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CNBC's "Fast Money"
An AI Realization Ahead Of Nvidia’s Results… And Insurance Stocks Get Hit 11/18/25
00:40:49
Amazon and Microsoft getting hit on lingering concerns over AI’s sky-high valuation. What analysts are flagging about the buildout, and what it all means ahead of Nvidia’s earnings report tomorrow. Plus Why one analyst says the weakness in health care stocks is a major buying opportunity, the sports betting drama between Draftkings, Fanduel, and the American Gaming Association, and the next move for nuclear stocks after a rough month for the group. Fast Money Disclaimer
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- [00:00]
Financial Advisor
What does it mean to live a rich life?
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Edward Jones Narrator
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Financial Advisor
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Financial Advisor
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Edward Jones Narrator
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- [01:04]
Melissa Lee
Live the NASDAQ Markets in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. An AI warning, shares of Amazon sinking as one Wall street firm raises the red flag on its artificial intelligence ambitions. What stage is that set as we get ready for Nvidia's earnings tomorrow and health care headaches. ACA tax credit credit set to expire in a matter of weeks. Some startling numbers on how much premiums could rise and what's at stake for the health insurers. Plus a shaky foundation for Home Depot after earnings. Could Eli Lilly be the next trillion dollar company? And investing in uranium, what to expect from nuclear stocks in the year ahead. I'm Melissa Lee coming to you live from Studio B at the nasdaq. On the desk tonight, Tim Seymour, Karen Feiderman, Courtney Garcia and Steve Grasso. We start off with a reality check for a pair of hyperscalers on on the eve of Nvidia's latest results, Rothschild downgrading both Amazon and Microsoft saying generative AIs economics are much weaker than investors realize. Analysts writing that management teams are getting way too much benefit of the doubt and that any missteps in AI deployment can quickly make investments in this massive buildout value negative. Both stocks were cut from buy to neutral. Nvidia, meantime, now riding a five day losing streak into earnings tomorrow. It is down over 14% from its record high. So what do we do here? Are these sort of, I don't know. I don't know if they confirm the fears that we've already seen or is this another reason why we should be bearish?
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Tim Seymour
Well, you could take the other side on Amazon. So I can appreciate the fact that we brought this up yesterday when Jim was here about all the different things going on in the market. And one of the things I mentioned is Amazon's out there in the market raising 15 billion. No big deal. Except for the fact that what we've been very concerned about. And look at that move in Matt, I look at the move in those companies that we think are possibly overspending. I'm not worried about Amazon here both in terms of valuation or in terms of credit quality, but I am of the view that the street in the market are demanding an answer. In other words, what is profitability? I want to see some vision to profitability. I want to not just be investing to infinity. And then if you look at the market overall, what clearly was a lack of breadth. You combine that with a sense that the Fed is on a slower dynamic and the fact that you've got maybe some weaker job numbers coming out, you get to this place where now we can all say suddenly we are investing too much in AI. I don't think so. I think that, I think this downgrade is interesting. I think it certainly comes at a time when people want to believe that some of these things are, are themes we should be looking at. I think the most important theme is that companies that were developing free cash flow are now going to be issuing debt. And it's not a one way street.
- [03:36]
Melissa Lee
Yeah. And to that point, I mean it's a, it's a change in the business model that I don't know if Wall street has completely processed in terms of valuation. Not only is it free cash flow positive to issuing debt, it's also from an asset light to an asset heavy. But business model, there are many changes. There are reasons why investors loved, love this group of stocks. High margins. Add that in there.
- [03:56]
Karen Feiderman
And now for Amazon though, being in the cloud business, that is an asset heavy business already.
- [04:02]
Melissa Lee
Already.
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Karen Feiderman
But yes, but this, no matter.
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Melissa Lee
This sort of build out is much more expensive than the previous traditional cloud build out and so therefore margins are more threatened and this actually may be value negative because it might not generate as much profits revenues from this sort of cloud business given the spend.
- [04:20]
Karen Feiderman
So I don't know how much of the cloud business is right now allocated to AI and it's just not called that or. Right, right. So I'm not really sure. But because the cloud business seems to be doing really nicely, they had really good growth, they had really good margins. I could it. Could it all be way too expensive? Yes, that's absolutely possible. I did think it was interesting. There's sort of a little nuance in the note about they're going to a neutral. Right. But the price target remains the same. So I'm not quite sure what, you know, why, what that means. Actually we still think it's worth this.
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Melissa Lee
Right.
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Karen Feiderman
But now I guess it's a note of caution, right?
- [04:58]
Melissa Lee
Yeah, yes, exactly.
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Steve Grasso
I think the major question is if they're off putting their risk to a different dynamic, then why shouldn't the investor.
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Tim Seymour
Right.
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Steve Grasso
So not to make it any more complicated, they're not using cash, they're using bond sale. Why should we look at it any better? It's got to be worse, right? If they're not taking the risk with their cash or if they. Is that, does that make sense or.
- [05:22]
Tim Seymour
It is. No, it is.
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Steve Grasso
But they're doing a bond sale versus using free cash. Using free cash. So I, so I think that still.
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Tim Seymour
An obligation on cash. I mean, for every fan there's no free lunch. But I mean it's better than them actually issuing equity for it. I mean, it's not dilutive.
- [05:36]
Steve Grasso
Better. Better. But is it better when you look at a stock to do it the way they used to do it?
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Tim Seymour
Well, I mean, the stock, as we've all just said, wants to see free cash flow to infinity. I mean, I'm looking at a report from, from Wolf Research where they're actually pointing out on Amazon that they actually believe that there's based upon the US acceleration driven by Project Rainier, that there's an upside to revenue and ebit, which means that there could be a multiple enhancement from this. And yet the. There's arguments in the other direction.
- [06:04]
Melissa Lee
Yeah.
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Financial Advisor
And I think really investors are just finally waking up to this idea that there's been so much capex. We just really need to see a return on that. And you're seeing this risk being taken off kind of across the board is happening. When you look at the bonds that are getting issues, there's a wider spread there. People are demanding a higher yield for those bonds because they are starting to question at what point in time are you actually going to get paid out on that. So I don't think this is the bubble bursting. I don't think this is the end of that. I think this is a pause that people are taking. I do think in video tomorrow is going to be something that's very, very closely watched to see what does that demand look like? Are these chips, you know, do we still need the most expensive chips? Are people doing them in house? What does it mean for the overall, overall story? I think tomorrow is going to be a Bigger story right now. It's just sentiment driven, more so than any actual data.
- [06:46]
Melissa Lee
In terms of the spreads you're showing.
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Karen Feiderman
Me, the talking about the core we sped spread blowing out. I'm not troubled by Amazon issuing debt. I do think there is a lot of debt coming to market in the same space. Right. So if you're an investor who, if you're a debt investor who, who wants exposure to this area, wouldn't you rather be Amazon than core weave? Than core weave. I mean, at some point, you know, the risk award makes core weave sort of like the Wal Mart target of it. And at some point you might say, all right, well I'll try the, I'll try the, you know, potentially higher high return one. But to me it's not a problem at all for Amazon's balance sheet. It's more of the market for these kinds, for this kind of paper in general. They're going to be, they're going to be fine, absolutely fine to be able to do whatever they want. They don't.
- [07:31]
Steve Grasso
But does it tell you what, does there, does this to their balance make the story more compelling? When we're worried about return on invested capital, when we're worried about that dynamic, I think this is more of a headwind than a tailwind for the story.
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Melissa Lee
So you're saying it's, it's less attractive because of the issuance of bonds?
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Steve Grasso
Yeah, I think, I think we've opened Pandora's box. I think that there, I think now this is another layer for the analysts to sift through. It's not going to be positive in my opinion.
- [07:57]
Melissa Lee
All right, all this going on and what does Jensen Huang say to. I mean, he's got a lot of hand holding that he's got to do with the Street. I mean, he laid out a clear plan, a clear sort of backlog at gtc. That's not enough, apparently. So what else?
- [08:10]
Tim Seymour
Well, we need to better understand Nvidia as an infrastructure infrastructure company as opposed to a semiconductor company with, you know, essentially a platform moat around their business. Because that's all. The last six months have been, you know, it's all been about Nvidia as an infrastructure play, investing in five companies who will invest in them and the turnaround. I think the market just wants to know more. Again, we had another announcement today with Microsoft and, and you've got a dynamic here where it's no longer juicing the stocks. It's actually, I think the market is concerned and market is actually looking at the circular nature of all this. So I Think Nvidia has done a great job of giving as much information to the market here. I think the market also, I'm not so sure Nvidia China is that rosy right now in terms of export dynamics. I think Nvidia is doing everything it can to play it perfectly with the White House. And I think the White House probably very happy that they're doing that. But uncertainty around China Bar is incredibly high. I don't think there's anything about 2026 that we should be worried about. I think 2026 is done and dusted. Question is, is the street priced in too much?
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Melissa Lee
The China aspect though, that's not in the model at all. So anything would be upside, right, if they had anything positive on China.
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Karen Feiderman
But also it's down like 13% from that peak right after that, you know, the very rosy projections. So is that enough? I don't know, but I would. Sorry to. Would you rather again, but I would rather it be here going into earnings.
- [09:35]
Tim Seymour
The only one that gets away.
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Melissa Lee
I mean, I, you know, got a free pass.
- [09:38]
Tim Seymour
I'd be thrown off the desk right now.
- [09:40]
Melissa Lee
All right, let's move on and talk about shares of Home depot. They dropped 6% after the company missed earnings estimates for a third straight quarter. Cut its full year outlook as consumers put off home improvement projects. High mortgage rates, a murky labor market, weak housing market, all weighing on demand. Most notably in the pro segment where you need contractors to complete projects, those projects were suppressed. They're on the sidelines. That was supposed to be an area of strength. Courtney, what do you think of this? I mean, I don't know if you're expecting this kind of weakness or not.
- [10:07]
Financial Advisor
Yeah, I mean, we just had a really tight housing market, which is. Everybody is hoping that that's going to have some sort of relief. And even though rates have come down a bit, you're not seeing any movement in the housing market. And that is when most people make big projects in their houses is either when they're about to sell their house or when they're buying a new house. And so that's when you're starting. You're likely going to see a lot more of a move. Here in Home Depot, I also thought it was interesting they noted that there were less hurricanes, which I think is a good thing environmentally. But it's a path from Home Depot, which I thought was kind of interesting there. But I think really you need to see mortgage rates probably come like around 5%, if not lower, to see like a real movement in the housing market. And I think that's probably going to be the next catalyst in Home Depot, especially the fact that rates probably aren't coming down here soon. I don't know when that's going to happen.
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Steve Grasso
You know, when you look at Home Depot we we've all Talked about it's 50% of sales is from the professional. Lowe's has more of the do it yourself person. Maybe Tim probably customer of Lowe's.
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Lance Wilkes
Right.
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Tim Seymour
I mean idea that John all day long. John. Yeah. I mean, I mean Karen seen me on my tractor. I so you know country song Go John Deere as well. Stock just went higher.
- [11:10]
Steve Grasso
So I think when you just look at the both of these things, Lowe's is more of a cyclical exposed name because it's more consumer facing. Home Depot is more of the professional facing. I think you're going to need lower rates to make either of these work. But I would buy Home Depot based on lower rates coming sooner rather than later.
- [11:27]
Melissa Lee
I mean the commentary was very interesting. In terms of our customers are homeowners. Homeowners are seeing more declines in housing markets around the country. They're more worried about their jobs and lower rates aren't. They're not going to solve these two issues here immediately. Not at 5%.
- [11:43]
Tim Seymour
I think they're worried about their customers. And as much as we as you've said pro has been resilient. What Courtney said is funny. I thought the same thing like hey, less storm. Sorry. You know, so great a quarter not enough masking tape and plywood. I think you're going to see downgrades. I think 26 is certainly put out there as being more in question. And, and a company that I want to own cheaper, I'm probably going to own cheaper.
- [12:08]
Karen Feiderman
So one thing their inventory was high. The quarter wasn't terrible. But the you know that it not what not getting better isn't great. And I think also the idea of home prices coming in if you're that homeowner. Yeah, right. Is is of concern. So Lowe's fared better for the reasons you said. It's a different mix there. I'm long Home Depot not delightful. I mean I'll stick it out, but we've been hoping this inventory overhang would be lifted somehow for a while now. Doesn't look like that's happening anytime soon.
- [12:38]
Melissa Lee
All right, for more on the markets and tech rotation, Natixis lead portfolio strategist Jack Genesiewicz joins us here on set. Jack, great to see you in person irl.
- [12:47]
Jack Genesiewicz
Thank you for having me.
- [12:49]
Melissa Lee
What do you what do you make of. So, so basically there are concerns about the narrative, their concerns about the consumer that we were just talking about in the A block. What is there for the markets to hang their hats on at this point?
- [13:00]
Jack Genesiewicz
Sure. I think if you kind of step back and look at the bigger picture backdrop, you know, the economy is still doing okay. I mean, I think you can make some points where you see the labor market is slowly cooling. The risk is obviously that that picks up and accelerates and faster pace where we start to lose jobs. But you know, I think the bigger picture level is still decent. Right. You still have, people are still spending money, the consumption numbers are still strong, the credit card debt is still strong. Look at earnings, earnings are still moving up and to the right. Margins are still expanding. You know, I think you've heard a little bit more questions maybe being raised during third quarter earnings calls about the health of the economy going forward. And I don't think we really heard that. So moving back and taking a big picture view here, the economy is still in decent shape. It's not terrible, it's not great, but it's not rolling over to a point where it's, you know, hit the eject but start selling everything.
- [13:46]
Tim Seymour
So I agree with you on the market, sorry the macro assessment, but the market's rolling over. So what do you think it is, Jack? I mean, because is it, is it the sense that suddenly the Fed is not as much of your friend? Because we all would say, you would say 25 bips one way or another in December doesn't change what the market should do, those earnings numbers. So what has been that, that proverbial straw.
- [14:06]
Jack Genesiewicz
Yeah. On the camels, I think it's a, it's a combination of a few things. Right. It's the reset of the narrative on the trade, you know, it's no longer giving a free pass to the CapEx spenders. But there's also things like a data vacuum going on right now. Right. The big thing for, for the, the markets with regard to the Fed, where do we stand on inflation? You know, where do we stand on the labor market? We don't really have the top tier data that we've been used to having. So we're sort of flying blind there looking at second or third tier data and as a result markets really not sure how to price the Fed. And you've seen that the VIX move up a little bit, you've seen the move index push higher. So you're getting that repricing of the potential for the Fed cut maybe it's 5050, a little less. You know those questions all on top of leveraged trades that are now starting to unwind because of the pickup involvement. It's not surprising that these crowded trades are putting a little bit more downside pressure. Now we suddenly just have a hey, let's just risk off deleverage. And this is now all of a sudden we're like, we're talking about a proper correction in the marketplace.
- [14:57]
Financial Advisor
Now when we're looking at the labor market, I know there's a lot of concerns that this is weakening. But I think we look a lot at the different types of consumers. We talk about the lower income versus the higher income consumer. But I don't think what's talked about enough is the baby boomers hold a majority of the wealth of this country who aren't as affected by the labor markets chasing. So how much should we be worried about a weakening in the labor market versus the overall consumer who may not be in the labor market?
- [15:20]
Jack Genesiewicz
And this is playing right to that two speed economy. Right. And who's really supporting the consumption right now? It's sort of that higher income band, which are the income cohorts you're just talking about right there. So you know, if you look at who's doing the bulk of the spending, it's really the 40 percentile and up quartiles that are spending the money. It's the ones that are getting pinched, that lower income cohort. But on a net basis they account for almost less than 9% of total personal consumption expenditure. So at the margin they're getting squeezed, but they're not really the ones that are driving consumption here. It's still the upper incomes that have access to the stock market. They're getting that wealth effect. They've locked in those mortgage rates at lower levels, so they're not getting impacted from higher interest rates, that sort of thing. And they're the ones that are benefiting from this and they're the ones who continue to spend.
- [16:01]
Melissa Lee
So if you're taking a step back and take a look at the economy as a whole and just sort of taking it all in given the market valuations here. Jack, I'm wondering if you're. If we are headed for some sort of a downshift in the economy, then what would that correction look like and when, because it feels like the markets want to sell now and ask questions later in terms of preparing, as you mentioned, deleveraging, preparing for some sort of a step back on the economy. Is that what we are in Fact seeing, because then shouldn't we be paying attention saying, you know what, even though things may be okay, we have to prepare for what's happening six months out.
- [16:35]
Lance Wilkes
Sure.
- [16:36]
Jack Genesiewicz
And I think if you even look out to six months or more, you know, again, go back to the Fed cycle, maybe we get a cut December, maybe we don't, but the market's still looking at two more cuts by summer of next year. So I think the bigger point there is that financial conditions at the margin are still probably going to be supported because the Fed is not hiking a pause, a cut very different than a hike. And we still see the Fed easing as we start to push into the beginning of next year. And then you get the bump from some of the, the tax rebates that are kicking in, from no taxes on to tips, you know, over time, that sort of thing. So I think there's reasons to have a little bit more optimism as we rolled in the beginning of next year. We just got to kind of get through what we're seeing today. And that's I think a more of a tactical, technical trade, if you will, more than anything else.
- [17:14]
Melissa Lee
So what are you doing with the trade at this point?
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Jack Genesiewicz
You know, I think the big one here is simply if you got to look at a portfolio, you don't want to be over leveraged to the mag 7 per se, and you still also want to play that capex spend game. Right. As we like to say, you know, one company's capex spend is another company's earnings. And I think we've got pretty good visibility between now and the end of the year and into the end of next year that the CapEx numbers from the hyperscalers are still going to be very strong. You may not like the fact that they're spending because you don't have clarity on that roi, but from a perspective of somebody else's earnings, that's still pretty strong. So maybe you're looking at not quite the same exposure to the Max 7, but the broader tech complex is still going to be beneficiaries of the spend, which I think we still have pretty good clarity on.
- [17:54]
Melissa Lee
You like the takers?
- [17:55]
Jack Genesiewicz
Yeah.
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Melissa Lee
Okay, Jack, thank you, Jack. James, the Texas and that's one way of looking at it, right? I mean the ones like an Nvidia, for instance, which are preparing for tomorrow, the ones that take the checks in versus ones that write the checks that go out in terms of investing, no question.
- [18:10]
Tim Seymour
And again, there's different parts of this even whole I build out, look at datacenter, build out. And we've, we've kind of dissected on this show and looked at the different pieces. And whether you're talking about H Vac, whether you're talking about different pieces of warehousing, you know, this is, I agree with that. I also agree with the point you are getting to, which is that the market seemingly is getting ahead of these growth concerns and there's zero growth slowdown priced into this market. Really. And in fact, Home Depot is a good example of a name that probably trades back to 240 before you even think about really assessing growth.
- [18:43]
Melissa Lee
Right. And, and if we don't get 25 basis points in December and we get 50 next year, is 50 going to do it? I mean, there's a number of questions that you ask after that. Are rates actually going to come down? Are mortgage rates actually going to come down? Is this going to actually help the labor market? I mean, it's a blunt instrument. We don't know if the impact is going to be as much as we hope when we have a downshift in the economy.
- [19:04]
Karen Feiderman
We also don't know why would it, why would they pause and only do 50? Is it because the labor market is stabilizing and they want to focus more on inflation? Is it even if a bad labor market inflation is really running hot, maybe they can't. Although I think once we get to May, we're going to, I think we'll have it, we'll have a dovish almost regardless. Yeah.
- [19:24]
Melissa Lee
All right. Coming up, reports of another bid sending Warner Brothers stock jumping today. What the company had to say about the latest rumors. Plus loving on Lilly. Analysts are feeling good about the pharma giant and where they see shares heading next. Do not go anywhere. Fast money's back into.
- [19:42]
Jack Genesiewicz
This is Fast Money with Melissa Lee right here on cnbc.
- [19:52]
Edward Jones Narrator
For 140 years, MultiCare has been in Washington prioritizing long term solutions, partnering with local communities and expanding access to care. Together, we're building a healthier future. Learn more@mycare.org we all take good care.
- [20:09]
Melissa Lee
Of the things that matter.
- [20:10]
Karen Feiderman
Our homes, our pets, our cars.
- [20:13]
Melissa Lee
Are you doing the same for your brain? Acting early to protect brain health may help reduce the risk of dementia from conditions like Alzheimer's disease. Studies have found that up to 45% of dementia cases may be prevented or delayed. By managing risk factors, you can change. Make brain health a priority.
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Karen Feiderman
Ask your doctor about your risk factors.
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Melissa Lee
And for a cognitive assessment. Learn more@brainhealthmatters.com smarter by CNBC make it.
- [20:40]
Jack Genesiewicz
An ever expanding curriculum of career and income boosting online courses. Get 25% off all 2025 courses now go to CNBCmakeit.com courses. Special offer ends December 5th.
- [20:53]
Melissa Lee
Welcome back to Fast Money. Warner Brothers discovery shares Whip Song today and reports of a new bid for the company. According to Variety, Paramount Skydance is preparing a $71 billion offer in partnership with several Middle Eastern sovereign wealth funds. Warner Brothers surging more than 6% at its highs, but giving back some of those gains after Paramount refuted the report, telling our Julia Boorstin that the information is, quote, categorically inaccurate. I mean, there are a lot of details in this report which made it very interesting that it was categorically incorrect. They named which sovereign wealth funds they said $7 billion apiece are going to go in. They didn't want to be part of a Comcast bid because they thought that Trump didn't like the CEO of Comcast, which is our parent company right now. So there's a lot in there for it to be categorically incorrect.
- [21:40]
Tim Seymour
There's a lot in there for it to be categorically incorrect. Incorrect. There's a lot in there that gives you some sense of where the media industry is going and what side you.
- [21:48]
Melissa Lee
Want to be on.
- [21:50]
Tim Seymour
Who's actually bankrolling this also when there seemingly are no other bidders out there. This is fascinating. And it does also, I think, ultimately speak to the intrinsic value of some of these underlying assets. So what was once seemingly the Ellison family bidding poor for WBD is now truly Paramount. And Paramount, which has been going through massive amount of restructuring and certainly has made it clear that the creative parts of these two empires that go all the way back, that are some of the most storied. They are, all of those storied assets in Hollywood history are going to remain intact. And that it's about then bringing the efficiencies that come with everything else that seemingly makes some sense in a new distribution model. Fascinating. And again, in a new media world.
- [22:37]
Melissa Lee
I read this and I thought immediately about Oracle and why Oracle would need help bankrolling this thing when it was always thought that they had the deepest pockets because of the Ellison family. And then you think, oh, Oracle's stumble from the OpenAI announcement, it's round tripped completely, that move. So then I go, oh, maybe they need some help making this bid.
- [22:57]
Karen Feiderman
Or maybe they think it's risky even if they can afford it. That doesn't mean you want to buy all of it or take down all the exposure. I don't know, I feel like also this is a little bit of gamesmanship in between the bankers and the companies. And I'm not exactly sure. I don't categorically, what was it? Categorically Inaccurate.
- [23:16]
Melissa Lee
Inaccurate.
- [23:18]
Tim Seymour
Some categories inaccurate, almost like technically you've got something wrong. But it's not, you know, thematically it's not inaccurate, you know, so in other words, like maybe I think they should be.
- [23:29]
Melissa Lee
So there's a chance. There's a chance.
- [23:32]
Tim Seymour
I'm playing wordsmith here.
- [23:34]
Steve Grasso
I think takeaway is with every rumor. If you, if you drop back five year chart on Warner Brothers, it's coming from such a low base that with any little bit of news, any little bit of headline, the stock is going to rally more. I think it, you know, for me, when I look at it, when you look at the other studios that have been rolling over, I'd rather stay away from it right now because right now I think it's just a toss of a coin. I'd rather play it, you know, a different way.
- [23:59]
Melissa Lee
Coming up, Eli Lilly at all time highs. And Wall street sees even more. Pharma fire ahead. Could the pharma giant go going Meg cap tech and the trillion dollar club. You're watching Fast Money live for the NASDAQ marketsite in Times Square. Back right after this.
- [24:21]
Edward Jones Narrator
Our state has changed a lot in the last 140 years. We know because Multicare has been here guided by a single purpose, making our communities healthier. That comes from making courageous decisions, partnering with local communities to grow programs and services and expanding healthcare access to those who need it most. Together, we're building a healthier future. Learn more@mycare.org.
- [24:52]
Melissa Lee
You know you've reached peak couple energy when your undies match.
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Steve Grasso
Meundies Match Me has you both covered literally in super soft ultramodal undies, socks, PJs and loungewear.
- [25:02]
Melissa Lee
Festive prince.
- [25:02]
Jack Genesiewicz
Check.
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Melissa Lee
Cozy vibes.
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Jack Genesiewicz
Double check. And right now, it's deal season.
- [25:06]
Steve Grasso
Get up to 50% off site wide for Black Friday and Cyber Monday.
- [25:10]
Jack Genesiewicz
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- [25:26]
Melissa Lee
Welcome back to Fast Money. Shares of Eli Lilly hitting a fresh record in today's session after analysts at JP Morgan upped their price target on the stock to $1,150. That's up from 1050. They move at the Company just shy of the trillion dollar market. Cap shares are up nearly 50% in just the last three months. Are you still juiced about Lilly?
- [25:47]
Karen Feiderman
Well, could it get to the trillion dollar club? Yes. It's 2.7% away. However, it's starting to be, I mean the multiple is getting pretty rich for me. I look some upside calls just looking at February expiration, which gives you their next earnings. Their last earnings was very strong. That was great. At 1200 call, little wide, but I don't know, 30 bucks. So it needs to be up $200 to be at the money. Seems a little rich to me. Yeah, you could make a collar and use that 30 bucks and buy a put that's much closer to where it is. So I like it. It's a great story. But it's getting a little bit rich.
- [26:25]
Melissa Lee
Is it rich?
- [26:26]
Tim Seymour
Yes.
- [26:26]
Melissa Lee
Given its pipeline?
- [26:27]
Tim Seymour
Yes. I mean, and I realize the incredent pipeline is something that's part of where the analyst community is saying, okay, that. But coupled with the fact that they've seemingly come, you know, the Trump deal or getting closer to a Trump deal on this is something that price cuts will be offset more than offset by volume increases. That seems to be the story. What's fascinating to me is wasn't all of this out there like I, you know, to some extent Lilly, which was stuck in the mud for a long time, you know, why didn't we see this?
- [26:58]
Melissa Lee
Sure. But we have more clarity on the pipeline. We have more. And also does doesn't the Pfizer Med. Sarah, the bidding war really underscore the value of all of these assets and the leadership that Lilly has right now and the desperation that Novo seems to have exhibited by going so hard after that one asset. I mean, I feel like the landscape has changed a little bit because of that bating war. In terms of the value of Lilly's.
- [27:22]
Tim Seymour
Franchise, it hasn't done anything for Pfizer.
- [27:25]
Steve Grasso
And I think the other aspect where it could go further is that what was the conversation last week it was the patent cliff where. And Lilly has very little risk, or I should say has sector average risk to patent cliffs due to the pipeline that they have. So if you're going to start gauging valuation on that, they probably can move higher from here.
- [27:48]
Melissa Lee
What do you think?
- [27:49]
Financial Advisor
Yeah, and I think it's really the direct to consumer that people are the most optimistic about. And I use the word desperation, but I think that's actually kind of what came to mind here is when you're seeing Nova having to cut their prices and they're really starting this bidding war or price cut war. It really is it because of that problems with Novo as opposed to can Lilly still just be the best of brand and continue to gain market share either way? So I agree it's getting expensive. Like I would almost look at a Nova, which is cheaper, but it has just continued to outperform. And so I don't know at what point the market's actually going to care about valuation because that's why they haven't.
- [28:18]
Melissa Lee
Coming up, a rough prognosis for health insurers. The latest pitch out of D.C. hitting the group and the premium pain that could cost you thousands. We will experience explain when Fast Money returns.
- [28:33]
Jack Genesiewicz
Missed a moment of fast. Catch us anytime on the go follow the Fast Money podcast. We're back right after this.
- [28:46]
Melissa Lee
Welcome back to Fast money. The Wall street sell off continuing with the S and P now in a four day losing streak, its longest slide since August. The dow falling about 500 points, also down four straight days. And the Nasdaq leading the losses down 1.2%. Bitcoin bouncing off its lows of the day, breaking below $90,000 at one point, hitting its lowest level since April. And shares of Baidu are also raising early losses down more than 5% in its lows, but ending the day up by about two and a half percent. The Chinese search engine reporting strong growth in its cloud division, but a 7% drop in quarterly profit. Excuse me. Health insurer providers UnitedHealth and Elevance lower today amid growing worries over a spike in premiums tied to the expiration of Affordable Care act premium tax credits. The change would affect millions of Americans. Let's bring in Lance Wilkes, who covers health care services stocks for Bernstein Research. Lance has got an outperform rating on UnitedHealth and Elevance. Lance, great to have you with us.
- [29:41]
Lance Wilkes
Great to be here.
- [29:43]
Melissa Lee
First, I want to get your take on President Trump's truth social post earlier today. Basically saying, you know, he'd rather hand out money directly to Americans to enroll in their own health insurance as opposed to continue these subsidies in your head. Does that mean that the subsidies are surely going away, that some sort of direct funding plan is the only way President Trump is going to agree to getting health care to Americans.
- [30:08]
Lance Wilkes
You know, I think the end game here for the health insurer is going to be very similar in that one way or the other, you're going to see consumers get some sort of extension, some sort of capability to get additional assistance with their premiums. The question is really going to be. Can they possibly construct something quick enough to have something based around a health savings account, something we all probably are more familiar with, that would get baked into this, you know, in time for the 2026 year? I think that's unlikely. I do think the stocks have priced in this membership decline though, that people are going to be dropping out of the Affordable Care act marketplace. And so, you know, I think from a stock perspective is already baked in.
- [30:54]
Melissa Lee
How do you sort of think about, though, if people have their own funds from the government to buy insurance, how, how they would navigate that landscape? If some insurers have better sort of brand names than others? Better. You know, I don't. Better reputations, Unh. Seems like it would not have a good reputation from a consumer standpoint. But that's just. That's just based on nothing except my observations.
- [31:22]
Lance Wilkes
Yeah, no, I know exactly what you mean. What I would say is in this marketplace space, or this is really just the individual insurance market. And in the individual insurance market, the blues are really popular. Some small companies like Centene and Molina, those are, you know, more active participants in that marketplace and they're really set up so that they could participate in a health savings account oriented product offering with a lower tier product, you know, more of a high deductible kind of insurance product, again similar to what a lot of employers would offer. And they can offer the Affordable Care act style products as well. United really is pulling back significantly in this market. They're a small player. They're more like a number 7, 8 player nationally. They're going to cut their enrollment by 2/3 going into next year. CBS entirely leaving this market next year. I think the real story for the stocks here is it's really an insurance pricing cycle and you're seeing a withdrawal of competition that's going to lead to, you know, strengthened pricing, improved margins and recovery.
- [32:29]
Steve Grasso
So last when I look at it, you name them, the two of them, Molina and Centene, they have the most exposure to Medicare, Medicaid. When I look at these names, I always try to get away from those names. You're saying that this could be an opportunity right now?
- [32:43]
Lance Wilkes
Yeah, this is, this is really unusual. I would agree with you. I think ordinarily you're looking for greater stability, but ordinarily in the health insurance market is from a stock perspective, you're really talking about stable earnings and compressing valuation from time to time when there's a big political threat. The Affordable Care act, the rise of Obama, the rise of Bernie Sanders in 2019, right now we're going through a real cycle. You've got margin compression of around 50%, sometimes greater than that when you're talking about Centine Molina, but even at united around 50% and you've got multiples down. So this is very much like a normal cycle. And insurance historically was a cyclical business where you would see capital flow in competition, flow in, that would erode pricing, erode margins. Right now what we're seeing is the result of that. Just like with this marketplace product, you're going to see capital flowing out, competition flowing out in marketplace. That's companies like Aetna and United pulling back and Medicare Advantage, you know, you had CVS and Humana pull back significantly last year, United and Elements pulling back significantly this year. And these are really industry sort of things. The industry is losing money in these products. Last year in 24, this year in 25. And that's going to lead to pricing discipline and improved margins and recovery. All we're talking about is just getting to recovery here.
- [34:06]
Melissa Lee
Right. Lance, thanks for your time. Appreciate it.
- [34:09]
Lance Wilkes
Thanks a lot.
- [34:10]
Melissa Lee
This is, I mean that was an interesting point in terms of, you know, remembering that this is a cyclical industry and we're just here in the middle of the cycle. Even though it feels kind of bad maybe for an investor in health care.
- [34:20]
Karen Feiderman
Care, I'm sort of wondering if we have, if we do see the promise of AI and a lot of white collar jobs eliminated, what that would mean for some of the insurers where that that is a really important part of their business.
- [34:35]
Melissa Lee
So be a good thing in terms.
- [34:37]
Tim Seymour
Of margin and profitability.
- [34:39]
Karen Feiderman
No, no, I think of those as.
- [34:40]
Melissa Lee
Oh, you mean losses for insured.
- [34:42]
Karen Feiderman
Yes, membership. Right, right, right. Membership lines from that.
- [34:47]
Tim Seymour
Well, I think when you talk about cyclicality, just even in the earnings profile, what you have with you and right now is people are looking at 26 and they see mid single digits. But as you get into 27, I think people think a lot of these pressures are alleviated and they're back to double digit. And therefore you're probably buying this thing towards the end of this year for 27.
- [35:04]
Melissa Lee
By the way, the end of subsidies. If they do go away completely, there's an economic obviously hit two different in the population, the impact of the cliff could be markedly different. And this will all be based on your age as well as your income. According to health care policy research firm KFF, households just under the threshold, for example, a 60 year, 60 year old making $62,000 a year would get a tax credit and pay about $6,200 in premiums next year. Where someone over the threshold making 64,000 would not get a credit and pay nearly 15,000 thousand dollars in annual premiums. That's nearly a quarter of his salary. So that could, that's the real life impact. And these are, this is the segment of the population already struggling the bottom of the K that we talk about every night. So regardless of what your politics are, the subsidies goes go away. People pay more unless government steps in. And that's the impact.
- [36:00]
Jack Genesiewicz
Yeah.
- [36:00]
Steve Grasso
It seems like you can't do it on an income. You know, there's no incentive then to make more money. Right. It's so it's even with taxes the same way.
- [36:07]
Melissa Lee
You don't have to get under the threshold.
- [36:08]
Steve Grasso
You want to get under the threshold. I think they've got to do it a different, a different way. But that's us talking around a table. That's probably not going to happen. I think this administration is going to be hard pressed in front of the midterm elections to try to subsidize it any way that they can.
- [36:23]
Melissa Lee
Go ahead. How do you look at the economic impact?
- [36:25]
Financial Advisor
Yeah, I mean we actually have clients who are like the retirees who aren't yet on Medicare and they're people who are affected by this. And I think that's where we're approaching the end of the year. And there are things you can do to look to optimize this. Like if we don't know what's going to happen. Trying to keep your income lower. So looking like can you make contributions to HSA accounts? Can you add to an ira? Like what? There's a lot of things you can do or not do in order to keep your income lower. And I think that's what you want to look at is what can you do to make sure your premiums aren't going to go up if. If that's a real possibility.
- [36:53]
Melissa Lee
Coming up, a nuclear reaction after a big run up. Why Jim Cramer got us thinking about nuclear stocks. Remember he was here last night where one analyst sees a group heading next Fast money's back into. The best. Times of magical investing are over and behind us.
- [37:11]
Tim Seymour
How are we defining magical the companies.
- [37:13]
Steve Grasso
That have no revenues and no earnings.
- [37:15]
Tim Seymour
That just keep going up that we.
- [37:16]
Steve Grasso
All hate and drive us crazy. And nuclear. No one wants those.
- [37:21]
Melissa Lee
We all want them in theory.
- [37:23]
Steve Grasso
But I do think that we have to be careful that we separate the greatness of the end of those stocks and we just can't keep having those stocks Go up.
- [37:35]
Melissa Lee
That was a memorable night last night. That was Jim Cramer expressing concerns over the run up in nuclear stocks. But is the group really in for some pressure for more on where the nuclear trade is headed? TD Cowan's Craig Hutchinson joins us now. He is a firm's base metals analyst. Craig, great to have you with us. I saw you sort of smiling when Kramer's going off on the end of magical investing. Can you sort of tell us why Kramer's wrong?
- [38:03]
Craig Hutchinson
Yeah, I respectfully disagree. Thanks for having me on the show. I think you got to look at the uranium sector really as a long term play. The uranium miners, the developers, they're looking to supply uranium for the next five, 10, 15 years. The market's been in deficit now for three or four years. We expect it to be in deficit to the end of this decade. A lot of the deficits have been supplied by inventories. We don't see that changing anytime soon. So I think when you look at this space you really have to take a long term view. And our long term view is the market's going to be very tight for a long period of time. If you think about the Chinese are building 33 nuclear reactors currently. There's obviously, I'm sure we could talk about just what's going on the United States in terms of rejuvenating their domestic industry. But yeah, I think, I think there's still, still a ways to go for this space. But you have to think about it more on a long term basis because certainly the uranium name has been caught up in the whole air trade.
- [38:57]
Melissa Lee
There have been a number of notable restarts to old mothballed reactor sites. Three Mile island is one notable one for sure. Have you noticed that, that municipalities, the government that they're really standing to the side, stepping away in terms of allowing this to happen. There's a market change in sort of the bureaucracy that would have blocked the restart of these mothballed reactors.
- [39:24]
Craig Hutchinson
Yeah, I think there's been a shift globally towards the acceptance of nuclear over the last number of years. I think 20 different countries that have pledged a triple nuclear capacity by 2050. The US is pledging to quadruple it by 2050. So there's a tremendous amount of government support that we haven't seen in the past. I think in the past the nuclear was few more as a sort of dirty source of energy. Now I think in a number of years it's really been, it's been reframed as a green source of energy, stable long term supply. You don't have the interruptions that you would have with renewables. So I think there is a growing acceptance globally at the municipal level for nuclear projects.
- [40:04]
Tim Seymour
Hey Craig, it's Tim. I'm with you on both the long term view and also the long tail investing. In fact, I feel like we could have been having this conversation back in 2002 or 2004. And one of the things that I've noted from both, just kind of as you lay out your base case in there is that we're talking about free market utilities that are buyers and we're in a world where I get the sense that there, if not now, there will be some free market utility buyers that have to pay whatever they can pay. And this is where I think both the Westinghouse investment in CCJ is really important, but also where I think people just don't have any idea what the squeeze looks like. Talk about that.
- [40:45]
Craig Hutchinson
Yeah, I mean this is growing demand. These, the hyperscalers are looking at adding I think 30 gigawatts of power. They've, they've, you know, effectively locked in some agreements with Smarts to kind of deliver that power. Right now. There's just, you've seen a big shift in United States in terms of the power demand and I don't think that's going to, to continue here for the foreseeable future. You know, markets are quite tight so you're obviously seeing a huge support across the board for, from a number of these utilities that really need to meet those power demands from the hyperscalers.
- [41:17]
Melissa Lee
All right, topics Cameco Next Gen Denison UEC Craig, we got to leave it there. Thanks so much for joining us.
- [41:23]
Craig Hutchinson
Yeah, thanks for having me.
- [41:24]
Melissa Lee
Craig Hutchinson TD SMR Small Module Reactors by the way, we got some news in the after hours session. Constellation Energy rising after news the Trump administration will provide it a billion dollar loan to restart the Three Mile island nuclear plant. So there it is officially. How do you view the nuclear trade in terms of the risk level in the portfolio?
- [41:47]
Financial Advisor
Yeah, I mean I think this absolutely is a long term play. I don't think you can ignore the fact that there is not enough energy to go around especially with the AI demand that that's going to push it towards there. And so that is going to be the optimism. So I think people have been generally optimistic about a more regulatory friendly administration right now. But this is something I think both sides of the aisle have to get figured out. It's one of the only solutions. So yes, there is more risk to it but I think the upside there is absolutely there in the long run.
- [42:12]
Steve Grasso
I think that's an interesting angle to it. It's a bipartisan effort where you would normally think. Nuclear is not a bipartisan effort. I do agree with Jim, though, to a certain extent. People like the idea this is magical.
- [42:23]
Melissa Lee
Investing and no, this isn't magical.
- [42:24]
Tim Seymour
This is.
- [42:25]
Steve Grasso
This is where he said about nuclear, where nobody wants. You know, when you hear Three Mile island, we're all pretty close, right? So it's like it's a great energy source unless it's in my backyard. But I do think these stocks can run further.
- [42:36]
Melissa Lee
All right, coming up, know when to fold them by Sports betting companies like DraftKings and FanDuel are parting ways at the American Gaming association and the prediction market surge fueling the rift More Fast Money into. Final trade time.
- [42:57]
Tim Seymour
Tim Unh, almost forgot that. But I didn't.
- [43:00]
Melissa Lee
You wrote it down.
- [43:01]
Karen Feiderman
Karen Yes, I sold some Dell puts today that I was long. It's the same as getting longer.
- [43:06]
Financial Advisor
Dell Cory, we talked about nuclear. I think Constellation is something to take a look at.
- [43:09]
Melissa Lee
Steve Melina thanks for watching. Fast Mad Money starts right now.
- [43:15]
Edward Jones Narrator
All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC, 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 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 and but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. To view the full Fast Money disclaimer, please visit cnbc.com fastmoneydisclaimer Save over $200 when you book weekly stays with Vrbo this winter if you need to work, why not work from a chalet? If you haven't seen your college besties since, well, college, you need a week to fully catch up in a snowy cabin. And if you have to stay in a remote place with your in laws, you should save over $200 a week. That's the least we can do. So you might as well start digging out the long johns because saving over $200 on a week long snowcation rental is in the cards book now at verbo. Com.