← CNBC's "Fast Money"
CNBC's "Fast Money"
Mag 7 Reports Results… And The Latest Fed Rate Decision 1/28/26
00:44:08
Meta, Microsoft, and Tesla on the move as the tech giants kick off Mag 7 earnings. The numbers out of their quarters, and what Fast Money friend Gene Munster sees in store for the group. Plus, Powell’s pause. The Federal Reserve leaving rates unchanged, as the central bank’s economic view improves. What Fed Chair Jerome Powell had to say about their latest decision, and who could be his replacement as President Trump ramps up his criticism. Fast Money Disclaimer
Loading summary
Transcript81 lines
- [00:00]
A
A rich life isn't a straight line to a destination on the horizon. Sometimes it takes an unexpected turn with detours, new possibilities and even another passenger or three. And with 100 years of navigating ups and downs, you can count on Edward Jones to help guide you through it all. Because life is a winding path made rich by the people you walk it with. Let's find your rich together. Edward Jones, Member, SIPC Avoiding your unfinished.
- [00:32]
B
Home projects because you're not sure where to start. Thumbtack knows homes so you don't have to don't know the difference between matte paint, finish and satin or what that clunking sound from your dryer is. With thumbtack, you don't have to be a home pro. You just have to hire one. You can hire top rated pros, see price estimates and read reviews all on the app. Download today.
- [00:53]
A
Live for the NASDAQ marketsite in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight, the Mag7 earnings kickoff. Meta, Microsoft and Tesla all on the move. We're dialed into the calls and bringing you all the details on the latest quarters and the Fed. In focus, the central bank taking a break from recent rate cuts as the economy improves but inflation remains elevated. All the details from the decision and what it means for the markets as The S&P 500 crosses 7k for the first time. Plus Starbucks loses its buzz after a strong start to the session at and T Pops after its latest earnings report and a luxury letdown. What had a LVMH stock sinking in today's session. I'm Melissa Lee, come to you live from studio Be at the nasdaq. On the desk tonight, Tim Seymour, Dan, Nathan Gu Adami and Michael Kantopoulos, Deputy chief Investment Officer at Richard Bernstein Advisors. Welcome. Michael. And we start off with that $6 trillion earnings night. Shares of Metta, Microsoft, Tesla all on the move after their latest reports. We've got full team coverage. Standing by, Steve Kovacs. Standing by with Microsoft. Philip Bose got Tesla. But we start off with Julia Borsten on Meta's massive move. They are higher after reporting earnings and revenues that beat estimates. Giving strong guidance. Julia? Yeah, that's right. Medicare is shaking off concerns about growing Capex with much better than expected first quarter revenue guidance. The company did guide to 2026 capital expenditures in a range of 115 to 135 billion versus the 110 billion consensus estimate. But CEO Mark Zuckerberg and CFO Susan Lee are On the call explaining right now what that will buy them. Mark Zuckerberg saying I will enable agentic shopping, increase the capabilities on WhatsApp and improve content creation. Plus we heard a lot throughout the call so about improving internal development, enabling fewer employees to do more. Met is also improving its core business, reporting a 6% increase in average price per ad with increasing monetization efficiencies, as they put it. And some positive news for some of their newer businesses. Sales of their glasses more than tripled last year. They said Threads is seeing momentum and is expanding to more countries. They said paid messaging on WhatsApp now has a $2 billion run rate. Alyssa? All right, Julia, thank you. Julia Borstin, again, the stock is up by about 9% here. There seemed to be a big overhang on matter going into this report. Concerns about capex, that capex and expenses were growing faster than revenue here.
- [03:14]
B
Well, and the Capex, by the way, grew faster than expectations, which tells you just how good these numbers were and just how good the guide was. And this is a growth company again, or maybe never wasn't. But the fact that they delivered revenues 24% ish versus 21% and that the guide at least when you consider not neutrality but the dynamic somewhere 25, 26% significantly better than the 21, that to me is what the story is about. Operating margin improves. And here's a company that's getting the benefit of AI now along with the CapEx. So if you're going to come in 15 to 20% higher on a high CapEx number than the street had, you better deliver what they did. And boy, you it seems like the street doesn't, you know, the market loves the fact that this is a company that's executing now in the world.
- [04:03]
A
And if you want proof of monetization, I mean you could take a look at what is going on with WhatsApp, which is already the area that was turning on the monetization. But it looks like AI is supercharging that, which is great news for investors.
- [04:14]
B
And you're seeing in the I think in the form of operating margins, as Tim just said, north of 41%, free cash flow, north of $14 billion, which is much better than she was looking for. And the guide was great. Which people then will say, you know, we're okay with the spend being between probably 125 and $130 billion. And valuation, there's still a valuation component that is attractive here. And we said I think last night collectively that the setup for Facebook was You know, you walk in here, it's up $50 or so and that's what's happening. The question is, is this good enough to get it through that seven, I think 796 level that we saw the prior all time high? And I think the answer is probably yes. Yeah, you know, you just mentioned WhatsApp and this is again a platform that they've never really monetized. Right. So if they're going to be charging businesses, right, to use this service and they have, you know, a couple billion, I think, monthly actives, that sort of thing, I mean that does move the needle. I don't think threads and the monetization there is probably going to move the needle. If you just go and think about what Twitter was doing in revenue right when they, you know, were still public. I mean, I think it was like five, six billion dollars or something like that. So at the end of the day, I think WhatsApp is probably the more important thing. And then you guys just outline how are they using this technology internally to better serve ads. And that was a big part of the first leg of the story with Metta over the, I don't want to say 23, 24. I think that abated a little bit over the last six months because maybe they were kind of pushing on a string and then investors were like, wait, they don't have a cloud business like the other hyperscalers, so maybe this is not the sort of name that they want to be involved in. And then kind of Google picked up the mantle at that point.
- [05:44]
A
I mean, going into this quarter there was a narrative, is this going to be the quarter where a reduction in capex spending or flat capex spending would actually be rewarded as opposed to increasing? We flip that on its head basically tonight with matters results. So what's your read through here?
- [05:58]
B
Yeah, I mean, so far, clearly very early in the season, the market's rewarding Capex once again. Listen, I think in the long run the capex spend is really going to end up hurting these companies and likely the valuations as well. What we're seeing, whether it's Meta or Amazon, many of the hyperscalers are starting to issue tremendous amounts of debt backed by hard assets. And one of the things that was so appealing about these large mega cap growth companies were that they were asset light. Now they're asset heavy in a technology. Listen, I'm going to be surprising. I'm the biggest technologist out there. I love technology. You do because I. Bigger than guy, Dummy. Even bigger than guy. That's impossible. But because I love technology, what I also know is that the technology changes incredibly rapidly and they're issuing long term debt on a technology, on hard assets, on technology that can rapidly evolve and be obsolete in not very long. Now listen, individual companies will you have winners, you can have individual companies that aren't. Who's to say what matter ultimately becomes. But in general I think the space could be under pressure in 2020.
- [07:03]
A
That was your piece in the FT by the way. That's what we're showing.
- [07:06]
B
Which outstanding job by you. Which is exactly right. I mean I think, in my opinion, I think Facebook wins this and as long as their margins continue to improve people will look past the spend now quarter by quarter. It's hard to say. I don't know why people were so exercised the last time around but now they're realizing actually this is a company along with Wal Mart that's figuring out how to use AI to their benefit. I think this was a relief and that's part of this reaction. But as we've talked about the characteristics of the stock and the behavior of the stock and the key levels, I mean this stock was $580 on an intraday back in late November of 25 and is already now up to 730. The stocks have collectively effectively done zero over the last 12 months and I think these levels are going to be tough to get through. I think we're going to need to see that next level. This was a relief that okay OP margins are okay. Capex is somewhat a trade off. I'm not sure the stock's ready to run that hard. It's not that cheap even though I think they're world class. And by the way rest of the world, the growth you think the US stuff was good? Rest of the world especially where WhatsApp by the way is where people use this thing that which is going to grow four times. It was over 33% growth. Yeah. By the way outside of the US the ARPU the revenue per user is so much worse outside the U.S. let's just be really clear on that. And just going back to your FTPs, I mean Facebook was actually one of the Metta was one of the first one of these major hyperscalers to do a creative deal to fund the expansion or the build out of the data center down in Louisiana. So that's one I think you got to put on your radar and I can't wait until the next one you write. I don't think it's a coincidence that they're all off balance sheet debt. Yeah.
- [08:37]
A
Yeah. Let's get to Microsoft. Big move in the after recession. They're moving lower despite top and bottom line beats Steve Kovacs in San Francisco. Excuse me with the details on that one, Steve.
- [08:47]
B
Yeah, Mel, it's the top and bottom line beats. Everyone knows about that. But what we're really focused on here and what's driving the price, Azure Cloud growth was a bit of a disappointment. It came in at 39%. Street wanted to see 39.4%. So perhaps you see that chart there could be moderating a bit. So some concerns there. But the other thing in this report I want to point out is the remaining performance obligations which jumped 110% to $625 billion. And 45% of that I'm showing you right here is just from OpenAI. So you can see out of that RPO number how much exposure the company has just to OpenAI. Now they also try to talk about how they diversified beyond there and non OpenAI companies, their RPO during that period they went up 28%. And in fact Microsoft makes a point of calling out Anthropic. You might remember last fall they had that new deal with Anthropic where they're going to be an investor and Anthropic is going to be a new Azure Cloud customer. So that's all baked in there as well. But still massive exposure to OpenAI. Now on the CapEx front, you guys were just talking about that with Metta. For the quarter, Microsoft said they spent $37.5 billion. That's up 66%. And we just keep seeing this accelerate quarter over quarter. Even Microsoft said the growth rate this year was expected originally to be slower. They just can't keep up with the demand. And I'll point out, as I just showing you in that last graphic, we see $72 billion in spend in just the first six months of this fiscal year. That is very close to the total spend they did in all of fiscal 2025. So we're going to see a huge number at the end of the year next summer. Guys, the call starts 5:30. Expecting some more information from Sacna Nadella and Amy Hood that could turn the stock in a different direction, guys.
- [10:34]
A
Including guidance, possibly Steve. Thanks.
- [10:36]
B
Guidance Steve.
- [10:37]
A
Steve Kovac. Yeah, and usually they give the guidance more off the air, so that's really helpful. But in terms of the concentration of this RPO number, feels like we've seen the story before. We saw it certainly with Oracle's rpo and the concern about concentration there. I asked Brent Thiel about that because we talked to him on overtime. He said this is different. Microsoft's margins are moving higher. It's a more diverse business. It is not the same. And yet we're seeing the stock down 5%.
- [11:01]
B
Yeah, I think again it wasn't, wasn't enough. It certainly not fooled by the EPS number that's inflated by some of this chat GPT stuff. I think that the M365 cloud deceleration is disappointing. I think Azure just not enough, not enough acceleration is what people wanted to see. Not a terribly cheap stock. Still really waiting to see these guys seeing also, you know, the question about what they're doing with their own AI chips and just how much of a distraction that could be from their core business and, and how much capex to come. Last night I sat here, I thought the setup was really good in earnings despite the fact that it had rallied 9% from the recent low and this quarter, you know, 39% growth. I mean, maybe not good enough. I mean, I think what it comes down to is there's a concern around the software side of the equation and you're seeing it clear in Oracle now. You're seeing it in Microsoft now. I still think valuation is a problem. It's been a problem. But what's a bigger problem potentially is that huge gap we have from that move I think we saw in April from 405 or 420 up to the recent highs that we saw. And it hasn't traded well since October. So that's hanging out there like this. Wait for it. Dan. Sort of Damocles. With that said, I don't think it's a terrible quarter at all. Again, I don't know what that means. I'm not the chat. Chad. Chad gpc yeah, the one thing I'll say we've spent a lot of time talking about the circular nature of a lot of investing. I think another way to think about is also the frenemy aspect of this. Right. So you know, Michael just told us the other Michael Kovac just told us about this relationship with Anthropic. They invested in them, they get the cloud contracts. Okay. That's the circular nature of this thing. The information has a story out today and this is to your point about the software stuff. Microsoft moves to respond to new threats from Anthropic. So Anthropic, a company that uses their cloud that Microsoft has invested in, launched a product called Co Work. Not by design. I mean by design. Right. Microsoft Products called Pilot Pilot. And all of a sudden now Microsoft, they're running around trying to say are guy is going to disintermediate us by putting this out there, undercutting us on price. And you know, basically the whole upsell with Microsoft 365 is like pay for this copilot. It's powered by open air. So this is going to be increasingly confusing, I think to a lot of investors and we don't have a lot of clarity on basically OpenAI and anthropic, on their fundamentals or on their financials, that sort of thing. So it's going to continue to be one of these situations where I think it's going to get harder for public market investors.
- [13:21]
A
Right. And then there's of course just the general weight on valuations in the sector, which just naturally pulls this one down, despite it being a premium, let's say.
- [13:32]
B
Yeah, it is. And I'm not ready to say the software's dead, but I do think this, this of 110% RPO increase, 45% being open air. That's scary, that that is circular at its finest. And it's messy. Dan. I mean we're talking about customers or competitors or I mean the Meta doesn't have this. I think it's very different. They go straight to the consumer and they're showing the margin.
- [13:57]
A
We do want to get to Tesla stock. That stock is trending higher even after posting its first annual revenue drop on record. And so much tonight. Less than 20 minutes until that call kicks off. Philip Bowes got more on this one. Phil.
- [14:12]
B
Emily, I think the stock is moving up because there's a number of things in here. If you were a Tesla bull, you're saying, yeah, I like what I'm seeing and I like what the possibilities are for the future. Let's start first off with the fourth quarter results. They beat on the top and the bottom line, earning $0.50 a share. The street was expecting 45 revenue, slightly better than expected, though it is down 2.9% compared to 2025. By the way, that is Tesla's first annual decline in revenue as a company. Not a huge surprise given the fact that we saw a fall off in annual deliveries, down about 16% in 25 compared to 24. So it's only natural to assume that you may see revenue fall off a little bit. But within the earnings announcement, a couple of nuggets in here that people are focusing on and saying, well now that's interesting. One of them is for the first time, Tesla is divulging its full self driving subscribers. And they say that they saw a sequential growth of 100,000 subscribers in Q4 versus Q3. They now have 1.1 million FSD subscribers, up 38% year over year in the fourth quarter of 2025. Obviously that's going to be huge for the growth of autonomous vehicles and that's part of the outlook that people are going to be focused on. When the conference call starts in about 15 minutes, what is the Robotaxi service plans? How is it planning to expand? They gave us a little bit of color about that within the earnings report. We'll talk about that in a bit. Cybercab begins volume production this year according to the company. And Optimus Robot development, the Generation 3 Optimus robot, the one that they ultimately plan to take to market, they are going to be showing that in the first quarter according to the company. As for the robo taxi rollout, they are adding these cities on their target list for 26 Dallas, Houston, Phoenix, Miami, Orlando, Tampa and Las Vegas. Remember, they are just now, on a very limited basis, starting to take the human observational driver out of the vehicles that are part of the robo taxi rollout in Austin, Texas. But that's their plan as they look to expand in 2026. Don't forget we have the conference call coming up in about 15 minutes. Melissa and I think people are going to be focused on that. And Elon Musk perhaps talking a little bit more about the $2 billion investment that Tesla has made into Xai. Melissa, we'll send it back to you.
- [16:36]
A
Definitely. Phil, just a quick question on Optimus Generation 3 to hit the market. They're going to show it off sometime in the first quarter. What did we see here at the NASDAQ in the front? Handing out gummy bears in a very clumsy fashion.
- [16:51]
B
I believe that. I'm not sure if that was Generation two, Generation one, what it was. So I wouldn't be able to tell you, give you a qualified, educated answer in terms of what was there.
- [17:02]
A
Okay, Phil, thank you. Phil LeBeau. I mean, I really hope it was won. It was doing a very poor job. It could barely clutch the little packets of candy.
- [17:12]
B
That's why human beings and Haribo go hand in hand.
- [17:15]
A
But anyway, they basically gave everything that you would want in terms of what you wanted to hear from them. Right. Mass production of Cyber Cab and Robo Taxi rollout. FSD subscribers.
- [17:28]
B
Yeah, except for, except for their core business was down. I don't know. I almost want to defer to our Tesla Bull here who's I'm staring across the table at butlining guy. Yeah, but, but I do think that if this is, this is those things are the reason you own this stock at these levels, not because of the core business. I'm not someone that owns the stock. Yeah, we gave up on this one I think a couple of quarters ago. We just said listen, here's the first time in 15 years since the company went public that the bulls and bears agree about that ev business that it sucks, it's not growing. I mean like that's it. Right? So you have a.
- [18:00]
A
Not important.
- [18:01]
B
Well, you have a trillion and a half dollar meme stock. And I'll just say this, you know the bake off for the Space X IPO has been going on now for the last week, two weeks or something like that. You know, every banker obviously they're going to be really bullish on. Everyone wants a piece of it. They're saying it's going to be a blockbuster, going to be a trillion and a half dollars. Now think about this, it's going to come in June. If you are an investor in Tesla and you have all this pie in the sky stuff that you have to believe in for this stock to continue to move higher, might you kind of move over to Space X a little bit? Especially if you are just an investor who hasn't had access to the private markets because that's a business Starlink and then all the other stuff with space, they're going up into space, they're doing that sort of thing. And so to me that might be a push and pull that you see from investors. And then you know, Phil just mentioned this $2 billion investment in X AI that's a 230 billion valuation for that sort of thing. I suspect Tesla buys that company this year and he really wants to tighten things up and have a two horse race between these two companies. You know, just looking at the last three companies, Microsoft, Tesla and Metta, I think it's interesting to see that they're all diverging. One's up 5, one's essentially flat, one's down 5. And you're starting to see some divergence between the mag 7. Now I love that you're starting to see some broadening of markets. You're starting to see diversification of the Mag 7. You're starting to see winners and losers. That's what's supposed to happen in markets. You reward earnings, growth, growth. And if the earnings growth is there, the stocks will do well. And if the earnings growth is not there. And the core business, to Tim's point, is not performing. There's no reason why investors are going to reward high valuation companies. This will be fun over the next day or so when margins are deteriorating, people say how it's not an auto company. You're focused on the wrong things. Watch tomorrow how many people point to gross margins for automotive being 20.4% well ahead of the street. Even if you pull out the regulatory credits, it's still better than expected. Now people will champion that. If it's not important on the way down, it shouldn't be important on the way up. With all that said, I think still the reason to own the stock if you want to is because this pay package is linked to stock performance, one of the 18 metrics. To me, that's the overriding condition here.
- [20:07]
A
Coming up, we'll bring you all the details from tonight's Mag 7 conference calls and get reaction from Fast Money friend Gene Munster. Plus more after hours moves in IBM and Southwest Airlines. The details straight ahead. But first, do not let the earnings action distract you from today's Fed decision. But the central bank had to say about rates in the economy and the latest shift in odds for Chair Powell's replacement. Don't go anywhere fast when he's back into. Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more@capella.edu. what made you confident that you could do something that hadn't been done before? I have no fear of failure. Trailblazing women, changing the game One of my favorite pieces of advice, Think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday, wherever you get your podcasts. Welcome back to Fast Money. The Federal Reserve holding rates steady this afternoon. Chris Waller, one of the potential candidates, replaced Jerome Powell as Fed chair, one of the two people who voted for a cut. His odds of getting the nomination spiked higher after that decision, According to Kelshi CMC Steve Lismann covering the latest developments in D.C. steve?
- [21:57]
B
Yeah, Melissa. After three straight cuts, the Fed kept interest rates unchanged at the January meeting in that range of three and a half to three and a quarter percent and hinted it may stay there for a bit until the data convinced them it's time to start cutting again behind the shift and upgrade to the economy. The statement noted that the economy expanded at a solid pace, changed from moderate. So a little bit of an upgrade there. Says unemployment has shown some signs of stabilization. Remove this issue of downside risk to employment from the prior statement and said inflation is somewhat elevated. Not overly concerned there. The Fed also use language in the statement from December that signaled a pause in January power wouldn't rule out future cuts, but was clearly not signaling anything imminent. We think we're well positioned here to watch how the economy performs. Look at the data. We're not making decisions about future meetings, but we, we do think we're well positioned after those three cuts to, to let the data speak to us. As Melissa told you, Fed Governors Waller and Myron dissented in favor of a quarter point cut. Waller, of course, remains a candidate for Fed chair. His odds went up and Myron is only on leave from the administration. Whatever their reasoning, dissenters can sometimes lead the way. So it may be that rates are going to come down eventually, but markets still don't see another cut till June when we'll have another Fed chair. And there's only a 60% probability, Melissa, on that second cut in December.
- [23:18]
A
Wow, Steve, was it your interpretation after you asked that question that the Fed would actually stay at this higher neutral rate for much, for longer?
- [23:27]
B
Well, I mean, I think there's a question as to what the Fed means by its neutral rate, whether or not it means a real neutral rate or a nominal neutral rate. I need to talk more about that at some other time, but I think the Fed is sort of happy where it is. Remember, we can talk about the two dissenters, but there were, you know, 10 other votes on the other side to hold. It's maybe a slightly more hawkish committee this year and I would take Powell at his word that we're waiting for the data to speak to us, is what he said. And I think the data right now, as you guys have been talking about both the earnings data as well as the economic data have been a lot stronger than anybody expected here. So the Fed's going to wait till that sort of figures itself out here with the only question about what happens to the job market here.
- [24:13]
A
Yeah, Steve, thanks. Steve Leeson, for more on the markets and Fed decision Let's bring in Savita Subramanian, the head of U.S. equity and quantitative strategy at bank of America securities. Savita, great to have you with us. Great to be here. So given what he said today, given some of the mega cap earnings that we're getting after the bell, what do you think is this, what are we making of all of this? Well, today felt like a really boring day until after hours. Right. So I think it's still a lot, a lot of the attention is still focused on tech. I, meanwhile, the market has been broadening. We've seen the S and P equal weighted outperform, the cap weighted benchmark. We've seen small caps come back. So I think there's a lot of interesting stuff going on that doesn't get a lot of airtime in terms of how to position for the year. I think it's important that this is a midterm election year because, you know, where we are is an environment where we need to, you know, kind of the current administration wants to really, you know, focus on affordability. The rhetoric is changing a little bit from just trade policy to affordability to domestic issues here at home. And I think that could actually be really positive for areas that have struggled like consumer staples. So consumer staples is our most out of consensus. Bullish, overweight and nobody likes it. And we get questions every day, especially after, you know, the most recent announcement from Amazon, Amazon on grocers. I think it's an interesting sector that's pricing in a lot of bad news. And if you do see that lower income consumer cohort that has been struggling the most against inflation, get a lifeline. And what we're hearing now from policymakers is a lot of good things in the, in the midst. I think that could be a really interesting sector to.
- [25:58]
B
I think you're right. I think it is at a consensus. And that's fascinating. I think it's, it's particularly coincident and fascinating that you're on tonight when Steve just gets off saying we upgraded the economy, we seemingly have upgraded EPS outlook. And you think those two ingredients for most people are not good for the stock market?
- [26:14]
A
Well, look, I think it's, I think that the stock market right now is more likely to be bolstered by capex and manufacturing than consumption. And I worry a little bit about consumption because when you think about the biggest contributor to consumption growth over the last 30, 40 years it's been white collar professional services, 25 to 45 year olds like, you know, basically us when we graduated from college and that cohort is not getting jobs today. There has been a kind of a big pause in terms of hiring grads. So college grads are going back to grad school, incurring more debt, and still not getting jobs. So I think that's something to keep an eye on. Maybe it's nothing to write home about right now, but we're seeing it. You know, we're seeing it everywhere. You're seeing just this sort of air pocket in terms of demand for new skilled labor. Because I can do a lot of.
- [27:07]
B
That stuff, if memory serves to say. If memory serves, which it typically does. It was June of 2023. The S&P was 4300. You were the most bullish you'd been in a decade.
- [27:18]
A
Yeah.
- [27:18]
B
And now look at where we are now. But your price targets suggest.
- [27:22]
A
Not so bullish.
- [27:23]
B
Not so bullish anymore.
- [27:24]
A
Yeah, I'm glad you brought that up. I mean, back then, there were a lot of things going right for the market. It was cheaper. There was, you know, very little debt, you know, no capital raises. You didn't see a lot of, you know, interest in equities. It was still like, we're heading into a recession. Everything is awful. Today is. The economy's booming, everything's fine. You want to be long stocks, crypto and everything else out there. So I feel like sentiment has really done a big 180. And Michael, you'll appreciate this. We have one model at B of A that we've been running since performance Rich Bernstein started it back in the 80s, and it is still telling us that sentiment on stocks is not necessarily euphoric. So I think there could be upside in a lot of areas of the market, but sentiment on AI and tech feels pretty darn euphoric to me at this point.
- [28:16]
B
Yeah, yeah. I mean, we agree. Obviously, Savita was sort of the broadening of the market. Much of our framework is. Is the same. Of course, Course. What happens if, you know, you have the Atlanta Fed right now running at 8% essentially nominal GDP, 5% real. You've got earnings growth that is accelerating. You've got inflation near 2%. What happens if the Fed just doesn't hike this year? What happens if rates go back up? Excuse me, doesn't cut this year? What if. What if the 10 year goes back up to 5%? What does that do to sort of the outlook? Is that better for the outlook suggestive of higher growth, or is it worse for the outlook because of.
- [28:52]
A
I think it's better for broadening and I would say stick to that broadening call. We, we thought broadening was going to happen last year. It didn't. Mea culpa. I think April 2 kind of screwed that up. But you know, this year we've got Capex kind of firmly in place. We know tax policy rates can move to five. I don't see that as anathema for the stock market word.
- [29:14]
B
Yeah, that's Wordsmiths. So I keep going.
- [29:17]
A
That's an as a T word that I. Yeah, just snuck in there. But I think that we could have a year where tech doesn't do as well. And I think that rates rising on the long end is most detrimental to these mega cap growth companies because back in 2023, what they did to deal with higher rates and less of a multiple was they cut capex, cut costs, fired a bunch of people, did a huge buyback today. Can they really cut capex, I wonder? We're in this arms race on AI, so I think that's where you get to the problems. But on the broader market, we could still see room for, for a lot of upside and multiple expansion as long as the reasons are cyclical growth. Yeah. Savita, thanks. Good to see you. Thank you. Great to see you. Coming up, what we're hearing out of the Mag 7 conference calls and the latest results from IBM and Southwest and the pops and drops in this morning's reports as well. You're watching Fast 20 live from the NASDAQ market site in Times Square. Back right after this. At Capella University, we believe accessible education can make a difference. That's why we offer scholarship opportunities to all eligible students. Un futuro diferente estam mass serca de lo que cres con Capella University. Learn more at capella. Edu. What made you confident that you could do something that hadn't been done before? I have no fear of failure. Trailblazing women, changing the game. One of my favorite pieces of advice, think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just gotta think big to accomplish big things. JULIA Boorstin, host, CNBC Changemakers and power players. New episodes every Tuesday, wherever you get your podcasts. Welcome back to Fast Money. Stocks closing near the flat line today. The S and P topping 7,000 for the first time, but ended the day just in the red. The Dow adding 12 points while the Nasdaq was up about 2.10of a percent at&t jumping after topping EPS and revenue estimates this morning. The company also approving a $10 billion stock buyback. Shares of French luxury retailer LVMH falling despite beating sales expectations. And GE Vernova raising its 2026 outlook shares climbing nearly 3%. And some more after hours action ServiceNow beating estimates in the top and the bottom lines. Raising revenue guidance. Southwest Air earnings in line with estimates but falling short on revenues. Las Vegas Sands dropping despite topping estimates. And IBM beating earnings and revenue expectations, raising its free cash flow guidance as well for the year by a billion dollars. John Ford's got more details from that quarter in the stunning move. John?
- [32:06]
B
Yeah, it is Melissa and the Q and A just now starting on the call but I have my own Q and A with CEO Arvind Krishna earlier. Here are some things that might get set on the call that investors should know. One, software portfolio diversification, a big feature for IBM. Now Red Hat was a little weak. It was 8% versus double digit growth for the rest of software. Arvin told me he's proud of that. The rest of the of software is big enough and growing fast enough to offset software's weakness. Also this sovereign infrastructure demand, particularly in Europe, a lot of countries a little iffy er about putting their data in a cloud owned by US Companies and hyperscalers, they're more focused on buying their own equipment, putting it in their own data centers. Arvin saying, hey, since 2017 he was predicting that this was going to happen. IBM benefiting because they do a bit of both. They have this hybrid strategy also the mainframe cycle very strong. It has been strong actually since a couple of mainframes ago. And so he said it's going to do what it usually does, strong first year flat, second year a little off the third year. But the raw numbers are going to be better in part because people are buying just more of this equipment. And also consulting, he's saying has turned the corner. Profitability include improved by 200 basis points despite the revenue being a little bit on the weaker side. He said this is the bottom, this is the base. We should expect growth, stronger growth from here throughout the rest of the year.
- [33:28]
A
All right, John. Thanks, John Ford. And also that headline you see at the bottom of the screen in terms of the first large scale Quantum computer by 2029. There's a little bit of quantum magic embedded in IBM stock.
- [33:39]
B
I think that's more the move thing given the market that we have here. But it is fascinating to think of just the sentiment change in terms of build your own infrastructure. Not necessarily. I mean the thought that the, that U.S. cloud would be Like a China cloud, you know, like something people wouldn't want. That's interesting.
- [33:59]
A
IBM shares up 8% right now. Coming up, Microsoft and Tesla just kicking off their earnings calls. What we're hearing from the names and where Fast Money friend Jean Munster sees the stocks heading next. Fast Money's back into. The. More details now out of Tesla's conference call. Phil Le Bo has the details there. Phil.
- [34:27]
B
Melissa, Elon Musk right off the top of the call, and it just started a couple of minutes ago, saying that the company plans to end Model S and X production at the company's plant in Fremont, California. Why? So that they can ramp up, retool the plant and ramp up production of the cybercaps. So this is a clear indication that Tesla is pivoting, as he has predicted, towards autonomous vehicles. So again, Tesla will be ending production of the Model S and X, I think he said, next quarter as they begin to retool and pivot for production of the Cyber Cab and what he believes will be the future of vehicles, autonomous vehicles. And that's a clear indication of where Tesla is at and where it is heading.
- [35:11]
A
So just for clarification, the only models that consumers will actually be able to purchase are the Y, which is the best selling model, and the Cybertruck.
- [35:19]
B
Yep.
- [35:20]
A
Okay.
- [35:21]
B
Model 3, Model 3, Model Y and the Cybertruck.
- [35:25]
A
Okay, Phil, thanks. Phil LeBeau, we see Tesla shares there higher by about 3.7%. Let's get more reaction with Gene Munster, Managing partner at Deepwater Asset Management. Gene, good to see you. So far Tesla seems to be delivering. What do you make of the quarter?
- [35:41]
B
Well, as someone who is constructive on AI, this is just a lot of good news tonight. Even with Microsoft being down, there's just so much to that we've been hit. But just to answer the Tesla question specifically, Elon just said just a half a minute before I got on here that they will be in dozens of cities in the US by the end of the year. Now they've said that they're going to be in and an additional seven by the middle of the year. But on top of that, there's something bigger going on that I think is largely underappreciated is the significance of how good FSD is now. And for Tesla owners out there who are running the latest software, they understand this and I would just encourage anybody, any investor who's short Tesla to go and do a two day demo. They'll give you a two day demo for their car and try fsd. It is remarkable how much it has improved. And the reason why I mention that that's why they're breaking out FSD now. That's why they're giving out the subs numbers. That's why they're talking about increasing from seven to dozens of cities. That's why they're talking about cutting out the S and the X in terms of production, focusing on Robo Taxi, is that they're feeling really good about where FSD is and they should, because it's really made a lot of progress. So that's my takeaway. I think this stock, it's not about valuation, it's about the hope of the future. And I think the substance of how this technology is progressing is really making some remarkable improvements recently. Hey, Jean, if it's not about all the things you just said, I mean, how long do you think Tesla investors are going to be willing to take losses in this robotaxi business especially? They're going to probably take bigger losses the more cities they roll out. Like, how long do you expect that to be? And when do they see this as profitable? So, kind of some fun with math. If you take what Waymo is going to do this year in terms of the autonomous miles driven and you assume that Tesla doubles what they're going to do this year, they probably will more than double. You get to the total Robo. The total autonomous robo taxi miles as a percentage of ride sharing, Uber and Lyft at just over a percent and a half. And so to answer the question, like, how long are they going to give? Like, there is a case where there's just a lot of room to go. If you look at total miles driven, this is almost even more remarkable. FSD right now accounts for about 0.1% of total miles driven in the US, 3.3 trillion miles a year. And so I think that's why this can keep going, is that these are huge opportunities that.
- [38:10]
A
I mean, it gets.
- [38:11]
B
The storyline gets old about scratching the surface, but that's what's going on and they're making a lot of progress to get there. Gene, Microsoft, what's going on here? So from my perspective, it was about some of this deferred revenue slipping. I haven't gotten their commentary on the call about why that has slipped. I don't know if that's entirely AI related, but I think that that's. It went from 59 billion at the end of last quarter to 50 billion. So an 8 billion drop. A little bit of seasonality in there, but I think that that's kind of what's driving it. But I think that that that's just one a quick level set. That's what's going on in Microsoft. But tonight's a big night for AI people who are positive on AI. The the capex from Microsoft if you.
- [38:52]
A
Follow through what they did in this.
- [38:53]
B
On the December quarter will probably be up 50% plus the street was thinking 30 meta's capex goes from 57% before, it'll be 85% after the guidance that they gave. These companies are still saying we're early and so even though Microsoft is having a tough time here, I think that this is for someone who's positive on AI this is like an all you.
- [39:16]
A
Can eat buffet in terms of good news. Yep. Jean, thanks. Gene Munster, Deepwater Asset Management we should note that Alphabet shares are higher by about 2.3%. I mean the read through Tim from Metta Robo and yet.
- [39:32]
B
I think what we've heard from the pure ad business of Metta and the cyclicality of that core business, the strength of the consumer, the strength of technology, increasing margins, it's great for Google's too and there's no question I think what we're hearing from Tesla in terms of Robo and what that means in terms of Waymo, I mean either way these businesses are growing and the delta of the valuation of the underlying company Google has more to gain than Tesla does by Waymo versus Robotaxi.
- [39:58]
A
Coming up hot and cold on Starbucks. The sales numbers that gave investors a jolt early this morning. Why shares of the coffee chain cooled off into the close. We got the details when Fast Money returns. Welcome back to Fast Money. Shares of Starbucks losing some of their caffeine Buzz rising nearly 10% early in the session but closing the day just in the red. This after the coffee chain posted its first same stor sales growth in two years as CEO Brian Nichols turnaround plan starts to gain some traction. CNBC's Kate Rogers Clapper wow, I'm going to visit. It's so nice to see you guys. So this was really the quarter that I think investors analysts have been waiting for with evidence that the turnaround under Brian Nichols plan is starting to take hold. So the company had mixed results with an EPS miss revenue beat. But the same store sales that you mentioned Melissa of Focus globally they were up 4%. That's the second consecutive positive same store sales growth. That followed six quarters of negative growth showing that changes are really starting to resonate with consumers now in the US there was also some real progress with same store sales also up 4%. Notably, the company said that it had transaction growth now for the first time in the US in eight quarters. That's a tough area for restaurant companies across the board right now. And on the call Nicole said that now they're seeing growth growth in both rewards and non rewards customers, which is key because remember the occasional customer had pretty much been lost before he came on board. In China, its second home market comps rose by 7% this quarter and it was bolstered overall just by a strong holiday season across the board, particularly in the US Having their best launch day in history. The company also providing short term outlook for the first time since Nickel took over and suspended guidance in the fall of 2024, seeing full year 2026 adjusted EPS in a range of $2.15 to $2.40 and global and US comp store sales growth of 3% or greater. That is a bit above consensus, but really just kind of showing that this turnaround plan that they put in place over a year ago now is starting to take hold. I'm curious what you guys think when you go to Starbucks. I notice a little bit of a difference in some of the stores I visit. But I mean it's a morning is the key, right? Winning the morning is the key to all of this, Tim. You go in the morning, that's exactly when you get.
- [42:17]
B
I'm a discipline, they're friendlier than ever. I get really cute designs and little like writings on my cups. But I think they've figured out how to get things going a little bit faster at least also for people that are normal. Unlike guy who orders like almond milk and stuff like that and his protein foam triple my.
- [42:34]
A
You're on the protein phone.
- [42:36]
B
Of course I am. Come on Kate know me. I mean I'll say this real quick. I mean maybe Kate can speak to this. Margins operating margins were disaster and they're promising the second half half to start to see margins start to do a little bit. That's the hope. Is it achievable? I guess.
- [42:51]
A
I mean they are definitely talking about the back half of the year looking better. And I think a lot of analysts are looking for tomorrow, hoping to see a longer term outlook when they give this presentation to investors. But remember they made this $500 million investment into labor, right. That involves better technology, some upgrades for baristas, better staffing and I think they hope to see some improvement on the margin front in the back half of the year. But that's really starting to take hold. And remember a lot more of These cafe uplifts that they call them are coming through about a thousand by the end of the year. So, Kate, great to see you. So nice to see you. Welcome anytime. We want to get to Steve Kovach. He's got some details on Copilot from the call. Steve?
- [43:31]
B
Yeah, Satya, Nadella and Melissa just announced that Copilot now has 15 million paid subscribers. So this is the M365 version of Copilot, the one they sell to businesses for $30 per user per month. 15 million, that's revenue. Do the math there that they didn't have before in artificial intelligence, but it is a very small percentage of overall seats for their enterprise customers. At least 400 million or so are the latest analysts estimates. So out of those 400 million seats, they've only convinced about 15 million so far to go over to this new Copilot system. And by the way, it's been about two years to get to this point. That said, this is new revenue that they haven't been able to do before and they expect it to keep growing, guys.
- [44:18]
A
All right, 15 out of 400 million.
- [44:21]
B
Yeah, a little.
- [44:21]
A
Doesn't sound very good.
- [44:22]
B
Like 6 billion. Is that something?
- [44:24]
A
Steve, thanks. More fast money. And too, We've got a news alert out of Washington D.C. trump officials saying the administration is stepping back from plans to guarantee minimum prices for US Critical minerals projects. According to Reuters, a Senate committee specifically reviewing the floor giving given to MP Materials, which the government took a stake in last summer, shares you see of MP down by about six and a half percent. USA Rare Earth, which it just announced a stake in earlier this week, down seven and a half percent. Lithium Americas and Trilogy, all lower here on this. So a little bit of a change here in terms of of believing in that Trump backing. It only goes so far apparently for these names.
- [45:07]
B
Yeah. Quickly. I wouldn't run too far away from this narrative can change very quickly. We've seen it before, definitely.
- [45:13]
A
Up next, final trades, Final trade time.
- [45:28]
B
Timbo, Kate Rogers on set would be reason enough. However, it's also a story that I think is breaking out above 95.
- [45:34]
A
Starbucks, Michael Kantopoulos.
- [45:36]
B
I think we're on a longer term trend of international performing well, so we like ex US thank you for being on the show. Michael Miga Palantir has had a very stealthy 25% sell off reports next week. I'm not buying the weakness guy. You know, I said to Tim the song is over. He said, who's next? I said, what? What year? He said, 1971. And it's amazing. Boom.
- [46:00]
A
Good at it.
- [46:00]
B
We're not good at something maybe the most important not we're great at Paul Thanks Sam X Ray thanks for watching.
- [46:07]
A
Fast Mad Money starts right now. 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 Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning, and effective communication, and you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.