← CNBC's "Fast Money"
CNBC's "Fast Money"
Markets Attempt Rebound And Opportunities in Emerging Markets, Health Care, and IPOs 1/28/25
00:46:33
Fast Money is live in Miami… breaking down the market rebound after yesterday’s DeepSeek sell off. The future of tech spending, and if the major players are changing anything going forward. Plus the latest sounds and sights from the Global Alts Conference. Where experts are putting their money to work, and the spaces where they’re seeing the biggest opportunity. Fast Money Disclaimer
Loading summary
Transcript163 lines
- [00:01]
Edward Jones
What counts most to you? Maybe it's spending more time with the ones you love. Or maybe doing more of what you love to do. The key to being rich is knowing what counts. At Edward Jones, our dedicated financial advisors are people you can count on for financial strategies to help support what truly matters to you. Let's find your rich Edward Jones member SIPC. For 140 years, MultiCare has been in Washington prioritizing long term solutions, partnering with local communities and expanding access to care. Together, we're building a healthier future. Learn more@mycare.org.
- [00:50]
Melissa Lee
Live from Miami Beach, Florida at the iConnections Global Alts Conference right here at the Miami Convention Center. This is a special edition of Fast money. Here's what's on tap tonight. On the rebound, Nvidia recouping a bunch of yesterday's losses and major averages, seeing solid gains. The dow getting within 100 points of an intraday record. So is the US I trade back on solid ground. We'll talk to Altimeter Capital, Brad Gerstner to get his thoughts. Then we're counting down to the first Fed decision of the year. What will the central bank say about its course of action this year? We'll break down what to expect with Morgan Stanley's Mike Wilson. And later, from big short to big long. Two of the traders known for their bearish bets during the 2008 financial crisis scored big wins last year by going long in some key areas. Porter Collins and Vincent Daniel will lay out their playbooks for the new administration. Welcome to Fast Money in Miami. I'm Melissa Lee and I'm joined on the terrace at the Convention center by Dan Nathan and Gaia Dami. We may not be poolside this year, but we do have palm trees.
- [01:48]
Dan Nathan
No, this is fantastic.
- [01:49]
Melissa Lee
We've got a great lineup. It's been an amazing conference so far. Under 6,000 people here.
- [01:53]
Guy Adami
Yeah, it's fascinating. It gets bigger every year and there was a lot of takeaways here. When you sit down, obviously you know what happened yesterday. I know we're going to spend a lot of time on that. You know, there's a thousand fund managers here and all of them seem to be focused on that one issue. But also one of the things that I found most interesting sitting in a lot of the sessions last year this time a lot of fund managers were talking about strategies that will do well in a lower interest rate environment. And I heard a lot today of managers talking about what are some of the themes that might work well in a higher interest rate. And that's one of the things, the push and pull I think that's going on in markets right now.
- [02:25]
Dan Nathan
Yesterday was obviously a fascinating day and a lot of people sort of in the aftermath. Is the trend trade over or is that an opportunity? And you know, I think there's basically some conflicting views. At least that's what I got over the last couple days. But you know, it's been an incredible conference. Had to move it to the conference center. It's so big and I got to start this show today and then end it tomorrow. We have an incredible crew here that spent the day putting the set together. They're the real stars of the show. Melissa LEE they are.
- [02:51]
Melissa Lee
And maybe we'll do a little bump shot at the end. 100% show everybody here. But let's get to what we did today because we did see the markets breathing a sigh of relief after yesterday's deep seek fueled sell off. The S and P rising nearly a percent. The Dow gaining more than 130 points while tech stocks led the charge. The NASDAQ rising 2%. Nvidia among the best performers. After yesterday's 17% drop surging nearly 9%, recovering more than $250 billion in market value. The stock though still trading near October 2024 lows in fact all of the MAG7 MAG7, sorry close in positive territory. MET and Amazon in fact hitting fresh all time highs. Well Apple, Microsoft and Alphabet each saw gains between 1 and 4%. So what should we do with this trade? Will it drive the markets higher still?
- [03:38]
Dan Nathan
Yeah, I'm so psyched that Brad's coming on. You're going to introduce him in a second. I think we have differing views but I'll say this, I think yesterday was a glimpse of what could happen when competition comes regardless of whether or not you feel it's viable or the truth around it. I mean I think that was a salvo that hey, wait a second, it's coming down. When a company like Nvidia 77% margins and at its peak peak traded at 23, 24 times sales. I mean that historically is a little excessive. And if competition is in fact coming, it's not an indictment on Nvidia, it's more of an indictment on the valuation.
- [04:08]
Melissa Lee
Yeah. And what has happened in today's session is interesting to sort of see the digestion phase of it all. Yesterday was just puke everything, right? But today it's like, well, who will benefit in this new sort of regime where things get faster, things are more efficient and it looked like software I mean, software is a big winner, no doubt.
- [04:22]
Guy Adami
And I think that was something that was really clear. If you're just taking a look around yesterday, there were some things that, you know, everything opened down. It was not particularly pretty picture. I think it really showed what investors, you know, kind of how concentrated its trade was. We've been talking about it, there's been very few ways to play it. Enterprise software has really underperformed over the last couple of years relative to, let's say the large hyperscalers and then those, you know, Broadcom, Nvidia Marvell joined the party late last year. So I think that you have to kind of broaden this thing out. You have to kind of think about like, who are they going to be the beneficiaries of this? You know, we highlighted a name like Cloudflare. It's in the cybersecurity space. The stock was up 10% today. Some of their developers posted on X. They were talking about how this is the real deal, they've already downloaded it, they're using it, it compares very well to OpenAI's O1 Mini and the like here. So I think there's going to be a lot of really good stories to kind of focus on that are away from the concentrated trades that we've got really used to over the last two years.
- [05:18]
Melissa Lee
And of course, it being open source, it can be used immediately by the 400 plus companies in the S&P 500 that didn't participate immediately in this AI trade. I mean, if AI can actually be deployed and you know, we could see the efficiencies faster, then that benefits a.
- [05:33]
Dan Nathan
Broader swath of there's a democratization, right? I mean, when cost is no longer, you know, it's not cost prohibitive, that allows a lot of people to get in the game without question, which should work theoretically to these software names. But again, on the flip side of that coin, again, not an indictment of the technology, more an indictment of the valuation.
- [05:48]
Melissa Lee
Well, Silicon Valley investor Brad Gerstner, known for early investments in Metta and Uber, owns Nvidia. The founder and CEO of Altimeter Capital stocked up on shares late last year. Brad joins us now here in Miami. Brad, always great to get your take, especially after yesterday's sell off. Where do you stand?
- [06:04]
Brad Gerstner
Exciting times, exciting times. Great to be here. Great event is my annual pilgrimage onto this set and I love it. And it couldn't come at a better time. I mean, you know, Nvidia today I think you just said trade 20 times revenue. It's traded 24 times earnings. Right? People talk about the bubble. This isn't what bubbles are made of. And as far as I can tell, the world's going to be, you know, have a compute shortage for the next three or four years. I don't think anything yesterday changed that. In fact, what happened is when you give models like Llama, very inexpensive, open source, for free or a deep seat, I don't think there'll be 400 US companies using an open source Chinese model that you have to send your corporate data to. But let's stipulate that the cost of intelligence is going to come down. That's a good thing. The amount consumed is going to go up. I heard yesterday Deepseek's out scrambling to get more GPUs to support the inference because they went to number one on the App Store here, Nvidia is down 17% and the company that's causing it to be down is out there trying to get their hands on more GPUs to support the inference. So I think there was a lot of hyperventilation yesterday and very few facts.
- [07:09]
Guy Adami
Yeah, Brad, two months ago or about a month ago, on your podcast, the BTG podcast, you guys had Satya Nadella.
- [07:15]
Brad Gerstner
On the CEO Squared podcast.
- [07:17]
Guy Adami
Sorry about that. It's a great podcast. By the way, you and Bill Gurley, two fascinating investors. You had Satya Nadella, the CEO of Microsoft, on the pod. You asked him directly, are you still chip constrained? Yes, he said, no, I am power constrained. That to me Guy and I were talking about it on our podcast. Go follow it on the podcast store there, people.
- [07:36]
Melissa Lee
That's a problem.
- [07:36]
Guy Adami
I know. Well, get out of your system. No, but we were talking about it at the time and like this is one largest companies early beneficiary, you know, investment in OpenAI two years ago, that sort of thing. And they're not chip constrained anymore.
- [07:48]
Brad Gerstner
Well, I think parse the words.
- [07:51]
Guy Adami
Yeah.
- [07:51]
Brad Gerstner
He said, I'm power constrained. And what that meant is that he's more power constrained than he is chip constrained. Trust me, all of these major companies are still chip constrained. There is a fight. The biggest challenge Jensen has, and he said it on our podcast, is he. All these guys get angry with him. And now Stargate comes along. We forecast it on our podcast that if they build $100 billion next year in Abilene, which is the objective, and I think, you know some differing opinions on that, we think it will happen. We estimated that's 2 million incremental GPUs. The total number of GPUs produced this year our forecast is 6 million. So you have a new player on the scene who wants to buy 30% of the total supply of GPUs when everybody else in the world also wants more GPUs. So again what happened yesterday, it wasn't a breakthrough on the model. They actually built a model that's kind of where OpenAI was 10 to 12 months ago, the 01 or the 01 preview model. But there was this idea that they did it for a fraction of the cost. And I heard reported all over CNBC yesterday that it was 6 million versus billions of dollars to train 01 or 01 preview. I would say my informed speculation is that the cost of training 01 or 01 preview was less than 20 million. This was not a big price breakthrough. It's actually what you would expect. The cost of compute comes down by about 50% a year. So if it cost OpenAI a year ago to build this model, $15 million, you would expect it to cost seven and a half. And we know they also use distillation techniques. It's not to take anything away from deepsea. I think it's a great thing for the world that we're going to make this cheaper for everybody. Everybody's going to have access. As a consumer, all these enterprises are going to have access is not just going to come out of places like Deep Sea. Lama is going to one up them. I imagine there are going to be other companies like OpenAI and Google and others who are going to be open sourcing their lower tier models while you know, they still charge a premium for the frontier.
- [09:51]
Dan Nathan
Brad, I mean your words are people should listen when you talk and I'm one of those people. And you mentioned price to earnings is not only reasonable but given where we've been it's extraordinarily cheap. But my concern is in terms of Nvidia, they're sort of out earning their revenue. In other words, the margins at 77% suggest that something's got to give at some point. That price to sales number is still for me a bit of a sticking point. So, thoughts on that?
- [10:14]
Brad Gerstner
Yeah, I mean, listen, I think as an investor I'm always trying to disprove my conviction. What is the thing that would cause me to change my mind on Nvidia? It's not the fact that we're going to drive down the cost of, of intelligence because I think Jevons paradox, the actual amount consumed goes up. What actually would change my view is if I thought there was an alternative competitor who could produce accelerated compute in the world, you know, anywhere close to total cost of operation, what they can do. So there was a lot of fear about custom ASICs and TPUs and inferencia and Graviton, you know, coming out of Amazon. But what we see is the explosion in demand is so great that there are use cases for those custom chips. But still the number of GPUs ordered by all those hyperscalers are going up, including Google, who uses their own custom tpus. So I don't think this is either or I think it can still work for Broadcom, still work for places like Astera Labs who are in that complex. But you know, I'm just looking at the numbers. I don't see the level of competition at the frontier of compute today to Nvidia.
- [11:19]
Melissa Lee
So if this pulls forward adoption of AI, what else does it pull forward? Presumably it pulls forward peak spending, peak capex spending. Maybe it distributes the gains to software faster. I mean what, what sort of changes in this new world.
- [11:34]
Brad Gerstner
So I mean the things that get us excited. A couple other themes. One is, you know, people look, you know, we wrote the letter to Meta in the fall of 22 and people wonder how did, how did Meta double, you know, more than 2x their revenues while going from 87,000 employees to 65,000 employees? Because they were leveraging AI, right? Every market leader can leverage AI to grow top line faster, accelerate their top line while reducing bottom line and they're doing it across their businesses. It's accelerating today. The other one in Software, we have 25% of our book in software. Everybody last year Bill and I did a POD when everybody declared software dead right. And Satya came on our POD and said maybe application software is a thin layer on top of a CRUD database. Again got everybody scared about software. Software's trading below its 10 year average at 5.7 times forward forward revenues. At the peak in 21 it was 18 times. So I think there's a lot of opportunity in the market today and AI is going to accelerate it.
- [12:33]
Dan Nathan
You know, you mentioned Facebook levering AI and it's manifested itself in the last two earnings releases. Walmart's the other company in terms which without question in terms of their margins. Any other companies out there that you've sort of noticed, I don't know, tangentially, just sort of looking that it's starting to figure it out on the AI front.
- [12:50]
Brad Gerstner
I was just with a CEO here before I came on set. He said over the last two years we've doubled our revenues. And we've held OPEX flat. Leveraging, I think it's ubiquitous. There is not going to be a single enterprise in America that's not leveraging AI, as Satya said on our pod, to drive their top line and to hold the line on their bottom line, who's not going to benefit? Okay. What I worry about is if you're not a market leader and you have to you get your your margins competed away in a commodity industry, even if you benefit right from AI, you're going to compete it away. It's going to go back to the consumer as a consumer surplus. So you want to own market leaders. Those market leaders can benefit from it and hold on to that incremental margin.
- [13:29]
Melissa Lee
Brad, thanks so much for stopping by.
- [13:31]
Brad Gerstner
It's great to be here.
- [13:31]
Melissa Lee
Hopefully we'll see you before next year, our annual pilgrimage.
- [13:34]
Dan Nathan
By the way, I have to say real quick, all the shows on CNBC wanted Brad to come on yesterday and he said, no, I'm going on Fast Money with Melissa Lee. So kudos to Brad, a lot of people.
- [13:45]
Brad Gerstner
You guys have a great show. You have a great show.
- [13:47]
Melissa Lee
Thank you, Brad.
- [13:47]
Brad Gerstner
Love the show.
- [13:47]
Melissa Lee
Thanks for having Brad Gerstner, Altimeter BG Squared got it right this time. We've got breaking news on the Trump administration's freeze of federal loans. Eamon Javros has got the details. Eamonn.
- [13:58]
Eamon Javers
Hey there, Melissa. Well, the freeze is now officially itself frozen, thanks to a federal judge who's just issued a pause on the Trump administration's freeze. That freeze was expected to go into effect or scheduled to go into effect about 13 minutes ago. The federal judge now saying that that will be on hold until Monday as the judge sorts out the competing claims here as to what exactly the Trump administration froze, what legal authority they had to do that, and the arguments presented by the National Council of Nonprofits to all this. So for now, a judge stopping the Trump administration's efforts to freeze funding to all nonprofits, nongovernmental organizations and states. As the judge says, they're going to take some time here to look at this one. Melissa, back over to you.
- [14:44]
Melissa Lee
All right, Eamon, thank you. Amen. Jabbers. Meanwhile, the House GOP conference is also gathering here in Miami this week. Emily Wilkins joins us with all the details. Emily?
- [14:54]
Edward Jones
Hey, Melissa. Well, yeah, there's one clear theme that's emerging here in Miami, which is that Republican lawmakers are eager to give Trump the backing to do whatever he wants, and that, of course, includes tariffs. Speaker Mike Johnson told reporters that Congress will back the White House when it slaps tariffs on other countries. Johnson also said he doesn't think that Trump will go for across the board tariffs. And shortly after Johnson's remarks, Trump Trump told lawmakers that he is planning to add tariffs on a wide range of products that includes chips, pharmaceutical drugs, steel, aluminum, copper. Meanwhile, the chair of the Select Committee on the Chinese Communist Party, John Molnar, said he is looking at ways to increase tariffs on China. And he also said that he has some of the same concerns about Chinese AI deep seat as he did with TikTok, saying American data needs to be protected. But he echoed Trump in saying that tech companies also need to become more competitive.
- [15:51]
Brad Gerstner
This is kind of like a Sputnik.
- [15:53]
Guy Adami
Moment where, you know, it's a wake up call for Americans to continue to invest in research and development and continue to lead the world.
- [16:04]
Edward Jones
Well, lawmakers will wrap up their time in Miami tomorrow. Speaker Mike Johnson said that they're going to take some of the first first votes next week on a major legislative package to back Trump's agenda. Melissa?
- [16:18]
Melissa Lee
Emily, thank you. Emily Wilkins from here in Miami. Coming up, much more fast Money from Miami. Morgan Stanley's Mike Wilson will join us next to lay out where stocks and rates could be heading as a Fed decision is less than a day away. And General Atlantic's Martinez Gabari says an IPO resurgence is coming where he sees the biggest opportunities from tech to emerging markets to healthcare and big shorts. Big long where big short traders Porter Collins and Vincent Daniel are putting their money to work right now and how the Trump administration will impact the broader markets this year. All that ahead. You are watching Fast Money in Miami live from the Iconnections Global Alts conference. Back in two. Every day thousands of Comcast engineers and technologists create connectivity solutions that change the way we work, live and play. Like Kunle, a Comcast engineer who is focused on revolutionizing the in home Wi fi experience today and for the next generation. Learn more at comcastcorporation.com WiFi what's at stake when administrations change? From the first 100 days and beyond.
- [17:34]
Dan Nathan
EY brings insights on the issues that.
- [17:37]
Melissa Lee
Matter executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability. No matter the policy shifts, EY helps business and government leaders remain resilient and seize dynamic growth. EY navigate the geopolitical and economic landscape with confidence.
- [17:57]
Guy Adami
Learn how to use AI to be more successful with CNBC make it's new online course.
- [18:02]
Melissa Lee
We'll give you examples that can help you master AI tools.
- [18:06]
Guy Adami
Go to CNBCmakeit.com AI and register now.
- [18:20]
Melissa Lee
Welcome back to Fast Money Live in Miami beach at iConnections. The NASDAQ and S& P rebounding from yesterday's losses while the Dow notched its sixth gain in seven sessions. That index now just a half a percent from its intraday high. The gains coming ahead of tomorrow's Fed decision on interest rates. Let's bring in Mike Wilson, Morgan Stanley's chief U.S. equity strategist and chief investment officer. Mike, it is great to see you. It's been way too long.
- [18:42]
Mike Wilson
Has been too long. It's great to see you guys.
- [18:43]
Melissa Lee
What's your outlook for the year in terms of the Fed and everything?
- [18:46]
Mike Wilson
Well, look, we finished the year spectacularly well. I think some of that was very predictable. The election was less predictable. It felt like the market wanted to go there and that we had a little bit of euphoria. Then around the inauguration, we've had a more of a sideways sort of first half view based on three things. First, interest rates are probably still a bit too high. We don't think the Fed's going to cut, you know, as much as maybe people were thinking a couple of months ago. And then there's just a lot of announcements coming out, right. It's not that they're bad or good. It's just uncertainty. And whenever there's uncertainty around politics, you know, multiples tend to kind of come down a bit. And now we have this event yesterday. I wouldn't say it's an event, but kind of a, you know, an evolution of this AI spending. And that I think is also going to create uncertainty. So, you know, 5,500 to 6,100 is a pretty good range to think about probably for the first three to six months of the year. But under the surface, there's a lot of really good things going on. I think Brad was just talking about it. We agree software has been kind of left behind. We sort of made that call back in September that software would benefit as there's, you know, kind of movement from semis to software that's a big one. Financials is another area that's been spectacular. Consumer services and then media and entertainment. So there are plenty of things to do on the long side of this take.
- [19:51]
Melissa Lee
I mean, the trade has been so sort of complacent. People just putting money there and it just staying there. It sort of sucked all the oxygen out of the other areas in the market to some extent. To the extent that we, you know, the action yesterday indicated that the air was coming out of the air trade and the rest of the markets were holding up pretty decently. I mean, your takeaway from that would be. I mean, I would think the trade can go away and the rest of the markets can actually be okay because money will be reallocated.
- [20:16]
Mike Wilson
Yeah, the breath, the best breath we had in like two years. And yes, it was a down market. Now, remember, unfortunately, typically when you get a shift from market cap weighted to say equal weighted or better breath, it usually happens in a down tape initially before the next leg higher. And that's. We think we're going to go through that transition. There's two is an interesting sort of comparison. We think the government has been crowding out the private economy in many ways. And so the government just can talk about doge if you'd like, but if they're able to shrink the government and the growth of the government, that can actually be liberating to the rest of the economy. Same thing for AI CapEx that has crowded out other IT spending and other types of spending. So if that just calms down, by the way, it's not going away. Okay. If it just slows down a bit, that may free up spending of other kinds, which could be beneficial for other parts of the market.
- [21:03]
Dan Nathan
There have been a couple of times over the last year where moves in the bond market rates to the upside have derailed. The broader markets happened three or four times. Is there a rate where, you know, maybe it's 5% where things might get dicey for a prolonged period of time?
- [21:17]
Mike Wilson
I think that's right. So 450 we identified as sort of a magic number. I mean, there's some math behind that, but that's where multiples would start to, you know, have trouble. And that that happened, we saw negative, the correlation between stocks and rates go negative when rates went through 450, when Powell is a little bit more hawkish and by the way, he's going to speak tomorrow. 5% is kind of a magic number where it becomes not just a gating factor in valuations, but maybe as a growth inhibitor as well. We're not there, but that would be something that would probably make us maybe a bit more concerned that it's not just going to be a rotational market, but maybe it's a bigger correction.
- [21:51]
Guy Adami
Yeah. On the flip side of that, so rates going higher, multiples get compressed, we start getting softer data. Right. And there's more pressure, let's say, from the White House on Fed chair Powell to lower interest rate. How do you think about that? I mean, because Again, we have this situation where fed funds, you know, is not pricing anything, maybe a 30% chance of a 25 basis point cut in the next couple of months or so. How are you thinking about lower rates and what that might mean to equities in particular? Will it kind of reignite a broader rally?
- [22:19]
Mike Wilson
Well, I mean, look, I mean, they cut rates, 100 basis points in the back end went out, right. So in many ways, I think Powell front loaded the rate cuts. Some of that was probably just to get ahead of the election. You know, didn't want to look too political. And now he's just saying, look, we're going to wait. He's not cutting tomorrow, they're not coming tomorrow. Maybe they cut one or two more times this year over the course of six months. But, I mean, I think Jay Powell seems, he seems pretty strong. I don't think he's going to cower to political pressure to do the wrong thing. Front end loaded the rates, and I think there'd be, I think the markets would be very upset if he were to cut rates under pressure and then the back end actually goes out because we don't need a rate cut. So I think they got to be really careful with, you know, front loading, more rate cuts for, obviously for political pressure. But even just because they're trying to get, you know, they're trying to juice the market, that would not, the bond market would not like that, in my view.
- [23:07]
Melissa Lee
What do you think is the biggest wild card when it comes to the bond market, when it comes to the Trump administration and its policies? I mean, a lot of the policies seem inflationary. If rates do come down, it could be, it could spur economic activity, which could stoke inflation. I mean, is there any risk of the Fed actually raising or we should be concerned about inflation rearing its ugly head again right now?
- [23:28]
Mike Wilson
I'd say no, because I think, I mean, look, the economy is doing fine. But remember, this gets back to the doge. If they shrink the government, okay, you're going to have probably a disinflationary force on the economy in many ways.
- [23:39]
Melissa Lee
Right.
- [23:39]
Mike Wilson
So I'm not as worried about inflation getting out of control as I am about maybe growth concerns coming back. Right now we're kind of in a sweet spot. You know, below 450 would be better, but, you know, 465 isn't the end of the world. You know, we're probably trading kind of where we should be. What I like the best right now is that the market is new. Things are popping up. It's not just seven stocks. And as an investor, that's way more exciting, right?
- [24:01]
Melissa Lee
Mike, great to see you. Thank you. Mike Wilson of Morgan Stanley. More than just eight stocks in your view?
- [24:07]
Guy Adami
Faithfully, Mike. I'm not bringing the guests back here, but when Broadcam joined the party, I mean and I think yesterday's really, I'm glad you teed me up there. I mean those eight stocks, the fate of the market was really in them. So if you want to talk about it broadening out, I know we've done that a bunch over the last year or so. It was bullish that there was so much money that came out of those yesterday. The S and P outperformed in that way. Those eight stocks are like 25, 30% the S&P 500. So I guess there is demand for some of these other stories. And so again, valuations the silver lining I've been trying to be, you know what we started this year and I told you I was fairly neutral on the markets here I am worried about the concentration. I am worried about the, you know, the kind of valuation turns that we've seen to the upside because of this euphoria in and around this theme. I think yesterday probably took a little air out of that.
- [24:56]
Dan Nathan
We're going to have Vinnie and Porter on and if you recall when they are on in June on Fast Money they said make volatility great again and they were spot, they're always spot on. But over the last couple weeks you've seen glimpses where volatility is going to be a story. And listen, it was a one day event yesterday. I get it. My sense is you're going to see a lot more of that going forward.
- [25:14]
Melissa Lee
All right, coming up, General Atlantic's Martin Escobarri joins us next where he sees the biggest opportunities in tech emerging markets and why he says the IPO market could be about to heat up. You're watching Fast Money in Miami live from the Iconnections Global Alts conference. We're back in two. What's at stake when administrations change? From the first 100 days and beyond.
- [25:52]
Dan Nathan
EY brings insights on the issues that.
- [25:56]
Melissa Lee
Executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability. No matter the policy shifts, EY helps business and government leaders remain resilient and seize dynamic growth. Navigate the geopolitical and economic landscape with confidence.
- [26:15]
Guy Adami
Learn how to use AI to be more successful with cnbc. Make it's new online course.
- [26:21]
Melissa Lee
We'll give you examples that can help you master AI tools.
- [26:24]
Guy Adami
Go to CNBCmakeit.com AI and register. Now.
- [26:35]
Melissa Lee
We'Ve got a news alert out of the Trump administration. Eamon Javers has got the details.
- [26:38]
Eamon Javers
Eamon hey there, Melissa. The Trump administration is offering what amounts to a buyout to all federal workers. In an email going out to the federal workforce this afternoon, the Trump administration is saying that if they offer their delayed resignation this week by February 6th, then they can continue to receive all of their pay and benefits until the end of September, even though they won't be required to do any work between now and then. So that's sort of the carrot in this carrot and stick effort. In order to make federal workers leave the workforce, they will be able to collect all of their pay even though they're not working until September 30th. According to the email sent out today, a senior administration official saying that they expect 5 to 10% of the federal workforce to take this buyout offer. They say it could lead to $100 billion annually in savings for the federal government once they clear that group off the payroll of the federal workforce. So all of this part of the carrot, the stick, of course, is the return to office mandate that the Trump administration has put in place. So the federal workforce here getting a bit of a shock to the system, Melissa. They're not used to being dictated to this way. And this is something that we really haven't seen before. Interestingly, in the email it says if you want to accept this offer, simply hit type the word reply in the email and hit send.
- [28:02]
Melissa Lee
Well, that's efficient. Eamon. CNBC.com also is reporting some news out of the Navy.
- [28:08]
Eamon Javers
Yeah, that's right. It's related to Deepsea. CNBC.com has gotten ahold of a memo to all sailors in the Navy that was sent out on Friday in which the Navy says that sailors are not allowed to use deepseaq either for work or for personal purpose purposes. They're obviously concerned about the Chinese ownership of Deep Seq. The Navy's warning saying, we would like to bring to your attention a critical update regarding a new AI model called DeepSeek. The memo says it's imperative that team members do not use Deep Seek AI for work related tasks or for personal use. So that's an interesting response from the federal government as well, Melissa. And we may see that roll out through the entire military defense industrial complex.
- [28:52]
Melissa Lee
Eamon thank you. Eamon Javors in Washington. The IPO market has been ice cold since a record setting 2021. But our next guest says that is about to change. He's working with 30 companies he thinks are ready to go public right now. Martin Escobarri is the co president and head of global growth equity at General Atlantic. Martin, great to see you.
- [29:09]
Martin Escobarri
Great to see you.
- [29:10]
Melissa Lee
Welcome to Fast Money. So what has changed in the environment? Is it the new administration? Is it just the cycle? We are in the market.
- [29:17]
Martin Escobarri
Yeah, We've been without an IPO market for three and a half years. This is the longest this century. The second longest was 18 months starting in March of 2000. After the dot com, there's about 3,000 companies waiting to go public. That drought has been great for growth equity because the pricing for private companies ready to go public who have not been able to access capital has meant opportunities for us for the IPO market to open. Historically, looking through the cycles, three things need to be true. You need to have at least 18 months of positive market performance, two years ripping. You need to have Vix low and relatively stable check. Third, you need a handful of IPOs to pop. That hasn't happened. Our bet is it will happen and the IPO market will be back roaring in 2025. Now I think the IPOs will be different. In my history, in my 25 year track record of as an investor, experience, as an investor, there's only been two periods where small companies can do successful IPOs. 2000 and 2021. So 2041, we'll see it again. I think the IPOs of 2025 will be larger, profitable, predictable, great companies. And we've got a handful that are eager to go and 20 plus that are ready to go.
- [30:26]
Melissa Lee
What do you think the investor appetite is for certain kinds of IPOs, certain kinds of industries? Has anything changed because of yesterday's rethink about AI and deep seek in terms of the portfolio of companies that you have right now that focus on AI.
- [30:39]
Martin Escobarri
And technology, I'm excited about the news of yesterday. I mean it's a talk of talent you guys are tired of talking about.
- [30:46]
Melissa Lee
Not at all.
- [30:47]
Martin Escobarri
Price of intelligence came down. That's good for the world. And what we're seeing is all our portfolio companies are using AI to cut costs to drive productivity. And ROI is already there. The next generation of AI is the application layer. After five years of sort of venture bets in the application layer, we're finally seeing companies that are leading, that are creating new services using AI models, proprietary data software that works better. We just did three major investments in AI. I think the next two, three years will be very exciting on the application layer. And I think investors will look for that.
- [31:23]
Guy Adami
Martin, you just mentioned profitability. That's something that should be a key metric when you're going public. What are some of the other metrics you think investors should focus on or some of the things that you guys are focused on? That kind of ticks a lot of boxes and signals that this company is ready to go public.
- [31:37]
Martin Escobarri
Yeah, listen, when we look at investing and I think public market investors are no different. The size of the market, the size of the price. We want companies that are going after vast companies. We are companies that are profitable. And then we want companies whose profitability has moat. Is it defensible? Do you have true competitive advantage or you just experiencing profits, temporary profits because you were first mover. But that's not defensible. So I think you want large markets and defensibility of profits in addition to profits.
- [32:03]
Dan Nathan
Let's switch gears to emerging markets because that's something you like. You know, Argentina, a lot of people be talking about that for years to come and there are many chapters left, but on the margins, incredible success story. Flip side of the coin is Brazil. You saw me looking at it. We're at a 10 year low in the EWZ, flirting with a 20 year low. Is there a potential turnaround in that part of South America?
- [32:23]
Martin Escobarri
We have been investors in the emerging markets for 22 years and for 22 years we've made more ROI, more IRR in the emerging markets and developed markets. It is tricky, it is harder if you go back 75 years. Today we are at the highest discount for emerging markets that we've ever seen. 75%. We haven't seen it since World War II. You can buy the entire country of Brazil for seven times earnings. It's pretty exciting times. It is risky, but I think at seven times earnings you get your money back in dividends in four or five years. I think you're doing okay.
- [32:58]
Melissa Lee
Martin, so great to speak with you. Thank you, thank you.
- [33:01]
Martin Escobarri
Great to see you.
- [33:01]
Melissa Lee
Martinez Gabari of General Atlantic Guy Trading.
- [33:04]
Guy Adami
The globe over there.
- [33:05]
Dan Nathan
I mean, well, Tim Seymour rubs off on all.
- [33:07]
Guy Adami
I know. But you know, one thing and again, I'm not going to kind of jump the guys here from Seawolf, but you know, you were on stage with them earlier today and they're starting to look, you know, far afield here. And I think that is going to become as you're looking for value in the public markets, as the concentration in some of these names have seen crazy multiple expansion here. I think there's probably going to be some great opportunities outside the Us.
- [33:26]
Melissa Lee
All right, we've got an earnings alert here on Starbucks shares just turning lower in the after hours after the coffee chain's latest earnings report. It was Brian Nichols first full quarter since becoming CEO in September. CNBC's Courtney Reagan's got all the numbers. Court.
- [33:38]
Edward Jones
Hi Mel, good to see you. So the coffee giant did beat on earnings by 2 cents slightly on revenue to total. Same store sales lower for the fourth straight quarter, but also coming in better than expected at down 4%. China Comparable sales down 6%. Transactions overall down 6%. Average ticket up 3%. And then on the call, which is ongoing right now, Nikkei discussed his back to Starbucks strategy. He's talking about investing in the staff processing and technology all to get back to that four minute delivery promise. And Nichols noting quick changes that they've made including 40% fewer discounted transactions in this most recent quarter quarter. Also eliminating the extra charge for those non dairy milk customizations. But he notes plans to further simplify the menu. He wants to reduce beverage and food SKUs by 30% by the end of fiscal 2025. He also sees opportunity to potentially double stores in the United States. Coffee condiment bars, those are coming back along with ceramic mugs and free coffee refills for customers dining in. Remember, Starbucks is sort of that third place location. Still no full guidance from the company. They suspended it when Nickel came in. But the CFO did note at least some puts and takes expected in the current quarter here and there. So maybe the analysts can work a little bit off that. Brian Nicol will be on squawk on the street tomorrow. He's going to discuss the quarter, of course, and a strategy for the turnaround. So make sure to tune in to that. But Melissa, back down to you in Miami.
- [35:00]
Melissa Lee
All right, Court, thank you. Courtney Reagan on Starbucks. And again, we're watching this very closely. I mean making the experience much better, making the stores much better. Efficient.
- [35:09]
Dan Nathan
It can only be more efficient. I'm not trying to be wise, you know that's true.
- [35:13]
Melissa Lee
Yeah. And you go to Starbucks almost every single day when you're on fast.
- [35:17]
Dan Nathan
To get other people.
- [35:18]
Melissa Lee
Yes, to get everybody else.
- [35:19]
Dan Nathan
Not for myself, I know. However, I mean if you look comps were lousy, but they were better than feared. But margins were down about 20 basis points. That is going to be a problem. And if our crack staff in ec and they are a crack staff, can look at a five year chart, I mean we've been in a pretty significant downtrend since the summer of 2021, which we have not broken. And I fear that this little pop we've seen is going to be sold off. So it's not a disastrous quarter. I don't think it's good enough though.
- [35:45]
Guy Adami
Yeah, again, you're going to have to give them a little time. But, but the stock had that huge gap this summer, so it might have pulled forward a lot of that. So if you talk about doubling market costs and reducing discounts, that might be a bit of a disconnect here. It might kind of weigh on margins also.
- [35:59]
Melissa Lee
Coming up, big short traders Porter Collins and Vincent Daniel will join us to lay out the under the radar market impact from the Trump administration. Fast Money live from the Iconnections Global conference in Miami continues into. Welcome back to Fast Money live from the Iconnections Global Alts conference in Miami Beach. Vincent Daniel and Porter Collins are known for shorting the housing market ahead of the financial crisis. Their story was documented in the best selling book the Big Short, which became a feature film. Their current firm, Seawolf Capital, is coming off a blockbuster year. Vinnie and Porter join us now. Guys, great to see you.
- [36:47]
Vincent Daniel
Great to be back.
- [36:47]
Melissa Lee
And when I say Blockbuster, we're talking 66% returns last year. So what did you do last year to get those 60? What was it that got you there and where are you now?
- [36:59]
Vincent Daniel
So, you know, we had a good year coming into the election. And if you think about the way we invest, people always think we're bearish, which we can be, we can vary, but you know, you got to think in terms of probabilities. Right. And we thought that, you know, Trump had a good probability, not a political statement, and a good probability of winning. And then you take that to, well, if he wins, what are the stocks that go up the most and possibly fall the least if he doesn't win? And so Vincent came on this show, pitched Fannie and Freddie Preferreds, which more than doubled. I pitched a stock that more than doubled. Not a lot of downside, a lot of upside. We sit here and we're scouring the globe and everyone's losing brain cells around AI, all that stuff. And how do we make easy money? And that's our focus right now.
- [37:53]
Melissa Lee
I mean, you actually said on stage during our big short panel today, AI, we don't want any part of that trade. Stay away. Okay.
- [38:00]
Porter Collins
You had Brad on before. The last thing I want to do is upstage him. I look like it's the world's most.
- [38:05]
Melissa Lee
Crowded trade at this point. And you are contrarian investors. So where are you going now?
- [38:10]
Vincent Daniel
Well, actually, lyda we're a little bit AI in the fact that, okay, if, if you look at the cheapest stocks in the world, you do screens, they all show up emerging markets, right. And we pitched, you know, Brazil and Chinese stocks and came up and said and everyone hates these Chinese stocks. Alibaba, which is AI came out and said that their model is better than Deep Seq. And I didn't know what Deep Seq was before Saturday and still don't, but you can. A lot of ways to win with the stock trading at four and a half times earnings cash. And the famous question we ask ourselves, what if it goes right, can it trade to 15 times? That's 3x our money. And so that's the type of thing we're looking at. We get excited about and saying, wow, this market's really cheap. Everyone talks about how expensive things are. But go to Brazil, talk about the guest just had on 10% dividend yields in the index.
- [39:14]
Dan Nathan
Right.
- [39:14]
Vincent Daniel
And so where can we make money? That's where everyone else is not looking.
- [39:18]
Dan Nathan
You know Vinny with Melissa, your panel's been the highlight the last couple years at this conference and when you were on the show in June, our show, you talked about and I teased it make volume great again. And you know, we've seen at least five or six different times over the last eight or nine months where it has been great. They're one day events. I think you're going to start to see more prolonged events. What are your thoughts?
- [39:39]
Porter Collins
Absolutely. And I think I said on the panel today that the straw that starts to drink is President Trump. Like it's no longer the Fed. It's, it's and look, we've seen it today. We've seen it, we've seen it for seven days so far. He comes out and moves markets and it's our job to not to be extremely objective and to try to determine where the puck is going. In many respects, what he wants is pretty clear. Like in terms of American exceptionalism, whether he's going to use tariffs or not. In terms of agreements, our view is that hopefully we can take advantage of where we think he wants to go and what is most probable of what he's going to get done. So talking about the emerging market trade, in order for this to work and in order for American exceptionalism to work, the dollar has to weaken, in my opinion. Right. And if the dollar starts to weaken, we're going to start, a lot of people are going to start looking at emerging market stocks relative to owning 15. The top 15 names. And this is where we see value. And I know value is a four letter word for a lot of people these days, but in general that's the, that's the crux of our analysis and in our process. And then from there we go from determining rates to change. And that's where we see the biggest opportunity. Opportunity.
- [40:49]
Guy Adami
Porter, you just heard Martin General Annec, one of the most successful VC firms I think of the last 30 years or so. They're excited about the IPO market reopening. How do you feel about M and A and the potential for deregulation in some sectors? Do you think that will be a big theme in 2025?
- [41:04]
Vincent Daniel
I think it's the deregulation is probably bigger than people can, can wrap their heads around. And so you know, Steve talked about in the panel, there's going to be a lot of bank M and A coming this year.
- [41:16]
Melissa Lee
Steve Iseman.
- [41:17]
Vincent Daniel
Yep. Steve Isman, sorry, our old boss. And you know, there's oil and gas, there's a lot of deregulation coming. There's already been a lot of mergers in this stuff. And so I think you're going to see a lot of M and A happen. I mean they, last year they, they stopped the, you know, the JetBlue merger with Spirit. Stuff like that's probably going to go through. And so I think you're going to see a lot more of this, a lot more business friendly. And that's why, you know, we're pretty bullish. And the stuff that we see, you know, we have more ideas than capital and there's just a lot of stuff that we see outside the top 15 names. And it's pretty exciting for us.
- [41:52]
Melissa Lee
After a year like last year though, I would imagine that people are knocking at your doors. You mentioned you have a lot of ideas and not enough capital. Capital's all around us here at this conference.
- [42:01]
Vincent Daniel
I mean, we're the lead professional guys here.
- [42:04]
Porter Collins
The fact of the matter is we actually really enjoy running our own money. And look, if we were to open up, we would look for a partner that actually agrees with us. Our process does produce volatility in our, you know, in our return streams. And so you have to accept that we've learned to accept it and deal with it. But you know, it's funny walking around this conference while all the people are looking for capital. We got about like five or six stock ideas from people who are coming up to us saying, hey, value idiots, did you know these three, four names? Right? And we're like, no, I've Never looked at this. And that starts our work that we need to do to see whether it'll go in the portfolio.
- [42:38]
Melissa Lee
So you've got like a little notebook where the stickers and all that. When we were walking through the halls. You're also telling me about fti, which is a stock that we talk about on the show. We talked about it when it was going straight up and then we talked about when it went straight down on the back of the money waters short report. Where are you now on that?
- [42:54]
Vincent Daniel
Well, we sold the stock at $20 something dollars and it, it went up 10x on us. We doubled our money. We were high fiving each other and then it went up 10x. And so we knew the name and the short report caused a lot of volatility. We like volatility. So the stock went from 200 to $75. And at $75 we knew the stock. We re underwrote it pretty quickly and we said we think this is a little bit overblown and we bought the stock. And so that's the opportunity. Opportunity of being small and nimble and constantly reevaluating the process.
- [43:30]
Melissa Lee
Last question. Because we're out of time, unfortunately. But your take on what the Fed could possibly do this year I thought was really interesting because I feel like that is something that investors are not at all baking in. I mean, I asked Mike Wilson and Morgan Stanley, do you think there's a chance that the Fed raises rates? You said on stage that you thought that there was a chance.
- [43:49]
Porter Collins
It depends. Right. So if Trump's policies creates a very pro growth agenda and we do see economic growth, I think six months from now there's a higher probability than what the market's expecting that we will be talking about thinking about raising rates. It's possible. But that's six months from now. I don't think that's a today event.
- [44:08]
Melissa Lee
A lot of road to go down.
- [44:09]
Porter Collins
Yes.
- [44:09]
Vincent Daniel
It's not as simple as it was in 22 where we knew they were going to hike rates. Right, right. That was easy. This is a little bit harder right now.
- [44:18]
Melissa Lee
Always great to get your guys perspectives. Thank you so much.
- [44:21]
Porter Collins
Awesome. Thanks for having us on.
- [44:22]
Melissa Lee
Danny and Porter, they are fun people, people.
- [44:25]
Dan Nathan
I mean when they see these guys with Steve and Danny, they run after.
- [44:29]
Melissa Lee
Them in the hallways.
- [44:30]
Dan Nathan
It's like Cher, four of them.
- [44:32]
Melissa Lee
Cher seems like four shares.
- [44:33]
Dan Nathan
Like four shares.
- [44:34]
Melissa Lee
That's the worst analogy.
- [44:36]
Porter Collins
I did not think that's where you were going with that one. But you know, it works. Quite talented though.
- [44:42]
Guy Adami
It's funny you know these guys, come on, we've known them for a while. They have that great track record. They seem pretty objective all the time. They're really fun, actually, outside of the markets and stuff like that. So very excitable too.
- [44:53]
Vincent Daniel
Try to be.
- [44:54]
Melissa Lee
Yeah. Thanks, guys.
- [44:56]
Porter Collins
Thank you.
- [44:56]
Vincent Daniel
Appreciate it.
- [44:57]
Melissa Lee
Coming up, a few fast movers catching our attention in today's session. How the traders are handling the moves in gm, Lockheed Martin and Royal Caribbean. More fast money live from the Iconnections Global Alts conference in Miami continues right after this. Welcome back to Fast Money. A couple of stocks moving that caught our attention today. We'll start with General Motors. Shares of the legacy automaker tanking despite posting better than expected results for the quarter. Concerns over potential tariff impacts and changes to EV pricing driving the stock to its biggest drop since early 2020.
- [45:40]
Guy Adami
Dan, you know, it's interesting again, tariffs has become a thing now and I think the guys were just talking about the potential for volatility around uncertain policy. That's not something we're really focused on, I guess, for the last few years. But you see a company like this, the way they performed over the last year, at least the stock, you say to yourself, okay, they got to kind of knock the COVID off the ball. I think the guidance was a little lacking. There's uncertain around policy. I see why the Stock was down 10% on those numbers.
- [46:05]
Melissa Lee
It's interesting because obviously tomorrow's Tesla's earnings. So this will be compared, you know, in terms of what they say, 100%.
- [46:10]
Dan Nathan
And the commentary around that. And to, you know, Danny's Moses point on stage with you today, it's going to be interesting if interest rates come up with Elon Musk. So that's something to watch for.
- [46:20]
Melissa Lee
He has talked about high interest rates hurting his business before. So could it happen again? Take a look at shares of Lockheed Martin. That stock plunging after missing on revenue, issuing disappointing guidance, the defense name seeing its worst day since October 2021 hitting its lowest level since last July. We actually had Raytheon, I think, too out disappointing. So.
- [46:39]
Dan Nathan
Well, you know, these stocks all got the benefit of the doubt spring of last year into the fall. And then when it became clear that candidate Trump looked like he was going to win from the election on, disastrous for a myriad of different reasons. What it means is they're no longer getting the benefit of the doubt and the market is now focused on that guidance. Valuation is fine, but the, I guess some of the feelings around this whole space is sort of squishy right now.
- [47:02]
Melissa Lee
And Cruise Line Royal Caribbean trading at all time highs on the back of an earnings beat. The company issuing strong guidance saying expects increased demand in the coming year. Carnival Norwegian Cruise Lines catching the wave. Both up about 8%. This really shows, Dan, that the consumer is out there. He or she is spending.
- [47:18]
Guy Adami
Yeah, we've seen it in the airlines too, right. Some of those names have gone parabolic. I think the most interesting takeaway there, and I know, guy, you're going to be excited about this, that Royal Caribbean, they're entering the river cruise market.
- [47:27]
Melissa Lee
The guys are waiting for a river.
- [47:29]
Guy Adami
Cruise, which is something that I think.
- [47:31]
Melissa Lee
Yeah, yeah, yeah, yeah, yeah. Up next, final trades. We'll be in Miami tomorrow at 5pm with another huge lineup covering everything from the Fed to big tech earnings kickoff. So stay tuned for that time for the final trade. Around the horn, Dan. Yeah.
- [47:55]
Guy Adami
Baidu out of China, a lot of cash.
- [47:57]
Melissa Lee
Well positioned for the AI trade, guy.
- [48:00]
Dan Nathan
Derek Mullen from Dublin, Ireland is flying to New York for the live show.
- [48:05]
Melissa Lee
So Derek, that's amazing.
- [48:06]
Dan Nathan
You're the man. Look at Alibaba, Melissa Lee.
- [48:09]
Melissa Lee
I will. And hi Derek. Thanks for flying in. Thank you for watching Fast Money live from Miami. Mad Money with Jim Cramer starts right now. All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their 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 Learn how to.
- [49:09]
Guy Adami
Use AI to be more successful with CNBC Make it's new online course.
- [49:14]
Melissa Lee
We'll give you examples that can help you master AI tools.
- [49:18]
Guy Adami
Go to CNBCmakeit.com AI and register now.