A slew of upgrades on facebook is it a big thumbs up for the stock from here . The Halftime Report starts right now. Its great to have you with us on this thursday. Our Investment Committee today, joe terranova, steve weiss and john and Pete Najarian and Portfolio Manager ann brown. Alphabet, amazon and intel all set to report earnings after the close. It could be a big day for the markets tomorrow, depending on what these three say pete, your feelings on amazon. I think it will be very interesting because of the fact that everybody weve watched this thing move all around it, and now all of a sudden youve got sort of the government kind of coming at them in some ways as well. I think its going to be very interesting how they put this out there. I still think you look at aws. That really is what amazon is, and because of that, they are a cloud company, the biggest there is and how well are they doing there, and if they do as well as i expected they would after you look at microsoft and some of the rest of them, i would think they would put up a pretty strong number, but is there some weakness from within as well, because they are getting attacked from different angles right now. Thats right. They are a distance third actually when it comes to Cloud Services but the growth rate in cloud is higher in facebook as well as alphabet john in, terms of amazon, you know, we just came off of prime day and oneday shipping was a big thing, and that is expected to be another big driver for this quarter. For this quarter though, mel. Expectations but also the spending on the prime day. Very true, very true. This is going to be, you know, with us for a long time as one of the Success Stories in American History really. Amazon has done fabulous, and they have branched into so many Different Directions this one doesnt get me nearly as excited as microsoft, however, mel, because microsoft has been just doing it on the cloud side with azure. Microsoft has also the subscription revenues and things like that. Only amazon has subscription revels they have prime, and you cited prime day which they extended by 12 hours this year kudos to them. It looks like singles day was made by ali baba this is a great way to get consumers to spend we also know it does pull forward a lot of the interest if not the outright buying, and they have put some things out there as a loss leader nonetheless. Yeah. Like amazon, like google, but these arent nearly as exciting to me from the cloud side. Sure. As apple will be because apple, we all have these billion devices around the world, and those billion devices putting stuff up into the cloud, that is going to be just mana from heaven. Youre nodding your head, joe, when jon was talking about microsoft being better over amazon and do you think there should be a discount to amazons valuation given what the government may or may not do when you reflect back on one year ago, there was so much of a reliance on what the results were going to be from big tech, from the faang names and from amazon, and if we think about last year, it was the really strong earnings that we got in this time of 2018 that propelled the market to the new alltime highs. I think were in a different place right now. I think were in a place where you can expect and not be surprised at all that amazon would be strong this evening youre looking at awful beth and intel. Youre wondering are they going to disappoint us again, and if they do, its not a big deal, why . Because technology is different. Theres more dispersion, theres oracle and adobe and lam research and all these other Technology Names that are working right now. I think thats a good indicator for technology right now because were less reliant on the big names. Weve seen that rotation. Software in favor. The recent run in semiconductors, so is faang just its lost its mojo in terms of investor interest. I dont think so. Take a look at what facebook was looking like after the call, another very, very strong quarter. There used to be a concern when a company was under government assault that they would like the Drug Companies used to do is rein in the quarter. I dont know if its aggressiveness or arrogance. Isnt that what we heard on the facebook call. Yeah. They were a little bit more cautious perhaps than they might have otherwise been. But they put up a very strong quarter. In terms of amazon, regardless of what happens this quarter its not the end of the amazon story. In terms of azure, look, it was the slowest growth they have had in the cloud in the last three years i believe, but thats a thats because of the size of the base has gotten big, so i still think they can be there and still perform. I dont think the market needs to perform to your point, but i think they will perform. Alphabet is the one that im worried about because they have had some growth issues even though the growth expectations are very muted, below 20 versus 26 were used to i shaved a little last week. I own a little amazon. Id buy more if that got crushed. Microsoft is still there, and i bought a little more after the quarter actually i think its much more predictable earnings stream in microsoft and more analyzable than amazon or the others so im happier. It was a firstquarter disclosure that have slowdown that really got alphabet, right . Yeah. And thats partly why or a big reason why its been a lagard compared to its bigcap peers . Does the valuation reflect that, or should there be a downside . I think it does reflect that. I get more interested all the time with alphabet i havent been in there in what teams like forever i havent been able to pull the trigger to say you know what, and im getting closer, but you now what, how many higher do i think microsoft gets before it starts to pause . And everybody who was on the sell side is now on the buy side everybody flipped. Its amazing give me a number. If we get towards 150 then im out. Im just going to walk away from microsoft for a while and wait for a great opportunity. They always come they will come i think in microsoft as well. Something will happen. They will stumble along the way. They will miss something the growth will be a lot more worse than expected, and because of that i think that will be the opportunity to jump back n. Where are we on valuations within technology . Valuations are certainly rich when you look at the underlying fundamentals of the businesses, but then you have instances like amazon that continue to innovate they continue to show strength in terms of moving deeper into the supermarket market so you continue to see these Companies Find new avenues to disrupt, and thats why its really hard to stay on the sidelines, in the services and the software and some of the internet names because they continue to find new ways to break into different markets. So i think they are going to continue to expand share i think that the announcement despite whatever government scrutiny may come . Its really hard to handicap what that is going to ultimately result in. Standing here today, you know, this is going to take a long time to work out do i want to miss the next year or two of good earnings and, you know, continued expansion into different Market Segments in order to, you know, because im concerned about Government Intervention, two to three years out which ultimately probably is going to result in some stricter guidelines and maybe some settlement but ultimately its unlikely to completely change the way that these businesses operate. You know, i think you have to stay involved in these names. Yeah, look at the banks the banks had the government as a silent partner and maybe not so silent for a number of years. Sure. Every time they did something, yet the bank stocks went up during that period without growth in lending or top line at all and they still went up this is a fact of life amazons dividend policy now may be the government going forward. Facebooks dividend policy may also be the government they are the only recipients of those dividends. Thats just how it is, a fact of life with that all said, amazon is paying out 5 billion, and its not hurting them whatsoever. No layoffs as a matter of fact, they are hiring more so the growth is enough to subvert those government actions in terms of penalizing them. I think the one difference though between the banks and the amazons or the facebooks of the world is the fact that, first of all, i dont think you can see a steer in terms of the government regulation in part because this is where the growth is this is where the innovation is in the economy and ultimately this is what our Growth Engine is that sort of differentiates us from the rest of the world. I think it would be really hard to impose very some of the more austere, you know, Government Intervention that people are concerned about right now on the tech sector given that this is whats fueling the underlying economy and really leading to job growth. Heres the positive side. They have massive war chests other companies, smaller competitors dont. So just like the banks that put the Smaller Banks out of business and forced them to merge, the Smaller Companies wont be able to compete because they will be under the smaller regulations and if they come to google and they say slit it up, youve got more parts coming out. Sum of the parts argument in terms of the difference in the argument i would side with erin because youre not paying the valuations that you paid for banks for growth, because youre paying for the growth that may ultimately be handicapped by government regulation. How do you separate those two, because for the banks you werent paying 26 times forward earnings, for instance, which is what google or alphabet roughly is trading at right now its too early. You know, if you take a look, you can say that this administration is more a. M. Ed on business than even the obama administration, but yet youve got a big cellular merger today so what were talking about is a year, two years, and then youve got appeals from that so could you five years out before anything happens. Lets talk intel. Mmhmm. Theres you a lot of stuff going on with intel including is it selling off its smartphone chip business . Where do you stand on them going in this one hasnt excited me lately. I know pete is excited. Youre still xided, okay. Micron for me is far more exciting and we talked about that the last couple of weeks on this show. Yeah. So i like that side of chips better the i even like amd better than i like intel so if you want brother versus brother, i mean, i like amd i like Advanced Micro Devices and i see a lot more Institutional Capital buying in, getting in rather than just intel where its been hiding out and staying in there for a very long time. And theres concern about data center, one of the most important businesses for intel, a moneylosing chip income that it may or may not be moving. I actually had somebody from within in the ceo process. You want a new guy. Now well find out, mel, but a hes been there a little while and how well is he directing probably a very difficult time last week with you on the 5 00 show we were talking and i had three different chip names that i put out as a final trade intel was not one of them. I am in intel still. And if i could continue to own this stock i think its so inexpensive right now with the growth that they have got that theres still upside, and i see 60 in the not too distant future for intel, and thats why im still there. I think its two completely different companies. The pe on intel is somewhere around 12. 5 so amd youre talking about a completely different model. Jon is right to highlight the opportunity its been in amd and it continues because they are getting far more competitive and taking some market share away from intel. Yeah. Intel tonight, to me the story is about the lack of strong sentiment i dont think theres very many. Ive heard pete talk favorably about it, but not many on the street expect tonight intel to come out and have a blowout quarter and youll see intel up 5 , 6 can the tomorrow i dont think thats where sentiment is thats one thing that intel has going for it and just fundamentally and looking at the momentum standpoint, amd is the right place to be right now. C pu and the ability of amd to gain market share over intel has been highlighted were sitting here on the Halftime Report talking about a call out of Atlantic Equities saying, you know what, it is happening, amd is positioned to gain over intel next year, but you know what, thats reflected in validation. What do you think . I think it is we sometimes make it more difficult than it has to be. Its momentum market, not only in stock price and fundamentals. Its the same thing with the chips. Youre either stage right or stage left i own much more of the index, the smh. Why make life more difficult ive got lots of difficult decisions. I own skyworks because of 5g and own amd because you brought a new ceo in there a while ago who is doing a phenomenal job redirecting the growth of it and you can sit and hope and pray that intel is going to be the next microsoft and change their business model, but they dont have the same levers, so i would rather go with growth. They have some levers. Absolutely. And when i look at intel, thats one of those its a stock that i own not necessarily i trade around it with options but the mike ron. I bought coles and bought stock in mike ron. Thats a trade im not sold that mike ron is going to be a company thats the next intel and be Everybody Knows that youll see this stock being 38 a share, maybe all the way up to 55, 60 a share so its an extremely volatile stock that you can own t. Amd the same way. I own calls in amd do i think its a bit of a valuation stretch . Absolutely, but i love the momentum we see in many so of the names. Intel is astock that i hole, like a merck and pfizer and some of the other names ive earned for years. Just as you and pete were saying, mel, as far as the new ceo, its more or less, not a clearing of the deck, but certainly the marking made right now by getting rid of this sell to apple and so forth. I think the reason they are doing that is to focus on the more profitable business areas, and so, in other words, get rid of this. Oh, yeah. And then move on to the other. Thats the stamp that the ceos putting on this company. Lets stick with chips. One of thehottest trades of th year, and thats exactly why our next guest says they are signalling a new high for the markets. Tom lee is the head of research and joins us on the phone right now. Great to have you with us. Thanks for having me. Youre seeing a rally of as much as 10 in the year. Whats the catalyst . Yeah. I think a lot of things are coming together and they are just cautiously optimistic i think they hate the moves and i think the earnings session thesis is turning to be more bunk i think its a more midcycle bump, and i think people underestimate the importance of this fed cut i mean, number one, i think it will have an effect on the strong dollar and strong dollars mean a hurt in earnings and theres been a stress in the overnight market feds fund is trading above the interest on excess reserves, and i think a fed cut will really ease financial conditions, and thats why i think 10 is really possible in the second half. How important is the rally weve seen in semis to make you believe that well see this rally in the second half i think its important because, you know, semis are a very important cyclical stock. They have typically indicated market peaks becauseins 01 and 07 they were rolling over pretty dramatically months before the top when a semi makes a new high this is not consistent with the kompany topping. If anyone has a late cycle and bear market around the corner, they are fighting history. The semis are saying were going to real and be big in the second half. Its joe. The contrarians will argue its just about being inventory being worked off, and the real strength in thesemi space is coming from the equipment side how would you respond to that . I think that inventory correction has been something thats really been mixing the economic picture everywhere. I mean, i think thats one reason pmi has taken a downturn and everybody watched a government shutdown, on of the longest in history and thats hurt the pmi and longerterm gdp but when i look at semis and their Price Performance, to me its not about inventory the market is good at discounting temporary earnings versus a ray rate of this group and semis are sniffing out and are moving ahead to fundamentals. You want to get cyclicals this time. Which could you like if we think about about it. I. N. A. , there is no alternative. Technology has a good cash return almost 6 , and u. S. Tech is cheaper than europe, japan, emerging markets the other group thats really interesting is financials, and, by the way, those are the two groups that are having pretty good eps revisions as were moving through the quarter and financials are up year over year i know you guys sort of talked about it, but im pretty bullish on financial. Tom, ill leave it there. Thanks for phoning in. Thanks for having me. Tom lee of fund strat you agree with tom there is no alternative to going to tech . I agree but i dont think semis is the place to go to. Even getting back to the argument, which companies actually have the big cash amounts on their company its apple, idm. So if youre making that alternative then you want to go into the software and services, not the technology center. My concerning are is they are trading at really in high valuations theres a lot of good news priced in. Yes, it has momentum on its side, but at the same time if you look at the inventory cycle and some of the leading indicators coming out of the u. S. And taiwan, that continues to go downward the fundamentals have really emerged from the stock Price Performance and i think theres better places to invest money that are not trading as rich that are starting to build more momentum we behind them. Such as i do think the software and services is still a good place i think that within the u. S. The home builder sector is starting to build up again and starting to get momentum behind it. I think that theres less cyclical risk that you need to take into your portfolio right now which i think takes advantage of some of the momentum that youre seeing build in the economy and build in the s p and broader equity markets but that arent trad