At current prices, such a block is worth about 26.8 billion Taiwanese dollars, or about US$850 million, and TSMC also assures that it has no plans to sell any more VIS shares in the foreseeable future.

What exactly is TSMC selling and why

TSMC $TSM announced that it plans to sell up to 152 million VIS shares through a block trade targeting institutional investors. The transaction represents a roughly 8.1% stake in VIS and will reduce TSMC's ownership to approximately 19% from the previous 27.1% on a fully diluted basis.

The firm commented on the move as part of a broader plan to "rebalance the portfolio" and focus capital on core business activities - i.e. high-end 5nm/3nm/2nm processes and new AI-oriented capabilities - rather than holding a larger equity stake in a dedicated foundry for more mature technologies. So it's a financial, not an operational break-up: TSMC remains the largest shareholder, but frees up the balance sheet for its own capex.

Already in June 2024, TSMC withdrew its representatives from the VIS board, the first visible weakening of formal ties. The share sale logically follows this - the company retains minority influence and strategic cooperation, but ceases to play the role of a "semi-parent" company.

Strategic partnership with VIS

Despite the share reduction, TSMC confirmed that its technical relationship with VIS remains unchanged. This concerns two areas in particular:

• Outsourcing interposer and mature-node manufacturing: TSMC has long outsourced part of the more mature processes (40-90 nm) and some interposer components to VIS to free up capacity for high-end processes itself.

• GaN technology licensing: in early 2026, TSMC licensed its gallium-nitride (GaN) technology to VIS for both high- and low-voltage applications. As a result, VIS is building a comprehensive GaN-on-Si platform and becomes one of the few foundries that can offer a full spectrum of GaN power chips.

Meanwhile, TSMC is gradually exiting GaN foundry services and focusing on high-end CMOS logic, HPC and AI accelerators. The transfer of GaN technology to VIS thus fits into a broader strategy: TSMC is divesting capital-intensive but less marginal "side" activities, leaving them in the hands of partners while retaining the most value-creating layers itself.

Who is Vanguard and why is it important to TSMC even after the sale

Vanguard International Semiconductor is a Taiwanese specialty foundry, founded in 1994 in Hsinchu Science Park by TSMC co-founder Morris Chang. The company operates five factories in Taiwan and Singapore with a capacity of over 280,000 wafers per month (as of around 2024) and focuses on more mature processes and analog/power chips.

In 2024, VIS and NXP Semiconductors announced a VSMC joint venture in Singapore to build a 12-inch fab and begin production in 2027 - mainly for automotive and industrial applications. This expands VIS's reach from 8" to 12" and strengthens its role as a partner to spillover some of the demand from TSMC and other customers.

For TSMC, having such a partner is advantageous: it can gradually outsource some of the more mature orders (e.g. 40-90 nm) to it, close its own older fabs and optimize its capacity structure without compromising continuity of supply to customers. Therefore, TSMC stresses that the change of stake is a financial decision, not a signal of exit from technical cooperation.

TSMC as the "ultimate pick" of the AI era

The stake sale in VIS comes at a time when TSMC is one of the biggest winners of the AI boom. The Durable Advantage Fund's Baron called TSMC the "ultimate tooling vendor" in the AI era - a company that capitalizes on the growth of AI deployments regardless of whether Nvidia, AMD, specialized ASICs or various model providers win at the application layer.

In its letter to investors, the fund said:

• TSMC has an "overwhelming share" of the most advanced manufacturing and pricing power that allows it to hold margins despite rising capex

• expects roughly 20% annual earnings growth over the next few years, driven by demand for leading-edge capabilities for AI, HPC, automotive and 5G

• The firm also profited in 1Q 2026, with its stock adding over 11% in the quarter alone thanks to strong demand for AI chips

Over the past 12 months, TSMC stock is up roughly 115%, equivalent to a market capitalization of over $2 trillion. TSMC's scale and technological dominance (from Apple to AMD to Nvidia) make it a key infrastructure firm for the entire AI ecosystem - in this context, it makes sense that it wants to concentrate capital there, not in minority stakes in more mature foundries.

How the market has reacted and what the implications are

TSMC shares rose slightly after the announcement, while VIS shares added less than 1% - so investors primarily see the deal as a positive for TSMC. The market appreciates that the company:

• Monetizes a portion of its long-term investment in VIS at an attractive valuation

• clearly communicates that it has no plans for further sales

• and emphasizes that key technical partnerships (interposers, GaN licenses) continue

Strategically, the move makes sense: TSMC is gradually rebuilding its portfolio to:

• own fewer smaller stakes in satellite foundries

• but continue to spill over some of the more mature processes and technologies

• while itself focusing investment and management on leading-edge AI/HP processes, where it has the highest margins and greatest barriers to entry

From an investor perspective, this is consistent with the story of a "capital disciplined AI manufacturing leader" that cleans its balance sheet of side bets and strengthens the core business. For VIS itself, on the other hand, it's a signal of greater independence - but also an acknowledgement that it remains an important link in the Taiwanese and global semiconductor ecosystem, just with a looser capital tie to its biggest customer and partner.

The investment thesis is not based on another wave of hype, but on the mismatch between the size and quality of the business and how the market values it. The combination of near-billion-dollar sales, positive FCF and a stabilized retail model now trades well below book value and below one times sales, while consensus target prices are heading into the multiple-of-current-price range. This is countered by an extremely tough tax and regulatory environment, sector stigma, a history of large losses and the real risk of further dilution if conditions deteriorate further. It is therefore an asymmetric but high-risk "special situation", not a defensive core portfolio.

Top points of the analysis

• Diversified regulated retailer, not a pure cannabis story - Canada's largest privately held alcohol and cannabis store chain, vertically integrated with manufacturing and distribution.

• Nearly a billion in sales and first positive free cash flow show a transition from a capital burning phase to a mode where operations can be self-funded.

• The alcohol side is generating the majority of gross profit and stabilizing results, while cannabis retail is growing at double-digit rates and shifting market share in a consolidating market.

• More than 350 stores bring scale and unique POS data in real time, allowing it to finely manage assortment, pricing and inventory better than smaller competitors.

• The current low share price represents a business trading below book value and with a price-to-sales ratio well below 1, even though fundamentals have improved significantly and analyst targets call for a multiple higher.

• The extreme tax burden, regulatory uncertainty, illegal market competition, and the possibility of further dramatic stock dilution in the event of a weaker FCF keep risk perception high and explain why the title remains so cheap.

Company performance

Sundial Growers $SNDL started out as a typical product of the cannabis boom - a producer and distributor of legal cannabis that sought to quickly scale up cultivation capacity and cover as much of the newly opened market as possible. The model was extremely cyclical, dependent on commodity prices, regulation and access to cheap capital. Once the bubble burst and it became clear that the market was oversaturated and margins were falling, the original course was unsustainable.

The turning point came with the arrival of new management, led by Zach George, who stopped relying on "more growth will fix everything" and began to translate the company into a regulated retail model. Instead of relying on wholesale sales and cultivation capacity, SNDL went the route of acquiring retail networks and building its own sales infrastructure - not just in cannabis, but in alcohol as well. As a result, today the business is based on a broad network of stores in several Canadian provinces, complemented by the production and distribution of cannabis products and a small investment portfolio in the sector.

Today, the company structure consists of four main pillars. Alcohol retail delivers stable profits in a mature segment, cannabis retail carries growth potential and the ability to increase market share, the operating segment (cultivation, production, distribution) provides supply and margin control, and investment activities spread sector risk and add an "option" component to the long-term renaissance of the industry. In sum, this is no longer a pure cannabis story, but a regulated consumer retail story where cannabis and alcohol share similar challenges and synergies.

Business and segments

Alcohol retail is currently the most important source of profitability. The strategic acquisition of Alkanna has given SNDL an extensive network of liquor stores, which is now the backbone of a stable cash flow. Alcohol as a category may be regulated, but demand is more reliable and less volatile than cannabis - profits are not explosive, but margins tend to be stable and less dependent on sentiment around one sector. This part of the business makes up the majority of the company's gross profit and acts as a "weight" to keep the bottom line down when the cannabis segment is surging.

Cannabis retail is the other key pillar - much more dynamic, but also much more exposed to regulatory and tax shocks. SNDL operates hundreds of stores across Canada and leverages its scale here for branding and logistical efficiencies. The trend is important: while the entire Canadian cannabis market has moved from a boom phase to a consolidation phase, SNDL is growing at a rate that is outpacing the market, which means it is gaining share at the expense of weakened competitors. However, growth is running up against the limits of taxes, regulatory licensing and the strength of the illicit market, so the goal is not just "more stores" but better mix, margins and efficiency.

The operating segment - the cultivation, processing and distribution of cannabis products - has undergone a significant diet. During the euphoria, the incentive was to build capacity and "farms" as quickly as possible, even at the cost of high fixed costs and inefficiencies. Restructuring has brought closures of some facilities, automation, and a shift to a more scalable model in which manufacturing has a supporting role to retail. Today, manufacturing is about being efficient enough to deliver margins and flexibility in supply, not about creating a growth story on its own.

Investment activities form a smaller but interesting component in terms of strategy. SNDL holds stakes in other companies and projects across the cannabis ecosystem, which spreads risk while creating potential value if the sector sees further structural growth or consolidation. It's not something that quarterly results are based on, but in the longer term it can be a source of pleasant surprises - or conversely a source of write-downs if part of the sector doesn't live to see the next phase.

Market and addressable potential

The alcohol market in Canada is relatively boring from a growth perspective, but that is where SNDL has an advantage. Customer behaviour is stable, regulation is long-anchored and the big players are well-established in many regions. That's not to say there isn't room to grow - there is room to consolidate smaller operators, optimise stores, work with categories and premium products - but it's about growing at a "healthy" pace, not chasing doubles in one year.

The cannabis market is in a completely different phase of its life cycle. After the legalization boom came the sobering: too much capacity, too many players, aggressive price competition and high taxes. At the same time, the legal market has to compete with the black market, which does not pay taxes and can offer significantly lower prices. This creates an environment where there is a lot of scope for consolidation - stronger, better financed firms can take over weaker rivals or their assets and, through scale, reach cost levels that smaller players cannot reach.

For SNDL, this is both an opportunity and a threat. Opportunity in that, with cash and a strong retail network, it can pick up interesting acquisition targets in times of market weakness and strengthen its position relatively cheaply. The threat is that along the way it may encounter regulatory restrictions, changes in licensing rules or tax interventions that disrupt plans. In addition, a U.S. market question hangs over the entire sector: once there is a significant shift in federal regulation, the dynamics of the industry could change quickly - whether toward more capital and higher valuations or the entry of new, stronger players.

Competition and market position

SNDL competes in the cannabis industry with well-known names such as Aurora Cannabis $ACB, Canopy Growth $CGC and other producers and retail chains. Many of them have a similar history of rapid growth and subsequent decline, but not all have been able to make the pivot to a more viable model. SNDL has the advantage of not staking its future on just one leg - cannabis - but building it on a combination of cannabis and alcohol, with an emphasis on retail and operationalized discipline.

In the alcohol segment, competition is more traditional - other chains, some state-controlled outlets, local players. SNDL has built significant scale here and can benefit from having very dense coverage in some regions. Combined with the cannabis retaile, this allows for shared know-how in store management, marketing and compliance. Compared to smaller companies, SNDL has the advantage of being able to invest in data analytics, systems and processes that are not worthwhile for a small business.

The competitive disadvantage, on the other hand, is the stigma of the sector and the company's history. SNDL's brand will be associated with the meme-stock era and losses for some time to come, just as the entire cannabis sector still faces investor distrust. That said, SNDL needs to deliver consistent results over the long term to change that perception - one good quarter isn't enough.

Management and strategy

Zach George and his team brought to SNDL a conscious break from the old "grow at all costs" mindset. A key step was to acknowledge that the pure cannabis model wasn't working in its current form, and to aggressively diversify into a segment that has different risk and reward characteristics - alcohol retail. The acquisition of Alcanna was a turning point: not only did it bring in sales and profits, but more importantly it changed the DNA of the company towards retail.

Strategically, the company today focuses on three horizons. In the short term, it is about stabilizing margins, completing the restructuring of operations and keeping free cash flow positive. In the medium term, management and the board want to take advantage of the sector-enforced consolidation to strengthen its position in both cannabis and alcohol retail and to move FCF to a level that moves the company from a "turnaround" to a "stable player" in the eyes of the market. They are taking a long-term view of potential regulatory changes in the U.S. and other markets, but even in communications, they are not positioning this as the foundation of an investment story - more like a potential bonus.

Access to shareholders also plays a significant role. After an era when equity issuance was the default source of capital, SNDL is trying to show that it values existing investors and doesn't want to dilute their holdings further unless necessary. But this is only on the assumption that free cash flow remains positive; otherwise, the company could once again find itself in a situation where it has to choose between further dilution and balance sheet risk.

Financial performance

On the revenue side, we see a relatively clean story: after strong growth, mainly related to acquisitions and consolidation, the company has stabilized in a range of around CAD 900-930 million per year. This means that the biggest expansion phase is behind us and the business is now more about quality than simply increasing sales. Importantly for an investor, sales have not fallen after the restructuring - the company has been able to grow and stabilize despite cutting inefficient parts.

Gross margins have visibly improved in recent years. A combination of production capacity optimisation, a better product mix and a shift in focus to retail, particularly alcohol, has brought gross margins to levels that are rather above average in the sector. While many cannabis producers struggle with gross margins of around 20% or even less, SNDL operates in the mid-20s, which is attractive for the asset-light retail side of the business, although it is still not the level of the traditional large consumer companies.

Operating margins have undergone a dramatic turnaround. Just a few years ago, the company was drowning in operating losses in the hundreds of millions of CAD; today those losses have been reduced to units of millions. This is not a cosmetic shift - it means that the backbone of the cost structure has been fundamentally redesigned. Adjusted EBITDA-type metrics have gone from deeply negative to plus tens of millions, and the trend continues to be positive. If the last few cost "issues" can be completed and margins maintained or improved, accounting break-even is a matter of the short term, not a distant vision.

Meanwhile, net profit remains slightly negative, but its trajectory is unremarkable. EPS, which previously reflected large losses, is gradually approaching zero, and the combination of free cash flow and balance sheet means the company does not need accounting profit to survive. However, it will be important for valuation re-rating to get at least a few consecutive periods in the black even at the bottom line level - some investors are still primarily looking at EPS and are only willing to pay very low multiples without it.

Balance sheet and debt

SNDL's balance sheet looks surprisingly robust for a sector that has a reputation as a "financial minefield." High cash, strong working capital, low levels of interest-bearing debt and a relatively high equity to asset financing ratio create a cushion that protects the firm from short-term shocks. Simply put - barring a sudden FCF collapse, SNDL has plenty of room to absorb a bad year or two without having to panic-rush for emergency capital.

But at the same time, it is important to remember that Altman's Z-score and other "bankruptcy" indicators still bear the imprint of the past. A history of big losses and a sector full of fiascos means that rating models view the company with caution. That's why, despite relatively good current numbers, we can't talk about a "safe" title - SNDL is still building its reputation, and it will take a few more years of discipline for even quantitative models to shift.

Valuation

SNDL's valuation looks like a classic case of "cheap because sector". At a price of around $1.5 per share, the market capitalization corresponds to significantly less than annual sales - the price-to-sales ratio is around 0.55-0.72. This means that the market is only willing to pay half to three-quarters of a dollar in market value for every dollar of sales, even though the company has positive free cash flow and improving margins. A price-to-book value ratio of around 0.47-0.64 then indicates that the market is not even sure of the value of the assets net of debt.

In terms of cash flow and EBITDA, the company does not look like a classic "distressed asset". With positive FCF and EV/EBITDA in the low teens, SNDL would likely trade at much higher multiples in another sector - perhaps standard retail or parts of consumer staples - or would have been a private equity target long ago. That this is not the case is mainly a reflection of sector risk, loss history and investor distrust that the improvement will last.

The analyst target prices, which in many cases are heading into the $5-6 range or higher, reflect a model where the company manages to stabilize sales, move into stable accounting profit, and maintain or improve free cash flow. In such a world, P/S approaching 1-1.5 and P/B around or above 1 would not be unusual. The question isn't so much "if" SNDL is cheap on today's numbers, but "if" it can sustain the trend and move to a point where the market starts to reassess valuations.

Growth strategy and catalysts

In the short term, the growth strategy is based on increasing quality, not quantity. SNDL is focusing on optimizing its store network - closing or relocating weaker locations, strengthening those that generate the best mix of sales and margins - and working with product mix. In alcohol, this means a greater emphasis on premium categories and brands, in cannabis on products and brands that can maintain margins even in a price war environment. Data from POS systems allows the company to see exactly what's working and react quickly.

The medium-term goal is to take advantage of market consolidation. Many of the smaller cannabis players are financially weakened and it may be attractive for a company with cash and a retail background to take them over, close some of the capacity, integrate brands and distribution channels and reap synergies. Similar logic may apply in alcohol, where smaller local operators face pressure from regulation and capital requirements. Any such transaction obviously carries integration risk, but in aggregate can strengthen SNDL's position as one of the few truly strong, liquid players in the sector.

The possibility of regulatory change in the US - in particular, the relisting of cannabis under the federal schedules and the relaxation of banking services - remains a long-term catalyst. Such a move would lower the cost of capital for the entire sector, open up new markets and likely lead to a revaluation of those companies with disciplined management and strong balance sheets. In such a scenario, SNDL could benefit not only from direct expansion, but also from a rise in valuations across the sector. But to rely on this as a certainty would be a gamble - in the base case, we need to allow for the fact that change may occur slowly and inconsistently.

Risks

SNDL's risk profile is still high despite the improvement in performance. Canada's cannabis sector is burdened by a complex mix of federal and provincial taxes and fees that, in aggregate, can eat up a large portion of gross revenues. This tax structure has two consequences: legal businesses must constantly fight for every percentage of margin, and the illegal market has a strong price advantage that is perceived by consumers. The illegal offer therefore remains a significant competitor in many regions, and not only with the most sensitive part of the customer base.

Regulatory uncertainty is another key factor. Changes in licensing rules, limits on the number of outlets, distribution or marketing requirements can, in the extreme, disrupt expansion plans or devalue part of existing investments. SNDL, by operating in many provinces and in both segments (alcohol and cannabis), diversifies these changes to some extent, but cannot escape them entirely.

Financially, the company may look better than ever, but the past is still reflected in quantitative indicators. The Altman Z-score suggests that the medium-term risk of financial problems cannot be ignored. If the combination of weaker FCF, regulatory shocks and competitive pressure leads to a resurgence of larger losses, SNDL could once again find itself having to reach for additional equity capital. Drastic stock dilution is always a real possibility in such a sector - and it is perhaps the biggest "black swan" for existing shareholders.

Finally, sentiment. Even if the numbers are good, the market may not reward the title for long - the "cannabis" sector has had a bitter track record, and many portfolio managers have an explicit or implicit prohibition in their investment rules against buying such titles at all. This can mean that even with honest delivery of results, valuations will remain low for significantly longer than pure fundamental analysis would suggest.

Investment scenarios

In the optimistic scenario, SNDL stabilizes sales above CAD 1 billion over several years, maintains or modestly improves gross margins, tightens operating margins into positive territory, and moves free cash flow into a range that convinces the market that this is a sustainable condition, not a one-off episode. Sector sentiment will at least partially improve, perhaps through a combination of consolidation and regulatory changes, and valuations will move closer to more standard retail multiples - P/S 1.5-2.0, P/B above 1, reasonable multiples on FCF. In that case, today's price of around $1.5 could be exceeded several times over.

A morerealistic scenario is more moderate. Revenues grow at only a modest pace, margins improve but remain under pressure from taxes and competition, free cash flow is stable but falls short of management's fully ambitious targets. The market will start to value the company better than today, but will maintain some "skeptical discount" - P/S will move to around 1, P/B to 0.8-1.0, FCF multiples will reflect both the quality of cash flow and the sector's perceived risk. Even that would imply very good valuation at current prices, but not a "home run".

The pessimistic scenario assumes that tax, regulatory and illicit market pressures erode margins again, free cash flow weakens or returns to zero, and profitability deteriorates. In such a situation, SNDL would likely have to choose between drastic cuts and further equity issues. If the market were to take the view that this is "just another cannabis company in trouble", valuations could remain at or below today's price levels - and combined with any dilution, this would mean a weak or negative outcome for existing shareholders.

What to take away from the article

• This is a regulated retail business that combines the largest privately owned liquor and cannabis store chain in Canada with sales close to CAD1 billion a year.

• The model has undergone a fundamental transformation: from deep losses and overcapacity to a state where the operation generates positive free cash flow and the balance sheet is not burdened by high debt.

• The current penny price tag reflects the sector's stigma and past rather than current numbers - valuations below book value and below one times sales create the potential for rerating if the improvement trend is sustained.

• The main risks lie in the tax and regulatory environment, illegal market competition and the potential for further dilution should free cash flow weaken again.

• In a portfolio, it makes sense to view this title as a smaller, high-risk "special situation" with potentially high upside, but with the path to an eventual fair price likely to be volatile and longer than would be consistent with conventional consumer names.

The energy sector is at an extremely interesting point in 2026. On the one hand, the global push to decarbonise and develop renewables continues, while on the other, geopolitical tensions in the Middle East and the closure of the Strait of Hormuz have dramatically increased oil prices and returned investor attention to traditional fossil fuels.

For investors who do not want to bet on individual companies, thematic ETFs are an effective way to gain broader exposure to the energy market. However, the differences between funds are significant. Some ETFs focus purely on large integrated oil companies, others cover service companies serving the mining industry, and still others track purely the renewables segment. Each of these approaches has a different risk profile, commodity price sensitivity and growth potential.

Moreover, the current market environment is bringing several structural changes that are changing the rules of the game. Growing energy demand for data centers and AI infrastructure is creating a new type of pressure on the energy mix. At the same time, continued investment in renewables is gradually changing the competitive dynamics of the entire industry. In this context, it is important to understand what type of energy exposure individual ETFs actually offer.

Energy Select Sector SPDR Fund $XLE

The Energy Select Sector SPDR Fund is one of the most heavily traded energy ETFs in the world and provides broad exposure to the U.S. energy sector. The fund tracks the energy segment of the S&P 500 Index and concentrates primarily on large integrated oil companies and refiners.

Portfolio Structure

The $XLE portfolio is heavily concentrated in a few of the largest energy giants. Dominant positions include ExxonMobil $XOM, Chevron $CVX, and ConocoPhillips $COP, which together comprise a significant portion of the overall fund. This structure means that the ETF's performance is closely tied to the performance of several of the largest U.S. oil companies.

The fund covers the entire value chain of the oil industry from production to refining to distribution. A large portion of the portfolio consists of integrated companies that own oil fields, refineries and distribution networks. A smaller portion is allocated to net oil and gas producers that focus solely on production.

Overview of top positions in the $XLEETF

Source: State Street

Current performance and growth catalysts

This year's geopolitical situation is playing right into $XLE s hands. The closure of the Strait of Hormuz and the significant increase in oil prices are creating a very favorable environment for the oil majors. Higher commodity prices are directly reflected in their revenues and profitability, which in turn is reflected in the value of the ETF.

In addition, integrated oil companies benefit from relatively stable refinery margins and continued demand for petrochemical products. Their business model is less volatile than that of net producers, as refiners can generate profits even when oil prices fluctuate.

Risks and structural challenges

• Long-term pressure to move away from fossil fuels. Increasing emissions regulation and the gradual shift of capital towards low-carbon energy sources creates structural uncertainty about future oil demand. This trend, although slow, could significantly affect the valuations of traditional oil companies within a few years.

• Capital discipline in the sector. After a period of overinvestment in the past decade, the major oil companies are now much more cautious about increasing production capacity. While this supports current prices and margins, it also limits their growth potential relative to other sectors of the economy.

• The concentration of portfolios in a few major positions also means a greater reliance on their individual performance. Should any of the dominant companies face specific problems, this could have a significant impact on the entire ETF.

iShares Global Energy ETF $IEO

The iShares Global Energy ETF offers investors broader geographic diversification than purely U.S.-focused funds. The portfolio covers energy companies from around the world, creating a different risk profile and exposure to different regional markets.

Global coverage and geographic structure

Unlike $XLE, $IEO includes significant positions in European and Asian energy companies. The portfolio includes companies such as Shell $SHEL, TotalEnergies $TTE, BP $BP and Canadian companies such as Suncor Energy $SU. This structure implies a broader exposure to the global oil market and different regulatory environments.

There are advantages and disadvantages to geographic diversification. On the one hand, it reduces dependence on the U.S. market and political environment; on the other, it adds currency risks and exposure to different tax regimes. European energy companies, for example, face stricter emissions regulation than their US counterparts.

A different approach to energy transition

A significant difference from US funds is the higher exposure to European integrated companies that invest more heavily in renewable energy. Firms such as TotalEnergies and Shell are allocating an increasing proportion of capital to wind and solar projects, seeking to diversify their business model towards low-carbon sources.

This approach creates an intermediate step between a traditional oil fund and partial exposure to the energy transition. For some investors, this combination may be attractive because it offers the current cash flow from fossil fuels along with potential growth in renewables.

Overview of top positions in the $IEOETF

Source: iShares

Valuation differentials and dividend yield

European energy companies have historically been valued at a discount to U.S. peers, in part due to higher regulatory uncertainty and lower growth expectations. This valuation gap may present an opportunity for investors seeking undervalued positions in the energy sector.

The fund also offers an attractive dividend yield (2.72%) that often outperforms U.S. energy ETFs. Many European energy giants have a long tradition of stable dividends and a commitment to maintaining them even in a lower oil price environment.

VanEck Oil Services ETF $OIH

The VanEck Oil Services ETF differs significantly from the previous two funds in that it focuses not on oil producers, but on service companies serving the upstream industry. This segment includes companies that provide drilling services, production technology or logistics support for oil fields.

Structure and key segments

The $OIH portfolio covers the entire spectrum of the oil sector. The largest positions include companies such as Schlumberger $SLB, Halliburton $HAL and Baker Hughes $BKR. These companies do not produce oil, but provide the technology, equipment and services necessary to extract it.

This business model has different economics than production itself. Service companies generate revenue from contracts for drilling services, equipment rentals, or technology supplies. Their profitability is closely linked to the level of capital expenditure by oil producers, not directly to commodity prices.

Exposure to upstream activity

A key driver of $OIH performance is the level of investment in new drilling and production expansion. When oil prices rise and producers increase capital spending (capex), service companies benefit from the growing demand for their services. In the current high oil price environment, upstream activity should remain strong, creating a favorable environment for the segment.

Overview of top positions in the $OIHETF

Source: VanEck

Higher volatility and leverage on oil prices

Importantly, $OIH typically exhibits higher volatility than ETFs focused on producers. When oil prices fall, producers are the first to cut capital spending and delay new projects. Service companies thus face a rapid decline in demand, which has a significant impact on their profitability.

Conversely, when oil prices rise and demand for drilling services accelerates, $OIH may have higher growth potential than traditional producers. It is therefore a more aggressive bet on the oil cycle with a higher beta to commodity prices.

Another factor is the geographic concentration of activity. Much of the U.S. service companies' business is tied to production in the Permian Basin and other shale areas. If there are regulatory changes or a decline in demand in these regions, it could have a significant impact on the entire sector.

iShares Global Clean Energy ETF $ICLN

The iShares Global Clean Energy ETF represents a very different approach to energy investing. Instead of fossil fuels, it focuses exclusively on renewable energy companies, including solar, wind, battery and hydrogen technologies.

Portfolio and thematic focus

The fund covers the entire clean energy value chain, from solar panel manufacturers to wind farm operators to energy storage providers. The portfolio includes companies such as NextEra Energy $NEE, Enphase Energy $ENPH, First Solar $FSLR and Denmark's Vestas Wind Systems $VWSB.DE, one of the largest wind turbine manufacturers in the world.

Geographically, the fund is very diversified with a significant representation of companies from the US, Europe and Asia. This structure reflects the global nature of the transformation of the energy sector and the fact that there are strong players in renewables across all major regions.

Overview of the top positions in the $ICLNETF

Source: iShares

Long/Short Term Strategy

From a long-term perspective, $ICLN represents exposure to one of the strongest structural trends in the current economy. Global pressure to decarbonize, growing regulatory support for renewables, and the declining cost of solar and wind energy are creating a very favorable environment for growth in this sector.

In the short term, however, $ICLN is significantly more sensitive to changes in interest rates and policy decisions than traditional energy ETFs. Renewable energy projects are very capital intensive and their returns are heavily dependent on financing costs. Higher interest rates are therefore pushing valuations of these companies down, which has been evident in recent years.

Regulatory support and risks

Government programs and subsidies play a significant role in the success of the clean energy sector. In the US, for example, the Inflation Reduction Act provides massive tax breaks for renewable energy projects, which significantly improves their economics. Similar programmes exist in Europe and Asia.

However, regulatory risk works both ways. Changes in political support or cuts in subsidy programs can quickly change the economics of projects and reduce their attractiveness. This factor creates additional uncertainty that investors need to take into account.

Competition with traditional energy sources

In the current environment of high oil and gas prices, the renewables segment faces increased competition from traditional fossil fuels. When oil prices are above USD 100 per barrel, the economic advantage of renewables is relatively reduced, especially in the short term.

On the other hand, high fossil fuel prices increase the interest in energy independence and diversification of sources, which in the long term encourages investment in renewables. The key question remains how fast this transition will happen and whether the clean energy sector can absorb the growing demand for energy.

Energy ETF Comparison

Strategic view

When choosing between these four ETFs, it is key to define the investment horizon and approach to risk.

• $XLE offers the most stable exposure to the U.S. energy sector, dominated by large integrated companies.

• $IEO provides global diversification and partial exposure to European companies that are investing more aggressively in energy transition.

• $OIH is the most aggressive, and therefore volatile, bet on continued high oil prices and growing upstream activity.

• $ICLN stands outside the mainstream oil market and bets purely on a long-term transition to renewables. In the short term, it faces pressure from high interest rates and competition from fossil fuels, but in the long term it can benefit from one of the strongest structural trends in the global economy.

What to watch next

In the coming months, it will be crucial to monitor developments in the geopolitical situation in the Middle East and the possible reopening of the Strait of Hormuz. Should oil shipments through this key route be normalised, a decline in commodity prices can be expected, which would be particularly negative for $XLE, $IEO and $OIH.

US central bank policy also remains an important factor. A possible interest rate cut could significantly support the renewables segment and therefore the performance of $ICLN. Conversely, a prolonged period of high rates will further depress this sector.

Capital discipline in the oil industry also needs to be monitored. If large producers start aggressively increasing production in response to high prices, this could lead to oversupply and downward pressure on oil prices. Historically, this scenario has repeated itself several times and has always resulted in significant downside for all fossil fuel-oriented energy ETFs.

Each of these four ETFs represents a different investment strategy within the energy sector.

The current market environment is extremely favorable for traditional oil ETFs due to geopolitical tensions and high commodity prices. However, structural trends have long supported a shift to cleaner energy sources, creating an interesting dynamic between the short-term outlook and the long-term strategy.

Historically, it does not make sense to bet on only one category. Combining traditional energy funds with a smaller allocation to renewables can provide investors with a balanced approach that benefits from the current high oil prices while gaining exposure to the future energy transition.

Will you be adding $NU as well, or do you think the stock is expensive?

The expected billions in subscription revenue reportedly "fell far short" of OpenAI's internal projections, the privileged position in the ecosystem of over a billion devices did not materialize, and executives are now considering steps ranging from a formal breach of contract notice to a lawsuit with an outside law firm.

How the deal was supposed to work and why OpenAI is pissed

The basic idea behind the deal was simple: Apple $AAPL integrated ChatGPT into Siri and other parts of the system, users could easily "snap on" a ChatGPT subscription through Apple's ecosystem, and the two companies split the revenue. Meanwhile, OpenAI internally reckoned that a privileged position on iOS - visibility in Siri, in settings, in native apps - would generate billions of dollars of annual business from Apple users alone.

The reality, according to OpenAI, looked different:

• Users had to explicitly say "ChatGPT" in Siri to get to the OpenAI model at all

• responses via Siri were truncated and less rich than in the standalone ChatGPT app

• Deeper integration into other Apple apps, which OpenAI expected, did not come

According to OpenAI's internal studies, iOS users have made it clear that they prefer the standalone ChatGPT app over "over Siri" integration. From OpenAI's perspective, this means that Apple didn't deliver the most important thing - strong distribution and product integration that would have made the partnership a real "money fountain", not just a secondary entry point for a few early adopters.

A "leap of faith" without a safety net: how OpenAI describes Apple

One OpenAI executive told Bloomberg that Apple wanted the startup to "take a leap of faith and just trust them." He called the deal a "failure" and claims that OpenAI did its best from a product perspective, while Apple "didn't, and worse, didn't even make an honest attempt".

OpenAI executives, according to these sources, expected:

• More prominent placement of ChatGPT within Siri (the default option, not a "summoned plugin")

• deeper integration into system applications (Messages, Mail, Notes, etc.)

• Visible marketing support at WWDC and in campaigns

OpenAI believes that Apple did not promote the integration enough - a large portion of users were reportedly unaware of ChatGPT's capabilities in Siri. Thus, from their perspective, the partnership failed not because people didn't want ChatGPT, but because Apple never really "pushed it forward."

What legal action OpenAI is considering

OpenAI has hired an outside law firm and is evaluating several possible steps. In the short term, it may be a formal notice of alleged breach of contract towards Apple without immediately filing a full-blown lawsuit.

Important points:

• No final decision has been made yet

• the company still hopes to resolve the dispute with Apple out of court

• the legal analysis is running in parallel with OpenAI's preparations for a potential IPO and the dispute with Elon Musk

The latter is important - any major legal battle with Apple would reflect on OpenAI's risk profile at a time when it is trying to prove to investors that it can build stable, long-term commercial relationships with all the big players around it.

Apple, meanwhile, is opening up Siri to other AI models

The tension comes just ahead of WWDC, where Apple is expected to unveil a significantly revamped Siri powered by Google's Gemini $GOOG while also allowing the integration of other models, including Anthropic Claude. iOS 27 is expected to allow users to choose their preferred AI model for the assistant, according to leaked information, giving Siri the appearance of a "multi-provider" platform, not a single ChatGPT integration.

OpenAI claims that opening Siri to other providers is not the main reason for the legal action, as the partnership with Apple was never exclusive. But it also admits that after its experience with the first deal, it has no interest in participating in the next generation of integrations - it sees the relationship as broken and the economics of the original deal don't make sense, it says.

From Apple's perspective, diversification makes sense:

• It reduces dependence on one AI partner

• gives the impression of an "open" platform

• strengthens its bargaining position vis-à-vis all AI providers

For OpenAI, it's another signal that without true "first-party" status (similar to Microsoft's), it will have a hard time positioning itself on iOS to match its revenue and ambitions.

OpenAI: record growth but more conflicts

The whole dispute is taking place against the backdrop of OpenAI's extraordinarily rapid growth:

• In March, the company closed a financing with $122 billion of committed capital at a valuation of $852 billion

• generates around $2 billion in revenue per month, according to its own numbers

• its revenue is reportedly growing about four times faster than it did at a similar stage at Alphabet or Meta in the Internet and mobile eras

But at the same time, the number of fronts it has to fight on is escalating:

• Elon Musk is suing it over its diversion from its nonprofit mission and alleged "betrayal" of its original charitable structure

• Relationship with Microsoft is strained as OpenAI wants more independence ahead of IPO, while Microsoft protects its giant equity stake and Azure deals

• and now a potential legal conflict looms with Apple, where it had hoped for a long-term distribution channel for a billion devices

Partnerships that were supposed to be a way to accelerate growth are turning into a source of legal and reputational risks in several cases. For investors, this is an important signal: OpenAI is no longer "just" a technology pioneer, but also a company that must manage the politics and contractual expectations of the world's most powerful corporations.

I’m currently thinking about what to do next with my position in $AMZN.

At the moment I hold three separate positions that together make up roughly 4% of my portfolio. I bought during Q1 2025 and again in February 2026. The average purchase price is about 208 USD and at current prices I’m roughly +30% unrealized.

I originally entered the position with a clearly defined target of 252 USD. Amazon broke through that level very quickly and continued much higher. When the stock reached 272 USD, I activated a trailing stop-loss (TSL), with the stop originally set at the original target level of 252 USD.

And now comes the harder part of the decision:

One option is to simply keep the TSL active. That would let the trend continue naturally, protect most of the gains and possibly let the position close automatically if momentum weakens. If a sale occurred, I would probably wait for a correction below 230 USD and then start rebuilding the position gradually there. Just sleeping well and no worries.

This approach makes sense to me mainly because it preserves discipline. Unrealized profit becomes realized profit and at the same time I recognize that the current valuation is not exactly cheap. With large tech companies volatility can also arrive very quickly. The same approach recently worked very well for me with $AMD and $ARM.

The second option is to cancel the trailing stop-loss and move $AMZN into the “forever hold - I hold forever” category. That would, however, completely change the original investment thesis. What started as a mid-term growth trade would become a long-term compounder position similar to stocks like $T, $MO, $BTI or $KO, which I hold mainly for stability and long-term resilience.

And honestly — Amazon might be starting to deserve such a category. AWS remains a dominant cloud business, the company has huge exposure to AI infrastructure, still dominates e‑commerce and generates massive cash flow over the long term. More and more, Amazon reminds me of a global technology infrastructure rather than a classic growth stock.

That's exactly why this decision is so difficult.

Momentum remains very strong, but the valuation is certainly no longer cheap. And historically even the best companies go through 15–30% corrections, sentiment resets, or periods of excessive optimism.

The key question then is:

Am I holding Amazon for its fundamentals? Or just because the momentum is currently too strong to sell? And that difference, in my view, is very important.

At the moment I’m still slightly inclined to keep the trailing stop-loss active, respect the original plan and possibly wait for a better entry when volatility returns.

On the other hand, I increasingly understand the argument “you don’t sell quality companies,” especially with companies like Amazon.

And honestly — these are some of the hardest investment decisions: recognizing the moment when a trade becomes a long-term investment.

What would you do in my place?

Trump vowed before his departure that his "first request" to Xi would be to "open up China to American companies," and that appeal was echoed at Thursday's meeting. Xi followed it up with rhetoric about deepening cooperation and reform and opening up that, while repeated for years, this time comes at a time when foreign investors face uncertainty over regulations, geopolitical tensions and pressure on "domestic technology."

What Xi specifically told U.S. CEOs

According to China's state-run CCTV and Xinhua news agency, Xi stressed that U.S. enterprises are "deeply involved" in China's reform and opening-up process, which has benefited both sides. "China's doors to the world will only continue to open," CCTV quoted him as saying, adding that US companies will have "even broader prospects" in China.

According to the Chinese readout, US bosses "expressed that they attach great importance to the Chinese market and want to strengthen cooperation and deepen their presence in the country". For Beijing, this wording is important - it is meant to show domestic audiences that despite the tensions, China remains key for big American brands and they themselves are interested in further growth in the country.

Above all, it is a symbolic policy of confidence: after a series of weaker macro data, a property crisis and geopolitical frictions, Beijing is trying to rebuild the narrative from "risky China" back to "opportunity for long-term investors". Xi has used similar promises of a "more open door" repeatedly - even in earlier meetings with US CEOs in 2024, he spoke of further easing market access and a 24-point plan to attract foreign capital.

Who was sitting in: Tesla, Apple, Boeing, Nvidia et al.

State TV footage showed Elon Musk (Tesla $TSLA), Tim Cook (Apple $AAPL), Kelly Ortberg (Boeing $BA) as well as Jensen Huang (Nvidia $NVDA) in the Great Hall of the People, who joined the delegation at the last minute , according to media reports. Alongside them, the wider delegation includes other players such as Micron $MU and financial houses for whom China is both a giant market and a source of regulatory risk.

Trump explicitly mentioned ahead of the meeting that the bosses "want to pay tribute to China" and are looking forward to new deals, while making no secret of his desire to take away specific deals from the summit - from agriculture and energy to a potentially historic Boeing aircraft order.

In a brief comment to reporters, Musk spoke of "a lot of good things" he wants to negotiate during the visit, Cook gave a thumbs up when asked, and Huang called Xi and Trump's talks "fantastic." Everyone knows that the symbolism is just the beginning - the real meaning will only come from the concrete regulatory steps and contracts that (in)follow.

Why Xi is talking about "more opening up" now

The rhetoric has several addressees at the same time:

• US investors: China is facing outflows of some capital, pressure for delisting, and a generally worse reputation in terms of legal predictability and state intervention. Meetings with iconic CEOs and promises of further opening up are meant to restore some of the confidence.

• Domestic audience: Beijing needs to show that despite Washington's tougher tone and export controls, US companies are still willing to come, sit down with Xi Jinping and talk about expansion in China.

• Trump and the negotiating table: Trump has declared that his priority is to "open up the Chinese market" to U.S. companies and increase Chinese imports of U.S. agricultural, energy and industrial products. Xi's words about greater openness are partly a response to this framework - but without specific commitments on sensitive topics like technology or government subsidies.

At the same time, trade barriers and market access are a long-standing dispute dating back at least to China's WTO entry in the early 2000s. Western firms complain of asymmetric access: China benefits from open markets elsewhere but keeps many sectors under direct or indirect state control at home. Xi's "more open door" thus needs to be read against the backdrop of this structure - in many sectors, access will continue to be "on China's terms".

What "greater opening" may mean in practice

Past experience shows that similar announcements have often led to piecemeal steps, but not across-the-board relaxation:

• Selective easing: Beijing may open up specific sectors or sub-segments - for example, renewing or extending licenses for imports of US beef or agricultural products, or easing restrictions on certain financial services.

• More certainty for existing investments: foreign firms often call less for "more areas" to enter and more for stability and predictability in what they already have in China. The "we don't want to drive you out" signal may be as important to Tesla, Apple et al. as a brand new sector.

• Deals like "more US purchases": Trump is seeking specific numbers - more imports of US agriculture, energy, machinery or aircraft. Xi's openness may manifest itself in just such packages, without fundamentally touching domestic industrial policy in high-tech segments.

Conversely, in technology (chips, cloud, data), China is likely to maintain hard red lines. The examples of Micron, Nvidia and others show that security screening and the push for domestic alternatives will continue, even if the rhetoric at the summit sounds friendly.

This is the basis of our view: Microsoft has a combination of growth, margins, balance sheet and revenue visibility that alone could justify higher multiples. The fact that valuations are only slightly above the long-term average doesn't look like an "AI bubble", but rather a period where the market is underestimating how strongly and for how long AI can translate into numbers - and that's the type of situation where it makes sense to analyze the company as a candidate for a long-term core position.

From a "normal giant" to an AI factory with a backlog

A few years ago,Microsoft $MSFT could be described as a high-quality but "mature" giant: Windows, Office, Azure, games, decent growth around 10%, high margins, lots of cash. The AI era has redrawn that picture.

Q1 FY26 shows:

• $77.7 billion in total revenue (+18%)

• Microsoft Cloud $49.1 billion (+26%)

• Azure and other cloud services +40% (+39% at constant currency)

• Operating profit $38 billion (+24%), non-GAAP EPS $4.13 (+23%)

Add to that the two numbers that define the "AI factory":

• USD 392 billion in commercial RPO (remaining performance obligations), +51% year-on-year.

• commercial bookings +112% in the quarter

This means it's not just a nice quarter, but a huge stack of future revenue - large multi-year contracts where cloud and AI services are packaged together. At the same time, Microsoft is building the physical layer of this AI factory: AI CAPEX was around $35 billion last quarter, and the company is openly talking about virtually doubling its datacenter footprint in two years and increasing AI capacity by roughly 80% in this fiscal year alone.

So from a business model perspective, the company has moved from a cloud-first strategy to an AI-first infrastructure where Azure is not "just" a cloud, but the default platform for training large models, running them, and for Copilots connected to Office, GitHub, security, Dynamics, and sector apps.

How Microsoft capitalizes on AI: Azure, Copilot, sector systems

Azure

Azure was already strong before AI, but generative AI has given it a new engine. In Q1 FY26, Azure and associated services grew 40%, with management saying directly that AI workloads are a major contributor to the acceleration.

Put simply:

• Big training (OpenAI, internal models, enterprise custom models)

• Copilot inference and operation

• agent systems in specific verticals

Pushes customers towards bigger, longer and more complex contracts. We see this in both RPO and bookings. Azure is not just a "comparable cloud" here, but an interconnected AI and infra platform that is increasingly difficult for competitors to enter - purely for comparison, Microsoft's AI CAPEX alone for the quarter is more than the annual CAPEX of most Fortune 100 companies.

Copilot

Copilot sits on all major products today:

• Microsoft 365 Copilot (Office)

• GitHub Copilot

• Copilot on Dynamics, Security, Power Platform and Windows

According to the latest data:

• Over 900 million people use some AI functionality monthly

• Roughly 150 million users use Copilots

• Microsoft 365 Copilot has already been deployed by most Fortune 500 companies

• GitHub Copilot has over 26 million users

Taking just Office: each Copilot seat (typically worth a few tens of dollars per month) is a net margin markup on an existing license, which increases ARPU and deepens a company's dependence on the Microsoft stack. GitHub Copilot does something similar in software development. These are relatively small amounts compared to the entire P&L, but in aggregate and over time they make a decent contribution to revenue and margin growth.

Vertical AI and agents

In addition to "generic" copilots, Microsoft is also pushing into vertical solutions:

• In healthcare, Dragon Copilot automates doctor-patient documentation, serving 17 million interactions in Q1 (5X more Y/Y)

• In security, AI agents help security teams filter and evaluate incidents

• In business applications (Dynamics, Power Platform) AI lowers the barrier to workflow and application creation

This layer is not just a "nice to have" feature, but a potentially very tangible ROI driver for clients - and therefore an argument for higher pricing and longer-term contracts.

Valuation: where it is today and why it doesn't feel like an overblown AI story

According to current data, Microsoft is trading at roughly the following metrics:

• trailing P/E of around 24-25×.

• a forward P/E of around 22×

• PEG in the region of ~1.3-1.4 (on expected earnings growth)

• EV/EBITDA ~17×

The P/E itself is not low, but the context is important:

• the company is growing sales by 18%, earnings per share by more than 20%

• has an operating margin close to 50%

• has an RPO of $392 billion with 51% growth, giving decent visibility going forward

• has a very strong balance sheet, dividend and regular buybacks

At this profile, the market would often accept a P/E of 25-30 times for another company. The fact that Microsoft is more at the lower end of its historical multiple range today has to do with two things: short-term fear of the size of AI CAPEX and general fatigue with the AI theme after the initial excitement.

From our perspective, however, this means that investors are buying quality growth at a multiple that corresponds to a "fair" tech, not a hype story - at a time when the monetization of the AI layer is just beginning on tens of millions of enterprise users.

Risks that make the market hesitant

To keep the argument from being one-sided, it's fair to clearly outline the main vulnerabilities that are keeping valuations at bay today:

• AI CAPEX and ROI - AI datacenters and chips are extremely expensive. If it turns out that AI demand is not as long term as RPO suggests, or that competitors push prices down, ROI may be lower than it looks today.

• Dependence on OpenAI - part of AI supply is intertwined with OpenAI, which carries contracting, regulatory and strategic risk. Management is addressing this by developing their own models, but the market perceives partner concentration.

• Regulation and antitrust - Microsoft is already under scrutiny from regulators (cloud, AI, antitrust). Any additional restrictions may limit growth or increase compliance costs.

• Competition - Google in cloud and AI, AWS with its own silicon, Meta with AI agents, specialist firms in particular verticals - all can take a bite of the pie.

These risks explain why valuations aren't "in the clouds," but at the same time, neither looks to challenge the core business over the next few years.

How EPS/FCF scenarios could be outlined

Without a detailed model, a framework can be thought of as follows:

• If Microsoft maintains revenue growth of around 12-15% per year over the next 3-5 years and margins near current levels, earnings per share can grow at a rate in the high single-digit to low double-digit percentages per year

• at today's forward P/E of ~22× and double-digit EPS growth, the "intrinsic" P/E at today's price declines over time - if the price doesn't grow as fast as earnings, the multiple would look like mid-teens in three years through the lens of then-current EPS

• once AI CAPEX stabilizes after the "investment wave", FCF has the potential to catch up with earnings growth and the market may begin to value FCF yield more than fear CAPEX

In a more optimistic scenario (Azure holds a higher double-digit pace longer, Copilot adoption hits a high percentage of users, and sector AI gains traction), one would expect the market to be willing to pay a slightly higher multiple - in a more conservative scenario, the multiple stays roughly where it is, with EPS and buyback growth as the drivers.

What to take from this

Microsoft in the AI era doesn't operate like a bubble, but more like a company where fundamentals are accelerating and multiples remain disciplined. Revenue and earnings growth of over 20%, 40% Azure growth, 51% backlog growth, and AI CAPEX volumes that few companies in the world have the capital to match put Microsoft in a unique position.

The fact that the stock still trades "only" at about 22 times expected earnings looks more like a phase where the market is ignoring part of the story than a point where growth would be fully priced in. For a long-term investor who wants to own a key AI and cloud "infrastructure title", it makes sense to at least think about whether this combination of growth and "just fair" valuation doesn't fit with what the title sums up: the most interesting periods tend to be when the numbers look better than the sentiment around them.

Huang eventually joined a delegation led by President Donald Trump en route to a summit with Chinese President Xi Jinping after Trump personally offered him a seat on board during a stopover in Alaska. From the market's perspective, hopes are pinned on the visit that it could unblock stalled H200 deals in China - but it also shows how deeply Nvidia is caught between US export policy and China's strategy of technological self-sufficiency.

Who is allowed H200 in China - and in what volume

According to leaked information, the U.S. Department of Commerce has approved about a dozen Chinese customers to purchase the H200 under license. On the list are the big names of Chinese Internet and cloud - Alibaba $BABA, Tencent $TCEHY, ByteDance or JD.com $JD - supplemented by a few distributors like Lenovo and Foxconn.

Each approved customer can take up to 75,000 units of the H200 chip under the licensing terms, either directly from Nvidia $NVDA or through approved distributors. In total, that's the potential for hundreds of thousands of accelerators, orders in the billions of dollars, which would represent a significant, albeit "truncated" recovery of Nvidia's market position, where it held an estimated 95% of the advanced AI chip segment before the tightening of export rules.

Before the tightening, US regulators estimated that China accounted for roughly 13% of Nvidia's revenue, with Huang himself talking about how the AI market there could reach $50 billion this year. All the more poignant is the fact that today he himself says Nvidia's share of AI accelerators in China has "effectively fallen to zero".

Why not a single shipment has taken place despite the approval

On a purely formalistic level, Nvidia and its Chinese customers have been given the green light by the US. But the reality is that the deals are being blocked primarily by Beijing. According to sources, after initial activity, Chinese firms began to back off after informal and formal "advice" came from Beijing to hold back.

Several factors are at play:

• Self-sufficiency strategy: the Chinese government fears that another wave of H200 imports would weaken the push to build its own AI chip ecosystem. Companies like DeepSeek already publicly stress that they build their systems on homegrown accelerators, including chips from Huawei - and these examples are used internally as an argument that "it can be done without Nvidia".

• New security regulations: the State Council recently issued two standards on supply chain security and launched a systematic review of dependence on foreign technology in critical infrastructure. This automatically puts foreign chips - including those from Nvidia - under more pressure.

• Technical backdoor concerns: the specific structure of the agreed export regime means that chips must physically pass through US territory, raising concerns in Beijing about possible hardware or firmware interference.

The result is a stalemate: paper-approved contracts, effectively zero deliveries, and growing pressure within China for companies to learn to do without US accelerators.

Complicated conditions from the US side

US conditions are not easy either. At the beginning of the year, rules came into force requiring Chinese customers to prove they have "sufficient security procedures" and that the chips will not be used for military purposes. At the same time, Nvidia must confirm that it has sufficient chip stock in the US so that new exports do not threaten domestic supply.

Another layer has been added directly by President Trump: he has negotiated a structure whereby the US will receive 25% of the revenue from H200 sales to China. Since US law does not allow for the direct imposition of an "export levy" on a specific company, the workaround is that the chips must physically pass through US territory where the relevant levies can be assessed.

From an American perspective, this is the way to:

• extract some of the economic value from sales to a strategic rival

• while controlling the physical flow of chips

In Beijing, however, this reinforces mistrust - the combination of passage through the US and a high financial "tithe" is seen as both a technical (modification concerns) and political risk (leverage in future disputes).

Nvidia between two fires: export restrictions vs. Chinese self-sufficiency

The entire episode illustrates the delicate position Nvidia finds itself in. On the one hand, the US government is using it as a tool of its technology policy - export restrictions are meant to prevent China from catching up with the US in AI computing at an accelerated pace. On the other, the Chinese government is pushing domestic firms to reduce their dependence on Western hardware and help grow their own high-end players, led by Huawei.

Until two years ago, Nvidia controlled the vast majority of China's advanced AI chip market, and China was a double-digit part of its revenue. Today, Huang himself admits that the share of AI accelerators has "fallen to zero", and instead of horizontally "restricting" exports (i.e. banning a portion of customers), it is realistically in a situation where it is de facto blocked by both countries simultaneously.

Meanwhile, every additional month without H200 shipments increases the chances that Chinese players will switch permanently to domestic chips and Nvidia will lose a large part of the market there permanently. In terms of long-term strategy, it is therefore clear why Huang is pushing so hard for a breakthrough - even at the cost of a politically sensitive "co-travel" with Trump to Beijing.

What's next: scenarios for the H200 in China

The combination of US conditions, Chinese caution and political pressure on both sides suggests several scenarios:

• Partial breakthrough: A compromise is negotiated, with limited H200 supplies under even stricter conditions (e.g. only through selected state or semi-state enterprises, with strong monitoring). Nvidia will get at least part of the sales back, but the fundamental change in the trend towards domestic chips in China will not be stopped.

• Long term stalemate: Approved licenses will remain on paper, China will de facto block imports, and Nvidia will be replaced in AI infrastructure by a mix of domestic manufacturers and grey routes. H200 won't make it to China in any significant volume at all, Nvidia will focus on the US, Europe and other parts of the world.

• The snag on one side: Further political escalation - new US restrictions or Chinese counter-steps - could make the matter a clear ban, which would lock the market in for good and send a signal to companies on both sides that the era of "globalized" AI supply chains is over.

KLA Corporation $KLAC

KLA Corporation operates in a segment that is almost invisible to most retail investors. The company does not manufacture chips or their components. Instead, it supplies critical infrastructure that allows semiconductor manufacturers to control the quality of their production. These are metrology and inspection devices that detect microscopic defects on a wafer during the manufacturing process.

In the era of advanced technology nodes like the 3nm or even 2nm process, tolerances for manufacturing defects have dramatically decreased. A single microscopic impurity or defect can devalue an entire chip that was worth thousands of dollars. This is where KLA technology comes into play. Their systems can detect defects at the sub-nanometer level and allow manufacturers to identify problems in real time, dramatically increasing production yields.

The company has a market share estimated by analysts to be in excess of 50% in the inspection systems segment of the semiconductor industry. The technological barrier to entry in this segment is extremely high and customers are very reluctant to switch suppliers once they integrate KLA systems into their production lines. In fact, migrating to a new supplier would require extensive recalibration of the entire process, which poses both a time and yield risk.

Business structure and profitability

KLA generated revenues in excess of $12 billion in 2025. Revenue structure is a significant factor. Much of the business comes from the sale of advanced inspection systems, which have extremely high unit prices. A single inspection system can cost tens of millions of dollars, which creates a very favorable margin profile.

The company's gross margin has been above 60% for a long time. This is significantly higher than most companies in the semiconductor supply chain. This is due to a combination of technological advantage, high value-added products and relatively limited competition at the top end of the market.

The company's operating margin is around 30%, indicating disciplined cost control and efficient business scaling. Moreover, KLA benefits from the fact that its customers are mostly large manufacturers such as TSMC $TSM, Samsung or Intel $INTC, which have stable capital plans and long-term contracts. This creates a relatively predictable environment for production planning and resource allocation.

Exposure to the AI boom

The link between KLA and the AI boom is not obvious at first glance, but it is structurally very strong. Manufacturing advanced AI chips requires the use of state-of-the-art manufacturing processes where inspection and quality control is absolutely critical. Each new technology node brings significantly higher demands on manufacturing accuracy, which automatically increases the demand for advanced metrology systems.

Hyperscalers like Microsoft $MSFT, Amazon $AMZN or Google $GOOG are currently investing hundreds of billions of dollars annually in building AI infrastructure. Much of this funding goes to chip manufacturers like Nvidia or $AMD. But they cannot increase production without their suppliers, led by TSMC, expanding production capacity. This is where $KLAC comes into play.

TSMC plans to invest over $40 billion in 2026 to expand production capacity. Similarly, Samsung and Intel are investing massive sums in upgrading their factories. All of these projects require the purchase of new inspection and metrology systems from companies like KLA. The company is thus benefiting from the AI boom indirectly, but all the more steadily.

The structure of the customer base

KLA's customer base is highly concentrated. The vast majority of its revenue comes from orders from the top 10 semiconductor manufacturers in the world. This concentration could be perceived as a risk, but in practice it creates a very stable environment. Large manufacturers plan investments several years in advance and KLA has very good order book visibility as a result.

Geographical diversification is also an important advantage. Most of the sales come from Asia, especially Taiwan and South Korea, where TSMC and Samsung are based. At the same time, the company generates significant revenues from the US and Europe, which makes it less vulnerable to geopolitical shocks in each region.

Another important element is the growing share of service revenue. KLA not only sells new systems but also provides long-term service, software upgrades and technical support. This model generates recurring revenues that are significantly more stable than cyclical orders for new equipment.

Capital efficiency and financial health

In terms of capital structure, KLA operates with a relatively conservative approach. The company has total debt of approximately $6.5 billion with a market capitalization in excess of $240 billion. The net debt-to-EBITDA ratio is kept below 1.0x, which is a very comfortable level and provides the firm with a sufficient financial cushion against any adverse scenarios.

Return on equity has been above 35% for a long time. This is an exceptionally high figure, reflecting both the high profitability of the business and the efficient allocation of capital by management. In addition, KLA regularly returns capital to shareholders through dividends and share buybacks.

The company has repurchased treasury stock in excess of $2 billion annually in recent years. This program contributes significantly to earnings per share growth, even if the firm's overall net income does not increase. But now there is talk of a new buyback program of up to $7 billion. The dividend yield is around 0.5%, which is not high for a technology company, but the combination of dividends and share buybacks creates an attractive total return profile for investors.

Comparison with competitors

KLA's main competitor in the inspection systems segment is Applied Materials $AMAT. The latter has a broader product portfolio covering more parts of the semiconductor manufacturing process, while KLA is much more focused on inspection and metrology. This specialization has its advantages and disadvantages.

The advantage is the depth of technological know-how in a narrow segment. KLA can invest all its research resources in developing the most advanced inspection technologies, giving it a competitive advantage in the top segment of the market. The disadvantage is less diversification of revenues. If there were a dramatic drop in capital expenditure in the semiconductor industry, KLA would be more exposed than other competitors.

From a valuation perspective, KLA trades at a forward P/E ratio of around 50x. Applied Materials trades at similar multiples (44x), suggesting that the market is valuing the entire semiconductor inspection and manufacturing technology segment consistently.

For a comparison with broader competitors, see the stock detail on Bulios.

Strategic Insight

KLA Corporation presents an interesting investment case primarily due to the combination of several structural advantages.

1. Technology barrier to entry: the development of advanced metrology systems requires decades of accumulated know-how and research investments in the billions of dollars. A new competitor cannot realistically enter the market and gain a significant share within a few years.

2. Switching costs with customers. Once a semiconductor manufacturer integrates KLA systems into its production line, switching suppliers means extensive process reconfiguration, risk of yield loss and time delays. Customers therefore prefer to stay with their existing supplier, even if a competitor offers a slightly better price.

3. Network effect within the industry. The more manufacturers use KLA technology, the more data a company accumulates about optimizing production processes. This data feeds back to help improve products, creating a positive feedback loop. Thus, KLA is not only benefiting from its dominant position, but this position is getting even stronger over time.

Risk factors

The main risk for KLA is the cyclical nature of the semiconductor industry. Historically, the sector has experienced significant fluctuations in capital expenditure. During periods of expansion, manufacturers invest aggressively in new capacity, while in periods of contraction, investment declines dramatically. As a capital equipment supplier, KLA is fully exposed to these cycles.

The current AI boom is creating a very favorable environment, but the current pace of investment cannot be expected to continue indefinitely. If the pace of hyperscalers' investment in AI infrastructure begins to slow, this could translate into demand for semiconductor manufacturing equipment relatively quickly.

The second risk is geopolitical tensions between the US and China. China represents a significant market for the semiconductor industry and export controls by the US government may limit the ability of the KLA to supply its most advanced technologies to Chinese customers. This could negatively impact revenue growth in the region, which has historically represented a significant portion of the business.

The third factor is technological competition. Although the entry of new players is unlikely, existing competitors such as Applied Materials or Japan's Tokyo Electron $TOELY are constantly improving their products. If either of them were to achieve a technological breakthrough in inspection or metrology, it could threaten KLA's dominant position in the segment.

Valuation and valuation

From a valuation perspective, KLA trades at a premium to the broader market, but within the technology sector, valuations are not as extreme.

Comparison to historical averages is also important. KLA has historically traded at multiples of 15x to 30x depending on the stage of the semiconductor cycle.

For dividend-focused investors, KLA is not a primary choice as the dividend yield of around 0.5% is relatively low. However, the company compensates for the lower yield with an aggressive share buyback program. The combined dividend yield and share count reduction is around 4% per year, which is already a competitive level.

What to watch next

The key thing to watch is, and will continue to be, capital expenditure trends at the largest semiconductor manufacturers. TSMC and Samsung regularly publish their plans for the next year, which provides good visibility into KLA orders. If these giants start to signal a reduction in investment, it could negatively impact sentiment towards the entire segment.

Another factor will be the quarterly results of KLA itself. Investors will focus on the evolution of the order book (book-to-bill ratio), which shows the ratio of new orders to invoiced revenue. A value above 1.0 indicates rising demand, while a value below that suggests cooling.

It will also be important to monitor management comments regarding demand for advanced technology nodes. If chipmakers begin to delay the transition to 2nm or next-generation processes, it could mean a temporary slowdown in investment in new inspection systems.

In the long term, it will be critical whether the current AI boom brings about a structural change in the semiconductor industry's capital expenditure or whether it is just the next phase of the cycle. If it is confirmed that AI creates a sustained higher demand for computing power, this could lead to a higher average rate of investment than in past decades.

The development of new chip manufacturing technologies will also play an important role. The shift to gate-all-around transistors, chiplet architectures or 3D packaging creates new challenges for manufacturing quality control. Each of these innovations requires new inspection technologies, creating additional demand for KLA products.

Geopolitical developments will also have a long-term impact. The drive by the US and Europe to localise semiconductor manufacturing means building new factories in the West. These projects will require massive investments in production equipment, including inspection systems from KLA. If successful, these plans could create an additional source of demand outside the traditional Asian markets.

KLA Corporation thus represents a less visible but structurally very strong investment case within the AI ecosystem. The company benefits from technological dominance in a critical segment of the semiconductor manufacturing value chain, high barriers to entry, and long-term relationships with the world's largest chipmakers.

Unlike AI chipmakers themselves, KLA is not as visible and media-followed, which may create an opportunity for investors seeking exposure to AI boomers with less volatility and lower valuations than front-line tech giants. At the same time, the company remains fully exposed to the cyclicality of the semiconductor industry, which requires close monitoring of fundamentals and capital plans of its largest customers.

Does anyone have shares of $CSCO in their portfolio?

For equity investors the signal is twofold: on one hand, it’s clear that capital is willing to fund AI champions at near-“megacap” valuations even before an IPO, because investors believe in the strength of the models, the brand, and long-term dominance in generative AI. On the other hand, such aggressive valuation of a private company competing with OpenAI for a leadership position raises the bar for public AI names as well — the higher expectations climb in the private world, the less room remains for a safe “re-rating” of stocks, and the more the entire AI trade starts to behave like the classic late stage of a bubble, where the question becomes who can sell the story to whom for a higher price before capacity and monetization realities burst it.

But at the same time, analysts warn that much of that euphoria is already priced in. After such rapid growth, Intel is more of a bet on being able to foundry transformation perfectly "off" without major mistakes than a cheap ticket to a hypothetical turnaround.

What started the 85% growth

The impetus came mainly from the media. A series of reports - from major titles to Korean sources - described Intel's foundry division $INTC as being in talks for specific contracts with Apple $AAPL and SK hynix. The very fact that there is any serious talk at all of Apple putting some of its M-series chips in Intel's hands is a major shift: just a few years ago, Apple was almost synonymous with TSMC $TSM in high-end manufacturing.

For investors, this means two things at once. First, that Intel has clearly managed to get its manufacturing processes to a level where large customers are willing to consider diversifying outside of TSMC. Second, that the foundry story is no longer a purely internal "promise for the future" but is starting to take the shape of sales and concrete contracts. It is no coincidence that 85% of the rally took place against the backdrop of this change in perception.

As Deutsche Bank sees it: a higher target, but no mindless euphoria

Deutsche Bank responded by raising Intel's target price to $100 per share, but left the rating at "Hold". Translated: fundamentals have improved, models are already pricing in a foundry contribution, but this is no longer a clearly cheap stock after the latest rise.

The bank is working with a long-term earnings power band of around $4-5 per share, to which it is applying a roughly 20 times earnings multiple. Importantly, foundry no longer plays a significant role in these estimates:

• Around 2027, they project external foundry revenues of roughly $2 billion

• in 2028 about $4 billion

• and with the foundry segment tipping into break-even at the operational level just at the end of 2027

From an EPS perspective, this means their 2027-2028 estimates are about 10% above consensus - so slightly more optimistic than the Wall Street average. But not enough to make sense to aggressively push a "Buy" recommendation after an 85% rally.

What an Apple deal would mean in numbers

At the center of the speculation is Apple. Rough analyst models suggest that if Intel were to acquire production of just a portion of Apple's M-series chips, its foundry business could cash in on about $2 billion in revenue a year. The figure alone sounds tempting, but the structure is more important: it's front-end wafer manufacturing and advanced packaging, the part of the chain that is most capital-intensive but also the most indicative of a manufacturer's technology level.

At the same time, we must not read the 2 billion as a "net profit bonus". In reality, it comes into play:

• pricing (Apple has long been pushing suppliers to the margins)

• production yield (every percentage of scrap production burns)

• spreading huge investments in factories over a larger number of orders

That's why even Deutsche Bank warns that even if Apple manages to win the contract, it will take years to get the foundry business out of the investment phase and into stable "revenue mode."

Foundry roadmap: revenue, break-even and what's already priced in

Putting together the outlook of $2-4 billion in external foundry revenue in a few years and the idea of a break-even by the end of 2027, a relatively conservative plan emerges. It's not a sci-fi idea of tens of billions over two years, but rather a gradual but realistic path to making the foundry segment start to earn its keep.

But after an 85% rally, the market is already largely accepting this scenario as a baseline. Intel is no longer a "CPU dinosaur that might someday do something in foundry" but a company that investors are implicitly counting on:

• get at least one large external customer

• handle the ramp-up of production processes without major disruptions

• and maintain a disciplined enough capex to make the ROI make sense

In other words: the room for pleasant surprises has shrunk; the room for pain from unexpected delays and technical problems has increased.

The result is a business that, while not showing explosive revenue growth - recent years have been more about double-digit but gradually slowing growth - has nevertheless managed to turn chronic losses into growing profitability, build FCF margins of around 10%, lift ROE to over 16%, and maintain a very solid balance sheet with an Altman Z-score of 5.4 and low leverage. The investment thesis is that when "AI megawatts" become the bottleneck of the U.S. economy, someone has to design, plan and execute the necessary substrate, grid upgrades and efficiency projects - and this company is realistically sitting there today.

Top points of analysis

• This firm is not a traditional EPC contractor, but a combination of energy consultant, grid engineer and project manager - from software grid analytics to design to construction management of substation and efficiency projects for utilities, cities and data centers.

• Over the past four years, she has gone from operating losses and negative EBIT to growing profits: margins have risen, EBITDA has more than quintupled, and net income has moved from negative to more than $22 million. USD 22 million per year.

• A key transformation is taking place in the energy segment: the company now lives mainly on energy efficiency, grid modernization and a growing order book around AI datacenters (site selection, substation design, fast interconnects), which have the potential to account for 10-15% of revenues already in 2025.

• FCF jumped from negligible or negative to more than €63m. USD 63 million in 2024, equivalent to a roughly 10% FCF margin - a very strong level for a pure infrastructure services company.

• The balance sheet is conservative: debt-to-equity around 0.24, net debt/EBITDA around 0.6×, Altman Z-score 5.4, current ratio 1.48 - the firm has room to use its expanded $200m credit line. The company has a USD 200 million credit facility for M&A and growth without jeopardizing its financial stability.

• Valuation around P/E 26-27×, P/S 1.7× and EV/EBITDA ~11-12× doesn't look cheap at first glance, but reflects a combination of quality FCF, improving margins and exposure to structural growth in power and datacenter demand.

• The main investment opportunity is that integrated datacenter services - from network analytics to substation EPCM - are a growing part of the business, while the main risks lie in the cyclicality of utility/municipality budgets, project risk and how quickly the company can convert paper pipelines into actual FCF.

Company performance

Willdan Group, Inc. $WLDN is a provider of professional technical, engineering and consulting services to utilities, government and private companies. Historically started as an outsourced engineer for California cities, today it has approximately 1,761 employees and operates in over twenty U.S. states plus Canada.

The business is divided into two main segments:

• Energy - Specialized energy services: audits, energy efficiency program design, grid modernization planning and design, demand response, project management, performance contracting, M&V, software and data analysis for long-term planning.

• Engineering & Consulting - traditional engineering and consulting work for municipalities and public agencies: civil and transportation projects, urban planning, construction oversight, geotechnical engineering, materials testing and other support services.

The key is that the energy segment today generates the vast majority of revenue and growth potential - especially where grid, efficiency, regulation and the advent of AI datacenters meet.

Business and products

In practice, Willdan's business can be divided into three layers:

1. Energy efficiency programs and grid modernization for utilities. The company designs and operates programs for IOUs and municipal utilities - from audits and plans to implementing measures at end customers. This includes grid analytics (load flow, hosting capacity) and grid reinforcement designs.

2. Engineering and project management for substations, microgrids and electrification. Especially after the acquisition of Alternative Power Generation (APG), Willdan has very specific capabilities in the design of substations, high voltage connections, microgrids, EV charging infrastructure and renewable integration. This is exactly the type of project that AI datacenters and new industrial sites need to have access to sufficient power at all.

3. Telecom and datacenters. A separate "vertical" market is telecom and datacenter projects - from site selection based on grid constraints, to design and EPCM substanic, to commissioning and M&V - with a focus on reliability, efficiency and minimizing CO₂ footprint. While this area is still a smaller part of revenues, management is targeting a 10-15% share of datacenter services in revenues in the coming years.

In terms of revenues, we see a shift from a pure municipal engineering to an energy-driven portfolio: the Energy segment's revenues are growing faster and carry higher gross margins (above 35-40%), while Engineering & Consulting is more stable but marginally less attractive.

Market and addressable potential

Willdan stands at the intersection of two structural trends:

• Modernization of the U.S. grid - outdated distribution and transmission grid, the need to adapt to increasing electrification (EVs, heat pumps) and integration of renewables.

• Explosion in demand for electrical power for datacenters - especially AI datacenters, which are expected to see significant growth in electricity consumption over the next two decades.

Estimates suggest that datacenter electricity consumption in the U.S. may grow by 50% or more by 2050, with much of the demand concentrated in a few key regions. In these regions, the grid is already operating at the edge of capacity - so each new large datacenter requires complex grid reconfiguration, new substations, line reinforcements, smart load management, and programs to free up "trapped capacity" at existing customers.

Willdan has the advantage of operating "inside the system" - working with utilities, regulators and municipal clients while being able to deliver technical solutions for specific datacenter projects. This means that the addressable market is not just "how many datacenters get built" but also "how many billions of dollars go into grid modernization, efficiency programs and the substance around them."

Competition and market position

On the competitive side, there is the following:

• Large engineering firms (AECOM $ACM, Jacobs $J, Black & Veatch)

• Specialist EPC players for utilities and transmission

• and energy consulting firms

Against these, Willdan stands out not as a low-cost EPC, but as a mid-cap specialist that combines:

• energy software and analytics (grid modelling, site selection)

• regulatory expertise and utility program knowledge

• and the ability to take projects from study to commissioning

References in utility programs, track record with utilities, and specialization in energy and datacenters, not generic "construction management" are a competitive advantage. Weakness is smaller size and thus a smaller global brand - large hyperscale datacenter projects can often split contracts so that Willdan gets the (study, engineering) part while the EPC part ends up with larger players.

Management and strategy

Current CEO Michael A. Bieber is leading the company in a direction that makes it a growth name in infrastructure, not just a "municipal engineer." The strategy can be summed up in a few points:

• Shifting the focus to the energy segment - energy efficiency, grid modernization, datacenters, EV infrastructure, microgrids.

• M&A as a competence amplifier - the acquisition of APG in 2025 strengthened the firm's ability to design substations, microgrids and other electrification projects for datacenters and renewables.

• Financial discipline - gradually moving from losses to profitability, growing EBITDA and FCF, maintaining reasonable leverage and expanding revolving credit facility from $150m to $200m. USD 150 million to fund further growth.

Management openly communicates the goal of getting to an Adjusted EBITDA margin of around 20%, which is ambitious for a company in this category. If successful, this will mean Willdan will become much more than a "project firm" - more of a high-margin energy consultant/engineer with an infrastructure character.

Financial performance

The numbers for 2021-2024 show a company in transition:

• Revenue: 353.8 million. USD (2021) → USD 429.1 million. USD 423.1 million (2022, +21.3%) → USD 510.1 million (2022, +21.3%) → USD 510.1 million (2022, +21.3%). USD 510.5 million (2023, +18.9%) → USD 565.8 million (2023, +18.9%) → USD 565.8 million (2023, +18.9%). USD (2024, +10.9%),

• gross profit: 135.9 million (2020/2020). USD → USD 143.6 million (2020: 2023). USD → 179.8 million (2020). USD → 202.8 million (2024). USD,

• operating result: -8.7 million. USD → -7.1 million. USD → USD 22.1 million. USD → USD 31.4 million. USD.

Revenue growth slows from +20%+ to low-double-digit, but gross profit grows faster and operating margin gradually moves from negative to around 5.5%. This shows that the company is not a "top-line rocket" but is managing to convert a higher proportion of revenue into profit - through a combination of a better mix of projects, efficiencies and arguably a greater weighting of more sophisticated services (software, analytics).

Net profit turned around from losses of around 8.4m. USD in 2021-2022 to a profit of USD 10.9m. USD 22.6 million in 2023 and USD 22.6 million in 2023. USD in 2024, EPS from -0.68 to USD 0.82 and USD 1.63, with a slightly rising share count (diluted shares around 14.2 mn). ROA of around 8.2% and ROE of 16.2% are solid for a company in the infrastructure segment - showing that capital allocated to organic growth and M&A is delivering decent returns.

Cash flow and capital discipline

Looking through cash flow is very important at Willdan because it shows the true quality of results:

• Operating cash flow: $9.8 million. USD (2021) → 9.4 mil. USD 9.9 million (2022) → USD 39.2 million (2022) → USD 39.2 million (2022). USD 72.1 million (2023, +316%) → USD 72.1 million (2023, +316%) → USD 72.1 million (2023, +316%). USD (2024, +84 %)

• capex around 8-10 Mio. USD per year, relatively stable

• FCF: 1.3 Mio. USD (2021) → -0.17 mil. USD (2022) → 29.3 mil. USD 29.7 million (2023) → USD 63.7 million (2023) → USD 63.7 million (2023). USD (2024)

This means that the firm:

• was able to significantly improve the conversion of profits into cash flow

• does not need massive capex to maintain or grow the business (asset-light)

• and has gone from FCF of zero to the high tens of millions within two years

Financing cash flow has been negative in recent years, reflecting debt repayments and relatively limited use of equity - no large dilutive issues, but no massive buybacks either. The company is behaving more conservatively: improving its balance sheet, growing organically and through M&A, while dividends are not being paid and buybacks are minimal for now, which makes sense in a growth phase.

Balance sheet and debt

Willdan's balance sheet is healthy on its face:

• debt-to-assets 0.13, debt-to-equity 0.24

• net debt/EBITDA around 0.6×

• current ratio 1.48, quick ratio 0.64, cash ratio 0.21

• Altman Z-score 5.4

This means:

• no structural debt risk

• Ability to use higher leverage if attractive M&A opportunities arise

• but some pressure on short-term working capital management (quick ratio below 1), which is common in project business

Extension of the credit line to EUR 200 million. This adds further financial flexibility - management can finance APG-type acquisitions or large projects without having to reach for equity. This is a positive if the capital is invested in projects with returns in the style of past numbers (ROIC ~13%), but poses a potential risk if the company starts chasing growth at any cost.

Valuation

With a market cap of around $1.1 billion and an enterprise value at a similar level, Willdan trades for roughly:

• P/E 26.8×

• P/S 1.7×

• P/B 3.9×

• P/CF 16.9×

• EV/EBITDA around 11-12×

On the face of it, this is not "cheap value" - multiples are above market average and roughly in line with higher quality infrastructure and engineering names. What the market is paying at these multiples:

• A combination of rising profitability and FCF

• solid ROE/ROIC while still relatively low leverage

• and exposure to very attractive structural trends (datacenters, grid modernization, electrification)

A conservative fair value of around $83 (vs. current ~$80, hypothetically) is more consistent with "hold/grow with the market" than massive upside - a real growth scenario would likely have to be built on significantly higher EBITDA margins (closer to 20% target) and a higher proportion of datacenter projects. Conversely, a downside scenario could lead to a repricing of P/E back into the high-teens if the cycle deteriorates or orders are delayed.

Risks

• Project and cyclical risk: earnings are dependent on order flow from utilities, regulators and datacenter clients - delays to large projects, budget cuts or reprioritization could dilute margins and FCF in the short term.

• Competition from large utilities: large players can aggressively target the same types of projects (datacenter, grid) and push margins or squeeze smaller players out of the most attractive contracts.

• Acquisition integration: APG and any further acquisitions need to be well integrated - with the risk of cultural and operational friction that could reduce the synergies achieved.

• Valuation risk: A P/E of around 27× and EV/EBITDA >11× imply that the market has already priced in part of continued growth and margin expansion; any disappointment could lead to repricing multiples even with relatively stable results.

• Regulatory and political risk: changes in energy regulation and planning can shift the type and timing of projects - and while the long-term trend is positive, short-term reprioritisation can be painful.

Investment scenarios (2-3 years)

Optimistic scenario

• Revenues grow 10-12% annually, with datacenter and grid projects making up an increasing portion of the mix.

• EBITDA margin approaches 20% target, FCF grows into the 80-100mn range. USD 100 per year.

• The market is willing to pay a P/E of 28-30x due to the combination of growth and quality FCF.

• With EPS in the USD 3.0-3.3 range, this implies a price range of roughly USD 85-100.

A realistic scenario

• Revenues grow 7-9% annually, margins improve but do not fully reach the target 20%; FCF remains around 60-80 mil. USD.

• P/E stabilizes in the 22-25× range, consistent with a quality but not "high-flyer" growth infrastructure name.

• With EPS of $2.5-2.8, the price band comes out around $55-70 - so more sideways/downside to today's levels, should the market decide to pull back multiples.

Pessimistic scenario

• Revenue growth slows to below 5% p.a., some projects delayed, margins stagnate or decline slightly, FCF stays in the $30-40m range. USD 30-30.

• P/E falls into the 15-18x range as the market re-prices the title as "project-cyclical engineering" rather than a growth energy platform.

• With EPS around US$2.0-2.2, this would imply a price range of US$30-40 - a significant downside from today's levels.

What to take away from the article

• This firm is an energy engineer and consultant that has moved from traditional municipal engineering to solutions for utilities, grid modernization and datacenters - selling primarily know-how and project management, not concrete and steel.

• Financially, it has gone from operating losses to growing profitability in a few years with ROEs of over 16%, FCF margins of around 10% and a very solid balance sheet with no significant leverage - a combination that is not commonplace in the infrastructure sector.

• Investment-wise, it offers exposure to the structural trend of growth in electricity and datacenter demand, in a way that is not purely commodity-based (as in electricity producers) but based on specialized services and know-how.

• A valuation of around P/E 27× and EV/EBITDA above 11× means the upside depends more on further margin expansion and FCF than simple revenue growth - "cheap" this title is not, but it can be reasonably valued if it delivers management's goals.

• In a portfolio, this stock makes sense as a growth infrastructure position tied to energy and AI datacenters, better suited for investors looking to profit from the energy "AI megawatt" trend without direct exposure to commodity electricity prices - but it's not a defensive dividend title, more of a cyclical growth bet with valuation sensitivity.

Earnings per share growth remains one of the most closely watched stock market metrics. While earnings show the size of a business, it is EPS that reveals how effectively a company is turning revenue into shareholder value. When a company can grow earnings per share at a rate above 25% per year over the long term, it usually signals either a strong competitive advantage, a successful restructuring, or a strong position in a fast-growing market segment.

In the current market environment, investors are focusing less on growth stories without earnings and more on companies that are actually generating increasing profitability. This is why companies with high EPS growth are attracting significant attention from institutional investors and retail traders. Each of the following companies has achieved high EPS growth for different reasons and each faces different challenges.

Lam Research $LRCX

Lam Research is one of the key players in the semiconductor equipment manufacturing industry. The company supplies systems for chip deposition and etching, processes that are critical to the production of modern semiconductors. Unlike chipmakers such as Intel $INTC or TSMC $TSM, Lam Research stands one level up the value chain. It supplies the technology without which advanced manufacturing of processors, memories and AI accelerators would not be possible.

Lam Research benefits from each new wave of investment in manufacturing capacity without having to compete directly in the cost-effectiveness of manufacturing the chips themselves. When tech giants or semiconductor manufacturers decide to build a new fab, Lam Research is one of the suppliers the project cannot do without.

EPS growth driven by AI investments

Over the past year, the company has managed to increase earnings per share by more than 25%. This growth comes at a time when the entire semiconductor industry is going through a massive investment cycle related to the development of AI infrastructure. Manufacturing advanced AI chips requires increasingly sophisticated manufacturing processes, which directly increases demand for equipment from companies like Lam Research.

The structure of the customer base is also an important factor. The company supplies both the largest foundries such as TSMC $TSM or Samsung $SSUN.F, as well as memory manufacturers including Micron $MU or SK Hynix $HY9H.F With this diversification, Lam Research is benefiting from growth across multiple segments of the semiconductor market, rather than just one product category.

Cyclicality and capital discipline

Semiconductor equipment is a highly cyclical industry. When chipmakers invest in new capacity, orders grow rapidly. But when there is overcapacity or a slowdown in chip demand, investment in equipment declines rapidly. This is why the current phase of high EPS growth needs to be read in the context of the investment cycle.

On the other hand, Lam Research has demonstrated in recent years its ability to maintain capital discipline even during downturns. The firm invests in R&D to maintain its technological edge, while actively returning capital to shareholders through share buybacks and dividends. This approach helps to stabilize EPS growth even in periods when revenues themselves are not growing exponentially.

Risks and outlook

The main risk remains a potential slowdown in AI infrastructure investment. If hyperscalers start investing less aggressively, this would quickly translate into orders for semiconductor equipment. Another challenge is the geopolitical environment, especially in the context of trade restrictions against China, which is an important market for the semiconductor industry.

On the other hand, the long-term trend towards more advanced manufacturing processes and increasing chip complexity is playing into Lam Research's hands. The company operates in a segment with high barriers to entry, and only a handful of companies in the world can supply the technology needed to produce state-of-the-art semiconductors.

General Electric $GE

General Electric has undergone one of the biggest restructurings in U.S. industrial history in recent years. After decades of expansion into segments ranging from aircraft engines to energy to financial services, the company has decided to radically simplify. It separated the healthcare division, the energy division and focused exclusively on the GE Aerospace segment.

This change had a direct impact on profitability. Instead of a conglomerate with many business units of varying profitability, a focused company with a clear strategy and improved operational efficiency emerged. This shift is one of the main reasons GE has been able to significantly increase earnings per share over the past year.

Aerospace segment as a growth engine

With the separation of the remaining divisions, GE is focusing on the manufacture and service of aircraft engines. This business has interesting economics. Engine manufacturing itself generates relatively lower margins because manufacturers often sell engines at discounted prices to secure long-term service contracts. The real profitability only comes in subsequent years through additional service, spare parts sales and maintenance.

It is this model that is now helping GE significantly. After the pandemic downturn, airline capacity has returned to pre-crash levels and in many regions has surpassed them. Planes are flying more hours, which increases demand for maintenance services and spare parts. This segment has significantly higher margins than the production of new engines alone and therefore the growth of the business translates directly into profitability.

Operating leverage and free cash flow

Another driver of EPS growth is improved operational efficiency. As part of the restructuring, GE has significantly reduced administrative costs, simplified its organizational structure, and focused on discipline in capital allocation. This approach is reflected not only in profit growth but also in the generation of free cash flow that the company can return to shareholders or reinvest in research and development.

Moreover, the aerospace industry benefits from a long-term structural trend. The global commercial aircraft fleet is ageing and many machines will need either engine refurbishment or complete replacement in the coming years. GE's market position gives it a significant share of the installed base of engines, which creates a stable service revenue stream for many years to come.

Challenges and competition

Despite strong EPS growth, $GE faces several challenges. Competition from companies such as Pratt & Whitney and Rolls-Royce remains intense, particularly in the new narrow-body aircraft engine segment. Another risk is potential supply chain issues that could delay deliveries of new engines and impact the outlook for future quarters.

On the other hand, GE's transformation into a pure-play aerospace company has brought greater visibility to the business and a better financial profile. Investors now have a clearer picture of where revenues are coming from and what the margin structure is. This shift may lead to a higher stock valuation in the long run than when the company operated as a conglomerate with less transparency.

Morgan Stanley $MS

Morgan Stanley is one of the traditional investment banks that benefits most from higher interest rates. Unlike retail-focused commercial banks, Morgan Stanley has significant exposure to wealth management, asset management and institutional trading. It is the combination of these segments that creates interesting profitability dynamics in a higher rate environment.

Indeed, higher rates mean higher income from cash held by clients in the wealth management division. They also bring higher volatility in the financial markets, which increases trading activity and generates trading income. Morgan Stanley has been able to benefit from both of these effects over the past year, which has translated directly into earnings per share growth.

Wealth management as a stabilising pillar

In recent years, Morgan Stanley has significantly strengthened its wealth management position through acquisitions, including the purchase of E*TRADE and Eaton Vance. This segment is less cyclical than investment banking or trading and generates a more stable income stream from asset management fees.

It is this diversification that helps Morgan Stanley maintain EPS growth even in periods when traditional investment banking is in a downturn. Wealthy clients continue to allocate capital regardless of short-term market fluctuations, and asset management fees generate predictable income. The combination of trading business with wealth management thus creates a more stable financial profile than that of purely capital market-oriented banks.

Operating leverage and cost efficiency

Another important factor is the bank's ability to scale the business without proportionately increasing costs. In recent years, Morgan Stanley has invested in technology infrastructure and digitization of services, which allows it to serve more clients with lower incremental costs. This effect is strongly reflected in EPS growth, as each additional dollar of revenue has a higher impact on net income.

The bank also benefits from a strong market position. Morgan Stanley is one of the top players in mergers and acquisitions, equity and bond issuance, and institutional trading. This gives it pricing power and the ability to generate above-average margins in segments where competition is limited to a handful of large players.

Regulation and macroeconomic risks

The main risk to Morgan Stanley remains a possible reversal in interest rates or a significant cooling of the economy. If the Fed were to begin aggressively cutting rates in response to a recession, wealth management revenues would decline and trading activity could slow significantly. Another challenge is the regulatory environment, which can affect capital requirements and thus a bank's ability to return capital to shareholders.

On the other hand, Morgan Stanley enters any slowdown with a significantly better financial profile than in past cycles. Greater diversification of earnings, a stronger capital base, and less reliance on volatile trading revenues could help the bank better withstand economic turbulence.

SAP $SAP

SAP is undergoing one of the biggest transformations in the history of enterprise software. The traditional business model based on licenses and on-premise installations is gradually giving way to cloud services with a subscription model. This change has a major impact on revenue structure and long-term profitability.

The cloud model brings in less upfront revenue than license sales, but creates a more predictable and stable cash flow over time. Customers pay a recurring subscription fee instead of a one-time investment, allowing the company to better plan for growth and investment. This shift is one of the reasons SAP has seen EPS growth of over 25% in the past year.

Cloud platform

A key product of the transformation is the Rise with SAP cloud platform built on the S/4HANA ERP system. Rise with SAP combines infrastructure, software and consulting services into a single package, simplifying the migration process from legacy products and accelerating adoption.

Migrating existing customers to S/4HANA creates an opportunity for SAP to not only retain existing clients, but also increase average revenue per customer. In addition, the cloud model opens up space for additional services and functionality enhancements, further strengthening growth potential.

Efficiency and margin growth

Improving operating margins also plays an important role in EPS growth. The cloud business has significantly better economics than the traditional on-premise model once scale is achieved. Fixed infrastructure and development costs are spread across a larger customer base, leading to higher profitability as growth continues.

SAP has also restructured its cost base, including optimizing administrative and sales structures. This process has helped to increase profitability even in segments where revenue growth rates are not exponential. The result is a situation where the company can grow EPS faster than sales itself, which is exactly what investors appreciate in the current environment.

Competition and the risk of a slowdown

SAP faces increasing competition from players like Workday $WDAY, Salesforce $CRM, and Oracle $ORCL. These companies often offer more specialized solutions with a better user experience than traditional ERP systems. Therefore, it is crucial for SAP to retain its existing customer base while convincing new clients that its platform can compete with modern cloud alternatives. For a comparison of competitors, see the share details on Bulios.

Disney $DIS

Disney is one of the companies that has undergone the biggest challenges in recent years. Pandemics have shuttered theme parks, cinema distribution has collapsed, and the company has invested aggressively in streaming without a clear path to profitability. The stock lost significant value as a result, and investors questioned whether the company would be able to return to growth.

The current EPS growth therefore signals a turnaround. Disney was able to stabilize the streaming business, restore the performance of the theme parks and strengthen the cinema division. This shift from aggressive investment to more disciplined capital allocation translates directly into profitability and earnings per share growth.

Streaming finally profitable

A key milestone was Disney+'s transition to profitability. After years of investing in content and gaining subscribers, the streaming division finally got into the black. At the same time, the company raised subscription prices, optimized production costs, and focused on retaining existing customers instead of chasing maximum user base growth.

This shift is crucial because streaming has long weighed on Disney's overall profitability. Once the segment hit profitability, it freed up room for EPS growth from other divisions that have had strong margins all along. The combination of profitable streaming with renewed parks performance and a strong cinema business creates a synergy that pushes overall earnings up.

The theme parks

The theme parks and residential resorts division generates the highest margins of any Disney segment. After the pandemic downturn, attendance has returned to high levels and the company has been able to significantly increase average spending per visitor through higher admissions, lodging rates and premium service fees.

In addition, Disney is investing in expanding park capacity and new attractions, which should sustain demand in the coming years. The experience business is one of the few segments where Disney has a distinct competitive advantage and where it can exercise pricing power without risking losing customers to competitors.

Challenges and future growth

Despite the return to profitability, Disney faces several challenges. Cinema distribution remains unpredictable and the success of individual films can fluctuate significantly. The streaming market is becoming increasingly competitive and retaining subscribers will require continued investment in quality content. Another uncertainty relates to the macroeconomic environment and consumers' willingness to spend on entertainment in the event of a recession.

On the other hand, Disney $DIS has one of the strongest content libraries in the world, a portfolio of respected brands and a unique position in the business. If the company can maintain its operational discipline and allocate capital effectively between streaming, parks and cinema, it has room for continued EPS growth in the years ahead.

Strategic view

All five companies achieved EPS growth above 25% for different reasons. Lam Research benefited from the investment cycle in semiconductors, GE from restructuring and the return of the aftermarket business, Morgan Stanley from higher rates and wealth management, SAP from cloud transformation, and Disney from the renewed profitability of streaming and parks.

But the common denominator is the ability to turn revenue growth or business efficiency improvements into profit growth. This effect is referred to as operating leverage and is key to long-term shareholder value generation. Companies that can scale the business without proportional cost growth have the greatest potential to sustain high EPS growth rates in future years.

At the same time, it is important to distinguish between cyclical and structural growth. For Lam Research or Morgan Stanley, part of the current EPS growth is linked to the investment or interest rate cycle phase, which means that the growth rate may not be sustainable over the long term. In contrast, for SAP or Disney, it is more about structural changes in the business model that could generate more stable growth even after the economic environment normalizes.

What to watch next

Some of these companies have already priced in an optimistic scenario for further growth. If EPS growth slows or negative surprises come, the stock could quickly correct. Conversely, if the growth rate is confirmed and the companies start generating even higher free cash flow, the room for further valuation growth may remain open.

Earnings per share growth above 25% is not a common occurrence, especially for large companies with market capitalizations in the tens or hundreds of billions of dollars. These five companies show that such growth can come from a variety of sources, from technology investment cycles to restructuring to cloud transformation or a return to profitability after a turbulent period.

Each of these companies has different challenges and opportunities ahead. It is the ability to manage these challenges that will determine which companies remain attractive investments.

I recently noticed that I’m hardly contributing to ETFs anymore and am mainly buying individual stocks, so the share of ETFs in my portfolio is gradually decreasing. Currently, ETFs make up about 8% of my portfolio and I don’t really mind, because I want to focus on individual stocks to boost the overall performance of my portfolio.

CEO $NVDA Jensen Huang joined Donald Trump's US delegation to Beijing at the last minute. According to Reuters and Politico, he wasn't originally on the list of businesspeople scheduled to travel. Trump reportedly invited him during the trip, and Huang subsequently boarded Air Force One during a stop in Alaska.

And honestly? This doesn't look like a coincidence.

This entire visit could be extremely important not only for Nvidia, but practically for the whole AI sector.

📌 Why?

China is still one of the largest technology and AI markets in the world. However, in recent years the US has significantly restricted exports of advanced AI chips to China due to concerns about technological dominance and military use of AI.

Nvidia was one of the companies most affected.

The company had to:

• modify its AI chips for the Chinese market

• look for alternative GPU versions

• and at the same time watch how enormous demand from China remained practically unmet

But now a very interesting moment is coming.

Trump publicly stated that he wants Xi Jinping to “open China to American business.” And he is bringing Jensen Huang with him — the person who today represents perhaps the most important AI company in the world.

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Now it will be interesting to see whether there will be:

🟢 1. Lifting of export restrictions for AI chips. This would likely be the biggest bullish scenario for Nvidia.

If Nvidia could again sell its AI accelerators more aggressively into China:

• its addressable market would expand significantly

• datacenter segment revenues could grow

• and the company's long-term outlook would improve

And above all: China is still investing massively in AI infrastructure, clouds, and datacenters.

📈 2. New trade agreements between the US and China

📌 What does this mean for investors?

The market will be watching very closely in the coming days:

• what the outcomes of the talks will be

• whether there will be mentions of AI chips

• and most importantly whether signs of easing export rules appear

Because if yes… it could be another huge fuel for the AI rally!

What do you think about this meeting?

EchoStar is selling approximately 50 megahertz of its nationwide spectrum to AT&T for their 5G network for $23 billion, including 30 MHz of mid-band and 20 MHz of low-band spectrum. It then goes on to sell 65 megahertz of its spectrum to SpaceX for $17 billion to support the supply of devices on equipment from the next generation Starlink.

FCC conditions approval on record $2.4 billion escrow

The US Federal Communications Commission (FCC) yesterday approved the USD40 billion sale of EchoStar's wireless spectrum to SpaceX and AT&T $T, citing the decision's rationale of boosting connectivity across the US. At the same time, the FCC is requiring EchoStar to set up a $2.4 billion escrow account to cover potential obligations to suppliers related to the licenses.

EchoStar is selling approximately 50 megahertz of nationwide spectrum to AT&T for $23 billion for its 5G network, including 30 MHz of mid-band and 20 MHz of low-band spectrum. AT&T will acquire licenses covering more than 400 markets across the U.S., according to a Reuters report.

SpaceX is buying 65 megahertz of spectrum for $17 billion to boost its next-generation Starlink service's direct-to-device offering. According to a Fierce Network analysis, SpaceX will gain exclusive rights to use the spectrum for hybrid satellite and terrestrial architectures.

Escrow requirement sparks dispute with EchoStar

EchoStar $SATS said in a statement, "The FCC has continually praised EchoStar's spectrum sales to AT&T and SpaceX as pro-competitive transactions serving the public interest, and we appreciate its approval today. However, these approvals come with an unprecedented involuntary escrow condition. We are analyzing this requirement and evaluating next steps."

EchoStar argues in its letter that its subsidiary Dish Wireless is not entitled to any proceeds from the sale of EchoStar spectrum and that it is exempt from contractual obligations due to force majeure - even though parent EchoStar is getting $40 billion (or more) for the spectrum.

EchoStar said in a filing Monday that it has already reached agreements with hundreds of companies and paid out hundreds of millions in the process. However, according to a Broadband Breakfast report, subsidiary Dish Wireless continues to inform business partners that it is exempt from contractual obligations.

AT&T gains strategic advantage against competitors

The FCC said AT&T's low-band spectrum will expand coverage across the United States, particularly in rural and underserved areas. The FCC also requires AT&T to build out its network years faster than the company originally requested.

According to Morningstar's analysis, the acquired spectrum provides AT&T with mid-band capacity across the U.S. that it can use very quickly to close the gap with competitors T-Mobile and Verizon. EchoStar is giving up about a third of its total spectrum holdings, including most of its low-band licenses, effectively removing itself as a long-term threat in the traditional wireless market.

"We've already deployed mid-band spectrum at record speeds, providing added capacity and stronger performance to our customers," said an AT&T spokesperson. "We look forward to closing the transaction, deploying low-band spectrum and continuing to invest in a network that keeps people and communities connected."

SpaceX boosts satellite connectivity with flexible rules

The FCC is also granting relief to SpaceX to address the convergence of wireless and satellite broadband. The announcement allows SpaceX to use its new spectrum flexibly for terrestrial, space and hybrid network architectures.

"Today's decision allows SpaceX to use its new spectrum flexibly for terrestrial, space and hybrid network architectures. This flexibility is subject to first-of-its-kind performance commitments designed to be technology neutral," the agency said.

The additional spectrum provides SpaceX with exclusive usage rights that can support direct connections between satellites and standard mobile phones, potentially transforming the way users access broadband in remote locations or during emergencies. According to a Cord Cutters News report, this could be invaluable for disaster response, maritime operations and underserved communities.

Transaction rounds out EchoStar's debt crisis

Other factors contributing to the FCC investigation included more than $500 million in outstanding interest payments and the completion of DirecTV's acquisition of Dish Network. EchoStar is reportedly sitting on more than $20 billion in debt.

EchoStar's ambitions to become the fourth major U.S. nationwide mobile carrier are over. Its subsidiary Dish built an advanced network based on Open RAN technology, but it proved slower and more complicated than expected.

"Today's approval, along with other secondary market transactions and FCC auctions already in the pipeline, puts America on track to free up approximately 300 megahertz of low- and mid-band spectrum by the end of 2027," said FCC Chairman Brendan Carr. "In the coming months, we will take additional steps to ensure that companies looking to innovate in direct device-to-device connectivity have the regulatory framework and spectrum resources to match."

Will any of you be buying $HIMS today after that drop?

Instead of fighting for every wrist in a crowded wearables market, Google is trying to occupy a higher tier - to become the "brain" that brings together data from different devices, analyzes sleep, movement and other biometrics, and is the first to answer questions like "how am I doing health-wise?" At a time when millions of people are asking health questions directly to chatbots, it's a safe bet who will become the main AI layer above personal health.

What Google is launching: Google Health and AI Coach

Starting May 19, the Fitbit app will be renamed Google Health, and at the same time, AI Health Coach, built on Gemini models, will go into full swing. The latter has:

• Summarize health and fitness data that the user voluntarily shares with it

• create personalised weekly plans (movement, sleep, recovery)

• act as a chatbot that answers questions about the custom data (e.g. why I feel worse after a certain workout, how my sleep has changed)

Google $GOOG is also launching a new Fitbit Air wristband - a simple "screenless" tracker without a display that serves only as a sensor connected to an app. But the main product is not hardware, but a paid Google Health Premium service: most of the advanced AI coach features (detailed summaries, plans, long-term trends) will be available just within this subscription, separate from Google's other AI plans.

AI Coach is meant to function as a digital version of the team that elite athletes have - nutritionist, trainer, sleep coach - in just one app. It can point out, for example, that a four-mile run topped a weekly goal of 20 miles, or that a few nights of longer sleep improved recovery indicators.

An open ecosystem: "brains" over Apple Watch and other devices

Google's strategy differs from the classic "locked down" approach. Google Health can already work with data from other apps today; through tools like Health Connect (Android) and Apple HealthKit, it wants to gradually connect AI coaches to Apple Watch, Oura, Garmin and other devices. At the moment, AI Coach is only available for Fitbit and Pixel Watch, but the goal is to expand support within a year.

From a user perspective, that means:

• hardware he can keep - Apple Watch, another Fitbit, a smart ring

• Google will "sit" above it as an analytics layer

• data from different sources converges in Google Health and an AI coach builds recommendations on top of it

This is key for Google as it lags behind Apple, Samsung and Chinese brands in the wearables market alone. If it manages to become a software superstructure over someone else's hardware, it can gain influence over how people use AI in health without having to win the battle for every wrist.

Competition: Microsoft, OpenAI and specialist players

Google is not alone in trying to become the "first AI" that people turn to with health questions.

• Microsoft $MSFT in March launched Copilot Health, which combines data from dozens of wearable devices with electronic health records to help evaluate trends, explain lab results and prepare questions for doctors.

• OpenAI launched ChatGPT Health, a mode that integrates medical records and data from wellness apps to make answers more contextual and tied to specific user history.

Specialized competitors are adding AI layers to this as well: Samsung is expanding health on the Galaxy Watch, and Oura and Whoop are adding AI comments on HRV, sleep and recovery. They're all aiming for the same goal - to become the default service where users consolidate their health data and to which they return with further queries.

Google is trying to differentiate itself with a combination of its own models (Gemini), Fitbit's experience and open access to third-party devices. Instead of "buy our watch" it says "use any hardware, we'll add brains to it".

AI coach not doctor: benefits and limits

Major healthcare institutions repeatedly warn that AI in health has limits: it can't physically examine, often lacks context, and can generate compelling but flawed advice. That is why Google - like Microsoft and OpenAI - presents its products as a complement, not a replacement for the doctor.

Real-world use of an AI coach makes sense in situations like:

• tracking sleep, weight, heart rate and activity trends

• identifying links between lifestyle and subjective well-being

• preparing for a doctor's visit (symptom summary, questions, history)

The risk occurs if the user mistakes a "wellness tip" for a diagnosis or if the model evaluates a common deviation as an alarming problem. Google therefore needs to address clear boundaries alongside model development: communicate that the AI coach is not a diagnostic tool and that for serious problems, the health system should be the first choice, not the chatbot.

Why it is crucial for Google to be first

From a business perspective, it's about dominating the entry point. If Google Health becomes the first place a user reaches when addressing sleep, fitness or blood pressure, there will be strong inertia:

• Switching to a competitor means re-setting data sources and "learning" a new coach's history

• Google gets a very rich temporal dataset on health and habits

• that can be used for other services, partnerships and model improvements

Thus, in AI health, Google is not really competing primarily for bracelet sales, but for its AI layer to sit on top of as much health data as possible - even that collected by hardware from Apple or other competitors. If it succeeds, it can succeed in the health AI race, even if it never wins the wearables sales charts.

But it doesn't look like that on the chart. The stock is currently trading around $84.30, at the low end of the 52-week range ($84.09-139.06), with a P/E of 23.61 and a P/S of around 3, with the 50-day average over $101 and the 200-day over $119 - the market has "moved the title significantly into the basement" after a series of weaker quarters and disappointing organic growth in late 2025/2026. Yet consensus fair prices and analysts' targets are around USD 130-143, well above current levels.

What's realistically happening at Abbott: Covid-free growth, improved margins, stable outlook

Covid testing has been a big "noise" in recent years, obscuring the evolution of the core business. Once the Covid pressure subsided, test revenues logically declined and negative momentum hit the title. However, it is important to look at adjusted sales:

• Q2 2025: sales of $11.42bn, +6.9% Y/Y; +7.5% after excluding Covid tests, above expectations of 7.5% and roughly in line with the previous year (10.8%).

• Q1 2025: revenue USD 10.4bn, +4% Y/Y; organic growth excluding Covid +8.3%, 8.1% expected.

• Q4 2025: sales $11.46B, +4.4% Y/Y; organic growth +3% (or 3.8% ex-Covid) vs. expectations of 6.2-7.2% - here came the disappointment that broke sentiment on the stock.

Meanwhile, management communicated early 2025 organic sales guidance of 7.5-8.5%, adjusted operating margin of 23.5-24.0% (up 150bps) and adjusted EPS of $5.05-5.25, with double-digit growth. The core business thus continues to target steady high-single-digit growth, while Covid Tests' share of P&L is declining.

Profitably, Abbott $ABT is moving in the right direction: margins are improving, the mix is returning to long-term drivers (diagnostics, cardiovascular devices, diabetes, nutrition), and the company continues to maintain discipline on the cost side. That's exactly the profile that the market usually rewards, not punishes, in a defensive aristocrat.

How Abbott makes money: the four pillars and AI as a silent enhancement

Abbott has four main segments:

• Diagnostics (Alinity, lab and point-of-care systems)

• Medical Devices (cardiovascular devices, diabetes - FreeStyle Libre)

• Nutrition (pediatric and adult nutrition)

• Established Pharmaceuticals (generics and branded drugs in emerging markets)

Diagnostics and AI

Diagnostics is one of the key pillars that grew even without Covid: in Q2 2025, revenues in diagnostics were mainly driven by core lab and molecular diagnostics. In addition, Abbott is gradually integrating AI into it:

• In core diagnostics, it uses predictive algorithms to anticipate instrument maintenance and reduce downtime

• for Alinity systems and across the broader portfolio, AI helps evaluate results and support diagnostic decisions

This improves efficiency for hospitals (less downtime, better workflow) and increases "stickiness" for Abbott - once customers integrate the system, they have no incentive to switch.

Medical Devices: cardiology and diabetes

Devices has several clear growth stories:

• Ultreon software in cardiology (optical coherence tomography + AI) helps physicians better plan stenting and optimize procedures

• Assert-IQ implantable heart rhythm monitor uses AI to more accurately detect atrial fibrillation and pauses, reducing data noise for physicians

• The biggest driver remains FreeStyle Libre, a CGM system that uses algorithmic AI to interpret glucose data and provide actionable insights for the patient and physician

Libre is also gaining another AI layer: the Libre Assist, a generative AI feature that uses image recognition to analyze a photo of a meal and translate it into macro information and recommendations for order of consumption based on the impact on glucose. This is a typical example of how Abbott is using AI not as marketing, but to actually increase the value of the device.

Nutrition and Established Pharma

Nutrition and established pharma are more stable, slower growing segments that:

• generate solid cash flow

• support geographic diversification (nutrition and emerging markets pharmaceuticals)

• and increase resilience to individual product fluctuations

Together, they form a mix that:

• are of high quality (med-tech, diabetes, diagnostics, nutrition)

• targets organic growth of 7.5-8.5%

• and leverages AI across multiple products without building an "AI hype story"

Numbers and valuation: why "for sale" may not be a euphemism for the problem

From the available data:

• Current price: $84.30 per share, 52-week low $84.09, high $139.06; 50-day MA ~$101.88, 200-day ~$119.82 - well below both averages

• P/E (TTM): 23.61, EPS 3.57 USD

• Market capitalization: 146.83 billion USD

• Consensus target prices: mid USD 130-143 (Patria USD 130.58, Investing/Morningstar around USD 132-143), upper bands of models go even higher

• Management guidance (2025): organic growth 7.5-8.5%, adjusted EPS $5.05-5.25, adjusted operating margins 23.5-24%

That said:

• the market today is paying roughly 16-17x management's proposed "midpoint" of future adjusted EPS ($5.15), if we convert to 84.30 / 5.15 - a rather normal to cheaper multiple for a quality med-tech/dividend title

• price is well below the midpoint of the target range ($130+), implying potential in the tens of percentages if sentiment normalizes and the outlook is delivered.

Of course, the outlook has been under scrutiny following the disappointing Q4 2025. Organic growth lagged there (3-3.8% vs. 6-7% expected), leading to a steeper correction and Abbott trading at a discount to historical multiples. But the core of the "on sale" thesis is not that the company is troubled - rather that the market overreacted to one weaker period in an otherwise consistent story.

Dividend, quality and why this is a "core" type of title

Abbott is a classic dividend aristocrat with decades of gradual dividend increases. While the specific DPS and yield change continuously, the structure is:

• Relatively conservative payout ratio (covered by free cash flow)

• steady DPS growth in the low to mid-unit percentages annually

• Strong balance sheet that allows it to fund CAPEX, R&D, smaller acquisitions and still pay a dividend

For the investor, this means that even if the valuation re-rating does not take place immediately, the combination:

• organic revenue growth of around 7-8%.

• moderate margin expansion

• and a regular dividend

can deliver a solid total return over a 5-7 year horizon without having to rely on "hype" or large M&A.

Risks: why the market is ignoring Abbott today

Key factors explaining low sentiment:

• Disappointing Q4 2025 - organic growth of 3-3.8% vs. 6-7% expected has created a sense that the story is slowing.

• "Post-Covid hangover" - investors had Abbott linked to Covid tests; their gradual decline reduces headline growth and makes comparisons between years difficult.

• Competition in CGM and devices - there is strong competition in diabetes and cardiology (Dexcom, Medtronic, etc.); the market is worried about price pressures and the emergence of other solutions.

• Macro and interest rates - defensive titles have suffered from capital rotation into "AI growth stocks" and higher cash flow discount at higher rates.

These concerns are real, but so far do not appear to have fundamentally broken the core business: the outlook has remained relatively strong, segments are growing, AI and higher value-added products are strengthening the competitive position.

What to take from this

Abbott is now a typical example of "boring quality" in a sector where the market now prefers to chase other stories. The core business is growing solidly, margins are improving, the pipeline of products (including AI-enhanced diagnostics and CGM) is strong, but the stock is trading at the bottom of its range and at multiples that do not reflect the company's long-term profile due to short-term disappointment and sentiment towards defensiveness.

For a long-term investor looking for a combination of quality, visibility, dividend and current discount, Abbott may be an interesting candidate for the "core healthcare" component of the portfolio at this stage - provided, of course, that they accept the risk of short-term volatility and continue to monitor whether the company is delivering on its organic goals and maintaining its technology edge in key segments.

The US economy is in an environment that has many investors worried. Inflation, which was originally forecast to be falling towards the Federal Reserve's 2% target, is instead showing unexpected resilience. March data showed consumer prices rising at an annual rate of 3.3%, well above the central bank's target.

Thus,today's release of April's numbers will provide another important clue as to which direction inflationary pressures are headed in the coming months. In particular, the dramatic rise in oil prices is playing a key role in this development.

The conflict in the Middle East and the subsequent closure of the Strait of Hormuz have triggered one of the biggest oil shocks in modern history. The price of Brent crude oil climbed to USD 120 per barrel during March and, although it has partially stabilised since then, it is still well above USD 100.

This energy shock is now reverberating throughout the economy and complicating the Fed's efforts to reduce inflation. At the same time, the Fed's own expectations are changing. While as recently as the end of last year the central bank was counting on the possibility of two rate cuts during 2026, the March dot plot (a graphical representation of the Federal Open Market Committee (FOMC) members' economic projections included in the quarterly Summary of Economic Projections (SEP) report. This chart shows how individual Fed members view the future path of interest rates) signaled the continuation of this forecast only in nominal terms. A closer look at the distribution of individual FOMC members' projections, however, shows that the consensus has shifted significantly toward fewer cuts or keeping rates at current levels for the entire year.

Interest rate expectations

Source: Federal Reserve

The March inflation shock and the role of energy

The March inflation numbers surprised nearly all market participants. The Consumer Price Index rose 0.9% month-over-month, the highest monthly increase since the summer of 2023. Year-over-year inflation came in at 3.3%, primarily due to dramatic energy price increases.

The gasoline index jumped 21.2% month-over-month and the overall energy component of the CPI rose 10.9%. This category alone accounted for nearly three-quarters of the total monthly increase in all prices.

Importantly, core inflation, i.e., price increases excluding the volatile food and energy components, remained relatively tame. It rose by 0.2% month-on-month and reached 2.6% year-on-year. This suggests that broader price pressures remain under control and that the current jump in headline inflation is indeed mainly driven by the energy crisis.

However, the problem is that high energy prices inevitably seep into other segments of the economy. Transport costs are rising, which is gradually being reflected in the prices of goods. Higher heating and cooling costs affect the operating expenditure of businesses across sectors. And above all, consumers are facing lower purchasing power, with a significantly higher proportion of their income going on fuel and energy.

Geopolitical realities and uncertainty

Behind the current energy shock is the conflict between the US and Iran, which escalated into a direct military confrontation in March. Iran subsequently closed the Strait of Hormuz, leading to the disruption of nearly 20% of global oil supplies. According to the International Energy Agency, this is 'the largest disruption to oil supplies in the history of the global market'.

Brent crude oil prices rose from $72 per barrel in February to almost $120 in mid-March, an increase of more than 55% in a matter of weeks. Although a partial calm has followed thanks to the ceasefire, the situation remains very fragile. The Strait of Hormuz is partially open, but the flow of ships remains far below pre-conflict levels. Iran continues to maintain military control of the Strait and any deterioration in diplomatic negotiations could lead to the closure of this critical route again.

WTI oil price development (monthly chart)

US President Trump has repeatedly threatened to resume military operations if Iran does not back down from some of its demands. The Iranian side, for its part, insists on financial compensation for the damage caused by the US attacks. It is this uncertainty that is keeping oil prices high and the market unable to return to normal. Analysts estimate that even with the partial opening of the Strait, oil prices will remain in the $80 to $100 per barrel range for several months, due to disrupted supply chains and damaged infrastructure.

Changing Federal Reserve expectations

The Fed has gradually adjusted its inflation and interest rate projections in recent months. The March projection showed an increase in the inflation forecast as measured by the PCE index to 2.7% for 2026, up from 2.4% in December. However, in the last week, the central bank's forecasts have come close to 4%.

Inflation in the US from 2020 (monthly chart)

April data from the New York Fed shows a further increase in consumers' short-term inflation expectations. One-year inflation expectations rose to 3.6%, up from 3.4% in March. Interestingly, medium- and long-term expectations remained stable at 3.1% and 3.0%, respectively. This suggests that consumers perceive the current inflationary pressure as largely temporary, but at the same time are unsure exactly when the situation will return to normal.

The problem for the Fed is that the energy shock comes at a time when the central bank has only just begun to gradually ease its restrictive policy. The target rate is now at 3.5% to 3.75%, still well above the long-run neutral level of around 3%. The Fed thus has some room to potentially cut rates in response to economic weakness, but it also faces the risk that easing monetary policy too quickly in an environment of heightened inflationary pressures could undermine the central bank's credibility.

Impact on equity markets

Equity markets have reacted nervously to the combination of higher inflation and uncertainty about rate cuts. The S&P 500 index has lost almost 8% since the beginning of March and technology stocks have faced even more pressure.

Higher-than-expected inflation reduces the likelihood of a rapid decline in interest rates, which negatively impacts valuations of growth stocks. The technology sector is particularly vulnerable. Companies like Microsoft $MSFT, Amazon $AMZN and Google $GOOG are investing hundreds of billions of dollars in AI infrastructure with the expectation that the cost of debt will gradually decline. But if rates stay at current levels longer than expected, these investments will become more costly and returns on capital will slow. However, the current wave of demand for AI is outpacing the market, leaving many stocks at absolute highs.

Another issue is the direct impact of higher energy prices on consumers. When households pay significantly more for gasoline and electricity, they have less money to spend on other consumption. This can have a negative impact on the income of retail and consumer companies. For example, $WMT or $CSCO may feel the impact.

This effect is not yet fully evident in the data, but if high energy prices persist into the summer, the pressure on consumption could intensify significantly. On the other hand, there are companies that can benefit from the current situation, literally. US energy companies are benefiting from high oil and gas prices. The US is a net exporter of energy and in April exports of crude oil and petroleum products reached almost 13 million barrels per day. So for producers like ExxonMobil $XOM or Chevron $CVX, the current environment represents an extremely profitable period with high margins.

A strategic view

From an investor perspective, it is crucial to distinguish between temporary and structural inflationary pressures.

The current energy shock is primarily geopolitical and is not the result of an overheated domestic economy or excessively tight monetary policy. That said, if there is a diplomatic resolution to the Middle East conflict and the Strait of Hormuz opens fully, oil prices could fall relatively quickly. The problem is that no one can predict with certainty when such a solution will occur. Diplomatic negotiations are fragile and military escalation remains a real possibility. This creates a very complicated environment for the central bank and for investors. The Fed cannot adjust monetary policy on the basis of a short-term oil shock, but it also cannot ignore the risk that high energy prices will trigger a second wave of inflationary pressures.

What to watch next

• Today's release of April CPI data (2:30pm) will show whether high energy prices continue to feed through to consumer prices, or whether there is a stabilization

• Developments in diplomatic talks between the US and Iran and the possible further opening of the Strait of Hormuz

• The May FOMC meeting (end of the month) and new central bank signals on the future path of interest rates

• Consumer spending data to show how high energy prices are affecting broader consumption

• The evolution of core inflation, which will be key in determining whether the current shock remains truly temporary or begins to spread to other segments of the economy

The current inflation dynamics in the US are primarily the result of the extreme energy shock caused by the geopolitical crisis in the Middle East. March inflation came in at 3.3% y/y, well above the Fed's target, but core inflation remains relatively stable at around 2.6%. This suggests that broader price pressures are not out of control and that the current problem is concentrated in the energy sector. The latest update, however, envisages inflation approaching 4%.

The Federal Reserve is in a difficult position. It cannot ignore inflationary pressures, but it also knows that their source is geopolitical and likely to be transitory in the short term. The March projection update showed a shift toward a more cautious approach, although the estimate has so far stuck with one rate cut.

In any case, the current situation is more of a geopolitical than an economic crisis. The US economy remains fundamentally sound, the labour market is stable and domestic demand continues to grow. That is why inflation can be expected to return to a gradual decline towards the central bank's target once energy prices stabilise.

For equity investors, this is an important signal that "cheap index funds for the masses" are not just an American story — Vanguard, with USD 12 trillion under management, intends to aggressively leverage the EU's push to support retail investing, is expanding teams in Germany, Spain and France, and openly states that the goal is for Europeans to start seeing themselves as long-term investors, which could significantly increase the volume of passive flows into European equities and bonds over the next decade.

Today, it looks like reality is giving Microsoft the benefit of the doubt - on paper, it has about a 27% stake in OpenAI, which the last round of funding valued at $852 billion, putting the value of its stake at around $220-230 billion. Nadella openly said in court that "it paid off because we went out on a limb early", but at the same time the court filing reveals just how detailed Microsoft planned ahead for the extreme return on capital from one "moonshot" AI partnership.

What the original return math looked like

According to a January 2023 memorandum cited in court by the media, Microsoft $MSFT modeled in internal material from President Brad Smith that a cumulative $13 billion investment in OpenAI could yield roughly $92 billion in total returns. In a footnote, the document mentioned an expected roughly 20% annual growth rate after 2025 - i.e., the assumption that the revenue stream associated with OpenAI would roughly double in four years.

This "92 billion" target did not arise in a vacuum. Microsoft looked at OpenAI as a combination:

• direct financial return from equity stake

• indirect returns through Azure (massive cloud contract)

• and the strategic value of first access to the most advanced models

In October 2025, the partnership restructuring confirmed that Microsoft's investment in the for-profit portion of OpenAI was valued at approximately $135 billion, which was equivalent to approximately 27% share on a fully diluted basis. The current $852 billion post-money funding round in March then increases this paper gain even further - media reports are talking about around 17-18 times the original $13 billion investment.

Nadella in court: no objections from Musk, just a fast-growing "bet" that he himself initially didn't believe

Satya Nadella testified as a witness in the Musk v. Altman case, where Elon Musk claims that OpenAI has deviated from its original non-profit mission and that Microsoft played a key role in its "conversion" into a for-profit AI corporation. Nadella told the court that Musk never contacted him with concerns about Microsoft's investment in OpenAI, even at key moments in the partnership - when the collaboration was announced in 2019, when the exclusive license for GPT-3 was granted in 2020, or when a large investment package was announced in 2023.

Internal emails produced to the court show that Nadella himself was initially rather sceptical. In 2018 memos, he questioned what business sense it actually made to give OpenAI significant discounts on Azure when Musk was telling everyone at the time that the company was close to a breakthrough in AGI, but the "business case" for Microsoft was not clear. Then in 2022, he wrote in an internal email that he didn't want Microsoft to become "another IBM" while OpenAI would become the new Microsoft - a direct reference to how IBM once let go of a key value in the PC era.

Nadella confirmed in the courtroom that the investment "paid off well because we took the risk early" - and today's numbers back him up. In terms of return on investment, Microsoft is the clear winner of two decades of AI research so far.

OpenAI as the most valuable private company in history

OpenAI closed a historic $122 billion funding round in March 2026 at a post-money valuation of $852 billion, breaking all previous records for private technology companies. The round involved a number of strategic investors . including Amazon, Nvidia $NVDA, SoftBank $SFTBY and Microsoft $MSFT - with the three largest partners reportedly collectively pledging around $110 billion of the total.

For Microsoft, that means a paper multiple of around 17-18x against the 13 billion they put in. Meanwhile, back when the deal was restructured in October 2025, the companies agreed that OpenAI would commit to buying about $250 billion worth of Azure services over a longer period, turning the partnership into a giant, upfront "tacked-on" cloud contract as well.

In addition to the stake itself, Microsoft thus gained:

• A long-term cloud revenue stream

• access to the most advanced models for its own products (Copilot, Azure AI)

• and the reputational effect of being an "AI leader", which translates into valuations for other businesses

New phase of partnerships: less exclusivity, still a lot of money

In April 2026, Microsoft and OpenAI announced a revised agreement that takes the partnership into a new phase. Key points:

• Microsoft remains the primary cloud partner, but OpenAI can now serve customers through other cloud providers - exclusivity falls.

• Microsoft retains the license to OpenAI's intellectual property for models and products until 2032, but now as a non-exclusive license.

• Microsoft will no longer give OpenAI a share of revenue from its own products built on their models. Instead, payments from OpenAI towards Microsoft (for cloud and revenue share) will run until 2030, with an overall cap.

In practice, this means that the initially very tied partnership is gradually opening up - OpenAI is getting more operational freedom, while Microsoft retains a strong economic position (equity share, cloud revenue, IP licensing) even as it gives up some exclusivity. It's a signal that OpenAI now doesn't want to be seen as an extended arm of Microsoft, but rather as a standalone "AI utility" for the entire market.

Could AI be starting to eat itself from the inside?

To pour capital into AI projects just because others are doing it , he says, is to ignore the cost, return and actual impact on the business - exactly the type of behaviour that has ended in painful corrections to tech bubbles in the past.

"We're going to create technology rather than buy it"

Abel said Berkshire $BRK-B is shifting from the role of "technology buyer" to that of internal builder. In practice, that means a preference for in-house solutions - such as predictive maintenance and operations optimization on BNSF railroads or advanced analytics in the insurance industry - rather than large, expensive external AI programs or chasing "hot" AI stocks just because they're trendy.

A key phrase he repeated in various iterations, "We're not going to do AI because it's trendy." This essentially draws a line between technology as a useful tool (improving efficiency, safety, decision making) and technology as an expensive logo for a presentation that is just meant to signal "we are AI-first."

Record cash and discipline as a counterweight to AI "capex mania"

Abel's warning comes as tech giants plan to spend hundreds of billions of dollars on AI infrastructure and datacenters this year. Estimates reckon that Alphabet, Amazon, Meta and Microsoft combined will increase capital spending from roughly $410bn in 2025 to around $700bn in 2026.

On the other side of the spectrum, Berkshire is sitting on a record $397 billion in cash and short-term securities, and Abel reiterated that "capital discipline is the rule." The firm, he said, will "act decisively when the dislocation occurs and the price is right" - that is, when the hype subsides and a truly attractive risk-reward ratio emerges.

In other words, while part of the market is trying to outpace the competition with the speed and size of AI capex, Berkshire is consciously choosing the role of patient observer with ready ammunition. Abel is implicitly warning that the current environment is not ideal for capital rationality - money is too cheap for "AI projects" but too expensive for mistakes.

AI as a tool, not a label: what Abel is saying to investors

Abel's statements about AI have two levels - the internal (how Berkshire is using AI) and the external (what he's saying to tech investors):

• Inside Berkshire: AI, he says, pays off where it improves efficiency, safety or decision-making - for example, at insurers Geico or BNSF, where it's predictive maintenance, performance planning and fraud detection or deepfake risk. It's not about "big stories," it's about tangible savings and better underwriting.

• For non-Berkshire investors: the main message is that chasing AI companies in a presentation without proof of real returns is dangerous. Abel "draws a line between useful tech tools and expensive hype" - and he's saying that much of today's AI investing is more fashion than fundamentals.

This caution doesn't mean Berkshire doubts AI - on the contrary, Abel openly says that "AI is impacting every aspect of Berkshire" and that the technology will be key to the continued profitability of Geico, BNSF and the energy businesses. The difference is that AI must first demonstrate a tangible benefit, only then will it receive capital - not the other way around.

Rejecting the "momentum play" in AI stocks

For technology investors, Abel's blasting of the "momentum approach" is most important. He said at the meeting that Berkshire doesn't consider tech spending or tech stocks a game where you have to quickly jump on a fashion wave and hope it gets overpaid by even more enthusiastic buyers.

In contrast to recent years, when the "Magnificent Seven" attracted huge amounts of capital purely on the "AI-first" story of the future, Abel is telling shareholders that at Berkshire, the decision is still the same: the ability of technology to generate sustainable cash flow, not the number of times the word "AI" appears in the earnings call transcript.

His stance is a particularly sharp contrast to the aggressive tone of many tech CEOs who frame AI as "the new electricity" and imply that those who don't invest fully today won't exist tomorrow. Instead, Abel argues that the biggest risk today is not to ignore AI, but to blindly adopt fashionable investment theses without regard to cost or return.

What Abel's warning implies for technology investors

Three practical lessons can be derived from Abel's statements for anyone with a portfolio overloaded with AI names:

• AI is not a self-justifying investment: the fact that a company is talking about AI or increasing AI capex says nothing about future returns. What matters is whether the technology improves margins, increases productivity or opens up new, monetisable markets.

• Price and timing still matter: with nearly $400 billion in cash, Berkshire is waiting for a "dislocation" - a period when the hype cools and quality assets start selling at a discount, not a premium. If the world's biggest "value machine" doesn't want to buy AI stories at current prices, that in itself is a signal.

• Technology vs. hype: investors should be able to distinguish between tangible use-cases that generate measurable cash flow and corporate "AI statements" in presentations. Abel says bluntly: technology should be an add-on to the business, not a fashion accessory for shareholders.

The energy sector has undergone a significant transformation in recent years. After a period of cheap oil and low margins, which forced many companies into aggressive cost-cutting measures, came a commodity super-cycle fuelled by geopolitical tensions and rising global demand. Companies that managed to maintain financial discipline during the difficult years are now in an exceptionally strong position. The combination of high oil prices, stable production and low debt is allowing them to generate record free cash flows and return capital to shareholders at a pace that was not possible in the past.

It is in this context that low debt becomes a key competitive advantage. Companies with a clean balance sheet do not need to panic about servicing debt in a volatile commodity price environment and can focus on maximising shareholder value. At the same time, they have greater flexibility to respond to investment opportunities or survive a potential oil price downturn without having to cancel dividends or sell assets on unfavourable terms.

Shell $SHEL

Shell is one of the world's largest integrated oil companies and its current financial position reflects years of disciplined capital allocation and gradual balance sheet lightening. Following asset portfolio divestments, cost base optimization and a strong period of price appreciation, the company has been able to significantly reduce debt. Today, the company's net debt ($75 billion) represents only a small fraction of its total market capitalization ($236 billion), making Shell one of the most stable mega-cap energy companies.

A key factor in this transformation has been management's decision to prioritize return on capital over volume growth. Rather than aggressively expanding into new projects with uncertain returns, Shell focused on highly profitable segments of its portfolio and actively sold assets that were not generating sufficient value. While this approach led to a decline in overall production, it significantly improved cash flow quality and capital efficiency.

Dividends and buybacks

A strong balance sheet enables Shell to return capital to shareholders at a rate that is among the highest in the sector. The company combines a stable dividend with an aggressive share buyback programme. This mix is made possible by low debt, which gives management the flexibility to make decisions as oil prices and business needs evolve.

This strategy also has the advantage of greater resilience to commodity price declines. If the price of oil were to fall, Shell would have a sufficient financial cushion to maintain the dividend without having to initiate new debt. It is the stability of the dividend that has been a critical weakness for the company in the past, which management has consistently corrected in recent years.

Energy transformation and capital discipline

Shell is investing in the transition to low-carbon energy sources, while maintaining strict discipline in capital expenditure. Unlike some competitors who have invested tens of billions in renewables with unclear returns, Shell allocates capital more selectively and requires clear financial metrics even for "green" projects. This approach helps it balance the pressure for ESG transformation with shareholder demands for returns.

ExxonMobil $XOM

ExxonMobil has long been one of the most disciplined oil companies in terms of balance sheet management. The company has been able to significantly reduce debt over the past few years despite massive acquisitions in the U.S. shale segment. The company's net debt (USD 48 billion) is now at historically low levels relative to the size of its cash flow, which provides the company with significant strategic flexibility.

Key to this position is an extremely efficient operating model. ExxonMobil operates at one of the lowest costs per barrel in the industry due to its technological edge, portfolio size, and vertical integration from upstream to refining and chemicals. It is this integration that allows the company to generate stable margins even in a volatile oil price environment.

Permian Basin and growth profile

ExxonMobil's exposure to the Permian Basin, the most productive oil region in the US, plays a significant role in its current strength. The company operates one of the largest portfolios of assets here and benefits from synergies between projects. The combination of a low cost base and growing production creates a strong cash flow profile that allows the company to pay down debt while increasing returns on capital to shareholders.

Unlike some of its competitors who operate with high cost or smaller portfolios, ExxonMobil has the advantage of scale and technological know-how. This translates into lower costs per barrel and higher profitability for individual projects.

Capital allocation and value

ExxonMobil combines a steady, growing dividend, which the company has paid for over 43 years, with growth in buybacks. The company maintains strict discipline in that it only invests in projects with clear returns and returns the remaining capital to shareholders. This approach has proven to be very effective in recent years, particularly in the context of strong oil prices and cash flow stability.

In addition, low debt means that the company does not face pressure to cut capital expenditure even in the event of a commodity price downturn. This gives it a competitive advantage over more indebted players who would have to react quickly with savings in such a situation.

Chevron $CVX

Chevron has completed several significant acquisitions in recent years, including the takeover of Hess, which significantly expanded the company's portfolio of highly profitable offshore projects in Guyana. Despite this, the company has managed to keep debt at a manageable level through strong cash flow and disciplined integration of acquisitions.

The company's net debt, at $45 billion, is well below what the market would consider risky. Moreover, the company was able to sell a number of non-strategic assets during the Hess integration and use the proceeds to strengthen its balance sheet.

Guyana and the high quality portfolio

Chevron's key assets are offshore projects in Guyana, where the firm operates alongside ExxonMobil $XOM. These fields are among the lowest cost and most productive oil projects in the world, with costs well below the global average. It is these assets that allow Chevron to generate strong margins even in a lower oil price environment.

A high quality portfolio also means less need for capital expenditures to maintain production. Unlike shale projects, which require continuous investment in new wells, Guyana's offshore projects provide stable production with minimal additional costs once construction is complete.

Dividend aristocracy

Chevron is one of the dividend aristocrats with more than three decades of uninterrupted dividend growth. This position is possible because of its strong balance sheet and stable cash flow profile. The company has been able to sustain the dividend even during challenging periods of low oil prices, demonstrating the financial robustness of its model.

Moreover, the low debt provides management with room to continue growing the dividend in the coming years without having to compromise financial stability. Thus, the combination of growing production in Guyana and stable oil prices creates a favourable environment for the continuation of the dividend policy.

Devon Energy $DVN

Devon Energy presents a different case than the mega-cap integrated companies. It is a pure-play U.S. producer focused on shale oil and gas projects that has transformed itself over the past few years from a leveraged growth player to a company with strong cash flow and minimal debt.

A key milestone has been the introduction of a variable dividend, which allows the company to return most of its free cash flow to shareholders over and above a fixed base dividend. This model works precisely because of the low level of debt, as the firm does not have to prioritise debt repayment and can focus on maximising return on capital.

Delaware Basin and operational efficiency

Devon operates primarily in the Delaware Basin, part of the larger Permian region, where it achieves some of the lowest costs per barrel in the U.S. shale industry. The company benefits from a technological edge, efficient infrastructure and optimized drilling operations.

Low costs are critical for shale producers because, unlike conventional projects, they require continuous investment in new wells. Devon has been able to reduce the capital intensity of its portfolio through efficiencies, allowing it to generate strong free cash flow even at moderate oil prices.

Return on capital as a priority

Devon's management has clearly signalled that the priority is not volume growth but efficient capital allocation and returns to shareholders. This approach is reflected in both low debt levels and an aggressive dividend and buyback policy.

The company has been able to return tens of billions of dollars to shareholders over the past few years through variable dividends and buybacks, made possible precisely because of its low cost base and lack of pressure to repay debt.

Equinor $EQNR

Equinor benefits from its position in the Norwegian energy sector, where it has access to highly profitable offshore projects in the North Sea. The company operates with low debt through a combination of stable cash flows from oil and gas production and disciplined capital allocation.

In addition, the Norwegian market provides Equinor with a structural advantage in the form of a stable regulatory environment and access to low-cost, long-life projects. It is this combination that allows the company to generate predictable cash flow without the need for aggressive debt.

Gas as a strategic asset

Equinor is one of Europe's largest natural gas producers and its position has strengthened significantly following the energy crisis triggered by the Russian invasion of Ukraine. European demand for Norwegian gas remains strong and the company benefits from long-term contracts with premium pricing compared to the global LNG market.

In addition, the gas business provides Equinor with a more stable cash flow profile than pure oil projects, as the European gas market operates on long-term contracts with fixed prices or indexed to the oil basket.

Energy transformation

Equinor is one of the leaders in offshore wind energy, investing in projects in the North Sea and off the US coast. Unlike some of its competitors, however, the company takes a disciplined approach to these investments and does not deploy capital at the expense of financial stability.

Low debt allows the firm to experiment with new energy technologies without risk to its core dividend policy or investment in conventional production. This balance is key to maintaining shareholder support in the context of the energy transition.

TotalEnergies $TTE

TotalEnergies is one of Europe's energy giants with the most diversified portfolio. The company combines traditional oil and gas production with refineries, chemical plants, renewables and energy services. This diversification helps stabilize cash flow and reduces dependence on volatility in individual commodity prices.

Disciplined capital allocation is key to low debt levels. TotalEnergies invests only in projects with clear returns and actively sells assets that do not generate sufficient value. This approach is reflected in a stable balance sheet despite massive investments in energy transformation.

LNG as a growth engine

A significant part of TotalEnergies' portfolio consists of LNG projects. The company is one of the largest global players in the LNG market and is benefiting from growing demand in Asia and Europe. In addition, LNG projects provide long-term cash flow through fixed-price contracts.

Exposure to LNG also protects the firm from short-term oil price volatility as the gas market responds to other fundamental factors. This diversification is one of the reasons TotalEnergies is able to maintain a stable dividend even in challenging periods.

Return on capital and ESG transformation

TotalEnergies invests aggressively in renewable energy and low-carbon technologies, while maintaining strict financial discipline. The company combines investments in solar and wind projects with continued oil and gas production, allowing it to finance the transformation from its own resources without having to raise debt.

Low debt also gives the firm the flexibility to respond to the changing regulatory environment in Europe and invest in new technologies without pressure on the underlying dividend policy.

Cameco $CCJ

Cameco is the West's largest uranium producer and its position has strengthened significantly in recent years due to a resurgence of interest in nuclear power. The company operates with minimal debt and has benefited from rising uranium prices resulting from a long-term structural deficit in the market.

A key factor is the lack of new mining capacity. A number of uranium mines have been closed in the past due to low prices and it takes years to get them back on stream. Cameco therefore operates in an environment where demand far outstrips supply and uranium prices are rising.

Long-term contracts and price stability

Unlike traditional commodities, the uranium market operates primarily on the basis of long-term contracts between producers and nuclear power plant operators. Cameco has hedged most of its production through fixed-price or spot market indexed contracts.

This model provides the company with a predictable cash flow profile and reduces exposure to short-term volatility. The combination of stable revenue and minimal debt allows Cameco to invest in expanding production without the need for aggressive debt financing.

Nuclear renaissance and long-term outlook

The growing interest in nuclear power as a low-carbon baseload resource creates a very favorable long-term environment for Cameco. A number of countries including the US, UK and France have announced plans to build new reactors, which will require a stable supply of uranium for the next few decades.

Cameco is one of the few producers able to ensure this supply in the required volume and quality. Moreover, its low debt allows the company to invest in new projects and expand capacity without risking its financial stability.

Comparison of financial metrics of energy companies

Strategic view

The group of seven energy companies with low debt represents the strongest segment of the industry in terms of financial robustness. These companies share several characteristics that differentiate them from their more leveraged competitors and create a structural advantage.

1. Disciplined capital allocation: all of these companies have gone through a period in recent years where they have had to adjust to low commodity prices and learn to operate more efficiently. The result is a culture that prioritizes return on capital over volume growth and requires clear financial metrics for every investment.

2. Focus on high-quality assets: Whether it's offshore projects in Guyana, the Norwegian gas industry or low-cost shale projects, all of these firms operate with portfolios that generate above-average margins. It is the quality of their assets that allows them to pay down debt and return capital to shareholders even in an environment of moderate commodity prices.

3. Diversification of revenue sources: integrated companies benefit from a combination of production, refining and chemicals, while pure producers such as Devon $DVN or Cameco $CCJ have the advantage of a narrow focus on low-cost segments. Both are models that generate stable cash flow without the need for excessive debt.

Low debt represents a significant competitive advantage in the energy sector, which is particularly evident in a volatile commodity price environment. All 7 companies have been able to combine strong cash flow with disciplined capital allocation over the past few years and have built balance sheets that provide them with maximum strategic flexibility.

While leveraged companies have to cut investments, cancel dividends or sell assets in challenging periods, firms with strong balance sheets can continue to make capital returns and use any price declines to acquire quality assets from competitors. In a cyclical industry such as energy, this flexibility is key to long-term value creation.

The fundamental difference is that this company is built on a B2B marketplace model for bulk goods and an infrastructure of 42 fulfillment centers at 13 key ports, allowing it to combine platform growth with a logistics advantage. In an environment where players like Wayfair are generating billions of dollars in revenue but are still in the red, here we see a combination of dynamic growth, profitability, a strong debt-free balance sheet and a valuation that more closely resembles a mature "value stock" than a fast-growing technology platform.

Top points of analysis

• A B2B marketplace for heavy goods that combines an Alibaba-style platform with its own logistics network of 42 warehouses at 13 ports - a business model that competitors cannot yet easily copy.

• Revenue growth of 65% per year is not just "more packages" but the result of the platform pulling traditional distribution chains online and handling all international logistics for customers, from factory to local warehouse.

• GMV and the number of active buyers are growing faster than sales alone, showing a strong network effect - each new side of the marketplace adds value to the other and improves monetization.

• Net margins of around 11% and FCF yields of over 12% make this platform a rare exception in e-commerce, where most players of similar size are still burning capital.

• A direct comparison with Wayfair shows the fundamental difference: a competitor with ten times revenue is generating hundreds of millions in losses, while this company is steadily profiting on its lower revenue base.

• Cash in the hundreds of millions of dollars gives management the ability to choose the pace of growth and buybacks without pressure from creditors.

• Despite this, the stock trades at a P/E of around 12 and an EV/EBITDA of around 12, with a conservative fair price of around $52 implying an upside of over 29.7% - the market doesn't believe the story as much as the numbers so far.

Company performance

GigaCloud Technology $GCT is a B2B marketplace and logistics platform focused on high-volume goods, primarily furniture and home appliances. The company connects Asian manufacturers with distributors and retailers in the US, Europe and other Asian regions, building on a hybrid model that combines an Alibaba-style digital marketplace with advanced 3PL services.

The business model is built to break down the classic barriers of international trade in heavy goods - separate solutions for transportation, customs clearance, warehousing and distribution. GigaCloud offers an end-to-end, one-price solution: the buyer selects the manufacturer and product on the platform, places an order, and the platform arranges transportation from the factory, customs clearance, warehousing at its centers, and final distribution to the local buyer. Since these are primarily B2B transactions, orders are larger and decision-making is less dependent on mass marketing, which has a direct impact on margins and cash flow.

Business and segments

The core of the business is the B2B marketplace for large parcels, around which the logistics infrastructure is built:

• 42 fulfillment centers on three continents with a total area of 10.5 million square feet

• locations at 13 key ports in Asia, North America and Europe

• Combination of marketplace fees, logistics services and complementary solutions for trading partners

The platform specializes in a segment where the traditional e-commerce model runs into limits: high volumes, high shipping costs, complex clearance, and the need to plan inventory for long periods. GigaCloud addresses these challenges by consolidating shipments across buyers and optimizing the use of container space, which reduces unit costs and accelerates turnaround.

Revenues grow from $414 million in 2010 to $414 million in 2012. USD 414 billion in 2021 to USD 1,161 billion in 2024, a CAGR of over 40% and 65% growth in the last year. Growth is not driven by just one segment - the company's own retail channels (white-label for large buyers) and logistics services are growing alongside the core marketplace division, but the marketplace and logistics backbone are still the main source of value.

Market and addressable potential

GigaCloud operates in a relatively specific niche: international B2B trade in high-volume goods. The overall market for furniture and large home appliances in the US and Europe is itself huge, but much of this volume still flows through traditional distribution channels (importers, distributors, local warehouses) with minimal digitization.

Structural forces that play into the hands of the company:

• Gradual digitization of B2B procurement - large and medium-sized customers are moving to online platforms.

• pressure to optimise working capital - retailers and distributors want to hold less inventory and are shifting some logistics and financing to platforms

• search for alternatives to expensive in-house warehouses and fleets

On the other hand, the market is not immune to the cycle - furniture and major appliances are typically deferred purchases that clients cut back on in a recession, which can drive down GMV and sales in the short term, even if the model remains workable.

Competition and market position

GigaCloud does not have a direct "clone" today, but operates in a world where there is some overlap with:

• B2C players such as Wayfair $W - who, while serving furniture and home goods, focus on the end customer and bear the costs of marketing, warehousing and often some logistics

• Horizontal B2B platforms like Alibaba $BABA or Amazon Business $AMZN - while these connect suppliers and buyers, they are not as deeply integrated across the logistics vertical specifically for large parcels

Wayfair is a good contrast: revenues of around $11.9 billion vs. $1.16 billion for GigaCloud, but a net loss of $492 million. USD 492 million for Wayfair vs. This shows that the end-customer-focused B2C model has completely different economics - high marketing spend, frequent returns, sensitivity to discount promotions.

GigaCloud is profiling itself more as an infrastructure player - less visible to the end consumer, but key to B2B flow of goods. Its competitive advantage is a combination of:

• a dedicated logistics network for large parcels

• a marketplace that feeds this network

• and cross-border trade knowledge in the furniture and appliance segment

The weakness, on the other hand, is size and awareness: against Amazon or Alibaba, the company is small, and if these giants decide to target the same niche, they can force pressure on prices and services.

Management and strategy

The firm is led by CEO Lei Wu, who has been behind the strategic transformation of the platform from a cleaner marketplace towards a fully integrated B2B solution for large packages. The strategy over the past few years has been consistent:

• Rapid GMV and revenue growth

• simultaneous building of logistics infrastructure (fulfilment centres at ports)

• Disciplined monetisation (maintaining double-digit net margins)

• and gradual use of cash and FCF for acquisitions and buybacks

The acquisition of New Classic Home Furnishings is an example of how management thinks about growth: it is not just about adding volume, but expanding the product portfolio and supplier relationships in the core segment (furniture), which can be further "stretched" through the existing logistics network. A share buyback programme of 46 million euros will be carried out in the future. In addition, the USD 46 million repurchase program signals that management sees the current valuation as attractive for reinvestment of free cash.

Financial performance

A look at the last four years shows a company in transition from a "small player" to a mid-sized, fast-growing platform:

• Revenues: 414 million. USD 490 million (2021) → USD 490 million (2021). USD 490 million (2022, +18.3%) → USD 704 million (2022, +18.3%) → USD 704 million (2022, +18.3%). USD 17070 (2023, +43.6%) → USD 1.161 billion (2024, +65.0%)

• Gross profit. USD → USD 83.1 million (20/20/20). USD → USD 188.6 million. USD 285.2 million (20/2020). USD

• Operating profit. USD → USD 35.0 million. USD → USD 110.1 million. USD → USD 130.6 million. USD

Revenue growth is accelerating, but more importantly, gross profit is growing faster than revenue - from triple-digit increases in 2023 to 51% in 2024 - and operating profit maintains a double-digit growth rate even with massive investments in opex (which nearly doubled between 2023 and 2024). This suggests that the company is investing in growth (marketing, logistics, technology) while making sure that these investments translate into higher GMV and margins.

Net profit is growing from 23.9 million in 2010 to 23.9 million in 2010. USD 94.1 million in 2022. USD 125.8 million in 2023 and USD 125.8 million in 2023. USD in 2024, EPS from USD 0.60 to USD 2.31 and USD 3.06. This is a combination of organic growth, margin improvement and a relatively stable share count (slightly increasing diluted shares of around 41m). So this is real earnings per share growth, not just accounting one-offs or buybacks.

Cash flow and capital discipline

A strong income statement would be of little significance in an e-commerce player if it did not translate into cash. But here we see it:

• Operating cash flow for the TTM period of around $190-200m. USD

• P/CF roughly 8.9×

• FCF margin of over 14% and FCF yield of around 12.1% against a market cap of around US$1.6bn.

That's a combination we hardly see in a fast-growing tech company - most peers are either on the edge of EBIT breakeven or FCF burn at this stage of growth. GigaCloud can afford to:

• Invest in new infrastructure and M&A

• finance everything largely from its own resources

• and still launch a buyback program without having to significantly worsen the balance sheet

From a capital discipline perspective, it's a conservative approach: no aggressive debt-hopping, no "all-in" marketing campaigns at the expense of margin, rather managed scaling where one dollar of capex and opex has a clear return in revenue and GMV.

Balance sheet and debt

The balance sheet is very solid by growth title proportions:

• cash and short-term investments of around $260-350m. USD

• current ratio 2.02, quick ratio and cash ratio around 1.11

• Debt-to-equity around 0.97, net debt/EBITDA 0.62, Altman Z around 3.4

Formally there is debt (some leases and accounts payable), but in practice net debt is very low against cash flow and assets generated.

This means:

• no immediate refinancing risk

• no pressure from creditors to restrict growth

• the ability to use any market correction (including the equity one) to make more aggressive buybacks or acquisitions.

In the context of a volatile sector (e-commerce, China/US trade flow, furniture cyclicality), this balance sheet is a real competitive advantage - it allows management to react proactively, not defensively.

Valuation

From a valuation perspective, we see a disconnect here between fundamentals and multiples:

• P/E 11.9×, forward P/E 11.3×.

• EV/EBITDA 11.9×

• P/S 1.27×, P/B 3.36×, P/FCF 8.94×

For a company with revenue growth of 58-65% per year, net margins of 10-11% and ROE of over 30%, this is a valuation that an investor would expect to see more in a mature, slow-growth cyclical business. Yet a conservative fair value of around $52 (DCF and conservative growth assumptions of ~17%) implies only 23% upside - a scenario where the market starts to perceive that this combination of growth and profitability is not a one-off anomaly.

For today's valuation to be "cheap" in hindsight, the company must deliver:

• Stabilization of revenue growth at least in the 15-20% per annum range for the next few years

• maintaining a net margin of around 10%

• maintaining a strong FCF and balance sheet without significant debt

If growth slows significantly below 10% and margins come under pressure (competition, weaker cycle), current multiples could look normal or even slightly expensive. So the important question is: is today's growth structural (network effects, B2B shift to online) or cyclical (post-covid, inventory overhang)?

Growth strategy and catalysts

In the short term, the growth thesis stands at:

• Continued expansion of GMV and number of active buyers/sellers.

• Integration of New Classic Home Furnishings and expansion of the offer in the furniture segment

• geographic expansion within the US, Europe and Asia

• and potential expansion of logistics infrastructure to other key hubs

The outlook for the next quarters (Q2 and beyond) with expected sales growth and margin maintenance shows that management itself is counting on further growth. Long-term catalysts are:

• further strengthening of the network effect - the more buyers and sellers, the greater the barrier for new competitors

• potential partnerships with large retailers who can use the platform as a white-label back-end

• and possible gradual expansion into other wholesale categories beyond furniture and appliances

Risks

• Geopolitics and tariffs: high exposure to the flow of goods between Asia (manufacturers) and the US/EU (buyers) means vulnerability to tariffs, trade wars and regulatory restrictions.

• Segment cyclicality: furniture and large appliances are cyclical - in a recession, companies and households postpone investments, which can depress GMV and sales in the short term.

• Competitive pressure: potential entry or increased activity by Amazon Business, Alibaba or other players in the B2B segment may bring price wars or pressures on margins and service.

• Short history and controversy: short-seller reports (Culper, Grizzly) have called into question accounting and earnings quality; management has dismissed them and referred to audits, but a portion of the market remains skeptical, reflected in short interest of around 6%.

• Valuation risk to growth: if today's 65% sales growth turns out to be a one-time overstatement and long-term growth stabilizes much lower, the market may reprice valuation downward even while maintaining profitability.

Investment scenarios

Optimistic scenario (3-4 years)

• Revenues grow 25-30% annually, GMV continues to accelerate, margins remain near current levels.

• FCF grows steadily, FCF yield remains around 8-10% even at higher share price.

• Market is reassessing the title towards growth platforms, P/E moving into the 18-20x range.

• With EPS shifting into the $4.0-4.5 range, this would imply a price range of around $70-80.

A realistic scenario

• Revenue growth normalizes to 15-20% annually, margins remain around 9-11%.

• FCF continues to grow, but at a slower pace, management combines investments and buybacks.

• P/E is in the 14-16x range, implying a price range of $50-60 at EPS of $3.5-3.8.

• That's close to today's fair value estimates (about $52), so decent but not "explosive" upside.

Pessimistic scenario

• Revenue growth falls below 10% per year, margins fall to 7-8% under competitive pressure and a weaker cycle.

• FCF stagnates or declines slightly, investors begin to view the title as cyclical, not growth.

• P/E compresses into the 8-10x range, with EPS around $3, this implies a price range of $24-30.

• That's roughly a 25-40% downside to current levels.

What to take away from the article

• This company is a B2B marketplace and logistics platform for high-volume goods (furniture, large appliances) that combines a marketplace model with the physical infrastructure of 42 fulfillment centers at key ports.

• Financially, it is a combination of 65% revenue growth, net margin of around 11%, ROE of over 30% and FCF yield of around 12% - a profile that is exceptional in the e-commerce space and more akin to a well-managed "asset-light" infrastructure business.

• Still, the stock trades at a P/E of around 12 and EV/EBITDA below 12, with conservatively estimated upside of around 29% to a fair value of $52 and the potential for a higher rerating in an optimistic scenario.

• The balance sheet with no significant debt, high cash and strong FCF significantly reduce the risk of "running out of cash" and give management great flexibility to fund further expansion and buybacks.

• The main risks lie in geopolitics, the cyclical nature of the furniture and large-goods segment, the potential entry of large players into the same niche, and how the market will evaluate the controversy surrounding short-seller reports over the long term; in a portfolio, this stock makes sense as a growth but relatively profitable bet in the e-commerce portion, not as a defensive dividend title.

But at the same time, Netflix is aggressively shifting the center of gravity of the business to ad-supported plans where the true value of the customer is measured primarily by screen time. For very active users, the combination of subscription and advertising can already generate higher monthly revenues than the most expensive ad-free plan, fundamentally changing the economics of streaming and the incentives of the platform itself.

Netflix: $20 for standard and advertising as an engine

In March, Netflix $NFLX raised the price of the standard ad-free plan from $17.99 to $19.99 per month, pushed the premium plan to $26.99, and made the ad-supported plan more expensive at $8.99. According to CNBC, this is the moment when the economics of streaming start to look strikingly similar to traditional cable TV - a cheaper entry-level plan with ads and expensive packages for those who want a "pure" experience.

EDO's analysis shows that a user on an ad-supported plan can generate a total of about $20 a month after about 28-29 hours of viewing - the same as a standard plan without ads costs. With around 41 hours of viewing per month, the total monthly revenue per user is close to $25, more than what Netflix collects for the standard ad-free plan. The model assumes a CPM of around $43 and about nine 30-second ads per hour. EDO's Kevin Krim describes this as a "double payoff": if a user on an ad-free plan is actively watching content and ads, they can be as valuable, or more valuable, to Netflix than a customer on an ad-free plan.

Advertising revenue is heading towards 3 billion and beyond

Netflix's ad business is no longer an add-on. In its earnings report, the company said it expects ad revenue to roughly double to about $3 billion in 2026, up from about $1.5 billion in 2025. In the first quarter of 2026, the company's total revenue grew 16% year-over-year, on a combination of higher prices, growth in its member base and a larger contribution from advertising.

According to data from The Current's presentation and analysis, Netflix has around 90-100 million monthly active users on an ad plan globally, and in countries where the option is available, ad-tier already accounts for more than 60% of new sign-ups. So in markets where advertising is running, it is the cheaper, ad-supported option that most new customers are choosing - the exact opposite of the narrative from the days when streaming was seen as an escape from advertising.

In the short term, this means a new growth engine for Netflix: the company benefits from both a higher average subscription price and the monetisation of viewing time through advertising. In the long term, however, it rewrites the definition of a "valuable customer" - it is no longer the one who pays the most, but the one who spends the most time on the platform.

Competition is getting more expensive and streaming is accelerating

Netflix is not alone in "streamflation". Antenna's data shows that between the end of 2022 and 2024, the average price of paid streaming services without ads rose by roughly 23%, and by roughly 25% for ad-supported plans. According to an estimate based on Bureau of Labor Statistics data, the "subscription and rental of video and video games" categories in the US rose nearly 20% year-over-year in December, confirming that streaming is among the most inflation-hit areas of entertainment.

The big players have continually raised prices across the board: Disney $DIS raised prices on both Disney+ and Hulu, HBO Max moved up its standard plan, YouTube TV $GOOG raised its monthly fee several times. In practice, this means that a bundle of five major services that only a few years ago came out at the level of cheaper cable often costs significantly more today - and the gap against linear TV is thinning fast.

Streaming is returning to cable - only digitally

The original promise of streaming was: fewer ads, more freedom, lower prices. But according to analyses by CNBC and Military.com, that's rapidly changing - ad-free viewing is becoming a premium class privilege from the former standard, while the default for the masses is a cheap ad-supported plan.

From the platforms' perspective, it makes sense to judge a user's value by a combination of subscription and ad revenue. A highly active user on a cheap ad plan can bring in more than someone who pays $20-25 per month but watches little. This moves streaming closer to the old cable model, where "eyeballs and time" was the main metric - the only difference is that today platforms have much more detailed first-party data and finer ad targeting.

So the biggest structural change is not the price increases themselves, but the reframing of product logic:

• Ad fare is becoming a core input

• the ad-free experience is a premium add-on

• viewing time is converted into specific ad revenue and users are segmented by profitability, not by tariff price tag

From the viewer's perspective, this means that the "world after cable" is becoming dangerously similar to what they once wanted to escape from - only instead of a set-top box, they have a smart TV in their hand, and instead of one cable bill, they have several smaller collections from streaming services.

Still, Goldman Sachs warns that "the bar for the stock's performance is relatively high" as the market is already pricing in a very ambitious future growth scenario.

What exactly is Goldman Sachs changing in its estimates

Goldman Sachs $GSanalyst James Schneider raised his earnings per share estimates for Nvidia $NVDA by an average of 12% and maintains a "Buy" recommendation with a $250 price target. This target implies roughly 20% potential upside from current levels, while the consensus of 42 analysts estimates an average target price of around $274.

For the first quarter, Goldman expects revenue of $80.05 billion, about $2 billion above the consensus of about $78.3 billion, and adjusted earnings per share of $1.86 - about 7% above the market estimate of $1.74. Schneider also raised estimates for calendar years 2026 and 2027 so that they are now about 14% and 34% above the Wall Street average, respectively, showing that Goldman believes in a longer duration AI investment cycle.

For the second quarter, Goldman is modeling revenue of about $87.68 billion, about 3% above consensus, anticipating continued growth in demand for the Blackwell and Grace Blackwell platforms. The bank is basing this on comments from TSMC and SK hynix, among others, about strong demand and aggressive capex plans from large US cloud players.

Datacenters as the key and the "trillion-dollar" outlook

Nvidia's $NVDA today stands virtually entirely on datacenters. In the last fiscal year, datacenter revenue accounted for over 90% of the company's total revenue, marking a leapfrog transformation from the company's erstwhile "GPU for games" to a backbone infrastructure for generative AI. Internal presentations and market commentary speak of a "trillion-dollar" outlook for cumulative datacenter revenue in the coming years, built on continued investments by hyperscalers, large model houses and sovereign AI programs of the states.

Importantly, this long-term outlook doesn't yet include the full spectrum of new products - notably the Ruby Ultra generation, the new Vera CPU racks, and specialized inferencing configurations that should expand the addressable market toward a broader range of workloads. This suggests that Nvidia can still grow not only "in depth" (more computing power per customer) but also "in breadth" (new system types and new customers).

Margins: superior but sensitive to cost and mix

Goldman Sachs estimates that Nvidia should maintain a gross margin of around 75% in 2026, an extremely high level for the semiconductor business. In the short term, however, margins are being squeezed by more expensive HBM memories and the new cost structure of platforms that integrate multiple components - such as Blackwell and the future Ruby.

Meanwhile, the company is operating from a position of strength: it enters the results with a net cash position of around $51.1 billion, a full-year gross margin of around 71.1% and a 12-month EBIT margin of around 60.4%. In addition, Blackwell generation analyses show an approximate tenfold improvement in cost efficiency per unit of power versus the previous generation, leaving Nvidia room to absorb higher nominal component costs through a better power/watt/dollar ratio.

New opportunities: CPU seagulls and the emergence of AI agents

In addition to traditional GPU systems, Nvidia plans to start shipping pure CPU-based racks in the second half of 2026 to target specific workload types - from AI agents to traditional cloud workloads where GPUs don't make economic sense. This opens up another revenue tier for the company and moves it closer to a full-fledged system platform where customers can cover most computing needs within a single ecosystem.

Goldman will be particularly watchful during the earnings conference call for comments on the adoption of AI agents and the impact on CPU-based systems. This is because in addition to hyperscalers, customers outside of this segment are also gaining traction - for example, OpenAI, Anthropic and sovereign state AI programs that buy large blocks of infrastructure and may create new demand and contracting models over time.

But the competition is not sleeping: custom ASIC solutions from large cloud companies, in-house chips, or alternative AI accelerator vendors are topics that investors will be watching closely in Q&A. The key question is whether Nvidia will maintain its technology lead and software lock-in (CUDA, libraries, ecosystem), or whether the first more visible signs of competition will start to appear in the numbers.

Awards

In his note, Schneider stresses that he expects a "beat-and-raise" quarter, but also reminds that the bar for the stock to significantly outperform the market after earnings is very high. Since the March low, the title has added roughly 28% and is currently trading around $210-215 per share. Options markets are pricing in an implied move of at least around 10% in either direction, reflecting a combination of high expectations and uncertainty around the next phase of the AI cycle.

At a P/E of around 43-44 (TTM), Nvidia is trading lower than in some past "euphoric" periods - the 10-year average P/E is around 50-55, the five-year even higher. From one perspective, this makes the stock look cheaper than in the past; from another, it's still a very high multiple that requires the company to continue to deliver high revenue and earnings growth and maintain its dominant position in AI infrastructure.

On the recommendation side, there is extraordinary consensus: of the 42 analysts following the title, 40 recommend buying the stock, one holds and one sells, creating a very strong "Strong Buy" consensus. The consensus target price of around $274 implies around 30% potential, but the market has already priced in much of the AI story - hence Goldman's talk of a "high bar" for further upside revaluation.

When people look at Berkshire, many focus on just a couple of things: Buffett, Apple, and the equity portfolio.

But in my view, Berkshire is much more than just “a holding with Apple shares.”

If we look at the company through a simple sum-of-the-parts lens, the numbers look very interesting.

The current market cap of BRK.B is roughly 1 trillion USD.

Of that, Berkshire holds approximately:

💵 391 billion USD in cash and T-bills

📈 288 billion USD in the equity portfolio

🏢 20 billion USD in other equity investments

Together that’s almost 699 billion USD in financial assets.

And then we have Berkshire’s operating businesses themselves:

🚗 Insurance / insurance franchise: approximately 40–60 billion USD

🚆 BNSF Railway: approximately 100–120 billion USD

⚡ Berkshire Hathaway Energy: approximately 55–75 billion USD

🏭 Manufacturing, Service & Retailing: approximately 150–180 billion USD

Conservatively, I estimate the operating businesses at roughly 345–435 billion USD.

When we put it all together, we get an estimated intrinsic value for Berkshire of about:

💎 1.04–1.13 trillion USD

So with a market cap around 1 trillion USD, Berkshire doesn’t strike me as extremely cheap, but rather a fair to mildly attractive value position.

And that’s, in my opinion, the point.

Recently Berkshire hasn’t outperformed the S&P 500. The market was driven mainly by big tech firms, the AI theme, and growth stocks. Berkshire, by contrast, is slower, more conservative, and less “sexy.”

Yet that’s exactly why it can be interesting today.

Not every position in a portfolio has to be a rocket. Some positions should protect capital, reduce volatility, and give the portfolio stability when the hype flips.

For me, Berkshire is interesting mainly as:

✅ a safer value position

✅ diversification outside tech

✅ a combination of cash, insurance, rail, energy, and industry

✅ a company with enormous financial strength

✅ a potential stabilizer for a portfolio

Historically Berkshire has been able to create extreme value. From 1965 to 2025, Berkshire had a CAGR of about 19.7%, while the S&P 500 was around 10.5%.

Of course, Berkshire is huge today and such returns are unlikely to repeat. But as a stable, diversified position outside the tech sector, it makes a lot of sense to me.

To me, Berkshire is more of a financial fortress than a rocket.

Not the sexiest stock on the market, but maybe that’s exactly why I like it.

This is not investment advice, just my view on Berkshire Hathaway’s valuation.

Yesterday $MELI released quarterly results, after which the stock initially dropped.

Personally, I view this reaction as short-term and significantly exaggerated. I used the dip to increase my position at a price of 1,636 USD. My total exposure to $MELI now represents approximately 2.2% of my portfolio, with an average purchase price around 1,700 USD.

My target price remains 2,500 USD.

Results vs. expectations:

The numbers themselves were, in my view, very solid. Revenues reached approximately 6.05 billion USD, which beat expectations of around 5.89 billion USD. EPS came in at approximately 9.74 USD, significantly above the consensus of around 8.52 USD.

The company also continued to show strong growth:

- GMV (Gross Merchandise Volume) grew year-over-year by approximately 17%

- Payment volume through Mercado Pago grew year-over-year by about 38%

Fundamentally, this was not a weak quarter. The market's negative reaction, in my view, was mainly caused by concerns about:

- temporarily weaker margins,

- higher operating costs,

- continued aggressive investments in logistics and the fintech segment.

Why I think the market reaction is exaggerated:

The company continues to deliver:

- strong revenue growth,

- expansion of the fintech ecosystem,

- rapid growth in payments,

- high user activity,

- a dominant position in Latin America.

The current pressure on profitability, in my opinion, is mainly related to investments in future growth. I don't see a structural problem with the business here, but rather a short-term squeeze on margins.

Comparison with competitors:

Compared to global competitors:

$AMZN dominates globally but operates in much more mature markets.

$SE has exposure to emerging markets but considerably less stability.

$PYPL is strong in payments, but lacks the strength of an integrated ecosystem.

$BABA faces significantly higher geopolitical and regulatory risks.

What makes $MELI unique is the combination of:

- e-commerce,

- fintech,

- logistics,

- digital payments,

- lending

within a single, highly integrated ecosystem.

Main positives:

Dominant position in Latin America, strong Mercado Pago growth, expanding logistics infrastructure, long-term digitalization trend, strong network effects

Latin America still has relatively low penetration of e-commerce and digital payments compared to developed markets, which leaves a lot of room for further growth.

Risks:

Currency volatility in Latin America, political and regulatory uncertainty, margin pressure due to investments, higher valuation compared to traditional retailers, competition from Amazon and local players

It is definitely not a low-volatility stock.

My view:

In my opinion, the market is currently too focused on short-term profitability swings and is overlooking the much more important long-term picture. I see this as another case where a quality growth company is being punished in the short term for aggressive investments into future expansion.

Historically, similar situations have often created interesting opportunities.

My position:

Last purchase: 1,636 USD

Average purchase price: ~1,700 USD

Weight in portfolio: 2.2%

Target price: 2,500 USD

In my view, the outlook for $MELI remains bullish for now.

How do you view MercadoLibre's results?

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

What do you think about this story? Is anyone here invested in $SNDK?