Steel Deal In Jeopardy… And Customers Pause On Microsoft’s Office AI Assistant 9/4/24

0:03Live 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. No deal. Shares of U.S. steel sinking on reports the White House may block its takeover by Japan's Nippon Steel. The implications of the move and what it could mean for the future cross-border M &A. Plus, a crude crash. Oil prices falling into negative territory for the year and energy stocks are dropping too. Is there any juice left in this trade? We'll debate that. And out of office, Microsoft customers reportedly pressing pause on the tech giant's AI assistant. What does this mean for Microsoft's place in the AI race?

0:34I'm Melissa Lee. Coming to you live from Studio B at the NASDAQ, on the desk tonight, Tim Seymour, Karen Feinerman, Steve Grasso, and Guy Adami. We start off with the latest wrench thrown in U.S. Steel's potential$14.9 billion sale to Japan's Nippon Steel. The stock plunging as much as 24 percent after twice being halted for volatility amid reports that President Biden is preparing to block the deal in an effort to keep the company U.S. owned and operated. This morning, U.S. Steel warned if the deal falls through, it would have to close its Pittsburgh plants. and move its headquarters, which would result in more than 11 ,000 job cuts and nearly$140 million in lost state and local tax revenue annually.

1:13For more on this ongoing battle and the potential fallout, let's bring in our senior Washington correspondent, Eamon Javers. Eamon, what's the latest? Well, hey there, Melissa. The Washington Post reported earlier today that President Biden is set to block this merger soon. Now, I reached out to a White House official to confirm that, but the official would only say that the Committee on Foreign Investment in the United States which is known as CFIUS, has not transmitted a recommendation to Biden yet. And that would be the next step in this process. Notice there, Melissa, that the White House official did not deny the Washington Post report.

1:45So it may be that presidential action is coming here, and they're just not quite ready to say that in public yet. Meanwhile, U.S. Steel telling CNBC they haven't heard anything yet on this, but they don't believe there's any national security reason to reject the deal, given that Japan is a staunch U.S. ally. And U.S. Steel, as you say, the CEO, David Burrett, told the Wall Street Journal earlier today that the company may have to close plants if the U.S. government does block the proposed takeover by the Japanese firm Nippon Steel. The threat to close a plant in the battleground state of Pennsylvania really opens another political front in what is already a highly politicized takeover effort.

2:25The deal is opposed by both Donald Trump and Kamala Harris, who announced her opposition on Monday in an effort to reassure American politicians. Nippon Steel said today that U.S. citizens will make up the majority of the board of directors and core senior management members would also be Americans. United Steelworkers Union leadership today, though, they denounced comments by U.S. Steel's CEO calling the company's leadership, quote, greedy and reckless. The union said the deal may enrich shareholders and management, but, quote, the merger sells out the future for workers, the retirees, the communities, and jeopardizes our nation's ability to produce the melted, poured, and finished steel products that we need for our national defense and critical supply chain.

3:11Melissa, back over to you. Eamon, it seems curious to me that they could reject this or the Biden administration could ultimately reject the deal based on national security reasons, given Japan is a member of G7. President Biden was just at a G7 meeting. They wanted to increase relations with G7 countries, particularly Japan, particularly countries in East Asia. What is the excuse that they could possibly give to not approve this deal? Well, I think you heard it there in the union statement, right? It'll be all about supply chains and protecting those for the defense industrial base of the United States.

3:43I think that's the argument that you'll hear. We'll wait and see if that does come through. But look, this is about politics as much as anything else. This is about Pennsylvania, plants there, and unions in Pennsylvania. The union doesn't like this deal. They don't want it to go through. Both Kamala Harris and Donald Trump are making a hard pitch for the union vote in the industrial Midwest in this election coming up in November. And so both of them are saying they're against this deal. I think either of these two candidates, if they happen to be the incumbent right now, would find a way to block it.

4:15I think you're going to hear that that way is about supply chain and protecting the supply chain for U.S. defense manufacturers. But we'll have to wait and see. Eamon, it's Karen. Thanks for coming on. Does this this I don't know if it's actually been decided for sure. I know there's sounds like they're going to block it. But what about CFIUS? Doesn't wouldn't that whole purpose of the CFIUS review to be addressed? This address this issue of supply chain and why not wait till then? Are they circumventing that entirely? And if CFIUS says, OK, can they just say, well, executive order, we're not going to allow it anyway.

4:50Well, I think what we're teeing up here is a CFIUS recommendation to President Biden not to go through with it on supply chain grounds for the defense industrial base. But that's why the White House official, when I reached out today, was cautious to say CFIUS hasn't made its recommendation to Biden yet. And so therefore, the White House is not going to comment beyond that as of right now. I think we can see where this is going. And look, remember, CFIUS is a committee made up largely at Treasury, but also U.S. intelligence agencies and other national security entities participate in CFIUS. It's a very secretive process.

5:24and these sort of decisions, you know, it's like watching the Vatican. You wait for the puff of white smoke. You know, CFIUS kind of issues a decision and that's it. Presidents, of course, appoint, you know, most of the members who are on CFIUS. And so presidents tend to get what they want when CFIUS looks at these things. All right. Eamon, thank you. Keep his post with Eamon Javers in Washington for so. It appears that it is a political issue at this point. No surprise. Guy? Clearly. I mean, again, we don't typically go down this road, but for a second, I guess we will. I don't get it either, to be honest with you.

5:57It'll save thousands of jobs. Nepon seals probably invest a billion dollars, keep it in Pittsburgh, keep it in the state of Pennsylvania. Nobody else seems willing to step up to the plate here. I don't understand, to your point, I mean, this is a pretty staunch ally for, you know, many decades. So I don't get it. You know, I could understand, you know, former President Trump having similar feelings about this, understanding sort of the ground that he walks. But this makes zero sense to me in terms of what this administration would be trying to do. Yeah, it's all about the union worker, right? So it depends on who's going to court the union worker, how you're going to get there.

6:34I do see I can make the case for both sides because there is a defense mechanism to it. You don't want to be reliant on a foreign country developing or making steel in your country. And that's why it's bipartisan. So I could play that role, too, but I get that it's about a swing state. It's an election year cycle. It's about the unions, and it's a hard press for those unions. Other than that, what's more important is if it's not carved in stone right now, then you're going to have a great opportunity to maybe nibble or play it through options or somehow, because maybe it changes with the wind tomorrow.

7:16Maybe they're just putting out feelers with this. You think that it might ultimately go through? I don't know if it will ultimately go through. I know that it's bipartisan against it. But a lot of times you kick the can down the road. They're running out of time to kick the can down. They need support from Pennsylvania. You have mail-in ballots that are starting pretty soon. So all of this is political. This isn't about U.S. Steel. This is about the state of Pennsylvania. I mean, this isn't even about Gary, Indiana and some of these other plants. Nipon has said$3 billion will go into these plants right now.

7:47No layoffs until 27. Japan is an ally. They actually want to compete against China. He knows the real steel problem is China. I mean, this is the most absurd thing if you want to try to argue in favor for market and strategic forces. And it's as if we can't make all the steel we want in this country. We sure can. In fact, there's too much steel. And that's part of the problem. So this, to me, is all about CFIUS and where this is now classified information. They don't have to talk to anybody. And that's why this deal, I think the bigger now thought for us is what do tariffs mean for this economy?

8:18And what are those tariffs that were left over from the Trump? By the way, you know, both sides, both sides want this. Biden kept all of Trump era tariffs. So it's not as if they got rid of the member. Remember that U.S. steel to 2018 guy? We're sitting on this desk. U.S. steel was probably a forty five dollar stock cruising with steel prices higher. And we dropped twenty five percent tariffs on China. This is this is more about China. And not just tariffs for Steele, tariffs in general. I mean, if this is the protectionist tone that you'll get from either administration, whether it be a Harris or a Trump administration, then that's sort of we're getting a glimpse of what that future could be.

8:53Yeah. Inflationary. Yes. But just going back to just the deal part for a second and the politics, how it's obviously so so much a political football more than anything else. if CFIUS were inclined to not allow this deal, wait for that as cover, and then decide, you know, CFIUS has spoken, we're not going to let it go through. Instead, they want to front run that. Get credit for it. Right, and get credit for it, which I understand, and that both sides really are in the same position. That's sort of interesting as well. But I do think, to your point, what does that mean if we become very xenophobic in terms of any manufacturing prowess outside of the United States?

9:32Incredibly. We are. Inflationary. And you could have, if they don't let the deal go through, as we all suspect they're not going to let the deal go through, you could have them try to bail out the steel industry. Yes, you're right. Which becomes even more inflationary, and you're directly buying votes then. So you're going to have, if he says, well, I'm going to block the deal, he's going to bail out the steel industry. Right. Or maybe Cleveland Cliffs can come in. Cleveland Cliffs had to get it. And borrow money super cheap from the government or some kind of help. Exactly, exactly. And the stock did drop on the back of this news by a little bit, but sort of indicating that maybe that's a possibility they could step back in.

10:10And again, if you go back to those Trump era tariffs and you look at the impact, you know, the numbers are do your numbers again. We're saying both sides here, so we're not being political because it's important to point that out. What we've also said is both sides of the aisle. I mean, the lines are so blurred in terms of what were traditionally party lines in terms of fiscal dynamics. None of it's deficit friendly. None of it's party, I think, specific. So now having said that, the Trump era tariffs, which were kept by Biden from 2018 and 2019, were a tax of$80 billion on American taxpayers in 2020.

10:42That's at least what the numbers say, you know, whether you feel it or not in your pocket. That's the reality that we're all talking about, what we're looking at for the next few years, if this is where we go. If we could put a chart up. Tim mentioned 2018. Throw a longer term chart and you'll see exactly what he was talking about. I mean, U.S. Steel was lower left, upper right. Those things get announced and the stock got cut in half in the course of a couple months. Number one. Number two, what if a U.S. company wants to make an acquisition in Japan? What's going to happen there? So I just don't.

11:10Again, that's why I don't run for anything. But this doesn't make any sense to me. Do you run from anything? Never. OK. Nice. Name of a song. Well, no, but he says he's not running for anything. I just want to know if he runs from anything. I would never think he would. I don't want Van Halen. We also mean it from from an M &A perspective. if this then limits the potential acquirers and acquisition targets out there in the world? If a G7 country isn't a friend enough of the United States to buy a U.S. company, then who is? I mean, that's the ultimate question. Yeah, I mean, it is surprising, right?

11:42But I guess there might be other industries that aren't so fraught. Yeah, but it's chill. If you're a banker, this is not a good thing. But China's dumping steel all over the region, all over the place. And this is, again, Japan doesn't have any interest here. Japan wants to work here. They want to grow here. They want to joint be able to compete against China, which you would think would be the bigger goal in the steel industry. I'm just talking about what goes on. What happened? Just not even to push back, but just to broaden the conversation out. If China is the reason, how does this help the situation or does it just push the situation off the table to another day?

12:22Do you want the U.S. steel industry to shrink? Do you want the U.S. steel industry to... It has. Right. Further. Further. As it should have. So if you get a light... As it should have. As it should have. As you get... So the U.S. steel industry has not adapted. They have not... There's no efficiencies. Right. So that's why we're... That's why Nippon has to come in to buy them out so that they afford them the money. But we haven't... There's a bigger reason why... What's the reason why they haven't been adapting? What's the reason why they haven't changed? That's just kicking it down the road again if we let the thing go through.

12:56All right. We've got a news alert we want to get to on NVIDIA, the company denying reports. It's been subpoenaed by the Justice Department in its antitrust investigation. Seema Modi's got the details on this. Seema. Melissa, NVIDIA confirming it did not receive a subpoena from the Department of Justice disputing yesterday's report from Bloomberg that claimed antitrust officials were looking into the chipmaker. NVIDIA went on to say, nonetheless, we are happy to answer any questions, regulators may have about our business. We did see shares of Nvidia close lower on the day by 1.6 % and remain about flat after hours.

13:30The stock is still down about 24 % from its June high. What semiconductor investors will be looking for next? Broadcom earnings tomorrow. Then we have Taiwan Semi, its monthly sales figures next Tuesday. That's going to be an important barometer for the entire industry. And then we count down to Nvidia CEO Jensen Wang, who speaks at a Goldman Sachs conference next Wednesday. Melissa? All right, Seema, thank you. Seema Modi. Karen, you're just asking about catalysts. It looks like there are some catalysts. Yeah, I was just thinking that. Okay, right. That's, well, this one, this subpoena, the not subpoena, I don't think that's, that was not what was responsible for the downfall.

14:05It was more, okay, what is the promise of AI and the growth trajectory and whatnot? We'll see what he says. He's, I mean, Jensen's a good speaker. He's obviously, he's master at multiple things, but the ability to speak to the market in a way that the market likes to hear things is one of his sort of superpowers. Technically, the stock probably stopped, Steve, as in front of him, I'm sure. But at a moving average, probably where it should have stopped. That's the good news. Bad news, I mean, all around NVIDIA, chips are starting to fall. I mean, look, C3 AI, AI is a symbol. Look at that in the after hours.

14:38I mean, again, it's a series of these companies sort of tangentially to NVIDIA are seemingly falling by the wayside in terms of their stock performance. So if you're starting to connect the dots here, you're saying, hmm, it's just a matter of time before something's going to happen here. And this is a stock that went from 140 to 90 over the course of a couple of months. The bounce was significant, but here we are at 110 again. So I'm still sort of leery about the whole trade. And that was Verone's point last night, Chris Verone, who was sitting in your seat last night, saying that all the ancillary companies in the AI trade around NVIDIA, around the picks and shovels, the market's gone after them.

15:09So the next stop is potentially an NVIDIA. Yeah, and then, you know, you have a Broadcom announcing tomorrow after the bell. And again, they're not quite nobody situated like Nvidia here. But again, this is a stock that has been rocketing. And the dynamic is ultimately what are you willing to pay for for Broadcom's earnings? And if you look at the semiconductors, at least at midday today, they were only about six percent above the August 5th. So remember, the day we went straight down and semis were the biggest. You know, they're only about five or six percent above where they closed that day, which tells you the pressure that we're all talking about in the space.

15:43I've been trading this really short term trading this. And when you look at the 100-day moving average, it's 110 and change. Until the stock gets back above that level, I don't think you should be trading it. Because I think you could possibly see a fade to the 200-day moving average, which is$88 and change. Big move from here. September, not a great month for semiconductors, not a great month for the overall market. Did you sell some of your position? I'm completely out of it. So I've been trading it 100%, sold it in the 120s, dipped in again and sold it again on Friday. I haven't been in it this week, and I don't plan on being in it until it stabilizes above the 100-day.

16:20Meantime, oil prices continuing to crumble, with WTI crude falling below$70 a barrel to settle at its lowest level since last December. The pullback fueled by fears of weak demand, raising speculation that OPEC could delay production increases that are set to begin next month. Energy was also the worst-performing S &P 500 sector today. It's going to be interesting to see what happens tomorrow. I don't want to get too in the weeds here. Tim probably sees it as well. But there was just a huge draw. You know, you get these statistics out. There was a 7 million barrel draw. The street was looking for a million barrels.

16:50So we'll see if that creates some support. But the weakness we're seeing clearly is on the back of global weakness, specifically in China, but here in the United States as well. I mean, the ISM data recently has not been good. So as much as the geopolitical risk is out there, the supply demand imbalances are still sort of skewed towards being bullish. I think what's outweighing everything right now is the economic weakness. Now, people say that's a positive for the consumer. I say, you know what? Yes, maybe on the margins, but the bigger story is the weakness that we're seeing. How about energy stocks?

17:17It's in your acronym, your BLYSEP. Yeah, so Chevron, I feel comfortable with. Again, so it gets back to this isn't, I don't think, really as much about demand concerns as it is supply side, which to me is what it's always about in oil. So the moment of truth for OPEC is, first of all, if they're raising output, that's a good thing in terms of demand, just to be clear. But the problem is this is happening at a time when the U.S., Canada and other Western Hemisphere producers have been increasing output. So do you fight market share or do you fight prices? And I think this is the conundrum they're in.

17:48If you look at that long term oil price, you know, around 70 bucks, we break lower from here. We could we've got some room. I would argue and certainly until this week, I think it was an argument I'd win that oil press volatility has been extremely low over the last six to nine months. But now, I mean, it's game on. It's also in your acronym. It is. Helm. It's not the ticker, just to be clear. It's energy. E for energy. Right, right. E for energy. Totally not the way you play the game. But putting that aside. Oh, my. Yeah, putting that aside. You know, this. I don't know what is going to happen in the short term with energy prices, but I really have always believed value will out, which means ultimately there's a price that these things trade at that, I mean, you can still make a lot of money as an oil producer right here.

18:35So I think ultimately we will see value created. That hasn't happened in the short term, for sure. If you could, Guy, get special dispensation to amend your acronym and remove the C from CLAM and make it a clam or something else, would you at this point in the year? My CLAM, I am steadfast. I am sticking with it. I have no issue with the C and the CLAM. And I'm with Tim on this one. You know, ExxonMobil, I think, closed at 114 and change. It has not been great, but it hasn't been horrible either. I mean, Conoco and Chevron, not particularly great, but you can make a very compelling case. And, oh, by the way, Warren Buffett continues to add to his energy.

19:13So he sees something I think the market is not seeing yet. But you get a rotation out of technology, it will find its way into energy. Coming up, a rough day in retail. Dix and Dollar Tree both dropping after their latest results. What has investors checking out of these names? Plus, a big call on Live Nation as Wall Street gets bullish on the name. Why analysts think this company has a backstage pass to profits. Don't go anywhere. Fast Money is back in two.

19:45Welcome back to Fast Money. Two retailers getting slammed after posting results this morning. Dick's Sporting Goods dropping almost 5 % despite a beat on the top and the bottom line. The company issuing weak full-year guidance. Shares had been down more than 10%. And Dollar Tree plunging after also lowering guidance. Discount retailer missing on the top and bottom lines. Results echoing its competitor, Dollar General, which fell last week. That stock posting its lowest close since 2015. So that really tells you, at least for the Dollar Tree segment of this story, what's going on in the much lower end consumer.

20:18That's what I believe. I mean, now it becomes sort of a trend. I mean, Dollar Gen, Dollar Tree, we've seen it across. And five below. Five below. I mean, we've rattle all these things off, and I think it's concerning, and we rarely use a word like this, but DollarGen crashed. DollarTree has crashed. And if you look at a longer-term chart, you know what? You'll see exactly what I'm looking at here. So one has to ask themselves, what is going on here? I mean, clearly there's a pulldown to Walmart from the higher end. Good for Walmart. But then people are trading down from the dollar stores to what?

20:47Now, I understand part of it is probably inventory and prices. I get it. But I think one has to ask themselves, what is going on with the economy where these stores are doing so poorly? Well, the commentary about the households with more than 125 ,000 going to buying as needed as opposed to buying as wanted. And also fewer parties being thrown, parties with fewer people, like people. We're throwing fewer parties. I mean, that's obvious. I mean, it's just. You're here on Fast Money or you have to see more households? More serious about our work. No, I look at Dollar Gen, Dollar Tree. To me, this is a seminal moment because I think these are structural questions and maybe existential questions about their business model, about the format.

21:23So between inflation and I think, again, cost both in labor that aren't getting better, but also the product line, there's only so much they can charge. And they can only, you know, the dollar store is now the dollar 25 store or it's the how about the section that's five bucks and below store. And I think that's the story. They didn't just cut EPS. They destroyed it. And this was after nine months of already preparing for this and cutting rates. So I think it's not a time to chase these. And plus Dollar Tree is still trying to deal with closing some stores from family dollar. Right. So I hear what Guy's saying about what happens to that echelon of income.

21:59But I think Walmart is just stolen share from all of these. Right. So as he said, good for Walmart. But I think people are just shopping at Walmart and this whole sector is on a limited time basis. Yeah, it does make Walmart look that much better. It really does. Right. I think, yeah, kudos to Walmart because they're just getting it done. The scale of Walmart is so huge. The logistics build out of Walmart is gigantic and it's hard to compete. But also Target has been able to do a better job as well. So disappointing, but it should be cheap. The only issue with Walmart, as someone that's owned it and loves the story, what are we paying for Walmart?

22:42At 33 times, you know, I mean, this is brick and mortar. I don't know. All right. There's a lot more Fast Monday to come. Here's what's coming up next. Front row seats for your portfolio. Why analysts say Live Nation has backstage passes to profits and the upside they see from here. Plus, a miss for Microsoft as its office AI plans hit a snag. The issues causing customers to press pause on integration. You're watching Fast Money live from the NASDAQ market site in Times Square. We're back right after this.