CNBC's Halftime Report: The Moment of Truth for Mega Cap Tech (01/29/25)

Release Date: January 29, 2025

Introduction

In this episode of CNBC's Halftime Report, host Scott Wapner delves deep into the latest developments affecting mega-cap technology giants, particularly Meta and Microsoft, as they prepare to release their earnings reports. With the backdrop of Deep Sea concerns and a significant Fed meeting, the conversation among expert panelists Joe Terranova, Carrie Firestone, Jason Snipes, and Steve Weiss provides investors with a comprehensive analysis of the current market landscape and what to expect in the coming days.

Mega Cap Tech Earnings: Meta and Microsoft

Meta’s Earnings Outlook

Joe Terranova begins by highlighting Meta's strong position ahead of its earnings report. He notes, “Mark Zuckerberg has already indicated that they are going to exceed the consensus estimate on capex at $52 billion. He's targeting $60 to $65 billion” (02:02). Terranova expresses confidence in Meta’s performance, citing a robust advertising environment and strategic ad placements, especially in light of the pending TikTok ban. He adds, “I think Meta has benefited in the fourth quarter from a very strong ad environment” (02:02).

Carrie Firestone echoes this optimism, stating, “We’ve been overweight Meta and are pleased to see it exceed expectations. The positioning of Meta and how they are benefiting from Deep Sea platforms becoming more ubiquitous is a strong indicator” (03:19). Firestone also cautions that the stock might be "getting a little bit ahead of itself" (03:42), suggesting a potential overvaluation.

Microsoft’s Strategic Moves

Turning to Microsoft, Jason Snipes expresses skepticism about the company's current spending strategies. He points out, “It’s troubling that analysts have come out expecting the quarter and set the bar pretty high” (05:02). Furthermore, Snipes raises concerns about Microsoft’s capital expenditures, questioning whether the company might reduce its projected $80 billion spend for 2025 as a result of Deep Sea's fallout.

Steve Weiss adds to the discussion by noting that Microsoft’s stock is holding steady despite market headwinds. He anticipates positive long-term impacts, particularly in Azure growth and potential margin improvements. Weiss mentions, “I think Azure growth will slightly decelerate this quarter, but it was up 33 plus percent last quarter. We're expecting around 30 to 31” (08:11).

Impact of Deep Sea on Tech Giants

The episode extensively covers the implications of Deep Sea, a significant development presumed to impact major tech companies' expenditures and strategic initiatives. Jason Snipes suggests that while Deep Sea could lead to reduced spending in AI and related sectors, it also opens opportunities for companies like ServiceNow and Salesforce to capitalize on increased efficiency and profitability.

Nvidia and Semiconductor Sector

Steve Kovac, CNBC’s tech reporter, highlights the shifting dynamics in the semiconductor industry. He emphasizes that Microsoft losing its exclusive cloud partnership with OpenAI (a consequence of Deep Sea) raises questions about Nvidia's future, indicating potential margin growth for software-related entities. Kovac states, “We know that Microsoft is going to spend $80 billion this year. That's already in the stock” (10:08).

Fed Day and Monetary Policy

A significant portion of the discussion revolves around the upcoming Federal Reserve meeting. Mike Santoli, CNBC’s senior markets commentator, anticipates that the Fed will maintain a data-dependent approach, signaling no immediate policy changes. Jason Snipes adds, “I think it’s going to be somewhat clarifying by the time we get through the next few hours” (40:05), suggesting that the Fed's stance could provide stability to the market amidst ongoing uncertainties.

Other Market Highlights

• Apple's Downgrade: Bill Baruch discusses the recent downgrade of Apple's stock by API, noting concerns about iPhone demand. However, he remains optimistic, stating, “I think there's a decent report” (21:45).

• Walmart's Resilience: Despite broader market sell-offs, Walmart remains strong, with Joe Terranova affirming, “Wal-Mart will be able to judiciously manage their price” (39:06).

• Soho House Takeover Bid: Daniel Loeb from Third Point has initiated a takeover bid for Soho House, challenging the company’s current board and valuation. Scott Wapner emphasizes, “It is believed... that it is worth a lot more than $9 a share” (33:24).

• Thermo Fisher’s Future: Carrie Firestone predicts an earnings rebound for Thermo Fisher, linking future growth to vaccine and drug development advancements (43:48).

Investor Moves and Strategies

The panelists discuss strategic investment moves amid the current market turbulence:

• Jason Snipes shares his rationale for investing in Vertive, highlighting its critical role in data center operations despite recent stock declines.

• Carrie Firestone defends holding positions in Booz Allen and other defense-related stocks, arguing their strong fundamentals and market positioning despite government-related uncertainties.

Legislative and Policy Updates

Megan Casella reports on a confirmation hearing for Commerce Secretary nominee Howard Lutnick, focusing on tariffs and trade policies affecting tech companies. Lutnick emphasizes that the impending tariffs on Canada and Mexico are conditional, stating, “As long as they execute there, then there will be no tariffs” (24:24). Additionally, Lutnick vows to enforce strict export controls against China to maintain U.S. leadership in AI, reflecting ongoing geopolitical tensions.

Upcoming Earnings and Market Events

The episode concludes with a preview of upcoming earnings reports and market events:

• United Rentals, Blackstone, MasterCard, Thermo Fisher, and Pulte Group are among the companies set to report earnings, each with unique factors influencing their performance.

• Jeffrey Gundlach is expected to provide further insights post-Fed meeting, with a focus on how monetary policy decisions will shape market dynamics.

Conclusion

CNBC's Halftime Report offers a thorough exploration of the critical factors influencing mega-cap tech stocks today. With earnings reports from Meta and Microsoft on the horizon, coupled with the broader implications of Deep Sea and Fed policies, investors are navigating a complex landscape. The panelists provide nuanced perspectives, balancing optimism with caution, ensuring that listeners are well-equipped to make informed investment decisions.

Notable Quotes

• Joe Terranova (02:02): “Mark Zuckerberg has already indicated that they are going to exceed the consensus estimate on capex at $52 billion. He's targeting $60 to $65 billion.”

• Carrie Firestone (03:19): “The whole positioning of Meta and how they are going to benefit from Deep Sea or platforms becoming more ubiquitous is a strong indicator.”

• Jason Snipes (05:02): “It's troubling that analysts have come out expecting the quarter and set the bar pretty high.”

• Steve Kovac (10:08): “We’re going to be looking forward past this fiscal year. What are they saying the rest of the calendar year looks like for their capex spend?”

• Bill Baruch (21:45): “I’m expecting to see a decent report. But I also think a lot of the sellers have already sold and I’m a big believer in that sense of flow.”

• Megan Casella (24:24): “Lutnick pledges to come out very strongly against China on Deep Sea, vowing to use both export controls and tariffs to ensure the US remains a leader on AI.”

Key Takeaways

• Meta is poised for a strong earnings report with increased capital expenditures and a favorable advertising environment.

• Microsoft faces scrutiny over its AI-related spending, with Deep Sea's implications potentially reshaping its financial strategies.

• Deep Sea remains a pivotal factor influencing tech giants' investment decisions and market performance.

• Fed's upcoming meeting is crucial, with a data-dependent approach likely maintaining market stability.

• Geopolitical tensions and trade policies continue to play significant roles in shaping the tech industry's future.

For investors and market enthusiasts, this episode provides essential insights into the movements of leading tech companies, strategic investment considerations, and the broader economic factors at play.