Google’s Quantum Computing Breakthrough… And Health Insurers In The Spotlight 12/10/24

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. Gaga for Google shares of Alphabet surging after a major breakthrough in quantum computing. What we know about how this technology could change everything. Maybe. And the suspected shooter of the UnitedHealthcare CEO raging ahead of his first court appearance today. The latest updates on the case and how last week's events could lead to more scrutiny of the insurance sector. Plus, Walgreens and talks to go private again. Boeing restarts production of the embattled Maxjet.

0:32and Amazon's delivery drones finally take off in Phoenix. The details on all those stories coming up. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Steve Brasso, Guy Adami, and Julie Beal. We start off with Google's groundbreaking achievement. The tech giant announcing its quantum chip Willow computed a calculation that normally takes 10 septillion years. What? That's a lot. Or 10 to the 25th power. In just under five minutes, quantum computing is hailed as the next frontier in uber-high technology. Some hope it can provide answers to everything from drug development and space travel to the origin of the universe.

1:09But so far, there are no real-world applications. Still, the breakthrough sent shares of Alphabet surging more than 5%, adding nearly$120 billion to its market cap. Does this milestone give the mega cap a leg up in the big tech race? Did it make sense that we added so much in market cap to Google for a technology that has no commercial application yet? Guy. Not necessarily. However, I think what it shows is Google's not as far behind the eight ball as the market thought a few months ago. And the fact that they're probably still somewhat in the pole position and on valuation, you can make a case still despite today's move.

1:42And I think that 191 and three quarter level that we traded up July is in the crosshair. So good for Google. So obviously there have been some missteps, not necessarily from them, but the market around them. But I think people realize that if they want value, Google's the place to be. What is that hockey metaphor about the puck? Skating to the puck? Exactly. Is that what it's doing here? Well, I think our audience at home would like to know what you think is going on in the world's most famous arena with the Rangers. I doubt it. Because it's been a tough ride. But Google's more important tonight.

2:09And yes, they are. I actually think it is warranted. Not because, as we've all just said, it's not that Willow, whoever's naming these chips, is going to be a real term dynamic to take on NVIDIA or AMD. But it's a reminder where Google sits in the middle of some really exciting tech verticals. And then as the Baird note that we prepped some of this with, it says, you know, it's the largest advertising company in the world. It is certainly front and center as it relates to search and digital ad. And everything in their core business is A-OK. And it's getting bigger and bigger. But then you are in cloud compute.

2:42You are in areas where I think Google, you're reminded at 21 times forward in a world where all of their peers are now trading at multiples that are probably 20 to 40 percent higher than they were five years ago. Google's at the same multiple and it probably should be and it could be higher than some of the others. Do you think that we're giving them a tremendous birth? If this were talking about AI, we'd be saying it was pixie dust, right? I mean, think about it. Do you think you're giving them more of a wider berth? No, I think it's great, but I think guys started off the right way. Where are they going to use it?

3:19Or your entrance to the show, where are they going to use it? How are they going to monetize it? I think if this was AI, we would have been saying a host of headwinds towards this right now. So maybe it's not pixie dust, but where are they going to monetize? And you know who's been at the head of this and who was at the head of AI? IBM was at the head of both. It's outperformed Google on a year-to-date basis. It's quietly doing everything that everyone else is doing, not in a glitzy fashion. So I think that this run-up wasn't too much. That's what you started the show with. I think it was a little too much, and I think you're going to start to see a fade.

3:55Or maybe this underscores the value of Google, Julie, for the things that are not in the valuation. And this certainly was not in the valuation. I mean, this is early. Talk about early stages. is Google has a six-step milestone roadmap for quantum computing. This is milestone number two. So it is very early in the pathway, but it just shows that there is something in its back pocket. Yeah, absolutely. I think this is really much more of a reflection on valuation than being able to handicap when this technology is actually going to be economic. It's so much more about, hey, I have missed out on some of these rallies and these other AI names.

4:31I need confidence that Google isn't going to get completely left in the dust, particularly since a lot of AI chatbots have an existential threat to their search business. And so it's really critical for investors, especially longer term investors, to get confidence that they are going to be still in the mix and that they are working on delivering something that can support and eventually overcome their key search business, which is really where everything hinges. Is this your favorite Mag7 in stock, Julie? I think so. I think people forget that so much of the strength that we see in open AI really originated at Google.

5:10And that talent is really pretty critical. So I think it's pretty underappreciated. I think its core business is among the strongest that it's trying to defend. But I do think that it is in the most peril in terms of what can happen with more of these chat bots and more search being done away from them. Yeah, I think that's fair. I mean, And if you had to rank them, well, just the top two, I think it's Facebook, Google, just in terms of being able to wrap your head around evaluations. And, you know, the stock moves have backed that up. I mean, some of these other names are obviously great stories, but some of these other names are trading at excessive multiples, to say the least.

5:44Yeah, Tim. I just I think you you've had this debate for six months, really, is AI or maybe it's been a year has shifted into overdrive where Google sits. And every time there's a challenge to Google. Look, the biggest challenge to Google right now is probably really for the first time, and I'm not sure how big of a challenge it is, is on the antitrust side. And so just some of the dynamics that I think we're running into. But it's not that Google is not a leading-edge technology company with, you know, it's the greatest incubator in the world. What are you doing to monetize that? You know, what do you put on some of those numbers?

6:13I don't know. But all the core businesses to me, they're in the most exciting growth verticals right now. Why wouldn't you want to be in this name at 21 times forward when, in fact, again, And the range around the competitive landscape is probably double that in terms of valuation. Just distilling what you said before, Grasso, you're choosing IBM over Google. You're choosing IBM over NVIDIA. Well, I think NVIDIA, right, so NVIDIA's top clients are its top competitors. So the writing on the wall is there. Not that I don't think it can go higher, but I think that it's probably run its course right now and needs to pull back.

6:50Google, would I choose IBM? I think IBM has executed poorly. So I would choose to replace the IBM CEO and then get a little bit more growth here. And that seems like the year of replacing CEOs. I don't know. I think that they've done a poor job. On paper, I think they're better than Google right now. But Google, to Julie's point, really has to show what they're capable of doing. And they have 85 percent of search. They need another trick. All right. For more, let's bring in Fast Money friend Gene Munster of Deepwater Asset Management. Gene, I don't know about the subtillion stuff and, you know, all the zeros.

7:30What can this do? Drug discovery and other things. Is this too much to afford, you know, Google's market cap today for what this could be in however many years? I'm in the camp, I think, consistent with what most of the panelists said, which is this is probably too much for today. I agree with Guy that this is more of a validation point for Google's tech. But this, just to put it in perspective, they started this Willow project 12 years ago. And so the potential around this being commercialized is probably 10 years away. And so it's still a long time. It does speak there is a piece where the stock should have been up today out of guests a few percent because I think it does speak to Google Invested in the right areas for what will be continuing tech acceleration in the decades to come I mean this is a Google investor is asleep Well at night similar as Waymo is asleep.

8:27Well at night business doesn't get a ton of attention But I think collectively Melissa I would have expected the stock to be up a couple percent today not 5 % Gene, I love when you agree with me, so thank you. I'll ask you this question then on the back of that. Who should be worried about this? I saw in your notes probably not NVIDIA, not AMD yet, but somebody has to be. Yeah, I think, you know, there's some of the other quantum companies. There's private companies on that side. But I think on the public side, you know, the worries are probably because this, again, is so far away. I think the piece that the rest of the MAG-7 needs to be contemplating here, and NVIDIA needs to be thinking about is just what are they doing to have some sort of position within quantum computing.

9:11It is, it's theory right now, but I think you have to pursue that theory. Similar to when aviation was theory before we got flight. I mean, all of these things go from projects from the lab. And so I would say the potential losers are the companies that aren't doing that. And I think Google is standing alone right now within the MAG-7 in terms of their investments in quantum. So you said 10 years away from commercialization. And what do you think commercialization could be? What is the field that could benefit the most from quantum computing? I mean, it's as simple as AI. I mean, just the peer, you went through the numbers, basically going from an eternity to five minutes.

9:53I mean, it's hard. This is the kind of stuff, it's called superpositioning. It's hard for me to wrap my mind around the improvements in compute speed. And so I think probably the biggest beneficiary is just everything that's AI. I mean, ultimately, you have a company like NVIDIA. If Quantum moves from theory to actually a production product, they need to have an answer down the road. And so the question, who's going to be impacted, what's the use cases on these, I think AI is probably front and center. And within AI, probably healthcare is one of the biggest areas, initial areas. Jean, great to speak with you.

10:28Thank you. Thank you. Gene Munster, Deepwater Asset Manager. We were just showing the chart of NVIDIA. And remember, NVIDIA fell yesterday in the back of the news of the China investigation. So it's interesting that it doesn't, you know, it can't catch a bid today. And then we have this interesting supercomputer news. Well, it's certainly, this is a trade today about tomorrow. NVIDIA arguably could be, you know, yesterday's trade today. I don't know. But I would look at the semiconductor space. You cannot single out NVIDIA. I would look at semis, which today hit another important relative value underperformance to the S &P, which takes you almost all the way back to February of this year, which was when they were going to to the moon.

11:07So it's, you know, again, a relative value chart looks a little bit like a reverse head and shoulders on the way down. We've got some breaking news out of Washington. Megan Cassell's got the latest. Megan. Hey, Melissa, so Scott Besson, Trump's pick to be the Treasury secretary, was on Capitol Hill once again today meeting with senators ahead of his nomination and leaving a meeting with incoming Senate Finance Chair Mike Crape. Our Karen James, our producer Karen James, caught up with him and got a chance to ask him a couple of questions about his priorities and about this idea of a shadow Fed chair.

11:36Take a listen. As the president said on Sunday, and I am in complete agreement with him, that Jay Powell will serve out his terms and leave the building as Fed chair on May 26th. Now, this is interesting for what he said, but also, Melissa, I would highlight for what he hasn't said there. He said that essentially they will not be firing Jay Powell before his term is up, sort of reiterating or reemphasizing what President Trump said, President-elect Trump said on Sunday in that interview, saying that he had no plans to replace Powell. But Bessent, of course, is the Trump advisor who initially laid out that idea of a shadow Fed chair, saying that he would advocate for nominating someone very, very early to replace Powell so that person could, in effect, become the one who lays out advice and who the market is listening to rather than Powell.

12:25Even while Powell is still in office, Karen said to him there, how do you feel about a shadow Fed chair? He says that Powell will stay in office until the end of his term, but wasn't completely putting the idea to bed there. So a lot to read into this, Melissa, but at least for now, Powell can think that his job is safe. All right. Megan, thank you. Megan Casella. A key inflation report out tomorrow. CPI may interrupt the Fed's rate cut plans. November Consumer Price Index out before the opening bell. Dow Jones expects the number to climb by a tenth of a percent from October. CNBC senior economics reporter Steve Leisman is here.

12:58On the desk. On the desk. In the house. He's playing live. Live, exactly. Stella Blues on CPI. It's a plug, right? Unsolicited plug. First of all, I mean, to the comments, he still he craftily did not really answer. He didn't say no shadow. Exactly. He just said Powell's going to serve the term, which we knew already. Well, we didn't know that already. I mean, I guess he kind of ruled out. Well, he ruled out the idea of maybe replacing him having a big fight over the idea, which is what the president ruled out. But they have not ruled out the idea that they could appoint this person ahead of time and kind of take some of the what is it done?

13:38Cut them off at the knees, so to speak, in the sense that if your shadow Fed chair says something about the future of policy, it removes the forward guidance tool, in a sense, from the Fed chair. Now, I don't know if they're going to do that. He was the guy that mentioned it. He did not specifically deny doing that there. And I guess if they get to a point where they're angry at Fed policy, they can do that. Right. Back to Fed policy. Is this going to change the trajectory of the Fed in December? I think it's a very consequential number tomorrow. And for y 'all traders around the desk here, I would say.

14:14And the next day, you've got to take the CPI and the PPI together. The market is very good at trading it in some, but in its pieces. So you want to be careful. Like if you get a hot CPI, but a cool PPI, we put them together. whether we create the PCE and that's the thing the Fed cares about. And by the way, that is the expectation. Sort of the number you read earlier, that 0-3, fourth one in a row, core CPI. So that's the notion. Guys, do you have that other chart that I made ahead of this conversation here, which is the one with the bar chart? And what you see is kind of an interesting story.

14:47You can see you're – no, not that one. That is a bar chart. It is a bar chart. I'm so sorry. The one about the CPI, the core CPI one, we're having fun here, ladies and gentlemen. Maybe it's not available. It shows the story of high earlier this year, came down in the middle, got everybody excited it was coming down. And now it's kind of back up about halfway. I don't know if we can do that. Do we have it? You're pointing. Well, she's pointing at me. This is what I do. While we wait for this chart, and I'll defer as soon as it goes up there, but we had small business confidence that came out today.

15:17Through the roof. It's highest in three and a half years. And they talked about the inflation, the wage components, all they talked about. They basically said their prices are highest that they've been since March, and they're probably going higher. It's great that they're confident. Obviously, it bodes well for small caps and all kinds of things we talk about. But this is another ingredient that says inflation's not coming down. It's going higher. Well, a couple things. First of all, be a little careful with the small business, NFIB. It's a very Republican-leaning group. Oh, okay. There's the chart, by the way.

15:42Oh, well, there you go. There's the story. So look at that. It was high before that somebody freaked out, those parts on the left there. Then everybody got really happy and comfy in the middle there. And now we're like, oh, is inflation stalling here? And that's what's going to add to the conversation. So be a little careful with that. It has been this absolute surge. I think maybe Democrats ought to think about why business leaders are reacting as if a boot was taken off their neck. I think that's not necessarily the best way to run your economic policies in the country. And you get that. And that creates this possibility of a surge in business spending and capital spending.

16:17And that creates some concern. But the Fed, I don't think, Tim, can make policy based on the expectations of people for policies that may or may not be enacted down the road. Sure. Okay? But this is just another ingredient of many that have been in the stew, that inflation isn't getting better. You know, what we hear from companies anecdotally throughout the earnings season was there's price pressures. There's certainly service price. We saw it in the ISM, and we've heard from corporate America. Okay. Did you see the unit labor costs today? Of course I did. Did you see the productivity numbers today?

16:55Did they make you smile? Yeah. Well, you know, I'm always happy to see good numbers. Look, if we have high productivity, if we have low unit labor costs, we can run the economy a little hotter without inflationary pressures, okay? And, look, I am getting a lot of commentary from people, especially over this thing, that are saying, Steve, you're out of your mind to think that I still think they have another quarter of recalibration in them. But now we can go to that four-bar chart, the one with four bars. That was a good chart. Is Sandy going to hate me after this? Well, too late. Maybe he already does.

17:30But if you said the Fed's rate path chart, then that chart would come up right away. Thank you, Melissa. Perhaps afterwards you can write the instructions for me. I will try. He said he had nothing but love for me in my ear. But OK. So let's talk about this chart. Yes. Let's talk about it. Let's talk about it. What we see is that 87, what is it, 84 % number is too far away. 85 % number, percentage probability of a cut coming next week. Then everybody thinks they take a pause. Now, the thing you have to realize is the next two bars represent the probability of the same quarter point cut. So over the course of March and May, they think another quarter is laid in.

18:05So that's 50. Now, I have another chart, ladies and gentlemen, which is the December 25 Fed Funds Futures Chart. I'm glad he named it. I know. It may smell really easier for the first year. Makes it easy to find it. Let's talk about this. This is 372. Let's do the math. That's 28 points to 400 and add another 60. So they think there's another 80 basis points built in between now and next year. We get perhaps 50 by March and then you're done. So the idea is the Fed does this other quarter and then maybe it does two other quarters over the course of next year. That's where it's kind of a proxy for the terminal rate.

18:46But if you go down to 26, you get other answers. But that's a good proxy for the terminal rate. What's interesting is from what I think matters to you guys, the market knows all this. The market has internalized all this. It doesn't seem to care all that much. I think that I did the math. You're up 7.7 % at the top from the election. Now you're up, what was the number I just calculated? 5.8 %? Yeah, 5.9 % since the election. You gave back two percentage points. So the market seems to be okay with this, Melissa. I think, are you upset by this? He doesn't look upset. But do you ever look upset? You always look happy.

19:24I'm a happy guy. No, listen, you know, I think Jerome Powell's done a remarkable, a couple missteps here and there, but that's probably not the, he's done a remarkable job. The messaging has been good. I mean, we'll see how we get through this. I know we've got a couple. We may have, there's two dissents that I'm thinking about. Bowman, maybe again? the Fed governor. And now Ms. Hammack, the new Cleveland Fed president, she was a little bit on the fence in the sense that she said, I could see another quarter point cut between now and January. So she was like, do that quarter either now or in January.

19:55So I don't know. You might get a surprise a week from now, in which case, I think you do get the extra quarter, though. I think they're still recalibrating. Steve, thank you. Thanks for all the charts. It was really wonderful to come down here. Thank you. I didn't really believe that, but we'll see. This doesn't happen when I'm remote. I get the charts up right away. Coming up. So you're blaming us. It's a warm feeling today. I'm not blaming you. Just talking about... These boots are made for walking right into the private equity market. This is for you, guy. Walgreens boots. Get it? Walgreens surging reports of a P.E.

20:25deal, what it could mean for the beaten down pharmacy company that is next. Plus, Boeing takes off. Shares leading the Dow as Max production goes back online. What it means for delivery numbers and how things look one month after the machine is strike. Don't go anywhere. Fast money is back in two.

20:46Welcome back to Fast Money. Shares of U.S. steel dropping nearly 22 percent at its lows after a report that the Biden administration is set to block its acquisition by Japan's Nippon steel. Nippon saying in reaction, we're confident that our proposed partnership is the best path forward to secure the future of U.S. steel and that we've engaged in good faith to underscore how the transaction will bolster American economic and national security by countering the threats posed by China. The White House just issuing a statement saying Biden will continue to see what the CFIUS process yields and that they haven't received any recommendation yet.

21:17Shares of U.S. steel down nearly 30 percent since the deal was first announced almost a year ago. So it's amazing that people continue to be surprised at this because it's been talked about so much. But there was sort of a glimmer of hope for some reason that Biden in the 11th hour would actually let the deal go through to save U.S. steel. I think it's a buy on the weakness, because if you think about it, what has Trump said? He's against the deal as well, but he's going to have tax incentives and tariffs to deal with it. That's going to pop the stock. So all of this is a buying opportunity, in my opinion.

21:50It's interesting. It's a day when you saw POSCO and some of the other global steels rally a little bit. And it's not necessarily that the fundamentals in the steel sector are that great. In fact, that's really the story here. So, you know, if there is an outside bid where there's some strategic value that's applied to the U.S. business, You know, it's not in the best interests of shareholders to see this deal not happen. In other words, this deal should happen and it would be voted on by shareholders, but higher powers. Meantime, shares of Walgreens notching their best day ever on reports of beating down pharmacy chains exploring a deal with private equity firm Sycamore Partners.

22:23Walgreens had previously tried to go public in 2019 when it was worth$55 billion. It closed today with a market value of just over$9 billion. What a decline. I mean, they've got to stabilize the retail pharmacy business, which has been a car wreck. Disaster. Now you want to play a little stock market here because this is a name that traded. It was a 32-year low, I think, in the name recently. And obviously, you got the bounce today on probably five times normal volume. The question you have to ask yourself, you know, you want to play it for another 25 or 30 percent, which doesn't mean it's fixed by any stretch, but you might be able to get that based on this news and based on probably the short interest.

22:59So, again, not fixed, but the stock might be a buy here in a pretty major way. Julie, what do you think? Yeah, it's a really difficult situation. It's, you know, the amount of value destruction that you've seen here is pretty substantial. And, you know, Sycamore, being a great firm, has not typically done deals quite this large. And it's a big ship that it has to turn around. I do think there will be continued interest from other parties because it's true you can split this business off. And it probably has some of the parts that's compelling. So I think it's definitely in play. But the fundamentals of this are really tough.