• I hate to be negative, but it’s worth thinking about the potential for disaster with the highly complex bets that are being placed on artificial intelligence, broadly speaking.

• SpaceX filed for IPO, as discussed in last week’s podcast, and this week Anthropic filed confidentially with the SEC its IPO prospectus paperwork, and we’re expecting to hear from OpenAI any day now. 

• All three could be worth a combined $4 trillion in market capitalization while having perhaps $200 billion in revenue next year. That would be 20 times projected revenue — pricey considering they’re losing money.

• Last week I discussed a report on how bubbles burst by Tavis McCourt of Raymond James.

Some things going on today: Shares of solar energy and energy storage equipment maker Nextpower are down 3% on Wednesday at $147.48 as the boutique GLJ Research’s Gordon Johnson issues a positive but cautionary note, writing that fundamentals are solid but that there may be a better price to buy the stock. 

Shares of cyber-security titan Palo Alto Networks are down 4%, reversing pre-market gains, at $283.81 despite a positive earnings report Tuesday evening. The stock, one of the TL20 group of stocks to consider, is up 54% this year.

Shares of Snowflake, another TL20 company, are down 6% at $246.26 despite fairly favorable responses to the company’s analyst day meeting on Tuesday. Snowflake shares are up 12% this year, underperforming the Nasdaq. I would attribute the sell-off to the fact that the company’s year outlook at the talk merely reiterated projections for revenue growth and profitability that were first offered on May 27th when the company reported first-quarter results. Ergo, there’s nothing new financially to get excited about.

JENSEN HUANG PUMPS HIS FAVORITE STOCKS

Boosting the stock market appears to be one of the side projects of Nvidia CEO Jensen Huang, especially when it’s to his own financial benefit.

He has not only taken numerous stakes in partners and vendors and even competitors (Intel); over the weekend, at the Computex trade show in Taipei, where he was doing his keynote, Huang reportedly called out Marvell Technology as “the next trillion-dollar company” — which is interesting because Nvidia has a $2 billion stake in Marvell, announced in March. 

Some things going on today: It’s often been said in defense of Elon Musk that he may make lofty promises but he usually ends up delivering. The New York Times’s Kirsten Grind, Jack Ewing, Aaron Krolik and Lily Boyce on Tuesday take the perception to task with a survey of 602 pronouncements made by Musk. You might call it a Bullshit Meter, as it reveals how often Musk simply doesn’t deliver.

U.S. President Donald J. Trump announced an executive order on Tuesday requiring AI companies to submit their newest models to government oversight. I expect said vendors — SpaceX, OpenAI, Anthropic, Google, etc. — will slice and dice this executive order until the order means basically nothing.

Quantum computing has been a very mixed bag this year as far as the top names, with IonQ up 58%, Rigetti merely tracking the market at 18.5%, and D-Wave Quantum underperforming, up 14%.

Monday afternoon, D-Wave made the case for its future with its first-ever analyst day meeting since coming public in December of 2020. The stock is up two points today at $29.76. Most price targets are in the $40-range.

The main takeaway from the presentation by CEO Alan Baratz and team was a set of milestones they expect to reach as they expand their product offering.

Some things going on this morning: Shares of recently public rare-earth elements supplier Rare Earths Americas get multiple favorable initiations of coverage on Monday. Rare Earths is barely a year old and joins the likes of MP Materials and USA Rare Earth. The group specialize in digging up materials such as neodymium-praseodymium in order to make things like magnets that are key for electric vehicle motors and the rest of the electrified future of heavy industry. 

At $20.92 today, up 8%, Rare Earths shares are down 8% from their first-day close of $22.69 on May 7th.

THE CPU TRADE

Most in the news this morning is the personal computer because Nvidia CEO Jensen Huang used the Computex trade show in Taipei, Taiwan, to announce the company’s “RTX Spark,” a microprocessor for desktop PCs, which will debut on new PCs this fall from Dell, Asus, etc..

Nvidia shares are up over 4% Monday morning at $220.74.

A day after cyber-security vendor Zscaler saw its shares fall 32%, founder and CEO Jay Chaudhry had a message for the Street. A couple messages, actually.

“Life is good across the board,” says Chaudhry in an interview Thursday he and I had via Zoom. Also, “We are best in class” in cyber and in SaaS software generally. That includes having “beaten all the metrics” that matter, he says, including delivering 25% revenue growth and also “annualized recurring revenue” up 25%. At $3.5 billion in ARR, “very few SaaS security companies are in that bucket,” he emphasizes.

But, as I said, the stock fell hard, so Chaudhry also had another message. At a price of $130.04 on Thursday, Zscaler trades for either 28.8 times projected earnings per share or 5.2 times projected revenue, fairly low multiples. That is “not at all” the right valuation, he tells me.

“I think investors don't appreciate the platform that we have built,” he says.

Update: Dell shares increased gains overnight following its stunning earnings report, currently up 33% in pre-market trading at $422.50.

The stock has gotten one upgrade this morning, from Mehdi Hosseini of Susquehanna Financial, who raised his rating to “Positive” from Neutral, assigning a $700 price target. That would be another 66% upside from here, not bad.

Hosseini concedes he’s a bit late, writing, “Why are we upgrading the stock following 150% year-to-date gain?”

His answer is that the ballooning server market can be sustained into 2028. “Combined with the expected ramp of the [Nvidia] Rubin AI platform in early 2027, some backlog is likely pushed into FY28, supporting continued double-digit revenue growth,” writes Hosseini.

Wednesday started out rough for software makers with a 31% plunge in Zscaler but things turned around Wednesday evening, with Snowflake rising as much as 38% in late trading, and price targets moving into the $300 and up range, 70% or better from Tuesday’s close of $175.26. With this off-hour gain, Snowflake’s loss for the year of 20% turns into a gain of 9% — still below the Nasdaq’s 14%, but definitely a step in the right direction.

The numbers reported by Snowflake are strong but it’s the AI stuff that is dazzling this morning. Snowflake’s revenue last quarter of $1.39 billion was 5% above consensus, the strongest upside since August of 2022. And the forecast for this quarter’s product revenue, $1.42 billion, is 2% above consensus, the strongest upside in a forecast since November of 2024.

But the stand-out is something called “Cortex Code,” what the company nicknamed “CoCo,” as CEO Sridhar Ramaswamy related on last night’s call.

Some things happening today: Merrill Lynch’s quant strategist Jill Carey Hall tells us Wednesday morning that investors last week sold individual stocks more than they bought for the second week in a row of net outflows, even though people  continued to load up on ETFs for a ninth week — but mostly value ETFs, not growth and not tech. That doesn’t surprise me given that the TL20 group of stocks to consider, which contains a lot of growth stuff, is up 58% this year, what I have called “parabolic,” suggesting some valuations needed to cool off even though I continue to see them all as great names to have.

WILL AI EAT WORKDAY?

Software is still in a slump (we’ll come to Zscaler’s plunge in a moment), and Merrill’s Tal Liani doesn’t have much to offer in the way of encouragement. Liani Wednesday starts coverage of Workday, which had been a relative bright spot of late, with a Neutral rating, and a price target of $140, just a bit above Wednesday’s price of $124.37. Liani’s main point is that Workday is unlikely to be replaced by AI programs, but the product faces pressure overall from “value compression.”

I’ve been wondering a lot in the past year if all the planned spending on AI data centers will play out as expected. Obviously, the answer to that has important implications for the companies I think about all the time including Nvidia and Micron Technology.

Fortunately, better minds than mine are on the case.

Raymond James’s equity strategist Tavis McCourt on Tuesday offers a very nice 32-page think piece about what has happened historically with massive capital spending projects such as the U.S. railroad expansion in the 19th century, the U.S. World War II mobilization, the DotCom boom and bust, and the Chinese property bubble of 2018 to 2020.

McCourt boils down the key ingredients. In the beginning, a new technology such as Internet broadband causes excitement and funding is available from “internal” sources, meaning, the cash flow of the parties in the industry. They spend in advance of meaningful revenue because they can afford to use their cash as they please. (Government funding of World War II expansion was public-sector but had the same characteristics.)

Some things going on this afternoon: We’re in an age of epic hyperbole about artificial intelligence. Pope Leo XIV in his encyclical this week compared AI to the Tower of Babel in the sense of a “grandiose project where decisions are driven by pride, profit and a push for homogenization,” according to Margherita Stancati and Sam Schechner of The Wall Street Journal. Elsewhere in The Journal, legendary venture capitalist John Doerr of Kleiner, Perkins calls AI “the biggest thing ever.” You can add that to SpaceX’s boast of a $22.7 trillion market for enterprise AI, “the largest actionable total addressable market in human history.” I suspect all these forms of hyperbole are off the mark of what is a more mundane reality: a prolific technological development with a lot of shortcomings.

TRILLION-DOLLAR MICRON

Whatever AI’s shortcomings, it continues to be great for business at Micron Technology. Micron shares are up another 21% on Tuesday at $909.62, bringing the return for this year so far to 219%, and bringing the market capitalization to over a trillion dollars for the first time ever.

Stocks have continued to rise steadily the last several weeks, bringing the TL20 group of stocks to consider to a 53% gain through the close of last week, May 22nd. 

Two factors have been driving stocks higher: very good earnings reports from the top tech firms, including Nvidia and Applied Materials, and the opening wide of the initial public offerings window, first with Cerebras Systems and then the filing last week of Elon Musk’s SpaceX.

Applied Materials’s terrific report on May 14th lead to higher estimates and price targets, but only a modest bump up for the stock. Applied is up 68% this year at Friday’s close of $432.16.

The artificial intelligence data center craze has an increasing need for computer chips that work together as one large chip, and that’s boosting the prominence of what’s called packaging. Chip packaging is any technique that lets multiple chips function together in a tight fashion as one. Examples are when multiple CPUs act as one giant processor, or when multiple DRAM pieces are stacked vertically to make the fastest AI DRAM, “high-bandwidth memory,” or, HBM.

Last week I had lunch in New York with Kevin Engel, the CEO of a fifty-eight-year-old rising star of chip packaging, Amkor Technology. Engel was in town for the company’s analyst day event on Thursday, which was the first analyst day the company has held in twenty years.

For a traditionally sleepy field such as chip packaging, it might not have been necessary to do the analyst meeting that most tech firms do on a yearly basis. But the sudden excitement for packaging caused by AI has driven sharply higher returns for Amkor stock. The shares are up 66% this year at Friday’s close of $65.75, and have nearly quadrupled in twelve months. Amkor has done even better than another prominent pure-play on packaging, BE Semiconductor.

Nvidia’s business continues to hum right along based on Wednesday’s fiscal first-quarter earnings report. To see data center chip sales nearly double at $75 billion is rather incredible. That is a scale of growth at a scale in absolute dollar terms the world has never known.

The shares Thursday, however, are down a point at $221.24, continuing a trend of the prior three quarters of selling off on perfectly fine results. Goldman Sachs’s Ed Schneider attributes the response to investors’ expectations being “elevated heading into the quarter, given recent upward CapEx revisions from hyperscalers.”

Probably more the case that investors are simply numbed to what has become such predictably stellar numbers from Nvidia. As Bernstein’s Stacy Rasgon put it, the report offered “typically powerful results that investors have grown to expect.” And as CJ Muse of Cantor Fitzgerald had mused just before the report “Death, Taxes & Another NVDA Beat/Raise; But Will It Matter?”

No, even stellar results don’t matter. Deutsche Bank’s Ross Seymore is befuddled, writing, “We remain challenged to find what fundamental catalyst will yield meaningful upside but see the persistent underperformance/valuation discount as yielding a positive risk/ reward on a relative basis.”

Some things going on this afternoon:

LAYOFFS THREATEN SOFTWARE

Layoffs are very much in the news, with more companies following the examples of Meta and Amazon and Oracle and Block. Software maker Intuit is going to lay off 3,000 workers, or 17% of staff, according to a report this morning by Reuters’s RashikaSingh and JaspreetSingh, citing an internal company memo. The report comes hours before Intuit’s quarterly report after market close. 

Singh and Singh relate that the memo, sent by CEO Sasan Goodarzi this morning, said the layoffs are meant to simplify the company’s structure in order to “help Intuit sharpen its focus on the company’s big bets, including efforts to infuse AI technology across its services,” as the reporters paraphrase the memo.

In response, RBC Capital software analyst Rishi Jaluria writes in a note to clients that layoffs are “no surprise” given the spread of AI in enterprises. “Layoffs are ~76% higher vs. 2025 on a year-to-date basis as of 05/20/2026 according to data from Layoffs.fyi,” notes Jaluria.

Some things happening Tuesday and overnight:

KEYSIGHT RISES ON EARNINGS

Shares of test and measurement equipment maker Keysight, a TL20 company, are up a percent in in morning trading at $347.75, after the company Tuesday evening reported earnings per share twenty-four percent ahead of expectations, and also beat expectations comfortably for the current quarter, supporting bullish expectations of analysts going into the report. Price targets are rising at most brokers to the neighborhood of $426 as analysts both increase their estimates based on strong orders and also assign Keysight a higher stock multiple in some cases. Keysight stock is now up 70% since the start of the year.

VERTIV ON THE HUNT?

Shares of data center equipment titan Vertiv declined 5% on Tuesday to $322.63 despite the company announcing higher financial targets for growth and profit at its analyst day event that should be very welcome to investors. (The last meeting with analysts prior to this was two years ago, so the company was due for an update.)

Going on this morning: On its third day of trading, Cerebras Systems stock, which went public Thursday, is up 4% at $290.83 despite a down day for markets. Shares of cyber-security outfit Zscaler are also bucking the trend, up 7%, at $173.49, after B. Riley & Co.’s Erik Suppiger this morning raised his rating on the stock to Buy from Neutral, but actually cut his price target to $225 from $275 to reflect the general compression of valuation multiples in the group. There is “relatively little risk that Zscaler will get displaced by AI,” he writes, but he is mindful that investors are worried Palo Alto Networks, Cisco, and startups Netskope and Cato could take some market share from Zscaler. Shares of CoreWeave and Nebius, two of the more prominent “Neo-clouds,” are both trading down heavily after Davidson analyst Gil Luria took over coverage of the stocks from colleague Alex Pratt and reversed Pratt’s Buy rating to a Neutral rating, writing that upside is capped given how they trade relative to their respective backlog of business. Luria quips he’s “taking a breather.”

NVIDIA’S RESOURCEFULNESS

Let’s talk a bit about the stable bets in chips and AI.

A few names from the TL20 group of stocks to consider are reporting this week, and I see the relative stability of their respective businesses boosting all of them.

Despite the fact that Nvidia stock has ceased to have the kind of giant gains it had in prior years, it’s doing quite well this year, up 19% at a recent $221.68. 

The trade overnight is not good for young bets on the artificial intelligence build-out. 

Stand-out decliners this morning include Nano Nuclear Energy, the “pre-revenue” developer of “small modular reactors,” which is down 9% Friday morning following Thursday evening’s results.

Also trading lower is Innventure, the tech conglomerate that owns the liquid-cooling data center startupAccelsius, is lower by 4%, and Blaize Holdings, a small-cap competitor in AI chips, down 22%.

In comparison, a company that has a robust business in AI, such as chip equipment giant Applied Materials, are mostly holding up. Applied is down fractionally at $437.75.

The moral of the story is, stick with the stable names such as Applied rather than speculative bets like Nano Nuclear. Buy quality!

Update: Cerebras stock ended the day at $311.07, down quite a bit from the open of $350 but still 68% above where it priced. A very good day for the bankers and the company and some lucky insiders.

Earlier:

One of my favorite chip companies of all time, Cerebras Systems, went public just now at a price of $337, more than double  the offer price of $185. That makes the 30-million-share IPO worth $10 billion. Cerebras will get about $5.6 billion less five percent for the bankers’ in fees, or, $5.3 billion, leaving a lot of money on the table.

I would estimate Cerebras’s 12-month potential price appreciation at 67% based on a “target price” of $563.

That is, if the whole thing doesn’t just implode because of customer concentration.

Allow me to explain.

The artificial intelligence payoff for Cisco Systems that emerged back in November continues to gain steam, as the company Wednesday evening announced a big jump in product orders, up 35%, speeding up from 18% in the prior quarter and 13% the quarter before that. And the company raised its projection for revenue related to AI for this fiscal year ending in July from $3 billion to $4 billion. 

Cisco is seeing success selling into what’s called “scale-across,” connecting racks of equipment between data centers in different locations — the same thing that’s been happening for the fiber-optic equipment of Ciena. 

The AI “inflection,” if you will, is real: it’s boosting growth for Cisco. 

Wednesday is a rough day for software maker Dynatrace’s CEO, Rick McConnell, with the stock down 15% at $33.73, after the company’s earnings “Metrics,” the non-GAAP numbers people obsess over, didn’t wow enough.

“I'm better on days when the stock price is up than the stock price is down,” says McConnell in a chat via Zoom this afternoon.

Still, he’s very upbeat about what the company has achieved.

Among the achievements of the fiscal year that ended in March, he notes, is having “stabilized” the company’s “ARR,” its annualized recurring revenue, which is a non-GAAP number that people take as the leading indicator of future reported revenue. And for the first time in several years, the portion of that ARR that was added, known as “net-new,” rose by double digits in the year, 12%. “That was a huge positive,” he says.

Another vibrant morning of earnings reports, of which I’ll give you just a few of the highlights.

Shares of Dynatrace, which was one of four stocks I was optimistic about regarding the looming “token” disaster two weeks ago, is trading down by about 9% this morning. The results and outlook were stronger than expected, but the individual “metrics” are being put under a microscope.

As Eric Heath of KeyBanc Capital Markets, a bull on the stock, notes this morning, the company’s outlook for recurring revenue this year is fine, at 16.5% promised growth, but it’s the company having only beaten by a small amount with what is called “net-new annualized recurring revenue.”

Ever since Intel split its business two years ago into two separate profit and loss statements for the microprocessor and the chip foundry business, investors have been anxious to know when Intel will win some clients for the contract manufacturing side. 

The foundry loses about ten billion dollars annually so it has to find a way to cover its costs. And with so many companies now designing their own chips, it seems like there should be a lot of customers looking to Intel as an alternative to Taiwan Semiconductor Manufacturing. 

There have been plenty of rumors but no big wins so far. There is a vague deal with Elon Musk’s xAI. The latest was an article last week in The Wall Street Journal by Robbie Whelan and Rolfe Winkler stating that Intel has reached a preliminary agreement with Apple to make chips for Apple devices, based on unnamed sources. 

In the quest to find the next gem in data centers, the Street will seize upon glimmers of something.

Such is the case with the upgrade Monday of Austrian chip maker ams-Osram, based in Premstaetten, Austria, and which is best known for selling light-emitting diodes used in electric vehicles.

Jefferies & Co. European semiconductor analyst Jenardan Menon on Monday raised his rating from Hold to Buy, and raised his price target on the ordinary shares traded on the Swiss exchange to 21 Swiss Francs, above Monday’s open of 18.02, after concluding that the company may be able to get revenue as a supplier of components for “AI photonics” at some unspecified point in time. (There is also a U.S.-listed depository share.)

The week that ended May 8th saw stocks rise on more positive earnings reports, and the TL20 group of stocks to consider was up 11%, one of its best weekly performances ever.

The TL20 continues its parabolic rise, now up 48% in the month of April alone, for a total gain of 485% since inception through May 8th.

The TL20 has handily beaten all its benchmarks, including the Russell 1000 Value index and Cathie Wood’s Ark Innovation ETF.

Standout gainers this past week continued to be AI-linked hardware names, with Micron Technology and SanDisk up 30% and 24% for the week.

However, we’re seeing what appears to be a software renaissance, with a select group of stocks seeing tremendous gains this past week.

Datadog, DigitalOcean, and Innodata all soared following earnings reports that showed they have a hand in helping with AI’s problems in production.

For many decades, Gary Smith, the CEO of fiber-optic giant Ciena, has pursued a hobby that requires a special kind of dedication and patience. 

Trained in the use of large-format plate photography, he travels the world on his off time doing beautiful black and white pictures, austere and highly detailed. Although he shoots with a digital Hasselblad camera, Smith follows the same painstaking steps setting up each shot that he was taught in early days. “I'm setting the aperture, I'm setting the speed, I'm setting the light balance — I'm doing all that manually because I'm thinking about what I want to convey,” Smith told me this week in an interview via Zoom.

Smith says the hobby is a nice break from the day to day of running a company, something that “makes me look around and get in the moment.”

To my mind, his patience for the craft is rather emblematic of his tenure at the company. 

Smith celebrated twenty-five years as CEO of Ciena on May 1st, an astounding track record in an industry that tends to churn CEOs quite a bit.

The most remarkable part is that after the DotCom collapse that devastated the fiber-optic business, Smith made sure Ciena was a survivor via focus, focus and focus: selling the fastest optical switches.

I’m going to try to summarize for few in a short span of time what’s been happening overnight because there have been a ton of earnings — fifty companies reporting after market close on Thursday, counting just the ones I tend to follow.

The biggest story to my mind is the 93% jump in shares of Innodata, which is another one of the companies that I had flagged on Saturday as a potential beneficiary of what I’m calling the “token crisis” or “potential token disaster” of AI, the likelihood that costs could spiral out of control. 

As mentioned in my March interview with CEO Jack Abuhoff, Innodata is very much on top of the issues that can make training and deployment of AI problematic. Investors are coming around to that, and after the shares having trended down by ten percent since the beginning of the year, the stock is playing catch-up in a big way.

Innodata’s surge cements what is to my mind an amazing rejuvenation for software stocks this week, following a jump of over 30% for Datadog on Thursday and a jump of over 30% for DigitalOcean on Tuesday, and a rise for Twilio last Friday of 24%. 

Shares of Datadog, one of two software makers I had discussed over the weekend as potential beneficiaries of the coming sticker shock in agentic artificial intelligence, are up almost 30% in pre-market trading at $184.97 after the company beat expectations as usual but also stunned with a big increase in its full-year revenue outlook.

The company now sees revenue of $4.3 to $4.34 billion, which is an increase of $240 million to $280 million versus what the company said in February. That is a 5% increase, which is a significant step up from the pattern of raising forecasts by just one or two percent in the last few years — it’s back to a level last seen in the COVID-19 years, when Datadog constantly dazzled the Street.

I think the most obvious answer for this jump upward is that Datadog’s most prominent customers, OpenAI and Anthropic, have suddenly decided to spend more with the company.

It is, of course, yet another day of AI-related earnings reports. Herewith, some of the highlights.

Even though Advanced Micro Devices has been a star performer this year, up 66%, the stock is up another 19% in early trading at $427.30. The upbeat report ties into the same theme as Intel’s big surge two weeks ago: CPUs are newly relevant for AI.

Bernstein analyst Stacy Rasgon, who I can’t remember ever having anything better than a Neutral rating on AMD stock, this morning raises his rating to Outperform, with the excuse “well, we were always late bloomers.” Rasgon gives the stock a target price of $525, representing a forward P/E of 35 times, way up from the 20 times P/E he had been using before.

Rasgon notes that “many stocks have been climbing
strictly on vibes lately” and that AMD, in contrast, “deserves significant credit for a fundamental story that
increasingly is looking real.” He’s especially encouraged by AMD having OpenAI and Meta both as customers for its GPUs.

Palantir shares are slumping by five percent Tuesday morning at $141.56 despite another very upbeat quarter from the company Monday evening. This is simply a slow reversion to the mean: the stock is beginning to reset to trade more like other software stocks despite big growth.

I was early in predicting difficulty for Palantir in January of last year, but I think my skeptical view of the valuation is now the norm.

Palantir still has amazing “metrics,” such as “Rule of 145,” the combination of revenue and profit, but those metrics no longer dazzle quite the way they did a year go.

The proximate cause, of course, of this mean-reversion is OpenAI and even more so, Anthropic, which every investor now suspects are the more likely AI champions, thus robbing Palantir of its crown.

The following table offers an update on where the TL20 group of stocks to consider stand as far as valuations, as of close of trading on May 1st.

Most but not all of them have seen their P/E multiples and their price-to-sales multiples surge with the 36% gain of the group this year.

There are a few discounts, which I’ve marked in red in the table. The most amazing item is Nvidia at twelve times projected sales, down from eighteen times six months ago. Nvidia is also one of the weaker performers this year, up only 6%, below the Nasdaq’s 8% rise.