Time to get Bullish? 5/7/25

Summary

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.

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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]

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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.

Transcript

[Jim Leventhal]

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[Scott Wapner]

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[Josh Brown]

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, thank you very much. Welcome to the Halftime Report. I'm Scott Wapner, front and center this hour as trade talks with China are finally set. Is it time now to be more bullish on stocks? We will discuss and debate with the investment committee. The Fed decision is looming and several key names are moving on their earnings. Joining me for the hour today, Josh Brown, Joe Terranova, Shannon Sokotia and Jim Leventhal. We'll check the markets here. NASDAQ is red and we're going to get to that big story in a minute. Everything else is green and hanging in as we focus on those talks with China. Got Bitcoin on the move to approaching 100k. Bond yields, they are down the 10 year at 428. But the story of the day, and I know you've heard a lot about it already and for good reason, Google Alphabet shares down substantially, a move that you just don't see all that often. Those shares were down 7% and it's really because of those comments that Apple's eddy Q made that searches in their browser fell for the first time in April. It is a significant moment in the whole anthology of where AI and search is going. Jim, you own the stock Alphabet. Now, Apple has implications here, too, and that stock is lower and we can get to that in a minute. But this seem to be focused solely or primarily, probably better said, on Alphabet, a stock that you own. What do you think?

[Jim Leventhal]

Well, you know, it's obviously very new news, so I want to be careful about Knee jerking one way or the other. My inclination is to hold through this, particularly after the damage that's gone on in the last couple of hours. What I will note is that this drop, and you mentioned it, doesn't happen that often, but it has happened before and I'm thinking, Scott, to two years ago, roughly two years ago, when there was a problem with Gemini, the search engine. Do you remember this? They misidentified in some trial run, they misidentified a Celestial object stock got absolutely clobbered and it was, it was the death knell supposedly for Google and its AI search, etc. Etc. We've been talking ever since then about competitive threats which so far have not impacted the financials of Google. Maybe someday they will. I want to go back to where I started. I'm not going to knee jerk positive. I'm not going to knee jerk negative. The stock is obviously down quite a bit. The valuation was cheap to begin with. My inclination right now is to stick with the shares, but obviously I want to parse this a little bit more.

[Josh Brown]

You're, you're really speaking to what I think is a bit of a different incident, one that caused or needed a tweak perhaps, versus one that brings up the existential threat and crisis around Alphabet. There are two different stories altogether. This is the big worry from day one, is it not?

[Jim Leventhal]

It is, but I, with what you said when that happened and it actually happened another time as well with I forget it was Gemini or Bard or whatever when that happened. It was absolutely categorized as an existential threat that Google was going to lose its search business when it happened. Absolutely. Stock was down to something in the mid-90s, had big drops when it happened and you know, we see where it is today even after the drop that we're seeing today in the 150s. All I'm saying, again, not knee jerking one way or the other, just saying this has happened before in the last couple of years.

[Joe Terranova]

I have a different perspective.

[Josh Brown]

I'm sorry, you sold it recently in the rebalance.

[Shannon Sokotia]

Yeah.

[Joe Terranova]

The strategy. Sold out of it.

[Josh Brown]

Okay.

[Joe Terranova]

It looks really good today, but I think this is a big deal. This is the cash cow. This, this is their primary business. This is how they're generating their cash. This is the primary business they're in. And the concern over the last several years has been number one, they're not moving fast enough to fend off the competition. And now here we are where there's actual evidence being suggested in this testimony today that whether it's chat, gbt, whether it's grok whether it's perplexity that there actually is a capture of market share and that is a really big deal fundamentally.

[Josh Brown]

So, Josh, you recently sold it April 15th. You got out of Alphabet. The significance of this moment in the Big Story here is what in your mind.

[Shannon Sokotia]

It'S extremely significant. Joe is right. I think Jim will eventually come around to this point of view. It's not that Google now disappears. Google has a steady business that will consistently be a good business. It's that the duopoly that we've become accustomed to over the last 10 years of Metta and Google being, you know, 70, 80% of online ads, that is now what's in question. And to act like this isn't a watershed moment, I think is to ignore how powerful Google has been since even before it came public. So just. And you could play back my comments from the last two weeks. I've been saying this for the first time. Google finds itself competing in core search. It never had to compete before it came public in 2004 after the first wave of search engines all disappeared and it was effectively Yahoo and MSN left on the board. And so Google came public 21 years ago. They had dominant market share and they never lost it. We've never seen Google really fight for, you know, they've been fighting on, on, on other battlefields like cloud. They've been fighting on workplace productivity with the G suite. So it's not that they can't compete. They never had. This was in the bag. This was in the bag. Basically, Google could go into any business that they wanted to go into because they had a money printing machine in the basement and it was never in question. And now what we're seeing is the Gen Zs are going to chat GPT first. They don't want a list of blue links, which is basically a treasure hunt here. Go find the answer. They just want the answer. And it's not that Gemini is not delivering that on the top of their search query results, it's that Gemini is not doing that by themselves. There are other competitors that have gained a meaningful amount of mindshare, market share, search share, inquiry share, however you want to phrase it. And it's the first time that we've ever had to worry about the money printing machine in Google's basement being 95% market share. So they don't compete on traditional search. This is important. There's a company called DuckDuckGo and then there's Microsoft's Bing. Those are not the competitors, the true competitors are the standalone AI services and they are growing increasingly complex and their results are getting better and they're easier for people to use and the younger generation are defaulting to going directly there. So that's what we're talking about here. It reminds me of PayPal, but on a much bigger scale like PayPal's fine. The service works. People still use it. It's still built into millions of websites. It's not going away, but it's a stock that sells at 12 times earnings. Ever since Apple Pay and Shop Pay and Square and all of these other services came along that compete with it. There was a time when PayPal had dominant market share as the shopping cart payment solution for every e commerce site. And that time has now passed. I think the way that you want to think about Google value tech Jim and I had this debate last week on the air. That's the way that we need to start thinking about it. And it's not the end of the world, but it's a very different dynamic.

[Josh Brown]

Let's bring in Steve Kovach who covers all of this. Certainly follows everything big in tech existential worst fears. Are those too strong of comments when thinking about this issue? Steve?

[Steve Kovach]

Not at all. And I hate to pile on Farmer Jim over there, but I do agree with Josh and Joe on this. It's and look because look where we're getting this testimony from. It's coming from Eddie Q In charge of services at Apple. Outside of Google, no one has a better insight into how Google searches are performing up or down week by week, month by month, quarter over quarter than this man. He sees how people are typing into the Safari browser on their iPhones, how often that's happening. And he said it dropped in April. And he specifically said a lot of that is due to artificial intelligence, that artificial intelligence search engines like ones they're considering integrating into iOS. He testified perplexity, anthropic chat, CBT, all of those that we talk about so often are eating into this share. And now we're seeing at least a little bit of evidence from someone outside of Apple who does have great outside of Google rather, who does have great visibility into the search ecosystem. Say this. And by the way, Scott, this is not just an Alphabet problem, this is also an Apple problem. Because the reason why Eddy Q. Is there testifying on this is because one of the remedies under consideration in this antitrust trial that Google lost to the Department of Justice is getting rid of this agreement the two companies have where every time they have this revenue share of searches on the default search engine within Safari. So every time you and I go into Safari, type in a query. There's a revenue share going on between Apple and Google and Apple basically gets free money from Alphabet for this. They test. Eddie Q testified in this trial earlier that it's up to $20 billion a year. That's, that would be a fifth of services. Revenue and services is becoming a worry point here now for Apple because they did not give guidance for the current June quarter which they have been. It's been growing by double digit percentage points. It's picking up a lot of the slack from these sluggish iPhone sales. And so much of that is attributable to this agreement that might get blown up by the government from Google. So that is another thing that we have to look at here. Is Apple potentially partnering with one of these other up and coming AI search engines in order to take over this Google relationship or at least provide another or better or different option than what they are getting right now through Google.

[Shannon Sokotia]

To Josh's point, 50 billion.

[Steve Kovach]

Go ahead Josh.

[Shannon Sokotia]

It's $50 billion to. Yeah, the money Google has paid Apple all these years to be the default search engine on iOS. It's so much money. We throw around billions like it doesn't matter anymore. It's so much revenue and the judge says it's non competitive. If this is the remedy, it's a huge story for both Apple and for Google and it's the end of an era. One of the reasons Google has been able to hang on to the degree of relevance that it has is that it's built right in as the default search.

[Steve Kovach]

Right.

[Shannon Sokotia]

So if that's changing, think about how many of the searches you do just anecdotally, not even data that you do on your app, on your iPhone during the course of the day. Is it 20, is it 30? Multiply that times hundreds of millions of people.

[Steve Kovach]

A billion. There's a billion iPhone users on the planet, Josh, doing this every day. And so again when you have Eddy Q up there saying those searches fell, that's less money for Apple, that's less money for Google and it just plays into this disaster scenario that folks have been worrying about. This is different than Google search getting or Google's AI search rather getting an answer wrong about what planet it's identifying or whatever that was that happened two years ago. This is usage falling. And that is where we're seeing the reaction in the stock right now is because people are using what you just described, Josh. Less according to Eddie Q. And Instead they're going to these other services. Eddie Q also said this is, this is going to change the Apple business. He also testified. Just saw a headline cross from this Testimony that in 10 years we might not even need an iPhone because AI is going to be able to handle so many of the tasks that we needed a screen and poker on apps for. So, I mean, this is really an inflection point. This is not. We're seeing search, traditional search drop in favor of these AI services. And hearing this from ediq carries so much weight for both of these companies.

[Josh Brown]

Guys, yeah, it's really great insight and perspective. I want you to stay with me and I'm going to give Jim a chance to respond to all this. But Shan, we haven't heard from you and how you're thinking about this as well.

[Deirdre Bosa]

Well, I think it's important. I don't know if the viewers all know that it's 57% of Alphabet's revenue is search. Right. And so if you're buying the stock from a growth perspective, you're looking at YouTube and you're looking at the opportunity to grow YouTube and cloud. Those are de minimis compared to what searches. So I think the challenge here is if you're hanging on here and looking at this as the potential for growth, it's not just what Joe and Josh were saying. It's not just the revenue that's being accreted by the search. It's that they're not going to be able to invest in anything else except defending this business. And so the upside here could become quite limited. And Jim, I mean, I, I hate to pile on as well, but like.

[Jim Leventhal]

I don't feel piled on. I really want to repeat the statement and let me just put some context to this. This news broke an hour and a half ago. All right, I was in the subway, came here, got my makeup on. This news to me is about 25 minutes old. And all I'm saying is I am still parsing through it. Josh said I may come around to it. I may come around to this position. I'm not set in stone on this at all. All I'm saying is there have. This is not the first time this threat has been raised and it's not the first time. I don't think I'm misremembering this that when it happened twice that Google's AI search engine did poorly and it was listed as exist.

[Josh Brown]

This is, I will, I will underscore what Steve Kovac said. The issue is, I think he so very well laid it out. This is the first time that we have had a definitive usage drop. The metric that matters to most, not only to Alphabet, but as Steve also laid out to Apple and the revenue that it gets. That's a separate story. The headline story is the fact that usage of search for Alphabet has dropped for the first time in April. According to Eddie Q. It's, it's. You don't want to come off respectfully too. I mean, you don't want to come off as flippant to the issue here by suggesting in any way. I don't think he was that, that what you're, you're saying the issue was before is in really in any way equated to what this issue is. We're talking about usage versus an issue, a problem, a momentary problem.

[Jim Leventhal]

I hear you and I don't want to get lost in that discussion because the main point that I am trying to say is as an investor, I don't need your reaction to any thing. And if that's a mistake, if that hurts my results in the long term, I will take it. Because in my opinion, relative to the style of investing that I do thoughtfully thinking through next actions matters more than just knee jerking out of it. That's my main position.

[Josh Brown]

Let's hold on one second. Let's also just flip this forward because I mean, the Alphabet reaction speaks for itself. The stock's down 8%, a big move. You just don't ordinarily see something like that outside of a time of greater market upset like we had post April 2nd. Obviously the apple angle here is significant too. I want to get the take. I'll give you, Jim, the first crack on this side of the story. Because if you're going to be talking about a services business that is, you know, already, you know, in the current environment, I think there's a little bit of concern there, as Steve was suggesting as well, what this means for a company whose services business would make the company a Fortune 50 by itself.

[Jim Leventhal]

Yeah, look, I've had some difficulty recently digesting the multiple on Apple. I did add to it not that long ago at 189, that that addition is in the money right now. But I didn't like what Mr. Q said about, hey, maybe we're not going to need iPhones in a little while. That has me, that has my attention perked up. Honestly, to me, I'm more worried about Apple in this news than I am about Alphabet. I mean, look, obviously, and as is usual, I'm in the minority over here, but that's where my concern is. You want to take the iPhone away. Whoa. Okay. See what happens to services then.

[Joe Terranova]

I don't know that that might be a little bit of an extreme. I think it's right to be concerned about both. And, you know, full disclosure, Jyoti added Apple the other day and it's obviously been awful. And I had some questions surrounding the fundamentals when it did that. But I just think in the case of Alphabet, Josh threw out PayPal as an example. I don't know, maybe in a worst case scenario, this is more like Motorola. Now think about Motorola and what Apple and what Samsung did to it and eventually where it got to the place where it had to be split up. And that's the point I want to emphasize. Maybe the best thing ultimately is that Alphabet is split up. That might be the best outcome for you as a shareholder.

[Josh Brown]

It is interesting, don't you think, Steve, that, you know, it's been nearly a year since the judge ruled that that Google had acted illegally to maintain a monopoly in the search engine market. And here we find ourselves in a wholly different environment. It just raises some serious questions about not only the outcome of that decision, but whatever remedies are going to be thought about.

[Steve Kovach]

Yeah. And Scott, this has been on the table since Google lost the case. And we heard from the doj, some of their proposed remedies, that this relationship was going to split apart again. Eddy Cue in the original trial when the, before the verdict came in, was testifying there to protect these massive profits they're collecting from Google. And then let's talk about the services business. Let's, let's broaden this out just a little bit because last week we learned of another existential threat after the judge in California ruled that Apple had to start linking or allow apps rather to link out to alternative payments outside of the Apple Store. Which means Apple can't get that 30% rake it takes off all those app transactions. Sometimes it's 15% depending on what's going on. And so you have two things going on right now in the United States. You have the DOJ saying on one side that we might bust up this relationship that is just massively profitable for Apple and they're going to have to find alternatives that we heard Eddie Q. Talking about saying it literally keeps them up at night because this relationship might go away. And then you have the App Store model on the other side that is under threat. Right now. Apple for the very first time is fully complying with the court's order as it goes through this appeals process. We've already seen companies that have been the biggest agitators of the Apple ecosystem App Store model come out. Spotify put out their update last week. You can now go into the Spotify app, skirt Apple's payment system and subscribe just like that. That's something Spotify has always wanted. This all came from the Epic Games case and Tim Sweeney, the CEO over there, Fortnite is going to come back to the App Store Store this week. He says they're going to go around the App Store payments and if they can get a sort of critical mass of these apps and developers who find a way to get around those payments that they've been paying to Apple, that is yet another existential threat. Forget about what we're seeing in Europe. US is where much more money is spent, especially in gaming on the App Store. So you have the Google side and you have the App Store side. Two huge mega threats to Eddie Q's business. And we see him on the stand today just speaking some truth about how tough this is going to be in the coming years. Scott?

[Josh Brown]

Yeah, Josh. You know, someone we work with is texting me, I think a good thought that they're likening this to when Disney first said in 2015 when they first mentioned cord cutting. And that stock has not been the same since. If you look at the returns of that stock versus as the S and P, for example, it's a pretty telling story, wondering whether, you know, we could be in for a similar outcome in this instance.

[Shannon Sokotia]

That is a fantastic example. Who is that? Becky Quick? Whoever texted you that? Perfect, perfect analogy. Because the cable business for companies like Disney was an incredible business with, I wouldn't say Monopoly, but let's maybe say like almost oligopolistic tendencies, where the cable subscriber was going to pay $110 no matter what they watched, Disney was going to get its chunk of that $110. The highest ticket item in the cable bundle was ESPN. You could watch 100 hours of ESPN of the month or zero. You were paying for it anyway. And what an incredible business that was for Disney. They had 100 million people basically paying for this service, whether or not they used it. That. So that's, that's a great analogy because it's not that Disney went away. It's not that people don't watch espn. It's that that cash cow of the automatic, the guarantee is what's went away. Now you have 50 million, maybe 40 million cable subscribers. And the one thing you can guarantee alongside death and Taxes is that with every passing year that number is going lower will never go into reverse. Disney is still competing and in fact this morning had an upside surprise in the amount of people buying a streaming subscription. But again, that's back to 2015. It's 10 years later, and they're still locked in this battle that they never had to worry about. To your point, with the Alphabet situation, it was a delayed reaction, but now we're here.

[Josh Brown]

To your point, it wasn't Becky, by the way. It wasn't. I'm not going to reel my teasing, but it was. Beck, I know. We love you back on Disney, by the way. Shares are flat versus 10 years ago. To just give you an idea of what that Stock has done versus an S& P. S and P, which is up more than 200% over, over that same period of time.

[Joe Terranova]

Well, and first of all, when I said Motorola is an extreme scenario, obviously I'm joking about that, but I do think the company might be better off being broken up. And I think to what Josh is suggesting, Alphabet has to recreate themselves. Now, if they're actually going to lose that cash cow business, it has to be something that they're going to evolve, they're going to innovate over the course of time. I think the company's in a good enough place that they're actually going to do that. I'm also sitting here wondering what is, you know, conceptually, what does this do to the, the investment philosophy surrounding the Mag 7? Because it seems as though the Mag 7 is just beginning to really deteriorate. Whether it's Tesla, which has broken down significantly, or it's now Apple breaking down, or it's Alphabet as well breaking down. I think, you know, you're literally looking at, okay, I've got better. I've, I've got Nvidia. Maybe Amazon wants to come along for the ride, but other than that, I don't think it's as strong as we thought.

[Josh Brown]

I don't know. Microsoft's only 50, like 7% off.

[Joe Terranova]

Yeah, but Microsoft, Microsoft spent the entire year last year.

[Shannon Sokotia]

Can I throw one thing in here?

[Josh Brown]

You can in a minute. Hang on.

[Deirdre Bosa]

The irony here though, Scott, is that this is actually representation of AI working for consumers, that consumers are adopting AI as an alternative, and yet we're questioning the Mag7 who has spent a significant amount of money on AI, and yet they're still behind, potentially questioning a business model.

[Joe Terranova]

I'm questioning just the investment philosophy.

[Deirdre Bosa]

But I'm, but I am, I'm telling you, I'm questioning if we're going, if there are going to be other ways to monetize AI, which we've been talking about as a threat to the Mag 7 for the last 18 months.

[Josh Brown]

Josh.

[Shannon Sokotia]

1 underappreciated thing about the just the fall in search in general that may become a bigger story away from AI, or maybe AI is playing some role in this. People forget One of the things that that has helped Google destroy multiple earnings calls just have these huge upside beats on search revenue over the last few years in the post pandemic is travel related search. Travel is such a huge category. Think about every trip you've ever taken, whether it's business pleasure, whatever it is. There are some analysts saying that search revenue, third as much as 13% has been made up by travel related searches. One of the things that we keep hearing is that travel overall is down partially because of the state of the economy and the more uncertain consumer, and partially because of all the trade war stuff that's now a Google search problem. They may not have that, that travel boost to help them exceed earnings in the coming quarters, even if you didn't also have this layer of the AI market share threat.

[Josh Brown]

Steve Kovach, I'm going to give you the last word and I guess we can look ahead. Ahead to what is almost a month away from today and that's wwdc, when you and me are going to be out in Cupertino. Yeah, this is, this is now an overhang on that event that we'll want some answers to.

[Steve Kovach]

It's an overhang on the Google Developers Conference too, which is coming a couple of weeks before that. So from the Google I O event, I'm going to be looking for any indications that they're redesigning the Google search experience to really take advantage in a better way, in a monetizable way around this Gemini search. Right now it just kind of parks at the top of your search results and doesn't do much else. And you still, to Josh's earlier point, have to scroll through and do a treasure hunt to find what you're actually looking for. What are they doing to make that core search experience better? And then on the Apple front, we know how they've whiffed on artificial intelligence. There's immediately going to be a much more skepticism around what they show because what they showed last year, much of it did not materialize. At least the most important part was series update didn't materialize. So how do they kind of steer that ship around and really tell a story and a provable story that they have their hands around this artificial intelligence moment, whether that's partnering with like Eddie Q Tip Perplexity or another AI company or building it in house, which they still haven't proven. They have to do. So a lot more to watch in the next month or so.

[Josh Brown]

Scott yeah, good stuff really surrounding this big story today today. Well guys, thank you Steve. Thanks to you. We'll certainly hear more from you as this day progresses. We'll watch those shares of Alphabet as well. Lows of the day we're going to take a break. Coming up, we do have more earnings to discuss. There is Disney to talk about. There's Uber. Josh is also a sell in terms of a committee move. Jim has a couple of buys. We'll do that all next Foreign.

[Jim Leventhal]

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[Josh Brown]

All right, welcome back. Our chart of the day today is Disney. It's up 10.5% as you see earnings beat. They did raise their guidance. They did see a surprising uptick in their streaming subs. Not very important there. They announced a new theme park plan for Abu Dhabi. So there's a lot to consider. You saw enough. You bought more of this stock.

[Jim Leventhal]

Yeah, and not being sarcastic at all. But I'm going to stay in the moment. 10 years is 10 years. All right. In the moment. I see a lot that I like here. I see that the experiences business is hanging in there despite a tough environment for the consumer. What I heard on the call today is they don't see weakness in the consumer. That's good. Also, what matters to me a lot, I've said this for a while, is the streaming business, which granted the profitability at around 350 million for the quarter is small relative to the overall company profitability. But the growth rate is very large. It's much better than expected. We know about cord cutting. Streaming is rapidly replacing cord cutting. I like the idea of the Abu Dhabi experience that they're going to be building out. I like that. We're going to get some news next week. You don't have to wait too long on ESPN streaming. What that flagship product is going to be, what it's going to cost. I like what I see here at this price.

[Joe Terranova]

Guess what, Jimmy, I absolutely agree with you. I think this is a fundamental inflection point for this.

[Jim Leventhal]

Are we all laughing? I agree with you for sure.

[Joe Terranova]

Listen, you had streaming. The subs on streaming was strong. We understand that. Here's the best thing about this is that sentiment and positioning has been depressed and been depressed for so long. And that allows for the opportunity where you begin to get the reversal, you begin to get the build. In a lot of portfolio manager portfolios, you'll see this name being acquired. Acquired rather. I like what I see here.

[Josh Brown]

All right, there are two stocks that I want to talk about next are linked because they just made your bet. Stocks list best stocks in the market right now, Josh. Uber and CrowdStrike. So CrowdStrike reaffirmed their guidance. They say they're going to cut about 5% of their workforce. The stock down about 2%. So there's that. And then there is Uber, which beat their revenues. Did miss. And the comments from the CEO Dara Khash Rashahi about autonomous Calling it the single greatest opportunity ahead for Uber needs to be discussed as well. What about these two stocks? Why did you add them to this, this group?

[Shannon Sokotia]

Well, these are two long term holdings of mine. I've been in both of them for years and years and they happen to have hit the list quantitatively. But, but let's talk about crowdstrike first. So this is one of the best performing stocks of the year already. Not just tech stocks, but throughout the entire S&P 500 they had a lot, a lot of ground to make up for and they have. The stock basically got right back to where it was prior to the outage, the IT outage last summer. So now it's like that's never happened. They just reported a 23% increase in the only number that matters, which is AR annually reoccurring revenue. That's how these stocks are valued. They're now at $4.24 billion in ARR as a run rate and it was a 31% increase in subscription revenue. The stock is 26% above its 200 day. So firmly in a long term uptrend, even with this small drop today. I think, I think if you want to risk manage the position as a trader, you'd look at that 390 level. But again, this is an investment for me. Another unbelievable quarter for one of the greatest companies in tech. I'm staying with it. You want to do Uber or you want it? You want to. What do you want to go?

[Josh Brown]

I want to go to Deirdre Bosa because we thought the DARA comment set up a good conversation about the race to autonomous. Really between Uber and Tesla, which d you're thinking a lot about if you know there's going to be a winner, if there needs to be a winner, and who it might be.

[J]

Right. And is this the winner take all market which darkasser Shahi he talked about? But first let me get to the different strategies because Uber and Tesla are betting on AVs in very different ways. Elon Musk, of course, he wants to own the entire stack. Cars, the technology, the robo taxi network. Uber, on the other hand, remember it sold off its AV unit years ago, so now it's positioning itself as the platform for the robotaxi industry. In other words, the middleman that connects users to, to whichever app that they want. That narrative certainly has been working this year. It was more of a threat last year. Uber shares are up nearly 40%. But here is the risk and it has less to do with Tesla, more about the biggest, most Advanced player. Right now, that is Alphabet's Waymo. And Uber's relationship with Waymo is limited, so they're partnering in just a few markets like Austin and soon Atlanta. Everywhere else, Waymo is either going direct through its own app or working with other partners, proving just how replaceable a ride share platform like Uber can be. Even the biggest rideshare platform in the world. That brings us back to Tesla or another competitor like Amazon Zoox for that matter, which is expanding rapidly. They can, and they are building their own ride sharing apps, giving up less margin. And even as I know Josh believes that Uber can deliver things like fleet management that AV native players don't want to do themselves, there's a number of upstarts here to choose from, which Waymo already is choosing from. So put another way, Uber's embracing a robotaxi future. Yes, that's positive. That sounds good to investors. But that might just be talking up its own disruption too. You look at those comments from Dara Khazrashahi this morning saying that, you know, the Waymos are outperforming human drivers. You don't think that's happening in places like here in San Francisco or L A where Uber is not a partner?

[Josh Brown]

Mm, good points, of course. Josh, comment?

[Shannon Sokotia]

I have been saying this since the 40s. I said it when the Cyber Taxi announcement first happened last April and dropped uber into the 50s. I said it again in October when that insane Cyber taxi event took place. I still don't quite understand what we saw. And I'll continue to say it because it's the most obvious thing in the world to me. And I don't understand why it's taken the market so long to figure this out. The market is starting to figure it out. That's why the stock went into the Earnings report up 42% year to date. But whatever, it took a while. Consumers. But Josh, consumers. What about the way I can have. Well, that's what I want to talk about. Consumers are not going to want to have 10 different mobility apps. So what I, what I think the market is realizing now is that the only thing the consumer cares about is price, convenience and speed. And so they'll have the Waymo app. They might also have the Cyber Cab app, but the Uber app is going to be the hub that gets them the driver fastest. They don't care at a certain point. Is it autonomous or human? It doesn't matter. Just get me the car for the right price right now. And that's the strategy that Dara is pursuing. He was the CEO of Expedia. People didn't want to go to 10 different hotel websites. They wanted to see all the prices in one place. Dara understands that. And he's going to be the one that helps all of these upstarts reach profitability faster because all of their cars are going to be available through the.

[Josh Brown]

Uber, Apple D, real quick. And I got to bounce.

[J]

I would just say, I mean, if you think that there's going to be 10 different AV, robotaxi apps, but you know, the way that it's trending is you have to be extremely well capitalized. You have to have a safety record. There's really only one right now and that's Waymo, Amazon, Zoox, maybe Tesla starting very, very small. But if Waymo is able to scale and expand the way that they have been planning and releasing over the last few months, months and weeks, and I think that could be a significant threat.

[Josh Brown]

All right. Good stuff, Dee. Thank you very much. That's George joining us. So we're going to take a break. We'll come back. I'm going to tell you about the name that Josh Brown just sold, a name or two that Jim Leventhal has added. Plus, we think we found what might be a catalyst for stocks. We'll tell you what it is next. We'll get the headlines now with Courtney Reagan.

[Scott Wapner]

Hi, Scott. Russian state media reporting Chinese President Xi Jinping has arrived in Russia for his 11th visit. The Chinese leader is set to hold talks with Russian President Vladimir Putin Thursday and joined 28 other world leaders for parade to celebrate the 80th anniversary of the Soviet allied victory in World War II. The Kremlin has highlighted Xi's presence as a sign of Russia's glowing growing global influence. Meanwhile, Vice President J.D. vance said Russia is, quote, asking for too much in negotiations to end the war in Ukraine. At an international security policy event this morning, the vice president said the US Would like to see Russia and Ukraine have direct talks, adding he believed it would be quote, impossible for the US to mediate talks. And Moderna's combined Covid and Flu MRNA shot outperformed existing standalone vaccines for both viruses in a phase 3 clinical trial published today in the Journal of American Medical Association. The trial, which was funded by Moderna, showed those who got the combo shot reduced more antibodies by 20 to 40% percent than those who took the current shots. Halftime Report. We'll be right back.

[Shannon Sokotia]

CNBC News Update is sponsored by Morgan.

[Josh Brown]

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[Jim Leventhal]

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[Josh Brown]

All right, let's do a move from Josh Brown While you sold Reddit, tell our viewers why.

[Shannon Sokotia]

The stock bounced with the rest of the high growth tech names throughout the course of April after obviously selling off with tech starting in February. And I just looked at it and I said, you know what? It was a good earnings report, actually was a great earnings report. There wasn't a crazy reaction to it. And if I'm bearish on Google search trends, you know, the fact that Reddit has been so highly placed atop Google search over the last couple of years is really one of the most bullish things to happen for the company. So it's hard to like this little cognitive dissonance there to be bearish on Google search trends, but bullish on Reddit, getting an increasing amount of revenue from appearing highly ranked in Google searches. So it was just a little bit messy for me mentally. I took it off the table into the into the rally. I did okay. I should have done better, but it's not off my radar. I'm still going to follow the name and I might come back to it in the future.

[Josh Brown]

All right, on your radar is Vertex. Jimmy, you bought more.

[Jim Leventhal]

Yep, I've owned it for a little while now. Stock had a very disappointing reaction to earnings, yet now they missed. And when a company misses, you have to ask yourself what happened? Is there something systemic wrong here? And I don't think so at all. There were some copycat drugs in Russia that illegally cannibalized some sales of their main cystic fibrosis drug. Their existing franchise in cystic fibrosis is very strong. The new pain medication is getting picked up quickly and they've got a lot of shots on goal coming with new medications for things like diabetes and kidney disease. This is one one I'm very comfortable holding for the long run.

[Josh Brown]

All right, thank you. Down three and a third percent today. We'll take a break. We'll come back. We'll tell you why buybacks are booming and what it might mean for this market from here. We'll name names next. Been asking the question, what's a catalyst for stocks? How about buybacks because they are booming? The FT says US companies plot $500 billion in share buyback spree. The April estimate of 234 billion was the second highest on record. Is this a place to look now that earnings season is coming to an end? The window is open, so to speak.

[Deirdre Bosa]

Yeah. I think it's important to look at buybacks. You think about, you know, prior to the pandemic and the stranglehold that the Mag 7 essentially built on the S&P 500 that was on the back of buybacks. And so there's a lot of opportunity here. What you really need to look for, though, is you need to look for a combination, in our view anyway, of strong free cash flow and a light tariff touch because we haven't talked about tariffs all day, Scott. But they are the rationale for many of these companies that have pared back or canceled their buybacks over the last couple of weeks.

[Josh Brown]

Look at the announced buybacks already. We made a wall to show you the big name companies that have done done so. Apple, Wells, Visa, Delta, 3M, Shell, Lilly, Chipotle, Arista, Joe, you follow this pretty closely.

[Joe Terranova]

I do. Over the last five years, the S and P buyback index, which measures the top 100 companies in the S and P, that the highest buyback ratios outperform the S and p by about 10%. I think the environment we're in right now benefits buying back shares because the CFO who's looking at the environment says to themselves, well, okay, originally I thought I was going to be able to execute some M and A. Really not going to be able to do that right now. Let's go in, let's buy back some shares, maybe return capital to shareholders as well. So I think it's really more a casualty of the environment.

[Josh Brown]

All right, we'll take a quick break. We come back to talk once again about Berkshire's next chapter. We'll talk to Forever shareholder Josh Brown. He'll weigh in on what he thinks it Means for a stock he has owned as he says forever. Next. All right, Josh Brown, we never got your take on the goat making the announcement that he did this prior weekend saying that he's going to step down as CEO at the end of the year. You own the stock have for a long time and I think we're pledging to be a forever shareholder. What do you say?

[Shannon Sokotia]

Yeah, I remember distinctly conversations 15 years ago, people saying well they're in their 70s, they're not going to live forever. But so this has been an overhang over the stock for a long time. But it hasn't really mattered because it's one of the best performing names of the last one year, three years, five years, 10 years. And I think for people like myself the only thing that's worth saying at this point is this is as good of a transition of a succession plan as I have ever seen executed market anywhere at any company. And it wasn't sudden and it's not an illness, thank God. It was something that they painstakingly did over the course of 10 years introducing the concept who the people would be bringing in portfolio managers, making sure agit Jane is there now letting Greg on stage for the last couple of years and they pulled it off. The stock made an all time record high and it's hanging high still. And as a, as a forever shareholder could not be happier. My hat is off to the goat. I would say he's on Mount Rushmore but there's nobody else that would belong on there with him. He's a1of1. We all know it and that's where we are.

[Josh Brown]

All right, good stuff. We'll take a quick break. We'll come back with finals next. All right, how's this for an afternoon Fed decision coming up, then the news conference, then Jeffrey Gundlach right here at post 9 in person for our exclusive get together on Fed Day. We'll obviously track where Google's going Alphabet, where is it going to close? We will find out. Josh Brown, your final trade is what.

[Shannon Sokotia]

Shock reported last week. They'll open 40 to 50 new company operated stores this year. I'm bullish, I'm long farmer Jim Wynn Resorts.

[Jim Leventhal]

The international expansion is making this company a growth growth stock.

[Deirdre Bosa]

Chan financial lack of new regulation is a driver here.

[Joe Terranova]

And Jyoti Spotify another all time high.

[Josh Brown]

All right, big afternoon coming up. I'll see you on the bell. The exchanges now you've been listening to CNBC's Halftime Report, the podcast you can always catch us live weekdays at 12 Eastern. Only on CNBC.

[Scott Wapner]

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 affiliate, 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.comhalftimereportdisclaimer.

[Courtney Reagan]

@Hotels.Com we know some travelers crave an ocean breeze, others don't want to deal with sand, and oftentimes those two people end up together. Compare properties side by side to find yourself poolside, oceanside and still in a relationship. Find your perfect somewhere with hotels dot com.