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Halftime Report
The Parabolic Tech Mania Continues 5/29/26
00:46:39
Leslie Picker and the Investment Committee discuss Dell's strong earnings report as the stock surges to record highs. It's our Chart of the Day. Plus, the desk share their latest portfolio moves. And later, the Committee reacts to Jamie Dimon's comments that the market is exuberant but not bad. Investment Committee Disclosures
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- [00:01]
Edward Jones Financial Advisor
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- [00:31]
EY Parthenon Consultant
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- [01:02]
Leslie Picker
Thank you, Carl and Sarah. Welcome to the Halftime Report. I'm Leslie Picker in for Scott Wapner. Today, front and center this hour, the record rally rolls on as yet another big name tech stock goes parabolic. Our investment committee is standing by to break down the massive moves. Joining me this hour is Steve Weiss, Carrie Firestone, Kevin Simpson and Bryn Talkington. Let's get a quick check on the market, which higher for the most part, although not a broad based rally. The dow up about 0.8%. The S&P up 0.2%. The NASDAQ up about 0.2% as well. But as you can see, the Russell Small caps down about 0.6%. But we begin with our chart of the day. Check out. It's on pace for its best day ever following blowout earnings. It joins the ranks of Snowflake and Micron which also had massive moves this week, currently up about 29%. Brand, you must be feeling pretty happy today. You own Dell.
- [02:01]
Brent Brennan
Yeah, I mean I think obviously the market was surprised. These single day moves up 30%, 40% for names are only surprising or what's more surprising is actually how strong the earnings are with Dell. Dell's more of a sum of the parts. It's their infrastructure services group, I think which caught everybody by surprise that you know, that that part had been growing very strong. But I mean they're coming in with crazy numbers. And so I mean the stock has reflected, has reflected appropriately. I really think what shifted was when Super Micro, obviously we had the co founder or the founder, you know, got in trouble for, you know, bringing the chips over to China. I think Dell is clearly taking share from Super Micro. I just think it shows you how this data center build out is really starting to take shape with, with these just incredible numbers that we get out of a great company like Dell.
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Leslie Picker
So you think this is an appropriate response to the earnings? Is there any concern that we could see peak growth or peak margins at this point in time? And what do you do from a portfolio management standpoint when you see a move like 29% for a company as big as Dell?
- [03:12]
Brent Brennan
Yeah, well, I mean their backlog grew, they raised guidance. I mean their infrastructure Services Group grew 181% year over year. I mean, ironically I had sold half of my position like three months ago or four months ago to buy Salesforce, which then I sold Salesforce so that I already had trimmed the position, unfortunately. And so I just think, you know, this is a great year for Michael Dell. They have a huge stock buyback so they continue to take shares out of the market. And so I just think we're still in the early days, especially if you listen to the Google I O conference last year, the token usage is going exponential, which is hard for us to understand. And so I just think this is a moment for Dell and a lot of other companies to shine and I think their earnings and margins are going to continue to be strong with all of these data centers names.
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Leslie Picker
Kevin, what do you think from a valuation standpoint at current levels, it looks like the forward P e is around 24 times trailing PE 37 times here. I mean, is that something that you'd feel comfortable with?
- [04:13]
Kevin Simpson
Yeah, 100%. Because I think that validates that this is a move based on earnings. So it's justified. It's not like some memeification or some crazy momentum. When you have companies like Micron, like Snowflake, like Dell, doubling their earnings, they're actually cheaper in some respects than they were a month or two months ago on a forward PE basis. So I think it's very constructive, very healthy. And I don't know how long it's going to last, but I wouldn't be jumping off the ship today.
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Leslie Picker
Carrie, what do you think?
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Carrie Firestone
I think that this is another example, as we've seen with Micron, we saw it with AMD in their earnings. We saw it for a year and a half within video, where the market suddenly hits on an idea that they hadn't fully embraced and decides we need to own it because this is part of the AI trade and Dell deserves to be part of this trade. I'm not Suggesting anything about what might be a potential downside. I would say that the investing public has, has now put Dell solidly into this category of companies that are going to be major beneficiaries of data center build out. As Brin would like to say, it's a Lone Star state company, which he didn't mention. But it certainly now is a great example of what can happen if you show earnings that get people excited that you're in the right spot at the right time.
- [05:38]
Leslie Picker
Now we, in a lot of the analysts commentary on the heels of this report, there's a lot of concern, I guess concern is probably too strong of a word, but there's a lot of discussion about potential pricing pressure in the second half of the year for Dell's supply chain. Are you concerned at all about the impact of these rising costs and what they might mean for, for margins for a company like Dell?
- [06:01]
Steve Weiss
Not really. We're not in a market where there should be any concern about, where there is any concern about anything, including the overall market. So I don't know why I would come to roost with Dell that actually has earnings as opposed to those that are trading significantly higher on, on just maybe revenue. You take a look at a nuclear company like Oklo, which doesn't even have a revenue line in their report in their filings, literally no revenue line.
- [06:31]
Carrie Firestone
Right.
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Steve Weiss
And that's trading at 11 billion mark. Cap was at 30 billion. So you take company like Dell with a guy like Michael Dell, frankly, who, who, who, who is a genius and is so often not included in the conversation of people like that because he's quieter, stays below the, below the radar, devotes a lot of his time and his wife to philanthropy. I'm not really concerned, you know, because when you have that kind of demand, your book is growing that big, you can pass on those costs to your customer. So it shouldn't impact them to your point.
- [07:03]
Leslie Picker
I mean this is not a new company. This is, this is a company. It's been around a while. It was taken private, it went back. Public revenue soaring 88% year over year in the quarter and its year over year growth has never exceeded 39% before this. So I guess kind of in the, in the go forward basis brand. Do you feel like today's movement moves really captured the attention that Dell has been kind of, kind of warranted in recent months and now it's finally getting it? I mean, how do you think about just this, this space moving forward?
- [07:37]
Brent Brennan
So, so Dell specifically, they're in like, they're in a different. They're in 2027 right now in their earnings. So if you look at their 2026 very consistently, their revenues have been growing about 20% year over year if you go back. Because once again they have a big PC business. This infrastructure services group is getting to be a bigger and bigger portion. And this quarter we just had this step function up to the right of orders. And so whether it's share from Supermicro, whether it's the tank just getting bigger, whether it's the tokens being used are going exponential, I think that the Runway, if you listen to the CEO Jeff, Jeff Clark on the call, I mean they're raising their own guidance. And so I think it's hard for investors to like think through if everyone really starts as an enterprise level, start using all of these tokens. You know, we obviously have physical, physical bottlenecks, but I just think the demand for their AI servers are going to continue to be just incredibly strong. I don't think it was an anomaly quarter. I think it's probably the beginning of what we're going to see probably over the next year or so of these type of upsized earnings. Just like we saw with Nvidia a few years ago. That took everybody by surprise.
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Leslie Picker
Yeah. Morgan Stanley describes it as a quote thesis changing quarter. And they basically say agentic is fundamentally changing the value of compute and data storage. We are seeing this play out in real time. I'm curious Kevin, how should we be thinking about all of the various bottlenecks at this point in time? As we know the data center build out, you know that they're just limited municipalities that are willing to keep funding these. It takes three years to build one. What we're seeing in terms of just all of the supply chain bottlenecks, you know, how does that translate for a company like Dell and its competitors at this point in the cycle? I mean, is this something that you think we have years of these types of supply restrictions that will continue to make Dell have better pricing, pricing power.
- [09:43]
Kevin Simpson
I think at some point, Leslie, it has to be cyclical, but we're not anywhere near the end of the cycle. But I love your question because you're talking about all of the bottlenecks and we just don't know how that's going to play out yet. In some regards we're just looking at this like on a wing and a prayer. But the hyperscalers have so much money, they're taking it from free cash flow. So, so it's not like they're, they're in this pickle just yet. But if they don't see an roi, if there's not a return on investment at some point, that's when you worry about this thing kind of coming to a stop. But I don't think it's another one, two or three quarters. I really think it's one, two or three years before we see how it plays out.
- [10:19]
Steve Weiss
Yeah. And I'd say that the ROI is important, but the companies that are spending are long term. You want to be long term term. And right now what they're spending, a good part of that is just, just the ante, the cost of being clued in conversation and not letting competition get so far ahead of you. So they have to do that. But the spending is not going to turn on dime. It's not going to be like you wake up one day and all of a sudden that, you know, they stop spending. Where my concern is with a company that I own, which is Micro, because we have seen those turn on a dime when it's the pricing. So that's commodity price. Dell's not really every, every business that sells a product has an element of commoditization in their products, including Nvidia, by the way. But you're in Micron. That's where I have a heightened concern on that because we've seen so many cycles before.
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Leslie Picker
So what do you do with a company like Micron, if that's your view?
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Steve Weiss
Well, I sold some, but, but you know, because you have to be as Britain was responsible on selling Dell for the position size. You go in your size position and you anticipate that's going to be X part of your portfolio as, you know, as that position grows. Now sometimes that positioning is informed by how the rest of your portfolio does. So it may become. But given the meteoric rise, we're talking about stocks up 7, 800%, you know, and so I shave some. But right now I just don't see the momentum in their business or in share price declining. Now there is one caution they have talked about adding capacity and adding capacity, whether here in South Korea has always killed the cycle, but now it's taking longer because supply chain issues to add that capacity. So that'll extend and the cyclical nature of this company as well as the spend. So Kevin's point, maybe you're a year out, maybe you're two years out. I don't know. I think that this will turn Micron turn quicker than the Dells and the others.
- [12:24]
Leslie Picker
Interesting. We're going to talk more about chips because these Massive moves are drawing parallels to the dot com bubble. But is it a bubble trouble this time around? Christina parts nebulous is following the money for us. Hey Christina.
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Christina Partsnebus
Hi Leslie. Well, semi stocks are like you said, on a historic run and Dell is the latest catalyst today. You guys talked about it briefly, but Dell CEO flagged some serious shortages in memory chips, processors, specifically CPUs and hard drives, with lead times stretching to at least a year. That's direct read through to Micron, SanDisk, ARM, all moving higher. SanDisk in particular is up 4 over 400 or 4000% in just 12 months. Micron having its best month since the year I was born. No, not 20 years ago, 1985. And this comes as the broader chip index is already tracking for its best start to a year on record, on track as well for its fifth straight quarterly gain and potentially its best quarter ever, beating a record that goes Back to the early.com era in 1995. Memory makers Micron, SK Hynix both crossed $1 trillion in market cap this week. And according to JP Morgan retail flow data, there's little evidence of broad based profit taking. Buying has remained persistent on the notion that this time it's different and elevated despite the memory stocks more than tripling this year. Nvidia though is of course the notable laggard, but still up about 15% year to date, too large for even a blow at earnings to move the needle for this stock. While the Soxx ETF is up 89%, the chip trade right now is just bigger than any one company.
- [14:00]
Leslie Picker
Christina, I'm curious if you, because you listen to all of these earnings calls and you follow the earnings, do you feel like the responses in the market are discretionary or is it kind of the, the, the theme itself and the trend itself is creating some of these parabolic moves.
- [14:17]
Christina Partsnebus
I think it's the narrative that has changed for a lot of these executives on the call. It's the first time where you have executives, Dell, Micron, Sanders saying that they're signing these longer term contracts and so they're locking in demand for at least two to three years, which gives visibility. And since stocks are priced on, you know, forward earnings, it's helping that narrative for the next little while. But to just the panelists speaking about roi, we don't know what the return will be two years from now. And once that capacity goes online, once they build the clean rooms, that will help mitigate the, the discrepancy between supply and demand. So I guess the reaction may be justified for the next Two to three years. It's just right after that what happens?
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Leslie Picker
Yeah, I think that's, that's the key question. Christina, thank you so much. Bryn, how do you think about semis in the context of the dot com era? I know you own in video here, which is the, the laggard actually year to date still up 16% though, you know, do you feel like those parallels to 1999, 2000, 2001 still resonate?
- [15:24]
Brent Brennan
Well, I think you know there's that fun chart that everyone bespoke had updated it and other people showing like Netscape versus Chat GPT, the overlay. And so if you look at that we're in like early late 1997, mid or early 1998. So I mean it is trending very similar. I think what's different are two things. There were so many more companies that IPO'd during that time, companies that just put a.com and they were able to IPO. Well, it's obviously very hard to IPO, so there's far fewer companies. And so that's why I feel like these companies, especially on the semis. Leslie as we've gone from GPU intensive to now the past year, we're all realizing these agents doing, doing tasks are CPU sensitive. And so that's where an AMD or to Christina's point, amd, arm, all those other names are really starting to catch up with that CPU move. And so ultimately, yes, we probably enter a time where these stocks get way ahead of themselves because that's just the nature of the, of the market. But right now it's hard to make those parallels that were in 1999 when you have earnings backing up all of these moves, nothing's moving. The exception of what Steve was saying, which I think is very valid about companies with no revenues, these 70s are moving based on earnings and so a lot of these stocks are actually getting cheaper because of the strong earnings power.
- [16:50]
Carrie Firestone
Kerry so another difference point out between now in 1999 and 2000 where I ran a fairly large sized growth fund is that in order to keep up with your index you had to own many companies that had not only no profit, they didn't have revenue, they, they really had nothing but a name that caught the attention of the public and institutions that wanted to keep up, whether it was AOL or I mean Cisco was a company that had business but, but not enough. WorldCom, for example, global Crossing, you know, just Yahoo, on and on and on. These businesses both have profits, they have revenue, but you can't get into the Chips business, unless you're already in the chips business, it's too hard to start a new company. They're embedded. Now the risk, the only major risk that I can see to the growth and the companies forget about the stock prices which of course get extended and might be a little too extended is if somebody announces that they can create efficiencies where the average chip now can produce 100 times what is expected on a token basis where there's enormous efficiencies, you don't need as many of them and their orders will be canceled. That's the only risk.
- [18:15]
Steve Weiss
And can we back up just look at this in the broader market lens Because I think that's important because it really is informative as to what investors the you know, the cohort investors we have. So normally in a market backdrop where you have inflation that's ticking up, we have rates while they moderate somewhat, are still high. So it's tight money. You have oil separate from inflation, keeps going up. Right now you read the article in Journal today you have a very large number despite what we hear from Jamie Dimes by what we hear from Brian Moynihan because those companies underwrite credit card loans, credit card balances to a much tighter extent than broadly. You have a large part of the country that are in default on a 90 day look back on their credit card balances. And then you take an approval rating for a president that's lower than a visit to the dentist. And I apologize my dentists. And all because of the economic outlook that normally wouldn't be a market that promotes this kind of individual stock performance. So I personally think it's worthwhile being cautious here and I'm saying that while still being pretty much fully invested. Invested. But that informs why company? While you don't care when companies if it's a favored company meaning in the AI unless they really miss and the stock goes down 40% they're going up. And if they do go down 40% it's not too long for the recovery. So it's a very unusual market environment that's feeding the performance in stocks because all of us sitting on the desk we can. You can't find another period where so many stocks are up 40% after earnings regardless of what that earnings was, you know, so it's crazy. It's really crazy.
- [20:09]
Kevin Simpson
All three of us Leslie sat here during the entire 90s and remember the comparisons. But one thing I think with respect to disclosure that's so important back then there was more than just a little bit of fraud you mentioned Global Crossing and I thought like Tyco, Enron, all the. These other companies at the time, WorldCom. It wasn't. Yeah, it wasn't. It wasn't just that they didn't have earnings, it was that they were just working the system as well. So if you.
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Steve Weiss
Look, if.
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Kevin Simpson
I feel like we're in a different era now where the profitability of these companies is one thing, but also the credibility of management is powerful and.
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Leslie Picker
Well, we've seen a couple of frauds and not, not recently, but at least last fall with some of the private credit, well, what was to be private credit but turned out to be more syndicated. There were a couple of what Jamie Dimon calls cockroaches that turned out to be alleged frauds. We'll see how that plays out in the court system. But you bring up a good point about just whether. How we should kind of think about the narrowness of the response and the rally as in Barclays had this great note about the mega growth we have seen without mega cap. They see the tech sector eps growth hit 50.1% year over year in the first quarter without the help of the magnificent mega caps. So, you know, does this seem to you all as being Britain? I'm going to turn to you a revision to the mean there just because, you know, areas like the Mag 7 have been such leaders in terms of the upside for so long and now we're seeing some of the catching up and kind of everybody else.
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Brent Brennan
I think what's interesting about the Mag 7, right, so if you look at the NASDAQ this time last year and you had frozen that and had the same holdings in the top 10, you would be up about 7% year to date versus the NASDAQ right now is up close to 20 now. Why is that? Because Intel, Micron, AMD have all entered into the top like 10, 10 to 12 holdings versus if you have this static max 7, you have Metta, you have Microsoft, that have been laggards by the way this year. And so I think it's really important to say, to not anchor. I will say on last year's winners are like the Mag 7 because if you just owned the Qs and just let that meritocracy and that market cap, you've done great this year. While those max 7 especially can equal weight, them have done, you know, pretty, pretty poorly if you lump them together.
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Leslie Picker
Yeah. Barclays goes on to say that the last time tech EPS was growing 50% year over year without the help of the biggest names was 2010 and obviously kind of the base level by which they were growing was distorted by the financial crisis at that point in time. So.
- [22:53]
Carrie Firestone
But, but on the other hand, you have Apple, which is growling. If you put up a chart of Apple, you'll see how strong it's been. I'm sure it's up 25% in the last quarter or so. I mean, I might be wrong, but it's had a really strong rally and people had thought it was dead, you know, six months ago. So there's rotation. And just because there's seven is what Prince said, it's a broader number than that now because they're all up near the trillion dollar level. If you start including the names like Micron and AMD who weren't even in the conversation. Here we go.
- [23:27]
Leslie Picker
Good, good point. And then obviously those implications on kind of index weightings and everything you were talking about earlier. Up next, committee move. Steve Weiss is ready with two trade updates, plus we'll debate our calls of the day. Halftime is back in two minutes.
- [23:47]
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- [24:43]
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- [25:28]
Contessa Brewer
Welcome back to halftime, everybody. I'm Contessa Brewer with your CNBC news update. The Trump administration is expected to propose that half of the components in cars come from US Sources in order to qualify for lower tariffs under the U.S. mexico Canada Agreement. That's according to the Wall Street Journal. The pact currently requires 3/4 of a vehicle's materials to come from North American sources. That has no requirement specifically for us. Kalshi has launched the country's first perpetual futures contracts which gives US investors access to more complex trades than simple yes or no bets. Basically, it tracks the price of crypto without an end date in sight. The CFTC said today it would permit these perpetual listings tied to Bitcoin and would review other contracts on a case by case basis. CNBC and Kalsha of course have a commercial relationship that includes customer acquisition and a minority investment. Rescuers on scene say at least one Laos gold miner has been brought out of a flooded cave where monsoon rain trapped a group of villagers for more than a week. Rescue teams have located five of the seven villagers in total who were trapped. So that's the news right now that we're watching. I'll send it back to you.
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Leslie Picker
Gosh. Hope they can find those other two contessa. Thank you. Let's get to some committee moves. Weiss, you trimmed Caterpillar?
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Steve Weiss
I did and I've been telegraphing this for a while. I want to get it to a long term hold and the stock is up well over 100% since I bought it one year ago. I'm May 27th. It's now selling at a forward PE, not counting today's move, but it won't change it much. About 32 times what would be and it typically sells in the mid teens. So. So look, as long as data centers are being built, this will participate. But at the same time I think it's prudent. Take some off the table.
- [27:20]
Leslie Picker
Not a butterfly quite yet.
- [27:21]
Steve Weiss
No.
- [27:23]
Leslie Picker
You've also bought more Dick's Sporting Goods?
- [27:27]
Steve Weiss
Yes.
- [27:27]
Leslie Picker
Simultaneously.
- [27:28]
Steve Weiss
Yes. No, not simultaneously. It was different days actually. But Dick's reported a quarter which I thought was pretty good actually. They did show some continued issues with margins and foot locker and influencing it. I think those will take care of themselves. They're excellent operators to me. I think the stocks, you know, very reasonably valued if not inexpensive and has a moat around business. They are unique and so destination place to go. They continue to improve the store format to make it much more of a destination. So I like this and I think
- [28:04]
Leslie Picker
stocks can do quite well sticking with retail. Costco, pretty big mover today. Kevin, you own this name. Do you feel like the moves are, are warranted?
- [28:16]
Kevin Simpson
Yeah, I think we were telegraphed a little bit from what we saw out of Wal Mart. So yesterday, Leslie going into the print we covered half the position. Wrote an in the money call at 985. Remember, the stock's trading up over a thousand yesterday down to about 950 today. We brought in $27 on that trade, covered half the position. We closed that out just at the start of the show for $5. So we netted a $22 profit overnight. Granted, the stock's down 44, so it's not a complete hedge. And we did it on half the position, but it still brought our cost basis down by about $11 per share. To your point, I thought the earnings were good. Yeah, very much what we expected. I think down here you can add to it. We know it always trades at a super high premium. If you can get your head around that P E ratio and you don't own Costco, this could be an entry point for you.
- [29:02]
Leslie Picker
So, Weiss, do you feel like the kind of consumer price sensitivity is not affecting all retailer? It doesn't seem like you're as concerned about it with the Dick spy.
- [29:11]
Steve Weiss
You know, the thing about Dick's is that families spend on certain things, right? So they spend on health care, which they have to. They spend on their children, which they have to. And they spend on their pets regarding as part of the family. So I think that's safe from that standpoint. But even Dick's, if we continue to see this go on and with credit cards maxed out for the two thirds of the country that unfortunately have to live, you know, paycheck to paycheck, it's going to impact all of them, regardless of the value proposition, regardless of the moats. However, I think that'll also be short term because eventually we will actually get a cessation of hostilities and opening in the strait. I don't know when that will be. You know, we've heard it was a few times already. Did. Shouldn't have. But it'll happen and so that'll do it. But in the meantime, I've got a big buffer here, which is the World Cup. So as they sell merchandise for the World cup, that's going to help offset some of what would normally be consumer weakness.
- [30:11]
Leslie Picker
Yeah, I've seen that merchandise appear in my house over the last few weeks. For sure. Kerry, American Waterworks up about half a percent today. It did get an upgrade. You own this one?
- [30:22]
Carrie Firestone
We think it's a great utility and a growth stock. Plus it's water. And that's in a different category. They are the largest water utility, largest public water utility in the world. And so we continue to like it. And it's just a diversifier across a portfolio that is now heavily weighted in technology and related types of sectors. Just one comment on Costco. What, what is a little uncomfortable about that stock right now is as you know, is the chart, you know, it's, it's kind of broken and this has been decades long outperformer and we've, we owned it for many, many years. And I just, you know, as you've done, try to hedge a little bit but clearly people are becoming concerned that that growth and the high multiple might be at your in jeopardy.
- [31:12]
Kevin Simpson
Yeah, I don't disagree with you one bit. One other, other thing that we didn't talk about is the potential for another special dividend. Every couple of years they pay 10, 15 bucks a share. So I'm hanging on a little bit with the hope that that gets announced at some point, maybe in the next quarter or two.
- [31:25]
Leslie Picker
That's a good point. Those special dividends are becoming increasingly rare as well. Up next, a massive explosion lighting up the night sky in Florida as the blue, a blue origin rocket goes up in flames. This video, I tell you, will bring you the latest on that story and the impacts it's having on one committee name Halftime is back in two.
- [31:49]
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- [32:16]
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- [33:27]
Leslie Picker
We are back on halftime. Check out this dramatic video out of Florida last night as Blue Origin's new Glenn rocket explodes during a test. Blue Origin founder Jeff Bezos posting on X that all personnel were accounted for and safe. And the company is working to determine the cause of the incident. The explosion is weighing on space stocks today. Day you can see AST Space Mobile down 15% via sat down about 8% and Intuitive Machines down 7%. Thank goodness nobody was hurt. But Kevin, you own Rocket Lab, which is down about four and a half percent. What is, what is these pictures tell you? What does this do for kind of the space ecosystem?
- [34:10]
Kevin Simpson
I'll speak for me personally, it does very little. I mean, in fact, effectively a Blue Origin explosion like this is to be expected as you're going through the process of building these amazing rockets. You know, we own Rocket lab. It's up 80% in a month, 400% in a year. It's down a little bit today. But maybe the explanation, Leslie, across the board is that the investors are freeing up a little dry powder maybe to put something on the sideline for Space X to diversify that space trade a little bit.
- [34:37]
Leslie Picker
Do you think that's institutional investors or retail investors?
- [34:40]
Kevin Simpson
Probably more retail. Retail at this point and with today's action.
- [34:44]
Leslie Picker
Yeah, it's interesting because, you know, sources have confirmed that this allocation could be about 30% to retail, which would be abnormally high, especially for a hot IPO and an IPO of this size. We've never seen an IPO this big period. And then we usually don't see retail allocations of about 30%. There are also so many retail investors in SPV, they are in ETFs with exposure to Space X beforehand. And a lot of people are buying those ahead of the actual IPO as well. And I just wonder kind of how that changes the dynamic, how it impacts the first day of trading. Because oftentimes, at least the original school of thought was fill the book with institutional investors, get some over subscription, and then you have the people who weren't able to get allocation be the kind of marginal bidders on day one. And so sources I talk with, it's part of the conversation. There's a bit of concern just around what that allocation might mean. Obviously, Elon Musk has a tremendous, tremendous cult following, a lot of social media followers and so forth. And so, you know, does that change kind of the traditional playbook as it comes to, as it pertains to an IPO is the big open question. And I think the company is hoping it does. Brent?
- [36:03]
Brent Brennan
Yeah, I mean, I think that this is going to be historic. If they raise what, 78 billion, we'll have to just all see about the plumbing of the market in terms of the liquidity. I do think there's definitely going to be some weakness in names. I think today's news on like ASTS or via Sat is more just about being down and sympathy of, of the platform blowing up as well over at Origin. But I think that the retail base, I mean it's on Schwab's platform, I think it's going to be on Robinhood platform. I think they needed that retail, that retail audience. I'm not sure how much demand they had on the institutional side. You know, we're hearing today, I think Bloomberg reported maybe 1.8 trillion. So there's a lot priced in. Right. It's going to open at a market cap bigger than Metta, which is unbelievable. But this is where we are. But I definitely think you could see this name pop because as to your point, there's a lot of excitement around this. And I think today what happened with, with Blue Origin tells you how incredible Space X is, that they can not only land the rockets, but they can land them and catch them in the little tweezers and then use them again. And so this is a really tough business. They have amazingly smart people that work there. And I just think that there's going to be so much excitement. But I am curious, I think we all are, about the plumbing of the market and the liquidity that's going to get sucked out going to this the day it opens.
- [37:28]
Leslie Picker
Yeah. I'm also curious what the ultimate valuation range turns out to be, which we could find that out as soon as next week, I'm told. That's still in discussion. Still debatable. We won't really know until that until, till that range is kind of finalized in the forthcoming days, hopefully. As we await that Space X ipo, we're getting new reporting on anthropic and open air race to go public. Rooney here at post nine with the latest. Take it.
- [37:53]
Kate Rooney
Great to see you, Leslie.
- [37:54]
Brent Brennan
Yeah.
- [37:55]
Kate Rooney
So some of the numbers coming out of this do speak to what Bren was just talking about. The trillion dollar IPOs anthropic now valued at close to $1 trillion. It was a $965 billion valuation, $65 billion fundraise. So series H, we're really climbing the Alphabet here as these companies stay private longer and longer. Some of the investors of this round as well, big names in Silicon Valley, some of the late Stage growth type investors. You've got Sequoia, Altimeter led this round Dragon year as well. And it does also make Anthropic more valuable at least on paper than OpenAI, one of its biggest rivals. That is a big part of this announcement. The last thing I would mention as we talk about the numbers, the run rate so it's $47 billion for the annual revenue run rate up from $30 billion that they reported in April. So it speaks to some of the growth. Of course that's not the total for the year that's annualized and sort of speaks to kind of a moment in time. Although you look at the annual revenue for last year, it was $10 billion. So you're seeing the law of large numbers not really apply here. They are seeing this growth. It's adding to the FOMO we're hearing from selling Silicon Valley at least where investors really wanted to get in on this. And it's a lot of late stage names in this round, even the T rows, the fidelity is that you typically see in a Space X before they go public and sort of your world. Leslie, as you look at IPOs.
- [39:10]
Leslie Picker
Yeah I hear those names that you list and I hear a lot of crossover investors and why I think that is important is it's often those crossover investors that serve AS anchors on IPOs. And what you need if you're selling upwards of 50 billion in an offering is a good amount of that. That's kind of already pre committed. That's. That's been the playbook for a long time. It's expected to be the case for Space X. And so I have to wonder as these private funding rounds happen, as you see a Space X go public, does that limit the potential investor capacity to serve as an anchor on on these big IPOs as they come down the pike too?
- [39:44]
Kate Rooney
It's a great point. One of the things I'd heard from an anthropic investor is that's really what they were looking for for there is no shortage of capital. They wanted these long term, long only investors who wouldn't go out and flip. And so Sequoia is in that category. Altimeter and Dragonier who both led this round are seen as sort of crossover funds too. But the investors are going to stick around. The other thing I would point out, these are also investors in open air and that is so rare that we are at this moment where I mean especially given the rivalry between these two companies, OpenAI Anthropic, founded by the same group, we just finished covering the MUSK Sam Altman trial Daria Amadi and Sam Altman. I mean, cue the picture. If you remember them not holding hands that everybody else did, but they openly really don't like each other. Those teams really don't like each other. And so historically you've covered Uber and Lyft. It's rare that you would invest in competitor, but I think it also speaks to how late stages the companies are in that it's almost like investing in public companies. And this point where you're not going to have the same taboo of oh, you invested in my rival. There's probably some. And investors I talked to this morning were saying there are some where it is seen as a betrayal if you go and invest in a rival, but at this stage it's actually not.
- [40:53]
Carrie Firestone
Yeah.
- [40:53]
Leslie Picker
And the same is true for underwriters too. With Uber and Lyft they had a different underwriter lineup. Same with JD.com and Alibaba Box and Dropbox to, you know, rival companies that go public around the same time. Different, usually different banks manage those. And so when we saw, you know, the Space X underwriter list come out and then shortly thereafter open, I'm like, who's going to do anthropic? And the answer was undecided yet. But just because Goldman and Morgan Stanley are working on those other two doesn't disqualify them for, you know, anthropic if it ultimately goes public as well.
- [41:27]
Carrie Firestone
Yeah, I think one of the more interesting elements that we're going to learn about is with IPOs that are this big and these are the biggest IPOs we have ever had in this country. It has to be a more collaborative structure because they're so large that you'd start to almost feel there'd be an anti competitive lawsuit waiting to happen if it's just one underwriter doing so much of it. They have to be inclusive. They really, really have to spread it around. Yeah, well, but it's going to be a necessity. And the ownership is also brought not just in the private, but you know, it's going to start. That's why they need the public too.
- [42:12]
Kate Rooney
Yes.
- [42:13]
Carrie Firestone
Because they're enormous. They're just.
- [42:15]
Kate Rooney
There's something like it ever interesting about OpenAI too that they've talked about is the ability to tap into debt by being a public company. And that's one incentive for them to get out there and listen. They from what we're hearing, what we've reported are looking to go as soon as September. I was talking to investor Anthropic who thinks it's going to be Q4. So you do have this sort of horse race between them. It seems like OpenAI is going to get out there first and it is sort of if you're not first or last situation where it matters to be first to go and tell your story to the street. We keep going back to Uber and Lyft, which I know you covered so closely, Leslie. But to tell your story, to communicate that to the street, talk about some of the losses and be the one who's out there telling your story. Anthropic is likely going to be second year, although might have the better profile financially. Well, we'll see when we get the yeah.
- [43:00]
Leslie Picker
All of these deals all coming within months of each other. Please send copy.
- [43:03]
Brent Brennan
Yes.
- [43:04]
Leslie Picker
Just kidding agents.
- [43:05]
Kate Rooney
That's what made clothes.
- [43:06]
Leslie Picker
Exactly. Kate, thank you so much. Kate Rooney from Post nine. Up next, Mike Santoli joins us with his midday work. We are back on halftime. Senior markets commentator and overtime co anchor Mike Santoli joins us with his midday word. Hey, Mike.
- [43:23]
Mike Santoli
Hey, Leslie. Yeah, so obviously, you know, another day, another buying frenzy. We you've been talking about Dell and all the adjacent hardware stocks and then down market a little bit you get every single day it seems there's a little bit of a, of a mini spurt in whether it's you talk about the space stocks, they were up huge earlier this week, drone stocks quantum on a given day. I don't know if anybody's noticed. BlackBerry is up 50% in the last week or so. Robinhood is up 10, 11% today on like old news and vibes as far as I can tell. So you have a lot of this kind of spicy mix going on in the market. But in aggregate it's actually staying controlled. It's actually just kind of rotational. The S&P 500 is in this relatively methodical uptrend. So for now I think we're okay. I would argue that we're kind of being held in check from from true broad based kind of silliness and euphoria by the fact that we still don't have final resolution on Iran. Maybe that's going to be the occasion for either a sell the news or some kind of radical rotation out of leadership tech and into cyclicals. And also what you guys were just talking about, I think the chatter around these IPOs mostly being liquidity events and whether the system can accommodate them and all the maneuverings around them, I almost feel like that's sort of contributing to a wall of worry as opposed to getting people really revved up. But look, we'll see. We never, we don't always have to get to full silly before the risk reward turns to turns down.
- [44:47]
Leslie Picker
Don't definitely don't need to get to full silly. We'll see what happens. Mike Santoli, thank you. Halftime. We'll be right back. Welcome back. Happening right now or more. Morgan Brennan is sitting down with JPMorgan CEO Jamie Dimon live from the Reagan National Economic Forum in California. Let's listen to part of that conversation.
- [45:22]
Morgan Brennan
Meantime, we do have equity markets at record highs. You've seen, especially the parts of the market I think about not to single out a company, but the stock has gone parabolic Micron record time, hitting a trillion dollar market cap here. What does that say about the market versus this infrastructure buildout?
- [45:39]
Jamie Dimon
You know, look, I view the market as exuberant, you know, and I've seen this before. You know, of course exuberance can go on a long time and it's not bad sometimes. You know, earnings are up 15, 20% this year and a lot of these companies have huge order books, so it may be justified. But you know, there is also hype in some of the stuff. You see hype in other commodities too. And then credit spreads are very low. So I look at all that as actually a risk. So it makes you feel good. But if something goes wrong, those asset prices can come down. Interest rates are gravity to asset prices. So it's a risk. I'm not terrified about it. We can handle whatever it is. When we look at risk, we look at the range of potential outcomes. You can handle it. So JPMorgan can handle rates at 2%, rates at 8%. We're not betting our company either one. And I give you probabilities of those things, which is more of an intellectual exercise than anything else. So we'll see.
- [46:33]
Morgan Brennan
SpaceX IPO thoughts?
- [46:36]
Jamie Dimon
Well, you know, I visited SpaceX. It's extraordinary. I mean the company, you could talk about values and all that, but which I can't. It's extraordinary. It's extraordinary what they've done. I think it was 100 launches last year. You know, they're reusable parts now. So the, the cost per launch, the cost per satellite is literally coming down like this. So I wish these guys and Blue Origin, I wish them the best. I mean they're inventing stuff that can change humanity for the better.
- [47:09]
Morgan Brennan
How do you think?
- [47:10]
Leslie Picker
J.P. morgan is of course one of the book runners on that Space X ipo, which is probably why he deflected on the question about valuation we will continue to monitor that. Conversation with Jamie Dimon will bring you any of the big head headlines, but sticking with the big banks next week, I'm speaking with Goldman Sachs CEO David Solomon at the Economic Club of New York. It is happening at noon Eastern on Tuesday. And we'll be sure to bring you all the highlights right here on halftime. Guys. It's interesting hearing Diamond's comments about the markets and exuberance because he's spoken about the exuberance of the markets for quite some time. I was struck more by when he said it's not that bad that the exuberance of the market is not that bad. He said there are risks out there, credit spreads are tight and so forth. What do you make of those comments?
- [47:55]
Kevin Simpson
Usually a little bit more glass half empty right when Jamie talks. But I think basically what he's saying is what a lot of investors are thinking right now. Yes, there is exuberance in this market, but that doesn't automatically mean that it's irrational exuberance. Corporate earnings are holding up. There's a massive spend. The economy backdrop is pretty good. We're not looking at rate hikes at the moment. So I agree with the fact that he's OK with it. But I think at the at the end of the comment there was probably a little bit of caution there, which makes sense. Be disciplined and be selective.
- [48:26]
Leslie Picker
Kerry, what do you think?
- [48:28]
Carrie Firestone
I think we've seen many markets in which you can look at valuation and say it's not crazy until it's ridiculous times to your definition of ridiculous. And I don't think we're at that level where it's such nosebleed territory by and large across the board where we have widespread selling. But exuberance is not a word that usually means calm and rational. It's a word that has implications which suggests something else is coming. So we have to just be aware of that as long as GDP stays decent and employment is fine. I think in the near term, yeah.
- [49:05]
Leslie Picker
Because back to that 99 conversation we were having earlier in the hour. Stay with us. Final trades coming up on halftime. We are back with final trades. Brent,
- [49:19]
Brent Brennan
IGV. It's broken above its 200 day at 98 and I think the software space continues to go higher.
- [49:26]
Leslie Picker
Brent, Kevin, sorry, Nvidia.
- [49:29]
Kevin Simpson
The earnings were fantastic. The stock sold off off at 22 times forward earnings. I still like it here.
- [49:34]
Carrie Firestone
Cari, Carrie, great minds there. Brent. Microsoft is my name. It's less than a market multiple and it's breaking out.
- [49:41]
Steve Weiss
And Weiss, if you're a dog lover as I am, I would buy Alibaba. I mean, it just hasn't been working all that well. I think it's got a good opportunity.
- [49:51]
Leslie Picker
Yeah, currently down 1.4%. That does it for halftime. The exchange starts right now.
- [49:57]
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- [50:32]
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