Closing Bell - Closing Bell: Valuation Frustration in Tech 02/05/25

Episode Date: February 5, 2025

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Welcome to Closing Bell. I'm Scott Wobner, live from Post 9, right here at the New York Stock Exchange. This make or break hour begins with the Alphabet aftermath. What it means for how the mega caps will trade from here a day when there is mixed action, and we're going to get to that in just a bit. In the meantime, let's show you the scorecard here with 60 to go in regulation. Green, but somewhat muted. NASDAQ, in fact, dipping into the red today. Strength in financials. There is strength in tech despite Alphabet. Utilities as well. Weakness in energy, discretionary and comm services. We'll get to that.

Yields mostly lower. There are some standout moves we want to tell you about. Uber shares are sinking after its outlook disappointed the street. And Mattel is higher on a strong forecast and some price target increases as well. It does take us to our talk of the tape today. A tale of three techs, Alphabet and Apple, pressured. NVIDIA surging, and that is helping the NASDAQ. Today, we have reports on all three of those. Steve Kovach on Apple's latest China headache. Deirdre Bosa on Alphabet's post-earnings ugliness.

And Christina Partsenevelos on NVIDIA's strong session as AMD pulls back today. Steve, we'll begin with you. This headache that just won't go away. Did you just downgrade it from earlier from a migraine, Scott? It was a migraine on half that report. Anyway, here's what's going on with the shares here today. We see the shares down about half a percent now. This is from a Bloomberg report overnight saying the China App Store is being investigated.

This is over those 30% fees that Apple charges. This is the same kind of investigations and lawsuits and so forth we've seen all around the world, including here in the United States and in Europe. And what's at risk here is, of course, the App Store revenue that plays into the services and overall margins that we've seen at Apple that continue to grow. All of those things have been picking up the slack for sluggish iPhone sales, especially in China. That is going to be a big worry here. Bank of America had a good note out on this this morning saying China makes up about 24 percent of App Store sales, meaning if this does go to effect and those fees go away that Apple is allowed to charge, that could hit Apple's

EPS from a range of 13 to 26 cents a share. And add all of this to the pressure from Chinese competitors, Huawei, Xiaomi, and the like. And plus, no Apple intelligence in the country, which Tim Cook last week told us was a reason China's sales were down. And by the way, this is just the continued decline in the China business, down 11 percent in the December quarter that just passed. It's a pretty ugly picture over there in China for Apple, Scott. If you want to stay with the headache theme, we can. I didn't mean to veer you off of that. Yeah, you tricked me. But this does show you, however, that this headache, whatever you want to characterize it as, is not going away anytime soon. Yeah, and that's

right. And part of this is just this renewed competition. This is what I'm looking at more. You don't hear Apple talk too much about what the competition's like. They've said, yes, it is very competitive and increasingly competitive. But we're just seeing this huge resurgence, Scott, with Huawei, with Xiaomi, but especially Huawei, which was out of the game for a couple of years to Apple's benefit during the pandemic. When Huawei was out of the game, you got a nice little lift in Apple sales because of that. And now with Huawei playing in there again, people are looking over to these Chinese homegrown brands to start buying again. Our Eunice Yun has done great reporting on this out in China, showing these Huawei stores that are literally built across the street or across the hall and malls from Apple stores and attracting just as many customers, if not more. And they're taking away

market share from Apple. And that also puts pressure on the services business, because keep in mind, when people aren't using Apple devices, they're not using Apple services. And this is another hit to them. What we're learning today about this investigation will put more pressure on their services if it does play out the way we've seen it play out in Europe and elsewhere, Scott. All right, Steve. Thank you, Steve Kovac. Now to Deirdre Bosa with more on Alphabet. No, by the way, Uber, which doesn't get talked about as much today, but it's an ugly story as well. But why don't you start with Alphabet and the hangover from this earnings report? Both ugly stories. Let me tackle Google first. Really, CapEx was focused, especially as a percentage of annual revenue, and that's what's giving

investors pause here. $75 billion in 2025 is what it announced. That would amount to nearly 20% of projected total revenue in 2025. That is a significant step up from the last few years, and as the CFO said, going to hit the P&L. Now, combined with its first revenue miss in two years and cloud that didn't live up to expectations, that's where you're seeing shares down some 8% today. The good news, though, is that Google's bread and butter search advertising, that's holding up well amid this generative AI shift, which was really this kind of existential crisis for the company. Executives on the earnings call said that AI overviews is driving more volume and more ad dollars. Let me get to Uber now. It's down a similar amount today. The issue here was guidance, which doesn't help Uber out in this broader

bull bear debate over the rise of robo taxis and whether it will threaten its business. On CNBC this morning, CEO Dara Khosrowsh, said that AVs represent both uncertainty and a huge opportunity. Uber's advantage, he said, is its experience with fleets at scale. And Scott, that is going to be put to the test this year because Waymo is expanding. We're expecting things from Tesla as well. Can Uber be the fleet? Will they do it alone? Will they partner with others? There's indication of all of that. All right, Dee, thank you. That's Deirdre Bosa. Now to Christina Parts-Nevillos for those moves in NVIDIA and AMD. And I guess when Alphabet says they're going to spend as many billions as they're going to spend, you see NVIDIA shares doing what they're doing today.

Yes. And even yesterday when the news came out, that $75 billion number, you saw NVIDIA pop. AMD didn't. Why? AMD's data center numbers just weren't up to snuff. Things looking bumpy ahead too. AMD telling us Q1 revenues will drop 7% sequentially as data center clients and embedded are all heading south. Only their gaming business is really showing any sign of life for Q1. Making matters worse, AMD won't give a specific forecast for their AI chip sales in 2025, GPUs, and that's a tough pill for some investors to swallow since they can't stack it up against NVIDIA numbers, especially to your point when cloud giants

are just throwing billions of dollars at data center upgrades right now. AMD is trying to play catch up by pushing up their next GPU, the MI350, to June this year, so that's a good thing. But Morgan Stanley says their big technological leap isn't coming until the MI400. That's the next iteration of the GPU hits in mid-2026. So that's a long way out. And it's given even more room to NVIDIA to run with that AI crown. Speaking of NVIDIA, you mentioned it shares up on that $75 billion promise from Alphabet. Separately, DigiTimes is reporting that advanced packaging capacity at Taiwan Semi is improving, and that should help ease any supply chain issues with NVIDIA's chips. And lastly, Supermicro says they are in full production of NVIDIA Blackwell racks.

That's GPUs, CPUs, liquid cooling, another way to ease NVIDIA's supply constraints. So those are all just catalysts as to why you're seeing the stock up 4.5%. And Supermicro up, what, over 9% too? Yeah, what's the catalyst today for Broadcom up 5.5 half percent or is it just part of what's happening with these other stocks it has to do with the custom chips and even yesterday amd ceo talked about the asic market and she gave credence she said that it's a it's a market that's not going away and that they're playing in it as well so i would assume it's just the conversation overall with the hyperscalers and amd saying that is six are important all right right. Thank you for that. Christina Parts and Ellis.

Let's bring in our panel now. Courtney Garcia of Payne Capital Management. Sandra Cho of Point Wealth Capital Management. It's great to have you both with us. Courtney's a CNBC contributor. But Sandra, I want to begin with you, because what stands out to me today from your notes is the fact that you say the underweight tech, which not too many people have come on of late and said that's the positioning that will work best. Why is that your view? Well, I mean, you see it right now, right? You see the volatility. And right now we are, you know, we're not negative tech by any means, but big tech.

And I think I should specify that. So big tech has had a huge run up. And as we see in Google and Alphabet and Uber, we see a lot of potential volatility and headwinds a little bit, at least for the short term. So right now, that's our positioning. Yeah. Court, does that match with you or no? Yeah, I do agree with that. I mean, really, we've been talking about broadening out your positions. It's not that we saw any of these big drops happening in tech necessarily. It's just you've already had these huge run-ups.

And I think a lot of the kind of obvious money has already gone into AI. And you've seen a lot of those shares have been driven up. And the multiples are really getting stronger. I think the question is, can that continue to outperform the way it has been outperforming? And we would argue probably not. I think the better way to play AI is with the other 493 stocks in the S&P 100 or looking at your small and your mid companies where they're going to get more accessibility to AI, probably at a lower cost. It's going to increase efficiency. And I think that's the better way to play this over the long run. You're seeing the markets are doing well despite those companies not performing well today. I mean, the argument against this, Sandra, of course, is that those stocks value and otherwise are cheaper for a reason. Their multiples are more favorable to people because for a reason. I mean, if you're if we're worried about an environment where we're going to

have tariffs here and tariffs there or threats here and threats there and we may get a pickup in inflation once again. How are these other trades going to work? I just don't understand that. Sure. Well, I'm not necessarily just talking about, you know, value, for example. I think it's great to have a dividend. And I think that, you know, bolsters up the potential future valuation.

But we do see a rotation, right? We even see it this year. And I'm not saying that, you know, big tech is going away or it's not a good long-term investment. I'm just saying for the short term, there are other areas that we really do like a bit better. So we're not just pulling out of big tech, but we like, you know, for example, healthcare materials, industrials, we see how not only, you know, not just that there was this broadening out of the other 493 other stocks last year, but we see the increase in earnings, that depth of earnings really going up even more

in those 493 stocks. And we see it this year. I mean, look at materials, look at industrials. You look at Constellation Energy, it was the number one performing stock in January. And you look at utilities, which are going to be powering AI. So once again, you know, speaking to that vision of these other areas of the market kind of, you know, feeding into AI and being able to participate in that rise instead of just directly with some of these stocks that are, you know, frankly, a bit lofty right now. Yeah. And I think, too, when you're looking at these big companies, and this is specifically the case with Alphabet today, right, where CapEx is the big problem. So they came out and they said, OK, we're probably going to be spending $75 billion on CapEx this year, mainly towards AI, when that was 43% higher than last year.

And it was expected to come in around $60 billion. And that's on top of Microsoft has, what, $80 billion they're spending towards AI this year, $65 for Meta. I mean, the amount of money that is going into AI, especially after the face of news last week with DeepSeek, thinking, OK, this might not actually be as expensive to create, yet you're seeing all of that spending wars are kind of continuing is a concern. Don't you want these companies to spend what they are to win whatever race is out there to be won? I mean, I feel like there are many more questions today than last

about DeepSeek, what it was really made for, and so many other things that we haven't even found out the answers to that are going to continue to come out. I mean, these companies obviously feel like revising up their CapEx numbers is the right move. Why isn't it? I think the question, though, is what is the return on that investment and how soon is that coming? Right. I mean, I think they are bringing tools that are more beneficial to all of these other companies who are not forking over the CapEx. So, yes, it is a good thing. I think a lot of that has already been priced in for them. So I think we'll continue to see it.

It is a race that needs to be won. I just don't know if they're going to see the return on investment in the short term enough to justify adding more capital there. Yeah. I guess, Sandra, you know, some people raise the issue of valuation in general on these mega cap stocks and suggest it's sort of emblematic of the view of the overall market that you're going to need earnings to really be good because you can only get so much multiple expansion from here. Those stocks obviously are at the top of the heap. Do you think earnings are going to be good enough to continue to lift the market and especially these other areas that

you point to? I mean, I think it depends on time horizon, right? I mean, these companies are growing very fast. They're going to continue to grow. And it's about forward earnings, right? Forward vision. And that forward vision is, you know, maybe going to be a little bit ways out. You have huge investment, you know, like from Amazon and whatnot into AI, and that is going to manifest and they are going to monetize it. And some companies are already doing it. But, you know, I think for right now, you know, you just have to make sure that it gets built out and that they monetize it, you know, as quickly as possible and that you see that in the results. So it's a real time effort.

And I think it's a little bit a ways out, maybe later on this year or even next year. But it's going to happen. Yeah. We're thinking about tariffs. We're thinking about rate cuts. The Fed's quiet period is now over after the meeting. And several Fed speakers are on the tape today, including Chicago Fed President Austin Goolsbee. He's speaking earlier this afternoon. Steve Leisman joining us now with the headlines that you think we need to know about most of all, Steve. Yeah, Scott, I bring this up because I'm hearing more and more Fed officials being less and less reluctant to discuss the tariff issue. And in fact, in the case of the Chicago Fed president being more cautionary about it and saying this is an issue for us and it's a more serious issue. It seemed like before they were like, hands off, we're not commenting.

They're a little bit more willing to comment in terms of the things that are being said. Goolsbee saying, hey, anything that raises prices, we have to take into account. It's going to be difficult for us to figure out if there's higher inflation if it comes from overheating or if it comes from the tariffs and the tariff and the pass along could be worse this time than in 2018 in part Scott because all the the easy stuff that you might have substituted out of from China that could be gone What's left could be essential items from China that when you have this higher tariff you have to pay it and perhaps pass the price along so items from China that when you have this higher tariff, you have to pay it and perhaps pass the price along. So we had even talked to Goolsbee on Friday, and he talked about tariffs, but maybe not in such stern words about it or cautionary words about it.

Of course, we talked to Susan Collins on Monday. She was willing to talk about it. So more and more Fed officials, Scott, are factoring the possibility of tariffs into their thinking. And I think there's two parts to this. It's not sure they're warning the administration, but they are telling markets that there could be a potential reaction here. I feel like, Steve, if you take these comments in total, I feel like he is saying we learned our lesson the last time in thinking that the inflation was transitory, that coming out of the pandemic, you had classic supply demand issues, which turned out

to be more a supply shock than I think they really realized that it was at the time, which is why the inflation turned out to not be as transitory as they actually thought. And when you look at a comment of what he made today, which says, quote, it would be the tendency to follow, quote, pure economic theory and ignore supply shocks such as tariffs was, quote, dangerous. I feel like he's telling you that, that it's not you can't just look at tariffs and now supply demand and prices going up. The supply shock issue is so much more present in their minds because they were wrong the first time and they don't want to be burned again.

Yeah, I think that's an excellent summary of the critical aspects of what Goolsbee's pointing out, which is that we didn't pay attention to the supply side. And generally, economists are more interested in the demand side for outcomes and don't follow the supply side. But we learned in the pandemic that the supply could be a major issue. And he's also pointing out, Scott, that with these integrated supply chains, the way they are, as cut to the bone as they are, there's not a lot of flexibility to react. He also points out the possibility, and he uses this phrase, I want to get it right here, this idea of tariffs on tariffs. He says you could have a situation where you stack tariffs on top of tariffs because something going back and forth across the border several times. So you're right. He said he's focusing on the supply side, said we didn't do enough of that in the pandemic and we shouldn't

make the same mistake again. Yeah, I mean, look, the whole thought process going into the rate cutting cycle to beat down inflation, Steve, as you know better than anybody, was to try and crush demand. They thought they had to do that. They had to do that to get inflation out of here. And there were just so many different dynamics at work that, I mean, they sound like they learned maybe the hard way of how hopefully not to repeat those errors if, in fact, they're faced with some sort of prolonged tariff this time. I think that's right. And I think that's one of the reasons they're talking about it. Look, it's kind of interesting. Kevin Warsh had this column in the journal where he sort of said the Fed is blaming Trump's policies. Well, Kevin Warsh also said that if there's inflation from

tariffs, it's on the Fed. And that's probably right, at least over a longer period of time, maybe not in the short run. So that means the Fed does indeed have to take responsibility for whatever these outcomes are. So I've said this before, Scott, if you raise prices, even if it's just a one time price increase, that's full stop for the Fed when it comes to cutting interest rates. You have to see this thing, see the impact, see how it passes through. And now this sort of cautionary note from Goolsbee kind of adds to the notion of let's take our time here to make sure there's not pass through. And also, as you're correctly pointing out, Scott, make sure we understand the supply chain impacts of what's

happening. Yeah, I appreciate that, Steve. Thanks for helping us understand this better in these comments, because we're going to get a lot of them in the days ahead now that that blackout is over. So, Court, I mean, obviously had the reaction on Monday. Was it an overreaction? Or if we do, in fact, have tariffs or you have more prolonged trade war, are we underestimating the impact on the stock market? You're going to get an impact like this, and especially like Monday was a good example. There is that headline risk. You're going to get that initial knee-jerk reaction with these. And I think at this point in time, what markets are kind of expecting or anticipating is this is more of a negotiation tactic than things that have actually gone in place.

And that's why markets have been able to shake it off. So I think we really need to keep our eye out to what's going to happen there. But that's where it's your big multinationals. So think of like your apples, for example, are going to be more at risk from headlines than this rather than, for example, your small companies would do less business abroad and less manufacturing abroad. So I think you're going to see it hit different markets of the areas differently. I don't think we're at the end of this yet. But I think that inflation story is probably going to continue because whether it's tariffs, whether it's tax cuts, there are policies that are possibly going to be inflationary. And that's what the markets are really trying to weigh out here. It's good having you here, Courtney.

Thanks for being here. It's Courtney Garcia. Thanks to Sandra Cho as well for joining us once again here, too. We are getting some more news out of Washington today. Megan Casella has that for us. Megan. Hey, Scott, we are just learning that President Trump has nominated Jason Trennert to be Assistant Treasury Secretary for Financial Markets. Now, Trennert is a frequent CNBC guest and best known as the co-founder and chairman of Strategas, the economic research firm.

In this role at Treasury, he'll have authority over debt management, Treasury bill issuance, some of what we saw this morning, as well as some market oversight and some regulatory aspects as well. It will require Senate confirmation, Scott, so something to keep an eye on there. But for now, we know that Trenert has been nominated as Assistant Treasury Secretary for Financial Markets. Scott, back over to you. Okay. A name and face very familiar to the viewers of this network. Good stuff. Megan, thank you. We, a name and face very familiar to the viewers of this network. Good stuff, Megan. Thank you. We're just getting started here. Up next, EMJ's Eric Jackson. He's back with us. He'll tell us how he thinks tariffs could impact the tech space. What he's heard from the big names thus far and the ones that are yet to report earnings.

Just after the break, we're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. All right, welcome back. Let's send it now to Kate Rooney for a look at the biggest names moving into the close today. Hi, Kate. Hey there, Scott. So Johnson Controls is a name to watch today, trading at record highs on better than expected quarterly results. The firm, which provides cooling solutions for data centers, raised its full year guidance as AI continues to fuel that power demand and spending. The firm is also naming a new CEO that's going to be effective in March. And then you've got shares of Workday also jumping that software platform, announcing it's going to cut more than 8% of its workforce. This is all part of a larger AI push. And the firm had really struggled with the slower enterprise

spend. But Workday's CEO is saying those cuts are going to help the firm prioritize AI and expand internationally. Scott, back to you. All right. Thank you. Back to you a little bit. It's Kate Rooney. All right. With all but two of the mega caps reporting earnings, Amazon on Thursday, NVIDIA in a couple of weeks. What is the takeaway thus far for the tech trade in general? Let's ask Eric Jackson. He's the founder and president of EMJ Capital. Welcome back. It's nice to see you. You too, Scott. So how would you assess all this so far? We've got Amazon still to come

and NVIDIA is a little way, but I think we have a good read on what's happening. I think the biggest takeaway so far, Scott, is we could have had probably, what, three or four markets in turmoil specials at 7 o'clock in the last month, and yet here we are, NASDAQ

up on the air. OtherDAQ up on the year, you know, other major indices up on the year. This is a market that wants to go higher despite, you know, put call ratio being so high. Second takeaway, I'd say on the MAG7 specifically, Scott, though, is that, I mean, the results have been fantastic overall. However, as you kind of have alluded to earlier in the show, I think we're sort of hitting against the upper limits of valuations with these companies. And so it has to come, as you said, from the earnings themselves to drive these stocks higher. And the multiples are kind of stretched. So, you know, that's tough for a name like Google, obviously, as we saw last night. But it's going to be, you know, you's tough for a name like Google, obviously, as we saw last night.

But it's going to be, you know, you're going to have to pick and choose your spots with the Mac 7 in 2025, is my belief. It's just not going to be straight up the way it has the last two years. In terms of valuation, you know, I understand the argument, but Alphabet's like 20 times. It's 20 times forward PE. Meta's not historically rich, is it? NVIDIA, that's your stock. It certainly people don't make that argument about NVIDIA. No, I'd say like Tesla and Microsoft are kind of the two most extreme from a valuation perspective. But some would say they deserve to be because of their business model and because of their growth prospects.

A name like Google has kind of been the laggard in the pack. And that's only really changed in the last couple of months of the year when they came out with their Willow Quantum chip. And it really kind of shook people up as, hey, here's a whole new category that we never factored into our sum of the parts for Google. So you're right. You got to look at each name specifically. However, in general, I would say a lot of them have tracked up.

Apple is a name that's tracked up. So out of the seven, I like NVIDIA the most. I own it right now. I like Meta, although I don't own it. And I don't own Tesla. I don't own Apple. But those are the four names I expect to traffic in this year in 2025. Okay. I've got a couple of questions regarding all that. You sold Tesla, in fact, a few weeks ago. Did you do it because of the valuation issues that you have? Well, two reasons, really, like incredible run since the election. I mean, it's straight up, basically, you know, and so I just felt like it was time to consolidate some of those gains.

But obviously, you know, knew that there was this potential for kind of looming China tariffs, which has played out just in the last day or so. And obviously, out of the Mag 7, Apple and Tesla are going to be the two names that kind of hurt the most on fears about that going on for a long time. I don't think it will. I think what we've learned this week is that President Trump wants deals. He wants to log wins. He sees Mexico and Canada as wins. I think he wants to

log a deal with China. And I think what was probably most promising on that front is the reaction of the Chinese to the tariffs and what they sort of counterproposed in terms of retaliatory tariffs. It could have gone much stronger, much steeper. They didn't. That signals to me that they want a deal as well. So you mentioned NVIDIA. How are you reconciling this deep-seek news in your own mind as it relates to the stock? What do you think it's worth? Are you as resolute in that belief as you were pre-deep-seek news? Well, DeepSeek, you know, definitely was a shot across the bow for, you know, American tech.

And I would say most of all to a name like OpenAI because it really sort of put it under scrutiny. You know, it's not enough just to raise billions of dollars from venture capitalists who have an endless checkbook

and just think that you can spend, spend, spend, and you're going to have the best models. I think what DeepSeek showed is that ingenuity and kind of necessity being the mother of invention and how you optimize your different algorithms to get the most out of your software can mean just as much as the NVIDIA chips themselves. So I think I saw more of a threat to the big LLMs, Anthropic and such. But for NVIDIA, NVIDIA is such a poster child for AI in general.

And so we have the double ETS, the triple ETS. So it just was such a shocker that it really took it down. I stuck with it because I believed it was overdone. And despite the fact that we have to work smarter at how we build these models, I don't think there's anybody who's going to pass on the opportunity to get their hands on some Blackwell chips or Rubin chips next year if they have the opportunity. So I think the order book for NVIDIA is going to show to be really strong. We've seen that with the Google CapEx guy and the Microsoft CapEx guy. So I expect NVIDIA to be just fine.

Before I let you go, let's talk quickly a couple of names that you like that are not within the Mag7. Tell me about Rigetti Computing. What's the market cap of that, by the way? $4 billion right now. So, you know, it's one of the quantum names. We weren't talking about it until the Willow chip came out in December. And then all of a sudden this became the hottest sector, arguably in tech, these quantum names. They're all small.

They're all, you know, some of them are pre-revenue. So you really got to, you know, go into these names almost like you're buying a biotech. But I don't think quantum is a flash in the pan. In fact, I think it's sort of going to be, you know, the next generation version of AI. Now, we have to argue, like, is the name like Rigetti? Is this a three-year story from now or is it a 30-year story as we kind of worried about when Jensen gave his comments a couple of weeks ago. Kind of interesting, though, a week after Jensen made those sort of skeptical quantum comments, he announced NVIDIA's Quantum Day coming up in March and how they were partnering with Rigetti

and they were partnering with all the big quantum players. So, you know, Bill Gates spoke earlier this week saying quantum computing, in his view, is probably three to five years away if if this sector is you know truly the next gen version of ai it's going to be much faster much more powerful much more cost efficient um then you know buying a four billion dollar market cap company named like like rigetti that's a pure play today um does that have a chance in five years to be a 400 billion dollar company yeah i think it does and that But I mean, a lot of these were trading like it was three to five minutes away. That, you know, quantum computing was going to happen tomorrow in some magnitude that was going to justify the move that a lot of these stocks had made. When Jensen Wang and others made those comments, those stocks got obliterated.

Absolutely destroyed. I mean, it cost people a lot of money. I'd be hesitant to think that, you know, it's not dangerous to think that another one of those moments could happen yet again for, as you said, I don't know the, you know, the financials of this specific name, if it's pre-revenue, if they're profitable or what have you. But if they're not, theoretically, the valuation would be hard to justify, no? I mean, all of these names are, you know, you're talking about $11 million in trailing revenue, $22 million, $33 million for kind of the most established players. So minuscule.

Yeah, it's small. But what's the opportunity? And is this really a sector that could be kind of, small. But what's the opportunity? And is this is this really a sector that could be kind of, you know, take over the throne versus risk? Right. That's what this whole game's about. Opportunity versus risk. I'm wondering whether we learned that the risk is too big and it's not worth the opportunity yet. Well, is is we're getting at 20 bucks after it had been at two bucks a couple of months ago a lot more risk you're right uh dropped dropped within 72 hours i think of jensen's comments to six bucks i mean just think about that you know 70 value destruction in three

days now it's at 14 bucks and so i'm i'm saying i'm saying, you know, you got to hold your nose. This is not a 20% position in your portfolio, Scott. But should it be a 1%, 2% position? I mean, I think about it like the way that Tom Lee used to counsel buying Bitcoin as like maybe a 1% or 2% position back in 2014, 2015. And I think you ride it out. And yeah, back in 2013, if Bitcoin corrected from $200 to $140, it was a huge percentage return. And now sitting here 10 years later, you scratch your head wishing you'd had the opportunity to buy. So scale in at the appropriate time. I would say $4 billion market cap, not much is priced in here. I mean, there's a lot of other kind of pixie dust type stocks that are trading for way higher market caps than that. So, you know, do your own research and kind of pick your spots to get into some of these names and realize they are going to be volatile. I appreciate the conversation, Eric, very much. Thank you. We'll talk to you soon. Thanks. That's Eric Jackson. Up next, Ed Yardeni. He's back looking

beyond the mag seven and tech. Tell us where he's seeing the. Up next, Ed Yardeni. He's back looking beyond the MAG7 in tech. Tell us where he's seeing the best opportunities next. Welcome back. Stocks getting most of their tariff-induced losses back, even after Alphabet's disappointing earnings report. Our next guest arguing there are many opportunities in the market and not just in tech. Ed Yardeni is president of Yardeni Research. Back with us once again. It's always good to have you. Thank you. I mean, we've had some again. It's always good to have you. Thank you. I mean, we've had some head-spinning action already this week. What do you make of what the market did and how it's recovered and what it all means from what happens next? You're right. You almost need a neck brace to watch this market.

But I think what happens next is the bull market moves on. I think it's going to widen out to the S&P 493. I kind of view all companies as tech companies. You either make it or you use it. But within the context of a broadening market, in terms of sectors, I really like the financials. I think the financials still have more upside, not only in the large cap, but especially in the mid cap area. The economy is doing well. The credit system remains very viable. So that's kind of my thinking of where we're going up ahead here. Is that why the market, you know, may freak out for a minute on a tariff headline, but then enables itself at some point, whether it's during that day or the following, to keep its eye on the prize. Why we've been bullish as a investor class in general about what we think lies ahead?

Yeah, I think, you know, they say that watching laws being made is kind of like watching sausage being made. You really don't want to see it. And maybe that's the same thing with tariffs. It's too visible here. And there's a lot of negotiating going on. And maybe that's the same thing with tariffs. It's too visible here. And there's a lot of negotiating going on. And, you know, we start out on Monday with the market being freaked out. And by late in the afternoon, Mexico gives Trump something and he says, OK, we'll postpone things. So it's a negotiating game. And I'm not sure it's really all about tariffs per se. It's not just a tariff war. It's a war over national security, a war over drugs. There are a lot of issues involved here. And the market's saying, well, what does this really have to do with us? The economy is doing well. Earnings are coming in fine. We can get excited about AI. And so I think the market's finding

some resilience here in the face of some pretty volatile data. Sure. But, I mean, lasting and steep tariffs could have an impact not only on inflation but on economic growth. Absolutely. Absolutely. But I think the market is coming around to a view I have, which is that this too shall pass. I don't think the United States or the other people sitting on the other side of the table really want to go into a terror force situation. I think you mentioned before that even China has

kind of held back on the amount of retaliation. They want to make a deal. And so I think that's what's going on here. And the market increasingly is focusing on what's important, and that is earnings. And the earnings outlook is, I think, extremely good. I think I hear you making the point that the next tariff headline might not have as dramatic an impact on the market as this. I think that's a good point. I think that's something to watch. If you don't see that the next tariff story has much impact on the market, then the market's decided, let's not focus on this much more. I mean, even deep seek seems to be an issue that's passing by the wayside. The fact is, companies are planning to spend a lot on equipment and software and technology. We're seeing that in

a lot of surveys. And we've seen that especially since the election. So we're seeing some animal spirits driving this. And so the economic outlook looks really quite good. The manufacturing's purchasing managers is back above 50. Granted, the services weakened a bit, but it's still very much an expansion territory. Ed, I'll see you soon. Thanks as always. Ed Yardeni. My pleasure. All right. Up next, we track the biggest movers into this close. Kate Rooney back with that. Hi, Kate. Hey there, Scott. So demand for weight loss drugs is driving one pharma giant higher and then one dating platform striking out on its forecast. More on those stock moves after the break.

We're less than 15 from the bell. Back to Kate Rooney now for the stocks that she is watching. Hi, Kate. Hey again, Scott. So Novo Nordisk, let's start with its name. Shares jumping today as demand for weight loss drug Wagovi drove some better than expected profit for the quarter. Wagovi sales were up over 100 percent year over year, but Novo did warn that there was going to be a slowdown in demand for the rest of this year, you can see shares up 3.5% roughly. And then shares of the popular dating app company Match Group lowered today thanks to some weak guidance for the first quarter and for the full year. This was due in part to a decline in subscriber growth. Match also announcing the appointment of board member and Zillow co-founder Spencer Raskoff as its new CEO.

Shares off about 9% heading into the close. Scott, back to you. All right, Kate, thank you very much. Kate Rooney still ahead. We're going to run you through what to watch for when Ford reports in overtime. Talk about a stock that's been impacted by tariff talk. Certainly one of them. Back on the bell after this. Coming up next, we break down everything you need to be watching when Qualcomm and Arm and Ford report at the top of the hour in the Market Zone next. We're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day.

Plus, key earnings reports we are watching for in OT. Christina Partsenevelos on Qualcomm and Arm Holdings. Phil LeBeau looking ahead to Ford for us. But, Michael, I'll go to you first. We've got a decent day, I guess, out of today. I mean, it's pretty unassailable, the market's ability on display to just kind of rebalance itself, almost to the point where it's like, OK, raise the degree of difficulty. You've got to have Google, Amazon, Apple, Tesla, Palantir, Uber all down a lot. And somehow you've got to get the S&P positive. I was looking earlier,

you know, talking about the beneficiaries of all this CapEx, right? So Alphabet down $200 billion in market cap today. NVIDIA and Broadcom together up 185. Yeah, up a ton. So they've essentially offset one another. Now, can everything run in this perfect for this for much longer? Can we always count on this choreography? Of course not. But, you know, while it lasts, it shows this very active dispersion trade. At the same time, I feel like people are kind of spending their risk budgets to start the year. It's not clear to me they have a lot more of that to do.

February back half gets a little dicey. So I think you have to respect it without thinking that it's bulletproof. All right. Earnings from Qualcomm and Arm Holdings. Christina, that we're looking to. And Qualcomm's off to respect it without thinking that it's bulletproof. All right. Earnings from Qualcomm and Arm Holdings. Christina, that we're looking to. And Qualcomm's off to a pretty good start this year. Yeah, they are, especially when you compare it to the likes of AMD or Intel. But three key themes dominate Qualcomm's upcoming earnings. You've got smartphone momentum, automotive softness, maybe that we saw with NXP and Texas Instruments, and then AI positioning.

And smartphones, the company is winning big with Android landing 100% of Samsung's Galaxy S25 chips. But is that enough to offset the looming loss of Apple's 5G chip business? The second focus is on automotive and IoT, the Internet of Things, where peers, like I mentioned, on Semi, Texas, and XP have reported some weakness. And then finally, China. It's at almost 50% of its 2024 revenues. We could get some insight on domestic smartphone trends and any tariff or export control concerns as well. You talked about ARM. They're also out after the bell, minutes away. It makes money by licensing its chip designs to semiconductor

and smartphone firms like Apple and Qualcomm. Two positive drivers for this thing, or this company, is ARM's royalty rates. They're moving higher in the smartphone market, which makes up 50 percent of their revenues. And then demand for more AI data centers could help expand its IP licenses. Also, while you're seeing the stock up, look at that jump in six percent its earnings. Thank you, Christina. Thank you very much. Phil LeBeau, what are we going to get from Ford? Probably a lot of talk about tariffs, no? There will be some discussion. I'm sure Ford will have some discussion during the analyst call about tariffs, the potential impact of them.

First, we're going to get the Q4 results and we get those shortly after the closing bell. And we're expecting or the street is expecting earnings per share of 33 cents a share, lower warranty costs. That's one of the questions that's out there. That has really been a drag over the last several quarters. Have they shown improvement in that area? And then, of course, there's the guidance for 2025. As you take a look at shares of Ford, keep in mind that when you talk about tariffs, they get, roughly speaking, I think about 12% of the vehicles they sell in the U.S. are built in Mexico. Far lower exposure than GM and Stellantis, or 15 percent built in Mexico. Still, it would be an impact if they're ever put in place. Lots to discuss with Jim Farley, CEO of the Ford Motor Company. We're going to be talking with him

on the overtime. Scott, we're going to be discussing not only the results, the guidance, but yes, we'll talk about tariffs and what the potential impact could be for Ford. Okay. All right. On the overtime, we will see you then, Phil LeBeau. Thank you very much. We'll see the numbers in that interview, of course. Mike, I'll turn it back to you. We've got about a minute left. We're going to turn our attention to Amazon tomorrow and see what that means in the context of what we've learned from these other mega caps. Putting a lot of it together in terms of cloud plus CapEx and what we're meant to understand about that. Amazon really has been on a great run,

so it's obviously a pretty challenging setup, arguably, although backing off today after those alphabet numbers. You've had enough give and take among the Mag7. They haven't really distinguished themselves as leadership, but obviously meta really strong. Apple down today, kind of holding above its 200-day average. That's something to keep in mind. It's around 220 mark a share. So, I don't know, everything's kind of holding together. Yields down has meant that positive breadth, positive small caps. That's been the pattern. Don't want to see yields fall apart. But at this point, coming off the boil, seems like it's

the excuse to get back into the financials and smaller cash flows. All right. Well, if I told you Apple and Alphabet are going to be down and the Nasdaq was going to turn green and maybe close there, you'd say, I'll take that. I don't believe you. But if that happens, I'll take it. And we may actually get that as the bell rings. Elsewhere, we are in the green on both these values.