What a week!
We had a light jobs report. SanDisk (SNDK) and Western Digital (WDC) hit me where it hurt (my account). And SpaceX delivered its first earnings report as a public company.
So let's jump into what you need to know right now, including the earnings season boom, Nvidia's (NVDA) monster comeback... and even how Caterpillar (CAT) turned into an AI stock.
Earnings Season Has Been Awesome. But Not for SanDisk.
Q2 earning season has been ridiculously strong, according to FactSet data.
86% of reporting companies have beaten EPS estimates, the highest percentage since Q2 2021.
And earnings are coming in a ridiculous 29.2% above expectations, the highest since at least 2008. Excluding Alphabet (GOOGL) and Amazon's (AMZN) large one-time investment gains, earnings would still be 10.9% above estimates.
Earnings growth is tracking at a whopping 32.0% excluding GOOGL and AMZN.
Unfortunately, our biggest, brightest shining star SanDisk (SNDK) got taken to the woodshed.
The flash memory maker delivered a strong report, but its guidance disappointed and the stock got smacked around. The same happened with Western Digital (WDC).
Now SanDisk is almost 50% off its highs!
But fun fact: SanDisk is still the #1 stock in the S&P 500 index this year:
Meet the Guidance Monster
Last Friday, I said power management semiconductor stock Monolithic Power (MPWR) may be the new SanDisk. And I bought the stock on Monday.
SanDisk and Western Digital's (WDC) guidance disappointments took them out of a unique category of AI stock I call "Guidance Monsters."
These are the AI stocks that deliver revenue guidance so strong that even the biggest bulls can't believe it.
Monolithic Power is seeing wild demand from data center clients.
And last week, its Q3 revenue guidance came in 17% above consensus.
You have to think that the company plans to handily beat that guidance.
See the lines going up and to the right?
Those are consensus earnings estimates:
This is exactly what you want to see with high-octane growth stocks.
Note: I also own SanDisk and Western Digital, so I didn't have a bang-up week on the AI front.
The Nvidia Value Trap Debate Ends for Now
I've been suggesting Nvidia might be a value trap based on its cheap valuation.
That was dead wrong because the stock just woke up:
This week, the stock got a nice boost when Elon Musk said SpaceX (SPCX) will exclusively buy Nvidia chips over AI chipmakers like AMD (AMD).
I've been wondering myself where Nvidia could find its next big customer, and SpaceX may be just that.
I have my doubts about how soon we'll see fully operational data centers in space, but SpaceX's capex spending is going through the roof.
JP Morgan said "we now project capex of nearly $200B in both 2027 & 2028."
A decent chunk of that will flow through to Nvidia.
It's Gonna Be Another Busy Week for AI
While most big companies have reported, multiple key AI/semiconductor names will report earnings next week, including:
Tuesday: Lumentum Holdings (LITE), CoreWeave (CRWV), Super Micro (SMCI)
Wednesday: Cisco (CSCO), Coherent (COHR), Cerebras Systems (CBRS)
Thursday: Applied Materials (AMAT)
So we'll have even more inputs to help us deal with the ultimate question:
Will the spending ever stop?
Everyone from Alphabet (GOOGL) to Meta (META) to Amazon (AMZN) to SpaceX is throwing wild amounts of money at AI infrastructure projects.
Heck, Caterpillar (CAT) raised guidance because of AI data center buildouts.
So maybe we'll add CAT to our list of AI stocks...
Here's the full calendar for next week:
Traders Are... Confused?
The AAII Sentiment Survey shows that investor sentiment is just all over the place week to week.
37.0% of investors are bullish, which is right in-line with the long-term average of 37.5%.
This follows two straight weeks of bearish readings.
This continues the trend of there being no real trend from week to week.
Meanwhile, CNN's Fear & Greed Index popped to 63/100, signifying modest Greed:
Of course, if the market dips 2% next week, sentiment will swing back bearish in the blink of an eye.
So it's getting harder and harder to make sense of sentiment data, because there's never any sustained string of positive or negative readings.
Oh well...
Have a great weekend!
