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Halftime Report
Believe in the Broadening Trade? 7/2/26
00:49:19
Scott Wapner and the Investment Committee debate whether you can believe in the broadening trade as stocks push higher across the board. Plus, Josh Brown spotlights Live Nation in his "Best Stocks in the Market." And later, Altimeter Capital's Brad Gerstners joins us to talk markets, Trump Accounts, and his outlook for the rest of the trading year. Investment Committee Disclosures
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- [00:00]
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- [00:26]
Schwab Market Update Host
brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com Market Update podcast or find Schwab Market Update wherever you get your podcasts.
- [00:55]
Scott Wapner
All right, Carl, thanks so much. Welcome to the Halftime Report. Scott Wapner, front and center this hour. The broadening trade. It is in full effect again today. So what does that mean for your money? We will discuss with the investment committee. As always. Joining me for the hour, Josh Brown, Stephanie Link, Malcolm Etheridge, Kevin Simpson take you to the markets. I'll show you what I'm talking about. Dow and equal weight new record highs today. In fact, it's a pretty good session for everything but tech and Comm Services. Discretionary is modestly negative, but I thought we would start, Josh, with what I feel is the market's role reversal, if you want to call it that. The top three performing sectors in April and May were in the bottom four in June. So the market sort of turned itself on its head. April and May, tech was up 42%, comm services up 22 and a half, discretionary up 18 and a half. Now over the last month, for all intents and purposes, you've got June Tech down three and a half, Discretionary down five and comm Services down eight. Is this a tell of what's to come?
- [02:01]
Josh Brown
I, I think you couldn't ask for a better setup to go into the second half than having sort of a catch up trade in certain areas, having some of the worst performing areas catch a bid like software. I know. We'll talk about that in a few minutes. And having a little bit of a breather in some of the momentum stocks within tech that have gotten us this far. I can't imagine what you would prefer if you wanted to be constructive on the second half. What, what could possibly be better than having this intra market rotation keep us within 2% of of all time record and really Give us a backdrop where people are finding success in every sector, finding stocks that are working or finding opportunities in stocks that aren't working and being rewarded for that. I think it's a, it's, it's a great tape. It's one of the better tapes that we've seen over the last few years. The contra to something like this I think would be worse where we have another month where Micron puts on 25% because why not? And we have all of the data center component suppliers continue to double and triple and we have the rest of the market fading away at. Everybody chases the same 20 stocks. That would not be preferable. That's the converse of what we're seeing today.
- [03:10]
Scott Wapner
I like it because that was the criticism of the move before is that it was, you know, so centered around all of the places that Josh just said. And now you literally have a bit of a reversal from that. This is exactly what the doctor ordered. If you're bullish, this market isn't it for sure.
- [03:31]
Stephanie Link
I love a broad based rally and a broad based market in general. It's healthy for tech to take a breather and comm services to take a breather. It's not normal for a sector to be up 42% in the first six months of the year. We'll take it. The growth is there, the earnings revisions are there. Fine. But I think the economy is growing above trend. It is driven by the consumer, it is driven by AI. It is driven by loan growth. H8 data last week up 8% for loan growth. They're at the front line of this economy and 8% growth is the best in three years. So I think you're going to see a broad based earnings results across every sector. And the valuations in industrials, in financials, especially in discretionary are very attractive. And I think those are sectors, I think that lead into the end of the year.
- [04:21]
Scott Wapner
I mean, industrials have been consistently strong.
- [04:25]
Stephanie Link
Certain.
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Josh Brown
Certain.
- [04:26]
Brad Gerstner
Yeah.
- [04:26]
Scott Wapner
But I mean as a, as a sector grew, they were good in April and may, up 10 and a half percent and then they didn't wane really at all in June, up 7%.
- [04:36]
Stephanie Link
Yeah.
- [04:36]
Scott Wapner
And then obviously a lot of that's a build out. I think we get it. Thank Caterpillar and many of the other names too, but. Right, sure.
- [04:45]
Stephanie Link
But Quantity Airlines.
- [04:46]
Scott Wapner
Airlines are in the airlines.
- [04:48]
Stephanie Link
Yes, but I think like the Rails are interesting to me or the logistics companies. They're on my radar screen to potentially add to. I really like this FedEx spin too.
- [04:58]
Scott Wapner
What do you think about the Changing makeup, if you want to call it that. Yeah.
- [05:02]
Malcolm Etheridge
I think you guys better curb your enthusiasm on this rotation that we're talking.
- [05:05]
Scott Wapner
Why?
- [05:06]
Malcolm Etheridge
Let's see. Let's see how much longer it lasts. So I'm not as willing to say that folks have found their religion around chasing the things that have been working and allowing them to continue to go up for the sake of. They've been going up. When you look at things like the Sox L, the 3x bull ETF on the pH L X and the Sox right, the semis are now being traded because the mechanisms used to trade them are going up. So the stocks have to go up. The Cosby is another good example of this. The semis are really what has gotten out of control in the last few months. If you just look since March, I guess that index is up 700% or that ETF is up 700% in three months. That to me says that the irrational exuberance hasn't completely gone away. I'm glad to see things like financials
- [05:53]
Scott Wapner
and real estate definitely moderating though, isn't it? I mean, when you look at the moment.
- [05:57]
Malcolm Etheridge
That's why I say it's. It's. It's not been long enough for me to say that this is investors finding their religion around what makes sense here. I think that realistically, we have to give it another couple of weeks at least as we get into earnings. We're going to get earnings from the big tech companies in a couple of weeks. It starts at least. And that's really going to set the stage for whether we're focusing on earnings like we should be as disciplined investors, or if things are continuing to go up because they've been going.
- [06:23]
Scott Wapner
But don't we know that these areas other than tech, or are the earnings estimates for them are all rising as well? No one's suggesting that you're all of a sudden going to get another sector group that's up 50% in terms of their earnings growth. But if you're getting what was low double digits up to high double around, you know, even maybe 20 plus percent in some of these lagging areas of the market, isn't that the support that would justify what we're already seeing and trying to get ahead of in some respects over the last month?
- [06:54]
Malcolm Etheridge
Yes, except what you're referring to as the laggards is the mags. Right. So those are the companies that to this point haven't quite participated the way we would have wanted to see them. And maybe for good reason. When you look at an Oracle in the financial report that just came out and then sort of walking back all the reasons that their buildout might not work. When you look at OpenAI potentially shelving its IPO at least in the back half of this year, maybe those spending commitments that the Mags have been built on all this time start to unwind a little bit. So I'm just saying that it doesn't necessarily guarantee that investors have found their religion because we've seen a couple of really solid days of rotation.
- [07:31]
Scott Wapner
Well, I mean it's been a month. Let's, let's be honest, it's more than a couple of days.
- [07:35]
Brad Gerstner
Sure.
- [07:35]
Scott Wapner
Two more weeks is going to, is going to, is going to make a decision for you.
- [07:39]
Malcolm Etheridge
I think getting into earnings and seeing how the market responds to the earnings of companies that actually have a legitimate business rather than the ones that are coming based on promises and coming based on. Here's what we know we can do by 2030. Those are the kinds of companies that the rally has really been pushed by. Micron is a great example of what I'm talking about. We keep hearing the conversation about their valuation being so offsides compared to their revenues. Yes, they could grow into that valuation, but realistically can they build enough to actually meet this demand before it disappears? I don't know that that's possible.
- [08:17]
Scott Wapner
What do you think?
- [08:18]
Kevin Simpson
So I don't think it has to be an either or story. And I didn't interpret your question when you were talking about the hyper concentration to be comparative to the mag 7 like Malcolm was answering. I think it's that broader picture and what's very encouraging is we're seeing, and it started already industrials, health care financials, if those can broaden out and I think they're sort of quasi adjacent, obviously industrials are and we hit on why. But when we're coming off of a six month period where that concentration. I don't remember a time when we've seen just a small handful of stocks fueling it to the degree that we did.
- [08:53]
Scott Wapner
We probably never have.
- [08:55]
Kevin Simpson
I couldn't think.
- [08:55]
Scott Wapner
Not to the degree when you, when you put that on there. Not to the degree we saw. I don't think we ever had.
- [09:02]
Kevin Simpson
Not with that concentration. 1999 was somewhat reminiscent but it stayed concentrated. 2023 was a Mag 7 trade, but that was coming off of like this massive sell off in 2022. 25 wasn't a bad year. 26 is like a handful of stocks. So if we get the breadth that I think we're all hoping for And I'm expecting, I believe that that's, that's the story for the second half of the year. I think it's really healthy for the bull market. Continue. Because to your point, Malcolm, you don't want it to be a handful of stocks, but I think you want to see more than just the Mag seven participating and I think we will.
- [09:36]
Josh Brown
I have a chart of kre please. The point we made last week. I'll make it again because I think it's central to what we're all trying to figure out here. This is not the AI trade, it's not AI adjacent. It's literally in its own world.
- [09:51]
Mazda/Expedia Advertiser
World.
- [09:51]
Josh Brown
But this is more important trade, I think for the overall health of the market. If we're trying to use stocks as a gauge for the economy, which I don't really do, but I know a lot of people do, so I'll play along.
- [10:02]
Stephanie Link
Financials are.
- [10:03]
Josh Brown
Well, hang on. Regional banks, what I have on the screen.
- [10:06]
Stephanie Link
Yeah. What do you think they do for a living? They lend.
- [10:09]
Josh Brown
Understood. So my point here, very simply put, is that these stocks are not going up based on when Open Air might come public or Nvidia's next, next version of a gpu. None of this is. What this is is people taking out loans for everyday activities. It's autos, it's small business lending, it's all of the meat and potatoes things that have to happen within an economy. And every chart of every stock in this regional banking index is saying the same thing. The consumer is okay, small business is okay, mid sized business is okay. And once again, it's not a referendum on IPOs. These companies are not capital markets businesses. So like for me, biggest part of the Russell.
- [10:53]
Brad Gerstner
Right.
- [10:53]
Scott Wapner
Regionals.
- [10:54]
Josh Brown
Yeah. So, so compare that, compare that KRE to the xli. It's another chart that looks exactly the same. And as I said last week, I'll say it again. When you have regional banks and industrials ratifying the state of the economy, I think it's a pretty good setup and I think it's way more important than whether or not we get another 10 or 20% out of the memory chips.
- [11:16]
Scott Wapner
That's why I declared this the other day. A Stephanie Link market. Right when we had you on. I think it was closing bell because this is exactly what your portfolio looks like, albeit with a move that I'm going to get to in a minute. But this sort of speaks to the themes that you've been talking about. You're not massively overweighted towards mega cap tech in any way, shape or form and probably have maybe the least exposure to it of almost anybody on our program save for Jenny Harrington obviously who doesn't do that sort of stuff. This market speaking to you?
- [11:51]
Stephanie Link
Yeah, I mean because the earnings are there but because the economy is really robust and I mentioned it earlier, the consumer is spending, I mean I pointed to this a couple of weeks ago the retail sales numbers I don't think I've ever seen 6.2% ex autos in retail sales. The consumer is spending. They do have, they do have jobs. I look at the weekly claims today not the non farm payroll numbers that are going to get revised five different ways from Sunday. So the weekly claims are still very robust. The jolts numbers are look good. Challenger grade layoffs are down substantially. So the consumer is doing their thing. They're, they continue to spend on services. We see that in the ISM Services report. For over two years it's been north of 50 so that's one thing. And then of course it is the air, it is the industrials that benefit from the air in the food chain. So I, and then it's the, it's the financials that are lending to these companies and taking market share from the private markets companies. So that's why I own a whole bunch of different things. But at the same time I just thought that the Magic 7 got crowded and expensive.
- [12:48]
Scott Wapner
Well that has turned, it definitely got crowded and if you want another bullish sign this week, I don't know, maybe it's coming from the mega caps. The fact that they've sort of roared back to life and said don't forget about us, we're, we're still here. We got a lot of good stuff going on. Apple's up 8% this week. Microsoft's up more than 4 meters, up more than 6. Amazon's up more than 5.
- [13:10]
Josh Brown
These stocks have been, these stocks have been really left behind and, and this week you got a 7% bounce in the equal weight mag 7 if you were to look at the mags ETF. So that's nice but I think it's important to point out it's not as though these stocks have joined the chase. Microsoft is in a 28% drawdown below all time highs. Meta still 26. Tesla still 19. Having a tough day today. Nvidia 17% below its highs. And by the way, Nvidia is now cheaper on a forward earnings multiple than the median stock in the S P500. And I promise you it's earnings growth this year at least. The guidance is way ahead of the median stock in the S P500. So that might be an opportunity. I think the key thing is Apple to me the only one that's within 5% of new highs, it's about 3% below that level. I think it's going to take that level out and I think out of the seven, Apple's the one to watch in the second half. Given product.
- [14:08]
Scott Wapner
Apple's the second best performing mega cap tech over the last 12 months, only behind Alphabet, which is like a capex
- [14:16]
Josh Brown
should be pointed out.
- [14:17]
Malcolm Etheridge
Well, we're still waiting for that big refresh. Right. I think that that's part of what is helping to keep Apple buoyant. It's investors haven't seen the story pan out just yet but we also haven't seen consumers really take hold of the 17 or anything else that is AI native. That is the opportunity for Apple.
- [14:35]
Scott Wapner
Well the last, the last upgrade cycle in fairness was pretty robust and now they're, now they've got all this other stuff coming up in the fall. They have five new iPhones through 27. Yes. They're looking at Chinese made chips and they also have the foldable. So they do have a lot going on.
- [14:53]
Malcolm Etheridge
You're making my point though. I think that's what is keeping Apple's share price buoyant right now. It's the excitement about the possibilities of all of the things you just mentioned. That refresh cycle hasn't hit us yet. We've been anticipating it for the last couple of years and because we haven't seen it, we want to be in position to benefit from it when it hits. And I think that's the reason that I'm in agreement with Josh here. Apple could be the one to lead the mags from here.
- [15:17]
Scott Wapner
Well that leads to a move that I, I teased for a moment but it's. You bought more Amazon. Yeah, right as this, as I said, you know this stock this week's up near 6%. Why do you add more to it now?
- [15:30]
Stephanie Link
It's strictly on valuation. It is D rated. It's at 23 times forward estimates. That's versus the five year average at 34 times and the 10 year average at 4:45 times on EBITDA stocks trading at 11 times EBITDA. That is really attractive by the way. Matt is trading at 11 times EBITDA. I'd much rather own this business model at this moment than met.
- [15:52]
Scott Wapner
Oh, I'm going to get there. I'm going to get there in a minute.
- [15:53]
Stephanie Link
Understood. There's many ways to win with Amazon. We all know this is not surprising in terms of us doubling their capacity, growing 28% last quarter. I think in the high 20s they can continue retail. Their prime day. The first four day prime day, same store sales was 9.3%. I mean other retailers would kill for those kinds of numbers. The ad business, the 70 billion revenue run rate going to go to 100 billion by 2030. And then also you have this custom chip business that could be $100 billion business. So all of this, we all know this is not new, but I think the valuation coming down 20% I just thought it was pretty compelling. I expect a very good quarter and maybe a little lower expectations.
- [16:34]
Scott Wapner
Everybody owns Amazon on the desk, so you get the first correct.
- [16:38]
Kevin Simpson
Well, your footnote was the, was the chips and I thought that that was like the biggest thing that came out
- [16:44]
Scott Wapner
overnight because designing, designing its own AI chips.
- [16:47]
Kevin Simpson
I think it's really important because there's so many of the other hyperscalers that have done this successfully. I know we'll get to Meta and what they're breaking into, but if they can design their own chips for their own hardware, it just allows them to own more of the AI stack. So I thought that was phenomenal news. I love Stephanie's pick and I think that this stock is one to watch for.
- [17:04]
Scott Wapner
Already designing their own chips, of course, but as you said, manufacturer for the, for the, for their hardware fire and future devices. Can we do Meta? Let's go to Meta because Metta had this huge day yesterday, right this report. They're going to build out a cloud business. The stock had reversed last I checked. So it's down now. Given a lot back. Right this, given half of it back from, from yesterday. And that was the best day since January. There was a note from J.P. morgan out today, which I almost feel like channels gets inside your mind a little bit. Step. Because they say we'd much prefer that meta develop core AI products, leverage them over its base of roughly 4 billion users and require massive compute for its own inference rather than selling access to its infrastructure.
- [17:48]
Stephanie Link
Yeah, I mean it took Amazon, Google and Microsoft a decade to build out their cloud business. So this is not going to happen overnight, if it even does happen. And it's also not that surprising because Zuckerberg talked about that everything is on the table at their May analyst day. So I was surprised at the reaction yesterday. I'll take it. But I'm still concerned about them monetizing and seeing real progress in terms of their ad business if they do this Cloud news. That's good because it'll diversify their business away from 100% being advertising revenue generated. But I think this is, you know,
- [18:23]
Josh Brown
I'm not of intel saying they want to go all in on building foundries. Like 10 years ago. It's sort of like, wait, now this is a tech industrial play. That's.
- [18:33]
Malcolm Etheridge
Is it, Is it possible, though, that the smart folks at Metta watched what happened with the Space X IPO and their ability to take X AI and focus it on initially building capacity for its own platform and then turning around and leasing that capacity to anthropic? And that being the thing that the street reacted to the most, maybe they looked at that and that 8% pop is exactly what they expected by making that announcement.
- [18:57]
Scott Wapner
My feeling is that you're wavering on this name.
- [19:01]
Stephanie Link
Yeah, I'm kind of tired of it. I'm tired of them spending and not showing the results that everybody wants to see. I think they're good results, but I'm getting tired. There's other names I could put, put my money in, which is why I did it to Amazon. I could have added to Meta. It's very, very cheap. But I think there's just so many more question marks in terms of how they're going to grow and when they're going to monetize.
- [19:19]
Scott Wapner
Josh also raises a good point. I think of at least a little bit of perception of, you know, throwing new stuff at the wall and seeing what's going to stick.
- [19:29]
Josh Brown
That's cut me out. That's cut me out of the stock the entire way down. I know it's cheap and I know it's an amazing business. And I know that Metta probably, if you had to make a list like what three companies globally have been the most successful at translating AI to actual revenue. I know that is in the top three by virtue of what they've done with their advertising business.
- [19:52]
Mazda/Expedia Advertiser
Right.
- [19:52]
Scott Wapner
Remember what Jensen Wong told me right ahead of the Super Bowl?
- [19:54]
Josh Brown
Yeah.
- [19:55]
Scott Wapner
Nobody does AI like metal.
- [19:56]
Josh Brown
And I agree. And I agree. And I agree. The problem is everybody knows it. It's in the stock. It's tough to get that incremental. Somebody that's going to watch an extra, you know, one minute of reels each day or somebody that's going to click on one extra thing that. That's the battle now. It's a, it's an incremental battle versus some sort of like a revolution.
- [20:16]
Stephanie Link
Well, I would say is leading to better time spent. We saw a 30% increase in video time spent from AI alone. So I will help them. It's just the not the numbers that were inflated into the stock.
- [20:30]
Josh Brown
Here's a question for you. How would the street react? How would you react I guess if they were to come out and say okay we're going to do a little bit of reform here. We have taken a lot of money from the cash we generate from our world beating unbelievable one of a kind advertising business and we've tried a lot of things and the reality is we're not 100% sure that that's what we want to keep going. Maybe what we want to do is focus more on shareholder return today and focus a little bit more on profitability and less about investments we're making for
- [21:04]
Stephanie Link
10 years years from now reality until
- [21:05]
Josh Brown
we decide on a strategy.
- [21:06]
Stephanie Link
Reality LABS They've spent $80 billion in the last decade and they've lost $80 billion.
- [21:11]
Josh Brown
How would the street, how the street react?
- [21:13]
Stephanie Link
And I think if that were to happen absolutely this thing be up 20%
- [21:17]
Josh Brown
did it in 2022?
- [21:18]
Stephanie Link
Of course he did. That's how I made a lot of money in the first go round but you know we have to wait and see and in the meantime they're raising debt to fund all this capex. There was a rumor about an equity raise and so it's like it's a headache. It's just a headache that you just don't need. I'm all for trying to find companies that are unloved. This one is a little bit frustrating, that's all.
- [21:38]
Scott Wapner
Speaking of unloved, I'll finish with one more thing. Some wondering whether software is back because a lot of those names have been unloved. Stephanie Link bought more service now. Yeah upgraded to a buy yesterday at Guggenheim and the IGV up in a way that the SOX is down.
- [21:54]
Stephanie Link
Yeah.
- [21:55]
Scott Wapner
Having a lot of people think about the comparison between the two groups.
- [21:58]
Stephanie Link
I mean the Sox is still up 82% year to date even with the pullback today in this week and the ITV is down 11% and this thing is down 31% and it trades now at 23 times forward estimates and a five year average is 54 times and this company is going to grow. Total revenues of 20% subscription revenue of 21% gross margins in mid-70s earnings growth of 20%. I just think that the risk of risk reward is so good here now and it's mission critical software. Not every software is stock is a buy but this is mission critical workflow automation companies need it.
- [22:33]
Josh Brown
CrowdStrike 4 for 1 split took effect today. It's a name I've been in for a long time. I think cyber has been crushing it.
- [22:40]
Stephanie Link
Yes.
- [22:40]
Josh Brown
Yeah. So they're not being. They're not being treated like software stocks anymore. That's over. The median forward P E for the S and P Software Group is 16.4, which sounds like it's a screaming buy, but there's a ton of dispersion there. Crowd Datadog Palo Alto are 127, 91, and 85 times, respectively. That's not the same as 16 times. Then you've got this value component of the software space. Adobe 8 times, Oracle 13 times. I do think it's notable at the IGV bottomed on the same exact day as the Mac 7 last week. And I would point out it's up 11% versus a 7% return for the mags. So maybe if you want to buy value in tech, maybe you want to look at the IGV names more so than you want to look at the.
- [23:29]
Scott Wapner
The Mag 7 just got the S1 for Jersey Mike's. Let's go, young man.
- [23:34]
Josh Brown
Come on.
- [23:35]
Scott Wapner
You have any. You have room?
- [23:36]
Josh Brown
I don't. I think maybe once in my life. Jersey mics. We don't have a lot of those on the island. No, the 516. No. It's tough to compete on Long island because we have, like, delis. You know what I mean? Like, you imagine waking up in Nassau County, I'm in the mood for a sandwich and going to a chain. It would never happen.
- [23:53]
Brad Gerstner
Like, the.
- [23:53]
Josh Brown
The normal person's going to Salpino.
- [23:56]
Scott Wapner
All right.
- [23:57]
Josh Brown
I'm just saying.
- [23:57]
Kevin Simpson
We have hoagies in Philly, A and
- [23:59]
Josh Brown
S. We'll probably go to Iverone Brothers. Like, we're not going to. I'm walking to Jersey Mike's. What am I, like, right off a coach bus? All right, we're going to have to leave it there.
- [24:08]
Scott Wapner
Scott, you want to read the tease?
- [24:10]
Josh Brown
Yes. Still ahead, our top calls of the day. Plus downtown, Josh Brown's best stocks in the market. And later, our halftime headliner, Altimeter Capital's Brad Gerstner. Halftime is back in two minutes. Stay tuned.
- [24:27]
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Josh Brown
Oh no.
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- [25:41]
Scott Wapner
Welcome back. Calls of the day. Caterpillar. It's been an incredible stock. $1218 is the new target. At truest it was 1043. It's 23% up Kev from here. Any reason why I can't go there?
- [25:58]
Kevin Simpson
Michael Barry thinks so. He's shorting the stock, but I am continuing to be incredibly bullish on it. We talked about using the word adjacent before, but it's so much more than just that. All of the infrastructure play flows through Caterpillar. Malcolm, you and I were talking about a stock split earlier on, I hope, and that happens. I think if they can split the stock, we'll see it go much higher. But 1200 pre split, I'm totally there.
- [26:20]
Scott Wapner
How much of a of what we're looking at on the screen right now? One year. Let's just take it from there. How much of that do you think is due to being an AI adjacent company? And is there reason to throw a little shade on that idea, which maybe, you know, burry is doing, thinking that maybe it's a little overdone, like the notion that this is a. Now we've taken this and made it just a full blown AI stock, not even AI adjacent.
- [26:45]
Kevin Simpson
It's a really great question. I think that probably 70% of this move is because of the AI. I don't think that his short, short position is outlandish. Stocks don't typically grow to the sky industrials. We've seen it with a couple of Stephanie's names. The same thing moving very much.
- [27:01]
Scott Wapner
That makes sense to you? 70% due to AI?
- [27:04]
Kevin Simpson
Yeah, I mean I think it's that powerful, that impactful. Anybody disagree?
- [27:08]
Stephanie Link
This is so easy going up like incredibly fast.
- [27:12]
Josh Brown
You don't have to have the answer to that riddle. What percentage of this is AI? Let's all agree it's a lot. Obviously the stock started acting very differently than it historically had when it became apparent that what they do and sell super important to the build out of all these data centers. All right, we all agree, Fine. Now what do you do? Well if you've been in the stock, why pick up a place where it's like oh okay, now I no longer think go up. You can risk manage this really easily. You've got a rising 50 day that has been obeyed by this name the entire way up. Really back since last summer. 9:13 right now. So if you're in the stock and you've been for a while, you have huge gains, you want to protect some or all of those gains. That's a trailing stock ride that rising 50 day. Let the market tell you when it's over. I don't think it's over.
- [27:58]
Scott Wapner
I don't know that my so called riddle was like looking for an exact percentage point, more so looking for the idea of Look, a lot of this thing has been thrown up because of people saying it's an AI play.
- [28:15]
Josh Brown
If Burry's right. If Burry's right, you don't have to decide. You don't have to, you don't have to pick sides. This has been on the best stocks in the market list all year.
- [28:23]
Malcolm Etheridge
But the moment backlog was deservedly so
- [28:25]
Scott Wapner
on the best stocks in the market.
- [28:26]
Malcolm Etheridge
Obviously the moment Meta finds religion like you're talking about in the in the previous segment. Look out below. Right, because this is a third order effect now from the AI build. Obviously it's not a hyperscaler, it's not a chip company. They're putting shovels in the dirt, actually building the data centers. The moment we get one of these hyperscalers saying we are having to pull back on our spending commitments unless the
- [28:48]
Josh Brown
other ones say sorry to hear that. Well, we will take that project that you have with Blackstone gladly and you're
- [28:55]
Stephanie Link
going to go from 800 billion and spend this year in capex from the big four to $1.1 trillion next year. How do we get there? Not if we're already back.
- [29:03]
Josh Brown
If matter pulls back, do we think Gemini care? Google cares? I don't know.
- [29:08]
Malcolm Etheridge
Yes, because they too are borrowing to do it. So the companies that are borrowing to get us that right. Oracle has already told us we might have to scale back the promises that we made. My big bold prediction that nobody is asking me for for the second half of this year, Open Air probably is the next one to start walking back those spending commitments that a lot of this is based on all the two trillions of dollars of backlog that we're talking about 50% of that is coming from anthropology and open air. The moment they have to walk some of that back because they need their financials to look clean to get out. I guarantee you Morgan Stanley and Goldman Sachs are asking them to make those financials look better. That's the reason we're hearing about a delay. That is where all of this excitement over the possibilities of what would be could be for these third and fourth order effects. That's where it starts to come down.
- [29:56]
Kevin Simpson
That's not happening in the next six months.
- [29:57]
Stephanie Link
Not happening in the next year or two.
- [30:00]
Malcolm Etheridge
Okay.
- [30:00]
Stephanie Link
Or five.
- [30:00]
Malcolm Etheridge
I'll bet you a Jersey Mike sandwich.
- [30:02]
Brad Gerstner
Okay.
- [30:02]
Stephanie Link
But I'm not gonna eat that.
- [30:03]
Scott Wapner
It happens in what timeframe?
- [30:05]
Malcolm Etheridge
OpenAI specifically. We started hearing them walking back those commitments before the end of.
- [30:10]
Scott Wapner
I don't think they were talking about that specific for the. For the Jersey Mike's bet. All right, we're back after this. Josh Brown's best stocks in the market next.
- [30:20]
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- [30:35]
Schwab Market Update Host
Hey, Fidelity.
- [30:37]
Scott Wapner
Can I get a second opinion on stocks in the Fidelity app?
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Mazda/Expedia Advertiser
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- [30:51]
Schwab Market Update Host
That's right.
- [30:52]
Mazda/Expedia Advertiser
I am always right.
- [30:54]
Brad Gerstner
Investing involves risk, including risk of loss. $0 commission does not apply to customers designated by Fidelity. As a professional equity trader. A limited number of ETFs are subject to a service fee of $100. See details of FIDE. Fidelity Brokerage Services LLC. Member NYSE, SIPC.
- [31:06]
Mazda/Expedia Advertiser
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- [31:13]
Malcolm Etheridge
It was amazing.
- [31:14]
Mazda/Expedia Advertiser
Chase Sapphire preferred the card that's preferred for a reason. Cards issued by JP Morgan, Chase bank and a member FDIC subject to credit approval terms apply.
- [31:30]
Brad Gerstner
Foreign.
- [31:37]
Julia Boorstin
Welcome back to the Halftime Report. I'm Julia Boorstin with your CNBC news update. Paramedics conducted CPR and someone experiencing cardiac arrest at a known address For Senator Mitch McConnell last month on the same day he was hospitalized. That's according to police scanner audio obtained by NBC News News. McConnell's office hasn't disclosed the cause or whether he remains hospitalized, but says he is conducting senate business. Citadel CEO Ken Griffin bought out all 138 condos in a Miami condo tower one by one over the years and now plans to tear it down to make space for his planned multibillion dollar Citadel campus. That's according to Bloomberg, which says his campaign included repeated rounds of offers and personalized pitches to reluctant sellers. He ultimately paid roughly $125 million. And former NBA player Malik Beasley pleaded not guilty to charges stemming from an alleged sports betting scheme. Federal prosecutors allege Beasley manipulated game stats while he was playing for the Milwaukee Bucks to benefit gamblers. A judge released him on a $100,000 bond with his parents. Coach signing back over to you.
- [32:51]
Scott Wapner
Okay, Julia, thank you. You imagine being the last holdout. That's the condo in the, in the building. The last holdout.
- [32:59]
Josh Brown
That's the move. Because then it's like you want to do this, so you don't want to do this. So I like it.
- [33:04]
Scott Wapner
It's your best offer, Mr. Griffin.
- [33:06]
Josh Brown
Yeah.
- [33:07]
Brad Gerstner
All right.
- [33:07]
Scott Wapner
Best stocks in the market.
- [33:08]
Josh Brown
Let's do it. Every once in a while, this, this happens. And I enjoy it. So if you've been watching the halftime report for the last five years, you know that that Live Nation is like a permanent portfolio holding. For me personally, I own it through the ups and downs, but recently it's been a lot of ups. And as a result, this stock has joined the best stocks in the market list. And it's not a secret why it's here. This is a very one of a kind business in the public markets. If you want to bet on humanity's continued interest in seeing their favorite artists and going to live, events like this is pretty much the most consistent version of that outside the NFL, which is not publicly traded. So this is what people want to do. Go look at your Instagram feed. It's sort of bulletproof. Regardless of the economy, regardless of a lot of things, this business continues to chug along. The key thing here, Judge, is deferred revenue. What that is, is cash that fans have already paid for shows that they haven't seen yet. So, like they own the ticket. That's up 22% year over year to 6.6 billion as of the last time they reported 85% of this year of the large venue shows that they've sold are booked, and ticket sales are up 11% versus last year, they've sold 107 million tickets. So I think the stock is going to continue to make new highs. What we're telling people in the best stocks column. The 50 day moving average at 166, you can see it right here, has been sort of, sort of a trampoline for the stock. I think it should continue to serve in that capacity a meaningful breakdown of the 200 day, which is about 154, 155. That might be an area where you say, okay, maybe, maybe the trend is over, but until then, I think you could own the stock. And I think we see a two handle in front of it at some point before the end of the year.
- [34:57]
Scott Wapner
All right.
- [34:57]
Brad Gerstner
All right.
- [34:58]
Scott Wapner
Up next, our Halftime headliner, Altimeter Capital founder and CEO Brad Gerstner. The Invest America Trump accounts about to go live. We'll talk to him about that, get his thoughts on some of the tech news of the week as well. Welcome back. The Invest America Trump accounts go live on Saturday as America marks its 250th birthday. As you know, Altimeter's Brad Gerstner was the driving force behind that program and he joins us once again live. Welcome. It's good to see you.
- [35:40]
Brad Gerstner
I mean, Scott, it's great to be here. I'm in my flag room. I got my flag cup, got the flag behind me. How about those boys out in Santa Clara last night? You know, country road, take me home.
- [35:50]
Scott Wapner
Yeah.
- [35:50]
Brad Gerstner
I mean, that was a huge victory.
- [35:52]
Josh Brown
Looks like he's in Rocky.
- [35:53]
Brad Gerstner
Great to be in America.
- [35:55]
Scott Wapner
Bogus red card. Let's just throw that out there because everybody agrees for certain.
- [35:58]
Kevin Simpson
Bogus.
- [35:59]
Scott Wapner
All right, let's talk about this. So what a journey. Right now. We're on literally the cusp of all this being live. I mean, how's this feel from when you first pitched this with us? It was a dream back then. I know you couldn't have imagined a day, maybe you did that this soon, theoretically, that we would be here.
- [36:20]
Brad Gerstner
Yeah. Well, it is soon. Thank you for asking. And frankly, thank you for having me on. Scott. In place the first fall of, I think 2020 or 2021, when we first talked about it on the Halftime report, you know, it was that show that caused it to go a little bit viral on Twitter that got more people talking about it, that led me to set up the Invest America Foundation. It's pretty surreal. You know, the idea that starting this Saturday, every child born forevermore, forevermore in the history of America will get an investment account at birth, seeded with $1,000 in the S&P 500 will compound for their lifetime. And the momentum we have around this is totally extraordinary. Every company that is signing up to add money to the Accounts of the kids of their employees. Companies like Micron Sanjay announced this week $250 million going to a million kids in the communities they serve. Of course, everybody's familiar with the $6.25 billion gift from the Dells. But we have Ray Dalio in Connecticut, me in Indiana, Harold Hammond in Oklahoma. And I can tell you I have billions and billions of announcements in queue for the kids. This is bonus dollars to go into these accounts. And of course, let's step back for a second. What did we talk about on that first show? Why do we need this so badly? Because 60 to 70% of Americans aren't feeling connected to the American dream. They're not participating in the upside of compounding. This changes all that. This makes every child a shareholder from birth. And they will be able to compound for a lifetime in the upside of the capital markets. Right? That's how we close the wealth gap. That's how we get everybody feeling like they're on Team America again, benefiting from the upside of America. Right? Owning some shares in Space X and Google and OpenAI and anthropic and all these companies that we're talking about. This is step one. Remember, this is a journey that will last decades. But this is an important milestone. I'll be at the White House on Monday for a historic joint bell ringing where the New York Stock Exchange and NASDAQ are coming together for the first time. And we're going to ring the opening bell, a joint bell from the Oval Office for the first time in history, marking the celebration for the launch of these accounts. So I couldn't be more grateful for all the incredible partners along the way. You know, on Monday, I was in Philly with senators Fetterman and McCormick. Yesterday I was in Newark at Big Brothers Big Sisters with Senator Booker. And this is a real big bipartisan tent. But we would not be here without the leadership of President Trump. He frankly, was the one willing to take the entrepreneurial risk to make sure that every kid in America had an investment account.
- [39:00]
Scott Wapner
You mentioned the momentum even more this morning that we, you know, Goldman Sachs to contribute a thousand to the Trump accounts for eligible employees, their children. Morgan Stanley, an announcement moving just moments ago before we welcomed you on the program. So the momentum is real, it's tangible. You can see it. And you mentioned SpaceX, which I thought was interesting. Are we going to get something from SpaceX where they become a contributor here as well? You brought the name up, so I might as well ask. Ask you.
- [39:32]
Brad Gerstner
Well, I mean, listen, I'm, you know, I'm unabashed. Michael Dell and I are the chairman of, you know, going out and talking to everybody and getting them to give to the kids of America. This is a transformational new type of philanthropy in America at scale. Remember when Berkshire, when Warren Buffett tried to give all his money to the Gates foundation and was, you know, frustrated by the overhead and the lack of success and return on, on, on that investment? Now imagine that instead he could just give a share of Berkshire Hathaway to every child in America and let that compound for the last 20 years. Think about the transformational effect of that. So we now have the ability to have large scale direct philanthropy. No middleman in the middle, taking a rake of those proceeds going directly to these kids. And we know when kids have savings, when they have, have investment, they're more likely to graduate from high school and college, they're more likely to buy a home, they're more likely to start a business, they're less likely to be incarcerated. So, yes, I have talked to SpaceX and Google and OpenAI and Anthropic and every one of our friends and major companies. And by the way, not just technology companies. I'm also talking with Dave Ricks at Eli Lilly and my friends in Indiana. You know, we're talking to industrial companies. We think that every company in America has an opportunity, opportunity to customize a giving program in a way that makes the most sense to them. I was talking to Ryan McInerney from Visa. They're matching for all the kids of Visa. But I said, ryan, why don't you adopt 100 schools across America and give to every kid in those schools? So this unlocks a creative new form of philanthropy. We truly are on day one, the companies we've already announced are the pioneers. So yes, I would say stay tuned. A lot of announcements coming.
- [41:16]
Scott Wapner
Okay, that's a, that's a good tease and we'll certainly keep watching. I'd like to use some of the time today, if I could, to talk to you a little bit about what's been happening in tech this week, because it's been an interesting start to the next quarter. And the way that the prior one ended certainly revealed a new makeup to the market, at least in some respects. Let me first get your take on where you think we are are in the, in the tech trade as a whole. Mega caps kind of roared back to life this week. The chips still look a little bit upset and that's going to be volatile moving forward as momentum has a bit of a problem in and of itself. What do you think?
- [41:56]
Brad Gerstner
Well, listen, I think Josh Brown nailed it earlier in the program, which is we needed to have a break. In fact, I came on the show, I don't know the last time I was on, in the last few weeks where I said we had moved, you know, from large to medium, small, small in terms of our overall exposures. Just because we had these parabolic moves in April and May and even June, we were up a fair bit relative to the market. So you know, markets don't move, you know, in a straight line. They needed to consolidate a lot of these gains. The stocks is up over 80% for the year. And the IGV, the growth software stocks and, and the MAGS, MAG7 they were all down on over the course of the last six months. So they're playing a little bit of a catch up trade here. I think that's healthy. We're seeing a broadening out of the trade. Generally. The backdrop looks really healthy, Scott. You know, you know we now have oil back below 70 bucks, you know, which will take some of the pressure off inflation, take some of the pressure off 10 year rates. So I think this set up going into the back half of the year is great. But you know, like you got to modulate your exposures here. We talk all the time. When I come on, is it small, medium or large. And you can't have an 80% move and just say I'm going to have my pedal, you know, to the metal. You know, you got to, you got to be willing to, you know, dial back some of those expense exposures. So you know, I think that's what you're seeing largely. It's not really flustering us much. You know, I think still we think that trade is going to continue. The single most important thing to the trade. Right. The question everybody had coming into this year is will there be AI revenues to justify all this CapEx? Sure. And remember, we have already had three or four 30 plus percent pullbacks over the last 18 months, two years on this very question. And then this year Anthropic lit the fuse with their incredible revenue growth in February, March and April. And everybody said, okay, the revenues are here, it's safe to go into the pool. You saw everybody move into the entire trade triggered by that fact. Okay? And so the single most important thing people should continue to pay attention to is the gains in anthropics revenue, the gains in OpenAI's revenue. I think what people are going to see is those revenue, that revenue growth is continuing at least if you believe the speculation from those people who are, who are doing tracking online, it appears that all that revenue is on track. If that revenue is on track, right. If they're headed to $100 billion of exit revenue, you know, this year and have an IPO in the back half, I think you could see a really robust back half of the year.
- [44:36]
Scott Wapner
Let me ask you lastly before I let you go, because you're a several time investor in OpenAI in the, in the private market, I think even led, led at least one of the rounds. If not, if not more just off top my head. So this news that, you know, they're apparently considering giving the 5% stake to the government would be dilutive obviously to somebody like you. And I read something that you posted on X not too long ago which said, quote, I don't trust shares in the hands of some future politicians that can coerce or liquidate and spend on whatever their political beliefs are. Does that mean you're against this?
- [45:20]
Brad Gerstner
Yes, it does. I don't believe in taxing or taking shares from companies. You know, that's not what this country is all about. We don't just have a government. We fought a revolution 250 years ago so that the king couldn't show up up and just take three acres of land because they decided on some given day that, that their land, your land, was now there. So that's not the way we do it in America. People suggesting that I don't think that way to go, I did say, Scott, is that I've been talking to all these companies, OpenAI included, about voluntarily contributing maybe 1% of their shares into an account that would go directly to the kids of America, into their Invest America, their Trump accounts. You know, we could set up a dedicated citizen pool where all the money could go that and it goes directly to citizens. I don't like the idea of government slush funds, right? Like where does this money go, who gets it, what do they spend it on, etc. So we have a mechanism now if we want to have a profit sharing between AI companies and citizens, we have a mechanism to do that directly without having to have an intermediary in the government. Government. And I certainly don't believe in a policy where this government, where this administration or any future administration can just go and usurp and take, you know, the capital stock from US companies. That would be a bad violation of the rule of law in this country and not the way we should go.
- [46:43]
Scott Wapner
Do you think we've already sort of gone a bridge too Far in how you mentioned the ideals of, you know, know, free market capitalism is what it is for a reason. This seems to be turning it on its head. Some would suggest that that's already been done to at least some degree in some of the stakes that the government has either taken or mused about. I mean.
- [47:11]
Brad Gerstner
No, no, I disagree with that. I think the intel stake, intel was going to go bankrupt. The US Government intervened, it saved it. Critical national resource. It's rebuilding, you know, the semis supply chain in the US that's critical to our national security. That was a smart investment. The US has profited, you know, handsomely from that investment. I supported that. That was a lot smarter approach than what we took under the CHIPS Act. But that is a very different thing. That was a negotiated transaction between two counterparties. We put money in, we got shares in that company. Company. That's very different from the suggestion that the US Government's just going to show up, like Bernie Sanders has talked about, and just say, now 50% of your company is the property of the U.S. government. Or 10% or 5%. You pick the number. I don't care who's suggesting. I don't care if a Republican suggesting it. I don't care if Democrats suggest it. It's a terrible idea. The Trump administration has not done this. I hope they don't go down this path. I don't think they're going to go down this path. I think the path they will go down, which is one that I would support, is if these companies want to voluntarily contribute shares of capital stock from founders, whether it's Sam Altman or Dario, or whether the companies themselves want to do what Marc Benioff has talked about, which is a 1% plan, give 1% of your equity, but it has to be voluntary. And number two, it should go directly to citizen accounts, no middleman. And if those two conditions are met, then I think this administration could really bring, you know, a public private partnership together that would be great for America. And I think that's the path they're looking at. I certainly know there are people around the administration who are suggesting these other things. I don't think it has a lot of momentum. And I know most Republicans on Capitol Hill, myself included, would be against it. And Democrats. Right. The idea that we're just going to show up, knock on your door, you know, and take part of your company, I think it's unconstitutional, and I don't think it's consistent with, you know, the spirit of America on our 250th birthday. We fought a war against this.
- [49:17]
Scott Wapner
We'll leave it there. And as you said, look, congratulations, the president got this over the finish line, but you had the sneakers on the whole way, wearing them out, pounding the pavement, trying to run what was a marathon. And now it ends this weekend when it opens live. Thank you for coming on and we'll see you. We'll see you next week.
- [49:37]
Brad Gerstner
Thanks, my friend. Take care. All right.
- [49:39]
Scott Wapner
Yep, that's Brad Gerstner again. We'll see Brad on Monday. He's going to be on Squawk Box. And that's going to be ahead of what Brad was talking about. This historic bell ringing in the Oval Office to mark the launch of the Invest America Trump account. You don't want to miss that. Nor do you want to miss Joe Kernan's exclusive interview with President Trump. That is tonight at 5pm Eastern right here on CNBC. We'll do finals next 3 o'. Clock. We'll close the week out. Professor Siegel, Tom Lee, Chris Harvey, I hope you'll join me as well as we wrap up this first week of a new quarter final trip.
- [50:22]
Kevin Simpson
I'm going to go with Alphabet Scott. Google Cloud remains one of the fastest growing businesses in tech and AI continues to make search better.
- [50:30]
Scott Wapner
Okay, who's got Netflix?
- [50:32]
Malcolm Etheridge
That's me. The one year chart on this thing looks terrible. But the stocks back trading basically where it was in February when they walked away from the WBD deal. I think this is a great opportunity to get in before their next growth catalyst.
- [50:44]
Scott Wapner
What's been going on here? The stock hasn't done. It's been of real disappointment. Netflix.
- [50:48]
Josh Brown
I actually have an alternative take. I think they're going to take a run at NBC Universal and I think the market is going to love it.
- [50:55]
Malcolm Etheridge
Netflix marketing into the parks business.
- [50:58]
Josh Brown
Yes. The market wants to see them do something aggressive and I think that's a better deal for them than the Warner deal ever was. So that's I'm long and I hope, I hope they do make a bid for it.
- [51:09]
Tom Lee
All right.
- [51:09]
Scott Wapner
Target. Must be Stephanie Link.
- [51:11]
Stephanie Link
It is. I did some chat.
- [51:12]
Scott Wapner
Been a while since you pitched this one.
- [51:14]
Stephanie Link
I did some channel checks in L. A this week.
- [51:16]
Julia Boorstin
Oh yeah.
- [51:17]
Stephanie Link
Product is great. The traffic is strong. Same store sales position to grow mid single digits trading at 16 times forward estimates.
- [51:24]
Scott Wapner
All right. And wow. Nike. Good week.
- [51:26]
Josh Brown
I'll just put a question to the group. Did I literally call the bottom of Nike? What do you guys think? Want to go around the table?
- [51:32]
Scott Wapner
Well, remains the week suggests you might. Thank you guys. Have a great fourth you on the
- [51:38]
Tom Lee
bell all opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates or and subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftime report disclaimer this
- [52:13]
Schwab Market Update Host
episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Landsford for this information packed daily market Preview, delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab schwab.com Market Update podcast or find Schwab Market Update Wherever you get your podcasts.