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Hey, I'm Cramer. Welcome to Mad Money. Welcome to Cramer. Other people make friends; I'm just trying to make some money. My job is not just education, not just to entertain, but to do some teaching. So call me 1-800-743-CBC. Tweet @JimCramer. News flash: sometimes stocks just go down. If they're visible, high-profile stocks, they can change people's minds about the rest of the market, usually for the worst.
And if you don't know about that linkage, you're more likely to panic and sell some very, very good stocks that were, I don't know, let's just say they were being pruned today. Hey, I prune my tomatoes each week. I try to show them on Letter X. They bear the most fruit if you prune them. They don't do so well if you don't.
On a not-so-hot day where the Dow declined 131 points, S&P losing 0.45%, Nasdaq tumbling 1.16%. Once again, we saw a wholesale change of the guard in the market, simply because one of the most visible stocks in the world went the wrong way after earnings. Sell, sell.
Now the stock in question doesn't trade here, which makes it a little harder. It isn't even American. It's a South Korean memory chip place called Samsung. And it's been an insane trader. It's up more than 370% in the last 12 months and over 140% year to date. Okay, that's a good-looking chart. All right, but last night Samsung stock got crushed, falling over 9% after offering a preliminary quarterly report that was superb, but not superb enough, leaving questions about the durability of demand for their basic memory products, the ones that are supposed to be in such short supply.
Right. But put aside that Samsung has outperformed almost every stock in the world in the last year. When you look at the booming South Korean market, only SK Hynix, the memory chip maker, even comes close in terms of market capitalization. That stock goes up 700% in the last 12 months and over 230% year to date. Samsung's no slouch, but that SK Hynix run is one for the ages. It allowed Hynix to become a trillion-dollar company, like its Samsung doppelganger.
Now, whenever you have a visible miss, no matter how slight, there's always going to be some nervous, jittery shareholders of other companies who insist on extrapolating that weakness, particularly if it's so visible, like the way that the climb was for a market winner like Samsung. They extrapolate it to their own portfolio, and they don't necessarily do it right. And they don't have all those fancy computers that tell you what to do. See, this thing goes like this.
Samsung makes products that are vital to the data center. We talk about data center all the time. If it misses expectations and it's got such demand from the data centers, then even very heightened expectations... well, wait a second. That means demand might be slackening. If demand is slackening in Korea, you can extrapolate that something must be rotten in America. When the bears see this stuff, they went out at any cost and short the stocks, and people get nervous.
Okay, listen. So down goes Micron right after reporting an incredible quarter, which is now all but forgotten. Off goes Vertiv, which builds the linchpin that links power to the data center. Today it just got obliterated. Vertiv makes power and cooling equipment for the data center. It may be weak. It could be weaker too for this, even as we know that Vertiv has been doing very well. Bang, bang, bang.
Nasty. Western Digital, Sandisk, Seagate, all clubbed like baby seals. Caterpillar went through the same thing. Almost every stock connected to the physical part of the data center has come down. The physical part, all the pin action from Samsung. The extrapolation didn't stop there. It included three favorites of mine: KLA, Lam Research, Applied Materials, all semi-equipment makers that just told us great things. They were in the back. They're like the 7, 8, 9 pins.
Always fun. Look, none of those other facts about how well companies were doing still matter, though. I mean, all of a sudden I thought it was last week because everything's now been superseded by last night's Samsung report. Why? Because now the thinking is that you don't want to be anywhere near these hardware stocks when the orders must be peaking for Samsung and the data center buildout is about to slow.
Remember, I don't know if this is the narrative. I'm telling you this is the narrative that people are acting on. So money poured out of the less proprietary data center plays, but it's where the money went that was most shocking. Three different places, and only one of them is prosaic; the other two are kind of staggering. First, as I predicted yesterday, there's a considerable amount of money going into the stocks of full immunity, even ahead of earnings.
There's Johnson & Johnson, which jumped nearly eight bucks. Cardinal Health, which soared another two bucks. PepsiCo gained a buck and a half. Don't forget the report Thursday. The defense has put on quite a show today. Of late, and only of late, we've seen a remarkable move into what would have been considered more defensive software stocks before the advent of AI. I'm talking about Salesforce, Adobe, and yes, ServiceNow. They don't have any shortages like tech hardware companies.
And suddenly, well, I got to tell you, ServiceNow's gotten, as we used to say in the business, jiggy. All right. Hey, by the way, Adobe was up three and a half today. Someone took it from a hold to a sell. You know what a bottom looks like when some firm takes it to a hold and a sell and the stock goes up three? And I don't really like Adobe.
Microsoft, such a hallowed stock, usually trades with the Mag 7, but lately it's traded with the defrocked enterprise software plays. I think these low prices were a gift, and now we're finally getting a bounce. We are going to try to hold on to Microsoft for the charitable trust, which you can follow by signing up for the CNBC Investing Club, but I've been in self-flagellation mode about that stock.
It's the final area, the third fund of flows of funds that really astounded me. I'm talking about a gigantic amount of money flew into what's become the last place on earth that you want to put money: the hyperscalers. Yes, the dreading, daunted, and dreadful hyperscalers. They've been acting like zombies, just walking around, going nowhere. They've seen some money coming in.
Amazon just did a $25 billion bond offering, though. I thought that was going to hurt the stock. It didn't. Maybe it was because they said they wouldn't do any more bond deals this year, at least. Yes, I'm actually talking about money moving back into the walking dead: Amazon, Google, Meta.
Yeah, well, I mean, that's kind of what they look like to me. The latter defying the possibility of some big losses and lawsuits that would make social media the new tobacco. Apple hung in there despite scuttlebutt that the App Store slowed in the most recent month. Something that bearish analysts always pick over. It's usually a lie.
Even Nvidia managed to rally. Nvidia, did you hear that? After the never-ending drumbeat of customers vowing to minimize their Nvidia bills by designing their own chips. At one point the stock was down huge. Sometimes I wish you could just put all these moves into a Claude or Gemini. I don't know, one of them, and ask what's really going on here. Maybe you just have to put it into me, because I'm going to tell you.
The Mag 7 have all had a miserable time of it for the better part of the year. Why? The reason today's action, where the stocks are going up and the wild bunch are going down, is precisely the correlation that's eluded so many, including at times me. These are component players that are soaring because we have shortages of many different semiconductors, and they're hamstringing the whole tech industry.
The money that had been going into the Mag 7 got wildly dispersed because it's hot money, and the people behind it wanted short-term results. You couldn't get them with Amazon, for example. Things had gotten too expensive in the data center. A disproportionate amount of the pie going to companies that don't have a lot of intellectual property, including DRAMs.
Was today the day where we saw a shift back? Perhaps. Is the great component trade over? Perhaps. Are people reverting to what they used to like? Maybe. Will the components come down in price, impacting customers more positively? Could happen. Or are those companies' budgets simply too distressed? I don't know.
The bottom line today kind of looked, at least in the afternoon, like the old days when we realized that you needed an Nvidia chip to calculate things and Nvidia was the heart of the data center, when the stocks of Google and Meta and Amazon had enough strength to carry the market, when Apple needed no one and wasn't worried about commodity chip prices. They didn't have to worry about that back then.
These commodity plays and their stocks somehow took over the market, and they brought chaos with them. Is it over? Today may have been one day of larger profit-taking in those, or maybe it wasn't. You know, it sure felt like a big change to me. I need to go to Sunny in Illinois. Please, Sunny.
Hey Jim, a big egg and berry booyah to you from Orland Park, Illinois. My longtime friend.
Doesn't get better than that. Thank you so much, Sunny. How can I help you?
Hey Jim, before I talk to you about my stock, I got to ask you a two-part question. Did you break the waking up at 2:47 a.m.? And if you did, how did you do so, my friend?
Um, no, I didn't. I got up at 2:47 tonight, and I got up at 2:47. I have a cough right now. And I looked and I said, 'Oh my god, it's 2:47.' And so right now I'm in 2:47 mode, and I'm going to try to get out of it. I don't know what to do right now. Um, but the 2:47 has just been the bane of my existence. You know, last week I said, 'Couldn't it be 2:48? Couldn't it just be one minute later?' But it's been in my head now since college. What can I do? Hey, but maybe by this point there's nothing you can do. Anyway, that's my advice, but my advice is there's nothing you can do.
Yeah, it's... no, actually it's been 40.
Oh, man. Well, listen, I hope it gets better for you, my friend. Um, thank you.
Before I talk to you about my stock, I want to give a huge shout-out to your staff and especially Sean. He is a gentleman and a scholar.
Everyone loves Sean. I mean, like, he should be out here as my co-host. The vibes that guy generates. We love him. I'm actually in the mothership. I'm in Englewood Cliffs today. So I'm near that gang. And that gang are like the nicest people in the world. I can't curse around them, though. I can't say mean things. I can't pretend to be, you know, that I'm happy. I have to be happy with these guys. They're like happy people. It's like really amazing.
You got a great, happy people staff, my friend.
I do. I have happy people. You can see them.
Well, good, man. Let's get down to business. So I'm looking at a pharmaceutical company. You've had the CEO on your show several times over the past few years. It pays a high dividend. It's down near the 52-week low. What do you think about Pfizer, Jim?
Okay. They do have earnings growth problems. They haven't been able to make the Seagen acquisition work the way it should. The dividend is safe at 7%. I wish, I really wish I could be more positive. It just can't be. It kills me to say that a stock that yields 7% that used to have a lot of growth is going to have growth again, but I can't come up with where the growth is. I just can't. I'm sorry. But thank you for the kind words. And how about Sean? Huh? Hey, Mad Money with Sean and Cramer.
All right. Look, I think today felt like a real shift when it comes to tech stocks. Mag 7 could be a phantom, but it felt different tonight. What's going on with the quiet sell in Walmart? I'm investigating what's behind the move downward and I'll tell you whether I still believe in one of my favorite places to shop. Then the airline industry has been going through turbulence for years, but names are now starting to stand above the rest. I'm going to reveal them and how you can play this space. And I think it's different this time. I know that's supposed to be expensive words. That's not true. And Applied Aerospace and Defense is one of the newest entrants to the public markets. I'm sitting down with the CEO to find out more about the company and the defense space. You will like this stock. You'll probably want to buy it tomorrow. It's David Cramer.
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Over the past few weeks, there's been a quiet sell-off in some of the largest companies in this entire market. You hear a lot about the beatdowns in big tech, like I talked about at the top of the show. But you know what? This is really a mega-cap problem. 11 of the 15 largest stocks in America are now down double digits from their 52-week highs.
Well, a lot of that comes from selling AI data center plays in order to raise cash for the SpaceX IPO. Well, it's not all tech. Take one I love forever. Take Walmart. You know that Walmart's down nearly 18% from its recent highs. 18%. When the stock peaked at 135 and change in mid-May, it was a member of the trillion-dollar club. Almost took that for granted. Then two days later, Walmart reported this quarter. Okay, so it was not well-received. Stock fell 7% in response. Since then, it just keeps drifting lower.
I think you're getting an incredible buying opportunity here because the stock's been getting pummeled right as Walmart's biggest worries have started to fade away. Specifically, concerns about expensive oil and the state of the consumer.
Look, but first, let's do this. Let's circle back to the original negative catalyst here. When the company reported mid-May, this really wasn't a bad quarter. Not by any stretch of the imagination. Walmart delivered better-than-expected revenues, in-line same-store sales, in-line earnings. Okay, margins on the softer side, but other than that, the results, I'm calling them fine. What tripped people up was the guidance. Walmart merely reiterated its full-year forecast when the analysts were expecting them to raise the numbers, and that's why the stock really got clobbered.
At the same time, their guidance for the current quarter was flat-out weaker than expected. Does that justify, though, the stock's 18% pullback from its May highs? No, not at all. Walmart shares got slammed because sentiment just got so ugly. People were worried about higher fuel costs putting the squeeze on consumers. Management seemed proud of the fact that they were able to reiterate their forecast despite a dismal backdrop. But investors were very worried about the impact high gas prices could have.
And the conventional wisdom on Wall Street assumed that we're looking at a nightmare environment for the consumer. And they were defying that nightmare. So when Walmart reports an okay quarter with some imperfections, with a higher price journey moldable than we are used to, those numbers look extremely ugly, downright bearish.
Don't buy. Don't buy. Don't buy.
But man, if you were worried that Walmart was about to suffer from an oil-induced slowdown in consumer spending, that whole story has gone out the window, people, over the past few weeks. Thanks to our government's diplomacy with Iran, the price of West Texas Intermediate has fallen from 110 in mid-May to the low 70s today. You know, it traded down to 68 last night.
Meanwhile, the national average price for gasoline has fallen from $4.56 on May 21st, the exact day that Walmart reported, to just $3.79 today, according to AAA. There are some categories of gasoline, typically jet fuel, that haven't come down enough. That will happen, people. Six weeks ago, everybody was terrified that Walmart and many other retailers would be laid to waste in a world where consumers had to spend fortunes at the pump. That world is gone, people.
So shouldn't we be getting more bullish from these stocks? Yes. Somehow, Walmart shares keep going lower anyway. I mean, take a look. I'm going to get over here to a different studio. Don't mind my back. I got to figure this stuff out, too, just like you. Look at this. This is Walmart. This is not some blowing-up semiconductor stock. It's one of the greatest companies on earth.
Now, I know there are broader concerns about the state of the consumer. Walmart stock slid lower yesterday along with the rest of the retail cohort, in part because we got a kind of a, you know, that labor report on Thursday that was not that strong. But here too, I think Wall Street's jumping to the wrong darn conclusion. Wall Street doesn't shop at Walmart. It doesn't know what's happening. It doesn't know why consumers are struggling a bit.
Walmart's going to be an ideal destination for shoppers all the way up to the $100,000 category. Okay? It's a trade-down play that people who are wealthier have discovered has a lot of incredible value. Go to your Walmart and you'll know what I mean. Go there.
Look at what happened last night when President Trump posted on Truth Social that Walmart would be lowering prices by a lot to celebrate America's 250th birthday. Management later confirmed that they've been offering thousands of lower prices, mostly for food, beverages, outdoor living, toys, and apparel. The stock jumped nicely in response because consumers are desperate for lower prices. Walmart is giving them. I've gone over the pricing mechanism for so many different things. It's cheaper than everybody else's, other than Costco.
Finally, let's talk tariffs. Back in February, the Supremes overturned the vast bulk of President Trump's tariffs, and they ordered those payments refunded. When Walmart reported in May, their guidance didn't include any impact from those tariff refunds, even as they're working hard to make sure that they get most of the money they can. And most, we're talking about less than half a percent of the company's annual sales in America. But that's free money, and I think a lot of analysts aren't baking it into the numbers.
The way I see it, okay, there's two potential outcomes here. First, Walmart could simply get a financial benefit from tariff refunds, which means, surprise, surprise, because it's not in the numbers. Second, and more likely, the company could use any benefit from tariff refund funds to lean into further savings for its consumers, basically passing the tariff funds on to the shoppers. That would be the Walmart ethos that I know. In fact, that's what Walmart basically said it would do.
On the last conference call, CFO John David Rainey, old friend of our show, says that the single best investment they can make right now, and I agree with him, is helping you. In the end, Walmart sold off hard like many other mega caps over the past month, a month and a half really, and I think the corn has just gotten ahead of itself.
If you were worried about the state of the consumer in a high-oil environment, you need to reassess your opinion now that we're back in a medium-oil environment going, I think, much lower. Somehow Walmart stock hasn't gotten an ounce of credit. Maybe the PE multiple is too high. I do not know. But I think you've got a great setup for the consumer and for Walmart.
Here's the bottom line. While Walmart's latest quarter, okay, wasn't perfect, so what? That's why the stock's down a lot? It was bad enough to justify the stock's subsequent 18% decline? No. Again, I think a lot of the weakness here comes down to the sense of mayhem created by super-high oil prices, and Walmart stock should get a reprieve now that oil's back down to reasonable levels. That's why I think Walmart's worth buying right here, right now, into weakness, especially if you missed out on that fantastic rally over the past couple of years. Mad Money is back after the break.
Coming up, with airline stocks taking off, Cramer's zeroing in on two top names poised to reach new heights. Next.
All right. Ever since the war with Iran started winding down in May, the price of oil has plunged, and that's allowed the airline stocks to roar. But when you drill down, there's more to some of these airlines' rallies than cheaper fuel. When you look at two stocks I'm going to be talking about here, Delta Airlines, United Airlines, I think there's something more structural going on because it sure looks like they've gotten off the cyclical roller coaster and become more consistent secular winners.
Sell, sale, sell. Bye, bye, bye, bye, bye.
Around 20 years ago, both Delta and United were in bankruptcy proceedings. Look, in the old days, the whole industry would collapse every decade or two. When you look at their charts, you can see that for most of their existence, these have been the textbook boom-and-bust stocks. They're prone to big rallies and big pullbacks.
Yeah. I mean, look, I just, I love this wall. I mean, this is like so cool. You can see it goes down and then go up. And yeah, you don't want... I don't want you down 20%. That's not my style. Okay. But anyway, listen. The airline stocks had a limited shelf life. How about that? Even when they were winning, you knew it was only a matter of time before you found yourself in the house of pain.
Demand would be strong. The airlines would raise prices. Then demand would start to wane, and we'd see aggressive price cutting, full-on price wars. I mean, we don't want full-on price wars. We want profits. Anyway, earnings take a big hit. Stock was tail off. It was a tale as old as time. Even Warren Buffett got caught up in it.
But in the past pandemic era, there have been some major structural changes to the industry that I think make it a much better place to do business. And other than than Philippo, I don't hear it talked about, so we're talking about it tonight. See, in recent years, we've seen a wholesale removal of low-end flights. The ultra-low-cost carriers have either gone under, like Spirit Airlines, or cut a ton of capacity, like JetBlue.
Southwest Airlines, meanwhile, another low-cost carrier, has become more disciplined, operating much more efficiently ever since activist Elliott Investment Management got involved two years ago. At the same time, we've seen a lot more discipline from the airlines on pricing. Now, this is something I pointed out last year. Early on in 2025, United said it was seeing flagging domestic demand. So they responded by cutting domestic flights that no longer made financial sense. Rather than cutting price, they just removed lower-margin capacity. All the majors seem to be following this playbook, and it's been a real boom for business. It really, really helps the price multiple.
On top of that, high-end carriers like the two I keep mentioning to you, Delta and United, have made a conscious effort to focus on their premium offerings, their first-class and premium economy tickets, business travel, higher-priced overseas flights. They also moved aggressively into new revenue streams like credit cards. You know, Delta's got this very lucrative partnership with American Express that made up 13% of the revenue last year.
Now, when the war with Iran started and the price of oil spiked, this whole group got pulverized. But those losses have been erased now that we're in peacemaking mode. With Delta stock up nearly 28% for the year, United up almost 15%, they both set fresh all-time highs last week. Well, many of your semiconductor stocks may have been clubbed.
And look, when Delta reported in April, even though their earnings guidance took a big hit thanks to higher oil, management made it clear that they've made themselves a lot less hostage to the price of crude. And boy, I got to tell you, they're very convincing. As for United Airlines, at an industry conference in late May, CEO Scott Kirby explained that his airline has been able to better deal with the quote, 'curveballs' that have come their way over the past couple of years, thanks to big strategic changes.
Later on, he talked about structural, permanent, and irreversible shifts in the airline industry in terms of winning customers over through brand loyalty rather than reckless price cutting. This is a new world. Now, as the second half of the year begins, we're going to have to see proof from these leading airlines that all this talk about improved strategy and more resilient businesses is actually paying off.
Delta and United both offered weaker-than-expected forecasts for the second quarter because at that time the price of oil was going through the roof, people go even higher. I think they can beat those low forecasts the next time that we hear them. Look, oil's coming down now. I know. Just be sure, jet fuel's not down enough yet, but maybe we'll hear something about that from Delta, which reports on Friday morning.
But here's why this is exciting. If it's true that Delta and United are becoming secular growth winners and not just boom-and-bust cyclical stocks like they've been considered for years, then you're going to start to see these stocks get re-rated higher. Phony Wall Street term meaning that investors will start to pay more for the same earnings. In other words, secular stocks, secular growth tend to get a higher price-earnings ratio than cyclical stocks because Wall Street will pay up for consistency.
Currently, Delta trades at just under 15 times this year's earnings estimates. United sells about 13 times this year's numbers. Those are the types of multiples that you'll see for high-quality cyclical names. Hey, these things used to be traded at mid-single digits because people didn't trust them. That's the PE. But in Delta and United, I'm telling you, they've become true secular growth winners. You could see their multiples expand toward the average stock in the S&P 500, which is 22 times earnings.
On top of that, as we start to look beyond 2026, we see that without the fuel headwinds, both these companies are expected to grow significantly. According to current consensus estimates, Delta is expected to earn around $6 per share this year. But you know what? That could grow to $8.50 next year, maybe 10 bucks in 2028. United, I expect to go from 10 and change of earnings per share this year to around 15 next year and 17 in 2028. If we're right about the secular growth thesis, that will happen.
Here's the bottom line. The airline stocks have rebounded like crazy in recent weeks because oil prices have come down dramatically while demand for flights has remained strong. But longer term, I think the industry leaders like Delta and United are a lot less boom-and-bust than they used to be. It really did help to take out those other carriers. Unlike the old days, the airlines no longer aggressively expand their fleets when times are good, which always led to a vicious pricing backlash when times turn bad.
That makes it much easier to own these airline stocks long term. As long as the industry stays disciplined, maybe we catch a couple days' spike in oil. These come down, I say go buy these two best-of-breed operators right here.
All right. You know what? Let's... we're going to go for some calls here. Let's go to Bill. Oh, our friend Bill in Massachusetts. Bill.
Hi, Jimbo. How are you, my friend?
Uh, not bad at all, my friend. How are you? We're in our regular studio today from the old days. You're going to get a kick out of it, Bill. You'll like it.
I love the club, Jimmy. I just love it. I just want you to know that.
Hey, I wanted to ask you about Honeywell. We really did good on the split, and I want to get a green light to get some more Honeywell.
I'll tell you why. Dave Cote, who is my... I know it's not about friends, it's about money. Dave Cote is my friend. He put together the Honeywell that we see, Honeywell Aerospace, and I think he put together the blue-chip airline play. Not Boeing, which we own for the travel trust. GE Aerospace is terrific, and I love Larry Culp, but this company now run by Jim Currier is a winner. I want to keep buying it for the trust. We don't have enough pure plays in aerospace, and we just got one put together by the man who was one of the greatest CEOs of all time, Dave Cote.
Let's go to Tim in Pennsylvania. Tim.
Hey Jim, how are we doing today?
I am doing well, Tim. How are you?
Oh, not too bad. I wanted to talk to you about railroads. They've always struck me as a real-economy infrastructure, helping drive our economy, moving freight, supporting manufacturing, and connecting ports and keeping the supply chain running, which is what we usually aim for. Correct. The stock has had... the stock in question has moved nicely recently, and I'm not looking to chase it just yet, but I did want to get your opinion on it. Do you see CSX as a good long-term investment?
No, I see it as a great long-term investment. Steve Angel's running it. Remember how much money he made for us in Linde? It was incredible. Jeff Marx nailed that one. Steve Angel's the guy. I mean, look, I like Joe Hinrichs, who was before he was the railroad man of the year, but Angel is doing it. It's $48. I think that stock could go to 60. I like the rails. Let me throw in Union Pacific. I like that one, too.
All right. Look, as long as the airline... I just like transports right there. As long as the airline industry stays disciplined, and I'm telling you, I think it's going to... you can own a piece in this space. But let's make it either Delta or United, please.
Watch more Mad Money, including my exclusive with a new aerospace player on the block, Applied Aerospace and Defense. You're going to want to own this one. Then there are a lot of use cases for AI that don't involve laying people off. I'm going to give you an example, one that just rescued my workday, and all your calls rapid-fire in tonight's edition of the lightning round. So stay with Cramer.
Last month, a company called Applied Aerospace and Defense came public to fairly limited fanfare. Although we told you we like this one, and it's rallied a bit over the last couple of weeks. I think this is a terrific business. Applied Aerospace is basically an outsourced manufacturer for the aerospace and defense industry at a time when we've learned we desperately need more drones, more missiles, more satellites. It's probably going to take years to restock after the war with Iran, which is why we need all the help we can get. We need it now.
So let's take a closer look with Trip Ferguson. He's the CEO of Applied Aerospace and Defense to learn more. Mr. Ferguson, welcome to Mad Money.
Hey, thank you, Jim. Really, really happy to be here today.
Okay, so Trip, you know, we profiled your company, and one of the reasons we did that is we just felt you were kind of the new contractor, fast, not wedded to certain systems that may be outdated. Can you tell us about the ethos of your company because it resonates throughout all your documents?
Yeah, absolutely, Jim. You know, Applied Aerospace and Defense exists to unleash advanced manufacturing supporting the defense industrial supply base. We both support emerging innovators and the proven leaders, and we do it through a couple different key data points. The first is decision velocity. We enable decisions to be made to build really highly complex systems that really operate in extreme environments for our customers.
We also drive what we call innovation through IP-enabled process. So we have decades of experience making really hard things. And when you have that experience, it drives the ability to take what might be a new design and really bring that forward faster and really meet the new threat environment. And that's what's changed today from the past. You know, looking and saying it's going to take 10 to 20 years to build a really complex program. Hey, it's 3 to 5 years now. We have to adapt to that.
But you do both. You work with both the old-line defense primes and the newer space and defense companies. Tell us what it's like to toggle between those two.
It's actually a lot of fun to start with. But you get the best of both worlds. So when you think of maybe the proven market leaders who move at a pace that really has been created over decades, we enable them to go faster. We enable them to operate more affordably. And we offer expertise really in and around really complex manufacturing that maybe they don't want to do in-house, and we do that really well.
When you think of my friends that are really innovative, might wear maybe hoodies and really comfy T-shirts, we really help them build at scale. So what makes Applied really unique today, we have the ability to be there day one and to be there at full-scale production, and there's very few companies that can do that today. And that's why Applied is so positioned to capture demand today and prepare for what's coming in the future.
Do you think we can make drones as cheaply as the Iranians or Ukrainians?
I do. I have a lot of confidence and a lot of faith in partnership within the American supply base. I see other leaders and other companies coming together. We not only need to be affordable, but we need to be able to make highly complex systems. So what's cheapest might not be best in all applications. So we need to do both really well.
Do you think that there's a possibility that Russia... look, there are forces right now today that are making so that Crimea may be lost by Russia? I mean, they're trying... Ukrainians are starving it. It's obvious that Russia is really stepping up the pace. Are you involved in trying to restock what they want or what NATO is doing?
So Applied directly supports international, you know, governments through foreign military sales. So short answer is yes. We currently operate here in America because the demand signal is so large. So we want to stay focused, and one of the things our leaders talk about is how do we meet America's need today? But the replenishment here and there are both very relevant, and we see it really as generational demand. This is a very unique time, and everyone needs to come together and move quickly to address this demand signal.
Now this is something people get. I mean, I don't usually like to talk politics in Washington, but it doesn't seem like that... I think the defense budget percentage of the GDP is too low. I know that's going to... half the audience is going to hate me immediately, but it is tracking a little lower than you would expect given the fact that the Department of War is engaged all over the globe.
Well, I think right now the key is consistent funding.
We work with all the major primes, and so the nice thing about Applied is we have great visibility into our funding, which gives us a longer runway before we feel the effects of some of those starts and stops.
