Big Tech Reports… And Opportunities in Private Credit 1/29/25

0:02Live from the iConnections Global Alts Conference in Miami Beach, this is a special edition of Fast Money Here's what we've got on tap for you tonight. A big night of big earnings, nearly$6.5 trillion worth of companies. Reporting after the bell from Microsoft and Meta to Tesla and Big Blue, we've got all the numbers covered. We're bringing you all the trades. And Trump versus the Fed, the president having some harsh words for the central bank after it held rates steady at its latest meeting. What he had to say and what the Fed had to say about inflation. Plus, a Bitcoin bonanza, the crypto up nearly 50 % since President Trump was elected.

0:34What the new administration will mean for the coin and the rest of the crypto space. We've got a huge slate of guests tonight to cover all of that. Bowman Sachs, Elizabeth Burton, Jeffries, David Zervos, Armin Panosian, co-CEO of Oaktree Capital, and Steve Kears of Galaxy Global. You won't want to miss a second. Welcome to Fast Money here in Miami. I'm Melissa Lee, and I'm joined on the terrace of the convention center by Dan Nathan and Guy Adami on this very, very big day, too. Huge day. Of the Global Alps. It's been a great couple days. It has been. You've been out front. People love Melissa Lee.

1:04I just want people to understand. They don't think you're bad, either. Oh, it's okay. carried away. Prolific. She's a prolific guy. But it's been a really great conference. We've got a really great lineup. Yeah. And you know, it's funny. We started this week out talking about this deep seek and what it meant for one of the biggest secular trades that has really gripped the markets. Obviously, a lot of the performance of the last two and a half years has been tied to that. It feels like, especially as we get into tonight's earnings, there's kind of some kinks in the armor here a little bit. We're seeing decelerating growth.

1:30You could have made that call on any occasion over the last two years, but maybe this is the week where we start to see it a bit more. All right, well, let's dig in here. We start off with a big trifecta of big tech earnings shares of Microsoft, Meta, Tesla, all on the move after their reports. We've got full team coverage of the results. Julia Borson is standing by and Meta, Philobo has got all the details on Tesla. But we start off with Steve Kovac, who's been watching Microsoft. Steve, what's the latest? Yeah, Melissa, this is a big one after that deep seek moment coming on Monday. But look, here's what we got now.

1:59Beats on the top and bottom lines for Microsoft. EPS came in at$3.23. That's a beat by 22 cents. Revenue, another beat here,$69.63 billion. Street wanted$68.78 billion. But what you guys really care about is all the AI stuff and cloud stuff, right? So Azure was a slight miss here, showing 31 % growth. Street was looking for 31.1 % growth. That's actually lower sequentially. We saw 33 % growth in that segment back in the fiscal Q1. And then of that, AI made up 13 percentage points of that Azure growth that is continuing to increase and become a bigger part of the Azure story. Meantime, Microsoft says it's a 157 percent increase year over year for artificial intelligence revenue across all cloud, not just in Azure.

2:49And then another new figure here is artificial intelligence business over at Microsoft. They're saying it's at a 13 billion dollar annual run rate. That means they took the revenue from this current quarter we're talking about, multiplied it by four, and they say they're now on a run rate of$13 billion and change. And then OpenAI, those losses over at OpenAI, which Microsoft, of course, is a major investment in, that's taking a hit on earnings over at Microsoft. Microsoft is saying$2.29 billion can be attributed to that OpenAI losses. They were expecting$1.5 billion when they gave guidance last quarter, worse than expected.

3:29And then capital expenditures, of course, a huge topic of discussion here amid the deep seat conversation. $22.6 billion spent in the quarter on CapEx. Look at this chart here. That is almost double what they spent in the year-ago quarter on CapEx. Huge question coming up on the call at 5.30 p.m., guys, is whether or not they need to be spending the way they've been spending. We know that$80 billion figure is good through the end of June. What happens after June? That's the big question, guys. All right. Keep us posted, Steve. Thank you. Steve Kovach in San Francisco for us. It does seem like the weak Azure number is front and center, at least right now, until they talk about guidance for CapEx on the call.

4:10Yeah, but weak one-tenths of – I mean, it's not a miss. I mean, it's basically in line. And I look at this and say revenue's up 12 % year-over-year. Margins were better. I think what it comes down to is valuation. You're talking about a stock that's probably trading around 30, 31 times next year's numbers. And in an environment now where valuation is front and center, given what we heard on Monday, that's concerning. I don't think you're going to sell the stock down to 415 or so, but it's one of those quarters where we're going to continue to go sideways. By the way, Microsoft made its all-time high in July.

4:39The broader market's been doing extraordinarily well since then. It's been going sideways to slightly lower ever since. Yeah, and I'm not so concerned about coming in line at 31 % versus the estimate, like I just said, of 31.1. It really is that deceleration from 34 % last quarter to 31 % this quarter. And then you have to start asking yourself, okay, well, they have this really cozy relationship with OpenAI. A big part of that deal over the last two years is OpenAI's use of their cloud infrastructure. And so if that relationship is being strained in everywhere you look. Because of Stargate. Because of Stargate, because of a whole host of other things.

5:13I mean, OpenAI, I think, quietly has been complaining about either their capacity, you know, that sort of thing. So at the end of the day, I mean, the Microsoft story was an early beneficiary in the public markets of this trend starting out in early 23. It might be one of the ones that's waning. And to Guy's point about the stock, I think investors are sniffing this out. It made a high in July of last year and has really underperformed many of the other names in the space. In terms of CapEx guide, if they talk about it for next year, if it comes in and it looks like 25 is the peak, is that good?

5:46The stock goes up? I think it would be good. I think you'd be saying, okay, we've got peak CapEx. We're going to the other side of it now. They've spent all the money they need to spend. We're sort of decelerating. I think the market would actually probably like that, and you'd see the stock bounce on the back of that. Yeah, it depends. If you think about what we just heard of Microsoft and Meta over the last few weeks about their cap backs and what they're expending for this year in 2025. I mean, it seems like they're in concert, at least reiterating some of the numbers that they've given over the last few months or so.

6:14I suspect you don't see a ramp up of those. I think the deep seek and the Ali Bobby mark, I think a lot of folks are going to kind of not too different what Fed Chair Powell said. They're not going to be in any hurry to do, obviously, to raise it. But in this case, you know, I just I don't know. I think we're probably going to hit a pause here for the next quarter or so. All right. Let's get to meta now. Now shares are moving higher on a Q4 beat here. The conference call just kicked off top of the hour. Julia Borson's been listening in. Julia. Melissa, Meta CEO Mark Zuckerberg is on the call right now talking about his focus on AI and in particular how the company's AI assistant called Meta AI will be transformative this year.

6:51They expect it to reach a billion people. He also talked about how important it is that people's AI assistant be personalized to them. And of course, Meta has lots of information about what kind of personalization we might want. Now, looking at the stock up about 2 percent this past quarter, Meta's revenue growth did accelerate instead of decelerating like analysts anticipated. Meta did guide to decelerating first quarter revenue growth of 8 to 15 percent or 11 to 18 percent on a constant currency basis. And after announcing up to 65 billion dollars in CapEx last week for the year, the company gave some more insight into its guidance of up to 119 billion dollars in total expenses for the year, saying we expect employee compensation to be the second largest factor as we add technical talent in the priority areas of infrastructure, monetization, reality labs, generative artificial intelligence, as well as regulation and compliance.

7:45Now, Meta did not give official full year guidance, but said this. We expect the investments we are making in our core business this year will give us an opportunity to continue delivering strong revenue growth throughout 2025. What's strong? We'll see. There were also a couple of upside surprises. Daily active people growth stronger than expected 5%. And Reality Labs lost less than$5 billion. That's far less than the$5.4 billion loss that analysts were expecting. Melissa? All right, Julia, thank you. Julia Boorstin on Meta. And of course, they'll keep us posted on all the developments. The D word, DeepSeek, hasn't yet been mentioned, although we are only eight minutes into the conference call here.

8:24But it sort of sits in this cross-section of the valuation is good, plus theoretically deep seek should help agentic ai and that's exactly what meta has the third quarter now we've talked about this there are two in my opinion there have been two companies that have absolutely figured out ai it's walmart and it's facebook and you how do you say how do you figure that out operating margins came at 48.3 percent the shivers are 42 percent which means if you know what you're going to slow down on the revenue side that's more than offset by the margin improvement which you're seeing in eps gains i mean that eps number is ridiculous which means the stock now at an all-time high, to your point, is still reasonably valued.

9:01And for everything I get wrong, which is a lot, Facebook is one I think we've been doing a decent job with. Yeah, you know, listen, this is no longer a hyper-growth company. You just talked about operating margins. That's great that they're getting that. So obviously they're getting leveraged from some of the investments that they've made. But expected earnings and sales growth for the next two years, about 12%, 13 % or so. You know, you better see that sort of margin, continued margin improvement. You know, and Julia just mentioned Reality Labs and the loss is not as big as expected. Go back and think about the 70 % the stock loss from its highs in 21 to its lows in 22.

9:33It had a lot to do with Reality Labs losses. And now the fact that they were able to reposition a lot of that spend and get the benefit. I just wonder if it's kind of pulled forward. Last thing I'll say, DeepSeq, you know, open source model, the Alibaba model, open source model, Lama, which is Meta's open source model. If those are blocked here in the U.S., that should benefit Meta to some degree. You're going to see a lot of developers working around Lama, especially if they're trying to keep up with some of the deep seek that's outside the U.S. By the way, a text from the chairwoman on buybacks from Meta.

10:03The street was looking for$6.7 billion, and they bought back zero. So that's sort of an interesting development in light of all the talk about spending and where they're spending their money. They're not spending their money on shares, at least in the latest quarter. Can we say hi to Karen? She's watching. Well, we are. Hello, Karen. Wish you were here. All right. Let's get to Tesla here. Shares up a couple percent. This is despite a top and bottom line miss. Phil LeBow's got all the details here. Phil. And, Melissa, that conference call starts in 20 minutes. And one of the questions is really most of the questions are going to be focused on what's the outlook for the cyber cab full self-driving.

10:36We'll talk about that in a little bit. Let's run down the numbers you mentioned, the miss on the top and the bottom line. Seventy-three cents a share. The street was expecting 76. Revenue coming in, what, basically$1.5 billion shy of expectations. Free cash flow of just over$2 billion. When you look at their deliveries, people were expecting them to give some type of guidance, increase to 10%, increase to 20 % in 2025. They are not doing that. All they are saying is that the automotive business is expected to grow in 2025. Perhaps we'll get greater color on that in about 20 minutes. In terms of the outlook, full self-guard, the energy storage business, which has been really the growth story in the last year, it's expected to continue growing in 2025, up by 50%.

11:21That's their expectation right now. Lower-priced model production will begin in the first half of 2025. And then CyberCab volume production is expected to start next year, though they do say that they expect to start launching it. That, along with full self-driving in certain markets in the United States later this year. As you take a look at shares of Tesla, remember the call starts in about 20 minutes. One last note, Melissa. The automotive gross margins, excluding zero-emission vehicle credits, the expectation was for it to come in at 16.3%. You see the impact of lower-cost models, the discounting.

11:58It came in at 13.7%. Guys, back to you. All right, Phil, keep us posted again. And the Tesla conference call begins in just about 15 minutes time. Another interesting development in the Tesla release is the booking of a Bitcoin gain or digital asset gain. That was$600 million in the quarter. So that is something different from what we normally hear from Tesla. The shares look impervious to bad news at this point. So we play a lot of games on CNBC's Fox Money. One of the games we play is if you told me this yesterday. What would the stock reaction be? What would the stock reaction be? You know that game.

12:33I'm familiar. If you had told me they're going to miss EPS, you're going to miss revenue, and margins would come in at 16.3%, which is going back like a year or so when we thought we saw trough margins, say, okay, where's the stock given the run it had post-election? I'm down 50 bucks. Easy. And it's not. It's actually up in the after hours. So clearly, they're not looking at this as a car company anymore. They're looking at it as something else. But, you know, the free cash flow number of$2 billion, which Phil said, you just explained, I think, the reason why. So label me a skeptic on this one, though.

13:06Yeah, I wouldn't say it's a hilariously bad quarter, like I said a couple quarters ago, but they missed on every key metric. And when you think about it, the company is embroiled in a price war. I think a lot of those EV tax credits might be gone despite the proximity of Musk to Trump. They're in a disastrous situation, in my opinion, in China. They're trying to make this lower end vehicle here in the U.S. to kind of stimulate growth. They did not have growth last year. The fact that they are not kind of guiding towards anything like that, it should make you think twice about where they are. Rates higher for longer, not a great thing.

13:39I know the guys last night, Vinnie and Porter, mentioned that. Two years ago, they were having a fit, or Elon was on the call, about rates and what that means for them. And then the last piece of the puzzle, Elon's gone back and forth about tariffs, about Chinese EVs. Listen, if they don't sell enough of the cars that they make in Shanghai, which is about half of their production, then they go to Europe. And Europe already has stiff tariffs on Chinese EVs. So I don't think they get out of this anytime soon. Last thing I'll just say is, like, if you want to buy this stock on robo taxi and mass production of those things at the back half of this year to be deployed next year, have at it.

14:13This is a cult stock. This is a cult stock, though, at this point. I'm not going to use that term because I got to go to an airport tonight. I'm not going to get whacked. You heard the guy on the horn before. Anyway, please. But that was the point. I mean, you brought up Porter and Vinny. They're saying we are invested in Lucid because all the money is going to Tesla because it is a cult stock at this point. It is not trading on fundamentals. We are seeing that in the after our session. Yeah. And yes, I think that's exactly right. I mean, based on all the metrics that I'm looking at right now, history suggests it should be significantly lower.

14:45It's gotten back what it lost during the day. So maybe that's part of it. But again, the math sort of doesn't work at this point. And now people are looking this through a different lens, I guess. Yeah. Let's get to NVIDIA here. Interesting move in NVIDIA, down 4 % today in the regular trading session. Up, though, after hours, Bloomberg reporting the White House is considering tighter curbs on its sales to China. Megan Cassell has got the details here. Megan. Melissa, that's right. So that Bloomberg report says that Trump officials are having what they called early conversations about putting additional restrictions on NVIDIA's chip sales to China and specifically focused on the H20 chips.

15:19These are those scaled down AI chips that had initially been designed to get around current U.S. export controls on NVIDIA's sales to China. The company saying in a statement this afternoon that the Biden administration's thresholds, they say, had been set on performance levels reached five years ago and that it's ready now to work with the administration as it pursues its own approach to AI. Now, the White House and Commerce Department did not respond to my request for comment on that report, but I would caution that it's very early for any decisions on export control policy. No one is yet leading the Commerce Department or even the Export Controls Office within commerce for the administration.

15:53So we're in very early stages here. I will add, though, Commerce Secretary nominee Howard Lutnick did today say in his confirmation hearing that he will be very strong and rigorous in his approach to export restrictions toward China in order to ensure that the U.S. remains a leader on AI. So it could suggest that this type of policy will be supported moving forward. Melissa? All right, Megan, thank you, Megan Casella. For more on all things tech and tech earnings, let's bring in Fast Money friend Gene Munster, managing partner at Deepwater Asset Management. Gene, great to have you with us. Hi.

16:27Let's start off with Tesla because that's sort of where we left off before with the traders here on the desk. What do you make of this quarter? It's a little head-scratching in terms of the reaction in the after hours given the quality of the print. Yeah, this was, Melissa, I was shocked to see the stock up. I mean, this was messy. I think And, Guy, what did you say? This is a cult stock. Ultimately, I think that the numbers are pretty choppy. And it's just hard to see why it's up right now. I think it's basically confirmation that people think that this is more to go. What do you want to hear from Microsoft?

17:04It's all about CapEx. And Zuckerberg said it related to Microsoft. It's all about CapEx. I want to highlight probably the most important point from these earnings calls so far. So Zuckerberg's comments that they're going to spend hundreds of billions on CapEx. I mean, that's really reassuring. That's what we're looking to hear from Microsoft, how much you're spending on CapEx.

17:27Do you think that we will hear guidance on CapEx for 2026? I know that is a mile away, but a lot of investors want to hear that Microsoft, you know, this year's 80 billion is going to be the peak. I think this, you know, coming into this earnings, just taking a step back, Melissa. this is all about what's going to happen with CapEx. And as I mentioned, Zuckerberg's comments about the hundreds of billions, to put that into perspective, this plays into what's going to happen in 2026, is common about hundreds of billions. So far, Meta's invested probably 50 billion in CapEx. So just to put some context about how far along the road we are.

18:05And I think that as we kind of play that forward to 2026, if he's saying hundreds of billions of dollars, And you have to kind of, given the competitive nature of how these companies are building the AI infrastructure, the comments that Zuckerberg's making is probably going to be similar to some of the comments that we're going to hear from Microsoft. And to get to that hundreds of billions probably means that this AI infrastructure build continues into 2026. And so I think that this is really positive. As I kind of process everything that we've heard so far and seen everything at Tesla, Meta and Microsoft, the biggest takeaway so far is this is really positive for NVIDIA, even despite what's happened with kind of the China piece, because, as you said, Melissa, that outlook for 2026 on the CapEx is just really, I think it's upbeat.

18:55And keep in mind, Zuckerberg didn't have to reiterate this. He didn't have to double down on what he had said last week. And given what's happened earlier in this week, I think it's really encouraging regarding just the broader AI trade from the early, very early part of what we've heard from these companies so far. Hey, Gene, you just mentioned, you know, it's NVIDIA being a beneficiary of all of it. We know that, right? So a couple of weeks ago, Microsoft, Meta, they gave their CapEx guidance for the year. So here we are, they're reiterating it. And, you know, let's see how this stock, you know, how far it could run a little bit if you could fill in that gap from Monday.

19:34But, you know, going back and looking at that chart over the last three years since it really took off, there's not a single gap to the downside. There's plenty to the upside. So I guess the question here is that is it going to be enough as far as this guidance is concerned? You know, given the headwinds that we might be seeing around the globe with some of these open source miles out of China, Like, is there a chance that the trade is just done for a bit? This is specific to NVIDIA, or NVIDIA, maybe the broader AI trade. I think, again, we're piecing together data points real time. That's what happened with DeepSeek, because it was one data point, and the market had to extrapolate it to, I think, out to several years.

20:15Now, since then, we've had some more data points. And like you said, with NVIDIA and their business, and I think the bottom line is this, is that if CapEx infrastructure continues to remain strong, we're going to see models, even if they're novel models like we saw from DeepSick that can be produced at lower prices, they're still going to want to build the infrastructure to get those models out faster. So if we continue to see that, I think that this is that build out, which is what we're hearing tonight from Zuckerberg. If we continue to see that, I think that not only will the hardware spend more broadly continue, but I think that the software piece is going to start to play out.

20:52And so I think that this broader AI trade is still very intact. Gene, thanks so much. Great to get your take. Thank you. coming up we'll keep an eye on all the after hours tech earnings uh we are 10 minutes away from meta as well as tesla's calls uh 21 minutes into uh another call here uh meantime we've got other names reporting las vegas sands ibm whirlpool and more the numbers from the quarter straight ahead but first the fed pausing its rate cutting campaign sending a warning about inflation jeffrey's david zervos and goldman sachs elizabeth burton join us next to lay out the impact and where the markets are heading from here.

21:30You're watching Fast Money in Miami live from the iConnections Global Alts Conference. We are back in two.

21:51Welcome back to Fast Money. Stocks closing lower but off their worst levels of the session after the Federal Reserve left interest rates unchanged. Fed Chair Jerome Powell striking a more cautious tone warning of sticky inflation and signaling that the committee is not in a hurry to cut rates. President Donald Trump reacting on Truth Social in just the last hour, writing that Powell and the Fed failed to stop the problem they created with inflation. The president adding that his policies around trade, deregulation and energy will, quote, make our country financially and otherwise powerful again.

22:21Joining us here in Miami is David Zervos, Jeffries Chief Market Strategist, and Elizabeth Burton, Client Investment Strategist at Goldman Sachs Asset Management. Great to have you both here on set in Miami. Elizabeth, I'll start off with you. What is your reaction? Because, you know, it's funny, the statement came out, people got really concerned that it was hawkish, the Fed sort of pulled that back a little bit, and then you got the Trump effect as well. I think it's not unexpected. We were sort of waiting for a pause this time. And by the way, Not a lot of the investors here, other than the managers, are really thinking about it.

22:54They're mostly thinking about the diversifying assets they want to meet here. But we haven't changed our forecast. We're still expecting two cuts this year, one in 2026. The timing's kind of uncertain around that. But we thought it was interesting that they removed the clause about the progress towards the 2 % inflation. Which was, again, not meant to be a signal. Sure. He later on said in the press conference. David, from your standpoint, we were chatting in the break, and you were saying that you were waiting for the Trump tweet afterwards. And there you got it. Yeah. You have the message on truth social.