NVIDIA Leadership Shakeup, AI Trade Fallout and OpenAI Valuation 11/12/26

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1:18Frank Holland: Thank you, Carl and Sarah. I am Frank Holland. Welcome to the Halftime Report. I'm in for Scott Wapner alongside Josh Brown, Stephanie Link, Malcolm Etheridge and Bill Baruch. We begin this hour with breaking news in the bombshell and announcement out of NVIDIA that Jensen Wong, he's out as CEO. We want to get right to our Seema Modi with the latest on the fallout of this hour. Seema, over to you.

1:37Colette Kress: Hey, Frank, we've been working the phones here. And here's what we know at this point. After a report of a second alleged affair involving former CEO Jensen Wong and a direct report, I'm told by a source familiar that sentiment internally turned. And NVIDIA's board called a meeting on Wednesday afternoon that ran into the night. But consensus on Jensen Wong's resignation was made last night. The team at NVIDIA then moved quickly to put together their communication strategy. That message was then delivered this morning. Jensen Wong was out. The board also appointed its first chairman, Harvey Jones.

2:10Colette Kress: CFO Colette Kress was named interim CEO. We're told Kress will convene with high-level executives today to discuss, yes, leadership, but also top agenda items, including earnings, which are less than one week away. In a letter to employees, Kress saying she recognizes how this is an extraordinarily difficult period, and I want you to know how grateful we are for your resilience, professionalism, and continued dedication. And there will be a company-wide meeting, she says, on November 18th. That's next Wednesday to discuss the future of NVIDIA. Kress is well-known on Wall Street, Frank. seen as pragmatic, a decision maker.

2:44Colette Kress: I spoke to two hedge funds who are existing shareholders who spoke very highly of her. They say she's often the one in the room who can translate former CEO Jensen Wong's larger-than-life vision into numbers. Back to you.

2:58Frank Holland: Steve Imoti with the very latest on NVIDIA. NVIDIA shares pulling back just about 5%. And now we get to our trade alerts. Stephanie Link, I want to come over to you. You sold your NVIDIA shares. Just to give us some context, you bought back on July 8th at about$2.04. You sold yesterday. Kind of give us the thesis and why you decided to get out.

3:14Colette Kress: Yeah, it was a really hard decision, though, Frank, because the fundamentals are very, very strong at this company. And I expect the quarter next week to be very good with$300 billion in free cash flow next year. They're going to grow revenues in 28 of 70 percent and gross margins in the mid-70s. But this stock is not going to trade on fundamentals, I don't think, for a while, because you have the overhang of the investigations, of leadership changes, of potential departures. And so I think it's really, for me, as an investor, I'm thinking the opportunity cost here, because I do think it's going to be kind of in a trading range for the next six to 12 months, in my opinion.

3:53Colette Kress: I will not have a problem buying the stock back if we get a really amazing leader and we can get past this. But I think we have time. And as a result, I actually added to Micron, because that stock is down just as much from It's high, 35%. And the fundamentals are very attractive. And it's trading at five times earnings. And I think they're going to announce a buyback when they report earnings in early December. So that has a clean fundamentals, clean story, cheap stock, whereas NVIDIA is just not clean at this point.

4:23Frank Holland: All right. Not calling it clean. By the way, a lot of people talk about the valuation. Trading at a very low valuation right now. I believe about 14 times forward earnings. Malcolm, I want to come over to you. Ten times. Is it ten times? Okay. I'm looking at our system. We have it at about 14. Nine times.

4:35Colette Kress: they're going to do$20 a share in fiscal 28. So, yeah.

4:39Frank Holland: It's unbelievable. Who cares?

4:41Colette Kress: Yeah.

4:42Frank Holland: Who cares? All right. Well, we know who doesn't care. It's you, Malcolm. You also sold out of NVIDIA as well. You care if you're still in it. You don't care if you're out of it. Well, I guess the question is, what are you still waiting for? Because I sold the shares in after hours because essentially the only question I was still asking initially was sell the stock and then buy what? Because there's not really a lot that you can use to replace a company like this that's seated at the center of the entire AI trade. But then the whole reason that I wanted to own the stock in the first place has left the building.

5:14Frank Holland: So I understand everything. You're saying Jensen Wall. Yes. Everything related to NVIDIA left with the CEO. So I understand everything that Stephanie's saying in terms of the fundamentals and all of the reasons that the stock is still attractive eventually. I don't understand, though, why there's still so many buyers in this name. So, yes, if you're already in the stock, maybe you're deciding you want to hold on and see what happens over the next 12 months. I know, Josh, personally, you have a low basis in the stock. I started buying it in the 90s after Tariff Liberation Day. So it matters where you got into the stock.

5:49Frank Holland: But the fact that it's holding up the way that it is means that there's a substantial amount of buying pressure in this name, too. That part I don't really understand, because it's going to You take a very long time before it turns the ship, if ever. And even when it does, without having the champion in Jensen Wong that it has had for the last four years, I don't know how you place the premium on this stock that you have for the last four years. There's no premium in the stock. So let me disagree with you right there. The stock has been selling at a below market multiple for 24 months. There is no premium on the stock.

6:22Frank Holland: There hasn't been since even before you bought it. However, the reason that the stock has been trading the way that it has is because there's been the promise that NVIDIA is at the center of literally everything. If CoreWeave wins, so does NVIDIA. If OpenAI wins, so does NVIDIA. You think that just changed? I do. I do. The reason I say that is because it's going to be very hard for this company to move the way it has moved in the past with the overhang of we don't know what all has happened from a national security perspective. We don't know what meetings they'll now be shut out of. We don't know what relationships have now been destroyed.

6:57Frank Holland: So there's just so many unknowns here that I think it's impossible to expect NVIDIA to be able to move the way that they have and be able to command any sort of a centerpiece relationship that they have to the AI tree. All right. So you're saying if Jensen Wong's out, you're out. By the way, William Blair coming out saying that NVIDIA is going to lose its creative, relationship-driven dealmaking. It sounds like you share that sentiment as well. Bill, I want to come to you. You and Josh still in on the name. So go ahead. Why are you staying? Well, we did trim it$217 three weeks ago, so that does help a little bit here.

7:26Frank Holland: It's still a top holding of ours. Now, I think you also want to look at the path. How did we get here at$165 right now? We can't get into how we got here. Well, but if you look at the selling. I don't think they want us to do that. But the selling that took place that broke$200 late in the month of October was on the heels of these big hyperscale earnings reports. And the sentiment around that was not only about the election that came the following week, but as well that the hyperscalers are going to maybe pull back on the CapEx. A lot of banks still believe that the CapEx is still going to be there.

7:57Frank Holland: So I think there was already a tremendous amount of selling that got us here. And this is the kick while you're down. But yeah, 10, 11 forward earnings, the backlog and current infrastructure, it's highly probable that you're going to get an above market rate of return in the future off this name. But when you start to look one to two years out, yes, There are going to be questions about how and will they move forward. Where is that competition going to come from? Maybe a Broadcom, maybe an Alphabet with the TPU. But again, I think that we're going to see, we've seen this exacerbate a little bit to the downside because of the news that came prior to this, the hyperscaler earnings, the sentiment around semiconductors, and then the election, and then now we're here.

8:34Frank Holland: So I think there's a lot of selling that has happened even before this, and it's been flushed out, and everybody's already sold. Who is left to sell? I would say that we need to see communication. We've begun to see that today. They have an interim CEO. They have a board share. We don't know anything. But I do think maybe, and I heard Kramer call for it on the network this morning, maybe we get a pre-report. I think the more communication that we get, and maybe there is more bad news, and we don't know all the information around Jensen right now, but I think the more communication we get will help this stock hold ground, and I think it can get back to the 190 range.

9:07Frank Holland: So, Josh, is that what you think we need? Because you're also holding on to this name. We need more communication. And by the way, just to get sentiment on the street, Oppenheimer pulled their price target. Mellius Benritzis, he cut his target down to 185. Title of the note, words we never thought we'd write. To be clear, he still thinks NVIDIA is going to be doing well. But I think to your thesis, Malcolm, and also, Link, yours is that the sentiment is so bad on this name. So, Josh, talk us through this. If you're somebody like yourself who's holding on to NVIDIA, why are you doing it? And what's the outlook for this stock going forward?

9:35Frank Holland: OK, well, here's the argument against selling it right now. NVIDIA is down 23 % in 10 days. This is the worst 10-day drop we've seen for the stock in four years. You have to go back to the tech crash of 2022 to find a comparable period. But basically, we're in the bottom 2 % of all 10-day rolling periods since the company came public. So the argument against selling it right this second today is just simply there's been so much selling already. even if you want out, and I'm not suggesting that's definitely the worst idea, maybe like not right this second. I do agree with what Malcolm said. We don't know anything yet.

10:15Frank Holland: If there is some sort of like a treason angle to this, it's going to get so much worse. And I acknowledge that. But I also have to point out, we've seen a trillion dollars come out of the market cap. Let's not act like everybody's complacent about it. So that's one. Two, this is sadness. This is one of the best stocks of all time. And it's just crazy. Like, testosterone is undefeated. So all these Silicon Valley guys are taking TRT, which is testosterone replacement therapy. They can't stop taking it. They tweet about it. They love it. The problem is, look what this guy has just done. He's wrecked his entire legacy.

10:58Frank Holland: He's maybe wrecked the company. That remains to be seen. And it's terrifying that holding any stock, somebody with this much power in a leadership role, could do this almost overnight. And it feels unprecedented right now, but there actually is precedent. The precedent is on the bear side. You go back to 20—and Stephanie and I were on the show talking about both of these incidents. Go back to 2010. Mark Hurd at Hewlett-Packard. Remember that? You're laughing. But at the time, none of us were laughing. Hewlett-Packard in 2010 was a very important company. To this day, it's a shadow of its former self.

11:35Frank Holland: He had an inappropriate relationship with somebody that worked at a company that he was in a position to steer contracts to. He ended up getting forced out. Larry Ellison picked him up eventually at Oracle. But it doesn't matter. Hewlett-Packard ultimately fell 70%. Why? Because the person they put in the job after, Leo Apotheker, destroyed the company. He bought another company for, I don't know,$11 billion. They ended up writing the entire thing down. And it was literally so disastrous, the stock never recovered. A couple of years later, we saw a similar situation happen with Intel. Brian Kranich in 2018 had an inappropriate relationship with someone who worked there.

12:22Frank Holland: They pushed him out. The new guy came in, came up with a whole new strategy. That distraction allowed TSMC to blow by them in the fab business. Intel has never recovered. The stock fell 90 % as a result. And I know the stock's had a resurgence since, but think about how long that's taken. And Intel never was Intel again. So that is the risk for me. As somebody who's willing to go over the waterfall with these people, if they make the wrong call on the next leader, you could literally put somebody in who does something like what happened at HP or like what happened at Intel, completely get the strategy wrong, and we might never see NVIDIA trade a 200 ever again as long as we live.

13:04Frank Holland: I don't know that that's definitely how this is going to go. So I have to stick around and find out. My average cost is so low that it almost doesn't pay for me to sell personally, and I'm not going to, despite the fact that all these alarm bells that Malcolm and Stephanie point out, They're very real, and I have to live with that. Yeah, I think you're echoing some of the sentences we're hitting from Wall Street. Evercore saying, again, price target$186, they cite, the lack of a CEO succession plan increases risk and also expects further PE compression in the meantime. Malcolm, coming over to you.

13:35Frank Holland: As we see Colette Kress take the interim CEO, Raleigh also, as you pointed out, appointed a board chair. Does that ease any concerns about governance of this company or even the path forward, the fact that an insider is the interim CEO and they are bringing somebody to oversee that person's decisions? No, because all the reporting that's come out to this point about Khaled Kress and her relationship with Jensen Long has been that even when she has tried her best to exercise control as the CFO, he's found a way to go around to override her decision making. It has been a company of one this entire time.

14:07Frank Holland: A person leading the world's largest company that has 60 direct reports and actually believes that they can do a very good job of managing and steering the ship, that just doesn't exist. And so I look at this still and I say I appreciate Josh and the trip down memory lane, the one caveat to everything he's saying. And those are the ones to the downside. I've heard the analogs, too, where people have pointed out, you know, Microsoft, Apple, other companies where now we rally a thousand percent the other direction when we get on the other side of it. But what all of those stories have been missing is national security implications.

14:40Frank Holland: Like a threat to our security apparatus cannot be understated. And so I think that the overhang on this stock, regardless of how great Collette Kress is in her role, is not going to be enough to right the ship. So people stepping in this name right now, the buying pressure again that I mentioned, I just want to remind people that you're supposed to step in and buy broken stocks at moments of weakness, not broken companies. And I see this right now as a broken company. All right. To your point, we're looking at a headline on the screen right now. Reports that there's an investigation to see if Alice Wong may have also smuggled super micro products into China.

15:13Frank Holland: We'll have to wait and see how that develops itself. A lot of head shaking over there. Link, I want to come over to you. Are there other beneficiaries of all this drama and controversy? If you're looking at the charts today, you're going to see names like AMD and Broadcom moving up higher.

15:25Colette Kress: Well, yeah, I mean, Broadcom certainly comes to mind, and I do still own that one. I think that I like the fact that they're very diversified, but their AI business is absolutely humming. I mean, they're going to do north of$100 billion in just their AI revenue alone. And they, too, could have$20 a share in earnings power in the out years. It's not as cheap as NVIDIA, but it's a lot cleaner. We go back to that whole thing, too. And I think you can also make the case for AMD, certainly. And that's why those two stocks are doing really well.

15:53Frank Holland: I think that's exactly the most important takeaway for the non-NVIDIA shareholder, is that people still want to be in the AI trade. Right. And you're seeing that being expressed in Broadcom and AMD, being able to sort of fight through this moment, having market cap increasing. I also think large cap managers, they don't want to abandon large cap tech. What's big enough to absorb all of that capital coming out of NVIDIA? Really only Apple, Amazon, Alphabet. And you're seeing these stocks catch a bid, not because this is great news, right, but because the money literally has to go somewhere. The people selling these stocks, they're not looking to buy a copper mine.

16:35Frank Holland: The Nasdaq is trading at 18, 19 times earnings, which is one and a half standard deviations below its long run average. I mean, this is there. They have to go into somewhere here. If you don't want to just abandon tech, of course, there's going to be Broadcom.

16:47Colette Kress: Just because there's NVIDIA problems doesn't mean the cycle is over and that the demand is ending. In fact, I mean, Broadcom grew revenues last quarter 86 percent. They went from 50 billion to 100 billion in AI revenue. You know, these are incredible numbers. And so you really still want to have exposure. So I can see why the flows are moving because the cycle is not over.

17:10Frank Holland: Could I remind you, though, Stephanie, when we got the rumblings coming out of Silicon Valley about the thing that we have created is going to destroy humanity as we know it. And we saw the AI trades start to unravel. A lot of these stocks start to sell off. There were only two really loud voices championing AI and saying, we're not slowing down, Jack. And that was Donald Trump and Jensen Wang. So now that those voices, presumably both of those voices, will be quieted on that front, it is possible that we could hear that can't start making noise again and see the opposite direction. Well, if that's true, don't the hyper.

17:44Colette Kress: I think Hock Tan is an amazing CEO, and he is also an amazing voice for the industry. And maybe he steps up in place of Jensen Wang. I wouldn't be surprised to see that.

17:54Frank Holland: If there is a slowdown, then wouldn't it benefit the hyperscalers? I mean, look, the Nasdaq is positive today, and it talked about where it is in a multiple standpoint. point, the spenders. And we saw that coming out of the election on Wednesday when the market rallied. Simis were left in the dust. But you saw some of the biggest gainers that day were Apple and Amazon and the spenders and Microsoft because Microsoft did a new record high then. So if that's the case and we're going to see it slow down, I mean, I love the Mag 7 minus NVIDIA.

18:20Colette Kress: Bill, that's exactly why I added to Meta last week. If you have a pause in the data center and it's not going to end, Blue Wave is not ending data center. But if we have a pause and an extended cycle, maybe you have a pause in all of this dollar raising frenzy. It's a frenzy. And Meta has gotten caught up in it as well. And yet the stock is trading at about 18 times and they're growing revenues about 26 percent. They are seeing monetization. So that's exactly one of the reasons why I added to the position.

18:46Frank Holland: Yeah, by the way, a headline just crossing. Jensen Wong agrees to testify before Congress, before Thanksgiving. So that'll be obviously very key testimony. Not only do we have NVIDIA earnings coming up next week, we have that testimony coming up. So two potential market-moving events, two potential, obviously, big events for NVIDIA as well. So something to watch. We're looking at Jensen Wong again. Agreeing to testify before Congress, before Thanksgiving. Also important to note, he's testifying before this Congress. The new Congress may also want to call him before lawmakers or a committee there.

19:14Frank Holland: So we could see him on Capitol Hill within the next couple months several times. That's something we have to look at. Goldman noted, I want to bounce off everybody. Anybody, feel free to jump in. Goldman saying, we believe NVIDIA's operations in certain jurisdictions to face more scrutiny going forward. For context, in fiscal year 26, the 10K, NVIDIA disclosed that its total sales exposure to mainland China, Hong Kong, and all other regions outside of the U.S. and Taiwan, that totaled about 11 percent. So double digits of revenue coming from outside the U.S. and Taiwan. Is that a risk not only for NVIDIA, but as we're looking at Supermicro and concerns there, is that a risk for other names, Josh?

19:48Frank Holland: I think it's a bigger risk for NVIDIA because NVIDIA is the biggest player and will be under the most scrutiny and have the world biggest microscope directed at it. I don't know that there's any ability of any of us to say, oh, yeah, no, everyone else is going to be fine. And actually, what I would, not that they care what I think, but if Colette gave me a call and said, what should I focus on besides the numbers? I would say, this is like really the only thing. Like, what are the worst case scenarios for some of these sensitive sort of defense-oriented projects around the world? Like, what do we really need to worry about most?

20:30Frank Holland: Like, let's assume the hyperscaler business will continue apace. Let's assume, right? But like, this is the part, what is the multiple on the earnings that we're expecting from some of these jurisdictions that we might have to zero out? And, you know, what does that do to our models on the sell side? And what does that mean for our price targets, et cetera? The good news is Wall Street didn't wait. Everybody slashed their price target even before they're cutting estimates. They're already cutting what they think the multiple should be. So maybe it's not going to be a worst-case scenario. And listen, I'm grasping at straws.

21:07Frank Holland: There's not a lot of positive things to say. I think it's telling that they jumped the gun to downgrade this country so quickly. They have to. Markets react so quick these days. What are they going to do? Say we still think it's worth$500? It's definitely not. But NVIDIA is the last company that gets downgraded following earnings, assuming there's an earnings miss, right? NVIDIA is the company that gets a pass quarter after quarter after quarter. Well, they never miss. I'm just saying, above anybody else, if there's a company that gets that pass, it's NVIDIA. So for you to see this many analysts lining up to get their downgraded.

21:40Frank Holland: I think they have to. But you're saying, as if it's so bold, I mean, the stock's lost about$2 trillion in the last month or so already. So it already had considerable downside momentum. Yes, but this is a company that you never want to be the one who says anything negative about it, especially in terms of your price target. So for us to get preemptively that many price targets, a cascading of price target downgrades, I think that's telling about how definitive people feel about it. Can we do a chart of Apple? You just called for it. I think we can. Speaking of Apple, by the way, we want to mention while Josh is looking at this chart.

22:14Frank Holland: President Trump out with a post on True Social this morning saying, now that NVIDIA CEO Jensen Wong, who has done a fantastic job, has resigned. There's only one man to take his place. Tim Cook of Apple. Yeah, that's what he wants to do. A legend replaces a legend. And, of course, he signed it, President Donald Trump. While you're looking at the Apple chart, Josh, I'll let you opine on this as well. Okay. I think this is the trade. I think Apple, we can all acknowledge, is the trade of the year. Like, this is the thing that kept going up when they knocked out SanDisk and Micron and Western Digital, now NVIDIA, and all the volatility that we've seen in the AI darlings.

22:47Frank Holland: This is the anti-AI large cap tech trade. And it's literally the trade of the year. Maybe it doesn't deserve the multiple it's now trading at, but we can all agree this is what's absorbing all of the market cap. People that want to stay invested in tech, they don't want all the daily ups and downs that come with the hyperscaler trade. This is literally the Pepsi to the AI trades Coke. No pun intended. but like this is what people are opting they say you know what maybe growth isn't fast enough to justify 30 something times earnings but at least i feel like the phones will get sold and the company will execute and i'm not dealing with chinese spies can oracle raise more money what's core we've going to say next time it reports like people are just gravitating toward this stock and i i don't know what stops it to be honest with you we already have the earnings and the guidance and both were great.

23:42Frank Holland: And I just feel like this could continue to roll higher. An ambitious new CEO. He's coming up. So Bill, Malcolm, you guys also on Apple agree with this trade of the year when we're talking about mega cap? I mean, undeniably, the most market cap coming into one of the mag sevens this year. It's been a safety trade since basically July, right? So when we started to see the blow up in semis, like you said, it was the default trade. You take the cash out of semis and then you have the question of and then go buy what? And the answer was, well, I know Apple won't disappoint me at least. And so it's safe to put my money there instead of putting it in a 10-year treasury.

24:14Frank Holland: It's up twice as much as the next best MAG7 name. And it's the mirror image of Tesla, which I think is down by as much as Apple is up on the year. And it's just been the thing that people have said, I could sleep at night. Doesn't mean you'll make money, but you're probably not waking up to a headline that makes you want to jump out a window. And Apple is a top holding of ours. And just to play devil's advocate with it, I mean, it is trading nearly 20 percent above its 200-day moving average. The multiple is historically high. And you're starting to see some of those stories out about the lukewarm duo and demand and the new Mac isn't really meeting some of the expectations.

24:51Frank Holland: If it pulls back from that, usually it does pull back after those stories start hitting the wire as much as they do. I think it's going to be a great buying opportunity. So, Link, I want to come over to you. Everybody's talking about the multiple. By the way, Bernstein came out with a note saying, is Apple's multiple outrageous? So a lot of talk about it. trading at 39 times forward earnings, according to our system. Link, why not put some money into Apple? You mentioned you saw it on NVIDIA. Why not put some money there?

25:13Colette Kress: It's just been valuation and services growth slowing for the second quarter in a row. So to me, that's your higher margin product. It's not a disaster by any means, but I just I've missed it. And it's expensive. And if the stock were to pull back, maybe I'd take a look. But I find that there's other places in technology that have much more upside.

25:31Frank Holland: I love the Micron buy, that money going towards that. You have the CHIPS Act. There's a lockup on buybacks that I think ends December 9th. I expect to see buybacks being a driver in a name like Micron. And though it's down, it's kind of lost today in half. It's only down 3.5%. It's above the 200-day moving average. I think it's kind of shaken off some of the worst of the selling that we've seen here over the past week. I really like that buyback. Is there a universe where, I'm making this up, but is there a universe where we wake up one day and there's a story about one of these memory stocks is surreptitiously sending product into China through an intermediary in Singapore, like, would it be so far-fetched?

26:12Frank Holland: Like, is that an overhang on these stocks? I don't think, I mean, if that's a story, it's not Micron. I mean, it's not Micron. They are too close in the infrastructure build out with the CHIPS Act and what's going on there. I just wonder if that's something that people are now worried about, as Frank adds. Like, I don't know. Maybe the money flows into the ETF altogether, so you can try and hedge that bet. Not necessarily get caught off guard like this, but you own 50 of the players instead of just one. Before we go to break, I just want to go around the circle one time. Josh, I don't think you said clearly.

26:39Frank Holland: Tim Cook, are you in favor or do you see it as a positive? Tim Cook potentially taking over NVIDIA. I don't think Tim Cook has come out and said he wants to do it. Put on the leather, Tim. Put it on. That might be trouble. Does he want to do it? What if he feels compelled? Like he feels like. I think he's already been compelled by the president. The question is, does he want to do it? What if he feels like I almost owe it to the world? It doesn't strike me as something that Tim Cook would say to himself, but what do I know? Why would he want to? Why would he want? For exactly the reason I just said.

27:14Frank Holland: But he went out on such a high. So the downside is he tries it for a year. Nobody would blame him if it doesn't work. But imagine the credit he gets if there's confidence in NVIDIA and the whole AI thing is back on track. That would be the reason to do it. Does he personally want this in his life? Because this is maybe one of the heaviest lifts in corporate America. Remember Brady's last year in Tampa? It was still a solid season. Come on, he won the Super Bowl the year before. He had a great season. He could have gone out on a high note, like Tim Apple has done, and leave it alone. All right, so Collette Kress gathering the executive team today.

27:52Frank Holland: We've got to go. We're going to have to leave this conversation on the table. A lot of rumors out there about who might take over. Some other stocks are actually moving lower. because of those rumors, but this is halftime. We don't do rumors. Coming up, taking stock of the AI trade now that Jensen Wong is out at NVIDIA, plus the very latest on the AI IPO horse race, new reporting on OpenAI's valuation. We're going to get to it all coming up next. More halftime coming back in two minutes.

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30:05Frank Holland: Welcome back to Halftime. New reporting out this morning on OpenAI's valuation. Our Kate Rooney is here with all the details. Kate.

30:12Colette Kress: Hey, Frank. So OpenAI, from what we're hearing, is plowing ahead in its latest private fundraise that we have reported on. Sources telling David Faber this morning that OpenAI has raised$15 billion in its latest round. That's up from about$11 billion that others had previously reported. And Frank, as we have reported in the past couple of weeks here, it is the same$1.25 trillion valuation, which is pre-money, meaning it's before this cash injection. It is a significant step up as well from its last private valuation. I am told by one source the round has not officially closed. It's set to wrap up in the next couple of weeks here.

30:48Colette Kress: I'm also told by multiple people that this has been more of an opportunistic funding round. It's seen as a bridge to an IPO for this company, which is expected in 2027. It does come as OpenAI's biggest rival, Anthropic, is set to list on the Nasdaq. Next week, we have also gotten some numbers just this week about what OpenAI's growth rate looks like behind the scenes. Two sources told us OpenAI brought in about$10 billion in the third quarter in terms of revenue that's up nearly 50 % from the previous quarter. The company is not profitable, though. According to the Wall Street Journal, operating losses were around$10.9 billion.

31:22Colette Kress: OpenAI's adjusted operating margin was negative, negative 109%, but that did improve from about 150 % negative margins. Anthropic is also working, I should say, on the other side. If we're comparing it to Anthropik, they've got positive margins, adjusted margins at least, about 15%. But of course, Frank, these adjustments are a big question when you compare these companies. Anthropik's figures include things like stock-based compensation and then charitable contributions too. So once these guys are both public, we'll be able to do more of an apples to apples. But that's the latest, Frank.

31:54Frank Holland: All right. First one coming up in just a few days, Kate Rooney with the very latest on OpenAI's fundraising. Kate, thank you very much. I'm going to come over to the group. Is this a read on sentiment for the public markets in any way you guys, the fact that opening, I was able to raise that much money, but it was at the same valuation. I mean, I think the market rallied yesterday with this news was sort of kind of coming in the background. I think that's a very positive sentiment for the market. I mean, we market with gangbusters, everything, but even Nvidia bounced yesterday too. I am on the side of the public investor.

32:26Frank Holland: So I'm always going to think it's good news when these valuations are chastened and these companies come public more reasonably than the top of the range. I always like it because I feel like when these stocks come public, yes, you want the employees to do well, the VCs, they'll be fine. Don't shed any tears for early investors. But you want there to be upside from the day of listing.

32:51Colette Kress: So a round that's not 20 % higher

32:55Frank Holland: automatically, I think is good.

32:57Colette Kress: I think that's why Anthropics news yesterday was so positive, because it didn't come. It's not going to come out at$2 trillion. It's going to be at the low end,$1.1 or$1.3. That's great. That gives you upside afterwards.

33:10Frank Holland: What do you think about the idea that I believe retail investors are going to get somewhere around 20 % of this? Do you think that retail is hungry for the Anthropics IPO? I mean, it seems like a silly question if I asked a month ago. Yes, I think yes. Still excited? I said on the air two weeks ago, if they canceled the IPO and needed to raise$100 billion, which they don't need to, right this second, they could do it in the private market. I also think what helped to lift the market was the$1.5 billion oversubscribed. I think that's probably, I mean, sorry,$1.5 trillion is the new expectation.

33:44Frank Holland: I think that had a lot to do with it because not only is there a lot of retail interest just in the direct placement and the fact that they got it done so quickly. That shows you there's a ton of instant placement. I could sell this. If I were back in my cold calling days, give me a stack of Dun & Bradstreet's. I want to talk to every family office in America. I really think after 500 phone calls, I could place$100 billion worth of Anthropic. I really don't think it would be problematic. Josh Brown in Boiler Room 2. I'll take these people to the mat. I want to go to some of the second derivative plates where we have a little bit of time.

34:19Frank Holland: Looking at some of the power names. So earlier those names were lower. Now they're moving up higher. I'm talking names that are some ownership here. Vertiv, Quanta, G, Vernova, also Vistra. There's a lot of ownership here on the desk. Link, I want to come over to you. You own a few of these. What do you make of these names moving higher despite all this NVIDIA controversy?

34:36Colette Kress: Because they're down 25%, 30 % from their highs. And the cycle is not over because we are going to continue to spend. whatever we spend on data centers, whether it's$3 or$4 trillion, we were originally supposed to spend$7 trillion, but the pause kind of brings that down. But we are still going to have to upgrade the grid. And we're going to spend a trillion dollars between now and 2030 on upgrading the grid. 75 % of the grid is over 25 years old. The grids were built in the 50s and 60s, and they only have a shelf life of 50 to 80 years. And we're up against that. So you need to do the upgrades.

35:09Colette Kress: And then in addition, we don't have enough power. And that's why we hear about nuclear, coal, renewables, natural gas. I actually think natural gas is going to be the long-term winner. We just don't have enough pipelines at this moment in time. But we're going to spend a trillion dollars on power between now and the end of the year. So that's why these stocks are down in sympathy with the theme, but they should be bought.

35:30Frank Holland: Yeah, I love Verta. We were a big owner of it. It's come down quite a bit. And we timed, we took some earlier this year. It was a very large holding of ours. I think right now, if you had trimmed NVIDIA and you want to think outside the box of some of the main names, Vertiv is a name to think about adding. For us, we may be looking to add more soon. But they are seeing revenues and backlogs accelerate. And this stock, after reported about three weeks ago, it was up 20 % after reported. It's made new lows since then with the overall space, the industry itself. But stable above 200 is a good thing.

36:04Frank Holland: Vistra is another name. They price per customer, which gives them an advantage in pricing-wise. I love those two names. We own them. Veritiv, I think, is one that I see us buying more of in the near future. A lot of our names hired today. All right, now we're going to turn over to our Contessa Brewer with the CNBC News update. Contessa.

36:22Colette Kress: President Vladimir Putin has agreed to let Europe join Ukrainian peace talks, according to U.S. Envoy Steve Whitcoff on Russian state TV today. However, Putin promised war would immediately resume if Europe follows through on its suggestion of sending Western troops into Ukraine following any peace deal. Wyckoff and President Trump's son-in-law, Jared Kushner, met with the Russian leader earlier today. Now they head to Ireland to meet with his Ukrainian counterpart, Vladimir Zelensky. Six people were killed in an Israeli strike on one of the few main hospitals still operating in the Gaza Strip, according to Palestinian health officials.

36:57Colette Kress: There is a nearly one-year-old ceasefire agreement in place. The Israeli military said that attack actually was targeting a Hamas commander and other militants. The commander was not identified among the dead. And the United States Postal Service wants to raise prices by 11 percent on package deliveries to account for fuel prices. That surcharge requires approval from the Postal Regulatory Commission. The Postal Service says its transportation expenses rose by$225 million between September 2025 and 2026 because of the higher fuel costs. That's the news now, Frank. I'll send it back to you.

37:35Frank Holland: Contessa, thank you very much. Our Contessa Brewer back at CNBC HQ. All right, coming up next, we've got Mike Santoli with his market memo. Stay with us.

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38:14Frank Holland: If you're a parent and want to help set up your child for success, then iExcel is right for your family. As an effective and affordable online learning program, IXL covers math, language arts, science, and social studies using interactive practice problems for kids from pre-K to 12th grade. Listeners can get an exclusive 20 % off IXL membership when they sign up today at IXL.com slash 20. Visit IXL.com slash 20 to get the most effective learning program out there at the best price.

38:45Colette Kress: AI is here, transforming how we work, live, and lead. And the women I talk to aren't waiting for the future, they're shaping it. I'm Julia Boorstin, Senior Media and Tech Correspondent at CNBC. This is CNBC Changemakers, where I talk with the female leaders transforming business as AI reshapes the world. Follow and listen to CNBC Changemakers, Women Leading in the Age of AI, wherever you get your podcasts.

39:31Frank Holland: Welcome back to Halftime. We're back with Senior Markets Commentator and Overtime co-anchor Mike Santoli with his market memo. Mike, NVIDIA is the story of the day. What are you looking at? I mean, how big of an impact could this story and NVIDIA's slide have on the broader markets going forward? I mean, it's a huge impact, Frank, but what's been impressive, and you guys have been talking about it at the index level, this resilience, is that the market is sort of finding destinations for all the capital that's surging out of NVIDIA, at least for now. I think we got a bit lucky timing wise on the breaking of all this news we've had in the last few days because the entire semiconductor group was so blasted and washed out coming into the week after that liquidation last Thursday that you had the scene set for a Broadcom and AMD to literally be up 25 percent in three days.

40:17Frank Holland: Now, whether that's fundamentally sound, whether all that demand is going to be repositioned into those other competitors, whether NVIDIA has been imposing attacks on the system and all of a sudden the hyperscalers get benefited from that, we'll see. I think tactically that's the reason we're hanging in there. But what I'm focused on is the stuckness of this market continues. The 7620 was the level we first got to in the early part of June. Since then, S &P forward 12-month earnings are up like 12%. You've had two straight quarters of 30 % earnings growth, and the market is kind of taking it, but kind of deconcentrating and trying to kind of find other places to support the index without making a lot of headway.

40:59Frank Holland: I think you see liquidity ebbing around the edges today. Gold, silver, Bitcoin down 3%. Yields are up big. Maybe that's going to get the market's attention. So I think you can be impressed with how the market has handled all this by also recognizing that, you know, We didn't solve everything that might have been pressuring it. Yeah, a lot going on in the markets. Mike Santelli with his Market Memo. Mike, always good to see you. Thank you very much. All right, coming up next on Halftime, Options Action with Oliver Rennick. Halftime's back right after this.

41:45Frank Holland: We're back on halftime with some headlines crossing from the Fed. Our Steve Leesman joins us now with that. Frank, very important data here. For those of you like me who plan their vacations around when the Fed is not meeting, you can take off October 2027. The Fed announcing that the meeting in October will focus on strategy and there will be no rate decision expected. This comes after Kevin Warsh told us at the last press conference about changes to the meeting schedule. So in 2027, there will be seven rate-setting meetings, not eight, as has been normal over the past decades. 2028, as you remember, were said in October at the press conference.

42:20Frank Holland: The decisions will decline to six from eight. The other meetings, the two meetings, will discuss broad monetary policy strategy, the Fed says. Frank, one of the reasons for doing it in October is I believe the Fed looked at the derivatives that were out there and there were not that many written for October 2027, so they don't have to be rewritten. So there'll be this nice big gap for volatility and speculation now between September and December 2027. All right, Steve, this one, the very latest on the Fed, no policy meeting or at least no rate decision in October of 2027. Thank you again, Steve.

42:56Frank Holland: Time now for today's Options Action. Oliver Rennick joining us from the SIBO Global Markets over in Chicago. Oliver. Hey, Frank, if anyone's looking for the$200 billion of NVIDIA market cap gone missing, They might want to start with AMD up 6 % and now about 10 % away from its record high last month. About a quarter of the market cap is showing up there with a$50 billion rally. It looks like it's mostly retail options traders that are really going after the calls here, though. There are a lot more calls trading versus puts on volume. That's more than twice the average, but mostly thanks to far out of the money trades like the 750 strike call expiring in February and the most closer 600 strike, but for tomorrow's expiry.

43:40Frank Holland: So it needs about another 4 % rally to work. The big, big traders are more mixed with the biggest trade of the day by an order of magnitude in AMD. Someone likely closing out what was a bullish call spread. But another potential player to watch is Alphabet. They've been carving out a role with their TPUs. And flows there are arguably even more bullish, with four times as many calls trading as puts and bullish trades from small to big, Frank. All right, Oliver Rennick, live from the SIBO. Ali, thank you very much for that one. I want to talk this through with you guys. As Oliver mentioned, a lot of money seems to be going into AMD.

44:16Frank Holland: Stephanie, that was with stock that you and I have been talking about a bit. What do you think about just this movement of money in the chip space in particular?

44:23Colette Kress: Well, yeah, I mean, you think the money we've been saying, the money wants to stay in the sector because it's not a demand problem. This is not a fundamental issue at NVIDIA. It absolutely is not. I expect the quarter next week to be very good. And as I mentioned, they have enough free cash flow. And they are, by the way, have a huge buyback program, too. So it's not fundamental. I don't think we want to go there, right? I mean, the fundamentals elsewhere also are very, very strong, but they're just cleaner stories. And so, yeah, we are seeing Broadcom up. We are seeing AMD up. The stocks have gotten cheap.

44:54Colette Kress: They're still down from their highs. So, I mean, I think you want to continue to see the flows. And I think you will continue to see the flows into these names.

45:02Frank Holland: So, Bill, coming over to you, you own Alphabet. Just your thoughts on Alphabet potentially being a big beneficiary of this, not only when it comes to sentiment in the market, but maybe if there is a talent drained from NVIDIA, I think Alphabet might be a logical landing spot. Yeah, one of the things with Alphabet, I mean, it's been hit hard after the earnings report. I mean, a lot of names in the space have been, but it missed on every revenue segment other than cloud. That is concerning. But if you're looking further out past that one, two years, the TPU that they're building, and I think that could be something that becomes very, very relevant, and it becomes a household name like high bandwidth memory, HBM, and before that, the GPU.

45:39Frank Holland: Alphabet is an interesting place. We own it. Maybe some of the worst news is already priced in. Yeah, potentially. Malcolm, I want to come over to you. NVIDIA's weighting in the major average is obviously declining because the market cap's declining. Does this change your view about any index investing, the fact that Nvidia's or your exposure to Nvidia has been lowered because of some of this? Not really. My thinking in that is really just that you don't know where all of the opportunity is really going to flow from a sales perspective. You don't know whether it's really going to be AMD or Broadcom or whoever else.

46:15Frank Holland: Because aside from just the data center, I'd already been looking to diversify my semiconductor exposure away from just the data center idea, simply because we got to go somewhere else. Like there's autonomous driving that Jensen's been a very big proponent of. We also know that there's the opportunity for compute to move into the cellular networks and then onto the actual devices themselves, which is the reason I wanted to buy Qualcomm. So I'm thinking as you're looking to diversify where those dollars will flow to, it makes more sense to just invest at the ETF level rather than trying to figure out where the obvious direction is, who's going to have the next best replacement for the GPU.

46:51Frank Holland: Is that the SMH then? Probably, yeah. Because you also have the CUDA infrastructure that's hard to pull yourself out of. Who has the direct replacement for that? Yeah, and I don't think there's any product on the market that anyone seriously working in the AI field would say is a better product than the Vera cluster, like Rubin. That roadmap is not materially going to change. And if and when one of these other semi-players or somebody building application-specific integrated circuits or whatever is able to stand toe-to-toe with the way NVIDIA builds, I will change my mind. But I don't think that that's something that we're going to hear about in three months.

47:34Frank Holland: But I think part of the reason AMD's earnings release was so strong and the response to the earnings release was so strong was because they have proved that they have a secondary option now. Or CPU sales, too. Like, NVIDIA is a powerhouse with CPUs, and that's an important part of that story. That's not going toe-to-toe necessarily with NVIDIA's products. It could change. Could there be a moment where the scientists at AMD and then the manufacturing operations somehow sort of catch up to NVIDIA? I guess it's conceivable. That's not going to be a 2027 story. And the problem is you're chasing a company that already was selling for like 60 times forward earnings and was up like 175 percent over the last year compared to a company.

48:22Frank Holland: We talked about NVIDIA coming into all of this that was underperforming the market at large. It's hard to make that switch because the valuation numbers are so drastically different. I want to go put the focus back on NVIDIA for a minute. Looking at shares down about four and three quarters of one percent. So off of their lows. Has the comeback begun, Frank? Josh, come on. All right. Come on, Josh. No, that's not the question. That's going to be the 2 p.m. show. Are you surprised? So you're almost there, man. Come on, we're doing a TV show here, Josh. All right, all right, all right. Anybody surprised?

48:54Frank Holland: Josh, pipe down for a second. Bill, I'm going to come over to you. Are you surprised it's only down four and three quarters at 1 %? No, I mean, I think at the end of the day, yesterday was down eight, and it kind of hung down. It didn't accelerate. And then when the news of Jensen's resignation, if you're watching the tape before the bell this morning, That's when it hit down about 10%, and it didn't follow through there after the close or after the open. And, you know, I'll give Josh credit for pointing it out today. There's a little bit of a hammer pattern on the daily tape for NVIDIA. We were talking about it before the show.

49:24Frank Holland: That's a very constructive technical pattern. If you're looking at something that has fallen out of bed, you're not wanting to catch the falling knife, but you look for something like a hammer pattern closing well off that wick that's created. That's a positive thing. So right now, I think this is positive. By the way, Josh being snarky later, him and Batnick. Has the rebound begun? It'll be out in the compound. Is this the NVIDIA comeback? Still ahead. Final trade. Still ahead. Halftime's back right after this. Give you a little tease of the compound later, too. We're back on halftime with Final Trades.

49:54Frank Holland: Bill, you're up first. Micron trades at four times. Insignificant buybacks are coming down the pipeline. Malcolm. Digital Realty. It's a crazy week. It's the least dirty sock in the data center hamper. Steph.

50:05Colette Kress: Natera. Down 26 % from its highs. Great quarter. Beat and raise. I think it's an overreaction.

50:12Frank Holland: Josh Brown. Moody's has now joined the best stocks in the market list. We wrote it up at CNBC Pro. Have at it. All right, we're going to leave it there. One quick check at NVIDIA. We've got to look at it one more time, taking a look at the video shares. Lowered today, but off their lows earlier. I believe they're down about 4.75 % at last check. That does it for halftime. The exchange with Brian Sullivan starts right now.

50:40Frank Holland: Weekdays at 12 Eastern, only on CNBC.

50:45Colette Kress: 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.

51:14Colette Kress: To view the full Halftime Report disclaimer, please visit cnbc.com forward slash Halftime Report disclaimer.

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