← CNBC's "Fast Money"
CNBC's "Fast Money"
A Consumer Canary In The Coal Mine… And An AI Bubble Warning 03/25/25
00:43:52
Shares of Walmart get hit as consumer confidence comes in at its lowest level in 12 years. Is the retail giant a canary in the coal mine for a potential recession? Plus One Chinese tech executive sounding the AI alarm. The bubble he sees forming, and why one top tech analyst still sees plenty of runway in an AI powered bull market. Fast Money Disclaimer
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- [00:00]
Melissa Lee
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- [00:32]
Capella University
At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at capella.edu.
- [00:50]
Melissa Lee
Live in the NASDAQ marketsite in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. A consumer under pressure shares a Walmart sinking as a new read on buyer sentiment hits 12 year lows. Is there still hope that the consumer can come to the economy's rescue? We'll debate that. And a big warning on AI from Alibaba chair Josiah why he's scared of a bubble forming and whether you should be too. Plus, is Copper telling a completely different story about the state of the economy. What options markets are saying about Tesla as that stock tries to mount a rebound and a big win for win as one billionaire investor ups his stake in the casino operator. I'm Melissa Lee, come to you live from studio. Be at the nasdaq on the desk tonight, Tim Seymour, Dan Nathan, Guy Adami and Mike Koh. We start off with what could be a consumer canary in the coal mine. Wal Mart tumbling more than 3% today on the back of the worst consumer confidence reading in more than a decade. Shares now down 6% this year. The conference board's gauge of buyer sentiment falling for a fourth straight month, while inflation expectations rose to their highest level in nearly two years. Less than 40% of consumers say they expect stocks to rise in the next year. That's 10 percentage points less than in February. And just 16% say they expect job openings to rise. The implications being felt throughout the consumer space, from dollar stores to department stores, luxury to athletic wear. Those stocks all seeing outsized losses in today's session. So does this latest data suggest chances for a recession are higher than we might think? Guy, what do you think?
- [02:19]
Guy Adami
Well, the Delinquency rates suggest you're already in a recession. I mean serious delinquencies, 90 days are over north of 11 and a half percent, which is the highest we've seen in about 14 years. The mainstream media is now picking up on this and I think it's concerning because we're not in a recession yet. You're seeing these rates, the highest growth rates since the great financial crisis. So I think it's a problem. And if you look at the homebuilding stocks and the way they've traded and some of the commentary out of them, it's problematic. And if people are concerned about their jobs to mentioned this last night, the last sort of the shoe to drop is the unemployment rate. If that starts ticking up, yeah, we're going to have problems here.
- [02:53]
Dan Nathan
It's all about jobs. And while the confidence numbers certainly give you some sense of where the consumer is ready to spend and housing numbers are showing some of that weakness and durables are showing it, it's really about whether you have jobs. And it's interesting because ubs who in a note out there today said that the consumer looks visibly tired and yet they're out there reaffirming 2% growth in 2025 from 2.3. So downshifting but not saying we're anywhere near recession. In fact, it's fascinating that suddenly we have people saying we, you know, whatever the percentages are on recession or north of 50% suddenly for the first time it's a very different view than what I think you're getting from the labor market. The labor market is not telling us that the Fed is not concerned about that either. So and I would echo the fact that this was slowflation. I mean this was, this was if anything the consumer confidence. Read into it what you want about the economy, but there's no question there was inflation in there. There's no question. You look at the 12 month mean inflation expectations. So one year out and they're up to 6.3%. They were about 5% back in November and they're you know, back pre Covid they were in the mid four. So inflation's back. The Fed has to be careful about this. But the economy is not falling apart.
- [03:59]
Tim Seymour
Yeah, well, I'll just say what's showing it, what's not showing it. Retailers, the st stocks are kind of telling you that right now we just got through their earnings period. You know, I think over the last few weeks or so and the stocks acted really bad. And I think you brought up Wal Mart here. That was One that was a very crowded trade. Costco is very tried to trade. No one cared about valuation on the way up. They certainly did on the way down. So to see a market like we're in right now and not see Wal Mart bounce at all, the flip side of this is that, you know, when you look at this consumer data we had the University of Michigan, I think two weeks ago or so, it really was split right, but split right down, Democrat and Republican. The Democrats thought it was much worse. The Republicans thought it was a lot better. I guess the risk to that is you look at this piece of data here and if it starts kind of coming together a little bit, if the housing market starts to weaken, if you see inflation start to pick up a little bit, then you're going to see kind of everybody be in that camp and then it's going to not be a great situation. Especially when you think about if the stock market starts heading lower and you have housing is kind of locked up, that wealth effect that you might expect in a good economy kind of goes away too.
- [04:58]
Melissa Lee
I mean, that's, you know, when Jay Powell was speaking after the press conference, Mike, he was ready to say that the U Mitch data was an outlier. It was one data point. Here we have consumer confidence and at a certain point all of this soft data, as it's called, goes into the hard data. And so I'm wondering what you think in terms of at what point does the market think, oh, it's going to be in the hard data. Do you think it's already going to be in the hard data?
- [05:20]
Mike Koh
Yeah, I think it is. There's a reflexive impact, of course. You know, I mean, as people sit here and watch shows like this one and they see that the data is coming in, you know, weaker than some people may have expected, I think that that's going to cause some pause where I'm kind of interested to see what's going to happen. We've got Lulu reporting later this week. You know, it's the consumer discretionary spending that I think is, you know, that's going to have the most flexibility. Right. So people going out and buying toilet paper, I mean, maybe they're buying smaller packages, but they're going to continue to buy it. Are they going to continue to do the discretionary spending? That's really the, the issue. Those are the people that have the luxury to continue to spend if they want to, but the flexibility to not do so if they are getting increasingly concerned. You know, look, if we do see a lot of government Spending cuts that is going to end up playing into these figures as well. There's only a certain amount of government spending cuts you can impose on an economy that was previously thought to get about 2.1% of GDP growth and not have a material impact. So those estimates coming in, I think that some of those, that trimming is actually a little bit conservative. I might actually think that you would trim it a little bit more. Maybe they just don't think they're going to get those government spending cuts.
- [06:30]
Dan Nathan
Yeah, I mean, interesting to hear where Mike's cutting back now.
- [06:33]
Melissa Lee
He's saying other people might cut back. They might buy smaller packages instead of buying like the bulk value packages or sheets.
- [06:40]
Dan Nathan
I don't know.
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Melissa Lee
I like, you know, rolls and like.
- [06:42]
Guy Adami
36, the big roll.
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Dan Nathan
So I get in trouble when I come home with the wrong kind of TP just to be, you know, some of the commercials are getting really racing.
- [06:52]
Guy Adami
On the, on the toilet paper front. But guys trade here. Interesting you should mention that, Melissa. So I do think people, and again, I do think it comes down to charge offs and delinquencies. And American Express will report, I think, on April 17, pull up a chart. You have not seen that dramatic itself in American Express in probably five years, but you saw it recently. Yeah, we've bounced off the bottom, but their delinquency rates are starting to tick up as well. And I think that's going to be a huge tell going forward.
- [07:17]
Melissa Lee
Not that I want to go back to toilet paper. You did it.
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Guy Adami
You did it.
- [07:21]
Melissa Lee
I think that she does this all the time. The real point is that, you know that there is a chilling effect on consumers. If you think about, for instance, if you're a federal worker and you think your job might be on the line, or you're a contractor tied to federal contracts, your job might be on the line. If you are a person who is here whose immigration status might, you know, you're not a US Citizen, you might be afraid of being deported. Or by the way, I got this from the CEO of a major company that I spoke to this afternoon. So this is not coming from me. But if you're out there and you think that you're, you know, you might be deported, you might lose your place in this country. You're not out there spending the way you were spending before. And that's just the effect.
- [08:00]
Dan Nathan
It's a devastating time for people. And I do think that there are people that are very nervous right now. And to the extent that spending is going to be affected, I would just get back to Wal Mart though. I love Wal Mart, I'm long Wal Mart but, but Wal Mart's trading 55% even after a pullback north of its 10 year P E. There's nothing cheap about it was priced like a growth stock. So at a time when you're punishing growth. Why? Why? I mean Wal Mart wasn't responding today to a consumer confidence number if you ask me. I think it was just the dynamics around what we've seen is an unwind of a crowded trade and I think sometimes they can be, they can look the same. I think you also have a dynamic here where you really do have discretionary stocks that have been torched for, for, for six months now. And I bring back names like deckers and you know those names that were trading as if they had AI and datacenter in them as well. So I think part of what we've seen over the last call it month but one of this, you know the velocity of this pullback we've all talked about it is something that has been rare and it's actually happened very quickly but it's happened in names where the valuation really didn't make sense and the rotation into names that, that actually are in some ways representative of the real economy. Don't tell you recession and how can copper be at all time highs if we're in recession? This is not just shenanigans with supply. I mean Dr. Copper is in some level a measure of economic at least growth or resilience.
- [09:22]
Melissa Lee
Talk about copper in a little bit. But I mean to your point about the unwind would have happened, I mean that goes back to the question of you go back to February highs and you wonder would we have seen that pullback? Is it because the data changed? Is it because we are afraid of consumer of confidence by CEOs turning on a dime, things like that or was it just that was the excuse to unwind crowded trades like the AI trade. Was today's confidence number an excuse to unwind the crowded trades like a Wal Mart?
- [09:47]
Tim Seymour
Yeah, well they didn't get that unwound either. If you think about it I really find it was kind of consumer related. You know it's funny on the copper thing, I mean you could say it's not reflective of economy that's about to go in recession and then you could go and guy will probably make this point. You look at gold, what is gold telling you? It's not telling you anything similar that copper is basically telling you that there's a lot of worry there from institutions, from central banks in the like. So, you know, I thought today they kind of held in there, given that sort of news. I just don't think investors are ready to pull the plug on the US Consumer right now. And, you know, you think about what we talked a lot about when the S and p was down 10% or so. You know, Treasury Secretary Bessant, they don't care about the stock market. Trump said they don't care about the stock market. They obviously do care about the stock market. It'll be really interesting to see if February or April 2nd comes next week. And they don't really kind of lay off on some of these tariffs and the stock market doesn't like and it's going back towards 5,500 because when it goes through the lows, if it goes through those recent lows, I think you're going to see a different demeanor from this administration.
- [10:43]
Melissa Lee
All right, let's bring in Terry Lundgren, Macy's former chairman and CEO. He joined, he now runs TJL Advisors and is executive in residence at Columbia Business School. Terry, great to have you with us.
- [10:53]
Terry Lundgren
Thanks, Melissa.
- [10:54]
Melissa Lee
When, when you see these consumer confidence, consumer sentiment numbers, how concerned do you get? When you were CEO, did you look at those numbers, think, oh boy, we're in for a slowdown here on the part of the consumer.
- [11:06]
Terry Lundgren
Historically, no, because there wasn't a direct correlation between how consumers felt at moment and how they spent moments later. In fact, I would say consumers have historically been really bad forecasters of what they will actually do in the, in the future. So, so I would say I wasn't worried about it in the past, but I think that's a little bit different today. And you all have touched on it just now in your, your conversation. My biggest worry, Melissa, is that this is just part of a package of numbers that are going to eventually come out that, that are combined will have show some concern. And the biggest one of all, and you touched on it to me, is jobs. You know, and so when consumers lack confidence and they're thinking about, you know, is this, is there going to be a slowdown? And is by the way, the person, my next door neighbor lost their job. I mean, I still have my job, is my neighbor lost their job, does that mean that I could potentially lose mine? And I think when that starts to filter into the psyche of the consumer is when there's going to be a slowdown, that's when jobs are going to be affected. Because, because obviously I'm, I'm talking to CEOs and they're thinking about the same thing. Do I invest in a consumer that has been on a terror for the last two years or is that going to slow down now and should I be a little bit more cautious in my, with my inventory decisions?
- [12:30]
Guy Adami
Terry, I've thought for a long time that what scares the jobs obviously, but what scares the consumer regardless of whether or not they stocks is a precipitous decline in the stock market. When the 6 o'clock news leads with big sell off in the stock market and when that takes place over a couple of weeks, we've seen consumer spending stop on a dime. Is that something you've noticed over your years or am I just making this up?
- [12:52]
Terry Lundgren
No, because I mean you know, even though. Well first of all, as you, as you all know there's been more participation in the markets from the average household income in the last five, six years than there has been previously. And so, so there's more people invested. But, but most people or many people who are working today have got a 401k or have got got company, you know, investments and, and so yeah, it matters and they think about that and they're counting on that. You know, they, they were counting on that plus the growth of their, their home as you know, their future nest eggs for, for retirement. And if those two both become in question, clearly that causes people to slow down in their spending.
- [13:32]
Dan Nathan
Hey Terry, it's Tim. While we're the traders and we're supposed to really have a sense of where the market has punished certain stocks notes and you're talking about say you know, dollar stores and saying you think that they're still really under a lot of pressure and one might argue they've, they've been de risked because these have been some of the worst performing stocks in the market over the last couple of years. I'm curious whether you think they are broken in terms of their model and at a time where Wal Mart is taking in more affluent consumers and really seems like they're winning in all segments and demos. Do you think the dollar stores are under more. We know they're under more pressure. Do you think that their model is challenged?
- [14:07]
Terry Lundgren
I do, but I think you know, part there's a lot going on and you touched on it. I mean I know you're all, you were all concerned and commenting on the Walmart stock performance today and perhaps you know, you can, you guys know better than most about whether they're overvalued or not in terms of PE multiples but there's such A strong performing company on so many levels. I think with miles to go before they sleep, I mean I just, just watch what they're doing on an innovation standpoint and they're, they're continuing to reinvent what didn't necessarily work for them in the past. And I think they're going to get better and better and that will negatively affect other retailers are just too big, you know of a share of total, of total consumption for retailers. So they will affect the dollar stores and others. The dollar stores are affected in many ways though. I mean think about that. That lower household income consumer that we're talking about here, the lower and low middle household income consumer, that's what they live on. That's what they, they thrive on. That, that consumer, if there's you know, immigration concerns as some of those consumers, they're not shopping. I mean they're not in those stores and exposing themselves and out there spending money on discretionary items. So you know, is it broken? You know, I think there's a lot of issues that is affecting the dollar store category right now. It's going to continue for, for some time.
- [15:27]
Melissa Lee
Terry, this may be an unfair question, but I'll go ahead and ask it anyway. And that, and I know you're not a stock but if you were forced to choose, would you choose Macy's the stock or Wal Mart? In this environment that's a tough one.
- [15:43]
Terry Lundgren
Because I own both stocks but Walmart because they're already doing well and I think Macy's is the nicest neighborhood in a difficult or the nicest home in a, in a difficult neighborhood if you, if you will. I think, I think the category of mid priced apartment stores has been, you know, under a lot of, a lot of pressure at both ends. The high end, the specialty stores, the you know, the brands opening their own direct to consumer opportunities with physical store as well as direct to consumer on. And so, so I think they've been under, under, under pressure but I think now you're seeing more and more of those mid tier, particularly the lower mid tier. If you, if I, if I, if I can point to a couple like pennies of course has been obviously under tremendous pressure. Coles been under a lot of pressure. I think making Macy's can actually take share from those but I think Macy's has some work to do first to get their house in order. I have a lot of confidence in Tony Spring that he's going to do just that. I've talked to him about his strategies, believe totally that he's on the Right track. So given the time that he's got, I believe that they will be able to take share from some of the others in the category.
- [16:51]
Melissa Lee
All right, Terry, always great to speak with you. Thank you.
- [16:54]
Terry Lundgren
Thanks, Melissa.
- [16:55]
Melissa Lee
Terry Lundgren. He also likes, by the way, T.J. maxx, Ralph Lauren, Coach Birkenstock, in terms of standout retailers and operators. Micah, what do you think?
- [17:04]
Mike Koh
Well, as far as Macy's is concerned, no disrespect, I have to say I wouldn't really be interested in picking up anything that is just declining on the top line. You know, you have a little bit of leverage on this balance sheet. Obviously they have a good cash position, probably about 1.2 billion bucks. But I don't see any reason to reach out in a, in a market that's chopping around like this and start picking up stocks that are seeing real year on year declines in sales in.
- [17:30]
Dan Nathan
A market where we've seen actually rotation into value, into real economy stocks, into equal weighted. So just look at the forms. The XRT or the retail measure has underperformed A, underperforming S and P by 13% since Thanksgiving or the day you're supposed to run out and go buy your holiday stuff. So I think the consumer remains under pressure. I don't think that we're falling into a recession. I think there also had been such pent up demand that in a lot of these discretionary categories issues and even travel, we've talked about this where it seemed like, okay, we'll spend money on services now we'll go on a trip. We're seeing some pressure there. We've heard from the airlines, they've all downgraded essentially first quarter. And I think that's something that doesn't change overnight. It's not just market sentiment here. I think this is a real shift.
- [18:09]
Guy Adami
Did you catch Terry Lundgren who by the way is out of central casting. Dropping a little Robert Frost on you. Did you catch that?
- [18:15]
Melissa Lee
No.
- [18:15]
Guy Adami
Oh yeah, he did. Miles to go.
- [18:18]
Tim Seymour
Come on.
- [18:19]
Dan Nathan
That's why central casting.
- [18:20]
Guy Adami
He looks great. I mean, that's a handsome man. I mean, if I'm just thinking like.
- [18:24]
Dan Nathan
Central casting, he's, he's impersonating something.
- [18:27]
Guy Adami
Not at all.
- [18:28]
Dan Nathan
I think people just like to men.
- [18:31]
Guy Adami
Terry Lundgren. With that said, tj I do. Very handsome. TJ Maxx has been bulletproof. It's actually sold off over the last couple of weeks. That has always been an interesting stock here.
- [18:41]
Melissa Lee
Coming up, mainland matchups. The details behind Merck's latest China deal and why the pharma space is going overseas to access new drugs. That's next. Plus doubling down on when the headlines, helping that casino stock cash in even as its rivals flop. We're talking everything gaming when fast Money returns back into.
- [19:01]
Tim Seymour
This is Fast Money.
- [19:02]
Melissa Lee
With Melissa Lee right here on cnbc.
- [19:11]
Capella University
At Capella University. Learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at capella. Edu.
- [19:27]
Melissa Lee
Check out the all new CNBC Sport podcast where sports business and investing collide from media deals to team valuations, private equity moves and more. Catch the biggest business stories on the CNBC Sport podcast. Listen on your favorite platform. Welcome back to fast money. Merck dropping almost 5% to close near session lows. The company announcing it will pay up to $2 billion for rights to an experimental heart disease drug out of China, the latest in a string of pharma deals for medicines developed by Chinese biotechs. For more on this and all the China deals, let's bring in Angelica Peebles. Angelica yeah, Melissa, this is just the.
- [20:02]
Angelica Peebles
Latest deal out of China from Merck. They did a cancer deal and an obesity deal with Chinese companies late last year. And just yesterday, Novo Nordisk announced that it was licensing an obesity drug from a Chinese company. And late last week, AstraZeneca also announced licensing deals with two Chinese biotechs. So far this year, 42% of big pharma deals with at least $50 million upfront have come from China. That's according to data from Deal Pharma, and that is up from 30% last year. And get this, zero in 2019. We're seeing large pharma companies and private investors essentially importing Chinese molecules. It's a strategy that's less risky than an outright acquisition. Plus, it's also less expensive to buy one drug versus buying an entire company. Now, dealmakers tell me that the drugs coming out of China are better than ever before and Chinese companies can test their drugs faster and at a lower cost than they can here in the US the drug that Merck is licensing today is already in phase two trials in China. So Merck will need to test the pill around the world to get it approved in the US but they already have a head start.
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Melissa Lee
Mel, Angelica, was there, is there a sense that there had been a rush to do these deals either ahead of or just when Trump was elected? Because it seemed like there was just an onslaught of deals all at Once. Yeah.
- [21:15]
Angelica Peebles
It's an interesting point in terms of the timing, but I haven't heard that there's any correlation in terms of the Trump administration and these deals. And in fact, you know, there's this debate right now whether this is a risk or an opportunity. And of course, different people will tell you different things. Some people say this is actually good for American companies because maybe it'll make drug prices less expensive over time. If it takes less money to get a drug approved, you know, and you're importing these drugs and the American companies are getting the value. Obviously, obviously there's another side that will tell you this is bad for us biotech companies because maybe, you know, if big pharma companies like Merck are not buying those biotech companies, they're just going to China getting what they need, that'll be bad for the industry. So there's two sides of it, but we'll have to see how it plays out. And if the Trump administration does take a closer look at this.
- [22:00]
Melissa Lee
Angelica, thank you. Angelica Peebles, by the way, a lot of these deals are very cheap upfront. It's usually $200 million payment. So it's almost like an option.
- [22:09]
Guy Adami
Yeah, I think a couple things, you know, the performance say Merck was awful. A lot of the big cap pharma names, I think people in the pharma world is something called loe loss of exclusivity. And around Keytruda, there's a concern and I think the. Why are you laughing at me?
- [22:24]
Melissa Lee
It's like a Tim thing.
- [22:26]
Guy Adami
There's ARPU and those things. I dropped an eloe on you. Well, some people might say, you know what, I'm glad you explained it because I didn't know.
- [22:34]
Dan Nathan
That's what we do. We don't talk, we try, we don't talk.
- [22:39]
Melissa Lee
Anyway.
- [22:39]
Guy Adami
I mean, there's this gigantic hole in terms of key Trudeau. I think the market's concerned. They look at this as sort of a, I don't know, this is sort of a Hail Mary type of thing and it reeks maybe of desperation. I think that's why you saw the sell off.
- [22:52]
Dan Nathan
I think the, the combo of that L O, E cliff, which is out about three or four years, it's not in the next couple of years. In fact, they're going to grow 8 to 20% over the next few years. The numbers look great. But then Gardasol, which is their second largest drug, has also got significant competitive threats coming out of China and other places. So to me, Merck, two months ago or about a month and a half ago when the Gardasil News came out was a sell. It's been kind of doing this since. And I think you can probably, I think you're going to get it lower.
- [23:18]
Melissa Lee
What are you seeing in pharma, Mike?
- [23:20]
Mike Koh
Well, I mean, just taking a look at Merck, this one traded almost five times its average daily put volume today when the stock was higher, is actually trading close to 91. Obviously it closed a lot lower than that. We saw 7,500 of the May 2 weekly 91 strike puts trading. That was an outlay of about 2.1 million bucks in premium on a on a bearish bet. So definitely doesn't seem like the options world is is enjoying this news at all.
- [23:46]
Melissa Lee
All right. There is a lot more fast money to come. Here's what's coming up next. Winning big why one casino stock is seeing all the action while its competitors fall into the red. Plus sounding the AI alarm. A tech billionaire says a bubble is brewing in the AI space. But our next guest says the AI trade has to run. You're watching Fast MONEY live from the NASDAQ market site in Times Square. We're back right after this.
- [24:19]
Capella University
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. We'll teach professional skills to help you 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. Learn more at capella. Edu.
- [24:49]
Melissa Lee
Check out the all new CNBC Sport podcast where sports business and investing collide from media deals to team valuations, private equity moves and more. Catch the biggest business stories on the CNBC Sport podcast. Listen on your favorite platform. Welcome back to fast money. Wynn resorts up more than 5% at its highs as billionaire investor Tilman Fertitta expands his stake in the casino operator. The $1.38 million purchase revealed today brings his holdings to nearly 12% of Wynn shares. This according to FactSet. Meantime, operators like MGM Las Vegas Sands and Melco Macau finish lower on disappointing gross gaming revenue, or ggr.
- [25:30]
Dan Nathan
This is what we out of Macau.
- [25:34]
Melissa Lee
What do you make of that?
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Dan Nathan
Well, what I make of it is we're all waiting for this inflection in Macao on gross gaming revenue and it just isn't there. I mean, you're seeing week over week. There's probably you know, there's about 3% up, but month over month it's flattish. And year over year it's flattish. And this is again a Chinese economy that largely was under wraps a year ago. You'd think that these numbers would be better now. They're starting to see some improvement in the premium gaming segment and some of that is encouraging. But if you're an investor in the names that are most tethered to that part of the world, and LVS is a name I'm long and certainly is tethered to that part of the world, it's disappointing. I think if you're a long term investor, this is a great place to be and I don't know that you have to see outcomes change in terms of the macro there.
- [26:17]
Melissa Lee
Overnight win is very interesting. What Mr. Fertitta who is a friend of the show, friend of the network.
- [26:23]
Guy Adami
Very good friend, 13 million shares. I think he's up. You probably haven't. So you know, Tim just mentioned the turnaround, potential turnaround in China. I mean Jefferies, I think in mid February upgraded the stock one 18 hour price target. A lot of it is just around valuation. I mean the stock is just too cheap at these levels I think. And I think more and more people are going to come around to the fact that maybe you've seen a bottoming there. You get some inflection point in China in these Macao numbers and it should be one eighteen dollar stock.
- [26:50]
Melissa Lee
What do you think of when Mike?
- [26:52]
Mike Koh
Yeah, I mean if you're concerned about what's going on in China, you could of course take some exposure to the space. I mean you'd still have China exposure of course if you looked at a name like mgm. But it also is trading at a relatively cheap multiple. Of course you're still going to be impacted by concerns about, you know, discretionary consumer spending if you're looking out at the strip where they have more exposure than some of those others that we were just talking about. I mean I personally think though that you probably are going to get some other opportunities to pick some of these things up cheap. We've gotten a little bit of a bounce here, but I have a feeling that, that it could be a little bit of a head fake.
- [27:26]
Melissa Lee
All right, coming up, a major warning on AI1 Chinese tech exec sounding the alarm on a bubble starting to form. But it's not stopping our next guest from believing in the bull run. What he says is still in store for the trade when fast money returns. Back to missed a moment of fast Catch us anytime on the Go Follow.
- [27:45]
Gene Munster
The Fast Money podcast.
- [27:46]
Melissa Lee
We're back right after this. Welcome back to Fast Money. Another check on how stocks close out the session. The S&P 500 notching a third day of gains. The Nasdaq up about half a percent. The Dow Eking out a gain as well, up just 4 points. Shares a lift 2% higher today. Activist investor Engine Capital reportedly building a roughly $50 million stake in the rideshare stock and will push for a strategic review, improvements in capital allocations and an elimination of its dual class share structure and gamestop jumping. After hours, the company announcing its board has approved a move to add Bitcoin as a Treasury reserve asset. Stocks up five and a half percent. Meanwhile, Alibaba chairman Joe Tsai delivering a warning about the surge in investment into data center buildout. Speaking at the HSBC Global Investment Summit in Hong Kong, he said, I start to see the beginning of some kind of bubble. People are investing ahead of the demand that they are seeing today. Alibaba plans to spend more than $52 billion in AI over the next three years. But has the market gotten ahead of itself? Let's ask Fast Money friend Jean Munster. Gene, what do you think?
- [28:59]
Gene Munster
Melissa, if you're an investor in the air trade and present company included, I would be concerned about a recession. I would not be worried about Joe's bubble comments. That word obviously strikes people's attention, but I wouldn't be worried for a couple reasons. First, is that what they said as you mentioned that was back on February 20th, about that build out being three times what they've had over the past or the next three years equivalent to what they've done over the past 10. So consider that a month ago they had some pretty bullish comments about the AI hardware infrastructure. And of course, what we heard from the hyperscalers at the end of January was that they accelerated from a 20% expectation growth to just about 40. Now, in the world of AI, a month is a lifetime. And so you can build the case that despite what Alibaba said a month ago, maybe things have changed. And so what do we know? Micron's the only company that's reported despite their stock being down on margin guidance, they raised guidance by just under 4% for fiscal for the calendar year here. And so that's kind of the fundamental piece. But I actually think there's a bigger play in force and play here that gives me confidence about where the AI trade is. And this is not a race about the hardware build out. It's not about building an AI hardware infrastructure to power today's chat bots and tomorrow's agentic bots. This is a race and this is what the hyperscalers are thinking. This is a race to get to artificial general intelligence. And we're probably three years away from that. That's the game that they're playing. They don't care about what the demand is for these applications one, two years down the road. They want to get to general intelligence because at that point you have exponential value that gets unlocked and there is winner take most as they race towards that goal. And so as long as that target is on the horizon, I think you're going to see some magnificent spending from the Mag 7 on the AI hardware piece.
- [30:55]
Tim Seymour
You know Gene, when you talk about three years AGI, I mean it seems like an eternity again in this kind of generative AI trade. And I just wonder between now and then and I'm probably one of these people, even though I'm the silver lining guy on the desk, I'd probably take the over in three years to AGI. So I guess my question to you is like these what AGI Explain that. It's basically general intelligence. It could be smarter than guy Adami in 3 years.
- [31:20]
Dan Nathan
I thought tonight was the show really.
- [31:21]
Guy Adami
Well we should.
- [31:22]
Tim Seymour
But Gene, help us think about like what might happen on that way to AGI if we do have a recession, if we don't find the use cases anytime soon. I mean these companies have to be somewhat responsive to shareholder demands and at some point, and we learned this from their earnings just a few weeks ago when you saw revenue deceleration and you saw these companies stick to those, you know, capex numbers, shareholders didn't like it. They all went down 20% in a straight line.
- [31:47]
Gene Munster
So there's going to be a difference between what happens to the stocks in that scenario if we get a recession versus what happens with the fundamentals and the hardware trades on the stocks is they will go lower on a recession. Historically that has been the catalyst that started the bursting of bubbles. If we even go back to the tronics bubble in the 60s and 70s, that was the catalyst to that. And so. But your question is about what happens with the hardware piece and will the hyperscalers basically pull back as they start to see, let's say we do go into a recession. And I think that it's reasonable to think there'll be some cuts to that. But I think that's probably some of the last places to get cuts. But I do believe what we've seen over the spending from the hyperscalers of the last couple of years is a sign that they believe if they don't make these investments, they could be irrelevant in the future. And so I think that that intensity isn't going to change. I think again, if there's a big pullback, they'll make some adjustments. But I think that the CapEx spending on the AI hardware piece is going to be relatively protected because of that big existential risk that they're facing.
- [32:49]
Melissa Lee
But I mean, I understand that, you know, a recession you think won't impact them, but why, why aren't Deep Seek moments and I use plural, why don't, why don't they cause you to rethink how much the hyperscalers might spend or how much companies in general might spend? And not only do we have Deep Seq, but we also had Ant Financial saying that it used chips from Baba as well as Huawei to train an AI model that had compensated comparable results to using an Nvidia chip for 20% less.
- [33:19]
Gene Munster
Part of the reason is that when Deepsea came out at the end of January is that was known for the public at that point, but the hyperscalers knew about Deep SEQ before that came out. Probably knew about it for six months and they were still through that period. There were, there was a couple earnings revisions where they continued to ramp that up. And so essentially the substance of this is that if you believe that the hyperscalers are competent, if they're strategic, if they understand how this tech works, they're basically saying what they've said over the last nine months is that they don't believe that. They believe that the scaling laws will hold together that to continue to move towards general intelligence, that what we saw with Deep Seq was more of a head fake than it was relative to the substance of getting there. And so all these are use cases. These are powerful use cases for some what I would consider tier 2 use cases like with Deep Seek. But to be at that front edge, again, that's where the spending is, is, is, is cutting that front edge. I think it's still going to be robust for the next couple of years.
- [34:20]
Melissa Lee
Gene, thank you. Always great to get your thoughts. Gene, thank you. Of Deepwater. What do you think?
- [34:25]
Dan Nathan
I think we need to think about who Josiah is really talking to. He's talking to the Chinese tech market, he's talking to the leaders in China. He was making comments about how reinvigorated the Chinese tech community is now that she's had this chat with the business community. He's talked about open source creating a lot of excitement for Chinese tech. So that's what's going on. And this is Alibaba, who's now been, they've been given a green light by the way. They've been tapped on the shoulder and say, you're part of this after a period where we weren't sure that they were going to survive. So, you know, that's how I listen to Joe Tsai's comments. I listen to him as very positive for China Tech. I don't necessarily, you know, we can all debate that. We are debating since Deep Seek, but this isn't about Deep Sea.
- [35:03]
Melissa Lee
In the meantime, there's going to be a test of investor appetites when it comes to AI and the AI space coming.
- [35:09]
Tim Seymour
Yeah. So Core Weave, a company that we've been talking about in the private markets, they've raised like $13 billion to date. They're going public probably on Thursday looking to kind of $32 billion sort of market cap. And they're looking to raise 2, 3, 4 billion, I don't know, depending upon where it comes. But this is a company that's raised $13 billion between debt and equity already. The founders have been selling shares over the last year or so. I just look at this name. You know, this is a data center leasing business. Microsoft is 62% of their sales. About a few weeks ago, I think the information was reporting that Microsoft was canceling some of these data center leases. Some of the analysts who are going to be covering this stock, some of the are not on the deal. Goldman, Morgan and JP are the three leads already taking down the growth rates for this thing. So when I think about this company, it better do well if you are focused on, you know, what this trade means as the existing publicly traded companies. I mean this could be either really weighing on the space or it could become a meme stock for all intents and purposes, like who knows. But at the end of the day, I just don't think that this is probably a great test for an IPO market that has been really, really battered over the last few years.
- [36:15]
Melissa Lee
Coming up, Waymo to Washington. The Robotaxi company planning a DC rollout as its national footprint continues to grow. The impact it will have on the ride share space next and sticking the auto space. Tesla trying to stay plugged into its recent bounce. How options traders are handling the name with shares still off more than 40% from their highs. That trade in fast money returns. Welcome back to Fast Money. Waymo making moves through the capital, announcing that its Robo taxi service will expand to Washington D.C. now next year, the Alphabet owned rideshare service plans to start out with human operated test drives in the coming months before launching an automated service in 2026. Shares of Alphabet ending the day up almost 2%, but still down about 10% this year. Meanwhile, Tesla investor Cathie Wood reiterating her bullish call on that company, saying shares could hit 20$600 over the next five years. That's nearly 10 times where they closed the day. So Mike, what are the options markets saying about Tesla now?
- [37:13]
Mike Koh
Yeah, I mean this is always one of the busiest ones. It actually hasn't traded less than 2 million contracts any day this week. It's in terms of contract counts, it's about second, second to Nvidia. But of course the share price is more than double the price of Nvidia. And if you look at it on a notional basis, this one trades about 65% greater volume than Nvidia. In fact, actually if you took a look at a handful of Companies like Meta, MicroStrategy, Apple and Amazon, all of those are very active stock options as well. And combine them, volume. Tesla is about that kind of options volume. Now, of course, on this sharp pullback that we've seen, bearish sentiment did tick up. This is one that almost always saw calls outpacing puts fairly significantly, but that definitely fell off quite considerably as the stock fell as well. It seems to have stabilized a little bit as the stock has too. You know, personally, if I was looking at this thing, I'd probably look to start fading this bounce a little bit. I think that we're, you know, we're getting into ticklish territory for the stock. I would look probably to one by twos to offset some of that increased options premium to make my bearish bet. So buying one close to at the money put and then selling two against it, looking to put on trades where I'm not really laying out much premium because I think that whenever the stock gets these really steep pullbacks, what ends up happening is the Tesla enthusiasts who don't care much about valuation will come in and create some support.
- [38:32]
Melissa Lee
There are definitely some questions around the fundamentals for the car business. And then when you take a look at some of the pillars of the bull case, it's robo taxis, it's humanoid robots. But when you hear companies like Waymo going out there, you know, rolling out their service to different cities, you wonder how much of the bull case for Tesla and Robo taxis should be diminished and so therefore your future projections are also diminished.
- [38:54]
Guy Adami
No doubt. Dan talks about all time is competition coming across a swath of different things. And that move from 488 down to 210 suggested exactly that. But we've seen bounces before and collectively over the last couple of weeks. When it got down to those levels, we said you could easily see a bounce to 285. I think it closed at 288 today. You want to play stock market 349 is a 50% retracement of the all time high and recent low. Maybe that's the overshoot, but I'm with Mike Co on this one.
- [39:21]
Tim Seymour
You know, the higher it goes into this April 2, you know the delivery number, I mean the worse it's going to be. I mean it was really oversold. The negative news was just very prevalent last last week. I think we're all in the camp that it's not a good press on the short side. But the higher it goes into that, I think the easier of a trade it is to the downside.
- [39:38]
Melissa Lee
Coming up, invested and afraid. Why retail traders FOMO is outweighing fear and anxiety. The latest read on Investor sentiment is next. More FAST MONEY into welcome back to FAST money. As markets struggle in the early part of the year, retail investors may be looking to buy the dip. The Financial Times reporting the group has plowed nearly $70 billion into individual stocks even as institutional investors back away from the markets. But investors are still increasingly fearful of the market. According to Investor PD's latest investor sentiment survey, more than 40% say they're either hesitant or skeptical about the moves. Editor in Chief Caleb Silver joins us now to dig into the disparity in the data. Caleb, great to see you. How do you think they they wrestle with that, that they're so fearful but yet they're buying the dips?
- [40:32]
Caleb Silver
Yeah. Grip by FOMO Tantalized by Tina they cannot stay away from some of their favorite stocks, yet they're as fearful as we've ever seen them in the past four years. Even going back to the days coming out of the COVID pandemic, they're fearing a market loss by and large. Half of them are fearing a recession right now. But they are still some of them buying stocks, buying individual stocks, buying their big favorite stocks that they've been owning this entire time, even though many of them are down 10% or more.
- [40:57]
Melissa Lee
Melissa so they're going back to the trade, going back to the well, back to the well.
- [41:02]
Caleb Silver
Nvidia is their topic. It's been their topic all. And we asked them what stock would you buy and hold now and hold for 10 years? It's Nvidia. So they're still into the big names, into the companies that brought them this far. Even though we've had this massive sell off and you mentioned it, global fund managers are running the other way. Someone is going to be very wrong here probably very soon.
- [41:20]
Dan Nathan
Caleb, how about the places that people have been rotating into? I'm just curious about where your investor is, whether it's international stocks, whether it's parts of the equal weighted market. I mean, are they changing how they're investing? I know you just said that they're buying some of those, those fateful eights, but I mean, I think it's a case where there are other places that the broader market is investing. Are they doing the same thing?
- [41:41]
Caleb Silver
Yeah, they're looking at international stocks. They're looking at gold as well. They've been buying some of that. But money market funds jumping up the list not only with what they're buying and putting more into now besides individual stocks. Those that are chasing individual stocks, a lot of people looking for safety in money market funds and their outlook, by and large, those that are fearful about market returns, they fear the market is going to drop another 10% in the next six months. And a lot of them just don't have trust in the administration of the policies to carry their portfolios forward. We asked a lot of questions around trust this time. Do you trust the capital markets? Do you trust the policies or the policies and the tariffs that are going into place. A lot of them fear that it's going to hurt their investments in the long run.
- [42:19]
Guy Adami
Tariffs and reciprocity, that's the top of the list. Can you speak to that? Because that's, that's a new entry, as they say.
- [42:26]
Caleb Silver
Yeah, tariffs and reciprocal tariffs circle April 2nd. Maybe, maybe not. But just the fact that there probably will be tariffs or at least this discussion, this conversation, these threats that is obviously clouding the outlook going forward and that's their number one concern behind that. It's a recession. As I said, About 50% of our respondents fear a recession is coming in the next six months. Whether that's true or not, we don't know. But they're fearing that those tariffs are going to cause a recession, inflation and they're going to cause a weakening in corporate profits, which is why their outlook for the market going forward is just not that strong.
- [42:57]
Melissa Lee
Caleb, always great to speak with you. Thank you. Caleb Silver, we are set to take the pulse of the retail investor this June right here at the NASDAQ Marketsite. Our next Fast Money live show is set for June 5. A limited number of tickets are still available for this event, so watch the show, join us for a Q and A session. Share a cocktail with these guys here. Karen, buy tickets, find out more about the fun, informative event, click on the QR code on your screen or head over to CNBC events.com fastmoney up next. Final trades before we get to final trades tonight, we wanted to take a moment to say goodbye and good luck to a key member of our team here at Fast Money, Nancy Primavera.
- [43:50]
Guy Adami
Ala Caikos.
- [43:51]
Melissa Lee
Ala Caikos is moving on to do bigger and better things, but she has been the steady hand behind the scenes with us for keeping us all in.
- [43:59]
Dan Nathan
Line, keeping all the line, keeping the train on the tracks, making sure when I throw up three seconds before the show that actually I can talk. She's been incredible. We're going to miss her.
- [44:09]
Guy Adami
But listen, we are family here. I mean, if you think you see us every night, but we have a lot of people behind the scenes. Nancy's been with us 12 years. She is family. Seen her get married, seen her two beautiful sons born. We're going to miss her a lot. I know personally, I will, I can speak for the rest of us, by.
- [44:26]
Melissa Lee
The way, she's staying at cnbc.
- [44:27]
Guy Adami
Oh, yeah.
- [44:28]
Dan Nathan
I don't like advice.
- [44:29]
Melissa Lee
She won't be here on a daily basis, but you know, she'll be with us still. Of course.
- [44:34]
Tim Seymour
She's the best.
- [44:35]
Melissa Lee
And she hates being up here, by the way, which is even fun for us on her last day. So congratulations, Nancy, and thank you. Final Trade Time.
- [44:44]
Mike Koh
Mike Coe well, I liked it at 190. I like it better at 170.
- [44:48]
Dan Nathan
Alphabet Tim Nancy, thank you for everything going.
- [44:54]
Melissa Lee
Dan yeah, thanks, Nancy.
- [44:56]
Tim Seymour
The L and Tim's blycep. That'd be lift. I like getting a little activist investor in there, guy.
- [45:02]
Guy Adami
You can show this to the kids at their weddings years from now. This is fun. Barrico G O L D melms all.
- [45:09]
Melissa Lee
Right, thank you for watching Fast Money. Thank you, Nancy. Mad Money.
- [45:18]
Capella University
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