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The Alphabet Aftermath: Your Next Move 7/23/26
00:44:02
Dom Chu and the Investment Committee discuss Alphabet's Earnings report last night, what it means for the market and your money. Plus, we hit some Committee stocks that are moving today. And later, Josh Brown spotlights Block in his "Best Stocks in the Market." Investment Committee Disclosures
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- [00:00]
Everpure Announcer
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- [00:27]
Dominic Chu
The board recommends approving regarding that seat on the committee we're promoting to post quarterly earnings.
- [00:32]
Vanguard Announcer
Every day, shareholders meet to discuss important matters about the companies you invest in. Now you can easily make your voice heard. Vanguard Investor Choice gives you a say in the companies you invest in. With just a few taps, you can set your proxy voting preference for your index funds. Visit vanguard.com investorchoice to learn more. Vanguard investors own shares of our index funds, which own shares of the companies they invest in. Available for Vanguard index funds that participate in Investor Choice. Vanguard Marketing Corporation Distributor I'm Scott Wapner,
- [00:59]
Josh Brown
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.
- [01:13]
Dominic Chu
All right, thank you very much, Carl. Thank you, Sarah. Welcome to the Halftime Report. I'm Dominic. You were in for Scott Wapner. Front and center this hour, the Alphabet aftermath. As more AI spending overshadows, cloud growth and waze on the markets, the investment committee is standing by with what it all means for your money. Joining me for the hour are Josh Brown, Malcolm Etheridge, Jim Leventhal and Jason Snipe. Let's get a check on the markets, which are decidedly negative. Again, throughout the course of this session here, we've seen the markets move to the, to the downside, and now we're just bouncing off some of the lows. The Dow is down about 523 points, roughly 1%. The S&P 500 down by about one and a third percent to a level of 7,400. That big figure right there on the number. And the NASDAQ Composite 25,089 off about 2.5% there. Gentlemen, this is a down day. We've seen them before. But does this one feel different than other down days, given the fact that it's being triggered by maybe arguably one of the Mag 7, if not two of the Mag 7 and then. Jim, I'm going to start with you on this one here.
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Jim Leventhal
Well, I mean, okay, it's a down day and I get it. Alphabet's down and some people are worried about the capital expenditures. I'm not. I would also point out that as far as down days have gone recently, it's nice to show a little bit of sign of strength in something like Micron. Some of the memory chips makes sense, right? If Capex is going up at Alphabet, if they're not throwing in the towel because of Chinese open source large language models, then okay, it's game on for spending at Micron, which of course they have those long term contracts in place. Look, I get it. There are people who are worried that AI is a bubble. I certainly understand that. I'm more in the camp of the CEOs of these hyperscalers, the Brad Gerstner's of the world, who all feel that at worst we're in the middle innings of this. And yes, I get it. Political blowback against data center construction. Some people don't want them in their backyard. There's enough places to build these things and clearly from Alphabet, we're going to continue to build them whether we like it or not. So I don't look at this as a bad sign. I look at it as the AI trade is, is alive and healthy.
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Dominic Chu
Josh, you either have to spend the money, you got to spend the money, right? Right. Because you position yourself for future growth or you don't spend the money and are not positioned for that future growth down the line. It seems like a bit of a paradox. Is it one that is overall constructive over the medium term? Long term we know it is. That's the future of technology. But short to medium term, how exactly then do you reconcile the paradox about spending versus positioning for growth down the line?
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Josh Brown
Okay, so two different answers to your question. And I know I have all the time in the world. Right guys?
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Malcolm Etheridge
We're good?
- [03:49]
Dominic Chu
Yes.
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Josh Brown
The first answer is I've been talking about the second half as being a totally different environment from the first half. And in the second half I think you want to focus on non hyperscalers that are seeing business improvement in the form of upside earnings surprises as a result of their uses of AI. I like this story so much better. This whole broadening out trade that we're living through in the markets, this whole shift away from Mag 7, from hyperscaler and into other sectors, other areas is being driven by this idea. There are companies that are demonstrating material progress in incorporating all of these AI tools that Alphabet and Metta are paying for and they're able to tell the street, oh, by the way, this earnings beat sponsored by our use of blank Name your name. Your favorite LLM. So I've given two examples for the viewers on the show recently I've been pounding the table on travelers. Let's go ahead and put up a chart here. Bright green in a dark red tape. It's not a secret as to why. Here's Chubb. We talked about this Tuesday cb another situation. Insurance just absolutely ripping to the upside. You talk about the companies that are going to feel the efficiencies and the productivity from AI use. First these have to be at the top of the list. Then you look at the industrials. I talked about Alphabet the other day as being literally the key to the market. What like, like what could resurrect this trade? It's going to be the capex number. Google took its capex number up by five or ten billion dollars. Good enough. Look at the industrials today. The best performing sector, Caterpillar up 1.7%. GE is up. GeV is up as well. Or and when you've got the industrials reacting positively to a game on announcement from Alphabet, you look at this market and you say okay, I don't need to worry about whether or not the hyperscalers hold up. I have so many other ways to play what's going on.
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Dominic Chu
Malcolm, the overall feel in the market right now has been for weeks this idea and we all go back to the same chart about how much money the hyperscalers are spending out of their free cash flow and how much of that is being transferred to hardware companies that have to build AI infrastructure. This is a trade right now though that to Josh's point, benefits way more companies than just the select maybe 10 or 15 at the top of this kind of mag 7 hyperscaler type food chain. Is it one though where if you look at these sectors overall, you have to be even more specific about what parts of those sectors and what industries specifically are going to be the outstanding beneficiaries of this as opposed to just the kind of market beneficiaries.
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Malcolm Etheridge
Yeah, it's absolutely a stock pickers market. Josh is pointing out there are companies with green on the screen even as the market seems to be selling off writ large today. This is an important moment to be paying attention to which companies are showing up green. But separately from that. I was on last week when Shannon said it's a tough quarter to have a tough quarter and I think that is being proven true right now for a company that was already trading at a decent premium to the market, something like 24 times earnings to then turn around and have a second miss in a row. The last thing that the street wanted to hear is and oh, by the way, we're going to raise the top end of our CapEx target by about $15 billion. I think that what Google has proven is that they are not going to be the first one to blink in this hyperscaler Capex arm, arm race. But I think what investors are looking to hear, what the analyst community is looking to hear, is really where the tangible benefit of this Capex is going to be. In layman's terms, we don't necessarily want to hear about the huge projections for by 2030 this thing will be. We got that in the form of increased, increased growth in Google Cloud, which I thought was very positive. They increased growth there by about 20 percentage points above what they did last quarter, which was massive last quarter. So I think they are working it out. They are priority proving the bull case for why you'd want to be invested in the companies doing the spending, at least for Alphabet. But it's also going to be a while before that one starts to really go in the other direction. But you know, it's up 70% still with today's pullback over the last year. Maybe there's a reason why folks are taking profits. Nobody ever went broke taking a profit.
- [08:09]
Dominic Chu
So Alphabet, by the way, to put points on this sequentially, you talked about the massive move higher in cloud revenue. It's even more impressive on a year, year over year basis. It's up 80 to 82% year over year. We've also got their CapEx guidance, of course, being raised. Let's talk about, you mentioned the analyst community. There are a handful of moves that are happening right now. JP Morgan did reiterate its overweight rating on Alphabet in light of these earnings, but they did cut their target price by 40 bucks to $420 a share. Piper Sandler cut their target price as well, but then reiterated their overweight rating. Piper Sandler says the 22 Q2, 26 results were largely in line with our expectations. But Cloud materially outperformed, accelerating 82% year over year. Shares fell 4% after hours as management raised its CapEx guide and reiterated plans for a significant increase in 2027. A handful of other analysts are out there doing this. And Jason, you're a shareholder of Alphabet. How much do you care about what some of these projections by the company itself are and then what the analysts are projecting the repercussions could be for share price down the line?
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Jason Snipe
Yeah, I think the key is obviously the reiteration of overweight. Right. I mean some, some price pullback, that's fine. I mean the stock is roughly flat up 2% so far this year. They had to raise it and reaffirm and raise the capex guide. From my perspective, I think the street also is looking at the operational margin. Miss. I mean it's by 2%. I think the expectation was 36. They came in at 34. You know, I think, I think that's a bit of a concern. And then negative free cash flow again. We got to continue to raise capital, whether it's secondaries or debt offerings, to continue to spice up the chain, to be able to reinvest and get these elements to a level where there's true enterprise adoption. So I think that is the story. I think we will likely see a read through to Amazon and some of the other hyperscalers as a result of some of the spending. Once one makes a move like this, the others will follow. And that is, you know, somewhat concern. But to Josh's point earlier, the story has to be about the breadth the beneficiaries. To Jimmy's point, Micron moving today, unfortunately we're seeing energy move a lot today for other reasons. But you know, we need to see other sectors continue to play in this bull run. Industrials, financials, health cares, which we've seen over the last couple of weeks. I think we need to continue to see that to overall see a healthy market going forward.
- [10:31]
Jim Leventhal
Tom, I just want to point out one thing. All right, this by the way, Jim,
- [10:33]
Dominic Chu
you're a shareholder as well, so I'm kind of curious, right?
- [10:36]
Jim Leventhal
And as a shareholder, a long term shareholder, obviously I'm not happy down 6% today. But I've got to put it in the perspective of over the last year, it's up 67%, right? Over the last year, the value of Alphabet, the company is up $1.2 billion. Like it can take a breather. The way that it got that much appreciation is because a number of earnings reports that came in much better than expected. And when you get the those reports a year ago, nine months ago, you say to yourself, it's not going to last forever. What's happened this quarter is very understandable, particularly the negative free cash flow. If you don't believe what I said earlier about this is the middle innings of AI, this is not the stock for you. I get it. Or maybe like Josh said, you've got a bunch of derivative plays elsewhere of where artificial intelligence is going to help out. But I'll tell You my own opinion is that this is an easy stock to hold over the next year. Maybe, you know, maybe it takes a few days, a few weeks to kind of digest this earnings report, but there's going to come a point in time, probably not that far away, where money starts flowing into the hyperscalers again. Amazon Alphabet will benefit.
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Josh Brown
Two things happened during the course of this quarter. One is it wasn't horrible, but search was not as good as expected as a specific line item. I wonder if you, if you view that as potentially now something to monitor going forward. Because cannibalization of search was always a negative hanging over Alphabet. It ended up being much ado about nothing because they went all in on, on AI responses to queries and the profitability was okay, but I'm just curious. And then the second thing. Yeah, look, this is a company that had been buying back stock for most of the last 10 years and during the course of this quarter they came out and surprised everyone with, with an at the market equity offering. Do you think there might be another one during the course of this quarter given what they're saying about Capex? And is that now something that maybe materially changes the story?
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Jim Leventhal
I mean, good questions of the second one first. I mean certainly they could. I don't think they would want to. I know the debt market is pretty saturated right now, but the cost of equity capital is a lot higher for Alphabet in my opinion, than debt capital. So I'd rather have them do that. Yeah, they did the secondary got some cash in their hands. Fine. Where this all comes down to, Joe,
- [12:50]
Josh Brown
is not small 85 million.
- [12:52]
Jim Leventhal
But where this all comes down to is they are investing. And as I said, you either believe the investment is going to pay off or you don't. If you don't, then obviously you're not owning Alphabet. I'm not going to dare anyone to short it. But if that's your, you know, if that's your cup of tea, go right ahead. With regards to your other question about search. I kind of saw it close enough to call it in line, but. Okay. Instead of debating that, what I think is more interesting is what AI AI overview is doing to a number of publishers. There's some reports on this, you know, Alphabet may have to figure out some ways to compensate the Reddits of the world, the Fortune magazines of the world,
- [13:26]
Josh Brown
or get sued into the stone age. Right.
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Jim Leventhal
Well, you know, I mean, I'm not sure those lawsuits would have any real legs to it, but it's probably better to just go co opt that and get a better revenue sharing agreement in place.
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Malcolm Etheridge
Can I go back to something really quickly? Because to answer your question about whether they're going to need to do another capital raise or not, I think the answer is obviously yes. But what I think gets missed here is for a company that is up 70% in one year, you know, who's also up all of their employees who get paid in restricted stock units. So buried in the details of the last equity raise is the fact that about half of that is going toward paying the tax bill associated with, with those RSU's. So as long as that remains the key component of their equity compensation plan for all of their employees because, oh, by the way, they're back up to about 200,000 as their headcount now. So there's a ton of people walking around with Google RSU's now. They're going to have to continue to keep tapping the equity markets that way, which is not going to be great for the analyst community, which you're seeing start to dial down what those price targets are. And you got to imagine they're baking in at least a piece of that.
- [14:26]
Dominic Chu
All right, so let's talk because I want to hit on something that you just, you mentioned. You mentioned the cost of debt capital right now. You mentioned the cost of equity capital. I don't think there's any doubt in many people's minds that the cost of equity capital at this point is on an after tax basis, certainly not as advantageous as doing it on debt capital right now. Which is the reason, maybe arguably why all of these companies are raising funds at not that many basis points above Treasuries at this point point to finance their expansion plans? I guess this has been a negative story for a while, but how much do we have to worry about the increased leverage that these companies are taking on vis a vis the overall size of their equity capital balance sheet or dilution from their equity issuances that they do. If you're a capital budgeter, if you're a treasurer or a CFO at one of these magnificent seven hyperscaler type companies, is it that much in doubt? I do this and I ask this question vis a vis credit default swaps, bond insurance, on Oracle specifically heading higher and higher and higher, it's still not, not investment grade, but it's showing signs. How much do you have to worry about that? And maybe, Jason, I'll start with you on this one.
- [15:36]
Jason Snipe
Yeah, I mean, you mentioned it. You know, Oracle is obviously the poster boy in that space. I feel like they switched from a growth story to a balance sheet story. Right now we're focused on the cds, as you, as you noted, and the credit spreads potentially widening. And they're just a hair above junk from, from a debt perspective. So I think that is concerning. It's no longer a story about rpo. Man, these size, sizable RPO numbers.
- [16:02]
Malcolm Etheridge
Wow.
- [16:04]
Jason Snipe
Quarter after quarter, it's are you able to execute and what is the cost of execution? So I do think it's absolutely a concern in the market, you know, the issuance and obviously how that affects shareholders. So definitely I think it's something I'll be watching very close.
- [16:19]
Dominic Chu
All right, guys, hold that thought for a second. We've got some breaking news out of Washington, D.C. let's head out to Eamon Jabbers with the latest here. Eamon.
- [16:26]
Eamon Javors
Dom, that's right. White House Press Secretary Caroline Levitt wrapping up a press briefing just a short time ago. A couple of headlines to bring you from that one is on trade. Remember those 10% across the board tariffs are set to expire tomorrow, Friday. And Levitt was asked what the president intends to do about that and she flagged that. There is expected to be an announcement from the U.S. trade Representative Jamison Greer this afternoon. We don't know what exactly that announcement is going to be, Don, but we do think it might have something to do with something he flagged on CNBC earlier this week, the possibility of tariffs based on foreign governments or foreign companies, use of forced labor. That could be up to 60 countries impacted by those tariffs, maybe 90% of American trade. So could be a potentially big one. We'll watch for that announcement from ustr. No confirmation of when that's coming or what exactly that's going to be though later this afternoon on the Saudi Arabian nuclear deal, Caroline Levitt, despite the fact that the Department of Energy put out a press release saying this deal was signed yesterday, Caroline Levitt portrayed it instead as very much an open process that's still going on even though the Saudis agreed to the deal yesterday and that press release went out. So that depends, she says, on the Saudis agreement to recognize Israel. Saudi Arabia has given really no indication that they're willing to do that. So where that nuclear deal ends up now really very much an open question given that it was inked a day ago. The president seems to be wanting to change the terms retroactively on that one to force the Saudis to agree to this additional condition of recognizing Israel. And then on the Iran war, I would just flag for you Axios posted an interview with President Trump in which he said he is considering a massive attack on Iran. He doesn't give a timeline for that. He says he's considering it might happen, might not happen. Hard to say what that means. If anything, given that the United States has attacked Iran for the past 11 consecutive nights, does the president have something of a different order of magnitude in mind? Is he thinking ground troops? Not really clear. But just wanted to flag for you, Don, that there are options out there for the president to really escalate dramatically, especially given what we're seeing in the Red Sea with the Houthis. Back over to you.
- [18:40]
Dominic Chu
All right. Eamon Javors with the latest there. Thank you very much for that. Just a quick reaction here, Jim. I'll go to you for this one. When we talk about the market moves that we're seeing with the dow down roughly 400 to 500 points, the NASDAQ, we know Alphabet's a big part of that story. Story. So is Tesla. In the market move scheme of things, mathematically, we understand that the majority of this is being driven by stock specific moves. I wonder from those stock specific moves and the broader markets overall together, how much do we care about this stuff? Right. Tariffs about the Middle east, about Iran, about maybe opening up another front against Oman given what's happening with the Red Sea versus specifically hyperscaler capex spending plans vis a vis Alphabet and maybe others.
- [19:24]
Jim Leventhal
Yeah, I mean, I'll phrase it this way, Dom. I think if you're making policy decisions in the White House about Iran, you have to put the financial markets to the side because in order to get done what needs to get done, you may over the short term have to sacrifice the financial markets. Let me be more specific. If you really want to get rid of the nuclear program, if you really want regime change, I know that hasn't been stated, but if that's what the goal is, you're going to have to do things that are going to freak out the oil market more than they already have. And we're kind of running close to the bottom, whether it's the Strategic Petroleum Reserves or Cushing, Oklahoma, commercial inventories. We're getting to that point where if we're not going to pull back from this, we're going to have serious problems and it doesn't look like we're pulling back. So the market, in my opinion, is skating past this where I look at the S&P 500 off about 3ish percent from a tie. I think we need to be prepared that as we get later in the summer, these higher energy prices may have an effect. In the end it will be resolved. But it could be a tricky August into September.
- [20:22]
Dominic Chu
If that's the case, Josh, what exactly then do you do from an investor and trader standpoint? If you want to be long this market and you want to be in it for the longer term, do you have to pay attention as much tactically, sure, short term to these types of movements or can you feel like the old dollar cost averaging every week or two or every month or so just works over the long term? How exactly do you have to really pay attention to price action like this?
- [20:50]
Josh Brown
Well, the first thing is you never sell your energy stocks. It is as an equity investor, it is the only hedge you have against these types of price spikes and inflation scares and geopolitical shocks. There's nothing else that really could work from an equity standpoint. So let's put aside you're going to be out there, the futures market, acting like you know what you're doing. Most people are not going to do that. So as a from a portfolio management standpoint, to answer your question, you do not sell your energy. What that means unfortunately is you will live through long stretches of time where it quote unquote doesn't help or worse detracts from performance. This is about being a long term thinker and understanding not every piece of the puzzle is going to be going up at the same time this year. It's been working very nicely. 25% of the energy sector has been advancing for the last five days and energy is the best sector this year, up 34%. It blows tech away almost double. Tech is up 18% this year. So you haven't paid the quote unquote energy stock tax this year. And I think thought we could blaze through a couple of tickers real quick because we have several energy stocks in our Porterhouse portfolio currently and many of these are also on the best stocks in the market list. Let's take a look at fti. Let's take a look at Devon. Halliburton's been on the list all year. We've talked about Marathon and Valero. I don't know how many times in these best stocks in the market segments on the show, 10 times. It just, it seems like the market has had this figured out over, over the last six months that they want to be in these names. They're willing to buy the dips. EOG is up 2% today. Fang is up 2% today. People don't really own these stocks. People don't really know them. I'm not suggesting you buy them today on an oil price spike, but for God's sake, take a few minutes, familiarize yourself with the sector, because there are probably some names that deserve a spot in your portfolio.
- [22:49]
Dominic Chu
I mean, for goodness sake, these days, even if you don't want to do all of the homework on these individual stocks, you can find any cadre of ETFs out there that can give you the exposure to those types of things if you're using it as a portfolio diversifier and a hedge against inflation and higher energy prices. I think overall though, if you talk about the way that these movements are working their way through the market, energy does not have that much of an impact. Yes, it's a great bright spot in the down market, but from a percentage weighting basis it doesn't really carry that much weight. What does though, versus the entire almost energy sector are those magnificent seven names. One of the ones that we didn't talk about as much or allude to is Apple. And by the way, Apple is a relative outperformer. Many of these Amazon metas are down anywhere from 3, 4 or 5%, just shy of what Alphabet is doing. Apple is right now down maybe one, one and a half percent percent. The last I checked. Is Apple one of those stocks and I say this because the entire desk here owns shares of Apple. It staged a nice quiet rally, didn't get as much fanfare over the course of the last several weeks, briefly overtook in video as the world's most valuable publicly traded company. What exactly is the thesis for Apple right now and why it is? Why has it become a laggard to now a silent leader? Malcolm, I'll go to you for this one.
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Malcolm Etheridge
We're still waiting for the super cycle. That's really all it is. We didn't get the dip that we expected. We didn't get the punishment in Apple shares that we expected over the last couple of years where almost everyone has sat at this desk and asked where is Apple in this AI arms race? They stayed out of it. Their capex looks minimal in comparison to what we're talking about with Alphabet for example today. And oh by the way, there's still a of ton ton of folks that haven't adopted the 16 and 17, which means that they still have the potential for the upgrade. So when you look at things like their recent announcement, the partnership with Klarna to help you buy at least their next devices, it's an opportunity to help spur that up that super cycle that we're talking about that upcycle. I also think it's an opportunity to help increase their services revenue which has been the spot that a lot of folks have pointed to as the real growth mechanism for for Apple. Because who doesn't already have at least one Apple device around the globe? So I think it's a patience story right now and if you have been patient with Apple waiting on them to show you how AI is going to change your life and the way that you interact with the device, I think you're probably going to be rewarded for it. But lastly I'd say this goes back to the point that I was making before about investors waiting on these analysts. Sorry on these earnings calls for CEOs and CFOs to to make the case in tangible terms, in layman's terms, this is how AI is going to change your life. We haven't really gotten that just yet from these companies. It's been very enterprise focused and I think Apple is the perfectly positioned company to tell that story in a way that regular ordinary consumers can appreciate.
- [25:39]
Josh Brown
I agree with Malcolm. Apple is, I think Apple's going to own consumer AI. I think you buy every dip. I think the stock could get to 400. They continue to execute. Last quarter was returned to earnings and revenue growth after I don't know, 18 months of nothing. The 17 was a smash comparable to two previous big replacement cycle phones and now the 18 is going to have AI on it. September 1st we're going to hear from John Ternus for the first time as CEO leading one of these launches. I think it'll be the foldable and you'll get a gentic Siri by year end and they have approval now to do AI on the phones in China. So I think like the tailwind behind Apple is as good as it's been in the last few years. The market has woken up to it and they love the fact that we don't have this like black hole of Capex happening.
- [26:34]
Jason Snipe
Apple's negative free cash.
- [26:36]
Dominic Chu
They do have a massive amount of capex but you know who it's being being funded by.
- [26:40]
Josh Brown
But there's an all of us in
- [26:42]
Dominic Chu
our correct because we're all out there buying to Malcolm's point if there is a super cycle coming up and iPhone upgrades and Mac upgrades and everything else. I remember talking to one tech investor who basically said you know what? There are not that many companies dom that have as many edge computing touch points as Apple does. Right. The devices in our hands, in our homes. If you're trying to Connect to the cloud. If you're trying to connect to many of these AI type systems, you're doing it through edge devices.
- [27:11]
Josh Brown
Two and a half billion devices.
- [27:14]
Dominic Chu
Massive.
- [27:14]
Josh Brown
They're the toll booth. So look, you like Claude. Great. You're probably going to utilize it through iOS, right?
- [27:20]
Emily Wilkins
Yeah.
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Jim Leventhal
Guess who's getting paid technicality to this as well. Not going to say technical, but a technicality. I have a market weight in Apple. Okay. I have to say I'm not as enthused as the rest of the the group in this regard. I think it's priced into the stock at 34 times earnings. But what am I going to do as a portfolio manager who has retail clients? What am I going to do? Am I going to sell Apple here, give them a whopping big tax bill because we've owned this phones?
- [27:43]
Malcolm Etheridge
Yeah.
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Jim Leventhal
No, I'm not. So, you know, new money comes in. Of course I'm putting some to work. Am I putting it in at the market? Weights a little hard with what it's done so far. I mean, this was a $180 stock 15 months ago.
- [27:56]
Dominic Chu
All right, all right. We have to take a commercial break. I didn't want to kill the moment. I'm like, I'm like the DJ that's killed all the momentum in this, in this conversation. The dance party right now. All right, coming up next year, more of the day's biggest movers and our top calls of the day. And then later on, Josh Brown's back with the best stocks in the market. His fintech pick, halftime is back in two.
- [28:24]
Everpure Announcer
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- [28:52]
Jason Snipe
You never forget your first fan.
- [28:54]
Bank of America Announcer
So how was practice, kiddo?
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Jason Snipe
My mom inspired me to dream big
- [28:57]
Malcolm Etheridge
and ask myself, what would you like the power to do?
- [29:00]
Jason Snipe
My answers helped me become the soccer player I am today. Trusting my instincts and stepping onto the pitch without fear.
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Bank of America Announcer
Bank of America champions U.S. men's national team member Tyler Adams and everyone who dares to ask, what would you like the power to do? Bank of America Proud to be the Official bank of U.S. soccer and FIFA World Cup 2026 bank of America NA Member FDIC the board recommends approving regarding
- [29:23]
Josh Brown
that seat on the committee.
- [29:23]
Dominic Chu
We're promoting quarterly earnings.
- [29:25]
Vanguard Announcer
Every day, shareholders meet to discuss important matters about the companies you invest in. Now you can easily make your voice heard. Vanguard Investor Choice gives you a say in the companies you invest in. With just a few taps, you can set your proxy voting preference for your index funds. Visit vanguard.com investorchoice to learn more. Vanguard investors own shares of our index funds, which own shares of the companies they invest in. Available for Vanguard index funds that participate in Investor Choice. Vanguard Marketing Corporation distributors.
- [30:06]
Dominic Chu
All right, welcome back to the Halftime Report. Let's get to some stocks on the move. Lockheed Martin soaring after delivering a beaten raise in its most recent quarter. Labenthal owns it.
- [30:15]
Jim Leventhal
Jim, you know, sometimes the stock market, the market makes things a lot harder than it has to be. If you pull this chart out over the last year or so, you'll see the stock's been all over the place. Guys, it's. It's really kind of simple, and I'm not saying this with any gladness. We're shooting a lot of missiles. We're using a lot of helicopters. We're spending all of the things that Lockheed Martin makes. This stock is a good hold for the next couple of years on that basis.
- [30:40]
Dominic Chu
All right. Blackstone's profit surging on its AI investment. And Jason, you are an owner.
- [30:47]
Jason Snipe
Yeah. So obviously, I mean, Blackstone has struggled this year, is down about 20 so far this year. Kind of this private credit overhang in the early part of this year I think is still playing on the stock, but nice revenue beat on the top and the bottom. Revenue was up 36%. Earnings was up 26%. Ton of dry powder. $228 billion worth of dry powder. So I continue to like this one. Also realizations, this $3.5 billion data center sale to Digital Realty. Now we're seeing their real estate division up for the most, and it's been in four years. So from an earnings perspective, I continue to like the measurements here and I'll continue to own. I'll stay patient here.
- [31:28]
Dominic Chu
The alternative asset managers have been one where people have been trying to pick a bottom for a while. So we'll see if that consolidation happens a little bit more in earnest here. Next one is Dorsey, Portugal, upgrading JP Morgan Chase to a buy rating from a hold. Malcolm and Josh both own J.P. morgan, and maybe. Josh, I'll start with you on this one.
- [31:45]
Josh Brown
Yeah. So I've spent the better part of 20 years ignoring all the upgrades and downgrades here because the fundamental thing that matters in banking is size and trust. And JP Morgan has both in spades. I think this is a stock that may not outperform every other bank bank over every cherry pick time frame, but in the fullness of time, because they are the most trusted to not blow up and because they are among the largest, if not the largest in almost every category they play in the earnings power has been literally off the charts. And I think that'll be the case for the. For the foreseeable future. So I remain long. You'll have to pry it from my cold dead hands.
- [32:25]
Malcolm Etheridge
I actually assumed it was a typo. Like how do you have the world's largest bank at a hold in the first place? This company has been, you know, co. Co lead investment bank on basically every large M and A transaction that's happening this year. You got all these blockbuster IPOs and they're a hold on your list because you know why?
- [32:43]
Josh Brown
Because they look at the price to book and they think they're rocket scientists and they figured out something no one else. J.P. morgan, relative to the other stocks in the group is overvalued by 18%. Oh, you're a genius. I wonder why that's the case. Why does it have a premium valuation? Maybe it's because of the way the bank is run, the success that they're having in every line of business and the fact that people trust them more than they trust any of the other leadership groups in the space. Could that be why there's been a premium on the stock for 20 years? Like, oh my God, you discovered fire. So that's why people have it as a.
- [33:21]
Dominic Chu
We know, we know how Josh feels about.
- [33:22]
Josh Brown
So anyway, I'm bonus.
- [33:25]
Dominic Chu
We didn't glean that in the monologue right now. All right, one last one here. Cleveland Cliffs is spiking after its second quarter revenue beat estimates. Jim Leventhal. You own this name?
- [33:35]
Jim Leventhal
Yeah. Congrats to the team at Cleveland Cliffs for a great quarter and a great prognosis going forward. I will be the first to admit before anybody piles on this has been a very tough stock for me for many years. I think they're well on track here. Look, this is. The stock's been trading this year like it's micron. It's up 15, down to 10, up to 15, down to 9. It's on its way back to 15. It should go higher. Look, this is a simple business. You've got this price of steel which they sell going up. Their energy costs are under control, their volumes are going up as the economy continues to expand. It's a simple equation and it's working out for their favor right now. I expect further appreciation from here.
- [34:12]
Dominic Chu
All right, guys, thank you very much for the comments there. Let's go over to stock Seema Modi with a CNBC news update right now. Good afternoon, Seema.
- [34:18]
Seema Modi
Hi, Dom. Here's what you're watching. The Secret Service says a member of Vice President J.D. vance's protective detail is under investigation for allegedly leaking sensitive information. Officials say the probe involves possible threats to operational security and could become criminal. The agency did not name the person or detail the allegations, but said any conduct risking a protectee's safety will not be tolerated. More than 10,000 people have been evacuated in southwest Florida, France, as a wildfire burns. Officials say the fire has scorched more than 4,900 acres with about 500 firefighters battling the flames. No injuries have been reported. And Norway's soccer federation is weighing a FIFA ethics complaint over President Trump's role in clearing US Striker Flo Baligan to play after a red card. Norway's federation president says FIFA bent a basic rule after Trump called the president. Belgium later beat the US for one in the World cup dumb.
- [35:11]
Dominic Chu
All right, Seema Modi, thank you very much for the news update there. Up next, Mike Santoli joins us with his midday word. Keep it right here. We'll be back in two.
- [35:20]
Mike Santoli
If you, your parent or spouse served in the military, you could join our family. Our members saved an average of $70 a month on auto insurance when they switched. Tap the banner or visit usaa.com join today to check your eligibility restrictions apply.
- [35:36]
Jim Leventhal
I want to grow the game of
- [35:36]
Dominic Chu
soccer and give every kid the chance to play.
- [35:39]
Vanguard Announcer
What would you like the power to do?
- [35:42]
Bank of America Announcer
Bank of America champion street soccer advocate Kyle Martino and is proud to be the Official bank of U.S. soccer and FIFA World Cup 2026. Bank of America NA Member FDIC.
- [35:50]
Dominic Chu
The board recommends approving regarding that seat on the committee. We're post quarterly earnings.
- [35:55]
Vanguard Announcer
Every day shareholders meet to discuss important matters about the companies you invest in. Now you can easily make your voice. Vanguard Investor Choice gives you a say in the companies you invest in. With just a few taps, you can set your proxy voting preference for your index funds. Visit vanguard.com investorchoice to learn more. Vanguard investors own shares of our index funds, which own shares of the companies they invest in. Available for Vanguard index funds that participate in Investor Choice. Vanguard Marketing Corporation Distributor.
- [36:36]
Everpure Announcer
All right.
- [36:36]
Dominic Chu
Welcome back to the half hour. We're going to get right back out to Washington, D.C. and Emily Wilkins with a news alert. Emily, what can you tell us?
- [36:43]
Emily Wilkins
Hey, Don. Well, we are, of course, continuing to track the congressional support for the Iran war. And we have two updates today, both the House and the Senate voting on a War Powers act that would put a few limits on President Trump's ability to have strikes. We should note that this actually passed in the House. You saw four Republicans go over and join Democrats on it both. But a recent vote in the Senate was not able to get enough votes to pass. Notably, you saw Lisa Murkowski and Senator Rand Paul, both who have supported these types of measures and limits in the past. They actually did not vote this time around. Not sure if this is just an absence or a statement of where they currently stand, but certainly something to watch because of course, over the last several months we have seen the Republican Party go from firmly standing behind President Trump on this to to raising some concerns with how his administration has been dealing with. And this, we should note, is really the first time that the House and Senate have voted on the war ever since Trump sent a letter back to Congress saying that attacks had restarted. This, of course, isn't the one back in February. It's much more recent. We'll be following, of course, the level of support that lawmakers have, especially as the Trump administration is asking for a much larger defense supplemental to continue funding efforts in Iran as well as other places. Guys. Don.
- [38:04]
Dominic Chu
All right. Emily Wilkins, thank you very much for the Update on Washington, D.C. we appreciate that. Now let's turn it to Mike Santoli, senior markets commentator and overtime anchor co anchor with his midday word from the Nasdaq. And right now we're seeing some stability. But is it something that makes people feel comfortable or is maybe just the worst to come as we head towards a closing bell?
- [38:24]
M
Look, Tom, I guess it's reassuring that things didn't get more disorderly in the morning. It threatened to do so. We did make a new one month low in the S&P 500. We're still in this mode where the thing that's been holding the index up is also the thing that's holding it back. The constant internal tension between what's working and what's not. We have not yet proven that semis can rally while the big tech platform, hyperscaler stocks can also participate and vice versa. You can't have a broadening of this market towards cyclicals and non tech if the bond market does not ratify that move and higher yields means it doesn't happen. And we have consumer Pretty weak today. So all those elements I think are still kind of churning around. I do think there's been a little bit of damage to the trend. I mean, you see the, you know, we're two and a half months into this mode where we haven't made much headway. The NASDAQ 100, does it not look like a possible top? I mean, or maybe it has more ground to give up. That being said, we've held together. The S and p is within 3% of its record highs. And if anything, the macro story for the market is leaning more toward overheat than vulnerability in terms of the pace of growth.
- [39:31]
Dominic Chu
Yeah, vis a vis that. The vanek Vector Semiconductor ETF is only down half of 1% today. So a lot of machinations going on right now. Thank you very much, Mike. We'll see you later on. On closing bell, overtime from the Nasdaq. Up next year, Josh Brown. Brown has his best stocks in the market. Halftime will be back right after this. All right, welcome back. We're off session lows. The Dow's down 465 points. Josh Brown is back with his best start stocks in the market. Josh, what are you focused on today?
- [40:11]
Josh Brown
That's right, Dom. We're going to talk about a stock that I literally do not trust. But as part of the research we do into the best stocks in the market, I have to listen to what the market's saying and at least investigate. And what it's telling me right now is that Wall street may be ready to reconsider Block. So you may remember this company as square ticker is inexplicable xyz. This was a early fintech payments giant that literally had a midlife crisis during the pandemic. They started doing the wackiest things you can imagine. Jack Dorsey would take a walk in the Hamptons with Jay Z. The next thing you know, block was paying $300 million to buy streaming music platform called Tidal for six times what Jay Z bought at for a couple of years earlier. Okay, I guess then they bought after pay literally at the top of the market for buy now, pay later. And then they started loading up the balance sheet with crypto. And by the time they were done, block fell 26% in 2021 as the market made new highs. It is still 72% below those highs. And what's happening lately though is that the market is taking taken this to a 52 week high. Thank you for that. Zoom in. Perfect timing. I don't trust Jack Dorsey. I was like an eight year Survivor of being a Twitter shareholder, Mark Zuckerberg famously referred to Twitter as a clown car that crashed into a gold mine. I think that's fairly accurate. And if not for the fact that Elon put us all out of our misery by buying it at a very high multiple, I probably would have lost money. Miraculously, somehow I didn't. So I'm not personally getting into this turnaround in particular, but I do want to spotlight it because you've got the stair step pattern of higher lows. You've got a company now that is expected to actually grow earnings faster than almost any other company in finance. They gave guidance to full year earnings per share of $3.85. That would be 62% above what they had done in the prior year. And in the meanwhile, you don't have to pay up for it. It's a fairly low multiple. So the market is starting to give this company the benefit of the doubt. Technically, I'm going to tell you right now, I need to see the breakout. I'm not anticipating this one. I need to see $81 a share with conviction. I want to see volume and I want an RSI that's in the high 60s. And if I don't get it, I'm going to stay on the sidelines. But I did want to bring it to people's attention because this stock has been down and out for five years and now is starting to make new year highs.
- [42:50]
Dominic Chu
All right, Malcolm, let's go to you for this one. Don't tell me you own this.
- [42:53]
Josh Brown
No, no, no, I don't apologize, but
- [42:57]
Dominic Chu
he does own other financials and fintech adjacent names so far being one of them. Visa, American Express. How does block compare given what you've heard from Josh versus other financial payments and tech players?
- [43:11]
Malcolm Etheridge
I don't think anything compares in the way he just framed that. I think Stripe maybe is the one that we would look at to give us a little bit of a comparison and the free cash flow coming from Stripe that allows them to be bold enough to decide to go buy something like an ebay. I think it's interesting. I think the whole fintech, excuse me, landscape is really being held down by the 10 year being what it is and being as stubborn as it is. There is tons of opportunity in names like Sofi. You mentioned in Rocket, we've talked about a million times on this desk is potential breakout as soon as the ten year moves. And so then mortgage interest rates move as a byproduct. But I am paying attention to American Express earnings that release tomorrow morning. What I'm looking for is an opportunity honestly to exit this position and be vindicated and calling it, I think early April when I got into the stock and said basically at 294 there's a disconnect between what the market is seeing and appreciating their pivot toward the higher end consumer. They're focused on the top end of the K. Really everyone who's getting an American Express card at this moment is only getting the Platinum card, which is far more expensive than all the other cards that they offer. And that seems like a really smart place to play. So if that one goes on a tear following earnings, I'll be looking for an opportunity to ring.
- [44:21]
Dominic Chu
All right, amex, a big one to watch for tomorrow as well. Thank you very much for that, guys. Up next, we got options action. Oliver Renick is following the big moves in energy and options. We're back after this. Welcome back. It's time for options Action with Oliver Renick. He joins us live from the CBO global markets in Chi Town. Oliver.
- [44:41]
Oliver Renick
Hey, Dom. WTI is above 90. Brent's above 100. And options traders think there's more to come. Options volume in USO is more than twice its daily average with more than 100, $150 million of premium trading there so far with more than 10% of it concentrated in just two call contracts. The in the money 130 calls expiring in September and October. Both of those are going for around 20 bucks a contract, meaning these traders think crude oil will rally another 8%. The best hedge might be XLE Energy ETF calls which are outpacing puts more than 3 to 1 on heavy volume today. Traders have already spent more than $25 million in premium there with 80% of it on the call side. Dom.
- [45:29]
Dominic Chu
All right. Bullish activity when it comes to those call options in energy. Thank you very much, Oliver, for that. Final trades are coming up so keep it right here on the halftime report. All right. One minute left in show here. We are back with final trades. Jason, we're going to start with you.
- [45:45]
Jason Snipe
Abbvie, Skyrizi and Rinvo continue to be the growth drivers for this stock. I like this one here.
- [45:50]
Dominic Chu
All right, now let's go to Jim Laventhal.
- [45:52]
Jim Leventhal
Yeah. Going with Transocean rig. This is probably the highest beta to energy prices play that you can have. They do have earnings coming up in two weeks based on everything that's been going on with contract announcements. A potential merger with a competitor I think now is the time to build your position.
- [46:08]
Josh Brown
I didn't know we could do penny stocks on this show.
- [46:10]
Dominic Chu
It's $5.
- [46:11]
Josh Brown
Come on.
- [46:12]
Bank of America Announcer
It's not a.
- [46:12]
Jim Leventhal
Hey, man, it's like a $6 billion stock.
- [46:14]
Dominic Chu
Malcolm, how about you?
- [46:15]
Malcolm Etheridge
Yeah, talk about a green stock on a red day. Cerebras just announced a strategic partnership with Crowdstrike that I think is going to help to validate their position as a leader when it comes to inference.
- [46:24]
Dominic Chu
Speed up 3% today.
- [46:25]
Josh Brown
And Josh, wish me luck because I added to Netflix this week. It's one of the worst stocks I own, but one of the best businesses. And I don't think it'll stay down here forever.
- [46:34]
Dominic Chu
All right, right now again, markets are on a down day right now. That doesn't. We'll see you later on. In closing bell, the exchange starts right now.
- [46:42]
Josh Brown
You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [46:54]
Mike Santoli
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 when it's time to scale your business, it's time for Shopify. Get everything you need to grow the way you want. Like all the way. Stack more sales with the best converting checkout on the planet. Track your cha chings from every channel right in one spot and turn real time reporting into big time opportunities. Take your business to a whole new level. Switch to Shopify. Start your free trial today.