CNBC's "Fast Money" Podcast Summary: "Google’s Quantum Computing Breakthrough… And Health Insurers In The Spotlight" (12/10/24)

Release Date: December 10, 2024

Hosted by Melissa Lee and featuring a panel of top traders including Tim Seymour, Guy Adami, Julie Beal, and insights from industry experts like Gene Munster, CNBC's "Fast Money" delivers an in-depth analysis of today's most pressing financial news. This episode delves into Google's latest advancements in quantum computing, significant movements in the health insurance sector following a high-profile incident, and other major corporate developments. Below is a comprehensive summary of the key discussions, insights, and conclusions from the episode.

1. Google's Quantum Computing Breakthrough and Alphabet’s Stock Surge

Overview: The episode kicks off with a spotlight on Alphabet Inc. (Google's parent company) following a monumental breakthrough in quantum computing. Google's new quantum chip, dubbed "Willow," successfully performed a calculation that would take a classical computer an estimated 10 septillion years but was completed in under five minutes. This achievement has positioned Google at the forefront of next-generation technology, igniting a surge in Alphabet's stock by over 5%, adding nearly $120 billion to its market capitalization.

Panel Discussion: Melissa Lee [00:59] introduces the topic, highlighting the transformative potential of quantum computing across various sectors, from drug development to space exploration. The panelists engage in a robust discussion about the immediate lack of commercial applications despite the technological leap.

Notable Quotes:

• Guy Adami [02:29]: "GUY not necessarily. However, I think what it shows is Google's not as far behind the eight ball as the market thought a few months ago and the fact that they're probably still somewhat in the pole position and on valuation you can make a case still despite today's move..."

• Tim Seymour [02:58]: "Well, Google's more important tonight... it's the largest advertising company in the world... it's front and center as it relates to search and digital ad and everything in their core business is growing and it's getting bigger and bigger..."

• Julie Beal [04:00]: "Do you think that we're giving them a tremendous burst? If this were talking about AI, we'd be saying it was pixie dust... Do you think you're giving them more of a wider... Where are they going to monetize it?"

Insights: The panelists debate whether the market has appropriately valued Google’s breakthrough, given the technology's nascent stage. While some argue that the stock surge may be premature, attributing it to market optimism about Google's long-term potential, others believe it reinforces Google's strong position in high-growth areas despite current valuations.

• Gene Munster [08:45]: "They started this Willow project 12 years ago. The potential around this being commercialized is probably 10 years away... it's still a long time... I would have expected the stock to be up a couple percent today, not 5%."

Conclusion: While Google's quantum computing milestone is a testament to its innovative capabilities, the panel remains cautiously optimistic, acknowledging that substantial commercial applications are still a decade away. The surge in Alphabet’s stock reflects investor confidence in Google's strategic positioning for future technological advancements.

2. U.S. Steel's Acquisition Blocked by the Biden Administration

Overview: U.S. Steel shares plunged nearly 22% following the Biden administration's decision to block its acquisition by Japan's Nippon Steel. The Japanese company expressed confidence in the partnership, aiming to enhance American economic and national security by countering China's threats.

Panel Discussion: Julie Beal [24:33] views the stock decline as a buying opportunity, citing potential tax incentives and tariffs that could benefit U.S. Steel in the long run.

Notable Quotes:

• Julie Beal [24:33]: "I think it's a buy on the weakness because... if Trump had his way, he's going to have tax incentives and tariffs to deal with it. So all of this is a buying opportunity in my opinion."

• Tim Seymour [25:13]: "This is a classic private equity dynamic because there's a balance sheet here that's unsustainable... The risk is that medical costs have exploded."

Insights: The blockage has led to a substantial drop in U.S. Steel’s stock, which has fallen nearly 30% since the deal was announced a year ago. Panelists discuss the strategic implications, suggesting that the deal's failure might open avenues for alternative growth strategies and potential future bids from other interested parties.

Conclusion: The blocked acquisition presents a mixed landscape for U.S. Steel. While the immediate reaction is negative due to the stock's sharp decline, savvy investors like Julie Beal perceive it as a strategic buying opportunity, anticipating future government interventions that might bolster the company's standing.

3. Walgreens Exploring a Private Equity Deal with Sycamore Partners

Overview: Walgreens shares reached an all-time high following reports that the beleaguered pharmacy giant is exploring a deal with private equity firm Sycamore Partners. The company's market value has plummeted from $55 billion in 2019 to just over $9 billion, reflecting ongoing struggles in stabilizing its retail pharmacy business.

Panel Discussion: Guy Adami [25:35] suggests that Walgreens is a prime candidate for a turnaround, highlighting the substantial short interest as a bullish signal despite fundamental challenges.

Notable Quotes:

• Guy Adami [25:35]: "This is a name, the trade, it was at a 32-year low recently... might be a buy here in a pretty major way."

• Tim Seymour [25:13]: "If there is an outside bid where there's some strategic value... it's not in the best interests of shareholders to see this deal not happen."

Insights: The panelists evaluate the potential of a private equity takeover to inject necessary capital and strategic direction into Walgreens. However, concerns about the company's debt and operational inefficiencies are acknowledged, suggesting that while the opportunity exists, the path to recovery remains challenging.

Conclusion: Walgreens stands at a critical juncture, with private equity interest potentially offering a lifeline. The panel remains cautiously optimistic, recognizing the firm's potential for restructuring and improved financial health under new ownership.

4. Boeing Resumes 737 Max Production Post-Machinist Strike

Overview: Boeing announced the restart of production for its contentious 737 Max jet, marking a significant step after a month-long machinist strike. The company reported delivering 13 planes in November, slightly down from October’s 14 units during the strike period.

Panel Discussion: Tim Seymour [30:08] emphasizes the importance of production normalization for Boeing's future profitability, while Guy Adami [30:11] highlights recent stock movements and price targets, suggesting bullish outlooks despite past inaccuracies in market predictions.

Notable Quotes:

• Tim Seymour [30:08]: "This is a story you want to own here. And I've said that for a year."

• Guy Adami [30:11]: "It's been wrong for months and months... I think we could be talking about Boeing in the mid-180s very easily by early next year."

Insights: The panel discusses Boeing's challenges in ramping up production rates to meet global demand, alongside repairing its tarnished reputation post-737 Max crises. The consensus leans towards optimism that resumed production signals a return to growth and operational stability.

Conclusion: Boeing's resumed production of the 737 Max is viewed as a positive indicator of the company's recovery trajectory. The panelists are optimistic about the stock's potential growth, anticipating increased deliveries and improved financial performance in the coming months.

5. Amazon Launches Drone Delivery Program in Phoenix

Overview: Amazon has officially launched its drone delivery program in the Phoenix metropolitan area, aiming to provide rapid delivery for smaller items. The drones are designed to be 40% quieter than their predecessors and can carry packages weighing up to five pounds.

Panel Discussion: The panel discusses the technological advancements and logistical challenges of drone deliveries, including safety concerns and competition from other retailers like Walmart.

Notable Quotes:

• Melissa Lee [41:48]: "Kate, those drones look big. I mean, how much can they actually carry in one go?"

• Tim Seymour [43:19]: "You got to really want to have an urge to play Jenga, guy."

Insights: The introduction of drones addresses last-minute delivery needs, although scalability and integration with existing infrastructure remain hurdles. The panelists debate the feasibility of widespread drone adoption, considering regulatory approvals and public acceptance.

Conclusion: Amazon’s foray into drone deliveries represents a significant innovation in the logistics sector. While promising for rapid, small-package delivery, the success of the program hinges on overcoming safety, regulatory, and scalability challenges. The panel remains intrigued but cautious about the long-term viability of drone-based delivery systems.

6. Murder of United Healthcare CEO Sparks Scrutiny on Health Insurers

Overview: A 26-year-old suspect, Luigi Mangione, was arrested for the murder of Brian Thompson, the CEO of United Healthcare, following a public outcry against the health insurance industry. Mangione’s manifesto criticized large corporations and the healthcare sector, alleging systemic issues with claims denials and transparency.

Panel Discussion: John Ransom, managing director at Raymond James, discusses the broader implications for the health insurance industry, particularly focusing on operational inefficiencies and regulatory risks exacerbated by the incident.

Notable Quotes:

• Julie Beal [34:33]: "It's a bad example, but with that said... you might be able to get that based on this news and based on probably the short interest."

• PJUM Representative [39:32]: "It's really a reflection of how broken the system is in terms of we pay more for our healthcare and have worse outcomes."

• John Ransom [36:06]: "The risk is that medical costs have exploded... the overuse of AI for things like prior authorization."

Insights: The incident has cast a harsh light on health insurers, highlighting public frustration with opaque claims processes and the overreliance on AI-driven systems that may impede patient care. The panel discusses potential legislative changes aimed at increasing transparency and reducing operational burdens on both patients and insurers.

Conclusion: The tragic murder of United Healthcare’s CEO underscores significant discontent within the healthcare system, prompting urgent discussions on policy reforms and operational transparency. The panelists agree that addressing these systemic issues is crucial for restoring public trust and ensuring the sustainability of health insurance providers.

7. Options Trading Amid Anticipated FDA Ruling on Hims and Hers

Overview: Shares of Hims and Hers (HIMS) experienced a nearly 6% drop as investors await the FDA's decision on Eli Lilly's Tirzepatide being removed from the shortage list. The impending ruling could significantly impact HIMS’s ability to produce compounded GLP-1 drugs, a cornerstone of its business model.

Panel Discussion: Mike Koh provides insights into the high implied volatility surrounding HIMS, indicating that options traders are anticipating major movements. The panel discusses strategies, including the surge in put options, signaling bearish investor sentiment.

Notable Quotes:

• Mike Koh [44:39]: "We see very high implied volatility. Big moves anticipated in HIMS by the end of next week."

• Julie Beal [44:41]: "We saw a lot of put activity... over 3,300 purchases of 12-27-29 strike puts in a 20-minute span."

• Tim Seymour [45:14]: "This was an eight-dollar stock at the start of this year... I'm not sure I want to buy the long-term option volume which is very expensive."

Insights: The panel surmises that the high volume of put options reflects widespread concern about the FDA's potential decision, which could exacerbate HIMS's already fragile business model. The discussion highlights the delicate balance between optimism for the company's product pipeline and the risks posed by regulatory outcomes.

Conclusion: Hims and Hers faces significant uncertainty as the FDA's decision looms, making it a focal point for options traders. The high implied volatility suggests anticipated volatility in the stock, with strategies leaning towards bearish bets unless the ruling favors continued production capabilities.

Final Thoughts and Upcoming Discussions

As the episode wraps up, Melissa Lee previews upcoming segments, including Amazon's advancements in drone deliveries and the ongoing legal proceedings surrounding the United Healthcare CEO's murder. The panel emphasizes the interconnectedness of technological innovation, regulatory landscapes, and public sentiment in shaping market dynamics.

Closing Insights: The interplay between groundbreaking technological advancements, like Google's quantum computing, and the critical challenges in essential sectors, such as healthcare and manufacturing, underscores the complexity of today's financial markets. The panelists advocate for a balanced investment approach that considers both immediate market reactions and long-term strategic potentials.

Disclaimer: All opinions expressed by "Fast Money" participants are solely their own and do not reflect the views of CNBC, NBC Universal, or their affiliates. Investments involve risks, and past performance is not indicative of future results. Always conduct thorough research or consult a financial advisor before making investment decisions.