Deep Dive
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I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast, the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in.
All right, Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the deep sell-off AI stocks, as you know by now, plunging today on fears of an emerging Chinese competitor. We will discuss and debate with the investment committee, try to separate some fact from fiction as well. Joining me for the hour today, Josh Brown, Bryn Talkington, Joe Terranova, Steve Weiss. We'll take you to the markets here where the game in town today is all about the NASDAQ. And that's well off the worst levels, by the way.
down 3%, NVIDIA's getting crushed. A lot of other stocks are as well. I want to start with you, Josh, and I'm going to hear from you and Bryn first, because you're our longest owners of NVIDIA. And I'm wondering what you make of today's sell-off, how you're putting it into context, the kinds of questions you want answered, and what all of this means to you.
I think there's a component of today's sell-off where people are very reasonably recalibrating their expectations for how big the total addressable market for new GPU sales is. But then I think there's an even bigger component that just speculators being unwound.
This is the most over-owned stock in the market, and for good reason. People have absolutely gone crazy with options trading here, with leverage. We've got vehicles that are 2X NVIDIA. We've got all kinds of zero-data expiration, weekly options. It's an absolute casino that's been built on the back of
of a legitimately amazing growth story and so i think if you didn't have that circus in town you probably see the stock down five ten percent but because you have all that leverage you're seeing much more uh... i think it's too very important things that people need to know about what's happening with deep sea k_i_ and the way it's being interpreted on wall street the first is it doesn't matter if it's a chinese government psyop or not
The technological innovation of having an LLM train itself through reinforcement learning is impressive.
The cost efficiency of doing inference with only 7 billion parameters rather than 700 billion parameters is impressive. The possibility of being able to do more model training and inferencing with less usage of power and less chips is impressive. It doesn't mean, though, that chip demand is at risk.
what I think it means is you're more likely to see an acceleration of AI everywhere, all over the economy. Um, and I think that that's kind of becoming the default version of, of what's, what's to happen here. The idea of LLMs becoming commoditized, Scott has always been on the table. That's why Zuckerberg released Lama to the way that they did. Um,
We've seen this in previous technological revolutions. In the cloud, for example, Google gave us docs, sheets, and slides, which commoditized Word, Excel, and PowerPoint. But everywhere in the world you go, you will still see people using WordCamp.
Word, Excel, and PowerPoint. I don't think there's a line of Fortune 500 CTOs who are dying to take a fistful of Chinese AI technology and shove it right into their cloud data. I just, it's unfathomable. So I think this is a little bit overdone. And then the second thing I would tell you here, maybe the more important thing, most of this conversation about the impact of
of deep seek is happening on twitter if you know anything about twitter x if you know anything about x you know it's loaded with hedge fund managers and asset managers who absolutely loathe the mag 7. they've been waiting for this moment for two years these stocks nvidia in particular have been making them look bad
for 24 straight months and they're dying for this moment where small caps are up Europe is flat value stocks are outperforming growth and they view this as comeuppance for the people who have been riding these giant tech stocks to huge gains and I
I think because there's that desire to see these investors get beaten up a little bit, maybe that's why some of the rhetoric about this being the end of NVIDIA is getting so overdone. I think there's some wish casting happening here from some of the pseudonymous hedge fund managers. Bryn, I mean, I think one of the most important words that Josh used in that answer was if, because there are a lot of ifs and there are a lot of unknowns.
whether this is all even possible or not. Stacey Raskin at Bernstein, who, by the way, is going to be on with me today on Closing Bell, says, we believe that the DeepSeek did not build OpenAI for $5 million. They say the panic he does. He says the panic over the weekend seems overblown. Kenner Fitzgerald today says this is actually very bullish for Compute and for NVIDIA.
almost certainly leading to an AI industry wanting more compute, not less. They'd be buyers of shares on weakness like you're seeing today, which is the worst day for this stock since March of 2020. Do you agree with that?
Do I agree to buy more shares today? I'm not sure. Let's see it. Let's see it flesh out. But where I do agree with Stacey, and I think that as investors, investors, this is what a good old-fashioned unknown unknown looks like. It comes out of nowhere. No one's prepared for it. And this is what you see. NVIDIA down 17%, Vistria down 30%.
But what I do know, if you read the technical paper, it says apparently in the technical paper that $6 million does not include costs associated with prior research on architectural algorithms, et cetera, et cetera. So I think that you have this, what I would call a fast follower that took all of the success of,
ChatGPT, OpenAI, et cetera, really smart folks. The smart folks are not stuck in the US, they're all over the world, and they've done something incredibly innovative. And so I think that the overreaction is this like $6 million number and to think that they did this out of nowhere when the paper actually says that cost does not include these other items, which we don't know.
And so I think as an investor, you have to like understand your positioning, understand to Josh's point about the large language models, you know, a big fan of Alex Karp. I'm sure he's kind of laughing today at Palantir because he's been saying forever, LLMs are the commodity. It's what you build on top of that is what's going to create the return. And so if Masa and Larry Ellison and Sam Altman are building all these data centers,
to go just infer for open AI, I think you call that into question. But if firms like Microsoft, Amazon, et cetera, are building these to create in Tesla robotics and actually applications for us to use, then I think the story is very much intact. But for right now, since we are in this unknown, unknown situation that we came into the weekend, I think you have to take a step back
kind of see how it fleshes out. But I absolutely don't believe that this is the beginning of the end of NVIDIA. Yeah. Weiss, you own the stock. We have the luxury of everybody owning the stock today. Mark Andreessen tweets that DeepSeek R1 is AI's Sputnik moment. For those who are wondering what all of this means, and as I said, there's a lot of ifs. We don't really know
what all of this is really about, what's true, what's not true, the cost of this versus the cost of that. What do you think about your position for those who have large positions in Nvidia today who loaded up over the course of the last 18 months 'cause they feel like that's the epicenter of the AI revolution story?
What do you do? Well, unfortunately, and fortunately today, but it's only today, NVIDIA is not a large position for me, as I've been saying. It is for some. It is for some. It is for many. And what I would say is that the reason it wasn't a large position is because necessity is the mother of invention. So I don't recall any time in the history of technology that I'm aware of
We're a company, and I've said this repeatedly, we're a company like NVIDIA has been able to hold their technological edge. So I don't know what to do about NVIDIA now. To Bryn's point, there is so much we don't know. This is a knee-jerk reaction, largely driven by the market that we're in, meaning that ETFs are 50% of it, lots of leverage. But here's what I do know.
If this is the future, in other words, lower costs, then I will tell you that Google, that Microsoft, that Meta should be up to date because their costs of building out new capabilities
has just come down meaningfully. So it's puzzling to me. Now, meta's up, maybe because of that. But all those CapEx budgets that analysts had a problem with, well, if this is true, it could take a long time to flesh this out. Well, then that's very positive for them. In terms of the NVIDIA, in terms of the Vertivs, in terms of all the others. Which are all down. I mean, Vertiv's down like 27%.
A lot of the power providers to the AI story are getting hammered today. It is certainly not limited to either NVIDIA or the hyperscalers themselves. So in order for those stocks to be down as much as they are, you have to believe that AI innovation is going to stop. Now, there's some technical nuances like
Will the fabs and will the data centers run as hot, particularly the data centers run as hot? Will they need as much cooling? Well, that remains to be seen. My suspicion is that the cost now building them goes down so that you will still need as much power because we're so short power, you will still need as many cooling systems. So on a day like today, I'm not doing anything because I don't really understand what's real and what's not. - Sure, that's the hardest part of this story.
The fear, Joe, for the hyperscalers is that all of this only commoditizes AI. I mean, not necessarily a bad thing, according to Satya Nadella, for example. You can look at the tweet that he put out as we all react to this story in which he says that.
Jevons paradox strikes again as AI gets more efficient and accessible. We will see its use skyrocket, turning it into a commodity we just can't get enough of. In other words, the increased efficiency leads to increased consumption, not less. Be careful how you sort of read into this entire story. So we're going to get mega cap earnings, some of them this week, some of the key ones. How do we think about all this based on what Nadella had to say ahead of these numbers that we're all trying to
download what's actually occurring here. Well, I appreciate the chance that I had the opportunity to listen to everyone because there were some thoughtful remarks and I want to be really specific here because when you think about who owns these names, particularly the Nvidia, the Amazon, the Apple, it's really not institutional money. It is not hedge funds. They have over the last several months and year pared back their positioning. It is retail that owns these names and it is retail that probably
probably has utilized a little bit too much leverage in the gamification of Nvidia with these zero-dated options. So I think if you are sitting here today and you see Nvidia down 15% and it is below the 200-day moving average for the first time since the middle of 2022, and you're relying on some fundamental wisdom, which guess what? Doesn't exist.
the best thing that i've heard so far josh is 100 right the genie's out of the bottle the technology is out there now it could be replicated forget who introduced the technology but other than that you are basically guessing on where this is going to go you're not going to hear from jensen wong earnings is coming up you're in a fundamental blackout period so this is what i would do if you have a position in nvidia and you are concerned about the position
and sell something today and hope the sale that you're making is a terrible sale. Hope that you are going on X or Twitter or whatever it's called and calling me the biggest idiot in the world for telling you to sell something. Because if I'm right and you sell something today and it's a good sale, you've got a bigger problem. Take off some risk on a day when it's down 15%. That's the message from the market. Even if you think that that move right there
is completely punk. How does anyone in reality really... The market is always the same way. It's an act first, ask questions later kind of market. The market will make a new all-time high and NVIDIA will make a new all-time high again. I think it's half punk. Josh, let me finish, please. NVIDIA will make a new all-time high once again, but it's a
how do you not eliminate risk? How do you reshape risk? You're coming up on earnings in the next several days. You don't know what's going to be reported. You don't know what Nvidia is going to report. I'm talking to the people right now, the retail community that feel uncomfortable about today. And if you have that uncomfortable feeling, just sell a little something to make yourself feel better. Josh. Sorry, Josh. The stock lost $450 billion in market cap today.
Because a research paper from a hedge fund in China that managed to do something really clever with training in AI on reinforcement learning. Everyone needs to take a breath and just understand there are fundamental concerns that maybe we won't need as many chips to do this in the future. That's real. But...
an outsized reaction like this is almost always going to be characterized as punk in hindsight. It's very rare that these types of moves represent the end of something. And we had a moment in September where NVIDIA was in a 25% drawdown. I forget what we were worried about back then.
uh... but in that moment absolutely there were people getting on round there were people who were to leverage there were people that were way too enthusiastic about nvidia either from a position standpoint it was too big
in terms of their allocation or they had too much uh leverage or margin that stuff has to play itself out and in the aftermath of that you're going to find out exactly how much this move was an overreaction so let's say maybe half of it is which is that's my that's like that that's like my hypothesis at this point um if that's the case there's opportunity here to not panic
And I think that that's what people really should be thinking about. Yes, there's an opportunity to do something, anything. Just make the pain stop. Okay, sure. But there's also an opportunity to not. And a lot of that is dependent on how you went into today, how overly bullish you already were. And so hopefully for the people watching the show, they've heard the skepticism.
And they've heard us talk about how challenging technology valuations are right now. And they didn't come into this moment like fully leveraged to the hilt. Hopefully that's the case. They have the opportunity to not panic. Well, I mean, you know, look, Dan Ives is out today, calls this a golden buying opportunity, says the threat is minimal.
JP Morgan, their trading desk on DeepSeek says the first major fundamental challenge to Mag7 and the AI theme, too early to abandon that. Those who are coming out in such stern defense, I mean, I don't know, do they know any more than anybody else at this moment? No, they don't. It's a little like to have to run to the printing press to put out a note in defense of all of this before we really have all the facts seem somewhat counterproductive.
for our viewers? - It does. - It does. And you know, something, I'm sorry, Steve, something that Josh said, I mean, Josh, you know this well enough, there are people that are in an uncomfortable position right now. There are people that have extended leverage and you have to at a certain point
have a a process of risk management strategy that you're relying on i know you look at technicals alright you have a break below the two hundred a moving average for the very first time so you're not uncomfortable i get it i understand that i'm not uncomfortable in my position either but some people are in those some people those people i think have to address it and i think for us to think that everyone right now has the right position in nvidia and then not extended in the leverage in environments got like you're saying what we just don't know
I disagree with that. Well, because there are so many, you know, and answer. Hang on, Brent, I'll get you in a few. I promise you. I want to bring in Deirdre Bosa from San Francisco because she's been reporting really out front of many on this story. Knows deep seek what it is and why why we're even having this conversation. And what I really see, Dee, as as as a few key questions that I understand.
hope you can shed some light on. Number one, did it really train the model for $6 million? And I think there's a fair amount of skepticism from those that I've been speaking with, and you, I'm sure, have been speaking with more people than me. Did it really, this model, outperform the benchmark? Did it really outperform OpenAI? Is it really the breakthrough that some are suggesting and the stocks are reacting to today? Can you really do that
with less computing power? Do they have more NVIDIA GPUs than they're letting on? Those are the types of questions that I am getting from people that I talk to. So I throw it to you.
So let me break this down, Scott. There's unanswerable questions and there's answerable questions. Let me start with the unanswerable. We don't know if they train this model for $6 million. The research paper says that they used NVIDIA H800s, which are essentially dumbed down H100s to do this, but it is possible DeepSeq was born out of a
hedge fund, a quant hedge fund in China that had access to GPUs and a whole lot of PhDs. Now, what we do know, yes, it is as remarkable as you hear. We've been covering this since that Christmas Day drop, which has really just shocked Silicon Valley. I mean, developers, VCs, founders alike, there is absolutely no dispute here. This is a remarkable model. How do we know this? Because it's
open source. Everything, most things are published and transparent. That's the beauty of an open source model. So people are quite thrilled. I just got off a conversation with Perplexity CEO Arvind Srinivas, and we were talking about the sell-off and the implications of all of this. And he was saying that, you know, it doesn't mean that NVIDIA is not going to be okay or the major American AI players are going to be able to recover from this and continue to have breakthroughs. But what it does mean is that the race has really been leveled.
So there's things we don't know, there's things we do know, but you cannot dispute how impressive this model is. And let's say we take what Alexander Wang, the CEO of ScaleAI said in Davos last week, he said that DeepSeq had access to 50,000 H100 DPUs. If that's true, they still created this for many times less. It was less expensive for them to create these incredibly impressive models.
So this really does open up a new front. And I would also argue that we're seeing NVIDIA down 15%. We're seeing a lot of the impact on this in the market. But this isn't just DeepSeek. We've been talking about this and TAC and Silicon Valley for a long time. What happened before DeepSeek is something quite remarkable also in the AI race. And that is we kind of plateaued when it came to pre-training advancements. We hit the data wall. So
So the game changed there as well, which enabled DeepSeek to do this. So there's a lot of different factors going on. But the point is that the way that we've developed AI over the last few years, which is throw billions and billions of dollars for bigger and better models, that seems to be over right now. OpenAI, Gemini,
Project Stargate. They're going to continue to try and go that route, but it's a lot harder now. And I think that's what the market is taking stock of. They're waking up to it later than Silicon Valley has. This is something we've been talking about for a few months now. Yeah. That's so good. So insightful for our viewers, Dee. I appreciate you for that. That's Deirdre Bosa, who, as I said, has been out front on this. So Bryn, I think Dee's overarching point here is don't be dismissive
of this what seems to be a real breakthrough in this technology. We can debate the cost because we just don't know and we won't know that maybe for some time. The opacity there is going to be insurmountable, I would say, for the foreseeable future. But what's your takeaway after hearing Dee's report? First of all, she's amazing reporting, so kudos to her. And so I think also if you think about the spend that OpenAI has done
and these other companies, the perplexity of especially open AI. Once again, all of that research, which not all of that is going to be an ROI, versus once again, you have this fast follower. And that's the way technology goes. It's just, it is what it is. So maybe this is existential for an open AI or all these private companies that have raised all this money. Not Microsoft? Why are we worried about Microsoft today? Microsoft, I mean, to me, I've talked about this-
Where my concern about Microsoft was is, you know, chat, I mean, Copilot was, you know, one of their main ways they wanted to monetize it. It's still expensive. I think it's still on the margin. And so I think that are they spending to get proper ROI? But sticking with Microsoft, what I find suspect about all of this and is the beginning of the end of NVIDIA, I haven't heard prior to this weekend, Elon Musk,
Mark Zuckerberg, Stotya, Sundar say, you know what? I'm good with the NVIDIA chips I have. I'm just fine. I don't need Blackwell. Not one person of consequence has come out and said that. So that's why I'm so suspect.
of this actually being the beginning of the end for an NVIDIA, because these are like the smartest, some of the smartest people in the world. And so, yes, the LLMs are going to be commoditized faster and that can be existential and it will be existential for certain companies, especially a lot of these private firms. But I think though that the CapEx allows people like Satya and Sundar
Andy Jassy to now think through, can we be smarter about our CapEx, which to me, Steve hit on it earlier, can be a potentially huge positive for these companies going forward if this open source model is actually replicable to the actually applications that these companies are building. Yeah. Let me give you one example of how ridiculous the silver reaction is in some stocks. Take Taiwan Semi.
Taiwan Semi does not have enough capacity. They won't have enough capacity despite the fab they're building in the US, the fabs.
Does anybody think that this is going to mean less production and less need for capacity at Taiwan Semi or more? Of course more, because if chips are cheaper. So if I were to buy one today, that would be it, because the future, which is extremely bright, just got a lot brighter. You are getting lit up on social media, man. I'm just telling you right now. You're getting lit up for suggestions that our viewers should sell something. That troubles me.
because that means that i am trying to speak to people who i know have way too much leverage in this name i'm not speaking to people who are well anchored in their position this is not the end for invidia in video will continue to move higher of talking to the people that are levered and i know they're out there i know those people are out there and if those people lighting me up on our own clothes will deal with them
If those people are lighting me up on Twitter, then it's clear. I think retail is very long NVIDIA. I think hedge funds, I think institutional money has stepped to the side. And you know what something is very interesting about today? Look at the tape. Software and a lot of longer duration software names are actually okay. Cybersecurity names are all fine. Datadog.
DocuSign, they're all higher today. Salesforce. So it's a very interesting rotation as well that's going on in the market besides paring back of some extreme position. All right. According to Forbes, by the way, Jensen Wang's net worth is down at $18 billion today. Don't cry for him.
I'll cry for him. No tears. He's still said to be worth more than $106 billion. So he's doing OK. We'll take a break. We have moves to talk about, too. Coming up next, building a bull case. Josh Brown reveals his newest buy in this market. It was on his best stocks in the market list, which we documented recently. We'll tell you exactly what it is coming up.
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.
And now, a next-level moment from AT&T business. Say you've sent out a gigantic shipment of pillows, and they need to be there in time for International Sleep Day. You've got AT&T 5G, so you're fully confident. But the vendor isn't responding, and International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease, so the pillows will get delivered and everyone can sleep soundly, especially you. AT&T 5G requires a compatible plan and device. Coverage not available everywhere. Learn more at att.com slash 5G network.
All right, welcome back. Trade alert for you. Josh Brown told you last week of a new stock on his best stocks in the market list. It was Home Depot, which he has now bought. Josh, tell us more.
Yeah, so I talked about it on Thursday. Stock had a great day Friday. And what I basically said was I'm really waiting for this thing to break out. And I want to see it around 420, 425. I'm anticipating the breakout here. The purists would tell you you need a convincing close above 425 on volume. But I'm just gully like that. I've always been this way. I don't know how to describe it.
The thing that's really exciting about Home Depot is that it's a rates trade, but it's also a comeback story. The stock has basically done a lot of nothing for the last year. High interest rates are hurting existing home turnover. And obviously, by extension, people spend less money in general on things like home improvement when there isn't as much housing turnover as you would normally have.
I think that story gets better from here. Today is one of the bigger drops in rates for the year. You have to key in on the 10-year to understand this in the context of mortgage rates. HD is up 1% today, one of the best names in the Dow. Lowe's is up 2%, confirming. We've got an RSI of 65 on the stock here. It's only 4% below 52-week highs. It's 5% above its 50-day. It's 12% above its 200-day.
And every single name in the S&P 500 home builder group is up at least 1% today. And the S&P opened down 2% this morning. So what you're basically seeing, I think, is people reacting to that 10-year, now about 4.53%, could even break below 4.5%. And if that happens, these stocks will continue to lift. So anticipating the buyout on Home Depot,
Earnings are not until the last week of February. Wish me luck. Yeah, stock is highs of the day up about two and a quarter percent. Just just shy of that. Joe, D.R. Horton today is is in the news. What you owned. Did you want to talk about Home Depot? No, I mean, or you want to deal with the housing trade? Obviously, high rates have crushed it.
DR got downgraded today to neutral from buy at B of A, and the target goes to 150 from 160. What do you think? I think the homebuilders have lost the positive momentum that they benefited from over the last 18 months. They are clearly, and this is being reported in earnings, they're offering way too many incentives. I also think they are going to be challenged
by higher labor costs if in fact they lose some of their workers undocumented workers i like josh's trade on home depot better very strong consumer and it's within striking distance i think the all-time high back in november was 439
It's about $15 below it, breaks about 439. You've got clear sailing ahead. So I'd rather go Home Depot versus the Home Builders. Home Builders certainly are challenged. - Wanna give me something on Twilio while you're at it? As we're talking about, you know, early we're talking about software. Relatively recent buy for you upgraded at Goldman to buy from neutral, target to 185. - Part of a lot. - On Twilio. - Yeah, and just to update the viewers, I was stopped out of Teradyne. I said I would be below 125.
took that capital, reallocated to existing positions in Twilio, DocuSign and Datadog, adding there. The earnings report from Twilio was very strong last week. And we're talking about this company now, free cash flow generation over the next three years above the estimates. They've really done a good job just kind of transitioning from being that messaging platform to now diversifying the model more.
and being much more than simplistically messaging. And this is a company that years ago was a favorite name of mine. It's making that return once again. It took them several years to recreate itself, but I think they've successfully done it. Home Depot is just a permanent compounder. I love it. I
I just continue to be put off to my detriment by the valuation wherever it is. So I always hope for a pullback. Got one to $286 a while ago. I forget who bought it. It was Jenny, whoever. And, you know, I'm still looking for now.
Hope it doesn't happen for Josh's sake, but a pullback. Josh, I'm sorry. Let's talk Starbucks real quick, if we could, because it was reiterated overweight at Morgan Stanley. It was also added to Redburn's sell list for the first quarter. They say recovery to come at a cost. That's a quote. What's your view of this stock here?
Real quick, Weiss is right on the valuation of Home Depot. It's 28 times trailing, 27 times forward. It's definitely not cheap here. I'm purely buying this name on technicals and a little bit of intermarket looking at the 10-year price.
Starbucks is going to report tomorrow. So we're going to find out really quickly whether or not this is the kitchen sink quarter. And we've heard the last of everything that had to be broomed out under new management. I think that's going to be the case, which is why I like it. I do not think the turnaround has begun yet. So this is a very crucial thing.
if you're an investor in starbucks which i am i'm not trading it you have to believe that the turnaround is going to take a while but that the street is willing to anticipate um and start to give you credit for just stopping the bleeding so they're gonna they're gonna do uh 9.32 billion in revenue according to expectations 67 percent uh 67 cents in earnings that would be negative year-over-year revenue uh
minus 1% and earnings per share minus 26%.
So does it get worse than that? I don't think so. The stock is not at the bottom. The stock's already bounced off the low. I'm talking about the fundamentals and the turnaround. I think that that's what's in front of us now, and we've seen as bad as it's going to get. Technically, it actually looks really good. RSI 69, 4% below those 52-week highs, 4% above the 50, 12% above the 200. So I'm long-term.
And may God have mercy on my soul when we get this number in the morning. All righty. We'll see what happens. Contessa Brewer has the headlines for us. Hi, Contessa. Hi.
Hi there, Scott. Survivors and world leaders gathered today to commemorate the 80th anniversary of the liberation of the Auschwitz Nazi death camp, where more than a million people, mainly Jews, were killed during World War II. King Charles III and Ukrainian President Volodymyr Zelensky were among the attendees at a ceremony where some of the remaining survivors wore blue and white striped scarves reminiscent of the prison uniforms. And they warned those gathered of a new rise in anti-Semitism.
South Korea's President Yun is now the country's first leader to be indicted on rebellion charges punishable by life in prison or the death penalty. It stems from his decision last month briefly to enact martial law. And as I said, he could face the death penalty if convicted.
And Vivek Ramaswamy is getting some political help to launch his expected bid for the Ohio governor's mansion. A source involved tells NBC News Vice President Vance's top political advisors will guide that campaign. Vance and Ramaswamy have known each other since they were at Yale Law School together. The source tells NBC Ramaswamy is likely to announce his candidacy next month. We'll keep our eye out for that. Scott, that's the news.
Contessa, thanks so much. Contessa Brewer. All right, coming up, more on the tech sell-off today. The sector is having its worst day in more than four years. Bob Pisani is following the money for us with the president of the Nasdaq in today's ETF Edge. We are back after this.
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.
We're back.
Bob Pisani has today's ETF Edge. And Bob, it is a heck of a day to talk about the Nasdaq 100. And we are here, Scott. We are at the Nasdaq market site for the 40th anniversary of the Nasdaq 100 index, which tracks the 100 largest non-financial stocks on the Nasdaq. 94 exchange-traded funds track the NDX in over 20 countries, including the Invesco
Triple Q, that's the fifth largest ETF in the United States. Let's talk with Nelson Griggs. He is the president of NASDAQ. Here we are. Congratulations, 40th anniversary. The NASDAQ 100 is synonymous with technology. We have big news today. The China firm DeepSeek reportedly launching an AI model that considerably less cost than the U.S. models. You're the keeper of the NDX, the NASDAQ 100. What
what does this mean for the index? What's it mean for Nvidia, Microsoft, Apple? Well, I think we take a step back. As you mentioned, 40th year anniversary. So the last 40 years, the NASDAQ 100 has averaged 14.25% over the last, you know, 14 or 40 years. So it's not a straight line. There's going to be ups and downs. There's,
there's more money being invested in innovation and R&D in ASIC 100 than it's almost a thousand times the broader market, right? So I think you're looking through moments like this and they're going to have to innovate and address any sort of competitive concerns and then, you know,
is we have some doubts isn't lower capital expenditures that's what I hear about this model is this good for the AI story in the lower capital expenditures make I more accessible for more corporations isn't this a good news you know how you look at a moment like today it obviously caught the market by surprise because we was it we saw the the futures in a care through the marketplace so I think overtime as investors digest this
It can be more company by company specific story. But over time, yeah, lower costs can be better for the marketplace. Sure. I can't help but look at these single stock ETFs that are out there. NVIDIA has leveraged ETFs that are out there, single stock ETFs. The volume is huge today in that, as well as the NASDAQ 100 leveraged ETFs.
Does this kind of volume on these kinds of days pose any kind of systemic threat to the markets? Well, we see that kind of volume also on up days, too. So I think this, again, was a bit of a surprise to the market. There's heavy volume in the overall markets as well, too. So, no, I think the products are well managed enough where we don't see any sort of systemic issue for sure. But there's heavy volume. It's an active day.
tech companies are they going to be under pressure to spend more or less on capital expenditures now? I can't sort of define what this means for the overall market. I think it's a highly, highly competitive environment for what is a moment in time. Just got back from the economic forum in Davos and AI was the topic and how can we move faster, get more of the cost savings, get more of the innovation going. So it's hard not to see us investing more in this amazing technology. The NASDAQ 100 is one of the most successful industries
indexes of all time. QQQ is one of the most successful ETFs. Why has this index been so successful every single year, every single year? Inflows, big inflows for decades. For decades, yeah. It's the companies that are in there. They are the ones that are the hallmark of growth, innovation. You look at what they are spending on R&D. And just you look at the U.S., particularly the retail investors, they love growth stories. And the names in there
are the ones I mentioned before, are spending an enormous amount on R&D and growth. So it's about 60% tech and consumers, about 20, then healthcare, there are many. We've got to go, but I need 10 seconds on the IPO market. I know you're very much in charge of that end of the business. 10 seconds. Well, we're up. Press for time. We're building. 23 terrible, 24 a bit better, and the deals have done well that ended the year. So I think we're seeing 25 as another build year. Maybe not floodgates, but we're starting to see momentum pick up for sure. And Smithfield is coming next week here.
Yes. Yeah. OK. Got it. OK. Much more coming up on the state of tech and the 40th anniversary of the Nasdaq 100 coming up on ETF Edge at 1 p.m. Eastern time. Nelson will be joined by Todd Stone. He's the head of ETFs for Strategas. That's ETF Edge dot CNBC dot com. Scott, back to you. Bob, thanks so much. It's Bob Pizzani up next. Josh Brown breaking down what he says might be the most important chart to understand this market this year. We'll tell you next.
All right, we're back. Josh Brown with a new blog post today. Says the key to the market today and this year could come down to one chart in particular. Tell us more. So this is a chart that comes from my friend Bob Elliott at Unlimited Funds. And I think it really neatly encapsulates the difference between the starting point for 2025 versus the starting point for the last two years. People looked and saw, you know, tech stocks doing well in the first half of January. They said, oh, here we go again.
I don't think it's going to be quite so simple. The blue bars on this chart represent what the consensus was for GDP growth in January in each of the last two years. And as you can see, we went into 2023. The consensus was basically at 100 percent chance of a recession. I'm not making that up. Google it. That's what Bloomberg survey of 2020.
Wall Street economists were predicting. We ended up actually seeing a huge tailwind from AI spending and stimulus money still in the system, and we had over 3% GDP growth versus the almost zero that was expected. Last year, same story, but not quite as extreme. The street was looking for 1%. We did 2.75%. The setup there, though, worked really nicely. All of the economic surprises in 2024
with very few exceptions, were upside surprises because of how kind of lukewarm the consensus was. The setup this year is very different. As you can see, the consensus right now is for GDP growth somewhere between 2% and 2.5%, and the hurdle is that much higher, which means...
As we get different metrics coming in throughout the course of the year, it's going to be harder and harder to produce those upside surprises, those upward shocks that force people to come out of cash and buy more equities. And so as a result, I think people want to start thinking about this year as more of like an in-between year.
rather than a continuation of the last two years. Doesn't mean we have to accept low returns. Doesn't mean we won't make money. I'm telling you, it's going to get harder to produce the upside shocks. What do we think? You have a take, Joe? I think it's a great commentary by Josh, as always. Josh, the question I would have, though, is what's the risk management strategy in that type of environment?
I appreciate the question. We use technicals for risk management. We have an in-house model called Goaltender. We've been running it for 10 years. It has no economic inputs whatsoever because we recognize the fact that that's a really difficult game to play. So if you're thinking about the economy and economic data in terms of...
How you're locating, I think that's more of an asset allocation question than a tactical question, at least when you're talking to people that work on my investment committee. The screen getting smaller, but the point remains large. Josh Brown, thank you very much. Mike Santoli is next with his midday word. Senior markets commentator Mike Santoli is here at the desk.
What are you thinking about today as everybody's trying to make sense of deep seek and the deep sink? Yeah, pretty stiff test of the market's ability to rotate away from danger. It's so far doing a decent job of an equal weighted semis down like 7 percent. It's no joke what's going on in those particular focused markets.
Really, if you dial back, what's gone on is the market decided it wants to pay 27 times the next year's earnings for Nvidia, which is not obviously some tremendously expensive level, but it's also not saying that this is a failing company. It's not going to grow. So I think you have to keep in mind that's what the vulnerability to the mega cap expensive group of stocks that got us in this market. So more stocks up than down.
You have the equal way down like half a percent. So, so far, OK. And the S&P wants to try to hang into 6,000. It does raise the stakes, though, for the mega cap tech earnings and what they say about the efficacy of their cap expense and how the market treats them. This changes the whole dynamic, I think, of earnings, where it's not the numbers now that matter this week. It's the commentary about what the threat is perceived to be and what the spend is.
is going to be measuring whether it's worth it or not. Yeah, for sure. All right, Mike, good stuff. I'll see you on closing bell. Finals are next. We're going to get to the bottom of this NVIDIA story today. We'll certainly try with the best analyst in the space. Stacey Raskin is going to join me three Eastern. I hope you watch that. Tom Lee, by the way, he's a big proponent of AI stocks. We'll find out what he thinks. Bryn, final trade is what? Uber. Thank you very much. Josh Brown. Same. Uber 69. Nice.
All right. Awesome, guys. Thank you. Steve Weiss. Taiwan sent me for the reasons I said before. Okay. And Joe T. Broadridge Financial, ticker symbol BR. All right. Well, we'll see how this day develops. I'll see you on Closing Bell. The exchange is now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.
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