The Deepseek Selloff 1/27/25

Summary

Podcast Summary: CNBC’s Halftime Report – "The Deepseek Selloff" (January 27, 2025)

Introduction On January 27, 2025, CNBC's Halftime Report delved into the significant market turbulence caused by the Deepseek AI selloff. Hosted by Scott Wapner, the episode featured insights from prominent market figures including Josh Brown, Bryn Talkington, Joe Terranova, Steve Weiss, and Dan Ives. The discussion centered around the precipitous decline of Nvidia and other tech stocks amid fears of emerging Chinese competition.

1. The Deepseek AI Selloff: Causes and Implications

Overview of the Selloff The episode opened with a stark overview of the market downturn, highlighting that the NASDAQ had plunged by 3%, with Nvidia experiencing one of its worst days since March 2020. Scott Wapner set the stage by emphasizing the gravity of the situation:

Scott Wapner [00:42]: "Front and center this hour, the deep sell off air stocks as you know by now, plunging today on fears of an emerging Chinese competitor."

Bryn Talkington’s Analysis Bryn Talkington provided a detailed analysis of the selloff, attributing it to both rational recalibrations of the GPU market and speculative unwinding:

Bryn Talkington [01:53]: "I think there's a component of today's sell off where people are very reasonably recalibrating their expectations for how big the total addressable market for new GPU sales is. But then I think there's an even bigger component that's just speculators being unwound."

She emphasized the excessive leverage in the market:

Bryn Talkington [01:53]: "It's an absolute casino that's been built on the back of a legitimately amazing growth story."

Technical Innovations vs. Market Reactions Talkington also discussed Deepseek AI's technological advancements, arguing that the innovation—such as training a large language model (LLM) more cost-effectively—should accelerate AI adoption rather than diminish chip demand:

Bryn Talkington [03:00]: "The technological innovation of having an LLM train itself through reinforcement learning is impressive. The cost efficiency... doesn't mean, though, that chip demand is at risk."

2. Market Reactions and Analyst Perspectives

Divergent Views on Nvidia’s Future The panelists presented mixed views on Nvidia's outlook. While some, like Dan Ives, advocated for selling Nvidia shares amid uncertainty, others like Bryn and Joe Terranova suggested a more measured approach.

Dan Ives [13:29]: "If you have a position in Nvidia and you are concerned about the position, sell something today and hope the sale that you're making is a terrible sale."

Conversely, Bryn countered the panic, suggesting that such overreactions are typically temporary:

Bryn Talkington [25:02]: "An outsized reaction like this is almost always going to be characterized as punk in hindsight. It's very rare that these types of moves represent the end of something."

Impact on Other Tech Stocks Joe Terranova highlighted that the selloff extended beyond Nvidia to other chipmakers like Taiwan Semiconductor, which he viewed as a buying opportunity given their crucial role in AI infrastructure.

Joe Terranova [23:56]: "If chips are cheaper... I would buy one today because the future is extremely bright just got a lot brighter."

3. Investment Strategies Amid Volatility

Risk Management The season's volatility prompted discussions on risk management. Bryn introduced their in-house model, Goaltender, which relies solely on technical indicators to navigate uncertain markets.

Bryn Talkington [42:39]: "We use technicals for risk management. We have an in house model called Goaltender... it has no economic inputs whatsoever."

Advisory on Leveraged Positions Dan Ives cautioned retail investors against excessive leverage, advocating for reducing risk during turbulent times.

Dan Ives [24:37]: "If you are comfortable feeling uncomfortable about something like that, make sure you enjoy that to the hilt. But if you're in an uncomfortable position... just sell a little something to make yourself feel better."

4. Broader Market Movements and Stock Highlights

Home Depot as a Strategic Buy Josh Brown introduced Home Depot as his latest buy, underscoring its potential as a rates trade and comeback story amid falling mortgage rates.

Bryn Talkington [27:32]: "What you're basically seeing is people reacting to that 10 year now... could break below four and a half percent. And if that happens these stocks will continue to lift."

Other Stock Discussions The panel also touched upon stocks like Twilio, Starbucks, and the implications of their recent performances and future outlooks.

Bryn Talkington [32:00]: "I'm long [Starbucks] and may God have mercy on my soul when we get this number in the morning."

5. NASDAQ 100’s 40th Anniversary and Technological Shifts

Deirdre Bosa’s Insights Deirdre Bosa shed light on the NASDAQ 100's performance and the impact of Deepseek AI’s innovations on the index. She highlighted the sustainability of growth-oriented companies within the NASDAQ despite current setbacks.

Deirdre Bosa [37:21]: "Lower costs can be better for the marketplace. It could be more company by company specific story."

Systemic Concerns Addressed Bosa addressed concerns about leveraged ETFs and their potential systemic threats, reassuring that current measures are robust enough to handle such volatilities.

6. Concluding Insights and Future Outlook

Navigating Uncertainty The episode concluded with a consensus that while the Deepseek selloff has introduced significant uncertainty, strategic risk management and selective investment opportunities remain viable paths forward.

Bryn Talkington [16:20]: "They have the opportunity to not [panic]. And a lot of that is dependent on how you went into today, how over how overly bullish you already were."

Final Takeaways The panel emphasized the importance of understanding market dynamics, leveraging technical analysis for investment decisions, and maintaining a balanced portfolio to weather ongoing and future market fluctuations.

Notable Quotes with Timestamps

• Bryn Talkington [01:53]: "It's an absolute casino that's been built on the back of a legitimately amazing growth story."
• Dan Ives [13:29]: "If you have a position in Nvidia and you are concerned about the position, sell something today..."
• Bryn Talkington [25:02]: "An outsized reaction like this is almost always going to be characterized as punk in hindsight."
• Joe Terranova [23:56]: "If chips are cheaper... I would buy one today because the future is extremely bright..."
• Bryn Talkington [42:39]: "We use technicals for risk management. We have an in-house model called Goaltender..."
• Bryn Talkington [27:32]: "People reacting to that 10 year now... could break below four and a half percent..."
• Deirdre Bosa [37:21]: "Lower costs can be better for the marketplace. It could be more company by company specific story."

Conclusion The Halftime Report episode provided a comprehensive analysis of the Deepseek AI-induced selloff, balancing perspectives from market optimists and cautious analysts. The discussions underscored the complexities of navigating a market influenced by rapid technological advancements and speculative trading behaviors. Investors were advised to employ robust risk management strategies and stay informed about underlying market fundamentals to make prudent investment decisions amid ongoing volatility.

Transcript

[Josh Brown]

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[Scott Wapner]

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[Steve Weiss]

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[Steve Weiss]

Together, we're building a healthier future. Learn [e-mail] I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. All right, Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the deep sell off air stocks as you know by now, plunging today on fears of an emerging Chinese competitor. We will discuss and debate with the investment committee, try to separate some fact from fiction as well. Joining me for the hour today, Josh Brown, Bryn talking to Joe Terranova, Steve Weiss. We'll take you to the markets here where the game in town today is all about the nasdaq and that's well off the worst levels, by the way, down 3%. Nvidia is getting crushed. A lot of other stocks are as well. I want to start with you, Josh, and I'm going to hear from you and Bryn first because you're our longest owners of Nvidia. And I'm wondering what you make of today's sell off, how you're putting it into context, the kinds of questions you want answered and what all of this means to you.

[Bryn Talkington]

I think there's a component of today's sell off where people are very reasonably recalibrating their expectations for how big the total addressable market for new GPU sales is. But then I think there's an even bigger component that's just speculators being unwound. This is the most over owned stock in the market and for good reason. People have absolutely gone crazy with options trading here with leverage. We've got vehicles that are 2x Nvidia. We've got all kinds of zero data exploration, weekly options. It's an, it's an absolute casino that's been built on the back of a legitimately amazing growth story. And so I think if you didn't have that circus in town, you'd probably see the stock down 5 to 10%, but because you have all that leverage, you. You're seeing much more. I think there are two very important things that people need to know about what's happening with Deep Seek AI and the way it's being interpreted on Wall Street. The first is it doesn't matter if it's a Chinese government psyop or not. The technological innovation of having an LLM train itself through reinforcement learning is impressive. The cost efficiency of doing inference with only 7 billion parameters rather than 700 billion parameters is impressive. The possibility of being able to do more model training and inferencing with less usage of power and less chips is impressive. It doesn't mean, though, that chip demand is at risk. What I think it means is you're more likely to see an acceleration of AI everywhere, all over the economy than. And I think that that's kind of becoming the default version of, of what's, what's to happen here. The idea of lams becoming commoditized, Scott, has always been on the table. That's why Zuckerberg released Llama 2 the way that they did. We've seen this in previous technological revolutions in the cloud. For example, Google gave us docs, sheets and slides, which commoditized word, Excel and PowerPoint. But everywhere in the world you go, you will still see people using word, Excel and PowerPoint. I don't think there's a line of Fortune 500 CTOs who are dying to take a fistful of Chinese AI technology and shove it right into their cloud data. I just, it's, it's unfathomable. So I think this is a little bit overdone. And then the second thing I would tell you here, maybe the more important thing, most of this conversation about the impact of Deep Seek is happening on Twitter. If you know anything about Twitter X, you know anything about X, you know, it's loaded with hedge fund managers and asset managers who absolutely loathe the Mag 7. They've been waiting for this moment for two years. These stocks, in video in particular, have been making them look bad for 24 straight months. And they're dying for this moment where small caps are up, Europe is flat value stocks are outperforming growth, and they view this as comeuppance for the people who have been riding these giant tech stocks to huge gains. And I think because there's that desire to see these investors get beaten up a little bit, maybe that's why some of the rhetoric about this being the end of Nvidia is getting so overdone. I think there's some wish casting happening here from some of the pseudonymous hedge fund managers.

[Steve Weiss]

Brian? I mean, I think one of the most important words that Josh used in that answer was if, because there are a lot of ifs and there are a lot of unknowns whether this is all, you know, even possible or not. Stacey Raskin at Bernstein, who by the way is going to be on with me today on Closing Bell, says we believe that the deep sea did not build open air for $5 million. They say the panic. He does, he says the panic over the weekend seems overblown. Kenner Fitzgerald today says this is actually very bullish for COMPUTE and for Nvidia, almost certainly leading to an AI industry wanting more compute, not less. They'd be buyers of shares on weakness like you're seeing today, which is the worst day for this stock since March of 2020. Do you agree with that?

[Josh Brown]

Do I agree to buy more shares today? I'm not sure. Let's see it, let's see it flesh out. But where I do agree with Stacy and I think that as an investors investors, this is what a good old fashioned unknown unknown looks out. Looks like it comes out of nowhere. No one's prepared for it. And this is what you see in video down 17, Vistria down 30. But what I do know, if you read the technical paper, it says apparently in the technical paper that $6 million does not include cost associated with prior research on architectural algorithms, etcetera, Et cetera. So I think that you have this, what I would call a fast follower that took all of the success of chat, GPT, OpenAI, etc. Really smart folks. The smart folks are not stuck in the US they're all over the world and they've done something incredibly innovative. And so I think that the overreaction is this like $6 million number. And to think that they did this out of nowhere when the paper actually says that cost does not include these other, these other items which we don't know. And so I think as an investor you have to like understand your positioning. Understand to Josh's point about the large language models, you know a big fan of Alex Karp. I'm sure he's kind of laughing today at Palantir because he's been saying forever, Ll M's are the commodity. It's what you build. On top of that is what's going to create the return. And so if Masa and Larry Ellison and Sam Altman are building all these data centers to go just infer for open AI, I think you call that into question. But if firms like Microsoft, Amazon, etc. Are build building these to create and Tesla Robotics and actually applications for us to use, then I think the story is very much intact. But for right now, since we are in this unknown, unknown situation that we came into the weekend, I think you have to take a step back, kind of see how it fleshes out. But I absolutely don't believe that this is the beginning of the end of Nvidia.

[Steve Weiss]

Yeah, Weiss, you own the stock. We have the luxury of everybody owning the stock today. Marc Andreessen tweets that deep seq R1 is AI sputnik moment for those who are wondering what all of this means. And as I said, there's a lot of ifs. We don't really know what all of this is really about. What's true, what's not true, the cost of this versus the cost of that. What do you think about your position? For those who have large positions in Nvidia today, who loaded up over the course of the last 18 months because they feel like that's the epicenter of the revolution story, what do you do?

[Joe Terranova]

Well, unfortunately and fortunately today, but it's only today. Nvidia is not a large position for me, as I've been saying and it.

[Steve Weiss]

Is for some, it is for for many.

[Joe Terranova]

And what I would say is that the reason wasn't a large position is because necessity is the mother of invention. So I've not, I don't recall any time in history of technology that I'm aware of where a company, and I've said this repeatedly, where a company like Nvidia has been able to hold their technological edge. So I don't know what do about Nvidia. Now to Brent's point, there is so much we don't know. This is the knee jerk reaction largely driven by the market that we're in, meaning that ETFs are 50% of it, lots of leverage. But here's what I do know. If this is the future, in other words lower costs, then I will tell you that Google, that Microsoft, that Metta should be up today because their costs of building out new capabilities has just come down meaningfully. So it's puzzling to me now matters up maybe because of that, but all those capex budgets that analysts had a problem with, well if this is true, it could take a long time to flesh us out. Well then that's very positive for them in terms of the Nvidia, in terms of the vertifs in terms of all.

[Steve Weiss]

The others, which are all down in vertigo's down like 27%. Yeah. A lot of the power providers to the AI story are getting hammered today.

[Joe Terranova]

Right.

[Steve Weiss]

It is certainly not limited to either Nvidia or the hyperscalers themselves.

[Joe Terranova]

So you, in order for those stocks to be down as much as they are, you have to believe that AI innovation is going to stop. Now, there's some technical nuances like will the, will the, will the fabs and will the data centers run as hot? Particularly the data centers run as hot? Well, they need as much cooling. Well, that remains to be seen. My suspicion is that the cost now building them goes down so that you will still need as much power. Because we're so short power, you will still still need as many cooling systems. So on a day like today, I'm not doing anything because I don't really understand what's real.

[Steve Weiss]

And that's, that's the hardest part of the story. The fear, Joe, for the hyperscalers is that all of this only commoditizes AI. I mean, not necessarily a bad thing. According to Satya Nadella, for example, you can look at the tweet that he put out as we all react to this story in which he says, jevons paradox strikes again. As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can't get enough of. In other words, the increased efficiency leads to increased consumption, not less. Be careful how you sort of read into this entire story. So we're going to get mega cap earnings, some of them this week, some of the key ones, how we think about all this based on what Nadella had to say ahead of these numbers, how we're all trying to download what's actually occurring here.

[Dan Ives]

Well, I appreciate the chance that I had the opportunity to listen to everyone because there were some thoughtful remarks and I want to be really specific here because when you think about who owns these names, particularly the Nvidia, the Amazon, the Apple, it's really not institutional money. It is not hedge funds. They have over the last several months and year pared back their positioning. It is retail that owns these names and it is retail that probably has utilized a little bit too much leverage in the gamification of Nvidia with these zero dated options. So I think if you are sitting here today and you see Nvidia down 15% and it is below the 200 day moving average for the first time since the middle of 2022, and you're relying on some fundamental wisdom which, guess what, doesn't exist. The best thing that I've heard so far, Josh, is 100% right. The genie's out of the bottle. The technology is out there now. It could be replicated. Forget who introduced the technology. But other than that, you are basically guessing on where this is going to go. You're not going to hear from Jensen Huang. Earnings is coming up. You're in a fundamental blackout period. So this is what I would do. If you have a position in Nvidia and you are concerned about the position, sell something today and hope the sale that you're making is a terrible sale. Hope that you are going on X or Twitter or whatever it's called and calling me the biggest idiot in the world for telling you to sell something. Because if I'm right and you sell something today and it's a good sale, you've got a bigger problem. Take off some risk on a day when it's down 15%. That's the message from the market.

[Steve Weiss]

Even when you, even if you think that, that that move right there is, is completely punk.

[Scott Wapner]

How do you.

[Dan Ives]

How does anyone.

[Steve Weiss]

It's always that the market is always the X the same way. It's an act first, ask questions later kind of market.

[Dan Ives]

The market will make a new all time high and in video will make.

[Bryn Talkington]

I think it's half.

[Dan Ives]

I think it's half they will make. Josh, let me finish, please. The Nvidia will make a new all time high once again. But it's about how do you not eliminate risk? How do you reshape risk? You're coming up on earnings in the next several days. You don't know what's going to be reported. You don't know what Nvidia is going to report. I'm talking to the people right now, the retail community, that feel uncomfortable about today. And if you have that uncomfortable feeling, just sell a little something to make yourself feel better.

[Steve Weiss]

Josh.

[Dan Ives]

Sorry, Josh.

[Bryn Talkington]

The stock lost $450 billion in market cap today because. Because a research paper from a hedge fund in China that managed to do something really clever with, with training an AI on reinforcement learning. Everyone needs to take a breath and just understand there are fundamental concerns that maybe we won't need as many chips to do this in the future. That's real. But an outsized reaction like this is almost always going to be characterized as punk in hindsight. It's very rare that these types of moves represent the end of something. And we had a moment in September where in video is in a 25, 25% drawdown. I forget what we were worried about back then, but in that moment, absolutely, there were people getting unwound, there were people who were too leveraged, there were people that were way too enthusiastic about Nvidia, either from a positioning standpoint, it was too big in terms of their allocation, or they had too much leverage or margin. That stuff has to play itself out. And in the aftermath of that, you're going to find out exactly how much of this move was an overreaction. So let's say maybe half of it is, which is, that's my, that's like, that's like my hypothesis at this point. If that's the case, there's opportunity here to not panic. And I think that that's what people really should be thinking about. Yes, there's an opportunity to do something, anything, just make the pain stop. Okay, sure. But there's also an opportunity to not. And a lot of that is dependent on how you went into today, how over how overly bullish you already were. And so hopefully for the people watching the show, they've heard the skepticism and they've heard us talk about how challenging technology valuations are right now, and they didn't come into this moment like fully leveraged to the hilt. Hopefully, that's the case. They have the opportunity to not panic.

[Steve Weiss]

Well, I mean, you know, look, Dan Ives is out today, calls us a golden buying opportunity, says the threat is minimal. JP Morgan, their trading desk on Deep Seek, says the first major fundamental challenge to Mag 7 in the air theme too early to abandon that. That those who are coming out in such stern defense, I mean, I don't know. Do they know any more than anybody else at this moment? It's a little like to have to run to the printing press to put out a note in defense of all of this before we really have all the facts. Seems somewhat counterproductive for, for our viewers.

[Joe Terranova]

It does, it does.

[Dan Ives]

And you know something, I'm sorry, Steve, something that Josh said, and Josh, you know this well enough. There are people that are in an uncomfortable position right now. There are people that have extended leverage and you have to, at a certain point have a process of risk management strategy that you're relying on. I know you look at technicals, all right, you have a break below the 200 day moving average for the very first time. So you're not uncomfortable. I get it. I understand that. I'm not uncomfortable in my position either, but some people are. And those, some people, those people, I think have to address it it. And I think for us to think that everyone right now has the right position in Nvidia and they're not extended in the leverage in an environment, Scott, like you're saying, where we just don't know. I disagree with.

[Steve Weiss]

Well, because there are so many, you know, an answer. Hang on, brain. I'll get you in a few, I promise you. I want to bring in Deirdre Bosa from San Francisco because she's been reporting really out front of many on this story, knows Deepseek, what it is and why we're even having this conversation. What I really see, Dee, as a few key questions that I hope you can shed some light on. Number one, did it really train the model for $6 million? And I think there's a fair amount of skepticism from those that I've been speaking with and you, I'm sure, have been speaking with more people than me. Did it really, this model outperform the benchmark mark? Did it really outperform open AI? Is it really the breakthrough that some are suggesting and the stocks are reacting to today? Can you really do that with less computing power? Do they have more Nvidia GPUs than they're letting on? Those are the types of questions that I am getting from people that I talk to. So I throw it to you.

[Scott Wapner]

So let me break this down, Scott. There's unanswerable questions and there's answerable questions. Let me start with the unanswerable. We don't know if they trained this model for $6 million. The research paper says that they used Nvidia H8 hundreds, which are essentially dumbed down H1 hundreds to do this. But it is possible. Deep SEQ was born out of a hedge fund, a quant hedge fund in China that had access to GPUs and a whole lot of PhDs. Now, what we do know, yes, it is as remarkable as, as you hear, we've been covering this since that Christmas Day drop, which has really just shocked Silicon Valley. I mean, developers, VCs, founders alike. There is absolutely no dispute here. This is a remarkable model. How do we know this? Because it's open source. Everything, most things are published and transparent. That's the beauty of an open source model. So people are quite thrilled. I just got off a conversation with Perplexity CEO Arvind Srinivas and we were talking about this sell off and the implications of all of this. And he was saying that, you know, it doesn't mean that Nvidia is not going to be okay or the major American AI players are going to be able to recover from this and continue to have breakthroughs. But what it does mean is that the race has really been leveled. So there's things we don't know, there's things we do know. But you cannot dispute, you know, how impressive this model is. And let's say we take, you know what Alexander Wang, the CEO of Scale AI, said in Davos last week. He said that Deep Seq had access to 50,000 H100 DPU's. If that's true, they still created this for many times less. It was less expensive for them to create these incredibly impressive models. So this really does open up a new front. And I would also argue that we're seeing Nvidia down 15%. We're seeing a lot of the impact on this in the market. But this isn't just Deep Seek. We've been talking about this in tech and Silicon Valley for a long time. What happened before Deep Seek is something quite remarkable also in the AI race and that is we kind of plateaued when it came to pre training advancements. We hit the data wall. So the game changed there as well, which enabled Deep Seek to do this. So there's a lot of different factors going on. But the point is that the way that we've developed AI over the last few years, which is throw billions and billions of dollars for bigger and better, better models, that seems to be over right now. OpenAI, Gemini, Project, Stargate, they're going to continue to try and go that route, but it's a lot harder now. And I think that's what the market is taking stock of. They're waking up to it later than Silicon Valley has, is something we've been talking about for a few months now.

[Steve Weiss]

Yeah, that's so good, so insightful for our viewers. Appreciate you for that. That's Deirdre Bosa who as I said has been out front on this. So Brin, I think these overarching point here is don't be dismissive of this. What seems to be a real breakthrough in this technology. We can debate the cost because we just don't know and we won't know that maybe for some time the opacity there is going to be insurmountable, I would say for the foreseeable future. But what's your, what's your takeaway after hearing these report?

[Josh Brown]

First of all, she's amazing reporting, so kudos to her. And so I think also if you think about the spin that OpenAI has done and These other companies the perplexity especially especially open AI once again all of that research which not all of that is going to be an ROI versus once again you have this fast follower and that's the way technology goes. Just it is what it is. So maybe this is existential for an open air all these private companies that.

[Steve Weiss]

Have not micro money, not Microsoft. Why are, why are we worried about Microsoft today?

[Josh Brown]

Mike Microsoft I mean to me I've talked about where my can more my concern about Microsoft was is you know chat. I mean copilot was you know one of their main ways they wanted to monetize it. It's still expensive. I think it's still on the margin and so I think that are they spending to get proper ROI but sticking with Microsoft. What I find suspect about all of this and is the beginning of the end of Nvidia I haven't heard prior to this weekend. Elon Mark Zuckerberg thought yeah Sundar said you know what I'm good with the Nvidia chips I have. I'm just fine. I don't need Blackwell. Not one person of of consequence has come out and said that. So that's why I'm so suspect of this actually being the beginning of the end for an in video because these are like the smartest, some of the smartest people in the world. And so yes the LMS are going to be commoditized faster and that can be existential and it will be existential for certain companies, especially a lot of these private firms. But I think though that the capex allows people like Satya and Sundar Andy Jassy to now think through can we be smarter about our capex which to me Steve hit on it earlier can be a potentially huge positive for the for these companies going forward if, if this open source model is actually replicable to the actually applications that these companies are building.

[Steve Weiss]

Yeah.

[Joe Terranova]

Let me give you one example of how ridiculous this overreaction is with some stocks. Take Taiwan semi by Taiwan semi does not have enough capacity. They won't have enough capacity despite the fab they're building in the US the fabs. Does anybody think that this is going to mean less production and less need for commercial capacity at Taiwan Semi or more of course more because if chips are cheaper. So if I were to buy one today that would be it because the future which is extremely bright just got a lot brighter.

[Steve Weiss]

You are getting lit up on social media. I'm just telling you right now you're getting lit up.

[Dan Ives]

Can I tell you something?

[Steve Weiss]

For suggestions that our viewers should sell.

[Dan Ives]

Something that troubles me because that means and I am trying to speak to people who I know have way too much leverage in this name. I'm not speaking to people who are well anchored in their position. This is not the end for Nvidia in video will continue to move higher. I'm talking to the people that are.

[Bryn Talkington]

Levered and I know they're out there.

[Dan Ives]

I know those people are out there. And if those people are lighting me.

[Bryn Talkington]

Up on Twitter, margin clerks will deal with them.

[Dan Ives]

So if those people are lighting me up on Twitter, then it's clear. I think retail is very long Nvidia. I think hedge funds, I think institutional money has stepped to the side and you know what's up. It's very interesting about today. Look at the tape software and a lot of longer duration software names are actually okay. Cybersecurity names are all fine. Datadog, DocuSign, they're all higher today. Salesforce. So it's a very interesting rotation as well that's going on in the market besides paring back of some extreme position.

[Steve Weiss]

All right, according to Forbes, by the way, Jensen Wong's net worth is down at $18 billion today. Don't cry for him, cry for him. No tears. He's, he's still said to be worth more than $106 billion. So he's doing okay. We'll take a break. We have moves to talk about to Coming up next, building a bull case. Josh Brown reveals his newest buy in this market. It was on his best stocks in the market list which we documented recently will tell you exactly what it is. Coming up.

[Deirdre Bosa]

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[Dan Ives]

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[Bryn Talkington]

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[Steve Weiss]

All right, welcome back. Trade alert for you. Josh Brown told you last week of a new stock on his best stocks in the market list. It was Home Depot, which he has now bought. Josh, tell us more.

[Bryn Talkington]

Yeah, so I talked about it on Thursday stock had a great day Friday and what I basically said was I'm really waiting for this thing to break out and I want to see it around for 2425. I'm anticipating the breakout here. The purists would tell you you need a convincing close above 425 on volume. But I'm just gully like that. I've always been this way. I don't know how to describe it. The thing that's really exciting about Home Depot is that it's a rates trade but it's also a comeback story. The stock has basically done a lot of nothing for the last year. High interest rates are hurting existing home turnover and obviously by extension people spend less money in general on things like home improvement when there isn't as much housing turnover as you would normally have. I think that story gets better from here. Today is one of the bigger drops in rates for the year. You have to key in on the 10 year to understand this in the context of mortgage rates. HD is up 1% today. One of the best names in the Dow, Lowe's is up to confirming. Got an RSI of 65 on the stock here. It's only 4% below 52 week highs. It's 5% above its 50 day. It's 12% above its 200. And every single name in the S&P 500, 500 Homebuilder Group is up at least 1% today and the S&P opened down 2% this morning. So what you're basically seeing I think is people reacting to that 10 year now about 4.53% could even break below four and a half percent. And if that happens these stocks will continue to lift. So anticipating the buyout on Home Depot earnings are not until the last week of February. Wish me luck.

[Steve Weiss]

Yeah, stock is highs of the day up but about two and a quarter percent. Just, just shy of that. Joe Dr. Horton today is is in the news what you own. Do you want to talk about Home Depot?

[Dan Ives]

No.

[Steve Weiss]

You want to deal with the housing trade. You know obviously high rates have crushed it. Dr. Got downgraded today to neutral from buy at B of A and the Target goes to 150 from 1. What do you think?

[Dan Ives]

Think the homebuilders have lost the positive momentum that they benefited from over the last 18 months. They are clearly and this is being reported in earnings, they're offering way too many incentives. I also think they are going to be challenged by higher labor costs if in fact they lose some of their workers undocumented workers. I like Josh's trade on Home Depot better. Very strong consumer and it's within striking distance. I think the all time high back in November was 439. It's about $15 below. It breaks about 439. You've got clear sailing ahead. So I'd rather go Home Depot versus the homebuilders, home builders. Certainly a challenge.

[Steve Weiss]

Want to give me something on Twilio while you're at it? As we're talking about, you know earlier, we're talking about software. Relatively recent buy for you upgraded at Goldman to buy from neutral target to 185.

[Dan Ives]

Part of a. Yeah. And just, just to update the viewers, I was stopped out of Terradyne. I said I would be below 125. Took that capital reallocated to existing positions in Twilio, Docusign and Datadog. Adding there the earnings report from Twilio was very strong last week and we're talking about this company now free cash flow generation over the next three years above the estimates. They've really done a good job just kind of transitioning from being that messaging platform to now diversifying the model more and being much more than simplistically messaging. And this is a company that years ago was a favorite name of mine. It's making that return once again. It took them several years to recreate itself but I think they've successfully done it.

[Joe Terranova]

Home Depot is just a permanent contact compounder. I love it. I just continue to be put off to my detriment by the valuation wherever it is. So I always hope for a pullback. Got one to 286 a while ago. I forget who bought it was Jenny whoever and you know I'm still looking for now hope it doesn't happen for Josh's sake. But a pullback.

[Steve Weiss]

Josh, sorry. Let's talk Starbucks real quick if we could. Because it was reiterated overweight at Morgan Stanley, it was also added to Redburn sell list for the first quarter. They say recovery to come at a cost. That's a, that's a quote. What's, what's your view of this stock here?

[Bryn Talkington]

Well, real quick, Weiss is right on the valuation of Home Depot. It's 28 times trailing, 27 times forward. It's definitely not cheap here. I'm purely buying this name on technicals and a little bit of intermarket looking at the 10 year Starbucks is going to report tomorrow. So we're going to find out really quickly whether or not this is the kitchen sink quarter. And we've heard the last of everything that had to be broomed out under new management. I think that's going to be the case, which is why I like it. I do not think the turnaround has begun yet. So this is a very crucial thing. If you're an investor in Starbucks, which I am, I'm not trading it. You have to believe that the turnaround is going to take a while, but that the street is willing to anticipate and start to give you credit for just stopping the bleeding. So they're going to, they're going to do 9.32 billion in revenue according to expectations. 67%. 67 cents in earnings. That would be negative year over year revenue minus 1% and earnings per share minus 26%. So does it get worse than that? I don't think so. So the stock is not at the, at the bottom. The stocks already bounced off the low. I'm talking about the fundamentals and the turnaround. I think that that's what's in front of us now. And we've seen as bad as it's going to get, technically, it actually looks really good. RSI 69. 4% below those 52 week highs. 4% above the 50, 12% above the 200. So I'm long and may God have mercy on my soul when we get this number in the morning.

[Steve Weiss]

All righty. We'll see what happens. Contessa Brewer has the headlines for us. Hi, Contessa.

[Scott Wapner]

Hi there, Scott. Survivors and world leaders gathered today to commemorate the 80th anniversary of the liberation of the Auschwitz Nazi death camp, where more than a million people, mainly Jews, were killed during World War II. King Charles III and Ukrainian President Volodymyr Zelenskyy were among the attendees at a ceremony where some of the remaining survivors wore blue and white striped scarves reminiscent of the prison uniforms. And they warned those gathered of a new rise in anti Semitism. South Korea's President Yoon is now the country's first leader to be indicted on rebellion charges punishable by life in prison or the death penalty. It stems from his decision last month briefly to enact martial law. And as I said, he could face the death penalty if convicted. And Vivek Ramaswamy is getting some political help to launch his expected bid for the Ohio governor's mansion. A source involved tells NBC News News Vice President Vance's top political advisers will guide that campaign. Vance and Ramaswamy have known each other since they were at Yale Law School together. The source tells NBC Ramaswamy is likely to announce his candidacy next month. We'll keep our eye out for that. Scott that's the news.

[Steve Weiss]

Contessa, thanks so much. Contessa Brewer all right. Coming up, more on the tech sell off today. The sector is having its worst day in more than four years. Bobzani is following the money for us with the president of the Nasdaq Dak in today's ETF Edge. We are back after this.

[Deirdre Bosa]

Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at capella.edu.

[Dan Ives]

Learn how to use AI to be more successful with CNBC.

[Bryn Talkington]

Make it's new online course. We'll give you examples that can help you master AI tools. Go to CNBCmakeit.com AI and register. Now.

[Steve Weiss]

We'Re back. Papazzani has today's ETF Edge and Bob, it is a heck of a day to talk about the NASDAQ 100 and.

[H]

It'S we are here. We are at the NASDAQ market site for the 40th anniversary of the NASDAQ 100 index which tracks the 100 largest non financial stocks on the NASDAQ 94 exchange traded funds track the NDX in over 20 countries including the Invesco Triple Q. That's the fifth largest ETF in the United States. Let's talk with Nelson Griggs, he is the president of NASDAQ. Here we are. Congratulations. 40 anniversary. The NASDAQ 100 is synonymous with technology. We have big news say the China firm Deep Seek reportedly launching an AI model that considerably less cost than the US models. You're the keeper of the NDX, the NASDAQ 100. What does this mean for the index? What's it mean for Nvidia, Microsoft, Apple?

[I]

Well, I think we take a step back as you mentioned 40th year anniversary for last 40 years the NASDAQ has averaged 14.25% over the last 14 or 40 years. So it's not a straight line. There's going to be ups and downs. There's, there's more, there's more money being invested in innovation and R and D in the NASDAQ 100 then it's almost a thousand times the broader market. Right. So I think you look at through moments like this and they're going to have to innovate and address any sort of competitive concerns and then you know there's ups and downs.

[H]

Isn't lower capital expenditures. That's what I hear about this model. Isn't this good for the story? I mean lower capital expenditures make more accessible for more corporations. Isn't this a good news?

[I]

Well, you look at a moment like today, it obviously caught the market by surprise because it was. We saw the futures and it carried through the marketplace. So I think over time as investors digest this, it could be more company by company specific story. But over time, yeah, lower, lower costs can be better for the market place. Sure.

[H]

I can't help but look at These single stock ETFs that are out there in video has leveraged ETFs that are out there single stock ETFs. The volume is huge today in that as well as the NASDAQ 100 leveraged ETFs. Does this kind of volume on these kinds of days pose any kind of systemic threat to the markets?

[I]

We see that kind of also on UP days too. So I think this again was a bit of a surprise to the market. There's heavy volume in the overall markets as well too. So no, I think the products are well managed enough where we don't see any sort of systemic issue for sure. But it's just there's heavy volume is.

[H]

Active day tech companies, are they going to be under pressure to spend more or less on. On capital expenditures now? I can't sort of what this means for the overall market.

[I]

I think it's a highly, highly competitive environment for what is a moment in time. Just got back from the economic forum in Davos and I was was the topic and how can we move faster, get more of the cost savings, get more innovation going. So it's hard not to see us investing more in this amazing technology.

[H]

The NASDAQ 100 is one of the most successful indexes of all time. QQQ is one of the most successful etf. Why has this index been so successful every single year? Every single year inflows. Big inflows for. For decades.

[I]

For decades. Yeah, it's the companies that are in there. They are the ones that are the hallmark of growth innovation. You look at what they are spending on R and D and just you look at the US Particularly the retail investors, they love growth stories. And the names in there are the ones I mentioned before spending an enormous amount on R and D and GROSS. It's about 60%, tech and consumers about 20. Then health care remaining.

[H]

We got to go. But I need 10 seconds on the IPO market. I know you're very much in charge of that.

[Bryn Talkington]

10 seconds.

[Steve Weiss]

Well, we're up.

[I]

So we're we're building 23 terrible, 24 a bit better. And the deals have done well that ended the year. So I think we're seeing 20, 25 is another build year, maybe not floodgates, but we're starting to see momentum pick up for sure.

[H]

And Smithfield is coming next week here.

[I]

Yes.

[H]

Okay. Got it. Okay. Much more coming up on the state of tech and the 40th anniversary of the NASDAQ 100. Coming up on ETF Edge at 1pm Eastern Time, Nelson will be joined by Todd Sohn. He's the head of ETFs for Strategus. That's ETF edge.cnbc.com Scott, back to you, Bob.

[Steve Weiss]

Thanks so much. As Bob Zani. Up next, Josh Brown breaking down what he he says might be the most important chart to understand this market this year. He'll tell you next. All right, we're back. Josh Brown with a new blog post today says the key to the market today and this year could come down to one chart in particular. Tell us more.

[Bryn Talkington]

So this is a chart that comes from my friend Bob Elliot at Unlimited Funds. And I think it really neatly encapsulates the difference between the starting point for 2025 versus the starting point for the last two years. People looked and saw, you know, tech stocks doing well in the first half of January. They said, oh, here we go again. I don't think it's going to be quite so simple. The blue bars on this chart represent what the consensus was for GDP growth in January in each of the last two years. And as you can see, we went into 2023. The consensus was basically at 100% chance of a recession. I'm not making that up. Google it. That's what Bloomberg survey of Wall street economists were predicting. We ended up actually seeing a huge tailwind from AI spending and stimulus money still in the system. And we had over 3% GDP growth versus the almost zero that was expected last year. Same story, but not quite as extreme. The street was looking for 1%. We did 2.75%. The setup there, though, worked really nicely. All of the economic surprises in 2024, with very few exceptions, were upside surprises because of how kind of lukewarm the consensus was. The setup this year is very different. As you can see, the consensus right now is for GDP growth somewhere between 2 and 2 and a half percent. And the hurdle is that much higher. Which means as we get different metrics coming in throughout the course of the year, it's going to be harder and harder to produce those upside surprises, sizes, those upward shocks that force people to come out of cash and buy more equities. And so as a result, I think people want to start thinking about this year as more of like an in between year rather than a continuation of the last two years. Doesn't mean we have to accept low returns, doesn't mean we won't make money. I'm telling you it's going to get harder to produce the upside shocks.

[Steve Weiss]

What do we think? You have a take, Joe?

[Dan Ives]

I think it's a great commentary by Josh, as always. Josh. The question I would have though is what's the risk management strategy in that type of environment?

[Bryn Talkington]

I appreciate the question. We use technicals for risk management. We have an in house model called Goaltender. We've been running it for 10 years. It has no economic inputs whatsoever because we recognize the fact that that's a really difficult game to play. So if you're thinking about the easiest economy and economic data in terms of how you cading, I think that's more of an asset allocation question than a tactical question. At least when you're talking to people that work on my investment committee.

[Steve Weiss]

The screen getting smaller but the point remains large. Josh Brown, thank you very much. Mike Santoli is next with his midday word. Senior markets commentator Mike Santoli is here at the desk. What are you thinking about today as everybody's trying to make sense of deep seek and the deep sync. A lot of pretty stocks stiff test.

[Dan Ives]

Of the market's ability to rotate away from danger. It's so far doing a decent job of it. Equal weighted semis down like 7%. It's no joke. What's going on in those particular focused.

[Bryn Talkington]

Trades really if you dial back what's.

[Dan Ives]

Gone on is the market decided it wants to pay 27 times the next year's earnings for Nvidia, which is not obviously some tremendously expensive level. But it's also not saying that this is a failing company. It's not going to grow. So I think you have to keep in mind that's what the vulnerability to the mega cap expensive group of stocks that got us in this market. So more stocks up than down. You have the equal weight down like half a percent. So so far okay. And the S and P wants to.

[Steve Weiss]

Try to hang into 6,000.

[Bryn Talkington]

It does raise the stakes, though, for.

[Dan Ives]

For the mega cap tech earth earnings and what they say about efficacy of their capex plans and how the market treats them.

[Steve Weiss]

This changes the whole dynamic, I think, of earnings where it's not the numbers now that matter this week, it's the commentary about what the threat is perceived to be and what the spend is.

[Dan Ives]

Going to, how they're measuring whether it's.

[Bryn Talkington]

Worth it or not.

[Steve Weiss]

Yeah, for sure. All right, Mike, good stuff. I'll see you on closing bell. Finals are next. We're going to get to the bottom of this Nvidia story today. We'll certainly try with the best analyst in the space. Stacey Raskin is going to join me three Eastern. I hope you watch that Tom Lee, by the way. He's a big proponent of stocks. We'll find out what he thinks. Brin Final trade is what?

[Josh Brown]

Uber.

[Steve Weiss]

Thank you very much. Josh Brown.

[Bryn Talkington]

Same Uber 69. Nice.

[Steve Weiss]

All right. Awesome, guys. Thank you. Steve Weiss.

[Joe Terranova]

Ty won't send me for the reasons I said before.

[Steve Weiss]

Okay.

[Dan Ives]

And Joe T. Broadridge Financial ticker symbol.

[Steve Weiss]

Br all right, well, we'll see how this day develops. I'll see you on closing bell. The exchanges now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live, weekdays at 12 Eastern only on CNBC.

[Deirdre Bosa]

All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftimereportdisclaimer Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning, and effective communication, and you can apply these skills right away. A different future is closer than you think with Capella University. Learn [e-mail].