The Nasdaq Surge: The Investment Committee's Strategy 9/22/26

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1:17I'm Scott Wapner. Front and center this hour, the surging Nasdaq, which hits another new high today. We discuss and debate the markets with the committee. Joining me for the hour, Joe Terranova, Jim Labenthal, Brian Belsky, Josh Brown. Let's check the markets. We do, as you know, as Carl and Sarah were just saying, we've got a mixed picture now, Dow negative S &P as well. But it's the Nasdaq that is up yet again. It does hit a new high today. The 10 years back towards 5%. We're watching oil. But we do want to stick on the fact that the Nasdaq is coming off its first record close since June. It has extended that today.

1:53The MAG7 ETF, Joe, is coming off its own intraday high for the second straight day, back to the inception in April of 23. Wall Street Journal writing about it today. The MAG7 is roaring back. You had the MAG's ETF, its first record, as we said, since May. What's going on here? I think what's going on here is that there has been a lot of defensive positioning over the last 30 to 45 days as yields have risen, as oil has risen. And that built momentum in the MAG7 itself. I think now, as over the last several days, we're working off that risk aversion, moving more towards a risk-on environment. And we clearly have in our sights the all-time high for the S &P 500 from August.

2:35I think you're seeing that investors are remaining anchored to the Mag 7 because NVIDIA is rewarding you for being there. It is rewarding you for being there with Apple. And now we're extending a little bit more into some of the areas of the market that over the last 45 days have been dormant, like semiconductors and the rest of the NASDAQ. Maybe it's your Marvell. I think there are some people that are somewhat concerned about the concentrated nature. This is not a broad-based rally. But either way, you tell me, Scott, the MAG said they're going to keep doing what they're doing. We are going to a new all-time high.

3:09Wow. So you said a couple of things that on the surface would seem to be at conflict with one another. Yes. risk on yes and defense at the same time right yes so i think i i think where we were was clearly a more more of a risk aversion sentiment as we moved into the federal reserve meeting last wednesday we bottomed out at the 100 day moving average at that point we carried forward positioning in a lot of those defensive mag seven and what did we do the risk on element no it's not financials It's not the broadening out narrative of the last several days. It's back towards semiconductors, memory.

3:50Apple. It's isolated to the technology trade. Oh, you have to be there. That's sort of the poster stock of what has been considered to be, Brian, at times the most defensive of names. Right? Yes. I think what Joe was trying to say as well is that quality. The number one quality sector in the market is tech. and big cap tech in particular. And I think this is a rent-to-own situation within the big cap areas. They're renting these names into the end of the quarter, got seven or eight days left at the end of the quarter. This is a very important quarter. A lot of people have underperformed this quarter, so they're going to chase up the MAG-7 because you can rent those because of liquidity.

4:31The ownership side of it, we still think, is the broadening out of the market. That's where you want to own. You want to own these companies that have been underperforming. So why? Because the market seems to be at odds. with that. If you would have said that three months ago, we would have said, of course. Now we're sort of saying, I don't know, yields back up, oil still in play, geopolitics on the front page, MAG7 reasserting itself, all of those things, box checks to theoretically be against that. It's a great point. But when you're owning, you're investing. When you're owning, you're looking at 6 to 12 months.

5:09We believe yields will be lower and inflation and WTI will be lower in the next 6 to 12 months. That's where you want to position. And so we do believe that you can still, the greatest thing about the Mag7 is you can both rent them and own them from a fundamental perspective. The rentals of the memory stocks are trouble Barney Rubble, in our view. And any kind of reversal on those will significantly hurt portfolios, and I don't I think most people are positioned for that. I mean, this move by the MAG-7 has really been, if you look at it, and we've shown this to you multiple times over the last couple of weeks, over the last six months, the MAGs versus the S &P.

5:47And we'll show you that. What was an underperformance, certainly in the latter stages of June and into July, you see that blue line and the dips down, and now the outperformance, And now it's becoming, Jimmy, even more stark. And that's why we're having this conversation today and reading you things like the Nasdaq with its closing high yesterday, extending its record high today, and why the money continues to flow back. That chart representative of that probably more than anything else. And as I listen to you set up that question, Scott, the thought that comes to mind is, what about Microsoft?

6:21What about Alphabet? Those are two names that, frankly, have not performed well recently. I know Microsoft's had a bid since the spring. That's great. But recently, the last few weeks, it's flatlined and Google really has done nothing. So what would happen if those get in gear? And I think they will, by the way, both based on the fundamentals and their valuation. I think this is setting up for a nice crescendo into year end. The one thing that I'm most curious about, though, beyond just the MAG7 but related to, is the chips which both Brian and Joe spoke about. Is this the market's way of saying that all of this talk about pulling back on data center construction is just political noise?

6:54I've happened to think that for quite some time. I can't prove it. And we won't know for sure until probably another month and a half ago. The elections are in the rearview mirror. And we hear what the newly elected politicians really say. I think what they're going to do is be very quiet on anything about data centers, because that's where the growth in the economy. I don't know. That's where the growth in Texas now they've halted data center for data center permits. I saw after having the moratorium. Now they're like, OK, no permits altogether. It's a politically wise thing to do. However, when you get past the election, Scott, I wouldn't be surprised.

7:26Can't prove it, but I wouldn't be surprised if those permits are then reauthorized and rather quickly because that's how Texas is going to pay for a lot of taxes. So, Josh, you look at the landscape and we read all the stats about NASDAQ and what the mega caps are doing. You think what today when you look at this market?

7:44The most difficult part of being a market participant is you never fully figure out what's going on. or I should rephrase that by the time you do, you're already out of date. So I don't know who said it, but one of my favorite all time aphorisms about investing in stocks is as soon as you think you have the key to the market, they change the locks. Everybody got really invested in this broadening idea and it worked like it was the trade all summer long. We had a pause going on in the mega caps and the mag seven and the chip stocks fell into a 20 some odd percent drawdown on great news and rather than panicking people just looked around and said all right well what else is working and they bought health care and they bought biotechs and then they got involved in um some of the retail comeback stories like target and they fell in love with some financials and it was like all right we'll do something else we'll bide our time but you thought you had the key to the market they changed the locks look what's back.

8:48We have this massive counter trend move now where three stocks, the only three that really matter for this move that we're talking about, Apple, Meta, and Nvidia have simultaneously undergone this narrative shift. The narrative shift on Nvidia is it's boring. I guess 98 % earnings growth is boring. Well, that's back now at the highs, probably about to break out, and people got a little bit of a wake-up call. The narrative on Meta is they spent$200 billion with a B on AI with nothing to show for it. Not so much anymore. The number one product in the App Store, and it's free, and it's in WhatsApp, and it's in Facebook, and it's being utilized by everybody.

9:34Out of the blue, you're seeing analysts go from 20 times earnings next year to 25. and oh by the way, they're taking their numbers up because if there's nobody on the planet better at monetizing AI than Meta. Wow, that's a big shift. Look at Apple. Apple doesn't understand AI. Apple's behind. Apple just fired their AI chief. They're never going to figure it out. They're never going to catch up. Doesn't matter. They're going to be the gateway for a billion consumers to touch any AI product that you want to come up with. Look at that narrative shift. Look what's happening in the stock. So the broadening trade was fun.

10:09That was then. This is now. We're back to the earnings growth winners. Just real quick, let me give you a number on there. The MAG-7 blended expected operating earnings as a percentage of everything that we think is coming is so big that it's almost become the entire story. The S &P 500's blended forward operating margin is 17%. And nearly half of that is going to come from the MAG-7s. If you strip that out, it goes to 14.5%. The forward P.E. on the MAG-7 is 23 times earnings. Not wildly, egregiously overvalued when you understand how critical these stocks are to 2027. I want to focus, for obvious reasons, on Meta.

10:55And I want to ask our awesome team in the control room to work me up a February 1st to today chart on Meta. I'll tell everybody why once I see the chart where I'm going with that. But they obviously, the stock's coming off its best day since April of 25, as Josh was saying on this Muse spark, OK? So the stock, back to early February, remember when we sat down with Jensen Wong at the Super Bowl? One of the lasting quotes that I remember him telling us in the day or two before the Super Bowl, in his backyard, nobody does AI like Meta. Maybe a little bit of a paraphrase, but I don't think so. Pretty much a direct quote.

11:37Nobody does AI like Meta. Maybe we're finally realizing how nobody does AI like Meta, at least in terms of what Jensen Wong's think has been a rocky road since then. But look at lately. So maybe it took them a while. They introduced this new product two weeks ago to the day today. Stock's up 22 % since that moment. Numbers go up, as Josh said. Price targets go up because they continue to do that. Today,$875 at Jeffries,$820 at JPM,$810 at B of A. The biggest question I have for all of you, what gives? No one owns the stock. Why? So for me, the stock clearly lost its momentum. I would imagine the next rebounds, you take a second look at that because it is reestablished momentum for sure.

12:35But fundamentally, think about what this announcement has done with Muse. For everyone that was skeptical about the history of this company's spending and inability to see a return on that spending. Here's your proof point that the spending can actually be validated with a tangible product in a year 2026, which is all about enterprise and consumer engagement with the technology and the innovation. This is the proof point that this company finally has wanted, that shareholders and investors have desired, and it's been delivered. And I think the move that we're seeing in front of us is a valid move and there's more to come higher.

13:18Dare I say, doubt Zuckerberg at your peril, and how many times do you have to be taught that lesson? We learn that every five years. You think? What did he say? Say it again. We learn that lesson every five years. Yeah, when they shift things. Yeah, exactly. But, I mean, seriously, why don't you own the stock? For exactly the same reasons Joe was talking about. I mean, we have like 47 portfolios. You don't own anything? I have 48 portfolios, Scott. Way to go. Number one, he can't own everything. Number two, he has proven that he is excessively Mr. Mr. Zuckerberg, is excessively volatile in terms of how he's running his operations.

13:57Number three, we can own other names like Google or Alphabet, I'm sorry, like Microsoft. We can still outperform which we are by not owning Meta. Now, should we take a look at Meta and see what their plans are going forward? Yes, but just look at the stock chart. Congratulations, a magnificent trade the last two weeks. We don't trade stocks. We own stocks. So if we start to see a little bit more consistency from Mr. Zuckerberg, which we have not seen for several years, I may consider the name for a longer term. You've seen that consistency per se with Microsoft. Yes. Microsoft has been able to for years, Scott, monetize their software.

14:38Microsoft to 2026 was what Alphabet was to 2025. Everybody and their mother, brother, sister, cousin, uncle thought that throw the baby out with the bathwater in terms of the hyperscalers. That provided a great opportunity to buy Microsoft, to own it longer term. I don't see the same type of management prowess and operation prowess in Microsoft, in Meta that I see in Microsoft. Who delivered a better AI product for the consumer and enterprise? Microsoft or now Meta? Because I'm going to argue Meta. Now Meta, Joe, but it's been the last two weeks, the last six. I'm not going to buy a stock for two weeks.

15:12I'm going to buy a stock for the long term. I'm not going to react. I'm going to watch. I'm with Brian on this. And look, I'm glad that Meta's doing well. I don't wish it ill. It's had a heck of a run the last month. But let's not forget that it was less than two months ago that we were selling stock collectively, not us on the desk, selling the stock on earnings. And the quarter before that, the same thing. Were you selling it on earnings or were you selling it on spending? Let me just finish. I'm getting right there. Thank you. Okay. On spending. And what we've seen so far in the last two weeks is, yes, in the app store, it has shot through the roof.

15:41That doesn't necessarily equate to monetization. I heard what you said, Josh, but it doesn't necessarily equate to it. Let's wait and see if the proof is there in the earnings. We've seen that proof in other stocks. We've seen it in Alphabet, which, by the way, over the last five years has done much better than Meta. Now, maybe Meta pulls away. I'm not hating on Meta, but what I am saying is, to your question, why don't I own it? I like Alphabet, where, frankly, it's not just Gemini. There's Search. There's YouTube. There's Waymo, which I grant you is not already a profit. Nobody's got a convenient answer as to why they don't own it.

16:13I don't think my answer is – I mean, Joe's wasn't convenient. I mean, he got right to the sort of core. You know, I don't know. I haven't seen the monetization yet. I grant you, again, I have seen the uptake in the downloads over the last two weeks. That has yet to be seen if that will transfer through to monetization. Have seen the spending, Scott. Have definitely seen the spending. In the last 52 weeks, the stock is down 2%. Momentum funds do not own it. This is a paradigm shift for this company. This is a fundamental change that will be acknowledged over the coming quarters. One of the best setups, whether you're trading or investing, either one, whether you're looking at the next six weeks or the next six years, is when you reverse embedded skepticism in an equity name.

16:57That is exactly what's going on. Maybe it needs to make Josh Brown's best stocks in the market before we get full, clearly, buy in figuratively and literally on our desk today. Because, you know, you tell me more about how you think about that. All right. So I have not owned it over the last year. I also didn't write it down 30 percent from a tie and I didn't get trapped in it. I've been trapped in other things like Netflix. I got enough things trapping me in my life. But, and I'm screaming about Apple all year and CrowdStrike. You know my steez. You know what I'm about. But listen, I might buy this because even after it has added$450 billion in market cap in the last 21 days, which is insane.

17:50Just give you a little perspective. that's like adding a Home Depot or a Costco or a J &J in less than a month. Even after, here's how pessimistic we were on this name. It's still trading at a forward PE of 24. And what Jensen said is true. While there was a lot of skepticism about why are they building all this compute? Why don't they just rent it to Elon and take the revenue or whatever, right? While that was out there, The other thing that was out there is, and we've said this on the show, nobody is better at monetizing AI. Exhibit A is reels. They are the best in the world at generating dollars from AI, just not necessarily on the data center side.

18:38Okay, stipulated. Now, they might actually have a use for all that excess compute that they were building. And I'm going to tell you something big. Number one, they won't be the only entrant into the market, but they do have an early mover advantage. OpenAI is coming in the fourth quarter with their own agentic personal assistant. So that's number one. Look out for that. Number two, if I were the people who just wrote a giant check to Instinct, which I think is being valued on the private market at 10 billion, Instinct, the product is amazing. I'm texting with it all day. It's booking me Ubers.

19:13It's returning phone calls, blah, blah, blah, blah, blah. if Meta can do that better for more people and is easier to use and works directly inside of WhatsApp, for example, it could be lights out. They have 2 billion users. Like everybody is already on their app. So that's what the market's pricing in. And if what I just said is true, this literally could get rerated to 30 times earnings. And next year, all the numbers might be too low. So that Joe is right. It's a different company today than it was today, this time in August. It's just, it's a totally different paradigm. And you have to respect that.

19:52I like the debate, Brian, where you say it's, I think you said it's sort of a lack of consistency. What was a fairly easy point of criticism of the way that that company was being run, where the money was being spent, where the eyes were on the ball, whether that was the right ball to have the eyes on, et cetera, whether that's now turning out to be a virtue that was looked at as a lack of consistency was being unafraid to be nimble, to pivot, to try and see at times maybe where the puck was going versus where you thought it was. and everybody piled on Zuckerberg. What is he doing? Where are they spending?

20:40What's the metaverse? Blah, blah, blah. Gerstner wrote his letter. They get their eye back on the ball. Stock goes from the worst year it's ever had to the best year it's ever had. People are hating on it in the AI build-out. They're spending too much money. Where is it all going? And now they have a concrete deliverable that sort of wows everybody and is a threat, it's seemingly, to the Frontier Labs and the agents that they have in development, as Josh was talking about. The kind of commentary that we've read today and over the last 24, 48 hours, and frankly, over the last two weeks since the stock took off is probably the most, speaking of consistency, the most consistent stream of positive news around this name that we've seen in the last few years.

21:24For a largest company, 10 largest companies in the world, to have a paradigm shift in two weeks, Let's use the hockey analogy. Let's put it in the net. So let's see if they can put it in the net with their quarterly results. Did you not give Microsoft thinking that they had a paradigm shift in two minutes when they did the OpenAI deal? Microsoft's a little bit different. They did the OpenAI deal, and everybody's, like, falling all over themselves. Like, it's a paradigm shift, blah, blah, blah. Well, Microsoft has also proven through multiple more years of being a public company and a brand-new CEO that came in 15, 20 years ago from Steve Ballmer to completely move.

21:57The stock went nowhere for, like, 20 years, didn't it? Yeah, because of Steve Ballmer and his bad leadership, what happened after in the shift between CEOs. But let's go back to Meta. When you're running a portfolio and running stocks longer term. Portfolios, plural. When you're running 48 portfolios like we do, we run money on sectors in the market, not on Meg7. I can own Google in the communication services sector and have a high tracking error and outperform the market by owning that core company in communication services and not own Meta. No, but do you own NVIDIA? Of course we do. Do you own Microsoft?

22:36It's a technology company. Do you own Apple? It's a technology company. Do you own Alphabet? It's a communication services company. Yes, we do. You choose not to own Meta. We choose not to because it's called stock picking. That's what it is. When you own 47 stocks, you can't own everything. And we own 47 stocks in our portfolio. Right, but you've made a choice that you didn't believe in this stock. Correct. I'd rather be late and correct than wrong and too early. Put the puck in the net. Let's see how the quarter results go in the next few quarters. That's fair. I mean, look, I'm doing the same thing.

23:08It has to prove itself from a momentum aspect and also really from the quality aspect as well. The revenue growth is not competitive to what you look at with an NVIDIA. but logically you can't expect that it was. What I am forecasting is that I believe they will put the puck in the net, and I don't think they're putting the puck in the net once. I think they're getting a high track. I'm not killing you for not owning better. That's not what this conversation is about. No, not at all. The conversation is trying to go a little bit deeper than, well, you can't own everything. Well, you kind of do own everything in that space except for this one.

23:37No, don't own the memory stocks? No, no, no. In the MAG-7, you own everything but this one. No, we don't own that one. Exactly right. So we still have a higher tracking here because you can put bigger positions than the other names. How about this stat that we saw? Not that there's a direct correlation to what's going on in tech, but I want you to pay attention to this. This is from CNBC. So you have the S &P up more than 1 % yesterday, and you all know where it is now relative. It's like, I don't know, what is it, less than 1 % from its high. Okay. More stocks yesterday in the S &P scored new 52-week lows, then hit 52-week highs.

24:23The last time that occurred in the S &P was in December of 1999. To the point that the market, unfortunately, the market, unfortunately, is going back to its concentrated nature. I began yesterday's show by saying the reversal in sentiment and positioning that we've witnessed since last Wednesday's Federal Reserve meeting is indicative of risk on. And I know Mike Santoli took issue with it, and Mike was right to take issue with it. Because really what it is is flipping from risk aversion to risk on, but the risk on is not broad-based. It's concentrated, and for a portfolio manager, that is challenging.

25:01Later in the show, I'm sure, we're going to talk about what the heck is going on with financials. They're trading awful. So you'd like to see more of a broad-based rally. You'd like to see the S &P equal weight right up there with the S &P market cap weight. The S &P equal weight is sitting at its 100-day moving average. The Russell is sitting at its 100-day moving average. They are not participating as well. Concentrated for sure. Problematic for a portfolio manager. Josh, that just brings it full circle to where we started. We've become more concentrated. So you're probably going to have stats like that jump out because of how concentrated things got then and how concentrated they once again look now.

25:41Yeah. But again, why are they concentrated? If it's for some weird reason that's inexplicable, I understand the concern. if it's because the revenue growth and the earnings growth are primarily being driven by 50 companies out of the S &P 500, then I understand why those 50 companies are growing in market cap relative to everyone else. I think it's perfectly normal, totally natural. We've had this happen before. We looked at things like energy going from 12 % to 2 % of the S &P was not the end of the world. We're watching consumer staples shrink over most of the last 30 years, almost without fail, every year, consumer staples become proportionally smaller than the rest of the industry, than the rest of the index.

26:27We've seen them split indexes up, like communication services and tech. A lot of those stocks were all under one umbrella. It got too big. They split them up. They all grew again. Like, this is about earnings growth. So I understand the concentration. I'm not an apologist for it. Like, it's great. And I only want to see five stocks with the whole market cap. But we have had moments of small cap rally, of equal weight rally. We've seen other sectors have a great six month stretch. All's fair in love and war. This is what it is. All right. We're going to take a break. We'll come back. We're going to debate Netflix because there's a pretty good street fight underway.

27:05Some downgrades recently, some outperforms today, targets going in opposite directions. We debate it coming up.

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29:16So Netflix is a stock that seems to be up for high debate. Remember on Friday, Wells cuts it to sell. OK, so that's sort of the backdrop for what's happening today, a few days later, at least in terms of trading sessions. HSBC cuts it as well today. They go to hold from buy. They take the target to 76. They had it at 96. Tides turned, obviously, in their minds. However, BMO goes 135. They're outperform. Piper is 85. They're overweight. So 135, that's an outlier, at least in terms of where most of the street is, whether you're a bull or a bear on the stock. B, you get your first crack on this. I can't remember a time, I don't know, in the last.

30:06Now, I get that it's been a battleground here for the last few months. Yeah. But it's been a few years before you've had this level, I think, of debate on Netflix. You had, you know, that disastrous quarter years ago. Stock just plummets. 2022. Right, Acme gets out. And then the stock pretty much sort of recovers itself and almost goes straight up. And here we find ourselves debating it again. What's up? Yeah, I remember adding the name in 2022. And in fact, you and your show had me on live during that day on the show talking about it. It was very it was even worse than it is now in terms of what people are thinking.

30:46From a sectoral perspective, we love communication services with the three C's cash content and consolidation. We own your stock, Versant. We own Paramount and Midcap. But in large cap, Netflix is going to be the winner. I think five years from now, this is my whole play. Five years from now, it's going to be Netflix, Alphabet, Apple, and Amazon that own all sports. So we want to be there from the content perspective. And that's why we've added Netflix to one of our 48 portfolios, which includes the value portfolio earlier this year. We think there's intrinsic fundamental value in that name, and we want to own it longer term.

31:19Now it's a value stock. I mean, that caught me by surprise. Is there another C involved here, which is competition? And I'm asking, I'm not hating on a stock that I don't own. I hate it when people do that, okay? But here's my point. You know, we know that Paramount Warner Brothers is now going through. Kind of did that on Meta, but never mind. Continue. I've moved on. But is this an issue where, hey, part of the Paramount settlement was they're going to issue however many more new movies. They're going to, you know, commit to California. Is this just too much content out there? It's an honest question.

31:48It's YouTube. It's YouTube. Go ahead. Yeah, Josh, it's a great point. It's nothing to do with Warner Brothers. Hang on, Josh. I'll come to you in a second. I promise. Just give me two seconds. No, I think there's going to be continued. I think that the competition is going to be taken care of by consolidation. There's more consolidation coming in the next three to five years, period. And I think Netflix is going to be the winner. You want it from a deliverability of the product in general. People love the Netflix machine. Look at how every other streamer has copied Netflix on how they provide things the last three years.

32:17So Netflix is, I believe, the base. Okay, that felt a little bit like, hey, you know, GM's getting into EVs after Tesla owns the market. I'm sorry. I'm really not trying to hate on a stock I don't own. I got your point. What do you mean? That was a big part of your bullish thesis on GM at the time before you got out. Well, yeah, you know, GM had a little bit more than that. They had these mean gas-fired vehicles, too. Yeah, but no, but you were like, you were all in on the EV thing for a while. I think we're now doing a little retroactive. Jimmy, I've got a lot of memory bankers stock with a lot of cards up there.

32:47I can pull a number of them at any time. Okay, yes. Also, remember, was a stock trading at six times that did an accelerated share repurchase of 15%. I understand, but you got out of that name the day that the tariffs were announced, if I do recall. I did. I did. To hell with that. All right. We're done on that. I just want a job watching you. Josh, what do you want to say about Netflix? There are actually two different bearish takes right now. The Wells Fargo bearish take is about the fact that they don't have any hits. And that is actually true. It's been a really long time since Netflix has had an original that people are talking about when they turn the TV off.

33:21and that's sort of necessary for this stock to work. They've done really well with live events, the World Baseball Classic, NFL. They're doing what they're supposed to be doing. They're driving a lot of viewership, but they are failing to deliver the next Stranger Things or Narcos or Bridgerton or the things that you can only get on Netflix. That's one of the bearish cases. Wells Fargo's target is 57, which is more than 25 % downside. The other bear take, though, is YouTube. And this is, to me, this is the real bear story. People are increasingly watching YouTube on their television in their living room, not on a phone, not on a computer, that puts Netflix directly in YouTube's crosshairs.

34:10And YouTube is ad-supported, and they can just absolutely crush Netflix if Netflix doesn't have a good response. In response, they're buying creators. They're buying podcasts. They're trying to take things off of YouTube and make them unique to Netflix. It's going to take a long time before people look at that and say, hey, cool, it's working. So that's the story on why the stock's not working. I am long. This is not my opinion. This is my position. My average cost is low 80s. I do think I will eventually make money. I'm not sure when. And I can't picture what the catalyst would be that all of a sudden puts this thing back into an uptrend.

34:50It's in a very bad place right now. I think this is the thing I have been the most wrong about in 2026. I have dug in and I have been incorrect. Down 23 percent year to date. So we'll continue to watch and I know we'll continue to debate it. We do have some headlines crossing regarding Anthropic. Kate Rooney has that for us. What do we know? Hey, Scott. So we are just hearing that Anthropic is announcing its newest frontier AI model. The headline here, Scott, is around cost. So Opus 5.5 is the name of it. It does perform, they say, at the level of Anthropic's best model, which is Fable. They say that's on most work.

35:26According to the company, costs around 40 percent less to run than the previous generation of this model. And for customers paying by usage, which is increasingly common, price is about 20 percent lower. At the same time, the model, they say, uses fewer tokens, which you can think of sort of like gasoline for a car, while generating answers 30 percent faster. I spoke to Anthropics' Diane Penn. She told me they incorporated a lot of feedback from customers on cost and efficiency in particular. Also said that this model communicates more naturally than prior versions. She described it at least as the daily driver for them.

36:00The price update does come amid much more competition from some of the cheaper open source options out there. It is also worth noting, Scott, this is the first model that Anthropic has released since Dario Amadei, the CEO, called for, quote, pacing the frontier. So clearly that doesn't mean they're going to be stopping the release of new models here. Anthropic told me they did extensive alignment testing as part of what they're calling pacing. It did also go through evaluations by some outside organizations. Plus, they say there are extra safeguards for cyber and bioweapons in particular. It does come as the company is reportedly on track to price its IPO in November.

36:36Scott, Back over to you. Yeah, pace the frontier, but not pace their own business. I think that's what we're learning here, and we'll probably learn from the others, too. We'll talk later, Kate. Thank you. Kate Rooney up next. Josh Brown's best stocks in the market. He is focused today on a group of names trading around all-time highs. The reveal's coming up.

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38:28Okay, we're back on Halftime Report. I'm Contessa Brewer with your CNBC News update now. Republican Senator John Curtis of Utah is calling for an investigation after a Russian oligarch paid for a wedding party for the president's son. Curtis sent a letter calling on the Senate Judiciary Committee to subpoena Donald Trump Jr. to face questions over the gift. Trump Jr.'s wife confirmed the oligarch, who has close ties to President Vladimir Putin, hosted two nights of parties in the Bahamas after the wedding. A South Carolina coroner says actor Hayden Panettiere died from an accidental overdose of several drugs, including fentanyl.

39:04She was found unresponsive at an apartment in Greenville, South Carolina last month. Her ex-boyfriend and his brother were at the home at the time. Panettiere was known for her roles in Heroes and Nashville. And San Francisco is suing the president's social media platform Truth Social over a feature that gives some users early access to Trump's posts. In July, Trump Media announced the new service, which costs as much as$100 ,000 a month. San Francisco's city attorney says the access amounts to a marketplace for insider trading. That's the news now, Scott. I'll send it back to you. All right, Contessa, thank you, Contessa Brewer.

39:41We'll do Best Stocks in the Market now with Josh Brown. We are focused on a group that we do talk quite a bit about, but you've raised the issue today on this group. For what reason are we talking about cyber today specifically? I just think that this entire group has built a new fan base in the stock market because people now understand the AI thing is not going away. Consumer use of these apps and services is starting to explode in the enterprise. It's already completely embedded. and this is a new threat surface, they call it. It's like an entirely new thing that requires obviously more money, which is more revenue and earnings for these companies, but I think longer time horizons for these investments.

40:29So I'm going to show you the cyber names that are on the best stocks list. And then as a treat, I'm going to show you two names that aren't, but could be based on their improving fundamentals and technicals. People are always like, why don't you tell me before it's on the list? Congratulations. Today, we're going to do that. Real quickly, here's Crowd. We've talked about it a ton, so I won't spend any time on it. But I want you to understand why it's the best stock in the market. Give me like a one-year chart. This is a classic stair-step pattern, right? It takes two steps forward, then it's flat, then maybe one step back, then another two steps, and on and on and on.

41:05We want to see these stair-step patterns. I see them in my dreams. Palo Alto, P-A-N-W, on the list, but technically does not look as good. Joe will confirm this because why? We have it hit 400 and now we have this series of lower highs. So it rallies, but then it doesn't quite get back to that 400 level. And then it can't get back to 390 and then 380. This is frustrating. I don't like this setup. Let's do Fortinet, FTNT. This one looks the best of all of them. Technically, this is actually a breakout in progress. People don't know this name as well as they know Palo Alto and CrowdStrike. Maybe that should change.

41:43This is a clean uptrend since the earnings gap. Now consolidating. The 50-day is acting as a rising floor. RSI at 58, not yet overbought. I like it right here. Cloudflare, NET. Look at this absolute wombat. This is a, look at this thing. Nobody even knows what this company does. It's perfect. Wombat? And then here are the two that are not on the list. Zscaler just crossed back above its 200-day for the first time all year with a golden cross forming right now, 50-day above the 200. And here's Sentinel One S. I won't buy this because they took the old Sears ticker symbol. And as Jimmy will tell you, that's bad karma.

42:26I agree. But it is breaking above a$25 billion market cap, which is the first hurdle to get on my list. There are many others. And technically, you can't deny, this thing looks like she wants to go. These are smaller companies, Zscaler and Sentinel-1, but people should know about them before they become the best stocks in the market. A lot of ownership, obviously, on cyber, except for you. Except for you, Jim. Except for that setup. Be a wombat. Well, my wombat is Cisco. I mean, that's actually an interesting setup where you've got security combined with software, combined with hardware. I actually like that.

43:08But I acknowledge I don't have the pure security names. Lopelski. Lopelski first. Okay. Pelo Alto is the leader here from our lens. The cheapest one is, well, from an enterprise perspective on Okta, Rubrik is data dependent. So they keep all the data. So that's the cool thing about that company. So there are smaller cap companies that you can own in that space. Can I please have a 52-week chart of Okta? That's the one name Josh didn't mention. When he sees it, maybe it's a candidate to go on the list. They have an investor day on Wednesday. This is a$33 billion market cap. They've been mentioned as a potential acquisition target.

43:51They are in a massive recovery from where they were. Pull that lens back, if you could, now five years. Go back over the last five years. This stock is actually down. They're making the comeback, diversifying the product. They're in the sweet spot and they are ripe for someone to come in and buy them. All right. We'll take a break. We'll come back. We're playing options action today. We'll go to Chicago next.

44:25We're back. We're watching Schwab today. Stock's pulling back. We want to get to Oliver Rennick. He's live at the CBO in Chicago with what the options market is betting on or against today. Oliver. Hey, Scott, Meta's Muse AI agent is threatening major disruption that's now hitting a few big financial players hard. Check out the sell off in LPL and Schwab in particular. This threat looks very real for Schwab, where options volume is more than five and a half times the 30 day average and nearly twice as many puts being bought versus calls. Right now, the most popular contract to buy is the 90 strike put expiring mid-January.

45:04That's a bet Schwab drops another 13 percent into the next three months. To be sure, there was one big counter trade sale of the October 16th, 95 strike puts. But perhaps what's most interesting here is that competitor Robinhood, which introduced in-house AI agents earlier this year, is moving higher today. And the sentiment's the opposite. Traders are buying twice as many calls as puts with almost 80 percent of premium traded tied to calls. Perhaps a sign the longstanding rivalry between these two is entering an aggressive next phase. Oliver, thank you. Oliver Rennick, what do you think? You own Schwab.

45:41Yeah, and it's not good right now. When you look at the exchanges, the asset managers, even some of the money center banks that derive revenue from trading, flattening yield curve, not working, the overall environment of the last 30 days, very choppy marketplace, not good for any of them. The move to independence is still on. We have more advisors going to Schwab on the platform. Same thing with LPL. At the end of the day, this business is still about relationships. I'm not worried about the AI stuff. I mean, what about others who are sort of making a move into wealth management, which is looking to be a threat to companies like this?

46:13Again, we'll see if that actually transpires into real volume and real business going that way. At the end of the day, people are going to give their money to advisors. Like Vanguard, for example. Well, Vanguard still. Vanguard is probably going to follow the same thing with Fidelity as it's still early on. Fidelity's done a pretty good job, but it took them a long time to build the infrastructure with respect to getting all these advisors on. All right. We'll take a break. We'll do finals when we come back.

46:39Josh, final trade. AMZN. Thank you very much. Checkpoint software cheapest in cybersecurity and not on Josh's list. Micron. I did it yesterday, but why fight it? Apple. Frontrunner. Right? Did he? Yes. Two days in a row, final trade. All right. I'll see you on the bell. The exchange is now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.

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