AI Bubble Anxiety… And An Earnings Season Surprise? 10/6/25

0:01Live from the NASDAQ market site in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap. The big AI boost. AMD booming. After OpenAI and Sam Altman talk about another huge deal, the details and what it means or might mean for the rest of the market. Then to the land of the rising sun. Japan's markets also soaring on the backs of that country's latest elections. How to trade the Nikkei and other global stocks. Plus, retail on sale. What's behind all the discretionary underperformance today? Chartmaster will lay out what he sees coming for treasury yields. And can you hear me now, Hans?

0:42Maybe not. Why Verizon investors are a bit gloomy today. Hi, everybody. I am not Melissa Lee. She is out today. I'm Brian coming to you live from Studio B at the NASDAQ. And on your desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan and Guy Adami. All right. A new week. Same money making markets. Big take big tech and the S &P 500 popping to new records. The NASDAQ getting within nine points of the rather magical twenty three thousand level. Now, the story of the day, it has to be advanced micro devices. AMD. At one point, that stock up 37%. AMD talking up a deal that could end up with OpenAI taking a 10 % stake in the company.

1:29There are still a lot of questions, but we also know a lot. So let's dig into what we do know and the reaction. Mackenzie Cigalos in San Francisco with more. Back. Hey, Brian. So OpenAI is becoming the kingmaker of the tech trade. Today, It's AMD, but we have seen this before. NVIDIA, Broadcom, and Oracle have each added hundreds of billions in market cap within hours off the back of single deal announcements with OpenAI. I just sat down with OpenAI Chief Operating Officer Brad Lightcap, and I asked what he would say to critics raising concerns about the circular nature of these partnerships. I think the financing models for these things are going to be unprecedented because the scale of demand for this type of thing is also unprecedented.

2:15And that demand is taking center stage here at Dev Day, where some of the four million developers in OpenAI's ecosystem will now have the chance to apply to join essentially what amounts to OpenAI's version of the Apple App Store Buffer AI. This is Sam Altman betting that this is the moment that ChatGPT becomes more than just a chatbot, opening it up to outside developers, embedding instant checkout, and launching a public app directory. Now, it is the company's third attempt at an app store, but this time the economics are baked in. And Brian, interesting guest speaking soon. Do you want to guess who it is?

2:50At this point with OpenAI and this story, it could literally be anybody. I have no. It could be McKenzie Sigalos. It could be Bernie Mac. I have no idea. I'm not the secret guest. It's Johnny Ive. You and I have been talking about OpenAI's hardware ambitions. Sam Altman paid$6.4 billion to bring the Apple, the legendary Apple hardware guy in house. He has been, Altman has been talking up what his hardware ambitions are for OpenAI, basically a consumer-facing device for the generative AI age, something we haven't seen before. A family of devices is how he has described it. But this is a closed-door session.

3:27There is no live stream. I'm going to be in there later today, and I will report back. Yeah, because, you know, I got to say, McKenzie, your background there, a guy on a stage in a sweater, a big background, sort of surprise guest. My gosh, what does it feel like, Tim Seymour? It feels like every day we're getting one of these announcements. It's insane. It feels like if we had our whiteboard up and we drew our circles and we drew our lines, you know, from OpenAI to Microsoft, but then NVIDIA over here around to Oracle. I mean, this is what the street is doing. This is what the investor community is doing.

4:00And again, it's both sides. It's investors that are running and seemingly chasing. But it's also a Wall Street community. It's an analyst community that's coming up with new ways to make the multiples make sense. And there's no question that if you think, you know, per gigawatt of demand by what? You shook your head like that when I said gigawatt. Well, I just love you. It made me happy. Well, you know, so each one of these per gigawatt opportunities apparently is double digit billions of dollars. And you can probably map this out through 2032 or whatever. For AMD, I think just to speak more specifically about the validation for the 4150, for their courtship, for their platform, for the software that surrounds it is part of what I think this really is.

4:46So I don't know whether you're supposed to rally this thing 30%. I have a position in AMD, and I did sell some upside calls today because the vol was extraordinary, and I didn't sell it far out. I sold it short term. It just feels to me, Guy, not in a bad way. And we're talking about open AI, which is private. It's not a stock. I get it. But you got the guy on stage. You got this sort of the big reveal. You got the App Store. Oh, and Johnny Ive. Man, it feels like Apple. Well, maybe it is. Maybe Apple 15 years ago, 20 years ago. You know what? You know, the gentleman that interview, unprecedented in terms of this type of event.

5:19No, not really unprecedented. I mean, you go back 25 or so years, and actually there was a precedent for it. So let's not get crazy. The number is just a lot bigger now. All the circular stuff, it should be concerning. But you know what? You want to look past it. I get it. Jim Cramer made some very positive comments about it earlier today. I'll say this. AMD today traded five times normal volume. I think it traded a quarter of a billion shares. It traded up to the highs that we saw in February of 2024 and gave the majority of it back. That should be a little bit concerning. I think Tim was right to sell upside calls.

5:50It's probably not a bad place to take some money off the table in terms of a long. Dan, are we are we by there's no question. AI is real. It's going to change the world. It's amazing. We haven't even begun to think what's to come. But is there how much future earnings are we buying today? What you've seen all the I mean, it's like you have to have X amount of hundreds of billions of dollars just to justify the spend of the CapEx that's been, you know, in the last three years or so. And again, no one's going to be able to figure that out until we start seeing these revenue models and the monetization models.

6:22You know, when I look at this, Andy, the guy's point, the opening tick of the day was the high of the day. The closing tick of the day was the low of the day. So it sold off basically 10 % from those highs. The guy's also point that was literally to the penny, that opening tick of those prior all-time highs. Now, that's technical stuff. Who really cares? The one thing that I would focus on a little bit, and to your point, Sully, is like when you have this sort of announcement and you don't have a lot of visibility to when those revenues are going to be booked, When you think about the margin structure of this company, AMD, relative to that of NVIDIA, this is a company that's supposed to have gross margins of 52%.

6:58One of the big reasons why NVIDIA has been able to enjoy the multiple that it had before it started coming down was because it had a 70 % plus margin. This is not something you usually see out of hardware businesses. So does AMD have a software that locks you into their platform? I'm not sure about that. The other thing for AMD, they really have to execute here. If they come out and they are not able to deliver a chip that is remotely close to what NVIDIA has been doing, and OpenAI maybe pulls back from that relationship, that's going to be a real problem for this company. And they have not executed particularly well.

7:35So when I think about these kind of second sources, we've been talking about competition coming for a very long time. It's here. And NVIDIA sold off 1 % today from an all-time high. That's it. I found this structure of this deal just fascinating, and I honestly don't fully get it. The idea that they would be giving away 10 percent of AMD to have the business of six gigawatts of OpenAI's business for the next five years. There's a lot that they haven't told us yet. If you look through the 8K, there's a lot of details that are really still out there we don't know. It seemed to me the idea that as AMD stock goes higher, then OpenAI can exercise the shares.

8:24So I don't know what to make of the whole thing. I find the reaction,$66 billion of market cap on a deal you talked about, tens of billions, I think was the quote, tens of billions per gigawack. So let's say$20 billion per gigawack. That's$120 billion. $66 billion on the stock today. I don't know what to make of the whole thing. And my question to Dan, Tim, was based on this, OK? You said gigawatt. In this deal, they're going to start with one gigawatt. That's about 750 ,000 homes worth of electricity, by the way, folks. The second half of next year, OK? We still don't know where the power is coming from because you know how many new nuclear plants are being built in America right now?

9:02Zero. You know how many new natural gas plants are being built in America right now? Zero. There are some expansions going on, but there's no capacity at scale being added. So if we're adding one gigawatt next year, Tim, let's say one a year, we're buying not only hopes and dreams, but we're buying earnings five plus years down the road, I think. I think that's what the last two weeks or three weeks really with a lot of these deals that have been in the hundreds of billions have been about. They have been about the future. They've been about a commitment to spend and they've been about strategic partnership by the biggest players in the space.

9:40I mean, I think in the short term, what this did for AMD and it's Danny's he's right to bring up the fact that that NVIDIA has competition seemingly. That's the headline tells you that it's competition. And yet it didn't you know, it didn't really trade off at all. Now, it's been struggling a little bit around these all time highs. But it does indicate that AMD has a greater share of data center server share. It does indicate that they have a greater share of the customer wallet based upon the validation they got today. And I think that was really the follow through we got from the street. Yeah, I think, Guy, listen, again, we're not talking about OpenAI because they are theoretically a nonprofit.

10:16It's got to be the world's large. It's got to be bigger than every nonprofit in the world ever combined, he said with a wink and a slight grin. I will say this, though. At current prices, one does wonder if NVIDIA and AMD are going to have to they're going to ultimately raise their chip prices and that their earnings may be better than we think because they're going to raise costs to meet demand. Because, by the way, you have to replace these chips every few years. Well, every six months, it seems like. I mean, the cycle's pretty quick. All right, but that's fine. Every few years, you're then saying the competition's not coming into space and they can continue to raise prices.

10:54And the 75 percent margins that NVIDIA enjoys right now are going to be there in perpetuity. I don't believe that to be the case. What I'm saying is if – so OpenAI made deals. Let me ask you it for you. OpenAI in the last three weeks has made deals with Broadcom, NVIDIA, Oracle and AMD. But just on the chip side, that's three major competitors slash coopetition all together. You're kind of rounding every. It's like if the Jets, the Giants played in the same team is kind of my point. Well, that's probably a bad example. That terrible example. But you get my broader cut. I'm saying the winner, OpenAI, has chosen.

11:34They've blessed the winners. There are a lot of that going around right now. And Intel's being blessed as one of the winners completely tangentially to this entire thing. So, yeah, I mean, they're picking winners and losers, and it's their right to do so. But, you know, I guess my point is this. The math gets a little bit odd. Karen brought up the fact that she's somewhat perplexed about it. If Karen is, it means I certainly am. And you look at this and you wonder, how long can this circularity continue in terms of giving people money, buying the chips back from them, getting an investment, getting a stake in their company?

12:06It all seems a little fugazi to me. There's a lot of concentric circles here, too. So we forget that NVIDIA is an investor in CoreWeave. If they didn't come in on the day of that IPO in late March, I mean, the CoreWeave CEO said that deal doesn't get done. Then it became a meme stock, and then we see all this multiple expansion that's happened. But think about this. NVIDIA is building their own data centers. OpenAI is building their own data centers. So they're all invested in each other. They're all competing with each other. And it just seems like a big mess. And at some point, if you ever do, and this is very different than six to nine months ago, because a lot of folks were saying, OK, maybe there's a slowdown in this CapEx and maybe we'll see some sort of digestion.

12:45Now they are all interlocked. So if there's one bit of slowdown, it's going to hit the entire tech complex. We're talking about the server makers. How bad? Well, think about this, Sully. We have Super Micro. We have Dell on the memory side. We have Micron, SanDisk, Western Digital. I'm missing one. Whatever the other one is. Seagate. I mean, it just goes on and on and on. It's the power guys. It's the paint guys. Remember we heard Sherman Williams. They're doing great. All these data centers need to get painted. You know what I mean? So the list is going on and on. Mohawk for carpet because you want to make it look nice.

13:18All right, I'll stop. No, your point is taken. And by the way, where's the water and the electricity coming from? Yeah, the cooling systems. For more on the AI trade and the markets overall, let's bring in Osun Kwon. He is the new-ish chief equity strategist at Wells Fargo, and he is out with his first ever earnings preview note in that role and is kind enough to come on Fast Money. Are you sure this is where you want to start? We should clap him in. I mean, next time. On the new rule. So I guess the debate, this bubble or not, whatever is happening, Your models, you run through all these thousands of models all the time.

13:53Your models show that earnings may actually be better than many think. Why? Yeah, so we're forecasting about a 4 % beat for the upcoming earnings season. So we came up with a pretty interesting model. We essentially looked through all the macro variables that we could find, about 350 macro variables. And we went through this machine learning process to figure out where the sales could be. And it's still pointing to a pretty decent beat. So we're forecasting about a 4 % beat led by AI, semis. Is it a big enough and broad enough beat to justify the rally that we've been seeing the last few months?

14:29I think so. I mean, you know, people say the bar is a little too high this time because EPS didn't get cut into earnings as it usually does. But if you look at where consensus number is for Q3, it's down about 4 % since the liberation day. Our view is that tariffs didn't really have much impact in Q3. Q4 event and into Q1 because companies carry about 65 days of inventory at the end of Q2, which means that since August 7th, their pre-tariff inventories are going to run out in the middle of October to November. That's not Q3. That's really Q4. So I don't think we have yet to see the real impact of tariffs yet.

15:07And if that's the case, I think earnings are going to come in around the liberation. OK, so earnings good and congratulations. So earnings are going to do better than expected, but it's still a multiple expansion to a large degree. So my question is, what is the right multiple in this environment? Because we're probably close to 23 times next year's numbers right here. Yeah, I think it's hard to argue that multiples are going to expand further from here. I think it's really going to be more of a earnings growth story going forward. We're forecasting 11 percent growth for this year and next, followed by another strong 12 percent growth in 2027.

15:38So about low teens returns for the S &P without any multiple growth. So can I ask a question? You're in. Get in there, Karen. So in your models, do you include what do you have for rate cuts? Yeah, so we're forecasting about two more cuts this year and two more next year. So about four, which is basically in line with what the market is pricing in. We actually, for the S &P overall, we came up with a pretty interesting framework called the PRISM. PRSM, profits, rates, sentiment, and macro. So those are the four drivers of the equity market that we have identified. If you go through each one, profits still in an up cycle.

16:17Rates is getting better because we're in an easing cycle. Sentiment is still neutral. Macro is actually improving too. So for macro, we're using growth minus inflation, which is actually still negative but getting better. So if you combine all those four, we're still talking about a pretty healthy backdrop for equities overall. So hence our target of 7 ,200 by year and next year. Does the Federal Reserve matter as much as the AI trade? Or is this market perfectly priced to a combination of both of these things? I think to Karen's point. Just worried if one of these doesn't go as planned. Yeah, I think AI matters more than the Fed.

16:59For broadening, I think the Fed matters. Outside of that, I think it's really more about growth. There was a lot of optimism heading into the FOMC that the Fed might be easing into a re-acceleration cycle. That's when we saw really the easing cycle trade happening, whether it be the Russell 2 or the home builders. Now that we are in an easing cycle, officially, we're essentially selling the news and rotating back into AI. Outside of AI, I'm not really excited about anything. For broadening, for sustained broadening, I think the PMI, the manufacturing PMI, has to go up about 50. And I don't really see that happening unless rates fall more from here, because this has been the most rate sensitive manufacturing cycle in history.

17:40And I think the reason why that happened is because it was a housing led downturn in manufacturing. There is some view that the non-res side is getting better, which is obviously is positive for the PMI cycle. The thing is, historically, non-res didn't really have an impact on non-res. And over the past three years, during the downturn of the PMI and manufacturing, non-res has been healthy. So even if non-res gets better from here, I think housing ultimately has to get better. And for housing to get better, rates have to come down. And for rates to come down, we need slower growth. So I think that actually will be negative for equities.

18:17Osun Kwon, really appreciate you coming on. First ever earnings preview note. Don't be a stranger. Thank you. Osun, thank you very much. All right. We've got a news alert coming out of Washington, D.C. President Trump making comments on budget negotiations with Democrats and addressing a few other topics as well. Emily Wilkins has more, Emily. Yeah, Brian, it was a newsy moment there in the White House. Well, look, first of all, there could be a new wrinkle in these negotiations over a government shutdown, with Trump telling reporters that he is discussing things with Democrats on health care and that he's got negotiations ongoing with them.

18:53Take a listen to what he had to say. We have a negotiation going on right now with the Democrats that could lead to very good things. What kind of good? And I'm talking about good things with regard to health care. Are you speaking with Democratic leaders? What kind of negotiation? Well, I don't want to say that. I don't want to say that, but we are speaking with the Democrats and some very good things could happen with respect to health care. So a little bit of a back and forth there. But remember, Senate Democrats are pushing their Republican counterparts to come to some sort of agreement on extending those Affordable Care Act tax credits.

19:28Now, Trump has not specifically said he wants to extend the tax credits, but he did mention that he does want to make some reforms to eliminate waste, fraud and abuse. However, we're now hearing from leading Senate Democrats that they are not in negotiations with Trump. Senate Minority Leader Chuck Schumer saying in a statement that Trump's claim is not true, but if he's finally ready to work with Democrats, we'll be at the table. And of course, that was just one piece of news that came from the White House. The other one is that the White House is now greenlighting a road ambler access that will provide more access to copper and to mining.

20:02Brian? All right, Emily Wilkins in Washington, D.C. Emily, thank you very much. Guy, I'm going to quickly ask you this. Not to go down the political road, but Supreme Court started their term today. They're going to rule on tariffs. Is there a market risk, and maybe there's not, is there a market risk to the Supreme Court ruling that the tariffs are invalid and illegal and we basically start, we just wipe out eight months of what we've been talking about? I don't know if you wipe out eight months. I do think there's a risk associated. You heard whispers of that a couple of weeks ago, and the market actually did sell off on the concerns that, you know, all that money taken in, all the money in the coffers somehow had to be given back.

20:44So if they were to rule in the way you just said, yeah, I think that's a market risk. All right. And just keep an eye, folks, on that thing that is out there, and it's called the Supreme Court. All right. Coming up, the shopping drop. Why the discretionary sector is lagging the broader market. Some of the names today that stuck out at checkout. Plus, not loving, app loving. With that stock taking a big hit as well. Don't go anywhere. Fast Money, back in two.

21:21We got a news alert for all the Swifties out there. AMC just announcing Taylor Swift's official release party of Showgirl this weekend brought in$50 million at the box office globally. $34 million of that was in the United States. AMC shares up slightly after hours. They dropped about 5 % during the session, but pretty good numbers. By the way, as one would expect, because everything Taylor Swift does seems to win. I went three times.

21:56That's not accurate. That was a showstopper. You should issue a correction. All right, meantime, I'm going to move right on. It wasn't all sunshine and roses in the stock market. The big retail ETF lost about 2%. Guys, throw me off. Some major underperformers included Starbucks, General Motors, home builder Lenar, and the aforementioned carpet maker Mohawk, all down 2 % or more in today's market. Karen Feinerman, any macro worries about discretionary? I mean, I guess some. You know, we talk about the labor market getting a little, you know, going the wrong direction, right? So, but I think still enough people are employed.

22:38I think we always have this lull right before Christmas, and Christmas isn't even that far away. We're like, oh, I don't think we're going to spend this year. And then Americans always do. Guy, you say never underestimate the power of Americans to spend. But across the board, it was pretty ugly for a couple of retailers and some of which I own. That was not fun. Real quick, you look at the homebuilders, and I'm not bullish. I mean, they've bounced a lot since April, as they should have, but they didn't make the highs they made back in January, number one. Number two, if you think rates are going higher, which I do, it's hard to be bullish.

23:09Higher. I think rates are going higher. And if you think the unemployment rate is going higher, which I do, it's equally difficult. So I think the homebuilding trade might be a little long in the tooth here. You see the president, by the way, Dan, the president came after the homebuilders today, kind of compared them to OPEC. It was like there's there's a lot of political stuff that's moving the market around here. Well, I tell you what, I mean, politics aside, I think the discretionary space is in trouble. And I could point to any number of names. And if you look at over the last month, we're talking about Deckers down 20 percent.

23:38You're talking about AEO down 16, RH down 20, you name it. And then you look at the XLY, which is the discretionary ETF. And you're like, wow, it's actually had a pretty decent month. And part of it is if you look under the hood, that's 20 percent Amazon, 20 percent Tesla. We know the run. Those two stocks have been on. So I just think that the marginal dollar to spend for discretionary for most consumers in this country, they're either tapped out or they already have it. If you think about the pent up demand that we had in a lot of these athletes, your sectors and a lot of these places. And you're seeing it in hospitality.

24:08You're seeing it in restaurants. You're seeing it in some of these apparel names and you're seeing it really across the housing space. So as much as the rest of the economy, if you look at industrials and banks and health care, which has gotten a lot of life in the last two weeks, those sectors look great. I don't think you want to be indiscretionary. And I don't think we've even begun to really hear about the consumer falling apart. Yeah. President Trump saying that the homebuilders are sitting on two million empty lots and compared them to OPEC as a group just kind of banding together. All right.