← CNBC's "Fast Money"
CNBC's "Fast Money"
A Big Call On Yields… And Databricks CEO On New Funding Round 12/17/24
00:43:43
Could the 10-year yield climb as high as 6%? The bold rate call out of one Wall Street firm, and what it would mean for this year’s rally. Plus A new funding round from one of the most valuable private companies, and what the CEO says could be next for the AI startup. Fast Money Disclaimer
Loading summary
Transcript144 lines
- [00:00]
Karen Feynman
At PGAM, our global perspective today unlocks investment opportunities tomorrow. Our 1,400 investment professionals provide global expertise and local insights to help you navigate the complexities of a changing world. We offer a diverse range of active strategies across public and private markets to help you identify opportunities and achieve your long term goals. Our investments shape tomorrow today.
- [00:29]
Steve Grasso
Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide and every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com creditcard based on the February 2024 Nelson Report.
- [01:01]
Melissa Lee
Live in the NASDAQ market site in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. Rates on the rise ahead of the last Fed meeting of the year. Will they keep heading higher and what would that mean for stock market valuations? We'll debate that. And could a make major EV merger be in the works? What a potential tie up between Honda and Nissan says about the state of the industry and what Tesla's dominance in the space might have to do with it. Plus, UnitedHealth shares slide to an eight month low. Shares of Pfizer get a booster shot. A not so bad guidance. The former CEO of TD Ameritrade gives us his read on the retail trader and the CEO of AI Darling Databricks, who today announced a massive $10 billion funding round is set to join us. Coming up, how he is planning to use that money and what it means for a potential ipo. I'm Melissa Lee coming to you live from studio. Be at the nasdaq. On the desk tonight, Tim Seymour, Karen Feynman, Steve Grasso and Julie Beal. We start off with a bold new call for the bond market. T row Price out with a note today Saying the benchmark 10 year yield could climb as high as 6%, a level last hit in the year 2000. Strategists outlining a number of fiscal risks at play, including a growing federal deficit fueled by Trump tax cuts, plus potential tariffs and immigration policies that could put even more pressure on prices. Rates have been climbing already this month, topping 4.4% at their highs today. But if T. Rowe Price is right.
- [02:21]
Tim Seymour
Price is right.
- [02:22]
Melissa Lee
Oh yeah. What could it mean for stocks? The major indices well down today. They're still trading close to records even the Dow logging its longest losing streak in more than four decades. It's less than 4% off its intraday high. Can the strength continue if yields push higher, Tim?
- [02:39]
Steve Grasso
Well, a little higher, yeah. And remember, growth scare would push yields lower and that's not good for the equity market. Where were we in September and October? You had a couple of bad payroll numbers. People were starting to question what was going on with the economy. And that's a lot worse for equities to me than a 10 year that could go to 5%. And if it goes to 5, I mean who knows what the psychological level is. There's a lot of empirical data and there's certainly a lot of history attached to when 6% was. And we were very different rate environment back in 2000. By the way, 2000 is also where we were the last time cash levels were this low on the equity market. So if you listen to Merrill lynch, bank of America and their fund manager survey, you know, we're at a sell signal in terms of equities, in terms of cash levels are low, optimism is high. So I'm not suggesting it's 2000 both from a rates environment or necessarily an equity environment, but it does tell you where we are. And I think from an economic perspective with the Fed on deck tomorrow, you've got BOJ this week you've got a lot of CPI data. I think it's a case where we want to see yields hold this level. I think I'd be very comfortable as an equity investor with yields up closer to 5% again, given the environment where we know the next administration has discussed dynamics that I think will be frankly yield friendly, meaning yields higher friendly. Go back to July of 2020 and you can make an argument that rates have been slowly moving higher on the 10 year. There's been some fits and starts. Carter would tell you they've done nothing in three years. I think that five year chart tells you there's upward pressure.
- [04:04]
Melissa Lee
5% on the 10 year. That's, that's fairly consensus out there. I mean IAG has that 5% mark. JP Morgan Asset Management. I mean a number of shops out there have 5% baked in for next year. But I guess the question is, you know, the T row note indicated a lot of sort of technical reasons why the tenure would go to including other countries not wanting to buy our Treasuries. And so does that matter that it's those factors that would drive yields higher?
- [04:28]
Tim Seymour
Well, you'd want yields to be higher because the economy is doing well.
- [04:31]
Melissa Lee
Right.
- [04:31]
Tim Seymour
Obviously you want that. And that's the scenario you're talking about where yields are higher because things are sort of, you know, the economy's growing and growing nicely. That 6% number, though, I think that that starts to get into a bad spiral. Right. And if the government needs to fund itself at six. Right. We're at, I think our average debt now is maybe three. Three at me, if that's materially wrong. But that's a very significant shift. So that they are talking about six right away, sort of a stop at five and then it could move to six. That six to me is a scary scenario. But I think the market can handle five if it's sort of for the right reasons, not Japan pulling back, China pulling back as buyers of US Debt.
- [05:17]
Melissa Lee
Yeah, Julie.
- [05:19]
Karen Feynman
Yeah, I agree. For the right reasons is the really important distinction to make. If you think about where we are right now, there's a lot of enthusiasm obviously in the equity markets and part of it was driven by lower rates. But part of it too is just the strength of the fundamentals. I think I have concerns for particularly what we see in small cap. A lot of these smaller businesses are impacted by higher rates. Many of them are not able to finance on long term debt. They are typically on variable rate debts with their banks. And so that could be a real headwind for small cap. And so I think overall it's not a terrible thing if we're at 5%, but it will hurt some businesses for sure.
- [05:57]
Melissa Lee
Yeah. See we just had Julian Emanuel on yesterday saying that small caps are his number one place to be in 2025. And so there's a collision course here. If rates do go to 6%, I mean, he probably would change his outlook on small caps, but that is a major factor.
- [06:12]
Julie Beal
Yeah, he would, he would change his outlook on small caps. But you know, obviously small caps are most cyclically tied to the overall economy. Is the economy doing well when we're at 5% in the tenure? Is unemployment static when we're at 5% in the 10 year? So there's a lot of things you have to look at. I don't think there's going to be competition. You know, Japan's 10 years yielding 1%. So I don't think there's going to be a lot of other countries where people are going to pull their money and go somewhere else. And remember what happened the last time yields spiked, they went to the safe haven of large mega cap tech. Is that going to happen again? Maybe. And when you look at the overall market, I Think we all probably have said on the desk that the market probably should retrace a little bit lower. It's had such a rip roaring rally coming out of the election. Maybe we're due for a little bit of a pullback.
- [07:05]
Melissa Lee
Mm. You mentioned cash levels and the last time that rates were high there was competition in the form of CDs and you wonder whether or not that comes especially as we have approached in our, at record territory levels, the want to sort of remove some of that money, take the risk off and put into something safer at a higher rate, even if it's 5% on this head.
- [07:29]
Steve Grasso
You know, I know I have clients that have a fair amount of money in interest bearing money market funds or just playing, you know, treasury ladders and whatnot, but have felt a lot of anxiety about not being fully into this rally because again, the place to be taking money out of money market accounts. Remember it was May of 2023 when suddenly we had Silicon Valley bank go bust and a lot of dynamics which had people on uneasy about certain banks and putting a lot of money into other places. But either way, we've been in a place for three years now where the cash has been an allocation or essentially money market. I think that's supporting equities here in terms of fund managers, institutional managers, they're not, you know, that's not what they do for a living. They keep certain amounts of cash. But this measure as a, as a, as a measure of risk, again, we haven't been here since January, March of or you know, February of 2011. These are awful, awful equity moments and at least precursing awful equity moments.
- [08:21]
Tim Seymour
Well, we'll see what the Fed does. Right. If they start to make that, that those bills less attractive because a lot of money's parked there. One cut I don't think is going to make the difference. But if we, what do we have in right now priced in two or three for next year?
- [08:35]
Melissa Lee
Three right now.
- [08:36]
Tim Seymour
Okay. So maybe that, maybe that sort of helps get that money over into equities. I'm not really sure, but I don't know. I just, I also like to look at, let's see what the deficit actually is. Let's see how they choose to fund it. What's the, you know, where across the curve are they going to be selling debt? That's going to be interesting to me.
- [08:58]
Melissa Lee
Yeah. You had mentioned so often, Karen, the inflationary pressures that we're going to see and A hawkish pause.
- [09:05]
Tim Seymour
Yes.
- [09:05]
Melissa Lee
Meaning they'll indicate that there's going to be a longer pause perhaps, or they're more inclined to not.
- [09:10]
Tim Seymour
Yeah.
- [09:10]
Melissa Lee
How about the idea of a rate hike in the environment you're talking about? I mean for all the reasons True outlined, the 10 year yield going to 6% would be bad.
- [09:20]
Tim Seymour
That would be inflation out of control. Right. Even with the economy growing. That if, let's say, let's the hypothetical. I think in that piece they talk specifically about that deportation is actually the thing that would really drive inflation. So you have huge labor pressure. Yeah, that, that would not be a good scenario.
- [09:41]
Steve Grasso
I just also bring it back to the equity market where you know the dynamics we were talking about with the Dow and is this down run if you, if you invest in kind of S and P value, this is a big ETF spy V. This is down 12 straight days. And we, you know, we've had some, some fun if not feisty conversations on this desk in the last week where you know, my argument is that the markets are going higher on the back of unfortunately those seven stocks. And I think we're in an environment where you're going to continue to see that. I think there's also a bit of a surge into year end that I think sets up people nicely to do some interesting things in the first part of the year. But it is a case where the parts of the market that we're getting people excited about, the breadth both of the market and also the strength of the economy, are things that tell me people could be a little bit worried about yields.
- [10:25]
Melissa Lee
All right. Our next guest doesn't think the 10 year yield will head much higher from current levels. Subhadra Joppa is the head of US Rate strategy for societies. General, great to have you with us, Badra. So by end of the year you don't expect 5%. How about for 2025?
- [10:41]
Subhadra Joppa
Unlikely.
- [10:42]
Melissa Lee
Okay.
- [10:42]
Subhadra Joppa
Because I think that what we're going to be focused on, at least for the early part of the year is tariffs and immigration and the inflationary impact of that. So if the Fed keeps policy on hold for a lot longer or doesn't deliver as many cuts, then what you're going to see is perhaps even a rally in the, in the long end of the, of the yield curve because you know, tariffs could be inflationary and you know, in some respects if you look at that as a tax on consumers, you could see that being translating into lower growth and lower yields in the back end. So it might seem like a contrarian view, but there's definitely a case to be made that the yield curve could actually Even flatten from here.
- [11:24]
Melissa Lee
Implicit in that forecast though is is the assumption that Fed, the Fed will adjust policy according to what is done by the President, what is done legislatively and that there is that sort of reaction when so many people have said, you know, tariffs are a one off, they're going to look through that. You don't agree they will adjust according to what is going on around them?
- [11:44]
Subhadra Joppa
Yeah, I mean, I think it is, it is a one off in the sense that you're going to see a step up in prices on the items that are being tariffed. It's not something that's going to have a multiyear impact. But that said, I think that, you know, the Fed doesn't have enough clarity on what's to come next year. So they're going to wait and see how things progress and then act accordingly. So you're going to see a little bit of a lag. But and that's why I think in some respects if you look at the summary of economic projections, I'm not sure how much real information there is going to be in tomorrow's update because they don't really know a lot about what's, what's coming up on the, on the policy side.
- [12:22]
Tim Seymour
So let me ask you, how much invisible pressure is there on the Fed to cut shorter and rate, to cut Fed funds rates because so much of the deficit is funded by these shorter term rates.
- [12:35]
Subhadra Joppa
Probably very little. I mean the Fed and the treasury work, you know, sort of separately and the Fed, you know, the Fed of course has a dual mandate. They're going to be concerned about inflation as well as employment. The treasury is the one that decides how they're going to issue the Janet Yellen treasury has favored more bills and hasn't really termed out the debt. We've heard from Besant that he might be more amenable to terming out the debt. But the concern as you were talking about earlier is that if you do see an increase in long end coupon supply that you could see that long end start to rise, you could see that term premiums start to build up on the yield curve. You really don't want treasury yields going to 5,6% in short order. I mean if it goes up gradually from here, it's one thing. But if there's sort of markets are spooked and you see this sort of sell off in the long end because of more issuance, that's something that I think you're going to have an impact on risky assets and you're going to see A tighter tightening of financial conditions.
- [13:36]
Steve Grasso
So in that context, when I think about US rates at times we've been somewhat a function of what's been going on globally. I was of the view that the BOJ was going to be in some way indirectly a driver of US rates. In other words, if rates in Japan go higher, I think rates in the US have to go higher. Any thoughts on this? Because again central bank policy also is becoming somewhat divergent. I mean Canada, their inflation rate slipped below the central bank's target. You can make an argument the ECB is going to be cutting more aggressively than the us. Central banks around the world are not aligned anymore and that will affect rates.
- [14:07]
Subhadra Joppa
Yeah, and you are going to see these divergences between all the different countries. Bonds for instance. Right now if you look at what 10 year treasuries are versus 10 year bonds, you're seeing that spread widen out quite meaningfully because the markets priced in a lot more cuts for the ECB versus the Fed. It's the same with the boj. But you know, the interesting thing about the BOJ is that the more they hike rates, the more, I should say less the demand for Treasuries because a lot of these domestic buyers are going to be buying JGBs as opposed to buying Treasuries. So the demand dynamic really changes. Again, that could be something that could put some pressure on term premium because we do rely on foreign demand for Treasuries to keep treasury yields lower.
- [14:50]
Melissa Lee
Right. Specifically for the Fed, what is the one thing you'll be looking for either in the SEP or in the press conference or any sort of what is the one data point or what is the one question that you would want answered?
- [15:05]
Subhadra Joppa
I'd like to see what their projections are for inflation for next year and how they square the circle on how many cuts they have pencilled in. I mean again, there's probably not going to be a lot of informational value because they don't know how things are going to play out next year. But that said, I think that that it is gives you an initial read to recalibrate. I mean, let's say they go from four cuts for next year, which is what they had in the summer in September, to 2. That leads me to believe that they're much more amenable just to keep policy on hold perhaps for a lot longer. Our personal views are they go from four to three because it's much more gradual. They probably don't want to be seen as moving the dots too much. But that's Something that I think would be more of an indication to the markets on where they're thinking on inflation and how they're likely to react if inflation is actually sticky.
- [15:54]
Melissa Lee
Subaru, thanks so much for coming by.
- [15:55]
Subhadra Joppa
Thank you.
- [15:58]
Melissa Lee
Julie Beal, your thoughts on the Fed tomorrow?
- [16:01]
Karen Feynman
Yeah, I'm really, I agree. I'm really curious about their outlook for inflation. Most importantly, the place I'm really fixated on is services. Inflation remains just too high for us to really get to the 2% target that they have set out. And unless we solve that, it's really, really difficult to feel confident that, you know, mission accomplished, drop the banner, we beat inflation. And I think that, you know, the chair Powell is really mindful of the mistakes of the 1970s, and I think that he's thoughtful about not wanting to be there and repeat that. So I think this kind of air of caution is probably going to be a little bit louder tomorrow, and I kind of look forward to seeing what they say about inflation for sure.
- [16:42]
Melissa Lee
All right. Well, UnitedHealth has continued weakness, a major driver of the Dow's longest losing streak since 1978. It is the worst performer in the index today, has tumbled more than 20% so far just this month alone. So where does the stock go from here? What's the prognosis secret? What are your thoughts here?
- [17:01]
Julie Beal
Yeah, I think in light of the events that have transpired and the bipartisan effort to really go after health care companies in general and in particular UnitedHealthcare, I think you're going to see larger payouts from the group as a whole, and larger payouts are going to squash profits and their margins. So until we get more clarity, I think it's sort of a no touch for me.
- [17:27]
Melissa Lee
Yeah. There are a lot of different aspects of legislation that are trying to make their way through that would target the PBM business specifically on top.
- [17:36]
Tim Seymour
Different than what Steve's talking about, The MLR ratio, Medical loss ratio? No, the pbm. I think this was today. Today's, yeah. You have to be very specific. Which drop in unh are you talking about? Because there have been so many. But today's. Was Trump really putting them in the cross, the PBMs. And for UnitedHealth, their PBM, that is a big part of their business. That's a little over 30% of their business. So. And profitable.
- [18:04]
Melissa Lee
Right.
- [18:05]
Tim Seymour
More profitable than other parts of the business. So that's painful. I mean, it's. As Steve pointed out, it's such a good bipartisan issue to pick because who's in favor of high Drug prices, right?
- [18:18]
Melissa Lee
Exactly.
- [18:18]
Tim Seymour
Drug companies maybe, and PBMs, I guess. But it's problematic for me with my elevance, which has just been terrible. It's been downgraded in my head for a while. But I mean, this is sort of to me feels like really Max noise. And maybe it's not all noise. We don't know what, you know, a lot of Trump policies out there. We don't know what exactly is going to happen. But I mean. Max Payne. Yeah.
- [18:47]
Melissa Lee
There is one PBM effort that could be included in a continuing resolution which will be voted on on Friday, which would basically the PBMs would get paid a flat fee as opposed to linking from drug prices from the rebates, which would be significant. And that could, I mean, that's Friday and that's for real.
- [19:04]
Steve Grasso
I think it is. And I think I'd be most concerned if I'm a CVS shareholder on this. Although CVS is priced in a lot of bad news. We know what Boots has done. I think 26 is probably a target year for this. I think this is a lot of rhetoric now. But, but you know, Laurie Calvini yesterday on the desk said, you know, investors are acting a little differently about this move in health care. This isn't just politics as usual around election season. It's usually before an election, by the way, you get this kind of concern because it's easy to attack them. This is post. So yeah, I don't need to chase. But unh, in terms of 30% growth and a multiple that is deserving of that stock gets attractive at some point.
- [19:42]
Melissa Lee
All right, coming up, shares of Pfizer popping on its 2025 outlook with investors eyeing the company's cost cutting measures. A comprehensive checkup on the stock. That's next. Plus a massive funding round for one of the most valuable private companies. But the CEO of AI startup Databricks says they'll do with the new cash and what it could say about the potential for an ipo. Don't go anywhere. Fast money's back in.
- [20:09]
Karen Feynman
If bonds are back today, why wait for tomorrow? At pjm, our fixed income strategies help investors uncover hidden value and unlock opportunities. Whether you're looking to enhance your income or diversify your portfolio, our broad range of strategies bring together local expertise and deep credit research to help you achieve your long term goals. PJM our investments shape tomorrow Today Stripe.
- [20:39]
Melissa Lee
Helps many of the world's most influential companies grow their revenue and build a more profitable business. Whether it's Hertz making checkout a smooth ride for their customers OpenAI answering unprecedented demand or PGA chipping away at back office inefficiency Stripe's financial infrastructure platform helps companies achieve ambitious goals. No matter what success looks like for your business, Stripe helps ensure the complexity of financial systems doesn't get in your way. Learn more@swepe.com Are you still quoting 30 year old movies?
- [21:11]
Steve Grasso
Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide, and every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com credit card based on the February 2024 Nelson Report.
- [21:41]
Melissa Lee
Welcome back to FAST Money. A boost in shares of Pfizer today after the company gave a 2025 outlook in line with Wall street expectations. Revenue expected to come in between 61 and 64 billion next year. Investors breathing a sigh of relief after disappointing guidance last year. Pfizer, though, did say it expects a $1 billion hit from changes to the Medicare Medicare Part D program. Shares still down more than 8% this year. The transcript of the call is very positive. They said they're very confident about this rev about the guidance, all the guidance and gross margins would be high end of 70%.
- [22:14]
Steve Grasso
That's nice and it's great for a shareholder Pfizer and by the way, a stock that's really at times we've said the stock is basing, it is basing, but it's been basing for a now maybe that's the definition of basing, but it was December. It could have been a year ago. We were saying around these levels the stock might be looking interesting now the stocks had a bit of a roller coaster in 24 times, looking like it was breaking out. The key here is that management has truly bracketed kind of up and down part of the Wall street expectations with this revenue 9 for 25 kind of right where people wanted to see it for a company that at times hasn't been able to do that. The problem is there's not a whole lot of specifics here. This is another one of these slightly amorphic hey, things are looking pretty good for us. We're feeling good and it feels like a Christmas present that you're not really sure what's inside the rack.
- [22:57]
Melissa Lee
But you don't believe them necessarily, even though they say they're very confident. They talked about it.
- [23:01]
Steve Grasso
I believe in, I believe in Santa, but I'M not sure. I believe in a tremendous amount of growth in 25 in Pfizer.
- [23:08]
Tim Seymour
So, I mean, it's nice. And certainly if they convey confidence, you want to really hope that they can deliver.
- [23:15]
Subhadra Joppa
Yes.
- [23:15]
Tim Seymour
Conveying confidence and not delivering.
- [23:17]
Melissa Lee
Why would you say we're very confident about the guidance unless you are very confident about the guidance? I mean, there's no reason to do that.
- [23:24]
Tim Seymour
Yes, that's true and that's why it was up nicely today. However, you know, I've been pointing out the last few days, Pfizer doesn't go down on bad news. So if I think it sort of bottomed, but if this really is a bottom, this was kind of a tepid response. Right. It's up nicely as a percentage, but only because it's so low. So I'm staying long. I am optimistic. I do think they will turn the corner. I like their optimism. I hope it's warranted.
- [23:52]
Melissa Lee
Yeah. These two burned Pfizer investors, Steve Grasso, are hoping for the best, but not assuming that it's going to come true. Is that the attitude you'd have about Pfizer, too?
- [24:04]
Julie Beal
No, I'm more positive and I get why they're, why they're, they have a tepid response to it. But if you look at what's the difference between a Pfizer or Moderna. Pfizer has 50 drugs that, that are just, they're ongoing developing, they have 20 ongoing trials, Paxlovid sales, up oncology, I think you mentioned that oncology, they have a huge pipeline in oncology. They aren't pivoting away from vaccines. They have something to pivot to. So when you, when you said, and I think you're, you're justified in saying they wouldn't be this positive unless they were this positive. You know, when you look at the stock, it's down 8%. Moderna is down 60%. I think people try to classify these two things as the same thing. They are not. And Pfizer, I think, is in the beginning of a very large bounce hire.
- [24:55]
Melissa Lee
All right, there's a lot more fast money to come. Here's what's coming up next. Merging lanes and businesses. Two Japanese auto giants may be coming together to take on EV giants like Tesla. What a deal could say about the electric landscape and how investors are plugging in. But first, brick by brick, one of the most valuable privately held companies is building up a big valuation. What the CEO says they'll do with.
- [25:22]
Karen Feynman
The money and if an IPO could.
- [25:25]
Melissa Lee
Be on the horizon, you're watching Fast Money live from the NASDAQ market site in Times Square.
- [25:31]
Steve Grasso
We're back right after this.
- [25:38]
Karen Feynman
At PJM, our global perspective today unlocks investment opportunities tomorrow. Our 1400 investment professionals provide global expertise and local insights to help you navigate the complexities of a changing world. We offer a diverse range of active strategies across public and private markets to help you identify opportunities and achieve your long term goals. PJM our investments shape tomorrow today.
- [26:08]
Steve Grasso
Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com CreditCard based on the February 2024 Nelson Report.
- [26:40]
Melissa Lee
Welcome back to Fast Money. Databricks announcing today $10 billion in financing, valuing it at $62 billion total. That makes it one of the most valuable privately held companies in a growing force in the air space. The data analytics company expects to generate positive free cash flow for the first time in the coming quarter. Deirdre Bosa joins us now for an exclusive interview with the CEO Ali Godsey.
- [27:00]
Karen Feynman
Deirdre, now, thank you so much. And Ali, thank you so much for being with us today. Let me put that number in context in another way. If this was an IPO would have been one of the largest by deal size of the last decade. So Ali, what does that level of investor demand tell you about the AI economy right now in databricks as role?
- [27:22]
Ali Godsey
Yeah, it just shows that there's a huge tremendous interest in one artificial intelligence. But also to what Databricks provides is a way in which you can really reduce your total cost of ownership to tco. And that's still top of mind because the Tale of Two Cities kind of there's AI companies, they're crushing it, but there's everybody else growing 10, 20% and they still want to reduce cost. So a lot of people still come to us so that we can actually reduce their cost. But they also, of course, also want the AI.
- [27:51]
Karen Feynman
Right. So, Ali, we spoke a few weeks ago and I asked you about a potential ipo. You said the earliest you would consider it was mid next year. Has this funding round changed your thinking around timing or market conditions?
- [28:06]
Ali Godsey
I mean, not really. I would say still the earliest theoretical possibility would be next year. But what this does give us is the ability to use Some of these proceeds towards liquidity opportunity for our employees. That's super top of mind for us. That is extremely important for us that we can actually help invest in our employees. And we're going to actually invest a lot of this back into the business. Especially now that, you know, war for talent in AI is crazy. So we're going to invest a lot in hiring talent. That's what we're going to use this towards. Acquisitions is another big area for us that we're going to focus on. And then of course we're going to continue hiring people in sales and marketing. That's super important for our continued growth.
- [28:46]
Melissa Lee
Right.
- [28:46]
Karen Feynman
And obviously, I mean, you guys are able to raise huge amounts of money in the private markets. How important is public market access to you?
- [28:55]
Ali Godsey
It is important, but I think the liquidity for the employees is probably the most important for us. And being able to provide that is also important. And what we signal to candidates who are thinking about should we join databricks or not. You know, there is a talent war out there. So this does help with that significantly. You know, we will be public as well. You know, I think the majority of the lifetime of databricks will be as a public company. So it's not a question of if, it's a question of when. And we will go.
- [29:22]
Karen Feynman
Okay. You know, a lot of public market investors compare you guys to Snowflake. You're both data analytics companies. What should public market investors, and a lot of those in our audience know about the difference between databricks and Snowflake?
- [29:37]
Ali Godsey
Yeah, I would say Snowflake is a great company and you know, they provide amazing capabilities, especially when it comes to what's called data warehousing, which lets you analyze your data and understand the past databricks. What we sort of excelled at for the last 10 years was using AI. So not just telling you about the past, but also telling you about the future. So that was one thing. And the second thing is we could really lower your cost because we were open source based so you didn't have to pay us huge fees for storing your data. It was mostly open source technology. Both of those two things I would say five years ago people didn't care that much about, didn't necessarily need to reduce their cost in the ZURB era. And secondly, AI, nobody really cared five years ago. Now with both of those there's tremendous interest. So those are the tailwinds that we have. And I would say that's kind of what differentiates us from them.
- [30:25]
Karen Feynman
Okay, last question for you, Ali. You were one of the earliest people talking about the commoditization of large language model models well over a year ago. Where are we at now? Do you think that advancement in AI progress is plateauing? What comes next is that the application layer?
- [30:43]
Ali Godsey
Yeah. What I would say is what happened is we had this thing called scaling laws, which simply means if you just throw lots of money at it, we had a silver bullet that would just make your models more intelligent. That scaling wall, we've hit that now. We can't scale anymore. It's a wall and we don't know how to use that technique to get much more intelligence out of AI models. So the game has shifted now to what's called in the industry inference, time, compute or test time scaling. So there's a new name for it. What that means is instead of building a gigantic model, you use the existing models and you have them produce more synthetic data on the existing customer problems that you have. And that way you can continue to push ahead on the intelligence sort of direction. So it's a new way and it kind of levels the playing field. Before, there were only three, four labs that you could join, which, you know, they had the funds to invest in these big scaling laws. But since we hit this wall now, this new approach, it's much more democratized, so you expect many, many more players to invest here and be able to push ahead on intelligence. So it's exciting times.
- [31:47]
Karen Feynman
Ali, it's always great to have you break down the trends and debates in the space at large. I'm excited to see what you do with this new funding round as well. Thank you so much for joining us and I'm sure I'll be talking to you again soon.
- [31:59]
Ali Godsey
Thank you so much.
- [32:02]
Karen Feynman
Mel. I'll take it back over to you, Deirdre.
- [32:04]
Melissa Lee
Thank you. Deirdre Bosa with the Databricks CEO. I thought it was interesting that he was so open about saying that he will be a public company. Just a matter of when he will be a public company.
- [32:13]
Tim Seymour
Yes. That was what really jumped out of me as well. The idea of instead of the having and hauling, we don't know, we're happy with our blah, blah, blah. And there's like, yeah, we're going to go, we're going. And it's just a question of when we're going to have the majority of our history as a public company.
- [32:26]
Subhadra Joppa
Yeah.
- [32:27]
Melissa Lee
Coming up, merging on the highway and in business. Nissan and Honda reportedly in talks to join forces as competition in the EV space charges higher. What that car combo could look like and how Wall street is plugging into the rest of the players in the space. Don't go anywhere. Fast Money's back into Missed a moment of fast.
- [32:45]
Steve Grasso
Catch us anytime on the Go.
- [32:47]
Melissa Lee
Follow the Fast Money podcast.
- [32:49]
Steve Grasso
We're back right after this.
- [32:58]
Melissa Lee
Welcome back to FAST money. Stocks falling ahead of tomorrow's Fed rate decision. The S and P and Nasdaq both down about 3.10of a percent. The Dow shedding 267 points, notching its ninth straight day of losses. That's its worst losing streak since 1978. Shares of Teva Pharmaceuticals surging more than 26 today to hit six year highs. Sanofi also moving higher. The two pharma stocks announcing positive results from the latest trial of their jointly developed treatment for inflammatory bowel disease. Teva has now doubled in 2024 while Sanofi is still slightly in the red. Meantime, a report out of Japan saying Honda and Nissan are talking about a merger to deal with rising competition in the global global EV space. The pair of automakers issuing a joint response to the report. Phil Lebow's got the very latest on this one, Phil.
- [33:43]
Phil LeBeau
Melissa, this comes from the Nikkei News association in Japan, which reported that the merger talks between Honda and Nissan could eventually create an umbrella corporation, if you will, a holding company, and might ultimately include Mitsubishi as well if they were to do this. According to the merger report, you're looking at a company that manufactures over seven and a half million vehicles. By the way, as you mentioned, both companies downplayed the merger report, saying, look, earlier this year we announced that we're going to be working together. That's where it is right now. Nissan is what's driving this more than Honda. But make no mistake, Honda is feeling the impact of pressure from China and the global auto chain. Overall, Nissan in November said it's going to cut 9,000 jobs, about 6% of its global workforce, slashed production by 20% and in the third quarter they swung to a loss of $60 million. So you're looking at this and you're saying, does this make sense? Well, on some levels it does make sense. These guys are not in the game relative to their Chinese competitors when it comes to EV production and that's part of what's driving this. Also keep in mind that with global size of 7 and a half million vehicles, they're scaled there. Admittedly they're not scaled in the EV department, but that will hopefully change if they can get together and make that a priority. And speaking of EVs, compare that 7 1/2 million vehicles in global sales between Honda and Nissan together to Tesla. This year, Tesla is on pace to sell a little over 1.8 million vehicles. What is Tesla's market cap? $1.54 trillion. Compare that with where you are with the automakers when you combine all them together. That's about three times combined of Nissan and Honda together. By the way, Tesla upgraded to outperformed by Mizuho today. Price Target $515. The AV technology has upside, according to Mizuho. And they also make a point of saying look where they are when it comes to Elon Musk and the Trump administration and the benefits that could be derived there. Melissa, I'll send it back to you.
- [35:52]
Melissa Lee
Yeah, I thought that was interesting. That's one of the first analysts notes that specifically said the alignment with Trump was a big reason why they're getting more bullish. Phil, thank you. Phil LeBeau, Julie Beal. This does seem to make sense. It would make Japan's auto market from fragmented to basically two players.
- [36:10]
Karen Feynman
Yeah, absolutely. I think when you're attacking a market as large as electric vehicles, it really makes more sense to be consolidated. You really need to have the scale not just in terms of the development, but in terms of just the natural resources. It's really important to do that. I think Honda has really demonstrated an ability to stay very flexible. They, they're really a leader in the hybrid technology. And as we see, there will probably be different kinds of restrictions and changes to regulation on CAFE standards and automotive. And I think Honda is really well positioned to flex hybrid up or down based on the regulations and really attack this market successfully.
- [36:50]
Melissa Lee
Tim, you have been bullish of Toyota. What does it do to Toyota?
- [36:54]
Steve Grasso
Well, I think it's the hybrid story is one that, as we're all talking about here is where I think it's pretty sexy. I think there's a dynamic that they're all pushing back on China, who seems to be really overly competitive on an, on a global scale. And I guess, yeah, I like Toyota. Toyota's story. I think part of investing in Japanese autos really is understanding the currency in some of the export markets. But I think it's a challenging time to be looking more broadly at the auto industry. I think there's a lot of questions on where we are in terms of demand and some of the profitability in the EV sector. So like Toyota, still like GM more.
- [37:27]
Melissa Lee
All right, coming up, not so stainless. Why steel manufacturer Nucor got hammered in today's session and the retail trader outlook for 2025. Former TD Ameritrade CEO Joe Moglia is in the house. He'll lay out the trends he sees in the new year. That's when he's back into welcome back to Fast Money. Bitcoin hitting new all time highs today topping 108,000 for the first time. This is retail traders and investors await tomorrow's Fed decision. For more on the outlook for retail investors next year, let's bring in former TD Ameritrade CEO and executive chairman Joe Moglia. He is also the executive adviser to the president of Coastal Carolina University and his former head football coach. Coach, good to see you. Welcome back to the show.
- [38:14]
Joe Moglia
Glad to be here a little while. I'm delighted to be here.
- [38:17]
Melissa Lee
We were just talking during the break and you're saying that you were the most bullish that you've been in 18 years.
- [38:22]
Joe Moglia
Why is it 10 years?
- [38:23]
Melissa Lee
10 years. Okay, 10 years. A decade.
- [38:25]
Joe Moglia
A decade.
- [38:25]
Melissa Lee
Why?
- [38:26]
Joe Moglia
Because of the President. I think finally we have somebody not final. We've got somebody in the office that is pro business, he's pro markets. He's become from somebody that wasn't crazy about crypto seven, eight years ago. Now he wants to be the crypto president. He wants us to be the center of the world with regard to crypto and he's going to blow our taxes. He's going to get rid of, he's going to minimize regulations and all those things are really positive for the markets. So for those reasons, only real concern that I've got is what takes place from a geopolitical perspective that we've got no control over. And I worry a little bit how he handles the tariffs might have an unintended consequence with regard to that. But as far as the markets themselves go, I am as constructive as I have been.
- [39:11]
Melissa Lee
You're pretty active in the markets yourself. You manage a lot of your own money and you're saying that 50% of your portfolio is really growthy stuff, including crypto. Cathie Wood kind of style investing tech stocks. How does this align with the view of the retail trader? Because you definitely have your pulse on the retail trader. And does your view on the retail traders view usually align? Have you noticed that over time or have there been different?
- [39:33]
Joe Moglia
I think one of the things, Melissa, that I do a reasonable job of, I think I explain things very simple to the individuals. When I ran Ameritrade, our goal was not to be there firm of choice. Our goal was to bring financial literacy to every family in this country. So we try to approach it that way. And up until Several months ago I was recommending we have a barbell. You were getting five plus percent in the front end of the curve with regard to your treasuries over here you've got whatever you think you should have over here and you start to adjust that as time goes on. I thought that was a pretty good strategy. That worked out well. I think today if you're an individual investor, I don't know how you could be in the market and expect to have good performance if you're not involved with technology. The Mag 7 is a good place to be. There are a lot of companies out there that are technology oriented, growth oriented, but we can't, we can't follow up on that. I kind of cathie wood on and then you've got the crypto play, which I think five years ago or two years ago that may have been overly aggressive. It's not that aggressive now. I think you've got to be involved those three areas.
- [40:30]
Steve Grasso
Coach, how would you describe the retail investor of today versus the retail investor of 10 years ago? And again, in the context of what you were doing at Ameritrade, the financial literacy, as you said, you set out to improve the tools that the retail has investor no longer. We've always invest money. I kind of feel like that's also been part of our mandate here is to make sure that we're talking to people that are not professionals and there are so many places to get information. But what is today's retail investor, do you think, doing differently and more effectively than they were 10 years?
- [41:01]
Joe Moglia
First of all, I commended you guys for a long, long time for trying to make things understandable for the typical individual that's watching your program. Part of the reason why Wall street makes money is because we tend to use terminology that makes it so complex. We can't figure it out. It's not that complex. But I think the individual investor today, Tim, is far more knowledgeable than the individual investor of the past. I think they have got much better risk management tools. They got far greater liquidity with regard to the market. That doesn't mean they can't make mistakes, but they need to do. I believe that too many families in this country spend more time trying to plan their family vacation than they actually do managing their money. And it's not that complex. So I think today they're more knowledgeable, they tend to be a little bit more aggressive. And the demographics has something to do with that too. So depending on where you are in the spectrum of life, you may not be as Aggressive as you might have been 10 years ago or if you a different age.
- [41:55]
Melissa Lee
Joe, it is fantastic to see you. Hope you'll come by anytime.
- [41:58]
Joe Moglia
You're happy to do that. Thank you. Thanks, Tim. Thanks, Karen. Really great talking to you.
- [42:03]
Tim Seymour
Anytime. I'm just a chatterbox.
- [42:07]
Melissa Lee
Everybody. Steve Rosso, what do you think in terms of being more bullish than, you know, he's been 10 years?
- [42:16]
Julie Beal
Yeah, I like that. Obviously I share that sentiment. I think this is the most pro business administration that we've probably ever had. But I do like the way that you start to look at this as a trading venue. If you look at Robinhood, Robinhood is up 227% year to date. IBKR is up 115% year to date. Charles Schwab is only up 12% year to date. You got to think out of the box. You got to think high growth, you got to think crypto and you got to expose yourself to a lot of different investment ideas that you otherwise would not have in the last 10 years.
- [42:50]
Melissa Lee
All right, coming up, a heavy metal forecast weighing on one steel producer. The profit warning out of Nucor that had shares melting away. The details when Fast Money metal.
- [42:59]
Steve Grasso
Yeah, I got it.
- [43:09]
Melissa Lee
Welcome back to Fast Money. Steelmaker Nucor hitting its lowest levels in more than two years today after issuing alarming profit guidance last night. The company saying expects fourth quarter EPS between 55 and 65 cents compared to facts that estimates of 89 cents a share. That's also drastically lower than the $3.15 a company reported just a year ago. And Julie, this really underscores the difficulty of this industry and, and U.S. steel's woes in terms of not being able to merge with Nippon.
- [43:38]
Karen Feynman
Yeah, absolutely. I think it's been a real challenge across the board. Nothing that they said was really that divergent from what we heard from Steel Dynamics. The difference is is even with the price action today, the valuation still isn't favorable. I'd prefer Steel Dynamics here, but overall this really reflects a the level of cyclicality in this business and be the lack of ability to kind of control pricing and costs. So I think overall I'm never going to be that excited about this space. But you know, looking on a relative basis, I think Steel Dynamics is a little better.
- [44:09]
Steve Grasso
The good news for investors is that the balance sheet is fine. In fact, they've been buying back more shares. I think you have a muted pricing environment. You have a dynamic where people are worried about demand and that's what adds up to the. I would have thought that this would have been priced in going into this kind of an announcement. But again, this is, you know, essentially it's a, it's a mid quarter guide and this is something that probably sends a more negative signal than people had already priced from a Stock that was $200 back in April all the way down to these levels.
- [44:37]
Melissa Lee
I mean this sector overall has been just terrible. Yeah, God awful. This whole, I mean the worst sector in the S&P 500 materials. Grasso, do you see any lift in 2025? Any relief?
- [44:49]
Julie Beal
Yeah, I think because both Presidents Biden and Trump were not in favor of the Nippons deal. I think you're going to have to see Trump go out of his way to offer incentives to the industry. And to Tim's point about it should be in the stock. If you look back in October, they warned similar to what they actually said now, they warned back October 21st. They need a couple of things. They need lower rates. They need more construction, more automobiles. The construction accounts for 60% of their revenue. So lower the rates and the construction should in theory increase. And they're looking for Trump to sort of keep away foreign steel and raise prices. However he does that, I believe he will find a way to do it. I'm long letter X and I added to it today.
- [45:39]
Melissa Lee
All right, up next, final trades. Time for the final trade. Let's go around the horn.
- [45:58]
Karen Feynman
Julie Saya I think we're finally seeing the bottom in transportation looking interesting.
- [46:04]
Melissa Lee
Steve.
- [46:07]
Julie Beal
Steel letter X bounce is coming.
- [46:10]
Steve Grasso
Tim that dividend Pfizer is also close to 7% and they say they could grow it.
- [46:15]
Tim Seymour
Karen yes, we talked about this yesterday. Selling some upside calls in Google and actually use the money to buy some downside puts for.
- [46:23]
Melissa Lee
All right, thank you for watching fast. See you back here tomorrow at 5. Meantime, don't go anywhere. Mad Money with Jim Cramer Stork Right now.
- [46:31]
Karen Feynman
All opinions expressed by the Fast.
- [46:33]
Melissa Lee
Money participants are solely their opinions and.
- [46:35]
Karen Feynman
Do not reflect the opinions of CNBC.
- [46:37]
Melissa Lee
NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed.
- [46:47]
Karen Feynman
On this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable, but neither.
- [46:59]
Melissa Lee
CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it.
- [47:04]
Karen Feynman
Should not be relied upon as such. To view the full Fast Money disclaimer.
- [47:07]
Melissa Lee
Please visit cnbc.com fastmoneydisclaimer Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world.
- [47:24]
Karen Feynman
We'll teach professional skills to help you.
- [47:26]
Melissa Lee
Pursue your goals like business management, strategic planning, and effective communication, and you can apply these skills right away. A different future is closer than you think with Capella University.
- [47:38]
Karen Feynman
Learn more at Capella.
- [47:40]
Melissa Lee
Eduardo.