How to Trade Tech 2/5/25
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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.

All right, Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the big tech trade with Alphabet, Amazon, Apple, all under some pressure today. We do have some new moves in those names and elsewhere as well from the investment committee. Joining me for the hour, Bryn Talkington, Joe Terranova, Steve Weiss, and Jim Labenthal. Carl just told you what we're doing in the market here. We're green across the board. NASDAQ's just gone green as well, which is notable given the slide that we have seen today in Alphabet. I do want to begin with

These questions about the biggest names in tech alphabet among them, which is sinking today on that revenue growth. Their capex spend is just exploding, obviously, as you know. Jimmy, you're in the stock. It's one of your biggest positions. Morgan Stanley today says not quite sticking the landing to start the year. Bernstein says now range bound.

Wells Fargo, more questions than answers. Tough setup from here. Six target cuts. UBS, JPM, Citi, Morgan Stanley, Bernstein, and Wells all taking their targets down.

So let me start with what for me is the most important thing. We walked into this print worried about competition on Search. We talked a lot about perplexity over the last several weeks and months. What we found yesterday was that Search came in better than expected and was up about 12.5% year over year. I know everybody wants to talk about cloud services, the miss there, miss while up 30% year over year. I mean, that's a little bit of an oxymoron.

I want to remind everybody the setup here. The setup is we were worried about search and competition. Right now, you don't have to worry about it. If that competition was going to show up, it would have shown up by now.

So as far as the capex goes, that's what's going to keep the competitive advantage for Alphabet. Obviously, the market doesn't like the higher capex number and the cloud services miss. But put this into perspective. This is a stock that over the last one, two and five years has outperformed not just versus the S&P 500 versus the Nasdaq Comp, which is the more relevant benchmark to work against.

So, sure, it's giving back something today, but it's had great performance. And I think this is more profit-taking than anything, with the excuse being the cloud services miss and the higher CapEx. I'm not worried about this at all. To be very clear, if you don't own this stock, this is an opportunity to buy it. This is not a stock that's going to keep going down. This is a great company right now at a great price. Do you want to take a shot at that, Weiss? Because, I mean, they've revised up their CapEx.

from 50, mid 50 billion to 75. We're talking a 30% increase in cost and spending. And you are having a decel in revenue growth, the lowest growth rate since 2023.

Jimmy sort of is dismissive of that because he focuses more on search, which he says is more important. But there's got to be a rub somewhere in that. If you're spending a lot more and your revenue growth is slowing, isn't that an issue? Well, yeah.

It's an issue today, obviously. Is it just today? Because I went through the commentary of now it's going to be range-bound, and now the setup is tough from here. That doesn't sound like it's going to be over by 1259 today. No, but I recall that same commentary in the 140s and then the 170s when they missed. And look where it is now. So Jimmy's right, basically, in everything that he said. His only omission was YouTube, which has done very, very well. So...

Look, competition in search could be a factor going forward. You don't know. You know, we've seen some advertisers go back to X. That's going to come from somewhere. We're having increasing budgets. But that was an issue. I'm comfortable with it. And I believe that, yes, the cap backs increased by 50 percent this year is substantial. However, it's what's needed to be done to drive the growth going forward.

So CapEx is really just, it's like planting the seeds on a plant or on a tree. You're doing it now, you're doing the spade work now so you can benefit from going forward. And that's exactly what's happening here. - Why didn't you buy more of the stock then? Why didn't you buy more this morning? That's a wise move. - It's a full position for me. It's a full position for me. - Full? - So I'm not going to, I may, you know, frankly, I may later. It's still very cheap. It's at a discount market multiple looking forward. So I'm very, very comfortable with it here.

Look, I want to talk about the CapEx. I think part of the surprise for the CapEx, in addition to what we saw from Meta, was that, hey, wait, you've got DeepSeat, which has told you they can do for a fraction of what's currently being deployed in CapEx. Trust me.

If these companies see a more efficient way to utilize their capital, if DeepSeek is real, if DeepSeek gives them ideas, and I doubt the latter, then they will adjust their CapEx spending. But they're not doing it right now. So I'm glad to see the CapEx. Would I rather them say we can get done, we need to get done with $50 billion instead of $75, of course. But look.

it's fine i mean joe you just bought it in the rebalance well it was purchased purely off of momentum it's up 31 over the last year it's up 18 in the last six months and when you think about sentiment and positioning before collectively for the mag seven position is uh i would say extremely bullish when you're talking about alphabet it's performed relatively well i i agree with the point that steve's making here

I think that they were clearly in a position when

guiding on capex to say, okay, we're going to go to the high side here. And that number you could expect potentially is going to come down. It's obviously good for Nvidia, very good for Nvidia today. Nvidia is up 4.7%. That's why the NASDAQ is green as we came on the air today. Otherwise, it was going to be a very different looking picture. If you have Apple red and Amazon red and Alphabet red and the NASDAQ's green, the first place you'd look.

Yeah, but I do think it initiates a conversation. Here we are February 5th about the Mag 7. And if you look...

At all of them, so far you've got only two that are positive year to date, with Alphabet today falling below that line of positive versus negative. So Meta, very strong, with good reason, and we'll discuss that. Amazon, very strong, with good reason, we'll discuss that as well. But trailing is Apple, trailing is Tesla, trailing is Microsoft, and there's reasoning behind it. All right, Brandon, you don't have Alphabet.

Right? Nope. Nope. I mean, how do you view this in the context of the other names that are in the wheelhouse of your portfolio?

If I look at Google's chart, first of all, it's a nice chart. It's done well. So I agree with what Jim said, right? I think it's an overreaction. And the chart still looks nice. What doesn't look so great is Microsoft, which I own, right? So Microsoft on one side juxtaposed with NVIDIA. It's like Google...

is really flying in the face of the deep seek flash crash, right? We know it didn't cost $6 million. Google's gonna spend 75 billion. I'm just curious, like what is the output, the end output that these companies are actually trying to create? With Microsoft,

their intelligent cloud grew 20%. They're focusing on co-pilot. But I think with me, with Microsoft, it is flat for like the last year. And so I think through what catalyst

is the market going to demand for microsoft specifically to get it off this zero return over the last year and i'm not sure there and i do think of those max seven names i think this year i think meta and amazon which i own for the queues and jeff q are positioned better than a microsoft so we'll see i may be buying some amazon i know it's already moved up but

I love Satya and Amy Hood, but just flat for a year when you have a lot of money being made is tough cheese to swallow. Let me ask you this about MEDUC. I mean, anybody can say, well, I own it through the queues. I mean, that's not really like, that's not really owning it. I hear you, but you could easily own it individually and you don't. I'm curious as to why, because that stock is continuing to rip. It's on the longest winning streak ever, by the way. This would be 13 in a row.

13 days in a row for Meta. You can see the chart right in front of you tells a better story than anybody else can. Why don't you own that?

Well, so I mean, if you look from portfolio allocation, I have large positions in JEPQ, the Q's, NVIDIA and Tesla, smaller positions in Microsoft and Apple. So like, I just can't have my whole portfolio be a levered up Mag7 trade. So I'm happy to enjoy the return via the Q's and JEPQ. But no, I mean, Meta with Lama, I think the market is leaning in that Meta is doing the right things. And I will say with Meta, from an advertising and from an AI spend,

I think more and more people are going to continue to spend on Instagram, Facebook, and WhatsApp because that's a really good way for them to monetize their AI spend. So I have so much of these securities already. I'm leaning into Nvidia and Tesla versus a meta. There's a big lean into thinking that

Meta for one, along with all these other names, is going to continue to go higher. I thought the Wall Street Journal had an interesting tear today on some options trades that have been made in these stocks. One being more than $40 billion in options contracts tied to the MAG-7 changed hands last week.

That's the biggest weekly tally thus far. That's according to the CBOE global markets data. 26 billion of the 40 call options. And call option activity tied to Meta reached its highest level since April of last year, April of 24. Also from the same source, activity tied to Microsoft hit levels not seen since July of 23.

Well, the bets are still being placed. Yeah, the bears will tell you, though, that that's indicative of a market that's reaching a top. I'm curious how much of that is related to correlating with the introduction of zero dated options. But overall, you can't dismiss that. There is clearly engagement. There's clearly activity. And in the case of just kind of following along here for a second on Meta,

Over the last several years, Scott, everything about the Mag 7, right? All this interest in call option, everything was about, well, they were delivering such strong revenue growth and they were delivering the revenue growth because of this innovation, generative AI. And we saw the significant contribution to NVIDIA. Where we are now, you can't dismiss if you see a slowdown in that revenue. And if you think about Meta for a second, okay, we know NVIDIA is still benefiting from

from revenue related to generative AI. Meta is still growing at 20%. The rest of the Mag 7 is seeing a little bit of a deceleration in the revenue growth. So you can't have it both ways. You can't say as revenue growth is accelerating, okay, let's applaud it. Everything's great. And as you see the moderation of revenue growth, you can't ignore that either. And it's beginning to happen. Oh, I don't, I don't.

Factually, you're correct. Google grew slower. But if you look at their cloud growth, 30%. And I think- Well, it was 35. Right. But Steve, that matters. Let me finish. Sure.

but 30% is still unbelievable growth of a much larger base, number one. Number two, we're still, even though you've seen the biggest uptake in technology ever with AI, it's really yet to come as the business cases get defined. So I think you'll see a reacceleration. And then if you do lower the cost

for getting in like deep seek has done or says they've done you'll see the democratization of ai tools now what what they will get from it where they will drive revenue is that those tools they put in the cloud and the extra data or the additional data

that's being mined and created also goes into the cloud. So if you don't have those tools to accommodate that in the cloud, like Amazon having to buy those tools from Microsoft for 10 billion, then you will be out.

But we're talking about a moment in time. You should never ignore, to your point, that there's a possibility of a slowdown. We've seen such rapid growth, but I personally think it's going to continue. - Are you bullish on Amazon ahead of the number on what's tomorrow after the bell? Stock did hit a record high yesterday. - Yeah, yeah, yeah, yeah. And I do own it. It's not, it's a decent sized position, but Meta is my biggest position.

um and has been for some time uncomfortably big so i may cut it back shortly because of ways move but in amazon look i don't get all that work about the about the quarters uh i felt and i said this before any of them report i felt strong about meta's quarter uh in terms of amazon i do think retail will be strong uh i don't know what the cost will be associated with that

So the top line should be strong. I do believe cloud will be strong, but this gives me some caution in terms of taking a firm stand that cloud is going to surprise the upside. Don't know if it's that or if it's a slight miss to the downside.

So I'm there, I'm not gonna buy or sell it, you know, unless it's an extraordinary move either way tomorrow or Friday morning. - I don't know, I think the direction of revenue growth matters more and it's one of the reasons why Amazon's at an all-time high, double-digit revenue growth. We weren't talking about double-digit revenue growth for this company a couple of years ago. - That's why it's high now. - That's why it was side, but that's why it was sideways. - But it hasn't reported.

Google was moving also. Wait a second. Hold on a second. Amazon has reported double digit revenue growth for the better part of the last year and a half. That's not something that you could say when it was in a sideways pattern. So, again, I'm not disagreeing with you. I like the Mag 7. I own a

bunch of mag seven names, but you can't have it both ways. You can't say I'm going to pay a premium for accelerating revenue growth and not acknowledge maybe it's time to pare back a position as the revenue growth moderates. And I know in the case of Apple, you agree. In the case of Apple, you agree. Well, that's been clear for years. Flat, flat, flat. And guess what? Stock's still up. The

The point I was making, Joe, is that the Google revenue growth looked great until they reported. Amazon's revenue growth looks great, but they're going to report tomorrow night maybe the same story. You're also, if you're hung up on the alphabet revenue growth number going from 35 to 30,

You're still paying a below market multiple for that stock. That's what I said earlier. Well, we really haven't dissected it. Give me a second. Its forward PE is 20 and a half. Going down to 16 in two years. Which is below the market multiple. Bryn loves that, by the way. Below the market multiple. So when I said something in the beginning that I said you're getting a great company at a great price, I mean, let's just define this. You're getting Alphabet. You're getting everything from Search, YouTube, as Steve mentioned, the cloud services, Waymo.

any of the other moonshots. You're getting all of that for just below the market multiple. That is a great price. And, you know, we're poo-pooing. It's fine. You know, the cloud revenue growth came in below expectations, but it was still 30%. There's going to be tremendous cash flows here. There's going to be buybacks. This...

This is a rare opportunity. By the way, just a distinction, because Bryn brought up Microsoft. Microsoft had kind of the same thing, a disappointing cloud number and CapEx a little bit higher than expected. The difference is Microsoft is still trading at 30 times forward earnings. I am the guy who usually talks about valuation, and I'm telling you it matters right now, valuation. Well, I think people are trying to figure out what the right valuation at the current time is for a stock like Apple, which is down, as we said,

The latest report to push it down is one that suggests China is reportedly considering a probe into App Store practices.

We already know and we learned yet again from the earnings report most recently that sales continue to be an issue there. We're talking about 15 percent of revenues or thereabout from the China region. It's clear to me, Steve Kovach, our tech reporter on all this, that Apple has a migraine related to China and it doesn't seem to be able to get rid of it anytime soon.

Yeah, that's right. And it's just not letting up, especially with this new tariff situation going on in this brewing trade war. Let me give you four things right now, Scott, that's happening in China that are causing this migraine, as you put it. First is that China App Store investigation that you had mentioned. Bloomberg reported that overnight. And this is the same kind of thing we've heard about from regulators all around the world, including in the United States and in Europe, that those App Store fees, the 30 percent so-called Apple tax,

is an antitrust potential violation. We're seeing the DOJ here sue Apple over that. EU put out that big, meaty Digital Markets Act to kind of combat this. But there's a caveat here because this investigation, at least according to Bloomberg, started last year before Trump even took office. So this may not be a direct

retaliation for the tariffs that went into effect this week. This has been in the works. In fact, our Eunice Yun over in China, she sent me a couple articles of state media talking about this Apple tax as far back as October of last year. So not necessarily directly aligned to this tariff battle that's going on. Second of all, Apple intelligence, that is still not approved in the country. And when I sat down with CEO Tim Cook last week, he cited that

as one of the reasons that China sales had their slump in the December quarter. People want that, according to him, want those Apple intelligence features. And without them, they probably go to other Chinese brands. And speaking of Chinese brands, they've been eating into iPhone market share for the last couple of years here. I'm going to show you a chart here in a second.

that shows of all these brands that you're looking at right now, Apple's the only one that has lost market share in China. The other ones, Vivo, Huawei, Xiaomi, they're all gaining market share against Apple. Unisun also did some good reporting on this last week, showing people are really in China gravitating towards these homegrown brands.

And then you've got the tariff issue here that could put 10 percent on imports from China. Of course, Apple makes most of its stuff in China. Morgan Stanley's Eric Woodring this week was telling me he expects if this tariffs do go into full effect against Apple, a three percent hit to earnings. And that would be a big problem to Apple.

Apple would have to navigate either diverting manufacturing from India or something like that. But again, China is just the bulk of the manufacturing. And then we got that crummy data last week from the December quarter for China sales. It was down 11 percent to 18.5 billion. Look at the China business in this chart that I'm showing you right now. It's just been down for much of the last couple of years here. And that is just not going the other way anytime soon, Scott.

Yeah, Steve, thank you for that. That's Steve Kovach. The other stock I want to get to, and I'm glad we had insight into that, is Uber today because it's selling off on its guidance today. We do have considerable ownership. Bryn, what do you make of this stock move today? Joe sold it in the rebalance last week. That was fortuitous timing, obviously. What about this move down 7 percent in Uber?

God, the market is so fickle. I listened to the call. It was a wonderful call. I mean, Dara was great, the whole team. On the guidance for Q1, they talked about

because Q1 has obviously already started, that you had the horrible devastating fires in LA, which caused part of that. Number two, you had the snowstorm that we had down here in Texas, Louisiana, Alabama. And then number three, FX was going to be a 5.5% hit versus 3.5% last quarter. So when I look at those, those are all just like exogenous events. The call, the guidance, Uber won, gained 5%.

5 million new users. I think they have a total of 30 million users or 60 million, which was up 60%, sorry, year over year. Their free cash flow is strong, but it's like if the algos are just looking at soft guidance, I call...

I call an audible on that because the guidance was very specific around events that have occurred that were acts of nature for the most part. Yeah, I think Bill Baruch would agree with you. Certainly must be his take because he did buy more this morning around 10 a.m. Joins us now via Skype to discuss why was this the moment?

I think it's an overreaction. Brin highlighted some of the weather around the country here in the prior quarter. I think there's opportunity. Yeah, the big headline beat was a big tax tailwind. The margins were a little weaker than expected. But the excitement around the call, I think, is very notable. The CFO even said that the stock remains undervalued fundamentally, and the company is going to be active buyers soon.

of the stock here in the future. So I see buybacks coming. The free cash flow gets us really excited, 122% year over year. And then gross bookings coming in at 17.6% year over year increase above the 15.5 estimated. And quarter one, they're looking at 17 to 20%. So there's a lot of good strength inside of this. Not only that, technically, you go back $60 is a good little floor that it gave us back in December, $55.

that August low. So we're leaning into this. We've doubled our position in our concentrated portfolio where we own no more than 10 names, made it a 7% holding, and we increased our holdings in the main portfolio by about 10%. So we like this year right here as a buying opportunity. Yeah, those are sizable moves.

Bill, thank you. Appreciate you for that. You own the stock, too. What do you make of, you know, Brent overreaction, Bill overreaction, buys more, takes his positions up, you know, pretty sizably. Yeah. Look, here's what I'd say. I'd say that the quarter was obviously excellent. It's the guidance because it traded up nicely until he gave the guidance.

We're at the point with this company where the reliable print and guidance was always higher. So to me, truly great companies can navigate any tough circumstance.

They're not a truly great company at this point because they haven't been able to. So there are always issues that pop up during the quarter. You just don't know what they're going to be. So snowstorms, not unusual. I mean, they navigated pretty well with what happened in the fourth quarter. So there's not a lot of extra there. Now, having said that,

I don't think it's unreasonably priced here when you look at the multiple and what their revenue growth is and what their cash flow growth is. So I'm not selling it at this level. May buy a little more, but I'm not very excited about the stock. Let's run through a couple more names before we get out of here. Chipotle. Take a look at the stock, please. It's lower. At least it was after earnings. Earnings beat. There it is. Down two and a third percent.

You still own the stock. I do. Same store sales came in a little bit light, 5.4 versus 5.7. I don't find that particularly troubling. I think the challenge here for owners of this company is what's the catalyst as we move through 2025? What had been the catalyst is the ability to pay a premium relative to its peers because

because of much stronger traffic. So that was always the case with Chipotle. Now if you're going to see a little bit of a moderation, of a slowdown, it really becomes a conversation about they have to prove themselves over the coming quarters in 2025. So we're maintaining the position. I think you just raise awareness more than anything else. I certainly wouldn't sell it. What's your take on the Disney quarter? We take a look.

Two big surprises, obviously, was profitability from DTC, but also the decline in subs for Disney+. And the last thing is the thing that bothers me. I'm sticking with the stock overall. I'm quite happy. I think the results were fabulous, except for the loss of subscribers. And while that was expected, the problem is we think about Netflix two weeks ago, and Joe and Steve, I know you guys own it,

They added subs like crazy. Now, the excuse here is probably that they raised rates on Disney+, so maybe that caused some churn. In the end for the quarter, operating income came in better than expected, so on net that was good. But here's the thing, we're now going to have to wait for another quarter to see if that churn continues on or if it was a one-quarter response to rate hikes

I happen to think this is a good long-term buy. You've got experiences going great. DTC should grow. I think the multiple is forgiving here, so I'm definitely sticking with it. All right, we'll take a break. We'll come back. We will track more trades today from the committee. We will break down more of Joe's big moves and his Joe T. rebalance. Plus, Bryn just made a new trade in the crypto space. We have that as well when we come back.

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Learn how to use AI to be more successful with CNBC Make It's new online course. We'll give you examples that can help you master AI. Go to CNBCMakeIt.com slash AI and register now. All right, we're back. Let's go through some of these moves here. As we usually do with your rebalance, what's interesting to us, you raised your financial exposure.

You were already big in that group. Now you are 31% exposed in financials. That's more than double the S&P. So...

Is that correct, sir? I believe we're- Isn't that correct? That is correct, Your Honor. Enter does evidence. So I believe where we are in the marketplace right now is, let's ignore focusing on which way the S&P is going to go, higher or lower. That doesn't matter. It's about generating alpha. And there's a lot of negative correlation trades that are going on with the market right now. Semis to software, India to China, and financials to technology. So, Scott, one year ago, our

Our exposure to technology was 28%. Our exposure to technology is now 16%. One year ago, our exposure to financials was 14%. Our exposure is now 31%. Could you make the argument that we're stretching the limit?

in that exposure to financials? I'll acknowledge that. Yes, absolutely. You can. Well, you think you're more than double the S&P, you think? At some point, that negative correlation trade is going to begin to have some mean reversion. And you'll see the capital go to technology away from financials. And you'll see the mean reversion in performance. But right now, you have to acknowledge that financials are a sector that has exhibited very strong performance and are

Also, the earnings are there. You're talking about 20% EPS growth. You're talking about 12% revenue growth on the 50 plus names out of the 77 financials that have reported. Look at names that we own, like Bank of New York Mellon, JP Morgan, both up double digit year to date, strong earnings growth. So there's a reason to be there. Interactive Brokers, another really strong name that we own. All right, so the new ones that you now own

include US Bank Corp, PNC. So you really like the regional trade. Super regional. I call that super regional. Super regional. Yeah. Thank you very much. Visa is new there. Visa joins MasterCard. Not surprised at all. Visa has been in the ETF previously. It makes it return once again on both strong quality and strong momentum. Capital One, CME.

- Gallagher, Aon, you like insurance too? - Insurance is right now one of the largest industries that we own, followed by financial services, software, and banks. Semiconductors, by the way, down to only 4%. - Is now the time to get bigger in the financials, Weiss?

I think there's a real question that's bubbling up in the financials, which is that will this, will 25 restart both the M&A cycle and the IPO cycle? And the people I talk to have real questions about that. Keep in mind it wasn't supposed to start until mid-25, but the way we're seeing some of the stocks, some of the sectors act,

It's a very legitimate question if that's going to occur. And part of that is the basis for loving the financials. From my standpoint, I think Goldman outperforms any environment and that has so many levers to pull and so many solid businesses that I'm not as concerned about it. But for others that are highly dependent upon that, I think there's reason to be concerned. - So you also sold Coinbase.

You did, Joe. Bryn, you bought the Ethereum Trust ETF, the ETH-A. So first, Joe, why did you get out of Coinbase? And then Bryn, you can tell me about this buy. But Joe first. So here's an explanation of momentum. You have to look at the momentum and measure it in terms of what's the distance and how quickly does it get there? And then what's the response to that? So on October 31st, the strategy takes a position in Coinbase at $179,000.

By November 11th, the position is up 80%. Since November 11th, through the rebalance, which was January 31st, that momentum has evaporated. That position in Coinbase, basically, it went nowhere. So that's the acknowledgement for that time period, you completely lost the momentum and

And that doesn't confirm the initial position that you're taking on October 31st that says, we think momentum is building from our starting point, momentum built, and it went away. Okay. Bryn, what do you think about that? I know you follow that stock as well, but what about your own trade?

Yeah, well, good trade, Joe. That was a good entry, good exit. So on Monday, actually over the weekend, there was a huge amount of leverage that got unwound in the crypto, the native crypto market. And so when Monday opened, Ethereum opened down 20%. So I bought the ETH, which is the iShares. I think that this trades back up to 25. I think you're going to fill that gap to 25. And so it's a trade. I just took the opportunity. You don't see

you don't see an asset go down 20% in one day so quickly. So I just thought it was a good opportunity to buy that iShare Ethereum trust, trade back up to 25. Okay. Thank you for that. Let's get the headlines now with Christina Partsenevelos. Hi, Christina. Hi, Scott. Well, a second judge has blocked President Trump's executive order to end birthright citizenship in the United States. The U.S. District Judge in Maryland issued a preliminary injunction nationwide today, which is more

permanent than the 14-day temporary restraining order issued last month by a federal judge in Seattle. The National Women's Soccer League has agreed to pay a $5 million settlement over past mistreatment of its athletes. That's according to a joint announcement with the league and three attorney generals. The settlement will fund compensation for players who experience any type of abuse. The league says it has made changes to its hiring and policies in response to these allegations.

And researchers say DeepSeek's chatbot is linked to China's state-owned telecommunication company. Canadian cybersecurity company Ferute Security says it found code in DeepSeek's account creation as well as user login areas on the web version that connects to infrastructure owned by China Mobile, which is banned from operating in the U.S. over claims that it has close ties to the Chinese military. Ferute CEO Ivan Tsirani will be on the exchange today to talk more on the code linking DeepSeek and China.

Scott, back to you. All right, Christina. Thank you, Christina Partsenevelos. Coming up, calls of the day. Five calls on five committee stocks you need to know about. We will debate them next.

Are you still quoting 30-year-old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now. It pays to discover. Learn more at discover.com slash credit card based on the February 2024 Nelson Report.

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All right, let's do some calls here. We're going to start with Exxon today. Price target cut to 131 from 134 neutral. Mizuho lowered on their weaker chemicals outlook. You have it in the T. You have it personally. And you like it a lot. I like it a lot. I mean, the target is a 20% increase from here. I think Mizuho might have just been a little bit ahead of their skis in terms of where their prior target was.

I think this is very simple. Unless you don't want to own energy at all, I think you have to own ExxonMobil. I think it's your first purchase within the energy space. It's diversified across the entire chain that goes into energy production. By the way, the chemicals and products, that's a very small portion. But scale matters here. If energy prices go down, scale is where ExxonMobil is going to still be profitable. And if energy prices go higher, they're going to make money hand over fist.

3.7% dividend yield. They've got a free cash flow yield of about 7%, attractively priced. Again, unless you don't want to own energy, I think you have to-- - Well, let me just ask you this, Will. - Yeah. - 'Cause you just painted a scenario in which the stock wins either way. - I did. - Right? But that's not how the practical, the world doesn't work that way. You just gave me a scenario, oil goes up, stock great. Oil goes down, stock great.

The stock is up like 7.5% over the last year. I'm just saying, like, there's got to be more to the story. I'm sorry. Yeah. No, no, wait, wait, wait, wait. Slow down. Slow down, my friend. He didn't ask you. The simple answer here is the starting point matters here. At roughly 14 times earnings, 3.7% dividend yield. And the free cash flow right now is going to be about $33 billion this year. What are they going to do with that? They're going to buy back shares. The share count bumped up.

when they bought Pioneer. Now they're going to be buying back those shares. Let me ask you this. The starting point matters. What if their arms are twisted into drilling more by the president? However laughable you may think that that is, what if that is a part of the equation here? That what was essentially free reign to do whatever you want,

You don't have to drill. We don't have any interest in doing that. We'd rather give the money back to shareholders and watch our stocks go up. I'm going to take your question at face value. If that happens,

happens, that's bad for the stock. I don't think that's going to happen. Now, every investor in every name has to make a decision about what they think is going to happen. I would counter this with GM, where I said I think these tariffs are going to happen, and I sold it. If I really thought what you just asked about were going to happen, I would not want to own ExxonMobil here. But I really think

It's a long road to hoe between telling everybody you want to drill, baby, drill, and actually getting ExxonMobil to put drill bits in. I know, but I was more interested in the other point of sort of like a no-lose scenario. Right, and let me address that. Please. If the commodity goes down in price, the share price is going down, period, end of story. So it's not a win-win situation. Why are you looking at me? You should be looking at me. I know, sir. Because he's annoying me right now for not to look at him. But.

I'm glad to turn the tables for once. But in the geopolitical landscape that we're in, let me ask you another question. Suppose with his good friend Putin, we settle the war in Ukraine and then we take the embargo off Russian oil. What happens then? Chevron's not going up. Exxon's not going up. They're going down. What if unicorns start flying from post-9 at the New York Stock Exchange? We can do this scenario analysis all day long. Let's get back to allocated energy. We carry no energy exposure.

into last Friday, we now have the same exposure that you get in the S&P 500 towards energy. Four names: Diamondback, EOG, Exxon Jimmy. Entry price matters. And the one I'm most excited about is Baker Hughes. Credit Tony Pasquarello with this. Energy was the only sector during President Trump's first administration that was negative.

All right. I mean, everybody knew that. What do you mean, Tony? Why are you gratuitously calling out Tony? I mean, Tony, all due respect, but I mean, we've said that a thousand times in like during the election coverage. OK, so let me take it. Refresh my memory yesterday. So it took you four years for Tony's note to realize that energy was down during Trump's administration.

We own a break. I mean, Joe, apparently you're annoying him, too. But, you know, it's only a one way. Just give me something. I want Joe to just squirm a little bit in his chair. Just give me something on Robin Hood, which was initiated today at Ray J, which you own. I don't want to go to break yet. I want the camera shot on Joe individually, too. OK, put it on me.

Is he throwing shade at Robinhood? Is he throwing shade at Robinhood? So like Palantir last year, I think that Robinhood is under-owned and under-followed by analysts. So the Raymond James analyst initiated coverage, right? He initiated coverage. He wants to follow it. It's a neutral for him.

But this company is at the crossroads of equity investing options in crypto. And I think this company is going to continue to get stronger and stronger. Their earnings come out next in seven days. I think they're going to blow it out of the doors. And so I think this is a stock to continue to watch and a company that's going to continue to gain market share, not only from a coin base, but also from the traditional custodians. All right. Thanks for that. Now we will go to break. And on the other side, Mike Santoli joins us with his midday word. Good luck.

All right, we're back. Senior markets commentator Mike Santoli here at the desk of this midday word. Also, by the way, great admirer of Tony Pacquarello's work. That's right. Yes. Did you come with any sector stats from Tony? A great friend and resource, of course. No, I don't think, you know, I think you guys chewed through most of the ones I would have mentioned. Well, Joe, me. Yeah.

What I find interesting, though, is this pattern of, look, the markets had multiple excuses to sort of really take a break to the downside, to have one blow up kind of morph into a broader pullback. It hasn't happened. That said, you know, we're not getting escape velocity either. It's churn. It's range bound. We're plus and minus 3 percent from pullback.

the November 6 levels in the S&P. So you have to give credit to this pretty resilient bid that's in this market, just not to let things come in too much. Definitely paying attention to Treasury yields. It's worth asking the question just how much you'd like to see them come down from here. If the two-year really starts to crack and maybe seems like the Fed is off sides,

That's not happening yet, but I think you want to be alert to it. Of course, jobs number on Friday could change that equation. You also don't want to get where you're asking yourself if rates are starting now to go down for the wrong reason. Sure. That if you're talking about tariffs and everything else, if you're worried about a run-on effect into the economy at some point. I think initially you can say sentiment of positioning,

against bonds was really skewed and now we're just seeing an unwind of that and people are confident about inflation. So to me, it's not a growth scare in a panicky way just yet, but it's sensitive to any soft data and it's showing up in the market. So, you know, we'll see it. I think it's still comfortable at this point. All right, good stuff. I'll see you on Closing Bell. That's Mike Santoli. We're back with the setup next. Setup time. Some companies that are about to report earnings, including Qualcomm today after the bell, which Jimmy, you own.

So the recent quarters have seen the stock go up wildly, down wildly, and it's all been about smartphone demand. I really would like to see this company and the investors' reaction to it move past that because they are doing a good job diversifying into automotive and Internet of Things. We will see if that happens tonight. I think expectations are low for smartphone and can be easily exceeded. I think expectations are high and can be met on the other two sectors. High because the stock's up almost 13% year-to-date.

So off to a good start. But given the valuation, don't you think this quarter will be a win-win?

You are just a source of hilarity every day, and I appreciate it. In his own head. Allstate is after the bell today, which you own. Yeah, let's add to the hilarity before I make my remarks. None of the statistics come from Tony. Okay, that's great. I think we've like literally beaten the dead horse at this point. But Weiss is ready. He's ready to go. It's about auto profitability. Allstate should see a recovery in auto profitability. I also think you're going to hear a lot about the impact, Scott,

of tariffs on auto insurance. Okay. AstraZeneca is tomorrow before the bell, Jim. Yeah, very, very solid pharmaceutical company, broad range of products, oncology, cardiovascular, rare disease. But the real opportunity here is that in the summer, it was knocked down on news of Chinese authorities investigating their practices. That

That gave a buying opportunity that still exists, good dividend yield, good multiple, good space. Okay. Yum China is tomorrow before the bell, recently added to the Joe T. I don't like where it is. I mean, the momentum has basically evaporated here. You need 15-plus revenue growth to see an acceleration. Wait a minute. You just added it to the Joe T. Now you're telling me the momentum's gone? You add things on momentum. You can't. Well, momentum and quality, both factors. This was added more on quadro leading than it was added on momentum.

You just added him. I know. We did. I'm telling you, I don't like words. You're telling me to check the momentum box last week and then it doesn't check it this week? Scott, there is no way that you can own a portfolio. What am I missing here? What you're missing is that there's no way you could own a portfolio of stocks and love each one of those stocks equally. There are certain stocks you're going to have in your portfolio you're going to be skeptical about.

You're going to question them about it. You don't like or love anything. It's all based on the rules. Right. And I'm observing the rules, and I'm telling you I don't like where I see Yum. I need to see Yum have very strong revenue growth to see an acceleration and a return to restoring the momentum. Okay. Thank you for the explanation. Final trades are next. Let's do final trades. Bryn, what do you have?

Energy transfer. All right. Pharma Jim. Vertex Pharmaceuticals. Steve Weiss. UnitedHealth UNH. Accent Enterprise. Wow, I didn't even call your name. All right. Thank you. See you on the closing bell. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.

Thank you.

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