Apple’s Rally Keeps Running… And Trump’s Crypto Plans 12/12/24

0:02Live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast Here's what's on top tonight. Unstoppable Apple shares just keep going up despite lackluster iPhone sales, less than seller reviews for its AI offering and continuing concerns about China. What is behind this record run and what does it say about the market we are in? Plus, Trump's crypto boasts the president-elect telling Kramer this morning he wants the U.S. to be the leader in the digital currency space. How his administration's embrace will impact Bitcoin and beyond. And later, breaking down service, Titan's big first day as a public company, digging in the details of Costco's earnings and giddy up by horse racing could be ready to rebound after decades on the decline.

0:42I'm Melissa Lee coming to you live from Studio B at the NASDAQ on the desk tonight. Karen Feinerman, Dan Nathan and Guy Adami. Sis? Yeah, yeah. Yeah, pressure's on. We start off with the latest record close for Apple. Shares of the iPhone maker now up more than 10 percent in just the last month and a whopping 51 percent from April lows. The stock closing today with a market cap just a stone's throw away from$4 trillion. That is more than the entire GDP of the United Kingdom. This year's rally coming even as the tech giant's efforts in the AI space fail to impress users poking fun at Apple intelligence's awkward chat summaries, faulty image editing, and sometimes bizarre Genmoji capabilities like making poop hair on a face.

1:24Yes, yes. Dan will tell you all about it. Apple also saw iPhone sales in China fall for the third quarter and is struggling in its partnership with Baidu to bring AI to its devices there. So with this rally going strong in spite of these concerns, has Apple become the ultimate defensive play? Does this just tell us the tale of the market where momentum is the word of the day, Guy? I think you hit the nail on the head. And, you know, you try to figure out why this is happening. I don't think it's happening for any fundamental reasons. Obviously, the market's been doing fine. So you try to figure out what's going on below the surface.

1:55There's a couple things, I think. Semis have actually now underperformed since July-ish, if you look at the chart. Qualcomm, Micron, Texan, names that we talk about all the time, really actually have traded poorly. AMD throw it in the mix. So I think in some ways there's been a rotation out of semis. And the other is Apple's in 400 ETFs, of which it's one of the top 15 holdings. So as money flow goes, Apple wins regardless of what they're saying. It's just a money flow thing as well. So I get it. But with each passing day, it's getting more expensive, not cheaper. Yeah. And, you know, it's interesting.

2:29So we used to talk about the cash. We used to talk about their buyback. We used to talk about their dividend. They're like rounding errors right now. If you look at their cash position, it's like four percent of the market cap net of their debt. It's like minuscule. Right. And then their buybacks. You know, remember that day earlier this year, they announced one hundred and ten billion dollar buyback. And actually the stock rallied. And, you know, think about that. It actually has no impact anymore. So you look at a stock right there. That whole part was really from 2012 when they announced that buyback till, I want to say, about five years ago.

2:58That was a really important part of the story. You started off saying defensive. But here's the problem. Fifty percent of their sales now come from iPhones. They're not growing. And this services thing, the AI, you know, this is the next leg of growth. This is the thing that would justify the multiple where it's trading at. It's just there's no there there. So I've never been so right about one thing and so wrong about the other. The right thing was June 10th when they had their WWDC. It looked very obvious to me what was going on there. It was a fugazi. And everything since then has been a joke, except the stock has rallied 30 percent since June 10th.

3:32That's the wrong part right there. So, I mean, sometimes it just both things can be true. Both things can be true. I think, you know, the buyback thing, what used to be super accretive when they traded a very different multiple, is actually not accretive now. But it's interesting. I mean, I own a little, and I've been sort of surprised with how strong it is. I don't really get this. I was only up a little bit today, but this valuation here, it's not super crazy. But if you, you know, we always talk about looking at the hardware and the software part, which we know the multiple, the contribution of each is changing towards services, which is much more profitable and recurring.

4:13But you'd think that China issues would really affect them a lot. On the other hand, though, Tim Cook has been very adept at, you know. Cozying up to Xi Jinping. Yes, yes, yes. That would be one way to say it. And, yeah, I think that would be right. And it's worked for him. But I think, I don't know, it's just sort of in the melt-up. There are other things I like much better, like a meta, you know, just valuation-wise. I'd much rather be there. That's what's interesting is that, you know, with the meta story, it really sort of underscores this notion that AI can, the effects can be seen. Right.

4:46In real. Like we can actually see them right now. The impact on its business, the impact on what it sells, its ads, et cetera. And yet with Apple, we don't have that impact. And yet it did levitate from that June date of the WWDC on the AI hopes. And here we are. What are they? It's Genmojis. It's summarizing notes. It's image generation. Gene Munster comes on and talks about that and the hope. And listen, Gene's going to wind up being right. By the way, he came on on that same day, June 10th, and said it was, I don't want to put words in his mouth, but transformational, one of the biggest events in the history of the company.

5:20So good for Gene in terms of the stock. He got it right. But you're right. I mean, in terms of AI, and we've talked about it on this show, there are two companies that are clearly winning in the AI world in terms of making and monetizing. And it's Walmart. And you see it in earnings releases the last two times. And it's Facebook over their last two earnings releases. And they're being rewarded for it in terms of the stock price and the valuation. Apple's being rewarded for something they're not monetizing yet. and quite frankly might have trouble doing over the next year, year and a half. So you guys may find this interesting, but I'm going to try to pick apart some of these big names that have supposedly accrued a lot of the value, at least in some of the investments that they've made in generative AI over the last year.

5:57Let's leave NVIDIA out of it because we all know that that is deserved, whether you think the percentage gains or not. But let's look at Meta that you guys just mentioned. They are totally reliant on iOS devices for people to use them, for the most part, here in America. They will not be in China, okay, because they don't make it past the firewall. You could say that those are headwinds. Amazon, they don't own, they're building a model, right, for all intents and purposes, but they have a very competitive landscape as it relates to their hyperscale, their AWS business, okay? They are leasing basically for all intents and purposes, Anthropics, you know, model and that sort of thing.

6:34Microsoft, it looks like this is kind of a dud, this licensing of open AI. They haven't been able to do a great job integrating it. Co-pilot is a big, you know, meh, as you guys say. And then they're just not getting a lot of uptake of the co-pilot as it relates to enterprise. So, I mean, there's things to kind of pick at. I'm probably missing. Oh, Google. You know, Google, this has been a bit of a train wreck, Gemini, and integrating it. I think it's better than Apple intelligence. But, again, I think there's things to pick at in a different sort of environment. You know, like I'm not sure that these are the ones that get going in 2025.

7:04The story has to broaden out a little bit. Why is not being in China Hedwin from Meta? Yes. Yes. Well, there's how many people? You know how many billion people there are. Right, but that's been the way it is. It's not like you're here. Why are you looking at it? I know, too. She's been there a few times. You know what I mean? Like, I've been there a couple times. There's a lot of people there. I'm just saying. But they're doing just fine. Can I tell you why? Okay. Go ahead. Because they have three billion people. You take a billion and a half out of China, and that's not. Wait, wait, wait. It's as if that.

7:28But they were never in China. It's not as if this is a market that they were losing. There's nothing in the valuation for China. There's nothing priced in, which is the right price. I understand. But what I'm saying is at some point, they're only going to be able to get so many more people on the planet to kind of use their services. That's a pretty good market that you'd want to be in. I think they're looking to monetize the services more broadly, not necessarily. I mean, the more people you have, the better. But having them spend more, which is what has happened. I mean, Meta is 100 % the best story right now, in my opinion, for a whole host of reasons.

7:55And you talk about valuation, but they are squarely. I have the Meta Wayfarer. These glasses, have you guys seen these things? Yes, I have. They're amazing. You're admitting to it? Zuckerberg gave Donald Trump a preview at Mar-a-Lago. Yeah. And then he gave him the Ray-Ban. These things are amazing. I mean. What? Last word here. No, they're no last words. The last word. There are too many words. You see these people. Dan's one of them walking around with these glasses on, talking to themselves, and then hitting the little button on the side to take a picture of you while they're talking to you.

8:28It's confusing to you, right? That's creepy as you know what. I love it. All right. Meantime, 10-year yields hitting their highest level since before Thanksgiving on the back of a hot inflation report and a jump in jobless claims. Producer prices rising four-tenths of a percent in November, twice as much as expected. That combined with more people filing for unemployment benefits raised fears over economic growth ahead of next week's Fed meeting. Karen, you said before that you were surprised the 10-year didn't move more on this. Yes, I would have thought. I mean, we've got PPI, so that's inflation.

8:58But then we have the potential for tremendous growth and, you know, more deficits and all of that. I mean, that's also why I get to the idea that the Fed will not be cutting dramatically in 2025. I don't know why they need to, especially if the economy is going. Karen's done a great job with this, by the way. And, you know, I'm still one of the very few people, I think, that the TLT is going back to levels we saw this time. well, October of last year, which is about 82.5%, which gets you to about somewhere between 485 % and 5 % in the 10-year. I know it sounds preposterous, but, you know, I just think yields are going higher for a myriad of different reasons.

9:35There are people a lot smarter than I am that are betting on the same. Paul Tudor, Jones, Stan Druckenmiller, for example. And, you know, it just makes sense with all the issuances that are coming forth in the first quarter of next year. Something's got to give. They're not going to be failed auctions, but the market's going to demand a higher rate of interest to buy our debt. And you guys are saying this. Rates are going lower. Yields are staying put. The dollar looks like it wants to break out about a range that it's been in for like a couple years or so. So all of these things, you know, you guys were challenging my headwinds to the tech story.

10:04These seem like headwinds to the economy going forward. Just a meta. Yeah, just a meta. Also a little meh auction, as you would call it. For the 30 years. Yes, for the 30 years. All right. For more on rates and where we can go from here, we are joined now by Stephen Whiting, City Wealth's chief investment officer and chief economist. The firm just unveiled its 2025 investment outlook. Alexieman, good to see you. Oh, thanks for having me. So you're looking for growth in 2025 and 2026. But even with that backdrop, you think investors are too concentrated in their portfolios? Well, look, I mean, step back.

10:32This isn't fast money stuff. But when you think about three American companies are worth all of the companies in Asia or all of the companies in Europe, it isn't even a PE issue. I mean, we have rapid growth in our tech companies. That's great. Multiples are going from 50 down to 30 because of all that growth. But there's been a lot of good fortune here. I mean, just think about large cap U.S. stocks have had a 13 percent return for a decade, right? So what we see is just the opportunity elsewhere. Small and mid cap American companies, growth companies have had a decline in valuation in the last 10 years.

11:07Compared to where we were when Donald Trump was first elected, in U.S. dollar terms, non-U.S. assets are 40 percent cheaper in forward looking valuations. It doesn't mean that they're going to come alive and just jump really, really sharply. We went into this election, 6 percent overweight U.S. equities. We've got to start thinking about more diversification, some opportunity and cheaper assets for the next 10 years. How do you think about this run that we have seen since the election? I mean, is this sort of policy hopes and dreams pull forward? It's a lot like when Donald Trump was first elected.

11:43We saw the dollar rise through the end of the year quite discreetly. There probably is less room for significant fiscal easing. There's a smaller majority in the House. We have tax hikes coming unless we do otherwise. I think there's legitimate hope for deregulation. Energy and power infrastructure, financials, banks, a lot of headwinds can disappear. But a lot of this gets priced discreetly just over a period of time. And then we move on to other more lasting sources of growth. So let me ask you something, and I'm playing devil's advocate a little because I'm long IWM, but what about this phenomenon that has nothing to do with valuation, but has everything to do about flow of funds into the market, into bigger, more liquid?

12:27Do you see that changing at all? So I think EPS itself, again, turning on a breadth of profits that's better. 2025 estimates for small and mid-cap look a lot better if they can actually execute on it, I think you'll see performance follow those gains in EPS. So far, we've had a really narrow economy, especially looking back in the last 12 months. You know, there were a lot of gains for AI infrastructure. But if we look at 12 months ago, half of industries had EPS declines, so quite narrow market. I think, again, we can get back from that. And corporate profits generally haven't looked as good as the labor market in the last one, two years.

13:08Love this one. Number two on the 2025 top six is medical devices, which has been out of favor now for a while, probably in the back of GLP, a number of different things. Speak to that, because I actually really like that. Nine percent historic dividend growth, 14 P multiples. Again, it's probably important for stock picking in terms of actual dispersion. But if you think about the two industries of what the economy is becoming, technology and health care is what the economy is becoming. We have a lot of confidence in future profits priced into tech, very little confidence priced into health care.

13:42And so basically health care is quite cheap. It looks a lot like, you know, the tech recovery from 2022. All right. Stephen, thanks for stopping by. Great to see you. My pleasure. Medical devices, that is interesting, especially when you think about the medical loss ratios of the insurers are so high because utilization rates are so high. You've got to think, you know, those devices are going in somewhere. Yeah, and its evaluation plays so spot on. I mean, Medtronic is a name that comes to mind right off the top of the – I mean, just valuation alone, this becomes compelling. And these stocks have just been beaten up on what's been a great tape for a number of different reasons, some of which are justified, some not so much.

14:18So I love that call in 2025. Yeah, it's interesting. XLV, if we can pull a chart up, maybe a five-year. For 2021, 2022, 2023, it was really in a tight range. It broke out earlier this year. It looked like one of the best-looking charts, one of the best stories. And now it's down a whole heck of a lot from those highs. and it looks horrible. And so when you think about how does the market broaden out, where does some new leadership come from? We know a lot of these sectors don't make up enough on their own, you know what I mean, to kind of power gains. But I think that's the story. How can you put a couple narratives together and how can this leadership broaden out if the Gen.A.I.

14:49trade was to take a little bit of a breather? But how do you think about Elevance, for instance, at this point? Well, can I just address XLV for a second, which is the H in my helm trade, XLV. Play that game correctly. You played that game correctly. Health care. Health care. So she gets a pass on that. XLV, health care. Great game, by the way, that we play every year. To your Elevance question, I mean, I think, and maybe to XLV more broadly, for each and for both potential administrations and now Trump administrations, here is a great target, right, bipartisan support, until you get the lobbying coming in, which happens later, but bipartisan support for, you know, caps on prices or some sort of pricing mechanism that isn't as good.

15:34And certainly for Elevance, which does have Carillon, which is their PBM, pharmacy benefits, that's been weighing on it as well as a couple of other things. I haven't done a good job with this one. But you still have it. Yes. Yes, right. By definition. We've got an earnings alert here on Broadcom. The chipmaker right now is higher by about 4 % in the after hours after its fourth quarter results. the chipmaker missing revenue expectations, beating earnings per share. The conference call just kicked off. Seema Modi's got the number. Seema. Melissa, Broadcom's bet on artificial intelligence seems to be paying off with 2024 AI revenue growing 220 % year over year.

16:15CEO Hock Tan on the call just now saying that he sees the momentum continuing, touting its AI revenue growth, which was driven by XPU accelerators and networking. On the non-AI business side, broadband, he thinks, will bottom and the recovery will start in the first quarter. It also closed its$69 billion acquisition of VMware and integration is complete, he says, with a number of new enterprise clients. The company is raising its dividend by 11 percent. And we've been watching shares of Broadcom outperform the chip sector this year, stock up over 69 % as it partners with the likes of OpenAI, Amazon, Meta to help each of them build their own customized AI chip.

16:54All, by the way, fab with Taiwan Semi. We'll look for more details on the timeline and confirmation on whether it is working with Apple to design its own AI chip. Right now, Melissa, shares of Broadcom up over 4 % in After Hours. All right, Seema, thank you. Seema Modi. And of course, there's also the headline today that Apple is working to replace Broadcom when it comes to, you know, having its own in-house chip for Wi-Fi as well as Bluetooth. So ending the relationship in some instances, building up a new one potentially in others. Yeah, you know, that might actually not be a bad thing for Broadcom, quite frankly, but that's another conversation.

17:27I mean, you look at the quarter, 62.7 % operating margins for this company. Slight miss on, I mean, really slight miss on revenue, beat on EPS. And the first times next year's numbers-ish. I mean, I think this stock is still going higher. You get through 186, a level we've had trouble with, and I think you're in a whole new range on the upside. Yeah, I think your point about the Wi-Fi and the Bluetooth chips, I mean, that's something that, again, you know, they're going to design generative AI chips, so maybe that does offset it. You know, Apple is a huge customer, 70 to 17 percent of Broadcom, and, you know, this thing is acting very contrary to many of the other names attached to what we saw.

18:04Marvel Tech telling a story about generative AI last week, it had a huge rally. It gapped up 25 % on those earnings due to new all-time highs. Coming up, more after hours action, this time on retailers, Costco and RH. Those names on the move after reporting results and numbers from the quarter next. And a big debut for Service Titan, the cloud software provider surging in its NASDAQ debut. Why investors are so hot on this tech name? Straight ahead, don't go anywhere. Fast Money's back in two.

18:36Welcome back to Fast Money. Earnings alert on Costco. Shares are a little bit lower in the after-hour session after reporting a top and a bottom line beat. The conference call began at the top of the hour. Melissa Repko joins us with all the details. Melissa. Yes, so Costco shares are barely moving despite the company beating on the top and bottom line. The Warehouse Club said comparable sales rose 5.2 percent in the quarter and e-commerce shot up by 13 percent year over year. Membership fees also came in on the high side, higher than Wall Street expected, totaling$1.17 billion compared to the$1.16 billion that analysts expected.

19:09The Warehouse Club had hiked its annual fee in early September, the first increase in about seven years. But Gary Millerchip, the CFO on the company's earnings call, said that that actually did not have an effect on the quarter. He said it didn't have much of an impact yet because of deferred accounting and represented less than 1 % of that fee growth in the quarter. On the company's earnings call, he also called out a few areas of growth. Gold and jewelry, gift cards, home furnishings, sports goods, health and beauty aids, and luggage were all up double digits. So some sense of what people are buying this holiday season potentially.

19:44Back to you. That's a lot of categories with demand. Melissa, thank you. Melissa Repko. Remember when they were selling also platinum, gold, silver, and they're selling out. People buying the luggage to put the gold bars in to get them out. Exactly. You think I'm kidding around. Except that the gold is like this big. I know. I'm kidding. It's heavy, though. A little troy ounce. That's true. Yeah. But we were talking about Costco. Costco, of course, all-time high yesterday. So really performing. The valuation could be perceived as rich, but they are executing. I mean, in isolation, in a vacuum, that is a fantastic quarter versus other retailers, right?

20:19Up 5.2%. I mean, but to your point, 55 plus times. Right. That's not good enough. I mean, Walmart's at 35. Yeah. And Target's at 14. I mean, clearly, they're different animals completely. But so this makes me feel a little bit good that I don't own it, that it's down like$2 or$3. Like a quarter of a percent? Yeah, right. Go Karen. You know, you take the wins where you can get them. Yeah. I mean, you say what you want, though. I mean, razor thin margins. So when they beat by the margins that they did. So, for example, operating margins was 3.53 percent. Doesn't sound like a big deal. For them, it's a big deal.

20:58Street was looking for less than 3.3. So they're operating better. And maybe in the world of AI, they'll operate even better. Better. Better. So I get the valuation concerns. concerns, but as Karen will tell you, I mean, there have been valuation concerns for the last five years the entire way up about Costco. More after hours action here. Shares of RH soaring on a big guidance raise. The company now seeing revenue growth between 18 and 20 percent in the fourth quarter compared to a 7 percent estimate. Earnings for this quarter did fall short of expectations, though, while revenues were in line with estimates.

21:33It's a big pop here. You ask, was there short interest here? 12 percent of shares outstanding. Yeah, a little bit, but this was pretty good, though. I think they also talked about strength. Was it November? Good strength there. So that gives them the guidance. I think imagine what will happen when people buy new homes again in a much right when existing homes come out of, you know, the cheap mortgage rate block. But this is pretty impressive. However, that having been said, still, I think, too expensive. Yeah. They also said on the conference call, apparently, that their margins would not be impacted by tariffs, which is a big deal.

22:10Yeah, that was important. Yeah. This was again, not that it matters. This was a seven hundred dollar stock in twenty twenty one that just absolutely cratered like a lot of other things. So the move now basically gets us to a 50 percent retracement of that prior high and the lows we've been trading at for the last, I don't know, year and a half or so, two years. It's going to trade north of 10 million shares tomorrow. I think you've got to let it breathe. I think it'll sift back in for you. All right. There's a lot more Fast Money to come. Here's what's coming up next. The newest kid on the block, Service Titan, making a splash in its IPO.

22:42The details from its first trading day and why the company priced well below its range. Plus, Bitcoin hovering near 100K. And our next guest says the rally is just beginning, where he sees crypto prices heading and what President-elect Trump is saying about the space. You're watching Fast Money live from the NASDAQ market site in Times Square. We're back right after this.