Mini Correction or Fundamental Rethinking?… And Bitcoin Bounces Back After Plunge 2/6/26

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0:51The key to being rich is knowing what counts. Let's find your rich together. Edward Jones, member SIPC. Life in the Nasdaq market is in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. Believe the bouts, U.S. markets surging after a rough week. But is this really a sign the sell-off is over or is there more pain to come? We'll debate that. Plus, staples close at new highs. Atlanta stock hits the skids. Bitcoin mounts a comeback after nearly dropping below a key level. And we're counting down to kickoff. How the prediction markets are gearing up for a historic amount of betting on Sunday's big game.

1:27Who could be the winners and losers off the field? I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Bono and Eisen, C. Grasso, City Head of Equity Trading Strategy, Stuart Kaiser and Tim Seymour. He's on a train somewhere. He'll be here shortly, remotely. We will start with a major market rebound to close out the week. Stocks rallying after yesterday's sell-off with the Dow surging more than 1 ,200 points and closing above the 50 ,000 level for the first time ever. The S &P 500 and Nasdaq both jumping 2 percent. The small cap, Russell, leading the pack up 3.5 percent.

1:59Some of yesterday's hardest hit areas coming back with a vengeance today. investors scooping up software and semi-stocks, NVIDIA, Broadcom, Oracle and Palantir notching big gains. Crypto also getting a reprieve, Bitcoin shooting back towards 70k after nearly dropping below$60 ,000 overnight, its lowest level since October 2024. Strategy, Robinhood, Coinbase, all up double digits. But are these big moves? They beg the question here, where do we stand right now after all the S &P was down for the week still? The tech-heavy Nasdaq was down 2%, Software stocks losing nearly 9 % since Monday. So was this a mini correction?

2:35Was this a fundamental rethinking of market leadership? I don't know. Stuart, what do you think? Look, I think there's something we've sort of been in the process of for the last three months or so, kind of rotating out of growth into cyclicals and value, maybe fading some of the MAG7 leadership. I think what changed, frankly, is instead of that being a nice, steady trend, it accelerated. The volatility hit people, and I think it definitely caught folks by surprise. guys, the reaction to MetaGoogle and Microsoft earnings, I think also, you know, was attention grabbing, you know, just because of the absolute size of the CapEx spend.

3:07I think what maybe happened a little bit later in the week was people said, wait a second, I don't like them spending 200 billion. I sure like the stocks that they're spending 200 billion on, though. And I think we kind of saw that play out as the week went on a bit. Yeah. Yeah. I mean, we went when you look at the patterns, you always try to as a trader, you like to see where the pattern is and where it's going. So we went from AI to memory to questioning valuation to replacement in software. And then when you look at the replacement in software, it was indiscriminate selling. They're going to replace everything now.

3:40Every software company is going to be replaced. And now you're going to see them sift through the carcasses. When you look at a service now that was dramatically hit, a sales for. Off a good quarter, by the way. Off a good quarter. So we always say when stocks don't go up off a good quarter, that tells you something. When they don't go down off terrible news, it tells you something. So I think it's a rehashing. It's sifting right now with the overall market. I think it was maybe conflated with crypto. So you have crypto acting like a risk asset. And crypto, when you look at crypto and the beating that it's taken, but then you compare it to some of the software stocks, some of the software stocks are more down than crypto.

4:25So is it a risk off? Is it geopolitical? Is it really about replacement? Is it about overspend? But Stuart just talked about it, right? You have operating cash flow up around 20%. You have free cash flow negative. And you have CapEx up 60%. These are things that bull markets, long in the tooth bull markets, start to question, and that's what we saw this week. For software specifically, Bonoan, did you think that the bounce today was convincing? It was very heavy volume on the IGV, but it was still a 2-plus percent bounce. Do you think we're clear, or do you think that there's more sort of downside pressure here?

5:03I think there's more downside pressure. I think this is impulse buying, kind of the buy-the-dip nature that we've been rewarded for time and time again over the last couple of years. And frankly, I think, you know, some of the volatility that we saw both on the way up and way down encouraged people. This was not, to Stu's point earlier, when we saw the rotation, it was a bit more of an orderly redistribution of allocation. The sell-offs were intact, but you could see like an orderly step down and to the right. This felt like the beginning of capitulation. And then when you saw the VIX, you mentioned this earlier, when you saw that VIX collapse five, six points, it seemed like people had just forgotten and put it so quickly in their rear view mirror.

5:45It seemed like this acceleration to the downside was a confirmation that people needed to start to step in. But I don't think that's likely the short term bottom. For one, as Steve pointed out, there's still a lot of sorting out to do in terms of what the implications are for software. where I think people got things wrong and why they stepped in is that you cannot have this reacceleration of AI CapEx spend and not have the AI story and simultaneously have AI disrupting all the software. Part of that story has got to give. So either AI is not going to be as disruptive and the AI CapEx spin is not justified, or AI is going to be disruptive and so transformative that these CapEx numbers are going to be justified over the long run.

6:34I agree. I mean, software should have been a hedge, in theory, to the AI trade, right? AI is successful, kills software, or AI is not successful and software lives. I mean, to Bono's point, having both be true is sort of hard to justify. And yet that's what we saw today, today and this week. And the selling immediately, like when Claude was released its tools for the legal profession, we saw those stocks just get slammed immediately. You know, Thomson Reuters faxed it. They got slammed. I mean, it was quite a reaction, a quick reaction. Yeah, I think, you know, if you were assuming that there was a existential risk to software from AI, for instance, I think those models are in the week said, well, this actually might not be a 10 year process.

7:16It might be a three year process. I need to get out of all of this stuff collectively. And then to Bono and Winsdy's point, you know, as the dust settles, they say, well, actually, I don't need to get out of all of it. Maybe I need to get out of half a dozen of these or 12 of these. And I think we did see some kind of recovery buying there. IGV is an interesting one. You know, you get a bid for that. But if you go down the membership list of IGV, you have Microsoft, Palantir, and then a group of stocks that you debate, you know, the survivability of AI in. So, you know, to Bono's point, I think this is like a knee jerk by software.

7:44But if you go stock by stock after two or three, you get a little bit uneasy within that IGV. And when you look at the tape, to your point, when things get hit immediately, AI drives algorithms now in selling the market. So as soon as something prints, it ripples through the market with anything associated to that. So it's kind of a fulfilling cycle that we go through in trading. Having said that, compare this to the April sell-off. How many days did it take to recapture? and you can't really do it because the market as a whole didn't cave the way we did in April. Taper tantrum, the tariff tantrum, right?

8:20But if you look at the stocks that were sold off dramatically, you can make it analogous to April. And it was only nine days. Now, I'm not saying they're going to recoup all of their losses, but it was nine days and we were back above where it was. So be careful. These things are whippy both ways. Right. So we saw a huge decline in Microsoft off the bat. And then we had CapEx, that whole idea of CapEx going to an NVIDIA or a Broadcom. Would you put fresh money today into a Microsoft or a Broadcom? She just gave you a minute. Would you rather? Well, I would rather both, but I'm going to play the game correctly.

9:00I'm going to play the game correctly. At this point in time, I'm going to say a Broadcom because I do think that at some point, Listen, Microsoft is in a downtrend. I love the company, but let's play the game. I'm going to choose Broadcom because I do think inference is closer than people think. I also think that while this acceleration is bullish for NVIDIA, there is going to come a point where these custom chips are the prevailing hardware that's being used. There is no way that these companies are going to continue to spend$200 billion,$185 billion per annum when eventually the switching costs will be lower and they will be able to do this in-house.

9:45It's why you're seeing the press on TPU. It's why you're seeing Amazon look, they're behind the curve, but it's why you're seeing them try to, you know, engineer their own custom chips. And I think the beneficiary of that custom process is Broadcom. I guess the notion is, would you buy the software sell-off or do you buy the picks and shovels trade, which seem to be affirmed by the raised CapEx numbers? I mean, I would definitely be, you know, to Bono's point, a buyer of the recipients of that spending as opposed to the spending right now, both because that's what the market reaction function is.

10:17And secondarily, like the AI PowerGen theme is just something we've been very bullish on for the last 12 months. Not wanting to walk away from that. I would say about 12 months ago was DeepSeek. And we had a similar kind of shakeout there. So that might also be another way to kind of think about how this might play out. And that was the sell-off in different wrapping, right? DeepSeek was supposed to be cheaper, more efficient. And that day is coming for AI, right? It should be done cheaper and more efficient. Meanwhile, NVIDIA shares jumping more than 8 % today. The biggest percentage gainer on the Dow, CEO Jensen Huang told Halftime that the tech industry's$660 billion CapEx spend is sustainable.

10:53Huang also expects AI is not going to crush software like so many fear right now. We are addressing the largest software opportunity in history. For the very first time, software is not just a tool. A tool is like Excel. Now software uses tools. So these AIs use Excel. And so I think the opportunity for this new era of software is incredible. Let's bring in Fast Money friend Gene Munster for Reaction. He's managing partner at Deepwater asset management. Gene, always great to get your take on things. Do you agree with that, that AI agents are using software? We're not thinking about this in the right way.

11:36I've got a ton of respect for Jensen, and I think that I have a little different view. Let's just play it forward, that in fact, we are in a new era of software where these agents are using software, agents using things like Excel. If that is in fact the case, those agents are not going to have full software suites, a typical Salesforce suite. There's different layers of it, but call it$150,$200 a month. That's just simply not going to happen. And so, Melissa, from my perspective, I think that the key here is less about these software companies being left behind. Ultimately, they're going to push hard to take their domain expertise and integrate with APIs with these bots.

12:16That's going to happen. They'll get ahead of it. They understand. Of course, Sundar talked about this very robust comment about token usage from software companies in the December quarter. So they're moving quickly, but ultimately it comes down to how disruptive is this going to be at Bowman? I appreciate your comments earlier just about, I mean, that's one of the roots of it here. So Melissa, my sense is that we're going to have seat loss. I think that these software companies will trade dollars for dimes. A lot of them, the ones that are seat based, usage based will do fine, but seat-based software companies are going to be challenged.

12:50Not to say we're going to get a bounce in the next three to six months in the software names, but if you think three years out, this headwind is not going to go away for these companies. I want to focus on Microsoft for just a second, Gene, because Microsoft is one of these companies increasing CapEx, but also feels the threat of AI to the software story. And so when you think about 365 and how many seats it has, 400 million or so. I don't know, 450 is the number. So, how do you think about that in the future? I mean, it's spending in AI, but it's also fueling sort of this existential risk narrative to its own business.

13:30Yeah, they're kind of hedging at the same point. I think, of course, Azure in a great place. And I think the software side of the business will be somewhat challenged. And so, I think, you know the market's kind of reflecting that and and i would just kind of maybe take the conversation again there's the the kind of the near-term part which is more exciting to talk about the long-term part the center of the bullseye right now is talking about agents that's what jensen talked about today that's what all the buzz is that's what's pressuring the market three years from now what we're going to be talking about is agentic tools and what that means is that essentially that this the structure around the internet effectively is going to be re-engineered it'll work with both humans and with bots and when you think about that something a company like Microsoft that has relied on humans to do the work for so long if you fast forward to this kind of re-engineering in our venture business we see companies that are pushing this forward when you think about that impact then you start to get a sense that Microsoft's in a great place when it comes to Azure.

14:34Usage is going to go up exponentially. But in a tough place, probably when it comes to software, those seats are going to go down. I mean, the cold reality of this is we talk a lot about AI. Most people don't use these tools. The people that use these tools have a strong conviction, look at the mega caps, how transformative this is going to be. It's going to impact, unfortunately, knowledge work, and Microsoft has exposure to that. So, Gene, when you look down, I like how you did the current and then three years out. So are you looking down the food chain, so to speak? Are you looking for smaller tech companies or are we still going to be talking about three of the seven mag seven names three years from now?

15:17So I think some of the two companies that are to answer your question, I think there would be a fracture in that. I'll say two companies that are in a great place. What we've learned about Claude and Claude bot specifically, or it's had like three different name changes in the past week here, this idea of personalized AI, this is the stuff, warning, don't try it unless you're okay with some security breaches. But ultimately is that concept of what they're doing on personalized AI, having these bots work on your behalf, like Google and Apple in an incredible place to, they're probably in the best place.

15:49And so, Steve, I think that we're going to see outperformance with those companies that capitalize on this personally. And I think we're going to see a lot of these, some of these smaller companies that people haven't heard of, become more top of mind as we think about kind of reengineering the Internet, essentially, to be bot friendly. Gene, great to get your take. Thank you so much. Thank you. Gene Von Sturr, Deepwater Asset Management. This goes to your point, Stu, in terms of taking a look at the IGV and the components. You've got the big ones, and then you've got the other ones that you don't know where they stand in this whole AI landscape.

16:23Yeah, look, I think one of the questions I'd have for Gene as well is how much of an advantage do, let's say, a Microsoft and a Google who are already embedded in large corporate enterprises have over kind of the smaller startups that are trying to break in there? Because if you have access to a Citibank, for instance, where we have hundreds and hundreds of AI products and your machines are learning and your support staff is learning from that, how much of a head start does that give you? Yeah, I think Gene makes a great point in terms of seat-based versus usage-based. I mean, that is a transition.

16:53To its point, I do think, and the reason why I like Microsoft as well, is I do think they have taken steps to insulate themselves to an extent and can't afford to take the hit on the software side. What really is concerning, and we're talking about these other names as if they're a monolith, but essentially like these horizontal platforms that don't really have an AI offering, right, where they're not deeply embedded within your workflow. I mean, we're talking about a Microsoft, and I know you mentioned Salesforce earlier, and I think that of the people that fit into that particular group, they are the largest and probably the most well-insulated.

17:27But I do question their offering. I mean, I think that's a tough situation. situation. Like, they are really going to have to show how, one, AI is creating internal cost reductions within their own operating leverage, and then what is the real offering there? Because aside from a CRM, I don't know how deeply embedded that really is into a workflow, and I'm not sure how real heavy the switching costs are there. Meanwhile, HIMS and HERS shares sharply lower after hours. The FDA saying it intends to take action against non-FDA approved compounded GLP-1 drugs, specifically mentioning HIMSS. The FDA will also take steps to combat deceptive direct to consumer advertising for the drugs.

18:12Novo probably doesn't have much by the way of after hours trading, especially on a Friday evening. But we did see those shares earlier this week really get hurt on this notion that there's going to be a copycat oral on the market out there because they saw last year the impact on revenues. They had to take their revenue guidance down a couple of times at least last year on the back of compounded injections. Yeah. And Novo seems to be getting it from every angle, whether it's falling behind or just chosen as a second best to Lilly. But hims hers stock has been just getting butchered in the marketplace.

18:48And when you take that out of the framework and you look towards the patent cliff that's coming up, the one with the least amount of exposure, negative exposure to the patent cliff is actually Nova. It's less than 20 % of revenue. Except semaglutide, which is loss of excess of these. Exactly. But as a whole, Lilly has above 30 % and Merck has closer to 40%, 50%. By the way, that's an after-hours chart for Nova. So we are seeing a pop here, 5.6%. We'll continue to monitor this story as we get some more. Coming up, sneaky staples, the group hitting a fresh record high amid this week's wild trading.

19:22Should the pantry be in your portfolio? Plus, fans betting on way more than who will win the trophy at Sunday's Super Bowl game. How the rapid rise in prediction markets is changing the game for the gambling industry. Don't go anywhere. Fast Money is back in two. This is Fast Money with Melissa Lee, right here on CNBC.

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21:15Welcome back to Fast Money. Time for our move of the day. There were a lot of them out there today, But check out the XLP Consumer Staples ETF hitting a fresh record high today, notching a more than 5 percent gain on the week, making it the best performing sector in the S &P. Among the standouts today, French fry maker Lamb Weston, Target and Dollar Tree. Walmart and Coca-Cola, meantime, hitting new records. I think Coca-Cola back to its levels when it IPO'd in 1919. We're talking about seat valuations at this point. I mean, I was looking at Coke. The forward PE is like 26. Meta's forward PE is 22.

21:50So where are we on this trade, do you think? I'll be honest. The flows that we've seen through the desk the last couple of days have been hedging and fading the move in staples. Doesn't mean it's going to work, but that's the flows we've seen. I think the story here, frankly, is if you're selling winners to buy losers or you're selling growth to buy value, you are buying a lot of staples. So I do think a lot of this rotation we're seeing is actually benefited staples in a way. And then secondly, the tax refund story is also potentially incrementally beneficial for staples as well. So you do have sort of a growth story that you can tell alongside the positioning.

22:23But a lot of the macro folks we talked to were kind of frustrated because Staples is not typically a cyclical, but it's getting kind of rallied with them. So it's a convenient thing to fade. I mean, I think the rotation probably has its days numbered only because particularly in Staples, you're not going to get the same type of margin expansion that you will. I mean, we're not even talking about high flying growth, but just tech or information. I mean, like you're talking about probably the most benign or one of the most benign pockets of the market. And I think that really speaks to the story of investor frustration and anxiety around the volatility that we're experiencing right now.

23:00Let's not forget that, you know, we haven't talked about it, but the metals trade, both precious and industrial metals, there's been no place to hide. Right. And even if you want to talk about health care, you look at the moves that are in like your lilies and your novos. Where do you go to kind of try to batten down the hatch and preserve capital? And I think that's the engine that Staples are. But in terms of that rotation continuing to have legs and new money continuing to flow in, I just don't think I think there's a limit to that. When you look at it on chart and if you pull back for the last couple of years and maybe we could put that up again, pull back to 2023.

23:34That was the real move in Staples. You had mid-year 2023 ratchet up aggressively to 2024. And then for two years, it played around with$5 increments up and down. So it's really done nothing for the last two years. So I think it can go higher. And when you look at a yield versus having a 40 % drawdown, you don't buy it for yield because the yield could be wiped out in one day. But if you want to sleep at night, maybe you put whatever percentage you had in your crypto, whatever percentage you had in your gold, and you're still up big in both of those, by the way, maybe not crypto anymore, but you're still up in the metals trade.

24:09Take that, put some into staples, and you sleep a little bit better at night. There's a lot more Fast Money to come. Here's what's coming up next. Gearing up for the big game and what could be a major moment for the prediction markets. Just how much is on the line? How high are the stakes for all the players? Plus, Bitcoin bouncing back. The crypto testing the 60K mark, but seeming to find its footing. Is the token ready to rally from here, or is there more damage to be done? Next, you're watching Fast Money, live from the NASDAQ MarketSite in Times Square. We're back right after this.