Mad Money 10/14/26 | Audio Only

My mission is simple, to make you money. I'm here to level the playing field for all investors. There's always a bull market somewhere, and I promise to help you find it. Mad Money starts now. Hey, I'm Kramer. Welcome to Mad Money. Welcome to Cra America. Other people make friends. I'm just trying to save you some money. My job is not just to entertain, but put this whole thing in some context. So call me 1800743 CBC. Tweet me at Jim Kramer. So last night try to start writing my talk for tomorrow's CBC Investing Club meeting. Anyone who's a member of the club knows how seriously I am about these meetings. I try to get everything on the table, the good and the bad, including snippets of my current feelings about all the positions we own in the travel trust. In other words, it's a big deal for us and for all club members, especially the ones we answer the questions from. Right now though, I want to explain how hard it is how hard it is to run this club in this mean and nasty environment. >> So in a day when the Dow lost 49 points, yes, we tumbled 1.1% and the NASDAQ plunged 1.88%. >> House of pain. >> Believe me, it was much worse in the early afternoon. Let me talk about what why and what got made me styy and how I ultimately gave up writing after about 4 hours and just said, "You know what? I better wait until tonight to plan my thoughts. There's too much at stake. There are too many variables and last night was way too far away from tomorrow for me to speak with any certainty and I don't like that. Let me tell you what I was up against in trying to make sense of this market last night. First, I and this morning, frankly, I knew that I'd have to wait have to deal with that consumer price index number that has been blown up by fuel costs and are now infiltrating the entire economy. Would people accept a hot CPI reading knowing that it's man-made and could be rolled back instantly if this war with Iran comes to an end? Sure enough, at 8:30 this morning, the number comes in and it was a little hotter than expected. Interest rates immediately flew up. But then, oddly, they worked their way down over time, even as the rate of inflation rose 6% from August to September. that is incrementally worse in a tightening atmosphere where the Fed's looking at the impact of its quarter point rate he hike so far. We can't tell whether it's really made a difference yet. Maybe you got to do more. Normally, I think that there should have been no recovery in the bonds here. That number was bad. If I g my talk today at noon, I would have said, you know what, I don't know where rates are going to go up, but they were going to go up plenty. But they didn't. They went down. Was it oil? No. No. This is still one more day where oil went higher. Was it that the inflation number wasn't as bad as we thought? Impossible. It was a It was a bad number, especially when coupled with a strong possibility of a hot producer price index reading tomorrow, which will restart the debate about how many rate hikes we're going to hear about. Might as well tell you about it for this year next. This CPI reading says that one hike, not enough. But of course, I haven't seen the PPI yet. Maybe it'll surprise me. There's just no way I can write a speech about the market and our stocks ahead of a PPI number when it might force the Fed to raise rates at its next meeting, which is October 28th. No. You know what I think happened? I think there was a flight to safety going on because we are now beginning to question if all these newer NeoClouds, these companies you see all the time on the tape, have enough money to keep building data centers. Maybe they're going to run out. Rates went down, I think, because some managers are frightened about how poorly the bonds and these neoclouds trade. And I'm talking about the companies that might have started up as Bitcoin managers or just companies that put out a shingle saying we can build you a data center. Now, in some ways, it's even trickier. For example, think about the decision tree here for the Fed. If the Fed raises rates again off some too hot numbers like the CPI we got this morning, that will show how determined Kevin Marsh is, the Fed chief, to stop inflation. But it could also really slow business. That could lower the cost of living, but there's a strong chance it'll also throw a bunch of people out of work. Unfortunately, if the Fed does nothing, I think it's actually possible that the 30-year Treasury, currently at 5.5%, goes to 6%, increasing the cost of housing, among other goods. Right now, housing is the worst part of the economy. The worst. And there are a whole host of other industries that would get crushed if that 30-year went above six. You'd like to think that someone in the food chain of price increases would eat the rising cost. But it looks like most of these increases are being borne by you, the consumer, right? Heck won't stop that process. Ultimately, this is all about oil. So only ending the war can fix it. Which brings me to still another variable. The Fed has tightened once. What if it tightens again and then the war conundrum solved? Right now, I believe that every well with oil is running full out. Every refinery is running at nearly 100% of capacity. I think oil prices could plummet should peace break out. Plummet. I think oil could be cut in half even more. The Fed would have tightened for nothing. The stock market rally would be huge. Will the big sellers of goods roll back their price increases though? Some will. Those who uh work at Walmart, Costco, Amazon, they know they got to do that. But I'm not sure about others. They certainly don't want to cut the prices. The last time we had a big spike of inflation, only those three are really the keepers of our sanity. Either way, if we can give peace a chance, inflation will come that hard. But we have no idea if or when that might happen. So, we're stuck in this limbo. I wish I could tell you what will happen in the war. But unlike so many other confrontations, it's not clear what victory would even look like. Are we going to fight the hoodies with Saudi Arabia? Are we going to fight them for Saudi Arabia? Oil suddenly become the focus of Russia's war with Ukraine. Will we keep backing the Ukrainians or is the White House about to back Russia instead? Does the president know something good about Putin he's just not sharing? Or do we just need the royal? Can we speed up Starling, please, in Ukraine? Tell me. Too many variables. Then there's the banks. That's the ones we've seen so far in earning season. What the heck? We're seeing some really nasty reactions to some very, very good quarters. Never a good sign. Bank of America reports a hoam quarters. Init stock initially sheds $4. Neither City or Wells Fargo can find their footing. Morgan Sting reports a decent quarter. It drops seven bucks. That's just lunacy. Suddenly all the charts now have head and shoulders patterns. the worst in the book and they well let's just say they could go down much further. That's what you'd be expecting if the numbers were bad though. But the numbers weren't bad. In some cases they're pretty darn good. Right now that doesn't seem to matter. The bank stocks are going down regardless. More on that later. But that's bad too. How about that? I'll talk about this later too. But it is safe to say that the free fall in core. Yes, NeoCloud is freaking people out. It's a big company, a lot of debt. It's a data center operator with so much debt, some of which has now become distress debt that it's dragging down the whole group and maybe the entire market. It's so ugly. Corweave CEO Michael Intrader says his employee told his employees that he blames the stocks more than 15% decline on the market acting irrationally. Hold it just a second. Good to know. But markets can stay irrational for longer than you can stay solvent. Not reassuring. Won't tech earnings save us? They have in the past. Nevertheless, ASML, the gigantic Dutch semiconductor capital equipment maker, reported a terrific quarter this morning. Talked about rising demand, much better than expected. When I got up this morning, the European stock was up a couple of points. I thought it might counter still one more day bad day for the Korean the Cosby, the Korean index that I've been talking about, the nightly SKH, the winch pin of AI Harbor was down about five when it came out. I thought ASML might be able to counteract it. Wrong. Instead, SKH fell another force. So ASML reversed and ended UP GETTING CLOBBERED. THOSE EARNINGS WERE FABULOUS. GOT CLOBBERED IN FABULOUS EARNINGS. The only stocks that rallied of any size, the ones that work in a serious recession where costs come down, but the consumer still has money to spend. Food, drug, think Proctor and Gamble. Wow. Market leader Colgate. That's not the kind of leadership you want though. You buy those stocks when you think the economy is in big trouble. Is it? Which brings me to the bottom line. If you have a market that can change the stripes usually every day, it becomes very hard to have what? Conviction. You just want to throw things away and go home. Sell sell. That's happened time and again since the do peak in 2000. Throw them away and go home. If you do though, let me ask you something. Will you be able to buy them back in time for those 10 glorious days of the year when all the gains are made? I don't think so. I say stay in the game. Watch my club tomorrow noon. It won't be soothing. It will tax everything I have learned in the last 45 years on Wall Street. It might even be fun, but only if you like macob humor. How about we go to Kevin in Missouri? Kevin, >> how you doing, Jim? Long time listener here. >> Good to have you on the show, Kevin. >> Thank you. Um, I've got a question around Walmart. So, I bought in at 111. Um, and I it it took a dip for a while and it's kind of bounced around a little bit. At what point should I should I get rid of it? >> Walmart? Get rid of it? You better hope it goes down a couple of smackers so you can buy more of it. You kidding me? You're not getting rid of Walmart. Walmart is the winner in this environment. Get rid of almost any other stock other than Walmart. Hey, you know, keep Costco if you got Costco. But no, don't sell Walmart. Walmart is perfect for this environment. Even though it has a 40 times earnings, I think these guys are dri Let's get Ferner on the show, the CEO. Hey John, I know you're a watcher. Come on the show. Let's go to Ryan in Pennsylvania. Ryan, >> hey Jim, this is just Ryan in Allentown, PA. How are you? I love Hey, I go to my Allentown Costco. You ever been to that Costco there? >> I just took my three-month-old the other day for his first time. >> CLEAN AS A WHISTLE. I TOLD MY WIFE I'D EAT SAMPLES OFF THE FLOOR THERE. She said, "WHY WOULD YOU WANT THEM off the floor? Why don't you take them from the tray?" She has a point. Let's go to work. >> Hey, Jim. So, uh I just want to thank you for all the education you've given me uh through your new book and I'm reading Get Rich Carefully as I'm home on paternity leave. Um two questions for you. The first one is with all the help you've given me, how are you going to help your Eagles turn this season around? >> Well, I can only I look, I don't work Sunday, so I can do some coaching and I'm not even worried about that. I know the place. I can actually run an offense pretty darn well. I can just run the ball right every single time. Or I can come up with something clever and I would do the D I would I would do the ladder. But I don't know. I'm looking at fans from commanders. I'm looking at some Chiefs. Whatever. Let's go to work. What's the other >> Jim second? Uh uh my question is on Tesla. Is it a buy, sell or hold at this point? >> All right. This is a great question. I I am a huge believer in in uh SpaceX. Uh that therefore makes me believer in Tesla because it makes too much sense for Elon Musk not to buy Tesla. But I've got to I do like SpaceX more. And this decline in SpaceX may be a gift. You're going to have to buy it slowly in pyramid style. But it's what will work in this market when the smoke clears. Right now we are in the smoke shop. All right. It can be tempting to just throw everything away in a market. I know that's what you probably think like let's turn that guy off. That screaming guy, the bald fat guy. Beat the fat stuff. By the way, please stay if it's worthwhile on man money tonight. Like I mentioned earlier, the banks reported solid quarters. But the stocks are telling a different story. I'm going to dive into the numbers and why this stuff can happen. And as software stocks are rebounding, investors are getting a reminder of what companies have always been working well. I'm sitting down with one that I like so much that I can't believe I didn't buy it, but I bet you I'm going to get another chance. And it's work day. And while the software stocks rebound, it's hardware's turn to get slammed by AI worries. I'm explaining how you can stay ahead of the imbalance. So stay in the market and stay with Kramer. >> Don't miss a second of Mad Money. Follow Jim Kramer on X. Have a question? Tweet Kramer #madmentions. Send Jim an email to madmoney@cnbc.com or give us a call at 1800743 CNNBC. Miss something, head to madmoney.cnbc.com. Yesterday, earnings season went into full swing when we started hearing from the major banks. Wells Fargo, JP Morgan, Goldman Sachs, and Cityroup. Then today, we got Bank of America, Morgan Stanley. So, now that we've gotten results from all six of the major banks, I want to walk you through what they're saying, starting with the big money centers because they are often a precursor to the entire earning season. Before we get into specifics though, you need to remember that the big banks have not been trading well. They limped into this earning season very unusual. They've been coming in hot. As of Monday night's close, every single one of them was lagging the S&P 500 for the year. And that is a recent development because the group sold off hard late last month. The banks have not been reacting well to the rising interest rates. And we know that the last few weeks of some of their businesses have not been good. In theory, higher long rates let them make more money, right? They get to charge more interest and they usually don't pay you much for your deposits. You ever see your deposit go up in this environment? But when rates sore, that slams the brakes in the economy, which translates into less demand for loans. At the same time, the investment banking business has been crimped by the slowdown in IPOs and the surprising girth of M&A transactions. Still, with the bank stocks trading so poorly ahead of earnings, I hope the expectations were so low that we could get some positive surprises. To some extent, that's exactly what happened, but it wasn't enough to prevent most of these stocks from really rolling over. Rather incredible because all in all, these were good numbers. Let's go through the big money center. Starting with Wells Fargo, which we own for the travel trust when Wells reported yesterday morning. I have to tell you the delivered revenue miss, but it was paired with a 2centent earnings beat off a $185 basis. That gave them 13% earnings growth. That's nice growth for a bank. Their net interest income came in a tad light as did their non-interest income. Could have been worse, though. We also net interest margin, what they make off the difference between the interest they pay you for deposits and the interest they charge you for loans, actually stabilized and came in slightly higher than expected. That's a really good sign. I've been waiting for this to happen. These guys had missed the net margin estimates for nine of the past 10 quarters. They said this number would stabilize and that's what they delivered. I thought that was very positive. What else? Well saw some good numbers from it small but growing investment banking division. They're taking share in equity capital markets although their trading business took a hit and their wealth management unit came up a bit short. That's it. Wells continues to perform well on the cost control front. Its efficiency ratio which is it's that's cost divided by revenues came in at 63% down from 65% a year ago. Keep in mind with the efficiency ratio, lower is better. Charlie Sharp, the CEO, has really cut the headcount here. Uh, this bank is running very well. In the end, though, the stock still dropped 3% yesterday because, you know, sure it did stabilize today, but tough for Wall Street to forgive that revenue miss, but I think we're getting a viable pullback here, which is why we just upgraded Wells Fargo for the charitable trust. We do rank each stock. If you remember, you'd know that. CEO Sharp emphasized that his bank is set up to do much better in a higher interest rate environment. And given his track record, I have no choice. I believe him. I've known this man for ages. Next up, let's talk JP Morgan, which had an ugly set of headline numbers. Clear top and bottom line miss. Even though their net interest income came in higher than expected, their non-interest income disappointed. There's so many line items these banks thanks to a big miss in fixed income trading. Also a miss in their asset management business that surprised me. On top of that, their non-interest expenses rose faster than their revenue, hence the big earning shortfall. Now, initially, the stock reacted exactly to that and it dropped in pre-market trading, but it began to firm up once the conference call. This very much of a conference call stock started going. There were two big takeaways from the call. First, JP Morgan offered a positive outlook from net interest income in both the current quarter and in 2027. That was shocking, shockingly positive. And let's regard that as the single most important metric. Second, CEO Jamie Diamond didn't hit us with his usual dose of doom and gloom. For once, the confl wasn't a minefield. It was a beautiful thing. I felt great after it. So, after the call, the stock was trading much better. JP Morgan actually opened up more than 5% yes, $5 yesterday before quickly pulling back and finishing the session down just.9% a loss that was totally erased with today's bounce. Overall, the quarter wasn't much of a needle mover for the world's largest bank. The results mixed, but investors seem to get over it quickly once they heard that more positive commentary on the conference call. Even if the if the present is not so hot for JP Morgan, the intermediate term future is looking bright. That one's a winner. The third and final money center to report yesterday was City Group, which has been rallying like crazy for the last 3 years. Thanks to the incredible turnaround orchestrated by CEO Jane Frasier, universally liked. Unlike Wells or JP Morgan, City posted a clean top model beat with earnings up 27% year-over-year. even when you exclude a major onetime item from last year's numbers. Now, at first looked like another workmanlike quarter from the ever improving city that interest income exceeded expectations, but non-interest income missed in part because of softest investment banking. Overall though, this was city's best third quarter revenue result in a decade. And the company also raises fourear net interest income guidance from the 5 to 6% range up to the mid to high 6% range. By the way, this was the only bank to beat expectations with their fixed income trading business. Seemed good to me. But after opening flattish yesterday and then briefly trading higher, the stock took a turn for the worse, ultimately finishing the session down 5.6%. Stock was cascading down a lot of times. It made it was woring the group. They got hit again down 1.8%. Now, honestly, I cannot give you a good reason for that to climb. While the quarter wasn't perfect, it was quite a bit better than cheap Wales. My suspicion is City stock was punished for its recent outperformance. For yesterday's beatd down, it was running circles around the rest of the group. But if you believe in the turnaround, as I do, this is a buying opportunity. Finally, this morning, really odd. We heard from Bank of America right after the Treasury Department hit them with a $1.2 billion fine last night for allegedly violating anti-moneylaundering laws. They had they did a settlement. And you know what? The quarter didn't know. Bank of America posted a clear top and bottom line miss with earnings down 13% year-over-year. Even if you exclude that regulatory penalty, the numbers, they disappointed. Both that interest income and non-interest income missed expectations. Bank of America's investment banking business saw its fees fall 11%. Sales and trading down 5%. Fixed income currencies and commodities trading down 17%. Just not a good quarter. Influential Wells Fargo banks analyst Mike Mayo called Bank of America's capital markets results easily worst in class. That was mean. Bank of America management stressed at its core main street banking business is performing well. I agree with that. Posit up 2% average loans and lease up 6% growth across every business segment. Unfortunately, those arguments fell in deaf ears between the fine last night and that which really was ugly to do with the same day as earnings. Lukewarm numbers from this morning. They were not happy and the stock tumbled nearly 5% today. Now look, it's not all bad news. This stock traded as low as $49.25 before finishing at $51.30. That was down $2.57. The recovery was quite strong. The bottom line, so far, this has been a rough earning season for the big money center banks. Even the ones that did well saw their stocks get hit. That's very odd, very rare, very bad. Stick around after the break. I'm going to get into the major investment bank. Coming up, Kramer's moving on to recap the major investment bank earnings and the reaction to them next. Okay, before the break, I'll walk you through the four earnings reports from the major nationwide banks. Those are known as the money centers. It's Wells Fargo, JP Morgan, City Group, and Bank of America. But of the six big banks, the other two are known as investment banks, Goldman Sachs and Morgan Stanley. They're less focused on traditional retail and commercial banking activity, much more liver to the capital markets activity as well as asset and wealth management. We saw with the money centers that investment banking divisions have struggled. So, how about Goldman? How about Morgan Stanley? Let's take them in chronological order. Yesterday morning, Goldman Sachs reported, "This is a stock we own for the capital have for ages and it pulled back dramatically after it last quarter in July, sinking from $1,154 at its high to just under $894 before it reported. able to slow down in M&A and the IPO market and the whispers about weaker trading activity in the third quarter which turned out to be true basically for all the west the Wall Street banks. I was still optimistic that Goldman put up could put up strong numbers. I told you that and I thought it could reignite some enthusiasm for it stock. I was half right. Goldman did put up some excellent numbers. They put in a monster top and bottom line beat 18.68 billion in revenue. Wall Street was only looking for 16.71 billion and nearly $4 per share uh that beat off of a $13 basis. I mean, we're talking 23% revenue growth, 39% earnings growth. In terms of revenue, this was Goldman's second best quarter ever behind only the previous quarter when they made a fortune leading the SpaceX deal. Goldman store global banking and markets division had a terrific quarter. Revenue up 32% year-over-year. Investment banking fees were up 21%. Equities revenue surged 72% year-over-year. The only disappointment was fixed income currencies and commodities trading known as FIC, which was roughly flat year-over-year coming in a couple hundred million dollars short of expectations. Like I mentioned before the break, fixed income currencies and commodities were a problem for everyone this quarter. Now, I did think there'd be enough trading and hedging to pull off an upside price for Goldman didn't happen. Goldman's smaller asset and wealth management division, the one that I worked at, also posted strong results with a 14% revenue growth year-over-year, nicely ahead of expectations. Well, this is only 27% of the business is much steadier than the investment banking side, which is insanely volatile. Even though that business had tremendous 32% growth year-over-year, it was still down 13% from the previous quarter. But see, again, because of the SpaceX IPO, but asset and wealth management has nice and stable growth. It was up 10% from the previous quarter. Expenses didn't seem to be a problem at all. Goldman's efficiency ratio was 59.4% when analysts expected something closer to 65%. Please remember, lower is better when it comes to that. that helped fuel the massive earnings and on the consequent match sounded incredibly positive with CEO David Solomon dedicating much of his prepared remarks to the importance of AI specifically all the financing opportunities Goldman seeing from the AI infrastructure buildout CFO Dennis Coleman added that Goldman's quote investment banking backlog remains very robust end quote which was good to hear with all the worries about the slowdown and IPOs mergers so this was a great quarter at first that's how the stock reacted it open up more than 3% yesterday but ultimately like champion Morgan Goldman couldn't hold into the gains stock ended yesterday down that shocked me 2%. Then it fell another 1.5% today. For me, this is straightforward. I think the market's dead wrong and that's why my charitable trust upgraded Goldman Sachs to a one yesterday. That is a two. Basically a buy and we said we'd be happily be buyers at this level. However, when a company reports the strong numbers and the stock gets slammed anyway, that tells you there are a lot of skeptics out there. They think the boom times are over. I do not agree, but that's the market's verdict at least for the moment. Almost every time since Goldman came public, my charitable trust has bought stocks on dips exactly like this when nothing changed. I'm going do it again. Finally, there's Morgan Stan, which dipped 1.8% yesterday in sympathy with the other banks and then tumbled another 2.8% today after it reported. Now, this was a case where the numbers were good, but not good enough to help the stock. Morgan Stanley's revenue grew 12% year-over-year and beat expectations. The institutional security segment, which is what they call investment banking, combined with sales and trading, put up 18% revenue growth. That's well above expectations. As with Goldman, equities trading was strong. All right, fixed income. I told you missed expectations. Morgan Stanley's mainly a wealth and asset manager these days and a real good one. Their wealth management revenue grew 10% coming in ahead of expectations. And while investment management fell 12%, it still was slightly ahead of what Wall Street was looking for. Across wealth and investment management, total client assets grew to $10.5 trillion. In a terrific interview with CNBC's Leslie Picker today, Morgan Stanley CEO Ted Pic also told us that he's quote cautiously optimistic about the fourth quarter. End quote. And I certainly hope so. They're the lead underwriter for the anthropic IPO that's supposed to come in November. Could be the largest deal in history. But again, apparently none of that was good enough to get buyers excited. So the stock rolled over today. Now, in the end, I think investors are on the edge in this earning season. It's just much harder for these banks to make a good impression after these past two days. Five of the big banks are lower. JP Morgan only up fractionally. Every other bank stock fell somewhere between two and 7%. Three of them are now negative for the year, including Goldman, which just reported an alltime an amazing quarter. Frankly, it's strange to see such universally negative reactions to a set of quarters that contain plenty of positives. But this is what happens when investors are worried about the future. And it's hard not to worry with persistent inflation, rising interest rates, and newly wobbly capital markets. We might have to expect some equity instruments for some of these neoc types. Maybe that will help the quarter. I don't know. If we can get some kind of resolution to the war in Iran, even a bad resolution, that should allow inflation to cool, give the Fed some breathing room to back off on its rate hikes, I think the capital markets would bounce right back. That's why I'm feeling more bullish on Wells and Goldman Sachs for the travel trust. Tomorrow's club meeting, you'll hear more. But the bottom line is, man, it's not easy to own these bank stocks right now, even the ones that reported strong quarters. The group is confounding. Maybe perhaps because it isn't a group anymore as each has now such different characteristics that I think it's fair to say no two are alike. Let's take some calls. Let's go out to Jim in Wyoming. Jim. >> Oh, thank you Jim. Thank you for taking my call. >> Ah, thanks Jim. Thanks for calling. How can I help? >> Well, I also want to thank you for your hard work and for your excellent advice. >> Ah, thanks a lot buddy. Earlier this year, Enriquey, Loris resigned as the chief executive of Hullet Packard to become the chief executive of PayPal. I wonder what your thoughts are on PayPal. >> Okay. Well, I've not been a big fan of of PayPal. I like what Enrique might be doing there, but my problem is it sells at 10 times earnings and I'd rather buy a Goldman Sachs and it's just a little bit more of a premium than that. Uh I just think that that PayPal is too limited. uh you're really hoping for a takeout and I don't like to buy stocks just with the idea that maybe they get a takeover but thank you for your kind words. They uh energize me on a bright tough day. All right. It's strange to see such negative reactions. Pretty good bank earnings. But that's what happens when investors are worried about the future. Much more money ahead including my exclusive with work day after strong analyst day and software is back in fashionable working while AI takes a toll on hardware. I think we're seeing a big reset in this market. Let me explain. And of course lawyer calls rapid parts and you should blow any rap just the software as a service apocalypse has come and gone and now the best of these enterprise software stocks have spent months rebounding from their lows. Take workday the cloud software company that helps businesses with human capital management and financial planning. After a beat down in 2025 earlier this year, the stocks now rebounded 71% from its April lows, including a major move this August. After we heard there might be a takeover interest from the private equity guys likely because the business got better. Quite the comeback. At the end of August, Workday reported a terrific quarter and the stock rallied almost 6% the next day. It's pulled back a bit in recent weeks. Could be an opportunity. Yesterday, the company held an analyst day where they laid out their AI strategy and reaffirmed their financial targets. That includes Workday's partnership with Anthropic, which actually already uses Workday software for their own HR and finance operations. How did anyone ever believe CLA would make this company obsolete? Now, Workday will be able to integrate its AI agents into claw. They're also acquiring C1 AI, which manages what employees and AI agents can access across business systems. I think that's important. So, can Workday pull this off? Let's check in with Emil Bushby, the co-founder, chair, and CEO of Morte and I should say an old friend of Mad Money. Mr. Bushby, welcome back to Mad Money. >> Thank you, Jim. It's been a few years. It's great to be back with you. >> Well, it's terrific to see you and I have to tell you as I read through the uh your excellent presentation that I did feel like it is a refounding to have you back. And if you could kind of explain what a refounding mean, I think our viewers would know why. I think both of us are very excited about your coven. >> Well, you know, the cloud was in its 20th year of of uh development and AI shows up and when a new technology shows up, you need to think like a startup. You need to act like a startup. You need to organize like a startup. And it effectively became a refounding moment. And along the way, I thought, well, I haven't been CEO for three years. Is there a playbook on what to do when I go back? and I watched I don't know how many countless Steve Jobs videos on Instagram. Uh, and he was a product genius. He was also a management genius. And he talked about making Apple the biggest startup in the world. And that's the playbook we're using. Well, when I look at what you're doing, it comes at a good time because frankly, we we heard that enterprise software might be obsolete, but when I look at all the things that you put together, actually enterprise software is kind of uniquely ready to be AI as opposed to other companies that are a little bit more on the pretender side. Talk about how easily it actually fit into what you're doing. >> Well, so the way that the software industry has worked, there's been a replacement cycle. But we went from mainframe to client server to cloud. AI is not the next. AI is built on top of cloud. And I think that's a that's a um a subtlety that many people miss. And what does cloud have? Cloud has a very simple data model. We have every customer on one version of the software. We have aggregated data across 80 million employees. that data and that one version of software lets us train the models to produce amazing AI agents that that make business better, automate, uh make make better decisions, all the like. And you can't really build those great AI agents unless you have a really solid enterprise software foundation, especially in HR and finance. >> Well, and you know, I think it's a good time to mention one because you're always filled with specifics that make people understand that it's not smok and mirrors. you uh you have 7-eleven talking about cutting hiring time by 70% using your AI. I mean, to me, this falls right to the bottom line. Well, exactly. And that's what AI can do. And there's the talk about whether it's AI versus traditional software. It's AI plus traditional software. It's it's deterministic and probabilistic. Applications like ours, we have a start of a payroll process. We have an end of a payroll process. You have to get it right 100% of the time and the process doesn't change. But can you help the process along by using AI to speed it up and and make decisions along the way? Absolutely. So our vision is that the world of the future is a marriage of deterministic and probabistic AI and and the cloud applications that we built. The 7-Eleven example is one really great example of of how that uh is coming to pass. Three months ago, we asked uh our our sales team to say, "Let's get 1 million users up and running on our self-service agent, which is basically our front door to all of our applications based on this incredible technology called SA that we acquired about a year ago." And so we so we have our own UI uh built in AI that many companies don't have. And in three months we have a million users using it out of 80 million. Uh so we're still in the early days and Accenture and and Beimo are two of those users and they're live and happy. So I think it's a really it's a really good sign that customers are adopting AI in front of workday and and being successful. >> Okay, let me dive into those. Sonic Concier, Son, Sonic Coach. Who uses them? What do they do? >> Well, Sonic Concierge is basically uh your employee help desk. You've got a question. You want to get some piece of work done. You might want to uh promote somebody. You might want to give them a bonus. You might want to sign up for travel. You might want to look at your business plan. You can almost ask it any business question you want. And instead of going through multiple layers of the system, it goes directly to where you get the work done. And it's so it's an AI driven uh uh front end that is uh built by this incredible guy Joel Helmark who is the founder of SA now is our chief AI officer. He's honestly a generational talent and every customer gets it. Like I want that user experience. I want it. I want it now. And that's why it's being embraced on on on such a broad pace and so quickly, faster than I honestly would have expected. >> Okay, I I want to talk about irony for a second. Uh which is that Anthropic and the customer experience in Sina. I mean, one of the things that was supposed to happen was they were supposed to wipe you out. Now, I don't know where that came from, honestly, because I said, you know, like wipe them out. I mean, I think this thing together melded together with the work they was doing is unstoppable. But talk to me about Anthropic because you know if Anthropic was supposed to be the enemy, it sure doesn't look like they're acting like that. >> No, they're they're a wonderful partner. Um, as is OpenAI, as is Google. We work with all the model companies. Uh, and at the end of the day, what they do is some ways it's magic, right? The the reasoning engines, the abilities they have are amazing, but they're probabilistic. They're trying to predict the future. our applications have to execute the future, right? You got to execute a payroll, you got to close the books, you got to finish a financial audit. So, the power of the two together is is amazing. And that's what we're proven out with with Anthropic, with OpenAI, with Google. Uh, you know, maybe down the road with Muse, uh, who knows? But, um, they're all amazing companies and we feel lucky to work with them. Very excited about the anthropic announcements and the OpenAI announcement we did around recruiting. Well, let me be probabilistic and deterministic, too. Uh, I don't see any reason why you would necessarily have to succumb to a Silver Lake takeover bid or even stake. You guys have plenty of cash. You're doing incredibly strong. Can we just put a spike in that and just say that this is workday being refounded. Let's see how it runs. >> Yeah. Well, I you know, I can't comment on that, especially on your show. Um, all I would say is I I came back for the long run and when the stock was at 110. So, yeah, I was really annoyed when it was at 110 and do we explore all alternatives? Yes. Uh, I just I would just leave it there. It wouldn't be succumb. It would be was there a different way for workday to be when it was 110? I was looking at all options on the table. >> Okay, that's fair. That's fair. You don't have to do my job. You have to do your job. All right. Then here's here's some of your job. C1.ai. Why would I want to that to be involved with workday? >> So, um, if you look at how identity gets provisioned, it all starts with the HR system. A company might have multiple identity systems. They have one HR system. The source of identity is HR. who works for who, who's an employee, who's not an employee, where they fit in the organization. All of those are credentialized by the HR system. It's always been a natural extension for us. And we have an agent system of record that manages agents the way we manage employees. So we thought a natural next move is to help our customers do the same with the agents. Give them governance around those agents. Give them permissions uh coming out of the HR system and basically uh helping to secure agents and humans with with uh provisions and and permissions that they get. It's a natural extension out of HR. >> It sure is. I hope that everybody hears you because instead of just mindlessly talking about guard rails, it sounds got a real service going. Well, look, and you know, I'm really glad to see you again. You've made a lot of money for people and you're just a good guy and I'm really glad you're back running workday. Okay. >> Well, right back at you, Jim. It's good to see you. >> Thank you. That's Neil Bush, co-founder, chair, and CEO of Workday, WJY. And like I said, old friend of the show. I play with an open hand. Money's back after the break. >> Coming up, he's the fastest mind on Wall Street. So, we're putting him to the test with your help. Bring on the lightning round next. It is time for the light round stock. Byebye. So just know the course stop my staff prepares the gra you playing the sound and then the lighting round is over. Are you ready? Ski D. Let's start with Michael in New Jersey. Michael, >> who are you? Jim, the world short power. The world's short power demands growing nearly 10% a year and not just from AI. Nuclear runs over 90% of the time. 24/7 power AI needs. X Energy has plenty of cash, 900 employees, more than Oakland, New Scale, and Nano combined. A DOE backed project with DAO and Amazon own 16%. Is that a buy? >> Uh, no. It's losing too much money. And since the rates started rising and the Fed started rising, I do not recommend companies that lose money because I will end up losing money for you. And then I wake up each morning and say, "Why did I take this job?" Let's go to Stephen in Florida. Stephen, >> hi Jim. I'm a longtime listener, a member of the investment investing club, and my stock today is McKessen Corporation. >> McKesen's a winner. I wish, you know, it is a middleman, but it is a winner. The stock is going to go much higher. It is exactly what you buy in this environment. Let's go to Bill of Masters. Bill, >> hi Jimmy. I have a uh small cap here in physical AI that I've been looking at. They have an excellent balance sheet, low debt. It's Bisha Group, BPG. Oh, Bet Precision used to be Vet Technology, Philadelphia company. Uh I have to tell you that it's valued too high right now. I wait till it came in maybe 10% and then you can buy it. Let's go to Sanjie in Texas. Sanjie >> Booya Jim. >> Booyah. I'm looking I'm looking to put new money into medical devices between Metronic MDG and the newly independent mini MMED. Which one would you buy today? >> Oh, that's easy. It's Metronic. I would buy that one. The other one I think is a little bit more commodity. 15 times earnings for Metronic. I think the stock is right here. It's weathered a time in the 80s and now it's going to start going up. Let's go to John in New York. John, >> Jimmy Bully, good evening. How are you? >> I'm doing well. How are you? >> I'm very well, thank you. I have a position that I've had for a while and it's been doing great. And with everything that's going on with AI, I want to know what what you think of where it's going. Cipher. >> Which one? >> Cipher. >> Cipher. No, no, you can't cipher. It's losing a ton of money that I mean, the reason why it's going down is because it should be going down. That's kind of the conundrum of this market. The only thing I'm really more worried about are the bonds of these companies. That's what I'm really concerned about. There's been way too many issues and I am determined to try to get to the bottom of what's going on in that bond market with these new issues. And that, ladies and gentlemen, conclusion of the lightning round. >> The lightning round is sponsored by Charles Schwab. Coming up with the markets in motion, Kramer's returning to his guiding principle to try to explain why stocks are rising or falling. Next, sometimes it's as simple as thinking about what people will pay for a given stock and what they won't pay for because it's too expensive or the prospects aren't even as bright as most investors think. You can see this most dramatically in the stocks in the technology sector which is the largest segment in the S&P 500. Specifically, I'm talking about the contrast between hardware and software and the price journeys multiples we will pay for them. The thesis for more than a year was simple. AI represents a new industrial revolution. So, we're going to pay more for the stocks that help that revolution along and pay less for the stocks that are standing around doing nothing. That's why we went wild with memory place and Seagate. They're essential for the data center. We decided to raise the price earnings multiple for stocks like Micron which is chronically low valuation stock. Remember in how to make money in any market I explained the importance of the PE multiple which isn't talked about enough and why people will pay more for one stock than another. Oh we were paying more for Dell because you needed Dell servers to integrate Nvidia hardware into your organization. And we recognize that a stock like AMD deserved a premium multiple because it had both GPUs and CPUs which would be beating hearts of AI and Aentic AI respectively. And that's how Dell could go from 110 in January to 595 at its highest last month. That's how AMD could go from $188 in March to $658 by last week. Now we're finding that maybe these moves were too big too fast. While hardware was roaring, Wall Street decided that enterprise software would be turned to roadkill under the wheels of Claude and Chach. Who needed Viva Systems which had the leading software platform for clinical trials when it was doomed to be displaced by claude, right? So a $300 stock gets cut in half. Same thing happened to Service Now. Everyone assumed it would be rendered obsolete. But out GBT, the stock goes from 193 to 81. Nothing was rougher to watch than Salesforce with a per seat business model that seemed to ignore AI. So that stock finishes last year at $264. Then it goes all the way down to the 160s 6 months later. And we just covered workday stock went from 247 to 110 in 6 months. But that whole dynamic disappeared and has switched ever since the summer. We decided suddenly that we were paying too much for that hardware and too little for that software. So we begun to savage the semis like SK Hyus, the largest memory chip company which dominates the Korean exchange and is now climbing to dominate our own listener. The earnings aren't being crushed. In fact, semiconductor capital equipment maker ASML reported Fantastic last night. Yet, it stock was down. Slam. The memory chip companies are all raising estimates, but we're paying less for those estimates. The PE multiples are being crushed. PE compression explains this move, not earnings. And the enterprise software companies from work data to Salesforce service. Now, they've become more involved in AI with a heavy endorsement from the likes of OpenAI Anthropic itself. Now, we're willing to pay much more for their earnings. No analysts have raised numbers for these enterprise software companies, at least not yet. So the question is, do you need to sell the hardware? Can you still buy the enterprise software stocks? Have the semis with their ever rising prices? Is Dell really done? I think we're seeing a reset and one that simply can't be gamed. I'm going over my choice holdings tonight and looking where there could be more rounds of multiple contraction and multiple expansion. My take too early to call bottom and hardware moves are too violent. But in the end, you will need the hardware to build data centers. All this stuff remains in short supply. The enterprise software companies, they can keep going higher because their stocks never should have been so low in the first place. They want to enjoy the multiple expansion after a year where we expected these companies to be destroyed by AI. It never came to pass. And with the changes they're making, it never will. I like to say there's always a market summary. I promise just for you radio mid money. I'm Jim Kramer. See you tomorrow. All opinions expressed by Jim Kramer on this podcast are solely Kramer's opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by Kramer on television, radio, internet, or another medium. You should not treat any opinion expressed by Kramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Kramer's opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full MadMoney disclaimer, please visit cnbc.com/madmoney disclaimer.