The State of the AI Trade 10/9/26

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0:45Scott Wapner: 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.

1:00Scott Wapner: All right, guys, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner, front and center this hour. Questions about the AI trade, which has been holding up this market, as you know, a big pullback as well in Apple today. Get to all of that with the investment committee. Joining me for the hour, Steve Weiss, Jason Snipe, Stephanie Link, Rob Seachin. Go to the markets here. We are green across the board. NASDAQ is higher. We did have that big decline yesterday, worst day since August, of course, on that OpenAI revenue report. It just shows you how anything that even is a whiff of question about this story is going to have a sort of swift and dramatic impact on the market.

1:41Scott Wapner: The market doesn't even wait to find out what's either legit or not legit, how much it matters, how much it doesn't matter. It just reacts. It reacts. And every time that happens, I think of, OK, what are the private market investors in an open AI and in Anthropic and all the others that have these unbelievable valuations. What are they thinking? They see others can exit. But today's not a very convincing return after what we saw as a sell-off. So I wouldn't say you're making lower highs, but it is worrisome. Look, I think about it all the time. What's worrisome? What's worrisome is the funding and the circular funding that's through all these companies.

2:26And if one defaults on it or if one can't raise capital, right now there seems to be insatiable appetite. And their spend in some of these companies are far more than their revenues.

2:38Scott Wapner: Take a look at, you know, you talk about the circular nature of a lot of this and the reliance that sort of the ecosystem has on OpenAI and Anthropic. We have something to show you that of all their partners, just to give you an idea of the kinds of stocks that you see. Yesterday, you had about$270 billion of MAG-7 market cap wiped. But then, you know, Nebius, CoreWeave, Oracle, AMD, Broadcom, they're not in the MAG-7 complex. Not far off, though. But to your point, the tentacles are everywhere. So if you can't, what happens? Here's the question. Now, we saw a company in Australia that couldn't bring the company market.

3:23The IPO isn't happening, or if it does happen, it'll be a much lower valuation or an AI company. What happens if they go to market, and even though rates are higher and they've got to offer rates, the market says no mas. The sovereign wealth funds in the Middle East say, you know, we've got enough of a position here. Don't look to us. What happens is because they have to spend. It's an arm race. So if they stop spending, that's where I think it's to look out below. And even though that'll be in the private sector, not the public sector, that disconnect is like a mile wide what's happening in private versus public.

3:59So public, I think, in this case, could very well lead that. And the debt trades publicly. So, look, I'm not calling the end of the cycle right now. But if you're not worried about it happening at some point, then you truly are, you know, whistling by the graveyard.

4:14Scott Wapner: Jason, UBS today says AI demand remains robust despite these jitters that we've seen in the market. But you need to be more selective and disciplined in how you position. You need to favor high-quality semiconductor and hardware beneficiaries of all of this AI spend, the mega cap platforms, and so-called defensive tech firms. What do you make of that? No, I think that's absolutely true. I think one of the things that's been a bit concerning for me is just the vulnerability of the concentration risk. Right. Obviously, as we've seen, as AI goes, the market goes. Right. And earlier this year, we were talking a lot about the RSP, the equal weight and how those numbers have outperformed.

4:54Scott Wapner: But I think one of the things as we've kind of taken a look and did our analysis, obviously, is more 52 week lows and 52 week highs. Right. And there's a lot going on under the service, which we need to pay attention to. So I see when I see a move from open AI and I see the news and then there's a little bit of a playback or it's just a calendar event. Right now, they're talking about through December that it was just an accounting era. And you're seeing a little bit of bounce back. But to Steve's point, not quite the bounce back of what we lost yesterday. But my concern overall is just the vulnerability of spend.

5:28The CapEx needs to continue to keep going for the market to continue to push forward. And the vulnerability in the market. I mean, right now, we're looking at a market where the baseline case for earnings is up 30 percent. But that's concentrated in very few companies. So even if they meet expectations, as we saw with Micron last few quarters, it's not good enough. With NVIDIA, it's not good enough.

5:51Scott Wapner: I wonder if this next chart, Steph, speaks a little bit to how reliant we've been on these large stocks. Let's show this. The share of S &P stocks outperforming the index on a three-year trailing basis is only around 30%. So that shows you just how reliant we are on the back of these companies. And they have been carrying the lion's share of this record run. There have been pockets of time when you've had a broadening move, but overwhelmingly it has been a concentration story. And if that doesn't show you what the tail of the tape is here, I don't know what does. The question is, is there risk in that graph that we just showed you?

6:53Well, sure, there is definitely risk. I think the kind of worry point for me is if we do see a change in the spend from the hyperscalers, we know that they're going to spend a trillion dollars this year and they're expected to go to one point two to one point six trillion next year. I think it's going to be at the high end. There's no indication whatsoever that these companies are going to reduce spend. But if they do, absolutely, there is risk, not only in technology, but in all of the food chain names and sectors that we talk about, the data centers, the grid, the power companies. But there's no indication whatsoever that we're seeing and going to see a slowdown.

7:32And I look at the hyperscalers. That's a really important number of a trillion dollars. But then I look at the behemoth in the industry, the smartest of the smarts, right? That's NVIDIA and that management team. And they are going to spend over the last year, they spent twenty four billion dollars in R &D expense just for AI. New architecture, they spent 18 billion equity investments, ninety nine billion versus 70 versus seven billion last year and supply agreements so that they can ensure that they get the supply of almost four hundred billion dollars. I mean, they are going full throttle. They are not decelerating.

8:09And that gives me comfort that we are still in the fairly early innings with regards to AI. And just wait until earnings season, because we're going to get confirmation from all those other sectors that I mentioned in terms of backlogs and orders and growth and probably margin expansion as well. And so I don't want to tap the brakes on this trade. I don't think that the economy is growing this fast just from AI. It's a big part of it, probably 70 percent. But the consumer is also doing their part. Look at the Bank of America surveys this morning from last month for last month. Last month's numbers were at really high, strong numbers.

8:50The consumers, they're angry, but they're

8:51Scott Wapner: spending. They're angry. Yeah, they are angry, for sure. But they're spending, right? I mean, I mean, you get the consumer confidence number today missed by a lot as those numbers go. But, you know, the employment market still looks pretty good. So, you know, you can hate spend, I guess, because you have no choice but to spend more because of inflation and the fact that prices are up. Grocery store, gas pump, et cetera, et cetera. Places that everybody knows. Rob, when I show you that chart that fewer and fewer stocks are outperforming the S &P, they make you nervous? Does it just make you say, you know what, that's how it should look, because that's how transformational this AI story is that, of course, the chart's going to look like that.

9:38Scott Wapner: The question is, though, can that continue to carry the market to higher highs? you know it it it should concern you in some ways but the reality of it is i agree with you what is happening should be happening because that's where the durability of growth has been and will continue to be because of the intent of the hyperscalers the intent on spending and the derivative beneficiaries of that but getting back to what steve said this entire market rests on one pillar of strength. And when I say the entire market, I don't just mean the stock market, I mean the economy as well. And the reason is, is the reason consumers are spending, as you pointed out, is because there's been a huge wealth effect as it relates to the stock market, which is disproportionately driven 44 % by the mag seven and the AI infrastructure stocks.

10:36And so you're resting on this one pillar of strength, which I think is very, very strong, however, completely dependent on access to capital. There is not going to be a change in intent, I can assure you. What there may be a change in is one of these financings not working, one of these financings failing. And what are the derivative implications of not being able to fund these. I don't expect that because I think the demand on the backside of this is incredibly strong. But you had better watch out, not only from a market standpoint, but from an economic trajectory standpoint, if that happens.

11:17The beauty of all this is the Fed, because of tightening rates, has been able to kind of reload, so to speak. So if they need to cut rates they can. But we're not wishing for that either, because I think it's going to be a pretty dramatic pullback if that happens.

11:35Scott Wapner: There's always, Weiss, a leg break in the chair of market dreams at some point. At some point. Right now, the chair looks great. It looks durable, looks strong, doesn't look to be even wobbling. It truly doesn't. Now, you're going to go through some of these moments here and there, but you and Rob speak to sort of the same thing. The impossible to know is the when and the what. What is the moment? When does it happen? Are we a 96? Greenspan, irrational exuberance in some parts. I don't know. The market's worked a lot of that stuff off, hasn't it? Multiple has come in a lot. We're under 20. We were above 23.

12:16Scott Wapner: But a lot of that is skewed by the remainder. The other 490 companies, whatever they are, in terms of what their multiple is. I mean, you take a look at some of the other sectors. Take a look. I pointed out the other day, the defense industry. Sure, you see some green there today, but those stocks are trading at 52-week lows across the sector. You see it in other sectors as well. Look at the sell-off in the financial stocks. Goldman's come down from over$1 ,000 a share. It's down 12%, 15%. That's reduced the multiple. A lot of those banks, by the way, are in full-blown correction territory. Right.

12:53Scott Wapner: Not bear market yet, but you're almost looking at double-digit declines off the highs for all those names. Exactly. Yield curve's gotten flatter. Net interest margin's not great under that scenario, of course. Yeah, and I agree, you're mostly about the yield curve. Yeah. But it's also about, are these IPOs, where they're going to make their highest margins, are they going to come to market? So that's a little part of it. Most of it is the yield curve. I think there's a growing amount of not only pessimism and skepticism about the IPO market. I think the numbers are starting to sort of bear that out.

13:26Scott Wapner: You've had, you know, IPOs pulled. Yes, of course, we're still waiting on Anthropic, and that's going to be the biggest kahuna in the ocean. But nonetheless, I think there's a little more pessimism, you know, permeating through the markets. Well, we'll see. You got a very treacherous period coming up because not only do you have earnings, But you've got the election, which is right during earnings. You've got what's the Fed going to do. And then you've got the threat of resuming the military campaign against Iran right after. What's that do to oil? So you've got all those that are working in concert, which, you know, depending upon how they go, could be a treacherous time for the market.

14:08Scott Wapner: There's another big story out there today, and I don't want it to get lost in the shuffle either. And it's regarding Apple. Take a look at shares. under pressure on a report of soft demand for its new iPhone, somewhat surprisingly soft demand, according to whatever report you read. Mackenzie Sigalos is on the case for us, as always. So what are we to make of this? So, Scott, Apple is the one Mag 7 name trading in the red this morning on signs of softer demand for its latest iPhone after Nikkei reported that Apple cut October production orders for the 18 Pro and Pro Max by at least 15 percent from its original plans.

14:42Now, I'm out to Apple on this report, but haven't heard back. Wolf Research weighing in this morning, saying what's especially notable here is how early these component cuts are coming. Because historically, Apple has waited until later in Q4 to pull back supplier orders. Now, one concern is price. Both pro models went up by$100 this year, and there's no base iPhone 18 in this fall launch cycle. So the starting price for a new iPhone this season is$1 ,200, which is 50 percent higher than last fall's entry point. UBS is also pointing to shorter wait times, despite stable supply, suggesting that demand may not be keeping pace after those September price hikes.

15:21There's also the fact that demand is being split across a more staggered launch schedule. Pre-orders for Apple's first foldable, the iPhone Duo, start next week. And Citi says that some of the softer demand signals could simply reflect buyers waiting for that device. And that is part of why Citi is keeping its broader iPhone unit forecasts largely unchanged. Scott?

15:42Scott Wapner: You know, I wonder when the when the price increases were first announced and even the rumors of them leading into the actual event where we got hard numbers. I think to a person, most were like, well, if anybody has pricing power, especially in tech related to devices, it's it's Apple. I wonder whether, yes, that's still true. But for consumers who are thinking about upgrading their phone, they're like, well, I'm already paying X amount of dollars more at the gas pump. I'm just going to wait because I don't have as much discretionary income as I want to at the moment to pay for what is, you know, a reasonable percentage increase in the in the price of the phones.

16:29Scott Wapner: It's just pushed off the upgrade cycle because of price, because of inflation, because of environment and everything else. And Apple did try to front run this, announcing Apple upgrade ahead of their big September phone launch event, essentially being able to break down the payments for the phone into a leasing program so that it would incentivize upgrading every year. You wouldn't necessarily work towards ownership like you currently do with the carriers. But at least in the case of the 18 Pro and Pro Max, there wasn't a huge change here in terms of the underlying specs. You saw some color changes.

17:02But to your point, nothing that really compelled a user to necessarily want to get the new phone because of a feature they couldn't access before. Because you can get the new Siri AI experience if you have everything north of an iPhone 15. And then there is this question, and that's what a lot of the street commentary is looking at this morning, is are people holding out for the first foldable phone? You've got pre-sales starting October 16th. They actually go on sale the 23rd, and that will be the big demand signal, whether or not Apple does have this pricing power, if it's just this staggered release of devices that's perhaps skewing demand signals.

17:37Scott Wapner: Mac, thank you. Mackenzie Segal. Jason, you own the stock. We're not going to go overboard on a stock that's given back not even 2 % on what is simply a report. And the prior upgrade cycle was more robust than I think people expected it to be. Maybe this is just, again, an elongated cycle. It gets more robust as you go down the road a little bit further. But what do you think about the stock? I think there's a lot of pressure on the duo. There's no doubt about it. I think there's obviously another foldable phone on the market with a different carrier. But this staggered launch, I think, plays a role.

18:09I think memory calls are a big deal. That's that's you know, they raise calls on the MacBook. They raise calls on the iPad in June. Right.

18:17Scott Wapner: I think that went over fine. But I think as as as a change, the launch cycle, as as Mackenzie just shared, that is what is, I think, impacting the stock and what's impacting demand in the short term. So I do think we'll see October 16th, you know, what the deal is. I think the duo will do well. I think Apple is, you know, and I think what Turner said, kind of running the game now, is going to be accretive and positive for the stock. And I think it's going to do well. I'm going to take the other side. Yeah? I don't think the duo is going to do so well. I think the initial size will be good. But the camera is deficient.

18:57And keep in mind, every upgrade cycle, they've focused on adding enhancements to the camera.

19:02Scott Wapner: I know, but how much better does the camera really need to be? The camera takes pretty good pictures, you know what I'm saying? But the camera goes backwards. It's not even maintaining the level of technical efficiency and options that the 17 and 16 have. So it's going backwards. I don't think there's a zoom on it. And it's$2 ,000. I mean, if we're talking about pricing now, what about for the baseline one of$2 ,000? bucks. Plus, for Apple, will it, because of the bigger screen, will it cannibalize the iPad? So it raises a lot more questions for me than it answers. But I do think the initial demand is going to be strong first adopters.

19:42And by the way, I don't recall a cycle on an iPhone where they didn't cut, where rumors were not ubiquitous that they're cutting back production. Because Apple always orders and lets their suppliers own that on their balance sheets. So it's really a free call option for them.

20:01Scott Wapner: There's another interesting story. I mean, at least a note, Rob, from Rothschild and Redburn, in which they ask if Meta is actually a threat to the iPhone. And they're talking about the Muse charm and the glasses. They're not suggesting that they're going to displace the smartphone. However, they say the Muse Assistant is a reminder that Apple's AI fast follower strategy will need to impress in 2027. Apple needs to get this right. What is, you know, the new Siri currently in beta form just needs to get it right because there's a lot of other options coming into the marketplace, irrespective of device, model, agent, etc.

20:52So I completely agree and will tell you that we're neutral on Apple, went to neutral in July, mainly based on valuation and lofty expectations around this release. And that's kind of a setup for a disappointment. You cannot be underweight Apple long term. Just too much capital efficiency, too much free cash flow generation, too much in that product ecosystem that retains the customer and owns the customer. You know, Steve is an influencer might not like the new camera. However, there are a lot of people that will and will make that migration to it. Remember, when you own the customer, as both Apple and Meta do, you benefit from the application layer of the infrastructure because all apps are going to be built on top of this base AI infrastructure that ultimately is going to sit on one of these two platforms that controls the customer.

21:51Of course, there's other platforms that controls the customer, but just as we saw in the wireless cycle, Those that own the customer are the ultimate beneficiaries of the app layer when it gets built out. So I'm going to stay neutral, Apple, because I think it got expensive. Meta, on the other hand, is very cheap. And we've seen historically that as Meta gets cheap, it's always been a good time to be a buyer. And when you look at Muse, two million daily active users, top rank app in the app store, ultimately underscores the opportunity in that stock. So we're overweight there. But again, two great long term companies.

22:36Scott Wapner: Let's let's just say there's three big stories in the in the in the market today, I think, to discuss. It's open AI and the fallout from yesterday. It's this Apple movement that we've already discussed and then where rates are. And if you look at the curve today, we're green across it. Ten years at 525. But you've got everything is higher today. Waller made news yesterday, the Fed governor did, when he said more hikes are likely necessary to get back to 2 % in a more timely way. Markets betting on December now. Anyone's guess as to whether October is 50-50, maybe less? Who knows? Steve Leisman may know or certainly has an opinion.

23:11Scott Wapner: He's our senior economics reporter. Because now we have the news, Steve, of that White House hearing regarding Lisa Cook. I wonder whether, you know, how that news is playing out on the curve. And this this hearing with I don't think it's a stretch to suggest a hearing with a predetermined outcome. If the outcome is going to be decided by the commander in chief who obviously wants Lisa Cook out. Yeah, ultimately, the decision, I believe, will rest with the president. There is a committee made up of the head of the Office of Government Ethics, the head of the EOC, as well as Kevin Hassett. Hassett, by the way, the NEC director, has already said that the allegations against Cook are serious and said she was being partisan by not agreeing to resign or step aside, in his words, in the face of the allegations against her.

24:09There's a lot of questions about this, Scott. We haven't seen anything like this since, we believe, the time of President Hoover, maybe. So what this is and the form it will take, the power that it has are all unclear to us. the attorneys for Cook have said that they do not believe it will be a legitimate hearing. And Elizabeth Warren called it a kangaroo court.

24:37Scott Wapner: Yeah, we'll watch it play out and we'll see how the market reacts. I guess the bottom line is the president can obviously try and fire anybody he wants. And he's already tried to fire Ms. Cook at one point. It's not going to change the fact, however, that seems this Fed has moved to be decidedly more hawkish. What would you say about October? What do you think is on the table in light of where we are on an inflation standpoint, where inflation expectations have now moved, you know, relative to some of the data also? Well, I think that two top lieutenants of Kevin Worsh have spoken and they've used this idea of the Fed could benefit from having more time.

25:22And those, of course, are Williams and Jefferson, the vice chair. I think that's probably where the chair is, I think, at this point. Although I think there are going to be members of the committee who might want to move now. Maybe Waller is among them. Certainly Hammock and perhaps Logan think that the Fed ought to be doing more right now, especially as these inflation expectations rise. They're definitely worth watching. The rise in gas prices has really infected the public's view of the outlook for inflation in a very negative way, in a way that could eventually or could become worrisome. I will say right now, Scott, that the odds of a October hike are only at 20 percent.

26:03They've come way down. And I don't think the Fed would hike into a 20 percent probability of a hike at this point. But, Scott, you raised a broader point, which is, you know, the president is not going to give up here. He keeps attacking the Federal Reserve. This is seen as by some as an attack on the Fed's independence. And he is blaming and members of the administration have blamed the committee and not the chairman for the recent rate hike and the bent towards hiking rates. And that's part of the reason why he has this idea that if he gets rid of the committee, he can get lower rates. And I don't know that that's true.

26:41Scott Wapner: All right. Steve, thanks. As always, Steve Leisman, our senior economics correspondent. And coming up, we do have a committee move to tell you about. Stephanie Link has made one, a new buy from a stock I don't think we've ever talked about on this program. I could be wrong. I don't think so. We'll do it next.

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28:30Scott Wapner: All right, welcome back. I mentioned Stephanie Link has a new buy. It's Mirian Technologies. I don't think we've talked about this name before. I could be wrong, as I said. But what drew your attention to it? We never talked about it, or at least I have never talked about it. What caught my eye was the Constellation Energy and Alphabet Partnership, the 20-year nuclear power partnership. They are going to bring 890 megawatts of nuclear power to the PJM grid. So nuclear is here. It's here to stay. It's actually gaining momentum, and I wanted to have some more nuclear exposure. I have a lot of power exposure, but not really nuclear.

29:12And what Miriam does is their mission-critical hardware-software services. It's used to measure and detect and monitor radiation. Nuclear is about 70 percent of their revenues. Medical is about 30 percent. They have recurring revenues of about 70 percent, double-digit revenue growth overall. Gross margins are expanding. They've done 10 acquisitions in the last six years, which I think are going to be synergistic. And they have$1.1 billion in backlog. And if I told you all this, you would have thought that the stock would have been doing well by now. It's down 29 percent year to date because of organic growth being a little bit slower than expected.

29:48But I think these acquisitions are really going to help the growth rate of the company. And I wanted to have more exposure on the nuclear side.

29:55Scott Wapner: Is there something about the nuclear side of this equation that is not being valued by the street? I'm looking at Oclo, for example, because I was going to ask you, well, why not that one? And then I come to see that. I mean, that stock's down 52 percent year to date. There seems to be a disconnect somewhere in the chain between the bullishness that you have and how investors are viewing this. And perhaps it's in the way that data centers are going to be powered currently and in at least the near future. Well, we don't have enough power, and that's why you're hearing about nuclear. You're hearing about coal.

30:34You're hearing about renewables and natural gas. And I believe long term natural gas is going to be the winner because we have a lot of it. It's clean. We just don't have enough pipelines. So that's why I own EQT for the natural gas exposure. But this deal with Constellation and Alphabet, this is a long term transaction and spring massive capacity in terms of nuclear. And I want to have more exposure there as a result. And I think most people were thinking nuclear would be a short-term situation. It's really hard to build new nuclear facilities. And that's why the expansion of existing are really very important.

31:11And that's what's nuanced here in my mind from this transaction earlier in the week. And I think this company has done a really good job in terms of delivering on expectations. But as I mentioned, organic growth was slower in the last two quarters. They did double-digit revenue growth mainly from M &A. And so I think going forward, though, you were going to see better organic growth and better momentum on the nuclear side.

31:36Scott Wapner: All right. Good stuff. Thanks for bringing that to us. We'll follow the stock up near 2 percent. Getting a little bit of a move here on this news from Stephanie. Frank Holland, speaking of news, has the news update. Hi there. Good afternoon to you, Scott. The FBI has reportedly arrested a man in Pennsylvania believed to be behind a hack that stole the personal information of thousands of FBI employees. According to the New York Times, that man is a Canadian citizen who was considered a primary co-conspirator in that September breach. The group's shiny hunters allegedly got into an FBI jobs portal and compromised the data of roughly 4 ,000 employees.

32:08Legendary Chicago Bears coach and Hall of Fame tight end Mike Dicca has passed away. Dicca, who earned the nickname Iron Mike for his gritty personality and his sideline outburst, led the 1985 Bears to the franchise's only Super Bowl title. He also won a Super Bowl ring as a player with the Dallas Cowboys in 1972 and as an assistant coach for the Cowboys in 78. Mike Dicca was 86 years old. And Arlington County in Virginia filed a lawsuit opposing the construction of President Trump's proposed triumphal arch. The lawsuit criticized the speed of the planning, saying the project has not gone through a full review process.

32:42Scott, back over to you.

32:44Scott Wapner: Frank, thank you. Frank Holland. Up next, Macau making big bets to reshape the gambling capital of the world. our contested brewer is there live. And she joins us next.

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34:13Scott Wapner: Casino stocks like Wynn and Las Vegas Sands having a dreadful year as gambling revenues have disappointed. It's been much the same story overseas, especially in Macau, despite strong visitation numbers there. Speaking of visits, our Contessa Brewer has made one. She's live, as you see. Tell us more. Well, so, Scott, you would not judge by the visitation numbers what's really happening behind the scenes because basketball fever has taken over Macau. You've got 14 ,000 mostly Chinese fans filling the Venetian arena tonight. And you know who really hit the jackpot? Patrick Dumont, the CEO of Las Vegas Sands, who's also the owner of the Dallas Mavericks.

34:53He's hosting the NBA China Games and getting to watch his own team play here. This year, it's reaching a new level. I think fans understand what's going on here. I think people of Macau understand how great it is to have the NBA. We have people coming from all over to the games. It's really exciting. But then to have the Mavericks here, it's incredible. It's a dream come true. He really sees these NBA games as an investment in the future. But as Macau is remaking itself more in the image of Las Vegas, more shows, more sports, more Michelin starred restaurants, visitors are responding. They're coming in droves, Scott.

35:29August set a new monthly record. September and October have been strong. But gambling revenue is falling lower than last year, lower than pre-pandemic levels. The competitive environment is really intense. It's got MGM and Sands taking share and Wynn and Melko losing share, according to Seaport Research. Promotions are rampant in town to woo the highest value gamblers. And credit sites issued a research report saying it's just difficult to see the path for gaming spending per capita to meaningfully recover. But again, this is what the government of Macau wanted when it extracted new concession promises to spend big on non-gaming amenities.

36:10Scott Wapner: What about, I mean, are we seeing a commensurate thing in Vegas, too, in terms of gaming revenues being off? And I mean, the stocks don't lie, right? The stock market don't lie. But interestingly, all the CEOs of these companies say that the investors are just ignoring how much cash is actually being thrown off by these big casino companies, that they are still making money hand over fist, even if it's not where it was at pre-pandemic levels. And the difference with Las Vegas is that years ago, the majority of its revenue was coming from non-gaming. So food and beverage, spa, sports, hotel rooms, all of that makes up the bigger bulk, about three quarters of the profits in Las Vegas, and gambling is much smaller.

36:56This was considered a hardcore gambling destination. Well, now there's so much other stuff to see and do and eat that the gambling has taken on less importance, at least if you're a family, you know, coming in to enjoy basketball. Now, there's still hardcore gamblers coming here, of course, and the fight over them is real.

37:18Scott Wapner: Contessa, thank you. That's Contessa Brewer live for us in Macau. Steph, as I said, the charts don't lie. I don't know. You know, I keep hearing everything about how the consumer is great and everything else. And these charts are just downright ugly. You own LVS. Yeah, I mean, it's a small position. I probably should have sold the whole thing. But yeah, down 44 percent. It's been a disaster, an absolute disaster. But I do think that there is still market share that they are taking in Macau and in Singapore. But the problem is gross gaming revenues are down 4 percent. You didn't have any World Cup bounce.

37:52So it's like numbers keep coming down and we know stocks follow where the numbers are going. And so even though they're taking share, it doesn't matter at this moment in time. The stock's at 12 times earnings and Contessa was spot on in terms of free cash flow and the buybacks that they've been announcing. So, you know, I'm just going to stick with it. It's a small position. It's down too much. But I do think that there's some upside in the coming quarters, probably not this quarter, but in the coming quarters, especially on easy comparisons.

38:19Scott Wapner: Where's Farmer Jim when I need him? You know, this is exactly where he should be. Man, all the days for him not to be here. Maybe he knew. Maybe he knew. Options, actions next.

38:38Scott Wapner: Time to play some options action. We'll do it with Oliver Rennick, as always, from the CBO Global Markets in Chicago. Where are we looking today? Hey, Scott, looking at some wild trading in Micron. By volume, there are more calls trading than puts at 40 % higher than average volume. But about$270 million in premium so far is likely tied to put buying versus$230 million of likely call buying. And a big chunk of that spread looks like it's coming from someone purchasing a roughly$14.5 million bearish spread using deep in-the-money puts expiring in June 2028. Now, interpreting data at strikes that are way out of the money can get messy, but taking it face value, it looks like they bought the 23 and 2 ,500 strike puts and sold the 2050s against them.

39:33For context, buying just one of those 2 ,500 strike puts costs about$150 ,000 all in and starts making money about$10 down from here in Micron, So basically a synthetic short, Scott.

39:46Scott Wapner: Interesting. Oliver, thank you very much for that. We'll talk later this afternoon. Steph, we'll talk now about Micron, this trade, meaning where, you know, where this name is going. It's so sensitive to any news at all. You know, some of the way that some of these chips immediately traded off of that report yesterday regarding OpenAI was fairly dramatic. What do we think? I mean, well, the stock is up 260 % year to date. So I get, you know, that there are high expectations for sure. But after the company reported earnings, I mean, they, I felt even better about that, at least the visibility. They talked about demand exceeding supply well through 2028.

40:27Visibility is getting better because they have new customer agreements. They have 24 customer agreements, and that accounts for 30 % of their business by 2030, over$100 billion. So, I mean, I mean, the business is there. We know that we are short just about everything, but we are definitely short memory and short, short compute. And and I think they have the pricing power. And that was evident in the gross margins. And so I'm going to stay patient with it. But I understand people don't take profits. They can. I don't think there's any reason fundamentally to be shorting this stock, though.

40:56Scott Wapner: All right. We'll take a break. When we come back, we'll tell you about the health care name that is absolutely ripping today and where we stand on it on this desk next. I told you there's a ripper in the health care space today. It's right there, H-U-M. It is Humana up 12 percent plus on some Medicare related news. Our Anika Kim Constantino following that story and tells us why the stock looks the way it does. Hey, Scott. So Humana is actually the biggest winner of new star ratings for 2027 Medicare Advantage plans, which were announced late yesterday. Humana said 95 percent of its Medicare Advantage members will be enrolled in plans rated four stars or higher in 2027.

41:37That's up sharply from 20 percent in 2026, thanks to the company's work to improve measures of care quality and member experience. The federal government rates Medicare Advantage and prescription drug plans on a scale of one to five stars. And higher ratings lead to bonus payments from the government that amount to billions of dollars and can boost plan enrollment. For example, Oppenheimer analysts estimate roughly$3.6 billion in added revenue in 2028 for Humana thanks to these higher ratings. Meanwhile, some rival health plans like CVS and Alignment Healthcare are in the red today after the government trimmed some star ratings for some of their plans, Scott.

42:15Scott Wapner: Annika, thank you. Annika Kim-Constantino, this got your attention. Why has she hit us up immediately? Yeah. The big deal, you said. Star ratings are incredibly important, not just for the big insurers, but for smaller companies, too. That's what drives their business. So it brings in membership, as you said. And it also, the bonuses that CMS gives out, it makes them title for it. But more importantly for Humana, and I've missed this stock. I've watched it. I should own it a lot. I thought you were in it at some point. No? I was in it at some point. It was a good trade. I should have stayed there.

42:46The performance has been phenomenal. Let's keep in mind that the CEO came in just about three years ago, And he's brought in new senior management in 24 and even 25. And the turnaround is, I'd say, complete. Now it's well on its way. They've rationalized the business somewhat, you know, quite a bit. But those star ratings at three were also lower.

43:08Scott Wapner: So to be able to turn those rounds quickly as they did is just incredible. Look at that chart, 70 percent. Steph, I mean, look, Weiss has UnitedHealth. You do as well. Is that your best name now in the health care space? Yes, it is. Well, Natera is the only two names that I own in health care. I love Natera, but it's very expensive. United Health Care, I think, in the managed care space is absolutely the one, in my mind, to own. When you can get this stock at 19 times forward estimates when its historical range is at 23 and it's trading at 15 times EBITDA, it's typically at 19 times. So it's a big discount.

43:45You have a great leader who is really turning the company around. The big key, though, Scott, next week when they report earnings is going to be all about their medical loss ratio, what the guidance is, what the cost framework is going to be for the second half of the year and into 2027, because we know utilization rates are going higher. And not only they're going higher, but seasonally they're also going higher. So we want to see if they can contain those costs. I think they will. And I think the stock is definitely best in breed on sale. I would be owning this all day.

44:15Scott Wapner: Jay, your number one name in healthcare, is it AbbVie? It's AbbVie. Yeah, absolutely. And I think, you know, for me, as a relation to kind of biopharma, they, you know, immunology is their story. But they continue to diversify outside of that. Obviously, there's a lot of talk of Sky Rizzi and Renvoke and how well those businesses have done. And they have gotten away from Humira as a biosimilar. But they are expanding outside of the immunology space, which I think is accreted for them long term. So I continue to like that one. Okay. We'll take a break. We'll do finals. On the other side. Professor Siegel and Tom Lee are going to join me at 3 o 'clock today.

44:50Scott Wapner: So good guests to have as we head into the weekend. We'll track the last hour of trade. Let's do some final trades. Stephanie Ling, what do you got? Wells Fargo, I actually think they're going to have a very good quarter. I think net interest margins have bottomed. The stock has lagged, and I expect better profitability targets as well. Okay, Robert.

45:12HPE, Hewlett Packard Enterprise. I think they're going to be a beneficiary of enterprise AI adoption. They're at a reasonable valuation and, you know, still cheap.

45:22Scott Wapner: Okay. Jason Snipe. Arista Network's revenue guidance continues to get revised upwards. I like this one here. I think there was an upgrade on this name today. It got called out positively by somebody, didn't it? That's why the stock's up, I think, 3%. We just didn't have a chance to get to it, so I'm glad you referenced it here. What do you got? Yeah, I'm going with UNH. I think it's got some catching up, too. They're reporting to 13. Okay. All right. Great stuff. Good weekend. You, everybody? You as well. I'll see you at 3. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.

46:13We'll be right back.