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CNBC's "Fast Money"
Is the Tech Slump Here to Stay?… And Opportunities Outside of Software 6/26/26
00:50:35
A rough week for Big Tech as investors shy away from AI and memory stocks. Deepwater Asset Management’s Gene Munster lays out why the AI trade may not be dead and how investors can navigate the tech sell-off. Then, why investors might find better returns outside of the software trade in lower-middle-market businesses. Plus, the next move in biotech after a big week, SpaceX falls back down to earth, and if Nike can run past its rough year when results cross the wires next week. Fast Money Disclaimer
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- [00:02]
Mazda Narrator
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Courtney Garcia
At Edward Jones, we believe rich isn't about having life all figured out. It's opening yourself to all the possibilities. That's why your dedicated financial advisor provides long term planning built around you, meeting you where you are and helping you get closer to where you want to be. So no matter where you're starting from, you can move forward with confidence. The key to being rich is knowing what counts. Let's find your rich Edward Jones member
- [00:59]
Frank Holland
SIPC live for the NASDAQ market site in the heart of Times Square in New York City. This is fast money and here's what's on tap tonight. Tech's tough week. The Nasdaq down five days in a row. We're going to talk with one tech investor who thinks a drawdown from here is imminent. And no school like the old school where private market investors are finding some big opportunity in some old economy companies. Plus the next move in biotech. After a blowout week, SpaceX, it falls out of orbit. And can Nike regain its footing after a soulless year? So far, options traders are setting up ahead of those results. I am Frank Holland in for Melissa Lee, coming to you live from Studio B at the nasdaq. On the desk tonight we have Tim Seymour, Courtney Garcia, Steve Grasso and Mike Koh. We start off with tech's week to forget the Nasdaq, writing a five day losing streak into the weekend, its longest downstretch since all the way back in January. And bank of America's Mike Hartnett noting the tech sector posted outflows of more than $9 billion in the last week, the first time that has happened since March. And that's just a huge reversal from the previous week when tech saw an inflow of $19 billion, actually more than 19. All this is the trade. It just kind of cools off and investors rotate into other parts of the market. So the question now, do we think the broadening trade is truly taking hold? Tim, we're going to kick things off with you. What do you think?
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Tim Seymour
Well, first of all, Frank, great to have you on this Friday. I do think at least the ingredients for market broadening are there. We have at least lower yields on the week, we have lower oil, we have lower commodity prices, and this has been very good for not just industrials and transports, but I mean, we've seen certain parts of the staples sector really respond. No question, we've seen equal weighted S and P respond and in fact extending its lead on the S and P year to date. So I think that's clear. I think we've seen the underperformance of the Mag 7. We're going to talk more about that at some point. Think that sets up quite nicely. But to me, this is a story about the week that health care was front and center, industrials were front and center. It's less to me about the angst that we have. There's no question markets have been volatile since the Fed chair changed and that shouldn't be a huge surprise because I think we still are not entirely sure where this Fed is leaning.
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Frank Holland
Yeah, you know, a lot of volatility since the new Fed chair. But in all fairness, also yields have declined double digits since Kevin Warsh became the Fed chair. So a couple of factors there. You kind of talked about the angst. Courtney, I'm going to come over to you this week. Max seven down more than 5%. A lot of hand wringing when it comes to that. And also a lot of volatility in Space X, which was supposed to be the IPO that just reinfused the market.
- [03:30]
Courtney Garcia
It was. And I think when you look at it, you take a look at those headlines, but then take a look at the equal weight S&P 500 was actually doing very well this, this week. And that's because people are broadening out, they're looking to the other areas of the market. And I don't think this is necessarily the end of AI, but I think realistically people are rotating out of that because you're just looking at these billions of dollars that are getting spent on AI and there is no near term time frame of when this is going to become profitable for those companies. So they're starting to look at the other areas rather than the spenders. And I think that's probably going to continue. So I don't want to get out of AI, but I do think you're going to continue to see this rotation happen. You want to play that? Absolutely.
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Steve Grasso
I think, I think it's interesting. Sorry.
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Frank Holland
No, go ahead.
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Steve Grasso
So I think it's interesting the way you pose that with, with rates coming down because with WAR taking a pseudo hawk stance, or maybe not even pseudo, maybe a hawkish stance. We've seen you would think rates would rise, right? We saw that with Powell, where Powell cut rates back in. Remember that September 2024 rates actually rose on on his cut. Now we're talking higher rates and rates are falling. 32% of the Russell is built on floating rate debt. 6% of the S and P is built on floating rate debt. So your original case was can the broadening out continue to happen? And I think you can for that reason. Oil has come down, rates have come down. Whatever shock was going to be in rates for the Russell is compensated with lower oil prices. And maybe those rate cuts, Frank, are not off the table as we wrote them off pretty recently. Maybe we'll either see a stable rate environment or a cut or maybe two in the next couple of months.
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Frank Holland
All right, Mike, I want to come over to you. Speaking of the equal weight is actually doubling the S and P market cap weight over the last two months. And during that time we've seen things like industrials raise rise about 5%, financials up about 4 and a half percent. What's your take on this broadening?
- [05:24]
Mike Koh
Yeah, well, I think broadening is really justified if you take a look at what's been going on in the tech trade. One of the things that we've really seen is multiple expansion. And not just a multiple expansion based on trailing earnings, but actually more multiple expansion based on forward earnings, which is kind of interesting when you think about companies like Micron Technologies, for example. That was obviously the big earnings result this week. The reason is that generally for cyclical companies, they are going to see the lowest forward multiples at the top of the cycle and the highest multiples at the bottom of the cycle as investors are forecasting what's going to be coming next. To see both the multiple and the expectations rising simultaneously is a little bit frothy. But if you take a look at some of the older industrial types of companies that you just mentioned, if you take a look at say The Dow Jones US 100 Dividend Index, this is a basket of stocks that actually has seen no multiple expansion, no meaningful multiple expansion. Now for several years, of course they have had revenue increases, they've had earnings increases, so the index is somewhat higher, but the multiple isn't. And you know, for people who are looking for value, there is still some to be found at sub 15 times forward earnings.
- [06:30]
Frank Holland
All right, we're going to get much more talk much more about the memory stock trade in just a minute. But Tim, I want to come over to you. When we see chips moving lower and big cap Mega cap tech moving lower, specifically the hyperscalers. Is that at all concerning? Because what's generally good for the chips potentially could be bad for the hyperscalers, just costs going up. But when both are going down at the same time, is that a sign of concern or just a real serious sentiment shift?
- [06:54]
Tim Seymour
If you want market leadership, there's no question that you need to see the semis outperforming the broader NASDAQ 100 and certainly the S and P. I think we've largely had that for three years and I'm not sure we're getting that far away from it. The hyperscaler relative outperformance ended last summer. So, you know, to me it's a case where I actually think we're, we're going through a difficult period for megacap Tech. And again, I think ultimately it's an opportunity. I don't see this, this leadership changing. But if we lost it. Yeah, I mean, I think looking at things over a couple of weeks is not what really concerns.
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Frank Holland
All right, we're going to turn back to Tech now. Mag 7 stocks are up about a percent today, but the group is slumping 12% so far this month with just two trading days left. The weakness comes with earnings season just a few weeks away. With that, want to bring in Gene Munster, managing partner, Deepwater Asset Management. Gene, great to have you back.
- [07:50]
Gene Munster
Hi, Frank.
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Frank Holland
All right, so Jeanne, you saying this is kind of much to do about nothing when we're looking at the weakness of the tech trade and the AI trade, You're going all the way back to the dot com era. You say between 1995 and 2000, there were 10 pullbacks of about 10%. And just for context, in the era you said is about four. Okay, so you're saying it's no sign of concern, but what about all those companies that turned out to not really be viable during the dot com era? Are we going to see something similar when it comes to that?
- [08:15]
Gene Munster
Right now, I think it's much different just given the context of these companies, the kind of revenue that they have. I mean, undoubtedly there'll be some washout. But for the vast majority, these companies that we're talking about today will have at the seat at the table kind of down the road. And I think maybe kind of that big picture going back. And I agree with your comments about kind of some of the fluctuations we saw in the market. That's a tell. When we start to see the market getting more fidgety, we've seen more up and down 3% days recently, which is a tell that this is usually a sign that we're due for these kind of 10% pullbacks. We don't haven't had one of those yet. So I just to be clear, I think we between now and when we get through the June earnings season, so call it five weeks from now, I believe that we will have kind of a pullback in the Nasdaq. I think that, you know, that comment, that cautionary comment masks what I still believe, which is when we think about the broader AI conversation that we've been having today, I'm in the camp that we're still very early. I think we're still in the second inning which seems out of touch with reality. And when I say second inning, I'm not talking about just the rollout and the usage of AI. I'm talking about the wealth creation piece of this and that's just how early we are. So yes, we need to learn from the past. But I think what we are seeing today, there are some very distinct differences, including these companies are much more solid today than they were 25 years ago.
- [09:40]
Frank Holland
What's the catalyst for this pullback that you're saying could be coming up? Is it weaker than expected earnings? Because you mentioned earnings season is coming up. The Mag 7 are expected to be really drivers of earnings going ahead. And also want to talk about two other areas. Cybersecurity actually positive on the week. Software actually only down 1%. So certainly not as impacted as other parts of the tech trade.
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Gene Munster
Well, the catalyst is just the big number as we've seen growth in for example cloud go from for Google Cloud from 34 to 50 to 60% growth. So it's just those big numbers, Frank. I think they're hard to get for investors to really capture their head on. So I think that the fundamentals are going to be great. I have some concern just about the sustainability of investors appetite around this. I think that's kind of the key. So again I think that the June numbers are really going to come through in spades. But ultimately the key question is will investors underwrite those? And when it comes to the underwriting piece, it's sustainability question. And so when we keep having these big numbers like we have with Micron, it of course begs the question what's the next year look like? And this is kind of the narrative that's going to influence how we think about the mag 7 in earnings a month from now. So again, let's look at micron for example, 370% growth in the May quarter, they got to do 340% growth in the August quarter. Next year, the street's looking for 60% growth. And that dynamic, we're going to see these incredible numbers once again with the big companies a month from now. But my biggest concern, the catalyst, the negative catalyst, is just simply the law of large numbers continues to nag these stocks. I just want to put one quick, finer point on that, Frank, is that over the past three months, the MAG7 has been down 7%. The NASDAQ has been down 1%. During that three month period, the revenue for the MAG7 has gone up by 3%. So we're seeing multiple compression numbers are going up, the stocks are going down. That's a sign that this law of large numbers, and I think that ultimately is the biggest risk to the market right now. Which begs the question, how do you get around that if the numbers just keep getting bigger and bigger?
- [11:46]
Steve Grasso
So, Gene, you touched on where I wanted to go. So earnings usually comes to the rescue for this group. So if you start to see the tangible numbers, I hear the large number issue that you're worried about. My issue is they're depleting free cash flow. They're raising money instead of spending their own. Does that mean the story is a little extended to you?
- [12:07]
Gene Munster
Well, on the raising the numbers, I think there's something below that. There's a question that I've been asking, which is what's really going on here about them raising money, about using this free cash flow? What's going on is these companies are increasingly convicted that they need to have the brain of AI, the hardware of AI be bigger than what they thought 3, 6 and 12 months ago, and they're willing to invest that. So for my perspective, it's less about what the free cash flow is this year or next year, and more about does, do these companies, does their leadership have, I mean, are they competent? Do they understand about ultimately the power of what they're building? And if you believe that's the case, that they are rational and competent in terms of understanding where the world's going, then all this investment will pay off and we'll see accelerating revenue growth. We will see a return on investment. I'm confident of that. But if your view is that they maybe aren't as confident or competent, then I think this free cash flow question is worth the vein. And again, from my perspective, I think they're making the right call. I think building out the brain of AI over the next few years is going to lead to new applications that will lead to physical AI, personalized AI. I think there's just many ways to go here. But we got to get through some of the noise, these large numbers, and separately some of the noise about what's going to happen with free cash flow.
- [13:28]
Tim Seymour
So, Gene, Tim, therefore I have to go straight to Nvidia and leadership there that, yeah, we can argue is as good as it gets and as visionary as it gets. But this is ground zero for the trade. What are you doing with Nvidia there might their multiple compressions seem like it started even before the rest of the max seven.
- [13:45]
Gene Munster
So, you know, if you want to get a sense around the trading table how you feel about something, you just ask if they own it. And in the case of Nvidia, we sold Nvidia and it was several months ago. We're big believers in terms of how impactful this is going to be, the growth rates. We sold it just because of the law of large numbers. What we started to see is kind of a diminishing appetite from investors to continue to underwrite that growth, in part because of the market cap size. And so I think that's the bottom line with Nvidia, all their success. And next year they're supposed to. The street's looking for 40% growth, down from around 90% this year. So a nice step down. They probably grow at 60% next year. And then the conversation is going to be what about 2028 and then growing at 40% there. And so I think this is a company that continues, a stock that continues to go higher. But from my perspective, there's other ways to play, other ways to invest in AI beyond Nvidia.
- [14:42]
Frank Holland
All right, Jim Munster, great to have you here as always. Gene, thank you very much. You, Courtney, I want to come over to you. Just your take on everything. Jean saying basically still has confidence in the trade, expecting pullbacks, though.
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Lindsay (Discover Ad)
Mm.
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Courtney Garcia
And I actually, I completely agree with that. And I think the biggest issue with AI right now is the Capex spend. So Goldman Sachs actually just came out with an estimate. They said that the current spend, about $765 billion on AI CapEx is expected to go up to about $1.6 trillion in 2031. And that's, I think what people are coming to terms with right now. So I think the question is, do you want to be investing the ice spenders or the more picks and shovels of this? Are the companies who are building out the infrastructure for AI because that is going to happen no matter what the demand is absolutely there. So I think it's those energy companies or commodities that come to our building out the data centers. Those are the ones I think you want to look at moving forward.
- [15:29]
Tim Seymour
Yeah.
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Frank Holland
By the way, I talked to Ben Steiner from Goldman. He thinks they're actually making a mistake and actually spending too much. So I think, you know, they're putting out the numbers, but difference of a difference of opinion between you and him. All right, moving on. We got some breaking news out of the Middle East. U.S. central Command conducting strikes against Iran in response to the attack on a commercial ship in the Strait of Hormuz. Amen. Jabbers has the latest details.
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Tim Seymour
Frank?
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Eamon Jabbers
That's right. The US Military is back in action against Iran this afternoon. CENTCOM putting out the statement just a short time ago. Here's what they said in par. They say US Aircraft struck Iranian missile and drone storage locations and coastal radar sites after Iran hit the motor vehicle ever lovely on June 25th with one way attack drone. The Singapore flagged cargo ship was exiting the Strait of Hormuz along the Omani coast at the time of Iran's attack. The unwarranted aggression against commercial shipping by the Iranian forces clearly violated the ceasefire. So that's the statement from centcom. What's unclear here, Frank, the wording of this statement suggests that this attack is now over by the United States. But what we don't know for sure is if this is one and done or if this indicates the beginning of sort of a larger campaign against some of those Iranian missile sites that have been used to strike at vessels in the Strait of Hormuz. Obviously, that was the primary bulk of the strategic activity by the US Military during the war itself. Before the cease fire, trying to shut those missile launchers down. They were unable to do it to the point where they could put the Iranians out of business. So this might just be sort of a tit for tat and more or less part of the diplomatic negotiations as a sign that those negotiations have hit something of a rough patch.
- [17:14]
Frank Holland
Frank, back over to you, Eamon Jabbers from dc. Eamon, thank you very much. Steve, I want to turn over to you WTI closing out today's section. Actually session below 70 bucks a barrel. Below that level.
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Steve Grasso
Yeah, that's where we started.
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Tim Seymour
Right.
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Steve Grasso
So before this altercation, before the war started, we were, we were below $70 a barrel. We were in an oversupplied state. We're probably going to return. We are going to turn to an oversupplied state. Saudis are going to pump more. Iraq wants to leave OPEC because it wants to pump more. The problem is with these one off headlines or not one off headlines, these multiple headlines that happen every couple of days can't have fees or tolls being charged through the Strait of Hormuz. And we can't have this constantly going back and forth. But oil didn't spike off this headline. That means to me that the oil markets are pricing in there in backwardation. Means the front months, the forward months, are lower than the front month. I think that the world is seeing $70 a barrel. I think we'll probably go lower than that if we can squash these headlines.
- [18:16]
Frank Holland
All right, Mike, want to come over and get your take?
- [18:19]
Mike Koh
Yeah, no, I'm, I'm with Steve. I mean, the situation that we had coming into all of this was that we were definitely producing as much as, as the world needed. And I think there's something else which is that once we had that shutdown in the Strait of Hormuz, a couple of things were put into stark relief, which is that, you know, energy independence is fairly critical. Alternative mechanisms of getting crude out of the Gulf, other than just going through the strait, is also in focus. And so I think that you have a combination of several things. You have a little bit of demand depression as a result of what's gone on. You have basically a forward look and expectation that the logistics and supply chain is going to improve and a look for alternative sources of energy. All three of those are going to come into focus. And I think that WTI is going to continue to fall.
- [19:02]
Frank Holland
Tim?
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Tim Seymour
Well, you know, 40% move lower in oil off of even where we were mid May and probably closer to 48% off the intraday highs is. It's been extraordinary. It's very hard for me to see, even with supply dynamics being what they are, that we're going to settle back into a pre war state. The key to that statement was violation of cease fire. Whether the administration really wants to press further, it shall be seen. I think we're going to continue to see rockiness out of this. But the market moved on on oil a month ago. Well, before we had cease fire. Yields were also somewhat responsive to a world that was without oil at 120 or 150, let alone. And I, I think that's where we stay.
- [19:49]
Frank Holland
All right, Courtney, want to come over to you. By the way. WTI down more than 25% over the last month. So certainly a decline.
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Courtney Garcia
Absolutely. And I think when you look at this like what to do from an investment standpoint, I think it's great that this is clearly lower. We're back to where we were pre conflict and clearly they're pricing or not pricing in these geopolitical headlines any longer. And I think what that really means is this is specifically good for your foreign investments. Those are some of the biggest beneficiaries when oil prices are lower. So I think this is more of a reason why you want to have some money allocated outside the US if energy prices stay low here.
- [20:18]
Frank Holland
All right, something to watch. All right, coming up here on Fast Money, big weeks for biotech and pharma as those groups close out with some very solid gains. The catalyst on the horizon and how our traders are positioned coming up next. Plus gravity hitting shares of SpaceX as the stock touches its IPO price, the fall out of orbit and where it's headed next. Don't go anywhere. Fast Money back into
- [20:42]
Eamon Jabbers
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- [21:07]
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- [21:34]
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- [21:49]
Kaskali Ad Narrator
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- [22:30]
Lindsay (Kaskali Patient)
Learn more@cascali.com
- [22:35]
Frank Holland
all right. Welcome back to Fast Money. The health care sector is just ripping this week. The best performing sector climbing nearly 7%. Biotech also in a role, the XBI Biotech ETF surging more than 10% in the last five days. Here, here to take us inside the all these moves, all these plays. Who better? CNBC's Angelica Peebles. Angelica, what are we looking at here? Why are we seeing these stocks move so much?
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Angelica Peebles
Hey, Frank. Well, it's funny because just last week on this show we were talking to UBS's Michael Yee about the XBI's record run and it's already even higher from then. The FTF, the ETF, excuse me, now almost 83% over the last year. And AbbVie's nearly $11 billion acquisition of Apogee Therapeutics helped lift biotech's stocks even more broadly this week. Another big gainer was Absai, which announced a $100 million investment from Lilly Moderna. Moderna continued that streak. That Stock up almost 13% today and now it's up 128% on the year ahead of expected phase three data for its personalized cancer vaccine. I talked to Jared Holtz about the moves and he said that he's never seen anything like this and that biotech is just on fire. And pharma also saw large moves this week. Lilly hit a new all time high today and jnj, Bristol and even Pfizer, a stock that's really struggled all higher today. And Holt says that we're seeing a rotation out of tech and into defensive underperforming names. And even though health care has outperformed the S and P the past two months, it still is lagging on the year. So it could take some time to get that fully turned around. But definitely one to watch. Frank.
- [24:03]
Frank Holland
Angelica, thank you very much. Courtney, want to turn over to you one names you left out there. Moderna actually up 5% this week as well. So the sector really surging right now.
- [24:11]
Courtney Garcia
Yeah. And I think this is part of that rotation that we're seeing. I think we just spent the whole beginning of the show talk about is there rotation? This is one of those areas people are looking at. The M and A activity here is huge. You're seeing that there's patent cliffs that a lot of these companies are facing. So they're essentially buying growth and they're looking into these other areas of opportunity and they're waiting for these later stage opportunities which is really going to add to the bottom line. And so I think this is definitely an area you want to look at which has been a laggard but I think this year it's absolutely something that is starting to turn around and I think it has a lot of potential, potential to continue doing so.
- [24:39]
Frank Holland
You know, huge moves from when it comes to biotech. Actually this year the XPI is up over 80% and that's with, you know, very little confidence about rate cuts. Generally the biotech sector is very rate cut sensitive. What do you make of this upside move and how to play it in the second half of the year?
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Steve Grasso
Yes, I would stay with the lower cap names. And even when you look at the XPI which is small cap biotech, the number one holding is a $9 billion company, right? And then it goes 9 billion, 8 billion, 6 billion. These are still huge companies. There's a 270, $275 Billion revenue at risk for the patent cliff. You have to fill that. So we see a handful of companies that are doing it, but they're not
- [25:17]
Gene Munster
going to be able to do it.
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Steve Grasso
They're losing 40% of their revenue in some cases, some cases 30%, some cases 60%. You're going to have to do this with multiple companies, multiple M and A. The market is bracing for an attack, a white hot M and A that we've already seen and that's going to continue.
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Frank Holland
All right, Mike coming over to you by the way. The biotech sector in general also has kind of a friend when it comes to the administration. They've been very vocal about the fact that they want to get more drugs approved on a faster rate. So just your view on the biotech sector?
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Mike Koh
Yeah, no, I think that's a big improvement obviously. Although I think in some sometimes we've seen administration sort of pressure for, you know, hasty approvals. It's appealing in concept, but of course in sort of safety and practicality I don't know that we want to accelerate that too, too. I will say that if I'm looking at health care generally, you know, some of the biggest, the largest cap names, you know, Steve was just talking about the fact that this as a group is relatively small cap, but if you look at something like xlv, which is going to include a lot of big mega cap actually health care names, you're talking about names like UnitedHealth, which is still trading at a huge discount to where it used to be. You know, I don't think you need to chase some of the stuff that has been performing well. Take a look at Moderna. That thing's up 200% off of its late 2025 lows. So I would rather, I think, take the more diversified approach, go into something like xlb. You've got a good mix of both pharma and managed care, things like that, and a reasonable multiple.
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Frank Holland
All right, so a lot of enthusiasm when it comes to health care right now. But we do want to switch gears. We've got more news out of the Middle East. Let's get back to our Eamon jabbers who's in D.C. eamon, what is the latest?
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Eamon Jabbers
Frank, what we've got now is a statement from the IRGC on telegram responding to the US Strikes that we just told you about earlier in the hour. IRGC is saying our naval and air forces succeeded in neutralizing this attack and forced the invading forces to retreat in order to protect Iran's sovereignty over its land and waters. They say they're announcing a counteraction against the attack carried out by the American forces on Syriac Island. They say we emphasize that this aggression will not go unanswered and our response will be swift and decisive at a time and place choosing. They say we warn that any new foolishness will be met with a harsh response that will shatter the invaders illusions in the region. So the US Response to the Iranian attack yesterday now met with an Iranian promise to respond to that attack. So the responses and counter responses seem like they're going to continue into the weekend, Frank, and we'll see where we go from there.
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Frank Holland
Yeah, we certainly will see. Eamon jabers live in D.C. actually, we'll have to see if the oil market does respond to headlines after that one. Thank you very much. All right. Coming up on FAST Money from liftoff to let down SpaceX shares going to the moon and back and bouncing off its IPO price where our traders see that stock headed next. You are watching Fast MONEY live from the NASDAQ market site in Times Square. We're back right after this.
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Mike Koh
There's only one ozempic.
- [28:27]
Tim Seymour
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- [28:51]
Mike Koh
There's only one Ozempic.
- [28:53]
Lindsay (Discover Ad)
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- [29:20]
Lindsay (Kaskali Patient)
in my line of work as an investigator, I'm always looking out for other people. Getting my diagnosis didn't really change that, but it did make me realize that I also need to keep an eye out for myself. So my doctor and I decided to start on Kaskali ribociclib.
- [29:35]
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- [29:50]
Frank Holland
And welcome back to fast money. SpaceX falling out of orbit and returning back to its $150 opening price from its IPO just two weeks ago. The stock did eke out a small gain today. For the week, shares dropped around 16%. Space X was added to the Russell at the close today and soon is expected to join the NASDAQ 100. Steve, you've been nibbling on this one.
- [30:13]
Steve Grasso
Yeah, so? So I had a small allocation like most who got an allocation off the 135 number. So when, when you say where it opened up, there were a lot of retail people who got a chance to bite at that 135 Apple. But when you look at where it went to and where it is now, you have to look at the NASDAQ inclusion, the Russell inclusion. Those are things that are happening right now. How much? 30% of the company or whatever the numbers, I think it's about 30 is going to be in passive hands. Passive hands don't care what the fundamentals say. It just becomes an automatic mechanism where you have to buy. They don't care the price, they have to buy it. NASDAQ entrance will be on July 6th. That closing price is when the passive investors would have to buy. As more shares become unlocked, the higher the weight becomes in the indices. And that's where you're trying to see where this equilibrium is. Supply, demand in the name.
- [31:07]
Frank Holland
All right, Tim, want to come over to you. Do you agree with Grasso's thesis that basically it sounds like you're saying it has a floor basically because there's going to be some force buying.
- [31:14]
Steve Grasso
Yeah, nothing has a floor. I'll just say nothing has a floor. Things can, can travel lower. Right. The gravity always takes things down and we know the history of IPOs.
- [31:23]
Frank Holland
Go ahead. I'm sorry, I don't want to misrepresent you, but I come over to you.
- [31:27]
Tim Seymour
Well, I think the technical dynamics are murky and speculative. And yes, there's no question this will be a heavy weighted stock at some point. We know S and P is going to take some time. I would just get back to the fundamentals and the valuation that going into the ipo, forget where they came at one and three quarter trillion. The idea was that multiple sources and people that were valuing the company had this thing south of a trillion. The sum of the parts dynamic, the three core businesses. The fact that it's kind of a holding company means it should probably trade at a discount to the sum of the parts. Right now it's well above that. So in a world where also there's concern and they've been out there too discussing Capex and you know, ultimately Elon said that's kind of why we're coming to market. We have a lot of growth here. So I just believe you're going to get the stock lower. I don't think it's wrong to build a position here. I think people that didn't get it early and want to nibble here on the way down, that actually feels good because you're probably feeling as if you missed a blow off top. I would encourage the fundamental approach to say let's wait and see where we actually get more clarity on what the valuation is. I think it's overvalued here, but it doesn't mean that it won't be a stock people want to own.
- [32:42]
Frank Holland
Yeah. Certainly no conglomerate discount in this name. All right, coming up, what all what's old is now kind of new. Where our next guest is finding opportunity and all this volatility and why he says it is hiding right in plain sight. The details when Fast Money returns. Welcome back to Fast Money. Stocks closing out the week in the red. The Dow with a small loss today but managing to end this week with a half a percent gain. The S and P and the NASDAQ however, both on five day losing streaks with the NASDAQ down nearly 5% this week. Just adding all that tech pain. Oracle shares falling another 3% today. That stock dropping nearly 20% since Monday and posting its worst weekly performance since all the way back in 2001. Even with a 1 1/2% pullback today, the industrial sector is hovering right around its all time highs, having surged over 17% this year. And as investors grapple with volatility in tech, our next guest sees big opportunities for so called old economy companies that are operating in the private market. Luke Sarsfield, he's the CEO and chairman of Ridgepost Capital. Luke, great to have you here.
- [33:46]
Luke Sarsfield
Thanks so much for having me.
- [33:47]
Frank Holland
Great to be with you. All right, let's talk about this. These old economy companies you're looking at, logistics, industrial services, things like that. So I want to ask you where is the opportunity for. First and foremost, these are very fragmented businesses, generally pretty low barrier to entry with the exception of the rail business and very human centric. So how do you scale up? Is there an AI play here?
- [34:08]
Luke Sarsfield
Well look, that is exactly the opportunity in some ways. And you say it's back. I don't, we don't really think it ever left. This has always been where new enterprises are created. Small and medium sized enterprises are the kind of growth engine of the economy. You're right. It's across areas like manufacturing, infrastructure, logistics, a lot of new founders building new great franchises and we're helping them through providing capital. And ultimately these grow up to be very large companies that drive a lot of economic growth.
- [34:37]
Frank Holland
All right, so is the play here that you acquire these companies and you just put new management in? Do you infuse AI? You didn't answer that the first time. What's the, what's the basically the, the upside to this because generally these are businesses that work in regions. They're not really kind of difficult to scale on a national level. You former Goldman Sachs co head of asset management, it seems like you're looking for some big plays out here, here, right?
- [35:01]
Gene Munster
Yeah.
- [35:01]
Luke Sarsfield
I mean, look, ultimately we want to help these companies grow and scale. And so through the many, you know, financial sponsors that we work with, they bring them into the portfolios. They're generally founder run companies at the start. And we have so many ways we can work with them to help them add value across their portfolio. We can obviously provide advice and services to how they scale their business. We can help them with capital in terms of scaling their business. You made the point about technology. We think there's massive opportunities to really Leverage technology to leverage AI to help scale these businesses. We can professionalize their operating infrastructure and we work with them on that. And when you put that all together, we turn them into really, really effective growth engines and then you can obviously merge them together and create that global scale, that global infrastructure. And that's what we're working with them on.
- [35:52]
Mike Koh
So Luke, when you look at, you
- [35:54]
Steve Grasso
just touched on it. When you look at AI and you look at technology as a whole to blanket over these quote unquote old world companies, that's got to be the low hanging fruit, right? We're all talking about the rotation out of out of the new shiny things to the old things that are bettering themselves. Caterpillar is considered an AI company now. So what's the profile of the company that has the easiest adoption of the technology that really ramps efficiency?
- [36:21]
Luke Sarsfield
Yeah, well, generally to your point, these are founder led companies at the start and oftentimes they've put little to no emphasis on technology. We can help them integrate technology into their business processes. We can help them use technology around customer acquisition and customer insight. That's a really important part of it. We can help them use technology to drive efficiencies in their supply chain and in many other places, businesses. And I would say those are really some of the low hanging fruit that we can help the founder leader entrepreneurs that have founded these enterprises scale those businesses to the next level. It's really leveraging technology across almost the complexity and totality of the value chain.
- [37:04]
Frank Holland
Luke, great to have you here. Thank you very much. Great to come over to you. Just your take on the idea that the quote unquote old economy, and by the way, Luke said it never went anywhere. It's always been there and a lot of innovation happen in there. That's where the opportunities are going forward.
- [37:16]
Courtney Garcia
Yeah, I agree with that. I think that's kind of what we've been talking about this whole show is you're seeing this rotation and I don't think I is at its end, but I do think you want to start to look to these other areas. And I do think where everybody's questioning, okay, if ISE going down, markets are going down, what does that mean for the overall economy? We even saw today like consumer sentiment numbers came out and even though consumer sentiment has been pretty low, the consumer has been holding up really strong. And I think we can't forget that the consumer is really the backbone of the US economy economy. And a lot of those do go into these kind of old economy stocks here. And I think that's why this probably will continue to hold up based on all of the data that we're seeing.
- [37:47]
Frank Holland
Yeah, Mike, I want to come over to you. Luke was talking about manufacturing. If you look at the ism, it's been an expansion for five straight months. Given a lot of bullish signs when it comes to the manufacturing sector.
- [37:57]
Mike Koh
Yeah, and that actually brings up a really interesting point too, because Steve was just mentioning Caterpillar as one of the industrials that sort of become part of the trade. And if you look at the industrials more broadly, you're going to see a bunch of those stocks that have really crushed it over the course of the last 12 to 18 months. And I think the way to play it would actually be to take a look at that sector more broadly, call out the ones that have already essentially won on that trade. And essentially, I think the barbell is to get long the ones that have not performed as well in that space, banking on the idea that these are companies that are ultimately going to end up benefiting from the improvements in productivity you can get from the technology once it's becomes available without necessarily chasing the trade for those industrials that have already done so.
- [38:40]
Frank Holland
All right, Mike, we got a newsletter on GameStop right now. Kate Rooney joins us with the details on that. Kate.
- [38:46]
Kate Rooney
Hey, Frank. So we're just getting an SEC filing from GameStop. In it, the company says that it remains focused on advancing this proposed acquisition of ebay. If you remember back in May, GameStop put in a bid to try to acquire ebay for about $55 billion in terms of valuation. Ryan Cohen, the CEO, has argued that eBay is a turnaround opportunity. They also just put out some quarterly numbers. GameStop says it now expects adjusted EBITDA of more than $600 million for its current fiscal year. That would be up from about $345 million last year. This is according to the AK. They also promised more materials explaining some of the strategic rationale for that eBay deal. EBay, of course, rejected that bid at the time, called it neither credible nor attractive. GameStop nevertheless seems to be saying here that they do plan to continue campaigning to buy ebay back over you.
- [39:39]
Frank Holland
Yeah, really great interview on Squawk Box with Ryan Cohen. I urge everybody to go watch that one. GameStop shows up about 2%.
- [39:46]
Kate Rooney
It's a good one.
- [39:47]
Frank Holland
It was a good one. K. Rooney, thank you very much. All right, coming up, Nike tripped up this year because the sneaker giant pivot when results cross the wires. Next week, options traders are lacing up ahead of that one when FAST Money returns. Welcome back to FAST money. Stocks closing out the week in the red. The Dow with a small loss today but managing to end this week with a half a percent gain. The S and P and the Nasdaq however, both on five day losing streaks with the NASDAQ down nearly 5% this week. Just adding all that tech pain. Oracle shares falling another 3% today. That stock dropping nearly 20% since Monday and posting its worst weekly performance since all the way back in 2001. Even with a 1 1/2% pullback today, the industrial sector is hovering right around its all time highs, having surged over 17% this year. And as investors grapple with volatility in tech, our next guest sees big opportunities for so called old economy companies that are operating in the private market. Luke Sarsfield, he's the CEO and chairman of Ridgepost Capital. Luke, great to have you here.
- [40:51]
Luke Sarsfield
Thanks so much for having me.
- [40:52]
Frank Holland
Great to be with you. All right, let's talk about this. These old economy companies you're looking at, logistics, industrial services, things like that. So I want to ask you where is the opportunity for first and foremost, these are very fragmented businesses, generally pretty low barrier to entry with the exception of the rail business and very human centric. So how do you scale up? Is there an AI play here?
- [41:13]
Luke Sarsfield
Well, look, that is exactly the opportunity in some ways. And you say it's back. I don't, we don't really think it ever left. This has always been where new enterprises are created. Small and medium sized enterprises are the kind of growth engine of the economy. You're right. It's across areas like manufacturing, infrastructure, logistics, a lot of new founders building new great franchises and we're helping them through providing capital. And ultimately these grow up to be very large companies that drive a lot of economic growth.
- [41:42]
Frank Holland
All right, so is the play here that you acquire these companies and you just put new management in? Do you infuse AI? You didn't answer that the first time. What's the basically the upside to this? Because generally these are businesses that work in regions. They're not really kind of difficult to scale on a national level. You former Goldman Sachs co head of asset management, it seems like you're looking for some big plays out here, right?
- [42:06]
Gene Munster
Yeah.
- [42:06]
Luke Sarsfield
I mean, look, ultimately we want to help these companies grow and scale. And so through the many financial sponsors that we work with, they bring them into the portfolios. They're generally founder run companies at the start and we have so many ways we can work with them to Help them add value across their portfolio. We can obviously provide advice and services to how they scale their business. We can help them with capital in terms of scaling their business. You made the point about technology. We think there's massive opportunities to really leverage technology, to leverage AI to help scale these businesses. We can professionalize their operating infrastructure and we work with them on that. And when you put that all together, we turn them into really, really effective growth engines. And then you can obviously merge them together and create that global scale, that global infrastructure. And that's what we're working with them on.
- [42:57]
Steve Grasso
So Luke, when you look at, you just touched on it. When you look at AI and you look at technology as a whole to blanket over these quote unquote old world companies, that's got to be the low hanging fruit, right? We're all talking about the rotation out of, out of the new shiny things to the old things that are bettering themselves. Caterpillar is considered an AI company now. So what's the profile of the company that has the easiest adoption of the technology that really ramps efficiencies?
- [43:25]
Luke Sarsfield
Yeah, well, generally to your point, these are founder led companies at the start and oftentimes they've put little to no emphasis on technology. We can help them integrate technology into their business processes. We can help them use technology around customer acquisition and customer insight. That's a really important part of it. We can help them use technology to drive efficiencies in their supply chain and in many other places. And I would say those are really some of the low hanging fruit that we can help the founder, leader entrepreneurs that have founded these enterprises scale those businesses to the next level. It's really leveraging technology, technology across almost the complexity and totality of the value chain.
- [44:09]
Frank Holland
Luke, great to have you here. Thank you very much. Great to come over to you. Just your take on the idea that the quote unquote old economy and by the way, Luke said it never went anywhere. It's always been there and a lot of innovations happen in there. That's where the opportunities are going forward.
- [44:21]
Courtney Garcia
Yeah, I agree with, I think that's kind of what we've been talking about this whole show is you're seeing this rotation and I don't think AI is at its end, but I do think you want to start to look to these other areas and I do think where everybody's questions questioning, okay, if ISE going down, markets are going down, what does that mean for the overall economy? We even saw today like consumer sentiment numbers came out and even though consumer sentiment has been pretty low. The consumer's been holding up really strong. And I think we can't forget that the consumer is really the backbone of the US Economy. And a lot of those do go into these kind of old economy stocks here. And I think that's why these probably will continue to hold up based on all of the data that we're seeing.
- [44:52]
Frank Holland
Yeah, Mike, I want to come over to you. Luke was talking about manufacturing. If you look at the ism, it's been an expansion for five straight months. Given a lot of bullish signs when it comes to the manufacturing sector.
- [45:02]
Mike Koh
Yeah, and that actually brings up a really interesting point too, because Steve was just mentioning Caterpillar as one of the industrials has sort of become part of the trade. And if you look at the industrials more broadly, you're going to see a bunch of those stocks that have really crushed it over the course of the last 12 to 18 months. And I think the way to play it would actually be to take a look at that sector more broadly. Call out the ones that have already essentially won on that trade. And essentially, I think the barbell is to get long the ones that have as well in that space, banking on the idea that these are companies that are ultimately going to end up benefiting from the improvements in productivity you can get from the technology once it becomes available without necessarily chasing the trade for those industrials that have already done so.
- [45:45]
Frank Holland
All right, Mike, we got a newsletter on GameStop right now. Kate Rooney joins us with the details on that. Kate.
- [45:51]
Kate Rooney
Hey, Frank. So we're just getting an SEC filing from GameStop. In it, the company says that it remains focused on advancing this proposed acquisition of ebay. If you remember back in May, GameStop put in a bid to try to acquire ebay for about $55 billion in terms of valuation. Ryan Cohen, the CEO, has argued that eBay is a turnaround opportunity. They also just put out some quarterly numbers. GameStop says it now expects adjusted EBITDA of more than $600 million for its current fiscal year. That would be up from about $345 million last year. This is according to the AK. They also promised more materials explaining some of the strategic rationale for that eBay deal. EBay, of course, rejected that bid at the time, called it neither credible nor attractive. GameStop nevertheless seems to be saying here that they do plan to continue campaigning to buy ebay. Back over to you.
- [46:44]
Frank Holland
Yeah, really great interview on Squawk Box with Ryan going. I urge everybody to go watch that one. Gamestop shows up about Two for it.
- [46:51]
Kate Rooney
It's a good one.
- [46:51]
Frank Holland
It was a good one.
- [46:52]
Kate Rooney
It was a good one.
- [46:53]
Frank Holland
K. Rooney, thank you very much. All right, coming up, Nike tripped up this year because the sneaker giant pivot when results cross the wires next week. Options traders are lacing up ahead of that one when Fast Money returns. Welcome back to Fast Money. It's been really a rough run for Nike shares so far this year. The sneaker giant falling 36% now trading at its lowest level since back in 2014. And options traders are lacing up for some big moves when results cross the wires on Tuesday. Mike co, what do you say?
- [47:27]
Mike Koh
So right now the options market is implying a move of about 8.5% after they report earnings. And that is substantially higher than the long term average of about 6.6%. That goes back more than a decade. But the reason prices are elevated is because the more recent moves over the last eight quarters have been much, much sharper. More than 10% on average over the last eight reported quarters. You know, the good news, I suppose is that we are starting to see the relationship between call and puts skew increasingly towards the calls. We did see a number of the weekly 45 calls for next week trading. So some people are speculating to the upside. But we also saw a big one by two put spread 40, 30. So there are some that think that there could be a little bit more downside. Potentially.
- [48:12]
Frank Holland
Yes. So potential for some outsized moves, implied moves. You just talked about eight and a half percent, long term average 6.6% and the recent over 10%. Courtney, I want to come over to you. What do you think about just the volatility in Nike? It's been down big this year. A lot of questions about its ability to innovate. Really?
- [48:29]
Mike Koh
Yeah.
- [48:29]
Courtney Garcia
I think the question is when does the turnaround actually happen? I think the fact that you're bringing a new CEO is hopefully helpful. But I think they're really looking at fourth quarter sales are expected to go down 2 to 4% and a lot of that is because of China. It's not even just the US we were talking about, you know, on the break here. They don't have the same kind of celebrity endorsements they used to. They have a lot more competition. They used to. The prices are, I mean, significantly lower than they were. They have been. So if you want to buy it purely on the fact that at some point, if a turnaround is going to happen, you're getting it a good price here maybe, but I don't think we're Quite at that inflection point yet is what I would. I would guess here.
- [49:00]
Steve Grasso
North America has been increasing, but China has been decreasing to Courtney's point. They don't have the caliber of an athlete. There's only one Michael Jordan. They haven't been boosted by a like Michael Jordan athlete because none exist currently. And then you have a lot of private companies that are stealing market share from them. A lot of sneaker companies that can just tweet something out or Instagram something out, post something out and get the same effect that Nike has been monopolizing the market for the last 20, 30 years.
- [49:31]
Frank Holland
Do you own any Jordans?
- [49:32]
Steve Grasso
Do you own a pair of just collectibles? But. But no, I don't. I'm not walking around in Jordans and
- [49:39]
Frank Holland
I have quite the collection. I'll tweet out.
- [49:41]
Steve Grasso
Who does? Dan Ives.
- [49:43]
Frank Holland
Dan Ives. Tim, I want to come over to you. Do you own any Jordans? You got any pairs?
- [49:47]
Tim Seymour
My 12 year old has a lot of Jordans, so I'll just leave it. That's no reason for me to weigh in there. I'll weigh in on Nike and I'll say, I think the biggest issue for me is that the entire space, the athleisure and the athletic footwear is heavy. I think it's oversaturated. I own some Nike. I don't own a ton. I think you can build here. But I agree with the panel here. I'm not sure we've hit the bottom, but this is, this is the leader. This is the leader of the pack. And yes, they've had some share erosion, but they are still top dog.
- [50:17]
Gene Munster
Yeah.
- [50:17]
Frank Holland
Looking at, Nike shares closed down about a third of a percent today. All right, coming up, a big week of volatility. The charts traders are watching as markets look to close out a wide wild first half of this year. More fast. Coming up in two. Welcome back to Fast Money. It was a big week for the market. We wanted to ask our traders what their standout chart of the week was. Tim, we're going to kick it off with you.
- [50:44]
Tim Seymour
Well, just Delta Airlines because we've been talking about transports and industrials and this is to me one of the great ones that has had a very challenging last two years despite the fact that Delta Airlines has outperformed the S and p by almost 35% over the last couple of years and by 20% over the last three years. In a tech world, there's Delta. But the argument I have is that this is a company that was really starting to show Margin growth and the resilience of their demand model across multiple cabins and different price points and then was derailed by Liberation Day. Went down almost a 50% drawdown. Started to get its mojo back going into the war trade since oil has come back and in fact you can make an argument Delta rallied even before for that. This is a margin story, this is a multiple rerating story. This is best in class.
- [51:31]
Mike Koh
Mike, Semiconductors. I don't know how you can take your eyes off of them. Obviously a terrible chart this week, but a great one this year. The part that you may not know is that implied volatility, that's the price of options, has nearly doubled since the beginning of the year. So if you're in some of these names, and a lot of you are, I would seriously consider taking advantage of that elevated implied volatility and look to start selling some covered calls or call spreads against the names in this space.
- [51:56]
Courtney Garcia
Courtney, the homebuilders here on the week we had, this was a sector that was up about 4.6% by the close of the day today. And I think this is actually a really indicative of the rotation that we're seeing and people going to other places. But the big thing is is this is really interest rate sensitive and the fact that we are finally seeing oil prices come down, inflation expectations are coming down, it's really indicative that people are looking a little longer term here and that that is directly beneficial to things like your homebuilders. And I think this is something that's probably, probably going to start to stick here. So you want to take a look at it.
- [52:26]
Frank Holland
Grasso, where is the bottom in crypto?
- [52:28]
Steve Grasso
My mine is Etherium. That's the chart of the week. And every time you try to pick a spot where you should should have some stability, it always breaks through. People look at the ratio between Bitcoin and ETH being at a low. That should add some stability to it. 180 billion in stablecoins settling on Etherium.
- [52:47]
Frank Holland
That's the infrastructure.
- [52:48]
Steve Grasso
So all the stablecoins coins, all of crypto trades on the infrastructure of Etherium. In theory, that should keep it up. And that hasn't worked either. So it's really just a. I don't want to say it's hope, but the Hodlers that just held it no matter what don't seem to be here anymore. And there's Space X to worry about. The dollar has been rallying. So if I asked you and you're not a crypto guy, I don't think but if I asked you, you could probably give me four. Three reasons why crypto is selling off. It only needs one reason, a rally. And we haven't found that one reason yet.
- [53:22]
Frank Holland
I think we're still looking. All right, coming up next, your final trade. Stay with us. All right, here it is time for final trades. Tim, you're up first.
- [53:35]
Tim Seymour
Frank, thanks for joining us this afternoon. Gm, Another great big industrial old school company that I think is rerating. Long time holding.
- [53:43]
Frank Holland
Mike.
- [53:45]
Mike Koh
Yeah, XLV. This 160 level is kind of a critical one, but I continue to like it.
- [53:49]
Courtney Garcia
Courtney Merck and the pharmaceutical space, they're filling up their pipelines with some deals here and I think it's something to take a look at.
- [53:55]
Frank Holland
Hot trade right now. Steve Grasso, you got the last word. You know what I love about you?
- [53:59]
Steve Grasso
I feel like you really had a good time.
- [54:00]
Frank Holland
I did great.
- [54:01]
Steve Grasso
And it comes out, comes out. You know what? I'm going to be watching Space X. I want to see how these index ads really effectively.
- [54:08]
Frank Holland
Alright, we'll have to wait and see. Thank you so much for watching. Fast Money. Mad Money. It starts right now.
- [54:20]
Mazda Narrator
All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable. But neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. To view the full Fast Money disclaimer, please visit cnbc.com fastmoneydisclaimer this year's girls
- [54:53]
Frank Holland
trip to Telluride was the best. We one upped ourselves with my Sapphire Preferred card and with 5 times points on Chase Travel, plus 3 times points on vacation homes with top brands, we
- [55:02]
Courtney Garcia
got this incredible cabin.
- [55:04]
Mazda Narrator
It was a mansion.
- [55:05]
Frank Holland
And with three times the points on dining, we ordered a Wagyu steak dinner
- [55:08]
Mazda Narrator
and that pistachio gelato was too good.
- [55:11]
Frank Holland
So where should we go next year?
- [55:13]
Mike Koh
I've got ideas.
- [55:14]
Frank Holland
Chase Sapphire Preferred the card that's preferred for a reason. Cards issued by JPMorgan Chase bank and a member FDIC subject to credit approval terms apply.