, by the way, speaking of energy sign up for our new weekly and energy intelligence piece, I guess I have to call it a newsletter. It's called Power Insider. Go to CB. It's a magazine. It's not, it's too long. You're doing a lot of work. That's all I'm going to say. There's a lot in there. There is. And don't matter. The trim it a little. We'll see. But hit that QR code. Check it out for yourself. Go to the website. Use your phone. Do it. Everyone's free. Anyway, up next Walmart is the new top pick at Mizzouho and not because of its lower discount prices. We'll talk to the analyst who sees the upside. Next. Walmart shares are moving higher today, about 2% pop after Mizzouho reiterated outperform and named the stock as a top pick. The analyst says their delivery density is becoming Amazon like, which could push the industry standard to free delivery within a one hour. And Walmart shares are outperforming Amazon by double digits over the past year. Wow, five-year basis. They're up more than 100 points when you broaden that chart out. Look at that. So can Walmart overtake Amazon officially as the delivery king here to discuss is the author behind that note, David Belinger. He's Mizzouho executive director and senior equity analyst. David, it's great to have you here. Thanks so much. So that, let's just talk about that five-year stock out performance because I don't think many people realize we spend so much time talking about the Mag 7, but again, Walmart is such a behemoth. So you yet see that this is impactful. Their delivery business is really changing the game. Talk about that. Yeah, absolutely. So the stock price performance is absolutely incredible. A lot of rewriting in the name. You've had some creative business drivers like advertising and of help at. But as we look at the core business, we did a lot of work around this ultra-fast delivery network that Walmart has now. And they can essentially deliver to 60% of the US within about 30 minutes or less. So we stress test of that. We ran through every store address, scraped everything, ran through Claude. Wow. And there's actually some real viability to that. They're highly credible numbers. We think it actually downplays it a bit because about 80% of the Walmart store bases within a 20-minute drive of pretty much of large portion of households. What do they currently have on offer? Is this part of their product suite or this is what they're moving towards? No, they have this available today. It's 60% within 30 minutes. We think it could actually be 80% and there's some operational gap you have to close. How do they get the product? So we know Amazon. We now see their fleets of trucks everywhere all over the. How does Walmart get you the product? So they have, I think, a very, very underappreciated piece of this story is that Walmart has its own gig network of delivery drivers, the Spark network. We think there's more than one and a half million drivers active on this platform. They could get you, you know, such close proximity from the stores or from a dark store that gets you to that customer really quickly. So it's almost as if this 1099 gig worker model has really cracked the code on the final mile for Walmart. I think that deal that they made years ago for diapers.com with Mark Lour. They got Mark Lour in his team in Hoboken, New Jersey, who know how to do this as good or better than anybody. I feel like that kind of launched that. Maybe go into that a little bit, but I also want to ask you about their data business because you go back to that chart. And, you know, we all know Amazon is like an information company as well. Other things I read on Walmart suggest that maybe investors don't fully appreciate how much of a data company Walmart is. Now they're building out a heck of an ad network. Yeah. For sure, two pieces of that, so that jet.com deal was the biggest ecom deal at that point in time. They really propelled them into ecomers too. What they have today, it's about a hundred billion dollar revenue run rate in the US. And that excellent. What they paid for that. I think they paid like three, it was jet. I think diapers was a part of jet or whatever. Yeah. I think they paid three billion. I think go down as one of the best deals of all time. Yeah. Well, they got Mark in his expertise. He was there for a while, moved on, but they really took all those learnings and propelled them into the Walmart.com core business. And to your point on that the data piece, I think that's a really untapped part of part of Walmart today. They're working really closely with a lot of these vendors and give them real-time data on why your product is moving, where it's moving, where you need more inventory. So that that is an incredibly high margin business, maybe even a hundred percent margin business, where they can materialize a lot of this and monetize a lot of this this data to their vendor base. And now I mean the classic questions to ask would be, is it all priced in the valuation gets kind of the same thing we always talk about Costco over the years. I mean, is there any, what are the Black swans that could make this story not work so well? Yeah, you always got to go back to the consumer. Right. So there's been some consternation on the part of slowing sales growth. And estimates have been coming down into this quarter for Walmart, which I think is actually pretty interesting, because it's the exact opposite of what we've heard over the last four, six, eight quarters, just these sky high expectations. So that's why we think the stock is much more attractive today, taking it to the top pick. But you also have to watch out for other implications of fuel costs. Walmart moves a lot of inventory. They had something like $900 million of incremental costs that are going into the P&L that were unanticipated. Even with that, they've kept their annual guidance intact. She was like, you've got some upside within the guidance. And I think they're ramping up some of these alternative and creative businesses as an offset. And that's what people are really looking for in the back half of the year. That's why you got a $130 price target. And like you just said, it is your top pick in the space. That's right. I mean, we took our top pick off about a year ago. Walmart was down year to date. We think that this is a really incredible buying opportunity. And there's years of runway ahead here, especially with this dark store build out e-commerce build out, gives us more conviction in the double digit e-commerce. The dark store makes me want to go more. What's in a dark store that sounds so exciting and interesting? Well, no lights, apparently. David Belinger, Mizzouho, Senior Equity Analyst, David Graystuff, really appreciate it. Thank you. All right, on deck. Will the public and political pushback on data centers actually stop new development? Or is the build out here to stay? Maybe with some caveats. We'll talk about all of that. And more, they real power player, Andrew Power, CEO of Digital Realty. All right, AI's biggest spenders. They are in the spotlight this week. All investor eyes are going to be on Meta, Microsoft, and Amazon. Their numbers come out. And they're going to also say whether they plan to keep pouring billions of dollars into AI data centers. One of the biggest beneficiaries of that boom has been digital realty trust. Tickard, DLR. And it certainly has made some dollar signs for investors this year. Stock is up 25%. Digital realty, one of the world's largest data center landlords providing the infrastructure behind the AI boom as more than 2,000 customers, including Microsoft, Google, Amazon, and more joining us at a power lunch exclusive. Digital Realty presence, CEO, maybe the best-name man in the power space. Andy Power, good to have you on. Thank you, Brian and Kelly for having me. All right, so I think that the quite, I'm sure you get this question from investors. Is the buildout going to continue or is all the public pushback, political pushback, some big names pushing back? Is that going to have a real impact? The answer to question is yes on both fronts. So we're certainly navigating called community engagement in many markets around the world. But luckily Digital Realty's been doing this for two decades. And we're about building trust and earning that trust in our communities. As you said, but for 19 of those 20 years, people ignored it. People maybe didn't have the spotlight on quite so much, but that just raises the bar for our industry, which we're rising to occasion. We're opening our doors to make sure people understand that we're serving mission critical applications, think of everything that's running your business, financial transactions, supporting small and medium-large businesses, healthcare, manufacturing, your last segment on amazing company Walmart. That's using technology and data and that's the infrastructure we're building for. I'm looking at your stock chart and it's, it's, it's, you had this huge run-up kind of post-COVID, which maybe was just all the work from home. What, what was the post-COVID run-up all about? Because that was previously the all-time high. Then there was a re-rating and now you're back at basically all-time highs. Yeah, there are a couple things going in play here. One, we are a read, we play a dividend, we're very much linked to interest rates. So as interest rates caught, went down, you had a, our surgeons in our stock there. The COVID area ushered in the likes of teams in zooms and work from home and using more technology and certainly our demand called move lock step with that. I think this year we're off to a banner start. We just report our earnings last Thursday. Our record signings in many categories. We've signed as much signings in one half of a year basically as we did the whole last Friday. It reminded me good, what differentiates you from, we've talked to a lot of these Bitcoin miners that have turned into, you know, data center companies, I mean basically. Are you now direct competitors? I would say we're not the direct competitors and that's on the customers and the markets where we operate and what we do. We actually served 6,000 customers and we're across three major sectors of demand. Digital transformation, cloud computing, which is a half a trillion and rapidly going market, market, which you saw from Google's results. Exactly, it's making the cloud growth accelerate. And now AI is a big piece of that. 50 plus metropolitan areas, six continents, and really focusing on growing customers. Here's why I ask, I don't know if you saw this quote, I'm making the rounds. Mark Cuban was on the all-in podcast. Did you see this? And he said, a lot of data centers will be turned into pickleball courts. Meaning, and they're going back through the economics of the.com era. And you have to think about this every day, obviously, right? And so I'm getting point to your stock performance has over the years consistently compounded. He is now warning a lot of these data centers could end up being, you know, go by the wayside because the power will get more efficient and the compute will. So how do you think through these investment decisions? I'm not disagreeing with his thesis, but I don't think that's going to happen to digital real-tese data centers. The workloads we support in our four walls, the cloud, it lives in specific markets with proximity to GDP populations, eyeballs. We are signing long-term 15 plus year contracts, a two plus billion dollar backlog with those type of high investor rate credit customers. Because there's a lot of people trying to build data centers. A lot of guys that were in other businesses are now data center developers. They're all coming to where the money is. Andy, you know what I'm talking about? So I think I wonder if Mark Cuban is talking about these kind of people like, they were building a bridge in Arizona, but now they're going to build you a data center, and then in five years they're going to do something else. We're living in a backdrop where the demand is well-opacing the supply. It's multifaceted in terms of the numerous markets. It's global and in terms of its nature, but we're not chasing demand to each and every of the 50 states, the United States. We're focused on places where our customers work with us and need to live, and when our customers put our workload with us in Northern Virginia, it likely has to stay there and it can't be going to North Dakota or another state. Why not? Why does it have to stay in Northern Virginia? The location or latency sensitivity, speed of light to what that application is being used for. It actually matters. Even though we're talking about milliseconds, right? It matters to the customer base. I read the fastest internet in the world. It was actually in Newark, New Jersey. I don't know if that's actually-- Seriously? I'm not saying it is. I read that could be bunk, but because all the wiring that's coming in, so with that in mind, this is maybe where the problems have been, Andy, which is the electricians. Getting wires built. Getting a concrete company to lay the foundation, what is the supply chain looking like now? If I wanted to Kelly and I decide, we are now in the data center business. We're one of those people. We're going to open up a data center. What's my lead time? The supply chain for every element of the data center supply chain from utility construction components all the way to our four walls is as tight as it's ever been. How many years, though? Idea to the first-- the lights go on. You have to be locking in components from multiple years in the future if you want to production slots for generators, switch gear, and the like. And go back to your first question about the people. These are many year construction projects where people are building out on our campuses, then permanent technical jobs for engineers, electricians, and every job in one of our data centers, four and a half jobs outside the data center. And that's the pitch, I guess, to a lot of these communities who are pushing back on it, but you see no reason for that. And the water usage, that's just the enclosed pool. What else? Let's go down the list of worries. Water, politics, I don't know what I'm talking about. There's numerous places where we have been operating for many years that show this can be done the right way. Water is one of my favorite misnomer or myths. So we operate 300 plus data centers. That's as much water as 18, 1,8 California golf courses, and there's nearly 16,000 golf courses in just the United States. Wow. All right. The data center guys against the golf course. It's it's it is listen, what we're trying to do here on CBCs is just get people on to say exactly what's going on because there's a lot of misinformation that's out there and some of that unfortunately is coming at very, very high levels. Andy Power, Digital Realty Trust CEO, appreciate your time. Thank you. Thank you so much. Let's get to Frank Holland now for the CNBC News Update. Frank. Hey, good afternoon, Kelly. Brian Colberger, who pleaded guilty to murdering four University of Idaho students says he now wants to withdraw his plea and reopen that case. Colberger sent a statement to the New York Times in which he claims he is innocent and will fight the conviction. He was sentenced last year to four consecutive licenses for those murders. The IPO for Jersey Mike Sub has reportedly attracted investor demand for more than 10 times the available shares. That's according to Bloomberg. The Blackstone Back San Luis chain is expected to price on Wednesday and is looking to raise more than a billion dollars in the offering. Jersey Mike says more than 3,300 stores across the US and Canada. And the Gordy How Bridge officially opened up this morning, the critical route for trade and tourism between the US and Canada. It spans the Detroit River, Canadian officials held a ribbon cutting last week, but representatives from the federal government and from Michigan, they were uninvited after President Trump suddenly announced 50% tariffs on Canadian goods entering the US. Brian, back over to you. Competing bridge in Detroit to Canada. Frank Holland, thank you. All right, on deck, get your motors running because there were three big auto industry stock upgrades today, including one big EV maker not named Tesla, the stock and the analyst behind the call. Next. All right, a lot of action in the automobile space today, Rivian upgraded. Piper San Luis, the analyst likes Rivians, quote, "de-risk balance sheet" and the launch of the new smaller R2. The same call, the analyst doubled downgrading Jeep parent companies to Lantis, staying things make it worse before they get better. Let's get to the analyst behind that call. Alex Potter joining us now. Good to have you on. Rivian, obviously a favorite of car owners. It's been a favorite of some investors. Stockspin, kind of me. You like it a little more now. How come? Yeah, I like it a little more now. I think there's a couple things you touched on. The de-risk balance sheet, they just raised some money. That was something that we had been somewhat concerned about. Don't always necessarily want to own stocks ahead of dilutive capital raises like that. That's no longer concern. I think the second big thing was demand and the R2 launch. R2 is their big new SUV that's coming out. They mentioned in the process of raising that capital, a pretty good demand backdrop. They increased their guidance for deliveries this year. No major red flags to highlight with regard to the R2 launch. Those are a couple big risks that I think are no longer on the table. We upgraded the stock. Yeah, the R2 retail, 45,000 is sort of the early MSRP. Obviously goes up from there. I get that. That's a lot better than the 80 or 90 or 100 for the R1. How much is that lower price point going to matter for broader consumer adoption? Because the math is just the math that a lot more Americans can afford a $50,000 car than a $100,000 car. Yeah, exactly. I think that's a big deal. It's going to matter a lot for consumers. Something that this company mentions a lot, which I agree with, is in the US at least we don't have a lot of choice when it comes to electric drive trains in that price range. This isn't China, this isn't Europe. We don't have, obviously there's a lot of crossovers and S-eats that are priced in that range, but they generally have gasoline engines. Not a lot. It's pretty slim pickings in electric drive trains. And Rivian coming out with a product in that price range, I think is going to be well received. I think it's also good in the context that A-guess lean is more expensive now than it has been as viewers are likely aware. And we've got some incremental positives, I guess, on the regulatory front with California starting to incentivize EV purchases again, big market for EVs. So yeah, I think that lower price point is a huge deal. There's so many things I want to ask him about that I would need, you might need to come back every day, Alex, because I'm concerned about the US. Clear my calendar. Thank you. US automakers not being competitive in the global market. More and more of every day can ask about Chinese EVs and they see the low prices, maybe they want their hands. You like mobile eye, you think Stellantis things could get worse before they get better. Do you cover SpaceX? Do you have a point of view on we have this poll today? We said to people, do you think it's going to fall below 100 or not? Which side of that would you be on? Oh my, I do cover SpaceX. So I've covered Tesla for 10 plus years and we just launched coverage. a neutral on SpaceX. That's a whole other can of worms to get it down and offend us, really want to wait into that. That's why we need to wait below $100. Yeah, exactly. So yeah, but I mean, you touched on something that's really important, though. That's SpaceX and Tesla and Rivian and also increasingly mobile. I all have in common and that's this idea of vertical integration, sort of being in control of your own destiny. That's something that the old school automakers like Stellantis and most, especially the European OEMs don't have. And so that was part of the reason why we downgraded Stellantis kind of in the same breath as upgrading Rivian. Well, thank you for bringing it all together for me. And to be continued, I hope, Alex, thanks for making the time. Alex Potter of Piper Sandler. The results of that power poll are coming up. Here's your last chance to scan that QR code. Tell us your thoughts above or below $100 for SpaceX this year. And we'll be back after this. It's time to reveal the results of today's power poll. We asked Will SpaceX shares did below $100 this year. Today was a new all-time low, by the way, below 110 wasn't even close. 88% of you say yes. And only 12% Brian, think the company shares will stay above that level. Well, stocks at 111 hit 200 right at the open. So if you bought right then, you've lost not quite half your money, but I thought it almost 25 maybe. I don't maybe you did. Yeah, by the way, quickly, LeBron James headed to Philadelphia. You know that, what you may not know is that he may not actually live in Philly according to ESPN. LeBron James may live part-time in New York City and travel by helicopter to and from Philadelphia for practice and games not confirmed, but maybe playing in Philly, not living in Philly. Not sure the people of Philly are going to like that because Philly people, they're Philly people. You like Philly. I'm not sure you're more bid, but after what happened to Kobe Bryant, I personally would be a little shy about relying on a helicopter is my primary mode of transportation. Again, maybe that's an overreaction. Maybe it's fine, but I would be really surprised if he did that, but he's LeBron. He can do whatever he wants. He knows the rest. King James. All right. Thank you for watching Power Lunch everybody. Close and bell starts right now.