Steve Grasso (3:48)

Yeah, I mean this really feels like I like to say I fatigue, the I spend fatigue is out there and matter really is the barometer for this. When, when years ago, remember when they were spending a ton on the Metaverse, then they stopped spending a ton and the stock ran. So now they spent a ton on AI and now they're not spending a ton and they're, they're throttling back. I think the market is saying show me something for the money.

Tim Seymour (4:13)

Right?

Steve Grasso (4:13)

So now when you look at Avgo, when you, when you look at Broadcom, I always, I hate the symbol like.

Melissa Lee (4:20)

I say BRCM in my head it's all the time.

Steve Grasso (4:23)

So when you look at the custom chips and those are lower margins, this is what they do. So they do have the kicker with the VMware of software. So that's why I like the stock. I would actually be a buyer on this type of weakness. But when you look at the other ones, they don't have a kicker. And I think that fatigue is real.

Melissa Lee (4:39)

I mean for the Oracle story it in particular because this has to do with Open Air data centers specifically. And there are questions also about Open Air and how it gets its money. Then you have what Seema had mentioned, which is how the bonds are trading for Oracle, which are now trading at a higher. For the September issued bonds, $18 billion of bonds, the premium has widened so investors are demanding to be paid more in order to lend Oracle this money. So that's gone up. Cds, the cost of insurance on the bonds, that's gone up. There is a question about every piece of the financing puzzle which in the case of the Oracle OpenAI.

Gene Munster (5:12)

Yes, and I'm glad you made that distinction because I agree. So I'm with Steve in terms of, I do think that there is this spinning fatigue. It's essentially, you know, investors are essentially saying, listen, we need to see where the, the revenue or profitability is going for there so that we can kind of like bootstrap and infer what is going to be the actually upswing from, from the spin. But again, I do think these are two distinct stories. I think in Oracle's case, they really haven't been able to button down exactly what the debt raise is going to need to be and essentially how long and how much they're going to be willing to spend. Now, whether or not margins start to compress, I mean we already know that they're kind of in a lower margin business that is part of their value proposition that they're able to provide servers and technology and software on this entire bundle for a lower price point. So I think the concerns there are real. I think OpenAI kind of opened the door for this whole concern when they mentioned the whole Fed backstop. But at the same time I will say that you are seeing some positive things. You saw the Disney deal. So again, I don't really get. I'm always concerned as an investor. Right. Clearly you always need to be a little bit skeptical, you should be a little bit paranoid. But at the same time I'm not ringing the alarm bells on the Broadcom side. The truth of the matter is that you are eventually going to talk and we all talk about when will Nvidia's day in the sun eventually come to an end? It will eventually come to an end and that will likely happen when there's more money being spent on inference than learning than training. And so I think the concern there is that like all of their current customers, the hyperscalers are eventually going to get their own custom chips. Well, when they do do that, Broadcom is going to be the beneficiary so for me, I think it's actually a way for you to broaden your exposure away from Nvidia. I just think right now, to Steve's point, the fatigue has set in and you're seeing Broadcom pull down with that. They did have slightly weaker non AI and software numbers, but the truth of the matter is that I think these are very distinct stories and should not be lumped in together.

Courtney Garcia (7:11)

Yeah, I do agree with that thought process that some of these are company specific. So I think when you look at Broadcom, I mean, that was trading near 40 times forward earnings. So it's pretty much priced to perfection. I think that's one of the biggest problems here is if they're not going to meet a very high bar, you're going to see some profit taking there. But I don't think they have as many structural issues as you're necessarily seeing with Oracle. Like that's where people are really starting to question can they actually really perform based on the amount of debt that has to come into this company. So I think when you look at those credit default swaps five years out and you kind of hit the nail on the head with this, that's up 50% in just the last month. So just in the last couple of weeks. I mean, people are demanding so much more on insurance on that company because they're not sure if they are going to actually be able to pay out on that. And especially because OpenAI is a majority of their remaining performance obligations. That is a company that's not going to be profitable for several years in the future. So I think that's a bigger concern to me than what you're seeing in Broadcom.

Melissa Lee (8:05)

I mean, I think a major distinction also is to get, to get to Courtney's point specifically on, on the bonds and the debt is can Oracle maintain its investment grade? I mean, it's on thin ice right now in terms of investment grade rating. But that's going to be a question, 2026, will they be able to keep that rating? Because they don't. It's going to cost even more to pay for all of this. There's not that fear for Broadcom yet. Yes, the revenue forecast really was not as bullish as analysts had hoped for. But it's not a question of being knocked down to a junk rating.

Julie Beal (8:35)

Yeah, I think that's pretty critical. It's pretty do or die right now for Oracle. And I think, you know, part of me, if, were I investor in Oracle, I would say, gosh, it would be a shame if these Deals with open air didn't work out and it's like probably it would be beneficial for them because it looks like the returns on them aren't going to be great. They are going to require a lot of capex. You're in an asset that's clearly depreciating. And so it's this relationship that I think has actually proved to be really painful for them. At Broadcom, it's a very different story in terms of a much more diversified customer base. They're much better positioned, their capital structure is much cleaner. They don't have these kinds of same concerns where they're really wedded to the new guy on the street that we still don't know exactly where all of this trillions of dollars of capital is going to come from.

Melissa Lee (9:20)

So what does this mean for the broader markets? If this major part of the markets, if there are doubts, there are question marks on, on them.

Steve Grasso (9:29)

So when you look at Broadcom, Broadcom is still up 55% year to date. Nvidia is up 30% year to date. And after all this, Oracle still up 14% year to date. For me, my, my whole thesis has been when in video starts losing that momentum, it'll go somewhere else. As long as it goes somewhere else, we're okay.

Melissa Lee (9:46)

Where is it going now? Because everything down, it's now at this.

Steve Grasso (9:50)

Moment for this, everything, everything is going to be down. I think that the, the fluff has to come out of the market. But we have seen a lot of the other names, whether it's the smaller cap names, sort of take on financial, a little bit financial, smaller cap names, I don't think that's sustainable. But I do think other technology will start carrying the burden.

Melissa Lee (10:10)

Okay, Julie, just quickly on, on small caps because what a run it's had so far. I mean, hitting record highs this week. What's your take on how that group is valued? This is your bailiwick.

Julie Beal (10:22)

Yeah. The thing is, is that we look at them like a monolith, but they're really not. And the parts of the Russell that have really worked the best are the most speculative, you know, quantum computing companies that don't even have revenue and a lot of biotech that's been very swayed by having interest rates coming down. That's not the part of the market that I want a ton of exposure to. And if you think about the Russell 2000, you know, 40% of it doesn't even have earnings. So I think it's interesting to see this move in low quality rally.

Melissa Lee (10:53)

Right.

Julie Beal (10:53)

It's affected a lot of small cap managers. Very few of them have been able to beat their benchmark this year because the rally has been so low quality and clearly retail driven. But I think over time earnings is kind of what matters. I don't, I don't think that's changed.

Melissa Lee (11:08)

For more on Tech's rough week, let's bring in Fast Money. Francine Munster Managing Partner, Deepwater Asset Management Gene, it's always great to get your thoughts. I want to start off with Oracle and I just curious how do you think this Oracle story progresses in 2026 and is there even though we know that Broadcom is a very different company, that Nvidia is a very different company in terms of customers, in terms of the balance sheet, etcetera, etcetera. Is there the risk of contagion from Oracle to the other AI players in 2026?

Gene Munster (alternate or guest) (11:36)

In 2026 I think there's less. I think kind of what we've gone through in the last week I think helps minimize that. I'm glad we've been through this episode in some respects. As far as what kind of the bigger outlook for Oracle in 2026 is, I think it's going to be underperformer relative to the rest of the large cap AI. And the biggest reason is that even though they've got these impressive growth targets, the reality is they probably going to fall somewhere a little bit below my sense is it's probably going to be capacity is going to be the kind of the governing factor and when you have big growth rate targets out there, even if you still have amazing growth but it falls below what their bar that they said it's just really hard to improve a multiple and so I think they've in some ways, I mean they had to disclose their backlog but that beautiful backlog from three months ago and then it improved again by another 63 billion this week. I mean it's kind of created a hard comp essentially for what they're going to do next year. So that's where I'm at relative to Oracle. But what I think really you're speaking to is this, this, this bigger dynamic around what's going on and Steve talked about it here. Is this the facts. The facts are this week was a really good week for AI fundamentally it sounds that that comment seems out of touch with reality and I think the question comes down to this fatigue that Steve talked about I think is at what point what's the event, events that are going to cause that fatigue to be reversed and people to Be more open to hearing about the good improvements and fundamentals.

Melissa Lee (13:11)

What do you think that event is, Gene?

Gene Munster (alternate or guest) (13:14)

So my, my sense is that, I mean I would, I would love like if I could get one thing for the holidays, it would be for the trade to be down another 10%. If you look kind of across the board, depending upon the small large, it's, it's, it's off 10, 20%. Ish. But I think just a really good, almost like a thrashing. We need that at this point. But just so investors feel like there's some form of a bottom end. So I think that would be one if we don't get that. And my sense is we probably don't get that because as we move to the end of the year, the conversation is going to turn back. This market is still a positive market. There's still optimism around AI. The conversation is going to shift back to what to expect, what we're going to hear on the December earnings kind of. So what's going to happen at the end of January? And my sense is investors are going to want to be positively positioned. So unfortunately I'm not going to get. What I'm wishing for is a flush in AI here. So as far as getting that fatigue to improve, it's not going to happen just based on the December results. But I think as the fundamentals continue to prove themselves out, and they will, we're still early in AI, it's still going to be more transformative than most people think. As that reality sets in. I think that these stocks are going to respond appropriately in the first half of the year. But it's got to be coming down to actual prints. Probably the combo of the December and March quarters.

Steve Grasso (14:35)

So, Jean, do we ever get another deep sea moment where it is a commoditized business? Right. Where in the US it seems like we're wasting a lot of billions. This is, you know, a depreciating asset, basically. Do we ever see that again?

Gene Munster (alternate or guest) (14:50)

Well, on the commodity part, just one kind of distinction. When I think about the commodity, the biggest piece on commodities, token pricing, there's the hardware piece which depreciates over five, six years, something like that. That's. You can debate commodity best chips do help performance. But when I think about the risk of like commoditizing this whole story, it's about the race to the bottom. When Sam Altman talks about a 10x annual decline in pricing for the foreseeable years, how do you kind of get that to grow? And I think actually I'm in a Little bit of a different camp, I think. You know this Jevons paradox that I think Sundar had talked about earlier in the year, this idea that as pricing comes down, usage will increase. Google experienced this back with search and mobile. And so my sense is that actually not all I just want to start there is I don't think all token pricing is going to be down 10x. I think the good tokens are going to be still priced well enough that we're going to see growth. Sam Altman this week still standing by that they're going to double revenue for the next few years. If that happens, I think that's going to be just a really favorable sign that this is not totally commoditized.

Melissa Lee (15:59)

Gene, great to see you. Have a great weekend. Gene.

Gene Munster (alternate or guest) (16:02)

Thank you. You too.

Melissa Lee (16:03)

Asset Management. If we are going to go through some tumult in this AI trade, Courtney, how do you view the players in terms of safety, which are the quote unquote, safest, the most defensible names within this group?

Courtney Garcia (16:17)

Well, I think you need to look at the names that have the cash flow really to support all of the spending that they're doing right now. So I think that's where Oracle is a really good example, where they really don't have that. So I think you're going to want to look at some of the bigger players there. This is also a reason you want to broaden out. I mean, you're seeing that even today or this week. The RSP, which is the equal weighted S&P 500s actually hit some all new highs this week. And so I think whether the trade is. Trade is getting expensive, maybe there is some pain here. Maybe there's that 10% pullback that Jean talks about, which, you know, ultimately probably is a buying opportunity. I don't think it's anything to be concerned about, but you're going to see some money go into other areas of the market. I think this is a really good reminder of why you want to be doing that.

Melissa Lee (16:53)

Okay. Forced to stay within the trade. Steve, is there a swing trade that exists for you? A flyer here?

Steve Grasso (16:58)

If.

Melissa Lee (16:59)

Would it be Oracle? Could it be Oracle?

Steve Grasso (17:02)

I'm tempted to say Oracle, but I really like Broadcom here with the damage that's been done the last day or so. If you look at the chart though, Micron's chart looks pretty good. If you're talking about, if you talk about memory and also intel, let's not forget about them. It's up 88% year to date. So no one thought about intel and It'd be odd for that to be a safety play.

Melissa Lee (17:23)

All right. Meantime, we've got news, a news alert here on Live Nation. Julia Horsin's got the details. Julia. Hey, Melissa. Legal blow to Live Nation. A federal judge ruling that a lawsuit filed against the company and its subsidiary Ticketmaster can be certified as a class action suit.

Courtney Garcia (17:39)

The plaintiffs met the criteria to expand.

Melissa Lee (17:41)

Their lawsuit seeking 15 years of alleged damages tied to the purchase of more than 400 million tickets into a class action suit. Now, this class covers consumers who bought.

Courtney Garcia (17:52)

Tickets directly from Ticketmaster or a Live.

Melissa Lee (17:54)

Nation affiliate for events and major venues since 2010. We've just reached out to Live Nation for comment and have not heard back yet. Back over to you. All right, Julia. Thank you. Julia Boorstin. Coming up, Lululemon shares Lumber. Lumbering. It's limbering. It's. We're talking yoga limbering up after a C suite shakeup. We'll debate whether this move higher is worth stretching for.

Katerina Simonetti (18:14)

That's next.

Melissa Lee (18:15)

Plus, pot stocks well in the green on rescheduling hopes. And our resident cannabis expert Tim Seymour says this time it could be for real. Why? He thinks the space is massively undervalued. Right after this.

Julia Boorstin (18:28)

This is Fast Money with Melissa Lee right here on cn, the heaviest metal credit card of all time, rumored to be one of only 18 in existence.

Melissa Lee (18:43)

Plated with the very same tungsten that.

Julia Boorstin (18:45)

Forged the international space station and wielded.

Melissa Lee (18:51)

At business dinners like a samurai sword.

Julia Boorstin (18:56)

It's a classic corporate power move.

Steve Grasso (18:58)

But the real power move, having end.

Julia Boorstin (19:01)

To end visibility on your most critical shipments.

Gene Munster (alternate or guest) (19:04)

FedEx.

Julia Boorstin (19:04)

The new power move, Sling is the live TV service that puts you in charge. Choose your plan. Orange for sports and entertainment favorites, blue for news and reality. Or select for the essentials. Only pay for the stuff you actually watch and pause your subscription anytime. Because paying for TV you're not watching, that's just rude. No long term contracts, no nonsense. Pick your plan. Add what you want. Sling lets you do that. Visit sling.com to learn more.

Melissa Lee (19:33)

Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning, and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at capella. Edu. Welcome back to fast money. Lu Lemon. Share Stretching more than 9% higher after the athleisure brand announced yesterday that CEO Calvin McDonald is stepping down. He will stay in the role until January 31st and serve as a senior advisor through the end of March. The stock, having its best day since last December, was the best performer in the S and P today. But shares still down more than 46% this year. A change though, could bring a turnaround, a true turnaround. Julie, do you buy that?

Julie Beal (20:32)

Well, first of all, I mean, how hurtful is it that, you know, stock rallies 10% when you get announced to leave? I would be a little heartbroken by that. But I think that genuinely it's going to take a lot. This is a big ship, it's not a small one to move around. And I think that the problems are multilayered. The biggest problem that they have is completely out of their control and that's that this category they used to just have by themselves and now there's so much good quality competition with brands that are able to reach people on Instagram very inexpensively and no one is really going to be able to fix that part of it. So getting it to be much more competitive is going to be challenging. I think there are real opportunities for them in terms of their brand innovation and things that they can do. But maybe it's a reflection of we need to concentrate on what we really can win, where we can be different. Because right now it is noisy.

Gene Munster (21:24)

Yeah, I agree, I think it's going to be a challenge, but I'm going to try to focus my efforts on finding what the constructive kind of storyline is for the stock. I think that if you really look at where this has been historically, the rerating on this name has been nothing short of incredible. This trades at a market discount multiple. Their TAM is still quite large. I agree there is fierce competition and they're able to reach viewers in a much more cost efficient way. But there's no reason that Lulu can't copy that playbook. There's no reason that they can't pursue some type of brand partnership. And I do think that there is some new blood being breathed into the company here. So I do think that I can see the case for somewhat of an optimistic story. The new entrants have done nothing more than show that the bar to being able to disrupt this submarket is quite low. So I think they're going to have to kind of take on a new innovators, a new entrance type of aggressive approach, an innovative approach and there's nothing to suggest that they can't do that. So I don't think it's mission impossible here. I just do think they're going to have to do some deep soul searching in terms of what their true brand identity is and how they're going to reach that, that end customer.

Melissa Lee (22:36)

You mentioned trying to find the constructive path. Maybe the constructive path is just being in Nike which reports next week or something else on or you name it. There's a whole list of companies in this space.

Courtney Garcia (22:47)

Yeah. And I think that's the reality. I mean I think Julie hit this on the head is with their competition. We always mentioned Vori and Alo is like their big competition. But it's so much more than that now. Like it's just becoming so like every company on Instagram is, is taking market share from them and I think that's really going to continue to be a problem. So people are optimistic today that with the new CEO who we actually don't know who it is yet, we just know this current CEO is coming away, that they hopefully can have a turnaround story. But I think it's still a high bar to reach. So I think when you have like your Nike, as you have your on clouds, like you have these companies who aren't having quite as intensive competition issues, I would say those are probably the better areas to be in.

Steve Grasso (23:25)

Yeah, I think it's too fragmented for everything that everyone has said the, the marketplace is too fragmented. If you want to go to successful companies, it's Tapestry, it's Ralph Lauren. These are companies that have made a name for themselves. When you look at Nike, Nike still down 10%. They still can't figure out their CEO leadership there. They keep hiring from within.

Melissa Lee (23:43)

There's a lot more fast money to come. Here's what's coming up next.

Julia Boorstin (23:48)

Stocks lighting up on a potential game changing move out of Washington. Our resident cannabis stock connoisseur weighs in on why this time may just be different. How to play this industry for the green next. Plus, do big time valuations mean big time danger for markets in 2026 where top opportunities and dangerous vulnerabilities could be lying next year? You're watching Fast Money live from the NASDAQ market site in Times Square. We're back right after this. Before the trophy and bragging rights are rightfully yours. Before your sleeper turns in a season no one saw coming before, stats and projections turn into points on the board and your lineup falls perfectly into place. You flip the lid on a can of on nicotine pouches and as you make your first pick you know this is the season where fantasy's going to surpass reality. It's on products for tobacco consumers 21 years of age or older. Warning. This product contains nicotine. Nicotine is an addictive chemical.

Melissa Lee (24:51)

At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at capella. Edu.

Gene Munster (25:07)

This segment is brought to you by Gelt. If you're a business owner wondering whether.

Julia Boorstin (25:11)

Your CPA is just filing forms instead of helping you use taxes strategically, GHELT.

Steve Grasso (25:16)

Was built for you.

Julia Boorstin (25:16)

Their expert CPAs and innovative AI tools help optimize entity structure, deductions and retirement contributions with proactive year round tax planning. Sirius XM listeners receive 10% off their first year of service when they sign up.

Gene Munster (25:29)

Visit joingelt.com to schedule a discovery call. That's joinglt.com join gilt.com welcome back to Fast Money.

Melissa Lee (25:39)

Cannabis stocks on fire on hopes high hopes high hopes President Trump will soon sign an executive order reclassifying pot as much less regulated. Schedule 3 drug trulieve jumping almost 67%. Green thumb and Tilray also jumping. Bring in fast money trader Tim Seymour. He's behind, of course, the amplify Seymour Cannabis ETF, which surged nearly 55% today. Its best day on record. Such a good day that Tim comes to us in a hoodie. Tim Hoodie cannabis.

Tim Seymour (26:10)

Why wouldn't we? Why?

Melissa Lee (26:11)

I mean, the rescheduling, that has been something that investors are hoping for. It seems like you get a whiff of it, the stocks go up. You say this is for real this time.

Tim Seymour (26:19)

Why a whiff? No pun intended. So I think it is real. I think it's always been real. I think even at the end of the Biden administration, the idea of rescheduling was out there. Remember, this doesn't require a congressional follow through, doesn't require legislation. This is an administrative order. Trump's been very clear all along. The question was could we get this in front of Trump and could it be something that has enough of a priority? It's very clear that the industry has engaged Washington in a way that I think is much more sensible, been much more focused. I think there's no question that top CEOs have been in Mar a Lago, have been in D.C. have been working with the president's team. I think there's no question that RFK Jr and the HHS and even Dr. Oz have weighed in on this and important people around the President have said Schedule 3 from Schedule 1 makes a ton of sense. And I don't think this is even that controversial, even in a world of bipartisan dynamics. In fact, I think the call Wednesday night that is spoken about in the Washington Post article that was out last night, night between President Trump and Speaker Johnson is one that just really kind of explained what can happen. And the question is on the timing. The implications for this are incredible for the industry. And I do think that this is the kind of a domino to fall that would get other things going that don't necessarily have to be legislative follow through either, including exchange listings, which I think is the holy grail here, because that really would bring in institutional capital. If you're investing in cannabis here, there's not institutional capital.

Melissa Lee (27:54)

Right. And that's what I wanted to go to. We have the screen up, Tim. In terms of the domino effect or the different tentacles, the different ways stocks will benefit, it's not just that they're, that the products themselves are no longer, you know, regulated in the same way as a cocaine, for instance. It has, it's all these other effects, including listings, including access to capital, etc.

Tim Seymour (28:15)

So Schedule 3 effectively, you know, legalizes the medical cannabis market. But what it absolutely does mean. So understand that at a Schedule 1 drug, cannabis is taxed in a way that basically profits, gross profits are absolutely taxed. It makes it almost technically impossible for companies to be profitable in any way. Vertically integrated companies can work within accounting constructs to, to be more profitable. But this has huge implications right now. Free cash, free cash flow. And this is something that the industry, at a time when a number of big companies have also actually pushed and rolled out some debt, have actually dealt with restructuring debt and have more to go. I think it's very important. It's potentially important for the 25 calendar year where there are taxes payable. If this gets done before the end of the tax year, it could actually be a boom even for 25 free cash flow. But more importantly, it really is about. Would be arguably the most important moment in Catalyst from a DC perspective. Again, this wouldn't be legislation. This would be administrative order. I think a lot would follow from here. We've heard headlines before, you know, the sources I have in dc, the dynamics that I know have been going on for the industry now for months. Remember we started getting real talk of Trump doing this in August, by the way. CNBC closed at the highs, but also at the high level of where Prices went at the end of August. A lot of cannabis stocks did. We were on record volume. I think this does feel different.

Melissa Lee (29:42)

Tim, great to see you, Hoodie and thank you every weekend. Tim Seymour, cnbc, this is etf. So what do you think?

Steve Grasso (29:51)

Yeah, so the biggest problem you have is the illicit market. So a lot of these names, they had a huge bump today, but they're down 60 to 90% from their all time highs. So they haven't had a substantive rally to make up. If you look at these long extended charts, they look like a ski slope. Right. It's horrendous. The illicit market. There's no enforcement. So you have 50 states in the country that don't have any criminal prosecution. So they're taking 40 to 50% of the revenues away from these legitimate businesses. You have to start with enforcement. I think that's the next step.

Melissa Lee (30:21)

All right, what do you think Vanuin of this trade? We heard, we've seen what happens when the Trump administration gets behind something, whether it be crypto or rare earths or you name it, in some way they get behind an industry, a sector and there's a floor.

Gene Munster (30:38)

Well, there's still not on record as having gotten and we have seen this pump Vic before. With that said, I mean I want to acknowledge the price action that we've seen today. I mean I hear your point, Steve. These have been tough to own for a long time and it seems like they're getting their time in the sun. With that said, I do wonder how much of this is short covering and retail. And so I don't think that you have missed your opportunity to get in here. If this truly is going to be an executive order and it truly does get signed, you will probably see a subsequent 50% rally. But I'm willing to wait to see the follow through because as you said, this has been an on and off again story for quite some time. I do think eventually it will happen. I was surprised it didn't happen under the Democratic administration. And so to your point, once Trump gets behind something, there is upside related there, but I think I want to wait until he gets behind it and ride that wave higher.

Courtney Garcia (31:33)

Yeah, I mean to play devil's advocate there, I think it's one of those things where you want almost like buy the rumor, not the news. Right. Because I think once they confirm it, it's probably already going to be in the stock at that point. But this, I mean it's been a really tough industry because we've seen this so many times where hopefully something is going to pass the regulation. It hasn't happened. This does seem more realistic, especially everything Tim is saying there. And I do believe that. So maybe this is going to be the hurdle that it needs. But I think what we want to see is are those tax easements for them going to be enough to see a path to profitability for them? I think that's the real big question here that we need to see.

Melissa Lee (32:03)

Coming up, will valuation fears outweigh bullish momentum in 2026? Why? One market watcher says rate cuts and increase spend might not be enough to take tech higher. That's right after this.

Julia Boorstin (32:16)

Missed a moment of fast Catch us anytime on the go follow the Fast Money podcast. We're back right after this.

Melissa Lee (32:27)

Welcome back to Fast Money Markets. Pulling back from records today, but our next guest expects US Stocks to outperform the rest of the world in the new year. Morgan Stanley Private Wealth Katerina Simonetti joins us here on set. She's a firm's private wealth advisor. Katerina, great to see you.

Katerina Simonetti (32:40)

Thank you for having me on the show.

Melissa Lee (32:41)

So you're pretty optimistic of 2026, but within the notes, I do see that you are concerned about text vulnerability. What, how does what happened today, the questions around Oracle, the questions around Broadcom, inform that?

Katerina Simonetti (32:53)

Absolutely. I would say the best way of putting it is we're cautiously optimistic. There is no way to hide the excitement behind technology. Right. The AI, generative AI is changing the world, changing the way we do things. But we have to proceed cautiously. When you look at the world of AI, the focus in 2025 was the buildup. How do we get there? Building infrastructure, building data centers, getting us there. But now the question is how we actually use it, how do we implement it and how do we get profitability out of it? And it's that show me the money moment that is going to be the whether it works or not in 2026. That's our focus.

Melissa Lee (33:29)

Right. At the same time, there is a bullish narrative on the street about 2026. And it feels like it's consensus at this point that there's going to be Fed rate cuts. You see three, for instance, in 2026 that tax refunds are going to be big, there's going to be changes to tax policy that will benefit consumers and businesses. Everybody believes that. What makes you, I mean, are you worried that everybody believes that at this.

Katerina Simonetti (33:50)

Point, whenever there is that momentum, right. That we're all either so optimistic about something or pessimistic about something? We have to ask ourselves, what are we missing. And we think that the big elephant in the room are tariffs.

Melissa Lee (34:04)

Right.

Katerina Simonetti (34:04)

Like we talked about tariffs and then we stopped talking about them like they are a little bit less impactful. But the truth is maybe it takes time to integrate the tariff, the results of the tariff policy into the economy. It is really the economy plus labor that is going to direct the Fed decision. And if Fed is going to end up not cutting rates as many times as we all expect, that's going to be a surprise. Right. And with overvalued stocks, specifically in the tech sectors, as we're talking about tech and we see the results right now, we see that heightened level of volatility and sensitivity. They are the favorite stocks for our investors, but they're also the ones that scare them the most. And so it adds that emotional component to the investor.

Steve Grasso (34:48)

So Katerina, what are you doing for your clients to hedge against that in case you're wrong? Right. Because you always have to have a plan B. What are you investing in or what are you investing as a peripheral to it? Is it small caps or is it another technology?

Katerina Simonetti (35:00)

We advocate broadening of the investment process. One is we're huge proponents of profit taking. When something is up, we absolutely don't advocate changing the strategy, but taking a little bit of money off the table. Investing in some of the sectors when maybe we're not overrepresented is always a good idea. Plus, you know, we love thinking of tech as something that drives the markets. But when we look at the last couple of years, let's look at the industrials, let's look at financials, let's look at this exceptional performance in the sector. So we advocate for profit taking, broadening of the market, taking advantage of the international opportunities for valuations are not quite as high as here in the US and also, you know, just taking the tax losses. This is just we have to do it in a tax efficient way.

Melissa Lee (35:47)

I'm going to ask you a very specific question which I'm not sure. I'm sure you can respond, but I'm not sure if you're going to respond. In terms of profit taking, what are some recent areas that you've advised clients to profit take in? 1, where have you put that money into?

Katerina Simonetti (36:00)

That actually is a great question. What we tell clients, especially in terms of the projections, is we have no idea if the level of growth we have seen is sustainable and whether this is going to continue. But let's say we tell them, take a look at your portfolio and let's see the top five performers in your portfolio and let's cut 10% off. And what are we putting the money into? Are the sectors where they're underrepresented? For example, health care has been under so much scrutiny with additional regulations. There are buying opportunities there. There are buying opportunities in emerging markets, in, you know, internationally, Also in maybe REITs and some of the dividend paying components, especially as interest rates are about to go down.

Melissa Lee (36:41)

Where is that money coming from though? Which, what are the top five sort of sectors? The top two, let's say tech.

Katerina Simonetti (36:46)

Absolutely. Industrial, some of the financial names and energy names and also, you know, clients with bitcoin. Look, you know, last month has been a huge wake up call. The sector is extremely volatile. So people, you know, a lot of investors have, you know, this wonderful results and, you know, they're up quite a lot. So taking a little bit off the table and diversifying never is a bad idea.

Melissa Lee (37:06)

Katerina, nice to see you. Happy New Year. Happy holidays. Katerina Simonetti of Morgan Stanley. Julie Beal, do you agree with the take some money from the top and put it into other places and do you like the other places that Katarina mentioned?

Julie Beal (37:19)

Yeah, I agree. I think that having a little bit of a broader base is pretty important. If you just look at earnings estimates, you do see a broadening, you see more interest in industrials and financials and I think that that makes a lot of sense. Having too much exposure to one theme is never ideal. It's worked really well for you in the last two years, but, you know, I think it really does make you vulnerable and I think now that valuations are where they are and we still, you know, this was supposed to be the year of a gentech AI and we still don't have a lot to show for that. And so I think a lot of these pilot programs that companies have been leading have not been exactly what they'd hoped for. I really am a believer in the technology long term, but I think that you have to be looking beyond that and I think software and small cap and industrials could be really interesting.

Melissa Lee (38:08)

Coming up, Chipotle shares jumping as the company opens its 4000th location. Full ongoing impacts from tariffs and fears about the consumer bite into those gains. That's next. Welcome back to Fast Money. Chipotle shares jumping today as the burrito giant celebrates the opening of its 4000 store. But shares are down 40% since January and tariff and inflation pressures facing their worst year since the great financial crisis. CEO Scott Boatwright joined CNBC earlier today to talk about what is weighing on the consumer, I think I said on.

Julia Boorstin (38:40)

The last earnings call, the age group from 25 to 34 is probably most under pressure and we over index to that of consumers as they're exiting college with obviously, you know, tuition reimbursed or tuition payments. They're leveraging buy now, pay later more.

Steve Grasso (38:56)

Meaningfully today than they have historically.

Julia Boorstin (38:58)

And there's just not real meaningful job growth for them coming out of college today. And so that's a group that is really under pressure, that needs to see some relief.

Melissa Lee (39:08)

That's a big obstacle, Courtney, for Chipotle shares.

Courtney Garcia (39:11)

And I think that, I mean that is their biggest problem is it's not necessarily cheap to go to Chipotle and you're seeing a lot of stretch consumers specifically in the age range that he's talking about. And this has come down over 40% this year. It still trades almost 30 times forward earnings. So I mean, yes, it's come down like its five year average is more like 44 times. But it's still not a cheap stock to own especially in this kind of environment. So yes, it could have some upside after this kind of a pullback. But it's not something that I'm jumping into now.

Steve Grasso (39:39)

When you look at the stores that they've added, 90 to 95% of the stores are in the U.S. i think if he starts focusing international that could help him with his labor issue that he has. And maybe there's different price points there. I think you should focus away from the US versus here.

Gene Munster (39:54)

You might get a slight momentum trade but there's quite a bit of overhang just above $40. So maybe you play it for another $4 or $5. But again, I'm with Courtney. I think that this thing needs to re rate lower.

Melissa Lee (40:04)

All right, coming up, it's been a bumpy year for home builders, but is balance finally returning to the housing market, our next guest says prices could fall and sales could rise in 2026. That is next for Fast Money to. Welcome back to FAST money. Real estate and housing stocks are on pace to finish the year basically flat as affordability, tight supply and stubbornly high borrowing costs continue to temper the housing market. But the sector could be primed to turn a corner in 2026 according to our next guest. For more, Compass chief economist Mike Simonson joins us now. Mike, great to see you.

Julia Boorstin (40:38)

Nice to be here.

Melissa Lee (40:39)

Mohsen, you say home prices, national home prices in 2026 could be flat. Is that going to be enough to spur demand? Just a flat market compared to the increases that we've seen year on year on year.

Julia Boorstin (40:53)

So we've, we actually look at 2026 as sort of the start of a next era of the housing market. So in the last four years, sales have been at really deep freeze levels and prices kept pushing relentlessly higher. So affordability gets worse. In the next era, that story flips. So sales are starting to move higher, but prices capped or maybe down. Incomes are rising faster than prices and so affordability improves for the first time in a bunch of years. It's, it's not a, not a dramatic improvement, but it's the start of the new era.

Melissa Lee (41:30)

Campus has always been a retail brokerage firm that prides itself on data and being digital. And I'm wondering what in the data that you see at Compass when it comes to listings, how listings are handled give you this sort of insight and this belief that this is going to happen in 2026. I mean, I love real estate. I follow it just as sort of a hobby in the New York area. And what I've noticed at least is that listings, if they don't move after a certain time, they're put on hold. There are no price cuts, but people are holding and they hold the listing and then they put it back on the market a few months later. And this happens again and again and again. Same home.

Julia Boorstin (42:09)

Yeah. And we, that, that is the withdrawal phenomenon which, so withdrawals were higher in 2025. Notably higher. And an interesting thing is it can be tempting to look at that as shadow supply, like supply inventory that's going to hit the market. But when you look at that, the, the people in there are actually tend to be owner occupiers. So those folks are really folks who want to buy and sell. It's like two transactions. And so in a, in an environment where conditions improve a little bit, we actually estimate that that's a representation of shadow demand. People that want to move, people that have delayed moves for maybe four years now. And we estimate there's about 150,000 of those people who would like to do two transactions next year. So in the right conditions that actually represent, that those withdrawals actually represent demand rather than just supply next year.

Melissa Lee (43:05)

In what markets do you anticipate seeing the most velocity of transaction in 2026?

Julia Boorstin (43:12)

The, the, the fascinating one right now is Florida. So the weekly pending sales in Florida are coming in 10 or 15% above last year at this time. So that's a new shift for the Florida market. In places like the New York tri state area or Chicago area, those have been limited by tight inventory. So sales growth has been limited as well in the next year, as inventory climbs a little bit, that allows more sales to happen in those markets as well.

Melissa Lee (43:43)

In your forecast for 2026, is there anywhere do you have to see any sort of decline in mortgage rates or can we assume that even if mortgage rates stay exactly where they are that what you're predicting for 2026 will still unfold?

Julia Boorstin (43:58)

I like to say that consumers are more sensitive to changes in rates than to the absolute levels. And so if they stay in the low sixes, that is roughly what our forecast is. And that means that that sales can grow a little bit, prices are capped, there's sufficient inventory so that prices are capped generally across the country. And if rates we get lucky and rates fall towards 6% in the first quarter, that would push the sales numbers up higher in the first and second quarter, the first half of the year when when home buying activity is the strongest.

Melissa Lee (44:34)

All right, Mike, great to see you. Thank you.

Julia Boorstin (44:36)

Thanks, Melissa.

Melissa Lee (44:37)

Mike Simonson of Compass, what do you think about housing stocks? We're seeing a couple report next week.

Steve Grasso (44:43)

Well, if you talk about Florida being the most active, Lennar has the biggest footprint. If you talk about new homes built, Lennar is the best homebuilder to buy. If you want exposure to that area, then Dr. Horton follows that behind it. But I would play it from Home Depot or Lowe's looking for a pop. If rates do come down, you're going to start to see those purchases of larger ticket items and then you have a tax refund that's coming that people are going to use that. So I'm going to play it ahead. So I would play Home Depot, Lowe's, Lenore.

Julie Beal (45:11)

Yeah, Julie, I agree. That's exactly what I would be doing. I think it's a little uncomfortable still to feel confident about the homebuilders because buying down the rates just hasn't worked as well as you would have hoped. But I agree that being able to play the players who are going to benefit from the refund checks and could benefit from an improving housing market broadly for the existing home sales, I think that's more appealing.

Melissa Lee (45:33)

All right, up next, final trades. Time for the final trade.

Julie Beal (45:46)

Julie Beal, Phenomena chicken for home builders. Installed building products has a great position among the home builders and I think.

Melissa Lee (45:52)

They'Re better positioned if you're looking into.

Gene Munster (45:55)

The broadening out trade. I think you want to just move away from the tech concentration and not into, as Julie pointed out, unprofitable names, RSP over iwm Courtney we were talking.

Courtney Garcia (46:06)

About housing, how Home Depot can actually be a really good way of playing that. I would use Home Depot as my final trade here.

Steve Grasso (46:11)

Steven Grasso how fun was the live event last night?

Melissa Lee (46:14)

I mean it was amazing. It was amazing.

Steve Grasso (46:16)

See the people that are behind the black hole that we look in, you know, every night, get their feedback from, right? I'm going with Boeing final trade.

Melissa Lee (46:25)

Thank you for watching Fast Money. Thanks for being fans out there.

Julia Boorstin (46:28)

By the way.

Melissa Lee (46:28)

Have a great weekend. Mad Money Jim Kramer starts right now. 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.

Julia Boorstin (47:13)

Before the trophy and bragging rights are rightfully yours. Before your sleeper turns in a season no one saw coming, before stats and projections turn into points on the board and your lineup falls perfectly into place, you flip the lid on a can of on nicotine pouches. And as you make your first pick, you know this is the season where fantasy's going to surpass reality. It's on Products for tobacco consumers 21 years of age or older. Warning. This product contains nicotine. Nicotine is an addictive chemical.