Google’s Chrome Dilemma… And MicroStrategy’s Crypto Connection 11/21/24

0:00Live 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. A target on big tech, Alphabet and Amazon plunging today as regulators across the globe take aim. Will we see breakups for these BMOs? And what could it mean for the stocks? Plus, banking on gains, regionals and money center banks leading the market today. Is there more juice left in the trade and which name should you bet on? And later, a Bitcoin bonanza, the crypto hitting another all-time high and inching closer to that key$100 ,000 mark. Meantime, a key reversal in shares of micro strategy.

0:30What's next for the stock? I'm Melissa Lee. Come to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan, and Courtney Garcia. We start off with a massive fallout from Google's antitrust woes. Shares of parent company Alphabet dropping 5%, erasing$100 billion in market cap in just one day. This coming after the Department of Justice recommended that Google sell its Chrome browser to fix what regulators call an illegal monopoly in online search. Reports of the DOJ recommendation had come out earlier in the week, but the stock wasn't rattled until today's session.

1:02Eamon Javers got more on this. Eamon. Hey there, Melissa. Remember, this is just the DOJ's ask, and Google will have a chance to respond in court. Ultimately, it's going to be up to the judge, and we don't expect that decision until the summer of 25. What the government is asking for here is a breakup of Google, and we haven't seen something this sweeping since the government ordered the breakup of Microsoft in the early 2000s. But remember, that decision was overturned on appeal. Now, what the DOJ is asking for here is to force Google to sell the Chrome browser, which has about 65 % of global browser market share.

1:35And they're also asking for Google to sell Android or for the government to put in what they call behavioral remedies that would block Google from using Android to favor its own search services. Now, finally, the DOJ requests that Google be blocked from paying Apple the billions of dollars each year that it pays now for default placement on Apple devices. Google reacted to all this harshly in a statement this morning, saying DOJ chose to push a radical interventionist agenda that would harm Americans and America's global technology leadership. DOJ's wildly overbroad proposal goes miles beyond the court's decision.

2:11It would break a range of Google products, even beyond search, that people love and find helpful in their everyday lives. So this fight goes into the final stages with the government making a big ask of the judge. And now we're going to have to wait and see how he responds. Melissa, back over to you. Is it in the thinking, Eamon, according to your experts, that the judge is unlikely to actually pursue an outright breakup simply because Microsoft's breakup order was overturned? That's a really good question. And I think the judge is going to have to take that precedent into account. And if he does push for a breakup, to make sure that he does it in such a way that it is stronger on appeal, because there's no question this is going to go to the summer of 25 before the judge makes his final decision.

2:55And just no question here that Google will appeal this thing. Right. Eamon, thank you. Eamon Javers in D.C. Google is not the only big tech name getting hit with antitrust headlines today. The EU reportedly considering a probe of Amazon's e-commerce business and whether the company is prioritizing its own brand products. If found guilty, Amazon could be fined up to 10 percent of global annual revenue. I don't know where we want to start with this. There's an overarching sort of regulation on big tech. The Google story is very interesting because the stock is definitely reacting. We haven't really seen that.

3:25Shockingly. I mean, we've sat on this desk, I think, for a decade talking about the headwinds of regulatory stuff. And we've just kind of been very dismissive about what it means for the stocks. And I think to the point that Eamon just made is like, yes, here was a proposed remedy. But yet it has to be, you know, I mean, there's a whole host of things that has to happen. The fact that it lost 100 billion plus in market cap is very odd to me. The other thing I'll just say is so the FTC or the DOJ basically has suits against Apple, Amazon, Meta. I don't know what they have against Microsoft right now.

3:52But all those companies actually have beef with each other and they actually support some of the other cases that are being brought against their competitors. So it's a pretty weird situation. I'll just say this. It's like these are our national champions. Make no mistake about it. This is the place for innovation. One of the things that I really underestimated over the last couple of years is just how pissed off so much of the tech community, so much of the investor community, so much of Wall Street, you know, has had. Think about Wall Street, okay? These guys who do a lot of M &A, there's been no M &A in the tech space because of the regulatory overhang.

4:23So a lot of these folks are really upset about this. So it will be interesting to see how this plays into 2025. But, again, I think some of these opportunities, when you have a stock down 5 % off of something, probably good buying opportunities. Yeah, I tend to agree. I mean, the ask, that's what he pointed out. And even as well, that's the most, well, you can ask for whatever you want to ask for, right? So whether that actually ever comes to, if that, in fact, came to pass, the stock would be, I think, a fair bit lower than here. However, between here and there is there's a lot to happen. Right.

4:52We haven't heard Google's response. Also, I think that the landscape is changing anyway in search. I think there was just a little while ago another competitor, you know, who wants to enter into search. I also wonder. So who would you sell Chrome to? And that's the sticking point. Nobody can figure out who would be the natural buyer for Chrome. Who does that then make the target? Then they have two-thirds of search. Exactly. So nothing's changed. Well, they don't have two-thirds of search. I mean, so think about it because the case here is that Chrome, if you have Chrome and it's already embedded, you're much more likely to search on Google, right?

5:29But let's say they sold it to OpenAI, who's working on a browser right now. Well, all of a sudden, there's going to be lots of choice where that search goes to. OpenAI right now is a search engine for all intents and purposes. So, I mean, to me, I do think there's not too many buyers of it for regulatory reasons. Well, I think the buyers are potentially very powerful as well. So it's also not. I don't know. I'm sorry. No, no, go ahead. I was just going to say, I don't even think it's where the big grievance is. I mean, the big grievance is really more on the ad tech side, which is another lawsuit that's just been filed.

5:59And again, all this is timing to rush stuff through before a new administration comes through. Now, I realize you can make an argument that the filing in 2020 on search is something that, you know, has had its hands in maybe maybe the previous administration, certainly in this administration. But we are talking about many years and possibly multiple administrations of DOJ pushing on these companies. So it's not as if suddenly the Trump administration would necessarily be looking to unwind all this. But that's the sense you get by the activity over the last couple of days. You get the sense that there's some rush to actually get stuff in before this next 2.0 Trump possibly dismantles years and years.

6:37And again, I would just get back to where are the grievances? They're really more on ad tech, more for marketers, more for advertisers. Is this a buying opportunity? I would say so. You know, I think realistically, when you look at what is actually being proposed, they're going to divest Chrome theoretically. That's if it actually goes through. This is relatively a small part of their actual business, right? I mean, it's been estimated they'll probably divest this for like 20 billion and their market cap is like about 100 times that. But I think the bigger issue is the regulatory concerns and just in general that environment.

7:04And Tim, you bring up the current administration because everybody's saying, OK, well, if Trump comes in, there's going to be less regulation. But when you look at Amazon, this isn't just a U.S. problem. This is coming from abroad as well. So I think that's a question. Is this a global regulatory phenomenon that's just starting? If so, that could put pressure on these companies. But short term, I think there's probably an overreaction. I think, though, if you think about what the number would be, 20, 30 billion, it is really important to their search business, right? So I read a stat that if you were going to go from Internet Explorer to Chrome, you're 50 percent more likely to do a Google search.

7:35So I think about where the default is. So if the FTC is basically saying this is noncompetitive, right, it's hurting, you know, consumer choice, that sort of thing. It is important. And if you think about the dominance that Google has in search. Right. And if you cleave that off and you don't have that connectivity to the search process, then it could be a huge hit to Google. But again, to your point, Karen, it's going to be probably at least a year or two away. Well, it's summer is when the judge decides and then Google will appeal. That could be tied up for years. So that's, you know, minute to implement.

8:05Right. Yeah, exactly. All right. Let's add Deepwater Asset Management managing partner, Gene Munster, to this conversation. Gene, how are you thinking about this ask of Judge Meda? Well, my initial reaction is to go to the worst case scenario, which would be, in fact, that Chrome gets spun out. In that case, Google's call it 90 % search share within kind of the, I think what I would consider developed countries, 90 % search share is going to drop. It probably goes to 80%. And in that case, you probably get a search business that was growing at 10 to 14 % over the past several quarters to quickly drop down to low single digits, maybe potentially even going negative for a little bit.

8:47And so this says, the reason why the stock's down 5 % is that this really gets to the core of half their business, which is search. And they will claw that back over time if this does get spun out. People love Google, and they will slowly come back just like they did with Yandex when they switched out their core in Firefox. And so that's the first place my mind goes to. The second place is what's the probability of this actually happening? And I think the panel outlined it appropriately. I think it's the odds of this, anything actually going anywhere low, not just because it's a difficult task to get a big spin out like this, but there just simply is in precedence to it.

9:24And so I think that ultimately this too shall pass. I do think that there are other things within what the Department of Justice and the FTC are doing against big tech that's going to rear its head in the next several months. But I think this chapter around Chrome getting spun out is going to just kind of blow over effectively. Let's though pursue that worst case scenario pathway, Gene. I mean, what does Gemini look like without a Chrome? Well, it doesn't look very good. I mean, it goes back to this 90 % share that is going to drop, and Gemini needs, it's right now, AI Overviews is riding on top of search.

10:06That is the mechanism that Google is fighting open AI with, is using their search dominance to do that. And so So that's been a key piece to this puzzle, the puzzle of Gemini, is to leverage search. And so anything you do, anything that happens that has a negative impact on their search share, this loosely circles back to something else that was buried in this Department of Justice letter that came out was related to Apple and their deal related to their search deal. and on both of these, if that deal got voided, that would have a negative impact. So this does, again, I think it's a very low probability.

10:47I don't think this is the A topic on Google. I think it's perplexity is the A topic. But since we're talking regulation here, I think it's something that if it does happen, the stock would definitely go lower. I mean, Karen mentioned it will go lower. I bet it will go down another 10, 15 percent on that. Gene, it's Karen. Thanks for being on. So about this default, is that what would be the default or is it there is no default and you have to choose from a menu, in which case you might very well choose Google to get back to your point of keeping a good percentage of market share. Do you know what the remedy would be looking for?

11:23The remedy would be, so if Chrome got spun out, what would happen is when you start up your browser, they would randomize which option comes up first for you to select. And so that would be some sort of a equal playing field to do that. Presumably, people would look down and check and go with Google. And so I think that's why they're not going to lose a huge percentage of their share, because I think a lot of people, but that's probably what the remedy. Ultimately, this Chrome business, without a deal where Google would pay for placement or somebody paying for placement, that business is a horrible business.

12:02I don't know who would want it. I wouldn't pay$20 billion. I wouldn't pay$5 billion because I'm out of fears that the Department of Justice would block any of these kind of payments. And so, Karen, I think that it's a randomized piece. I think that anybody who's interested in purchasing this would want to have some assurance that they could sell placement on that. Hey, Gene, you just mentioned the Apple search deal that they pay about$20 billion. That would be Google to Apple, 15 % of their profits. When you think about that, is there a way that that deal could be blocked and not the Chrome deal?

12:34I'm just curious how you're thinking about that. I'm a big believer in Apple. I think this company is going to have accelerating revenue growth with the iPhone. The piece that keeps me up at night is what happens with that search deal. And I came up on the Google last earnings call. Sundar said that there would be unintended consequences if in fact that deal got voided, but the fact that that language reappeared in the Department of Justice in this Chrome, and not only did the language reappear, but it almost outlined language to the effect of don't try to work around this, don't try to work around us, the Department of Justice in it.

13:08And so, Dan, I think that, again, it's a low probability because this would be a very negative event. I think there's just a lot of lawyers on Google and Apple that would fight hard for this. But if in fact that did happen, the reality is that your numbers are right. Mine are pretty close to that 13 percent, call it, but it's a measurable impact to earnings. And so I'm surprised that Apple wasn't, again, a big believer in Apple. I own the stock. I think it's going to do well over the years, but I'm surprised the stock didn't react more today. Gene, great to see you. Thanks so much for your time.

13:42Thank you. Gene Munster, I want to go back to the point that we were talking about at the beginning of the show, which is why today, why today of all days, did Google decide to react to an antitrust headline when so many headlines have passed, we've sat here on the desk, and nothing happens to the stock? Well, I think it gets back to what a timeline is, both in the context of possibly a change in administration, but I think it also gets back to really what the upcoming dates. Again, December 20th, Google produces, I think, their final remedies. Then you get into this post-discovery period and then you're you're really into the summer.

14:15And I just think at some point there has been pressure on the company to to respond and respond aggressively. And I think that's part of what it is. And think about classic negotiation, overreach on each side. And when you talk about Google remedies, you're already on some level acknowledging, OK, we'll do X, Y and Z. And I think it's it's important for them to get out there and act reasonable, even though they have to be very vocal in opposition. All right, let's get to NVIDIA now and the rollercoaster ride for shares since earnings last night. The AI darling initially fell more than 5 % after hours, but opened today's trade in the green, rising nearly 5%, then fell back into the red midday, down as much as 3.5%, clawed its way higher to finish the day just above break even.

14:55We were talking here, we were saying, what does it do tomorrow? You said down 5%, I said up. Yeah, you did. Somewhere in the middle, but somewhere in the middle, we were both right. I mean, listen, this price action tells you that they're not done with this one yet. You know, I mean, so, again, you know, that quarter. Who's they and what has done me? Oh, jeez. I'm just asking. I mean, they, the ones who bid it up like 1 ,000 % over the last, you know, three years or so. That's a retail investor, by the way. You know, listen, and we've seen the hyperscalers, their biggest customers kind of fall by the wayside.

15:23Microsoft can't get going. Google can't get going. You know, Amazon's still doing pretty well. Meta's still doing pretty well. Super Micro is not doing particularly well. Those are their top customers, 50 % of their revenue. So they're just not beating the way they were before. Sooner or later, they, Tim, are going to not be as impressed anymore with the magnitude of the beats. And then ultimately, it's going to become a story like some of these other ones, a bit more mature. They were OK, though, with the smaller beat. Right, Courtney? Were you OK with the smaller beat? Yeah, I think this really wasn't enough to take the stock down.

15:54And I wouldn't be surprised if it trades kind of flat here because it also wasn't enough to be that catalyst higher. But realistically, it is the fastest growing of your mega caps. You're seeing this risk on rally, right? I mean, you're seeing that with Bitcoin, and that is where the retail investor wants to put their money. They want the thing that's doing the best, which is in NVIDIA. It's in many of your ETFs, which as people put money in, it's going to continue to push it higher. So it's not where I'm adding our money. Most of our clients are over allocated there because it's done so well.

16:16But I wouldn't get out of it by any means. I will play the role of the NVIDIA bull here. Because it was a smaller than expected beat, right? It didn't match the whisper number, and it struggled higher. And it still managed off of record highs, still managed to close higher. All right, you're the bull. I'm the bull. Okay, I'm long, so I have to. I want to be the bull. Okay. Are you the bull in real life? I'm the bull in real life. Even at these levels? They successfully downshifted all expectations last night. I mean, to me, we have a more modest outlook for Blackwell. We have a dynamic where we know, if anything, there's a slow transition going on.

16:51And yet it's trading at 33 times forward, 26. To me, that is something that ultimately, look around the market right now. Considering the growth you're getting from NVIDIA. I mean, you know, I know we like to sometimes be revisionist around here. I mean, I feel like I've felt this way about NVIDIA for a long time. I think it's a case where this is growth at a reasonable price, given what their growth is. I think you had to listen to the conference call. To me, that was where all the context was. And Jensen Wang was very, very bullish about the being in the early innings. Right. And that we have tremendous more growth.

17:26And I think that this sort of changeover from Hopper to Blackwell, which they cited, all right, we will see lower margins as Blackwell scales. And that won't happen probably till the beginning of April or so. So we are going to see margins go down. But it is not a demand problem, right? So that would be the problem that the beat and raise wasn't enough if it's because demand isn't there. That is not the way they painted it. And I tend to agree, tend to believe him. Dan is not the ball. I think there's so many other things that are telling you that we're going to have overcapacity built out. If you look at so many other names in the ecosystem, I will say this, though, to the bulls.

18:05You saw Dell act pretty well today. You saw Micron act pretty well today. So you saw like a reemergence of some of the ecosystem that had come off pretty hard. You can be right. But the problem here is when do you pull the trigger and sell? You know I'm not going to. I mean, listen, I think Courtney's point is a great one here. If you've owned this stock, it's become such a bigger part of your portfolio. Sooner or later, you have to do something because you are so concentrated in this one name. All right. Coming up, we're watching Gap on the move and extended trading. Shares are higher after reporting results.

18:33The details and the numbers in the quarter next, plus a first-class ticket to airline technicals. Nice. The head and tail wins. Get it? Head and tail wins in the space in the Chartmasters. Plain pairs trade ahead. Don't go anywhere. Fast money is back in two. Welcome back to Fast Money. Shares a gap, popping 14 percent after beating top and bottom line estimates and raising its guidance ahead of the holiday quarter. CNBC's Courtney Reagan joins us on set with more details. Courtney. This one I feel like has had so many stories over the years, so many CEOs, but it looks like they're starting to gain some traction here.

19:04So, Melissa, good point. They beat earnings per share by a decent margin. Revenues, a beat, slightly in line, kind of depends on how you want to look at that. And then comparable sales, maybe slightly light, but they were positive overall if you take all those brands together. And then the Gap namesake brand actually turning in really strong sales up 3%. Old Navy was flat this time around, and that had sort of been the winner. But they're talking about gaining market share seven quarters in a row at Old Navy, which I thought was really notable. And then the fourth straight quarter of positive comp growth at Gap.

19:32Athleta seems to maybe be inflecting. Those comps were higher by 5 % too, just at a time when athleisure really seems to be taking off. I know you spoke with the Viore CEO that was on here recently. We talk about Allo a lot, but Athleta is still trying to hang into this gang. And so it seems like they're doing well. The call is ongoing right now. They continue to talk about the financial rigor, getting back to basics when it comes to the finances and the operations. And then that's when it's going to help these brands take off. So, you know, we'll see. Obviously, new denim silhouettes might have also helped sort of spur some of those sales.

20:03Like the wide leg, the high-waisted. What's new denim? And should I be wearing it? And you're our denim guy. So I feel like anyone should know it should be you, which also, by the way, usually means you end up buying new tops and new shoes. And I need to go. Because when you've got a new silhouette, it doesn't, yeah, everything has to get changed up. So we're really good. Is that all right? Yes, Tim. Go ahead, please. With jeans, and then we call that a Canadian tuxedo, which actually Levi says is very popular right now, denim on denim, believe it or not. Oh. It's very popular right now. So you would be.

20:34I was worried our Canadian friends would be writing in. No, no, no. You would be on trend. But, yes, so far, you know, they're starting to be maybe little bits of trends in the right direction for Gap. But they've got a long way to go. But InterRepublic is definitely still a point that really needs to be fixed. Men's stronger there than women's, but overall, business weaker there. So, basically, less bad is great. Less bad is great today. I mean, look at that. Even Ross Stores, which reported after the bell, not a great quarter. And those shares were higher as well. So, really interesting. Also want to get some more detail from Richard Dixon.

21:05and I'm going to speak to him actually later tonight, and then we'll have the interview tomorrow, just about sort of the intricacies of the apparel selling and discretionary. Is it weak or is it not? It seems like it depends on who you are. So maybe it's not a consumer thing, and maybe it's really down to what you're selling. Court, thanks. Thank you. Courtney Reagan. Courtney Garcia. What do you say about the game? I think there's a lot of positives to be said about this. They do seem to be closing a lot of stores in there. I think Athleta actually could go either way, right? Because I think some of this you're going to see, like with Nike, they're actually talking about a shift away from athleisure and towards traditional.

21:39But actually, as you're starting to see them gaining share, I think that's actually a really positive sign here, especially with a lot of competition like an aloe and a lululemon here. You're nodding your head, so I'm a student. I love it. I love the athleisure trend you're talking about. Well, I'll just say this as our chief denim correspondent here. I find the Levi really interesting right here. It's down 40 % from the 52-week highs here. Trades at a very reasonable multiple. Well, I guess there was definitely a downgrade in their guidance if you go back about six months. I'm seeing it more and more people.