Mad Money 10/09/26 | 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 Kramer. Other people make friends. Hey man, I'm just trying to make a little bit of money here. My job is not just to entertain you, but to do some teaching. So, call me at 1800 743 CBC. Do we beat Jim Kramer? No more guesswork. We're about to go into the wide world of earnings season. So, we don't need to hang on every little data point to figure out where to put the money in the market. Oh, we had a nice rebound today. Dow gaining 423 points. Has to be advancing.59%. NASDAQ climbing 64%. Would have liked that to be a little bit higher. We reassessed how well tech companies are really doing after a jarring day of mistaken assumptions about an artificial intelligence slowdown. More on that later. I think we need to rebel against the persistent idea that somehow all these trillions of dollars in AI infrastructure spending will prove to be the biggest fool's game of the century. When the greatest investors of our time, I'm thinking about people like Mark Zuckerberg, yeah, Elon Musk, Sadell at Microsoft, all decide that they need to spend big money to meet the demands for AI. I tire of these Wall Street pundits, hedge fund manager tell us, hey, the trade is over. Not according to the largest companies on earth. We're going to we're tell I'm going to explore that tonight, too. And not in a happy way. But the correction to the correction is now behind us. So, let's go to next week's game plan in a kind of a truncated week. All right. And uh I said Monday uh very quiet, no serious earnings or numbers. Tuesday, here it goes. Plethora Bank earnings. Now, these stocks have been coming in way too hot in previous quarters, but the banks have been some of the worst performers of late. So, I think they're priced for disappointment. You know what? If they don't actually disappoint, we might actually catch a rally. Which which ones am I thinking about? Well, first is Goldman Slacks. That was my name for Goldman Sachs, which we own for the Chapel Trust and I worked at. We're telling club members that there's more to Goldman than just IPOs and M&A, of which, frankly, it's been very little. There's bond issuance and trading in an environment where the volatility has been so incredible. Something is usually good for Goldman's bottom line. And Goldman stock has dropped from $1,153 to $895. Can it really be that bad? Wells Fargo's been clubbed up of late yet I believe that this stock another CNBC investing club name is truly ready to roll. The stock sells at just over 10 times next year's estimates making it one of the cheapest stocks. I think it's going to give you both growth and better net interest margin. I think Charlie Sharp the CEO CEO is fired up to deliver. I think it's right here. On the other end, JP Morgan reports too. Now this bank consistently does well, but it stock is priced for that. It's priced for consistency and that makes it a little bit dicer than the other especially when its brilliant CEO Jaime Diamond does have a tendency to say things that sound borderline apocalyptic on a conference call. I fear he'll go there if he asked about AI. I just want to know how the business is doing. I'm oldfashioned but not not a slew of downbeat warnings please about a future that he claims will also be very right very bright at the same time. I don't know. Can you be I hope he doesn't put the odds of all of us dying in 2030 and May only like 5%. That would all be a bummer too. Next I've been telling you about the City Group is the one to own for any season. I've been doing that for a long long time. Then the last time I got it wrong. Uh so now I got to see if they regroup. CEO Jane Fasure done a remarkable job. She's incredible turnaround city last quarter just okay. It's not all banks. We also get the results from United Health Group. I think that company's ready to return to its old beat and raise greatness. comes out at six o'clock. It's like I think they write the headlines before it comes out. Beat and raise and then it comes out. Now, the what I want to address though, and I think it's a little tricky, but we're gonna go there because I want to make you some money is Johnson Johnson. I am willing to say that J&J is a top 20 company in this country, but it stock is a terrible trader. Now, what do I mean by that? I'm not talking about absolute performance. The stock's up 26% for the year. When I say J&J is a terrible trader, I'm talking about how it reacts to earnings. As soon as the release comes out, the stock tends to jump up and then it starts a sickening slide down, a real pyouette that seems to last into early part of the conference call. Usually in the middle of the call, by then, we begin to realize something special is going on, that things are better than expected, and then people start buying the stock back, but not before a lot of money is lost. It is agonizing. With 18 potential blockbuster drugs in the pipeline, among the best cardio and oncology franchises, J&J needs to be bought when the stock gets crushed. You need to be nimble. It's almost always that way. It's going to be that way probably again. Now, if you buy the stock in the tsunami of red ink in the wake of the published numbers, but before the call gets going, I bet you're going to get what we say is a terrific basis in J&J, your starting point. So, keep that in mind. Giant position for the travel trust has been for ages. Wednesday, we're on macro watch. We get the consumer price index. Fed chief WSH wants to shrink inflation. I'm with him. And believe it or not, I'm starting to see some signs that he's getting it under control, excluding oil. Will the CPI provide any relief? It may be too early for a single 25 basis point rate hike to have the kind of impact that we need as a nation, but I think it could be a nicer start than people realize. That'd be terrific. Then we have the producer price index the next day. We're watching inflation like a hawk these days. And to do that, we have to care about more than just the CPI. We need to see how embedded it is. Before we come in on Wednesday morning, it was a Dutch company called ASML. They report they make these gigantic machines. They're like size of city buses, help manufacture semiconductors. We saw a couple of them when we were in Boise, Idaho, looking at that new foundry and at Micron. If ASML raises guidance and talks about solid demand, then you need to be ready to do some buying. And the ones you want to pick up are Lamb Research, Applied Materials. Those are my two favorite semic equipment stocks in America. Now, we've got three terrific financials reporting. Black Rockck, Bank of America, and Morgan Stanley. So many people think Morgan Stanley is just an investment bank. Wrong. It's also one of the biggest repositories of people's wealth and it's been incredibly successful at corelling young people who want to invest for the longer term. Needless to say, they also have a ton of super rich clients. Bank of America solid and solid means a quiet increase in stock. Black Rocks a stalward uh the biggest asset gather in the world. It's going to be good. Hey, by the way, Thursday really is a hose of uh of earnings starting with Taiwan Semi. We get a pretty good snapshot of its business earlier this week. But this is the earnings number we've been waiting for. Taiwan semi could control pretty much any chip stock if it's weak. If it's strong though, we could have a rally of immense proportions. Now, Nvidia closed really horribly today. I don't know if it can rally until we see TSMC. We also want to see if retail is slow. We're going to find out from the September retail sales numbers. The industry's been roaring at late and all that spending could turn out to be inflationary. You notice that theme that I'm giving you? individual investors become real forced in this market a way we really haven't seen since do come here now they've moved the averages and they're getting invested in lots of idea stocks I love that who knows more about what they're buying than Charles Schwab so we'll listen on that conference call too plus the company has an analyst meeting that day meaning we'll get a real good look at the business not much on Friday but remember what we're looking at here bottom line we have earnings we have to worry about oil and we have to start accepting that we're going to have a plus 6% long bond that's the 30-year Treasury because of demand for money from both the Treasury and private enterprise, chiefly data center investments. When it comes to bonds, there's too much supply and not enough demand for the moment. It's coloring everything and we need to respect how challenging the market can be when interest rates head inexraably higher. How about we go to Mike in Minnesota? Mike, >> how you doing, Jim? >> Mike, I'm good. How are you? >> I'm really good. I've been following you guys since day one. >> Oh, man. That's fabulous. Thank you very much. So my question is I'm holding Intel. I'm down seven or eight% based on today's close and earnings are at the end of this month. I'm wondering should I hold through earnings? >> No, you buy through earnings. Uh the stocks come down hideously from 115 to 104. It's really a terrible trader. I know they can't do a buyback. They just did a big issuance of 95 where by the way the CEO bought stock one. It acts terribly. I know that. But remember, it is up a lot and it has just become a lousy trader. When things are bad, it goes down more. When things are good, it goes up more. I'm not crazy about that, but that doesn't mean I don't like the company and that's what I care about. Oh, Skyler in California. Skyler. >> Booyah. Mr. Kramer. >> Booyah. >> I'm uh longtime viewer, first time caller all the way here from Sacramento. >> Oh god, I looked at I lived at 10th and B. Love it. Right near where all the honeysuckle is. This really smells great in the spring. I was living in my car, though. >> Yeah, >> that was the problem. >> Oh, >> all right. So, what's happening? >> Yeah. Uh, I am calling about stock ticker N. It seems like it's finally getting out of the low. What do you think? >> Well, it did have, you know, it's kind of a relative thing. It had a better quarter than most in that industry, but I don't want to touch that industry. I don't want to touch anything leisure. I mean like I don't want I I think oil is bottoming and that's terrific and new management is doing a good job. I think you could make a couple of bucks but it's a trade and I'm looking for investments and it is just a trade and thank you for watching. It's been watched forever. I think it's fantastic. Um bonds are coloring everything. We just have to accept that this is a different market when rates are this high and climbing and then we can start thinking about the actual earnings of the companies I just showed you. Oh man, money tonight. News of OpenAI's revenue shortfall since some tech stocks really tumbling yesterday. It is it really that big a deal? I'm going to crunch the numbers and earnings out of Delta showing a bright spot in the airline industry. Don't miss my analysis of the latest quarter. And yesterday was a reminder that if you're not diversified, holy cow, you're not going to be able to stay in this market. And that's why we're playing a round of Am I diversified? David 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 1800743CNBC. Miss something? Head to madmoney.cnbc.com. Midday yesterday, a jarring headline from the Financial Times hits the wires. Open AI annualized revenues $20 billion less than previously signaled. >> What a gut punch. The whole AI infrastructure complex immediately gets slammed. Nvidia's finishing down nearly 3%. Oracle which has practically joined the hip with open eye dropped more than 5%. Smaller new cloud names like coreweave got hit even harder off 8%. Sell sell the NASDAQ composite had its worst session since mid August. >> The house of pain. >> Now if this story is true then that's devastating for the entire AI complex. So is it true? Short answer not really. Long answer, this is a complicated story driven by obscure accounting policies that generated a blitz of confused headlines. So, you know what we got to do? I got to walk you through this thing because it's really unbelievable this could happen. As best as I can tell, the confusion started all back on September 29 when a couple reports said that OpenAI's annual recurring revenue had reached nearly $70 billion. Those stories initially came from Reuters and Axios, both citing inside sources. Then they were picked up by many other media outlets, not to mention a host of posters on social media. Gradually, everyone just accepted, see, well, at least seemed to accept that OpenAI had genuinely reached $70 billion in annual recurring revenue by the end of last month. That was the baseline assumption before yesterday, and it was a powerfully bullish. Then the Financial Times came out and said the $70 billion figure was wrong. In fact, the real number is more like 50 billion. That sure looks like a $20 billion less than previously signal miss, right? It looked to many as a major short shortfall and it crushed the entire complex. But the problem is these numbers are not apples to apples. To understand what's happening here, you need to know that OpenAI and Anthropic, the two leading AI labs, account for the revenue earned through third parties differently. Basically when you buy access to claude or to chat GBT you can do it directly or you can go through the big cloud infrastructure firms Amazon web services Microsoft Google cloud of course those firms they take a cut I bring this up because anthropic includes all the revenue from that type of third party sale as its own revenue they the cut that goes to AWS or Microsoft is then recognized as an expense but Open AI doesn't do that they only recognize the revenue they actually collect from these third parties. Apples to oranges. So, here's what seems to have happened. According to some much clearer reporting from CNBC and Bloomberg, uh you can get a real picture of how distorted things got. At some point in late September, OpenAI shared with someone, probably its own investors or the prospective investors, that if a company reported the same way that Anthropic does, its annualized revenue would be close to $70 billion. Presumably they were trying to give these people the apples to apples comparison to the largest competitor. Then what happened seemed to be a game of telephone. Someone who heard it that from OpenAI tells it to someone else and that person tells what they heard that from to a reporter from Reuters or Axios. Then that $70 billion number gets reported and since the story came from two different news outlets, well, it's got to be fact. Then the Financial Times gets his hands on this $50 billion revenue figure this week and they report as a major news story. Fair enough. Everyone thought the 70 billion number was real. So this makes it for a sexy negative headline. At first glance, it's a disaster for the AI complex. In reality though, these various news outlets were actually talking about two different numbers. The $70 billion is OpenAI's gross revenue, which it doesn't use for its own financials, and the $50 billion is his net revenue, which it does use. The business isn't doing worse than we thought. It's just that the just an errant comparison with anthropic got loose and people got confused. Much selling for nothing. Look, while we're on the subject, I need to also talk about another thing was going on and it's been driving me crazy. Both the Reuters report and the Axis report last week said that OpenAI's annual recurring revenue had reached nearly 70 billion by late September. Putting aside whether that gross revenue or that's net revenue, it really shouldn't be called annual recurring revenue. This is a real metric that software companies use to track their subscription contracts, hence recurring. The customers obligated to spend a certain amount of money at certain intervals for a defined period of time. While the AI labs do have some contracts like that, they sell subscriptions to Claude and chat to be GPT. They also have many customer arrangements that are basically consumptionbased. The amount you pay is based on the amount you use. And you know what? That's not recurring revenue. If we get a better version of catch GBT like OpenAI launched with Astra last month, then they could snatch a bunch of enterprise customers from Clawude. Anecdotally, that seems to be happening. Or those customers could just switch to cheaper openweight models. So again, I think it's wrong to quote these companies overall revenue totals as annual recurring revenue. What makes this so tricky though is that the more accurate term is the same acronym, ARR. It's the annualized revenue run rate, but that's just the revenue total for the most recent month multiplied by 12. You can say, "Who cares?" Well, I care. That's who. Because annual recurring revenue is more durable. It tends to get a higher price during multiple. Uh when you're trying to value a company, Wall Street pays less for non-recurring revenue than than they do for recurring. Too episodic. It's a major difference. And it's the journalists get it wrong all the time. Some same goes for, by the way, for the distinction between gross revenue, net revenue. Given that these AI labs are either not very popular or genuine money losers, they're most likely going to be valued on a price to sales basis. But that means you need to use the right sales numbers. You're going to end up overvaluing the company. In the end, I don't think OpenAI did anything nefarious here at all. Certain reporters eager to get some sort of scoop about the state of the business got confused about what exact metrics they were hearing and reported something that lacked crucial context. Of course, OpenAI could have they they could have saved everyone a lot of trouble and corrected the record when those reports were coming out last week. Although, as a private company, they're under no obligation to disclose that to the public. But the real takeaway here is that nothing actually got worse yesterday for Open AI or the broader AI ecosystem, even though some of these stocks did not come back at all. When I did my checking, I heard things actually for Open AI were better than expected. still this point. This only goes to show that we really need to see the details of these AI labs financials because until we do know more, there's probably going to be a lot more days like yesterday when the whole cohort gets hammered on pure confusion. Now, this should happen whenever uh anthropic IPO perspectives is revealed to the public, which should be the next few weeks. If a company is still targeting a mid November IPO, the sooner we get these numbers, the sooner we'll know if all of this AI capital spending by the hyperscalers has been worth it. But the bottom line in the past two days what what's been what we've seen is that we can't wait for these leading AI labs to open the kimono and show us what they've really got financially speaking because until that happens too often we'll be trading on hearset and hearsay a very quick way to lose money's back after the break coming up was delta able to land a strong quarter kramer's calling up the numbers to find out. Next, when the price of oil is at $91 a barrel, the Fed's hitting the brakes on the economy with rate hikes. You'd expect that to be a nightmare scenario for the airlines. For decades, these were textbook boom and bus stocks and the bus were brutal. It's why I have stayed away from them for years. But lately, I pointed out that the top airlines seem to be transforming into something more durable with loyal business customers who consistently pay up for the best seats at the front of the plane. That thesis is really being put to test here. But right now, I really like what I'm seeing. This morning, Delta Airlines, one of the best, reported a small earnings miss paired with a similarly modest revenue miss. Worse, they did slash their fullear earnings forecast by 24%. That's big. Management now saying they could earn $510 to $5.60 per share, which is down from 650 to 750 range. That were the estimates. But after opening lower and trading down nearly 4% this morning, the stock battled back all day and turned positive just before the close because Wall Street saw this coming. And Wall Street was right. At the same time, they're talking about earnings of $1.15 to $165 for the current quarter. The midpoint's only 3 cents below what the analysts were expecting. Delta's even guided for 20% revenue growth when Wall Street was only looking for 18%. Basically, they're taking a terrible beating on profitability from high fuel costs, but demand for flights remains strong. Delta paid an adjusted $361 per gallon of jet fuel, up 60% year-over-year. The adjusted pre-tax profit was roughly $ 1.5 billion for the quarter, up about 1% from last year. For the full year, they're looking at a six $6 billion increase in fuel costs, but management believes they can put up a pre-tax profit of 4.5 billion. That's only down 500 million from last year. That's incredible. Delta's been able to generate enough additional revenue to offset most of the damage. All right, so I mean I th this was really kind of an impossibility how they how they pull this off. Okay. The company's premium revenue grew 18% to six $6.82 billion. They're now making more money from first class, business class, and expanded leg room seats than they are from Coach. Premium sales increased 6%. But on the conference call, we heard an especially encouraging detail. Premium load factors rose almost two percentage points, which while fairs also increased too. Delta added premium capacity, filled more of it, and charged more too. This is the best kind of demand, and it's proving to be pretty sticky. This is the long on money, short on time customer that I always talk about. After co people who have been stuck at home decided they want to make up for lost time and what do they do? They travel. They get an experience. I thought that might be temporary. Increasingly though, it looks like a lasting change. The same way that the Great Depression permanently soured my parents' generational banks. Now this morning, Delta CEO Ed Bashing came on Fox to speak with our own Phil Leau. He said he wasn't seeing a slowdown in bookings. the conference call, we learned that the fourth quarter was already more than 60% booked with encouraging early trends for the first quarter of next year. Even prices are up. It's incredible. Even inflation squeezing the consumer, Delta's well healed premium customers, they don't seem to know the difference. And look, the strength extends beyond the front of the plane. Main cabin revenue increased 12% with unit revenue uh up 17% while seats declined modestly. Across the company, capacity was essentially flat while revenue rose nearly 16%. In the old days, the airlines would expand aggressively when times were good, then get pancakes slow slow when the economy slowed down. In more recent years, they've been a lot more disciplined about adding new capacity, and now it's really paying off. It helps that there aren't a lot of planes for sale from either Airbus or Boeing. Corporate sales grew at double digit rates across every sector, led by banking, technology, and energy. The week after Labor Day was Delta's strongest corporate sales week in history. Can't make sense. That's unbelievably good. More than 90% of respondents to his corporate survey expect travel to increase or remain stable next year. Domestic international unit revenues also improve broadly. That's fantastic. I mean, in the Zoom economy, that wasn't supposed to happen. It's obviously happening. Then there's loyalty. This year, Delta's on track to receive more than $9 billion from American Express Sky Miles Partnership. Card holder spending grew at a double digit clip for the eighth consecutive quarter. The rewards program is arguably the best part of the business. The company also has outsourced airline maintenance business that saw 28% revenue this past quarter. Just through September, it's brought in about a billion dollars. Delta thinks they can more than double that business over the next several years. Basically, this airlines is much less hostage to actual flights than it used to be. Oh, within the core airline business, it certainly doesn't hurt that Delta led the industry in on time arrivals and departures this quarter. No wonder premium customers are willing to pay up. There's finally an airline that gives them decent service. Now, the fourth quarter outlook assumes jet fuel approximately $4.25 a gallon, including a 40cent benefit from Delta Refinery. They own a refinery. That refinery provides a very useful offset, but it's not enough obviously to cancel out the impact of oil at $91 a barrel. So Ed Bastion painted a pretty darn bullish picture long term. Delta's been raising fairs to recover th those fuel costs and so far there's been limited resistance from their customer base. Once the war with Iran ends or at least fizzles to the point that oil can come down, this airline will be printing money. Of course, that assumes the rest of the industry stays disciplined about adding new planes and holds a lot on pricing. But I'd be willing to bet take that bet because there just aren't enough new planes that can be bought and Delta is in much better shape than it used to be. The analysts are seeing the same thing. Wolfe emphasized the company roughly spending earnings despite the fuel shock suggesting that Delta's accelerating unit revenue could stand out against competitors. Jeffre liked the revenue momentum. UBS viewed the results as solid. Bernstein tab more cautious about cost and the fourth quarter outlook. Goldman noted the strong revenue guidance largely match investors expectations. But look at this. The price targets here got an $82 stock. Wolf is a $90 price target. Jeffy's 95. Bernstein 100. UBS 105. Goldman Sachs 114. That that's a real vote of confidence. With the numbers being missed, these are beautiful price targets at these levels. The stocks trading just over 10 times next year's estimates. Not expensive. UBS and Goldman are looking for Delta to earn more than $8 a share next year. Consensus is about lower about $7.68. Those forecasts depend on fuel, fairs, and cost, but the recovery potential is pretty meaningful. If the earnings also become more predictable, investors could eventually award Delta a higher price to earnings multiple. And that is the old that's what we I talk about how in the book how you can get a higher PE and that's how a stock can go higher. All right, how about the latest broadside from Elon Musk? solved this problem. When Delta picked Amazon's forthcoming satellite internet service, LEO for its next generation inflight Wi-Fi rather than Starling, Mus predicted that Ed Bastion would lose his job over this. Regular viewers know I like Starling. Maybe I love Starling. But in his interview this morning, Bastion basically refused to engage with Musk. He stayed focused on the customers and the business, which is doing much better than has any right to do in this environment. So, let me give you the bottom line this very encouraging, terrific story. I'm not rushing to buy an airline, okay? Uh not into the fuel spike, but I buy the story that Ed that Ed Bastion told Phil Labau, Delta's putting up incredible numbers to the point where they're able to offset a huge chunk of the increase in fuel costs. Once the price of crude comes back down, I think they'll make out like bandits. There's a reason the stock bounded hard from its lows this morning and finished the session in positive territory. The reason is Delta's better than ever. Now we're gonna go to Stanford in California. Stanford. >> Hey Jim, how you doing today? >> I am doing well, Stanford. How are you doing? >> I'm great, thanks. Uh, I want to get your thoughts on Otis Elevator. I know they have some exposure to the Chinese housing market, but I know the stock's been pretty well punished. >> Okay, now this is a tough one because Otis, candidly, uh, China's not been great. They're really much more in the service revenue game. Um, the stock has come down. It's down to 20 down 24% for the year, but I see no catalyst. Without a catalyst, I can't recommend a stock just cuz it's cheap. All right. I buy the story that Delta's head bastion is telling once fuel prices normalize. I think Delta could be in a great position. Now, much more man including Kramer favorite game and my diversified and Wall Street financial media love to get stuck on esoteric terms. But I think it's time to retire one of them that's really getting on my nerves. You want to hear about this? I'm going to explain and while your call is rapid fire tonight just the lightning round so stay with the S&P is near record highs but that doesn't mean you shouldn't be prepared for volatility in this market when one article about a private company can send an entire cohort of stocks give them to the red it's a reminder that you need to be diversified if you want to stay afloat and stay in the game that's why tonight we are playing am I diversified That's where you call in, you give them your top five Bible holies. And I tell you, if you're diversified enough or maybe you need to mix it up a little. We're going to start with Mary in Idaho. Mary, what do you got for me? >> Well, Jimmy, it's been a minute since I talked to you. Happy TGIF. >> Oh my god. Yes. >> Yeah. Great day of the week. Uh I I finally gave up on Chewy. Much as I hated to, I just couldn't bear to see it go down any further. I hear you. You're We're a user, but you know, I mean, that's about the extent of it, isn't it? >> Yeah, it is. I mean, I I can't envision ordering dog things from anywhere else cuz they are so good. >> Um, true. >> But, um, sometimes you just have to close your eyes and say it's going to get better. >> All right, so let's go over what we got. Uh the five stocks I have are my two own it don't trade it Apple and Nvidia. Um Marvel JP Morgan and Amazon. >> Wow. Okay. All right. This is a little tough for me, Mary. Uh yeah, I can't I'm not going to try to tell you to sell one of these because I say it don't trade. Hey, we had good trade. They always said buy Apple down there. I get 332. Um, but here's the problem. And JP Morgan, I think it'll put a good quarter. Not a great quarter, good quarter. The stock's a little bit too high versus the others. But that's okay. It's a nice steady slope by J by more JP Morgan gets hit. All right. Now, these are ones where Matt Murphy runs Marll and I've known Matt for years and we got Andy Jassu on Amazon. Uh, these are both trading together. And the notion of being diversified is you don't want to have too many stocks trading together. We are going to have to Matt Murphy close your ears. We're going out to sell Marll and we're going to buy some J&J next week when it reports. Okay. So, we're going to sell Marll Monday and buy some J&J. We'll let you keep Amazon for right now because Amazon right now is being much more of a I mean, look, I should I should tell you to sell the Amazon, too. I just don't want to do it. I don't want to sell all the stocks I really like. Mary, I'm making an exception for you. I happen to love Amazon, but this has too much tech and you will get hurt on a bad tech day like we had yesterday. But, thank you for the call. long bed you got out of the Chewy. Can't can't seem to hold the the can't seem to hold like the 25. All right, next up we've got Joe in my home state of New Jersey. Joe, >> hello Mr. Kramer and uh thank you for taking my call and I just want to let you know tomorrow I will be in Lavallet surf fishing and I still haven't gotten a stripe bass. Hopefully tomorrow is the day >> I You will man I fish there. I fish Normandy beast with Fordo. You know, I do a lot of fishing in that area. I love LBI fishing. Love >> my five stocks are Apple, Costco, Cisco Systems, Microsoft, and Merc. Mr. Kramer, am I diversified? >> All right. Now, this is another tough one. Joe's got me over a barrel here. Well, obviously I like Merc, and I I think that they are doing incredibly well. It's just been a good good period for them. Sold a bunch of number bumps today. Um, uh, Costco. I go to my Neptune Costco down there, Joe. I don't know if you passed the Neptune Costco on the way down to Lavallet. If you did, you'll be taken the wrong way, but that's okay. It's pretty good. Um, Apple's on it. Don't trade it. So, now what do we do? We have Microsoft and Cisco. Now, I got Deacon. I mean, I don't know. Chuck Robbins is probably listening. Chuck never misses the show. Chuck, we're going to have to get You have to trade your Cisco, Joe, because you got to go in. You got too much too much tech and I and wherever we look we've got data center exposure whatever I think that you need to be thinking Wells Fargo I really like Wells Fargo they report next week I think it' be very good Microsoft again Satcha I love Amy Hood I mean like I'm looking at my executive Bruce knows how much I think of Amy Hood great tremendous commencement address at Duke this year uh and for instead of that one instead of Microsoft I want to go with RT RTX and I'm going to go with RTX. We're in Boeing right now. Um, but RTX is down worse than Boeing even if you can imagine because there's also a defense just for this moment and I want to see how that acts. But anyway, I I I have to make these changes because yesterday this portfolio was killed and that's not what people want. Now, let's go to Tony in Florida. Tony, >> hey Jim, thank you very much for everything you do. I know that, but I really mean it. It's >> Thank you very much. Well, I'm going to keep doing it. Don't worry. Okay, let's go. >> I I hope you do. Uh, my five stocks are Amazon AMZN Diamond Properties, SPG, Pala, Alto, P A N W. Then we got CVS and Verizon VZ, MIV. >> All right, let me go to work on this. Yeah, let me go to work on this. Okay, Verizon, we saw how they they were crushed today by uh the fact that SpaceX is is going into the inner cities, which is going to be in in skyscrapers and everything. Uh it's it will probably bounce. But I directly believe that when SpaceX comes in, as I'm a user of SpaceX, then everybody else get does indeed eventually get blown out. So, we're going to keep that, but we're going to be mindful that I would rather see in SpaceX. CVS, we passed the test of those uh the star test that we were worried about uh for the plans. CVS did fine. Uh we're going to call that healthcare now. We're not going to just call it retail. Uh Palo Alto Networks and cyber securities that they do this is the cash Aurora who my soul was with the president and I thought that was terrific. Nesh Simon Properties I was in beautiful Simon Property Mall about 30 minutes from Florence was fantastic. The late David Simons built an amazing company. And then Amazon, we were trying to call that a data company earlier or a retailer. I think you could do both. Healthcare, retail, um a real estate investment trust, cyber security and telco. That's perfect. I'll take that. I mean, I know, you know, some people say, "Well, Jim, come on. Amazon and Pal and Palo Alto." No, I'm willing to accept that. Those are two different buckets. Any want to thank everyone for playing on very very difficult because everyone's so in riddled with tech. We got to be very careful. Go check to see my portfolio that I have for the CNBC Investing Club for some more diversification. Everybody needed it. And Mike's back everybody. It is time. It's time for the white sound. And then the lighting round is over. Are you ready, Steve D with Richard New York? Richard Jim. Thank you for taking my call, sir. been a good listener and I've done a lot of I owe all my success to listening to you and I appreciate it. Thank you very much. >> Thank you. A little pride. Thank you. >> This is the longest day. I thank you for that. >> You're welcome. I'm calling about a stock Cort Cortiva which I've owned recently. It got spun off with Wiler and there's a compelling reason to keep or I mean for both to be successful. What do I do? Do I keep two? Do I >> I want you to We did a pretty good analysis. Uh Ben Stoto, our the chief research director and also our only research director. Um really was that he and I would beating around this thing and there's absolutely no reason why you would want to own this one uh over the Bor, which is absolutely a better one, I think. Let's go to Bobby in North Carolina. Bobby, >> hey Jim, I've been watching you all my life. You are you are you you you are legendary. I want to commend your beautiful staff. They never gave up on me when I'm impatient. My store is onto O. I do I do not. >> All right, here's what I want to do. You're obviously really fired up and I really like that. And we're going to take a harder look at onto because it's another one of these companies that's process control solutions and they're all really hard to understand. And I'm going to give you because of the way you came in fired up a better read than I can just say I like it. You deserve better than that. Let's go to Larry in New Jersey. Larry, >> hey Jim, a big booya here. Larry Clark from Wayne, New Jersey. >> Oh, great. I like Wayne. What's going on up there today? >> Good. Good. >> Do some paintball there. >> We'll do some paintball. What's going on? Right. >> Well, we got a big ball here as well. uh call calling about a real estate mortgage rate as opposed to the mortgage rates which have been getting hammered lately. Uh company owns properties 220 hotels in highend suburban areas and all the urban areas as well. >> Mhm. >> So Sherins >> high in hotels in Mar. >> I know it the problem I know, Larry. Here's the problem. If I think rates are going to go to 6%. If I think R's going to go 6% then I can't own that. I can't own that sock. You're gonna end up losing money to buy that sock. And I think rates can go to 6%. Uh let's go to Doug in Virginia. Doug, >> hello Jim. It's an honor to speak with you. I'm a first time follow Yes. >> Excellent. Thank you. >> What's up? >> Yes, Jim. I'm interested in your opinion on Echoar in light of their deal with SpaceX for a long-term investor by >> Okay. I have to tell you, I I I read today a very informative piece about how Echoar could get a bid from SpaceX and I I I it was very compelling. I've not liked the stock, but I certainly can't I cannot be oblivious to that takeover talk. Let's go to Jerry in Illinois. Jerry, >> good day, Jim. I'm probably one of your earliest followers. I've been a member of the club forever. >> Oh, thank you. I love me. >> Jim, courtesy of Jim CL Jim Kramer and Mad Money, you put my son through college. I'm forever grateful. >> Thank you. I can't make my question. Thank you. I mean, I'm not making this up. I mean, I don't know this caller and and Jerry from Illinois is kind enough to say that. And thank you, Jerry. Thank you. >> It's a fact. It is a fact. We're heavy into Eli Liy. Uh my wife must branch out to a company, Jazz Pharmaceuticals. >> Okay, now you're starting to go into a very speculative situation where they actually do make money though. I'm going to say I'm going to say yes to Jazz Pharmaceuticals. I think the biotech between here and the JP Morgan conference going to do very well. I like that one and I thank you for the kind comments. And that lends the conclusion of THE LIGHTNING ROUND. THE LIGHTNING ROUND is sponsored by Charles Schwab. We need to do something. We need to retire the term trade as in the AI trade. That's the wrong way to speak about a gigantic industry that's very much here to stay. Far too often we hear traders query, is the AI trade over or is the AI trade dead? That's confusing to you. When you talk about the AI trade, that makes it sound like there's this group of high-flying stocks that are always on the verge of collapse. That couldn't be further from the truth. Take the last 48 hours. We've heard about this small Australian data center builder that's had to pull its IPO. But the deal was poorly structured and priced much too high before it was pulled. More than half of the insider stock could have been sold as soon as the darn thing started trading. That's insane and stupid. Normally, the vast majority of insider selling is frozen for at least the first six months. Nobody questioned the unbelievably boneheaded structure of the deal. All I heard was, "Is this it? Is this how the AI trade unravels? Is the AI trade dead?" Then we heard about the alleged slowdown in Open AI, the one I talked about earlier. We got the same nonsense. There are so many Chicken Littles out there. It's amazing that anyone owns these stocks. Some people seem bent on bad mouthing this group. No matter what happens, but what I think people are missing is that when the largest companies on earth are spending hundreds of billions of dollars, believe me, they aren't just participating in some trade. They're investing in something that they are certain will make them a lot of money and they are smarter about their business than we are. The idea that it's all just going to unwind or collapse because some poorly structured Australian IPO, that is far nothing. Now, it is true that a hedge fund using way too much leverage imploded back in July situational awareness and that temporarily crushed the entire AI complex. That made us feel like the whole group was fragile because how else could it be laid low by a single hedge fund. But that fund controlled billion tens of billions of dollars by using margin. They bought stock on margin. They didn't really understand it. And in that way it is possible to bring any stock down if the stock starts going down once you have a huge position on borrowed money and then get forced to sell it all at once. That happened to many of the stock that this hedge fund owned. Uh it the the person who ran the fund only had eyes for AI and the person who ran the fund didn't understand the ramifications of trading with borrowed money. So what should we call the AI trade? Look, there are companies that build data centers and companies that provide power sources. There are companies that provide components. There are companies that have data storage both in the cloud and the flash drives and hard drives. In the end, I would call it the artificial intelligence industry because that's what it is. Sure, there's the huge assemblage of NVIDIA chips controlled by SpaceX. They generate what's known as compute. You can call it the compute industry if you want. Compute can be bought, sold, and traded. Right now, SpaceX is getting about between three and four billion dollars a month from several hyperscalers that need the ex extra compute power. That's not what I am talking about when I mention the AI industry. I'm saying you have to consider these companies as part of the say new oil that runs the economy. It's everywhere. It's pervasive. And if you don't use it, you're riding around a horserawn carriage just waiting to be steamrolled by the competition. Listen, at one time Standard Oil had almost 100% of the oil market. It was a monopouist. Government broke it up. Although that although by that point they didn't really mind because they just made even more money as separate enterprises. But what matters is that Standard Oil pioneered a product that became a universal in uni universal with trillions of dollars in infrastructure behind it. Was it a trade? No, it was an investment as were many oil companies, oil service companies pipelines refineries gas stations. AI is a new oil. It too is an investment. Let's call it that and recognize that it isn't going away whether some Australian IPO doesn't do well or we have a bad headline for the Financial Times. The sta standard oil could never be taken away. It wasn't possible. There will just be many companies created to exploit what we now see in this version of Standard Oil. You can call them a lot of things, but a trade it isn't one of them. I like to say there's always a world market somewhere. I promise I'd find it just for you right here on May of Money. I'm Jim Kramer. See you Monday. 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.