← CNBC's "Fast Money"
CNBC's "Fast Money"
Chip Giant’s China Deal… And A Software Slump 8/11/25
00:43:44
A China chip deal making headlines as Nvidia and AMD agree to give a piece of their revenue to the U.S. government. What it means for the semi market both companies are gaining access to, and if there could be similar deals in the works. Plus A slump in software stocks. The names showing signs of stress, and where one top tech analyst sees the group heading from here. Fast Money Disclaimer
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- [00:00]
Melissa Lee
What does it mean to live a rich life?
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Tim Seymour
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Melissa Lee
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Tim Seymour
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Melissa Lee
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Tim Seymour
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Melissa Lee
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Tim Seymour
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Dan Nathan
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- [01:04]
Melissa Lee
Live in the NASDAQ markets right in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. Striking a deal. AMD and Nvidia agreeing to give the government part of their China chip sales. The precedent that sets that it sets and what it could mean for the rest of the tech sector. And Matic Monday, shares of the software stocks plunging despite of earnings beat this morning. Why the sector has been so under pressure and whether it can rebound from here. Plus, Ford making a renewed push to produce cheaper EVs. Lilly tries to stage a rebound after last week's big drop and pot stocks light up as rescheduling gets new momentum. Are these names worth a buy? Now our resident expert will weigh in. I'm Melissa Lee, come to you live from studio Be at the nasdaq. On the desk tonight, Tim Seymour, Dan Nathan, Gai Adami and Julie Beal. We start off with that major deal between two of the biggest US chip makers and the White House. Nvidia and AMD each agreeing to pay 15% of revenues from certain chip sales to China to the US Government. In exchange, they will receive export licenses for their AI processors. This as President Trump announced a 90 day extension of the China tariff deadline which was supposed to go into effect tomorrow. For the very latest, let's get to Eamon Jabbers in Washington.
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Guy Adami
Amen, Amelis said. That's right. Take a look.
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Eamon Jabbers
Let's start with some of this video that we got just about an hour and a half ago here at the White House. This is the CEO of Intel arriving for his meeting with President Trump just a short time ago, captured by our cameraman on the street, Ashley Stringer, look, the president had called for the CEO of Intel to resign, said he was conflicted by ties to China. Obviously a huge challenge for Intel. This meeting, it appears, has just now wrapped up because we see a post from from the president on social media just within the past couple of minutes. Melissa, he says, I met with Mr. Lip Bhutan of Intel along with Secretary of Commerce Howard Lutnick and Secretary of the Treasury Scott Besant. The meeting was a very interesting one. His success and rise is an Amazing story. Mr. Tan and my cabinet members are going to spend time together and bring suggestions to me during the next week. Thank you for your attention to this matter. So the president with a very positive tone here coming out of a meeting with a man who he had said must resign from his position. So we'll endeavor to get a little bit more information about what happened in that meeting to seemingly turn the President's mind around on the CEO of Intel. Meanwhile, I am told by a White House official that the President has already signed the executive order to extend the deadline on China negotiations. That deadline was tonight expected to be signed, and I am told that it has been signed.
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Guy Adami
Now.
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Eamon Jabbers
The White House has not publicly announced that or put out any documentation on it just yet. And then that deal that you were talking about, Melissa, with AMD and Nvidia agreeing to give 15% of their revenues on those chips that are sold into the Chinese market back to the US Government. I've asked officials here throughout the day whether that's any kind of precedent. Are we going to expect to see other companies that want export export licenses, export approvals from the U.S. government to pay 15 or 20%? What officials here are saying is that for now, the chip market they see as unique because it touches national security and AI, they don't see this model being rolled out with other companies being forced to pay. But they're not ruling it out. They're not saying they'll never do it. They just say that they see this as a one off kind of a situation. Melissa. So a lot going on here over at the White House today.
- [04:35]
Melissa Lee
All right, Eamon Jabbers, thank you. There is a lot to unpack here, but it's interesting that Eamon brings up the national security point because remember, that's how this whole thing got started in terms of requiring export controls on this very unique sector. Eamon had said it's because of national security effort and all of a sudden 15%, it makes that go away seemingly.
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Julie Beal
Let's hone in on yes and we're going to discuss the AMD and Nvidia and what it appear to be, you know, pay to play type of thing. But you know the intel calling for your calling for his resignation last week, he's compromised. I don't know if that was a word used, but that was implied in terms of his relationship with the Chinese government. Okay. Today and correctly he gets himself to the White House. Good for him, that's a smart move. But if you think about what all this leads to, I mean the whole built in the USA thing, Intel is, should be the poster child for that. So in the wake of whatever this was, I think you start hearing Intel's investment in the United States and how this is a national security play. Homeland Security, intel dovetails very nicely with that. You know, I've said it for a while, it's been incorrect, but I think you buy intel on this meeting.
- [05:45]
Melissa Lee
Look at that pop in the after hour session on the back of those positive true social posts up more than 2% here. So clearly lip Bhutan was important to the story. I mean the US has a lot of stake in intel as well. We gave, we the taxpayers gave intel about $9 billion and there's a lot.
- [06:03]
Dan Nathan
More there for them too. And so I do think if you're looking at one of the concerns around intel was balance sheet and if anything they've been contracting. I do think this is good news guys, right? I mean, you know, playing ball with the White House right now is, is pragmatic. Look, look what it did to Apple last week. Maybe I don't think it was totally that, but when you think about 24% of AMD sales or China intel in their last fiscal year somewhere 13 to 15% depending how you're counting it, they don't really care. Now should we care? In a world where the US is looking to export AI to the world, I think this makes a lot of sense. And in a world where as someone who spent a lot of time in emerging markets and watched export licenses be be bought and sold and the horse trading that went on, it's what it feels like. And to extend the metaphor, data is the new oil. So if you think about the world that was 20 years ago was all about controlling resources and now it's about controlling these resources. I agree. It makes no sense if in April this ban began because of security risks. How does security risks go away for 15 to 20%? They don't. But I do think this is probably good news for Intel.
- [07:10]
Guy Adami
Yeah, and you keep hearing about precedent, right Larry? Larry Kudlow must be rolling over in his grave right now because this is not free.
- [07:15]
Julie Beal
Larry. So Larry still with us?
- [07:17]
Melissa Lee
Yeah.
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Guy Adami
Okay. Well, I'm just saying he must be frustrated over there, you know, wherever he is. Right. So you think about what's going on here. I mean, this is something that, you know, it's like if it is about national security, if it is something that we were bolstering a lot of our national champions over here to create manufacturing because of what we learned in Covid, because of our concerns about, you know, national security, you could have made the argument all along that Jensen Huang pushing for this, okay, for Nvidia is not doing it in the best interest of our country. This technology is going to find its way into their defense and intelligence apparatus status, which is being used against us like in their whole host of other different things. So I just think it's really funny that, you know, this is an America first sort of thing, but if you want to pay, then you're fine. You get these export licenses. And so, I don't know, it should be troubling. The precedent that's being set is a problem. If you are a foreign company looking to do business here in U.S. what does that say about this as an environment to do business with? So I think the whole point of the trade war is to bring manufacturing back here. And what Apple just did is reiterating some of the stuff that they were already doing to avoid, let's call it the tariffs also. But not just on their own products coming here, but on the chips that they need to go into their products. It just seems like we're in a really, really messy place. I don't think it gets that much clarity anytime soon. We just pushed out these China tariffs. There are still 30% tariffs on stuff coming in from China right now. So again, I think we left the thorniest issues for the end of it, but we still don't even have a deal with Canada or Mexico.
- [08:46]
Dan Nathan
It does feel though, this is also the day where we got the 90 day extension on, on China. Now maybe we were all expect, but it. But it really does seem as if both sides want to quietly get a deal done. And it's interesting because if there was a place where the US really could have had the greatest puff pigeon using a yoga term guy, because I know that's helpful for you, it would be with China. It would be where there was unanimous support. In fact, I would argue on the other side of the aisle just as much support, more so. So I do think that for Markets today, it was an interesting day and semi is really getting near those actually extending to all time time highs.
- [09:24]
Melissa Lee
Yeah, we do want to show you some video. As Eamon had mentioned, Lip Bhutan, the CEO of intel has left the White House. We have video of him exiting that meeting and departing the meeting from which Trump had actually posted that it was a very positive meeting, that his success story was amazing and we did see intel shares pop by about 2% to the after hours session. Julie Beal I understand the whole, you know, the free market capitalism aspect of not wanting companies to do deals, not wanting the US government to extend their reach into the private sector in the discount that could imply that it could imply on the private sector companies. But at the same time this is a little bit of clarity for at least these two companies, AMD and Nvidia think Stacey Rasgun of Bernstein put it very succinctly. 85% is better than zero when it comes to revenues going into China.
- [10:16]
Duarte McNeil
I think that's some pretty expensive clarity that we're paying for. Right. Because if you think about it, first of all these export taxes are unconstitutional. So we know that they're probably going to get challenged at some level. But I think the bigger issue is that if you remember that time period where everyone was investing in China in a really aggressive way because of the growth opportunities and then the government started to really crack down on tech companies and try to limit their control, there was a fleeing of capital from those Chinese markets. I think that when you start to really mess around with the rule of law, which in the US was really the envy of so many in terms of our capital markets, that damages the actual sanctity of it. And it creates a lot of hesitation for international investors who had been really propping up a lot of equity valuations in the US to be as invested as they have been. And so I actually worry that there are real long term ramifications of actions like this markets.
- [11:17]
Melissa Lee
As the emerging market specialist here on the desk and have exactly OK economies, markets where there is that implied discount because of government control, government activity in the sector, etc. When should we start to worry about this?
- [11:32]
Dan Nathan
Well, it just makes me feel like how different is this then? I understand we're in semiconductors, we're in chips, we're in an area that really is an export dynamic. But think about Alibaba outflanking and essentially moving ahead of the the Chinese government. Think about Russian oil companies striking deals around the world on the private sector again with with sovereigns that need their Oil. I mean, this is stuff that we've seen in EM Land for a long time. And it is a case where suddenly the government says, great job, we're in here now. And I do think it ultimately, if. If in fact, you are really under the thumb, and that's. That's to be debated based upon today. I'm not saying that that's where we are. I think Nvidia Jensen has been, again, very tactful in terms of traveling the world with the president, with going to the Middle east, with selling AI to sovereigns and being that part of essentially the conduit between the private sector and the. And the. And the government sector. But I will say, yes, it is something we have seen in other parts of the world in countries where they trade at a significant discount to the US because of that reason.
- [12:40]
Melissa Lee
You know, the kicker to all of this is the Chinese government's response is Nvidia has to prove that the chip has no backdoor. So now they are worried about us putting our chips into their. Whatever it is and spying on them.
- [12:56]
Julie Beal
They've heard. They've heard the same from us. So listen, without question, and as a CEO in today's world, it's almost a requirement to do exactly what's going on. Again, we've talked about the fiduciary responsibilities that CEOs have to their employees and their shareholders. And if they. Part of that is going to the White House and, you know, having a session, then so be it. It has to happen. But, you know, in terms of intel, again, foundry business in the U.S. i mean, you could see where this is going. You know, we need a domiciled foundry business to have a strong, you know, keep track of our ip, all those different things. And an odd way, if this meeting was as productive as it seemingly, when, I mean, intel finds itself in a really good position, I think.
- [13:37]
Guy Adami
All right, so back to Nvidia, and what you were just saying is like, okay, so the Chinese, they know what's going on here now. You know, Trump just said, you know, pay me my vig and you can sell in there. And what the Chinese haven't come back with is, have they extended the export deal that they made on the truce that we gave three months ago on rare earth materials, right? So they actually have a lot more leverage right now. Because if Trump's going to go back to the whole taco thing, right? Like, then we have a situation where he's already. He's basically lifted the ban. Then he put it back on, then he lifted it for pay.
- [14:09]
Dan Nathan
Right.
- [14:09]
Guy Adami
So he sees us going back and forth and by the way, like export bans for licenses, that's something the CCP would generally do right now. So as far as the other side of this chip thing, the rare earth thing is far from, I think, settled. And I think it's obviously going to be a really important point about what goes on with whatever deal we end up striking with China. All that said, though, we go back to the first Trump administration. Those first Chinese tariffs went on in March of 2018. We did not have a framework for a deal or a phase one deal being implemented until January 2020.
- [14:40]
Melissa Lee
All right, for more on the China trade developments, let's bring in CBC contributor Dwordrich McNeil, who served in the Obama administration. He's now senior policy analyst at Longview Global. Dwordrich, great to see you. I want to pick up where Dan left off, and that is we sort of, or the Chinese now have a window as to how to proceed with negotiations, more so than they did before, perhaps. I mean, you know somebody, I read this somewhere. The monetization of US Trade policy is what we're witnessing right now. You wrote discretionary industrial policy. All of it means, effectively, you pay enough and you get to play here. And so I'm wondering if this sort of gives Beijing a little bit of leverage in terms of how to navigate this next phase of trade talks.
- [15:24]
Brent Thill
Are you, Melissa? I think it gives Beijing a lot of leverage, actually. To your point, what this has done is essentially confirm what Beijing had always believed, and that was Trump is more transactional than he is principal, particularly when it comes to national security. And if you press hard enough, if you incentivize, and if you show that you are persistent, that eventually you will fold. Look, I think it was said by Courtney earlier that this is not clarity. I agree with that. Chinese have very clearly said, regardless of what you decide on the age 20, we have our own concerns and we're going to ask you to prove that. Which opens up a whole lot of know how when they start to dissect this chip, which they will. But what the Chinese have also said is we don't really think that the H20 is a quality chip anyway. What we're looking for are the H100 and the B100. And what the Trump administration has done with this decision is essentially said to Beijing, if the price is right, maybe we'll look at the H100 and the B100. So I think you've opened up a Pandora's box here with this decision and I don't think the Chinese are going to back off. They're going to press advantage here as we move forward in these next 90 days.
- [16:37]
Dan Nathan
Duarte or Gatem. So, so what are they looking for? What is, what is the move on the chessboard for the Chinese here to counter this? What would be the best outcome for them? I mean we, we kind of get, it's not just about keeping tariffs where they were before Liberation Day but, but, but drop us into the tech context where obviously China has their own chip aspirations and they have their own goal to maintain global leadership. So what does today mean for them?
- [17:07]
Brent Thill
Yeah, I think you're absolutely right to kind of focus on what does this mean long term and long term, Tim, I think what we're trying to suss is where the Chinese are looking to fill gaps in their own development for high tech chips and frontier models on AI. Like that's the big game here. And I think for the Chinese there, there are lots of deltas between what Nvidia can do and what some of their high end chips companies can do. So they're looking to close this gap. I think Trump has given him that window. But let me just say quickly about what it means for Nvidia in terms of market share, Tim, and you and all the traders are familiar with this. The Chinese will continue to welcome Nvidia with limits over a period of time until they can close these gaps and then they're going to get the Volkswagen treatment, the Tesla treatment, the Apple treatment, the Starbucks treatment. And so the real question I have Tim, is how long will it, how many times does Lucy have to pull this football before our Charlie Brown Corporation stop running to make the kick? I just don't understand this move. There's no long term future for Nvidia and China the worldwick in terms of.
- [18:16]
Julie Beal
China, the economy there, how, what position are they in to sort of play hardball? Because clearly things have been slowing in a pretty precipitous fashion.
- [18:27]
Brent Thill
Yeah, this is a great question. Look, not much has changed from our conversations about the Chinese economy from last year. Let's be clear. We still have a consumption problem, we still have a problem with deflation, overcapacity. The Chinese government has even owned this as a problem now. So there are some real concerns about the Chinese economy. But again it comes back to who can stomach the most pain. And as we talked about earlier in the year, the Chinese are not going to fold. They are prepared to take some pain. But ultimately, and it was mentioned earlier, their trump card here is our overdependence on critical minerals. So they're prepared to leverage that as much as they can with a weak economy and play a strong hand based on our vulnerabilities with respect to critical minerals.
- [19:15]
Melissa Lee
De Wardro, great to see you. Thank you.
- [19:18]
Dan Nathan
Thank you.
- [19:18]
Melissa Lee
Melissa Dwarric McNeil. All right. Julie Beal. So would you invest in Chinese stocks?
- [19:28]
Duarte McNeil
That's tough. I think that, you know, we can talk about trade all we want, but the thing is, is that it doesn't change the housing situation in China, which is just so overbuilt, and it's really difficult to dig out of that. I will say it does seem like consumption seems to be starting to pick up, and that really has been the linchpin to transitioning that economy away from solely being an industrialized country to one that can take on more consumption. I think what. What people miss, I think quite often about China is we make this assumption that the reason why it has industrialized the way that it has is because it's just cheap to do things there. And that really misses how much development, how much innovation, how much growth, how much efficiency happens in those markets. You can't do some of the things that the Chinese economy can do. You can't move goods the way they can. And we lose sight of that. And I think we overplay our hand. And, you know, I think Doric's right. They will starve their people if they have to for the sake of their principles. They are used to taking on lots of pain. Remember the COVID lockdowns? So I think this is a very difficult player to be playing chess with.
- [20:35]
Melissa Lee
There is an expertise in manufacturing that exists in China that I think gets overlooked in the discussion about making T shirts and cheap stuff over there. There's also, as you mentioned, Julie, a lot of innovation in terms of the biotech sector. We hear time and time again deals being made for different molecules, you know, a license agreement. Big, big cap pharma here. I want to ask you, though, about China exports, because in July, it looked like the outbound shipments were actually higher, even though shipments to the US were down 22%. So their stuff is going elsewhere.
- [21:04]
Dan Nathan
Well, and is it. Is it. Is it backdooring its way into the U.S. it's not so much that, but one of the dynamics of trade around here. And we saw this with the brics. They're getting together to cut new deals. And this is a lot of bilateral. It's less about, you know, global. And I think that's exactly what's happening here. And I would just point out that if I had to rank the winners today in the semiconductor world today, it's definitely to me amd being at the head table here is a win in terms of the relative amount they have to gain by it. Intel, as Guy pointed out, I think is a winner. Taiwan semi is the one semiconductor company that every country in the world is trying to do business with and courting them to build out in their own land. Taiwan semis a must own real quick.
- [21:46]
Julie Beal
I mean China's trade surplus they just $1.2 trillion. That's a record. It's been lower left, upper right. So to your point, I mean your point as well, it's going somewhere.
- [21:56]
Melissa Lee
Yeah. Meanwhile, gold settling almost 2 1/2% lower today. This comes after President Trump posted on Truth Show Social that gold imports will not be tariffed. The precious metal settled at a record on Friday.
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Julie Beal
Guy yeah, look, it's a big move obviously in terms of dollars, in terms of percentage. I don't think the gold story is pred tariffs and import and export taxes and those types of things I get. Maybe there's some fluffing on the back of that, but nothing has changed on the gold front in my opinion whatsoever. Mills.
- [22:26]
Melissa Lee
Coming up, Ford plugging back in how the automaker is charging off its electric vehicle ambitions and why the CEO is calling it a Model T moment. Got the details next. Plus, rolling back into the cannabis craze. The report getting marijuana stocks sky high today and what our own Tim Seymour sees in store for the group straight ahead. Do not go anywhere. Fast money's back in two.
- [22:52]
Tim Seymour
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Dan Nathan
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Melissa Lee
Building your personal brand.
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Dan Nathan
Register now@cnbcmakeit.com Personal Brand.
- [23:40]
Melissa Lee
Welcome back to Fast Money. Ford re upping its plans in the market, announcing it will invest $2 billion in a Kentucky plant to roll out more affordable electric vehicles. Philippe spoke with Ford CEO Jim Farley about The company's ambitions, Phil and this.
- [23:54]
Phil LeBeau
Is an ambitious move by Ford. Melissa what they're basically doing is saying the old way that we tried to do EVs wasn't working. We got to lower the cost. We have to be more efficient and we have to be quicker. So here's the new Ford EV plant. By the way, they've been working on this at their skunk works operation in California over the last couple of years. It's a $2 billion investment in their Kentucky plant which will be retooled. They will secure 2,200 of the existing jobs there. You might be saying, wait a second, they have more than 2200 jobs. Yeah, about 600 fewer jobs will be needed once the plant is converted to EVs. Does that mean those people will be laid off? Not according to Jim Farley when we talked with him earlier today.
- [24:35]
J
We have two battery plants that we're.
- [24:36]
Dan Nathan
Going to need to staff. There's plenty of jobs for the people here. And what we haven't announced, which we will, will build more body styles than the first one coming out.
- [24:45]
J
So the 2200 is just the beginning.
- [24:47]
Dan Nathan
And by the way, he didn't mention it. We're adding 1700 new jobs up in Michigan that don't exist today.
- [24:53]
Guy Adami
So Ford's adding jobs.
- [24:54]
Dan Nathan
We'll continue to add jobs. The 600 people here will have plenty to do.
- [24:58]
Melissa Lee
Do.
- [25:00]
Phil LeBeau
Okay, so what is the new EV coming from Ford? Well, they haven't given us a peek at it yet, but they did tell us it will be a midsize pickup truck expected to launch in 2027. The estimated price, $30,000. That's a key point because higher priced EVs, they're just not selling. And what the what the industry needs, what Ford needs are more affordable priced models. That's the reason as you take a look at Ford sales right now of its electric vehicles, down 10.7% or in the first half they were down 10.7%. And the question is how much they're going to grow beyond this third quarter surge once the federal tax credit goes away at the end of September. Keep in mind, as you take a look at Ford year to date, yes, the stock is moving higher, but the EV sales or the EV losses, they continue to mount $1.3 billion in the second quarter. Melissa they lost almost 5 billion, I think last year. So this is their chance to do a reset and they expect it to be successful when they complete it in 2027. Think faster, lower costs, more efficient. That's going to be the key if they're going to be able to be competitive.
- [26:07]
Melissa Lee
How would this 30k vehicle, Phil, stack up against Tesla's low cost vehicle?
- [26:14]
Phil LeBeau
Well, price wise, it's in the right range. That's what you need. You need to be under 40,000. That is definitely what you need to do. That's why the EV tax credit going away, $7,500, that's a big deal. There are a lot of EVs that are in that $45,000 range. And you'll always hear the automaker say, hey, with the credit you can get it down to $37,000, $36,000. No, you need it to be closer to $30,000. And they believe with this new manufacturing system that they will be able to get there.
- [26:41]
Melissa Lee
Yep. Phil. Thank you, Phil LeBeau.
- [26:43]
Phil LeBeau
You bet.
- [26:45]
Melissa Lee
The press release is very interesting. The press release is titled Ford's $5 billion bet on America.
- [26:53]
Julie Beal
Yeah, I mean, yeah. I mean, clever. Watch tv. I mean, the commercial.
- [26:58]
Melissa Lee
On message.
- [26:58]
Julie Beal
On message, right. The stock's not on message. Listen, they've made a lot of mistakes. They seemingly, in terms of just costs and stuff. They're getting lapped by General Motors and I think the stock sort of stuck in the mud. I think GM though, is it a point where you get a couple of dollars higher? You get it north of 59 and a half at $60. It's a level we saw in November of last year and November of 2021. And all of a sudden we're talking about a breakout in gm. So in a self imposed game of would you rather General Motors?
- [27:26]
Guy Adami
Well, by the way, as long as I've been around, Ford has been, you know, talking up America here. And that's good, right? I mean, Detroit, right. Like, you know, solidarity here a little bit. But you know, your question about how does it compare with the Tesla low end? There is not one, though.
- [27:41]
Melissa Lee
There is not one Ford low end. Well, I'm just saying. Well, I'm just saying how do they stack up?
- [27:46]
Guy Adami
But my point is there's not one. The average three and the average Y probably cost $45,000, $46,000. So they're talking about, you know, taking away this credit and then they're talking about getting to a low end sort of thing below 30,000. It's not likely to happen because if you ever been in the three and a Y, they're pretty much scaled down. You take battery out of that to get cost, well then you got a car that goes, you know, less than 200. 200 miles, you know what I mean? On a charge. So I think Ford sold 16,000 EVs last quarter where in North America total car sales were 4 million. So they're nowhere. They're going to continue to lose a lot of money doing this, but sooner or later they got to start producing some of these EVs.
- [28:24]
Dan Nathan
So in Ford's case, less bad equals good. And that's going to be the story for the stock to take the next level. 3 billion in losses is the expectation. You know, that's where Phil had talked about where they've come in on their losses. But he's concerned that I think that's where the street is. And then on free cash flow plus 12%, not bad.
- [28:41]
Melissa Lee
There is a lot more fast money to come. Here's what's coming up next.
- [28:44]
Dan Nathan
Blazing higher the headlines, burning up the pot stock trade today and where our resident reefer expert sees the group heading from here. Plus a software slump, why the sector has seen such a slide and what it'll take to debug the group and reboot the games. You're watching Fast Money live from the NASDAQ market site in Times Square. We're back right after this.
- [29:16]
Tim Seymour
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- [29:46]
Dan Nathan
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- [29:57]
Melissa Lee
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Dan Nathan
Register now at CNBC, NBC, make it.com/Personal Brand.
- [30:04]
Melissa Lee
Welcome back to Fast Money. Pot stocks soaring after President Trump said his administration was looking at a potential reclassification for marijuana. Lightning, criminal penalties and changing the industry's federal standing trulieve. Cure leaf, Green Thumb and innovative industrial properties. The biggest winners among American cannabis companies. Top three ETFs also saw massive gains. Our Tim Seymour is all in on this space. So. So I feel we've heard this in the past didn't happen, but this time maybe different.
- [30:32]
Dan Nathan
Yeah, and hopefully I've been trying to look, I run a cannabis etf, but I've tried to be careful about the pom poms here because we have heard this before and going into the elections, there's no question that Biden administration was finally coming around to rescheduling what's clear about this administration and even the big beautiful bill where there was money allocated to veterans and veterans causes for medical, cannabis, medical, with, with, with an emphasis on the word medical. So medical, medical efficacy is what will change Schedule 1 to Schedule 3 at this point, there's no question about it. And the FDA under Biden did that. Remember, think of all the presidential and administrative actions that this administration is carrying out. That's all this requires. This requires Trump's ear, the argument, excuse me, the article in the Journal, the CNN report, all corroborating that there was a meeting earlier in the month between Trump and a bunch of big influencers in the cannabis industry. By the way, cannabis CEOs doing the right thing, coming together policy wise, that's what it takes. And they have lobbied the president. So if you go from Schedule 3 to Schedule 1, it changes free cash flow dramatically in the cannabis space. And these stocks, after a 30% move today and a 40, almost a 40% move last week, are still down 50% from pre election. This is an industry without any institutional capital. And if you start to get some of these things follow through right now, that's all it takes.
- [31:52]
Melissa Lee
Rescheduling would also mean that institutions would, would then theoretically be free to invest. I mean, doors open once it's rescheduled.
- [32:00]
Dan Nathan
I think institutions are free to invest right now, just many choose not to. I think the, the exchange listings are a big deal for that. There's no question though that if you suddenly have this as a medicinal influence in people's lives and it's, and it's regulated and it's handled the right way, I think this opens many doors.
- [32:17]
Melissa Lee
Coming up, digging in on the software slump. Can the group get its groove back? And what are the names that could lead a comeback? Do not go anywhere. Fast Money is back into.
- [32:30]
Dan Nathan
Missed a moment of fast. Catch us anytime on the go follow the Fast Money podcast. We're back right after this.
- [32:43]
Melissa Lee
Welcome back to Fast Money. Stocks starting the week in the red as Investors await tomorrow's CPI data. The Dow falling 200 points. The S and P losing a quarter of a percent. The NASDAQ down about 410 of a percent, but hitting a fresh record earlier in the day. Just days after completing its merger with Skydance, Paramount is buying UFC rights from TKO Group in a seven year, $7.7 billion deal starting in 2020. Six, the company saying all UFC matches and events will be streamed in the US Via Paramount Plus. And check out Lithium stocks are surging. The move comes after EV maker battery maker Cattle halted operations at its mine in China for at least three months. Meantime, shares of Monday.com plummeting today. The stock having its worst day on record after giving a disappointing Q3 revenue outlook despite strong Q2 results. It's just the latest software stocks seeing struggles. The IGV ETF down a percent today. C3i, Klaviyo and HubSpot, some of the names leading the losses. For more on the weakness in software, Jefferies, Brent Thill joins us now. Brent, great to have you with us.
- [33:45]
J
Thanks for having me.
- [33:47]
Melissa Lee
So we talked about this last week in terms of this whole notion that AI is threatening the software space and you're seeing names. We mentioned a few of the losers today, but Atlassian CRM, I mean these are stocks are down more than 20% year to date. What, what is going on here?
- [34:05]
J
Investors are fearing that AI is going to eat software and the multiples are going to fall apart. And I think the fear is overblown. But nevertheless, we're living through a period right now where investors just really don't care about our group. They care about one area in tech and that's infrastructure for AI. You look at Nvidia, Oracle, Microsoft, many of the big platforms that provide infrastructure for anything I are doing well and then there's nothing left. Everything else has been wrecked. It is, it has been a winner of only a few. And there's a laundry list of many losers year to date in many of these stocks. And it's, it's really just rides around the simple fact. Investors think that all categories of AI, whether it's apps, infrastructure, security, vertical apps, they're all going to get AI'd and there's going to be a simple prompt bar. We're going to say create a custom coding app for my car business or whatever you want to build. And I think that's just simply wrong. And it's a misunderstanding of how software is built and maintained. So right now it's the fear that you can't effectively put out. You can't chase this fear because it's still out a year to two years. And we've been seeing this in a multiple bleed in Adobe for the last year and a half. We've seen in Salesforce's multiple downdraft. You're seeing it across the board. And then we've had okay numbers. We haven't had Amazing numbers in some of these companies. So Monday.com for example, not a great outlook. They had some changes in their S and P go to market business with, with the Google relationship and that, you know, you saw a great company fall almost 30% today and I think that's overdone. So we think that's a buying opportunity.
- [35:53]
Guy Adami
Hey Brian, going back a couple of years, mid 2023, I mean companies like Salesforce and you know, ServiceNow and Workday and Adobe, they were telling a story about how they were going to use generative AI and it was just going to be, you know, it was going to be something that helped transform their business. Not too different than we've heard from a lot of other companies that the stock market is at least rewarding right now. Do you think there are some unusual usual values in the space that are just not being appreciated, what their opportunity set might be using this technology?
- [36:24]
J
Yeah, I think the application software sector is, has been crushed. I mean you look at Salesforce, you look at anything in applications, it's all down Monday included today. So I think that category is the category that's been hit the hardest and it is having the least impact today in that category because remember, all the cloud infrastructure companies are getting money from the application companies to build this infrastructure. The Apple companies, applications companies aren't monetizing that yet. And so Oracle's backlog is going up 100% year to date and Salesforce is growing, you know, 7, 8, 9%. It's not super exciting, but that's going to come to them over a period of time. So we do think some of the names, again, Monday.com is a great example. Intuit we like a lot that was down, you know, 5% plus today on the fear of S and P weakness. We just don't see that. So we think there's some tremendous buys like Intuit and Monday and the application category that are, are great businesses and that are not going to get run over from AI.
- [37:24]
Melissa Lee
Are there some though, Brent, that you think about and think they are vulnerable, then in a couple of years, you know, I will eat some of their business.
- [37:34]
J
Well, I think every company has an opportunity to layer in AI and if they don't layer it in, they're going to be hurt. But I think that right now many of the infrastructure companies are all benefiting. We thought everyone thought Oracle was left, left on the sidelines and look at their growing, one of the fastest growers. So I would say the one that I think investors have worried about has been IBM. They Have a great services business around AI, but where's the software business? And that again I think is yet to be seen. So I think the jury is out. Can, can IBM make that pivot from a services AI company to a software led story? I think you're seeing what happened with Palantir versus C3. I think it's pretty clear what's going on there and that in that race Palantir is winning and they're, they're in a great spot. C3 is losing from, from just, you can see it in the numbers and I think, you know the jury, I think right now the biggest concern has been on Adobe when we all can use chat cbt to create images. Adobe has been a big concern for investors on AI.
- [38:35]
Melissa Lee
All right, Brent, thank you. Brent of Jefferies. And it is Adobe. They got us thinking about software again today. Ben Wright is over at Melius downgrading Adobe to a cell and making the comparison to Dell back in the mid 2000 or so. Dell once upon a time had a fantastic business model and then launched and then it scrambled trying to buy services and software. The multiple eventually got compressed to five times and the stock was down 70%.
- [39:05]
Dan Nathan
And I don't think you want to be buying Adobe on multiple. I think this is a stock you wanted to buy when it was expensive and at 16 or 17 times now it's cheap, we know that. But they really are about digitizing content and for creatives. And it does seem like this might have the most exposure. This, this stock. I mean the charts, awful.
- [39:25]
Julie Beal
The space is losing on two fronts. Losing on the capex front and the losing on the investment dollar front. All to the air names. But look at Salesforce real quick because if you've wanted an entry point point, this might be as good as it gets in the short term. This is the level we traded down to last June. This is where we traded down to an April and bounced from. And now we're back to April lows. Not a lot of stocks you can say that about. So if you're looking for an entry point, CRM might be right here.
- [39:51]
Melissa Lee
Julie, picking anything up in this sector?
- [39:54]
Duarte McNeil
Yeah, but you know, more on the small cap side like a Tyler or a Bentley. I think these are the thing that's really important if you're buying a software name and you're worried about AI is do they have proprietary data that the large language models don't have? And then I think if you're able to apply that elegantly for a solution that's going to really work for your customers. I think you're in much better shape if you're a business that's solely focused on digitizing and automating and optimizing. That is very simple to be replicated with basically vibe coding. Right. And that I think is what we're seeing in a lot of earnings calls as companies that are in these software businesses that are focused on optimization, they're talking about longer sales cycles. And I think what's happening is companies are experimenting with AI to see can we build our own little software solution that automates these trades or whatever else it is that we do and not have to pay for these big software names and these big locked in contracts.
- [40:51]
Melissa Lee
Coming up, shares of Eli Lilly trying to bounce back today after the pharma giant's worst week since 2008. Can the stock keep its momentum going? We'll debate that. Fast Money's back into. Welcome back to Fast Money. Eli Lilly paring some of its last week's losses, rising 4.6% at its highs, closing up a percent and a half. The stock dropped sharply Thursday after the zepbound maker reported disappointing trial results for its weight loss. Pill shares hit a nearly two year low on Friday. Are you thinking it's marked a bottom?
- [41:30]
Dan Nathan
I think it's an interesting time to look at it and remember this was almost, this is kind of the culmination move of what had been a drift lower on combination of valuation and I think really just some sense of where they were going to on the next phase of oil. But you know, the comparison to Novo in terms of how much of an impact, a 2%, a 1 to 2% percentage point, at least less on the weight loss side affected the stock.
- [41:54]
Melissa Lee
Stock.
- [41:54]
Dan Nathan
I think that was an overreaction much in the same way I felt it was the overreaction on some of the, some of the data flow on Nova.
- [42:00]
Julie Beal
Not a lot of valuation. Christian. I think we were all. But we've been saying that on the way up and now on the way down. Now on the way down with the news flows seemingly turning a little bit, people are focused on that. So this is an entry point. I don't think it's the best entry point. Feels like it's got room down about 610 or so, which is where we broke out from a couple of years ago.
- [42:18]
Guy Adami
Yeah, I think it's really clear. The story's probably broken. I mean optimistic as you want to be about orals, about this or that, whatever. I mean the story's broken. The drug is going to continue to be amazing. There's going to be a lot more competition. But if you go and think about what happened in Novo, and I know it's a totally different thing, but it roundtrip the entire move, there's a lot more room for Lilly if folks who are piling in on the whole way up in 2024 are looking to get out in the next, you know, period here before that next result.
- [42:42]
Melissa Lee
Coming up, Target under pressure. How the stock's rough a year at search for a new CEO in frustrated employees are piling up against the retailer ahead of earnings. That's next. More FAST Money into welcome back to Fast money. Target shares down today, bringing its losses on the year to more than 23%. The weakness coming ahead of next Wednesday's earnings report where we could get more insight into the impact of tariffs. Tariffs. The Wall Street Journal also reporting over the weekend that Target employees are fed up with the company's performance with about half saying they don't have faith in the company's future. Target is also, by the way, looking for a new CEO with Brian Cornell's contract extension due to expire next month. Julie Beal, where do you stand on Target? I mean, you could make the argument that with a new CEO that could give it the Runway for a turnaround.
- [43:35]
Duarte McNeil
Yeah, absolutely. A lot of these retail names, they trade around the turnaround possibility. The thing is, is this is a big ship to turn around and they've been trying to do that for quite a while and it can't really seem to get out of their own way. I'm really curious actually to get a litmus test on where exactly they are. If they still have traffic declining materially, that's going to be a really big problem because rebuilding traffic is what takes the longest in any kind of retail story. And they're also probably going to have to take pricing on their owned goods in order to offset. That's where they're seeing the most margin pressure. So I'm really curious for all of the commentary, but I think a turnaround is many quarters away for this one.
- [44:14]
Dan Nathan
I like the CEO change. I like that stock. I like that basing. I think the segment mix is better and I think inventory is better. I think it's cheap.
- [44:22]
Melissa Lee
Up next, final traits. Don't miss the latest episode of Big Short investor Steve Isman's podcast, the Real Eisman Playbook. I sit down with Steve and get his insights and strategies. We talk about the great financial crisis, some great behind the scenes stories. If you love the movie, if you love Steve Eisman what they did.
- [44:50]
Julie Beal
If you love Melissa Lee or if you love me.
- [44:54]
Melissa Lee
Anyway, it drops tonight so you can catch it wherever podcasts are available. Time for the final trail around the horn.
- [44:59]
Duarte McNeil
Julie yeah, like we talked about Bentley, this is a software name with proprietary data and they're ready for AI and.
- [45:07]
Dan Nathan
The breakout of GDX to Gold unquestioned. I think you stay in the GDX.
- [45:12]
Guy Adami
Dan yeah Monday.com had a bad case of the Mondays.
- [45:16]
Melissa Lee
You've been waiting.
- [45:17]
Julie Beal
You know what?
- [45:17]
Guy Adami
I really have. I do not think you buy this.
- [45:21]
Julie Beal
Things you learn in the commercial break Shout out to Sarah Palin, Big fan.
- [45:25]
Dan Nathan
Of the show, huge fan right now.
- [45:28]
Julie Beal
And Ron Dugay, Gilead breaking out.
- [45:31]
Melissa Lee
Thanks for watching. Fast Mad Money starts right now.
- [45:38]
Tim Seymour
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@ 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 courseroom to the workplace. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.