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.

“Steve Jobs humbly said when the iPhone was announced in 2007 that he thought he had a two-year lead over Blackberry and Nokia. We have substantially more than that.”

In a week packed with earnings like this one, with nearly a hundred and fifty names of merit, one way to look for patterns is to ask whether the latest report marks any kind of departure from trend for a company, good or bad.

In that respect, some companies saw a rebound, after disappointment, such as chip equipment vendor Onto innovation, and some saw a continuation of healthy trends, such as software tools maker Jfrog.

And, then, some companies stumbled after offering high hopes, including communications software maker Twilio and advertising platform The Trade Desk.

Let’s take the positive stories first.

Among healthy trends that continued were not only Jfrog but also cloud data storage vendor Backblaze; cyber-security software maker Gen Digital, which owns the famous Norton consumer safety brand; GigaCloud, which runs a B-to-B parcel network to connect Asian manufacturers with U.S. retailers; and LegalZoom, which is basically a cloud-based, outsourced legal department for small businesses.

All of these companies had notched at least one prior quarter where the stock had jumped, and in some cases, they’re on a three or four-quarter streak.

This week’s earnings calendar is the gift that keeps on giving, with forty companies — yes, forty — reporting Wednesday evening, and another sixteen on Thursday morning.

I’ve tried to pick out just the most interesting this afternoon on which to dwell.

First, Fortinet, one of the more popular cyber-security names over the past several years, is Thursday’s most spectacular implosion, receiving five downgrades after the company missed with its outlook for revenue this quarter, sending its stock down over twenty-five percent at $72.32.

The stock had already sat out the year, rising only two percent, and it was a dud in the past twelve months as well.

The problem is that the company has been talking to the Street for a while now about how its customers have to “refresh” their licenses to the company’s main product, the firewall. That should be an automatic bump-up for any company whose revenue is tied to customers renewing a contract, which is why so many had a positive view on the stock.

But, that refresh has largely played out now, and the very success of it leaves less in the cupboard to get excited about.

Tuesday evening’s earnings reports featured a rebound for two artificial intelligence darlings that had fallen out of favor, and a hard landing for one stock darling that had soared this year. 

But first, Arista Networks was the star, rising seventeen percent on Wednesday to a new 52-week high (also an all-time high) of $138.78. 

The company had come into Tuesday evening’s report under something of a cloud, a debate between BNP Paribas’s Karl Ackerman, who said the company would be severely impacted by Nvidia’s sales of ethernet networking, and the positive view, which I had articulated, that ethernet is a rising tide that lifts all ships.

The stock was up seven percent this year, trailing the market, as that negative narrative had been carrying the day. Tuesday, the positive view won out. 

The week ending August 1st saw stocks decline on further tariff pressure in spite of some very upbeat earnings, with the Nasdaq Composite Index and the S&P 500 both closing the week down 2%. 

But, the highlight last week, from a news standpoint, was the initial public offering of thirteen-year-old Figma, a software maker that is, sort-of, the Adobe for the current epoch, a company that is the tool of choice of designers of apps and Web sites.

The IPO, which netted $400 million, soared in value, almost quadrupling on its first day from the $33 offer to $115.50, then, rising again on Friday to $122. 

Then, the stock plunged on Monday by 27%, which is probably because the smart money realized that the stock isn’t worth anything nearly so much.

Shares of Palantir are surging by seven percent Tuesday, at $172.04, after the company Monday evening turned in its best earnings beat since coming public in September of 2020, with revenue seven percent higher than expected, better than the second-best beat, back in February, which was six-point-seven.

The fact that revenue is already at a billion dollars per quarter and rising at forty-eight percent last quarter is rather stunning to just about everyone. Combined with a mid-forties adjusted operating margin, Palantir is the only software firm currently a “Rule of 90” company — probably one of the only ones on the planet — meaning, its combination of growth and profitability.

Price targets are zooming to as high as $200, and at least one bear is stepping out of the way.

Deutsche Bank’s Brad Zelnick raises his price target on the stock from Sell to Hold, calling the report “AI Excellence.”

Monday morning’s earnings reports started off with a bang, with the announcement by Amphenol, the $137 billion maker of a variety of connectors for electronics equipment, that it will acquire from CommScope a business called “Connectivity and Cable Solutions,” for $10.5 billion.

Yes, it’s viewed as a play on artificial intelligence growth. The “CCS” business, as it’s called, makes $2.8 billion a year selling fiber-optic connectivity devices of various sorts including optical amplifiers and passive optical network terminals. It’s on a rapid growth path, in part because of its use in data centers.

In the press release, Amphenol CEO R. Adam Norwitt specifically noted that the unit adds “significant” fiber-optic product ability, “including for artificial intelligence applications.”

In the quarter just ended, the “enterprise” part of CCS, the part focused on AI, rose eighty-eight percent, year over year, to $213 million. Amphenol said in its announcement today that it expects the unit to generate $3.6 billion in sales this year, and a fairly decent Ebitda profit margin of twenty-six percent.

On Friday, I sat down software maker Procore Technologies’ CEO, Tooey Courtemanche to discuss the company’s quarterly report on Thursday evening. The full interview is in the accompany video. There’s also an audio version if you like.

Procore’s software tools are used to run the core operations of construction project management by general contractors, sub-contractors, and, increasingly, project owners.

Although results and outlook topped expectations, the stock sold off by thirteen percent on Friday.

On investors’ minds is whether the tariff drama is going to hurt construction firms’ willingness, or ability, to spend with Procore. On that score, Courtemanche is adamant that higher costs are not as serious a worry as most people consider them.

A whopping twenty-eight significant tech names have reported in the past twenty-four hours, and despite some very upbeat reports from Apple, Amazon and others, nothing matters as much this Friday as the news overnight that the administration of U.S. President Donald Trump has slapped more tariffs on dozens of countries, including a thirty-five percent tariff on Canadian goods.

I have been remarking weekly, including in the latest podcast, that we are not out of the woods when it comes to tariffs, and today’s drop in Apple shares despite the positive iPhone sales are clear evidence of that, coming as it does following a decline already of seventeen percent in Apple shares.

Although you shouldn’t read too much into stock prices in a single day, let’s start with what’s not working at the moment. 

Small-cap companies that have complex stories that are not well understood by investors: That includes Enovix, makers of a novel silicon battery technology, and Innodata, a services company helping in the training of artificial intelligence models, and Riot Platforms, one of the many crypto-currency hopefuls now trying to be more of an AI hosting provider. 

Shares of GPU-chip rental service CoreWeave are soaring on Thursday by fourteen percent at $116.95 following Microsoft’s upbeat report Wednesday evening, in which CEO Satya Nadella reaffirmed a commitment to spend like made on cloud and artificial intelligence, and also said Microsoft remains supply-constrained for computing capacity. 

It’s rather surprising that Microsoft should resuscitate CoreWeave’s recently limp stock given that one big knock against CoreWeave for a while now has been the fact that so much of its revenue is tied to Microsoft, which accounts for about two thirds of CoreWeave’s sales. Usually, when a company is so concentrated with a single customer, it’s a negative. 

All the bullish sentiment about Microsoft and Meta, and it’s been plentiful for several quarters now, was rewarded Wednesday evening as both companies continued a streak of satisfying with their results and outlook.

This is a repeat of April’s earnings calls from the duo, which showed business is humming along for both.

Microsoft is now on track to become the next four-trillion-dollar company by market value, after Nvidia, as its stock rises by eight percent in early trading to $554.98.

Microsoft stock has gotten one upgrade already this morning, from KeyBanc’s Jackson Ader, who regrets having downgraded the stock in April as he now raises his rating from Sector Weight to Overweight, and introduces a $630 price target (about thirteen percent upside): “And thus ends a terribly timed and short-lived stint at Sector Weight.”

Allow me to bring you up to speed on the state of play as of Wednesday afternoon in a very busy earnings week.

We had winning reports from numerous companies, including seven in particular that have seen double-digit gains following the reports: Cadence Design Systems, Corning, Sanmina, Celestica, Teradyne, and Amkor Technology.

All six are very intimately tied to manufacturing on a global scale, which obviously puts them in the middle of tariff pressures. You might think they would be affected already by months of uncertainty.

So far, actually, the firms are doing just fine, and my sense is the contract electronics manufacturers such as Celestica and Sanmina may even be poised to thrive in this environment.

These companies get paid a fee to assemble stuff for clients around the world, from computer network equipment to wireless earbuds. They’re broad, diverse contract assembly businesses that work closely with tons of different kinds of clients.

Earnings season can bring some surprises, and Wednesday morning saw Palo Alto Networks, the biggest name in cybersecurity, announce it will acquire CyberArk, one of the younger vendors in the market, for $25 billion, confirming a Wall Street Journal article yesterday speculating on the deal.

Both are companies in the TL20 group of stocks to consider. CyberArk is up thirteen percent since being added in February, which is good, but Palo Alto is up only twenty-seven percent since being added in August, just below the Nasdaq’s thirty percent.

The purchase price, consisting of 2.005 shares of Palo Alto, and cash worth $45 per share of CyberArk, works out to $471.54 for every CyberArk share, which is a nine percent premium to yesterday’s close, although CyberArk had already jumped over thirteen percent yesterday on the Journal’s speculation. 

Palo Alto is slumping by seven percent this morning, adding to yesterday’s five-percent drop, as holders are clearly not thrilled with this large expenditure. 

This is Palo Alto’s biggest acquisition by far, after doing deals mostly worth less than half a billion dollars. That kind of change from the playbook is typically something that doesn’t sit well with investors.