Closing Bell - Closing Bell Overtime: Nvidia Pullback, AI Impacts, and Steel Industry Shifts 1/27/25

Episode Date: January 27, 2025

That's the end of regulation. Unilever ringing the closing bell at the New York Stock Exchange. The Chinese consulate general in New York doing the honors at the Nasdaq. What a day. NVIDIA and other AI plays getting rocked as China's deep seek raises questions about AI spend. NVIDIA plunging 17 percent, losing hundreds of billions of dollars in market cap, and the Nasdaq falling more than 3%. And yet, the Dow finished with gains. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Well, is this the NVIDIA buying opportunity you've been waiting for,

or the start of a bigger downturn? We're going to debate that question, talk about the names that could actually benefit from today's news. Plus, J.P. Morgan's global chair of investment banking joins us with a look at how this potential reset in the AI narrative could change the money flow in the tech space and beyond. Well, let's start with NVIDIA getting crushed along with other chip and AI related names, logging the worst single day market cap loss ever around $600 billion. It's larger than the entire market cap of Netflix, Oracle, or UnitedHealth. Let's bring in Mellius Research, head of technology research.

Ben Reitzes, got a buy rating on NVIDIA. Ben, welcome. So the way I see it, the bearish argument on NVIDIA from here is this, that it's going to shift the whole industry's focus from how many GPUs, how many accelerators can I get as soon as possible to drive the best outcome, to how can I get the best AI results using the fewest compute resources? Because up until now, there was little downside to overspending. Now the risk is China's going to embarrass you. Well, we call this the inverse Sputnik moment, where Sputnik in 1957 caused the space race and massive spending. Now we had potentially an event that causes the reverse, causes

the reverse Sputnik, which is less spending. And we have to see what happens, John. There's a couple of dynamics here, OK? So the common sense reaction is sort of what happened today. I mean, the CapEx is going to fall off a cliff, if not this year, then next year, as folks realize they don't need the state-of-the-art best Ferraris to drive the AI car. What I think is that adoption should go up. There should be quite a bit of adoption because it's going to be made cheaper if folks use the techniques that DeepSeq is going to use. And so what might happen is we might see a ton of adoption and a lot more inferencing and maybe increase the demand for chips. So we really have to see. We're going to get a lot of information, though, this week with Microsoft and Meta reporting. Why did these guys just reiterate their CapEx literally

last week, literally on Friday, and then all of a sudden something's going to happen that causes that to tank? So we're going to have to look at it. I'm kind of skeptical of the reaction of the market. I think it could be overblown, but I acknowledge what I don't know. So go ahead. So Satya Nadella, CEO of Microsoft, wrote about this paradox, the idea that if you make the resources cheaper, it's actually going to drive demand, make them more efficient. But it could also shift the balance of power in the AI ecosystem, right? The way that Linux, open source, did in enterprise infrastructure 25 years ago? It's possible, John. I mean, what I think here is that really these open source models are open to the public. You can use them. You can see how they work. And what was scary about this one was

that even though we think that it costs way more than $6 million, they had probably hundreds of millions in research before that. It still looked cheaper to train and cheaper to inference. But in terms of what NVIDIA has built with developers being able to use the platform and then the AI enterprise software and some of the other things that they have within the ecosystem, I think that's going to be a tough thing to dislodge. And if inferencing surges, you may still need a Ferrari. But we sure do want to hear from them a little more than the public statement that they said today. I think that they're in quiet period. But hiding behind quiet period when your stock's down this much is not probably a good move. I would advise them to kind of over the coming days come out with something that's a little more substantive. A lot of customers are watching this market. Ben, you just mentioned Meta, which actually finished the day higher, looking at our screen

just a few moments ago. How does this set the stage for the hyperscalers and other mega cap tech names that begin reporting this week? Well, look, Meta just said they're going to spend 60 to 65 billion. It is looking like an astute, brilliant move to obviously open source this and have AI proliferate. They obviously benefit the cheaper the technology gets and the cheaper the technology is for folks to develop great ads and content for their platform. So that's what their motivation is. And obviously, they went up. People got it right away.

There's a couple other companies that I think could benefit as well. Obviously, Apple increases usage of AI. I think folks will need more smartphones and obviously shows that they were pretty smart to kind of let this thing shake out if indeed things get cheaper. But Meta was a good move for them to do that. And I think a lot of folks can benefit. The one thing, Morgan, I would say is the jump to increase your holdings of SaaS. I would caution against that. The consensus today was, oh, I got to cover my SaaS shorts because it's going to be cheaper for them to use AI. It's also going to be cheaper for a lot of competitors to disrupt the Adobe's, the Salesforce's and all the guys that are scrambling right now. All right. Ben Reitzis, thanks for joining us with a mixed day.

For the major averages, the Nasdaq finishing down more than 3 percent. NVIDIA having its worst daily drop since 2020. Joining us now to talk about the tech sell-off and the broader ripple effects in the market, Charlie Babrinskoy of Ariel Investments and Eric Jackson of EMJ Capital. Great to have you both here. Charlie, I'm going to start with you because, as we mentioned at the top of the hour, terrible day for tech and anything related to AI infrastructure, including some of those energy and power player and industrial names. But the rest of the market held up fairly well today. We actually had positive breadth. And if you look at the equal weight S&P, it outpaced the weighted S&P 500 by

the most since July of 2024. So is this a buying moment for other parts of the market? And if so, where? Well, you didn't mention the Russell 2000 value was actually up today. The part of the market that did the best was value stocks. And that's I'm sorry to keep pounding my book, but that is the case, that that is why value will often do better than growth, because growth by definition has a price that is much higher than current earnings would demand. And so in order to buy a growth stock, you have to have some optimism about the future. People tend to be too optimistic about their ability to predict the future, whereas value stocks traded at a reasonable multiple of what they've already proven. And so on days like today, people go look around and say,

what's trading at a very reasonable price compared to what they've already proven? Housing stocks did very well today. Consumer staples did very well today. Health care did very well. The Russell 2000 was up today. Eric, I want to get your thoughts on this, and specifically what we're seeing in the tech trade and some of these growthier parts of the market, because those are also the parts where valuations have arguably been the most stretched. It wasn't just NVIDIA and chip names and some of the other tech names.

It was also things like Bitcoin and cryptocurrency related stocks that moved lower today, too. So how much of this is a reflection of concerns of deep seek? How much of this is perhaps just an excuse by investors to take some money off the table and rotate? Well, Morgan, I think that for all the chip names, it's remarkable just how wide the sell-off was for all of those. And I think that and for the PowerGen AI affiliated names, I don't think it's going to be a quick bounce back. I think we're probably going to hear from Microsoft, we're going to hear from Meta over the next few days and weeks. And I expect them all to say, hey, we're going to be re-upping

our CapEx guidance, full steam ahead and all this kind of thing. We're not going to hear from NVIDIA probably for another six, seven weeks, I think it is. And I think it might take until hearing directly from Jensen before they'll be in all systems go for folks to get back into a name like NVIDIA. I'm still long. I do see it as a buying opportunity. I just don't think it's going to be a knee-jerk response. I think there is going to be some exploration into some other areas. This is a fundamentally

huge moment and a sort of a wake-up call to America with just how quickly DeepSeek has developed. And it's a big threat. And it's going to have to be met with a response. There's a whole kind of rethink about how we've been going about developing these models. If OpenAI had been a stock today, it would have been crushed way more than NVIDIA was. I think they're the ones that have been affected the most. We've got to go open source.

We've got to focus on software optimization. And I think the Trump administration has to support that and they have to support other areas that could potentially leapfrog the Chinese in AI, which are names like the quantum names. I like Brigetti the most. I own it. And the area called post-quantum cryptography, which is the security to protect ourselves from quantum attacks. And the name there I like the most is BTQ. NVIDIA reports its fourth quarter fiscal 25 results February 26. So just about

four weeks, a little bit more than that. Charlie, finally, how are you going to gauge whether the market sentiment overall is shifting overall toward value at this point? Well, that's hard to predict in the short term, but it's just it's a tale of two markets. If you look at housing related names again, you're seeing multiples like 11, 12, 13. When you look at Nvidia and AI names, you're seeing multiples like 40 to 50. So it's not going to be hard to see where there is value, what's trading at an inflated price, what's trading at a low price. I teach an eighth

grade class, two eighth grade classes. They pick stocks. All the kids in that class wanted to own Nvidia. They all wanted to own Microsoft and Amazon. None of them wanted to buy value stocks. That's right now why value stocks are just a much better value today. You couldn't get any of them to buy Mohawk? Come on. I tried. I tried. Charlie, Eric, thanks to you both. Well, now let's bring in Mike Santoli for a closer look at the market's outsized reliance on tech and AI stocks. Mike. Yeah, John, certainly the indexes have outsized reliance on those areas. This is a look at the equal weighted S&P 500 relative to the Nasdaq 100. Now, on a one day

basis today, the equal weight S&P outperformed the Nasdaq 100. Now, on a one day basis today, the equal weight S&P outperformed by three percentage points, three full percentage points. That is certainly historic. I heard Morgan talk about the performance relative to the market cap weighted S&P going back to July. Well, guess what? July was when we did see the absolute low in this relationship, basically the median stock relative to mega cap tech as measured by the NASDAQ 100. But I did want to show this two year look to show how deep the hole is and how halting the progress has been. Now, you've had this really little mini uptrend there. It's attempt to have a broadening market. I always point out that a broader, more inclusive market is not always one where you have great index performance or you have lower volatility or it's a safer, more stable market. It is just one where stock picking maybe is more, I guess, fruitful. And you don't have to necessarily lean as much on the very largest consensus winners out there. Now,

take a look within the index at how top heavy it is, both in terms of market cap weight and then also where the earnings come from. So here's the top 10 stocks in the S&P 500 share of market cap weight and then also where the earnings come from. So here's the top 10 stocks in the S&P 500 share of market cap going into today was close to 38 percent. The top seven is more like 33 percent. Now, the top 10 also deliver 28 percent of the S&P 500 earnings, according to 12 month forward forecast. That obviously shows you that those stocks are on average more expensive than the market, mostly because they're higher quality, just better profit margins, higher forward forecast that obviously shows you that those stocks are on average more expensive than the market mostly because they're higher quality just better profit margins higher returns on capital all the reasons you know why people think that the earnings power of the biggest

tech stocks are kind of repeatable and and more worth paying up for so this is showing you why the S&P 500 itself can get whipped around when even the majority of stocks are not getting hurt or not doing much of anything. I also final point bespoke had a look at the times that the S&P 500 has gapped down by more than one percent, as it did this morning off of an all time high. Now, there's only 11 times in the last 30 plus years that's happened, five of them in the last five years. Why? Because it's much easier when you have a handful of stock at the top to have them move a lot on an instantaneous basis. All right. Mike Santoli, appreciate the context. As always, on a day where the S&P, the Nasdaq and the Nasdaq 100 all had their worst day since.

To put this in context, only December 18th. After the break, longtime tech industry insider Patrick Moorhead has a list of surprising potential winners from the deep-seek disruption. He's going to join us next with the names that could benefit the most. And Apple outperforming in a big way today. You can see it there up three plus percent as it gets ready for earnings later this week. We're going to look at how a different kind of competition from China could play a major role in results going forward over times back in two. Welcome back. The deep seek fallout reaching Washington House Speaker Mike Johnson just weighing in on the company and what he calls

an abuse of the system by China. China, for example, is a terrible trading partner. They abuse the system. They steal our intellectual property. They're now trying to to get a leg up on us on AI, as you see in the last day or so. It's a it's a serious threat to us and to our economy and our security in every way. And so the president takes that seriously. And I think that he will deal with that in appropriate manner joining us now to talk more about the deep seek disruption is patrick moorhead more insights and strategy founder ceo and chief analyst pat good to see you so the big question to me here with all this deep seek stuff is is this a minor shock that's going to lower the cost of ai infrastructure boost demand

as much or more or is it the beginning of an ecosystem shift that's going to hit chip and infrastructure valuations for a while? So I subscribe to the former. I believe that this is going to radically shift costs down, which is exactly what we need to hit those downstream effects that I talk about in every one of these shows. Consumers and enterprises have to buy into the benefits. And if they don't, everything crumbles. And what this does, it accelerates us to get there. And on the other hand, if I look at the future of, let's just say the end game is AGI, that's going to require a tremendous amount of training and the entire ecosystem that goes with it. So I think net-net, this is a positive for tech. And I think the

reason that the markets are responding the way that they are is because of the uncertainty around it and what it means. And NVIDIA, I know they're in their quiet period, but it seems like people want to hear more from them than their statement that they put out today. Pat, where does it open up opportunity? I know you got some software names that you're going to share with us, but also I wonder about the hyperscalers themselves, because they're all designing their own AI chips that they've put out there with the idea being, hey, you can run some things more efficiently with us. Is this going to cause customers to be more open to that efficiency argument and not just

automatically say, give me as much NVIDIA as I can eat? I don't care what it costs. Yeah, so on the software and SaaS side, the Adobe's, Microsoft's, Salesforce's, SAP ServiceNow, I think are all going to do well there. When it comes to the AWS's and the Azure's and Google Cloud folks like that, their homegrown chips are even more important because although they can do training, they primarily have been used to do inference. And that's exactly the breakthrough that we saw here.

And if you look back five years ago, there was a lot of investment into training for machine learning. And then it shifted to inference. It went from 90-10 to 10-90. Here we are in generative AI. It's about 90-10. We will likely see a shift like we saw previously with ML to where the action is inference. This is where we've seen NVIDIA put a lot of effort into education where they're saying, hey, we're really good at training, but we're really good at inference too.

And they do have a point because the low latency, the experience that you need to deliver on the inference side is a lot more complex than it was five years ago. And you do need more silicon to do that. You know, we've been talking about it for a while. You just touched on it. And it's this idea that application and implementation of AI is going to be deflationary. The pricing piece of this, where DeepSeek specifically is involved, what it's offering into the marketplace and what it's charging to do so, I think perhaps maybe perpetuates the deflationary nature of this even further. That, I guess, remains to be seen. But just going back to the House speaker's comments, I have to think that regulators are going to be circulating around

this. If you think there were national security implications tied the data to TikTok, this is going to raise even bigger questions. So it also raises the question, where does a deep-seek or a Chinese AI startup actually fit in the broader ecosystem and landscape? And how is that going to shake out not only along country lines, but also along industry lines. Yeah, so if nothing else, what the Deep Seek reasoning model did is show the power of open source. And it also showed that how if people are constrained on resources, developers just get more creative. I think what this should send to the administration is a sense that you may think you're able to cut off and reduce access to leading edge GPUs, and you think you know

what the end result is. But I think DeepSeek has shown that that approach is very much incorrect. And I do think that the latest restrictions that were set up by the final days in the Biden administration will probably be overcome because people are going to realize that it's almost impossible to restrict trade of something that's very small. And even if they do restrict it, they will likely find a creative way around it. Pat Moorhead, thank you for joining us. Great to have you today. Thanks. After the break, the ripple effects of an AI reset.

We're going to talk to JP Morgan's global chairman of investment banking about how deal flow and money flow could shift following DeepSeek's emergence. And yeah, later, NVIDIA bulls are licking their wounds today, but the pain is even greater for investors in leveraged ETS tied to NVIDIA's performance. We'll look at that part of the fallout ahead on Overtime. Welcome back to Overtime. The emergence of China's deep-seek AI model has brought up big questions about the enormous amount of money being allocated to AI. Joining us now is Jennifer Nason. She is J.P. Morgan's global chairman of

investment banking, joins us here on set. And it's always great to have you. Welcome back. Great to be here. Thank you for having me. So I am going to start there because you run investment banking at J.P. Morgan. You have a particularly expert purview on the tech sector. And one of the conversations we've had on the show in the past couple of years is how much money is going toward AI investments and how companies are gaming this out. So when you hear about the innovation of DeepSeek, what does that do to change the narrative, if anything? So I'm not sure yet, but I will say it felt like DeepSeek got thrown on the table this morning and nobody had ever heard of them before. Whereas there's been a conversation, certainly in the Valley and amongst the tech industry, about DeepSeek for a while.

So I do think it's a name that just suddenly got into the zeitgeist today. And we'll actually have to do a little bit of work I think to figure out what the what this all means but I personally think moments like this where we see step function changes in how AI is evolving is ultimately good for all of us and certainly if we can make it cheaper that's going to accelerate innovation but I wouldn't I wouldn't go thinking that NVIDIA is somehow no longer relevant to this story. So I think everybody needs to take a breath. Does AI still continue to fuel the deal-making pipeline here? Or is that expanding out, especially with the Trump administration now?

No, I think it's core to everything we're going to be doing in technology going forward. And I've heard comments today about things like we're hitting data walls or suddenly this is all getting commoditised. I think that is not likely the case. There's so much innovation going on at the data level, at the algorithm level and at the hardware level with chips. So, you know, I'm not even sure we're at the first inning. We may be just picking up the bat and getting ready to swing. So I think there's a lot of positioning for a lot of

companies and it's not clear where the money is going to be made ultimately. What is this pie going to look like and who's going to get what slice I think is still to be determined. And I've been around long enough where rollout of the internet, rollout of mobile, it wasn't clear early on where the money was going to be made, but we know now how the pie got shared. Well, speaking of, Jennifer, maybe you can help me out with perspective on this. You entered, I believe, J.P. Morgan's TMT business about 25 years ago, just as the dot-com wave was cresting, but also something else happening was the rise of open source.

And open source shifted where the value was in the enterprise ecosystem pretty dramatically. How much potential do you see for something similar to happen here with deep seek in AI? How's that going to affect the way things are valued? Yeah. So Chinese open source, I think, may be in its own category. But the debate around open source versus closed systems has been around as long as we've had software. And I can I can give you arguments on both sides of that equation. I think if you're Microsoft or you're Google and you're investing billions and billions of dollars in building out the infrastructure. I think open source might be a little scary here, but it's clearly the best way

to foster innovation and to have transparency in how these models actually work because there's a lot of value judgments in these models. It's not like a calculator. It's making a lot of value judgments in how it assesses and analyzes data. We're still near all-time highs now for the S&P, despite today's downdraft. We've been talking a lot about animal spirits. What are you seeing in terms of M&A activity this year with Trump at the helm, in terms of IPO pipeline finally starting to open? So I'm always optimistic when I come on, Morgan, and I'm as

optimistic as I've ever been. 2024 was a great year for deal activity, for IPOs and for M&A. Tech a little bit behind. We need to see more tech IPOs coming to market, and we're hopeful we'll see that in 2025. But the mood is good. There's euphoria in many places around what the Trump administration might bring. Nervousness around interest rates, clearly a big looming issue. But the mood is good. And we're certainly gearing up for this to be potentially a record-breaking year for investment banking activity generally.

Very quickly, you're getting ready to retire from J.P. Morgan, 40 years in investment banking. You've seen these types of cycles before, I take it? I have, and they're exciting and you have to buckle in and you have to be prepared for days like we had today. But there's a lot to be optimistic about, particularly in the U.S. and particularly in the U.S. tech sector. Jennifer Nason, it's a pleasure to have you here on set. Thanks for joining us today. Well, it's time now for a CNBC News update with Kate Rooney. Kate. Hey there, John. A top Trump-appointed prosecutor opened an internal review of the Justice Department's January 6th riot cases, sources tell The Wall Street Journal, the acting U.S. attorney Ed Martin asked prosecutors today to turn over files, documents and notes and other information related to those cases. The Justice Department has yet to comment, but it does come a week after President Trump pardoned the January 6th defendants.

Israeli Prime Minister, meanwhile, Benjamin Netanyahu, is planning to travel to Washington next week for a meeting with President Trump at the White House. Sources tell Axios it's a gesture from Trump for agreeing to the Gaza ceasefire deal. Should that visit happen, Netanyahu would be the first world leader to meet with Trump since he returned to the White House. And NATO deployed its first coordinated response to the Baltic Sea after another deep sea cable was damaged between Sweden and Latvia. The incident is the latest in a string of alleged deep sea attacks in that region. Western officials have said Russia is behind the attacks, allegations that Russia has denied. Guys, back over to you. OK, thanks. Up

next, where investors looked for shelter from the storm in today's tech wreck. And if safety trades are back in fashion, we'll be right back. Welcome back. Volatility surging. The Nasdaq getting crushed today as AI related names tanked. Well, Mike Santoli returns with a look at where investors looked for safety. Mike. Yeah, Morgan, traditional places, there was a bid in treasuries. In fact, the broader stock market probably would have had it a lot worse if you did not see treasury yields coming down. This is the 10 year yield. Interesting. We came right down to this point where people might say that's the little uptrend line from the fall as we got that yield shock. People thought about

a hawkish pivot from the Fed and all the rest of it just came down onto it. So we haven't broken down yet. We do have the Fed meeting this week. A lot to be said about which direction this goes. But it was definitely supportive of broader risk assets outside of tech. Take a look, too, at lower volatility S&P 500 stocks relative to the more aggressive jumpy ones in the high beta ETF. That's SPHB pretty much kind of crossing each other here in terms of one year performance. Now, just for, you know, kind of putting names on it, SPLV, Top Holdings, Coca-Cola, Berkshire Hathaway, Procter & Gamble, Colgate-Palmolive, SPHB, High Beta. It's basically Palantir, Supermicro, Broadcom, obviously some of the more aggressive, growthy and expensive names. So you're seeing essentially a little more of an even playing field

after the aggressive parts of the market had outperformed for most of last year and even into the latter part in December as well. All right. Mike Santoli, thanks. Well, Apple, real bright spot today as it avoided AI competition questions raised by China's deep seek. It was up 3%. But up next, we'll look at why a different kind of competition in China could be a concern facing Apple when it reports earnings this week. Plus, retail investors chasing the AI trade through leveraged ETFs. That got absolutely crushed today.

We've got those details later on Overtime. Welcome back to Overtime. Big tech is facing big AI competition from China. That's the reality that brought the NASDAQ down today, and it's going to be a big theme in Apple's earnings this week. In today's China Lens, our Eunice Yun brings Overtime a closer look at how the smartphone matchups look to the consumer in Beijing. Behind me is one of Apple's first stores in China. The company's been facing a lot of competition these days, like those guys. Huawei has become

Apple's biggest rival in China, despite, and maybe because of, Washington's clampdown on the Chinese tech giant on national security grounds. As a Chinese, I definitely consider Chinese brands first, this man says. It's a matter of national pride. Huawei has a reputation among Chinese for having technology on par with Apple, including a very competitive camera, which is an important feature for many Chinese. All the Chinese brands have been upping their game with better features and technology. And the perception is they're narrowing the gap. There isn't much difference among all the phone brands anymore, he says.

There's a myriad of models, foldable, super thin, professional lens, screens that double as a tablet, all appealing to Chinese consumers who are constantly on the hunt for something new. Brands like Xiaomi, Oppo, Honor and Vivo are moving into higher price levels, typically Apple's domain. Historically, Vivo is known to be a cheaper brand, but look at these prices. The bestseller is over $800. But the iPhone still has its army of loyal fans. Apple holds roughly one-sixth of the market here. The big ARMY OF LOYAL FANS. APPLE HOLDS ROUGHLY ONE-SIXTH OF THE MARKET HERE. THE BIG THING TO WATCH IS A.I. SERVICES.

APPLES COMPETITION IS ALL IN ON A.I. TODAY, XIAOMI'S A.I. CAN EDIT OUT STRANGERS FROM PHOTOS. WITH A SCRIBBLE, HONORS CAN MOVE ITEMS SEARCHED ON ONE APP TO BUY ON ANOTHER. AND HUAWEI'S HELPS YOU SHARE FILES WITH A FLICK OF YOUR HAND. one app to buy on another. And Huawei's hopes to share files with a flick of your hand. Well, most of the time. The AI may not be a draw for Chinese consumers today, but looks to be a point of competition in China's refashioned phone landscape.

Yunus joins us at a crazy hour there in China. Yunus, great stuff. You showed us some smartphone AI features there that are a bit ahead of what we see in a lot of phones here, and maybe it hasn't quite caught on yet, but what's your sense of how much investment is going on in that and maybe even how much buzz around DeepSeek's impact over here? Well, there's a lot of investment going into AI, but as you pointed out,

from an everyday user perspective, a lot of these features aren't really driving people to various phones. But of course, the competition is fierce. Companies want to have an AI solution. And then that does pose a problem for Apple because Apple intelligence isn't here. But there's a big belief that if Apple doesn't come up with some sort of solution, get through an arduous regulatory process, that could be a problem for Apple down the road. Eunice Yoon with great on the ground reporting. Thank you for being with us. Up next, an exclusive interview with a man that could be the next CEO of U.S. Steel if activist Ancora gets its way. And if you thought NVIDIA's drop was severe today, the pain for leveraged NVIDIA ETFs, much worse. We're going to look at the rise of these products ahead on Overtime.

Welcome back. Steal yourself. We've got an earnings alert on Nucor, the steel company just reporting earnings of $1.22 per share, nearly doubling the estimate of $0.65 a share. Revenue also came in above estimates at $7.08 billion versus expectations of $6.76. You can see it was higher, but now it's about flat. All right. Well, we're going to stick with steel. U.S. Steel finishing in the red today after the latest twist in its deal-making drama. Shareholder and activist investor Ancora releasing a letter to the board announcing it has nominated a majority slate of nine candidates, is calling

for the company to abandon its blocked and currently being challenged in court merger with Nippon Steel, and is seeking the ouster of CEO David Burrett. For the CEO role, Ancora is putting forward Alan Kestenbaum, who most recently ran Stelco, which was sold to Cleveland Cliffs last year. Now, U.S. Steel responding to Ancora, saying in part, quote, we remain confident that our partnership with Nippon Steel is the best deal for American steel, American jobs, American communities, and American supply chains. Also adding that, quote, it's also concerned about the motivations behind these nominations, given Ancora's and Alan Kestenbaum's recent dealings with failed bitter Cleveland Cliffs.

Well, joining me exclusively is Alan Kestenbaum, former Stelco CEO and chairman and Ancora's nominee to be the new head of U.S. Steel. It's great to have you here on set. Welcome. Thank you so much for having me. So there's a lot to dig into, but the first thing I want to start with is the fact that what's being put forward by Ancora and what you're proposing to do as their nominee for CEO is to turn U.S. Steel around and to do so as a publicly traded standalone company that does not need to be acquired by somebody else. How do you do that, especially when everybody, including U.S. Steel, is saying there needs to be some sort of acquisition because there needs to be some sort of infusion of capital to update the plants. Yeah. Well, let me start by saying the Nippon deal is dead. It's been killed. President Biden killed it.

The folks in the Trump administration have spoken out against it for a very, very long time. So, you know, the notion that the Nippon deal is an option is gone. So now what's left is you have a company run by a CEO. CEO has done a very very poor job in running the company and it kind of breaks my heart because I've been growing I grew up in the steel industry and I actually know that I could take this company and actually restore it to its greatness. And I came up with this acronym, MUSCA, Make U.S. Steel Great Again. And why I'm the person to do it and how I'm going to do it, it's very simple. I bought Stelco from U.S. Steel.

It was in the exact same condition. Very, very low morale, very poor earnings, high cost of production. And I bought that company in 2017 from them. At the time, it was just losing money. They lost $1.4 billion in that investment. I bought it for $53 million from them. Four months later, I took it public for a valuation of $1.7 billion. I then made and returned to shareholders $2 billion. I put a billion into CapEx, and I made it the lowest-cost steel producer in North America. And so when you ask me about what I can do with these plants, Dave Byrd has said he's going to shut these plants down.

Well, first of all, he's just shooting from the hip, because if you shut those plants down, you also need to shut the mines down. And the mines are one of the most valuable assets that the company has. So it's just a sort of irresponsible statement that he made. And my plan would be to do exactly what I did at Stelco and to rebuild those plants, particularly the ones he talked about. Mont Valley and Gary have the opportunity to be even lower cost than Stelco. So I can take those plans, make them very, very profitable, turn them around from where they are today with some very similar techniques as I did at Stelco. You mentioned the Nippon deal is dead. It's not actually dead. I mean, it was it was hung at CFIUS. And then President Biden at the time

decided it was the deciding vote and basically blocked the deal. But Sifius has since extended the implementation of that block by six months. So this can go through a court process. So we still need to if they decide to, they still need to proceed through through that channel. We've heard from U.S. Steel. We just read it at the beginning of this. And there have even been some analysts that have raised this. And that is questions about dealings with Cleveland Cliffs and whether you're, quote, unquote, doing the bidding, essentially, of Cleveland Cliffs in this process, which we know has put offers forward and is still very interested in buying U.S. Steel. Your response? Yes. Well, first of all, let me respond to the first point. The deal actually is dead. The court process that is being pursued, there is no

precedent of any court process prevailing in such a situation. So the fact that they decided to start a lawsuit does not make the deal not dead. The deal is dead. There's no basis for the lawsuit. To say that the president didn't have the authority when he clearly did have the authority is not really a lawsuit. So I expect they're going to lose the lawsuit in terms of cleveland cliffs i have nothing to do with cleveland cliffs i'm an independent businessman i just sold my business to cleveland cliffs and i love the steel industry and i have a tremendous track record as i mentioned before in turning around steel companies not just stelco before that was globe specialty metals i turned around which was also left for a dead and so to me, looking at the storied history of this company and thinking about the employees I encountered at Stelco and at Globe who were depressed and thinking they're going to be out of jobs.

And then you read their own CEO, their own boss telling them they're going to be out of jobs when actually you can go fix the company and make it super profitable. That's what drives me. I have nothing to do with cliffs. This is what I want to do. And this is what I plan to do, which is to keep it as a standalone public company and make it successful. So you have been in steel for a while. And so I do want to get just take a step back, a more macro question about what we're seeing in the steel industry right now. And that is the fact that you have President Trump now on the helm. We know he wants to continue to spur U.S. manufacturing. He's talked up things like coal, including at Davos last week, on the one hand. On the other hand, the possibility, the growing possibility of more

tariffs in this particular case on Mexico and Canada as soon as this weekend. Your outlook for steel? My outlook for steel actually is positive because of Donald Trump. So he imposed tariffs in 2017. Biden continued those tariffs. And most of the steel companies actually became very, very successful. Speak about Nucor, Steel Dynamics, Cliffs. Who hasn't been successful? U.S. Steel. So despite a great macro environment, the only company that couldn't turn themselves

around is U.S. Steel. And so I'm very optimistic about the steel industry. I think he's going to continue these measures to give the steel companies and the steel industry time to recover. And when I get that seat of CEO of U.S. Steel, I'm going to be able to take advantage of those environments. Alan Kestenbaum, great to have you on set. Thanks for joining me. Thank you so much. Well, up next, risky business. Why the rise of leveraged ETFs in AI trades like NVIDIA cost retail investors a pretty penny today. Be right back.

Welcome back to Overtime. NVIDIA shares plunging nearly 17 percent today, shutting roughly $600 billion in market cap. That's the largest single-day market cap loss in history. And investors who own leveraged NVIDIA ETFs saw even larger losses. Kate Rooney has the details. Kate? Hi, John. Yes, there was some real short-term pain during this NVIDIA sell-off is being felt by those who had been trading the stock through these leveraged ETFs. So these single-stock ETFs have seen an explosion in popularity since 2022 when they were approved by regulators. This chart from Strategas shows that boom over the past couple of years.

They offer double the upside. So that's great, of course, when NVIDIA is leading the markets, but double the downside as well. Not so great on a day like today. There's about $18 billion in these types of semiconductor ETFs alone. That's according to FactSet. There's also a growing list of these NVIDIA long ETFs. So today, NVIDIA down about 17%. These ETFs, these two times long ETFs, were down closer to 34%. So tickers like NVDL, NVD. There's other volatile names out there.

Think of Tesla and MicroStrategy. They've also seen a wave of these riskier ETFs and products out there. The ownership here, it's largely retail, so less than 10% institutional ownership in these names. And there's a lot of demand coming from overseas. Today, likely a wake-up call for those chasing some momentum through these ETFs, as Todd Sonover, strategist, told me, you must read the label on how these things work and the risks involved. Doubling your money sounds great in theory, but when an event like this occurs, it can be detrimental to your wallet and your psyche, guys. Kate, I think worth noting, these came out mid-July of 2022. That was near the bottom in a bad year. So these leveraged ETFs, single stock ETFs,

haven't really stood the test, at least retail investors haven't, of a bad market. No, you're right about the cycle there, too. And if you look at sort of the short ETFs, be the inverse, they're not nearly as popular because this has been up until now a really successful trade. Again, it's very short term. This doesn't tend to be sort of a long term investor here, but there are people out there that likely made money on this. NVIDIA was the big winner. And today is sort of when the music stops. And you do learn those types of lessons. As you mentioned, though, the timing, I think, of when those launched is key. And there's also fees associated. So as Todd Stone said,

buyer beware. You got to read the labels here. Kate Rooney, thank you. Mixed day, big tech route. We get more earnings this week. We also get a Fed decision. And in a little while here, probably a Treasury secretary. Yeah. Watching video for the bounce. That's going to do it for us here at Overtime.