Mad Money 06/03/26 | Audio Only

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Bull markets can be killed by business conditions or interest rates or geopolitical turmoil, but the thing that most easily leads them to the slaughterhouse is an excess of new supply. Too many new shares, not enough buyers. Like any market, when supply outstrips demand, prices go right down as buyers get overwhelmed and they go home. So when I read today that Anthropic is picking brokers to come public at the same time that Alphabet just placed a gigantic slug of stock right on top of the pending SpaceX IPO next week, I get concerned that stock supply will indeed overwhelm investor demand. Plus, there's plenty of talk about OpenAI doing an IPO right on top of the others. You know what? I think that's maybe the major reason why the Dow lost 621 points today. The S&P shed 0.74% and the Nasdaq dropped 0.89%. It was a very ugly session.

Listen, I don't blame any of these companies for wanting to raise money. In fact, if I were their competitor, say Amazon or Microsoft, I'd probably want to raise some money, too, if only to stay competitive. Although, I should add, neither company communicated that they might issue stock. As Chuck Robbins, the CEO of Cisco, told us last night, "These companies have no choice. It's existential. They need to build out their footprint. They need the compute, or else they might wither on the vine and get beat by the others. So they have to raise money just to get the job done, or else." I get why they feel that way. I just wonder if there's enough money to support all these IPOs and secondary offerings without knocking back this market to maybe even much lower levels.

Now, we should be heartened by what happened to the stock of Alphabet today. They were able to raise some $45 billion out of the $85 billion that they want to raise totally, pretty much in a snap, and the stock even traded up briefly after the pricing. Perhaps that's because Berkshire Hathaway bought $10 billion worth — good impromptu, even if it's the Greg Abel Berkshire and not the Warren Buffett version. I think Goldman Sachs did a remarkable job placing that deal. Point is, Alphabet could raise serious money, and look at the action in the stock — you barely notice. It was the first, though, in the chute for these companies. That was a really smart move. I'm heartened by the way that the SpaceX deal is being talked about, at least to a point. More on that later. I bet there'll be plenty of money around to make that IPO a success.

You know, I'm a big fan of Anthropic. It looks like this company can make a lot of money as a business-to-business AI play with many lucrative revenue streams. If it was the only big IPO this year, I'd be all over it. But sandwiched between SpaceX and perhaps OpenAI, I got to be a little less enthusiastic. Then you have to start worrying that OpenAI will see how easy it is to raise money and decide to take advantage of the moment. That company loses a ton of money. Could be a real surprise, not necessarily a cool one. And again, I also fear that Microsoft and Amazon will sell some stock like Alphabet did. They're spending so much building these data centers that they may need to raise equity in order to pay for it.

That said, okay, I got some good news here. I want to put this in context. I don't want to scare you or anything, but once these companies are done with their issuance, we've gotten through the big fundraisers for 2026, and the bull can come back. Right now, though, looking at the calendar, I don't know how we're going to afford all these deals without taking the market lower. It's too much capital at once. It's going to lead to multiple follow-on offerings, meaning more stock both from the insiders and the companies themselves.

Now, let me go over what could happen here. If you're one of these companies, you're now in a race. That's right. You have to get your deal done before the other guy. It's too crucial if they want to keep spending on AI to have enough money. And if they wait too long, they won't get a good price for their stock. That's what this is really about. It's a foot race. We only have a few companies that are in the hunt: Alphabet, Amazon, Anthropic, Microsoft, OpenAI, and SpaceX. Six companies. Between them, I think they possibly need to raise $600 billion to cover the next phase of the data center rollout. $600 billion, maybe more.

Is there $600 billion really lying around in cash, ready to be put to work in these companies and all the different brokers and banks? I doubt it. Sure, there is plenty of idle cash, lots of liquidity. Alphabet couldn't have raised that money so easily if it weren't. I've said that SpaceX will be able to raise tons of money because of the cult of Musk, but it's losing so much money it could be a drain on the market for some time. Anthropic could be the easiest IPO, but OpenAI might be a miserable deal, especially if it comes last in the queue. It's private, but I'm not hearing anything that tells me it's really ready for prime time. The company's been able to raise a lot of money in the private markets, but I fear not enough to stay competitive without a bigger slug of capital.

So, what happens then? Well, the investors who want to participate in these deals will raise money by selling something else. Specifically, they're going to have to sell some winners. Which brings me to the elephant in the room. Brings me to Nvidia. This company just had a very successful Computex festival in Taiwan with CEO Jensen Huang at the top of his game, talking about how his Vera Rubin chips are so fantastic and they have brought acceptance already. It was a very compelling story, and you know I remain a believer in Nvidia. But when I look at the stock, the big six need to sell, sell, sell. I'm betting most of the buyers will also own the stock of Nvidia.

If you love the data center story, right, you love Nvidia. It's at the heart of it. Jensen sticking by his mantra: companies that buy his wares will make money with them. Of course, his wares have to be put in these gigantic warehouses full of servers, and they need a lot of power and a lot of money. But the whole thing could take years. It's a huge buildout. So, the most natural source of funds for these deals isn't a Chevron or JP Morgan or a Walmart or Lilly or maybe even an Apple. Sellers will most likely hit Microsoft and Amazon, anticipating deals where they might be able to buy the stock back. And once again, I hope they don't try to raise that money. I really wish they could just come out and say they won't, but that's a tough thing to do. Really, though, the buyers will raise money by selling Nvidia.

I am deeply concerned that it'll become known as a market donor, a source of funds for those who want to buy these new companies and don't have the capital to do so. I hope Nvidia gets a chance to buy back so much stock that it'll be great. But you know what? It's going to be a little difficult right now. That's why I believe Nvidia stock was down so easily today, down eight bucks, 3.62%. It's just too easy to sell. Of course, this could be just the beginning. And we now are starting to see some software stocks roll over. We saw a lot of semiconductors roll over this very evening, and some cybersecurity all got clubbed. We're going to see some other semis sold tomorrow. Big gains there, easy to take.

Right now, Nvidia is looking like the biggest piggy bank in the world. While it's not going to be emptied, of course, it does have $5.2 trillion of other people's money as its market cap. You got to expect some withdrawals, even as I think the story is excellent. We own Nvidia for the Travel Trust. I have total faith in AI as the fourth industrial revolution. I have total faith in Jensen Huang. I'll try to own it through this phalanx of deals, but I have no illusions. It's going to be a tough time for shareholders. Here's the bottom line: once we get through this period and we see that the buyers of Nvidia's wares are making fortunes, we're home free. That will happen, or these companies wouldn't be spending all that money in the first place. Until then, though, it's a battlefield.

Hey, you better go get your armor, 'cause you just might need it. Let's go to Adam in Illinois. Adam.

Adam, how are you?

I think it's too dicey. I think it's too dicey, Adam. I don't want to do that. I mean, I think we have so many real estate investment trusts that are better. I think Six Flags is the kind of thing that could make it so that your kids sour on stocks. We don't want them to do that. I have so many stocks I talk about in "How to Make Money in Any Market" or, of course, in the club. I'm not trying to dodge it. There's just so many that I like. That one I do not. But I appreciate that you're looking for something that they might want. I just don't think that one has too much risk. How about that? Let's go to Merrick in California, please.

How you doing? I am doing well, Mark. How about you?

I think it's a great idea. I think Strauss Zelnick's got a real winner. I understand that GTA 6 is probably going to be the biggest entertainment property of all time. If you want to start a position, it's down six today. I wouldn't buy it all at once. It's an erratic trader, but I share your enthusiasm for Take-Two Interactive. Let's go to Elizabeth in New York, please. Elizabeth.

I think, Tony, this is a great question. I debate it all the time because there's a couple of stocks that came public during a period and there's kind of wavering sometimes. I think Tony Xu has done a remarkable job putting together the number one company in its field. I think that you're absolutely right. It sells at a premium multiple, 32 times earnings. Maybe that's too expensive. Maybe the stock would be better bought if it got down to 100 to 120. But that said, I like the company and management very much.

All right, guys. I still believe in Nvidia. I didn't mean to talk it down. I'm just trying to tell it as it is. I'll try to keep owning it and some of the other semis which are getting hit very hard, and cybersecurity, but I know it's going to be a tough time. Sometimes you have to go through tough times as shareholders. People don't tell you that. Oh man. Is it possible to still have a bull case for Eli Lilly after a huge run last month? I think so. I'm sharing why I think it can keep going higher. And there's more than one aerospace-related IPO that you should be watching. So much more on my deep dive on today's debut, which is a company called Applied Aerospace Defense and Logistics. Replogle, which I've liked for so long, has been outperforming lately. It's pivoting to doing some data center buildout. I'm going to sit down with the company's new CEO to hear more about the strategy. I think you'll like it, particularly on a day like today. Stay with Cramer.

When the price of oil spikes and most of the market rolls over like it did today, you're going to wish you owned something that's insulated from the broader economy. Like I talked about last night, look at Cramer fave Eli Lilly, up over 1% on an otherwise ugly day. This is a stock that has quietly rallied 27% from its latest April lows, and it's once again part of the trillionaire club. Now, regular viewers know I've been a fan of this one for ages. It's been a core holding for my charitable trust for nearly five years. It's up more than 360% since our first purchase. We have patience with this one. Best of all, for most of this run, Lilly's had a gloriously simple story. Alongside Novo Nordisk, they invented a new class of revolutionary diabetes and weight loss drugs. You've heard of the GLP-1s. The big difference is that Lilly's always had much better execution. Their first pill version was approved back on April 1st, which should be a big upgrade from the previous injections.

Now, behind the scenes, Lilly was investing billions to ramp up GLP-1 production so that it could ultimately meet the insatiable demand for this wonder drug. At the same time, Lilly's got a terrific portfolio, including big treatments for cancer, heart disease, and autoimmune conditions. These never get as much attention as the GLP-1 drugs, but they've made the company a ton of money. Lilly's revenue shot up from $24.5 billion in 2020 to $65.2 billion last year, while its earnings have grown from $7.93 per share in 2020 to $24.21 per share last year. That's a compound annual growth rate of 25%. Like something from the big pharma heyday decades ago. CEO David Ricks is a terrific steward of his shareholders' capital.

Still, at the end of the day, the thesis here boiled down to the simple fact that Lilly's got the best GLP-1 franchise. But that means the stock gets hit whenever investors tire of that theme, as they did, by the way, late last year when the space started getting competitive. And worse, Novo Nordisk beat Lilly to market with its own GLP-1 pill. That's why the stock had trouble finding traction the first few months of the year. In the last two weeks, though, we've gotten some major bullish catalysts from Eli Lilly. I want to walk you through them tonight so you know how I feel about this.

First, on May 21st, Lilly reported new data from a phase three trial. That means it's been approved phase three right there on their new weight loss drug called retatrutide. This is a GLP-1, but it's combined with two other hormone agonists. That makes it kind of like it's GLP-3, so to speak. The data from this trial showed retatrutide is more effective than the drugs that we currently have. Participants who took the highest dose lost an average of 70 pounds in 80 weeks. Basically, it's as effective as bariatric surgery. Even with the smallest dose, people lost 47 pounds over the same period. The side effects are a little more serious than Zepbound, but the drug's a lot more effective, too.

But an unspoken part of the story — and this is, you got to be really careful here because it's not been approved for this, right? — it's about muscle atrophy. The big problem with GLP-1s is that they make you lose both muscle and fat. There's been a lot of speculation that retatrutide will help you lose more fat and less muscle, even as Lilly itself is not making that claim. But that's why so many people are taking it in the gray market. They've got non-FDA-approved compounded versions of the drug, which I would not recommend. But it's telling that there's so much demand for something that isn't even out yet. It could be the biggest drug of all time. You heard me. Biggest drug of all time. The key is that, at least so far, no one else has a weight loss drug in the pipeline that's in the same league as what Lilly's working on.

Second positive development. On May 25th, Lilly announced some positive phase one — that's very early — trial results for a new gene therapy that they're testing on high cholesterol. But get this, very early stage data. The drug showed promising results for lowering LDL cholesterol, which is the bad kind of cholesterol. Although actually there isn't any good cholesterol anymore. We discovered that specifically with a single intravenous infusion of the drug currently called Verve-102, participants saw up to a 62% decrease in LDL cholesterol with durable effects and a clean safety profile. I'm calling that incredible. Basically, these results make the goal of a one-time treatment for high cholesterol look more realistic. Lilly plans to begin enrolling a phase two trial by the end of the year.

While we're still a long way from a drug like this making it to market, the results were very encouraging. At this early stage, it seems slightly more effective than Amgen's Repatha. Although, unlike Repatha, you only need to take Lilly's drug once. I take that thing every other week. I don't like it, but it's working.

Third, the very next day after that promising gene therapy data, Lilly announced that it was acquiring three vaccine makers in one fell swoop. The deals all included undisclosed upfront cash payments — when you got a lot of money, you can do these kinds of deals — and up to $3.83 billion in value cumulatively across the three transactions, assuming each company hits all the milestones. First deal was for a company called Curvo, which is working on a vaccine for the prevention of shingles in adults. That's a very big market. The second is for a company called Limit Biologics, which is developing vaccines against bacterial pathogens that have built up resistance to traditional antibiotics. Again, something that the hospital system is desperate for. The third was for the very boringly named Vaccine Company, which is developing technology for vaccines that mimic viruses without actually including any genetic material from those viruses. That could mean vaccines with fewer side effects.

In short, Lilly's making a big initial push into vaccines, an area where it doesn't have a major presence at the moment. With RFK Jr. running the Department of Health and Human Services, vaccines are not a particularly hot area right now. Lilly seems to be making a longer-term bet, using a small fraction of its GLP-1 proceeds to create an entire new franchise. I think it's a smart move.

Finally, here's some more good news. On May 28th, we learned that Lilly reached a deal with CVS Caremark, the largest pharmacy benefit manager in the US, to cover both Zepbound and Fondeo, their two big weight loss drugs. With this Caremark deal, all three of the nation's largest PBMs will cover Lilly's full obesity medicine portfolio, significantly expanding the number of Americans who can access these drugs through their existing insurance. So for eligible patients with commercial coverage, both medicines are now available for as little as $25 per month. This stuff used to cost $1,000 per month, and people were bankrupting the system. Uh-uh. Separately, Medicare Part D beneficiaries may also be eligible to pay $50 per month for their obesity medicine starting July 1st through the Medicare GLP-1 bridge program. Basically, many more people can now afford these things.

Here's the bottom line. While Lilly's stock had swooned late last year and early this year, it's made a big comeback in recent weeks, driven by real positive catalysts, not just sentiment. That's why I'm sticking with Eli Lilly for the long haul, especially during times when tech's a tither. Mad Money's back after the break.

While we wait, observe, get all excited about the big SpaceX IPO, I got another idea. We have a bunch of other recent deals that I think you should know about. I don't want them falling through the cracks. Take Applied Aerospace and Defense. So, this one came public today, but not too much fanfare, even though it has exposure to some of the strongest sectors in this market. Applied Aerospace helps their customers in the space and defense industries to design and manufacture their products. I want you to think of it as an outsourced manufacturer, like some of the real hot ones we like: Flex, Jabil, Celestica. Except rather than electronics, it's focused on the military-industrial complex. By the way, all three of those stocks have been on fire lately, and you know I'm big fans of that industry. That got me interested in Applied Aerospace, in which this thing builds complex mission-critical subsystems for extreme operating environments, both for space and military applications.

Some of Applied Aerospace's predecessor companies have been around for decades, and they use their expertise to help clients rapidly prototype new hardware and quickly get it to production. Now, this is not some new player that came out of nowhere. They have long-term relationships with the major aerospace defense contractors. Now, like many recent IPOs, Applied Aerospace is basically a private equity-backed rollup coming public. A firm called Greenbrier Equity Group made a series of nine acquisitions in the space, starting with PCX back in 2021. A year later, they bought the old Applied Aerospace Structures. Then they made two more aerospace acquisitions before combining it all with the business formerly known as PCX. In the process, they've created what I think is a pretty heavy hitter. Of course, even after the IPO, Greenbrier still owns roughly 81% of the business, which will be a problem the moment they start to ring the register. Hopefully, the stock will be much higher. That's not going to happen anytime soon.

Okay, but let's talk about the numbers. It's a little bit noisy because Applied Aerospace never stopped making acquisitions. Just this March, they purchased a company called CBI. They gave you both the real numbers and the pro forma numbers that show what the business would look like if they closed on the CBI deal at the beginning of 2025. We have to use the pro forma numbers because they're more representative of the current state of the business. But I want you to keep in mind that a lot of the growth here is inorganic. Last year, for example, Applied Aerospace had 51% revenue growth going by the pro forma numbers. Without including the CBI numbers, that would have been just 25% growth. In the first quarter this year, pro forma revenue was up 37% from the actual first quarter 2025. Without the acquisition, revenue would have been up 21% year-over-year. Still pretty good.

As for profitability, again, this is what hurt it. I think it's complicated. First, using the most stringent GAAP numbers, Applied Aerospace is losing money. In the first quarter of this year, the company had a pro forma net loss of $78.8 million, which was much larger than the $7.3 million loss in the first quarter of 2025. I don't like that. The losses for 2025 and for the first quarter would have been much smaller, though, if not for the CBI deal that's reflected in the pro forma numbers, indicating the acquisition bolstered growth but hurt profitability. Now, all that said, if you're willing to look at the more forgiving adjusted earnings for

Interest, taxes, depreciation, amortization or EBITDA numbers — now they look much better. I'd argue that EBITDA is the right way to evaluate what's essentially a contract manufacturer with lots of depreciation. Applied Aerospace saw its pro forma jump 69% last year; without the CBI numbers it would have been up 40%. In the first quarter of this year, the pro forma numbers show 13% EBIT growth. Without the CBI deal it would have been 5% growth. The numbers work out to EBIT margins in the low 20s in 2024 and 2025, no matter which numbers you use for 2025, and that's pretty good. That said, the company's EBIT margin fell to the high teens in the first quarter. I'm not going to lose sleep over that. But do you see all the confusion that went into this one? I wish they didn't have it so complex.

There are a couple other things to flag on the financial front. First, Applied Aerospace disclosed that it had a $1.06 billion contract backlog as of the end of March. That's encouraging because it's 1.75 times last year's revenue. Less encouraging is Applied Aerospace's cash flow. The company had negative cash flow from operations in 2025 and again in the first quarter of this year. Now we're going to talk balance sheet, which is often an issue for these private equity-backed IPOs. Applied Aerospace says it's using essentially all of its IPO proceeds to pay down debt. That should shrink their total liabilities from $1.25 billion down to more like $661 million. Just looking at the total debt, the company should have a leverage ratio of 2.3 now that it's come public and paid off a big chunk of debt. That strikes me as fine.

Finally, let's talk about valuation. The IPO had rather tame pricing at just 20 bucks, which was just above the midpoint of the deal's marketed price range. We also didn't see much of a pop today. In fact, after the stock opened up less than 4% from its offer price, at $20.75, it fell from there, breaking below its offer price and settling at $19.10. Now, which some of you may find discouraging — me, I actually like deals that break the print, as long as I'm not in them. It tends to create bargains that I can sit back and look at, especially now the market cap's only $3.25 billion. If we add back the company's post-IPO net debt total, we get an enterprise value of $3.57 billion. And if we use a very crude 2026 EBITDA estimate of $114.8 million — that's four times what they made in the first quarter — then we get an enterprise multiple of 31.

By the way, if you use the 2025 pro forma numbers that include the CBI acquisition, you get an enterprise multiple of 25, which might be more accurate here. But I'm okay using a lower EBITDA estimate because I want to be conservative. I'm giving you all these numbers — I just don't want you to blindly move into this thing. So, is an enterprise multiple of 31 a good price? Honestly, still a bit high. It's probably why the stock broke the print. If you look at the three contract manufacturers that I mentioned — the great ones, Flex, Jabil, and Celestica — all of which have been rallying like crazy for the past months, they sport enterprise multiples of anywhere from 16 to 31. That makes this stock too expensive.

That said, I can easily see a scenario where my back-of-the-envelope EBITDA estimates turn out to be too low, possibly way too low, and Applied Aerospace, which is in all the right end markets, looks a whole lot cheaper in retrospect. Here's how I see it. In general, this is a story I like and a stock I want to own at some price. Ideally, you get a couple of bucks lower, say somewhere in the mid-teens, where it would have a mid-20s enterprise multiple based on a rough EBITDA estimate. That's good. Based on the stock's lukewarm reception today, not impossible — though I don't think you can count on it getting down that low. But if you really like the story, then you know what? You've got my blessing to buy it here. This wasn't a super hot start. You're not chasing anything. Valuation isn't crazy, just a little elevated. And like I just told you, in reality, the stock's probably quite a bit cheaper than it looks.

Here's the bottom line. I actually like this Applied Aerospace Defense. Why spend so much time going over the numbers? If you can get the stock at a price you feel comfortable with, you know what? I say go for it. Let's go to John in Florida. John?

My thank you. I've been working — did some more stuff on the club today. I just feel like we're doing so many things right. Got a new position we're putting on. Doing it generally, gingerly, buying on the way down. You got to get involved. I think it's a great idea. How can I help you?

No, I want you to hold it. I want you to hold it. Look, the reason I don't tell you to sell it is because I know that their products are doing well, but the problem is it sells at a very high price-to-earnings multiple. Now, people don't understand the M. This is why I wrote "How to Make Money in the Market." The M is the secret sauce, and the M's too high, and people are selling it because of it. Hey, let's go to Bill in Massachusetts. Bill?

I don't want you to do it. I don't want you to do it. Boeing's a C right now. Boeing trades with the war. Okay? I mean, it shouldn't, but it does because people feel that travel's going to be hurt. You can't touch it, Bill. I'm not going to let you buy it until it goes lower or the war ends. Okay? It is just like so many other stocks that are stuck in purgatory because of the war. Thank you for the call.

Applied Aerospace and Defense. What a great name. Think it covers everything, right? It didn't have a sputter start, but you know what? I think that's good. Gives you a good chance to buy something probably cheaper than it looks. Watch where I made money, including my exclusive with logistics and data center REIT Prologis, old friend of the show. Then there's a few things the market could do to protect retail investors interested in the SpaceX IPO. I'm going to detail them here and I'm going to make this my push. I want to save people money. And your calls, rapid fire. Tonight's edition of the lightning round. So stay with us.

Not that long ago, Prologis was a logistics play. It's a real estate investment trust. Owns and manages 1.3 billion square feet of logistics facilities across 20 countries. Lots of fulfillment centers. But then they realized they could take some of these warehouses and fill them full of servers, get a piece of the data center business. This transition, where AI infrastructure is a very important addition to warehousing logistics, has helped the stock rally 30% over the past 12 months. They have a lot of interest from the hyperscalers we talk about all the time. When Prologis reported its most recent quarter, the numbers came in strong even as the company's investing heavily in the data center buildout. Meanwhile, the core logistics business is improving, with large-format space pretty much solid. I sold out across the entire portfolio. Could the stock have more room to run? Well, let's take a closer look with Dan Letter, he's the new CEO of Prologis, to find out. Mr. Letter, welcome to Mad Money.

Well, first of all, you got big shoes. I have to admit, because Hamid Moghadam was one of our first guests and what a genius. He taught me so much. Tell me what you want to do that's similar, and maybe you've got some different courses to take.

Why don't you talk about that, because I think correctly he was not going to hype an area, so to speak. He's a very solid guy, as I'm sure you are, but it does seem like such a great opportunity to do these data centers.

How big that is? That's not a small amount.

Now, Hamid was the first to tell me, you know what, we have these roofs and on the roofs we can do solar. I imagine that's a tremendous advantage for you guys.