Mega Cap Moment of Truth 1/30/25

Summary

Podcast Summary: Halftime Report – "Mega Cap Moment of Truth" (January 30, 2025)

Host: Scott Wapner
Guests: Josh Brown, Liz Young Thomas, Kevin Simpson, Jim Lebenthal, Dom Chu, Steve Kovac, and additional contributors
Release Date: January 30, 2025

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Introduction

In the January 30, 2025 episode of CNBC’s Halftime Report, host Scott Wapner delves into the latest developments affecting mega cap stocks, providing listeners with in-depth analysis and expert insights. The discussion centers around recent earnings reports from leading technology giants, market reactions, and strategic investment decisions amidst evolving economic and regulatory landscapes.

Market Overview and Mega Cap Earnings

Scott Wapner opens the discussion by highlighting the mixed performances of mega cap companies following their latest earnings reports. Notably, while Meta (formerly Facebook) and Microsoft presented contrasting outcomes, Apple is poised to release its earnings later in the day, heightening anticipation in the market.

"We are green across the board," Scott Wapner states at [00:46], emphasizing a generally positive market sentiment despite the nuanced performances of individual stocks.

Microsoft’s Mixed Performance and Cloud Guidance

The episode examines Microsoft's recent earnings, where the company experienced a decline due to lower-than-expected cloud revenue growth. Jim Lebenthal offers a nuanced perspective:

"This does not mean that there's something fatally wrong with Microsoft. Far from it," Jim Lebenthal remarks at [02:03], reassuring listeners of Microsoft's enduring strength in software and cloud services despite the current setback.

Kevin Simpson concurs, noting the potential for Microsoft to be a buying opportunity once the stock stabilizes:

"I think there is tremendous opportunity still with Azure," he comments at [05:34], suggesting confidence in Microsoft's long-term prospects despite short-term challenges.

DOJ Lawsuit Against Hewlett Packard Enterprise’s Juniper Networks Acquisition

A significant segment of the discussion revolves around the Department of Justice’s (DOJ) lawsuit to block Hewlett Packard Enterprise’s (HPE) $14 billion acquisition of Juniper Networks. Dom Chu provides detailed analysis:

"The DOJ stated that this consolidation would reduce three major players down to just two, creating an effective duopoly," Dom Chu explains at [03:28].

Scott Wapner highlights the broader implications:

"An administration that was deemed to be more business and merger-friendly is now taking action to block this deal," he notes at [05:02], signaling potential shifts in regulatory stances.

Investment Committee Insights and Stock Reactions

The panel discusses the immediate market reactions to these earnings and regulatory news. Jim Lebenthal and Kevin Simpson share their strategies regarding holdings in Microsoft and Nvidia:

Jim Lebenthal at [22:50]: "I'm amused by the pushback on Nvidia. I still own it, but I think CapEx disappointments may be near," reflecting cautious optimism.

Kevin Simpson at [30:59]: "Reinitiating our position in Agnico Eagle Mines as it hits a 52-week high," illustrates proactive portfolio adjustments.

Meta’s Performance and Strategic Positioning

Contrasting Microsoft’s decline, Meta showcases resilience with a modest uptick despite heavy competition in the AI landscape. Kevin Simpson praises Meta’s diversified strategy:

"If this AI play becomes a monetization story for real, this stock will continue to move higher," he asserts at [15:12].

Apple’s Earnings Anticipation and Market Sentiment

Apple stands as a focal point for upcoming earnings, laden with both optimism and skepticism. Steve Kovac from Cupertino expresses mixed feelings:

"I'm not excited about Apple's prospects in Q1," he states at [18:12], citing concerns over AI integration, China market challenges, and stagnant iPhone refresh cycles.

Dom Chu reinforces these concerns, pointing to insufficient evidence that Apple Intelligence is driving significant sales growth:

"We have not seen evidence that Apple Intelligence is launching new devices effectively," he remarks at [20:05].

Nvidia’s Volatility and Strategic Reevaluation

Nvidia, having been a stellar performer, faces a downturn, prompting Jim Lebenthal to reassess his position:

"I think the probability that earnings disappoint has been brought forward," he explains at [23:32], emphasizing the need for risk management despite holding a positive outlook on the company’s fundamentals.

Emerging Insights and Future Outlook

Liz Young Thomas adds context to the AI-driven competitive landscape, emphasizing the necessity for diversification and fundamental strength in investment strategies:

"CapEx dollars will flow into beneficiaries of the AI theme," she notes at [25:14], underscoring the dynamic nature of technology investments.

Final Market Moves and Strategic Recommendations

As the episode nears its conclusion, guests share final investment moves:

• Kevin Simpson discusses repositioning in Agnico Eagle Mines and potential rotations back into favored stocks.
• Jim Lebenthal remains optimistic about Las Vegas Sands, anticipating growth opportunities in Macau and Dubai despite flat stock performance over the past year.
• Steve Kovac highlights IBM as a top performer, lauding its transformation and positioning within the AI sector.

Concluding Insights

The Halftime Report episode effectively encapsulates the volatility and strategic decision-making inherent in the current mega cap landscape. With regulatory challenges, shifting AI dynamics, and diverse earnings performances, investors are advised to remain vigilant, prioritize risk management, and seek opportunities in fundamentally strong yet undervalued stocks.

Notable Quotes

• [02:03] Jim Lebenthal: "This is still the juggernaut in software and cloud services that it's always been."
• [03:28] Dom Chu: "The DOJ stated that this consolidation would reduce three major players down to just two, creating an effective duopoly."
• [05:34] Kevin Simpson: "I think there is tremendous opportunity still with Azure."
• [15:12] Kevin Simpson: "If this AI play becomes a monetization story for real, this stock will continue to move higher."
• [18:12] Steve Kovac: "I'm not excited about Apple's prospects in Q1."
• [23:32] Jim Lebenthal: "I think the probability that earnings disappoint has been brought forward."
• [25:14] Liz Young Thomas: "CapEx dollars will flow into beneficiaries of the AI theme."

Conclusion

The Halftime Report provided a comprehensive analysis of the current state of mega cap stocks, highlighting both opportunities and challenges within the technology sector. Listeners were offered valuable insights into strategic investment decisions, informed by expert opinions and real-time market reactions. As the episode concluded, the emphasis remained on the importance of diversification, fundamental analysis, and adaptability in navigating the ever-evolving market landscape.

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Transcript

[MultiCare Representative]

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[AT&T Business Representative]

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[Scott Wapner]

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. All right, Carl, thanks so much. We'll follow that breaking news. Obviously make the transition to covering the markets for you this hour. Stocks, they are higher today. Welcome to THE Halftime report. I'm Scott Wapner, front and center for us this hour, the aftermath and the look ahead. We're talking mega cap earnings. Metta and Microsoft are in the books, moving in opposite directions. And now Apple is on deck. We'll trade all of it with the investment committee. Joining me for the hour today, Josh Brown, Liz Young Thomas, Kevin Simpson and Jim Laban. I just told you, we are green across the board. In fact, we are. But we are also reacting to those mega cap earnings last night, looking ahead to the one that looms large this evening. We will begin with Microsoft, which is the big loser at this moment because it's falling on its cloud guidance. By now you know the story. You've seen the stock move. What you haven't heard from is Jim Lebenthal, who owns that stock and who, like all of you, is thinking about what this now means for the trajectory of those shares. So I'll toss it to you first.

[MultiCare Representative]

Sure.

[Jim Lebenthal]

I mean, let's just come out and say the obvious. This is still Microsoft. This is still the juggernaut in software and cloud services that it's always been. To the extent that there was a disappointment last night for somebody like myself who's been underweight to stock at less than half of what The S&P 500 weighting is, it now becomes quite tempting. We know we've talked for quite some time, Scott, on the program about how Microsoft has underperformed for quite some time. We also talk quite often on this show that valuation is not a catalyst. But in the end, valuation does matter. It's just a question of when. It was simply too expensive in the mid-30s. Now we're looking at a forward multiple that's in the high 20s. And I will wait for this stock to stop going down, but then I will add to it, this is still Microsoft. It's going to be a huge part of any passive ETF flows and that's it. So one quarter disappointed. This does not mean that there's something fatally wrong with Microsoft. Far from it.

[Scott Wapner]

You know guys, I'm going to make a turn for just a moment because I like to keep you up to date on things that are moving right now. And we're going to have more reporting on this. But let's show shares of Juniper Networks if we could at this very moment because the Department of Justice has sued to stop HP billion dollar deal to buy Juniper. And you can see the instant reaction here as we see shares sell off. We do have Dom Chu who's up for us on this news. What are we learning here, Dom, as we see the obvious reaction in the stock. Sure.

[Dom Chu]

I mean forget billion multibillion, it's a $14 billion deal, Scott, $40 per share in cash. It was almost a year ago, a little over a year ago that Hewlett Packard Enterprise announced that they were going to buy Juniper Networks. What this would do is create a computer networking behemoth, if you will. Some of the commentary coming out of the now Trump Department of Justice with regard to this particular suit to block this deal, this idea that there would be a consolidation of what is currently now three major players. So says the statement from the DOJ that it would consolidate from that three, those three players, hp, Juniper Networks and Cisco Systems, down to just two, creating an effective duopoly. So aside from that, what we do have now is the shares of Juniper now at $34.20, so below that $40 per share cash offer for the company. Hewlett Packard Enterprise as well is reacting to the downside to the tune of about 2%. So we will dig into the overall filing but the headline is this is an interesting move from a DOJ perspective because a lot of pundits out there over the course of the last several months have identified a more merger friendly possible Trump administration with regard to how it would treat some of these types of deals. This one here apparently did not sit well with the doj. We'll bring you more, as we know more. But again, $14 billion deal, $40 per share in cash from HP to buy Juniper now seemingly on the rocks. Scott, I'll send things back over to you guys.

[Scott Wapner]

I think your last point there, Dom, was perhaps the most salient one. An administration that was deemed to be more business and merger friendly, at least so far. There's the decision that we see suing to stop this deal. So we'll follow that story for the rest of the day, obviously and beyond. Back to the con about Microsoft. Kevin Simpson, I toss it to you. So stocks down, Azure revenue, the growth is down. That's what one of the problems is. You sold a covered call in Microsoft ahead of the number.

[Kevin Simpson]

Yeah, we didn't think the number was going to be great, but we didn't think it was going to be this bad, Scott. So I think I agree with Jim. If anything, it's a stock that we'd be looking to add to at this point. We wrote a call going into it. Obviously we're going to collect that premium. I think that there is tremendous opportunity still with Azure. It's slowing down. That's problematic. But I think it's because they can't keep up with the demand. And you've been raising the red flag on this stock for a while and I think at this point you were right. And I think we're looking probably to get back into the names.

[Scott Wapner]

Okay, so we'll watch it, obviously. What are you thinking about, Josh, as you see a stock down near 6%? I mean, if there was a question about, look, there's a lot of questions about Apple, we'll get to that. But if there's a question about one of the hyperscalers directly in the AI game, maybe this was the one that had the most to live up to, given Deep Seek and the questions about Microsoft's already, you know, sort of changing relationship as it relates to OpenAI.

[AT&T Business Representative]

Yeah, look, I think that there was a moment where we all collectively kind of agreed, oh wow, Microsoft made this early equity investment in OpenAI. They kind of wrapped up Sam Altman and they are in the driver's seat seat for this technological revolution. And as a result, the stock galloped ahead, got a big valuation and then all the plans to spend and spend and spend like there's no tomorrow started to ultimately weigh on this company. And I've pointed this out before, if we're worried about the AI driven market advance, then this would be ground zero. When does Microsoft decide it's time to spend a Little bit less. We didn't get that this time. But what we did get was slightly less good guidance going forward on, on the Azure business. And as a result we have the worst individual trading day for Microsoft since 2022. I think it's notable, I think the company's okay, stock price might not be okay. It's been consolidating since April of last year. Now it's at the lower end of that consolidation range and you really don't want to see it break below meaningfully because what that would imply is not that there's some fundamental issue with the company, but it would imply a downward rerating. And we're no longer excited about the prospects here as a shareholder base. Now we're more concerned that what the cost is going to be and where is the ROI as a result. So forward revenue outlook guidance cuts are almost always negative in the short term. I don't think that I would be playing the stock for a quick bounce, but I think longer term it'll be okay. So if you're like a trader, I think it's off your list right now. If you're a long term investor and you don't own it, it should be on your list. And that's the different perspectives that I think are worth having after what we've just heard.

[Scott Wapner]

You know, we wondered what the Capex fallout might be, Liz, as it relates to Deepseek, the CFO of Microsoft said CapEx would be similar for the next two quarters. It's probably too soon for them to kind of reassess how much the goalposts might have moved, how much the game may have changed, but at least it's not changing in terms of the spend right now.

[MultiCare Representative]

Yeah, well, CapEx is going to come under scrutiny I think for the entirety of the year and it has been since the middle of last year for all of these names. And, and Microsoft is obviously not immune to that. To Jim's point earlier, the flows into passive ETFs and I want to be clear, software was one of my calls and still is one of my calls for 2025. So if you look at a software ETF ticker IGV, Microsoft is a top holding in that ETF, so it's pulled down today. I still believe software will be a beneficiary of this, but there's obviously going to be some bumps in the road and sort of this handoff between software companies that could be the next phase beneficiary and the ones that are benefiting perhaps today semiconductors and that theme. So this capex question continues to be the thing that investors will queue on. And the other piece that I want to mention about this particular earnings season, companies are getting punished a lot more than usual for missing even on some of those, just little line item details. And I think that will continue as well. So these expectations are high.

[Scott Wapner]

I'm glad you brought up the IGV. And we could show ServiceNow, we can show Snowflake, we can show Salesforce today. Because if you want to see where some of the more significant losses are, it is related to software. Cloud ServiceNow down almost 12%. Snowflake's down almost 3. You see Salesforce as well. It takes me to Oracle bu. Because you're trimming some, as you suggest, there are now perceivable threats. That's interesting because Larry Ellison was recently in the Oval with the President or wherever that news event was at the White House and Oracle shares were up a ton.

[Kevin Simpson]

Right.

[Scott Wapner]

But where's the perceived threat?

[Jim Lebenthal]

Well, the perceived threat is deep seek. I mean, I think that's obvious. I mean, let's just go back a week ago, right? Nobody saw any threats, including me. Right. We riding Oracle up last week was amazing with Project Stargate and Nvidia for that matter. And then all of a sudden over the weekend the threat landscape changed. Now the weird thing about trimming and I'm looking at the camera but I'm kind of talking to you at the same time. Scott, the weird thing about trimming is the day after you trim, you're really not sure what you're hoping for. You still have a position in both Oracle and Nvidia, which I trimmed as well. So it's not like you're hoping for them to go down, but you took money out. So you are to a certain degree voting with your feet. At the end of the day, I have to characterize this as simple risk management. That's all it is. The threat landscape is different now than it was a week ago. It's higher. I'm still in both positions, but I have to respect the fact that it's not as free and easy as it was a week ago. And also tying into this, and this is what I think what you were talking about, at least as I perceived it with the software trade, is there does seem to be a leadership change in the market for the last several weeks, maybe even the last couple of months. We know the equal weight is outperforming. This doesn't mean that tech is now going to be consigned to the dustbin of history. Far from it. Tech should do just fine. But it is a time that somebody like me who has believed in the broadening for quite some time is willing to not only reduce risk, but take it from those areas where he thinks the puck has been great to where it's going to be going, which is the rest of the market.

[AT&T Business Representative]

He's talking in the third person again, Judge.

[Scott Wapner]

He does, yeah.

[AT&T Business Representative]

Referring to yourself as he. What's going on here?

[Jim Lebenthal]

I'm actually proud of myself.

[AT&T Business Representative]

All he asked you was why did you sell Oracle and you went biblical on us. I don't know. It's a lot.

[Jim Lebenthal]

Did I, did I smite?

[Scott Wapner]

If I find.

[AT&T Business Representative]

Look, smote.

[Scott Wapner]

I'm thinking back to a tariff threat cell gm.

[Jim Lebenthal]

Yeah.

[Scott Wapner]

Don't wait for the details. Yeah, a deep seek threat trim Oracle. Don't wait for more details. How do you know that it is in fact the threat that you claim it is and how the game has changed like you suggest it has.

[Jim Lebenthal]

Okay, I love your question. Let me be really clear.

[Scott Wapner]

I wish you didn't. I like it better when you don't. But it's okay.

[Jim Lebenthal]

That's okay. I'll give you something to fight with.

[AT&T Business Representative]

Jim doesn't know.

[Jim Lebenthal]

I don't know anything with certainty about the future. Neither does anyone else. Again, risk management with gm, I had a little bit of insight, to be honest. I mean, Trump the first administration was just awful. The trade wars were terrible for gm. I'd love to get back into gm. I mean, honestly, if the tariffs don't come through, that stock's what, 20% lower than it was before that news came out and they're going to make what, $11 a share? I know we're not talking about GM. Here's the point. You don't know with certainty, so you have to evaluate and always balance risk versus reward. With gm. I sold the whole position with Oracle and in video, I still retain between the two of them, 7 percentage points of my portfolio. So I'm really exposed. I'm in that no man's land vis a vis Scott, who, if it goes down, will say you own it. And if it goes up, you say, well, you trimmed it.

[Scott Wapner]

I know. It's not a matter of that. It's a matter of, I'm thinking to what Tom Lee told me the other day on closing bell about how the market reacted to the deep sea news. It was like, ready, shoot, aim. So it was like you, you know, there was a, there was a panic in the market where all of these stocks got hammered on a headline or the conversation about Deep SEQ when we really don't know other than the fact that their model is being praised. Anything else about the story?

[Jim Lebenthal]

I am not an IT expert reading all the IT experts. This idea of distillation where somebody like Deep SEQ can Basically glom onto OpenAI use Open AI to create its own model. That seems to me to be a risk. I mean, I'm sorry, I don't mean to chuckle about that. Seems to be a risk that needs to be dealt with and until it is, and I'm not sure that it will be. As I said, I think the threat landscape has changed still in the names but I'm really quite comfortable taking some money out on the perception that notwithstanding what matter Microsoft every everybody said about capex that could change the threat landscape is different.

[Scott Wapner]

Now you want to talk about Metta which is going the opposite direction which seemed to, I don't know its positioning going into this number because of open source. The reason why Deepseek sort of generated the conversation that it did. Well, there's Metta up 2%. That's not a huge move obviously, but nonetheless. Kev, you got the stock. It's your number one Mag7 pick. Is it still after this report and what this company had to say as it hits a new record high today.

[Kevin Simpson]

Yeah, this continues to be our number one Mag7 play for 2025. Even in light of what happened with the Chinese AI companies earlier in the week. We think that the 60 to 65 billion dollars spend is a lot, but when you listen to the conference call, you feel like they have it under control in terms of their massive game plan. And it's not just a one trick pony anymore. I talk a lot about the hardware that this company has competitive with Apple to the degree in which it works and operates. And the advertising is something that I feel like no one will ever get better. So if this AI play becomes a monetization story for real, this stock will continue to move higher 50% earnings growth. It's unbelievable.

[Scott Wapner]

You want to give the download from your perspective on better.

[AT&T Business Representative]

I just loved Zuck cold open on the call last night, like I just thought that was so hot. He's like, he's like the opposite. You got. First of all, you get the opposite reaction that you got in Microsoft. Zuck gave you the same reaction that Tesla shareholders got when they listened to Musk do the same thing. This is what it takes now. You want to run one of these, one of these Mag 7 names. You want to be the CEO, you have to be part of the entertainment too. You have to come out early on the call and say things about ten xing and hundred xing and what Zuck said about agents. And this being the year, not two years, five years, this is the year that a billion people utilizing one of the Meta platforms will have their own personal assistant. I don't know if he could deliver that. The stock price certainly thinks he can. And I feel like that's a really big ingredient here that was missing from Satya Adela. Zuck does not feel like he's playing defense. In fact, it feels like open sourcing Llama early on was the right move. And so I think that that's why you got a way better reaction here. Obviously, in addition to the fact that they're finding tons of growth in reels and videos and etc. Etc.

[Scott Wapner]

He knows what audience he's playing to as well in terms of the commentary that he had regarding the new administration and how, you know, Meadows role and his own perspective has sort of dramatically morphed into something that wasn't there.

[AT&T Business Representative]

They all, they all bent the knee, but he put on the red hat and shareholders were interpreting that as good. That's what we need you to do right now.

[Scott Wapner]

So I mentioned, you know, Apple has a lot to prove tonight. There's no question about that. Just given what the stock has done and the way that Wall street has really turned negative on it over the last couple of weeks, you've had a number of downgrades the likes of which you really haven't seen before going into a print. I can't remember when the street has been this negative going into the print by this many different analysts, all because they're uncertain about AI and what it's going to mean for the upgrade cycle. You own the stock too. So this is the one of the three that we just talked about that you do own. How do you view this going in as you get another downgrade yesterday from OPPY to perform from outperform.

[AT&T Business Representative]

So I candidly, I think, I think I sort of disagree with. It's all because of AI. I think there was a narrative shift in the wake of the deep seat stuff where people thought Apple is screwed. They're building on OpenAI's platform. They don't have their own AI, the phones aren't selling, they can't sell AI in China, blah, blah, blah. Then when that news came out and they whacked all the AI stocks, Kevin's nodding. Apple caught the biggest bid we've seen all year. Because I think the narrative now shifts to oh wait a minute, maybe Tim Cook played it right all along, did not commit to spending $50 billion to build out a large language model knowing that those LLMs were susceptible to becoming commoditized. And instead Apple is now in a pole position to do something new in the aftermath, benefiting from cheaper, more efficient versions. So that's kind of like what we saw in the stock price. I don't know how long they'll hold on to that aura that they obtained by accident, but that's where it landed. I think the bigger issue for Apple is number one, China. Number two, the refresh cycle is nothing special. Number three, it's unclear what the monetization is going to be from smarter Siri, by the way, Siri still stupid. And Apple Intelligence, which clear clearly is not getting people off their couches to upgrade their phones at a faster rate than in previous model refresh cycles. And that's a bigger issue for the stock. It looks once again like it's 2023, 2024, slow to no growth and that's going to weigh on this name at a 30something times multiple. I don't think there's anything we could do about it as long term shareholders, quite frankly, and I said this at the beginning of the year, I'm not excited about Apple's Prospect expects in Q1.

[Scott Wapner]

Here you go. Steve Kovac, you've had a longtime shareholder who says I'm not excited. Gives you all the reasons why tonight in very many ways is its moment of truth.

[Dom Chu]

That's exactly right. So we're going to get finally some answers to the questions we've been asking since Apple Intelligence first debuted right behind me back at WWDC in June of last year where they, and basically to Josh's point here, how much they're spending on artificial intelligence capital expenditures to train their models. That almost doesn't matter as much if it doesn't result in growth in iPhone sales. And so far the third party data we've been getting hasn't been that great and hasn't really played out this narrative that people have been hoping that Apple Intelligence will launch of these new devices. If you want to experience Apple Intelligence, you need to run out there and buy an iPhone 16 or one of these newer devices. We have not seen evidence of that. And that is why we've seen four downgrades so far just to kick off this year playing up all of these concerns around Apple Intelligence. Launch the middling reviews around Apple Intelligence. These concerns of you know, there's notifications that we've seen. They've had to make changes to how it displays news because it's been putting out false information, things like that. That has been a real headwind for them. Also just these concerns about weakening demand in the current quarter that we're in right now ahead of the iPhone 17 launch in the fall. I will say though, services has been kind of picking up the slack here that is expected to grow double digit percentage points. But still the iPhone is the big question and everyone's going to be wondering from Tim Cook on the call today is whether or not Heath is seeing this evidence of Apple intelligence driving sales or not. I'll also mention the China angle here too. There is a deep seat factor here as well. Apple intelligence is still not in China. We don't know when it's going to launch. Last we've heard from Apple is there are discussions to get it out there, but they need the government's approval not only to bless and approve Apple intelligence, they have to find a Chinese partner in AI in order to put that into their Siri chat bot like they have done with ChatGPT here in the United States. So these are all challenges and headwinds they're going to have to talk through.

[Scott Wapner]

Today, Scott, and we'll, we'll see what happens and we'll, I will obviously hear from you later as well, Steve. Thank you. Steve Kovac, Cupertino right outside in Apple Park. As you see, the other stock that we need to address here is Nvidia because it's the worst week since November of 2018. It's been a no good, very bad week, as you know, down 17%. Leads me back to Jimmy Jitters. You trimmed Nvidia. You trimmed Nvidia now too.

[Jim Lebenthal]

I'm sorry. That was pretty good, dude. Yeah, I did. Look, the stock's been a home run. I mean, what has it done? Triple for me in about 15 months.

[Scott Wapner]

And maybe trim it at somewhere around here, here. Not like after it falls off the ski slope and gets hit with the avalanche.

[Jim Lebenthal]

I'm going to say this again, it's up like three times in 15 months. And I'm going to give full credit to Josh who's been in it forever and is up like a thousand times in it. But I have absolutely no hesitation on this. I'm amused and you know, I'm amused by the pushback on it. Still own it. But I think we have to take seriously the possibility, not the certainty, the possibility that CapEx maybe not 2025. But 2026 starts to disappoint. I'm not saying that's definitely the case. If I thought that were definitely the case, I wouldn't have a position in it at all. But I think the problem, excuse me, the possibility has increased over the last week that capex, particularly in 2026 will be lower than expected.

[AT&T Business Representative]

7 times earnings though. This is the cheapest you've been able to buy forward earnings. This is the cheapest you've been able to buy in video probably. Since I've been aware of the stock. It's not hating on it, not quite Harrington territory, but it's in Jim Labenthal territory.

[Jim Lebenthal]

Yeah, I mean the PEG ratio I think is probably less than 1.

[Scott Wapner]

Why aren't you buying more? Why is this a trim down 17% on the week and not a buy more of what still is at the forefront about where this whole movement's going?

[Jim Lebenthal]

I think everybody in the market, market, particularly in the leadership names at which the top of which is Nvidia, got a shot across the bow. I think there's a shot across the bow and when you take a shot across the bow, the next move shouldn't be to continue on so that you take a shot in the engine room and get sunk. It's a time to pull back and think about it. I'm trying to find different ways to say the same thing, which is this is just risk management. I'm not hating on the stock. I agree with the valuation comments that Josh has made. I do think though that the probability that earnings disappoint has been brought forward in time from what might have been a 2027 event. So I can't say with certainty I'm not actually hoping to be right. I still have almost a 4% position in Nvidia, so.

[Scott Wapner]

So Liz, why don't you wrap this up for us in a sense of has. Has anything that's happened this week caused you to reassess in your own mind where you know the clients that your company is advising as it relates to the market on how to think about the mega caps? Have the goalposts moved related to these stocks?

[MultiCare Representative]

I think the competitive environment has changed and that's something that we should have expected at some point in this AI theme. The AI theme is not a months long theme. This is a years long theme and we should always expect when an innovative technology player is in the marketplace it's going to change the competitive environment. That's I think what happened this week. I don't think we found out that something suddenly was wrong with the US Players in the market. It's just that competition changed. So to answer your question directly about the clients that we have, we have mostly younger investors. We've got a lot of our investors between the ages of 20 and 40. They are interested in technology names, they are interested in these mega cap names, the headline makers, the disrupt probably over.

[Scott Wapner]

Over leveraged to these kinds of names.

[MultiCare Representative]

So perhaps, perhaps, I mean, not all of them. Right. We do have an ETF that tracks the top 50 holdings on our platform. But what I would tell them and what I have told them is that you have to make sure that you're diversified into the stuff that you think is probably kind of boring. I mean, even last year Gold was beating the S and P up through the middle of the year. That's not something that typically younger investors are usually clamoring to buy. Now you have to look at sectors in the equity index because I don't think investors are going to rush out of equities. They're just going to continue buying other places within equities. So you look at sectors like health care, you look at things like industrials, you look at materials, you look at some of the stuff that still should have earnings strength this year because I think it's all about fundamentals this year. But that isn't trading at all time highs.

[Scott Wapner]

All right, good stuff. We'll take a quick break. We come back, we have many moves to get to from Kevin Simpson. We'll document all of those. Plus coming up, five new names have just hit Josh Brown's best stocks in the market list. We will tell you what they are a little bit later. What's at stake when administrations change? From the first 100 days and beyond, EY brings insights on the issues that matter. Executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability.

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[Scott Wapner]

As we come back, we continue to follow the Latest on that deadly mid airplane crash near the nation's capital. In the nation's capital, Eamon Javors is live at Reagan National Airport with the very latest.

[G]

Eamon Scott, the tragic reality here at Reagan National Airport is that earlier this morning this investigation moved from a search and rescue investigation to a search and recovery effort. That means there are no survivors here. 67 people have apparently lost their lives in this incident last night and now the effort begins to recover all of the bodies from the frigid Potomac river here and also to bring up some of that wreckage and get a sense of what exactly caused this tragic incident. I want to show you some pictures that we shot, Scott, from our vantage point. Take a look. We shot these just a short time ago and you can see some of the activity that we saw here. FBI teams, D.C. fire Department teams. We also saw teams of divers going into the water. It is brutally cold out here and was overnight. There's still ice on the Potomac River. You can see there some of the water vessels making their way out to the wreckage and just how cold that ice is. As the Coast Guard officials begin to look for bodies, to look for wreckage of the plane to figure out what exactly happened here. The folks who responded to this responded within the first 10 minutes of the crash last night and they have been here overnight and through the morning as of right now. Scott, I can tell you that one of the ironies here is that life does go on. Reagan National Airport has reopened as of 11am this morning. They are launching flights here. They're taking in landings here. We just, we're talking a little bit about the congestion of Reagan National Airport. We just ran a timer here. We're clocking landings just about every 65 seconds here this morning at Reagan National Airport as they work through the backlog. And that gives you a sense of just how busy an airport this is and how many flights are coming in and out of here on a minute to minute basis throughout the day and night. Scott so they are getting things underway here. Travelers are moving through the airport now even as that recovery effort. We can see from where we're standing here, some of the boats in the Potomac river just over my left shoulder are still continuing to look for the bodies of some of those victims of last night's tragedy.

[Scott Wapner]

Eamon, thank you. It's Eamon Javors the latest there at Reagan national just outside Washington D.C. let's return to some more of Kevin Simpson's portfolio portfolio moves as I said we would. These are in your devo. You Bought more Agnico Eagle Mines.

[Kevin Simpson]

Yeah, we actually reinitiated this as a new position. It was a stock that we owned last year, Scott. Really, really great name. Small Canadian mining company, much more gold than copper. We were writing calls against it. It got called away. We pivoted into Freeport McMoRan, which is more copper than gold. And we just haven't been able to get the stock to move or do anything for us. We've been writing calls, writing calls, writing calls. We're going to rotate back into Agnico Eagle. It's at a 52 week high today. Strong dividend growth, nice share buybacks. We like the name a lot.

[Scott Wapner]

You sold covered calls in Amgen, in TJX and Freeport. Why those three?

[Kevin Simpson]

Specifically with Freeport, we went out of the stock. So we wrote an in the money call. I've been writing calls just out of the money and the stock keeps going down, so it's hard to get out of it. This time we just said, you know what, we'll write an in the money call and ensure that we're out of the position. We like the name long term, not short term. TJ Maxx is just a little bit of a hedge on half the position heading into earnings in case there's any pullback in retail. We love the name Long term Amgen. It's a covered call that we don't think will get called away. It brought in real nice premium, but it's a 295 and the stock's at 283, so we should be good there.

[Scott Wapner]

Okay. Now these other moves are in the Q Devo. MongoDB, you bought and Toast as well.

[Kevin Simpson]

Yeah, this Josh, this strategy is a lot more fun to talk about on tv. And I got Toast from Josh and it was a stock that I started following when he brought it up. And we talked to a lot of restaurant owners that are just embedded in that ecosystem. I think you got stopped out of it or sold it last month, but.

[AT&T Business Representative]

We'Re actually buying it as an adr. I'm buying French Toast. So continue.

[Kevin Simpson]

We can write us based options on that. So it's still fine. We really like the ecosystem. The customers are growing at a very rapid clip and they're stuck in that ecosystem. They can't get out of it. So a little bit more speculative, a little bit more volume, but it allows us to write really great option premium against it. MongoDB, same thing, just tremendous volatility. It's down today. We're probably going to add to it a little bit. It's a really, really tiny position, but we own it because it's got such robust call premiums that we can generate a lot of cash flow on this volatile name.

[Scott Wapner]

Still like toast I do.

[AT&T Business Representative]

I got stopped out of it after 100% gain in the stock during 2024. But like, it's on my screen, I probably should be back in it. This thing is going to go. Looks like it's going to challenge that old high from December and I'm going to keep my eye on it. We'll see if the trigger gets pulled.

[Scott Wapner]

Okay, straight ahead, we'll tell you those new stocks on Josh Brown's Best Stocks in the Market list. One of his names just crushed earnings. It's pacing for its best day ever, which is why you want to know what it is. I'll tell you next.

[AT&T Business Representative]

What'S at stake.

[Scott Wapner]

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[Scott Wapner]

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[Scott Wapner]

All right, here we go. Let's do the best stocks in the market list. According to Josh Brown, IBM is number one. IT is hitting a record intraday high following earnings. Today mentioned IT last week, I think, as being on your list. What is your take today?

[AT&T Business Representative]

Look, IBM has completely transformed its business. IT popped onto the list a short while ago. Obviously you're not chasing the stock after today's huge move, but I think it deserves to stay on your radar because it's in the new sweet spot of the market, which is AI. But from an IT and services perspective, we actually brought a guest on the show, Dan Dolev last summer. Scott, if you remember from Mizuho who laid out the case for why you need to follow the IT stocks, they are at the crux of where this AI thing where the rubber is actually going to meet the road for business customers. All of these stocks are on fire. I got a bunch of them on the best stocks in the market list. You want to go through them one by one?

[Scott Wapner]

Let's do that. Gartner. Yeah, tell me about Gartner.

[AT&T Business Representative]

Ticker symbol is it. I mean, can it be more on the nose? Look, did you know that of the hundred million dollar in revenue plus companies in the United States, 88% of them are not publicly traded, which means you've only ever heard of 12% of them because they have ticker symbols. The nation is filled with companies that are huge and going to spend tons of money on AI and companies like Gartner are in position to help. The ticker is it. It's the right place to be in the market. And this is one of the market leaders. And if you pull the chart back, I know we're doing intraday here, you can see this is obviously a stock that's on the verge of breaking out above those old highs.

[Scott Wapner]

Okay, thank you for that one. Cognizant is the next.

[AT&T Business Representative]

Yeah, ctsh. Although they spell cognizant with a Z which is sort of a off putting for me. But we'll get past it. Up 11% below the all time highs. 71 RSI. So slightly overbought. Big rally. 52 week high as we speak. But it's a 16 forward P E. Of the five names I'm talking about today, it's the cheapest of those five. Looking for 7% earnings per share growth. And I'm betting the estimates will be going up based on all of this IT spend, same story as IT Accenture, same thing. The third IT name on the list, Accenture is perhaps the largest of them all. ACN is the ticker. Pull that chart back. Here's a name that is breaking out. I mean it looks unstoppable to me. If it can get above 390, there's really no resistance there. And again, AI contracts with small and large businesses as far as the eye can see. Companies don't know how to implement LLMs. They need to pay Accenture to come in and help them do it. And that's the bull market that doesn't go away deep seek or otherwise.

[Scott Wapner]

Okay, Cloudflare.

[AT&T Business Representative]

This is a cloud data play similar to Snowflake, but does not have a habit of blowing up every other time it reports earnings. So that's obviously a plus. This is a stock that still hasn't fully recovered from the bear market of 2022, 37% below those all time highs. But look, looks like it wants to continue to rally. Stock has been absolutely ripping this past week up 10% of 23% last month, 62% last 12 months. And I still think it's being discovered. Most people don't know what this company does. And if you're a new long, that's your advantage.

[Scott Wapner]

Go daddy.

[AT&T Business Representative]

Okay, back to the Super Bowl. For the first time in eight years, we're getting a GoDaddy commercial. Walton Goggins is going to be playing a small business owner trying to sell goggles. Get it? Using GoDaddy's new AI product for small business air. Oh, I think it's pronounced arrow. Anyway, GoDaddy's at 24 times price to free cash flow, so not cheap. But it's less than 1% below all time highs. This is AI and if you look at the last few earnings reports, they have absolutely blown estimates out of the water. That's why this name is working. And if they become the go to AI provider to small business, all the people that buy their domains and manage their web properties through GoDaddy, that's a really big business and most people aren't giving them credit yet for getting in there.

[Scott Wapner]

Okay, good stuff. Additions to the list as we try and do on most Thursdays. Up next, we debate more committee stocks that are on the move today. A big sell call on one of Josh's names. A pop for one of Jim's, a drop for one of Kevin's. All right, welcome back. Let's show you our shares of CAT because they're lower today, profit falling, tepid equipment demand. We could show the stock. There it is, down near 5%. Kevin, you own it.

[Kevin Simpson]

It's still up over 20% for the past 12 months. We didn't think the earnings were going to be great, but admittedly we did not think they would be this bad. Two weeks ago we wrote a covered call, brought in some nice premium. We'll be able to close that out today. I don't know that I'd be a buyer at this level. If you don't own the stock, it's probably not the best entry point. Still a little bit expensive for us, but we're going to hold it. We've got nice option premiums on it that we'll be able to drive as we wait for it to recover. Still a great company.

[Scott Wapner]

Jimmy Yeh and Wynn, which shares last we saw were up following strong results from LVs, which is Las Vegas Sands.

[Jim Lebenthal]

So Las Vegas Sands represents Macau. So there were better than expected results in Macau. Whether I agree with it or not, Wynn is and has been for the last two years measured on MC Macao results. I'm of the opinion that it is far more than Macao. Las Vegas has been killing it. They've got a growth opportunity in Dubai that will hit next year. And frankly, when I look at Win and I see a company that's been growing ebitda, it's quadrupled EBITDA over the last two years. Granted, the pandemic hit them. I think this is a very undervalued stock. I'm frustrated that it's been flat for so long. But as I continue to see them execute well and buy back shares, I really think it's just a matter of of time.

[Scott Wapner]

What's the stock done over the last year? I'm asking. I don't have it in front of.

[Jim Lebenthal]

Me, call it flat, but there's times it's been up, there's times it's been down, it's been a disappointment. I'm not going to sugarcoat it at all. A disappointment from the share price point of view, from an operational point of view, they kill it and what that means. By the way, Scott, you've heard me say this many times before. They take their excess cash flows, they buy back shares. When this hits, it's going to have leverage from a lower share count.

[Scott Wapner]

Starbucks reiterated sell today at Redburn price target to 78. It was 77. The stock did hit a new 52 week high. What's your assessment here? After earnings, we suggested going in that, you know, Brian Nicol has gotten a pass at this point for obvious reasons. But now he's got to show me. Show you? You're the shareholder.

[AT&T Business Representative]

Well, I'm in the name, so I obviously didn't expect that to have this big of a jump. After the news, I basically went into the call like okay, this is probably the last of the bad quarters. It looks like that's what the street has kind of coalesced around that idea that all right, the last four quarters have been terrible and this last quarter is the last time that we really don't have Nickel in there. Putting his imprimatur on every aspect of what's wrong with this business. I again, I did notice the baristas are writing people's names with Sharpies on the cup. I know people are giggling about that, myself included. But there's a bigger idea there which is getting back to the roots of people actually thinking that this isn't just an assembly line where they have to walk in and pay $11 every day. There's some meaning again to that experience when you're in the store. I don't think that that single handedly will turn the story around. But the stock is winning, so it's now 14 above its 20 day moving average, 84 RSI. So it's definitely overbought. Let it pull back. If you missed it, maybe you'll get it at 106, 107. But I think the name can work from these levels and I do not want to be out of the story.

[Scott Wapner]

Okay, the setup is next. We have a developing story for you. OpenAI Sam Altman addressing the Deep Sea threat for the very first time publicly. Our Kate Rooney is live in Washington with the very latest. What's he saying?

[H]

Kate Scott so CEO Sam Altman addressing that Deep Seek threat on stage. Two lawmakers to Trump insiders to some administration officials calling it a consequential moment for open air and for AI. He says it shows very real competition in the world. Speaking about China there and that compute and computing power is more important than ever. Deep Seek has sparked some conversations around cost as you guys have been talking about, and some of the spending commitments if costs do come down. Someone asked Altman what Deep Seek is going to mean in light of Stargate and what could be a $500 billion level of spending on data centers. Altman saying, quote, this shows that that's a really good thing to be doing right now. OpenAI as backdrop here is accusing that Chinese competitor to chatbots of essentially ripping off their AI models to build another version at a fraction of the price. I spoke to Chief Product Officer Kevin while I'm going to paraphrase what he told me, he said there are a lot of legitimate and concerning questions around the origins. Basically said what it means and the takeaway is that China is here. He said we knew this is going to be not just Competition, competition between U.S. companies and Chinese companies. It's ultimately going to be competition between the US and the prc. Says it's kind of the first big salvo in this. Also said it's the first time, not the first time rather that China has tried to copy US IP so they're ready for it and that they have a new model coming. He said that is head and shoulders above anything else that's out there today. I am hearing from a source as well that OpenAI is in the middle of raising up to $25 billion additional dollars from SoftBank, which would make Softbank the largest shareholder in that company, upping Microsoft there. They would replace Microsoft as the biggest shareholder. Scott, back to you.

[Scott Wapner]

Interesting stuff, Kate. Thank you for that. That's Kate Rooney. As you see down in Washington. For us, we will do finals next and try and maybe squeeze in some setup names too. Jimmy Jitters is not on Closing Bell. Anastasia Moroso is, though. Malcolm Etheridge is. Rich Saperstein, Brent Talkington and Stacy Raskin as well. Final trade. Jimmy, your first.

[Jim Lebenthal]

The bull likes Alphabet.

[Scott Wapner]

The Bull likes Alphabet. All right, Kevin Simpson, RTX.

[Kevin Simpson]

Incredible free cash flow. Almost 55% higher than last year. 31 years in a row of dividend growth.

[Scott Wapner]

Okay, thank you. Liz Young Thomas, Software.

[MultiCare Representative]

I think it's the next beneficiary of this AI theme and capex dollars will flow there.

[AT&T Business Representative]

Josh Brown, my Baker Hughes report reports before the open tomorrow. I'm already pre clenching to get ready.

[Scott Wapner]

All right, good. See, I told you we'd get a little set up in there. Thank you for that. Thanks for watching. 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.

[MultiCare Representative]

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.comhalftimereportdisclaimer. 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.

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