Guy Adami: The Market Is Pricing In "Great Expectations"

CoreWeave

Across the shows: 91 speakers in other episodes, 27 bullish and 101 bearish calls, past 30 days

• Danny Moses · Moses VenturesBearish

  CoreWeave's model needs GPU prices to stay elevated for years, and its term-loan financing is fragile.

  Danny says the model only works if GPU rental prices stay elevated for more than seven years, and he thinks investors are assuming that without questioning it. Because longer-term debt is too expensive, CoreWeave is using shorter-term term loans and taking on the risk of refinancing. He calls this financial arbitrage and gymnastics, with Wall Street happy to extend credit lines so the company can stay alive. With around $35B of debt, he says he does not know what the company is worth.

  “I won't go through all of the metrics, but you have to assume that the price of GPUs is gonna remain elevated. Maybe it will for a prolonged period of time, more than seven years in order to make this model potentially work.”at 7:39

• Guy Adami · CNBCBearish

  CoreWeave's six-year GPU depreciation schedule is too long given how fast chips are becoming obsolete.

  Guy points out that CoreWeave depreciates its GPUs over six years. He admits he doesn't know whether the chips will hold their value, but he thinks the schedule should be much shorter given how quickly competition enters the space and how recent Nvidia news shows technology can make chips obsolete quickly. A shorter schedule would change the company's economics and reported earnings.

  “their depreciation schedule on these things is a six year depreciation schedule. [...] given this Nvidia news and how quickly competition comes into the space, I don't think they should be depreciating on a [shorter] schedule”at 8:14

NVIDIA

Across the shows: 105 speakers in other episodes, 87 bullish and 58 bearish calls, past 30 days

• Guy Adami · CNBCBearish

  Nvidia's 76% margins won't last; margin declines have historically signaled investors should exit.

  Guy has been arguing against Nvidia for most of the rally. Its roughly 76% gross margins are unlikely to continue indefinitely. Historically, when margins start to decline is when investors should get out of these stocks. Some argue this time is different because of Nvidia's leadership role and moat, but he thinks margins are the key warning sign.

  “they're enjoying 76% margins. That won't continue in perpetuity. Historically, when margins start to decline is when you want to get out of these stocks and run for the hills.”at 16:51

• Danny Moses · Moses VenturesBearish

  Nvidia's gross margins will eventually fall below 50% as chip replacement cycles shorten; trust is in question.

  Danny argues that gross margins will inevitably come down once chips become commodity-like with shorter replacement cycles of six months or a year. He says the market has seen this happen in semiconductors before and that margins then drop below 50%. The timing is the question, not whether it happens. He also says the stock reflects that the company's complexion is changing, with a trust factor after the scandal and China sales questions, so the Jensen premium is coming off.

  “at some point, the gross margins inevitably come down. [...] when you do get to that six month replacement cycle or one year, which we've seen happen in semiconductors are commodities, we know where the gross margins go below 50%.”at 18:49

VanEck Semiconductor ETF

Across the shows: 9 speakers in other episodes, 2 bullish and 9 bearish calls, past 30 days

• Guy Adami · CNBCBearish

  Semiconductor leadership topped in June and some chip names are cut in half, cracking the AI trade.

  Guy points to the SMH chart showing semiconductors topped in mid-June, before the recent Nvidia news. These stocks were the drivers of the broader market, so their peak matters. He says some memory and chip names have been cut in half or more, which makes him wonder whether the foundation of the AI trade is starting to crack and what that means for the broader market.

  “you look at the semiconductors, for example, Danny, Amanda could pull up an SMH chart. These topped out in the middle of June. And these were the drivers of the broader market.”at 5:41

Anthropic

Across the shows: 113 speakers in other episodes, 154 bullish and 90 bearish calls, past 30 days

• Danny Moses · Moses VenturesBearish

  Anthropic's IPO valuation looks stretched given slowing revenue growth, token price pressure and circular financing.

  Danny argues the market is still valuing Anthropic on revenue growth even though that growth is slowing. Run-rate revenue went from about $71B annualized in October to about $81B, but the rate of growth is falling. Anthropic depends on token prices, which he says are getting crushed, and it competes with OpenAI. The last private round was about $900B pre-money, so an IPO near $1.4-1.5T implies a large step-up. Hedging on the IPO is also a concern: about $26B would come from already committed hyperscaler and chipmaker capital in a circular arrangement, and insiders are selling roughly $250M each in the offering. Danny concludes the stock will struggle to trade up given the capital Anthropic will need over time.

  “So it's amazing to me guy that we're still valuing things on revenue growth, which is fine except revenue growth is actually slowing for anthropic. They're dependent on token prices. We know those are getting crushed.”at 11:09

iShares 20+ Year Treasury Bond ETF

Across the shows: 4 speakers in other episodes, 3 bullish and 1 bearish calls, past 30 days

• Guy Adami · CNBCBearish

  The recent bond rally is an oversold bounce; yields are likely to resume climbing, pressuring TLT.

  Guy flagged a reversal in October when ten-year yields traded above 5.3% and then closed lower, which he took as a warning sign. He views the bond rally since then as a bounce off an oversold condition rather than a change in trend. He doesn't think anything fundamental has changed, so he expects yields to resume climbing, which would weigh on long-duration bond prices.

  “I think this was a bounce in the bond market off an oversold condition that's just going to start to find itself getting back on its [course] in terms of yields going higher.”at 25:23

Tidewater

Across the shows: 1 speaker in other episodes, 1 bullish and 0 bearish calls, past 30 days

• Danny Moses · Moses VenturesBullish

  Tidewater is cheap with strong cash flow and recent results support the stock following through.

  Tidewater services the rigs with vessels for tugging platforms in and out, and Danny calls it an incredible cash-flow business. The stock has fallen sharply with oil, but it is now cheap and reported great numbers the day before. He notes the stock is following through a bit higher, which supports his view that energy names with strong cash flow are attractive on weakness.

  “But incredible cash flow company. I mean, look at that chart, what it's done. Cheap as you can be, great numbers yesterday, stocks following through a little bit today.”at 27:43

Energy Select Sector SPDR Fund

Across the shows: 1 speaker in other episodes, 1 bullish and 0 bearish calls, past 30 days

• Guy Adami · CNBCBullish

  Energy trade still in play; XLE's drawdown is smaller than crude's and integrateds are printing money.

  XLE is down roughly 10% from its all-time high, which is not commensurate with the drawdown in crude oil. That gap suggests the energy trade is still in play. Large-cap integrated oil companies are printing money, and Guy argues they are entitled to that. Energy is a boom-and-bust sector, and it is currently in a boom.

  “If you look at the XLE, [...] it is not commensurate with the drawdown we've seen in the crude market, which suggests to me that the energy trade is still in play here.”at 28:41

VanEck Gold Miners ETF

Across the shows: 2 speakers in other episodes, 3 bullish and 0 bearish calls, past 30 days

• Danny Moses · Moses VenturesBullish

  Gold miners in GDX are a buy on weakness; he holds a full position and will let it play out.

  Danny says the miners had been acting better than gold over the prior week, then got hit as the sector fell. The GDX chart is holding a pattern he is watching. He is still a buyer of gold on weakness and has a pretty full position, which he plans to let play out over time.

  “I'm still a buyer of gold guy on weakness. I have a pretty full position here. Just gotta let it play out over time, but GDX”at 30:20

US rates & the Fed

• Danny Moses:

  Crisis-era Fed and Treasury bailout programs could be revived if the AI trade falters.

  Danny's note reviews the 2008 and COVID-era Fed and Treasury programs and argues they moved risk from private balance sheets to the public's. The US now has over $40 trillion in debt and the Fed still holds about $6.7 trillion of assets. He argues that if the AI trade goes south, given how important it is to the economy, Wall Street, private equity, utilities and municipalities, policymakers would likely bring that playbook back. He says many of the programs made money even though he doesn't agree with them.

  “all we did was transfer the risk from private balance sheets to the public's balance sheet.”at 20:45

• Danny Moses · Moses Ventures

  Higher two-year yields and Fed hikes raise the cost of capital, a big drag on the economy and growth.

  A December Fed hike now looks nearly certain, and a 50bp move has only about a 13% probability. Since the election the stock market has been flat, but yields have risen, especially the two-year. Danny says the Treasury has been issuing a lot of short-term paper instead of longer-term debt, so short rates are moving in sync with the front end. He calls this rising cost of capital massive for the economy and growth, something investors have to reckon with.

  “the one thing that hasn't... That has changed since the election, the stock market might be flat, but yields are higher, especially the two year yields are higher. And so, again, that's something you have to reckon with, and that's cost of capital, and that's massive”at 23:18

Gold & precious metals

• Danny Moses · Moses Ventures

  Gold will have its day as the Fed eventually stops and prints money; he is buying gold on weakness.

  Danny thinks gold is caught between the Fed's tightening and concern about the health of the global fiat system. He believes the Fed will eventually stop and print money because that is what it will have to do, and gold will then have its day. Central banks are still buying gold and sovereigns are pledging it, which supports the case. He is a buyer on weakness.

  “I'm a big believer that at some point the Fed stops and they're gonna go print money because I think that's what they're gonna have to do eventually, and gold's gonna have its day.”at 29:42

• Guy Adami · CNBC

  Central bank gold buying has not abated and supports gold despite hawkish Fed headwinds.

  Central banks bought about 300 tons of gold last quarter, which annualizes to about 1,200 tons, the upper end of the range seen over the last five years. Central bank buying has held up through the period of rate pressure. Guy acknowledges the headwinds a hawkish Fed creates, but he believes circumstances may force the Fed to change course, a point he says nobody is discussing.

  “central banks bought 300 tons of gold. [...] 1,200 tons is sort of the upper end of the range we've seen over the last five years or so. So I bring that up because the central bank buying has not abated.”at 30:29

US stock market outlook

• Danny Moses · Moses Ventures

  Market leadership rotating to staples and a slowing economy argue for a hedged bearish tilt.

  Danny says the leadership that drove the market is leaving, and when consumer staples start to lead the rally it raises the question of what the appropriate market valuation is and how a slowing economy will be affected. Inflation is still running hot and may be peaking, but he questions why it would come down. He says he would tilt bearish on overall market valuation, while admitting that valuation is not a great timing tool.

  “I'll tilt to the bearish side of things just from evaluation overall in the market, which never tends to be a great source to how to judge the market.”at 3:33

US growth & recession risk

• Guy Adami · CNBC

  Much of recent US GDP growth rides on the AI build-out; an AI slowdown would hurt GDP.

  Guy argues the US economy has historically been driven by consumer spending, such as travel and dining. Recently, though, a large part of GDP growth has come from the AI trade and the build-out around it. Kevin Walsh has made a similar point. If that trade structurally slows, GDP growth and the Fed's posture, which seems locked into hikes, both become vulnerable.

  “a large part of this GDP growth is on the back of what you just talked about. This whole AI trade and the build out around it, which is fine.”at 22:09

US deficit & government debt

• Danny Moses · Moses Ventures

  Debt and deficit problems will have to be dealt with, and the market isn't pricing them in.

  Danny says there is a debt ceiling issue coming in less than two months that nobody is talking about. Beyond that, the debt and deficit have to be dealt with eventually, and he doesn't think the market is pricing that in at all. Each time the problem is set aside, it does not go away.

  “These are things that are gonna have to be dealt with and I don't think that that's being priced in in any capacity into this market.”at 24:15

Oil & fuels

• Danny Moses · Moses Ventures

  Energy stocks are a buy on weakness; oil-driven selloffs offer entry even if crude falls below $80.

  Danny says that barring a recession, energy still seems like a place to trade even if oil falls below $80. He argues energy stocks get whacked when oil drops sharply for a day or two, sometimes falling 20% when crude falls 5-7%, and that is when he buys. He doesn't try to predict the commodity itself.

  “energy to me still seems to be a place to trade even if oil comes down below $80 [...] Energy seems to be a place that I'm a buyer on weakness guy”at 27:52