In short
Podcast Summary: Disney’s Inflection Point… and China’s Chip Check (March 25, 2024)
Episode Overview In this episode of CNBC's *Fast Money*, hosted by Melissa Lee along with a panel of top traders, the discussions focus on two main topics:
- The ongoing boardroom battle at Disney and its implications for the company's stock.
- China's recent moves to phase out U.S. chips and the potential consequences for the semiconductor sector.
Key Topics Covered
- Disney's Boardroom Battle
- Discussion surrounding activist investor Nelson Peltz and his campaign to secure board seats at Disney.
- A review of Disney's stock performance, which has seen significant increases since Peltz's involvement.
- Analysts from Barclays and other firms weighing in on Disney's valuation and potential future stock price.
- China's Semiconductor Strategy
- China's efforts to phase out U.S. chips from its government systems, which affects major tech companies like Intel and AMD.
- Speculations regarding the broader implications for the global semiconductor industry.
Detailed Summary
- Disney's Proxy Battle
- Current Situation:
- Disney is gearing up for its annual shareholder meeting on April 3rd.
- Nelson Peltz’s Tryon Fund is intensifying its campaign to influence the board amidst mixed support.
- Since his involvement, Disney shares have surged approximately 44%.
- Analysts' Insights:
- Barclays upgraded Disney’s stock, setting a price target of $135, which is above the current trading price.
- Tim Seymour emphasized Disney's potential for further growth based on its valuation and market strength in the streaming space.
- The conversation also touched on cost-cutting measures and operational stability as factors bolstering Disney’s stock.
- Management Support:
- Key figures in the industry, including George Lucas and Jamie Dimon, publicly support CEO Bob Iger, reinforcing the legitimacy of his leadership amidst the proxy battle.
- Future Considerations:
- The panel speculates on the potential outcomes of the shareholder meeting, the implications of Peltz's involvement, and the overall health of Disney’s business model, especially regarding ESPN and streaming.
- China’s Semiconductor Strategy
- Policy Changes:
- The episode discusses China’s new guidelines that aim to phase out U.S. chips from government computers.
- The implications of this strategy on major U.S. semiconductor companies, particularly Intel and AMD, are scrutinized.
- Market Reactions:
- As China pushes for local chip production, the possibility of retaliatory measures from the U.S. is raised.
- The long-term effects on the semiconductor market and the potential for market volatility due to these geopolitical tensions are considered.
- Expert Opinions:
- Analysts caution that the market may not be fully pricing in the risks associated with deteriorating U.S.-China relations, which could lead to greater volatility in tech stocks.
Key Takeaways
- Disney's Stock Dynamics:
- The current boardroom tensions could either positively or negatively impact investor sentiment and stock performance in the near term.
- A strong backing by influential figures may signal confidence in Iger’s management despite the proxy battle.
- Geopolitical Impacts on Semiconductor Sector:
- The shift in China’s policy poses a significant threat to U.S. semiconductor companies, suggesting that investors should remain vigilant regarding geopolitical developments.
- Ongoing advancements in local chip manufacturing capabilities in China present a long-term challenge for U.S. firms.
Conclusion The episode provides a timely analysis of Disney’s corporate governance challenges and the shifting dynamics in the global semiconductor landscape, emphasizing the importance of investor sentiment and geopolitical factors in shaping market performance.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.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 tonight. Magic for Disney shares the entertainment giant about to lock in their best quarter in over three years. With CEO Bob Iger facing a potentially nasty battle over board seats, can the stock keep rocketing higher? We'll debate that. Plus, a Boeing bounce. Shares of the aerospace giant rising as much as 4 % after announcing CEO Dave Calhoun will leave the company at the end of the year. Will new leadership be enough to get the stock back on track? And later, massive moves for Micron as the semi-stock locks in its seventh day of gains.
0:35Bitcoin breaks higher and takes the rest of the crypto space with it. And Reddit options hit the market. We'll dive into the pits to find out where our traders bet their shares are heading right now. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Bono and Eisen, Dan Nathan and Guy Adami. And we start off with Disney's proxy battle royale. With just over a week away from the company's annual shareholder meeting on April 3rd, Nelson Peltz's Tryon Fund management in the final stages of its campaign to secure seats on Disney's board. Just today, Tryon's board said it was withholding its votes from CEO Bob Iger, a move that contrasts with the firm's proxy recommendations and Peltz's own public statements.
1:11But since Peltz reignited his proxy battle for the Magic Kingdom in October, Disney shares have soared nearly 44 percent. Barclays today upgrading the stock, raising their price target to one hundred thirty five dollars. That's on shares up three percent to their highest close since August 2022. It is now nearly a dollar above the average analyst price target on the street. So is Barclays right? Do Disney shares go even higher from here? Tim, what do you think? Shareholder Tim, what do you think? I think there's a valuation argument that they should go higher. And I think there's certainly been an ability to play some of the parts.
1:45I think the broader tailwinds in the entire streaming space, I know that sounds crazy. It's not just Netflix, though. I mean, we've certainly heard from Disney their ability to control costs. And I think the profitability of this business is still a very big deal and a big driver for this stock. But I think if you look at the core drivers for the company and how the investor community is coming about, I would also just say this is a story of the broader strength across the real economy stocks. And so I do think that agitation at the top isn't a bad thing. I think the fact of the matter is there has been a need to push a little bit of outside influence at Disney.
2:20I do think that there is an environment where there's less reliance on the studio. There's less reliance on things that used to be the heyday. And that may be a good thing. But right now, you know, I think it's a valuation story for the street. It's interesting to see these same analysts that probably were 20 percent lower on their target prices don't really have a whole lot to raise it for other than possibly this agitation. Right. And it's not just pelts in agitating for change. There's also Blackwell's. And then on top of this analyst at Barclays is making the case that earning stability has improved greatly because of cost cutting.
2:52So you have that plus the potential kicker, the potential upside from some of these proxy battle, you know, efficiencies. And obviously, Robert Iger has a stake in seeing this do well. He doesn't want to be, you know, the second iteration being a failure. And the stock, I have the stock up over now 50 percent from the lows we saw in October. But we're splitting hairs in terms of when Nelson Peltz reiterated. But, you know, valuation was a trade maybe 20 times next year's numbers. You know, you put a couple turns on that, you get to 23, 24, and you got a stock that could easily trade in the mid-130s into earnings in early May.
3:25So you've had this quiet stealth rally. Cost cutting, you know, you don't cost cut your way to greatness, but you certainly can cost cut your way to a stock that can continue to rally in this environment. Yeah, and I guess, you know, the thing is, right, when Chapek came over or filled in for Iger, took the job, right, There was a lot of this kind of sort of groupthink that I think that was going on. I think Tim made a really good point, right, to have some outside agitation at a time where so many different large media conglomerates have been disrupted over the last 10 years. These guys made a huge push to kind of go all in on streaming and end up not being the right bet at the right time.
3:59I think they thought about defending their boats and kind of, you know, like all these upstarts like Netflix in particular were coming in. But when you think about how this business has operated, especially with the cost cuts over the last couple of years, because of, I guess, you know, just the nature of the business in general. But now that you've had this proxy thing going on for a while and a change in management, I just can't see how it ends up being a bad thing, however it ends up, in my personal opinion. And then you think about where the earnings are stabilizing and how they're growing double digits over the next couple of years at a valuation you're talking about 22 times next.
4:30It seems like it's going to come out OK either way, you know, at the end of it. I mean, it's a win-win. Well, I do. I really do think so. You know what I mean? And it seems like they have things kind of under control in some of the things that people are most worried about about two years ago. Or is a win-win situation already reflecting the stock's run? Well, it could be. I think I'm in that camp, at least for the short term. I think the stock has had quite a run, 45 percent. I think it's 45 percent in the last six months. I think it's 25, 30 percent year to date. It's trading in the mid-20s in terms of EPS.
5:01You know, I think it's pretty fairly priced here. I do like Tim's point about it kind of reflecting the broader economy. I think there's, like, actually a bit of a tailwind there. However, I'm not sure that just this proxy battle in and of itself is really, like, an accretive situation for the company. In fact, you can't even get Triad and Blackwell on the same page in terms of how they want to go about seeking out these board seats. So I think it gives a signaling effect that they are going to do something different. And to Dan's point about them cost-cutting after going all the non-streamings, I think that's right-sizing the ship.
5:31What takes that ship to new heights? I'm not really sure I see that right now. What might take that ship to new heights is ESPN. I still think that there's a lot of optionality around that. You know, this whole DTC concept, and we still don't really know what's going on with this crazy JV. I will say DTC is a kind of expensive endeavor if you think about what it's going to cost. And yet there's only so much in the way of a TAM out there for this. But I do think that ESPN has been underpriced in terms of this sum of the parts. I do think it's a case where everybody knows what's happened to Linear TV.
6:00But I still think the power of this brand is enormous. I also think people are underestimating, and I don't know this, but I'd say it's probably mostly base case, not pie in the sky case, that they get to profitability in fiscal 24 on streaming. And if they get there, I mean, I say look out because this has been such a drag. And I think this operating income of, you know, 20 to 25 percent is realistic. All right. Let's dive deeper into what to expect at next week's shareholder meeting. Joining us here on set is our own Julia. All right. Clap around. Yeah, we've got to clap around. Clap around.
6:30It's a pleasure to have you here. So there are two activists in the stock right now. They issued both statements today. I mean, what do you make of the battle and where it stands right now? It seems very heated and very contentious. Very contentious. But I feel like a lot of what we've been hearing the last couple of weeks is just more of the same. There really isn't going to be any more major news until we have this shareholder meeting. We've heard from so many different people who are in support of Bob Iger and his management slate for Disney. I mean, just to mention some of the big names. You have George Lucas.
6:57You have Lorraine Powell Jobs, both of whom represent some big M &A deals that Iger did under his first tenure as CEO and who are now saying we are voting in support of Iger. You have Michael Eisner, who is Iger's predecessor. All of these names saying we support Iger. We believe he is the right person to run this company and his board is the right person to oversee it. Jamie Dimon also weighed in in support of him. So now that we've heard the support from those big names, it's really what Peltz is saying and continuing to say. The fact that he decided to withhold his votes in support of Iger, which is in contrast, as you mentioned, to what they said they were going to do.
7:31I think that's also just noise. At the end of the day, he's trying to poke the bear and he really wants to highlight the fact that he doesn't believe that the current plan is going to be successful. I think ultimately what we're seeing right now from Iger is what he laid out in the last earnings, which really showed an acceleration of some of their their key growth points and also showed that what he'd been working to implement was working. And in the interview where he sat down with me, you saw the stock rise over the course of that interview because he laid out whether it was the ESPN spinoff or the joint venture, even though we don't have a lot of details about it, or turning around the studio, they just announced a new head of the studio, or the fact that streaming is perhaps going to be unprofitable earlier than expected.
8:13And that is the thesis of the Barclays note that was out today. So let's say Peltz prevails, Iger stays in, and Peltz gets elected to the board along with his pick, who is a former CFO, correct? Is it all of the same? Is it Bob Iger's plan continues to move forward, and so there's not tremendous change, but it's just sort of finally seeing what Bob Iger has laid out and seeing it come to fruition, basically? Well, I think no matter who is elected to the board, this year will be the year where we see all of the investments that Iger made last year come to fruition. If you look at the parks, for instance, this is a part of the business that takes years of investment.
8:49They have three new cruise ships that are launching in 2025 and 2026. That's going to create a huge tailwind to the parks business, as is the fact that they've been expanding, expanding the actual real estate of the parks. So if Jay Rizzullo is back, I think it will be a challenge for Bob Iger to have Nelson Peltz and Jay Rizzullo on the board because they are so clearly in conflict. but I don't have a crystal ball so I can't exactly predict what's going to happen next year. I'm sorry, next week. How important is legacy? He walked away the first time. He would have been in the Hall of Fame, first ballot, no question.
9:21Comes back and now people might start questioning things. So, number first question is, do you think he's happy he came back? Second question is, how important to his legacy is getting this right? He needs to get this right. He understands that and he's said that repeatedly. He wants to get this right for the company and for his own legacy and for all of these people who work for Disney and for Disney shareholders. And I think he sees it as a multiple stakeholder business. And also, if you think about Disney consumers, he talks about wanting to get the studio right and wanting to make sure that they have more of these big blockbuster hits, which they had fewer of last year.
9:52So I think he understands that the stakes are very high, but it's been just fascinating to watch the range of different changes he's implemented in the past year. And this is the year when we really see what those look like. Julia, maybe this puts you a little bit on the spot, but what if Peltz's agenda do you think is legit? I mean, what, you know, we're, it's easy to talk about someone who's an activist and he's there to agitate, and this is what he does for a living, but there are some legitimate claims. But what's interesting is a lot of the things that he's advocating for, no, I'm going to answer, a lot of the things he's advocating for are actually things that Iger's already doing.
10:25For instance, cost-cutting. His big thing is cost-cutting, cost-cutting, cost-cutting. Iger has already done a lot of that. The other thing that he's really focused on is succession planning, And you could say that Iger is working on that, too. So what's interesting is in a lot of ways, they're not really in opposition. He made some comments about the sort of cultural connotations of the studio. This is an area where he doesn't have a lot of expertise. And obviously, Iger has already made changes in the studio. So I don't know how much he would be a helpful aid there. But frankly, the board members don't really weigh in on the studio.
10:56That's just not something that a board would necessarily do in terms of the logistics of films. But I think that his overwhelming focus on succession planning is something that I can guarantee you is top of mind for Iger and his current board and a lot of people who work for him as well. Julia, thank you so much for coming by. You're welcome here anytime. Pleasure to be here. Julia Borsten. All right. So what do you think? That board is like it's like the, you know, Mount Rushmore of CEOs right now. If you think about it, they have Mary Barra. They have Mark Parker from Nike. They have Safra Katz from Oracle.
11:29They have James Gorman. You know what I mean? Like, when you think about it, this is about board seats. They're already doing the cost cutting. They're doing a lot of that. So I just think about this. It's like this company is being run by one of the most successful CEOs in the last 100 years. You know what I mean? A Fortune 100 companies. I suspect staking his reputation and his legacy on this with that sort of board that's in place, with the cost cutting that's in effect, I think they'll probably get it right. The lowest on the street in terms of price target, I think, is$66. The range is like$66 to$142.
11:57So what's going to wind up happening, I think, in terms, I understand what Bono was saying. He's probably going to be right on. But analysts will start to have to play catch up on this name like you saw today. I think that will get you to that 135 price target. Let's get to today's other big story. Boeing shares rising nearly 4 percent at its highs of the day. On news that CEO Dave Calhoun will step down at the end of this year. Shares gave back much of the gains but still closing the green. Calhoun's departure just one of many changes announced at the company. Former Qualcomm CEO Steve Mollenkopf will succeed.
12:25Larry Kellner as the board chair and lead the CEO search and COO Stephanie Pope will now serve as a commercial airplane CEO. Dave Calhoun was on CNBC this morning speaking about his vision for his successor. I want somebody who knows how to handle a big, long, long cycle business like ours. It's not just the production of the airplane. It's the development of the next airplane. Our next leader is going to develop and call out the next airplane for the Boeing company. It'll be a$50 billion investment. That will all happen on that next leader's watch. Will this change be what the company needs to get back on track?
13:04Stock's reaction was interesting. It wasn't as robust as one might have thought it would be. We talked about it last week. Phil LeBeau, which we had the conversation, was clear that Phil didn't want to get into it in great detail. But I think he probably saw this coming. However, playing the game, if I had told you on Friday or Thursday what would happen, it would be the stocks to be north of$200. And quite frankly, earlier this morning, it looked like that was going to exactly happen. We gave some of it back. I still think the stock is higher into earnings. I think this was a necessary step. It's somewhat mitigated by the fact that he's leaving at the end of the year and not, you know, immediately.
13:38However, with that said, you know, I think that 179 low that we saw a couple weeks ago is going to be the low for a while. The shakeup was needed. We were on the show a couple of weeks ago talking about essentially when will the newswire get positive about this stock? And it was when the newswire stops. I wouldn't be surprised if 737 Max is just banished from dictionaries going forward. With that said, I think what would stop the rally from continuing forward is that there is not a clear succession plan in place. And we just talked about it around Disney. I think once we have a firm name in terms of what that handoff is going to look like, I think that will probably lead to what I think most people at this point view as an inevitable change.
14:15Well, I wonder if it's going to be an outsider. And one might posit that Boeing would be better off looking at an outsider for the job. Yes, especially when you consider that Dave Calhoun was an insider. I mean, he was at the board for 10 years before he was named in 2019 during a really difficult time again. And, you know, he was not necessarily really in that. He absolutely was not in that chair during those bad Max 8 crashes, awful time for the company. And then they went into COVID. And it was I mean, it was it was really an incredibly tumultuous period for Mr. Calhoun, who clearly was from the inside.
14:53That was the whole point. That's why he was supposed to be there. I just get back to also this is a CEO announcement. It's a critical company. You could make an argument. It's a strategic company in this country and it will continue to be. This is a company that, despite all of this, is still going to print over 10 billion in free cash flow by 2025. I mean, I just I think we lose sight of the fact that Boeing is still a world class company, that everything they do is under the microscope, as it probably should be. But nonetheless, this is a company I want to own and I do. All right. Coming up, a red hot Reddit share soaring on the social stocks.
15:26The third day of trading and options activity is lighting up more in the subreddit surge next. Plus, send me a sideline how China may be looking to phase out U.S. chips and the impact it could have on the tech names. The details and fast money returns. This is Fast Money with Melissa Lee right here on CNBC.
15:54Welcome back to Fast Money. Reddit shares surging 30 percent to kick off the company's first full week as a publicly traded stock. The stock's options debuting today with some eye-popping numbers. Let's get straight to Mike Coe with all the action. Hey, Mike, what are you seeing? Yeah. So Reddit traded over 81 ,000 contracts today. That would have placed it ranked 30th in the Russell 1000 if it was in the Russell 1000 above JP Morgan. And right now the options are pricing some pretty violent moves. If you take a look at the April straddle, basically it's implying that the stock could move about 35 percent higher or lower over the course of the next three weeks.
16:28But actually, considering how much it moved today, that seems very fairly priced to me. The busiest contract were the April 75 calls. Those are 25 percent out of the money. Over 7000 of those traded buyers of those calls, obviously betting that today's rally could continue. Wow. Do you interpret this, Mike, and I would you know that this is retail action? Well, there is a lot of retail action. And actually, you know, 81000 contracts, given the fact that the stock traded 22 million. And oftentimes when you see these really volatile stocks, you'll actually start to see that the option volume will exceed the equity volume.
17:02Because it was the first day, maybe some people weren't even aware that they were able to trade these things yet. But the one thing you do expect is that over time, usually over the first couple of weeks, you have this really high volatility. And then it'll start to fall off steadily as people sort of find a level for the stock. And the options premiums will also come in a bit. All right. Mike, thanks, as always. Mike Coe. Meantime, the original meme stock, GameStop. Shares seeing their best day since November, up more than 15 percent today. The company reports earnings tomorrow. And check out Digital World Acquisition Corp.
17:34Soaring 35 percent. It will complete its merger with the parent company of Donald Trump's Truth Social tomorrow under the ticker DJT. So we'll convert tomorrow to that. I don't know. What do we make of this action overall in these sort of meme riskier names? But, you know, the action Reddit is very interesting considering the huge dramatic surge that we've seen since the debut. Well, I think if you think about what's going on in the semiconductor space, there's been a narrowing within that, too. Right. So we've seen that over the last let's call it week. We've lost AMD, lost Intel, but you still have SMCI and NVIDIA pushing higher.
18:07So I think the idea that there's more supply coming on the market, new stories that people can pick through, that sort of thing. Look at this Astero Labs. It was up 23 percent today. Look at how Bitcoin is traded or some of the stocks that are related to Bitcoin, that sort of thing. It just seems like there is demand for scarcity right now, which seems like a great time to bring your private company to market if you are considering such a thing, especially when you consider the S &P at NASDAQ at all time highs. Well, the Bitcoin's over 70 ,000. I mean, you know, there's there's definitely correlation there.
18:35I mean, the risk frenzy that's going on with some of the same investor group. I mean, I don't what was the news in GameStop? I mean, you know what? I mean, they're going to have earnings tomorrow. Right. But so here's the point. Like, I don't follow GameStop. So, you know, but I don't want to follow GameStop. I mean, I'm not even sure what goes on there. So, I mean, I think there's a lot of stocks in this milieu that are rallying with all the risk on right now. Markets are at all-time highs. Yeah, I think Reddit is somewhat of a poster child for that retail trading cohort that is sophisticated, perhaps a bit angry or anti, as they say.
19:10And I wouldn't be surprised to see this stock continue to trade with quite a bit of volatility. I think they expected that. And I think we shouldn't be surprised to see the options activity being that that has been the cohort of retail investors that have really grasped on to squeezing companies through optionality and gamma squeezes. By the way, Reddit shares are up 9 % after hours. There's a lot more fast money to come. Here's what's coming up next. A chip crunch in China. Some semi-stocks getting hit as the country looks to push out U.S. manufacturers. What the move could mean for the chip space next.
19:46Plus, bulking up while slimming down. The weight loss wars rage on and one company is trying to combat one major side effect from the big players. How one pharma name is tipping the scales with a new experimental drug. You're watching Fast Money live from the NASDAQ market site in Times Square. We're back right after this.
20:11Welcome back to Fast Money. Stocks kicking off the last week of the quarter in the red. The Dow down more than 160 points. The S &P and Nasdaq both falling about three-tenths of a percent. Shares of Ulta in need of some concealer. Beauty stock on an eight-day losing streak, down nearly 11 % in that time. Some stocks are hitting all-time highs in today's session. Royal Caribbean, Colgate, Palmolive, Allstate, Ingersoll Rand, and Cigna. All trading at those levels and a number of energy names doing the same. Marathon Petroleum, Phillips 66, Valero, Constellation, Diamondback Energy. Bang. Which is on a 15-day winning streak, tying its longest streak ever.
20:51We were just talking about these names. We were. I mean, throw up an XLE chart. I mean, very quietly, that's trading up to close to a prior all-time high. And energy is clearly in play. And if technology ever gives it up in a meaningful way, I think the money flows are going to be into the energy sector because it makes sense. And I think Morgan Stanley, Mike Wilson made comments about the energy sector as well. So underloved, reasonable valuations, great balance sheets and the commodities working for you, too. Free cash flow, profitability. I think, as you said, if you if you do see that rotation out of technology, you're going to be looking for somewhere that gives you some like modicum or a level of safety.
21:29And I think you you're going to traditionally think about utilities. I'm not sure if you want to deal with rates here. Then you're going to think about health care. And I really think that there's been winners and losers there. If you're not on the GLP ones, a weight loss adjacent, you probably have kind of gotten your lunch sheet. And it's hard to really squeeze out the performance there, even with the low beta. So I'm with Guy. I think it's an under-owned segment. Actually, OIH has also made a tear. And you're still starting to see some M &A activity in the space. So the consolidation means fewer players and, as Tim has mentioned several times, much more efficiently run companies.
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22:01Yeah, look, I'd say don't get too far away from technology either. I mean, I understand it's not been a big day, but I mean, and I think the market broadening is where it is. This is all happening as rates are going higher. Dollar is going higher. So I'm not sure that the dollar has a lot of higher, much higher movement in it. I do think, actually, that there's opportunities in the broadening of the market. And the energy sector is a perfect example. But other parts of, again, reaching out for risk. Look at biotech, IBB, you know, again, breaking out. So on a day when the market was largely flat to down small, it's easy to say, hey, what happened to mega cap tech?
22:39But I don't think you'd get too far. All right. Coming up, a big year for semi stocks. But could one overseas adjustment spell trouble for the entire chip trade? More out of the mainland next. And bulking up in the weight loss space, one pharma company looking to combat muscle loss tied to obesity drugs. The CEO will join us in just a few minutes to weigh in. Don't go anywhere. Fast Money's back in tune. Missed a moment of Fast? Catch us anytime on the go. Follow the Fast Money podcast. We're back right after this.
23:14Welcome back to Fast Money. Intel and Advanced Micro under pressure today after the Financial Times reported Beijing introduced new guidelines to block U.S. chip makers and government computers and servers. This is the CEOs of Apple, Qualcomm, and Micron head to Beijing to meet with the premier. Shares of Micron jumping nearly 7 % today, a seventh day of gains in a row. So what does this all mean for the chip space? First, I was kind of surprised they allowed U.S. chips at all into their servers, et cetera. But this is the case now. And so what do you make of it? I mean, listen, I would continue it like all year long.
23:48We're going to see this get ratcheted up, right? And so we're going to obviously retaliate a little bit. And we've been doing this. We've been kind of leading the charge a little bit. I mean, at some point, you have to think about who's next in the crosshairs a little bit and who might have to do, you know, go through the sort of hoops that NVIDIA had to do to sell certain GPUs into China and the like here. But I mean, make no mistake about it. I mean, the Chinese are really trying to actually do everything that they've actually had, you know, our chip makers doing over there, being built over there, you know, in Taiwan semi fabs and the like.
24:16They're trying to do it there locally and they're going to play the long game here. So if they can kind of, you know, go back and forth and kind of weaken our companies in the near term. I think they're going to probably try to do that as much as possible. I don't think, again, this is my view, but I've had this view and it hasn't been right. But the market is not pricing any of the ratcheting up of the rhetoric between the United States and China, whose relations are probably the worst they've been since the early 1970s. So if this thing does get worse, there's got to be at some point there has to be a tipping point for our market here to the extent that the rhetoric continues to go higher and which it will, by the way.
24:47What would that tipping point be, though? I mean, I feel like this has been ratcheted up just a notch, a notch, a notch, a notch. And we don't realize to mix metaphors. And I'll do this on purpose because it drives you nuts. Yeah, I don't like a good mix metaphor. You don't feel like the water is boiling. No horse in the hunt here. The temperature has been going up so slowly. But that's what's happening. It has been a slow simmer, not a slow burn. But it's it's a case where if you listen to the charm offensive of the Chinese commerce secretary over the last couple of days, There are other sectors that are being engaged actively.
25:20But you've also heard the Micron CEOs say, hey, look, we're planning on big things in China. I think every side is doing what they need to do. The fact that they're selling Intel on this, this is not the reason you sell Intel today. And for all the pain they're having in China, I think they're getting inflated in this country. And I am long Intel. But, yeah, stakes have been raised. We know it. One emerging markets analyst believes China is not essential to Intel in advanced micro. David Riedel runs Riedel Research Group, got back from Taiwan just a few days ago. So why do you think is it just jumping to conclusions?
25:52Is that why we saw that sort of knee-jerk reaction in those two names, David? I think it is. I mean, clearly China is a major market for Intel chips, almost 30 percent of their sales. Same for AMD, about 15 percent. But not a lot of that's ending up in the government sector. And this is going to be a slow rollout of this prohibition on having them in government computers only. So I don't see it having a big impact. Can we jump to the conclusion, though, that this is just the beginning? Because maybe that's what the markets are thinking. They're not thinking about just this one step, but thinking about what if it went a little bit further and that would be a ban on these chips inside any of the computers?
26:28Well, it's certainly not the beginning because we've been banning Huawei and other chips and things from China since 2019. And this was a policy that was promulgated at the end of December. So this is just a sort of shining a light on a policy that's actually already been in place for a couple of months. So I think you are probably going to get incremental changes as they ratchet up this concern. The current administration has been very firm on trying to prevent advanced chips from getting into China and trying to encourage chip development here at home. And I think that's going to continue. Do you think investors here are adequately pricing in a potential China risk?
27:05Are we just sort of hoping that it just stays simmering and nothing really explosive actually happens? Should we start thinking about that, especially as we head towards the elections? I don't in terms of a particular company impact or something like that. I think there will be an incremental movement towards nationalism from Beijing and some sort of China bashing on the campaign trail. The real risk in Asia, as you've heard me say before, is a risk of a hot war in the South China Sea or in the Taiwan Straits. as a result of some sort of accident. So that's the risk I think people are underpricing.
27:40But, David, it's Tim. Because you know Asia so well, there are those, certainly South China Sea dynamics. But how about the rest of Asia? And who gains by this? I mean, it seems like there's quite a charm offensive with Korea. So Hynex, for sure. Samsung have a lot to gain by this. I think the Japanese chip makers, and I think there was a time everything was made in Japan. I think there's an aspiration there. Anything to talk about? Absolutely. I was just, as you said, just back from Taiwan, a lot of great activity on the ground there. It's not just TSMC. There's a lot of other chip makers there as well and people who supply into that industry.
28:12So definitely keep an eye on Taiwan. Keep an eye on somewhere like India, which might benefit from a transfer of some of the manufacturing by people like Foxconn, another Taiwan-listed company under Han High Precision, to India. But I think you're right. North Asia is the one set to benefit most from ongoing struggles in the chip market. You could see Japan, you could see South Korea, and you could see Taiwan really benefiting. I know you said it won't translate into a company-specific risk statement. You just got back from Taiwan, and you're talking about Taiwan Semi. And I have to ask you because it doesn't have the multiple necessarily as some of the other chips.
28:49And I think that there's some premium taken out of it just because of China risk. Is that misguided in your view, or is there in fact a China risk? I think there is in fact a China risk. It's impossible to pick when that's going to materialize. But I think you're just one election away or one fiery campaign speech away from having those tensions ratchet up. So I would be concerned about that. TSMC is obviously diversifying quickly into other places that they can manufacture, including here in the United States. So I'd keep an eye on that. But they definitely have quite a lot of China risk. All right, David, great to see you.
29:23Thank you, David Riedel of Riedel Research. Guy. Not the Stemware. Well, also actually the Stemware. No, I know. We mentioned it last time. Related to that. Yeah. I don't again, I'll say I'll reemphasize just talk about Davidson. I mean, he's on the ground there and he sees the risk. Clearly, the market doesn't see it. But I'll say this as well. I think it was a year and a half or so ago. Jensen Wang made comments about this. The base of the existential risk to their company in terms of China, Taiwan. Now, that stock's actually, you know, it's been on a lower left, upper right. But if something were to manifest itself there, NVIDIA probably stands to lose the most.
30:01Yeah, I think there's two mitigating factors here that have kind of kept this situation self-contained. Most importantly, I think it's really been the AI boom. I think the kind of excitement around that dynamic has been more of a focus and more of a tailwind than this particularly might be as a headwind. And then, as he mentioned, the fact that it's concentrated within the government sector, Until this leaks really into the private space or until the Chinese regime is essentially able to dictate that these sanctions are placed into the private area of the business or semi-state-owned, however you want to kind of describe it, I think it's going to be relatively self-contained.
30:38And the excitement around AI more than offsets even the 15 % and 27 % respective revenue allocation to AMD and Intel. Yeah, Mel's point, though, about the premium that's been taken out of Taiwan Semi, despite the fact how well it trades, it's very near, you know, 52-week all-time highs, that sort of thing. If you think of their customer concentration, Apple at 23 percent, Qualcomm is about 8 or 9 percent, and then the AMD, I think, is 7 or 8 percent or so. I mean, this stock trades for expected revenue growth of 20 percent next year in 2025 and 24 percent expected EPS growth at 18 times. Like, that doesn't seem, when you look at that customer concentration.
31:11So when I look at that name, it just tells you on valuation relative to its peers and that growth rate that there is like some worry about something going on with Taiwan Semi, but not too much in some of these other names that have actually, you know, just I don't know. They don't seem to mind at all. Coming up, the next weight loss revolution, a potential solution to the muscle mass loss associated with the popular drugs. We'll sit down with the CEO of Biohaven to discuss his company's entry to the space and the benefits it could offer patients. And we're celebrating Women's Heritage Month. Here's the CEO and co-founder of Element Biosciences.
31:46When changemakers can challenge the status quo, they will met adversity. So I think that changemakers will have to be driven by a profound higher purpose to bring great benefits to human society. Only then the change makers can motivate themselves and transcend these kind of adversity into motivations.
32:18Welcome back to Fast Money. As GLP-1 obesity drugs soaring popularity, companies are pioneering treatments to help patients shed pounds while trying to counteract the muscle loss that can occur alongside it. Among the players putting their hats in the ring is Biohaven. Preclinical animal testing of the company's experimental drug showed significant weight reduction coupled with lean mass gain. The treatment currently in phase one for obesity with phase two trial projected to begin in the second quarter of this year. For more, we are joined by Biohaven CEO Dr. Vlad Kourouk. Dr. Kourouk, thanks for joining us.
32:48We appreciate it. Thanks for having me on today, Melissa. I mean, this is one of the biggest issues with GLP-1s. 20 to 50 percent of the weight loss is actually muscle mass. So your new drug is a myostatin inhibitor. Can you just, you know, in layman's terms, describe how that works? Sure. And you're exactly right. What we're trying to do is result in significant weight loss without losing muscle mass, which is what you see with the GLPs. And so a biohavens approach is a drug called T-alpha, and it targets a molecule called myostatin. And myostatin regulates your muscle growth. And so by blocking myostatin, we believe T-alpha will increase lean muscle mass, increase your resting metabolism, and result in significant weight loss.
33:34And do so without the reduction in muscle mass that you see with GLPs. So T-alpha is already in testing for spinal muscular dystrophy. What has the safety profile been there? You're already going to enter phase three, I believe, in the second half of this year. So we started our trials in muscular diseases, and there we have experience now with over 500 patients and thus far a very clean safety profile. And we're waiting for our top line data and SMA in the second half of this year. In terms of phase two, can you give us any idea of timing and also describe to us what you hope to achieve here, since it sounds like you're going to be testing T-alpha alone, but also T-alpha combined with the GLP-1?
34:19That's right. As you know, the GOPs have become the new standard of care for obesity. And what we want to demonstrate is that T-alpha can compete as monotherapy against the GOPs. But also, we think there's an important synergistic role that we could play in conjunction with GOPs. So our phase two trial sets to start in the second half of this year. We'll look at T-alpha alone and T-alpha plus GOPs compared to GOPs alone. And we think that will really give us the data we need to understand what's the best way to advance this asset. How much pressure do you feel in terms of getting the testing done and getting this to market?
35:00I mean, Eli Lilly with its Versanus is working on a similar myostatin inhibitor, which would be the answer to the drug that you are testing. And so I'm curious, how how fierce is this competition for this particular weight loss treatment that combats that muscle loss? Well, you know, we're no stranger to taking on other big companies. As you recall, we had a migraine asset that we launched against AbbVie and we became the number one prescribed migraine asset. I think you have to follow the science. And, you know, the pressure comes off when you have a really good drug profile like T-Alpha in the clinic thus far.
35:34And what we're seeing there is we're seeing nice differentiation in some very preliminary data. We're seeing increases in muscle mass. We're seeing decreases in fat. And if that translates to a positive phase three trial, I think the data will take the pressure off and we'll have a nice differentiated product at the end of that phase three trial. As I mentioned, one of your competitors is Versanus, which is a unit of Eli Lilly because it just bought Versanus last year. So they'll have deep pockets. Do you have the cash to bring this to market when that time comes? Yeah. By our last quarterly filing, we have over$300 million in cash on hand.
36:12We're well-funded at this point in our research. But what's important is that we have a differentiation story even compared to the Versanus asset that you described. That asset blocks the receptor very robustly. And if you look at their data, they had 40 percent rates of muscle spasm and diarrhea. And that's not what we're seeing in our trials. We don't see those type of side effects in our preliminary data. So if that holds true, I think we'll have access to capital and be able to continue to develop this program. $385.5 million exactly, to be exact, in terms of cash and cash equivalents. So congratulations.
36:49What do you think the revenue opportunity is, assuming everything goes favorably for this drug? What are you guys forecasting, if anything? Well, you know, I think this whole space, people are thinking, could be valued in$100 to$150 billion in the obesity space in general. Look, I don't want to get ahead of ourselves. We need to see that phase three data that we're planning to launch in the second half of this year to really know how we'll differentiate from the competitors. Once we have that data, I'll be able to give you a more accurate assessment about market size. But I think we all know obesity is a major health problem affecting two billion people worldwide.
37:27And so once we have our data, I look forward to answering that question. Do you think T-Alpha could, I mean, I know it's early, but could it replace or at least, you know, gain some significant part of the market share that Novo and Lilly have in terms of their GLP-1s? Look, I give a lot of credit to Novo and Lilly. They changed the paradigm in obesity. What's most impressive about their data is you get reductions in things like heart attacks, stroke, diabetes, hypertension. It's going to have a meaningful impact in the obesity treatment for years to come. I think that we will have a very important drug here that could either act synergistically or alone.
38:06And once we have that data, I look forward to discussing how we'll differentiate in the marketplace. Until then, it's a little bit too soon to say how we'll shake out compared to the competitors. Fair enough. Hope you'll come back and keep us posted. Appreciate your time. Thank you very much. Take care. Vlad Korich of Biohaven. It's a big space. This is, you know, the holy grail for a lot of pharma companies. Huge space. Stock is probably trading higher in the aftermarket. Four and a half billion dollar market cap. So here's the bet. If you're saying they're going to be successful, this is a seven to ten bagger from the current price that it's trading at.
38:41If it fails, it goes right back down to$10, which is probably what it was prior to all the news. That's really what it comes down to. If you're willing to make that bet, this is the place to do it in. But what we've learned as this, like our conversation is certainly mine, it all becomes more sophisticated. We've learned that the niche elements of this industry are part of what's continuing to be developed. Biohaven certainly has a role here. And this is a company that certainly has carved out a real presence in the hard to diagnose different parts of the market. And this is kind of where they belong.
39:09So I think they stay. Yeah, I think the fact that they can be used as an independent type of drug and also, as you mentioned, synergistically along with the other GLP-1s kind of repositions what that target adjustable market may be. It's not as if you have to be a substitute one for the other. You can actually take both drugs concurrently or that's the supposed final situation with the drug. So I think that situation, you know, as we continue to develop these drugs, you're going to see the second order effects addressed, which is the muscle loss associated with the weight loss. And so I think this is just a natural order of progression of things.
39:45And, you know, I think it's a pretty compelling story. I think that the proof will ultimately be in the pudding. It's still very much early innings. We're in the phase three. Yeah. Coming up, Bitcoin bouncing back. We're tackling the crypto rise back over 70K and the proxy players seeing a boost. That's next. More Fast Money in two.
40:06Welcome back to Fast Money. Major cryptos jumping higher today with Bitcoin back over 70K. Ether and Solana also surging the rally, helping crypto proxies rise as well. MicroStrategy soaring more than 20 % to all-time highs. Grayscale rising 11 % in Coinbase at its highest close in more than two years. Is this just risk-taking in the markets, or is there something more to the Bitcoin story? Is this fundamentally believing that it has a place in institutional investing? Well, it's a little perverse on a day when the dollar rose and yields rose. OK, so that's part of what, you know, but I think the Fed lit the market on fire last week.
40:45I really do. I think they sent it all signal ahead. And as a gold investor and I own some Bitcoin, not a ton. I wish I owned a whole lot more. But I do think it's strangely ironic that gold is actually rallying because Bitcoin's rallying. And that's not what we're used to. Dan? Well, we're not used to it. The narrative has changed dramatically in the last five years. It's actually, and it's almost validated a lot of the folks. I mean, like you just mentioned, with rates where they were, with the dollar rising here, you know, Bitcoin's not supposed to work in that sort of thing. And I just keep hearing this from a lot of smart investors who dismissed it years ago.
41:19I guess we're waiting for Jamie to get all in there, Jamie Dimon, that is, who just see this as a real risk asset, a macro risk asset that plays a way that they, you know, have traded lots of other risk assets. But this one's new, and maybe it's more interesting than gold right here. Green light. Tim, I think, hit the nail on the head. For all the other reasons, ETFs, I get it. It's the green light that the Fed gave risk assets like gold, like Bitcoin, to sort of be off to the races. And listen, I don't know what's going to happen to Bitcoin. I think I know what's going to happen to gold. And I still think gold's in the really earning inning.
41:49So buckle up, people. Up next, final trades.
41:57Final trade time. Tim. K-Web, I think China, whether you expect the macro to improve or not, I think the trading in these core stocks is seen a low. Bono in. I think whether or not technology holds, I think there's a case you made for owning energy. It's under-owned. XLE. Dan. Yeah, XLU, utilities. I'm not sure rates are going so much higher here. It looks like they've been basing the breakout. Baseball starts this week, Mel, as you know. We'll break it down on other shows. Transocean, that comes out rigged. It's been stealth rally mode. All right. Thank you for watching Fast Money. We'll see you back here tomorrow.
42:32Bye for more Fast. Meantime, do not go anywhere. Mad Money with Jim Cramer starts right now.
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