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Halftime Report
Is a Bigger AI Correction Coming? 11/18/25
00:47:20
Scott Wapner and the Investment Committee debate whether a bigger correction in the AI sector is coming as the selloff in tech continues. Plus, CNBC’s Mackenzie Sigalos joins us to discuss the latest news on Bitcoin triggering a death cross, the desk discusses how to trade the crypto space. And later, Josh Brown spotlights Health Care in his "Best Stocks in the Market." Investment Committee Disclosures
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- [01:01]
D
Scott Wapner and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Carl, thank you very much. Welcome to the Halftime Report. I'm Scott Wachter. Front and center this hour, the sell off AI stocks once again in the eye of the storm. We'll discuss and debate these markets with the investment committee. Joining me for the hour today, Jenny Herring, Jim Leventhal, Malcolm Methridge and Josh Brown. Let's check the markets here. We have come off the worst levels. Russell's gone green, but we're still about 1% down on both the Dow and the NASDAQ. You know the kind of week it is. Nvidia's tomorrow afternoon and that's going to be big. The S&P 500 is below its 50 day moving average, so there's some technical damage to watch as well. Malcolm, I'm coming to you first. I thought one of the most interesting things today is we as a, as an investor group take a look at these markets and we worry about the AI trade. That bank of America's fund manager survey, more than 50% of those asked continue to think AI stocks are in a bubble. That's pretty interesting. Don't you think that more than half of fund managers in this survey think we're in an AI bubble? These are people who are, you know, deploying capital and getting skittish probably because of what they see in this market. What do you think?
- [02:28]
E
I hear you, but I don't know that I see it that way. I think those same fund managers, if they were asked the second question, are you selling the answer would still be no. So the concern is I have to own these Mag 7 names. I have to own these AI heavy names because I can't afford to get caught out right now being underweight tech. And so those same fund managers, until we see. I saw the same talking point you're talking about, but nowhere in there are we saying that we don't want to own Microsoft, we don't want to own Amazon, we don't want to own Google.
- [02:58]
D
Somebody's been selling the names.
- [02:59]
E
I didn't want to front on that one. I thought I wouldn't steal your thunder.
- [03:02]
D
That's okay. But I mean somebody's obviously been selling these stocks. They're all well off their 52 week highs.
- [03:10]
E
I don't think it's these same institutional fund managers though that we're talking about. I think a lot of retail is getting skittish right now. You see the price of Bitcoin and it obviously has to have a correlation to everything that's happening in the riskier names. A couple of weeks ago you had Liz Ann Saunders on. She was talking about how the retail investor at Schwab is focused more on those quantum names, the crypto names, those, they went downstream into the micro caps and they were probably going to be rotating back into the things that we consider them finding their religion. I think she was absolutely right. And this is us seeing the culmination of that.
- [03:42]
D
So Josh, you have the stat that I read and then you have JP Morgan's vice chairman, Dan Pinto. He warns of a possible correction in valuations. And then on top of all of that, you have Rothschild Redburn today downgrading both Microsoft and Amazon to neutral from buy. They say, quote, it's time to take a more cautious stance on the hyperscalers and move beyond the industry's reassuring trust us, Jenny is just like early cloud 1.0 narrative which looks increasingly misplaced. This is a big call today. Microsoft shares are lower by the way. Microsoft's underperforming the S and P now over the prior six months.
- [04:23]
A
Yeah, I think, I think that's, I think that's a perfectly respectable call to make. And it's not impugning Microsoft strategy for Jenny and it's not specific to anything that these companies are doing. It's really more about how much future earnings growth have we already priced in. It's not like this rally started three months ago. This is now three years of rallying on essentially the same concept that we're basically going to be ripping out CPU driven data center equipment, replacing it with GPU driven equipment. And then that upgrade cycle is going to go on for years and years and years to come without any sort of pause or hiccup or taking a breath to rethink some of the numbers involved. And it's just an unrealistic idea. And so I think what we saw in the share prices of the mag 7, at least through the first half of the year was just a complete and total absence of any sort of doubt. And what's changed in the last, let's say two to three weeks is a lot more questions being asked. If you're bullish and if you're constructive, you actually would prefer this scenario versus a continued melt up that goes on for another two or three months, right into, you know, early January, February, and then all of a sudden we have Empire State building shaped charts, parabolic moves higher in multitrillion dollar companies and instead of a dip or a correction, we get something much worse. I prefer this. I like the questions are being asked. And if I were to sell side analysts and I had the opportunity to ask Jensen on the earnings call tomorrow night, any one thing, Scott, it's exactly about these concerns. Yes, of course we all want to know about gross margins, etc. Etc. But what we actually want to hear him weigh in on is the depreciation debate that sparked this latest sell off. We want to know, Jensen, Jensen, you have openly mocked people for using previous generations of your equipment of GPUs. You have sped up the upgrade cycle to once a year from once every 18 months or once every two years. Congratulations. How do we square the circle with companies that are in the cloud, the hyperscaler or the NEO scaler who are talking about five and six year depreciation schedules. Can you harmonize those two things in a way that makes us all feel comfortable that we're not gonna have that hiccup? And I don't know if someone's gonna ask him that question, but that is the only question that I really need to hear from him tonight.
- [07:12]
D
They might. Now, Jimmy, you own both Microsoft and Amazon, so you wanna weigh in on this downgrade. It's a pretty striking call here. And the language is right in the face of these two companies. Time to take a more cautious stance on the hyperscalers and move beyond the industry's reassuring, trust us.
- [07:29]
B
Yeah, it feels to me, Scott, like that's reflective of a mood right now, a mood that I would characterize as a correction going on in the markets. I will admit that a week ago I Thought this was just a little liquidity, lightness that was causing things, but now it has evolved into something that I would characterize as a sentiment driven correction where people are expressing sentiments like this analyst call right now.
- [07:50]
D
What I said at the time, I mean you tried to blame it on the government shutdown.
- [07:54]
B
Okay, I've moved past that and I've said this has evolved into a correction, which is what I believe it is. However, to be more specific, and this is where this note that you just referenced comes into play. It is sentiment driven. If you're going to tell me that fundamentally there is a need for a bubble to be popped when I'm looking at Nvidia, the bellwether and I'm sorry, you asked about Microsoft, let's do Microsoft.
- [08:13]
D
I asked about both Microsoft and Amazon, which you own both of them.
- [08:16]
B
So these forward multiples, these forward multiples, 30ish, 34ish, I think for Amazon, 30ish for Microsoft are to me acceptable given the growth rates that we see ahead. You have to doubt the growth rates and earnings ahead to say that this is in a bubble. And I will draw the comparison to the quintessential bubble which was Cisco in 1999 at 120 times earnings. Given the earnings growth rates of Amazon and Microsoft, to be at 30, 34 times forward does not frighten me at all. This is a correction. It will come to an end probably pretty soon.
- [08:48]
D
Do you have any concerns whatsoever about the so called called circular deals that we've seen and today is another example of it. Here's what we got earlier today. Okay, stay with me. Anthropic is going to spend $30 billion in compute through Microsoft and Nvidia. Nvidia is going to invest up to 10 billion in anthropic and then Microsoft's going to invest up to 5 billion in Nvidia to complete this latest circle. You have any issues with that?
- [09:20]
B
I'm paying attention to it. And we can't ignore this circular revenue stream and the comparisons that many, including me have made is, is this exactly like the fiber optic networks that were being laid down in 1997-1999? To that I will say this. At each step in the arc along these circles, there are positive returns on investment being generated. That was not the case at the end of the fiber network layout where we had 75% of those fiber optics not lit, not generating any revenue. At could it possibly end up that way with the artificial intelligence build out the data centers? It could, but the answer to that is not going to be known for two years. These things are still being built. The fiber optic networks had been laid and were found out to be useless. And that's when the bubble popped. We are nowhere near that.
- [10:07]
E
Could I jump in there for a second? I think that we're talking about this, the circular deals as one collective and I think that's a mistake. I think when you look at a company like Co Core Weave for example, that's leveraged to the hilt in order to make these investments in Nvidia backed startups to buy Nvidia chips, that circular logic does start to look a little scary. You think about OpenAI and all the commitments that it's made and all the questions that were asked about it. I get why there's concern there. But if you look at a company like Nvidia for example, which is investing directly into its next generation of customer, I think that's perfectly logical. They can't continue to be but so reliant on Microsoft and Google and whoever else for their Meta for example is like 14% or so of their revenue base. They have to be looking for who's going to be their next customer. And so investing in a lot of these other startups that have the wherewithal, the capacity to be able to generate the compute, to turn around and buy new GPUs, I think they have to and they have the free cash flow to do it. They've got to do something with the cash that they throw off. So I think we have to separate some of these circular deals from, from.
- [11:09]
D
Each other so you have exposure to the one hyperscaler that's been in the, in the eye of the storm too. It's, it's matter. There's obviously a lot of concerns around their, their spend. Zuckerberg unwavering on what his plans are into 20, 26 shares are down 22% since that earnings release. So what do you think about this issue as you see it through the prism of the stock you own?
- [11:37]
F
Well, to me I don't even know that it makes sense to talk about it through just, just Meta. Because Meta, I'm like, all right, you know, it's just a, it's just a company. It trades at 19 times earnings. It still has decent earnings growth ahead. I think the story is so much bigger than just one that I don't think it's possible to look at it that way. And I'll tell you how I do look at it. I actually look at it more through a lens of something that I don't Own. And what I don't own is MicroStrategy. I'm watching MicroStrategy really carefully since July, like for no other reason other than that. I think it's interesting. And I realized that I've been watching it the same way I was kind of watching ark back in 2021. And I've been thinking, who's in this? And to the question asked earlier, who's selling? Right, who's selling? And what I think was similar in ark back in 2021 before the market bottomed a year later. What's interesting in MicroStrategy, which by the way is down from like what $453 or $543 earlier this year down to 200ish now who is selling? It's. I think it's the lower end investor. I think it's an investor who doesn't any longer have the ability to take risk. I think it's the investor who wanted to take risk, who wanted to hit a home run. No, a grand slam. That's even better than a home run. See, I have sports knowledge. You're welcome. But I think it so I think this is the lens that I'm looking at. To me, Metta, that's just whatever, who cares? It's not that telling. So I'm looking at it and I'm saying, okay, I think it's a lower end investor. We know the lower end consumers pinched. There's many, many more lower end investors and many, many more lower end consumers than there are high end than there are wealthy. Once you start to disaggregate who's participating in the market. Once you start to disaggregate the consumer, Once you start to disaggregate the market, you see real pockets of weakness. And what I'm thinking about is this inability to take risk is starting to trickle up. So Jim, I disagree a little bit on one thing with you, which is you said you think it's a sentiment driven pullback. I don't think it's a sentiment driven. I think it's ability driven. I think people have less ability to take risk, less ability to spend money than they did now. And with respect to circularity, I don't think.
- [13:39]
D
I don't know.
- [13:40]
F
I'm just telling you what I think.
- [13:41]
D
That's a stretch.
- [13:41]
F
Fine. But what I think also a big stretch. You do?
- [13:45]
D
Yeah.
- [13:46]
F
But let me just say one thing. I also think with respect to circularity, none of us know, but we all know it stinks. Can I do it around long Enough that once something starts to stink like it tends to rot.
- [13:55]
B
Here's to me why I say sentiment and a lot of this is based on experience. We all have experience. But I look at for instance Oracle debt. Five, six weeks ago they came to market with 18 odd billion of debt. They placed that it was snapped up at yields of 5 to 6% which by no means are distressed. And yet in the last two weeks we've seen credit default swaps more than double that. To me there's no way that in the space of five to six weeks that all of a sudden there has been evidence that the creditworthiness of Oracle is damaged in some way. It will take far more longer than that for any real evidence of the creditworthiness decline to come before you.
- [14:30]
D
And you know, farewell that markets react long before a potential event. You don't necessarily need to see an event to sniff something out months in advance. Whether anything going south on this or not, who knows.
- [14:49]
B
And the markets can be wrong. And I believe that this is sentiment, that exactly there is sentiment out there that the credit worthiness Scott of the bonds issued by Oracle are not going to be as good as they were felt to be just five weeks ago. But corrections happen in anticipation of things that quite often don't come to pass. When they do come to pass, it gets worse. It turns into a recession, a bear market. And I don't think that's what's going to happen with Oracle or the markets. From where we are now.
- [15:16]
D
We'll do the Oracle thing now since you went there and Sema sitting on the seller this year because they're hosting their shareholder meeting today, right. If there's one stock I know I referenced, Meta is kind of in the eye. It really is Oracle and ever since the big announcement they had along with their earnings report and the stock had this massive run up and it's given everything back and then some. As we're looking at the CD asking you just give us an idea of what the big worry here is.
- [15:42]
G
Well, top of mind for this investor meeting is going to be the speed at which Oracle is going to the debt market. That's, that's top of mind right now because the company is rapidly transforming from a pure play software enterprise company to one that is investing heavily in hard assets from artificial intelligence chips, servers to developing and leasing data centers. There's a shift in mindset and investors are getting more comfortable. Top of mind today Baird cutting its price target to 315 a share from 365. Still maintaining its outperform rating. But analysts there expect gross debt to rise over the coming years. They also add that Oracle needs to find creative ways to finance the infrastructure. I would point out that there's been a lot of talk about the deal that metadata with Blue Owl where it's using these off balance sheet facilities. So is that an opportunity for Oracle to minimize its risk on the credit side? We'd love to hear, would hear your thoughts on that. But I would also add what UBS shared this morning. They're removing Oracle from its preferred list and changing its credit rating to deteriorating. They're still remaining comfortable holding their existing position. But you can't ignore that Oracle's investment grade rating is triple B which is lower than the other hyperscalers. And I think that's something that is being debated right now. We want reassurance from the CEOs on those long term EPS targets and more details on that $300 billion deal with Open Air because there's concerns around whether they can fulfill that contract.
- [17:00]
B
Jim, the speed with which they have gone to the debt side is absolutely, absolutely the concern. And I'll phrase it a different way. In fiscal year 23, they end May 31, they had roughly $12 billion of free cash flow this year. Two years later they're going to have negative 9.1 billion. And what I say to you is at the time that they were piling up a lot of free cash flows, thoughtful investors were saying what are you going to do with it? What are you going to do with it? Don't give it to me in a dividend. That will really, that will cement your legacy as a value stock. They found productive projects into which invest. They're going to invest and I applaud them for that. That's what they should do. Remember, this is still Larry Ellison's company, all right? He is the majority shareholder. And to the extent, Jenny, that you just said it's the size of the debt, this is a man who has been very comfortable and very successful doing this in the past. It's also a man who, regardless of what you think about his affiliation with the President, is benefiting from it. With regards to Project Stargate with the tick tock algorithm, there are a lot of reasons to be on the same side of the bet with Larry Ellison. Last thing, Baird, the target of 315 is about a 50% jump from where we are now. I'd take that.
- [18:11]
D
You on the stock too?
- [18:12]
A
Yeah, yeah.
- [18:13]
E
And as we're talking about it, the question is where do you want to catch this falling knife. Like I've been looking for an opportunity to buy back the 50% that I sold out of this position earlier in October. And the challenge that I'm having is the more I study it, the more concerned I get. So when we talk about like the depreciation of these chips that Oracle is loading up on with debt on the back of it, when we talk about the lesser margins in the business coming from OpenAI versus the other companies that are leasing the cloud, it starts to get a little unnerving. But to Jim's point, when you, when you look at the company overall and its track record, you'd be foolish to bet against Larry Ellison and crew. And so it's yes, I want to own the company, but at what price?
- [18:56]
D
Well, Jim makes it. Makes it seem like the whole thing is sentiment driven. What you just laid out is more fundamental.
- [19:01]
E
Yeah, I disagree that it's solely sentiment. I think that sentiment is what drove it from 230 to about 350. And that's all also what sent it coming back down.
- [19:09]
B
Just put up the CDS chart again. Put up the CDS chart and tell me what happened two weeks ago, the specific evidence that caused that spike. Okay. That to me is sentiment driven. Now, I can't prove it, Scott, I cannot sit here and give you proof, but I'm looking at that chart and as an experienced investor, that to me.
- [19:27]
D
Screams sentiment gets sour based on fundamental things.
- [19:31]
E
That.
- [19:31]
B
Nothing fundamental has happened in the last two.
- [19:33]
F
I don't think anything fundamental happened. No, but it was like it was just one too many things. We just reached a tipping point.
- [19:40]
E
Nothing fundamental has happened in the last two weeks.
- [19:43]
D
Debating this is ridiculous because it's like debating whether the sell off was due to the government shutdown, which was absurd at that time.
- [19:50]
B
It wasn't absurd.
- [19:50]
D
It's absurd today too.
- [19:52]
B
It is absurd.
- [19:53]
D
We're going to move on Alphabet. I want to talk about because it was upgraded to a buy today at Loop Capital. So what's interesting about this story is now's the time to upgrade the stock. We don't need to look at the intraday guys. Let's pull it back out. They had a hold on since May of 2023. Okay. Shares are up 142% since then. The time to upgrade the stock was when sentiment got really bad when Jim upgraded it on the show. Essentially the day of the Eddy Q sell off. The Stock is up 88% since then. So we'll highlight the upgrade to a buy now. But I mean, come on, really what's the deal here?
- [20:39]
B
I'm not trying to continue the fight. I just want to observe. This is the exact mirror image and the same effect of bear downgrading Oracle after it's off 33% in a month. Your incredulity is how I would characterize.
- [20:53]
D
They're arguably trying to get ahead.
- [20:56]
B
They're both. It's gone from 345 to 215.
- [21:00]
D
If you think that the slide is finished, this is. I mean you've had a hold on it since May of 23 and now you upgrade it after it already had the amazing bounce back.
- [21:12]
B
I agree with your incredulity on both cases. I agree this is probably not the best time to upgrade Alphabet.
- [21:19]
D
By the way, Sundar Pichai says, quote, no company is going to be immune if the AI bubble bursts. Josh, you want to. He was speaking to the BBC in which he was asked whether Google would be immune to the impact of an AI bubble bursting. He said, I don't think no company is going to be immune, including us. It just speaks to the bigger issue we're talking about. Why did the circular deals raise so many concerns? Because if one has a problem, everybody has a problem because everyone's relying reliant on one another.
- [21:52]
A
Yeah, that's one of the unfortunate things. Like there are stocks right now selling at huge multiples with expected growth rates that in that scenario obviously would be slashed to zero or worse. And those stocks of course will get punished. And then you have reasonably priced names like Alphabet, which will also be punished. So what we're actually talking about then is in that scenario, which is not my base case, is we're debating the degree of punishment. I don't think you get murdered in an Alphabet at a 27 forward multiple. Even if the earnings growth that people are pricing in because of AI, blah blah, blah, even if those numbers come down, I still don't equate this to the same amount of pain that you're going to Take for example in a chip equipment stock where they tap you on the shoulder and say, hey, remember that whole upgrade cycle for chips? Well, that's now over for the time being because ugly today, by the way.
- [22:52]
D
Lamb research materials, KLA 10 core.
- [22:57]
A
Yeah, so I'll get there in one second. Take Matter as another example. I think the stocks buy. If the sentiment driven correction or whatever we're calling it continues, it'll go lower. But it's now 19 times forward. And yes, if there's like an AI sell off, they'll beat up matter not going to cut it in half because it's, it's not selling at 50 times earnings. Oracle is, you see. So, and this is not a comment on whether or not Oracle's good met is bad. I'm just making the point like the expectations in the market are different for all of these different AI related opportunities and I think as a result the punishment will be meted out in varying amounts. And what investors seem to be doing now is they're looking for tech and communication stocks that aren't like all in on this AI trade. Let's pull up Netflix just to illustrate this point and then I'll pass the ball.
- [23:56]
D
But I think I want to take it.
- [23:58]
A
Yeah, yeah, like Netflix is not involved in the AI capex trade. The stock is hammering out a bottom here. The stock went green really quickly relative to some other names. And like this is an area where tech investors can go if they're in on this ABC idea, anything but chips. Like this is a stock that clearly did a 10 for 1 split. The buyers came in, it's finding some support here. Did not make a lower low. And you know, I think that people are taking a second look and ideas like this as they liquidate positions in some of the darlings and that's what you would expect in a moment like this.
- [24:39]
D
We've been highlighting the social media posts from Dr. Michael Burry who has another one today which I think speaks to the environment that we're in for the overall market. It's a pear trade, basically. Long Molina Health stock, he says, and long Palantir puts like peanut butter and bananas. To me this does speak to exactly what's working and what isn't in this market. A statement on the market itself. Health care, the best performing sector. Right. Versus a Palantir, for example, which is, you know, in the heart of the debate over AI valuations. Jenny, you want to, you want to weigh in on, on that?
- [25:22]
F
Yeah, and it's been interesting because I haven't seen it as a, I personally haven't seen it as a broad based correction or retracement. There's every day that the market's had a terrible day, there's been a disproportionate amount of green on my screen and it's been in the same areas, health care, real estate, utilities, energy. And you see the companies that have fair valuations, and by fair I mean 15 or 16 times less and decent earnings growth ahead, that's likely no matter what. And I mean by that, I don't know, 5% to 12% earnings growth. So I've really seen this rotation coming or happening and it's encouraging. It would suggest a broadening out and I think that's healthy. We've seen it all in one place. If you don't mind, I'm going to jump the gun on something, but I just added a new position to the portfolio in a company called Amcor and Amcor fits this description exactly. It is a products company. So they make, in fact I encourage you to go to the website and look at it. But they make everything from bottles like these to when you pop your little pills out of the packet, those to trash bags, absolutely everything. It trades at a 11 and a half times earnings, has about 12 to 18% earnings growth ahead from synergies from a big merger that they just did. That's something that since their earnings call two weeks ago, the stock's up about 6 or 7%. And so I've really seen that rotation. I think Michael Burry's call is smart. Just take money off the table in the risky frothy areas and put it into something that has higher certainty.
- [26:44]
D
All right, we'll take a quick break. When we come back inside the crypto collapse. Bitcoin is dropped, dropping below $90,000 today. We're following that money and the trade, it's rebounded above 90, it's above 93. But it's volatile as you know. And that chart tells a pretty good story of how this trade has been of late. We'll do it next.
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Let's talk about bitcoin. We just showed you the chart. It's just below 93,000. It did dip below 90,000, negative for the year. Mackenzie Segalus is following this because we know so many of you are as well and the related names that are trading in tandem here.
- [28:53]
G
Scott, it's been whiplash in the crypto market since bitcoin triggered a death cross on Sunday. That's when short term momentum turns weaker than the long term trend. You said it. The token briefly broke below 90k this morning, but a sense bounced back is trading around that $93,000 level. But technical analysts say the bottom may not be in yet. Fairlead's Katie Stockton sees potential downside to 78k before long term support holds. Still, two distinct pockets of crypto linked equities are trading higher today. You've got the digital asset treasury names, Tom Lee's bit mine Immersion strategy and Marathon all in the black. That group led the crypto trade over the summer before losing steam the past two months. And then there are the exchanges, Coinbase, Bullish, Robinhood, all ticking higher, moving in lockstep with bitcoin's rebound now it's part of this morning's comeback narrative. But analysts warn that liquidity is thinning. Forced liquidations are near $1 billion in the past 24 hours. And then that key institutional buyer still hasn't shown up to buy the dip with those spot crypto funds marking net negative flows again on Monday. Scott?
- [29:57]
D
Yeah, I mean, you have to take this all into context. I think a better look at this rather than, you know, looking at the stocks stacked on top of each other. Let's do a one month of strategy, for example. Mac, as you talk through this, it's down more than 27%. These crypto treasury type names are the ones that have seen some of the biggest selling, right? It's this one. It's the one that, yes, I understand Tom Lee's, you know, bit mine immersion is up a bunch today, but it was down a ton as well.
- [30:29]
G
And you had this great conversation with Tom Lee where you asked him whether or not this digital asset treasury trade has undermined the spot market because it's essentially made it easier than ever to invest in crypto through these crypto linked equities, but not necessarily in the underlying asset. But one point that he made that I thought was interesting about this DT trade is the fact that they are permanent holders of the ether token. In their case, some of these proxy trades hold bitcoin with as strategy does. But he said that they're permanent holders, they hold 3% of the ether supply and on top of that they don't have leverage that they're not going to be wiped out with these liquidations. So he was saying that that has really helped to provide a floor to the base price here. But it is a standing question strategy. It's no longer trading at a premium to the value of bitcoin and that is a real sign of erosion of confidence in the bitcoin trade.
- [31:16]
D
Yeah, of course. I mean you still have, you know, Tom Lee, one of the evangelists out there and people listen to what he, what he says on this and other topics. Mackenzie, thank you very much. Mackenzie Seagal's Josh, you have a thought here as we see this really renewed volatility related to crypto.
- [31:33]
A
Yeah, I never. So I obviously I've been accumulating bitcoin myself and I own a bunch of other crypto things for a really long time. I'm not a laser eye person but I am open minded about the idea that, that as these protocols grow in use in the real economy, of course their prices will have to go up in order to facilitate commercial sized transactions. So I get the bull thesis and you know, I don't want to sound overly cynical. What I never understood and I never bought these stocks and nobody ever explained it to me was why I would pay a premium for an operator of a, of a dad who is going to be diluting me and then trying to accumulate as much of that underlying as possible like in a race to get to a certain percentage of that market. And the reason I never believed in it is I spent 12 years as a retail stockbroker and we sold closed end funds and that's what these really look like to me. And I can't think of a category of closed end fund ever in all of my time on the street that traded at a persistent premium to its assets. There are closed end funds from uni bonds for corporate debt, for real estate, investment trusts, any category you could think of. All of them trade at a discount to navy almost all of the time. And that's just like a standard thing. So why would we have one where it trades at 100% premium to its navy? And I understand it went on for a long time and people bought into this narrative that like oh no, no, you don't understand, this is different. These guys have this plan, etcetera I just, it never captured my heart and soul. So I, I'm not in the space. I'm not looking for buying opportunities.
- [33:20]
E
Yep.
- [33:21]
D
All right. Let's get the headlines now with Courtney Reagan. Hey, Courtney.
- [33:24]
F
Hi there, Scott. Bloodshed in the occupied west bank today as Palestinian attackers stabbed an Israeli to death and wounded three others. That's according to the Israeli military, which says the the attackers were then shot and killed. It follows several instances of settler violence against Palestinians there recently and comes just a day after the UN Security Council approved President Trump's blueprint to secure Gaza. Amtrak said today that it set a record for revenue and ridership this year and also cut losses by 15% to $598 million.
- [33:54]
G
The railroad is in the middle of.
- [33:55]
F
A huge effort to improve aging infrastructure along the busy Northeast corner corridor as well as buying more high speed Acelo trains and increasing service nationally. And the United Kingdom is cracking down on resale ticket market prices. Under the new plans that are set to be announced this week, people won't be allowed to sell tickets above the face value price. According to the Guardian, the ban walls to put a cap on the fees resale platforms can charge. The news sent shares of StubHub lower.
- [34:24]
D
Back over to you, Court. Thank you, Courtney Reagan. Up next, Josh Brown. He is ready with his best stocks in the market list. The three names he is focused on in this month's best performing sector. He will tell you we will next.
- [34:38]
C
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- [35:10]
D
We're back with Josh Brown's Best Stocks in the Market list. We've talked about health care a lot. For obvious reasons. It is the best performing sector of late and your spotlight shining brightly on a few names here.
- [35:22]
A
Yes. And we're going to talk about health care not just because they're up, but because these are names that have started to be under accumulation before this whole storm and with good reason. A lot of these stocks were just thrown in the garbage, forgotten about. But what's really interesting here is they're big ones. This is not a situation where we're looking at tiny biotechs that may or may not get approval for a drug. So we're going to talk about Abbvie, we're going to talk about Lilly, I'm going to talk about Amgen. Abbvie and Amgen are obviously leadership names in the biotech space. AbbVie is up 36% over the past year. Amgen is about 12%. So it's not like these stocks have completely run away from us because they spent a really long time doing a whole lot of nothing. In the case of Abbvie, if we could just focus on that one, you're talking about a $400 billion market cap with a 3% dividend yield. This is a stock chart that's been going up and to the right for basically most of the last 10 years. The fact that you had a pause in the name as health care fell out of favor enables you to have an entry here that's not at some egregious high. I like the rising 200 day here as a stop. I'd be updating that at the end of each week. And I would look at this more as an investment long than a trade. That's about a 13% downside from today's level. Amgen is very simple. This stock's been in an uptrend for 15 years with occasional periods of boredom. RSI is a little bit overbought here in the mid-70s. I would give it a couple of days to cool off, but, you know, this is a name that is now broken. The September 2024 highs. This is a breakout that's over one year in the making. And I think we have to give this company the benefit of the doubt. I know it looks a little bit parabolic on this chart, but again, that's after a very long period of consolidation. These companies have great earnings. Scott, These companies are offering decent entries. The third one, if I could just say quickly on Lilly, this is a name that is really showing what a focused management team can do at a pharmaceutical company. In a space where you have loser names like Pfizer, this company is just outshining everyone. I think you'll get a better entry here too, if you give it a couple of days, let it cool off. But you want to be in these names and I think you want to ride them with, with, with trailing stops.
- [37:53]
D
Jenny's loving this move in health care. So tired of listening to us talk about AI and all these tech names since you don't own that many. But you have a good amount of exposure in the health care orbit and feeling pretty good obviously about that.
- [38:06]
F
We do. And it's, it's our happiness is exactly what Josh said. Not at egregious high, egregious highs and great earnings. So today, for example, Medtronic reported and the stock's up 5%. We've owned this for a long time and if you look at it, it's fine, right? Like revenues are up 6%. Earnings came in a little ahead. But the point is it's the strongest revenue growth that they've had in over a decade and they increase their guidance a little. Not amazing, but it's a huge relief to see them increase their guidance after years of being disappointing. So now math me, math is simple. It's like 16 times 5 and a half percent free cash flow yield and earnings growth of 8 to 7%. Interesting. Molina, when she which you referenced for Michael Burry earlier, almost the same math on that. 16 times earnings in this case, in the case of Molina, it's 13 to 15% earnings growth that was down 52%. But you can look across our portfolio more broadly and see Regeneron, Thermo, Fisher, Zimmer, Josh's loser, Pfizer or Bristol. And all of those stocks either have a very high free cash flow yield or a very high dividend yield. In the case of the growth year ones like Regeneron, Thermo, Zimmer, they all trade at a fair multiple. 16 times, 23 times in one case, 10 times on Zimmer and then 5. Pfizer and Bristol are trading like 7 times with a, with a 7% yield for Pfizer and 7 times the 5% yield for Bristol. Those are, those are places to be where your expectation return for return are much, much more certain, I think than other areas of the market where you're banking on, on a story that may or may not come about. Those have earnings that are going to happen.
- [39:37]
D
All right, good stuff. Up next, we're doing calls of the day. A top analyst says buy the pullback in this stock that's having its worst month this year. Jenny and Josh are in it, which means we debate it, do it.
- [39:50]
F
Next.
- [40:06]
D
We're talking cyber because Rosenblatt that is raising targets today. A crowd strike goes to 630 from 550 Zscaler to 365 from 330. Malcolm, you own both, right?
- [40:20]
E
I do. I like it a lot. I think rather than selling big cap tech and going into healthcare like Jenny and Dr. Burry, I'm more interested in selling maybe Mag 7 and going into other tech and you know how bullish. I've been on cybersecurity for quite some time time. So I really like the opportunity that's being created right now in front of zscalers earnings specifically they report next week, Tuesday I think exactly one week from today. And the bug Cybersecurity ETF is down about 10% over the last month which has created an opportunity to do something to stay in tech, stay in those giant margins that exist compared to other sectors, but not necessarily be so overly exposed to AI.
- [40:59]
D
Let's kick Uber around because it was reiterated a buy today at Argus 114 is the price target. Stocks not traded all that great. You could show a one month on it if you would, please. It's the worst month since December. That tells the story of what there it is, what the stock has has done of late. Jenny, what do you think?
- [41:19]
F
So I think this is why I argue with the idea about it all being sentiment and sentiment around AI, AI and AI circularity. I think it's more than that. I think it's this ability to take risk because the reality is is Uber shouldn't trade in line with an AI play. Here you've got a company that's just Solid trades at 25 times earnings, mints cash. They still have a 5.1% free cash flow yield and their EBIT is growing like 30% next year, 26% the year after that. It's a terrific company. So I'm all for all for the upgrade up all for the $114 price target. It's fundamentally sound. You agree with me, right Josh? Okay, Josh, sorry, sorry.
- [42:00]
D
Josh, go ahead.
- [42:01]
A
Great talk. Great, great, great toss, Jenny. You're a real pro.
- [42:05]
F
Thank you, thank you. I just wanted to hear you say I agree with you, Jenny.
- [42:09]
A
Yeah. Very quickly, let me catch people up on the story. The story is that Waymo and Tesla Cyber Cab are Uber killers. And as they expand across the country, Uber is going to be in a bad competitive situation or whatever. Very reminiscent of what they said. Netflix was dead because Disney plus was launching and all of these other streaming services. We know how that turned out. What ended up happening was the investors and the users showed a preference for the biggest company in the space and the company that could deliver profitably. Uber has the only profitable business model in the space and they have a structural advantage. No vehicle capex, no depreciation, minimal risk in hardware. This is the best model right now. Waymo is building great tech, but they're sort of middle of the road. They have huge costs. Those cars are incredibly expensive and they don't have the same mapping and data that Uber has because Uber's already been operating in all these places. So their expansion, which will happen, is going to go slowly and cost a ton of money. I can't imagine when they're going to be profitable. In the case of Tesla, they're talking about 70 or 80% gross margins per vehicle. So long as Those vehicles drive 20 to 60 hours per week. I don't know when that's going to take place either. They still have human drivers in the front. So this is the asset light business model in Uber and the company with the ability to partner with everybody. There are dozens and dozens of companies bringing autonomous rides into cities all over the world. Uber is standing by and ready to sign agreements with them. All that does is drive down the cost because you don't have a human driver, which is the biggest cost, and make Uber's margins bigger. As this technology becomes ubiquitous, I think it's the clear and present winner today. I think it'll continue, continue to be. As far as the eye can see, stock is ridiculously cheap, given their market position.
- [44:07]
D
All right, Mike Santoli is next. We have some breaking news on Meta. Mackenzie Sagala Ellis has this for us. What do we know?
- [44:29]
G
Hey, Scott. So Washington judges ruled in Meta's favor, tossing out the government's antitrust case tied to its Instagram and WhatsApp acquisitions. The FTC had argued that the deal stifled competition, but the court disagreed. Medicares are moving higher on the news, but still trading lower on the day.
- [44:45]
F
Scott.
- [44:46]
D
All right, Mac, thank you. You have a quick thought on this? Did you expect something different or.
- [44:50]
F
No, no, actually didn't have too much thoughts on it at all.
- [44:52]
D
You don't? Okay, great. Thank you. Mike Santoli is here at the desk. Well, that's a rarity. Wow. Take the win, take the time. I use that time for. Mike. Your thoughts, Mike?
- [45:03]
H
Yeah, well, first of all, I don't think the market was on pins and needles about the legal issues here when it comes to matter. What's more interesting I think is the, is the kind of the flow of this attempted pullback off the lows from the S and P. The, the move lower was the stampede out of the crowded popular stuff that some of it, which has held up better. So it's a catch down of the s and P500, the NASDAQ 100, to the junk that had been leading the Downside and what do you have relief in Bitcoin, small caps, the stuff that already is hit hard. So this kind of, kind of rotational action trying to get the rhythm of a pullback in place. The S and P And the NASDAQ 100 basically went back and checked levels from the September rate cut. When they resumed Fed rate cuts, that's 6,550 in the S and P. So technically you have the makings of. Okay, that was a proper reset. Maybe we now have restored the ability to be pleasantly surprised, whether from Nvidia or anything else.
- [45:56]
D
It's interesting that this, this pullback hasn't really been driven by a, a singular event.
- [46:02]
H
Right.
- [46:03]
D
That, that had everybody all of a sudden concerned. It's just the idea around spending and the idea around debt Fed and the idea around private credit. Really seen something dramatic to cause a dramatic move in the market?
- [46:19]
H
Well, no, it's a layering of these concerns that were below the surface that have then been brought into, into the light. And I think when the market is ready, when the market's getting overheated and it starts to pull back, you find the reasons and that's what's been going on. And by the way, the market peaked on October 29th. That was when the Fed cut rates in the then said don't, don't expect another one. So there's no accident there either that basically at that point started to lose some of the friendly policy backdrop. I do think ultimately if this is going to be a trading low that turns into a real run for the highs again, you probably need reassurance either that the Fed is going to be cutting again and or that the economy is stronger than we now fear.
- [47:00]
D
But I mean the Dow had 48 closed above 48,000 well after the, the Fed and we've given up to almost 2,000.
- [47:07]
H
That shows you the market was attempting to kind of rotate away from the danger of the overheated parts of the market. And then you lost some of that. The gears just slipped a bit in that rotation.
- [47:16]
D
Yeah, there's, there's the chart that shows.
- [47:18]
H
By the way, we didn't even get to a 5% pullback on the S and P. We didn't, you know.
- [47:22]
D
All right, I'll see at 3. That's Mike Santori. Finals are next. We're going to do finals in a second. But we have another move. We mentioned your buy of Amcor. You sold wpp.
- [47:37]
F
Right. So this was in our international income strategy and it's really just a violation of our investment Thesis. The company is doing horribly compared to its two top peers. We have a huge tax loss. We have a lot of gains in that portfolio. So we realized the tax loss got out of the stock. We're done. There's not that much interesting to tell.
- [47:55]
D
Okay. All right. Well, thank you very much for that. I thought it was interesting.
- [47:58]
F
Thank you.
- [47:58]
D
Brian Belsky, Sonali Basak, Aswath, the motor in. Elizabeth Burton from Goldman Sachs and Liz Thomas. They're going to join me. 3:00 clock on the closing bell. We track this final hour of trade. We'll see if the market continues to move towards the. Towards positive territory. We've come off the lows, as you know. There is the Russell, which is now green. In fact. Let's take a look at the majors. You show them all of them for us, guys. Just so we can give everybody a little. A little look because we've been so volatile of late. We'll do. We'll look at that as we do some fun. There you go. So we're still red, obviously, but we're not as red as we were. Josh Brown, your final trade.
- [48:36]
A
Netflix. I like this price action today.
- [48:39]
D
Malcolm.
- [48:40]
E
I'm going Nvidia. Focus on receivables versus inventories. Ignore the rest of them.
- [48:44]
D
All right, well, you're going to get earnings tomorrow and that's going to be pretty interesting. Farmer Jim.
- [48:51]
B
Your honor Armor. Your honor, I submit as evidence Lockheed Martin on the basis of the F35 is simply the best jet in the air right now.
- [49:00]
D
You're out of order.
- [49:01]
B
What?
- [49:02]
D
Jenny. Jenny was out of order earlier. Jenny was out of order.
- [49:06]
F
Jenny Freeport, McMurray and just did an update for their investors. Stocks trading at 10 times. Sorry, 10% free cash flow. You have 13 times earnings.
- [49:13]
D
Okay, the exchanges. Now, you've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [49:27]
C
All opinions expressed by the halftime report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their 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 an opinion. Such opinions are based upon information the halftime report participants consider reliable, but neither CNBC nor its affiliates and or 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 reportdisclaimer is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning, and effective communication, and you can apply these skills right away. A different future is closer than you think with Capella University. Learn more@capella.edu.