Halftime Report: "Time to Get Bullish?" (May 7, 2025)

Hosted by CNBC's Scott Wapner, this episode of Halftime Report delves into significant market movements, focusing primarily on Alphabet's (Google) stock decline amid rising competition in the AI search landscape. The panel includes Josh Brown, Joe Terranova, Shannon Sokotia, and Jim Leventhal, who provide in-depth analysis and diverse perspectives on the evolving tech sector.

1. Alphabet's Stock Plunge and AI Search Competition

Timestamp: [01:03] – [05:21]

The episode kicks off with a discussion on Alphabet's substantial 7% drop in shares, a rare occurrence influenced by comments from Apple's Eddy Cue regarding a decline in search usage tied to AI advancements.

• Josh Brown highlights the unusual nature of the stock's decline, attributing it to Apple's comments about reduced browser searches:
  "Google Alphabet shares down substantially, a move that you just don't see all that often." [01:03]

• Jim Leventhal responds cautiously, noting that while the news is fresh and significant, Alphabet's valuation remains attractive:
  "The valuation was cheap to begin with. My inclination right now is to stick with the shares." [02:41]

• Joe Terranova offers a contrasting view, emphasizing the threat to Alphabet's core search business:
  "This is their primary business... actual evidence being suggested... is a capture of market share and that is a really big deal." [04:40]

• Shannon Sokotia underscores the gravity of the situation, comparing Google's potential market share loss to PayPal's decline after competitors emerged:
  "This is the first time that we've ever had to worry about the money printing machine in Google's basement being 95% market share." [05:32]

2. Implications for Apple and the Big Tech Landscape

Timestamp: [09:05] – [18:52]

The conversation shifts to the broader implications for Apple, especially concerning its lucrative agreement with Google and potential shifts in the AI search domain.

• Steve Kovach links Apple’s testimony to Alphabet's challenges, highlighting the $50 billion revenue from the Apple-Google search agreement:
  "It's $50 billion to... it's a huge story for both Apple and for Google and it's the end of an era." [11:40]

• Josh Brown draws parallels to Disney's "cord-cutting," suggesting that Alphabet and Apple might face long-term challenges similar to those experienced by traditional cable services:
  "It's similar to when Disney first said in 2015 when they first mentioned cord cutting." [20:57]

• Deirdre Bosa emphasizes the dominance of search revenue for Alphabet and the limited growth opportunities outside of defending its core business:
  "57% of Alphabet's revenue is search... the upside here could become quite limited." [14:27]

• Jim Leventhal expresses concern over Apple's future, especially regarding the potential decline in iPhone necessity as AI progresses:
  "I'm more worried about Apple in this news than I am about Alphabet... if you're going to take the iPhone away." [17:07]

3. Regulatory Pressures and Future Outlook

Timestamp: [18:23] – [27:48]

The panel discusses ongoing regulatory challenges facing both Alphabet and Apple, with implications for their business models and market positions.

• Steve Kovach highlights recent antitrust rulings affecting Apple's App Store and the potential breakup of its partnership with Google:
  "Apple has to start linking or allowing apps to link out to alternative payments outside of the Apple Store." [18:52]

• Shannon Sokotia draws attention to the significant financial impact of these regulatory decisions, noting the massive revenue stakes and the end of Google's dominance in search:
  "It's so much money and the judge says it's non-competitive. If this is the remedy, it's a huge story." [11:43]

• Josh Brown anticipates upcoming events like the Google Developers Conference and Apple's WWDC as pivotal moments to gauge future strategies and market responses:
  "Ahead to what is almost a month away from today and that's WWDC... where Google's going to close." [26:27]

4. The State of the Mag7 and Broader Market Dynamics

Timestamp: [24:31] – [33:52]

The discussion broadens to assess the performance and future of major tech giants (Mag7), questioning their investment appeal in the face of current challenges.

• Joe Terranova expresses concern over the deteriorating status of the Mag7, questioning the strength and future of these traditionally dominant stocks:
  "The Mag 7 is just beginning to really deteriorate." [24:34]

• Deirdre Bosa challenges the investment philosophy surrounding the Mag7, suggesting a need to rethink strategies due to shifting market dynamics:
  "We're questioning the Mag7 who has spent a significant amount of money on AI." [25:02]

• Shannon Sokotia references broader market shifts, using Disney as an analogy to illustrate potential long-term impacts on dominant companies facing new competitive pressures:
  "Consumers are not going to want to have 10 different mobility apps." [34:11]

5. Market Reaction and Forward-Looking Statements

Timestamp: [33:52] – [47:06]

The panel anticipates future developments, including upcoming earnings, buyback trends, and strategic moves by major companies.

• Shannon Sokotia discusses buyback trends, noting a significant increase as companies leverage strong free cash flows amid changing market conditions:
  "Over the last five years, the S&P buyback index... outperforms the S&P by about 10%." [43:37]

• Jim Leventhal and Shannon Sokotia highlight specific stock performances like Disney, Uber, and CrowdStrike, analyzing their resilience and growth potential despite broader market uncertainties:
  "Disney's experiences business is hanging in there despite a tough environment for the consumer." [30:13]
  "CrowdStrike... one of the greatest companies in tech." [33:52]

• Deirdre Bosa and Joe Terranova emphasize the importance of strategic buybacks and the potential for companies to return capital to shareholders as alternative growth avenues:
  "Look for a combination of strong free cash flow and a light tariff touch." [43:12]

6. Closing Insights and Upcoming Events

Timestamp: [47:06] – [48:01]

In the closing segments, the panel touches on geopolitical developments and recent advancements in the pharmaceutical sector, briefly touching upon their market implications.

• Scott Wapner mentions Chinese President Xi Jinping's visit to Russia, underscoring the geopolitical tensions impacting global markets:
  "Chinese President Xi Jinping has arrived in Russia for his 11th visit." [38:26]

• Courtney Reagan reports on Moderna's successful combined Covid and Flu MRNA shot, highlighting its superior performance in clinical trials:
  "Those who got the combo shot reduced more antibodies by 20 to 40% than those who took the current shots." [38:26]

Conclusion:

This episode of Halftime Report provides a comprehensive analysis of the current challenges facing Alphabet and Apple, set against the backdrop of evolving AI technologies and regulatory landscapes. The panelists offer varied perspectives on the potential long-term impacts on major tech stocks and the broader market, emphasizing the importance of strategic adaptability and cautious optimism in these turbulent times.