Episode summary
The AI correction, tech earnings and the rally
CNBC Halftime Report
· · 10 min · Hosts: Scott Wapner
Summary
The panel argued that the recent pullback in rates has improved the market setup for tech, especially AI-related stocks, by easing pressure on valuations and reducing the need for the market to fight the bond market. One panelist said the Fed meeting this week should be a non-event, with the 10-year still below 5% and positioning now looking cleaner. Another argued that the key is not whether AI is a theme, but whether the market rewards good AI earnings news with strong price action after several disappointments from names like Micron, Lam Research and Western Digital.
The conversation centered on whether the AI trade is merely correcting or still in the early innings. One panelist said AI is in the fourth inning, cybersecurity in the third, and robotics in the first, and cited an analyst note saying the AI trade is far from over because it may be a 7 to 8 year investment cycle. The group also pointed to stronger financing for hyperscalers and ongoing spending by Microsoft, Alphabet, Amazon and others as reasons the earnings backdrop remains supportive.
Jenny Harrington pushed the discussion beyond megacap tech, arguing that AI-led economic activity may be spreading into industrials and other cyclical names. She cited an earnings roundup with solid upside at companies like Hilton, Coca-Cola, Polaris, Royal Caribbean, S&P Global, TransUnion, HCA, Freeport, Johnson Controls, Pentair and Corning. The broader point was that skeptics may be underestimating how much of the earnings cycle is being helped by AI, even if the biggest upside reaction does not come only from the tech trade.
Key takeaways
- The panel sees falling rates and cleaner positioning as the main setup for a stronger year-end rally, especially in AI and tech.
- One panelist expects better price reactions to AI earnings this week after weak stock responses to Micron, Lam Research and Western Digital.
- The group said AI remains early in its cycle, with one panelist calling it the fourth inning and citing a 7 to 8 year investment horizon.
- They expect hyperscalers to keep spending, with Microsoft, Alphabet and Amazon still likely to drive demand for semis and infrastructure software.
- Jenny Harrington argued that AI-related growth may be spreading into industrials and non-tech names, not just megacap technology.
Notable quotes
“I THINK WE'RE IN THE FOURTH INNING IN AI, AND I THINK WE'RE IN THE THIRD INNING IN CYBERSECURITY, IN THE FIRST INNING IN ROBOTICS”
“I THINK THE SETUP IS REALLY GOOD. I THINK WE'RE GOING TO LIGHTS OUT TOMORROW. AND THIS WEEK ON THE INDUSTRIALS THERE'S NO QUESTION”
“EARNINGS STOCKS WILL FOLLOW THE EARNINGS. AND I EXPECT THE SEMICONDUCTORS TO HAVE VERY GOOD RESULTS”
“I THINK WE NEED TO BE CAREFUL WITH EXPECTING THE BIG UPSIDE RESPONSES IN THE SHARE PRICE TO COME FROM JUST THE TECH TRADE”
“WE DOUBT THE AI TRADES OVER EVEN IF IT ENDS UP BEING A 7 TO 8 YEAR INVESTMENT CYCLE”
How the episode opens
Has clearly helped heading into a fed meeting this week where we really don't expect anything at all. So there's the tenure which has come down. It's still below 5% as you see.
And by the way, positioning is a lot cleaner as well. And that's significant. And that's where I want to begin with you, joe, you've been talking a lot about that on our show.
Wells fargo today says interestingly, correlations versus semis for hyperscalers and software have flipped positive over the past month. Unlike in july, we read that as a sign that the market has treated ai tech indiscriminately and see opportunities in hyperscalers and infra software. Still, the market's going to want to see capital discipline, but nonetheless, the positioning environment looks and feels cleaner.
It does. And I think that's an excellent setup for this return of optimism that I'm anticipating us to close 2026 out with. I think you want to focus on the large cap names.
I think that's where you exert the discipline that they cite there in their report. What I would like to see this week, and we're getting a glimpse of it today, but I feel good about that, is when we get good news surrounding ai. I want there to be a good reaction.
I didn't like the reaction that we had last week from western digital. I didn't like the reaction we had from lam. I didn't like the reaction in september.
Subsequent trading in october from micron. Today you hear the news about this collaboration with oracle and open ai. And you see intel's up 4%.
You see cerebus is up 8%. You see that nvidia is rallying. That's what is important.
I like that type of reaction. I want follow through for the remainder of the week.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai correction
- tech earnings
- stock rally
- market outlook
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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