Mad Money w/ Jim Cramer 12/16/24
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Getting there starts here with State Street.

Before investing, consider the funds, investment objectives, risks, charges, and expenses. Visit ssga.com for perspectives containing this and other information. Read it carefully. DIA is subject to risks similar to those of stocks. All ETFs are subject to risk, including possible loss of principal. Alps Distributors, Inc. Distributor. My mission is simple, to make you money. I'm here to level the playing field for all investors. There's always a bull market somewhere, and I promise to help you find it. Mad Money starts now.

Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramerica. I'll be with my friends. I'm just trying to make a little money. My job, entertain, teach, educate. Call me, 1-800-743-CBC. Tweet me, at Jim Kramer. Sometimes...

The action in the stock just seems so obvious that you only notice it after it happens. So today we're all anticipating what the Fed will do on Wednesday with the Dow dipping 111 points as it be advancing 0.38%. Now it's at gaining 1.24%, to a record high, by the way. I think it's worth reflecting on why we didn't grab hold of certain opportunities, ones that in retrospect seem so obvious, so we don't miss similar ones in the future.

The first mistake we made, and I am speaking collectively, was in truly believing that the fundamentals always matter. I know from experience that this is just not always true. For example, there are these cult stocks. These are stocks where what's happening at the company and what's happening in the stock are two very different animals. But unlike meme stocks, cult stocks have such a loyal shareholder base, they can trade independently of the business for years and years. The most obvious example, Tesla.

This rally, since the election, is one for the ages. It's a movement, in retrospect, everyone should have seen coming, right? I mean, why not? Elon Musk has been all in with the winner of the presidential election. Electric cars are doing much better than everyone else's. Full self-driving could be around the corner.

But now let's look at what might have kept you out of the stock. If you go back in time to when we found out that Elon was a big-time Trump supporter, the media was filled with, "How long will that last, chatter?" The president-elect is famously mercurial, while Elon Musk is obviously brilliant but equally arbitrary and capricious. The idea that these two could bond in any way before they clash seemed inevitable.

Plus, electric vehicle sales, they were sinking everywhere. We saw adoption slow for all EVs, including Tesla, in the United States. The competition in China, it became cutthroat. Musk's Tesla is a relatively high-cost producer. Numbers, the estimates, they kept going lower. Plus, there was this lawsuit about him getting his bonus where it wasn't clear that he'd stick around as CEO if he lost. Too easy to pimp to some other part of his empire.

Now, of course, the reality turned out to be quite different, but it was easily missed by the numbers guys on Wall Street. First, the public is backing this topic bigger than ever. The public doesn't listen to Wall Street research. Many don't even know what it is. Others think it's worthless. The public do one key thing that the analysts didn't. Musk was incredibly close to Trump, spent hundreds of millions to help him win. So as long as Trump won, Tesla was going to be a huge winner. You had to be on board. You had to believe it was like it was like a sports team.

As it is, it turns out Tesla has more driving on self-data than Google-backed competitor Waymo. Data that Trump will buy into, maybe, and crown Tesla the full self-driving winner versus the piecemeal city-by-city approach of Waymo. Maybe it gives them the whole interstate highway system. I don't know. It also helped the GM drop down to the self-driving taxi business, making must-view more a reality. Tesla's much more than just a vehicle company. It's a tech company on wheels.

Of course, Tesla's up 86% for the year, with nearly all of that coming after the election, when we realize that not only is Musk tight with President-elect Trump, he's helping reform the government to Trump's liking, doing a lot of this. Or he plans to.

Once you get a CEO with that kind of political influence, it's easy for the faithful to imagine the unlimited possibilities, which means they're no longer constrained by the price-to-earnings multiple. They'll pay anything for Tesla, much higher than these prices. They're actually insensitive to price. Oh, and did I mention that brokerage firm Mizuho just upgraded the stock from hold to buy off of an improving outlook under the Trump administration a few minutes after the market closed?

Next up, Netflix. What the heck were we thinking when we didn't know Netflix? Is there a week that goes by where we don't talk about a Netflix show? The big linear TV networks like to do expensive shows about fires and hospitals and police. Fire Country Hospital PD. It's been their formula since the 1970s. They just keep doing the same thing, failing each year.

But Netflix, hey, they come up with things like Jake Paul versus Mike Tyson, and it did huge viewership numbers. I tried to get at it. I was like, what the hell is that? It didn't work. At least when I was trying, but it didn't matter. Millions of people watched it. We're 10 days from the start of Squid Game 2. Take that, fire country! We watch all sorts of pro—what the hell?

We get all sorts of programming from other countries because we've been taught by Netflix to like subtitles. It's insane how good this company is. Honestly, convincing Americans to read subtitles, that may be the most important cultural event of the 21st century.

And yet Wall Street doubted Netflix the whole way when it came to their new ad-supported subscription tier. They didn't get it perfect right out of the box. They told us many of you who followed the company presumed there was a bust. Oh, it was hardly a bust. And it's just going to get bigger and bigger. It's easy to say, of course, that...

It wasn't anyone could have had it. But those who spend their lives examining this company thought otherwise. They said, stay away. And they're the professionals. Who are we to doubt the professionals? They doubted the ad tier. Who are we to doubt them? And then there's the multiple. The darn price journey is multiple. Netflix was always selling for 50 times earnings, which is just too hard for the people who care about valuation. Those people.

aren't the general public. They aren't the home gamers and the home gamers who love Netflix. They won cold stock, cold stock that's up 89 percent for the year. That was easy. Then there's Palantir. Now, this enterprise software slash defense contractor is a real company. I mean, like totally real. It has a tremendous business model. It could change the entire Defense Department budget. But in some ways, Palantir is a renegade company playing by its own rules. Like AMC, the theater chain, the CEO actually caters not to Wall Street, but to Main Street. And if

to investors. The difference is that when it comes to enterprise software, you don't use price journeys models. You use this difficult to understand rule of 40, where you add the revenue growth rate to the EBITDA margin. If the sum is above 40, then you got a winner. Most companies that are losing money can't reach this number, but some can if they have incredible revenue growth. Palantir appear to be losing money hand over fist.

but it passed the rule of 40 tests with flying colors. Since then, the growth's been accelerating rapidly. The profits are exploding. It's among the fastest growers in the entire industry. Top of the rule of 40. Plus, like Tesla, Palantir, tight with Trump. So why didn't we see it? Because the CEO was too brash and the actual business too opaque? Uh,

By nature, what they do is secretive. But there are plenty of renegade traders and investors. See, they saw it. The kind who made money and got out of AMC near the high when the CEO sold. The kind who made $100 or $200 on GameStop. These people bought Palantir on CEO Alex Karp's say-so. To them, it was worth a lot more than anything else, even as it was worth nothing to Wall Street analysts who covered it.

Now, Palantir's made a major breakout. It is up 340% for the year. Seems obvious in retrospect, but it was anything but at the time. A stock that's been gunned by retail, that now, because it's about to have a real earnings breakout, is finally being blowed by institutions.

Oh, and the individuals who still like it, they start their buying at 4 a.m. They walk it up right into the opening. It's wondrous to ball. Get up early and see it happen on the crawl sometime. But I don't look. You don't even have to worry. They do the same thing at 4 p.m. Right after the closing bell, they take it up maybe like 30 cents, 50 cents, usually about a buck. Here's the bottom line. There's a lesson here, and it's a brutal one. Sometimes conventional methods of valuation are completely weird.

worthless. And you need to embrace the dynamics of cult stocks. House of pleasure. The trick is to recognize when we're in one of those moments. In 2025, let's do this. Let's strive to find the stocks of companies that do defy orthodoxy. Some will prove to be wrong. But if 2024 is any guide, the ones that prove to be right will more than make up for any of those losses. I'm going to start the question with Tommy in Texas. Tommy. Yes, Jim. Tommy.

Yes, will you tell you my question concerns the refineries, specifically Marathon Petroleum. Where do we go from here? Buy, sell or hold? Well, I think that our view, our view is that President Trump is very conservative.

President-elect Trump very much wants oil to come down in price in order to be able to offset any inflation from tariffs. And I think he's going to make good for that. And that's getting people out of the stocks. And I'm not going to go against that orthodoxy. Let's go to Ian in Virginia. Ian.

Jim, how's it going? Would love to hear a little bit about TKO. Seems like they have some pretty big opportunities with 2025 sports rights renewals, both with continued synergies, and then some big opportunities for WWE with international expansion and sponsorship revenue. Love the show. Merry Christmas, Jim. Thank you, and same to you. And I think you're right. This company is heavily motivated to go higher. They just insist. It's really a wonder to behold. I'm not getting in front of it. I mean, I just think if you want to own it,

Be my guest. All right, as we reach the end of the year, it's worth thinking about the reasons why certain stocks shot up in 2024. In 2025, I'll be looking for stocks that defy orthodoxy. Well, man, money tonight, can the homeowners keep heading higher? I'm investigating if some signs of weakness could shake up the bull runs foundation. Then I'm checking up on a sector that I think is ripe with opportunity. I'm kicking off a series where I'll reveal some top tier names to keep an eye on. And later, with the shares of Marvell Technology up

over 100% this year. I've got the CEO to break down what's behind this massive move and whether there's more behind it. And stay with Kramer.

Don't miss a second of Mad Money. Follow at Jim Cramer on X. Have a question? Tweet Cramer. Hashtag Mad Mentions. Send Jim an email to madmoneyatcnbc.com or give us a call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com.

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And for two and a half glorious years, is the bull market, the home builders, finally coming to an end?

Two weeks ago, the S&P Home Builders ETF, the XHB, peaked after a 146% multi-year run. Since then, the XHB has pulled back about 10% because we're seeing newfound concerns that the industry is running out of gas.

Let's start with the most obvious reason that the builders are taking a breather, interest rates. Everyone was very excited about getting lower mortgage rates once the Fed finally started easing. But when they kicked things off with that double rate cut in September, that's not what happened. Instead, long rates, which are actually set by the bond market, began to soar because the bond buyers don't believe that the Fed's truly beaten inflation. They're holding back.

We got a second rate cut in November, and we'll probably get another one on Wednesday. But the bond market still isn't playing ball. The yield of the 30-year Treasury bottomed at 3.9% the day before the Fed started cutting rates, then soared to nearly 4.7% mid-November. After pulling back earlier this month, the 30-year yield is back to 4.6%. Mortgage rates are hostage to the bond market. So as long as bonds don't take their cue from the Fed, rate cuts don't mean much for housing. Oh, that's dispiriting for homebuyers who might have been waiting for the Fed to cut

to cut to get a mortgage, and it's disperting for the industry that this long-awaited catalyst really hasn't panned out at all. Homes are the most intractable when it comes to price and are a big reason why inflation is just too high. The election result didn't help either, because there's a concern that some of President-elect Trump's proposals will put upward pressure on inflation, blocking the Fed from cutting rates more aggressively. At the same time, if Trump cracks down on immigration, the homebuilders will have fewer customers, and they'll also have to pay a heck of a lot more for labor.

More important, last week we heard from Toll Brothers, the nation's top builder of luxury homes, and Wall Street certainly didn't love what they had to say. I consider Toll one of the best home builders, so this one's important to me. While the actual quarterly results were fine, even good,

Toll's forward-looking metrics, which is what really we care about, were less good. Same goes for the guidance. I mean, first, the company's backlog is slipping a bit. It stood at 6.47 billion in October. It's down 7% year over year. That number was still comfortably better than expected, but you never like to see the backlog ebbing down.

Then there was Toll's guidance. Their four-year forecast for deliveries was good, same for average price per home, but their guidance for the current quarter fell short on both these lines. Basically, the guidance seemed to be implying that even though 2025 would have a slow start for Toll Brothers, management thinks they can make it up maybe in the rest of the year. In short, they're asking you to take a leap of faith, and Wall Street just doesn't like to take a leap of faith.

On the conference call, a fantastic CEO, Doug Yearley, told an interesting story, which was interpreted different ways, kind of like a Rashomon conference call. Yearley said that as long rates rose throughout the quarter, the market softened in September and October. So Toll Brothers began to ramp up incentives. Their strategy is to focus on maternal equity and turning over inventory. So they'd rather make concessions to get a sale done rather than stick stubbornly to a higher price, not sell things.

But these incentives naturally had an impact on the company's guidance for the current quarter. It's not a good sign when you need to discount your merchandise in any business, including home building. Now, Yearley also said, though, that the housing market got better in November. He thinks it's because the end of the election cleared a mental headwind for demand. The economy remains strong. Stock prices are high. Plus, tolls even starting to see evidence that a wealth transfer from parents to millennial homebuyers is happening.

as parents are helping out with down payments. And as the market got better, the company began to pull back on some of the incentives that it leaned into in September, October. And that's why Toll's guidance for the full year looks so much better than the guidance for the current quarter. It mystified people, though. I actually think you really told a pretty reasonable story about a company doing what it needs to navigate a tricky environment.

Overall, though, the numbers are just going in the wrong direction. Your tolls coming off two years in which average selling prices were around a million dollars per home. Now it's looking at nine hundred fifty five thousand for twenty twenty five and lower than that for the current quarter. The saving grace is that they got it for higher deliveries this year.

But that was kind of expected. Remember, we were waiting for these rate cuts to unshackle the housing market. The bottom line is that toll seems to be working harder than investors thought it would have to in order to maintain high volume despite a not so hot environment. So in response, the stock fell nearly 7 percent. Then it kept falling further on Wednesday, Thursday and then Friday. By the close of Friday, toll was down 5%.

Well, roughly 15 percent from where it closed on Monday right before the quarter. Now, to be honest, I was surprised about the extremely negative reaction to this quarter. And I wasn't surprised that it sold off, but it was much more violent than expected. I mean, the most negative thing for the homebuilders last week was the 2025 outlook note from the sector from J.P. Morgan, which included some particularly bearish comments about the industry, along with estimate and price target cuts across the board. I actually I don't.

I thought the piece was extreme. But the J.P. Morgan analysts explained that they thought the industry's favorable supply-to-manage dynamics going away. In a more normalized environment, you're going to see more price concessions and other incentives, which will hurt margins. It doesn't help, by the way, that we're starting to see more existing homes coming back to the market. That's good for buyers, but not good for homebuilders. There are some things I could quibble here, but I like

Like the idea that homebuilders are too expensive, the stocks? I mean, or that interest rates aren't expected to improve materially in 2025? I'd debate both those. In the end, the Toll Brothers report had some disappointing lines, but I don't think it was bad enough to send the stock down 15% last week. The J.P. Morgan industry downgrade was disconcerting, but also a prediction for the future, not a new data point.

Still, I have to admit, I am concerned. There are two big things coming up for the homebuilders this week, and I'll be watching like a hawk. Wednesday night, Lenoir reports this is another best-of-breed operator. We need to see if they're having some of the same problems as Toll. Second, there's the Fed meeting. The Fed's favorite reporter at The Wall Street Journal, Nick Timmer, has put out a piece today suggesting we might get fewer rate cuts next year than people are expecting. If the Fed does anything to indicate that on Wednesday, the homebuilders will indeed roll over.

Bottom line, I'm not ready to call time of death on the home builder bull market yet. But those trends that I just described, they're not lasting forever, right? The things that were good, things have gotten tougher for this industry. So keep an eye on these stocks because as long as the bond market refuses to play ball, the home builders, they're going to struggle. We have money's back after the break. Coming up, Kramer checks the vital signs of the health care stocks going into the new year. Next.

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Given how much stocks have run in the past six weeks, it'd be hard to find good places to put new money to work. But there's always an opportunity somewhere. As we head into 2025, I think that opportunity is going to be in health care. Mainly that's because the health care stocks have been such terrible performers as you're dramatically lagging behind the broader averages. Now, it's hard to bet on health care when the Fed's cutting rates because these are textbook slowdown stocks and thriving economies not doing so well. But

But the election was also a clear negative catalyst for the group. As president-elect, Trump wants Bobby Kennedy Jr. to run the Department of Health and Human Services, something that terrifies the industry because he's considered to be a big-time vaccine skeptic. Plus, if the second Trump administration tries to dismantle Obamacare, like it did the first time, then lots of people now getting subsidies simply won't be able to afford health insurance. That's very risky for the whole health care edifice.

But at a certain point, all this stuff will be baked into health care stocks. And frankly, I'm thinking we're pretty darn close to that. Over the weekend, we ran some numbers to try to quantify the damage that's been done to the health care stocks. And I've got to tell you, it's pretty horrifying. When you look at the 62 health care stocks that are in the S&P 500, on average, they're down more than 19 percent from their highs. That seems extreme when so many other sectors are trading at all time highs. And that's why all week I'm going to comb through the health care sector looking for high quality stocks at good prices. Tonight, I want to start with one of the hardest hit subgroups, biotech.

and pharma. The 16 stocks classified as biotech or pharmaceuticals companies in the S&P 500, they're down an average of 21.4% from their highs. It's the hardest hit subsector. It's pretty decimated out there. Well, it looks good. Let's not overthink this, please. Eli Lilly is at the top of the list. Now, we own this one for the Chappell Trust, and it's earned its nearly $740 billion market cap. But with the stock in the high 700s, it has pulled back almost 20% from its highs in late August.

As recently as late October, this stock was still sitting in the low 900s. But Lilly got hit real hard after putting a seemingly not so hot quarter. And then it got hit again after the election, reportedly on an idea that RFK Jr. is not a fan of GOP-1 weight loss drugs like Lilly's Lonjaro. Now, I think these events are bad reasons to sell the stock. First, while Lilly technically responded, reported a miss, it was just technical.

And it's technical that it just cut its full year of guidance. The reasons for this were important. The company cited wholesale destocking from Mojaro and Zepbound for the softer numbers. Many investors took that to mean that the demand for the GOP-1 drugs has to be impaired.

But I think Lilly was just being measured with its marketing and promotion at a time when supply was constrained. I don't think there are any issues with demand whatsoever. These are miracle drugs. If anything, I'd say Lilly's guilty of poor communication. But that's created a buying opportunity for anyone who's missed the stock's tremendous run. You can get back in.

As for the political risk angle, I got a chance to speak with RFK Jr. on air last week on the floor when President-elect Trump visited New York Stock Exchange. I asked him directly about these GOP-1 drugs. He said basically that his preference is that people never need these drugs because they eat well and get plenty of exercise. I can't argue with that. But as David Rick, CEO of Lilly, has said on this show, diet and exercise, hard to stick to. And there's plenty of people who need some additional help, which is why these wonder drugs can do.

Kennedy may not like it that we need these GLP-1 drugs, but it certainly doesn't sound like some major crackdown is coming. I think that is completely false. So in the end, I see things going back to normal for Eli Lilly, assuming they can deliver some better numbers, which I think is a fair assumption. Now we'll be back to focusing on the incredible growth of these GLP-1s.

which could be huge if that data is any good. Basically, you're getting a chance to buy Lilly at a Black Friday-style discount of nearly 20% a year despite its tremendous prospects. What's that like?

Oh, next, how about Vertex Pharma? Vertex Pharmaceuticals, which has evolved over the past decade or so from a promising biotech company focused on cystic fibrosis to a diversified pharmaceutical company with a $120 billion market cap. Not long ago, that market cap was much higher. I like Vertex because they're working on developing non-addictive painkillers with some potential FDA approvals and product launches on the horizon.

Well, Vertex is only about 10% or so from its all-time high right after the election. In part, that's because it reported a great quarter the day before the election. After a couple days of post-quarter gains, the stock has pulled back hard for reasons, frankly, that aren't readily apparent to me. Frankly, it just looks like round-the-mill profit-taking. Vertex is up 113% since the end of 2021, fueled by the market's apathy toward pharma. But with the core cystic fibrosis business humming and some major painkiller catalysts coming,

I think you should buy the dip here. Finally, as I've been saying pretty regularly for the past few months, I think you should consider building a position for some higher squib, which happens to be the newest position in my chapel trust, as well as headquartered in the hometown where I live. This stock has been hot since the summer as investors have bought into the new strategy put forward by CEO Chris Berner, who took over late last year.

Now, Berner's trying to build world-class franchises in cancer, cardiology, and neuroscience. His plan started paying off when Bristol-Myers got approval for the first in a totally new class of schizophrenia drugs back in September, something they picked up from a recent acquisition.

far fewer side effects than the competition. Doesn't hurt that AbbVie's working on a competing product that failed a major clinical trial last month. But after a nice pop on the AbbVie failure, Bristol-Myers has been pulling back this month to the point where it's now down almost 9% from its mid-November highs.

Asked with Vertex, I can't give you a good reason for that. Again, I think the pullback simply reflects concerns about the group. It has nothing to do with Bristol-Myers specifically. Hey, by the way, even after rallying some 42% from its early July lows, this stock sells for just 7.9 times next year's earnings estimates. Boy, that's the cheapest pharmaceutical company in the S&P 500, aside from the unprofitable Moderna.

Bristol Mars also sports a 4.4% yield. That's the second best of the group. So to recap, the fundamentals improved dramatically in the second half of this year. The stock's still dirt cheap, and you're even getting paid to wait with that juicy dividend, which was just boosted last week. So here's the bottom line. With so many groups hitting new highs, I think it's worth taking a step back and putting money to work in one of the most hated groups out there, healthcare. These stocks have simply gotten too cheap, given its prospects, especially Eli Lilly, Vertex Pharma, and Bristol Mars.

Stick around for the rest of the week. I'm going to give you some more fresh health care ideas at cheap prices. Let's take some calls. Let's go to Ron in New York. Ron. Hello, Jim. Six time caller. Wow.

I'm interested in Pfizer. I own 300 shares and I don't know what to do with it. I bought it at around 35 and I don't know if it'll ever see that again. I don't know whether to buy more or to sell it. I don't want you to buy more. I don't want you to buy more. We need to see two good quarters in a row. We haven't had that, but it has a 6.8% yield and that yield is safe. So on your sixth call, I would say hold, don't buy, don't sell. Let's go to Richard in California. Richard.

Hi, Jim. You're a true legend. Thank you for all your dedicated years helping. Thank you. Thank you. OK, so listen, I'm concerned about Amgen's crystal lowering PCSK9 injection drug, Repatha, which is their third largest drug in their portfolio with around two billion in worldwide sales because it's being displaced by both in the United States and in Europe by new competition drugs.

The competition is coming from Asperian Therapeutics, who creates a drug called Bemadoc acid, which is sold in Europe by the Hitchi Sankyo, a $50 billion company. They're growing scripts in Europe like gangbusters and now half a million patients. Asperian labels the drug Necrotol and Necrostat.

here in the U.S., which is a combo drug, and now insurance is covering the cost of the drug. And this year, the FDA granted Aspirin drugs, both their drugs, a primary prevention label. They're the only statin alternatives with primary prevention label. The second concern in Europe, the EMA, European Medicines Agency in Germany, have recommended Bambadoc Acid ahead of PCSK9. Well, I'll tell you the truth. I actually am still a believer, Rupatha,

I know that that's problematic to what you just described, but I think that Repatha is a great drug. My problem with Amgen is that there was a lot of hype about their GLP-1 equivalent, and the studies just didn't come through. So I guess we both find reasons. Richard, you're a very good caller. I've known you for many, many times, and I think your analysis might be better than my analysis. But I'm saying stay away from Amgen, and you are too. Let's go to Alan in Pennsylvania. Alan. Yes.

Hi, Jim. This is Alan from Pennsylvania. I'm looking to see what you think of symbol B-I-I-B. Biogen, I'm not a fan of. I do believe that if you're going to go for Alzheimer's drug, you're going to go for Eli Lilly, which is not talked about that much.

because there's so much talk about Lilly's GLP-1, but I think their Alzheimer's drug is going to be a great standing over multiple years. All right, now look, as we head into 2025, I think it's time to take a look at the healthcare stocks, which in my view have been hated for too long. There's much more mad money at it, including my swing with Marvell Technologies. After the company's early December earnings beat, Marvell is doing so well. Plus, I'm telling you where I stand on opportunity in individual stocks.

following some incredible conversations with Kramer Americans and club members. Now, all your calls are rapid-fire in tonight's edition of The Lightning Round. So stay with Kramer. The biggest winners of the year just kind of keep winning in December. And that's exactly what we're seeing in Marvell Technology. The semiconductor company is now up over 100% year-to-date. It doesn't hurt that they reported a terrific quarter two weeks ago with strong tailwinds from their AI-related businesses. One that set the stock up 20%.

53% in a single day. Since then, Marvell's kept running. So can the momentum continue? Let's check in with the hard-charging Matt Murphy, the chairman and CEO of Marvell Technologies, to get a better read of the situation. Mr. Murphy, welcome back to Mad Money. Yeah, thanks, Jim, for having me. Appreciate it. Okay, so I'm going to tell you, Matt, with all the executives I've met, you have been the most plain-spoken about the revolution that was occurring in your company.

You said it out loud to everybody, and there were a lot of skeptics. But could you walk through the narrative? Because you were very clear that AI was going to be the future for you. Very much so. Look, three years ago in 2021, we did an investor day. We laid it all out there that in the cloud and in the data center, the trend was going to be towards custom silicon and custom silicon for AI customers.

The last three quarters, we've been saying that on our earnings calls. In fact, I came on your show in April after AI Day, and we laid it all out. $75 billion opportunity for Marvell, targeting 20% market share in custom AI chips.

And now you're starting to see in our financial results, in our third quarter and our Q4 guide, tremendous momentum. But it's all it's been out there. It's been out there to the point where you even flagged me. So, Jim, please look at the press release we had.

which was, as Louie said, Marvell expands strategic collaboration with AWS to enable accelerated infrastructure. And it was December 2nd. So I looked at it. I said, wow, I think that's really big. It turned out to be huge. It's huge. Tell us why. It's unprecedented, I think, in two ways. One,

It's actually a two-way relationship. So on the one hand, there's a five-year arrangement where AWS is going to buy silicon chips from us, both for custom AI and for networking. So that's one part of the arrangement. Five-year deal. But the other side of it, which is very strategic, is AWS is our supplier. We use AWS for our design of our chips in the cloud. We're an early adopter here.

So it actually works both ways. Both companies are leaning in

to support each other, to drive the growth. So it's very unique. But we would be wrong to think when we think of hyperscalers that there's just one that's a customer of yours. You've got others. We do. Yeah, we do business with all the top four U.S. hyperscalers. We're shipping custom silicon chips to all of them. And then for two of them, we're developing custom AI accelerators. But this does not necessarily mean to the exclusion of work that you've been doing with NVIDIA.

No. Look, NVIDIA has been a tremendous long-term partner of Marvell, and we work with them in a very complementary way because we have a very strong business in chips that are for the connectivity inside the data center, getting the data on and off the chips and into the network. So we work with them on those types of products as well. Can you explain to people that every chip, everything, custom silicon, every bit of it is needed? It's not like, well, if you win, somebody's losing. This is just one where everybody needs your stuff.

Absolutely. Look, we are in an unprecedented AI super cycle.

for AI as a service, but also for the silicon TAM underneath it. This is unbelievable. I've been doing this for 30 years. I've been through every major one of these cycles. PCs, smartphones, digital cameras, cloud computing, you name it. This one's bigger than all of them. Okay, so where are you seeing people use it? Because we still have skeptics, Matt. When you tell the skeptics other than the fact that you plunked down a million dollars because people weren't listening when your stock was at 72, it's at 125. Where

What are people doing with these chips with your custom silicon that you know that they don't? Yeah. Think about it this way. Think about the data center CapEx that's being spent. Okay. Hundreds of billions of dollars a year. And these are smart people. They're not wasting their money. They're very smart. And so what you want to do if you're going to spend that kind of capital and the OpEx as well, because energy is so critical, you've got to optimize your cloud. You've got to optimize your system. That means everything.

every watt of power you want to squeeze out in terms of performance and power savings. And so when you optimize or customize all the silicon up and down the stack, you can get that benefit. So there's a huge economic reason that these companies want to go do that, but it's not a zero-sum game. This market size is enormous today, and it's going to be astonishingly large in the future. Why is it so hard for people to understand your critical role in all of this?

Until now. Yeah. You told everybody. Look, I think it's a, to be fair, I think it's a combination of we've had a strong story. We've had strong proof points along the way. But our third quarter results...

And our strong fourth quarter guide, you know, biggest beat and raise we've done as a company. I think it just sent the message that it's here. It's not in the future. It's already starting. At the same time, you've had these other businesses that are, you know, this is secular we've been talking about. You've got some secular business that I think, especially with an easier Fed, they could turn up big. Oh, yeah.

Oh, they're not small. Yeah. No, that will have a big impact on it. And in fact, when I came on here in April, you gave me a little bit of a bad time about those legacy businesses, but fairly so mature. But guess what? Those those businesses like an enterprise networking carrier, telco, those types of businesses. We guided those businesses up 15 percent mid single digits in our fourth quarter.

So they are recovering now. So that's really the base foundation kind of bedrock of Marvell in terms of profits and EPS. But then we have the growth kicker from the AI, which is a much bigger market. Why are people always saying, putting words in your mouth? A guy, like two wise guys said, oh, Matt's going to buy Altera. And I said, well, I don't think so. Then he said, oh, Matt's going to leave and he's going to go to Intel. I mean, there's just this kind of weirdness of a yesteryear. Right.

thing that Intel's got going versus what you guys are going. Yeah. Look, I said on my earnings call, first of all, I'm so blessed to be at this company. So blessed. It's an amazing... And it didn't start easy. No. You should tell people you almost... I thought you were going to go bankrupt at one point. Yeah, it was a turnaround situation. Very serious set of problems. There was a delisting notification from NASDAQ. The board had turned over.

There was no CFO. The auditor had quit. I mean, there was a lot of things to deal with. And the bones of the company were, the engineering bones were good, but the products were all in consumer tech. So the transformation that we drove, me and my team and this company, is to a pure play, custom AI platform.

data center company. That's 75% of our revenue. It was zero back then. You saw it coming. And you made some acquisitions. And some of it was a little bit of luck. But you told me, look, Jim, I think this one may have something big in it. You were the most transparent executive I have ever met. And all I can tell people is, this guy told you what was going to happen. And he even finally in the end just bought stock in the open market because you weren't listening. And, well, what a great run. Yeah.

Matt Murphy, chairman and CEO of Marvell Tech, MRVL. Go look at the history of this company. You will not believe how big and how great it is versus what Matt inherited many years ago. We'll be right back. Coming up, Kramer takes your calls and the sky's the limit. It's a fast fire lightning round. Next. It is time for the lightning round. We'll be right back.

And then the lightning round is over. Are you ready? Let's get down to the lightning round. I'm going to start with Brian in Colorado. Brian. Jim, how are you doing? I am doing well, Brian. How about you? I'm doing great. I hope they give you some time off over the holidays here. Oh, I hope so, too. I got a lot of other stuff I got to be cooking on. Let's go to work. What do we got?

Going into 2025, I was wondering how you feel about gold miners, specifically Newmont Corporation, ticker NEM. I think Newmont is terrific and I think you'll do well. I think that we have to have a hedge and it can either be Bitcoin or gold or both. Let's go to Joe in New Jersey. Joe. Hi, Jim. Happy holidays. Same to you, Joe. How you been?

Oh, good, good, Jim. Jim, Dow Chemical. What do I do? Dow Chemical, I'm deciding that it's just a China stock. It seems to trade with the materials, and the materials are trading off of China. It doesn't matter if it's even true or not. But that's why this thing keeps going down, and I'm not going to touch it until January, because now we've got everybody out of a loss on the darn thing. Let's go to Jade in Ohio. Jade!

Jim, great to be here, man. I just want to say a big thank you from the bottom of my heart for what you do to people. Oh, thank you. And it was credit. Thank you. Quick hand to my friend back at home, Carlotta. Congrats on the baby girl. Jim, what are your honest thoughts on Allstate's balance sheet right now? Oh, Allstate's balance sheet's fine, but I don't like the insurers. The only one I'm recommending is Chuck. Let's go to Stuart in Florida. Stuart. Professor Kramer, how are you this evening? I'm doing well. Thank you for giving me tenure. What's going on?

Well, I wanted you to know that I'm a club member. Thank you. And I had the pleasure of meeting you and Jeff at the annual meeting in Carl Gables. It's going to be fun. Next year we're already planning. It's going to be great. I need you to be there. How do we go to work together? What are we thinking?

I also have to thank you for helping me improve my account balance by over 40% this year to date. Thank you. That's what we want. We want club members to make a lot of money. That's the point. It's a simple, simple goal. Let's go to work.

Well, about six months ago, I bought into a small position in this company, and it immediately popped up 20%. But since then, it's been churning and consolidating and going back and forth between 15% and 20% up. And it missed earnings in November by a few pennies. And so I was wanting to get your opinion on CLH.com.

Clean harbors. Doing the doing. All right, so my take is that it's time to ring the red here. It's up 40%. It's a very event-oriented stock. I think you should take profits in clean harbors. I don't like the chart either. Not that that should necessarily determine things, but the stock's up a great deal. Let's go to Timothy in Florida. Timothy.

Hey, Jim. Good evening. Thanks for taking my call. Can I say hi to my daughters, Jayla and Lainey? My stock is Sirius XM Radio. The numbers aren't there. The numbers aren't there. We got to move on from that one. I don't care that it's already down, but the numbers are not there for S-I-R-I. Let's go to Powell in New Jersey. Powell. Hey, Jim. Booyah. How are you? I am doing well. How about you?

Good, good, good. Thanks for taking my call again. Of course. Happy holidays to your family and your amazing, amazing team. Thank you, sir. Thank you. May the Santa rally continue.

And my question today was about Reddit. I know you have this. I did. You know, I've liked Reddit, but you know what? Reddit now has a parabolic chart, and I don't know what to do about it. It's just gone bonkers, and I wish that it has a pullback before I can recommend it. It's an extraordinary chart, and it's just moved up too much. Let's go to William in New Jersey. William.

Jim, it's good to hear your voice. Thank you. I've got a question about press. Press at shutterstock.com. I go to them and I don't know. Digital imagery. I don't understand why it's not doing better. And if I don't understand why it's not doing better, then I think there must be something else to it that I can't figure out. So, therefore, I cannot opine on it. And that, ladies and gentlemen, is the conclusion of the lightning round.

The Lightning Round is sponsored by Charles Schwab. Coming up, Kramer takes stock of stock picking in an uncertain market. Next.

When you get to talk to investors, I mean, investing club members or people who just like to talk about stocks, it becomes very clear that individual stocks alongside index funds, not by themselves, alongside are the right way to go. This Saturday, while signing bottles of my wife's mezcal, I talked to people who turned against the orthodoxy of index funds with a vengeance. Now, sure, they own some and they aren't going to leave the fold entirely, but

But boy, are they tired of being patronized by an industry that's been conquered by those who think it's foolhardy to pick individual stocks. The conventional wisdom of financial industry says you're an idiot if you try to pick stocks. So just put your money in index funds that mirror the averages. But why did you tell that to a man I'll call Robert? I met at Cherry Hill, New Jersey, Total Wine & More. First, he thanked me for allowing him to believe in himself.

Second, he said that because he did believe in himself, he was able to make a judgment that NVIDIA was the next big thing. Yes, he was helped by me, and I was grateful for that. But he described his thought process and the repeated buys during the 2017-2018 period in the wake of my renaming Everest, my rescue mutt, NVIDIA. I acknowledge it was a silly thing to do. He said, not so fast. Let me give you the outcome.

Robert was up $100 million on the NVIDIA he bought in the time when I hounded everyone to buy NVIDIA. $100 million. Even with inflation, that's real money. I thought I heard wrong. So I went over it again. I said, $100 million? He said, yeah. I quizzed his wife. $100 million?

She said, yeah. I went back again and I said, listen, I mean, you know, tell me. He said, $100 million. He'd simply come down to buy a bottle of Lisa's Phosphor and to pay his respects. Thank you for giving him permission to invest how he saw fit, not just in index funds. After we went through the picture-taking session, I asked him again, please don't exaggerate. He knew the lots. He knew the days. He wasn't exaggerating. Now talk about a satisfied investing club member, too.

After that, I asked everyone in line what they were buying, what they were seeing. I got a mixture of people who like the index funds, but really we're doing a lot of the buying of stocks that we like at the club. Buy like TJX in particular. I also heard people buying Ollie's, which he had recommended on Mad Money last week.

I told everybody they're both superb with lots of room to grow. Now, I didn't come down to the bottle signing in order to preach the gospel of owning individual stocks. That's for club members like those who will be on Thursday's club call. But by the time we were done with a three hour session, I found myself actually saying, well, wait a second. Don't forget the index fund component. It gives you a little bit more of a license, gives you a safety blanket. If you got some money set aside in an index fund, I think it's much easier to take necessary risks with their individual stock portfolio. Balance is the key.

But I did feel emboldened to come out here tonight and tell you that something's going wrong with the industry I used to love. Wall Street's so enamored with index funds, they're either making a fortune from selling these things or they really do think their clients are morons and they just don't want to say it.

Sure, they have Warren Buffett on their side with his folksy attacks on hedge fund managers that include a patronizing attitude toward individual investors who can't compete. So they should surrender to, yes, index funds. And he's too sainted to disagree with. But look, if Robert were the only one who made a lot of money picking individual stocks, then I'd say, you know what? He basically won the lottery. Forget about it. And you could say the people who came to Total Wine are self-selected because of the investing club.

But I'm not buying it. I'm saying that the wizards of Wall Street and their journalist doppelgangers have gotten too proud of themselves for convincing millions of people to surrender to the mediocrity of index funds, lock, stock, and bow. And I think their era may finally be ending. And if I helped, if I helped it to end this era with the investing club and with tales of people making tens of millions of dollars by picking stocks, then here's what I have to say.

I'm just getting started. I like to say there's always a bull market somewhere. I promise I'll find it just for you right here on MidMoney. I'm Jim Cramer and I'll see you tomorrow. All opinions expressed by Jim Cramer on this podcast are solely Cramer's opinions and do not reflect the opinions of CNBC, NBCUniversal, or their parent company or affiliates and may have been previously disseminated by Cramer on television, radio, internet, or another medium.

You should not treat any opinion expressed by Jim Cramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Cramer's opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

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