Is the AI Trade in Trouble? 11/5/26

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1:15Carl, thank you very much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the tech wreckage, NASDAQ getting hammered today, as you already know. The AI trade unraveling as we speak. We'll discuss and debate all of that with the Investment Committee. joining me for the hour today. Everybody's here at Post 9, Josh Brown, Malcolm Etheridge, Surat Sethi and Rob Seachin. It is all about the Nasdaq. It's a full-blown correction at this point. The worst day since April of 25. The VIX is surging and undoubtedly the biggest story in the market remains whether something material has changed, at least in part, for the AI trade due to the result of the midterm elections.

1:53And the stock market clearly is voting yes. Semis are down sharply, as you know. The Sox is having its worst day since March of 2020. That was COVID. So it gives you an idea of how far these stocks are falling. There it is, down almost 10 percent from highs. Names like Micron down 45, Marvell 57, Lamb 55. The chip equipment names, pretty brutal. Qualcomm's down 42 percent from its highs. They had earnings. The CEO's coming up in just a little bit. Perfect time to have Cristiano Amon joining us. How about this from Bespoke today? Only other periods since 1994 when semiconductors fell at least 17 and a half percent in five days.

2:36The Asian financial crisis, the Russian debt default, the dotcom bust, the GFC and the COVID crash. But Josh, that's where we are. And I think people are trying to make sense of what happens now. Look, I just think it's a function of that's where a lot of hot money was. And that's more importantly, where the leverage has been, not launching 2x Berkshire Hathaway products, right? Like if we understand market structure, we understand what retail is doing and what some of these pod shops that are a little bit more levered than normal are doing, they're chasing the AI hardware bets. They've been for a while.

3:12The situation has been deteriorating for a while. Most of these stocks peaked in July, which is already four months ago. And a day like today, the people that held on, held on, held on or worse, doubled down, more leverage, more leverage. Now it's not up to them anymore. Now it's up to somebody else who calls them or executes the trade on their behalf, whether they like it or not. This is the reality of trading and the types of high stakes activity that we've seen in the market for three years. So it's not the first time. Definitely won't be the last time. I think it's instructive where the pain actually is.

3:51All the worst performers are AI hardware. Yeah, infrastructure plays. And then, like, I have Berkshire Hathaway making a record high. I have Staples flat. I have energy stocks that are green. Like, it's not a market-wide event, although it can feel that way when you see the Dow move, a four-digit move. Every sector, obviously, is red. So there's a lot of red on the board. Of course, there's going to be - Not equal. I get that. But, you know, I'm not necessarily sure that that that's the the headline or the subheader or anything like that at the moment. I mean, look at the AI power names, Rob. They're down substantially from their highs.

4:29Places like Vistra, 42 and a half percent, which you own. We talked about it yesterday. There was a lot of chatter going into the election. Oh, don't worry about all this negativity on data centers. Once the election's over, that'll be over. Well, not so fast. And the market clearly doesn't think that's the truth, nor do people who are on the front lines, if you will, of the industry itself. Dina Powell McCormick of Meta President said at a Wall Street Journal tech conference, midterm results will make building data centers harder. Citrini Research says the infrastructure trade, quote, as we know it, is ending.

5:03They argue that it's peak CapEx growth and that the risk is now to the downside there. Even Dan Ives, we mentioned yesterday, has tempered his own bullishness, says 10 percent of the data center's plan will not happen. Now they'll be, in his words, wiped off the roadmap. He also thinks that CapEx growth is going to peak much earlier than he expected initially in 27 versus his prior view that we're talking 28 to 29. That maybe shortens, you know, people who say, well, we're just in the third inning or the first inning or whatever inning, that would imply that you're in later innings, perhaps, of the story than people had wanted to believe.

5:47What do you make of all that? I'm not going to tell you it's not a big deal because it is. The AIL build out just got harder, whether you hear it from Meadows president, Dan Ives, who's a perennial bull saying that things are peaking. I think you have to respect that. But nobody voted to make compute less scarce. Microsoft's Azure is growing at 48 percent. They're capacity constrained, not demand constrained. And when new capacity gets harder to build, existing capacity becomes more valuable. Yes. So I think this is a timing issue, not a final demand issue. That's one of the reasons why, by the way, you're making a good point that the mega caps were up yesterday.

6:33Yesterday. Yesterday. Big. I mean, you've had record highs for some of the names there. Yes, because they're incumbents, the so-called incumbents. They already have a lot of compute. Maybe their spend slows. They get back to free cash flow positive faster. And the value of the compute and a point you just made, and I think it's the right one, it goes up. 100%. And those that don't have the same political connectivity, they don't have the access to capital markets, are going to suffer more. Think about CoreWeave and what it's been hit the last few days. New low. Those that are the suppliers into this ecosystem, given that there's going to be much greater, a greater climb for them and their trajectories on earnings have changed slightly.

7:20Those are going to be more impacted. Are you guys all like rethinking your positioning in your portfolios right now? I mean, because we talk endlessly about the mega caps, the hyperscalers and the AI trade. It has dominated for the last three years. We have talked to almost every show leading off on a day where there wasn't some other breaking news or other news that demanded our attention more substantially on this very story. Rob and I, just speaking for Rob and I, both of us said the same thing in October. This is a time to take allocations back to where they belong. A lot of people had been free riding a NASDAQ that was compounding at 25 % a year, and they had 60 % go to 80%.

7:58We said it like on five different shows. I don't know how many different ways to say it. You have a risk-free rate north of 4.5%. You have this opportunity with volatility coming back to the sand disks of the world. You don't need to be at 80 % U.S. stocks and have 60 % of that exposure be tech. It makes no sense. And look at what happened. We were talking about fixed income and the rewriting there. We were talking about hedging. All those things today from a portfolio construction standpoint are working wonderfully. I want to get these guys in. Go ahead, Malcolm. Yeah, I'm listening to this. I've been reading since the midterm election results became obvious and people are cheering this, basically saying here comes the rotation.

8:42And I understand the impulse to be excited about the rotation. It means that all of the other 493 that haven't done so much, here's your chance to participate. But I think it's very important to point out the thing that should be obvious, which is that 40 percent of the S &P is related to these mega cap tech companies. So it's impossible for anything else to do well. Those do not so well. And we all get out of this a lot. What I mean by that is you look at GDP growth for the year, about 75 percent is estimated to be attributable to the spending of the hyperscalers. When you look at all of the growth that's come from two companies, OpenAI and Anthropic, the compute promises, the spending promises from those companies that has given these folks the confidence to do the spending.

9:29If that suddenly deteriorates, well, then so does the earnings growth that we were so excited about this year and going into next year, because it's all been tied to three companies, NVIDIA, Broadcom, and I'm blanking on the Micron, right? So without those companies doing that spending, there goes the entire S &P 500. Isn't that the conversation that needs to be had? I mean, Brad Gerstner was on the All In podcast, and he's talking about the very thing. 75 % of GDP growth, just like Malcolm said, comes from AI infrastructure spend this year. And if you pull that back, he thinks you could have at least a 50 basis point hit to growth next year.

10:06If growth is going to get hit, earnings are going to get hit. If this trade unravels in a more substantial way, how can these stocks be valued at current levels? How? You can't. And you're seeing the re-rating going on. And you saw it in October as well. And if you look at the equal-weighted S &P in October, it outperformed the market cap. And the rotation that you're talking about kind of started four to six weeks ago. And really, if you were invested, to Josh's point, in health care and staples and had a diversification strategy, You know, those are the stocks that even yesterday, look at health care.

10:41It was a three standard deviation compared to kind of the rest of the market. So, you know, to the point of semis, if you look back, they peaked at 20 percent of the S &P. They were 16 percent really as of last week. They're probably down to 12 or 14 now. But the largest that it ever became was 2008 when there was 8 percent of the S &P. So you had a lot of money following really fast and growth that is probably not going to be there. But the opportunities there, and we've talked about it at length, you can be in other areas that can't have organic growth. Oh, I understand that. But, I mean, this has been the story.

11:15I caught your eye as we were having this discussion here, and I got the feeling that you disagree on part of this. I don't know that I completely disagree. I may disagree on the timing. To me, it's all about what happens to earnings going forward. Microsoft told you about the demand side. It's insatiable. You're going to hear about the supply side of this from NVIDIA on November 17th. I think right now what's being threatened is the future build. As I said, compute is going to become more expensive for those who are able to provide it. I also think this whole notion that the financing of this is built on pillars of salt and sand is true maybe for some companies, but it certainly isn't true for others.

12:02Look at Meta's financing. They went out to raise nine billion dollars and had fifty three billion dollars of demand. They're sitting on cash. You know, you look at a private equity company, it's five times levered. They're trading at one times free cash flow. It's ridiculous that we're worried about financing for the best companies. The way the NASDAQ looks right now, it's as though everyone were about to take off their hard hat and say, oh, Democrats won. No more Internet, I guess. Yeah. And we're all going to stop. And walk off the job site like Fred Flintstone, slide down the back of a dinosaur.

12:39Like, that's literally not happening. There's no Democrats saying that that's going to happen. What is more likely, what is more likely, and Malcolm's point on where are the earnings going to come from, the market never believed in them anyway. And that's why NVIDIA is selling it 14 times forward. If anybody thought that their 28 and 29 estimates were anything other than like a best, best, best case scenario, that stock would at a minimum sell at a market multiple. Sandisk is three and a half times earnings. Does that tell you that anyone believed that this was going to go on at the same pace that it was?

13:14So you already have been re-rating and readjusting those expectations. The last 18 months we've had multiple corrections. The point you were going to make is what? You were making my point when you mentioned Microsoft. They're the perfect example of what I'm saying. So now we're in this moment where they might seize this opportunity to reduce guidance on CapEx going forward, where they were the company that came out and made it very clear we're not going to go free cash flow positive. We've had the reporting for several months about how Amy Hood was not a fan of how aggressive they had been with spending on the AI build out.

13:48And now's the opportunity for those hyperscalers to say, you know what? We see what's happening out there with the political climate, and we think maybe we ought to walk back what those commitments are, what those expectations are. I don't think they can. This is the window to do it is my whole point. It may well be. This is their window to do it. It may well be, but if they're going to do it, then they won't need the levels of debt financing that you're talking about. We agree on that. But if I see a business that is far outstripping my ability to sell it. Then why are they canceling projects with N-Scale and others?

14:23Maybe they don't feel like a neocloud is the right bet. I do not know. They don't want to build it themselves and keep that debt and the asset on their books. They've been outsourcing it for years. Here's the good news. I'm hearing your point. Wait, wait. Here's the good news. If Malcolm is right, you probably agree with this. Yeah. All of a sudden now we have less of that reverse crowding out effect, less AI-related bonds coming to market, pushing up treasuries, pushing up interest rates. You get a virtuous outcome. Then we get them. Then Tim Cook's hundred year flood in memory chips. We don't have to hear about that for a while.

14:57And maybe the price of Apple products doesn't have to become as extreme in 27. A lot of these are palliative. A lot of these are good things. They may come from a lot of carnage in certain areas of the stock market. But if we're reducing inflation and reducing interest rates and the need for further interest rate hikes because the pace of this buildout can be stalled or slowed. Yeah, you might be pissed if you run IREN. You're probably not pissed if you're a regular executive working in the corporation. If you're saying, in spite of many of the headwinds that have come in our faces as we've been driving down this seemingly smooth, for the most part, road, some bumps here and there, You had to veer around some potholes that earnings were the thing that were going to keep you, at the end of the day, getting to your destination.

15:46Tech was going to grow 30, what, 30 percent at least. Right. Semi 65 percent. If I'm telling you that if you're Dan Ives, for example, and you tell me that CapEx is going to peak sooner than than we thought by a year, a year. OK, so I'm going to have to sort of rethink. my numbers on a lot of different things. How can you not rethink the earnings numbers in the same breath? You are, but it's relative to the growth you're still going to achieve. And it becomes much more selective on what you want to own. The higher leverage players are going to have a higher weighted average cost of capital. There's going to be more compression in their earnings.

16:29They might not even be able to attract capital, but the strong will absolutely survive. Right now, Now, the NASDAQ and some of the best names from a fundamental standpoint in the index, yes, they've moved from being capped light and huge returners of capital to more capital intensive because they have attractive investments to make. I understand, but you're shrinking the market at the same time you're doing that. You're making the point that now you're going to have a much smaller pizza. Yeah, it's going to be more selective. It's going to be like a personal pie. And you're going to have three or four names that live up to the billing of what you are talking about, Whereas before, you had like a huge pie where all these winners were going to be.

17:09The power plays, the semi names, this, that and the other. The Oracles, the Dells, the whomevers of the world who were going to participate in this. You just made the case that the pizza went from here to here. I do think it gets narrow specifically in the short run. And I think this was a rising tide that lifted everything, including our economy, as Malcolm said. The whole economy was underpinned by this one trade. And that's why everybody was trying to figure out if the financing issues were going to be such an endemic problem, right, and bring us down to lower GDP growth. Something else has, and that's the election result with the AI referendums that have definitively slowed that.

17:51Yeah. Right? And so now we've got a different backdrop. And I think you're going to have the AI providers of compute with the beneficiaries. And I think you saw in health care, by the way, yesterday as well. Look at what were the strongest places yesterday. It was the hyperscalers and a lot of the health care companies that I think are going to be the large beneficiaries of early compute power. OK. And the change. Are you like a guy like you and the kind of stocks that you generally buy and own and like a reasonably concentrated portfolio? You're not so heavy in tech. No. Right. Are you licking your chops at this kind of moment?

18:24thinking that this is the moment, again, you've been waiting for. Economy's still pretty good. And you're looking at opportunities outside of this universe, which you think are going to do well. 100%. And, you know, we're 18 % in healthcare right now. So if you look at some of our defensive sectors have been doing really well for the last few weeks. And I think the opportunities there are going to get even more, especially when you look at organic growth and cash flow, other companies that you can focus on? So, I think that's right. And the healthcare rally started months ago. And the market is really smart.

18:58And I think it figured this out. You've also had an energy rally this year. They're 2 % of the S &P, so nobody cares. Nobody pays attention. The market has basically been saying, we don't believe these numbers next year or the year after for this whole I trade. We're thrilled with the story for the economy. We don't think that any of these numbers are realistic. That's why you've had multiple compression. And then you've had this sub Rosa rally in energy, in health care. Maybe the health care one became more noticeable over the last two weeks. I don't think the buyers of health care were predicting an election outcome.

19:31No, I think it's people saying to themselves, I got to diversify away from this thing that I've been riding like a dragon. And I'll tell you anecdotally, one of the things Dara said on the Uber call yesterday, they were talking about third-party-owned autonomous fleets, private equity and private credit, putting up money for some of these projects to make and build and have available thousands of autonomous vehicles. One of the number one reasons they're saying they want to back these projects, they want to do something that's not a data center. So the memo has been out. It's really only the last two weeks that we've seen it reflecting in the way the NASDAQ's act.

20:09Let me ask you this, because it's the question that Evercore asks today, which I think is where we're going here. Can the bull market continue marching higher if semis and its accoutrement, the bull market's engine, continue to sputter? That's essentially what I'm asking, Surat, and how I think I want all of you to think about how you would answer that question. What do you think? can the bull market continue if I take out semis and all the accoutrement around that, and that's what I leave you with? Yes or no? I think that it can, and I think it's not an if we take out semis. I think we are taking out semis from this equation, at least to some degree.

20:49And yes, I do think the market can still make it there. I think what you should be focused on, if you're an investor paying attention to this conversation now, is where are the companies, Where's the sector that's going to be most positively impacted by all of the compute that's been spent on at this point? To your point, health care has been an obvious answer to that. Software, to some degree, is an obvious answer to that. Where are the other sectors? What are the other companies that are going to immediately show that return on invested capital? So two points to that. One is on the index level, on a market weighted, I don't know if you're going to get a bull market going forward.

21:23But if you are selective on an equal weighted or looking at a stock specific index, I think you'll do fine. To your other point, we haven't talked about is the SaaS stocks that were getting killed because all the compute that was going to come out. Well, guess what? That's not going to happen as well. And you saw, at least in the last couple of weeks and even yesterday, some of the software stocks that were going to be taken for dead are now reacting. I just feel like yesterday is a real hard day to hang your hat on anything that happened other than the fact that the market was exuberant, that it was a so-called clean election, that there wasn't a big, messy fallout from it.

21:56So it was an exhale that at least we got past that possibility. I do want to talk about OpenAI and Anthropic, though, because I think it's a good way to finish rounding out this conversation in how these companies are reacting to the midterm result. Kate Rooney is following that for us because there are so many different implications related to IPOs and other things, Kate. Yeah, Scott, well, the midterms especially really did put a spotlight on this entire data center backlash. So you have the Democratic sweep this week, of course, in both chambers of Congress, plus a Democrat in the governor's mansion in Texas.

22:34It's not great news for the AI labs that are really relying on growing their compute and that overall capacity to grow revenue. OpenAI, at least trying to reconcile some of that data center backlash this morning with a new set of promises to communities. They're outlining commitments for future projects in this new policy blueprint that they put out. They talk about getting input from local communities, more cost support, things like more disclosure, and then scrapping non-disclosure agreements and NDAs. OpenAI's chief global affairs officer, Chris Lehane, told reporters it could set a standard for the industry.

23:09It could also become codified, become law, would likely be at the state level, though. It does feel like damage control, Scott, after the midterms, but OpenAI said they've been working on this since August. They said the election outcome has added some urgency. And then Lehane said that AI was very much on the ballot and that the policy window is now open. There are also some questions about overall AI legislation and the new scrutiny out of Congress. Together, and tougher regulation, I should say, was mentioned in Anthropics S1. It was one of the big risk factors. There's also a theory that the gap right now between the AI labs, which have been the leaders in AI, and then some of the big tech companies could start to narrow.

23:48The big tech companies you guys have been talking about, they are the ones that already have data centers in the ground. They can more easily retrofit some of these existing sites. That is one threat to these AI labs. And then the biggest thing as we talk about Anthropics IPO, the biggest thing investors are watching is the market mood right now. Sentiment is the swing factors. We expect to get this listing in a couple of weeks. I did talk to an investor this morning who thinks $1.5 trillion might be a stretch at this point in terms of valuation, given the discount on tech today. For context, I mean, people were talking about$2 trillion just about a month ago.

24:20But given what's happened in the market, Scott, and the conversation you guys are having, tough time for Anthropic right now. I'd love your reaction as well, Kate, to another thing that Gerstner said in the podcast that I referenced earlier of what the midterms mean for Anthropics IPO in general, which he obviously has been an early investor in in the private market and has made the case and he said it publicly. He intends to be a big investor on the IPO. He said that he thinks that it will now price to the lower end of the range. Those were those were his direct words. Now, I don't know if he's right.

24:56He doesn't know if he's going to be right. But that was the way that he's thinking about what the midterm results could mean for this IPO with so much in the market itself hanging on this. What do you make of that? Brad Gerstner with that, Scott, really does capture the sentiment, I would say right now in Silicon Valley. I mentioned investors that were talking about a$2 trillion valuation have now come to terms that they will need to price at a lower end. And it really just comes down to math. I mean, they need to do the math to say, what are the comps? What is the discount on tech? So that is widely the expectation that they're going to have to go to that lower range.

25:31Something else that somebody brought up to me, another investor yesterday, was the difficulty for Anthropic as a public company to forecast going forward. With all of this uncertainty, with the pushback on data centers, what's maybe coming out of Congress, it's going to make it really difficult for them to put out future revenue forecasts. And the The revenue and the growth can be so unpredictable for these AI labs. It is going to be a test of an entirely new asset class. It's not like we're getting another cloud company or another chip company going public. Anthropic is the dawn of a new asset class, and they're going out to the market at a time when growth, when tech is getting punished.

26:07And it's going to be tough for them, and they're going to have to clear that hurdle. I would say the bull case is if they price low, then there's more upside. But it's something people are talking about. I think, Brad, you nailed it there. Yeah, I just think the current environment makes this story all the more interesting. Kate, we'll talk to you more at 3 o 'clock this afternoon. That's our Kate Rooney. We mentioned what's happening with Qualcomm shares today on the back of earnings. It's so relevant to really what is happening in the market. I can't think of a better time for us to speak with the CEO, Cristiano Amon.

26:37Stock's down 11%. John Fort is with Mr. Amon, joins us right now. Hey, John. Hey, Scott. Thank you. Cristiano, great moment to have you not only after earnings, but as you were just probably hearing the panel there questioning whether semiconductors are really part of the picture for those who are trying to remain optimistic about the market. iShares, Semiconductor ETF, SOX down about 10 % today. NASDAQ still down about four and a half. But let's talk about Qualcomm and the data center growth strategy that you have, because perhaps that will inform investors about the optimism that you still see in this market.

27:17I think the number was what? Five billion that you set for the next fiscal year where you expect that business to be on. Are you concerned about data center demand given those projections? Look, great talk to you, John. Look, this is not a great day for the Sox. I think the whole market is down. But I think the Qualcomm story is a little bit different. First of all, I think I saw a lot of commentary on handsets. The handset thing is everybody understand it. Apple's coming off the model. I think I don't know how many years we've been explaining that. But the story of Qualcomm is what we have done outside that.

27:56On the data center, a specific question. We're new to this. We're new entrant. And we made very clear projections of what we're going to do. $5 billion of revenue in fiscal 27 and 15 in fiscal 29. And I tell you right now, regardless of all this noise, I think the$5 billion commitment we made, it's not demand-bound. It's all supply-bound. If I have more supply, I'll probably do better than$5 billion. So for Qualcomm, none of those things change. Which we have very high confidence. I think that's an why is that? What is the fundamental shift in data center architecture that's happening with the advent of AI, where you feel that Qualcomm is positioned to pick up that kind of share?

28:41Because I think that that innovation case is important for investors to have in mind as they also weigh kind of the anti-neocloud case and concerns about leverage that are certainly rippling through this market right now. Yes. So the majority of the$5 billion we have on fiscal 27, let's say that's the short term, that's coming from connectivity and customizing business. But I think you asked a good question about technology shift. What we're doing in the data center is if you think of a company like Qualcomm, our DNA is about low-power consumption computing. We have a number of different technologies.

29:17I'm very happy when we announce on Investor Day. We talk about 0.5 picoyals of energy per bit. The chips now is at 0.3, better than advertised. There is going to be a need for lower TCO in the data center. So when we think about our$15 billion projection of FISCON 29, there's a lot of new technologies coming in. And we really focus on inference, on decode, and try to do this with the lowest possible compute density in power consumption. And I think we've seen that. Data centers are evolving in technology. So, Cristiano, there was a shift in mainstream compute as we moved from the PC era into the mobile era, where at first it was all about the megahertz race.

30:06There were fans on all the computers. But when we moved to smartphones, suddenly, you know, you can't have a phone. You can't have a fan in that. You've got to be efficient. You've got to be lower power. That's part of what Qualcomm grew on is the data center going through a similar transformation with AI because of these energy and resource demands that even we've seen the electorate concerned about this week. And are you saying that's part of your play and the reason why you continue to see lots of room here for growth? Look, I don't think I can make the same comparison between phones and PC, but I'll tell you in general, and I'll use the success we have in automotive as an example, low power consumption one in the automotive compute.

30:51So I think as a general statement, efficient compute always is successful. And when you think about data center operations, and I think the SIC for margins, total cost of operation is important for all of the companies, whether a big hyperscaler or a neocloud. So efficient power consumption is going to be a differentiating factor. Finally, got to ask you about Starlink and this deal that you have with them. There's been a lot of criticism of Elon Musk and Starlink's ambitions to be a telco, a wireless carrier across the whole country. Qualcomm, from 3G on, certainly knows this business. Tell me, can they do it as Qualcomm looked at this?

31:38And as you're supplying it, how long will it take? How big is the opportunity for Qualcomm, longer term 5G, 6G, as something like the Starlink network builds out with your assistance? No, look, great question. Even though we spend a lot of time, I think, in the past several years diversifying the company and talking about compute and data center and automotive and industrial robotics, I think Qualcomm knows how to do cellular communications. And I think we're very excited about what this is. This is a new complete buildout of a nationwide terrestrial network in the United States. It's probably one of the largest buildout.

32:21We have been saying since we started talking about the future of wireless networks, the architecture is going to change from modern equipment for the infrastructure that is built like a data center and the Internet has been built. This is an exciting project. I think it's going to bring a lot of innovation in wireless. And it is good to happen, especially as we think about the future transition of 6G. We're very excited. And I think this is going to be great. Your financial question will start to show up in revenues as we exit fiscal 27 is more of a fiscal 28 story for us. We will watch it. A lot of people watching red across the board today in particular.

33:03But that's a look at the future. Cristiano Amon, CEO of Qualcomm. Thank you, Scott. Thank you. Gentlemen, thanks. Good and timely stuff. John Ford. Thank you. Malcolm, you bought the stock. I did. Tell me more. Well, as the disciplined investor that I like to tell myself that I am on days like today where everything on the screen is bright red, I like to look through it and see if I can find an opportunity to pick up something that I actually like that has sold off with the rest of the market for no obvious reason. And I understand, to Cristiano's point, that the analyst community is anchoring to that 26 percent decline in handset growth because that has been their bread and butter this entire time.

33:43But they're also guiding for 60 percent growth over the next year in non-handset revenue. And so I think that's a missed opportunity right there. You also heard him mention automotive, which they're looking at about 89 percent growth year over year in the quarter they just reported. So it's showing that at the same time that the handset segment is on its way down, the rest of the business is on its way up. The problem is it's a show me story. So where the analyst community is looking at this and saying, I understand that you don't want us to think of you solely as a handset company. We understand that you want us to think of you as a diversified business within the chip sector.

34:19You're going to have to show us. I see this as an excellent opportunity to be planting a flag and starting to build a position in the company, with it being off about 20 % in the last month and 40 % from its 52-week highs. You got a new fellow shareholder. I do. What do you think about that? No, look, it's trading at 12.5 times earnings, forward earnings, right? So you've got a great balance sheet. It's got a dividend. And you've got two other things here that we've kind of highlighted, but we didn't really say. Apple is out of the picture, right? All this overhang of Apple, Apple, Apple, they're not going to be partnered with Apple anymore.

34:51So going forward, it's going to be handsets with SpaceX or handsets with somebody else. But it's automotive. It's all the other growths of semiconductors. Define that, that growth with other things. Connected devices. What is this Internet of Things that they talk about that's so exciting? It's smart glasses, wearables, headphones, smart home devices, robotics. If anybody's not excited about those things and they are near 50 percent of their business is those things right now, automotive and Internet of Things, right? That's different than the legacy business. You know, it's very hard to make this pivot that Qualcomm's trying to make, but there are examples of it working.

35:30A recent example is UPS. They basically became reliant on Amazon for unit growth for 10 years. And then just the numbers no longer made sense, and Amazon was competing with them anyway. And they said, we're basically out of the Amazon business. We're going to reinvent UPS. We're going to do more high-end deliveries. We're going to do more custom things, more corporate stuff. We're going to be international. They weaned themselves off Amazon. And if you look at the stock, UPS, like it took a few years for, well, this is 10 minutes, but it took, it's fine. Just kidding, Control. It took a few years, but look at this, look at this comeback, like just in the last few weeks, like something's happening here.

36:13So I think the Qualcomm story, if they can pull it off, like it might take a little bit more patience, but it could happen. But I think, you know, you get caught up in the semiconductor malaise today when all the ETFs are selling, all the momentum. I think the opportunity to buy something like a Qualcomm today that has real earnings and diversified earnings base, not just going into data centers. The market also wasn't interested in the SpaceX deal because the revenue is not supposed to show up until 2028 that starts to show where it bears fruit. But if you're buying now at this discounted share price in anticipation of the additional revenue that comes from something like helping to build out the wireless cell network of the next up-and-comer, I think it's an attractive opportunity.

36:53All right, we'll take a break. Josh still has best stocks in the market. We're still doing that today. Get your pens and paper ready. We'll be right back.

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38:17AI is here, transforming how we work, live, and lead. And the women I talk to aren't waiting for the future, they're shaping it. I'm Julia Boorstin, Senior Media and Tech Correspondent at CNBC. This is CNBC Changemakers, where I talk with the female leaders transforming business as AI reshapes the world. Follow and listen to CNBC Changemakers, Women Leading in the Age of AI, wherever you get your podcasts.

39:04All right, we're going to attempt to find some stocks in the market that look good. Good luck. I said one in the A-Blog. Berkshire Hathaway. Happy new 52-week high. Look, this is the type of market where you get into names that have great trend lines, and then the market decides we don't really care about that anymore. Stocks that are part of baskets get sold out quickly. We were talking about Okta the other day. It's a cybersecurity name, but it's a tech name. They slaughtered tech. Okta's already stopped out. It's like, I don't know, 10 days after we talked about it. This is why every time we write up a best stock in the market, we not only talk about entries, but we talk about exits.

39:44How much pain are you willing to endure to be in some of the best stocks in the market? In some cases, you need a tight leash. The name we're going to talk about today is MSCI. This is a company that builds indexes. It's a financial data business. It initially sold off during the SaaSpocalypse because the market wrongly concluded. Software is worthless. Data is probably worthless, too. It turned out to be the opposite. it. This company has had an unbelievable run since people disabused themselves of that notion. The quarter they reported on October 20th was incredible. Stocks made a huge move.

40:17We wrote this up as a stock that you want to let come to you. We want to see how it acts after making a parabolic move, pulls back into a zone where buying is a little bit more reasonable. And we're working with 600 for traders as sort of a line in the sand. I don't want to take an intraday whipsaw on this. So we're talking about a Friday close, weekly closing low below 600. As you can see here, this is a huge move. It needs to be digested. But the strength of this business is absolutely incredible. AI agents are lapping up the sort of data that MSCI sells in addition to the strength of the business where they sell index licenses to all the ETF providers.

40:59They're in a bull market for what they do. Doesn't mean the stocks to buy at any price. But I want it on people's radars because I could see this thing continuing to move for years to come as AI increasingly requires the type of unique data sets that only MSCI can provide. Let's just show the NASDAQ real quick, guys, if we could. I know we may be out of time for this segment, but whatever, because it's down by more than a fresh full 5 percent. NVIDIA is down eight and a half percent. It's just something you just don't see very often. Stocks like that getting hit that hard. The two-day decline of 8%.

41:40AMD's down almost 15%. Micron, 14%. Marvell, 14%. The market already didn't like the deal that it did. And it's continued to punish that name. But you could go so many other names. I mean, even Cyber. CrowdStrike's down almost 10%. Palo Alto, down 9%. Oracle's down almost eight.

42:04It's a bad market to be fully invested, I think is the only comment to make. If you don't have the opportunity or the wherewithal to do anything, you're 100 % tech stocks. I don't really know what you do from this point. I don't know that the right thing to do is to be out there puking up stocks if you don't have margin calls. But I don't think most investors are 100 % invested in tech. I think people look at this and they say, all right, I love SpaceX. I didn't get into it. It was$125. It went to$180. Now it's back below the IPO price. I'll pull the trigger on SpaceX if and when I think the dust is settling.

42:42I think you'll see people doing that. And I don't know from what price, but I think that's exactly how this ends. I mean, we're showing SpaceX now. I don't own it. Maybe I'll end up with it. No, but you should show Tesla, too, because birds of a feather are getting destroyed together. There's no question about that. I mean, the amount of market cap that has been waxed from those names combined since the election result, given the amount of money that Elon Musk spent in the political arena for this election cycle down in Texas, broader implications about what the change in the balance of power might mean continues to weigh on those stocks dramatically.

43:26You have SpaceX, you had in the private market. You must have thoughts as you're watching this. I mean, I wonder how people are just rethinking. I said birds of a feather, you know, get hammered together because people think of these two as together because Because they assume that they eventually will be together. And I personally still think they will. We did invest privately. We did invest early as the lockup has unwound. And it's a staged lockup on wine. We've been taking advantage of selling that. But this is not a business story. This is a political story. This is a Washington story. They have their largest customers, the U.S.

44:05government. They have huge contracts that need to be renewed. I do think that Elon, given his support, is going to be somewhat in the crosshairs of that for a while. So real price discovery is happening around that right now. It's always been expensive. It was trading at 93 times sales. Now it's 53. It's hard to say it's cheap, but I think this company has some unique assets, and it has some monopoly characteristics. And when you have monopoly characteristics, it does attract scrutiny. But let's be honest, those unique assets are things we all may need and need more of. And I do think that you should have some of this in a portfolio.

44:50We don't own it outside the private sector. I understand that, but there are people in the orbit of our program who do. I'll give you another number. I mean, you almost have$500 billion worth of combined market cap wiped away since the election result. It's just something to keep an eye on. I think a really big difference here, Elon Musk went all in on the Republican side. He was a Democrat. He decided in a way that Dario Amadei did not, in a way that Sam Altman did not. That distinction may not matter at all. If they decide they want to hold hearings and craft real regulation around AI and transparency of the models and data centers, it ain't going to help any of them.

45:35Or if this just becomes a thing like, hey, you know what? Let's investigate Starlink and how it acted in the Ukraine. Like that will affect SpaceX, Tesla and this corner of the market uniquely. We really don't know. But like that's what the market is pricing right now. Here's another thing on timing, on timing of doing this. I think because a lot of people bought this on the IPO and chased it up, there's going to be huge tax loss selling in a year where there's not a lot of that. So as we come into year end, I would be mindful of the timing. If you want to get long Tesla, SpaceX or Tesla, you want to make sure that your timing is right.

46:14So you don't walking in front of that selling pressure. All right. So we're going to take a break. You guys want to take a break. We'll do that. We'll squeeze one in here. We do have fresh moves still to get to. Both Malcolm and Surratt have things to say coming up about moves that they've made in their portfolios. We'll do it next. Good point.

46:58Sawyer Investigation, tonight on ABC. Traditional home security only alerts you after a break-in, and that's too late. SimpliSafe is changing that. Stop. This is SimpliSafe. Police are on the way. We don't just alert. We help stop crime before it starts. Plans starting around a dollar a day. Right now, get 70 % off your new system with professional monitoring at simplisafe.com. SimpliSafe. Ahead of crime, in real time. Outdoor deterrence plans start at$49.99 a month. Visit SimpliSafe.com slash licenses for alarm license information. AI is here, transforming how we work, live, and lead. And the women I talk to aren't waiting for the future, they're shaping it.

47:40I'm Julia Boorstin, Senior Media and Tech Correspondent at CNBC. This is CNBC Changemakers, where I talk with the female leaders transforming business as AI reshapes the world. Follow and listen to CNBC Changemakers, Women Leading in the Age of AI, wherever you get your podcasts.

48:15All right, we do have some moves I did mention that we wanted to get to, and it's, we'll start with Surat. In what has been a top-performing sector over the last month, that's healthcare. I think it was number two. What are the moves that you have here? So adding to, well, buying Medline, which is the Amazon of medical supplies, they sell that across the board to many different companies. It's growing 10 % organic growth, 30 % margins. We think this company's had a lot of runway to go, and we're selling United Health, which is up over 20 % for the year. We did very well with it. I think, you know, the upside there is more limited.

48:51So really moving within healthcare and staying with Medline. OK. Wells Fargo today, Malcolm, of American Express said, quote unquote, we're buyers. Best position overall among consumer finance stocks. You read that and said, I'm selling it anyway. I wish them the best. Why are you selling it? The operative word there was consumer. I do not want to be tied to anything related to the consumer, especially at a moment like this. So I bought this stock initially on April 2nd. It was trading at$295. I thought the market was discounting the amount that they were leaning into the top end of the K and really reshaping the business to focus on the higher income consumer.

49:34But as they reported earnings last month, card member spending was up 8%. Revenues were up 9%. They beat earnings. They delivered exactly what the analyst community was looking for. And then the market sold their shares off anyway. And I said, this was probably as good as it was going to get for that story. It didn't work out the way I wanted it to. So it's time to exit stage. OK, speaking of earnings, I mean, this is the kind of day you just want to, like, curl up with some Shake Shack. Right. Put the sweats on. Just chill out. Right. Don't talk to anybody. Just eat your Shack Burger or whatever.

50:09So they had earnings. Yeah. Their earnings beat. Revenue missed. It was a very good report, but it doesn't matter. The stock's been building back. It's been a horrible stock since the spring. But it's been earning back its credibility. And I thought this was a really good quarter. But it doesn't matter. You don't report on a day like today by choice. It's just on the calendar. I will say Q3 revenue up 15.2 % year over year is very good for the category. Now$423 million quarterly revenue. Same-shack sales were up 2.5%. That's 23 straight quarters of positive comps on same-shack sales, which is what tells you more people are coming in or they're getting better pricing for what they're selling or some combination of the two.

50:53And guidance was good, but it's the day that it is today, and that's the end of the story. I don't know what else you're going to do about it. That scene that I painted resonated with you. You seemed to have an outsized reaction to the rest of the group. It was actually my Sunday. I literally went up, grabbed a shack burger, and came back and watched the Steelers. That was my Sunday. You know this guy takes the bun off, though, right? You know. Lettuce around it. Knife and fork? I'm a lettuce. Knife and fork. Lettuce. You should admit that on TV. I'm from Pittsburgh. It balances it out. A little toughness with a little fitness.

51:28There you go. There you go. All right, we'll do finals after this.

51:33NASDAQ's getting smoked down 5%. Smoked. Right around there. There are so many different names from so many different areas of the AI trade are under significant pressure. Dan Ives is going to join us, by the way, on closing bell later. I told you he had sort of tempered his expectations now on not only data center build, but CapEx. So we'll figure it all out later. Alex Kantrowicz is going to join us as well from big technology. We think about the coming Anthropic IPO, what any of this market upset means for that. What Brad Gerstner said about where it could price within its range, that's significant, too.

52:07Liz Thomas, Stephanie Gill, Brian Levitt, Adam Parker. We'll surround this whole thing coming up later at 3 o 'clock. Siege, final trade. CF Industries turning natural gas into fertilizer. Great AI hedge. It's up a lot today. All right. The fertilizer trade is pretty resonating on a day like this. Great earnings, too. You know what I'm saying? Sirac got the joke. I think Rob's final trade really hit the fan today. The market looks like a pile of fertilizer. It does. Surratt. Morgan Stanley, I think it's unfairly being sold off in the financials. It's a good time to buy it. I was thinking, you know, Morgan Stanley and Goldman today.

52:42We didn't even mention that. I wonder if this is sort of thinking about coming IPOs. Yeah, but I still think you're going to get. Companies that are leading. You're still going to get capital market activity. You're still going to get wealth management. I hear you. Yeah. What do you got? Joe. All right. Green on a red day. ConocoPhillips. Same. Okay. All right. I'll see you at three. The exchange is 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. Traditional home security only alerts you after a break-in, and that's too late.

53:16SimpliSafe is changing that. Stop. This is SimpliSafe. Police are on the way. We don't just alert. We help stop crime before it starts. Plan starting around a dollar a day. Right now, get 70 % off your new system with professional monitoring at simplisafe.com. slash SXM. SimpliSafe, ahead of crime in real time. Outdoor deterrence plans start at$49.99 a month. Visit SimpliSafe.com slash licenses for alarm license information.