Old & New Tech Take Off… And Weight-Loss Drug Prices In Focus 3/12/24

0:01Live from the NASDAQ market site in the heart of New York City's Times Square this is Fast Money Here's what's on tap tonight. Old tech, new tricks. It's not just NVIDIA taking the market to record highs from Oracle to Dell to IBM. Some of technology's old guard are in rally mode this year. What does this resurgence say about the strength of the market rally? We'll dig in. Plus, China rising. The FXI has rallied nearly 20 percent since hitting 15-year lows in January. Is this just the start of a real rebound in the region? We'll talk to one top investor to find out. And a big bank breakout. Shares of long beleaguered Deutsche Bank suddenly hitting two plus year highs.

0:36Is there more room for the name to run? One of our traders lays out the case. I'm Melissa Lee. Come to you live from Studio B at the Nasdaq. On the desk tonight, Tim Seymour, Courtney Garcia, Dan Nathan and Guy Adami. And on the day when the S &P sets yet another new record, it was the index's top two performers that caught our eyes. Oracle and NVIDIA both surging and highlighting strength across generations of big tech. Oracle's pop after earnings last night bringing its gains for the year to more than 20 percent. And it's not the only veteran in rally mode. Dell, HPE, IBM all trading at or near all-time highs.

1:08But the recent tech darlings didn't get left behind either today. After a two-day pause, NVIDIA jumping more than 7 percent, closing just off its record high. Meta also recouping much of yesterday's losses. So is this a case of in with the old, in with the new, too, Guy? I like that. You write that? That's very good. Apparently so. And again, we play this game a lot. But, you know, with the move in the bond yields today up to now 415, you even told me last night what's going to happen to these stocks. I'm like, they're all going to sell off, especially given the reversal we saw in a lot of these names on Friday.

1:39Clearly that didn't happen. However, to answer your question, you know, one thing I think we've done a good job on are these old tech names. We had Ben Reitzes on this show, I think, on March 4th. He talked about Dell. You know, the good news there is that stocks come off from 131 down to current levels. You know, I think that's a stock you want to absolutely take a look at. But IBM, we've been steadfast. Sandy Kenneld, our great senior executive producer. I think that was the I in his anagram or what do they call the thing? Acronym. Acronym. Right. Last year. So kudos for him. But we've been talking about that for a while.

2:09So old tech is actually a place where you can rationalize valuation for a lot of those names, as opposed to some of these other high flyers. There's also an AI undercurrent also to all of these, quote unquote, old tech names are playing sort of a catch up game at this point, Courtney. Absolutely. And AI has, you know, NVIDIA has been the big winner there. But what people need to realize is you're going to need hardware. Like if we actually want to use AI, you need a device that's enabled with AI in order to use it. And that's where something like HP or Dell is going to come back in favor here, right?

2:37Because after the pandemic, everyone got their computers. But it takes about a three-year cycle for everyone to get new ones, which is in general. People need new computers. But in general, over the next decade, you're going to need those AI-enabled ones. So I love this old-school hardware technology play. I think it's absolutely here to stay. I cycle those 15 years. So you're talking about a PC refresh recycle, Tim. You heard that one before? Somewhere, but, you know, it always seems to work somehow. I'm just saying, I mean, like, listen, I get what you're saying, too. And that is going to be the next iteration of this trend, right?

3:06So everybody needed the GPUs. That's why all these semiconductors have gone this way. What Dell and what Oracle and what the hyperscalers and all these folks are telling you, it is a verticalized, you know, sort of operation here. At some point, though, I would just expect that that demand kind of gets, you know, settles out a little bit. There was an article in Information early this morning, starting the day, talking about how Google and some of these other cloud players are kind of tamping down expectations for the commercialization of some of these products. I think that is going to be a story that clearly hits the tech market at some point this year.

3:35And that is a story about expectations. And it's a story about how excited people are about some very crowded investments. But again, on a day like today, when you saw the reversal on Friday of some of these semi names that kind of follow through, we were talking about last night on the desk. I think we're all a little bit surprised that they didn't follow through a bit more. And to see NVIDIA come back the way it did, it tells you that they're just not done yet. You know, I mean, they're just not done yet coming for these names. Well, I look at Oracle. And again, this is old tech. It's a company, though, that's transformed itself over the last few years.

4:07I mean, they really have. And they now, if you look at the strength of the numbers they put out yesterday, not only were they like a lot of these companies showing margin enhancement, more efficiency. Everybody's got the year of efficiency. By the way, see AI and see what really happens. I think that's part of the multiple here. But again, their core business is across two or three business lines, whether it's RPO, whether it's OCI, a lot of initials here. The OCI certainly gets you more into the AI space. And I just think it gets back to a place where people are looking for the names that have multiples that they can get behind.

4:36We can question all day long, right or wrong, on what you want to pay for AMD or NVIDIA. But when it gets back to some of these older tech names, the valuations are a lot more palatable, if I may. And so there are a few tech names, by the way, I think it's also important to point out, really haven't been part of the party. Look at Cisco. I mean, Cisco has been kind of dead in the water. It hasn't been a disaster. But it's a case of, again, a company that's been slowly trying to transform itself. I happen to know this story because I'm long and it's really lagged in the software and security dynamic of their business, which is also high margin and recurring revenue and annuity dynamics, which help multiples, have really not gone so well.

5:12Intel, we talk about this name all the time. Not cheap, by the way, certainly on a multiple, maybe under-owned, which is why I still own it, not the only reason to own it, but I actually think that they're starting to come through on a product base. But it's a fascinating time when I don't think that a lot of the market is all that expensive. And yet, if you look at the top of the tree and those names are very expensive. Well, I was just going to say Intel, too. And again, it's not that exciting. I mean, when they reported in late January, they missed. They guided lower. The stock gap down 12 percent in one day.

5:40It's been kind of range bound here. And I think your point is a good one. It's expensive right now on current estimates if those estimates start to go higher. Because, again, you know, look at what Taiwan Semi, the beneficiary of the CHIPS Act and building, you know, plants here in the U.S. Reshoring is going to be a big theme. I know Guy has been talking about this. But if you just look at a name like Qualcomm, and we mentioned this a couple months ago, it, again, was a name. If PCs are not great, if handsets are not great, right? and you have to wait for a refresh cycle for AI to be on the devices or whatever.

6:08Well, Qualcomm just ran in front of it. So you'd want to look at a name like Intel, where a lot of their end markets are not doing particularly well, but maybe they do have this manufacturing angle at some point this year, next and the like, and should play catch up. But again, that only happens if this whole thing is broadening out a bit. And you guys have all made the case that it has, except for a handful of names. Yeah, I think it is. Okay, here's a question. One year time frame, Intel or NVIDIA? Probably Intel. I mean, to be honest with you, because I don't know how a company like NVIDIA that encapsulates, I think, so much of the excitement in and around this chip space and as clearly the beneficiary of all the orders has gained a trillion dollars in market cap in just two months, has gained a trillion and a half dollar market cap in 18 months.

6:50I mean, Intel's left for dead. I mean, that's where I would be putting my money right here if I had to do it. Here's an interesting one later this week. Adobe, I think it's Thursday they report, quarter of a trillion dollar company, had a huge run up into 21, fell off a cliff like everything else. People are going to start to talk about this as sort of an AI name. Have they figured it out? Reasonable valuation. Of course, the problem is it's had a huge run, and it's historic for their earnings releases and then sell-offs after. But if Adobe can catch a bid, then maybe we are broadening out to the extent that everybody thinks.

7:18But is that the name of the game? In order to broaden out, you have to be part of AI? No. And I think look at banks. Banks aren't part of AI. Look what's going on there. Look at industrials. And technology. Sorry. Okay. Yes and no. I mean, we've seen a lot of software names that are just software names. I mean, software doesn't have to be AI software. Look at CrowdStrike. Look at a lot of the names that have had big, big days. And I think they've also followed high multiple stocks. That, to me, has been the progression. You followed semis. Then you followed software. Then you followed mega cap techs.

7:44But are we done with tech? Because I just wanted to talk about something else. What do you want to talk about? Tim, you know, it's your show, you know. Your time, Tim. You're a key participant. What's your agenda today? You were asking me about tech, but guys started bringing up interest rates in CPI. Did you look at it right now? I know I did. I thought I was in trouble. I thought, go ahead. No, no, no. It's all tied in. I mean, if I told you what the CPI print would be today, what would you think the market reaction was? What do you think tech's reaction would be? And I could have tied it back to tech.

8:15Maybe I was too honest here, Mel. But the point is that that CPI number wasn't great for markets. And it was a fascinating day because rates went higher. I think we're still on a two-year uptrend on long rates, by the way. Every time I test the bottom end of that channel, I think it's bouncing. I think if you looked at what we got in terms of services, inflation, what you got on owner's equivalent rent dynamics, I think June is 50-50. It was 75 % to 80 % a few weeks ago. And yet equities don't really seem to care. And that's what makes a day like today fascinating, because I think there are parts of the market that really love this dynamic, and I think banks are near the top of that list.

8:51At what point should we start caring that maybe that rate cut is being priced out of June and that you only have the back half of the year to get those accomplished? Yeah, and I think we're going to need to see how the next couple of reports come. Because at this point in time, right, I mean, we did see an increase in CPI. It's clear the markets didn't care about because, A, I mean, it wasn't a huge increase. But you saw core inflation actually came down. Super core inflation actually also came down, which is a good thing. But one of these data points isn't going to make or break things. As much as we like inflation to come down on neat, pretty lines, it just doesn't work.

9:21like that. So having one or two data points coming up is not a problem. But if this continues to be a trend, absolutely, that would be a problem. I don't think we're there yet. Neither do the market. So we're gonna have to see over the next couple of months how it continues. You know, again, we've stopped talking about the yield curve because clearly the market doesn't care. But Liz Young, who's on that great show, Halftime Report from time to time. Also on some podcasts. She is, actually. And that's an excellent point by you. But she does all the different CNBC shows except this one. But she tweeted earlier that, you know, today we've actually surpassed 7980 in terms of longest duration of an inversion and yield curve, which I think should matter.

9:56But clearly, the market doesn't care. And at some point, again, it's not the it's the steepening where people should care. And we haven't gotten that. We got close, but we haven't gotten there. And here we sit at 45 basis points or so and seemingly off on our merry way in the market. I think there's more to it than that. All right. Well, it's not just the U.S. China. Internet stocks are also breaking out. The Crane shares China Internet ETF jumping more than 7 percent so far this week. It's on track for its best week since last September when it gained almost 8 percent. The K-Web, which includes Alibaba and JD.com, now up almost 16 percent from its late January low.

10:30So is this momentum a sign a sustainable rebound is underway? Have we seen the worst in terms of the indices in China, do you think, Tim? That's certainly how I've been positioning. And I've been positioning on some levels for this for maybe a year, year and a half. But I do think, especially when folks are allocating for, you know, 12, 15, 18 months, even not two years, the dynamics in China are really interesting. China as a global economy is structurally going through a change that we never expected they'd go through, even though that's what happens when your demographics are as poor as China's are.

11:03Yeah, I said that. It gets back to a place, though, that the multiple is pretty attractive. We've talked about the 80 billion of the 195 $5 billion in market cap of BABA being in cash. We've talked about the positioning. And I just drill in on the positioning. The top global funds who have exposure to China historically, and again, that includes MSCI Global, are as underweight China as they've been in 10 years. And that's before the MSCI A shares were put in the index. In other words, they're below a level before a significant part of the index forced them to own China. There's just there's no there's nobody that owns this market.

11:35There's a lot of reasons for it. And I still don't feel like I can have high conviction that the government's my friend here. But I look at some of the big Internet names in China, their version of the Mag 7, whatever we're doing, and they're interesting on a multi-year basis for sure. It's fab four, bro. But I'll just say this. I think everything what Tim just said makes a lot of sense. If you think about how bad the data coming out of China is right now and then you think about some of this export data that's been really good, right? I actually think you want to flip that narrative upside down a little bit.

12:03And so to me, everything we talked about last night about TikTok and the banning and the lack of our digital companies being able to be over there. I think that's the stuff that stays pretty murky for some time to come. And you mentioned President Xi and how he feels about their domestic champions. Well, they've already taken them out to the woodshed. So if I look at it like a name like Baba, which is obviously very consumer focused and obviously they don't want things to go pear shaped. They've already gone bad enough. If there's one stock on my entire board that I think could double over the next year, it'd probably be Alibaba.

12:34I mean, when you think about it. You put your B where your zebra was, by the way. I really did. Thank you for remembering. Dan's a little self-conscious. Not self-conscious. He feels like his acronym doesn't get enough attention. In February, I did. My blicep gets a lot of attention. In Guy's Clam, it's trending some nights during the show. I'm sure it's trending. It's trending all over the place. Real quick, if we can throw an FXI chart up, because we actually flagged this in late January. We said, you know what, folks, here's your opportunity. Got down to 21, same levels we saw, I think, October of 2022.

13:09Go back all the way. I think it was 08 the last time it was down there. We said, this is it. The risk reward sets up well. Now, I know it hasn't exploded to the upside, but it's actually done okay. And I'm with the guys on Alibaba, and I'm sure Courtney feels the same way. I mean, this thing we've seen in a downtrend for four years, it's had 35 to 50 percent rallies. probably seven or eight different times. And I think we're probably on the verge of one now. Yeah, I'm completely on board with that. I mean, we've really been making sure that we have a stake in emerging markets. And I think it's interesting because when you look at fund managers have been underweight China, we're definitely seeing that from investors too.

13:44Like actually BlackRock came out and they did make an emerging market fund ex-China because people just aren't willing to go in there even though they're on board with the idea of emerging markets. And it is a good portion of some of those funds. But I do think because of some of those risk rewards And because some of that sentiment, people are so out of it right now. And I think there's a lot of money that will eventually go back in. I do think you want to have a piece of that in your portfolio. Absolutely. A leading emerging market analyst sees reasons for investors to dip their toes back into China.

14:09David Riedel runs Riedel Research Group and is a former Salomon Brothers analyst based in Asia. David, great to have you with us. I think what's not getting that much attention is what happened last week at the National People's Congress and the efforts that China might actually get accomplished to boost consumer spending, which could be huge for a lot of these stocks? Absolutely. I think it's really gone under the radar that there is a generational change potentially in China where they are planning to liberalize or considering liberalizing what's called the household registration program. So all these hundreds of millions of migrant workers that live and work in the cities really live in the shadows.

14:47They can't own property. They can't send their kids to local schools. They can't access health care or any of the other social benefits because their household registration is actually back home in their little town in rural China. So they are talking about changing that, which would unleash a huge amount of consumer demand for household goods, for apartments, for all kinds of things. So I think that if China gets that right, it starts to become investable in a way that I don't think it has been in the last five or 10 years. At this point, David, would you say that the Chinese government itself or the U.S.

15:22government is the bigger risk to China stocks? I think the U.S. has kind of taken itself a little bit out of that risk. They played a game of chicken with Beijing a couple of years ago about audit and SEC and registrations and listings and so on and so forth. And China blinked. You know, China has been willing to inflect a lot of pain on their own market through the attacks on big tech. and so on and so forth in the last few years. I think if Beijing backs away a little bit and gives people some confidence that they're not going to interfere, China could be in for a multi-year run. Hey, David, it's Tim.

15:59It's great to have you because you've caught different pieces of this. You were very bearish on China in October of 22. It's great to have you back on what looks like a pivot. And if there's anyone I'm listening to on EM, it's you. And so I get back to some of the technical dynamics. We've heard about China's version of the plunge protection team. Basically, their government's going in and buying ETFs, and they're stimulating their market much in the same way we did here. What do you think about that? And I talked before about positioning for global investors, big, big investors who, if they just change this much, are going to change, I think, the return profile of the asset class.

16:34I think that's exactly right. But remember what China has going for it, right? They control 70 percent of their economy. They've got$3 trillion in reserves and building up their reserves all the time. So they've definitely got money to spend in Beijing to support different parts of the economy that they want to support. Let's not hope that they put their thumbs on the scale too much to really turn things over. But you're right. My clients have been out of China for years at this point. And I think some of them are starting to regret it, and they're starting to look at ways to get in. Where can I get comfortable with governance?

17:05Where can I get comfortable with valuation? Where can I get comfortable that Beijing is not going to insert themselves into an industry or into a company and upset the apple cart? If I can answer a few of those things in the affirmative, I've got a great opportunity to invest in China today. David, I love your stemware. Geopolitical risks, South China Sea. I mean, what percentage do you put in terms of this thesis? You caught that melding. You know, you just look at the film from last week. Chinese maritime authorities shooting water cannons at a Philippine fishing vessel, blew out the windshield and injured four Filipino fishermen.

17:39It is just a hair's breadth away from someone getting killed on either side of one of these aggressive attacks by China on the Philippines, on Vietnam, on the Taiwan Straits. It's just too dangerous for them to be operating at this kind of velocity. I'm actually leaving for Taiwan on Thursday, so I'll be able to report back next week when I get back on how things are feeling on the ground there. But I think everyone needs to be super careful and not get fault trip into an inadvertent war in that region. David, great to speak with you. Thank you, David Riedel. Riedel Research, not Riedel Stemware.

18:14And I think that's the first time Stemware was actually used. I don't even know what Stemware is. Oh, come on, Tim. Stop it. You know what Stemware is. Glasses with stem. Cabernet. I don't drink a lot of wine. Maybe I'm really showing my boorish nature here, but sorry about stemware. Anyway, JD had great earnings. PDD got a big upgrade yesterday, huge advance. Where would you start here in China if you wanted a China stock? Yeah, I mean, we're definitely playing the broad index. But I think that is what you're seeing with any of the individual companies. Late last year, even when you got some good news with these companies, it wasn't getting priced into the stock.

18:48But you're finally seeing that, right? I mean, good news is actually leading to higher prices, which means that the momentum and the optimism is actually really shifted here, which is good news. I'm just getting word. This is breaking news here. You look excited about something. David Riedel's family is somewhere. Stop it. Get out of here. That's unbelievable. So you see, you made fun of me. Meanwhile, you did not know that. Yes, I did. Yes, I did. I did not know that. We just got this in. And I'm the one that pointed on the TV that I don't have a lot of wine glasses, so I would assume I'm going to get a box of these things sent to me.

19:18because we should actually, David's listening. And I love David's work. I'll say this really quickly. Emerging markets, whether you're following the VWO or the EEM, because 40 percent of that's China. And you look at these indices, they're right up at the EEM is the 42 levels. The level has been bucking up to for a year and a half. Remember the false breakout? Maybe it was a real breakout when rates started going higher in May of 2000 and markets are going high. EEM took off. And as a guy that's been in this asset class for 20 years, it's it's an interesting time. I was buying levered calls on the EEM earlier this week.

19:51The more you know. The more you know. The more you know. Coming up, headwinds in the airline trade. Airlines losing altitude has continued problems of Boeing weigh on their travel plans and some new reports on Alaska Air. That is next. Plus, has gold's run gotten out of hand? Some analysts souring on the precious metal after it's a record run. But two of our traders say it's not losing a fluster just yet. More on that when Fast Money returns.

20:19Welcome back to Fast Money. We've got a news alert on Alaska Air, some new reporting about that midair blowout in January. Phil Abbeau's got the details. Phil. Melissa, this comes from the New York Times, which is citing documents and interviews regarding the incident back on January 5th. And according to the article posted by the Times just a few minutes ago, engineers at Alaska Airlines were so concerned about a couple of warning lights. times warning lights had gone off in the plane where the door plug eventually blew off, that they were scheduling a maintenance check for the evening after that plane finished its final flight.

20:57As we know, that flight is when the door plug came off. So the point of this being there had been concern about what was happening here. There had been allegedly complaints from passengers on previous flights about a whistling sound within the aircraft. We bring this up because it's all part of what we're noticing right now, Melissa, with whether it's the lawsuits, whether it's the investigations that are taking place, and there are at least three right now, the DOJ, the FAA, and NTSB looking at Boeing and its manufacturing process. All of this gets into the question of should this have been flagged earlier and should the manufacturing process have caught some of the problems that ultimately led to this door plug being blown out.