Good morning.
Futures green across the board. SPX +0.4%, NDX +0.7%. NVDA +1.1% on Rubin supply chain confirmation — production release late July, Blackwell CoWoS trimmed, Rubin up 150%. AMAT +0.8% after the DRAM WFE thesis got a number: five inflections, >2x growth vs NAND. CIEN and LITE both up on CPO de-risking (package-level now, not chip-level drudgery). MU flat — the Innolight pushback on performance rumors is credible but the optics are still muddier than we'd like (management denied the miss forcefully on a roadshow yesterday, full order book through 2027, margins stable). EEFT and RBRK both green in pre-market after strong prints. GTLB flat — waiting on the call transcript for direction.
Asia mixed but holding. China semi names giving back some of yesterday's gains — Innolight (300308 CH) +0.3% after management rebutted the performance miss rumor, but the tape doesn't fully trust it yet. Taiwan holding up on TSMC packaging allocation data confirming Rubin pull-forward. Japan quiet. Dollar steady. Bonds tighter — 10Y at 4.12%. No macro catalyst today, so it's all stock-specific.
Three themes framing the day:
ONE — THE RUBIN CYCLE IS REAL. The supply chain data (TSMC packaging, PCB, connector tolerances resolved) confirms the pull-forward. NVDA's NVFP4 on Blackwell is the efficiency differentiator that keeps the per-token cost advantage intact. CIEN, LITE, ANET all benefit from the interconnects ramp — this is the cycle getting priced in, not the cycle peaking.
TWO — THE SEPTEMBER QUARTER MODEL REVENUE DECELERATION RISK IS REAL BUT MAY BE OVERSTATED. Frontier token pricing still holds a 9x premium to open models. Anthropic at ~$60B run rate. The demand is there — the question is timing. The token minimization trend (enterprises cutting spend by 50% while growing token usage) creates a tug-of-war. We think the market is ahead of itself on the bear case here. GOOGL, MSFT, and META all positioned to benefit from the commoditization of Opus-tier models at lower cost.
THREE — CPO DE-RISKING IS REAL BUT NOT LINEAR. The move from chip-level to package-level discussion is a positive signal. Warpage and CTE delamination are being addressed with duplex stainless steel replacing copper, thermal models being updated. ~6 week timeline slip, not a fundamental failure. This is a call option on CIEN and LITE for the back half of 2026.
We'll hit up NVDA, AMAT, and CIEN first, then get to the semi subs and optics names.
UBS RAISED PT TO $35 FROM $32 — Neutral maintained. Hosted a lunch with management in SF this week, and the team walked away feeling better about the near-term demand backdrop. The key positive: seat growth described as "very healthy." That’s the variable that matters most right now.
"Management commentary around strength in seat growth, described as 'very healthy,' stood out as the most positive datapoint."
The rest of the conservatism from last quarter (macro, price-sensitive cohorts, DAP revenue, tech layoffs, reorg) is generally stable to improving. DAP still a FY28+ story — largest customer running a pilot in early CQ4 after upgrading to 18.8 in late CQ3. Guidance for FY27 looks increasingly conservative, but at 3.7x CY27 revenue estimates the r/r is balanced. UBS wants to see more evidence on seat growth stabilization and DAP traction before getting constructive. Stock at $33.55 — basically at UBS’s new PT. (Bernstein still at $60 Outperform, but that’s a different camp.) Not enough to get aggressive yet, but the floor feels firmer.
DA Davidson keeping the faith at $102 — that's a 32% upside from here, and the thesis is simple: Q2 prints July 29, and they think it meets or beats the bogey. The FX tailwind is fading (modest headwind coming), but management is expected to affirm 2026 guidance of 10-15% adjusted EPS growth off a 12% comp in 2025. Not exactly a barnburner, but for a stock at 12x forward earnings, the risk/reward is attractive if the digital businesses (21% of revenue per Needham) keep compounding.
"DA Davidson expects management will affirm guidance for 2026 with second-quarter results, including 10% to 15% year-over-year growth in adjusted earnings per share."
The Q1 beat ($1.58 vs $1.45) backs up the operating momentum, but the real torque comes from Ren, Dandelion, Ria digital, Xe, and gaming in ePay — things that don't show up in traditional ATM metrics. Needham at $85 is more conservative, but still implies 10% upside. The bear case: too much FX noise and sluggish consumer spend in Europe. But with a 12% EPS growth floor, this is a grind — not a rocket.
The thesis is tightening. TD Cowen comes out of investor meetings with Mehrotra and CFO Murphy and basically says supply stays constrained beyond 2027. Demand from hyperscalers, enterprise, auto is so strong that even customers with supply/capacity agreements still can't cover their total volume needs. That’s the kind of structural undersupply that makes earnings estimates look low.
"Recent field work indicates DDR average selling prices will likely grow more than 15% in the third calendar quarter, followed by mid-single digit growth in the fourth quarter of 2026 and first two quarters of 2027. This implies upside to the Street’s $160 EPS estimate for CY27."
Stock already up 700% in a year, trading at $975 with a $1.1T market cap. TD Cowen keeps $1600 PT. 27 analysts have revised earnings higher recently. The risk? Samsung’s earnings forecast knocked the sector last month – but that’s noise against the supply-demand regime here. Position for the next leg in DRAM pricing, not the last one.
Verdict: The bull case just got a hardware roadmap. That leaked internal memo is a game of chicken with the market — Meta is telling you it will spend $145B in 2026 (top of guidance) and double compute capacity to 14GW in 2027. The stock is up 8% in a week, but Benchmark is holding at Hold while the rest of the Street is piling in at $800-835.
The memo is the real signal. It details multi-year supply agreements with Samsung (memory), SanDisk (flash), and Sumitomo (fiber), plus an existing AMD deal covering up to 6GW of Instinct accelerators. The kicker? Meta’s in-house Iris AI accelerator clears TSMC production in September after a clean tape-out — something the MTIA program has historically struggled with.
"An unusually clean tape-out for the Meta Training & Inference Accelerator program, which has stumbled repeatedly since inception."
Wall Street leans loud and long: Piper Sandler, BofA, and Citizens all have $800-835 PTs (Overweight/Buy/Market Outperform). Wolfe goes further, bumping 2027 capex to $220B. Benchmark’s Mark Zgutowicz is the lone holdout — not bearish, just not ready to chase the stock at these levels on what is still a spend-forward narrative.
Bottom line: The bears will point to $145B in cash burn and a memo that reads like "we’re building this because we can." The bulls see a revenue base growing 26% with 82% gross margins funding a 14GW moat. Rate of change is accelerating, positioning is getting crowded, but the roadmap is now concrete. Watch for the Iris production ramp and any pushback from regulators on Canada’s CAD $13B data center.
BMO raises PT to $98 from $87, stays Outperform. Durable growth thesis intact. Identity solutions (Identity Recovery & Resilience) are the near-term catalyst — already contributing to FY27, with RAC likely in FY28. Revenue run rate $1.42B (+46% LTM), profitability on the horizon. Baird, Cantor, Truist, DA Davidson all reiterate buys with PTs from $90 to $110. Noise is low but conviction is high.
"Rubrik’s identity recovery solutions are largely complementary to identity security providers’ capabilities at this time, though the firm believes Rubrik is replacing Semperis."
That line matters. It’s not just a bolt-on feature — it’s active displacement. Identity is becoming a standalone wedge, not an upsell. R/R still favors the long side here, especially as profitability inflects. Keep it on the watchlist for PMs with mid-cap exposure.
NVDA — Rubin production release confirmed for LATE JULY. TSMC CoWoS allocation shifted: Blackwell down slightly, Rubin UP 150%. The PCB/connector tolerance issue on 224G is resolved — APH connector modification fixed it, no delay. A batch of Rubin SMT boards had a 12% fail rate from GPU shorts, fixed with a new reflow carrier clamp. Supply chain is resilient, suppliers are locked in. Morgan Stanley's roadshow confirms no Rubin Ultra delay and accelerating revenue growth even at $100B/quarter. The NVFP4 + Dynamo inference stack is widening the moat as frontier token pricing faces pressure.
AMAT — #1 in DRAM WFE. Management sees FIVE DRAM inflections (EUV, advanced peripheral logic, CMOS-bonded arrays, vertical-transistor 4F², 3D DRAM) — each requiring new tooling. That's a >2x DRAM WFE growth vs NAND. Plus two advanced packaging inflections: panel-level substrates and eBeam. This is the most diversified semicap exposure in the group. Broad-based recovery, not just AI.
AVGO — Q2 2026 AI semi bookings over $30B against $10.8B shipped. The ratio tells you demand is massively outstripping supply. H2 2026 AI semi revenue expected to DOUBLE from H1. FY2026 guidance of $56B, FY2027 >$100B. ~80% growth at that scale is unprecedented. The hyperscaler custom silicon shift (TPUs, Trainium) doesn't hurt Broadcom — both ASIC and hybrid customers are growing.
TSM — The key catalyst is the 7/16 earnings. Consensus has CY26 capex guide maintained or raised. The supply chain confirmation is clear: CoWoS for Blackwell slightly down, Rubin revised UP 150%. Taiwan supply chain consumables (drill bits, CMP pads, thermal equipment) all at records in June — production activity, not capex announcements. Mobile share sliding to ~20%, AI/HPC at 55%. The capex guide is THE number that anchors the entire AI semis chain.
ASML — Memory rose to 51% of net system sales in Q1 2026, up from 30% in Q4 2025. Dramatic shift. EUV and High-NA are critical for DRAM inflections (4F², 3D DRAM). Average EUV price nearly doubled in 5 years. Memory becoming the largest segment is structural — supports higher ASPs and volume.
MRVL — Google's 2.4T coherent-lite transceiver modules for TPUv9 scale-up are entering mass production. Marvell supplies the custom DSP. This is near-term revenue for the datacenter optical business. Coherent-lite is the bridge before CPO volume (~2029). Multi-year visibility in AI scale-up networking.
CIEN — ~50% of revenue from cloud customers (Nokia <10%). WaveLogic 6 Extreme supports 1.6 Tb/s. 63% long-haul DCI market share. $7.8B backlog. Both Ciena and Nokia benefit from 'rip and replace' tailwinds, but Ciena's cloud exposure is a structural advantage.
LITE — CEO says "trying to build up capacity as much as we possibly can to fulfil demand that we see out five years." Several years of visibility in a supply-constrained photonics market. Key supplier for AI datacenter optics.
ORCL — Profits expected to triple over 3 years. Trading below 10x 2029 earnings. OCI growing 93%. Backlog ~$640B. One of six public cloud providers now (SpaceX and Meta added). Multi-year revenue visibility.
MSFT — Only hyperscaler that hasn't issued debt for the AI buildout. FCF positive through the super-cycle. Trading at ~20x forward, lowest in a decade. Nadella's "reverse information paradox" thesis positions Azure as the trusted enterprise defense layer. Owns 30% of OpenAI but flags data risk — competing with the model layer.
AAPL — Sued OpenAI for trade secret theft. Former VP allegedly directed employees to bring "actual parts" to OpenAI. Could disrupt OpenAI's hardware plans. Bearish signal: Apple's negotiating leverage with memory suppliers is eroding as AI/HPC dominates demand. Mobile now ~20% of TSMC, AI/HPC 55%.
WULF — Signed 20-year, $19B lease with Anthropic covering 401MW. Headline is massive but the $3.5B first payment source is questioned. Signal of long-term AI capacity demand at scarcity pricing, but financing structure raises credit quality concerns.
SKHY — Q1 2026 revenue $35B (was $12B Q1 2025). New ADR listing up 13% first day. Employees got $400k bonuses. Leader in HBM. HBM4E bit exchange rate (4-5x) increases DRAM wafer consumption per GB. Chairman noted it took 9 YEARS to build Yongin cluster.
DELL — CEO: 4 years to build a memory plant. Investments for 2027 capacity would have been made in 2023. Structural lead time constraint in memory supply.
SPCX — Raised over $100B to attack $28.5T TAM. Plans orbital data centers launching next year. Anthropic pays $15B/year for 300MW+. JPM forecasts 5,000 Starship rockets/year by 2031. Goldman expects 5,288 AI missions. If accurate, enormous demand for datacenter and networking in space.
TSLA — AI5 chip taped out on Samsung 2nm at Texas fab. Transistors 3.5x smaller than AI4. Volume production expected. Enhances in-house AI for FSD and robotics.
NFLX — Narrative of deceleration may be premature. Password-sharing tailwinds ended, but ad tier scaling. AI content generation could lower production costs and expand margins.
TMDX — Flight tracker shows +11.8% MoM, +73.6% YoY in July. Management targets 10k OCS cases by 2028, 20k by 2030, 30k by 2032. Revenue could hit $2B by 2030. Undervalued.
NBIS — Former CFO says 10-15% ROC guidance is sandbagging. CRO says demand is "extraordinary, much more demand than we're able to fulfil."
APH — Connector modification resolved the Rubin PCB/connector impedance tolerance issue. The fix enabled the production ramp to begin.
GOOGL — Deploying 2.4T coherent-lite for TPUv9 scale-up using Marvell DSPs. Bullish for networking. But hasn't released a frontier model in 5 months — a "decade in LLM world." Distribution moat (search, Android, Chrome) may still dominate.
Hearing the September quarter could see a revenue deceleration for frontier models. Meta and SpaceX both released Opus-tier models at ~1/4 the cost, and enterprise token minimization is accelerating. Sam Altman acknowledged the pricing pressure with the 5.6 sol release.
Word is Innolight management forcefully denied the performance miss rumors in a direct roadshow. Full-year 2026 and 2027 orders are booked by QUARTER AND MONTH. Margins stable, material easing in H2. The selloff was sentiment-driven, not fundamental.
Channel checks suggest CPO warpage and CTE-driven delamination are the gating issues. Duplex stainless steel replacing copper, TSMC thermal model updates are the fix. Timeline slipped ~6 weeks but moved from chip-level to package-level discussion — de-risking optics in 2026.
Hearing Anthropic is paying SpaceX $15B annually for 300MW+ of compute. The TeraWulf $19B lease headline uses a different layer — 20-year, 401MW, equivalent to ~$2.1B annual landlord revenue per facility GW. The financing structure is being questioned — where does the $3.5B first payment come from?
Word is the Csquare IPO (Brookfield-backed, 64 data centers) is pricing at top of range to raise ~$1.35B at ~$4.2B valuation. Revenue growing 16% but net loss widening. Margin path unproven.
Hearing one of the world's largest hedge funds says its AI token spend is up 86x YTD. Quants are being empowered with LLM tooling. Institutional adoption accelerating.
Channel checks suggest frontier token pricing has SPLIT BY TIER — premium models at ~9x the rest, open models commoditizing. OpenAI/Anthropic/Gemini weighted price rose from $1.07 to $1.62 per million tokens since January. All others dropped from $0.22 to $0.18. This supports continued spend on highest-end silicon.
Word is the Rubin ramp is pulling forward CoWoS demand. TSMC's advanced packaging allocation confirms: Blackwell down slightly, Rubin UP 150%. The PCB tolerance issue is resolved with APH connector modification. No delay.
Hearing Broadcom CEO says AI semi demand is "far outstripping supply." H2 2026 revenue doubling implies rapid capacity expansion AND strong pricing power. Q2 bookings of $30B vs $10.8B shipped — the ratio is insane.
Word is NVIDIA's NVFP4 combined with Dynamo orchestration is significantly reducing cost per token. The inference stack moat is widening as frontier pricing faces compression.
Channel checks suggest US electricity intensity increased 0.7% in 2025 — first increase after decades of decline. Too early to call a trend, but AI/data center demand is the likely driver. Structural shift if it persists.
Hearing TensorWave's GitHub repo accidentally revealed their deployed hardware config. Rare look at a non-hyperscaler AI cloud's actual infrastructure.
Word is the September quarter model-revenue deceleration risk is real. Enterprise token minimization went from "token maxing" in March to "token minimization" in June. Coinbase CEO says they cut AI spend nearly in half while token usage grew.
Hearing Satya Nadella's "reverse information paradox" thesis is a subtle signal that Azure is increasingly competing with the model layer — Microsoft owns 30% of OpenAI yet flags data risk to enterprise customers using third-party models. Defensive positioning for Azure.