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Halftime Report
Managing a Portfolio Full of Winners 6/4/26
00:47:05
Scott Wapner and the Investment Committee debate whether you should stick with the winners in the market or rotate out of these high-flying stocks. Plus, the desk share their latest portfolio moves. And later, we look ahead to the Space X IPO, Leslie Picker joins us with the latest. Investment Committee Disclosures
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- [00:00]
Chase Sapphire Reserve Announcer
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- [00:25]
Scott Wapner
Learn more@chase.com Sapphire Reserve cards issued by JP Morgan, Chase bank and a member FDIC subject to credit approval.
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Malcolm Etheridge
Before we had ATT wireless coverage, our delivery GPS wasn't the most reliable. Once our driver had to do a 14 point turn to get back on route. A 14 point turn. An influencer even live streamed the whole thing. Not good for business. Now with AT&T business Wireless, routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though.
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Scott Wapner
AT&T business Wireless connecting changes everything. I'm 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 Wapner. Front and center this hour, the markets, of course, Broadcom, crowdstrike, they're weighing on tech today. Chips are weaker, some software names, bitcoin approaching a new 52 week low. The Dow though is surging today. The there's a bit of a rotation going on and we will discuss and debate that with the investment committee. Joining me for the hour, Malcolm Etheridge, Jim Leventhal, Bill Baruch and Bryn Talkington show you the markets here at 12 noon. In the east, the S and P and the NASDAQ are on track to snap their nine week win streaks. That's your picture here at noon. The Dow is the big ripper, Malcolm, today you do have some broadening into financials and discretionary and industrials and health care. And there's money coming out of the biggest winners within the tech universe over the last month. A lot of the chip names are weak, some of the cyber names are weak and we can get to the individual broadcoms. And the crowd strikes in a moment. But just the overall makeup of the market today. What do you, what do you take from it?
- [02:15]
Malcolm Etheridge
I think we're probably seeing one of the first of many tests of this existing bull market within tech. The AI revolution. Continuing on, the narrative is going to continue to be challenged this summer and into the fall, as we've got these massive IPOs that are going to show up here, we've got a lot spending, that investing that has happened in both private and public markets. And I think investors are now trying to make sure that they're not caught offsides. Right. There's a lot of hearkening back to 1999. There's a lot of talking about whether this is 99 all over again. And I think one of the key differences here is the retail investor is able to move a lot faster than they were back then. They're also a lot more educated on the markets than they were back then. And so I think what we're seeing is a lot of people trying to make sure that they line up on the right side. I don't think that this is necessarily indicative that we've reached the top and it's time to ring the bell here. But I do think we're going to see these kind of kinds of ebb and flow moments throughout this year as we have these big events named and listed.
- [03:16]
Scott Wapner
If you look on the board today, you know, a lot of the biggest monthly winners. As I, as I was saying, you know, the, the crowd strikes and the Palo Altos, which even with the declines that you're, you're seeing today are still up near 50% over the last month alone. Everybody knows what's been happening with the chip stocks. AMD over the last month up 53%, Micron over the last month up 75%. So a little bit of money coming out of those areas and finding a home elsewhere in some of those other sectors is probably a welcome sign for those who have been looking for a little more healthy looking market.
- [04:01]
Jim Leventhal
I completely agree. I mean, this is what a consolidation should look like. These parabolas have occurred. They have to come down a little bit and then stabilize before the next leg higher. And that consolidation is healthy because it sets up the next leg higher. I do want to draw a distinction. There's no reason that I can see to think that there's going to be a correction anytime soon. Whether it's the market overall or semiconductors or technology. I think for a real correction to happen, you'd have to have a massive sentiment shift. Now that could happen if, say, things with Iran get meaningfully worse. But let's face it, this is a market that has grown very inured to what's going on in the Persian Gulf. It's grown very inured to West Texas Intermediate being somewhere around $100 a barrel. So a consolidation is healthy. Very unlikely to see corrections. But I want everybody to consider if you as most of us have some of these parabolas in your portfolio, it is a good time to do some risk management. Not sell the entire thing, but trim some and go into other areas. I think that's what's happening, Scott. I think that's why you see a nice outperformance today from the equal weight S&P 500 versus the Nasdaq or the Dow versus the S&P 500. Rotation is healthy, if you ask me.
- [05:14]
Scott Wapner
It's not like tech's having a miserable day. It's just as I said, the areas that have gone up the most, the, you know, the parabolic moves in many respects are the ones where a little bit of air is coming out. But you're getting buying today in the Microsoft, you're getting it in the alphabets in video, which hasn't traded well at all, is up one and a half percent. The gains in other areas of the market, other parts of tech over the last month so outweigh these areas. So it's not a surprise either that money would be going back. So like the trend is messed up by any sense of the imagination. It's just looking at chips. Maybe Broadcom initiated that last night, maybe Crowdstrike initiated it for parts of software. But the trend feels like it's still very much intact. It just may be a little bit shifty within the tech universe.
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Bill Baruch
I agree. Trends intact. This is a healthy rotation. As Jim noted, you kind of have to have this and consolidate and show strength in other sectors in order for it not to be a correction. And it really kind of take the next leg higher. I completely agree. One thing that stood out to me yesterday was when President Trump talked about the strait may not open until Labor Day. You know, he's setting, he's setting a time frame out there and I think that put the market in general on a little bit of weak footing. Now we know how a lot of his negotiation tactics work and that could start getting moved up to the, to the more near term and that becomes a bullish catalyst. But these two companies, Broadcom and Crowdstrike, I don't think they were bad reports by any means.
- [06:41]
Scott Wapner
No, no, no, no, no, they weren't. But expectation wise, you're in a real difficult playing field.
- [06:47]
Bill Baruch
I mean, Broadcom just the last week was up 20%. So we're just giving that back. You had these reports come out when not only also you had the comments from Sam Altman talking about air spending in the budgeting of these companies correlating into the spending. So you had some just weak footing yesterday and then these reports come out and then, and then it exacerbates some of the downside.
- [07:07]
Scott Wapner
Are you buying more Broadcom like you own it? I mean so the revenue missed for the first time Since December of 24th their outlook was unchanged. It's not like they're, you know it was but you can't be unchanged. Your outlook can't be ho hum in the environment that the stocks have run up in. That's just not going to cut it as they're finding out the hard way. And you as an owner of the shares are as well.
- [07:29]
Bill Baruch
Yeah, it has to be a real raise on that guidance. It can't just come in just below the high expectations of the guidance. It was a good report. You know some of the things that are emerging from here is, is where their moat is on the tpu. You know they have that contract with Alphabet going on I think 2031 it might be but names like Marvell are starting to appear in the mix there. And you've seen it, seen that get name go parabolic. Now Broadcom, like I said was up 20% in the last week. It's given that back. I think it was a good, you know it's been still a great name this, this year. We're not buying more of it right here but I do see a tremendous amount of support if it were to keep going. 355, 360. That's where the 280 moving average is. That's where consolidation was earlier this year. So there's, if we did keep going and there were a real correction in the name, I think that's where you want to be buying.
- [08:17]
Scott Wapner
Well, this Street's not given up in any way, shape or form on, on this story. Wells Fargo is bullish. They're buyers of the weakness. This got 6 target raises today JPM to 580. UBS cut theirs down slightly, 485. But the street remains bullish on this stock. And I don't come across very many investors on this program or otherwise that are not bullish on this name.
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Malcolm Etheridge
I don't disagree with any of that. But I think what also factors into this that we're not talking about is the fact that you have Taiwan semi CEO saying we don't see any way that we're going to catch up to global demand for semiconductors anytime soon. And a lot of the excitement and the bubble that we've talked about the run up in chips for the last few months has been based on this idea that the remaining performance obligations continues to grow. And it's kind of the point that I've been making for a while that the reason this industry is so cyclical is because it takes three, four or five years to build the infrastructure necessary to actually create the chips that these companies are relying on. And so by the time they actually build the infrastructure needed to create the chips, the foundries, the demand has subsided one way or another. Either we figured out another solution and we don't need it as much as we did before, or we've already gotten the supply that we needed from somewhere. And so I think that that's also what's being reflected in the response to Broadcom specifically is this idea that, yes, the number was decent. Yes. I mean, we're Talking about what, 48% revenue growth year over year that any other company reporting those numbers would be up 15% today, not down. But I think that this is indicative of that sentiment to where can we actually kind of stop the excitement over RPOs and actually start to be concerned about legitimate sales happening?
- [10:12]
Scott Wapner
Brian, you got to like the fact that you've got an almost evenly split market performance over the last month. If you, if you take the NASDAQ over the last months, up 7% thereabouts. S&P up five and a quarter. Russell 2000 up near five. The Dow with its big gain today up about five and a third or so, approaching 5.5% over the last month growth. It's hard to argue about, you know, the makeup of, of all of that, especially as I said, at a time when, you know, people are hung up on the fact that yes, we do have a narrow market at the top, we get it
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Angelica Peebles
right.
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Bryn Talkington
I mean, the narrowness is not necessarily in just in performance. The narrowness is the size of the top companies just make up so much of the return because their size. But that is very different. To your point, there are other sectors that are in other securities that, that are doing well. To me, what I think today is really interesting and what I've been thinking about for some time is really when you look today at the semis being down besides in video is how the construct we're obviously big investors in the queues has just meaningfully changed over the last 12 months, really, versus the last five to 10 years. So if I were to tell you, Metta, Nvidia, Apple and Microsoft and Google are all handily positive today, but the Qs are down. They were down 1% earlier you'd say that's not possible. But because the semiconductors, the intel is like a top 15. You have micron, you have Broadcom, you have. These semiconductor companies are now such a big part of the cues. It's interesting how much is that so changing. And so I think this bifurcation is going to continue. But I do think for four key investors, it's very interesting to see those other traditional leaders are up very nicely today, but the queues are down, which is telling me just investors need to understand what the biases of the cues are right now. And it's definitely going to be in the non Nvidia semiconductors deciding if that index is going to be up or down for the day.
- [12:25]
Scott Wapner
That's it. CrowdStrike, which is lower today on, you know, the street, just taking it as lackluster guidance. But again, I told you, the stock's up a ton into the print. So is that a shock? Not much is up like 60% over the last month, heading in five target raises, the highest of which is 750 from B of A. Today it was 535. Blew past that. They knew they had to raise it, which they did. They reiterate the buy. Ives obviously bullish. 720 price target bumped there as well. You own the name, right? CrowdStrike, what was your takeaway?
- [13:02]
Malcolm Etheridge
Well, so this specifically the response doesn't actually surprise me. If you just look at the movement in the name like you've been saying this whole time, we're talking 60% year to date, but 90% since they released their earnings last March. Right, In March. So it's been a massive run up in those shares for anybody who's owned it this year. And so it makes perfect sense that anybody will be taking profits in this name right here. I can't argue with the idea. Makes a ton of sense to be ringing the register and making sure you have something to show for taking that ride. However, I just was at the Gartner CyberSecurity conference in D.C. earlier this week and one of the things that I took away from that was the fact that CISOs are just now finally getting CFOs to be willing to release the personal strings a little bit more than they have been in the past. Because Mythos is scaring the crap out of everybody. It's making it very clear that where we used to be able to identify a vulnerability and say, okay, well we've got time between the time the vulnerability happens or gets found and when it actually gets exploited by A bad actor. Those days are over. Post Mythos we're now talking about zero day attacks and that is scaring CISOs into scaring their CFOs into being willing to spend. So I think the cyber category all across the board, separate from CrowdStrike because it's been one that's been a very momentum forward name. I think there's a lot of spending that's going to happen in that category and I think it's one that you want to continue to own.
- [14:27]
Scott Wapner
Which is why Brent, as you own the bug, you know, you could make the argument and the bulls certainly do that the you know, so called death of cybersecurity as it relates to, you know, fears about anthropic and whatever other models are out there were greatly exaggerated rated. That's the case that the bulls obviously made and the market justifies that in some respects because the way the stock had moved back from whatever sell off had happened several months ago.
- [14:54]
Bryn Talkington
Yeah, I mean bull or bear, you would want to anchor yourself in facts. And I think the facts are telling us, have always told us just sentiment or hedge funds or what have you overwhelmed the market for a minute that somehow these companies are going to be, you know, usurped by companies that don't really exist today. And so I think these companies, you know, they got access to the big cybersecurity companies, got access to Mythos to, to understand it. And so I think that these are going to continue to get stronger. The total addressable market with this industry is going to continue to get larger because cyber attacks, I mean Malcolm, I think said it so well with these zero date attacks are just going to continue to get smarter as I get smarter. And so I think you're going to get ebbs and flows. But I think for investors, you know, watch the 5100 day, 200 day of these stocks and like take those opportunities to buy. I obviously want to buy Bug because I don't. I think the individual stocks, you know, ebb and flow and I just want the direction of it long term. So I'll continue to add to that, you know, over time. But I definitely think that that idea that open air I guess and anthropic are going to take over. These is. It's just not based in fact. It was based in sentiment and pure fiction.
- [16:10]
Scott Wapner
I want to note as well, let's throw up the Dow guys. Just give everybody a picture here. We're better than 900 points now. It's a near 2% gain. We do have a new high on the Dow from an intraday basis today, 51,606. We're right at what the new number for a new record high is for the Dow is. You do have that broadening. Every sector is up today except for tech. I thought it was interesting, the conversation I had yesterday with Goldman's president and chief operating officer John Waldron, asked him about his view on the markets. The narrowness that we've been seeing. Whether there's reason to worry or not. Here's what he said.
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Jim Leventhal
I think we all should worry to some extent that it's a narrow singular
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Malcolm Etheridge
bet that's being made and that's driving asset prices crisis.
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Jim Leventhal
I have a hard time disagreeing that that's something that's worthy of concern.
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Malcolm Etheridge
But I do tend to go back
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Jim Leventhal
to are the microeconomics attractive and are
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Malcolm Etheridge
we doing something that is fundamentally creating enormous value in the economy?
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Jim Leventhal
And I think that at the moment evidence points to the fact that we are.
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Scott Wapner
Okay, that's Waldron yesterday. Jimmy, you know, in other words, just don't be singularly focused on the narrow makeup of what we've witnessed. It's for a reason that has greater meaning for what's happening in this world and to society. I get the hang up about it. According to UBS, the 10 largest companies in the S and P now account for more than 40% of that index. A level of concentration not seen since the mid-1960s. You make of what Mr. Waldron had to say to me yesterday?
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Jim Leventhal
I think it's absolutely right. There is fundamental basis for what technology has done and why these companies are concentrated. I think though, that one can also draw the conclusion that there are still opportunities outside of the 40% of the S&P 500 that is technology. So I'm not saying go and sell all your technology, but if you are looking for the buy low part of the sell high, buy low equation, you can find that outside of the of technology. And you also have to be comfortable, as I said earlier in some of these parabolic moves, trimming names. I actually did that today, Scott, as you know, with, with Cisco, which has been a darling one of these parabolas. I've owned it for 11 years. I'm not sure I've ever trimmed it, frankly. I mean, you might remember Scott better than I do. So it's grown to be outsized in my portfolio. Was looking for a reason and you know, we get these bad responses. Not bad earnings response, but bad responses from the three names we've talked about. CrowdStrike, Palo Alto Network, Broadcom gives me the reason to do it. But let me be clear. I still have a massive, massive position in Cisco because I agree with Mr. Waldron that there are fundamental reasons for technology to outperform while at the same time there are things that have gotten very cheap. And I think that's why if you look at small caps today, you look at the equal weight, you look at the Dow which you mentioned Scott, they're all doing very nicely. I think that rotation can where do
- [19:07]
Scott Wapner
you put the money that you, you redeemed from part of that Cisco.
- [19:12]
Jim Leventhal
So I didn't buy anything today but I'm going to tell you what's on my mind and this look, this is classic me space classic me. That's I like that though. But no, I'm not going to do that. Health care right. I mean the demographics support health care stocks doing well but they really haven't done well for the better part of a year. Best group today and so maybe somebody, maybe somebody is from running me sectors up almost 3%.
- [19:37]
Scott Wapner
If you're looking for reasons why the Dow is doing what the Dow is doing. Health care is arguably the biggest part of that things today. And again we're, we're, we extended and we are continuing to extend the new all time intraday high for the Dow 516 to 7 is, is now watching it. I'm coming back to you in a minute. Yeah, go ahead.
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Jim Leventhal
There are many ways to, to make money in the market. All right, so somebody who is more, more momentum oriented is going to look at Broadcom and say I want in right now. I get it. That's great. That's your way of making money. I love it. I like to fundamentally look at stocks and see where there's a dollar's worth of value trading meaningfully less than a dollar in the stock market. And health care really does fit that bill.
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Scott Wapner
You know who thinks the market is attractive even at these levels? Because you know, don't forget as price action has gone straight up to the right right equity prices by and large have gone straight up into the right valuations haven't really earnings degree valuations have compressed because earnings have been so good. Which may be why according to JP Morgan share buybacks exceeded a half trillion dollars in just April and May. So corporate America thinks their stocks are cheap. Why shouldn't everybody else?
- [20:50]
Jim Leventhal
I think first off, you know I love buybacks. I love them all right. It concentrates the earnings power for those of us who continue to hold the shares that are outstanding. But I think it also Reflects Scott, not just that the stocks are cheap, but there is tremendous cash flows being generated. Now of course, we know free cash flow in the tech sector is going into data centers and the artificial intelligence build out. Got it. But generally in corporate America, there is a ton of free cash flow and it's being recycled not only into the business, but into buying back shares. I love it.
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Malcolm Etheridge
It's sucking up that free cash flow though. These companies are just now coming to grips with how expensive Anthropic is. Yes, I'm picking on Anthropic, but all of the different models that they're using, they're just now coming to grips with the fact that the token usage when you roll these things out across the board, across your entire enterprise is actually more expensive than anticipated by a factor of five or 10. So you had Microsoft, for example, say, you know what? Too expensive for us. We're walking it back. If it's too expensive for Microsoft, who can afford it. And so I think that maybe what we're going to see is a slowdown in some of that free cash flow growth that we're talking about from the companies trying to figure out the right mix between human employee and AI agent. And it's going to take a while for them to actually find that equilibrium. So that could also be some of the sentiment we're seeing Shift shifting the tech trade right now is just trying to figure out where does the spending slowdown come from.
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Scott Wapner
Let me do one more tech related item and it's a trimming of a name that you know, was up a bunch yesterday. It's been a pretty nice rebound of late matter. Yeah, they, they roll out this new agent for business yesterday. Stock gets a nice pop. It's like most of the megas are red, it's green. We have Mahaney on yesterday, Bullish on the name. Underappreciated in many respects. Why do you trim it? It looks like it's like performing.
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Bill Baruch
It has, I mean it's up 7 to 8% in the last two days. We're using that opportunity to pop to just bring it down. We're now at weight matter. We've had it overweight and if I had to have one name in our portfolio, that kind of keeps me up at night and wondering, you know, is it really going to make an impact for us? It's been meta and we were talking about where the Dow is making new highs and some of this rotation. So that's kind of where we're viewing. We've been leaning in more into more Health care names previously and other and other things as well. But, but matter the spend and the spend and where they're heading. I just, it makes me a little uncomfortable compared to say a name like Alphabet who I think is executing at a high level. And then there's a little bit of question around Meta and the stock is telling you that it's down, still down 5% year to date and there's going to be a lot of resistance technically up towards that 660 level. So I have to see it get above 660 to really get excited about it again.
- [23:32]
Scott Wapner
The last thing I want to do before we take a break. Bryn, I know you've been watching what's been happening with bitcoin. Lowest level since very early in February. It's down another two and a half percent today, down more than 20% in a month. What's happened with this, with this story?
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Bryn Talkington
So I think there's multiple, I'll break it down. Recently we saw MicroStrategy did sell some Bitcoin to go put into their US reserves. I think MicroStrategy's capital stack is very confusing, but that's, that's out there. I think that there's sentiment on every stock in every sector. The sentiment to me, the, the energy, the, the tourist capital. Scott has left the space and is in the air trade and I think gearing up for Space X next week, which There's 30% retail. I think people are down on a lot of different crypto currencies, take their losses and roll it into Space X or roll it into AI, etc. So I think that whole speculative aspect that's always been in crypto is just not there today. And so the technicals don't look great. I think, you know, bitcoin's a long term asset class, but I definitely think these more fringe tokens continue just to have a ton of pain and it's not great. I don't think that MicroStrategy sold some shares. I could be wrong on that. But it's definitely, it's definitely out there that I think has weighed on it a little bit. Last week they did.
- [25:00]
Scott Wapner
What do you think?
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Malcolm Etheridge
I think it might be more tightly correlated to the Space X IPO than Brent is saying. I think the whole slew of things could be true, but I think it's. If you just look at the announcement on Monday of the date finally for the IPO and you look at the fact that bitcoin fell, I think it was 73,000 down to now 63,000 over that same time period. I think that is the stampede of retail investors trying to raise cash to get ready for the IPO. I think it's very directly correlated that way.
- [25:30]
Scott Wapner
52 week high, Bitcoin 127,000. So we're, we've knocked that in half. All right, we're going to take a quick break. And speaking of SpaceX hitting the road today, the roadshow beginning towards that $1.8 trillion valuation of that IPO. Front and center today. Leslie Picker breaking down all the details for us. She joins us next.
- [25:56]
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- [26:21]
Scott Wapner
Learn more@chase.com Sapphire Reserve cards issued by JPMorgan Chase bank and a member FDIC subject to credit approval. This episode is brought to you by
- [26:27]
Malcolm Etheridge
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 MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts. Before we had ATT Business wireless coverage, our delivery GPS wasn't the most reliable. Once our driver had to do a 14 point turn to get back on route. A 14 point turn. An influencer even livestream the whole thing. Not good for business. Now with AT&T business Wireless, routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though.
- [27:19]
Scott Wapner
AT&T business Wireless connecting changes everything. All right, big day for the Dow new record high. Big day for Space X kicking off its IPO roadshow today, marketing that to potential investors. We're also learning more today about how some of the listings major underwriters are pitching the name to clients. Leslie Picker, following that money as always for us, joins us as you see right here at Post 9. Hi there. Tell us more.
- [27:58]
Leslie Picker
Hey Scott. Yeah, so typically you see the pitching to clients that are in institutional investors, but I'm Told this company wants 30% of the allocation to go to retail investors. That's about $23 billion worth, nearly the size of Alibaba's entire IPO. Now historically retail has comprised a smaller proportion, especially on buzzier deals like this one, because it's easier to have a conversation with a few large, long only investors to make sure that if you are giving them shares that they'll hold on to them. But retail is a course a channel that's been supportive of Musk for a while and I'm told that this is important to him. So at least two of the underwriters, JP Morgan and Bank of America, are hosting events with their respective executives, including JP Morgan CEO Jamie Dimon and B of A President Jim Demir alongside Space X's president Gwen Shotwell and CFO Bret Johnson. And they're livestreaming to an invite only audience of thousands of their high net worth clients. Clients across the country. Many of the underwriters are also going all out. Here are some new images from Morgan Stanley, which owns E Trade and is expected to be one of the key platforms for retail distribution. The firm is also managing the Directed Share program which is reserving 5% of the offering for certain employees and people based on the discretion of their executive officers.
- [29:15]
Scott Wapner
Scott, the hardest thing I hear people talk about is how really to value this company. Right. Analysts today are talking about that. I'm wondering how you think that plays out as you get closer to next Friday. You know, they have a moat. They got Musk. He's the X factor in the valuation question because you're not exactly sure how to measure his metric.
- [29:42]
Leslie Picker
Right. What he means.
- [29:43]
Scott Wapner
Right. What's the premium they're getting into the index immediately is another factor. How do you think investors should be thinking about that, especially those here in my committee and those who are watching thinking about buying it?
- [29:57]
Leslie Picker
Yeah, I would say that this is not the typical discounted cash flow model that you can use to assess what this valuation is because of all of the different structural forces that you mentioned. Scott, you have the Musk premium. What kind of valuation do you ascribe to that? That you have fast tracking index inclusion as soon as about two weeks after this IPO with expanded waiting, you know, as that float gets bigger through earlier lockup releases. How do you measure that? And then you have the FTSE reporting that Goldman is expecting the revenue to grow 100 times for its AI segment by 2030. How do you measure something like that? So I think that is what a lot of investors are really grappling with right now. And then, by the way, this isn't something where they came out with a price range and you said, oh, I feel comfortable with this valuation at this part of the range. They came out and said that the price is the price.
- [30:50]
Scott Wapner
This is what it is.
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Leslie Picker
Kind of take it or leave it. Now the price is fungible. They can raise it, they can technically lower it. I don't know if they will choose to do those things, but it's not that same kind of gamesmanship on valuation that you might typically see.
- [31:05]
Scott Wapner
Well, the ultimate judge is going to be the market.
- [31:06]
Leslie Picker
Yep.
- [31:07]
Scott Wapner
So. And that'll be the most interesting thing to see is, you know, people like you, Malcolm joked earlier. I said, well, what are you going to do with the profits from Cisco? Malcolm goes, SpaceX. You're like, no, no, no, no, no.
- [31:18]
Jim Leventhal
I mean, I can't. I can't. Right?
- [31:20]
Scott Wapner
95, you can do whatever you want.
- [31:22]
Jim Leventhal
Okay. Do it based on who I am, who you know me to be. Scott, you'd be disappointed if I bought that. You would be. I'm serious. I'm not kidding around. You'd be disappointed if I just threw my stripes to the wind and said, yeah, I'm going to become a momentum investor.
- [31:34]
Scott Wapner
Done in the past. Don't act like you haven't taken the Mr. Value man suit off.
- [31:39]
Jim Leventhal
Okay, you know what? This is actually a very good point because there are people who are absolutely dogmatic with what they do. There are times. I think you're referring to Roku.
- [31:47]
Scott Wapner
I don't know what I'm referring to,
- [31:48]
Jim Leventhal
but I know you've done it just so darn fun, you know, and it was just so obvious right there in front of you. Economy. It's not that with Space X. Okay? With Space X, you're talking about the Elon Musk premium. I think that's exactly why he wants 30% to go to retail. Because who believes in that Elon Musk premium the most? It's retail. I'm sorry, A fundamental analyst like me thinks that Space X is just a fabulous company. Fabulous. What they do. Best engineers in the world. And the best engineers in the world want to go work there. But at 95 times sales, negative, negative earnings, there's just no way somebody like me can do it. So retail. He needs retail. That's why 30% is going there. They believe in him.
- [32:25]
Scott Wapner
I want to hear. I want to hear from Brian on this because she, she owns Tesla and I know she's a big believer in Musk. However, just sit tight for a second. Let me go to D.C. and Emily Wilkins, who has some news. Let's get that and then I'll come back to you here. Hi.
- [32:37]
Angelica Peebles
Hey, Scott. Well, we have just seen a bipartisan group of House members release a major air regulatory tory bill. The framework, it's 269 pages, so very thorough. Basically, what they're aiming to do here is create a single national standard that would override a number of state laws. This is something, of course, the industry has been asking for. But it would also put some stronger guardrails on the industry than we've seen from recent things, say, like the executive order from the White House that among requirements would be audits. It would require these large frontier developers, think things like OpenAI, Google, Metta, to actually put out reports saying, look, if there is an issue, this is how we plan to handle it. Follow plans for managing risks, reporting serious safety violations and would penalize those companies if they do not report serious, serious violations and make those public while investing in AI education and workforce development. Obviously a pretty big bill. Still a lot to go through. The lawmakers who put it out say that they are hoping to continue discussing this. But at this point, this is the most serious effort that we have seen seen from Congress when it comes to regulating a I, it speaks to, I think, the momentum in wanting to do something, of course, a bit of a ways for this bill to go, but certainly a huge marker that they have released this today. Scott?
- [33:55]
Scott Wapner
Yeah, I was going to say the key word in all that is draft to whether, you know, something like this, even if it passes, would be DOA on the president's desk. You know, there are a lot of voices within the administration and the peripheral periphery that are probably making the argument less rather than more regulation for a variety of reasons. Right.
- [34:16]
Angelica Peebles
I mean, Scott, that's what we've really heard from the administration as well as from a lot of top Republicans. But I think it is notable that this is something that Republican leadership has been looped in on. They have been working with other lawmakers on pieces of this bill. This was something that, you know, Mike Johnson said was going to be released today, was sort of talking, talked highly about in terms of a next step type thing. And I think it does show that even if there might be some pushback from the Trump administration when it comes to doing things on AI, there is still a solid bipartisan contingent of lawmakers who say, look, there are some very serious risks here that this technology can pose and we need to make sure that we are trying to get ahead of those risks and hold these companies accountable.
- [34:59]
Scott Wapner
Okay, Emily, thank you for the update. Emily Wilkins from Washington. Let's button up the conversation that we were having about Space X. And Bryn, I want you to do that for me in the context of this. So you've owned Tesla for a long time. I want to know if you're going to buy Space X and if not, why? Because it's not like this is so far different from that in the sense that Tesla's always traded at a much higher valuation than the fundamentals would necessarily suggest that it should. There have always been end of the rainbow projections from Musk that have not necessarily reached the pot of gold in the time frame to which he has suggested they might over periods of time. And yet investors have consistently, especially the cohort that believes in him, given him the benefit of the doubt. So why should this be any different this time for somebody like you?
- [35:52]
Bryn Talkington
Yeah, I mean it won't be. And I own Space X through a variety of funds. Right. I can't do anything about it because I'm not managing it, but through some private funds. And so I think that what's interesting is when you look actually in the VC world or with Iran Baron or in a bunch of different funds, I feel like the smartest investors in the world have been investors in Space X this whole time. And so I think it's silly to say, oh, they need to have retail to fill this. Elon's always, I mean, on the Tesla calls in the early days, he allows people from YouTube to ask questions. And I think that what they are doing with Gwynne Shotwell and the whole team is so incredible from a valuation standpoint. You cannot value this company. You can't. It's not. Doesn't make any sense. Metta will do 10 times the revenue of Space X this year and Metta has three times more net income than Space X has revenue. So it's like to Jim's point, you cannot put a valuation on it. But I think when you have this company that can catch a rocket with tweezers and then land a rocket on the ocean, while at the same time Blue Origin blew up their platform, which probably won't go back live until late 2027, the platform, this is really hard stuff that they're able to execute on and then you put Starlink on top of that, which, what is the TAM for Starlink three or four years from now. Plus now that Anthropic is buying Colossus data, I don't know the Sum of the parts plus Elon. I've always thought that Elon is the Thomas and Edison of our time. He's very, you know, peculiar, etc. But just brilliant with one shot. Well, so I think this thing will, will be strong. I bet it trades well over the 1.77 trillion once it actually, once it actually starts trading. I think that's my, I think concern is what actually happens if people put at the market, you know, orders in. But I think it's going to be a cool company. It's going to go in the nasdaq. So I'm excited about it.
- [37:57]
Bill Baruch
And we've been invested since 2021 in a private with a bunch of our clients and I'm really strongly considering more here. And a lot of what Brent said is I totally believe in and the other thing with this cursor deal that I think they will fully acquire later this year is it allows them to train their X AI models, the CLASSES model. And I think that really starts to become a massive revenue generator for them. But not only that, the deal in order for the data centers that they're using to get more Nvidia chips and they're putting those chips to work if they continue to to train their this data. And I think that's something that people are underestimating as a value point here.
- [38:31]
Malcolm Etheridge
You guys are being very generous here. We're talking about valuation. Name me one other company you'd be willing to pay 100 times sales when they lost 4 to 5 billion dollars last year.
- [38:42]
Bill Baruch
It's not what you're doing for me now.
- [38:44]
Malcolm Etheridge
I don't know what we're talking about. Catching rockets with tweezers. Right? I'm using Bryn's terminology. I know she was, she was being a little hyperbolic there, but how much of what the company does is related to that versus everything else. We're talking about leasing data centers to Anthropic now because we overbuilt and found out nobody really wanted to use Grok in comparison to the other major LLMs. We're talking about buying cybertrucks that were defective and should have been recalled with IPO money. We're talking about a lot of other things that have absolutely nothing to do with Starlink and actually sending rockets up to space and landing them successfully back here into the Earth's atmosphere. And we're being very generous with this valuation saying that anyone other than a retail investor who's buying the Elon Musk premium would be willing to value this company anywhere close.
- [39:32]
Scott Wapner
I wonder too. Leslie, some of the points have been made here as I think about, you know, questions about the valuation and who has already had access to these through the private markets, whether the very high net worth people that some of the underwriters are marketing the IPO to have already had exposure to it at much lower valuations and would be reticent to get into it even bigger at a much higher valuation. And what role that might play.
- [40:00]
Leslie Picker
I wonder that too, because when you think about it, there are a lot of people who do have exposure, whether it's through special purpose vehicles or through, you know, traditional, traditional venture vehicles. And if you have a company that's looking to be valued at $1.8 trillion and it was valued at half of that just six months ago, you have a lot of people who are going to have space X as a really big proportion of their portfolio that may not have even expected that a couple of months ago. And so what do you do if that's the case? Do you buy more shares? I don't know. Do you sell when the lockup expires, maybe just in order to have some sort of portfolio rebalancing? So I think that's something that may have gotten a little lost in the, the narrative as well is just who are going to be these marginal buyers on top of the the book build up of the 75 billion, are they
- [40:46]
Scott Wapner
doing a step down in terms of their lockup like we saw from Cerebras? Right. Because you're trying to avoid the cliff lockup expiration where you just get this supply, just a tremendous waterfall.
- [40:58]
Leslie Picker
Yes.
- [40:58]
Scott Wapner
Over the cliff.
- [40:59]
Leslie Picker
Yes. So traditionally it's 180 days what they're doing, which actually lines up kind of nicely with the index inclusion and it supports the index inclusion because of the higher the float, the greater the weighting you get in that index. So what they're doing is, you know, after, it's like two days after their first earnings report, they release some shares and then it's if they're up 30%, they release some shares. Second earnings report, they release some shares. So it does have that kind of waterfall effect.
- [41:26]
Scott Wapner
Okay.
- [41:26]
Bill Baruch
And if the S and P or the Nasdaq eventually you're going to have to have this in your portfolio. That's kind of the argument.
- [41:33]
Scott Wapner
Well, if it's in the S and P, you're going to end up owning it whether.
- [41:35]
Bill Baruch
Yeah.
- [41:35]
Scott Wapner
Whether you want to or not. Your point's well taken. All right. Less. Thanks, Mike Santoles. Next.
- [41:41]
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- [43:06]
Scott Wapner
AT&T business Wireless connecting changes everything.
- [43:31]
Angelica Peebles
We're back on Halftime Report. I'm Angelica Peebles with your CNBC news update. The Senate is voting today on an amendment pushed by Democrats to eliminate the DOJ's proposed $1.8 billion anti weaponization fund. The vote is part of multiple proposed amendments to a $70 billion bill that would fund ICE and Border Control Border Patrol for three years. Democrats need a simple majority for the motion to pass. An Ohio State university has agreed to pay $100 million in damages to 279 former students who said a campus doctor sexually assaulted them decades ago. The school has fought lawsuits brought on by former student athletes for failure to stop abuse by Dr. Richard Strauss since 2018. Strauss worked at the school from 1978 to 1998 and died in 2005. And fans headed to the World cup games will be banned from bringing reusable water bottles into stadiums. FIFA made the last minute policy reversal, saying the ban protects the health and safety of players, fans and staff. Other items like bottles, cups, jars and cans are also banned to prevent the risk of injury if thrown. Scott, back over to you.
- [44:37]
Scott Wapner
Okay? All right, Angelica, thank you very much. Angelica Peebles, Mike Santoli, their senior markets commentator and the overtime co anchor is here at post nine for his midday word. It's good to see you. Been a minute since we've had a day that looks like this. Right. With such a profound outperformance from everything other than tech.
- [44:55]
Mike Santoli
It has. And that was the big question coming in. Right. We know the setup. The setup was semis have to rest. They're super overbought. The AI hardware trade seem kind of fully exploited in the short term. Okay, we're going to back off with Broadcom. What is it going to mean? Well, everything else picked up the slack. The idea that this momentum unwinded, it's a very modest one right now is not destabilizing the whole tape, at least today. That's what bangs the vix down by a point from the high this morning. Right. Everyone was like, okay, maybe it's time to hedge. A lot of the street commentary coming in is it's time for the summertime rest for this market. Right. It hasn't really made a lot of headway, an index level in three weeks, in fact like half a percent at this point. So I say, you know, you've passed the test today. You have to see if it, if it continues or if it's more just, you know, basic repositioning. Hedgers have been gotten, you know, essentially shamed by all this activity because the rotational energy remains in gear. I always think of the playground game two for flinching. You know, if you flinch, when someone goes to fake punch, you get two punches and that's the way it feels until the real sell off comes and then the hedgers feel smart.
- [46:02]
Scott Wapner
Yeah. All right. We'll see how the day progresses. But it's, you know, you got Some Goldman's up 5%, for example.
- [46:08]
Mike Santoli
Goldman and you and H. About half the Dow increase today.
- [46:11]
Scott Wapner
Yeah. All right, I'll see you in a little bit. That's Mike Santoli. Committee moves are next. Bill's adding to a stock. It's down nearly 5% this year. We'll tell you what it is next.
- [46:29]
Leslie Picker
Foreign.
- [46:35]
Scott Wapner
Welcome back. Another move to tell you about. Bill Baruch buys more Berkshire Hathaway.
- [46:39]
Bill Baruch
Yeah.
- [46:40]
Scott Wapner
Tell me why.
- [46:40]
Bill Baruch
Well, we're starting to see that rotation we've been talking about most of the show and I'm leaning into the rotation. The fact the financials are at the lowest level relative to the S and P in history. Now, I think there's really a stock picking way to go about this because there might be some interest industries within financials you want to ignore. I think Berkshire is one that can really start to benefit. I like the investment they made this week. Taylor Morrison or the Alphabet and Alphabet, the 10 billion. Greg Abel, he was the CEO of Mid American and then became the CEO of Berkshire Energy. And I think this is a start of his legacy to make an acquisition or investment here and you're going to start to see some of the things that he likes to do and I think that's going to help the, the stock wake up from the slumber that it's been just been trading sideways and below the 200 day moving average. So I think buy it. While it's not really loved much right now.
- [47:29]
Scott Wapner
What do you think of the Taylor Morrison thing?
- [47:31]
Bill Baruch
I like the acquisition there. They're starting to put money to work and move around. I think that's also just very important because over the last couple of years they haven't done a lot and as they were waiting for the sit on
- [47:41]
Scott Wapner
this mountain of cash.
- [47:42]
Bill Baruch
Yeah. So I think the activity is going to get people excited about the name. I think that for us too we've been leaning in health care, leaning into financials and we're trying to rotate some of that profitable profits we have in tech into these sectors. I think you see health care and financials really take a move here in the next couple of months.
- [48:00]
Scott Wapner
You think, Farmer Jim, that this stock is primed for something. Would you make of, you know, this is Abel putting his, putting a stamp on, on his future here, what it's going to look like.
- [48:11]
Jim Leventhal
I think he's coming out of the gate strong with both deals, the housing deal and the Alphabet deal. I agree with the purchase but I'm speaking from a fundamental point of view, Bill. What I know of you, this is a little bit against the grain and I like it. Right. Because the, the chart doesn't look good. But, but the chart has been saying for a year that it's taking the Buffett premium out. And I think at this point the Buffett premium is out. You labeled it as a financial. That is what it's classified. But if you really look at it, there's a lot of this kind of company that's not so much financial but it's railroads, it's you know, aerospace, it's energy. This is a microcosm of the US economy and I think it's cheap at about a low teens multiple. When you look at those operating businesses from a fundamental basis. I totally agree.
- [48:52]
Scott Wapner
When was the last time you added to it?
- [48:54]
Jim Leventhal
It's been a little while. But maybe he's triggering me here. Maybe he's making me think that's all it takes.
- [48:59]
Bill Baruch
Not part of the Dow. But, But I, He's. He's. I look at.
- [49:02]
Scott Wapner
He's. He's highly impressionable is what we're taking away from this.
- [49:05]
Jim Leventhal
Oh, yeah, I'm highly impressionable. I'm an old man, Scott. But look, waiting.
- [49:10]
Scott Wapner
Has age have anything to do with that?
- [49:12]
Jim Leventhal
A guy gets stubborn. You know, actually, this is true. You know, I'm very patient, but sometimes I do think I'm stubborn. And as I look at this chart over the last year, there's been plenty of times that maybe I should have bought it. But this is a case where patience has paid off. I think you'll be. I think you'll be vindicated. I do have to point out, though, to answer the question, yes, please, there's no casualties catalyst here. I mean, it's really. I mean, maybe he makes some big splashy deal, but if he made a big splashy deal, bigger than the Taylor deal, I think at these prices that we're seeing in the market, that might actually be looked at.
- [49:42]
Scott Wapner
Introspection is good, no matter how seasoned one might be. All right, just remember, I do, I
- [49:47]
Jim Leventhal
honestly do think about. Patience is a virtue in investing. I strongly believe that. But taken too far, it can be stubbornness.
- [49:53]
Scott Wapner
Okay, final trades are coming out. Why is that funny? Brin, final trade, please.
- [50:02]
Bryn Talkington
ABB going to 232 Integris.
- [50:06]
Bill Baruch
Advanced manufacturing for chips.
- [50:08]
Jim Leventhal
Oracle. The bottom is in Apple.
- [50:11]
Malcolm Etheridge
Lots of excitement heading into WWDC next week.
- [50:14]
Scott Wapner
All right, and we will be there. As a reminder, live halftime and closing bell. I'll see you on closing bell, 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.
- [50:31]
Angelica Peebles
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 half time 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.
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