← CNBC's "Fast Money"
CNBC's "Fast Money"
Big Tech Reports… And Opportunities in Private Credit 1/29/25
00:43:48
Big Tech earnings are underway, with Microsoft, Meta, and Tesla all delivering results. The trades on these names, and how Nvidia is faring amid DeepSeek concerns, as well as latest chip restrictions from the White House. Plus Opportunities in Private Credit. How rising interest are impacting the space, and where our next guest is seeing the best returns. Fast Money Disclaimer
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- [00:00]
Melissa Lee
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- [00:30]
Guy Adami
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- [02:03]
Dan Nathan
You've been, you've been out front. People love Melissa Lee. I just want people to understand they.
- [02:07]
Guy Adami
Don'T think you're bad either, so I'll get carried away. Prolific.
- [02:11]
Melissa Lee
She's prolific, Guy.
- [02:12]
Guy Adami
But it's been a really great conference and we've got a really great lineup.
- [02:15]
Melissa Lee
Yeah. And you know, it's funny, we started this week out talking about this deep seek and what it meant for one of the biggest secular trades that has really gripped the markets. Obviously a lot of the performance over the last two and a half years has been tied to that. It feels like especially as we get into tonight's earnings, there is kind of some kinks in the armor here a little bit. We're seeing decelerating growth. You could have made that call on any occasion over the last two years, but maybe this is the week where we start to see it a bit more.
- [02:38]
Guy Adami
All right, well, let's dig in here. We start off with a big trifecta of big tech earnings. Shares of Microsoft, Meta, Tesla, all on the move after the reports. We've got full team coverage of the results. Julia Borson is standing by and Matta Filiboe has got all the details on Tesla. But we start off with Steve Kovac who's been watching Microsoft stuff. Steve, what's the latest?
- [02:55]
Steve Kovac
Yeah, Melissa, this is a big one after that deep seek moment coming on Monday. But look, here's what we got now. Beats on the top and bottom lines for Microsoft. EPS came in at $3.23. That's a beat by 22 cents. Revenue, another beat here, $69.63 billion. Street one at $68.78 billion. But what you guys really care about is all the air stuff and cloud stuff, right? So Azure was a slight miss here showing 31% growth. Street was looking for 31.1% growth. That's actually lower. Seque saw 33% growth in that segment back in the fiscal Q1. And then of that I made up 13 percentage points of that Azure growth that is continuing to increase and become a bigger part of the Azure story. Meantime, Microsoft says it's a 157% increase year over year for artificial intelligence revenue across all cloud, not just in Azure. And then another new figure here is artificial intelligence business over at Microsoft. They're saying it's at a 13 billion billion annual run rate. That means they took the revenue from this current quarter we're talking about, multiplied it by four and they say they're now on a rate or a run rate of 13 billion and change. And then open air those losses over at OpenAI, which Microsoft of course is a major investment and that's taking a hit on earnings over at Microsoft. Microsoft is saying $2.29 billion are, can be attributed to the, to that open eyed losses they were expecting $1.5 billion when they gave guidance year worse than expected. And then capital expenditures of course a huge topic of discussion here amid the deep seat conversation. $22.6 billion spent in the quarter on CapEx. Look at this chart here. That is most, almost double what they spent in the year ago quarter on CapEx. Huge question coming up on the call at 5:30pm guys is whether or not they need to be spending the way they've been spending. We know that $80 billion figure is good through the end of June. What happens after June? That's the big question, guys.
- [05:01]
Guy Adami
All right, keep us posted Steve. Thank you. Steve Kobach in San Francisco. For us it does seem like the weak Azure number is front and center at least right now. Until they talk about guidance for CAPEX 1 10.
- [05:12]
Dan Nathan
I mean it's not, it's not a miss. I mean it's basically in line. And I look at this and say revenues up 12% year over year, margins were better. I think what it comes down to is valuation. You know, you're talking about a stock that's probably trading around 30, 31 times next year's numbers. And in an environment now where valuation is front and center, given what we heard on Monday, that's concerning. I don't think you're going to sell the stock down to 415 or so, but it's one of those quarters. We're going to continue to go sideways. By the way, Microsoft made its all time high in July. The broader market's been doing extraordinarily well since then. It's been going sideways to slightly lower ever since.
- [05:46]
Melissa Lee
Yeah, and I'm not so concerned about, you know, coming in line at 31% versus the estimate, like I just said, at 31.1. It really is that deceleration from 34% last quarter to 31% this quarter. And then you have to start asking yourself, okay, well they have this really cozy relationship, relationship with OpenAI. A big part of that deal over the last two years is OpenAI's use of their cloud infrastructure. And so if that relationship is being strained in everywhere you look because of Stargate, because of Stargate, because of a whole host of other things. I mean OpenAI I think quietly has been complaining about either their capacity, you know, that sort of thing. So at the end of the day, I mean the Microsoft story was an early beneficiary in the public markets of this trend starting out in early 23. It might be one of the ones that's waning. And to Guy's Point about the stock, I think investors are sniffing this out. It made a high in July of last year and has really underperformed many of the other names in the space.
- [06:39]
Guy Adami
In terms of capex Guide. If they talk about it for next year, if it comes in and it looks like 25 is the peak, is that good, the stock goes up?
- [06:49]
Dan Nathan
I think it would be good. I think you'd be saying, okay, we've got peak Capex, we're going to the other side of it now. They've spent all the money they need to spend. We're sort of decelerating. I think the market would actually probably like that. And you'd see the stock bounce on the back of that.
- [07:00]
Melissa Lee
Yeah, it depends. You know, if you think about what we just heard of Microsoft and Metta over the last few weeks about their Capex and what they're expending for this year in 2025, I mean, it seems like they're in concert at least reiterating some of the numbers that they've given over the last few months or so. I suspect you don't see a ramp up of those. I think the deep seek and the Alibaba Mark, I think a lot of folks are going to kind of not too different what Fed chair Powell said. They're not going to be in any hurry to do obviously to raise it. But in this case, you know, I just, I don't know. I think we're probably going to hit a pause here for the next quarter or so.
- [07:33]
Guy Adami
All right, let's get to Meta now. Shares are moving higher on a Q4 beat here. The conference call just kicked off. Top of the hour. Julia Borson's been listening in. Julia? Well, CEO Mark Zuckerberg is on the call right now talking about his focus on AI and in particular how the company's AI assistant called Meta AI will be transformative this year. They expect it to reach a billion people. He also talked about how important it is that people's AI assistant be personalized to them. And of course, Matter has lots of information about what kind of personalization we might want now looking at the stock, up about 2% this past quarter, Met as revenue growth did accelerate. Instead of decelerating like analysts anticipated, Meta did guide to decelerating first quarter revenue growth of 8 to 15% or 11 to 18% on a constant currency basis. And after announcing up to $65 billion in capex last week for the year, the company gave some more insight into its guidance of up to $119 billion in total expenses for the year saying we expect employee compensation to be the second largest factor as we add technical talent in the priority areas of infrastructure monetization, Reality Labs general generative artificial intelligence as well as regulation and compliance. Now, media did not give official full year guidance but said this. We expect the investments we are making in our core business this year will give us an opportunity to continue delivering strong revenue growth throughout 2025. What's strong, we'll see. There were also a couple of upside surprises. Daily active people growth stronger than expected. 5% in reality labs lost less than $5 billion. That's far less than the 5.4 billion loss that analysts were expecting. Melissa? All right, Julia, thank you. Julia Boorstin on Metta and of course they'll keep us post on all the developments. The D word Deep Sea hasn't yet been mentioned, although we are only eight minutes into the conference call here. But it sort of sits in this cross section of the valuation is good plus theoretically Deep Seq should help Agentic AI. And that's exactly what matters.
- [09:36]
Dan Nathan
The third quarter. Now we've talked about this or two. In my opinion, there have been two companies that have absolutely figured out it's Wal Mart and it's Facebook. And you, how do you say, how do you figure that out? Operating margins came at 48.3%. The shoe is at 42% which means if you know what you're going to slow down on the revenue side, that's more than offset by the margin improvement which you're seeing in EPS gains. I mean that EPS number is ridiculous, which means the stock now at an all time high to your point, is still reasonably valued. And for everything I get wrong, which is a lot, Facebook is one I think we've been doing a decent job with.
- [10:08]
Melissa Lee
You know, listen, this is no longer a hyper growth company. You just talked about operating margins. That's great that they're getting that. So obviously they're getting leveraged some from some of the investments that they made. But expected earnings and sales growth for the next two years, about 12, 13% or so. You know, you better see that sort of margin, continued margin improvement. You know, and Julia just mentioned Reality Labs and the loss is not as big as expected. Go back and think about the 70% the stock loss from its highs in 21 to its lows in 22. It had a lot to do with Reality Labs losses and now the fact that they were able to reposition a lot of that spend and get the benefit. I just wonder if it's kind of Pulled forward. Last thing I'll say. Deep seek, you know, open source model, the Alibaba model, open source model, Llama, which is met as open source model. If those are blocked here in the US that should benefit matter to some degree. You're going to see a lot of developers working around Lama, especially if they're trying to keep up with some of the deep sea that's outside the U.S.
- [11:01]
Guy Adami
By the way, a text from the chairwoman on buybacks from Meta street was looking for $6.7 billion and they bought back zero. So that's sort of an interesting development in light of all the talk about spending and where they're spending their money. They're not spending their money on shares, at least in the latest quarter.
- [11:17]
Dan Nathan
Karen, she's watching.
- [11:17]
Guy Adami
Well, we are. Hello. Hello, Karen. Wish you were here. All right, let's get to Tesla here. Shares up a couple percent. This despite a top and bottom line. Ms. Phil LaBeau's got all the details here. Phil.
- [11:29]
Phil LeBeau
Melissa, that conference call starts in 20 minutes and one of the questions is really most of the questions are going to be focused on what's, what's the outlook for the Cyber Cab full self driving? We'll talk about that in a little bit. Let's run down the numbers you mentioned, the myths on the top and the bottom line. 73 cents a share. The street was expecting 76 revenue coming in. What basically $1.5 billion shy of expectations. Free cash flow of just over $2 billion. When you look at their deliveries, people were expecting them to give some type of guidance. Increase of 10%, increase of 20% in 2025. They are not doing that. All they are saying is that the automotive business is expected to grow in 2025. Perhaps we'll get greater color on that in about 20 minutes. In terms of the outlook, full self or the energy storage business, which has been really the growth story in the last year, it's expected to continue growing in 25, up by 50%. That's their expectation right now. Lower priced model production will begin in the first half of 2025 and then cybercab volume production is expected to start next year. Though they do say that they expect to start launching it. That along with full self driving in certain markets in the United States later this year. As you take a look at shares of Tesla, remember the call starts in about 20 minutes. One last note, Melissa. The automotive gross margins excluding zero emission vehicle credits, the expectation was for it to come in at 16.3%. You see the impact of lower cost models the discounting, it came in at 13.7%. Guys, back to you.
- [13:05]
Guy Adami
All right, Phil, keep us posted. Again, the Tesla conference call begins in just about 15 minutes time. Another interesting development in the Tesla release is the booking of a bitcoin gain or digital asset gain that was $600 million in the quarter. So that is something different from what we normally hear from Tesla. The shares look impervious to bad news at this point.
- [13:25]
Dan Nathan
So we play a lot of games on cnbc, a lot. One of the games we play is if you told me this yesterday, what.
- [13:32]
Guy Adami
Would the stock reaction be?
- [13:33]
Dan Nathan
What would the stock reaction be? You know that game, I'm familiar. If you told me they're going to miss eps, going to miss revenue and margins would come in at 16.3% which is going back like a year or so when we thought we saw trough margin say okay, where's the stock? Given the run it had post election, I'm down 50 bucks easy. And it's not, it's actually up in the after hours. So clearly they're not looking this as a car company anymore, they're looking at as something else. But you know the free cash flow number of 2 billion, which Phil said you just explained. I think the reason why. So label me a skeptic on this one, Mel.
- [14:07]
Melissa Lee
Yeah, I wouldn't say it's a hilariously bad quarter, like I said a couple quarters ago, but they missed on every key metric. I mean when you think about it, the company is embroiled in a price war. I think a lot of those EV tax credits might be gone. Despite the proximity of Musk to Trump. They're in a disastrous situation in my opinion in China. They're trying to make this lower end vehicle here in the US to kind of stimulate growth. They did not have growth last year. The fact that they are not kind of guiding towards anything like that, it should make you think twice about where they are. Rates higher for longer, not a great thing. I know the guys last night, Vinnie and Porter mentioned that two years ago they were having a fit or Elon was on the call about rates and what that means for them. And then the last piece of the puzzle, Elon's going back and forth about tariffs, about Chinese EVs. Listen, if they don't sell enough of the cars that they make in Shanghai, which is about half of their production, then they go to Europe and Europe already has stiff tariffs on Chinese EVs so I don't think they get out of this anytime soon. Last thing I'll just say is like if you want to buy this stock on Robotaxi and mass production of those things at the back half of this year to be deployed next year, have at it.
- [15:15]
Guy Adami
This is a cult stock. This is a cult stock, though, at this point because I got to go.
- [15:20]
Dan Nathan
To an airport tonight. I'm not going to get whacked. You heard the guy on the horn before anyway, please.
- [15:25]
Guy Adami
But that was the point. I mean, you brought up Porter and Vinnie. They're saying we are invested in lucid because all the money is going to Tesla because it is a cult stock at this point. It is not trading on fundamentals. We are seeing that in the after hours session. Proof of that.
- [15:38]
Dan Nathan
Listen, and yes, I think that's exactly right. I mean, based on all the metrics that I'm looking at right now, history suggests it should be significantly lower. It's gotten back what it lost during the day, so maybe that's part of it. But again, the math sort of doesn't work at this point. And now people are looking this through a different lens, I guess.
- [15:56]
Guy Adami
Yeah. Let's get to Nvidia here. Interesting move in. Video down 4% today in the regular trading session. Up though after hours. Bloomberg reporting the White House is considering tighter curbs on its sales to China. Megan Cassell has got the details here. Megan? Melissa, that's right. So that Bloomberg report says that Trump officials are having what they called early conversations about putting additional restrictions on Nvidia's chip sales to China and specifically focused on the H20 chips. These are those scaled down AI chips that had initially been designed to get around current US Export controls on Nvidia's sales to China. The company saying in a statement this afternoon that the Biden administration's thresholds, they say, had been set on performance levels reached five years ago and that it's ready now to work with the administration as it pursues its own approach to AI. Now, the White House and Commerce Department did not respond to my request for comment on that report, but I would caution that it's very early for any decisions on export control policy. No one is yet leading the Commerce Department or even the Export Controls Office within Commerce for the administration. So we're in very early stages here. I will add, though, Commerce Secretary nominee Howard Lutnick did today say in his confirmation hearing that he will be very strong and rigorous in his approach to export restrictions toward China in order to ensure that the US Remains a leader on AI. So it could suggest that this type of policy will be supported moving forward. Melissa, all Right, Megan. Thank you. Megan Casella. For more on all things tech and tech earnings, let's bring in fast money friend Gene Munster, managing partner, Deepwater Asset Management. Gene, great to have you with us.
- [17:27]
Gene Munster
Hi.
- [17:29]
Guy Adami
Let's start off at Tesla because that's sort of where we left off before with the traders here on the desk. What do you make of this quarter? It's a little head scratching in terms of the reaction in the after hours given the quality of the print.
- [17:41]
Gene Munster
Yeah, this was Melissa. I was shocked to see the stock up. I mean this was messy, I think. Guy, what did you say? This a cult stock. Ultimately, I think that the numbers are pretty choppy and it's just hard to see why it's up right now. I think it's basically confirmation that people think that this is more to go.
- [18:02]
Guy Adami
What do you want to hear from Microsoft?
- [18:06]
Gene Munster
It's all about capex and Zuckerberg said it related to Microsoft. It's all about capex. I want to highlight probably the most important point from these earnings calls so far. Zuckerberg's comments that they're going to spend hundreds of billions on capex. I mean that's really reassuring. That's what we're looking to hear from Microsoft. How much you're spending on capex.
- [18:28]
Guy Adami
Do you think that we will hear guidance on capex for 2026? I know that is a mile away, but a lot of investors want to hear that Microsoft, you know, this year's 80 billion is going to be the peak.
- [18:42]
Gene Munster
I think this, you know, coming into this earnings, just taking a step back, Melissa, this is all about what's going to happen with capex. And as I mentioned, Zuckerberg's comments about the hundreds of billions. To put that into perspective, this plays into what's going to happen in 2026 is common about hundreds of billions. So far Meta's invested probably 50 billion in capex. So just to put some context about how far along the road we are and I think that as we kind of play that forward to 2026, if he's saying hundreds of billions of dollars and you have to kind of, given the competitive nature of how these companies are building the AI infrastructure, the comments that Zuckerberg is making is probably going to be similar to some of the comments that we're going to hear from Microsoft. And to get to that hundreds of billions probably means that this infrastructure build continues into 2026. And so I think that this is really positive as I kind of process everything that we've heard so far and seen Everything at Tesla, Meta and Microsoft. The biggest takeaway so far is this is really positive for Nvidia, even despite what's happened with kind of the China piece. Because as you said, Melissa, that outlook for 2026 on the CapEx is just really, I think it's, it's upbeat. And keep in mind Zuckerberg didn't have to reiterate this, he didn't have to double down on what he had said last week. And given what's happened earlier in this week, I think it's really encouraging regarding just the broader AI trade from the early, very early part of what we've heard from these companies so far.
- [20:17]
Melissa Lee
Hey Gene, you just mentioned Nvidia being a beneficiary of all that. We know that. Right. So a couple weeks ago, Microsoft, Meta, they gave their CapEx guidance for the year. So here we are, they're reiterating it and let's see how this stock, you know, how far it could run a little bit if it could fill in that gap from Monday. But you know, going back and looking at that chart over the last three years since it really took off, there's not a single gap to the downside, there's plenty to the upside. So I guess the question here is that is it going to be enough as far as this guidance is concerned? You know, given the headwinds that we might be seeing around the globe with some of these open source miles out of China, like is there a chance that the trade is just done for a bit?
- [21:01]
Gene Munster
This is specific to Nvidia or Nvidia maybe the broader AI trade. I think again we're piecing together data points real time. That's what happened with Deep Sea because it was one data point and the market had to extrapolate it to I think out to several years now since then we've had some more data points and like you said with Nvidia and their business and I think the bottom line is this, is that if capex infrastructure continues to remain strong, we're going to see models, even if they're novel models like we saw from Deepsig, that can be produced at lower prices, they're still going to want to build the infrastructure to get those models out faster. So if we continue to see that, I think that this is that build out, which is what we're hearing tonight from Zuckerberg. If we continue to see that, I think that not only will the hardware spend more broadly continue, but I think that the, the software piece is going to start to play out and so I think that this, this broader trade is, is still very intact.
- [22:00]
Guy Adami
Gene, thanks so much. Great to get your take Gene. Coming up, we'll keep an eye on all of the after hours tech earnings. We are 10 minutes away from Metta as well as Tesla's calls. 21 minutes into another call here. Meantime, we've got other names reporting. Las Vegas Sands, IBM, Whirlpool and more. The numbers in the quarter straight ahead. But first, the Fed pausing its rate cutting campaign, sending a warning about inflation. Jefferies, David Zervos and Goldman Sachs Elizabeth Burton join us next to lay out the impact and where the markets are heading from here. You're watching Fast Money in Miami live from the Iconnections Global conference. We are back in two.
- [22:47]
Melissa Lee
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- [23:18]
Guy Adami
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- [23:40]
Dan Nathan
At stake when administrations change?
- [23:42]
Melissa Lee
From the first 100 days and beyond.
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Dan Nathan
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Guy Adami
Executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability.
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Melissa Lee
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- [24:02]
Dan Nathan
EY navigate the geopolitical and economic landscape with confidence.
- [24:13]
Guy Adami
Welcome back to FAST money. Stocks closing lower but off their worst levels of the session after the Federal Reserve left interest rates unchanged. Fed Chair Jerome Powell striking a more cautious tone, warning of sticky inflation and signaling that the committee is not in a hurry to cut rates. President Donald Trump reacting on Truth Social in just the last hour, writing that Powell and the Fed failed to stop the problem they created with inflation. The President adding that his policies around trade, deregulation and energy will, quote, make our country financially and otherwise powerful again. Joining us here in Miami is David Zervos Jeffries chief market strategist and Elizabeth Burton client investment strategist at Goldman Sachs Asset Management. Great to have you both here on set in Miami. Elizabeth, I'll start off with you. What is your reaction? Because, you know, it's funny, the statement came out, people got really concerned that it was hawkish. The Fed sort of pulled that back a little bit, and then you got the Trump, Trump effect as well. I think it's, it's not unexpected. We were sort of waiting for a pause this time. And, and by the way, not a lot of the investors here, other than the managers are really thinking about it. They're mostly thinking about the diversifying assets. They want to meet here. But we haven't changed our forecast. We're still expecting two cuts this year, one in 2026, and the timing is kind of uncertain around that. But we thought it was interesting that they removed the clause about the progress towards the 2% inflation, which was again, not meant to be a signal. He later on said in the press conference data, from your standpoint. We're chatting in the break and you're saying that you're waiting for the Trump tweet afterwards and there you got it. You know, you have the message on Truth Social. But how do you put this all together? Because you have where the Fed is and it seems like a growing tension between the President and Jerome Powell.
- [25:52]
Phil LeBeau
Yeah, I thought there was a chance that Jay could have broke that tension today and maybe, maybe said something like, we're looking, we're looking at what deregulation means for inflation. We're looking at, you know, what the tariffs and immigration policies mean. We're kind of coming up with our own versions of it. But he, he really is playing it as low key as you possibly could. He just did not want to talk about anything related to the new administration. And I thought that was kind of a, you know, I just, I think he's got to do it at some point, so why not get it out of the way and just start the process. I don't know what delaying it for another six weeks does, but, you know, that's what he chose to do. He's going to have to step up and start saying things sooner rather than later. And, you know, we're going to be watching these Trump tweets post FOMC meetings, probably closer than we're going to be watching the SCP and the statement in the coming months, you know, coming quarters.
- [26:44]
Dan Nathan
To or watched Elizabeth over the last year and a half, she was one of the few people that got the inflation story right. And it's still a problem without question. CRP index is at a 15 year high. So is it going to continue to be a problem? I guess is my question.
- [26:57]
Guy Adami
It could be a problem. I think there's some over indexing on the tariffs issue. That's only going to add, we believe, about 3%.3 percentage points to inflation. But on your point, if it does become a problem and it's not our base case, but if it does, as you know, Goldman believes that over the next decade there's a 1 to 7% return kind of bracket there for US equities. And if inflation does stay higher, then you run into the risk of negative real returns. And for the clients I serve, which is mostly US Public pensions, that's a massive issue, particularly because, look, last year was a good year for 60, 40, but only because of the 60. So there's a lot of hurdles here.
- [27:32]
Phil LeBeau
Yeah.
- [27:32]
Melissa Lee
David, you know, we keep hearing about this new administration and flooding the zone with all these policy ideas. Right. It sounded creating a little bit of uncertainty or a lot of bit of uncertainty. How do you think about that? Right. So we're just talking about Powell at some point is going to have to obviously stand up and kind of stake how they're going to go about this. But all that uncertainty and how the Fed has kind of changed their tune over the last six months or so, how do you think it shakes out? If we do have interest rates kind of stick around here at this four and a half sort of level, how does it play out for equities?
- [28:02]
Phil LeBeau
I think the optics actually look pretty bad for the Fed at the moment and they look a little like he's setting himself up for a 2018 showdown with Trump. And I hope that's not what happens because that won't be good for equities. I hope he moves the other way. But you know, the 50 basis point cut just before the election, not good optics. Now pausing just after the election, not great optics. So I think they've got to kind of really stake out. Do they really have this disinflationary view that we're getting back to two what is it on? Is it on energy? Is it on the tariffs not being as big a deal or the immigration not being as big a deal? I think they've got to start taking a stand on all of those issues. By the way, it's not that uncertain. We saw the movie in 17, 18 and 19. We saw tariffs, we saw immigration, we saw exactly what his fiscal policies were and inflation went nowhere. So it's really hard for me to get my head around a Fed that wants to jump into this, oh my God, there's all these inflation risks I got to worry about when three years of Trump policies produced 2 1/2 to 3% growth and very little inflation. And then of course, we got Covid and all bets were off. So I think there's enough history that they could make an educated guess. I'm just a little bummed out that Jay balked so hard this time. I think he had a chance to step in and maybe do something and he didn't.
- [29:23]
Guy Adami
There is obviously a lot of question marks still regarding policy and how that's going to impact what the Fed does and the economy. Elizabeth, so what are you telling clients in terms of the volatility that so many people are expecting in the first six months? Give it of the administration. Volatility is actually a good thing. You sort of want volatility if you want to make money. Right. So I think you want to be looking for investments that can make money without calling the interest rate phenomenon correctly. So volatility is good for convertibles. Right. And there's a lot of tailwinds behind that, whether in arbitrage or long only strategies. There's also tailwinds behind private credit. Either way the rates story goes. I know a lot of people think that's a great thing to look at in rising rates, but in declining rate environment, you can pay off and lower your debt better. And then liquid alts and hedge funds, anytime there's volatility, relative value trades are the way to play it. And there's a lot of that here today. And that's what our clients are looking for. Yeah. And in terms of Jay Powell not diffusing that tension between the central bank and the White House, I mean, how, how are you anticipating that will impact equities immediately?
- [30:22]
Phil LeBeau
Look, I'm very optimistic on equities, but I'm very optimistic on equities. Not because of the Fed. I'm optimistic because I think the deregulation trade is really underappreciated. And I think people are still, you know, the number one question I get in a meeting is what are you worried about? Are you worried about tariffs? Are you worried about immigration? Are you worried about fiscal recklessness? Everybody's got a wall of worry to climb and that's usually a great sign for equities. So I think we've underestimated drag. It's a huge story. The president said it in his speech two days ago down here at Doral or three days ago now in Doral said, I talk to CEOs every day and I ask them, would you rather have tax cuts or deregulation? Every CEO tells me the same thing. I'll take the deregulation. We should be talking about that so much more. The cutting of the red tape is huge. The tariff stuff, the immigration stuff, these are to me much bigger sideshows than the deregulation story. And I think he mentioned that in his tweet after today's Fed meeting that the bank regulation stuff is really something they want to focus on to unleashing our industry from under the reins of what was created from eight years of Obama and four years of Biden. Those were big regulations on the financial services industry, Dodd Frank and everything else. And kind of Michael Barr being out and kind of the next stage of what financial markets look like in a deregulated environment. I'm just really excited. I'm excited for our industry.
- [31:37]
Guy Adami
All right, thank you, David Zervos, Elizabeth Burton. Appreciate it. Coming up, China's got more. And one more entrant in the global air race, new model from Alibaba Baba that could already be outdoing Deep Sea and what it could mean for the stock. Plus opportunities in private credit. Oaktree Capital's co CEO Armen Pannojian will join us next to detail how moves and rates are impacting the space and where he's seen the best returns. You're watching Fast MONEY live from the Iconnections Global conference in Miami, Florida. Back in tune.
- [32:10]
Melissa Lee
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- [32:41]
Dan Nathan
What's at stake when administrations change?
- [32:44]
Melissa Lee
From the first 100 days and beyond.
- [32:46]
Dan Nathan
EY brings insights on the issues that matter.
- [32:50]
Melissa Lee
Executive orders, regulation of AI, the fate.
- [32:53]
Guy Adami
Of billions in tax credit, global trade and workforce stability. No matter the policy shifts, EY helps.
- [32:59]
Melissa Lee
Business and government leaders remain resilient and seize dynamic growth.
- [33:03]
Dan Nathan
EY navigate the geopolitical and economic landscape with confidence.
- [33:14]
Guy Adami
Welcome back to Fast Money. A couple fast movers catching our eyes today. Shares of Alibaba up again today, bringing gains over the past week to near 12%. The China Tech company releasing a new version of its AI model that they say outperforms Deep seek and some more after hours action here. Shares of IBM jumping after topping EPS and revenue expectations. Las Vegas sands also sharply higher despite an earnings miss. And Whirlpool dropping after reporting disappointing revenues. Servicenow, take a look at that. Also lower as results come in in line with expectations. You die, Alibaba.
- [33:47]
Dan Nathan
Yeah, well, we play this. What's that game we play so many.
- [33:49]
Guy Adami
I don't know, one week letters.
- [33:51]
Dan Nathan
You try to make a word that half the people have no idea how to play it correctly.
- [33:55]
Guy Adami
A is not in two, I am.
- [33:56]
Dan Nathan
Not one of those people.
- [33:58]
Guy Adami
But B is in 2, B is in the 2.
- [33:59]
Dan Nathan
And B has actually done pretty damn well. And you know what? We had Vinnie and Porter and they think Alibaba's probably 40, 50% undervalued. And then IBM real quick. Do you believe in coincidences?
- [34:09]
Guy Adami
No.
- [34:10]
Dan Nathan
No. Neither do I. It's no coincidence that when Gary Cohn came in, look at what that stock has done. By the way. I think that was the iron Sandy Kennel. It's like Swift trade a couple of years ago. Last year, all time high in IBM, maybe a little extended, but this has been a great story.
- [34:24]
Guy Adami
All right, coming up, Starbucks shares brewing up a nearly 2% 2 year high, I should say. As the coffee chain updates investors on its turnaround plan. The changes coming to the menu next. And Oaktree Capital's arm Panosian helps us dig into the private credit market where he's seen the biggest opportunity in the space. Do not go anywhere. Fast Money in Miami is back into. Welcome back to Fast Money. A new administration, the specter of inflation and a hawkish Fed may have major implications for credit markets this year. But our next guest says any potential uncertainty could be a huge opportunity. Armin Pannosian is the co CEO of Oaktree Capital Management. Welcome back. Great to see you again this year. Connections. Why is that?
- [35:16]
Steve Kovac
Well, anytime there's uncertainty, it creates opportunity for firms that have the depth of expertise and finding that type of idiosyncratic situation that needs a solution. So we're really excited about the uncertainty. We think there's opportunity embedded in it. But in addition, I think because there's some uncertainty around the inflationary policies that, that President Trump may be taking on, kind of leans on rates being higher for a little bit longer, which is great for credit investors.
- [35:42]
Guy Adami
Right. Where are, where are we? I mean, are we in a sweet spot right now in terms of rates for the private credit markets? I mean we, we just had Elizabeth Burton of Goldman Sachs and she was saying it's actually better if rates are a little bit lower, you know, your borrowers can pay back better.
- [35:56]
Steve Kovac
I think there are different types of borrowers. So in terms of consumer borrowers who are below prime or subprime, I think the rates are kind of tough right now. We are seeing some elevated delinquencies in that type of borrower base. But in terms of corporate borrowers, fixed rate borrowers, this last few years have been a pretty good period for them because they've been able to grow with inflation and some of the stimulus. So they're actually feeling really good about life.
- [36:23]
Dan Nathan
I mean, I'm sorry, I was just say something's happened. It's never happened before. Since September 10 year yields 3.6 Fed cuts goes up to 4, 8 over the course of five or six months. We've never seen that before. Is there a threshold where you know, rates get to 5%? That's been the number that's been talked about. Things start to get a little dicey in your world.
- [36:40]
Steve Kovac
They do. And I think it's really because there are certain types of assets that are pegged to that tenure, especially in real estate. And I don't know what the magic is on 5%, but that does feel like there is a, an issue that will become a problem if 5% is the persistent rate on the long end of the curve.
- [36:57]
Melissa Lee
I mean, you said higher for maybe a little longer. So we, you know, we hear higher for longer as kind of a mantra here. You know, we're at 4 or 5 in the 10 year. If you had to look out, I don't know if you're betting man or not. You know, look out six months, are we 5% or we 4% in the.
- [37:12]
Steve Kovac
10 year 500 betting man? I would say closer to 5% there. There's a lot of deficit spending that is planned that leans on the rates being a little bit higher. We, we need to be a bigger borrower as a country. And but for some, some pretty significant changes in the buyer base of our Treasuries, I think it leans on higher rates.
- [37:33]
Guy Adami
In terms of private credit here at Iconnections, obviously you're talking to a lot of potential investors. What are the biggest drivers still driving them to the private credit market at as another layer of investment? And what role do you know, do treasury yields play in that decision? In terms of carving out your basket? Deciding within my fixed income basket, within my bond basket, I'm going to go to private credit over something else.
- [37:57]
Steve Kovac
It's a great time to be in credit. It's partially due to the rates being high. It's also partially due to some pretty attractive spreads above those base rates. When you compare that against equities, I think think the prospective returns on credit are far more attractive because there's a contractual rate of return. The coupon is very powerful. If you look at the forward PS today and you were to overlay them against history and kind of do a little bit of prediction on what equity markets we return, we think they'd be inferior to credit in the, in the short to medium term. And that's why a lot of investors are looking at credit because of that contractual return, because the picture for equities is a little bit uncertain and that's why they're allocating. But in addition to that they just like the income, I mean high Yield bonds yielding 7%, broadly syndicated loans yielding even more than that. Private credit close to 10% if you're a pension fund that has a roughly 7% payout ratio. Feels really good to, to be in that, in that sweet spot of credit of below investment grade credit.
- [38:57]
Guy Adami
Armen, thank you. Great to see you. Arming of Oaktree. Coming up, the changes coming to the Starbucks menu as that stock jumps to a nearly two year high in the back of earnings. More on the turnaround plan next. And bitcoin prices hovering near record levels but taking a sharp leg lower after today's Fed decision. What our next guest says about the pullback and how President Trump's stance on crypto will impact the space. You're watching Fast Money in Miami live from the Iconnections Global conference. Back in to thank you. Welcome back to Fast Money. Starbucks up more than 8% on the back of its strong earnings report. The coffee chain posting earnings and revenues that beat expectations and announcing it will slash 30% of its food and beverage offers from the menu by the year end. It was the best stock, the stock's best day I should say since last August and its highest close since May of 2023. We talked about this yesterday guy, but the move today was really something rong on this one.
- [39:59]
Dan Nathan
And look at the stock that traded almost 40 million shares. It typically trades 8, so the volume was behind it. A lot of people have been out of this trade obviously poured in. I talked about the four year downtrend that I thought was intact. We closed through it today. Good for Starbucks. There's a lot of hopium now and people believe Brian clearly. But they have a lot of obstacles still and valuation is not cheap here.
- [40:19]
Guy Adami
Obstacles like what?
- [40:20]
Dan Nathan
Well, I mean all the obstacles that they've had. I mean, I think they have a growth problem without question. They have a market margin that's been going down.
- [40:28]
Melissa Lee
Yeah.
- [40:28]
Dan Nathan
I mean the business is on the other side, I think. And people are saying he's going to the magic wand that he did at Chipotle, he's going to do at Starbucks. They're entirely different problems.
- [40:38]
Guy Adami
Coming up, a new world for bitcoin Galaxy. Steve Kurtz will join us next to detail the latest moves in the crypto space and what a US Stockpile could mean for the price of bitcoin. That is next. More Fast Money live in Miami right after this. Welcome back to Fast Money in Miami. Bitcoin climbing almost 50% since President Trump was re elected in November. The cryptocurrency just off of all time highs from last month, but still solidly above the 100k level. Galaxy Global's head of asset management, Steve Kurz joins us now on the crypto landscape. Steve, great to have you with us.
- [41:20]
G
Thanks for having me.
- [41:21]
Guy Adami
You've been coming to this conference since the inception. How different is the environment now?
- [41:25]
G
You know, it feels a little trite to say this time is different, but it really is. I mean it's the standing room only crowd for all of the sessions on bitcoin. I think the best way to explain that I was at the bar with my wife last night. We had a nightcap. Two skeptics who were investors were next to me. They spent 30 minutes debating why crypto wasn't real, but they knew everything about Solana, Ethereum, Trump Coin, all the meme coins. You're like, this is very different. The starting point is very, very different.
- [41:51]
Guy Adami
In terms of that incremental sort of party that's interested this year. Who is it? Is it the institutions, is it pensions? Who?
- [41:59]
G
It's all the above. I mean you have certainly the allocators that now have had work done by the consultants. So the operational due diligence work is done. The pensions are looking the institutional wealth crowd, which is a $50 trillion market that hasn't yet really come into the space. They now see a one year track record on the Bitcoin ETFs. They're starting to take real look towards investing their client capital in bitcoin. It's really all the above, Steve, when.
- [42:22]
Melissa Lee
You think about it, we've heard a lot of use cases over the years and many of them have kind of fallen by the wayside.
- [42:27]
Guy Adami
Right.
- [42:27]
Melissa Lee
It really has become a store of value. So when you talk about a lot of these big Institutions and the demand for it. Is it just that? Is it just digital gold?
- [42:34]
G
Well, it's chicken and egg. You need the regulations and a framework to build. Crypto was a back end technology. First you're going to see an explosion of building on top of crypto. Now it's not just digital gold. You have Ethereum and Solana obviously, but stablecoins. What you're going to see is stablecoins moving from a $200 billion market cap to 4 or $500 billion. It's a cheaper technology, the settlement is faster, it's found product market fit. We don't need to do anything except to put more fuel on that fire.
- [42:57]
Dan Nathan
Very friendly administration. How important is a bitcoin reserve?
- [43:01]
G
The bitcoin reserve is, it's of course important, but it's not as important as the fact that the war on crypto by the US government is officially over. It really is. You've never seen 180 degree shift so quickly from one administration to the next. What happened in the last few years is we were talking about what is crypto then, why is crypto important now? It's how are we going to bring crypto to the US you got the executive orders, you've got the SEC actions giving you air cover and setting the tone, already bringing builders back to the US but then you have real legislative rolling up your sleeves. We were Justin Doral talking to Republican congresspeople. Where does defi fit on the board? How do we sequence this? How do we get things done this year?
- [43:38]
Guy Adami
What would be the number one legislative or regulatory catalyst for you for the price of bitcoin?
- [43:46]
G
Well, we just need to know for the price of bitcoin we need a framework around market structure and we need an overall what is a security, what is not a security that's going to help bitcoin, that's going to help the other coins, that's going to help the front end of crypto be built, like I said.
- [44:00]
Guy Adami
All right, Steve, great to speak with you. Thank you.
- [44:02]
G
Thank you so much for having me.
- [44:03]
Guy Adami
Galaxy. We got to get back to Gene Munster here. He's been listening on the Tesla conference call. That stock is at after hours session. Highs up about 5% right now. Gene, what's the latest?
- [44:12]
Gene Munster
Melissa, three key takeaways. First, the robo taxi service launches in Austin. That's in June. Most people had expected it late in the year. They did say it's dipping the toe into the water. Second is that he described 2026 as a year that's going to be epic in 2027 and 28 as being ballistic, ridiculous and bananas. I mean he just really can't poly the adjectives on more strong. And last is on the capex side. He says given the opportunity around AI more broadly and autonomy and optimist, a $500 billion infrastructure buildout is justified. So I think it's kind of all systems go at least for the people that can look past. Not a lot has been said about 2025. I think he's laying the groundwork that give him space in 25 for a breakout in 26.
- [45:02]
Guy Adami
All right, Gene, thank you, Gene Munster for that update on Tesla. The other stocks pretty stable in the after hour session in terms of the moves, but Tesla is the one that is moving higher. It looks like somebody used the source.com tonight in terms of ballistic and bananas and using all these different words to describe amazing.
- [45:19]
Dan Nathan
Well, it's just incredible to have that kind of clarity that far out when I don't think a lot of people have clarity what's going to happen over the next couple of weeks. But you know what if he does? That's why he's being rewarded right now.
- [45:28]
Melissa Lee
Yeah, it looks like they backed away from 2025 guidance that they gave I think for you know, growth of 30% or something like that. And they're really kind of back end loading it. I, I mean I think that sort of commentary is kind of bananas and I don't think that institutional investors really want to hear that sort of stuff. I think the cult stock owners get really excited about it. It is a trillion and a half dollar meme coin. That's what's going on here.
- [45:48]
Guy Adami
Up next, final trades, final trade time. Let's go around the horn.
- [46:00]
Melissa Lee
Well, short horn, it's banana that Tesla's going to build thousands, thousands of optimists this year and that robo tax will be in Austin in June.
- [46:07]
Dan Nathan
I started yesterday's show talking about the crew. I'm gonna end it that way. The people behind the scenes have done a remarkable job. The true heroes of the last two.
- [46:17]
Guy Adami
Days of the show putting up with you.
- [46:19]
Dan Nathan
Gdx, Melissa Lee.
- [46:20]
Guy Adami
All right, thank you for watching Fast Money live in Miami. Mad Money starts right. 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. 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 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 Eduardo.