Scott Wapner (4:03)

So you're on the PT team. Pt.

Steve Weiss (4:05)

Exactly, exactly. Paul Jones Right now you don't have to show ROI audit. What you do have to do is show up and spend. So you don't know if your spend meta doesn't know if all their spends going to yield return or what returnable yield. But they know if they don't do it now and if the others don't do it now, it's an issue and that trickles down to the companies that we see like a couple would talk about.

Scott Wapner (4:28)

So Weiss said something within that that I made note of and I wrote it down when he did because he said values are now inflated. Okay. There's a difference between valuations being inflated and prices being inflated. Right. So the price action of this market has made everybody sort of sit back and say this is incredible. Like it's, it's insanity to some degree. But what's a price appreciation doesn't necessarily mean a valuation appreciation. You look at like Micron's chart, for example, right?

Michael Santoli (5:01)

Yeah.

Scott Wapner (5:01)

Like, look at Micron. You look at that and you're like, this stock goes up like 10% every single week. I mean, every single day of every single week, it feels like that's up 12%. Yeah. Just again today. But look at that. But the multiple, right? The multiple is not like some historically egregious number, but the price action is crazy.

Jim Lenthal (5:19)

Why? Answer my question.

Steve Weiss (5:20)

No, no, I just want. I just want to give context, because I meant to give that as an example. I bought Micron when it fell after earnings. So I bought it on the end of March, March 30th, and then again in April, I paid 350. March 30th. On April, I paid, I think, 425. It's doubled, you know, from that 4, 350amonth ago. A month and change ago. That's not natural. The company is not worth as now, two sides of the bait. On one side, it's not gotten 100% better. On the other side, bait, maybe it shouldn't have been down.

Jason Snip (5:52)

So.

Steve Weiss (5:52)

But that's just a question of the lunacy in this market.

Scott Wapner (5:55)

Well, is there a lot of pull forward, double order, you know, all that, all that kind of stuff which, which talks about the forward PE of Micron. Eight. Less than eight. Yeah.

Jim Lenthal (6:05)

I mean, that's.

Scott Wapner (6:06)

You look at the stock price, a lot of people look at the move and they say it's got to be like 800 right. Times earnings. And in fact, it's not.

Jim Lenthal (6:13)

It's not because these companies are delivering, they're blowing away rising earnings expectations. And that has been the elixir that's driven this market. It's been a market of one, it's been a market that has been driven by AI.

Scott Wapner (6:27)

Been a market of five.

Jim Lenthal (6:28)

Well, when I mean one, I know what you mean.

Scott Wapner (6:31)

One, I know what you mean.

Jim Lenthal (6:32)

And it's ignored some of the risks that Steve pointed out. There's no question. I mean, the, the risk of high oil prices, the risk that the Fed's been, you know, moved to a status that is immaterial given the growth that we're seeing in one of the greatest secular opportunities of all time. I think what it leads to, though, is a pretty narrow market where semis are now 14% of the market. Right. So you do have to pay attention to. If there is a pivot, we don't see it yet. When I say pivot, a slowdown announcement from. Hey, this is going to decelerate.

Scott Wapner (7:07)

You never see it until it's here. That's part of the problem. And that's what happened in 99 into 2000. You, you, everybody was riding this wave on this, thinking the surfboard was good until, until the wave rolled. It's true. Most. Okay, I don't know what you look, give me that look like you were the only one who saw it coming.

Jim Lenthal (7:24)

No, I'm not saying I'm the only one that saw it coming, but I'm saying it was a different cohort of businesses that weren't producing earnings.

Scott Wapner (7:29)

It doesn't matter. People still saw a wave of, of, of money coming their way in the market. They, they were like blinded to whatever the risks were until it ultimately rolled. And then it, and then it was painful.

Jim Lenthal (7:42)

So I think what's, what's a little more helpful today is the analytical capabilities of everybody involved. You're looking for the change in the rate of change, which is a precursor to what could ultimately happen. So we sit here and we wait for that. And every time that Delta has, has ran positive. Sorry, I lost my.

Scott Wapner (8:02)

That's okay. You can fix it. You can, you can fix it. But look, the optimism is abounds. Obviously RBC today they lift their year end target to 7979 from 7750 because of AI optimism. And we all get the optimism because it is everywhere. Does it matter in any way, Jim, that only about half of the S and P constituents are above their 50 or 200 day moving averages? Does it matter that nearly 2/3 of the S&P is down 10% or more from their 52 week highs? Does any of that matter? As long as we are at, to Rob's point, singularly driven on this one thematic investing opportunity.

Jason Snip (8:46)

So I think it does matter. But it matters, depending on what your perspective is, is if you're bearish, you're going to say, okay, well see, that's not a healthy market. It's all narrow. It's concentrated on just a few stocks. If you're bullish, which I am, you're saying that all of the things that are driving the semiconductor stocks and the AI trade right now are going to flow through to rest of the economy. Whether it's financials that are financing everything. Think about Oracle's debt financing, just as an example. Think about the IPOs that are coming. Think about energy, that there's still, you know, we have high energy prices. Think about materials, then the demand for things like steel going into these data centers. So again, yes, it does matter, Scott. And I look particularly, not that this is a perfect analogy, but at the 493 stocks other than the MAG7 trading at 19 times earnings with an earnings growth rate through the rest of this year, that's going to approach 20%. And I say, hey, that's fine. I, I think you can buy those areas outside of technology if you are nervous about anything going on in the semiconductor space. Just to the semiconductor space. Yes. When we look at Micron, 8 times earnings looks like a buy. There are other semiconductor stocks. I think we're going to talk about them. I don't want to front run, you know, but if you look at something

Scott Wapner (9:57)

like sounds like you're on your way to doing it anyway.

Jason Snip (9:59)

Yeah, I'm sorry, I'm sorry Scott, but

Scott Wapner (10:00)

I think I don't want to front run them. But hey, you see Qualcomm and then he's going to go on this whole thing for like 3 minutes. On Qualcomm. Yeah, seen this movie before.

Jason Snip (10:07)

Go ahead. But up 70% in a month. Up 70% a month. Okay. It was a good quarter, but it wasn't that good. And by the way, for the next quarter they guided down. So this is all on the come regarding things like data center building and a bottom in the handshake.

Jim Lenthal (10:22)

Notice something though.

Jason Snip (10:23)

Let me just, let me just, let me just land the plane here. Okay. There are some parts of this market that are pretty darn frothy.

Jim Lenthal (10:29)

Well, you notice that one of the fundamental underpinnings that I'm hearing from all the executives I talk to is a refocus not just on AI, but on technology writ large. And what that is forcing them to do is think about how to invest in productivity in their business. And I do believe that you will see positive output from that more broad base than just AI.

Rob (10:55)

Yeah, listen, I mean there's, there's, it's absolutely a thematic market. I mean if we just turn to the earnings picture with the 85% beat rate, 27% earnings growth rate and again it's the themes, it's the Microns. I mean we haven't talked about Nvidia today yet. But you know, as I look at Nvidia even two or three years ago buying a stock that's growing a 70% clip, trading at 23 times, that's an absolute bias screaming buy similar to what's going on in Micron. So Scott, you're absolutely correct with these, These stories are out earning, right? So they, they appear to be not expensive. And I think that's kind of a moment in time. But I think the other thing that I think is prudent is position sizing. We want to make sure that you're actively rebalancing. I know this story has got a lot of legs, it's got a lot of Optane, it's got a lot of fuel, and I think it will continue to go, but I think you just need to be prudent from an asset allocation perspective.

Scott Wapner (11:49)

This move in market from the March low has even picked up the areas within the AI trade that were, you know, seemingly left for dead, like software, for example. Now, we're not really talking about software companies becoming either disintermediated, in some cases out of business altogether because of what AI. And as we identify that the world is going to, going to look like because now, now you have. The IGV is about to have its fourth straight positive week. It's the longest since September. Cyber's coming off its best day since April. Of 25 huge winners across Datadog the other day, up 68% this month. Now Oracle's up 36. Applovin's up 29. The cyber names, I'm talking about Fortnite in a month, up 30. CrowdStrike up 20. Weren't the cyber names like, done because of Anthropic Now? Now they're, they're off the mat. You get my point. It's like, yep, we're not even discriminating anymore between AI and tech. If you are in AI, you are riding this wave to, to, to new highs in ways that we just haven't seen in an awfully long period of time. Whether it's justified or not, everything's playing ball.

Steve Weiss (13:06)

Yeah, I think the market is saying, look, we're going to be a little more in tune with what the corporate narrative is, what management says, how we're going to benefit from AI. In a lot of cases, in strict software names, even Microsoft's had a nice bounce and that had been the primary target.

Scott Wapner (13:23)

It has. Microsoft's up 17% since the March low. Looks paltry compared to Alphabet's 45.

Steve Weiss (13:29)

But yeah, and it's still down significantly from the high. I mean, 25% or so. So I think that's what the market's doing. It's looking for its opposing bargains and defines bargains not by the valuation but by the stock price. Going back to your point that you made in the, in your opening comments, it's about price.

Rob (13:47)

Now.

Steve Weiss (13:47)

It is still discriminating some companies that haven't Set that message clearly and is not part of the software index. Pick a pick, you know, pick a Bah, right. Who's Alan? I mean that can't get up its own way and every day it's a little more down. It's largely a software company, it's largely a, a consultant company. So there's still picking and choosing but once the momentum starts, that's signal get on board or you're going to miss out, miss performance and everybody sees it. So there is a huge element of greed in this market that's driving.

Jim Lenthal (14:21)

I think there's going to be something very different there though. I think in the software space it's going to be much more earnings based than multiple based. I don't think you're going to have that enthusiastic multiple opportunity expansion opportunity without earnings delivering and therefore I think you're going to have, have and have not.

Scott Wapner (14:39)

Isn't that the whole, isn't that the whole difference though? Now the, the tech trade in general, right? You had that, this was largely a multiple expansion kind of market for a while but then we said that earnings were going to have to pick up the slack the, the multiple compressed. So now you were going to get, you had to get earnings driven results and that's exactly what you've got.

Jim Lenthal (15:00)

And, and some of those, some of those fears turned out to be overblown for some of these software stocks. You look at a stock like Adobe, it really hasn't moved much from, from its lows. You look at some of the other. Jim knows that you did your reference. I did too. We sold it. So I, I needed Rob.

Steve Weiss (15:17)

It is a multiple expansion also because the earnings that been reported don't justify 50% moves since an earnings report or 70% moves since the Qualcomm.

Jason Snip (15:30)

There's just, there's a degree to which it's, you know, some of these stocks,

Scott Wapner (15:32)

it's Adobe's ripping by the way, over the last month.

Jason Snip (15:35)

Yeah, well, just stand by. I mean this is your opportunity to buy it. I'm not backing off of that but I do want to because that's not. If we're just going to do the yuck yucks on Adobe. I don't know, it's not fun for me. But what I think is why do

Scott Wapner (15:47)

you think they're doing it?

Jason Snip (15:52)

But what may be a little bit more germane as we're talking to this is confirming, in my opinion, confirming the software move are the asset managers. I mean has anyone looked at Apollo recently? It was below 100 like two months ago. Remember the whole Trinity article could also.

Jim Lenthal (16:06)

Jimmy and I love you.

Jason Snip (16:08)

No, go ahead.

Jim Lenthal (16:09)

Buying. Bouncing off oversold.

Jason Snip (16:12)

So. So that's so. So that's what I meant by maybe it's a certain stock's turn. I happen to not think that in Apollo with Qualcomm, which I'm still owning and I know Jason, you own it as well. I feel like 70 in a month. It's just, it's turn like everybody decided, you know, whoever is the. The participant, Steve, that you talk about the new participants, they've just decided it's quality.

Scott Wapner (16:32)

It got upgraded today to outperform Daiwa. 225 is the price target. I mean it's knocking on the door.

Jason Snip (16:39)

Attitude follows.

Steve Weiss (16:39)

Now I think somebody.

Scott Wapner (16:41)

Why aren't you. Why aren't you. If you believe that, why aren't you taking any. Because off the table.

Jason Snip (16:46)

Because it might be early.

Scott Wapner (16:47)

You don't want to get out of the way. See that. Why are you talking both sides. Both sides of your mouth?

Jason Snip (16:51)

No, I'm maximizing my returns. Let me, let me speak out of that side of my mouth. I probably will trim. In fact, you can ask Andy. I texted her this morning that I'm long and strong on Qualcomm and Cisco because they're going up. But those two are trim candidates right

Jim Lenthal (17:05)

now there in the early days, it's trading at 22 times. They play.

Rob (17:11)

Play.

Jim Lenthal (17:12)

Automation, robotics and connected devices. That's all anybody's talking about right now.

Scott Wapner (17:17)

Yeah.

Rob (17:17)

And it wasn't even a great quarter for Qualcomm. Right. So handset business was somewhat down but Iot and, and automated was up a lot. And it's really about the Q4 story. It's even the guidance was weak in Q3.

Scott Wapner (17:30)

Okay, so that then let's have this debate because you guys just set it up perfectly. Rob on Qualcomm, that's all anybody's talking about. Stock straight up to the moon. Jason's like, well, the quarter wasn't even that good. Nor was the guide. Isn't that exactly what we're talking about here?

Jason Snip (17:45)

Yes.

Scott Wapner (17:45)

That have. But. But ones that are. I dare I use the word justified in their runs and those that are just on the hype train. Yeah, you, you're.

Jim Lenthal (17:57)

Is it hype or is it the directional focus that is happening in markets plays right into their hand and it hasn't manifested itself in the current quarter yet. And I think it's. That is what driving. It's not just a positive headline. It drives it. It's the core Focus of the business.

Scott Wapner (18:16)

Rising tide lifts all boats. Is this a motorboat or a sailboat?

Jim Lenthal (18:21)

Well, a lot of people think that they're going to catch a wave and it's going to be a pretty fast motorboat because of the areas they're focused on. That's kind of what I'm saying. Right. So we may have had an outside move. Outside move to Jim's Point. But I think it's because we're fundamentally looking for the next asset in the space. It's no different than Broadcom when it was left behind. Same thing. And then ultimately, you know, the, the earnings proved out to verify.

Jason Snip (18:49)

There is something to be said about how cheap the stock is. And a lot of times we talk about cheap stocks and we say they're cheap for a reason. But sometimes when you've got a good company that's just undervalued, good things can happen. Now, I'm not gonna, you know, back off of what I'm saying here, which is to say this, if we were talking about this yesterday, would have been up 61% and it would have been a trim candidate there. But as a portfolio manager and a market participant, when a stock's running like this, don't get in its way.

Scott Wapner (19:14)

Let's look at Taiwan. Let's look at Taiwan Semi for a minute. I want to see what it's, what it's doing today. And then I'll make the point that, that I, I think I'll have the ability to make. Well, I mean, the stock's not, not doing all, all that much. But if you back it out, I don't know, let's do a year to date on, on Taiwan Semi because relative to some others, maybe it doesn't look like that massive of a move. It's still up 36% and even being down a bit with news that the sales have grown the slowest in months. Okay, so yes, the AI build out persists and it does for everybody. The sales growing the slowest in months, the slowest revenue expansion since October, and the Stock's down a fifth of 1%. Market doesn't even care.

Steve Weiss (20:01)

Well, there are lots of reasons for that. So some could be they're waiting for new designs. Others could be that they already sold out their capacity. So they don't. Which they have done. It's been sold out for a couple of years. So they don't have the wherewithal to really drive earnings until new capacity comes on, you know. But look, what I'd point out is what's happening here There's a multiplier effect which does impact the multiple on the stocks. Take a look at MD at amd. Good quarter, some would argue great quarter. Was it a hundred billion dollar quarter?

Scott Wapner (20:35)

Right.

Steve Weiss (20:36)

Should IT have added $100 billion to

Scott Wapner (20:39)

the market cap today?

Steve Weiss (20:41)

It's crazy. So to me that's crazy. At the end of the day this will come to an end in terms of this growth. But here's the beauty of it. The beauty of it again going back to pull Paul Tudor Jones what he said, which I agree with. You don't have to pick winners and losers just now. Now it's about the spend. Now it's about these knock on plays, the second derivative that are going to see their business grow. But we don't even know, you know if the deals they've announced will be funded. We're seeing some that step back in the funding. You see with Core Weave and others it's difficult to place billion dollar, you know, loans.

Rob (21:15)

So.

Steve Weiss (21:16)

So right now it's sort of like you got to do an awful lot to be wrong in this market. Well on those names and that's what

Scott Wapner (21:23)

scares me the challenge and Jimmy kind of alluded to it, it's knowing that this is going to end badly at some point. Yeah, right. Moves like this always end badly.

Steve Weiss (21:37)

Of course they do.

Scott Wapner (21:37)

Eventually no one can, no one, no one ever knows when. Okay, but it always ends kind of bad. Right. And so you're weighing that in half your mind. And then the other part of you is like, well, I, I don't want. What if it's two years from now? I don't want to miss out on the next year or two. Now you're not necessarily saying that those exact words when you talk about Qualcomm. But you look at it and you're like, well, this moves kind of nuts. Maybe I should take some profits. But on the other hand you got the person on this shoulder. Right? But we don't want to miss out, Jimmy.

Jason Snip (22:11)

Yeah, but you know what?

Scott Wapner (22:12)

You want to keep riding that subway car to the next book.

Jason Snip (22:15)

That's right. I love the sub the subways. Look, what you do is you trim. You don't have to sell the whole thing and we talk about this. They're not doing that because it's going up. I mean and I'm not being facetious in the slightest bit. Look at making my point for me, right? So wait till the going up. Wait till we would have had this conversation had I been on yesterday. We could have had the same conversation about Qualcomm that same conversation. What's the difference between.

Steve Weiss (22:42)

Let me ask questions going back to my thesis years ago, five years ago, if you saw these kind of moves in the stocks, what would you have done? My bet is you being a value player at the core, you would have been out.

Jason Snip (22:55)

Well, okay, but, but let's also bear in mind that this particular stock is trading at what, six General?

Steve Weiss (22:59)

Not this year.

Jason Snip (23:00)

So I, I think, I think I'm agreeing with you, Steve, which is that. Let's call it silly time, let's call it what it is. Okay, but that doesn't mean you shouldn't make money. No, no, I agree. I'm not, I'm as green as you,

Steve Weiss (23:11)

but that goes to Scott's point, which is that it's going to.

Jason Snip (23:15)

So what you're not going to do here, and I'm speaking to the viewers here, don't try to top tick this. Just let it go and when it comes down like a few percent, just say, that's good enough. Okay, but I will say, I will say this, though, to the stocks that we're talking about.

Scott Wapner (23:28)

If it's a dance until the music

Jason Snip (23:31)

stops, well, that's exactly what it is. But why stop early? Why? Let's dance, let's have some fun, let's make some money.

Jim Lenthal (23:38)

Frankly, the most powerful factor in the market is momentum. He's right. There's, there's none other. Followed by we're selling today.

Jason Snip (23:46)

I think you'd be saying, what are you doing?

Scott Wapner (23:48)

No, no, I'm, I'm genuinely interested and curious as to how, how all of you who advise people.

Jim Lenthal (23:56)

So there is, there is an element of making sure your positions are right sized from a risk management standpoint. So if you're talking, those are all your. Yeah. Talking by stock. You know, you might not want to get off the train, but if the stock becomes a very outside position within the portf in the valuation is a little scary. I think you can trim and still own. Listen, there's plenty of people that have, you know, have bought great houses. They don't want to move in. Sometimes when they get a little ahead of themselves, they're tempted to do things that maybe they shouldn't. I think Jim's an investor and he's saying, stay the course in that. There's others that may flip off a portion of their property, you know, you know, but maintain the exposure to the neighborhood.

Rob (24:48)

And I'll say, I'll say this quick thing just on the memory run that we've seen. If you go back three or four years ago, these stocks had no pricing power whatsoever. So I think there's a, there's an element of the story that the business model is evolving and changing. I know the concern about cyclicality and double ordering, but the business model is shifting. So I do think you need to respect the momentum.

Scott Wapner (25:09)

All right, coming up, stepping into the limelight. It's just not anthropic. OpenAI or SpaceX on their quest for the IPO. There's another notable name just filed to go public. Our McKenzie Segalis is following that money for us. You'll be interested in it because you know the name. When we come back,

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Com.

Steve Weiss (27:17)

Hold on man.

Scott Wapner (27:17)

You stole snipes water. You crushed. You crushed two in like 21 minutes and you stole his too.

Jason Snip (27:23)

I felt like two in the A block is my recommended daily allowance and I might do one or two when

Scott Wapner (27:28)

you're getting ready for the water cam up here.

Rob (27:31)

Please.

Scott Wapner (27:32)

Can you please.

Steve Weiss (27:33)

I don't want to be sitting next to him when the water load hits. Okay.

Scott Wapner (27:38)

I mean in terms of using expenses for this program, seriously, I Feel like.

Steve Weiss (27:43)

Yeah.

Scott Wapner (27:43)

All right. Anthropic OpenAI and SpaceX, they've sucked all of the water out of the IPO stream lately. But another company of interest just filed to go public. It's Lime, the company best known for its scooters and bicycles in cities around the world. You certainly know it. If you've traveled, maybe seen them here, too. Mackenzie Segalos has those details. Hi, Mack. Tell us more about this.

Mackenzie Segalis (28:06)

Hey, Scott. So this is an IPO that has been years in the making. Lime filed this morning to list on the NASDAQ ticker Lime, with Goldman Sachs and JP Morgan among the underwriters. The company, based here in San Francisco, did not disclose terms of the offering. But I've been going through the S1

Edward Jones Narrator (28:23)

and the pitch to investors.

Mackenzie Segalis (28:24)

Investors really starts with growth. Revenue is up 70% over the last two years. It's been cash flow positive for three years straight. However, Lime is still not profitable. Losses have come down significantly from 2023 levels, though ticked back up last year. Debt is an issue as well. They have around a billion dollars in current liabilities, with the vast majority due by the end of this year. Lime says it doesn't have enough liquidity to cover that and warns that there's substantial doubt about its ability to continue as a going concern unless it raises money through this IPO or finds other financing. Uber, of course, the key strategic backer here at Led Lime's rescue round in 2020. And today Lime is that scooters and bikes business inside of the Uber app.

Scott Wapner (29:07)

Scott Mack, thank you very much. This is Mackenzie Segalis. I mean, it's a little bit of a tough pitch. Yeah, right. We gotta go public or else we're done.

Steve Weiss (29:16)

Yeah. And I looked at Lime and I looked at others on these pricing on various rounds over the years, and there's no real moat to business. If you have the dollars, you can raise the capital for the infrastructure because you got to pick them up, you got to take them from where they're dropped off, bring them back. And the problem is those costs so high, I doubted they would ever be profitable, which is why we didn't participate. So that's really the issue. So I assume they've run out of opportunities from their existing investors who are unwilling to play in this round. Keep in mind, the valuation 1 point was 5 times what it is now coming out. So it's. I think it's a problem business. For obvious reasons, I wouldn't invest in it, but I'm sure there's some others that'll play the mobility platform, that, that was actually a very popular private company, you know, theme like let's play mobility. So you had all these, all these related companies, you had autonomous planes. I can't tell you how many autonomous plane companies there are out there.

Scott Wapner (30:17)

I thought that the, maybe the sound bite of the week was from Brad Gerstner on, on way back on Monday when he was talking about open and anthropic and SpaceX saying essentially if you, if you're looking at the big picture of the IPOs that are, that are on the come, that they've already IPO'd, they've IPO'd in the private market. So investors in general, you all retail need to be tempered in their expectations of what these mega IPOs are potentially going to do.

Jim Lenthal (30:48)

I do agree. We, we many rounds of SpaceX OpenAI XAI, you know, and frankly each one of these has moved quite a bit since we initially participated. Great for all of you, great for the private rounds that are those that are able to get access, which is obviously harder.

Scott Wapner (31:09)

But well, in some respects it's becoming easier too. It's much easier, much easier for retail to get, get involved in private companies now.

Jim Lenthal (31:16)

Not that easy for all the viewers on this show, Steve, to get access to those things. Well, let me tell you, if they have an, if they have an access point and so I do think they're, they're scaled back, they're measured rounds, there's some democratization, there's no price transparency on some of that unless it's around. You can go to these various channels where an insider can sell on a Carta or on a, on a Forge.

Scott Wapner (31:45)

Right.

Jim Lenthal (31:45)

And you can get access. But it's a name, your price thing, a negotiated, it's a negotiated thing. If you're able to participate in some of these things, it ends up being great. I do think in these businesses though, there's enough enthusiasm built up through the private rounds with still a lot of demand going into the ipo. So I think they're going to be fine. I don't think we're going to see the asymmetric upside that we used to see in some of these because they happen much, much earlier, but they don't need to. I think that there's a bigger discussion here on the changing structure of the capital markets and how, when is the right time to go public when you have endless access to capital?

Scott Wapner (32:24)

Well, that's the whole reason private length that they are. I gotta go and, and will only remain that way. I'm just thinking about the, the reward for the, the viewer who is can't wait for these IPOs because they think, well, I've been waiting for anthropic and open and I'm so bullish about the prospects of AI when their upside might be more limited because they've waited so long to go public. That's the point. And the people like you all who have access to private markets on behalf of their high net worth clients, yes, you have given them the benefit of that. But not everybody, to your point, has the easy access that one may.

Jim Lenthal (33:02)

I think that will change actually with tokenization, digitization. I think there's a seminal change coming with that. It's just not here today. And frankly, the structure, the rails of the capital markets are going to change quite dramatically over the next several years.

Scott Wapner (33:19)

All right. Let's get the CNBC News update with Seema Modi. Hi, Seema.

Mackenzie Segalis (33:22)

Hey, Scott. Here's what we're watching at this hour. French prosecutors are escalating their investigation into Elon Musk and his company X to a criminal probe. The Investigation began in 2025 and is focused on complaints that the social media company manipulated its algorithm to interfere with French politics. They also argue that Musk and X knowingly allowed users of the AI chatbot Grok to spread disturbing content. In other news, at least three hikers were killed when one of Indonesia's most active volcanoes erupted this morning. The eruption sent a thick ash cloud six miles high into the sky, according to local authorities. Investigators are looking into why the group was hiking the volcano after officials banned hikers due to increased activity. And the Justice Department is seeking to strip the U.S. citizenship of a former U.S. diplomat who was caught spying for decades for the Cuban government. Manuel Rocha, a native of Colombia, admitted to working secretly for Cuba for nearly 40 years, including during his time as the U.S. ambassador to Bolivia. Rocha is currently serving a 15 year federal prison sentence. Scott.

Scott Wapner (34:25)

All right, Seema, thank you. Seema Modi. Coming up, the trade on Citi after that company holds its first investor day in the some four years. Our Leslie Picker speaking exclusively today with Citi's CEO Jane Fraser. We'll give you the highlights next. We'll talk to the shareholders sitting to my left as well.

Jason Snip (34:41)

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new followers though at&t business Wireless connecting changes everything. All right, welcome back. We're watching City shares closely today following the company's first investor day four years. CEO Jane Frazier speaking exclusively today with our own Leslie Picker within the last hour or so. Leslie joins us now with those highlights. And I talked to Mike Mayo yesterday who told me that he loves what this company is doing and why that stock is now his number one pick.

Edward Jones Narrator (37:24)

Yeah, he's been a big champion of Citi for sure. Matt, Yesterday's investor day. Citi did boost its its short term and medium term targets for profitability. But most analysts still saw that new guidance as somewhat conservative. Frazier told us last hour that there's potential for further upside because they didn't bank on looser capital rules which appear to be coming down the pike from this administration. I asked her about why investors should trust that the turnaround she has been spearheading is different from the prior 12 that have been attempted by others. At Citi, we rebuilt the bank from the ground up. We did not take an easy path. We had a very deliberate path of how do we build the bank for the decade ahead. And that's not a bank in a calm and easy world. It's been very deliberate and we haven't taken the easy path, no shortcuts. We've taken tough decisions and we're very proud. You can see the improvement in the performance. Fraser also spoke about geopolitics, given Citi's uniquely global exposure. She said that while the global economy has been resilient, we have yet to see what she calls the second and third order effects of higher energy prices and supply chain challenges. We will see a more protracted inflation challenge certainly through the rest of this year. At that point, it should then go back and we should see the US heading back to more of the 2% range again. But this is unquestionably going to have an impact, and I don't think it's fully appreciated how long it will be. We also asked her to comment on reports that she plans to accompany President Trump on his trip to China. I am planning on going next week, and I think it's very important to see engagement, engagement between the two governments of the two most important economies in the world. We all need that engagement to be occurring. Fraser said she's interested in learning more about China's leadership in physical AI while on the ground in the country. Scott.

Scott Wapner (39:37)

All right, Leslie, thank you very much. That's Leslie Picker. You're the shareholder. Jim. And this stock year to date is the best performing of the big firms, up 11 and a half percent year to date. Right.

Jason Snip (39:47)

I think there's more to come, Scott. Now, I do want to be frank that the easy money has been made. If you go back two, three years ago, this was a stock trading at 50% of tangible book value, which at the time, and for a long time I said was ridiculous. Well, no, it's, it's no longer there. It's 1.3 times now. We're in the execution phase of. We need those higher profitability targets to be met. We need the Ban MX IPO to go through. We need to get Citi out of the consent orders from various regulators. Here's the punchline. Jane Frazier has shown she's up to the task. She's shown it. She's been doing this for five years now. The first three years, the market gave her no benefit of the doubt. The market said this is going to be another failed turnaround. Last two years the market has believed, she has proven them and I think she will continue.

Scott Wapner (40:31)

Mayo is a believer but even he admits in all of the positives that he can cite there, this is what he told me. Yes, they're only part of the way there and if they can execute on the existing plans, there's still a lot of upside for the stock. Not a foregone conclusion that they can in fact do that to keep delivering. What you already said was some degree already in the name but I think there is more.

Jason Snip (40:56)

And when it is all about execution here and when you look at the growth areas for Citigroup it is primarily wealth management and the investment banking they have brought in leadership over the last two to three years there that has really invigorated both of those business lines and that's where I think they will continue execute. In addition to what I mentioned before,

Scott Wapner (41:13)

okay, B of a goes to 170 and Morgan Stanley goes to 154. That's coming off that investor day again, the first in four years. Mike Sintoli.

Jason Snip (41:37)

Foreign.

Scott Wapner (41:44)

Markets COMMENTATOR over time co anchor Michael Santoli joins us now with his midday word. Wasn't exactly sure where I was going to take this but then I looked again down at Micron and I'm like we've, we're memeing, we're, we're just memeing this stuff.

Michael Santoli (41:57)

No, without a doubt. I mean the market is trying to keep pace I guess with the, the whole momentum behind the out years, earnings estimates going higher. This idea of the only things working are AI plus scarcity and that's both contained in Micron. All that said, at some point it goes vertical, gets unstable just because of the speed of the move and we have to figure out how the market's going to deal with whatever retrenchment comes. You know yesterday I said we had a two day shakeout a couple weeks ago in the semis index and it was like 7% and we bought it.

Scott Wapner (42:32)

It.

Michael Santoli (42:32)

Well yesterday we had down two and a half percent. Now we're buying them again. So clearly there's a, there's that reflex to just grab at these stocks. The rest of the market is not doing anything particularly noteworthy or interesting but it's also not falling apart. I think you could squint and say banks are down almost 2% as a group, big cap banks on a, on a week to day basis doesn't seem to be fouling the mood. We got the jobs number today that at least gave people permission not to worry about an imminent consumer downturn beyond what we were already worried about. And then it's all really about the internal dynamics of this market and how much, as you guys have been talking about, the AI trade can sustain it.

Scott Wapner (43:10)

All right, I'll see in a couple hours on closing bell. Michael, thank you. Mike Santoli. Coming up, options action in Cisco ahead of earnings next week. Jimmy's in it, but we have the options trade that's got Oliver Renick's attention at the C boat. He'll tell you what that trade is next. All right, welcome back. Tracking some notable options activity today in Cisco ahead of the earnings report which is coming next week. CNBC's Oliver Renick's live at the CBO Global Markets in Chicago with the trade that he has his eyes on. Tell us more. Thanks, Scott.

Jim Lenthal (43:45)

Cisco options are leaning very bullish right now.

Scott Wapner (43:48)

More than four times more calls trading the put.

Jim Lenthal (43:51)

And in those calls, more than twice as many were bought today compared to sold. Most of the trading is in at or near the money call contracts.

Scott Wapner (43:59)

And the biggest trade we saw come

Jim Lenthal (44:00)

through CBOE today was a $200,000 purchase of more than 55095 strike calls expiring May 15, a bet on another 3%

Scott Wapner (44:11)

move higher to pay for the premium by next Friday. But here's what's key. As you guys were just talking about

Jim Lenthal (44:17)

with the memeified stocks, implied volatility in

Scott Wapner (44:20)

Cisco is the highest in more than a year.

Jim Lenthal (44:22)

Paying up for these calls ahead of

Scott Wapner (44:24)

earnings is basically the options equivalent of accelerating into the turn, a high stakes maneuver that mirrors what we've seen in

Jim Lenthal (44:32)

the options of other high flyers like

Scott Wapner (44:35)

intel and AMD in the lead up to their explosive breakouts. Scott. Oh, interesting, Oliver. Thank you. Oliver Renick. We'll see a little bit later. CBOE in Chicago. So you have the stock that reports next Wednesday after the bell.

Jason Snip (44:47)

Yeah, and I think I've implied earlier that this price action is making me a little queasy. Not a lot, but a little. And I think Oliver just set it up really well by the comparison to Intel. I might have made the comparison to Oracle a year or so ago when it had a breakout. Now that breakout, we talked about this, Scott, earlier this week was a bit of a sugar high. I am not trimming until earnings and I'd love to see that little breakout and then I will. It only trades at 21 times earnings with estimates going up. The stock's been a home run. I've owned this for about 11 years and during that time frame it's nicely outperformed the S P500 with a beta less than 1. But at some point you look at these stock moves. This is what we've been talking about all day today and you say I got to take some action. To be clear, I'm not taking any action today. I'm going to ride it into earnings but likely after that I trim.

Scott Wapner (45:31)

Okay, amat is next week, right? That, that's you talk about stocks that have gone straight up these chip material names as well.

Jim Lenthal (45:38)

One of the strongest pockets of the entire market. This expectations are massively high. So I, I, you know, I think they have to deliver. There's no question about it.

Scott Wapner (45:49)

All right, hold your finals out this break. Back on the halftime report with a news alert from Mackenzie Segallos. What do we know Mac?

Mackenzie Segalis (46:17)

So Scott, you got intel shares surging more than 14% on a report from

Edward Jones Narrator (46:21)

the Wall Street Journal that says it.

Mackenzie Segalis (46:23)

Intel's reached a preliminary agreement with Apple to manufacture some of the chips that power its devices. They are citing people familiar with this matter. Apparently those intensive talks have been ongoing for a year now. Of course intel and Apple longtime partners. Intel used to provide the chips for their machines. They indexed away from that relationship back in 2020. Now it seems intel is going to be manufacturing the chips that Apple designs. What I will say is that it is still unclear at this point which chips intel would be manufacturing. We know that they've got the M series for their machines and they've got the A series for their iPhones. But those shares more than 15% higher now for Intel.

Scott Wapner (47:00)

Yeah, market Market doesn't need any more specifics just now Mac. Thank you Mackenzie Segalis because investors are bidding that up by better than 15%. You back that thing up over a couple of months or even a month and you're going to see just a tremendous gain. This is one of the best performers out of the chip space. 113% Jason snipe in in a month.

Rob (47:21)

Crazy. Crazy. I mean I'm not in it man.

Steve Weiss (47:23)

But you're an Apple.

Rob (47:24)

I am in Apple which is at

Scott Wapner (47:26)

an all time high today. It is, it is.

Rob (47:28)

And iPhone sales were up 22%. You know services were up 16 and we think about all the capex spend that we've been talking about, you know, throughout the quarter. R and D is now 10 of sales for Apple. So stay tuned to what they might

Scott Wapner (47:41)

get on their way knocking on the door of 300 bucks. So we need to keep A close eye on that. We have some moves that we didn't get to as well. Yep. So you sold Leidos?

Steve Weiss (47:51)

I did.

Scott Wapner (47:52)

That's a big deal.

Steve Weiss (47:53)

It is a big deal and I was a little late in doing it. Look, I was waiting for this quarter to actually turn the tide and didn't book to bill was 0.8. The quarter was better than expected. Guidance was better than expected. But they're also laboring under the same software clouds and a couple of big contracts. Management's excellent. I'll be back. It's just I thought it was dead money and that's a cause this time you bought ftai. I bought it back. You know, I've traded that fairly aggressively. Yeah, on their quarter, you know, originally it was down and then it just took this major move up. I didn't count that major move up. I didn't catch it by the way. But I bought it at the tail end of that and still up 10% in a week. Same thing with VRT. I went back into VRT at the same time.

Scott Wapner (48:39)

And you trimmed Netflix again.

Steve Weiss (48:41)

That's dead money. You know the narrative there just isn't changing. It's a show me stock, particularly with sub growth not being recording.

Scott Wapner (48:50)

What do you mean dead money? Like after they, after they didn't get wbd. It wasn't dead money.

Steve Weiss (48:56)

No, it should have moved up.

Scott Wapner (48:57)

It was rip roaring money.

Steve Weiss (48:58)

But the quarter, when they reported the quarter was a disappointment and this stock trades on quarters more than anything else. Expectations were there was going to be good quarter, quarter. It wasn't. And again, there's a cost to owning these stocks even though I view them both as very cheap. Leidos is exceptionally cheap. Netflix is historically cheap, but it's where it goes. So that's the money for vrt.

Scott Wapner (49:18)

And you have a quick thought on Netflix.

Rob (49:20)

Listen, it has been, you know, as of late but I think that their continued foray into live sports is going to be the story for them and I think that's going to continue to expand.

Scott Wapner (49:30)

You have it too, don't you?

Steve Weiss (49:31)

We do.

Jim Lenthal (49:32)

Just bought it recently on valuation and you know, think there's a lot of room to run here.

Scott Wapner (49:37)

So you disagree with the dead money car call?

Jim Lenthal (49:38)

I do.

Scott Wapner (49:40)

Okay.

Steve Weiss (49:41)

I hope you're right. I still own something.

Scott Wapner (49:43)

Yeah, that was deep.

Jim Lenthal (49:44)

We, we, we just got long within the last three months on the show. I'm thinking you got 40 seconds for final trade. I'm looking.

Scott Wapner (49:56)

How long take you to give me a name?

Jim Lenthal (49:59)

Nvidia.

Scott Wapner (50:00)

I know you like to talk But I mean cvs. Okay, okay.

Jason Snip (50:04)

Transocean vert of fti.

Steve Weiss (50:08)

It's not what you sell, it's where you put it. And Those are up 10% versus Netflix.

Jim Lenthal (50:12)

Thanks, Steve.

Scott Wapner (50:14)

So every, everybody picks something in the green. It's not like everything's in the green today. But. But the Nasdaq is is obviously the standout. Up another 1.4%. Let's just show you micron again as we head for the exits here and and send it to the exchange and I'll see you back on closing bell. But that yet again just epitomizes this market. Up another 13%. I'll see at 3. You've been listening to CNBC's Halftime Report, the podcast you can always catch us live weekdays at 12 Eastern only on CNBC.

Edward Jones Narrator (50:47)

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 Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftimereportdisclaimer it's go time.

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