Risk On Gets Wrecked… And What’s Behind The Move In Rates? 2/25/25

0:00Live 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. Risk off from Tesla tanking to Bitcoin below 90K to rates rolling back. Investors seem to be fleeing the momentum trades. Will the pain continue and how should you play the moves? And NVIDIA on deck. The chip giant and AI darling gearing up to report tomorrow night. What can we expect to hear from the company and how will markets react? Plus, Home Depot breaks its comp sales losing streak. Lilly gets a boost thanks to a price cut for Zetbound. And Instacart does not deliver on earnings.

0:31How to trade that stock now. I'm Melissa Lecombe, live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Dan Nathan, Guy Adami, and Mike Coe. But we start off with a wreckage of the risk on trade. The tech-heavy NASDAQ leading the market losses today, dropping for a fourth straight session, closing at three-month lows. All but one member of the MAG-7 was down today. The group losing a combined$300 billion in market cap during this session. And take a look at some other high-tech high-flyers, Applovin, Palantir, Intel, all getting their wings clipped. as investors begin a mad dash into safe havens.

1:05Even gold unable to escape today's carnage, the precious metal falling from all-time highs as investors look for even safer places to put their cash. So does a risk-off run from tech have even further to go? Guy. First of all, welcome back, Melissa Lee. It is great to be back. Great to be back. John Sebastian. Yeah, John Sebastian. Welcome back. Cotter, in this case, Melissa. Much better than Cotter. Much, much better than Cotter. I think Gabe Kaplan would have. I think it's let's talk about. Let's talk about the market. No, clearly a risk off day. And the thing that really struck me the most was the fact that yields are now below, you know, 435, which I thought should have been support.

1:42So flight to quality or perceived quality in a form of the bond market. Gold sells off in an environment where it should have actually done well. And then obviously these individual names. But of all the things in the bond markets on the top of the list, the fact that the VIX probably had its highest close in a while is something I think people should pay attention to. I thought for a while that volatility is going to be a story and it's starting to rear its ugly head, Mel. If you think about where the market was most concerned maybe a month ago, it was all about inflation. I think we say this a lot.

2:10What's more critical? What's more anxiety provoking for the market? It's not inflation. It's a growth scare. And so we talked about those those names that we posted at the top of the show. Those are high growth companies, so they're going to be hurt the most. Also, very interesting that in the craziness that we've also, I think, kind of chronicled in the market in terms of some of the go-go stocks, the meme stocks. How about these levered ETFs that have been exposed to whether it's the Mag7 or just NVIDIA or MicroStrategy? So these are places where I think there's been a lot of pain. But if you look at the data that's coming through, and there's a consumer confidence report out today that was the lowest since April 21.

2:46I think consumer surveys are less important than real data in terms of retail sales, but housing, retail sales, service PMIs have all been weaker. So again, you get back to the market that we have and you look at the weakness in the MAG7. And I'll go again straight to the semiconductors, which look like we're getting a bear cross, which look like we are back to essentially March of 2024. The places where you had the growth, the places and this is going into an Nvidia print tomorrow. So it's a gross scare, people. It's not inflation. Well, it's not only a gross scare. It's also a popping of a bubble.

3:18And I don't mean the whole market was a bubble. I don't mean the Nasdaq was a bubble, but there were some very bubblicious stocks. If you just pull up AppLove and Impalantir, these are two names that we've talked a lot about. Most investors who've been buying these over the last kind of few months or so don't even know what these companies do. They don't know. You know, Palantir had a$300 billion. But this was nearly a$200 billion market cap company that has been up 500 % in the last year or so. Same thing for Palantir. So we're talking about a$300 billion market cap for Palantir at one point, a$200 billion nearly for App Loving.

3:50These two stocks, if you put them up next to each other, they look identical. They both just had these blowout quarters in guidance, and the stocks gapped up 25%. They've since filled in both of those gaps. So you tell me whether it's going to find support here. There's no valuation support. There's no support as it relates to these stories in a market like this that's trading at a valuation that it is broadly. So I think when you see this sort of thing, I think it's healthy to see this sort of action come out. I think it's healthy that Bitcoin finally broke that$90 ,000 or whatever you want psychological level because you still have an S &P that's up on the year, which is pretty shocking.

4:25take a lot of that froth out of the market. But is Meta an app loving? I mean, we're talking about the company that everyone could find every reason to own. It was the one thing that was impervious. It's down 13.5 % from that intraday high that it hit, I don't know, four or five days ago after it was completing a 16-day in a row run. So it's the pain within the mega caps that I think is the most interesting. It's the fall from grace. And again, a handful of these stocks are through their deep-seek intraday lows. So remember, we all knew you where you were when you heard that news and what the market was doing.

4:55A lot of those stocks, ironically, not NVIDIA, going into tomorrow's print, which may be a concern for people. But again, all the big boys that we wanted to see kind of rally from that. They did, and they've given it back, and then some. I mean, there are questions about the AI trade that go back to deep seek. There are questions about the tariff environment. There are questions about export controls impacting tech. There's a question about enterprise spending overall, Mike Ho. I mean, if you were to sort of pinpoint the one thing that concerns you the most, because it's not just, you know, mega cap tech.

5:25There's something bigger here going on in terms of sentiment in the market. Something is changing. Well, I think there's two things, really. Dan was sort of talking about it, and that is that there's a lot of stocks in here where the valuations are pretty questionable. I mean, Tesla, obviously, is another one. It's pretty hard to get your arms around the valuation in that one. But even sort of mature big companies that are operating well but are trading at multiples that are hard to justify. I've mentioned Walmart before, I think, is a good example. And another thing to think about, if there's a risk-off type of a market, and everybody's been talking a lot about the fact that we have a lot of passive investing that tends to basically be a propellant for a lot of the largest cap companies.

6:05Well, the opposite's also going to be true, right? If people start taking risk off the table, it's the biggest market cap constituents of the index that are going to feel it the hardest. So I think probably if we take a look at a historical, appropriate earnings multiple for the S &P, it could arguably be 20 % lower than the highs that we saw recently. So, you know, if you were going to have a correction or worse, it probably makes sense from a fundamental perspective. You know, we talked about this last night, Mel, but if you look, you know, I would think I would have thought this as well, except that I look at it all day, every day.

6:38But the SMH is one of the things that everybody looks at. That made its all-time high in July of last year, and it's been trending lower ever since. If you want to pull up a chart, 235 is critical support were basically there now. And Microsoft, which again, one of the most important companies in the world, let alone stocks in the world, is now below$400, another name that probably made its high around that same time. So below the surface, with again, the S &P effectively at all-time highs, the damage is being done in what's theoretically should be carrying the water here. Well, I think the below the surface thing is really important.

7:09Go back to 2021, right? So we had a market at all-time highs. The S &P made a new all-time high the first week of 2022, But under the surface, there was a lot of stuff that worked really well in 2020 and 2021 that started to roll over. It actually brings me back not too differently than the year 2000. And I know a lot of folks who are watching the show, they've been with Guy for the 18 years that the show has been on here. But, you know, it was a very similar sort of thing. I mean, the market, the S &P had made a high. There was some stuff in the Nasdaq that started rolling over. They led to the downside.

7:39But the S &P is always like the Alamo. It's kind of going to be the last thing, the last man standing. If you think about what's gone on over the last 25 years, it's been tech that's always led the way, that's always done the heavy lifting. Some of the names have changed. But when you think about the socks, Tim's been mentioning it's been underperforming for like nine months right now. NVIDIA has been the whole story. But NVIDIA has been underperforming the broad market, too. So I guess the underpinnings of this secular trade seems to be that they're ready to take a little bit of a breather. But this is exactly why Europe is doing better.

8:10I mean, our tech weakness, right, is Europe spent. If you take a look at MSCI all country ex-US, it's up 7 % for the year. The US, the S &P 500 is up, what, 2 % or something like that? China's doing better. Europe's doing better, Tim. Wait, are we trading the globe right here, Tim? We should be. We should be. Well, I'm glad you mentioned international because it's outperformed the S &P, depending on what you're looking at. Europe certainly. I run an international ETF, Idevo. The dynamic for an SAP or a Siemens or a Barclays or a Mitsubishi. So these are dynamics that are really interesting. the days of U.S.

8:43exceptionalism on the GDP front. There's at least a few economists out there saying that the GDP gap between the U.S. and Europe is going to be half a percent, which is as tight as it's been in a long time. So I think you can stay there. I think those valuations are really compelling, and I think you have the dividend yield to go along with it. But I think you have to be careful about assuming everything is going downhill. I want to just put in a positive word for the market here. I think things are a little oversold. I think you've got a dynamic here where some of these defensive stocks were trading so well until about three weeks ago, and it wasn't just because there was growth opportunities elsewhere.

9:15Be careful jumping into names that have rallied that are staples and move 15%. It's always great when we have our emerging market specialists with us, but I will mention— In the house, you mean. In the house. EWZ, Mel, if you recall when we were at the conference at the end of January, we talked about EWZ, the Brazil ETF. That is an emerging market that has been doing extraordinarily well for the last two and a half months, And that is about, I think, to break a 17-year downtrend. So keep an eye on that. In the meantime, the Trump administration is planning to beef up Biden-era chip export controls, further restricting what NVIDIA can send to China without a license.

9:50CBC's Eamon Javers has got more on this. Eamon. Yeah, Melissa, this is a report from Bloomberg earlier today that the Trump administration is eyeing even tougher restrictions on semiconductor exports to China than the recent Biden administration had put in place. and those were deemed to be pretty significant at the time. Citing people familiar with the matter, Bloomberg reports that Trump administration officials are holding meetings to discuss new limits with key U.S. allies and working on a longer list of restrictions that could be put in place in the coming months. The goal here overall is to slow China's technological progress and especially so in sensitive areas like artificial intelligence.

10:28The Trump team is looking at three specific possibilities, these curbs on sales of chips that NVIDIA designed specifically for China, reducing the computing power that can be exported without a license, and putting more restrictions on the types of NVIDIA chips that can be exported without a license. Now, all of this is likely to unfold over the next several months. So we're going to have to wait and see how it plays out. No indication that any of this is immediate, Melissa, but it's something to watch. All right. Eamon, thank you. Eamon Javris, so yet another pressure on the chip sector, something that NVIDIA specifically will be a force to deal with if this comes to fruition.

11:05We should note, too, there was a Reuters report today. R2. Right. Yeah. That there's a pull forward, basically, on the H20, the chip that's made specifically for export to China from the major Chinese firms like Alibaba, Tencent, ByteDance, ahead, probably, of these export threats. Yeah, and there's an argument that DeepSeq did all they needed to with the A100 chips before the ban went into place. And the other thing that's part of that note that you're talking about from Reuters is that apparently there's going to be an R2 release in DeepSeq coming through, which is going to have better coding, is going to be multi-languaged.

11:38And I think it's a case where this is part of what has the market concerned. Every hyperscaler has kind of indicated we're going to continue to spend, because what else are they going to say? I'm not saying that that's also failed in a theory and that it's been proven that DeepSeq is the answer. I'm just saying that the reality is there really is a tug of war out here and deep seeks putting the pressure on. Yeah. The more restrictions that you might find on exports, you might find the deep seeks that are innovating in a way. I mean, you could look in the EV market and look at the competition there.

12:07I mean, BYD is finding a way to get around some of the innovations that we've had here by Elon Musk and Tesla and the like here. So, again, we can either kind of figure out how to work with China or we can have this very adversarial approach. I'm not saying that what these, you know, both administrations have done with this chip, you know, kind of bands is the wrong thing to do. I think for national security reasons, I think we want to get our arms around this. But when it comes to things like EVs and, you know, like microprocessors going into some useless consumer products, I think that's probably less interesting.

12:3874 percent gross margins to me. I mean, I think that's what you have to look for. And I'm hard pressed to believe they're going to get there. And if you start seeing margins, I'm talking about NVIDIA, decelerate, I mean, that's when you start to get concerned, because then all of a sudden you start looking at their revenue vis-a-vis their EPS and say, you know what? They've been out earning their revenue stream and margins are going to start to contract. That's when you get a problem with the valuation. All this, of course. NVIDIA is reporting earnings tomorrow. For what to expect, let's bring in Fast Money friend Gene Munster.

13:05He's a managing partner of Deepwater Asset Management. Gene, always great to see you. Hello. Hello. So, Wedbush is saying that they're looking for a$2 billion beat and a$2 billion raise. That's what the market's expecting. Do you think they deliver? Expectations are so high. Yeah, no, I think that they will deliver on that, in part because supplies improved meaningfully over the last month to two months. And so, that really is the bogey, that kind of 1.8 to 2 billion beat for the quarter. I would mention that I think there's something bigger at play here. and just to kind of shortcut what to look for when these numbers come out.

13:45Guy just mentioned the gross margin number. That's important, but I think what's even more important is that we're going to see two press releases that come out. One, the earnings, and second, a letter from their CFO. In that letter, it will likely be some commentary about what is the demand, how far they're out with the supply-demand equilibrium related to Blackwell. And I suspect that they're going to say we're four quarters out, basically through all of 2020 calendar 25 they're going to be essentially sold out of Blackwell if that language is in there I think that that is going to be a reassuring comment for AI investors if they maintain that it's just several quarters out like she said in last quarter's letter I think that's gonna send kind of a shockwave so that's probably the piece that I think investors are going to dig most into related to the NVIDIA earnings.

14:39Do you think they address DeepSeek? Yes, I mean it's going to come up and I think that Tim had some comments about like you know these hyperscalers and what they're spending they will reiterate that and I think that I just want to emphasize a piece related to DeepSeek relative to what the hyperscalers said. Going into DeepSeek just before it came out, the hyperscalers were expected to increase their CapEx spend by 20 % in calendar 25. Now it's expected to be just above 40%. That's a meaningful move higher. And so I think that really is important. And I think the substance of that and we may not see that in how Nvidia trades on Thursday morning.

15:19But I think the substance of this is that the AI hardware trade will last longer than most investors expect and understand kind of the apprehension about the funk that the AI trade in is right now. But if what these hyperscalers are seeing is true, companies like NVIDIA should have more upside throughout this year than investors are currently anticipating. So, Gene, what's the other side of that, though? So I hear you, and I kind of agree with everything you just said, but DeepSeek introduced a level of at least uncertainty around what spend means and who benefits from DeepSeek. And have you gotten bullish because of DeepSeq and other directions?

15:55Yeah, I think that I'll say what consensus is, is that consensus is DeepSeq has been a positive for AI hardware. It's NVIDIA stock hasn't reflected it. Market's not buying it, but that's what the, I think that's the substance of this. I think when it comes to the cost of AI inference, it's going to go through the floor. Sam Altman said after deep seek that they expect the cost of tokens to go down 10 to 12 x per year for their second tier model i mean that's basically through the floor and i think the third piece to this if those two happen we get this hardware build out we get the cost of compute or the cost of inference declining i think you're going to see some just profound impacts and so i'm still bullish on this market i think that what we're seeing right now is a funk and i think that we still got two great years left to this AI trade.

16:45Gene, you've had a great call on this, the trajectory of the demand for this over the last couple of years. It doesn't seem like you're pulling back at all. What excites you? Like we don't spend a lot of time talking about Apple, Apple intelligence. I think we all agree to date, it's not particularly exciting. Do you see an opportunity for an Apple if the cost of compute's coming down, the cost of inference, doesn't that make it that much more attractive for developers? And talk to us a little bit about what that could mean for Apple. Yeah, we saw a little bit of that too in terms of how the market reacted when DeepSeek came out.

17:15Apple tended to do pretty good because that piece of the cost of inference goes down. That should help the likelihood that developers come and build these AI applications. And so I think that Apple is a beneficiary today. I think their shareholder meeting was largely scripted. There wasn't much of anything that came out of substance beyond the fact that the company continues to believe in this opportunity. It's going to take longer. I think the cost of AI declining is going to be a positive for Apple. Probably six months out before I think we get a really compelling Apple intelligence, but I think it is around the corner.

17:51All right. Thanks, Gene. Great to see you. Gene Munster. Thank you. And do not miss CNBC's special report tomorrow following NVIDIA's earnings. John Fort will speak as CEO Jensen Huang, covering the numbers, AI strategy, chip demand, and more. That's 7 p.m. Eastern time right here on CNBC. Mike, if you expect some trouble in NVIDIA's report, how do you protect yourself here? Yeah, I think, you know, one of the things you can do right now, the options market is implying a move of about 8.5 % after they report, which is not that surprising when you consider, I think, 8.15 or so is what the company has averaged over the last four reported quarters.

18:27I will say that two of the bigger drawdowns we saw were at this time of year in 21 and in 22 when they reported. So I think one of the things you could do is try to minimize your premium outlay by a downside put spread. I was looking at the 125, 115, and then sell an upside call at the 140 strike. That's going to basically have no net debit or credit. And it gives you meaningful protection. It's about 7.9 % worth of protection to the downside if the stock should fall by the implied amount. But you still have upside to almost 10 % up to that 140 strike. But, you know, we took a look and over the last 44 reported quarters, this would have helped you about 16 times, would have been a knock against you about eight times.

19:08And the rest of the time, it wouldn't have had any net impact to hedge yourself this way. So in general, I think this is probably the best way to do it. All right. Well, we got some breaking news here. I want to get to on Supermicro, the company filing their long delayed 10K in time for the Nasdaq filing deadline. Christina Parks-Nebulis has got the details. Christina. Well, delinquent no more. The server of summer, like you mentioned, finally filing their delayed quarterly and full year results. A quick recap, though, for Q1 and Q2, revenues were a miss. And we're not going to compare earnings per share numbers because analysts use an adjusted figure.

19:40Supermicro doesn't provide comparable numbers. This is a company, though, just a quick recap. They had a short seller go after them last year. An auditor quit. There's an ongoing DOJ and SEC investigation. And yet the stock has jumped, what, 50 percent into the close today, year to date. In the risk section of the financial filings tonight, Supermicro saying that there is no material impact on the company's consolidated financial condition, results of operations or liquidity as of December 31st, 2024. So seen as a sign of strength. And then the company also ensuring assuring investors that their current cash and cash equivalents will be sufficient to support their business operations and interest payments for this entire year.

20:20So those are two positive notes in the risk section, and the shares are jumping 17 % on this. Guys? All right. Christina, thanks. Christina Parsinevelis. This is a crazy story, I mean, that we've been following. And they're back on the NASDAQ now, I guess. They're not delinquent. Prior to your trip, you know, I think the stock was trading 46, and we said, listen, you can't short the stock. It probably has room to 72. I actually think it got to 66 and then backed all the way back down. Now, here we are. So personally, I think you're looking for a level where you pull the ripcord on this thing. And I do think it's in the low 70s.

20:55I don't think it's fixed by any stretch, but this could create a real huge short covering opportunity. Coming up, a lot of earnings action to bring you still. Instacart, Caesars, Workday, much more all on the move after hours. The details and the numbers from the quarter ahead. And speaking of results, Home Depot heading higher on the back of its report this morning. And for a store known for fixing things, the retailer is breaking a key losing streak. How the sales are stacking up and fast money returns. Welcome back to Fast Money. Bitcoin plunging below$90 ,000, hitting a three-month low. The cryptocurrency now nearly 20 % below the record high hit on Inauguration Day.

21:31That's bad news for strategy, formerly known as MicroStrategy. The Bitcoin proxy play falling nearly 13 % today. Our own Tanea McKeel has more of these moves. Tanea. Yeah, Melissa, Bitcoin sort of at a critical juncture here if you're not a long-term holder. hovering under 90K, which is the bottom of the range Bitcoin's been trading in for the past three months. And then MicroStrategy, you said it, lowest closed since the election after it just bought more Bitcoin yesterday. And what you're seeing here is definitely part of the overall risk-off move in markets. I know that there was a huge crypto hack last week, biggest in history.

22:03And it is interesting because bullish sentiment in crypto and the enthusiasm around our new pro-crypto administration is still very high. And the thing is that since we got Trump's executive order on crypto at the end of January, which I think was widely anticipated and for the most part very well received, crypto investors haven't had a clear catalyst to get them through this macro uncertainty now. So investors I spoke with today say there's certainly room for Bitcoin to pull back, maybe all the way to 70K if it doesn't retake 90K until we get that catalyst. Melissa? Today, I'm just curious what your thoughts are on strategy.

22:39The average price of their Bitcoin holdings is$66 ,000. And you mentioned$70 ,000 as a key level that investors are watching. I'm wondering if there's no coincidence to those levels. Yeah, certainly. Something on a lot of people's minds. I was talking with Mark Palmer from Benchmark today, and he was looking at that contract and was basically explaining that strategy has it set up in a way so that there's no trigger clause. So, you know, there should there should not be any fears about a new low in Bitcoin, you know, in terms of forced liquidations or anything like that. OK, Tanea, thank you. Tanea McKeel on Bitcoin's massive move.