Markets Sink as Yields Spike, and OpenAI Scores a Big Win Against Apple 05/21/25
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Live from the NASDAQ market, right in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap tonight. Rate shock, a sharp spike in yields, putting fresh downward pressure on stocks and lifting Bitcoin to record highs. Will the climb in the 10 and 30-year treasury put a lid on the stock market rebound? We'll debate that. Plus, Apple picking. OpenAI announcing a $6.4 billion deal to buy former Apple exec Johnny Ives' AI device startup. The details and the negative impact on Apple coming up.

And later, Uber stalls the day after Elon Musk says he doesn't need them to build his robo-taxi empire. Target tumbles after slashing guidance. The retail ripple effect. And go New York, go. We'll go inside the Knicks. Valuation surge as the team makes the deepest playoff run in 25 years. That's right. Go Knicks. I'm Melissa Lee coming to you live from Studio B at the Nasdaq. On the desk tonight, Tim Seymour, Karen Feinerman, Steve Grasso.

and former TD Ameritrade chairman Joe Moglia. Joe, welcome to the show. Thank you, Karen. Thank you, Melissa. Thank you, Karen. We start off at the sea of red on Wall Street stocks taking a sharp turn lower midday with the S&P tumbling over a percent and a half.

And the Dow losing 816 points. The small cap Russell 2000 leading the losses down almost 3%. The catalyst, a spike in bond yields triggered by a disappointing 20-year Treasury auction this afternoon. Weak demand sending rates in the benchmark 10-year briefly above 4%.

point six percent during the session, their highest level since February. Thirty are hitting its highest since late twenty twenty three. Meanwhile, Bitcoin that hit fresh record highs for the first time since December, getting within a stone's throw of one ten before pulling back from those levels. And gold also higher up now for a fourth straight day.

So what was this all about, Tim? This was one of those days that felt really important. And the price action, yeah, it was the most volatile day we've had in a month for an equity market that's been on a tear. And there's some questions about maybe Apple. And so there's kind of existential stuff

out there when it comes to global bond yields, a 20-year auction that a lot of people probably didn't even know we had a 20-year bond. In fact, this was an auction that was only brought back to life about five years ago. It was a $16 billion auction. But more importantly, it was the lack of demand. It was the fact that a coupon settled in over, you know, started out at 5%, and yet dealers took almost 17% of this issue, which is a lot.

It comes after we've had significant backup in yields in Japan. It comes on the eve of a tax budget, a budget being pushed through that has a big tax cut in it. Whether we already had that tax cut or whether it's a new tax cut, it doesn't matter on the politics side.

The credit folks are telling you one thing. And in fact, I think even Moody said that whether people want to listen or not. So it's been a very interesting few days. We all debate all the time. What's that breaking point for equities in terms of bond yields? We closed at that intraday high of where we were on the day. It seemed like the Trump administration blinked on the bond market, not the stock market. So what do you have in S&P that fell 80 percent?

almost 80 handles immediately after that auction. Interesting day. Yeah. Strategists after strategists, 4.5%. That's a cap for equities in terms of how high we can go. Here we are 4.6%. Firmly, Joe, and that has proven to be an issue. I think one of the things that creates a lot of

agita in the marketplaces. We seem to settle down a little while ago when Trump made it clear that he's willing to negotiate as far as tariffs go. But we still have issue with regard to taxes, what's going to happen there. We still have an issue with regard to the budget. We still have an issue with regard to deficit. So if you have a failed auction...

All that means is that ultimately we're going to have higher expenses for our debt that is already close to a trillion dollars. If you if you look at increased expenses for your debt, you don't have a whole lot of room left over for discretionary spending to cut that. So that that that raises, I think, major issues in the mind of the marketplace. Right. Yeah, I think, you know, we all saw that sell off a dramatic sell off, dramatic rally back.

This is just a breather zone. If we stay stabilized above 5,500...

- Haven't you been the one who said Treasury is over 4 1/2? You have been among that chorus of people saying 4 1/2% is an issue. We're at 4.6% right now. - Yeah, that's why I said 5,500 in the S&P, if we stay above that. So I think we're gonna draw down a little bit based on that. I also feel like we could run to that 6,000 level again. I had put that a couple of weeks ago on the desk. I said four to six months. We did it basically in a month to get back to that level.

Too fast on the way down, too fast on the way up. If we could stay middle 5,000s, I think that's a win for the overall market. I mean, the market seems to be operating in extremes at this point over the past month or so. And it's just startling that a 20-year Treasury auction, an auction we barely ever mention even on the air. I mean, Peter Bukvar wrote in a note today, this is something that I don't write about usually because it's a low liquidity sort of like, you know,

off-forgotten treasury bond, the 20-year-old. Right. So why popular bond? No, not at all. It's sort of a bellwether now, or a proxy anyway, for rates in the market. Well, for longer-term debt, right? Long-term debt, yeah. Right. So, I mean, the market's selling off. It's just math. If rates are higher...

Right? Discounting cash flow of earnings forward, then you get lower values. But I also think we had such an enormous run. The volatility index was down below 18 today. It closed, I think, near 21. Below 18, that probably shouldn't have been there today. But...

You know, we've all been worried about this deficit situation and the math of it just getting worse and worse. And it's sort of, you know, gradually at first, then all of a sudden. Are we in the all of a sudden? I don't know. But that is the thing that I find most scary. Yeah, you mentioned volatility going to the extreme lower. Carter Braxton Wirth actually put out a note recently.

pretty much in the middle of the sell-off this afternoon, pointing out the gaps above us here. And the gaps will be filled, meaning volatility will go higher and the markets will continue to be challenged as we fill those gaps. Yeah, I think we often say, I hear Steve using that term a lot, especially in down moves.

So I think it's extraordinary. I think it's extraordinary when you think about that if you want to take it to the extreme and people are now bringing up the term bond vigilantes. And what does that really mean? Well, it's not like one big hedge fund. It's just a lot. It's basically the bond market saying at some point enough's enough and we will vote with our feet. And the extreme example of that is Liz Truss in the UK budget, when again, they tried to jam through a budget that was terrible.

deficit terrible for an economy that was slowing down. So you get a confluence of events that right now are a big challenge. And I do think that this is another one of those challenges. And I think there's a lot of pressure from the White House on the legislators to push through this bill. In fact, this is really being seen as a loyalty test and being phrased that way and therefore

The market is saying something very different. The market is saying be loyal to the bond market, which is being loyal to essentially funding America at a time when there's a lot of issues here. So it's a fascinating day for equities because equities, we all know, are always second fiddle to what the bond market has to do. And I think this is not the kind of thing you could pressure the Fed.

Right. This is beyond this is this is not a Fed thing to move. Right. It is the markets to move. Right. I mean, bonds. We're talking in the car right. We talk on the car ride home about things we talk about on the show. Very exciting stuff. Extremely exciting car ride home. But you're mentioning bond yields. They're not political. They're not biased. They will go where they go. Exactly. But to that point, whenever we start to get to these bond yields above four and a half percent,

There's always a sneaky headline with the government. It's something that they can't control. Trump will come in. So something happens where all of a sudden we're back at four point three in the 10 year. Some CPI data. That's good. I mean, it's that it's that quick. And when I first started my career in the early 90s, the markets used to take weeks, months, years to play out a scenario. They do it now in days, in hours.

HOURS AND DAYS AND WEEKS. SO WE COULD BE LOOKING AT A TEN-YEAR THAT'S FOUR AND A QUARTER TOMORROW. THIS IS HOW QUICK IT HAPPENS. AND THEN THE WHOLE NARRATIVE CHANGES. I THINK THE OTHER SIDE TO THIS, THOUGH, IS WE CAN'T FORGET THE PRESIDENT THAT WE HAVE WHO HAPPENS TO BE A NARCISSIST. SO HE WANTS TO LOOK GOOD NO MATTER WHAT THE SITUATION IS. SO HE WANTS TO MAKE SURE THAT IF THE STOCK MARKET IS DOING WELL, HE WANTS TO BE THE PERSON RESPONSIBLE FOR THAT. IF THE

If he always considers himself a great deal guy, so you've got deals going on with regards to the Congress, with regard to taxes, with regard to deficit, with regard to every other country in the world. And he's not going to allow himself to look bad.

And if things go too far in a negative direction, he's going to step up. He's going to come up with a tweet. He's going to do something that will help put a halt on the market's down move and help turn it around a little bit. So you also believe that Trump somehow will step in to save the world?

The markets can't go too far. I 100 percent believe that, Melissa. I really do believe he's not going to let it happen. But the thing that has to give and it's it's so it's so painful for us to get into the political realm on this show because let Washington do what they do.

But if you think what I'm reading from Wall Street economists is that if this tax bill goes through, this big, beautiful bill goes through, it has the implications of about a $3 trillion impact over the next decade in terms of the deficit. So you get back to what the market is somewhere and the bond vigilantes who are not a particular person, but it's a force that

It's saying enough is enough. And it's one thing to have the rating agency that no one really listened to come in either very late or not. But but at some point you can make an argument that, as Steve says, this is happening quickly. Or I can make an argument that since July of 2000, after we digested the worst of covid, that rates have been going higher. And, you know, Carter comes on here and he's right to point out that we've drifted in a range for two years on the tenure. But I can look at that chart and I can tell you we're going slightly higher. How?

But if the reality is, though, things really get bad, can we count on the Fed to actually come in then? Isn't that when they're going to tend to be more accommodative? What's really bad, though, is it? I mean, if it's a labor market that gets really bad. The markets, the markets and a bit of a free fall rates really, really much higher. I mean, I think at the end of the day, at some point in time, I think the Fed does act.

I don't see that happening tomorrow, but I think if we look like we're going into a recession, we're going to have some serious issues. I think the Fed potentially does wind up doing so. It feels like the Fed's going to want to see an uptick in unemployment. Like, we are going to be either in it firmly or— They're going to go with whatever the first thing that shows on their mandate. So if it's inflation that spikes, they're going to treat inflation. If it's unemployment that spikes, they're going to treat that. That's going to have to do their dual mandate. But if we think back to Tim's point—

The Biden the first Trump administration wrote seven point six trillion dollars extra in deficit spending. Biden wrote eight point four trillion. The markets were still still terrible on a fiscal level, but better than the entire globe on a fiscal level. So something to keep in perspective. All right. Let's go to Washington here. All these moves come as lawmakers scramble to finalize a budget bill before Memorial Day weekend. Emily Wilkins is in Washington with the very latest on this. Emily.

Hey, Melissa. Well, yes, President Trump just met with the deficit hawks today at the White House, trying to get them, yes, on his mega bill that includes a number of legislative priorities, most importantly, perhaps his tax proposal. And we understand that meeting just met. We're still waiting for a bit of a readout here. But the two groups traded barbs earlier in the day as Trump has been pushed for pushing for a vote this evening or as soon as possible. And these holdout lawmakers are

pushing for deeper cuts. They want more spending cuts, including phasing out certain green energy tax credits completely within the next few years and implementing work requirements earlier for Medicaid. Chip Roy criticized the current proposed cuts in the bill as not going far enough today. He tweeted,

that writing a deficit-backed blank check, and he's referring to the state and local deductions there, is easier than cutting spending. And he lists a couple of things like DOGE, those green energy tax credits, and post-COVID spending.

The congressman said that Congress in the swamp will always choose the easy route, but we can't afford it. The White House responded soon after that in a statement touting the bill's positive impact, but it ended with a warning saying that President Trump is committed to keeping his promises and failure to pass this bill would be the ultimate betrayal.

Speaker Mike Johnson, who was also at the White House, he had hoped to have a potential vote on the bill today. He was thinking maybe today or tomorrow. But lawmakers have been waiting since 1 a.m. for a final agreement to come about from leadership and these fiscal hawks. They could not be. They could be having an agreement around the corner or they could be waiting for much longer. We're all waiting to see exactly what the outcome of this meeting is. Melissa. Emily, thank you. Emily Wilkins.

i wonder if any of these guys are going to point to the bond market and what they did what the bond market did today as a sign that maybe it's not going far enough in terms of all these cuts explain the bond market to them all right let's save that for another show well i i do think that there is pressure here and i do think that there's pressure at least again it's it's so interesting that uh

Folks that claim that they are conservative Republicans are really stepping into what at least has been a traditional role. I mean, they are fiscal hawks. They are dyed in the wool. They are doing what they should be doing. And it gets back to what markets are willing to tolerate. Today was a day that felt a lot like a month ago, not just because the S&P was down, but again, it was one of those days where the dollar was weaker.

equities were weaker, bonds were weaker. We had the emerging markets feel to us in this country. This is all also happening on a week when the G7 gets together. And there's a lot of politics around the dollar. And there's a lot of sense from a lot of our foreign trading partners that this administration would like this dollar significantly weaker.

That's playing into some of this, too, all the time when, again, I know, folks, you're not looking at Japan's bond market. But what's happened in Japan over the last 10 days is a lot more significant in terms of the impact, at least the relative move there, than what went on here today. It's a big deal and it will put upward pressure on U.S. rates. All right. Meantime, more signs of cost pressures in the retail sector today. We had a number of

of earnings reports. We also have the Wall Street Journal just reporting that Walmart plans to cut 1,500 jobs to help manage expenses and speed up decision-making. This after all these retailers this morning raising concerns over the impact of tariffs, Target cutting its full-year sales outlook, TJX warning it could miss Q2 earnings estimates, and Lowe's saying it is seeing a drop in demand for do-it-yourself projects. For more on all this, let's bring in Brian Gildenberg, Managing Director at Retail Cities North America. Brian, great to see you. Great to see you, too.

So when are we going to start actually seeing a consumer in distress? Because so far we haven't really seen it, but we've gotten signs and clues.

Well, I think you've got a couple of things that are going on right now. And the easiest way to think about this is the two-prong issue. You've got, one, you've got the math problem, which is what will happen to products that are tariffed and how retailers are going to treat the prices of those products. And you heard a bunch of the retailers talking about their varying approaches to that today. I think the second problem, which is harder to forecast, obviously, but more pronounced right now, is the impact that the inflationary narrative is having on consumer confidence.

Consumers right now are expecting a 7.3% inflation rate for the next 12 months, which is the highest number since 1981. Is that right? Probably not. But-

whether it's right or not matters less than whether the consumers believe it or not. So I think right now what needs to happen is the actual math on tariffs will be one thing, but I do think that the narrative settling down around what a known amount of inflation and a known trading and a known balance of what's going on from a trade terms point of view would be extremely helpful to helping both the consumer and then the retailers forecast results.

Brian, it's Karen. Thanks so much for being on. So we're heading into summer. We got back to school season coming up. How often does consumer sentiment not align with what the consumer actually spends? I think we always try to look at consumer sentiment in terms of its directions, probably more important than the absolute number and that consumers are

It's kind of you would assume the consumer sentiment would drive purchase behavior. But what we often found was exactly the opposite, which is that what you were able to buy changed your sentiment. So I think there's going to be an interesting impact to that as prices go up.

If prices go up and as they do, shoppers are going to feel worse about their situation in the short term and in the medium term. And that'll probably put a bit of a crimp on expenditure. I think the other thing right now is that it's important to remember that the American shopper is extraordinarily gun-shy about inflation, having just gone through two or three years of relatively extreme inflation for us.

And as a result, I think any narrative or any evidence that they can find will be sort of confirmation bias for the shopper. So I don't know how helpful it is to look at the past sometimes of this. It's really important to understand how consumers feel about inflation now and what they're going to see and hear now that's going to change or influence that behavior.

Walmart really got a drubbing, Brian, from President Trump when he said that it might have to start raising prices on tariff goods soon. And it seemed like the other retailers learned their lesson in terms of how they approach price increases on their conference calls.

Do you believe that? Is there a way for them to continue to keep prices low by haggling with vendors, et cetera? How much leeway do they actually have? Or did they just learn their lesson and they said, we're not going to talk about it explicitly on the conference call, but off the call, they're like, yeah, that's probably going to happen because it has to happen. You mentioned it's a math problem. It is a math problem in terms of margins.

I thought Target had the sanest approach I've heard today to this, which is to say, look, prices move a lot, and we're going to

tariffs will be one of many inputs into how we need to think about that problem. And I think Target was right, because even just the stupid headline, but the DailyMail.UK had a headline from a Target employee who posted on Reddit that the price of some charger went up, and that became news. So, I think Target and a number of retailers realize that if they say they're not going to raise prices,

that they're highly subject to somebody pointing out that they have. And I think Target's particularly gun shy about negative narrative at the moment, so that makes sense too.

But yeah, I think there are certain retailers that are certainly less China dependent than Walmart and are in a more comfortable position with that. Walmart does derive a lot of its import volume from China. And as a result, I do think has to be more cautious about that. I think other retailers like Target, whose supply chain is more apparel centric, have been diversifying away from China as a source of

as a sourcing place for years, partially because that's kind of where the whole apparel industry has moved, and that's a very big part of Target's business vis-a-vis Walmart. I think every retailer is in a slightly different position with this, and to some degree, I think retailers are going to have to figure out within the context of the politics what the narrative needs to be. Yeah. Brian, great to have you. Thank you. Brian Gildenberg. Thank you. Bye.

Where do you stand on retailers? So when you look at Target, Target's on a one-year performance is down 40%. We're all saying the same stuff. They've had their issues on a multitude of different problems, and it's an ongoing basis. Walmart has the ability to haggle with any one of its suppliers more than any other retailer across the board. They're a behemoth.

When I look at the stock I want to invest in, I look at TJ Maxx. What's their bread and butter? They're figuring out how to have the right inventory, figuring out how to take someone else's surplus and sell it for a cheaper amount of money. And people go to them. They flock to them.

This probably plays right into a TJ Maxx or a Ross stores where they're taking someone else's era in inventories and making it their tailwind. Yeah. When I think about where I'd like to put my own money, I think the last place I want to put it is consumer discretionary.

They've been in a bind. They are in a bind. They're going to continue to be in a bind. So we're the CEO of one of these companies. You always have to care about market share. You have the threat that you have tariffs that are very, very real reality. Market share. You can enhance your market share or maintain it by lowering your prices or not allowing them to go up or you have a better product and service. So if you if you choose to absorb, if you choose to eat the tariff.

then that may help you near term as far as your market share goes. But eventually that's going to shrink your market. Your margins are going to have a negative impact on your stock price. And how long can you continue to do that? So I don't I don't see I don't see anything that's really going to help the consumer discretionary sector with the stress that they're under and the pressure politically, frankly, from the president.

Coming up, shares of Medicare Advantage providers sinking after hours on news of more aggressive auditing efforts from regulators. The details moving the socks next. And Uber slams the brakes how Elon Musk's comments yesterday put shares in reverse and what the future of the ride-hailing space could look like. This is Fast Money with Melissa Lee right here on CNBC.

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Are you still quoting 30-year-old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now. It pays to discover. Learn more at discover.com slash credit card based on the February 2024 Nelson report.

Ryan Reynolds here from Mint Mobile. I don't know if you knew this, but anyone can get the same premium wireless for $15 a month plan that I've been enjoying. It's not just for celebrities. So do like I did and have one of your assistants assistants switch you to Mint Mobile today.

I'm told it's super easy to do at mintmobile.com slash switch. Upfront payment of $45 for three-month plan equivalent to $15 per month required. Intro rate first three months only, then full price plan options available. Taxes and fees extra. See full terms at mintmobile.com. Welcome back to Fast Money. We got a news alert on Nike sending shares higher after hours or Kate Rooney's got the latest. Kate.

Hey, Melissa. Well, it looks like Nike and Amazon are getting back together. This is according to the information reporting that Nike is coming back to Amazon. This is six years after the retailer stopped selling through Amazon in favor of going direct and selling through its own stores and websites. Nike shares, as you mentioned, higher on this news. An Amazon spokesperson confirming this to the information. We are reaching out to both companies. It's a win for Amazon after losing that major brand deal.

And also Nike is really trying to revive some slumping sales here. And big deal for Amazon, though. They've really tried to lean in to some of those bigger brands and the more popular consumer brands. But moving shares, not seeing anything on Amazon after hours. But big news for Nike. Back over to you. All right, Kate. Thanks, Kate Rooney. Up 2.5% or so, Tim, on Nike shares.

I like it for Nike as a shareholder here. It makes you wonder what what Dixon Footlocker are thinking again when part of this was really built around who is going to be able to put a little bit more pressure on, you know, I mean, Nike's got they've got options and it's been clear that a couple of Nike's rivals have gone the Amazon Prime route already. So maybe there was pressure on Nike here. I don't think this really changes the game, but fascinating.

all right meanwhile health insurers including cvs humana and united health all dropping in the extended session this a cms announces a major expansion of its auditing efforts for medicare advantage plans bertha coombs has got the details on this one bertha well you know the center for medicare and medicaid services says that it's going to ramp up that auditing of medicare advantage plans and expand its technology and workforce to catch up on more than six years of audits

If last fall the feeling was that the Trump administration would take it easier on M.A. plans, well, the Biden than the Biden administration had this afternoon. That's certainly not looking like it's the case. CMS pledging to look to expedite its review of plans billing from 2018 to 2024. CMS Administrator Dr. Metz was saying, while the administration values the work that Medicare Advantage plans do, it's not.

Do CMS faithfully, it's time he says that CMS faithfully executes its duty to audit these plans and ensure that they are billing the government accurately. This whole issue of overbilling has been one that has dogged these players for years now. One of the things they're going to do, they're going to enhance their technology, spend more on that, etc.

EXPAND THE WORKFORCE AS THE REST OF THE HEALTH DEPARTMENT IS BEING SLASHED. THEY'RE GOING TO EXPAND THE WORKFORCE OF CODERS FROM 40 TO 2,000 BY SEPTEMBER 1ST. INCREASE AUDIT VOLUMES TO 200 RECORDS PER PLAN. RIGHT NOW THEY DO ABOUT 35. THEY'RE ALSO GOING TO WORK WITH THE OFFICE OF THE INSPECTOR GENERAL TO MAKE SURE THAT THEY COLLECT ON PENALTIES. MELISSA, THE DOJ IS ALREADY LOOKING AT PENALTIES ON OVERPAYMENTS OR OVER BILLING FOR -- AT

Aetna, Humana and Elevance, this is certainly going to put that regulatory pressure and ramp it up.

Bertha, thank you. Bertha Coombs, the sector just can't catch a break here between medical loss ratios and audits now. Karen, you own Elevance? I do. It's a little less exposed than some of the other names. But down after hours. It's down a little bit after hours. I mean, UnitedHealth just can't seem to catch a break at all. It's down another $10 in the aftermarket.

It's cheap, but I still can't quite get there. Yeah. Joe? I think as far as UnitedHealth goes, I think they're doing a good job internally from a PR perspective to troubleshoot and talk about we don't really have a problem here, but we have been above board the whole time. But the reality is the DOJ is not going after them if they don't have something that they really feel they're going. They're not going to embarrass themselves by going after one of the greatest companies of all time.

and the DOJ is not going away. So the issue I've got with United Healthcare, as great a company as it has been, they're going to be in the woods with this for a long time. This is not going away tomorrow.

That's not going to do anything good for the stock. I try to drill these down and just look at the exposure to Medicare Advantage. So as Karen said, Elevance has less. The most is UNH. Then it goes Humana and then CVS. Cigna sold most of its Medicare Advantage or all of it back in 2024. So they have a negligible exposure to it. So if you're looking for just that,

To get out of the way of Medicare Advantage, Cigna is the one to go to. Coming up, Uber shares skidding to a halt after Elon Musk boasted about Tesla's robo-taxi feature, how AI is turning the ride-hailing industry upside down. Plus, open AI stages a major coup as it lands a deal with the legendary former Apple exec. What it means for the iPhone maker and the state of design. You're watching Fast Money Live from the Nasdaq MarketSide in Times Square. Back right after this.

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Welcome back to Fast Money. Uber dropping more than 3% after Elon Musk said in a CNBC interview yesterday there was no need for Tesla to buy Uber to build a self-driving fleet. The stock hit an all-time high just yesterday after announcing a partnership with Waymo to offer autonomous ride shares in Atlanta.

Tesla basically said, we can build an app. There's no need for an Uber. Is that easy to replicate the Uber business? Then why hasn't everybody done it? And now it's the other side. It's like, oh, the hardware is not important, but it's really about the software. Well, the software, we don't need it. And by the way, I don't think Uber or in its price is a Tesla bid. So, you know, this is this is noise to me.

you know, what I think you listen to more at Uber is the fact that management recently reiterated at some kind of an investor day, they're expecting 30 to 40% EBITDA growth and 90% conversion of that to free cashflow. I mean, this sounds like a machine to me. And, and I think there's a lot of levers they can pull. I think Uber is a really good company. Number one. And number two, I think just the fact that, uh,

Musk said, well, we don't need Uber. We don't need to do anything about it, is the reason why it wound up taking a bit of a hit today. Uber's a pretty solid company, and Musk is convinced, of course, he's a pretty bright guy, but the future of the world is going to be the self-driving and the optimist with regard to the robots.

But that's not around the corner. Even David Faber was pushing him on that. Is it 2030? When is that going to be? So that's down the road, but that's well down the road. And I think between then and now, Uber can continue to build what it's doing, and somebody else might be able to come in one day and take over Uber. But Tesla's not quite there yet. Yeah. So I do believe Tesla has enough money and Tesla has enough know-how to do anything they want to do. But if they wanted to buy Uber...

What you say is, I don't need to buy Uber. You know, you're not going to up the price before you actually buy it.

I'm playing this with Lyft because I think Lyft is climbing the mountain. Uber is the one that gets all the sunlight. I think Lyft has a lot of ground to make up. And I think it's look at the move Lyft has had recently. And I think it continues that. I don't know if some of the Waymo tie up prohibits a maybe not contractually purchase. Yeah. Or some sort of deal with Tesla for Uber. Yeah, that's a good point. Coordination that they can't or won't.

Coming up, OpenAI landing a massive coup, getting Johnny Ives' tech design firm and the legendary iPhone designer's talents. More on Sam Altman's grand designs right after this. Missed a moment of fast? Catch us anytime on the go. Follow the Fast Money Podcast. We're back right after this.

Welcome back to Fast Money. Apple shares taking a sharp leg lower today after OpenAI announced it is acquiring the startup of former Apple designer Johnny Ive. In a $6.5 billion deal, Ive will take over OpenAI's creative and design direction. For what this could mean for Apple, Gene Munster of Deepwater Asset Management joins us here in a rare appearance here on set in the house. All right, Gene, in the house. Always good to have you. Is this really as bad as it is for Apple as the market cap drop would

imply? So I think the next two years it's not as bad. I think Apple has some time to kind of work through this, but I won't even take a step back to the bigger picture here and then the little picture. And the bigger picture is something dramatic is going on in terms of how the people who are closest to AI and how they're building this technology, those people have a broader vision in terms of how AI is going to be used in our lives.

And if you believe they're competent, we can read today's development as a sign that AI is going to be more impactful than maybe what we thought six months ago.

Second is that Apple and Google over the past 15 years have largely been unchallenged. And when you turn the page to AI, this now sets up a new situation where they are going to be challenged. And I think that today was a wake-up call for Apple and to a lesser extent Google. But a push into hardware by the designer who basically brought the world the iPhone...

This implies that there needs to be a device that is different from what we know today in order to navigate the AI world, which implies also a disintermediation of computers, of iPhones, of all the devices that we have today. Do you think that is the road? We'll have another kind of device?

We will have another kind of device. I mean, that's what they teased today with Sam and Johnny did a video. They teased this. So we're still going to have many devices, and there's going to be a new device that they're going to start with. It's likely going to be some form of a wearable that will listen to what's going on and will see what's going around us. You'll be able to interact with your voice and some form of a gesture to it.

It's going to be out next year, but to answer your question is that they will insert this into all the devices that we live. Just like how our content consumption started out small and grew over time, devices will just be everywhere, and there's that opportunity that I think Johnny's going after. Tim wants a wearable brooch. Yeah, look, I mean, I have a couple for a couple different occasions. But I know you're always quick to point out the $2.7 billion installed base and the dynamic there, and it just...

That to me has often been where I've felt very comfortable with Apple because I don't know that they need to win anything in AI. They just need to be serving it up to people and the platform from which they draw from. And I know we can't speculate, and you're not today, that suddenly this interface is going to change without a screen the way people live their lives. But why can't Apple also be partnered ultimately with AI?

you know, with open AI and deliver this and maybe even with this hardware. It just seems to me Apple is still the platform. So Apple's a platform today and they could definitely do some form of a partnership. They're working with open AI today. But the fact that they brought on a design team, a hardware design team, and the fact that that's one of Apple's core competencies, I think was a shot across the bow.

And so I think that this is, as I mentioned, I think it is a wake-up call for Apple and to a lesser extent Google. And I would say even the bigger picture here is, at least for Apple as it pertains to what's to move forward, is that if you look at Tim Cook as an incredible CEO, I can't say enough good things about him. I think the same as Sundar, he's a great CEO, Jassy. But these are peacetime CEOs.

And what happened today, this was a shot across the bow that this is war when it comes to AI. It's not just going to be stick to your models and we'll do our thing and we'll partner with you. We're going to get into your business is basically the message here. And when you think about wartime CEOs, Zuckerberg was peace. Now he's war. Elon just lives in war. He can't operate in peace. He doesn't like that. But I think that there are

I actually think that there's going to be some, as an Apple investor, which I am, our firm is invested in Apple, I think there's going to be something good that's going to come across this, which I think it's going to really promote Tim and the culture to really step up and say we've got to innovate.

If you're open AI, if you're open AI, you're always looking for, no matter who you are, you're always looking for a competitive advantage. So if you're open AI, what better way is there to find a competitive advantage than go out and actually buy the guy that created the number one product in the history of mankind other than the wheel? I mean, it's...

It's as good as it gets from like a product design standpoint. And it's not just Johnny. Johnny has a team that comes along with him that used to be at Apple. They've been loved from more recently. But so he's got this great team with them. And I think when you think about what OpenAI is doing and Sam and some of the questions about his leadership to land the gold standard of Johnny, I think really validates him as a leader. Why didn't Apple do this?

I think if we go and rewind the clock, why did Johnny leave Apple is kind of the start there. I think Johnny needed a break. This was five, seven years ago. But I also think that...

there has been the innovation piece has been so focused on hardware. What makes, what draws Johnny into this is there's a hardware piece, but what's going on under the hood with AI. And I think that that piece is, of course, Apple just wasn't there. They're not there right now when it comes to large language models. So even if Apple said, Johnny, come over here, let's do this. It just doesn't have the tools that OpenAI has to bring this vision, this product vision to life.

Gene, always great to see you. Great to be here. Come by anytime. Thank you. Gene Munster, Deepwater Asset Management. What do you think this means? So when you look at Apple, I think if they make an investment and they go past and they go to quantum versus just AI, like a quantum kicker,

on AI, they've only spent a tenth of what everyone else's CapEx has been. So that was an actual tailwind to them. But now they're falling so far behind, they need to pull a rabbit out of a hat. You're starting to see the bifurcation. Today you had Google up, Netflix up, Nvidia up. And you look at the other side, you had Amazon down, Apple down, Microsoft down. Apple has the ability to pull something out of a hat and make a bigger investment.

I never want to count Tim Cook out. He's extraordinary, but I'm happy to have no exposure to Apple and Collard. I do feel like they're just falling increasingly behind in a world that's moving super fast. And then they have all these other issues.

of tariffs and where do we manufacture and could you even possibly manufacture that in the U.S.? Right. You know, I think, excuse me, the metaphor that Gene used, I thought was really a brilliant one with you've got peacetime CEOs and peacetime businesses and you've got wartime CEOs and wartime businesses. And the reality is that Apple has been so effective, so successful for such a long period of time

they've gotten a little bit complacent. And the world today, as we know it with regard to AI, is totally, absolutely changing before our eyes. And there were a lot of firms that got in trouble in the 1990s because they didn't acclimate enough to the internet. And,

And so I'll extend that. You have peacetime stocks and you have wartime stocks for the market's perspective. And in a world where the market is being is questioning what multiple the S&P should be for facing growth. I mean, Apple's P makes zero sense. I think Apple is very defendable and is defensive because it hasn't really told. I mean, Apple intelligence has been kind of a disaster, but it wasn't something that the valuation of this company was built on. It was built on services, technology.

And yes, this should be the ultimate service. But Apple stock doesn't have a lot of AI in it. The question is, are we is the market coming in? Because if the market's coming in, so is Apple. Coming up, a bright spot in the tech trade alphabet shares jumping on day two of its I.O. conference. The headlines boosting the stock that is next. More fast money in two.

Welcome back to Fast Money. Alphabet, the only Mag7 stock in the green today, shares up almost 3%, more than erasing yesterday's losses. The company was hosting day two of its Google I.O. developers conference today. Announcements included updates to Gemini, Gmail, and much more. Just yesterday, we were talking about how maybe their announcements were disappointing in terms of AI developments, and here we are, stock completely reversed.

I think, well, some of the research came out, they were not disappointed, actually. And also, there's, you know, people floated the idea of the sum of the parts and what if we were to spin off all of the pieces here. I'm happy to see a trade up, although I did use that as an opportunity to hedge some today. All of this talk of, well, how long till search is really affected?

But no one in the last few days or weeks has mentioned they've got this potential serious remedy issue of their search business. Right. And two antitrust. So so I'm a little concerned about that. It's still very much a threat. Yeah. I mean, Sundar Pichai had made it very clear that they are processing 50 times large language model and tokens where they were last year and that they're they're on the move. So everyone expects Google to not be there. I think this was a day when the stock had been kind of beaten up relative appears had a chance to come back.

All right, coming up, the New York Knicks making a wild run through the NBA playoffs and the team's valuation is on a meteoric rise. Just how much ticket prices are boosting the team's worth will go inside the numbers for the league's second most valuable franchise. More Fast Money in two.

Welcome back to Fast Money. The NBA Eastern Conference Finals tip off tonight. And for the first time in a quarter century, the New York Knicks will be on the court. The team was the second most valuable in the league at the start of the season. But what will its success mean for the future value? For a closer look inside the numbers and how the other teams left in the playoffs stack up,

Let's bring in CNBC senior sports reporter Mike Ozanian. Mike, how much more valuable are the Knicks now? I got to think that the Knicks are approaching $8 billion. You got to look at it this way, Melissa. Each home game brings in an average of $10 million in incremental revenue during the playoffs. Your EBITDA margin on that is over 60%. We saw the Celtics sell for $6.1 billion. Last year's championship team certainly helped that sale price.

But the bulk of the valuation, isn't that meteorites mostly? So how much more expensive or how much more can they bring in through meteorites being in the playoffs? Well, the Knicks could generate, if they go to the finals, let's say, they can generate $120 to $140 million in incremental revenue from the home playoff games.

You've got to remember with the national media, yes, that's by far the biggest chunk of revenue, but that's divided equally among every team. It doesn't matter if you win every game or no game. You get an equal share of that. So the pecking order to a large degree of NBA team values is determined by how much arena revenue you could bring in and then how much playoff revenue you could bring in. Unfortunately for the Knicks and MSG Sports stockholders...

The Rangers are bundled with that stock, and the Rangers, who went to the conference finals last year, missed the playoffs this year. So in aggregate for MSG Sports, the total number of playoff games between the Knicks and the Rangers will probably be less this year, even if the Knicks go all the way to the finals. Yeah, Mike, it's Tim. And although what the Knicks are doing also for the region, I mean, those watch parties, if you're a store owner anywhere near the Garden or, I mean, for the commerce of New York City, the Knicks are big business as well.

How about these players? Are they helping the value of this team? This team is so likable. Jalen Brunson, a couple of his college compatriots, these guys won a national title together. Big Cat. I mean, these are likable guys. Do they have any long-term impact, at least, or medium-term in that valuation? Yeah, I think you brought up a couple of great points between the watch party and the players. Likability is very important.

Short term, yeah, you know, we're talking about numbers, revenue, profits, etc. But long term, what you're talking about boost the value of the team because you're talking about suite prices, sponsorship prices. These are deals that are generally contracted in three to five years, maybe a little longer. So when you renew them, the likability of the team is very important, very important for TV viewership. Are you going to get on more national games?

as the knicks become a more national brand hopefully with more playoff games yep mike thank you thank you go knicks up next final trades

Final trade time. Joe Moglia. I like the Knicks at home tonight. Great to have you here, Joe. Tim. I like having Joe on the desk. I like the Knicks, and I like utilities. XLU. Karen. Yes, I'm always wrong, but I've got to hedge some of my Mag 7 exposure. Triple Q put spreads. Steve. I'm going with a quantum name, D-Wave. I've been in it, out of it. I'm back in it now. All right. Thanks for watching Fast. See you back here tomorrow at 5 for more Fast Money. Meantime, do not go anywhere. Mad Money with Jim Cramer starts right now.

Thank you.

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