Nvidia is making news as much with its largesse these days as its chips.

Monday, the company announced a plan with ChatGPT creator OpenAI for the latter to deploy “at least” ten gigawatts of Nvidia’s chips, in return for which Nvidia will invest a hundred billion dollars in the startup, 

The news follows Nvidia’s announcement last week it will take a ten-billion-dollar stake in chip rival Intel.

Nvidia shares were up one percent on the news, at $178.97.

To put that in perspective, New York City pulls five gigawatts of power on an average day, according to those in the data center business who track these kinds of mammoth usages. Ergo, the two companies are planning to deploy two very large metropolitan areas’ worth of AI chips.

The deployment of ten gigawatts constitutes “millions of GPUs for OpenAI’s next-generation AI infrastructure,” said the two companies in prepared remarks. 

Intel shares are up twenty-three percent Thursday afternoon after it announced with Nvidia that the latter will take a five-billion-dollar stake in Intel, equivalent to four percent at Wednesday’s close, and the two will develop custom chips for artificial intelligence servers and a new breed of laptops.

The stock bounce gives Intel a fifty-three percent gain for the year, topping Nvidia’s thirty percent to date. Nvidia shares rose four percent, while ARM Holdings, perceived as put out in the cold by this, is down four percent. Advanced Micro Devices, now the odd one out for the x86 world, declined by one percent.

The Street reaction has so far been very upbeat for both companies, although I suspect that the balance of the account is squarely in Nvidia’s favor.

IonQ, one of the three publicly traded “pure plays” in quantum computing, along with Rigetti Computing and D-Wave Quantum, last Friday held its “analyst day” to brief sell-side analysts on its technology roadmap and financial goals. 

Most of the points made by CEO Niccolo de Masi and his team were the same points that de Masi made in my interview with him last month; you could say that our chat was a preview of what was heard last week. 

You can catch the whole day’s presentation in the archived recording on the IonQ investor Web site. You can also download the deck of accompanying slides. 

The talks were very well received, with the shares closing up by eighteen percent on Friday. At a recent $68.27, IonQ shares are up sixty-three percent this year.

At a high level, the company reiterated its outlook for this year’s revenue, $82 million to $100 million. And de Masi again compared IonQ to IBM as the only company that he contends comes even close to competing with IonQ. Analysts so far have not made any dramatic changes to their estimates for IonQ’s financials.

We are not in a bubble of artificial intelligence, but that doesn’t mean things can’t get perilous in the AI trade.

So implies Bernstein analyst Mark Newman in an initiation of coverage on Monday spanning a hundred and twenty-three pages in which Newman reflects on the AI payoff for Apple, Dell and other vendors of IT hardware such as server computers, disk drives and smartphones.

Newman thinks the opportunity for hardware vendors is “massive,” though he also sees the risk there could be a period of “digestion,” which brings to mind thoughts of the DotCom collapse.

“We see sustainable increase in spending as AI expands the addressable market for IT and creates a potentially massive opportunity for IT hardware to return to growth,” writes Newman.

Newman’s report is filled with lots of great detail, reflecting his many years covering the hardware beat. His contribution is to put some serious numbers around the AI trade and where it is going.

Newman has three main points.

We have come to the end of earnings season, with some significant news from two of the last companies to report, Oracle and Adobe, really the first companies of a new earnings season, they just report very early.

Oracle’s stock soared by 36% on Wednesday after its Tuesday-evening report contained the stunning disclosure that it had more than quadrupled its annual backlog of business, its “remaining performance obligation,” or, RPO, promising sharply increasing cloud revenue for the next five years.

Oracle is up 75% for the year through Friday’s close. The pop in Oracle stock gave the newly rebalanced TL20 group of stocks to consider a forty-percentage-point gain since the rebalancing, now up 273% for the year through Friday’s close.

Almost immediately, questions arose about that backlog. 

Adobe shares are rising three percent in early trading at $361.90 following Thursday evening’s fiscal third-quarter earnings report, and, if it holds, this would be the first time in five quarters the stock hasn’t sold off. 

The drama of Adobe is by now well understood. The worry on the part of investors is that the company will see its franchise eroded as more and more average users, people not trained on its Photoshop and Premiere tools, turn to generative artificial intelligence to do their design work.

The stock has been an absolute dog as a result, down forty percent this year and the same amount over a twelve-month period. 

The praise keeps coming today for Oracle as its shares soar by thirty-five percent to $325.04 after its stunning surprise Tuesday night in which it announced an enormous backlog of business of nearly half a trillion dollars.

One new convert Wednesday is Merrill Lynch’s Brad Sills, who Wednesday raises his rating to Buy from Neutral, and hikes his price target to $368 from $295, and writes that the backlog of business is “exceptional,” and “suggests that Oracle has become a key AI compute platform.”

Profit is an open question, as I noted last night, but is not a deal-breaker for Sills.

“Although profitability of AI workloads remains a key debate, it is clear that Oracle is capturing share in the large and rapidly growing market for AI infrastructure (we estimate that the AI applications industry alone will represent $155 billion by 2030),” he writes.

“Oracle is clearly leveraging a number of advantages in its cloud software/hardware businesses to attract the largest of the AI enterprises, including OpenAI, xAI, Meta, NVIDIA and AMD). These visible reference customers should help position Oracle to capture share of AI compute.”

When I added Oracle to the TL20group of stocks to consider last week, I was not expecting it would have a blowout earnings report. Frankly, I was not thinking about Tuesday evening’s report, which crept up on me.

But here we are, the stock is up twenty-six percent in late trading at $305.12. (Update: The stock jump is above thirty percent Wednesday morning at $317.30.)

It’s a bit of an odd report because it contains a big surprise. The revenue and profit were just okay, as is often the case with Oracle. Revenue growth of twelve percent slightly missed expectations, actually, and profit was lower than expected as well.

What was jolting was that Oracle’s backlog of business, known as “remaining performance obligation,” or, RPO, more than quadrupled, year over year, and more than tripled from the prior quarter, to just under a half a trillion dollars versus expectations for $149 billion, mostly for its Oracle Cloud Infrastructure, its cloud computing service.

Several billion dollars’ worth of new contracts for cloud computing had come during the quarter, CEO and CFO Safra Catz indicated. “We have signed significant cloud contracts with the who's who of AI, including OpenAI, xAI, Meta, NVIDIA, AMD and many others.”

Catz had until this time been a little bit of the girl who cried wolf: she talked a lot about big business coming down the line from AI but it kept being another quarter out. Well, it has now come to pass and people such as myself who rolled our eyes are rather stunned.

Monday brought the initiation of coverage of Bullish, the seven-billion-dollar Bitcoin trading exchange that went public on August 13th, and which has subsequently dropped by twenty-six percent.

The shares fell four percent Monday to $50.12 as two of the three lead underwriters for the IPO, JP Morgan and Jefferies & Co., came out with a Hold rating, while Citigroup started it at a Buy.

Bullish is closer to the financials industry than to tech per se. It makes the majority of revenue in fees and in the narrow difference in price that is the spread between bid and ask in the sales of crypto-currency it facilitates. It is, however, a tech business in the sense that any market maker brings to bear technology that is supposed to lower costs to transact and improve price discovery, etc., and it appears Bullish has very good software and systems for doing all that.

It has a smaller, second business lead by CoinDesk, the well-regarded crypto news site, which Bullish bought in 2023, which sells data, brand advertising and tickets to its popular crypto conference. 

Bullish, which was brought public with the help of special-purpose acquisition company, a “SPAC,” a blank-check firm, Far Peak, is among the biggest IPOs this year, at $1.2 billion in proceeds from the offering, all of which the company took possession of in crypto-currency!

It’s smaller than CoreWeave’s $1.4 billion IPO, but ahead of software maker Figma, which raised just under $400 million, and Circle Internet, another crypto venture, which raised $254 million.

Friday was a nice day for two of the TL20 stocks to consider, software maker Samsara, which soared seventeen percent, and chip giant Broadcom, which jumped nine percent, both propelled by their respective earnings reports on Thursday evening. 

I had had a reservation about Broadcom for a long time until I put it into the TL20 in February. My reservation was that CEO Hock Tan spent billions on software firms that were tired assets, which was to my mind a way of milking fading assets for not good purpose. 

It’s good that I got on board because all that is rapidly becoming irrelevant. With surging growth in Broadcom’s artificial intelligence chips, Broadcom is poised to see AI revenue go from a third of its total revenue today to seventy percent in two years time. 

Broadcom is becoming an AI-chip company overall, in other words, the same transformation that happened to Nvidia in the past several years. 

Thursday is an interesting contrast of old and new tech. Shares of Ciena, the last remaining big fiber-optic networking firm, is soaring by eighteen percent, to $116.29, while Figma, the software maker that went public on July 31st, is down nineteen percent, at $54.56.

Ciena’s revenue, almost four percent above expectations, was the largest quarterly upside in two years, prompting Evercore ISI’s Amit Daryanani to title his report “Shock & Awe.”

The key point is the company’s forecast for 2026 revenue growth of “high-teens,” notes Daryanani. Both the cloud computing operators and Ciena’s traditional telecom company customers are buying big, he notes. The “webscale” part of the business that serves the cloud saw sales rise by more than ninety percent. But phone companies are also buying, invest in building out telecom infrastructure for data centers and for “AI-to-edge” computing.

This week was the sixth rebalancing of the TL20 group of stocks to consider, and it was the biggest change so far since the TL20 was inaugurated in July of 2022. 

The group has been changed from a market-cap-based weighting to a “capped” weighting in order to alter the influence that different stocks have on the group. 

Specifically, Nvidia drops from being almost half the value of the group to just twenty-five percent.  

Nvidia’s 982% return since the start of the TL20 (through the close of August 29th) has helped the group handily beat all benchmarks, including the Nasdaq Composite, the S&P 500, Cathie Wood’s ARK Innovation ETF, the ARKK, and the iShares Expanded Tech-Software Sector ETF, the IGV.

But that soaring performance made the TL20 way too dependent on Nvidia.

Shares of Alphabet are up eight percent Wednesday, at $229.46, after U.S. District Judge Amit P. Mehta, who a year ago found the company guilty of violating Section 2 of the Sherman Act in order to maintain its monopoly in mobile search, on Tuesday avoided imposing the strongest remedies requested by the U.S. Department of Justice, such as forcing Alphabet to spin off Google’s Chrome browser unit or share data about its advertising business.

This is taken as the best-case outcome for Alphabet, though it is likely to be appealed. 

The larger question is just what is the competition in the market. Mehta indicated that he was measured in imposing remedies because Google faces more competition in search services than it has in decades, especially from artificial intelligence-driven chat bots such as privately-backed Perplexity.

So, is that true? Well, maybe not so much in practice.

It’s time to put less weight on Nvidia, as marvelous as the company is. The giants of the AI trade still have very good growth ahead of them but probably less upside in price. Corning is one name with a favorable valuation being added to the group.

Plus ça change plus elle reste la même.

A year ago, I wrote of the earnings reports of Dell Technologies and Marvell Technology, “Marvell and Dell boosted by AI,” and although both stocks are down today, both are still all about the artificial intelligence trade.

The worries about both of these companies caused broad weakness in the market Friday, helping to push down shares of Nvidia and others.

My sense is that the blemishes for both companies are really specific to where those two companies are at, their unique challenges and opportunities, and are not reflective of some kind of overall breakdown in the AI equipment market.

Allow me to explain each in turn.

Wednesday is a nice night for four members of the TL20 group of stocks worth considering. Shares of Snowflake and Pure Storage are both surging in late trading following upbeat reports. While Nutanix and Nvidia are both trading down, the results and outlook are also strong.

The bottom line is that all four of these businesses are doing very, very well.

First, Nutanix. I spoke following the report with Nutanix CEO Rajiv Ramaswami. He first rattled off the numbers that matter to investors.

“Solid top line growth, solid profitability, 2,700 customers added over the year, I think that's quite substantial,” says Ramaswami. He cites also that revenue rose eighteen percent for the full year, and “annualized recurring revenue,” or, ARR, rose up seventeen percent, while free cash flow rose “significantly” to twenty-nine percent.

The company beat by a wide margin its own forecast offered a year ago of fourteen percent revenue growth and twenty-three percent free cash flow margin.

The idea that commercial software companies will be destroyed by artificial intelligence because AI will automatically create code is a theme I’ve returned to a many times this year. 

It’s a fear that hangs over software investing. Even cool-headed investors such as Paul Wick of Columbia Seligman are paying attention, as Paul mentioned in my interview with him last month.

This week, three prominent software analysts offered their thoughts on what the threats are and what might happen to the industry.

KeyBanc’s Jackson Ader offers the first of a series of promised notes. He identifies three threats. Two are concrete, namely, that AI can both lower barriers to entry and displace commercial software altogether. A third thing, harder to conceive, is “the collapse of the app,” the blurring of software functionality into one giant app:

Earnings season is still in full swing, with Nvidia coming up this Wednesday, August 27th, after market close.

The past two weeks have brought some disappointments among the reports, including fiber-optics vendor Coherent and chip-equipment giant Applied Materials, but also successes such as Palo Alto Networks, the cyber-security vendor, and Analog Devices.

Coherent’s report August 13th followed a very favorable report by competitor Lumentum the night before. 

Coherent’s CEO, Jim Anderson, who is in the process of refashioning the company, said that company is taking a “bit of a cautious view” as regards the part of the business selling to the industrial market for lasers and such, because of tariffs and trade.

“As I look out seven years, I think there are really interesting technologies that will be part of the story.”

The Street’s reaction to the U.S. government taking a ten-percent stake in chip maker Intel is slightly positive Monday, and the stock is up a couple of points at $24.84.

However, I suspect the worst lies ahead for Intel. 

First, let’s look at the pros and cons.

Intel announced Friday, after market close, that “the United States government will make an $8.9 billion investment in Intel common stock, reflecting the confidence the Administration has in Intel to advance key national priorities and the critically important role the company plays in expanding the domestic semiconductor industry.”

Interestingly, U.S. Secretary of Commerce Howard Lutnick was quoted speaking on behalf of Intel, stating, “Intel is excited to welcome the United States of America as a shareholder, helping to create the most advanced chips in the world.” 

When you get money from the government, they tell you if you’re excited!

It happens to be a busy Thursday for Street research. Let’s start with nuclear power, shall we?

NuScale Power and Oklo, two of the more prominent names in the new age of nuclear, got lukewarm comments on Thursday. 

Both are developing new kinds of more efficient, compact reactors, called “small, modular reactors,” or, SMR, the same kind of technology as a third startup, Nano Nuclear, which I profiled a year ago. Oklo, which was taken public in a SPAC (special-purpose acquisition vehicle, a “blank check” company) by OpenAI CEO Sam Altman, is leveraging an older technology that it argues is well-proven in the market, “liquid-metal-cooled, metal-fueled fast reactor.” I profiled Oklo in Fast Company last year.

Both Nano Nuclear and Oklo have yet to make any revenue, while NuScale may make about fifty million dollars this year.

Back in May, shares of analog chip giant Analog Devices sold off sharply despite an upbeat report because of fears that the company’s business was being distorted by “pull-ins,” sales of chips that were artificially sped up because of tariff and trade concerns by Analog’s customers.

What a difference ninety days makes: ADI stock surged by over six percent Wednesday to close at $244.87 as company management allayed those fears.

CEO Vincent Roche, responding to Goldman Sachs analyst Ed Schneider on the morning’s conference call, remarked that this past quarter also saw some “accelerated buying,” as he put it, but that “we do see an unwinding in Q4,” and that, “We think that that will be the sort of close-out of that early buying.”

There you go, problem solved!

Tuesday’s three percent rise in shares of Palo Alto Networks, the largest of the cyber-security vendors, was especially nice on a day when the Nasdaq Composite lost a point and a half, the S&P 500 was down sharply, and most big tech names lost ground.

The response from the Street was very much a sigh of relief after fears of slowing growth at Palo Alto were put to rest.

This was the fourth fiscal quarter, and analysts had been reducing their estimates for the new fiscal year’s revenue, worried that given Palo Alto’s size, approaching ten billion dollars in annual revenue, the company was bound to have a hard time growing the top line very much.

Instead, the sales outlook was the best relative to consensus expectations that it’s been in a while. “All-in, a decent Q against percolating slowdown/saturation concerns,” writes Fatima Boolani of Citigroup, who reiterated a Buy rating on the stock.

“This whole category is going to be reshaped by how people use AI.”

It’s that time of the quarter, time to sharpen up your Nvidia stock models in advance of next Wednesday’s earnings report, August 27th, after the closing bell. 

The shares have gotten two price-target increases today, from Morgan Stanley’s Joseph Moore and Cantor’s CJ Muse, who raised their price targets to $206 and $204, respectively, representing returns of thirteen percent and thirty-one percent from a recent $182.38.

The challenge for Nvidia has been keeping ahead of rising estimates. The May report featured the smallest revenue upside in two years and a sales outlook for this quarter that missed consensus for the first time in over two years.

But Muse argues that estimates are going to take another big leap. 

Applied Materials, the largest chip equipment vendor in the world, has been a difficult moving target this year, with analysts stumped about how to model the effects of tariffs and restrictions on sales to China.

It all came to a head Thursday evening as the company missed with its quarterly forecast for the current quarter for the fourth time in a row, and its shares sold off in late trading for the sixth time in a row. 

Only, this time, the drop of fourteen percent in late trading Thursday evening, to $161.86, is the worst after-hours decline I’ve seen for Applied in a decade or more.

The novel tariff and trade situation is introducing a different dynamic in these earnings trades: Applied’s plummet tonight is similar to the twenty-percent drop during the regular session Thursday of fiber-optic name Coherent

However, the issue is not just China and not trade.

There’s another factor, call it, “The Taiwan Semi Effect.” 

Thursday’s twenty percent plunge in shares of fiber-optics giant Coherent to $91.65, following a disappointing quarterly forecast Wednesday evening, is the worst decline the stock has seen in response to earnings in a decade. 

I believe some investors have overreacted. The company’s forecast for this quarter would have actually been right in line with the Street if not for the fact the company also announced it is selling the part of its business that sells into aerospace and defense. That divestment will cost the company twenty million dollars of revenue this quarter. CEO Jim Anderson has decided the unit is not really in keeping with the company’s focus on the market for artificial intelligence infrastructure components. 

Anderson was brought aboard in June of last year to shake things up. He had previously refashioned chip maker Lattice Semiconductor over the course of six years. Anderson told the Street last August that he would divest some businesses and redirect R&D to the most promising parts of Coherent’s portfolio, and that’s what he is doing in this case.

Fiber-optics vendor Lumentum Holdings continues its streak this morning, rising five percent, the second quarter in a row of positive response off of earnings, adding to what had already been a forty-four percent gain this year.

Price targets are zooming, and the stock has gotten one upgrade this morning, from Merrill Lynch’s Vivek Arya, who raises his rating to Neutral from Underperform, with a $135 price target versus the $125.01 in pre-market trading.

As in the prior quarter, the cloud computing giants, the majority of revenue, keep spending on fiber. CEO Mike Hurlston noted cloud-related revenue is “growing well over 20% annually,” and said the company is now targeting a non-GAAP operating profit margin over twenty percent versus the fifteen percent achieved last quarter.

Semiconductors are having a busy Monday, with speculation still going on about how Intel’s CEO, Lip-Bu Tan, is going to deal with the President of the United States calling for his resignation (see the Podcast), and President Trump confirming reports that Nvidia and Advanced Micro Devices will pay the U.S. fifteen percent of what they make from sales of AI chips to China.

But, the focus today is really on Micron Technology, which announced this morning that its revenue and profit for the quarter ending this month is going to be higher than expected. The announcement was made because the company’s chief business officer, Sumit Sadana, and its head of investor relations, Satya Kumar, were both appearing onstage today with John Vinh, semiconductor analyst at KeyBanc, for brokerage’s “Technology Leadership Forum.”

The stock is up three percent today, bringing its return this year to forty-five percent. Micron is one of the TL20 stocks worth considering.

It’s been a strange week: possible ouster of the head of Intel by the president of the United States, a massive tariff on semiconductors, and now reports Nvidia will have to pay money to the U.S. government in order to sell GPUs to China.

Stocks rose nicely last week, including Mega-Cap tech, bolstered by favorable earnings reports.

A hundred and forty-seven tech companies of note reported, and only sixty-five ended the week down, so, the vast majority did alright. See the table at the bottom of the post for the details.