← CNBC's "Fast Money"
CNBC's "Fast Money"
Oracle Reports Results… And Stocks Swing Amid Iran War Developments 3/10/26
00:43:29
Shares of Oracle on the move after reporting results. The latest numbers from the quarter, and what the company is saying about its data center construction. Plus, a wild day for stocks as investors digested the latest developments in the Middle East. The impact on energy prices, and how a top investment strategist is navigating the volatility. Fast Money Disclaimer
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Live from the NASDAQ markets side in the heart of New York City's Times Square. This is me. This is fast money. Here's what's on tap tonight. Oracle on the move. Shares of the tech giant higher after its latest earnings report. We'll dig into the numbers and bring you all the details from the call. And an oil shock, the volatility in crude front and center with prices jumping off. Session lows on concerns over Iran's defense on the Strait of Hormuz. What it means for the broader markets and stocks in the space. Plus the memory stocks back in rally mode. The China trade data that send shares of those stocks soaring. And is Bitcoin back. We make sense of the Crypto's bounce above 70k. What it means for the investing space. I'm Melissa Lee, come to you live from CWP at the nasdaq on the desk tonight, Tim Seymour, Karen Feiderman, Dan Nathan and Guy Adami. We start off with that all important Oracle earnings report. Shares popping after the earnings beat top and bottom line estimates and giving strong guidance. Also indicating it will not do any more debt raises this year. That conference call kicked off moments ago. Seema Modi joins us now with the details. Seema. Well, Melissa, Oracle is saying that demand for cloud computing, for AI training and inferencing continues to grow faster than supply the company. Also adding that some of the largest consumers of AI cloud capacity have recently strengthened their financial positions quite substantially. That is most likely being seen by the market as a nod to open air and its $110 billion fundraising round. All this is giving Oracle the confidence to raise its 2027 revenue targets. That was not what the wall what Wall street was expecting going into today's report. Now on financing, Oracle also said it does not see it taking out more debt this year following the $30 billion in debt it raised last month. And in regards to that equity portion, it hasn't commenced that sale. So the cadence of equity dilution was will likely be a topic that will come up on the call. Capex for 2026, Melissa does remain unchanged at $50 billion. However, one key question will be around its backlog. With growth tied to remaining performance obligations decelerating from 438% last quarter to 325% this quarter, we are looking at shares popping here. Instant reaction from Dan Ives at Wedbush. He writes that this will be viewed as a huge relief for software and tech given the AI buildout jitters. Now back to you. All right, Seema, thank you. Sima Modi, as you had mentioned, we're about two minutes into the conference call. A lot can change, but for now, what would be your inclination? Is this 8% pop one that you buy or one that you sell? Dan?
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C
You know, it's probably viable. I mean, I think we've been talking about this for the last week and a half or so. The stock has actually been grinding here while the IGV had a healthy rally off the recent lows. So it just showed you how much trepidation there was. So it wasn't going to take too much of news to get the stock moving. You know, all those numbers metrics that that Seema just went through, they're all fine. I mean, they're not great. You know what I mean? I think they are a relief. You know, Dan Ives just commented that it's going to be a relief for the software sector. I'm not sure about that. I think this was very specific and I don't think it has much to do with software. It has to do with infrastructure build. And when you think of a lot of their peers, their much stronger peers, the hyperscalers, they've all stalled out, right? And so the fact that this stock is only up 8%, I think it's kind of shocking. You know, I would have expected a much bigger pop if investors were really looking to kind of bottom fish in this name. And I think they're willing to leave it in the penalty box for now. I know it's post, you know, earnings right away. Let's see how it turns tomorrow.
- [04:22]
D
Yeah. So I think, I mean, given the stock's performance in the last, I don't know, couple of months, I think this is good enough. But I really do caution. You got to hear the conference call. I mean, there's. So, you know, they do address the issue of more debt. Sounds like they have no expectation right now of issuing more debt if their RPO or if revenue seems to accelerate, maybe. But that's okay. You know, that's not necessarily a bad thing. But the issue of debt is still one that's significant here. So I really. I wouldn't be a buyer here right now. It might be fine. It might be. I just would want to wait to hear what I think is probably going to be some news of significance coming out of the call.
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A
So in other words, the bigger the rpa, like if there's a huge increase. There is. They would need. They need to build it out. They need to finance that build. And so therefore that debt issue remains if that business.
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D
Unless the customer pre finances for them.
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E
Yes, Guy, I think Dan and Karen, right. I think this is a tradable bounce here. I mean, again, the optimism around this stock in September is only matched by the pessimism around the entire space over the last couple of weeks. And the quarter was fine, the guidance was fine. They actually some of the commentary is good. To me, the biggest takeaway, at least up until this conference call, is the fact that there are no debt issuances for the remainder of this year. I think the market will breathe a collective sigh of relief around that. I don't think Oracle is fixed, but I think it's tradable here. When I say tradable, it would not surprise me to see sort of a195 handle at some point over the next couple of weeks. And it goes back to what we said about the software sector a couple of weeks ago on this show, that it felt like it may have bottomed out. It wasn't on the back of Oracle with some other names. I think Salesforce started it and I think that's probably true as well.
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A
Tim, does this Oracle quarter really allay concerns about the AI buildout or does it only allay concerns about Oracle specifically? I mean, we saw Amazon go to market in the corporate debt market with credit, you know, investment grade credit, raising $37 billion on a very big day overall for investment grade. I mean, people are buying that story of financing AI. They're just buying it from different dealers.
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F
Yeah, yeah.
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I mean, I mean, it was one of the biggest private debt deals of all time. And I think Amazon seen as very different in terms of the credit. And I would just say I think software is still kind of in the penalty box. I know we've gotten a nice bounce on the IGB although, you know, kind of failed at the 50. I don't know that we feel a whole lot better. And I think with Oracle I do believe there's a need to, there was a need to see a very clean number. You got a great number, you got a dynamic where I think earlier in the week and even last week we got this sense that oh, OpenAI and Oracle are willing to hold off on on certain projects. The Abilene Texas build out is, is ready or so we understand and there's some flexibility on where they could put some of that capacity to work. I just think Oracle right now is still too much of a black box. I think their ability to show flexibility on financing is great and I do think it's going to trade in a range. I think the next stop is 170. That's where you get back to the 50 there. And I'm not sure it has to trade a lot higher. But let's wait and hear what they said.
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D
Just one thing about Amazon issuing that much debt. Amazon is a very different credit rating double A minus than Oracle which is triple triple B. They could have one minus and still be investment grade. And then below that they would be
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C
going to broaden it out a little bit. Remember Stargate? Right. So that's softbank investing in Open Air which is giving the contract to the build to Oracle. So softbank stock has been cut in half if you looked at that over the last three months. They do not have ingress investment investment grade debt. They have a portfolio where it's half of it is private and it's illiquid. They are funding this Open Air build. They waited until like the last week of last year to fulfill a $30 billion commitment in open Air. So then if you think about just the string of this sort of stuff opening ise getting to a point where they can't really raise any more money. We know that Nvidia said they are not going to do that full hundred billion. That's why this company has to go public. But when they go public, what do you think their debt is going to look like if is not going to look much better than Oracle. So you have this whole string of these companies in Stargate which I think the funding seems pretty dicey at this point from. And let me tell you something, if rates aren't going lower, you know, over the next few years, that could be a huge headwind to this data center.
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E
Build out the rate part that's an interesting component of this entire equation because I still believe rates can go higher from here. Now the market has this tug of war flight to quality in the form potentially the bond market. What's going on? Obviously global rates have been going higher. Tim talked about that the other day. I think global rates and US Rates do go higher in the long run for the wrong reasons, which will not be supportive of what we're talking about. However, we've seen relief rallies before and things that last a lot longer than people think. And I think we're in the midst of one now in the software sector.
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All right, for more on Oracle results, let's bring in Gil Lauria, managing director, head of tech research at DA Davidson. Bill, great to have you with us. The stocks up almost 8%. What do you make of the quarter?
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Yeah, a lot of things that you talked about are actually positive. They beat, they raised. But I'll focus you on one number that's really important to me which is they held on to their margins. That means that not only did they grow revenue 20%, they grew their profit 20%. And if you zoom out on Oracle, this is a company that's been growing low to mid single digits for many years on an organic basis. And for years they promised this ability to grow a lot faster. This is the first quarter they've actually delivered on that. So now we're talking about the fact that we, we were so skeptical about their ability to grow this fast and we were then even more skeptical about their ability to hold on to margins as they accelerate growth based on Oracle Cloud. And they delivered for the first time really on that promise and they did so while extending the outlook into next year. So I actually think this is even better than it looks on the surface because if they can actually grow Oracle Cloud at reasonable margins, that means this is a double digit and higher earnings growth rate company, which I don't know that a lot of us even expected leading even into this quarter.
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D
Gail, it's Karen. Thanks for being on. I'm not sure if you're talking gross margins are operating, but one note that was interesting to me in the release was their talk about their own efficiency gains through AI and I wonder what inning of that do you think we're in? So how much more improvement could there be in their margins?
- [10:49]
B
Yeah, I think we're very early on and one of the things that gets missed in the grand software debate of what is the terminal value 0. How are software companies going to get held up is the fact that nobody is going to know how to use AI internally better than software companies. Software companies spend the most money on software developers. If coders and software developers actually are getting that much more productive, they are getting the most productive for software companies. So we're very early on in that process of these software companies showing operating leverage based on their ability to have much more efficient product development and software coding. And that's going to start showing up in these results. It's also going to show up. Oracle is going to have to do more layoffs and they may have to do more divestitures as well in order to fund this growth. But again, they're starting to see payoff from this growth, which I think very few investors were expecting that to show up in the way that it even did this quarter.
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There seems to be some enthusiasm in your voice, Gil. So the question I'll ask is, is 180 price target that you have on the stock too low? Does this sort of make you reconfigure, sort of go back to the drawing board and say, okay, this is sort of the relief core that we've been waiting for, not going to raise debt. My 180 price target should be raised too. And you can fill in the blank if you want.
- [12:11]
B
Obviously I can't answer that. Our price target and rating are under review as they always are during earnings. But what I can tell you is that Oracle at this price is pricing almost entirely just the baseline software and legacy OCI business and almost nothing for the ramp in OCI for AI, nothing for that backlog where if you look at comparables like Cor Weave and Nebulous, they're trading at more than one times that backlog. So Oracle is getting almost no credit for that backlog of 553 billion. Nebulous and Core Weave are getting more than one times credit for that. That tells you that there's quite a bit of upside if the market starts believing that Oracle can deploy that backlog and will do so at reasonable margins.
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We're getting some comments from the conference call, Gail, that I just want to bring to your attention. To the audience's attention, Co CEO Sicilia saying that AI is not replacing software as a service. It could disrupt some of the smaller AI players, but they are developing their own tools and employing them, which means that it is not a threat to them. Also talking about the 15% equity stake in TikTok US and I'm wondering how much is that valued at, if at all, in in Oracle's valuation?
- [13:29]
B
Yeah, I think TikTok is in there For a couple of reasons. First of all, it's important because it is the tenant. It's the anchor tenant for the classic oci, that cloud hosting business. So the fact that they own a piece of it means that that business is secure. As TikTok grows in the U.S. which we expect it to grow, that 15% interest is worth at least $10 billion. And if think about what matter is worth, even if you just take the US part of Metta, let's not forget that TikTok is the third most important option for advertisers after Google and Metta. So there's very significant potential for them to realize value in TikTok as well. And then the in terms of the 15% stake again for now we'd give it 10 billion, but we think that that could be worth a lot more.
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And then does Oracle have any exposure to the Middle east when it comes to datacenter build out sovereign AI? And could that, could we see either delay or maybe indefinite pause to it?
- [14:31]
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It's not a material part of that backlog. Let's not forget the backlog is very open air centric, which is a double edged sword. The good part of that means that a lot more deployment stateside for those data centers to serve open AI. And even as they diversify, they're going to diversify more into into partners like media as opposed to necessarily Gulf states that want to do sovereign.
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All right, Gail, we're going to leave it there for now. Gil Laurier, thank you so much. D.A. davidson. And we are seeing Oracle tick to after our session highs at this point, 9.3%. Is that gain?
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D
Yeah.
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To Gil's point, I think diversification away from OpenAI would be something very welcome to investors. So for instance, this Abilene Texas data center, they said if OpenAI. Well, they didn't say it by the way, it was a report, I can't remember Bloomberg or something. You know, if matter were to actually take that capacity capacity and take that lease, I think that would be perceived as a positive. But to your question, Mel, and again, I'm not an analyst, I don't cover this. I don't know if they have the ability to go build out any more infrastructure from another customer. Certainly not overseas and the like. I mean they really have to complete the projects that they're working on because if they don't, then these customers have the ability to push it out or cancel.
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Right. Meantime, new developments in the ongoing conflict in the Middle East. Iran reportedly stepping up its defense of the Strait of Hormuz Amen. Javors has got the details. Amen.
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Melissa.
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That's right.
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President Trump taking to social media just a short time ago to say that the United States is stepping up its offense in the Strait of Hormuz.
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Here's what the president had to say.
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He says, I am pleased to report
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that within the last few hours we have hit and completely destroyed 10 inactive
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mine laying boats and or ships with more to follow. That followed a previous social media post in which the president said that he
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expects the Iranian government to remove any
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mines that they may have laid in
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the Strait of Hormuz. The president pains Melissa, in both of these social media posts to suggest that
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there's no indication that mines have actually
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been laid in the Strait of Hormuz,
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saying that the mine craft that he struck had been inactive. So there's some question now about exactly what the state of the Strait of Hormuz is in terms of mines. And we'll leave it to folks on
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the ground there to sort all that out.
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But the president saying he's been taking some action on it today.
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All right, Eamon, thank you, Eamon Jabbers. And obviously what was said about the strait and then taken back about the strait in terms of a military escort of an oil ship traveling through the strait, that is what we really were trading in today's session.
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E
And we will continue to trade on similar over the next couple of weeks probably. But question is in my forget about the commodity for a second because I don't think a lot of people out there are actively trading crude futures right now. But what they are probably trading or energy stocks and I think all we need now for crude stocks to get back on the horse is for sort of this flattening out. Somewhere in the level we're trading at is called the low to mid-80s. And I think the crude market, excuse me, the equities will like that. The volatility they won't like stabilization. They will and the names have been working. The Valeros and Marathon Petroleums I think will continue to work.
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G
Tim, those names are working even before Iran. So I do agree with Guy. I I want to see lower stable oil prices. That's when you buy energy stocks. I think there are investors that are going to look at even the move, some of it which was pre Iran and say this is a spike I don't want to buy, there's too much volatility. And again, it gets back to why people don't like to buy oil companies during an oil price spike. I get back to the integrators, those that have exposure to refining and also refining from Venezuela and parts of the Gulf that we're already looking better, but those that have free cash flow generation, and this will help that. So I don't think energy shares need to rally a whole lot here. In fact, I think you should be looking for your spots where you want to be buying a bit lower. And there's no question the oil volatility will give you an opportunity to buy some of these integrated names lower. I think Europeans, as I said, have better free cash flow at a lower break even for their dividend than even the US Integrators.
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D
The one thing I did today was by volatility, I just thought after that that, you know, the volatility index came down to 22 and a little bit, which just, you know, Guy and I always say together that.
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Ready?
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Yeah.
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One, two, three. No man's land.
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I was going to say the VIX doesn't live at. And so that's what I want to say.
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We really don't rehearse this.
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We didn't.
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No, really, it's very clear.
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The whole show's not rehearsed. They know, that's for sure. But I just felt like, all right, maybe there, you know, maybe it passed through safely, maybe it didn't. Who knows? That doesn't mean that, you know, it's wide open. Okay. Ships that start flowing through right away. So it just seems to be there's more potential volatility here. And that's, you know, I'm always long, so I got to have some head.
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C
And I agree with that. You know, this is a very unpopular war right now, and the idea that we're going to put our sailors in harm's way to kind of in this immediate or intermediate phase to get, you know, tankers roofing through there doesn't make a whole heck of a lot of sense. So the idea that this is going to continue to be a bottleneck, I think makes some sense. So a lot of folks were just saying, I mean, like, you know, Sankey last night was saying, 60 is the new floor, 80 might be the new floor. I mean, this thing does not get resolved anytime soon.
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A
We've got a news alert on the ongoing anthropic Pentagon feud. Kate Rooney's got the details. Kate. Hey, Melissa. So Microsoft now getting involved here, throwing its support behind Anthropic in this ongoing fight with the Pentagon, filing an amicus brief supporting the AI company Microsoft, advocating here for a temporary restraining order that would block the Pentagon's supply chain risk designation. That is what Anthropic has already asked for. They said sued the Trump administration yesterday calling the government's actions unprecedented and unlawful. Microsoft in this brief supports that argues that it would avoid disrupting the American military's use ongoing use of advanced AI. They say otherwise Microsoft other tech companies would need to act immediately to alter existing products. They argue bottom line, it could potentially hamper U.S. war fighters at a critical point in time. Microsoft does have a financial stake here to $5 billion investment in Anthropic, so likely part of the reason they are arguing here close partners with Microsoft, but they are jumping into this debate and this ongoing back and forth between the White House and Anthropic mill. All right, Kate, Thanks Kate Rooney. Coming up, committing to memory storage stocks back in rally mode today. Can the surge continue and how much higher could these names go and global gains The China trade climbing today as well. The trade data out of the mainland helping boost that group. Straight ahead. Don't go anywhere. Fast money's back in two.
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I learned it from my adoptive mom, hold my hand. You hold my hand. Learn about adopting a teen from foster care@adoptuskids.org you can't imagine the reward brought to you by Adopt Us Kids, the U.S. department of Health and Human Services and the Ad Council. What do the steam engine, electricity and AI have in common? These technologies not only change how we work, they can transform entire economies. I'm Stephanie Huang, host of where the Internet Lives, a podcast from Google and Latitude Studios about the unseen world of data centers. Explore how data centers are unlocking growth in every sector of the economy. From agriculture to medicine to manufacturing, data centers are powering a new era of AI innovation. Listen to where the Internet lives wherever you get your podcasts. Welcome back to Fast Money, a rally in memory chip stocks today. Shares of SanDisk, Micron, Seagate, Western Digital all jumping in the session. The stocks close are retaking close to retaking all time highs. SanDisk up over 160% so far this year, while the rest are up 40% or more. So how much upside is left in this raging AI play? And then there's the other story, of course, where you have a lot of the other memory makers, Samsung, sk, Hynix being impacted by what is going on in the Strait of Hormuz in terms of limited energy on a lot of South Korea depends on foreign energy to power the electricity there. So there are concerns about electricity shutdowns, which the South Korean government have warned about. There hasn't been any yet, but that could certainly snarl production and make these chips a little more scarce, a little bit more expensive. Tim?
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G
Well, it's been interesting because as South Korea has had some of their own issues with the Iran war, it's, it's triggered also some broader pain across memory. Look what we've all been talking about for the last month, maybe longer. You know, Dan's done a nice job of flagging at least the valuation absurdity in memory and that while, yes, I think we have some understanding when supply can finally respond to the demand here, I'm not chasing memory stocks here. And I think you have a case here where the market was sorting through a lot of the rotation even before Iran. Korea's rally back is very much a function of what's going on in the Middle east and at least better sentiment night overnight. Let's, let's see what goes on tomorrow. And that's something that I think is, is therefore pulling up high next. I mean, they what's going on in the Korean market. There's a lot of levers, there's a lot of retail. There's, there's been a lot of FOMO that's related to what's been going on and reform in their market. I wouldn't impute that upon sandisk and Micron and Western Digital.
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A
All right.
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E
I look at SanDisk and I think, listen, the move to the upside has been historic, in a word. But look how quickly people pull the ripcord on the stock. It was below 500 a couple of days ago. It's obviously rallied back north of 600 now. But what that speaks to is the hair trigger. I think all these names are on now. If you think you're adept enough to get out of these things, as Dan would say, have at it. But the next rug, pull in these names. I'm not necessarily sure it's going to stop.
- [24:30]
F
Agree.
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D
I mean, could it go higher? Absolutely. I would not short these for sure. They're all up a little bit, I guess, on the back of Oracle a good oracle, you know, up a percent or two after hours, but not for me here.
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A
All right, there's a lot more fast money to come. Here's what's coming up next.
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Moves in the mainland Beijing's export data
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fueling gains in Chinese stocks A look at the trade numbers and the biggest winners on the news. Plus, navigating the volatility investors digesting the latest developments in the Middle east, how
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the swings in energy prices are impacting
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our next guest's investment decisions and where she sees opportunity. Now. You're watching Fast MONEY live from the
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NASDAQ market site in Times Square. We're back right after this. Thirty years ago, blinds.com broke the mold and made custom window treatments easy for everyone.
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A
the register before AT&T business wireless checking out customers on our mobile POS systems took too long. Basically a staring contest where everyone loses. It's crazy what people will say during an awkward silence. Now transactions are done before the silence takes hold. That means I can focus on the task at hand and make an extra sale or two. Sometimes I do miss the bonding time. Sometimes AT&T business Wireless connecting changes everything. Courage. I learned it from my adoptive mom. Hold my hand. You hold my hand. Learn about adopting a teen from foster care@adoptuskids.org you can't imagine the reward brought to you by Adopt Us Kids, the U.S. department of Health and Human Services and the Ad Council. Welcome back to Fast Money. China reporting a record trade surplus, its trade balance soaring to more than $213 billion in the January February period versus expectations of less than $180 billion. The country's exports also massively beating expectations. This despite ongoing trade tensions with the U.S. the strong data partly attributed to the late Lunar New Year holiday Chinese stocks gaining on this news. Tencent Alibaba Baidu and PD Pinduoduo all seeing outsized gains. And Tim, this is interesting because this captured the time period in which Trump levied a 10% global tariff. But in the end, China's tariff actually came down. So that was a help.
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G
It was. And I don't know as investors, we really want to see China's export and trade surplus. We want to see exports up, but we don't want to see the trade surplus be at a record. And obviously the US doesn't want to see that. But, but leaving the politics of that aside, I want to see domestic consumption. I do think there's some lumpiness in this number and I think we just need to be careful. Also based upon the Lunar New Year. If you get back to Chinese equities though, in the Chinese tech sector that K Webb is down 31% from their highs in October. I'm not sure fundamentals have changed a whole lot today. Tencent, which I think was really oversold, was up over 11%. There's some discussion that they're actually putting agents into WeChat. It's a story that I think is, is going to continue to be where some of the Chinese mega cap tech companies are also finding their, their access. We know Alibaba has a number of different elements and that Ali Cloud is a place that I think investors should want to own. Exposure to the politics equal the fund flows in China tech. But I'm long and I stay long.
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D
I'm long also though Alibaba for me is my biggest position there and in some FX and ky. But the run that Alibaba's had in not a good way I think, you know, was so oversold. This is an opportunity or the excuse to have a rally. And I think there's legs to this rally.
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E
Yeah, I agree with that. The report on the 19th, you can make an argument that you should have gotten to 125 if you want to get technical levels. It didn't get that low. But I think the setup in earnings in my opinion is probably as strong as it's been in a while. I think the average price target, not that it matters for analysts is about to $200 on the screws. I don't think you can see that post earnings, but I think even a benign report, this stock should be in the mid-150s.
- [28:57]
C
What's one of the most important companies in the world coming from that? That would be Taiwan, Taiwan Semiconductor that we, we don't rehearse that either. So they released sales for, for January and February up 30% year over year.
- [29:11]
F
Okay.
- [29:11]
C
This company that had sold off the Stock was down 15% from its all time highs at the lows yesterday it opened up a couple of percent on that. It should have. That's a great number. Right. Their biggest customers are. We know who they are. Nvidia, Broadcom, AMD stock closed down in the day today. And I just think that's really interesting. Obviously, what you're talking about with those companies you just mentioned is a very different story than Taiwan semi. But to me, this also remains one of the most important stocks to me in the market right now because I do think it just kind of ties a lot of the stuff we've been talking about with the trade today.
- [29:40]
A
Gunner Coming up, the next move for stocks as developments in the Middle east continue to swing global markets and energy prices. Where our next guest sees opportunity and how she is putting money to work. Fast money's back into. Welcome back to FAST money. Stocks closing out a volatile day near the flat line. The NASDAQ just in the green. The Dow shedding 34 points and the S&P 500 losing nearly a quarter of a percent. All had been solidly higher earlier in the day. A number of fast movers catching our attention today. Kohl's finishing a percent and a half lower in a volatile day. Shares were up more than 14% early in the session. The retailer topping earnings estimates this morning, but forecasting a steeper than expected drop in annual sales. Elevance Health higher after reaffirming full year guidance ahead of investor and analyst meetings. The stock still down more than 30% over the past year. Shares of Novo Nordisk getting hit after receiving a warning letter from the FDA due to a 2025 inspection at the drugmaker site in New Jersey. Novo down nearly 24% this year. And vaccine maker BioNTech dropping nearly 18% after announcing its co founders are leaving to start a new company. The company also giving a disappointing revenue outlook. And vertex pharma jumping 8% after saying its experimental drug for a rare kidney condition succeeded in a phase three trial as the company looks to diversify beyond its cystic fibrosis treatment. Meantime, crude oil settling lower today but trading off its worst levels after reports that Iran was laying mines in the Strait of Hormuz. President Trump threatening action if those reports were true. The news also sending shares off their stocks, I should say off their highs of the day. For more on what the ongoing conflict in Iran could mean for the market, we're joined by Jasmine Yu, chief investment officer at Bryn Mawr Trust Advisors. Jasmine, great to have you with us.
- [31:27]
H
Thank you, Melissa.
- [31:29]
A
You are really taking sort of a, a calm approach to this whole thing because you actually say it's, it's a good time to buy. History tells you to buy.
- [31:37]
H
Yeah, we think we're in a Political event, headline driven, choppy markets because investors really don't know how the conflict with Iran is going to resolve. So it's been a tug of war. On one hand, oil approach 120 yesterday after pulling back, it's still up substantially.
- [32:03]
A
Right.
- [32:03]
H
25% year to day a month today, 50% year to day. And that raises concerns about, you know, higher input cost, slower consumer demand and softer sentiment. But then on the other hand, every time when this geopolitical event, markets generally sell first, ask questions later, and then equity markets 12 months after, usually they went up higher. Right. If you look back at the Iran war, the first Gulf War, you know, even the conflict between Israel and Hamas, equity markets were higher. So six to 12 months later. So unless geopolitical tensions morphed into, you know, sustained high energy prices and that's going to make inflation sticky and may potentially delay Federal Reserve's interest rate cuts later in the year.
- [33:04]
A
But layer that into the, the picture that we had going into the conflict and that was private credit concerns. We have concerns about the job market slowing. It wasn't exactly a robust picture for stocks going in. And then we have this and you're still bullish.
- [33:24]
H
I will say a base case for the economy. The economy is slowing, but it's not breaking. So we're seeing slower economic growth, sticky inflation. But if you look at corporate America, it's still delivering. So three quarters of the S&P 500 companies are beating earnings estimate for the quarter and that means profits are still holding up. If you look at the policy, right. Last year we got the one big beautiful bill providing support for tax cuts, R and D incentive and a constructive M and A environment.
- [34:03]
G
Environment.
- [34:04]
H
So putting this conflict aside, when we look at the US equity market in particular, we think it's at 945. So it's not at the peak, but it's certainly late cycle. And I think the past few days with the conflict, you see equity markets are still very resilient. It's only off 2 1/2% of its all time time highs. And some of the weaker areas year to day software, max 7, even cryptos have shown relative strength. I think that tells you market leadership can stabilize sooner than you expected.
- [34:47]
F
Yeah.
- [34:47]
C
Couldn't you make the case though that it's a lot more like the end of 21 into 22. And you know, in 22 we had obviously this surprise invasion of, well, it wasn't much of a surprise surprise I guess of Russia into Ukraine and the disruption that we had from energy. I Mean this pales in comparison to that.
- [35:02]
F
Right.
- [35:03]
C
If you think about where we were as far as valuations as equity leadership, some of the themes that were going on, the economy was definitely, you know, on shaky ground then. Well, the S and p sold off 27% peak to trough. Right. And it took two years to get back to those prior highs. And I think the longer this goes on, I think we're going to see more comparisons to that period. Especially because you have a weakening labor market. You have obviously growth, debt has been slowing a little bit. If you look at GDP year over year and then you have inflation that's sticking around. It's not 9% but it's enough right now to keep the Fed on the sidelines. So just thoughts on that.
- [35:33]
H
Yeah, I think it's hard to compare back to 2022 because yep, oil price has gone up. You question how sustainable it's going to be. And if you look at other components within the CPI like rent, wage growth, those are not seeing a lot of growth within cpi. And also I would say we run balanced, well diversified portfolio, global portfolio, not just in the US Multiasset, you know, across fixed income, equities, alternative investments as well. So for us there is an only way to deliver on that return. If I look at my fixed income sleeve, we actually had pullback on risk. We have become a bit more defensive. We trim credit, we added to US treasuries within 10 years, really focusing on income and quality within equities. We have slight overweights to US large cap, small caps and we're running neutral in international, both international developed and emerging markets. But we're actually putting risk on international small cap. And then within alternative investments we like real assets, which includes commodities, natural resources, real estate and infrastructure because they provide inflation protected cash flows. And talking about volatile markets, we actually like liquid hedge funds, particularly like CTA trend following strategies, long short equity, macro, global macro strategies. All of these can monetize volatility.
- [37:27]
A
Jasmine, great to see you. Thank you.
- [37:29]
H
Thank you Melissa. Thank you.
- [37:31]
A
Coming up, how affordability concerns and credit turmoil is impacting the consumer. Sumer, the CEO of Fintech company Dave tells us how he is navigating the market moves and how his firm is using AI to disrupt the banking system. Fast Money is back into. Welcome back to fast money. Average US gas price hitting nearly 2 year highs due to the war in Iran. That combined with broader inflation and recent job cuts means the American consumers feeling a lot of pressure. Our next guest hopes to alleviate some of that pressure. Using AI to Change banking for the lower end consumer. Jason Wilk is CEO of Dave, a mobile native consumer banking company. He joins us now on set. Jason, great to have you with us.
- [38:13]
F
Thanks for having me.
- [38:14]
A
Who is your target audience here? What kind of consumer are we talking about?
- [38:17]
F
So we help 14 million Americans with short term credit using AI for alternative underwriting versus using traditional FICO. We found that customers in this segment were overpaying for credit with overdraft fees, payday loans. We disrupted the whole space by using cash flow underwriting combined with AI to deliver a much better experience at a fraction of the cost of the incumbents. Our customers have FICOs under 580 generally and we've been able to offer credit in the size of around $200 per user per paycheck with loss rates now 1% thanks to AI.
- [38:49]
A
What have you been seeing recently, if anything, in the past couple of weeks that might indicate that the consumer's feeling in their wallets? What is going on in Iran?
- [38:58]
F
So what's unique about our business is that to get underwritten for credit, consumers have to connect their bank account to us via a company called Plaid. When they connect their account, we can see all their transactions over the last six to six to 12 months and we're just not seeing a lot in the customers accounts like income is actually up a little bit. Tax refunds are up 10% year over year. Our customers are mostly gig economy, they're working retail jobs. And so it was interesting to see the impact of the, of the tax refunds here as of most recent. But things like the war in Iran that are pushing up gas prices over $100 a barrel though a little bit down today. But that puts stress on the American consumer. They're already pretty stretched in right now. But ultimately that's the consumer that we're here to help. Before Dave, they're turning to heavy overdraft fees, paying $34 to access gas when they can't afford it. Now with Dave, they can access gas money for $5 per, for a borrowing, for a tank of gas. And that's a pretty amazing innovation. And while we're doing so well in this economy and pretty much every type of economy at this point, Jason, in
- [39:58]
E
an environment where delinquency rates are going higher, yours are going lower. Your 28 day delinquency rate was down 12% sequentially, which is pretty astonishing. Is that based on I would think a large part AI and the platform you have?
- [40:11]
F
Well, it's a combination of, a combination of having the visibility into the Consumers experience accounts and then also the duration. Our duration is really short. Customers borrow money with us between paychecks. So average duration is about 8 to 10 days. Very short. When you combine that with the heavy visibility and all the collection capabilities that we've got, then you marry an AI. Lawsuits have gone from 10%. In 2017, we launched the business. 200 million transactions later, we're down to 1%, which is record lows for the business. And we think AI is huge part of the story.
- [40:42]
C
All right, sticking with the air here. So you have 14 million customers, nearly $700 million in sales expected this year, and you only have 280 employees. So we've seen fintech, we've seen job cuts, that sort of thing. Talk to us a little bit about how you operate with such a low employee base and then how you see it playing out like across the industry.
- [41:01]
F
One of the benefits of our model, we're so capital efficient. And so even prior to going public in 2022, we only raised 60 million of venture capital funding. Compare that to some of our competitors that raised billions of dollars. And so a lot of those companies got pretty bloated headcount. We've always been very efficient because we've used our cash flows and our profits to generate our, our hiring. And ultimately we've been 300 people since going public. We're still 300 people today. If anything, we're actually hiring this year. We're going to from 300 to 320 to invest in new credit products for this segment of the market that we think is largely overlooked by the big banks.
- [41:36]
A
Jason, great to have you with us.
- [41:37]
F
Thanks so much.
- [41:38]
A
Not Dave. Dave is the company.
- [41:40]
F
Not Dave.
- [41:41]
E
You looked at me when you said that as if I made the mistake called.
- [41:45]
A
We had a CEO of Bob Evans on and I called him Mr. Evans when his name was not.
- [41:50]
E
I wish we could find that. That was actually very funny. I apologize.
- [41:53]
A
Yeah, yeah. But when you think about AI, there are obviously ways that big banks benefit from AI, the efficiency, etc. But it also could enable startups that could.
- [42:02]
D
Yes.
- [42:03]
A
Competitors in some way.
- [42:04]
D
Right, right. I mean they've been facing that for a while. I think Jamie Dimon would probably say. I think it was square. That was the one that he wish he bought, Right?
- [42:12]
A
Exactly. Quick programming note here, May 28, right here at the NASDAQ. Markets like Karen and I will be part of a great CNBC pro event. Wealth for women, financial strategies for serious investors looking to up their investing game. It's an all star lineup of top CNBC Wealth Advisor contributors. So for tickets click on the QR code on your screen or visit CNBC events.com/wealth for women. And by the way, anybody can come. Let's make that clear.
- [42:39]
E
Except if your name is Guy.
- [42:40]
C
Yeah, or Dan Nathan. Thanks for the look.
- [42:42]
A
And that has nothing to do.
- [42:43]
F
We're serious investing guys.
- [42:45]
A
Much more fast money into. Welcome back to Fast Money Checking in. Oracle once again up 9% still the company beating estimates, giving strong guidance. The conference call just ended so let's go back to Gil Lauria da Davidson for some details. Gil, what you hear, a lot of
- [43:05]
B
the conversation was about capital needs and they gave us a couple of important updates there. One is they said remember when we look into next year we don't have to do it all via capex. We can use prepayments and we can have some customers that are going to bring their own GPUs so the level of capex doesn't have to grow in respect to the level of revenue that's going to bring. That's one update. The other one is they have not yet started issuing that the market offering. That means they still have 20 billion of of dry powder to raise and it's a good thing they didn't because the stock was 143 just a couple of weeks ago. If they do issue shares it's better to do it at 163. And then the third is pointing to the fact that their customers now have a lot more capital. That's referenced to OpenAI that just raised $110 billion of equity which should make them set for the next two or three years in terms of compute spend. So part of it can go to Oracle. So that's a pretty positive update on their ability to deploy capital and then have the revenue grow in respect to that.
- [44:09]
A
Did we actually get the CapEx number for out years? Gil?
- [44:13]
B
We did not. They didn't give a fiscal 27 outlook for capex mostly because those are all moving pieces they have to figure out. But again they're saying it's not going to have to grow that much.
- [44:26]
A
Right. Gil, thank you for the update. Gil Lauria DA Davidson, Tim Seymour. That's interesting. Prepayment or BYO gpu? Mm.
- [44:35]
G
Well, yeah, the flexibility is what we've kind of been talking about. But also Gil talked about the black box nature if we don't know where capex is going to be. The fact that they reaffirmed 50 billion on capex for 26 and the other things that Gill is talking about are capital markets dynamics. So they funded 30, they have 20 to go. They're not going to fund any more in 26 as far as I can tell. And those are the short term things. I don't think you've removed the uncertainty here but what they've expressed and I'll go back to the open air, you know, let's step away from some data center because we can and show that there's flexibility. Doesn't change the uncertainty hanging over this company. But I do think in the short term people feel as if we've got some visibility. Not long term.
- [45:18]
A
Having the full ATM though hanging out there. I mean, are you. Would you be concerned about dilution involved?
- [45:25]
D
Well, it's a known thing.
- [45:27]
A
Right, Right.
- [45:27]
D
So you would hope that that's already accounted for. And 20, I mean it's a very, very large company. So 20 billion, they can feed that out. I mean good for them. Gil makes the obvious point, but though. But 20 bucks higher is a better thing.
- [45:38]
A
Yeah. Up next, final trades. Time now for the final trade. Let's go around the horn.
- [45:46]
G
Tim Seymour, Brazil EWZ is up actually almost 2% the last five days. Been very resilient. A lot of oil exposure there to the upside. Either way, stay long. Brazil.
- [45:57]
D
Karen yes, we talked about a little before. Alibaba had a very nice day today, but I still think with that bad run that it's had, there is more to go to the upside.
- [46:05]
A
Dan?
- [46:06]
C
Yeah, Bitcoin at 70,000. I think it's 60,000 before 80,000. I'm one Ibit guy.
- [46:12]
E
Like what Tim did there. I speak Portuguese as you know. I would say to the bane to that.
- [46:16]
A
That's about it.
- [46:17]
E
Tim Seymour. Tim looks good tonight, by the way. I'm not exactly sure why. Salesforce CRM.
- [46:22]
A
All right. Mad Money starts right now. All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. To view the full Fast Money disclaimer, please visit cnbc.com fastmoneydisclaimer 30 years ago,
- [47:01]
C
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G
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