Credit Concerns Hit Banks, Private Equity… And Opportunities In The Software Selloff 2/27/25

Summary

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Podcast Summary: CNBC's "Fast Money" – Credit Concerns Hit Banks, Private Equity… And Opportunities In The Software Selloff

Date: February 27, 2026
Host: Melissa Lee
Notable Panelists: Tim Seymour, Steve Grasso, Mike Co, Bono

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Episode Overview

This episode of "Fast Money," broadcast from the NASDAQ Marketsite, zeroes in on a volatile day for the financial sector as credit concerns batter banks, spook private equity, and create ripple effects in lending and asset management. The roundtable interrogates whether this is the start of a real credit crisis or an overreaction by markets, explores AI-driven disruption in both finance and employment, and analyzes where opportunities lie amid the rout—particularly in resilient bank names and oversold software stocks.

Major stories include the fallout from a troubled UK mortgage lender, widespread layoffs at Block attributed to AI, energy sector movements tied to Iran tensions, a US government ban on Anthropic AI, and the outlook for Target ahead of its earnings under a new CEO. The panel brings in experts to parse whether this is a disaster, a buying opportunity, or just a showcase of market overreaction.

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Key Discussion Points and Insights

1. Credit Market Stress: Banks, Private Credit, and Asset Management

[00:46–10:59]

• Financials Led the Selloff:
  – Major financial stocks like Goldman Sachs (-7%), American Express (-8%), JP Morgan, BlackRock, Blackstone, and KKR all saw sharp declines.
  – Regional banks and the KBW Bank Index posted their worst day since April 2025; private equity names like Apollo and Ares are down 30% from highs.

• Root Causes:
  – Tim Seymour: "It tells you the market's looking for anything to have a bad day. And it tells you also, you know, the debate of AI versus credit debate, which is going to be today or is it AI inspiring credit concerns?" ([02:27])
  – Rumors of a collapse at a "little known UK mortgage lender" heightened anxieties about complex mortgage derivatives.
  – Signs of “credit spread widening” with more put buying on high-yield and investment grade bond ETFs (Mike Co, [06:30]).

• AI-Fueled Fears:
  – There is concern over AI’s role in job loss, especially white-collar, and its effects on consumer credit quality and spending.
  – However, some panelists caution against an excessively bearish outlook, seeing the panic as overdone.

• Opportunities Amidst Panic:
  – Panelists urge distinguishing between systemic contagion and isolated disruptions.
  – "I think American Express is very emblematic of the concerns around there...this is an opportunity to buy high-quality name when sentiment has just kind of seemingly just bled into everything." ([03:56])

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2. Private Credit and Opacity Risks

[11:06–15:28]

• Expert Guest: Chris Maranack, Breen Capital
  – Sees strong cash flow and resilient earnings setups for banks, minimal risk from expected loss changes.
  – "I think the Regionals and the mid sized banks are really where the activity is. I think that's where you still see consolidation opportunities ahead." ([11:39])

• Concerns About Nonbank Lending:
  – Growth in non-depository financial institution (NDFI) loans far outpaces traditional corporate lending (35% vs. single digits).
  – Maranack: "We need more information, more granularity, just like we had as you had issues in commercial real estate..." ([13:59])

• Takeaway:
  – Short-term stress may linger, but fundamentals and cash flows in the space are strong; buying opportunities likely as panic subsides.

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3. AI Layoffs and Prolific Job Cuts: The Block Example

[07:42–09:37; 37:15–41:20]

• Block (formerly Square) Lays Off Nearly Half Workforce:
  – The move, attributed to efficiency and AI-driven automation, is perceived as both an efficiency win and a social risk. – Block stock jumped +16% on the news, highlighting market preference for leaner, more tech-enabled business models despite human costs. – "I don't think Jack Dorsey just did this willy nilly...I think Jack Dorsey has made it clear for a long time he is ready to utilize new technology to its advantage." ([08:11])

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4. Geopolitical Tensions: Iran and the Energy Complex

[15:55–19:06]

• US-Iran Negotiation Stalemate Drives Oil Up:
  – Secretary of State and President Trump issue hardline statements, resulting in a ~3% spike in oil prices. – If peace prevails, blowoff expected in energy shares; risks flagged for airlines/cruise lines if military escalation occurs.
  – "I'd be a seller of energy if we get a peaceful outcome." ([18:01])

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5. Anthropic Banned by US Government: AI-Driven Regulatory Risk

[19:06–22:36]

• Ban on Anthropic AI in Federal Supply Chain:
  – Prompted by disputes over Pentagon access and ethical red lines (autonomous weapons, surveillance).
  – Contract loss is ~$200m, but the supply chain risk has larger implications for enterprise clients (e.g., Amazon). – Kate Rooney: "The risk...is that there could be this chilling effect on the enterprise business..." ([21:09])

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6. Software Selloff and Investor Opportunity

[31:43–34:50]

• Guest: Katerina Simonetti, Morgan Stanley
  – Believes AI transformation favors embedded adopters, including financials, health care, industrials, and materials. – "We are extremely excited about the AI adopters across the industries...the biggest disruption happening outside of tech." ([32:51])
  – Sees "market corrections" as likely entry points during the sorting of AI winners/losers; not a time to avoid but carefully pick up value.

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7. AI’s Limits and Human Alpha: Harvard Study

[38:01–41:15]

• Guest: Prof. Lauren Cohen, Harvard Business School
  – AI model can predict 71% of mutual fund trading, but the 29% that's unpredictable is where outperformance lies. – "Asset managers do, that's predictable...But I think one of the key jewels...is that 29% that's where the outperformance is." ([38:12]) – Unlikely that AI will soon reliably predict market prices—behavior yes, prices no. Human decision-making still adds value.

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8. Target Earnings Preview: Sentiment & Option Activity

[42:48–44:49]

• All eyes on Target’s (TGT) first report under new CEO:
  – Options imply a ~10% post-earnings move; puts are notably more active amid a strong recent run. – Tim Seymour: "I actually think we're going to hear some pretty good news in terms of where they are starting to see credit card spend, some inflection, some of the margin mix getting a little bit better." ([44:07])

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9. Solar Selloff—Germany Ends Subsidies

[29:57–31:15]

• German policy to end subsidies for solar puts pressure on stocks, but exposure varies: – First Solar largely domestic (USA/LatAm), less affected. – Enphase and SolarEdge more vulnerable due to international (esp. European) revenue mix.

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10. Notable Market Moves / Final Trades

[45:19–45:58]

• Panel Final Picks:
  – Mike Co: "Despite the Anthropic news...Alphabet is a good play."
  – Tim Seymour: "Target...bad news already out there, expecting good news."
  – Bono: "Abbott Labs—cardiometabolic play without GLP-1 risk."
  – Steve Grasso: "IJR (iShares Small Cap)—quality small caps."

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Notable Quotes & Moments

• Tim Seymour on the Mood in Financials:
  – "This does feel very much a...software driven rout that leads to credit lending. There are all kinds of terms of small bugs that crawl around...they're called cockroaches...[that’s] the new term for credit lenders." ([02:27])

• On AI vs. Human Judgment (Lauren Cohen):
  – “About 71% of trades are predictable. But...29% aren’t. I think the interesting question...That 29%, that's where the outperformance is.” ([38:12])

• Chris Maranack on Bank Resilience:
  – “We have a very strong cash flow and good earnings set up for the first quarter. The credit risk of these companies I think has been minimal.” ([11:13])

• On Block's Layoffs:
  – “This is block actually in the stock rewarded that view. I read one broker report where it was like this is that day. Do you remember when you heard Block was going to cut half their staff? Because this was an important day in the history.” ([08:42])

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Timed Segment Highlights

• Financial Sector Selloff and Credit Fears: [00:46–10:59]
• Block Layoffs & AI Disruption: [07:42–09:37; 37:15–41:20]
• Geopolitics/Energy Market Moves: [15:55–19:06]
• Anthropic Ban & Supply Chain Fallout: [19:06–22:36]
• International & Solar Stock Commentary: [29:57–31:15]
• AI, Software, and Market Correction Opportunities: [31:43–34:50]
• Asset Management & AI Paper: [38:01–41:15]
• Target Earnings Option Preview: [42:48–44:49]
• Final Trade Ideas: [45:19–45:58]

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Podcast Language & Tone

The episode maintains a blend of urgency and cautious optimism. Panelists are candid—sometimes wry—about market panics, software and AI-fueled disruption, and the difference between catastrophic narrative and statistical trading opportunity. The expert guests echo the pragmatism, encouraging viewers to focus on cash flow, valuation, and transparency as buffers against headline anxiety.

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Useful For: Investors evaluating whether the current rout in financials and tech is short-lived, traders seeking volatility and sector rotation opportunities, or anyone tracking AI’s growing impact on jobs and asset management.

Transcript

[A]

Hello, I'm Lara Castleton with Janice Henderson.

[B]

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[A]

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[B]

Live from the NASDAQ marketsite in the heart of New York City's Times Square, this is fast money. Here's what's on tap tonight. Credit crunch to anything tied to lending, from private credit to card companies to money center banks getting hit hard today. The fallout for financials and whether there's any relief in sight. And the job threat block cutting nearly half its workforce as technology tools reshape the way it does business. We talked to the author of one new study about just how deep the impact could be. Plus, tensions with Iran send energy stocks higher. Is there a light at the end of the tunnel for solar stocks? And we count down to Target's first earnings report under its new CEO. What we can expect from the retailer and how options markets are preparing for Tuesday's release. I'm Melissa Lee, come to you live from studio via the nasdaq. On the desk tonight, Tim Seymour and ice and Steve Grasso and Mike Ko. We start off with the financial sector route that roiled Wall Street. While major indices were down across the board, it was the financials posting the biggest losses. The S&P 500 and Goldman Sachs, American Express, JP Morgan together were responsible for cutting more than 600 points from the Dow. Seemingly every group in the space getting hit. Money center regional banks deep in the red. The KBW Bank Index ETF posting its worst day since April of last year. Credit card companies like Capital One and Amex also trading sharply lower. Asset managers taking on the chin to blackrock, Blackstone, KKR and Brookfield dropping on credit concerns. Goldman Sachs down more than 7%, one of the worst performing stocks in the Dow and the S&P 500 today. And private equity stocks taking another hit. Blue Owl, Jefferies, Apollo and Aries now down more than 30% from their highs. So what do these continued concerns in the credit markets tell Us, Tim?

[A]

Well, it tells you the market's looking for anything to have a bad day. And it tells you also, you know, the debate of AI versus credit debate which is going to be today or is it AI inspiring credit concerns? And there's some of that. There's also, you know, there's a little known unknown UK mortgage lender that collapsed that created a lot of tension about complex mortgage derivatives yet again. And there was a number of banks that were tied to that. So it was a week when you had investment grade credit begin to widen. We haven't had a credit widening period. I'm not sure that we've had one yet. But this is the beginning of something that I think is very concerning. You know, you talk about a KKR and a Blackstone. I mean these stocks have been not just, you know, falling, they've they've sliced right through some really important levels. This does feel very much a, you know, an AI software driven route that leads to credit lending. There are all kinds of terms of small bugs that crawl around. They can't get out of that. You know, they're called cockroaches. And apparently that's the new term for credit lenders that the big banks don't like. But that, that's the story to me and that's the story of today on a week when it seemed like it was this kind of has stolen the Nvidia headline.

[B]

Yeah, I mean there's also the element of growth concerns. I mean whether it be AI fueled AI replacing jobs or because of other reasons in the economy, a slowdown overall. I mean you saw American Express is down 8%. I mean capital One Financial, I mean these in theory don't have necessarily exposure to software but, but here we are concerns about them.

[A]

Yeah, so it's kind of a dual lane situation here, but it's all, it all kind of tethers back to AI. So you know, the concern here is really whether or not AI is going to be replacing not only software but white collar jobs. And that's kind of been the part of the economy that's held up and a bit, a bit been a bit more robust. So I think American Express is very emblematic of the concerns around there. Listen, I think this is an opportunity to buy hog quality name when sentiment has just kind of seemingly just bled into everything. I can understand the argument around disruption. Clearly there will be some job displacement or disruption, but I think the doom and gloom, I would caution against kind of buying into absolute doom and gloom scenarios. For one, we're traders Here we're looking for significant, statistically significant moves that are outside of the norm. Right. Those tend to be your primary and best trading opportunities. So American Express to me stands head and shoulder above some of the others because again, you're not worried about the portfolio contagion. You're not worried about, about the credit quality there. Perhaps you are about the actual consumer. But if Americans have shown you nothing else, they have a propensity to spin, whether it's cash, whether it's savings drawdown or whether it's through credit.

[B]

Well, maybe. And maybe the retail earnings coming up next week will, will give us a little bit of reason to believe that what we're talking about sounds like investing. But in terms of the trade, I mean the sentiment in this area is that there's going to be mass layoffs. There's the pendulum has swung all.

[A]

Wouldn't that make it more efficient though for someone like American Express? Right. So there should be efficiencies. If you have mass layoffs in that

[B]

particular cardholders are laid off.

[A]

Well, that's a different aspect of it. I think we're hitting with macro concerns. The macro concerns today were PPI versus PC or AI and software, you know, cannibalizing companies and software companies. I think that any purchase you could make to Bono and point in a financial, in a regional, you should be buying stocks right now. Software has nothing to do with the headwinds for these companies, period. And end of story. If you, if it were something that was micro, we would know that by now. This just felt like a Friday sell off when there was. We have Iran still hanging in the wings and we have plenty of things to worry about. This I don't think is one of them. And I think if you look at regional specifically, they have zero to do with software issues and AI issues and they're less likely to get hit with all the headwinds that we discussed.

[B]

Mike, would you step in or is this catching a falling knife at this point given the sentiment surrounding some of these sectors?

[A]

Well, I would say that the economic data in general has been pretty good. And I can kind of understand the fallout that we're seeing here. You know, Tim made the point that he thought this was a spread, widening trade. And for those people who don't follow the fixed income markets, you can see signs of that by taking a look at what goes on in fixed income ETFs, particularly on the option side. So take a look at things like Hygie and the options volume we saw there. That's the High yield bond ETF or lqd, that's the investment grade. And compare and contrast that to what you're seeing in tlt which is the long term treasury etf. We saw a lot of call buying in tlt. We saw a lot of put buying in Hygiene and lqd, we saw those were weaker. That is a spread widening trade. Now I do think axp, American Express, now there was a lot of put volume in that one and Goldman in particular was traded six times its average volume. By the way. I think that AXP is probably going to be the least sensitive but there is going to be some fallout felt by some employees. I think you take a look at the layoffs that took place at Block. You know, we had a trader at our firm whose sibling happened to be one of the victims of the staff cuts there. So you know, hopefully they don't have an American Express card with a big bill on it.

[B]

I guess hopefully. And we wish that person well at the same time yet. I mean the Block news in particular, I don't know if you can extrapolate that Jack Dorsey tripled the size of the workforce in three years. Also on the other side of it and now is cutting. So I don't know if that's, if AI is an excuse to get cut jobs. And I think that's sort of the market is trying to figure out now. Are we actually seeing job cuts because of true AI displacement or, or are we just seeing excuses regardless is people getting laid off.

[A]

What do you sometimes like producers get mad when you're looking down at your stuff. And I was looking to see if we were talking at block later in the show. So is this our block time? Because if this is our block time. Sure. How about what I, what I wanted to point out is that I don't think Jack Dorsey just did this willy nilly. I don't think they're doing this playing, playing defense. I think Jack Dorsey has made it clear for a long time he is ready to utilize new technology to its advantage. This is block actually in the stock rewarded that view. So this vision, I understand this gets into who's it good for, who's it bad for.

[B]

Right.

[A]

But, but you know, as we talk about block XYZ formerly known as Square, you know, this is I think a pretty exciting day. I think as we look back to the credit story and what this means. Look, American express has lost 20 billion in market cap over the last month. This isn't. So I bring it back to Jack Dorsey who's been telling Us this was going to happen. And I read one broker report where it was like this is that day. Do you remember when you heard Block was going to cut half their staff? Because this was an important day in the history of.

[B]

Okay, but that, that there's a major push pull which is the push pull that's going on in the markets. And that is. Block's reaction was up 16% on the day. But as Mike said, there's. There are all these people out there who now maybe can't afford to pay their bills. And so that's the push pull. The impact on people and the economy versus the corporate leanness of productivity. The reshaping in a more productive, efficient way thanks to AI.

[A]

Much like I think the market is moving too fast. I think the market's moving right to that scenario. I would just, you know, being the real silver lining CI on the desk, I would actually say really implying that

[B]

Dan is not, you know, I mean,

[A]

I think by the way that's a compliment to Dan. I think he's probably be happy to hear that. I mean because it's, it's. We're saying that sarcastically. I actually think that the market is doing a great job here. I think the fact that you've got a dynamic where you've been weighing the two biggest sectors in the market, how badly they've traded and we're just off of all time highs. The S and P almost crawled back to flat today. So I don't know. I think today's price action was difficult. I think we should absolutely be considering of this. I think not forget there are credit cycles. They do happen. We could have another one. I think the market gets a little inured to the fact that there is credit risk.

[B]

Could work, but.

[A]

Yeah, but anyway, this week was overdone. Yeah. I don't think it's. If I, if I had to pull back the lens, I don't think it is much to worry about on the credit side. I think that, I think that markets will definitely overreact to the credit side because it's a, it's a big event. But I don't think there's the sense of contagion or the cascading through the entire market the way we've seen in some other crises that we've had in the past. I do think that there's an element of creative destruction where we've seen that with many new technologies over the last 20, 30 years. I don't think it's gonna be anything different than that. And I think the market will survive.

[B]

All right, our next guest sees opportunity in the bank sell off. Chris Maranack is Breen Capital's Director of research. Chris, great to have you with us.

[A]

Thank you. Good to be here.

[B]

So I'm assuming you think that there are a lot of babies being thrown out with the bathwater here?

[A]

Absolutely. I think that we have a very strong cash flow and good earnings set up for the first quarter. The credit risk of these companies I think has been minimal. On loss changes and loss expectations, we haven't seen estimates being cut at all. I think overall, if we have a few credit surprises, the banks can handle it and are very resilient.

[B]

Is there a worry on your part about the impact of AI on the workforce and therefore the economy?

[A]

Very minimal. I think that this is going to come and go as an issue and I think we still have a lot of positives in terms of credit demand and actual opportunity for the sector to move forward. Hi, Bono in here. When looking at opportunities in terms of, you know, taking advantage of sentiment, kind of really shifting and accelerating to the downside, would you be focused on the money center banks like bank of America or some of the regionals or perhaps some other tertiary type of name that can kind of allow one to express a positive view here and really get a safe compounding cash flow positive story amidst the chaos. So I think the Regionals and the mid sized banks are really where the activity is. I think that's where you still see consolidation opportunities ahead. I think overall the value proposition is excellent for those names are trading about 10 and a half to 11 times earnings. There still are opportunities for those companies to surprise on earnings. I think credit overall is still very solid and I think that you still have a good combination of expense, operating leverage as well as loans that are rolling over in terms of new yields going up. So the fact that the Fed may not cut right away is actually bullish for margins and for spread income. Hey, Chris, you're right, I think, I mean, I agree with you. You're pointing out that both balance sheet and credit exposure for some of the biggest banks in the world and even the regionals, which are also significant sized banks. But how about what's been going on with KKR and Blackstone? How about what's been going on with folks that have exposure to either complex derivative products or private credit? What is that telling you? Is the market right? And we can have this kind of bifurcation and may not be contagion in the 2008 style, but it could mean that there's Some of these companies still could have a long way to go. Tim, you're correct and I think what the market wants is more transparency. I think the banks are lending pretty hard into the NDFI non depository financial space. They grew 7% the last quarter versus 2% for the total loan book. We have to see more information on these companies, on what exactly is happening with these credits and that's on the KKRS and the others who are lending as well as the banks who are providing lines of credit. I think we need more information, more granularity, just like we had as you had issues in commercial real estate and hotels and other problems the past several years.

[B]

There is actually a stat in your report, Chris, which I thought was really interesting and that is total NDFI loans fourth quarter 2024 to 2025, fourth quarter 2025 and that was up 35% compared to C and I loans which are up single digit. I mean that sort of underscores that point that you're making. So if we are to say that there is this risk that exists that we can't really get our hands at because there's more opacity with NDFI loans then does that hang over the group still? You could make the case till you're blue in the face that there is no risk here. But can that question mark about systemic risk plague this group?

[A]

Well, we had that happen before Melissa back in October. It lasted for about a week to week and a half. So sure this may go on for a few more days but I do think the market moves on because again I think you're going to see another good earnings release for these companies back in April. So I don't think we have to wait till April to see the stocks bounce, but I think this could be a couple more days as we still sort of discount the bad news. I think markets like to take profits and I think that's what's been happening these past few days, today in particular. And I think we'll move on from this issue. Again, I think the operating cash flow of these companies after dividends is so much stronger than the actual charge off that we see in the short run.

[B]

Chris, great to speak with you. Thank you. Chris Maranak of Breen Capital. Mike, would you be a buyer and do you think that this is just going to be a few day kind of thing?

[A]

Yeah, I do think this is probably a buying opportunity. You know one of my earlier comments where I was talking about a lot of the bets on the credit spread issue doesn't mean that I think that the world is coming to an end. There's a difference between disruption and disaster. And I think really dealing with disruption right now, not disaster. And so I think kind of, I think to Bonoin's point and to Steve's point and probably Tim's, too, that this is actually going to present some buying opportunities in the space.

[B]

All right. Do not miss an interview with JPMorgan CEO Jamie Dimon. That's Monday, 1:30pm Eastern Time right here on CNBC. Oil prices rising nearly 3% as we head into what could be a key weekend. The United States and Iran have yet to reach a deal on their nuclear talks. For the latest, let's bring in CNBC's Eamon jabbers. Amen.

[A]

Hey there, Melissa. That's right. It does look like negotiations will go through the weekend, even as the US has amassed a tremendous amount of firepower in the region in case President Trump does decide to order military action against Iran. The State Department warned Americans this afternoon not to travel to Iran for any reason and said that any Americans in Iran should leave immediately. Now, the foreign minister of Oman, who has been mediating negotiations between the two countries, was in Washington today, posting a photo of himself meeting with the vice president and writing on social media. I Met Vice President J.D. vance today and shared details of the ongoing negotiation between the United States and Iran and the progress achieved so far. I am grateful for their engagement and look forward to further and decisive progress in the coming days. Peace is within our reach. President Trump, though, speaking earlier to reporters on the South Lawn, said he does like the way that the talks have gone so far, but he's a little bit wary. Here's what he said. Well, we haven't made a final decision. We're not exactly happy with the way they negotiated. They can they cannot have nuclear weapons and we're not thrilled with the way they're negotiating. So we'll see how it all works. Now, Melissa, we also know that Secretary of State Marco Rubio is going to hold talks in Israel with Prime Minister Benjamin Netanyahu on Sunday and Monday. So this could be a tense weekend. Back over to you, Eamon.

[B]

Thank you, Eamon Jabers. And specifically, when Trump was asked about using the military in Iran, he said sometimes you have to. We definitely saw a bit in the energy stocks sort of around when those comments were made. What do you think here?

[A]

Yeah, I think there's probably a 6 to 10% varying lift to those stocks, whether it's energy or whether it's Defense stocks. But, but I would keep. And then you get the headwind for airline stocks and for cruise line stocks. So if there is a strike, I would look for those moves to continue. And if we pull back and it becomes just a negotiation, then I would look for those moves to totally unwind. So I'd be a seller of energy if we get a peaceful outcome.

[B]

Right. You're flagging the airlines.

[A]

Flagging the airlines because I do think they, they're not rewarded when Brent was at 60 and yet we're punishing them when it's at 73. And I just think that the, the hedges they have in place first of all means that they're probably on both sides of this, more or less neutral. I do also just think back to the energy companies. We've been positioned and the news flow has been for more supply coming into the market, not less. And these stocks have been rallying. So to me, you're not letting up on the energy trade. You're starting to see some breakouts and I think a lot of people are actually feel that's a safe place to be. These companies fit the bill.

[B]

Meantime, President Trump directing all U.S. federal government agencies to immediately stop using anthropic technology following a feud between the AI giant and the Pentagon. Kate Rooney's got the details on this. Kate. Hey, Melissa. The latest we just got out of the Pentagon is a statement from Pete Hegseth saying that they are officially labeling anthropic a supply chain risk. This was what we anticipated. This was part of the threat from the Pentagon during this standoff between the company and the US Government saying here this week anthropic, quote, delivered a masterclass in arrogance and betrayal as well as a textbook case of how to not do business with the US Government or the Pentagon. He says our position will never waver. They need unrestricted access to Anthropic's models for every lawful purpose. It's quite a long statement, so I won't read the entire thing. But we also had President Trump accusing Anthropic of essentially trying to strong arm the Department of War. So echoing here what Trump said in Hegseth statement, Trump saying, quote, he was directing every federal agency to immediately cease all use of anthropic technology. Says we don't need it, we don't want it, we'll not do business with them again. We also says there's going to be a six month phase out of their technology, threatens major civil and criminal consequences if they don't comply with that Anthropic and The Pentagon, as I mentioned, had been at odds over the use of the company's models for classified networks. The red lines we've heard from CEO Dario Amadei were around using this technology for autonomous weapons and mass domestic surveillance. We also mentioned the supply chain risk that is now official. There were some prediction markets popping up around this on Calci. You can see there now it's official. 94% probability. I would put that now at 100, but we did just get that confirmed. The volume around that contract doubled in the last couple of hours here. But that is the latest officially a supply chain risk and big implications for one of the biggest companies in the US the fact that the federal government is cutting off ties with Anthropic, it makes the designation as a supply chain risk sort of moot. I mean, it is already sort of taking it to the fullest. But in terms of anthropic valuation, Kate, how should we think of this in that context in terms of how valuable a government contract is? So I would actually put it in two buckets, Mel, so that the US government ceasing ties with Anthropic, that's about a $200 million contract for Anthropic. So that's sort of in its own vacuum. And then you think about the supply chain risk, that actually has bigger implications for this company because it threatens what enterprises, what companies would actually be able to work with Anthropic and if they have government contracts themselves. So the risk when you talk to investors is that there could be this chilling effect on the enterprise business. Take, you know, an Amazon, for example, they do government work. Is there going to be an effect of them saying, okay, well, if you're a supply chain risk, that's an unprecedented move. That's what they did with Huawei. And that's not typical unless it's a company that works with U.S. adversaries. So I would say that is the bigger deal for Anthropic. As this company looks to go public, obviously in private markets, you don't see the same tick by tick stock price moving. But the big threat from what I'm told, is when this company goes public, this is likely going to come up in their prospectus and it's gotten quite political. You're seeing this company now getting really criticized by the administration and you wonder what that means as this company looks to IPO potentially as soon as this year. Sam Altman's comments though, indicate that it would be aligned with Anthropic. And so therefore maybe the ding to the valuation would be across the board for these guys. True. Although Sam Altman also put out a memo to employees that we saw it was late last night, saying essentially they had the same red lines, they had the same issues with working on classified contracts. But he was saying that they were looking for solutions, they were trying to de escalate. So it's possible that they are able to fill that void and somehow get around this in a way that anthropic was not. So some of the details are unclear, but Altman is positioning as you know, we don't agree with with those two main things, autonomous weapons and surveillance. But we will try to come to some sort of solution and outline sort of what they're looking at. The other one I would mention is X and Elon Musk are seen as the front runner for getting this contract. Kate, thank you. Kate Rooney, Thanks, Bill. Coming up, stormy skies for solar stocks sun run falling off a cliff as Europe's biggest economy considers pulling the plug on solar power subsidies. What it means for the stock sun here in the States. But first, Netflix investors breathing a sigh of relief after the company walked away from Warner Brothers discovery. What comes next as one streaming saga ends? Do not go anywhere. Fast Money's back in two.

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This is Fast Money with Melissa Lee right here on cnbc. Finding the music you love shouldn't be hard. That's why Pandora makes it easy to explore all your favorites and discover new artists and genres you'll love. Enjoy a personalized listening experience simply by selecting any song or album and we'll make a station crafted just for you. Best of all, you can listen for free. Download Pandora on the Apple App Store or Google Play and start hearing the soundtrack to your life. Did you know that parents rank financial literacy as the number one most difficult

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welcome back to Fast Money. Shares of Netflix seeing their best day since October 2023, surging almost 14% after declining to raise its bid for Warner Brothers, the streaming giant now has recouped all of its losses since the start of the year. Paramount Skydance also having a Monster stay up 20%. The company announcing it assigned a definitive merger agreement with WBD after the bell. So Mike, what do you think? Because it didn't recouped its losses this year, but it didn't recoup its losses from before it went into this bidding war, which is 110.

[A]

Yeah, I mean, I think it's got a long way to go and I think the options market actually would agree with this. It was one of the busiest single stock options that we saw today. It was second only to Nvidia, traded about 3 million contracts. And the most active contracts were the par calls that expire next week. I mean, to your point, this has a lot of ground to make up from its highs that we saw early last year. And one of the other things that we saw in Netflix was a big decline in the two month implied volatility. So essentially that's the uncertainty that the options market is attributing to the stock. Looking forward, it was essentially at six month highs earlier this week. This has calmed investors down quite considerably. Yeah, I think it's going higher. I mean, let's not forget a 2.8 billion breakup fee they receive. Let's. It's interesting they. The comments. It goes from, you know, a must have, or was it a must have to really be nice to have, but not at the additional price. The fact that that was the breaking point for the deal, I find that hard to believe. I do think there was much more afoot here, but as a Netflix shareholder, I'm pretty happy about this. And there's been an opportunity. I still think that Netflix needs a catalyst or two to really break out, certainly past 110. And I think it's not wildly cheap here, but this is great news. Yeah, I tend to agree. I mean, the stock price tells you everything you really need to know. Clearly investors didn't like the deal at, at any price, essentially the stock, and essentially paid the price for that. I do think there is somewhat an implicit admission of guilt that this is becoming a more mature company and some of the easy money leading up to this point has been made ad tier, cutting back on password sharing, et cetera, et cetera. So listen, I do think that on one hand they do need to find some catalysts for growth. On the other hand, I think they now have the cash in hand that will make it available for them to do so. And it seems like the real focus is going to be into live sports and live events and it's probably going to be where their area of focus is. And who knows, all it takes is one AI story in terms of being able to produce some massive hit show and you might see a completely different re engagement with the volatility in the stock. So listen, I think clearly investors like to see a more capital light path going forward and I think their stock reaction is a reflection of that.

[B]

Do not miss an exclusive interview with Paramount skydam CEO David Ellison, who will sit down with Julia borson. That's Monday, 10:00am Eastern time. A lot more fast money to come. Here's what's coming up next.

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Looks like rain, a washout for solar stocks as Europe's biggest economy plans to end subsidies for the group. What the move means for renewable energy stocks stateside next. Plus, where are gains going to come from in March? Our next guest says AI is the way to go next month. How to play the market's most pivotal trade coming up. You're watching Fast Money live from the NASDAQ market site in Times Square. We're back right after this. Hey, this is Will Arnett, host of Smartless. Smartless is a podcast with myself and Sean Hayes and Jason Bateman where each week one of us reveals a mystery guest to the other two. We dive deep with guests that you love like Bill Hader, Selena Gomez, Jennifer Aniston, David Beckham, Kristen Stewart and tons more. So join us for a genuinely improvised and authentic conversation filled with laughter and newfound knowledge to feed the smartless mind. Listen to Smartless now on the SiriusXM app. Download it today. Lifelock how can I help?

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Welcome back to Fast Money. Two very different moves in Dell and Core Weave after their earnings reports last night. Dell hitting a nearly four month high in its second best day since coming back to market while Core Weave and its second worst day since its IPO last March, Novo Nordisk notching its ninth straight down day, closing at nearly five year lows. The Ozempic and WeGovy makers down more than 20% this week on growing pricing pressure and competition. Setbacks to its pipeline and solar stocks powering down today and reports that Germany plans to end subsidies for smaller solar power systems like rooftop panels. International operators down sharply in response. First solar off by a percent and a half while Enphase fell by more than 7. This is the story that you brought to us.

[A]

Yeah. So when you look at First Solar, First Solar is pretty much domestic, so I wouldn't really be worried about that with the European headlines. It's got its own issues here to be worried about. When you look at Enphase, their converters so they don't make panels, they just switch DC power to AC power so it could be used. So I think you have to know what you're buying and know what's exposed. And phase is definitely more of an international play. And then if you throw in their solar edge, that's sort of 60, 65% international as well. First Solar has very limited exposure to Europe. It's more Latin America and USA and

[B]

not really residential either.

[A]

Not really residential.

[B]

Coming up, stocks dropping after this morning's hotter than expected inflation report. But our next guest sees some opportunity in the dip where she is putting some money to work when Fast Money returns.

[A]

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

[B]

Welcome back to Fast money. Markets down today after the January producer price index came in hotter than expected. But our guest next guest sees a bounce back coming. Let's bring in Morgan Stanley Private Wealth Management's Katerina Simonetti. Katerina, great to have you with us. So what, what exactly did we overshoot? Is it just sort of the assumption that is going to kill everything. I mean, what part of the narrative do you dispute? Well, I think that it's a very interesting narrative and no one can dispute the fact that AI is absolutely transformative. That is going to change the way we're going to do things and the way the companies are going to operate, change the margins, change the profit potential, but the at what speed and which companies. So we are extremely excited about the AI adopters across the industries. As a matter of fact, we see the biggest adoption, the biggest disruption happening outside of tech, specifically in health care, in financials, in industrials and in materials. You know, we see just this great move at the same time with the excitement, but also skepticism about generative AI. The really the jury is still out which companies are going to be affected negatively, where their businesses are going to be disrupted by AI because they're not going to be able to just really kind of move with the times. And the markets seem to have voted on which sectors are going to be decimated by AI. And they're mostly services, mostly ones that have data as their asset as opposed to hard assets. And I'm wondering how you think about those opportunities because I'm sure there are a lot of people at home thinking there's got to be an opportunity here. But how do you think about the business model in a world that you can't predict the impact on? Well, that's how, that's what we try to manage, the unpredictable. And let's just take software for example. There are going to be companies that of course just experienced a major sell off. But if there are giant companies with proprietary technology, strong customer relationships, competitive advantage, they are going to be able to adopt and they're going to be able, in their own accord, actually use AI for their model expansion. But it is very much an extremely competitive environment in a little bit of a wild wild west and a race to who is going to have technology that is going to be the most efficient.

[A]

Would you rather avoid all of the noise that we're going to go through? It sounds like we're going to go through this in your opinion, for the next couple of months while the market sifts through winners and losers. Can you avoid that with going with low cap, high quality stocks? I'm not talking about iwm, but talk to that if you could.

[B]

Well, instead of avoiding it, I would see an opportunity in it. Instead of saying that I'm going to stay away from the sector, I actually would be very careful looking at the sectors that are getting negatively affected by this market and look for buying opportunities and build up positions in the sectors, especially in companies that, you know, stand to just really benefit with that. Are we expecting that with market valuations where we are, we are going to have not one, but maybe several market corrections this year? Absolutely. But our positive towards the year end is still extremely positive.

[A]

Katerina, not surprising to the desk. I'm going to ask you about international. You seem to be overweight US over international, but you love emerging and you're overweight emerging. So talk about that, talk about and talk about where you think you're going. Clients should be on a percentage basis, right?

[B]

Well, international, if you look at the larger scope, has underperformed US Markets for quite some time. So customers that used to have their in their portfolios, you know, 10%, 12% exposure, are now sitting at 2 or 3 and are thinking, should we have more? And we think yes, valuations are extremely attractive on the international side. But we cannot discount the fact that there is a major conflict happening in Ukraine. Ukraine, that there are still, you know, issues that, you know, they're dealing with. And the, as much as we want to be excited about the rebuild and investment in Europe, we think that that might take some time. With that, with the tariff situation no longer in play, we seems that it seems like our relationship with China is getting a little bit more normalized. We see a lot of potential in emerging markets.

[A]

Great.

[B]

Katarina, thank you for coming by. Have a great weekend. Katerina Simonetti of Morgan Stanley. Michael, what do you think of the strategy and what do you think about the volatility that Catarina seems to think is going to play out this year?

[A]

Well, I, you know, I mean, we have seen a little bit of volatility. We're slightly above average. But I actually think that we're probably going to settle down a little bit as we, as we come into the summer. I'm not expecting anything too wild. I mean, look, the disruption I was talking about earlier, there is going to be some industries that are going to take advantage of it. Some of them we can't really take advantage of because they're not publicly traded. But, you know, technology has played into trading and investing for a long time, ever since actually I started in the business, I started out with something that was black and gold. This one's platinum and black now. But well, yeah, I mean, this has more lines of code, but that's how far we've come in the last 30 years in this business. And so I think that actually we have a lot of good things ahead of us. And that's really what people should be looking for.

[B]

Yeah. Vano, what do you think?

[A]

Yeah. So one of the things that stuck out to me in her research piece was essentially this, the stickier inflation that perhaps than we want or perhaps that has been modeled in portfolios. And I'm just curious because it kind of gets overlooked portfolios quite a bit. Just to see what type of tactical tilt she is suggesting in terms of allocation to real assets. We've talked about gold, we talked about silver, talk about bitcoin and some of the alts, and they're getting a lot of the attention right now. But that seems like another area that she was highlighting as well.

[B]

Coming up, block blaming AI for laying off nearly half its workforce. We'll dive into some other areas the technology could impact right after this. Welcome back to fast money. We are starting to see real signs of AI's impact on the labor market. Block, the latest company to slash its workforce in favor of automation. And I could have sweeping implications for asset management too. According to a new study, researchers deploying an AI model that accurately predicted 71% of active mutual fund trading decisions, correctly anticipating whether a manager would buy, sell, or hold a stock. For more on the findings, lead study author Lauren Cohen joins us now. He's also a professor of business administration at Harvard Business School. Professor, great to have you with us.

[A]

Yeah, thanks so much for having Melissa.

[B]

Is the conclusion of this that I can replace asset managers, that asset managers don't have an edge? What is it? What's your conclusion?

[A]

Yeah, so I think that's a little bit hasty. And so what we find is that, you know, much like all human behavior, that's lots of what asset managers do, that's predictable. And so what the paper finds is that about 71%, like you said, of trades are predictable. But I think one of the key kind of jewels for the asset management literature is what that means is that 29% of what they do isn't. And it turns out that 29%, that's where the outperformance is.

[B]

So you're making the case that it's the human aspect, right? That, that 29% of the judgment, that is sort of the, the magic of sauce, that's what you're paying for. So is it really bolstering the case that you need humans to manage a portfolio?

[A]

Yeah, yeah, I would say so. You know, and I would say that it says that. Look, what I think is one of the intriguing parts of it is that, you know, they have these hundred let's say we know they own 100 stocks, so there's these hundred trades that they make and about 71, like we said, our predictable 29 aren't. I think the interesting question is if we were to run that, like, you know, fourth grade worksheet paper where you connect the dots to which one's, well, which one is it? I don't know if they could predict which ones are and which ones aren't, Lauren. Tim? Well, first of all, Excel, I'm glad I'm not going to be out of a job soon. But he didn't say that. I didn't hear him say, how about the second derivative of this, which almost is how that if AI is predicting these things, therefore they're not going to happen. In other words, if you already know where the puck is going, you're not going to skate there. What do you think about that? I mean, because these computers, this is the whole point. AI is getting smarter and smarter and when will it outthink itself? Yeah. And so look, I think it's a great question, Tim. So if I were one of these mutual fund managers, this is what I do, right? I would go to my boss and say, hey, look, yeah, 71% of what I do is predictable. No kidding, buddy. So here's what I need. Give me a little bit more time to spend on those 29% and I'm going to increase that to 39% or 49%. And so I would try to lean into that and really, you know, spend more of my effort, ability, and kind of mind share on those 29% of outperformance. And I think that's where we can kind of stay ahead of AI.

[B]

Do you have a view, Lauren, on. On whether or not I will be able to pick stocks based on this research at all or other case studies that you've looked at or are conducting right now?

[A]

Yeah, and so another great question. So look, this is what we found in the data so far, Melissa, is that AI, and that's the reason we did this study. AI is good. AI is just pattern recognition, right? They're pattern recognizers. You know, they're big fancy ones, but they're pattern recognizers. And so turns out AI is pretty bad at predicting the stock market and prices because that is the amalgamation of, you know, thousands, millions, tens of millions of different people and different trades and capital moving and information. But it is good at predicting behavior. And so I think it won't be able to predict prices. I don't foresee a time when it can ever do that, but it can predict behaviors. And so the more again that we can understand that it can predict parts of our behaviors. So to move to those things and to put our eyes in places where we think behaviors are going to be idiosyncratic and maybe have some alpha and outperformance them, I think that's where we should go.

[B]

All right, Lauren, fascinating stuff. Thank you so much for joining us. Appreciate it.

[A]

Perfect. Thanks so much, Melissa. Thanks for having me.

[B]

Lauren Cohen of Harvard Business School. Mike Cohen, are you feeling better about your place in the world?

[A]

Well, I fully accept that a lot of the things that I have done and am doing is going to be displaced ultimately by, by AI and in the investment world. Technology has played into this now for decades. I mean, you think about it, Excel spreadsheets were a huge advancement over, you know, a pencil and a ledger. And you know, when we think about high free, high speed trading nowadays, almost all of its algorithmic. So that pattern is simply going to continue. But I'm kind of with Lauren on the idea that taking past patterns and extrapolating from them and making all of your investment decisions based on that alone is a dangerous exercise. And I have a feeling that people are going to take a little bit of time before they just simply allow people to manage their money that way. And I know we've already goodbye the guests, but if Lauren was still here, I would say I would ask him, doesn't knowing behavior lead to knowing pricing? If that was. Yeah, because that to me seems to be the crowds. Yeah.

[B]

Then can't you predict the direct why

[A]

the past performance is not indicative of future. I guess that fits into this whole thing. But remember one, one little bow tie on this. Less than 20% of money managers outperform the overall market for 10 years straight. So I think we could aggregate that information. It helps in modeling. Right. What used to take us weeks, sometimes months to model in stocks, you can do now in minutes.

[B]

Coming up, Target taking a breather ahead of Tuesday's earnings report. A look at how options traders are gearing up for the results. That is next. More fast MONEY into. Welcome back to FAST money. Target headlining a jam packed lineup of consumer earnings next week. Shares are up more than 16% this year, but options traders are betting the retail giant could miss the target. Mike Co has the action. Mike?

[A]

Yeah. So right now the options markets implying a move of about 10% higher or lower after they report by the end of next week. That's in line with the about 9.2% that the company has averaged over the last eight reported quarters, although the last four we haven't seen moves quite that big. Now puts were certainly outpacing calls today. We saw above average volume in the top five most active options contracts that are not expiring today were all puts. The leading one among those was the 3-1-15 puts. We saw about 1400 of those trading for about $6.75 on average. But as you pointed out, the stock is up 16%. So it is possible that some of that activity could just be some people who have benefited from that run hedging their exposure.

[B]

Yep. And of course this is the new CEO. This is the first quarter under this new CEO Tim. So as a shareholder, are you expecting the kitchen sink? I mean that's sort of. He would get a free pass if he did that.

[A]

Yeah, I feel like there's been a lot of sinks chucked out there already on target. I actually think we're going to hear some some pretty good news in terms of where they are starting to see credit card spend, some inflection, some of the margin mix getting a little bit better. Again the comps are really nice for Target here as the T in Timbo. That's my acronym folks. I actually like this name and I think this is all about enough to get a rerating to a 15 to 16 times. You're at $140 stock easily. I hear Timber said implied move and my immediate reaction is to look to sell volatility. I don't think that's the right move going into this earnings. I think you're just willing to kind of spend the premium to get the extra exposure that you want.

[B]

All right. Don't miss an exclusive interview. That's Tuesday 10:00am Eastern Time. Targets new CEO Michael Fidelke on earnings day. Live with Sarah Eisen at the company's headquarters in Minneapolis. It is his first interview since taking the job at the start of the month. Up next, final trades, Final trade time. MIKE co.

[A]

So despite the anthropic news and the deal that Alphabet has with them, I still think that Alphabet is a good play if you are interested in sticking with the trade. Timbo, Timbo T and Timbo Target. Again, I think we've got a lot of bad news out there. I think what they're going to announce both in an investor day and a broader earnings Release on the 3rd is good news on strategy Von A win Looking for a way to play the cardio metabolic theme without the GLP1 pricing risk. Abbott Steven I was looking for a way to play small cap quality and I found it. I J R that is an iShares Trust.

[B]

Thank you for watching Fast Money. Have a great weekend. Mad Money with Jim Cramer starts right now.

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