AI stocks back in the spotlight... And a bold call for three rate hikes this year 8/12/26

19:22Tim Seymour:Yeah. Tim, is Citi still your top? Yeah, I'd like the valuation, but I'd like the earnings momentum, the margin momentum. I think it's a story where their core businesses are executing. It's not as sexy of an investment banking or even a sales and trading play. But I think the corporate governance improvements and the margin improvements and the valuation at a time when people are a little worried about financials. So I like it. I like Bank of America. I'm long bad. And J.P. Morgan. Are you so you're surprised that J.P. Morgan was not part of that roundtable? Because Jensen said that he approached these firms and all of them said yes.

19:56Tim Seymour:Every firm that he approached said yes, which means that the firms that are not part of it were not approached at all. Not necessarily. They said, yes, we'll do the show or yes, we'll do this facility. The facility. I see. The facility. Then, OK, then maybe at the moment they're not. They were maybe. I don't know. I have no particular insight into this at all. I just found it notable. Also notable. It was only NVIDIA. Right. Exactly. Yeah. Yeah. Very notable. A lot more fast finding to come. Here's what's coming up next. Mattis Moment of Reckoning. The landmark trial over social media addiction hitting shares today.

20:36And whether the fallout could threaten its AI ambitions. Plus, three rate hikes. This year, one firm doubling down on its base case for Fed tightening as inflation data remains stubborn. You're watching Fast Money, live from the NASDAQ market side in Times Square. We're back right after this.

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22:21Tim Seymour:Welcome back to Fast Money. Shares of Meta down over 3 % today. as jury selection began in a California federal court where the company is being sued for allegedly harming the mental health of children. Julia Borson's got the details here. Julia. Melissa, that's right. This federal trial is the biggest test yet of youth safety allegations against Meta. California, Colorado, Kentucky, and New Jersey allege that Meta designed its platform to addict users. Plus, 29 states claim that Meta violated the Children's Online Privacy Protection Act by collecting and using children's data. Now, Meta said in a filing that the damages could be as high as$1.4 trillion, which is close to its market cap.

23:01Plus, the states are asking for big changes to Meta's algorithm, including eliminating infinite scroll and notifications, making Meta prioritize content focused on well-being instead of focused on engagement, implementing age restrictions and time limits for young users. Now, Meta saying, quote, We strongly disagree with these allegations and are confident the evidence will show our longstanding commitment to supporting young people, going on to say we're proud of the progress we've made and we're always working to do better. Meta CEO Mark Zuckerberg and Instagram head Adam Mosseri are both expected to testify in this trial, which is set to last around seven weeks.

23:41Melissa?

23:42Tim Seymour:Julie, are you surprised that it's gone this far and that Metta hasn't somehow engaged in some sort of settlement in order to avoid Mark Zuckerberg or Mosseri from actually testifying in court? They've testified before, Melissa. This wouldn't be the first time they've testified. Metta thinks it has a strong defense. It thinks that the arguments are quite narrow that we're seeing from these states. I also think that the state AGs would like this to go to court. I think they'd like to be able to make their case. And remember, Melissa, it's not just this case. This is one of a series of lawsuits that we're seeing this year and next year, which are being compared to the big tobacco moment where all of those lawsuits came up against big tobacco decades ago.

24:25The question is how all these lawsuits work together. There are also some lawsuits filed by school districts. So it's not just this one case, but perhaps many opportunities to get Mark Zuckerberg on the stand. Juliet, it's Karen. Thanks for being on. So for this case, What's the timing of this case? Seven weeks. So jury selection is today. The opening statements are on Tuesday, and it's set to last about seven weeks. And I say we're expecting Mark Zuckerberg and Adam Osseri to testify, but we don't know for sure. It will be live streamed. I was reporting on a case that was in New Mexico. That one, there was a live stream.

25:02There was another case in Los Angeles where Zuckerberg testified, and there was no live stream there. But because there is a live stream, because there are all of these state AGs involved, this one is expected to draw the most attention. I would say it's the highest stakes in terms of both the financial implications as well as potential changes to the algorithm. So we'll see how these next seven weeks go.

25:22Tim Seymour:Sorry, Julie. What are the potential financial implications? So Meta said in a court filing that it could be forced to pay fines of as high as$1.4 trillion. Now, that is, of course, a massive, massive number. And it's worth noting that the state AGs have not given those numbers. It's possible that all of the fines for all of the different potential violations would add up to that. But I think Meta is trying to highlight how massive that number is to show maybe it's out of sync with the impact of its apps and its algorithms. So I think perhaps even more dangerous for Meta than the fee it might pay, because so far it's had to pay fees.

26:02And they talked about that in their most recent earnings are the changes to the algorithm. Because that would have long lasting implications for the company beyond a one time fee.

26:10Tim Seymour:Yeah. Julia, thank you. Julia Worsten. Tim, how much of an overhang to you is this? I think it's more than it has been in the past. And I realize we've gotten very comfortable with Meta having all kinds of dynamics against it, certainly in the in the courtroom of public opinion. But I there's a couple of things here. First of all, apples and oranges. Look at age restrictions and roadblocks and what it's destroyed that that stock has destroyed that company. I understand we have a different dynamic here. I do also just think about the manifesto that I heard from Zuckerberg the other day. There's nothing in what he said other than trying to be open and trying to necessarily have greater flexibility in their model and some of the concerns around AI.

26:57But I also heard a lot of spending. And I still think that's a dynamic. I look at that chart. It's one of the weirdest charts for a major, major company. The trend is down and it hasn't reversed that. Hard to believe it made its all time high. I want to say almost a year ago, either this week or next week, eight hundred dollars or thereabouts. And you see where we are now. And Tim is right. I mean, it's been a series of lower highs and lower lows. But where else are you going to find? Karen can speak to this. 17 times next year's numbers with the kind of growth rate they have. This I understand what's going on here, but notwithstanding, you have to say most of this, if not in the entirety, should be priced in at this point.

27:31Yeah, well, growth is expected to slow. We're going from 12 percent expected this year of EPS to 9 percent next year. So when you think about these overhangs, I mean, I don't know. They're not going to be charged a trillion dollars. But you know who's really bad at testifying? Mark Zuckerberg's really bad at testifying. We've seen that again and again. And it's really interesting that we have art imitating life. Aaron Sorkin is writing this or wrote and directed this movie called The Social Reckoning. And Jeremy Strong is playing Zuckerberg. And it is exactly about this issue. It's coming out in October.

28:01So I just think it's really funny. We got a third of the planet on their products. They broke our brains, all of them. It's not just about kids. And so at the end of the day, I think there should be some sort of reckoning. I'm not saying it has to be in the stock, especially when you consider the financial performance that they do have. But make no mistake about it also. They're losing in AI. I mean, they're just not doing particularly well. And they have amazing distribution for this project. And they keep going back and forth. And let me tell you something. When you're writing a 6 ,500-page or a 6 ,500-word manifesto and you have to put it in the Wall Street Journal, you're not winning.

28:32I mean, let's just be clear. So there's probably pretty good reasons why the stock trades this poorly. So they've been there before. Sure. Right. So remember, we had the Cambridge Analytica privacy scandal, and that was a big to do and took a while to clear up. But it did this. So I wouldn't be surprised if this regardless of what happens in this trial. I think we could still be in this situation. Who knows? Several years. At the same time, you have the metaverse happening all over again with the spend of, you know, just enormous spend with unknown return. So that, I think, weighs on the stock.

29:09I guess the$122 since, I'm sorry,$222 since the peak, which is a lot. All along, the underlying business is really performing. It's an extraordinary business. Unfortunately, now in a chocolate-covered CapEx litigation crust that it doesn't really taste so good. So I don't know. I'm still long. I'm long less than I was for sure. But I do think the valuation here is compelling.

29:43Tim Seymour:Coming up, the inflation waiting game. The latest CPI print suggesting prices aren't hot enough to panic about, but not cool enough to declare victory. What it means for the next move in markets when Fast Money returns. Missed a moment of fast? Catch us anytime on the go. Follow the Fast Money Podcast. We're back right after this.

30:11Tim Seymour:Welcome back to Fast Money. Stocks mostly higher in Wednesday trade. The Dow off by just 20 points for a third straight session in the red, while the S &P rose by a quarter percent. NASDAQ added half a percent. Gold settling half a percent higher, now trading at more than two-month highs. Price is now closing in on$4 ,500 an ounce. Gap falling over 3 % after Jeffries downgraded the stock to a hold with a$23 price target. Analysts growing concerned about softer demand trends at Old Navy, with that brand making up more than 50 % of the company's sales. And another earnings alert to bring you. StubHub sinking after earnings fell short of estimates, though revenues beat expectations.

30:46Tim Seymour:The company also raised its full-year outlook for gross merchandise sales. Got to go to you, Guy, on gold. Two-month highs here. Well, we've been saying, first of all, I never thought it'd get as low as it did. It did. But here we are over the last month or so. It's traded well. Look at the gold mining stocks. They're telling you this is real because they've outperformed. But I'll say this. We thought at a point when the bond market deteriorates historically a headwind, that was going to become a tailwind. And I think that's what's happening now. I mean, we're seeing it across the board with metals, Tim.

31:11Tim Seymour:I know you're watching copper. You're watching aluminum. All those surging. They are trading together. I also think on the industrial metals and non-precious, you have global demand. You are definitely seeing imports into China, but you're also seeing some numbers out of Rio Tinto and some of the integrated miners that support prices going higher. Copper prices near all time highs. I think they stay there on the gold side. Central banks have returned. They started returning in April. But what really has changed the move for the GDX is that the ETF flows 24 billion tons, excuse me, 24 tons of essentially ETF demand were added in the last three weeks.

31:48And that's what's moved the underlying. So I don't want to see gold get euphoric because I think that turns it more into a trade than an investment. All right.

31:58Tim Seymour:Meanwhile, new inflation data out today. Consumer prices in July rising a tenth of a percent to an annual rate of three point four percent. The report coming in line with Wall Street estimates. B of A security sticking with its three rate hike forecasts following the print in a note to clients. But it comes with a caveat. Aditya Bhave is behind the call. He is the firm's head of U.S. economics. DT, great to have you with us. So still, you're calling for three. Nothing has changed. Why? Sure. So the way we think about the Fed is pretty simple compared to a year ago. The unemployment rate is down.

32:29Inflation is up and further away from target. And yet the policy rate is 75 basis points lower than it was. So that doesn't make sense to us. We think they need to take back those 75 basis points of cuts. They were hedging against downside risks to labor that didn't really materialize. And we think given where stocks are, there's no sign that financial conditions are particularly tight. It feels like policy rates should be higher. So let's say that's a given. That's the case. Policy rates should be higher. Do you think that will happen? We think it will, because if they don't hike, then I think we'll be facing a fairly challenging situation a few months down the line.

33:08We know there's seasonality in the data. Every time we come around to this time of the year, things look a little more dovish. At the start of the year, job growth is stronger, inflation is higher, things look more hawkish. The difference this time is that the third year is already at 525, the 10 year is at 470. If they don't hike now and the data turn hawkish again early next year, they're facing a very serious risk that the long end could get unanchored. Okay, I'm with you. Until this data point, the jobs number was a disaster. You could say it was a one-off and everything's fine. Unemployment rate ticked lower, but under the surface, something else is happening here.

33:44So hiking into that could be problematic. I'm going to push back again. Please. I don't think the jobs number was a disaster. The Fed has told us, and I absolutely agree, that break-even job growth right now is pretty close to zero. The labor force is barely growing. In that situation, you're going to get months like this. And then there's the seasonality issue, where we know that the data are a little bit softer around this time of the year. If you average over the full year, we're still growing around 50 ,000 jobs per month, which I think is absolutely fine. And the unemployment rate's falling.

34:18Tim Seymour:So you think the market's going to test the Fed at this point? I mean, the Fed has to prove itself. Yeah, I think so. Yes, exactly. So let's say at the next meeting, they don't hike. Yep. I mean, when do your forecast of three hikes, when do they happen? When do you think they should happen? We have them happening in September, October and December. Admittedly, there's uncertainty around the timing. There's there's many permutations. Certainly, if the inflation data are soft over the next couple of months, they won't go in September and they might start later. So we're open minded to that. So just coming back to this pressure on the Fed again and on Warsh.

34:56I mean, do you think because of the midterms that there's just so much political pressure for them not to hike? Right. So I don't think they'll start in October. That's too close to the midterms. If they've already started, they might continue in October, but I don't think they would insert themselves into the conversation six days before the midterms. They either start in September or start in December.

35:18Tim Seymour:How about the argument that a big driver of inflation, oil prices, energy prices, they will fall off, that those will dissipate, that the impact of the tariffs will roll off as well, and so therefore we won't have as much upward pressure? Right. Great question. So we're not focused on headline inflation. We knew headline was going to go up and then come down pretty fast. It's about the core. On tariffs, actually, the 12-month impact of tariffs is probably a little bit lower than it was at this time last year. So tariffs are already rolling off. Ah, so we have a bigger problem than we think then.

35:52Tim Seymour:We have a bigger problem than we think. So here's one way to think about it. 3.3 % core PC inflation as of June. We think about 40 basis points if that was tariffs. 20 basis points was Iran, and about 20 basis points will get revised away in September. So if everything goes right for the Fed and nothing goes wrong, and that's not how life works, but if everything goes right, you're still at 2.5. That's a pretty big overshoot when the labor market is looking basically in equilibrium, right? So policy should be a little restrictive. We don't think it is. That's why we think they hike. At what point do you get concerned that the Fed will not act and therefore you will change your forecasts.

36:31How do you think about that? Right. So the way we're thinking about that for now is that the proximate risk is a delay to December. And then we'll have to see how the data play out. Right. And then we'll think about whether they go next year or they don't go at all. But if they go, I think 75 is totally reasonable because you need to do more than just a symbolic hike to truly tighten financial conditions.

36:52Tim Seymour:Aditya, thanks for coming by. We do appreciate it. Thank you. Aditya Bhave. Tim, what do you think? Should the Fed do something or risk losing control of the long end? Well, I think I love how Aditya pushed back on Guy. I mean, he basically stepped on him and said enough. And I'm not the economist, but I think another dynamic with the labor market is that 230 ,000 a month since January are falling out of the labor force because of immigration. And that's putting upward pressure or more strain and certainly pushing down the unemployment rate. So I continue to think that's good. I think global PMIs are surprising to the upside.

37:32Europe has been very resilient. I think China's going to surprise. I just would add that we have global GDP around 2.8, 2.9 percent. And what I loved about what Aditya said around is he acknowledged liquidity conditions in the stock market at all-time highs. So I think they could go three. I don't know if they're going to, but those three from last year should be taken out. Yeah, it's interesting. The CME FedWatch tracker is out 40 % for September. They're not going in September. I mean, like that article in the Wall Street Journal last week about Trump, and I know I keep saying this, but it just seems really obvious to me.

38:02Trump keeps calling Warsh, right? And, you know, what does that mean? He's talking about the economy, this and whatever. I just think the pressure on him is clearly not to do anything prior to the election. We're talking about six weeks to the midterm. So it just, you know, have a ball. You think they're going to do, you know, 75 basis points? You better wait a little bit. I wouldn't hold your breath. I respect him immensely. You goodbye to the guest so he's not here. But I will tell you, the revisions on top of that job report, I think another 123 ,000, we're not good. So we can argue. I mean, I think we're trending the wrong way.

38:35Tim Seymour:Coming up, taking Wendy's off the menu, what's behind a reported take private push at the fast food chain and what it could be saying about the health of the restaurant trade. Fast Money's back right after this.

38:54Tim Seymour:Welcome back to Fast Money. Shares of Wendy's surging almost 15 percent. The Financial Times reporting Nelson Peltz's Tryon is looking to take Wendy's private. Wendy's issuing a statement saying the Wendy's company would thoroughly review any proposal submitted by Tryon consistent with its fiduciary duties. We are moving with urgency and under Bob Wright's leadership as our new CEO, we have identified core strategic areas of focus to improve performance and turn around the business. and saying in fast food, McDonald's getting a little McLovin from the street. Wolf Research highlighting a bullish inflection point in the charts.

39:27Tim Seymour:Wolf sees momentum carrying McDonald's to 300 bucks a share. That's a 9 % gain from today's close. Both of them had not good earnings. Wendy's probably worse. It pulled its guidance. It has a new CEO, CFO. I mean, maybe not an entire surprise. It is a complete kitchen sink. But here we are. Historically, when Nelson Peltz gets involved, Karen can speak to this, that good things happen. I mean, it might take a little while, but good things happen. I don't know what the short interest is. Karen can look it up, but I think that's what you're about to see on the upside in Wendy's. So if you're asking me to play the would you rather game, given the news that we heard, Wendy's McDonald's in the short term, it's Wendy's, Milms.

40:0237%. It's big. Wow. That is big. That is really big. I don't know. It's sort of interesting. I mean, Nelson Peltz, he used to own Arby's, ultimately sold it to Rourke. You would think Rourke, which is a lot of restaurant private equity deals, if Wendy's were for sale. Right. Of course they're going to say we would look at it. You have to. You have to look at it. Any bid doesn't mean you can't reject it out of hand. You can. So I don't know. I'm not quite seeing at the moment why he would want to buy it right now. But given the trajectory that it's had, maybe he feels like that's when you have to buy things.

40:40I'm not long, though. I'm not playing it.

40:43Tim Seymour:Tim, when you think of McDonald's here, that was a difficult quarter, too. It sounded like a case of not executing well. Their franchisees weren't offering the value menu, so people weren't getting the value that McDonald's is known for. Yeah, not executing well is not what we hear from McDonald's most of the time. And the Wolf Note was really it's a technical note, right? So it's an oversold condition at a key support level. And over the last couple, you've actually seen about a 20 percent move in McDonald's. And then it's failed to hold that. The fundamental story is, and I bring it back to the chart, around$250, this would be trading at around 18 times.

41:19And that would make it wildly cheap. And I think that the Burger King slogan was it takes two hands to handle a Whopper. I would be buying McDonald's with two hands at$250. And I think McDonald's is far superior to any other fast food chain out there. So I think you could start to buy some here. And I think you're an investor at McDonald's. I'd rather not be a trader.

41:41Tim Seymour:did me did tim did you just make that up it takes two hands to hold a 100 100 100 look look there's a lot of things that i'm good at a lot of things i'm not remembering ever well i will tell you not that i ever saw this but i've heard that tim had underwear that said home of the whopper all right all right you know what all right i mean look i don't want to embarrass other people out there but i i'll just tell you this this is a case of i remember 70s and 80s tv slogans Is it have it your way? Yes. Have it your way. Have it your way. Thank you, Sandy. I promise you, if you at home go out and look up on the Internet, on the interweb, it takes two hands to hold a while.

42:23Tim Seymour:Sadly, we are going to hear this over and over again in the coming weeks. All right. Coming up. Pixel. Perfect. A look at the new smartphone lineup announced by Google today in the race. Put more powerful AI in your pocket. More Fast Money in two.

42:44Tim Seymour:Welcome back to Fast Money Shares of Outfit. Closing just below the flat line today, even after the Google parent unveiled its new Pixel 11 lineup, putting its most agentic version of Gemini at the center of its smartphones, is coming just ahead of Apple's expected reboot of Siri AI, which is also powered by Google. For more, Mackenzie Cicalos joins us here on Mac. Come on. Mac is here. Great to see you, Mac. And you were just at the event today. I was, and I spent the entire day demoing Google's new Pixel 11 lineup, including that latest foldable from them, which is competing in an increasingly crowded market.

43:19Now, design-wise, it stands out, sticking with a taller shape as Samsung moves toward a shorter, wider device, similar to what we're expecting from Apple this year. Now, there are some meaningful upgrades, including a faster Tensor chip and new camera features, but the headline today is Gemini intelligence. Google is turning Gemini into a gentic assistant across the phone, understanding what you're doing, connecting information across apps and then taking actions for you. And Google gets to make their case for this just weeks before Apple's big Siri AI relaunch, which, of course, is also powered by Gemini.

43:53So Google is effectively competing against its own technology using Gemini intelligence to differentiate the pixel while also supplying the models behind the rebuilt Apple intelligence.

44:03Tim Seymour:Is there any thought that this is in any way a preview of Siri AI? 100%. And I talked to Rick Osterloh, the Google devices chief, yesterday, and he pointed to some of the more bespoke features that would come solely through the Pixel or the Android ecosystem. There are a lot of similarities here. The on-screen context, a lot of the capitalizing on the data within the flywheel that you have in-house. And I will say, in terms of the form factor, what's interesting about the foldable phone, and I've got it here. Hold it up. is that they're making this different bet, and that's hugely popular in China, right?

44:37You've got Huawei with their trifold. You've got Samsung. Oh, OK. All right. Keep holding it up. You've got Samsung out with, like, a new Ultra that's very similar to the reporting that we've seen around what Apple's is going to look like. Mac, what was the vibe there? You know, there was a headline today that Gemini just passed, what, a billion monthly active users. And then when you think about, like you just said, that it's going to be on iPhone. It's going to be revamped. revamped, you know, new phone. It seems like from a distribution standpoint, like Gemini is in a great spot. They are. But then it's on the same day that you've got reports that Sergey Brin is saying, well, no, we need to be at the frontier of the AI model fight.

45:17Right. And there's been this exodus of talent lately from the Gemini DeepMind lab. And there's been this question of what that means. And what Google would say is that you don't have to have the most cutting edge model. You don't have to compete with Claude and OpenAI at the frontier to win with the consumer. You can do that with, I mean, this is Gemini Nano. This is a model that's able to run on device. You don't have to go to the cloud, which is a very compelling case. You've got Flash, which is very compelling among Google Cloud enterprise customers that can run it for, like, undercut on the token prices that you're paying Anthropic.

45:47Tim Seymour:Mac, great to see you. Thank you. Good to see you, Mel. Mackenzie Zagalos. Up next, Final Trades.

45:59Tim Seymour:I just wanted to say that Tim was right. It is really a slogan. It takes two hands to handle a whopper. Karen, final trade time. Yes, Google. Dan? Yes, Cisco, buy the bill. As I've said many times, we are family here. One of our family members is leaving for an incredible opportunity, Natalie Zhang, who we adore. Yes. And we will miss her dearly, but we're very happy for her. So, Natalie, from all of us, best wishes and good luck. Starbucks, Melms. All right. Thank you for watching Fast Money. Natalie, thanks for all your hard work on our team all this time. That and why Jim Pramer starts right now.

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