The U.S. Exceptionalism Trade 03/25/25

Summary

Halftime Report: The U.S. Exceptionalism Trade (03/25/25)

Release Date: March 25, 2025 | Host: Scott Wapner | Contributors: Josh Brown, Stephanie Link, Jim Leventhal, Rob Seachon

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Introduction

In this episode of CNBC's Halftime Report, host Scott Wapner delves deep into the ongoing discourse surrounding the U.S. Exceptionalism trade. As markets navigate uncertainties related to tariffs and the broader economy, the panel of top investors—Josh Brown, Stephanie Link, Jim Leventhal, and Rob Seachon—explore whether the once-booming U.S. market remains a lucrative investment avenue or if the tide is shifting in favor of European and other international markets.

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U.S. Exceptionalism Trade: Current Landscape

The discussion kicks off with an examination of the U.S. market's performance year-to-date. Stephanie Link observes, "S&P, believe it or not, doesn't feel like it is only it's down less than 2% year to date" ([02:30]). Despite lingering uncertainties around trade policies and economic growth, Link maintains an optimistic stance on the U.S. market's resilience and potential for growth beyond the tech sector.

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European vs. U.S. Market Valuations

Concerns about shifting market sentiment are highlighted when Oppenheimer notes that European stocks are poised to outperform the U.S. by the largest margin ever this quarter. Link counters this by asserting, "I think US is still a place to be. There's plenty of value out there beyond tech" ([03:50]). Josh Brown adds a contrarian perspective, emphasizing that the valuation gaps between Europe and the U.S. are not yet fully closed and cautioning against prematurely abandoning the U.S. market. He states, "I would not advise people, yes, go chase Europe, but this notion that oh, the rally's over, go back to the Mag 7, I think in the fullness of time that's going to look ill-advised" ([05:00]).

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Mega-Cap Stocks and Market Dynamics

The focus then shifts to mega-cap stocks, which have significantly influenced the Nasdaq and S&P indices. Scott Wapner highlights the mixed market picture, attributing it to gains in mega caps while acknowledging broader economic concerns. Rob Seachon discusses tactical moves within mega caps, particularly Amazon and Nvidia, emphasizing their relative valuations and long-term growth prospects. He notes, "They are going to play an attractive combination of relative valuations and dominance and durable long-term growth" ([22:19]).

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Apple's Struggles Amid U.S. Exceptionalism

A critical segment of the discussion revolves around Apple’s challenges, especially its deteriorating sales in China. Stephanie Link elaborates, "Apple did nearly $24 billion in sales in China in that big December quarter in 2022. It was 18 and a half billion that same period last year." ([17:03]). The delay in launching Apple Intelligence in China and heightened competition from local brands like Huawei have pressured Apple's growth. Jim Leventhal adds that while Apple is an exceptional American company, its reliance on the Chinese market poses significant risks, stating, "If my investment thesis is primarily on China, I'm not that comfortable right now." ([19:02]).

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Data Center Bubble Concerns

The conversation shifts to concerns about a potential bubble in data center investments, sparked by comments from Alibaba Chairman Josiah. Stephanie Link counters worries about a data center bubble by emphasizing the ongoing and growing demand for data infrastructure. She argues, "We have 11,000 around the world, we have 5,400 here in the States. You have to get at least double that just to meet up with the demand." ([24:13]). Jim Leventhal concurs, suggesting that while there are sensitivities, the fundamental demand for data centers remains robust.

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Strategic Stock Picks and Portfolio Adjustments

Rob Seachon and Jim Leventhal discuss strategic stock additions, focusing on companies like Amazon, Nvidia, and Lockheed Martin. Seachon highlights In Video's strong position in AI chips, projecting significant revenue and cash flow growth. Leventhal emphasizes the value in Lockheed Martin, noting its diversified portfolio of defense products and attractive valuation metrics: "Lockheed Martin is a provider of those around the world at 16 times earnings, 3% dividend yield. I'm going to add to it." ([38:40]).

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Real Estate and Consumer Stocks

The panel also examines the real estate sector, particularly homebuilders like Dr. Horton and Martin, which are trading at attractive valuations despite recent disappointments in orders. Stephanie Link points out, "All you need is interest rates to come down and 30-year fixed to come closer to 6 versus 7," suggesting a potential rebound in the housing market as interest rates stabilize ([39:47]). Additionally, Chipotle is discussed as a value buy despite its high forward P/E ratio, with Link noting its mid-single-digit same-store sales growth and strong unit expansions ([40:50]).

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Ride-Sharing Sector and Future Prospects

The episode also touches on the ride-sharing industry, with a focus on Lyft's recent volatility and strategic moves. Stephanie Link updates listeners on Engine Capital's stake in Lyft, clarifying the investment to be around $50 million rather than the initially reported $500 million, which tempers some of the stock's gains ([49:27]). Josh Brown speculates on potential acquisitions, suggesting that giants like Amazon or Tesla might consider buying Lyft to bolster their delivery and autonomous vehicle capabilities ([46:46]).

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Concluding Insights and Future Outlook

As the episode wraps up, the panelists share their final thoughts on the U.S. Exceptionalism trade. Josh Brown remains optimistic about balanced portfolios incorporating both U.S. and international equities, while Stephanie Link underscores the importance of strategic stock selection in navigating market uncertainties. The consensus suggests a cautious yet optimistic approach, emphasizing value investing and readiness to capitalize on market corrections.

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Notable Quotes

• Stephanie Link ([02:30]): "I think US is still a place to be. There's plenty of value out there beyond tech."
• Josh Brown ([05:00]): "I would not advise people, yes, go chase Europe, but this notion that oh, the rally's over, go back to the Mag 7, I think in the fullness of time that's going to look ill-advised."
• Jim Leventhal ([19:02]): "If my investment thesis is primarily on China, I'm not that comfortable right now."
• Stephanie Link ([24:13]): "We have 11,000 around the world, we have 5,400 here in the States. You have to get at least double that just to meet up with the demand."
• Jim Leventhal ([38:40]): "Lockheed Martin is a provider of those around the world at 16 times earnings, 3% dividend yield. I'm going to add to it."

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Conclusion

The Halftime Report episode on the U.S. Exceptionalism trade offers a comprehensive analysis of current market dynamics, emphasizing the enduring strength of the U.S. market amidst global uncertainties. The panel underscores the importance of strategic stock selection, value investing, and balanced portfolio allocations to navigate evolving economic landscapes. As global markets continue to shift, the insights provided by CNBC's top investors serve as a valuable guide for both seasoned and novice investors seeking to optimize their investment strategies.

Transcript

[Stephanie Link]

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[Scott Wapner]

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. Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the US Exceptionalism trade is it still on given all the uncertainty around tariffs in the economy? We will discuss a debate with the investment committee today. Joining me for the hour, Josh Brown, Stephanie Link, Jim Leventhal, Rob Seachon is going to be on in just a bit with some new mega cap moves to tell you about as well, but we'll start with checking the markets. We do have a mixed picture. It is a Nasdaq and S and P story today thanks to a gain in the mega caps. Steph, I'll start with you. You know we've rallied back S and P believe it or not, doesn't feel like it is only it's down less than 2% year to date. There's a lot of uncertainty obviously around trade and the economy. I thought our top story really should be this US exceptionalism trade, which was all the rage some two months ago. We came into the year, we're two months, three months into the year. We're two months or so into Trump 2.0. And we've had a lot of people suggesting on this network in notes from Wall street that other markets are going to do better than the U.S. now that there's just too much going on here. Oppenheimer points out today European stocks are on track to outperform the US this quarter by the largest margin ever. If that doesn't tell you where sentiment has shifted, I don't know what does.

[Stephanie Link]

So we overdid it on the upside of US exceptionalism and now we're overdoing it on the downside. In my opinion. I think US is still a place to be. There's plenty of value out there beyond tech, but even within tech, GDP is not going into a recession. We're probably going to do 2% in, in GDP growth this year. We're going to see double digit earnings, maybe not 14%, Scott, but maybe more like 9 or 10. And we're going to have margin expansion. And so you had the market correct. The multiples have come down and a lot of stocks beyond tech are very, very cheap. You know, the last couple of weeks I have been buying, we talked about it, that I went from 9% cash to 3% cash over the last four weeks. And I have a lot of different ideas. I would fade Europe in a heartbeat, I think. Yeah, in a heartbeat. Because I think they're barely going to grow 1% in GDP. I think earnings are going to disappoint and that at best they're going to be mid single digits. Margin expansion is a pipe dream in my opinion. You're not going to be able to see margin expansion. There's just too much regulation in Europe and the valuation is not that compelling. I would own some China, you know. I do via US Companies that have exposure in China. I think the transparency is way better from US companies with exposure to China. So Las Vegas Sands, for example, I'm keeping my eye on NSD Lauder, keeping my eye on Nike. So there are a lot of names to be looking at if you want the Chinese exposure. But I still think the place to.

[Scott Wapner]

Be is the US that's going to be a headline. I would fade Europe in a heartbeat, says Stephanie Link. Josh, turn to you on that because J.P. morgan's trading desk has an interesting note out today saying that Europe versus the US is done for now anyway because the valuation gap is closed and they look at the comparison between let's say an SAP which is 40 times versus a Google which is 18 and a half or Microsoft which is 29 and that the Mag 7 valuation is now looking cheap versus history. That Europe really benefited during the rotation out of tech and that's done. And to Steph's point that the market was just too extreme at the beginning of all this pricing in this US exceptional trade under Trump and it's already unwound. And they go to some other reasoning too that coming to month end you're going to see a lot of buying coming into the US as, as well. What's your thought on this? Because you talked look early on in the game about Europe. You raised your hand, said hey, take a look at Europe and what it's doing versus the U.S. but what about now?

[Josh Brown]

I applaud the contrarianism. Some would call it knee jerk contrarianism. It's a very common thing on Wall Street. If everyone's zigging, therefore I should zag. I think it's too early. I don't think it's true that the valuation gap has closed at all. I think SAP is an argument from the extreme. That happens to be a European tech, which is not the same thing as a median European stock. And when these things take root they tend to run on for longer than most people expect possible. I would not tell people, sell all your US stocks and just buy European equities. We don't do that where I come from. We've kept Europe as an allocation and added to it as that performance gap and valuation gap have expanded over the over recent years. And that's why we were positioned to be in it ahead of what's just gone on and we're not chasing it. So I would not advise people, yes, go chase Europe, but this notion that oh, the rally's over, go back to the max seven, I think in the fullness of time that's going to look ill advised. It's not like European stocks just doubled MSCI. Europe is up 8% year to date versus the S&P negative 2. Let's all calm down a second about that performance gap because if you look out over the last year, US is plus 12, Europe's plus 11. If you look out over 2 years, 3 years, 5 years, 10 years, there is no 12 month period where European stocks have done better than the US by which I want to state, I think it's possible that this rally, relative rally is still somewhat early and I don't think you want to be taking profits just yet. SAP at 40 notwithstanding, there are still lots of companies in Europe where the valuation gap is nowhere near what the historical averages have been. The other thing to keep in mind, judge, unlike the S&P 500 which is still hyper concentrated even given the sell off we've had in Mag 7, MSC Europe is highly diversified. The top 10 holdings in Europe only make up 18% of total exposure. That's versus the US top 10. That's more like 35 or 36%. MSCI Europe, if you, if you think about it from that standpoint, has is in a situation now where even with this rally it's still underappreciated, under owned. And something major has changed in the psychology of government officials and in the ideas about how important a strong capital market is in order for a company to not only a country to not only grow but like have the capability of defending itself. I don't think this is like a moment that's going to pass tomorrow. I think there's a fundamental psychological shift underway where these companies in these countries have more room to appreciate. So I would not fall for the instinct to be contrarian just yet.

[Scott Wapner]

Jimmy, bank of America, their client flows biggest net sale of US Equity since August. You've had record tech outflows. Clients were net sellers for the first time in eight weeks. So the money continues to flow there. Jeffrey Gundlach was talking to me the other day about that very fact. He doesn't think it's over either. Listen, I think that that's sensible given this reindustrialization concept in Europe. One of the things that might be an unintended consequence of all of Trump's rhetoric is, you know, he's making people think about how much can they rely on the United States for their weapons, for their defense, for their cooperation. And that's probably going to continue to make Europe very, very bullish versus the S&P 500. All right, that's Jeffrey Gundlach to me the other day on closing bell. What say you, Jimmy?

[Jim Leventhal]

I think Josh was kind of tilting at this. You have to understand what the composition is when you go internationally. This is not a tech heavy continent. When you look at Europe, if you're going to invest in Europe, just as an example, I know there's China, there's other places as well. You're really tilting more towards the value oriented sectors, financials, industrials, energy and materials. Hey, I happen to like those. But just you have to know that's where you're going. You're not really going to get the alphabets in the Amazons of the world. Now I'm a US Equity portfolio manager who occasionally buys a European stock on holdings. You may remember that Scott, that was, that is based in Switzerland. As a member of our investment office, we do have allocations for our clients to interest national equities. But and this is important right now, we are not adding to them. So that's our way of saying, hey, we believe in them for the long term. But we do think this rally has gotten a little bit ahead of itself. There is some fundamental basis to the rally, particularly the fact that Germany has released its debt break and is now going to use debt to spend on defense spending. But you've got to understand that's a very long term phenomenon. They don't just all of a sudden, sudden crank up the factories. They don't have the factories to crank up. What they're thinking about doing is taking idle Volkswagen plants and using those to build tanks. That does not happen overnight. It does however happen over years. And I think over years you are likely going to have other opportunities to add to international equities. Not sure I would do it right now.

[Scott Wapner]

Let's also be clear, we're not suggesting in any way, shape or form get out of the US Stock market and go into the European stock market. There's not a conversation about that. It's simply do you move from a dramatically underweight position which I think many investors have had for the last handful of years, and just up your exposure? Now you may look at what's happening with tech lately and say no, because if tech continues to perform form, that's where US exceptionalism is the most exceptional in those companies that are leading the AI transformation. So why would I want to get out of those names now after they've already corrected, when you may have had the worst of the earnings revisions, where the multiple corrections have already taken place. And if you look at the gains that we've had and the bounces that we've had, yes, they've gone from magnificent to mediocre of late. That doesn't mean that that's where the story is going to judge.

[Josh Brown]

Yeah, I think it's important to understand the way portfolio, the way portfolios actually get allocated over the last three years. If you're working in wealth management or even family office and to a lesser extent institutional asset management and you're talking to a prospective new client, you know what you're not showing them in a portfolio. You're not showing them Europe. Like you're not doing oh, this is how you would have hypothetically done over the last three years. Oh, and by the way, here's a 15% slug in Europe and a 10% slug in emerging markets. Nobody was showing people portfolios like that and winning business because Europe and emerging markets and to a lesser extent Japan, they were just a drag on returns. So the way people win business on and off Wall street is to show people a portfolio that effectively has been constructed in a rearview mirror. So of course, overweight mag 7, overweight mid cap growth, overweight large cap growth. Hey, I won the business. What a miracle. Look at the portfolio just showed people. That's about to change now. You're about to see people showing off a more balanced portfolio of value of assets around the world of different things other than Mag 7, because the Mag 7 have now been underperforming to a great degree for more than a quarter. The longer this underperformance goes on, the more portfolios you'll see allocated to these other areas and this type of thing could go on for years. So I'm not suggesting that there's going to be a new Mag 7 and it's going to be based in Holland. That's not, that's not what we're saying. We're saying everybody presents prospective prospects with a portfolio that's allocated based on whatever just worked over the last 36 months that you've got now. Opportunities in international stocks that make a track record, a backdrop test of a prospective portfolio recommendation look pretty damn good. Especially given the volatility we've experienced here which leads to increased flows to those areas and ultimately more dollars going into them. I know Stephanie's about to say I don't do that. Okay. I know nobody does not want to.

[Stephanie Link]

Say with the way this works, I'm not actually saying that at all. I'm going to just say I think the best value internationally is India, which is down 2% year. Yes, it's down 2% on the year.

[Scott Wapner]

That feels like a little late.

[Stephanie Link]

They're going to have the fastest GDP growth of all of the countries that we're talking about this year at 6.3%. They're going to have double digit mid teen earnings growth margin expansion. They have 1.4 billion people in their population, 40% of which are under the age of 25 years old. So just think about this between now and 2030, the productivity and the growth that is going to take place there. So it's been a very good country to own in the last couple of years. This year it's actually lagging. That's where I think you want to put your money. And I have money in there and I have for a while and I have been adding most recently we talked about it. So I do think that you have a prime minister there that's very pro growth. You're going to see continued 6% ish kind of growth. You're going to see $1.7 trillion of infrastructure spend between now and 2030. And I think that's going to be the driver of that.

[Scott Wapner]

I want to go back to the the issue that may be the most pertinent towards, you know, whether this idea of US Exceptionalism and that trade returns in some meaningful way. And it does center around the mega caps, whether whether you like it or not, it does. The biggest stocks in the market there, where all the action remains. Yes, they've gone from magnificent to mediocre, as we have suggested. You look at Metta. Metta is the only one of the group that's positive year to date, but the others are coming back a bit. They're still down considerably from their most recent highs. Tesla has its own idiosyncratic issues related to musk and politics and all that. Nvidia is down 22%, Alphabet 18, Meta 15, Amazon 15, Apple 14, Microsoft 16. Those are the percentage amounts off of their most recent highs. I thought we should focus on Apple for a minute because it has so many issues all of a sudden. It feels like they've bubbled to the surface around AI, they've had the executive change as it relates to that, continued China concerns, etc. We're worried about tariffs and everything else, it would seem. Steve Kobach joins us now. Maybe one of those issues is going to get resolved or at least take a step forward soon, potentially.

[Stephanie Link]

Scott so let's talk about Apple and China here, because that is really weighing things down. We talk about American exceptionalism, sure, Apple's.

[Scott Wapner]

An exceptional American company, but it's got.

[Stephanie Link]

This noose around its neck with China here. And look, Tim Cook out there in China ahead of this anticipated Apple Intelligence launch in the country, possibly next month or more likely in May. Also, late last night, Apple held a virtual session for Chinese developers where they walked them through Apple Intelligence tools. Still no indication when they're going to be available for Chinese users. But look, this trip is coming at a real pivotal time for China. Sales were down 11% in the December quarter, way off the highs of what.

[Scott Wapner]

They used to do in the country.

[Stephanie Link]

And the business has been struggling to grow basically since Huawei Started selling competing phones again in China a few years ago. Let me put this on perspective. Apple did nearly $24 billion in sales in China in that big December quarter in 2022. It was 18 and a half billion that same period last year. And we all know Apple whiffed on that big upgrade to Siri that was supposed to launch this spring, delayed at least until next year, possibly 2027. It's going to make Apple Intelligence a much tougher sell to those Chinese consumers. Only those minor features so far a bright spot though. You're looking for some bright spots, Scott. Government subsidies, those are going to be applicable to smartphones. That could give Apple business a smaller boost this quarter. Cook actually kind of hinted on this the last earnings call, that he expects government stimulus to help move more iPhones this March quarter. They also found that local AI partner in Alibaba for the launch of Apple Intelligence. And the meantime, Cook's playing the diplomat over there in China saying all the things he needs to say on this trip. He praised Deep Seek's AI model which of course was developed in that country, also announcing some investments in clean energy and and education. All of this though with the backdrop of the looming trade war between the US And China.

[Scott Wapner]

And we know that might get worse.

[Stephanie Link]

On April 2, so called liberation Day next week. Scott?

[Scott Wapner]

Yeah, Steve, thank you very much for that, Steve Kobach. I mean people have been drinking a lot of haterade around Apple of late. You own the stock.

[Jim Leventhal]

Yeah. But I think this is all about whether you hate it or love it in the stock market. It's about AI right now. You know, this stock has had a rally for 10 months since the worldwide developer conference last June. The stock was well below $200. It then shot on the AI news that came out then up to 260. And since it's backed off again on air news on the delay to AI now today you've got a nice little rally. It's actually been about a two or three day rally on the news in China. So this is all about AI and when I distill this down, they are behind in AI. Will they catch up? Of course they will. Of course they will. But it still seems like it's a little ways off. And as far as the China news, look I just as an observer in the world as well as an investor, any investment thesis that has China as sort of the central growth story right now is to me a little suspect because of the trade war. It's just that sometimes you just distill this business down to Its simplest elements. If my investment thesis is primarily on China, I'm not that comfortable right now. That's why I'm underweight the stock.

[Scott Wapner]

I understand, but I mean you represent. That view represents what people have long held about this stock and why it was elevated for as long as it was despite a premium valuation and less than premium fundamentals. The benefit of the doubt. You said it twice. Of course they will. Will they get it right? Of course they will. Well, now it's a show me story.

[Jim Leventhal]

Yeah, you know what, thanks. I just want to add something tangential but related. Okay. The stock now trades at roughly a 30 times multiple. That's still growth. You might call it garbage. But what it doesn't do is get the crossover value investor. Yes, there are a few of us in the world left. Okay, I'm looking at Stephie. Thanks. You know, but if you look at an Alphabet right now, 20 times what's matter, Stephie? 20 times forward earnings, whatever. Nvidia 25 times earnings, 20 times next year's with a 50% growth rate. Those are stocks that can get crossover value investors. Apple. Scott, remember 15 years ago the stock traded at 11 times earnings that drew in value investors that then propelled it higher. If you look over the last 15 years, stocks spin from one end the lower left of the chart to the upper right. I just don't see that crossover investor coming into Apple right now.

[Stephanie Link]

Cheaper than Apple though. And you get better growth for Amazon probably almost all the other mags. That's the only problem, right?

[Jim Leventhal]

Amen.

[Scott Wapner]

I'm glad, I'm glad you mentioned that because we do have a buyer committee member who is buying some of these mega cap names. Amazon Rob Seachen bought more Amazon Rob Seachen bought more in Video. Rob Seachon joins us on the phone now to tell us exactly why now.

[Stephanie Link]

Well, Scott, nice to be with everybody.

[Scott Wapner]

Hi.

[Josh Brown]

Hi guys.

[Jim Leventhal]

Last week on the show we talked.

[Scott Wapner]

About being in an athletic stance and.

[Josh Brown]

On Friday that's exactly what we did.

[Jim Leventhal]

Corrections like these are historically great buying opportunities for long term investors because forward.

[Scott Wapner]

Returns skew positive and you have to.

[Jim Leventhal]

Be ready to capitalize on that. Along these lines, we use the weakness that we saw to increase our exposure to our highest conviction current highest conviction Mag seven names. Now we've been overweight matter for a long time.

[Scott Wapner]

Underweight Amazon and in Video.

[Jim Leventhal]

And we just think those two names offer an attractive combination of relative valuations.

[Scott Wapner]

Dominance and durable long term growth.

[Jim Leventhal]

On In Video specifically obviously Belware I incredible edge in advanced AI chips years ahead of competitors. Next gen Blackwell is showing healthy momentum and this is despite concerns about competition export controls slowing capex at the hyperscalers and you have a company that is going to do track double double their revenues in the next two years and produce a remarkable 100 billion in free cash flow. And as Jim just said it trades at 25 times 25 EPS, 20 times 26. So on Friday we entered the name and we think it's a, it's a good buy. We're still not market weight but we.

[Scott Wapner]

Continue to increase as the market presents opportunity. I appreciate you calling in and telling us about it because it gives us a good segway. Rob, thanks. We'll see you back on the desk soon. I'm sure that it's a good segue to those comments that the Alibaba chairman Jos made today. You bet. Warning of a bubble in a data center build out. He said the following quote I start to see the beginning of some kind of bubble. I start to get worried. When people are building data centers on spec there are a number of people coming up, funds coming out to raise billions or millions of capital. There are a number as you know guys number of private equity firms that are making big investments in data centers Blue Al, Blackstone among them kkr. There are companies that have seen their share prices go to the moon. They've fallen back down to earth in some respects. Vista Verde for Nova, Eaton, Constellation Energy, last I checked they were all down today. Maybe on these comments Nvidia slightly lower perhaps on these comments as well. What do I do with that from Josiah?

[Stephanie Link]

There is some speculation, there's no question about it but the names that I own, they're contracted out until 2030 and I still think that if we believe, believe in the story which we all do you still do need data centers. We do not have enough of them. We have 11,000 around the world, we have 5,400 here in the States. You have to get at least double that just to meet up with the demand. And of course you then need an upgraded grid which Eaton has said 70% of the grid is over 25 years old. And we have these mega projects. I don't know if they're ever going to be fulfilled but $1.7 trillion is what Eaton has said is out there and only 15% have started to be.

[Scott Wapner]

What price do you pay though? I have been buying what you just said. I have valuation, right? Because if you look at I got eaten in front of me the high 380 it's down to 2, 299, Constellation Energy, the high 352, it's down to 224. I mean, you get my point.

[Stephanie Link]

Yeah, of course. So I got slammed on the deep seat day because they got hit. And I still started buying about a week later just to let the dust settle a bit. So, you know, these stocks were all down double digits and I just feel like there, this is, I think we're in like the second or third inning in this and these companies have done a really good job in terms of managing expectations. And Eaton has a new CEO and he just talked about $21 billion of cash that he's going to be putting to work between now and 2030, between M& A and buybacks and dividends and that sort of thing. So that's kind of a little bit of a special story within GE Vernova is all about it's being spun out and the margin expansion is enormous at this company. And I bought Next Terra because I like the GE Vernova combination, the joint venture that they announced. So I think there's a lot of ways you can play it. You don't have to reach for the stars and buy these really super expensive stocks because these have all come down and I think they're very good valuations.

[Scott Wapner]

Yes.

[Jim Leventhal]

Steph, to what you just said, there's many ways to play it. If you're working. Worried that there is some bubble brewing? I don't think so. Or let me put it this way, if there is a bubble, you know, it's in the inflating phase. I don't think it's imminently going to pop. But if you're worried about it, play a hybrid name. I mean, think about something like Oracle, which right now is being, you know, brushed as an AI stock, but they actually have a software, you know, a database company that gives you another piston in the engine or you know, Microsoft for that matter. There's a heck of a lot more to it than AI. So again, I'm not that worried that we're imminently going to pop a bubble in data centers. But if you're worried that AI is a bubble, there's a lot of other ways to play it. Cisco System.

[Scott Wapner]

Well, maybe we were on the press on the precipice of something that has self corrected in some respects. Josh, real quick before we go.

[Josh Brown]

Yeah, we're about to get a really good heat check here on this theme. When Core Weave prices its IPO this week and comes public at the current valuation expectation, this thing will be coming public somewhere between 27 and $32 billion in valuation. You can kind of understand it because their growth rate over the last year is like 700%. But it's a heat check because I don't think anyone thinks anything like that can keep going. Core Weave is infrastructure as a service, so they build these massive data centers filled with the newest GPUs from Nvidia and then people come in and rent that compute. We're going to get a really good sense of where the market's appetite is for that theme and it's not going to take us very long to process based on how that stock opens.

[Scott Wapner]

All right, good to know. I appreciate you bringing that to our attention. Coming up. Speaking of Josh, is the third time a charm? Well, he certainly hopes because he is back in a stock he's already sold twice before, we're going to trade school with him next.

[Stephanie Link]

Don't just ride the index, seek to outperform it with Felc, the Fidelity Enhanced Large CAP Core ETF. Unlike passive ETFs, FELC is run by a team of experts to adapt to market conditions and pursue upside potential wherever it's hiding. And while you get the potential outperformance of an actively managed fund, you can still buy and sell it on your terms just like any other ETF. Discover FELC, the Fidelity Enhanced Large Cap Core ETF part of Fidelity's suite of active ETFs. Learn more at fidelity.com felc before investing in any exchange traded fund, you should consider its investment objectives, risks, charges and expenses. Contact Fidelity for Prospectus, an offering circular or if available, a summary prospectus containing this information. Read it carefully. While active ETFs offer the potential to outperform an index, these products may more significantly trail in index as compared with passive ETFs. Fidelity Brokerage Services LLC Member NYSE SIPC you ever meet someone who seems kind of off? Whether it's a creepy neighbor or random.

[Scott Wapner]

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[Stephanie Link]

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[Scott Wapner]

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[Stephanie Link]

Running confidential background checks on anyone you're planning to meet from online dating apps, go to truthfinder.com podcast for a special offer. That's truthfinder.com podcasts. To access your special offer today, check out the all new CNBC Sport Podcast.

[Jim Leventhal]

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[Josh Brown]

Catch the biggest business stories on the.

[Stephanie Link]

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[Scott Wapner]

All right, welcome Back. Guess who's back. Back again. Slim Shady, Josh Brown. Tell us, tell us about this third time. Hopefully a charm for you. And.

[Josh Brown]

Yeah, this is Toast. And by the way, first time I've ever been called Slim on tv. So thank you for that. Look, I, I have traded this, I have traded the stock twice before, once successfully, once at a break even, but I think in the mid-30s and the fact that this stock has pulled back because of broader consumer related fears about the overall economy and people eating out, etc. I think it presents an opportunity because when you go through the last earnings report that they put out on February 19, you just have to come to the conclusion that they have figured it out. They are hitting on all cylinders and this is poised to become a really good business. They added 28,000 net locations in 2024. This is everything from like a counter service here by a muffin and coffee to the entire restaurant chain in all of the Marriotts and everything in between. And they have a take rate of about 56 basis points. So you think of it as like a gross payments volume business. And then you ask yourself how many other services can Toast sell? Their existing payment processing company customers. They're adding thousands and thousands of restaurants all over the country and each time they do that, number one, they're making money from the transactions. And the number two, they can sell other services, everything from payroll to order management systems for the kitchens and you name it. So it became a really good business. Finally over the last year they've become profitable. They exceeded on basically every metric out there. I should point out Block just blew up the other day because their payments business is not doing as well. So Toast is doing something very special within their niche. Morgan Stanley named it one of their best ideas for this year. I think the company grows earnings by 39% this year, over 50% next year. It's trading at a forward P E of 31 and they've just completed their first full profitable year. So I think it's still relatively early to the story.

[Scott Wapner]

What was the issue, I guess that caused you, you got. What was the issue that caused you to get out of this a couple of times? I know you got stopped out once. What were the concerns, I guess on Wall street about this name that sent it lower to the point where you got stopped out and then I suppose to the point where when you bought it back, you sold it again?

[Josh Brown]

Well, two things. I have commitment issues, as many who know me know. But bigger than that, this was an unprofitable company in A tape where profitless tech was being punished. So some of it is the context of the environment. That's no longer the case. This company is showing how profitable it's going to be right out of the gates. And it's pointing to a roadmap of more adjacent opportunities and enterprise, bigger customers, a bigger footprint in different regions. And that I think really transforms this from a stock that I want to trade trade to a stock that I want to consider a longer term position. So I don't have a huge position on here. It's something I'll be adding to. I accept that this is a high beta name. It'll be volatile, but this time I'm willing to commit to it. Given the results that we've seen over the last few quarters, I think they've finally transitioned from being a speculative profitless tech company to really something that's becoming an institution within financial services. Like they are a very important company to the customers who work with them. I don't think that's going to change anytime soon.

[Scott Wapner]

All right, we'll keep keep our eye on that spiking stock. It is toast. And Josh is back again. Coming up, we do have more committee moves first though. We get the headlines today with Silvana Hanaud. Hi, Silvana.

[Stephanie Link]

Hey, Scott. Good afternoon. China remains the top military and cyber threat to the United States. Now, that's according to an annual threat assessment published by the U.S. intelligence Community. Now, according to the report, China has the ability to hit the US with conventional weapons, compromise infrastructure with cyber attacks and target U.S. assets in space. Reuters is reporting that U.S. officials have given Syria's foreign minister a list of conditions that need to be met in order to lift some sanctions against the country in place since since the rule of Bashar al Assad. Now, among the reported conditions that no foreigners serve in senior government roles, that Syria destroys its remaining chemical weapons and that the new government cooperates on counterterrorism. And in the wake of Elon Musk's effort to slash the size of federal government, a new report from job site Indeed shows a spike in the number of federal workers looking for new jobs. According to Indeed, job applications from workers at agencies targeted by Doge are up 75% compared to 2022. There you have it. Halftime report. We'll be right back. CBC News update is sponsored by Morgan Stanley. Where old school hard work means bold new thinking. Don't just ride the index. Seek to outperform it with FELC, the Fidelity Enhanced Large Cap Core ETF. Unlike passive ETFs FELC is run by a team of experts to adapt to market conditions and pursue upside potential wherever it's hiding. And while you get the potential outperformance of an actively managed fund, you can still buy and sell it on your terms just like any other ETF. Discover felcing the Fidelity Enhanced Large Cap Core ETF part of Fidelity's suite of active ETFs. Learn more at fidelity.comfelc before investing in any exchange traded fund, you should consider its investment objectives, risks, charges and expenses. Contact Fidelity for a prospectus and offering circular or if available, a summary prospectus containing this information. Read it carefully. While active ETFs offer the potential to outperform an index, these products may more significantly trail an index as compared with passive ETFs. Fidelity Brokerage Services, LLC Member NYSE SIPC you ever meet someone who seems kind of off? Whether it's a creepy neighbor or random phone number that keeps calling you, Truthfinder has you covered.

[Scott Wapner]

You can search for people by name.

[Stephanie Link]

Address, phone number, email and more.

[Scott Wapner]

Truthfinder can be especially helpful for running.

[Stephanie Link]

Confidential background checks on anyone you're planning to meet from online dating apps. Go to truthfinder.com podcasts for a special offer that's truthfinder.com podcasts to access your special offer today.

[Scott Wapner]

All right, stocks on the move time. We're starting with Boeing today. There is news today that that company is seeking to withdraw its guilty plea agreement in the criminal case, according to the Wall Street Journal. Yesterday, of course, we had the news that Boeing won the Air Force contract to build the F47. There was also news, just moving moments ago, that a Senate committee has called Boeing CEO to testify on April 2 in a hearing titled Safety First Restoring Boeing's Status as a Great American Menu Manufacturer. You own the stock, Steph, if I recall, I think I'm right. You told me a couple of weeks ago that this is your favorite stock this year. Am I remembering that right?

[Stephanie Link]

Isn't that sad? This is my favorite stock. I actually said it in January, to be honest with you, and because it's been such a dog for the last couple of years. But more importantly, they now have better execution. They have a new CEO and he is doing a really good job, especially with the fish. AA supply chains are getting fixed. We talked about GE saying the same thing. That's important as well. But most important is the 737 and 787. Production rates are going higher and that's going to lead to better free cash flow. And the CFO was quite bullish Last week at a conference talking about free cash flow actually being positive for the second half of this year. So that's what the stock trades on, Scott. And even though it's up 23% from their March lows, it's still down 20% in the past year.

[Scott Wapner]

Okay, we can look now at Lockheed because when the news broke that Boeing had won that contract and Lockheed did not, Jim Labenthal said, overdone, big stock decline. There was a downgrade of the price target. By a lot. Right? By a lot. And you said, no way, Jose. Too much.

[Stephanie Link]

Yep.

[Scott Wapner]

And now you are buying more shares of Lockheed Martin.

[Jim Leventhal]

Yeah. Look, clearly the loss of the F47 was a disappointment for Lockheed Martin. Stephie, you know, I'm happy about Boeing. I want you to do well in it. Lockheed Martin has a lot of other irons in the fire, okay? It does C130. It's got the SR72, the Blackbird, the next Blackbird that it's working on. Who knows, maybe it will win. The Navy's next generation fighter. That bid is still up. Could be a disappointment as well. But either way, this is just too cheap for a company that is producing the weapons the world wants. And I hate when those words come out of my mouth. But we live in the real world, okay? The real world has, unfortunately, guns and bombs being used. Lockheed Martin is a provider of those around the world at 16 times earnings, 3% dividend yield. I'm going to add to it.

[Scott Wapner]

All right, Home builders new home sales came in slightly below. Steph, you own Dr. Horton Martin. Josh owns Invitation Homes. And Jonathan Krinski put out a note right before we came on the air today. Said he's renting along in the homebuilders, that there's been a bullish divergence into the best month of the year. Steph, what do you think about that?

[Stephanie Link]

Well, I mean, the quarters have been abysmal. Right. And so I'm actually encouraged though, Scott, the stocks are green today after KB Homes actually disappointed and orders were down 15%, which is way worse than expected. But these stocks trade at like 9, 10 times earnings. And for Dr. Horton, it's down 17% in the past year. So we know how bad housing is. All you need is interest rates to come down and 30 year fixed to come closer to 6 versus 7. And I think we are starting to see some green shoots with existing home sales. With new home sales, with home starts, I think there's all little bits of green shoots as interest rates continue to drop.

[Scott Wapner]

Let's do Chipotle here. Oppenheimer is bullish on that. They met with management, the management team, they say, quote, we left that meeting confident that CMG remains well positioned to drive a traffic rebound in 2H25 and beyond. We also identify a clearer path for the margin story to flip from headwind to tailwind as the year unfolds. Their longer term growth targets remain, in their words, solidly intact. That Stock is down 20% in 33 months.

[Stephanie Link]

I know, and it's not cheap, but it's at 38 times forward estimates. But it's down from its average of 50 times. And these guys have mid single digit same store sales, growth, unit growth, pricing power. And on the margin side, I think marketing and digital infrastructure that they're putting out I think is going to help as well. So I think it's down just because high multiple stocks are down a lot and I'm a buyer.

[Scott Wapner]

Quickly, Josh Reddit overweight reiterated Morgan Stanley.

[Josh Brown]

Yeah, I mean this stock is in a massive drawdown from its recent highs, although still looks really good versus the price it came public at. I probably should have bought some when it was close to 100. I didn't get the chance. Now it's recovered somewhat, but it's still very far from from its January February highs. I like it. I'm staying long, small position, very volatile.

[Scott Wapner]

All right, good stuff. Take a break. Mike Santoli, he's next on the other side of this break with his midday word. We have news that is crazy causing shares of Lyft to move. Deirdre Bosa brings it to us right now. Dee, what do we know?

[Stephanie Link]

Hey Scott. So shares of Lyft, they're up about 5% on this Bloomberg headline that says that Engine Capital is said to have built a stake in the ride sharing company and is pushing a review for outstanding questions. Also says that Engine Capital is set to have a $500 million stake. This is about a $5.3 billion market cap company. Remember that CEO David Risher, he took over in April of 2023, took over for the founders of the company at a time when it was really struggling and losing a ton of value. The stock hasn't done a whole lot since he took over. But there were these existential questions around the company. What was it going to do? Uber was only getting bigger and capturing market care. Rischer seems to have stemmed some of those losses and recapture some market share. He's also been signing deals with autonomous vehicle companies, but you know, it was only a matter of time. Probably until you know, investor took a hard look at this. It is the smaller ride sharing company by far. It's only has operations in North America versus a much bigger Uber that operates all around the world. So shares are up about 5%. They were up even more on the news, but they've come down a little.

[Scott Wapner]

Bit, Scott, you know, aside from the competitive issues that you know they've had obviously with Uber D that, that you know of. Clearly if you look back at that chart, once the Fed started raising interest rates and there was much more scrutiny on companies that traded for higher valuations, that were lower in profitability, there was really a comeuppance and this was caught right in the middle of that. You look at the chart, it tells the story.

[Stephanie Link]

I mean also remember that this was a company that was worth over $20 billion in market cap at one point, now down to 5 billion. Part of the interest rate story is this company was very unprofitable. So was Uber for a very long time. But with these operator CEOs coming in place, Dar Khad Shahi at Uber, David Rischer at Lyft, they have focused on the balance sheets, on the finances of the company. A chart of Uber investors have been a lot more positive or bullish on the bigger company. And the partly because Lyft is just the smaller sort of little brother. It's not quite as profitable yet as Uber. So that's part of the story here. You're going to sell these unprofitable companies in a higher interest rate environment. The question now is can it turn that around especially as it becomes more profitable.

[Scott Wapner]

Yeah, yeah, there are a lot of charts that look like that, those growth at any price names that really corrected. Thank you for that, dear Gibbos. I'll see you on closing bell. Look, little bit later. Josh Brown. It just brings us back to Uber and why, you know, investors have favored that name and some big investors have built new positions recently like Bill Ackman.

[Josh Brown]

Yeah, look, I think Uber in a very undisputed way has won the last war. But the new war still to come is going to be about who are the dominant players in Avenue. And right now I think there's only three. I think it's Uber as the, as the hub. And then I think obviously Tesla is going to launch this June. Waymo has already launched as partnered with Uber and Lyft doesn't really fit in. If you wanted, if you wanted to understand why Jeff Bezos was so willing to help fund the inauguration parties and to attend in person and if you wanted to better understand what he, he's done with the editorial board at the Washington Post, one way to think about that is Amazon should probably buy Lyft. There were rumors last year that they were interested or Lyft was talk or, you know, I don't know if it ever went past rumors. But think about how much money Amazon spends delivering things. What if you had an army of a million drivers who were rolling around town in their cars anyway who could make those deliveries and in fact lift this part partnered with Amazon and Anthropic to reduce, for example, call center times amongst their own customer support staff. The other company that should probably consider buying Lyft is Tesla because they might have an amazing robotaxi service, but they're going to quickly run into a problem where they recognize not every route should be automated. Some of these should have human drivers. Tesla hasn't got any. And this is a really quick shortcut where they can be ambidextrous, so to speak, autonomous and human depending on the route and the situation. So it's, it makes sense to me that they're going to review whether or not Lyft should remain a standalone business. I wouldn't be shocked if they find a buyer.

[Scott Wapner]

All right, we'll follow that story. Watch that stock throughout the day. Of course, Santol is next with his midday work. We are back with our senior markets commentator Mike Santoli sat down at post 9. I would love your comments, your thoughts on Joe Size comments about a potential data center bubble. You've seen a lot of markets, you've seen your share of bubbles. Utilities are the worst today. There are a lot of stocks that seem to be moving in part hard at least on those comments. What do you think?

[Jim Leventhal]

And of course Nvidia being held in check.

[Scott Wapner]

I think there's just really these two.

[Josh Brown]

Currents now, these worldviews of there's an.

[Jim Leventhal]

Asset light way of doing, getting where.

[Josh Brown]

We need to go in the way of AI. And there's the, you can't invest enough.

[Jim Leventhal]

Or even if, even if it's going.

[Josh Brown]

To be too much, we still have to participate.

[Scott Wapner]

Infrastructure build out.

[Jim Leventhal]

It's one of the reasons I was, I've been saying for a while that.

[Josh Brown]

I don't think that the market is ever going to have the AI infrastructure stocks on as long a leash as it did a while back.

[Jim Leventhal]

So there's always going to be this, you know, the clock is ticking on this. By the way, Microsoft shares are down.

[Scott Wapner]

On a 12 month basis.

[Josh Brown]

They were the first in to say this is huge. We're going to be an anchor investor in all this stuff and the market.

[Jim Leventhal]

Is no longer giving them credit for that.

[Scott Wapner]

And in fact, Satya Navel has said.

[Jim Leventhal]

Kind of putting boundaries on how much.

[Scott Wapner]

They want to spend, spend. So you have Alphabet saying, yep, it.

[Jim Leventhal]

Might be wasted on some measure, but we're still going to throw all this money into it. What is Alphabet valuation done? It's gotten compressed.

[Josh Brown]

So I do think the market's expressing the sensitivities around.

[Scott Wapner]

Not to say it's game over, but.

[Jim Leventhal]

Everybody knows that as one of these tech revolutions happens, the economics, the profitability.

[Josh Brown]

Doesn'T stay with the initial hardware build out.

[Scott Wapner]

Players better not be game over. Stephanie Lake, that's for sure, right? I mean Stephen, many investors looks at the pullback and says the trends not going in, there could be two years.

[Josh Brown]

Left in it and it goes much higher from here.

[Jim Leventhal]

But I just think people are always.

[Josh Brown]

Going to feel as if. Yeah, well, we just don't know for sure.

[Scott Wapner]

Greenspan's irrational exuberance.

[Josh Brown]

In fact, four years.

[Scott Wapner]

Yeah, three and a half. Three and a half. But you get my point. All right, I'll see you on Closing Bell of Mike Santoli. Finals are next.

[Stephanie Link]

Are you following the Halftime Report podcast?

[Jim Leventhal]

What are you waiting for? Look for us in your favorite podcasting app. Follow the Halftime podcast Now.

[Scott Wapner]

We want to get back to George Rebosa with more on that Lyft story we were discussing a few moments ago.

[Stephanie Link]

Dee Scott, I wanted to give you an update. At the time, Bloomberg had said that Engine Capital was said to have a $500 million stake. According to a source that is closer to $50 million. A $50 million stake is what we are hearing, not a half a billion dollar stake. And that could temper some of the gains that we've seen for Lyft stock. It's already down to just up about 3%. Back to you.

[Scott Wapner]

Okay, appreciate that update. Thank you. That's Joe Jerbos. I hope you'll join me. 3:00 Eastern Time on closing bell, we'll have patient capital. Samantha McLemore with us. Sarah Malik of New Veen, Aya Yoshioka as well. We'll see what these markets markets do take you right up into the close as well. Josh Brown, your final trade is what.

[Josh Brown]

I wanted to give you guys again. Chevron staying long. Stock still looks really good to me.

[Scott Wapner]

Thank you very much. That again, new buy. Just to remind everybody who's when that's me.

[Jim Leventhal]

I know we've talked about this a lot and we're kind of like, when will this ever hit? There's news today that billionaire Tillman Fertitta is in increasing his stake. I'm not the only one who sees value here. There is value here. Just give it a little more time.

[Scott Wapner]

Well, who else does? Talk to other people.

[Jim Leventhal]

What?

[Scott Wapner]

I'm just kidding.

[Stephanie Link]

Stephanie Link, Palo Alto New position for me.

[Scott Wapner]

Okay, thank you. I'll see you on the bell. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live, weekdays at 12 Eastern only on CNBC.

[Stephanie Link]

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 you ever meet someone who seems kind of off? Whether it's a creepy neighbor or random phone number that keeps calling you, Truthfinder has you covered. You can search for people by name, address, phone number, email and more.

[Scott Wapner]

Truthfinder can be especially helpful for running.

[Stephanie Link]

Confidential background checks on anyone you're planning to meet from online dating apps. Go to truthfinder.com podcasts for a special offer that's truthfinder.com podcasts to access your special offer today.