The Moment of Truth for Mega Cap Tech 1/29/25
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Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the moment of truth for the mega caps. Meta and Microsoft reporting earnings tonight amid all those questions now about deep seek. We will debate that. What investors must hear tonight? What you need to know. The Investment Committee joining me with the answers. Joe Ternova, Kerry Firestone, Jason Snipe, Steve Weiss. We do check the markets today. Dow is negative. It's all about the Nasdaq, obviously.

which is negative today as well. I understand it's Fed Day and that's big and we're going to get to that and what ramifications there are, but it is about mega cap earnings, Joe, especially with the fallout of the last couple of days. You own Meta in the JOTI. What do you need to hear tonight?

So they often say you never want to count other people's money, but that's exactly what we're going to be doing tonight. We're going to be counting to see how much everyone is spending. Now, Mark Zuckerberg has already indicated that they're going to exceed the consensus estimate on capex at $52 billion. He's targeted $60 to $65 billion. In addition to that, you want to see what expenses look like. Do they come in above the $108 billion consensus number? And are they able to maintain operating margins above that?

above 40%. I feel confident about Meta because I think Meta has benefited in the fourth quarter from a very strong ad environment.

I think they also benefited just in terms of ad placement from the pending TikTok ban. I think that Realty Labs, the spend there is also going to be critical. But I think e-commerce sales could be a surprise here. And the stock is trading accordingly.

over the last seven days at a new all-time high yesterday. And it seemed impervious to the tech sell-off that we saw on Monday. Well, it's up 12% in a month, by the way, Kerry. And it's by far the best performer this week in the face of the fallout from DeepSeek. How are you thinking about your stock holding right now? Yeah, well, we've been overweight, Meta, and we are people who liked Meta back in November of 2022 when the world hated it.

And it has exceeded expectations. And interestingly, the whole positioning of Lama and how they are going to benefit from deep seek or platforms becoming more ubiquitous. Open source, right? They've got the open source.

Right now it's open source, so they don't make any money on it. That's only possibly an upside. Can't be any lower than not making any money. It could be that this is a source of revenue and profit for them. It definitely puts them in a leadership position if other competitors are

are using it and learning from it. So right now, there is a lot going for Meta. They're going to have a really strong quarter. They're going to talk about how what they're seeing will benefit them. I don't think it's going to be anything negative. They might have to spend less, not more, if you go out a few quarters. So the year is going to be good. It's an

strong setup, but the stock has been fantastic and maybe the stock could be getting a little bit ahead of itself. Com Services, Weiss, is looking for its eighth straight day of gains. This has now become the center of attention as a result of DeepSeek and we're thinking about, we'll get to Microsoft in a minute, and some of these others. Are you feeling pretty good going in tonight? Do you feel like new questions need to be asked and answered?

Yeah, so I am feeling good about Meta. It's troubling to me that analysts have come out in expectation of the quarter already raising price targets, talking about how they expect to beat. So they've set the bar pretty high. Guggenheim today, for example, to your point, they reiterate the buy. We continue to view Meta as best positioned within digital ads with

with several foreseeable tailwinds and consensus ad revenue estimates as relatively de-risked. They don't even mention sort of their positioning in the AI race, but obviously that's viewed as a net positive versus a lot of others. Yeah, and as I said on Monday when the news broke that

Why should Meta be down? Because their budget spending, their budgets on AI, while Zuckerberg just came out and raised them, as Joe pointed, could very well go down. Those are flexible numbers. Are they? I mean, that's an interesting point you raise. What happens if they, because the street has already modeled in the tens of billions of dollars that these companies are spending every day.

Every quarter they come out and say, well, our expectations are that we're going to spend, you know, 50 billion dollars this year. What happens if they say we're reviewing that, which we're assessing what the fallout of deep sea actually means for the arms race itself? And we're reassessing what we are potentially going to spend. Is that a good thing or a bad thing?

I think it's a good thing, but I don't think it's a very good thing, actually. But I don't think that's the way they're going to say it. I think they can say that we're always looking for less expensive opportunities to grow our technology, to improve our technology. I do think ads are they are the brightest star in terms of ad revenues, but we still don't really know.

what DeepSeek is or what it means for anybody. Okay, I've heard Reid Hoffman on today. You can listen to others like Jensen Huang, who generally talks his own book, say something else. So you just don't know. We know that it's open source as far, open source is deliberate for everybody because it exposes them to more developers, to more product going on their platform.

So there's always a sunk cost, because it takes a while to get to the open source technology. And then you build on it. So look, so I like it. In terms of Microsoft, though, which is also reporting, that one is always a little more iffy. And the reason is that what analysts will be looking for is their finally uptake

on their AI offerings. People believe they're expensive. They are useful. And to me, this quarter doesn't matter for either company, frankly. Jay, you own Microsoft. Yeah. You don't own Meta, but you got a lot on Microsoft. So how are you thinking about that going in? As Barclays wonders whether this is the beginning of a comeback, there are obvious questions about

being so leveraged to OpenAI and what the fallout is for Open as it relates to DeepSeek. Like if OpenAI was a publicly traded stock, I can't imagine what that chart would look like this week. Microsoft, for its part, is flat. Well, Microsoft week to date is

I think the market's taking a bit of a wait and see. Maybe it's become more of a show me story now more than it was last week. You tell me as the investor and shareholder. No, I think so. And I think a lot of the news on Microsoft is obviously in the stock, right? Joe mentioned, obviously, the CapEx for Meta.

We know that Microsoft's going to spend $80 billion this year. That's already in the stock. We've heard about OpenAI, and now the exclusivity deal is no longer, right? So that's also in the stock. And then, obviously, the news from DeepSeek earlier this week. And I think, for me, it spells potential margin growth and profitability for some of these software-related names like Microsoft down the road.

Of course it will be positive if they talk about the advent of deep-seek and potentially affecting their CapEx spend going forward. I don't think, to Steve's point, I don't think they'll dig too deeply into that. But I still like the name.

Azure growth will slightly decelerate this quarter. It was a really strong quarter last quarter, up 33 plus percent. You know, we're expecting around 32, 31. So I think it will be a solid, you know, but I'm looking for springboard towards the end of the year. Barclays, as what they say in the rest of the note, we're not expecting, to your point, the December quarter itself to show a reacceleration in Azure just yet. Initial guidance for the March quarter will.

In our view, this shows the capacity constraints are easing, which should enable better times ahead. Is that how you see it? Everybody owns Microsoft on this desk, by the way. Yeah, look, first of all, Microsoft over the last 52 weeks, I think, is only up about 8%. And it's well below its July 5th all-time high. I think the best thing that happens this evening is that CEO Satya Nadella says something about what the spend looks like beyond 2025, to your point.

so does the new llm technology this new open sourcing does this allow them okay we're going to spend 80 billion in 2025 but after that as a consequence of the new llm modeling we could spend less money you know what's going to happen if they say that look out below for nvidia

Absolutely. Which, by the way, is down again today. I don't disagree, but he's on the earnings call speaking about Microsoft. His concern is Microsoft. So Microsoft wants to spend less than $80 billion, I would think. They don't want to spend $80 billion in 2026. Is there an opportunity to spend less than what they've indicated? Well, let's bring in our tech reporter, Steve Kovach, who's going to let us know what's

what is most important tonight and whether that question is now different than it would have been last week. - It's completely different, Scott. If I was here on your program a week ago previewing Microsoft earnings, I would say, oh, it's just gonna be another quarter. Let's look at Azure growth and what Copilot is doing. That's not the case anymore. With the Stargate announcement last week, we learned that Microsoft is no longer the exclusive cloud partner for OpenAI, has the first right of refusal for those kind of things.

And then we have the deep-seek moment from Monday, and it raises those new questions about CapEx. I'll piggyback on what Weiss was just saying here, that we've heard Nadella say on the earnings calls numerous times over the last year that they're going to be dynamic in their spending. They're always evaluating demand and figuring out what they want to spend. In the meantime, though, as these questions about

the relationship between OpenAI and Microsoft come up. We see that Nadella and Altman are out there with this friendly selfie that they posted on social media yesterday, kind of showing everyone, look, we are still partners, which is true. And Microsoft still has early and exclusive access to the best technology out of Microsoft. That is their benefit for now until, of course, they have their own thing. And then also to your guys' point, the fiscal 2025 CapEx, that $80 billion figure that we keep throwing around, that's over in July.

We're going to be looking forward past this fiscal year. What are they saying the rest of the calendar year looks like for their CapEx spend and what they're seeing, not just from the demand side, but this idea of the distilling of models, the idea that you can use other models to train your other model cheaper, maybe don't need the best and greatest NVIDIA chips.

All of that is on the table, and all of that we're going to be hanging on to Dell as every single word about what he says about how they think they can do this cheaper. And then also to Joe's point, Microsoft shares are just lagging behind its peers over the last one year, down about 8% for the year, where you see Apple, Meta, Amazon, Google all up double-digit percentage points.

at the same time. So they're going to really have to show this growth is happening in artificial intelligence on Azure and other monetization things like Copilot, which is still a big question, Scott. Nadella and Altman are putting a good face on it, literally and figuratively. But you do, I hear you suggesting that they are perhaps a little more defensive coming into this earnings report tonight and the kinds of questions that Nadella is likely to get.

Yeah, that's exactly right. And on top of this idea of them losing their exclusive cloud capabilities with OpenAI just because they don't have the demand, they also have to take the losses from OpenAI. We know that this quarter they're about to report they're expecting $1.5 billion to

hit to their earnings because of the losses that open ai continues to suffer so we're going to have to get some more guidance on that it is it is still a money losing proposition for them they're and they're spending enormous amounts of money now to keep up in this ai race that we're seeing all the at the same time scott amid these questions of whether or not they need to be spending that much in the first place it's going to be really interesting to see

how Nadella on this call and his CFO, Amy Hood, really thread that needle and say, look, we need to spend a lot. Here's why we need to spend a lot. Here's the demand we're seeing that's justifying all this, at the same time answering these deep-sea questions whether it's too much.

good stuff i'll see you later this afternoon steve thank you steve kovac our tech reporter on on top of all this last point carry on this and then we move quickly don't we want to hear what he has to say about co-pilot it's not as if it's been a raving success and if there's something that open ai is really doing and streamlining and the efficiency and improvement in copilot that's what microsoft should highlight i mean

One of the stories this week and the defenders, if you will, Jason, have tried to come out and you look at the declines, for example, in Nvidia and Broadcom, Micron's down a ton again. This week, I should say, both those stocks are down double digit percentage points is that this is only going to lead to more consumption, more chips, not less. But as an Nvidia shareholder,

As that stock was up quite nicely yesterday, giving half of it back again today, that's where the real questions still lie. And it relates exactly to what Steve was talking about with Microsoft and what we talked about with Meta. Any suggestion whatsoever about a reassessment of spend

You're going to look right at that stock and see the impact. Yeah. And I think for me, one of the things as I'm kind of reviewing the news with DeepSeek over the weekend, obviously costs are undeniable. The cost to build out this large angle model that they did was obviously far cheaper than

than what the costs have to buy an NVIDIA chip. But the other thing that I think is somewhat debatable is performance, right? What is the real performance? Only enterprise and only consumers can make that determination. So for me, as I look to NVIDIA and I look to NVIDIA earnings towards several weeks from now,

- Yes, I mean, all beltways have led back to Nvidia and now this is a complete reset. We've heard from other players, ASML, obviously as an example, talking about this is only gonna spur demand.

We'll see. We'll see. I do think it's going to be a reset, but I do think they have the most important chips at play for this AI revolution. But it is somewhat of a reset, and I think that's good. Evercore is defending all this today. They call it generally a buying opportunity.

for it, NVIDIA and some other names too. AMD today was reiterated overweight at Wells Fargo. 165 is the price target. That stock's near a 52-week low. They're like, okay, enough is enough. With that, Joe, you own it.

look it's in the etf it's a ski slope down it's just literally it's down uh 34 percent in the last 52 weeks it doesn't look good from a technical perspective you want to make all the fundamental arguments about it being overdone okay i'll accept that i understand that yeah give me one yes they have 10 on that yes they have a decent balance sheet but everything begins with me

with an exploration of momentum. And I'm sorry, it just that that chart looks ugly. Well, I mean, there's the ski slope. It's like the downhill. It's not even a slalom. It's a downhill since since the fall. I'll bet it won't be in the JOT as of February 1st. We'll see. But NVIDIA, this was inevitable. It's always been part of my thesis and why I don't have a big position, regrettably, because I would have made a lot more money in stock.

But part of that $80 billion in capex that we're hearing, $65 billion in capex, I'm guessing, unless it's somewhere else, going to be somewhere else in your income statement, is going to develop of competing chips in cheaper ways.

to build out their AI capabilities. So it's no surprise, the only surprise with NVIDIA is the timing, 'cause they were not going to be the first semiconductor company in the history of the world to maintain a technology lead forever. - No, but of course not. But the speed in which we are asking this new question,

is largely unprecedented. Yeah, but the price in which the stock was selling implied that the monopoly could go on for a very long time, which was like 3-day-no in NVIDIA. You missed a lot. I understand that. There's another view if you move past the hyperscalers and then you move past the chips that

other software names, the ServiceNows, the CRMs, HubSpot and some others are going to be the potential beneficiaries. That's what BMO is talking about today, ServiceNow. And it played out in the price action obviously this week. You did not see ServiceNow pulling back. In fact, through the sell-off earlier this week, it was actually moving. So when I think about software as an example, I started to allude to this earlier,

When I see costs coming down on the infrastructure part of this, it only spells more profitability and margin expansion for software names, like a ServiceNow, who's already, by the way, hold on, hold on, who is already monetizing their AI tools. So that's why I continue to like names like that. So if you democratize

the ability to use very, very smart chips and GPUs, you open the establishment to competition. That's what always breeds competition, that the price for admission is a lot less expensive.

So the premium pricing that a sales force or a service now charges, right? And in some cases, the complacency that they have, even though managers will say we're not complacent at all, right? You open that to new entrants coming into it. So I'm not so sure this can be so fantastic. But there are economies of scale in those businesses, Steve. Absolutely. Let me ask you a question, okay? You may. Thank you.

How much scale do Perplexity have five years ago? They weren't even around. - No, they weren't around. - Right? - Salesforce. - They built a nice business, right? - Well, let's talk about Salesforce. You brought it up. So Salesforce is dominant in the CRM business. And communicating, right, communicating within organizations to other organizations is a whole lot easier if you're using Salesforce.

than if you're using somebody, some no-name serum, and you're trying to touch Salesforce. - So are you saying Salesforce-- - It's just why Google dominates search. - Are you saying Salesforce is impervious to competition? - No, I'm saying it's a whole lot easier. You made it sound as if you lower costs and there's tons of competition. Not necessarily so easy. - Well, there won't be tons of competition. There won't be tons of actual competitors, but there will be a mechanism to force them to lower their prices and lower their profitability.

Carrie, you get the last 10 words. I think you're wrong. Mic drop. Okay, Apple tomorrow. We might as well touch on that. It got downgraded again. It's like a pile on now. Oppie today. They cut it to perform from outperform. They removed their target. You obviously have a lot of questions about

iPhone demand. Now, this stock's actually held up pretty well lately, for sure, as it's largely been out of the fray of deep seek and all that. We want to bring in our Bill Baruch right now because he's got a move he wants to tell you about. He bought more Apple. Why did you do that now ahead of earnings?

Well, you know, I talked about it on the show. We ended up trimming Apple the first day of the year. And last week on the show, I talked about moving it to the 200-day moving average. It's falling out of love. And that's when you really want to think about buying Apple. What really did it for me on Monday when we pulled the trigger on this was the entire tech space was getting bludgeoned.

Apple was turning positive. It told me from a relative strength space, this is now ready to not go down anymore. So we leaned in Apple and started allocating back into it Monday morning. All right. So, I mean, where are your expectations going into the print? I don't know. Maybe, you know, you'd say, well, the questions about demand are in the stock. But is that really true? And the stock's been, if you look at the chart once again more recently, it's been pretty good.

Yeah, and I do agree with that. Now, the thing here is the iPhone 16 sales...

they've had certainly a negative impact. So how much of that is already being priced in with this thing fell 15% from its highs? I think there's two things, that being one and the other being flows. At the end of the year, there was actually big selling pressure last couple of days and then the first week of the year. I think there's different flows, some rebalancing flows. So I think at the end of the day, this thing has washed out a couple of narratives.

And I'm expecting to see a decent report, but I also think a lot of the sellers have already sold. And I'm a big believer in that sense from a flow standpoint and from a supply-demand technical standpoint. So you bought, oh wait, you're selling all of Dell. That's interesting. Why are you doing that?

Well, we sold all of Dell. As we moved into quarter four, the second half of last year, we owned more names than we typically do, 42 names in our equity portfolio. That was to avoid idiosyncratic risks. A name like Dell fit the bill because we didn't know where the puck was going in AI next, and we wanted to have some exposure there. I think here, getting rid of it

it hasn't performed. It's had a couple of decent earnings reports, but it has not come through with price action for us. So we thought this was a really good opportunity this week to move away from it and set the stage for some buying opportunities that we'll get to next. All right. Good stuff. Thank you. We'll see you soon. That's Bill Baruch. We have a news alert out of Washington. We want to get down to our Megan Casella, who has that for us. What do we know?

confirmation hearing for Congress Secretary nominee Howard Letnick. A lot of news coming out of this hearing, particularly on two fronts. It's tariffs and trade, and then it's China and deep-seek. So on the tariffs front, first he was just asked specifically about the forthcoming tariffs on Canada and Mexico. The latest from the White House is that we should expect those

to take effect on Saturday. Lutnick saying that those are not a tariff per se. In fact, these are domestic policy action trying to get Canada and Mexico to adjust their behavior. And he's giving them a way out. He says that both countries are acting swiftly to shut down their borders and stem the flow of fentanyl. And he says as long as they execute there, then there will be no tariffs. So giving them a way out without there to be tariffs. He's also been asked about whether he thinks that tariffs will drive up consumer prices. Take a listen to his answer.

I can commit that the economy of the United States of America will be much, much better. A particular product's price may go up, but all of them, this is not inflationary. The two top countries with tariffs, India and China, have the most tariffs and no inflation. It is just a nonsense that tariffs cause inflation. It is nonsense.

And then Scott, finally on DeepSeek, he's pledging to come out very strongly against China on DeepSeek, vowing to use both export controls and tariffs to make sure that the US remains a leader on AI. He says that he does not believe that DeepSeek was done entirely above board. He says that the Chinese have stolen things

They've broken in. They've taken our intellectual property. And he's vowing there to be rigorous in our pursuit of restrictions and of enforcing those restrictions. Of course, Lutnik, if confirmed, would oversee that exports controls office, the Bureau of Industry and Security. So would have a lot of say in how to respond to China. Scott.

Megan, thank you. Megan Casella down in D.C. with the latest for us there. We'll take a quick break. When we come back, we have more committee moves. Steve Weiss with three that I see in front of me at the very least, plus some new at noon reporting you don't want to miss next.

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Welcome back. New at noon today, a battle over the future of the membership club Soho House. Daniel Loeb of Third Point sending a letter to that company's board of directors today over a plan to take it private. Third Point holding a near 10 percent stake in Soho House revealed today it was an investor, by the way, in the IPO.

Loeb says he is in favor of a go-private move, but calls the $9 a share offer made late last year with Soho House chairman Ron Burkle, who runs the investment firm Yucaipa, a, quote, sweetheart deal.

Quote, Burkle's obvious conflicts of interest and undue influence on the board via his super voting share class make it imperative that the board open the sale process to outside bidders. That's what the letter said today. Mr. Loeb says there are numerous qualified parties with experience in the hospitality industry that would be interested if their proposed sale was in fact open to the highest bidder. I'm told by a source familiar with the company that there is a belief.

that it's worth a lot more than $9 a share and that the sale process is just getting started.

Soho House did go public right here on the New York Stock Exchange in 2021 for $14 a share. It has struggled financially, however. Third Point had sold that initial stake after it was disappointed in the performance. The market cap here, $1.5 billion. And this is a new stake, the near 10% one, which Third Point filed on today. We'll see how this all develops, of course, and we will keep you up to date on it. But an interesting statement.

Interesting setup here to keep our eyes on with Mr. Loeb and Soho House. Let's get to Mr. Weiss. I think you've been to Soho House before. You do have some moves to get to. My family, actually. Okay. All right. I'm not allowed to go. Full disclosure. Yeah, they don't let you in. No, they don't. You bought more Vertiv. I did. Tell me. Look, the stock was down 30% on Monday. We talked about it on Monday during the show. It's

I just took the opportunity to buy some what I thought was a compelling price and valuation. So look, there is some risk here, of course, and that's what the stock is telling you where it is. But I think that risk is way overstated. You're still going to build lots of data centers. They're still going to run hot and need their cooling technology. So I'm very comfortable with the position. Of course, as we learn more about

the deep seek and spending plans and all that that could change but i just don't see it right now what are your defense moves suggesting today you sold booze allen you trimmed leidos right as well yeah my defense moves are are uh are saying basically that it's chaos in washington

that we have a Secretary of Defense who's not run any business whatsoever. And if any one of us sat on a board and said, here's somebody who we want to run the most important company in our portfolio and one of the most important companies in the world, Department of Defense, with a $900 billion budget, he may be where the last people went to. We'd want somebody experienced. So I have no idea if reason and logic and experience will control the

the non-government employees of which Booz Allen has a ton of them in the government. That's a very easy place to cut expenses because the reason why that was created was during the Clinton administration when they wanted civilian employees because they were so much easier to fire than union employees at the government or government employees.

Leidos, I shaved because some of the same risks, even though if you take a look at their business, talk about tens of millions of revenue in a multi-billion dollar company. So I just thought it was too much exposure. Booz Allen was a very new position. I thought that we had determined from what came out of Washington that the cutting was not going to be a path. But Elizabeth Warren then sends an email to or a letter to Elizabeth.

Hegseth, and it actually made some sense. And frankly, Elizabeth Warren has never, at the end of the day, impacted any of my holdings. It's about a lot of bluster. But here, with inexperienced managing DOD, et cetera, I just thought prudence cut risk on that position.

You own Booth's? Yeah. We've owned it for a long time. And there have been times in the past where the stock gets hit because of concerns about spending on defense and government contracting. This is an unprecedented concern. Well, you know, it's 30% down. There have been other times in the last 10 years there's been a 30% drop. It's selling for 17 and a half times next year's earnings. I understand your concerns about Pete Haxton not knowing how to run something. But that, to me, implies that he's more likely not to do anything rather than to do a whole lot.

because this stock has already reflected the cuts that you're talking about. So you don't believe in the recent moves and the proclamations that have been made, whether it's legality supporting the layoff and the severance pay for government employees. Forget about that. There's a lot of talk. What other time in the 30% drops is this analogous to? Because this is a case of first impression.

as is this administration and you and you sold the stock and we're looking at it and saying at this price level this is a very good company very well run we're going to stay with it okay um

Courtney Reagan has the headlines for us today. Hey, Court. Hi, Scott. Good to see you. So the Justice Department asked a federal appeals court today to throw out the case against President Trump's co-defendants in the Florida classified documents case. Now, the presidents of L.A. and Mar-a-Lago's property manager were charged with conspiring with Trump to interfere with an FBI investigation into the case. The court still needs to approve the request in order to end this case.

Hamas plans to release three Israelis and five Thai nationals in the next hostage exchange, which is set for tomorrow. That's according to volunteer group the Hostages Families Forum. Prime Minister Benjamin Netanyahu's office said those numbers do match the information gathered by Israeli intelligence on the release.

And MGM Resorts agreed to pay $45 million to victims of a 2019 data breach and a 2023 ransomware attack. In both incidents, the hackers stole sensitive information from guests, including names, passport numbers, and social security numbers. The settlement would bring 14 class action lawsuits to an end. It does still need final court approval at a hearing in June. Scott, back over to you. Okay.

Court, thanks. Appreciate that. That's Courtney Reagan. Just want to show shares of Soho House once again, as we have told you about this reporting here, that Daniel Loeb of Third Point has sent a letter to the company's board. He has also filed on a new near 10 percent stake in the company, wants the proposed sale process to be open to the highest bidder.

And it is believed, according to a source that I have spoken with, very familiar with the company, that it is, in fact, worth more than the nine dollars a share that has been already offered by the company's chairman, Ron Burkle of Yucaipa, that the sale process is just beginning, that this whole scenario is far from over. We will keep our eyes on that story and on that stock. We'll be back after this with our calls of the day.

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 seize dynamic growth. EY, navigate the geopolitical and economic landscape with confidence.

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Let's do some calls today. As Wolf today says, the financial setup remains extremely strong. Now, they break it down, obviously. They're talking about the large financial institutions, banks, and private equity. They do note ahead of Apollo's earnings next week that the setup is not setting up well. Now, these stocks have gotten a huge boost, right? Right after the election, it was like, okay, private equity is the place you want to be. 100%.

Animal spirits, deal-making, exits, realizations, whatever you want to call it, is going to be good. What do you think now? All the below, right? I mean, we've talked about it ad nauseum. Obviously, these are the themes that have been playing out in the price action for last year and kind of coming into this year. So part of me is of the belief that, yes, it's run a lot up into the print. That's partly part of the reason for this call. But I don't think any of those themes are—

I do. Let me say this. I do think all those things will run true. I think capital markets will come back meaningfully this year. Net realizations will double this year. And I think fee related earnings will also continue to grow. So I continue to like most of these names as well as there's a chart. Right. This is the election bump. Right. You go straight line and then Trump gets reelected. You're like, OK, D-reg and you're going to have a better environment of deal making pro business. What about private equity stocks like this one?

You know, not involved. We've got our own private equity. Well, you are. You know what? You are involved in Goldman, though. You put up a Goldman chart. I do own Goldman. You put up a Goldman chart. I'm sure it looks similar to that.

Coincidentally, I ran into David Solomon this past weekend, and we... Sorry for him. Did he run and go the other way? I'm sorry for him, but... Did he know you were going to reveal that? It was unfortunate for David, yes. But, you know, the environment, I think...

That I think is going to be much better. We have a lot of direct holdings, so we'll benefit from that standpoint. But with Goldman, the reason why I choose Goldman, and I said this to David, is the culture.

You've seen so many people leave, and yet the next person up is as good as the one that left. So you have that kind of culture where it's performance culture and it's a quality culture. And that's what I bet on. Culture defines success or failure of any company. And man, do they have it. Culture in spades. So that's why I own that. Sometimes people say, you know, that your conversations are off the record. How do you know the sighting and the physical experience?

reaction wasn't off the record as well. Maybe he didn't want anybody to know that he was with you. That's an interesting point you make. Invalid, but interesting. It's true of many others, though. Just not of him. I couldn't resist. Caterpillar. Price target trimmed at $390 from $414. That's it. Mellius. Jason, you own Caterpillar.

So, Cat had a really strong start last year and then kind of lost momentum towards the end of the year on the idea that sales volumes were slowing. But there has been some margin growth over the last three years, meaningfully at least. And what I continue to like about Caterpillar, they have a very strong balance sheet, a very strong team there. And I just think that with this onshoring and an industrial kind of feel that's in the market, I think Caterpillar can continue to be strong. DataDog.

was downgraded today. It sure was. From buy to hold price target to 140. We can see the stock, Joe. Fairly full valuation is what they say. So the ETF owns this name in December, early December. It made the high. It's pulled back recently. I've bought the pullback personally. A little disappointed. I think I have to measure time here more than anything else because it does not look like it's participating in the software rally

other names clearly working zoom working twilio working guidewire docusign the totality of software is a good environment very resilient in the last couple of days and this is actually having poor relative performance that tells you something you want to hit walmart real quick which was reiterated by today another old-time high that's ahead of earnings the earnings are are

uh... in fed later february as is the economy of scale they have the economy of scale they're winning in in grocery they're winning on price but people talk about the potential impact on consumer products if there are in fact tariffs in that environment wal-mart will be able to judiciously manage their price so

So it's been a core holding for an extended period of time. I think the most important thing on Walmart is their e-commerce efforts are really bearing fruit. And as I talk to people, I haven't talked to you about this, but that's what they're attracted to in stock and driving it to new highs. All right. Thank you. Mike Santoli is here next with his Midday Word.

We're back with our senior markets commentator, Mike Santoli, for his midday word. I feel like Fed meetings don't normally take a backseat to anything, but with Meta and Microsoft and even Tesla, for that matter, reporting tonight and no move expected, feels like this one actually might.

Yeah, I mean, and by the way, I think that's probably a net positive. When you have essentially a virtual non-event for the Fed in terms of its decision, in terms of even how it probably is going to explain the decision, it means, as Powell will no doubt say, policy is in a pretty good place. The economy is in a decent spot. You have a pretty persuasive idea that maybe you have further downside to inflation. Then it's a matter of, you know, the market's going to have to tell us how high or low expectations are embedded in stock prices.

for these big companies right now. I don't think there's a good way to handicap it. These stocks wouldn't move 5% plus on report when they have dozens of analysts covering them if, in fact, there was not an inability to know in advance just what precisely is priced in. So I do think it's going to be somewhat clarifying by the time we get through the next

few hours and you know look I don't want to you know go away from the idea that there's a chance that Powell can say something that the market decides to trade on but that doesn't necessarily mean that we're in for some other kind of bond market panic two-year yield is below where it was at the December 18th 19th meeting so I think that tells you the market is in in tune with where the Fed is going to be asked obviously about you know tariffs the

The Commerce, proposed Commerce Secretary, you know, Lutnick today suggesting that it's ridiculous to nonsense, I think was the word that he used to suggest that tariffs are inflationary. Sure, the Fed chair is going to be asked about that and also suggestions by President Trump himself that he's going to demand that interest rates go lower. For sure. Now, there are easy answers to those things for Powell, which is we'll have to wait and see. You're not going to necessarily, not just in

anticipate the policy and how it gets implemented, but what the impact is in advance. So you can sort of fall back on we are data dependent, we're not going to prejudge. And for now, the economy is not giving you too much reason to worry. We'll see what direction he thinks the risks are. By the way, no dots today, which means he doesn't have to explain too much.

about the range of views along the spectrum of the committee. Yeah, I mean, Atlanta taking their forecast down today just in a day, changing it. So that's interesting, too. Mike, thanks. I'll see you later this afternoon. The setup is next. Next. Let's do the setup for you now. Earnings that are right in front of us. After the bell today, United Rentals, Joe T.

United Rentals kind of in a sideways type of trading pattern. The key here is going to be specialty retail, specialty rental kind of come in here above 20 percent. In addition, overall revenue growth. Can it get out of the mid single digit territory? That's what you're going to need to see positive momentum reignited. Blackstone is Thursday, tomorrow before the bell carry.

Yeah, we expect a good quarter. They're going to sound very positive because of increased realizations in the private equity world.

MasterCard also tomorrow, Joe. MasterCard, I think Visa might be as well. Both of these stocks are trading as we speak near an all-time high. They're just literally in the sweet spot, as is Discover Financial Services and Synchrony, all these payment processors. The economic environment works perfectly. All right, what about Pulte Group? There are an awful lot of questions about housing.

Yeah, there are. These days, given mortgage rates and everything else. What about Pulte Group? That's tomorrow before the bell. The homebuilders went through a very strong cycle that reached its inflection point about six months ago. It's been in deterioration ever since. There's been an awful lot of incentives that have been offered. There needs to be something that fundamentally activates

is a catalyst for the home builders. I'm a little skeptical we're going to see that anytime soon. Carrie, Thermo Fisher is tomorrow before the bell. What's your take on this stock? Well, Thermo is a stock that has suffered because of the post-COVID world where

can't be selling a lot of tests when nobody is taking them. We don't have COVID everywhere. So the stock is underperformed. The earnings came way down, started to outperform and now is living under the cloud of what's going to happen with vaccine development, drug development and all of the spending that would come to them. We think it's attractive and that

earnings growth should start to really accelerate in 2025. Want to give me something on tractor supply? Strong start so far for the year. Let's see if earnings can back that up. Again, the consumer environment is conducive. All right. We'll do finals next.

All right, closing bell, Fed meeting, and then Jeffrey Gundlach, as usual, right after Chair Powell is finished with that news conference. And then, of course, we're going to walk you right up to Meta and Microsoft. So we've got a lot on our plate, and I hope you'll join me at 3 o'clock Eastern time. Final trades, Weiss. I also added, as you know, to Taiwan Semi on Monday, because no matter what happens, they are the winner. Sniper. Palo Alto, stay long here. Kerry.

Ford of precision instruments for manufacturing. The Jyoti. Chubb, strong earnings despite the costs in L.A. Okay. We've got a lot going on today, and I hope you'll join me on Closing Bell. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.

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