Managing Risk in a Volatile Market 10/19/26

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0:56Scott Wapner: I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast, the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in.

1:12Scott Wapner: All right, Sarah, thanks. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour of the AI trade. Whether fears are justified or overblown, we debate that with the Investment Committee. Joining me for the hour today, Joe Terranova, Jim Labenthal, Stephen Weiss. Check the markets. Green across the board, led by the NASDAQ, which is up one and two thirds percent. So a nice bounce there. Let's just get right into this because it feels like, you know, as all the neoclouds are higher, as as the neoclouds go right now, so does at least the tech trade, if not the, you know, the overall sort of sentiment.

1:47Scott Wapner: And you do have calls today from the street defending Corweave, whether it's Goldman or JPM or even Wells Fargo with their own words about why a lot of this has been overdone. But what do you think the impact is here forward on this trade and where you think we currently stand? Answer the question I asked at the top. Justified or overblown, these fears?

2:07Oliver Renick: Well, I think there's two things. Number one, I think this signals in 2027 you have an AI CapEx slowdown. So I think you have to reprice your allocations in the direction of the AI trade accordingly. Your expectation as it relates to earnings, you have to moderate. You have to temper that enthusiasm. I think that's exactly what the market is doing right now in front of us. As it relates specifically to CoreWeave, I'm going to stay away from the equity side. It's never been a quote-unquote momentum name, which might be surprising. So it's not an area I'm going to focus on the equity. I could tell you on the debt side, keep in mind the unsecured debt, the pricing of it and the trading of it.

2:51Oliver Renick: The liquidity is thin. Let's remember that. It's very thin liquidity. So that marketplace has extreme volatility and it's translating into the equity price itself. I think looking forward, this has been a favorable shakeout over the last week of the AI oriented trades. A lot of people over the last week have said, OK, here we go back to the broadening. I don't carry that perspective. I still think the AI trade is in place. I think you want to be bullish on it. I think the degree of ownership got extreme. I think we're working it off. And clearly what's going on in the unsecured debt of core weave is the catalyst.

3:34Scott Wapner: So you said something right at the beginning there that kind of caught my ear. are you suggesting that you, like some others, think that earnings for these big tech spenders are peaking and that start preparing now for a more sizable slowdown in those earnings into 2027? Did I hear you say that? Yes, you did.

3:58Oliver Renick: And I think the example for that is NVIDIA. I think NVIDIA is the perfect example of that. Two years ago, you were talking about a company growing its revenue triple digits, 200 percent. Moderation on the other side goes through a period of consolidation before ultimately it could have this pause that refreshes again. That's my expectation as I look at the 2027 for the AI trade. I don't think you can anticipate the rate of growth that we've seen over the prior three or four quarters. It has to moderate. But isn't that true of any company that has experienced that growth? The ability to drive growth at those levels of a much higher revenue base, they have nothing to do with whether the AI cycle is peaking, Capit cycle is peaking or not.

4:48Oliver Renick: That's just a law of large numbers, right? Well, we're being told that this is different, that we've never seen the type of innovation since the build out of the railroad, and it's being subsidized to a certain extent by the federal government. So we're being told this is never we've never experienced this type of growth. But in terms of it's different. I agree with you. I'm just pointing out that large numbers, regardless of how expansive the growth is and whether we're peaking or not, you would not see the same growth as you had prior as the companies become this fair enough. But let me just respond to that.

5:25Oliver Renick: Fair enough. But in most of the instances you're citing, it was an inflection point and the cycle rolled over. and that was the end of the cycle. That's not what I think is in front of us. Again, go back to NVIDIA. I just think it's a peak, consolidation, and a revival on the other side.

5:39Scott Wapner: But who suggests that the spending is going to continue in perpetuity anyway? I mean, at some point, obviously the spending is going to slow and you're going to start to get a larger ramp in the return on that spending, which is going to sustain the story and sustain earnings. You're almost painting it as a – that will be the bearish picture When you get a slowdown in spending, then the story starts to slow down in and of itself. Is that the only thing that's keeping this?

6:08Oliver Renick: The month of October has recalibrated my expectation. I think a lot of portfolio manager expectations that are invested towards AI, the month of October has said, wait a second. Yes, Scott, we anticipated that there would be a slowdown in CapEx. But guess what? You probably were conservative in what that expectation was. You need to be a little bit more aggressive in moderating what you believe for the capital.

6:36Scott Wapner: Do we think that what we're witnessing in the market right now is based on the fundamental story in any way? Because everybody who's coming out, talking about it, Jensen Wong, everybody else, is like there is no sign whatsoever in waning demand for any part of this story.

6:54Oliver Renick: Including your interview last week with Brad Gerstner. So there are a lot of people out there who are inside the so-called beltway of Silicon Valley, if I can use that expression, who are saying that this isn't slowing down. The questions are there about where peak spending will be. And we're going to get some catalysts coming up in the next few weeks, particularly when the hyperscalers report, Scott. Well, Meta's this week. Okay. And you know what? But that's the point. The next two weeks, you're going to get some catalysts that are likely to say the following. Number one, spending isn't slowing down.

7:23Oliver Renick: Yes, of course, at some point it is going to slow down. But they're likely to say that it's not on the near term horizon. Number two, what they're also likely to say is that the growth rate is still constrained by the supply of commute. That's what they're likely to say. The last thing that they're going to say, we got some insight from Andrew Jassy last quarter about how quickly they get payback on these data centers. Now, I'm talking not about the neoclouds. I'm talking about the bigger, the biggest scaled players. And I'm looking forward to what those comments are now, both about the demand that's out there and how quickly they pay back just on the data center builds.

7:57Oliver Renick: I'll also point out some other catalysts that we think are coming. Now, we're predicting the future could go awry. But we think Anthropic is going to go public sometime before Thanksgiving. When that happens, and I honestly don't care if it's one and a half trillion or two trillion. The point is it comes in. They get money that they continue their build out with. Oh, by the way, OpenAI is doing its private funding round right now. These are catalysts that may put to bed this question of whether we're at peak spending.

8:25Scott Wapner: If I told you guys that in nine to 12 months from today, we're going to hear about the slow in spend from the from the hyperscalers. Would you would you sell those stocks today? Yes.

8:38Oliver Renick: And that's what I've been saying. Absolutely. Because, first of all, I've done that. So I've taken money off the table in micron invertive. So if you want to, there's not been a cycle I've lived through where every CEO that's invested in the cycle hasn't said there's no slowdown. And that's true. I'm not discreet with that. However, stocks begin to anticipate the peak in spending, not a decline necessarily, but a peak in spending a year before it happens. So decide when you want to cast your lot. I think now is the time to take, if you're highly contrary in the AI trade, I think you take some off the table.

9:20Oliver Renick: Now, I also think you're getting to the point where in these cycles, at first you want to go to the companies like the NVIDIAs, like the Vertives, that are on the receiving end of the CapEx. And you don't necessarily want to own those that are on the paying end of it, right? At some point, that reverses. And you want to own the ones that have been buying, right, investing in the future, and now, to your point, are seeing real ROI on it. Now, I think it's prudent to start making that decision now, and very prudent in terms of concentration of the portfolio. We got that last week. Friday was really more of the Iran issue, that the way the positioning was of our assets over there, there was going to be a bombing campaign over the weekend.

10:07Oliver Renick: That didn't happen.

10:08Scott Wapner: But if interest rates weren't where they are today, would the market be having a fit about CoreWeave and some of these other neoclouds? Or are we looking to make more than really exists, suggesting that these kinds of companies, you read the Gartner report, and you're like 80 % of the neoclouds are going to cease to exist or operate by 2030. That's extreme. That's a unique part of the market, the neoclouds, right? Well, they seem to be driving, in many ways, sentiment in and of themselves because of not only questions about the durability of the business, but the bond yields and how they're being stressed even more by where interest rates are.

10:47Oliver Renick: They were always risky assets. If you recall, CoreWeave came in below its original range, right? It was 45, 49, and it came in at 40, moved up quite nicely. This stock's down from 180. And I think that's a direct indictment of their business model. that's built on leverage. I also believe that there's a fair amount, without any proof right now, but there's a fair amount of double ordering of compute and data center needs. Then you theoretically would be negative

11:17Scott Wapner: on almost every semi. If you think there's double ordering on compute, that's exactly what you're speaking towards.

11:23Oliver Renick: Well, that's what happens in semis too at the end of every cycle. So the only semis I'm involved in is a relatively small position that is relative to TSM.

11:32Scott Wapner: But how are we at the end of the cycle if these companies can't even meet the demand that's out there?

11:37Oliver Renick: Well, two things. I think some of that demand is false demand, that they're projecting what they want for demand, and they need capacity. It's no different. You double, triple order chips, right, towards the end of every cycle, number one. Number two, they are spending now. But, again, they're not going to spend like this forever. It's virtually impossible to spend like this forever.

11:58Scott Wapner: And by the way, the AWS CFO says AI spending is sustainable, according to Axios. The boom is sustainable because it's driving meaningful innovation, which you're only going to see continue.

12:11Oliver Renick: I think we're all going to agree that this will end in a peak. I mean, there's nobody here who's like, keep my mind when I say, I'm not saying spending ends. Let me finish. I'm not saying spending ends. I'm just saying the delta, the growth in the spending is going to moderate severely. And that's going to be the issue. That's a reasonable expectation. That's a reasonable expectation. And the question is when. You know, I can't help but draw the parallel to the tech telecom boom of the late 1990s. I know it's different, but there are some things that are missing in the current situation that were present then.

12:41Oliver Renick: One is there's no cliff date like a Y2K after which you're done upgrading at least your personal computers in an enterprise level. Number two is you're nowhere near the speculative investments. And I agree, Steve, this will happen, but it's not now. Now, you're nowhere near the speculative investments in terms of all the fiber optics, 90 percent of which were dark when they were laid, i.e. unspoken for. These data centers that are coming on right now, we speak about Andrew Jassy or Satya. Any of these people are likely to say if we had more of these, they would be in demand. So that's just for me a really big difference.

13:13Oliver Renick: They've got a different business model, though, Amazon. Amazon's got a different business model. I'm simply speaking about the cloud businesses of these companies, just those cloud businesses. Right, and for them, cloud's pretty important because it's going to constantly produce more and more data, like 20 times what pre-AI data was produced. I got it. Right? But you're talking about the other ones. I'm just going to sum this up. 1997, Steve, not 1999. That's my call. Okay. 97, not 99. But this is not a unique thought I have. Take a look at Broadcom, what's happened to that stock. Take a look at Caterpillar, what's happened to that stock.

13:47Oliver Renick: Take a look at any of them, right? We can talk about, please, take a look at NVIDIA. Nvidia is OK, but, you know, the stock's correct. It's had periods. But basically, the stock topped out if you go back to, you know, six months ago. So people are in that trade. They are reducing risk to the AI trade. But you're not saying it's over, correct? I'm not saying ever going to be over. OK, here's the example. Jimmy, you bullish on Micron? Yes, I am. Steve, you bullish on Micron? No. OK. I don't own it. I sold a thousand bucks. I'm bullish on Micron. I'm bullish on the semi-equipment cycle. Jimmy, when did Micron have a temporary peak?

14:25Oliver Renick: June. And has the demand slowed? Has memory pricing slowed? No. Absolutely. But if you wait until everybody rings the bell that it's slowing, then you're going to sell at a lot lower price than you want. You can't wait. Why do I have to sell? That's the question. It's the great example of NVIDIA. It goes through a period where you're frustrated. It goes sideways for six months and then it revives itself. That's what I'm telling you is going to happen. I'm with your microns, with your semi-equipment. You watching LAM? Yes, of course I am. Closely this week, they report. LAM reports. Middle of the week.

14:59Oliver Renick: It reports this week. It's going to be a great quarter. The stock has not traded well. It's down 37 % off of its June high, but it's up 62 % year to date. That's fine. But Joe, you're a student of the markets. I'm a student. Jimmy is. Scott, everybody. everybody. Isn't this sound so eerily familiar that Micron six times it's so damn cheap and their order book is so big, right? And that they can't meet all the demand. Have you ever heard that before? There's one big difference. Hold on. I've heard it about 10 times, you know, my career. There's one big difference. Your point is well made, but here's the key difference.

15:37Oliver Renick: Everybody always finds a difference at the end of the cycle. Yeah, but this one matters. They have no debt, Micron. They have about$100 billion in cash. They're generating$130 billion in free cash flow. And what are they doing with it? They're recapitalizing the company by buying back shares at$6 ,000. How much debt do you think they had in prior cycles? A lot. A lot. Jimmy, it doesn't matter when the order books dry up. Jimmy, let me ask a question. You think the order books are going to dry up? Dry up? In terms of what they believe, I'll phrase it a different way, Their take-or-pay contracts for 40 % of the revenue in 27, if the spending peaks, those take-or-pay contracts mean zero, like in every cycle.

16:17Oliver Renick: Listen, I'm not going to dispute that with you. But that's what the bull case is. Hang on, hang on. Half their revenues are guaranteed. This is a simple question that we're disagreeing on, which we have rights to do, which is where is the peak? Where is the peak? And again, if we look back— I'm saying it's prudent to think that the peak is half a year. And I would agree with you that it peaks a year before spending peaks. I agree with you. What I'm saying is this cycle, and it is a cycle, okay, is longer than that.

16:43Scott Wapner: What happens if the demand story isn't close to peaking at all? Isn't that what the conversation is about? Isn't that why Dan Ives is out today suggesting that what we're seeing now is no different than the so-called SaaSpocalypse? But now it's just become, now we're worried about this. And demand isn't waning at all.

17:04Oliver Renick: The answer to your question, which is the question, lies somewhere between a year from now and four years from now. Most of the projections are the spending goes through the next four years. I find that a little bit hard to believe. But equally, and just based on what I hear from managers of these companies, I grant you, Steve, biased. Of course, they have their perspective. But what I'm hearing from them is it's not one year either. It's longer than that. But keep in mind, I'm not selling all my AI stocks, right? I've just reduced my exposure to the group. So you've reduced Meta. Have you? No, Meta, actually, I took the opportunity to increase the size.

17:41Oliver Renick: But what's the difference between that and the others? Because I think Meta is a product company, ultimately. So they'll benefit. They're on the other side of the CapEx cycle, right? So, of course, they're going to spend. They have a unique ability to spend, given their balance sheet. They're also going to benefit from what they're spending in terms of their products they offer to the public.

18:00Scott Wapner: So if you're reducing your exposure to AI stocks, which ones are we talking about?

18:04Oliver Renick: We talked about Micron. We talked about Vertiv. You know, Micron was a really big position. It's gone. It's been gone for a few months now.

18:13Scott Wapner: You own NVIDIA?

18:15Oliver Renick: Again, small position, relatively small position.

18:17Scott Wapner: But you haven't reduced that, have you?

18:22Oliver Renick: Yeah, I did. At one point I got out and then I got back in, lower prices. So yes. And it's smaller now than it was. Taiwan Semi is still probably my largest position.

18:32Scott Wapner: Meta, by the way, target today goes to 820 at Morgan Stanley. Outperformed 900 by Ives.

18:41Oliver Renick: I bought some more meta this morning. It was down 15 bucks. I'll be out of that extra over. But still, I think it's my second largest position.

18:49Scott Wapner: But, I mean, that's a pretty right in the thick of it AI stock.

18:54Oliver Renick: But, again, they have a unique ability, I believe. and I don't mean a bill unique of one, to expand to different product areas as we're seeing. So if they want to go into the enterprise market, they can go in the enterprise market. If they want to go in the cloud market, go in the cloud market. So, and again, I love the fact that Mark Zuckerberg is the only founder still running one of these mega-gap companies, aside from Jensen Wang, but he's got a very capital-intensive business, more capital-intensive than what Meta has. And, you know, having that founder's mentality to be able to go into new areas without being held back as an operator, like we see it at Alphabet and we see it at Microsoft.

19:41Scott Wapner: Well, the founder and, you know, the ability that you don't have to listen to shareholders at all by virtue of the structure.

19:49Oliver Renick: You think like a founder, which means that rather than just being—

19:52Scott Wapner: Unless you're Brad Gerstner, you listen to him.

19:53Oliver Renick: Right. Unless you're—well, Brad Gerstner's not running a major company. No, but I'm saying like. But I'm saying they find new areas. It's like they're a founder in Facebook. Think of how that that that company has changed since Facebook. They find these problems and they seek to solve these problems. That's what makes founders special. I think you said it before. The detrimental relationship for the neoclouds is all about treasury yields. If yields were not sitting where they are today, if yields were 50 to 75 basis points lower, then the neoclouds wouldn't experience the stress that they have right now.

20:33Scott Wapner: What about the semis, which are coming off the worst losing streak in like 20 years, right? How about this from Jeffries? The MAG7 have now outperformed the semis for 10 straight days. That's the longest streak ever. Tony Pascarello at Goldman talks about hedge funds retreating from semis. That feels like as much of a problem as anything else. you're sort of abandoning this trade.

20:54Oliver Renick: I don't think it's a problem at all. I actually like the fact that we are seeing hedge funds lighten up their exposure to the semiconductor trade. Remember, we are sitting in the middle of October, which from a seasonal standpoint is generally a weak period. On the other side, November and December seasonally is a very strong period. I like the setup for positioning, if you're telling me, that the speculative community, which has been anchored to the semiconductor trade for the better part of the last three years is going to lighten up their exposure and rotate into the more defensive mag seven.

21:29Scott Wapner: So I think that's good setup. So then let's say let's just say the the selling volatility continues. We got a couple of weeks left in the month. It's, you know, choppy, uneven. Maybe the market trades down. Is it a buying opportunity today? Like Mike Wilson suggests that it is says the next market sell off could be the time to add risk. We advise investors to be ready for either a rapid reconciliation or a slower bleed into November because in our view, that will be the time to add risk rather than shun it. Do you agree?

22:00Oliver Renick: We do agree. I agree. And the reason I said we is because we had some of our analysts do a look at individual stock volatility versus the overall market. Individual stock volatility is 3x that of the market, which is a way of saying you were talking about rotations earlier, Joe. We all know those rotations have been fast and furious, but it also is a way of saying there's been a lot of damage done. And I think what we're answering the question today of is whether the mag seven and the AI trade needs to catch down to where the rest of non-tech has been for the last several years, or whether that catch up trade and that broadening as stunted as it's been can continue.

22:35Oliver Renick: But the overarching comment in the last option, which is what I believe, is that AI and tech is a buying opportunity right here, that it's not something where those stocks need to need to catch down to the rest of the market. The fundamentals support it. The valuations support it. The earnings support it. Yeah, I like that. And I do believe that this is an opportunity on the position lightning that we're seeing related to tech and the AI trade. Where I struggle is a lot of the commentary that I heard last week, which was, oh, here we go. The broadening trade is back on once again. I don't know if I see in front of me.

23:12Oliver Renick: That was a defensive reaction. I don't know if I see the evidence in front of me that I could get behind that. I don't know how to resolve oil at$102. I don't know how to resolve treasury yields that stay uncomfortably high. So I'm not so sure the place that I want to go is in that direction. What happened last week, yes, it broadened, but it broadened into defensive health care and it broadened into energy because of high oil prices. I mean, what you really want to see is things that you were talking about just a minute ago, like Caterpillar or some of the utilities and things like that to start to spread through and see a broadening that way, which is not what you saw yet last week.

23:45Scott Wapner: Jamie Dimon gives an interview to the Journal and says the economy is booming. I mean, not naive to the risks of inflation and the war and oil prices and everything else, but it doesn't.

23:58Oliver Renick: Look at Dick's Sporting's goods, right? I bought it, got crushed after the quarter, went down to 121. You know, I added significantly to 144. It's the ultimate consumer stock. Now, I think they've got some edge in terms of being, you know, the brand in the space. But yes, but but, you know, just so my my position is clear, all I'm saying is if if I'm wrong and it's not peaking in a year, I'm prepared to miss it. I've made enough money on the trade. I'm sticking with the ones that I think are permanent compounders. And I'm ready to miss the flow. I understand that.

24:34Scott Wapner: But are you avoid the are you then also suggesting that you're staying away from these stocks? for the year, for the next year, until you find out?

24:42Oliver Renick: I own Meta. Alphabet's a big position of mine. I own some NVIDIA. Goldman Sachs I own. Goldman is also levered to the AI trade and the M &A pipeline and the IPO pipeline. So I'm not out of it completely. I own Apple, which is more of a product company in the AI trade. It's AI-deficient trade. So I'm comfortable with what I, and Taiwan Semi. So I'm not out of it. I'm just more selective. As we move into November and December, guess what I want to own? The momentum factor. I think in November and December, what has been the best trade of 2026, I think we go out with that being the strength. Talking your own book.

25:27Oliver Renick: He is, but also in December, it's sort of like a rule. We'll pull forward demand from January. But don't forget, we've got. Okay. But you're in a great position with that momentum factor because it has gotten annihilated since Micron reported at the end of June. It's been a very difficult Q3. I just want to see what happens with the elections. I want to see the earnings reports coming next week and first week in November as opposed to meta just this week. Give us a good indication. They're all going to say there's no slowdown in spending. But let's see what they report in terms of the ROI from what they've spent so far.

26:03Scott Wapner: All right. Let's do this. Let's get a break in. We'll come back. We'll do our calls today. We got a stock on the move. Jimmy had a pep in his step today. Should have seen him. Here's a stock with some momentum. You should have seen him. He went straight for my stash of espresso beans. Yeah. He was ready to go. He's got a pep. It's a good day. Cleveland Cliffs. Cleveland Cliffs has a pep in its step today. We'll talk about all that coming up.

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28:03All right.

28:04Scott Wapner: Welcome back. Let's talk Cleveland Cliffs. Stock surging, obviously, on the back of its earnings. What's your take, Mr. Labenthal?

28:13Oliver Renick: Yes, Your Honor, here's the evidence I put before the court. It's the second really good quarter in a row. And I say that they beat that on the trailing metrics, whether it's earnings, whether it's EBITDA, but the guidance, particularly for 2027, is raised once again. The street does not believe the guidance. You can see that the estimates for EBITDA next year are still$2.5 billion. That's after last quarter when they raised it to$3 billion, and this quarter when they raised it to$4.5 billion. Now, I just want to take that$4.5 billion for a moment. That's projected EBITDA next year. Maybe they hit it, Maybe they don't.

28:48Oliver Renick: But the current enterprise value is three times that EBITDA. Steve, definitely a cyclical company. We've had a conversation in the break. Of course, it's a cyclical company. I will tell you that even a cyclical company at a peak of its cycle, which I'm not saying this is, deserves a multiple more than three times enterprise value. If you put a trough multiple, which we've seen before, five times on this, this pretty much doubles your equity from here. The street does not believe it. That's why the stock has potential to go higher from here. Well, but they're doing all the right things. They're cleaning up the balance sheet.

29:21Oliver Renick: By the middle of next year, they think their leverage ratio will be two and a half times. And as they continue to deliver on what they say they're going to do, the street will believe.

29:29Scott Wapner: I'm just I'm just channeling what your pal, the CEO, is talking about, which you didn't even mention at all. The benefit that they're having from tariffs, that if tariffs are 50 percent, This is, again, what the CEO is talking about today on the back of the earnings. Tariffs at 50 percent. You're importing less. And by having tariffs, you've raised the prices on domestic steel, which is helping the bottom line. You didn't mention that. Now, I'm wondering if the street isn't giving them the credit you think they deserve and not believing the numbers like you say they should. is because what happens if the tariffs at 50 % become 0 % or lower than that?

30:13Scott Wapner: And then some of the direct benefits that we saw from the earnings report, which the commentary from the CEO himself backs up, dissipates a bit. Is the story different?

30:23Oliver Renick: OK, so good question. Hot rolled coil steel prices per ton were$800 about a year and a half ago. Now they're$1 ,300. Your point is well made. First off, I would be very surprised. I think the world would be surprised if we took tariffs from 50 percent under Section 232 to anything less than 25 percent. Even if that happens, a couple of things to consider. Hot rolled coil prices don't go down to the$800 that they were a year and a half ago. That's number one. Number two, the forward curve right now is pricing in well above$1 ,200 a ton for hot rolled coil over the next year. So I'm just listening to the market right now.

30:58Oliver Renick: The last thing, which is also pretty important, is tariffs have cut both ways for Cleveland Cliffs. Two years ago, they bought Stelco, a Canadian operator. The tariffs have absolutely been a headwind for them. And yet they are now putting up excellent results despite those tariffs. So it's a two-way street for tariffs. Number one, I don't think they're going to zero spot. 25 % maybe, but boy, it's taken a long time to get there. In the meantime, these guys are going to keep making money. And they're simply too cheap, even for a cyclical company. So I believe. But one last thing on this. Two quarters in a row that they've really done well.

31:33Oliver Renick: You get a third one, look out, this thing flies. Do they do AI also? Hey, listen, Mr. Steel Dynamics. You know, back in August, you told me you thought I should be in Steel Dynamics instead of Cleveland Cliffs. Okay. I'm glad I stayed with Cleveland Cliffs. Even though your Steel Dynamics has done fine, I think it's, I don't know, it's up to something. But not enough. Hey, not enough to Cleveland Cliffs. To get you excited. All right.

31:57Scott Wapner: All right, let's do some calls. Yeah. Do we have time for that? We have time for that. I don't know. I'm doing it anyway. How about that? Because I don't know. Datadog upgraded to outperform at Bernstein. The target raised to 350. Clearly, our imagination failed us.

32:13Oliver Renick: I like that one. We put it in the ETF back in April at 132. They report on November 4th. The stock made a all-time high on October 12th at 300. This is about cloud monitoring, the security surrounding the cloud and the utilization of AI in that infrastructure. They're benefiting in that regard and they're seeing the revenue acceleration accordingly.

32:37Scott Wapner: All right, let's get the news update. Julia Borson has that for us today. Hi, Julia.

32:40Oliver Renick: Hi, Scott. The Department of Homeland Security is letting immigrants from Ukraine and Sudan keep their temporary protected status for now. Their protections were set to expire today. The status allows people already in the U.S. to stay in the country and work legally if their home countries are affected by natural disasters, armed conflict, or other extraordinary circumstances. The Supreme Court said today it will consider whether to strike down a 150-year-old ban on distilling spirits at home. It was enacted in 1868 after the Civil War to crack down on liquor tax evasion. The Trump administration is defending the law, but challengers argue the prohibition exceeds the authority of the Constitution.

33:21Oliver Renick: And CNN's chief international anchor Christiane Amanpour is stepping down in June. She's been with the network for 43 years. Amanpour said she looks forward to interesting new projects down the line and will always be rooting for CNN and maintaining its history of independent journalism. Her exit comes weeks after David Ellison's Paramount Skydance took over CNN's parent company, Warner Brothers Discovery. Back over to you, Scott.

33:46Scott Wapner: All right, Julia, thank you. Julia Boison coming up next, ETF Edge with the domino. Dom Chiu, what's coming up? All right, Scott, it's been a rough couple of weeks for stocks, especially when it comes to that bigger tech and AI trade. But has it been rough enough to get traders and investors to rethink momentum? We're going to speak with an ETF expert on some of the near and long-term trends playing out and where she's seeing some notable buying on dips and selling on rips. That's coming up next on ETF Edge on the Halftime Report. Keep it right here.

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35:42Scott Wapner: All right, welcome back to the Halftime Report. I'm Dominic Chiu with today's ETF Edge. After a very tough week for some of these tech stocks, early traders appear to be dipping some of their toes back into the tech trade, But are investors going to wade back in for the longer swim as well? Joining me now for this conversation is Valerie Grimba, RBC Capital Markets Director of Global ETF Strategy. She watches all the trends, what's going in and out, fund flows. What can you tell us? The Nasdaq is ripping today and everyone's getting back seemingly into chip names, AI, some software. Is this something that can last?

36:18Oliver Renick: It's been a very interesting week in ETF land. And what we've seen is this kind of recommitment to the buy the dip muscle memory. And then today's move is confirmation bias. It's an additional rep in their repertoire that actually stepping into any market weakness and buying can pay off.

36:35Scott Wapner: Now, when you say that, there are certain, though, key parts of the tech trade that have been flashpoints, specifically software at one point, semiconductors at one point. Is this something where people are going back just into broader ETFs that track tech or their specific thematics that they're going after?

36:51Oliver Renick: Yeah, I would say that they're actually being quite discerning and price sensitive. So last week, you know, the semiconductor index and those companies were hit hardest. Those ETFs also saw the biggest fund flows. So it's not indiscriminate buying. There is selectiveness. And, you know, I think with a catalyst rich week ahead with earnings season here, that investors really saw value and they're picking their points.

37:15Scott Wapner: And really quickly, are there places in the market that folks you can see are staying away from where there are maybe net outflows and have been consistently so for more than just a couple of weeks?

37:26Oliver Renick: Yeah, there's been a few different areas where we've seen investors selling or at least taking a more cautious approach. Of course, it's been a rough few weeks for the fixed income markets at large. We're seeing different pockets there seek, again, selective buying. We're also seeing selective trimming into strength as well. So I'd say there's definitely more uncertainty from a fund flows perspective on the fixed income side. And it's more modestly bullish, I would say, for fund flows on the equity side right now.

37:50Scott Wapner: Interesting dynamic developing for sure. Absolutely. Thank you very much for that. We're going to continue this conversation over at ETFEdge.CNBC.com. Valerie is going to be joined by Victor Hagani, the Elm Wealth founder and CIO. He's looking at all kinds of valuation metrics, Scott, and he thinks there are certain key parts that may be overvalued in this market. I'll send things back over to you. We'll see you then. Just a little bit, Dom. Thank you. That's Dom Chu coming up. We take a break. Then we're joined Bill Baruch. He has some new moves to tell you about, several, in fact, that we'll document next.

38:34Scott Wapner: All right, we're back. Bill Baruch joins us now. I said he's been making some moves, in fact, a few. Nice to see you. Your first one is a new buy, and it's McDonald's. Why? Yeah, we want to rotate a bit into this consumer stable-ish business. It's trading three standard deviations under its long-run multiple. And I think it's an opportunity to buy a name that has been down about 25 % this year. The pessimism around it is growing. And, you know, they have a new strategy. These four pillars called Next for their growth strategy, elevate the menu, capitalize on brand loyalty, modernize and utilize AI, and invest in its people.

39:12Scott Wapner: So I think given a lot of this, given where it's tracked this year, I think there's some upside, and I like this rotation at the moment. Why do you think the stock's traded like it has? Well, I think the GLP wants, I think that's something that's been a heavy burden to it. But really, it's a real estate company. I think it's something that has been a burden as rates have gone higher. So I think that that pessimism has become priced in, and I do like the upside. here, given what it's done this year. Okay. Why'd you add to Walmart? Walmart, I mean, it's a name that we added about around Labor Day, right ahead of Labor Day weekend.

39:48Scott Wapner: It was a new buy for us as we continue to look into the staple-ish businesses here. But last week, it got above its 200-day moving average. We like the technical strength. If you look at it, it's 30 % of the same-day orders. They pay an elevated fee, so you start to see margin expansion there. The Sam's Club unit is definitely a Costco competitor that you're getting as an option that trades at a cheaper multiple than Costco. But they reach 94 percent of the U.S. population in a three-hour window. So I like what we're seeing here with Walmart eating into some of Amazon's core business. I think there's definitely upside here.

40:24Scott Wapner: Again, we're making a move that's putting us into more stable-ish businesses as we're rotating out of some of our marginal AI companies. Joe, you have Walmart. What do you think?

40:35Oliver Renick: Walmart's had a nice recovery. They reported August 20th, and they really needed in that earnings report to show investors that there still was fundamental opportunity, the ability to grow their revenues, the ability to benefit from this K-shaped economy going in and visiting the store. They did exactly that. You've had a nice recovery rebound because, remember, the stock was struggling coming into that report, as was Costco. So a little bit of a modest bounce. If you could pull that chart back for Walmart, maybe over the last year, you'll see what I'm talking about, where you had that Q3 summer pullback.

41:08Scott Wapner: Yeah, well, there it is right there. I mean, year to date shows that. All right. So you sold Arm and Antigris. Why'd you do that? So we still believe the AI trade is in the early innings. But we cannot deny that some momentum has been tarnished over the last two weeks. Now, it really began, I mean, if you remember two weeks ago, early in the week, we set new record highs, the NASDAQ 100. But later that week, OpenAI came out with their revenue shortfall. And that really hurt, that really crushed things that day. We still like the overweight and semi-manufacturers and core hyperscalers. But as we moved from that OpenAI revenue news into last week's CPI that was a bit stronger than expected, we began to see some unwind of foreign investment in U.S.

41:57Scott Wapner: tech that has unhedged currency risk because the Nasdaq was selling off of the dollar. Now, I don't think this is something that's going to, again, it's not going to kill the AI trade. We still believe it's early innings. We're still overweight and semi-manufacturers and core hyperscalers, but we want to be trimming at the margins. Arm was our smallest position. It was the easiest one to pull the trigger on. A 60 basis point position. We looked at it as a call option with no expiration date. And we bought it below 200 before it broke out. It's coming back and testing that. I think right here, we like the CPU story, what is moving its business into there.

42:33Scott Wapner: But the stock has fallen quite a bit from its high of the year. And as for Integris, you know, they're a strong focus in the supply chain, materials, and packaging. Thought they'd gain better pricing power in this environment. but combined with the technical weakness, I think it's not a must own name. So it's easy for us to kind of start to manage risk around the AI trade if it continues to deteriorate more, but because we can't do it all at once. But I still like our main positions and city manufacturers and core hyperscalers. OK, good stuff. We'll see you soon. Thank you, Bill Baruch. Up next, Options Action.

43:07Scott Wapner: We'll go to Chicago.

43:25Scott Wapner: All right, it's time for some options action. Let's go to Chicago. Oliver Rennick joins us from the Seaboat Global Markets. What do we see? SpaceX. Scott, it's been a very busy period ahead of this second earnings. They sent four astronauts to the space station, are looking to raise debt to buy NVIDIA chips,

43:41Oliver Renick: and the stock has survived multiple lockup expiries. Options pricing implies a 6 % move after the report, which might feel small considering its 13 % swing after its initial earnings that ended up being a springboard for a 60 % run before reversing earlier this month. Analysts expect a flip to positive earnings, and the bias in the options is quite positive. 190 ,000 call contracts were likely bought this morning compared to just under 80 ,000 puts. And the most popular call contract expiring this Friday was the 170 strike, which needs about a 14 percent rally. Also notable was buying in the 190 strike for month end.

44:25Oliver Renick: That's a 40 cent flyer that will need SpaceX to rally big through two more share lockup expires, Scott.

44:33Scott Wapner: OK, good stuff, Oliver. Thanks. We'll see you this afternoon. Oliver Rennick, Santoli's Market Memos coming up next.

44:42All right.

44:43Scott Wapner: Senior markets commentator, overtime co-anchor Mike Santoli's got his market memo. It's nice to see you. Yeah, you too. So what's your read? You know, nice little bounce. Yeah. But let's see.

44:52Oliver Renick: I was going to say plenty to prove on this bounce. We came into the week where it seems to me both bulls and bears were saying semis have to bounce here. You know, they were so oversold. It was such a kind of disorderly amount of pressure last week. You had this whiff of contagion out there in terms of data center credit that it seemed like something could break. You come into this week, doesn't seem like anything's really broken, but everybody's a little bit tentative. I think, you know, conviction is lacking. Some of the action's a little bit erratic still. You know, the S &P has held this trend.

45:23Oliver Renick: It's kind of amazing. Past four sessions, we've crossed the 7 ,700 mark again. We do it one way or the other with either tech or anti-tech. So I don't know. I feel like positioning has been reset enough that the bar's lower going into this earnings season. But everyone keeps saying that, so we have to see if it proves out. meta on everybody's mind on Wednesday? Without a doubt, for a lot of reasons. Obviously, it had this great move. But also, if you just look at a two-year chart there, it's got this ceiling above it, the stock. It's right just below 800. And it was unable to kind of surmount that.

45:56Oliver Renick: So I do think that there's a lot of encouragement about what they're doing in AI. I still think, though, it's the hardware food chain that's going to dictate whether the earnings, making the denominator bigger for the P.E. is going to actually be enough to get the P higher.

46:10Scott Wapner: Yeah, it's interesting that this report is this week. You've got to wait for everything else in terms of the megacast. They pulled it forward. A lot of chatter. Just given what's going on in the market, it makes it maybe all the more, you know, interesting to pay attention to. Base action matter, though. Yeah. All right, good stuff, Mike. I'll see you later on. Mike's in totally finals next. All right, we'll track the last hour today with Adam Parker, Stephanie Link, Malcolm Etheridge, and Lo Tony. So I hope you'll join me at 3 o 'clock Eastern time for the final hour of trade. Let's do our final trades.

46:40Scott Wapner: What do you got?

46:41Oliver Renick: UnitedHealthcare, that's moved up since they executed well in the quarter, I think continues to move higher.

46:46Scott Wapner: You must be Twilio.

46:47Oliver Renick: I am Twilio, Scott. Low-risk position trade here. $2.25 as you're out.

46:53Scott Wapner: Is that personally owned or in the T, or what's the deal?

46:57Oliver Renick: It is not in the T. It is not personally owned, but it will be personally owned at the close this afternoon.

47:02Scott Wapner: Oh, well, I do think that's a little of an important information that should be revealed, right? That's why I responded to your question. All right.

47:09Oliver Renick: Transocean merger with Valeris has cleared all regulators. Good contract news today. All right. The exchange is now.

47:15Scott Wapner: You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC. All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, internet, or another medium.

47:37Oliver Renick: 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 opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com forward slash Halftime Report disclaimer. Some of the most important design choices are the ones that go unnoticed. The details that together make an experience feel intuitive, comfortable, and above all, exhilarating.

48:09Oliver Renick: At Acura, that means looking closely at how every detail could make your experience behind the wheel more rewarding. Every lesson learned and every idea refined becomes part of what comes next, and it lives inside every MDX, ADX, and Integra. That's precision-crafted performance. That's Acura.