The Battle For Warner Brothers Discovery… And The Outlook For Banks In 2026 12/22/25

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22:07Taxes and fees extra. Are you as confident as you should be when it comes to growing your business? Is your strategy ready to execute today? If cash flows aren't where they need to be, growth could be at risk, especially in the eyes of your investors, board members, and the business press. But when your business is operating in top shape, you've earned the right to grow. EY Parthenon can help you reimagine your business and execute a game plan for long-term growth. EY Parthenon. Solutions that work in practice. Not just on paper. It's smart to always have a few financial goals. And a really smart one you can set?

22:43earning cash back on what you buy every day. And with Discover, you can. Get this, Discover automatically matches all the cash back you've earned at the end of your first year. Seriously, all of it. And we trust you to make smart decisions. After all, you listen to this show. See terms at discover.com slash credit card. Welcome back to Fast Money Alphabet, announcing plans to acquire a data center and energy infrastructure company, Intersect. The acquisition worth almost$5 billion aims to bring power generation capacity online faster. Shares of the Google parent up almost 1 % today. For more on this deal, let's bring in CNBC's Deidre Bosa.

23:22Hey, De. Hey, Mel. So Alphabet, as you said, acquiring Intersect for nearly$5 billion in cash and debt. This is a move aimed at locking down power and data center capacity, of course, as the AI demand surges. Now, Alphabet already owned a stake, a minority stake in the company. This deal brings Google control over multiple gigawatts of energy and data center projects already tied to Google's infrastructure build out. It gets at a key question in the AI trade right now, and that is where do the hyperscalers get the energy to power the next wave of data centers? Chips are no longer the only constraint.

23:53There's power permitting, grid access. This is Alphabet doing what it does best, vertical integration, moving upstream to secure its own supply. Now, it largely comes down to this one chart. This is the impending U.S. power crisis. The black line is the peak supply anticipated, where the orange one is peak supply needed. And as you can see, there's a huge gap here, and Google is only starting to try and fill it for its own needs with this deal. There's likely more to come, and we've seen deals among other hyperscalers as well. It does seem interesting, Deidre, because it seems like a lot of the big players, they have made purchase power agreements for energy supply.

24:34But this is just one step further in securing that supply. Is there a sense that there'll be bigger deals? I mean, for Alphabet, this is small,$5 billion. Right. And like I said, it may only be the start. You're right. There's been sort of purchase power agreements. This is the first full-on acquisition. Google says that the company is still going to be operating independently, but there has been sort of talk that maybe SoftBank is looking at something similar, and this is only going to become more essential. If you want to have the compute power that is necessary, that everyone seems to need from the hyperscalers to open AI, you may want to do more of these deals to make sure that you have sort of upstream supply, direct supply of the grid when everyone's going to be looking for it in the next year, years ahead.

25:20Debo, thanks. Deirdre Bosa in San Francisco. A lot of energy companies were up on the back of this, So what do you make of it?

25:27Melissa Lee:Listen, there's just not an infinite amount of energy for these things. And so, you know, Dee just said it, like the idea that you'd vertically integrate makes some sense. I mean, there's all these potentials to see delays in the build out of these data centers, but there's none more important than the access to energy. So to me, I think it's probably a rounding error. If you think about how much money, you know, Google has committed in spending and capped backs, this might be, you know, an easy little$5 billion tuck in that gives them some sort of multiple, you know what I mean, as far as leverage is concerned on the power front.

25:57Yeah, and when you look at it, it gives them the flexibility. It gives them the ownership of it. So they're not relying on U.S. grid at all at that point. So they have backups and they have going forward, they have hiccups. This is a smart deal for them. And by the way, they're going to be able to sell power to others as well through this company.

26:12Melissa Lee:On the margins, it's inflationary. I think the market's going to realize that in 26. And that's an entirely different conversation. But Bloom Energy has been trading with Oracle, which makes sense to a point. At some point, it will decouple. Oracle can go nowhere and BE goes higher. But CEG, GE, Renova, all these names we've talked about should continue to go higher from here. Inflationary meaning just the draw, the power causing increases. Virginia has 666 data centers and electricity prices have gone up 13 percent year on year. Coming to a theater near you. I mean, they set up really well. If you're down in that area, they do newscasts on this seemingly on a weekly basis.

26:50Melissa Lee:It's a problem. But it's not just going to be Virginia. This is moving across the country. Yep. Julie Veal, do you like this sort of deal from the Alphabet shareholder perspective? Yeah, I think, you know, for them, they really have to find ways to be in control of their own destiny. And it's funny because if you think about the whiz-bang excitement around generative AI, the things that are impeding it are very basic and pedantic. It's our ability to integrate it into our workflows, which is not necessarily the easiest thing if you've been to the DMV. and the power that they get. And that is really being inhibited by many, many districts recognizing that they don't necessarily want these data centers in their backyards because they don't necessarily provide a lot of jobs past the construction phase and they draw down on power.

27:36So I think this is going to be the most relevant gating factor to the adoption and broader expansion of generative AI. And it's a real challenge because it's not that easy to just make the power happen.

27:48Melissa Lee:Yeah. On a different note, I mean, Guy's point about inflationary, you might have made it actually, you know, as it relates to energy and just think about what's going on next year. You can roll back tariffs on cocoa or, you know, coffee beans and bananas. But when you have your health care premiums going up like this, you have your energy prices going up like this. I think it's kind of underappreciated in the near term. There's a lot more fast money to come. Here's what's coming up next. EV Velocity, shares of Tesla plugged in and pumping. But can the stock keep charging into 2026? Our traders debate next.

28:22And speaking of the new year, we're checking in on the financial sector. Why our next guest says there could be major opportunity in regionals and smaller banks. You're watching Fast Money live from the NASDAQ market side in Times Square. We're back right after this.

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29:27Seriously, all of it. And we trust you to make smart decisions. After all, you listen to this show. See terms at discover.com slash credit card. It's my first day of work and I need to make a big impression. From executive producer Mindy Kaling. This is our sexual harassment training. Hands off your co-workers. Now sign this saying that I trained you or you're fired. Yes, ma 'am. Work relationships are too messy. I just met the woman of my dreams. You gotta chill out and not come on too strong.

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30:08Welcome back to Fast Money. Shares of Tesla hitting fresh records today. The EV maker now at more than 21 percent this year and more than doubling since its April lows. Accord on Friday overruled a 2024 decision to void CEO Elon Musk's monster pay package, restoring stock options worth about$138 billion. There's also what happened with Waymo over the weekend in terms of the blackout in San Francisco. We were stranded in the crosswalks. And Elon Musk said our robo-taxi is not affected by that at all because of differences in technology.

30:39Melissa Lee:Well, listen, I mean, that's the driver right here in the stock. I mean, it's closing at a new all-time high. And, you know, the auto business is like an afterthought at this point. And you think about the optionality or the upside, you know, to this whole story right now. I'm not saying it's deserved like$1.5 trillion or on its way to$2 trillion. But he's got$10 trillion. What's his number? What is his pay package? $1 trillion or something like that? He's got a lot of reasons to continue to make this work. It just continues to be a hard story. You've got to believe in a lot of stuff that we haven't seen so far.

31:07Melissa Lee:It's a rollout of Robotaxi, a rollout of Optimus, and, you know, a lot of the AI stuff that's all kind of in between the cracks. Yeah, and when you look at Ford and GM, both have pulled back completely, basically, from EVs. It doesn't seem like they're putting any money. This is a direct play. And Rivian is actually left for dead. they've shown signs of life. So I think Tesla could actually go higher from here. Yeah. Julie? It would be surprising to me because we are pretty decoupled from the fundamentals, right? We have deliveries that are probably going to be down double digits in the next quarter because the EV tax credit has rolled off.

31:43You're not seeing really a ton of improvement in Europe because he still remains quite unpopular there. And I can understand the excitement over robo-taxis, but the early indications are still not great. We're talking about Austin and the space of like a New York City apartment is where you can drive to. It's not great. And then the robots, you know, the biggest challenge with the robots is we're still probably five to 10 years away from having a robot battery that has the capacity for eight years of work. Right now we're at two, sorry, eight hours of work. Right now we're at two hours. That's not enough.

32:15I mean, that's how much I work in a normal day. It's very little.

32:21So Julie could be replaced by a robot right now.

32:24Melissa Lee:Right now, Julie, two hours. GM all-time high today, this iteration of GM at least, and I think that story continues. I mean, Tesla, for all those that said guy, you're looking at it wrong, it's not a car company, they were right, because the car company clearly is a loss leader, and if you believe in this pay package, one of the metrics of the 18 metrics is stock price and market cap, And I've said now, since that came out, you've got to bet along with him in this one for sure. In terms of what happened with Waymo versus RoboTax and the technology, though, do you think that this is a defining sort of moment in terms of underscoring the differences in the technology that power both of these RoboTaxes?

33:03Melissa Lee:I don't think it's one versus the other. I think it's the ability to kind of think about scale. I mean, these are not at scale right now, but they're also two different technologies, and there's going to be lots of different issues that both of these face. and they're just really isolated kind of rollouts right now. And generally, they work pretty well. But I think we're going to be surprised at some of the things that don't work, which is going to be one of the reasons why we probably don't see the expansion of the rollout too aggressively. In a city like New York, I just can't imagine how it could work anytime soon.

33:32Coming up, New Year, even better bank trade. Can 2026 see a financial breakout for the group where our next guest sees the most opportunity when Fast Money returns?

33:43Missed a moment of fast? Catch us anytime on the go. Follow the Fast Money podcast. We're back right after this.

33:57Welcome back to Fast Money. Stocks jumping to start the shortened holiday week. The Dow climbing more than 200 points. The S &P and Nasdaq both up more than half a percent. All three indices now on three-day winning streaks. Chip stocks helping fuel the tech trade NVIDIA higher and reports The company plans to begin shipping H200 chips to China by mid-February. This, according to sources, Oracle, Micron, Broadcom, AMD also higher today. And check out shares of Airbnb up for a tenth straight day. That's its longest winning streak since going public five years ago. The stock up 12 percent in that time.

34:28And shares of Citi jumping nearly 3 percent today, hitting levels not seen in more than 17 years. Our next guest says the stock will be the top big bank performer next year. For more on the 2026 Outlook for Financials, KBW's head of U.S. Bank Research, Chris McGrady, joins us here on set. KBW is a Stiefel company. Chris, great to have you with us. Great to see you. So why Citi? What's the backdrop here? Well, Citi's in the midst of a multi-year turnaround, right? They're simplifying the business. They're exiting countries. And they're taking the ROE from a bottom tier to average. And you can make a lot of money going from bottom tier to average.

35:04So the stock's been a great stock this year. But if you look at the valuation, it's just breaking through tangible book, right? The last 10, 15 years, that's been the ceiling. We think the narrative on deregulation in capital markets helps bring that ceiling higher. In terms of the deregulation narrative, I mean, that has been, you know, some of the fuel for this bank trade for this entire year. How far are we in terms of realizing those gains? It's less of an unknown. You know, people expect it. If you look at expectations, expectations for capital return broadly are up about 30%. this time versus a year ago.

35:38But if you think about it, there's still 100 to 200 basis points of excess capital that is yet to be put in our projections into buy side, sell side models. So there's still the use of capital debate, right? We're talking about buybacks. We're talking about dividends. We're talking about inorganic growth. But earnings have a real big impact on the trajectory of estimate revisions has a big correlation over my career to stock. So earnings revisions for the largest bank up 16 % year on year. That's 2x the smaller bank. So those

36:06Melissa Lee:banks are outperforming, but for good reason. Chris, we're making the same argument for Citi, so let's play the math game. I don't think it's deservative of a J.P. Morgan price to tangible book, but somewhere between where it is now and where J.P. Morgan is makes sense. Does 1.8, somewhere between 1.8 and 2 make sense? Because if that's the case, this stock has another 65, 70 percent of upside. You know, that's not our base case. That feels a little aggressive, but what, 1.2 to 1.5, you can make a lot of money, right? J.P. Morgan's trading it three times. and they're delivering 20 % returns. Citi's target for next year is 10 to 11.

36:41And I think what's really going to be important as you look into May, they have a very important investor day on May 7th. I think what they're going to talk about there, investor days have been the topic of du jour for the banks. They're going to talk about that medium-term target, probably going 12, 13, 14, and they're going to give you the path over the next couple of years. If that happens, they're going to be compounding book value. They're going to be simplifying the business, and earnings estimates are going up. So I think there's a lot of room between my number and yours. So, Chris, you're focused on Citi, but brought it out for me.

37:09Every time you go into the regionals, people sometimes get burned. Where are you on them for 2026? I think selective would be the word. They're making a lot of money. They're building really great competitive companies through acquisitions. Our experience studying this for 20 years is as that is occurring, as they're building more profitable companies, the stocks don't necessarily outperform. But would I be doing anything differently? No, I'd be deploying the capital to where the highest returns are, but we are selective. So one of the names we really like is Citizens. Citizens Bank, again, this is a pre-described, you know, the ROE improvement story is baked, right?

37:48They're going from 10 to 15, 16 percent, just basically with the passage of time. Another reason we like it, you get that capital markets exposure, middle market capital markets. And then finally, we don't think they're going to be acquiring another bank. They've been very clear about there's enough organic momentum, and that can continue, so you can make a lot of money even without the help of M &A.

38:07Melissa Lee:Chris, are there any foreign banks you like here? Again, maybe you don't cover them. I'm just curious if there's any geographies that you find pretty interesting here. Yeah, we focus on the domestics, but if you think about the universal, the largest banks broadly, they all have an international component, right? J.P. Morgan, Morgan Stanley, Goldman Sachs. They have international businesses, and the capital markets tailwinds across the world are really strong. B of A is more of your domestic place. cities, your international place. So you can kind of get the international exposure through the domestic banks.

38:36I'm curious as to whether or not the banks should be re-rated in any way, not just because of the fundamentals in place, capital markets, the regulation, et cetera, all these sort of known narratives, but for AI specifically. Is there any component of AI that should be reflected in a bank's valuation? I think it's a great question. I think if you about the technology wallet, right? So we're a big proponent of scale, scale in banking, capital markets. Technology is a scale business. JP Morgan's spending$18 billion on technology this year. You have to think that there are going to be benefits and they've kind of given you the bad news on the expenses for next year.

39:11I thought it was really strategic, right? They've gotten the expense adjustment out of the way. And in January, I think they're going to tell us great efficiency. JP Morgan's a growth company. It's probably not a consensus view, but if you look at the last five years, JP Morgan grows revenues high single digits. They grow expenses high single digits slightly lower and they generate operating leverage. So that's a company where technology over time that's going to continue to support that through the cycle. Are we in the high teens? All right. Chris, great to see you. Thank you. Happy holidays.

39:38Happy holidays to you. Julie Beal, top bank pick. I'd probably mold this on the small cap side. I think I really like having the capital markets exposure of that business. And so I think it's it's one that's the most interesting from here. but on large cap, it's still probably JP Morgan. I agree that it trades at a premium, but I just think that its positioning has allowed it to be so flexible and so robust in a way that no one else has really been able to match.

40:03Melissa Lee:It's great to have Chris on set, number one. Number two, the re-rating of Citi will continue in 26 and more people are going to realize that Jane Frazier has done a remarkable job there. I think the stock continues to go higher. Yeah, I mean, for all the reasons that Chris just mentioned, I mean, JP Morgan, despite the valuation, no one seems to care ever. You know what I mean? It just seems like if it's going to play some catch up on the capital market stuff to Goldman and Morgan, I think this is probably the place to be. And if you look at the performance for the year, Citi has outperformed everyone else.

40:31But a close second or not so close second is Morgan Stanley. Coming up, standouts in small caps are Julie Beal, our resident expert. She's the most opportunity in the space in the names that could lead the Russell in 2026. Fast Money is back in two.

40:48Welcome back to Fast Money. The Russell 2000 has had a strong year, hitting all-time highs a few weeks ago and pacing for its eighth straight month of gains, its best run since mid-2021. But what can we expect for the group in 2026? Let's turn to our resident small-cap expert, Julie Beal. What do you think the backdrop will be for small-caps, Julie? I think it looks pretty positive. You know, small-caps are more economically sensitive, and they should be benefiting from lower interest rates because they tend to borrow on a variable interest rate market. But it's been kind of a crazy year. It's been 18 months of me saying, look, small caps are going to start to outperform once the earnings really comes through.

41:22And then what ends up happening is the small caps outperform, but it's the companies that have no earnings. It's companies like biotech. It's companies like quantum. It's the lowest quality parts of the small cap market. And it's been pretty confusing for most active long managers. I think something like 1 % of them are beating their benchmark, certainly not me. And it's left us all kind of in a real quandary, like waiting for, you know, to be the bridesmaid. And finally, no, we're still not chosen, right, for quality. But I do think that over the long term, earnings growth is what really matters.

41:52And the setup for 2026 is more favorable for small cap than it is for large cap and mid cap, even the mag seven. So I think that's a good place to look. A few names I like, Ollie's is this discount bargain value retailer. And I think everything that's in value, customers are so starved for value. It doesn't matter what income spectrum you are. If you can prove that you can deliver real value, you really tend to outperform. and I think they're still well positioned. They've been doing great. LeMetre is a healthcare company that has very differentiated products that it sells to vascular surgeons.

42:23It's just been this kind of quiet compounder that's finding pricing, that's finding margin. And I think it's really well positioned. And so if you don't have a lot of healthcare exposure, it could be an interesting name for you. And the last one we talked about briefly, Mollus. You know, this is a company that has been swooping up all of the best bankers in the downturn of private equity. And so they have some of the best investment bankers. They were on the Netflix deal in the announced with Warner Brothers. I just think they're quite well positioned and their earnings can really inflect pretty materially from here, especially with a better regulatory backdrop.

42:54So those are just a few names I'm thinking of.

42:58Melissa Lee:Guy. Yes, yes, Melissa. By the way. Yes. I mean, she worked more than two hours to bring that to light. Well, three picks. Yes, absolutely. Tremendous job by Julie Beal. At least two and a half hours. At least. Did you like any of those picks? Mollis is sort of an interesting one, you know. And Julie's been talking about it for a while, and it's performed for a while. I will say this, though, quickly in terms of small caps. Obviously, economically sensitive, very, I'm going to paint with a broad brush here, but if rates are going higher for the wrong reasons, if the unemployment rate starts moving higher again, which is what we're going to see, it's going to be very hard, in my opinion, for small caps to continue in 26.

43:35Good caveat there. Coming up, Nasdaq in rally mode, and we're not just talking about the index. Shares of the company behind the exchange hitting an all-time high today. Can that climb continue? Next, more Fast Money in 2.

43:50Welcome back to Fast Money. Shares of Nasdaq, the company that runs this exchange, our landlord, setting an all-time high today. The stock rallying 2%, bringing its gains for the year to more than 26%. Shares have outperformed other exchanges like the CME Group and NYSE operator ICE this year, but are trailing the SIBO. You flagged this. You've been tracking this. Impressive gains.

44:12Melissa Lee:And I think for the longest time, Wall Street investors, whatever community was looking at this is simply this exchange. And it's not just an exchange. It's a technology company. And now people are starting to see that. I think Morgan Stanley had a piece out$111 price target. People will say it's way too expensive in terms of valuation, but it might be for an exchange. It's not for a tech company, which they are. They're obviously extending hours means more fees for them. Adina Friedman is one of the great CEOs in the country. she understands that it's a technology company. So now at least the market is figuring it out.

44:44And when you look at the NASDAQ, they're correlated to tech stocks, as Guy was saying, but they're correlated to listing fees. So when you look at the other exchanges, they have a lot more diversified income streams. Sometimes it works in the case of SIBO. Sometimes it doesn't work. But NASDAQ, this was the year for them with AI spend and technology stocks doing very well. And then think of Anthropic to come, OpenAI potentially to come. I mean, what should be all the great things for the bank trade will be great for also the NASDAQ.

45:12Melissa Lee:Yeah, no doubt. But there's also other things. I mean, we've spent a lot of time over the last few months talking about prediction markets. And just as we're on the exchanges, we know that CME Group did a deal with FanDuel. And so all these new products are coming to market. And when you think about those sorts of businesses, you ask yourself, what's the moat for a poly market or a cal sheet? When you get a company like CME partnering with somebody who has the know-how with like a FanDuel, I mean, that's going to make it really hard for some of these upstarts, in my opinion. We do have a news alert here on Novo Nordisk.

45:39The FDA just approving an oral version of its GLP-1 drug, Wegovi, the first pill to be approved in the U.S. Novo expects to launch the pill here in January. Shares are trading higher in the after-hours session by about 4 percent. Up next, final trades. Quick check on Novo, which just got approval for its oral Wegovi, the first in the United States to launch in January. Those shares are higher by more than 7 percent right now. Final trade time, Julie Beal. I think those regional banks are going to be doing better and they're going to be buying more software probably. Encino will probably sell it to them.

46:12Steve. If Paramount Skydance does not get Warner Brothers, they're going to be looking at something else. Lionsgate.

46:17Melissa Lee:Dan. Mel, I think you probably fade that Novo mood in the aftermarket. Snap in 2026 might have an AI moment. Guy. One of the founders of Fast Money floating around. Andy Barsh is here. Hi, Andy. I'm paying attention. Bristol Myers, BM1. Thanks for watching Fast Mad Money with Tim Kramer starts right now.

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