Halftime Report: Debating the Tech Trade (February 10, 2025)

Introduction In the February 10, 2025 episode of CNBC's Halftime Report, host Scott Wapner delves deep into the current state of the tech sector, which remains the only negative-performing sector year-to-date. The discussion features insights from top investors Joe Terranova, Amy Raskin, Jim Leventhal, and Rob Seachen as they analyze the latest market movements, particularly focusing on David Tepper's recent 13F filings and their implications for the tech industry.

1. David Tepper's Strategic Moves in Chinese Tech Stocks

David Tepper, renowned for his strategic investments, has made significant adjustments to his portfolio, notably increasing positions in several Chinese internet giants. Scott Wapner highlights these changes:

• Alibaba (BABA): Tepper increased his position by 18%. Rob Seachen comments, “Tepper looks at that and is like I told you guys on CNBC already a few months ago how much I like China” [02:00].

• Baidu (BIDU): An increase of 7% in Tepper's holdings.

• JD.com (JD): A substantial 43% uptick in positions.

• Pinduoduo (PDD): A modest 1% increase.

Rob Seachen's Analysis: Rob explains the rationale behind Tepper's moves, emphasizing the undervaluation of these stocks. “The stocks came down a lot so I'm increasing my positions in a lot of names that I had” [02:45]. He further illustrates Alibaba's potential by referencing its price drop from $117 in October to $80 in early 2025, deeming it an attractive entry point.

Joe Terranova's Agreement: Joe Terranova concurs, noting the strategic undervaluation due to geopolitical risks and regulatory headwinds. “There's just peak pessimism around tariffs and around China” [04:00]. He underscores the opportunities in Chinese tech, comparing Alibaba’s business model to Amazon's, highlighting its dominance in e-commerce and cloud computing at a third of Amazon’s valuation.

Jim Leventhal's Perspective: Jim points out the positive inflection since September, driven by aggressive stimulus measures from Chinese policymakers. “Look at JD's performance since then, up 57%... I think it's very close to returning to its high aim” [05:05]. He also contrasts the performance with Indian ETFs, which have seen decline, highlighting a geographical shift in investment flows.

2. Tech Sector Outlook and MAG7 Stocks

The conversation shifts to the broader tech sector, particularly the performance and future of the MAG7 (Meta, Apple, Google, etc.) stocks.

Scott's Observation: Scott notes Tepper's reduction in positions like Amazon and Meta, despite their strong market presence. “We know that Meta has been on this tour in pace...” [08:00].

Rob Seachen on MAG7: Rob attributes the trimming of these stocks to their elevated valuations and the desire to capitalize on profits from high-performing assets. “There's nothing wrong with taking a little profit off the table” [08:55]. He anticipates that growth rates of MAG7 will converge with other stocks by Q4, suggesting a broader market rally.

Amy Raskin’s Input: Amy concurs, advocating for underweighting the MAG7 due to increasing capital intensity and deteriorating free cash flow. “I do think the capital intensity is going up... they're over owned” [10:25]. She emphasizes shifting focus to other market opportunities outside the U.S., Europe, and Japan.

Jim Leventhal on Risk Management: Jim supports the reduction in MAG7 exposure as proper risk management, especially in light of Tepper's actions and recent earnings reports. “David Tepper selling off some of these, I think that's proper risk management” [13:03].

3. Tariffs and Their Market Impact

Tariffs remain a contentious topic, with differing opinions on their impact.

Rob Seachen's Stance on Steel Tariffs: Rob passionately advocates for tariffs on steel producers like Cleveland Cliffs, arguing that such measures protect domestic industries. “Republicans, their tent pole is tariffs... they've been decimated over the last 20 years” [25:57].

Scott Wapner's Challenge: Scott challenges Rob’s position by questioning the lack of proactive discussion on tariffs despite their evident market impact. “If you thought that this was going to happen, why weren't you pounding the table on Cleveland Cliffs...” [21:03].

Jim Leventhal on Policy Implementation: Jim argues that persistent positive market reactions indicate strong backing for tariff initiatives, suggesting that the administration will push forward regardless of market sentiments. “The economic team and President Trump's administration looks at that and they gain even more confidence...” [25:01].

Amy Raskin’s Counterpoint: Amy counters by emphasizing that foreign markets are secondary to the U.S. market's resilience in driving tariff policies. “It's the market totally” [26:12].

4. Committee Moves and Stock Adjustments

The investment committee discusses various stock adjustments in response to market dynamics.

Vertex Pharmaceuticals Trimming: Ahead of Vertex's earnings report, Amy explains the decision to trim holdings despite long-term confidence in the company's pipeline. “We're just taking a little bit off the table... the pain bump is already in the stock” [35:29].

Natera Reduction: Amy also discusses trimming Natera, a cancer detection firm, due to its significant stock run and the need to manage risk. “We think it has a lot of growth in front of it” [36:20].

CareDx Addition: Conversely, Amy highlights the addition of CareDx, a leader in blood-based organ transplant rejection testing, citing its innovative technology and growth potential. “It's genome-based technology where they can test the blood to see... much cheaper, better way” [37:28].

Jim Leventhal on Applovin: Jim updates on Applovin, anticipating it to surpass its December all-time high, driven by strategic moves and market positioning. “It's about to take out its December all-time high... about 4:17” [46:36].

5. Sector-Specific Insights

The panel provides insights into various sectors outside of tech, identifying potential growth areas.

European Banks and Energy: Amy Raskin points to European banks and the energy sector as promising investment areas due to their strong performance and undervaluation relative to the U.S. “European banks look great... energy has been working year to date” [15:23].

Home Improvement and Retail: Discussions around Home Depot and Walmart highlight their resilience and growth prospects. Jim emphasizes their market share and economies of scale, while Joe Terranova remains patient despite macro headwinds. “They continue to act as a headwind... we're going to be patient with it” [31:15].

Applied Materials and Semiconductor Equipment: The conversation touches on Applied Materials, Lam Research, and KLA Corp, noting their strategic positions in the semiconductor equipment industry amid declining Chinese revenue. Jim mentions, “There's a lot of names that are struggling... options imply 6% move here” [44:50].

6. Market Commentary and Future Projections

The panel discusses broader market sentiments and future projections.

Mike Santoli's Insights: Mike Santoli observes the NASDAQ’s strength despite overall tech weakness, attributing it to strategic holdings like Nvidia and Broadcom. “Most of today is a tech story... broadcoms of the world” [40:48]. He also anticipates upcoming Fed Chair Powell's speeches and their potential impact on market dynamics.

Closing Trades and Final Thoughts: The episode concludes with final trades from the committee members, emphasizing strategic adjustments in response to market movements. Joe Terranova mentions adding to NRG and a rare earth elements mining company, while Amy reinforces her support for CareDx and strategic trims in other holdings.

Notable Quotes:

• Rob Seachen on Alibaba: “Tepper looks at that and is like I told you guys on CNBC already a few months ago how much I like China...” [02:45].
• Joe Terranova on Chinese Tech: “There's just peak pessimism around tariffs and around China...” [04:00].
• Amy Raskin on MAG7: “I do think the capital intensity is going up... they're over owned” [10:25].
• Jim Leventhal on Risk Management: “David Tepper selling off some of these, I think that's proper risk management” [13:03].
• Rob Seachen on Tariffs: “Republicans, their tent pole is tariffs... they've been decimated over the last 20 years” [25:57].
• Jim Leventhal on Policy: “The economic team and President Trump's administration looks at that and they gain even more confidence...” [25:01].

Conclusion The February 10th episode of Halftime Report offers a comprehensive analysis of the tech sector's current challenges and strategic investment opportunities. With insights into David Tepper's significant moves in Chinese tech stocks, the potential recalibration of exposure to MAG7 stocks, the ongoing debate over tariffs, and strategic committee adjustments, the panel provides listeners with valuable perspectives to navigate the evolving market landscape.