Power Lunch - Dow drops, S&P 500 slides for fifth day in big market reversal 02/26/25

Episode Date: February 26, 2025

Stocks are giving up their earlier gains, putting the S&P 500 on pace for a fifth straight day of losses as uncertainty around President Trump’s trade policy heightened worries on Wall Street.While Nvidia shares are rising ahead of its earnings report after the closing bell today. We’ll tell you all that you need to know about markets and your money. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I'm Kelly Evans, and we're seeing a big midday reversal here in the markets. We'll talk about why, speculate, see if we can figure out which of the recent events might have been contributing. We were trying to break a four-day losing stretch for the S&P and the NASDAQ, but we're not looking that way right now. We're at pretty much session lows with the Dow down 288 points, two-thirds of a percent. The S&P down 18 points, third of a percent right now. Even the NASDAQ has tipped lower. What's interesting about that, InVIDIA, was one of the best stocks in the market earlier. And it's still up about 2% ahead of its earnings after the bell.

We'll circle back to that. And let's look at a few names which have been caught up in this momentum selloff as they were looking to maybe bring that to an end. But App Lovin, one of the hottest stocks last year, up 700%, down 13% now today. And 35% since the start of last week. It comes as a couple of short sellers release reports on the company. On the other hand, we have AXon Enterprise, a security company, which makes the taser. It lost 30% of its value in the five trading days. up until now, but the stock rallying back up 16% on better than expected results.

Also, keep an eye on Philip Morris. It is quietly rising to an all-time high dating back to its spinoff from Altria back in 2008. Barclay's noting this morning, we are in the early innings of a generational shift towards nicotine investing. We'll have more on that trend later on. Let's start, though, with the first cabinet meeting of the second Trump administration, with a special appearance by Elon Musk, warning America will go bankrupt without spending cuts. Aymann Javers has more from the White House.

And Aman, not sure if it was some of the uncertainty around tariffs that's contributing to the sell-off this afternoon, but plenty of headlines. Yeah, there was a lot of talk about tariffs in this cabinet meeting, Kelly. President Trump says he's made up his mind for tariffs on the European Union, which he said he'll be announcing soon and which will generally be 25%. That seems to be in line with what he was talking about in terms of reciprocal tariffs with other countries around the world. We'll see if we can get some more clarity from the White House on that.

He was also sharply critical of Europeans for not accepting, as he said, American cars and farm products. And he expressed hostility to the European Union itself. European Union's been, it was formed in order to screw the United States. I mean, let's be honest. The European Union was formed in order to screw the United States. That's the purpose of it. And they've done a good job of it, but now I'm president. So part of what the president might be upset about is that the EU currently places a 10%

and tariff on American cars sold into Europe. Average European tariffs on American agricultural products vary. They've been as high as 25% on some products in recent years, although those numbers move around, negotiation and negotiation. But speaking of trade, the Senate voted 56 to 43 to confirm Jameson Greer as the next U.S. Trade Representative. Remember, Greer was the chief of staff to Robert Lightheiser in the Office of the U.S.T.R. in the last Trump administration, Kelly.

So some more Trump trade personnel coming on board. here, even as this talk of tariffs is swirling around the White House. It seems the fact that he said, you know, tariffs day after April fools, that, you know, I look at, I think the market is seizing on that to some extent. Yeah. So there's a couple things going on. There's two different deadlines here, and that's part of the confusion. One deadline is March 4th.

That's for the Canada and Mexico tariffs. Remember, he announced those tariffs, put them on pause for 30 days. That 30-day period comes up on March 4th. The second set of deadlines is this April 1st slash April 1st. second deadline, which he's been talking about for reciprocal tariffs, that's for the entire rest of planet Earth. So that negotiation is ongoing. Every single country is obviously calling the White House and asking to be exempted from those

tariffs or working on some kind of offering that they might give to get themselves out of it. All of that is a very much moving target, but you've got these two different sets of deadlines, which is sort of conflated in that cabinet meeting, one for Canada and Mexico on March the fourth and the other for the rest of the world reciprocal tariffs, which is April 2nd. But do you find it, am I, am I, you know, reporting it correctly, Amon that he said the tariffs on imports to Mexico and Canada would take effect on April 2nd now? He did say that.

I'm not, we have to see if that's a slip of the tongue. Right. If he was conflating in his own mind, those two different deadlines which are happening, that's what we know of those two deadlines. We'll get some more clarity from the White House on whether that was an official policy extension by the president or whether that was just a conflation, you know, sort of apples and oranges and bananas as you're talking all in one sentence, right?

I mean, I think some of this is confusing, even if you're the guy setting all these deadlines. Because remember, he's proposed these tariffs and they put them on pause in different sets of tariffs for different sets of time. So it gets confusing. Indeed. And I think the market just heard tariffs going forward and the details they'll wait for, but they're now going to maybe price that in more. Appreciate it for now. Amon, thanks. Amon Javis at the White House. Now, meantime investors are awaiting the most anticipated report of the whole earnings season just a couple hours from now. In Video, of course, whose shares are higher after yesterday's declines.

They're still up about 2.5%. The street expecting another beaten raise, potentially a positive spin on that deep seek breakthrough and all of that. For more, we have Christina Partsenevelas here on set with me, along with D.A. Davidson's Gil Luria. Welcome to you both. Christina, there's revenues, there's earnings, there's gross margins to look at. There's going to be his comments with John Fort later as well. And we just heard from Andy Jassy last hour who basically reiterated that they have huge. huge demand for NVIDIA chips, and he said, basically, if we had more, we could do more.

So what are you telling me? You're telling me that the fundamental story is intact for NVIDIA, but the problem is you look at the stock, and people have been on the sidelines for the past eight months. You raised gross margins are coming down. We know that. Management already warned. U.S. restrictions are a big overhang for guidance, and I think that's why you've seen, especially by side estimates. They've come down for the first time in two years to fall in line with consensus. So the big number would be guidance at $42 billion. That's what we're expecting. But you raised gross margins, U.S. exports, the air pocket going from the old iteration of the hopper chip or architect to the new stuff, the Blackwell, and then the Blackwell Ultra, and then eventually the Rubens. They're always going to have this transition period, too. But overall, demand is still intact. I just think that there's questions more about CAPEX monetization. Show me the money. Like, you know, you can't keep spending, and when do we hit this peak? And I think Gil probably knows that.

is demand, you know, inexhaustible or not. What do you think, Gil? I mean, the market now is kind of saying maybe they feel better about this than they did a day ago. Well, I think Christina's spot on in her analysis. And how I would say it is, what they're going to report,

this quarter is going to be fantastic. The fourth quarter spent from the hypers and the other large customers for Nvidia was a big jump up. And so this quarter is great and likely that the first quarter of the fiscal year, they're already in the books in terms of what the hyperscalers and other large customers are going to do. It's the other things Christina talked about that investors are concerned about.

What kind of sanctions are going to have on China? What did Jensen Wan promise President Trump when he visited the White House? How is Blackwell going to translate to gross margins over the next few quarters? And then finally, what Christina brought up, which is really the biggest overhang is, when are we going to see enough usage of AI to justify this massive buildout that we've had? And if we don't see it this year, are we really going to build out as much next year? That's the biggest overhang. And some of these questions are not questions that the company is going to answer today on the call.

Well, they can't answer some of them. You know, we talk about how consumers are using it, the enterprise, whether these, Gil, maybe that's one quick fault for you. What do you hear from the community? Can you get to the frontier now with less compute or no? Well, in terms of the training, the pre-training, what we've learned is that you can't really scale to the moon. There's diminishing returns for the clusters.

I think initially a year ago, we probably believe that we're going to train on 100,000 GPUs and then a million GPUs and then 10 million GPUs, and we're going to get correspondingly better models. That is very clear that that's not the case, that the advancements in these models will be more incremental and will have little to do with the size of the cluster they're being trained on. So a big source of the excitement about the ramp of data centers has gone away. And then when you start talking about the models getting smaller and smaller and more efficient, that means that demand is going to have to rise a lot faster to require more

compute. And interestingly, a very important point that may have gotten missed in the deep sea conversations is when the models get small enough, they're not even going to be hosted in a data center. They're going to be hosted on a device, on an Apple device, on a PC, where there's not any Nvidia chips. So these are the type of things we're thinking about in terms of going, especially going into next year in the year after that. And it's why we're watching stocks, Christina, like, Verdev and those who are all part of this like gold rush, right? So it's going to be for that trade important, maybe what Invidia says tonight, or maybe not. I mean, they might be unique in terms of where they sit. Well, to Gil's point, then, if there's a peak for hardware,

Nvidia is going to say, hey, we're still focusing on DJX cloud. We have our cloud offerings, our software offerings, the run rate is going to increase for software. They're going to bring up robots, humanoids, all of these other avenues that may not affect the near term, but that's going to be their argument. In terms of just your question about compute, think of GROC 3, right? Elon Musk went from, they were originally going to use 100,000. GPUs and then they doubled it to 200,000. Really? Yeah.

So that was a big surprise when it first came out. So the necessary compute, the chips, the hardware is still needed in the short term, but I do believe it's going to be commoditized. And I say this because you, you pay for your monthly subscription, right? We, it goes back and forth, but I will say this. I guess I pay for GROC because of baby paying for Twitter or something, but that model with the 200,000, that model is definitely better than some of the others that are out. But not by that much, right?

And so the reason why I bring it up is that they're commoditized. that they're commoditized, but the underlying foundation of all of them is still NVIDIA. And there's been no other comparison. You could say, oh, the ASIC chips or these specifically programmed chips would fall into place, AMD so far behind, Gowdy 3 from Intel so far behind. But Nvidia still has that stronghold as well as Kuda, which would be the programmable language for developers' use.

Which is now people say kind of becoming more and more ingrained. Gill, quickly, I mean, not that you cover avertive, but what would you say to investors who are wondering if this is a chance to look at, and Broadcoms down almost 20% from its highs. We will continue to build data centers. Let's not forget, we were growing data center buildout even before AI because we need them for cloud storage. So we will always be building data centers for storage.

And in fact, the over buildout that we've had over the last couple of years for AI will not go to waste even if there aren't great applications for AI because the hyperscales will turn around and use those for storage. So for the other data center providers, it may be a little bit less of a concern. If you're making liquid cooling, there's a company called Modin that makes liquid cooling. Blackwell runs hot. If you don't cool it enough, it'll melt the wires. So if you're making liquid cooling for data centers, that's going to ramp up over the next few years,

regardless of how Nvidia does. And on that note, just circling back to Amazon, we just heard from the CEO. He seemed to indicate the demand for Nvidia and for all of this is still strong. rolling out their own new, souped up Alexa AI. What do you think about it? Well, Amazon just guided, again, they reported a very high level of CAPEX for the fourth quarter, and then they said, we're going to keep this level for the next four quarters. So year-over-year, that's going to be up, but they're actually going to moderate spend going

forward. They're not going to raise CAPEX at the same rate. Microsoft made a similar statement. Their fourth-quarter CAPEX was very high, but it's going to remain the same for the first than the second quarter. So this rate of buildout is very fast. They're expanding very quickly, but the rate of growth should moderate going forward

as they support these very important applications they're introducing, including Alexa Plus. All right. You've still got a 280 price target. So significant upside ahead, potentially. We'll see what the next few hours bring. Gil thanks. Christina thanks as well.

Gil Luria and our Christina Parts in Evelas. And after those earnings, don't miss a live CNBC special report tonight. John Ford will be speaking with NVIDIA, CEO Jensen, in Wong following their earnings, and that begins at 7 p.m. Eastern. Lots more to come on power lunch, but first, crypto declines are continuing as Bitcoin falls below 85,000 today. That massive ether hack, along with theft claims in Argentina, sending chills throughout the industry.

Our dreams of a U.S. Bitcoin Reserve, just that. It's next. Welcome back. Two scandals are cracking, to some extent, crypto's foundation this week. A big hack in Dubai and an alleged scam in Argentina, shaking some optimist. throughout the industry and Bitcoin prices are below 85,000 today. Let's bring in McKenzie Sigalos with more. There's a lot going on here, McKenzie, but this Ethereum issue is being blamed for some of the weakness we saw in crypto earlier in the week. Yeah, it certainly is. And this past week has been a stark reminder that no amount of pro-crypto policy, even from a U.S. president, can protect the industry from perhaps its biggest weakness, security flaws in the

technology itself. The largest crypto hack in history just hit Dubai-based exchange, By-Bet, $1.5 billion stolen. North Korea's Lazarus Group is the prime suspect using a sophisticated laundering scheme to move those funds. Now, Bybit is offering bounties to anyone who can help recover the stolen assets. They're literally crowdsourcing a digital manhunt,

paying millions to individuals and companies that can track and freeze the stolen tokens. And this isn't the only turmoil in crypto. You've got world leaders who are now pushing meme coins. President Trump, First Lady Melania, and Argentina's president, President Javier Malay have all been tied to viral token launches.

Trump's meme coins skyrocketed to a $14.5 billion market cap in a day. Now it's crashed over 80%. Melania's token is down 93% from its peak. And then in Argentina, the president promoted a token called Libra, claiming that it would help the economy. Then it collapsed, wiping out $4.6 billion in value. He's now facing a fraud investigation and calls for impeachment. And Kelly, markets are feeling the fallout.

In the last week, you've got Bitcoin. And Ethereum both down 10%. And there's been over $2 billion in Bitcoin ETF outflows. Half of that just yesterday. Are people in the crypto space connecting that to some of these issues? You mentioned, like what happened with Ethereum or some of these other things? Or does it just seem to be a risk-off mood? I think it's a combination of both.

So the hack specifically targeted ether tokens. And then you've got the NASDAQ 100 that's down, and Bitcoin still very much trades like a high-risk tech stock. Right, exactly. And we're seeing that today, you know, to the upside and to the down. McKenzie, thanks. McKenzie Segalos. Let's stick with crypto and breakdown with these recent events might mean, excuse me, for the industry at large. Joining us now is investment firm Crucible Capitals,

Melton Demers, and cybersecurity firm Trusted Sex, David Kennedy. Welcome to you both. Meltem, I'll start with you. How would you explain what happened to Ether? Yeah, so look, I think overall, if we look at what's happened with Bitcoin, Bitcoin is 70% of crypto's market cap. So it is by and far the largest asset, just in terms of mine, in terms of liquidity. What we saw Bitcoin teleported from 70K to 100K around Trump's election inauguration. We never really got prices in the 75 to 90K range. We're seeing prices fall off and we're retesting that range. The ETF inflows and Michael Saylor's strategy buying Bitcoin propped up to bid for Bitcoin throughout Q4. Then we saw some retail fervor hedge funds buying

as we saw from 13F filings a few weeks ago. So I think it's really really, really just there was a massive bid for Bitcoin around expectations on a rally. That rally happened. Now we're seeing a retesting of this 85 to 90K range. And again, there's a lot of uncertainty. There's a lot of risk. Markets don't like uncertainty. Although, David, there are some blaming, you know, bad cold storage practices for leaving this ether vulnerable to this hack. Yeah, what's interesting about this hack specifically is it very much mirrors a breach that we know very well, solar winds a few years ago from Russian hackers where they were able to get access through social engineering methods, very similar to what happened here with North Korea and the Lazarus

group, get access to a developer's computer and then use that to upload code to the safe wallet infrastructure that then targeted the cold wallet infrastructure, which is supposed to be heavily more secure. It's considered offline, you know, much harder to hack into. And they did a lot of research, a lot of understanding around the exchanges, the infrastructure, how these types of, you know, public and private key cryptography components work, and we're able to really abuse that, showing that, you know, these are a major front of attack for these groups and, you know, one of the largest, the largest heist that we've seen in cryptocurrency attacks ever. Both of you seem to agree this is a North Korea problem as much as anything. So, David,

what do you do? Like, does a typical holder of things like Ethereum, Bitcoin, do they need to worry about ever being targeted? Well, I think you're seeing the attacks on cryptocurrencies, you know, continue to elevate. The Lazarus Group has been around for 15 years, and their focus has always been on cryptocurrency, and they're getting more and more sophisticated with what they're doing. They're spending longer understanding the technology, the code behind it, how they can abuse that. If you notice this attack went completely seamless. They waited for a trigger event to happen through Bybit on that cold wallet and then,

you know, farmed it out to over 6,000 different, you know, addresses to try to mask and hide it to make it very difficult to actually go and recover it. You know, very methodical, very repeatable, something that they're going to look at doing for other cryptocurrency exchanges as well and targeting other companies that have, you know, security built into these products and everything else. So it just goes to show you that, you know, it's a very rocky situation for cryptocurrency right now. And specifically this heist that was able to, you know, retrieve over a billion dollars. Melton, would Bitcoin ever be vulnerable to a similar issue? Sort of speaking of the moving it to cold storage and that kind of

thing where the North Koreans kind of pounced. And do you think that might make corporate America or even officials considering a strategic Bitcoin reserve thing twice? I think these are two separate issues, right? I think when it comes to investing in Bitcoin, so far, Bitcoin that has been secured by cold storage has stayed secure. Again, there are these new vulnerabilities that are merging all the time. I just want to reiterate, this is a North Korea issue. It will continue to be a North Korea issue. The Trump administration is smart on crypto. They view this not as a crypto issue, North Korea issue. There is always private key risk in crypto. It's just like any other sort of asset that trades on chain that settles with

finality, right, the moment you move it. It's going to be a honeypot. I think what we're seeing in the industry that does give me a lot of encouragement is industry actors are working together in 2003, in 2022. An incident like this probably would have been the end in Bybit of Bybit. In this instance, all of the crypto companies came together, security providers came together, people are tracking, doing forensic analytics, freezing funds. So there is coordination amongst crypto players, governments, and other actors in the space. to try to stop these funds from moving to recover as much as they can. So again, this is something that is just an inevitability of interacting with this new type of technology

and this asset that settles with finality. It is great properties that has downsides. But in my view, this doesn't in any way mitigate or less than the investment case for Bitcoin as an asset that's worth holding in a balanced portfolio. David, do you think Bitcoin is more secure? Well, I think, you know, all of the technologies that are being used for cryptocurrency are designed to be secure, right? And when you start implementing the human element of things where they can get access to developers that are helping secure that infrastructure, I think that's where you have

major risk and exposure. And Bitcoin's not impervious to that in any way, shape, or form. You know, I agree with the sense that, you know, there's a lot of investment, a lot of umph behind cryptocurrency right now. And I think that will continue to go. But it does bring into a pretty good light that there is a lot of exposure with this as well that are being heavily targeted by North Koreans, but also other actors in ransomware groups and things of that effect, leveraging it as some of their main methods for payments. It continues to be a problem all across the board, supporting ransomware groups for payments

and our own infrastructure in the United States when we receive a tax, as well as these nation states that are leveraging it for a big heist like we see today. Yeah, incredibly sophisticated. Appreciate the detail there, kind of discussing what happened. Thank you both today.

Appreciate it. Meltem, DeMere's Crucible, David Kennedy with trusted SEC. After the break, two tech heavyweights to facing off in a war of words. We have those details next. Welcome back. You know, it's not just in video. Salesforce also reports after the bell today.

With the stock about flat over the past 12 months, amid all these AI headwinds for software, it's negative on the year. And the company hasn't been able to ride the AI wave quite like some of its rivals. Microsoft is now rubbing some salt in the wound as well. Sima Modi here with the details on this growing feud we're seeing.

Hi, Seema. Really fascinating to watch, Kelly. Salesforce CEO, Mark Beniof is feuding with Microsoft as it pushes to make its agent force the dominant AI product over coprope Beniof recently calling Microsoft's co-pilot a repackaged chat GPT and Clippy 2.0. CEO Setonadella has been less willing to outright attack Salesforce as agent force, but did suggest on a recent podcast that software companies relying on agents will lose over time.

Now Microsoft's chief communications officer taking it a step further, writing on LinkedIn that Benioff has, quote, no idea what he's talking about. When Salesforce reports earnings tonight, Kelly, investors really want Claire. really want clarity on demand and the pace at which AI agents are growing. The latest channel checks from cities suggest heavy discounting to drive adoption. And, of course, whether the outspoken leader, Benioff, will use tonight's earnings call to bash its competitor again. So, Seema, I think the larger backdrop here is sort of it's less about, I mean, look, it's always fun to watch these two kind of have at it. But it's an open question right now. I mean, a lot of investors, on one side you have people.

who say there's no way they're going to like outright replace these software names. Software names are going to integrate AI to be more sticky with the customer than ever. And then there's others who just say, no, it's going to reinvent the way we do business. And we'll see. Listen, the stakes are high as you just highlighted. And I think the war of words between these two companies really highlights how competitive the artificial intelligence landscape is becoming. But also keep in mind that these two companies have history. They've competed when it comes to Salesforce's Slack, which competes with Microsoft. teams, even Salesforce's core customer relationship management software sort of competes with Microsoft's

365 dynamic. So this is something is sort of seen as the next era, right, on AI. And while co-pilot is different than Salesforce's Asian force, there still have the similar objective, which is to use this cutting edge technology to drive adoption and increase productivity. We'll see who can win in the race. And tonight what we hear from Benioff on how, how, how, how how receptive customers have been, that will be key to understanding what the future of this company's AI product really is. Yeah, to me, this is what makes Markets fun, figuring out who's going to figure it out. Seema, thanks. Appreciate it, Sima Modi. And don't miss Jim Kramer's exclusive sit down with Mark Benioff tonight after earnings.

You can catch that on Mad Money at 6 p.m. Eastern. Still to come, our next guest is the most cautious he's been on tech in over a decade. So he, like many, lately. Well, maybe not this name, but he is betting on this health. care name. The reveal is next. Welcome back to Power Lunch. I'm Leslie Picker with your CNBC News update. Agriculture Secretary Brooke Rollins announced today that the Trump administration will invest up to $1 billion to fight the spread of bird flu. Rollins added the investment includes increasing the country's

imports of eggs to increase supply and curb record high egg prices. According to the USDA, the bird flu outbreak has killed 166 million chickens since 2022. California governor Navi Newsom is ordering the state parole board to look into the public safety risk of freeing the Menendez brothers. That's according to a letter sent to the defense lawyer today. If parole were granted, it would be a step toward clemency for Eric and Lyle, who are currently serving life sentences for the 1989 murder of their parents. And New York City police say actress Michelle Tractenberg was found dead in her Manhattan apartment earlier today. Police say they do not suspect foul play. Trackenberg is best known for her roles in Buffy the Vampire Slayer Gossip Girl and the kids film Harriet the Spy.

She was just 39 years old. Very sad. So sad when I saw that. Leslie, I appreciate it. Awful. So tragic. Leslie Picker. Markets are off the lows we hit earlier this hour when the doubt was down about 300. We've actually come back significantly.

The NASDAX's back into positive territory. This uncertainty around tariffs that we heard from the cabinet meeting from the president could be one cause of the volatility. this afternoon. Here to discuss that and more. Jason Ware is CIO and head of research at Albion Financial. Jason, you hate tech stocks.

Welcome. Definitely not. Do not hate tech stocks, but I will say after over a decade of being quite overweight, I am much more sensible about what's possible in the coming years.

I don't know where these stocks are going to trade in the next few months, but as we look out over the next five and 10 years, you know, there's just no way they can continue to compound at the race that they have. It's just simple math. If you look at Google and Alphabet and Microsoft, you know, Amazon, et cetera,

they've been growing at over 20 percent per year. Just to give you an example, if Apple were to continue to do that over the next 10 years, it'd go from a $3.6 trillion market cap to almost a $30 trillion market cap. So we still like them. We still own them. Great businesses, just at smaller position sizes. What if the market caps don't change? What if it's just, you know, earnings and buybacks? I mean, well, actually, Apple's not a great example of that. But look, a lot of people look at the valuations and go, they're not even that steep. So I take your point about their sheer size, though. Yeah, and the valuations aren't steep. I mean, Mag 7 is trading at 39 times when you include Tesla. When you take Tesla out, which has 100 PE, it goes to about 29 times. So sub 30 PEs for companies that are

growing high teens, you know, a peg of about one and a half is not terrible. But again, I think we just need to be realistic about what's possible. So we have, we've right sized those positions, but we still own them and we still think you should own them. These are the best management teams, best businesses, wide modes, good balance sheets. No reason to sell them, but just be more realistic about, you know, the forward path. I didn't ever think we would see trillion dollar companies consistently. I just figured, you know, competition takes over at some point, you know, and yet it's the new normal. I mean, we had a guest last hour who was bullish on Amazon say they're going to do a trillion in revenues by 2028. Yeah, and we agree. You know, they're going to do 700 billion this year. That is something

that we absolutely see as well. And so these companies, they can double. I mean, Amazon can go to a $4 trillion market cap, you know, Apple and Nvidia, you know, they can be $6, $7, $8 trillion. I don't have any problem with that kind of thinking. In fact, that's our base case expectation. But again, as we think about the ability to, you know, be three, five, ten baggers, that's just where we get a little bit more cautious and we've been a little bit more realistic in how we want to size based on that. And there are lots of other opportunities in the marketplace where we can spread out that capital. Okay, but United Health. Don't tell me, you think that's a three, four, or a five bagger? I guess it depends on the time frame, right? But I will say it's a cheap stock. This is trading at 15 times forward earnings now. This was a quiet compounder for so long until about three months ago. Now it's been taking on water. There's no question. But the earnings profile, the earnings power of the company we think is not changed. What has changed is the stock is re-rated lower, is trading at a 25% discount to its own historical.

PEE, it's trading at a discount to the S&P by almost 10 turns. And anytime United Healthcare gets this oversold, unless there's a fundamental impairment on the earnings, we don't think there is. It's a stock to be bought, not sold. What do you think is going on in the market more broadly right now? This churn that we're seeing the collapse of the momentum names, you know, and weirdly, it's accompanying a collapse in interest rates. You know, you can easily make a story, oh, you know, rates are back up to five, and the momentum's coming out of back.

No, it's the opposite. You know, it's all kind of tilting underwater. Yeah, it's a keen observation, Kelly. And the way that we think about it is is that the drop in the 10-year yield is a reflection of kind of this growth scare that seems to be bubbling up, almost a vibe shift, if you will, in the markets where we went from tax cuts and deregulation and pro-business and animal spirits to this period where people are now pausing and rethinking that and wondering at the offsets of tariffs and Doge being perhaps heavy-handed in terms of cuts and job growth and those kind of things at the federal level, whether that might upset the apple. car. Our view is that that's not going to be the case, that earnings will come through this year. We're quite bullish on corporate earnings. We think the economy's okay. Inflation is benign. Yes, it's above that target. It's sticky. But we think the cocktail for stock prices to continue looks pretty good despite the volatility recently. It's not just health care. You like thermo. That's another one. But also, and this might catch some people by surprise based on your earlier

remarks. You like Nvidia. You like Salesforce. You like Uber. I mean, this, you like Broadcom. See, we still like tech, Kelly. Still big, still big, still big, fans of tech, but you just have to be, I think, a little more diversified and you have to pick your spots. Sales Force, you guys were just talking about it a moment ago. As I look at this, this is a sub 30 PE for a company that's going to continue to compound earnings at around 15%. They're the number one leader in CRM and cloud in that space, and they have agentic AI, which we're very bullish on over the next five and 10 years. You know, Broadcom, you're not sure whether you want semis or software. It's a great play because 40% of their business is in high value software.

Meanwhile, they're doing custom chips for AI, which we think is kind of the next wave, we get more to infer inference. And then, of course, InVIDIA, we're underway to Nvidia, but we still think it's one you have to own GPUs, still huge demand. We think Blackwell is going to be big this year, moving to Rubin. And then, of course, there's physical AI coming. So it's still a stock we want to have in the portfolio, just have a smaller size. Mystery man.

Jason, thanks so much for joining us. Appreciate it. As everyone's kind of reconsidering their portfolio, Jason Ware of Albion Financial. Let's get to Rick Santelli. Speaking of falling bond yields and some of these curve moves, Rick, that people aren't feeling too happy about? Well, you know, I think you have to start at the source. Tariff talk up, stocks down, yields down. Listen, what's going on in treasuries, it's not the proactive part of this trade. The proactive part of this trade is uncertainty in how it's

affecting stocks. And once again, especially on a day where green turns to red, and yes, maybe it's getting less red or NASDAQ's going up. But that type of volatility in the face of The way equity's been trading in the face of what the administration's been putting forth in the news with all that uncertainty, well, look at the S&P, the Dow and Tens. Pretty much it explains everything right there, especially the notion that as stocks go up on the right side you see there, look at yields or not. Because it needs to be a stock day where you start strong, you get stronger, and you need a couple of days of that to take this attention away from capital preservation turning into a safety. account trade in treasuries, especially the long end. Now, you mentioned the curves. If you look at three months to tens, it's inverting.

It's the most inverted, actually, a minus four should close here, since the second week in December. But what I want you to really notice is how that chart looks pretty much exactly like a 10-year chart, and it should, because that's really the force going on here. And if you look at twos and tens, pretty much the same chart as well, the flatest that just it just under 18 basis points since the 18th of December.

And I would look for more of this to continue because it's just one of those trades where it's a knee-jerk reaction. You now have just conditioned investors the more they see volatility in the negative side in equities, the more they're going to camp out in long-dated treasuries. And what's more? If you look at what's going on with the auctions this week, they've been spectacular. Yesterday was an A. Today was an A.

Why? Because investors are seriously wanting to own treasuries. Back to you. What a thought. Rick, thank you very much, Rick Santelli. Still ahead, going nuclear. Why the huge need for more electricity is leading to an energy renaissance of sorts. And as we had to break, take a quick look at shares of Solventum. This was a spinoff of 3M. reports hitting the market that Nelson Peltz is pushing the company to further simplify its business. That's good for a half percent pop in SOLV. We're back after this. Welcome back. Demand for electricity is soaring. It's literally growing by the second. And as folks look to cleaner sources, nuclear is seeing a major rebirth. But building large-scale reactors is costly. It's complicated. It can take years, if not decades. So what if it didn't have to? Diana Oleg is looking at that in her continuing series on climate startups. Hi, Diana. Hey, Kelly. Yeah, you know, we've talked a bit about small modular reactors with investments from big companies like Amazon. But building these and moving these and moving.

them on site is still expensive and can take many years. Well, some are now working to eliminate those hurdles by putting the reactors in the water. At this shipyard in the UK, a new method of building nuclear power plants is being developed. A startup, Blue Energy, is building modular power plants for modular reactors using the existing cranes, equipment, and workforce of the shipyard. CEO Jake Gerwit says it will dramatically reduce costs. cost and build time. Everything is prefabricated in centralized shipyards and then floated to operating locations close to the water.

We're taking a light water small modular reactor and putting it inside of an XL monopile, the same exhal monopiles that have been de-rested and commoditized by the offshore wind industry. The reactor is fully isolated from the rest of the onshore power plant. Putting it in the water, Gerwit says, adds an important barrier. The water introduces an infinite source of cooling and aircraft impact protection, so it's much more protected from extraneous events, such as aircraft impact, ship collisions, other sorts of extreme events like earthquakes that you have to consider when you're engineering a nuclear power plant. Others like Seaborg, core power, and last energy are working on similar systems. Blue Energy is working with a data center in Texas to provide nuclear energy by 2031. With success, what Blue Energy does is it unlocks an asset class for small modular nuclear reactor deployment.

And that asset class is going to have enormous top line growth heading into the 2030s and beyond. In addition to engine ventures, Blue Energy is backed by At One Ventures, Propelor Ventures, Tamarack Global, Angular Ventures and Starlight Ventures. Total funding so far, $51 million. While all of this sounds new, it's actually an old idea from the 1970s. That's when Westinghouse and Newport News Shipbuilding, we're looking at building nuclear plants at shipyards, particularly in Florida and then floating them up the East Coast to New Jersey. That that never materialized due to a combination of stagflation and cancellations of nuclear projects.

Kelly? New Jersey has a decent amount of nuclear power as it is. I think 40% of the grid or so. It's been a source of stability. Diana, thanks. Appreciate it, Diana Oleg. Let's take a look at shares of Broadcom bouncing 4% today as investors are a little optimistic ahead of those NVIDIA results while Tesla continues to fall. It's down for a fifth straight day, down 4% and below $300 a share for the first time since November.

Both of these companies, by the way, have also fallen out of the trillion dollar market cap club. Up next. We'll look at some more movers of the day. Three Stock Lunge is next. Welcome back. Let's do some three stock lunch, taking a look at three earnings movers today and how to trade them. Matt Maley is our trader. He's the chief market strategist at Miller Tayback. Matt, good to have you. We're actually going to start with Workday, which is higher by 6% nearly after beating estimates with 15% year-on-year revenue growth. What jumps out to you and do you like the stock? Well, you know something, Kelly, it was funny because I was a little worried about this one coming into their earnings because, you know, their subscriber growth has been slowing.

And, you know, this issue of the lack of increase of users was something I thought, you know, might really hit the stock even further. But the great news is that two things. Number one, they're increasing their margins. So that is obviously a good move. But the other thing I really like is that where they're looking to broaden out. I mean, they get 75% of their sales domestically, but they're looking to not only broaden those out here in the U.S. with small to mid-sized companies, but internationally as well.

So if they can grow that kind of, any kind of earnings growth from overseas, that that's going to be very bullish, especially because the stock is kind of fairly valid in the middle of its five-year range in terms of price earnings ratio. All right. You're looking to load up there. Then moving along to Instacart, this one is a super interesting story today. Down more than 11% after disappointing Q4 sales and weaker than expected revenue guidance. You know, we were just having this big discussion last hour with the launch of Amazon souped up Alexa Plus about the merits of that one relative to DoorDash and Uber for grocery and food delivery. No one mentioned Instacart. And of course, that's a problem. I mean, the other thing, too, is that I'm worried about is what's going on with the consumer.

I mean, we know it's, you know, there's a lot of talk about that, it's just really because of the weather. The weather's been bad to start off the year. But, you know, remember last summer where everybody was talking about credit card debt being so big. Well, now we're talking about something more. We're talking about credit card delinquency levels really shooting up and other consumer credit delinquency shooting up like auto loans. And so, you know, how much are people going to really pay for this kind of grocery and food kind of delivery is a concern for me? And so, you know, it's not, I love the concept, but they're talking about making it more affordable. Are they going to be able to do that and still maintain their margins?

So this is one I want to avoid and not buy on a dip. Yeah, still up 37 percent over the past year, but some tough competition ahead. Let's move along to lows, which is higher after fourth quarter at earnings beat this morning. And it said its sales slump should end in the year ahead. Impressively, this also comes after the shares rallied on Home Depot's results yesterday. Do you stick with lows here? You know, I do like lows on a long-term basis. I am a little worried near-term.

I mean, the reason why I like it, number one, is, you know, every time we get a hurricane or something, these stocks tend to do two better. And, of course, with the rebuilding of L.A., after those horrible fires, that should be helpful. Also, you have people that, you know, they don't want to go into, you know, their 3% mortgage, they don't want to go into a 7% mortgage. So instead of moving into a bigger house or a different house, they're going to do itself a home improvement. So that's really positive.

One concern I have, of course, is that the housing stocks haven't been getting beaten up lately. We saw last week housing starts worse than expected, new home sales, worse than expected than the same thing with existing home sales today. Actually, it was the new home sales today. But those stocks are very highly correlated with home depot and lows, so it does make me concerned. But longer term, I do like the stock, and I think that, you know, You don't necessarily want to chase it on this bounce, but it's okay to buy over time.

Yeah, and imagine if the tenure fell another point or so. Maybe they're sort of looking for that as well. Matt, thanks so much today. Appreciate it. Thanks, Kelly. Matt Maley with Miller Tayback. And be sure to listen and follow Power. Welcome back.

Last hour here is going to be interesting as we tip back towards session lows with the Dowdown $235 points, about a half percent, quarter percent for S&P and NASDAQ. A couple of companies to keep an eye on TJX, higher on strong. the holiday sales, shares up 2.5%. They had weaker than expected guidance for 2026. Mike Coe was a bit cautious on it yesterday, but again, they're shaking it off. And Budweiser parent AB InBev also jumping on a fourth court. These shares are up 7% now, despite seeing a drop in volumes year on year owing to weakness in China and Argentina. But again, a little bit of a turn of fortune here after the Bud Light issue. General Motors hire, and this is impressive,

given the tariff headwinds in the market today, 3.5% after raising its dividend and announcing a $6 billion share buyback. That dividend will now match forwards. And again, as mentioned, keep a close eye on all the news flow as markets digest the tariff talk into the close. Thanks for watching Power Lunch. Closing Bell starts right now.