The find comes at a time when OXY has a much cleaner "oil & gas" producer profile following the sale of its chemical division to OxyChem and aggressive debt reduction. The combination of new potential in offshore projects and strong cash flow from Permian puts the title back on the radar of investors looking for leverage in oil but not wanting an extremely leveraged name.

What we know about the new discovery in the Gulf of America

Occidental $OXY has been ramping up activity in the Gulf of Mexico in recent years, using the term "Gulf of America" as part of a broader package of offshore projects. It's an area where the company is betting on deepwater projects in paleogenic formations that may hide significant volumes of oil, in addition to established fields.

According to company commentary and sector analysis, OXY plans to increase capital expenditures in the "Gulf of America" by about $250 million, precisely because of new opportunities in the deeper horizons of the Gulf of Mexico and parallel projects in Oman. Already in 2025, the company launched the ultra-deep "Bandit" well targeting paleogene structures, a clear signal that it wanted to resume an aggressive exploration role in the region.

The new find builds on that story: it confirms that the Gulf of Mexico - or "Gulf of America" as some US companies are using it after President Donald Trump's policy advice - still offers attractive growth opportunities, even though the region has been mined for decades. Exact figures on the size of the deposit and expected costs are not yet publicly available, but the mere fact of a commercially interesting discovery boosts market confidence in OXY's long-term reserves.

A clean balance sheet: OxyChem gone, debt below target

In parallel with exploration and new projects, Occidental is undergoing a significant financial transformation. The company closed the sale of its chemical division OxyChem to Berkshire Hathaway for $9.7 billion, of which roughly $6.5 billion was used to reduce debt. This brought net debt below the long-term target of about $15 billion and significantly reduced the leverage that the market had blamed the firm for after the Anadarko acquisition.

In terms of the structure of the business, this means that OXY is now a much "cleaner" energy company whose results are mainly driven by oil and gas in the Permian, Rockies and Gulf of Mexico. It's a clearer story for investors: less of a conglomerate mix of chemicals and upstream, more direct exposure to oil, but with a balance sheet that can afford higher buybacks and a more stable dividend.

Production, capex and reserves: where OXY stands

For 2026, Occidental projects capex in the $5.5-5.9 billion range and average production of 1.42-1.48 million barrels of oil equivalent per day. The main driver of growth remains the Permian, where the company has acquired additional prime assets in the high-return Midland Basin following its acquisition of CrownRock.

Analysts point out that cost optimization and infrastructure sharing at Permian have resulted in OXY's "all-in" cost per barrel hovering somewhere around $30-35, allowing the company to generate solid free cash flow even at relatively conservative oil prices. Reserves at the end of 2025 were in the single billion boe range, and the high recovery rate shows that the company can replenish reserves both in the Permian and in offshore projects.

New discoveries in the Gulf of America should further strengthen these long-term reserves. Combined with the production growth in the Permian and the potential to increase profitability through Stratos-type projects (CCUS, CO₂ recovery in EOR), this gives OXY a relatively comprehensive portfolio - from conventional production to low-carbon projects that may be worthwhile in the future thanks to tax incentives.

How OXY shares are reacting

The market is reacting positively to the combination of the new find, improved balance sheet and higher oil prices. In recent weeks, Occidental shares have hit new 52-week highs in the $56-$66 range, driven by the oil price, but also by improved results and the outlook for steady or slightly rising production.

The rise in oil prices following heightened geopolitical tensions and signals of renewed interest in offshore exploration (including in the Gulf of Mexico) by major energy companies are creating an environment in which investors are reassessing the valuations of producers like OXY. The company itself has repeatedly beaten earnings expectations over the past year, thanks to a combination of higher-than-planned volumes and a more efficient midstream environment, helping it to mitigate the impact of oil price volatility.

Importantly for the valuation, OXY is no longer in 'survival mode', but in managed growth and return on capital mode. Lower debt, stable capex and new discoveries in the Gulf of America give management room to continue its mix of dividends, buybacks and selective investments without having to reach for extensive new debt.

What this means for investors

For investors who believe in continued structurally higher oil prices and a shift in production from some from shale back to offshore projects as well, Occidental is one of the visible beneficiaries. The company has quality assets in the Permian, is growing in the Gulf of Mexico ("Gulf of America") and at the same time has a significantly improved balance sheet following the sale to OxyChem.

On the other hand, the classic risks of the energy sector have to be taken into account: the oil price, the regulatory environment and the technical risks of deepwater projects. If the combination of lower oil prices and weaker demand is prolonged, it could knock both profits and the market's willingness to pay current multiples for Oxy.

Do you think Meta’s AI model can outperform ChatGPT? Do you own shares of $META?

$TSLA once again raises a topic the company has promised and postponed for years – a truly affordable electric car. According to current reports, the firm is working on a smaller, more accessible model, likely a compact SUV, which should cost less than the current Model 3.

This move comes at a time when demand for electric cars is weakening and competition, especially from China, is pushing prices down. At first glance it looks like a return to Elon Musk’s original vision – making electric cars accessible to the masses.

A turnaround strategy, or a sign of trouble

Optimists see the cheap model as a chance to reignite growth and appeal to a broader market. Tesla is facing slowing sales and growing inventories of unsold cars, which points to softened demand. Skeptics, however, note that the company has changed or canceled similar plans several times before — for example the “Model 2” project. Moreover, in recent years Tesla has focused more on robotaxis, AI and robotics than on traditional cars. The budget model could therefore be more of a reaction to pressure than a well-considered strategy.

Tesla’s future: cars or technology

The key question is where Tesla is actually heading. The company still earns most of its money from car sales, but its leadership increasingly speaks about autonomy and artificial intelligence as the crucial future. An affordable electric car could be a bridge between the present and that vision — or conversely proof that Tesla still can’t do without conventional cars for now. Investors are watching to see whether this is a new beginning or just a step backwards.

Is a cheap Tesla a real game-changer, or just a necessity?

On March 17-18, 2026, the Federal Open Market Committee (FOMC) agreed to keep interest rates in the 3.50%-3.75% range. The decision was made by a vote of 11 to 1, with the only dissenting vote coming from Stephen Mirano, who favored a 25 basis point cut. While the rate decision itself surprised no one, the content of the minutes reveals deeper tensions within the committee than the brief press release suggests.

The March meeting took place in an environment of greatly heightened uncertainty. The conflict in the Middle East, which led to the closure of the Strait of Hormuz, shot up oil prices by around 50%. At the same time, concerns remain about the impact of artificial intelligence on certain sectors of the economy, particularly the software industry. Inflation as measured by the PCE index remains at 2.8%, still well above the Fed's 2% target. It was this combination of factors that made the March meeting minutes some of the most important in years.

US interest rate developments in 2018-2026

What the Fed said: key points from the minutes

The FOMC minutes reveal several key insights that go beyond the brief press statement.

• First, most participants noted that upside risks to inflation and downside risks to employment have increased. This is a very important signal because it suggests that the Fed is facing a so-called stagflation dilemma, a situation where the economy is slowing while inflation remains elevated. In such an environment, the central bank cannot simply cut rates without the risk of further price increases, nor can it raise them without the risk of deepening the economic downturn.

• Second, some Committee members openly discussed the possibility of raising rates. The minutes indicate that some participants saw a strong case for a possible increase in future interest rates. This is a significant shift in rhetoric from previous meetings, where the debate focused primarily on the pace and timing of rate cuts.

• Third, futures markets were already signaling at the time of the meeting that the probability of a rate hike by early next year had risen to around 30%. At the same time, options markets pushed back the expected timing of the first rate cut to December 2026. This is a fundamentally different situation from expectations at the start of the year, when markets were still pricing in two cuts during 2026.

Inflation: oil shock complicates disinflationary trajectory

One of the most discussed topics at the March meeting was inflation and its outlook in the context of the surge in energy prices. Headline PCE inflation was 2.8% in January and core inflation (excluding food and energy) was 3.1%. Both readings were about a quarter percentage point higher than a year ago.

Fed projections from above: GDP, unemployment, inflation, core inflation

Source: Federal Reserve

Causes of elevated inflation

Two factors are primarily behind the rise in core inflation.

• The first is the continued impact of tariffs, which raise the prices of core goods.

• The second factor is still elevated non-residential services inflation, which remains above pre-pandemic levels.

On the positive side, inflation in the housing sector has slowed considerably and is approaching pre-pandemic levels.

However, the oil shock brings a whole new dynamic to the situation. Oil futures rose by around 50% during March, which is already feeding through to consumer energy prices. Oil companies, however, have benefited from this trend. Shares in companies such as $XOM, $CVX and $COP have strengthened significantly during this period. Meanwhile, the equity markets as represented by the $^GSPC index weakened.

The annual inflation swap rose by almost 50 basis points. Interestingly, however, forward inflation compensation rates at horizons beyond one year remained virtually unchanged. This suggests that markets believe that the current oil shock will be relatively short-lived.

In its updated projections, the Fed raised its estimate of headline and core PCE inflation for 2026 to 2.7% (up from December's estimate of 2.4% for headline and 2.5% for core inflation). The estimate remains at 2.2% for 2027 and the target 2.0% for 2028. However, a major concern of Committee members relates to the possibility that longer-term inflation expectations could become more sensitive to energy prices after several years of above-target inflation. If this were to happen, a temporary oil shock could turn into a more permanent inflation problem.

Updated FOMC Economic Projections (March 2026)

Labour market: stability on the surface, vulnerability under the surface

The unemployment rate remained at 4.4% in February, the same level as in September 2025. However, average monthly employment gains remained low and February's data were further affected by the health sector strike and unusually harsh winter weather. Most meeting participants assessed the labor market as broadly balanced, but some pointed to worrying signs.

Hidden risks in the labour market

Several factors are worth noting and are explicitly mentioned in the minutes.

The concentration of job creation in health care and a few other sectors suggests that the broad base of the economy is not strong enough to generate new jobs. Several meeting participants also warned that firms are beginning to delay or reduce hiring in anticipation of adopting AI and other technologies, which could lead to a more significant increase in unemployment if another negative shock comes.

The vast majority of participants assessed the risks to employment as tilted to the downside. Many pointed out that in an environment of low job creation, the labour market was particularly vulnerable to adverse shocks. Most Committee members also mentioned the risk that conflict in the Middle East could weaken business confidence and further reduce hiring. The Fed's projections for unemployment remained relatively stable: 4.4% for 2026, 4.3% for 2027 and 4.2% for 2028.

Economic growth and financial markets

Despite all risks, participants noted that economic activity continued to expand at a solid pace. Consumer spending remained resilient, supported by growth in household wealth. Corporate investment remained robust, mainly driven by the technology sector and AI-related investments. The Fed raised its GDP growth estimate for 2026 to 2.4% (from 2.3% in December) and for 2027 to 2.3% (from 2.0%).

There have been several notable trends in financial markets over the recent period. Equity indices weakened by around 5%, with the software sector again lagging due to concerns about artificial intelligence. The dollar held steady thanks to its safe-haven status and the US position as a net energy exporter.

International developments are also worth noting. Several central banks, including the European Central Bank, the Bank of Canada and the Swiss National Bank, have started to expect a modest rate hike later this year, although initially they were expected to stay put or ease further. Increased energy prices are thus creating global inflationary pressures that are affecting monetary policy around the world.

Projections for real GDP in 2026-2028 and beyond

Source: Federal Reserve

Dot plot and rate projections: one cut, but with an asterisk

The updated dot plot from the March meeting shows that the median of the FOMC members' projections assumes one rate cut during 2026 (median year-end rate of 3.4%) and another cut in 2027 (median 3.1%). What is important, however, is what lies below this median.

Seven out of 19 participants expect rates to remain unchanged this year, one more than in the December projections. The spread of projections for 2027 is considerably wider than before, with a range from 2.4% to nearly 4.0%. The long-term neutral rate moved higher to 3.1%, signaling a collective belief that the neutral rate level is higher than previously thought.

It is key for investors to understand the difference between the dot plot and market expectations. While the dot plot still points to one cut this year, the CME FedWatch at the time of the meeting assigned approximately a 75% probability that rates would remain unchanged through the end of the year. So the markets don't have much faith in the Fed to actually get to a cut.

This chart shows the Fed's assumptions about the future path of interest rates.

Source: Federal Reserve

Change of Chairman

The March meeting also has a political dimension. Jerome Powell is likely to chair the Fed for the last time. President Trump has named Kevin Warsh, a former member of the Board of Governors who is widely perceived to be more supportive of lower rates, as his successor, although he has not publicly commented on current monetary policy.

At the same time, the legal dispute surrounding Powell is ongoing. U.S. Attorney Jeanine Pirro issued a subpoena in Washington in connection with the renovation of the Fed's headquarters, which Powell has described as a pretext to push for rate cuts. The court sided with Powell and dismissed the subpoena, but the appeal process continues.

What this means for investors

The minutes from the March FOMC meeting offer several important takeaways for investors.

The first key takeaway is that the Fed is in wait-and-see mode. All participants agreed that monetary policy is not on a predetermined path and will be determined based on incoming data. That said, any other major economic report, from inflation data to labor market numbers to oil price developments, could move market expectations significantly.

The second key point is that the rate hike scenario is no longer purely academic. The fact that some FOMC members have openly talked about the possibility of a rate hike if inflation remains elevated is an important signal. For growth stocks and highly leveraged companies, such a development would present significant hurdles.

A third key theme is the growing importance of geopolitics for monetary policy. The conflict in the Middle East and its impact on energy prices has become a central factor in Fed decision-making. Despite the current two-week truce, oil prices are still high and will feed through to the economy in future data releases.

What to watch next

• The evolution of the Middle East conflict and oil prices: if oil prices remain at current levels or rise further, inflationary pressure will increase and the likelihood of a rate cut will drop significantly.

• Inflation data for March and April: Any further number exceeding expectations will strengthen the case for higher rates for a longer period of time.

• Next FOMC meeting April 28-29: No update on the dot plot, but with minutes that may show whether the rate hike debate has widened.

• Transition in Fed leadership: The end of Powell's term in May and the arrival of Kevin Warsh may bring a change in communication strategy and monetary policy priorities.

• Impact of AI on the labor market: the Fed explicitly mentions that firms are delaying hiring due to expectations of AI adoption. This trend may slow job creation even without a recession.

The March FOMC meeting minutes confirm that the Fed is in one of its most complicated periods in years. The combination of still elevated inflation, the Middle East oil shock, a slowing labor market, and structural changes associated with artificial intelligence are creating an environment in which the central bank has no easy path forward.

For investors in particular, this means increased volatility, uncertainty about the direction of rates and the need to closely monitor every other economic report. There is a path to further rate cuts, but it is narrower than at the start of the year and depends on developments that the Fed has only partial control over.

What complicates the decision today is not the quality of the company, but the price you are being asked to pay for that quality. With the share price up about 37% over the last five years, the key question is whether it can keep compounding revenue and margins fast enough for current valuation multiples to make sense, or whether too many good years are already priced in and future returns will be constrained even if the business continues to execute well.

Top points of the analysis

• Baidu made CNY129.1bn (about USD18.5bn) in 2025, down 3% from a year earlier; but in Q4 2025, revenue grew sequentially by 5% to CNY32.7bn (USD4.68bn).

• New AI business already accounts for 43% of core segment revenue and generated over CNY40bn (roughly USD5.6bn) for the full year with 48% growth; AI infrastructure (cloud for AI) alone brought in about CNY19.8bn (USD2.8bn) and grew 34%.

• Net profit in 2025 was about CNY14.1 billion (about USD2.0 billion) and earnings per share was CNY6.99, up about 11-17% year-on-year by metrics; in Q4, profit was CNY1.8 billion (USD255 million) and earnings per share was CNY3.71.

• Apollo Go's robotaxi has completed more than 17 million rides, has been driven in more than 20 cities in China, is being tested in Europe and Dubai, and works with platforms like Uber and Lyft; it travels hundreds of millions of kilometers annually in autonomous mode.

• The company is sitting on cash and short-term investments of over CNY294-296 billion (about USD42 billion), has launched a USD5 billion share buyback and announced a plan to pay its first dividend, an exceptional signal for a Chinese tech firm of this type.

What has changed

Until a few years ago, Baidu $BIDU was all about search, advertising and a few ancillary digital services. Today, the revenue structure is different: the "new" business related to artificial intelligence - i.e. AI infrastructure, services on top of the ERNIE model and automation - makes up almost half of the core, while traditional advertising is stagnant or slightly declining. In the 2025 numbers, it's easy to see: while overall revenue is down 3%, revenue from the new AI business is up nearly 50%, so it's starting to take over as the main driver.

At the same time, profitability has changed. Instead of higher investment in AI leading to a deep loss, Baidu has managed to maintain solid margins: net profit of CNY14.1 billion (USD2.0 billion), earnings per share of CNY6.99 and total operating profit of CNY20.2 billion mean that the AI transition is proceeding on a relatively sound financial footing. In the fourth quarter of 2025 alone, AI activities already accounted for CNY11.3bn (USD1.6bn) in revenue, or 43% of the underlying business, and their growth momentum is much higher than the rest of the company.

There has also been a big shift in robotaxi. Apollo Go is no longer just a trial program in two cities, but a service with millions of actual rides, driverless operations in multiple locations, and plans to expand outside of China. It has reportedly completed more than 17 million rides and is operating in more than 20 Chinese cities, with tests and pilots also underway in Europe and the Middle East. Baidu is thus collecting valuable real-world traffic data that is critical to the quality of autonomous driving.

How it becomes money

From an investor's perspective, the most important thing is that Baidu is starting to have three distinct sources of future value.

The first is the AI infrastructure itself. Baidu is not just selling a "cloud" but a specific AI building block: data centers, computing power, its own ERNIE model, and ready-made enterprise services. AI infrastructure revenues of around CNY19.8 billion (about USD2.8 billion) a year and 34% growth show that there is interest in this offering. This is a business that is high-margin when scaled - once built, the facilities can serve many clients.

The second source is Apollo Go robotaxis. In the short term, it's a project that costs more than it makes, but as mileage and cities grow, it starts to approach economics where the cost of operation spreads out significantly. Additionally, Baidu doesn't need to build its own app for end customers everywhere - it integrates its system into existing platforms like Uber and Lyft to focus on technology and fleet management, while leaving marketing and user interface to partners. If autonomous transportation takes off, this puts Baidu in a good position to earn a commission or royalties from it.

The third source is working with capital. The company has over CNY 294 billion (roughly USD 42 billion) in cash and liquid investments, which is almost comparable to its entire market capitalization. This cash is funding both its large-scale AI investments and its US$5bn share buyback and, more recently, its dividend. If profitability and growth can be sustained, the combination of buybacks and dividends can significantly increase earnings per share and gradually create a "floor" under the stock price.

The numbers that support this thesis

Several key numbers emerge from the 2025 results. Total annual turnover of CNY129.1bn (USD18.5bn) was down 3%, but of this, new AI business was around CNY40bn (USD5.6bn), growing 48% year-on-year. AI infrastructure turnover of around CNY19.8bn (USD2.8bn) grew 34%, with AI activities accounting for CNY11.3bn (around USD1.6bn) in Q4, or 43% of the underlying business.

Net profit of CNY14.1bn (USD2.0bn) and earnings per share of CNY6.99 imply year-on-year growth of around 11-18%, confirming that Baidu is managing to increase profitability even without strong growth in overall revenue. In Q4, net profit was CNY1.8bn (USD255m) and earnings per share CNY3.71, with a margin of around 5%; at the operating level, the firm is seeing margins of around 5-10% depending on whether we look at accounting or adjusted results.

The balance sheet remains very strong: total cash and investments at the end of the year exceed CNY294bn (over USD42bn), with a debt-equity mix more consistent with a conservative profile than an overbought growth title. This is an important difference from many other AI companies - Baidu can invest for the future from a strong balance sheet, not from debt risk.

Comparison with competitors

Compared to other large Chinese tech firms (Alibaba $BABA, Tencent $TCEHY), Baidu looks like the purest AI bet, but also the most "punished" title in terms of return on capital. While Alibaba and Tencent have significantly higher ROEs and stronger, more mature businesses in e-commerce and gaming, Baidu has ROEs of only around 3-4% and again, much of its profits are being tipped into AI projects that are just getting off the ground in terms of numbers. On the other hand, Baidu is trading just below book value (P/B ~0.98) and at less than double sales, while both Alibaba and Tencent are trading higher - so the investor is paying relatively less for each yuan of sales and equity.

Even more interesting is the comparison with US AI-related companies. Large providers of cloud services and computing power for AI, such as Microsoft, Alphabet or Amazon, have significantly higher revenue multiples (often 4-8 times) and profit margins, but also much greater exposure to Western regulation and an oversaturated market. Baidu trades at around 2 times revenue against them, with similar gross margins but significantly lower return on capital - so the market is clearly discounting it for the Chinese environment and the fact that some AI projects are still in the build phase.

In the autonomous transport segment, Apollo Go is a direct competitor to projects like Waymo (Google), Cruise or robotaxis from Tesla and other manufacturers. In terms of cities, mileage and fully driverless driving, Baidu is among the world leaders, but unlike Waymo or Tesla, it does not receive as much attention in the Western press. From an investment perspective, this means that much of Robotaxi's value is probably priced more conservatively in the share price than its US competitors - while investors there often "overpay" for a story, with Baidu we get that story more as a lesser paid bonus.

Valuation

According to current indicators, Baidu is trading at about 36 times earnings, less than twice sales and just below book value - the price to equity ratio is 0.98. That's a combination that we hardly see in a classic "AI growth" title: they typically have significantly higher price-to-earnings and book value ratios, but at the same time often have weaker or negative profitability.

A gross margin of around 45% shows that Baidu still has a very decent margin between revenues and direct costs, but the operating margin is still slightly negative (-2.6%), reflecting the high investment in AI, robotaxis and robotics. The resulting net margin of around 6.9% means that the company can remain profitable on an overall operating level, but the return on capital is still low - a return on assets of just over 2% and a return on equity of around 3.4%. This is significantly lower than what, for example, large US technology firms are achieving today.

From a balance sheet perspective, Baidu looks relatively conservative: debt to assets is 22%, debt to equity is 37% and an interest coverage ratio of 8.5 shows that the company has no problem paying interest on its debt. Liquidity is solid (current ratio 1.91, quick ratio 1.65) and working capital of about CNY 75 billion provides comfort for current operations. Altman's Z-score of 1.60 does suggest that the company is not in a "worry-free" zone, but in light of the high cash and stable earnings, this is not an immediate warning sign, but rather a reflection of the capital-intensive industry.

Investment scenarios

In a favorable scenario, Baidu manages to sustain high AI revenue growth, Apollo Go's robotaxi gets into profit mode in at least some cities, and the licensing model expands with partners in Europe and the Middle East. Overall sales will return to growth, margins will remain in double digits, and the combination of earnings, buybacks and dividends will lead to a gradual revaluation of the stock towards the levels we see today in Western AI titles with similar momentum.

In a realistic scenario, the AI business will gradually fully replace the decline of the legacy segments, total revenues will grow at a mid-single digit rate, robotaxis will act as a long-term option, and capital will be returned mainly through earnings, a modest dividend and buybacks. In that case, it makes sense to expect the current "discount" to historical valuations and to Western competitors to close at least partially.

In a pessimistic scenario, politics come into play - tighter AI regulation in China, conflicted relations with the United States, or reduced cooperation with foreign partners. Combined with a possible slowdown in the Chinese economy, this could limit the growth of AI services, slow the adoption of robotaxis, and prompt investors to demand an even higher risk premium. In such a world, Baidu will remain profitable and liquid, but a valuation discount may become the "new normal."

Risks

Geopolitics and regulation are key risks. Baidu operates in an environment where the state imposes strict requirements on content, data and technology development, and the company is also exposed to tensions between China and the West - be it sanctions, restrictions on technology exports or possible restrictions on Chinese apps and services abroad. The second big risk is technological: autonomous driving and robotics are long-term plays dependent on security, public trust and support from authorities. All it takes is a few serious incidents or a change in rules to slow deployment for years.

Similarly, the competitive pressure cannot be overlooked - in both AI and autonomous mobility, Baidu is competing not only with other Chinese companies, but also with global giants that have a strong position in cloud and model development. Although Baidu has a head start in some areas (for example, in the scale of robotaxi traffic), this head start is not guaranteed. Last but not least, there is the risk that investments in AI and robotaxi will drag on, remain low-margin for a long time, and investors will become impatient.

What to take away

Baidu today is more of a Chinese "AI infrastructure and autonomous" player than a traditional internet company. It brings a combination of a growing AI business, a big bet on robotaxis, a very strong balance sheet and, more recently, a return of capital in the form of dividends and share buybacks - all at a valuation that is strikingly lower than comparable Western titles. For the investor who is not afraid of Chinese risk and wants exposure to AI and autonomous mobility at some "discount", Baidu could be an interesting medium to long-term opportunity.

Underneath that product roadmap lies one of the most aggressive AI capex plans in the market. Meta has guided for 2026 capital expenditure in a range of roughly 115–135 billion dollars tied largely to AI infrastructure, yet still generates tens of billions in annual free cash flow from its core advertising machine, leaving room for buybacks and dividends even after the AI build‑out. For investors, the message is that Mango and Avocado are not being financed with leverage or financial engineering, but with the cash gushing out of Facebook, Instagram and WhatsApp – a bet that today’s ad profits can underwrite tomorrow’s push toward superintelligence.

Mango and Avocado: the first wave after the Llama era

$META has officially unveiled Mango, aimed at generating images and videos, and Avocado, for text-based tasks, logic and programming. These are the first major products from Meta's new Superintelligence Labs division, which builds on the Llama family of models but aims higher in both multimodality and programming capabilities.

The company openly admits that Mango and Avocado may not be instantly the best in all areas compared to OpenAI, Anthropic or Google's $GOOG models. The goal is to have several strong domains that will be attractive to end users - especially in visual content generation and hands-on programming. It is these areas that are intended to help Meta strengthen its core products, from social networking to tools for creators.

Meta initially focused on a flagship model, codenamed "Behemoth," which was intended to be an answer to the most powerful models of the competition. However, its release has been repeatedly delayed due to concerns over performance and its ability to keep up with the top. Llama 4, launched in April, has not received the reception from developers that management expected, deepening Mark Zuckerberg's frustration with the pace of progress. Mango and Avocado thus come as a more pragmatic first step - preferring well-performing models in clearly chosen segments rather than a belated "perfect" jack of all trades.

135 billion dollars: Meta buys the future, but with its own money

Meta is planning capital investments in the range of $115 billion to $135 billion in 2026, nearly double the roughly $72 billion in 2025. The bulk of this is going into AI infrastructure: data centers, compute clusters, and specialized chips for training and deploying models.

The financial results for the fourth quarter of 2025 confirm the quality picture. Revenues were approximately $59.9 billion, up about 24% year-over-year, while net income increased to about $22.8 billion, up 9%. Earnings per share were around $8.9. Thus, Meta is showing that it is able to dramatically increase investment in AI without sacrificing margins and profitability.

This essentially raises the bar for the entire sector: it shows that if the underlying advertising business is strong enough, a tech firm can afford AI investments in the hundreds of billions of dollars without losing Wall Street's confidence. The planned $135 billion in capital spending thus doesn't feel like a gamble, but rather a statement of ambition - Meta wants to be one of the players that define the next generation of AI, not just one of many users of someone else's model.

Alexander Wang and Meta Superintelligence Labs

A key figure in Meta's new AI chapter is Alexander Wang. The 28-year-old entrepreneur, who became a self-made billionaire at the age of 24 thanks to Scale AI, now heads Meta's Superintelligence Labs division while remaining a member of Scale AI's board of directors.

Meta paid approximately $14.3 billion for a 49% stake in Scale AI, securing both the technology and the talent. Wang brought part of his team - the "Scalien" employees - to Meta, along with the know-how in data annotation, data infrastructure and practical deployment of AI in large organizations. Combined with Meta's in-house capabilities, this creates one of the largest integrated AI workplaces in the world.

Mark Zuckerberg is personally orchestrating the recruitment of this new generation of AI leaders. Meta has poached more than twenty researchers from OpenAI and other leading labs and is purposefully building a team to compete with Silicon Valley's elite research groups. Wang also maintains a close relationship with the US government - his Scale AI has won contracts to supply AI tools to the Pentagon, and Wang attended President Donald Trump's inauguration.

Meanwhile, the reorganization within Meta is one of the biggest in the company's history: AI is shifting from its role as a support tool for advertising to a central pillar to influence all major products - from feed and recommendation algorithms to messaging to virtual and augmented reality. Mango and Avocado are the first visible output layer of this transformation, but the real impact will depend on how quickly the company manages to transform internal processes, product teams and the development cycle around the next generation of models.

A partially open approach: between community and competitive advantage

Meta has long profiled itself as a proponent of a relatively open approach to models - something it has already demonstrated with the Llama family. With Mango and Avocado, however, the company is opting for a more sophisticated, "partially open" strategy.

Unlike competitors' fully closed models, Meta wants to make its models available to a wide range of users and developers around the world. The goal is clear: to create the largest possible ecosystem of applications and tools built on its models, thereby locking in its position as the preferred AI platform for consumers in the long term.

But at the same time, the company doesn't want openness to undermine security and its own competitive advantage. For Avocado, for example, it will not include the full range of capabilities to generate advanced cybersecurity or exploit code in publicly available versions. These features will remain limited or only available in a regulated environment to reduce the risk of exploitation.

This "calculated trade-off" is intended to keep Meta in an advantageous position: open enough to attract developers and users, but closed enough to maintain a technological edge where the most valuable capabilities are concerned. At the same time, the company is counting on its models not being the best "across the board," but it wants to dominate in a few strategic segments-for example, optimizing to run on mainstream PCs and end devices, where Meta can leverage its experience with mass-market consumer products.

The total funding package is expected to reach roughly 16 billion dollars, including about 2 billion of equity from Blackstone, with Bank of America leading the design and potential syndication of the debt. The deal is being assembled just as investors are becoming increasingly uneasy about Oracle’s rising leverage, with the stock under pressure this year on concerns that aggressive AI infrastructure spending is stretching the balance sheet. For Pimco and its clients, the appeal lies in the yield on a loan backed by Oracle’s long‑term contracts, but the risk is clear: it is also a leveraged wager that Oracle can manage its growing debt load and that OpenAI‑driven demand will stay strong enough for the campus economics to hold up.

What the financing for Oracle's data centre should look like

According to Bloomberg, Pimco is in talks with Bank of America $BAC about a debt package of about $14 billion that would finance the construction of Oracle's $ORCL data center in Saline Township. If the deal is completed, Pimco will become the lead lender on the project, with some of the risk likely to be spread among other institutional investors.

According to reports, the debt is being considered to be structured as a Rule 144A bond issue, a form of privately placed debt that can be traded by qualified institutional investors. This setup allows the issuer to raise a large amount of funds with a relatively limited pool of investors who are accustomed to dealing with complexly structured debt associated with infrastructure projects.

According to Reuters, developer Related Digital is aiming to close a total of $16 billion in financing for the project, with the debt component led by Bank of America and roughly $2 billion in capital supplied by Blackstone $BX. The negotiations with Pimco add another layer to long-running efforts to secure stable funding sources for the project, despite previous doubts from some partners.

Data centre for OpenAI and part of the Stargate megaproject

Oracle and OpenAI's planned data center in Saline Township is part of a previously announced partnership to deliver additional capacity for the 4.5 gigawatt Stargate project across the United States. According to Oracle, construction is scheduled to begin in early 2026, and the company will ensure the operation of the data center and the integration of the latest technologies for OpenAI's needs once it is completed.

The campus, nicknamed "The Barn" because of the preserved historic red barn at the entrance, will consist of a trio of single-story buildings totaling roughly five hundred and fifty thousand square feet. The data center, with an investment of about seven billion dollars and a projected capacity of approximately 1.4 gigawatts, is to be built on a roughly five hundred and seventy-five acres of farmland south of Ann Arbor.

The project is to be LEED certified and the design calls for minimum building setbacks of seventy-five feet from public roads as well as extensive shading to better integrate the site into the surrounding landscape. Regulators in the State of Michigan have already approved expedited review of contracts with DTE Energy to provide the necessary capacity to connect the data center.

Negotiations continue despite investor concerns

The Oracle data centre project in Michigan has also been met with some scepticism from financial partners in recent months. According to the Financial Times, Blue Owl Capital, which specialises in data centre financing, has decided not to support the project further after negotiations with Oracle stalled.

Oracle responded by saying that developer Related Digital had selected "the best capital partner from a competitive set of options" and that the equity portion of the financing was progressing as planned. A company spokesperson told both Bloomberg and Reuters that Oracle is encouraged by the rapid progress in both financing and site development, and highlighted the ongoing collaboration with OpenAI, Related Digital, Bank of America and other partners.

Oracle's comments reiterate that work on both financing and site preparation is on schedule and that the data center is a key part of the company's broader AI infrastructure expansion strategy. However, it is critical for investors and lenders alike whether the debt structuring can be successfully concluded and the market convinced that the company can finance such a large investment programme without a material deterioration in its credit profile.

Rising debt and pressure on Oracle shares

Aggressive expansion into AI infrastructure is taking a toll on Oracle's balance sheet. Analysts say Oracle shares have fallen more than 25% this year as investors worry about a combination of high capital spending and rapid debt growth. The company has already secured roughly $30 billion through bonds and convertible preferred stock and plans to raise up to another $50 billion in debt and equity.

Extensive investments in data centers have pushed Oracle's free cash flow deep into negative territory, with long-term debt rising to more than $120 billion over the past few years. Credit risk indicators, including the cost of five-year default hedges, are near all-time highs, a signal that the market perceives the risk associated with the company's debt as elevated.

Ratings agencies S&P and Moody's rate Oracle in the investment-grade range, but both companies have previously placed the rating on negative outlook due to the potential for further debt increases. Therefore, the successful closing of financing for the Michigan data center, including Pimco's potential participation, will be an important test of market confidence in the long-term sustainability of Oracle's investment strategy.

Economic benefits for Michigan

The Oracle data center project and OpenAI also have a significant economic impact on the region. According to materials from Oracle and local authorities, the construction of the campus is expected to create approximately two and a half thousand union construction jobs. Upon completion, the complex is expected to directly employ approximately 450 people and indirectly create approximately 1,500 additional jobs in the greater Washtenaw County region.

Oracle has committed to invest millions of dollars in local schools and public infrastructure. The project is estimated to generate about eight million dollars annually for the school district, at least $1.6 million annually in direct tax revenue for Saline Township, and more than fourteen million dollars in direct community benefits. Michigan regulators have already approved the necessary energy contracts, confirming political support for the project at the state level.

The balance sheet looks more like that of a cautious industrial than a flashy AI stock. With roughly 1.7 billion dollars in cash and securities, negligible debt and its first fully GAAP‑profitable fiscal year behind it, the company carries real optionality for buybacks, acquisitions or simply riding out a bad macro patch. Yet the market only asks around four times current‑year revenue and about twice next year’s sales estimate for that combination of sticky enterprise relationships, mid‑teens growth and a fortress balance sheet – a multiple that would be unremarkable for a slow, on‑prem licence vendor, but looks almost suspiciously low in a segment where anything with an “AI” label often clears ten‑plus times revenue.

Top points of analysis

• Revenue in fiscal year 2026 (ending January 31, 2026) was $1.611 billion, up 13% year-over-year; annual recurring revenue (ARR) rose to $1.853 billion, +11%.

• In Q3 and Q4, the company beat its own guidance, with Q3 delivering $411 million in revenue (+16%) and Q4 delivering $481 million (+14%), a decent pace in pure growth terms on an already relatively large base.

• Gross margin is around 83%, GAAP operating margin has gone into the black ($57 million operating profit for the full year and $80 million in Q4 alone), net margin is around 15%.

• Operating cash flow for 2026 was $371 million, the company has been generating positive free cash flow for several quarters now, so the accounting profit is not "paper".

• The firm completed a $1 billion share buyback program and announced a new program of up to $500 million, which at a market capitalization of around $6 billion is a significant signal of management's confidence in its own valuation.

What UiPath does and how it makes money

UiPath $PATH was founded as a company that focuses on one seemingly boring thing: how to make a computer do what people do today at a monitor. In banks, insurance companies, hospitals and industry sit "armies" of people whose job it is to open applications, copy numbers, click approvals and create reports. Each step is regular, but together there are so many that no one can keep track of them manually.

UiPath offers an end-to-end platform where:

• Process analysis and mapping tools identify where there is room for automation

• design tools (often in a low-code environment) allow an analyst or advanced user to define a process

• a "robot" then executes that process - opens applications, fills out forms, reads documents, interacts with databases

• an "orchestrator" runs on top of it all, controlling how many robots run, when, on what tasks, and who is responsible for them

Revenues come mostly from recurring licenses and subscriptions (ARR around 1.85 billion), with a smaller portion from consulting and implementation services that help customers with deployment, integration and training. This makes the business relatively predictable, plus a tight link to how many licenses the client has active and the volume of processes they use.

How UiPath engages artificial intelligence

Previously, people talked about UiPath as a player in robotic process automation. The company itself now talks about "agent automation" - a shift from simply mimicking clicks to a system that can understand context and make more complex decisions.

In practice, for example, it looks like this:

• The AI model can read unstructured documents (invoices, contracts, emails) and extract the data it needs from them.

• Based on the content, it decides what process the document belongs to, what exception needs to be handled or who to send it to for approval

• generative AI allows the user to describe in plain language what they want to automate, and the platform itself will suggest a process structure

UiPath has integrated with major AI model providers (e.g. OpenAI, Microsoft $MSFT, Nvidia $NVDA) in recent years and is trying to be the layer that translates these models into specific enterprise work-flows. From an investor's perspective, it's important that it's not just about marketing: more comprehensive automation means more value per deployment, bigger contracts, and a stronger connection to the customer.

Where UiPath is growing and where it is slowing down

Growth is no longer as explosive as in the early years after going public, but the numbers show solid momentum:

• $1.611 billion in revenue (+13%)

• ARR 1.853 billion (+11%)

• Q3 sales 411 million (+16%), Q4 sales 481 million (+14%)

• Net new ARR $186 million for the year

In terms of momentum, we can see that:

• ARR growth may have slowed from earlier higher double-digits, but the company is still adding significant annual recurring revenue

• dollar-based net retention of around 107% shows that existing customers are spending more than last year, although not at the pace of "hyper growth" cloud companies.

At the same time, however, some analysts are pointing out that a pace of 11-16 percent annually is no longer "wow" for this type of technology - which is why the stock came under pressure after the March 2026 results, despite beating expectations. This is important context: the numbers are good, but sentiment is negative at times due to the view that growth is slowing and that competition from big platforms (Microsoft, other players) may continue to steal potential.

Management and corporate governance

UiPath is led by co-founder Daniel Dines, who was at the birth of the company in Romania and took it from a small team of developers to a listing on the New York Stock Exchange. Dines has long been seen as someone who understands both the technical side of the product and how large enterprises operate - which is why the company often emphasizes stories of concrete implementations, not just "AI in the abstract."

CFO Ashim Gupta, who has been in the CFO role since 2019, is one of the key figures in the transition from "growth at any cost" to a sustainable profit model. It was under his tenure that the company significantly improved operational discipline, managed to get to GAAP profit while building a cash cushion of around $1.7 billion without any material debt.

Management has given some clear signals in recent quarters on how it views capital:

• The priority is a combination of growth and profitability, not a return to aggressive cash burn

• cash is to serve as both an insurance policy and a tool - for potential acquisitions and for a continued share buyback programme if valuations are attractive

• AI is not to become a marketing slogan, but a practical layer that will lift the value of automation with existing clients and accelerate adoption with new ones

Importantly for the investor, the combination of a founder on the board and a CFO who has a proven track record of driving the company to profitability reduces the risk of chaotic strategic turnarounds. On the other hand, it will need to watch how it handles cash - whether it sticks with disciplined buybacks and targeted acquisitions or embarks on larger, riskier purchases.

Profitability and cash flow: switching from "growth at any cost" mode

A few years ago, UiPath was a typical "growth at a loss" business: high sales, marketing and development costs, pressure from investors to acquire positions quickly. 2026 looks different:

• GAAP operating profit of $57 million for the full year, $13 million in the third quarter, and $80 million in the fourth, meaning the company is managing to maintain profits even as it invests in AI and growth.

• Non-GAAP operating profit of $370 million, an operating margin of around 23%, already a level that is consistent with a "mature" software company.

• Operating cash flow of $371 million and adjusted free cash flow of a similar amount, proof that profitability is not just about accounting adjustments to stock compensation.

A return on assets (ROA) of around 7.9% and return on equity (ROE) of around 12.9% from the data confirm that capital is starting to work decently, although the company is not yet "maxed out" to the max - it is still investing in growth and AI direction.

Balance sheet, cash and share buyback program

UiPath is one of the few tech companies that are combining today:

• a large cash reserve

• lower debt

• while growing profitability

As of Jan. 31, 2026, the company had about $1.69 billion in cash, equivalents and marketable securities, working capital of about $1.2 billion, a debt-to-assets ratio of 0.02 and a debt-to-equity ratio of 0.04. Altman's Z-score of 3.5 indicates a sufficient buffer against financial distress.

The approach to return on capital is also interesting:

• The company has completed a $1 billion share repurchase program

• and announced a new share repurchase program of up to $500 million

With a market capitalization of around 6 billion, this means that management is willing to theoretically buy back around eight percent of the company if the price makes sense. Combined with rising free cash flow, this creates the potential for earnings per share growth even with only moderate earnings growth.

Valuation

The following picture emergesfrom the key metrics:

• Sales of 1.61 billion, market capitalization of 6 billion → price to sales of approximately 3.87

• net profit and earnings per share correspond to a price-to-earnings ratio of 26.66

• free cash flow or operating cash flow gives a price to cash flow ratio of around 19.3

• price to book value is about 3.12

For an investor comparing within the software, this can be summarized as follows:

• On the quality side, there is a high gross margin, a positive and growing operating profit, solid cash flow and a very strong balance sheet.

• on the valuation side, the numbers are not "worth a song" but are lower down the bandwidth, not higher, compared to many other AI and automation titles

But part of the market is particularly noting slowing growth. Some analysts argue that the low multiple to revenue is deserved - better businesses are said to have higher "earnings power" and grow faster. Against this is the contrarian view that around 2-4 times expected sales, a first fully profitable year and a billion and a half in cash create an asymmetry that is interesting to the patient investor.

Where UiPath can grow and what it plans to do

UiPath is no longer a start-up, but it's also still at a point where it has some clear growth vectors ahead of it. Management has been quite specific on calls and in investor materials about where it wants to take the company.

1) Target: 2 billion in ARR and more

The company has set an internal milestone of achieving at least $2 billion in annual recurring revenue by fiscal 2027, counting on existing large customers to drive much of the growth. It already has more than 2,500 customers with ARRs over $100k (plus more than 10% year-over-year), and the number of clients with more than 1 million ARRs has grown from roughly 317 to 357 in a single year. This moving "up the ladder" - from smaller contracts to million-dollar contracts - is a key driver of growth because it shows that UiPath is becoming a topic for senior management and not just a one-department experiment.

2) Agent automation and new products

Much of the future growth is set to come from what UiPath calls agent automation. The company is investing massively in tools such as Maestro, Agent Builder, Autopilot and AI Trust Layer to enable the creation of "digital workers" - agents that can independently handle entire processes, not just individual tasks.

• Maestro is meant to manage "swarms" of agents that collectively handle complex multi-step processes across departments.

• Agent Builder and Autopilot are meant to speed up the creation of automations by tens of percent, making adoption easier at companies where there is a shortage of developers and specialists.

• AI Trust Layer is to ensure that AI agents can be deployed securely from a data, regulatory and compliance perspective - a prerequisite for banks, insurance companies or the public sector.

For the investor, this means that UiPath does not want to remain just an "RPA tool", but is moving towards a broader role as a platform that manages the entire digital workforce.

3) Product expansion and new verticals

Growth is not just to come from more bots, but from a wider variety of what the platform can do. The company plans to keep expanding:

• process and task mining - tools that automatically map how work actually gets done in the enterprise and where it pays to automate

• test automation - an entry into the world of DevOps, where a robot tests new versions of systems

• communication and document processing - emails, chats, voice, scans

• contact centre automation - connecting robots with customer support agents

The strategy is to expand the volume that UiPath can bill in a single enterprise through these adjacent areas, while leaning into the verticals where the push for automation is greatest: financial services, healthcare, industrial, public sector. The company itself is targeting to grow in these segments at a rate in the "upper teens" per year, faster than the rest of its portfolio.

4) Partnerships and ecosystem

UiPath is building on the fact that it won't do everything on its own. It strategically relies on:

• Deep integrations with large "hyperscalers" (Azure, Google Cloud, others) that bring both AI models and distribution channels

• a marketplace with over 2,000 prebuilt components and a goal of 20-30 percent of new automations being built from ready-made blocks, not from scratch

• Growing partners' share of new business: the goal is for over 40 percent of new contract value to be generated through partners, which would significantly cheapen and accelerate expansion

A strong ecosystem is important at a time when automation is becoming a common part of large companies' IT architecture. A partner that can deliver the whole package (cloud, AI, data, automation) has an easier position with large customers than a standalone vendor.

5) Geography and public sector

Already, roughly half of UiPath's revenue comes from outside the United States, which means the company is no longer a purely American story. It wants to continue to grow, particularly in Europe and Asia, with an important role to play:

• Local data residency - cloud-based solutions where data never leaves a given country or region

• a sovereign cloud for the public sector - so that government institutions can automate in an environment that meets their security regulations

This is where the space opens up for large and long-term contracts in the public sector, which are slower to win but often more stable over time.

Investment scenarios

Baseline scenario

In the UiPath baseline:

• maintains revenue growth in the 12-15% per annum range

• improve operating margins slightly and continue to generate growing free cash flow

• Use some of the cash for continued share buybacks and possibly smaller acquisitions

In such a situation, the multiples would not need to change dramatically - the investor would profit mainly from earnings per share growth combining sales growth, improved margins and the impact of buybacks. If held for several years, one would expect decent, if relatively "boring", appreciation.

Growth scenario

A more optimistic scenario assumes that:

• agent automation and AI integration prove to be a significant driver of demand

• ARR growth returns to above 20% per annum

• the company is able to deepen the use of the platform with existing customers while convincing more medium-sized businesses.

In this case, the market could decide to price UiPath similarly to other "AI winners", at 6-8 times sales, with profits growing at a double-digit rate - a combination that would offer a potentially very attractive return.

A more cautious scenario

At the other end is a scenario in which:

• growth slows further and falls to single digits

• competition from large platforms persuades some clients to use a 'part of the package' rather than a dedicated platform

• management misuses cash (overpriced acquisitions, inefficient investments)

In such a scenario, UiPath would trade as "mature" software for the long term at somewhere around 2-3 times sales, without significant re-rating. While the investor would not have much risk in terms of solvency, the return would be limited.

What may surprise UiPath positively

• Acceleration in ARR growth due to AI - if the new AI layer proves to lead to bigger contracts and deeper client deployment, it may cause the market to realign its expectations.

• Stronger use of buybacks - if management judges that the share price is well below their intrinsic value, a $500m buyback program could mean a noticeable reduction in share count and faster earnings per share growth.

• Partnership network - better integration with the big players (Microsoft, Nvidia and others) can bring UiPath closer to being a "standard layer" of automation within the AI ecosystem, not just one of many options.

Risks to keep on the table

• Slowing growth - if revenue and ARR slow further, the market may refuse to pay higher multiples in the long term and the stock will remain "stuck".

• Competition - large cloud players have the ability to offer "sufficient" automation as part of a broader suite of services, which may satisfy some of the market.

• Cash utilization strategy - a large cash position is a plus, but also a test of whether management can invest capital in a way that generates value for shareholders.

What to take away from the analysis

UiPath is not the wildest growth stock or the cheapest "deep value" bet today. Rather, it's a solid automation platform that:

• has high margins, is growing at a decent pace

• is profitable and generates cash

• has a very strong balance sheet and actively returns capital through buybacks

• and yet trades at multiples that are not exorbitant for quality software

The key question for investors is whether they believe the combination of AI and automation is not yet fully valued, and whether UiPath will be among those who benefit from it in the next decade. If so, the current price may represent an interesting entry, especially for someone willing to give the company a few years.

For shareholders, this means the narrative of “pure growth on the wave of AI servers” is now burdened by an additional legal and reputational layer: it will be investigated whether this was the excess of a few individuals or whether the company systematically benefited from these sales to China and underestimated export control risks. Until there is clarity, SMCI will face heightened risk of further actions by authorities and investors (lawsuits, potential fines), which could, in the short term, outweigh otherwise strong demand for its AI servers.

Why low debt is a key advantage in 2026

In equity markets, investors have traditionally focused primarily on revenue growth, profit margins or valuation multiples.

However, the Debt-to-Equity ratio, the ratio of total debt to equity, is often overlooked, even though it is particularly important in times of higher interest rates and geopolitical uncertainty.

Companies with low D/E ratios operate in a fundamentally different position than their debt-laden competitors. They don't have to spend hundreds of millions of dollars a year on interest expense, they don't have the risk of refinancing at an inopportune time, and they have the financial flexibility to make strategic moves that debt-laden companies simply can't afford.

2026 will amplify this dynamic. Interest rates in the US continue to hold at elevated levels and the Federal Reserve has not yet signaled significant monetary easing. In this environment, the difference between a firm with minimal debt and one operating with high leverage is much more visible than in the era of cheap money. Moreover, companies with a net cash position can actively use higher rates to their advantage, as their free cash generates higher interest income.

The following six companies combine virtually zero debt with dominant positions in their sectors. From European luxury to enterprise software and e-commerce to gold mining and memory chips. They have one thing in common: a strong balance sheet that gives them a strategic advantage in any market environment.

Hermès $RMS.PA

Luxury without compromise and without debt

Hermès is one of the most exclusive luxury brands in the world, and its financial profile is as exceptional as its products. Founded in Paris in 1837, the company today operates with a Debt-to-Equity ratio of just 0.13. This makes it one of the most financially sound companies in the entire luxury sector. With a market capitalisation of over 170 billion euros, this is a remarkable figure that reflects management's conservative approach to capital structure.

This financial strength is mainly due to the extreme profitability of the business. Hermès achieves a net profit margin of around 28.5% and a return on equity (ROE) of over 25%. The company has cash of around €12.2 billion, while its total debt is only €2.3 billion. Hermès thus operates with a net cash position of almost €10 billion, a position that few companies in the world can afford.

Pricing power as a source of financial independence

The key to Hermès' financial strength is its extraordinary pricing power. Unlike many of its competitors in the luxury segment, the company regularly increases the prices of its products without adversely affecting demand. Waiting lists for the iconic Birkin and Kelly handbags last months to years, allowing the company to maintain extremely high margins without having to resort to any external financing. Revenues for last year were approximately 16 billion euros. In the context of the sector as a whole, the comparison with LVMH $MC.PA, which operates with significantly higher debt and lower margins, is interesting.

However, it is important to note that Hermès shares have depreciated by more than 35% in the last year, reflecting the broader rotation of capital out of the luxury sector. Despite this, the company remains valued at relatively high multiples with a P/E of around 49.

According to the Fair Price Index on Bulios, the stock is still, even after falling 22%, still 16.6% above its intrinsic value.

SAP $SAP

European software giant with minimal debt

SAP is Europe's largest software company and one of the global leaders in enterprise software. With a Debt-to-Equity ratio of 0.21, it is one of the least indebted technology companies in its size category. The company has a market capitalization of over $169 billion and annual revenues of $36.8 billion, making it one of the largest software players in the world.

SAP's financial strength comes from its position in the enterprise resource planning (ERP) segment, which is business process management software. This type of software is extremely difficult for customers to replace, which provides the company with highly predictable subscription-based revenue. SAP has cash of approximately $11.2 billion against total debt of $8.78 billion, a net cash position of about $2.4 billion.

Cloud transformation and its impact on the balance sheet

The company has been undergoing a major transformation toward cloud services in recent years, with its flagship product , S/4HANA Cloud, gradually replacing legacy on-premise installations. While this transition increases capital costs in the short term, it strengthens revenue predictability and improves the margin profile in the long term. Importantly, SAP is financing this transformation largely from its own resources, without the need to significantly raise debt. In addition, the company is actively integrating artificial intelligence into its products through the SAP Business AI platform, which opens up further growth opportunities.

Shares of $SAP have depreciated approximately 31% this year, creating an interesting valuation situation with a forward P/E of around 20. In addition, the beta of 0.69 indicates that the stock is less volatile than the broader market.

Salesforce $CRM

From aggressive acquisitions to a disciplined balance sheet

Salesforce has undergone a significant transformation in its approach to capital allocation in recent years. While the company grew aggressively through large acquisitions between 2020 and 2023 (such as the $27.7 billion takeover of Slack ), it now operates with a Debt-to-Equity ratio of around 0.11 to 0.29, depending on the calculation methodology. This shift reflects a new approach by management, which, under pressure from activist investors, has rethought its strategy towards financial discipline and higher returns on capital.

Salesforce is a global leader in CRM (Customer Relationship Management) software and today serves customers across virtually every industry. The company's annual revenue exceeds $41.5 billion and profit margins have stabilized around 18%, which would have been unthinkable just a few years ago. The company generates free cash flow in excess of $12 billion annually, allowing it to pay down debt while returning capital to shareholders.

AI ambitions funded by its own cash flow

A key theme for Salesforce is the integration of artificial intelligence across its product portfolio through its Agentforce platform. The company is investing in AI agents that can automate customer business processes. A key advantage over many competitors is that Salesforce is funding these investments from its own operating cash flow, without having to raise debt. In an environment where many technology companies are massively increasing CapEx on AI infrastructure and funding it with debt, this is a significant competitive advantage.

Shares of Salesforce have depreciated by about 31% this year, pushing the forward P/E to around 13.6. With a PEG ratio of 0.77, Salesforce trades at valuations that are well below historical averages.

PDD Holdings $PDD

Chinese e-commerce giant with virtually zero debt

PDD Holdings, the parent company of the Pinduoduo platform and global marketplace Temu, has one of the lowest Debt-to-Equity ratios in the entire stock market. With a value of just 0.03, this is a company that is funded almost entirely with equity. This is particularly notable given how aggressively the company is expanding in global markets through the Temu platform.

PDD's financial numbers are extraordinary. The firm has approximately $59.5 billion in cash and short-term investments, while its total debt is only $1.5 billion. Thus, its net cash position is over $58 billion, which is extremely strong for a market capitalization of around $140 billion. Annual sales exceed $60 billion with a net profit margin of around 23% and a return on equity of over 30%.

Risks despite a strong balance sheet

Despite the impressive financials, investing in PDD comes with significant risks, not related to the balance sheet but to the geopolitical and regulatory environment. The company operates in a jurisdiction where regulatory interventions can come unexpectedly and can have a dramatic impact on the business model. In addition, Temu's platform expansion faces increasing protectionist pressure in the US and Europe, where rules for low-value shipments from China are tightening. Added to this is the question of the sustainability of Temu's aggressive pricing strategy, which is based on massive marketing spend. Each quarter's results are so closely monitored.

Yet it cannot be overlooked that PDD Holdings has one of the strongest balance sheets in the entire market. In an environment where many e-commerce companies operate with high debt, this position is a clear advantage. Moreover, the beta coefficient of 0.05 shows an extremely low correlation with the US market.

Despite the rise in $PDD share price in the early days of this year, the price is now 12% below the January 1, 2026 opening price.

Newmont $NEM

Largest gold producer with a conservative balance sheet

Newmont is the largest gold-focused mining company in the world. After integrating the 2023 acquisition of Newcrest Mining, the company operates with a Debt-to-Equity ratio of around 0.15. This is very low for a mining company of this size, especially given the massive capital intensity of the mining industry. The firm's market capitalization is around $124 billion and annual revenues will reach a record $22.1 billion in 2025.

A key factor in Newmont's current financial strength is the record gold price, which is around $4,800 per troy ounce this year. At these prices, the company is generating extremely strong operating cash flow, allowing it to reduce debt quickly. The company holds cash in excess of $8.2 billion against total debt of around $5.7 billion, which puts it in a position of being a net creditor. Profitability has improved dramatically, with a net margin of over 32% and a Piotroski F-Score of 9 out of 9, signaling excellent financial health.

Strategic diversification and outlook

Newmont has completed a $4.5 billion program of non-performing asset divestitures in recent months and is now focusing on its 12 most productive mines. In addition, the company is strengthening its exposure to copper, the production of which from mines such as Cadia and Boddington adds an important secondary source of revenue in the context of the energy transition. Production guidance for 2026 calls for slightly lower output of 5.3 million ounces of gold as the company prioritises value over volume.

What makes Newmont interesting is the combination of a strong balance sheet and exposure to gold in an environment where geopolitical uncertainty and inflationary pressures are fuelling demand for safe-haven assets. However, unlike previous companies, the shares have managed to appreciate this year and now command a YTD appreciation of just under 15%.

SanDisk $SNDK

A new player on the stock market with a clean balance sheet

SanDisk returned to the stock market as a standalone company in March 2025 after being spun off from Western Digital $WDC. Entering the market with a virtually clean balance sheet and a Debt-to-Equity ratio of just 0.08 gives the company significant strategic flexibility in a sector where many competitors operate with significantly higher debt. The firm's market capitalization has shot up to approximately $105 billion, reflecting the extraordinary investor interest in the memory sector.

The firm has cash of $1.54 billion against total debt of $813 million, a net cash position of over $700 million. Annual sales are $8.93 billion, and the company is focused exclusively on NAND flash memory, which finds applications in consumer electronics as well as data center and SSD storage.

Memory cycle and valuation risk

The main driver of SanDisk stock growth is the ongoing recovery in the memory cycle. The shortage of NAND flash memory in the market, caused by a shift in production capacity to high-margin HBM chips for AI, has dramatically increased flash memory prices. SanDisk has benefited from this development as its product portfolio includes both consumer and datacenter segments. In addition, the separation from Western Digital has allowed the company to focus management's attention exclusively on flash memory.

However, two important factors should be noted

• First, the company is currently loss-making with a negative ROE of around minus 9.4%, which is due to the accounting costs associated with the separation.

• Second, valuation is very tight after the stock's meteoric rise (over 1,100% in the past year). The forward P/E of around 13.8 may not look excessive, but one has to take into account that this is a highly cyclical sector where margins can normalize quickly.

Table

Comparison and common features

Looking across the six firms, it is evident that a low Debt-to-Equity ratio is not in itself a guarantee of a good investment, but it provides an important structural basis for financial stability. PDD Holdings $PDD has the strongest balance sheet with a D/E of just 0.03 and a net cash position of $58 billion. Hermès $RMS.PA and SanDisk $SNDK also operate with minimal debt and strong cash positions. SAP $SAP, Salesforce $CRM, and Newmont $NEM have slightly higher D/Es but are still well below their sector averages.

Interestingly, all six companies cover very different sectors. They range from luxury (Hermès), to enterprise software (SAP, Salesforce), to e-commerce (PDD), to gold mining (Newmont), to memory chips (SanDisk). This diversification shows that a conservative approach to debt is not limited to one sector, but is rather a matter of corporate culture and management.

A strategic view

In an environment of elevated interest rates and geopolitical uncertainty, low debt has several practical advantages. Companies with minimal D/E ratios can take advantage of market corrections to make acquisitions at attractive prices, while debt-laden competitors focus on survival at such times. They can launch aggressive share buyback programs when valuations are low. And they can invest in growth opportunities without having to issue new debt on unfavourable terms.

But it is also important not to confuse low debt with automatic investment attractiveness. Some companies are underleveraged simply because they do not have sufficiently attractive opportunities to allocate capital to. The key therefore is whether the firm can combine a strong balance sheet with a high return on capital and clear growth catalysts. Hermès in particular stands out in this respect, with an ROE of over 25% and PDD Holdings with an ROE of over 30%.

What to watch next

• Fed interest rate developments that directly impact the relative advantage of low-leverage companies

• Memory cycle and sustainability of current NAND flash memory pricing for SanDisk

• The regulatory environment in China and trade tensions with the U.S. for PDD Holdings

• Gold and copper price trends determining Newmont's profitability and cash flow

• The pace of SAP's cloud transformation and adoption of Salesforce's AI solution

• Consumer sentiment in the luxury segment and Hermès' ability to maintain pricing power

A low Debt-to-Equity ratio is one of the most valuable attributes a company can have in the current market environment. In an era of higher interest rates, increased volatility and uncertainty about the global economic outlook, companies with minimal debt enjoy greater financial flexibility, a lower cost of capital and are better positioned to make strategic moves.

These companies are showing that a conservative approach to balance sheets is not a barrier to growth. Conversely, companies such as Hermès, PDD Holdings and SAP demonstrate that it is possible to achieve strong profitability and dynamic growth without massive financial leverage.

What happened in the markets and what does it mean for your portfolio?

WTI oil plunged within hours from $117 to just under $94 per barrel, a drop of more than 16% in a single session. Brent fell to approximately $91. S&P 500 futures immediately jumped by more than 2.5%, Dow futures added 1,000 points and Nasdaq 100 futures shot up nearly 3%.

The conflict between the U.S., Israel and Iran has been ongoing since February 28, 2026, when the U.S. military launched Operation Epic Fury. Over 38 days U.S. forces struck approximately 7,800 targets in Iran and carried out over 8,000 combat sorties. The Strait of Hormuz, through which roughly 20% of the world's daily oil production flows, was effectively closed from early March. Maritime traffic all but stopped, and tankers refused to enter the narrow strait for fear of Iranian attacks.

Pakistan acted as mediator

Pakistani Prime Minister Shehbaz Sharif played a key role, asking Trump for a two-week delay to his ultimatum while also urging Tehran to open the strait "as a gesture of goodwill."

Iran ultimately agreed and presented a 10-point peace plan that includes, among other things, a coordinated transit through the Strait of Hormuz under the supervision of Iranian armed forces, the withdrawal of U.S. troops from the region, the lifting of sanctions and compensation for war damages. Trump described the plan as "a usable basis for negotiations." Peace talks are scheduled to begin on Friday, April 10 in Islamabad.

Israel also supported the ceasefire and pledged to halt bombing of Iran.

What does this mean for markets and investors?

The energy sector gained nearly 38% in the first quarter of 2026. But with the potential reopening of the strait, the cards are being reshuffled. Oil giants like $XOM and $CVX, which had benefited from tight supply, will face price normalization. Conversely, airlines such as $DAL and $UAL immediately strengthened, as jet fuel futures began to plunge.

Be careful though of false optimism. The two-week ceasefire likely means two more weeks of status quo, with only a minimal number of tankers passing through. Real restoration of shipping will take at least two months, experts say. U.S. oil is, even after Tuesday's drop, still more than 70% higher than at the start of the year.

Equity indices led by the S&P 500 are currently 7.6% above this year's low and only 3.1% below their ATH. Will the rally continue, or will prices get "stuck" again after the peak they reached at the end of last year and the beginning of this year?

The market has rewarded the narrative shift, at least initially. Intel’s shares jumped more than 2–3% on the announcement and are now roughly 35% higher since the start of the year, helped by earlier optimism around AI‑focused Xeon chips and fab restructuring. To underscore the symbolism, the company pushed out a photo of chief executive Lip‑Bu Tan shaking hands with Musk on its California campus and stressed that the deal caps off months of talks – a visual way of saying that, this time, Intel intends to be inside the next big AI build‑out rather than watching it from the sidelines.

Intel and Terafab: target one terawatt of computing capacity per year

Terafab is a new chip manufacturingcomplex being built in Austin, Texas, to serve as a vertically integrated facility covering the entire process from design to manufacturing to testing. Tesla $TSLA, SpaceX, and xAI, a company recently integrated into the SpaceX structure, are collaborating on the project to provide enough chips for autonomous cars, humanoid robots, and future space data centers.

Elon Musk unveiled Terafab in March 2026 with the ambition of producing chips with a total of one terawatt of computing capacity per year, multiples of current global production of advanced AI chips. The project is estimated to cost at least twenty to twenty-five billion dollars, with some analyses putting the final cost as high as thirty-five to forty-five billion dollars.

The complex is to include two high-tech factories: one focused on chips for Tesla electric cars and Optimus humanoid robots, the other designed for chips destined for data centres in space. At the same time, analytical estimates warn that Tesla's long-term plans to produce tens of millions of robots a year could mean demand for hundreds of millions of highly specialised chips, far exceeding the current production capacity of traditional suppliers.

Strategic context: the merger of SpaceX and xAI and the planned IPO

Intel $INTC 's entry into Terafab fits into Elon Musk's broader strategy to build a self-sustaining technology ecosystem for both artificial intelligence and space projects. SpaceX recently completed its acquisition of xAI in a transaction that was reportedly valued at more than $1 trillion and is one of the largest deals in the history of the technology sector. The structure of the deal allows xAI shareholders to convert their holdings into SpaceX shares according to a pre-determined ratio, bringing artificial intelligence activities under one roof.

SpaceX has also filed a confidential application for an initial public offering of shares in the United States, with media reports that the target valuation is up to around the $800 billion mark. If these plans come to fruition, it would be one of the largest share issues in history and a significant source of capital to fund projects such as Terafab.

What Intel brings to the project

Intel said it is entering Terafab to fundamentally accelerate the development and production of ultra-high-performance chips for future generations of artificial intelligence and robotics. The company brings to the project its capabilities in chip design, manufacturing and advanced packaging, which are key to achieving high performance at reasonable power consumption.

CEO Lip Bu Tan described Terafab as a fundamental change in how silicon logic, memories and their integration into a single unit will be designed and manufactured in the coming years. The factory is to be designed from the outset to handle mass production of highly specialised chips for a variety of deployments - from automotive to industrial and home robotics to the extreme conditions of space data centres.

Strengthening Intel's position in the race for artificial intelligence

For Intel, which in recent years has lagged behind Nvidia $NVDA in AI accelerators and behind AMD in the server segment, Terafab represents an opportunity to become a key technology partner for one of the world's largest AI projects. News of the partnership has boosted investor confidence, which has been reflected in the stock, which has already benefited this year from expectations of a turnaround in earnings and new contracts in advanced chips.

Elon Musk has repeatedly warned that current global chip manufacturing capacity will only meet a small fraction of the future needs of Tesla, SpaceX and his other projects. He says the companies face a simple choice: either build Terafab or not have enough chips to fulfill their plans. The partnership with Intel is therefore another step towards chip self-sufficiency as well as strengthening the position of the US semiconductor industry in the era of artificial intelligence.

Do you have healthcare stocks in your portfolio, for example $CVS?

If Universal’s board and regulators can be brought onside, the transaction would also change where the stock trades and who can own it at scale. A move from Amsterdam to a U.S. exchange would put UMG directly in the path of the biggest passive and benchmark‑driven portfolios, opening the door to inclusion in headline indices and to liquidity more in line with U.S. entertainment mega‑caps than with a European media outlier.

Parameters of the offer and the amount of the premium

Pershing Square is offering Universal Musicshareholders $UMG.AS a combination of cash and shares in a new company that would be formed by the merger of Universal Music and Pershing Square's acquisition company SPARC Holdings. According to information released so far, shareholders would receive approximately $9 billion to $11 billion in cash and, in addition to each existing UMG share, a stake in the new entity, which would be listed on the New York Stock Exchange. The total offer price comes out to 30.4 euros per share, a premium of more than 50% to the market price.

Universal Music's market capitalization was until recently around thirty to fifty billion euros, so Ackman's offer represents a significant increase in value compared to how the market has valued the company in recent months. Pershing Square argues that such a high premium reflects Universal Music's strategic value and the long-term potential of its music catalogue in an era of rapidly growing streaming.

Ackman's long-term interest in Universal Music

Bill Ackman is not a new name to Universal Music shareholders. Back in 2021, he acquired an approximately ten percent stake in UMG from French group Vivendi for roughly $4 billion through his then vehicle Pershing Square Tontine Holdings. At the time, the company's valuation was based on roughly forty billion dollars, and Ackman profiled himself as a long-time supporter of the music giant and its plans to float on the Amsterdam stock exchange.

Pershing Square is one of the activist investors that has been pushing for changes in corporate governance and capital structure. In recent years, the fund has held significant positions in technology firms such as Alphabet $GOOG, Meta Platforms $META and Amazon $AMZN, demonstrating its focus on large global businesses with distinctive brands and high margins. Universal Music fits well into this strategy because it controls a large catalogue of recordings and rights that generate stable licensing revenues.

The move to the New York Stock Exchange and the cancellation of part of the shares

The proposal includes reorganising the structure of Universal Music to become a company incorporated under the laws of the State of Nevada and listed on the New York Stock Exchange. This would increase the availability of the stock to US institutional investors while opening the way to inclusion in the S&P 500 index, which typically means greater liquidity and a broader investor base.

At the same time, Pershing Square anticipates that approximately seventeen percent of Universal Music's existing shares could be cancelled as part of the transaction without the company losing its investment grade rating or jeopardizing its long-term financial flexibility. Following the settlement of the offer, the new UMG would have approximately one and a half billion shares outstanding and would report results under U.S. GAAP accounting standards. Ackman reckons the entire transaction could close by the end of the year if shareholders and regulators support it.

Criticism of Pershing Square's undervalued stock and arguments

In his statement, Ackman praised the work of Universal Music's management, led by CEO Lucian Grainge, which he said has built a top-notch artist portfolio and provided the company with solid revenue and earnings growth. However, he also points out that he believes the stock price performance does not reflect the true strength of UMG's music business.

Pershing Square points to several factors that he believes contribute to the undervaluation of the title. These include the uncertainty surrounding the group's roughly 18 per cent stake in Bolloré, delayed plans to list the stock in the US, an under-utilised balance sheet that is hampering growth in return on equity, and the absence of a clearly communicated capital allocation plan. Ackman argues that it is the proposed transaction that would solve most of these problems, helping to unlock Universal Music's hidden value for existing and new investors.

Universal Music as a global music leader

Universal Music Group is now the largest record label in the world and home to many of today's most popular artists. Its wings include Taylor Swift, Drake and Kendrick Lamar, and the company also owns the iconic Abbey Road studios and major labels such as EMI and Island Records. Recorded music makes up the majority of its revenue, through more than a dozen labels including Interscope, Capitol Music, Motown Records and Def Jam.

The strength of its catalog, global distribution network and dominant market position are the main reasons Ackman believes in the long-term growth of Universal Music's value. The Pershing Square Fund emphasizes that all equity financing for the offering will be provided by it and its related entities, while bank loans and other forms of debt are to be confirmed upon signing of the commitment documents. Universal Music itself has not yet officially commented on the offer, and the market is now waiting to see whether the company's board of directors will recommend that shareholders agree to Ackman's takeover play.

From an investor's perspective, this is more a confirmation of the known: Apple would rather accept a delay than risk the first foldable iPhone having a visible crease in the display or poor longevity — an issue that has plagued competitors for several generations. If the iPhone Fold is indeed delayed to the end of 2026 or later, in the short term it isn’t a major hit to the business (most revenue still comes from standard models and services), but it could limit the hype around the "new form" in the very year when, according to leaks, Apple is reshuffling its release calendar and placing more emphasis on premium models.

The irony is that this leaves investors with a bank that is well capitalised and globally entrenched but still under‑earns its potential, so at around 115 dollars a share Citi changes hands on roughly 16.2× earnings and 0.8× book, even though standard DCF work points to fair value closer to 137 dollars – a paper upside of roughly 19–20% that ultimately depends on returns finally catching up.

Top points of analysis

• The bank is profitable, but not surprising - Citigroup can generate billions of dollars in profits and has solid earnings from investment banking, corporate services and wealth management. The problem is that it only makes about 7% profit on every dollar of equity invested, while the best U.S. banks are more than double that.

• The $7.4 billion transformation is already cutting costs - a major modernization program has begun to push operating costs down slightly, but has not yet been enough to significantly raise overall return on capital. Citi is still in the middle of the road, not at the finish line.

• Strong pillars are pulling, weaknesses are holding back - global corporate services, markets (FX, bonds) and wealth management are growing and profitable, while retail and credit cards are weighing on results with higher credit losses and poorer efficiency.

• Regulators are still pushing - despite billions in investment, Citi has been fined again for slow progress on risk management. This shows that the authorities are not yet satisfied and the risk of further intervention is still in play.

• Valuation is slightly below potential - the stock is trading below book value and at a lower earnings multiple than top competitors. Fair price models and scenarios assume that if profitability improves to at least the sector average, room for growth of around 15-20% is realistic.

What has changed

The biggest change in recent years has been under the surface of the P&L (profit and loss statement). Citigroup $C launched a transformation program in response to a series of regulatory rebukes and Consent Orders issued by the authorities in 2020. The main criticisms were directed at fragmented systems, weak risk management, inconsistent data platforms and a complex, unwieldy organizational structure. In practice, this meant dozens of parallel systems, different processes across regions and a high likelihood of errors and weaknesses in controls.

The $7.4 billion transformation therefore has a clear mandate: to unify core IT, build modern risk and compliance platforms, simplify hierarchy, and exit or sell businesses that are not delivering a return on capital. Citi has already exited a number of retail markets, pulled out of Russia, sold consumer banks in Asia and Latin America, and is shifting its focus to institutional services, markets, investment banking and wealth management.

But at the same time, it is clear that much of the transformational benefits are still "to come". A cost-to-income ratio of over 65% is still too high for a bank of this scale, especially when JPMorgan is delivering around 55%. The $2.7bn cost of risk shows that the retail and card business has both cyclical and structural cleansing ahead. And the $136m fine is a significant one. Specifically, the US$550 fine for slow progress on risk management says regulators don't yet see the transformation as accomplished - despite billions of dollars of investment. So Citi is at a point where it is starting to reap its first cost savings, and performance in key segments is strong, but the whole thing doesn't look "done" yet, more like construction in an advanced stage.

How it becomes money

The key to monetizing today's investment lies not in further balance sheet expansion, but in what Citi does with what it already has. The first step is to reduce the cost-to-income ratio - every percentage point down means billions of dollars a year that can be left for shareholders. In an environment where revenues are growing at a mid-single-digit rate and transformation is already starting to reduce costs, it is not unrealistic to see the cost-to-income ratio move closer to 60% in 12-18 months from 65% today. That alone can shift RoE by several percentage points without Citi having to dramatically change the size of the business.

The second lever is the normalisation of the cost of risk. The current level of $2.7 billion per quarter, driven mainly by credit cards, reflects a combination of the macro cycle, rates and historically less restrictive standards. As Citi completes its risk systems transformation, tightens underwriting where it makes sense, and adjusts product pricing, credit costs should gradually return to more sustainable levels. Again, at the same level of revenue, this means a net improvement in ROE, not "just more revenue growth".

The third driver is the high ROE segments - institutional services, markets, banking, wealth. Here Citi is very well positioned: a global network, the ability to serve multinationals in cross-border payments, liquidity and trade finance, strong FX and FICC trading platforms and a growing wealth clientele. As transformation reduces overhead and profitability drain through legacy segments, the weight of these pillars in the consolidated numbers will lift. This is when the banking "tanker" starts to behave more like a focused institutional platform that can command a higher multiple to equity.

The numbers that support this thesis

Citigroup already has "big" full-year numbers behind it for 2025, not just one quarter. Revenues came in at roughly $169 billion, down just under a percent from 2024 but still well above 2022-2023 levels - so the bank is maintaining a volume of business that has skyrocketed since the pandemic.

Operating income (operating income) at $20.2 billion was up more than 18% year-over-year, Citi earned nearly $19.8 billion before taxes, and net income moved to $14.1 billion, up about 11% from a year earlier. Earnings per share grew even faster, thanks to a decline in the number of shares (buybacks in recent years), with diluted EPS rising to $6.99, up nearly 17-18% from 2024's $5.95.

On the balance sheet, Citi got bigger - assets grew to about $2.66 trillion, equity to about $214 billion, and book value (net tangible assets) moved above $209 billion. Total debt rose to about 716 billion, but together with growth in invested capital (over 920 billion) and stable equity, this corresponds to an expansion of the balance sheet, not a dramatic deterioration in the risk profile.

On the cash flow side, we can see how challenging the banking environment has been in previous years. In 2024, Citi had significantly negative free cash flow (-$80 billion) and very volatile operating flow, but by the end of 2024/2025 the bank still held over $260-275 billion in cash, with capital expenditures (CapEx) around $6.5 billion per year - an amount it can afford given its balance sheet size and profitability. The key takeaway from an investor's perspective is that 2025 shows the combination: steady, high revenue, rising net income and EPS, still robust capital and balance sheet, but at the same time very weak conversion of those numbers into top-line ROE - which is exactly why the title is only slightly undervalued today and a big "if" around completing the transformation.

Valuation

Citigroup's current valuation can be read on two levels. The first, more superficial, is "slightly cheap relative to the sector" - P/E 16.2× vs. roughly 17-18× for large peers, P/B 0.8× relative to assets. These numbers give you a simple conclusion: a DCF fair value of $137 represents about 19% upside, and the analyst consensus of about $125 represents a more conservative 8-9%. The second level is deeper: the market today values Citi as a bank that will earn below-average ROE over the long term and never approach the 12-15% ROE that is the norm for quality banks.

If we believe in only "slightly better tomorrows" - ROEs of 8-10%, cost-to-income somewhere just below 60%, credit costs below $2 billion per quarter - then that 19% at $137 makes sense as a mid-range scenario. However, if we accept that the $7.4bn transformation is not just cosmetic but structural, and Citi will approach at least the bottom end of the competition within a few years, it is also reasonable to expect a P/B revaluation to 0.9-1.0× and a P/E to 18× on normalized earnings. In that case, we're more in the $140-155 range, or +20% to +35%, with the dividend and any buybacks providing the rest of the return.

Investment scenarios

In the optimistic scenario, the transformation will take off in full force: Citi gets cost-to-income below 60%, credit costs stabilize at a more comfortable level, ROE moves somewhere between 12% and 15% in 18-24 months, and regulators close the most important parts of Consent Orders without further large penalties. The bank will start to look more like an institutionally oriented franchise than a "tired conglomerate" and the market will award it multiples close to the top of the sector. In that case, a target price of around $150-$155 is realistic, especially if you factor in historical profitability levels before the crisis.

The realistic scenario is less dramatic but still attractive. The transformation continues, but with occasional complications; ROE rises into the 8-10% range, cost-to-income drops only a few percentage points, credit costs normalize, but not at ideal levels. Regulatory pressure doesn't subside, but there's no "mega-crash" coming to wipe out results for a year or two. In such a world, Citi will simply go from being a "discounted" bank to a mediocrely valued one - and the 19% upside to $137 is an accurate reflection of that shift.

In the pessimistic scenario, by contrast, the transformation drags on, regulators again resort to more severe penalties for lack of progress, credit costs remain high due to the weaker economy, and management fails to shift the revenue center of gravity quickly enough into highly profitable segments. The market will then start to value Citi again as a structurally low-ROE institution with persistent problems, P/E will fall somewhere towards 14-15×, P/B below 0.8× and the price may slide towards $100-105.

Risks

The biggest risk is that today's discount isn't just a market lag, but a reflection of a deeper structural reality - that Citi simply can't raise ROE to the levels it historically used to have and that its competitors have today. A multi-billion dollar transformation may end up in a half-hearted state where it systemically prevents the worst problems, but it still won't allow the bank to operate with the efficiency of the best players. It also runs the risk of management and investor "fatigue" - a few years of promises with no visible shift in KPIs can push capital elsewhere, into simpler stories.

Regulatory risk remains present until the authorities explicitly declare that Consent Orders have been complied with. Any further delays, negative reports or new sanctions carry not only direct costs, but also reputational impact and the possibility of more stringent capital requirements. And the macro must not be forgotten - Citi is a large global bank that carries cyclical risk across industrial clients, emerging markets and retail. In an environment of a sharper economic slowdown, the pressure on credit costs may be more pronounced than the scenarios modelled today.

What to take away from the analysis

At a price of $115 and a fair value of $137, Citigroup looks like a bank with a clearly defined middle case scenario: slightly undervalued today, with 15-20% plus dividend potential if it pulls through the transformation to at least a state that brings return on capital closer to the lower end of the competition. It's not a quick trade or a pure defensive title - it's a bet that the most expensive part of the rebuild has already taken place and that the global franchise in institutional services, markets, investment banking and wealth management has more value in it than the market is pricing in today.

If you prefer stories with clear momentum in the numbers and a simple investment scenario, Citi is likely to disappoint. But if you can tolerate a 12-24 month "dirty" phase where P&L mixes transformation, fines and cyclical swings, then it is the current discount and robust capital position that make Citigroup a candidate to be in the better bank category in a few years.

When bird flu paradoxically helps business

Cal-Maine Foods has found itself at the heart of one of the most controversial periods in the American food industry over the past two years. Egg prices in the U.S. hit all-time highs during 2024 and early 2025, and consumers have questioned whether the bird flu's impact is justified or a price gouging. The company has been caught in the crosshairs of the media, politicians and some members of the public. Yet it is this controversy that reveals just how specific Cal-Maine $CALM s business model is and why the company's current market position is far more interesting than it might first appear.

In March 2025, wholesale egg prices (Urner Barry index) reached a record $8.69 per dozen. The cause was a massive increase in highly pathogenic avian influenza (HPAI), which has led to the culling of approximately 138 million laying hens since the start of this cycle in 2022. This is the largest outbreak of avian flu in U.S. market history, and its impacts have been dramatic as the reduction in egg supply has affected prices more quickly and intensely than in previous waves.

Cal-Maine, as the largest egg producer in the United States with a market share of around 20%, was experiencing record profitability at this stage. In fiscal year 2025, which ended on June 1, 2025, the company reported sales of over $4.26 billion and net income of over $1.2 billion. Net margins exceeded 28% and return on equity(ROE) reached 48.5%. These figures are quite exceptional for the food sector and reflect the extreme profits the company achieved in an environment of structural egg shortages in the market.

However, the company did not face the direct impact of avian flu to the same extent as smaller competitors. While Cal-Maine had to cull approximately 1.6 million laying hens at its Texas facility in April 2024 (about 3.6% of its total flock), most of its farms remained unaffected during this period. This was due to rigid biosecurity measures, high geographic diversification (farms in 15 states) and vertically integrated operations that allow the company to better control the entire production chain. While the industry as a whole was losing capacity, Cal-Maine managed to keep production relatively stable and benefited massively from rising prices.

Why is Cal-Maine's low P/E misleading?

One of the most common arguments for investing in Cal-Maine sounds appealingly simple: the company has a P/E ratio of around 5 with a sector average of over 21. This is a clear signal of undervaluation. But this argument ignores one fundamental fact - Cal-Maine's profitability is completely unsustainable in its current form.

Wholesale egg prices are extremely volatile and react almost immediately to changes in supply. Once the hen population stabilizes, egg prices often fall faster than the market hopes. This is exactly what happened in the second half of 2025. Egg prices began to fall sharply, and in December they reached normal levels again at around $3 per dozen. This decline was immediately reflected in Cal-Maine's financial results.

In the fiscal second quarter of 2026, which ended November 30, 2025, the company reported a net income of $102 million, compared to $369 million in the prior year. Revenue fell 19.4% to $769 million and net margin declined from nearly 47% to just 13%. These results showed how quickly Cal-Maine's profitability can change once egg prices normalize.

The latest results

Even more dramatic was the drop in the third quarter, announced on April 1, 2026. Net income fell to $50.5 million (down from $323 million last year) and net margin fell to 7.3%. Total net income for the first nine months of fiscal 2026 was $302 million, down 18% year-over-year. This was due to a further decline in wholesale egg prices, which returned to levels around $3.16 per dozen.

Cal-Maine's forward P/E ratio is around 21.9, almost identical to the sector average. In other words, the market is valuing the company not on record earnings from a period of high egg prices, but on normalized expectations of future earnings. Thus, a trailing P/E around 5 is a misleading metric that reflects temporarily inflated profitability, not the firm's true long-term generative capacity.

Dividend volatility as a business model

Cal-Maine is not a traditional dividend company with a conservative policy of regular payouts. The company uses a variable dividend policy that is directly tied to its cash flow and current financial position. This results in dividends that fluctuate with egg prices.

In 2025, during a period of record egg prices, the firm paid out a total of $8.716 per share to shareholders. Thus, the dividend yield ranged between 9% and 14% during the year. This huge yield was largely the result of one-time extraordinary payouts associated with extremely high earnings. It was clear even then that maintaining this level of dividends would not be possible.

In the first half of fiscal 2026, as egg prices normalized, dividends fell to just $2.89 per share per year. At the current share price of around $79, that translates to a dividend yield of about 3.6%, a solid but certainly not extreme number.

For investors looking for steady dividend income, Cal-Maine presents a volatile investment story. Dividend yields can exceed 20% in one year while falling below 2% in another. The company itself offers no guarantee that current dividend levels will be maintained, and historical data clearly shows that this company's dividends are as volatile as its financial performance.

Moreover, despite the high dividend in 2025, overall profitability has grown an average of 115.7% per year over the past three years, signaling that these gains are not stable but cyclical. The current dividend is not a reflection of stable capital generation, but a temporary surplus resulting from increased egg prices.

Competition and structural risks

Cal-Maine has a dominant position in the U.S. egg market, which gives it some pricing power and operational advantages. However, it also faces increasing structural pressures that may erode its margins in the long run.

• The first issue is the regulatory environment. Some US states, including California, Washington and Oregon, have imposed stricter standards on the conditions under which laying hens are raised. Cage-free and free-range production requires more space, higher infrastructure investment and has lower efficiency than conventional cage production. The company therefore has to rebuild its farms, which is capital intensive and reduces productivity. Cal-Maine is responding by expanding its capacity in the specialty egg segment, which includes cage-free, organic, free-range and pasture-raised eggs. In the fiscal first quarter of 2026, specialty egg sales grew 10.4% and accounted for 35.9% of total sales. Still, these products generally cannot charge prices based on the Urner Barry spot index because customers buy them mostly on long-term fixed contracts. This reduces the volatility of sales, but also means that the company cannot benefit as much from price increases as it can for conventional eggs when there is a shortage of eggs on the market.

• Another structural risk is consolidation on the customer side. Most of Cal-Maine's sales go to large chain stores like Walmart $WMT, Costco $CSCO or Kroger $KR. These companies have tremendous bargaining power and regularly push suppliers to lower prices. While Cal-Maine $CALM has long tried to shift a share of sales away from conventional eggs and toward high-margin specialty products, this shift has been slow and the market is still heavily influenced by mass sales of standard eggs with very low margins.

• The company also faces increasing competition from smaller players that specialize in the premium segment of the market. Vital Farms $VITL, which focuses exclusively on pasture-raised (the highest standard of hen raising) eggs, has maintained relatively stable prices even during the spot market downturn because its customers are less price sensitive. This is a growing market segment in which Cal-Maine faces direct competition from premium-only companies that have built strong brands.

Acquisition and diversification

In recent years, Cal-Maine has made acquisitions aimed at strengthening its position in the prepared foods segment. In June 2025, the company acquired Echo Lake Foods for $258 million. The move brought precooked eggs, egg omelettes, wrap products and other convenience products to the foodservice sector.

Revenues from Prepared Foods in fiscal first quarter 2026 grew 839% year over year to $70.5 million. In the second quarter, sales from this category reached $85 million, up 586% year-over-year. But this dramatic jump was primarily due to the inclusion of Echo Lake Foods in the results, not organic growth.

The company also invested in the Crepini Foods joint venture, which makes egg wraps. This segment has the potential to grow within the trend of high-protein and low-carb products that are popular among health-conscious consumers.

But the question remains whether Prepared Foods can truly change the nature of Cal-Maine's entire business. Their overall share of sales remains relatively small (around 9% in the most recent quarter) and the profitability of these products is still uncertain. The company reports that the prepared foods segment has better margins than shell eggs ( $CALM's core business), but specific numbers are not separately reported.

Map $CALM's farms

One advantage of prepared foods is lower price volatility. These products are sold primarily on the basis of long-term contracts with distributors, which means more stable sales than shell eggs. If this segment continues to grow, it could act as a counterbalance to the cyclical volatility of the conventional egg business in the future.

Balance sheet strength as a key advantage

Cal-Maine has one characteristic that sets it apart from most of its competitors. The company has zero long-term debt. The current ratio is around 8, meaning the firm has more than eight times more current assets than current liabilities. Total cash on hand at the end of November 2025 exceeded $1 billion.

This financial strength provides Cal-Maine with significant flexibility. The company can invest in capacity expansion, new farm purchases, or acquisitions without having to take on additional debt or issue new stock. Over the past few years, Cal-Maine has completed several acquisitions, including Creighton Brothers for $128 million in December 2025, and plans to further expand production capacity by 30% over the next 18-24 months.

In the context of a cyclical business, this financial discipline is essential. During periods of low egg prices, the company can survive without the risk of bankruptcy or forced asset stripping. At the same time, it has the capital to buy competitors who face financial problems during weaker market phases.

But the problem remains that financial strength alone will not ensure a high return on capital in a normal egg price environment. During the fiscal third quarter of 2026, Cal-Maine generated an operating margin of only 10.6%, well below the record levels of the previous year. Cash on the balance sheet has value, but its use will depend on management's ability to find attractive investment opportunities.

A strategic view

Cal-Maine represents a specific type of investment. It is a highly cyclical company whose profitability is directly tied to egg prices, which fluctuate with market supply and demand. The current low trailing P/E is a de facto trap for investors who do not consider that this profitability is not sustainable. A forward P/E of around 21.9 much better reflects the true valuation of the company.

For investors looking for a stable dividend, Cal-Maine is not an ideal choice. Dividends can exceed 20% in one year and fall below 3% in another, depending on egg prices. This model is better suited for investors who can time their entry and exit according to egg price cycles, rather than those who want regular income.

If one believes that avian flu will remain a long-term structural problem for the U.S. egg industry and that egg prices will be above historical averages in the years ahead, Cal-Maine may be an interesting investment. The company has the best biosecurity measures in the industry and is better prepared to weather the next wave of bird flu than smaller competitors.

Conversely, if the chicken industry stabilizes and egg prices return to long-term averages, the firm may face further declines in profitability and dividends. In that case, the current price of around $79 per share might not represent any particular valuation.

It should be noted, however, that according to the Fair Price Index on Bulios, $CALM stock is currently significantly undervalued. According to the index, they are currently as much as 46% below their intrinsic fair value. However, this valuation includes some of last year's strong earnings growth, so the fair value may be a bit lower. But the stock is already down 37% since ATH in August.

The development of the prepared foods segment is also a key factor. If the company can expand this high-margin segment and reduce its reliance on volatile shell eggs, the overall nature of the business could gradually change. However, this is a long-term process that will take years and cannot be built on an investment thesis for the next twelve months alone.

What to watch next

• The evolution of wholesale egg prices (Urner Barry index) - any return to prices above $5 per dozen signals a continued lack of supply and the potential for further profitability growth.

• Avian flu outbreak in the US - new outbreaks in major breeding regions may lead to further culling of laying hens and a resumption of the cyclical price boom. The USDA publishes HPAI incidence data on a regular basis .

• Progress in the expansion of the prepared foods segment: revenue growth above 10% of total revenue would signal real diversification of the business.

• Cal-Maine's ability to sustain specialty egg production: this segment has more stable prices and higher margins than conventional eggs, but requires capital-intensive farm conversions.

• Dividend development: if the company starts paying consistent quarterly dividends instead of variable ones, it will signal that management is trying to build a more stable dividend story.

• Regulatory pressures on cage production: additional states implementing cage bans would increase costs for the entire industry and could lead to further structural increases in egg prices.

• DOJ investigations: a federal investigation into possible price gouging during the avian flu may lead to fines or regulatory restrictions that could affect Cal-Maine's future pricing power.

What to take away from the analysis

Cal-Maine Foods presents an interesting but highly cyclical story. The company has a dominant position in the U.S. egg market, a strong balance sheet, and the capital to continue to grow. At the same time, it faces extreme volatility in profitability that is directly tied to egg price movements. The current P/E of around 5 is a misleading metric that reflects temporarily high profits from the bird flu period, not the company's long-term earnings potential.

An investment in Cal-Maine is not a bet on a stable dividend stock, but on the company's ability to benefit from cyclical shocks to the egg market. For investors who can time their entry during periods of low egg prices and exit during price spikes, Cal-Maine can be a profitable investment. However, for those looking for long-term stable income, it is probably an unsuitable choice.

As things stand, the market appears to be pricing Cal-Maine realistically. The forward P/E of around 21.9 reflects normalized profitability in a normal egg price environment. The Fair Price Index, however, indicates some potential in possible future price appreciation.

For parents, Playground is pitched as the low‑friction alternative to the usual mobile game swamp: no loot boxes, no surprise card charges, and content curated for preschool and early‑school kids under Netflix’s existing parental controls. For Netflix, it is another way to lock in the household “decision makers in training” and create room to nudge pricing higher by one or two dollars over time, knowing that a child hooked on Peppa or Sesame Street inside Playground makes it much harder for parents to cancel a subscription that now covers both shows and safe games in a single bundle.

What does Playground bring to the table and to whom?

Playground is a standalone mobile app, separate from the main Netflix $NFLX app, designed for kids under eight. All games are included in the subscription, so parents don't have to deal with any additional payments, ads or lootboxes - Netflix explicitly puts this as a major advantage over regular "free-to-play" games in its materials. Kids will find simple puzzle games, coloring pages, mini-games, and story interactions with favorite brands they already know from TV shows - from Peppa Pig to Sesame Street - in the app.

For parents, the key is that Playground works offline. Games are downloaded to the app and then kids can play them in the car, on the plane or wherever there's no connection - without the risk of inappropriate advertising or prompts in between. Netflix describes it in the official text as a "curated space" where parents can be sure their kids are spending time in a safe environment.

What impact Playground could have on Netflix - what, how much, why

1) Lower churn of family subscribers

Families with young children are among the most valuable groups - they use the service more often and cancel less. If Playground increases children's Netflix usage during the day (not just evening viewing), it will lift the longevity of the service. It's already hard for parents to cancel on a platform their kids are used to; if they add their favorite ad-free games, the pressure to cancel is further reduced.

Impact estimate:

• If families make up, say, a third of the user base, and Playground reduces annual churn in this group by 1-2 percentage points, it could mean hundreds of thousands to units of millions of retained subscriptions per year

• at an average revenue per user in the US/Canada of over $17/month, this can add up to hundreds of millions of dollars per year in additional or retained revenue - not through direct Playground revenue, but through families staying.

2) A stronger argument for further price increases

Netflix recently raised prices in the US - the cheapest plan with ads costs about $8.99 a month, the premium plan $26.99. The company has long built a case for not discounting, but for incremental ARPU (revenue per user) growth through price increases and new services. Playground is a typical value add:

• In the short term, the price does not change, but the value of the package increases (families have movies, series and safe games)

• in the medium term, it puts Netflix in a better position for the next wave of price increases, as it can argue for a wider range of services - especially against Disney+ and others who don't yet have a similar gaming app for kids.

Estimating the impact: if Netflix were to add another $1-2 per month to the average subscription price in key regions in the coming years while maintaining retention of families (thanks to Playground, among other things), this would mean billions of dollars in increased annual revenue at its current base of hundreds of millions of users, even if subscriber growth slows.

3) Strengthening the bargaining position with licensing partners

Playground gives Netflix $NFLX a new way to monetize children's brands - not just through series and movies, but also through games and interactive content. This strengthens its position with IP holders like Peppa Pig and Sesame Street:

• Netflix can offer an "ecosystem" - series, games, maybe merch and other activities

• licensing partners gain deeper reach among kids and parents as a result, and can push for higher licensing fees from competitors that don't have such a platform.

Financially, Playground is more of an indirect source of revenue for Netflix: it raises the value of licenses and extends relationships, but doesn't generate advertising or micropayments itself. The benefit will therefore be mainly in Netflix being able to better retain key children's brands and license them more expensively to competitors.

Impact on competition: where Playground can push the hardest

Disney + $DIS

Disney has the strongest children's IP in the market, but does not have a standalone Playground-type gaming app. If Playground turns out to significantly help Netflix with family retention, it will put pressure on Disney to either:

• create its own "kids gaming hub" linked to Disney+

• or start actively leveraging partnerships with other platforms (Apple Arcade, custom mobile games)

Apple Arcade $AAPL

Playground resembles a "kids version of Apple Arcade" in form and content - ad-free games, no purchases, included in the subscription price. Families who already pay Netflix may wonder: why else pay for a gaming service for kids separately when I get a similar basic feature in Playground? This may hinder Apple Arcade's growth in the family segment for some households - especially where subscription budgets are limited.

YouTube Kids and free-to-play games $GOOG

Playground is taking direct aim at parents' frustration with ads and purchases in kids' games and videos. YouTube Kids will remain the main venue for short videos, but some of kids' time may move to Playground, where there are no ads and parents have more control. While this is a marginal impact on overall ad revenue for Alphabet, in the long run it supports the trend: parents are looking for "ad-free packages" even at the cost of a higher monthly fee.

Costs and risks on Netflix's side

Playground is not free, of course. Netflix pays for the development and maintenance of the app, licensing fees for the brands, and the team that proofreads the content and ensures security. The advantage is that these are relatively simple games - the cost is multiples lower than big console titles, which Netflix has found in the past to be unprofitable.

The risks are twofold:

• Adoption - if kids and parents don't actively use Playground, the investment won't be recouped in the form of higher retention and better ARPU.

• Reputation - any content or security flaw that puts children at risk could damage the Netflix brand far more than a problem with a regular adult series

Overall, though, Playground fits well with Netflix's strategy: instead of aggressively entering the expensive world of "big" games, the company is focusing on a segment where it has a natural advantage - children's content, familiar characters, and parental trust. If the app manages to win over a significant portion of families, it can be a quiet but very effective tool for retaining subscribers and for advocating further price increases.

That does not mean a divorce from OpenAI. A revised partnership struck in October 2025 gives Microsoft roughly a 20–30% economic stake in OpenAI, long‑term access to its IP and models through 2032 and an enormous commitment that OpenAI will buy about 250 billion dollars of Azure cloud capacity over time, making it one of Microsoft’s largest anchor customers. The pact was intentionally designed to let both sides pursue independent opportunities, so Microsoft can build its own frontier models while still treating OpenAI as its primary external model partner – a hedge that spreads technical risk, locks in cloud revenue and keeps the company central to the next wave of AI, no matter which lab is ahead at any given moment.

A new arrangement with OpenAI: less dependence, more freedom

The new agreement rewrites the existing relationship. Microsoft retains a significant minority stake in OpenAI and access to its models, but is no longer the "mandatory" exclusive provider of computing power. Three points are crucial:

• Microsoft $MSFT has licensing rights to use OpenAI's models and products until 2032, including those that eventually arise after general AI is achieved.

• OpenAI has committed to take a huge bundle of Azure services in the coming years, guaranteeing Microsoft long-term cloud revenue.

• Both parties have explicitly freed up their hands to develop their own, competing models - so Microsoft is no longer just "packaging" OpenAI's technologies into its products, but can compete for the cutting edge of AI itself.

This is what Suleyman identifies as a key prerequisite: making sure the partnership with OpenAI remains, but also having the contractually confirmed right to go its own way if it is strategically advantageous.

First custom models: speech transcription, voice and images

The most obvious proof that this is not just about marketing is the newly introduced speech-to-text model. Microsoft claims that its system achieves a significantly lower error rate than the previously commonly used solutions from OpenAI and other competitors, while running at lower computing power requirements. This is important for anyone looking to transcribe calls in bulk - from customer service lines to media houses.

Alongside this, the company has also released its own voice and image production models for widespread commercial use. This makes it clear that it doesn't want to depend solely on external partners in these segments. From the point of view of users of Microsoft 365, Azure and other products, this means that it is no longer just OpenAI running "under the hood", but increasingly pure Microsoft technologies.

Huge infrastructure investments: those who want their own models must have their own "power plant"

In order to compete realistically with the biggest players, Microsoft needs not only researchers, but more importantly computing power and energy. That's why the company is significantly increasing its investment in data centres and GPUs on which the big models are trained. In fiscal year 2026 alone, more than $120 billion is expected to go into AI infrastructure.

Meanwhile, Microsoft boss Satya Nadella has long said that the race for AI is not just about the number of chips, but also their efficient use and the cost of energy. That's why Microsoft is also investing in optimising its models to do more work with less computing resources. This doesn't just apply to training, but more importantly to day-to-day operations - the cheaper a single model query is, the easier it is for AI to pay for itself in real-world applications.

The partnership continues, but the AI strategy is expanding

Despite all the changes, Microsoft is publicly presenting the partnership with OpenAI as strong and long-term. OpenAI's products continue to run on the Azure cloud and Microsoft is deeply integrated into their offerings. The difference is that the bosses in Redmond no longer want the company's entire AI story to stand on OpenAI.

Rather, the new direction is "multi-model": the OpenAI models, Microsoft's own models and third-party models can run side by side in a single service. The company is going to make decisions based on which system is best suited to the task at hand - sometimes it will be high-end, general-purpose models, sometimes it will be specialized, cheaper, faster variants.

AI across products: Copilot as a gateway

At the same time, Microsoft continues to push AI across its entire portfolio. Copilot in Office, Windows, and other applications is becoming a major face of the new strategy. It's gradually transforming from the original "assistant" to a tool that can proactively perform tasks and work across services - for example, find needed documents, prepare analytics, or automatically resolve simple customer requests.

So far, it's a minority of users who are paying extra for Copilot, but this is where Microsoft sees huge room for growth. Every extra percentage point in adoption among the hundreds of millions of Microsoft 365 users means billions in additional revenue per year. The combination of proprietary models, a strong cloud, and deep integration into everyday tools gives the company a chance to be not just an "AI component vendor" but the main interface through which businesses and individuals interact with AI.

Instead the stock changes hands at roughly 2.7× trailing revenue and about 18× free cash flow, multiples that sit at the low end of the peer group. Management is guiding for more than 2.1 billion dollars of revenue and around a 25% adjusted EBITDA margin by 2028, which implies a mid‑20s compound growth rate from here if they hit the targets.

Top points of the analysis

• Revenues have grown at least 20% a year for six years in a row, reaching $1.3 billion in 2025 and jumping by nearly half in the past two years.

• The company has its own database of about 245 million consumer profiles in the U.S., giving it an advantage in targeting accuracy and cost over competitors that depend on external data.

• Gross margins are around 60-70%, adjusted EBITDA margin is over 20% and free cash flow has a margin of around 14%, effectively turning revenue growth into cash.

• Net income is still slightly negative, but operating profit has turned positive for the first time and the loss has narrowed significantly from hundreds of millions to tens of millions of dollars in just a few years.

• The balance sheet is healthy: the company has net cash of over $400 million, virtually no long-term debt, and financial ratios suggest low risk of payment problems.

• The stock trades at about 2.7 times annual sales, well below the average of similar tech firms of about 5.9 times, and fair value models point to long-term upside room for the price

What Zeta Global does and what it does for a living

Zeta Global $ZETA is not an advertising network or agency. It's a company that gives big businesses the brains behind their marketing - the Zeta Marketing Platform. This platform collects and stores data about customers and their behavior, builds unified profiles from it, designs segments and campaigns, and controls who sees what when on email, web, app, or other digital channels. The goal is not to buy more advertising, but to use existing budget to maximize sales and loyalty.

Zeta earns primarily on platform subscriptions and campaign processing fees. Most of its contracts are multi-year enterprise contracts that run in the hundreds of thousands to millions of dollars a year. It adds services - help with implementation, setting up data flows, creating segments or integrating into existing systems. As a result, revenues are relatively predictable and are based in significant part on recurring revenue.

The backbone of the business is approximately 450 large customers who spend in excess of $100,000 annually. For these so-called scaled customers, the average annual revenue is close to $1.9 million, growing by almost a fifth year-on-year. This means that Zeta isn't just growing by adding new names to its roster, it's growing by going deeper with existing clients - into more countries, product lines and marketing channels.

Data empire: 245 million profiles and deterministic identity

What sets Zeta apart from most of its competitors is its data foundation. Over the years, the company has built its own database of some 245 million consumer profiles in the US for which it has consent to process data. These are not anonymous aggregate numbers, but individual identities that combine email addresses, mobile identifiers, campaign response history, purchases and other signals into one coherent picture.

The key is that Zeta connects these profiles deterministically. This means that when a new signal appears in the system, such as activity from a mobile app or email, it can match it to a specific profile with a high degree of confidence. Unlike probabilistic methods, which only guess if two different signals belong to the same person, Zeta works with unambiguous links. As a result, matching accuracy is reported to be above ninety-five percent, whereas probabilistic models tend to be around eighty.

This has two major advantages. The first is the quality of targeting - when Zeta says it is sending a message to a particular segment, it does so with less "noise" than competitors that depend on third parties. The second is cost - once you build a database, the cost of each additional unit of data is relatively low, whereas buying external data packages tends to get more expensive with volume. This gives Zeta a scale advantage: with each new client and each additional signal, its data empire becomes both more valuable and relatively cheaper per unit.

Athena AI: an AI agent that translates data into decisions

Above this data base is a layer of artificial intelligence. Zeta doesn't sell it as a standalone AI "toy" but as part of a marketer's regular job. The most visible product is Athena - an AI agent that the company has deployed into the platform as a conversational interface.

Athena can answer questions in everyday language like, "Which segments responded best to the last campaign?" "What message generated the highest return for customers in a particular region?" "Which customer groups are likely to leave soon and how to reach them?" The agent can suggest new segments based on the data, automatically generate campaign variations for different groups, and adjust budgets between channels based on actual consumer behavior.

For clients, this means they don't need an army of data analysts to leverage a comprehensive data foundation. For Zeta, it means its platform is harder to replace - when one part of marketing learns to rely on Athena's help, this way of working often spreads to other departments. This increases the value of the platform, and with it, the average revenue per customer.

Growth and margins in numbers

When we line up Zeta's key numbers over the past few years, it looks like a textbook example of a growth technology company reaching profitability. In 2022, the company made roughly $591 million. A year later, revenue had grown to $729 million, a growth rate of over twenty percent. In 2024 came a jump to 1.006 billion, a 38 percent growth, and in 2025, revenues moved to 1.304 billion, another nearly thirty percent increase.

Gross profit grew even faster over the same period. From about $324 million in 2022 through $403 million in 2023, it rose to $550 million in 2024 and climbed to $791 million in 2025. Thus, gross margin today is roughly 61% and, after adjusting for one-time effects, is in the 65-70% range, which is typical for high-quality software with a significant data component.

The operating result has improved step by step. From an operating loss of nearly $259 million in 2022, through losses of $165 million in 2023 and $60 million in 2024, Zeta has moved to an operating profit of around $5 million in 2025. Net profit is still slightly negative - a loss of around $31.5 million - but that's a major shift by the standards of a company that was burning through hundreds of millions not so long ago.

When you look at cash flow, the picture is even better. Adjusted EBITDA margin is about 20.5%, and the company has managed to improve adjusted EBITDA margin year-over-year for nineteen consecutive quarters. Free cash flow grew by over seventy percent in Q3 2024, free cash flow margin was around fourteen percent and we see similar levels in the full year numbers. This means that Zeta is getting to the stage where every new dollar of sales is bringing in more cash than before.

Balance sheet, cash and share buybacks

The financial side of Zeta is relatively conservative today. The company has net cash of over $400 million, virtually no long-term debt, and debt-to-asset or equity ratios near zero. An Altman Z-score of around 3.3 suggests that Zeta is in a healthy zone in terms of bankruptcy risk or acute financial problems.

Management adds active capital work. Zeta has announced a $200 million share buyback program, which at a market capitalization of about $3.5 billion represents a little over twelve percent of the company. Combined with rising free cash flow, this means that even if the pace of revenue growth slows slightly, earnings per share can continue to grow thanks to higher margins and a declining number of shares outstanding.

Management

Zeta is led by co-founder David A. Steinberg. His approach can be summed up in two words: consistency and scaling. Just as he built the company's data layer incrementally, he is building investor confidence. Zeta has had more than fifteen consecutive quarters in which it has beaten its own revenue and earnings guidance and then raised the outlook. That said, management doesn't want to look good with one big announcement, but prefers to repeatedly deliver slightly better results than promised.

At the same time, the team has learned to manage costs so that growth is not bought out by endless losses. The transition from operating loss to operating profit, rising EBITDA margins and discipline in debt show that Zeta is not "scorched earth for growth at any cost". Instead, it is moving into the category of companies that are combining double-digit revenue growth with a gradual but clear improvement in profitability.

Zeta Plan 2028: growth and profitability targets

At the investor day, Zeta presented a roadmap to 2028 that summarises where it wants to take the company. Revenue targets are to exceed $2.1 billion, up from $1.3 billion, which implies annual growth of around twenty percent. Adjusted EBITDA margin is expected to move to 25%, a few percentage points higher than today, and adjusted EBITDA is expected to exceed $525 million in absolute terms. Free cash flow is expected to grow above 340 million as a result, and the free cash flow margin should reach sixteen percent.

The path to these numbers leads in three main directions. The first is deepening relationships with existing clients and increasing revenue per customer. The second is expanding the portfolio of features and leveraging AI to enable Zeta to charge higher prices for better value. The third is geographic expansion - particularly in Europe and other regions where marketing budgets are growing and digital is gaining momentum, but the market is not yet fully saturated.

Competition: Adobe, Salesforce and the big tech players

Zeta is in a segment where it is up against both specialist firms and tech giants. On the marketing cloud side, the most prominent are Adobe Experience Cloud $ADBE and Salesforce Marketing Cloud $CRM. Both systems have the advantage of size, breadth of features and an entrenched position in the IT architecture of large companies. Zeta defines itself against them by offering depth in several key areas - a unified view of the customer, deterministic identity matching, and a proprietary data base that competitors often replace with a mix of client data and external sources.

Alongside this, there is pressure from big technology players such as Google $GOOG, Amazon $AMZN and Microsoft $MSFT. These combine advertising systems, cloud services and AI and can absorb some of the demand for marketing technology in their own ecosystems. Zeta is therefore betting that many companies will want a partner that is not tied to one advertising channel, but can collect and activate data across the entire digital environment.

Valuation: cheap or fairly priced?

Looking at basic valuation metrics, Zeta today trades at roughly 2.7 times revenue, 18.8 times free cash flow and more than four times book value. For a company that is growing sales at a rate approaching thirty percent, has a gross margin of over sixty percent, an adjusted EBITDA margin of over twenty percent, and a double-digit free cash flow margin, these are not inflated multiples.

Comparisons with other marketing technology players, who often trade around five times revenue, suggest that the market is not fully factoring growth and margins into Zeta's price. Fair value models that combine discounted free cash flow and peer comparisons often come out around $20 per share, sometimes higher. This implies a near-term potential of about a quarter to a third higher than today's price if current growth rates and margins can be maintained.

But at the same time, the market is discounting Zeta for risks that are real: data regulation, competition from big players, concentration of large clients, and the fact that book net income is negative so far. All of this explains why multiples aren't higher - and why investors who believe in the Zeta 2028 story feel there may be room for overvaluation.

Risks that cannot be ignored

The first risk is the regulatory environment. Zeta is building much of its advantage on the use of personal data. Laws like GDPR and California's CCPA have shown that regulation can fundamentally limit what marketers can do with data. Further tightening, whether in the US or elsewhere, could limit Zeta's access to data or increase the cost of protecting and managing it.

The second risk comes from the marketplace. Adobe, Salesforce, and the big tech players have more resources, stronger brands, and broad portfolios that can in some cases displace Zeta or at least slow its growth. Zeta may have specialisation and proprietary data, but it must constantly innovate to maintain this advantage.

The third risk is concentration. Because Zeta works with a relatively small number of large customers, the loss of one or two key contracts can take a significant hit to revenues. In an environment where large companies sometimes consolidate their suppliers into a smaller number, this is not a purely theoretical risk.

A fourth risk is the integration complexity of acquisitions, particularly Marigold. Merging platforms, databases and teams in a way that does not affect clients through outages or reduced quality is a complex task. Any major setback could damage Zeta's reputation as a reliable partner.

Investment scenarios

Baseline scenario - delivering Zeta's 2028 plan at a slight discount

In the base case, Zeta succeeds in delivering most of what the Zeta 2028 plan promises. Revenue grows at a rate of around twenty percent per annum, reaching around $2.1 to $2.3 billion around 2028, as indicated by both management's own targets and the estimates of some analyst houses. Adjusted EBITDA margin is gradually moving from today's approximately twenty percent to the targeted twenty-five percent, free cash flow is approaching or exceeding the $340 million per year mark, and free cash flow margin is around sixteen percent.

In such a situation, the market would likely stop valuing Zeta as a "suspiciously cheap" growth title and would be willing to pay roughly four to six times each dollar of revenue, more than the current 2.7 times, but still at some discount to the biggest names in the industry. If such a revaluation were to happen alongside earnings per share growth boosted by buybacks, an investor coming in today could see a combination of decent earnings per share growth and reasonable rerating multiples over a three- to five-year horizon.

Growth scenario - Zeta as the "hidden" leader of AI marketing

In a growth scenario, more will be accomplished than what is locked into a conservative plan. The monetization of Athena and other AI features will accelerate platform adoption, Zeta's share of the marketing cloud market will roughly double as some analyses predict, and revenues will reach or exceed the high end of estimates around 2028. If revenues move more towards $2.3 billion and free cash flow margins reach the target sixteen percent, we are talking about free cash flow of around $340 million per year, as reported by several external models.

In an environment where Zeta has built a reputation as one of the leaders in AI marketing, it would not be unusual for the market to value such free cash flow at a multiple of twenty to twenty-four, which, with free cash flow in that range, supports a future enterprise value of roughly $6.8 billion to $8.2 billion. Against today's market capitalization of about 3.5 billion, this would imply a potential well above fifty percent over a multi-year horizon, but at the cost of higher execution intensity and sensitivity to market developments.

The cautious scenario - slowing growth and a sustained discount

In the more cautious scenario, Zeta's growth slows faster than the plan envisages. Revenues will grow not around twenty but rather around fifteen percent per year, and the company will still improve margins but will not quite reach the targeted twenty-five percent adjusted EBITDA margin or sixteen percent free cash flow margin. The regulatory environment will tighten and competition from the big players will siphon off some of the growth where Zeta has less differential value.

In such a scenario, the market would hardly be willing to move the price to earnings multiple well above three times. The stock could then trade somewhere in the 2.5 to 3.5 times earnings range over the long term, giving investors a return based on incremental earnings per share growth rather than a large revaluation multiple. With a strong balance sheet and free cash flow, it would still be a relatively safe growth title rather than a speculative one, but expectations would need to be proportionately more sober.

What to take away from the article

Zeta Global is a growth company that is no longer in the promise phase. It has a multi-year history of double-digit revenue growth, gross margins of over sixty percent, improving operating margins, and double-digit free cash flow margins. Under the surface, it's built on a data infrastructure of 245 million consumers and AI layers that translate that data into actionable marketing decisions. Management has a history of conservative communication and repeatedly beating its own targets, and has a plan in front of it that can take the company to the level of a free cash flow generator in the hundreds of millions of dollars within a few years.

The current valuation is partly consistent with this and partly not. A revenue multiple of around 2.7 is at the bottom, rather than the top, of the range for such growth and margins, but it also carries a discount for the real risks - regulation, competition, client concentration, and the still unfinished path to stable profitability under accounting standards. If you believe that Zeta can deliver on most of the Zeta 2028 roadmap and that its data and AI advantage will stand up to the big players, the current price may represent an interesting growth position with the potential for revaluation. But if you're nervous about the combination of data regulation and the power of Big Tech, it makes sense to keep an eye on Zeta, but keep it more as a minor weight or as a candidate for a later entry when the path to target numbers becomes even clearer.

TSMC has just announced that its second Japanese fab in Kumamoto will start production on the most advanced 3nm process in 2028.

Originally, this fab was supposed to produce chips on significantly less advanced 6 to 12nm processes.

Japan’s multibillion-dollar bet

Total investment in both Japanese fabs is expected to exceed $20 billion. The second fab alone could cost about $17 billion, although TSMC has not officially confirmed that number.

The Japanese government has approved subsidies of up to $4.62 billion for the second fab.

The entire project is being led by TSMC’s subsidiary JASM, which was established in 2021 with the support of Sony $SONY and was later joined by DENSO $DNZOY and Toyota $TM.

The planned monthly capacity of the second fab is 15,000 twelve-inch wafers on the 3nm process, with both fabs together expected to reach a capacity of 100,000 wafers per month.

The numbers

TSMC’s annual revenue $TSM for 2025 reached $122.3 billion, representing a year-on-year increase of 38.5%. For comparison: in 2024 it was $88.3 billion and in 2023 "only" $70.6 billion. So revenues nearly doubled in just two years.

Gross margin in Q4 2025 climbed to 62.3% and operating margin reached 54%. EPS recorded a year-on-year increase of 46.4%.

Global expansion at scale

Japan is only one piece of the puzzle. In Arizona, TSMC is investing a total of $165 billion to build five new fabs and two packaging plants, making it the largest foreign direct investment in U.S. history. The first Arizona fab began mass production on the 4nm process at the start of 2025 and supplies key clients such as Apple $AAPL and Nvidia $NVDA.

The second fab is slated to begin high-volume production in the second half of 2027, and the third is already under construction. The company is also planning fabs in Germany and continuing expansion in Taiwan.

Capital expenditures (CapEx) for 2026 are set at $52 to $56 billion, an increase of 27% to 37% compared with last year’s roughly $41 billion. Approximately 70% to 80% of that will be directed to the most advanced 2nm and 1.6nm processes.

How the stock is doing

Forward P/E is approximately 23, which isn’t excessive for a company with such growth and market dominance. TSMC holds roughly a 70% share of the global foundry market.

Do you have $TSM in your portfolio, or are you betting more on its customers like $NVDA or $AMD?

Here's why these companies are leading the market in 2026

The year 2026 has brought some major surprises to the stock markets. Instead of the AI tech giants that dominated returns in 2025, oil companies benefiting from the conflict in the Middle East and the closure of the Strait of Hormuz, as well as semiconductor equipment manufacturers benefiting from a massive cycle of investment in chip manufacturing capacity, topped the performance charts.

The size of these companies also plays an important role. All of the companies in today's survey have a market capitalisation of over $100 billion, meaning that these are not speculative bets on small growth companies, but established giants that can generate growth even at the huge scale of their businesses. It is the combination of strong share price growth this year and massive market capitalization that makes these companies interesting to say the least.

ExxonMobil $XOM

ExxonMobil is one of the absolute winners of 2026 in the US stock market. Shares are up approximately 33% since the beginning of the year, an extraordinary result for a company with a market capitalization of over $650 billion. This rise is mainly due to the dramatic increase in oil prices as a result of the conflict in the Middle East and the closure of the Strait of Hormuz by Iran in early March 2026. The price of Brent crude oil climbed to $126 per barrel in March, the highest level since 2022.

ExxonMobil is one of the biggest beneficiaries of this development. The company has an extensive portfolio of producing assets in the United States, particularly in the Permian Basin, which is one of the world's most productive oil regions. Unlike some of its competitors, ExxonMobil is not directly dependent on the transportation of oil through the Strait of Hormuz, which ensures operational continuity even in times of peak stress. At the same time, the company has completed the key Golden Pass LNG project, which strengthens its position in the global LNG market.

Fundamental strength and dividend stability

From a fundamental perspective, ExxonMobil operates with a P/E ratio of around 24, a dividend yield of approximately 2.4%, and continues a streak of 43 consecutive years of dividend increases.

The company generates strong operating cash flow and maintains a disciplined approach to capital spending. Analysts at Citigroup $C raised their target price to $150 in March (current price per share for $XOM is $160), highlighting a structural shift in institutional investor exposure to the oil sector. Interestingly, ExxonMobil's forward P/E even outperformed Nvidia's forward P/E in April.

Chevron $CVX

As the second-largest U.S. oil producer, Chevron has appreciated approximately 30% year-to-date this year, with the company's market capitalization rising to nearly $400 billion. Shares hit an all-time high of $214.71 apiece in March. As with ExxonMobil, the oil shock caused by the closure of the Strait of Hormuz remains the main catalyst for growth.

Chevron has significantly higher exposure to the price of oil compared to some of its competitors due to the structure of its portfolio. The company's primary focus is on the upstream segment, i.e. oil and gas production, which means that rising commodity prices translate directly and significantly into its profit margins. An important milestone in recent months has been the completion of the acquisition of Hess, which expanded Chevron's upstream portfolio to include high-quality assets in Guyana.

Valuation and risk

Chevron's current P/E ratio is around 30, which is well above the historical average and reflects investor expectations of a continued favorable oil price environment.

The dividend yield is approximately 3.5% with the company having increased the dividend by 4.1% this year. Analysts at DBS reiterated a Buy recommendation, but it should be noted that the consensus analyst target price is around $186, which is below the current share price. This suggests that the market has already largely priced in a positive scenario, and a potential drop in oil prices could lead to a quick correction.

Applied Materials $AMAT

In the case of Applied Materials , it is not an energy company, but a company that is a key supplier of manufacturing equipment to the semiconductor industry. The stock is up about 36% since the beginning of the year and has a market capitalization of over $275 billion. Applied Materials is the largest manufacturer of semiconductor wafer fabrication equipment in the world and holds the leading market share in the deposition segment, which is the process of depositing new materials onto silicon wafers.

Several structural factors are behind this year's growth. The shift to advanced Gate-All-Around transistor architectures, the development of backside power delivery technologies, and growing demand for High Bandwidth Memory (HBM) for AI applications are creating record order books. The company reported record sales in both its Logic and DRAM segments in the first quarter of fiscal 2026, and management announced a 15% increase in the quarterly dividend.

Competitive advantage in the AI chip era

Applied Materials' key competitive advantage is the breadth of its product portfolio. Unlike more specialized competitors such as Lam Research $LRCX or KLA $KLAC, Applied Materials covers virtually the entire manufacturing chain from etch to deposition to metrology and inspection. This integrated approach reduces dependence on a single process cycle and allows the company to better protect margins.

Intel $INTC

Intel is undoubtedly the most surprising name in this ranking. The stock is up about 37% since the beginning of the year and more than 160% over the past 12 months. The company, which most of the market wrote off as a lagging giant two years ago, is transforming itself into one of the most watched turnaround stories in the entire semiconductor industry under new CEO Lip-Bu Tan . Market capitalization has climbed above $250 billion.

The dramatic turnaround is primarily due to the successful completion of the program, with the company starting volume production on the 18A process in October 2025. This production node is reportedly about a year ahead of TSMC's rival 2nm process $TSM in implementing its key PowerVia technology for backside power delivery. In March 2026, the company began shipping its first commercial 18A-based products, specifically Core Ultra Series 3 (Panther Lake) processors for notebooks with integrated AI capabilities.

Strategic investments and risks

Intel has received massive strategic support: the US government holds approximately 10% stake through the conversion of an investment from the CHIPS Act program, Nvidia has invested $5 billion and SoftBank $2 billion.

These investments confirm the technological direction of the company, but also show the huge capital intensity of the entire turnaround. The firm still operates with negative free cash flow and GAAP gross margins remain around 30%, well below those of a healthy semiconductor company. CEO Tan calls 2026 an execution year, noting that he expects the real growth inflection point to be in 2027. A key test will be winning the first large external customer for the 14A process, which is scheduled for production in 2027.

TotalEnergies $TTE

European energy leader that has taken advantage of market chaos

TotalEnergies is the only European company in today's selection and one of the biggest winners of this year's oil shock. Shares on the New York Stock Exchange are up more than 42% since the start of the year and the market capitalisation is around $200 billion. As an integrated energy company, the company is benefiting not only from higher oil prices, but also from the extremely favorable refining margins and business opportunities that the current crisis is creating.

According to the Financial Times, TotalEnergies was able to execute one of the largest deals in the history of oil markets in March 2026. Its traders bought around 70 cargoes of crude from the Emirates and Oman, more than double the February figure, and took advantage of the dislocation in the Dubai crude benchmark market, where the price climbed from around $70 to $170 a barrel. Total profits from this trading operation reportedly exceeded $1 billion.

Diversification as a long-term advantage

Unlike pure US oil companies, TotalEnergies has a significantly more diversified business model. The company operates not only in oil and gas production, but also in renewable energy, LNG and electricity.

It recently announced a $2.2 billion partnership with Abu Dhabi Masdar focused on renewables in nine Asian countries and signed a 12-year nuclear power supply agreement with EDF. A P/E ratio of around 16 and a dividend yield of over 4% make TotalEnergies one of the most attractively valued oil majors in the market. Analysts at JPMorgan $JPM and Berenberg raised their price targets on the company in April.

Comparison to the broader market

The performance of these five companies significantly outperforms the broader market indices. While the S&P 500 is up around 4% year-to-date, all five companies in today's review are achieving double-digit appreciation.

The energy sector as a whole is one of the strongest sectors in 2026 thanks to geopolitical momentum, while the semiconductor sector is benefiting from a continued wave of investment in AI infrastructure and manufacturing capabilities.

Interestingly, this year's winners represent a rather unusual combination. Oil companies and semiconductor equipment manufacturers are not usually in the same group. This reflects the specific nature of 2026, when two independent but concurrent catalysts are shaping the markets: the energy crisis in the Middle East and the structural investment cycle in the semiconductor industry.

A strategic view

From an investor perspective, it is crucial to distinguish between cyclical and structural sources of growth for individual companies. ExxonMobil, Chevron and TotalEnergies have benefited primarily from the geopolitically driven oil shock, which is inherently temporary. If the Strait of Hormuz were to reopen or a diplomatic resolution to the conflict were to occur, oil prices could fall rapidly and with them the valuations of oil companies.

On the other hand, Applied Materials and Intel are benefiting from structural trends in the semiconductor industry that are longer-term in nature.

For energy companies, it is therefore important to monitor geopolitical developments and the real impacts on physical oil flows. Analysts warn that oil inventories are declining rapidly and if the Strait of Hormuz remains closed until mid-April, the world is in for a much harsher oil shock. For semiconductor companies, on the other hand, the pace of investment in new production capacity and the ability of companies like Intel to actually execute their plans remains a key factor.

What to watch next

• Developments in the negotiations between the US and Iran over the reopening of the Strait of Hormuz and its impact on oil prices.

• Q1 2026 earnings season: ExxonMobil and Chevron (April 24) and Intel (April 23).

• Intel's progress in securing external customers for the 14A process in the second half of the year.

• Developments in demand for HBM memory and advanced manufacturing processes that directly impact Applied Materials' order books.

• OPEC+ decisions on further production increases and market reaction to the potential release of strategic petroleum reserves.

Conclusion

The top 5 companies with the highest growth and market capitalization over $100 billion show how fundamentally the composition of market leaders can change in response to geopolitical and structural events. While just a few months ago the rankings were dominated exclusively by AI technology firms, today oil giants profiting from the energy crisis and semiconductor equipment manufacturers building infrastructure for the next generation of chips are coming to the fore.

At the same time, strong growth this year does not automatically make for an attractive entry point. For some of these stocks, the positive scenarios are already largely priced in, and a possible reversal in geopolitical developments or a slowdown in the semiconductor investment cycle could lead to a quick correction. The key to success therefore remains distinguishing between temporary catalysts and truly structural changes in individual business models.

For David Ellison, the head of Paramount Skydance and son of Oracle co-founder Larry Ellison, this solves the fundamental problem with the whole deal: a company with a market capitalisation of around $12bn is buying a business valued at more than $110bn including debt, in a package that includes an obligation to pay Netflix $2.8bn in severance for the cancellation of a previous deal. Without a massive injection of outside capital, it simply wouldn't have worked.

How the Gulf money is put together

According to leaks so far, the structure is supposed to look like this: the Saudi Public Investment Fund (PIF) will supply about $10 billion, the Qatar Investment Authority and the Abu Dhabi entity L'imad Holding the remaining roughly $14 billion. This money will be added to the equity of Ellison and RedBird Capital and debt financing from banks and private-equity partners such as Apollo Global Management.

Crucially, the Arab funds are to be formally non-principal. As structured, they enter with no voting rights, no board seats and no direct control over the combined firm. This structure has two functions:

• reassure regulators that this is not about "selling CNN to the Saudis" or about direct control of the media house

• and to allow the funds to share in the proceeds of a potentially very profitable consolidation of global media brands

Paramount therefore argues that the transaction should not come under the sharp scrutiny of the Committee on Foreign Investment(CFIUS) because foreign capital does not receive corporate control.

The political reaction: money yes, influence no - really?

Seven Democratic senators, led by Cory Booker, have already sent a letter to the FCC chairman expressing "deep concern" that billions of dollars from PIF, QIA and Abu Dhabi investors are helping to fund the takeover of Warner Bros. Discovery $WBD, including such brands as CNN and HBO.

Their argument is twofold:

• Even without formal voting rights, there is room for some power - through joint projects, content financing, future investments

• and the combination of capital from the Middle East region and from China (for example, through Tencent for other media assets) creates complex, sometimes competitive relationships that deserve more than a "superficial review"

The Senators therefore call for a thorough examination of whether such structured participation increases the risk that foreign governments may be indirectly involved in influencing editorial decisions and business priorities in sensitive areas - for example, just for CNN's news coverage or content licensing for markets where they have political interests.

As a result, even if the legal structure formally envisages 'money without a voice', the regulatory and political level may not agree. The FCC, DOJ, and potentially CFIUS will be under pressure to look at the scheme not only from an antitrust perspective, but also from a national security perspective.

Regulatory hurdles and timeline

The DOJ has already begun issuing subpoenas as part of its antitrust review of the transaction. That's standard for a deal of this size, but it suggests that everything won't just run on a fast track. Antitrust experts don't expect a ban yet - the combination of Paramount and WBD will indeed create a very strong player, but the market is still fragmented (Netflix $NFLX, Disney $DIS, Amazon $AMZN, Comcast $CMCSA, others).

Still, it's to be expected:

• A long approval process

• possible conditions (sale of some assets, commitments to continue open licensing of content, etc.)

• the involvement of European and Canadian regulators, who have already begun informally gathering input

Time is running out: the deal provides for a "ticking fee" - if the deal does not close by September 30, 2026, WBD shareholders will start collecting $0.25 per share for each additional quarter of waiting, which means a total of about $650 million per quarter extra for the buying party. Paramount thus faces a double whammy: convincing regulators and getting it done in time so the deal doesn't start eating into its own costs.

Why Paramount is doing this in the first place - and what the GCC investors are doing about it

From Paramount's perspective, the motivation is clear: to acquire Warner Bros. movie studios, the HBO and Max brands, CNN news and other assets in a single transaction and create a media group that can match Netflix or Disney in size and catalog. In an environment where streaming services are under margin pressure and where the price of talent and sports rights is rising, consolidating the library and brands makes strategic sense.

For Gulf funds, it is in turn part of a broader strategy to diversify the economy beyond oil and buy the global brands they bring:

• long-term cash flow from content, licensing and rights

• the opportunity to develop their own film and entertainment projects at home (studios, festivals, production)

• a reputation as a player who co-determines what the world watches

Just because they don't formally have voting rights doesn't mean they won't have a voice at the table when it comes to major co-productions, filming in the region or strategic investments.

Sector Technology – Software is currently taking a solid hit and most well-known names have dropped by tens of percent:

👉 And it's not just these big players — for example Duolingo ($DUOL) is about -45% year-to-date and is at the lowest levels since 2023.

👉 What's behind this?

- higher interest rates → pressure on growth stock valuations

- slowing growth at some companies

- but mainly FEAR OF AI 🤖

👉 The market is afraid that:

- AI could make software cheaper and reduce pricing power

- companies will lose part of their competitive edge

- some products will be partially or completely replaced

👉 Result? Investors are now often "selling everything," because it's unclear who will be the winners and who will be the losers.

👉 What is important to realize:

Most of these companies still have:

- strong cash flow 💰

- high margins 📊

- dominant market positions 🌍

Just look at $ADBE — where revenues are clearly rising! Still, the company is down by about 30% year-to-date.

📌 Question for investors: Is this the start of a bigger problem, or a typical correction that has historically created the best buying opportunities?

💬 Personally, I see these situations as moments when some quality companies reach more attractive valuations. Even so, I consider AI a huge risk for these companies and I tend to avoid most of them. For me, for example, DUOLINGO is misunderstood, as is UBER.

👀 Do you follow any of these companies? If so, which one and most importantly why that one? 👇

$CRM $UBER $INTU $FICO $PAYX $NOW $ADP

To me, this is one of the drawbacks of investing in ETFs: we're "forced" to buy overpriced companies, like SpaceX.

Personally, I'm also bothered by Tesla's large weighting in the S&P 500, but SpaceX's valuation is truly out of this world.

Crucially, the new commitment sits on top of a 2.9 billion dollar pledge from 2024, taking Microsoft’s announced investment in Japan above 13 billion dollars in a few years. Partnerships with Sakura Internet and SoftBank are meant to ensure that the added Azure capacity is physically located in Japan and architected to meet domestic rules on data residency and security, giving local enterprises and public agencies comfort that AI workloads can run at scale without leaving the country.

Why Microsoft $MSFT is focusing on Japan

Japan is a large and rich market, but one that has lagged behind the United States or Western Europe in some areas of digitization and cloud. This creates a strange combination - a lot of room for catching up, relatively high corporate and government purchasing power, and a strong emphasis on data security and sovereignty. By building local AI infrastructure, Microsoft is buying access to these future budgets. For the Japanese government, in turn, having a global technology partner that is willing to invest in-country and tailor services to local regulatory and security requirements is attractive.

The security dimension is also important. The package includes enhanced information sharing with the National Cyber Security Authority and joint projects aimed at protecting critical infrastructure. In the context of tensions in the region (China, North Korea, Russia), this is a signal that Microsoft wants to be seen as a strategic partner of the state, not just a private contractor. This opens the door to segments where contracts are long-term and barriers to entry for competitors are high.

Local partners: what role do Sakura Internet, SoftBank and the "big five" IT houses play

Microsoft will not build everything on its own. It announced that it will partner with datacenter provider Sakura Internet and SoftBank $SFTBY to increase Azure's computing capacity in Japan. It was a strong signal for Sakura, which is listed on the Tokyo Stock Exchange - its share price immediately jumped by around 20% as the market is pricing in the fact that some of the investment and new contracts will physically manifest themselves in its data centres and infrastructure.

SoftBank adds another layer. As a telecom operator and technology investor, it can connect its network, cloud capabilities and portfolio of AI firms with Microsoft's ecosystem. This is particularly interesting in the "we provide the complete solution" play - from connectivity, to infrastructure, to applications and services for end customers. From Microsoft's perspective, this provides a local "leg" that knows the market, the regulation and has its own customer base.

Another part of the programme targets human capital. Microsoft wants to train up to 1 million engineers and developers in cloud, AI and cybersecurity over several years in partnership with major Japanese IT firms - Fujitsu, Hitachi, NEC, NTT Data and SoftBank. This has a twofold effect: first, it will strengthen the overall skills of the country's workforce, and second, it will naturally "glue" this generation of IT professionals to Microsoft's tools and platforms. Those who learn on Azure, Visual Studio and Copilotech are less motivated to move to competing ecosystems.

What's in it for investors: Microsoft and select Japanese players

For Microsoft shareholders, the $10 billion move is a relatively small item given the size of the company, but it makes sense strategically. It helps the company:

• Strengthen the position of Azure and AI services in a region where it has not yet been as dominant as in the U.S.

• position itself as the preferred partner for the digitization of Japanese corporations (automotive, industrial, finance) and government

• and diversify growth outside the US market at a time when competition in AI among the "Big Three" (Microsoft, Google $GOOG, Amazon $AMZN) is intensifying

The risk is execution - whether Microsoft will be able to fill the new capacity quickly with real contracts and projects, and whether market conditions (regulation, security requirements) will inhibit the adoption of AI applications by more conservative Japanese companies. From a valuation perspective, however, the investment fits into a broader trend: Microsoft has been systematically building regional AI hubs around the world, and the Japanese package is one of the more visible steps in that mosaic.

On the Japanese side, three groups of companies in particular are worth watching.

• Sakura Internet, as a local datacenter partner, can benefit from higher demand for capacity, technology upgrades and reputational effect. However, the significant rise in the exchange rate also means that market expectations are high and any delay or weaker contract reality may lead to a correction.

• SoftBank, which has built its story on investments in technology and AI in addition to telecom services, can leverage partnerships in its investor communications and in specific digitization projects for corporate clients.

• Fujitsu, Hitachi, NEC and NTT Data will be at the forefront of integrating AI solutions and training - if Microsoft's program really gets the wave of projects rolling in the corporate and public sector, these companies may see increased demand for consulting and implementation services.

What other questions investors should ask

For the investor looking beyond the announcement itself, there are a few things to keep an eye on:

• What proportion of the $10 billion invested goes into physical infrastructure (datacenters, servers, networks) and what proportion goes into the "soft" components (training, security projects, software)

• how quickly specific large AI contracts will start to appear in segments such as car companies, banks, industrial conglomerates or government

• whether competitors (Google Cloud, AWS) will come up with similarly large programs, or whether Microsoft will manage to temporarily get a head start

Sometimes it's worth being patient with high-potential growth tech stocks, even though they come with increased volatility. These kinds of names often reward disciplined investors who wait for the right entry instead of trying to catch the exact bottom and top.

Over the past six months I had $BITF (Bitfarms) on my watchlist with a planned entry at 2.00 USD. After careful monitoring and recent price action, I opened a new position yesterday at 1.88 USD with a weight of 1% of the portfolio. My target price is set at 4.50 USD.

$BITF is among the largest publicly traded companies focused on Bitcoin mining. It operates large, energy-efficient mining farms in North America with an emphasis on sustainable energy sources.

Why I view $BITF as an interesting medium- to long-term investment:

Attractive valuation after the drop: The current price offers an entry significantly below my original target and reflects a reasonable valuation considering the mining capacity and plans for further growth.

Exposure to Bitcoin's long-term growth: As a pure-play miner, $BITF directly benefits from growing Bitcoin adoption, demand for network security, and potential price appreciation, without the risks typical for early crypto projects.

Operational efficiency and expansion: The company optimizes its hardware, secures cheap energy contracts, and increases its share of global hash rate, which positions it well even for the post-halving period.

High upside potential: Successful expansion and potential corporate catalysts could lead to a significant re-rating of the stock over a 12–24 month horizon.

Main downsides and risks:

High dependence on Bitcoin's price: A significant drop in $BTC would immediately impact mining economics and the stock price.

Energy costs and regulation: Rising electricity prices or regulatory changes (especially in key regions) can negatively affect margins.

Strong competition in the industry: Larger players with stronger balance sheets may gain an edge in efficiency and scaling.

Risk of the broader crypto market: Negative sentiment or regulatory interventions can cause severe declines across the sector.

I'm also watching other interesting names in this segment of tech infrastructure:

$IREN (Iris Energy) – planned entry 32 USD

$CIFR (Cipher Mining) – planned entry 11 USD

$NBIS (Nebius Group) – planned entry 76 USD

$CRWV (CoreWeave) – planned entry 52 USD

Overall, I view $BITF as an attractive way to gain leveraged exposure to Bitcoin's long-term growth and related technological infrastructure. At current prices, a small, well-managed position makes sense to me.

What do you think? Does $BITF make sense at these levels for you, or are you waiting for lower prices? What's your take on the other mentioned stocks?

Tickers mentioned in the post: $BITF $IREN $CIFR $NBIS $CRWV $BTCUSD

You can find the English version of this post on my eToro profile. If you'd like to follow me there or copy my USD portfolio, I'd appreciate it!

2026 confirms that gold is not just a relic of the past or a speculative asset for "old-fashioned" investors. The price of gold broke the psychological USD 5,000 per troy ounce mark in January this year and was in an extremely volatile range during the first quarter. It is currently trading around USD 4 700 per ounce, representing an appreciation of around 8 to 9% since the beginning of the year. Over the past 12 months, gold has delivered a total return to investors in excess of 55%.

Behind this development is a combination of several structural factors that have gradually strengthened over the past few years, reaching a critical point in 2026.

The position of the major banks

Central banks around the world continue to accumulate gold. They purchased more than 1,000 tonnes in 2025, the third consecutive year with such a high volume. Although the pace has slowed slightly in early 2026 (5 tonnes in January versus an average of 27 tonnes per month in 2025), the demand base is broadening. Traditional buyers such as China and Poland are joined by Malaysia and South Korea, which have increased their gold reserves for the first time in many years.

Geopolitical instability, particularly the conflict over Iran and the closure of the Strait of Hormuz, together with the ongoing war in Ukraine, is creating an environment in which institutions are looking for assets outside the reach of financial sanctions. Another important factor is the weakening confidence in the US dollar as a reserve currency. Rising US government debt, uncertainty around the future direction of the Federal Reserve and the overall fragmentation of the global financial system are leading to a structural shift of capital towards gold.

Major investment banks such as J.P. Morgan $JPM, Goldman Sachs $GS and Wells Fargo $WFC have set their gold price targets for the end of 2026 in the range of USD 5,400 to 6,300 per ounce.

Access to ETFs

For retail investors, however, there is no such thing as gold. How you gain exposure to this precious metal can fundamentally affect your portfolio's return, volatility and overall risk profile. Physical ETFs tracking the price of gold behave differently than funds investing in mining companies. The following four ETFs represent four fundamentally different approaches to the same asset.

SPDR Gold Shares $GLD

SPDR Gold Shares is the oldest and largest physically-backed gold ETF in the U.S. The fund was launched in November 2004 and has since become the de facto standard for investors seeking direct exposure to the price of gold. Each share of the fund represents a fractional ownership of physical gold that is stored in secure vaulted storage. The fund does not invest in futures contracts, shares of miners or other derivatives.

With assets under management in excess of $155 billion (as of March 31, 2026), GLD is by far the most liquid gold-focused ETF in the world. For institutional investors and large traders, this means extremely tight bid-ask spreads and an established options market that allows for sophisticated hedging strategies. The fund's expense ratio of 0.40% per annum is higher than some competitors, but the liquidity premium the fund offers often offsets this disadvantage for large positions.

Performance and market position

Since the beginning of 2026, $GLD has appreciated approximately 8%. Over the past 12 months, then, the total return exceeds 54%. The fund has moved within a wide range during the first quarter, reflecting the extreme volatility of gold prices during this period. GLD is ideal for investors who want clean and transparent access to gold without the operational risk associated with mining companies. It is also the preferred choice for short to medium term trading and hedging positions.

iShares Gold Trust $IAU

BlackRock 'siShares Gold Trust is the second largest physically backed gold ETF on the market. The fund was launched in January 2005 and is virtually identical in structure to GLD. Each share represents a stake in physical gold stored in vaults managed by JPMorgan Chase $JPM. From an investor's perspective, it is an alternative approach to gold that differs from GLD primarily in the cost structure and size of each share.

The main differentiator of IAU is the lower expense ratio of 0.25% per annum. The 15 basis point difference from GLD may seem small, but this cost differential accumulates over a long term holding period. For an investor who holds a position in gold for five or more years, the lower expense ratio of IAU can provide a measurably better total return. Assets under management of the fund are approximately $71 billion, making IAU the second largest gold ETF in the world and a very liquid instrument.

IAU's performance is virtually identical to GLD because both funds track the same underlying asset. YTD appreciation is approximately 8.1%, with a total return over 12 months in excess of 53%. IAU is an ideal choice for cost-conscious investors who plan to hold a position for the long term and do not need maximum depth in the options market. The lower price per share (IAU trades at approximately one-fifth of GLD's price) also makes it easier for smaller investors to gradually build a position.

VanEck Gold Miners ETF $GDX

The VanEck Gold Miners ETF represents a fundamentally different approach to gold exposure. Instead of holding the physical metal, it invests in shares of companies that mine and process gold. The fund was launched in May 2006 and tracks the MarketVector Global Gold Miners Index. The portfolio currently holds 57 titles, dominated by the world's largest gold mining companies.

The largest positions include Agnico Eagle Mines $AEM (around 12% of the portfolio), Newmont (11%), Barrick Mining $B (7.5%), Franco-Nevada $FNV (around 5%) and AngloGold Ashanti $AU (around 5%). The fund is sector concentrated exclusively in the basic materials segment, with Canada dominating geographically with around 55%, followed by the US and Australia. The fund's expense ratio is 0.51% per annum and AUM is approximately $29 billion.

A key feature of GDX is its higher beta to the gold price. When the price of gold rises, miners' shares typically rise faster as higher commodity prices are more reflected in margins and profits when mining costs are relatively fixed. But this effect works both ways. During the March gold selloff, miners' shares depreciated much faster than the metal itself. The fund's five-year monthly beta against the S&P 500 is about 0.66, but volatility against gold is significantly higher.

The fund's YTD appreciation is around 10%, but over the past 12 months, miners' stocks have delivered a total return in excess of 107%. In 2025, the fund posted over 144% appreciation in a single year. GDX is an option for investors who believe in a continuation of the upward cycle in gold and want to gain increased exposure while accepting higher risk.

WisdomTree Efficient Gold Plus Gold Miners $GDMN

WisdomTree Efficient Gold Plus Gold Miners Strategy Fund is the youngest and most aggressive fund in today's selection. It is an actively managed ETF launched in December 2021 that uses the principle of so-called return stacking. For every $100 invested, the fund allocates approximately $90 to a basket of global gold mining stocks (weighted by market capitalization) and another $90 to gold through futures contracts. This leaves approximately USD 10 as cash collateral. This results in a total exposure of USD 180 for every dollar invested, which is equivalent to approximately 1.8 times leverage.

This structure allows investors to gain simultaneous exposure to both physical gold and miners in a single instrument without having to sell other positions in the portfolio. WisdomTree presents the fund as an alternative to traditional leveraged ETFs on miners because its leverage comes not from daily resets (as with 2x or 3x leveraged funds) but from the structural layering of the two exposures.

The results are accordingly. In 2025, the fund attributed a whopping 239%. Since the beginning of 2026 (through the end of February), it is up about 42%. But this return comes with corresponding volatility. The fund's annual price range ranges from approximately $30 to $147, illustrating the extreme amplitude of the movements. The fund's AUM is approximately $231 million, significantly less than the other funds in today's comparison, and the expense ratio is 0.45% annualized.

GDMN is clearly designed for experienced investors with a high tolerance for volatility. In a strong gold growth environment, this fund significantly outperforms other gold funds. However, in the event of a correction, losses can quickly reach tens of percent. Moreover, the low liquidity (average volume of around 87,000 shares per day) and the limited size of the fund bring additional risks for larger positions.

Comparison of the four ETFs

Strategic view

Choosing the right gold ETF is not a question of which fund is objectively better, but of what role gold should play in a given portfolio. For a conservative investor who wants gold as a long-term hedge against systemic risk, GLD and IAU are the logical choices. IAU offers lower costs with an almost identical structure, while GLD excels in liquidity and a broader options market.

GDX makes sense for investors who believe in the continuation of the commodity supercycle and want to leverage the operating leverage of mining companies. In an environment where the gold price is rising and mining costs remain relatively stable, shares of miners can generate significantly higher returns than the metal itself. However, they also carry operational risk, political risk (many mines are located in volatile regions) and cyclical risk associated with the industry's investment cycle.

GDMN is designed for investors who are betting on gold's continued growth and who want to maximize their exposure without having to use traditional daily leveraged funds. The capital efficiency of this fund allows it to preserve other positions in the portfolio, which is an interesting feature from a portfolio construction perspective. However, it should be clearly understood that the 1.8x leverage works both ways and during a correction the fund can lose value significantly faster than the underlying assets.

What to watch next

• Fed rate developments and potential change in leadership: the nomination of Kevin Warsh to replace Jerome Powell as head of the Federal Reserve adds further uncertainty to the market. Any move towards more aggressive monetary easing would be positive for gold.

• Geopolitical developments: the conflict over Iran, the closure of the Strait of Hormuz and the ongoing war in Ukraine remain key factors for demand for safe-haven assets. Any easing of tensions could trigger a short-term correction in gold prices.

• Central bank purchases: the broadening base of buyers (Malaysia, South Korea, other emerging economies) signals a structural change in access to reserve assets. If this trend is confirmed, gold may receive further long-term support.

• Inflation Expectations and Real Yields: If the energy shock caused by the closure of the Strait of Hormuz translates into higher inflation, real US Treasury yields may remain negative or low, which has historically been strongly supportive of the gold price.

Summary

The current global gold market environment is creating conditions that have not been seen in this combination for decades. Structural central bank demand, geopolitical fragmentation, questions around the future of the dollar system, and record levels of government debt are all combining to support the long-term case for gold as an asset class. At the same time, however, it is important to remember that after a period of very strong growth, a correction may come, which will be significantly different for different types of exposure.

Each of the above offers a different risk-return profile, a different cost structure and a different sensitivity to the various factors affecting the gold price, so each ETF is suitable for someone else and neither may fit into some portfolios.

In January 2026 the balance sheet was rewired to match those ambitions, with roughly 960 million dollars of fresh capital lifting the cash pile to about 1.5 billion dollars and giving management room to chase a minimum 375 million dollars of revenue this year – more than seven times 2025 – without worrying about liquidity. The market, however, still largely files the name under “small wireless gear vendor”, which creates a gap between label and reality that a patient investor can exploit if the company executes on turning its border contract, Blue UAS status and Palantir‑powered data stack into a repeatable, high margin autonomous‑drone business.

Top points of the analysis

• Revenue jumped from about $7.2 million in 2024 to $50.7 million in 2025, up about 605 percent, with the fourth quarter of 2025 alone bringing in $30.1 million - about 60 percent of full-year revenue.

• The Autonomous Systems (OAS) division increased revenue from about $5.3 million to $49.7 million - an increase of about 840 percent in one year.

• Holds the only FAA type certification for a small UAS designed for autonomous safety and data collection

• Has the only FAA-approved drone system to fly beyond visual line-of-sight without a human operator on site

• Secured a government contract to deploy thousands of autonomous drones across state borders

• Signed a strategic partnership with Palantir

• The counter-UAS systems market is estimated to grow from roughly $6.6 billion in 2025 to more than $20 billion by 2030.

What Ondas does and what it makes money from

Ondas Inc $ONDS is now a holding company for two main parts: Ondas Autonomous Systems (OAS) and Ondas Networks. Ondas Networks was the original business - industrial wireless networks for railroads and critical infrastructure. But most of the investment story has shifted to the OAS division, which aims to deliver governments, militaries and critical infrastructure operators a complete autonomous defense system against drones and other threats.

The core of revenue today is a combination:

• Systems sales (drones-in-a-box, anti-drone systems, ground robotics, aircraft protection equipment).

• services and support (installation, training, maintenance, upgrades)

• Software and data services - control software, integration with AI and analytics platforms (Palantir $PLTR) and, over time, mission data output

For the customer, Ondas is not a "single drone supplier" but an integrator to deliver a whole suite of technologies, certifications, processes and data matched to actually reduce the risk of a drone attack to an acceptable level at a particular airport, power plant or military base.

Why is this company different than the typical drone title

There are plenty of companies on the market that can make a drone, radar or jammer. Ondas is different in a few hard-to-copy ways:

• The company says it is the only player to have full FAA type certification for the Optimus small autonomous system, designed for continuous patrol and data collection without a pilot

• is the only system in the U.S. to be FAA-cleared to fly beyond visual line of sight(BVLOS) without a physical operator on site, a major advantage for civil airspace

• won a government contract to deploy thousands of autonomous drones along the nation's border, an infrastructure, not just a test project

• increased autonomous systems sales by 840 percent and company-wide sales by more than 600 percent in one year

• in 2025-2026, going from "one company" to a conglomerate of nine acquisitions that form a complete multi-domain defense stack, from a drone in the sky to a robot on the ground.

For a long time, Ondas has been looked at as a cheap "micro-cap wireless provider," which explains why the stock was still trading below one dollar in 2025 before rising above $11 within a year.

Products and ecosystem - six layers of a defensive stack

To make sense of what Ondas is building, it needs to be viewed not as individual products, but as six layers to address the entire drone threat lifecycle - from detection to analysis.

1) Guardian: Optimus - a drone in a box

Optimus is a fully autonomous system that looks like a larger container with a charging station and a backroom for the drone. Installing it on an object means:

• the drone takes off on its own on schedule

• flies along a defined route or according to events

• collects imagery and other data

• lands, charges and repeats the cycle, without a pilot on site

This system is no longer just on paper - it's deployed in the UAE and with customers in the Middle East, Europe and elsewhere.

Two strong differentiators:

• FAA type certification - four years of approval and testing

• BVLOS permit without operator - additional years of operational data collection

This is a regulatory lead measured in years rather than months.

2) Raider to Raider: Iron Drone

Raiderhttps://www.youtube.com/embed/m4it_Z6HXLk?rel=1

The Iron Drone Raider is a fully autonomous anti-drone system. Once the detection system confirms an enemy drone, the Raider:

• automatically takes off

• ascends to the target

• launches a reusable net that physically intercepts the drone

• and then safely lands

Speed is key - human decision-making is often too slow with high-speed drones. Raider is designed to reduce the time from detection to neutralization to a minimum. In November 2025, Ondas won two consecutive contracts of $8.2 million each from a major European security agency, and each involved a different airport - no longer a pilot project, but the start of an infrastructure.

3) Cyber Layer: Sentrycs

It is not always appropriate to "take down" a drone physically. Over a crowd, expensive or critical technology, a silent intervention is better. Sentrycs, an Israeli firm that Ondas is buying for about $225 million, offers a "Cyber-over-RF" approach - the system takes over radio control of the drone, redirects it, and perches it safely.

The benefits:

• No interference with other systems (unlike crude jammers)

• no debris and collateral damage

• data retention in the drone - it can be traced back to where it came from and who was controlling it

Sentrycs has already been deployed in live operations, including protecting airspace at the World Economic Forum in Davos in 2026 - a reputationally extremely strong reference.

4) Ground Robotics: Roboteam and Apeiro

Ondas doesn't stop at the air. Roboteam, an Israeli manufacturer of tactical ground robots, supplies machines for explosive ordnance disposal, reconnaissance and urban operations that are used by militaries and security forces in more than 30 countries. Apeiro Motion complements other ground-based systems and tethered drones powered from the ground.

This allows Ondas to offer a response not only in the air but also on the ground - for example, to send a robot to secure a downed or captured drone, or to reconnoiter the area from where the threat came from.

5) Gateway to the U.S. military: Mistral

Mistral, whose acquisition for about $175 million was announced in March 2026, is a prime contractor for the U.S. military and special forces. It manages over $1 billion in existing contracts, mainly in weapons and unmanned platforms.

Crucially, Ondas also buys so-called IDIQ contracts with Mistral - framework contracts through which the US military can repeatedly buy without a full tender. While it takes years for a new player to get into such a mode, this move gives Ondas a shortcut to the world's largest defense budget.

6) Brain: Palantir

The final layer is data. The Palantir Foundry is meant to be the nervous system that connects stratospheric systems, Optimus drones, anti-drone systems, Sentrycs, and ground robots into one operational view.

Simply put: data from radars, RF sensors, cameras, drones and robots converge into Palantir, which helps:

• classify threats

• design responses

• evaluate incidents and learn the system for next time

For Ondas, this means a twofold advantage - technological (an AI layer it would take years to build on its own) and distribution (Palantir has relationships with virtually every major defence ministry and intelligence agency in NATO).

What airport deployment looks like in practice

Imagine an international airport that has had to shut down several times because of hobby drones costing a few hundred dollars - one stopped hour means millions of dollars in losses. At such an airport, Ondas installs Optimus stations along the perimeter that autonomously take off at regular intervals and patrol the runways and surrounding area.

At 2am, the system detects a drone entering the restricted area. The AI evaluates its trajectory and signal as suspicious - at that moment:

• Sentrycs will attempt to take control of the drone and guide it to a safe landing in the defined zone.

• if the takeover fails, the Iron Drone Raider takes off, climbs to the target and catches the drone in its net

• Roboteam robot goes to the landing site and secures the machine for analysis

The entire incident is logged into Palantir to evaluate the drone's behavior, possible origin and improve the detection model for the next time. The airport doesn't have to stop traffic, no one has to shoot, and the security team has a report on their desk in the morning, not just a "what the hell happened last night" question.

Why it's hard to replicate

Trench 1: The control wall

It took four years to get FAA certification for the Optimus System. BVLOS exemptions required a multi-year process of submitting operational data to prove the safety record of the system on a large scale. No competitor in the U.S. currently has equivalent certifications.

Why is this so important? Because government contracts (the primary market for this product) often require certified systems. Without FAA certifications, a competitor cannot bid for the same contracts Ondas is winning today. They would have to start the regulatory process from scratch.

Estimated time to replicate these certifications: at least three to five years, assuming the competitor already has a comparable product and starts the process today. Most won't.

AeroVironment (AVAV), the closest publicly traded competitor, has a deep relationship with DoD and a long history with tactical drones. But AeroVironment's products were designed for military operators, not for fully autonomous, unmanned commercial and security applications. Their certification architecture is different. Their BVLOS approval is different. They build in the same space, but from a different starting point.

Moat 2: System of Systems Architecture

One company can be outperformed. System of systems players are fundamentally harder to replace.

When the government buys an Ondas stack, it doesn't buy a drone. They are buying a complete autonomous security infrastructure: aerial surveillance, kinetic interception, cyber interception, ground response, AI-driven command and control. Each component reinforces the others. Replacing one component requires the exchange of interfaces, data protocols, training, maintenance relationships, and regulatory approvals.

This is a switching cost that is measured not in dollars but in years of program disruption.

Red Cat Holdings (RCAT), the most aggressive small-company competitor in this area, focuses primarily on ISR drones and has strong tactical drone capabilities. But Red Cat doesn't have a capability against UAS. It doesn't have a ground-based robotics stack. It doesn't have a Sentrycs cyber layer. It builds one dimension to the problem. Ondas is building a complete stack.

Moat 3: Combat Proven Operational Record

Iron Drone Raider has been deployed in Israel, UAE, Europe and several other areas. Sentrycs has operated in active defense environments. Roboteam platforms are used by military forces in 30 countries.

In defense acquisitions, operational track record is the currency. When the government evaluates a system against drone settlements, it is not just buying technology, it is also managing risk. A system with a documented operational history in GPS-denied environments, adverse weather, and complex airspace has a credibility advantage that cannot be produced in a laboratory demonstration.

Management

The transformation of Ondas is being led by Eric Brock, who combines the roles of CEO and Chairman of the Board.

Under his leadership, the company:

• made nine acquisitions in just a few quarters - Sentrycs, Roboteam, BIRD Aerosystems, Apeiro, Mistral and others

• Completely pivoted the portfolio from "wireless networking and commercial drones" to a multi-domain defense stack

• Raised nearly $1 billion in capital in January 2026, bringing cash on hand to about $1.55 billion

Brock openly says 2025 was a watershed year - a transition from a portfolio of technologies to a "scaled operating platform" with a growing backlog and global demand for integrated autonomous systems. But this also brings a downside - massive dilution: the number of shares jumped from tens to hundreds of millions in just a few years.

So the key question for investors is whether this capital allocation will look in retrospect like a smart bet on a new defence standard, or an overpriced roll-up.

The numbers: growth, losses, cash and balance sheet

Revenue and margin growth

• 2022: sales of about $2.1 million

• 2023: 15.7 million (more than six times)

• 2024: drop to 7.2 million (trimming old parts, rebuilding)

• 2025: 50.7 million, a growth of about 605 percent

The OAS division jumps from 5.3 million to 49.7 million, about 840 percent. Gross margin from five percent to about 40 percent - a major signal that the size of contracts is already starting to tip the fixed cost-to-revenue ratio.

Losses and cash burn

Operating costs rise from about 35 million in 2024 to 78.5 million in 2025, so the operating loss is about 58 million, with a net loss of $137 million. Adjusted EBITDA is around minus 32 million, roughly minus 9-10 million in Q4 2025 - so the company is still in a cash-funded growth phase.

Management is targeting product profitability around Q3 2026, segment profitability in OAS sometime in 2027, and company-wide profitability after that - these are targets, not certainties.

Cash and debt

Ondas has $594m in cash at the end of 2025, and has raised around $960m in new capital in January 2026, for a total of around $1.55bn. Debt is negligible, with a debt-to-assets ratio of a tenth of a percent, and an Altman Z-score above 4.

In other words, the risk of "running out of money" is currently low, the real risk is "under what conditions will capital be able to appreciate".

Market and competition

The counter-UAS market is set to grow from roughly $6.64 billion in 2025 to $20.31 billion in 2030, a rate of around 25 percent per year, according to MarketsandMarkets. The drivers are:

• Experience from Ukraine and other conflicts where low-cost drones have fundamentally changed tactics

• incidents at airports like Gatwick, Frankfurt, Schiphol, where hobby drones have managed to shut down operations

• pressure to protect critical infrastructure and large events

Ondas stands between here:

• Big weapons companies (Lockheed, Northrop, RTX) - they have the resources and relationships but are slower and often solve the "2035 problem", not the "2026 problem"

• specialized firms like D-Fend Solutions, Dedrone - strong point solutions (cyber, detection) but lack system-of-systems

• Smaller drone companies (e.g. Red Cat) that are strong in ISR and tactical drones but do not have a cyber layer, ground robotics or full integration

Ondas is trying to lean on that:

• has a regulatory edge (FAA certification and BVLOS)

• has an air-to-ground-to-cyber combination

• has references from real deployments (airports, Davos, Middle East)

• and through the Mistral can gain passage into US contracts

Valuation and what the market sees in it today

According to the data, with a market capitalization of around $4.9 billion and revenues of $50.7 million in 2025, Ondas is trading at roughly

• price to sales around 97 times

• price to book over 11 times

• negative P/E (loss-making company)

That in itself looks brutally expensive.

Context:

• If the company actually delivers 375 million in sales in 2026, the P/S would fall somewhere near 13 times - still expensive, but already comparable to other fast-growing defense-tech names

• Fair value of around $4.9 from a conservative screener based on historical numbers and punishes the firm for extreme volatility and losses, hence the low "valuation level"

• Reality is somewhere in between: the market is paying for ambition and stack today, but hasn't yet fully priced in a 10-year "defense infrastructure" scenario - for that, Ondas must first tap into hundreds of millions in stable revenue and better margins

Investment scenarios

Baseline scenario

• Revenues reach $170-200 million in 2026, integration of acquisitions is slower than the $375 million target would suggest.

• Gross margin stays around 40 percent, operating expenses grow a bit slower, losses shrink relatively, but the company is still in the red.

• Cash burn in the tens of millions a year is manageable due to cash, the market is gradually moving the multiples down (to 8-12x earnings, for example), so the return to shareholders is more a combination of modest price and valuation growth plus potential "rerating" if a clear path to profit is shown.

Growth scenario

• The integration of Sentrycs, Roboteam, BIRD and Mistral is running smoothly, revenues approach $300-375 million, backlog grows faster than reported revenues and passes $150-200 million during 2026.

• Gross margin moves above 40 percent, operating losses decline, EBITDA approaches zero in 2027.

• The market is willing to pay 15-20x expected revenues as Ondas is seen as a benchmark player in counter-UAS, similar to Palantir in defensive analytics - in which case the return to shareholders may be in the multiples, but it is a high execution scenario.

A cautious scenario

• Integration is harder than management expects - different cultures, systems, contract delays, Mistral brings in fewer contracts than thought.

• Revenues only grow to 100-150 million, margins stagnate or fall, market loses patience, revenue multiple falls into the 4-8x range.

• For the investor, this means that much of the "premium" valuation evaporates and the return is more about patience than a quick rerating.

Growth catalysts

• The accelerating wave of drone incidents - airports, infrastructure, borders - is making counter-UAS a priority for governments, not a "nice to have".

• Increasing NATO and allied budgets, shifting money from conventional platforms to asymmetric defense and counter-drone systems.

• US grants and programs to protect major events (World Cup, World Cup, national celebrations) create a specific domestic demand where Ondas has a head start thanks to the FAA.

• Partnering with Palantir increases Ondas' visibility with customers Palantir already works with - at the point where projects need autonomous drones and robotics, Ondas is a natural candidate.

Risks

• Extreme dilution - if the story stalls and the company nevertheless continues to fund growth through acquisition, existing shareholders continue to bear the cost of a series of issues without a corresponding increase in value per share.

• Ambitious targets - the jump from 50.7 million to 375 million in revenue in two years is extremely aggressive even in the context of roll-up strategies.

• Integration risk - bringing together nine companies that each had their own processes, culture and technology is difficult in such a short space of time; any major "stumble" will impact margins and reputation.

• Competition from large arms companies - their entry or acquisition of a similar stack can change the balance of power within a few years, especially in the US.

• Regulatory uncertainty - BVLOS permits are an advantage today, but a change in the regulatory framework (e.g., the FAA's new Part 108) may rewrite the rules of the playing field.

What the investor will take away

• Ondas today is more of a small "drone defense Palantir" than the former wireless network for industry - it composes a complete stack for autonomous defense against drone and ground threats and has a fundamentally unique combination of regulation, credentials and capital.

• The numbers are extreme on both sides: revenues are up hundreds of percent, margins are up, but losses and dilution are high, making Ondas a typical high-risk, high-reward bet.

• If you're looking for a second Palantir in a different corner of the defense market, Ondas may be a candidate - but more likely for a smaller, risk-conscious position with a longer horizon, where the path is not expected to be straight.

In practice, the pressure will fall heaviest on companies that depend on high value finished imports rather than on those that already have deep US manufacturing footprints. Multinationals that ship patented drugs from Europe or Asia, speciality steel and aluminium producers using offshore mills, and import‑heavy distributors with thin margins are at the front of the line, while integrated US based players with pricing power may find themselves in a stronger negotiating position if rivals are suddenly forced to rework supply chains.

1) Pharma: 100% on paper, zero for those who comply

The administration formally imposes a 100% tariff on imports of patented drugs and active ingredients, but at the same time opens a wide path to a 0% tariff.

Companies can avoid the duties if:

• they sign an agreement with the government to build new manufacturing capacity in the U.S. within 4-6 months; and

• agree to the Most-Favored-Nation (MFN) pricing scheme for selected segments (e.g. Medicaid, cash payments).

Other exceptions apply to countries that have trade agreements with the U.S. - EU, Japan, South Korea, Switzerland, UK - where base rates are significantly lower (15% or less) and typically also conditioned on MFN agreements. Generics and biosimilars remain out of scope for the time being, the duty does not apply to them and the situation is not due to be reviewed for another year.

Where is the real impact:

• Companies that already have an MFN and on-shoring agreement (typically Pfizer $PFE, Eli Lilly $LLY, AstraZeneca $AZN) will have a 0% tariff while fixing price and manufacturing commitments in the US.

• Manufacturers who dither will risk rates of 20-100% and will be under intense pressure from investors and the government to get on board.

The most exposed big players:

• Global big-pharma with a large share of patented drugs manufactured outside the US - Johnson & Johnson $JNJ, Novartis $NVS, Roche, Sanofi $SNY.

• Contract manufacturers and active ingredient suppliers in Europe and Asia, who will be forced to decide whether to invest in US pipelines or accept that US supply will be less competitive.

For investors, this means: negotiating noise in the short term rather than an immediate bump in P&L, but real production reshuffling and price pressures in the US in the medium term. Those with US production and MFN agreements will be privileged in the domestic market.

2) Steel, aluminum, copper: 50% stays, but duty is calculated differently - cargo will go up

Formal tariffs on steel, aluminum and copper remain at 50%, but the way they are calculated is changing: duties will now be based on the US spot price, not the value declared by the importer. The aim is to prevent under-invoicing and "optimization" of duties. The administration itself admits that it expects a higher volume of duties actually collected.

At the same time, the rules for products containing metals are being clarified:

• products with less than ~15% steel/aluminium/copper will be exempted from metal duties (only normal duties apply)

• products "substantially" made of metals will now typically fall under the 25% band on derivatives, while pure metal products remain at 50%.

Sectors and companies most affected:

• Construction and Infrastructure: producers of structural steel, pipe, sheet metal - U.S. Steel, Nucor $NUE, Steel Dynamics - may benefit from more expensive imports and greater domestic market protection.

• Automotive and white goods: Ford, General Motors, Stellantis, Whirlpool, Electrolux; higher import costs for steel and aluminum will put pressure on margins unless everything can be reflected in final prices.

• Electrical and engineering: Caterpillar, Deere, Siemens Energy (for equipment for the US market), cable and distribution equipment manufacturers, where copper is a significant part of inputs.

In practice, this means: it is more difficult for importers to circumvent tariffs, and for many products the effective duty moves closer to the nominal rate. Domestic metal producers and some construction firms may be relative winners, while industrial metal buyers will feel the cost pressure.

3) Construction and infrastructure projects: more expensive materials, uncertain contracts

A fixed 50% tariff on basic metal products, 25% on derivatives and 15% on some industrial equipment means that:

• large infrastructure projects (bridges, railways, energy) will have to rely more on domestic suppliers

• imports of some more complex equipment will become more expensive if metal content exceeds key thresholds.

Impact on companies:

• Domestic suppliers of building and structural components - e.g. Martin Marietta $MLM, Vulcan Materials $VMC (more aggregates, but often bundled with steel), regional steel mills - benefit from a more competitive pricing position relative to imports.

• Large EPC and construction giants - Fluor, Bechtel (non-traded), Jacobs $J or KBR - will need to focus more on optimizing supply chain and contract terms so that tariffs don't destroy margins on fix-price contracts.

What matters to investors is who has long-term contracts with the ability to pass on costs to the client, and who is locked into fixed-price contracts and will "swallow" the duties on their margin.

4) Retail and logistics: duty drawbacks, planning uncertainty

In parallel with the new tariffs, the government is launching a scheme to recover some $160 billion in unjustified duties collected from the already abolished IEEPA tariffs. Some 25,000 importers, including big players such as Costco and FedEx, are waiting for refunds that could improve their cash flow, but the system is rolling out gradually and payments can take up to 45 days from the approval of a claim.

Impact by company type:

• Large retail importers (Costco $COST, Walmart $WMT, Target $TGT, Home Depot $HD) - they will get a one-time boost from duty refunds, but at the same time, the new structured tariffs on metals and possibly other categories complicate their cost and pricing planning.

• Logistics and courier companies (FedEx $FDX, UPS $UPS) - refunds will help improve the balance sheet in the short term, but the overall complexity of customs schemes increases administrative costs and the risk of declaration errors.

5) Geopolitics and next steps: China, new investigations and the threat of further tariffs

The current wave of changes comes along with two new Section 301 investigations that target "structural overcapacity" and other practices in roughly 60 trading partners. The result may be new country-specific tariffs similar to those that previously fell under IEEPA, only now under a different legal heading.

China has launched its own investigation into US practices, and there is a real risk of further escalation of reciprocal tariffs ahead of the Trump-Si meeting in May. Pro:

• Exporters to China (e.g. manufacturers of manufactured goods, agricultural commodities - Deere, Caterpillar, agribusinesses like Archer Daniels Midland), this means an additional layer of uncertainty,

• global chains across automotive, electronics or engineering, this increases pressure to diversify production outside China and the US (Mexico, South East Asia, Europe).

What does this mean for investors

• For pharma, who has MFN and on-shoring agreements is more important than the nominal 100% rate itself. Companies with U.S. manufacturing and agreements will be relative winners; late responders may come under fire in the short term.

• For metals and industrials, expect more of an effective load, even if rates don't formally change. Domestic metals producers and some construction firms will be more protected, but industrial buyers will take another cost hit.

• For retail and logistics, duty drawbacks bring short-term relief, but the overall tariff regime is becoming more complex and less predictable, increasing the risk to long-term planning.

Personally, I definitely find selling a winning position more difficult, because I'm never sure it's the right time and I keep thinking I might hold a little longer since the uptrend may not be over. Paradoxically, a losing position bothers me less, because if the fundamentals haven't changed, I see it as a buying opportunity and expect to keep the shares in my portfolio for a long time.