AI debt Fears Fuel Tech Volatility: The Investment Committee's Strategy 10/16/26

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Scott Wapner (0:57)

I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast, the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in.

Leslie Picker (1:11)

Welcome to the Halftime Report, everybody. I'm Leslie Picker. In for Scott Wapner today. Front and center this hour. Big spend. Bigger questions as we close out a tough week for the tech. More tech with AI funding costs coming under more scrutiny. We'll discuss and debate with the Investment Committee. With me for the hour, Kevin Simpson, Jason Snipe, Rob Seachen and Malcolm Etheridge. Good crew today. Let's check on the markets. Near session lows, you can see the Dow approaching the flat line right now. The S&P down 0.6 percent and the NASDAQ, the key laggard with tech under pressure today down 1.4 percent. Ten year, pretty stable today at 5.098 percent at this time. So it has been a week. I was just kind of reflecting back. We had the AI rethink. We had anthropic numbers that people perceive to be weaker than expected. We had bank earnings that came in and really underwhelmed the street as well.

How are you thinking about just the overall setup, given everything that has changed? By the way, CPI, PPI coming in hotter than expected too, on the macro front.

Was this kind of an inflection point of a week on the multitude of factors that have really been driving the markets?

Kevin Simpson (2:22)

I think, Leslie, it was a multitude of factors, but we still have to focus almost squarely on the AI trade, because I think that what we saw this week was a reality check. You look at CoreWe, the NeoClouds, even some of the semis, they got hit very, very badly this week, and I think it makes sense that the investors are wondering, what is going to happen with this super spend? And we just continue to perpetuity to spend hundreds and hundreds of billions of dollars without some type of return on that capex. And I think what we're looking at now is something that's kind of healthy, which is, you know, show me a little bit of a return. And from that standpoint, you know, we'll be sitting here in five, ten years from now, and there'll be haves, there'll be have-nots, there'll be some of these companies that survive. But I think it's really impressive that we're starting to identify at least some sanity in this trade. Who's going to be the profit centers, and maybe the have-nots will be suffering. So I think it was an important week, but really a week about AI.

Leslie Picker (3:19)

As we think about, though, the haves and have-nots, how much does cost of capital now play into that? Because for so long, as we were talking about higher interest rates, as bonds were selling off, AI was kind of seen and held up as this, you know, special place that wouldn't be affected by higher interest rates. And this week really felt like that conversation changed. Credit is now a key pressure point, as made evident by CoreWeave. In the AI trade, is that what we should be looking at? Those who have too much debt, higher interest costs, higher cost of capital if they need to go out and do some more financing? And those who are in a much better place on their balance sheet?

Jason Snipe (3:56)

No, I think that's absolutely a story. I mean, obviously, yields on the move. Oil obviously has been a structural issue throughout the balance of this year. I think, and I totally believe that yields have not peaked as of yet. I think they could potentially go higher, so there's no doubt about it. Anyone who has leverage on the balance sheet and the cost of capital continue to increase is disproportionately affected by what's happening. Clearly, the story with the neo-clouds this week hasn't been great. I mean, the semis are down 10 percent. They've been in a protracted drawdown.