Deep Dive
Shownotes Transcript
A rich life isn't a straight line to a destination on the horizon. Sometimes it takes an unexpected turn with detours, new possibilities.
And even another passenger. We're three. And with 100 years of navigating ups and downs, you can count on Edward Jones to help guide you through it all. Because life is a winding path made rich by the people you walk it with. Let's find your rich together. Edward Jones, member SIPC. ♪
On WhatsApp, no one can see or hear your personal messages, whether it's a voice call, message, or sending a password. To WhatsApp, it's all just this. So whether you're sharing the streaming password in the family chat or trading those late-night voice messages that could basically become a podcast, your personal messages stay between you, your friends, and your family. No one else. Not even us. WhatsApp. Message privately.
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.
Carl, thank you so much. Apple Park in Cupertino, California. The backdrop today for a special halftime report on location. Welcome, everybody. I'm Scott Wapner. It's great to have you with us as we await the start of the company's Worldwide Developers Conference. CEO Tim Cook will take the stage for his keynote in just about an hour amid a flurry of questions about the company.
he runs an A. I. strategy played by doubt and delay a stock price stuck in place as the trade war weighs heavy we'll ask our experts over the course of this next hour if this will be the event that gets things back on track the investment committee they are with me back east today Apple
Apple shareholders Rob Sechin of New Edge and Joe Terranova through his JOTI ETF. And one committee member who sold shares many months ago and hasn't looked back, Stephanie Link, along with us today as well. Super analyst Dan Ives and all things tech expert Alex Kantrowicz along in just a bit as well. We start though here with CNBC's Steve Kovach. He's alongside me once again.
to help set the stage. It's great to be with you on what has become an annual tradition for us, for what some now are calling a prove-it moment for this company. Yeah, it's exactly it. Because when we were here a year ago, Scott, what did we get? We got Apple intelligence. There was all this pent-up questions and demand and wondering, what is Apple going to do with AI?
Well, it was Apple intelligence. And since then we saw the rollout. Some of the features did roll out on time and we saw this idea of Genmoji and summarizing notifications and they were cool. They were okay. ChatGPT came along, that was okay. And then the big whiff this year that was missing out on that AI version of Siri where that was supposed to be Apple's answer to ChatGPT and all these other things. Well, that is now indefinitely delayed. So here we are, Scott, the pivot,
pivotal moment for them to kind of reset the stage here, reset expectations. How are they going to play along with this AI thing? And like we've been talking about last week, there are a few things they can talk about right now that can kind of alleviate some of the concerns. One is making more partnerships like they already did with ChatGPT. There's Google Gemini, which a year ago at this very event, Scott, they said, hey, we are going to partner with Google. We are going to incorporate Gemini into this. Maybe we get that today.
Eddie Q, the services boss, testifying in that Google DOJ case a few weeks ago saying, hey, we're looking at perplexity, that hot AI startup that is already becoming a search AI engine for Motorola, soon to be Samsung. Maybe we'll see that in Apple too. And then there's the developers. This is a developers conference after all, and they need to convince developers we have the AI tools that are just as good or as better than what you see from the competition. You point to...
a backdrop with a lot of pressure yeah on this company the wall street journal today one of their headlines says apple's growing list of problems clouds ai reboot ai troubles tariffs google payments app store fees way down on the stock ahead of wwdc i guess my question to you is
Will they deliver enough to satisfy people who want so much, whether it's the analyst community or the shareholders? Brian White was on the network earlier and said they probably won't make a big, bold announcement today around Apple intelligence. Is that going to fly? Yeah. The vibe is much more muted than it was compared to a year ago because, remember, what they announced did not come to fruition. They failed to deliver on this big AI promise, Scott.
And they're going to be very careful this time because they lost a good fair amount of credibility by saying we're going to have this amazing new product. We're going to advertise it along with the iPhone 16. Say this is a reason, Scott, why you should buy an iPhone 16. There's supposed to be a super cycle. None of that materialized. So they're going to be extra, extra careful that everything they say on stage today is actually going to launch when they say it's going to launch. The stock really tells the dramatic story, doesn't it? Guys, you take a look at what the
stock has done year to date. It's obviously dramatically underperformed its Mag 7 peers and by no small amount. Tesla feels like it's in its own category, of course. But if you look at that performance on a list, you will see there is Apple. It sticks out like a sore red thumb.
Down 18% that stock is on the same time frame. Now Microsoft today is going up for eight days up in a row, right? So it gives you the divergence between some of these names. Rob Seach and I said you own the stock and you own it outright. What are your own expectations coming into today?
Well, maybe you get some exciting news from this conference, but given their slow progress on AI thus far, Scott, I think it's fair to be skeptical. That said, historically, this stock has really performed well in the three months following this conference. Over the last 15 years, the average gain is about 12%.
And there was only one down year, and that was the 2015, the year of the China growth scare. And last year, we were up 14 percent in the three months following. Obviously, they delivered that news, which never met expectations. But we realize this may be a sell-the-news moment for them if they don't deliver something absent a big AI announcement.
but it's hard for us to be too pessimistic on this name um... and it's hard to be materially underweight apple given their uh... their management is typically shareholder friendly they have a tremendous balance sheet and there's a ton of negative news surrounding this stock so when you have that kind of cocktail you know we're neutral we decreased the neutral we didn't want to go lower than that because of what we saw in the second half
of last year. So long-term core holding that we're neutral right now. Hopefully we get some good news. Yeah, neutral, Joe. Joe, you no longer own the shares outright, but as I mentioned at the very top of the program, you do through your JOTI ETF, which looks at quality and momentum. This stock, I don't think anybody would argue with the fact that it's quality, and Rob lays it out as to why, and you've been punished over the years if you've gotten too pessimistic about
But what about momentum? Can today get the momentum back for Apple stock? Okay, well, first of all, as it relates to today, I think there's one important word, and I heard Rob mention it, and that's progress. So potentially, Scott, just enough progress on...
development of AI and the ability for developers to contribute there that might just be enough I think one of the reasons why that actually might be enough is because if you look at the sentiment surrounding this stock and it's had an awful year and it's probably directly attributable to the trade war and sitting in the center of that contentious- situation right now but if you look at said to me you take the seven largest technology companies Apple has
Apple has the lowest percentage buy rating of all those seven companies at only 60%. So there's not strong, compelling belief behind this company. It's kind of waffling. It's kind of, as Rob said, you can't not own it, but you're not really excited to own it because is it really a growth stock anymore? It really trades more like a value stock. Why are you owning this stock?
You're owning the stock because of the ecosystem, high margin services business, the ability to return capital to shareholders. But the revenue growth is missing. You haven't seen double digit revenue growth in this company since 2021. And the expectation is, as you look forward over the coming year, you're not going to see anything more than maybe mid single digit revenue growth. And you mentioned Microsoft. That's going to give you double digit revenue growth.
Alphabet's going to give you double digit revenue growth. So this is really becoming more value tech than anything else. And it's not that exciting. I'm trying to figure out how you can call it value tech when it trades at 26 times. It trades at a growth premium. It doesn't trade as a value stock premium in any way. So for somebody who owns it, you're suggesting it's overvalued?
I think potentially it is. I think over the last 10 years, the average valuation on stock is somewhere around 22 times. By the way, I have a trading at 27 times. I could be wrong on that. It's down from 34 times. 27, 26. They both make the point. It's not trading at a value. But they're both. OK.
Okay, but they're both above the historical average over the last 10 years. And I'm not growing at double digits anymore. I'm not growing like I was back seven, eight years ago at 20 plus percent. I'm growing at 4% at best. And there are years like 2023 where I'm actually having negative revenue growth. Steph, you've been the doubter, I suppose, is the best way to say it. You have a sell rating on the name. I mean, because you did own it and you sold it. And as I wrote in the intro, you haven't looked back. And one of the reasons is the valuation, right?
Oh, yeah. I mean, 26, 28 times forward estimates for 7.8% earnings growth and 5.1% total revenue growth. I'm not paying 28 times for that. And it's really interesting. It's like, what a difference a year makes. Because last year, I actually bought the stock ahead of WWDC because I expected them to talk about AI and that to be the catalyst. Fast forward to where we are today, they haven't delivered on AI. And as a result, iPhone
is not going to be a super cycle unless they have AI in it. So to me, I think you have time. And oh, by the way, yeah, the tariffs are a big overhang. If there are 25% tariffs on Apple, they're going to have to increase pricing something like $200 to $400 per phone. So that also might eat into the demand side of things. So I just think this is kind of dead money. I know it's down a lot.
But it's just not cheap enough for me. And I think you have time.
it's really amazing what's happened too in the last year steve kovac we can take people through a timeline to remind everybody remember we sat here a year ago amidst really profound optimism about what was going to happen here some of the analysts notes leading in let the games begin from loop capital dan ives is going to join us in just a moment he said that this event one year ago was going to kick off an ai driven growth cycle a new frontier those are his words
he wrote just ahead of this event one year ago and as we see this timeline here it was in june of 2024 that apple did announce apple intelligence right here at wwdc the first features released in october of that year and then december the chat gpt integration announced the stock hits a new high it was almost a straight line up to the right
from wwdc until the end of the year when that stock hit a new high and then some of the issues started to come about and the stock started to go south improvements were delayed for siri the ai executive shake-up happened the rollout in china was delayed according to the financial times
as well so that's where we were today is where we are which raises the stakes right and exactly the whole point of apple intelligence was to move more iphones they purposely designed it so it had to work on those newer phones at the time it was a 15 pro or better the implication of course being
16 was was even announced yet but okay i'm going to need to buy the new phone if i want to use all this ai stuff and yes that was the case this is going to move iphones it's going to create a new super cycle and that never materialized and right when we got that siri delay announcement people started reducing their estimates saying this that was supposed to be the super siri that was supposed to be the version of siri we're kind of promised by steve jobs
when he first bought Siri over a decade and a half ago, that was what we were supposed to get. And it just did not happen. And that was supposed to help them sell more iPhones. So services again is cranking away, but that's not AI. That's taking a rake off the app store. That's advertising. That's other kinds of stuff that Apple
Apple has been doing a great job at extracting more value out of each iPhone in the billion-plus ecosystem. What can they do today to create some monetization around artificial intelligence?
I don't know. I think our friend next to me is going to tell us that. Well, Needham analyst Laura Martin downgraded shares just last week. 225 is the price target. And that was based on, look, the lack of excitement around AI to this point, which hasn't led to a great iPhone replacement cycle. And
She fears that it might not for the next 12 months. Rosenblatt after earnings in May cut the stock. AI strategy, a big reason why. And now we do bring in the aforementioned Dan Ives of Wedbush. He is here. He has made calls as flashy as his blazer is today.
um and he hasn't really wavered at all it's nice to see you great welcome it's good to be with you i mentioned your note from one year ago which you declared this a new frontier that it was going to kick off ai driven a growth cycle for the years to come hasn't happened has it i mean i'd say it's delayed
But our confidence that the consumer AI revolution runs through Cupertino remains. I mean, I just continue to view 25% of the world is going to access AI through an Apple device. Now, has that been delayed a year? Did they hit snafus? No doubt. But I think what Cook is going to come out with today is laying the seeds
of growth for the hearts and lungs, the developers that more and more, when you see these apps, where are they gonna be? On the App Store. Apple is gonna be on the consumer AI revolution. I continue to view them as the best consumer AI revolution play. And I don't sit here in any way
feeling less confident in that story in terms over the next two, three years. But when you declared it last year that this was going to be the start of AI monetization and here you are writing a note as of Friday and then again today going in declaring the same thing, the skeptics are like, okay, I'm not sure. It's a show me story. As I said at the very top, they prove it.
Prove it that they can do that. Look, it's a prove me story. And no doubt right now in New York City, cab drivers, Barish and Apple, not just in WWDC, but just given what we see with tariffs back against the wall. Cook is a 10 percent politician, 90 percent CEO. The Alibaba partnership in terms of AI, you know, that continues to get to it. But Scott, I think we sit here. It's going to be step by step in terms of I.
in terms of iPhone 17, in terms of iOS 26. And I think we sit here over the next six, nine months and view this actually as a huge buying opportunity, not the time where I view it that this was a value tech stock. I continue to think it's a growth tech stock. I think double digit growth will be yet again in that Apple story. - Are there holes in the Ives story?
I'm curious, because you sound like you're talking about the App Store. The growth is going to come from the App Store. We're going to give the developers all these cool new AI tools. More apps get made, more money gets made, Apple takes its rake. How do you play in the Epic Games case, though? Because we're already seeing big names, Spotify, Amazon Kindle, so many others start to take advantage of these new web payments, not give Apple the cut. They'd rather play Stripe or someone else, 33% to 5%.
as opposed to 15 to 30 percent to Apple. How does Apple combat that? Do you expect them to offer some better economics for developers or something? Because otherwise, they're just going to go to the web. That's how OpenAI started, on the web.
I mean, what prevents them from going over there? It's a great question. Look, my view is that many consumers, if you think about it, if you think about the Apple services ecosystem, that golden ecosystem that they built, many consumers, they continue to buy in that Apple ecosystem. Will some go out? No doubt. Is the regulatory, you know, potentially some, you know, what I view as headwind with Epic? Yeah.
But when you look at the rock of Gibraltar services, you look at the install base, 1.5 billion iPhones worldwide, you look at the 2.4 billion iOS devices, betting against them. Again, it's like betting against Shuffler in a golf tournament. I just view it as where they are right now and the valuation. I just think haters have all come out, and they've had good reason in terms of what Apple's given them in terms of some of the delays. But I think what you get today, Scott,
you actually get the seeds of growth. And I think the sentiment in here, super low bar in terms of going WWDC. I think if we want what Dan is saying to materialize, they're going to have to give us some amazing new AI developer tools. It's better than the APIs that you get from OpenAI, better than the open source stuff from Meta's Lama models. It's better than everything else they've been playing with and developing on for years and years now.
They're going to have to really wow the developers in order to do what you just said. I mean, you've talked about developers are the hearts and lungs of Cupertino. And that's and that's what that continues to be. And I'm my opinion, best install base in the world. It remains, though, doubtful as to whether they will deliver enough today. They may deliver to what you expect over the coming months.
ahead, but it's today, given what the backdrop is and where the narrative has gone as to whether you'll get enough today to make the assumptions that you think would happen. Yeah, and I think to your point, they're not going to overpromise on the delivery. Obviously, last year, I think a little trauma, what we've seen here. But I think what they're going to do is they are going to talk AI. They're going to start to
I think chip by chip, you know, go away at this strategy in terms of where they need to be. And I just think this will be a $4 trillion markup. And in my opinion, AI continues to be the consumer. The consumer AI revolution runs through Cupertino. They're the toll collector in this AI revolution. You need to get the China issues figured out because I know you have such high hopes for the BABA relationship. You just need to get it going.
Look, and part of it is that Cook, I mean, it speaks to like, obviously you're under a spotlight in terms of Trump, in terms of the India situation, building in the U.S. As we've said, it's a fairy tale building iPhones in the U.S. unless you want a $3,500 iPhone. But we need to actually see them navigate this because they are...
are involved in the storm, but that's why Cook is the Hall of Fame CEO he is. All right. We will see you on the backside of all of this to get your first reaction to what you've seen and heard inside the buildings.
behind us and we look forward to doing that. Dan Ives of Wedbush, thank you very much. So Joe Terranova, you heard Ives make the case, the bullish case for Apple. He disagrees with your notion, by the way, of it being a value stock, says it very much is a growth name and you will soon learn once again why.
okay well it's not a growth stock today that's just a plain and simple fact i hope that it becomes and they're able to show us today the evidence why they will provide the growth in the future that's why people want to be excited about apple because it's something potentially tangible
and is is exciting that will be delivered to the consumer as it relates to i ai but in the moment apple is really paying you to wait they're paying you through the buyback they're paying you through the dividend they are not giving you the revenue growth they haven't given you the revenue growth for multiple years now and i'm glad that dan's confident about it we're long i hope apple goes higher but the reality is what i see in front of us right now is that it really isn't very much
to get excited about in terms of actual process of progress progress moving towards the deliverability of that tangible product to the consumer but the other issue too is that the competitive landscape
is much more crowded. And we seem to be learning that more and more, if not by the hour, but certainly by the day. You had the news reported by Bloomberg a day ago that Meta was in talks for a multi-billion dollar investment into an AI startup called Scale AI, and that could exceed the investment
of some $10 billion. It would be Meta's biggest external AI investment ever. So that's just one angle. Google just had its big IO developers conference. What'd the stock do after that? It went up. There was a lot of optimism about that as well. Big technologies, Alex Kantrowitz is with us now on the competitive landscape, which as I said, it's great to see you here as well. Feels like it's getting a lot more crowded, isn't it?
that's definitely heated and i'll make a point here right away there's only a few companies that can build what apple and google well apple's trying to build right a contextually aware assistant that knows everything about you because it has all your data where you're going what you do your email your contacts and can make sense of that i'll say apple google and amazon maybe can turn that into an assistant
that you use every day, all the time, that supersedes every category. That's something that can boost devices. That's something that can boost services. That's why people were excited last year when Apple said, we're going to do this. In the years since, who's made the move? It's been Google and Amazon. And we don't have Alexa Plus yet, but we have the vision for that. We have, I think, tangible progress from Google. Meanwhile, we're sitting here this year looking at what's probably going to be operating system upgrades and then maybe some developer tools
from Apple. So Apple had the right vision last year, but when you look across the competitive landscape,
The other two have made significant progress while Apple stands. Well, you're making the point, too, that we're just going to have to be patient as shareholders, that today is not going to be the great payoff unless there's some surprise in the keynote from Tim Cook relative to where expectations are, including from yourself. Patience might be the word of the day or even the year for Apple. People are talking about this as an AI gap year for Apple, that they made the big vision announcement last year. Not a lot of progress this year as they tried to build it. It's hard to build. I mentioned Apple's
Amazon and Alexa Plus, they made this big announcement in February. We still haven't seen Alexa Plus rolled out broadly. So this is a very difficult thing to build, but you need an AI development team inside your company that really has the chops. We haven't seen that from Apple. That's why we're in this scaled back moment today. Can they right the ship? Maybe. Do they have time? I think they do, but we're gonna have to see some movement. - So you were at Google IO. You spoke with Sergey Brin and some others there. So you're right in the thick of it. There's that angle.
There's now the Johnny Ive OpenAI development. The building behind us was kind of built in some respects, you could say, on the vision of Johnny Ive and Steve Jobs. And in many respects, the leadership of Tim Cook, he deserves as much credit as anybody, given what the stock price has done in his tenure here.
But those are all new wrinkles now as we're thinking about well what does the eye of open I. I. partnership lead to where we thinking about new devices does Apple. Are they thinking about a new form factor new devices that are going to be at the forefront of this revolution.
Absolutely. Well, what Sergey told me was any engineer should not be retired now. He doesn't have to work. But he said this moment is so exciting that there's no way I'm sitting it out. He's in Google working on the technical side of AI. OK, so not just setting vision, but actually they're in the trenches. And the same with Johnny Ive. He said, OK, listen, I can't sit this out anymore. He partners with OpenAI. You know, there's a
a concept in silicon valley that most people within the tech ecosystem they have one good idea so they build a company and then they maybe they sell it or they exit and then they try to just go do it in you know a subsequent format and if you're able to come up with a couple good ideas you get a building like this right steve jobs not only the mac but the iphone the ipad and he also bought siri by the way
So what we're going to have to see is reinvention throughout Silicon Valley. Like you said, this is a moment where every company is going to have to reinvent beyond their bread and butter if the AI vision is lived out the way that many expect it. And that's kind of...
That is the moment that we're in right now with Apple to see if they can actually rise to that occasion and say, we are going to reinvent despite this unbelievable business that's brought us to a $3 trillion market cap. How are you thinking about the competitive landscape? I mean, you think of it even beyond that when you look at Huawei and China and the like. But in the broad spectrum of competition, it's getting more fierce. It's getting more crowded.
And it may not be winner take all, but there's a lot of potential winners who want to take a lot. Not even close to winner take all, but I also just look thematically at what OpenAI is doing. The way they announced that Johnny Ive partnership was brilliant. They went to the reporter who breaks all the news on Apple and gave him that story, the interview with Johnny Ive. They've been, the fact that they took
that they took Johnny Ive as their leader on this. It's just a huge, not a nice word, but a huge you-know-what to Apple by doing this. And yes, they're Apple's partner, but they're also their rival. And Apple would not be in the position it was in today without OpenAI doing what it's doing. You mentioned Huawei, you mentioned China.
bleeding has not stopped in china it's the the acceleration has slowed down that is true it's not down as much as it used to be but it is still way down off the peak and that is in part because of the regulatory regime in china saying we can't let you guys launch apple intelligence we figure out this trade war thing with the president yet another way the president is hurting this company right now and then also huawei just because right when they came back
Back online a few years ago, they just started steadily eating and eating and eating into Apple's market share. It turns out Chinese customers love Chinese brands and homegrown brands. And Apple still, even before we got into this AI conversation, Apple still did not have a good answer to go toe to toe with Huawei. They benefited so much, Scott, during the pandemic when Huawei was out of the game and they were able to sell, sell, sell in China, sell, sell, sell all over the world in Europe where Huawei is successful as well.
now the AI thing on top of it, it's a really tough nut to crack for them. The competition is really hot right now in a way I haven't seen it since early 2010s with Samsung. All right. So we're going to talk to you before this whole thing gets going. We'll see you back, Steve Kovach. Thank you very much. Alex Kantrowicz, Big Technology. It's great to have your insights too. We will visit with you too on the backside of this event today with Dan Ives, and we'll see what's
taking place and we will certainly look forward to your opinions on it. Coming up next, we will have the very latest on those high stakes trade talks between the United States and China. We'll have a live report from the White House coming up. And later, Stephanie Link has a new buy you want to hear about. We'll tell you what it is coming up. We're live today in Apple Park, WWDC, about 30 minutes away. We're back in two.
With leading networking and connectivity, advanced cybersecurity and expert partnership, Comcast Business helps turn today's enterprises into engines of modern business. Powering the engine of modern business. Powering possibilities. Restrictions apply.
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.
Hey guys, have you heard of GoldBelly? It's this amazing site where they ship the most iconic, famous foods from restaurants across the country, anywhere nationwide. I've never found a more perfect gift than food. GoldBelly ships Chicago deep dish pizza, New York bagels, Maine lobster rolls, and even Ina Garten's famous cakes. So if you're looking for a gift for the food lover in your life, head to goldbelly.com and get 20% off your first order with promo code GIFT. That's
That's GoldBelly.com, promo code GIFT. All right, welcome back to the Halftime Report live in Cupertino, California. Today, stocks, as you see, pretty mixed. There's the S&P, barely green. NASDAQ as well. Dow's just a smidge negative. As we wait at news from the U.S.-China trade meeting today in London, Megan Kinsella at the White House for us today with the very latest. Hi, Megan.
Hey, Scott, that's absolutely right. These talks now are in their fifth hour, having started just after 8 a.m. Eastern. And, you know, unlike the Geneva round, we are not really expecting a big breakthrough here on the Terra front, for example. This is really a much more technical round of talks, mostly centered on two issues. You can see the live picture there of the location where these talks are ongoing. But the two issues here, Kevin Hassett told us on CNBC earlier today that the goal
for the White House was to get a handshake agreement with China, restarting the flow of rare earth minerals, likely in exchange for the U.S., then loosening recent export controls. The Wall Street Journal also reporting just in the last hour or so that the president authorized Treasury Secretary Scott Besant to take some steps to undo some of those recent restrictions on things like jet engines and chip software in order to get these talks moving. So we're waiting for more on that. And in the meantime, Scott,
As for the other big story here, that's the fallout between President Trump and Elon Musk. And after last week's really tumultuous back and forth between the two, Musk was posting on social media this weekend in support of the president, mostly about the ongoing L.A. protests. But President Trump told NBC in a phone interview on Saturday that he had not spoken with Musk and he did not expect
to. The president saying that while he would be allowed to cancel government contracts with Musk's companies, Starlink and SpaceX, he was asked about, he says he hasn't given it much thought. He also called Musk, quote, very disrespectful. And he said he assumed their relationship was over, saying that he saw no reason to try to repair it. So, Scott, likely not the end of what we're hearing between these two men, but for now, at least the president appears to be trying to move on. Scott.
Megan, thank you. Megan Casella, North Lawn of the White House with the latest on both of those fronts, which have obviously garnered a lot of interest. Stephanie Link, on the market standpoint first in these trade talks, what are your expectations? What do you care about most coming out of this as to where you think stocks go from here?
Well, Joe used the word progress in the last segment, and I would say the same thing. I just want to see, I want to hear progress. I don't think we're going to get a lot of detail, unfortunately. But Scott, you know what's interesting? In the face of all of this uncertainty, we are still growing right now, GDP, almost at 4%. The Atlanta Fed tracker came out late last week at 3.8%. And I went back and I looked at the first quarter GDP numbers, and
And remember, the first quarter, which was actually a negative in terms of GDP, but final sales to private domestic purchasers rose 3%. Business equipment sales rose 22%. Consumption up about 2%.
We are in a position to handle this very well. And why we care is because we always bring it back to earnings. And I think earnings are going to continue to deliver and exceed expectations. So I just want to get this behind us and let's start focusing on the other parts of the administration's growth agenda, meaning lower taxes and also deregulation. And I think that will be very much welcome for me anyway.
Joe, I want to get your thoughts on the falling out between Elon Musk and the president. You own the stock. I don't think we've heard from you directly related to that issue yet. A couple of calls on it today do, however, mention it. Downgraded at Baird today. They say that Musk's ties to President Trump have added considerable uncertainty.
also downgraded today at Argus. They're concerned that the war of words between the two, along with the expiration of EB credits, could further weaken demand for new Teslas. How are you thinking about all of this? I feel like Joe's audio is having a bit of an issue. We'll attempt to work on that. But you did see those two downgrades today. I'm right here. So now we can hear you, Joe. So tell me how you're thinking about this.
Yeah, so look, the strategy that we incorporate, it's rules-based. So I have a universe of 500 stocks. I can't change that 500 stocks without going to the SEC and changing their prospectus. I'm not going to do that. But I will say this, if I had the ability, if I had the discretion...
to kind of tweak the strategy there are certain stocks where i would say okay you know what forget about the actual capital that we're going to expend on investing why are we expending the mental capital in being in these names because there's such a chaotic nature surrounding tesla and that chaotic nature has existed for far many years
He is without question, arguably the world's greatest innovator. He's a phenomenal businessman. And when he's focused, when he's specifically focused on Tesla centric strategies, that's when the stock thrives. But when you have all these extracurricular activities that are taking him away from thinking about the innovation in the future of the business, it's just too chaotic.
And I don't understand why anyone who has the discretion would exert that type of mental capital in addition to that. Remember,
The significant challenge that Tesla has in terms of margins is because they are reliant on a lot of components and materials from China for the development of batteries. And because of the high tariff rate there, that's going to continue to be a challenge for this company, and you're going to see margin compression as a result of it. So there's nothing we can do. It's in the universe, so we'll maintain positioning there. But
if you have the ability to exert discretion, I just don't understand why you accept the chaotic nature surrounding it. All right. Yeah. You sound a little frustrated, I think, as many have as they've watched this stock do, I think, what they didn't expect since the election. Joe, thanks. Let's get the headlines now with Courtney Reagan. Hey, Courtney.
Hi, Scott. Well, the biggest overnight drone bombardment of the war. That's what the Ukrainian Air Force is saying today after Russia launched launched almost 500 drones and 20 missiles at central and western parts of the country. The escalation comes as the two countries began a prisoner swap today, agreeing to exchange twelve hundred prisoners each.
The hidden costs of home ownership are averaging just over $21,000 this year, according to a new bank rate study out today. Hidden costs are those that go beyond a mortgage, including home insurance, property taxes, utility and energy costs, and home repairs and maintenance. The states with the highest costs are Hawaii, California, New Jersey, Massachusetts, and Washington. Those with the lowest costs are West Virginia, Mississippi, Indiana, Missouri, and Arkansas.
And Lilo & Stitch made it three weeks in a row at the top of the box office. According to studio estimates, it made $32.5 million at the North American box office, beating out the John Wick spinoff Ballerina, which took home $25 million. Lilo & Stitch is now closing in on $800 million globally. Scott, back over to you.
All right, Court, thanks so much. Courtney Reagan coming up. Committee moves. Stephanie Link has a really interesting new move to tell you about. It's a buy, and we're going to tell you what it is. It's already in Joe's portfolio. We reveal it 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.
Ryan Reynolds here from Mint Mobile. The message for everyone paying big wireless way too much. Please, for the love of everything good in this world, stop. With Mint, you can get premium wireless for just $15 a month. Of course, if you enjoy overpaying, no judgments, but that's weird. Okay, one judgment. Anyway, give it a try at mintmobile.com slash switch. Upfront payment of $45 for three-month plan, equivalent to $15 per month required. Intro rate first three months only, then full price plan options available. Taxes and fees extra. See full terms at mintmobile.com.
All right, welcome back to Cupertino as we await WWDC 25 here at the top of the hour at Apple Park. In the meantime, we have some new moves from Stephanie Link that we think you'll find pretty interesting. Steph, you bought Uber. You joined the party. Why?
I joined the party. I've been watching this for such a long time that I just had to do it. Look, these guys have the dominant market share in the industry. 68% market share, 32% global share. They're in 10,000 cities and 70 markets. What got me interested though recently is they have two things. They have a whole new slate of products, affordable products.
that I think is going to continue their momentum. They've got margin expansion, but also the CEO of Palo Alto was announced to be on their board last week. And I think you're going to start to see more M&A as a result. And so it's not cheap. The stock's had a heck of a run, but it is still 7% below its highs. So I started with a very small position and on any weakness, I'll be adding to it.
All right. A quick comment from Joe, and then I want to get to another move from Steph. But Joe, how about this? Obviously, I support what Steph so eloquently stated. This company, what has impressed me most about it is how they have navigated the complete turn in their balance sheet, how they now generate cash. And that cash allows them to set forth into a lot of the different areas of business that is allowing them to have that diversification.
Steph, I arguably think the other move is more interesting in some respects. You sold Home Depot. Yeah. You're the one who had housing as like a key bullish theme of yours. So what happened? Well, I still own D.R. Horton and I have been adding to D.R. Horton on this weakness. It's a heck of a lot cheaper than Home Depot. Home Depot, there's nothing wrong with it. It's just it's not very it's it's it's not cheap.
by any means a 25 times estimates and I think there's more leverage on the dear port in the home builder side verses the retail store so I'm just I'm still very bullish on housing for the long term I know we need to see interest rates come down to see real demand but I do think we have pent up demand it's just a matter of waiting out on the interest rate front so I just think that to your heart is just a lot cheaper so on the plus
In consumer, I just like the Uber story better than Home Depot. Okay. All right. Well, we'll follow that story, both of them. Stephanie Link, up next, Mike Santoli. He's here with his midday word. It's a WWDC edition because we get his take on Apple's importance to the broader market. Is it what it used to be? A little pine on that next. Welcome back live to Apple Park today.
For the Halftime Report, Senior Markets Commentator Mike Santoli joins us with his midday word. We're doing a WWDC edition of this. Okay, Mike, and you know what they used to say. As goes Apple, so goes the market. Well, not necessarily anymore.
No. And, you know, I would argue and have argued for a while that it's bellwether status used to be overstated. And it's only more true now in a lot of respects. That's a two year chart of Apple relative to the S&P 500. You see how it gapped out very widely with that downturn in Apple in early 2024 after a very strong 2023. And you see also that Apple did not lead the rest of the market down. In fact,
Apple had to catch up to the broader tape. And then more recently, you see the divergence as well. So it's not just about Apple kind of having leads and lags because it goes on these big streaks.
A couple of reasons for this. One is that it's just not as big relative to other large tech stocks as it used to be, right? You have the rest of the MAG-7 has filled in, MAG-6, whatever you want to call it. It was five times the size of NVIDIA three years ago. Now it's the same size. It was four times the size of Meta three years ago. Now it's double. Amazon,
All of it, it basically is just not what it used to be. And I would also point out there are years, 2011, 2013, where it went totally different directions or magnitudes from the market. So I guess basically you have to look elsewhere for your lead dog.
you know your points are well taken microsoft's biggest s p 500 weightings microsoft at 6.9 nvidia 6.8 and apple 6 and in terms of the nasdaq 100 it's microsoft nvidia and then apple the the market itself lastly mike before i let you go uh are we just waiting a bit on london see what happens out of that meeting
I think that's a big part of it, at least in the immediate term. And then I think we're just going to maybe hesitate here around that 6,000 mark. We went through the jobs report catalyst looking for the next one. Market is both looking very strong in terms of reasserting this uptrend, but also maybe bereft of its next obvious directional move as it looks a little bit overbought. What's interesting, though, is it's rotating. You have the Russell 2000 up two thirds of 1% when the big caps are asleep. So it seems like
Maybe they're grabbing for some laggards here. All right. I'll see you in a couple hours back on Closing Bell. We'll see what happens both here in Apple Park today and then those developments with the trade talks in London. And we'll get your perspective on that in Closing Bell. That's Mike Zantoli. We do have committee stocks on the move, many of them today. A few names getting slammed. We'll tell you exactly why.
We are back. I want to show you a group of stocks today that are on the move and to the downside rather decidedly. Take a look at Applovin, Interactive Brokers, Carvana, Robinhood. There you go. Four percent for almost everything but Carvana. The news of the day here. There are no changes to the S&P 500 happening right now.
right now. And there was a lot of speculation around some of these names getting in. In fact, they're not. So they're selling off. It's relevant for us, Joe, because you own Applovin and you own Interactive Brokers. Applovin got their target raised today by 40 bucks at Morgan Stanley to 460. Interactive today got downgraded at Citi. What do you think?
There's a group because there's actually another name that we own that is part of that S&P 500 disappointment. That's Viva Systems. In the case of Applovin, this really stalls what has been positive momentum after the last several weeks. A little bit skeptical.
that Applovin can advance from here without some really good fundamental news. In the case of interactive brokers, I actually think the fundamental news is there. So I take the other side of this disappointment. And I think the intraday price action is reflective of that. I think the same for Viva Systems. You're seeing that it's bouncing from much lower pricing earlier in the day. And the fundamentals are strong there. They exist as well.
Call today, Stefan G. Ivanova from Goldman. They reiterated their buy rating and they take the price target to 570 from 500. What do you think? Well, the stock's up 200 percent in the past year, so it's had a heck of a run. I have been trimming it just because it's up so much. But, you know, I have been all over the electrification theme. We're going to spend four trillion dollars between now and 2050 on this theme. And that's power. That's grid. That's AI. That's data center.
So I own a whole bunch of names. G.E. Vrnova, obviously the one. But Quanta, Eaton, Rockwell, Vertiv was a new position for me last week. I think that this theme is in very early innings. And I think you could maybe not buy the G.E. Vrnova. Those other names that I mentioned, I think, are better values. Rob, B of A is bullish on both KLA and Lamb Research today. They take the price targets up on both. KLA goes to 900. Lamb goes to 100. Your thoughts? You own both.
We do. The semi sector has been one of the best year to date. I think KLA is up north of 30 percent. Lambs up north of 20 percent. They're both a little more expensive than they historically trade. They both continue to do well because on the back of the AI tailwinds.
offsetting some of the legacy parts of the chip segment. But they are fully valued. I don't know that I'd be a chaser right here, but we're going to continue to own them.
All right. We are literally minutes away from WWDC 25, the keynote from CEO Tim Cook kicking off in the buildings behind us, this complex here. I'm here again with Steve Kovac, who is going to be listening intently to everything they say. What are the chances of any surprises, number one?
And the idea that I get the disappointment and I get the fact that investors always want more rather than less and they want it now rather than later, but this is still Apple and they're never first or rarely, but they're usually right and best. And the thought still is that give this company time as Dan Ives used the word patience and they're gonna get it right.
Whether it's today, tomorrow, or the next day, it's going to happen. Yeah, a couple of things there. This is really their chance to reset the narrative that we've been talking about all year. Let's put tariffs aside, kind of out of their control right now to a degree. But the stuff they do have control over is how they deal with developers,
how they deal with artificial intelligence. And to Dan's point earlier, what can they show us? They're at least making progress there. We know we're not going to get a surprise. I'd be surprised if we got a surprise. We're not going to see an Apple car or a new virtual reality headset or some kind of magical AI device. It's going to be very developer focused and very wonky in some issues. But look, we're showing you this board right now. This is the kind of stuff
that both developers and investors are going to be watching for because of this whiff on the AI strategy, on the failure to deliver a lot of their promises. What can they do? Who can they partner with in order to fill in the gaps in time and also give developers the tools they need to stay on Apple and not go somewhere else? I guarantee you, there are so many other companies, Microsoft, OpenAI, Google, they would love to take these developers away from Apple.
And this is probably their best shot. All right. We will talk to you afterwards and see what has happened here. Steve Kovac, thank you very much. We'll do finals next.
We're back here at Apple Park where Tim Cook has already taken the stage at WWDC here a few minutes before the top of the hour. As things have officially gotten underway, we heard him making some remarks to the developers. And we'll have the postgame show at 3 o'clock Eastern, of course, on Closing Bell. Kantrowitz and Ives and Kovac back with us along with some others as well. Guys, let's do some final trades. Stephanie Link, what do you have for us first? It was an outstanding quarter. Conservative guidance. Thank you, Joe Terranova.
In the last five years, Boeing has never showed up on a momentum screen. It's starting to do that now. All right, Rob Seachin. Welcome. I think this AlphaWave deal shows that they're elbowing the data center market. It's a cheap way to play the semi-space. All right, guys, thanks so much. I'll see you on Closing Bell right after WWDC ends. 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.
but only as an expression of an opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com forward slash halftimereportdisclaimer. At Capella University, learning online doesn't mean learning alone.
You'll get dedicated support from people who care about your success. A different future is closer than you think with Capella University. Learn more at capella.edu.