OpenAI Concerns Hit Tech Trade… And Fed Expectations Ahead Of Powell’s Last Dance 4/28/26

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1:03Here's what's on tap tonight. Hyperscalers under pressure and the NASDAQ pulling back from records as OpenAI's CFO suggests things may not be so rosy in AI land. What it means for the big tech trade and the recent rally to all-time highs. Plus, an OPEC shakeup. WTI briefly breaking back above$100 after the UAE says it is leaving the energy block. We'll dig into the move and the impact on the stocks in the space. And later, a slew of after-hours earnings on our radar. are all the details moving shares of Seagate, Starbucks, Robinhood, and Visa, and how you should play the names right now. I'm Melissa Lee, coming to you live from Studio B at the NASDAQ.

1:36On the desk tonight, Tim Seymour, Karen Feiderman, Dan Nathan, and Guy Adami. We start off with the eye-opening report from the Wall Street Journal that OpenAI has fallen short of its own revenue and user growth targets. The news putting pressure on the tech-heavy NASDAQ off by almost a percent after closing at record highs just yesterday. In a statement, And OpenAI called any suggestion it is pulling back from securing new resources, quote, ridiculous. But still, its infrastructure partners were among today's biggest laggards, as investors once again questioned the pace of spending across the sector.

2:07Oracle, which is the company's largest cloud provider, down 4%. Neocloud stock CoreWeave dropping by nearly 6%. Chipmakers also taking ahead. NVIDIA down almost 2%. Broadcom seeing its worst day since January. Now, tomorrow, we will hear more on hyperscaler spending plans when Microsoft, Alphabet, Meta, and Amazon all report after the close. Those companies alone represent roughly$12 trillion in market value. Microsoft, the only one higher today, but maybe a bright spot for the AI trade after the close. Memory giant Seagate surging after reporting its earnings. Revenue and current quarter guidance came in well ahead of estimates.

2:41The report helping the likes of Western Digital, SanDisk, and Micron recoup some, if not all, of the day's losses. So let's get to Christina Parts and Nevels for all the Seagate numbers. Christina. Well, the story really is just about pricing leverage. Earnings were a beat. Revenue of just over$3 billion, up 44 % year over year, also a beat. But the real number, gross margins for the quarter, came in at 47%. That's up from 36 % just a year ago. Seagate CEO Dave Mosley calling it a record margin performance with close to a billion in free cash flow. So that tells you customers cannot get enough product.

3:15This is a company that makes hard disk drives, the picks and shovels of AI. not the compute side, but where all the data actually gets stored. Seagate and Western Digital are essentially a duopoly in this space, and historically there has been a commodity market with a boom and bust cycle for this particular disk drive space, but not necessarily anymore. Seagate has pricing power it has never had before, and the guide proves it. Q4 EPS of five bucks versus the street at$3.97. I had to do a double take. That is a 26 % premium to consensus. So the read-through is important, too. If Seagate is raising prices, Western Digital is likely doing the same.

3:52And if you can't get enough hard disk drives, demand spills over into the NAND flash world. And that's where SanDisk benefits. And that's why the whole group is moving higher in after hours trading, guys. All right. Christina, thank you. Christina Parts Nevelis. I don't know if Seagate helps to counter the OpenAI report from The Wall Street Journal or if this is just a sideshow. But, you know, in terms of all the earnings that we're going to get tomorrow, I think it'll be interesting to hear about the demand for AI, too, since part of the journal report was that it is missing internal revenue forecasts, but also subscriber growth targets.

4:28So, I mean, the market liked to make a whole lot out of it. I don't know how much of it is true, but I do think we're still in really early innings. So the pie is still growing for sure. The pieces of the pie, the market share, I think has changed. I mean, look at, you know, two and a half years ago, is it Microsoft who was way ahead? Right. You know, with OpenAI. Google was out. And then Google was out. And then Google was in. I think perplexity had a moment in there. And then Anthropix seems to be really running away with it at the moment. But we know that could change. So you have to look at it in the backdrop of this semiconductor run, which I know, Tim, you love to talk about how bullish you are in semiconductor run, has been extraordinary.

5:07And if we back up and look at it and just squint, nothing's happened today versus three days ago. But this move up to here, even with this today pullback, is extraordinary. So, I mean, these Seagate numbers are fantastic. That kind of operating margin improvement is really impressive. And the guidance, which why not be conservative, is really bullish also. So it's bullish and conservative, maybe. There's a lot of good things happening. Interestingly, Seagate's biggest customer is Dell, which is unchanged in the after hours. But that's OK. It's a smaller part of Dell than Dell is to Seagate. I didn't hear about any misstep in demand here.

5:48I heard about a misstep in terms of the competitive landscape for open AI and Anthropic. Definitely. I don't know if they're eating their lunch, but in terms of coding and enterprise, they are making major inroads. And yeah, this is a valuation question for open AI. eye, it's not a question of demand as reinforced by Seagate. What's fascinating about Seagate on the margin side is some of seemingly these revenues, the analyst community, the investor community thought they kind of understood gross margins based upon long term contracts. So they, you know, clearly some of these have been redone. Those that are desperate for capacity and product are probably willing to redo long term contracts at much more advantageous prices.

6:28So the gross margin story, the demand story, alive and well. I just think I like Karen talking about the pie because we know it's a bigger pie, as she said, but it doesn't mean that there aren't a whole lot of people competing for that pie. And I think that's the story. Dan? The Seagate, just say this, I mean, this is a company that has pricing power now, you know, in two years ago, I know in 2022, they had like$12 billion in revenue and by 2024, it was cut in half. Okay. So this is the way this company is just, they're subjected to this, right? So right now they have that pricing power. They might be experiencing double or triple ordering.

7:06If you do see some period of digestion as it relates to demand, these guys are dead. It's that simple. They're dead. And this has happened again and again over the last 30 years. Now you can make a lot of money as long as you're riding this train. If you think the pie keeps increasing, All I can see from the OpenAI thing is that they're missing revenue targets because fewer people now. They got to 800 million not paying, but subscribers. And I think I don't know what the percentage of paying, but it gets worse and worse. And to Tim's point about Claude, yeah, they have a coding advantage. They have an enterprise advantage.

7:43It's one of the reasons why OpenAI has shut down things like Sora that was consumer facing. They need to compute. It's one of the reasons they've given one and a half trillion dollars in contracts out there. But when you have customers like Oracle who can't actually they keep telling you that they're fine, they're not fine. They're not going to be able to build out this capacity. Right. And so this is all, you know, it feels really rosy. It feels great right now. It is interesting that the company that just raised one hundred and twenty two billion dollars at eight hundred thirty billion valuation is the one that's having a hard time kind of hitting those internal revenue targets.

8:14And they are racing, as the article said, you know, to an IPO. Good luck with that if you keep missing revenue targets internally while you're a private company. And the other thing that seems very difficult to me as they're racing towards this IPO and they're going to be going into supposedly, you know, a roadshow period. It's like you have your CFO saying one thing. This is like two or three times over the last nine months or so. And the CEO of the company that no one really trusts is coming out almost immediately and refuting it. Like what what's going on there? I mean, it just it seems like a dumpster fire, to be very honest with you.

8:49So Seagate numbers are amazing. Karen said, Tim said, Dan said as well. And the boom and bust cycles are clear. We're obviously in the middle, seemingly in the middle of a historic one in terms of boom and the gross margins. I mean, it's extraordinary number. I'm looking at it now. Now, 47 percent was 42 percent in the second quarter. So good for them. Pricing power. Absolutely. If the open A.I. story, if there's any truth to it. And again, I don't know if they refuted it or not. I mean, it speaks to the potential commoditization of the space in terms of what we've seen historically. And if that happens with open A.I.

9:20in the middle of this entire thing, is that sort of the cube that gets pulled out of this puzzle? Because they're the epicenter seemingly of this whole circular financing thing. I think we're a long way from that. But that, I think, is a bit of a cautionary tale. Now, you're not going to see it in backward looking earnings, clearly, but you could start seeing it in terms of the spend going forward. If companies are start to ratchet back, we don't seem to be anywhere near that. But I think the open A.I. commentary, again, if there's truth to it, it should be a little bit concerning. The analyst community does what they do, which is to probably, and this isn't going to be insulting, you have to chase some of the news flow in your valuation, which is that gross margins are higher on numbers we've never seen before.

10:03And that's really the story. The question really is how much can DRAM go up between now and next year? And again, this is why tactically Dan's caution is, look, it's great right now, But markets tend to want to price in the future and probably should be pricing in now. I just think we have to get back to a place where the investor community is still, I think, somewhat cautious in the positioning on some of this stuff. And I think there is a chase going on. And I do think that there's not a question at all about AI. You know, hearing about this morning being a little bit of like a deep seek moment, you know, it's it's not it's it's not a question about demand.

10:43It might be a question if DeepSeek wasn't a question about demand either, but more about the amount spent. That's pretty interesting here. But hyperscalers this week, absolutely. And my guess is talking about flexibility on CapEx will be bullish. Right. Flexibility, meaning rationing back, because for every dollar they spend, they're buying less. Yes. Right. I mean, that's what Seagate's earnings really demonstrate, that they're able to raise prices. Despite long term contracts, somehow prices are going higher. And so for every dollar of CapEx, you're buying less whatever it is you want to measure it by.

11:17Gigawatt, I don't know, compute power and whatnot. And so how do you think about a CapEx forecast that was given and reaffirmed or raised in the last quarter versus this quarter given the backdrop of higher costs? Right. Well, it's got to be higher, right? It's hard to see how it would be lower. But let's go back to the Seagate-Dell analogy. So Dell is an enormous customer for Seagate, probably the biggest customer. Seagate is a small percentage of Dell's revenue, of Dell's costs, right? So that's not exactly the same. And, you know, the same is true for memory. But still, costs are going up. So I expect to see, I mean, it seems to be like Google and AWS, they are just going full bore.

12:03I think they're going to up their CapEx. The one that makes me the most nervous, actually, is Meta, because we really don't have a sense yet of how this is all going to play out for them. We have much more of a roadmap for AWS and Google. And I think that I know we've seen a bunch of cuts, a few. Maybe this is a year of efficiency and CapEx. I don't know. Does that net out to something better cash flow? I'm not really sure. That's what I'm the most nervous about. I feel best about Amazon and Google. By the way, Seagate is higher by more than 16 percent in the after-hour session. From all of this, let's bring in Gene Munster, managing partner at Deepwater Asset Management.

12:42Gene, great to have you with us. First of all, what's your take on this astronomical move in Seagate in the after-hour session? It's pretty clear as we're still in the second inning. And I think, Guy, you were talking about, you know, midway through. All indications are from what we're hearing from these companies, we're still early. I also agree with Dan, eventually there's going to be a quarter of reckoning with these memory companies, with the hardware companies. I just don't see that happening probably in the next couple of years. And so my initial take was, I think this is representative of what's going on.

13:17And what's going on is much bigger than a Wall Street Journal story. What's going on is that we're still early in this, not only the build out, but also the applications that will eventually have a big impact on how we live. So you're not worried about the Wall Street Journal article in terms of the health of the AI trade, demand for AI, the ripple effect on the open AI ecosystem? Well, part of it is we don't know what the bar is. We don't know the number that they're missing, supposedly. I mean, they could be missing a doubling of the revenue. This doubling of the revenue concept is something that is the street is basically baking in right now or investors are baking in.

13:54So that's where the bar is at. So did they have an expectation internally that they're going to grow at 150 % and they're missing that? So that was an important piece that was missing in the journal story today. A second is in terms of the CapEx and some of this concern that they may not be able to meet some of these expectations. Is that as a CFO, you probably always want to have that conversation. But also the story talked about that they have to hit these revenue growth targets. And we've known that since the Oracle deal was announced last September that they have these big targets. And I'm going to bring it all together here is that I continue to believe that they're going to double their revenue this year.

14:33They'll double it again. This is OpenAI next year. But bring it all together is that at the core here, we're seeing more outages of those who are using these tools today than we saw six months ago. OpenAI, I think that's a big tell in terms of what's happened with demand. OpenAI on their Kodaks product, which competes with ClogCode, this GPT 5.5, it is crushing ClogCode when it comes to the most heavy users who spend the most. So if you talk to people who are actually doing real coding on this, not just Vibe coding, is that OpenAI has had a great response to what has happened with ClogCode. And so Melissa, when I put all this together, I think some of these headlines can kind of miss the bigger point, is I still think we're very early.

15:17And this concept that this is a canary in the coal mine, with all due respect, Dan, I don't think that this is, in fact, any sort of indication that we're at the beginning of some sort of cresting point. Yeah. So, Gene, what are you using tomorrow when four-year companies are reporting at five o 'clock? You're probably going to use an LLM, I would assume, to do some summaries of those reports. So, we've gone back and forth, Gene, with investors rewarding these companies for raising capex and then punishing them, too. So here we are right now. We got all of those numbers for 2026 when the company's reported in late January, early Feb.

15:53So Meta is expected to have capex up 70 percent. Amazon up 50 percent. Alphabet up 90 percent. And then Microsoft only up about 30 percent. How do you think? What do you expect to just reaffirm? Do you expect any of these companies to raise full year capex? And how do you think investors will react? So you're getting to really what the core of the excitement part of this week is what they're going to say on CapEx. Unfortunately, we're probably not going to see a ton. I agree, Karen, with your comments about this kind of inflationary piece. They'll probably hint to that. But I think that the substance of where investors question on this broader AI is what does it look like in 2027?

16:32And as a point of perspective is that the mega caps grew their CapEx almost 80 percent last year. The expectations, as you mentioned, are up about 60 % this year. So Wall Street's looking for a little bit of a dial back in terms of that. But for 2027, it's just over 10%. They're expecting essentially to more or less hit a wall. And I think that your point is accurate. That's what we're all going to be listening for. But unfortunately, the real question and the real question about open AI and is it going to make it isn't dependent upon what's going to happen this quarter. It's is there something fundamentally bigger going on with AI that's going to have a transformative effect that they're going to find a way to monetize?

17:13And that is a dynamic question. And it's going to they're going to have to keep reinventing themselves every year to ride that wave. And we're not going to get a good read on that this week. Gene, great to speak with you. Thanks. Thank you. Gene Munster, Deepwater Asset Management. What do you think on CapEx? They raise it. Then what? Good news, bad news? It seems like companies are being rewarded for it now. A couple of quarters, four or five quarters ago, they were penalized. Now, seemingly, you want to see that because it suggests they're actually benefiting from it. I think another question is, at what point, if at all, but I think there will come a point when, instead of paying for these platforms, these platforms are going to have to pay to be on an Apple, for example, and they're going to have to pay them to be part of their consumer products, you know, the consumer service products side of the business.

18:01And I don't think we're as far away as people think. Competition is there. I mean, you go to Google for free. I think there's going to be a day where you go to these sites for free as well. Yeah, Apple, which was up today, by the way, too. I mean, there's a lot of reasons why Apple might have been up on a down day for tech. But I believe in some of what Guy is saying. I always believe in everything you're saying. But I mean, particularly, too, having to pay to be on the platform. And I bring it back to the market because what's happened price-wise in terms of the charts and some of the technicals is also very interesting.

18:31I mean, is NVIDIA a breakout or is this a false breakout? Because, I mean, it took them nine months to get to this place where it looked like they really broke through. Micron went from 420 down to 340, is now back at 500. So, again, you know, the charts to me are telling me that there's been a deliberation. There's been some kind of a view that, you know, we had to deliberate, but ultimately that we're making new highs. And I think if NVIDIA is making new highs, the whole space is going higher. So what I'd like to see when they all report and give us a CapEx number that's likely bigger is something a little more concrete than we think it's a great opportunity, something a little more concrete in terms of a return on invested capital.

19:14You know, if you read Andy Jassy's letter, he's clearly incredibly excited about this opportunity. He's seen nothing like it. But we don't know how does that translate. And so if you're going to be spending that much money, it would be great for shareholders to have some sense of what you think it'll turn into. We are getting some more details on the indictment of former FBI Director James Comey. Megan Cassell's got the latest developments here. Megan. Melissa, former FBI Director James Comey was indicted today over a photo of seashells that he posted last year, something the government says threatened President Donald Trump.

19:46So Comey posted the photo on Instagram last May, and it showed seashells laid out to spell 8647. 86 is a term used in the restaurant industry when a menu item is discontinued, President Trump being the 47th president. The indictment says a reasonable recipient who is familiar with the circumstances would interpret that as a serious expression of an intent to do harm to the president of the United States. So the first count charges Comey with knowingly and willfully making a threat to take the life of and to inflict bodily harm upon the president. And the second charges him with transmitting that threat in interstate commerce.

20:18And, Melissa, you'll remember this is the Justice Department's second time indicting Comey, who has long been a political enemy of Donald Trump. The first indictment, though, was thrown out by a judge late last year. Melissa? Megan, thanks. Megan Casella. Coming up, more after hours action to bring you the results, moving Starbucks, Visa, and Robinhood, and what our traders make with those reports. And speaking of earnings, some big names on the move after the reports this morning. The details from GM, UPS, and Coca-Cola. Don't go anywhere. Fast Money is back in two.

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22:24Welcome back to Fast Money. Starbucks shares are higher by about 5 % here after hours after the coffee chain beat top and bottom line estimates. The company also raising its full year outlook. CNBC's Brandon Gomez was listening to the company's call, which is a little less than an hour in. Brandon. Yeah, Melissa, you hit both those points. Top and bottom line beat guidance raised for fiscal year 26. But the big number was same-store sales, up 6.2 % overall, well ahead of the 4 % that was expected. North America, the bright spot there. CEO Brian Nicol on the call, highlighting several product innovations drawing back consumers.

22:55Still, we know any weight on the consumer's wallet tends to impact this industry. So when he was asked about rising fuel prices and the consumer pullback, Nicol said, we haven't seen a lot of the macro effects trickle into consumer behavior as it relates to Starbucks. But I think we want to be cautious going forward because we're not sure how it'll play out. On the margin impact, the company's CFO spoke on North American Q2 input costs, saying about half of product and distribution increases were innovation-led product mix, and the remainder was inflation-driven by tariffs and coffee prices. That they expect to moderate by the back half of 2026.

23:26Melissa. Brandon, thanks. Brandon Gomez with Starbucks, again, up 5%. So we are seeing progress here, and that's the important thing. Yeah, improving the top line gets to the bottom line. And the guide was, I think, better than 5%, which was really exciting. I'm still not sure. And by the way, I love Starbucks coffee. I love going there in the morning. And I've kind of loved the stock for years, but I don't love it here. I do think it's a case where it's not cheap. I want to wait and see. I don't think the stock should get away from me here. And we're getting such mixed cross-currents from the consumer this week.

23:58But, yeah, I think things are going well under the nickel helm. I think they're getting back to basics and simplicity. And so far, that's showing signs of working. So good for them. I mean, this is the beginning of something maybe. because North America, the street was looking for 4.5 % comps. 7.1 % is a really good number. Even global comps better. So it suggests maybe what they're doing is right. And margin improvement, too. Valuation, yes, Tim is right, is a concern. But is the market going to say they finally figured it out and we're going to look past that? That's the rub. I don't think you chase it at 102, but at least they're showing signs of progress.