NVIDIA Fallout, Chip Volatility and the Case for 60/40

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Scott Wapner (0:57)

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Frank Holland (1:12)

Thank you, Carl and Sarah. Welcome to the Halftime Report. I am Frank Holland. And for the judge, Scott Wapner, front and center at this hour, navigating the Nvidia fallout. The stock is lower once again today as the committee makes some key moves in that name. And again, as you can hear Sarah in your ear, Nike Investor Day coming up next week. But joining me for the hour, we have Jim Laventhal, Jason Snipe, Kevin Simpson, and Liz Thomas. First quick check on the market. You can see a lot of red going on on this board right now. The Dow is down just about 170 points, the S&P pulling back 1%, the NASDAQ Composite down 1.5%, as you can see the 10-year, well above a 5% yield of 5.13. Important to note, the major averages are positive for the week, with the S&P up about 2% on the week. We also want to check shares of Nvidia right now. Obviously, Nvidia, the story of this week, Nvidia shares pulling back just about three and three-quarters of 1%.

Over the last week, Nvidia shares pulling back more than 14% as investors digest all the controversy around Nvidia CEO Jensen Huang and his decision to resign as the CEO of the chip giant. With that, we're going to begin our conversation. Jim Labanthal, good to see you. You're right here to my left.

Jim Labenthal (2:15)

Frank.

Frank Holland (2:16)

What are you making of today's action? After yesterday, people just kind of were shocked by Jensen Huang resigning today. What do you think we're seeing in the markets?

Jim Labenthal (2:23)

Yeah, well, it's been a shocking week and it got worse as the week went on. I think what we're going to see from Nvidia, the stock for the foreseeable future, is this tug of war between the bulls and the bears. The bulls, like myself, are going to point to the strong order book, the growth that's projected. We'll get an update on that with next week's earnings. We're not expecting a major change.

We're going to talk about things like free cash flow over 300 billion, the forward multiple of 10, and say, wait a second, how can we be selling this here? And I'm not. I'm not selling it here. New money that comes into accounts, I am putting into Nvidia.

The bears are going to say, listen, there's going to be export controls and the China business is going to be curtailed. That's probably right, Frank. It is probably going to be curtailed. Now, China is about 11% of overall revenue. I don't think that goes to zero. But again, at 10 times earnings, free cash flow generating a well above 300 in the coming 12 months, 300 billion, that is. I honestly think the bulls went out in the long run. But, but for the next week, two weeks, it's going to be back and forth. This tension between the bulls and the bears. As I said, I'm sticking with my position. New money that comes into accounts. I think this is a great time to buy it.

Frank Holland (3:34)

You know, one quick point, Jim. I think you're setting this Goldman report that came out yesterday that outside Taiwan and the US, China, Hong Kong, and the rest of the world make up about 11 percent.

Jim Labenthal (3:43)

I've also heard 20 percent as a number too. So I don't, you know.

Frank Holland (3:46)

Right. A lot of different estimates out there.

I want to ask you about the valuation of Nvidia and why you're saying you're putting new money to work. Is the fact that the valuation is so low that it's attractive? Do you think all the pain has come out of this stock with all the controversy? Do you not see more pain potentially in the future?