Stocks Close Off Day’s Highs, and Dollar General Tumbles, but Dow Hits a Record Description 8/29/24

0:01And we do live from the Nasdaq market site in New York Times Square. This is Fast Money. Here's what's ahead on this action-packed hour. A sigh of relief. The Dow roaring up. With the S &B and NASDAQ shrugging off NVIDIA's post-earnings fade? Is this a sign the bull run can keep rolling on? Plus, call it Disaster General. Shares of Dollar General getting shredded, prompting one of our traders to question the whole mortality of the format. Later on, inside Goldman Sachs' golden run, Google's new legal headache, and a rare ray of sunshine from Intel. Yes, Intel. I'm not Melissa Lee. I'm Brian Sullivan coming to you live from the studio, Studio B, at the NASDAQ Market site.

0:49And I can assure you, even as a fill-in, I'm better than the Mets relievers. On the desk tonight, Courtney Garcia, Guy Adami, Tim Seymour, Mr. Met, and Carter Worth. All right, everybody. We are going to start with the markets losing a little bit of steam late in the day. It's the end of summer. Got a three-day trading break ahead. We did close well off the highs of the session. The S &P falling into the red right at the close. The Nasdaq shed two-tenths of a percent. Both, though, had been up a percent or more earlier in the day. And since, folks, we are guessing that some of you may care about NVIDIA, one of 42 times I say that tonight, let's talk about it.

1:30And NVIDIA closing near its lows of the day, losing more than a 6%. Apparently, a bullish forecast, simply not bullish enough. We'll go deeper into NVIDIA in just a moment. Because it was a little bit better for the old Dow, notching a record intraday and closing high once again. And random and interesting, Guy Adami, the Dow up more than 7 % from its lows of the month. It's like NBC, the more you know. So, Guy Adami, NVIDIA, big numbers, apparently not big enough, market unimpressed, but do you take anything away from the fact that NVIDIA did not bring down the entire market? Welcome. Thank you.

2:12Good to have you. I learned something. I'm going to answer your question, but Nancy taught me something before the show. Apparently, your tribe is your vibe. What was that called? Or you attract your tribe by your vibe, and so we have a great tribe here tonight. We do. Just wanted to throw that out there. Number two, yes, it's encouraging that NVIDIA down whatever was down today. The S &P closes unchanged, and it didn't drag the rest of the space with it. That is encouraging as well, without question. The real issue, though, is, is this the beginning of something? You know, NVIDIA, seemingly a great quarter and all.

2:43Margins were flat. Revenue, the guides higher are now less and less. In terms of absolute numbers, obviously greater. But the magnitudes have become less and less. And at a certain point, the market's going to say, you know what, we're the other side of this. And I think that's when things start to turn. You said the beginning of something. Yeah. Good or bad? Bad. Bad. Because, look, the numbers are staggering for NVIDIA. But people are going to start to say, OK, again, the magnitude of the guides have become less and less in terms of percentage. More and more in terms of absolute numbers. But the percentage guides are not.

3:15We went from$7 billion to$11 billion a year and a half ago. The market championed that. We're not seeing anything close to that in percentage terms. Markets going to start to look at price to revenue and at 20 times next year's revenue. This is historically extraordinarily expensive, regardless of what you think about the space. All right, Tim Seymour, comment on that. I guess Guy Adami is calling it a Michael Jackson market because he's want to be starting something. And maybe this is not the start of something good. Agree or disagree? Well, I think your Mets jokes need to beat it. And I consider you a guy who's not in a year.

3:50You're not a yes man. So taking Adami's bad jokes when, in fact, his Yankees lost two of three to the lowly Nats in the nation's capital. But we're here to talk about NVIDIA, aren't we? We're here to talk about a company that ultimately, you know, what I heard from those numbers and what I've seen from the analyst community is that they can put a 35 multiple on a company that's going to grow EPS about 35 to 40 percent over the next three years. That should be good enough. And I agree that the market dynamic here has been somewhat troubling in terms of where it's been NVIDIA taking one third of the Nasdaq's returns this year.

4:22But the fact of the matter is NVIDIA has underperformed the S &P by almost 15 percent since it peaked somewhere in mid-June. And the market today is the day when you had the equal weighted S &P make all time highs, the S &P value ETF making all time highs. So I think the market dynamic is something that we digested this. And I think we got enough of what we needed to do. I don't you know, I would be not surprised to see Nvidia up tomorrow. And I think in a backdrop where we have a labor market that isn't cooling too quickly. This is an environment for mega cap tech. And so that's really, I think, today's story.

4:56Today's story is that the market overall since that July CPI has been broadening, has been rotating. And at times that our word in rotation seems painful. But today's price action really has to be considered a relief. these numbers by NVIDIA. If you read both the analyst community and the buy side community, this was enough to keep the market doing what it's doing. Well, Courtney, there's a firm by the name of Goldman Sachs and Goldman Sachs had a note. I don't know if it was today or yesterday, but basically it said, and I'll summarize it, the market's going to keep going higher because the algos, the hedge funds, they're just going to keep buying.

5:30It's going to buy no matter what. They didn't buy NVIDIA today, but from a macro perspective, do you still see the trend of the market as up. Because every time we get a dip, buyers come in. Yeah, and I think some of the reason you're seeing that happening is there's still so much cash on the sidelines that at some point does need to make it in, especially as rates come down. I think that's where some of that comes into play. And that's on both the institutional and the retail level. But I think what I really like to see today is the fact that the markets were not dependent on NVIDIA. And really, they're focusing on some of those bigger picture numbers.

5:59GDP got revised upwards. PCE came in lower. So So really, you're seeing economy growing, inflation coming down, the Fed's likely cutting interest rates. All of that is a really good backdrop for the overall markets. And if you do continue to see earnings accelerating at a slower pace for those MAG-7, but the rest of the markets are at such good valuations that are going to have accelerating earnings going forward, yes, it's the shift in what's doing well. And Tim points out the equal weight is actually starting to hit all-time highs, or actually outperformed the S &P 500. And I think that that kind of story is what's going to continue here.

6:31Yeah, because it feels like this rotation. Everybody bought Apple a number of years ago. They still are. Everybody bought Tesla. Now everybody's been buying Nvidia. Are we finally starting to see this long-awaited, where people are realizing there are many thousands of other companies that may be worth owning? And I think that's exactly what you're seeing. And I don't think that the AI trade is dead by any means. It probably is getting a little long in the tooth here, and you are starting to question how much of an expense it is versus how much earnings are actually going to generate from that in the future.

6:59But at a certain point in time, you're going to see that money shift elsewhere. So, yes, I think that's going to continue. Well, Carter, you don't have to hate the AI trade to simply believe maybe I can make some more money in something else. Maybe all the money in the whole AI ecoverse has already been made. You can comment on that. And then, of course, do what you do best. Look at the charts. What are we seeing for the macro market technically? I mean, not to just put it back to the big one, NVIDIA, but I think the most important point today about the stock was how little it moved. And one could say, what are you talking about?

7:32It dropped 6.38%. Do you know if you added up every single day for the last year, the percent change? The average daily move in NVIDIA is 4.7. Average daily, no earnings, earnings, a Monday, a Thursday, a Tuesday. Average is 4.7. It moved 6.3 on an earnings. Good, not good. I'm surprised how muted it was. I'm a buyer of the weakness. As to the market, yes, we know it's broadening. The question is, is the overall market now to the point where so many other things have come to life and participated that maybe even the equal weight index is getting full rich crowded? Well, comment on that. I mean, sort of, Carter, answer your own question.

8:20Exactly. Well, here we go. My guess is that we know money moves around. We know there's rotation and we study flow. And it is, of course, and it's been going on for a while. The Qs haven't been outperforming the S &P for two years. They've just simply matched the market. So as money does rotate, it has brought other things to life. But a lot of things are already well bid. Homebuilders are well bid. Banks have come off the floor, certain small caps. My own hunch is that even the equal weight is something that one might want to trim or reduce. There were a think, I think, don't quote, Guy Adami, don't hold me to the number.

8:57Why would I do that? Because that's what you do. I believe there were 30 S &P 500 stocks that hit new 52-week or all-time highs today. Names, not NVIDIA. J.P. Morgan, American Express, Best Buy. Go in more to the banks. You've noted Goldman didn't hit a new high today, but he did, I think, two weeks ago. It's been acting, and J.P. Morgan has been acting, almost like tech stocks. Not almost. I mean, if you put up a short-term chart at Goldman Sachs, you'll see the last month, month and a half has looked exactly like a tech stock. And they shouldn't trade that way. So, listen, they trade great, and it's a rotation into banks.

9:34We've been waiting for that. But is it the right environment to be rotating into banks? And, again, this is an environment where Warren Buffett has the most cash on his balance sheet that he's had ever. The Buffett indicator is at 202 percent, which we've never seen before. And oh, by the way, he's paring down his Bank of America position at this point. So if he's doing those things, it's against the backdrop where he doesn't necessarily he's taking advantage of. But I don't think he necessarily believes we're going to go quickly, Tim, coming on that, because we've got more in the banks later.

10:01So we don't have to dive right into the bank. Specifically, the broader point I was trying to make, Tim, was that there's a lot of stocks that are performing really, really well. And because they're not named NVIDIA, they're not getting a lot of attention on networks such as this one. Well, and again, because we're going to talk about the banks, I guess, later on in the show, we won't talk about them here. I will say that you have dynamics where if credit is fine, if people have jobs, we hear all about the anecdotal either delinquency numbers, what's going on in terms of the size of aggregate household debt.

10:35But that's the point. And also we've had folks on our air like like Savita from Bank of America who point out how the industrial companies are probably trading at higher margins or are operating at higher margins and therefore should be trading at higher multiples. Look at look at transports, look at industrials and look at health care. And these are places where I think you have the dynamics of A.I. That's still probably a tailwind to some of those those multiples in terms of margins. So, yes, I think overall it is a market of other stocks. I tend to agree with Carter that, I mean, look, if you can put a 35 multiple on NVIDIA and feel fine about it, you know, ultimately, one, you can certainly defend that relative to a Microsoft at 33 times.

11:17But the price action in Apple, to me, is very, very impressive. And of all these seven stocks that now we don't really want to talk about, that's the one that I think is probably going higher and will help this market. Beautiful transition, Tim, because we are going to talk more about AI and Apple and NVIDIA because apparently, reportedly, Apple and NVIDIA are both in talks to invest in open AI. Perhaps the biggest AI player out there, at least right now. Kate Rooney joining us with the market intelligence on artificial intelligence. Kate. Hey, Silla. Yeah, so the Wall Street Journal is today reporting that both Apple and NVIDIA are now looking to get in on OpenAI's latest funding round.

12:00They reported yesterday that Microsoft is also expected to put more money in. We have not heard back from those companies, but this is all tied to a multi-billion dollar funding round for OpenAI, which we've been reporting on for CNBC. I'm told by a source close to the deal that OpenAI's valuation will be at least$100 billion in this new funding round. That source telling me that the venture firm Thrive Capital is going to be leading the round and they're putting in$1 billion in new investment into OpenAI. And this sky-high valuation, it really puts the AI darling just behind SpaceX in terms of the most valuable companies out there.

12:34Also, a lot of other public companies valued at more than$100 billion here. I did speak with an investor who is looking to get in on this deal. They say that OpenAI is going to need to justify that valuation with exponential growth and then even better products. So large language models, chatbots, they think this company can eventually be worth half a trillion dollars in the next five years or so. So that's how they're justifying this. But it is part of this all out arms race we're seeing in Silicon Valley to raise cash. OpenAI has chat GPT, which has really been the leader. It's in pole position, but it's going to require even more cash.

13:07They want to stay ahead. Brian, back to you. Big, big numbers there. Kate Rooney, thank you very much. All right, So let's dig a little bit deeper directly into the NVIDIA story and AI in general. Now, NVIDIA, as you heard, fell today and it took down some other semiconductor stocks with it. But NVIDIA's numbers were huge. So why didn't the stock respond in a positive way? Let's find out more. Bring in fast money friend Gene Munster, managing partner at Deepwater Asset Management. It's a good question. The numbers were good. The guidance were good. But apparently the market wanted great, not just good.

13:40You know, Brian, I'm a big believer when you start explaining you are losing and I run the risk of explaining here today. So the my perspective was I think the market is viewing this exactly like Guy laid out is that the incremental raises are getting less impressive. In fact, if you look at the guidance, it was up two and a half percent from where the street was expecting for October. They got it up 5.2 percent back when they guided the July quarter. So you see that deceleration. But I think there's an important piece that can be missed here, which is it was very clear that Blackwell shifted from the October to the January quarter.

14:20And very few analysts made any adjustments to their numbers as that was being rumored. So if you look at the guidance on an apples to apples basis and bring in the several billion in revenue that Jensen outlined for the first quarter when Blackwell ramps, it's now in the January quarter. But bring that back to the October quarter. They raised guidance by 12 percent. And that would have been an acceleration. So, again, I'm explaining. I think the market is just viewing this as taking a breather, wanting more. But they're going to get more when it comes to that January quarter. I expect that's going to be a blowout.

14:56Gene, you heard, first off, you gave Guy a nice compliment, which is wonderful and well-deserved. But you also probably heard what he said, which is that, you know, is this the start of something in a bad way, and stocks can turn. First off, NVIDIA hasn't really made any money in two months. I know it's only two months, but still, stocks can turn quickly. I mean, you have these kinds of numbers, these kind of beats, and this kind of forecast, and we don't see positive price action. Do you think this could be, to Guy's point, kind of the start of investors not losing confidence in NVIDIA, but maybe traders losing confidence in NVIDIA as a tradable stock?

15:33I think we still have two great years left of NVIDIA. Deepwater, we own the stock. The reason why we own it is that we believe that to get to general intelligence and eventually super intelligence, the scaling laws in tech are going to hold and the scaling laws are to increase compute you have to put more hardware and data at it. And if that's the case, if you believe that in order to reach general and super intelligence the scaling laws will hold, NVIDIA is going to have an outside benefit to that and I think we're still very early in this trade. We talked some of the traders talked earlier about kind of this AI trade getting long in the tooth and I think it's really healthy for an AI trade.

16:11I'm in the camp that three to five year bull market that's going to be powered by AI and so we're still early in that. So Brian I'm optimistic and I'm basically staking my career that AI is going to be more transformative than the internet and I mean that belief informs how I view how I think about how I'm video. Okay, Courtney's got a question, but go on it. How can AI be more transformative than the internet gene, all due respect, when AI runs off the internet? So it's like that's the internet is this and AI is layered on top of it. How can it be bigger than the thing it needs to exist? It's its host organism.

16:48The internet was built on intelligence, was built on human intuition. It was built on intelligence. There was And ultimately, that is what AI is solving for, is it's intelligence at scale and at a speed that humans can't touch. And so that's why I think that intelligence came before the Internet. And, you know, what is the value of basically commoditizing intelligence? And I think it's I think there's a high value there. Now, Gene, we talk a lot about NVIDIA and really it had been kind of almost a bellwether. Everybody's expecting if NVIDIA doesn't do well, the market's not going to do well this week, which clearly didn't happen.

17:28You're actually seeing the correlation with NVIDIA and the markets has been getting smaller over the last two years. And I'm curious what your thoughts are there. Like, let's say that we're wrong and this AI trade isn't going anywhere. Does that mean it's something negative for the stock markets or can they continue to go higher even if that trade doesn't pan out? I think the way this plays out is right now it's obviously it's a narrow market that's driven. The performance has been narrow. It's been related to AR and largely related to AI hardware. And I'm of the belief that this will impact margins.

17:57This is a well-traveled bull case for AI, is that ultimately every company is going to have to have AI as part of their fabric of their company, just like mobile and the Internet is. And so if that's the case, I think we can see higher margins. I think that the rest of the market will get pulled up. If I'm wrong, I still think we're going to see leadership within AI, within some of these companies. It's hardware for the next couple of years. Then we're going to see the baton move over to software. We're going to see a class of new IPOs probably in 2027. It's really exciting. Staking his career.

18:28I wouldn't go that far, Gene, but you're definitely staking a lot on it. And we appreciate the boldness. That's what it takes. Gene Munster, thank you. All right, moving about as far away from NVIDIA as you can, we've got a news alert on Tyson Foods, the chicken company. The company saying that Kurt Calway will replace John Tyson as CFO. Effective, immediately. John Tyson is, of course, the heir to the Tyson legacy. He got suspended from the position after he drunk driving arrest back in June. Callaway has been serving as interim CFO since then. What will become the permanent CFO? No move in Tyson right now, but there you go.

19:03All right. We are just getting started here on Fast Money. And coming up, more earnings action from consumer stocks like Lululemon to Ulta. We've got Dell, Marvell, and more. All the numbers and reaction coming up. And some financial stocks. We talked about it, trading near records, how far that trade can go, and the best picks for you. Not good ones. The best ones for you. We're back in two.

19:38As the graphic says, we have got an earnings alert on Dell. Now, Dell shares, they're pulling back. They're still higher, but they're pulling back a little bit after the company reported a top and bottom line beat, driven by what else? Strong AI server demand. The conference call got underway in the last hour. Seema Modi has been tuning in. Peel her away a bit for details on Dell. Brian, Dell's third quarter guide, slightly light of expectations, so perhaps that's why the stock is off the highs. While the clear standout, though, in the second quarter, AI servers and networking, which grew sales by 80 % year over year, personal computer sales continue to remain sluggish.

20:15Dell is betting on AI servers, though, for its future. Executives say we continue to see an increase in the number of enterprise customers buying AI solutions each quarter, and that enterprise remains a significant opportunity, as many are still in the early stages of AI adoption. And server margins were up sequentially in the quarter. You may recall Dell competitor Super Microsoft weaker than expected margins in the same quarter. Stock has been gaining momentum as of late. Dell up about 4%, but again, off the highs we saw since reporting earnings, Brian. All right, Seema Modi, Seema, thank you very much.

20:50Carter, let's go to, I know you look at the charts as well, but from evaluations trading at 21, 22 times forward earnings, that's about 50 % higher than its five-year average of about 13.5. The stock has doubled this year. Do you still see momentum on Dell? Yeah, evaluation aside, I think the key here, Brian, is, of course, If you think about its sell-off, its summer swoon, the stock dropped 51 percent. You know, the S &P dropped 10. The tech sector dropped 20. Semiconductors dropped 30. 51 percent. That's a beating. And so this bit of a small recovery, my hunch is to fade the move right here in the aftermarket.

21:28Fade the move. Courtney? Yeah, and I think with Dell, really, the optimism there has been the fact that you're going to get this PC refresh cycle, which probably won't happen until, like, the second half of this year and the AI servers. But I think the question is how much of that has been priced in at this point, because to your point, it's up between 45, 50 percent this year. It is starting to get expensive compared to its averages. So it is something I like here. But I do start to question the valuation. Is that worth jumping in or has it run some of its course this year? So I'd be a little bit cautious here.

21:55I think Courtney nailed it as usual, Tim. The big question around Dell and Morgan Stanley bringing the price target down just a touch today, still above where it is, is like the iPhone. Will AI drive this whole new wave of PC sales, laptop sales, whatever, because people need new processing power and computational abilities for AI? I think it will, but I'm not sure that's even what's been totally driving the move in Dell. I mean, some of it is just this ISG group, this infrastructure services group, which is a very high margin business. That's why it's getting a higher multiple. And yeah, I mean, on a trailing basis, it's now around 22 times forward.

22:37It's a little less than that. I do think that I kind of agree with Carter on the move. I think the stock is, from the charts perspective, I think it was overindulged as people were looking for ancillary plays. I do think the story is one where AI server demand and the underlying PC demand are dynamics that will continue to have Dell very well bid here. But again, is this the way I'm playing a rebound in the space? Probably not. I'll throw this out quickly. You are correct to point out historical valuation. And Ben Wrightsies, who comes on the show, was in here in the fall, was an$80 stock. He thought this stock could go to$125,$130.

23:15He was right. It's the hardware play of AI. I get it, which makes them deserve it of a premium valuation. However, how much of a premium? One. And two, full year guidance. Gross margins expected to decline 180 basis points when they should be at least flat, given what we're seeing right now. So I think that's something that you absolutely should watch. I mean, again, it comes down to margins. If you start to see the other side of margins, that's when these things typically turn the other way. All right. Well said, Guy Domi. Thank you very much. All right. Coming up here on Fast Money, financial stocks.