Mad Money 07/20/26 | 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 Craig, friends. I'm just trying to make a little money. My job is not just to entertain, but to educate. So call me at 1800743 CBC. Tweet me at Jim Kramer. Come in to work and you'll learn that the Chinese are targeting all the frontier AI models, the anthropics and the opening eyes. And you wonder if they can get their IPOs off. Maybe not because the Chinese also have cheap memory, which we think they do, or maybe they don't. But if we can get some hands on it, it' be great. But if American companies truly avail themselves of the Chinese tech, won't they be targeted by China's open source models? And what does that mean for the price of tokens? Jebins paradox and national security. Did you understand any of that? I don't I can't figure out how this will ultimately impact Intel or Nvidia, two of my charitable trust core holdings. Could it delay an open AI IPO? Impact their deal with Oracle will keep repelling AMD. After a day where the Dow shed 307 points, S&P declined.19%, NASDAQ dip. 05% after what was by the way a very strong opening. All this hand ringing over AI competition from China makes me want to turn my back on tech and just find high quality companies like Goldman Sachs and Wells Fargo or dig my teeth into FedEx and FedEx Freight. Maybe scoop up some Honeywell Aerospace and Boeing. You know why? See, because if you own too much tech, you're going to be slaughtered and you won't even know what hit you. Okay, not today. And we've been hit pretty hard here as you will find out if you stick around. But I don't want to be some jouro who only piles on when things are down. We might have some momentum here. But if you own these kinds of non- tech stocks that I like and they do go down, you know what you can do? You can confidently buy more of them because Goldman Sachs or FedEx are comprehensible and they're not subject to rumors or Chinese riposts. In so many ways, that's what's wrong with this market. I mean right now for example if SK highinex the high bandwidth memory maker from Korea or SpaceX the must satellite company or Oracle with his flagging bonds and stock really break down then believe me they're going to take everything with them including many tech stocks that do not deserve to be hammered. Now I've told you how my chapel trust has diversified away from tech from new with with new money with the exception of Intel. More on uh that in a second. for the club. I've been content to own industrials, not necessarily data center industrials, as well as healthcare, because we don't want to be the next SKH, the stock uh of of a tremendous semiconductor company that's been hijacked by desperate traders who really should be feeling should be stick with betting on the World Cup. The Bulls remember the early 2025 Deep Seek affair where stocks were crushed because of the introduction of a Chinese AI program, then bounced right back. Now, the Bulls are arguing that this new AI threat Kimmy K3 brought to you by the Chinese company Moonshot AI is similar to the Deep Seek affair where everything else was brought down. But if you bought tech, especially data center tech, you're going to make fortunes just like when deep seek turned out to be second rate. I'm not so sure that we should swoop in and buy this time because the stocks that could be rocked are stocks that even after the decline are still incredibly high like a Micron, like an SK highex. They're ridiculously cheap on an earnings basis, but they're high. We will examine some of the most hard-hit stocks later in the show. You can make up your mind. I'm thinking some will have come down so much there is some real opportunity here, and I'm not blind to it. That said, let me tell you what we're doing. First, we are not touching the trust long-standing Apple position. The sharp knives are indeed out for the Apple uh let's say management from the tech intelligencia. The intelligent say that Apple missed the most important story of our lives, artificial intelligence. They landbased Siri. They regard the lost opportunity is critical to Apple's failure for the next generation. Yet, you know what these same people are posting from their iPhone 17 Pro Max. You know what? They'd rather SLIP THEY WOULD RATHER SLIP THEIR WRIST THAN SWITCH TO SAMSUNG. THEY REMIND ME OF WHEN I SAT NEXT to Steve Balmer at my 35th college reunion when he was still CEO of Microsoft and he pulled out some sort of gizmo that made me giggle. It was a Windows Mobile. Does anyone else remember that? I doubt it. So, in its core business, Apple's bulletproof and they never spent much on AI in the first place. I want you to think about this as as you look at Apple down seven bucks today. Did anyone switch to Samsung during this travesty of an AI issue? Did anyone say that's it? I am sick of it. I'm sick of the 17 Pro Max. Get me a Lenovo. Perhaps the Cognizant wishes that Apple would spend $200 billion, maybe 70% on the data center structure and power, maybe give the rest to Google TPUs, maybe buy some expensive Nvidia GPUs. As someone who owns Apple for my chapel trust, I actually like that they let Alphabet spend those billions of dollars on AI and then they've had Alphabet pay them a nominal sum. So, it was in the iPhone. Uh, the pros have a term for this Apple Alphabet deal. You know what it's called? A great deal. Oh, I also want Nvidia. I know people think I've been unkind to Nvidia of late. have been critical that they're not buying back more than $80 billion worth of stock given that the shares are insanely cheap on next year or investments. Do you know this is actually more of a love tap people throughout this period there have been companies that claim that they think the world of Nvidia but they want to make their own chips. You know what I say? Go ahead make videos day. But if the customer wants Nvidia what do you do? What do you say to them? No. No. You see like we don't have Nvidia you know we've got the deli worst. I mean they go somewhere else. Nvidia is at the heart of the data center. Practically invented the data center. It has no Chinese competitor for real. The fact is these machines and they are machines by the way packed with hardware and software. They're the envy of the world. I I indeed sue AMD comes close but there really is nothing like Nvidia and that matters. Yes. And we want Intel which reports this week. Intel is a triple play CPUs that you need for the new AI agents, the foundaries to manufacture chips and the packaging of chips with their high margins. Something CEO Lith Bhutan knows better than anyone. Why? Because he saved cadence, the best at packaging. And then he gave you a 50 bagger while he was at it. His boundaries are going to be the best hope we have for an American semiconductor renaissance. Intel is a national treasure. I hope the stock sells off on Thursday. Please, please sell off. Please sell off. You know why? So we CAN GET A BIGGER POSITION. Understand again. I think the world of AMD, but I can't own both Intel and AMD. Too much overlap. We think ARM can be perfect, but it needs foundry space. We own Broadcom. Why? Because CEO Hawkan hates to lose. He's a competitor. Hey, by the way though, same goes for Matt Murphy at Marvel Tech. But again, the concentration is too much for me because these stocks at the very moment mistakenly trade with the Korean stock market overnight and then they get beaten down by the American press in the morning, which loves to praise the Chinese competition. Oh my, the American press loves China so much. They're so smart. They're so smart. We're so stupid. We're so stupid. Clowns to the left of me at Caltech. Jokers to the right at Stanford. Stuck in the middle of MIT. In the end, today was a day to buy FedEx. It was a day to pick up some Honeywell Aerospace. Hey, how about buying some GE? It was down a ridiculous amount even after it got the biggest order for it one ever, 1,000 leap engines to power the Airbus A320 Neos part of a joint venture. It that wasn't enough. I was shocked that the stock wasn't up on that news. Instead, it fell nearly eight bucks. Kind of a crazy market, but to buy more tech only if we get a wash out self sell off first. uh where all the margin mongers and the option o ogres they just get blown out both here and in Korea where the NASDAQ of course truly had to make a buck bringing them over. I should add we have plenty of hyperscaler stocks for the uh the travels but we don't talk about them much unless it's the month meeting. When we get that speculative wash out sold off, it'll be all over tech and the values will be self-evident to anyone who still has uh cash. But the bottom line for the moment, it's time to go to other sectors. They can make you money without the volatility. You know what it makes me think of? Pharaoh's fury. The last time I threw up at a theme park, but I missed my daughter. I mean, I didn't hit her. Bill in Indiana. Bill. >> Hi, Jim. I'm a club member and I thank you for the help and advice you've been giving me over this period of time. >> Thanks buddy. Thank you. Thank you. Thank you. >> My question is about AutoZone. I've held the stock for about 5 years while there's been a big consolidation in the auto parts industry. So, it's been a very profitable trade for me, but it has now lost about 30% uh over from its high from the last several months ago. So, I'm thinking about selling it. What? >> No. No, Bill. I mean, look, they did have a problem, Bill. They had a problem, you know, like they have a lot of Chinese, uh, you know, they had some tariff problems. Um, I don't This stock sells only at 19 times earnings. They continue to buy back stock. I wish you would not sell it down here. I think that they can make a comeback, but I hear you because I did think this was going to be a big year for them. And so far, I am wrong. Thanks for being a member of the club. I'm looking at the stock and thinking, "Oh, wow. Don't sell it here." All right. for the moment when it comes to the market I think you have to look outside of tech to get the best opportunities but that'll change if we get a real wash out on man money tonight I'm digging deeper into this hell often anything related to AI don't miss my rundown of where the worst spots are and where to find opportunity then is it time to pray press play on a position in Netflix and why the stock has been beaten down so much and whether now's the time to buy I'll find you and this earning season hasn't been too exciting. But there are some things to keep your eye on that I'm pointing out. So stay with Kramer. >> Don't miss a second of MadMoney. 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 1800743CNBC. Miss something? Head to madmoney.cnbc.com. After an ugly close to last week's trading, it's clear we're witnessing a vicious meltdown for many of the key components of the AI infrastructure trading. I mean, this was the hottest part of the market until about a month ago. Today, many of the AI infrastructure stocks were able to bounce. Others tried and ultimately failed, but they're still down dramatically from their highs. And that's what matters. And that's why I want to spend some time focusing on what's happening here, why it's happening, and how we'll know when this meltdown is truly over. Not the kind of thing I saw today, but truly over. See, the crazy thing here is that the AI infrastructure clubbing is barely reflected in the averages. The Dow and the S&P are only down about 2 to 3% off their highs. The NASDAQ indices give a bit more of a clue with the Nasdaq Composite, the IXIC, and the Nasdaq 100 down 6% and 7% from their early June highs respectively. But that's nothing compared to the declines you're about to hear about in the AI infrastructure plays. Let's start with the memory and data storage stocks, formerly the single hottest part of the market. Now the Roundell Round memory ETF symbol DRAM you know like DRAM which launched in April is now down an astounding 35% from its late June peak. Micron Technology Sanders Seagate and Western Digital are all down anywhere between 30 and 41% from high set about a month ago. They all went parabolic and this extends to the broader semiconductor industry. The Philadelphia semiconductor index or socks is down roughly 20% from its high and the Vandex semiconductor ETF is off nearly 17%. Looking at some of the top individual names the semis we see varying degrees of weakness. AMD and Intel which investors have piled into as we realized the simple CPU chips that they make would see an increased demand as AI agents exploded have come down 40 14% and 32% respectively just for the last day of June. Broadcom's down 24%. Marvel is down 41%. ARM holdings a top chip design company is off 40% from its highest. And Pterodine, a semuctor testing company that have been a real darling, is down 32%. Even the semi-ductor capital equipment makers have been hit. ASML, the Dutch company that basically has a monopoly on the equipment used for leading edge AI chips, has been least damaged, down 13% from its high as it just reported tremendous quarter. But applied materials, KLA and lamb research have all come down between 28 and 33% from its highs. Their highs set less than three weeks ago. That's breathtaking. Beyond the semiductor complex, many of the leading networking equip equipment plays have come in significantly. Corning, which I own for the travel trust, has come down 44% from its end of June high. It's taken my breath away. Astero Labs is off about 38% from its high set the same day. Coherent Lumenum the two leading photonix companies have come down 35 and 30% from its high their highs set in either June or May. Now they are just you know trying to bounce. Some older networking plays that have been seeing a bit of a renaissance due to the AI infrastructure trade. They've been hit too. Sienna down 41%. Oh my god, that was a good one. And Cisco's down 15% both from early June highs. Hey, speaking of hardware within the data center, the leading makers of service have been hit. UL Packard Enterprise, HP is off 31% from its early June highs. Dell, arguably one of the best quarters of the year, has fallen 19% from its high, sit at roughly the same time. It's not just that. The great AI data center buildout has been a boon to many classic industrials, at least until a few weeks ago. Verings, which makes power and cooling equipment for the data center, has come down 23% from its midday highs. Mod manufacturing old maker of thermal management systems had found new life in the AI is off 29.5% from its late May peak. Caterpillar it had been on fire both because its equipment is being used to build data center structures and because its power generation equipment was increasingly being used to power these sites. It's now down over 19% from its high 3 weeks ago. And Bloom Energy, oh my, a company that makes distributed power systems had been one of the darlings of the AI year, but it's now plunged 44% from its high late June, late June. The biggest winners from AI infrastructure are the biggest losers of the last few weeks. Now, that includes the construction and engineering companies that we've been, you know, I've been talking a lot about these. They they've been making a mint helping to build data centers or power infrastructure. Sterling infrastructure. Oh man, we had them on. What a hot shot. Quant services. These have come down 35% and 20% respectively. And of course, the companies that actually build data centers have seen their stocks get slammed too. Take the NeoClouds which exist to rent out their computing power to other companies. So loved at one point the leading name in the space. Coreweave is down 47% from a recent high set in May. Same story with Iran which is down 43% from a local uh local high set last month. Uh, Nebius, arguably the second best NeoCloud name after Corewave is down 39% from its late June high. And smaller players like Applied Digital, Hut 8, Terowolf are down anywhere from 28 to 45% from their highs. You can argue the same selloff has hit new IPOs with AI exposure. SpaceX, Cerebrus, the former is down 47% from its high set on the third trading day, while the latter's down 54% from where it peaked on its first trading day. I remember when that was the one that was supposed to wipe out Nvidia. SK Hinx, the the Korean memory chip maker has seen it shares whipsaw around uh after debuting on the NASDAQ 10 days ago. They're currently down about 22% from their highs just set last last Tuesday. From what it's worth, though, the company's career listed shares are down about 39% from their late June high. By the way, Samsung's down 34% from its peak in mid June. If it's connected to the data center, it's getting crushed. Other 2026 IPO names with AI infrastructure exposure have also come in. There are a few industrial rollups that were popular because they were selling equipment into the data center like 4G power solutions. We got a question on that last week. Madison Air Solutions and Ino those are all down anywhere from between 22 and 41% from high set last month. Wow. Just last week we saw evidence that the weakness of the AI infrastructure trade was impacting the IPO market. One new data center operator, C Square, oh that would have been loved a month ago was priced its steel at 21 down big from the proposed range of 23 to 27 and it traded even lower since then. Oh my nuclear play. Oh boy, remember those standard nuclear nearly cut the size of its offering in half and priced its deal well below the range. But the stock still fallen from its offer price of $15 in the single digits now in the first three days of trading. That's awful. Now, I haven't mentioned the Magnum 7 yet because this is a diverse group of vaguely tech companies with enormous market capitalizations. But the Mac 7 names a varying degrees of exposure to the AI infrastructure trade. For Nvidia, it's almost everything. For Apple, it's barely connected at all. But even Nvidia is only down 14% from its midMay all-time highs. It's holding up much better than the other data center supporters. Thank heavens. Because, you know, I think that even though it's a supplier, I think it's head and shoulders above the others. Let me give you the bottom line here. When you look at the carnage in the AI infrastructure space once the hottest part of this entire stock market, it is clear we got a problem here. But is this merely a temporary detour? Or are we looking at something much more worrisome? Stick around after the break. I'm going to give you the answer. Coming up, is the sudden AI stock selloff just a blip or something you should seriously worry about? Kramer's doing the calculus next. Like I mentioned before the break, the whole AI infrastructure complex has been melting down for weeks now and we need to know what to make of it and and whether now uh now that everything is real negative, there might be some stocks worth buying. So let's talk about why this is happening. The truth is there are a bunch of overlapping reasons. First, we've got the macroeconomic factors. Now that the war with Iran has flared up again, oil prices are rising, and it'll be much more difficult for the Federal Reserve to cut rates. We've seen this movie before. These AI infrastructure stocks were able to roar after our government reached a kind of day taunt with Iran in early April, but now that's over. And the price of crude has jumped from $67 on July 2nd to $83 and change today. that actually impacts these stocks very hard and not in a good way. On the interest rate front, after the benchmark 10-year Treasury yield peaked at 4.7% midmay, it then fell to a low of 4.36% in late June, but now it's back to just below 4.6. So 4.3 all the way back to 4.6. The market wasn't even able to enjoy a cooler than expected June CPI report last week because we knew that it was just likely to be ephemeral. That makes us a tricky market, especially for stocks that had huge gains. Those are the stocks people sell when they're worried about economic turmoil and inflation. >> How about more AI specific issues? The big worry with the AI infrastructure buildout is that it just seems to be costing too much. And now the bears are wondering who the heck's going to be able to make any money from all this investment. We know that the hyperscalers are paying increasingly large sums to build these data centers because many of the components have skyrocketed in price. Labor costs are getting mighty steep. It's gotten to the point where even Alphabet, which spews cash, needs to raise money, roughly $85 billion in total, consisting of $45 billion place in un under unwritten secondary offering last month, followed by a $40 billion at the money offering that's likely going on right now, and it's guming up the works. Who else is footing these bills? Well, there's Oracle. After a nice run through April and May, this stock's fallen an astonishing 51% from its high on June 1. By the way, the price of credit default swaps, Oracle's debt, you can insure it, have risen to fresh highs, up more than fivefold year-over-year. That's not a sign of confidence. We need Oracle to pull some sort of rabbit out of a hat, make some money here, anywhere. Meanwhile, the two leading AI labs, Open AI and Anthropic, are going to be paying a fortune for these data centers one way or another. In late June, again, right around the time these stocks peaked, it was reported that OpenAI was thinking about delaying its IPO until 2027. They raised $122 billion, largest private funding round ever earlier this year. And you got to figure that they will it'll tide them over until an IPO next year. But with the amount of spetting they're committed to, that's an open question. Here's what they should do. They first of all, they should listen to me. They got to shoot for a fourth quarter deal no matter what. As for anthropic, at one point in early June, we heard that a late July IPO could be in the offering. Well, we aren't hearing that anymore, though. An IPO this year still seems likely for now. That should come in September. But the Well, that's my again, that's my view. Okay. And by the way, I'm going to be right. But that's okay. I mean, my wife said I've been arrogant lately, so I just decided to go all in. All right. Right here. She said, "You know, you really have been arrogant, Jim." I said, "You know what? All right. But the AI labs are part of the problem. We've seen more and more grumbling recently about how much it costs to run some of these leading models like those from Anthropic in an enterprise setting. That's how we got to the latest issue dour for the AI in infrastructure trade. The emergence of a new Chinese model called Kimmy K3, an open- source model from an outfit named Moonshot AI that's supposedly just as good as the top frontier US models. Sure, that's what caused the la latest for the AI infrastructure stocks last week. But given that these stocks were already getting hammered before the China news, it's clearly not the whole story. There are other similar smaller issues that have contributed the weakness here. For example, over the last few weeks, we've been realizing in real time how much of an impact bullish Korean retail investors have had in pushing up the memory stocks. Last week, Korea's top financial regulators suspended new listings for single stock leverage ETFs. Got to wonder how much much those Korean leverage ETFs were responsible. the final extreme push higher that we saw in the memory stocks before they all peaked in late June. And either way, leverage is likely to be magnifying the moves of this broader group, pushing them up excessively and then making the down days all the more painful. Sector and thematic ETFs that package all these stocks together, compound the issue as well. They really make it difficult to find a bottom. Let me give you another reason for the AI infrastructure meltdown. Too much stock. I mean, this is something I've been warning you about all year with new IPOs and secondary offerings. We have been flooded with ways to play the AI data center theme and eventually an over supply of stock can and will push down the entire group. I think we need a breather here. I think it's happening right now. Keep in mind, we just had three of the largest offerings in history. the $75 billion IPO of SpaceX, the monster secondary offering from Alphabet and that dastardly 26.5 billion listing of SKH Highix in the NASDAQ earlier this month. According to the stats from IPO experts at Renaissance Capital, we have had 86 IPOs that raised a collective 142.4 billion this year. Okay, that figure alone is up 791% for this point last year and it matches almost exactly the amount of proceeds from all of 2021, which by the way was a wild year for IPOs. We don't have enough money slloshing around to pay for much more stock at these levels. It's killing us. So, at the end of the day, while we don't dismiss each of these individual new factors that might have caused or contributed to the AI infrastructure selloff, we also wonder if we're just running into the wall of supply that we always knew was going to come, always knew was going to present us with problems. And it's happening right now. Put it all together, these AI data center stocks have turned, let's just say, they've been sunk by a perfect storm of negativity. I think the main issue is the flood of new stock which makes it hard for these names to keep rallying. But the resumption of the war with Iran definitely hasn't helped. So how does this all end? Well, a couple things need to happen. We probably need the IPO market to calm down, but that's a problem that tends to fix itself by lower prices. Last week's two AI related deals flopped. That tends to dissuade others from coming public. We need that to happen, too. I'll also have to be watching the earnings reports from the hyperscalers closely. They need to give us tangible evidence that their huge capex bills are actually worth it. We've seen in recent quarters that companies with cloud infrastructure businesses have seen accelerating growth and we need that to continue for the AI theme in general. I also want to see evidence that the end users of AI, the companies that pay for Claude and Chat GBT are getting let's at least like their money's worth. Someone other than the suppliers must start making visible amounts of money here or at least forecast a profit. What else? How about a fresh cheese fire in her in that help? Here's the bottom line. It's very tough to own these AI infrastructure stocks right now. But if you want to stick with this group, I recommend circling the wagons around the highest quality stories, especially profitable companies with reasonable valuations, like I said at the top of the show, or at least historically ones that are coming back. Those are the ones that will make it to the other side relatively intact. The others for those we can wait until the new stock is digested and then we can pick at the rubble. Hey, how about we go to Evelyn in Florida. Evelyn, >> hi Tim. I'm at the Villages of Florida. I watch your show all the time and tell my grandkids to watch and learn. >> I previously >> Oh, you're welcome. I previously was in a ladies stock club in New Town, Connecticut, where I researched and bought CLS Celestica at $31 a share. Today it's over $300. >> Yeah. >> And but where is it going now with the new Canadian pair? >> Okay. Um well, look, the problem with Celestica is it's part of the buildout of the of this entire data center movement. So, it's going to head lower. It's the 29 rings. These stocks are all coming down. It's not necessarily the Canadian t the real issue here. I I hate to say it like this, but it had such a run. I mean, you bought it at 30, it's at 307. there's just going to be profit taking and that's what it is because it is a really good company. Let's go to Stuart in Florida. Stuart, >> booyah. Jim, how you been, my friend? >> I'm doing fine, Stuart. How about you? >> Doing great. I want to buy a dominant long-term compounder. While the stock is down 36% and trading at its lowest PE multiplier in 5 years, bears are focused on transient macro headwinds like inflation, compressing restaurant margins down to 23.7%. But I'm looking past that. Their massive expansion plan of 370 new locations and 38% digital sales mix protecting throughput and positive transactions. Is this time to get in Chipotle? Um I think you know look it reports on the 29th. Uh I doubt it runs away but if you want to put a quarter position quarter position on only right now because there's always a chance that frankly they have this lettuce issue and we just can't have the lettuce issue get in the way of building a new position. All right. It's tough to own anything in the AI related space right now. There's too much supply. But if you want to say stick with a couple of high-profile quality companies, I'm in favor of that. Now, much more may have money ahead. Are investors still watching the stock of Netflix? I'm taking a deep dive into the company amid a big day for media news. Then I'm running through the top stories of this earning season so far and all your calls rapid fire in tonight's edition of the lightning round. So stay with Kramer. Has the stock of Netflix finally become too cheap to ignore? Over the last 12 months, this stock's now down 44%, including a 9% decline just since it reported last Thursday. It's gone from a beloved market darling to a complete pariah. Of course, Netflix is not alone here. The entire media cohort has been struggling. But in the old days, Netflix rarely traded just like another media stock. This is the company that invented streaming video. But now everybody in the business has their own subscription streaming platform. Now we got to start asking ourselves if Netflix is still unique or is the competition for your eyeballs at last catching up to this amazing business. When the company reported last week, the sales missed expectations slightly and earnings per share matched the consensus assessments. These were not awful numbers, but they certainly weren't what the bulls hoped for. Worse, Netflix's free cash flow was much, much lower than expected, just 1.53 billion. Wall Street was looking for 2.67 billion. Uh, that was mostly from higher tax payments, including taxes on termination fees they got when Warner Brothers walked away from that merger. So, this wasn't necessarily a collapse in the underlying cash generating power of the business, but when a stock has already lost the market's confidence, a free cash flow mission is not what you want to see. The worst part, though, is the guidance. For the third quarter, Netflix got for weaker than expected revenue and earnings while also narrowing their fullear forecast. Of course, the company isn't falling apart. It's still on pace for 13 to 14% revenue growth this year with a 31.5% operating margin, 12.5 billion in free cash flow. Most companies would kill for those numbers. The problem is that the direction of travel is a lot less exciting than it used to be. In the second quarter of last year, Netflix is it grew at a 16% clip. The growth here is decelerating. Management blames some of the deceleration on timing and tougher comparisons, but it's harder and harder for the Bulls to dream up ways for the company to accelerate its core subscription business. Netflix also announced that it will begin releasing its what we watched engagement report annually rather than twice a year. Remember, Netflix stopped giving us quarterly subscriber numbers in the first quarter of 2025. Now it's reducing the frequency of engagement disclosures. Whenever a company decides to give you less transparency, Wall Street tends to assume management's hiding something. Again, not ideal. At the same time, Netflix hasn't been producing the kind of franchises that used to drive dramatic subscriber growth. Where's the next Squid Games or Stranger Things? Maybe they're coming. We're certainly ready for it. Personally, I like their American Experiment documentary and I Will Find You series, but those weren't pop culture sensations like Netflix has had in the past. Unfortunately, the streaming business has become increasingly, here's a word you never want to hear, commoditized. Consumers can subscribe to Netflix for one month, switch to HBO Max for the next, then move over to Disney Plus, Apple TV Plus, and Paramount Plus. The switching costs zero. Apple, Google, and Amazon can afford to treat entertainment as a strategic side business. Apple doesn't need Apple TV Plus to generate Netflix-like margins. Amazon uses Prime Video to make Prime subscription more valuable and more products and gain market share. Which brings me to the Warner Brothers deal. Many investors hated the idea of Netflix buying Warner Brothers. The prospect of that acquisition crushed the stock. Bulls didn't want Netflix entering a bidding war with Paramount over an old media business filled with declining cable networks. When the transaction fell apart, Netflix got a $3 billion termination payment. Wall Street actually treated that as a victory. But the problem here is that it now looks like Netflix arguably needed Warner Brothers more than even the skeptics thought. This deal would have brought an enormous library of intellectual property, including HBO, DC comics, CA characters, and decades of television programming. Still, the stock's almost been cut in half over the last year. So, let's talk about what makes the stock interesting. When they're cut in half or near it, I get more interested, not less. First of all, Netflix repurchased $4.7 billion dollar of stock during the second quarter. That's the largest quarterly buyback in its history. It still has roughly 27 billion dollars remaining under the repurchase authorization. Netflix expect to produce 12.5 billion dollars of free cash flow this year. It can fund the slate the the the slate invested advertising sperm with games live programming and still retire enormous amount of stock. If the share price remains depressed, Netflix can keep up the buyback. Don't forget, they've been among the best capital allocators in the industry, growing into a global behemoth while maintaining relatively little debt versus when it first started. At 19 times this year's early assessments, Netflix is the cheapest spin since 2022. And you know what happened since then? It turned out to be one of the great buying opportunities that I've seen. From 2025 through 2028, JP Morgan expects Netflix to produce compound annual growth rate of 12% for currency mutual revenue, 20% for operating income, 24% for earnings per share, 22% for free cash flow. If those numbers are even close to right, SIGN ME UP. The stocks trading at discount the S&P 500 as a whole. That's crazy. premium growth expected for the next few years. Then again, many members of the Magnificent 7 trade at similar discounts of the market and some of them are better businesses. Heck, Nvidia trades their lower price journeys multiple based on next year's numbers. So, should you buy the dip? Look, I won't pretend that the quarter was great. It was a disappointment. The content slate clearly isn't as strong as usual. Meanwhile, Netflix is investing heavily across ads, games, live programming, podcast, sports, including some potentially big NFL games, and AI. And while it's historically cheap, 19 times it earnings, isn't exactly a steal. If engagement keeps slowing and revenue growth falls into the single digits, the stock can certainly still get cheaper. On the other hand, this is not a broken company. It's one of the best companies around with one of the best products, and the numbers are still better than most. I think there's a reason why these guys are buying back stock at the fastest pace in history. Advertising revenue should roughly double to $3 billion this year and management believes the gap between the economics of the ad supported and the ad free plans is narrowing. Netflix estimates is less than 45% penetration of its addressable broadband households captures only about 7% of the entertainment revenue available in this markets and accounts for just about 5% of global television viewing. So there's still plenty of room for growth. So, here's the bottom line. Netflix may no longer be a hyperrowth monopoly story, but at 19 times earnings, hey, I'm thinking you're getting a well-managed business, one of the largest corporate buybacks in America. It's not often you get one of the best companies ever created put on sale. That said, you know what? You can take your time as you saw from today. You you you don't have to rush this if you're still a believer in Netflix. I put a small position here and then gradually add on the weakness in pyramid style because I wouldn't be surprised if the weakness sticks with us for a while. But that ultimately you have a potential big winner. Bad money's back after the break. >> Coming up, you've got questions. Kramer's got the answers. Get charged up for a fast fire lightning round next. It is time for the light of course. We play here the sound and then the lightning round is over. Are you ready to light with Sam? Jim Fer seeing new management and I think the stock might be a buy down 70%. What do you think? >> I think that they have to merge with someone. I'm looking calling for like as I did this weekend in a piece I wrote for the club. Massive consolidation in the fintech area. We have way too many companies in that area. Let's go to Sean in Michigan. Sean, >> hey Booyah, Jim, how's it going? >> I'm doing well. How about you? >> Good, good. Love your book. Um Oh, thank you. >> Hey, the company that I'm called about uh seems to have turned a corner. Gross bookings and revenue are growing and they generated over a billion dollars in free cash flow. I'm wondering if now is a good time to start a position in lift. >> I think David Richer is doing a good job. I mean, he's been trading back and forth and back and forth, but 15's a good level to start. I agree with you. Let's go to George in New York. George, >> hello Jim. Thanks. >> Hey, George. Jim, how are you? Of course. >> Good. How you doing? Thanks for taking my thoughts. >> Good. What's your uh what are your thoughts on CleanSpark? >> You know, look, it's Bitcoin, you know, just go by Bitcoin. It's a lot easier. Bitcoin seems to bottom once again. Incredible. Let's go to Frank in New York. Frank, >> hi Jim. It's so good to talk to you. >> Oh, thank you. >> I've international shipping for a while and I'm going to continue to hold it to see if Israelis um allow the sale. >> But even if they don't, I'm still going to hold because it's been such a good investment for me. I just wanted to get your thoughts on on Zim International Shipping. >> I think you're right. I mean, I do think that there's worth there and I if the deal doesn't happen, maybe someone else buys it. I'm with you on that. Not crazy about it, but I'm with you. Let's go to Brian, Illinois. Brian. >> Booyah, Mr. Kramer. >> Oh, booyah. Brian, what's going on? Hey, I got this uh stock. It's uh pretty highly profitable. Uh it's got a lawsuit against it right now, and it's kind of worrying me a little bit. The stock has first solar. >> Man, that thing has just been crushed. You're buying it at a very inexpensive price, but it has I mean I hate to default to being a technician. That's one of the worst charts I've ever seen. Let's go to Al New York. Al Jim, this is Al from Bronx, New York, home of the Yankees, but you know, Nick and five. >> Hey babe, I love you. >> Yeah, man. I love your take on Cheesecake Factory tickers. Okay, people don't understand that Cheesecake Factory has a fantastic menu that has a lot of stuff for everybody and it's confounding to people because they don't go to Cheesecake. They just say, "Oh, I don't want to own that." 52- week high, big menu, lots of stuff for people who don't want to own put on a lot of weight. It's a mistake that people make avoiding that one. Let's go to Patrick in Virginia. Patrick, >> hey Pat. Hey, how's it going Jim? >> I am doing well Patrick. What's going on? >> Excellent. I'm actually in New York City, right down the road from you at the soft tavern, as a matter of fact, on vacation. >> I tell you to come over, but you know, I got to I got to go. I'm going to the doctor after the market. >> Got to get my foot my ankle. Yeah. What can you do? Yeah. >> No kidding, man. It's been a rough one the last couple weeks. Listen, my question is about Space Mobile. All right. Um I'm long on it. Real long on it, but I'm a little bit worried about the competition. >> Look, you got to be worried. I mean, the company's losing a fortune. We no longer, you know, that kind of stock is now out of favor. I think at $40. You could wait till it gets to 40 before you have to pull the trigger. I am not kidding. And that, ladies and gentlemen, conclusion of the lightning round. >> The Lightning Round is sponsored by Charles Schwab. Coming up, with a new week underway, Kramer's giving out some key advice for making it a great one. Next. Booya. Jim Kramer. I'm a firsttime caller, a happy club member, and want to thank you for being the people's champion of investing. >> Thank you for helping me become a millionaire. Jeez, this earning season's been pathetic. First we frontload all the banks on one day so we don't have time to even examine them. Who knows was the best after Goldman Sachs. I don't know in the interregnum we get the first good quarter at Labs at ages. I I think you go much higher that United Health want to kick myself. They were there for the taking. I was too busy focusing on Kimmy K3 Schmidt and the moonshot whatever it was to buy off the book. Then we have that nasty Netflix with insistence that it gets 100% of the world watching. Better to work to get it to say mid- teens. I know it wasn't the perfect quarter. I know they're trying to get sports right, but I also know it's a tough road. Not a lot of humility, but when they were crushing it, they didn't do a lot of gloating. Now, I want to do some shameless self-promotion. I don't know if you're aware of what's known as the home stretch. This is a fabulous bulletin for members of the CBC Investing Club that tells you in the mid-afternoon what's happening and shows you what could happen next so you can take action on it before the close. For example, tomorrow we have General Motors. I found myself wondering what would constitute a good quarter for the company. What am I looking for? GM is a stock that tends to move down on earnings day, usually after blip up. And then once earnings day is done, people realize they just sold a company that's incredibly lucrative for no reason whatsoever given that it trades just about six times earnings. My father used to sell scotch tape and sasheen ribbon for 3M and they always treated pop well, much different from the others he worked for. So I'm partial to the company. It's got this terrific past t-shirt manufacturing and it's not dependent on the data center. I've been following the work of CEO Bill Brown closely. I think a breakout's coming. Uh the home stress also flag standard. Here's a stock that is quietly moving up. This time without my travel trust. Healthcare and science stocks are going higher. This one fits the bill. The market's been kind to uh Novartis. And if he gets hit on any one particular drug, you might want to step up because it could be a non- tech day tomorrow. Remember these tech days are either up or down. Mostly down. So you need something in case tomorrow's not like today. The inconsistency maddening. Finally is Charles Swap. Now, this is a tough one because we keep hearing that it's vulnerable to those who want to poach clients who don't get as much return on their cash balance at Schwab. I can imagine some other broker offering some sort of sweep one day using AI. But right now, I think we had to just take a hard look at what the stock does after reports. The home stretch is one other thing. It breaks down the most important stories of the day. This time, it's how Alphabet's trying to come up with a chip that allows it to versify away from, yes, Nvidia. Given that Microsoft has aligned itself with AMD on a new chip, causing AMD stock to sore, I would say it's still one more day when the knives are sharpened and Nvidia's the target. I wanted to let you know about this home stretch feature because when I was away in British Columbia with limited wireless, I was desperate for the zeitgeist. What was really going on those days? All I just tuned in to what our director of portfolio analysis, Jeff Marx, writes about and I didn't need to bother with much else. That was terrific. When you're with your kids on a fishing, kayaking, and nature ride adventure, you don't want to waste your time and you don't want to get caught looking at the market. The Investing Club's Homestretch Bolton, therefore, is the ideal way to go. Alexa, as always, market prop just for your right 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.