Mad Money: Tariffs, Coreweave Acquisition, and Defense Stocks

Impact of New Tariffs

• ⚠️ Tariffs on cars and trucks from Korea and Japan are expected to raise prices by approximately 25%, impacting about 17% of the US auto market.
• 📉 This tariff news contributed to a significant market pullback, with the Dow tumbling 422 points, the S&P falling 79%, and the NASDAQ losing 02%.
• 💡 Despite the market's negative reaction, the tariffs could be beneficial for domestic automakers like Ford and GM, though their stocks also declined.
• 🧐 The specific numbers and consistency of new tariffs on countries like Kazakhstan, South Africa, Laos, and Myanmar seem arbitrary, leading to uncertainty and comparisons to a "tariff hat" approach.

Coreweave Acquires Core Scientific

• 🚀 Coreweave, a data center operator focused on AI computing, announced the acquisition of Core Scientific for $9 billion in an all-stock deal.
• 🤝 The two companies have a long-standing partnership, with Coreweave leasing Core Scientific's infrastructure since 2018, initially for cryptocurrency mining.
• 💡 This acquisition aims to integrate Core Scientific's infrastructure, including its 1.3 gigawatts of power capacity, to support Coreweave's accelerated computing and HPC offerings for AI clients.
• 📈 Coreweave's stock, which has risen nearly 300% since its IPO, fell over 3% on the news, while Core Scientific plunged almost 18%.
• 💰 The deal is expected to incrementally reduce Coreweave's leverage and enhance its ability to expand its footprint and serve demanding AI clients.

Defense Sector Analysis: Leonardo DRS

• 🛡️ Leonardo DRS is an advanced defense technology company specializing in advanced sensing and computing (65% of revenue) and integrated mission systems (35%).
• 🇺🇸 The US government is its largest customer, accounting for approximately 80% of total sales across various branches of the military.
• 📈 The company reported a strong quarter with 16% year-over-year revenue growth and a 3-cent earnings beat, driven by demand for electric power and propulsion systems, tactical radars, and naval network computing.
• ⚠️ While facing some exposure to rare earth materials and geopolitical complexities, management believes its primarily US-based operations and domestic supply chain insulate it from significant tariff impacts.
• 💰 The stock has seen a substantial run-up (46% YTD, 83% over 12 months), and while the company is sound, its current valuation at over 37 times earnings may be considered pricey.

Analyst Downgrades and Market Psychology

• 📉 Valuation downgrades on stocks like Netflix, CrowdStrike, and Wells Fargo are discussed, with the argument that these downgrades can cause investors to miss further upside.
• 🤔 Cramer criticizes downgrades based solely on valuation, suggesting that strong companies with excellent management can continue to perform well even when considered expensive.
• 💡 He highlights that Netflix has a history of executing on expectations, CrowdStrike has shown resilience after past issues, and Wells Fargo is benefiting from the Fed lifting its asset cap.
• 🧠 The prevailing market psychology is to buy weakness, including tariff-induced dips, as investors have been conditioned to expect continued upward movement.