NVIDIA Fallout, Chip Volatility and the Case for 60/40

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1:23The stock is lower once again today as the committee makes some key moves in that name. And again, as you can hear Sarah in your ear, Nike Investor Day coming up next week. But joining me for the hour, we have Jim Laventhal, Jason Snipe, Kevin Simpson, and Liz Thomas. First, quick check on the market. You can see a lot of red going on on this board right now. The Dow's down just about 170 points. The S &P pulling back 1%. The Nasdaq Composite down 1.5%. As you can see, the 10-year, well above a 5 % yield at 5.13. Important to note, the major averages are positive for the week, with the S &P up about 2%.

1:55on the week. We also want to check shares of NVIDIA right now. Obviously, NVIDIA, the story of this week, NVIDIA shares pulling back just about three and three quarters of 1%. Over the last week, NVIDIA shares pulling back more than 14 % as investors digest all the controversy around NVIDIA CEO Jensen Wang and his decision to resign as the CEO of the chip giant. With that, we want to begin our conversation. Jim Labenthal, good to see you right here to my left. What are you making of today's action after yesterday, people just kind of were shocked by Jensen Wang resigning today. What do you think we're seeing in the markets?

2:27Yeah, well, it's been a shocking week, and it got worse as the week went on. I think what we're going to see from NVIDIA, the stock for the foreseeable future, is this tug of war between the bulls and the bears. The bulls, like myself, are going to point to the strong order book, the growth that's projected. We'll get an update on that with next week's earnings. I'm not expecting a major change. We're going to talk about things like free cash flow over$300 billion, the forward multiple of 10. and say, wait a second, how can we be selling this here? And I'm not. I'm not selling it here. And new money that comes into account, I am putting into NVIDIA.

3:01The bears are going to say, listen, there's going to be export controls and the China business is going to be curtailed. That's probably right, Frank. It is probably going to be curtailed. Now, China's about 11 % of overall revenue. I don't think that goes to zero. But again, at 10 times earnings, free cash flow generating well above 300 in the coming 12 months, 300 billion that is. I honestly think the bulls went out in the long run. But for the next week, two weeks, it's going to be back and forth, this tension between the bulls and the bears. As I said, I'm sticking with my position, new money that comes into accounts.

3:36I think this is a great time to buy it. You know, one quick point, Jim, I think you're setting this Goldman report that came out yesterday that outside Taiwan and the U.S., China, Hong Kong, and the rest of the world make up about 11%. I've also heard 20 % as a number, too. So I don't, you know. Right. A lot of different estimates out there. I want to ask you about the valuation of NVIDIA and why you're saying you're putting new money to work. Is the fact that the valuation is so low that it's attractive? Do you think all the pain has come out of this stock with all the controversy? Or do you not see more pain potentially in the future?

4:04So good question. No, there is likely more pain. I'm not sitting here saying that$159,$160 is absolutely the bottom. Anybody who knows me knows I'm not a day trader. I'm a long-term investor. And what I see is that the hyperscalers, again, this quarter reported that they're going to stick with their CapEx spending plans. I also note that the tone of the market right now has been slightly, more than slightly negative with regards to the blue wave that came out of the election and the potential for slowing the data center build out. I'm strongly of the opinion that slowing the data center build out is a good thing, that it allows cash flows from those hyperscalers to catch up with their capital expenditure plans, taking pressure off of financing in the capital markets.

4:48But all of this that comes in from financing, and I'm talking about capital markets coming up next week with Anthropic, $60 to$80 billion, is going to flow through to the likes of NVIDIA and the other chip manufacturers. So is the pain over? No. And that's where I'm saying the next couple of weeks, probably going to be volatile. But this is a price, given the fundamentals going forward for the next year, I'm very comfortable buying. All right. So NVIDIA shares down about 3.5 % right now. We want to talk a bit more about NVIDIA. We're getting some news. Our Seema Modi joining us now with the latest on NVIDIA.

5:19Hey, Frank, so the Financial Times reporting that NVIDIA's board has approached Arm CEO Renee Haas as a potential successor to Jensen Wong. Bloomberg reported yesterday that Haas was one of the external candidates that NVIDIA was considering. Frank, this tells us, though, that the board is trying to move faster ever since Wong's resignation on Thursday morning, that now the board is moving fast to secure a longtime time CEO, someone who can be a permanent replacement to him, as right now they have interim CEO Colette Kress, who was CFO currently in place, right as we expect earnings now on Tuesday.

5:54More as we get it, Frank. Yeah, certainly a lot of anticipation for those Tuesday earnings. Our CMO Modi with the very latest on NVIDIA, new reporting from the FT that the board is considering. Renee Haas, obviously the arm CEO as a potential successor to Jensen Wang. Right now, again, shares of NVIDIA down about three and a half percent. I want to come over to you gentlemen right here. and also Liz, we want to bring you in the conversation. Certainly a fast-moving development when it comes to a potential replacement for Jensen Wong. Is that comforting, or do you think that could be concerning?

6:21A lot of talk, including my colleague John Ford, that if you bring an outsider in, some talent may lead because they feel like they were passed over. No, I think that's a positive development. Obviously, the leader of Arm has been at NVIDIA before he left, I think, in 2013. So I think, you know, there's some calm with that potential decision. What I will say, I mean, to Jimmy's point, of course, from a bear's perspective, there's a mountain of headwinds, you know, from a tactical perspective, at least. I think there are concerns around export controls, as Jimmy mentioned. National security, obviously, is an issue.

6:56Where are the chips going ultimately, you know, in parts of the Far East, whether it's Malaysia, Vietnam, ultimately getting to China, the more advanced chips? I think that's a concern. But when I look at this stock from a fundamental basis that Jimmy already kind of shared, alluded to,$115 to$117 billion worth of revenue this quarter, 70-plus percent margins. To Jimmy's point as well, 10 percent. I mean, trading at 10 times forward, I mean, if you remove the name and looked at a stock like that, you're like, hey, this is something I want to lean into. It's down, I know, close to 20 percent this month.

7:31But I think there potentially might be an opportunity. I think there's more to come. Sadly, we'll hear the testifying behind closed doors, and there's a lot more to evolve in this story. But I do think there will be an opportunity as a long-term investor. To your point about more to come, yesterday I was actually speaking to a Democrat that's in Congress now who has been reelected. So they'll be in the new Congress, and they told me just flat out, he's going to have to come back. He will be back on the Hill. So it looks like the Democrats also want to have some conversations with him. I also do want to point out, NVIDIA shares, they've gained about a half a percent, still lower.

8:07But since this news broke, and if you look on Kalshi, Rene Haas' odds of becoming the next NVIDIA CEO at 35 percent, they spiked up as soon as his FT report came out. And you don't think that's because of our positive talk on it, Frank? Perhaps, perhaps. Kevin, I want to come over to you. Just your thoughts about a new CEO for NVIDIA, perhaps, you know, a decision being made. I don't know when he would take over the role, but, you know, days or the day after Jensen Wong stepped down. I mean, you can replace the CEO, but it will be very difficult to replace the visionary that was Jensen Wong. I think that the street would prefer an outsider.

8:40I think that's why there is some enthusiasm here. I think the board has to move quickly. This is not something you want to linger in any way, shape or form. I think that there will be people that leave NVIDIA regardless of whether they promote from within or they bring from without. All of the fundamental case that the gentlemen have laid out is accurate. If this was a blind ticker, to Jason's point, you'd be buying it, but it is not. And there will be more things to come, for sure. Where there's smoke, there is fire. And yesterday, we sold, Frank, half of our position on pure price action alone.

9:13And it's heartbreaking from the standpoint of looking at the portfolio, the admission that you're wrong and you take a 20 % loss. Like, we literally bought this stock at 200 and sold it yesterday in the 160s, not because we don't like the fundamentals, but I have a rule based on price action. from our entry point. Most of the world bought it at like 5 cents, and they've owned it for two years, and it's doubled every 20 minutes. We didn't have that luxury. They've recently initiated a dividend, a share buyback. We put them in our portfolio. We only got stopped out of half of it. If the price continues to pull back, we'll probably lose the rest of it.

9:47Maybe the Rene Haas news gives it a little bit of a stability point here, which I would like to see. But I think the fundamentals are great, but sometimes there's more to a story. So can I ask, and I hate to press you on this, but you took a loss on this. It doesn't happen often, Frank. Let's talk about it. Did you want to get out because you were worried about this? Were you worried about what could happen with Jensen Wang going forward and how that could impact NVIDIA? Or were you worried that the company just basically lost its vision? I mean, why take a loss on something when there's so many developments left to happen?

10:18It's an excellent question. I think it's a great time for trade school. I don't have any emotion to any of the tickers. I look at it purely from a math equation. I paid$200. We got stopped out on relative underperformance on half of it. I think everything that these guys have said is accurate. I think that there's lots of reasons that if you don't own it and you want to take a risk and get into something that's under a lot of pressure, you can have tremendous reward on it. But I don't mess around with how I feel when it comes to the portfolio. These are the rules. They've served us very well over time.

10:47Occasionally, you take a loss. I better take my tongue out of my cheek. You're a terrific risk manager. I don't want to make a joke at your expense. No one was paying attention to you anyway. All right. That's fine. Just want to get back to the headline very quickly. NVIDIA's board has approached RMCO Rene Haas in its search for Jensen Wang's successor. That's according to the FT. Liz Young, I want to bring you in this conversation. Very important to note, NVIDIA is having a terrible week due to these Jensen Wang headlines, but the markets are positive for the week. I just want to get your sense of what NVIDIA means for the markets after Jensen Wang, in the post-Jensen Wang era, I guess we have to call it.

11:20Well, first I want to say I respect Kevin's risk management. I think it's really tough to take a loss. But as investors, you also have to think about the opportunity cost. And what I would say about first, let's start with just the semiconductor industry group, and then we can talk about tech as a whole. But for both of those, there's an overhang that's going to remain for a while here. And even if it's just a few weeks, I don't think as an investor, you're going to miss some great upside if you sit this out for a few weeks. So perhaps some of Kevin's other thought was, if I take this out now at a loss, I've got the opportunity to go invest in something else that can move in the next few weeks, maybe the next couple of months, as we wait for this all to sort itself out.

12:01And I do think that there's more news to come. I mean, we've gotten the big, bright, shiny headlines already, but there's more news to come. And Frank, to your question earlier in the show about them moving fast to find a replacement, I think the first order of business is you need to find somebody who's going to operate the company well, and then they've done a good job of that. But then the replacement, I don't remember who made the point about the visionary, replacing the visionary. I don't think it's even just about replacing the visionary for AI. You've got some damage control to do for AI as a whole and for the semiconductor industry as a whole as this investigation drags on.

12:36So that's most of it. Now, to finally get to your question, Frank, what does it mean for the broader market? Fascinatingly, the broader market has done pretty well despite what's going on this week. So we came into this, as we know, with a lot of overhang from the midterm elections and question marks about what 2027 will look like. That remains the case. And I think we also have to remember that semiconductors and the broader AI trade was under pressure coming into this as well. So a lot of times when you get new news like this, all it does is exacerbate the existing trend. And I think that's what's going on here.

13:12But the broader market and semiconductors as a whole, except for today, has held up pretty well. So clearly, there's still buying appetite from investors out there and a lot of investors who believe in this long-term story. Yeah, I mean, certainly, I think people believe in the long-term story. But chips right now, they seem a little bit volatile. I'm looking right now, AMD down even more than NVIDIA is. So is Broadcom, Micron, also under quite a bit of pressure. And then you look more broadly at the price target cuts of NVIDIA. They're pretty dramatic. I'm looking at Truist from 346 down to 174.

13:42And they go, unfortunately, it's not just about XCO Jensen Wang's affairs or his resignation. And Jimmy is kind of speaking to what you were talking about, but also about the potential that NVIDIA's culture becomes impaired. And the company may have shipped GPUs that became accessible to companies and government entities in China, challenging future revenue performance. That 11 percent that's outside Taiwan and the U.S. HSBC also cut their price target in half from 365 down to 170. So can this stock overcome some of this negative sentiment? Do the fundamentals overcome that? Because, of course, earnings are coming up.

14:13And Jason, you pointed out to the margins and the revenue growth. Well, I believe it can. But I think, you know, to the point that Liz was just making and which I was trying to make as well, which is for the next few weeks, this is going to be a volatile stock. There will be up days. There will be down days. And to the point, Kevin, I think you made, we're not done. No, there's going to be more news. And I'm not just talking about affairs. There's going to be this hanging question of was there treasonous activity that occurred here? And how complicit was the administration in this? These are legitimate questions that are currently not answered.

14:45And as the answers to them become clear, that will create volatility in the stock. I think when you step back and you framed this, Frank, by talking about the other chips being down, we have to remember the context in the market right now is there is concern that we are approaching peak spending, particularly with the blue wave coming out of the elections. As I've already said, I think that that's a positive. Instead of creating a bubble that would have gotten inflated quickly and been a threat to pop, now we're going to have this data center build-out go out over many years at a more sustainable pace.

15:16So I'm not looking at the chip sector or NVIDIA at being in peril from a fundamental point of view, which was your question, from demand. But NVIDIA specifically, it will be volatile for the reasons I mentioned. To me, a long-term investor, I am very comfortable holding this. Now, by the way, I mean, I've been in this since 2023. The return, even at these reduced prices, has been phenomenal over that period. And I don't think we're done. The price target cuts, the analyst downgrades make sense, right? We can't be looking at it the same way as we were looking at it two weeks ago. But to the point I'm trying to make, the stock isn't where it was two weeks ago.

15:55It isn't where it was six weeks ago. It's off 30 % from its high. That is pricing something in. Is it enough? I think so. But again, it will be volatile. All right. Also, forward P of around 13. There was some dispute on the desk yesterday. I don't know if you guys were watching. But our system shows about 13. So I think the question is, we know the money is leaving NVIDIA. Where can it go that's going to see some upside? And what could benefit from this kind of shift? And what I think some people are seeing is a shift in leadership. By the way, Evercore upgrading Arison Networks, calling it the clearest beneficiary of the NVIDIA Fallout.

16:28Jason, that's the name that you are. 100%. So networking is obviously a very important component of kind of the whole entire AI ecosystem and infrastructure play. But what I would say as it relates to NVIDIA, like where customers potentially, where now there's optionality, perceived optionality, and now we're not looking to buy the entire NVIDIA stack, you know, because what happens is when you do buy that, it's NVLink, it's InfiniBand, it's Spectrum X, which are kind of built into the NVIDIA stack. I'm sorry, Arista Networks is an independent player, right? And I think that when there's kind of a move from NVIDIA and their chips, names like Arista Networks are huge beneficiaries of this play.

17:18I think the concern sometimes with Arista for me personally is the revenue with, so Microsoft has 26 % of their revenue. Meta is 16 % of their revenue. So a lot of it is concentrated. But I like this opportunity for Anet and many others in place. I mean, Anet's up 50 % so far year to date. A lot of people seem to agree with you. Shares up almost 16 % year to date. Three names seem to be coming out. Excuse me. Week to date, not year to date. Three names seem to be coming out that people see as being beneficiaries in the chip space of NVIDIA. It's Broadcom, it's AMD and Marvell, both Oppenheimer and Wolf, both saying that these are the stocks that they're positive about.

17:57Kev, I want to come over to you. You own Broadcom. Yeah, we own Broadcom and we also own AMD in our growth portfolio. Broadcom specifically, I think they lowered their price target for economic reasons. Their challenge is who's going to be there to pay for all of this AI demand. They're not questioning the demand, but I think their price target may be a little bit low at just shy of$400. There will be beneficiaries of some of this NVIDIA fallout. But at the same time, the competition is coming from other companies beyond just this small handful. So I think if you are taking out this lens of where do we redeploy capital, that there are other names out there from a diversification standpoint.

18:34We're comfortable with Ivago and AMD, but there are others. All right, Liz, I want to come over to you. We were talking about this maybe before the show. I was talking to some of these guys about it. The fact that the SMH and also the SOXX, harder to say than you think, they're both positive week to date. What does that say about the chip trade in general? Generally seen as a cyclical trade, but with the AI build out, I think a lot of people think that cycle is going to be much more extended. But then at the same time, there's clearly going to be investigations into chip sales, not only NVIDIA, but other companies.

19:01Yesterday, there were some headlines about Supermicro. How are you viewing just the chip space right now? Well, the long-term view of it is that demand is still there. And as we know, many of these companies have demand already spoken for for a couple years out into the future. So I don't think any of that is changing anytime soon. And the knee-jerk reaction, which the conversation that you guys were just having alluded to, is that people looked at, OK, if NVIDIA is falling to the wayside a little bit or is at least under pressure for the next few weeks, Who can swoop in? Can anybody swoop in and take some of that capacity?

19:36And I don't think we know the answer to that yet. Now, I don't talk single stocks, so I'm not going to opine on which ones might and which ones might not. But I think that's what is going on under the surface of the semiconductor trade right now. One stock's loss is another stock's gain. So if we're expecting to see volatility in NVIDIA for the next few weeks, we probably see volatility in some of those other big names for the next few weeks as well. But the broader semiconductor complex, I think, is a question that, yes, has to do with NVIDIA, but it's a bigger question that has to do with what does data center build-out capacity look like in 2027?

20:11What does regulation look like in 2027? And I know CapEx, Jimmy, I think you were talking about this, if CapEx slows down a little bit, maybe that's a good thing for the hyperscalers because it'll bring things back down to earth. But I don't think the market will digest CapEx slowing down very well. So if that is in fact the case, that happens in 2027 where CapEx slows down, I think a lot of this trade stays under pressure. So if you look at the highs that the SMH or the SOX made back in summer, I don't know that we're reclaiming those highs anytime soon. I don't see a catalyst for a huge bounce back up to those highs.

20:49I think this is going to be a trade that relies on fundamentals. And although they're still very strong, I don't see there being a near-term or maybe even a medium-term catalyst that's going to get us back up to those levels. In fact, I see a lot more forces that are keeping it in mind. Hey, Liz. Obviously, it's Jimmy. Just thinking about what you said about the market not digesting a reduction in CapEx well. I feel like that is true if, you know, Amazon had come out and said voluntarily they're pulling back on CapEx. But we've talked how these companies are in a prisoner's dilemma of who's going to be the first one to blink.

21:26If they're all forced to blink by the new state legislatures, new governors that are coming in in 2027, if they're all forced by moratoriums and legislation to slow things down, couldn't that be perceived as a positive? What if, you know, it's a different mechanism of slowing down? A positive in the sense that the companies aren't saying, okay, we can't afford this CapEx anymore. It's not that they're slowing down because revenue isn't proving it. I still think the market would view that negatively because then it's the government coming in and limiting capitalism, right? Limiting that growth, limiting the CapEx that those companies can put towards the buildout that, frankly, the economy is so heavily dependent on right now.

22:10And that CapEx has baked into GDP numbers to a level that we haven't seen in a very long time, if ever. Levels that are higher than even what we saw in the Internet boom. So I think it would still be a negative consequence. It would just be a different way to point the finger. So I agree totally with everything you just said. I would just follow it up by saying I think that is why the market, particularly in the AI industry, has been punkish for the last few weeks. is already anticipating that. Punkish? That's a legitimate word. Yeah, I like that word coming out of your mouth, Jimmy. I don't even know what that means.

22:46I don't know. Is that good or bad? It's bad. It means slow. Just checking. Punkish. Speaking of punkish sentiment, I don't know if that's the right way to use it. I'm just going to throw it out there. Let's take a look at Cisco shares right now. They beat on the top and the bottom line. They also said their AI infrastructure revenue would double. And now look at this. So is this a punkish react? I don't even know. I'm just trying to use the word in context. It sounds the right way. You also own Cisco, so it seems like an appropriate question to ask you. Is this a punkish reaction to earnings that were otherwise strong?

23:15So vocabulary lesson, yes, that is a punkish response right there. With regards to the stock, I mean, it was a good earnings report. I think what people are looking for and the reason that it's down right now is they wanted more of a guide up based on the results that they've produced. I think where the market gets this stock wrong is they think that this is supposed to be a mid-20s to high-20s multiple stock. It's not. It's supposed to be a high-teen stock. This is a company that beats on earnings usually by a few pennies. It doesn't shoot the lights out and then you're up 20%. However, as I said just two days ago, this is a stock that if you hold this for years, and I have held this from 2015, it outperforms the S &P 500 without that much drama.

24:02Now, today is dramatic. Obviously, it's dramatic. But the company's fundamentals are strong. The demand is there. If you don't think that the data center build out is going to come to a crashing halt, then this is a very cheap way to play it. All right. By the way, analysts, cutting price targets left and right on this name. Citi keeps the buy, but they go from 139 down to 120. Goldman maintains neutral, cuts from 125 down to 115. Wells Fargo from 150 to 130. So punkish? I don't know. Moving on. You know, we had a movie star on the show yesterday. Star of Boiler Room 2, Josh Brown. He said Apple.

24:37Apple's the trade of the year. And a lot of bullish sentiment when it comes to Apple. I know a lot of ownership here, too. Kev, I'm going to come over to you. What do you make of Apple today? Positive despite some of the punkish sentiment out there. I'm going to use this all day. I have a lot of high net worth investors I need to speak to today, Frank, so I only have a minute. Yeah. So Josh also called it the trade of the year. And, I mean, honestly, he had a point. It just seems to continue to move higher. Valuation is certainly a question, kind of the opposite of NVIDIA right now. Just what do you make of Apple right now and the fact that it seems to buck the trend?

25:06I think sometimes the best trade is a company that's not making the most noise. When you look at the whole CapEx story, which we've covered here together for years, I mean, they've been reducing CapEx, they're not spending, and they continue to do everything perfectly. The execution is outstanding. I will tell you personally, I had a$350 call expired last Friday. Luckily, we had some pullback in the tech trade. It didn't get called, so we're sitting up here close to 360. Just want to show you that we have some winners, not just our NVIDIA losers and the book folks. But I think the only thing to be concerned about, if you want to worry about valuations, 37 multiple is historically high for Apple, but we're not cutting the position.

25:44We have a full allocation. We believe in this company and have for a very long time. I think the flip phone, probably the next version, if they can make it work with the face instead of the thumbprint, will be a game changer and really, really happy to see this stock continue to perform. So, by the way, despite all these concerns about NVIDIA, there seems to be quite a bit of bullishness, at least under the surface in the market. Again, the markets are a positive week to date, but Bank of America saying U.S. equities saw their largest inflow since June. Wells Fargo saying the S &P 500 ETF and ASEC 100 ETF seeing their biggest inflows since mid-June as well.

26:18Liz, what is that telling us about how investors feel about tech and the broader markets? Well, it certainly looked like the beginning of November was going to be the beginning of a newfound rally in tech. And we'll see if that finds footing. Usually after midterm elections, you see a nice rally in the market. I think this NVIDIA news has put a little bit of a pin in the balloon, so to speak. So I think that there is still a lot of optimism and, frankly, desire for that trade to find its footing and find upside. What I can say about midterm elections is that the 12 months following a midterm election are usually quite positive for the market.

26:57But the third year of a presidential cycle is usually pretty tough on technology. So if I look ahead to 2027, I think it ends up being a year of transition. And now we're in this space at the end of the year where we hope for that year-end rally, but then we start the next year and try to figure out what that's going to look like. And I think the year is going to be challenging because we're transitioning in a number of ways. transitioning to tighter monetary policy, transitioning perhaps in AI leadership, transitioning perhaps into a later part of the economic cycle with hot inflation and the Fed trying to control that.

27:32So I think we have to be on the lookout for some of those indicators and adjust our investments appropriately. Yeah, also, I mean, I think it's kind of a little easier for people to be bullish. You're looking at the latest earnings estimates. Earnings up 34 % year over year for Q3. and NVIDIA coming up next week. It's going to be another test. All right, coming up here on Halftime, committee moves. Kevin Simpson's buying more of a big industrial name. That trade's coming up next. Plus, we'll debate our top calls of the day. Halftime's back in just two minutes.

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30:02And welcome back to Halftime. We do have an IPO here at the New York Stock Exchange today. Swiss Dental Tech Company, Vavardis, is now open for trade, looking at the first trades. trading, I believe, at$14.30 a share right now. Just opened up for trade. I'm assuming these are some executives here. The company has a drill-free cavity treatment that's part of its offerings. So Vivartis opening up for first trade. Shares opened up down just about 21 % ticker. Triple V, or excuse me, quadruple V. You don't see quadruple very often. Vivartis. All right, we've got a committee move. Kevin, you bought more Caterpillar.

30:37Walk us through this trade. Yeah, tough act to follow, huh? We looked at Caterpillar as an adjacent trade to the AI, probably a stock that moved far too fast too far, but has come down dramatically. And I think this is an opportunity for us to add to a name that we've owned for over a decade. It's not just an AI trade. And even if you think about data centers slowing down a little bit, we're still going to need power. We're still going to need this company to generate that power. There's also mining, there's industrial, there's a lot here. We picked up some shares the other day at 581. The stock's moved up nicely.

31:10I think this is a great long-term investment. If you don't own it, it's gotten cheap, and you can certainly enter here. All right. Caterpillar shares over the last week rising about 6.5%, but right now down about 1.5%. We want to get to some calls of the day. We're going to kick things off with Palo Alto, upgraded to overweight at KeyBank. Jason? Yeah, Palo Alto, I mean, obviously, this stock has been a rocket ship most of the year. It's down around 20 % in the last month. I mean, just about a month and a half ago, it was up close to 100%. Their focus has really been in ID security. I think that's going to be extremely accretive for the stock going forward.

31:42They spent$30 billion in acquisition this year, so we're going to need to see some execution there. There's been some consolidation, I think, in the stock. But I continue to like this one. And when I see more AI, I just think more cybersecurity and Palo Alto being one of the leaders there. So, by the way, the price target they put out there is$3.80, about an 18 % upside. Important note, this stock's down about 20 % over the last month or so. Some of that, though, has been some pressure because I think there were some rumors that Nikesh Aurora, the CFL Alto, could possibly go to NVIDIA. It seemed to be one of the reasons it sold off a couple of times.

32:14What do you think of that price target,$380? I like it. I like it. And that was obviously very recent, right, in terms of kind of what Nikesh Aurora might potentially do. But again, in terms of the fundamentals of the stock and the acquisitions that they made, I just think that there's a long runway for this name. All right, moving on. Robinhood maintained as a buy at Deutsche. Kevin, this is one of your names. Yeah, I like this stock. It's a generational fintech company that goes through ebbs and flows. This is a stock where they need to not get more people trading on it, but they need more assets to stay on it.

32:43So they're trying to mature away from just an online trading to a more true fintech wealth planning firm. I think the stock down here is certainly attractive. Remember, we sell calls against this, so we really harvest the volatility. We like names with some vol behind it. At$77, I think you'll sneak it back to triple digits. All right. One more call. We got Apollo being named the top pick at UBS. Jim and Jason, you both own this one. Jim, you up first. I really like Apollo. I mean, let's call it like it is. It has been laboring under two clouds this whole year. One is private credit. The other is the financing that they provide to data centers.

33:19As we've already talked about ad nauseum, I think the data center thing will eventually pass, the concerns about it, that is. And on private credit, I never did think that was as big an issue as it was made out to be. and that's what the evidence is showing us. All right, Jason? Yeah, there's no doubt about it. I think the private credit story is totally overblown. I think that was a big narrative and story early part of the year. You know, stocks down 15. You know, they had been really pulling in a lot of flows into the business. They got to start to deploy the capital. I really like the Athene business as well, which is their insurance wrapper.

33:52But I like this stock here, and I think it could be opportunity. All right, Apollo in the Green today, but year and date, down more than 15%. Now we want to turn to our Contessa Brewer with this NBC News update. Good afternoon, Contessa. Hi there, Frank. The FBI says it seized about$1.2 billion worth of cryptocurrencies stolen from the crypto exchange, Binance. It brings the total amount of money clawed back by the U.S. government and the private sector to more than$2.7 billion of the more than$6 billion stolen from Binance last month. The FBI blames the attack on members of the North Korean military it calls traitor, traitor.

34:26You know, like being a trader to your country. Efforts to freeze and track the remaining assets are ongoing. Law firm Baker McKenzie is shifting away from billing clients by the hour as the default as it continues to adopt AI. The firm's global chair told The Wall Street Journal the company has begun charging clients on a value-based billing model based on what's actually delivered rather than the time spent solving legal problems. Because, of course, AI speeds up the work cycles. And SpaceX is scheduled to launch its 15th Starship test flight later today from its Starbase site in South Texas.

35:02The launch will include Starship's first attempt at catching both parts of the rocket as they return to Earth. This double catch, this is really key towards SpaceX's goal of developing a fully reusable rocket. Cool to watch, Frank. Yeah, I mean, amazing video. It's just amazing what we're doing with space these days. Tessa Brewer, thank you very much. Good to see you. All right, Mike Santoli and his market memo coming up next.

35:44See you, Markets, commentator and overtime co-anchor Mike Santoli with his market memo. Mike, thanks for joining Post 9. What are you looking at? I mean, we're looking at a market where we're seeing a lot of red on the board, but positive for the week. Positive for the week. And, in fact, coming into the week, Frank, I definitely thought we had a lot of the ingredients put into place for the market to actually have a bit of a recovery off of the washout from late last week. It still remains the case, but I think the way it's doing it, it's leaving plenty to prove. You know, the S &P's up a couple of percent week to date.

36:15It's still, though, in this really kind of soggy zone that we haven't been able to escape going back several months. Today's action in semiconductors, and you guys were talking about it, it just shows you that the perfect rotations don't always hold across multiple days. And so everything is kind of selling off after those rallies that we saw. I'm focused on that a little bit, giving it more room because seasonally, positioning-wise, guys, everything does suggest that you should have some kind of upside air pocket coming in here. Maybe it's going to be about getting up to and through the Anthropic IPO.

36:49That's going to be a little bit of a clearing signal. But we've been waiting for clearing signals for like three weeks now, and it hasn't happened. Yeah, I don't know if it's a clearing signal. It's definitely not punkish, but Bank of America is saying tech inflows highest since June. I believe it was Wells saying SPY, NDX, highest inflow since June. So there's something. I mean, that's fine. And all the retail buying of NVIDIA, I got to tell you, I don't like that. I would rather when they get despondent and they briefly become net sellers, that's when you got lows in late March and late July.

37:21Despondent, another vocabulary word. Mike Santoli with his Market Memo. Thank you very much. We're also getting some news on Anthropic. We want to get to our Kate Rooney with those details. Kate. Hey, Frank, this is part of Anthropic's IPO Roadshow. CEO So Dario Amadei is on stage with JP Morgan CEO Jamie Dimon in New York right now. As I mentioned, part of their ongoing roadshow, Amadei making a couple headlines here addressing their compute commitments. He called the$900 billion price tag a large amount, but then argued that they buy relatively little compute, said they buy it for low cost ahead of time compared to competitors.

37:57I'll read you, Frank, what he told Jamie Dimon just now. He said, we actually tend to buy on the low side. And then he said, we buy relatively little for a relatively low cost ahead of time. And then he said, if things do not go as well relative to expectations, we're well covered. If things go really well, then said relative to expectations, we have an opportunity to buy more compute on the spot market, which so far he says has been available. He says it will continue to be available and they continue to do that. So interesting strategic look behind the scenes there. He also said there's a buffer of cash.

38:35He talked about this enormous amount of cash, I should say, on the balance sheet. They do plan to raise more through this IPO. Revenue growing quickly. Talked about gross margins being better than competitors. It was around 15%, the adjusted number. Then talked about efficiency too, Frank, of these AI models. He called it a misnomer that there are these expensive models out of Anthropic that are really good and then cheaper models from others. He's trying to make the case that Anthropic is able to do both, Frank. All right, Kate Rooney with the very latest on Anthropic. Kate, thank you very much.

39:04Coming up, the earnings set up outside of NVIDIA with most of the big retailers coming up on deck. We'll debate that trade coming up next.

39:27And welcome back to Halftime. Let's get the setup on some retail names reporting next week, starting off with Home Depot on Tuesday. Kevin, you own this one. Yeah, I don't think we can have any enthusiasm about Home Depot. For some reason, this stock has benefited over the past month by magically appreciating some 18 % to 20%. What we really need is a reduction in interest rates or a new super cycle spend. And we had one back during COVID. In the next year or two, I think we'll see it again. New floors, new wall coverings, new appliances. I'm not expecting much out of this earnings report. But we own the stock and we're in it for a long term.

39:59Yeah, as you mentioned, shares up just about 19 % over the last month. Coming up next, Walmart reporting its earnings on Thursday. Maintain is overweight at Wells Fargo with a price target raised from 120 up to 135. It's another Kevin name. Yeah, I think the stock's moved a lot also, as has Home Depot. I don't know that you want to chase it here from a multiples perspective. This as well as some of the others in the space carry high multiples. But really, it's a company that benefits from the high-end consumer, the low-end consumer. We're heading into the holiday shopping season. They're increasing their online sales.

40:31The grocery is incredible. I know Target's having a comeback. But what Walmart's done over the past three years is really separate and distinguish themselves as the go-to realtor. All right. Barnstein out with the top consumer picks. They recommend a more positive position in U.S. consumer discretionary. Among their names are TJX and AutoZone. Jason, you own AutoZone. Yeah, AutoZone is down a little bit this year. It's down about 3%. I think part of it is storied is some of the capex spending on the mega stores are starting to grow in Latin America. But what I'm excited about is what they're doing in commercial sales.

41:03They're really starting to expand there away from retail. So I think there's an opportunity going forward here. Yeah, big lift over the last month as well. Shares up over 13%. Also, Costco maintained as a buy at Bank of America with a target raise to$1 ,257 from$10.95. Jason, you own this one. Yeah, this one's been a nice one. It's kind of an earnings compounder for us, up 28%. They just authorized a$4 billion buyback, 90 % renewal rate, and again, continues to be relevant for the value-conscious consumer, which obviously, with inflation being what it is today, I think is really important. So, Liz, we're kind of seeing like a big lift when it comes to some of these consumer discretionary names.

41:41I think sentiment was a bit punkish before, and all of a sudden it seems to turn around. The blue wave victory, that seemed to be kind of an inflection point for some of these names as well. I remember the day after the election, a lot of that consumer discretionary space was higher. Yeah, and I don't want to be a wet blanket on this trade, but I think a lot of the optimism was the idea that perhaps a blue wave would bring the war risk down or that the war would be shortened or would end sooner and that oil prices would come back down. Given where consumer sentiment is right now, which is in the crapper, to be perfectly frank about it, I am not bullish on a lot of consumer names.

42:20I think that until inflation really gets solved and until people feel like inflation expectations are better under control, I don't see a ton more upside for a lot of these names, particularly in the discretionary space. Now, some of the names you guys just talked about are those cost-conscious stores, where people go when they're being value-conscious, they're trying to save money. I think those can probably still do well, and stores in that space can do well. But the consumer, through most of this cycle, has continued to begrudgingly spend. I don't think they're going to stop spending anytime soon.

42:55But in order to feel really optimistic about retail and discretionary, you want to feel like the consumer is going to increase spending. And I just don't think that's going to happen until oil prices really come down. Yeah, to your point, I believe highest PPI in four years. Also, Goolsby, I'll say the Fed has a lot more work to do when it comes to inflation. So inflation is certainly on the mind of a lot of leaders when it comes to the economy and also in the market. All right, coming up next, is it time to rethink the 60-40 portfolio? The new note today that has us asking that question. We're going to debate it coming up next.

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45:07Welcome back to Halftime Report. UBS out with a note today arguing the revival of bond yields improves the case for a 60-40 portfolio, but it's still vulnerable to elevated inflation and rising rates. Liz, I want to come over to you. How are you thinking about this? I certainly think there's been a revival in bond yields and there is now an alternative to some equity exposure. I've used the Treasury, the 10-year Treasury as my final trade a few times on the show. So I do think that there is a decent chance that a 60-40 portfolio does better. But I want to caution investors on a few things. Number one, in the 60 of your portfolio, make sure that it is better diversified than it has been likely up until this point.

45:49And when I think about what that means right now, I would be doing things like the equal weight S &P. And then if you look at the 40 in your portfolio, I would also caution investors to not have too much exposure to things like investment grade credit that perhaps is growing and becoming more of a supply on the market and high yield credit that's just going to have a high correlation with equities. I still like treasuries. And make sure that you throw into the mix something like commodities or even gold, because if we are heading into a stagflationary environment, 60-40 is really going to struggle.

46:25So those are some of the cautions I would give to people. And the things that you can do to help it to struggle less are use things like commodities. Yeah, it's good to struggle less. Absolutely. All right. Final trades on halftime. They are coming up right after this break. Stay with us.

46:41We are back with Final Trades. Liz Young, you're up first. Liz Thomas, excuse me. Thank you, Frank. The 10-year Treasury, I previewed it a little bit before. The last time I used it as a final trade, I think it was trading at 524, but I will certainly take it at 513 as well. Kevin. I like Caterpillar. AI needs more than ships. They need power, and it's down today. Jason Snyte. Amazon. AWS, 39 % growth. Jim Labenthal, punkish. Nobody knows what it means, but it's provocative. It gets the people going. I'll tell you what's not punkish is eBay. I mean, look at this stock over the last year. Look at it over the last month.

47:16This is a stock that wants to go higher. It's got great fundamentals. All right. That's going to do it for halftime. Take a look at the markets very quickly. You see right across the board, the Dow just fractionally lower, the Nasdaq down about one and a quarter percent. S &P pulling back three quarters and one percent. The exchange starts right now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.

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