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Melissa Lee

From the NASDAQ markets in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. Counting down to what is expected to be the biggest ever US Listing of a foreign company. What to expect when SK Hynix starts trading tomorrow and what it could mean for the broader semi trade and the yen and retreat the Japanese currency near its lowest levels in four decades by one of our traders is flagging a deeper concern amid the move plus Pepsi's warning on input costs. Homebuilders get a much needed bid. And see Starbucks ups its bet on how the coffee maker is changing the way it does business and the companies that could get left in the dust as a result. I'm Melissa Lee comes along from Studio B at the nasdaq. On the desk tonight, Courtney Garcia, Karen Feiderman, Dan Nathan and Gai Adami. We start off with the latest details on what could be a landmark listing from South Korea's SK Hynix stock in the chip manufacturer expected to price at $149. Cosby traded shares have been under pressure ahead of the offering, down more than 25% from the late June high. Christina Parks Neville joins us now on to expect when it starts trading here at the Nasdaq tomorrow.

Dan Nathan

Right here.

Melissa Lee

Right here.

Dan Nathan

And it's going to be the biggest share sale since Space X's record IPO last month. The offering is more than seven times oversubscribed. For context, SpaceX is anywhere between three and four times. The company is selling nearly 178 million ADR. So American Depository Receipts. Each one of those US shares result in a tenth of a common share in South Korea and they're expecting the US shares to trade at a premium to the same stocks stock in Seoul. Barclays bets anywhere between 10 and 15% higher. But why pay more for the exact same company? Scarcity SK Hynix is the purest bet on HBM. The high bandwidth memory powering Nvidia's AI chips. SK controls roughly 56% of that market according to their filing. For us investors who couldn't easily buy Korean stocks, this is the first clean way in. Normally hedge funds would arbitrage that premium way by the cheap Korean shares short the US wines wait for the prices to converge. But it may not be so simple this time. A company spokesperson tells me converting ADR so the US ones into Korean shares, quote, can be executed freely. But going the other way requires, quote, a separate reporting procedure, time and paperwork which would create friction. And that kept to TSMC ADR at a double digit premium for decades. So if that premium holds, it means US investors are willing to pay more than their Korean counterparts for the same AI memory exposure of first on CNBC with the chairman of SK Group, the conglomerate tomorrow, 10am Eastern.

Melissa Lee

That should be fascinating. I'm wondering, they also have a much closer relationship to Nvidia. They're right. Nvidia's number one supplier for memory. So I mean in terms of the differences, a lot of people are going to be comparing, contrasting it versus a Micron, of course. Yeah, but this is bigger, right? It's cheaper right now and it has

Dan Nathan

a closer relationship with valuation is I think it was 5.8 times the last I checked and Micron is close to seven today. So you can say that Will the valuation increase or will Micron get compressed? Yes, it is the primary supplier to Nvidia has that strong relationship. Jensen Huang was just in Korea and said that that relationship is not changing anytime soon. The question is though, will is there going to be net new money coming to the market? Because they're looking to raise over like 20 billion bucks. So is that brand new cash, where is that cash coming from? Or is it going to come from a source like Micron or a source like the other chips or the rest of the market for that matter.

Melissa Lee

Right, Christina. Thank you Christina. Parts nevilous Goldman Sachs saying today should be traded at nine times forward.

Tim Seymour

Right. And you know I'm going to so go with Goldman Sachs. By the way, great job by Christina and congratulations to the nasdaq. So we'll see. I mean in terms of what does it create here, who wins and who loses in terms of the incremental investment dollar and I'm not certain you can play that game. I mean, I think that's probably been gamed out for a while. I think it's an incremental positive for the space. Without question, you have more diversity now in the form of this. But I don't think you're going to have to sort of pick winners and losers going forward.

Karen Feiderman

I think this timing is actually way better than had it come three weeks ago. We saw, we've seen a few, most recently Cerberus. I always Cerebral Cerebris. Right. Which I always get backwards. Remember that just went berserk 185 and then it opened at 220 and went to 280 and then very shortly it was. So I actually think this is better, the listing that some of it has cooled. It's still pretty white hot, but it's definitely cool from where it was three weeks ago.

Melissa Lee

Yeah, it's also after Micron reported, after Samsung reported.

Guy Adami

So White Hat is really interesting. You know, seven, eight, nine times oversubscribed. I'm like, you know, like got all you need, you know what I mean? Go buy that DRAM ETF or, you know, get loaded up on Micron, which is up 1000% in a year or so. I go back to 2014 and maybe this is similar, maybe it's not. When Alibaba listed here in the US and that was priced, that was a big deal. It was $25 billion and just think that's like, what's the matter, 12 years ago, that sort of thing. I mean, it was a really big deal. I think it was one of the biggest deals ever. And you know, that stock doubled in the next month or two. I think was priced at like 68 bucks. Hit 120 in two months and then it got cut in half, you know, over the next year or so. And so I guess narratives change, scarcity changes. I think that some of these premiums relative to the local are things that a lot of investors are going to keep track of, but it's also going to be a bit complicated. So to me, I think by the time we're thinking about this in six months from now, I think the fever will have been broken in the memory names. And so I think this is like a Johnny Come lately sort of thing. Might you be able to make some money in this thing over the next few months or so?

Fast Money Announcer

Sure.

Guy Adami

Especially if this narrative continues to play out. But I don't think more ways to play. This is actually a layup that we're going to see. Good Price performance in this name.

Courtney Garcia

I think the fact that you're seeing this over subscribe though really just shows that there is still significant demand towards the infrastructure platform play. Like you, you've already had the obvious beneficiaries of AI and now everybody's looking to the next source. And this is one of those kind of pure play memory chips that people are going to look to. So I think the bigger thing of whether this is a good opportunity or not means the demand is absolutely still there. People are asking, is this trade over or not? I don't think so. Not when you see this kind of demand. You saw this with Space X, you're seeing this now. There's a lot more money willing to go in here than is actually going to be capable to go in. And that means people have the dollars to put down right now.

Melissa Lee

I mean when money goes into the semi trade, it goes into the memory stocks. That's what we have seen time and time again. The pullback in Micron, that was an opportunity in some view, people's view, to buy the stock. And here we are once again. I mean, what did we see in today's session? The SMH outperform the broader markets. Except for Nvidia. Right, except for Nvidia.

Tim Seymour

And we had a whole valuation conversation about Video last night and you know, we said it's cheap and that's either a good thing or a bad thing. But we'll sort of come back to that in terms of this. You mentioned the pullback in Micron being a buying opportunity. If you recall, it was clearly, I think back in March when they reported earnings, the stock cascaded lower. I think it was down some 40% and that was within the course of a couple of weeks. The bounce. This is something different going on. I mean, there have been 8 to 10% moves seemingly on a daily basis, both up and down in Micron, I want to say since late May. I don't know what that signifies, but historically when you see intraday volatility like that over a prolonged period of time, it signifies a bottom and in this case potentially a top.

Karen Feiderman

So in video it'll be really interesting to see earnings, let's say in video slows, right? Or comes in not. The rate of change slows and people get freaked out by that. Do you think then I would think that the Mu's of the world would have a outsized reaction to that. This is the center of where everything is. And everything is, you know, exponentially above that. Right. If that slows, how could those not Slow more stock rather. How could the stock not underperform form more than in video?

Melissa Lee

Do you think that the rate of growth for Nvidia would slow this at the same rate potentially. Would you project that slowing rate of growth onto an MU and. Or for instance we're just using as an example or is there demand for in other places for that memory and not just directly from Nvidia?

Karen Feiderman

Not just, yes, but in video is sort of the bellwether. It's the proxy. Remember when Cisco used to be the absolute proxy for whatever the Internet infrastructure was? I think this is the same thing in the AI space.

Melissa Lee

Would you agree?

Guy Adami

Yeah, sure.

Melissa Lee

I mean like a resounding yes. Okay.

Guy Adami

I guess what I focus on is price right here. It's not about valuation. Last night we talked about Nvidia. Nvidia had grown into that multiple and now it trades like a cyclical stock.

Scott Cohn

Right.

Guy Adami

And we're going to see that in a whole host of other places. It's happening, it's going to happen to these memory names, it's going to happen to the CPU guys, it's going to happen to, you know, a whole other parts of the stack. And we're already starting to see that pressure. If you think about the weakness in the hyperscalers just of late, I'm just not convinced that there's so much, you know, that demand is way outstripping supply right now. And I think we talked about this again last night. You know, this whole notion of token max and going to token minimizing in such a short period of time tells you that the budgets for this sort of compute right now may not be there to justify some of these valuations we're seeing. And so when you think of an issue like this with SK Hynix, nine times oversubscribed. If you're a customer of these companies, how many times are you putting an order in? You know, when you think about what you need relative to what the world is expecting for the sort of compute

Melissa Lee

by the contracts behind these orders.

Guy Adami

Okay, fine. There was contracts with the clecks, you know, going back 27 years ago, there was contracts for all this fiber and all this sort of stuff and they all went away. Because some of these companies are going to go away. And that's why some of these issues, you know, the RPO's and this, that or whatever, these long term LTA's and everything like that, it's fine, that's great narratives right now, but it's going to be on the other side of this thing. If the hyperscalers don't get, I mean if they get to a point where there's just excess capacity, then that goes down the whole stack.

Melissa Lee

Well, I think it's interesting that you have, that you raise these points and you've been raising these points. This is not the first time, obviously

Guy Adami

I'm here every night. Have a ball.

Melissa Lee

We are at a point now where the valuation, valuations, the hyperscalers are getting people to say we are now taking a look at the hyperscalers, they're too cheap and we should rotate into them. And so when you marry, if you're saying that this train is coming and people are all of a sudden saying, oh, now it's time to get into hyperscalers because their valuations are cheap, that's, that's sort of a bad combination. It's bad timing.

Dan Nathan

Yeah.

Courtney Garcia

But I mean I think the question still remains with the hyperscalers and the amount of spending that's going into the capex. I mean I think that is still an active question. I think once earnings season comes here, I think investors are really going to want to see answers there. And I think the fact that you are seeing, it's not just do we go into hyperscalers or do we go into other technology. The rest of the markets are really performing. You saw small caps are actually really holding up the market today. They've been doing really what really well this year. And I think the fact that you're seeing this broaden out to the whole markets is a much more positive sign than do we go in or back out of the hyperscalers.

Tim Seymour

Karen's point, I hadn't thought about that clearly because Karen thought of it and she's way above my pay grade. But you know, the Cisco correlation makes a lot of sense and it's not just going to be sort of the map, back of the envelope math. If you see a slowdown in video, which I think reports at the end of August, so we have some time, people are doing a self first asked questions later and I'm not suggesting it's going to happen, it's going to happen at some point. Whether it's this quarter or not remains to be seen. But the whole thing is sort of predicated is that what is that game where you pull the logs out Jenga or something and then you yell like Jenga, like a jerk.

Melissa Lee

Do you yell that?

Tim Seymour

I don't, I don't do that. But you understand what I'm saying?

Melissa Lee

Yeah. Got it. Our next guest warns that a significant slowdown in the payoff of I could tip the economy into recession. Apollo chief economist and partner Torsten Schlock joins us with more. Torsten, great to have you with us. So you're basically asking the question, what if it takes longer for this payoff to actually materialize or what if it doesn't happen? What are the odds? How do you, how do you assess the risk and the reward here?

Torsten Slok

Well, let's first agree that AI is making a huge difference in all our lives. So it will be a revolutionary technology. It continues to have a dramatic impact. But the key issue from a stock market perspective, any stock price is essentially the net present value of the future cash flows. So the discounted net present value of future cash flows then suddenly becomes important. What is the slope of those cash flows that are coming in the future? And the question now, of course is what are the assumptions in market pricing today about how quickly revenues will come to the hyperscalers on the back of the investments that they have made. So it's really this simple observation that a lot of investments are being made and our markets now pricing in that revenues are coming too slowly, too quickly at the right pace. This is essentially the discussion that we're having in markets and the debate, namely, will the revenues come quick enough?

Guy Adami

Yeah, so another debate. And Michael Burry of Big Short fame, there's a little Jenga thing in there. You remember that movie there, it was a great scene and everyone's like this. Yeah, this whole notion, and he was writing about this, this whole notion that you and we were talking about last night, this depreciation of these high end GPUs.

Kathy Lean

Right.

Guy Adami

And there's certain marks and you know, over the last year we've seen, you know, some companies like Amazon stretch out that depreciation and we've seen matter, for instance, you know, kind of narrow, that sort of thing. So we're going to get to a point where the marks are kind of funky, but they are masking some of this performance that we're seeing or they're augmenting, you know, I mean, some of the performance. At some point, don't you think the rubber has to hit the road on this sort of thing and it's going to be by the hyperscalers. And maybe that's why they trade so poorly, because maybe 20, 26 of the back half is going to be the period in which we get more clarity on the marks of these GP use. Yeah.

Torsten Slok

The counter argument, of course, is that the demand for compute is basically unlimited. Let's agree that There will be so many different ways that compute will be needed for consumers, for households, and broadly speaking, of course, for companies also. So if that's the case, the question becomes what is the price that the hyperscalers can get and what is the revenue they can get from that compute? And that's where the conversation becomes so important, particularly with the Chinese models coming in. Also, the token matching that you just talked about. All this becomes incredibly important because it again brings back this discussion around, well, what if the revenues arrive much faster? Well, then the hyperscalers are actually cheap? Well, if the revenues arrive much slower and the implementation of AI is going to be slower, well, then the revenues, of course, are going to be a lot weaker. So that's why the implicit discussion we should be having is, well, what is the pricing that is in the market today? And what does that assume in terms of consensus expectations? And contentious expectations at the moment are assuming that we basically will have a doubling of the revenue and ultimately of the free cash flow for the hyperscalers in a matter of three, four years. So that's of course a very, very optimistic assumption around how much demand there will be and ultimately what price the hyperscalers will be able to charge for that demand.

Karen Feiderman

So thanks for being here in person. Nice to have you here on the desk. These are the other side of this demand, which I believe insatiable is the right quantity of demand. But the supply side response, how do you think about that and what that does to that demand curve and price, that price curve?

Torsten Slok

This is very important because the risk, of course, is to this, the demand is essentially unlimited. Is that namely that the supply may be a lot slower in rolling out. So that of course could imply that the price would ultimately not go down to zero. Instead, there would be a lot of competition because there's so many people who need that compute. So you're right. Maybe we have very unlimited demand and we have much more limited supply because there's going to be some challenges and it's going to take some time to roll out all the capacity, then that would ultimately indeed be a situation where the price of compute would not necessarily be going down that much. And it might even begin in episodes to go higher.

Tim Seymour

I dig your energy, I dig your work. And this sort of going to dovetail into this conversation a few days ago. The energy shock is over. The rate shock is not over.

Torsten Slok

Exactly.

Tim Seymour

What happens if the rate shock isn't over in this conversation we're having?

Torsten Slok

Well, what's really, really important is that for a long time Rates are basically moving up and down with oil prices. So whenever oil prices went up because the straight up and was closed, well then of course rates also went up. But a few weeks ago, something very, very important happened, namely that rates kept on hanging out higher levels and oil prices really came down a lot. So exactly to your point, the risks now is that interest rates will be higher for longer. And this shift that we've seen in rates markets away from focusing on headline inflation to instead now focusing on core inflation. That's why on the day today when Kevin Walsh announced his task force heads, well, this is of course very important because the Fed now needs to deal with that there is less focus on headline inflation and now there's much more focus on core inflation, which raises this risk exactly to your point, that rates will be higher for longer and therefore the cost of financing will also be higher for longer for anyone who is investing both short term and long term.

Melissa Lee

So how do you think about what the Fed would do most likely next? I mean, do you think that a cut is more likely than a hike because of economic weakness?

Torsten Slok

So as we speak, markets are pricing that the Fed will hike twice, right? Once in September and once in March next year. I mean, that's a very, very strong statement from the market saying that there is a shift in attention away from headline inflation, maybe coming down. But now we're beginning to worry about coin facing hanging out at higher levels. And for markets, that indeed means that all assets that depend a lot on interest rates, and that is of course in particular tech, software, anything that has long duration cash flows are going to be more sensitive now that rates are going to stay higher for longer.

Melissa Lee

Torsten, great to have you with us. Thank you. Torsten Slok of Apollo. We've got a news alert we want to get to a Netflix reportedly exploring TV options. Let's get to Pippa Stevens for the details.

Pippa Stevens

Pippa shares are down about 2% here in extended trading as Netflix does explore live TV and bundles. That's according to the Wall Street Journal as it looks to increase its subscriber engagement. This comes after the company back in April reported disappointing guidance for Q2. The Netflix is expected to report earnings next week. So we will get an update on that as well as its latest engagement numbers. Now the stock is down here about 20% on the year and down 2% in extended trading as it explores live TV reportedly. Melissa.

Melissa Lee

All right, Pippa, thank you. Pippa Stevens. Sounds like another effort for Netflix to find growth which may not be interpreted

Tim Seymour

well by the markets we Give Dan a lot of. I'll save the vernacular, but I think the folks at home know the word that I would use.

Melissa Lee

Hard time.

Guy Adami

Sometimes I could say love.

Tim Seymour

No.

Dan Nathan

Yeah, I was.

Tim Seymour

However, if you recall, after the deal was consummated and Netflix rallied I think to like 111, 115. He thought you had to fade that in a material way. I did not. I thought it would continue higher. And look at it now. I mean, it's right. It's actually, I think as low as we saw in the midst of that sell off during that proposed deal. So good for Dan. And this speaks to what you just said, their continued hunt for organic growth, which seemingly they're having a difficult time finding.

Karen Feiderman

I think that, well, just from what I see that they're going to be bidding on World cup, which obviously has been enormous.

Guy Adami

Love it.

Karen Feiderman

Everybody's going to be bidding on World cup though. So why they're down, I don't really know. Is that down because they might get it? Because they might not.

Melissa Lee

I spend that much money.

Karen Feiderman

Right. The other thing, Q2 guide, they're never good at guidance. If Q2 actually comes in weaker, that's something else I'm long. It really has not been the place to be. I still like the story. If I own none, I buy it here.

Courtney Garcia

I do think though, when they stopped actually guiding for their subscribers, I do think that was a question of is that going to be concerning now you're saying they are trying to grab more attention here. So they're trying to get into live sports. Clearly they don't have enough content there. But I do think it's something to question here what that looks like for their growth going forward if they're having

Karen Feiderman

to pay for that.

Guy Adami

Yeah, I mean they added advertising.

Unknown CNBC Contributor

Right.

Guy Adami

They added different tiers of their pricing and you know, they're trying to do some live stuff, which I think is. Well, they're doing live unscripted stuff.

Unknown CNBC Contributor

Right.

Guy Adami

It's. It's much cheaper. And so now they want to move into sports and the like here, which is expensive. It is. But you know, at the end of the day we heard the CEO, the company say, I want to say it was about a month ago, so that they're going to actually do less quantity and more quality. Right. And I think we can all agree that they're probably pretty good at identifying quality and they're really good at serving it. And so I think some sort of like, sort of menu that you are going to have, you know, right now it's just the original programming as the catalogs of other things. And it's a lot of documentaries. And so I just think more choice is going to keep people on the platform a lot longer. And I remember when Reed Hastings said, I want to say a few years ago or so, he's like, they're not competing with other streaming networks. They're competing with how much you want to sleep every night.

Melissa Lee

Yeah. With everything else that you might spend your time on. Fill in the blanks. Coming up. Pepsi fizzling out. What the company said on today's earnings call that spooked investors. What it says about inflation and the consumer. Plus laying the foundation for housing stocks inside the Bounce and homebuilders today. And the latest read on the real estate market. Don't go anywhere fast. When he's back into

Fast Money Announcer

this is Fast Money with Melissa Lee right here on cnbc.

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Melissa Lee

Welcome back to Fast Money. Pepsi shares down more than 3% after warning about rising input costs in the second half of the year. The soda and snack maker also saying consumers were pressured by higher gas prices in the second quarter. The stock now down 4% this year while rival Coke is up more than 18%. We were making that point, you know, the snacks, having snacks is a big difference between the two in terms of performance.

Courtney Garcia

Yeah. And I think that's the question is do you want to blame it on the consumer because the consumer is pressured or are they just not wanting to buy these certain products. And I think that's the big question here because I think when you look at the consumer, like, clearly compared to the competitors, they are going places. And generally speaking, they have been holding up well. Consumer spending's been holding up well. If you look at debt to income ratios are actually still relatively low. It's like 8% of income, which means the consumer has generally been on good footing. They're just not wanting to put their money here, even though they've been doing good abroad. It was the North American sector that hasn't been doing well. So I think it's more a question of the products than it is the

Melissa Lee

consumer guy loves Fritos still, right?

Tim Seymour

You know, first of all, I do love snacks. Fritos. No, I was never a Frito guy. The munchy nugget, they would. Once you get them on your hands, it's like you get all greasy and stuff. I like barbecue potato chips. I also like Pepsi. Last night I said I could make a cogent argument for it, and here we are down four bucks. So I thought the valuation was sort of baked in. In terms of the quarter. I think the quarter was bad. But when they talk about, again, input costs and slowing demand, it's problematic. And, you know, given the discounted trades to Coke, I thought it was worth a look. I still do, but I understand why people would say, don't look here.

Melissa Lee

How do you extrapolate the results on to other retailers or even out of Walmart first?

Karen Feiderman

And Walmart was down a little bit today. And okay, tape. So you've got to think that's a pretty. That correlates highly. You would think, right? Wal Mart is obviously. They're so huge. They do have more power than most vendors do, but. Or than, you know, most supermarkets or whomever do. But you still have to think, all right, the consumer is stretched here. But I do also think that tends to send people to Walmart who might not go to the rest.

Tim Seymour

What would be your chip of like,

Melissa Lee

you're on a salt and vinegar potato chip, hands down. Easy.

Karen Feiderman

Okay. You know how to win her heart now?

Tim Seymour

Well, wait, hold on. You assume prior to.

Guy Adami

We're not going to go around the horn on that one.

Tim Seymour

We don't have a lot of time here. What do you like?

Guy Adami

I'm like a cool ranch Dorito guy.

Karen Feiderman

Of course not. Oh, I can see that.

Guy Adami

That's also.

Tim Seymour

What about Courtney? Ask Courtney.

Melissa Lee

Now, Courtney, what are you into your favorite snack?

Courtney Garcia

Oh, I don't eat chips, guys. I'm a chocolate person myself.

Melissa Lee

Okay, well, that's good to know.

Tim Seymour

Karen, come on.

Karen Feiderman

I didn't eat anything I don't like.

Melissa Lee

An avocado.

Guy Adami

Chocolate covered pretzel could be a thing.

Melissa Lee

It's a bad all right, news you can use here. Lots more fast money to come. Here's what's coming up next.

Fast Money Announcer

Home builders raising the roof after a rough start to the month. What's fueling the turnaround? And is the latest rally built to last? Plus Japan's currency crunch with the yen at four decade lows keeping the pressure on and why? One expert says it could be flashing a major warning for the market. You're watching Fast MONEY live from the NASDAQ market site in Times Square. We're back right after this.

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Melissa Lee

Welcome back to Fast Money. Sales of existing homes unexpectedly fell in June, down almost 2.5% from May. That's according to the latest data from the national association of Realtors. The median cost of those homes, meanwhile, hit a record high of more than $440,000. Still, homebuilder stocks gaining ground, Toll Brothers rising almost 2%. Lennar Dear Horton KB Home Pulte Group also higher today even the rates are pretty firm and not too far off from conflict level highs.

Courtney Garcia

Yeah, I don't think this is surprising because even though Home prices are going up. It's the interest rate that's more important because if anybody's going to sell their existing home, where are you going to go if your rate is going to be higher, Actually paying more in that new house? And nobody's putting their homes on the market right now. And this is why the home builders are benefiting from that because that's really where you can find the inventory right now. But I think especially you're looking at Toll Brothers, one of your better performers. And because we talk a lot about the stretched consumer, it's particularly your lower income consumer who's hurting. Your higher income consumer is less hurting. Toll Brothers is that higher rate of new home purchase. So I think that's what you want to look at with your home builders is that that bifurcation probably will keep continue.

Melissa Lee

And for consumers, I mean that's where they're getting lower rates because their homebuilders continue to buy down those rates and

Tim Seymour

they're going to probably continue regardless of whether or not they want to. And Courtney brings up a great point obviously in Toll Brothers. They don't report till the end of August as well. But our crackstaff and ec by the way, we're going to single one out later in the show. That's a tease. Tease, major double top in Toll Brothers. Go back to 2024 and you will see that 165 level traded off, traded back up to it. But if you're of the belief, which I am, that rates are going higher and the employment picture is not as rosy as the unemployment rate suggests, I don't think you can own home builders here.

Karen Feiderman

Also, it's not great for Home Depot and Lowe's, which I own both of. And if I look at the chart, Lowe's going back to the downside of COVID when we started to come out of COVID raise rates. I mean it's, you know, five years, six years, it's really done nothing disappointing.

Melissa Lee

But still holding yourself.

Karen Feiderman

Yeah. For no good reason apparently.

Melissa Lee

Yeah, I think still waiting.

Karen Feiderman

Yeah. Revisit that.

Melissa Lee

Coming up. How low can the yen go? The currency extending its slide as pressure builds on Japan's policymakers. When the BOJ might step in and what it means for markets right now. We're back in two.

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Melissa Lee

Welcome back to Fast Money. Stocks gaining ground in today's session. The Dow adding 140 points. The S and P up nearly a percent. The Nasdaq leading the charge up 1.3%. AstraZeneca meanwhile sinking almost 6% after its nerve disease drug Wainuya failed in a pivotal late stage heart disease trial. The drug jointly developed with Ionis Pharma, missing its primary endpoint of reducing cardiovascular death and recurrent heart events. And matter rising nearly 5% today according to reports. The company is planning to start production of a new AI chip in September as it looks to scale 14 gigawatts of compute. Next year it will work with Broadcom on the design and Taiwan Semi on manufacturing. How did you take this news, Karen?

Karen Feiderman

Well, there's a few things going on that's sort of interesting for one but also just looking at Metta, you know, clearly Mark Zuckerberg seems to be he's messaging that okay, things aren't going exactly as planned but, but you know, we're going to address this and we're going to think about revenue streams and how to do that. It does really make me confused about how much Capex they will spend. On the one hand he seems to be very aggressive and on the other hand I think he's getting the, you know, here's the message that Capex spend. It's, it's questionable what the ultimate return on it is going to be and the stock has suffered for it. It's rallied some in the last couple of months but, but that's going to be a really interesting tell. I looked at the straddle today for matter for earnings and well it looks about 12% which is a 12% very big move. So I mean this one I think will be probably the most interesting of all the hyperscale.

Guy Adami

Yeah, I think meta story is so confusing that it might end up being good. I mean that seriously, I think it's confusing.

Melissa Lee

It's good.

Guy Adami

Yeah. No, I just think investors are really having a hard time put this all together. But again, you know, going back to Nvidia, I mean that is a huge customer video. We're wondering why is this thing not going anywhere? Because all of their huge customers are going other places or designing their own chips right now.

Melissa Lee

Meantime, the Japanese yen trading around four decade lows against the dollar. Our next guest sees the move as a major warning sign for the market which could push the bank of Japan to intervene. Kathy Lean is Managing Director of Strategy at BK Asset Management. Kathy, great to have you with us. I feel like every morning you wake up and you're wondering probably you maybe not me wondering if the bank of Japan will actually intervene that day. Why do you think it hasn't so far?

Kathy Lean

I think it's become clear that the Japanese tolerance for a weak yen in support of exporters as well as tourism has increased significantly. They also know that without the support of the US coming in and core data intervention, their efforts will be futile. So that is why we haven't seen any evidence of intervention because either trying to convince the US or, or they're actually tolerating more yen weakness is probably a combination of both.

Tim Seymour

All right, Kathy, was July of is around this time of year actually 2024 Dollarian 161 CPI print came out on a Thursday. It was soft $yen in 5 minutes went to 157 by August 2nd of that year a month later the Vix was trading like 60. The US equity market was under considerable pressure. The circumstances have changed considerably because their bond market has deteriorated exceedingly. I mean just an extraordinary amount since that time. Debt to GDP 250%. There are no levers they can pull. So what should we be worried about here?

Kathy Lean

Well, from the perspective of Japan, there's probably a lot to be worried about. We're talking about, you know, Japan's markets. We don't necessarily have a crisis signal right now, but it's definitely a warning sign because you know, the, the problem that we're having with the debt to GDP level, the problem they're having with the weak yen impacting, you know, the cost of living for consumers, yes, it's helping exporters, but this is very bad for consumers. And all of that is going to translate into weakness for the Nikkei. We haven't seen it yet, but household spending in general has been very weak in Japan and they're dealing with the possibility of food costs rising as well. And of course, you know, their strife with China is hurting a lot of export demand. So there's a lot of trouble spots that make me worried about the Nikkei level right now.

Melissa Lee

I think that there was some guidance a few weeks back that there's open lines of communication between the Japan and Treasury here. And I'm wondering if you think treasury is, is just doesn't want to take part of that in this or what the reasoning might be for not stepping in helping Japan yet.

Kathy Lean

I think the motivation to get involved in the intervention of the currency is still limited at this point. I think, you know, at the end of the day, you know, the us they're focused on, you know, what's happening in, you know, within its own borders. I think they don't want to necessarily intervene in the markets and they're trying to see if verbal intervention will be effective enough. At the end of the day, I think all of us realize that it's going, it's not just going to be intervention that's going to be effective. It needs to come from substantial fall in US yields as well as, you know, some sort of risk aversion event. And so that comes from the US side, the US interest rate story, the US Data story. Intervention in the past, you know, probably in the future is rarely lasting.

Melissa Lee

So do we break 40 year lows on the yen? Where do we go?

Kathy Lean

I think we get to, you know, right under 165, you know, 1 6475. We even hit 165. That's my next target. Because the reason here is that the Fed story is very strong. And I think there are many reasons to believe that rates will continue to rise this year. And as long as rates continue to rise, especially in relation to some of the other rates abroad in Japan and the Eurozone, demand will continue to flow into the greenback. And as long as the greenback remains in demand, that's going to keep the yen under pressure. It's going to be very difficult scenario to change at this point.

Melissa Lee

Do politics come into play at all? I mean, the bank of Japan, of course, Central bank, but at the same time, you mentioned cost of living and that is a real problem, especially as oil prices are so high, particularly for the Japanese, this becomes a real problem for the political party, the Prime Minister. At what point do you think that factors in, if at all?

Kathy Lean

I think that's becoming a very pressing issue right now and that's probably part of the motivation for the latest interest rate hike because maybe they want to stem the slide in the yen and they realize that that alone is ineffective. So there's going to be a lot of political strife that starts becoming out of this because 40 year lows, you know, for a prolonged period of time is going to be very damaging, especially when you're hurting already from the tourism factor. So I think, you know, it's going to have reverberations all around the economy, politically, economically, socially as well.

Melissa Lee

Kathy, great to see you. Thank you.

Kathy Lean

Always a pleasure.

Melissa Lee

Kathy Lee and BK Asset Management, what do you think happens?

Tim Seymour

They own, they're the largest foreign holder of US treasuries in the world, $1.2 trillion. What do I think happens? They're going to have to do something there and I think it requires them to sell Treasuries, try to defend the currency which is a moocs game. Historically, it doesn't work. So when they're going to have to turn to their bond market, I mean, there are problems there without questions. There are no levers they're going to pull that are going to fix this. And at some point it makes its way here. I just don't know what the breaking point is. But I will tell you, each day their bond market sells off, each day their currency sells off. As Liz Thomas of so far says, that's a relationship problem that needs to be reconciled somehow.

Melissa Lee

At the same time, good for the stock market, which Kathy had suggested. And so therefore, I mean, would you think, oh, the Nikkei has more room to run? I mean, if Kathy says that it's going to get weaker, higher, why wouldn't the stock market go higher?

Karen Feiderman

Well, I have the dxj, which is the yen adjust adjusted rights. You're not taking the currency risk and I want to continue to hold that. But I mean, you're right. You know, I came into the business when the pound was being defended and we all know that that didn't really work out. So since then, I can't remember a currency really being defended that really worked out.

Melissa Lee

That doesn't work.

Karen Feiderman

That seems like a waste of money.

Tim Seymour

There's a saying in gambling, not that I gamble, but you don't want to chase bad money with good money. And I think that's what this is.

Melissa Lee

Coming up, Ohio taking the top spot in this year's top states for business. But the biggest surprise might not be who ended at number one. The states that have made the biggest leaps in the rankings. That's next. Fast Money is back right after this. Welcome back to Fast Money. The World cup quarterfinals kicking off today with France currently leading Morocco 2 to 0. In Boston, the economic impacts of the tournament are already being seen. Bank of America finding all 11 US FIFA World cup host cities have seen an increase in credit and debit point of sale spending. Kansas City, Los Angeles and Miami seen the biggest increases. Spending between June 10th and July 5th up more than 6% year over year. Although it seemed like Nike didn't have any boosts from the World cup and

Karen Feiderman

traditionally maybe they did.

Melissa Lee

Oh, interesting. Yes.

Karen Feiderman

That should be worse. Yes.

Melissa Lee

Oh, oh, yeah.

Karen Feiderman

Yeah, I hadn't thought about that until you just said.

Melissa Lee

Right. We'll see. All right. Meantime, Ohio may be number one on CNBC's annual Top States for business this year, but which one saw the biggest moves in 2026? Scott Cohn is in Columbus with more. Scott?

Scott Cohn

Hi, Melissa. It's been kind of a slow climb for Ohio. They were 30th the first year that we did this in 2007. Other states are moving up the ranks even a little bit faster than that. Let's check out this year's most improved state. Arkansas. The Natural State jumps 13 places to 28th place this year. Jeanine and Kevin Segan moved to the best area from Utah in March.

Melissa Lee

It's peace. We wake up to the birds and the deer and we go to bed and sleep with the birds and the deer. But if we need to get someplace, it's a matter of 20 minutes.

Scott Cohn

Remote workers for Utah based Intermountain Health, they could have moved anywhere and they looked, but they landed here. They liked the schools here for their teenage daughter and the welcoming atmosphere. It's kind of all encapsulated in quality of life. Their realtor, Anthony Moseley says there's more where they came from.

Tim Seymour

I have people that have come from all over the United States, Canada, Mexico,

Torsten Slok

had people come from Europe.

Scott Cohn

Helping Arkansas rise 23 spots in our workforce category and 10 spots in economy. A top state for job growth. But Arkansas still has problems, finishing 41st for quality of life, near the bottom for health care. Their healthcare system needs to change.

Melissa Lee

On top of that, even if we did get into a specialty doctor, they're booked out there until almost next year.

Karen Feiderman

Yeah.

Scott Cohn

Biggest move over 20 years has been Michigan, which started at number 41. This year it's number six. Second biggest move is here in Ohio. There is a great group of people, lots of them that work on top states for business every year. I wish I could thank you all of them. But a special shout out to our top states producers this year, Leanne Miller and Mallory Leonard, their first top states for business. They put up with me and they nailed it. Go to topstates.cnbc.com see where your state ranks.

Melissa Lee

Melissa just been tremendous. And Leanne, by the way, is a fast Money alum. She was on this team. So shout out to her too. Scott, thank you. I feel like I only see you once a year basically. So see you next year.

Scott Cohn

SCOTT cohn, maybe sometimes I come back, but yeah, I hope so. Thank you.

Melissa Lee

Hope to see you before then. All right. Before 2027. But Ohio, of course, is the top state for business this year. Mike Santoli, have to give him some credit. My closing bell, Overtime co host, he guessed it. He nailed it.

Tim Seymour

He's a clever man.

Unknown CNBC Contributor

He nailed it.

Tim Seymour

And of course, Joe Kernan, the great Joe Kernan, who you co hosted with

Melissa Lee

this morning he wanted to have confetti on Squawk Box this morning. He got one of these party popper things.

Tim Seymour

No, he didn't.

Melissa Lee

He couldn't pop.

Tim Seymour

Didn't pop because he was unable to twisted it.

Melissa Lee

He couldn't twist it.

Tim Seymour

Yeah, that speaks volumes as to Joe Kernan and also of course Sarah Eisen from the great state of Ohio. But Scott Cohn does. It's amazing. It's fun work and it's great. And you're right, he should be on the show more often.

Melissa Lee

He should. We miss Scott, but this is amazing. All right, coming up, changes at brewing, changes brewing I should say, of Starbucks, the coffee chain upping its reliance on AI to cut costs inside the company's latest efforts and the impact on the struggling software sector. Straight ahead, more fast Money into. Welcome back to Fast money. Starbucks jumping 2 1/2% today on reports the company is tapping into AI to develop in house software. The move could curb its reliance on third party vendors like IBM and Microsoft. And as part of the coffee chain's $2 billion cost cutting push. This is interesting. This shows you how companies can actually use AI and save money and have a return on that investment court.

Karen Feiderman

Yeah.

Courtney Garcia

And I think that's what people have been waiting to happen is like when are you going to see all of these like small companies all across the country who are using this to lower their costs and streamline their businesses. And I think it also is going to come into question again the capex of your hyperscalers, like if that's going to take away from anybody's business because you can do this tough in house, is that still justified? So I think we want to see that. So I think you're probably going to start to see more of these stories. I think it's fascinating.

Melissa Lee

Yeah. And this whole, you know, software, I mean that narrative I would find, I would think fuel, you know, this is fueled by it.

Guy Adami

Yeah, I think that this comes back to return on investment. Let's see how some of this stuff works. And we've been talking about this for a couple of years and I think it's much more likely to happen in small medium sized businesses. And you know, I obviously larger companies have a bigger budget for this and the ability to actually squeeze more out of it. But you know, I just think it's going to continue to take time. We're going to have some one off situations that kind of justify it and there's going to be plenty where people are like, you know what, I'm just not there yet.

Karen Feiderman

I Don't know what you think of them as a medium sized company, a big company. I don't know.

Guy Adami

They're massive.

Melissa Lee

Yeah.

Karen Feiderman

Okay, 40, I don't know, $40 billion, it looks like.

Guy Adami

Well, just because they're doing it doesn't mean it's going to succeed.

Karen Feiderman

No, it doesn't. But I mean, they have the wherewithal to do it. If you're are, you know, a salesforce, you have to be concerned about this. How can you not? And even if it doesn't happen now, if this cost isn't justified right now, it's not such a leap to think maybe in short order, right, it will be much more efficient to do that.

Melissa Lee

I mean, specifically for this, they're saying it's a Microsoft inventory tracker and you know, like, things like that. It's like not massive. It's not like they're replacing 365 by any stretch. But still, I got the margins.

Tim Seymour

This, this adds up first, probably not the last. Right. I think you're right to bring it up. But where would Carter Worth sit? In your words, like the Parthenon.

Melissa Lee

Yes.

Tim Seymour

And he would look at this Starbucks. I can't speak for him, obviously, because he's not here, but he would look at the Starbucks chart and say, you know what? I am looking at it. Yes, I am. If you did, long term, you'll see a classic bearish to bullish reversal. And very quietly, Starbucks has gotten itself off the mat. Big valuation. But you know what, the chart actually looks pretty good here.

Melissa Lee

Yeah. Unless you're worried about the consumer. I mean, I don't know. This seems like the one thing we're here.

Karen Feiderman

Yes, he would definitely be complaining about the price of coffee for sure. But no, I mean, he's done a good job. Not an easy turnaround, so good for him. But I've missed it.

Melissa Lee

Cort.

Courtney Garcia

Yeah. I think the question of the consumer, though, is what are they spending money on? And I think Starbucks, I mean, when you look at their loyalty program, like they have pretty loyal customers there. So I think that's the question. I think this is much more of a story of them being more efficient with AI than it is the consumer. But I do think that's going to be continue to be a question.

Melissa Lee

Guy's a loyal consumer.

Tim Seymour

Not for myself.

Melissa Lee

Starbucks. Right. On behalf of others.

Tim Seymour

On behalf of others.

Melissa Lee

I'm a giver, Starbucks giver.

Tim Seymour

And I saw some nice policemen in there today. But they typically said, no, no, no, no. I shove the guy out of the way. I said, you know, I'M not interested in what you know.

Melissa Lee

Did you spin the wheel for them or did you actually take their order?

Tim Seymour

No, I asked them what they want.

Melissa Lee

All right. Just wondering. Up next, final trades. The Fast Money family welcomed a new member this week. Our coordinating producer Michael and his wife Louise welcomed a healthy baby girl on Tuesday. Rose Afinya. Adorable.

Courtney Garcia

That's beautiful.

Melissa Lee

I know. Beautiful, happy family.

Karen Feiderman

And they met on cnbc.

Tim Seymour

Stop it. Watching the show,

Melissa Lee

dying out for the final trade.

Courtney Garcia

Courtney Toll Brother, you're talking about home building. I think this is one of the names to look at.

Melissa Lee

Karen.

Karen Feiderman

Yeah. Congratulations to them. It's wonderful. Wonderful. I like Ulta beauty.

Melissa Lee

Dan.

Guy Adami

Beautiful baby. Ultra beautiful Dram. Let's see how this SK Hynix trades tomorrow. I think you sell this dram.

Tim Seymour

We lost a family member last week. We gained one in the midst of that. So that is beautiful.

Melissa Lee

Thank you for watching. Fast Mad Money starts right now.

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