CNBC Halftime Report: "Are Mega-Cap Expectations Too High?"

Date: January 29, 2026
Host: Scott Wapner
Panelists: Josh Brown, Jim Lebenthal, Malcolm Ridge, Rob Sechan

Episode Overview

This episode centers on the dramatic drop in Microsoft’s stock price following its earnings miss and explores whether market expectations for mega-cap tech stocks—especially those in the "Mag 7"—are unreasonably high. The investment committee dissects Microsoft’s results, debates the implications for the broader market, and compares outcomes across other major tech names (Meta, Apple, ServiceNow, IBM). The panel also addresses broader sector movements and key macro headlines.

Key Discussion Points and Insights

1. Microsoft's Earnings Shock: Is the Reaction Overblown?

• Microsoft experienced its steepest single-day drop since March 2020, losing around $400B in market cap after Q4 earnings disappointed.
• Main Issues:
  • Higher-than-expected capital expenditures ("spend up")
  • Slower-than-anticipated Azure/cloud revenue growth ("revenue growth down")
  • Lingering questions about ROI on massive AI and cloud investment
  • Deeper reliance on OpenAI, despite earlier signals of independence
• Market gave "no room" for disappointment; even minor shortfalls are punished harshly in this high-expectations environment.

Panel Viewpoints:

• Malcolm Ridge (02:31):
  “My focus was entirely on Microsoft figuring out a way to signal to the street this is their first opportunity since the restructuring of the deal with OpenAI to say something, to tell a story that lets us know just how little they rely now on that relationship…”
• Jim Lebenthal (03:35):
  “This, to me, seems well overblown… Azure disappointed by about 1 to 2 percentage points relative to what was expected… To take $400 billion of market cap off because the Azure revenue growth was 38%… this seems overblown to me.”
• Scott Wapner (Host, 04:26):
  “I think you oversimplify it… You missed the fact that spending was greater than expected. And how can you have one versus the other and not have a reaction like you're having now?”

2. Mega-Cap "Max 7" No Longer Move in Lockstep

• Historic spread between Microsoft (down sharply) and Meta (up 8%) shows decoupling of mega-cap tech trajectories.
• Panel highlights the market’s “healthy” differentiation and price discovery—no longer "monolithic" index-led movement.

Notable Stat – Josh Brown (09:36):
“Microsoft down 12% while Meta up 8%. That is a 20% spread… the second largest daily spread between those two stocks since Meta came public.”

3. Meta’s Comeback: Spending Now Equals Growth

• Meta, which suffered a similar market drubbing last quarter, rebounded with an impressive report featuring strong revenue growth—reassuring investors about the ROI from its own heavy AI investment.
• Bernstein, among other analysts, upgrades Meta (target to $900).

Scott Wapner (11:38):
“You're spending like crazy and we're not convinced that you're going to see the ROI fast enough… Yes, they showed a big pickup in spend bigger than expected. They showed a bigger than expected pickup in revenue growth too. And that is the story.”

Rob Sechan (12:22):
“If you're able to monetize quickly, which is where it resides, you will have the ability to have an earnings report that looks like you're healthy.”

4. Software Sector Swoon and AI Overhang

• Microsoft’s results feed into a broader selloff in software stocks (ServiceNow, Salesforce/CRM, Oracle all sharply lower despite raised guidance or positive commentary).
• Street sentiment has turned: “good” isn’t good enough amid AI disruption fears.

Malcolm Ridge (17:23):
“I jumped into ServiceNow… This represents peak pessimism to me. I thought it was overblown… Bill McDermott did everything he could… [but] it has a lot more to do with sentiment related to them trying to acquire their way into being a AI competitor versus growing it organically.”

5. IBM: Slow and Steady Wins the (AI) Race

• Unlike other software names, IBM outperforms—growing its AI consulting/services business and integrating Red Hat successfully.
• The panel points to strong growth in enterprise AI adoption as a driver.

Malcolm Ridge (21:55):
“As we were getting excited… about all the hyperscalers spending all this money to build out data centers… you needed someone to come alongside you… and IBM is where it made sense… Their book of business has more than doubled from last year.”

6. Market Resilience: Broader Indexes Withstand Mega-Cap Jolts

• Despite Microsoft’s collapse, the equal-weight S&P 500 and small caps remain stable.
• The committee welcomes this as evidence of a "healthier" market less dominated by the mega-caps’ movements.

Jim Lebenthal (14:02):
“…we can have this correction in the concentration with, without an absolute bloodbath. I think this is healthy.”

7. Apple Preview & Positioning

• Expectations are high for Apple’s earnings tonight, amid recent focus on its AI strategy and new partnership with Google (Gemini).
• The panel points out Apple’s historically resilient business model, recurring services revenue, premium margins, and the strength of their “ecosystem.”

Steve Kovach (Apple Segment, 25:08):
“Most of all, first of all, we know it's going to be a blockbuster quarter for that iPhone business… And then we turn our focus over to AI… it is still unclear how [AI monetization] works over here at Apple…”

Jim Lebenthal (28:18):
“This stock goes up over time… The 20 year annualized stock return is 27%… the S&P 500 is 11%. I see no reason that doesn't continue…”

Notable Quotes & Memorable Moments

• On Mega-Cap Expectations:
  “Room for disappointment is about this big." – Rob Sechan (07:10)
• On Market Structure:
  “This is a really healthy market environment where the Max 7 are not trading as a monolithic thing… people are making rational buy and sell decisions on results.” – Josh Brown (09:36)
• On Software ‘Bubble’:
  "Oracle is in a 55% drawdown. So much for all the bubble talk. Hard to have a bubble when Oracle’s cut in half.” – Josh Brown (18:14)

Timestamps for Key Segments

| Section | Topic | Timestamp | |------------------|---------------------------------------------------------------------------------------|-------------| | Opening | Microsoft’s Selloff, Azure Cloud Concerns, Investment Panel Introductions | 01:01–05:47 | | Microsoft Debate | Capex vs. Revenue Growth, Supply Constraints, OpenAI Dependency | 02:31–07:52 | | Market Context | Mega-Cap Divergence, Meta vs. Microsoft, Price Discovery Returns | 08:20–11:05 | | Meta Discussion | Meta’s Earnings Rebound, ROI on AI Spend, Analyst Reaction | 11:38–14:02 | | Software Pressure| ServiceNow, CRM, Oracle, “AI is Killing Software?”, Sentiment Shift | 16:19–19:45 | | IBM Segment | IBM’s Steady Outperformance, AI Consulting Growth, CEO Praise | 19:45–22:35 | | Macro Headlines | Fed Chair Shortlist, Gov’t Shutdown Looms, Tariffs, Geopolitical Updates | 22:35–24:30 | | Apple Preview | iPhone 17 Expectations, AI (Gemini), Memory Prices Impact, Ecosystem Strength | 24:30–29:27 | | Best Stocks | Josh Brown Picks Nucor (NUE), Panel Reacts, Materials Strength | 39:28–41:34 | | ETF Edge | International Markets, Dollar Weakness, Value/Discount Abroad | 42:24–44:24 | | Show Wrap-Up | Final Trades (Black Stone, IBM, Cisco, Exxon), Takeaways on Rotation & Resilience | 46:05–46:42 |

Additional Stock Moves & Analyst Commentary

• Joby Aviation:
  Josh Brown doubled down, viewing capital raise as a speculative but long-term bet as EVTOL (electric vertical takeoff and landing) approaches commercialization (33:19).
• Lockheed Martin:
  Strong positive outlook on defense spend, supply chain resolution, and missile production ramp up (35:32).
• Lilly:
  Analyst target raised but panel is neutral; strong margins and GLP1 potential (36:32).

Panel’s Closing Tone

• Market is showing strength and resilience despite tech volatility.
• Mega-cap stocks are no longer insulated from disappointment but are also differentiated by sector and their approach to AI.
• There’s rising optimism for international equities and a focus on “idiosyncratic” stock picking within sectors.

Summary Takeaway

This episode underscores a key theme: mega-cap stocks may no longer be "too big to fall" in the eyes of the market—every earnings miss or spending spurt is evaluated critically, and investors are rotating capital on a case-by-case basis. The market’s ability to weather Microsoft’s sharp drop without overall contagion signals newfound stability and rational price discovery. With Apple earnings looming and the market’s narrative shifting from hype to ROI on AI spend, investors are advised to remain disciplined, focus on fundamentals, and expect more “idiosyncratic” moves in tech ahead.

End of Summary