← CNBC's "Fast Money"
CNBC's "Fast Money"
Nvidia Reports Results… And The Future OF Fannie Mae And Freddie Mac 5/28/25
00:43:50
Nvidia on the move after reporting its latest results. How the Fast Money traders are handling the chip giant’s stock reaction, and what one top semi analyst thinks about the quarter. Plus Mortgage maneuvers out of the White House, as Presiden Trump weighs ending the conservatorship for Fannie Mae and Freddie Mac. The impact it could have on mortgage rates and the housing market. Fast Money Disclaimer
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- [00:00]
Melissa Lee
What does it mean to live a rich life? It means brave first leaps, tearful goodbyes and everything in between. With over 100 years experience navigating the ups and downs of the market and of life, your Edward Jones financial advisor will be there to help you move ahead with confidence.
- [00:22]
Guy Adami
Because with all you've done to find.
- [00:23]
Melissa Lee
Your rich, we'll do all we can to help you keep enjoying it. Edward Jones, Member SIPC Are you still.
- [00:32]
Dan Nathan
Quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com credit card based on the February 2024 Nelson Report.
- [01:02]
Melissa Lee
Live in the NASDAQ marketsite in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. All eyes on Nvidia. Shares of the semi giant jumping after its latest earnings report sending its market cap above Microsoft for the first time in two months. We are dialed into the semi giants conference call bringing you all the details plus a government guarantee. What President Trump's plans for Fannie and Freddie mean for the rest of the housing sector and still too cheap. Shares of Abercrombie and Fitch soaring as much as 36% on the back of its. But one of our traders says the stock is still too cheap. They lay out the case for the apparel company. I'm Melissa Lee, come to you live from studio Be at the nasdaq. On the desk tonight, Steve Rosso, Karen Feineman, Dan Nathan and Guy Adami. And we start off with that all important earnings report out of Nvidia. Shares are jumping about 5% after the company beat both top and bottom line estimates for its fiscal Q1. The company's data center business also growing more than 70% over the last year. The conference call kicking off just moments ago. Christine BC's Christina Parts and Nobles got all the details on the quarter. She joins us here on set.
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Karen Finerman
And then I promise I'll go downstairs and get on that conference call. Right. In terms of the guidance, Q2 guidance is really a big deal for this company, $45.1 billion, which sounds like it's a little bit less than, you know, the $2 billion guide that they always do every single quarter and they've been really great but is still Higher than a lot of buy side estimates that have come down just over the last little while to factor in for the H20 ban. And speaking of the H20 ban, these are the chips that were geared specifically for China that fel the U.S. threshold. The company announcing in this report that they actually took a $4.5 billion write down, which is less than the 5.5 billion they talked about. The reason why it was a $1 billion difference is they were actually able to reuse the materials. And for me, that's a little bit of news because previously so many analysts said, oh, this is complete wash. Nobody wants these H20 chips because they're so low specced and they actually fall lower than the Huawei Ascend chips too. So that's for the Q1. And then for Q2, they are also taking an $8 billion write off for the so for a total of like 12.5, which is also less than what Jensen Huang said in a stratachary report recently, about $15 billion. So those are all good portions of news and gross margins too, if you don't account for the write down came in at 71.5. They were anticipating 71.
- [03:17]
Steve Grasso
So confused a little bit about the 1 billion, $1 billion difference. Is that that they sold that much or that was what, the whole 5.5 or 4?
- [03:26]
Karen Finerman
It's not sold. It was just the write down.
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Steve Grasso
Write down. Right, but so that was the write down on the entire thing. 80% from 5, 5. No, no.
- [03:35]
Karen Finerman
They're saying originally they're like, we're going to take $5.5 billion hit in this quarter.
- [03:39]
Steve Grasso
Right.
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Karen Finerman
Now they're coming out and saying, hey, we're not going to take down that much of a hit because we were able to reuse the materials for some of the chips. So now it's only 4.5 million.
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Steve Grasso
So 24Q1.
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Karen Finerman
Yes.
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Steve Grasso
Okay.
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Melissa Lee
So the point that you're making about the revised chip for the China market, which is actually maybe not as competitive as some of the domestic chips in China.
- [03:59]
Karen Finerman
It's not.
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Dan Nathan
Yeah.
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Karen Finerman
Especially the Huawei cent.
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Melissa Lee
So is anybody buying those chips?
- [04:03]
Karen Finerman
Well, somebody. The choice of words from the CFO commentary was the materials were able to be reused. So certain materials, but not the full amount. Right. And I don't know that's going to come up for sure on the call which market is going to be buying even lower spec chips. Right. And it would be okay with the US Government to do so. And then in context too, a lot of reports have come out very recently too that Nvidia is still moving ahead with another chip that will fall under the US threshold, maybe the B30, whatever you want to call it. But they've been doing this for quite some time. It's not that like they're going to say goodbye to the Chinese market, especially with that new R and D center in Shanghai that they just announced. They're still, you know, really maintaining those relationships with China with Jensen Huang there not too long ago. So I don't think that door is closed at all.
- [04:48]
Dan Nathan
Yeah, you know, it's interesting. We've been going back and forth about exclusions, Right. And I just wonder, Christina, the longer we don't have some sort of resolution with the Chinese with you know, the tariff situation, don't you think the risk like it extends further? Right. So we've had these big write downs. We have one for this quarter as you just detailed, we have one for next quarter. You think about like China has been about, I don't know, 15% or so of their revenues over the last two years or so. I think it like there's risk to that. I mean do analysts are talking a little bit about that because we don't have resolution with China. There's Nvidia, there's Apple, there's Tesla. These are squarely like these are leverage pieces for the Chinese here.
- [05:23]
Karen Finerman
I like that perspective and I would say that analysts are not taking that perspective. If anything, they're so bullish now that the Middle east has come forward and promised to buy 18,000, for example, Saudi Arabia, 18,000 chips within the next five years, specifically from Nvidia, UAE is going to be buying billions of dollars more and spending more on US Soil as well. The sentiment I'm getting from all so many reports is that China's revenue stream is going to shrink dramatically. But don't worry, the Middle east is here to save the day. And I don't think they're really acknowledging how big of a drop that could be from blocking sales to China in 3, 4, 5/4 from now and especially when Huawei continues to steal market share.
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Melissa Lee
So do you think dollar for dollar, the Middle east can replace China's revenues? Because the market share loss in China over the past four years is astronomical. And that's even before these tightened export controls. So they tighten further. They ship these degraded chips over to China that are not competitive and at some point they're just going to just lose it. It went from 95% to 50% in.
- [06:27]
Karen Finerman
Four years, but then that's a positive. So now I'll flip it and say 95 to 50% and yet look at the stock. Look at how well they've done every single quarter and they've continuously lost market share in China. So to your point, if they continue to do so maybe it won't be that bad. Why? Because they went from 95 to 50 and everybody's still cheering and everybody loves this company. It's so highly held, owned and in the spider ETF 6% weighting and so really impacts.
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Melissa Lee
I mean if the hyperscalers keep spending at the rate they're spending then maybe we can still be hopeful when the.
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Steve Grasso
95% of what kind of market there in terms of price is 50% of a much higher margin.
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Melissa Lee
Right.
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Steve Grasso
Much more. Is that better? Dollar wise is probably better but still you don't want to be losing that much.
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Karen Finerman
Mark, that's a good point. Especially with the black wall and it's Blackwells aren't there because I would say the specs, the average selling price is much, much higher in the margins on that. But that's a very good point.
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Melissa Lee
All right Christina, we're going to let you go because it's five or six that calls underway somewhere to be. We'll see you later on. So I just.
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Karen Finerman
Right now and right.
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Melissa Lee
Okay, what do you think?
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Tim Seymour
Well Gene Munster tweeted that, you know, it's actually a lot better than people thought when you back out the China stuff. And he's right. And then Dan's point is at some point you're going to have to say well wait a second, you can back out all you want and how long it's going to last. The most encouraging thing to me was margins sort of hung in there for now. You know that was a surprise to me. I thought they'd come in a lot worse than that and they didn't. They're hanging around so that's good. And Karen and Steve were talking about the gaming revenue which that's sort of old school in video obviously not as big a deal but that was an impressive beat as well. It's good enough to get the stock where it is. The question is is it good enough to get the all time highs of.
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Melissa Lee
153 and change gaming still 10% of revenue. So it's not nothing. I mean it's much more.
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Guy Adami
So you have the China ban, you have competition and the hyperscalers where Christine has said if. When you said if they continue to spend, she said if. So if you have Google and you have Amazon making their own chips, Microsoft pulling back data centers, there's a lot of ambiguity there, a lot of gray area. I don't think the Saudis replace that total income. I'd be a seller of this population after hours. And I think it was just people were bracing for a lot worse than we got. I think it comes off here. I think you're looking at lower prices tomorrow.
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Melissa Lee
Yeah. What do you think, Dan?
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Dan Nathan
Listen, I think the story has gotten like, pretty much on the equilibrium. Right. There's still a lot of uncertainty. What we just talked about with the China situation, I think one of my biggest takeaways over the last month or so is that Jensen's literally been on the President's tail no matter where he's going. And I think he recognizes the fact that they have the ability to kind of ramp up and, and, you know, in the Middle east and there's going to offset a bit of this uncertainty if he remains loyal to the President's causes. You know, Christina just mentioned the Stratacherian interview with Ben Thompson about a week and a half ago. I mean, he went all in. I support the President. I support his vision. I support this or that, whatever. I mean, these guys know how to play this sort of situation. So if they can ultimately get to a place where even if there's not some trade resolution and they get some sort of exclusions, they get some of this business back, they've grown the business in areas like Saudi Arabia, it's not a bad thing. I'm with Steve, though, and, and I've been saying this for now a while. You know, the Capex by the hyperscale, it's going to slow down at some point. And, you know, like the rate of change over the last year or so has slowed down a good deal. And so we haven't reached that digestion phase. So that's likely to come. No one can put their finger on it, but Nvidia hasn't done anything in a year. Okay. It's like literally the same spot it was a year ago. And I think that's telling you enough. There's probably better ways to play this theme right now.
- [09:57]
Melissa Lee
Although since the last earnings report, it's up about 12% versus the semiconductor ETF, which is 3%, basically flat. I mean, that's an interesting context in terms of going into this quarter. There's every reason to find fault with this quarter, but investors are liking it. They're bidding out 5%. And maybe that also has to do with the sentiment in the markets at this point, with the narrative that the worst of tariffs are behind us.
- [10:20]
Tim Seymour
The Magnitudes of the in terms of the absolute dollars dollars are staggering. The percentage beats though get less and less seemingly each quarter, which, listen, there's nothing wrong with that. I mean that's just the nature of the beast. I mean that's the natural progression. But they're being rewarded for what I think are still beats from three or four quarters ago. And that to me is in not the price to earnings valuation, but the price to sales.
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Steve Grasso
So a couple of things. The margins being good we talked on is really important that earlier in the year was a big question mark. Right. They talked about, oh, when we scale up we're going to see margins improve. Maybe we'll see them improve maybe even a little bit more quickly. So that's good. But you get to, I mean the AI story now does seem to have legs again. It really didn't about three or four weeks ago. And so I think that that Middle east trip was huge. We remember we had Elon Musk talking about 100,000 GPUs. And so all that, having said, that's great. I do agree it's sort of had an extraordinary run from what, 93, 90 something. I, well, I collared some. So that's sort of, that's. So it is going to be smaller. So I probably do nothing then.
- [11:28]
Dan Nathan
Yeah, just on a price action standpoint. I mean, you think about this huge basis and maybe they can give it a one year basis. I mean, Mel, to your point, yeah, it's up 12% or so from that last quarter. But the stock's been all over the place within this fairly wide range. And the thing you have to ask yourself is is there anything in the quarter that you can kind of expand or the guidance that they gave that's going to cause this stock to kind of rerate and establish a new range? I don't think it's there and I think we're likely to see a continuation of this sort of range that go goes from really 100, let's take out the April lows to this kind of $150 level.
- [11:59]
Steve Grasso
Just one last thing. You know, I always say you got to listen to the call this call, you really got to listen to it later. There's going to be so much nuance in there that the numbers only tell half the story.
- [12:07]
Melissa Lee
Yeah, Christine is on it. We'll get to all the headlines as they come through. And also don't miss Nvidia CEO Jensen Huang on Mad Money tonight for a first on CNBC interview that is at the top of the hour. Well, stocks closing around, session lows at the major indices selling off in the last hour of trading. Earlier in the day, the Fed released minutes from this month's meeting saying it may face quote, diffic tradeoffs if President Trump's tariffs rekindle inflation. Treasury yields higher on the session. For more, let's bring in Michael Schumacher, head of macro strategy at Wells Fargo Securities. Michael, great to have you with us. Thank you. Where are we in this, in this market run?
- [12:39]
Michael Schumacher
So as far as the Fed goes, the Fed's really concerned about uncertainty regarding tariffs and trade, etc. Also, spending thinks inflation could stay high a bit longer than the market anticipates. You put it all together, the Fed's going to sit. There's no reason whatsoever for the Fed to move anytime soon. And I think what that means is if you're buying treasury bonds or treasury securities, you can't expect the Fed to come in with a big rate cut to give you a big capital gain. You've got to be comfortable with yield levels and just wait for Jay Powell and friends.
- [13:07]
Melissa Lee
What do you anticipate for yield levels here in the United States given the lackluster Japanese auction for longer dated Treasuries there?
- [13:15]
Michael Schumacher
It's a tale to bond markets. Melissa, so you think about the shorter term bonds, five years and in pretty comfortable. We think yields fall slightly there. The longer term stuff, whether it's Japan, there's not much appetite for 30 to 40 year debt. US people are very concerned about the big beautiful bill, lots of spending, etc. Not a big appetite for 30 years here either. I'd avoid the long end. I'd buy three to five year securities.
- [13:38]
Steve Grasso
So you talk about waiting for Jay Powell and friends. When do you think they come to the party in a, in a significant way?
- [13:44]
Michael Schumacher
Yeah, Karen, I think what happens there is it's late this year. So the Fed's incentive now is to wait, wait, wait. They'll probably go big when they eventually go, but probably fourth quarter, that type of thing. It's not going to be really soon.
- [13:54]
Tim Seymour
How important? Bond auctions in Japan last week they had the worst one since the late 1980s. How important is what's going on to what's going on here?
- [14:03]
Michael Schumacher
Potentially, I think it's a big deal actually because when you think about governments globally, the common thread is more spending, whether it's Japan, whether it's here, whether it's Germany, whether it's Canada. Bond markets have to absorb that and people are saying, you know what, yield levels aren't that great. Generally speaking, we're not getting compensated. To me it's a bad omen.
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Melissa Lee
So if yields go higher here on the ten year at least, is that a cap for the markets?
- [14:28]
Michael Schumacher
I think it restrains markets to some degree. And we're not saying yields go crazy. And I think it's really more the back end, like the 30 year stuff in particular. But it's a headwind. I think that's pretty clear.
- [14:39]
Guy Adami
So Mike, when you look at all this, when you digest it all, what do you think about inflation? What do you think about unemployment? Is the economy so the, the takeaway. Flip, flip the whole conversation on its head and say what does everything that you just said say about the economy? Now where are we? How good are we? Where are we in the, in the cycle?
- [15:01]
Michael Schumacher
The markets are telling this really nice story. If you look at inflation, swaps and that sort of thing, inflation is going to be high for about a year and come back to a pretty normal level in the US it seems awfully optimistic. That's what I got from the Fed minutes. That's what we get as well. You wouldn't need much of a lingering effect in inflation to make people pretty nervous. So I think things are priced a little bit too nicely for inflation.
- [15:23]
Dan Nathan
Mike, you just mentioned that when the Fed comes in to cut, they're going to go big. Right? And so when they cut in September is the first cut really since COVID Right. Going back to 2020 and then went big, 50 basis points. I think it surprised some folks. What do they go big for? Is it because the data is weakening? That was the reason why the Fed cut. They were worried about the jobs market back in September or is it because they can? So really, I mean, it's soft landing versus worries about a harder landing.
- [15:47]
Michael Schumacher
I think it's two things. One is because they could, if you look at Fed funds still very high above 4%. And the second thing which Powell has talked about a fair bit is he says, look, real yields are still very high. So what I think he and the committee want to see is evidence not that inflation is low, but that it's peaked. So we get this surge from tariffs, wait three, four or five months and it comes down a little bit. The Fed says, aha, that's a good thing. Now we can actually be afford, we can afford to be a little bit more aggressive here. We can come in, we can try to get some easing.
- [16:16]
Melissa Lee
And how does your view if at all change if the Fed doesn't move because inflation hasn't shown that it's peaked because tariffs remain in place for much longer than anticipated and or inflation is stickier than anticipated.
- [16:27]
Michael Schumacher
I think in that case. And also I guess the other scenario I throw in there, Melissa is the idea that spending is high. So think about the Senate tacking on more goodies to this huge bill and the Fed sets. Then what? Yields go up somewhat, probably not catastrophically, but you're looking at the 30 year yield probably in the mid to high fives, something like that. 10 year 5 ish, something of that sort. So unpleasant but not really awful in the bond market.
- [16:51]
Melissa Lee
All right. Mike, always good to see you. Thank you. Michael Schumacher, Wells Fargo.
- [16:54]
Tim Seymour
We had a conversation last night that you could have bond yields higher and the stock market higher. I think Michaels, he's not wavering in that, but I think he's in some agreement. I'll say this, the TLT to me is headed to levels we saw in October of 2023 which is like 82 and a half back of the envelope. Gets us about four and three quarters for 80 in the 10 year. And I just don't think the stock market's going to like it.
- [17:14]
Dan Nathan
By the way, he's a very fit man. If you had to guess how many marathons he's run.
- [17:18]
Melissa Lee
Four.
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Dan Nathan
That's for New York.
- [17:20]
Melissa Lee
Yeah.
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Dan Nathan
15 total. He was holding out on us.
- [17:24]
Melissa Lee
15 total total.
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Dan Nathan
Schumacher, good stuff. I got nothing else to say.
- [17:29]
Melissa Lee
That's it?
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Dan Nathan
Yeah. I'm just really excited for that. I thought that was amazing news.
- [17:32]
Melissa Lee
You can use.
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Guy Adami
You know when Scott Besson talks about how the treasury secretary how high or how tight the monetary policy is, he states the two year and the fed funds rate. The gap between. Mike said what to Dan's question, why are they cutting? He said because of where the fed funds rate is. The Fed is tight right now. They could be cutting if they want to. There's going to be a massive amount of cuts. It sounds to me like a Fed.
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Melissa Lee
Put oh, he said the economy is okay.
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Steve Grasso
Real rates are high which would be a reason.
- [18:06]
Melissa Lee
So you're constructive on the markets where you think Nvidia is going to fail.
- [18:09]
Guy Adami
I think in video is a stock specific. We look at. When you look at the chips they're boom bust cycles. We're pricing in video as a growth company to perpetuity. So that was the kicker. It's getting priced into infinity now for growing. I think that's a mistake.
- [18:29]
Melissa Lee
Okay. I guess my question was can the markets go higher without Nvidia? Can you be a disbeliever of the Nvidia story but a believer in the market.
- [18:39]
Tim Seymour
You know, it's funny, we had that conversation about Apple a couple of years ago where an Apple did not trade particularly well. The stock market went on its merry way. So probably the same thing can happen here. I'm with Steve on in video. In terms of look, I think the Fed could, Jerome Powell could call us right now and say we're cutting rates 50 basis points and I still think 10 year yields are going higher from here.
- [18:58]
Melissa Lee
Coming up, we're keeping an eye on Nvidia as the company conference call gets underway. The latest headlines from that and where a top chip analyst sees a stock heading next. And there's even more after hours action to bring you shares of HP and Salesforce on the move. After reporting the details and the numbers from those quarters next, do not go anywhere. Fast Money's back in tune.
- [19:18]
Dan Nathan
This is Fast Money with Melissa Lee right here on cnbc.
- [19:28]
Melissa Lee
This episode is brought to you by Square. Your favorite neighborhood spots run on Square. Did you know Square can help you turn your small business idea into a big success? Yes, even that wild idea for squirrelfuel, your squirrel themed coffee bar. Square is so much more than just a point of sale for local businesses. What started as a little white card reader is now powering things behind the scenes, helping you manage finances, schedule staff and cover cash flow gaps. With Square, you could keep things at Squirrel Fuel running like clockwork. No caffeine needed. Well, except for the baristas. And good luck finding ones willing to wear a squirrel costume. Square gets it. Local business can be big business, yet with growth comes complexity. But whether you're expanding to new locations or building your loyal following, Square meets you at every opportunity. Square helps you handle today and dream bigger for tomorrow. Go to square.com go fastmoney to learn more. That's S Q U-A-R-E.com go fastmoney square meet you on WhatsApp no one can see or hear your personal messages. Whether it's a voice call message or sending a password to WhatsApp, it's all just this.
- [20:42]
Karen Finerman
So whether you're sharing the streaming password.
- [20:44]
Melissa Lee
In the family chat or trading those late night voice messages, that could basically become a podcast, your personal messages stay between you, your friends and your family. No one else, not even us. WhatsApp message privately are you still quoting.
- [21:01]
Dan Nathan
30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com credit card based on the February 2024 Nelson Report.
- [21:32]
Melissa Lee
Welcome back to Fast Money. More after our action to bring you shares of HP getting hit hard and Salesforce also reporting results. Steve Kobach got all the details on both.
- [21:40]
Guy Adami
Steve hey there. We're going to start with Salesforce here. We're seeing that stock pop after hours from strong guidance for the rest of the fiscal year. For the current quarter, EPS beat by 4 cents. Revenue beat by about 8 million bucks. As for that strong guidance driven in part by currency tailwinds with the dollar weakening, of course. Going to want to listen into the call for more commentary on artificial intelligence Agent Force. That's their big product. Still in its early days, but looking for more signs of momentum now. Let's switch gears over to hp. Tariffs are the culprit behind these results. Look at Those shares down 15%. EPS missed by 9 cents at 71 cents a share. Revenue just a slight beat and guidance is way off expectations. I talked with CEO Enrique Laurez on these results. He says tariffs are really the culprit here. Told me it's going to take until the company's fourth quarter to fully mitigate tariff effects. And they're going to do what Apple's doing, moving production to Vietnam and India from China for all the products they sell in the United States. And of course they're going to have to raise some prices on products to keep their margins in order here. Mel.
- [22:42]
Melissa Lee
All right, Steve, Thanks. Steve Kovac. Karen, you think about Dell?
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Steve Grasso
Yes, exactly. Thinking about Dell, you on the one hand, you'd think the Nvidia move would be nice for Dell. Maybe it is. However, on the other hand, the hpq, I mean, you know, a lot of Dell's business is, you know, PCs and so monitors and whatnot. So that's not great. I don't love that.
- [23:03]
Tim Seymour
Yeah, there was a Dell upgrade earlier this week. I guess it was yesterday. But Salesforce real quick, I actually think it's okay. I mean they beat the full year. Guide was commensurate with the beat. That's good. Next year we're looking at 22 times next year's numbers. Not expensive. I mean the stock has sold off a lot. I think it's actually okay here.
- [23:22]
Dan Nathan
Yeah, I'm with Guy Dami here. One issue I have with this acquisition, Informatica and I can't speak to the strategic nature of it. But a financial standpoint, I mean Salesforce has like higher expected EPS growth, higher expected sales growth. They have a similar margin structure. I know that they want to get into some of the businesses that obviously Informatica has. But when you think about, you know, this sort of M and A, I just don't know what this does for it because you know you're talking about single digits growth for both and what is it called? Informatica? Sales and revenue growth. And I don't know, I mean I like Benioff's strategy. It's gotten him this far. But the guy's pointed 22 and a half times for next year seems pretty reasonable if they do what they've done with the integrations of these last sort of acquisitions. So I think it's fine here too.
- [24:04]
Guy Adami
Yeah, I think the investment in AI, to Dan's point, you're betting on. I say this all the time. You're betting on the CEO. He's one of these CEOs that always seems to pull a rabbit out of a hat. And another One is Bill McDermott. And when you look at, when you look at the service now and you look at Salesforce, a lot of enterprise clients have both. It's not a winner take all game. So I think there's enough for both of them survive. I would like to say I'm a seller of CRM, but I'm afraid of Benioff, meaning I'm afraid of what he's going to do.
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Steve Grasso
What do you think about. No, I'd be interested to hear Benioff talk about Microsoft. Right?
- [24:42]
Melissa Lee
Oh right, yeah, yeah, Microsoft. A little.
- [24:44]
Steve Grasso
Couple of bucks, but little. Yeah, a little.
- [24:45]
Dan Nathan
I just want to say one thing about the Oracle did this and Benioff comes from Oracle and for a long time Oracle traded at, you know, a real big discount to a lot of its other peers because of the roll up that how they gain sales. And the last thing I'll just say is like this is a $1.7 billion revenue company compared to Salesforce without 40. So this is one that I don't think you should expect to have a material financial impact one way or another. But I think Salesforce on its own looks pretty reasonable right here.
- [25:12]
Melissa Lee
All right, coming up, a few stock moves catching our attention. Today's session why Eli Lilly, an electric air taxi company made some headlines. You're watching Fast Money live from the NASDAQ markets at Times Square. Back right after this. 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 Are you still quoting 30 year old movies?
- [25:47]
Dan Nathan
Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash. Welcome to the now it pays to Discover. Learn more at discover.com/credit card based on the February 2024 Nelson Report.
- [26:15]
Melissa Lee
Welcome back to Fast Money. Stocks closing near their lows of the session today. The dow falling nearly 250 points. The S and P and Nasdaq both dropping half a percent. Eli Lilly agreeing to buy privately held site One Therapeutics in a deal worth as much as $1 billion. The acquisition giving Lilly access to an exchange experimental non opioid pain drug. And shares of electric air taxi company Joby aviation surging nearly 30%. This after receiving a $250 million investment from Toyota. The payment is part of a previously announced deal to support Joby certification and commercial production. In after hours, Tesla shares up 1%. The company reportedly targeting June 12 to launch its much much awaited, long awaited robo taxi service in Austin, Texas. That is according to Bloomberg. And shares of Birkenstock and Wilson parent Amer Sports down after hours. The company is both announcing secondary offerings in the face of tariffs. Grass. So you mentioned Joby.
- [27:08]
Guy Adami
Yes. So there's two evtol companies, Joby and Archer Joby. And it's extremely cost. What's the word I'm looking for? Burned high cash. High cash burn. They burned $500 million per year. They have about 1.3 billion. I think the partner with Toyota huge on the manufacturing side, deep pocketed. But Archer a lot of partners as well and they burn less cash. So you have two choices. I think either one probably sees the future coming quickly.
- [27:42]
Melissa Lee
Guy, what would you like to trade?
- [27:44]
Tim Seymour
I want, you know, I was just looking at that as well. But what was the other one you mentioned? Eli Lilly, thank you. If you put up a chart since November 715 has been support now three different times. But as Carter Worth will say, even Louisiana, the more times you test support or resistance, the more inclined you are to break through. I mean there's been real no meaningful bounce here in Lilly for a while. That to me is somewhat concerning.
- [28:06]
Melissa Lee
That's interesting.
- [28:07]
Dan Nathan
I have a comment not about an individual stock.
- [28:10]
Melissa Lee
Just in general. Just.
- [28:11]
Dan Nathan
I think it's interesting that we're seeing companies raise cash in the face of tariffs and the uncertainty of it. And I think that's a smart thing. You don't get what you just talked about, two companies doing that. So I wonder if some of these companies that are worried about raising, raising prices to kind of get in the ire of the White House, maybe they just raise some cash and try to weather the storm a little bit.
- [28:29]
Melissa Lee
Maybe they are worried about the markets in the future. They're willing to access cash in the future, I think.
- [28:34]
Steve Grasso
Well, I think. Well, Birkenstock, I don't know. It doesn't look like they need the cash. Sounds like a good time. I mean, it's done well.
- [28:41]
Dan Nathan
It's good. Excuses.
- [28:42]
Steve Grasso
Exactly.
- [28:42]
Melissa Lee
That's what I'm saying. Exactly. All right.
- [28:44]
Steve Grasso
Trying to be a lot of nuance.
- [28:45]
Dan Nathan
But there's no nuance here.
- [28:47]
Karen Finerman
Exactly.
- [28:48]
Dan Nathan
You expect it.
- [28:50]
Melissa Lee
Coming up, we are keeping an eye on Nvidia after hours. The company conference call well underway. The headlines from that and what one chip analyst makes for the quarter. Fast Money's back in two.
- [29:02]
Dan Nathan
Missed a moment of fast.
- [29:03]
Chris Rolland
Catch us anytime on the go Follow.
- [29:05]
Dan Nathan
The Fast Money podcast. We're back right after this.
- [29:19]
Melissa Lee
Welcome back to Fast Money. Another look at Nvidia shares off this after our session. Highs now up by almost 4% about 30 minutes into the conference call. Susquehanna Senior senior analyst Chris Rolland is here to give his reaction to the results. Chris, great to have you with us. And I'm just reading through some of the comments that are coming across right now specifically about the China market, which of course is a big part of Nvidia's quarter here. The CFO saying the company is still evaluating limited options to serve the Chinese market and losing access to the Chinese market with material adverse impact on Nvidia's business. How should we view if the tariff that if the export controls remain in place, how should we view the China market and what it will be to to Nvidia in a couple of years?
- [29:59]
Chris Rolland
Yes. So I think the big revelation about Q2 is that they were planning on shipping 8 billion, probably almost twice as much as we were anticipating they would actually ship into China in the second quarter. So this was turning out to be a very large blockbuster product for them. It is unclear at this point exactly how they're going to sidestep step the restrictions and exactly how powerful and how valuable this will be to Chinese customers. So it is a tbd.
- [30:39]
Melissa Lee
So how do you put that TBD in your model. I mean, you could put TBD in there, but it won't calculate anything. So how do you, how do you view that? I mean once, once the chips are throttled to a certain extent, they're just not competitive anymore. I mean the market really diminishes pretty quickly from there. So how do you view that and how do you view Nvidia's presence in the Chinese market in even two years given that they've lost so much market share in just four years without even the strictest of the export controls that we're seeing now?
- [31:07]
Chris Rolland
Yeah, Melissa, you got all the moving parts right? In terms of my model, it's not going in it until there's some sort of clarification here. And interestingly, Jensen on the call called out Trump's restrictions here and controls and saying they are counterproductive. So it was interesting to see him actually vocalize his objections.
- [31:34]
Steve Grasso
Chris, it's Karen, thanks for being on. Do you think that was theatrics he's playing just to the President.
- [31:42]
Chris Rolland
I think he is angry and I also do believe he thinks it's counterproductive and he's worried that other platforms like Huawei for example, are going to capture that market in the race for AI. So I do believe he's angry and would probably with justification.
- [32:02]
Tim Seymour
Chris, the top of show we pointed out the margins actually hung in there pretty well. Surprisingly so, at least for me. But what are the thoughts back end of the year they promised a reacceleration. What are your thoughts on that?
- [32:12]
Chris Rolland
Yeah, I think if they're on track this quarter, they're probably going to be on track for the rest of the year and I do think they can get to that mid 75 that they've.
- [32:22]
Melissa Lee
Talked about in your model. Chris, dollar for dollar, can the Chinese revenue be replaced by sovereign AI revenue from the rest of the world? From the deals at a Saudi, from the increases or assumed increases in capex by the hyperscalers?
- [32:38]
Chris Rolland
Yeah, I think in the second quarter guide that was better than we were expecting and that was minus 8 billion of potential Chinese revenue. So that backfill is absolutely happening right now with Blackwell.
- [32:54]
Guy Adami
Hey Chris, when you look at AI, it seems like everything the best case scenario is priced in within video. What makes the bears right? How does that story really. 90% of the analysts that cover in video are bullish. There's only one analyst that's negative on the name. How does this story come apart if it can come apart?
- [33:15]
Chris Rolland
Yeah, sentiment is high, but so is execution and in terms of Valuation, if you look at it on almost any metric in terms of profitability, it's not actually that extended. So those are our points there. If you were to paint a bear case for this, it would probably be hyperscale development of their own asics. And we're seeing that with guys like Marvell and Broadcom, guys like Microsoft, Amazon, Trainium, Google, tpu. These things are coming and these are going to be million XPU clusters by the time we're done here.
- [33:58]
Steve Grasso
Chris, it's Karen. So I get that that could be, that could go sales elsewhere. But in terms of the demand, the story more generally now do you see any signs, signs of this slowing seems to be accelerating somewhat.
- [34:14]
Dan Nathan
Sure.
- [34:14]
Chris Rolland
And yes, it is indeed accelerating. If you look at for example hyperscale Capex numbers were up, I think 35% year on year. That was up from 30. Were our estimates a quarter? You know what could hit this thesis? I think if these million XPU or GPU clusters start coming to market and there's no performance increase in these LLMs, that might be a sign of worry. But so far we are seeing the scaling laws intact and that's going to mean bigger and bigger clusters.
- [34:53]
Melissa Lee
Chris, we're going to have to let you go. Thanks so much for joining us. We appreciate your analysis.
- [34:57]
Michael Bright
Thanks guys.
- [34:58]
Melissa Lee
Chris Rowland of Susquehanna. How do you feel about Nvidia? Some headlines from the call.
- [35:03]
Dan Nathan
Yeah, I mean the scaling loss, that's a big one, right? And so if they hold up, as Chris just mentioned, and I know Gene Munster has been talking about this, then the stock has legs because especially if that custom silicon thing doesn't really materialize in the way that some folks don't think it's going to. Especially when you think about like the way this computing is going right now, the cycles being extended, expanded to some degree. I'll just say this though. We talk about like what is the thing that could cause this stock to re rate higher. Everyone says it's cheap and may establish a new range and kind of get going the way it has after the last few years. It's gone through these consolidation periods and breakout and I'd say it's the taco trade. And I know that that's something that.
- [35:38]
Melissa Lee
We heard about today, which stands for.
- [35:40]
Dan Nathan
Trump always chickens out. And we have lots of examples about that. So if somebody like Jensen Huang is starting to push back a little bit, then maybe that is the thing for the fourth time in two months that causes them to chicken out. And that is the thing that probably gets in video that Means if they.
- [35:54]
Melissa Lee
Get some exemption or something. Okay, all right. He's got a 180 price target.
- [36:00]
Steve Grasso
Chris.
- [36:00]
Tim Seymour
Chris, you know, let's get to 153 first. That was the all time high again. I'm sort of with Steve on this one. It's a fine quarter, but the magnitude, the absolute numbers are bigger. The magnitudes of the beat, percentage wise are smaller.
- [36:13]
Melissa Lee
How do you view the China market when you think about Nvidia and what it's worth?
- [36:18]
Steve Grasso
It's an excellent question. I do sort of think this will work. I think this Jensen, I mean, I always say he's great at two things. One, the engineering, the chip part of it. The other is sort of mastering the Street. And this I think is sort of part of that. This job. Owning.
- [36:35]
Melissa Lee
Right. Managing the expectation.
- [36:37]
Steve Grasso
Managing expectations everywhere.
- [36:39]
Guy Adami
Yes, I think Jensen, I think Jensen got the stock to where it is. But if you just ask yourself, is, is the hyperscalers, is there going to be more demand or less demand from the hyperscalers, even? And Chris, who's bullish on the name, said that the hyperscalers are actually making their own chips, developing their own technology. Is the, are the hyperscalers going to demand more from Nvidia going forward or less? I'm going to say it's probably an easy answer. It's less. So you have competition, you have China. God bless you.
- [37:11]
Tim Seymour
Thank you, sir.
- [37:12]
Guy Adami
You have competition, you have China, you have people going away from Nvidia. I think it's an easy sell at this point. Can it go a little bit higher? Of course it can, but I'm looking for the stock. This is where the range should be coming in.
- [37:24]
Dan Nathan
Yeah. So, Karen, I just say not just managing the street, but also managing the tech narrative going forward. He's convinced the whole tech world that this is a new form of computing that's got lots and lots of legs.
- [37:34]
Melissa Lee
Coming up, mortgage maneuvers out of the White House. President Trump weighing whether to end Fannie Mae and Freddie Mac's conservative conservatorship. The impact it could have have on the housing market when Fast Money returns. Welcome back to Fast Money. Over the counter shares of Fannie Mae and Freddie Mac surging today. And renewed hopes around President Trump's plans to take the mortgage giants public. The two have been under government conservatorship since the 2008 financial crisis. The president writing on Truth Social last night that he will continue to oversee the company's win public and that they will retain their US Government guarantees for more. Structured Finance Association CEO Michael Bright Joins us now. He also served as Ginnie Mae's chief operating officer from 2017 to 2019. Michael, great to have you with us.
- [38:21]
Michael Bright
Thanks for having me. Good to see you guys.
- [38:23]
Melissa Lee
So when you think about this plan to bring to return them to the private sector, what are your biggest concerns? Because you think of a company being publicly traded and you think about the things that they do to juice returns to return more money to shareholders and those may not necessarily align with keeping the mortgage market safe.
- [38:42]
Michael Bright
Yeah, no, that's, that's exactly right. I mean that's really what we had as a model in the lead up to the financial crisis. You know, it contributed to the demise of these companies. And so you really want to make sure that if they are removed from conservatorship that you keep in place some guardrails and some protections to ensure that they are focused on their core mission. That's really the long term concern that you would have with moving them out of conservatorship.
- [39:06]
Tim Seymour
What's the benefit for I guess the investing public for them to go back into a publicly traded company? Talk through the whole, I don't know the mechanics of it and why people would want that.
- [39:19]
Michael Bright
You know, it's hard to know exactly what the benefit would be without seeing the structure, you know, the overall structure. All we've seen so far is a couple of posts by the President. So there is an argument to be made and reform efforts in the past have attempted to separate the government's role in ensuring liquidity in the mortgage backed securities from the risk taking role of private enterprises that could potentially go insolvent and undergo some sort of a resolution mechanism, be it, you know, a title to Dodd Frank type resolution or something like the fdic. Would they take a company into receivership? But in most reform plans that are comprehensive, you have a very clear backstop that the government provide liquidity to the MBS so that the mortgage backed securities holders aren't taking on the credit risk of the underlying companies themselves. Thus far from the administration, we haven't seen any details. We don't really know what the government would do with the stake that it has. That's a hugely important question. And really what would need to happen is the government would need to clarify when and under what circumstances it would step in so that the bond market can price certainty, not speculation.
- [40:22]
Steve Grasso
It's Karen, thanks for being on. So much has been talked about explicit, implicit, you know, the government backstop, how much does that actually matter to the, to the rate of a, of a standard Mortgage hugely.
- [40:38]
Michael Bright
It's very, very, very important. I mean agency mortgage backed securities. So Fannie, Freddie and Ginny MBS trade tight, very tight to Treasuries. So that is in price on the bonds which lowers the rate that borrowers actually pay for their loan. That is largely a function of the fact that the government has a very clear legal relationship with the companies right now. It allows banks to put them on their balance sheet with very low risk weighting so low capital requirements. Foreign central banks can buy it. Our central bank buys these mortgage backed securities in times of crisis and to lower interest rates. None of that can happen if they're just purely private companies and you're in the market supposed to anticipate that they would always get bailed out. Asset managers, insurance companies. A lot of that capital will need to be reallocated. And so right now the investors of all these MBS as looking through their agreements and trying to decide whether this would be a credit investment or an interest rate investment. It's unclear to me how the twin goals of spinning them out of conservatorship absent clarity around the government's role while also not impacting mortgage rates to borrowers. They seem to be saying they want both of those things to happen. But a lot of work needs to be done in order for that to work.
- [41:48]
Melissa Lee
I mean it sounds like a huge mess if MBS were viewed as a credit right as opposed to treasury like investment. So what can the government do to actually say, you know what we are going to backs up to the degree where MBS should be just as safe as they are today with Fannie and Freddie privatized?
- [42:07]
Michael Bright
Well, the best thing would be for Congress to get involved and to clarify what the government's role is going to be and they can put congressional stamp on it and then investors know what they're getting. That's exactly what you have with Ginnies. And when I ran Ginnie Mae I would go around the world and talk to central banks and go around the country and talk to investors. And they all knew that the government's role was very clearly defined. And this is Ginny didn't even take any losses during the financial crisis because it was a backstop that was deep in the capital stack without Congress, without something like a Ginnie Mae. I mean they would need to do some sort of machination where they would have a very strong government preferred share purchase agreement, the PSPAs which they have right now and some sort of arrangement between Treasury I guess and the enterprises saying that treasury would always backstop Them, but you're pulling out a thread and it's not really wise to do that all administratively. So it would be good to have it explicit. It would be great to have congress involved.
- [42:59]
Melissa Lee
All right, Michael, thanks for joining us. Appreciate it. Michael Brown. There are some notable investors in Fannie and Freddie. Bill Ackman being among them. 10%, I think, of a stake.
- [43:11]
Tim Seymour
This is just, you know, Karen I'm sure has more thoughts on this, but to me, if it's not broke, don't fix it. I mean, things seemingly are going okay. You just said it. I mean, it creates a whole sort of can of worms are going to open up. And I don't know how it sort of resolves itself.
- [43:24]
Steve Grasso
There's sort of that moral hazard issue. Right. If it's. If it's public. Right.
- [43:28]
Melissa Lee
It has to maximize profits.
- [43:30]
Steve Grasso
Yes, yes. Yeah, but. Right. So, I mean, it's. It's already moved tremendously on the hope of this. I would think this sort of risk reward now is less compelling.
- [43:41]
Melissa Lee
Coming up, a major move in retail as Abercrombie and Fitch surges even after slashing its profit outlook. Why? One of our traders says the stock is still cheap at these levels. That is next, more fast Money into. Welcome back to Fast Money. Shares of Abercrombie and Fitch surging nearly 15% after quarterly earnings and revenue beat estimates. Investors seemingly unconcerned that the company slash its profit outlook, saying tariffs will cost it $50 million. Karen called the results spectacular on her noon call.
- [44:15]
Steve Grasso
Yes. So two parts of the business note. There's Abercrombie and Hollister. Abercrombie was the. What weighed down this company and weighed down these earnings, which would have been spectacular if we'd only look at Hollister. So I think they're working through the Abercrombie issues. They had more inventory than they hoped to have. That weighed on the margins. Hollister, completely different story. Gigantic, same store. Sales beat balance sheet. Huge momentum there. No price pressure there. So if it has a blended multiple sort of of the two together of, you know, 8ish, 8 and change, a spectacular balance sheet. They bought.
- [44:52]
Melissa Lee
They.
- [44:53]
Steve Grasso
They bought $200 million worth of stock at about $76. So I think it's just too cheap because I do think the Abercrombie turn is happening while Hollister is on fire.
- [45:04]
Tim Seymour
Yeah, this time last year it was too expensive. This time this year it's too cheap. And, you know, it might have gotten cheaper, to Karen's point. And you look at it and say, okay, a lot of the bad News has been priced out over the last year. Now it's just a valuation play and I think in just terms of them being able to perform well, I mean it's just seeing this was a turnaround story last year, I don't think that's changed. I think it's gonna be a reacceleration of that.
- [45:27]
Guy Adami
I mean if you look at the bottom it definitely looks like it's rounding on a technical level to Guys Point is $190 a year ago basically almost to the the day but there is slowing growth. Operating margins by their own guidance seem to be coming in. This is a stock you could never get right. It's for me at least I think this is a great entry point. I don't own it because I've never, I've never traded it right.
- [45:50]
Melissa Lee
We have a lot of other retailers report today Macy's cut its outlook on tariffs. Dick's reformed its full year.
- [45:57]
Tim Seymour
So not well we talk about all the time. All retailers are not created equal. Again it still comes down to if you really want to play the game it's still Walmart's world.
- [46:05]
Melissa Lee
Mel up next, final trades, final trade time.
- [46:15]
Guy Adami
Steve I love the Evtol story. I'm going to play it with Archer Aviation.
- [46:19]
Steve Grasso
Karen yeah, so if A and F was good enough for the F block 20 seconds a minute ago, it's good enough for the final trade Anf Dan.
- [46:27]
Dan Nathan
It traded really poorly today despite the gap. I just want to say closed on the lows and I just don't think there's too many interesting retail stories out there right now. Maybe one offs like this, but I think you sell the xrt.
- [46:40]
Tim Seymour
Keith, how you doing?
- [46:42]
Melissa Lee
Good.
- [46:43]
Tim Seymour
I like Newmont Mining. I like the way it closed today. Take a look at that.
- [46:47]
Melissa Lee
Thank you for watching Fast Money. We will see you back here tomorrow at 5 for more. 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, 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 Our state has changed a lot in the last 140 years. We know because MultiCare has been here guided by a single making our communities healthier. That comes from making courageous decisions, partnering with local communities to grow programs and services, and expanding healthcare access to those who need it most. Together, we're building a healthier future. Learn more@mycare.org.