Leaders Losing Steam… And Former President Trump Digs Into Meta 3/11/24

0:01Live from the Nasdaq market side in the heart of New York City's Times Square this is fast money. Here's what's on tap tonight. Ready to rotate a couple of recent high flyers losing steam today from semis to pharma to Japan and some otherwise beaten down names getting a boost. What does the shift say about where the market is heading? We'll debate that. Plus, an enemy of the people. That's what former President Donald Trump called Facebook this morning. The effect that is having on the social media giant and what it could mean for the future of TikTok here in the U.S. And later, we've got a big trade alert for you.

0:31One of our traders is hitting the buy button on this beaten down bank. We'll get their thoughts on why later on in the show. I'm Melissa Lee, coming to you live from the studio via the Nasdaq. On the desk tonight, Tim Seymour, Karen Fiderman, Dan Nathan, and Guy Adami. We begin with what might be a sign that the air is coming out of what have been some of the year's most popular trades. Lilly and NVIDIA boasting big drops today, outpacing the losses in the broader market. NVIDIA has now fallen nearly 12 percent from the record high hit just Friday morning. Japan's Nikkei also nosediving, falling to its lowest in over two weeks.

1:01Even the red-hot industrials trending lower. Meantime, recent laggards catching a bit of a bid today with both Alphabet and Apple notching gains. So have markets lost faith in this year's high flyers? Is this the start of a rotation, which some might call healthy at this point, Guy? Could be. You know, and Tim has correctly pointed out that as the semis go, the market's going to go. So let's try to drill down there quickly. NVIDIA on Friday, massive reversal. We talked about it on the show. Traded two times ish, two and a half times normal volume, huge rotation lower, $230 billion of market cap taken off in a single day is significant when they're probably only 50 or so companies that big in the first place.

1:41So, yes, technically you have to pay attention. Taiwan Semi, the next biggest holding in the SMH, huge double top. Pull up a chart and you'll see that as clear as day. So that's now close to 32 percent of that ETF. If you believe in technicals and if you believe that Friday was a day, it stands to reason that the SMH is probably going to reverse and look at levels for prior highs of 160 or so. If that's in fact the case, almost by definition, the broader market has to follow. We led with the move in NVIDIA, it being a key reversal on Friday. And this is actually just an extension of what was going on on Friday.

2:17So the slide is continuing. Well, we talked about Friday. I think Carter talked about it. But there, you know, depending on which textbooks you read, this was a textbook reversal. You could say outside reversal. You could say whatever you want to say. If you look at the semis guys referring to from that intraday high on Friday to where were they closed today, down a little over 8 percent. NVIDIA a little bit more, not surprising, Taiwan Semi. I mean, this has been the story. And yet they're still up 28 percent this year. And they've outperformed the S &P by over 20 percent during that time, even in the last it feels like last six weeks.

2:48If you look at the VIX overall, it's been creeping higher. It's still relatively low. You can make an argument. There's still a lot of complacency out there. But if you look at a VIX that only closed up 3 percent today, but we are still at levels that are probably three, you know, three month highs or so. If you look at the dynamics in a place like Japan, you know, there are things afoot in currency land. We've been waiting for the yen to finally strengthen on some level that might be good. It might be a sign of actually inflation and normalizing policy in Japan. It's not great for the exporters.

3:18I still think Japan is a market you want to belong in some market. I'm very much overweight. It's the market I'm overweight and the ETF I'm involved in. So I think you've got a dynamic with Japan that the good stuff has been fantastic, but that I think some of the exporters are concerned on the weaker dollar. Rates have been kind of sideways. Powell was kind of in line last week. We've got a Fed a couple of weeks away. I just think markets needed to catch their breath. And a CPI tomorrow. Right. I actually think that'll be a peg in that if we see a really hot number, then some of the real high flyers will sell down on that.

3:50I actually thought over the weekend I was thinking, wow, NVIDIA could really get crushed today. And it did. I mean, this isn't great for sure, but I think it could have been down a lot more. That wouldn't have been so surprising. So, you know, we have a couple of things point to Oracle tonight. That's probably a little bit good for NVIDIA, for Dell, for the AMD interview with John Ford and Lisa Su talking about PCs. But I do think it'll be an excuse tomorrow for the market either way. Like hot, it'll go down. And cold, I think we'll see some bids. You know, it's funny. There's been a lot of analogs.

4:23We've heard them all about how this period reminds us of, you know, 2000 and really some of the speculative sort of buying we saw there. And we see all the differences about the companies that are kind of leading the way here. And we can go on and on about them. You know, when I listen to Lisa Su just now on the network, I mean, talk about and Guy has said it probably 100 times over the last, you know, five or so years. This is one of the best CEOs that exists on the planet. Like just the sort of soberness when things are really good, the soberness when things are bad, you know, how she's laid out kind of where the company's going, how they fit within their industry, how they're competing, where they are.

4:56You know what I mean? On the edge of some of these new technologies. And so you listen to her and you say to yourself, you know, I kind of like I like that stewardship, stewardship. I also could say the same thing about Jensen Wang. But the problem is that that stock has gained a trillion dollars in market cap in two months. And that gets me back to that bubble conversation. In all of our careers, we've never seen such a thing happen, even for a company that's amazingly profitable, that trades at a reasonable valuation, that is leading all its peers and that sort of thing. And so those sorts of push and pulls are the thing that we're going to see play out in the market right now.

5:28So when you talk about the reversal that we had on Friday, that is an emotional thing. A lot of investors, a lot of traders, they kind of piled on that. And I was surprised that we didn't have more of a follow through today, that we didn't see NVIDIA down 5 % or something like that. So there's still dip buyers in these sorts of names. Taking some of the froth out, no matter how bullish you are for whatever time period, whether it's another week or a year or 10 years, that would be a good thing because we all know this, when you have these sorts of bubbles, again, bubble doesn't mean it's about to pop or a really negative thing.

6:01It's not a great foundation to build an investment thesis on. Just for clarity, is AMD also in a bubble? or is Nvidia in a bubble because of the gain in market cap in the past? Because if you look at a forward PE basis, Nvidia is actually cheaper. Yeah, but to me, bubble really speaks about sentiment. It speaks about risk versus reward. It feels like what you want in the near term versus the long term. And Guy mentioned this. We were on the desk on January 31st in Miami the day that the AMD reported earnings. It was not a great quarter. It was not a great guide. The stock was down. How much has that stock rallied in the last month and a half on the heels of everything else that's been going on in the sector?

6:34So that, to me, speaks of a bubble environment. You own it still, NVIDIA. I do, yeah. Do you think it's bubbly or do you think? It is. It's both. I mean, I do think that this story is real, that, you know, we always talk about is the picks and shovel, and I think that's going to be the case for a while. But to your point, I would be fine with a sell-off. I do think it's healthy. That's why I was sort of surprised that we didn't see a much more aggressive sell-off today. But I also think, you know, among something like Dell, which is a lot cheaper. Now, granted, it doesn't have the margins that NVIDIA does, But I think that's sort of a different way to play it.

7:08And Lisa's comments about PC, you know, the AI PCs, I think is a good one for that. I think about a Nasdaq that's done almost nothing over a month. Right. And if you think about outside of the semis that are in the Nasdaq, but mega cap tech, we spent a lot of time talking about the names that have been the haves and those that have been the have nots. And Apple and Google actually rallied today. So I look at the broader market and I actually, you know, once again, I continue to see banks doing fine. I continue to see retail doing fine. I continue to see industrial setting all time records. We've got UPS coming up.

7:40Let's listen to those earnings. But transports are also making highs. And so the broadening of the market, I think, is is sneaky because a lot of these names were so beaten up. I think they deserved a bounce here. But seeing froth come out of NVIDIA and two days. I mean, like we're still 30 percent above where they were before they reported earnings. We're still above after a 13 percent move where it closed last Tuesday. So, I mean, it's definitely a dynamic where I think we've got a dynamic here that is let's watch this play out. The broader market in a benign inflationary environment where the Fed is, where the margins have proven so far in earnings season, to me is a signal that some of these stocks are going to continue to move higher in the absence of any major change in global geopolitics, which I think probably are some of the biggest concerns out there.

8:28I think the Fed is still a risk, although I think we've de-risked the Fed. So I think there's certainly surprises out there because that's the stuff we don't see. It's always there. But for the stocks that are rallying, the stocks that have underperformed for the previous year, you know, I like the move we've seen. Yeah, I mean, surprisingly, maybe not surprisingly to many, Equal Weight has outperformed broad-based S &P 500 by 200 basis points over the past month. So we have seen it in the past month pick up. The question is, you know, if you're going to pull the money out of the lilies of the world, the invidias of the world, where would you put it?

9:03Yeah, and is it enough to continue to drive? Right. I think I know the answer, but clearly I don't. And where would you put it? Well, I mean, again, I'll say it over and over again. I still think there's a place for energy in this world. I still think some of these mining stocks, some of these material stocks can do well in this environment. But quickly, just to sort of wrap some math around bubbles and where. So AMD trades at 10 times next year's revenues, probably 36 times next year earnings. OK, that's fine. It is expensive on a P.E. By comparison, and this is my problem with NVIDIA, you know, on a P.E.

9:34multiple, it's actually very reasonable, a lot cheaper than AMD. It's the price to revenue price to sales that should scare people because at some point, those 77 percent margins that they're enjoying are going to work their way down, which is going to hurt their earnings, which theoretically should make everything come back down to some normalcy. So trading it close to 20 times revenue historically is probably twice as expensive as it should be. Do we feel like Lilly and Novo, do they also fall into this category of sort of bubble? Yeah, because we're talking about this brave new world. We're talking about the brave new world of an addressable market in weight loss, obesity, drugs, and obviously, most importantly, cutting to the core of diseases that I think have been, you know, there's an enormous impact in terms of what they're doing to society.

10:20Therefore, we're speculating as to what it's going to do. Remember what we were doing to Hershey's and to some of the junk food stuff. Sorry, Hershey's. Let me redo that. Snack food, carbonated soft drinks. The bottom line is when you think about Novo and Lilly and you think about NVIDIA and AMD, you're talking about a world where we're speculating on a brave new world. And I think there's a lot to do with that. I would say the same thing about Lilly. I mean, their margins are extraordinary right now, but I believe there's competition coming. I agree that it's a momentum trade, right? As money is like, you know, coming off the sidelines thinking I've got to get into this.

10:58To the extent that it's cooled now, I think it's the same thing. I don't even know how much people look at the independently different stories of AI and GLP ones, which are totally different stories, but they move together. Is Bitcoin also? Does that fall into this category? I mean, look at the correlations. I mean, this is some of the, like, listen, everyone's crowding into the same stuff. And I think it's interesting that if this kind of spot Bitcoin ETF did not kind of take over the narrative over the last few months or so, I'm not sure Bitcoin, for the reasons that dollars come in a little bit, the Fed's getting closer to ease.

11:30You know, like, fine, those are the reasons why Bitcoin maybe, you know, like rallies. But I thought Michael Saylor on your end, Squawk of Friends, this morning. I thought, yeah, I thought he was probably the most cogent. I've heard an argument about why to own Bitcoin or why you have over the last year. and thinking of it not as digital property, a store of value, which we've talked about. How many times have we talked about that? A hundred times. All the folks who want to come on and talk about it as a currency, well, no one uses it to buy anything. Why would you if it's so scarce, if they keep halving it and all that sort of stuff?

12:00So to me, I think it all fits in the same mania, and I think we are in a mania category. You can make great arguments why there is longer-term value, but in the near term, I think a lot of these things seem a bit crowded and they seem a little bit euphoric. I thought you were going to say what was interesting was the argument he made to invest in MicroStrategy when there are now actual Bitcoin ETFs out there. And his was that they are leveraged because they can borrow at 0.625 % for convertible, which is their most recent offering, and buy Bitcoin and be super leveraged in that way. Well, proxy plays historically were ways to get exposure to Bitcoin and blockchain and whatnot.

12:33I'm not sure why you wouldn't want to own the pure. I guess I look at Bitcoin and gold a little differently. Remember, gold's also breaking out to all-time highs, and it's taken a while for gold to do it. But I think this is about geopolitics. I think it's sniffing out an election cycle. I think it's sniffing out a U.S. government that has a huge deficit. I think rates have upward pressure from that, leaving aside, obviously, the economy. So not the same brush I want to paint it with, but I think there is a lot of fervor out there for speculation. All right. Meantime, Boeing dropping 3 percent on reports that the Justice Department opened a criminal investigation to January's midair blowout.

13:07Also today, roughly 50 passengers aboard a Boeing plane were injured following a strong movement mid-flight, the latest in the string of operational issues involving Boeing jets. The ZOC is now down 26 percent this year. For more on all of this, we're joined by Stiefel Aerospace Analyst Bert Subin. Bert, great to have you with us. Great to have you on. In terms of this new criminal probe, how do you look at the worst-case scenario in terms of the financial cost to Boeing and how long it takes to get resolved? Yeah, I mean, I think if you look at what happened in 2021, which was a$2.5 billion total settlement, which was broken down really as$1.7 billion to customers and then about$500 million to the families of victims from the Max-8 crashes, and then about$244 million in criminal penalties.

13:57And so, you know, what's it going to be this time? Part of the handicap. But the stock was down over 3%, as you mentioned. And that would indicate about a$4 billion move in market cap. And we don't think the net present value of any potential criminal penalty would be that high. So I think what people are really looking at is, you know, what does this do to production? There's obviously been a lot of negative headlines on the Boeing side recently. everyone's been focused on this 38 maxes per month number, which is where they're actually restricted to right now by the FAA. So I think is really what's happening is, you know, you're looking at what happened to some of the United aircraft last week.

14:34You're looking at FAA comments and transportation secretary comments. And it's just sort of piling up to a degree to where I think people are pushing out production expectations more so than the criminal penalty being what's weighing on it. The 2021 agreement that you refer to as a deferred prosecution agreement, in which case in the amount of time they have to sort of be in good behavior. If this falls into the category of violating that period, are they then back on the hook for more criminal prosecutions relating to fatal crashes? I don't think so. I think this will be, you know, centered around the MAX 9.

15:09And interestingly, that DPA was set to expire two days after this accident happened. So it was unfortunate timing for Boeing. But, But, you know, I think, one, this is going to take, you know, a period of time to actually be resolved. So I wouldn't look for anything sort of in the near term. And then, two, it's going to be, you know, increasingly difficult from Boeing's perspective, from our perspective, to actually handicap, you know, how much money they could ultimately owe under criminal penalties, if there are criminal penalties. So, Bert, we're approaching the October lows. Boeing's a company to do$22 billion in a quarter-ish, half of which is commercial air.

15:42I get it. But, you know, we talk about this a lot on this test. Defense is another$7 billion of that. Then they have a global services and support is rounds the entire thing out at these levels. And given the backlog they have, I mean, it seems as if you're getting a lot of this company not for free, but at a significant discount. Can you speak to that? Yeah, I think your thought on. I mean, we look at the market structure and the reality is there's two aircraft producers. There's Boeing and Airbus and there's Comac, but still a ways away from sort of seeing that have, you know, true penetration in this market.

16:13And so what you're seeing is Boeing is not really losing orders. Their backlog after the fourth quarter was the highest it's ever been. And then American placed a pretty tremendous order for max tens last week. And so if you're adding that together, you've got an all-time high backlog, and people are essentially factoring in a risk premium for sort of what could happen next. And I think every day that goes by where something significant has not happened, that'll start to erode. And the way we actually value the company is on a enterprise value to backlog basis, historically around 40 to 40. Right now, sub 33 percent.

16:49Hey, Bert, Tim. So I agree that I'm long bowing. It's been a frustrating roller coaster, really, because after a 50 percent move off that market inflection, we're right back there. But what do you do as an analyst in terms of discount rate? You're not necessarily doing this on DCF, but there are there are dynamics with the stock that certainly affect the multiple. And how would you assess that approach right now versus where we were one year ago for you? Yeah, I mean, that's a good question. I mean, yeah, I think it's very difficult to do a DCF in Boeing. And we don't really look at it that way.

17:20We look at it either on an EV to backlog basis or on a free cash flow multiple basis. Management stood by their target of getting to$10 billion of free cash in the 25 to 6 timeframe. My view is that's probably moving to 26 sort of plus. And I think that's where the market is. But if you look at a company that even in a year as tough as the one we're going through is going to do something near$5 billion of free cash. And then once we start to see production normalized, which is months, a couple quarters away from starting, you should start to see that discount rate that's ultimately baked into it go down.

17:52But yeah, it's certainly gone up. And that's been part of it, not just rates going up, but the risk around Boeing going up. But if you look at their prospects and the market structure and their orders, you know, there's certainly a lot of value to extract if you believe some of these near term headwinds start to fade. Bert, thanks. Bert Subin, Stiefel. Thank you. Guy, it sounds like you think maybe there could be value here. Well, I think the low back in October, if I'm not mistaken, was right around 180, 179 and change. So, listen, they can continue to push this. We had a similar conversation with Apple.

18:24You're not looking for a place to sell the stock now. You're trying to figure out where to buy it. And if it gets down to that 180 level ahead of earnings in April, I think you buy with both hands. It's hard to hear, though, an analyst say it's hard to figure out how much they'll be on the hook for, that you have no idea. And production should restart and return back to normal in a couple of quarters, maybe within this year. But the expectation, I think he has to address that as a risk. But the criminal probe dynamics, I don't think are material. This isn't like a Johnson & Johnson story. This is, I mean, this is at least to this point.

18:53And unless what we're learning about Boeing in terms of product production and quality control is alarming and especially with spirit and with the Alaska Air Journal has a really interesting article today, how that plane sat on the conveyor belt or whatever, wherever planes sit, sat on the line for three weeks before the right team came in to look at it. And obviously that stuff wasn't fixed. What we've learned about the Spirit deal is it's about bringing back in all manufacturing, which has slowly been put off to suppliers over the years. And that's something that needs to continue to change.

19:26But I think it's an opportunity here. It's been frustrating. As I said, it's been a roller coaster ride. But this is not the time to sell. Coming up, Oracle earnings are out. Shares of the software company on the move after reporting results. The details and the numbers out of the quarter next. And Bitcoin notching a new record high, surpassing$72 ,000 for the first time ever. So will crypto just keep climbing? We'll debate that when Fast Money returns. This is Fast Money with Melissa Lee right here on CNBC.

20:02Welcome back to Fast Money. We've got an earnings alert on Oracle, the cloud giant jumping after hours on an EPS beat, even as revenues fell short of estimates. The conference call is underway. Steve Kovacs got the latest. Steve. Yeah, I like what they're hearing so far in that call. Look, mixed results for Oracle's third quarter, but some commentary on their AI plans appear to be what's setting shares higher after hours even before that call started. EPS had beat with the$1.41 adjusted versus expectations of$1.38. Revenue, like you said, very slight miss here,$13.28 billion versus the$13.3 billion expected.

20:32As for those AI comments, CEO Safra Katz saying in the earnings release, there were new cloud infrastructure clients bringing remaining performance obligations soaring 29 % to$80 billion. Katz says that's a record for the company, though less than half of those obligations will come in over the next four quarters. Now, no formal guidance, but Katz's statement says to expect more of those large contracts to come in. Also noting demand exceeds supply for its AI products. Shares now up better than 10 percent, Mel. Thank you, Steve. Demand surpasses supply despite opening data centers very, very rapidly.

21:09So they can't they can't possibly get their hands around it right now. Look, you can make a compelling case on value. The last two quarters have been disasters. Each time the stock, I think, traded, held$100, which is a round number I know, but it also happened to be a support level. Here we are now. So valuation, you can make a case. Cloud revenue grows 25 % year over year. Good for them. Problem is, is the stock now, are you going to chase it at 125? Are you going to wait for it to back and fill, which it typically does? As you remember, Oracle was one of the O's or the only O in my hope trade back in the day.

21:42and I still like the name. How many years back was that? Three. At least three. I feel like it was during the pandemic because I feel like in the pandemic you had hope. I prefer his clam pandemic. Don't chase here, I don't think. It seems kind of similar commentary to what we heard from Dell after the call. So Dell was not trading up that much, right, on the actual result that they printed and then when they started talking a little bit it started like, you know, going up 5 % at a clip or something like that. So I think a lot of these CEOs probably know, especially if the current environment wasn't as good as one might expect.

22:18Like, there's plenty of things you can see. And they are seeing this demand. I'm sure they are. Whether it's going to materialize, you know, in six months from now or 12 months from now is another story. But to Guy's point on a valuation basis and expectations, I think, was the key one, how low they were coming in the print. But, again, I wouldn't be chasing it either. I mean, that remaining performance obligation, that jump and the guide well, well, well above the street, that's huge. So, I mean, this to up$10 doesn't seem that crazy to me, given what a giant number this is. Now, you probably think, OK, it's double ordering, that kind of thing, which it might be.