More Tech Trouble Ahead? 11/6/26

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0:57Scott Wapner: Carl, thanks. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the latest on this tech trade. Yes, it's trying to rebound today. Many questions, though, still remain, which means we discuss and debate all of that with the Investment Committee. Joining me for the hour today, Jenny Harrington, Jim Labenthal, Kevin Simpson, and Brian Belsky. All right, let's check the market. That's what it looks like right now. So the Nasdaqs looks great. Again, it was down so much yesterday that it's still working hard to get a good portion of that back. Everything is green at the moment.

1:32Scott Wapner: It was the worst day for the Sox, the semiconductor index since the very early days of the COVID outbreak, to give you some perspective. And I thought Charles Schwab today had some more perspective that was noteworthy, and I think worthy of a deeper conversation. They point out in mid-June, the Philly Semiconductor index was up by 106.6 % year to date. That was mid-June. That gain has now been cut to 27.2. That shows you how much damage has been done within the chips. Yesterday alone, Micron, AMD down more than 17%, double digit losses almost across the board. NVIDIA down nine and a half percent.

2:15Scott Wapner: It's negative on the year. At least it did go negative yesterday. Farmer Jim, I'm going to go to you first because you had tried to remain negative. I mean, positive, excuse me, Freudian slip. It's a Freudian slip. I was thinking of his flinches and it made me think of, was he going to flinch again? No, seriously. What are you thinking? I knew something was wacky when when Jenny's waving to people who are walking by.

2:43Mike Santoli: They're Boy Scouts. My son's a Boy Scout.

2:45Scott Wapner: I know if you noticed that we're on the wide shot. I know, but it's like a whole group of Boy Scouts going by

2:50Mike Santoli: and I have a soft spot in my heart for Scouts.

2:51Scott Wapner: I knew something was wacky when Jenny turned bullish last week. I wasn't bullish. And yet you were pretty bullish. We can regret the tape. But I want to hear from Charma Jim first.

2:59Oliver Renick: Let's try to cut through a lot of the uncertainty that's out there. A couple of things went on yesterday. First off, there were legitimate concerns. I'm not going to call them fears, but concerns about what new Democratic governors and state legislatures will do to slow down the AI data center build out. And they will slow it down. I think it's highly unlikely that they're going to stop it, because doing so will certainly turn the U.S. economy into recession, result in tremendous job losses, and a decimation of the tax bases for these newly elected politicians. So I don't think stopping it is what we're talking about.

3:34Oliver Renick: We're talking about slowing it down, which frankly cures the prisoner's dilemma that many of these hyperscalers have been in for many months of are they going to be scott the first ones to flinch in terms of capital spending now they don't have to be labeled with that the politicians will do it for them now that's number one that's a legitimate concern but i actually think it's a positive i'm not alone in saying that but what happened yesterday was more than that on the desk we've talked about this many times over the past few weeks scott you've made references to this the deleveraging that was going on, particularly in the highly levered long short hedge fund space.

4:09Oliver Renick: And yesterday, the truth came out and it was ugly. A lot of really well-known names were down big in October, continuing into November, and they at the least unwound their positions, which resulted in a deluge of selling. And in some cases, they actually shuttered Pods or the entire firm. That is what contributed a lot to yesterday. Now, I am not saying that that's it and it's over. But what I am saying is the positives of strong labor markets, strong economic growth, strong profit growth are likely to propel the markets higher after we get through a week or two of this post-election, post-delevering volatility.

4:49Scott Wapner: So I think it's interesting you chose in large respects to focus on the hyperscalers in your analysis of what the data center backlash and the results of the midterms will mean. When the market is clearly focused on other areas that are more acute to the question itself, like the semis, right? Yes. And the power names. Yes. And you don't think that what's happening there makes some degree of sense if you're going to...

5:22Oliver Renick: Oh, I think it does make sense. I think what we saw and what you alluded to with the Charles Schwab, I think that was who made it, the comment that the Sox was up 100 % plus through June and now is only up 27%. The market was sniffing this out well in advance. I mean, yes, yesterday's declines in Micron, in NVIDIA were breathtaking, certainly. But they were and may be the final throws of a correction, more than a correction, a bear market in those semiconductors that now prices them appropriately for earnings that may well have to come down in the next couple of years, given a slowdown in the AI build out.

5:58Oliver Renick: But these valuations, now we're looking at NVIDIA, I believe, 14 times forward earnings. I believe micron, four times earnings. Now, maybe these earnings are going to come down. Maybe. But these are multiples that are now expressing sentiment that is simply, in my opinion, far too negative.

6:15Scott Wapner: So, Belsky, there are so many different people opining on the destruction that took place yesterday. Chris Harvey, CIBC, sell-offs not over yet, says volumes weren't elevated enough, believe it or not. Yesterday was pretty brutal. He said it still wasn't enough. Mike Wilson has been saying, look, the market needed to get through a clearing event, have sort of one more meaningful pullback, and then that could be the end of the correction. He says this is likely the final stages of that. There was an interesting UBS note, sort of throwing cold water on the rebound that we were seeing in the futures this morning, really pointing out to some of the deleveraging that still needed to take place, particularly from quant funds who were still highly exposed to this trade which got so overwhelmingly crowded on many different levels that there was still some more to work through how do you feel about where we are right now relative to what we witnessed yesterday i think

7:22Mike Santoli: the mike wilson note is brilliant it's brilliant in terms of the catch down because i really think that's what's happening per jim's point and talking about the indices and then following back on the Schwab comment. It's really interesting. October was a bad month. Some of these names are already starting to break in October. We should not be surprised that you saw the roller coaster. You're looking over the edge. And oh, by the way, yesterday was this on the way down. So is it enough yesterday? If you take a look at upside versus downside volume, downside volume was five to one. Usually on these types of days, you need like an eight or 10 to one.

7:57Mike Santoli: And so I hate it when people lose money. Today, I would not be surprised, quite frankly, if the market turns negative on a Friday. I don't want it to. I don't want to have people lose money. But I think we're closer to the washout per Mike Wilson's comment in terms of the index

8:14Scott Wapner: catchdown. Okay. How about this? Because I've been thinking a lot about this. If you look at the numbers from the semi-pullback, Kev. On the way up, you had all these comparisons of 2000. The market's gone too parabolic. There were some moves that were just insane, okay? People looked at straight up into the right for the Microns and the Marvels, and there were so many of them before they went through this period of pullback. What if we actually did have our 2000 already? But we had it in the places that were more reasonably suspect and vulnerable to a 2000 like pullback. So chips aren't down 80 percent like the Nasdaq went 2000.

9:04Scott Wapner: But there are names that are 50 and 60 percent off of their highs. The market's already cleared out a lot of the suspect stocks, if you will. Marvell is almost 60 percent off of its high. Lamb Research is 55. Teradyne's 56. KLA's 56. Applied Materials is 56. You love Micron? It's 45 % off of its high. Yet, what looked like a house of cards, so to speak, in 99 going into 2000, because a lot of stocks went up undeservingly because they didn't have any earnings. Some of them barely had any revenues. the pillars of this house, the hyperscalers, the mega caps, do they look bad?

9:55Mike Santoli: To me, they don't look bad. And I think the trade on Wednesday was a little bit more accurate than the trade we saw yesterday. It was the haves and the have nots. So if you look at companies like all the ones that you just mentioned, which are more cyclical in nature, and maybe this cycle is longer and bigger, but I'm not sure that it's necessarily over. But the idea that we've seen a big part of the correction already take place is absolutely valid. And the house of cards in the 90s compared to these companies are completely different from the standpoint of some of these companies are just so cash rich.

10:27Mike Santoli: You mentioned Micron. It was up 100 percent. It's down 45 from its highs. Sure, it could go lower, but it's probably not going to go to zero.

10:34Scott Wapner: I'd say the The biggest companies now at the forefront of this revolution are in an entirely different position than the biggest companies then were at that revolution.

10:47Mike Santoli: A thousand percent. And here's why it's at the other end of the spectrum where they have nots. The companies that are dependent upon capital markets right now, they're the ones that suffered on Wednesday. They continued to suffer yesterday. It's not just where interest rates are. It's what their price is or their cost of capital is to the market. So I look at the differences of 99, and I sat in the same chair all throughout the 90s as I've done through this episode. And I think that the confidence that I have in the big companies is far greater than anything I had in any company in the late 90s.

11:18Mike Santoli: They're so cash flow rich that they can support anything in the capital markets. But more importantly, I can probably survive anything that may come from an administration, whether that be a municipality, a state or from Washington. So these big companies, these high quality names, that's where I'd want to be. The more speculative, the smaller companies, those that are more sketchy, they probably have more room to fall.

11:39Scott Wapner: Some are going to look, Jenny, and say that, you know, the hyperscalers may be having their baby in 96, 97. But these other areas so acute to the infrastructure build out, they've had their 2000 moment. Now, that's not to suggest that they can't go down more.

11:55Oliver Renick: Yeah.

11:55Scott Wapner: Because who knows where all this is really going to settle out. Data center power names, Vertiv, 53 % from its high, 50, 40, 30, high 30s for a lot of these names. Neoclouds, one month, one month. Iron, down 53%. Nebius, 48. Core Weaves, down 50 as well. You've had a pretty sizable, better than correction, full-on bear market in these names.

12:24Mike Santoli: Well, let's say the best case is that they've already had their 2000s. Or close to it. Yeah. What happens next? If they follow the same playbook, you know what they do? They sit flat for 25 years. I recently sold Sienna that I think I've mentioned a few times in the past. And I held like two or three shares in my own personal account that I bought back in 1999. And if you can pull up a chart of Sienna, yeah, that won't do it. Pull up that chart, if you don't mind, for 25 years. And you'll see that it sat flat for 25 years. And then it recently had a pop. You know, so I thought that's kind of crazy.

12:56Mike Santoli: But so let's say, Scott, they have had their dot-com. What are they going to do? Maybe they're going to sit flat. But my suspicion is that they haven't had their dot-com moment and that they haven't. I think on that smaller name, and I think this is where we might rhyme with dot-com, but we're not repeating, is I think Kevin's right. I, too, have more confidence in the meta, in the alphabet, in the hyper, in the big guys, right? Especially because, like, if Anthropics stumbles, if OpenAI stumbles, that's to their credit. But I think one of the things that I'm latching onto in my head is the idea of maybe there's not an AI bubble, but maybe there's a data center bubble.

13:33Mike Santoli: And one of the companies in my portfolio is Microchip. And they just reported. And Steve Sangy, the CEO, said twice on the call, I think data centers are in a bubble. And he was careful not to say AI. And that's an interesting idea. Maybe there's too much build out of the data center.

13:47Scott Wapner: I think you're, I think, honestly, I think you're making the point that we're talking about here. There's not an AI itself thing. It's real. Demand is real. Sarah Fryer, you heard her talking. Others, I mean, who are on the front lines. Everybody knows that demand for AI is real. Did the data center trade get a little ahead of itself or a lot ahead of itself? Did more than the data center trade get ahead of itself or a lot ahead of itself? Perhaps. But those are like massive, massive pullbacks to the point where, Jim, you bought Qantaservices, which is down 34.5%, if not a little more, from its high.

14:32Scott Wapner: Getting a nice move today. It's had a rough week. You know what the stocks have done. Tell me about that move.

14:38Oliver Renick: Well, obviously, I'm taking the exact opposite side of Jenny, and that's fine. What I look at, and I think if you're buying Quanta, you have to believe that the data center trade is going to continue. And that, frankly, it's not a bubble. So let me make that assertion. Now let me back that up a little bit. Let's just look at the demand, or excuse me, the revenue growth that we saw from Azure, that we saw from Google Web Services. We're talking, in Google's case, 100 % plus year over year. We're talking, in Azure's case, over 40%. That, to me, is not what a bubble is. A bubble is when things are being built without demand for them.

15:15Oliver Renick: These companies are telling us that they have more demand than they can meet with supply. We know, by the way, that when we're talking about data centers, a critical bottleneck, if not the critical bottleneck, is electrical power supply.

15:28Scott Wapner: I would say we never really knew, to be fair to that assessment, whether we were and maybe we still are building too many data centers. I think we were going to find the answer out for a while until we really knew where demand was going to be. So I'd be careful with trying to, you know, make make that make that.

15:47Oliver Renick: I will take the the cautious reminder. I will take it because it is probable based on human history that a bubble eventually forms, gets highly inflated and pops. To that extent, I think a Democratic led slowdown of this bill that might actually be welcome. But in terms of these data centers that are being built for the next year or two, they are going to be built and they're going to need the electrical power supply. I draw a distinction between, of course, we always want to make this comparison to the late 1990s, but think about how much spending was done on Y2K that came to a crashing halt on Jan 1 of 2000.

16:26Oliver Renick: And I mean a complete stop. That's not what we're talking about here. Also, the fiber optic networks that were laid in the ground all over these cities were 90 percent unused. That's the exact opposite of what we have now.

16:38Scott Wapner: So, I mean, you're making the case that you don't think the you don't think the data center reality. I'm not even going to call it concerns because it's more of a reality now that the midterms have happened. And we, you know, even people like Dan Ives are saying, well, you're at minimum, you're going to get 10 percent fewer than you thought as a direct result of this. You don't think that's true. You don't you think this is way overdone.

17:04Oliver Renick: Use the 10 percent. Exactly. Way overdone. Use the 10 percent. Fine. We're going to have 10 percent. That's a guesstimate. I got it. I got it. I mean, I'm just keying on what you're saying. But what you also said is, and I do believe this, I think this is overdone. Now, look, Quanta is not exactly cheap at a mid-20s multiple, but it's also off 33 % from its recent high. Amazon is at the cheapest it's been, frankly, in years and years and years. And it's not just data centers, although definitely Amazon Web Services, Tranium Chips, etc. This is a big play in there with other drivers in terms of the retail as well.

17:39Scott Wapner: Man, at the end of the table, he owns Quanta and he owns Vista. What do you think of this jumping in now?

17:45Mike Santoli: I'd like to thank Jim for buying Quanta. Number one. Number two, yesterday was a binary day. If you had a data center attached to it, sell it. So guess what? Coming out of this, you want to buy the best. You want to buy the best stocks. You want to buy the best operations. Qantas is the best operation. Even though it's got Colorado and Texas, this is the one that's only in Texas. We'll see what happens there. But decisions have not been made yet. But the market made it for you yesterday, making a binary decision. Sell anything related to data centers. And I think that's a mistake. when markets do that?

18:19Mike Santoli: Had been happening for months, too. I mean, look, look, like that's like tail as old as time, right? When the market sells off everything and it's indiscriminate, blah, blah, blah. But it's my sense that it hasn't gone far enough, right? There's a lot. Probably with the overall, Jan, but I think for certain stocks, this is now when you do stock picking. Okay, but let's take Micron, for example. Like, you know, you can really look at that two ways. You can say, yeah, it's down 50%. You can say it's still up, it's still 200 % in a year. You can say, like, okay, we think the data centers are only going to lose 10%.

18:48Mike Santoli: Or you can say eventually competition is going to come on, or maybe it's more than 10%. But that's why it trades at a reasonable multiple still, because people are so skeptical about what the real future earnings growth is. And it's just my sense, also having lived through.com, it's just my sense that it hasn't gone far enough. And I think there's important math to remember, too, here, which is, okay, sure, the market looks great today. There's green everywhere, right? But when a stock like Micron is down 18 or 17 % yesterday, it needs to be up almost 20 % to recover that. It's only up 6%. So I'm not really seeing today's move as terribly reassuring in terms of, like, redirecting that momentum.

19:27Mike Santoli: Now, we all know I'm not a momentum trader, so maybe you should listen to me on that. But it just seems to me like people are caring about valuations. The numbers aren't there. The feeling isn't there, you know, to get the trip rolling again. I mean, there's an insatiable demand for memory.

19:40Scott Wapner: and there's going to be. There's a dramatic supply demand imbalance. For sure. And there's going to be. There's nothing at this point to suggest there will not be. Okay, so that's great

19:52Mike Santoli: and that's right. But then what is Micron's earnings growth rate in 2027, 2028, and 2029, for sure? And no one can answer that right now.

20:00Oliver Renick: That's where it gets tricky. If we want to talk about Micron, let's not forget they're going to buy back$100 billion worth of shares. For a market cap that just got a lot cheaper is$750 billion. It's a lot of shares. That's a good point. And so when we make these inevitable comparisons to the 1990s, we have to draw distinctions about where things are different. There's no debt on Micron's balance sheet. I mean, that's different than any other cycle that Micron's been on. There's no debt. They're generating gobs of free cash flow. Yes, Jenny, there are questions about the growth rate. That's the challenge.

20:28Oliver Renick: Literally four times next year's earnings. I'm OK with it.

20:31Scott Wapner: Did you what are you doing with Nebius? Right. Because the neoclouds are part of this conversation too. And I'm glad you're on. We're waiting to have you on about this. That stock's gotten crushed, obviously.

20:41Mike Santoli: Still up 42 % year to date. That's one of the genies stories.

20:44Scott Wapner: I know, but you don't want to sit here and watch that continue to have to say, still up 32%, still up 22%. You know what I'm saying? Exactly.

20:51Mike Santoli: But here would be my retort. 50 to 60 % of their CapEx is prepaid by their existing customers. They have$10 billion of debt. CoreWeave has$50 billion of debt. So it's a small mid-cap name for us. We want to play in that space, and that's the one we want to play out.

21:09Scott Wapner: You're comfortable. I felt like that was too brief of a defensive. Really? Well, I'm comfortable. Yeah, because I mean, this to me, this subsect of stocks feels like it's the biggest, in many ways, conversation. Like the neoclouds are right at the heart of what happened, the way that they run up, the way their valuations are, the amount of debt that I think the memory and the chips are a bigger deal.

21:35Mike Santoli: Nebius is a small mid-cap name. We own 50 basis points compared to an NVIDIA where we own 700 basis points. It's a completely different ballgame.

21:45Scott Wapner: Yeah, I know, but one is more at the epicenter of the worries about what's happened on many levels.

21:52Mike Santoli: If you take a look at the total market cap of the NeoCloud areas versus semiconductor chips versus the memory space, it's very small relative to the rest. So that's why our opinion. So you're holding the stock.

22:04Scott Wapner: Yes. You're keeping the stock. I mean, the mega caps have obviously held up better than many of the others, as we did discuss. I want to bring in Malcolm Etheridge, because I mentioned what's happened with NVIDIA this week. You've trimmed it. Tell me more. Ahead of earnings, by the way, which I think are on the 17th.

22:24Mike Santoli: Yeah, so I've actually trimmed it now for the third time this year. And I know that you would assume that that's probably because when the market seems to be souring on the AI trade, the company that's at the center of all the spending related to AI and all the building related to AI would be the first one to be under pressure. But it's actually because something about AMD's earnings just didn't sit right with me. So AMD reported 97 percent year over year growth in data center revenue specifically, which was a really big positive for the broader semiconductor industry, you know, overall and the health of the A.I.

22:58Mike Santoli: trade. But it also they also included some guidance that suggests that they expect to capture a growing share of that A.I. infrastructure spending going forward, which is the space where NVIDIA has dominated. So they included in there a little bit of detailing on guidance or detailing on the models that they now the contracts that they now have with the model builders, you know, Anthropic, OpenAI, the hyperscalers, Microsoft and on. And they basically have proven now that they have the ability to come and potentially unseat NVIDIA in some ways, nibble at their market share in some ways. And I know, you know, 90 billion dollars per quarter in revenue is what NVIDIA is reporting in data center revenue versus about nine billion for AMD.

23:44Mike Santoli: So I'm comparing like a watermelon to a grapefruit, probably. But just the fact that they have the potential to come along and be a substantial competitor to NVIDIA is what I think is disheartening a little bit for anybody who's been really excited quarter after quarter about how much market share they've been able to control, how much of the gross margin they've been able to put up quarter after quarter. And so to your point, I'm selling it ahead of earnings just in case the market decides once again that it doesn't like what it hears from NVIDIA post earnings. Because for the past few quarters, each time they report, the market says, yeah, that's great, but it's not good enough.

24:26Mike Santoli: What else could they tell us? And so I think it's a good place to just be doing some risk management here for anybody like me who's gotten over their skis in NVIDIA. I've trimmed it twice earlier this year and it keeps on growing back like a weed. And so I think it's a good place to be doing some trimming where the market is souring, like I just said, on the entire space altogether. I think the big difference when we talk about earnings is that we've seen NVIDIA run into earnings and then sell off on news. If you look at NVIDIA now, Malcolm, you're talking about a stock that's coasting at best, maybe even limping into earnings.

24:59Mike Santoli: I don't mind the idea of de-risking. I think that's fantastic. If you're trimming again, that makes sense. I wish Belsky would trim some of the neocloud position. That's a conversation maybe for another day. But I don't look at this NVIDIA earnings season quite the same way as I have previously. If anything, I'm definitely holding the position and we're not looking to reduce it.

25:16Scott Wapner: When you say you don't look at it like you used to previously, why? Because of market conditions?

25:22Mike Santoli: Yeah, I think that the entire trade now because of the data center change. Let's say that we're talking about 10 % fewer data centers, 15 % fewer data centers. It doesn't really matter. It changes the economics for every one of these companies, regardless of the tentacle. So for me, you have to just lower expectations. The conversation about Micron was valid. Maybe they're sold out through 28. But Jenny, you mentioned 29. I think that that peak in sales is probably here. So I'm still a believer in NVIDIA. I still think it's cheap. We own it. But I'm not sure that it's going to have the same problems post-earnings that it's had previously in the quarters that we've seen three months, six months, nine months ago.

26:02Mike Santoli: And that to me is a big difference with NVIDIA and some of these other names.

26:06Scott Wapner: We will see where things are. I'm sorry. Go ahead, Malcolm.

26:09Mike Santoli: I was just to Kev's point. I think we have to at least consider what increased competition from here looks like for NVIDIA. So the Helio system is what I was referring to before about allowing them to run their software and hardware under one roof. It's similar, very similar to what NVIDIA has been offering with CUDA, which has been the thing keeping their customers locked in to that sticky ecosystem. So with the names that I just mentioned, the companies that they've already started to secure contracts with and do business with, being willing to step in and validate that there is something there in terms of AMD's potential to slide in and slide itself as a meaningful number two.

26:50Mike Santoli: NVIDIA hasn't really had to worry about competition in a meaningful way for the last four years that we've been talking about this AI trade. And that's why I'm saying specifically that before their earnings, it's a good time to be looking at risk management.

27:04Scott Wapner: All right. We'll talk to you again soon. Malcolm, thank you. That's Malcolm Etheridge. We'll end the block with another buy. Amazon added to it.

27:12Oliver Renick: Look, leaning in, this is a reflection of there is no sign yet of a slowdown. Not a slowdown in demand, not a slowdown in pricing. I'm talking, obviously, about AI trade, Amazon with its web services, with its Tranium chips, etc. Leaning into it. I think what we're going through right now is a consolidation, a pause, not the beginning of the end. I can't make it any more clearer than by the trades I'm making.

27:40Scott Wapner: Who's got a thought on that?

27:41Mike Santoli: We added to Amazon before earnings. We were a little bit early, maybe wrong, but I like the fact that you're seeing value and opportunity there.

27:48Oliver Renick: This is not December 31st, 1999. I'll make that statement, and you can skewer me later if you want, but there's no sign of demand stopping. The politicians may slow it down, but the demand is there. How come no one's talking about the consumer business at Amazon? No one's talking about that. Because it's kind of like you're making an excuse for buying it, right? If you're buying Amazon right now, you're buying it for AI.

28:10Mike Santoli: Yeah, you are. And as AWS grows to 50 % of where revenues are going to be, but you have that core business there. And I don't think it will not enough people talk about the consumer sector.

28:20Oliver Renick: I agree with you. I just didn't lead with that because it felt like I – I mean, if I led with that, Scott would skew it in for real. Oh, you're buying it for the retail. Go ahead. Hey, Scott, I'm trying to get it. I'm trying to get it for the retail business.

28:32Scott Wapner: All right. We're going to take a break. We have a double downgrade for a stock that Jenny just made a move in. So we'll get to all that. We still need to discuss SpaceX and Tesla and what's happened to both of those stocks this week. We do have ownership there. I want to hear from our committee on those names when we come back.

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31:06Scott Wapner: All right, so it's not often you see a double downgrade, but that's in fact what we did get today on TripAdvisor. To underperform from buy, the target to 8 from 15, it's Bank of America. and you sold it.

31:22Mike Santoli: And you know what else doesn't happen often? It doesn't happen often that you sell a stock a few minutes before it drops 30%. So did you really time it like that?

31:31Scott Wapner: Just by good fortune?

31:32Mike Santoli: By good fortune. And that is the truth. So, so we've owned TripAdvisor actually since $14, right? So we still had a huge loss on it.

31:40Scott Wapner: You think in B of A for putting out the downgrade when they did?

31:44Mike Santoli: I don't really care. You know, the stock was down on earnings. Yeah. Yeah. Good point. Well, sorry, you're exactly right. This is what it is, right? You're several months or a year too late.

31:54Scott Wapner: And you're getting some ice cream, B of A, right?

31:56Mike Santoli: I'm not sending them ice cream. I tried. Yeah, we bought it a couple of years ago at$14. And the thesis was, this is a really great travel booking leader. And they had their Viator business and they were minting cash. It was a huge free cash flow yield when we bought it. But then what happened was Agentic AI crept in And that really started to pummel the shares. And that was really the thesis for us saying, hey, this doesn't make sense for us anymore. And the investment thesis has fundamentally changed. You book travel in a different way. So we sold the stock on Wednesday at about$10. They announced earnings.

32:28Mike Santoli: We had zero expectation for such a rotten earnings quarter, but they missed on revenues. They missed on earnings. They announced a new CEO. And the stock was down like 28 % in the aftermath. half. So that's one where you just, you know, you want to pretend you're smart, but you might just be lucky.

32:44Scott Wapner: Well, all right. Well, we appreciate you keeping us up to date on that. And by the way,

32:47Mike Santoli: sorry, to the double downgrades, like, I don't know that I'd buy it here. Like, this is the heart of at-risk from AI and Agentec AI. It's really frightening. And they have good businesses. They have good cashless still, but they're under threat.

32:58Scott Wapner: All right. Let's take a look at SpaceX and Tesla. Let's try and do that, both of those stocks together, because I don't really think there's another way to talk about them. You can't talk about one. You got to talk about both. Some people think they're going to be both sooner rather than later. Both are getting a nice rebound today. SpaceX, remember, let's see the stock price on that again, because the offer price on the IPO is 135. Remember that? It's been below that. Can we get the chart? There it is. So, it's still below that. So, you had more than$400 billion worth of market cap wiped off the map in what happened in the market yesterday and then the actual day after the election.

33:40Scott Wapner: Now they're going to wind down. Tesla is the cyber truck. Production sales just had never sort of got to where people suggested they would. Musk himself suggested they would. Maybe 10 % of the original plan. What are you doing with this name? You have both Tesla and SpaceX.

34:01Mike Santoli: A thousand percent in our growth portfolio. We believe in SpaceX. We believe in Tesla. We own this and we're going to own it for a very long time. Winding down the cyber truck in Texas, I think, is not that big a deal. If it's making room for more robo taxis, that's fine. We don't own this position or SpaceX because of the cyber taxi necessarily today. We own it for the cyber taxi years into the future. but robotics, space, Starlink. This is a very volatile stock. This is an incredibly polarizing individual. You have to look at what happened on Tuesday and factor that in to your point in terms of combining this company.

34:38Scott Wapner: Are you factoring that in?

34:40Mike Santoli: I think you have to.

34:41Scott Wapner: I think you have to. But you're not coming out more negative, though.

34:45Mike Santoli: Well, I think this is going to be a rodeo for a long time. But I like the stock. I believe in Elon Musk and I'm going to own it. We bought it at 120. We bought it at 150. We'll probably continue to add to it on volatility. We did not buy any full disclosure yesterday. We have a position that's small, big enough. Because if you're looking at a position that's three, four, five years down the road, I don't think you want to have too big of a weighting in your portfolio. You only have Tesla, right? Yeah, I would echo exactly what Kevin said. I mean, this is about cyber cabs and robotics. I'm confused on why the stock is even classified as consumer discretionary stock.

35:19Mike Santoli: It should be an industrial or technology name. So we own less than 1%. I mean, we're just hanging on for the merger.

35:25Scott Wapner: Okay. I think you and a lot of other people, I mean, I want to know what the options market is suggesting too, because it's such a popular name, Oliver Rennicks at the SIBO in Chicago. You have more on what kind of trades that you're seeing? Nevermind. We'll get back to Oliver, I think. If not...

35:45Oliver Renick: I'll just look, I'll say this on SpaceX, Scott. This is the sort of stock I would like to own. I love what they do. I think it's really cool what they do. I can easily justify it by out years multiples. But I guys just don't know how this is going to trade when they make the announcement, which inevitably they will, that they're merging. I don't know how it's going to go through antitrust. You know, Elon's going to be occupied for the coming year or so with a lot of answers to be given on Capitol Hill. So I'd like to at least wait for that merger announcement and see how the stock trades. OK, let's get the news.

36:16Scott Wapner: What do you guys think? Yeah.

36:18Mike Santoli: Yeah.

36:18Scott Wapner: Fair. Pippa Stevens. Pippa Stevens. Hi, Pippa.

36:21Mike Santoli: Hey, Scott. So European authorities are investigating a new wave of bomb threats against passenger flights. Fighter jets escorted three planes over Hungary, while other aircraft were diverted or searched in France, Italy, and elsewhere. No explosives were found, and no one was hurt. More than two dozen flights received similar threats earlier this week. Two U.S. Senate races remain too close to call. In Mississippi, Democrat Scott Colom leads Republican incumbent Cindy Hyde-Smith by about 1 ,100 votes with provisional and mail balloting outstanding. In Alaska, Democrat Mary Peltola holds a roughly 600-vote edge over Republican Senator Dan Sullivan, with about a quarter of ballots still uncounted.

37:01Mike Santoli: And Pope Leo is beginning a 12-day tour of Uruguay, Argentina, and Peru just weeks after surgery to remove an early-stage cancerous growth from his lungs. Doctors cleared the 71-year-old pontiff to travel. The demanding visit includes 14 flights and a return to Peru, where he served four years. Scott.

37:20Scott Wapner: Okay, Pips, thank you. Pippa Stevens. Mike Santoli, his market memo is next.

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39:42Scott Wapner: Senior markets commentator and overtime co-anchor Mike Santoli. He is with us. Mike, it's good to see you. Here I am. Yeah, exactly. Sorry, Oliver. I don't know what happened. That was my bad. All right. What are you thinking about this rebound in the chips? And the way I say rebound is not by accident.

40:02Oliver Renick: Right, exactly. It's pretty tentative. You're not getting back really a huge chunk of what was lost yesterday. At the S &P 500 level, it looks like it's trying to escape without further damage. But the intraday chart is a series of like a slinky going down the steps. You know, it's like a little bit of a lower high. So we'll see where it ultimately settles out. you can definitely make the plausible case that we finally got something pretty close to, you know, washout-type conditions yesterday in the tech part of the market, of course. The complicating factor is that we were talking about this yesterday.

40:34Oliver Renick: This real kind of clockwork choreography of rotation was broken. So if there was like the perfect dispersion trade that's worked for months, definitely got interrupted yesterday. You've kind of stripped some of the teeth off the gears of this market because the equal weight S &P He had a massive run against the NASDAQ. And then it was time for it to cool off and back away in the defensive sectors. And tech wasn't there to take up the slack. I think that's what we're dealing with right now. And it's really a matter of, I mean, the debates about the trajectory and the velocity of the AI data center built, very legitimate.

41:07Oliver Renick: Does Anthropic come in and kind of backstop the trend for a while by getting its IPO? All of that stuff is very relevant and is going to matter a lot. But in the moment, I also think that you have just exactly how much positioning stress have we gone on, gone under, and just how oversold do you have to get to really rebase here if this is just a correction into continuing up.

41:28Scott Wapner: Does Anthropics valuation matter that much or are we going to more focus on the fact that, well, thank goodness they came public? Yeah, I'm in the camp that's saying. On the schedule that we thought.

41:41Oliver Renick: I'm on the side that says just they have to get it done probably. I mean, it can't be a massively down round from the last private valuation, I would guess. They want to get cash in the door. I don't know what that's going to tell us for the model business down the road and for the fortunes of OpenAI. But in terms of let's refill the coffers or top them up and maybe the credit markets will be placated and things like that. I do think you probably want the deal done. I can absolutely see the opposite point of view, which says sometimes a pulled IPO is exactly that sort of final blow for a pullback that gets you the maximum panic.

42:22Oliver Renick: And then you can rebuild from there. I think it's more about we want the deal done.

42:25Scott Wapner: OK, good stuff, Michael. Thank you. Appreciate that. That's Mike Santoli. I'll see you later this afternoon. We're back with more after this.

42:48Scott Wapner: Oracle shares are falling at the moment. Let's go to Seema Modi, who's got details on some headlines that have sent that stock lower. What's going on here?

42:55Mike Santoli: There is a report from Bloomberg that Microsoft is potentially winding down an arrangement to rent AI computing capacity from Oracle. We did report separately in the last hour that Microsoft, from the sources we spoke to, is in the process of consolidating its neocloud partnerships. We did reach out to both Microsoft and Oracle on this report, but it does mark sort of a potential shift in the AI computing landscape and signals that Microsoft and others may be rethinking the types of partnerships they have across the landscape. Again, this report suggesting that Microsoft is potentially winding down an arrangement with Oracle more as we get it, Scott.

43:33Scott Wapner: But you think that this could be part of maybe what becomes a larger rethink? Is that what I understand?

43:39Mike Santoli: The concern is that this could potentially lead to some forging of certain relationships, prioritizing a few neoclouds over the others. Again, we're still working the phones here to understand what these new arrangements could potentially look like. The reason this really matters, though, is because this is Oracle with that triple A rating. Many of these new clients rely on Microsoft's investment grade rating to secure a lot of off balance sheet loans. Scott.

44:05Scott Wapner: Good stuff. Seema, thanks for the insight. Appreciate that. That's Seema Modi. I've got some ownership here. You and you. What's up?

44:11Oliver Renick: Nothing to like about that news headline. And this is not an environment in which I or anyone should start explaining away bad news headlines. Yes, Oracle will report in mid-December. That's a long time, and I hope there's some updates from the company before then as to what this means. You know, the big thing with Oracle is that half of their remaining performance obligations are open AI. So to me, I do focus on open AI, hopefully completing this fundraising that they're going through. That's been downgraded. We know that from$30 billion to$20 billion. But I'd like to see them get that done. Nonetheless, I just don't like this news at all.

44:44Mike Santoli: I would expect Oracle, exactly what Jim said, to be a little bit more visible with respect to what's happening. They've been a lot better lately in terms of coming out with news. And so we'll see exactly what percentage of that business will go away. I think this has a lot bigger repercussions if it's real. And that goes back to some of the conversation last week about the cost of capital changing. Right. As we saw Neoclad funding disappear, as we saw Pac-10 needing to intervene to get deals done. And this just says to me, like, there's pressure at the margins. And when there's pressure at the margins and all these companies are interdependent on each other, something insidious starts to start to happen.

45:17Mike Santoli: If we go back to the A Block, and I talked about the cost of capital, it's not interest rates, it's credit worthiness. The next move of this market isn't going to be dictated by the stock market. Mark my words, it'll be the credit market that moves the market. I think you're right.

45:31Scott Wapner: Okay. After the break, guess who is joining us?

45:35Mike Santoli: Oliver?

45:36Scott Wapner: Yeah. Oliver Rennick. Wow. He heard me calling. She came running. He's next.

45:58Scott Wapner: Oliver Rennick at the CBO Global Markets in Chicago. What would we do without you? Thanks for coming by. What do you got?

46:08Mike Santoli: Appreciate it, Scott. Some interesting stuff, I think, in an area that's been under the radar here throughout this week. That's the international equity trade. Namely, I'm looking at the emerging markets, EEM, ETF, and China, FXI, or KWEB. First emerging markets, which got hit about as hard as anything else yesterday, options volume is about four times the average in EEM, and it is very, very bearish. 190 ,000 options traded, and almost 180 ,000 of them were puts. And it looks like three times as many of those puts were initiated by buyers than sellers, with the most popular purchase, the 54 strike put expiring, NOV 20th.

46:46Mike Santoli: That's 9 % lower. Now, in China, it's basically the opposite of this. It's call buying all over the place. And the group is up, but we have seen just too many high volume, bullish options flows in FXI throughout a steady decline the past year, I think, to get too excited unless you think something monumental has changed for China this week.

47:10Scott Wapner: Oliver, thank you. We'll see you later this afternoon. Oliver Rennick will step away. We'll come back with finals next.

47:19Scott Wapner: All right, we'll see what this last hour of trade does. It's been a week, hasn't it? Ed Yardeni, Jeremy Siegel, Anastasia Amoroso, Courtney Garcia, Eric Woodring on where Apple's next move might be. And I hope you join me then. Brian Belsky, final trade. Take two, TTWO, Grand Theft Auto.

47:38Mike Santoli: November 19th. Regardless of what's happening under the surface of the credit markets, Amazon, they have a strong balance sheet.

47:44Oliver Renick: ExxonMobil, not done.

47:46Mike Santoli: Corox just had a great earnings report.

47:48Scott Wapner: Excited. All right. I'll see you on the bell.

47:52Mike Santoli: 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. 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.

48:21Mike Santoli: To view the full Halftime Report disclaimer, please visit cnbc.com forward slash Halftime Report disclaimer. When an intruder approaches a home, they expect a camera. What they don't expect. Stop. This is simply safe. Police are on the way.

48:33Oliver Renick: Using smart AI cameras, live US-based

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