Meta’s Rally Keeps Rocking… And A Major AI Safety Warning 9/24/26

CNBC's "Fast Money"

The episode explores a period of intense volatility in the bond market, with Treasury yields reaching multi-decade highs and impacting mortgage rates.

Key takeaways

• 10-year Treasury yields reached 5.2%, a level not seen since June 2007.
• Meta shares saw significant gains following the unveiling of Muse AI hardware and agents at the Connect conference.

Main topics

• Treasury Yield Surges
• Meta AI Strategy

Notable quotes

The countdown to too big to fail starts now.

Conclusion

Investors face a complex landscape where strong economic growth and AI

Transcript preview

Speaker 2 (0:00) From gas prices to housing prices, from government spending to consumer spending, from the AI boom to the data center backlash, how will this election hit your pocketbook and your portfolio? Continuing coverage, The Economy Election, CNBC. Speaker 5 (0:16) Live from the Nasdaq Market site in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap tonight. A monster move in meta. Shares jumping again today and on pace for their second best month on record. But is a news-led spark sustainable? We'll debate that. And Presidents Trump and Xi holding high-level, high-stakes meetings in Washington. All the headlines from the bilats and where the relationship between the two superpowers stands right now. Plus, Treasury yields mark another big milestone. Oracle sends a warning about its status center build-out. And countdown to Tesla's semi-launch. What should we expect from tonight's rollout event? And will it move the needle for the EV stock? We'll get some answers. I'm Melissa Lee. Coming to you live from Studio V at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan, and Guy Adami. And we're going to get to Meta in a moment, but we start off with another massive move in Treasury yields. Ten-year rates yields hitting fresh 19-year highs, surpassing a 5.2 percent level for the first time since June of 2007. That is after a 15 basis point jump yesterday. That was its biggest gain in over a year. Long-term 30-year yields hitting fresh 22-year highs, passing the key 5.5 percent level, while two years inched even closer toward 5 percent. What does it say that we... didn't see a pullback today, Guy. Speaker 1 (1:32) Shocking, actually. Again, we play the game. If you had told me, well, Mel, if you had told me you'd have a historic move yesterday in the bond market, followed by this move today, where's the S &P? Down easy, 150 handles. And obviously that's not happening. It's incredible to the VIXs where it is. I'm surprised that the equity market doesn't care. But I guess it speaks to the power of passive investing and the fact that flows continue to come in. But something is going to break here in the bond market in terms of credit. Just given that this is the largest economy in the history of mankind, you should not see moves of this magnitude over the course of a couple of days. Yet here we are seeing it. So I think you've got to be sort of forewarned as far armed here. Speaker 3 (2:10) I'm thinking I'm not sure what it is, but if I had to guess to be the most likely, those PMI numbers showed really significant strength. Right. And so if the reason we're going up is because the economy is really humming along and things are getting better. Right. Growth is there. Then, you know, clearly that's positive for most companies earnings for those that have debt and that debt's rolling over and it's going to be higher. That's problematic. But for so many others and certainly the ones that have been driving this rally, that's not problematic for them. And so that that would explain it. I still find it confounding. Right. I still am amazed at the at the move. and how quickly the move has happened. But those two things are consistent. Economy growing. Absolutely. Well, Speaker 4 (2:58) here, let's connect. Other things, right? If you think about it, so if you think the economy is humming and a lot of the data suggests such, like what percentage of that or what part of that is coming from the data center demand, right? And if you think that that is like a big part of it, which it has been as far as GDP growth year over year, and then you think about where yields are and you think about how that AI build out is going to be financed going forward, a lot of it's going to be with that. So when you have this sort of move, you know, in such a short period of time with yields in general, and we're not just talking about the 10 year here. Does that become a bit of a challenge for some of that build, which feeds its way into, you know, ultimately growth? And when we think about it through the lens of S &P earnings, you know, we know that that's a big part of S &P earnings. This year, one of the biggest contributors is Micron. Think about that. Micron. This is one of the most cyclical companies that we have all known for a very long time. They had negative gross margins three years ago, and now they're off the charts. They're not going to be able to sustain these. And there's also been some reports. out there, this Raspberry PI guy, I know, Pi, whatever, you're all over this, but they're talking about peak memory sort of prices, right? And so at some point, if you sort of see those sorts of pullbacks, then at the end of the day, a lot of this is attached. And then you see with yields, look at where the dollar is, the Dixie. I mean, this is getting back up to 52-week highs. And you say to yourself, OK, well, it's hitting a level that it's been to five times over the last couple of years or something like that. But as we get into earning seasons and we hear from multinationals, Right. And we start breaking out more of these non-operating gains. I got to tell you, that's another thing. If you think about how much of the earnings growth is coming from markups and open AI and Anthropic and SpaceX and the like. Well, what would ever happen? If Anthropic and OpenAI, their value started going lower. If you look in the public markets, a lot of their comps, and let's put meta aside, they have actually stalled out. They've been actually going lower over the course of the last year. You know, NVIDIA is trading at the same spot it was six months ago. It's not making up any ground, and it trades below a market multiple. So, again, I just think there are definitely some reasons to get your antennas up as we get into Q3 earnings. And really, it's more about Q4 guidance. For Speaker 5 (5:05) NVIDIA, you can say, OK, but AMD and Intel are up. the data center. Okay, so let me ask you this. Speaker 4 (5:10) Jim Chanos, who I just spent a lot of time talking to earlier today, he said, why in the world would any of NVIDIA's customers trade at some sort of better multiple than NVIDIA does? They're the ones that have the lock on GPUs, that sort of thing. So you're affording these companies that are growing fast, they're buying the chips a higher multiple than NVIDIA? That doesn't make a lot of sense. I know you're long NVIDIA, but I'm just saying there's a lot of curious things going on. Speaker 5 (5:35) Tim, what do you make of it? Because there is an argument that, you know, you know, a quarter of percent move higher, one percent move higher on yields will not impact the data center build out. Because what is the return on investment that they are getting much greater than the amount that they have to pay for that debt? So what is the problem? Speaker 2 (5:53) Well, well, we think and I guess the short end of the curve has really told you that this is not just a dose. Remember, again, the Fed meeting and then the follow up comments, you know, the two year. Going from 420 to 492 or something in the same amount of time we've been talking about the 10-year is as important. I do think this is a case where you look at rates and you look at also what the Treasury has been doing and at least attempting to influence or at least the technical side of what's been going on with these buybacks. There was another one today. They didn't buy what they wanted to. Since Scott Besson started talking about the long end and all the power that they had to do it. rates, long rates have gone up 50 basis points. Karen's right. The PMIs are a big part of this. I mean, the cyclicality PMIs manufacturing has gone up 12 straight months in this country. So that's great news. And I know we're not a manufacturing economy. This is feeding through into services, prices and labor costs. And I think it's ultimately somewhat inflationary. So I don't think we have a dose. I think we have multiple doses. The question is how many. The rest of the world is going significantly higher. Equities should be responding. I think they will at some point. And we're going to talk about meta in a second. I'll just weigh in on NVIDIA. I like NVIDIA here. I mean, I'm very comfortable with the valuation. I recognize there's a lot of unknowns. And as I said before, it trades like a holding company, maybe as it should. But they are, I think, very much in the lead of this arms race filled out, and they're in control of a lot of these players. Speaker 1 (7:26) How long have Speaker 2 (7:27) we been doing this show? Speaker 5 (7:28) It'll Speaker 1 (7:28) be Speaker 5 (7:28) 20 years in January. 100 years. You just started showing it. Speaker 1 (7:33) If we get to January, number one, it's important to say that because you never know. There Speaker 2 (7:37) are Speaker 1 (7:37) no guarantees. Don't knock on anything. But do we ever really talk about Treasury on this show? Not really. And we're talking about it. A lot more than we historically have. Now, I'll throw this out there. If it was just an economy thing, and I understand PMIs are very strong, I don't think Treasury would be as concerned about rates going higher as they clearly are. I mean, they're concerned for reasons that I think... are non-economic. I think they see some of the problems that are out there. Economy notwithstanding. Oh, you Speaker 5 (8:03) don't think it's just a political thing? We don't want mortgage rates to be so high? It's interesting. It's an easy Speaker 1 (8:08) explanation. I would think it would be an easy explanation. If the economy is as strong as everybody seems to indicate that it is, the natural course of events is that yields go higher in the back of a strong economy. That is historically what happens. Now, I asked Steve Leisman a question a couple weeks ago. Can both be true? Can you can the president be right saying that we should have lower rates based on a strong economy? And can Kevin Warsh be right? And the answer for him was yes. I'm more into Kevin Warsh camp, though. I think other things are going on right now. I Speaker 5 (8:34) want to bring in Steve Leisman now. We want to get more on what is next for rates in the Fed. Senior economics reporter Steve Leisman joined us. Steve, you've been listening to our conversation. I mean, it is remarkable to think that the two year yield has moved higher by more than 150 basis points. since the Iran war started. That is a tremendous move. I'm wondering how you think, how economists are thinking about how Kevin Warsh perceives this market, if he wants to look to the market for signals, how he perceives that move, which is remarkable, and then also the move in the 10-year and the 30-year. Speaker 8 (9:07) Yeah, I was just doing a little spreadsheet work here, Melissa. I got 66 basis point move in the 10 year in 11 days. I have 22 basis points. I've got 22 basis points in two days. And you have to go back to what day? Liberation Day, April 8th, 2025, to find a bigger move, which was 25 basis points for the 10-year in two days. I think the important thing here, Melissa, is the markets today confirmed the trade and added to it with another meaningfully bad day in the bond market. I mean, what you see here, take a look at the 10-year. You can see it right here. Speaker 8 (9:48) 5.20, that's adding another 7 basis points after the big 15 basis point rise on Wednesday. It was a similar set of factors today, Melissa. High oil prices, hawkish Fed talk, more Fed rate hikes expected. And then two speakers today, I consider them to be among the more centrist on the Federal Market Committee. They were leaning towards more hikes. Williams, the New York Fed president, said it's likely that another rate hike may be appropriate by the end of the year. Paulson saying, if conditions evolve as I expect. Some modest further tightening may be warranted. That just added to the FOMC members, you can see there, have put on their hiking shoes and seem ready to drive rates higher amid concern over inflation being stubborn and oil prices. And you can