In short
Fast Money episode (5/21/26) covers: Walmart’s consumer warning and stock drop after earnings, plus health-care and AI/tech market catalysts.
Guests
Bill Simon (former Walmart U.S. CEO; on Darden Restaurants board), Jared Holtz (Mizuho Healthcare Specialist), and Tom Miller (CEO/co-founder of Iambic Therapeutics; Disruptor 50).
Key claims
Walmart CFO cites a “K-shaped economy,” with higher-income shoppers spending confidently while lower-income consumers cut back as fuel costs rise; Walmart expects pressure to worsen in Q2 when tax-refund tailwinds fade. Panelists debate whether Walmart’s valuation risk is offset by its ability to win share and grow digital/advertising margins; Bill Simon highlights digital sales growth exceeding total U.S. growth.
Notable examples
Walmart pump gallons below 10 since 2022; Kroger cutting prices; Workday margin guidance; OpenAI IPO filing rumors; Spotify Investor Day AI tools; Lilly retatrutide (highest dose ~28% weight loss over 80 weeks); U.S. $2B quantum grants to nine firms; Iambic’s AI drug discovery partnerships (Lundbeck, Revolution Medicines, Takeda).
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOWalmart's Disappointing Outlook
1:44 to 2:05
Discussion on Walmart's recent earnings report and consumer impact.
“We'll get more on what drove the Dow to its first record since February later in the show, but we start off with that retail red flag out of Walmart.”
Analyzing the K-Shaped Economy
2:05 to 3:02
Exploration of the K-shaped economy and its effects on consumers.
“Walmart saying the pain at the pump is straining consumers' budgets and that things could get worse in the second quarter when the boost from tax refunds goes away.”
Walmart vs. Kroger: Market Dynamics
3:02 to 4:30
Debate on how Walmart and Kroger's competition affects pricing and market share.
“I understand the stock traded lower today.”
Valuation Concerns and Opportunities
4:30 to 5:35
Discussion on Walmart's valuation and potential long-term opportunities for investors.
“that they've caused for all intents and purposes.”
Comparing Walmart and Target
5:35 to 6:28
Comparative analysis of Walmart and Target's market positions and strategies.
“I think that the real question is how long will we see gas prices where they are because it is going to have a negative impact on their low-income consumer.”
E-commerce Growth and Consumer Trends
6:28 to 7:55
Examine Walmart's e-commerce growth and its implications for retail.
“I could buy Amazon for a cheaper valuation.”
Insights from Former Walmart CEO
7:55 to 9:12
Bill Simon discusses Walmart's performance and strategic positioning.
“nitpick a little bit, inventories are up close to 9 % against 7.1 % sales growth.”
Retail Sector Insights and Opportunities
9:12 to 14:01
Analysis of retail sector performance and potential investment opportunities.
“At the same time, on the same day, in fact, we saw a couple of other very good data points out of retail, Ralph Lauren and Williams-Sonoma.”
Evaluating Retail Signals
14:01 to 15:16
Learn about the mixed signals in the retail sector and undervalued stocks.
“Because, you know, you take a name like Walmart, it was trading at all time highs basically for the last couple of months.”
Workday Earnings and Market Sentiment
15:16 to 16:41
Explore the implications of Workday's earnings report and stock performance.
“I mean, do you agree that maybe things are actually better than what we all think here?”
Show all 24 chapters
Upcoming IPOs and Market Competition
16:41 to 19:40
Discuss the anticipated IPOs of OpenAI and Anthropic and their market impact.
“So this was sort of one of these names that Dash got decimated because of the fear about AI displacement.”
Growth vs. Profitability in AI Firms
19:40 to 24:15
Analyze the balance between growth and profitability for AI companies in the market.
“This is Fast Money with Melissa Lee right here on CNBC.”
Concerns Over Market Viability
24:15 to 27:06
Understand the risks associated with unprofitable companies going public.
“new coding product that they have and taking share away from Anthropic.”
Notable Stock Movements
28:42 to 29:55
Discussion on significant stock performances and earnings reports.
“WTI crude pulling back again today, falling 2%, selling just above$96 a barrel.”
Analysis of Spotify's Market Position
29:56 to 31:34
Experts debate the implications of Spotify's recent AI developments.
“Steve Grasso, what do you want to trade?”
Challenges with AI Recommendations
31:35 to 32:04
A lighthearted discussion on the limitations of AI in music recommendations.
“I have my Spotify playlist, like 900 songs, as I mentioned.”
Eli Lilly's Weight Loss Drug Results
32:05 to 33:05
An overview of Eli Lilly's latest trial results for a weight loss drug.
“The latest trial results on Eli Lilly's next-gen weight loss drug in the stocks making moves after the ASCO data drop.”
Comparative Analysis of Eli Lilly and Novo Nordisk
33:06 to 35:28
Discussion on the competitive landscape of weight loss medications between Eli Lilly and Novo Nordisk.
“And so what these two data sets have in common is that these are treatments in the first line setting, so they have the potential to challenge or expand the standard of care here.”
Market Reactions and Future Outlook
35:29 to 37:18
Insights into market reactions to pharmaceutical news and future expectations.
“I'm not throwing a curveball at you, but I know you're capable, Jared.”
Government Grants in Quantum Technology
37:19 to 40:55
The impact of government grants on the quantum technology industry.
“All right, Jared, great to see you as always.”
Iambic Therapeutics and AI-Driven Drug Discovery
40:56 to 42:00
An interview with the CEO of Iambic Therapeutics discussing their innovative approach to drug discovery.
“But, you know, picking winners and losers in companies, to me, is somewhat problematic.”
Advancements in AI for Drug Discovery
42:00 to 45:18
Learn how AI is revolutionizing drug discovery and clinical trials.
“And a platform that can turn those AI designs into experimental data extremely rapidly allows us to close the loop and drive forward discovery to make better medicines.”
Market Implications and Small Cap Opportunities
45:18 to 45:50
Discussion on the impact of smaller biotech firms on the market landscape.
“Yeah, I mean, the fact that you can do this, I'd be really interested in seeing what was back tested, how it would have changed the environment of the drugs that have already been out there.”
Final Trades and Market Predictions
45:50 to 46:46
Insights on final trades and market predictions from panelists.
“I remain skeptical of AI data centers in space, especially cooling them here on Earth.”
Transcript
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1:01Tim Seymour:Live from the NASDAQ markets right in the heart of New York City's Times Square. On a day the Dow sets its first record close in over three months, this is Fast Money. Here's what's on tap tonight. Walmart's warning the retail giant seeing its worst day in two and a half years after its latest earnings report. What the company had to say about the U.S. consumer and the ripple effects through the economy. Plus a quantum leap for quantum computing stocks. Spotify soars after its first investor day in four years. Lily legs higher in hopes for its next-gen weight loss drug. And speaking of health care, we'll talk to the CEO of a company trying to revolutionize drug discovery.
1:34Tim Seymour:The head of Iambic Therapeutics, number 33 on this year's Disruptor 50 list, joined us on set later this hour. I'm Melissa Lee. Come to you live from Studio B at the NASDAQ. On the desk tonight, Dan Nathan, Guy Adami, Steve Grasso, and Julie Beal. We'll get more on what drove the Dow to its first record since February later in the show, but we start off with that retail red flag out of Walmart. The big box giant dropping more than 7 percent its worst day since November 2023. After the company gave a disappointing outlook for the year, painted a stark picture for the consumer. Walmart saying the pain at the pump is straining consumers' budgets and that things could get worse in the second quarter when the boost from tax refunds goes away.
2:13Tim Seymour:Here's what the CFO had to say on Squawk Box this morning about what's becoming increasingly K-shaped economy. The high-income customer continues to spend with confidence in many categories, whereas the lower-income consumer is a little more budget-conscious, even navigating some financial distress. Since we gave the guidance 90 days ago, we've seen fuel prices increase, and so it stands to reason that incrementally from 90 days ago, there's a little more pressure on the consumer. This narrative around the K-shaped economy, we see that in our business as well. So how should we think about this?
2:49Tim Seymour:Should we be more concerned about the consumer guy? What do you think? I think it's just for me, it's just a reiteration of the fact that we've been talking about the consumer and the weakness for quite some time. So Walmart said something, nothing that I don't think all of us knew already. And the question really is, does Walmart win to that? I think they absolutely win to that. I understand the stock traded lower today. We've seen this before, maybe not to the magnitude, but I think three or four quarters ago when the stock was making an all time high in like the 106, 107 area, we had a report.
3:16Stock then subsequently traded down to the low 90s and bounced. I think that's what we're setting up for now. People are going to indict the valuation. I totally get that. The valuation is rich. But the environment that Walmart is talking about and being cautious about is the environment that Walmart wins in.
3:30Tim Seymour:This is where they can take share, right, because they can eat some of that cost.
3:33Melissa Lee:Maybe. I mean, you saw the news out of Kroger this morning, right? So the CEO is talking about they're looking to cut prices to better compete and take market share back from Walmart. Listen, that's all good for consumers. If you think about it, have Walmart and Kroger beat each other over themselves. You know, to get market share, it's only going to be good for consumers. There's two things, though, I take away from this. And maybe this is as we get to the end of earnings season, it's worth noting. I mean, Walmart is eating a lot of those input costs, right? They're not passing them through. They're not in a position to do that if you think about their competition.
4:02Melissa Lee:Now, Kroger, if they cut prices, well, they're doing the same thing, right? And so at the end of the day, when you kind of start to think about multiples, you start thinking about who's the contributors to earnings growth, that sort of thing, you might see margins that just kind of peaked out for a lot of consumer-oriented sort of things. So again, it's also a political environment where the administration is going to look not particularly kindly to companies that are passing through, you know what I mean, costs, basically increased costs that they've caused for all intents and purposes. You think about a war, you think about tariffs, you know, to a consumer that's strapped right now.
4:35Tim Seymour:I think this is an interesting sort of test, Julie, in terms of how you look at the same sort of data points, because we have a very positive interpretation from Guy in terms of this being the exact environment that Walmart will thrive off of versus what Dan is saying, and that is that the premium valuation that it stands out might be at risk here. What do you think? I agree very much that the valuation is a stumbling block for a lot of people because you can't really sustain this level of evaluation if you're going to have margin compression. And I think it's hard to see how they don't avoid margin compression.
5:13But for the longer term, these periods are great opportunities for Walmart to introduce new customers, higher end customers who would never have shopped there to the brand and to recognize that they can be really profitable for them long term. So what could be an interim headwind in terms of margin compression and a high valuation could for a really, really long term investor actually be an opportunity. I think that the real question is how long will we see gas prices where they are because it is going to have a negative impact on their low-income consumer. We just have to look at credit card data and see how it tapers off at the end of the month.
5:50You see that that kind of low-income consumer is really pulling back right at the end of the month before they get paid. That's not a good sign.
5:57Tim Seymour:I mean, this is a very interesting stat, I thought, out of the Walmart earnings release, and that is the number of gallons per pump was below 10 for the first time since 2022, Steve, and that really shows you how stressed, how paycheck to paycheck the consumer is right now. Yeah, and this is why when you have a supply shock,
6:19they don't have anything to actually push for the demand destruction. So when you're looking at Walmart, Guy touched on it right out of the block, valuation. I could buy Amazon for a cheaper valuation. And for in large part, for years, why the stock ran was because it was supposed to be another Amazon-like stock. But if now you're telling me that it's not going to grow as quick, then I'd rather just go buy Amazon. The only thing I find is that if I look at ad dollars, ad revenue is up 38%. So now you might say, well, that's a very small portion of revenue, but it's 25 % of operating income. So if you look at this and you think that, to Julie's point, gasoline prices are going to come down in the next couple of weeks slash months, then you want to be a buyer on this dip at Walmart.
7:10Tim Seymour:I think that's an interesting point in terms of, you know, maybe Amazon's the right way to go. I mean, they compete on many different things, including grocery, by the way, at this point, and you get the kicker of it being an AI trade. Yeah. Well, yes. And you get a better valuation to see his point, which I get. I mean, if you want to compare the two, I understand why you would do that. I still think if you look at the way that Walmart's been able to integrate AI and what it is meant to margins in an environment where a lot of margins for companies are going the wrong way, they win to this. Now, I know the guide isn't great.
7:38And quite frankly, even with this move, you can make the argument that the stock is more expensive after today's close than it was yesterday at a higher price. So I totally get that. But I will tell you, I think the environment that we find ourselves in and we will continue to find ourselves in. Walmart wins to that. And I think they've done everything right. If you want to nitpick a little bit, inventories are up close to 9 % against 7.1 % sales growth. So maybe they have a slight hint of an inventory problem, although I don't think they do. That's the one thing. And the guide is the other thing.
8:06But I think you buy Walmart here.
8:08Tim Seymour:So if Walmart wins, Target loses. I mean, this doesn't seem like the environment for Target at this point.
8:13Melissa Lee:I think everything we've talked about really has to do with food. I mean, this is groceries and it's gas. And I don't think that's somewhere that Target, you know, is obviously pretty exposed and apparel is a big thing for them. And they seem to be like every other year just really screw up as far as trends, as far as inventory and that sort of thing. And, you know, I'll just make one point about the Amazon. And I don't think it's a great would you rather right here. I think Steve's point about the advertising is really good one. I think that was something that was a big driver for Amazon, too.
8:39Melissa Lee:And it's doing a lot of good stuff for Walmart because it's basically pure margin for all intents and purposes. And the way that they're using AI, Guy's been on this for about a year and a half or so. But with Amazon, like its stock just rallied 25 percent. It has nothing to do with North American retail. I mean, like really, it doesn't. Right. It all has to do with, you know, how the models are working on AWS, how their share is taking, you know, who they're invested in and that sort of thing. So to me, I think it I know it doesn't sound like a pure play AI, but that's kind of how it's being valued right here, despite that.
9:08Melissa Lee:And so, you know, this stock was in the tank just, you know, a month ago, two months ago is not one that was performing particularly well. You saw reacceleration in AWS. You saw the stock reacceleration.
9:18Tim Seymour:Yeah. At the same time, on the same day, in fact, we saw a couple of other very good data points out of retail, Ralph Lauren and Williams-Sonoma. So that K-shape, Steve, is really, I mean, underscored by the reports we got out today. Yeah. And when you look at Ralph Lauren, you see the shopper out of China has deep pockets and you could say whatever you want about that economy, but that's what really was reaching for that premium brand. But when you look at the premium brand, I think Julie mentioned this. Walmart grabbed the consumer that makes over$100 ,000, but they're very picky because they want cheaper prices.
10:00They will go somewhere else very quickly if prices rise. So there's no elasticity to defend a Walmart. But when you look at a Target versus a Walmart, the valuation target wins. New CEO, new CEO, but Target much lower bar to jump over than a Walmart. But remember, getting back to where you started at Ralph Lauren, handful of premium retailers, they're one of them. If you're going to reach for one, that's the one to reach for.
10:32Tim Seymour:All right. Tim was probably a Ralph Lauren model at one point, don't you think? I mean, if he wasn't, he should have been. Should have been. There could still be time. Always time, Mel. Let's bring in former Walmart U.S. CEO Bill Simon. He's now on the Darden Restaurants board. Bill, great to see you. Hey, guys. I'm going to kick it off. I usually end the interview with this question, but I'll kick it off with this question. And in this environment, based on what we heard so far, Walmart or Target for you? Gosh, you know, it's always such a hard question. It's hard for me to imagine that Target could get worse.
11:08So, you know, they've got a whole lot more runway than Walmart. Walmart's got to be perfect to sort of maintain. And you guys have been talking about the valuation to maintain the momentum in the valuation. So, you know, as a retailer, Walmart's doing a much better job as a stock, a place I like might want to put my money at. I might go with Target because I think there's more upside.
11:29Tim Seymour:So, I mean, in terms of the quarter, Bill. I mean, what did you make of Walmart's execution in the quarter? And is this sort of the kind of environment where Walmart will ultimately thrive? So as an investor, you might not like immediately what you see. It might be a very tough operating environment. But, you know, two, three quarters down the line, it could be in a much better position. Yeah. I mean, I think they had a good quarter, right? Like, it's hard to imagine that they're getting the beating that they're getting other than their, you know, the valuation is difficult to sort of rationalize.
12:02There's a couple of things in there that really stand out for me. For the first time that I can remember seeing in Walmart reports, the amount of the digital sales that are due to their e-commerce business, and that exceeded their total growth in the U.S. So if you sort of interpolate that, That means their physical store business was flat to down, which you would expect with the gas price pressure. But the online business is growing. You know, I think it was six and a half percent or 650 basis points contributing to same store sales. That suggests that the upper branch of that K economy is still shopping at Walmart and sticky because we talked about this a couple of quarters ago, wondering whether that affluent customer would stay.
12:51And it looks like they are. All right, Bill, clearly, when you think of Walmart, you think retail. I understand that. But they obviously also came to the Nasdaq, the biggest move from exchange to exchange, I think, in history for, I think, one reason to position themselves as a technology company, which I believe that they are, which means in my book, they deserve this valuation. So thoughts on that? Yeah, 100 percent. I think they did a brilliant job with the investments that they made, the move to NASDAQ and selling and then delivering on the story that they're a technology company. And, you know, you could even sort of look at it that you can't even break out physical and digital anymore because an increasingly large portion of their digital business is done through the stores or facilitated through the stores.
13:39We talked about their advertising revenue and they've done a really good job developing that.
13:44Melissa Lee:Hey, Bill, you've been obviously watching retail names and been involved in them for a very long time. And, you know, there seems to be a lot of dispersion in the space right now. If I look at like a Home Depot that reported earlier this week or I'm looking at a Best Buy, I mean, these two stocks are down, you know, at 52 week lows, multi-year lows. And so where do you think that investors are getting, you know, like good signals versus bad signals? Because, you know, you take a name like Walmart, it was trading at all time highs basically for the last couple of months. And then you take this thing down 10 % in just a matter of days.
14:14Melissa Lee:And then you have all these other names that are trading well below market multiple. And we talk about turnarounds in the space all the time. Are there unusual values in some of these names that have just been really thrown out with the baby with the bathwater? Oh, yeah. There you go. Yeah, I think people have gotten so enamored with what could be that they're failing to realize what is. This is a really good quarter for retail across a lot of categories. The department stores all had positive same-store sales. Macy's, Nordstrom's, Dillard's. The drugstores had positive sales. Amazon was up 12.
14:53Walmart was up five or six. Target was up for the first time. That's a lot of volume and a lot of growth coming out of retail, which suggests that the economy might be better than a lot of people are thinking. General merchandise, apparel, Abercrombie was up. It's pretty good right now. And I think a lot of the retail names are undervalued.
15:15Tim Seymour:All right. Bill, we've got to leave it there. Thanks so much for joining us. Always good to see you. Bill Simon. Julie, you think that? I mean, do you agree that maybe things are actually better than what we all think here? I think that the economy right now and anything I've learned from first quarter earnings is that things in the moment right now are quite good. And there's good, solid earnings growth drivers that are in the market. I think that the real question is, can we have a good economy if the low-income consumer is really struggling? Because that probably continues as long as gas prices are high.
15:49And can we continue to move more and more of the growth into capex as opposed to consumer spend, which was really the primary driver before. And I think if you can feel confident about those, then you can probably feel pretty good about the stock market. But it makes it harder to know longer term what the outlook is going to be. Because right now, if you think even the high income consumer who's clearly motivated by higher equity prices, if there is any hiccup in the stock markets, does that change the consumer economy? Because a lot of it's been driven now by the equity markets, not housing. All right.
16:23Tim Seymour:Meantime, we have an earnings alert on Workday. That stock is popping after the HR and finance software company boosted its full year margin forecast. Workday also beating top and bottom line estimates. Even with tonight's pop of about 9.5 % right now, shares are down nearly 40 % this year as the software trade struggles under the AI threat. So this was sort of one of these names that Dash got decimated because of the fear about AI displacement.
16:48Melissa Lee:Well, I think I would call it like throwing baby with a bathwater. That's what's happening. No, I want to be clear. I would not say that.
16:53Tim Seymour:You're still throwing babies. I don't throw babies. Unless you're doing it in a playful way, throw them up in the alley.
16:58Melissa Lee:Yeah, well, let's not even do that. You were obviously dropped on your head a few times back in the day. You know, listen, there's going to be some unusual values here. You know, and a lot of folks, when you look at like a ServiceNow, for instance, too, I mean, you're expecting 20 % earnings and sales growth right now with 80 % gross margins. The stock has been down 65 % from all-time highs. And all-time highs came like two years ago when a lot of investors were actually really excited about the opportunity for AI within these businesses. Now, you know, they've been disrupted. There's little doubt about that.
17:28Melissa Lee:But right now, the numbers have not come down meaningfully. And when you have a company like Workday put up a report like this and give that sort of commentary with that sort of guidance, it's really hard, I think, just to kind of wave a wand and just say that the SAS names are done. They're moving towards, you know, consumption models away from seat models. And it just may take a little time, you know, for that to kind of play out a little bit.
Read the full transcript
17:49Tim Seymour:But in terms of the longer term plan, Steve, I mean, part of for Workday, it's unleashing all these agents, agents that will help with corporate travel, for instance, doing expenses, all these things that we don't like to do and would love to have an agent do. And that's sort of where it is. The pop, though, we should, you know, just sort of caveat that because there's a 12 percent short interest in the stock. So part of that 10 percent pop, 9 percent pop we're seeing right now is fueled by that. Workday is back to the COVID lows or thereabouts within reason. Do you think we're at the COVID lows for this stock?
18:25I would say no. And you have to look at the SaaS companies through two different lenses. Which ones are the infrastructure plays? And I think ServiceNow and Workday fit into that category. which ones are the ones that could be replaced easily by artificial intelligence. That's front office, back office. So back office are the infrastructure place that I'm talking about. But when you look at it on a chart, you go back, you know, obviously six years on this. Is there any reason why this should be trading at covid lows? I think not. So I would be a buyer of this. March of 2020. Steve's talking about I'm looking at the same thing.
19:05he is. And we did it on big volume and we're bouncing. Listen, you want to play the valuation game. It's even with this move, it's probably trading at 10 and a half, 11 times next year's numbers, which is never a reason to buy these things on the way down. But something people will focus on now that you got a quarter out of the way and it actually looks sort of interesting. So I think there's more left to the subside move in Workday.
19:24Tim Seymour:Coming up even more after our action, the details out of Decker's Ross stores take two and Zoom ahead. But first, Another IPO countdown. Investors gearing up for OpenAI's blockbuster debut. What to expect from the filing and what getting to market first could mean for the AI race. Don't go anywhere. Fast Money is back in two.
19:44This is Fast Money with Melissa Lee right here on CNBC.
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21:38Tim Seymour:Welcome back to Fast Money. The IPO boom about to kick into even higher gear with OpenAI expected to file for its offering. as early as tomorrow. CNBC's Kate Rooney's got the latest. Kate. Hey, Melissa. So OpenAI, from what we're hearing, is preparing to file for an IPO confidentially as soon as tomorrow, looking to go public. From what I'm hearing, as soon as September, this is according to a source familiar with those plans. It would follow the SpaceX listing that you guys have been talking about with its AI business. XAI, I'm also told by sources that rival Anthropic has been getting IPO ready behind the scenes, but no word on exactly when it would file.
22:11Tim Seymour:OpenAI, though, really planting the flag here getting out ahead of what is its biggest competitor, Anthropic, to try to frame its story and some of the financials to Wall Street. We're not going to see the numbers, guys, until the S1 flips. So that would be closer to the listing date, likely in the fall. But we have gotten some breadcrumbs of revenue growth. Of course, these are private companies. But a source tells me OpenAI's first quarter revenue was around$6 billion. That in Q1 was above Anthropic's revenue. The information was first to report this one. But in the second quarter, Anthropic appears to be pulling ahead from what we're hearing, almost$11 billion in revenue for Q2.
22:46Tim Seymour:That would double what it saw in the first quarter and mark its first profitable quarter. It would also top all of sales that the company saw last year. According to a source familiar with those numbers, OpenAI has taken a much more aggressive approach when you look at data center spending and compute, argues that is a strategic moat amid a compute crunch, but it could also mean much larger near-term losses, guys. But we will see. Back over to you. Yep. Kate, thank you. Kate Rooney. Do you want to see Anthropic be a profitable company right now? Or do you want to see it spending for growth?
23:18Melissa Lee:I think, you know, and Kate just said this. I mean, both these companies are compute constrained. Right. And so one of the knocks on Anthropic over the last couple of years is they were not nearly as aggressive as OpenAI was. So, you know, to the point, I mean, OpenAI is losing money hand over fist, but they're also growing revenue at an astonishing rate. I mean, when you think about how much revenue, the tens of billions of dollars these companies have amassed over the last, you know, just couple of years, it's pretty astounding. At some point, it will justify the spend. And these companies that, you know, again, we don't know when it's going to end.
23:48Melissa Lee:We don't know what the demand is going to be. We don't know what the return on investment, you know, by the companies that are going to be using this compute. But the one thing I think is really important, if OpenAI is able to make this transition more towards enterprise, and that's what Anthropic has been doing. It's a more recurring sort of thing. not relying on consumers paying$20 a month and not relying on an ad business that doesn't exist just yet. You know what I mean? So again, that's probably the bull case for OpenAI, if they're able to demonstrate that they're making inroads in the enterprise with this new coding product that they have and taking share away from Anthropic.
24:22Melissa Lee:But this is not going to be a winner take all right now. I mean, there's a lot of folks, there's a lot of runway. We just spent a lot of time talking about ServiceNow and Workday and how poorly positioned than they are, this technology is going to help some of those companies come back from the dead.
24:36Tim Seymour:I agree in terms of the long-term picture. But right now, I mean, in terms of the snapshot going public, it seems like a bigger leap to say that OpenAI will have a meaningful enterprise business right now. Anthropic is so far in advance.
24:49Melissa Lee:Listen, we're going to have three companies that are coming public this year that are probably equal to$5 or$6 trillion in market cap, and all of them are wildly unprofitable. This is not something that we have seen in the S &P 500, or the NASDAQ 100, probably ever. You know what I mean? So these are going to be some of the biggest companies in the indices, and they don't make money. In terms of size, yes. In terms of 20-something years ago, Amazon was a company that everybody was excited about that was not profitable for quite some period of time. And they were given the benefit of the doubt until they weren't, if you recall, because there was a period of time where Amazon went down about 90%.
25:22People forget that. Dan doesn't.
25:23Melissa Lee:Well, the irony also is that AWS was part of the bear story 20 years ago. I mean, people are like, what are they doing spending on this? And now we just talked about this again, really surrounding the trade here. I mean, now this is basically the valuation. The North American retail business is valued at what, Guy? No, I like that. Nothing. Yeah.
25:41Tim Seymour:That was a thing we used to do. But, I mean, it just shows you how fierce the competition is in terms of opening. I really rushed. And we had all those reports, Julie, about the CFO saying that, you know, basically they're not ready. The numbers aren't ready yet to go public. And yet here we are. we're hearing about that filing as soon as tomorrow. It's pretty concerning if you're an investor to hear that you have a CFO that is not ready to publicly file because they're really concerned about the quality of the numbers. And all you have to do is go through the SpaceX S1, which I delightfully did yesterday, to see that these numbers are really not great.
26:18And unlike Amazon, I think what's really different different about this whole scenario is that when we're talking about the build out of telecom, the build out of rails, all of these kind of huge build outs, we were doing it with assets that were not depreciating on a two and three and four year cycle. And that's different in this case. And so I think that's the discomfort that a lot of us have is, you know, they're talking to us about adjusted EBITDA. EBITDA is not relevant when you are spending this much on CapEx just to sustain your business, to say nothing of the margins that you're charging.
26:49So I remain really, really concerned. We really want to see these numbers to get a sense of what the potential can be. We understand that businesses can be unprofitable when they come to market, but there has to be kind of a long-term path and trajectory, and it's really difficult to see that right now.
27:06Tim Seymour:Coming up, turning up the volume on Spotify, the headlines out of the music streamer's Investor Day that has investors tuning in, and why being a superfan could pay off in a big way. You're watching Fast Money live from the Nasdaq market site in Times Square, back right after this.
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28:33Tim Seymour:Welcome back to Fast Money. Stocks posting some small gains today. The Dow jumping 276 points and closing at a record high. It's first since February. The S &P and Nasdaq both with fractional gains. WTI crude pulling back again today, falling 2%, selling just above$96 a barrel. Shares of Spotify jumping 13%, its best day since February after hosting Its Investor Day. The company announcing a partnership with Universal Music to double down on AI in unveiling new offerings, allowing eligible premium subscribers to reserve concert tickets and an AI tool that generates custom podcasts from user prompts.
29:07Tim Seymour:Shares of Spotify still down more than 20 % over the past year. Some after-hours action, shares of Estee Lauder jumping on a report that cosmetics giant ended a merger, merger talks, I should say, with the Spanish beauty company Puig. The stock fell sharply in March when rumors of a deal hit the market. IMAX also higher after WSJ report that the movie screen company is exploring a sale. Shares are still down 20 percent from their 52-week highs. And some new ads to the S &P Small Cap Index, Universal Technical Institute and Peloton will join the index on May 27th. And more earnings to bring you.
29:42Tim Seymour:Decker's Raw Stores and Zoom, all topping earnings and revenue estimates. Take-Two also jumping after beating revenue expectations. The company adding its Grand Theft Auto 6 video game is still on track for a November release. That was a lot of information. Steve Grasso, what do you want to trade? Yeah, so Raw Stores is one of the obvious ones. They don't have – we had a guest on last week. We discussed what their tailwinds are. They don't have any tariff issues. They're domestic. They get to benefit from the overordering that other corporations do to stay ahead of whatever tariff headwinds that they have.
30:20And then if you look at Spotify, this is a really interesting one. If there's one thing that AI should, in theory, be able to disrupt, it should be Spotify. And if you look at the performance from April up into this recent pop, stock wasn't doing that that well. And there's going to be label renegotiations. Margins probably get compressed. I think you actually sell Spotify off of this, oddly enough.
30:47Melissa Lee:Yeah, I'll take the opposite of that. I mean, if anything, I think they're going to leverage AI. They have been, right? So if they've been using machine learning for years now, we call it AI, right? And there's so many different levers that they can pull as it relates to recommendations, but also, you know, content creation. And then when you think of the integration with some of the deals that they just mentioned today, I mean, I think these are things that are going to be tailwinds, right? Especially when investors have not been too excited about this. If you look at the potential for margin growth, which is what they're guiding to, that's what they spoke to at this investor day.
31:16Melissa Lee:And they also guided towards, you know, a billion users. Half of those are paid. That dwarfs what Apple Music has. So to me, I find this one very interesting. And if Guy was playing Would You Rather, I'd probably go with this over Netflix right now.
31:29Tim Seymour:Interesting. You weren't, though, were you? I can't. But may I say something about Spotify? Quickly, because this is supposed to be a short block. It upsets me. I have my Spotify playlist, like 900 songs, as I mentioned. Yes. And then at the bottom of it has songs like they think that I would like. Yes. Why do they think that? Why do they think I would like a Doobie Brothers song or a Chicago song? Both those bands suck. I don't like either one of them. Well, because you have 900 songs on your playlist, there's no way for AI to determine what you actually like. Clearly. It's too all-encompassing.
31:57Tim Seymour:Thank you. You made my point for me. What, that your list stinks? No, that they can't figure out what I like. Anyway, coming up, Pharma and Focus, The latest trial results on Eli Lilly's next-gen weight loss drug in the stocks making moves after the ASCO data drop. All that when Fast Money returns.
32:20Tim Seymour:Welcome back to Fast Money. Scientific abstracts are out ahead of the American Society of Clinical Oncology's annual meeting, otherwise known as ASCO. It offers an early look on the advances in cancer treatment set to dominate this year's conference. Annika Kim-Constantino joins us now with some of the key readouts. Annika. That's right, Melissa. So we're watching moves in two familiar names. A lot of the major data is being presented next week, but we're still seeing some pops from BioNTech and Merck. So BioNTech is up almost 6 % after mid-stage data on its biospecific antibody drug combined with chemotherapy as a first treatment for patients with a certain type of lung cancer.
32:52Tim Seymour:Meanwhile, Merck is also up 3 % on phase 3 results on a targeted cancer drug combined with Keytruda as a first treatment for patients with another certain type of advanced lung cancer as well. And so that combo reduced the risk of disease progression and death by 65 % compared to Keytruda alone. And so what these two data sets have in common is that these are treatments in the first line setting, so they have the potential to challenge or expand the standard of care here. And we're going to come back to you with any other movers here. All right, Annika, thanks. Annika Kim-Constantino. Well, today's other big health care story, Lilly rising 2 % after giving fresh data on his triple agonist weight loss shot.
33:27Tim Seymour:Over 80 weeks, patients on the highest dose of retitrutide shed 28 % of their body weight. That's an average of 70 pounds. Almost half a patient saw weight loss greater than 30 percent. For more, let's bring in Mizuho Healthcare Specialist, Jared Holtz. Jared, great to have you with us. The expectations were already high on Reditrutide or Triple G. And so I'm wondering, you know, how you think the actual data compared with what was expected. Yeah, I mean, we were all sort of expecting 25 to 30 percent weight loss for this drug, which is obviously very powerful. And that's sort of what we got. So I wasn't shocked by the results.
34:04Again, you know, when we look at these things from a stock perspective, there's been such a hyper focus on on percentage of weight loss. And so the company sort of delivered on expectations for sure.
34:17Tim Seymour:I wanted to ask you about this this note from Bernstein. I know that's probably taboo to ask you, but basically the argument was that, you know, Lilly was going to cream Novo Nordisk because Lilly is a marketing machine and its oral pill will eventually overcome the Wagovi pill that is going to continue. Lilly will continue gaining on the injectable front, et cetera. And I'm wondering how much you agree with that, if at all. Well, I feel like the execution piece of the Lilly versus Novo debate or discussion has sort of already played out. And going forward, it seems like if you're looking at these stories today that Novo is gaining a lot of momentum in the oral market to just come out and say that Lilly is going to be victorious there as well, I think sort of negates a lot of the success that Novo has had early on with the WeGovi pill.
35:17On the injectable side, yes, I think it's clear that Lilly is in the lead and probably will continue to be in the lead for a while. But I don't think there's anything totally new there. I guess my one pushback would be you have over a million patients now on the Wegovi pill, and it's being completely overlooked, again, in my opinion, versus what Lilly's doing. I'm not throwing a curveball at you, but I know you're capable, Jared. This Merck news, which we just heard, seemingly could be not a death knell, but obviously a negative for Summit. Is that move lower that Summit's probably not enjoying right now?
35:53Is that going to be some sort of opportunity down the road? It could be. I mean, the Summit was down a couple of weeks ago because they they've basically not delayed their trial, but they didn't take an interim look. And so we're going to have to see, you know, when that when the final version of that trial reads out what it looks like. I do think this Merck is maybe a small negative for Summit. Again, it's really tough to look at these trials in a vacuum and say it's definitively bad for the other player. We still need to figure out whether this PD-1, VEGF combination is really the real deal.
36:30Tim Seymour:What are some of the other companies you're watching for in terms of big moves, big data dumps? Well, I think the one that the street's really looking forward to the most, and I am as well in part, is Revolution. just given the fact that pancreatic has really taken center stage. I imagine this is going to be the one where investors and the clinical community sort of rally around. And we'll get probably a little bit more durability or duration data out of revolution at this meeting. I think the large cap pharma names are interesting. Obviously, Merck, Roche is going to have some data as well. BioNTech was mentioned previously.
37:07And then there are a couple of small caps like Corpus and BICARA that will have ADC data. Again, probably more incremental versus stuff that is truly novel. But anytime you're dealing with small cap stocks and they introduce something even on the margin, sometimes it's meaningful.
37:24Tim Seymour:All right, Jared, great to see you as always. Thank you, Jared Holtz of Mizuho. In terms of a cap pharma or I mean, which one? This Merck news, and I can't speak intelligently about what this means to Keytruda's patent cliff. But, you know, when you start to use Keytruda with other drugs, that might extend it or give them sort of a new lease on life. So I think Merck is a buy here. Julie, do you see health care as being an area to, you know, so you can like hedge AI in the market? I do. I do like owning health care. I don't like owning this kind of pharma, especially when we're talking about small and mid cap.
38:01You're dependent on one drug and you're dependent on FDA submissions. But companies like a West Pharmaceutical that provide, you know, the components around the drug delivery mechanism, those I'm all for. All right. Grasso. Yeah. So to Guy's point, Merck is up 10 percent. Johnson & Johnson's up to 10 percent. Bristol's up 10 percent. Lilly's down three and Novo's down 13 percent. There's going to be a string of pearls. I know Guy loves that saying approach to the patent cliff and Merck's doing it better than most. I dare say that the market is sort of moving away from the GLP story. And when you look at Revolution, where Jared was talking about with pancreatic cancer, that stock is up 93 percent.
38:51The home player, XBI. Revolution is actually the number one holding, even though it's fragmented, in XBI. And that has outperformed IBB by a large margin. So go with small cap biotech over the names that you all know and hear about every day. All right.
39:09Tim Seymour:Coming up, a major move in quantum companies as the U.S. takes a leap into the space. Who are the grants are going to and how it could help power the group to new heights? Fast Money is back in tune.
39:24Tim Seymour:Welcome back to Fast Money. Quantum stocks surging today after the U.S. government announced two billion dollars in grants to nine firms working within the space. Inflection, D-Wave, Arquit, Global Foundries, all seeing double-digit gains. IBM, which will get a billion dollars in funding, having its best day in over a year, and single-handedly sending the Dow to a record close. Steve, you've been in these names. Yes, I'm in currently IonQ and Inflection. And the IonQ is the I in my Enigma trade, our fast money acronym game. This is something where the government gives you a validation of these companies, changes the complete landscape of the investment community.
40:07Everyone was looking at these being a 10 and 15 year time horizon. That time horizon has brought forward probably two to five and they are making revenue now. Not profitable, but when you look at where the puck is going, I make the analogy of quantum is where AI was back in 2018 with a very strong tailwind current.
40:33Tim Seymour:There's still a long runway out there for quantum to actually materialize into something, you know, that actually works right now. But in terms of the government backing guides proved to be right, invest along with the government. Worked at Intel, worked, obviously, MP Corp, right? So people are going to say, you know what, I'm not going to make the same mistake once, twice, three times. And then again, on back of this, my own, if there's a problem in politics, you know what out of me. But, you know, picking winners and losers in companies, to me, is somewhat problematic. And that's what's going on now.
41:05For any administration. For any administration.
41:08Tim Seymour:Coming up, the CEO of one of this year's CNBC Disruptor 50 standouts joins us next. How iambic therapeutics is shaking up the biotech space when Fast Money returns.
41:21Tim Seymour:Welcome back to Fast Money. CNBC's annual Disruptor 50 list was released earlier this week, highlighting the most promising venture-backed companies innovating and reshaping the economy. Iambic Therapeutics has made the list two years in a row. The biotech company develops medicines using its AI-driven drug discovery platform. For more, CEO and co-founder Tom Miller joins us here on set. Tom, welcome to Fast Money. Thank you. Pleasure to be here. What does AI-driven drug discovery actually mean? I think the basic challenge in drug discovery is to find a new molecule that's going to address a target and ultimately a disease.
41:57And that's a massive search problem. And AI helps us explore that search. And a platform that can turn those AI designs into experimental data extremely rapidly allows us to close the loop and drive forward discovery to make better medicines.
42:10Tim Seymour:So you've actually discovered candidates and you've partnered, So can you walk us through some of the big partnerships that you have so far? So yes and yes. We actually have a wholly owned pipeline that we've demonstrated got to clinic in a third of the industry average pace. So we now are gathering clinical data with AI Discover Drugs in a way that really validates the platform. And you're right. In addition, we've done multiple major partnerships with Lundbeck, with Revolution Medicines, with Takeda, that are using it also in partnership and providing revenue for the company as well. Why is it that it seems like you're so much farther advanced versus some of the bigger pharma companies that want to do this because it seems obvious but seem to be farther behind?
42:52Tim Seymour:And they're actually going elsewhere. They might go shopping. A lot of molecules are being bought in China, for instance. Yeah. The pharma partners have been great collaborators. They've been very interested in what we're doing with those partnerships that I mentioned. And, you know, it involves multiple challenges of not only creating those novel AI technologies, but integrating them in a way that can manufacture data on a effectively weekly timescale that really allows you to retrain the models and drive forward discovery very quickly. A little bit of a sidetrack. So clinical trials cost hundreds of millions of dollars, sometimes billions of dollars.
43:28Correct. Is this a potential predictive model for companies that are going down a road where you could say, hey, we see what you're doing here, but our model suggests it's not going to work? The tools can absolutely be used in that way. And equally, they can be used to design molecules that not only get to clinic, but they can be predicted to succeed through clinic. And we're absolutely doing that.
43:49Tim Seymour:Do you think we'll ever see the day where AI could supplant maybe early phases of clinical trials? I think that we're already seeing that AI is allowing us to avoid many experiments and many dead ends that otherwise would have been the case, which, in fact, drive up the cost of clinical trials through the high probability of failure. And I do expect that with time that we're going to see that cross the boundary from the preclinical to the clinical side. As somebody who regularly develops new drugs and finds new molecules, I'm wondering what your thoughts are on why so many big pharma companies are going to China to buy molecules there as opposed to staying here in the United States.
44:35Tim Seymour:Is the innovation not happening here at a fast enough pace? What's going on? I think there's great science being done the whole world over. And I think with the rise of AI and with the sophistication of China, I just think there's always a rising tide of innovation and sources of potential new medicines. And we compete in that environment. And the timescales and the success that we're able to show is in that environment. So I think that, you know, there's always going to be the need for incredibly challenging new targets and new medicines. And IAMBIC is showing that we can compete in that landscape.
45:12Tim Seymour:Tom, it's great to speak with you. Thanks for coming in from San Diego. We appreciate it. Tom Miller, Iambic Therapeutics. Grasso, what are your thoughts here? Yeah, I mean, the fact that you can do this, I'd be really interested in seeing what was back tested, how it would have changed the environment of the drugs that have already been out there. But it just leads me back to where I constantly keep going to is the smaller biotech firms. You're going to see a bunch of these flood the market with a lot more efficacy than we've seen in the past. So I think it's a really exciting time to be in small cap.
45:50Tim Seymour:Up next, final trades.
45:59Time for the final trade. Julie Beal. I remain skeptical of AI data centers in space, especially cooling them here on Earth. Aon does it pretty well. Stephen. With this grant information that we received to the market today, I think you're going to see inflection get more coverage, higher price targets, and I think it's just the beginning for one.
46:20Melissa Lee:Dan. Yes, Spotify. I like the story here. I like the reframing of the story, the growth story, and some of the new add-ons they got. And for those Spotify fans out there, please follow Guy's first playlist. Miles said I should say that. I apparently have like 130 followers. I should have a lot more.
46:34Tim Seymour:It's not first. It's only. It's only. By the way, the Knicks, a few blocks south of us, play tonight, as you know. What are the chances of you watching the game? Work the game. Okay, very good. Thank you for watching Fast Money. Mad Money with Jim Cramer begins right now.
47:05as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Fast Money Disclaimer, please visit cnbc.com forward slash Fast Money Disclaimer. Pandora makes it easy for you to find your favorite music. Discover new artists and genres by selecting any song or album, and we'll make you a personalized station for free.
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From the publisher
Walmart raising the alarm bells on the consumer, as the big box retailer posts a disappointing outlook amid rising gas prices. How the oil shock is hitting shopper’s wallets, and what we can expect to hear about the consumer when competitors report results next week. Plus, details on OpenAI’s IPO timeline, how Spotify is raising the volume for its superfans, and Eli Lilly’s heavy hitter; how the pharma giant is moving forward in the weight loss drug space with its next-gen obesity drug.
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