Title: Time to Be Cautious on Stocks? 9/2/26 Show: CNBC Halftime Report (podcast of the live noon ET show) Host: Scott Wapner + Investment Committee -- Joe Terranova, Liz Thomas, Jim Lebenthal, Steve Weiss Guest: Oliver Renick (Options Action, from Cboe Global Markets, Chicago); Frank Holland (CNBC News Update). Soundbites: Sam Altman (OpenAI) on "unsustainable silliness"; the Treasury Secretary at the G20. Date: 2026-09-02 (Wednesday) URL: https://open.spotify.com/episode/7rUBH3kjLekXPNDHZsEVpC Length: 44:11 Note: Spotify auto-generated transcript (accuracy may vary); this is an AUDIO podcast -- the Spotify panel carries NO (mm:ss) cues, so there are no timestamps anywhere in this file and the analysis page's "At" cells are plain "listen" links to the episode. CAPTURE METHOD: unlike the 2026-SEP-01 episode (13 scrolled window pulls), this episode's transcript tab panel held the complete episode in the DOM at once (709 child nodes, 46,179 characters). It was read in SIX consecutive 9,000-character slices with no scrolling and no overlap; the six slices join at exact character boundaries mid-word ("...the prior|week.", "...over the last t|hree months", "...can be d|one on a sustainable basis", "...they're creating j|obs", "...Oracle we ar|e compute constrained"), so coverage is continuous from the cold open to the closing disclaimer. NO GAPS; NOTHING WAS INVENTED. Speaker diarization was numeric only ("Speaker N") and was relabelled from context: 1 = Scott Wapner, 2 = Joe Terranova, 3 = Liz Thomas, 4 = Jim Lebenthal, 5 = Steve Weiss. Spotify reuses the numbers for remote guests and soundbites, so those blocks are relabelled: the G20 clip [Treasury Secretary], the options block [Oliver Renick], the news update [Frank Holland]. Sam Altman's clip carried no label and is labelled from context. The diarizer also splits single speakers mid-answer (Frank Holland's news update runs on under a "Speaker 1" label; Wapner's "Joey" cue is tagged "Speaker 5"); those are corrected here. The closing disclaimer voiceover is not a panelist and is left unlabelled. Spotify chapter headings are kept as == section == markers. Fillers ("you know", "I mean" where contentless) and stutters removed; obvious ASR name mangles corrected: "Jim Leventhalstein, Weiss"->Jim Lebenthal, Steve Weiss; "Chairman Warsha"->Chairman Warsh; "Jensen Wong"->Jensen Huang; "Octa"->Okta; "GE Vanova"->GE Vernova; "SIBO"->Cboe; "Oliver Rennick"-> Oliver Renick; "Frank Collin"->Frank Holland; "Sarah Partners"/"Sarah, part"->Cerity Partners; "Lowe's"->lows (situational-awareness lows); "pairs back"->pares back; "I'm bored Observer"->I'm a board observer; "took BL Move on"->took the L, move on; "Wolf"->Wolfe (Wolfe Research); "medicine nice winner"->Meta's a nice winner. Genuinely ambiguous garbles are LEFT AS SPOKEN and are NOT turned into tickers -- notably Weiss's data-center trio "why GE Vernova is down, why FDA I is down, why Verdict hasn't done really much of anything" (only "Verdict" is read on the analysis page, as Vertiv/VRT, and flagged there as inferred; "FDA I" is not identifiable and no ticker was created for it) and Terranova's Vertex deal target "Chronetics Pharmaceutical" (a $10bn acquisition announced the prior Monday; the target's real name is not recoverable from the audio). Wording otherwise verbatim. == Navigating Cautious Market Sentiment with Selective Investing == I'm Scott Wapner and you're listening to CNBC Halftime Report, the podcast, the most profitable hour of the trading day. You record this live weekdays at 12 Eastern. Listen in, guys. Thanks so much. Welcome to the halftime report. I'm Scott Wapner front and center this hour. The outlook for stocks, bond yields easing a little bit today. Still though, the narrative around the markets feels like it's growing more cautious. We'll discuss and debate that with the committee. Joining me for the hour today, Joe Terranova, Liz Thomas, Jim Lebenthal, Steve Weiss. Let's check the market. So I'll show you exactly what I'm talking about. We do have a decent day. I think people needed that after what we've been thinking about over the last couple days. More cautious commentary, no doubt. Bond yields backing up, in some cases surging. So you get a little bit of relief. The 10 year briefly did hit its highest level since November of 23. Piper today says bull market's still intact. Leadership has shifted. They're obviously referring to what's happened to the tech trade over the last several weeks. Jonathan Krinsky, BTIG, he's the technician over there, says he continues to see downside risk. So he's talking about a potential retracement to 7200 to 7300. We'll see. Look, there's a lot of good stuff still happening in this market. And Joe, I guess we'll start there because it feels like we're in a tug of war between a narrative that has suddenly shifted more cautious and an environment that still honestly feels pretty good. And how couldn't it, if earnings are where they are despite everything else going on? [Joe Terranova] So the perspective that I'm maintaining as we move into this month -- and I will absolutely acknowledge that there are clearly more headwinds, specifically as you mentioned oil and rising yields, that is in front of us. But I want to pick up on the word cautious. The way I think you have to approach this month is to be selective. And here's the difference. Selective means you don't have a view on where the overall index is going, but you acknowledge that foundationally we are in a bull market. You're also understanding that some valuations are stretched and you're trying to identify tactical opportunities in front of you. I think that's the right way to play it. I think when you say you're cautious, I think that leads you to very quickly become bearish. And as I referenced yesterday, what I'm seeing building is as it relates to the momentum factor, I think we're pretty washed out. I think we're washed out. I think a lot of the notes that I'm reading lately are suggesting due to the momentum factor's significant underperformance in Q3 that leads you to extrapolate, OK, you need to be bearish in the month of September. I don't believe you play that game. Don't get too bearish, don't get too bullish. Be selective, identify opportunities as we have been doing. And you're right, a lot of those opportunities, they are outside. [Scott Wapner] I don't think that it has to be because you're cautious, you're all of a sudden bearish. And I would frankly use what I think is the perfect counter to that from what we mentioned yesterday from Citadel Securities and Scott Rubner, who says, yes, the risk reward has changed, would use some strength to reduce exposure, but then says this is a reset. It's not a change fundamentally to the trend or fundamentally to the story. That's simply identifying, it feels like it's time to be a little more cautious. We're in a historically awful month for stocks. There's a lot going on. Yields are backed up, oil's up. I'm not talking about by the second today, obviously, but you get where I'm going with that. That doesn't mean you need to get bearish and all of a sudden change your overall position on the markets. I think that pretty much lays that out. [Joe Terranova] OK. The way you frame that, I like it a little bit better than what I'm hearing from some people, which is saying, OK, I'm cautious and pointing to these historicals for September, which I don't think mean very much. Understand foundationally we are in a bull market. So find opportunities if you can. Capital is flowing away from the areas of the market where you saw the significant and in some cases parabolic Q2 moves. It's flowing into financials, it's flowing into healthcare recently, it's flowing into agriculture. That's what I mean by saying, OK, let's be selective. == Understanding Market Seasonality, Yields, and Portfolio Adjustments == Liz, what do you think? Because yesterday we talked about a cautious cavalry arriving because it was like one note after another, whether it was from Citadel Securities, which I just highlighted, JP Morgan's trading desk, we're moving to a more tactically cautious neutral view. Wells Fargo, we're turning cautious on equities, yadda yadda yadda, right? You get the gist. The calendar turned and it feels like sentiment did too. [Liz Thomas] This happens every year. Everybody at the end of August starts to talk about September and October are rough. We have historical analogs that show us that volatility happens, big crashes, all of that this September. I think this could be happening at any time of year. What we're dealing with right now has nothing to do with the fact that it's September. We're dealing with a Treasury and a Fed that are sending mixed messages. We're dealing with yields that are higher than investors have been used to for decades and an inflation environment that investors are trying to grapple with. We're dealing with an AI theme that is now 3 years old and people are trying to figure out what does that fundamental picture look like as we shift into a new narrative of the next step of it. And I think that this is a time where again, in this cycle, if we do have a pullback, I hope we have one. If we do have a pullback, all it does is elongate the possibility for this cycle to continue and the bull market that Joe is talking about to have strength once again because it keeps valuations in check. I'm not saying valuations are attractive, but they are certainly more attractive than they were a year ago. They're certainly more attractive because of the fundamental picture that lies underneath. [Scott Wapner] Next to you, Liz, remains in focus and that's the 10 year yield which is at 4.80, which we said as we come on the air looked like it was dipping negative again a little bit, red. But as long as it's at 4.80 and the conversation around what happens if it gets to 5 is out there, I can't imagine that volatility, regardless of calendar date, is going to change. [Jim Lebenthal] I'm with you on that, Scott, and I think what you have in front of us is the reason for the volatility, which is to say if we're talking about the month -- and I feel stupid saying that seasonality exists, but Liz, I think you're pointing out it does exist. There's always a fundamental reason for it. And it is oil, inflation, higher interest rates, as we're seeing here, the probability that the Fed does hike in a couple of weeks. And I happen to think that they will, just based on having listened to Chairman Warsh's speech on Friday, it seemed to me clear that he's going to. We'll see. We'll see how the August CPI comes in. But to be helpful to our viewers, I want you to know what I'm doing. I'm certainly not selling stocks wholesale here. I've never tried to time a correction. I don't think it's something that can be successfully done. It happens too quickly. However, to the extent that there are stocks that I'm not all that enamored with -- and Scott, I know we'll get to one later, but there's one where the fundamental picture just doesn't look as bright. I'm using that as an opportunity. I'm using this time frame as an opportunity. [Scott Wapner] That's an idiosyncratic story, too. Let's be honest. [Jim Lebenthal] And that's exactly my point, good use of the word idiosyncratic. I'm going to key off of that. So if you're looking at your portfolio and there's something very unique, idiosyncratic that you're saying, jeez, I really don't like this stock, now is the time to take it out. And you can have that cash on the sidelines because you want to have some dry powder if this month turns out the way it usually does. You want to have that dry powder to pounce on the things you do like. [Scott Wapner] How about this? People are, maybe they're not to use your word, pouncing, but Bank of America's client flow trends. Now again, it's a little backward looking. We're talking about last week, not this week. Clients were net buyers of US equities after selling the prior week. Inflows were primarily driven by single stocks, $5.3 billion worth. Following two weeks of outflows, 6 of 11 sectors saw buying, led by tech, which did see outflows the prior week. I think that speaks to the tug of war, the push and pull, people wanting to get cautious because the calendar tells you you should, taking your eye off of the fundamental ball of where we still think we are. [Steve Weiss] Yeah. So here's how I look at it. Yes, you've got seasonal factors and history bears those out. But what does it mean? It means the S&P is down 1% or so, maybe 2%. So what do you do? You know in advance of that you do nothing. Maybe you don't deploy new capital into the market because of course that one to 2% is an average. Others will get hit more. So you should have your shopping list. But to sell stocks here when markets go up over 90% of the time because of where we've gone and where we are in the year, I think it's a major mistake. So if you've raised some cash as I have through selling some of the AI plays, because I do believe -- we'll talk about this later -- that there are some issues there to be aware of. It's just that now I've got a cash chest, so a treasure chest. I can go and buy stocks when they come dislocated near my portfolio like it did with Dick's, when I had that disastrous last trade call, or others that I have in my shopping list. So you can't get too worked up about this. The flow show, to point out money still coming to equities, and guess what, the problems we're having with rates, as you point out Scott, other shows, other parts of the world are having just as bad, even worse if you go to Japan. So we continue to be the best equity market out there. And as long as we've got earnings continuing to move like they have been and there's no reason to believe they won't, I think you're in a safe place. == Analyzing Momentum Factor's Struggles and Broadcom's AI Test == I think we need to discuss momentum because as we've been focusing on, it is still on track for the biggest quarterly underperformance in 25 years and the notes around it continue to flow as well, which is why we continue to highlight it. Mizuho's trading desk today says the following: momentum baskets have now completely round tripped and broken below their July lows, taking out the levels seen during the situational awareness unwind. The move has become increasingly self fulfilling as systematic strategies de-risk, forcing additional selling into weakness. The key part of that is if you thought that the initial dislocation around situational awareness was just that, because the three or four subsequent days following you had about as strong a rally in momentum as you've ever seen. So you had a dislocation and then a rebound. But now if you've broken back below the SA lows, OK, situational awareness lows, I wonder what that says about the factor itself. Goldman Sachs's trading desk today says their TMT -- tech, media, telecom -- and momentum pair, which has dated back to April 2011, had its worst month on record last month. And that's talking about July. So that's where we are in what you make your living partially in. [Joe Terranova] So how I would explain it to the viewers is picking up on what Steve said. If you are looking at the momentum factor right now, I don't think you could begin to build a significant amount of bearishness where you would say to yourself, OK, I think there's further deterioration ahead for the momentum trade. [Scott Wapner] You said earlier you think it's washed out. [Joe Terranova] I think it's washed out, but the other side of that is that I don't think you step in here until that factor proves itself, because to your point, in the wake of situational awareness, you had that false start. You have to understand this investing universe that we all live in. It is not a science, it is an art. It is tacit knowledge. It is not explicit knowledge. OK. As example, think about one of, if not the highlight of the momentum trade this year, SanDisk. David Tepper in Q2 -- [Scott Wapner] I thought you were going to say Micron. [Joe Terranova] David Tepper in Q2, in what is fundamentally the strongest quarter the company has ever had, he has the tacit knowledge, the art of investing, to get out of the position. And that's exactly what I'm trying to identify. So what you have to do is you have to allow these factors to prove themselves. And there is not enough evidence right now in front of us to say the momentum factor is about to restart. I can say to all of you, I think it's washed out, OK, but I think you have to have a degree of apathy towards it. Also understand one last point. As you move into the fall, this factor, if in fact the AI trade does not come back, is going to continue to rotate more and more into energy, healthcare and financials. Keep that in mind. It's the same thing it did in 2022. [Scott Wapner] So let's see what Broadcom does after the bell. If you want to get a real time tick by tick indication of where the momentum psychology is, let's see what they deliver, because the stock hasn't traded all that well. Like a lot of these names, one month is hard to make a judgement on. The stock's down 5%. The factor itself has not done well either, but in the SMH's top 10 holdings, Broadcom's the worst performer in that period of time. It's down 23 1/2% over the last three months. So it's had pain more so than the others. Do you feel like this is a good test now for this? [Joe Terranova] Here we go. This is the third test, and I had a debate yesterday with someone on when you look at what potentially the setup is for Broadcom, why can't this be the next Palantir? My response to that was, well, I sat out on the sidelines for Palantir. Palantir had a nice post earnings bounce because the stock was washed out on really strong earnings. I think it's down 7% today if we look at Palantir, but I don't have enough evidence in front of me. Here's what you need to know and understand about Broadcom. The last earnings report on June 4th signaled an inflection point, very clear. Why? Because they missed by $1 billion in their AI revenue -- 1 billion, 16 billion instead of 17 billion. The stock goes down 12% the next day. So you could cite valuation. OK, it's cheaper. It's 21 times forward now. It was 32 times forward in June. The 10 year average is 18. What I'm trying to get everyone to understand is sometimes there's no trade, and I just don't see the setup in this for there to be a specific trade related to Broadcom. Maybe it restarts, maybe it restarts the AI trade. Possibly it does that. I'm not sure, but if they come in tonight and if they deliver 200% earnings growth and 85% revenue growth and that's not enough, then that AI momentum trade is going to continue to sit silent. [Scott Wapner] There needs to be some -- suggests there's a story out today that says they need an NVIDIA like earnings report to stop what has been a $520 billion skid in the stock. But remember, Nvidia's quarter was great for NVIDIA, didn't really lift a lot of other boats, did it? We sat here and marveled at the fact that NVIDIA gave about as good of an earnings report in the current period of time that you could ever ask for. The guidance was, people couldn't even get their arms around what the company was telling you they were going to do in 2028. And yet it didn't send the AI trade in general off to the races. So I don't know whether Broadcom has the same NVIDIA like earnings report to do that, to Joe's point either. Maybe this just needs to be a Broadcom moment. == The Semiconductor Landscape: Competition and Must-Own Stocks == Well, if it is going to be a Broadcom moment, they're going to have to address competition. I'm glad, Scott, that you brought NVIDIA in because that's where my head was. What NVIDIA is saying is that the whole space is supply constrained. What Broadcom has been saying, Joe, with your comment about last quarter they missed by a billion, is that there's competition out there. Now which one of those two is right? I happen to very strongly believe NVIDIA. Basically what they're saying is they could do more than 70% if supply constraints come out of the way, particularly on memory. I got that. But basically the whole semiconductor space is semiconductor supply constrained. And what that means is if there is competition, say from AMD versus Broadcom, particularly with the Alphabet partnership, then it really doesn't matter. The competition doesn't matter because there's enough of this pie and it's growing big enough to satisfy everyone. That's what Broadcom needs to say tonight, is that the pie is big enough that don't worry about the competition. And frankly, Scott, that is what NVIDIA was saying, is the pie is big enough and it's growing faster than anybody can fully meet. [Scott Wapner] Let's take a look at Taiwan Semi, a stock we really don't talk about all that often. Weiss does because he owns it. Initiated buy today, 515's the target. Stifel did that today, by the way. So over the last three months, yes, the space has been largely rough. Taiwan Semi's one of the better performers in a down month for pretty much everybody except for NVIDIA. Their quarterly chip making tool needs almost doubled this year, again, according to a report that we saw. What's your outlook for this stock, Weiss? [Steve Weiss] Look, I've owned the stock for years already. My outlook continues to be very positive. Jensen Huang often says if I can only get more capacity out of Taiwan Semi, and they make the chips for everybody. So it's a great company. If you don't want a fab -- and who does -- they're the ones you go to. So they're adding capacity and the capacity they're adding, usually I'm a little cautious on that, but they'll fill it with demand. Number one. Number two, it's going to take years to add it. So to me, this is the must own in the sector. I think it's a better must own, frankly, than NVIDIA because Nvidia's getting their chips made there. As I said, so is Google, so are all the others. So this is going to be a mainstay. I love the stock and I'm just going to continue. Now, I did cut it back a little bit just because the position got so big through performance, but it's still I think my largest position actually. [Scott Wapner] Were you going to say something? [Jim Lebenthal] Well, no, I heard Steve and I'm thinking about should NVIDIA be replaced with Taiwan Semi. I think if anything you own both of them. NVIDIA has something -- [Scott Wapner] I don't think he's saying that. [Steve Weiss] I'm not, I didn't say that at all. [Jim Lebenthal] I'm paraphrasing. I'm paraphrasing a little bit. You know where he said -- [Scott Wapner] It's a lot of it. [Jim Lebenthal] OK, let me continue though. I don't -- [Scott Wapner] I do, because I don't want -- [Joe Terranova] I do also. [Scott Wapner] He's not suggesting that you should trade one for the other. If you're in NVIDIA, sell it and buy Taiwan Semi. So I just want to make sure people are clear on that. [Jim Lebenthal] Let me rephrase. Your Honor, please, I'd like to redirect. Proceed, OK. What he's saying is that Taiwan Semi might be a better stock. [Scott Wapner] We'll be in chambers at 10. [Jim Lebenthal] Boy, OK, might be a better stock. 10:01. OK, I'm trying to stay out of trouble here. Let's see how I do. Taiwan Semi. Steve, I think what you were saying is it might be a better stock than NVIDIA, and because Taiwan Semi has a certain monopoly in terms of producing the chips, it's a point well made. I think that NVIDIA has a special secret something as well with the whole ecosystem. I'm not talking about the financing that they're doing of AI, but I'm talking about CUDA and the software that supports the chips that they're making that really provides a moat to their business as well. So what I'm really saying is I'm not going to get caught up in which is the better stock. Taiwan Semi is an awesome stock and I really like NVIDIA. And the momentum right now to me in NVIDIA is really quite clear. I think that even with September being the month that it is, there's a chance this takes out a new high in this month. [Scott Wapner] Maybe you want to trade. == Adobe, Dell, and the Complexities of Cybersecurity Valuations == If you want to do trades, you want to trade Adobe for Dell. [Jim Lebenthal] OK, now listen, I heard you guys giving me some shade on that yesterday. I do watch. And I guess, look, I should be flattered to talk about me when I'm not there, but let's not miss the fact that Adobe's showing some signs of strength here. All right? This was a $200 stock just about a month and a half ago at the height just before situational awareness blew up. It's around 285 today. And there's -- wow, what happened in the last minute? Jesus. All right, anyway, OK, it was to you before the show start. Yeah, exactly, Steve. There is a catalyst showing up here. One of the things that's held it back this year is the CEO departing. What happens if they name a CEO? What happens if they name a CEO who clearly has a design to selling this at 10 times earnings to another company? I happen to continue to think this -- [Scott Wapner] You can own it now for an event. [Jim Lebenthal] The CEO -- [Scott Wapner] No, for this company to be sold. [Jim Lebenthal] Well, here's my point. [Scott Wapner] That's your bull catalyst. [Jim Lebenthal] The catalyst here? First off, Cerity Partners, my fine firm -- [Scott Wapner] You keep stepping in it, I'm going to keep -- [Jim Lebenthal] I know, shut up, let me finish the points. [Joe Terranova] He wants to take a drink. [Jim Lebenthal] Cerity Partners, my fine firm, with 1800 people, just re-upped their Adobe contract. Now were there some price concessions? Of course there were. However, the idea that Adobe is going away, that I love Jenny, that she's going to replace Adobe with her vibe coded whatever she was doing yesterday. OK, good luck. I hope it works for you. Cerity Partners with 1800 people, 200 billion in assets under management. We're not going to do that. We're going to stick with Adobe. I think other enterprises will as well, and at 10 times earnings, look, I'm sticking with it. The catalyst, Scott, is the CEO replacement. Let's see who they announce. [Scott Wapner] I wanted to look at Dell. I know that nobody owns it. [Jim Lebenthal] Too, by the way, but you brought up Adobe. [Scott Wapner] Well, let's talk about Dell because last I saw it was surging on the back of the earnings report. They lifted their forecast, about as good as you could deliver last night. Citi and B of A both go to 600 bucks. So what do you want to talk about there? [Jim Lebenthal] I was just kidding. I don't own Dell. I just wanted to take the heat off of Adobe. But it's certainly, I think what we can say in this will tie in this. [Scott Wapner] Only makes you have more heat. [Jim Lebenthal] I know, I don't think I have enough water, but we're going to keep going here. What this is showing is, for all of those people to say AI is a bubble, the CapEx is going to turn off, I don't think so. I don't think so. In this place, directly in stocks that I do own, I don't want to get in trouble the way Joe did by front running things. I know there's a name we're going to talk about, but one that has been in the AI trade in the CapEx build out and the stock has done terribly. When I look at Dell's response today, I think to myself, hey, Oracle's going to be just OK. It's going to be fine. Don't worry about it. I know, I know, Joe, I'm taking the heat off of you. [Scott Wapner] Let's talk about Palo Alto, because let's do it -- as of mid morning, the stock was on pace for its worst day in a couple years, about 2 1/2 years. Let's throw that up guys, if we could. Thank you. Down 10 1/2 percent. What happened here? [Joe Terranova] What's interesting is going into this report, we highlighted that over the last several quarters, Palo Alto does not respond to good earnings. OK, great. What does that do for you? You go into this quarter, you get now record earnings, you get a quarter that they have never had before. It's historic, and I think what it is, is it's evidence to how difficult this art of investing actually is. Because if you're relying purely on fundamentals, then this quarter would tell you that all the cybersecurity names should move higher. But there's more to it than that. There's a mosaic here involved. You have to look at positioning, you have to look at sentiment. And every cybersecurity name today is down across the board. It's CrowdStrike, it's Okta, it's Fortinet, it's Datadog, and they all are down because positioning is full and the expectations could not be exceeded no matter how high and how well they actually performed. You just had extreme bullishness in place and sometimes that has to get worked off, and it will get worked off over the course of time. [Scott Wapner] Getting worked off, I don't -- [Joe Terranova] Think it's a one day event either. [Scott Wapner] 12% in three months. [Joe Terranova] I'm going to sit long and painfully watch it. [Scott Wapner] 82% year to date. So you're still riding the thing? Yeah, Weiss, go ahead. [Steve Weiss] Yeah, I'd say there are a couple other factors here, which is the first is that these stocks are very expensive. There's no way you can justify the earnings for a Palo Alto, the valuation rather. And the second is that we see every day there are more announcements from OpenAI, from Alphabet, from Anthropic about their cyber tools they're putting out there. So to me, this is where it's smelling a little bit like we saw with software. We create these tools not only to attack -- red teaming, blue teaming, which is the phrase for defending and fixing. So I think the competitive landscape's changed here as well. And given the valuations, unless these companies just do extraordinarily well and blow out, like really, really blow out the earnings and can be done on a sustainable basis, this is what we're going to have. [Scott Wapner] All right, I want to talk about Google as well because the Wall Street Journal reports they're set to release Gemini 3.8 Flash AI model this week. So in an otherwise mixed tech tape, Meta's a nice winner today along with NVIDIA, Alphabet not doing all that much. What do we think about that from the owners that we have on the show, Jim? [Jim Lebenthal] Yeah, they need a little resurgence in their AI model. About nine months ago, they were on the top of the heap. Since that time, Anthropic has clearly taken over in terms of the most popular, most used large language model. OpenAI is not being left behind either. So Google needs to continue to innovate, continue to improve. This is an important point. The stock has fallen off from roughly 400 to around 330 today. They need this model to do well in the marketplace. [Scott Wapner] All right, let's take a break. We'll get to your move coming up too, OK, the idiosyncratic sale that you made, but we will discuss coming up. == Sam Altman on 'Unsustainable Silliness' in Data Center Growth == Up next, unsustainable silliness. That is what one of the biggest players in the AI race is calling the data center boom as the build out backlash grows nationwide. We'll bring you the very latest next. [Sam Altman] I'm not worried about our compute build out plans. I am worried about the world's compute build out plans. I think we are going to be able to use all of the compute very profitably that we are planning to build. But I am seeing the first signs of what feels to me like unsustainable silliness of random new neocloud popping up, people claiming that they're going to build gigantic massive compute next year that I think they don't have the revenue to support or a buyer. Yeah, I definitely feel like some fear about what the world is doing as a whole, although I think we feel very good about what we've committed to. [Scott Wapner] All right, well, that's Sam Altman, of course, OpenAI, the first signs of what feels to me like unsustainable silliness. So that sounds like he's sort of weighing in on the data center debate, which everybody seems to be lately. A report by PwC, by the way, says AI data center spending will reach $32 trillion by 2050. You have the projects in Pennsylvania facing higher local scrutiny because of the governor's executive order there. Missouri voters appear to recall the city councilman over data center support. So if you support it, people are coming out against you. Senator Ted Cruz in Texas blames misinformation for data center fears. Then he got pushback from constituents as well. So now you have a new data center messaging group aiming to counter a public backlash. So that's out there. == Addressing Political Backlash and Data Centers as Strategic Imperative == And then I want you to listen to what the Treasury Secretary said at the G20 about who's to blame for all this. [Treasury Secretary] I think that the AI companies, whether it is the builders of the data centers, whether it is the labs themselves, have done a horrendous job, horrendous job of explaining themselves to the American people. And I think we need a big reset on this. They're going to have to take some of the blame and they are going to have to convince the American people that all the benefits will not accrue to a small group. [Scott Wapner] OK, I thought that was a very telling comment for a variety of reasons based on what the president has said and posted on social media in the last 48 hours, and what the Treasury Secretary, where he just went blaming the industry for these issues. And maybe that's why there's been some weakness in the trade. What do you think about this? [Liz Thomas] That's probably part of the weakness. First of all, Sam Altman spoken like a true CEO. We're going to do it right, but everybody else is who I'm worried about, right? I think that's probably not the last comment we're going to hear like that from AI companies and everybody that is so-called responsible for this build out. The reality is we need the build out to happen if the demand is going to stay like it is. So the build out, game on. However, it is now becoming such a political topic as we head into midterms. But more so, I think this is going to be the topic into the 2028 presidential election. So I am not surprised that we have a political person coming out and taking a stand against it. I do think that this is a big risk to the industry for the next couple years, a risk that is not priced in right now. So that risk is that the government gets so involved and actually oversteps that it starts to affect earnings, it starts to affect our ability to meet the demand that's out there, that then the demand actually pares back. [Scott Wapner] When I listen to the Treasury Secretary, what I think resonates with me is the fact that this is an administration that has had an extraordinarily cozy relationship with much of big tech through it's now second term, halfway, almost halfway through its second term. This is an absolute direct shot at that industry. We're not going to take the blame for being advocates for the AI build out. You are. And you all need to do a better job getting out there and selling to the public why data centers are needed. [Jim Lebenthal] I think that's true. The data centers and the big technology companies do need to do a better job of explaining the benefits versus the costs. And there's a similarity to when fracking came in vogue about 25 years ago and there were a lot of concerns about everything from polluting the water supply to many earthquakes. And now we look at fracking as a strategic imperative for this country. I think that's what the data center companies and this administration need to do going forward, which is to say this is a strategic imperative versus China. Now we're at the tail end of the campaigning season, so we're politicking. We are. Once we're past the Election Day, I think this administration will work with the technology companies to do what needs to be done to make sure we don't get out competed by China. This is absolutely a strategic imperative. [Scott Wapner] Were you talking about Election Day in November? You're talking about 28 because -- [Jim Lebenthal] 28 is so far -- [Scott Wapner] And I said that on purpose because there's a belief that just because you get past the midterm day, this issue is not going away. [Jim Lebenthal] Here's what I think -- [Scott Wapner] It's only going to grow louder into the general in 28. [Jim Lebenthal] Okay, maybe it will at the tail end of 28. But once you get into December of this year and you have newly elected legislators and governors in place, they're going to do what Willie Sutton did. Willie Sutton robbed banks because that's where the money was. And they're going to promote data centers because that's where the money is that they can tax. I'm not even being cynical. I'm just being an older man who has seen this game time and time again. You politic to get elected and then once you're in office you go where the money is. [Scott Wapner] Oh, no, this seems twice like the kind of existential issue that the industry is going to have to deal with. And I don't think it's naive to think that some of what we've been playing and talking about every day has filtered its way into the stock market, that the reason why the tech trade has struggled over the last, let's just say, a handful of weeks is squarely on this issue. The lack of trust around the data center issue, whether the cycle is now going to be elongated because there's going to be too much pushback or moratoriums or whatever. And that is going to have a material and fundamental impact on the earnings prospects that investors have already placed their bets on. [Steve Weiss] I think it's absolutely correct. And we see it in some of the stocks. I think it's one of the reasons why GE Vernova is down, why FDA I is down, why Verdict hasn't done really much of anything. It's really hitting those stocks that power the data centers or sell into the data centers. It's absolutely clear and it is up to the industry to do a better job presenting it, because right now all neighborhoods know is I don't want that near me. Number one. Number two, that is driving my electricity prices through the roof. Now, I think you have to disregard somewhat what Sam Altman said, because Sam Altman said, no, we're special because we're going to use all our compute. They've got such massive compute. From a competitive standpoint, he doesn't want more going up because he's already locked in what he needs. But I'm involved with a company, a private company, and I'm a board observer, and I can tell you we're a cloud company, cold storage, and our prices are going through the roof in terms of leasing out data center capacity. So you'll continue to see them come on. And as long as they're creating jobs, only taxes, Jim, which is a good point, creating jobs, they will happen. So to me, this is a momentary pause. They'll put them elsewhere. So it's always not my neighborhood, but I think that'll continue for a little while. == Latest Market Headlines and Bullish Calls on Key Companies == We're going to go to Frank Holland for CNBC news update. Hey there. [Frank Holland] Hey, good afternoon, Scott. The Trump administration is backing OpenAI in a lawsuit brought by The New York Times along with several other outlets and publishers. It centers on copyrighted work used to train OpenAI large language models, and in its brief supporting OpenAI, the government argues AI training generally makes fair use of copyrighted material. A federal judge today ruled in favor of Google, saying it does not have to sell its advertising technology business. The DOJ and a coalition of states sued Google over its dominance in that business used by online publishers and websites. In April of last year, the judge ruled that Google unlawfully locked publishers into using its exchange. But today, the judge said most of the proposed remedies to the company's past behavior are not being accepted. And Southwest Airlines is getting into the airport lounge business. The company announced it's building high end lounges in Austin, Baltimore, Nashville and Honolulu in an effort to lure travellers with a new premium credit card launching next year. Southwest says it plans to launch a network of at least 11 lounges. Scott, back over to you. [Scott Wapner] All right, Frank, thank you. That's Frank Holland. Up next, calls of the day. We got 5 bullish calls today off 5 committee names, plus Jim's latest trade we told you about coming up as well. We're back. Check out Vertex today. Reinstated overweight, 665 is the target at Morgan Stanley. Jim Lebenthal. [Jim Lebenthal] This is a company with terrific science. It pretty much owns the cystic fibrosis business, but they've added to it with things like kidney treatments and pain treatments. They have great science. They are likely to put out more products like that. A little bit expensive. There can always be a hiccup along the way, but the momentum, Joe, is clearly here in this name. [Joe Terranova] Excellent deal on Monday. Chronetics Pharmaceutical, $10 billion acquisition, diversifies beyond cystic fibrosis. Not that they need to, they dominate there, but this is a good deal. [Scott Wapner] OK, you own that. You own Lilly. Reiterated overweight today, 1400 bucks is the target at JPM. The portfolio that they have, a portfolio quote, "appears increasingly differentiated from its peers." [Joe Terranova] Absolutely. And they've done such an excellent job in diversifying the product line and using the revenue from GLP-1. They're dominating GLP-1. As I'm speaking, if you could show a chart of Novo Nordisk, you'll see the significant outperformance for Lilly. Lilly is up to $20 billion in deals so far in 2026. I often speak about this being a large cap biotech company more than anything else. I think the value of the market cap right now is around $1.1 trillion. If you continue to allocate, allocate in their direction because they are doing such a phenomenal job diversifying the product line. [Scott Wapner] All right, how about this one, Jimmy. Wynn Resorts, initiated outperform at Wolfe today. 128 bucks is the price target, more or less 40% upside. They call it global gaming's luxury brand, trusted and aspirational, positioned at the top of the K shaped economy. They have a new resort in the UAE and also their premium positioning in Vegas. [Jim Lebenthal] What an awful chart. Look at that chart. Sorry. Sorry about that chart. In my partial defense, I will say I did trim it by half about a year ago at 130. My mistake so far has been to buy back in at 106. I do think we'll get to that 128 stock price. The reason for this chart -- [Scott Wapner] The reason why is the reason for that? [Jim Lebenthal] Because their next resort is going to be in the United Arab Emirates right on the Strait of Hormuz. That's why. Now they are still planning to open that next year. One does have to believe that the war with Iran will be over. And I think, common sense says this war has to end by the end of the year. [Scott Wapner] This looks like a chart that was breaking down before the war even happened, right? And if all of these conditions which Wolfe talks about already existed, if they're at the top of the K shaped economy, back this chart out a little more guys too, the stock's -- [Joe Terranova] The casino stocks peaked, to your point. They peaked in November for Las Vegas Sands. When I -- for December -- [Jim Lebenthal] When I trimmed it was late November. [Scott Wapner] I know, but why, if? [Jim Lebenthal] Because of concerns about Las Vegas and spending in Las Vegas, but the K shaped -- [Scott Wapner] Economy was already the K shaped economy. [Jim Lebenthal] I know, and the beneficiary of that is Wynn. This is why I was comfortable buying it back at 106. Now what is -- how to keep it, because remember I trimmed it at 130. It came down to 106. I added to it based on the K shaped economy, based on the fact that in Las Vegas, Wynn is the premier resort, it's the premier property. By the way, they have other properties as well, developed in Boston, undeveloped in other areas of the world. I do think this will come back, but over the last six months, what has held it back is unquestionably the United Arab Emirates business that they're building. [Scott Wapner] You did what, LVS? [Joe Terranova] We sold out of LVS. Yeah, Jimmy, I loved your opening statement, which is the chart looks -- I think you said horrible, if I quoted you correctly. It's like a -- [Jim Lebenthal] Ponzi scheme. [Joe Terranova] Wynn looks awful, but I don't know. You're inferring that this is, to use your word, idiosyncratic to Wynn and it's a relationship in the Middle East. It seems to me the casinos are just trading awful. Las Vegas Sands looks awful as well. [Jim Lebenthal] Well, Las Vegas Sands is Macau, which actually is coming back. But the issue for the gaming industry has been Las Vegas. We had really bumper crop years earlier this decade. Pricing went through the roof. The industry has had to reset pricing to get demand back. I think it's coming back. I do. == Exploring Global Options, Jim's Portfolio Shift, and Panel's Final Picks == OK, coming up, we're going global for today's options action. Oliver Renick following some big bets in one international market. He'll tell us exactly where from Chicago. Next. Options action time. Oliver Renick at the Cboe Global Markets in Chicago. What are we talking about? [Oliver Renick] In Brazil, Scott. Maybe it's because commodity prices are surging, maybe it's ahead of the country's election next month. Either way, it is very rare that you see the iShares EWZ in the top 20 traded securities among all options today, and that's where it is with 300,000 plus contracts exchanged and volume more than six times the 30 day average. More than $30 million in options premium has traded so far and 94% of it is tied to calls. Now what's interesting is that while the ETF has surged the past month, implied volatility has too. And today roughly half the call premium we see is being sold, meaning as many traders are using this ramp to fade the speed of the move as they are trying to chase it. That said, the most popular contract to buy today is the 45 strike call expiring in November, which needs another 20% plus to pay off, Scott. [Scott Wapner] All right, good stuff, Oliver. Thanks. I'll see you at 3. Oliver Renick. Up next, Jim's latest move. Tell you about it. All right, we're back. Let's do this move. So you sold PG&E, which is -- [Jim Lebenthal] An electric -- [Scott Wapner] Very much in the news this week, obviously tied up in California politics. This was directly related to that, right? [Jim Lebenthal] Directly related to that. And as an investor, what I wanted was a plain vanilla utility, and what I got is something that's a pinata in California politics. They were not responsible for last year's terrible fires. However, they are likely to be on the hook, as we can see from bills that are pending and potentially will pass eventually in the California legislature. It's so bad that the company is now doing a strategic review that they've announced today. This is not what I signed up for, so I went out. [Scott Wapner] OK, took the L, move on. We'll take a break. We'll do finals coming up. Stephanie Link, Lo Toney, Mark Yanis on the hottest asset class around, that is sports. We'll get you set up for earnings, too. Snowflake, Broadcom. It's critical. We'll walk you through the last hour. Weiss, what's your final? [Steve Weiss] Alphabet. These things cycle in terms of who's got the lead in the AI technology. This is really too cheap not to own right here. [Scott Wapner] All right. Thank you, Farmer Jim. [Jim Lebenthal] Oracle. We are compute constrained and Oracle will benefit. [Scott Wapner] Liz. [Liz Thomas] Gold. I used it last time, it's down 3% since then, like it even more now. [Scott Wapner] Joey. [Joe Terranova] Stay with the refiners, Valero. [Scott Wapner] I'll see you on the closing bell, the exchanges. 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. All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet, or another medium. 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