Shifting Sentiment and Sliding Semis: The Investment Committee's Strategy 10/23/26

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0:43That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to Discover. Terms apply. See discover.com slash 5 for details. I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast, the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Welcome to the Halftime Report. I'm Scott Wapner. The state of the markets front and center today. They're under pressure. Investor anxiety is running high. We discuss and debate with the Investment Committee. Joining me for the hour, Stephanie Link, Jason Snipe, Jim Labenthal, and Rob Seichen.

1:25We'll go to the markets, see where the trade is right now. So the Nasdaq's gone green by one-third of 1%. Some buyers coming in. Dow's down about 1%. Was down a lot more than that. But it's come back a little bit, and the S &P is off about a tenth or so of a percent. Ten-year yield under 5%. That's been a big story as well. Oil is surging. Consumer confidence is dropping. That's a big story today. UMICH was at 48. Wall Street Journal says the second lowest reading ever in the survey's history. And that voters' economic mood heading into an election has never been this low. So there's a lot of consternation out there.

2:05VIX at 20. Discretionary. Industrials are down sharply. What's this about? It feels like growth scare. Like, what do you think? What do you think? Because you've been more optimistic than most on almost all parts of this whole story. And the negativity is actually interesting to me because earnings, we've had 25 percent of the company's report so far. We're running up 38 percent in earnings. You mentioned sentiment. Well, retail sales last week were 5.1 percent, excluding gasoline. Today, the ISM manufacturing and services numbers were strong, continue to be well above 50, well above expansion.

2:43And then I thought the most interesting thing is that yields are falling this week. We went from 536 to 495 at the lows. We're bumping up a little bit today. But at the same time, we're broadening out. So the S &P equal weight is up almost 2 percent week to date. And the S &P is down 0.5 percent. So we're broadening out because the economy is doing OK in the face of all the unknown. OK, let me stop you for a sec. Let's debate this for a minute. OK, because you say we're broadening out because the economy is strengthening. Staples, health care and utilities are not going up because the economy is strengthening.

3:23You know that. You know that. So the broadening that you put forth. Is that really broadening or is that like defensive? No, that's a defensive masquerading as a broadening. That piece of it is defensive. So I know you're going to ask me. Well, it's the obvious thing, isn't it? No, no, no. Let me finish. Materials are up 6 % month to date. Financials are up 6 % month to date. Discretionary is up 6 % month to date. And even home builders are up 3 % month to date. So, yes, the leaders are a little more defensive. Do I think that's the right call? I absolutely do not. I think there's much more value in the stocks, the sectors I just mentioned.

4:02But it is broad-based. And that is because earnings are fine. They're good. They're going to be great. Wait until we get next week. We're going to get 30 % of the S &P. It's going to be great. All right, here's the problem. And the other thing we're getting is monetization, Scott. SpaceX, we're going to talk about that later, but their AI revenue up 754%. Meta, I know the stock fell, but their monetization up 26%. I think that is going to drive the companies next week that report earnings. We're going to see growth increase, monetization increase, and I think that's going to give people confidence come this time next week.

4:35Okay, so maybe so. And when we didn't have any earnings, all we were saying was, well, we're going to get earnings. We need earnings because earnings are going to justify the story. And that's going to set the market back on its feet after, like, wobbling. You know, it took a few body blows, a couple of uppercuts. And we're like, we just need earnings to come. We sat down. They put the sponge all over our face, a little Vaseline around the eyes, a few cuts here and there. But we're back. We answered the call. except Western Digital, LAM, Micron at the end of September, Meta. Right. Good earnings.

5:14Yeah. Check, check, check, check. All four. Bad price action. 100%, Scott. And I think that the story is, and I hope Stephanie is right, you know, on the broadening, right? I hope that is absolutely the story. But I think what we're hearing from when we heard from Meta last week, right, with the cat-back spend increasing on the lower end of the guide, and you and you're so it's capex and it's also execution because these rpos and these backlogs are just growing and growing and growing like crazy we'll hear from the big boys next week i think that's our super bowl clearly but if we cannot execute on this backlog that's going to be a problem if the capex slows down that is a problem and the math to steph's point she's completely spot on.

5:59The Nasdaq was down 3.3. Tech was down 3.3 % yesterday. Financials, health care, material, all up. But Steph says the negativity and the lack of confidence in the market right now is not justified. Yes. That's what she's saying. Yes. Do you agree with that or not? Because that is the argument in the market right now. Time to get bared up, time to batten down the hatches a little bit, or time to take advantage of some of the dislocations that have happened in the market around the AI trade and put a foot or two back in the water. I think it's the debate. No, and I think it's absolutely the latter.

6:34I think it's time to take advantage, right? Because I do think we're going to get some really nice prints from the big boys next week and continue to follow through through the rest of earnings. To Stephanie's point, earnings are up 38 % so far. I think that will carry through, and I think that's what's going to lift the market. Rob, Goldman's trading desk today says there's just too many overhangs right now. to feel comfortable playing offense in the market. FOMC, next week. Earnings, big time next week. Busiest week of the season so far, next week. The elections around the corner, it's just there's too many things going on, at least for now.

7:11Those are their words, to play offense. Steph wants you to play offense. Snipe wants you to play some offense. Are you throwing the ball or are you running it? We're running the ball. I think if you are in a place where you've already been throwing the ball and you've benefited from the early performance of the semis and some of this AI infrastructure trade earlier in the year, you can afford to give a little back. These stocks are down a lot, but they're still up more than the market. I think there's a lot of questions that remain unanswered, but there's only one from my lens that's material.

7:45And that is the financing of all this growth built on pillars of salt and sand. And the answer to that is probably no. I think that there's going to be financing available and the growth will be there. But it also becomes at what cost. Is your weighted average cost of capital so high that it compresses margins and therefore ultimately pushes down the forward multiple a little more? So I think I'm confident long term in the theme. I think this build out is a generational build out. People are going to make a lot of money on this build-out. But the challenge is to the CapEx side of this. And if you look at companies that have been late to spend on this, Apple hitting all-time highs today, right?

8:31So why? They are not spending as aggressively as some of the others. Because it's a wholly different story. But hold on. It's all on the same pillar. It is a different story, but it's not impacted like that. Let's use NVIDIA. Tons of free cash flow. Right at the heart of this story, Scott. How come every semi is down a ton and they're only down 4 %? Well, I mean, I think isn't the answer to that obvious. Cash flow and ability to finance. Well, wait a second. They're down more than 4 % from the recent high. Well, they've held up a lot. Since the start of the chips. Yeah, but NVIDIA has held up a lot better.

9:12You can't argue, Jim. Listen, fact. 243 to 212. 243 to 212. It's had a drawdown, maybe not as much as all the other semis, but it's had a drawdown. Not even close. Yeah, close. 243 to 212. It has massively underperformed year to date, and it passed a year. Nobody needs to convince me of the merits of NVIDIA. I'm big in NVIDIA. I'm simply saying it hit that 243 two weeks ago. So if we talk about what's going on, and just to be clear, I'm in agreement with you, Steph, and Jason, about let's lean into this. Like, this is a correction that's worth taking advantage of. Where are you doing that? I don't see any moves from you.

9:49I'm fully invested. I mean, two weeks ago, no, seriously, I am fully invested. I'm not going to be one of these people who comes on and says I'm buying every day when I haven't sold in weeks, OK? Over the last few weeks, you've seen me add to Qualcomm, to Oracle, to Micron. I mean, there's no question about whether I'm bullish and whether I'm positioned for it. But, you know, what's not being mentioned here is whether the reason that certain things like the semis have underperformed has nothing to do with fundamentals and is more of a technical reason. And look, I don't like engaging in innuendo, but there's a lot of talk out there from trading desks like Goldman Sachs that over-levered players have been unwound over the last few weeks.

10:26And frankly, as a market veteran, that's exactly what the last two weeks feels like. Let me tell you one thing. I'll give the ball right back to you, okay? Yes, sir. Jeffrey's trading desk with an interesting note. Tech was once again the most for sale subsector on their desk by a wide margin. This was yesterday. And in the last 10 days, we've been net for sale in tech. Our net trading flows over a 20-day period, one of the more dramatic net selling periods we've ever seen in tech in recent years. That makes me so happy and so bullish. I hope that I don't have to explain at length why that makes me so happy and so bullish.

11:03The positioning has already gone too far to the negative. That's what Tom Lee would suggest. And he did as much yesterday. Deutche Bank tracks that, and allocations are in the 25th percentile. So positioning is on your side. If you want to know what the catalyst is, and I'm not saying this is definite, but if Anthropic actually does go public before the end of November, and if OpenAI closes this$30-ish billion funding round, those two things happen. And it erases this worry about is the funding out there. And the trade's back on when that happens. But I don't hear a lot of people saying, you know what?

11:37Lamb, Rob, is now 47 % off of its 52-week high, or KLA is 52 % off of its high, or Hynix is 31 % off of its high, or AMAT's off 48. Do I hear, like, go buy more now? I don't. I don't. Well, we own a lot of each of those, and they're up huge. We're up 600 % in Lamb. We're up 300 % in KLA, and that's after these recent sell-offs. So we're not going to continue to double down on the bet right now. Do you think other people should buy on those dips? Well, listen, I think these are incredibly high-quality companies. The question is when. The market is in a risk-off mode right now. And as Steph said, or you outlined at the beginning of the show, there's a ton to worry about.

12:27But the biggest catalyzer to allow people to come in is the slow removal of these negatives. And they will. I believe they will. You're asking me if right now I would do it. The answer is no, not for me right now. And what it's evidenced by the price action in the Treasury market. And that price action is directly linked to the negative price action that is in semis right now. I can tell you, if you just looked, you said it on the show one time a couple of weeks ago. Bonds were way oversold. Now is the time to buy bonds. I was pounding the table, too. They're a natural shock absorber to this. So if you're going to get involved in these, you can do it with a shock absorber.

13:07And I would barbell it with these two areas, the two highest conviction areas, health care and still AI infrastructure for us. Those are my two favorite areas. But I also like bonds quite a bit still. So you think that that yields were dropping like a stone because they got bonds got too cheap. They got too cheap and risk off as well. No, obviously. Too cheap. Down 5 % year to date. Well, it has to be. Fixed income is not supposed to lose your money. It's supposed to be right down the fairway. I understand, but yields are not supposed to do what they did yesterday. We had a two standard deviation move up and honestly back down.

13:47I'm saying your call was right, but the reality of it is market risk, macro risk. It was a spark that lit the bond rally, in my opinion. So it's not slowing economy. I just I think that's one of the. No, but I think that's a flight to safety a little bit on fears, on fears of if the A.I. story starts to unravel a bit, it's going to have a huge hit on the economy because it's had the biggest influence on the economy. There's no question about that. Well, the consumer has. Yeah. But this is the big story. It's the story. It is. And I'm not in the camp that it's that it's a bubble. I think that we're in the third or fourth inning in terms of A.I.

14:25and A.I. infrastructure and the food chain. All right. So next week, when we get the mega caps, Dan Ives says that's just a relief that we need, that that is what is going to calm a jittery tape. Those are his words that you're going to get. The spending is going to be big. The guides are going to be big. The commentary is going to be good. And we're all going to feel better at the end of next week after all this goes down. because you're going to hear from, you'll hear from, well, you won't hear from Apple until the following Monday and you're not going to hear from NVIDIA until like the middle of November.

15:00But otherwise, Amazon, Alphabet, Microsoft are going to report next week. You think he's right? We feel all great. We wake up next Friday morning and we're like, I told you, we're back. I do, I do. I think the momentum continues like across the cloud businesses as an example. Like if I think about Google Story last quarter. Google Cloud was up 82 % year over year. Yes, they went free cash flow negative. I think that was a big problem. They will reiterate the guide in terms of CapEx. I think Google Cloud will also be very strong. Microsoft has a very kind of interesting story as well going into the quarter, going into the print, I should say next week, 30 million paid co-pilot users.

15:46Azure's business will be up 40 to 45 percent. I think that's going to be a very nice story. And they will all and they're free cash flow positive. Right. That wasn't the story for them last quarter. So I think these names will be strong. And even for Amazon, I think, again, you know, AWS is the largest cloud provider in the game. They'll be in the mid 30s in terms of growth year over year. And I think the Tranium chip will be also a creative because that's coming online. Steph doesn't just talk the talk. She walks the walk. We've learned that time and time again. She was walking towards Amazon.

16:20She bought more. I did buy more in one account. I just thought, I don't know why it was down 4 % yesterday for no reason. Maybe people taking profits. I don't know. But I do think the quarter, to Jason's point, is going to be a strong one, especially in AWS. And I actually think AWS could accelerate from 37 % growth last quarter to 42 % or 43 % because they have doubled their capacity. So they can meet that demand. They can't meet the demand, but they can meet it better than they have been in the last several quarters. And we know that this is one of their highest margin businesses outside of advertising.

16:57So I think the quarter is going to be really strong. I think retail, they're obviously the leaders. I think you're going to see margin expansion there, too. And I just can't believe this thing trades a 17 times forward estimate. On Amazon, Andrew Jassy gave us an absolute gem in the last quarterly call when he said that these new data centers that they're bringing on pay themselves back in terms of the investment that they make in less than three years. That was one of the clearest examples of the return on investment that these capital expenditure plans are reaping. And I'd like to get a similar bond mow or something that I can sink my teeth into.

17:30And I think we will. I think the results will be good. Steph, Jason, as you guys are talking about, but I'm really looking for something that's more specific on return on investment. The stock's 13 % off of its high. So a lot of these things have been in a correction. Yeah. I would just say I agree with everybody on the strongest players in the space. And that's what you're outlining. And the real question that de-risks the market are the core weaves and those that have a little bit more trouble accessing capital markets as it relates to this? And are there going to be any announcements of support towards that part of the ecosystem?

18:07What are the financing needs? Because we saw SpaceX kind of spook the market with all the spend that they're talking about. I mean, it's an unbelievable business. You see what's happening. But there's only so much ability. You're already hearing crowding out effects in the IPO window that's coming up because of them dropping. Yesterday about what Meta had buried in their filing about trying to get to market before others. Correct. Because they see everybody trying to access the same pools of capital. Right? And that's the fear. Now, I did say yesterday there's going to be haves and have-nots. But the haves, for sure, as David Solomon said on one of the CNBC shows, are going to have access to capital.

18:56because those are great business. It's at what price, and right now there's an arbitrage between the growth and the price that you're paying for capital. You know, I'm not saying to not buy this space. We're heavily invested. What I'm saying is you can't be Pollyanna about the fact that there is potential risk to margin here, which we all know the second derivative, the change in the rate of change, can cause a re-rating for a period of time, and then a new base builds and they grow off the new base. That's true, Rob. That's the debate as to why and whether compressing multiples are as attractive as they may look on the surface.

19:39Like when you say Amazon, I can't believe it's at 17 times. But if you're now in a new margin environment where the cost of capital and the access to it is a little more challenging, whether these multiples have compressed to a point that they deserve to be. At the large end, yes. Well, it's 17 times, and the 5 - and 10-year average is 35 times. So I'll give it to you that we should see some multiple compression because the cost of capital is going higher, but not to 17 times forward estimates. We're not debating Amazon. When I'm talking about AWS is going to see an acceleration, and at Jimmy's point, that is going to be the fire that Andy Jassy talks about in terms of the acceleration in ROI, eye, because that is clear information and a data point that I felt better about last quarter, let alone this quarter.

20:27Hey, Scott, to your question, the right one about, you know, have multiples compressed enough for where growth rates are? To me, this is why I always, or at least quite often, refer to the peg ratio, because it gives me a numerical answer to that question. So I could look at, I'm looking at Google right now, Alphabet. The peg ratio right now looking into next year is 1.3. So that's the price to earnings multiple divided by the growth rate of earnings. I'm telling you, 1.3 on an absolute basis is really quite cheap. That's basically where most of these stocks are. Amazon is actually lower than that.

20:58But it just tells me, and anybody can have their own opinion, but that multiples have compressed more than they should have for where growth rates are going. But it's not just perhaps growth rates. It's the expectation that you're coming to the closer to the end of the road of earnings continuing to accelerate and go up. I don't think we're going to accelerate. And if you reach a peak or if we're in the process of, the market's trying to get ahead of that. Yeah. Look, I don't think we can expect to see 30 odd percent growth year over year in earnings like we're seeing this quarter. And that's not even what's projected.

21:35Full year, next year estimates for S &P 500 earnings are up 15 % over this. So I don't think anybody's out there thinking, or at least I'm not, thinking that You're going to keep seeing this. You're already decelerating, but you're decelerating to a growth rate combined with a multiple. It to me is very attractive. And again, I point to the peg ratio on that. But you have to consider, and I think it was in one of the concerns about Meta, for example, that expense growth is rising at a faster pace than sales growth. Yes, you do. Yes, you do. You absolutely do. And my answer to that. I don't hear enough people talking about that.

22:08Well, no, but that's, okay, so let's be explicit about that. That's why we pick stocks. That's why we pick stocks. That's why I'm quoting an alphabet as I just did, and I'm not quoting a meta. I don't particularly like the spend rate. No, but you're talking about a lot of these kinds of stocks. Yeah, I'm talking about the ones I own. All of you are willing to accept that, that expense growth is at a faster clip than sales growth, Because everybody assumes that the sales growth and the return on the expense growth is going to happen. Are you with me? Yes, I am. So let me be a little bit more. Let me get detailed to this, because the reason I'm quoting Alphabet is because it's not all on the back of CapEx.

22:48It's not all on the back of data center buildouts. I mean, we know that, first off, they're doing their chips. They've got Gemini. Oh, by the way, they've got YouTube and Search. So I'm not comfortable with the spend at a company like Meta because anytime I do a pro forma on what Muse might monetize to, it doesn't cover the cost of capital. Not right now, but it will. It's going to become a Muse story. And it may take a couple of years. In the meantime, they just put up 26 % revenue growth. Yes, I'll give it to you that CapEx went up for the full year. I mean, they narrowed the margin. I wasn't surprised about that at all.

23:23And we didn't get 2027 numbers, which I didn't really expect as well. But the OPEX actually was better than expected versus the CAPEX. So I know that they're controlling what they can control within the business momentum. But I want them to spend more because I want Muse to win. And I think Muse will win as they leverage almost 4 billion of users. And by the way, I don't think 19 times forward estimates is very commanding. What about the power related names in this story? because you've got to look at every sort of derivative play of the pure hyperscalers and everything that goes into the story.

24:00Yes. So Vertiv is almost 50 % off of its high. CAT's 36 % off of its high. GE Vernova is 31. Quanta is 30. So Link, Stephanie, Vertiv, Vernova, Quanta. It's been painful. There's no question. One of the reasons why I own these stocks, though, is for the AI infrastructure buildout and the food chain. And by the way, GE Vernova is still up 26 % year-to-date. Quant is up 29%, and Vertis is up 21%. That doesn't mean I haven't felt the pain over the last month, actually in a couple of months. But I don't think the fundamentals justify the pullback. Maybe the momentum is kind of slipping from the group, but I do think overall they're going to have great quarters, great backlogs, better margins, market share gains across all three of these names that I just mentioned.

24:47And I think they're buys now. And I sold a name we're going to talk about at the next block. so that I have cash so that I can actually add to these. OK, good tease. Jason, you have Eaton. Could you make an argument that the fundamentals have changed? That when you were first buying these stocks and people were sort of loading up on these names, there was only really optimism to the horizon. Then all of a sudden, there were picketers, not in my backyard. The whole thing. A lot of screaming. And now we've, I don't know if we've reached a crescendo in that or not. People say we have and that it's going to start to die down after the midterms.

25:29I'm not so sure about that. People aren't going to just change their minds after they go into the polling booth. They won't. So that's a fundamental change, isn't it? No, I would agree with that. But I think at the end of the day, once those votes are tallied and they're in, we're past that. So you can continue to bicker and talk and be concerned and have a lot of all that conjecture. But I think that it's still$800 billion worth of capital spend this year. And when I think about a company like Eaton or Avertivore or any of these folks in this infrastructure space, there's just too much capital in that direction.

26:07And they're a part of all the megatrends, electrification, the digitization stories. I just don't think that slows down. For me, I think of it as an opportunity. Eaton's now, I mean, just a few short weeks ago, was up almost 30%. It's now up 16, right? So it's been cut in half over the last couple of weeks, but I just think that there's a potential trend going forward. All right, we're going to take a break. So Stephanie teased that she has a move coming up. In fact, she has three. And we'll do all of those after this break. Ever notice how every new AI tool asks you to explain your business to it all over again?

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27:24It pays to discover. Terms apply. See discover.com slash 5 for details. Still waiting in line? Again? That's time you'll never get back. Save time and money with Stamps.com. Over 4 million businesses have skipped the line with Stamps.com. Join them to save up to 90 % off carrier rates from your computer or phone right now. Print postage for certified mail, registered mail, and packages in seconds. Then schedule a pickup right from your home or office. For a limited time, go to Stamps.com and use code podcast for a free welcome gift. Taxes and fees apply. All right, let's do those moves. Not the one yet that Steph teased, although that may come up when you talk about the way you funded some of the things that you bought.

28:11Yeah. So you bought more wells. Okay. Tell us. I'm kind of surprised the stock hasn't recovered. It's down 11 % year to date. I thought the quarter was really very good. They're making progress post-asset cap lift. I think they're going to gain market share going forward. Their ROTCE targets of 17%, 18 % are actually not aggressive in my mind. I think they can actually do better than that. And their guidance for net interest income was better than I thought for the full year. and that interest margins expanded for the first time in several quarters. And so I think the stock at 1.5 times book, Scott, it's a value here.

28:44And it's just a bit of laggard. And I just think it's going to play catch up over the next couple of quarters. OK, so you bought some more wells. Now you bought something else. But to get the cash to buy the something else and to buy more wells, you sold Dover, which you teased in the last segment. And I'm kind of up a little bit in it. And it's nothing against the stock or the company, the management and the progress they're making and the short cycle story that I'm a still believer in. But I own a lot of industrials that are down much more. We talked about it the last block. I want to add to those.

29:15And then I just don't have enough cash to buy some of these other things that I want to be adding to, which I think are much cheaper, much more beaten down. Adding to or adding is new positions, right? Like Zscaler. Yeah. Right? That's new, right? CrowdStrike, Palo Alto already in the book. Now Zscaler is too. Yeah. So Zscaler is only up 9 % year to date when the other two are up over 120 % year to date. It trades at a discounted valuation, 50 % discount EV to sales versus its historic rate. They're a big player in the space. Their total addressable market on existing customers is up something like$15 billion or four times the ARR.

29:53They're going to grow 25 % in their TAM. Margins are going to expand between now and 2030 to 27 % to 30%. And so I think this is going to play catch up at some point. It's a little bit of a show me story after a couple of quarters that were not so great. But I do like the growth and the valuation. It looks like one of the greatest buying opportunities in the history of buying opportunities in a sector ever happened in May. Late April, early May. In all of these stocks, every chart looks the same. Cycle through them again, guys, if you would. This, Palo Alto, Fortinet, Bug, whatever you want to do.

30:28You want to know what happened? Yeah, I know what happened. The Anthropic thing happened, didn't it? Situational awareness. That's what that was was pressing all of these stocks down. Situational awareness, shorting these stocks, other hedge funds piling on, and then it got unwound. But you also you also had that that announcement from Anthropic where everybody freaked out and sold off all these stocks really hard. And a lot of you all said, well, that's crazy overdone. And then there were not only just on this desk, but on other desks, buyers came in. And it's evident on the charts. You only have Palo Alto, though, right?

31:04Yeah, yeah, yeah, yeah. So, I mean, for me, I'd just very simply say it's like more AI, more cybersecurity, period, right? And I think, you know, pointing to what happened just a few months ago, I think, was a big deal. But I think, you know, CTO budgets are continuing to expand. There's just more opportunity for these companies. I like this buy from Z-Scale. I think CrowdStrike and Palo Alto, Fortinet. I mean, these are the best-to-breed names in this space, and I just think they continue to accelerate. There's no operational slowdown for me in terms of how these companies operate and the TAM that they're out to execute.

31:41You had, like, the Claude Code security thing. You had the Mythos leak thing in the early to mid-spring. Everybody freaks out. Stocks go down in unison. and then they just rally hard. And all we hear about like every week, if not every day, is another either cyber incident or fears of more. I mean, it's endemic at every business that we work at, too. I mean, there's constant threat to the organization and how you align yourself with the right protections is going to continue to get more and more important as these AI agents are now out there potentially doing things that could cause great harm.

32:30We've owned Fortinet a long time. You know, we had to sit through some pain. I remember Steph one time on the show saying, when is this thing going to wake up? It did wake up. Thankfully, we didn't do anything. But boy, I wish I would have added back when everything got beat up, because it's kind of obvious right now that these are some of the greatest companies in the world and will continue to benefit from a theme that's not going away. Yeah, that's for sure. Frank Holland has the CNBC News update for us. Hey there. Good afternoon to you, Scott. Six people are dead and 28 others injured after a gunman opened fire during a funeral at a Greek Orthodox church in Jordan.

33:07The attack happened in the city of Karak, about 100 miles south of the capital of Amman. State media says the suspects are still at large and that there have been no claims of responsibility. Two former FBI intelligence officials have been charged with lying to Congress about Hunter Biden's laptop. One of them, Nikki Flores, worked for the FBI for nearly 20 years. Her attorneys denied the allegations and accused the Department of Justice of bringing politically motivated charges just days before the midterm elections. And the World Series gets underway tonight as the Milwaukee Brewers host the Tampa Bay Rays.

33:38Both teams are chasing their first World Series championship. Milwaukee swept the defending champion Dodgers to reach the fall classic. First pitch set for 8 p.m. Eastern time. Scott, back over to you. All right, good stuff. Frank, thank you. Frank Holland. Coming up, calls of the day. Got a big one, a double upgrade for one of Steph's names. We'll tell you what it is next. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools, no extra logins, just one subscription that gives you personalized AI right inside your actual workflow.

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35:47phenomenal momentum, total revenues of 161 percent, led by AI total revenue growth of 754 percent. Capacity sequentially grew 22 percent, gives them great visibility going forward, and they increased guidance by 50 percent relative to expectations. So I think this is just getting going. I like the story. I like the move. All right. Service now target to 180, was 150. Bank of America continues to love it. Rob Seachin, you first. Listen, this is the air traffic controller of the corporate AI stack, IT stack rather. It's an AI beneficiary. It's not an AI casualty. I think that's one of the most important things you can say of that.

36:29But it is a platform of platforms where it gives companies a single point of control over all their technology. I think it's one of the places that cannot be disrupted by all the stuff we're seeing in software. Why don't more investors see that? Well, it was my final trade yesterday. I think the news is getting out. You're starting to hear a bunch of upgrades. I know a lot of my colleagues on the desk here have owned it and my team loves it. Rob, I mean, Jason, you own it. Yeah. No. I think the most important point Rob just mentioned, you're talking about the unleashing of these agentic AI agents.

37:09ServiceNow owns the proprietary data for a lot of enterprise companies. And for them to be able to monitor and govern those agents is, and from a positioning standpoint, it's very important for that company. 20 % revenue growth, expanding margins, like I said, leveraging it. And used by 90 % of a Fortune 500 is somewhere in their ecosystem. And not expensive for the growth that you're getting. I mean, 20 to 25 % growth, 25 times multiple, margin expansion. Yeah, I think the story is totally misunderstood not to be a mission critical software company. And it was down 30 % just a few months ago.

37:48Just to, I'm sorry, to Rob's comment used by whatever percent you said of the Fortune. 90 % of the Fortune 500. I mean, okay, so what? Like what percent of the Fortune 500 uses Salesforce or uses whatever, you know, SaaS product is out there? The whole point is that they're paying less because of everything that's happening with the AI story. Thus, that has totally raised the issue of collapsed margins for those companies and obsolescence. Obsolescence, but this is the conductor of the train. So if you're putting new technologies in, you're using ServiceNow to choreograph all that. I think that's an important distinction versus being one of the plug-ins like a Salesforce, which I also am not hating, by the way.

38:42We don't own it anymore. No, I understand. The reason why these stocks have gone down is not because ServiceNow or Salesforce are never going to be needed again. It's the economics of a lot of software has changed, or the prospects have changed. The prospects have changed, or the expectations of the prospects have changed. station's business. Yeah, right. So that doesn't mean that's how it's going to play out. And we're in the business of identifying what might be different about that. 50 % of their business is consumption-based versus seed-based. That's a big change to their model. That's a good thing.

39:20That's more visibility, more ARR, and that sort of thing. And I think just the fact that they're leaning into AI is really boosting their average selling prices. That's a big deal for the margin expansion. All right. To be continued, for sure. Mike Santoli's Market Memo is next. All right, senior markets commentator and overtime co-anchor Michael Santoli joins us now. His market memo has a headline of what do you think today? Well, I think it would have a question mark at the end of it, but I think the headline is we sold out. I mean, I think you can start to build the case. You look at, you know, all the segments of this market that have had full corrections, kind of still in full corrections, like consumer cyclicals, banks, transports, obviously semis.

40:01And so, in other words, you've had this sort of rolling payback phase that's been going on. Today, the S &P 500 once again went back to the June highs, right, this level just above 7 ,600. It's trying to hold this range. You definitely saw some signs that the more crowded parts of the AI trade have, again, had another purge. And, you know, again, we look ahead to the meat of the MAG-7 earnings report season. It's like the third out of the last four quarters where they're being asked to sort of rescue the tape on some level. Sometimes they have, sometimes they haven't. So I do think you have that set up to say positioning has reset a lot.

40:36The problem, I guess, is just how squirrely the market action has been and how these rotations have gotten manic with the staples and health care going vertical just because semis are down a lot. And the AI trade going up when bond yields go up now because that seems to be the new link. So, you know, it's hard to necessarily feel like you have a handle on exactly what's going on in terms of the internal movements. But you have had plenty of damage done without really having, you know, the earnings picture change very much. And well, it's going to change next week. You know, some are going to argue with the, you know, the three mega caps that that are going to report.

41:14Michael, thanks. I'll see you later this afternoon. Mike Santoli, Options Action with Oliver in Chicago is next. We're back. We go to Chicago. Options Action with Oliver Rennick. What are we looking at today? Energy, Scott, looking pretty good. options volume is double the average in USO and XLE. Conviction looks quite bullish in both with the most trading happening in the oil fund USO. More than 200 ,000 contracts traded, including over$90 million of premium that looks like it came from bullish call buyers, including a few million dollar buyers of in the money 155 and 150 strike calls expiring in December and March next year, but also a lot of speculators in the 210 strike expiring this month.

41:59That contract costs less than a quarter and needs a 24 % rally or a big spike in volatility, which is actually climbing on this latest breakout. In XLE, it's almost all call buying in the top 20 trades by dollar amount, including one standout buyer of 7 ,569 strike calls expiring December 18th. That's a trade worth just under$3 million that needs XLE to gain another 4%, Scott. Okay. Good stuff, Oliver. Thanks. And a perfect day to talk about this, Steph, given what's happening with oil. We can show crude again, show Brent, and you've got SLB. Yeah, they reported a really good quarter, which I'm not surprised.

42:44The CEO is wonderful. He actually is very consistent. The execution has been there. Margins have upside. And this is when the Middle East business is kind of sluggish, given what's going on with the war. So just imagine if we ever get through that, what this earnings power of this company could be. All right. Setup is coming up next. All right. We'll do the setup because there are, I said it already, next week, busiest thus far. And granted, this season is young. But nonetheless, Boeing is Tuesday before the bell. It is on track for its seventh straight down week. It's down 13 % year to date. It's been a very disappointing stock.

43:22So has GE. But GE's fundamentals are quite strong. Boeing, it's going to be puts and takes. Its deliveries are going to be light because of product constraints. But when do we get better cash flow? Is it$4 to$5 billion for 2027? I think if they guide to that, we'll be OK, especially given the low expectations. Coca-Cola, Tuesday before the bell record high. Best month since February of 2025. Do you have that? We do. It's the only staple we own. It's been on a monster tear of late. It's probably not a name, if I didn't own it, that I would buy into earnings because the valuation it sits at, the bar is very high.

44:02You think staples are overextended as much as they're up? Listen, I think the market's in a risk-off mode, So yes is the answer. Because there is a lot of talk about that, that some of these areas like staples in health care and even for that matter, utilities have just gotten way ahead of themselves. It's a gigantic risk off trade. And those are the risk off beneficiaries. This as stuff talked about at the beginning of the show, this breadth is not a broad cyclical rotation. Right. And so I think these areas are just where money goes to hide, but needs to stay invested. And as such, I wouldn't I wouldn't be there.

44:40Fifteen seconds. Yeah. If you draw that chart out further, you'll see the staples have been left for dead. So at least part of this is a bounce from a really oversold condition. Most of these are a little too expensive for my taste. OK, we'll do finals next. All right. The professor, Jeremy Siegel, joins us along with Abby Yoder, Cameron Dawson, Alex Kanczewicz, Warren Pies. World Series kicks off two. Or first pitch kicks off World Series. Alex Sherman, he joins us with that. All right, final trades. Siege. Devon Energy, sector no one wants to own but own the cash flow, own the discipline, and let the market catch up, I think.

45:22Farmer, Jim. Lockheed Martin, we know what they do. Maybe a little pricey at 18 times, but the peg ratio is only 1.2. You got any brushwork this weekend on the farm? Not a bad idea, but I'm going to play some golf. Oh, you are? Oh, it's going to be nice weather it is. What's your final shape? Goldman Sachs. Equity revenue was up 72%. That's the quarter. IBM, they're back. All right, great stuff. I'll see you at 3. The exchange begins 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.

46:22or reliable. But neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com forward slash Halftime Report disclaimer. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number 2. Show off different outfits. No party remains unattended.

46:57And rule number 1. Have it all without spending it all. Happy holidays from House of Burl, Burlington.