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Halftime Report
Nvidia and the AI Trade: Your Next Move 5/21/26
00:45:56
Scott Wapner and the Investment Committee debate whether Nvidia is underappreciated after the company reported it's earnings yesterday. They discuss your next move in the AI sector. Plus, we look ahead to the SpaceX IPO, what it means to the market and the future of investing in space travel. And later, Josh Brown spotlights Morgan Stanley in his "Best Stocks in the Market." Investment Committee Disclosures
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- [00:00]
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- [00:56]
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. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the Nvidia aftermath and countdown to blast off for the SpaceX IPO. Should you buy into that, we're trading it the whole market with the investment committee. Joining me for the hour, Josh Brown, Stephanie Link, Malcolm Etheridge, Bill Baruch. Let's check the markets here. We are modestly red everywhere but the Russell today as we do look at those two big stories. The aftermath of Nvidia's earnings, the SpaceX S1. We'll do Nvidia first for obvious reasons. There were many highlights. You can pick whichever one you want. Revenues up 85% year on year. The guide was good. The buyback of 80 billion. They raised a dividend. The data set up data center revenue almost doubling. We knew it was going to be good. It was. We knew the stock wasn't likely to do all that much right after it hasn't the stocks moved a lot. It's up 10% into the number. What do you make of what you got and what it means now?
- [02:08]
Josh Brown
I still think it's going to 2:50. Nvidia is not a great post earnings reaction stock because as we've talked about it pre rallies it rallies on the results of its 10 biggest customers which we hear from weeks before they actually get a chance to report. And as such, the most important number each quarter is not top line sales, is not the earnings per share. Most important number is always the guide. The guide was ahead of expectations by 4 or 5 billion. That's all we need. And I think that, look, you don't get plus 10, 10 points in the stock after. Because look at the rally from April into now. Basically you had a stock sitting at 170 that nobody wanted, and now here we are. 220. That's the equivalent of a $17 stock running to 22 ahead of the number. Now you got the number that at least justifies the rally we've already had. I think it's a day or two of digestion and then this thing could take off all over again. Not saying it will, saying very likely in my view. And so you wanna sell a stock trading 18 times forward earnings, that's telling you they're going to grow earnings 83% in the next 12 months. You could make that sale if you feel like it. I wouldn't.
- [03:19]
Scott Wapner
Malcolm, here's a good question for you. The one that heard on the street, the Wall Street Journal asks today, or at least points out, is Nvidia underappreciated? People hear me say that and I sit back like, what the hell is this guy talking about? At 5, almost $5 trillion in market cap? How can you possibly say that? Are they getting enough credit for their position in this whole ball game? Is there too much apathy towards it because everybody thinks they know the story? It's not the shiny new thing on the mountaintop. Is that causing the stock to sputter a little bit? Jensen talked about it himself, talked about it being a mystery. Mysterious why? The stock's been a bit stagnant. What do you think?
- [04:12]
Stephanie Link
I think you have to put it into context of whether you're thinking like a trader or you're thinking about this like an investor. Because an investor is going to look at this particular period and say, this company is obviously underpriced, selling for 18 times forward earnings. Like Josh just pointed out, 250 should be no brainer, right? You're about to get the stampede of price adjustments from all the analysts post earnings as we usually do. But if you're looking near term, just at 20, 26, let's call it, it's reasonable to think that the stock is probably going to continue to stagnate because they can't continue to impress us anymore. Any other company has the earnings report that we got last night, we've got 85% growth. We've got a doubling in data center revenue. We Even heard the CPU business is going to be responsible for about 20 billion on its own. Right? This is a tertiary business. If you consider it against GPUs. Any other company would be up 25% after earnings today. But Nvidia specifically, because they have this pattern of beating the expectations by about $2 billion on top line, which they did again showing us outsized growth that nobody else can do and 75 to 80% gross margins. It's just become such a common story that it's hard to really impress the stock.
- [05:25]
Josh Brown
Does the buyback help with that problem?
- [05:27]
Stephanie Link
I don't think so. I don't think the dividend increase even makes enough of a difference. Even though it was 25 times what it was before. Because you're not buying this stock because you care about the current income. You're not buying this stock because you want them to financially engineer their way into a great share price appreciation like an Apple, for example. You're buying this stock because it is the innovation engine. You're buying the stock that's available.
- [05:50]
Josh Brown
If the stock is selling 18 times earnings, they just up their authorized buyback from 39 billion, which was what was left on the original, to 80 billion. They should probably be doing that buyback right now. I don't know why they'd wait. If you're running the company and thinking about the best use of capital. Yeah, we understand they're making these one off investments into a lot of projects that they think are benefiting long term. But the free cash flow here is just absolutely exploded. I can't think of a better thing for them to do than some float shrink while the market may be bored with the story or whatever.
- [06:26]
Bill Baruch
Who's your incremental buyer though? Josh, I'm serious about this. You have 95. You have 95% of the sell side that have buys on this and you ever. Everybody owns eight and a half percent of the S&P 500 waiting. So obviously there's a lot of owners. Who is your. I mean I don't think at 23 times or okay maybe say 18 times.
- [06:46]
Josh Brown
Didn't they say that about Apple at 200 and it went to 300 dump.
- [06:49]
Bill Baruch
But I don't think at 18 times. I don't think it. Value buyers are going to be jumping in at 18 times. I mean I, I think it's going to take a cheaper multiple for the value players. I'm not disagreeing at all with the growth. The growth is amazing at this company. It was a phenomenal quarter. I think the guidance for 27 people wanted more color. I think that's one of the reasons why you've had this subdued reaction. But I, I Do struggle with. And by the way, I feel the same way about Broadcom.
- [07:14]
Scott Wapner
You will know Nvidia, same play.
- [07:15]
Josh Brown
Could you be the right.
- [07:16]
Stephanie Link
They're waiting on you. They're waiting on you.
- [07:18]
Bill Baruch
I have Marvell. There you go, Marvell, which we never talk about. I bought. I bought Marvell. And it's up.
- [07:24]
Scott Wapner
I know, but we're talking about Nvidia.
- [07:26]
Stephanie Link
Nvidia.
- [07:26]
Scott Wapner
What would get you to. What would get you. Come on. What would get you to buy Nvidia?
- [07:30]
Josh Brown
What do I need to say to put you into this call?
- [07:33]
Bill Baruch
You know what? You know what I feel really good about, though? I feel good about the food chain. The AI Food after this report. So data center is alive and well.
- [07:42]
Scott Wapner
That's the bigger story today, isn't it? The derivative trade off of this 100%.
- [07:46]
Bill Baruch
So, like quality industrial names that I own.
- [07:48]
Scott Wapner
Well, all those. But the arms, the soft banks, like everything like that. Those are the ones that are running, right?
- [07:54]
Bill Baruch
And there are a little bit. I don't know if they're off the radar screen as much, but maybe not as much as Nvidia. I just have a. That's what I struggle with. I struggle with this. The same thing with Broadcom. So I'm being consistent. I think you need these things much cheaper for the value buyers to come in. And I think it's in limbo as a result.
- [08:09]
Scott Wapner
Bill, I mean, how would you address the issue as to whether this stock, the company is underappreciated, as blasphemous as that sounds coming out of my mouth. You could make the case, though, as some have, that this stock performance, at least after they report their numbers, isn't anything to write home about. Unless you think we're at another one of those moments where we were below 170. Remember when Christina Port came on, we were like 160 something. She's like 170 is a line in the sand here. Stock gets above that and then say, you know, sort of look out above. It took a minute and then it did, and look where it is now. Are we primed for another one of those?
- [08:50]
Malcolm Etheridge
I wouldn't be surprised. I mean, heck, the Stock is up 16 and a half percent year to date or not even halfway through the year. I think it's kind of odd that we become accustomed to in the Simi space, 50% moves, 70% moves. In some of these names, this is a. A 16 and a half percent. Halfway through the year is a banner year. The revenue continues to grow. One thing I was looking at, and I know I trim did slightly a week ago, but getting above 205, 210 is similar to that 170 level that I've been watching. I think, you know, consolidating here. I like Josh's point. You get a lot of sort of run up in this name. Their customers, all of their earnings have already come out. You have to know and expect what you're going to receive here out of this earnings report. So it's nice to see it consolidate. I think consolidating is really well here. And then, then I do think we could take the next.
- [09:40]
Scott Wapner
I mean, look, Baird today, okay, Baird goes to 500 buc bucks. They're at 300. They go to 500. I don't think that's a typo.
- [09:49]
Stephanie Link
That's the standard.
- [09:49]
Scott Wapner
That's 500. Dan Ives, they remain the king of the castle. He says, what do you think about this $500 target?
- [09:58]
Josh Brown
So I actually, I think a lot about a conversation I had with Adam Parker a couple of weeks ago. And he's not like a semi analyst anymore.
- [10:05]
Stephanie Link
He.
- [10:06]
Josh Brown
That's where he got his start. But he thinks about Nvidia as an asset class, not as a corporation. And he understands it is a corporation, definitionally. But if you start to think about it as an asset class, and that asset class is compute, you can convince yourself that this probably should be the first $10 trillion market cap company. I don't know if that ever happens, and if it does, I don't know if that takes 10 years. But when you start thinking about the dominance, you accept the fact that there are other players in the ecosystem, there are competitors, there are ASICs that are carrying out very specific workloads where it's more efficient than a gpu. All right, stipulate. We all get that we own more than one stock. But if you think about it as an asset class unto itself, given its dominance, you can mentally get there to A$500.
- [10:54]
Scott Wapner
And it's fair target.
- [10:55]
Malcolm Etheridge
It's fair to think of it as an asset class to some degree. I mean, look, the software mode that it has to run its GPUs. There is no other competition. There's no number two. No number three. It is number one.
- [11:06]
Scott Wapner
There's no competition here. Part of the issue for why the stock isn't doing all that much. There's competition in China. That's true. And they're largely conceding that, as they said. Okay, so if you don't have any visibility into business in China that you're not Just, you're just not going to get any like what you maybe thought or investors were hoping for. Does that change the story?
- [11:30]
Josh Brown
What's the catalyst? This. Think, think about this. China has historically been Nvidia's number two global market. There are $0 in the forecast coming from China. None, not a dollar.
- [11:44]
Scott Wapner
They use those words largely conceded. Well, the market to Huawei today.
- [11:48]
Josh Brown
But things change and I don't know, they didn't change.
- [11:51]
Scott Wapner
He went over there. Jensen was literally, you know, feet on the ground with the President of the United States and came home and then days later says they've largely conceded the market.
- [12:01]
Josh Brown
Understood. I just, I don't think that you respect Jensen's g. Because we've had conversations on the show that Apple would be ejected from China. Hasn't happened. Apple's China sales out of nowhere became a bright spot. We heard Tesla would never survive.
- [12:18]
Scott Wapner
But Apple already had 20% of its revenues coming from. Nvidia hasn't had anywhere near that degree
- [12:25]
Josh Brown
of business coming from in the last five years. No, but historically China has been a huge market for GPUs. And, and I don't think we should just say because there's nothing in the forecast now, there never will be.
- [12:39]
Malcolm Etheridge
Many companies are allowed to buy them. Remember Jensen went on that trip with Trump last week. No one's actually purchased, no purchase.
- [12:47]
Josh Brown
There are approved buyers. That is something.
- [12:49]
Malcolm Etheridge
China is what's holding back. But, but more approved buyers.
- [12:52]
Scott Wapner
Before we just learned more specifics about who could buy. We had already approved the buys. Yeah, I don't know who the buyers may be.
- [13:00]
Malcolm Etheridge
There could be, may well be competition that shows up from China. But I think there's are, there are geographical barriers being set by the White House and some of the policies that are there. But furthermore, it's forced, it's forced Nvidia to become a Berkshire Hathaway of sorts of tech. I mean, you're seeing how their investment is up and down and now the CPU revenues of 20 billion that are being forecasted, I mean, they, their investments across their vertical is just amazing.
- [13:24]
Scott Wapner
I want to go back to Steph on the derivative angle of this because, you know, I like how you were taking us in that direction because I do feel that today that's the, the bigger story, like the biggest. Okay, what's the actionable thing now you see what ARM is doing? I mean, how are you thinking about that in terms of either putting more money to work in the names that you like, maybe looking at some other names that now you think could benefit that are cheap enough in your mind to go buy well or add to.
- [13:50]
Bill Baruch
I've been focused on the industrial plays, right. Because they have obviously a lot of exposure too. And if you look at some of the numbers that Nvidia was, you know, came in at, came out at with was hyperscale. Total revenue up 115%. AI, cloud, industrial and enterprise revenues up 74%. Physical AI at 9 billion. That is so positive for robotics. So I am inclined to buy more Rockwell Automation or Teradyne in the technology world. I don't necessarily want to own any more of these semiconductor space because I got my eyes, you know, I'm up to my eyeballs in these things. But I feel good about Quanta Services, I feel good about Eaton, Caterpillar, all these Vertive. I mean if you look at all of these companies, on average their backlogs last quarter were up 34% year over year. Just to put it in context, on average over the last 25 years these companies have had backlog growth of 3 to 5% and we would get excited about it. So the visibility is so extreme. So you can take it any way you want in any sector. That's the area I'm looking at. And I'm also looking at I do not own something like a Vistra Energy. That stock actually has lagged this space in a big way and it's certainly
- [14:57]
Scott Wapner
on my radar screen more recently. Yeah, I mean what was it the best performing stock in the S&P 500 two years ago, two years ago.
- [15:04]
Bill Baruch
But it's down 9% year to date, Scott, and it's actually attractive 15 times.
- [15:09]
Scott Wapner
Let's move to the other big story of the day. It's SpaceX, the S1 long awaited. Obviously it's going to set a record for the largest IPO ever. Could be one and a half trillion dollars. Could be even bigger than that. Leslie Picker's been following the money on that and waiting for this moment, doing reporting leading up to it. It's going to list on the nasdaq. SPCX is going to be the ticker. Give us some more information, the most important things you, you think we need to know.
- [15:34]
Leslie Picker
Well, for this show in particular, I think the financials are really important. We finally got a long awaited peek into the 24 year old company's financials. The numbers pretty modest for a company looking to garner a 13 figure public valuation since SpaceX made $18.7 billion in revenue last year. Up 33% from the prior year. In the three months through March, SpaceX generated 4.7 billion in revenue and a net loss of 4.3 billion, so nearly the same size there. The company also showed long term debt of $29 billion, an IPO range yet to be determined. That will come out in a few weeks. But on the conservative side, I am told to expect it to be north of SpaceX's recent 1.25 trillion valuation from its latest private fundra, but below 2 trillion. So at say, 1 1/2 trillion dollars, we're talking about a multiple of about 80 times last year's revenue. There appears to be more revenue coming down the pike though. SpaceX said that Anthropic will pay 1.25 billion per month through May of 2029 as part of a compute deal that was announced earlier this month on an annualized basis that would nearly double SpaceX's revenue. SpaceX says in the prospectus that it has the, quote, largest actionable total addressable market, or TAM in human history, which it quantifies at, oh, $28.5 trillion, most of that stemming from AI. So this IPO, like many other small listings that came before it, will hinge on the validity of many big dreams here.
- [17:06]
Scott Wapner
Scott, there are a lot of big dreams. Big hopes, big hopes. Retail would like a cut. They're going to get some, obviously direct access through the brokerage firms too. Less good reporting leading right up to the release. Appreciate all of and thanks for joining us here. My biggest question is my wealth management group, what are you telling your peeps? Like someone calls you up and says, I'd like to get in. What do you say?
- [17:28]
Josh Brown
Good luck, Good luck, have fun. Why we don't do this? I think this is one of the most interesting companies to come along since my career began. I can't wait to see what happens when it goes public. And as Elon's vision for combining AI with the cluster of satellites and Starlink and then ultimately I think merging in some way with Tesla, incorporating the robotics piece to the whole thing. I'm pretty sure, like that's how this ends up going. I have no idea how to look at 5 billion in Starlink revenue and a couple of billion dollars in AI revenue from renting out, renting out compute to Amazon, how do I take that and get to 1.75 trillion?
- [18:14]
Scott Wapner
If you can't get your arms around the possible $28.5 trillion total addressable market, what's the matter with you?
- [18:21]
Josh Brown
The entire economy is 119 trillion. So we're saying the TAM is 30 trillion.
- [18:26]
Bill Baruch
But there's a lot of ways to win. It's space, it's connectivity, it's AI. I mean, I bet you get one of them right. There are a lot of shots on gold here.
- [18:33]
Scott Wapner
I agree. But what are you going to do? You will.
- [18:36]
Bill Baruch
100%. Absolutely.
- [18:38]
Josh Brown
You want to end pre IPO from today's valuation?
- [18:40]
Megan Casella
Absolutely.
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Bill Baruch
Absolutely. Are you kidding? I'm not going to. You can't count Musk out, number one. And number two, we all know this stuff and we're in like the negative innings here. We're not even at the batter's box in this stuff.
- [18:51]
Josh Brown
What if it goes public at 1.75 trillion?
- [18:53]
Bill Baruch
I don't care.
- [18:54]
Josh Brown
And because markets are markets, there's an opportunity to own it in a 30% decline.
- [18:59]
Bill Baruch
What I would do is I would have a small position and I would just put it away and take my eyes off of it because I can't value it. Just like you can't kind of get your arms around that piece of it, too. But 28.5 trillion total addressable market. What if they just had a fifth of that total addressable market?
- [19:14]
Josh Brown
So to your, to your point, and this is, this is. I said this internally. There is no universe in which this stock trades on its. On its financials anytime in the next 10 years.
- [19:26]
Bill Baruch
Absolutely.
- [19:27]
Josh Brown
So if you've spent 15 minutes analyzing the company's financials, you've wasted 13 minutes because no one buying and selling this stock has any interest in that. It doesn't matter.
- [19:37]
Bill Baruch
That's why I said they have a lot of ways to win if they get one of these things. Right? And they already have Starlink. I mean, my goodness, you're traveling all the time. Whenever you get Starlink on United, you're like, happy as can be, Right? I mean, we're just starting with that whole thing.
- [19:53]
Scott Wapner
The alternative is that the WI fi doesn't work.
- [19:56]
Bill Baruch
Right.
- [19:57]
Josh Brown
Amazon is not sitting around doing nothing. Leo is probably five years behind, let's be honest.
- [20:01]
Bill Baruch
Sure.
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Scott Wapner
What's your take?
- [20:03]
Stephanie Link
Yeah, I agree. There's no way I would be looking to buy this, at least that ipo, simply because Starlink alone as a standalone company would be interesting enough to invest in. SpaceX alone as a standalone company would be interesting enough to invest in. I think we're probably 20 years off, at best, from data centers in space being a real conversation we need to be having.
- [20:26]
Scott Wapner
I don't know. You know, Bezos. Yes. Bezos yesterday talked about that. And while he would agree with you, the timeline is unpredictable. 20 years sounds a little bit far fetched to what even he was talking about. And he was sort of honest in the idea that, well, if you're saying like in the next few years, I don't know, maybe that's crazy, but say three. If you mean six.
- [20:47]
Stephanie Link
No, I mean 20. We have data centers sitting in Santa Clara right now in Nvidia's backyard full of GPUs that can't get powered on because they can't get the power generated to power these things here on Earth. So we're now going to be launching these things into space and rely on the technology being so buttoned up that it can send that data back to Earth faster than the latency problems we're already having between the GPU clusters that already exist. It's the reason Cerebras and Grok and everybody else has an opportunity. It going into space and stretching that that chain even further makes it so much more unlikely that it becomes a thing again. I think the space economy makes sense. I think there's some there, there. But I don't think SpaceX is the company that's going to Elon capitalize deliberately
- [21:34]
Josh Brown
sets timetables that are unreasonable as a management philosophy. If I don't, if I don't set these things aggressively, people won't do what I need them to do. When you say three years, it might happen in six years, but if you say six years, it might not happen for eight years. And I sort of understand it and it's obviously worked out for Tesla shareholders. That's 1, 2. He does have this undeniable advantage where even if you think Amazon's going to be a serious competitor in the core business of SpaceX. The thing is, Elon Musk doesn't have to wait for somebody else's launch schedule. The Falcon 9 has already taken 8,000 satellites into orbit. Jeff Bezos, for all the money in the world that he has, has to wait for a third party to, to launch and he's got 200 satellites. So it's a, it's a wide gap and that's kind of an undeniable advantage.
- [22:31]
Stephanie Link
So if SpaceX as a standalone company that was just focused on launching rockets into space in reentering Earth's orbit, and that being a reusable rocket that we now can rely on sending loads into space again and again and again, that is a very interesting proposition. I've watched the YouTube videos with the demos and it is very impressive. But there's so much else baked into this thing as he's trying to build the Everything app that I just can't imagine how I get to $1.7 or $2 trillion anytime soon. In a way that makes sense to be allocating this in anybody's portfolio. We're already going to get a ton more of it than we want in the S and P and in the, in the Q.
- [23:10]
Josh Brown
If you had to make a binary bet, would you guys bet on an opening day? Let's say 1.75 trillion is the number. Would you make a binary bet against an opening pop of more than 20%?
- [23:22]
Stephanie Link
Oh, no, it's going to pop.
- [23:23]
Scott Wapner
It's still going to pop on a
- [23:24]
Stephanie Link
pop because Elon's Elon and retail is
- [23:27]
Bill Baruch
going to get 30% of this thing.
- [23:28]
Josh Brown
Yeah.
- [23:28]
Stephanie Link
But six months later.
- [23:29]
Bill Baruch
Percent, which is typical on IPO.
- [23:31]
Stephanie Link
Once the lockup is over, what does it look like?
- [23:34]
Josh Brown
Well, so here's what's interesting.
- [23:35]
Scott Wapner
At the last, last point that I
- [23:36]
Josh Brown
got about the lock up is rolling. So they're selling stock, I think within five weeks. Not a lot, but the lockup is almost like an ongoing part of the story.
- [23:45]
Scott Wapner
Okay, we, we have a bunch of moves today on this desk. So we'll take a break. We'll come back. I'm going to get to all of those. Quantum is on the move. One of Steph's name is jumping. Best day since October. I don't want to miss that one either. Josh has best stocks in the market. Spotify shares are popping today. They're still down on the year though, because I fears. Well, you're going to hear exclusively today from the company's co CEO. Coming up. We're back after this.
- [24:12]
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- [25:08]
Scott Wapner
take a look at some Quantum names today. Many in that orbit are surging as the US reportedly plans a $2 billion award and taking equity stakes. We're focused today on IBM because Steph owns it, Malcolm owns it. Stock's having its best day since October. Of obviously the other names too, we're jumping even more. RIGETTI for example, IonQ which has been a Brin name and maybe some others on the desk here as well. But what about IBM?
- [25:38]
Bill Baruch
I mean it's, it's good news. But quantum computing is less than 1% of total revenue right now for IBM. It's going to grow much bigger over time. I think of Quantum as really Getting embraced by 2029, 2030, this is a total addressable market according to IBM at $1.3 trillion. By 2035 they have 75 quantum computer computers in product day. That's more than all of their competition. So they are definitely at the forefront of this thing and it is really quite power. I think that this is AI on steroids quite frankly. But I think we've got a long way to go before we see real revenue meaningfully attribute to the, to the financials. So like it still like IBM for a lot of reasons. It's down 18% year to date even after this move. And I think the valuation is pretty interesting. And again there's a lot of ways that they can win. I think we can.
- [26:28]
Scott Wapner
Show me Walmart guys, if you could please. Because the stock is pacing for its worst day since November of 23. Saw the back of earnings. Some commentary, a little cautious about the consumer. I use it to get to Target which was down yesterday even though the earnings were pretty good. The stock had moved a bit obviously. And it was reiterated today at Wolf, at Pure Perform. Why? Because even though they acknowledge that the year is off to a fast start, they say it's too early to tell if the momentum can hold. You're making a bet today that it can, right? Because you bought more.
- [27:02]
Bill Baruch
I mean I can't remember the last time we saw 5.6% same store sales. But the reason I bought more was not because of that, it was because of traffic, Scott. That was the reason I sold it because they weren't getting people in the doors. Traffic rose 4.4%.
- [27:16]
Scott Wapner
Well, it's all the same story. Momentum in traffic, momentum in business, just momentum back.
- [27:20]
Bill Baruch
I just need them to get in the store because they do have the products and they've been right sizing the products and they've been improving the products, mix of the products. And so once you get them in, then people are buying and they're spending. And actually the ticket numbers were actually pretty encouraging as well. Last time Target beat, by the way, on same store sales to Walmart was in the first quarter of 2022. I mean, it's been a long time, it's been a world of hurt for Target. But I do think that the new management is doing really good things and execution is starting and I'm willing to give them the benefit of the doubt. And I think they're being conservative in terms of overall numbers and guide.
- [27:52]
Scott Wapner
Okay, so you sold Gap.
- [27:54]
Bill Baruch
Yeah.
- [27:55]
Scott Wapner
Right?
- [27:55]
Bill Baruch
Yeah.
- [27:56]
Scott Wapner
You also sold Shark Ninja, right? No more frozen marks?
- [27:59]
Bill Baruch
No.
- [28:00]
Scott Wapner
What's up with that?
- [28:01]
Bill Baruch
No, well, that Shark Ninja is really more housing and I already have a lot of housing and so I think that's going to take time, especially with mortgage rates at six and a half
- [28:07]
Scott Wapner
people buying houses and buying blenders.
- [28:09]
Bill Baruch
Yeah.
- [28:09]
Josh Brown
Need a new vacuum.
- [28:11]
Bill Baruch
Of course, nobody moves with their old vacuum, but they're listening. But Shark Ninja is a great company. I just think once we get the activity going, I will probably be back in that gap. I've made some money. I was just, I'm just trying to clean up my retail exposure and I really didn't have a lot of cash on hand to buy more Target. And I have much more conviction long term in Target.
- [28:28]
Scott Wapner
All right, so Malcolm, we had merger Monday, right? Dominion and Nextera. And you sold Dominion because the deal.
- [28:34]
Stephanie Link
Yeah, I completely understand why Nextera wants to own Dominion. Right. They've done more data, they brought more data centers online than any other energy company across the United States. And it's still a very fragmented market. So you consolidate here to get bigger and get that expertise in house. But when you just look at the mechanics of the deal here, there's a lid put on the shares at about 72 bucks based on the way Nextera traded. Which means that after the shares spiked from 62 before the announcement to about 69 after the announcement, if they stay range bound between 68 and 69 like it looks like they're gonna do for a while, for 12 to maybe 18 months while this deal comes to fruition, I've got maybe a 5% move I can bank on between now and then. I'd rather just take those dollars and apply them somewhere else where there's a much better growth opportunity. Because realistically, if you're hanging into this name here, you really are more attracted to the dividend than anything else. And nothing wrong with that. But as a growth investor, I'd much rather go find a better opportunity now that I know where the ceiling is.
- [29:33]
Scott Wapner
Okay. Bill's got so many moves, we have to save them for another block. We come back or Seema Modi has a CNBC news update for us. Hi there.
- [29:40]
Seema Modi
Hey, Scott.
- [29:40]
Bill Baruch
Here's what we're watching at this hour.
- [29:42]
Seema Modi
Acting Attorney General Todd Blanche is meeting with Republican senators this morning to discuss the so called anti weaponization fund. Senator Majority Leader John Thune telling reporters today that Republicans, Republicans want to hear an explanation of how the $1.8 billion fund will work. Republican Senator Thom Tillis called the fund tyranny in an interview today. Chinese President Xi Jinping may visit North Korea as early as next week. That's according to a South Korean news agency citing government officials. The visit would be Xi's first trip to North Korea in seven years. It's a significant development following visits to Beijing from President Trump and Russian President Vladimir Putin in the past week. And the tobacco company Reynolds American donating $5 million to a super PAC called Maga Inc. About a week before President Trump's FDA lifted restrictions on some flavored vaping products. That's according to the New York Times. The paper reported that two days after the donation was given, a top rentals executive met with Trump over lunch to talk about the FDA's regulation of the industry. Scott, I'll send it back to you.
- [30:41]
Scott Wapner
Okay, Seema. Thanks, Seema Modi. Up next, Josh Brown's best stocks in the market. Big update to a big bank on the list. We're back in tune.
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Whoa.
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I did it.
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- [32:07]
Scott Wapner
All right, here we go. Best stocks in the market according to Josh Brown. The spotlight today is an update. We said it was on a big bank. Which one?
- [32:16]
Josh Brown
That's right, Scott. We're here to talk about Morgan Stanley today. Added back to the list this April. I think what's happening here is maybe underappreciated away from the analysts who cover this company. They ha. That basically is twin engines here. Number one obviously in a bull market, companies that are involved in investment banking make a lot more money than they normally do. You've got IPOs, you've got all kinds of capital formation, money raising, private equity, private credit, it's just, it's a bonanza. But we understand that the wealth management part of this business though is what's really on fire effectively. They have built this internal referral machine that is unlike anything else that exists at any of the other wirehouses or Wall street wealth management businesses. They pulled in $1.6 trillion in net new assets. They doubled their fee based flows. They now have 20 million client relationships. They finished last year with 7.4 trillion in wealth assets. And what's really exciting is about $100 billion of the flows have come into financial advisors at Morgan Stanley from some of these internal referral engines, E trade obviously, but also Morgan Stanley at work which is like servicing people's stock options, et cetera. So they acquire these businesses, they turn them into referral engines for the advisors and as a result I think they have the best wealth business in the world. So Morgan Stanley, very simple chart setup. The 50 day is at 178. That would be the pivot point. You can see historically it has respected that 50 day. I think it will again. I think the stock's an easy move up to 200.
- [34:05]
Scott Wapner
Okay. Did you know, did you know that it is the best performing of the big banks? Malcolm, you own it. Year to date it's slightly ahead of Goldman. It's 11.2% to just north of 10 and a half. What do you think about Morgan Stanley right here?
- [34:24]
Stephanie Link
I have been looking for an opportunity to buy more shares of the big three. J.P. morgan, Morgan Stanley and Goldman Sachs. For all of the reasons that Josh just pointed out. Software is crumbling. The annually recurring revenue stream inside of that business model used to be the thing we could hang our hats on. The next best looking option is the assets under management model that Josh just laid out, which is simple and recurring and repeatable. And obvious revenue. And so I think it's a great place to be allocating capital right now because as the market has been on fire, M and A transaction actions are just going to increase. We got a number of blockbuster IPOs coming this year, but I haven't had an opportunity to buy into any weakness.
- [35:03]
Josh Brown
Well, today's your lucky day.
- [35:04]
Stephanie Link
There's no Link.
- [35:05]
Scott Wapner
What about the Linkster? You own it, right?
- [35:07]
Bill Baruch
They're firing on all. On all cylinders. I mean, they really are. Under this fairly new CEO, investment banking last quarter grew 36%. It was the best of the group you had trading up 26%. The best of the group. Josh pointed out wealth management, they had NNA of 6% that most of the people in this business would love, and that is growing about 16%. And most importantly, that's the profitability. 27.1% ROTCE. I mean, they are just crushing, using a lot of.
- [35:37]
Scott Wapner
Use a lot of acronyms.
- [35:38]
Bill Baruch
I know. What's profitability? It's important.
- [35:41]
Josh Brown
You know, Morgan Stanley actually over the last 15 years has outperformed Citigroup, Wells Fargo, bank of America and JP Morgan to pull it back further than 15 years. JP Morgan wins. But this is. I mean, I get it. Like, where's the weakness? Where's the opportunity? You'll get. You'll get one.
- [35:58]
Stephanie Link
It's the stock plan services business that you alluded to that Gordman said he didn't even realize existed inside of the company when they bought it.
- [36:04]
Scott Wapner
Yeah.
- [36:05]
Stephanie Link
That is what has really set this thing on fire the last decade.
- [36:08]
Josh Brown
That's right.
- [36:08]
Scott Wapner
All right, quick break. As I said, 1, 2, 3, 4. Bill's got six moves that I still have to tell you about. Stephanie. Link's got another one, too, and we'll do that coming up. Plus, we have that Spotify exclusive as that that stock is on the move. The first investor day in some four years amid questions about AI disruption. It's all ahead. That's the breaking news out of Washington to Megan Casella, who has that for us. Hi there.
- [36:31]
Megan Casella
Hey, Scott. We just heard from President Trump in the Oval Office making news on a number of fronts. The first one being the President saying that he has postponed the signing of an AI executive order that had been planned for today because he didn't like specific aspects of it. This comes as we've been waiting for an executive order on AI that would involve some level of voluntary government review of advanced AI models before they are released. The President saying just now he didn't like certain aspects of it. He postponed it he says we're leading China on AI, we're leading everybody. And I don't want to do anything that's going to get in the way of that lead, suggesting they might be going back to the drawing board, at least in some aspects of that executive order. It does say postponed, though, so perhaps still coming at some point. He also spoke a little bit about Iran making a little bit of news here on the Strait of Hormuz, as there have been reports today that Iran is looking to charge tolls in the strait. The president saying, we want it open, we want it free, we don't want tolls, suggesting that that's something they are still negotiating with the Iranians as well as this idea of the highly enriched uranium and what will happen to it in the event of any deal. The president saying that we, the United States, will get that highly enriched uranium. He says we don't need it, we don't want it. We'll probably destroy it after we get it, but we're not going to let them have it. That has also been a red line for the Iranians and a lot of discussion about whether it would go to the US Whether the Iranians would agree to export it to, but clearly more to be discussed between the two sides there. And then finally, Scott, all of this was taking place at an event in the Oval. That was where the president was announcing he was overhauling to EPA rules that are meant to lower costs, grocery costs for consumers. So we had some grocery CEOs in the Oval with him. And he was asked, are there any assurances from the grocery chains that they will pass on these savings to their consumers? And the president said, well, let's ask Kroger about that. He had the Kroger CEO beside him, put him on the spot there. And the Kroger CEO then said, yes, we're right in the middle of doing that at the moment. We are concerned about the cost of living. But Scott, as we've been looking at this relationship between these public company CEOs and the white House private company as well, but public CEOs in the white House, to see this moment with that CEO there beside him, almost being pressured by the president to say, yes, we are looking at the cost of living for consumers.
- [38:39]
Scott Wapner
Scott okay. All right, Megan, thank you. Megan Casella, let's do those moves. I've been teasing for better part of the last 20 minutes or so. Bill Baruch, thanks for being patient on that. So you have mostly buys and a sell. So you bought the China Tech ETF, but you sold the EEM? Yeah, take me through that.
- [38:58]
Malcolm Etheridge
So EEM is about 30% Taiwan Semiconductor and Samsung and SK Hynix. And what we're doing is really just moving this exposure. We like Asia Tech. We're moving the heavy exposure that we're seeing, which is very dependent on US Tech as well, to China tech. I mean, we talked about in the first block that Nvidia is basically surrendering China to Huawei. Whether that's right or wrong, I mean, this China ETF Hue is a. Is a private company, but this China ETF CQQQ has a list of semiconductor hardware and computing within that name. And it's different than a K web, which is, for instance, Internet China.
- [39:35]
Scott Wapner
Okay, you bought Southern Copper and you bought Texas Roadhouse. Why each of those.
- [39:42]
Malcolm Etheridge
Okay, Southern Copper, again, eight block. We talked about data centers. I mean, this is a great way to lean into copper here. 25,000 to 50,000 tons of copper is required per data center. About 24 hours from now, I'm going to be driving through Wisconsin and there's a Port Washington data center that covers 670 acres. They, the total land owns 2,000. I'm just saying that.
- [40:02]
Scott Wapner
Are you visiting that or.
- [40:03]
Malcolm Etheridge
I'm driving to Upper Peninsula Michigan.
- [40:05]
Josh Brown
So I'm doing physical delivery.
- [40:06]
Malcolm Etheridge
So I'm taking.
- [40:07]
Scott Wapner
I was wondering why I dropped that.
- [40:09]
Malcolm Etheridge
But I'm just saying how important it is of copper is going to outstrip with the supply of copper right now. And copper futures hit a record high last week. I think you have to have copper exposure in your portfolio. And Southern Copper avoids fcx. FCX is really struggling with that Grassberg mind. So moving on from, moving on from that Texas Roadhouse. Has anybody been to a Texas Roadhouse recently? This, this restaurant is amazing. Now I have you. I have. I. I frequent. Frequent the.
- [40:37]
Scott Wapner
Don't ask a question like that. And when I say have you not
- [40:39]
Malcolm Etheridge
say, I haven't absolutely. Bloomingdale, Illinois, restaurant I frequent all the time. Great restaurant. And what's important is now you might
- [40:45]
Scott Wapner
not even be able to get into the place.
- [40:48]
Malcolm Etheridge
It is stacked.
- [40:49]
Josh Brown
You cannot do the line dance.
- [40:52]
Malcolm Etheridge
I mean, you do see the line dancing there. But I'm telling you, the, the place itself, the owners, the operators, the operators, they. They get a portion of the profits. And so that. That incentivizes these restaurants to do better and better. Now, the margins on them has stayed steady at 13% despite the rise of beef costs. And the rise in beef cost is something to pay att because in trading commodities, I do think it's starting to sort of pace is starting to peak in the rise of beef costs and that's kind of being a tailwind to text sort of. One more thing on that is, is the fact that the grocer stakes have become more expensive, outpacing the rising cost of a Texas roadhouse steak. So it's driving there. And they're much more than steak too. I mean that baked potato fully loaded is out of this world.
- [41:35]
Scott Wapner
So. Okay, moving on. Finally a couple other moves though, but we gotta go. Oh, I'll come back. Okay.
- [41:42]
Josh Brown
The show is 60 Minutes, baby.
- [41:43]
Scott Wapner
How about this? You bought more antigris and you bought more intuitive surgical that we don't have to come back. We'll come back after this with Spotify. How about that? That's better. All right. That's better. We'll do that. All right. Welcome back. Spotify is popping today, the company holding its first investor day in some four years. Shares though down sharply this year on concerns that AI will disrupt its business. Julia Boorstin live in New York for an exclusive interview today with the company's co CEO.
- [42:10]
Gustav Soderstrom
Hi Julia, Scott, thanks so much. And thanks so much for joining us. Gustav Soderstrom, your first interview since becoming co CEO of Spotify. A lot of news today driving the stock higher but specifically your financial guidance for the revenue and margin growth you're expecting by 2030. Stocks up today but it's still down meaningfully from your highs last year. What gives you confidence you'll be able to achieve those goals?
- [42:36]
Julia Boorstin
Thank you so much for having me. We're very excited to be able to share with the world what our plans are and what we said today is we promised by 2030amid teens revenue CAGR. We promised a 35 to 40% gross profit. We promised a north of 20% operating profit. And we also said that we're going to have strong free cash flow. And we also said that we're going to be committed to our long term goals of billions of subscribers, 100 billion in revenue and north of 40% gross profit. And what gives us the confidence is really the momentum that we have right now. As you've seen, you may have heard, we actually had our biggest subscriber intake in Spotify history just recently last week at our 20th anniversary. So we are still firing on all cylinders and we're seeing strong free growth in free users and in subscribers.
- [43:25]
Gustav Soderstrom
Well, one of the questions analysts have been asking is whether AI could be a tailwind or a headwind. You announced a big partnership today with Universal Music Group to enable your premium subscribers to pay for some AI tools. How do you make sure that there isn't a flood of AI slop?
- [43:43]
Julia Boorstin
So AI does two things right. It is a tool and it can be used for new music and for existing music. There's already lots of new music being made out there across many services. It is getting uploaded to Spotify and there's both great music in there and maybe not so great music. And obviously as you create tools, you also get more opportunity for fraud. But Spotify has always been the best in the industry at fighting stream fraud. That is nothing new to us. Right? What we're excited about announcing today is not the net new music. It is the kind of generative music that can't happen today, which is with the existing catalog. So largely existing creators with existing catalogs have been completely left out of AI. It's only about new music and replacing their catalog. But if you look at other industries like TV and film, existing IP tends to be the most valuable, not the least valuable. But it hasn't been possible for existing creators to participate because there was no legal licensing framework. That is what we announced today, a landmark deal with UMD for our users to be able to do remixes and covers of existing artists music if they opt in. This is voluntary to opt in. We hope everyone opt in. This is one of the first products though, where we don't need everyone to opt in. It is enough that some opt in for us to get started. But we are very excited to let all the existing creators and all the fantastic musicians out there participate in AI as well.
- [44:57]
Gustav Soderstrom
How much do you think AI is specifically going to be driving your growth?
- [45:02]
Julia Boorstin
I think the catalog is expanding drastically and it's going to expand even more with AI, it is important to know that it has been expanding. I think when Spotify started, I've been there for 17 years, we had something like 2 million tracks. And now it may be something like, like over 200 million tracks. So it has already expanded orders of magnitude. I think that that will continue. And so for Spotify, more, more catalog is good because it means the recommendation problem and understanding you as a user gets even more important. But it's important that it's good for creators as well. And that's what we're trying to solve here.
- [45:35]
Gustav Soderstrom
And just a final question. You've expanded to audiobooks, podcasts, and now your next big expansion is into selling concert tickets. How does that fit into Spotify's overall business?
- [45:45]
Julia Boorstin
Well, it's important that we have actually been selling concert tickets. For a long time. This is different and this is very unique. So if you're a premium user, without paying anything more, we're just going to hold two tickets for you to these concerts. This is not an add on tier. You're just getting as a consumer. The fact that we're going to hold two tickets for you and what this solves is a huge problem in the industry, which is that most of the tickets get taken by scalpers. So it's not the right fans that get to go to the right concerts. You had to sit in line and wait to get a chance to get these tickets and you often miss them. What happens now is we actually know who is the biggest fan. We have the play data. We know how deep into the catalog you go, we know how long you've been following them. So we are going to let the biggest fans of a certain artist when they tour get a chance to book these tickets. We're not buying them for the user, we're holding them. And then they can go in and buy them and they don't have to rush. They can take their coffee in the morning and just say, call a friend. Do you want to go? So we think this is huge for our audience, but also for the creators because the musicians hate when their biggest fans cannot go because they missed it. So we're very, very excited for this. This is also unique to Spotify so
- [46:52]
Gustav Soderstrom
much out of this investor day, your first investor day as co CEO. Thanks so much for joining us to tell us not just about your guidance but also your increasing focus on AI and also all of these premium tiers.
- [47:03]
Julia Boorstin
Thank you so much for having me.
- [47:03]
Gustav Soderstrom
Steph Soderstrom, thanks for joining us.
- [47:05]
Megan Casella
Scott.
- [47:05]
Gustav Soderstrom
I'm going to send it back to you.
- [47:07]
Scott Wapner
Julia. Thank you so much. Julia Bortson, quick comment before we do finals. You own that name?
- [47:11]
Stephanie Link
I do. And I'm glad to hear they're throwing the AI kitchen sink at this to get it back to last year's high, around 785.
- [47:18]
Julia Boorstin
Right.
- [47:18]
Stephanie Link
So they still have a long way to go from 500 today to get back to that number.
- [47:23]
Scott Wapner
Well, sure is better than how the day started. When you look at the year to date performance to what the stock is now bouncing at, we'll follow it obviously. What's your final trade while I have you, Mel?
- [47:31]
Stephanie Link
Now IBM, I think that Quantum is the sizzle, but realistically their AI book of business is the stake.
- [47:38]
Scott Wapner
All right, there you go. The man at Texas Roadhouse. You're gonna grab a brat on the on the road in Wisconsin.
- [47:43]
Malcolm Etheridge
Maybe some chicken tenders. Some brats too. Texas Roadhouse makes great chicken tenders.
- [47:49]
Scott Wapner
I thought we had moved on from
- [47:50]
Malcolm Etheridge
there service now it's up 8% on the week, down 3 today. I think services in general service that
- [47:56]
Scott Wapner
you can see that turning didn't get the Wisconsin thing.
- [47:59]
Bill Baruch
Stephanie Lay Alcoa is actually a new position for me tied to the AI and the industrial demand and this is the number one player in the industry.
- [48:07]
Josh Brown
JB Netflix making a higher low. This is constructive action. We'd like to see it.
- [48:12]
Scott Wapner
Chris Harvey just raised his price target on the S and P. He'll join me at three. I'll see you then. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekly days at 12 Eastern only on CNBC.
- [48:29]
Edward Jones Financial Advisor
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. Accuracy and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftime reportdisclaimer what would
- [49:03]
Bank of America Advertiser
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Seema Modi
Don't worry, you got this.
- [49:08]
Bill Baruch
Whoa.
- [49:09]
Bank of America Advertiser
Hear that?
- [49:10]
Scott Wapner
I did it.
- [49:11]
Bank of America Advertiser
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