← CNBC's "Fast Money"
CNBC's "Fast Money"
Strong Bank Earnings Fuel Markets… And Impact Of China’s Rare Earth Crackdown 10/15/25
00:43:36
Bank results coming in strong to kick off earnings season, as many of the big money centers top estimates. How their numbers are fueling the market, and why the CEO of KWB says the financial outperformance will continue. Plus, What China’s rare earth crackdown means for the U.S. supply chain. And how one media and tech entrepreneur is implementing AI in the entertainment industry. 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. Because with all you've done to find your rich, we'll do all we can to help you keep enjoying it. EDWARD Jones Member, SIPC.
- [00:32]
Tom Michaud
How will you.
- [00:32]
Tim Seymour
Shape the future of the technology sector with confidence? Tech is at an AI powered inflection point facing innovation cycles that accelerate every day. EY brings a full spectrum of services that help enterprise giants manage fragmented data. Telcos minimize disruption and media companies monetize connected experiences. In a world where every company is a tech company, EY delivers real outcomes to those that build the systems on which enterprises run. EY shape the future with confidence.
- [01:03]
Melissa Lee
Life in the NASDAQ markets in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. Bank on gains major money center soaring as they wrap up earnings season with some of the biggest names trading at all time highs. Is there more upside to come? We'll debate that and rare earth lifts. We'll talk to the CEO of a company making magnets that do not rely on the critical metals at the center of trade tensions. What they are doing differently and how geopolitics could impact their growth. Plus, United shares take off after earnings. AMD jumps on an expanded deal with Oracle and AI in Hollywood. Media veteran and Jib Jab founder Greg Spirit Ellis talks about the future of entertainment in the world of AI. I'm Melissa Lee comes to you live from Studio B at the nasdaq. On the desk tonight, Tim Seymour, Karen Feiderman, Dan Nathan and Guy Adami. Well, big bank earnings in the books. A number of financial giants jumped to records on the back of results. Morgan Stanley, Wells Fargo, blackrock all notching all time highs today. Bank of America which reported this morning trading near levels not seen since 2007. But well strong investment banking and trading revenues help boost results. Potential credit concerns loom over the industry. JP Morgan CEO Jamie Dimon saying the bank upped its reserves for loan losses by $810 billion in the wake of the bankruptcy of auto parts supplier First Brands and warned there may be more trouble. I probably shouldn't say this but when you see one cockroach, there are probably.
- [02:24]
Tom Michaud
More and so we should.
- [02:27]
Jonathan Rowntree
Everyone should be forewarned on this one.
- [02:31]
Melissa Lee
So with the stocks trading at or near records it begs the questions, should banks get rerated or are they fully valued? Right now let's bring in Tom Michaud, CEO of kbw, a Stifel company. We're bringing him at the top because.
- [02:42]
Karen Feiderman
I mean, this is.
- [02:46]
Tom Michaud
Thank you very much. Thank you.
- [02:47]
Melissa Lee
So we'll start off with you. It does feel like we're at a moment where you can believe in the virtues of deregulation, what the banks will be able to do now with regulators off their backs. But at the same time, there are these underlying credit concerns. How do you view valuations at this point?
- [03:01]
Tom Michaud
So. So first of all, the fundamental story is very good. There's a broader narrative which is we think earnings per share are going to be 13% higher next year. We are raising estimates for most of the banks. Just the revenue side is good, the expense side is good and the pipeline talk is good. I'll tell you, coming into the quarter, there was a lot of concern about credit. We had had the first brands bankruptcy, the tricolor bankruptcy, and there's concerns about consumer subprime credit. The numbers that we've seen so far, we were expecting benign credit costs. I'd say they've even been better. So the story out of the banking industry is that credit continues to remain very solid. Now, I heard you just play Jamie's comments. The reality is is the industry is currently over earning on credit. A lot of our provision expectations are about 26, 25 basis points. That is too low. The industry's over and credit, it will go higher at some point. The question is, is it manageable? We think it's manageable. We haven't seen anything that scares us on the credit side. But there, there will be credit challenges in financial services. We've had a huge run in private credit and I would look to the financial institutions that have grown the fastest as possibly the places for the most risk. Over my career, that has always been the first place to look and I think it still is in play today.
- [04:24]
Melissa Lee
What are those areas?
- [04:25]
Tom Michaud
Well, it would be private credit and I don't mean to throw an arrow at the whole sector, but you know, the whole. But, but that is where I would look. Just because of the growth rate that they've had, they've grown so quickly in the last four and a half years.
- [04:38]
Karen Feiderman
M& A activity was sort of the what we heard at the beginning of the year. Now over the last couple of weeks, we're starting to see it continuation in the 26, because that's part of the bull case as well.
- [04:47]
Tom Michaud
I believe it's going to happen because we have a confluence of many forces that would support it. The economy is in good shape, the stock prices are in good shape. And also consolidation has been working. Generally scale has, has led to more profitable banks that are more highly valued by investors. So those are the drivers. But I'll tell you, it is night and day in Washington. We had, we had seen mergers that had happened that would take 16 months to get an answer. If you get an answer, you're now getting answer within the six month time frame that's been the case for the last four decades. So you're getting a reset to a more traditional approach to consolidation which frankly I think the industry thinks it's a little bit on the clock because as the President emphasizes that all these agency heads work for the President and it means the next president will probably be in the same position, which means to the industry, if you feel like you have a pro growth administration, you probably ought to act now. And I believe that that's some of the thinking.
- [05:51]
Guy Adami
So let me ask something about rerating in the context of bank of America's results, which I thought were excellent on so many fronts. All the big ones that we've seen about, you know, M and A business and credit market, capital markets also the credit quality was better than thought. So it's now trading at 14 times earnings, which is high for this. But we're at a market now that's 24 times earnings. So we know there's always a big discount between bank multiples and S and P multiples. Where could you see a multiple for something like a bank?
- [06:23]
Tom Michaud
So it gets to some, it gets to something that like Melissa was talking about earlier, which is that these stocks are trading near all time highs. But I think that if I were to boil it all down to one point that they made, which is return on tangible common equity, okay. That is we think the main driver for valuation relative to book value. And Bank America today alluded to the fact it's likely to reset the target. It's having its first investor day in years, in two weeks in New York City Group, after many years is having an investor day. They're not doing that to get bad news. They're doing that because they're really positive. And usually at these investor days they reset. Wells Fargo reset. So you're seeing these banks, which are major broad corporations, say we think our business models are going to drive more profitability. I think that's how you re rate. If you look at the relative P E multiple of the market, like you just said we're still 30% cheap to the market. We still think there's upside in these stocks. And don't forget the dividend yields. Citizens raise theirs nine and a half percent. That's not a minor bump.
- [07:30]
Dan Nathan
So Tom, financial conditions, they're pretty easy. They're about to get easier, right? We're seeing, like you just mentioned, deregulation is kind of unleashed a sort of pro growth environment, that sort of thing. When you put it together though, and you say to yourself, okay, if we're deregulating, if we don't have to go that far back, let's go back 20 years. You know, you give the banks enough rope, they're likely to hang themselves. Not you guys. Okay? But like I think about this, you get rid of the cfpb, you allow a bunch of, you know, regulations to go by the wayside. How do you think? Aren't there risks associated as we can go back to 2018 and some of the deregulation we saw in around regionals and we did have a regional banking crisis in 2023.
- [08:06]
Tom Michaud
So it's all relative and I'll bet you it is all in the eye of the beholder. And I've done this for several decades. I can tell you the intensity of regulation on the banks was intense after the global financial crisis. I've been watching a lot of Secretary Besson speeches. If anyone wants a homework assignment, go watch what he said at the Fed last week for the community bank. You need more homework.
- [08:30]
Karen Feiderman
I like homework.
- [08:30]
Tom Michaud
That would be homework. Because this is what he said, which I think alludes to your point. He said after the global financial crisis, so much regulation came down on the banks that it shifted due to arbitrage lending to an activities to the non banks. It may have gone too far to the point where now the policy has been shifting finance away from banks to non banks and, and the country might not be happy as that happens. What needs to happen is a reset where you keep private equity, but you keep it alongside the banking industry. You don't force banking to it. And if we get just that reset where you continue to keep the industry safe, because I agree with you, we shouldn't go back to having no rules. Let's not do some of the things we've done before. But I think there could just be enough of a reset that's going to be very good for these stocks and for these companies and I also think it's appropriate.
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Tim Seymour
So Tom, then with all these tailwinds and everything from D.C. and everything from even the street looking to possibly re rate. We've heard equity, Morgan Stanley equities up 35% year over year. We've heard investment bank, we've heard M and A, we've heard financing of all these areas or whether it's you know, balance sheet and just net interest income. What are you most excited about looking for the next 12 months or even six months? Because again the trends from every one of these players including capital ratios and what they plan to do with less capital. What are you most excited? I mean you.
- [09:54]
Tom Michaud
Any part of the earnings permit. Okay, so we. Well can I pick which part of the banking industry and then we can get to that.
- [10:00]
Tim Seymour
You can do whatever you want.
- [10:01]
Tom Michaud
All right, so we follow 200 banks from really small to the biggest. The 50 to 100 billion banks are the cheapest today. There are 18 banks in America that we follow. We rate nine of them by many of them have 8 and 9 P E ratios for next year, big dividend yields, double digit growers and and consolidation is likely to happen I believe. I would say that's the sector that we like the most in the biggest banks. The stocks have gone up a lot but. And they have a high bar but we think they can meet them because I think there's pent up demand for investment banking activities is really high and we're going through this capital reset that we were talking about earlier. I have found even if stocks are fully priced but estimates keep going higher, there's a lot of momentum here that I think that will still be good for these big banks. So I would say in the near term I think investment banking is going to continue to be robust because we're not. We haven't cleared all the activity that needs to happen.
- [10:58]
Melissa Lee
I want to go back for a moment to cockroaches in the system that may come crawling out. And let's say that they are isolated to non depository financial institutions. So non banks. How will those blow ups though manifest itself? Will it just be bank exposure like we've heard in drips and drabs or is there some other transmission mechanism that you would be concerned about?
- [11:20]
Tom Michaud
Well I think first of all like I said, we are over earning on credit and and no one should be surprised when credit costs go up. We should all be surprised for how long. It was essentially zero. So I think it's coming and we should expect higher credit costs even in the banking industry. But what I find is there's been a big push to banks not to go down the commercial real estate route. The regulators actually have pushed this with some limits that they've set. When you lose money in real estate, you usually don't lose 100 cents on the dollar. When you lose money and C and I lending, you can lose 100 cents on the dollar quickly. What I worry about this is this regulatory push away from collateral lending has caused some of these banks to get into commercial to commercial C and I lending late and that they might not like the outcome when we get a cycle. So I think that would be the area that I would worry about. I would worry about CNI lending for new entrants, even banks, because there's no collateral behind it. And if you make a mistake, it can be, it can be costly.
- [12:25]
Karen Feiderman
One more for me. So the Fed made it clear in Wyoming that unemployment, the employment picture was their primary concern. So how important to this overall thesis is an unemployment rate sticking around here at 4243? Where does it get ugly, do you think, for the banks?
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Tom Michaud
I mean, I think it kind of generally does start with, with, with employment and unemployment. I mean, if you saw, we do in our models have it ticking up, but we don't have it going north of 5% for, for example. But I think the health of the consumer really does matter. So I think minor changes around here, everything's okay. The reality is the economy is probably growing too slowly at like 1.9%, let's say over the next 12 months. It would be better if it was faster. But it's also, there's no talk of recession and we don't have that in our model either. But, but I would say if you did see the consumer really peter out, I think that slows the whole, the whole economy.
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Melissa Lee
Tom, thanks for being part of the conversation. Really.
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Tom Michaud
Thank you so much.
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Melissa Lee
Tomichaud KBW so in terms of the argument about rerating rtc, I mean, that's a pretty good argument, right? Yeah.
- [13:34]
Guy Adami
Yes, it is a good argument. I think that, I mean, I feel like we're early on in this renaissance for banks in that the regulatory environment has been so difficult for so long and they're just getting over that sort of. And so that allows for that increasing your balance sheet. And you know, we saw Wells Fargo with that huge reaction. I really was impressed with bank of America, who I, who I've not always been totally impressed with, still their, you know, hold to maturity is not great, but there really was a lot to like in this.
- [14:03]
Dan Nathan
You know, it's interesting what Tom just mentioned about private credit in general. Right. And Jamie Warman, Jamie Dimon at JP Morgan.
- [14:09]
Jonathan Rowntree
There you go.
- [14:10]
Dan Nathan
You know, he had a warning about private credit. Now you could say that, you know, these are generally loans that they make to private companies or, you know, companies in general, but they're actually loaning to the private credit companies. So it is interesting that there is a chain right there. And for him, I mean, that's probably good business. They loan to the private credit companies. They don't take the risk that the private credit companies are. But the fact that he's out there, you know, warning about that, I think it's something to pay attention to because again, as money gets easier, we're going to see probably worse and worse loans being made or investments from the private credit companies.
- [14:45]
Tim Seymour
First of all, it's good to have Tom on because he was extremely bullish about these trends, you know, six months ago when we had him on and he talked about D.C. and it's just interesting because this is a conversation that we've had on this desk. The rerating of banks because of their ability to give capital back because of what's going on in Washington. David Solomon's comments yesterday we said it, you know, strategically being able to do what they want to do. It's exactly what Tom just said. So the banking sector, I think they're in play and I think they're going to be able to be finding new revenue streams that were certainly in the digital economy and in the underwriting of all this debt that needs to be built out for AI and datacenter. I think it's going to be good times.
- [15:20]
Karen Feiderman
Want to play the rerating game. And I think we've collectively done a good job with Citi. You know, we thought it could get to 105. It did. It pulled hold back. They just reported, I think tangible book of about 108 ish. So if Wells doesn't get rerated, if bank of America is to get rerated, if Jamie, if JP Morgan deserves that three times price, then you got to think Citibank could go to 1.21 and a half in this new order, which puts it somewhere between 125 and 150.
- [15:46]
Melissa Lee
All right. Meantime, we do have an earnings alert on United Airlines shares just turning negative after an earlier jump. The company beating EPS estimates but missed on revenue. The conference call taking place tomorrow morning. CNBC's Phil LaBeau's got more details on this quarter.
- [16:00]
Tim Seymour
Phil and Melissa, this wasn't a bad quarter. I think you might see some of the pullback due to the fact that compared to other airline stocks, United has Come further in the last six months that may be one factor of people saying okay, let me take some money off the table. Here are the numbers for the third quarter. As you mentioned, they did beat the street and beat it pretty easily. 278 a share compared to the street at 263. Revenue a slight miss there, but not by much. Revenue per seat mile was down 4.3% and a pre tax margin of 8% in the third quarter. Couple of things on domestic as well as international revenue per seat mile, that's the metric so many people are focused on. Domestic revenue per seat mile was down 3.3% compared to Q3 of 24. International revenue per seat mile was down 7.1%. Keep in mind that the available seat miles, which is one of the key factors in what you ultimately get when you look at revenue per seat mile, the available seat miles say domestically it was up 6.6%. So that did put some pressure on the overall PRASM stats that we just read there. Take a look at their revenue though. In terms of basic economy, premium and loyalty, this is where United has had a lot of success and continues to to have Success. Basic economy up 6%. Premium up. Basic economy 4%. Premium 6. Loyalty up 9%. Bottom line is this Melissa. And we'll get more details on the conference call tomorrow. As you take a look at shares of United, keep in mind that they have also raised their guidance relative to the street for the fourth quarter. Three to three fifty is the expectation. The street is at 287 and again the conference call comes tomorrow morning.
- [17:39]
Jonathan Rowntree
Melissa.
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Melissa Lee
Phil, thanks Philibo. And capacity, capacity was boosted more than 7% in the quarter. Tim, where do you go with this one?
- [17:48]
Tim Seymour
I like United, I like Delta more. I think airlines though as a group have some room to run. I think they haven't been given kind of the operational leverage story in the economy after April. And I just, you know again, by the way he was using a lot of acronyms there. We like to, you know I heard rasm, I heard no, he know Phil always explains better probably than I do. Definitely better than I do. So I mean what he also is explaining is the efficiency in the sector. Talk about rerating. Airlines need to trade higher these these Delta especially but United to these two are run better than they've ever been run. And yes United's outperformed Delta, but Delta is the premium.
- [18:26]
Karen Feiderman
If there's a minor concern, it's on a technical basis. United traded up in February, January of this year about 115ish sold off like everything else traded back up there recently in early September and and it's traded off. So if we can't hold these gains here, maybe you get a back and fill back down to the low 90s. A breakouts above 115 though.
- [18:46]
Guy Adami
Moms, I got a question for Tim, not what is plasm mean? Okay, we all know but the question is oil prices have moved a lot in the last quarter. What what do you think that does.
- [18:57]
Tim Seymour
For these I think airlines hedge a lot of their fuel costs and I think from what I've seen over the years, airlines don't get credit in the lower kind of fuel environment where they get punished in a higher fuel environment. I don't it should be in the multiple I don't think it is. So I think your observation is a good one. Is this a driver? I don't think it will be.
- [19:16]
Melissa Lee
Coming up, the AI deal spree continues. The headline sending shares of AMD surging and how it positions the chip maker in the race. Plus strength in retail and some alternative energy plays. But not everyone held their gains. The details behind the big intraday reversal in one Nuclear name ahead. Don't go anywhere. Fast money's back in two.
- [19:38]
Greg Spirit Ellis
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Tim Seymour
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Tim Seymour
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Greg Spirit Ellis
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Tim Seymour
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Tim Seymour
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Greg Spirit Ellis
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Tim Seymour
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Tim Seymour
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- [20:35]
Melissa Lee
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- [21:09]
Tim Seymour
I have no fear of failure.
- [21:11]
Melissa Lee
Trailblazing women, Changing the game One of my favorite pieces of advice Think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just got to think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday. Wherever you get your podcasts. Welcome back to Fast Money. AMD the best performer in the NASDAQ 100 today, surging over 9%. Yesterday the company announced a deal with Oracle to deploy 50,000 graphics processors starting in the second half of 2026. It's a second major deal for the chip maker this month with OpenAI also set to deploy 6 gigawatts of AMD GPUs over the next several years. A couple of analysts today raising the price target on the stock HSBC as well as Wedbush saying this gives them a lot more clarity into revenues for the next few years. So they're getting all bulled up on this one.
- [22:09]
Tim Seymour
Let's not forget AMD is the A in band land depending on so you know, my view was that they were an underperformer in the the two men or women arms race that was identical. I think the ASML numbers this morning reported over in Europe had a lot to do with AMD strength and again it's it's imputed upon some of their core business, especially in data center. You know, it's not about multiple here, it's about where I think positioning is strategically right now. AMD is seeing as closing ground on Nvidia, even if it's in a different part of the space.
- [22:40]
Dan Nathan
Yeah, 6 gigawatts though it's dwarfed by what Nvidia is doing. A and B. You know, if you think about just the percentage of AI chips that AMD has been selling over the last couple of years, it's not particularly large. I think it got up to high teens last year. This is a company that still has to execute. This is a company that has not executed to their expectations over the last few years when it comes to AI chips. And I do think it's interesting that. By the way, Tim MD is the A in Jenny. I you know, because I actually that was the theme. It was going to broaden out a little map in There we also had EA in there by the way the game got taken out. So when I go back to this thing, I just think it's interesting that the market is giving these sorts of multiples to amd, Oracle and Intel. These are three companies that have so badly mis executed, you know, you know, over the last five or six years into the play, into this generative AI. And so if you want to rerate them and you want to give them the benefit of all these orders that they are booking right now, have at it.
- [23:38]
Melissa Lee
I mean I, I'm hearing this is just coming over the transom. Oh that the A in gen AI is actually Applied Materials.
- [23:46]
Tim Seymour
Oh, wow, wow, wow. Go back to Vision is history and no one was paying attention. You know, it means that no one was probably even paying attention.
- [23:56]
Karen Feiderman
I have an email that says it's the correct Stephanie.
- [24:00]
Tim Seymour
Busted.
- [24:01]
Dan Nathan
I don't know.
- [24:01]
Tim Seymour
I don't know.
- [24:02]
Guy Adami
Wow.
- [24:02]
Melissa Lee
You never know. The point still stands though that you're skeptical as to whether or not they're going to be able to execute actually fulfilled to, to book the revenues that these analysts are recording them at this moment in time.
- [24:13]
Guy Adami
Well, what are those? I was thinking, okay, there's 50,000 chips right, for next year starting 2026. I don't know. I put a $40,000 price on the chip, $2 billion. I thought, well that doesn't seem so much actually relative to the revenue. That would be a nice bump if that's just the start of something. What's the multiple on that? I don't know. What's the margin? I don't know that either.
- [24:33]
Dan Nathan
But the margins relative to Nvidia are going to be just, I don't know, half maybe. I'm just throwing that out there. And you think about how they're competing with Nvidia on price, you know.
- [24:43]
Tim Seymour
Yeah, but the market cap is, is more than 110 below Nvidia. I mean, you know, I mean you're talking about proportionate dynamics. I mean there's no question it trades at a massive, massive discount.
- [24:54]
Dan Nathan
Wow.
- [24:55]
Karen Feiderman
I mean that's a heady conversation there. I was just going to ask Dan. We don't have a lot of time.
- [24:59]
Melissa Lee
We don't.
- [24:59]
Karen Feiderman
So I won't ask him. I'll ask him in a break. I'll say this quickly. The fact that AMD traded down to the prior high 210 from March of 24 in this recent sell off and held is actually encouraging. So maybe Tim is on this, but.
- [25:12]
Dan Nathan
Nvidia is actually trades much cheaper to AMD and it's got a 70% or 71% gross margin versus AMD at 51%. And if they're going to have to compete on price, price, you could see those margins going lower. So I mean to me you can make the stronger case for AMD right now.
- [25:28]
Tim Seymour
Well, I don't think Nvidia is expensive. Excuse me, I'm long both of them. I don't think Nvidia is expensive here. For the record.
- [25:35]
Melissa Lee
Coming up, the single stock moves from today's session where our traders see these names heading next. You're watching Fast Money live from the NASDAQ markets out in Times Square back right after this. What made you confident that you could do something that hadn't been done before?
- [25:59]
Tim Seymour
I have no fear of failure.
- [26:01]
Melissa Lee
Trailblazing women, changing the game. One of my favorite pieces of advice, think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just got got to think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday, wherever you get your podcasts. Welcome back to Fast Money. Stocks losing steam throughout the day, eventually closing mixed. The Dow slightly lower. The S and P and Nasdaq both up half a percent. Some retailers higher again today. Wal Mart hitting a new record best buy in dollar tree also well in the green adding to what's been a strong week for the group. Alternative energy stocks continuing to see gains and phase leading the solar names while nuclear name new scale power was up nearly 17% but after surging more than 11% at the Open shares of Oklo reversed sharply midday closing down more than a percent. Biotech outperforming broader markets today. IBB shares I beat biotech ETF I should say up more than 1% now trading at its highest level since December 2021. And some more after hours action. JB Hunt jumping after topping EPS and revenue estimates and Hewlett Packard Enterprise plunging after the cloud company released full year revenue guidance well below investor estimates. You flag oklocare and it was interesting because it not only went higher, it hit a new high right then reversed sharply.
- [27:24]
Guy Adami
Yeah so that I thought was interesting. I didn't see any substantive news specifically about them. Seemed like actually guy your kind of price action. Exactly that you would comment on new.
- [27:35]
Karen Feiderman
All time high closed on the lows 1 1/2 2 times normal volume having having had a parabolic move to the upside. Yeah you got to take this one and say if I've been long this stock, if I've enjoyed this, you got to move your feet here. You have to do something and that's something is either sell half, third quarter, whatever it is, but you got to move your feet.
- [27:53]
Melissa Lee
That Wal Mart move is really interesting. I mean yesterday was the deal with Open Air. It has been a very good week for the group, as we had mentioned. But this Wal Mart move in particular, particular on the back of that deal.
- [28:02]
Tim Seymour
There'S no question, I guess the theme of tonight is rerating. And while we talked about that with Wal Mart with a north of 30 multiple most of this year and could it support it given the environment we have? People will ask questions later. You know people, people will take this multiple higher and I think you probably should.
- [28:20]
Melissa Lee
Coming up a rare earth route, massive losses across names like MP Materials. Today on new comments from the Treasury Secretary, we'll talk to the CEO of one magnet maker about how he is able to bypass the trade tensions. That's next. Welcome back to FAST money. American rare earth metal companies getting hammered today after Treasury Secretary Scott Bessant said the US Would set price floors across industries and emphasize the need for a strategic minerals reserve. Our Eamon Javers is in Washington with the very latest on this developing story.
- [28:55]
Tim Seymour
Eamon hey there, Melissa.
- [28:57]
Dan Nathan
Treasury Secretary Scott Besant spoke to our Sarah Eisen at a CNBC event here in Washington this morning and he telegraphed the idea that the administration does plan to continue to take equity stakes in American companies, particularly in what he said are seven key sectors of the economy where China is putting American firms out of business.
- [29:15]
Tim Seymour
He described that as setting a priority.
- [29:18]
Dan Nathan
Price floor that the Chinese could not undercut for 20 years.
- [29:23]
Tim Seymour
Anytime anyone in a market based economy.
- [29:28]
Dan Nathan
Stood up a processor refiner, China came.
- [29:31]
Tim Seymour
In, cut price and put them out of business. So we're going to set price floors and the forward buying to make sure that this doesn't happen again and we're going to do it across a range of industries.
- [29:46]
Dan Nathan
And Melissa, at the same time, Bessen said that the US has to be careful not to overreach by interfering too.
- [29:52]
Tim Seymour
Much in the private sector.
- [29:53]
Dan Nathan
And he said he's encouraged to see private sector actors like Jamie Dimon and.
- [29:56]
Tim Seymour
JP Morgan step in with private capital to help with mining and rare earth.
- [30:01]
Dan Nathan
Processing and other what he views as strategically important industries.
- [30:05]
Tim Seymour
And by the way, Melissa, that seven.
- [30:07]
Dan Nathan
List that the treasury secretary cited there, he said they've got seven areas of the economy where they may intervene further. Nobody at treasury or at the U.S. trade Representative's office could Give me a list specifically of the seven areas where they do see this.
- [30:23]
Tim Seymour
But you can kind of work it out based on what they've been doing.
- [30:25]
Dan Nathan
It's pharmaceuticals and rare earths and mining and some of the other industries that they see as absolutely crucial to national security.
- [30:33]
Melissa Lee
Right, Eamon. Thank you. Eamon jabers. Well, the US imports a full 70% of its rare earths from China. And a crackdown could devastate the supply chain. Our next guest is the CEO of, of the only company in America manufacturing industrial magnets that use zero rare earth metals. Their customers span industries from defense and EVs to medical devices and more. Jonathan Rowntree of Nirin Magnetics joins us now. Jonathan, great to have you with us.
- [30:59]
Jonathan Rowntree
Yeah, thank you for having me on the show today.
- [31:02]
Melissa Lee
And you just broke ground on a second manufacturing facility in Minnesota. This is fascinating because this company, which makes iron, iron nitride magnets, so no rare earth, they use commonly found inexpensive materials. But this has actually been in progress for almost a decade. It's not like you just woke up and discovered the tensions between the US And China and said, let's start making magnets.
- [31:28]
Jonathan Rowntree
Yeah, that's correct. Actually, we celebrated our 12th birthday last week. And we with a genesis of a Department of Energy sponsored research program that the University of Minnesota did more than a decade ago, we've developed the world's most powerful permanent magnet technology. And it is indeed iron nitride. And we make that from iron and nitrogen to very readily available materials that are fully domestically sourced. And our technology requires no rare earths, no critical minerals.
- [31:58]
Melissa Lee
What are the barriers that. It seems like if this was so easy and it's made with inexpensive materials, that this should have happened a long time ago. Is there difficulty in scaling this? Is there difficulty in the manufacturing process?
- [32:13]
Jonathan Rowntree
Yeah, great question. So the iron nitride technology, ion nitride, exists in multiple phases. And what we like is one specific phase. It's very difficult to produce the material in that phase and then keep it in that phase. And so we developed a process to do that. That's where a lot of our trade secrets are. And also our patent. We have more than 100 PAT around this technology. And so the first seven or eight years we're really figuring out how to scale that technology. And magnet is a cost competitive industry. And so how do we do that cost effectively? And so in 2017, we figured that out. That's the route now that we're using to scale our technology. And I'm calling in today from our commercial Pilot facility where we've already taken this technology from the gram to the ton scale. And two weeks ago we broke ground in our first manufacturing plan. That's a 1500 tonne facility that will come online in early to mid 2027.
- [33:13]
Melissa Lee
You feed into a lot of different industries right, right now, Jonathan, I'm worried if there are. I'm wondering if there are certain industries that are better suited to your, to this kind of magnet. I don't know if some magnets require more magnetism at certain temperatures or are there some other variables there?
- [33:29]
Jonathan Rowntree
Yeah, great, great question. So we're engaged across all end market segments. As you know, the modern world runs on permanent magnets. We're engaged across consumer electronics applications. Samsung has invested in us there. It's for audio and appliances. We're engaged across Industrial Motors Automotive where we've had GM and Stellantis invest in us and also into defense and other renewable energy applications. We're probably most focused right now around small and medium sized motors as well as audio applications because those will be the first products that we have that go for first commercial sale early next year. And then we'll ram here as we bring our first production plant online.
- [34:13]
Melissa Lee
So right now there are none of these magnets in products that are in use right currently, is that correct?
- [34:20]
Jonathan Rowntree
Yeah, we're qualifying at various stages with multiple customers. You will see first products in market here in Q1 in a pro audio type application.
- [34:32]
Melissa Lee
When was your last fundraising round, Jonathan? And I'm wondering if the administration has contacted you about a strategic stake in any way and whether or not there are other investors who are now interested in investing in you at a much higher multiple because. Just because of what has gone on in the world.
- [34:51]
Jonathan Rowntree
Yeah, absolutely. Our last funding round was several years ago. We are planning to do a series E fundraising probably later this year or early next year. We have already raised significant funds for plant one and that's why we broke ground. And in fact this week the bulldozers are clearing the ground there in Sawtel, Minnesota. It's about 75 minute drive from our current facility. And we're also now in discussions and planning for a second manufacturing plan which will be a 10,000 tonne facility. And so exciting time here is we're building devices with customers with very encouraging feedback. We're progressing down the qualifications and already now thinking about our second manufacturing plant.
- [35:35]
Melissa Lee
Has the administration reached out to you?
- [35:37]
Jonathan Rowntree
Yes, we've had discussions with the administration, we've had a number of government funding. The genesis of NARAM was the department of Energy grant. We received a follow on grant here to scale our technology back in 2023. We also had secured Department of Defense grants. So we're in discussions with the administration, we're working with them to figure out how can we accelerate, especially Plant 2 to bring that 10,000 ton plant online as soon as possible.
- [36:04]
Melissa Lee
Jonathan, great speaking with you. Hope you'll keep us updated on your progress.
- [36:08]
Jonathan Rowntree
Yeah, thank you very much.
- [36:10]
Melissa Lee
Jonathan Roundtree of Nairin Magnetics. Fascinating. What is out there to sort of avert this whole sort of logjam with.
- [36:18]
Tim Seymour
China and what's not out there for investors to invest in. And that's why, you know, MP Materials, you look at a company without revenue and the dynamics here, it's getting upgraded because again, the view that they're going to move, first of all, vertical integration, moving downstream and the ability to actually grow some of that downstream expansion significantly over the next couple of years. There's no question as we look to the administration support for rare earths, that there are going to be huge opportunities. Just be careful because there are a lot of companies that will slap this on their nameplate. Not this one and certainly not mp.
- [36:53]
Guy Adami
So it's interesting he did say that the administration's contact. Which makes sense, right?
- [36:57]
Melissa Lee
Yes, totally.
- [36:58]
Guy Adami
How prevalent is that? I forgot exactly what it's called. Nitrate oxide. What is that?
- [37:05]
Melissa Lee
Iron nitride.
- [37:05]
Guy Adami
Iron nitride, yeah. How prevalent is that? How available is that?
- [37:10]
Melissa Lee
Iron is very available and very cheap. Right.
- [37:12]
Guy Adami
Cheap to mine, cheap to all of it. So it's sort of a fascinating story that round E is going to go a lot better than probably round B.
- [37:20]
Melissa Lee
When I imagine good for them.
- [37:22]
Karen Feiderman
First of all, you found this story, so kudos to you, Melissa Lee.
- [37:26]
Jonathan Rowntree
That's true.
- [37:27]
Karen Feiderman
Why are you looking at me quizzically? I mean, it's impressive that you dug this up. So good for you, number one. Number two, this rare earth, I mean this is the center of this whole US China thing and China's ratcheting up, which is why MP traded down today. And you know, there'll be this tit for tat that will continue that. I think these stocks are in the crosshairs. MP just got a $115 price target put on it by bank of America. But to Tim's point, you know, at some point, valuation matters in all these different things.
- [37:52]
Melissa Lee
Yeah. Coming up, it's been a rough year for Starbucks since Brian Nickel became CEO. What he had to tell our Jim Cramer about the company's turnaround and when the stock will rebound fast money returns.
- [38:05]
Tim Seymour
December 11th.
- [38:07]
Tom Michaud
Join Melissa Lee and the team of.
- [38:08]
Tim Seymour
Traders in New York City for an.
- [38:10]
Tom Michaud
All access celebration live and on air. Fast Money live trading the holidays. Get your tickets now at CNBC events.com/fast money.
- [38:24]
Tim Seymour
I think we're ahead of schedule on the turnaround. That's part of the reason why we leaned into launching the Green Apron model sooner and faster.
- [38:33]
Melissa Lee
And you know, I just fundamentally believe.
- [38:36]
Tim Seymour
As we continue to make progress and.
- [38:38]
Karen Feiderman
The results I think follow the stories.
- [38:40]
Tim Seymour
That I'm sharing, you know, the stock will take care of itself.
- [38:45]
Melissa Lee
That was Starbucks CEO Brian Nichols speaking with our Jim Cramer this afternoon about the company's turnaround plan. The stock was up 2% today, but is down 9% Nickel took over about a year ago. And catch the full interview on Mad Money top of the hour. But in the meantime, let's trade it. He's very bullish on this turnaround. Tim. I don't know if you see the results in the Starbucks you frequent.
- [39:04]
Tim Seymour
Look, you know they've closed down a couple of my favorite Starbucks, the one at 67th and Columbus. I feel for you people. You're great, you're very good at your job. But what I'm worried about with Starbucks right now is I don't know how you overcome the dynamics on their margin profile and the competitive landscape where people have benefited from Starbucks for our coffee and now they're undercutting them a little bit. I also think at 37 times trailing and 33 times forward, there's no value here for this company on a turnaround. I love the brand, I like the stock.
- [39:35]
Tom Michaud
But not, not, not a lot.
- [39:37]
Karen Feiderman
You know, four years ago when it made its all time high, you could justify valuation because they were growing, growing and there wasn't really competition. Now they're not growing and there's a lot of competition. So that same multiple looks a lot more expensive. So maybe the turnaround plan is working. I don't know. I know Tim. Frequency establishments, I do not. However it feels.
- [39:55]
Tim Seymour
I thought it was not good for your constitution.
- [39:59]
Karen Feiderman
I want to be crystal clear here. Like if somebody feeling well yeah, you get them people here laughing and you're making fun of it because it's funny.
- [40:07]
Tim Seymour
Because it's also not good for, because it's funny.
- [40:09]
Karen Feiderman
No, for me it doesn't work. But if people are sick, like I'll get them a nice hot tea.
- [40:12]
Tim Seymour
So you go with like a protein foam or something.
- [40:15]
Melissa Lee
What is that? I don't even want as often as possible coming out. Putting the AI in entertainment. The impact artificial Intelligence is having on Hollywood and how our next guest is putting the tech to use with the launch of a new animation company, More Fast Money. And two.
- [40:39]
Tim Seymour
Whoa.
- [40:40]
Melissa Lee
Don't be scared, Tim. Welcome back to Fast Money. Continues to reshape a swath of industries, but the impact on entertainment and media seems unclear. For more on the future entertainment in the age of AI, let's bring in Greg Spirit Ellis, co founder and CEO, Spirit Ellis Brothers Studios. He's also the co founder of the viral video site Jib Jab Storybots. Also, my kids love them. Great, great to have you with us.
- [41:03]
Greg Spirit Ellis
Great to be on the show. Thanks for having me. Excited to be here.
- [41:06]
Melissa Lee
I mean, the assumption is that AI is going to replace everybody in the industry. Is that too extreme?
- [41:13]
Greg Spirit Ellis
I think it's too extreme. I think, look, I think what it's going to do is completely transform the industry. It's going to change the way content is created, produced and distributed. But that doesn't mean there isn't going to be a role for the great artists who are in roles today. It just means those roles are going to change because this technology is like a superpower. And so what one artist is going to be able to do is going to be a multiple of what they were able to do before. And how we organize talent in the production of great stories that's, you know, there's always going to be great talent at the core of that process.
- [41:49]
Melissa Lee
I feel like where the most disruption or a lot of disruption could happen is actually in children's programming, Greg. And you would know a lot about that. I mean, it seems like a lot of it's computer generated animation. And why can't a kid say, I want a story about a dog, a rabbit, a baby elephant, and they go on an Easter egg hunt and wait for it to come out and watch it on Netflix.
- [42:10]
Tim Seymour
That's a great story, by the way.
- [42:12]
Greg Spirit Ellis
100% what you're talking about are new formats and that's what technology's always enabled. So when Jib Jab did this land is yous land on dial up modems or we did elf yourself like in the early Facebook days or even storybots that started on YouTube and we wound up selling to Netflix. These new technologies enable these new formats. And you're exactly right. What kind of stories we're going to be able to tell and what kind of. And the ways we're going to be able to engage the audience in telling those stories is going to be completely transformed. That's what excites us. That's what we've done for 25 years and this is the most exciting time in the history of technology and entertainment to be doing this.
- [42:53]
Dan Nathan
Hey, Greg, help us think about this. I think 10, 15% of Hollywood and streaming movies are animated. But mostly I think 50 or 55% of the revenues, box office worldwide are animation. Is this one of the reasons why you're focused on animation right here?
- [43:09]
Greg Spirit Ellis
100%. I mean animation is our roots. But you know, if you think about post pandemic, families want to go to the movies. Going to the movie as a family is an event. And so we think there's a huge opportunity to actually focus on that format as a way to build franchises. So just really quick, if you think Snow White and the Seven Dwarfs in 1937 was 700 people, Lion King was 600 people, Toy Story was 120. And Flo, which was the best, the Oscar winner for the best animated feature last year, beat out, Inside Out 2 and Wild Robots that had a 40 person team. We're talking about a $3.6 million budget. So the entire way that the entertainment industry is organized around producing entertainment in animation is about to collapse. And that's what we're building. We're going after. How do you build a studio from the ground up to take advantage of these seismic changes that are happening right now?
- [44:12]
Guy Adami
Greg, it's Karen. Thanks for being on. So let me ask you a tangential question, which is for live Action where there's a lot of stock footage that they have to, they can't buy it, they have to make it. How big of an, how big of a disruptor would this, whether it's source, something like it or Nano Banana, whatever it is, how big of a disruptor, how much could they save for huge content providers like a Netflix or Disney?
- [44:39]
Greg Spirit Ellis
Oh, I think the, the cost savings in the creative flexibility that these tools offer, especially in the live action side because that's where most of the training, most of the model building is focused on creating these live action, live action video content. So the cost savings are going to be enormous. But we're going to be able to do, we're going to be able to produce more, more creators are going to be able to have a voice because the tools are accessible. I think capital and distribution have always been the gate that has held smaller producers and smaller voices out. And now that gate's opening up and we're going to see a lot more interesting voices.
- [45:19]
Melissa Lee
Greg, great to speak with you.
- [45:21]
Greg Spirit Ellis
Thanks for having me. It's great being on you.
- [45:23]
Melissa Lee
Up next Final Traits welcome back our own Tim Seymour rocking it out tomorrow for a very special cause today.
- [45:35]
Tim Seymour
Him well Oleg to stand on charity for cosmetic and I don't know, surgeries for kids in developing spaces who need help need our help. This is a charity alto.org you can still buy tickets for tomorrow's event. Brian Sullivan our Brian Sullivan is the MC my band Jam Partners will be playing. It's one of the great charities out there. Please check it out.
- [45:56]
Melissa Lee
A lot of fun having gone to one myself. Time for the final trailer around the horn. Tim Seymour yeah platinum.
- [46:01]
Tim Seymour
I think PGMs are still happening people is a way to get exposure.
- [46:05]
Guy Adami
Karen yes Amazon has had really not a particularly good run but I still like it.
- [46:11]
Dan Nathan
Yeah I swapped out AMD frame that. I'm sorry about that last minute though but I like amount here.
- [46:17]
Karen Feiderman
I didn't know Rick Springfield was in Tim's band Fungi.
- [46:21]
Melissa Lee
Thanks for watching Mad Money Starts now. All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the 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 what made you confident that you could do something that hadn't been done before?
- [47:08]
Tim Seymour
I have no fear of failure.
- [47:10]
Melissa Lee
Trailblazing women Changing the game One of my favorite pieces of advice Think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players New episodes every Tuesday. Wherever you get your podcasts.