Two Big Tech Events On Deck… And China’s Property Rescue 5/17/24

0:02Live from the Nasdaq market site in the heart of New York City's Times Square on a night when When the Dow close above 40K for the first time, this is Fast Money. Here's what's on tap tonight. Big tech on deck. Microsoft getting ready to launch its co-pilot powered PCs, while AI darling NVIDIA preps for earnings. What these two events could mean for the red hot trade in the week and months ahead. Plus, propping up the property market. China announcing new measures to help its struggling real estate industry get back on solid foundation. But will they succeed? And what's it mean for Beijing's economy?

0:32And later, heavy metal moves from gold to silver to uranium. What is driving the hard commodity gains? Transports get stalled even as a broader market trades near records. And Robinhood rips higher. The call driving that stock toward three-year highs. I'm Melissa Lee coming to you live from Studio B at the NASDAQ on the desk tonight. Tim Seymour, Steve Grasso, Guy Adami, and former Bridgewater chief strategist Rebecca Patterson. And we start off with those two big tech events coming your way next week. The Microsoft Build Developers Conference and NVIDIA Earnings. Microsoft is set to give updates on its marquee AI assistant co-pilot.

1:05The company also expected to show off a new line of PCs before Build officially kicks off. We'll get more on that in just a few minutes. But first to NVIDIA's report. The semi-giant expected to say EPS more than quintupled from a year ago, driven, of course, by demand for its AI product. Shares up nearly 40 percent since it last posted results and more than 85 percent already this year. But are those gains at risk if it disappoints on Wednesday? Could the market's gains be at risk as well, Guy? The only disappointment would come in, I think, in the form of either guidance, which is pretty obviously, or margins.

1:39If margins start to decline sequentially, then you're going to have a problem because then the market will say, OK, we had peak margins last quarter, 70 something percent. This is the other side of it now in terms of their revenue and their EPS. I mean, EPS, which is fantastic, but not the commensurate revenue to sort of basically back up price to sales and price to earnings. then I think the stock might be in trouble. Short of that, I think it's fine. With that said, I'll go back to it again. Despite the fact that the stock's had a great run over the last week and a half, two weeks, that March 8th reversal day has not been violated yet.

2:13Yeah, I think it's too early to say it's call it quits if they miss one, but their guidance has to be in place. If you look at the gains, it's NVIDIA, Google, Amazon, Meta, Microsoft. But we have energy, and we have a bunch of other things that contributed to this rally. So it's not just the Mag 7 or the Fabulous 5. There's a couple of different other sectors that have contributed. But definitely the cheerleader is NVIDIA. Yeah, I think when we think about NVIDIA, don't just focus on the stock. Think about the concentric circles around that stock. And we're seeing them everywhere from Constellation Energy to Nextera, you know, the utilities.

2:52But you're seeing all the players in this ecosystem that are going to support that AI tech wave. And the number in my head, 200 billion. That's how much, we'll call it Mama. Microsoft, Alphabet, Meta, and who did I forget? Amazon. 200 billion just this year in CapEx. And so that's going to happen each year for the next several years. Somebody prepared for the show. Mama, that's nice. She came up with her own acronym. On Friday. Whoa, whoa, whoa, whoa. What was that? That little, that's like Stockard Channing in like Greece. Should we go around the horn here and do that? Maybe. No, no, no. No, don't do it.

3:31My point is that whatever NVIDIA does Wednesday, there is such a tsunami of cash coming into this sector and that ecosystem that if you do get those dips, I think you still have a structural trend you want to invest in. I think NVIDIA is clearly important to the semi trade. And I think semis actually picked up the leadership of the market this week. We also had some confluence of lower inflation dynamics playing into we're getting other forms of CapEx updates and parts, I think, that gave you more insight into the broader the broader picture, some of the peers. But I don't think that the market needs an NVIDIA here.

4:06I don't think what we've seen over the last month is that the more important dynamic again this week was the Fed. I look at the broadening. You mentioned Dow 40 ,000. Dow doesn't have a whole lot of high tech tech in there. Right. The dynamic that we've seen around the miners and the banks. And this week to me was a week that was not really about tech. It was a week where we digested a world where we know inflation is probably higher for longer. The Fed has even said that, but the Fed is out there two or three times this week saying we're not going anytime soon. I think that's really a more important dynamic.

4:37We had retail sales that were kind of OK. We had jobless claims that were maybe a little concerning two in a row. But I think NVIDIA, while the leadership of the market, I still want to see Semi's hold serve here. I don't see a major breakdown. And if you don't get a major breakdown, you've had S &P outperformance without the NASDAQ since really the summer. Right. We have Walmart at all time highs. Goldman Sachs trading at its highest level since its IPO. Morgan Stanley at a new high virtually. So maybe we don't need NVIDIA, especially as, you know, to Rebecca's point, all these other companies have already said we're going to spend money on CapEx.

5:12So that AI trade is there supported by that outlay. No, that's fair. And we have precedent for it because Apple, back on its horse now, but for months prior with the market at all-time highs, the market was doing that without Apple for a long period of time, not only without Apple, but with Apple actually trading lower. So you're probably right in terms of not needing it. But in terms of inflation, real quick, I hear what everybody's saying. But the most important banker in the world, again speaking this week, talked about his concern about inflation. He's always negative, though. Yeah, I guess.

5:41But maybe he's justified to be. You know, the market says one thing. I think the things that he says something else. And quickly, we're talking about precious metals. Base metals have been on fire. I mean, and base metals are as good an indicator in terms of what's going on in the inflation front as anything else. And zinc, nickel, aluminum, lead, all making multi-year highs right here. And don't forget about the company buybacks, because now we're through earnings. So Goldman Sachs has written on it. B of A has written on it. there is a demand for 5.5 billion on a daily basis, basically ripping through the markets until middle of June.

6:15So I think the markets are still sensitive. I still think we can go lower, but middle of June is going to be the test for me. I still would like to see a test of a 200 day, but it's not happening until middle of June. Yeah. I mean, we came into this week thinking CPI was going to be the tape bomb and we got past it. Now we think NVIDIA is going to be the tape bomb. Maybe we're just overly concerned at this point. We're almost through earnings. We've heard a lot already, Rebecca. We've gotten some pretty good inflation data this week. So why not just sort of be comfortable? You know, I wish we could be.

6:47I mean, I guess we're all getting paid here to think about what could go wrong. Right. Right. We always have to worry about our downside. And so maybe that's part of the conversation. What could go wrong next week? NVIDIA, what could go wrong this week? Inflation. When you see Russia and China getting more and more cozy, That makes me nervous. You know, when you see the Fed suggesting it may need to be higher for longer, of course, that has ripple effects. So there's the K-shaped recovery with the lower end consumers struggling. And we'll probably get to that later with Walmart. You know, there is still plenty to be worried about.

7:20But as long as you have an overall consumer that is doing well on the high end, is getting helped by housing prices and by everything rallying, as we've talked about, as long as they keep spending, we have the earnings power. And as long as rates don't go higher from here, probably the worst of that news is priced in. So we keep going. Yeah, the highest end consumer is more than half of spending overall. And they're doing okay. So maybe we shouldn't be so worried. Well, I think we're all right to understand that the soft landing fantasy is, I think, a fantasy. It's just a question of when. But the consumer is not breaking down now.

7:57And yes, we know Walmart's got a slightly more affluent consumer. Yes, we know there's certain parts. We've also seen, though, whether it's cosmetics and beauty, we've heard it from LVMH. We've heard it from Lululemon. We've heard it from Nike. And we've heard it from Starbucks. Some of these companies have company-specific issues in terms of competitive landscape, in terms of just where they were trading, in terms of growth rates. In Lulu's case, I think are hard to replicate over and over again. But the consumer is not falling apart. And we get back to me a backdrop of a market where if we go sideways on the data, we're going slightly lower on rates probably.

8:29And we're probably going higher on the stock market. I don't feel comfortable as an asset allocator that everything's going up. And I think this is what Rebecca is talking about. It doesn't matter what you're looking at. This week, everything went up. It was stocks. It was bonds. It was crypto. It was currencies. It was gold. These are things that typically aren't totally correlated on the upside. That's concerning. It does feel like there's risk aggression. When we spent half this week talking about meme stocks, that bothers me. But when I think about the money that's still in money market funds, I think of essentially there still is a lot of fear.

8:59There are plenty of people that are underweight, tons of benchmarks this year based upon the fear of seeing what the market did going into this year. And look what it's done now. So I still think the risk trade is to the higher. Yeah. And Tim said that earlier this week. You know, he said before the CPI came out, the risk trade was higher and that was spot on. and it's probably still intact. You know, I'm still struggling. You know, what's going to be the one thing that sort of breaks it? And listen, yields traded a lot lower than I thought, but yields actually traded down and held a pretty critical support level.

9:25TLT to the upside basically traded up to resistance level. I'm still one of the few people, I think, that think yields are going significantly higher, and we'll see what happens. Because if you look around, I mean, Japan is still a mess. Very quietly, dollar yens back on its horse. And obviously, Rebecca was just talking about what's going on in China. All right, so let's go deeper into NVIDIA right now. Now, what is the options market expecting for the earnings report? Let's bring in the options action crew, Carter Wirth and Mike Coe. Carter, first to you. What did the charts show? Sure, let's get right to it.

9:55First, I just want to look at what the stock has done the past five quarters. We have a table, and Mike will speak to this later, but the implied move is actually sort of muted, about 7 % to 8%. But that hasn't happened once in the past five quarters. Here on the screen, you can see it's been big up, big down, or onch. And yet, this time, it's implied something sort of muted. But let's get to the charts. Three identical charts. And we can draw the lines several different ways. But the first thing to note, of course, this was basically a range-bound stock between 400 and 500 for about eight months, and then essentially double, went from 450 to 950.

10:35And so let's look at that consolidation and draw some lines here. So again, this is the question. This kind of formation, more often than not, is resolved to the upside. But I think what's important is a fairly muted up, not one of the big ones. That's my guess. Final chart, I think you can anticipate we stay sort of in this range. And one could say, well, that's still some good eating from here. I don't think the prospective upside move outweighs the risk of what might be something unhappy. So, Carter, before we go to Mike, that range is what? Because you had three lines, three parallel lines.

11:15So is it the lower range that you were talking about? Well, meaning, in fact, I didn't characterize the table quite accurately. You'll see that there were no big downs either. Onch, two quarters where it was onch and then big up. We've had not one down in quite some time. That's the risk. And if indeed we're going to have a down, I think it's going to be bigger than the prospects of the potential up move. So that essentially summarizes as follows. I think the up move is what's likely, but it's going to be muted. But it doesn't outweigh the risk of what could be your first down move in quite some time.

11:46All right. Carter, thanks. So, Mike, how are you trading this? Yeah. So as Carter pointed out, the implied move for just the day of earnings is a little over 8 percent. For all of next week, the options market is implying that NVIDIA could move about$90 higher or lower, just over 9 percent. I think if you're going to play this kind of range bound thesis and sort of a muted potential up move is the one that you are hoping is going to be most profitable. One of the things you could, of course, do is try to sell some of the elevated premium by, for example, selling next week's 840, 1020 strangle.

12:19So you're selling the downside put and selling the upside call. Of course, selling those options naked like that carries unlimited risk. So the way you hedge that is by buying a longer dated strangle of those exact same strikes. I was looking out to September, which captures, of course, not only next week's earnings, but the one that's subsequent to it. That way you get to capture some of that decay that could happen in the near dated stuff while still having some longer dated options to protect you. And the peak profits would be if you get that move to the upside. All right. Thank you very much, Mike Coe.

12:47Some old school away action. Strangles. I mean, it's really a throwback here. The bottom line, though, in terms of the prediction on the move, according to Carter, is slightly higher slash muted with a downside risk guy. Downside risk. And again, I don't disagree with that. The downside risk, I think, will come in the form of margins. And I think that's what the market's going to focus on. You know, they'll look at revenue, look at EPS. If they see a margin decline, I think the market will key off for that. All right. Let's turn now to the Microsoft Build Developers Conference. CNBC technology correspondent Steve Kobach will be in Seattle for it.

13:23So, Steve, what are we expecting? Yeah, Melissa, well, we had two AI reveals down and two more to go this week, of course. We got the latest from OpenAI and Google. And starting Monday, it's Microsoft's turn with that Build Developers Conference. Expecting a slew of AI announcements, including new AI PCs with Qualcomm's first ever PC chip. Plus, plenty on the software side, like new AI features in Windows. And then, of course, there's Copilot. That's Microsoft's marquee AI assistant. Microsoft has been making a big push to sell it to businesses this year. But investors have little clarity on how well it's selling despite all that hype from Microsoft.

13:58I spent some time catching up with CTOs and other execs who decided to buy tools like Copilot to see how it's being received. And the answers were pretty mixed. No one we spoke to is ready to deploy Copilot widely. Still just testing with a couple hundred employees at a time. They say it's just too expensive while they can't quantify the benefit. But it's not all bad. Almost everyone I spoke with said they love Copilot, how it summarizes video meetings in the Teams app or organizes email. Microsoft has given some nuggets on Copilot sales. Most notably, IT company Cognizant says it bought 25 ,000 Copilot seats for its employees.

14:34But broadly, not much for investors to go on. perhaps more hints at the event next week, Melissa. We've had a couple of AI events this week already, Steve. So how is that going to sort of either raise the stakes for Microsoft and maybe put the pressure on it next week? Yeah, so Microsoft is perceived as the leader. And a lot of what we heard from Google, a lot of that was experimental. There is that search product that is going to launch for U.S. users next week, the AI search. But other than that, everything is either in testing mode or will be launched in sort of a beta version. So we're going to see Microsoft try to take the lead it already has, products it's already selling, enhance them and, you know, expand upon that.

15:15It all starts with the hardware event that we're expecting on Monday. Yep. Steve, thanks. Steve Kovac, safe travels to Seattle. What does this mean for Microsoft in your view? I think it might mean more for Qualcomm and AMD, what the chips that they're using versus the actual company. Microsoft, I like the chart, but an AMD has definitely lagged, so there could be a little bit of a pop for AMD when you hear the news of what they're using that chip for. I think what Steve hit on is sort of the million-dollar question. That is, what is this worth to companies if you're paying$30 a pop per user? What are they getting out of it?

15:51And I think that's a big question in terms of all of this AI spend. Right. How quickly does it and widely does it get adopted? And then how, to the point made earlier, can you quantify the impact? Right now, we feel it, but we can't quantify it. I think Microsoft is a fascinating company right now, not only because it's a fascinating company, but because they have a lot of different levers. I mean, they've got security is now a real growth driver for this company. They talked about Call of Duty now being part of a subscription service. I mean, Microsoft's multiple has been one of the harder ones to defend at a time we've been watching multiple expansion.

16:23And yet, of course, they were first right in here in the AI trade. And it seemed to be at Google's expense. Meanwhile, Google's at all time highs and Microsoft's been struggling a little bit. I don't think Microsoft next week needs to deliver something. This may sound in both cases. I don't know that it's that critical. The Microsoft story to me is very much intact and they're in this game. What do you think? 32 times it's expensive. I mean, it's been expensive for a while. I mean, it's priced as if they better continue to operate. Again, all these stocks are priced that they operate in the same way in sort of perpetuity.

16:55It's one hiccup that gets people upset. Facebook is a great example, and that was for different reasons. But you can see how quickly things go pear-shaped in some of these names. Coming up, glistening gains. Silver at 11-year highs. Miners making moves. And gold actually lagging. We'll dig into the metals' sterling performance and debate whether this precious play has more room for gains. And that's not the only heavy metal mover. uranium stock Cameco touching nearly 17-year highs. What's driving that move next? This is Fast Money with Melissa Lee right here on CNBC.

17:37Welcome back to Fast Money. Silver surging to its highest level in more than 11 years today. The metal up nearly 8 percent just this week, adding to what has been a huge month. It's more than tripled gold's gains so far in May, up more than 17 percent versus 5 percent. And that's not all. The SIL Silver Miners ETF, which holds names like Pan American Silver, Hecla Mining, Mag Silver and Wheaton Precious Metals, hitting its highest levels since 2022. Tim. It's extraordinary what is going on in precious metals, but what is also going on in industrial metals. Copper is at all time highs. Copper had a close of around 505 a pound, which is very scary for inflation.

18:16If you think about what copper is a key ingredient of in so much infrastructure in this country, let alone in EV, let alone in data center, let alone in all the things that are hot now. So copper, to me, might have been the story of the week. Gold, another all-time high. You think about what's going on in other parts of, you know, kind of the hedging dynamics of why people might want to own gold. It's fascinating that gold is doing what it's doing. And gold miners are actually finally playing ball. Gold miners since February 28th are 45 percent to gold's 19 percent move. That's the kind of beta you want when you're investing in miners.

18:49But again, I think if I was going to be allocating a fresh dollar here, as much as I love gold miners and I've been long and I'm going to stay long, I think the copper companies, whether it's Freeport, Southern Copper, Antofagasta, and then the integrated BHP and Rio Tintos are the most interesting right now, especially with China kind of making noise about more stimulus. I think that's the place to be. And I also think when you make the silver or gold, silver has an industrial use. Silver could be a financial asset. Silver is used in the renewables. So Tim touched on that. When you talk about gold, it's really just for jewelry or your central banks and an inflation hedge, which is which is that's, of course, going to be big.

19:28But when you look at how many ounces of silver it takes to buy an ounce of gold, you, I'm sure, knew this. It's 80 ounces now. The average was 60 or 68. somewhere around there. So that spread, people are waiting for that spread to narrow a bit, and hopefully they'll buy silver while they're waiting on gold to come in. So one of two things are going to happen. Silver is going to trade up. Gold is going to trade down. But while you're waiting, you have a bunch of different industrial uses for silver as you're waiting. How big do you think the central bank dynamic is in this gold trade? Huge. So China, we just got data for April.

20:02China bought for the 18th consecutive month. And the Chinese consumers, the other leg of this, It doesn't matter what stimulus China is doing because it's not touching the consumer. It's all industrial. It's all property. Until the consumer gets more comfortable getting back in the local stock market or bank products, they're buying gold beans. They're buying gold ETFs. The ETF buying from China in April was a record high. Wow. So it's not the only flow out there, obviously. But what makes gold to me unique, I like all the metals right now. But what makes gold to me unique is that it has this leg of support coming from an idiosyncratic factor, which is China, to a different degree than the other metals we're talking about.

20:44I do think the others will outrun gold in the short run because they are less liquid. So they're going to move faster. And they've got this industrial CapEx boom behind them. But in terms of what I want to hold for the longer term, I definitely want to keep my gold if I already own it, even if it lags. She said it's so much better than I mean, it's not a high bar. Are you just going to defer your time to Rebecca? No, I mean, she's, I mean, she's, all the things we've been saying. Well, look, I traded gold. I traded gold for years. Guy traded gold a long time ago. We guys could have been in the pits together.

21:16Two peas in a pod. I like to think that. Two gold bars. You know, Steve mentioned gold-silver ratio in, you know, sort of layman terms. If you think about it, as Tim said, gold's at an all-time high. Prior to the last couple days, silver was half of its all-time high. So even if silver would just recover a percentage of that, it's got a 35 handle coming to a theater near you. And I've got to tell you something. Put your seatbelts on Sunday night because what happened over the last couple days is going to bleed into the Sunday open in precious metals, and it's going to get really interesting. All right.

21:44There's a lot more fast money to come. Here's what's coming up next. Heavy metal movers. Uranium stocks soaring as the U.S. officially ditches Russia and goes all in on American nuclear power. What it means for the major players in an industry getting a huge shot in the arm. Next. Plus, China's latest plans to kickstart its struggling real estate market. Can the stimulus get the sector back on track? We'll sit down with an expert who says this creative move might not be enough. You're watching Fast Money, live from the Nasdaq market site in Times Square. We're back right after this.

22:26Welcome back to Fast Money. Uranium stocks on the move after President Biden signed a law banning Russian imports of the heavy metal. The policy goes into effect in mid-August and potentially unlocks nearly$3 billion in federal funding to expand the uranium industry here in the United States. Shares of Cameco soaring more than 6 percent today, posting its highest close since June 2007. You've been on the uranium train for a long time, Tim. And I'm not getting off. And the squeezy nature of this is a combination of geopolitics, structural dynamics, things that have changed the way, first of all, not only just the view on uranium.