Good morning.
Futures green across the board, semis leading. NVDA bid into the open (open-source models are compute additive, not subtractive), MU +2% pre-market, LITE and EOPTX both firm. S&P futures +0.3%, Nasdaq +0.5%. Not much in the tape yet — this is a positioning day ahead of GOOGL Wednesday.
Key earnings reactions: EOPTX earnings call last night fully de-risks the bear case. Demand visibility through 2027-28, NPO/CPO deeply engaged + potential Anthropic-tier customer adds. Supply constraints are managed. This is the single cleanest signal in optics this quarter. (IBM still bleeding from last week's -26% — avoid.)
Asia / macro: China AI narrative accelerating. BABA effectively mandated to open-weights, Aliyun cloud demand surging. TSMC flat, but the undercurrent is demand pull from Kimi K3 and domestic inference scaling. ERCOT interconnection positions selling at premium — power access > generation assets.
Three themes frame the day:
1. Jevons Paradox is real, and NVDA is the beneficiary. Open-weight models (Kimi K3, Qwen) are not commoditizing compute — they're exploding token demand. NVDA's 80%+ GMs hold while standalone labs get squeezed. CoreWeave confirming 50% of compute is already inference. This is the bull case for ASML, TSMC, and the entire semi-cap complex.
2. Model-layer margin compression vs. infrastructure layer pricing power. The margin compression thesis is accelerating at the API level (Coinbase cutting token budget by 50%, JPM trivial for now but accelerating 2H). But the scarce complements — power, networking, advanced packaging — retain pricing. ASML has line of sight to 60%+ GM, 2028 High-NA EUV capacity could reach 110 units. This is not a "peak capex" environment.
3. GOOGL Wednesday is the single most important datapoint for token economics. GCP growth acceleration from 34%→48%→63% is the headline, but the risk is the top 1% of customers (Uber, etc.) optimizing spend. This print decides whether token-multiplication beats token-minimization in the near term. Positioning is light — good r/r into the print.
We'll hit up NVDA, EOPTX, and GOOGL first, then get to semi-cap (ASML, ACMR, TSMC).
KVYO IS A WAITING GAME. Cantor stays Overweight with a $28 PT (57% upside from $17.86), but the real story is the guidance recalibration. Q2 rev guide of $359-363M (23-24% y/y) looks soft relative to Q1’s 28% growth, but management is deliberately guiding closer to actuals — Q1 beat was only 2.7% vs a historical 4-4.5%. CANTOR ESTIMATES A 2.5% Q2 BEAT TURNS INTO $371M ACTUAL (26.5% GROWTH) and expects that $9M beat flows into full-year guidance, lifting implied growth to 23.7% from 23%. That’s not a blowout, but it’s a directional improvement that matters for the narrative.
“We suspect management will flow through the approx. $9M Q2 beat to the 2026 guidance, implying 23.7% expected growth vs. the current 23%.”
THE BULL CASE: Growth is re-accelerating from a lower base, product expansion (Klaviyo Social Marketing) adds TAM, and the new CFO (Erica Smith) brings operational focus. Stifel cut its PT to $24 but kept Buy — they’re just waiting for the guidance shift to prove out. Goldman initiated at $26 Buy, seeing significant upside.
THE BEAR CASE: 57% upside to PT is only credible if the beat/raise cycle restarts. If Q2 prints in line and guidance stays unchanged, the stock stays stuck. The 23-24% growth isn’t special for a 6x sales multiple (let alone a $1.7B market cap). New product adoption is unproven.
Bottom line: KVYO is a Q2 earnings play. If Cantor’s math works, the stock re-rates. If not, it’s a show-me story at $18. Positioning is light — could snap either way, but the guidedown from 28% to 23% growth was the poison pill; the antidote is a beat and a raise.
Verdict: The Lumibird Medical acquisition is the catalyst the bull case needed. Stifel reiterates Buy at $125 (stock at $103), and Needham just upgraded to Buy at $110 — both pointing to the same turning point: IPGP is finally doing what it should have done years ago.
The deal: €300M cash (plus €50M earnout) for Lumibird Medical, ~15.9x FY25 EBITDA. That multiples IPGP’s medical revenue from ~$60M to roughly $200M pro forma. Medical is suddenly 26% of Advanced Solutions sales (was 16%), and the total addressable market expands by ~$1B. IPGP has $800M+ cash, zero debt — can fund this in sleep. CFO did sell some shares at $120, but that’s noise; the strategic vector is the story.
“This deal aligns with management’s strategy of pursuing complementary bolt-on acquisitions in the $50M to $200M revenue range, with medical as a priority vertical.”
Stifel gets it. So does Needham. The narrative shifts from “industrial laser commodity” to “diversified photonics platform.” Rate of change improves. PMs sizing this for the multi-year margin recovery play — that report from management meetings laid out the roadmap.
The mainframe pre-announcement was a gut punch, but at 22% off the highs the value crowd is starting to circle. JPMorgan slashed its PT to $250 from $291 (still Overweight) — the core argument being the stock now trades below sum-of-parts despite the cyclical mainframe headwind. The rest of the Street is playing defense too: Bernstein Market Perform, Argus to $280, Oppenheimer downgraded to Perform, BofA to $280. The question is whether this is a one-quarter inventory digestion or a structural shift in enterprise hardware spending.
"The stock now trades at a discount to its sum-of-the-parts multiple."
The bull case: IBM’s software and services backlog is still growing, Red Hat’s trajectory is intact (AI ops launch for Power systems is a nice catalyst), and the mainframe cycle has historically been lumpy. At $214 — hovered just above the 52-week low of $204.44 — the r/r improves if you believe the guide reset is conservative.
The bear case: Q2 revenue of $17.2B MISSED consensus by ~$660M (consensus $17.86B). EPS of $2.93 short by $0.09. Management blamed a late-Q shift to servers/storage ahead of price hikes — but that sounds like customers pulling forward demand, not a one-time clean miss. If the mainframe weakness spills into Q3, the valuation floor drops again.
NVDA — Compute layer king, 80%+ GMs defensible. Open-source model commoditization compresses lab margins but Jevons paradox accelerates inference demand. Vera Rubin cuts inference costs 90% — the next product cycle is massive and CoreWeave staying NVIDIA-only confirms customer lock-in beyond specs. The anti-NVIDIA trade is wrong.
EOPTX — Stunning Q2 beat: net profit RMB 4.22-5.22B, +51-87% QoQ, far above expectations. Supply constraints being managed — pre-positioned inventory de-risks near-term shipments. Demand visibility out to 2027-28, NPO/CPO roadmap widens the moat. The recent pullback was a gift.
ASML — Margin guidance beats with line-of-sight to >60% GM. High-NA EUV capacity could reach 110 units in 2028 vs 85 consensus — massive upside. EUV prices surged +45% to ~$284M/unit with zero cancellations. Monopoly on sub-2nm lithography, DRAM scaling adds a second demand leg.
INTC — Agentic AI creates a server CPU bottleneck as CPU:GPU ratio approaches 1:1 by late 2027. Advanced packaging (Foveros, EMIB) winning hyperscaler customers — leading indicator for foundry adoption. Foundry as national champion provides a capex floor. Thursday earnings is the key test of shell capacity fill.
GOOGL — Wednesday print is the first major read on token economics. GCP growth acceleration from 34% → 48% → 63% is the headline KPI. Token minimization by top 1% of customers (e.g., Uber, Coinbase) is the risk — but selling TPUs to Anthropic and Fluidstack creates a new revenue stream. Mega-cap internet relative strength vs semis is key.
AMD — Anthropic confirmed as a customer on senior director's GitHub — game changer for inference positioning. Venice (2nm) EPYC CPU launches this week, first enterprise CPU on TSMC 2nm. MI450/550 accelerator pipeline building with competitive pricing vs NVIDIA. Positive price action during semi selloff signals institutional rotation.
MU — Memory is the bottleneck, not logic. Server DRAM spot prices for 64GB DDR5 surged +146% above June contract. Q3 DRAM ASP forecast +21% QoQ. SK Chairman flags 50-60% overall memory demand growth next year with virtually zero supply increase. Sovereign AI demand from Middle East adds a new structural layer.
SNDK — NAND is catching up to DRAM. OEM rush orders confirm +20%+ QoQ price increases for NAND. AI inference servers require massive storage for KV cache and model weights — high-density 3D NAND is the beneficiary. Sector selloff creates a favorable entry using long-dated calendar spreads.
LITE — Optical components are core to AI infrastructure as clusters scale to 100,000+ GPUs. Named alongside NVDA, MU, SNDK in AI infrastructure baskets. Volatility favors structured positions rather than outright longs. Fundamentals strong but caught in sector risk-off.
ACMR — Precision semi-cap exposure vs blunt neocloud longs. "Using an axe where you need a surgeon's scalpel." Benefits from TSMC and memory capex ramp — wet processing equipment for advanced nodes. Better risk/reward than generic infrastructure longs in current environment.
TSMC — Capex hike to $60-64B is the strongest possible demand signal. Tool inflation explicitly cited as a driver — validates pricing power for ASML, AMAT, ACMR. CEO "jealous" of memory peers' profitability is an indirect bear flag on own margins. Stock down 8% despite positive earnings — classic positioning extraction.
BABA — Mandated by Chinese government to pivot from closed to open weights — state forcing infrastructure investment. Qwen 3.8 claimed second only to Fable 5 (2.4T parameter MoE) but lacks benchmarks. Open-source strategy accelerates Aliyun cloud as inference demand scales domestically. State buybacks provide a price floor.
COIN — CEO posted cutting token spend by nearly 50% by routing to cheaper models — extreme example of token minimization. Underscores API pricing elasticity: model providers cannot rely on lock-in. Leading indicator for broader enterprise behavior — winning model minimizes cost per completed task.
JPM — Token expense trivial now but CFO forecasts meaningful acceleration in 2H. Classic S-curve adoption — early stage invisible, then inflects. If JPM sees token spend growing materially, enterprise AI penetration is real beyond early tech adopters. Risk: stays trivial longer than expected.
ZM — CFO grappling with how much detail to give on AI token costs — indicates spending becoming material. Anthropic equity stake is a hidden asset if IPO happens this year. Core business decelerating vs Microsoft Teams, but AI optionality provides a floor. Not a core holding.
NFLX — Revenue growth slowed to 2% — crack in mega-cap armor. Spending $587M on InterPositive (Ben Affleck AI startup) while reducing engagement transparency looks like desperate diversification. Likely company-specific (password sharing fade, content cycle weakness) — no read-through to META, AMZN, GOOGL yet.
CDNS — Kimi K3 open-source chip design hit CDNS and SNPS hard — autonomously designed a functional chip in 48 hours using open-source EDA. If viable, threatens duopoly pricing power. But AI-driven EDA (Rapidus partnership) also an opportunity — threat real but early.
SNPS — Symmetric risk to CDNS from open-source EDA disruption. Larger share in some segments but same narrative. Premium multiple faces downside from this new threat vector. Monitor third-party validation of K3 chip quality.
NBIS — Trading at 1x CY2030 consensus revenue ($45B) — market pricing in perfection. Stakes in Clickhouse, AVride worth ~$8B provide some downside cushion. Neocloud competition intensifying (CoreWeave, Together, Runpod). Any execution miss causes sharp re-rating.