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All right, Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner, front and center this hour of the AI fallout. NVIDIA trying to bounce today after its worst sell-off in years. We are debating the damage for that stock, the other big names as well, and the investment committee making new moves around all of this. Joining me for the hour, Josh Brown, Stephanie Link, Shannon Sikosha, Jim Labenthal. We'll check the markets. Carl just took you through it. We are getting a bit of a bounce today in the NASDAQ, especially up one and a third percent.
Steph, NVIDIA is trying to bounce after this horrible day that it had. Broadcom, though, is lower again. And you own that stock. And I was part of me was thinking, well, Steph's probably buying on the dip. You didn't. Why?
I think it's going to take a couple of days, maybe a couple of weeks to settle itself out, right? There's just still so many questions with regards to DeepSeek's technology, the cost, what it means for a cheaper AI for the industry. Does it drive demand? And I just didn't like the violent reaction. I understand why, because the stock was up about 100% until yesterday, right? So it's still up quite a bit.
It's had a nice couple of months actually since last quarter. And so I just think it's going to probably sit here, take a breather until we get more understanding about the CapEx levels from hyperscalers. I don't think you're going to see massive declines in the hyperscalers CapEx because I think they want to continue to dominate the AI arena. So I don't think in the near term, maybe even the next couple of years, you're going to see a lot of change there. But I think like the psychology around it, plus the stock moving up so much,
That's why I didn't buy it. I bought other things. We're going to talk about that a little bit later. But I will say why I continue to like Broadcom, and that's because it is diversified in terms of its revenue stream. It's not all AI. About 30% of their business is AI, but 40% of their business is software from the VMware acquisition. And then, of course, you have the cyclical businesses that have not turned yet that are troughing. And so I think you add it all up.
And you could do something like $11 to $12 in earnings power. But I'm just waiting for things to settle out, Scott. I absolutely will be adding to this name. I just want to give it a little bit of time. Josh Brown, 24 hours later. I'm not sure the dust has fully settled yet. But how has your thinking about all of this evolved over that time period since we spoke with you a day ago?
I think the right characterization of what went on yesterday can best be captured by what Michael Semblist at JPMorgan said, which was a shoot first, ask questions later market. Okay, so we shot.
Nvidia had the largest one-day dollar market cap decline in world history. No one's ever seen anything like that before. Great. We had probably 30 names that have doubled and tripled over the last 18 months, declined by 15 or 20% yesterday. And those range from...
AI software companies to chip companies to infrastructure plays. So now that we've done the shooting, let's ask some questions. Here's one. Have you traded through the dot-com meltdown of 2000 to 2002? Because if you haven't, today might be a good day to sit down.
I'm going to tell you right now, I think it's very possible that the selling in the chip names is overdone because of this age-old...
idea that the more efficient you can more efficiently you can do something, the more use cases will come up for it. So I think the chip sell off is probably overdone and a lot of it is leveraged by the way coming out when you consider the options volume and the levered ETFs, etc. But there is simultaneously the possibility that
The utility stocks, for example, some of the energy plays connected to the AI build-out theme haven't gone down enough. I don't think those are coming back. So if you say to me, well, what is the right question to ask? The question to ask is, do you think that every CapEx plan being envisioned by the Fortune 500 a week ago
are going to come to fruition in the next two years? Or do you think that people are going to start crossing projects out because of the uncertainty that has now been introduced into the ether? I think the right answer to that question is yes. We are not going to see the same furious pace of announcements and build-outs and groundbreakings. I just think people want to invest,
but don't want to look stupid. And if you remember 2000 and 2002, that's exactly the way it went. Everything we thought about the internet became true. The problem is there was too much money being thrown at infrastructure. And so remember global crossing.
Remember the competitive local exchange carriers, the CLECs. Remember the companies that thought it would be endless demand for laying fiber, like Corning, like JDS Uniphase. There are a litany of names that if you've been around, you will remember from 25 years ago. That mentality is back in play today. And if you weren't there, start reading about it. And if you were, this paradigm will not be materially different.
Chris Harvey, Wells Fargo, says this is not the post-1999 tech wreck. If you look at some of the stocks like Josh is talking about, Vistra was one of the best performers. Utility last year out of the S&P 500 in the top five performance. That stock is up today. It's still down 27% week to date.
Jimmy, I mean, you own Nvidia. Steph's got a move that I'm going to get to after this because it plays right into what we're talking about here. But how are you assessing the damage here? Morgan Stanley today cuts the price targets of a number of semi stocks, including Nvidia and Broadcom and Marvell and Micron. Nvidia goes to 152 from 166, whereas Baird today says they'd be buyers of Nvidia on this dip.
So 152, just to use that number on NVIDIA, would still be a nice 20% rise from here, which would indicate that you should not sell all your NVIDIA. What you should do, though, is evaluate risk. And I watched the show yesterday. Obviously, I'm here today. We are all talking about risk management. And for the last two days, I've been talking to a lot of portfolio managers within Serity Partners, outside of Serity Partners.
There are very few, in fact, I don't think there's anybody who said that now is the time to back up the truck on AI. By the same token, nobody is saying sell all these names outright. That's not the conversation. The idea that these are bust in some sort of post-1999 way is not what people are talking about. Now, maybe that's wrong, but we'll find out what people are talking about. And by people, I'm referring to professional portfolio managers,
is this: Did we go into the end of last week with simply too much risk? Were we too blase? Consider Oracle for a second, one of the stocks that's in the headlines the last two days. It shot up like a moon rocket last week on Project Stargate, and now it's given that all back. You have to be comfortable with the level of risk that you have.
What I'm saying to you, just to be explicit, is most people that I'm talking to are talking about trimming risk. What I'm doing in light of that is I'm waiting because we are going to get more information as the week goes on. I don't want to get ahead of where we are in today's rundown, but I will say we've got earnings coming up from two of the major hyperscalers, Microsoft Meta. Let's see what they have to say. There are going to be questions about DeepSeek on those conference calls. I will wait for that information, but I think this is a time for everybody
everybody to say not should we sell these all outright but did we have too much risk Nvidia is at the highs of the day you know as we're sitting here talking and Josh makes the case that you know some of this might be overdone to at least some degree it's trying to get five percent back of yesterday's huge sell-off has this for you changed the investing conversation around the space
I don't think for us it's changed the conversation all that much, Scott. I mean, frankly, our view is that we were really looking for broadening out based on underlying economic momentum. And so while we agree that the AI trend or mega theme, if you will, is going to have a number of different iterations and it's an evolution over the course of the next several years, our view is that, you know, the benefit of AI and which could
technically, Scott, be even broader if the costs come down. The benefits of AI to other industries and the productivity enhancement that we could see more broadly if costs in this space come down could actually offset some of this sort of near-term malaise or concern about a very small subset of the companies that have benefited from AI. Scott, we talked about this last year a lot. You know, we talked about this expansion of where do you go next in sort of
playing the AI theme. And I think where you go is you go into some more cyclical businesses that could potentially have this productivity enhancement, but more importantly, are already benefiting from the economic momentum that we're seeing. So for us, it hasn't really changed. We have been wary of significant concentration in some of these names. We have been concerned about the potential for
to Jim's point, investors to become somewhat complacent. But I do want to temper that, Scott, with I think that I agree with Josh in terms of semiconductor demand based on AI, there is going to continue to be demand. And it's just at what level of demand and the price paid for it that I think is going to be in question over the next several weeks. It is beyond the semi-space. There's a note from Mellius today which talks about this being a
substantial risk that the AI CapEx arms race has peaked. And they're looking at names like Vertiv and Eaton and Trane and Johnson Controls. I know we're hearing a lot of static. You probably are at home, too. I can just tell you we're working on it the best we can. Just bear with us, if you would. It leads me to trade in Eaton.
that you made right so could we show can we show some of these stocks please eaton vertiv train johnson controls you bought more eaton i did it was down huge yesterday and i still believe very strongly in ai i think all four of us do all five of us do right we're in the early innings of ai if you believe that to be the case you need data centers if you don't
If you need data centers, you need a better grid. We haven't spent money on the grid in 50 years, incremental money. And we're going to spend $4 trillion between now and 2050 on the energy transformation. And then you also need power as well for all of this. So that story does not change.
The data center story is sort of interesting to me because we have 11,800 data centers around the world. That has to go higher. The US has the largest amount at 5,400 data centers. It's likely going to 10,000 plus. Maybe we could debate is it 8,000, is it 12,000, but it's going higher and if you believe that,
You want to have exposure to the infrastructure place, right? So to me, Eaton is a world-class company. They're probably going to do, have a good quarter, 6% to 8% organic growth. They could actually increase their guidance to 10%. Record margins.
going higher it's a very conservative company though scott so i've only bought a small because they added to the small position and i'll buy more because it always kind of trades squishy around the quarter but i also added to quanta services they've got 34 billion dollars in backlog and also very strong uh customer base 60 of their customers are utilities utilities aren't going out of business and we know utilities have to spend on the grid so to me these
15 to 20 to 25% declines in these names in two days as an opportunity long term. I think this is a decade long theme. So that's what I'm actually playing for. - You know, we're about to get starting tomorrow, mega cap tech earnings. You know, Meta is a new record high. Microsoft is tomorrow too.
There is the thought from some, Josh, like Citi today, which says this is a risk to U.S. exceptionalism, certainly as it relates to AI. I mean, if anything, it's reset the conversation around that, that, you know, this was such a shocker, so to speak, of what
you know, DeepSeq was allegedly capable of doing for the cost that they were apparently capable of doing it, that you do have some questions around the dominance of the Mag7 from here as it relates to AI and maybe ways you didn't on Friday afternoon.
I think it's really tough for me to give you a definitive take on what the actual fallout will be. But it's not hard for me to say, make a list, if you would, of Fortune 500 companies slash global sovereign governments who are anxious to start standardizing on Chinese AI. Come up with, tell me your name. Who wants to go first, IBM or...
Pepsi. I mean, let's take a deep breath. That's number one. Number two, a lot of the companies that sold off yesterday actually are net beneficiaries of a higher productivity, lower energy usage situation
regarding LLMs. So that's why I think you're seeing some of the MAG7 names bounce here. You know, there's this funny thing. We used to be like, oh, is this bullish for emerging markets when oil went up? Well, which emerging markets? India imports oil, Brazil exports it. So like all of these companies are not the same and they don't all have the same levers that make something better or worse. So I think the nuances is the key here. Um,
but I would be fading these infrastructure stock rallies because it's like a fever that broke. And now people are like, wait, hold on. I was paying 28 times earnings for a utility or I was pile driving my portfolio into companies that are gonna make mini nuclear reactors. Are these things actually really gonna happen now if the efficiency gains that this startup in Asia was able to demonstrate
wide, you can't be sure. How could you be sure? So that is that's the nuance here that I'm trying to introduce into the conversation. Josh, just talking about infrastructure and the grid, 70 percent of the electric transmission lines are over in this country are over 25 years old.
The grid repair has to happen. And then you're going to maybe think about growing the grid, but that's not even in the conversation because we haven't spent money, incremental money on the grid and you need it for all of this stuff. So I totally disagree in terms of not wanting to be involved in the infrastructure names. Do I want 10% of my portfolio to be eaten? No, but I do think the declines are offering a really good opportunity for this very long term secular theme.
I think Josh, sorry. Josh, you want to respond? I hope so. I hope so. I hope you're right. I'm not short.
Well, I have a lot of confidence in terms of at least the spend going into these companies and just talking to them. I mean, you haven't seen these kind of backlogs in years. They will be the last to know. And it's not just coming from the hyperscalers, though, Josh. I mean, it's coming from every different industry. So it's not just this situation this week. It's these companies would never have this kind of backlog if it was just coming from seven companies.
You're right, but does Vistra Energy go up 300% if not for enthusiasm over potential earnings from the hyperscalers spent? I could never get comfortable with Vistra Energy. I think everybody piled into it. So that's what I'm talking about. Everyone piled into NVIDIA. I think these other names, they have more diversification too. They're not just the grid. There's a lot of products that they have that they offer that they will benefit from lower costs in terms of AI.
There are a lot of so-called everybody piled into stocks. For sure. And I think that is where the debate needs to be had the most. Don't you think? Like a lot of stocks that got a halo because a lot of people decided just to pile into anything that they thought was a derivative play of AI. First you go with chips and the hyperscalers and then you start going down, you know, pick your software, play, down.
Dell and everybody else. OK, pick your utility plays and everybody else. And now maybe a comeuppance of sorts as we really sit back and try and reassess what's actually taking place. Yeah. Yesterday, definitely a slap in the face. Like Steffi, I agree that we do need to upgrade our infrastructure. But Josh made a very good point and something that I know a little bit about, which is that
To your point, Scott, the nuclear power investment thesis was always kind of ridiculous. I mean, look, I know something about nuclear power. I spent seven years in the nuclear navy. You don't have to believe me. You can go look up Vodal Plant, the only nuclear power plants that have been built in the U.S. in the last 25 years.
eight years longer than expected. They cost twice as much, which was $14 billion in overruns. So this idea that either we're going to repeat that process or come up with these small modular reactors, really, it sort of got believed in a way by the investment community that it never should have. I'll go back to Oracle. I don't know if it was two quarters ago or three quarters ago where
On the call they said, "Hey, we're going to build a new nuclear power plant." Now, look, if you got Larry Ellison and company saying something like that, I understand why the investment community would jump on it. But if you actually just look under the hood at what it takes to build nuclear power plants,
it's laughable so i do think and that this is the point that josh was making on the fringe on the leading edge of the halo effect that you're speaking about scott it got ridiculous however step he's got a point we do need to serve you look at it i know but no one ever says it's ridiculous when it's happening it's after the fact that all well it was ridiculous dot on the side of that's what i said well you know i don't know if i would like to say that's exactly what josh is saying and i'm sorry i'm speaking over josh but did you see me buying consolation energy act now
You know, we vote with our feet. Can I give you something bullish? Can I give you something bullish that I think should be obvious to... Okay, here's the most obvious bull case coming out of these events. And you're hearing it here first. By the end of this week, everyone will be talking about it because I'm looking at share price performance. Everyone knows I think cybersecurity is a 10-year opportunity opportunity.
will be basically uninterrupted by anything other than the end of the world given the risks and given how high the stakes are if we're saying that this type of a technological breakthrough regardless of infrastructure spend
equates to way more AI activity and the acceleration of AI use cases, well then it's fairly obvious that it's a guarantee more cybersecurity will be necessary. And you guys know my pick in the space for the last five years, CrowdStrike. Look at the stock today. Don't let
Don't like, tune me out. Put the thing on mute while I talk. It doesn't even matter. I just want you to look at the chart. Why is this happening right now? Okay. So I think if you want to be bullish on AI, you should be. I am. But like, who's going to benefit? This is so obvious to me. I'm sure it's obvious to Steph and Jim as well. You know, the cyber stocks are up for a second straight day, by the way, in the upset and the cloudy TF.
is up 10 days in a row. Huge. 10 days in a row is the cloud ETF. We're talking about the CrowdStrikes, Duown, Snowflake, Zscaler, stocks like that. Yeah. No, I mean, look, I've said this for a very long time that I think cybersecurity is bigger than AI. I really do. Because we have cybersecurity companies that are getting attacked on themselves because there are too many companies out there. There are 4,000 vendors and none of them talk to each other.
And so you're going to see massive consolidation. Plus, you have this growth in the industry. It's, you know, a trillion dollar total addressable market, whatever it is, it's large. And so I was lucky. I bought CrowdStrike over the summer when it fell and it was down 41 percent from its high because it's best in class, growing 40 percent earnings, 30 percent revenues and subscriber growth is 30 percent as well. And then you also look at something like that hasn't worked well, Zscaler. And actually, that stock was down last year when everything else was up a lot.
And I just think you're going to see a mean reversion at that one as well. And Snowflake, it's all about data and metadata, right? That's what's so important about AI. It's the cleanliness of the data. It's the accuracy of the data that goes into the systems. And that's exactly what they do. All right. We're going to take a quick break. When we come back, we have a number of new moves. I mentioned this at the very top.
To document for you today, Josh with a trim of a very well-known stock. He's going to tell you what that is. Stephanie Link has several moves that we need to tell you about as well. We've got a number of committee stocks on the move. We had a special guest coming up later in the show by the name of Mr. Michael Ovitz. He's going to join us from Miami. He's thinking a lot about and investing in AI as well from Miami.
Being the most powerful man in Hollywood to think in a lot about its impact, AI's impact on that business and beyond. We're back after this.
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All right, let's talk about these committee moves that we have to document for you. Josh Brown, you trimmed 3M by 20%. That stock hitting a new 52-week high today. Can you take me through the thought here?
Yeah, this has been a fabulous trade. It popped up on my list of the best stocks in the market. And quite frankly, it never really left. Now it's trading. So I'm in at 100. So I'm out at 150 and change. Now it's trading at 3.1 times sales, which is higher than the industry average of one times sales.
And higher than the one, three and five year median valuation that people have paid for the stock. I understand why. It's because the turnaround is working and people are excited. And that's why I'm keeping 80 percent of my position. But again, it's up 16 percent since January 1st.
It's up 87% in the last year, 15% over the last 30 days. So I need capital to do other things. This thing's had a huge run. I'm just right-sizing the position, but planning to stay long. - Steph, you're in the name.
Yeah, and I thought the quarter was just so-so. It was kind of in line. But what was encouraging was the organic growth was double the expectations. Yes, only 2.1 percent. But this company hasn't grown anything organically in years. And so their guidance of 2 to 3 percent for the full year, really encouraging. The restructuring is actually almost complete. So if you can get that higher organic growth, you're going to start to see more margin expansion and operating leverage. And Bill Brown, I think he's in like the 50s.
third inning of his tenure at the company. He's got a great track record. I do think it's not as cheap as when I was buying it when it was 11 times earnings. It's at 19 times, but I still like it a lot for the long term. You have several moves to document here. You bought more Accenture and United Healthcare. Yeah. United Health Group. Accenture first. Why?
Well, I think you're going to need a lot more consulting from this whole AI debacle and just having companies try to figure out and understand. And this company is in a great position to do so. And they're seeing their bookings actually in consulting alone last quarter was 7%. I think you're going to see acceleration. Their free cash flow was double the expectation in the quarter. They're going to be buying back stock, increasing dividend, etc.,
And so it's also trading at a discount to its long-term total average as well. So I just think this is quality. It was on sale, still is on sale, and they'll benefit from all of this stuff happening in AI and the unknowns. UNH.
UNH was, we started, we talked about this a couple weeks ago that I added to it. I hadn't known it for quite some time. Number one managed care company in the world. Growing earnings and total revenue, double digits. Margins are actually probably peaking on the low side, if you will. I think margins are actually going to go higher. That's medical loss ratio. It's the inverse of margins.
And I also think with a strong balance sheet of 18 billion and a new buyback program, I think there is support. So I think the setup for 2025 is really great. 17 times earnings, long-term average is 24 times. You sold Exxon? To raise cash, honestly. I made a little bit of money. I prefer Diamondback.
I'm huge in SLB. I just keep buying that thing every time it goes down. It's now a 6% position for me. So I just didn't need another energy name. I wanted cash to be buying all this other stuff. You sold FCX also. Yeah, that was a bad quarter, Scott. That was just a bad quarter and I'm tired of it, right? Their cash costs continue to disappoint. Their volumes are going down and their guidance is kind of like, do we believe it or not? And
I'm a long-term believer of copper, EV, and grid, like we just talked about, and they should benefit, but they just can't execute in good times or bad times. So, took the money and ran with that one. All right. We will get the headlines now with Bertha Coombs. Hi, Bertha. The top Democrat on the Senate Appropriations Committee, Senator Patty Murray, called on the GOP to pause the approval of Russell Vought's nomination as the White House budget director until the White House reverses its freeze on
on federal aid. Senate Majority Leader Chuck Schumer also called for similar actions in light of President Trump's order to freeze all federal, foreign and domestic aid while agencies undergo a review to make sure their spending aligns with the president's agenda.
The federal bribery trial of Nadine Menendez, former New Jersey Senator Bob Menendez's wife, has been postponed once again because of her cancer treatment. According to a new court order, the court received a letter last week from her doctor that supports her motion to push back the trial, which was supposed to start this week. Her husband is set to be sentenced tomorrow.
And the Mona Lisa is getting its own room inside the Louvre Museum. French President Emmanuel Macron said today it's part of a years-long overhaul to modernize the museum. Louvre's last overhaul was in the 1980s when I.M. Pei's iconic glass pyramid was unveiled.
You know, I'm not even sure. I've never really noticed that there's anything else in the room but the Mona Lisa in that room. That's true. It's sort of transfixed by that by itself. Bertha, thank you. Bertha Coombs coming up from Hollywood Hills to Silicon Valley. Former super agent turned venture capitalist Michael Ovitz is next. We'll talk about AI, the future of streaming, where he is finding the next great investment idea as well. He joins us from Miami next.
What's at stake when administrations change? From the first 100 days and beyond, EY brings insights on the issues that matter. Executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability. No matter the policy shifts, EY helps business and government leaders remain resilient and sees dynamic growth. EY, navigate the geopolitical and economic landscape with confidence.
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We are back. Hollywood continues to assess the fallout from advancements in AI and what all of it means for the way movies are made and consumed in the future. Our next guest was once one of the most powerful people in the entertainment industry. He now navigates the world of venture capital. Michael Ovitz joins us live from the Eye Connections Conference down in what looks like beautiful Miami Beach. Michael, it is great to welcome you back. Thank you so much for being with us today. Hey, Scott, how are you?
I'm doing very well. I think, good. I think, Scott, I've got to call you out on something. And I've known you a long time. But you know what a stickler I am about returning phone calls and texts. And you owe me from two calls and two texts, Scott. And I'm thinking of walking off here. Okay, please don't. I'll call you right when we're done. We'll settle this. We'll settle this, I promise. Okay.
My bad, obviously. Look, I'd love to start our conversation about AI and how you are thinking about, as we set up this segment with you, the transformative impact it's having on Hollywood. As I've heard you speak in the past about your fascination with the text-to-video specifically and how that is going to impact all of that in the future.
Well, I think that AI will have a substantial effect on a number of things in creativity. I don't think it's going to happen as quickly as everyone would hope. The entertainment business over the years has been very slow to adopt outside technologies. They have made, you know,
a lot of advancements over the years with types of film and types of cameras. I do think that AI is going to be helpful.
One of the things I don't think is going to happen is that it's going to have an immediate use outside of production. I don't see any soul in AI yet. I don't see the kind of things that would attract audiences. What I do see is extraordinarily powerful ability to cut production costs.
And I think we're going to start to see that put into place. And I think we're going to start to see applications coming into entertainment that are going to start to be adopted.
I know that you've been thinking a lot about the evolution of media, particularly streaming, as we all really try and get our arms around what the future of our business is going to look like. You said at an event last year, quote, streaming has destroyed the business I grew up in. Is it Netflix clearly now and everybody else, or has that still to be decided to some degree?
Look, I don't think anybody, particularly me, can make a prediction about what's going to come around the corner. I think Netflix has basically changed the game. I think Disney's done a very good job. But I do feel that if you would have asked me 10 years ago, could a singular business come in and change the entire viewing patterns
of this country, let alone the world, I think anyone that was in the business with a reasonable mind would say no. I think what Ted and the Netflix team has done is revolutionary and we're just seeing the beginning of it. We're starting to see live events, we're starting to see sports, and basically they have changed
how people consume, the concept of binge watching, the concept of seeing every episode of a singular series on demand. It's just everything is different. And then from an economic standpoint, Scott, the business has changed that I grew up in, in that artists worked and created and were invested in what they did, and they received royalties and
profit participations. In the streaming world, you get paid up front and there's little or no back end involved.
Will that change? I don't know, because I'm not quite sure how that formula can work. But I do think the business is incredibly different right now. And I know you're thinking about the future of it and dealmaking and the like. Josh Brown, who's on my investment committee, has a question for you along the lines of maybe deals that could be done in streaming in the future. And he would love to ask you a question, Josh.
Hey, Michael, huge fan of your book. So last year was sort of the last year for defense in Hollywood amongst the large publicly traded media companies. Disney got to profitability with its streaming service. Netflix obviously blew everyone's doors off. Paramount found a deep-pocketed buyer with endless money, so we've put that to bed. And now David Zaslav is talking about
he's open for business, for deal-making. So if we think 25 is offense, I guess my question to you is, how badly do you want to put the pads back on and get back into the game? And what do you think investors should expect to see amongst all of these different publicly traded players, and maybe there are too many of them?
- Well, you know, there's, Josh, first of all, thank you for your kind words. There's never too many. I will state that I am so happy that the Ellisons got involved with Jerry Cardinal at Paramount. I think that saving that legacy brand is so important to the business. I personally don't think consolidation is over. I think that scale is critical going forward.
I do feel that Netflix has changed the economics of the game. I don't think that we're going to ever see it revert to the way it was. I am very bullish on content. I'm very concerned about the cost of it. It is more expensive than ever to make content. And I'm very concerned about distribution patterns.
But I think that they are going to be basically overrun by the power of day and date and streaming and the way that the public is accepting viewing patterns.
As far as investors, Josh, there's gonna be some opportunities. They're not gonna be like they were, but I don't think we've seen the last wave of consolidation. - I mentioned, Michael, we've leaned on your expertise from sort of how you grew up in this business in front of many of us, obviously, but you've also spent a lot of time
out in Silicon Valley. You have firsthand experience in helping scale up Andreessen Horowitz, for example. You do a lot of venture capital now. You were an advisor to Palantir when it was getting going. What is most exciting to you these days out in the Valley? And also, what do you make of the fact that what was really a church and state sort of deal, you had Silicon Valley was on the West Coast,
White House policymaking was on the East Coast and there was really never any get together. And now you literally have Silicon Valley's foot in the oval. I'm wondering what you make of all that. Well, I personally, I'm very happy that everyone's talking to each other. I think these split schools were terrible for the country.
In 1999, Marc Andreessen and Ben Horowitz approached me to go on their board. That was 25 some years ago. It was the single most life-changing experience for me because they opened up for me a world that I now live in that is the most fascinating, interesting place to be. I am incredibly confident
about the talent that we're producing out of the valley and in this country. I'm very confident about our technology. I know there's all kinds of discussion going on right now about this Chinese AI company. I am bullish, bullish, bullish on American technology and where we stand.
I think that from my standpoint, the entertainment business is going to finally benefit from that tech. And I find that having people in tech and entertainment intertwined with policymakers can only lead to positive things for the country. We'll leave it there, Michael. It's good to catch up with you. Be well and stay by your phone because when the show's over, you're going to get a phone call.
That's all I can say. I hope so, Scott. Thanks. Thanks to you. Thanks, Josh. All right. That's Michael Ovitz from iConnections down in Miami. By the way, don't miss the special Fast Money live from that conference tonight, 5 o'clock Eastern time. We are back. Starbucks after the bell in earnings. Josh, in that name, this setup is coming up. All right. Back to the setup now. Starbucks is after the bell. Josh, you want to talk to us about what you're expecting?
Yeah, I don't know. They're writing my name on the cups now with a Sharpie, which I know is a big thing Brian Nickel wanted to bring back. But this feels like it could be the last kitchen sink quarter. I think the expectations go up from here. So the expectations feel really low. Nobody is excited about the fundamentals. And I like that setup. So I'm going into this thing long. And honestly, if it sells off, I'll probably stay with it either way.
Anybody else have a take on Starbucks? Why doesn't anybody else own it? It's a turnaround story. Missed turnaround story. I know I love a turnaround story, but I just think it's nobody likes a turnaround story more than you. I know that's very true, but I actually prefer Chipotle because I think they're executing better and the stock is still down and the valuations come in. So to me, that's the one I'm playing with. I understand what you're saying. And by the way, I wouldn't be surprised at some point.
that Starbucks actually splits out China. Remember when Nichols was at, um, when, when he was at yum, they spun out the China business as well. So, Oh, I think it's coming, but I just think it's gonna take a long time. The numbers aren't going to look so good tonight. NASDAQ's tomorrow too, Josh. Yeah. Um, now look, NASDAQ is not yet at the place where I think they've seen a meaningful fundamental contribution, uh,
in terms of new listings. And new listings is like between a third and half of the business. So until that really picks up and we start seeing these startups come public, I think NASDAQ's fine, but the real catalyst is probably as we get later into the year. So that's been the story since I bought it in the 60s, I want to say. And I'm still here for that reason. All right, cool. We're back right after this.
All right, we're back. Senior markets commentator Mike Santoli here at the desk. We're trying to get a little back. Yeah.
Yes. From what we did yesterday. It's not that strong, though, it doesn't feel, for a number of these names. It's actually an upside-down version of yesterday. So the equal weight S&P is down half a percent. It actually is weak breath, strong S&P because you have the mega caps participating. The one consistent element is Apple bid for a second day as opposed to the strong from yesterday backing off a little bit. That's got great sponsorship of the S&P right now. The dispersion trade, we're going to start hearing more about it. It's back in play.
I hope you'll forgive me, Mike, but we have somebody on the phone that I want to bring in to our conversation today. It's the billionaire investor Mark Cuban who joins us now because, Mark, you were listening to our conversation about AI. And I think as everybody and you yourself included, I'm sure, is sort of trying to get your arms around the deep seek story and what it really means and what correlations, if any, there are.
to back to 1999, which you know better than most considering you sold your company in April of '99 for $6 billion and collared it and became the Mark Cuban we all know now. How are you thinking about all this?
So I think one of the fundamental issues with the market right now is no companies are going public. You know, there isn't... Back then, you know, Amazon was a new company. Dell was relatively new. You know, there were incumbents that we all looked at as being, you know, the default powerhouses. But there were new companies coming public that we could look at and say, okay, maybe these guys have something unique. I mean, if...
if it was today, Google probably would not be public. Amazon might not be public. You can go down the list and there are companies right now that are up and coming in the AI space that are private. And because they're private, nobody gets to invest in them. Well, at least, you know, typical investors don't. And you don't really get
get much conversation about them. And I think that impacts the conversation and the market movements that we saw yesterday and today. Do you think it's going to change? Does this open the door to more startups because of what we witnessed from DeepSeek, the way we sort of think about these open source models, the way that, you know, maybe the incumbents are suddenly put on the defensive, so to speak?
Yeah, it was interesting because you mentioned earlier about an arms race. You know, the Meta, the Amazon, OpenAI, all just spending just billions of dollars. And that really reduced the competition because it sent the message that, hey, you've got to raise all this money just to play the game. Now with DeepSeek, the door is open. And actually, the door had already been opened already.
For smaller companies that were, you know, like a company, Grok, that does an inference processor, the door has been opened, but I think it's opened wider now. And you'll see more companies get more visibility. And I think with the new administration and the changes at the SEC, I think there's going to be an incentive and a push for more companies to go public.
because the reality is it's not a stock pickets market anymore because the number of public companies continues to decline. - When you watched the sell-off yesterday, as an investor, I don't know what you're invested in today in terms of public market stocks. I think you've gone through gyrations over the last five to 10 years of being heavily invested in the US stock market and then perhaps not so much. I mean, how does that look today?
Well, you know, I had gone to cash because I was concerned about tariffs. I was concerned about the uncertainty. You know, how high can this market go? And so when yesterday hit, I certainly took a look and said, okay, is now the time to dive in? And is this just an aberration? And I just don't get that feel. Like I said earlier, there aren't those up-and-coming public companies that you can say, look, this just opened the door for them. Let's jump on board with them.
I think there's so much uncertainty still on DeepSeek. You know, is the information we got in terms of their cost to create the models accurate? I mean, it's still too early to tell. What impact do you think it'll have on Sam Altman? I'm not sure how well you know him, how much you might know about Open. But the idea that now, you know, he's talking about, wow, this is really an incredible opportunity.
It's going to force us maybe to be better and earlier in how they introduce some of their new features as well. I mean, it really feels like, Mark, this was a goalposts moving moment for AI and how we're all going to relate to it as investors. Do you feel that way, too?
Well, it certainly has been perceived that way. I mean, I think it's still too early to tell. You know, I try to geek out and learn more about mixture of experts and the way they're doing their models and all that stuff. So, you know, I think it's still too early. But I think what really changes is it's not just a race to raise as much money as you can in order to be a player. And it also impacts regulation behaviorally.
Because before, when we talked about AI regulation, the presumption was all these companies, the Metas, the Googles, et cetera, open AI, they were so big they needed to be regulated because there really weren't up-and-comers that could disrupt them.
Now, if all this plays out the way it appears to, the message is, you know, bring on the 12-year-olds. You know, bring on the disruptors who can come in here and change the AI game. You know, there's an old saying, when you run with the elephants, there's the quick and the dead. And we finally found somebody quick who can run with the elephants. And now the question is, can the elephants run with the quick companies like DeepSeek? And I think you're going to see a lot more entries into the AI space
I think you'll see a lot of more private investment into small up-and-coming companies. I can't tell you how many conversations with private companies I've had, and now it turns out I was wrong where it was like, well, shoot, you're going to have to raise billions and billions of dollars just to compete with these guys. Now someone can walk in
I had a conversation with a company last week where we were talking about, you know, the thing with TikTok is their algorithm, and they wanted to do algorithms as a service and build models so they can license what they think will be a better than TikTok algorithm to any social media company or other company that wants to use it. And the question was, how big a model and how much of an investment do we need to make? That all just changed. And so I think you'll see a lot more companies building
get funding that otherwise might not have gotten it because it won't take as much money to compete. Interesting. I so very much appreciate the fact that you were not only watching the debate and discussion that we were having, but that you were willing to be a part of it. Mark, thanks so much. We'll talk to you soon.
Appreciate it, Scott. Thanks, guys. Yeah, you bet. That's Mark Cuban joining us there on the phone. A reminder as well, you can catch us at 3 o'clock Eastern as well on Closing Bell. We'll continue this conversation, see what the market does from here. And we'll talk to Alex Kantrowitz of Big Technology, Alger's Dan Chung. He owns a lot of these stocks, venture capitalist Rick Heitzman as well. So that conversation is going to continue to evolve, and we hope to be at the forefront of that. Let's do final trades. Josh, what do you got?
CrowdStrike, staying long, new all-time high, raise the roof. Jimmy. Cisco Systems, it was off 5% yesterday. That's too big of a reaction. It doesn't have that much exposure to AI. Here's an opportunity to get into a recent darling in tech. Shan.
Healthcare, play a little bit of offense, a little bit of defense. And if Steph's right and we're close to tops on MLRs, MCOs might even look attractive. All right, Steph. Fingers crossed. Steph, what do you got? Boeing, it was a bad quarter, but free cash flow is positioned to recover. All right, stock up 5%, just about. I'll see you on Closing Bell. Exchanges now.
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