Intel CEO Stepping Down… And Fast Money’s Obesity Week Kicks Off 12/2/24

0:01Live from the Nasdaq market site in the heart of New York City's Times Square this is Fast Here's what's on tap tonight. On the out at Intel, Pat Galsinger ousted from the CEO spot at the semi-company after nearly four years of lackluster results. But will new leadership be able to turn around a long, struggling stock? We'll debate that. Plus, resilient retail consumer stocks have been outperforming the broader market over the past month. Will holiday shoppers keep this trade in rally mode? And we're kicking off Obesity Week here on Fast Money. former FDA Commissioner Scott Gottlieb on set to discuss the latest developments and how the weight loss space could be impacted by the next administration.

0:36I'm Melissa Lee. I'm going to be live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Dan Nathan, Guy Adami, and Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America Securities. Welcome, Savita. We start off with the Intel CEO shakeup. Pat Gelsinger abruptly pushed out from the top spot after almost four years at the helm. The board announcing that the The company's CFO and products head will take over as interim co-CEOs. The U.S. chipmaker has struggled with declining market share and has failed to gain traction in the AI race. The stock was down more than 60 percent under Gelsinger's tenure.

1:09Today's news initially sent shares popping as much as 6 percent. But the end of the session in the red, it was the only stock in the SMH ETF down today with names like Taiwan Semi, AMAT, Marvell, all seeing outsized gains. And so what does this mean that this news couldn't even get shares of Intel rallying? Seems like there's deeper troubles ahead, Guy. You know, I want to be kind here, but then again, I don't want to be kind. We've not ever been kind to Pat Gelsinger because of the performance. Justify myself. Apparently we played a video. I wasn't paying any attention. I'm sorry, Sandy. I'm sure it was great.

1:42But you think about it. It's almost impossible to have that kind of. There it is. One, two. I mean, that's it. See, and you know what's amazing? Why do it at all? Why do it at all? Why do it at all? Anyway. And that was, I think, the beginning of the end. And so when the stock is down. Actually, the stock was down like 60 % at the point he did that and it went down another 60%. Which is remarkable. And over that same period of time, think about what semiconductors have done and think about what the broader market has done. So it's really difficult to have that kind of underperformance. With that said, you'll read about how Intel is a difficult company to manage.

2:20a lot of moving parts. But, you know, the bottom line is you can't cut your way and then lack of innovation your way to prosperity. And that's what's been going on there. With that said, I'm surprised the stock behaved the way it did today. If you had told me a week ago this would happen, I'd say the stock's going to be up 5%. It wasn't. But I'm still probably one of the few people that think there might be some opportunity here in 2025 for a name like Intel. It was initially. And then the analysts started coming out saying, maybe this raises questions about the path of manufacturing. It raises broader questions about its progress, etc.

2:50balance sheet. Exactly. Exactly. So I think at one point it was up six and a half percent, at least pre-market. And what what signified here is that the board has a search committee. I don't think they knew this was coming. And so you can say that's good news or bad news. I'll take a glass half full just because we we we know change was needed at Intel, abrupt change. And in fact, I think that the path forward here could be one where they find a manufacturing partner. Taiwan Semi has always been that path. Now I realize there's politics around that. But I do think getting in partnership to eventually enable TSMC wafers to work with the Intel fabs is part of at least a story where they're relevant now, even while all the exciting, sexy stuff, I think, is out of the way.

3:33So, yeah, I think you have to like the news. There's no quick fix. You know, it's so interesting. This is one of the biggest years in terms of CEO and C-suite changes that we've seen for the S &P 500. I feel like this is telling us that we're moving into a stock pickers market. because, you know, a year ago, it didn't matter who was at the helm. It was all macro and rate risk. But I think this is a really interesting sign that it's becoming much more idiosyncratic. Yeah, and I think to Tim's point about who benefits from this, I mean, there's going to be a whole heck of a lot of uncertainty for a while.

4:05We talked about this summer, there was a rumor about Qualcomm looking to possibly buy Intel. And the fact that Qualcomm actually commented on it at the time, they said they're not going to consider anything until after the election. And so here you are. I mean, there's probably not a lot of great history seeing a CEO ousted, having a board potentially shaking up and seeing a kind of merger or an acquisition of this sort of size. But I think to Tim's point about who benefits, you know, so Taiwan Semi was up 5 percent. I thought it was kind of curious why AMAT. So they're a provider of machines that obviously make the chips.

4:37That was also up 5 percent, kind of filled in the gap. So there must be some angle there. But, you know, we talk about it all the time. And Sabita just said it's stock pickers market. It's like you don't really want to be buying value stocks in a rip-roaring bull market like this. They just don't work particularly well. At some point, you're starting to see a lot of crap starting to rally as the market is kind of broadening out a little bit. And if this thing can't get out of its own way, it has that huge gap from earnings a couple months ago. And just assume whoever takes over, they're going to do exactly what Gelsinger did in early 2021.

5:06They had a plan? No, no. You're going to clear the decks. You're going to guide down so you can make it. So there's probably more gaps to be had in this one. So let's say we're trying to find the value here. What is the path, in your view? I mean, if they shed manufacturing, if they don't go down that very, very costly plan to go into manufacturing and build all sorts of – I mean, what is left of Intel? Or maybe that is the way to plow forward with that. I think it's to plow forward with that. And I think it's also to say, hey, you know, we've been behind the curve in obviously semiconductors that are the growth area.

5:36We're clearly – they're data businesses. I mean, that clearly has been a drag. But I do think there's opportunity. And if you look at, again, we've mentioned this, it didn't work out. But in terms of Homeland Security plays and the importance of Intel in the United States, I mean, there's an argument to be made. And by the way, there were a lot of old tech companies over the last five or six years that were left for dead. IBM being one, Oracle being another, that seemingly found their way out of nowhere. I think Intel can be one of those companies. Building foundry, as I think I'll say, is costly and it's going to take some time.

6:06So you get the sense that there's some need to have more financial stability in the short term. And that means there's going to be asset sales. There's going to be there are going to be partnerships and there's going to be a lot of government help. So I think the story remains somewhat murky here. And I think really it entails existential existence. You know, is if this was a Jean Paul Sartre class school, you know, we would all be questioning who they think, well, this is what we do once in a while. Anyway, well, the last thing I'll just say is we've heard this again and again over the last month or so.

6:36since earnings season really got going is that the PC business is really bad. You know what I mean? Even the smartphone business is not particularly great. They don't have a lot of exposure there. But the PC stuff, they do. And so to me, if you don't have a chip, and AMD has shown us this, if you don't have something that's competitive with AMD and generative AI, you're kind of nowhere. And if that other business that you're relying on to keep you above the fold is not doing particularly well, there's a breakdown right there. It's not a great place to be. All right. For more, let's bring in Chris Rowland of Susquehanna.

7:05Chris, what's your take? Nick, what is Intel's path forward? Is this a value stock? It's certainly not a growth stock. So I believe that they had some sort of a setback here. It could be guidance for the quarter. It more likely, though, is a setback on their five nodes in four years. That was Pat's plan. And perhaps even 18A, more specifically, their next big node that may have slipped here. And this puts everything kind of into jeopardy. This does not seem like this was something that was planned. It seemed a little bit more sudden. I think Pat was like ride or die Intel. He was ride or die American manufacturing.

7:51And so my guess is that something slipped here. It could have been in the roadmap. And this puts kind of the whole PAP plan in jeopardy. So you mentioned the quarter and could it be because the quarter was bad, the current quarter, I'm assuming. I mean, the August quarter was horrendous. And so for you to say that the current quarter is something went wrong, that means it's horribly wrong, considering in that August quarter, they cut their guidance for the year. They cut their workforce by 15 percent. They suspended the dividend. I mean, you name it, it was terrible news that day. Yeah, it was an awful update.

8:31And like I said, Pat may be leaving because of the December guidance. I do think, however, it's more likely about manufacturing, more likely about that roadmap, and 18A perhaps slipping as well. This was his thing, five nodes, four years. And so if That doesn't work. He doesn't work. Intel's plan of becoming the next manufacturing American giant. That doesn't work either. I think that's more likely it rather than guidance. So, Chris, it's Tim. Thanks. This gets us then to kind of that question we were getting to earlier about the philosophy. But it really gets back to and I think one of your competitors has a statement out there that they need a technologist to solve technology problems.

9:21And I'm curious if that's what you think, too, and really gets back to who are they? What are they going to be here? Yeah, I think the path forward here, back to Melissa's question, is to break the company into two. And it's to break the product or design part of the company away from manufacturing. Manufacturing is going to be low multiple, high value. You're going to have to inject CapEx. Perhaps you can even sell part of the design slash product business to inject capital into the foundry part of this. But the design part of this, and perhaps the part that Qualcomm is interested in here, is quite valuable.

10:06But for some reason, AMD has a$250 billion market cap and Intel only has$100, even though they still have majority share in both servers and PC over AMD. So I do believe that there is value there, but it's being completely masked by this manufacturing business that is something like a relic of a decade or two past. Yeah, the margin deterioration over the last couple of quarters has been dramatic. I mean, this last, Mel just said it was a disaster. I mean, is there anything in the short term they can do to focus on things at a higher margin that might be able to move the needle that might get people excited about the name again?

10:49You know, truthfully, not really. So they have actually moved to TSM and these products, Lunar Lake for PC in particular, are benchmarking really well. And ironically, it's not their own silicon. So that is weighing on gross margin. The thing they're trying to do is bring their own products into their own product, their own manufacturing into their own products to increase gross margin. But that's not expected until late 2025. So there's not a lot that they can do right now. And so, you know, the die has kind of been cast here. Ali Ayakta-Est, the die has been cast. Very nice. Whoa, look at you.

11:35I keep going here. Whoa. All right, Chris. So$24 a share approximately as we're Intel trading now. If you are right and they break up the company, should you be a shareholder right now thinking that value will be unlocked? Or is this just a no touch completely? I don't know. We're going to have to do some deep work on breaking this apart. It really matters how much cash needs to be injected into the manufacturing operations. Are they going to shut down, for example, the Ohio construction that's underway right now? There's a big mud pit. Are they going to shut that down? How much capital do they need?

12:19What are they ultimately going to do with that? But my guess is if they can cleave these off successfully, the two parts are probably worth more than 30 bucks in aggregate. But we need to do some deeper work. And there are some big questions that need to be answered if we were to do that. Chris, great to speak with you. Thank you. Thank you, guys. Chris Rolland of Susquehanna. A lot of hair on this story. Do you want to touch this one? So to Guy's point about margins. I mean, you know, back in 2019, this is a company that did$22 billion in net income. OK, and they had 67 percent gross margins.

12:55They're expected to have 35 percent gross margins this year. And the company swung to a loss. I don't know how you come back for that. It really is a sum of the parts story. They're not going to be able to kind of compete from a technology standpoint with the places that they need to do with this sort of financial performance. So I hate to be so dire about it. I think it does get sold for parts. You're still a shareholder. I am. And, you know, I'm a much smaller shareholder, not just through drawdown. But, you know, I don't it's been very difficult because when you asked about the value dynamic, there's no value in terms of the earnings multiple.

13:26There's no value here at all. I mean, this stock isn't cheap. I think it gets back to a couple of things. I think the board is in a much more independent position. Savita is bringing up a great point about think about the year of 2024 and what it's meant for CEOs getting kicked out of the door. And we're talking about high profile CEOs. Enough is enough. There's a couple also who look like they're about to go. I won't name companies, but they're hanging in there. I think for the semiconductor space, it will get back to stock picking. And I think if you look at the semi space since six months is actually down one and a half percent to the S &P's, you know, whatever it's doing.

13:59It's underperformed retail by 1500 basis points. So, you know, that's a dynamic here. And if you look at AMD relative to NVIDIA, that's a place where I think that that pair looks interesting, even though you don't have that kind of growth. I like MD. You know, I'm just going to give you a quant stat. So divestitures, you kind of want to own them. The statistics show that companies that break up or spin out generally outperform. Over what time period? So we looked at, I think it was like a six-month time frame. So maybe you have to be patient, but it's usually a good idea. Companies don't do it unless they have to.

14:35Yeah, but Hewlett was a bit of a disaster. I mean, like, you know, I think in tech it's a kind of hard thing. Right. guy? Franz Kafka wrote The Metamorphosis. Gregor Sampson? Yes. A literary show. Gregor Sampson is sort of the Pat Gelsinger. If you treat somebody like a bug, they turn into a bug. And I think that's what we're seeing here. So who is the bug in this metaphor? Pat Gelsinger is the bug? He's the Gregor Sampson. He never really busted out of his cocoon. They had him in the basement. They threw an apple. It lodged in his back. With all that said, I mean, I do think if you're looking for a trade in 2025, I think Intel could be one of those ones that surprise people to the upside.

15:17All right. Well, tech spending is one of the big reasons why our guest trader, Savita Subramanian, is bullish on stocks. She's got a 66.66 price target on the S &P 500 for next year, which implies a 10 % gain from today's close. So what do we know about you? You like stock picking here. That's how we'll get there. I like stock picking, but I think even the index, it's hard to say there's more downside risk than upside risk. And here's my call. I know that everybody is bullish and it feels like sentiment has hit these really high levels where you want to sell. But the truth is there is euphoria in one specific pocket of the market, and that is mega cap tech.

15:55Outside of that, there's not a lot of bulls on your average company. The other factor that I think is so interesting is if you look at the spread between the average S &P company and the index itself, massive difference. So, you know, again, I'll say it again, and we all know this, but the index is very top heavy. But the average company in the index is actually trading at relatively healthy multiples. I think, you know, going back to this manufacturing theme, I think this could be the beginnings of a stronger environment for manufacturing. Because when you look at, you know, ground that's been broken around reshoring or building out grid and infrastructure, we're in an environment where this is a long tailed theme.

16:37Most tech companies have told us that the key risk around AI is underinvesting. So they basically told us they're going to spend a lot of money over the next several years on not just tech, but, you know, power, infrastructure, metals, machinery. That huge pickup, I think, in terms of manufacturing dollars spend. As a strategist, do you always believe what companies are going to tell you about what they need to do going forward? And I mean that sincerely, because, again, you have to chronically disbelieve what they're saying. Because the upside to CapEx spends as a percentage basis keeps going lower.

17:14I know the numbers, the absolute numbers are going higher. That's the one thing I would kind of worry about, because if the rest of the sectors that have not been infected or not euphoric, as you just mentioned, don't spend, if they don't see the return on investment, then the CapEx is going to come down pretty quickly. Well, I don't necessarily think so. In fact, I think what we're seeing now is just the beginnings of an acceleration in CapEx. And here's why. The U.S. has underinvested in its own infrastructure for more than 10 years, right? Stuff is old in the U.S. and it's starting to break.

17:45Meanwhile, since 2015, we've moved all this manufacturing capability from other parts of the world to the U.S. And we're starting to see municipalities fray, right? I mean, if you look at the accident rate in certain municipalities, it's really jumped up just over the last couple of years because of all this extra activity. So I think that there's an almost mandatory infrastructure, rebuild, get efficient. I mean, look at all the equipment that companies are using. It's not efficient. If they replace it, they'll become that much more efficient. And that involves spending money on old economy, you know, machinery and construction and commodities.

18:24And, you know, so I think that this is really an environment where we all poo-poo the idea that the U.S. could ever see a real spending cycle. But we're there. All the ducks are in a row. We're not able to move to other parts of the globe anymore. In fact, we're moving back to the U.S. More activity here, more activity up and down the North America corridor from Canada to Mexico. So I think that all of this is creating this perfect storm for cyclicals to outperform in a really material way over the next several years. Meanwhile, conversations with clients are all about tariffs throwing the world into a global recession.

19:03We're still in this environment where folks are looking at the glass as almost empty. Meanwhile, I feel like it could runneth over. I'm going to use some fancified terms here, too. But I think that we're at a point where the U.S. economy could be really surprisingly strong, which means inflation, which means less Fed cuts. But it's also positive. Coming up, Thanksgiving in the books. But the holiday spirit is just getting started, where consumers are grabbing their gifts as retail posts its best November in years. That is next. And it wasn't just holiday shopping this weekend. Moviegoers piling into theaters and smashing records just how far Moana 2 will go and how wicked is defying gravity.

19:45All that when Fast Money returns back in two. This is Fast Money with Melissa Lee right here on CNBC.

20:02Welcome back to Fast Money. It's Cyber Monday and the holiday shopping season is in full swing. Tim, you can start shopping now. Shop early, Tim. Don't wait till the 24th. I've got a couple things on the books. All right. Retail names have been getting in the spirit. The XRT outperforming the S &P today and over the last month, nearly doubling the benchmark's return since the start of November. And take a look at some of today's big winners. Victoria's Secret, Gap, Lululemon, even Dollar Tree seeing some outsized gains. Can the shopping spree continue through year end? Guy, what do you think? For the stocks, yes.

20:32I mean, for the consumer, we always say never underestimate you as consumers. They will always spend. But now you've got to figure out what's run too much and what is sold off that gives you an opportunity. We actually talked about it when they reported. I thought the Nordstrom's quarter was fine. I thought the guidance was sandbagging. That's what scared people. We thought it could trade lower, probably trade a little lower than I thought. But here we are now back above 23. So a name like Nordstrom's to me, you can make a pretty compelling argument for. Gap might have gotten a little bit ahead of itself here.

21:00Macy's, maybe it has some room, but you're looking for the names that have gotten beaten up, in my opinion, unjustifiably. Yeah, Lulu, Five Below. They've got earnings this week. Yeah, I think you're going to see probably a surprise in the dollar store space, the Five Belows. And they've actually traded okay. Some choppiness, very China-dependent, a lot of tariff headlines. That's determining. Lulu's had a phenomenal run. It's hard for me to hear that Lulu is going to tell you that margins are getting better and that the competitive landscape is getting easier. So I'd be careful on that one. I certainly haven't changed my tune.

21:32Something like a Home Depot. You know, we got an update from both they and Lowe's and their move to all time highs has not been becoming coming from lower interest rates or heat lock loans or dynamics. It's been coming from better margins, even though they've been very cautious on the next couple of quarters. That to me is a setup. I think it goes higher. You know, it's interesting. You know, we talk about e-commerce. We've been talking about it for 25 years, how disruptive it's been. Amazon always runs. I mean, like it always runs into Black Friday, into Cyber Monday. It almost got back up towards those highs.

22:00But another name I think is really interesting is Shopify, which has had tremendous performance this year. It's up 45 percent on the year. They guided up and put up a great quarter just a few weeks ago, huge gap to 52 week highs. And they're talking about GMV, so gross merchandise value, up 22 percent year over year. That's not counting today, Cyber Monday. But that's exactly what it was up last year at this time. So I think that's kind of interesting. Valuation's getting rich. Stock's getting overexposed. If you have any disappointing data over the next week or so, I think some of these stocks could be vulnerable.

22:29All right. There's a lot more Fast Money to come. Here's what's coming up next. It wasn't just turkey leftovers and shopping this Black Friday. Moviegoers following the yellow brick road to a record holiday weekend. The numbers defying gravity. Next. Plus, Fast Money's Obesity Week kicking off with special coverage of the weight loss industry and how leading experts and emerging players are tipping the scales in the space. You're watching Fast Money live from the NASDAQ market site in Times Square. We're back right after this.

23:08Welcome back to Fast Money. The box office is booming this season with Moana 2, Wicked and Gladiator 2 combining for a record holiday weekend, bringing in over$400 million. Julia Warson joins us now to break down the blockbuster numbers. Julia. Well, Melissa, Disney's Moana 2 led a massive box office rebound this weekend with a$221 million domestic box office take, despite lower critics and audience scores than the first movie. Now, Moana 2 had the biggest Thanksgiving opening for a movie ever, the highest ever global weekend for an animated film. And all of this bodes so well for Disney because it has a Lion King prequel, Mufasa, opening on December 20th, and Disney Plus generally gets a boost from sequels driving viewership of an original film.