← CNBC's "Fast Money"
CNBC's "Fast Money"
Tech Sells Off On DeepSeek Concerns… And Fed Decision On Deck 1/27/25
00:43:35
Nvidia leading the tech sell off as China’s cheaper AI model DeepSeek sparks investor concerns. What it means for U.S. leadership in the artificial intelligence race, and the details surrounding DeepSeek. Plus Another key Fed rate decision due out Wednesday. And with President Trump sounding off on interest rates, all eyes on the central bank’s next move. How it will all impact equities and the broader market. Fast Money Disclaimer
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- [00:00]
Courtney Reagan
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- [00:06]
Melissa Lee
We'll give you examples that can help you master AI tools.
- [00:09]
Courtney Reagan
Go to CNBC, make it.com AI and register now.
- [00:17]
Tim Seymour
Live from the NASDAQ markets in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. AI in retreat. Claims of a cheaper, more powerful chat bought out of China sending big tech sinking and Nvidia to its worst day since the start of the pandemic. Are the concerns overdone or is the US In a trade? Is the US Trade in real danger? And out of energy, the once red hot nuclear energy stocks getting crushed on that same news today. Mr. Energy now negative for the year. Can the sector rebound? We'll debate that too. Plus a couple of market bright spots in today's sea of red. An activist investor tells US Steel to go it alone. And we count down to the first Fed meeting of the year, how the central bank is digesting all of this data, all the market moves and everything else that we're working our way through. I'm Courtney Reagan in this evening from Melissa Lee coming to you from Studio B at the nasdaq. On the desk tonight we have Tim Seymour, Carter Worth, Steve Grasso and Mike Ko. But we are going to start with the AI apocalypse. Maybe question mark. China's deep seek ravaging names like Nvidia, Broadcom, AMD, Palantir, Microsoft after its R1 reasoning model reportedly outperformed OpenAI and costs less than $6 million. Yes, million with an M to design now in video losing nearly $600 billion in market cap just today. That's the largest single day loss in dollar terms ever. That's more than the total valuation of names like MasterCard, UnitedHealth and Exxon Mobil. The nearly 17% drop in flagship AI stock was its worst day since 3-20-20 and sent it below its 200 day moving average for for the first time in over two years. The move in big Tech dragging the broader markets down with it. The Nasdaq seeing its worst day since December 18th. The S&P down percent and a half. Remarkably, the Dow managing to end the day in the green. Our Deirdre Bosa joins us now for more on how a company few people had heard of before today and I'm still trying to make sure I don't say wrong could have such a big impact on the market and how much merit there is to these claims. We all spent a lot of time this weekend and most of today trying to think it through, tell us what we've learned.
- [02:33]
Deirdre Bosa
Okay, so Apocalypse. Not so sure about that. But without a doubt this is a monumental shift in AI. What's real is its performance. We don't have to trust Deep Seek or the Chinese on that. This is an open source model so we can see inside of it and compare it using third party benchmarks. It is just as impressive as people say it is. Not only was it cheaper and quicker to build, but it's also cheaper and more efficient to run. So developers are adopting it en masse as well as American consumers pushing it to the top of the app store charts and dethroning chat GPT. Now it hit the markets hard today because it raises a ton of questions about the way American AI has developed OpenAI, Anthropic, Google, etc. Have raised and spent billions of dollars to create ever bigger and better models. Demand for Nvidia GPUs was insatiable. But late last year, and this really started before Deep Seek. Late last year, model advancements stalled at a new race, took off in reasoning or the inference phase. And that was deep seats opening to essentially jump to the frontier and build off what those American companies already achieved. And this is key. It open sourced it. Now it's not just Deep Sea creating competitive models at a fraction of the price. You've got bytedance releasing one last week. Berkeley researchers, they did something similar for $450 in 19 hours. So whether Deep Sea did it for $6 million or $60 million, that is now besides the point. It's called distillation. The most advanced models on the market right now, they don't need hundreds of millions of dollars in GPUs and infrastructure. And that is a massive paradigm shift for the trade as we've known it. Why the sell off today affected everything from chips to energy to mega caps. Now the saving grace for the bulls though, and what I hear from my network in Silicon Valley is that it's highly unlikely that American AI players are going to scale back their spend those billions of billions of dollars. The race only got that much more important and the pressure to stay ahead has intensified in the American companies. They're going to continue to throw money at this because it's existential for them.
- [04:37]
Tim Seymour
This is all just so fascinating. D and at first I was trying to think through it and thinking is this good or bad? I mean isn't competition great? If we can do something more efficiently and less expensive, isn't that good? Maybe not so great for America if it was done by this Chinese company when we're worried about all sorts of other ripple effects there. And that's obviously part of a bigger discussion. But altogether, I mean, how should we feel about this news even if we don't know exactly what it cost?
- [05:03]
Deirdre Bosa
So that is such a great point. And there are many in the technology sphere, founders, CEOs, venture capitalists, who say this is a really good development. That Deep Seq essentially did what OpenAI was supposed to do all along, create an open source model, democratize AI. That's what Deep Sea did. It is so ironic that that came from a Chinese company. And when you worry about things like, okay, this is developed in China, so are we going to have the same kind of censorship that the Chinese government imposes on their companies? Well, again, it's open source, so developers can just take parts of it. And you've actually seen this happen in real time today. Perplexity CEO posted it about this. You can just tweak the model so that you can leave things aside, like the censorship part that won't talk about Tiananmen Square. That is a remarkable development. On the other hand, Courtney, I mean, Deep Seq was top the App Store. That is the app that is going to consumers that are not filtering, that are not getting an uncensored version. And I mean, when you think about what we were worried about with TikTok, that's a social media network worried about influence and propaganda. This is ideological. If American consumers are adopting a Chinese AI GPT, essentially that has massive geopolitical implications.
- [06:17]
Tim Seymour
Wow, that's just a lot to go through. Deirdre, thank you so much for joining us and for following this all day long. For more on Deep Seek and how it's putting the US place in the iris at risk, she tried to say, check out our tech, check digital doc, scan the QR code right here on the screen or go to cnbc.com/tc takes. Deirdre, thank you again. I mean, wow, we, we just went through a lot there, Tim. I mean, when you started to digest the news from the weekend and then you saw the reaction, what you think.
- [06:49]
Steve Grasso
Well, first of all, kudos to Debo, who was out on this news well before the market and a few days back really covering a story that I think caught a lot of people by surprise. But you know, the reality of what's been going on in the chip wars with China is, you know, what's the expression? I think necessity is the motherhood of invention and restriction might be the motherhood of invention here too. And in terms of what's real and what's not, in terms of the cost to develop this, I think there's still a lot of questions, but there's no question and Debo emphasized this is that this is a case where what we have here is a large language model that is doing things a lot more efficiently than some people that have been in the market for a long time. So I don't think this necessarily calls into question the 2 20, 25 CapEx. And remember, this is a big week for big tech. We're going to be laser focused as we were. We're only a few days from matter telling us about 65 billion in capex for 25. So think about that. But it really does call into question 26 and that's something that if you look back to some of the chip players and Nvidia notably, that is where valuations are looking at. Look, it comes back to also just positioning in markets. And this is here also what we, we talk about is just what the markets have and what the markets had was a very crowded trade. A case where you had a dynamic even just three, four days ago. And maybe there's a coincidence to two Stardate or not or you know, Star Trek or where Stargate. Yeah, but, but the bottom line here is I do think this is the kind of news that the market needed and I do think this is the kind of news. Also Carter's going to have a great call on what's broken, what's not on Chartland. But there's still so much faith that have been placed in AI and spend and the impacts that today is at least a wake up call.
- [08:27]
Tim Seymour
Yeah, Carter, I wanted to go to you. I feel like I can't go too much further in the show without talking about the impact a little deeper on Nvidia stock today. I mean, do you think that that was overblown? And then what about some of the names that are competing with Nvidia? I mean, because it's opened the door for them, maybe they don't have to spend as much money.
- [08:42]
Carter Worth
Sure. So obviously in each case it's different. Nvidia versus Vago versus Taiwan. But if you look at rd, which is an ETF that covers all AI and it has those names in it, I mean it's an 8% drop today. And one could say, I mean that's a major setback. And yet the other way to interpret is you just went back to where it was two weeks ago. Right. So if you Think about extreme weakness on any given one day, this kind of thing, typically the precondition for that is one of two things and it's the exact opposite. Extreme weakness comes from something that's been really bad and really bad in an established downtrend and then has a collapsing type day, meaning a sick asset that has yet further dropping and collapsing. Or it comes from the condition that is happening today, something that's been very, very strong, crowded, complacent, and then out of nowhere you get a drop. So that is of course the circumstance you use the word crowded or complacent. And so the question is, and this is unknowable, right? I mean, let me just say something. I think I'm as qualified as the planet to determine whether tomorrow is up or down in these stocks. And I have no clue. Okay, so let's get that out there. It's usually right to resist the temptation to buy into a drop in gap. There's an expression called let the dust settle. And so it's tempting to do it, but usually it's wrong. Let a few days pass and some people, I know you like to turn to a three day rule or tender. I'm not sure there's a fixed rule, but the concept of let the dust settle, jumping in just because something's down usually is a bit impetuous.
- [10:06]
Tim Seymour
So you don't think it's a buying opportunity if you go by your rules just yet, but maybe it could be.
- [10:10]
Mike Ko
So just elaborate on that. So it's not really. It doesn't have to be a three day rule, but it, but it could be when it's stops going down. Right? So when you make a higher low in a consecutive day, then you buy it and use that day's low as your exit if it breaks down again. But a couple of things that you mentioned, is it good or bad? I think it's kind of good for some software companies, right? Because if the input cost is. If the input cost is going to be AI then shouldn't that in theory be better for your bottom line? The problem is the cat's out of the bag. So if you borrow its use of the US we already know that they can do it cheaper. So how much money have these top mega cap names spent and wasted and going forward they can't recapture that money. But to Tim's point, I think Capex is still there. And to these point will. Will meta still spend the same amount of billions?
- [11:11]
Carter Worth
Probably.
- [11:11]
Mike Ko
Will they buy a ton more or will they go a different direction? I think the competitive nature that you noted in the beginning of the show, I think is healthy for the markets. The problem is the placement of it. So was it Stargate, was it TikTok? When Gina Raimondo was in China, they unveiled the Huawei phone. Right. So there's a lot of stuff with the friction between China and the United States that they want to show, hey, we have this up on you. We can still do this better than you. So there's a lot of infighting. But what we haven't talked about is does Trump, where he started with tariffs, forgot about the tariffs. Did those come back in now where now you get the markets focused on something else. So it's the shell game of the market. Let the dust settle. I made a purchase today. I think that, I think that things got overdone.
- [12:07]
Carter Worth
So again, I think I would. You asked about Nvidia and I didn't give you an answer to that. I mean, there are two ways to interpret it. Is something that's up 3 and 400% entitled to pull back 15 or 20, not to personify the stock, but that's the expression. And the answer is yes. The question is, is it weakness take advantage of or weakness to stay away from? Right. And there are two types. My hunch is that the downside is to 100 in video. And so that's if it goes there, that's another 17, 18%. But right now the stock is where it was in June, so it can't be considered extended. Right up and up and up. And it hasn't made any price change since June. We're now January. And so support does come into play. At some point. At some point, people will step in and buy. And some will be doing it right now in the aftermarket and tomorrow pre market, I think downsides 200 and again, I would apply that rule. Just stand aside, nothing to be lost by postponing all new buy in a name like Nvidia until it just starts to stop, go down. What's, what's waiting.
- [13:04]
Mike Ko
How many people said at 140 and Nvidia, if I could get it at 100, I'd go all in again. And then you're going to get tested. Because as it falls to Carter's point, is it something you want to buy? Is that weakness ongoing now do when you really get your feet to the flame?
- [13:21]
Steve Grasso
Well, and one of the stories around Nvidia that we've been talking about for months is, is at what point are the hyperscalers, who are the biggest customers going to begin to be competitors. And I go, congratulations. That he just felt. And to what extent that, that that's right. I mean there's, there's going to be already competition within the ranks and that there will be more efficient models coming through. And again, I think this puts a focus on roi and this puts a focus not only on ROI in terms of the companies that actually are developing models and where they're actually monetizing, but also in terms of, you know, which companies really are actually monetizing AI now. And if you look at the broader implications for the market in today's market reaction, and if you look at the indices, we know why the Dow outperformed because the Dow is a very different group of companies. There's really nothing to say that suddenly that the industrial world or some of these older, more traditional companies are now going to benefit. But I would say there's no question that what you have done on the other side of this, if you are significantly cheapen the costs to broaden AI and raise the game and bring the game in that much faster to that many more companies, it is very positive and it's very positive more broadly, possibly for the multiples and the margins the market trades at.
- [14:26]
Tim Seymour
There's so many threads to pull on here. But I do want to take a look and turn to our friend Mike because options traders are also betting that a full US tech meltdown is unlikely. Mike Co joins us here with a little options action. What do you have for us, Mike?
- [14:40]
Dan Niles
Yeah, well, I mean, it's probably not that surprising that Nvidia was the busiest single stock option today, net of that huge decline. First of all, it was always going to be one of the top three on any given day. But today's big move prompted a lot more flow into it. What was interesting is that calls still did manage to outpace puts. And actually, rather than reaching out and grabbing the falling knife, which is how we refer to that sometimes, and waiting for the dust to settle. As Carter was just saying, you know, where people are making their bullish bets was in short dated upside calls. So for example, the most active contract were the weekly 130 strike calls. Buyers were paying about a buck 80, a little bit more than that. Almost a couple hundred thousand of those things were trading. And so that was a way for people to risk, you know, a little over 1% of the stock price betting on a rebound. I don't know that that's all that likely because I think the dust probably will settle for a few more days. But I think this is probably the point that Tim was trying to make. I think if AI is going to be so much more accessible and so much less expensive, we can think about that as a meaningful productivity and a more democratized productivity boost for businesses more generally. And if you take a look at all of the s and P500 stocks today, two thirds of them were actually higher.
- [15:53]
Tim Seymour
Yeah, that is, that is obviously very interesting. And I'm also wondering, you know, does this just give any of us the, the incentive maybe to just broaden out a little bit? Right. I mean, look at all the eggs we have in this basket. I think that if I had 469 ETFs have in video among the top 15 holdings. So even if you think that you're not an Nvidia holder, you hold it in some way and maybe that this makes you want to diversify that portfolio a little bit. Even though, as Carter put a nice perspective, we are back to where we were in, in June.
- [16:22]
Steve Grasso
Yeah. In fact, if you look at semis relative to the market, I mean, they're back to where they were in February of last year. So, so, I mean, yeah, there's no question that this trade and the, the, the excitement around this trade has been kind of dead for a while. And in fact, the market looking for leadership from both the mega cap techs triple Qs to the S and P or the semis to the Qs have been lacking for that for a long time, I think. Carter. Since when? July? I mean, is that really.
- [16:44]
Carter Worth
Yeah, I mean, and that's the stunning thing because you only can by looking at a ratio chart of relative. You see, wow, this has felt good, but actually it's negative alpha that is the case.
- [16:54]
Steve Grasso
Yeah. And I just, I think we're. Again, look, when I woke up and read these headlines and I quickly checked my screens and heard from some of the smartest analysts on the street, the sentiment was pretty skeptical. Skeptical that, hey, how could Google, Apple and Microsoft, how could these companies not have heard anything about this? How could we just have gotten some, some insight and yeah, I mean, ultimately this is, you know, four or five days within the announcement of Stargate. This is a concept that I think a lot of people felt that we won't really ever know the costs attached to this. And hey, by the way, do you really want Deepseek as your backbone when they potentially can back up to your infrastructure and your entire Gmail account or all the things that we already were concerned about? So, you know, there's, there's again, it's layered on top of the geopolitics that were already ripe and red hot in the middle of tariff season. And by the way, this has implications for our Fed conversation because there's no.
- [17:47]
Tim Seymour
Question I was going to say there's so many different webs we can weave here. But I do want to move on to our guest because we have a noted hedge fund manager who started worrying about deep seek around Christmas time. So let's bring in Dan Niles of Niles Investment Management. He was a semiconductor in computer, computer hardware analyst. So again, tying everything together during the dot com bubble. I know Dan, obviously this is something that you brought up as a concern. So when you started to hear the news, it probably didn't feel as shocking to you as it did maybe to some of the rest of us. But how are you thinking through the action that you saw today and what you think we should be aware of as investors and traders moving forward this week?
- [18:20]
Sunny Madra
Well, I think it's more than just this week. So I've been talking about the fact that I expect an AI digestion phase in 2025 since probably mid year and there have been a lot of data points along that way where if you think about it, Microsoft, which has the 49% economic interest in open air, when they reported their June quarter, they guided revenues below the street for the September quarter. Then they reported the September quarter, they guided revenues below the street for the December quarter. And then when Microsoft CEO was asked in December, are you supply constrained? He said, well I'm power constrained but I'm not chip supply constrained. So and then you had Elias Sutzkober, founder of OpenAI, saying back in November, I think that we've already trained on all the data on the Internet. So training scaling is basically dead. So you've had a lot of data points leading up to this point. And when I initially saw the deep SEQ data in, you know, released on Christmas Day, I was like, yeah, there's no way they trained on it for that little. And then as I talked to contacts in Silicon Valley, because don't forget, this came out on Christmas Day, right? Everybody's on vacation, we're all enjoying New Year's etc. It became increasingly clear that they had made some fundamental improvements in the way to approach this, whether it's distillation or mixture of exports, partial activation or I'm not going to get into all the technical stuff, but bottom line, they did make some big software improvements and from what I heard, everybody, because it's open sourced, was looking at it saying hey, how can we incorporate some of this into our models? Because don't forget, it's not like OpenAI came out of not having the benefit of Google, which you could argue invented Transformers or did a lot of the early work. They just didn't commercialize it, which OpenAI did. So all of this stuff builds one on top of the other. And what it gets down to is I don't think there's any chance that Nvidia, and I've said this before, does revenues up 50% this year. Because whether it's Microsoft cutting back on CapEx, because don't forget they said they're going to spend 80 billion this fiscal year. Well, if you do the math, they spent 20 billion in September. They said that's up in December. Their fiscal year ends in June, which means the first half of 2025. Capex spending is down from the back half of 2024, and it's been growing at 70 to 80% for a year and a half. That's a very big change when the largest spender on AI is going from growing 70 to 80% to not growing at all.
- [20:55]
Tim Seymour
So I understand that you don't believe in Nvidia necessarily, or at least you don't believe that the revenue growth they'll have is what they've said they will have. What about some other names, names like Metta for instance, which was up today with all of this. I understand that's a name that you like. What are you thinking about that name and how this plays out?
- [21:12]
Sunny Madra
Yeah, and to be clear, Nvidia is never guided for this year. They only guide one quarter in advance. But that's what the analysts have have out there. And I just don't think those numbers are achievable. But you're correct, the thing you should look at, and I talked about this on Friday and something I posted, which is, look, you have to look at the stuff this benefits because when you lower hardware costs, it really helps with the software that's sitting on top of it. And also guys that use AI. So Metta uses AI to figure out, hey, this is the video that Courtney would like to watch. And, oh, these are the ads she's willing to engage with. And they use AI to help with that, which is why their numbers went up so much last year. And so that's one of the names that I think will benefit. And funnily enough, a name like you look at the software names, they're also going to benefit a lot. And so those are areas that we've been Swapping into in terms of our likes versus dislikes. And if you further back to the eight to the Internet bubble, originally you had all the hardware stuff take it up. So you know, cisco, cisco, sienna, etc. And then you went through this 78% crushing in the Nasdaq. And what were the biggest companies that came out of that? Well, the ones that used all those lower hardware costs, like an Amazon for example. And so I think you're going to see the same thing play out over a number of years. And by the way, I think Nvidia revenues will grow. It's just going to grow slower than a lot of people anticipate. But I think the value is really going to be in the software guys that go, okay, these are the changes I can make and how can I ride on all of this investment that's happened underneath it. Much like dark fiber did not turn out to be what everybody thought back in the Internet bubble and you went through a crushing, but that crushing was great because all the guys that built on top of all that dark fiber overspend did very, very well.
- [23:06]
Tim Seymour
Got it. That all makes sense. And yeah, that for the Facebook and the platform is really working because I'm seeing an awful lot of Buckeye championship videos and I like it. Dan Niles, thank you so much. Well, for more on Deep Seek and what how that could impact the future of AI, let's head to the Iconnections Global Alts conference in Miami where the captain of the fast money ship, Melissa Lee. She joins us with Sonny Madras, the CEO and president of AIA AI company. Gosh, how many times I'm going to say that today. Mel, take it away.
- [23:35]
Melissa Lee
Thank you so much, Courtney, great to see you and great to have you here. Sunny. On a day like today, you're saying that you thought the market reaction was overdone to the news. Why is that?
- [23:44]
Courtney Reagan
Well, just so the magnitude, you know, really if we think about what's happened, we now have a world class open source model that is low cost, easy to deploy and will probably be deployed in many different places. So you would think that the market would be excited, there'd be more use of AI and if there be, you know, some amount of movement downwards, it would have been to the magnitude that we saw today with Nvidia.
- [24:05]
Melissa Lee
Right. I mean in terms of broader adoption, the thesis though is that it's going to force deflationary pricing within AI and so that will force more broad sort of adoption by companies, by consumers, etc. The timeline is just sped up by what times?
- [24:20]
Courtney Reagan
At this point I feel like we've had an 18 month jump happen where all of a sudden now it's easier for companies to deploy. If you think about this model, it can be deployed by Apple if they want to on the kind of technology that they have. And so we're going to see a lot more, a lot more deployment happen, happen. You know, that was going to happen 18 months from now, happen right now.
- [24:38]
Melissa Lee
Okay. So in terms of who will deploy it will be businesses. I mean, that's where you're sort of looking for the next wave. So. So when we are looking at, you know, the trade thinking, oh, these companies need to prove sort of return on investment, we need to see businesses adopt it and show that they are saving money by doing so. We will see that theoretically in a shorter time frame. Which is exactly what the trade wanted to see.
- [25:00]
Courtney Reagan
Yes, yeah, and exactly that. Right. Everyone's been concerned, one, with Lock in now you have open source, which enterprises and researchers and business startups love, and two, a lower cost of running it.
- [25:11]
Melissa Lee
Right. What are you looking for in terms of the next steps here? How do you think the community is responding? I would think that Meta, with its open source llama could be the primary beneficiary immediately from this Deep Seek being released.
- [25:26]
Courtney Reagan
Yeah, I do think they're probably one of the top groups. You know, their researchers are probably looking at what, you know, the Deep SEQ team, did they publish the research, the model is made available, the code is available, the weights are available, so people are looking at that. I also think, you know, smaller teams are going to be empowered in the US and other places to go and build because they now know what's possible within a much more constrained budget.
- [25:46]
Melissa Lee
Right. What does it do for a company like yours, which is AI inferencing technology, lower cost, lower efficiency, which is really what Deep Seek is, is sort of promoting at this point. You had a recent fundraise which put you at a $2.8 billion valuation I think last summer. Now what?
- [26:03]
Courtney Reagan
Well, look, we've been saying our founder Jonathan was the creator of the tpu and so he's been thinking about inference for a long time. And these models, these reasoning models, consume a lot more tokens and produce a lot more tokens. So for us this is really excellent. And we think as the world is going to need to consume more tokens, Nvidia can't even supply enough chips to everyone. So it gives opportunities for us to sell into the market even more aggressively.
- [26:28]
Melissa Lee
There's been a lot of Talk about this the whole day within the tech community, I'm wondering what is sort of the most off base take on this whole deep sea situation? Everybody's got a take.
- [26:37]
Courtney Reagan
Yeah.
- [26:37]
Melissa Lee
What is the most off base take that you've heard?
- [26:39]
Courtney Reagan
Well, I think the, the biggest one was the speculation that some chips were smuggled into the country. And Nvidia came out with a post themselves saying that no, these were chips that were sold or eight hundreds which are allowed under export control. So I think that was the biggest one that, you know, 50,000 chips were smuggled into the country.
- [26:55]
Melissa Lee
What do you think is a takeaway here for the United States? And I'm not asking you to be play politician or anything like that. In terms of export bans, obviously that did not stop because we were also talking prior to this interview about all the other releases coming from China. When it comes to sort of this general industry, competitors to Dall? E and photo imaging, etc. What does this show us?
- [27:17]
Courtney Reagan
It shows us that the best minds and technology can't be constrained. And really this should be kind of viewed. And I think Mark Andreessen had this post a Sputnik moment and hopefully we together as Americans ban come together and basically really push ourselves over the next five years to create, be the number one leader and not try to do that through regulation.
- [27:38]
Melissa Lee
I think Mark also said this is a great gift to humanity. Do you agree? Definitely, because the stock market is looking at it and just selling off the names that were associated with the AI trade. Not looking at sort of the bigger picture.
- [27:50]
Courtney Reagan
Yeah, I think like what this really unlocks is the ability for more people to do interesting research, not just chatbots. But you know, what we were hearing about even during the Stargate announcement, like the biology work, the science work, the research in math and physics, I think we see a lot more happen there because we have the ability to run these models and researchers can run these models without having to have bigger and bigger clusters to do that.
- [28:11]
Melissa Lee
Does this also pull forward the peak in AI spend in your view? I think, I mean it's pulling forward everything. So by logic, you know, it should pull forward the peak also in spending 100%.
- [28:21]
Courtney Reagan
You know, Jensen, he was on the BG2 pod a couple months ago and he had this comment. He said inferencing is going to be a billion times bigger than training. And I think that's just been pulled in. So I think it's going to be acceleration of spend.
- [28:33]
Melissa Lee
All right, Sonny, great to get your take. Thanks so much.
- [28:35]
Courtney Reagan
Thanks for having me.
- [28:36]
Melissa Lee
Sunny Madra. And do not miss of course a special Fast Money live in Miami that starts tomorrow. And Wednesday Altimeter Capital CEO Brad Gerstner will join the gang down here to break down what he is seeing in tech, AI and much more. That all starts tomorrow 5pm Eastern time right here on CNBC Court. See you then.
- [28:52]
Tim Seymour
Thank you so much Melissa. We will be watching. It looks so nice to be down there outside. Melissa and Sunny, thanks so much to you. Well, coming up, much more on today's big tech sell off including how deep seek is impacting the utility trade and how the Fed is interpreting all the market moves of tease that a little bit. But first, a couple of names making headlines today. The activist push on US Steel and how AT&T managed to buck the trend to hit nearly four year highs. Don't go anywhere Fast Money back into.
- [29:24]
Carter Worth
What'S at stake when administrations change. From the first 100 days and beyond, EY brings insights on the issues that executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability. No matter the policy shifts, EY helps business and government leaders remain resilient and seize dynamic growth. Navigate the geopolitical and economic landscape with confidence.
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Courtney Reagan
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Courtney Reagan
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- [30:10]
Tim Seymour
Welcome back to Fast Money. U.S. steel shares down more than a percent as activist investor in Cora makes a push for new leadership at the company and says it should pull out of its steel to be acquired by Nippon Steel. And Core reporting that it holds a 0.18% stake in US Steel. Steve, you've made some moves here. Explain to us why you think U.S. steel could be a winner.
- [30:31]
Mike Ko
Well, I think in any case scenario, Trump saying no to the deal, Biden saying no to the deal. They had to make sure that the that Nippon Steel, the Nippon Steel deal, they had to make sure that they were either going to be okay with tariffs, tax incentives or another buyer. So we saw Cleveland Cliffs, we saw Nucor thinking about a bid rumored to have a bid. Is it going to be the Nippon deal in the 50s? Probably not. Will it be the high 30s in in steel? That's probably a little bit too low. Price targets across the street are probably, you know, 20% higher at least higher from where they are right now. And when you're talking about this new CEO coming in, I'm a little confused. They're encouraged Core is looking to get that breakup fee. I'm not sure who would pay the breakup fee if it wasn't the fault of Nippon for breaking up. So it would be the United States that was really at fault. I think either way, if you look at consolidation in this space and trying to save the steel, steel companies that have had a lot of heavy, heavy headwinds, I think the stock goes much higher.
- [31:35]
Tim Seymour
All right, Michael, what's your take on this one?
- [31:38]
Dan Niles
Well, yeah, I mean, Cleveland Cliffs had made a bid for the company at around the same time that Nippon Steel did. And you know, they came in only just slightly light. I think it was 54 bucks versus 55, something like that. So, you know, clearly, and they probably should have gone for that since as a domestic acquirer, although it wasn't an all cash deal that would have been more palatable to regulators here. But I'm with Steve. I mean, I think there is some, some meaningful potential upside. I mean, we just have sort of the proper backdrop from it politically. And you know, I'm missing is pulled back somewhat considerably. I like having an activist in there and I can understand why they have a little bit of questions for the CEO not taking a domestic bid.
- [32:19]
Tim Seymour
Interesting stuff. A lot of movement and there is a lot more fast money here still to come. Here's what we have coming up next.
- [32:25]
Courtney Reagan
Earnings season in full swing with two names kicking off the week with some major moves before the bell. The numbers that had sofi sinking and AT&T surging. And another Fed decision on deck as President Trump is already sounding off about interest rates.
- [32:43]
Carter Worth
What we can expect to hear from.
- [32:45]
Courtney Reagan
The central bank on where it's going in the months ahead. You're watching FAST MONEY live from the NASDAQ market site in Times Square. We're back right after this.
- [33:25]
Tim Seymour
Welcome back to FAST money. We are counting down to the first Fed meeting of the year. The central bank widely expected to hold rates steady on Wednesday. For more on what we can expect, Ben Emmons of Fed Watch Advisors joins us. Onset. Ben, any chance the Fed doesn't hold? Is it all in what Powell has.
- [33:40]
Ben Emmons
To say is all what he's going to say. But you know, market pricing at near 100% of on hold. First time since the fall of 2023 we had rates a little higher than we are today. So if he is a little bit dovish, even if it's like a tinge of it, that would be kind of a shock. Right? So now would he. I think what we have to take note of is what's at stake when.
- [34:02]
Carter Worth
Administrations change from the first 100 days and beyond. EY brings insights on the issues that matter. Executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability. No matter the policy shifts, EY helps business and government leaders remain resilient and seize dynamic growth. EY navigate the geopolitical and economic landscape with confidence.
- [34:28]
Courtney Reagan
Learn how to use AI to be more successful with cnbc. Make it's new online course.
- [34:34]
Melissa Lee
We'll give you examples that can help help you master AI tools.
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Courtney Reagan
Go to cnbc, make it dot com, slash AI and register.
- [34:42]
Ben Emmons
Now is Waller, Chris Waller, who I think was really deviating from the cautious tone that we got out of the Fed over the last several weeks, looking at the data and saying we got to keep our eyes on the inflation ball and really pay attention to that. And he came from a completely different angle. You know, Powell has always been with a little bit with him in that sense of like looking at inflation slowly declining, having confidence and feeling like this is going to continue no matter what's going on in the economy. So he will point to that.
- [35:11]
Carter Worth
Now.
- [35:11]
Ben Emmons
I don't think he will be politically influenced. Like he will maybe tweets will go around and he will maybe pay attention or not. I don't think though that he knows about the administration, what they're planning to do. So they will probably have talked about Colombia and what's what happened with this and how markets have reacted. And there's probably a little bit of discussion in the Fed too. You know, you're going to have to play into this now because this is going, this is a new reality.
- [35:32]
Tim Seymour
That was exactly what I was going to say. It's the first Fed meeting since Trump has officially been the president. And obviously Powell does not want to be and says he is not influenced by politics. But we know if tariffs come into place and that does really change the game from the economic landscape. I mean, what should Powell say right now when they're kind of being used as threats, as negotiating tactics? Does Towel even dip his toe in that water at this point?
- [35:55]
Ben Emmons
Point not exactly that border, but what he will do is that he will take note of what they put his forecast out in December where there was a surprise to markets when, when they raised the forecast and sort of signaled like we're getting ready for these tariffs, they're going to impact pce. That was the message I think a lot of people got from that. And so now we're here and we're seeing the first sort of stage of it they're going to have to think about, like, what's our policy look like from here? They will keep cuts on the table. I don't think that's off the table. I don't think they will hike near term either. So they're sort of like stuck with the data that's strong. But they are dealing with the uncertainty of this trade policy. You know, there's this example of we're going to put tariffs on to Colombia and I would just take them off right away. It just causes uncertainty. So I think the Fed will have to play into that, meaning they're going to keep the cut on the table. I think that's their way of dealing with uncertainty.
- [36:46]
Steve Grasso
So that sounds to me like almost the opposite of a hawkish cut. That sounds like a dovish hold, which I guess isn't the opposite because there's no action. But I think you're pointing out that this is a consequential hold. And I, if I hear you right, I think I hear you say that Waller is kind of really the Fed whisperer, that maybe he's out there doing a little bit of the lifting in terms of the messaging for Powell. But sounds to me like there's nowhere else to go but to be dovish here and to kind of come back in off of what was obviously, look, that was a very hawkish cut last month and it was a case where markets which were very offsides going into that CPI tells me there's a trading range here in Treasuries.
- [37:24]
Ben Emmons
Yeah, I agree, Tim. I think that we're sort of at the low end of the range currently here at 4 and a half ish. You may dip a little bit below that, but then the upside is really for 80 to 5. I think that stays in place. Exactly. For that reason, you have to actually sound dovish, like sort of leaning against this uncertainty of, of the tariffs because we don't know how it exactly impacts the economy. It could push up inflation, but it could also cause unemployment because people get uncertain, don't know what to do. I don't know how to respond to what does it all mean for my consumer products that I buy every day. And so it is a dovish hold, but I don't think they're at the point that they can accelerate rate cuts. I don't think they're there. So what, what Walla did was sort of having, yeah, well, we won the bottle, the battle on inflation. We can keep lowering rates, but that's not an accelerating rate cut cycle.
- [38:10]
Tim Seymour
So that's the whole I think words will matter. Once again, Ben Emmons, thank you so much for being here with us. Carter, I want to get your reaction.
- [38:17]
Carter Worth
Well, I'm a broker record on this one but I mean and Ben referred to this that the yield on 10 year treasuries the cost of 10 year money was 4.35 at the end of Q3, 2022 we are now into Q1 of 2025. It just hasn't gone higher. And so the question really is here at 4.5% is the next hundred basis points 5.5 or is it 3.5? I'm in lower camp.
- [38:43]
Steve Grasso
Or is it 100 basis points or.
- [38:45]
Carter Worth
Is it just stay here and it becomes this non event that keeps on being a non event because again if the cost of 10 year money is 4 and a half percent that is not high. That is, that is good money, cheap money and it just hasn't gone higher. Every time we pump up a little bit oh we're going to six one. It's never happened. The real interesting thing of course is that gold continues to behave so well. Beat the S and P last year has doubled the performance of the S and P year to date. And I think that's the way to play a lot of this.
- [39:13]
Mike Ko
And Powell has said that monetary policy is restrictive right now and they are data dependent so it's kind of hard to forecast. Oh, let's figure out what tariffs what that we heard from the last time 20% of Fed governors were factoring in tariffs, 20% weren't weren't factoring in the rest were just trying to figure out which way the wind was blowing Exactly.
- [39:33]
Tim Seymour
Well, we'll wait and see I guess. Coming up, power stocks plunging as DEEP seek sparks concerns over demand for energy. Why the new China AI model is putting question marks on what kind of juice artificial intelligence actually means. We're back into. Welcome back to Fast Money. Nuclear power stocks plunging today on new questions surrounding energy needs in the U.S. vistra, Talon Energy, GE, Vernova, Constellation Energy all tumbling more than 20% today. CBC's Pippa Stevens has the details for us. Pippa, what a day. Yeah, Courtney. Well, so much of the momentum behind nuclear and power stocks has been Gen.
- [40:20]
Courtney Reagan
I and Jenny I and forecasts that.
- [40:22]
Tim Seymour
We'Ll need an ever greater amount of power for data centers which is why DEEP seeks promise of a more efficient model is hammering these stocks. Nuclear owner Vistra was the biggest loser.
- [40:33]
Courtney Reagan
In the S and P today, wiping.
- [40:34]
Tim Seymour
Out more than a quarter of its.
- [40:36]
Courtney Reagan
Value with Constellation and Talon Both down.
- [40:38]
Tim Seymour
More than 20% now Evercore.
- [40:40]
Courtney Reagan
ISI said that the magnitude of the decline means that any uplift from data center load growth has now effectively been wiped out. The selling also extended to small modular reactor names like NuScale and Oklo. Still, Arthur Hyde from Segregate Capital said that Deep Sea doesn't really change much for nuclear over time, but that some of the independent power producers and small.
- [41:01]
Tim Seymour
Modular reactor names were crowded.
- [41:03]
Courtney Reagan
The upstream players also dropping with the.
- [41:05]
Tim Seymour
Ura, Uranium and NUKZ all down double.
- [41:08]
Courtney Reagan
Digits with Cameco a major miner dropping 15%.
- [41:12]
Tim Seymour
So Courtney, it is important to note.
- [41:14]
Courtney Reagan
That while AI is one theme driving power stocks, it is not the only one.
- [41:18]
Tim Seymour
Restoring electrification are also raising power demand. Court yeah, this was a really, really interesting space today. Pippa, thank you so much for running us through it. I mean Mike, Pippa makes a good point. I mean maybe in the long run you don't need. We still need energy. It's not like we don't need energy. Maybe we just don't need as much. It's not as concentrated right now. I mean, how do you trade it? Mike?
- [41:39]
Dan Niles
Yeah, I mean there's obviously some cross currents here. So you know, a big part of the nuclear thesis was based on these very high demand numbers. And what was interesting to me was that where the nuclear producers and the miners like Cameco and URA traded down. Which by the way, I should mention that options traders actually were taking this as a buying opportunity and buying a lot of calls and all of those. But if you actually take a look at the natural gas space, so short term natural gas sold off and that's because of weather issues, people are saying, oh, it's getting a little bit warmer. So near term natural gas demand went down, but longer term natural gas demand over the course, week on week actually went up. And you take a look at Nextera Energy, which is actually a natural gas generation player, they actually were trading higher today. So natural gas spools a whole lot more easily. You can fire up new generation on the natural gas side. So basically I think that you could probably sort of put a little bit of a energy barbell trade on here. Buy a little bit of calls on both long term natural gas and on some of the uranium miners.
- [42:42]
Tim Seymour
Very interesting stuff. We have just talked and talked and talked. We're running out of time. Don't miss fast coverage from the Iconnections Global Conference that's starting tomorrow. We'll be speaking with Morgan Stanley's Mike Wilson, Altimeter Capital's Brad Gerstner original Big Shore traders Porter Collins and Vincent Daniel and many, many more. It all starts Tuesday at 5pm Eastern only on CNBC. We do still have more Fast Money, though. Back into gut. Breaking news on the Senate vote on the treasury secretary nominee, Scott Bessant. Eamon Javors has the details. Scott, Amen. What do you have?
- [43:21]
Carter Worth
Hey there, Courtney. Take a live look now at the Senate floor where Scott Besant does now have the votes to be confirmed as.
- [43:29]
Steve Grasso
Treasury Secretary in the Trump administration.
- [43:31]
Carter Worth
Scott Besant, of course, a former Soros Fund management partner, founder of Key Square Group, a Yale veteran, and now he will be Secretary of Treasury in Donald Trump's administration. This is something that Besant campaigned for in Mar? A Lago in November and December, narrowly won the job, although there are some.
- [43:52]
Steve Grasso
Doubts at the last minute whether he.
- [43:53]
Carter Worth
Would get the nod from Donald Trump or not. He did get the nod. He now has the votes and he will be the next Treasury Secretary.
- [44:00]
Tim Seymour
Courtney back over. Thank you very much. Eamon Javers in Washington. Up next, your final trades. It's time for the final trade. Let's go around the horn, Mike.
- [44:17]
Dan Niles
Next Era energy ticker and you're buying.
- [44:21]
Steve Grasso
Weakness in nuclear and energy.
- [44:22]
Carter Worth
CCJ Carter, Pure Cycle, a stock that's on 40% due for a big bounce.
- [44:28]
Mike Ko
And Steve Arista Networks overdone.
- [44:30]
Tim Seymour
Thank you for watching. Fast Money. Mad money starts right now.
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Deirdre Bosa
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Tim Seymour
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Tim Seymour
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Deirdre Bosa
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Tim Seymour
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Courtney Reagan
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