← CNBC's "Fast Money"
CNBC's "Fast Money"
Google’s Quantum Computing Breakthrough… And Health Insurers In The Spotlight 12/10/24
00:43:51
Shares of Alphabet surging as Google unveils a ‘breakthrough’ quantum computing chip. What it means for the future of coding, and the areas of tech that could benefit. Plus A spotlight on the health insurance space, as the suspect in the UNH CEO murder investigation heads to his first court appearance. The latest details on his motives, and how it could all impact other players in the health insurance space. Fast Money Disclaimer
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- [00:00]
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Ryan Reynolds
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- [00:59]
Melissa Lee
E details live from the NASDAQ market site in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. Gaga for Google, shares of Alphabet surging after a major breakthrough in quantum computing. What we know about how this technology could change everything maybe. And the suspect, suspected shooter of the United Healthcare CEO raging ahead of his first court appearance today. The latest updates case and how last week's events could lead to more scrutiny of the insurance sector. Plus Walgreens and talks to go private again. Boeing restarts production of the embattled Max jet and Amazon's delivery drones finally take off in Phoenix. The details on all those stories coming up. I'm Melissa Lee coming to you live from studio via the nasdaq. On the desk tonight, Tim Seymour, Seabroso, Guy Domi and Julie Beal. We start off with Google's groundbreaking achievement, the tech giant announcing its quantum chip. Willow computed a calculation that normally takes 10 septillion years. What a lot or 10, 25th power in just under five minutes. Quantum computing is hailed as the next frontier in uber high technology. Some hope it can provide answers to everything from drug development and space travel to the origin of the universe. But so far there are no real world applications. Still, the breakthrough sent shares of Alphabet surging more than 5%, adding nearly $120 billion to its market cap. Does this milestone give the mega Cap a leg up in the big tech race? Did it make sense that we added so much in market cap to Google for a technology that has no commercial application yet?
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Guy Adami
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 and I think that 191 and three quarter level that we traded up July is in the crosshair. So good for Google. Obviously there have been some missteps, not necessarily from them but the market around them. But I think people realize that if they want value, Google's the place to be.
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Melissa Lee
What is that hockey metaphor about the.
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Tim Seymour
Puck skating to the puck?
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Melissa Lee
Exactly what it's doing.
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Tim Seymour
Well, I mean I think there are audience at home would like to know what you think is going on in the world's most famous arena with the Rangers because tough, right? But. But Google's more important tonight and yes they are. I actually think it is warranted not because as we've all just said, it's not that Willow, whoever's naming these chips is going to be a real term dynamic to on Nvidia or amd but it's a reminder where Google sits in the middle of some really exciting tech verticals. And then as the beard note that we prepped some of this with it says, you know, it's the largest advertising company in the world. It is certainly front and center as it relates to search and digital ad and everything in their core business is aok and it's getting bigger and bigger. But then you are in cloud compute, you are in areas where I think Google, you know, you're reminded at 21 times forward in a world where all of their peers are now trading at multiples that are probably 20 to 40% higher than they were five years ago. Google's at the same multiple and it probably should be and it could be higher than some of the others.
- [04:00]
Julie Beal
Do you think that we're giving them a tremendous berth? If this were talking about AI, we'd be saying it was pixie dust, right? I mean think about it. Do you think you're giving them more of a wider. No, I think it's. I think it's great. But I think guys started off the right way. Where are they going to use it? Or your entrance to the show. Where are they going to use it? How are they going to monetize it? I think if this was AI, we would have been saying a host of headwinds towards this right now. So maybe it's not pixie dust but where are they going to monetize and you know who's been at the head of this and who is at the head of AI? IBM was at the head of both. It's outperformed Google on a year to date basis. It's quietly doing everything that everyone else is doing, not in a glitzy fashion. So I think that this run up wasn't too much. That's what you started the show with. I think it was a little too much and I think you start to see a fade.
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Melissa Lee
Or maybe this underscores the fact the value of Google, Julie, for the things that are not in the valuation and this certainly was not in the valuation. I mean this is early. Talk about early stages. Google has a six milestone, six step milestone roadmap for quantum computing. This is milestone number two. So it is very early in the pathway, but it just shows that there is something in its back pocket.
- [05:19]
PJM Representative
Yeah, absolutely. I think this is really much more of a reflection on valuation than being able to handicap when this technology is actually going to be economic. It's so much more about, hey, I have missed out on some of these rallies and these other names. I need confidence that Google isn't going to get completely left in the dust, particularly since a lot of AI chat bots have an existential threat to their search business. And so it's really critical for investors, especially longer term investors, to get confidence that they are going to be still in the mix and that they are working on delivering something that can support and eventually overcome their key search business, which is really where everything hinges.
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Melissa Lee
Is this your favorite Mag 7 stock, Julie?
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PJM Representative
I think so. I think, you know, I think people forget that so much of, you know, the strength that we see in OpenAI really originated at, at Google. And that talent is really pretty critical. So I think it's pretty underappreciated. I think its core business is among the strongest that it's trying to defend. But I do think that it is in the most peril in terms of what can happen with more of these chat bots and more search being done away from them.
- [06:29]
Guy Adami
Yeah, I think that's fair. I mean if you had a rank, just the top two, I think it's Facebook, Google, just in terms of being able to wrap your head around evaluations and you know, the stock moves have backed that up. I mean some of these other names obviously great stories, but some of these other names are trading at excessive multiples to say the least.
- [06:45]
Tim Seymour
Yeah, Tim, I just, I think you, you've had this debate for six months really is AI or maybe it's been a Year has shifted into overdrive where Google sits. And every time there's a challenge to Google. Look, the biggest challenge to Google right now is probably really for the first time and I'm not sure how big of a challenge it is, is on the antitrust side. And so just some of the dynamics that I think we're running into. But it's not that Google is not a leading edge technology company with, you know, it's the greatest incubator in the world. What are you doing to monetize that? You know, what do you put on some of those numbers? I don't know. But all the core businesses, to me they're, they're in the most exciting growth verticals right now. Why wouldn't you want to be in this name at 21 times forward when in fact again, the range around the competitive landscape is probably double that in terms of valuation.
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Melissa Lee
Just distilling what you said before, Grasso, you're choosing IBM over Google? You're choosing IBM over Nvidia?
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Julie Beal
Well, I think Nvidia. Right. So Nvidia's top clients are its top competitors. So that the writing on the wall is there. Not that I don't think it can go higher, but I think that it's probably run its course right now and needs to pull back. Google would I choose IBM? I think IBM has executed poorly, so I would choose to replace the IBM CEO and then get a little bit more growth here. And that seems like the year of replacing CEOs. I don't know. I think that they've done a poor job on paper. I think they're better than Google right now. But Google, to Julie's point, really has to show what they're capable of doing. And they have 85% of search. They need another trick.
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Melissa Lee
All right, for more, let's bring in Fast Money friend Gene Munster of Deepwater Asset Management. Gene, I don't know about the septillion stuff and you know, all the zeros. What can this do? Drug discovery and other things. Is this too much to afford Google's market cap today for what this could be in however many years I'm in the camp.
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Ryan Reynolds
I think consistent with what most of the panelists said, which is this is probably too much for today. I agree with Guy that this is more of a validation point for Google's tech. But this, just to put in perspective, they started this Willow project 12 years ago. And so the potential around this being commercialized is probably 10 years away. And so it's a, it's still a long time it does speak. There is a piece where the stock should have been up today out of guess a few percent. Because I think it does speak to Google invested in the right areas for what will be continuing tech acceleration in the decades to come. I mean this is a Google investor is asleep well at night, similar as Waymo is asleep well at night. Business doesn't get a ton of attention. But I think collectively, Melissa, I would have expected the stock to be up a couple percent today, not 5%.
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Guy Adami
Gene, I love when you agree with me, so thank you. I'll ask you this question. And on the back of that, who should be worried about this? I saw in your notes, probably not in video, not AMD yet, but somebody has to be.
- [09:48]
Ryan Reynolds
Yeah, I think, you know, there's some of the other Quantum companies, there's private companies on that side. But I think on the public side, you know, the worries are probably because this is again is so far away. I think the piece that the rest of the Mag 7 needs to be contemplating here and Nvidia needs to be thinking about is just what are they doing to have some sort of position within quantum computing. It is, it's theory right now, but I think you have to pursue that theory similar to when aviation was theory before we got flight. I mean all of these things go from projects from the lab. And so I would say the potential losers are the companies that aren't doing that. And I think Google is standing alone right now with within the Mag 7 in terms of their investments in Quantum.
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Melissa Lee
So you said 10 years away from commercialization and what do you think commercialization could be? What is the field that could benefit the most from quantum computing?
- [10:46]
Ryan Reynolds
I mean it's as simple as, I mean just the peer. You went through the numbers basically going from an eternity to five minutes. I mean it's hard. This is the kind of stuff, it's called superposition. It's hard for me to wrap my mind around the improvements in compute speed. And so I think probably the biggest beneficiary is just everything that's AI. I mean ultimately you have a company like Nvidia. If Quantum moves from theory to actually a production product, they need to have an answer down the road. And so the question what, you know, who's going to be impacted? What's the use cases on these? I think AI is probably front and center. And within AI probably health care is one of the biggest areas, initial areas.
- [11:28]
Melissa Lee
Jean, great to speak with you. Thank you.
- [11:31]
Ryan Reynolds
Thank you.
- [11:31]
Melissa Lee
Gene Munster Deepwater Asset Manager we're just showing the chart of Nvidia. And remember, Nvidia fell yesterday in the back of the news of the China investigation. So it's interesting that it doesn't, you know, it can't catch a bid today. And then we have this interesting supercomputing news.
- [11:45]
Tim Seymour
Well, it certainly this is a trade today about tomorrow. Nvidia arguably could be, you know, yesterday's trade today. I don't know. But but I would look at the semiconductor space. You cannot single out Nvidia. I would look at semis, which today hit another important relative value underperformance to the S and P, which takes you almost all the way back to February of this year, which was when they were going to to the moon. So it's, you know, again, a relative value chart looks a little bit like a reverse head and shoulders on the way down.
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Melissa Lee
We've got some breaking news out of Washington. Megan Cassell has got the latest. Megan? Hey, Melissa.
- [12:19]
Fast Money Announcer
Scott Besant, Trump's pick to be the.
- [12:20]
PJM Representative
Treasury secretary, was on Capitol Hill once.
- [12:22]
Fast Money Announcer
Again today, meeting with senators ahead of his nomination and leaving a meeting with incoming Senate Finance Chair Mike Craip, our Karen James, our producer Karen James caught.
- [12:31]
PJM Representative
Up with him and got a chance to ask him a couple of questions about his priorities and about this idea.
- [12:36]
Fast Money Announcer
Of a shadow Fed chair.
- [12:37]
PJM Representative
Take a listen.
- [12:39]
Steve Liesman
As the president said on Sunday, and I am in complete agreement with him.
- [12:46]
Melissa Lee
That Jake Powell will serve out his.
- [12:48]
Steve Liesman
Terms and leave the building as fed chair on May 26th.
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Fast Money Announcer
Now, this is interesting for what he.
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PJM Representative
Said, but also, Melissa, I would highlight.
- [12:55]
Fast Money Announcer
For what he hasn't said there. He said that essentially they will not be firing Jay Powell before his term.
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PJM Representative
Is up, sort of reiterating or reemphasizing.
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Fast Money Announcer
What President Trump said. President Elect Trump said on Sunday in that interview saying that he had no.
- [13:10]
PJM Representative
Plans to replace Powell. But Besant, of course, is the Trump.
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Fast Money Announcer
Adviser who initially laid out that idea of a shadow Fed chair, saying that he would advocate for nominating someone very.
- [13:19]
PJM Representative
Very early to replace Powell so that.
- [13:21]
Fast Money Announcer
Person could in effect become the one who lays out advice and who the.
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Melissa Lee
Market is listening to rather than Powell.
- [13:27]
PJM Representative
Even while Powell is still in office. Karen said to him there, how do.
- [13:30]
Fast Money Announcer
You feel about a shadow Fed chair? He says that Powell will stay in office until the end of his term, but wasn't completely putting the idea to bed there. So a lot to read into this, Melissa, but at least for now, Powell can think that his job is safe.
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Melissa Lee
All right, Megan, thank you. Megan Costello, a key report inflation report out tomorrow. CPI may interrupt the Fed's rate cut plans. November Consumer Price Index out before the opening bell. Dow Jones expects the number to climb by a tenth of a percent from October. CNBC senior economics reporter Steve Lisman is here on the side in the house.
- [14:02]
Tim Seymour
He's playing live.
- [14:03]
Melissa Lee
Exactly. Sellable blues on cpi. It's a plug, right?
- [14:09]
Steve Liesman
Unsolicited plug.
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Melissa Lee
First of all, I mean, to the comments, he still, he craftily did not really answer.
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Steve Liesman
He didn't say no Shadow Fed exactly.
- [14:19]
Melissa Lee
He just said powell's gonna serve the term, which we knew already.
- [14:22]
Steve Liesman
Well, we didn't know that already. I mean, I guess he kind of ruled out the. Well, we ruled out the idea of maybe replacing him and having a big fight over the idea, which is what the President ruled out. But they had not ruled out the idea that they could appoint this person ahead of time and kind of take some of the. What is it, cut them off at the knees, so to speak, in the sense that if your Shadow Fed chair says something about the future of policy, it removes the forward guidance tool, in a sense from the Fed chair. Now, I don't know if they're going to do that. He was the guy that mentioned it. He did not specifically deny doing that there. And I guess if they get to a point where they're angry at Fed.
- [15:01]
Melissa Lee
Policy, they can do that right back to Fed policy. Is this going to change the trajectory of the Fed in December?
- [15:10]
Steve Liesman
I think it's a very consequential number tomorrow. And for y'all traders around the desk here, I would say, and the next day you got to take the CPI and the PPI together. The market is very good at trading it in some, but in its pieces. So you want to be careful, like if you get a hot CPI but a cool pie, we put them together, we create the PC and that's the thing the Fed cares about. And by the way, that is the expectation sort of that number you read earlier, that 03 fourth one in a row, core CPI. So that's the notion. Guys, do you have that other chart that I made ahead of this conversation here, which is the one with the bar chart? And what you see is kind of interesting story. You can see. No, not that one.
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Tim Seymour
That is a bar chart.
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Steve Liesman
There's a bar chart. The one about is the cpi, the core CPI one. We're having fun here, ladies and gentlemen. Maybe it's not available. It shows the story of High earlier this year, came down in the middle, got everybody excited, was coming down, and now it's kind of back up about halfway. I Don't know if we can do that. Do we have it you're pointing?
- [16:11]
Tim Seymour
Well, I do while we wait for this chart. And I'll defer as soon as it goes up there. But we had small business confidence that came out today through the highest in three and a half years. And they talked about the inflation, the wage components, all they talked about. They basically said that prices are highest that they've been since March and they're probably going higher. It's great that they're confident. Obviously bodes well for small cap and all kinds of things we talk about. But this is another ingredient that says inflation's not coming down, it's going higher.
- [16:35]
Steve Liesman
Well, a couple of things. First of all, be a little careful with the small business nfib. It's a very good leaning group.
- [16:42]
Tim Seymour
Okay.
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Steve Liesman
There's the chart, by the way.
- [16:44]
Guy Adami
Well, there you go.
- [16:45]
Steve Liesman
There's the story. So look at that. It was high before that somebody freaked out those parts on the left there, that everybody got really happy and comfy in the middle there. And now we're like, oh, is inflation stalling here? And that's what's going to add to the conversation. So be a little careful with that. There has been this absolute surge. I think maybe Democrats ought to think about why business leaders are reacting as if a boot was taken off their neck. I think that's not necessarily the best way to run your economic policies in the country. It's not so. And you get that. And that creates this possibility of a surge in business spending and capital spending, and that creates some concern. But the Fed, I don't think Tim, can make policy based on the expectations of people for policies that may or may not be enacted down the road.
- [17:33]
Tim Seymour
Sure.
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Melissa Lee
Okay.
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Steve Liesman
Now, but this is, this is just.
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Tim Seymour
Another ingredient of many that have been in the stew, that inflation isn't getting better. You know, what we hear from companies anecdotally throughout the earnings season was there's, there's price pressures. There's certainly service price. We saw it in the ism and we've heard, we've heard from corporate America.
- [17:51]
Steve Liesman
Okay. Did you see the unit labor costs today?
- [17:53]
Tim Seymour
Of course I did.
- [17:54]
Steve Liesman
Did you see the productivity numbers today? Did they make you smile?
- [17:57]
Tim Seymour
Yeah, well, you know, I'm always happy.
- [17:59]
Steve Liesman
To see you sweat a little less about. Look, if we have high productivity, if we have low unit labor costs, we can run the economy a little hotter without inflationary pressures. Okay. And look, I am getting a lot of commentary from people, especially over this thing that are saying, Steve, you're Out of your mind to think that. I still think they have another quarter of recalibration in them. But now we can go to that four bar chart. The one with four bar.
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Tim Seymour
That was a good chart.
- [18:28]
Steve Liesman
Is Sandy going to hate me after this?
- [18:30]
Guy Adami
Too late.
- [18:31]
Melissa Lee
Maybe he already does.
- [18:32]
Steve Liesman
He may already.
- [18:32]
Melissa Lee
If you said the Fed's rate path chart, then.
- [18:36]
Steve Liesman
Thank you, Melissa. Perhaps afterwards you can write the instructions for me. He said he has nothing but love for me in my ear, but. Okay, so let's talk about. Let's talk about this chart. Let's talk about it. Okay. What we see is that 87. What is it? 84%. 85% number is too far away. 85% number, percentage probability of a cut coming next week. Then everybody thinks they take a pause. Now the thing you have to realize is the next two bars represent the probability of the same quarter point cut. So over the course of March and May, they think another quarter is laid in. So that's 50. Now I have another chart, ladies and gentlemen, which is the December 25th Fed funds futures chart.
- [19:15]
Tim Seymour
Glad he named it.
- [19:16]
Melissa Lee
I know it makes.
- [19:17]
Steve Liesman
How do I do, Melissa?
- [19:20]
Tim Seymour
Makes it easy to find it.
- [19:21]
Steve Liesman
Let's talk about this. This is 372. Let's do the math. That's 28 points to 400 and add another 60. So they think there's another 80 basis points built in between now and next year. We get perhaps 50 by March, and then you're done. So the idea is the Fed does this other quarter and then maybe it does two other quarters over the course of next year. That's where it's kind of a proxy for the terminal rate. But if you go to 26, you get other answers. But that's a good proxy for the terminal rate. What's interesting is from your. From what I think matters to you guys, the market knows all this. The market has internalized all this. It doesn't seem to care all that much. I think that. I did the math. You're up 7. You're up 7.7% at the top from the election. Now you're up. What was the number I just calculated? 5.8%. Yeah, 5.5.9% since the election. You gave back 2 percentage points. So the market seems to be okay with this. Melissa, I think. Are you upset by this?
- [20:22]
Guy Adami
He doesn't look upset.
- [20:24]
Steve Liesman
But do you ever look upset? You always look happy.
- [20:26]
Guy Adami
I'm a happy guy. No, listen. You know, I think Jerome Powell's done a remarkable couple missteps here and there, but that's probably not. It's done a remarkable job. The messaging has been good. I mean, we'll see how we get through this.
- [20:37]
Steve Liesman
I know we got a couple we may have. There's two dissents that I'm looking thinking about Bowman maybe again the Fed governor and now Ms. Hammack, the new Cleveland Fed president. She was a little bit on the fence in the sense that she said I could see another quarter point cut between now and January. So she was like do that quarter either now or in January. So I don't know, you might get a surprise a week from now. In which case I think you do get the extra quarter, though I think they're still recalibrating.
- [21:04]
Melissa Lee
Steve, thank you. Thanks for all the charts.
- [21:06]
Steve Liesman
It was really wonderful to come down here. Thank you.
- [21:09]
Melissa Lee
I didn't really believe that, but we'll.
- [21:11]
Steve Liesman
This doesn't happen when I'm remote. I get the charts up right away.
- [21:14]
Melissa Lee
Coming up feeling today.
- [21:16]
Steve Liesman
I'm not blaming you, just talking about.
- [21:19]
Melissa Lee
Moot boots are made for walking right into the private equity market for you guy. Walgreens boots. Get it? Walgreens Surging reports of a P E deal, what it could mean for the beaten down pharmacy company that is next. Plus Boeing takes off shares leading the Dow as max production goes back online. What it means for delivery numbers and how things look one month after the machine is strike. Don't go anywhere Fast money's back into waiting for dinner. Spice things up with Golden Nugget Online Casino.
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- [23:43]
Melissa Lee
Welcome back to Fast Money. Shares of U.S. steel dropping nearly 22% at its lows after a report that the Biden administration is set to block its acquisition by Japan's Nippon Steel. Nippon saying in reaction we're confident that our proposed partnership is the best path forward to secure the future of US Steel and that we've engaged in good faith to underscore how the transaction will bol bolster American economic and national security by countering the threats posed by China. The White House just issuing a statement saying Biden will continue to see what the CFIUS process yields and that they haven't received any recommendation yet. Shares of U.S. steel down nearly 30% since the deal was first announced almost a year ago. It's amazing that people continue to be surprised at this because it's been talked about so much. But there was sort of a glimmer of hope for some reason that Biden in the 11th hour would actually let the deal go through, save U.S. steel.
- [24:33]
Julie Beal
I think it's a buy on the weakness because if you think about it, what is Trump said he's against the deal as well, but he's going to have tax incentives and tariffs to deal with it. That's going to pop the stock. So all of this is a buying opportunity in my opinion.
- [24:47]
Tim Seymour
It's interesting, you know today when you saw Pasco and some of the other global steel's rally a little bit. And it's not necessarily that the fundamentals in the still sector are that great. In fact, that's really the story here. So, you know, if there is an outside bid where there's some strategic value that's applied to the US Business, you know, it's not in the best interests of shareholders to see this deal not happen. In other words, this deal should happen and it would be voted on by shareholders. But higher powers.
- [25:14]
Melissa Lee
Meantime, shares of Walgreens notching their best day ever on reports of beaten down pharmacy chains exploring a deal with private equity firm Sycamore Partners. Walgreens had previously tried to go public in 2019 when it was worth $55 billion. It closed today with a market value of just over $9 billion. What a decline. I mean, they've got to stabilize the retail pharmacy business, which has been a car wreck disaster.
- [25:35]
Guy Adami
Now you want to play a little stock market here because this is a name, the trade, it was a 32 year low, I think, in the name recently, and obviously you got the bounce today on probably five times normal volume. The question you have to ask yourself, you know, you want to play it for another 25 or 30%, which doesn't mean it's fixed by any stretch, but you might be able to get that based on this news and based on probably the short interest. So again, not fixed, but the stock might be a buy here in a pretty major way.
- [26:01]
Melissa Lee
Julie, what do you think?
- [26:02]
PJM Representative
Yeah, it's a really difficult situation. It's, you know, the amount of value destruction that you've seen here is pretty substantial. And you know, Sycamore, being a great firm, has not typically done deals quite this large. And it's, it's a big ship that it has to turn around. I do think there will be continued interest from other parties because it's true, you can split this business off and it probably has as some of the parts that's compelling. So I think it's definitely in play. But the fundamentals of this are really tough. It's probably going to limit the buying pool.
- [26:33]
Tim Seymour
This is a classic private equity dynamic because there's a balance sheet here that's unsustainable. There's a debt problem that if you're an equity player, you're like, oh, wow, there's really an opportunity. It's oversold. You know, they're going to fix their business. There's a debt overhang that's a big problem here. And I think this is exactly where private equity will work some magic.
- [26:49]
Melissa Lee
All right, coming up, Boeing back out of the company, restarting production of its 737 Max planes one month after the end of its machinist strike. Will the news jumpstart the stock further? And a violent outburst from the UNH CEO murder suspect as he's brought into Pennsylvania court. The latest details on that and how this is all casting a spotlight on other players in the health insurance space. You're watching FAST MONEY live from the NASDAQ market site in Times Square. Back right after.
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Melissa Lee
Detail. Welcome back to Fast Money. Stocks in the red as investors awaited tomorrow's inflation data. The Dow falling more than 150 points now on a four day losing streak. The S and P and Nasdaq also down about a quarter of a percent. But the Nasdaq did hit a new Intraday record early in the session. A federal judge blocking supermarket giant Kroger's $25 billion merger with Albertson siding with the FTC. The agency arguing that the merger would eliminate competition in the industry, leading to higher prices for shoppers and reduce bargaining leverage for unionized workers. Boeing popping four and a half percent today on news that the company restarted production of its 737 Max a month after the end of its machinist strike. The company also saying it delivered 13 planes in November, down from 14 in October when the bulk of the strike occurred. And GM shares jumping after hours following the automaker announcing its decision to no longer fund its robo taxi effort and instead focus its autonomous and assisted driving development on personal vehicles. And S and P just downgrading intel to triple B rating due to a slow recovery in its business. That is the lowest investment grade rating from the credit agency. Hmm.
- [29:28]
Julie Beal
A lot of roads there.
- [29:29]
Melissa Lee
Yeah. What do you want to trade?
- [29:31]
Tim Seymour
I'll trade Boeing. And let's be clear, you know, 13 is nothing to do cartwheels on on deliveries, but down from 56 year over year nine max. I think down from something in the 40s it's a case where really to believe in Boeing, you have to believe in some beginning of a normalization process in terms of production. Because if they are anywhere near, if they are three quarters of where they were on last year's production schedule, they're going to be cash flow positive. That's the story. This is a company, it's not about is it cheap? There's no profitability right now. So I mean you can depend how you want to look at this one. But I am of the view that this is a story you want to own here. And I've said that for a year.
- [30:08]
Melissa Lee
And been wrong and you've said that more recently, Guy.
- [30:11]
Guy Adami
I have. And it's been wrong for months and months. But since that secondary, a few months and a half, 143, I mean you've had this stealth rally that's basically been very quiet and all of a sudden you find you wake up, it's $164 stock. And you know, I think it's right up against 150 day moving average, which is somewhat problematic. With that said, you know, you get through it and we could be talking about Boeing in the mid-180s very easily by early next year. And nothing has effectively changed other than the stock price. So I think for a while at least the bad news is out of the way.
- [30:42]
Melissa Lee
GM getting rid of cruise or stopping the spending, that's $1 billion once the plan is completed in money that it won't spend on Cruise, which is a good thing.
- [30:51]
Julie Beal
It's a good thing. And GM has actually been one of the shining spots within the automotive motive industry. Everyone compares this to this massive run that Tesla had, but you only really have to compare it to Ford. And I'd rather GM than Ford. But also when you look at Intel, I think Julie said some of the parts in her earlier stock. Why isn't Intel a sum of the parts story? I know that we've tried to make it that CEO gone. Well, there's got to be a bid in this at some point, right? I mean, I feel like I'm holding my breath.
- [31:22]
Melissa Lee
You look at the chart, think everything.
- [31:25]
Julie Beal
Look at the chart. But I will tell you one little thing. I know you want to go to Julie. Boeing, when you look at that, what do you think Doge is going to go, go to town with Boeing, talk about the inefficiencies and the contracts. 37% of their income is from government revenue. They're going to go to that with.
- [31:40]
Melissa Lee
A hacksaw coming up. Murder Suspect Luigi Mangione yelling at reporters ahead of his extradition hearing. The latest details on his motives and how the entire health insurance space could be under scrutiny. Fast money is back in two. Welcome back to fast new developments in the murder of the United Healthcare CEO. You're looking at an agitated Luigi Mangione being forced into a Pennsylvania courthouse while yelling at TV cameras. The 26 year old suspect is facing extradition to New York where he faces a murder charge in the killing of Brian Thompson. Bertha Coombs is here with the very latest on what we know and the growing backlash for those involved in the capture of the alleged murderer. Bertha?
- [32:27]
PJM Representative
That's right, Melissa. 26 year old Luigi Mangione remains in custody in Pennsylvania tonight after a judge in Pennsylvania again denied bail following the preliminary extradition hearing. His public defender told the court that Mangione is contesting extradition. Manhattan district attorney's office says it will seek what's known as a governor's warrant to push for that extradition. That followed an outburst from Mangione ahead of the hearing as he was escorted in.
- [32:54]
Tim Seymour
Completely out of touch and insult the.
- [32:57]
Melissa Lee
Intelligence of the American people.
- [33:01]
PJM Representative
He was saying there that it's completely unjust. Now, New York officials have not formally shared a motive. Senior law enforcement officials tell NBC News that Mangione had a three page manifesto with him when he was arrested yesterday at a McDonald's in Altoona, Pennsylvania in which he decried large corporations, the healthcare industry and United Healthcare in particular with statements including quote, I do apologize for any strife or traumas, but it had to be done. Frankly, these parasites simply had it coming. And a note saying he acted alone. Quote to the feds, I'll keep this short because I do respect what you do for our country. To save you a lengthy investigation, I state plainly that I wasn't working with anyone, unquote. Officials are concerned that we could see others act out given the backlash that we've seen against employees at the McDonald's where they had called about a tip about Mangione's location yesterday. And the Altoona police say the officers were arrested. Mangione and the department itself have been receiving threats since yesterday as well as a deputy police chief says this is quote, a very polarized case. Melissa. It's really touched a nerve for many people who are frustrated with the US health system and with claims denials that often frustrate so many as they're trying to get care for themselves and their loved ones.
- [34:25]
Melissa Lee
Yeah, I think everybody's got a health care story, Bertha. And that's that's what's really behind the animus here. Bertha, thank you for covering the story. Bertha coombs, let's get more now with John Ransom, managing director and director of health care research at Raymond James. John, great to have you with us. You say that, you know, the health care industry has always been unpopular, that UnitedHealthcare in particular has worked through these periods in the past. But wouldn't you say that this is a little bit different? I mean, we haven't been through a period where the CEO of a health care unit gets assassinated in the streets of Manhattan and people are cheering.
- [34:58]
Tim Seymour
Sure.
- [34:58]
Mint Mobile Representative
I mean, the old saying that politics is downstream of culture, you know, the culture right now would paint these bullseye on these guys, use a bad metaphor. I think the uncertainty, if you look at the Gallup polls, it's gotten more unpopular among Republicans. If you look at the polling, it's kind of fascinating. So we don't know who's going to be occupying these seats next year in Congress. But yeah, this industry, particularly the Medicare Advantage guys, were beat up pretty badly by the Biden administration. Investors think the incoming Trump administration will be a little kinder. But I think the bet is a little bit hard to make because you don't know who's going to be occupying these seats. And also you just, you do have a more populous party and the industry is not as popular as it used to be.
- [35:44]
Melissa Lee
Yeah. What is the biggest risk to this industry? I mean, part of it is the lack of transparency. So to the extent that there could be forced transparency in the form of some sort of regulation, would publishing denial rates be that much that detrimental to the industry? As you sort of take a look at the risks, what are those risks, in your view?
- [36:06]
Mint Mobile Representative
Well, what's interesting, let's take cvs. You had an eloquent money manager on a couple of weeks ago. CVS is medical loss ratio in their Medicare Advantage book is up from about 85% to over 95%. So CVS is actually spending 10 points more and they're losing their shirt. They're losing billions of dollars in Medicare Advantage. So if you look at the business risk, it's the fact that medical costs have exploded. Now, of course, that hasn't bought the industry any goodwill. But the truth is these insurance companies that people don't like are losing their shirts on Medicare Advantage and also on some CVS also is losing $1 billion in the exchanges. So the risk is that that's the risk. It's the medical loss ratio. I think the legislative Risk. And this is where I think there's a debate is have we overused AI for things like prior authorization? Can we do things to make appeals processes more transparent? Could companies be easier to work with? Absolutely. And that's the thing, I think, where there could be some meeting of the minds. I mean, when you get a claim denied, I can't think of anybody who's come away from that saying, oh, gosh, when I appeal, that was just a wonderful process. And I think lastly, AMA is on this warpath on prior authorization for prescriptions. And that used to be in place for very expensive drugs, but again, this trend has increased. Prior authorization has grown and grown. You know, I talked to a guy yesterday, said, yeah, every one of my prescriptions is prior auth and has to be appealed. So I think that friction and maybe the overuse of AI. United bought a company called Nava Health and I think replaced some of the human engineering with some robotic engineering. And that's where I think there should be a healthy debate, because maybe that has gotten out of control.
- [37:52]
Melissa Lee
So there is an aspect of AI gone wrong. I mean, we, you know, investors are touting as the great growth trade right on. On one side of the ledger in the markets. And then here we are in an example of an industry that has embraced, in theory, it should reduce costs tremendously because of all the paperwork. And yet it's backfired in this case. Do you think the companies are willing to roll back?
- [38:12]
Mint Mobile Representative
Let's think about good. I. Let's say I'm a United customer and they look at my. I got discharged from the ER for 2A. At 2am I miss a prescription. I've got a police record. I've got something on my file. They should say, let's get John some help. You know, predictive analytics. Get John some help that's using large language models to look across all these data sets, predict where people need help, intervene before they crash. That's a great example of where AI should be. But yet, did we overdo it on prior off? That's the debate. I'm not saying we did, but I think that's where that's where we need to. Where we need to have a debate.
- [38:48]
Melissa Lee
John, great to speak with you. Thank you.
- [38:50]
Mint Mobile Representative
All right, thank you, John.
- [38:51]
Melissa Lee
Ransom, what do you think?
- [38:53]
Guy Adami
Well, John's right. I mean, the good AI is right, but we're light years away from that. We're on the other side of that spectrum. It's like, how can we basically ding this claim and not fill this? So that's the problem. That's why people are upset. It doesn't justify anything, by the way. But with that said, I mean, unh, despite the fact that competitors have had horrible stock moves, it hangs in there like a champ. So you sell this one at your own risk. I think here.
- [39:17]
Melissa Lee
Mel? Yeah, Julie?
- [39:19]
PJM Representative
Yeah, I think it's really much more a reflection, not just of claims, but so much medical debt is really, you know, putting people under and into bankruptcy. That's the number one reason for bankruptcies is medical debt. And I think it's just a reflection of how broken the system is in terms of we pay more for our health, come for our health care, and we have worse outcomes. I really think it's a broader reflection than just claims processing. But yes, I agree, this is a great example of where AI maybe isn't perfect.
- [39:47]
Melissa Lee
Coming up, it's a bird, it's a plane, it's a drone. Dropping off some Amazon packages how the E commerce giant is hitting the skies once again. And if the program can finally deliver, that's next. Plus how options traders are handling the drop in HIMS shares, down nearly 6% in today's session. So what is behind that? We'll discuss that when Fast Money returns. Welcome back to Fast Money. Amazon shares failing to lift off today. It comes as the company is officially kicking off its drone delivery program in Arizona. The E Commerce Titan saying its new fleet of drones is 40% quieter than the older versions, which saw some pushback in other test sites like College Station, Texas. Our Kate Rooney is live in Phoenix with the very latest. Hey, Kate.
- [40:35]
Fast Money Announcer
Hi, Melissa. So Amazon first started publicly talking about this drone project about a decade ago. They are officially now using drones to deliver packages around the Phoenix metro area. These are meant for smaller items. Think of things that fit into a shoebox. They have to weigh five pounds or less and then they drop from a drone. It's about 12ft in the air. You pay $10 or so extra for a drone delivery to get some of these items faster. There have been some changes in design over the years. They did cut the noise, they say, by 40%, doubled the range and then through testing have figured out some things. They talked about how to avoid dogs, which you can imagine, like to chase these drones. Amazon executive David Carbon, who spent nearly two decades at Boeing, tells me managing airspace has really been one of the biggest challenges. They did get FAA approval in October for the latest MK30 drones. And the site here is integrated directly with one of those sub same day fulfillment centers which is right nearby. And that's how they plan to scale quickly, I'm told they're going to be rolling out into new cities next year. The goal, they say it's 500 million deliveries per year within 30 minutes or less. So far they've only done thousands of deliveries, they say, and there's a lot more competition out there. Walmart is among those rolling out their own drones in the area. Back to you, Mel.
- [41:49]
Melissa Lee
Kate, those drones look big. I mean, how much can they actually carry in one go?
- [41:55]
Fast Money Announcer
So it's one box. It's got to be smaller than a shoebox. So these are things you need immediately. They use the example of say you're cooking and you forgot an onion and so it's those small things. Helping Healthcare is really popular. We saw a Jenga box, the game get delivered. So they're not the bulk items. It's sort of the last minute item. And they talked about this really not being right for everything. Not everything is going to be delivered through a drone, but it is that sort of last minute thing. They hope at some point that it's kind of on par pricing wise with trucking. But there's some metro areas too, you can imagine it's actually easier, the network is set up better to have trucks out there, whereas more rural areas and even some of the suburbs here might actually work for a drone. But you also kind of need a yard. You need a sort of landing pad where you can have a box drop down. This would be really hard to do in a major city.
- [42:39]
Melissa Lee
And you gotta hope that you don't have a pet or small children underneath the box.
- [42:44]
Fast Money Announcer
That was one of the biggest things the dogs, they said, actually the engineers that thought of everything and apparently none of them were dog owners because when they went out to actually test in College Station, the dog thing kept coming up again and again. So they had to figure out ways that they could hover without landing if there was a dog and kind of abort the mission and go back. But they say actually not landing is pretty common because you could have a kid who runs out. Safety is a huge headline risk. If there were some sort of issue you could imagine that would really set this program back in a big way.
- [43:14]
Melissa Lee
Kate. Thanks. Kate Rooney. Yeah, safety. But you can get your Jenga right away.
- [43:19]
Tim Seymour
You got to really want to have an urge to play Jenga guy.
- [43:22]
Melissa Lee
I know there's going to be a Jenga emergency.
- [43:25]
Julie Beal
You really mean that? You go to Uber. You go to Uber delivery if it only holds £5 right now. Right?
- [43:31]
Melissa Lee
So, so you can't get a really big Jenga set.
- [43:33]
Tim Seymour
You never, never played out so it.
- [43:38]
Melissa Lee
Doesn'T collapse and then you say Jenga.
- [43:40]
Guy Adami
When you screw it up.
- [43:41]
Steve Liesman
Sure.
- [43:42]
Melissa Lee
I don't know how that works.
- [43:43]
Guy Adami
Jenga.
- [43:46]
Melissa Lee
A big drop in hands as traders. A brace for major court ruling next week. What the decision could mean for the company and how the options fits are positioning ahead of it. More fast Money into Welcome back to Fast Money. Shares of hims and hers falling today as investors anxiously await an update on the FDA's reevaluation of its decision to take Eli Lilly's Tirzepatide off the shortage list. That update expected next week could have a major impact on the effect on the ability of the compounder to actually make those compounded GLP ones and that would hurt its business. Options traders are betting that the ruling may not go in himss favor. Mike Koh's got the action. Mike, what are you seeing? We see very high implied volatility. Big moves anticipated in himss by the end of next week. We see very high implied volatility there. Moves of more than 16% are implied.
- [44:40]
Julie Beal
And we saw a lot of put activity.
- [44:42]
Melissa Lee
Actually it was the 12-27-29 strike puts.
- [44:45]
PJM Representative
That saw the most opening activity.
- [44:47]
Melissa Lee
Actually purchases of more than 3,300 of.
- [44:50]
Julie Beal
Those took place over a 20 minute.
- [44:52]
PJM Representative
Span between 1:40 and 2pm this afternoon.
- [44:55]
Melissa Lee
Buyers of those are obviously betting that the decision could be unfavorable and that the stocks decline that we saw today could continue. All right. You know, we've seen this roller coaster of the hims and her stock every single time there's like a little blip of the possibility that it might not be able to compound. It's so fragile, that business model.
- [45:14]
Tim Seymour
But at some point it's an inevitability, isn't it? I mean based upon what we're expecting from these drug companies and the ramp and everything that we're hearing from them. This was an eight dollar stock at the start of this year. So I mean if I'm an option player, depending, I'm not sure I want to buy the long term volume which is very expensive. But I think it's going to happen.
- [45:34]
Guy Adami
15 to 35 basically in a heartbeat from I think late August until now. I mean I think these are the right strike. I mean 25 is a 50% retracement of that. They may be a little expensive but you get that volume will kick in for you if it starts to move to the downside.
- [45:48]
Julie Beal
Yeah, we've got a short interest of 15%. It's up 246% year to date to both of the both of my panelists panelists on the side of it right now. So it doesn't doesn't need doesn't need that much to send the stock higher.
- [46:02]
Tim Seymour
I've been doing this 18 years not.
- [46:04]
Melissa Lee
Yet if we make in January of next final trades.
- [46:09]
Tim Seymour
Sorry.
- [46:21]
Melissa Lee
Time for the final trade.
- [46:23]
PJM Representative
Julie Beal Notice some insider buying on a name I already like Le Match something to pay attention to Tim Willow.
- [46:31]
Tim Seymour
Or no Willow I like Google. Whether it's the value, whether it's the growth it's giving you stay there.
- [46:38]
Julie Beal
Stephen IBM at the forefront of quantum computing and AI. Get an activist in there IBM guy.
- [46:45]
Guy Adami
I think Willow is the name of Michael Corinthos wife in General Hospital. Not a good person as it turns out.
- [46:53]
Melissa Lee
If you've been watching GH really strange.
- [46:55]
Tim Seymour
Book current GH or is this current ghost? It's been 30 years for me.
- [47:01]
Melissa Lee
Luke and Laura, do you have a trade please?
- [47:03]
Guy Adami
Gilead. Look at the Gilead dude.
- [47:06]
Melissa Lee
Mad money starts right now.
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PJM Representative
All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of cnbc, NBC Universal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium.
- [47:23]
Melissa Lee
You should not treat any opinion expressed.
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PJM Representative
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.
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Melissa Lee
Warrant its completeness or accuracy and it.
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PJM Representative
Should not be relied upon as such. To view the full Fast Money disclaimer, please visit cnbc.com fastmoneydisclaimer it's time to.
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