Deep Dive
Shownotes Transcript
To be invested with Betterment is to believe in better. Whether it's saving for today or building wealth for tomorrow, they help people and small businesses put their money to work. They automate to make savings simpler. They optimize to make investing smarter. They build innovative technology backed by financial experts for anyone who's ever said, I think I can do better. So be invested in yourself, be invested in your business, be invested in better with Betterment. Get started at Betterment.com.
Well, 1:30 now. Let's do it. I'm ready. We're going to do a little reset here. This is the On The Tape podcast. I'm Dan Nathan, joined by Guy Adami. On a Fed day, we're doing this podcast right before the Fed statement that's going to come out and then the Fed presser afterwards. Guy, there is nearly a 100% probability that the Fed will not move the Fed funds rate
Thoughts on expectations in the print the last time the Fed met was December 18th. We saw a lot of downward volatility immediately after what was a hawkish statement. Yeah, well, it's interesting. We had a GDP revision this morning, which I think sort of surprised some people. As a matter of fact, I was listening to Carl Keaton near this morning, and he said, I thought that was a misprint. He had to look at it again.
But maybe that was due to the fact that a lot of people were shipping their goods ahead of potential tariffs. So maybe that's just a one-off. With all that said, 0% chance they move at this meeting. I think we'll all agree the market does as well. It's sort of the commentary and the Q&A to me is that's going to be as fascinating as you've seen in a long time. Because my sense is one of the first question he's going to get is,
You know, President Trump has talked about the want and the need for lower interest rates. What are your thoughts, Fed Chair? And I think he's going to have to address that probably from a number of different angles. I'll say this. If you're looking at it, the fact that 10-year yields went as high as they did on the back of the September cut, when they started cutting, yields went from 3.6-ish almost to 4.8. Never has happened before, and that's
time span. I think that's probably got them a little concerned. So I don't think they're going to be as dovish as the market probably wants them to be. I think they're looking at this re steepening of the yield curve and as quickly as yields went higher as a bit of a cautionary tale. And there are people out there that think if they were just lower rates, it's going to lower 10 year yields. No, we'll do the exact opposite. Yeah. You know, it's fascinating. So a lot of you folks, they love the zero days to expiration options and they probably love them. Uh,
the most on Fed days, especially in the major sector ETFs or indexes. And when I think about this, I look at the VIX, maybe Amanda. Well, it's not going to be Amanda. Let's look at the VIX guy. You were talking about that move on Monday that we saw up to about 23. Here we are. We filled in most of that gap. It's about 17. So a little bit elevated on a down day into the Fed. The implied movement.
on today in the SPY is less than 1%. I think there's a pretty good chance that we're going to have more than a 1% move between the Fed statement at the end of the day. And I just want to be really clear with the SPY at 602, if you have a $4 implied move between now and the end of the day, the idea of realizing $4, I think it's pretty good on either direction. Let's say you don't know which way it's going to go. The flip side of that, $2 if you want to buy the call or
or two bucks, whether you want to buy the at the money put, I think you get one of those if you have any conviction whatsoever. I just don't see the likelihood of a flat day between now and the end of the day. The market's got so conditioned to watching vol spike and then watching it come right back down. And there's so many participants that have made a fortune by selling volatility on up days. And I think
To a certain extent, that's worth seeing. I mean, the people have been complacent on that front. And what you just described speaks to exactly that. You know, if you're asking me, which you clearly are, I mean, you could have clearly one of these Fed days where the market rips, you know, the Dow goes up 350 points, and then by the end of the day, it's, you know, down the exact amount or vice versa. We've seen that before. I think there's a potential to see it again, especially during some of the Q&A stuff. So I am, well, I'm not shocked. I'm not surprised.
that volatility in what you just described is as cheap as it is because the market's been conditioned to be sellers of vol on any spike and they've been rewarded for doing that. 100%. I mean, and again, going back even to that December 18th day when you saw that big downward move and the major indices in the equity markets and you saw that big vol spike, but you've said it again and again, those have been really good opportunities.
Let's talk about earnings here. By the time many of you are listening to this, we've already been through Microsoft, Tesla, and Meta all reporting Wednesday after the close. A lot of big implied moves. They've moved up a bit week over week since that Monday price action. Which of these, Guy, are you most closely following? If you think the major secular trend that has benefited stock market gains or been a big driver of stock market gains really for the last two and a half years right now,
And if we think that it's at an inflection point, which of the names you want to focus on? Microsoft. I think that's, well, I mean, they're all important. But if you look at Microsoft, I mean, they're sort of at the epicenter of everything we talk about seemingly on a daily basis. A stock that, you know, quite frankly, has gotten itself pretty expensive. A stock that since June or July hasn't done all that much with a broader market making all-time highs. We're within, what are we within? One and a half percent of an all-time high in the S&P 500.
So Microsoft to me is sort of at this bit of a crossroads here. What are they going to say that's going to reinvigorate that stock, because it'll get people excited again? Is it going to be re-acceleration of growth in the cloud? I'm not sure, but to me if there's one that's going to dictate the market over the next couple weeks, it's Microsoft. Yeah, so this one's really fascinating, right? So if you want to go back to the start of '23, they had invested in OpenAI. This is a company that a lot of folks outside of tech was not particularly focused on, private company.
their ChatGPT 3.5 in late 2022, that got this whole thing going, the way in which it was kind of operating relative to all the other chatbats prior to it. Microsoft had invested a couple billion dollars, then they went in with $10 billion. Part of that investment had to do with the fact that they were going to have some exclusive access to this technology so they could kind of build it into their products and services.
but they were also going to have the benefit of open AI further training those models on Microsoft Azure. So on their cloud. So it looked like a great deal. Microsoft was trading very well. You know, the stock made an all time high guy in July. July. Got near what? 470 is. And then between
Early July to early August, the stock went down from 470, I think as low as 390, and that was the big reversal day. And since then, it's really lagged the broad market, the S&P and the NASDAQ. I'll just say one last thing about this OpenAI-Microsoft relationship. If you've been keeping a close eye on it, it's been fraying over the last six months or so. And so, you know, if OpenAI were to kind of pony up with one of Microsoft's
you know, competitors in the cloud. That would be something that I think would be a problem for Microsoft. And the last thing I'll just say here is that the company put out some CapEx guidance, I want to say a few weeks ago, $80 billion, you know, again, they said half of it's going to be here in the U.S. You know, with some of this regulatory sort of situation and the government kind of focused on this and deep seek right now, it'll be interesting to see if they raise that number or lower that number. And I think that's going to be a big driver, guys.
Without question, I'm laser focused on that because that's, I've said it a number of times, it's not one of the three most important companies, it's definitely one of the five most important companies in the world given all the different things they intersect without question. And quickly, if you're just looking at some of the other stocks that I think are really important, if you want to do the top five, I think Taiwan Semi's got to be in the mix as well. And I only mention that
because very quickly you've seen a 10% drop in Taiwan Semi over the last week and a half or so. And that's sort of coincided with this move we're seeing Nvidia. So if the Semi trade starts to break down, which it seemingly is doing, what does that mean for the broader market? I mean, everyone's known this. This is why Nvidia has gone from a $200 billion market cap, I want to say about two and a half years ago, to just $3.5 trillion coming into this week. And that was the most valuable
market cap company in the world before this huge drop. And I just kind of put it in context, you know, Monday, Nvidia was down 17%, closed on the low. Yeah, it had a bounce on Tuesday, but here we are Wednesday afternoon and the stock is down 6%. So from a technical perspective, from just the kind of volume that has traded over the last three years,
Today's a really important day. To Taiwan Semi, if NVIDIA has 85% of the high-end GPUs that go into the servers, that go into the data centers, that train the models, Taiwan Semi makes up 85% of the manufacturing of those GPUs. So it's a really easy thing to kind of connect those two dots. And then the last thing I'll just say is like ASML that makes the equipment that makes the chips. They reported on Wednesday morning. Now, Guy, help me make some sense of this. Remember that ASML?
Huge, huge down day it had in late October. The company ASML reported their bookings number was 50% less than what consensus had. So all of a sudden they report Q4 today. You ready for this? The bookings were up a lot more than they expected, right? And then going forward. So you can't cut a number in half and be that dramatic about it and then have some smaller beats and try to take a victory lap. Well, that
And that's exactly what they're doing. And I think a lot of some of these pundits were trying to do the same thing. But this is a stock that was $1,100 in July. And I think it almost was cut in half into the fall of last year. And now we're getting this bounce. This bounce is not that inspiring to me. I mean, I get it. People are excited to get in this bit of a relief rally.
But I don't think it changes the course whatsoever. So, you know, yeah, it looks good today and people are sort of, to your point, taking that victory lap. But look in the context of what this is thing, where it's been. And real quick in terms of NVIDIA, because I do think it's somewhat important, we've become so sort of desensitized. Company lost $600 billion of market cap on NVIDIA.
on Monday, $600 billion. How many companies in the world are that big in the first place? A handful. And, you know, they're just numbers now to people, but that is a staggering thing to me. No doubt. I mean, it just speaks to the concentration. It speaks to the huge gains that investors have had. And if you kind of came into 2025 and you were sitting on 185% gains in just 2024 on NVIDIA, it's not going to take much for you to think about taking some profits and funds.
Trying to find some other trends to redeploy that capital within generative AI. There's lots. And you and I have been talking about this. And, you know, Vincent Daniel yesterday, I think on Fast Money, but he definitely did it on the session here at Global Alts. That's where we are, by the way, if you're listening to this right now. CNBC is recording our Fast Money here. This is where we're doing the podcast. But this is the iConnections Global Alts podcast.
conference. There's 5,000 people here. So Danny, Vinnie Porter, Steve Eisman were being interviewed by Melissa Lee. And I think it was interesting because you and I have said this, the next trade in the generative AI is the use case trade, right? It's the software companies that
are basically able to integrate this technology into their products and services, right? And kind of whether you're a SaaS company, you know, grow seats and the like here. And then what are they selling to? They're selling to all the other sectors outside of technology. You've used the example of Walmart increasing the pace of their e-commerce. These are the sort of use cases
And that's probably got the next leg of this trade. Well, that's why Facebook is so interesting because, you know, if you think about it, the next iteration of them is the margin improvement. Listen, revenues are probably going to be declining, which is fine. Their earnings are probably going to accelerate because of AI and because of what it's done for their margins. Without question, Walmart is the same thing. But what's interesting and what you talked about, it's never different this time. These chips do become commoditized, which then hurts margins.
which theoretically hurt the stocks but it's great for software companies to your point because their costs just went down significantly so facebook should theoretically win to all this and you know they're going to talk about the spend they've talked about it before i don't know what the market's going to do that punish them or not but
What I am focused on is continued margin improvement for them on the back of what you just talked about. Yeah, coming into earnings, the stock's up 15% on the year. It's very near an all-time high. I think that one of the things we could take away from this deep seek data that we saw late last week into this week is that it is an open source model.
That is what Lama is, that Meta has spent the last few years training. That's the thing that has actually benefited their business internally, the way they serve ads, the way they monetize, a whole host of other things. I just wonder if that's in the stock. And we just talked about Microsoft, who's given that CapEx guidance for the year.
So did Meta, and it was $65 billion minimum. That was two weeks ago, I think, or a week and a half ago when they said that. Let's see what they kind of speak to now, Guy, whether they ramp it up or whether they actually tamp it down. Because if you have two open source models that are competing with each other, I think Alibaba said the same thing about their model. You have the ability, if you're a developer, to take bits and pieces of that code and kind of build on top of it. So,
I think what Meta has to say, what Mark Zuckerberg in particular has to say, and again, this goes back to his proximity to the new administration, right? Satya Nadella, I don't think, was at the inauguration like some of these folks were. So let's see what Microsoft and Meta have to say. Imagining a better future is the first step. Investing that future with Betterment Advisor Solutions is the next. Whether you're launching your own practice, looking to streamline client onboarding, or
or just searching for efficient ways to scale your firm, Betterment is here to help. They automate to make tax optimization simpler. They provide support to make administrative tasks easier. At Betterment, they're building innovative technology all for anyone who's ever said, I think I can do better. So grow your RIA your way with Betterment Advisor Solutions. Learn more at betterment.com slash advisors. Investing involves risk, performance not guaranteed.
Okay. But.
the delivery miss and I think earnings were even missed. So right now, fact set consensus for the quarter is 77 cents on a non-GAAP basis. And basically, you know, that's analyst consensus. I think they missed that. Okay, why? Because I think margins are going lower too. And I think analyst consensus for
Gross margin, 18.6%, and maybe it comes in below, I don't know, man, if it came in at 17.6 or lower, what's the stock doing given the rally that the stock has had since the election? Well, it'd be another deceleration in margins. You know, it was about a year and a half or so ago when we thought we got to trough margins, and they spoke to that.
And they said, I mean, Elon Musk said, "We're not gonna get, our margins are gonna decrease, but we're not gonna get down to legacy auto margins," which they basically did wind up getting down to. - 100% did. - And then you saw subsequent bounce in margins. People say, "You know what? That's the all clear sign. Here's the reacceleration."
But to your point, if we were to see anything with a 17 handle, I think, would just suggest, you know what, they have a problem on the margin front. And so much of that story, I think, is predicated on them being able to hold their margins. And they're not. And if deliveries continue to go down for whatever reason, and if competition is out there,
which it clearly is and then all the other input costs which haven't been going down I mean I don't know how margins do better yeah on a sequential basis we're supposed to see about 19 percent that was down from 19.8 that was the largest gross margin the company had since
2022 and just to be clear in 2021 the company posted twenty twenty three and a half was twenty five twenty five I was close. Yeah I know it was and I just like that was the year in which they said their margins are not going to get down to traditional autos and you know just to be clear if you just have a chart package in front of you can look at this thing you know the stock topped out at four hundred dollars in late twenty one it got as low as a hundred dollars in early twenty three the stock
as of November 6th was trading or just before that I guess you want to say September October was trading around $200. This was one of the worst performing stocks in the entire S&P 500 that had a market cap above a half a trillion dollars. And then you see this stock go from $220 up to 500 nearly because of you know Elon Musk proximity to the president. Now it's come in obviously it's trading 390 here. I think if they miss
EPS, they missed deliveries, they missed margins. This will be fascinating to see how this stock trades if all of that stuff on the political front can outweigh
outweigh what's going on in the fundamental front. My sense is tonight on Fast Money we will spend an inordinate amount of time talking about the stock reaction in Tesla one way or another. And I'm sure somebody will come on to defend, somebody will come on to talk about the flip side. But it's a name that has fascinated people for a myriad of different reasons. But I don't know though, and you may disagree with this, I don't know how important Tesla is to the broader market sentiment. I think at one point it was. I'm not sure so it is anymore.
Okay, but we keep hearing about the Trump trades, the Trump trades. This is like of all the Trump trades. It's on top of the list. This is on the top. I mean, the stock at its highs just recently gained like three quarters of a trillion dollars in market cap on nothing fundamental on the hope that the proximity of the CEO to the White House was going to cause...
further deregulation that will allow them get closer to full self-driving, which will allow them to get to a robo-taxi. I think the robo-taxi is a pipe dream. Whatever you want to give me that's the over-under guy, I'm taking the over. It's interesting, and that's what they seemingly throw out there when the stock is
in trouble in terms of a downward trajectory. They throw out the robo taxi and it's coming. And it's a carrot. It's the horse and carrot thing. I mean, people run towards that and it happens every single time. But, you know, at some point it's like, you know, you got to sort of come up with it. You got to sort of you got to fulfill your obligations. Otherwise, the markets will start to discount the rhetoric. Yeah. And we haven't even mentioned China. OK, so half of Tesla's cars are made in
in Shanghai, and half of those cars, if they're not sold in China, they go to Europe. Europe has already placed some pretty substantial EV tariffs, okay, on Chinese automobiles. You know, Trump obviously keeps threatening big tariffs on China for any sort of product that's made there. So to me, I think that, you know, Tesla is in the...
it's in the middle of this trade conversation. It's in the middle of just the way you think about the pricing of these cars. I mean, China has obviously underpriced Tesla cars. They look very expensive in China. So that'll be interesting. And the last point I'll just make there is,
do the Chinese start to have some real nationalistic tendencies about their purchases as a lot of this rhetoric gets dialed up? Guy, which leads me to Apple. There were some reports out that their Chinese business is down 18% year over year. This is a company that under the first Trump administration, I think Tim Cook pretty masterfully had a bunch of their products carved out of a lot of the trade situation, a lot of the tariffs. They report Thursday after the close,
Talk to me about this one. Do you think that other than Microsoft for the broad market, is this one as important? You know, it's interesting. There was a period of time a year or so ago where Apple was not performing well. And, you know, historically I've said as Apple goes, the market goes. But as it turns out, I mean, Apple was a complete underperformer in a stock market that was doing really well. That obviously changed in June when the stock went from basically 190 to 240 in a straight line post that developers meeting, whatever they called it.
But to answer your question, yeah, I do think it's important. You know, Apple wins to basically one thing, in my opinion, one thing only. They're in over 470 ETFs, I think,
of which 415 of them have Apple as a top 15, 1.5% holding. So as passive money comes in, and last year to the tune of a trillion dollars, the biggest beneficiary of that is Apple, without question. And the move that we saw since June to the recent high is all multiple expansion, which people will say is justified because they're in the catbird seat and their services business is now a bigger percentage of overall revenue, which is the reason why they get to multiple.
I get it. But you know what? At the end of the day, they're still selling things that people have to buy, and they're still sort of subject to the economic conditions that people are facing right now. And I think that entire move from June is going to be roundtrip. That's not today or Thursday or Friday, but at some point. Well, it's interesting that you just said have to buy. And that's been a big part of the bull story in the back half of last year is that there's like, I don't know, hundreds of millions of iPhones around the world.
that need to be upgraded because the batteries start leaking, you know, all this sort of stuff. You get to three years and that's what happens. The problem is the product that they released at the Worldwide Developers Conference on June 10th was Apple Intelligence and that was meant to kind of spurn that sort of upgrade cycle. That's why all the analysts in the street were going crazy. That's why the stock went up 10% in two days. You and I were not of that belief. Everything that I saw coming out of that in what was going to be a staggered release
of that product over the course of the year, there was no reason to run to an Apple store to upgrade your phone in September or October. And that proved to be true, right? So when you think about that, what is the upgrade cycle? When does it happen? Well, first things first, if the Apple business in China is so bad, Apple intelligence will not be in China, especially when you think about this deep seek news. I think there's a really good chance
So we talk about some of this political rhetoric. We talk about a trade war. You talk about nationalistic buying tendencies. Well, it all fits with Apple too, right? So if you're a Chinese consumer and you've been spending or paying up for an iPhone over the last, call it five years or whatever, and all of a sudden now you have this AI bot
that you can download on your phone and it could be an Android phone that's probably a third of the price of an Apple iPhone. You have a WeChat super app. All of a sudden you're like, wait, do I need to buy this sort of thing? I mean, the only reason to buy it is because your battery dies and you get sort of tired of looking at your screen that's broken. I mean, quite frankly, but
There is going to come a point where these are not cheap devices. And if you believe the economy is slowing, if you believe the consumer here in the United States is becoming exceedingly strapped, which a lot of these data suggests that they are in terms of credit card debt that's out there, total household debt that's out there, Apple doesn't win to that.
And when passive becomes active, it's never active on the way up. So I just say sort of get ready. Full disclosure, you had Gene Munster on OK Computer the other day. I think he's really optimistic about this, Brent. He's very bullish on Apple, and he's been right. Yeah, I mean, the move that we saw from late December 260 down to 220 just last week, and we were talking about why did Apple act so well on a relative basis to other mega cap tech stocks after that deep seek data came out is because they haven't spent
tens of billions, $100 billion building out the infrastructure. They got to license it. So again, Apple, it kind of ran a lot to 240, not a buyer hurt. You know, real quick, going back to Tesla, but General Motors had a 10%, 11% move this week.
uh to the downside and again i'm not suggesting that's going to be any sort of causation for tesla but just sort of put it out there i mean they're still the auto sector in general is still having their issues in terms of the stock so just keep that in mind going forward into that print because i do think it's going to be interesting yeah so early next week we'll hit google on tuesday after the close amazon thursday after the close but again by the time you're listening to this i think we're going to know a lot more microsoft capex any tweaks to that meta
The same thing. And then Apple, you know, this is a big one, obviously. I mean, I think it's a lot of Apple-specific stuff. And then Tesla, to me, purely a sentiment about the Trump trade. Fair enough. And we're going to find out. So, I mean, that's it. A lot to look at. We're going to have a Fed presser now in the next couple minutes that, you know, again, when you're listening to this, it'll take place. But interest rates, to me, before we get out of here, to me, that's still the driver. We saw from 3.6 to 4.8 in the 10-year over the course of maybe five or six months.
subsequent move back to four and a half. I think we're going to sort of find a floor. I think rates are going to reaccelerate to the upside. I don't think the market's going to like that. And that's one of the wild cards for 2025. Yeah, I guess the other wild card is what sort of pressure the White House continues to put on the Fed, right? So if the Fed comes out here, and they
And they've got a tough wire to kind of walk across right now. So they've got to talk about this deep seek and what it means for the gender of an eye trade. I mean, there's just a whole host of things they've got to do. And if, for instance, it's a bit hawkish today, what is the White House saying about this? Well, the difference this time, you know, the first Trump administration in 2018 in the fall, Jerome Powell was in the seat maybe for three or four months-ish, right? So he was new at the game. I think he was learning. He had the market muck.
working against him yet the administration sort of beat him over the head every day and i think the acquiesce i think it's a much different ron palmer seven years later and i don't think he's going to be subject to the same pressures like i think he's better equipped to handle it yet not that well it's good i think this is going to be one of the first big battles that we see out of the white house with kind of this apolitical sort of uh... you know organizations are supposed to exist in our government but we will see so that you're not gonna be back on the market call
That would be Thursday at 1 p.m. We're going to be previewing a bit more of the earnings. And then on Friday, we have it. Friday's drop is going to be pretty epic. We have Melissa Lee interviewing Danny Moses, Porter Collins, Vincent Daniel, and Steve Eisman. That was a great conversation. It was a great conversation. So that will drop.
You know, that was a half-hour conversation. It could have been an hour and a half. I mean, those guys are really interesting, and Mel does a great job. So I want to thank everybody for joining us. We'll see you tomorrow, 1 o'clock on a market call. Yeah, it's been a great couple days at the iConnections Global Alt Conference. We killed it here today. Well, I don't know about killed it. We did okay. And you've got to give a shout-out to this. I mean, we have so many crew members out here. We have at least six guys that have done an amazing job. So thanks to them because they've been with us the last couple days. All right, we'll see you all.