NVIDIA Risk, Anthropic IPO Test, and Texas Roadhouse Rally

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0:56Or find Schwab Market Update wherever you get your podcasts. My mission is simple. To make you money. I'm here to level the playing field for all investors. There's always a low market somewhere. And I promise to help you find it. Mad Money starts now.

1:17Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramerica. Good morning, friends. I'm just trying to help you make some money. My job is not just to entertain you, but also do some teaching. So call me at 1-800-743-CBC. Tweet me at Jim Cramer. Sad. That was my first emotion when I learned yesterday what had happened with Jensen Wong and NVIDIA. Sad for his family. Sad for his company. Sad for shareholders. Maybe sad for him. Because Jensen brought this upon himself, whatever this is, other than something that's real bad for everyone involved. On a day where the market was actually quite good, aside from NVIDIA, with the Dow climbing 1 ,104 points, S &P jumping 2.35%, NASDAQ pole learning 2.74%, I find myself drawn to the Jensen Wang story because I think the world of him.

2:09But I am not drawn to the prurient. This time, though, we have no choice because Jensen admitted to a liaison with a woman who was an alleged Chinese spy and ran an outfit that might be a shell company for the People's Republic of China. That, as my lawyers would tell me, is a real bad set of facts. Right now, Jensen is still working, still CEO, and he still is the support of NVIDIA's board of directors. But given the facts of the story, which seem to get worse with each update, we're going to have to consider owning shares in a Jensen-less NVIDIA. First, if that is the case, you can no longer be bound by our own it, don't trade it mantra, which has been the default view of the CBC Investing Club for its biggest win ever.

2:52We don't know who would or could take over for Jensen, but I know there is a real bench at the company. We are not anxious to dump it. People learned that lesson when they dumped Apple after Steve Jobs died. They left a fortune on the table when Tim Cook took over and oversaw 15 years of fantastic value creation. For all we know, there is another person who can play an important role, do a good job. No one, not even Jensen, is irreplaceable, and the institution must be preserved, NVIDIA. Yes, NVIDIA has the best technology and is the undisputed leader in its industry, although we know that AMD is a more capable, really, is becoming a more and more capable competitor.

3:29Would it distract Jensen, if he remained CEO, be as forceful as one who would need to be to both fend off all the comers and design new chips? That's not clear. I don't have much to add to the current stories other than to say that the NVIDIA board was misled initially about the relationship of the affair and was told that the company in question, Megaspeed, was going to be the equivalent of a CoreWeb for Southeast Asia, a neocloud-like enterprise that could use all the GPUs it could get. Great client. At least it seemed to be a great client, not a conduit for China. Did Jensen know more than that?

4:00Did he give up plans or secrets, either corporate or presidential, to the alleged Chinese agent? If the answer is yes to any of those questions, that could jeopardize Jensen's role at the company. either because the board feels it has to take action on Jensen's duplicity or because the U.S. government demands the change. Again, our interest is to figure out if the company's stock is still a buy, both right now and in the future, not if Jensen is compromised and must leave. I still think NVIDIA is a buy, though we must be prepared for a change. I think NVIDIA can go forward just on the strength of its multi-year product roadmap that's already developed.

4:33But I am concerned that the blue wave will limit the data center's growth, and NVIDIA needs tremendous growth here and abroad to keep beating estimates. Put simply, the company is worth less post-election than it was pre-election. The elected politicians who opined on the issue almost universally came out against the industry and actively campaigned against data centers. Voters rejected data centers in 40 of 41 ballot measures the people have spoken. I think that means if the Democrats take back the presidency in 2028, the federal government could end up regulating the industry. That's a decided negative because the swiftness with which we are putting these up would just go away.

5:09We could have a federal regulator like FERC, which handles pipelines and has been a huge roadblock over the years to quick pipeline development, even when it would reduce dependence on foreign oil. For now, I think there is a window to permit new projects, and I do expect that will happen in some parts of the country. But the notion that there'll still be this gigantic, far-as-the-eye-can-see data center build out, that is no more. I think that means we can no longer be as aggressive in the sector, and Jensen-Wong's behavior only complicates what had already become a very complex situation. Now, there's one other concern that looms large, maybe the largest, and that's financing.

5:43Data centers cost fortunes. They can't be built with existing funds or, in most cases, funding with cash flow. If an investor knows that an elected official can put an end to a project, why would she possibly commit capital to it? Especially if it is a speculative neocloud behind the project, like an IREN or a Nebius or a CoreWeb, which reports tomorrow. I think these marginal buyers of NVIDIA chips may not be able to get the financing they need to build data centers on their own. Worse, perhaps, NVIDIA would have been a lead investor in many new data center projects, but maybe a new CEO would disagree with that posture.

6:19Maybe a new CEO would disdain that kind of financing that Jensen pioneered. Without Neoclouds as a boundless source of gigawatts, that leaves the industry hostage to its own hyperscale or build-outs. It is possible that without the Neoclouds, you have kind of this, I want you to picture this, a Formula One racing issue. An accident occurs. A yellow flag gets waved. The race slows. No passing allowed. Hmm, maybe that's why shares of the incumbents like Amazon, like Microsoft, were up so much today.

6:49That's still one more reason why you have no choice but to scale back on what was once the greatest story ever told, the data center build-out, with NVIDIA now being part of the scale-back group. Now, we did sell a bit of another data center-related stock for the CBC Investing Club Charitable Trust this morning. It was a small trade, but we have been trying to wean away from the group ever since many of its stocks went parabolic. Look, we put money into a consumer group stock because I have more trust in them going forward, even though much slower growth, but much better price. What should you do?

7:23What should you be in? Judging by today, you can be in anything, including, oddly, some parts of tech. It looks like what happened at the end of last week was nothing more than a liquidation by several hedge funds who had bet too big on data center stocks and guess wrong or didn't think the election mattered. The selling finished late last week, and we are now back to the Wednesday rally. It's almost as if last Thursday's sell-off didn't happen, except it did. I think that away from one of the president's comments that seemed to take aggressive action against Iran off the table allowed oil to fall big.

7:56I mean, really big. When oil falls big, everything does well that touches the consumer. And two-thirds of our economy touches the consumer. I will come back with more of what can work later in the show, even as I feel the need to remind you that we are in a period of heightened volatility where we have to recognize that we could be down tomorrow as much as we are today. But the bottom line, what happened with Jensen Wang is sad above all else. But I'm here to help you make money, not to judge the man. So what you need to know is that NVIDIA is a less attractive stock than it was a week ago, even as I think the business remains strong.

8:30That was true before this weekend's sad revelations about spies and affairs based solely on the election results. But if Jensen's transgressions mean he can no longer lead this company, that only makes matters worse. That said, if you do look away from NVIDIA and the data center theme, there's lots of stocks that can still work like we saw today. Stay tuned. We got a few. But they are in no way as important to the future as NVIDIA. Maybe nothing ever will be. Let's go to Anne in Indiana. Anna. Ann. Hey, Jim. Thanks for the club call on Friday. Oh, thank you. I'm glad you liked it. We put a lot into it.

9:05Regina Gilgan did a great job. Jeff Marks did a great job. Really proud of the CNBC team. And I think we can lead. I think we can lead with what we're doing with this club. So how can I help? Well, there's no competition, really. So I'm calling about Casey's bought on the way down. It feels more like a staple than a discretionary, but the P.E. still feels high. Yeah, this is so tough. You know, they had one miss, but, you know, unforgiving. And this market is so unforgiving with one miss that we now need to see too good in order to offset one miss. That's my rule of thumb. And so I am on the fence on Casey's.

9:46I see a lot of other stocks like a Texas Roadhouse that I like more here. But thank you for the call. Thank you for the kind words about the club. And I say once again, we will leave. Let's go to Ken in Texas. Ken. Yes, Jim, my stock had good positive momentum up until about three months ago. It suddenly got very volatile. I started a position in Merck about 21 years ago. It's about 7 % of my portfolio. Is it still a good hold or should it be worth? Oh, 100 % a good hold. Rob Davis is doing a fantastic job. It's just, look, I mean, when a stock goes straight up from 85 a year ago to 148, you're going to get a little what we call consolidation.

10:29I think Merck is a terrific stock and a great company. All right. Old Man Money tonight. The biggest IPO of the year could kick off soon as tomorrow. I'm diving into every angle of the hotly anticipated anthropic IPO so you can stay ahead of the game. Then does a 3D printing stock have a place in your portfolio? I'm turning in my homework on Proto Labs and telling you where I come down. And with beef prices on their way down, is it indeed times I just mentioned and book at Texas Roadhouse? I'm giving you my analysis of this restaurant company. So stay with Kramer. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

11:07Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. You've never been one to settle, stand down, or stand still. You're a lifelong learner, energized by excellence. There's a fire inside you you can't ignore. You've got competition to outrun, momentum to build on, and your own high standards to meet.

11:48Stop now? Not a chance. At Capella University, we help you catch what you're chasing because you've always had the drive. Now, go earn the degree. Capella University. What can't you do? Visit capella.edu to learn more. You know, recommendations can be great. Maybe someone recommended this podcast and here you are. but home projects are different if a podcast isn't your thing you lose a few minutes if you hire your cousin's neighbor to mount your tv you might end up with a lopsided screen and wall damage maybe i know a guy just isn't enough for your home that's why thumbtack works it matches you with top rated local pros with photos reviews and credentials all in one place for your next home project try thumbtack hire the right pro today don't miss a second of mad money follow at Jim Cramer on X.

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13:03Tech stocks have taken on the chin these past couple of weeks. Basically, everything connected to the AI data center getting hit. Investors reassessed the durability of the entire AI theme. I've been looking for several things before I could feel better about tech stocks. But most of those tests for the tech sector have gone the wrong way. Charts haven't improved. With the exception of Microsoft, the market view, the hyperscale earnings is disappointing. And the midterm elections only created a new set of worries for the theme. Today seems like a bit of a one-off bull when you consider the prospects for at least this sector.

13:34But there's one last big test that I've been telling you we've got to have, it's got to pass before we can feel better about tech. And that's the upcoming Anthropic IPO. As vol as the AI trade has been, it still seems like we're on track for November listing for Anthropic. And it is crucial that this deal happens. Without it, I just don't see how the AI-related stocks can make a real sustained recovery. I don't think it's hyperbolic to say that this could be one of the most consequential IPOs in history. Yes, there is that much riding on it, including the fortunes of about 25 % of the S &P 500.

14:08After Anthropic made its first S-1 filing public two weeks ago and published an updated S-1 a week ago, we should see the IPO roadshow begin this week. And then, assuming there's setbacks, the deal could price, and Anthropic shares could begin trading as soon as this week. That's why all throughout this week, I'm going to be pairing you with a multi-part Know Your IPO series. Yeah, one second. I'm telling you, this is incredibly consequential. I'm going to talk about Anthropics' top-line growth trajectory, what it's looking like, just how profitable or not it is. I'll also get into other aspects of the deal, like a quirky lock-up release, governance, and things like customer and channel concentration.

14:44At the end, I'm going to give you my final thoughts about whether you should be thinking about buying Anthropics shares, maybe selling Anthropics shares, and at what level. But tonight, I want to start by simply explaining the stakes for this IPO, why I think this is such an important event for the market. Then I'll start to frame the debate about Anthropic shares, specifically by offering some ballpark numbers about a potential deal size, as well as the latest reporting on valuations for Anthropic. So why is this deal so important for the AI data center theme in the broader market? The short answer is that Anthropic is important because it is one of just a few companies, a handful, at the end of the food chain for all the AI data center investments that we keep reading about, that we've seen.

15:22So it's one of the few companies that ultimately need to make money from the hundreds of billions of dollars in investment spending that we have seen. If it can't do that, or if it cannot convince enough investors that it will do so, then it's tough to justify all the AI investments that are being made today. A huge part of the market would suddenly be deemed overvalued. Let's get more specific to explain what I mean. NVIDIA makes expensive computing equipment that's purchased by a handful of companies, the hyperscalers, including what I just covered in depth on Friday's SpaceX. I explain that SpaceX has seen explosive growth over the past two quarters and that its revenue growth has mostly come from its super intelligence segment.

15:58But that's not because there are suddenly more people using Grok at SpaceX's AI model or because the people using Grok are paying more. No. Instead, it's because SpaceX has started to get lots of revenue from renting out its computing capacity to others. While SpaceX has said that they've seen a ton of demand for compute from many different companies, all we know right now is that they have two big customers, Alphabet's Google, which is paying about$900 million per month for SpaceX compute and Anthropic. Originally, when the SpaceX-Anthropic deal was announced, the deal was that Anthropic would pay$1.25 billion per month to SpaceX.

16:33But at some point over the past few months, that deal was expanded. In Anthropic's IPO prospectus, the AI lab disclosed that it will now be paying over$3 billion per month to SpaceX. That's starting in December. That contract is the main reason that SpaceX can feel comfortable making gigantic purchases of NVIDIA equipment. They know they'll see a quick return on that investment, mostly because Anthropic is paying so much to them. But if an Anthropic deal fails, then Anthropic might not have the cash to fulfill its contracts, and you'd have to take estimates down for both SpaceX and NVIDIA, along with a whole host of other compute providers to Anthropic and their suppliers.

17:11And I haven't even talked about the fact that many other companies like Alphabet, like Amazon, and yes, NVIDIA, again, have invested billions in Anthropic, And the appreciation of those investments has fueled those companies' earnings growth in recent quarters. You want to reverse that? So those are the stakes here. But I'll wrap up this first leg of our Know Your IPO segment with the latest reporting on valuation. Throughout the fall, as the IPO came into focus, we were told that Anthropoc was looking to raise up to$100 billion in a deal that would value this company at$2 trillion. Those type of numbers would make this the largest IPO of all time.

17:48SpaceX currently holds the title with a$75 billion offering in June, which valued the company at just over$1.75 trillion. But over the past month, really important, do you know that those numbers have come down? In mid-October, Anthropic hosted an event for investors and disclosed that its growth had slowed a tad in the third quarter. After that, there were reports that investors were discussing evaluation were like$1.5 trillion. As recently as a week ago, that was still roughly the range I was talking about last Monday. The Journal said$1.5 trillion,$1.6 trillion. Bloomberg reported the conversation shift to$1.4 to$1.5 trillion range.

18:22Okay,$1.4 to$1.5 trillion. Keep those numbers in mind because then the election happened. And we had last Thursday's tech collapse. By the end of last week, even a$1.5 trillion valuation seemed like a stretch. Bloomberg reported last Friday that investors were discussing a$1.2 to$1.3 trillion valuation range. With some saying it could go as low as$1.1 trillion. CMC quoted one investor that's had a valuation of between$1 trillion and$1.25 trillion was more likely. Oh, man. Those are the latest numbers that we're working with, and now I see two big questions. First, would Antropa be willing to do a deal that valued the company at only a small premium to the$965 billion valuation used in the last private fundraising in May?

19:05More importantly, would there be enough demand for the stock, even at a valuation in the trillion-dollar range, knowing that it had come down so much? Last week, we also learned that anthropic rival OpenAI closed a new private fundraising round at a$1.25 trillion valuation. Now, that was lower than the$1.4 trillion valuation that OpenAI was originally seeking for this funding round. But I think the even more relevant point is that OpenAI reportedly only raised$11 billion, saying the remainder of the round could reach$20 billion in a coming lease. Well, that's well below the target of$30 billion.

19:40that's a damning indication of where demand for these AI labs may be standing. Or this year in the previous round, OpenAI raised$122 billion with relative ease. Now they had to work hard to get less than a tenth of that amount? Hey, guys, this is significant stuff, stuff that market participants seem not to be paying any attention to at all, especially not today. Here's the bottom line. The upcoming Anthropic IPO is the next big test this market faces, and it needs to be a success for the AI stocks to stand any chance of a longer-term recovery. That's why all throughout this week, I had to focus on this.

20:12I'm going to be covering the deal in a Know Your IPO series. Tonight, I've established the stakes of this deal and discussed how the potential valuation for Anthropic has come down in recent weeks. Not up. But tune back in tomorrow when I discuss the latest revenue and growth stats for Anthropic, which will offer ammunition for both the bears and the bulls. Mad Money's back after the break. Coming up, still wondering if ProtoLabs is worth adding to your portfolio? Kramer is printing out his homework on the company next.

20:56Last week, the show's old friend Bill in Massachusetts called him to the lightning round to ask about a stock I didn't know. Proto Labs, ticker PRLB. So I said I'd do some homework and I'd get back to him with the verdict. Proto Labs is a digital manufacturer that makes custom parts for other companies, from a single prototype to a small production run. Say you're an engineer at a drone maker and you need a new part. You send them a computer file that shows the parts shape and size, see what it'll cost, and wonder when to try. If it works, they'd love to make the next thousand, too. Take the job Proto Labs did for NASA.

21:31At a conference in 2024, NASA engineers used artificial intelligence to design a holder for a flask that could collect gas samples on the moon. They wanted it in hand before everybody went home. Protolabs machined it out of aluminum. The cutting alone took 19 hours, but within 36 hours, the engineers had it in hand before they went home. It's not just aerospace and defense. Sonos, you know that one, the audio company? It wanted a deeper bass out of a slimmer soundbar. ProtoLabs 3D printed early designs and used injection molding to make more precise prototypes. That led Sonos to refine a piece of the speaker's suspension.

22:05Sonos says the resulting soundbar, the Arc Ultra, delivers up to twice the bass of its predecessor. When Bill called, my first thought was ProtoLabs was primarily a 3D printing company. That's what I remembered it as. Turns out it's only their third largest business. Last quarter, 3D printing sales grew 11.4 % to$22.4 million, or 14.5 % of revenues. The biggest business of Proto Labs is called CNC machining. That's the computer-controlled process it used for that NASA flask. The division focused on using computer-controlled tools to cut metal or plastic into the exact shape customer needs. Sales from that division rose 16.4 % to$73.4 million, nearly half the total of all revenues.

22:47Another 35 % came from this injection molding where you used the same mold to turn out identical parts. That business grew 12.5 % to$53.7 million. Sheet metal and other work accounted for the rest. All right, so who uses this company? Well, Blue Origin, Raytheon, Aero Environment, Agility Robotics are all customers. Back in July, management put aerospace and defense at about a quarter of its sales. Last week, it said it serves more than 100 drone manufacturers. And revenue from those customers has risen more than 90 % since 2023. ProtoLabs has increased capacity on one line of HP 3D printers by 50 % to meet demand from aerospace, defense, and drone companies.

23:27Last quarter, ProtoLabs served slightly fewer individual buyers than a year earlier, but the average buyer spent about$7 ,400, up nearly 17%. Madden says some of its customers, its bigger ones, are sticking with ProtoLabs as they move from testing designs into production. That's a positive sign. On October 29th, ProtoLabs reported third-quarter sales of$154.3 million. That's up 14%. It was a company record. That was about$5 million ahead of Wall Street's estimate and above management's$145 million to$153 million forecast. So far, so good. Adjusted earnings jumped 33 % to$0.63 a share,$0.03 ahead of estimates, and near the top of management's range of$0.56 to$0.64.

24:06Management now expects 10 % to 11 % sales worth this year. That's up from 8 % to 10%, and that's ahead of Wall Street's forecast. If they deliver, it'll be their first full year of double-digit organic sales growth since 2018. Oh, but the bears, they had plenty to work with, too. And their work prevailed. Adjusted EBITDA came in at$26.2 million versus the$28 million that's expected. And adjusted gross margins came in light. The stock dropped nearly 15 % that day, and then another 11 % the next, from just under$91 to less than$69. Ouch! As Pete just shy of$100 in early October, the stock had nearly doubled from the start of the year.

24:48This thing was still up nearly 80 % going into earnings. At around$69 today, it's still up about 36 % year-to-date. I think that really helped explain why the EBITDA margin misses hit the stock so hard. Still, it was a brutal comeuppance for ProtoLabs shareholders. What squeezed the margins? Customers can have—God bless you. The cameraman sneezed. I always have to say God bless you. Customers can have their work—that's okay. Customers have their work at a ProtoLabs factory or through its network of outside manufacturers. In the U.S., more customers went for the faster service at ProtoLabs' own plants.

25:19Factory sales grew 17.5%. Network sales grew just 3%. When the work goes to its own plants, ProtoLabs has to supply the machines and the people to run them. Expensive. Using an outside network of manufacturers is more lucrative than in-house works, so that explains a lot. Machining sales at its U.S. factories grew more than 20 % year-over-year for the sixth straight quarter. To keep up, ProtoLabs added more than 40 machines over the past year. Also upgraded older machines and brought in contract workers. Materials got more expected, too. A lot of things going the wrong way. As a result, adjusted gross margin fell from 46.8 % in the second quarter to 44.5 % in the third.

25:56That was below the 46.4 % Wall Street expected. Wall Street hates when margins shrink. Machine upgrades accounted for about a point of that decline. Contract labor nearly another point. Doesn't really matter if margins are going down. Stock goes down. Next year, management expects operating expenses to grow closer to the pace of sales. For the fourth quarter, expect selling and administrative expenses at a percentage of revenue to look more like the first and second quarters than the third, which would make for a nice comeback. The midpoints of the fourth quarter sales and adjusted earnings forecast both top decimates.

26:25Still, the sales forecast implies about 8 % growth, and that's down from 14 % in the most recent quarter. Management expects lower volumes and some overtime around the holidays, leaving gross margin flat to slightly lower than last quarter. Again, these are more reasons why the stock got hit. Now, fortunately, ProtoLabs can afford the equipment. Adjusted net income is$15.3 million. That's above the$14.5 million consensus. ProtoLabs generated almost$23 million in operating cash flow. Finished September with$175 million in cash. Investments against zero debt. Now, with the market cap under$2 billion, ProtoLabs sells for just over 30, I'm sorry, 30, 30 times the consensus adjusted earnings estimate of$2.27 a share.

27:06At$91 for forward earnings, that would put the same multiple at$40. Wow, that was rich for a manufacturer heading to a quarter of single-digit sales growth. Down here, you know what I'm kind of interested in and inclined to sign off on a small position? Historically, it has traded closer to 30 times forward earnings. This one could definitely get cheaper. So what do we do? Here's the bottom line. Bill, and everyone else, I think ProtoLabs can be the one speculative stock I suggest in how to make money in any market in an otherwise diversified portfolio only. 30 times earnings is still expensive.

27:34But these guys are profitable. They got no debt, and they sell parts to real deal companies like Blue Origin, Raytheon, Agility Robotics. I like the exposure to U.S. re-industrialization, digital manufacturing, and demand from aerospace and defense drones, data centers, robotics, without having to pick winners. If you've done your homework and you want this as your speculative play, I bless it. I recommend a small position here. OK, maybe a larger one, a few points lower. I want to see those factory investments pay off in the gross margin, see more wins and partnerships on the production side.

28:02But you may not have a chance to buy it if you get that in the numbers. Otherwise, I think this one, for me at least, it's just too volatile, and I don't need the headaches. Let's go to Sam in Pennsylvania, please. Sam. Jim, here's the stock that I discovered as you were in their factory. I'm looking at Corning here. They're expected to grow revenue roughly 20 % over the coming decade as we got this fiber optic buildout. I'm curious what you think given the diversity of their product offering. They've got products in solar. They've got products in fiber. They've got products in AI infrastructure.

28:37They've got a lot of a lot of growing industries for them. So curious what you think of Corning here. Well, Sam, I got to tell you, we had a home run of two home run in Corning for the travel trust. And we don't look back. I mean, maybe if the stock got back to the 80s, 70s, we would take we would take a swing again. But it was up 10 today. And I think, frankly, you know, the market is not going to pay up for these stocks. if you start hearing some bad things say about the Anthropic deal, or if we have a second day of tech, it could be a reversal day. I don't trust the market after this big run today.

29:11Let's go to Lisa in New York. Lisa. Buena sera, Jim. My question to you is, I bought Caterpillar at a much lower price. As you know, it was as high as about$1 ,000, maybe a few dollars over that. And it's since pulled back quite a bit, a lot actually, despite the earnings being very good. So my question to you is, should I hold, buy more on the dip, or take my profits and run? Okay, I want you to hold it. I'll tell you why. I think that the company did not communicate the quarter very well. They did not choose to raise numbers. They said things were good. I think that the 22 times earnings, things are much better than that price-to-earnings ratio would indicate.

29:57I normally would tell you, use the price earnings. Wait till it goes to 25 times earnings. I think you literally, I think you have another 150 points here. And I don't want you, Lisa, to get out of it until you get that. You deserve it. It's going to go higher. All right. Much more mad money ahead, including my deep dive on Texas Roadhouse. Then the last few trading days, I've seen some unbelievable points. So what is that telling us about the state of the markets right now and what's driving things? I'll give you my analysis. Of course, order calls rapid fire tonight's edition of The Lighting Wrap.

30:28So stay with Kramer.

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31:28Now, go earn the degree. Capella University. What can't you do? Visit capella.edu to learn more. You know, recommendations can be great. Maybe someone recommended this podcast and here you are. But home projects are different. If a podcast isn't your thing, you lose a few minutes. If you hire your cousin's neighbor to mount your TV, you might end up with a lopsided screen and wall damage. Maybe I know a guy just isn't enough for your home. That's why Thumbtack works. It matches you with top-rated local pros with photos, reviews, and credentials all in one place. For your next home project, try Thumbtack.

32:02Hire the right pro today.

32:08On Friday night as part of our special show with a live audience made up of CMUC Investing Club members, what a fantastic time. I took some questions, including one from a well-dressed club member named Nick. With beef prices high and the cattle still low, the stock's up over 10 percent in the last month. Is it time to get back into Texas Roadhouse? I told Nick that while I like Texas Roadhouse very much, the club had backed away from the stock earlier this year because of the relentless multi-year climb of beef prices that had come to dominate the darn narrative. So he took a small profit in Texas Roadhouse shares and focused instead on Starbucks in the restaurant space, which has become a big winner for the club.

32:49But after the show, you know what? I wish I'd given Nick a bit more about the stock that he asked about, TXRH. I felt like I was a big clip with my answer. So tonight, I want to quickly return to that stock with some more thoughts on what to do with the stock, especially after its gain of$6.44 today. When my travel trust sold out of Texas Roadhouse in February, the stock was in the 180s. Hey, it was a good sale because it quickly sank to the low 150s by May. A summertime rally then brought Texas Roadhouse back to the 200s in August. But when gasoline prices started climbing again, investors gave up on most consumer stocks.

33:25Well, Texas Roadhouse had another swift sell-off. Early October, Texas Roadhouse shares were back to the 150s. Oh, man. Nick's right, though. The stock has been acting much better of late as investors rotated out of tech stocks over the past few weeks. Many consumer stocks, including the restaurant stocks, have caught a real nice bid. Texas Roadhouse in particular, quote, four different analyst upgrades in October, all of which took the stock to a buy rate. That's pretty amazing. And the stock made it all the way back to the 190s. It's a little bit above the level where my trust sold it earlier this year.

33:58So to Nick's point, is it time to get back to the stock or have we missed it again? And then we need to wait until this roller coaster comes back down. First things first, let's take a look at beef prices. And there's some good news to report on this front. Live cattle prices peaked at north of$2.50 per pound in late April, but have since retreated about 15 % from their highs. In fact, when I look at the chart for live cattle prices, you know what I see developing? A definitive head and shoulders pattern. There's the shoulder, there's the head, and there's the shoulder again. And do you know that is one of the most reliably negative pictographed picks I could possibly show you?

34:46Difficult to keep an$11 price point on a really good stake, and I think their stake is real good. But Texas Roadhouse always aspires to do so. So if we're past the peak of beef price, it's going to be a lot easier for this stock to work because the gross margins are going to expand. That said, Texas Roadhouse announced its third quarter results last Thursday night. And at least based on the headline numbers, this quarter looked like a big miss. Comparable restaurant sales were up 4.3 percent, but Wall Street was looking for a 5.3 percent increase. Total sales grew nearly 10 percent, but also missed expectations slightly.

35:17On the bottom line, Texas Roadhouse had a 10 cent miss. And that's why the company's stock fell 4 percent on Friday when most of the market is rebounding it for Thursday's sharp losses. But you know what? This is quizzical to me. So I've had a chance to look closer at the quarter over the weekend. And there are some crucial details here that make us feel much better about the story for those numbers. See, right near the top of the premier remarks, Texas Roadhouse CEO Jerry Morgan, straight shooter, said, quote, Our third quarter results, specifically in September, were negatively impacted by what was determined to be a social media hoax that occurred at the end of August.

35:50End quote. He continued, quote, through our investigation, which included an external forensic analysis, we were able to we were quickly able to determine that the allegations made in the social media posts were completely false. End quote. Now, I hadn't heard about this, but I looked up what happened afterwards. And I got to tell you a pretty ugly story. One that you know what? It's so ugly I'm not going to repeat her. I don't dignify it. I take the company at its word that the whole issue is fabricated. What matters is what Morgan said next. He had just returned from his annual fall tour and he said, quote, overall sentiment is positive, end quote.

36:28Adding Texas Roadhouse is, quote, seeing momentum in the restaurants that were affected, end quote. Now, hopefully you put that blip behind us. And if that's the case, then there is a whole lot to like here. Management told an excellent tale of positive comparable sales for all three of its brands. in addition to Texas Roadhouse. They also own Bubba's and Jagger's brands, much smaller, but still part of the mosaic. The company has great visibility for its unit growth well in the next year, including international growth via franchise partners. There's some menu innovations that sound like they're working.

36:57Even Texas Roadhouse isn't the first place I'd think of for chicken Alfredo pasta. Hey, you know, there's no accounting for taste. Like Kramer-fave Chili's, part of Brinker International, Texas Roadhouse is also winning because it's offering real good deals on booze. Get this, they got$5 ice cold beers. When was the last time you had one of those? Long Island iced teas. Legendary margaritas. I don't know. My wife has a legendary margarita, but they don't call it legendary. And that's a winning formula in a world where the consumer is looking for value. Texas Roadhouse is also seeing nice throughput improvements thanks to the technology investments that it's made for stores.

37:31They are chock full of the technology. But I looked at one behind the scenes. Pretty impressive. But here's the bottom line. With more time to look into the story and offer full opinion, I would tell Nick from Friday Night Show, if, let's say, Nick was right here wearing that incredible jacket that I wish I had, I would say, Nick, it's starting to look pretty attractive again. Maybe you should buy it. Okay, Jim, maybe I'll get some. First and foremost, that's what it would be like. First and foremost, live cattle prices are off the boil, hopefully for good, though I know better than to say that definitively.

38:00And while last week's report looked like a setback upon further review, that's not the case. There was this one-time issue that I'm not going to dignify its past, and everything else sounds as good as ever. The truth is, there are a lot of good restaurant stocks right here, right now. And this one should be considered one of the very best. Good value, plenty of room to grow, and great management. What's not to like? Mad Bunny's back after the break. Coming up, he's the fastest mind on Wall Street. So we're putting him to the test with your help. Bring on the lightning round next.

38:38It is time. It's time for the White Mountain. I'm going to talk to you about the receiving stock. I'm going to talk to you about the buy-sells. I'm going to talk to you about the course. I'm going to talk to you about the stand. I'm going to talk to you about the stand. I'm going to play the sound. And then the lightning round is over. Are you ready? It's time for the White Mountain. It's time for Stafford, California. Stafford. Hey, Jim, how are you doing? Doing well. How about you? I'm okay, thanks. Hey, Churchill Bounds. Okay, this is a very well-run gaming company. People often overlook it.

39:04It sells very inexpensively versus the others. I know it's had a little bit of variety here, but I think you can go higher. How about we got Arash in Texas? Arash. Hi, Jim. Arash from Houston. Big fan of your show. Given the war with Iran could be imminent again, what's your take for Valero? Does it still have room to go higher? I think Valero's, I think its day has come and gone. I think it's been a terrific trade. I would ring the register. I'd ring the register tomorrow. It's been a real win. Don't let it go into a deficit. Let's go to Bill in Pennsylvania. Bill. Jim, this company missed earnings on Thursday, but the stock is up anyway.

39:40Their main shtick is firefighting, including being a dominant global supplier of wildfire suppression agents. And with climate change providing a continuing tailwind, what's your take on PRM Papa Romeo Mike? I don't know it. I'm stumped. I don't know it. I'm looking at the 42 people who backed me up here, and I say, Thank you, Ben. Let's get to work. All right. Let's go to John in Wisconsin. John. Thank you for taking my call, Jim. Appreciate it. Oh, good to have you. Good to have you on the show, John. What's going on? Symbol RRX Regal Flexnord. Oh, man, this is just kind of a basic American company that is worth so much more than it's selling for.

40:23I'm glad you mentioned it. I'm saying bye, bye, bye. Let's go to Raj in California. Raj. Yes, sir. This is Bhagai Raj from California. I would like to know regarding company Snap, S-N-A-P. No, that and$5 will get you$5.05. You know what's a shame about Snap? I can't really think about what's a shame about it. Just it's a shame. Okay, let's go to Saeed in California. Saeed. Hi, Jimmy. Thank you for taking my call. My question is on Marvell, M-R-V-L. I have a large position in this stock. And considering the merger and the market condition and today with NVIDIA, do you think the stock is still good considering the, you know, over 50 % went down discounted?

41:17Look, I have thought about Marvell endlessly since that deal. And I have to tell you, at this price, at$150, I think if you wanted to buy 100 shares, I would buy 25. And then I would literally wait to 100 to buy 25. That's called a very wide scale. It needs a wide scale because it is, as much as I do like Matt Murphy, everybody knows that, it is a broken stock right now. People feel it's a broken segment and a broken stock. It's not, though, a broken company, which is why I would say buy some, but not a lot. Not at these prices. Let's go to Frank in New York. Frank. Yeah, I did. That's for taking my call.

41:57Of course, Frank. You mentioned I was hot on Akamai just like you about two weeks ago or whatever. I bought it. I paid$103, but I really was confident. And now it's$78. What do I do? You know, they did this big convertible bond and everyone's running from it. You know what? They all like Cloudflare, even though it's much more expensive. But you know what? I do, too. I think that Matthew is the real deal. I'm Matthew Prince. And I think that Cloudflare, even though it's the most expensive stock in the market, I like more than I like Akamai. How about them apples, huh? How about Apple? And that, ladies and gentlemen, conclusion of the Lightning Round.

42:37The Lightning Round is sponsored by Charles Schwab. Coming up, Kramer's sifting through the market's big swings to see which moves are for real next.

42:58Every day around here seems like it's either a wild bull market or a hopeless bear market. Last Thursday, we had this hideous one-day bear market that took stocks down dramatically. The worst day since Liberation Day. The day before that, we had a gorgeous bull market with multiple sectors ramping. Today, the stampede was back on. Which one's which? It's tough to tell because we have some really good things happening that seem to be ratified by a president who may actually have heard what the electorate had to say on Tuesday. He has acknowledged that the war with Iran hurt the American consumer, and he seems to be ruling out more aggressive military action.

43:30He's hinting about a settlement this evening. I mean, he hasn't repudiated tariffs, but he doesn't have to. The Supreme Court helped on that front already. And now they will revert to their original province, which is Congress, which will most likely repeal them. That will bring prices lower, not as much as oil, but in some cases pretty substantially. We know that a Democrat-held Congress would like to raise taxes for the rich, change the long-term capital gains tax rate to match ordinary income levels, and bring back higher corporate taxes. But that can only happen if they win the White House.

44:00And today, unlike last Thursday, we aren't thinking about that. We know the data center theme just got damaged again, this time by the potential sidelining of NVIDIA's Jensen Wong. Hey, he's the godfather, may I? There are names that are considered data center stocks that bounce hard today, but that seems to just be a recovery. Really, after a round of forced hedge fund selling last week, boy, those charts look terrible. And it is a chart-driven momentum group, but don't let yourself believe it otherwise. So what post-election rallies might be for real based on that worldview that I just gave you?

44:31I am looking at stocks in three sectors that are trying to tell us something, and I am listening to what they are saying. You should listen, too. The first sector is indeed retail, and the stock that stands out is Best Buy. Now, here's a stock that could gain no traction whatsoever for five years. Long time. Suddenly, it rallies 20 quick points and takes out the high from August 24 on nothing, no news, no earnings, nothing. What's that about? All right. When you go to Best Buy's site, it features appliances. We know they sell computers. They sell television. They sell Apple products. These are all expensive products.

45:01But if the price of the pump is coming down and the consumers unleash, well, then they become that much more attainable. Best Buy's move coincides with the stock of Home Depot, which rocketed higher. It fell up 76 points from its early October low, where members of the club urged me to sell it. It's a big travel trust holding. Tools and appliances are being featured at Stanley Works, too, which has the added advantage of perhaps seeing a decline in tariffs. They really hurt them, as well as lower interest rates. Second group, the bags. Now, this is a tough read. Maybe it's the fact that there are two more years for these companies to make deals, to get things done, to borrow more, to see more M &A before the public administration goes away.

45:39I don't know. Can't just be business as usual. You wouldn't get that kind of run in a stock like JPMorgan Chase or Citi, both of which have been a bit of a drag on the averages. To me, this says better credit is coming because people have more spare change and are less likely to fall. Finally, there's the incredibly strong move in the consumer packaged good stocks, which have done next to nothing for ages. I'm talking about stocks like Clorox, Procter & Gable, Kimberly-Clark. These stocks do well when the economy slows, but they also do well when transport costs and raw materials go down, bulking up gross margins.

46:12Put it all together, and the market is saying that the beaten but dragged a working person is about to get a really good break, a price break on pretty much everything. Oil coming down is a huge spur for this economy. I think that's terrific, but it is a bit of a nice dose of pan gloss. Again, to me, this is the kind of a one-day wonder bull market, just like the one-day bear market last Thursday and the one-day bull market of last Wednesday. We committed a small amount of capital to the market today for the Travel Trust, but we also took some out, all part of a critical restructuring, repositioning out of the data center.

46:44Why don't you join the club? You can find out everything that we do. Even if you think I am wrong and that we are beginning at the beginning of a huge move, here's what I ask you to do. Don't chase. Don't chase. Don't pay up for stocks. This market keeps giving you a chance after chance to get a better price. Just write down the names of companies that intrigue you. The essence of this market is that you are going to get a chance to buy those stocks of companies at a better price in the near future. Just wait. I can't promise you better prices, but I do think you'll get them. I like to say this is always a bull market summer.

47:15I promise you I'll find it just for your hero man money. I'm Jim Cramer. See you tomorrow.

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