Nvidia’s Shareholder Meeting…. And Bank Stress Test Results 6/26/24

0:02John, thank you very much. Live from the Nasdaq market side in the heart of New York City's Times Square. This is Fast Money, and here's what's on tap tonight. All eyes on NVIDIA as CEO Jensen Wong lays out a rosy picture for the semi-giant's AI future. The stock staging a late-day rally to end the day in the green. Is this a good sign for the stock and the sector? We will discuss. Plus, stressed out? Bank stocks on the move after the results of the latest government stress tests. What they revealed about the health of the financial system and how shares should react. And later, shares of Whirlpool Whirl higher on reports Arrival is weighing a takeover bid.

0:42General Mills loses a star as revenue and guidance disappoint. And is it time to bet on casino stocks? Why one top analyst thinks the year's drop is overdone. I'm Tyler Matheson, in for Melissa Lee tonight. Glad to be with you, coming to you live from Studio B at the NASDAQ Mark desk tonight. Karen Feinerman is with us, along with Steve Grasso, Guy Adami, and Julie Beal. Glad to have each of you here. Thanks for being here, Tyler. Oh, it's great to be with you. You know I love being here. Short straw again for you. I love it. I love being with you. We start with a late-day rebound in NVIDIA, managing to close a quarter of a percent higher for a second straight day in the green.

1:22Shares were down nearly 3 % at their lows, even after CEO Jensen Wong delivered an upbeat outlook to investors at today's shareholder meeting. On the competitive environment, Wang suggested that while competing chips might have a lower price tag, NVIDIA still offers the best performance and cost to run. He touched on the growing number of industries relying on AI processors from pharma to telecommunications and autos, ultimately expecting the recently launched Blackwell GPU to be the most successful one in the company's history. But while NVIDIA did eke out again, other semi names were feeling the pain.

2:02Qualcomm, AMD, Applied Materials, and Taiwan Semi, just some of the chip makers in the red. So what should we make of the choppy trading in chips? Let me turn to you, Guy. It is great having you, Tyler. Great to be here. So it's a great question. NVIDIA late day rally without question. Obviously had a nice day yesterday. I'll still go back to June 20th of last week when we saw that reversal. looked a lot like it did back on March 8th. So the setup to me suggests that the stock has a leg lower. It's not an indictment of the story by any stretch of your imagination. It's just what we've seen historically.

2:37And we try to sort of get in front of some of these trading moves. To answer your question about some of the other ones, you know, it's interesting. It's become almost zero sum, not only in the market, but in the sector as well. And NVIDIA's gains are to the detriment of a lot of names you just mentioned. I'll say this, though. Qualcomm, which traded down to the 50-day moving average today and seemingly held, looks more interesting for a trade right now than I think NVIDIA does at these current levels. Steve? So a couple of things. I think they did a great job at pointing out the sectors in space that will be helped with AI chips, which are all, right?

3:11So 11 sectors are going to be helped by it. And they also have an 80%, 85 % market share. So as long as those two things are still reality, I think it can go higher. But to Guy's point, it's had a massive run. The law of gravity probably applies. Would I be shocked if it came in? No. Am I long it? Yes. Will I stay long it? Yes. And Karen, history shows that this stock can go down, not only up. Yes. You know, I still think we're in the early innings, but that doesn't mean the stock needs to track the opportunity exactly, right? So just as Guy and Steve said, a little breather is not – we should expect it.

3:50Don't freak out. Absolutely. Don't freak out. Nothing has changed since that three days ago when it hit 140 and change. And today, nothing's changed. Valuation is now 10 percent lower. But I still like the story. I'm long. I think that – it's interesting. I don't usually think of the shareholder meeting as eventful in any way. But it was an opportunity for him to, you know, talk up the story still and, you know, the market share in Blackwell. Karen just made the point, Julie, that it's not really all that often that shareholder meetings get this kind of attention. But it's not all that often that we have a stock that gets the kind of attention NVIDIA has lately.

4:29That's right. I mean, Jensen's an absolute celebrity at this point. And so it makes sense that people would be listening with a lot of interest. And I think the onus is really on the company to start being able to demonstrate what the economics are of using their chips. It's not enough to me that they are the most efficient or that they are saving on power. And what they've tried to do is talk about, for hyperscalers, if you spend$1 on NVIDIA, you're going to get$5 of hyperscaler revenue over the next four years. That's great. But the problem with that is that we don't really know for sure that that's what companies are going to be willing to pay.

5:01And so I think that question mark is going to hamper really the development and the growth in this business. But I think for long term investors, it's still the place to be. I was speaking earlier today with a person and I kind of asked the question this way. Are the chips that they're making so advanced that the companies that are buying them need to find a way to use them? In other words, we haven't figured them out yet. that there's a scenario that you get$5 in return for every dollar you spent. But who knows, really, because these are so new, Julie. It's extremely ambiguous. And I think that's the big problem with any kind of tech transformation.

5:40You know, there's the acronym IPA. You start with infrastructure, which is the level that we're at right now. Then you have platforms and then you have applications. In order for the whole thing to work, we have to have these killer apps. And if they don't come to fruition, then all of this spending will be for naught. I'm confident that we will get there, but it's an ongoing question that I think plagues a lot of investors who are worried that the return case isn't quite there yet. Guy, IPA is usually something to drink. You don't do that, Tyler. Did you take math at the University of Virginia, or was it just a liberal arts thing?

6:11I took a probability class, and then I was done with it. You probably did extraordinarily. So let's play a little math game here, shall we, for a second. So Qualcomm, very mature company, and again, I'm only comparing it through the lens of they're both semiconductors. So I understand NVIDIA should trade at a premium. But Qualcomm is a$220 billion company that will do$42 billion of revenues-ish next year. Let's just round up and say they traded six times revenue, which, by the way, is sort of the historical norm for semiconductors. And the flip side of the coin, NVIDIA, with a$3.1 trillion market cap,$155 billion expected to earn next year, I mean, back of the envelope suggests they're somewhere between 19 and 20.

6:49Now, they deserve that premium multiple on revenue. To revenue. Just to sales. Historically, again, these are mid-to-upper single-digit companies. Now, I'm not saying it should trade at six times revenue, but should it be trading at 20? So there has to be, at some point, there's a maturity to these companies. It will manifest itself in margins. Competition is coming. And the 20 times revenue, unless they grow into it in a remarkable way, is expensive, in my opinion. Where is the competition coming from? Well, I mean, AMD is hoping that it is coming from AMD. I wonder if it could come from NVIDIA itself with needing to sell chips at a lower price, right?

7:28If there's just some pushback on the demand and that maybe would make them need to sell at a lower price. But, I mean, for right now, that kind of market share is so extraordinary. They've got like 90-some percent, right? And I think it's between 80 % and 85%. But we're splitting hairs here, right? So they're so far ahead of everybody else, and they've got the only ability to actually produce the chips. so the other companies can't actually get them as fast as NVIDIA can get them. Go ahead, Karen. One other point I want to make, right, so you're locked in now to NVIDIA, and they want to lock you in with software and hardware, right?

8:05So you get this very sticky customer. Ecosystem, somewhat like Apple. Ecosystem. Ecosystem. That's what they're building. That's what he's trying to do. Yeah. And they're still best in breed, right? Yeah. So as long as they can be the arbiter of who can produce the most amount of chips, They produce the best in breed chip. All these corporations are going to want the best in breed chip, especially if you want something that's really advanced. So NVIDIA started out with Internet of Things, gaming, car, everything. And now they're all everything to everyone. And that can't last for an extreme amount of time.

8:41But it certainly could last until the others start to produce. I would think I don't I'm not a money manager. You guys are. You have this virtuous cycle where I'm sure clients would say, if you're not overweight in NVIDIA, what are you doing? Why aren't you hitting this stock in a major way, right? Well, you're talking about career risk for people that do it for a living. Like, how do you explain to people that, no, we didn't believe the NVIDIA story. We're not in it. I mean, as you get towards July, which we're on the precipice of, as it gets later in the year, if you missed it, you're chasing.

9:14And I think to a certain extent, that's what we're seeing. But quite frankly, I don't know if that's good or bad. It is what it is, but I'm not certain it's a good thing or a bad thing at this point. All righty. We're going to stick with the chip sector. We've got an earnings alert now on Micron. Shares in the red after earnings despite a top and bottom line beat. Let's get the explanation from Seema Modi, who's been listening in on the call. Hi, Seema. In guidance, that seems to be why the stock is down, Tyler. CEO of Micron, Sanjay Mahathra, spending time on the earnings call discussing its next generation higher bandwidth memory product, HBM3E, which he says has 30 percent lower power consumption compared to its competitor solutions.

9:51He adds that HBM shipment ramp began in the third quarter. He also says data center solid state drives are in the midst of a strong demand recovery as customers have worked through their 2023 inventory and that the PC replacement cycle, which there's been a lot of questions around, should gather momentum through calendar 2025 as new artificial intelligence applications are rolled out. Now, Micron has been widely seen by the market as one of the AI beneficiaries in the semiconductor industry, providing the memory and storage for those systems. Its forecast, though, as I said, failed to meet the high expectations going into this report with a stock up 67 percent.

10:30CFRA analysts in the last hour saying that what you're seeing right now is a re-rating of the stock, but he still sees upside from current levels, tighter inventory levels. Another big talking point, they expect that to help pricing long term. Tyler, we're looking at Micron down 4.7 percent. All right, Seema, thanks very much. And Micron's and Micro CEO. Steve, why don't we talk a little bit about this? How do you trade this particular stock? So I was in and out of this one and I haven't been in it in quite some time. So I missed the hyperbolic run that it's had. It's about DRAM for them. It's a little over 70 percent of their revenues is DRAM.

11:07DRAM is needed for these data centers. So they were sort of a secondary trade for the AI push. They're not a sexy story like NVIDIA. They're the ones that are supplying the memory storage for them. They need to keep that story sexy, as sexy as you can make DRAM. And then DRAM is a boom bust commodity story. So right now, it's forever. It's been like an annuity. They had their time in the sun. Now they have to really put up or shut up that the future is going to be just as exciting as people had thought it was going to be. Julie, can you make DRAM sexy? If anyone can, it's me, right? Well, no, I think the real trick for this business is that the stock doesn't go up if they just sell as much as they possibly can.

11:59They need to not be able to even meet the demand. And that's not the case right now, because as we noted, it's a commodity type of business. And so for these guys, they can attach themselves to the AI train as much as they want. But at the end of the day, it's still a much more competitive and commodity business. So they can benefit, but there's going to be lots of competition. And who knows what margin and profitability there's going to be in that business. Very interesting. All right, let's get more on NVIDIA. Go back there in the AI trade with the Milius head of technology research, Ben Reitzes.

12:29Ben, welcome. Good to have you with us. Hey, Tyler. Great to be here. Is what's been going on in, we sort of touched on it with Karen a moment ago. Is what's been going on with NVIDIA a kind of expectable phenomenon, something we've seen before? So an investor who is in there for the ride and goes, oh boy, we were down 15 % last week. Is this the end of the game here? Should I be out of it? What's going on here? Well, I think that NVIDIA has these moves intracorder where people find themselves underweight and they have to catch up and then it runs and then there's all sorts of things. This last week there was a rebalance and I think a lot of people were playing that and then it kind of unwound and it created a big move.

13:09But in general, NVIDIA has nailed the full-stack approach. The only thing that I've experienced like this is, well, maybe two things, maybe the Wintel monopoly of the 90s or duopoly, whatever they were, and then Apple getting the iPhone. And the full-stack approach, when people nail it, when a company nails it, is able to generate a disproportionate share of the profits for that sector. And in their case, some people argue it's like all the profits. Well, that sounds like you're describing the word we used earlier, and that is ecosystem, that they have built it, they own it, it is their game to lose.

13:46That's right. Or win. Well, the foresight that they had is unparalleled. unparalleled. That's why we were kind of laughing when some people asked me, are they being investigated? For what? For foreseeing the biggest tech change ever and they should be punished? But okay. But what they did is they built a language, a computing language and an ecosystem that allows you to monetize AI and obviously they're killing it. And I think that people, this is probably got the most upside of the Mag 7 that we cover, even though we really like Apple and a few others. Questions, thoughts? Oh, good, Karen. Sorry.

14:25No, go ahead. Go ahead. Real quick. Ben initiated Dell on November 20th, and you've been spot on ever since. The quarter was May 31st. The stock sold off. Made actually sense to me. Are you concerned how it's been trading since? You had that little bounce after the sell off, but it's right back to sort of those levels. I think the story's still intact, but the stock seemingly run out of steam a little bit. Well, you can't go straight up unless you're NVIDIA, right? That's the rule. So in Dell's case, they missed margins. And there's concern that only NVIDIA is allowed to beat margins, but some of their partners don't.

14:59I think if Dell demonstrated margin expansion sequentially as we go throughout the year, stock rebounds. But bigger picture guy, I think that we're in a generational shift of market cap from like software SaaS back towards hardware. And if Dell shows that they can be part of these AI factories, that means a secularly right company. Secularly right companies get market multiples, even premiums, right? So we're staying the course based on that thesis. What is – you had a question. Yeah, so he talked about Blackwell, first of all, coming out earlier than people thought. And then also that we will come out every year with a new chip.

15:39So in part of that, creating the ecosystem, how long do you think customers will buy that? Yeah, I think that what's really amazing about these guys is obviously they're doing all this and then they're innovating on this annual cadence. So developers and their customers, the clouds, can say, hey, I know where they're going. I'm going to budget accordingly and look into the future and know that there's an upgradable cadence. That is so valuable. Well, you know, even though it's not an enterprise business, Apple does it every year. And that cadence is so reliable and gives you such a pole position.

16:15And also, they're running, you know, everybody's trying to catch them. And if they're running 150 miles an hour while everybody else is running 100, I mean, it's going to be hard to catch these guys. So, Ben, sort of piggybacking on that, when you look at the stock, it's got 80%, 85 % market share. We've discussed that. When they did the stock split, I had thought they were pulling a rabbit out of a hat that they didn't need to try to take the attention off of megabeats going forward. They wanted to sort of suck up as much oxygen in the room. The retail investor could buy fractional shares. You didn't need to split the stock to be able to do that.

16:52In your mind, I know you're bullish, but in your mind, how long before we get to that next hump in the road do they have? Is it a two-year cycle? How long do they outperform? Well, we think they continue to outperform, and it's really hard to know quarter to quarter, but we are showing sequential growth. And I think that what we need to see is they continue to beat and raise, at least at some cadence. And that is very doable in a lot of our research that we see. The margins actually, one of the big surprises, margins have been able to stay intact and expand. And that's just staggering. 70 % operating margins is rarefied.

17:29air guy. That's why they deserve that high EV to sales. Because anyway, I think that as long as we see that sequential growth, you know, we're going to keep going. One thing we wrote about recently, Steve, is that there's 270 billion in cash these guys are going to generate over the next three years. If they add a buyback to this, they don't want to say that because that's something mature companies do. I just got the goosebumps. Well, that was going to be my question. What are they going to do with all the cash they're going to have? This could be the thing that answers Steve's question. It's no one's talking about it.

18:01And when you do the model we do, it's a cash gusher. And there's just nothing they can do. This government's not going to let them buy anything big. They can't invest that much in R &D. It's just not possible. So we got to get it as shareholders. And that could be the thing, one of the things that helps. And it doesn't mean they're not growing. It's not an insult to buy back stock if you got nothing else. Of course, final button here. It's in the 120s now. What's your price target on that? My price target's 160. And we feel really good about that. Ben, thank you very much. Thanks, Tyler. Thanks, guys.

18:31Thank you for being with us. All right. Coming up, we're going to jump into Japan as the yen sinks to its lowest level against the dollar in nearly 40 years. What it means for the Japanese and U.S. economies and a pair of fast movers heading in different directions. Why Whirlpool is flowing higher and the results that had shares of General Mills getting toasted. Don't go anywhere. Fast money's back in two. You're watching Fast Money here on CNBC. We'll be right back.

19:12Welcome back to Fast Money. The Japanese yen slipping to its lowest level against the dollar since 1986. The currency topping the key level of 160, a level at which the Bank of Japan has previously intervened. The country's central bank has recently suggested its quantitative easing plan could be bigger than expected next month and may even include a rate hike. You've been watching this level. What is the JCB likely to do here? Well, I think whether they acknowledge it or not or whether they know it or not, I think they find themselves in a bit of a difficult situation. Proper decorum prohibits me from saying exactly what it is, but they're screwed in a word.

19:48And, you know, they intervened in April. They intervened on behalf of the yen. Dollar went from 160 down to 152. And here we are right back above it. That's, by the way, in the face of interest rates going higher as well. So those two things shouldn't be happening. Their economy is a bit of a mess. They have a demographics problem. And quite frankly, I mean, whatever they do at this point is going to be really problematic for their economy. You say, OK, why should we care here? Because they own a little over$1 trillion worth of U.S. Treasuries. And I don't think it's coincidence, Tyler, that 10-year yields went up in a pretty market fashion today on the back of dollar yen going through 160.

20:22So all along, one of the things that I've thought about interest rates, they'll go higher here in the U.S., predicated not in large part, but in some part of what's going on in Japan. Julie, what's the economic implication of this? When you look at what a weaker currency means to a country that exports a lot, it means that their exports become, what, cheaper, more available. Can that help Japan's economy? It can in some ways, but I think there is a limit to where that becomes helpful. And the challenge for them is they cannot fight our Fed, which is holding rates higher. Jerome Powell is like Derek Jeter at a little league game, right?

21:03It's just really hard to offset that. And I think that's a little bit the situation of a lot of different economies. They don't feel like they can even lower rates because until the Fed does it, it really doesn't help their economies all that much. Karen? Well, also, Julie, another point of Julie's point is, but everything they import is so expensive. So expensive, yes. There's the other side of that. Yeah. So it raises their cost of living. Can I ask Guy a question? Certainly. Okay, so this trillion dollars, are you saying that they're not going to roll over? They're going to use that because they're rolling over at, you know, much higher percentage than they're going to earn on their own bonds.

21:37But are they going to use that all for trying to support the yen? I think that's one of the fears that that's exactly what we'll do, right? And they've been sort of, I don't want to say the buyer of last resort. They've been a pretty obviously significant buyer. I don't think that's happening now. And I think at some point there's a concern that they'll actually start selling U.S. treasuries. By the way, and Tim said this a couple nights ago, all what we've just talked about for the last four or five minutes leads to the gold trade, I believe. So nobody wants to say it. I get it. They're the fourth largest economy in the world.

22:06I understand that. You know, Karen said it in the break. But, you know, you're going to start hearing as this thing, if it approaches 165, you're going to start seeing headlines about currency crisis and those things and the ramifications it might have for global markets. What's the third largest economy, by the way? I think it's U.S., China, Germany, Japan. But Germany and Japan are basically 4.2-ish. Quick final button here. Well, this is the problem. And Julie spoke about it. If the U.S. is holding rates where it's at right now, it's not just dollar yen. It's dollar everything else in the world.

22:38and there usually is a coordinated effort to stay on the same page. So even though people are saying that they're going to remain hawkish in the U.S., there's a limited time that they can do so. All right, a lot more fast money to come. Here's what's coming up next. Whirlpool making a splash as General Mills gets baked. How one company's potential appliance buyout and another's weak revenues are moving these stocks. Plus, stress test results are out, so the bank trade is coming up. Why our next guest says the group is in great shape and could just keep climbing. You're watching Fast Money live from the NASDAQ market side in Times Square.

23:17We're back right after this.

23:27Welcome back to Fast Money. Shares of Whirlpool topping the tape today, jumping 17%. That's the agitator right there, the agitating cycle. 70 % on reports that Germany's Bosch is considering making an offer for the home appliance company. It was Whirlpool's biggest gain since March of 2020, but the stock is still down more than 16 % so far this year. Spin cycle here. Yes. So, I mean, even with this big jump, it's gone from like seven times earnings to eight times earnings. They do have debt there. I mean, that's kind of crazy, right? But, you know, obviously, without a lot of home sales, we don't need to replace all of those appliances again.