Nvidia Still A Buy?... And Boeing’s Latest Black Eye 5/23/24

0:02Live from the Nasdaq Market Sight in the heart of New York City's Times Square. This is Fast gold shares tumbling as the struggling aerospace giant says cash flow is going to be even worse than expected this year. Is there anything that can get the company back on track? We'll talk to one bull who still thinks there's upside to be had. And later, Elf Beauty Sock gets a makeover, Ticketmaster forced to face the music, and all the headlines out of the ASCO abstracts moving healthcare stocks. I'm Melissa Lee. Come to you live from Studio B at the NASDAQ. I'm the desk tonight. Tim Seymour, Karen Feynman, Steve Grasso, and Julie Beal.

0:45We start off with that big market divide, the Dow dropping more than 600 points for its worst day. In more than a year, the S &P 500 and Nasdaq pulling back after hitting record levels early in the session. That even adds, Nvidia soared more than 9 % on the back of an earnings report that few could find fault with. So why weren't the strong numbers from the third biggest stock in the U.S. enough to boost the rest of the market? Maybe ironically, even stronger numbers on the economy. A better than An expected read on PMI sent probabilities of September rate cut from nearly 58 percent yesterday to about even money right now.

1:19So our markets now all about the Fed once again. Tim, what happened today? I think the Fed is the most important dynamic in the market and will always be existentially. But I do think you have a case here where that PMI, that composite PMI, the services component, 54.8. Last number was around 51. We were actually starting to see the services weaken a bit. This was a very solid number for, as we all know, the biggest part of the U.S. economy, the part of the U.S. economy that also is very inflationary still. We've seen services inflation, whether it's been measurement in PCE and whatnot, come through on the high side.

1:53You also had a jobless claims number. I realize this is a very volatile series, but we were getting, if you were looking for a little weakness out of the labor markets, not there. You have jobless claims that are coming back in. You have initial claims that are pretty much sideways. You had a Fed yesterday. You had Fed minutes this week. There was nowhere in there did we hear we heard data dependent, data dependent. Well, right now, again, depending on how you looked at Fed fund futures yesterday, today, things got tighter. No question. Yeah. Karen. But yesterday, though, they did. You know, there was this higher for longer rhetoric.

2:23And I know people sort of dismissed it as somewhat dated, sort of like a 13F, where by the time it comes out, maybe it's not relevant anymore. But so this I don't know. It shouldn't be a surprise, really. So I feel like what happened in the market today, I mean, you had Boeing, which some idiosyncratic things that to me seemed more idiosyncratic than pervasive in the market. So you did that. But ultimately, it was just too weighty at the end of the day to took everything down other than a couple of things. Right. I know that you're watching the outside reversal that happened today with the S &P.

2:57Well, I think we're going to hit the 200 day moving average. So that's at 47.53-ish. It's a rising 200-day moving average. But when you look at what's going on right now, you have the Fed, as we kicked off the show, how many times did we say which is the most important thing? Now we know it today, right? But I also think that it's a day-by-day basis where you can have a sell-the-news event where everyone was waiting for NVIDIA. We got it. Okay, what's next? The Fed has been talking forever. They get blacked out in nine days or so. Buybacks get blacked out in a month and a half or a month or so, middle of June, basically.

3:37So I think you can weave that needle pretty perfectly to a sell-off late June where the bottom sort of falls out. Not forever, but a quick dip and then a quick bounce back into year end. Julie, were you surprised by this action? I mean, NVIDIA basically reinforced the whole AI narrative that has lifted the market so far this year. It's underscored and reinforced the notion that all these hyperscalers like the Microsoft, the biggest market caps in the world, are spending and that AI story is, in fact, intact. What happened today, in your view? It's a little surprising, I'll be honest. I mean, not only were the news out of NVIDIA good, but it also is seeing a broadening out.

4:16I had been really concerned that there was a lot of customer concentration at NVIDIA and that if any of these guys started to pull back, it would have meaningful results on their financials. But, you know, that wasn't the case. they're actually seeing a broadening out, which is really positive overall. But I think at the end of the day, with these hotter than expected prints and everyone reviewing what the Fed minutes were yesterday, a lot of the language was around, well, we need to see kind of three or four good prints before we want to really cut rates. And so as better prints come out, it just kind of keeps pushing things out and makes it harder to really feel confident that rate cuts are on the horizon.

4:52I mean, if anybody made a bear case for NVIDIA, I mean, all of those points were addressed in yesterday's print, right? Every single one, from the broadening to the potential air pocket with the transition to the Blackwell later this year. Which was going to happen to the Blackwell coming on earlier. He said, we're going to make a lot of money from Blackwell this year. And so considering how high expectations were, NVIDIA ended up not being a buy the rumor, sell the news. Yeah. In fact, I mean, even on a very bad day, it was up, I don't know, 7.5%, which is pretty impressive considering where it had been going in.

5:25But that just narrowing at the very top of, you know, Dell, I guess, at one point was only up like two bucks. Maybe it closed up a little higher. But this was just so strong, though, for NVIDIA that it didn't matter what else went on. However, for the rest of the market, it really did. Everything started to get hit. Industrials, banks, across the board. What they told us in terms of Blackwell, what they told us in terms of their core business, the expansion. I mean, doesn't this reinforce CapEx cycle for mega cap tech? Doesn't this reinforce a lot of the broader economic arguments that we know NVIDIA is more than that?

6:00But it's fascinating. And I thought this was the kind of that relief to buy. You can do the math. I mean, S &P was probably down 120 basis points if you remove NVIDIA today. You know, 5 % of the S &P, up 10%. That's pretty simple math. Steve, I actually I'm kind of impressed by the call to the 200 day because that's that's a that's a correction. I'm just going backwards, looking on the technicals. When we've tested the 50 and then the 100, we don't usually just stop at the 100. We rally a little bit, and then you wind up. So this is part of the last pullback. So it's part of the last pullback.

6:32But if you go back a couple of months, we did the same type of thing, where we tested all the moving averages, then bounced pretty effectively off the 200-day. But I think it's Pollyannish to think that we're just going to rise up to 5 ,700 going to year-round without a substantial pullback. By the way, we respect getting out there on a call. And I actually think that that's interesting because a lot of people, you get NVIDIA out of the way. We've had a good earning season. The Fed is kind of benign. Whatever we're saying about these Fed minutes, they're dated. I also think that NVIDIA, did anyone think it was kind of kooky that they came out with the split now?

7:07Why? We all know that the split doesn't do anything. But right-size splits go up and downside splits, reverse splits go down. but they don't do anything. The right size place doesn't do anything. The economics. The one thing it does do is allow options trading when a$1 ,000 stock is just too big to buy one country. Yeah, I just thought they pulled a lever of something. Why pull it now? Why pull it now versus last time around versus the time before that. You're so skeptical. A thousand stock's never been this expensive. They probably said at a thousand bucks we need to do this and we're pretty much there.

7:42The high of the street target, the last time I was on, a couple days ago, I said there's people who think that it's not expensive at$1 ,350. So I believe that was the high price target on the street. But when you look at it, it's just the timing of it is, yes, I am always skeptical because I want to see what the – there's always a – nobody comes across with that idea of splitting the stock. Just, hey, guys, what do you think we should do? Should we split the stock? I think when you get to$1 ,000 a share, you've got to start thinking about splitting the stock. Yeah, how many$1 ,000 a share stocks are there?

8:10I don't know. Right. I mean, we saw C. Chipotle no longer, right? But my thought is maybe we're seeing save it a little bit longer, and maybe you're coming to them because they're beating God higher, beating God higher, and maybe they're trying to do something because they think they're not going to. The flip side is that they've got so many arrows in their quiver that they're not worried about expending this one. Yeah, again, it's an interesting thought. I think they probably capital markets wise have some planning that's out there in the future. And this number makes some sense. But looking at semiconductors as a group relative to the S &P after a day like today.

8:50So the question is, you close really much almost in line with that March 7th top that came after the last NVIDIA. So we're right there. Intraday, we're through it. And I was saying, wow, semis have resumed leadership against the S &P. This is an important day. Maybe this is a double top, because, again, on a relative basis, If you look at ratios, semis to S &P is a very important thing to follow in this market. And we got to that top and we stalled. Tomorrow's another day. Next week's another week. But it's absolutely worth watching. Julie, is the message of today that there's still more gas in the tank for NVIDIA in the AI rally and you should be in that to avoid sort of the broader downside of the markets?

9:30It's always really hard to feel good about any kind of rally when it is so concentrated. And, you know, the broadening out is great. But again, if we're this dependent on this much capex from only a handful of companies, it doesn't take much for those companies to say, oh, you know what, it's the year of efficiency, we're actually going to pull back on our spending. And, you know, people act like that's impossible, that could never happen. But we don't really know, it's not written in stone. And I think the biggest challenge that we have is the business models and the business use cases around AI are still pretty nascent.

10:01And I think at some point for now, investors are like, sure, if you're going to do AI, I'm going to bid up your stock. But at some point, there has to be an economic business model around that. And investors will need to see that. All right. Well, our next guest says NVIDIA's breakout is just beginning. And even with today's bounce, it is still cheap compared to other chip names. Let's go off the charts with LPL Financial Chief Technical Strategist Adam Turnquist. So that's the question everybody has. How much higher? Can you answer that? I don't know if I can answer it, but the technicals can at least give us some guidance here because that's definitely the question on investors' minds right now with this latest breakout.

10:39When we look at the charts, we're seeing a breakout from what we call a bullish flag formation. If you measure that out, you look at the flagpole back from January and then the flag formation down to the lows, you can get an upside or a minimum upside technical price target right around$1 ,350. So some pretty good gains to go. the technical suggests the path of least resistance remains higher. Stock spent some time in the penalty box earlier. It's been just breaking out to new highs over the last two months after getting overbought. It looks like that uptrend is going to resume here for NVIDIA.

11:14So 1350 is your next level there. What do you make of the broader action in the markets that we saw today? Not a good finish, as we can see. A bearish engulfing candlestick. So we'll be watching to see what kind of downside we get. It's all about follow through coming into Friday. So we'll see how the market reacts. And if we do get a bit more follow through to the downside here, I'm not going to go with Steve's call to the 200 day moving average. But I do think you could get close to the maybe worst case scenario, 4 ,800. But I do think those April lows are going to be the key level to watch to see if we get there or not.

11:48And those are right around, I think, $48.50. Barish engulfing candlestick is what you said? Sounds ominous. It really does. Engulfing. You don't want anything to be engulfing a candlestick. But Adam, it's great to speak with you. Thank you. Thank you. Adam Turnquist. And if you're looking for a cheaper way to get into NVIDIA right now, let's bring in Mike Coe for an option strategy on this name. Mike, people feel like they missed it. People are afraid of owning the stock up here. What do you do? Yeah, I mean, it's a difficult one, right? So people may have been sitting there thinking, I'm going to wait until we get some news out of earnings.

12:24And then when I get the good news, then I'll buy it. And of course, they wake up and find that the stock is almost$90 higher. And that can be a difficult situation. Another difficult thing, and Karen was actually alluding to this, is going out and buying calls, for example. The September at-the-money calls cost roughly 11 % of the current stock price. So is there a way to get upside participation without necessarily either having to chase the stock at its current levels or just reaching out and needing the stock to make a big move higher for you to see profits, one way to do that would be to use a call spread risk reversal.

12:58I was looking, for example, at the September 1100 calls. You would buy those, sell the 1200 calls, and then also sell the 900 puts to help finance the purchase of those calls. Now, the interesting thing is that the sale of those two wing options actually more than pays for the 1100 call. So it It actually generates a standstill rate of return. So if the stock just sits here, or even if it drifts a little bit lower, goes a little bit higher, collect a little bit of premium. The downside risk in a trade like this is that you would have to own the stock at the strike of the put that you sold. But that actually represents an about 11 % discount to the current stock price.

13:32So you effectively would actually buy it at a price lower than where it was yesterday before they announced. So this is a way you can get some upside participation without actually chasing the stock right here. So, Mike, do you put a trade like this on and expect to sort of take off different legs depending on the stock moves? Are you holding this until expiration or some big event? Yeah, no, that's a really good question. And, of course, you can trade opportunistically around a trade like this. If the stock starts to rally, one of the things that's going to happen, of course, is that the closest to at-the-money call you have is going to appreciate.

14:06But very importantly, that downside put that you are short is going to begin to go down in value, both as a function of decay and as a function of the stocks move higher. And you would use that opportunity, of course, to cover that downside. And then essentially you're getting a much closer to free ride to the upside if you wanted to continue to maintain that long position. Mike, thank you. Mike Coe, you're an owner of NVIDIA, Karen. What are you doing at this point? You know, I did nothing today. I looked at calls. We talked on our midday call to sell what I I and probably many, many people have a much lower basis.

14:43So if you want, you know, I'm never going to be great at picking when to sell and then when to get back in. And the spread needs to be big enough that it is worthwhile for me to pay the taxes and jump back in and hope that that's just too hard for me to do. So I'm just staying long. All right. Let's get more on the names that can benefit from NVIDIA's rally. Let's go to Gene Munster of Deepwater Asset Management. Gene, good to see you. We want to go outside the obvious. So how are you thinking of sort of the next layer of trades out? So it starts with a little bit of a different view on what happened last night.

15:21I think that NVIDIA's results underscore that this is happening much faster than anyone could have imagined. And really, to put that into perspective, is that in the April 2023 quarter, NVIDIA's business was down 13 % year over year. This last quarter was up 260%. And the speed that things are happening really underscores the seismic shift of this transition to AI. In the midst of what we've talked about with AI for the last year and a half, there's just so many buzzwords around it. I'll just leave it at this, that the substance ultimately is going to exceed the hype. And when you have that perspective, the concept of worrying about inflation starts to fade away and you focus on what companies.

16:06And to answer your question, where do you go below the fold here? It's companies like TSM, ASML. I think that Google and Meta are particularly well positioned given they actually own the underlying models. So that's where we're looking for kind of this next shift. but this undoubtedly is going to be the underpinnings of a bull market for the next three to five years. So hyperscalers and hardware, are you thinking software at this point? Are you thinking about companies that will deploy AI for gains in their business that may be outside of technology? So currently most of our investments are not there, but I think that that's going to be this next wave, call it a year plus, kind of the two to five years.

16:48So eventually we'll get around to doing that. We invest in private and public companies. And so there are companies like Hugging Face, for example, that is on the model side. So there are other opportunities, I think, to invest in this wave that are not right down the middle with NVIDIA. Gene, when you look at Blackwell, it's about four or six times faster than Hopper. And you wind up seeing their integration with their new chips being so much faster than the previous iteration of it. Do you think you're going to run into a scenario where people just sort of get paralyzed and they want to wait for the newer chip?

17:25We've seen that a little bit. Or do you think the bandwidth of AI currently, people don't need the latest and greatest. Or there's a finite amount of companies like Amazon can consider doing whatever they're doing with Alexa and others need the latest and greatest. Have you added that to your calculus? Yes, absolutely. You're getting at the Osborne effect. This is that phenomenon of buyers waiting for the next kind of wave. And what surprised me related to last night's call is just the degree that NVIDIA is going out to its customers and saying, we're going to upgrade these chips once a year. And once you set that expectation, the probability that you have some air pocket before next cycle declines.

18:08If they would upgrade the chips every three years, this would be, you'd see these big boom and busts. But I think they are training their customers. We're gonna get new faster chips every year. This is kind of Moore's law type of improvements. And I think that does minimize. That was my big concern going into this quarter was the Osborne effect didn't play out. Gene, at what point with Nvidia do you think the growth will not warrant the chase? So, you know, right now seems like they've put to rest any question that they're not going to grow EPS 30 to 40 percent over the next couple of years. Makes the stock really quite attractive right here.

18:46And at some point, there might be even greater discounting mechanism for this stock based upon the move it's had and how important it's been. Any thoughts? I think into calendar 26, this is going to be wide open. When I say wide open, right now the street's going to, after the revisions last night, is looking for almost 30 % growth in calendar 25. I think they can grow 35 % plus 25, 26. So this is bigger. It's not just hyperscalers. It's industrial AI. There's an application layer. There's sovereign nations. This is the things that Jensen talks about. And I believe that. And based on that, NVIDIA still is not challenged.

19:22And I think that this growth story is going to continue. We're going to be saying it's deja vu. Thank you. Thanks. Great to get your thoughts. Gene Munster, at Deepwater. We've got some breaking news we want to get to. The SEC has made a decision on spot Ether ETFs. Contessa Brewer's got the details. Contessa. And it's been approved, Melissa. That's the big news coming in, that these ETFs based on the price of Ether have been approved for the NASDAQ, the CBOE, and the New York Stock Exchange, potentially paving the way for these ETFs to be listed later this year. Remember earlier this week, The agencies themselves had largely predicted, as had many of the experts on our air, that this would be denied based on some of the commentary we had heard around the Bitcoin ETFs being approved.

20:09But in fact, you've got VanEck, ARK Investments, BlackRock hoping to launch these ETFs tied to the second largest cryptocurrency. You're seeing Ether up about a percent and a half. Bitcoin, by comparison, took a little bit of a dip there. But again, that's the news coming in. The SEC has approved ETFs tied to Ether. All right, Contessa, thank you. Contessa Bruin, of course, we saw that big climb in Ether earlier this week. It is the E in Steve's wage acronym. What do you do with it now? The news is out. Yeah, you could always get some back in, Phil. And you're going to see that. Even with IBIT, which I own IBIT as well, you're going to see a demand just really accelerate.

20:51You're going to see institutions go for it. But the roadmap is what happened with IBIT. And this doesn't have to replicate it exactly, but to a large extent, you could see a 40 % or 50 % of the same move that IBIT had. All right, coming up, some big moves in health care stocks as we get some early headlines out of the ASCO conference. The companies with some key results out of their cancer treatment trials next. Plus shares of Alibaba dipping on reports of a possible bond sale, how much a company is looking to raise and what it could mean for the stock's next move. Don't go anywhere. More Fast Money in two.

21:31Welcome back to Fast Money. Investors getting a first look at the data being presented at the world's largest cancer conference next week. The ASCO abstracts just released at the top of the hour. Angelica Peoples has been sifting through the reams of reports and has some details moving the stocks. Hey, Angelica. Hey, Melissa. Yeah, tonight is a big night for cancer drugs. We have been going through these abstracts and looking at the data. Remember, these abstracts are basically a summary of the data that will be presented next week at ASCO, and that's the world's largest conference for cancer drugs.

22:02So I want to point you to two names that are moving right now. One of those is Maris. That stock is up about 16 percent after saying that its experimental drug given alongside Merck's Keytruda was well tolerated and showed promising results for a head and neck cancer in a phase two trial. Another name that's moving is Immunocore. The company is saying that its experimental drug for melanoma was well tolerated and showed promising clinical activity in a phase one. But that stock is down about six percent right now. And but we will note that it's trading with light volume. One metric wasn't as impressive as what investors were looking for, but I spoke to the company and they're saying that that metric isn't as important with this drug as it has been with other cancer drugs.

22:45Obviously, investors might not agree with that right now, but we're going to keep an eye on that and see how it shakes out. They have already started a phase three trial for that drug. We're going to keep going through the results and we'll get back to you with anything else we see. Melissa? Of course, the big moves, Angelica, will be seen by some of the smaller, like the biotech names, smaller market cap names. But the thinking, I think, of investors in terms of the large cap names is that potentially there could be deals to be made. So from that standpoint and ASCO, who are the large biotech or large pharmaceutical companies that are looking to possibly do a deal in cancer specifically?

23:18Yeah, that's something that we're definitely going to keep an eye on. Some of these names, these smaller companies like Immunocore and Maris are always names that people will be keeping their eye on to see if a large pharma might go after them. Next week, we are going to hear from some of the bigger companies like AstraZeneca, Novartis, J &J. They'll all be presenting data. So we'll have to see and listen if they have any indications on what exactly they're looking for. All right. Angelica, thank you. Angelica Peebles with the ASCO data dump is what we often like to call it, although it doesn't sound very nice, a dump of any sorts.

23:53But in terms of the pharma trade, in terms of biotech, you know, we're talking about sort of these smaller names. I don't think any of us are invested in Ameris or Aminocor. But in terms of the larger names, yes, you guys are. There could be deals. So when you look at in the last seven years, the cancer sales in these drugs. So you brought up who would be looking for a purchase. AstraZeneca has increased their cancer sales in the last three years by 3x. So has Merck. So has AbbVie. So has Johnson & Johnson. And so has Pfizer. So when you look at these names, those are the ones that are aggressively building out their portfolio.