Mega Cap Earnings in Focus: Your Next Move 7/20/26

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The board recommends approving...

**Joe Terranova** (0:26)
Regarding that seat on the committee, we're promoting......to boost quarterly earnings...

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**Scott Wapner** (0:56)
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**Leslie Picker** (1:11)
Welcome to Halftime Report. I'm Leslie Picker. In for Scott Wapner. Front and center this hour, the next test for the market. They were just talking about it with key earnings looming in the coming days. Our investment committee is standing by with this setup. Joining me for the hour, Joe Terranova, Shannon Sikosha, Steve Weiss and Surat Sethi. Let's get a quick look at the market midday.
You got the Dow down about 0.2%, the S&P up about 0.4% and the NASDAQ higher up about 0.8% as we see some rebounding of the semiconductor names today. But as we mentioned, earnings, we're getting Alphabet this Wednesday. There are a lot of questions involving CapEx as we start to see the hyperscalers report. And I want to hear from the committee today about what you think happens with regard to CapEx in terms of a market reaction. Do you think at this point in time, the market wants to see higher CapEx, lower CapEx or just slowing growth of CapEx? Let's start with you.

**Surat Sethi** (2:09)
Well, I think two things. One is going to be, what's the forecast for cash flow for all these Mag 7?
And I think that's going to what we're going to tee off from, because if that changes and just say it goes up, then I think the market is going to say, all right, what's your return on investment going forward? If it's coming down, then I think the market's going to not be happy at all, and they're going to expect that CapEx comes down. But at the end of the day, it's the return on invested capital. That's what we're all trying to see, because originally the thesis on the Mag 7 was, hey, free cash flow, you get to do what you want, but now you're so focused on spending money here, what is this going to be? And then you get all the, whether it's noise or news from China in terms of open or closed systems, and then you got IPOs coming, so I think it's going to be really important for capital to stay in these big stocks.

**Leslie Picker** (3:02)
Right, because you could see return on invested capital now, but then if you have this looming threat of these open source models abroad and what that means in terms of the overall equation here, how do you think about those two levers moving forward?

**Steve Weiss** (3:16)
Well, so go back to your first question, what does the market want to see? It depends where you are in the market, right? So if you're in the MAC 7, you want to see that they either can tell you what the ROE is, right, or the ROI on it. If you're in the semis, you want to see budgets increase, right? So the MAC 7 goes down, so there's no really, there's no one answer, but look, there's so many other points at play, like China, right? Much cheaper chips, cheaper memory, everything's less expensive.
So that may influence, I believe it is, the training in Micron, SK Hynex and all the others. So you have to look at all those. Bottom line is, I think we can all agree that CapEx spending is going to continue, and that the AI spending is not over, but that sort of disassociates from the stocks. So it's what the stocks are going to do, what the company share prices are going to do, and is it pulling forward the end of the cycle, sometimes the cycle peaks in terms of the stocks a year ahead of time. I think that's where the debate actually is right now. Now, if you have a meta that says, hey, we found our use for our, we don't know if it's to get into new business or if they bought so much capacity, which generally happens when markets get tight, right? You over buy to make sure you have it, then you get stuck with it. So they've forced themselves getting stuck with this excess capacity, so they're offering compute out to others. So we don't know.