Why high dividend yield ETFs are becoming increasingly popular

Interest in dividend investing has been growing significantly in recent years. The combination of higher interest rates, volatile stock markets and an aging investor population is creating an environment in which regular portfolio income is playing an increasingly important role. In addition, dividend-oriented ETFs or option strategies offer advantages that individual stock selection often lacks, notably broad diversification and professional management.

But a high dividend yield is not free. Strategies worth yields of 8 percent, 12 percent or more are significantly more complex than simply holding dividend stocks. Three of the four funds analyzed employ a covered call strategy, a systematic sale of options on the underlying portfolio or index. The fourth fund relies on a selection of dividend stocks from the low-volatility S&P 500 index. Each of these approaches has its advantages and disadvantages, and understanding them is key to proper investment portfolio allocation.

JPMorgan Equity Premium Income ETF $JEPI

JEPI is an actively managed ETF launched in May 2020 that has become the largest covered call fund in the world in just a few years. It has more than $43 billion under management and has gained popularity among investors due to its combination of regular income and lower volatility compared to the broad stock market.

Portfolio

The fund invests in 1,123 U.S. stocks, mostly from the S&P 500 index, focusing on quality, stable companies with lower volatility. Alphabet $GOOG represents the largest position, with a weighting of less than 2% of the portfolio. This illustrates well the high level of diversification of the fund.

In addition to equities, JEPI also uses equity-linked notes (ELNs), structured instruments through which it generates income from the sale of options on the S&P 500 index. It is the combination of equity portfolio and option strategies that differentiates JEPI from most competing funds.

Moreover, portfolio manager Hamilton Reiner does not allocate all option positions to a single expiration date. He spreads options across multiple time periods and strike prices, reducing risk concentration and increasing return stability. The result is a fund with lower volatility than the S&P 500 Index alone and a dividend yield of about 8.4% per year. Distributions are made monthly.

Portfolio composition and sector diversification

The sector allocation of $JEPI differs significantly from the traditional S&P 500 index. Technology makes up approximately 15% of the portfolio, while industrial companies, health care and the consumer discretionary sector are represented above 10%. Thus, the fund emphasizes the more stable parts of the economy, which tend to be less sensitive to fluctuations in the business cycle.

This defensive orientation fulfils two objectives. First, it helps reduce portfolio volatility, and second, it increases the effectiveness of the covered call strategy, which tends to be more successful with more stable stocks than with fast-growing technology titles.

The fund has received the highest possible Gold Medalist Rating from Morningstar, making it one of the top-rated funds in its category.

Risks and limits of the strategy

Like other covered call funds, JEPI sacrifices some growth potential in exchange for regular income. As a result, it typically underperforms the S&P 500 Index itself during periods of strong equity market growth. This is because the return from the options sold limits the ability to take full advantage of market growth.

The tax treatment of ELN distributions may also be a disadvantage. In most cases, these are treated as ordinary income, not qualified dividends, which may mean less favorable taxation for some investors.

The risk associated with ELNs is also a specific risk. If the issuer of these instruments is unable to meet its obligations, part of the value of the investment could be lost. The fund manager mitigates this risk by diversifying among multiple counterparties, but it cannot be eliminated entirely.

Global X NASDAQ-100 Covered Call ETF $QYLD

QYLD is a passively managed ETF by Global X that tracks the Cboe NASDAQ-100 BuyWrite V2 Index. The fund holds stocks in the NASDAQ-100 Index while systematically selling call options on the entire index.

It uses a so-called at-the-money covered call strategy, in which options are written with an exercise price close to the current market value of the index. This approach allows for the collection of high option premiums, but at the same time significantly limits the ability to participate in the growth of the underlying portfolio.

It is because of this strategy that $QYLD offers one of the highest returns among income ETFs. The current dividend yield is around 12% annually. The fund manages approximately $8.3 billion and pays out income every month. However, the amount of each payout can vary depending on the state of the options market, as higher volatility typically means higher option premiums. The fund was launched in December 2013 and has a history of more than a decade of regular payouts.

NASDAQ-100 as the basis of the strategy

The QYLD portfolio replicates the composition of the NASDAQ-100 index, which is dominated by the world's largest technology companies, such as Apple $AAPL, Microsoft $MSFT, Nvidia $NVDA, Alphabet $GOOG and Amazon $AMZN.

The technology orientation of the index brings higher volatility, which increases the value of option premiums and supports high payouts to investors. At the same time, however, it creates the biggest weakness of the entire strategy. This is because during periods of strong growth in the technology sector, the fund fails to fully exploit the growth potential of its equity positions.

This was clearly visible, for example, in 2023 and 2024, when the NASDAQ-100 posted significant gains. While the index itself added tens of percent, $QYLD s performance remained significantly more subdued as it gave away most of its upside potential through sold options.

The fund's fee is 0.60% per year, which is more than that of $JEPI. However, given the nature of the strategy and the high income the fund generates, this is still a relatively acceptable level of expense.

Capital erosion as the main risk

QYLD's biggest drawback is its long-term tendency toward capital erosion. While the fund generates high regular distributions, it does so at the cost of limiting almost all capital growth.

If, for example, an investor receives a dividend yield of 12% per annum, but the value of the ETF also falls by several percent per annum, the actual total return is significantly lower than the dividend rate itself suggests. This is why it is more important to look at total return than dividend yield alone when evaluating similar funds.

A long-term comparison shows that QYLD significantly underperforms the NASDAQ-100 index, even when reinvested distributions are included. The high income here is offset by limited growth in the value of the investment.

QYLD is particularly suitable for investors who need a regular monthly income and are not dependent on long-term capital growth. Typically, these may be annuitants or retired investors. Conversely, younger investors who are building wealth over decades tend to find this strategy less attractive.

Another factor to consider is the tax treatment of option premium income. In most cases, these are treated as ordinary income, which may result in less favorable taxation than traditional qualified dividends.

Global X Russell 2000 Covered Call ETF $RYLD

RYLD is often referred to as the smaller sibling of $QYLD. While QYLD builds its strategy on the technology-oriented NASDAQ-100 index, RYLD uses the Russell 2000 index, which includes small and mid-cap U.S. companies. The fund holds shares of that index through the RSSL ETF while selling call options on the entire index.

The fund's dividend yield is currently around 11.9% annually and payouts are made monthly. Assets under management are approximately $1.3 billion, which is significantly less than the $JEPI or $QYLD funds. The fund was launched in April 2019 and has paid investors a regular monthly income since inception.

Russell 2000 and exposure to the U.S. economy

The Russell 2000 Index includes approximately 2,000 of the smallest companies in the broader Russell 3000 Index. Unlike the technology-concentrated NASDAQ-100, it offers a much more balanced sector distribution. Health care, industrials, financial services, and technology have the largest representation, with no one sector significantly dominating.

This diversification brings certain benefits, but also specific risks. Smaller companies tend to be more sensitive to developments in the domestic economy, interest rates and the availability of financing. Therefore, they tend to lag behind large corporations in times of economic slowdown. Conversely, during economic recovery, small-cap stocks can achieve above-average returns and outperform the broader market.

Risks and limitations of the strategy

Morningstar analysts have assigned the Fund a negative Medalist Rating. This rating indicates that they believe the fund has a lower probability of outperforming its peers after taking into account risk and expenses over the full market cycle.

This is primarily due to the structural disadvantages of the strategy. Small-cap stocks have lower liquidity than large caps, and the option market tied to the Russell 2000 tends to be less efficient than the largest U.S. indices. This can lead to higher transaction costs and lower efficiency in generating option premiums.

Like QYLD, RYLD suffers from long-term limitations in its upside potential. While a passive at-the-money covered call strategy generates attractive regular income, it also removes a significant portion of potential capital appreciation from investors. As a result, the long-term total return tends to be significantly lower than the dividend yield alone might suggest.

Thus, RYLD makes the most sense for investors who are looking for high regular income while seeking exposure to the smaller U.S. companies segment. For investors primarily focused on long-term capital growth, however, there are more efficient alternatives.

Invesco S&P 500 High Dividend Low Volatility ETF $SPHD

SPHD differs significantly from other funds in this comparison. Unlike JEPI, QYLD or RYLD, it does not use any option strategies or other derivative instruments. It is a passively managed ETF launched in 2012 that tracks the S&P 500 Low Volatility High Dividend Index.

The fund's methodology combines two key factors: high dividend yield and low volatility. It first selects 75 companies from the S&P 500 index with the highest dividend yield. It then includes in the portfolio the 50 titles that have had the lowest price fluctuations over the past 12 months. The resulting representation of each stock is then determined by the amount of dividend yield.

Portfolio

The Fund currently holds approximately 58 positions, offers a dividend yield of around 4.5% per annum and pays dividends monthly. Assets under management exceed $3.3 billion and the fund's expense ratio is 0.30% per year. This makes SPHD the only fund of the quartet whose income comes solely from dividends paid by the companies it holds, not from option premiums.

Defensive sector structure

The SPHD portfolio is significantly more conservative than the broad S&P 500 index. Companies in the consumer staples and real estate investment trusts(REITs) sectors are the largest holdings, accounting for roughly 20% of the portfolio. Utilities and the financial sector follow. Technology, on the other hand, plays only a marginal role.

Some of the largest positions include Verizon $VZ, Altria $MO, Pfizer $PFE, Healthpeak Properties $DOC and Kraft Heinz $KHC.

The fund's methodology itself naturally favors established companies with high dividends and stable cash flow. Conversely, fast-growing companies that reinvest most of their profits into further expansion rarely make it into the portfolio. An additional safeguard against over-concentration is the 25% limit per sector. In addition, the portfolio is regularly rebalanced twice a year.

Rate sensitivity and long-term underperformance

SPHD's biggest risk is its high sensitivity to interest rate movements. Sectors such as utilities, REITs and traditional dividend companies are often viewed by investors as an alternative to bonds. When interest rates rise, their dividend yields become less attractive and the share prices of these companies tend to come under pressure.

The fund is also more exposed to regulatory risks. Indeed, a significant part of the portfolio consists of sectors that face long-term pressure from regulators, such as the tobacco industry or pharmaceutical companies. The ability of these companies to maintain high dividends therefore depends on their ability to generate stable cash flow even in a changing regulatory environment.

Morningstar analysts rate the fund neutral. Although SPHD offers an attractive combination of regular income and lower volatility, it has lagged the broader stock market over the long term. Over the past five years, the S&P 500 index has more than doubled in value, while SPHD's total return has been significantly lower.

SPHD thus illustrates well the classic trade-off of income investing. The investor receives higher and more stable dividend income, at the cost of lower long-term capital growth. Investors seeking regular payouts and lower volatility may find this strategy attractive, while investors primarily focused on maximizing long-term returns are likely to find it less suitable.

Fund comparisons and investment profiles

From a long-term total return perspective, $JEPI provides a trade-off between regular income and capital protection. Active management, an emphasis on defensive stocks and a sophisticated options strategy have earned it Morningstar's top rating as well as a position as one of the most popular income ETFs in the market. In contrast, QYLD and RYLD offer higher yields, but at the cost of limited upside potential. SPHD, while providing the lowest yield, offers pure dividend income without the use of derivatives and a more conservative portfolio profile.

These ETFs represent four different paths to one goal: generating regular income from an investment portfolio. JEPI offers the most balanced combination of yield, stability and capital protection. QYLD and RYLD attract above-average payouts, but investors pay for them with limited growth potential and a higher risk of long-term capital erosion. SPHD, on the other hand, relies on a traditional dividend strategy without derivatives and appeals to investors who prefer simplicity and a more conservative approach.

Neither fund should be judged solely on the amount of dividend yield. It is important to understand how the yield is generated, what risks it entails and whether it fits the investment horizon and objectives of the individual investor. It is these factors that have a greater impact on performance over the long term than the amount of the monthly payout alone.

Why? Because a few weeks before the results, the FDA rejected the company's second product, and investors began to do the math: patent protection on a key drug expires in 2029, when the first generics enter the market. So the company has a three-year window of peak revenue with adj. EBITDA of over $300 million per year with a market capitalization of just $634 million - and has engaged Goldman Sachs to look for strategic alternatives. Is this a value trap or contrarian opportunity of the decade?

Top points of analysis

• The company reported Q1 2026 revenue of $106.5M (+159% YoY) and EPS of $0.24 adj. vs. $0.07 consensus - a massive beat - yet shares fell 13.6%; the cause was lingering sentiment following the FDA's April 2026 rejection of apraglutide and single-product concerns.

• LINZESS generated Q1 2026 US sales of US$272.5m (+97% YoY), with performance underpinned by a combination of organic demand growth (+5% TRx) and significant price normalisation following the removal of 2025 inflationary pressures.

• FY2026 outlook: revenues USD 450-475m (midpoint +54% YoY), adjusted EBITDA over USD 300m - with a market cap of USD 634m, this implies EV/EBITDA below 4X on a forward basis.

• Apraglutide (GLP-2 analogue drug for short bowel syndrome) as a second product in the pipeline ended in April 2025 with FDA rejection, requiring a new Phase 3 study due to dosing issues in the original STARS study; the firm engaged Goldman Sachs to explore strategic alternatives.

• LINZESS generics may enter the market no earlier than March 2029 (Teva, 145 mcg and 290 mcg) and Mylan from February 2030 - after 2029 the business model is existentially threatened unless a new pipeline is added or an acquisition occurs.

• Analysts have an average 12-month price target of $7.50 vs. a current price of around $3.85-3.92, an implied upside of over 90%; Citizens bank holds a $10 target.

Company performance

Ironwood Pharmaceuticals $IRWD is a Boston-based pharmaceutical company focused exclusively on gastroenterology. Founded in 1998 as Microbia, the company was renamed in 2010 and went public on NASDAQ in 2012. After years of diversification, Ironwood has transformed itself over the past three years into a single-product specialist: selling its pipeline of assets, restructuring the organization, and focusing everything on maximizing the value of LINZESS.

Key context: LINZESS is not a new drug. It's been FDA-approved since 2012 for IBS-C and since 2014 for CIC, with expansion to pediatric patients (age 6 and up) coming in 2021. The business model is based on 50/50 profit-sharing with AbbVie (formerly Allergan) - Ironwood gets 50% of net profits from US sales of LINZESS and royalties from non-US sales. That's a neat arrangement: Ironwood doesn't worry about the entire sales apparatus, receives half the profits on $1 billion in annual sales, and maintains a very lean structure (253 employees).

CEO Thomas McCourt has led the company since 2023, coming from Vertex Pharmaceuticals, and his profile suggests a focus on disciplined capital allocation and strategic transactions - which explains Goldman Sachs' quick involvement after the FDA rejection.

Business and product

LINZESS - locally stimulates fluid secretion into the intestine and accelerates passage through the digestive system. It's a drug that IBS-C and chronic constipation patients take long-term, providing a predictable, recurring revenue cycle. Total TRx (total prescription) volume grew 5% YoY in Q1 2026 and 11% YoY for the full year 2025 - modest but consistent organic growth in an established pharmaceutical product.

Why did sales jump 97% YoY in Q1 2026? Because of AbbVie's "rebate" reserves. A drug rebate is essentially a retroactive discount that a pharma company pays to an insurer or PBM for having its drug in good "standing" on the drug formulary. In Q1 2025, AbbVie negatively overstated rebate reserves, which depressed Ironwood's share to $41.1 million - an extraordinarily low number. In Q1 2026, by contrast, came a normalization plus a list price cut from January 1, 2026, which management implemented to improve pricing and increase prescription volume without losing net revenue. The result: a huge YoY jump that is part statistical artifact of the comparative base and part real fundamental performance. Both are important to distinguish.

Collaboration revenue structure: the US LINZESS generates ~$1.1-1.175 billion in gross revenue annually, of which Ironwood receives a 50% net profit share. In addition, Ironwood collects royalties from linaclotide sales outside the US under various partners - these are small but steady streams. Naturally, Ironwood's gross margin is over 91% because virtually the only expense on the cost of revenue side is payments for licensing arrangements and manufacturing contracts.

Apraglutide: big bet, big flop

Apraglutide was the second axis of the strategy - GLP-2 for rare disease (SBS-IF). SBS-IF affects approximately 18,000 adult patients in the US, Europe and Japan who are dependent on parenteral nutrition (IV nutrition given intravenously, in extreme cases for up to 15 hours a day). It is a rare, devastating and financially attractive disease - payments for orphan drugs can reach hundreds of thousands of dollars per year per patient.

The February 2024 Phase 3 STARS trial reported positive results in the primary endpoint - apraglutide reduced weekly parenteral support volume by 25.5% vs. 12.5% in the placebo arm (p=0.001). Ironwood filed an NDA (New Drug Application) in February 2025. Only the FDA found a major problem: due to errors in dose preparation and administration during the trial, patients received less exposure than planned. Ironwood attempted to resolve the situation by pharmacokinetic analysis of existing data. The FDA did not accept and required a new Phase 3 study in April 2025.

The stock reacted to the news by falling approximately 33% in a single day. The company announced that it was engaging Goldman Sachs to explore "strategic alternatives" - a pharmaceutical code for a potential sale of the company, merger or split. The challenge is clear: as a standalone program, Ironwood, with 253 employees and $600 million in debt, can hardly afford to refinance Apraglutide without a strategic partner or raising additional capital.

Financial performance and quality

The view of financial development from 2021 onwards is more layered. In 2021 and 2022, the company generated solid revenues of around US$410-413 million and net income of over US$175 million in FY2022. 2023 was a disaster - operating loss of US$945 million (largely due to one-off impairment charges and restructuring costs), net loss of US$1 billion.

FY2024 brought normalization: revenue of USD 351m (-21% YoY due to revenue model transformation after divesting part of the business), operating income of USD 93m, net income of USD 880k - virtually flat but positive.

2026 is a break-even year: revenue guidance of USD 450-475mn, adj. EBITDA over USD 300 million would mean record operating profitability. Q1 2026 results suggest the company is on track - revenues of USD 106.5m vs USD 41.1m in Q1 2025, adj. EPS of $0.24 vs. consensus of $0.07.

The gross margin of 91.91% is exceptional and reflects a purely collaborative model - Ironwood does not manufacture and does not have an expensive supply chain. Operating margin of 36.34% is strong. The problem, on the other hand, is in the debt network: debt-to-assets of 1.51, negative equity of -$301 million and Altman Z-Score of -2.10.

Debt and balance sheet - the key issue

Here is the company's Achilles heel. Total debt was $599 million as of 12/31/2024 (convertible bonds and lease obligations). Of this, the convertible bonds maturing in June 2026 ($150 million, 8.375% interest) represented immediate refinancing risk. The company restructured its debt during 2025 - management has repeatedly emphasized strategic repayment of the convertible notes as its #1 priority, with the Q1 2026 earnings call confirming progress.

Negative equity of -$301 million is not unusual for a pharma company with large R&D costs - but the combination of negative equity, negative Altman Z-Score and absolute dependence on one product creates a cocktail that explains market skepticism despite nice operating numbers.

The key positive on the liquidity side: working capital has returned to positive territory - $143.5m as of 12/31/2024 vs -$42.8m in 2023. 2024 FCF was $285.7m (+54% YoY) and FCF growth YoY +326%. These are numbers that show that operating cash generation is healthy and the company is systematically getting rid of debt ovis.

Market, competition and patent cliff

LINZESS holds a dominant position in the US IBS-C market - it is a premium drug in a segment where patient compliance is key and brand switching is less common than in other therapeutic areas.

Generics are a major threat. Teva $TEVA has licensed 145 mcg and 290 mcg generics from March 2029. Mylan from February 2030. Sun Pharma from February 2031. After 2029, LINZESS faces a steep revenue cliff - the standard pattern after generic erosion is a 40-70% volume decline in the first two years. So Ironwood has about a 3-year peak revenue window (2026-2028) in its base case scenario, after which comes a structural decline with no new product.

Valuation - cheap or a trap?

On the face of it, the numbers are compelling. Market cap USD 634 million, enterprise value USD 1.1 billion, expected adj. EBITDA of over USD 300m for FY2026 - that's an EV/EBITDA of around 3.7x, an extremely low multiple for a healthcare company with 91% gross margin and +36% operating margin.

P/FCF of 9.37× with FCF margins of over 18% is again low. A P/S of 1.87× for a firm with a high-margin, recurring revenue pharmaceutical model would be a cheap multiple with no patent cliff risk. Analyst consensus gives an average target of $7.50 vs. current $3.85-3.92 - potential over 90%. Fair value from our data is $8.08.

Why is it so cheap? The market is essentially selling:

1. Patent cliff 2029: generics LINZESS will come in and erode most revenue

2. Single-product: 100% of revenue from one drug, no pipelines approved

3. Apraglutide failure: loss of secondary product, Goldman Sachs means M&A uncertainty

4. Debt: negative equity, over $600 million in debt

5. Revenue composition: much of revenue is rebate-timing dependent, creating apparent YoY swings

Investment scenarios

Optimistic scenario - M&A/strategic transaction: Goldman Sachs will help Ironwood find a buyer or partner for apraglutide or the entire company. Acquirer pays a premium for LINZESS royalty stream, assumes debt, and Ironwood shareholders get an exit for $7-10/share. Yield from today's price 90-160%.

Realistic scenario - standalone peak revenue execution: the company will use 2026-2028 to maximize LINZESS revenue and either find a new product (acquisition, in-licensing) or pay out remaining cash to shareholders before the patent cliff. The stock is trending towards $5-7.

Pessimistic scenario - value trap: Patent cliff comes sooner or harder than expected, apraglutide Phase 3 retry is too capital intensive and no partner comes in, debt pushes cash flow, stock moves to 1-2 USD or company goes bankrupt in a debt spiral.

Final view

Ironwood is a prime example of the "value trap vs. contrarian gem" dilemma in pharma. The business is in great operating shape - LINZESS is growing, margins are high, cash flow is solid. At the same time, the company is debt-laden, single-product, with a defined expiration date for its primary revenue source and a pipeline in tatters.

Contrarian argument has logic: peak revenue window 2026-2028 generates adj. EBITDA of over $300 million per year at a market capitalization of $634 million - if the company pays down debt and returns the remaining cash to shareholders or gets bought at a reasonable premium, the investment can work. Timing and the Goldman Sachs process is key - if the M&A deal comes through by the end of 2026 or 2027, shareholders will profit. If it doesn't come and the company enters a patent cliff with no alternative, the situation will be tough.

For an investor with a higher risk tolerance and the ability to monitor M&A developments - a small position in IRWD as a special situation bet on either M&A or disciplined working out of the peak revenue window. For the conservative investor - too many moving parts, too short a runway, too much debt.

The deal is not just business news, but also a political signal. Ortberg accompanied President Trump to China along with the heads of other US technology and industrial firms including Tim Cook, Elon Musk and Jensen Huang. By his own admission, an order this large is "100 percent dependent" on the course of US-China negotiations. This means that Boeing is more dependent on the Washington-Beijing political axis in the short term than a long-term investor would ideally like.

What exactly was agreed: 200 aircraft as a down payment on a larger package

Formally, Boeing $BA confirmed China's initial commitment for 200 aircraft, saying it expects additional orders to follow this "initial series." Ortberg speaks of a "very successful trip to China" and that the main goal was to reopen the Chinese market for orders - not to negotiate a complete megapackage right away.

The market initially speculated an even larger number, so the initial volume of 200 units may look less overwhelming on paper. But more important is the quality of the signal: Beijing is finally letting Boeing back in the game after years of official bans. Given the size of the Chinese market and the average prices of narrow- and wide-body machines, we're already talking tens of billions of dollars in book-to-bill value for these 200 units, with an eye on multiplying that volume in the years ahead.

For production, this means that Boeing can start planning Chinese slots back into the existing backlog. It already has over 6,800 aircraft on order, including more than 4,300 737 MAXs, with a total value of around $600 billion. Thus, new Chinese commitments could account for a significant portion of assembly line utilization over the next decade, especially if the broader package of 500+ narrow-body and 100 wide-body machines under consideration can be completed.

Politics in the cockpit: Trump's role and dependence on geopolitics

Ortberg's words about not expecting "any big short-term orders from China" without the administration's active involvement are a good indication of how deeply entrenched the trade embargo was. When Donald Trump returned to the White House in January 2025, a new tariff war kicked off, to which Beijing responded with an outright ban on Chinese carriers ordering Boeing aircraft - and even taking delivery of previously ordered units.

Only a ceasefire in the trade war late last year opened the way for a resumption of "normal" activity with Chinese customers. The current deal is thus not an isolated commercial event, but part of a broader political package. For Boeing, the impact is twofold:

• In the short term, it is a huge positive - without this reset, the company would continue to lose ground to Airbus and its domestic COMAC;

• in the long term, it increases the political risk - any deterioration in relations could quickly close the Chinese door again.

Ortberg was personally present at the Beijing talks alongside the heads of GE Aerospace and others when Trump announced the framework agreement, in which Beijing promises to buy hundreds of jets and engines from U.S. manufacturers, essentially confirming that without "big politics" Boeing would have had a hard time getting into China on this scale.

The end of a decade-long fast: why China is critical for Boeing

Since the two 737 MAX 8 crashes in 2018-2019, Boeing's position in China has been gradually dismantled by a combination of safety concerns, regulatory delays and a trade war. While deliveries of some types have resumed in recent years, a large new order from China hasn't come in nearly a decade.

In the meantime, Beijing has been buying massively from Airbus and pushing the development of a domestic manufacturer, COMAC (ARJ21, C919), to be a strategic alternative to Western manufacturers. For Boeing, traditionally the largest US exporter by dollar value, this meant not only a loss of market share but also a reputational blow. China is one of the fastest growing aviation markets, and if it were to be "written off" in the long term, Boeing would have to cut capacity or rely on other regions to fully replace the missing demand.

The current agreement thus breaks a roughly 10-year horizon in which Chinese airlines have not placed a large order with Boeing. The political truce and the resumption of the ability to realistically deliver new machines to China puts the company back in the game for tens of percent of global demand for narrow-body aircraft. Without this market, Boeing's long-term investment story would be significantly weaker.

What might come next: from 200 units to 600+ aircraft?

According to Bloomberg, Fox Business and Aerotime, China is considering a much larger package: up to 500 737 MAXs and about 100 wide-body jets. If this framework actually comes to fruition, it would be one of the largest orders in commercial aviation history - and a contract that could fundamentally change Boeing's revenue and utilization trajectory for the next decade.

Analyst Richard Safran of Seaport Global Securities estimates that such a summit sale could mean an additional five 737 MAXs per month in the production schedule. For the 737 family, that represents a very noticeable increase in monthly revenue and a better spread of fixed costs. At the same time, however, it should be perceived that:

• Boeing will only be able to realistically deliver higher volumes from this new package in a year or two

• the current capacity and supply chain is already running at high speed and the company is still facing pressure on quality and controls after previous scandals

In other words, the potential mega-contract from China is a structural story, not an immediate boost to results in the coming year. In the short term, it mainly adds confidence to the backlog and reassurance that Boeing will have someone to produce for once production capacity continues to stabilize and increase.

What's in it for Boeing

Several key points can be drawn from the combination of facts:

1. China is not lost - on the contrary, after years of stagnation, there is room for new large orders. This reduces the risk of a long-term market share decline in favour of Airbus and COMAC.

2. Political risk remains high - the current success is strongly linked to the Trump administration and the current "truce" in the trade war. Any new escalation could quickly change the playing field again.

3. Backlog is getting better - a higher proportion of Chinese customers and major airlines increases revenue visibility over years to decades.

4. Manufacturing and supply chain will be under pressure - to realistically monetize new Chinese contracts, Boeing must simultaneously manage increasing production rates, addressing quality issues and regulatory confidence.

Overall, the Chinese contract is significantly positive strategic news for Boeing: after years of defensiveness and crisis, the company is getting back to a growth market that can fill its order books for a long time.

The final deliberation awaits Donald Trump's approval. WTI crude oil is weakening below $88 per barrel this morning.

The proposed memorandum of understanding would guarantee free passage through the strait, and Iran would have to remove all minefields within 30 days of signing. Negotiations on Iran's nuclear program would begin concurrently. A critical issue remains the question of frozen Iranian assets amounting to approximately $24 billion, with Iran demanding their full release while Trump conditionally insists on maintaining sanctions.

Caesars Entertainment $CZR, the largest casino company in the US, announced that it has accepted a takeover offer from Fertitta Entertainment.

The price? $17.6 billion in cash, of which $11.9 billion represents assumed Caesars debt. Shares of $CZR reacted with an increase of roughly 1%, since the offer of $31 per share represents only a 7.7% premium over yesterday’s closing price.

A 7.5% premium is modest for a large transaction. And that says a lot about the condition Caesars is in.

What's going on

Caesars is a massive company with 60 casino resorts and gaming venues across the US, operating under the Caesars, Harrah's, Horseshoe and Eldorado brands.

But there’s a catch. Caesars is burdened with massive debt. As of September 30, 2025, Caesars had $11.9 billion of debt at face value. Total debt is nearly $25 billion. That’s a stark contrast to a market capitalization that doesn’t even reach $6 billion. And although the company is actively paying down debt, with that level of leverage any larger revenue swing is painful. Interest costs have eaten all operating profit in recent quarters and the company reports net losses despite a very healthy Adjusted EBITDA.

New owner: Tilman Fertitta

Fertitta Entertainment is the empire of Texas billionaire Tilman Fertitta. It includes the Landry’s restaurant chain with more than 600 locations, the Golden Nugget casinos and amusement parks. Fertitta has been pursuing Caesars for a long time.

From a synergy perspective it makes sense. Caesars has the Caesars Rewards loyalty program with tens of millions of members. Fertitta has a huge restaurant infrastructure. Connecting the two ecosystems is therefore a logical move.

Moreover, Caesars’ digital segment is growing quickly. In the first quarter of 2025 this segment delivered EBITDA of $43 million versus only $5 million in the same period the previous year.

What it means for shareholders

The deal includes a so-called "go-shop" period until July 11, during which Caesars can actively seek better offers. That signals that management wasn’t fully convinced about the price and is leaving the door open. A 7.7% premium is low. Shares of $CZR traded substantially higher a few years ago, but the debt load has compressed the valuation to current levels.

Do you have $CZR in your portfolio, or were you betting the premium would be higher? And do you think a competing bid will surface during the go-shop period?

The claim is against 3M and its Australian subsidiary over the use of foam at 28 defence bases around the country. The government alleges that the company assured for years that the substance was safe, biodegradable and non-toxic, even though it had internal tests showing significant negative environmental impacts. 3M denies the allegations and has announced it will defend itself in court.

Australian government's biggest legal action

The lawsuit has been filed in the Federal Court and, according to Justice Minister Michelle Rowland, represents "the most significant legal action ever taken by the Commonwealth and the Department of Defence". The government is seeking more than AUD2 billion in compensation for "significant past and future costs" associated with the investigation and management of the PFAS contamination.

According to Deputy Defence Minister Peter Khalil, 28 defence bases across Australia were affected. The lawsuit seeks to shift the financial burden of cleanup from taxpayers to chemical manufacturers. Rowland stressed that the government was "acting on behalf of the Australian people and the communities affected by PFAS" and described the case as a crucial precedent for holding big industry players to account.

As the government describes 3M's misconduct

The Australian government alleges that 3M supplied firefighting foam with PFAS and provided assurances that it was safe to use and dispose of, despite having internal testing and information about serious environmental risks. According to the company's court filing:

• presented the foam as biodegradable and non-toxic

• withheld the results of its own tests, which showed significant negative impacts on ecosystems

• failed to inform the government about the long-term persistence of PFAS in the environment

3M $MMM said in a statement that it intends to vigorously defend itself against the allegations. The company stressed that it has never produced PFAS in Australia and stopped selling the affected foams in the country about 20 years ago. In addition, according to 3M, the Australian Department of Defence continued to use PFAS foams for almost another twenty years after sales ceased, which the company says undermines the manufacturer's direct liability.

What are PFAS and why are they a problem

PFASs (per- and polyfluoroalkyl substances) are a group of several thousand synthetic chemicals used in products that resist water, grease, dirt and heat - from firefighting foams to non-stick surfaces to textiles and food packaging. The nickname "forever chemicals" was coined because they are virtually undegradable in nature and can accumulate in soil, water, food chains and the human body.

Research has long linked PFAS exposure to a number of health risks, including liver damage, reduced birth weight, immune disorders and certain cancers such as testicular cancer. It is the link to contamination of drinking water and groundwater sources that has led to a series of lawsuits against the manufacturers of these substances in many countries. In 2023, 3M agreed to a major settlement in the U.S. - pledging to pay $10.3 billion over 13 years to public water systems to test and remove PFAS from drinking water.

How much Australia has already spent on remediation

According to Peter Khalil, the Australian Department of Defence has spent about AUD 1.3 billion so far to address the impacts of PFAS contamination. Of that:

• Approximately AUD 408 million has gone towards legal settlements with affected communities around the bases

• more than 200,000 tonnes of contaminated land has been removed or treated

• more than 13 billion litres of water has been treated or purified to reduce PFAS concentrations

According to the government, these figures show that this is not just a historical problem, but a long-term financial and health commitment that will require billions more in spending. The lawsuit seeks to shift these costs, at least in part, to the manufacturers of the chemicals that caused the contamination.

3M and the global wave of PFAS lawsuits

The Australian case is the latest chapter in a long line of litigation surrounding PFAS. 3M faces thousands of lawsuits around the world from municipalities, states, water companies and individuals who claim their water, land or health has been harmed by "perpetual chemicals."

• In the U.S., the company agreed to a $10.3 billion settlement with public water systems in 2023 over drinking water contamination

• The settlement is to cover the cost of testing and cleaning up PFAS and covers most US water systems, with 3M pleading not guilty

• 3M also announced a plan to end PFAS production by the end of 2025, precisely because of regulatory pressure and growing legal risks

The Australian lawsuit is not only a financial risk for the company, but also a reputational risk - it is the largest claim to date by a single government outside the US, and may inspire similar actions by other countries addressing contamination at military and industrial sites.

What's next: a long legal battle and pressure for accountability

Government officials, led by Michelle Rowland and Peter Khalil, have stressed that the legal action against 3M is "the most significant legal action in history" and that Australia is "holding 3M to account on behalf of residents and communities affected by PFAS". The case is likely to take years to resolve and 3M can be expected to defend itself not only with the argument about the post-sale period of the foams, but also the state's shared responsibility.

But in terms of precedent: if Australia succeeds - or reaches a large settlement - it could reinforce the trend of states and public institutions actively recovering clean-up costs from chemical manufacturers, even decades after use. For 3M investors, this means PFAS will remain one of the company's top legal and financial risks well into the next decade.

Over the past 12 months, COHR stock has appreciated approximately 380%, yet it still trades at just 13x forward earnings and a PEG ratio of 0.921. The data center segment is growing 37% year-over-year, the orders-to-deliveries ratio exceeds 4x, and the latest quarterly outlook beats analyst consensus.

Analysis highlights

• Record Q3 FY2026: Revenue of $1.81 billion (+21% YoY), non-GAAP EPS of $1.41 (+55% YoY), gross margin of 39.6%.

• Q4 FY2026 guidance: revenue $1.91 billion to $2.05 billion, non-GAAP EPS $1.52 to $1.72, well above consensus.

• Nvidia investment: $2B equity stake + multi-billion purchase commitment through 2030, focused on CPO and advanced lasers.

• InP manufacturing: world's first 6-inch wafers deliver more than 60% cost reduction and four times higher capacity vs. 3-inch lines.

• CPO and OCS: A new product category with an addressable market of over $4 billion (OCS) and potential of over $10 billion (CPO) in 5 years.

• Debt restructuring: Leverage dropped from 2.3x to 1.7x, divisions sold for hundreds of millions of dollars, financial flexibility increased significantly.

• Key risks: Chinese competition (7 of top 10 optical module vendors), manufacturing bottlenecks in OCS, $3.2B of lingering debt.

Transformation from cyclical supplier to AI backbone

Coherent Corp. $COHR has undergone one of the most remarkable strategic transformations in the photonics sector over the past 20 months. The company, which until recently operated as a fragmented conglomerate of industrial lasers and specialty materials, has repositioned itself as a key provider of optical transceivers and photonic components essential to the operation of AI data centers.

This transformation is underway under the leadership of CEO Jim Anderson, who joined from Lattice Semiconductor and launched a speed-to-market strategy focused on the AI data center market, the most significant strategic shift in the company's 50-year history.

The results are extraordinary. COHR shares are up approximately 379% over the past 12 months, while the SPY index has added approximately 29% over the same period. The key question for investors now is not whether Coherent is growing, but whether this transformation warrants a fundamental reassessment of valuation.

Financial results: acceleration across quarters

Fiscal 2025 and Q1 FY2026

In fiscal year 2025 (ended June 30, 2025), Coherent achieved record annual revenues of $5.81 billion, up 23% year-over-year. The data center and communications segment grew 51%, and data centers alone grew 61% year-over-year. At the same time, the company returned to full-year profitability, although the quarterly net loss persisted due to restructuring charges.

In the first quarter of FY2026 (ended Sept. 30, 2025), Coherent reported revenue of $1.58 billion, up 17% year-over-year, and non-GAAP EPS of $1.16, well ahead of estimates of $1.04. Gross margin on a non-GAAP basis was 38.7%, 200 basis points better than a year earlier.

Q2 FY2026: Solid base

The second quarter of FY2026 (ending 31 December 2025) delivered revenues of $1.69bn, up 17% year-on-year (and up 22% after adjusting for the sale of the Aerospace and Defense division). GAAP gross margin increased to 36.9% (+145 bps YoY), non-GAAP gross margin to 39.0%. GAAP EPS was $0.76 (+71% YoY) and non-GAAP EPS was $1.29 (+35% YoY). The data center and communications segment posted 33.5% year-over-year growth.

Q3 FY2026: Record results

The third quarter of FY2026 (ended March 31, 2026) was the company's strongest quarter ever. Revenues were $1.81 billion, up 21% year-over-year (27% on a pro forma basis after adjusting for divisions sold in prior quarters). Non-GAAP gross margin of 39.6% increased 105 basis points year-over-year due to improved yields from 6-inch indium phosphide (InP) production lines. Non-GAAP EPS of $1.41 was 55% higher YoY, with EPS growth outpacing revenue growth due to margin leverage.

The data center and communications segment accounted for 75% of total revenue and grew more than 40% year-over-year. Data centers alone grew 37% YoY and 13% sequentially, the second consecutive quarter of double-digit sequential gains. The communications segment even saw a 60% year-on-year increase thanks to strong interest in ZR and ZR+ transceivers.

Outlook for Q4 FY2026

Management issued a bullish outlook for Q4: revenue between $1.91 billion and $2.05 billion, noticeably above the market consensus estimate of $1.9 billion. Non-GAAP EPS guidance of $1.52 to $1.72 with the midpoint comfortably beating the then-current estimate of $1.53. Non-GAAP gross margin is estimated by management at 39% to 41%.

Strategic positioning: three axes of competitive advantage

1. Vertically integrated InP production

Coherent has built a globally unique capability: it was the first company to start production on 6-inch indium phosphide (InP) wafers at its Sherman (Texas, USA) and Järfälla (Sweden) factories. The switch from 3-inch to 6-inch wafers yields four times more equipment per wafer and more than a 60% cost reduction. Coherent is one of the few companies able to vertically integrate the entire optical stack: silicon photonics, InP lasers, VCSEL technologies and advanced packaging.

Revenues on the 6-inch InP production line have already surpassed those of the original 3-inch line, thanks to the know-how of a team that has five years of manufacturing two billion VCSEL devices on 6-inch gallium arsenide. Management estimates that internal InP production capacity will double by 2026, with a combination of in-house production and external suppliers to meet robust demand.

2. Product roadmap for AI infrastructure

Coherent is actively shipping 1.6T transceivers, which are key to the coming generation of high-speed AI interconnects. The order book in the data center segment is reaching a book-to-bill ratio of over 4x, indicating a multi-year outlook.

Optical Circuit Switches (OCS) based on proprietary non-mechanical liquid crystal technology represent an entirely new category with a market opportunity estimated by management at over $4 billion. The OCS market as a whole is conservatively estimated by Cignal AI to be on track to reach $2.5 billion by 2029, with a view to significantly increase this estimate. The OCS backlog has been increasing sequentially and the company has recorded more than 10 customer engagements, primarily focused on 320x320 systems.

• Co-packaged optics (CPO) is the product of the future. At the OFC 2026 conference, Coherent presented a 6.4T socketed CPO system operating at 200G per lane, with energy efficiency approaching 4 pJ/bit, and a 400G-per-lane InP optical engine for far greater scalability of CPO systems. Initial CPO revenue is expected in the second half of calendar year 2026.

3. Strategic anchoring through NVIDIA investment

Critical to the company's reclassification valuation profile is the investment by NVIDIA. On March 2, 2026, Nvidia announced a $2 billion investment in Coherent (and a parallel additional $2 billion in Lumentum) as part of a strategic partnership focused on co-packaged optics and advanced lasers. The deal includes a multi-billion dollar purchase commitment extending through 2030, with revenue contribution beginning in CY2027. The partnership is non-exclusive, and Coherent can continue to service all hyperscalers.

Analysts view this investment as a major breakthrough: Nvidia is explicitly signaling that the optical layer is moving beyond being a peripheral component and becoming a strategic input to AI infrastructure. The clear signal is that Nvidia's spending commitment is going primarily to CPO and advanced lasers, not just pluggable transceivers, opening up a new addressable market category for Coherent.

Debt restructuring: the source of the revaluation

Coherent's story cannot be analyzed without looking at its balance sheet transformation. Following II-VI's acquisition of the original Coherent brand in 2022, debt has grown to approximately $4.2 billion. This burden handicapped the stock for years.

During FY2025 and FY2026, management made a series of portfolio divestitures: it sold the Aerospace and Defense division for $400 million and the materials processing division to Bystronic. In Q1 FY2026, the company repaid approximately $400 million of debt. Debt leverage ratio fell to 1.7x in Q2 FY2026, down from 2.3x in the same quarter a year earlier. Total long-term debt fell to approximately $3.2 billion, with cash reserves at the end of FY2025 reaching $899 million.

The financial flexibility gained by lightening the balance sheet allows management to aggressively invest in InP capacity, CPO development and capex increases without compromising the financial health of the company. This is one of the key structural reasons why the valuation may have undergone a fundamental reassessment.

Valuation: where the bread is broken

Trailing vs. Forward view

A trailing P/E around 180x looks scary at first glance. But this view is misleading: it reflects GAAP earnings burdened by restructuring costs and amortization from acquisitions, not operational reality. A forward P/E of around 13x (relative to an EPS estimate of around $5) is a significantly different perspective. A PEG ratio below 1.0, specifically 0.921, signals that the stock is more likely undervalued when growth rates are taken into account.

By comparison, peer Lumentum traded at approximately 47x forward P/E, growing at a slower pace. Coherent, meanwhile, posted 37% year-over-year growth and a 4x book-to-bill ratio in the data center segment, which at 13x forward P/E creates an asymmetrically favorable price-to-growth ratio.

The analyst community expresses a positive sentiment in Q3 2026:

• Needham raised the price target from $135 to $190 and reiterated a Buy rating, citing excellent Q1 results and InP fab expansion.

• Barclays raised the price target to USD 170 with an Overweight rating.

• Stifel has repeatedly raised the price target.

• Morgan Stanley raised the price target to $120 from $89.

The real valuation implications are clear: the company's market capitalization has reached approximately $73.8 billion. The forward P/E for the fiscal year ending June 2027 comes out at acceptable levels assuming continued EPS growth, while the forward P/E for 2028 at an estimated $2.3 billion in earnings comes out well below 40x.

Key risks

Competitive pressure from China is among the most serious structural risks. Chinese optical companies have occupied 7 of the top 10 positions in the optical module market and have secured their status as key suppliers in AI demand. The aggressive pricing policies of Chinese vendors create pressure on margins and require continuous innovation and differentiated IP. Analysts warn that Chinese competition in particular poses a risk to margins in the 2027+ horizon.

Production capacity constraints are the second key risk. In Q3 FY2026, Coherent admitted that bottlenecks in OCS capacity have only recently been resolved and management has delayed its long-term capacity expansion plan by at least one quarter. It was this warning that caused the stock to lose 7.4% the day after the results were released, even though the results themselves beat consensus.

Customer concentration remains a sensitive spot, although NVIDIA's investment diversification has paradoxically increased. Dependence on a few hyperscalers for the bulk of data center revenues remains a risk factor, although long-term commitments from Nvidia reduce forward-looking uncertainty.

Technological substitution in the form of a shift to co-packaged optics may paradoxically also threaten the current dominance in pluggable transceivers. If CPO expansion proceeds faster than Coherent handles industry transitions, there may be a temporary sell into uncertainty.

Future catalysts: what to watch

The outlook for FY2027 and FY2028 is heavily shaped by several key catalysts. The ramp of 1.6T transceivers in the hyperscale segment will be the primary driver of sales in the coming quarters, with management explicitly pointing to double-digit sequential growth as an established trend. The launch of scale-out CPO revenues in the second half of CY2026 opens up a new addressable market segment with the potential to exceed $10 billion in five years.

The OCS pipeline is another latent catalyst: with more than 10 customer engagements, market estimates of over $4 billion, and a growing backlog, OCS is poised to generate material revenue contribution over the CY2027 horizon. Finally, the continued decline in debt reduces interest costs and frees up cash flow for capacity investment and potential buybacks.

Management's outlook for FY2028 includes revenue of $7.7 billion and net income of $732 million, implying 9.8% annual revenue growth and a massive turnaround in profitability from the then $80.5 million loss.

Conclusion: the valuation debate in a new context

Coherent has successfully transformed itself from a cyclical optical vendor into a strategic AI infrastructure provider. This transformation is supported not only by organic results, but also validation from Nvidia in the form of a $2B equity investment, a multi-billion purchase commitment, and a direct link to AI data center expansion.

The valuation debate has shifted from the question "is the company financially healthy?" to "how big are the addressable opportunities ahead?" Forward P/E of around 13x with 37% YoY growth in the datacenter segment and a 4x book-to-bill ratio suggests the market is not yet fully pricing in the future potential of CPO, OCS and the 1.6T cycle. At the same time, debt risk, Chinese competition, and manufacturing bottlenecks are real factors that warrant some risk premium over peers in the technology sector.

For the investor, this is a story of a company that stands at the intersection of two structural trends: AI infrastructure expansion and photonics-optical data center upgrades. The challenge is timing the entry and assessing how much these trends are already priced in at a market capitalization of approximately $74 billion.

How bonds work

A bond is essentially a loan. The issuer, whether a government or a corporation, borrows money from an investor for a pre-determined period of time and agrees to pay a regular coupon, or interest payment, and to return the principal at the end of the maturity. The yield on the bond then reflects the total annual appreciation that the investor expects to receive for holding the instrument.

The fundamental mechanism that every investor must understand is the inverse relationship between the price of a bond and its yield. If the yield rises, the price of the bond falls, and vice versa. This is a mathematical fact arising from the way in which future cash flows are discounted.

The US Treasuries market is not just about debt instruments. It is a barometer of the entire global economy. The ten-year US Treasury bond, tracked around the world under the symbol US10Y, sets the benchmark rate from which mortgage rates, corporate bonds, discount rates for stock valuations and, not least, investor sentiment are derived.

Correlation between bonds and equities

The correlation between bond yields and equities has been considered negative for decades. If yields fall, stocks rise. If yields rise, stocks fall. While this simplistic version is partly true, it overlooks a key detail: it depends on WHY yields move.

If yields are rising because the economy is expanding strongly and investors believe in future corporate profits, the correlation may be positive. Stocks and bond yields then rise together because they both reflect economic optimism. Conversely, if yields rise because of inflation or fiscal instability, their relationship with equities generally reverses. Higher yields then push equity markets down.

Data over the past sixty years confirm this dualism. From the mid-1960s to the late 1990s, the correlation between stocks and bonds was mostly positive. After the bursting of the tech bubble in 2000, there was a twenty-two year period of negative correlation. 2022 brought that era to a definitive end.

Four historical phases of correlation

The great inflation of the 1970s and 1980s produced an environment where bonds and stocks suffered simultaneously. Yields flew up then, peaking at over 15% for 10-year Treasuries, and the stock market experienced a volatile decade. The positive correlation during this period simply meant that both asset classes suffered under the pressure of inflation and high rates.

The lull in the 1990s brought a gradual decline in inflation, rate cuts and a stock market boom. Bond yields and stock prices moved up hand in hand as both reflected a healthy economy with declining inflationary pressures.

The zero interest rate era(ZIRP) from 2009 to 2022 represented a historically unique environment where negative correlation worked reliably. Investors were able to build portfolios on a 60/40 philosophy and bonds reliably offset equity sell-offs. The correlation between stocks and bonds was in negative territory see this analysis.

The current environment from 2022 onwards has brought a dramatic reversal. Aggressive rate hikes by the Fed since early 2022 have turned the correlation back into positive territory. The data shows that the correlation between stocks and bonds has risen to 0.64 and within one year. Bonds have stopped acting as a portfolio hedge and have started to fall along with stocks.

The year 2022: a brutal lesson in historical correlation

The year 2022 served as the most painful live demonstration of what happens when bond yields explode due to inflation. The US 10-year yield jumped from around 1.5% at the start of the year to over 4% by the end of the year. The Nasdaq lost more than 30% of its value, the S&P 500 index wrote off around 20% and the Bloomberg US Composite Bond Index saw a 13% decline.

It was a year when the seemingly safe 60/40 diversification strategy (60% stocks, 40% bonds) did not work at all. Both components of the portfolio fell at the same time. The cause was an inflation shock that hit bonds through the discount mechanism and stocks through the increase in the cost of capital. Technology stocks, whose valuations are based on discounting future earnings, were hit the hardest.

How did it work? If the yield on a risk-free 10-year bond jumps from 1.5% to 4%, each stock has to compete anew with a higher risk-free alternative. Firms with valuations based on distant future cash flows are discounted at a higher rate, and their intrinsic value therefore declines. Think of it as a decision between a stock that is highly volatile and has an uncertain return and a risk-free government bond that yields a steady 4.5% over the same holding period.

Current situation

At the end of May 2026, the yield on the 10-year US Treasury is around 4.5%, with a short-term response to developments in the Middle East and Fed rate expectations. The two-year note carries around 4.1% and the 30-year bond has exceeded 5.2%. The yield curve is now positively sloped, normal after the previous long inversion that preceded recession fears.

Analysts at Goldman Sachs $GS, based on historical data analysis since the 1980s, point out that at about the five percent level of the 10-year yield, the correlation with the stock market becomes clearly negative.

In today's market, this creates a specific tension. The yield is in the range of 4.5 to 4.6 per cent, the earnings yield of the S&P 500 index is around 3 per cent. The equity risk premium is therefore extremely low. In fact, equities offer only a marginally higher yield than US government bonds, which carry zero credit risk.

Inflation risks are accelerating. Markets have overestimated the probability of a Fed rate hike by the end of 2026 to around 80% after the oil shock caused by tensions in the Middle East heightened inflationary concerns. Should yields break out and stay above 5%, historical data suggests that a stock market correction in the 5% to 10% range would be likely.

How yields predict stock movements

Bond yields are not just a passive reflection of rates. They are also indicators of future economic developments. One of the most reliable warning signs that analysts watch is yield curve inversion, a condition where short-term bonds carry a higher yield than long-term bonds.

The inversion of the spread between the two-year and ten-year bond, tracked as the 10-2 Year Treasury Yield Spread, has preceded every recession in the U.S. economy over the past 40 years. The average time from the beginning of the inversion to the recession is approximately between twelve and eighteen months.

After a long inversion, which lasted from 2022 to 2024 in the U.S. and signaled fears of a recession, the yield curve returned to a positive slope. Historically, this renormalization may not be a positive signal. On the contrary, the yield curve typically normalizes shortly before or immediately after the onset of a recession.

Equity markets have historically been able to ignore this for months. But yield dynamics are still one of the most critical factors that determine whether the environment will be conducive to risky investments or whether capital will gravitate to safer assets.

What works and what doesn't work in a high yield environment

High bond yields do not create equal pain for all segments of the stock market. Historical data and recent developments show that yield sensitivity varies significantly by sector.

Yield-sensitive sectors: where to look for risk

• Utilities and REITs: these sectors have traditionally been considered alternatives to bonds in a portfolio. In addition, REITs do not finance real estate debt at higher rates, which puts pressure on their financial performance. An example of this segment is $O.

• Technology and growth stocks: firms with high valuations backed by distant future cash flows are mathematically the most sensitive to discount rate movements. 2022 was a textbook example in this regard. Firms like Zoom $ZM, Rivian $RIVN, and Peloton $PTON, whose valuations were almost entirely based on a growth story, lost tens of percent of their value in a rising earnings environment.

Sectors that can benefit from high yields

• Financials: Banks and insurance companies are the top firms that translate nicely into higher earnings in a higher rate environment. You can see this beautifully in the stocks of the biggest players like $JPM and $BAC in recent years.

• Energy and Commodities: bond yields and commodity prices have historically been linked to inflation. When yields rise due to inflation, oil, gas and commodity producers benefit directly. Additionally, due to the Hurmuz shutdown, these companies($XOM, $CVX and others) are destined for higher yields.

• Value stocks and low-debt dividend titles: companies with conservative balance sheets, stable earnings and reasonable valuations have historically outperformed the market in a higher rate environment. Examples of stocks in this segment may include $WM or $WMT.

Overview: correlations, sectors and historical parallels by yield environment

What to watch out for

• Equity Risk Premium: This indicator tracks the difference between the stock market's earnings yield (inverse P/E) and the yield on a risk-free Treasury bond. The lower the premium, the less attractive stocks are compared to bonds. The current low premium in the US signals that investors are receiving minimal compensation for equity risk above the risk-free rate.

• Shape of the yield curve: A normal (positively sloped) curve signals a healthy economic environment. A yield curve inversion, where short-term returns exceed long-term returns, has historically been a reliable leading indicator of recession.

• Real yields: not only the nominal level of yields but also their real level net of inflation is key. Ten-year Treasury Inflation-Protected Securities ( TIPS ) currently yield approximately 2% in real terms, which is historically above average. High real yields compete directly with equities as an asset class.

A strategic view

Understanding the dynamics of the bond market does not mean that an equity investor should move capital into bonds. It means that he should tailor his stock selection to the environment in which he operates.

In the current yield environment of around 4.5%, there is room for both interpretations. Yields are attractive enough to allow government bonds to regain a legitimate place in a diversified portfolio after a decade when zero yields did not give investors that option. At the same time, they are not yet high enough to definitively break the equity bull market if corporate profits remain robust.

The key catalyst for the stock market in the coming months will be inflation and the Fed's reaction. Should inflation data remain above target and the Fed proceeds with further rate hikes, yields would approach the critical five percent threshold. The historical analogy from 2023 to 2024, when yields temporarily exceeded this level and stocks failed under pressure, could repeat itself.

And that’s the point: it’s not clever analysis, but classic insider trading, just not on a stock but on a betting/prediction contract. Like the soldier who allegedly used classified information about a military operation, it demonstrates that once there is a “market for information,” an insider has an incentive to monetize it anywhere — not just on the stock exchange, but also on Polymarket, Betfair, or elsewhere.

Shares of Dell Technologies, trading under the ticker $DELL, reacted immediately, jumping roughly 4.6% to $319.40 in aftermarket trading. This surpassed the previous 52-week high of $312.14 and continued the exceptionally strong gains of recent months. Over the past month, Dell has gained approximately 48% versus roughly 5% growth in the S&P 500 Index, and year-to-date has posted a gain of over 138% versus roughly 9% growth in the index. For investors, this confirms that the market increasingly views Dell as a key player in enterprise infrastructure and federal IT contracts, not just a "computer maker."

Savings of $422 million per year through centralization

The key argument for this deal is not just the technology, but the savings. According to Pentagon Chief Information Officer (CIO) Kirsten Davies, the new framework agreement is expected to save the Department of Defense approximately USD 422 million per year. The source of these savings is the centralization of budgets and purchases - instead of each military branch, agency and command acquiring software separately, licensing requirements will now be consolidated into a single purchasing structure.

Historically, a fragmented acquisition system has led to massive duplication and inefficiencies. Each component handled its licenses, renewals, support, and cloud separately, often at different terms and price levels. Over years of uncoordinated sourcing, this resulted in unnecessary spending, unused licenses, and a complex mix of contracts that was difficult to audit. The new "second generation" agreement is intended to address these issues by bringing together key Microsoft $MSFT software and services into one consolidated framework that applies across the entire department.

How Dell won: five years of competition and price pressure

The contract is not the result of an overnightpolitical decision, but a five-year competition in which Dell Federal Systems beat out several competitors. Bidders were evaluated based on the competitiveness of their offerings, comparison to General Services Administration (GSA) price lists, and the overall value they were able to deliver to the Department of Defense.

The result is a framework that will allow the Pentagon to purchase Microsoft licenses, cloud subscriptions (e.g., Microsoft 365, Azure services) and Software Assurance across various classification levels - from unclassified administrative systems to highly sensitive and classified environments. Given that the Pentagon is one of the largest employers in the world, with over 2.1 million military personnel and over 800,000 civilian employees, unifying licensing policy and support represents a massive intervention in the way federal IT operates.

The agreement is also intended to eliminate redundant licenses and overlaps - situations where different services were paying for the same or similar technologies in different contracts, often without the ability to share capabilities. This type of "licensing waste" is typical of large government organizations, and this is where much of the claimed savings lie.

Political context: Dell, "Trump accounts" and the White House

However, the contract has not only a technical and financial dimension, but also a political one. Michael Dell, founder and CEO of Dell Technologies, has been in the spotlight in recent months for his active involvement in the agenda of President Donald Trump's administration. Dell has pledged $6.25 billion to fund investment accounts for children, referred to as "Trump accounts," a government initiative to encourage long-term savings and investing for younger generations.

At a recent White House event, President Trump publicly praised Michael Dell and explicitly urged Americans to buy computers and technology from Dell. Michael Dell has also joined Trump's Council of Advisors on Science and Technology, further connecting the company to the political decision-making center in Washington. So the timing of the announcement of this contract - shortly after Trump publicly praised Dell - naturally raises questions about political ties and the fairness of the competitive process, even though it was formally conducted under standard procedures.

For investors, this means that Dell has become not only a technology player, but also a distinctly political one. On the one hand, this opens the door to more government contracts and major modernization projects; on the other, it increases the company's sensitivity to potential changes in administration, political priorities, and congressional investigations.

Dell shares at new highs, Microsoft still 'cheap' on valuation

The contract was clearly welcomed positively by the market. Dell Technologies shares jumped 4% in extended trading, marking a new all-time high and another break above the 52-week high of around $312. The stock has then added approximately 48% over the past month.

In terms of the broader ecosystem, Microsoft $MSFT, whose software is the subject of the contract, is also worth noting. According to GF Value-type metrics (GuruFocus), at a price of around $412-415, Microsoft appears to be approximately 25% undervalued relative to an estimated intrinsic value of around $550. The P/E ratio is around 24.5 times, while the five-year median is over 34 times. This suggests that while the market is pricing in Microsoft's growth and quality, in terms of historical valuations it is still not paying the absolute premium it has been willing to pay in recent years.

For investors, it may be interesting to note that both parties benefit from the contract - Dell cashes in directly on revenue and margins within its federal division, Microsoft strengthens its "embedded" position in the U.S. government's critical infrastructure, and gains further confirmation that its platform is the de facto standard for large institutions.

Implications for federal IT: the end of the era of fragmented contracts?

The Dell deal is an example of a broader trend: the logic of consolidation that has taken hold in the commercial world over the past decade (SaaS, cloud, single licensing frameworks) is gradually making its way into federal infrastructure. In an environment dominated for years by duplication, outdated contracts, agency siloing, and buy-as-you-go purchasing, the push for centralization is almost inevitable.

The Pentagon has asked Congress for a budget of approximately $1.5 trillion for fiscal year 2027 and faces enormous pressure from lawmakers to finally deliver a clean audit and demonstrate value for money. Technology, and enterprise software in particular, has become one of the most visible places where real savings can be found in a relatively short period of time without impacting the military's front-line capability. Consolidating Microsoft licenses under one framework and one integrator is a logical step in this strategy.

From an investment perspective, this contract demonstrates two things:

• in an environment where many contractors promise "efficiencies and savings," the winner is the one who can demonstrate the ability to operate within a complex government system

• federal IT modernisation has yet to make a major splash - this contract may set a precedent for similar mega-contracts in other departments

What's in it for investors

For Dell:

• Giant benchmark contract worth $9.7 billion strengthens Dell Federal's position as a key integrator for government IT

• Stable, highly visible revenue over a five-year period supports the case for a higher valuation relative to pure hardware manufacturers

• Political ties to the administration may open up additional opportunities, but also increase political risk

For Microsoft:

• Confirmation of standard platform status in the world's largest military organization

• Long-term revenue security from licensing, cloud and support in an environment that doesn't just go from vendor to vendor

• From an investment perspective, a combination of "quality" and still relatively moderate valuation relative to its own history

Lately I’ve been trying to look mainly where sentiment isn’t ideal.

Not where everyone chases the biggest hype.

Not where stocks have shot up by tens of percent in a few months.

But where quality companies are going through a weaker period, investors are cautious and valuations start to look more interesting.

One of the sectors that currently interests me is luxury.

---

The luxury sector has been very strong in recent years.

Companies like Ferrari, LVMH, Hermès, Richemont or Kering have long benefited from growing wealth, a strong Chinese consumer, globalization, tourism, rising demand for premium products and extremely strong brands.

But today sentiment is no longer so positive.

The market is dealing with several problems:

🔹 a weaker Chinese consumer

🔹 geopolitical uncertainty

🔹 tariffs and currency pressures

🔹 lower demand from aspirational customers

🔹 a slowdown after strong years

🔹 higher costs

🔹 pressure on margins

🔹 concerns that luxury won’t grow as fast as before

That’s precisely why I think it’s worth watching this sector.

Not because it’s without risk.

But because with the highest-quality luxury companies, bad sentiment can create interesting opportunities.

---

Luxury is not an ordinary consumer sector.

When someone buys an ordinary t-shirt, shoes or a car, they often consider price, function and availability.

It’s different with luxury.

Luxury sells status.

Identity.

Scarcity.

History.

Emotion.

Story.

A social signal.

And this, in my view, is a big moat.

A strong luxury brand can’t be built overnight.

You can’t just create a new Ferrari, Hermès or Louis Vuitton by pouring money into advertising.

These brands were built over decades.

They have history, reputation, symbolism and psychological value.

And that’s why the best luxury firms can have extreme pricing power.

---

Personally, I’m most interested in Ferrari.

In my view, Ferrari is not a typical carmaker.

It’s a luxury brand, a status symbol and an extremely scarce product.

A regular carmaker often has to compete on volume, discounts, costs and cycles.

Ferrari plays a different game.

It produces fewer cars than it could sell.

It artificially maintains scarcity.

Customers often wait.

Personalization increases margins.

And the brand is so powerful that people don’t just buy a car, they buy a dream.

That’s a huge difference.

If Ferrari’s stock drops significantly just because of weaker sentiment around luxury or short-term uncertainty, it’s a company I want at least on my watchlist.

It’s not cheap.

But the best luxury brands usually never look cheap at first glance.

---

LVMH is a completely different type of luxury story.

It’s the world’s largest luxury conglomerate.

Louis Vuitton, Dior, Tiffany, Moët, Hennessy, Sephora and many other brands.

LVMH’s advantage is diversification.

You don’t buy a single brand.

You buy the whole luxury ecosystem.

Fashion, handbags, jewelry, spirits, cosmetics, retail.

When one part does worse, other segments can compensate some of the pressure.

On the other hand, precisely because of LVMH’s size, the question is whether it can grow as quickly as in the past.

If the Chinese consumer doesn’t return stronger and margins remain under pressure, the market may remain cautious toward LVMH for some time.

But in the long term I still think it’s one of the highest-quality luxury businesses in the world.

---

Hermès is perhaps the highest-quality luxury company of all.

An extraordinary brand.

Extreme scarcity.

Extreme pricing power.

Bags like the Birkin or Kelly are more than just products.

They are symbols of status and limited availability.

In my view, Hermès has one of the purest moats in the entire luxury sector.

The problem is valuation.

The market knows Hermès is an exceptional company.

And that’s why it often values it very highly.

Even if the stock falls, it may still not be cheap.

So with Hermès I wouldn’t just look at the percentage decline from the peak.

I would mainly look at whether the valuation finally provides a sufficient margin of safety.

---

Richemont is mainly interesting because of its jewelry.

Cartier.

Van Cleef & Arpels.

Buccellati.

These are very strong brands.

And jewelry, in my view, is one of the most resilient parts of luxury.

Richemont has recently shown that jewelry can grow even when the entire luxury sector isn’t in perfect shape.

That’s interesting.

Jewelry has different dynamics than fashion.

They can be less cyclical, more timeless and more tied to a wealthier clientele.

That’s why Richemont seems to me like a higher-quality luxury story than some weaker fashion houses.

---

Kering, in my view, is the biggest turnaround story in this group.

Gucci used to be the growth engine.

Now it’s more of a problem that the market punishes.

Kering can be cheap.

But cheap doesn’t automatically mean good.

This isn’t just about bad sentiment for a quality business.

It’s also a question of whether Gucci can truly turn around.

If yes, the upside could be large.

If not, the stock may remain cheap for a very long time.

That’s why I wouldn’t view Kering the same way as Ferrari, Hermès or LVMH.

Kering is more of a risky turnaround.

Not a pure compounder.

---

My personal hierarchy of the luxury sector would look like this:

1️⃣ Ferrari – the most interesting brand/scarcity play

2️⃣ Hermès – the highest-quality luxury moat, but often expensive

3️⃣ LVMH – the best diversified luxury conglomerate

4️⃣ Richemont – a strong jewelry business

5️⃣ Kering – a turnaround with higher risk

If I had to pick a company that best fits my investment philosophy, I’d probably watch Ferrari and LVMH the most.

Ferrari because of brand strength, scarcity and extreme pricing power.

LVMH because of diversification, the quality of its brand portfolio and its long-term ability to survive weaker cycles.

Hermès may be the highest-quality business, but for me the main question there is valuation.

---

Why might luxury be interesting now?

Because expectations are no longer overly optimistic.

A few years ago the market felt that luxury would grow almost without pause.

China was strong.

Wealthy customers were spending.

Margins were high.

Stocks were trading at premium valuations.

Today the mood is different.

Investors are more cautious.

China is an unknown.

Growth has slowed.

Valuations have fallen.

And it’s precisely at moments like these that I think it’s worth starting to watch quality brands.

Not because the bottom has to be right now.

But because the best buys often happen when a quality company temporarily looks less attractive.

---

However, risks should not be ignored.

Luxury can stay weak longer than you think.

If the Chinese consumer remains under pressure, the whole sector will feel it.

If the global economy worsens, the aspirational customer may cut back on spending.

If tariffs or currency pressures arrive, margins may suffer.

If a brand starts to stretch too much and loses exclusivity, it can damage its moat.

And if you buy even a quality company at too high a valuation, the return may not be good.

That’s why I wouldn’t buy luxury blindly.

---

My point is simple:

The luxury sector today is not without risk.

But that’s precisely why it’s becoming interesting.

The best luxury firms have something that’s very hard to copy:

a brand, history, status, scarcity and pricing power.

And if these companies temporarily fall due to weaker sentiment, it can be an interesting opportunity for a long-term investor.

Not all companies in luxury are the same.

Ferrari is not Kering.

Hermès is not ordinary fashion retail.

LVMH is not an ordinary consumer company.

And that’s why you need to differentiate.

---

My current luxury watchlist:

🔹 Ferrari

🔹 LVMH

🔹 Hermès

🔹 Richemont

🔹 Kering

Of these, I’d personally watch Ferrari and LVMH the most.

Ferrari as a pure scarcity/brand play.

LVMH as a diversified luxury giant.

Hermès as the highest-quality but often the most expensive business.

Richemont as a strong jewelry compounder.

Kering as a riskier turnaround.

---

Conclusion?

While many investors today chase AI, chips and tech momentum, I try to also look where sentiment is weaker.

The luxury sector is exactly that kind of area.

It’s not automatically cheap.

It’s not without risk.

But with the right company, the right price and a long horizon it can be a very interesting space.

Top luxury brands don’t just sell a product.

They sell status, emotion and scarcity.

And that’s a moat that can’t be easily copied.

This is not investment advice. It’s just my personal view on the luxury sector and why I’m currently following it

At the same time, the battle for the "throne" in European EVs is proving to be much fiercer than it might have seemed a few years ago. Tesla is regaining traction in the region after a weak period, but Chinese brands are stepping on the gas even faster. Meanwhile, European brands are facing dual pressures - regulations and emissions targets on the one hand, and an aggressive price and product offensive from China on the other.

April in Europe: battery cars drive market growth

April's figures clearly show that sales growth in the EU is now driven by pure electric cars. While the overall market added just over 5%, battery electric vehicles (BEVs) jumped by almost 37-38%. In other words: while overall registrations are growing slowly, the BEV segment is expanding at several times the rate and stealing an increasing share of the market.

In the first four months of 2026, new car registrations in the European Union increased by 4.2%, with the share of battery electric vehicles rising to around 19.7% compared to around 15.3% in the same period last year. This is not a cosmetic shift, but a structural change - almost one in five newly registered cars in the EU is already pure electric.

Tesla $TSLA: From European downturn to visible recovery

Even at the beginning of the year, Tesla seemed to be losing its breath in Europe. Competitive offerings had expanded, the EV price war was squeezing margins, and Chinese brands began flooding the market with cheaper models. But April signalled a turnaround.

Tesla's registrations in the EU jumped 67.2% year-on-year to 9,169 cars. Market share rose from around 0.6% to 0.9%. At first glance, this may seem like a small number, but in the context of a short monthly timeframe, it's a strong signal that Tesla is breathing again after a prolonged lull in the European market. In aggregate for the period January to April, Tesla increased its registrations in the EU by 61.7%, underlining that this is not just a one-off blip.

There are several reasons. Tesla has a history of aggressive pricing adjustments to bring its models closer to a wider audience in Europe. At the same time, it benefits from a still-strong brand and an extensive Supercharger network that remains a competitive advantage in the perception of ordinary customers. Yet it is clear that in Europe Tesla is no longer a clear synonym for the electric car, but one of the more significant players.

The Chinese offensive: BYD, Chery and MG take a bigger slice of the pie

While Tesla is growing again in Europe, the momentum of Chinese brands is even more pronounced. BYD more than doubled its car registrations in the EU in April. Chery, which is still less well known in Europe than BYD $BY6.F, managed to almost quadruple registrations year-on-year. And SAIC, which operates in the European market mainly through its reborn MG brand, reported growth of around a quarter for April.

For the first four months of 2026, the numbers look even more convincing. Tesla may have added about 61.7%, but BYD shot up about 153% in the same period. This means that while Tesla is still nominally selling more in Europe, the pace of growth and gradual erosion of market share is now primarily driven by Chinese players.

This development comes despite growing trade frictions between the EU and China. Brussels is considering tariffs and restrictions on imports of Chinese electric vehicles in response to massive state support for domestic manufacturers in China. But so far this has not prevented Chinese brands from growing rapidly. If the EU does indeed move to more significant tariff barriers, this could slow expansion in the short term, but in the long term Chinese manufacturers are likely to seek to locate some production directly in Europe.

Who really "rules" the European EV market today

The question of who rules the European EV market has no simple answer. In terms of absolute number of vehicles sold and penetration in Western European markets, Tesla still holds a strong position, along with European brands such as Volkswagen $VWAGY, Stellantis $STLA or Mercedes $MBG.DE. But if we look at growth dynamics, rate of share gain and pricing pressure, it is the Chinese brands led by BYD and MG that come out as the most aggressive players today.

So the reality is that the European throne is not firmly in the hands of one manufacturer. Tesla is rising again and showing that it is not a write-off. Meanwhile, Chinese companies are using a combination of scale production, lower costs and aggressive pricing to get the biggest piece of the pie. European carmakers stand in the middle: they have strong brands and a local presence, but must manage the transition to electric mobility without losing margins and market share.

For an investor, it is crucial to distinguish between two levels:

• who is selling the most today

• and who is growing the fastest and has the best chance of being king tomorrow.

In the first case, Tesla and traditional European manufacturers still have a significant role to play. In the latter, however, the Chinese players stand out the most and could fundamentally redraw the map of the European EV market within a few years.

The implications for investors

Fresh data shows that the European EV market has moved from an early growth phase to a fiercely competitive one.

• Tesla is showing that it can resume growth after a period of weakness even in a challenging environment, but it no longer has a monopoly on the perception of the "modern" EV.

• Chinese brands are proving that their expansion is not just a marketing story, but backed up by real growth in registrations and an increasing presence on European roads.

• European carmakers will have to innovate faster, streamline production and adapt to the price levels set by Chinese competition - otherwise they may gradually lose share in their home region.

Except that a second look complicates the story considerably. The same governmental power that in one document wiped out over 70% of the company's market value in July 2021 and wiped out the entire commercial K-9 tutoring sector in China still exists and can still change the rules. The firm operates through a VIE structure, effectively through contractual arrangements, not direct ownership of Chinese assets, a legal fiction that can cease at any time. The shares are listed in the US as ADRs, so the risk of delisting from US exchanges also hangs over them if the geopolitical climate worsens or if regulators tighten audit requirements for Chinese companies. All of this together paints a picture of a stock that is cheap by the numbers but expensive by the hidden risks that the spreadsheets don't capture.

Top points of analysis

• The company completely rebuilt the business after the devastating ban on commercial K-9 tutoring in July 2021, when the stock lost over 70% of its value in one day; the new model is built on non-academic enrichment education (STEAM, humanities, sports), AI-powered learning devices, and international expansion under the Think Academy brand.

• FY2026 revenues reached $3.02 billion (+33.7% YoY), net income jumped to $532.7 million (+530% YoY) and full-year operating cash flow reached $601.5 million - numbers that objectively reflect a functioning business with real demand.

• On balance, the company holds over USD 2.1 billion of net cash plus short-term investments and almost zero debt, while the enterprise value is negative (around -USD 683 million) - the stock is essentially trading below the net cash on the balance sheet.

• P/B valuations of 0.18× and P/S of 0.25× are extremely low even for the Chinese edtech sector and reflect solely regulatory and geopolitical discount, not poor operating performance.

• The key structural risk is threefold: regulatory (Beijing may change the rules again), legal (the VIE structure does not guarantee a minority shareholder a direct claim on assets) and geopolitical (the threat of delisting from the NYSE if US-China relations deteriorate or HFCAA audit requirements are not met).

• Think Academy is expanding internationally into the US, UK, Singapore, Australia, Canada and Malaysia as diversification from the Chinese regulatory environment, but this component is only a fraction of revenues so far and the time required to make a meaningful contribution is on the order of years.

Company introduction

TAL Education Group $TAL is a Chinese edtech firm with a history dating back to 2003 when it was founded in Beijing as a math tutoring center called Xueersi (Learn and Think) by Bangxin Zhang and Yunfeng Cao with an initial capital of RMB 100,000. From a modest math tutoring business, the company grew to become one of the largest private education companies in China by 2020 with a market capitalization exceeding US$50 billion. Then came July 2021.

A July 2021 government document - Opinions on Further Alleviating the Burden of Homework and After-School Tutoring - transformed the entire sector overnight. The ban on commercial tutoring of academic subjects for K-9 students (grades 1-9), the ban on weekend and holiday tutoring, the re-registration of all remaining entities as non-profits - all effectively destroyed the primary business of TAL, New Oriental, Gaot and dozens of smaller players. The combined market capitalization of the three largest firms fell from $100 billion to $8.4 billion in a matter of weeks.

From the rescue situation, TAL built a new business around three axes: non-academic enrichment programs (STEAM, sports, arts, humanities) under the Peiyou brand, AI-integrated learning devices (Xueersi xPad, AI Think 1-1, Thinkacdmy tablet), and international expansion under Think Academy into the English-speaking world. The company is headquartered in Beijing, employs approximately 15,000 people, and lists its stock on the NYSE as an ADR.

Business and segments

The core of today's business is Learning Services - offline Peiyou centers and online enrichment courses. The offline Peiyou network provides face-to-face classes in STEAM, humanities, sports and other non-academic education at its own centers across China. Online enrichment courses then deliver education with virtual environments, gamified elements, and interactive literary scenarios. The key growth driver is enrollment growth, not price increases - average selling price remained relatively stable in Q3 FY2026 while volume grew.

Instructional facilities are the second component - and potentially the most interesting from a story perspective. The Xueersi xPad is a premium educational tablet that management claims is a top-3 seller in the premium educational tablet segment in China. The average selling price of the device was approximately US$550. The AI Think 1-1 segment facilitated over hundreds of thousands of hours of guided learning, and AI assistant Xiao Si was activated by students over one billion times in 2025. But management's note is crucial: the devices are still operating at a loss, and the timeline for reaching the break-even point remains uncertain.

The third component is international expansion, primarily Think Academy, which operates in the US, UK, Singapore, Australia, Canada and Malaysia as a math school for K-12 age children. Think Academy UK is an accredited organization offering mathematical thinking courses for children; Think Academy US has a physical center in San Jose, California. This arm is small in volume for now, but strategically important - diversifying regulatory exposure and testing the company's ability to compete in highly competitive Anglo-Saxon markets.

Market, position and competition

The Chinese market for non-academic education and enrichment programmes will undergo a dramatic restructuring post 2021. The ban on K-9 academic tutoring wiped out 83.8% of offline and 84.1% of online providers, according to the Ministry of Education. Ironically, this has opened up space for companies like TAL and New Oriental in the non-academic segment, where regulatory pressure is much lower because STEAM and enrichment are not "academic subjects" in the Double Reduction policy definition.

The closest competitor is New Oriental Education & Technology Group $EDU, which has undergone a comparable transformation and now competes with TAL in the same segments - offline enrichment centers, online courses, educational facilities and international expansion. Both companies have benefited from market consolidation post 2021 and both are reporting strong growth today. Other players include Gaotu Techedu and a number of smaller local and online platforms. In the AI educational devices segment, they then compete with general hardware manufacturers integrating educational content.

TAL differentiates itself from New Oriental with a stronger focus on AI technologies (MathGPT, its own LLM model for education), a more aggressive approach to hardware-software integration and a slightly less diversified portfolio - New Oriental has a stronger position in overseas training and adult language courses.

Management and strategy

CEO Bangxin Zhang, the firm's founder, has led TAL since its inception in 2003. This combination of a founding personality with over twenty years at the helm brings a consistent strategic view and strong technology leadership, but as with other firms, raises the question of leadership diversification. Operating and financial results are presented mostly by President and CFO Alex Peng, who communicates conservatively and repeatedly warns against over-reliance on a single quarter to estimate margins.

The strategic narrative is clear: TAL presents itself not as a tutoring company, but as a "technology-driven learning company." Investments in MathGPT, a proprietary LLM focused on education and math, AI assistant Xiao Si, and gamified learning environments show where management sees a long-term competitive advantage. The CES Innovation Award for AI Buddy in 2026 is external validation that technology products are not just marketing claims.

The $600 million buyback program authorized in July 2025 is a signal to investors that management believes the stock is undervalued - between August 30, 2025 and January 6, 2026, the company repurchased 844,856 shares for approximately $27.7 million. This is a positive gesture on management's part, but a modest move so far in terms of absolute volume ($27.7 million out of 600 million authorized).

Financial performance

The financial data from the last four fiscal years (February 2023 to February 2026) tell a remarkable story of restart:

In FY2023 (Feb 2023), the company reported revenues of $1.02 billion and an operating loss of $90.7 million - the business was just finding a new model after the devastation of 2021. In FY2024 (Feb 2024), revenues jumped to $1.49 billion (+46%), but the operating loss did not close. FY2025 (Feb 2025) brought revenues of USD2.25bn (+51%) and a historic breakthrough - positive EBIT of USD132m for the first time since 2021. FY2026 (Feb 2026) then brought revenues of USD3.02bn (+34%), EBIT of USD277m and net income of USD532m.

Gross margin exceeded 54% in FY2026, an exceptional figure for the combination of offline education, online courses and hardware. Operating margin of 5.83% is low on the face of it, but reflects active investment in expansion - new Peiyou centers, AI product development and marketing spend. The net margin of 14.51% is then above the operating margin due to non-operating income from the cash position.

Q4 FY2026 specific: sales of $802.4m (+31.5% YoY), non-GAAP operating income of $72.5m and strong free cash flow. Management describes results as robust across all three segments - learning services, content solutions and learning devices.

Cash flow and balance sheet

Here's where the TAL story is most surprising to the uninformed observer. As of November 2025, the company reported $2.146 billion in cash and cash equivalents, another $171.1 million in short-term investments, and $339.3 million in restricted cash. The total net cash position exceeds $2.5 billion, while the total market capitalization of the stock is approximately $681 million.

This implies a negative enterprise value of approximately minus US$683 million - the company is trading for less than it has net cash on the balance sheet, and on top of that you get a business with US$3 billion in annual revenues. In classic value logic, this would be an immediate buy. The problem - and this is fundamental - is that this cash is physically in China, denominated largely in RMB, and the Chinese regulator controls how much of it is allowed to cross the border.

Operating cash flow for FY2026 was US$601.5m, FCF margin 18%, debt virtually zero (debt-to-equity 0.10), current ratio 2.17. This is an almost flawless balance sheet in terms of liquidity and solvency. The Altman Z-Score of 2.80 is in the "grey zone" (below 3), but this reflects the specifics of the model rather than real financial risk.

Valuation and discount

Valuation is probably the most interesting part of the whole analysis. A P/B of 0.18× is an almost absurd number for standard markets; a P/S of 0.25× would be considered an extraordinary opportunity for any other company with 34% revenue growth and 54% gross margin. A P/E of around 6-7× in a world where the average tech or edtech title trades at tens of multiples of earnings seems like a gift.

Why is it this cheap? Because the valuation carries four layers of discounts:

Regulatory discounting: Beijing did it once and may do it again. The current business targets non-academic enrichment, but the boundaries of what the government will and won't accept may shift. Xueersi Xuersi was accused of running banned tutoring activities under the guise of "enrichment" courses in 2023, and the firm eventually settled the investor dispute with a settlement.

VIE discount: foreign investor owns shares of Cayman Islands holding company, not directly Chinese assets. The entire control structure is based on contractual arrangements that a Chinese court may not enforce in every situation.

Cash repatriation discount: more than US$2.5 billion of net cash is available primarily in China and the movement of capital across borders is subject to regulation.

Delisting discount: U.S.-China tensions, HFCAA audit requirements, and geopolitics all combine to increase the likelihood of a scenario where the stock ceases to be listed on the NYSE.

Conservative projections

Under conservative assumptions - slowing revenue growth to 15-20% annually (after the peak of the reboot), stabilizing operating margin around 7-9% and continued buybacks from cash:

FY2027 revenue around US$3.4-3.6bn, net income around US$350-450m. A P/E multiple of 10x would imply a market capitalization of USD 3.5-4.5bn and a share price of around USD 18-23 vs. around USD 11 today. That would be a healthy yield, but only if regulatory and geopolitical risk doesn't materialize.

In a more aggressive scenario - if the learning devices reach break-even, Think Academy contributes meaningful income and the market closes some of the regulatory discount - the target potential is significantly higher.

Critical conditionality: any projection of TAL's share price is conditional on Beijing leaving today's regulatory framework unchanged. This is a conditionality that is not directly influenced by the analyst or investor.

Risks

Regulatory risk is existential and not subject to analysis - it can only be accepted or rejected. The year 2021 has shown that the Chinese government is willing to destroy a billion dollar sector in a matter of weeks with no prior signal and no compensation. Today's TAL business targets non-academic enrichment, but the definition of "non-academic" is in the hands of the regulator. The 2023 lawsuit for continuing prohibited activities under the guise of enrichment courses is not encouraging.

VIE risk is structural and applies to all Chinese ADRs, but is particularly acute in the edtech sector because Chinese law explicitly restricts foreign ownership of education companies.

Geopolitical risk in the form of delisting would create a serious liquidity problem for investors outside Hong Kong - TAL does not have a full dual listing on the Hong Kong stock exchange, unlike Alibaba $BABA or JD.com $JD.

The cash trap: more than $2 billion of net cash looks great on paper, but unless the company can meaningfully return it to shareholders or use it for acquisitions outside China without regulatory permission, it is less valuable from a foreign investor's perspective than the balance sheet number suggests.

Competition in learning devices: Samsung, Huawei, and a number of smaller Chinese hardware firms are integrating educational AI into tablets; TAL must compete with significantly larger firms in the hardware segment, while its advantage lies in content and pedagogy.

Investment scenarios (3-5 years)

Optimistic scenario: regulatory environment remains stable, enrichment programs continue to grow 15-20% per year, learning devices reach break-even, Think Academy exceeds 10% of revenue, and the market gradually closes the regulatory discount. Share price shifts to $20-25, buyback program reduces share count and increases EPS. Total return in 3-5 years may exceed 100%.

Realistic scenario: revenue growth slows to 15% per year, margins stabilize, regulatory environment remains unclear without significant deterioration. The discount to NAV will partially close, but not completely - the market will retain a premium for regulatory risk. Share price moves to $14-18, total return over 3-5 years around 30-60%.

Pessimistic scenario: the Chinese regulator tightens the definition of "enrichment" courses or imposes new restrictions on edtech hardware, the company has to restructure again, revenues fall and the share price returns to USD 5-7. U.S. delisting could dramatically worsen the situation.

What to take away from the article

The company is a fascinating example of corporate resilience - from zero to $3 billion in revenue in four years, with a functioning business, a strong balance sheet and real technology products.

The valuation is statistically extremely attractive - negative enterprise value, P/B below 0.2x, P/S below 0.3x - but these numbers are cheap for a good reason, namely because the real risks are not captured in the financial statements, but in the geopolitics, regulation and legal structure.

For an investor with a high risk tolerance and the knowledge that they are buying a de facto Chinese regulatory option - a bet that Beijing won't tighten the rules - a small position can be interesting.

For a conservative or intermediate-risk investor, this is a title where even the excellent numbers of the past four years do not outweigh the risk that the 2021 scenario could repeat itself in a different form.

Final view

"Sit on the fence amid uncertainty" describes the situation accurately. The company is doing the right things - investing in AI, expanding internationally, buying back cheap shares and showing strong growth. The business model without K-9 academic tutoring is more regulatory compliant than in 2020. And yet: the government's 2021 plan was not an economic mistake, but a political decision. Policy decisions are not analyzed, but respected.

For an investor, this stock is essentially a bet that Chinese government policy in the edtech sector will remain predictable - and the historical record says that this bet has a chance to work, but has never had a guarantee. Still, if we want to have exposure to China's education boom with an AI element, TAL is one of the highest quality operators with the strongest balance sheet of the available titles.

McDonald's is one of the most recognizable brands in the world, but few people truly understand how the company makes money. The biggest misconception is the idea that it is primarily a company that makes money from selling food. In reality, it operates primarily as a real estate and licensing platform that generates an extremely stable and predictable cash flow, no matter how many burgers are sold each day, thanks to an extensive network of partners. With more than 45,699 restaurants in more than 100 countries, sales in excess of $140 billion annually, and a digital ecosystem with more than 210 million active loyalty program members, McDonald's is one of the most resilient consumer companies in the world.

Yet the stock is trading just above its annual low in 2026. Since the peak in late February, the stock is down 18%.

Why the stock is down despite strong results

McDonald's stock has weakened about 9.6% since the start of 2026, significantly underperforming the Dow Jones Industrial Average.

But at the same time, the company has reported very strong results. In the first quarter of 2026, it reported its fastest revenue growth in eight quarters, beating analysts' expectations on both earnings per share and comparable sales. However, after an initial positive reaction, the market reversed course after management warned of a more cautious outlook for the period ahead.

Factors behind the decline

• Change in growth structure: McDonald's has been increasing sales in recent years primarily due to higher prices and higher average spend per customer. However, investors are concerned that this model is starting to hit limits and the company will have to rely more on traffic growth, which typically yields lower margins.

• Insider sales: In the past 90 days, company executives, including U.S. segment president Joseph Erlinger, have sold about 71,000 shares worth about $23.3 million. The market often sees such transactions as a signal of increased caution by management.

• Pressure on low-income consumers: CEO Chris Kempczinski said during the earnings call that the economic situation for this group is not improving and in some cases is even getting worse. Higher fuel prices and persistent inflation continue to weigh on households, which make up an important part of McDonald's customer base.

• Competition: Burger King reported 5.8% growth in the same quarter, while McDonald's reported 3.9% growth. This shows that the battle for the price-sensitive customer is becoming much more aggressive.

The business model

Approximately 95% of the 45,699 restaurants are operated by partners. But the key point is that McDonald's owns or has long controlled the real estate of a large proportion of these outlets. Franchise partners thus pay not only royalties to the company, but also rent.

Licensing fees are typically around 5% of restaurant sales. In addition, lease agreements often contain inflation clauses or are linked to the development of sales of the establishments, which allows the company to increase revenues almost automatically over time.

This is where McDonald's real strength lies. Ray Kroc understood in the 1950s that the greatest value lies not in selling food, but in owning premium commercial real estate. Today, McDonald's Real Estate Company manages over $40 billion in real estate assets. This model allows the company to achieve operating margins of around 45% to 48%, which are extraordinary for the consumer sector.

The model has another major advantage. Operational risk is borne primarily by the partner. If an individual restaurant slows down or comes under pressure, McDonald's still collects rent and royalties.

The result is an extremely capital-efficient business. Although system-wide sales for the entire chain exceed $140 billion a year, the corporation itself reports its own sales of "only" about $27 billion. This is why McDonald's can generate ROIC of around 25% to 30% over the long term, which is exceptional for virtually any consumer business.

Moreover,Morningstar calls McDonald's a wide economic moat, or wide moat, company precisely because of its combination of brand strength, real estate barrier to entry, and extensive digital ecosystem.

The latest earnings in detail

McDonald's Q4 2025 results represented a significant turnaround for McDonald's following the E. coli scandal in the fall of 2024. Revenue rose 10% year-over-year to $7.01 billion, beating analyst expectations of $6.84 billion. Adjusted earnings per share came in at $3.12, also beating market consensus.

US same store sales were also very strong, up 6.8% against expectations of around 3.9%. The company closed the full year 2025 with sales of $26.89 billion and net income of $8.56 billion.

The first quarter of 2026 then delivered the strongest year-over-year sales growth in eight quarters. Consolidated sales reached $6.52 billion, representing year-over-year growth of 9.4% and beating consensus of $6.47 billion.

Adjusted EPS came in at $2.83 versus expectations of $2.74. Systemwide sales were up 11% and 6%, respectively, in constant currencies. Operating profit rose 12% to $2.95 billion and adjusted operating margin was 46%.

The strength of the franchise model remains a very important signal. Franchise profits exceeded $3.6 billion, confirming the strong resilience of the business as a whole, even in a weaker consumer environment.

The company also continued to return capital to shareholders. During the quarter, it paid a dividend of $1.86 per share, representing approximately $1.3 billion, while repurchasing 1.3 million of its own shares for $393 million.

Still, management warned during the earnings call that the second quarter of 2026 could be more challenging. This is due to high prior-year comparative bases and continued pressure on low-income consumers.

The company also reaffirmed its full-year targets for 2026:

• Operating margins in the mid to upper 40% range

• opening of approximately 2,600 new restaurants

• net system growth of approximately 2,100 locations

Digital transformation: loyalty program as a new growth engine

One of the most important changes in recent years has been the digital transformation of McDonald's.

Over the past two years, the company has invested heavily in its digital loyalty platform, which now includes more than 210 million active users across more than 70 markets.

During Q1 2026 alone, digital revenue generated through the loyalty program exceeded $9 billion. In the last 12 months, digital sales have then reached approximately $38 billion.

From an investor's perspective, this is an extremely important metric. The digital ecosystem:

• reduces the dependence on purely cyclical restaurant traffic

• enables personalised marketing campaigns

• increases average customer spend

• creates a valuable database of consumer behaviour

The company launched the McValue platform in 2025 and expanded it to include 10 more items under the $3 threshold in April 2026.

At the same time, the company is developing a beverage segment inspired by CosMc's concept and partnering with Google Cloud to implement AI technology in drive-thru establishments.

Financial Profile: High margins, but also high debt

McDonald's is also specific to its balance sheet structure.

The company's total debt stands at approximately $54.8 billion, while its cash position is roughly $774 million. Thus, the net debt is around $54.1 billion.

The net debt to EBITDA ratio is approximately 3.7 times, which is a relatively high level for some institutional investors, especially in a higher interest rate environment.

But this capital structure is no accident. McDonald's has long taken advantage of the stable cash flow from its franchise model to fund dividends and share repurchases through cheaper debt capital.

Free cash flow over the past 12 months has exceeded $7.6 billion, allowing the company to continue to make very generous returns on capital to shareholders.

The annual dividend is currently $7.44 per share and the payout ratio is around 60%.

In addition, McDonald's is one of the dividend aristocrats and has increased its dividend for 49 years in a row.

At the current share price, the dividend yield is around 2.6%. Estimated long-term dividend growth of around 6% per annum combined with expected EPS growth of around 8% per annum creates an attractive profile, particularly for long-term oriented dividend investors.

McDonald's in 2026 offers exactly the type of investment mismatch that long-term investors are most interested in: the stock declines while the business grows.

For the patient investor with a horizon of three years or more, $MCD in the current price range of $280 to $285 is an interesting position, not an obvious trap. The key test will be the July 29, 2026 report: if comparable sales in Q2 hold positive territory despite challenging benchmarks and continued consumer pressure, the market is likely to reassess the overly pessimistic discount it has built into the stock in recent months. Conversely, if traffic remains negative even with the support of the McValue platform, the question of the model's structural resilience to changing consumer behavior becomes legitimate and valuations will need to reflect a lower growth trajectory.

Which camp are you in? Micron — sell/buy more/hold? For my part, I can say I’ll keep holding. I don’t know how sci‑fi the 1 625 price tag is, but I still see room for growth.

At what price did you manage to buy Micron, whether this year or in previous years?

For investors, it was a moment of confirmation: the strategy Qualcomm has been talking about for the past few years was starting to be visible in concrete customer contracts. And because ByteDance is one of the world's largest builders of AI infrastructure, the weight of this contract goes beyond the order numbers alone.

Qualcomm at all-time high after report leak

On Tuesday, Qualcomm $QCOM stock jumped to an all-time high of $248, with a total daily gain of approximately 4.4%. Shares tacked on well over 8% during trading before correcting slightly by the closing bell.

To give you some context, Qualcomm had gained more than 43% over the previous 12 months, and the ByteDance deal was the latest major catalyst in a string of positive news that has pushed the stock higher since the spring results. In late April, Qualcomm added over 13% in a single day after earnings, as CEO Cristiano Amon convinced investors that the smartphone market recovery and data center expansion could run in parallel.

What exactly ByteDance is buying from Qualcomm

According to sources at Bloomberg and Reuters, ByteDance is set to buy millions of ASICs, or application-specific integrated circuits, from Qualcomm. ASICs are chips designed for a very specific type of computing task, as opposed to generic GPUs or CPUs. In this case, they are meant to serve as the basis for ByteDance's AI agent software, the autonomous AI systems the company is developing for various products and platforms.

The contract has two components:

• Qualcomm will supply finished ASIC chips in large volumes

• it will also help ByteDance complete and prepare for mass production a custom chip that the company has designed internally but needs support for the manufacturing process

It is this second part that is strategically interesting for Qualcomm, as it shows that the company wants to be not just a supplier of a finished product, but also an industry partner for the design and manufacture of its own hyperscaler chips. This is exactly the model that leading ASIC consulting houses have long been betting on, and gives Qualcomm a potentially deeper and more lasting relationship with its customers.

Neither Qualcomm nor ByteDance have publicly confirmed the contract, and Reuters has not been able to independently verify the report. Bloomberg published it based on sources familiar with the negotiations.

Regulatory full stop: the contract should not violate export rules

A sensitive issue with any chip contract between a U.S. firm and a Chinese buyer is the current U.S. export restrictions. These prohibit the sale of the most advanced AI chips to China without special licenses and have caused Nvidia billions of dollars in losses.

In the case of Qualcomm and ByteDance, the situation looks more favorable. According to Bloomberg's sources, the chips are within the allowable limits of computing power defined by US export rules. This means that manufacturing partners like TSMC $TSM would not be in violation of U.S. regulations when producing these chips for ByteDance as long as the products do not exceed the established performance thresholds.

This is a key difference from Nvidia's situation. Nvidia had to develop a specially watered-down H20 for the Chinese market, and even that was subjected to further export restrictions in April 2025, causing the company to take a $5.5 billion write-down. Qualcomm's ASICs are designed for a different type of AI task, and are apparently below the threshold where US regulations hit the hardest.

ByteDance: 200 billion yuan for AI infrastructure in 2026

To give some context as to why ByteDance is making such contracts: the company plans to invest about 200 billion yuan, or roughly $29 billion, in AI infrastructure in 2026, up 25% from the 160 billion yuan originally planned late last year.

About half of this budget is allocated to the acquisition of AI chips and processors. ByteDance is making a parallel effort:

• keeping up with competitors in developing its own AI models

• ensure sufficient computing capacity at a time when access to the most advanced Nvidia chips remains limited

• and diversify chip suppliers to avoid dependence on a single source

ByteDance's global data centers are located in Southeast Asia and Europe. In Thailand, the company won approval for a $25 billion data center. In Europe, ByteDance, through TikTok, is investing over €12 billion in so-called Project Clover, which includes two data centers in Finland for a total of €2 billion. This geographic diversification helps the company circumvent various regulatory pressures while building infrastructure closer to local users.

Qualcomm beyond smartphones

Qualcomm has been known as the dominant manufacturer of Snapdragon chips for smartphones for decades. But the smartphone market has slowed, and Qualcomm has been trying to reduce its dependence on this segment for several years.

CEO Cristiano Amon described a 3-point plan for data centers at an investor conference in April:

• Custom ASICs for specific customer needs (exactly where the ByteDance deal is headed)

• Inference accelerators for general AI computing in data centers

• and central processing units (CPUs) for server deployments

This ambitious plan will get its full investor pitch on June 24, 2026 at the planned Investor Day in New York, where Amon and Qualcomm executives plan to present specific numerical targets and a product roadmap for data centers, industrial AI, and "physical AI" (robots, autonomous systems).

The ByteDance deal comes at an ideal time: it's a direct confirmation of the thesis that Qualcomm can pull hyperscalers into the ASIC segment before this plan makes it to the annual presentation.

Qualcomm vs. Nvidia: different segments, different risks

From an investor's perspective, it's important to understand what exactly is and isn't at stake. Qualcomm is not challenging Nvidia in the GPU segment for training AI models, where Nvidia holds a dominant position and where the barriers to entry are extremely high. Qualcomm is targeting a different segment:

• ASIC chips for specific AI applications and AI inference

• Customers who want to "tailor" their own silicon to their own workloads

• and manufacturing and design support for hyperscalers who want less dependence on Nvidia GPUs

Qualcomm is in a much more open battle in this segment, and the ByteDance deal shows it has a real product that customers are willing to pay for. At the same time, Qualcomm also faces direct competition: in the ASIC and custom silicon segment, Broadcom $AVGO, Marvell $MRVLicloud giants like Google $GOOG (TPU) and Amazon $AMZN (Trainium) are active.

What to watch for Qualcomm in the coming quarters

From an investor's perspective at Qualcomm, there are three key questions following the ByteDance contract:

How big is the actual business weight of this contract? The "millions of chips" line number without a stated financial value does not allow for accurate modeling of the impact on revenue. Qualcomm has not yet released any financial numbers, and Bloomberg has not mentioned the exact value of the contract.

Will more big customers come? ByteDance is supposed to be one of the first, but Qualcomm has talked about working with an unspecified hyperscaler whose name it still hasn't revealed. June's Investor Day should provide at least hints.

How will the regulatory environment evolve? The ByteDance contract seems to remain in a regulatory safe zone, but geopolitical tensions around China's tech sector are changing quickly. Any tightening of export rules could also affect the ASIC segment, which Qualcomm now openly positions as one of its key growth pillars.

For investors, it's an interesting paradox: Target had three years of declining revenue under its belt, and new CEO Michael Fiddelke was planning to spend another $2 billion on stores, renovations, and AI - while at the same time the variable costs of the actual "brains" to deliver that turnaround were rising. So AI went from being a marketing buzzword to an item that architectural teams and senior management are addressing at the "what exactly does that do to our margins and capex" level.

From "we have AI somewhere" to "we're working with AI"

Zimmerman described two key shifts:

• Target $TGT has moved from AI pilot projects to having AI embedded in core processes - inventory planning, pricing, personalization, promotions management, logistics.

• But at the same time, it started pushing for "intentional use" - i.e. not AI everywhere, but AI where it has a clear business impact: faster inventory turnover, less depreciation, better product mix, higher basket per customer.

For the retail chain, this makes sense:

• AI can tell you exactly what to stock in a particular location.

• when to re-price seasonal items so they don't sell below cost

• or where it makes sense to send your own brand into direct competition with a discounter

But every such "smart" feature now means specific token consumption and a bill to the model provider.

Token AI: why it started to hurt Target

The second level is purely cost. OpenAI, Anthropic and others are moving to a model: you pay for what you actually use - the number of tokens when you run models, the breadth of context, the type of model. This is for the large enterprise:

• more flexible (you don't pay for capacity you don't use)

• but more risky (dependence on the volume of requests that you miss if you don't have good governance)

Zimmerman said bluntly that this shift "forced Target to rethink strategy." So the AI debate is taking place on two levels:

• in architectural forums (how to design systems to use tokens most efficiently)

• at the senior leadership level (how many AI initiatives can we realistically afford this year without eating into the budget)

This is an important signal to investors: AI adoption is no longer binary (have / have not), but about whether the company also has financial leverage in hand - sensible cost management around models.

India as the backbone: 40% tech people, focus on analytics

Target India is no longer a backoffice but a hub where AI and data translates into reality.

• Around 5,600 people work in Bengaluru, around 40% of Target's entire tech workforce.

• The teams cover merchandising, digital, stores and supply chain.

• The company is looking to further strengthen analytics there - especially the ability to turn huge volumes of data into quick insights: what's selling, where, at what price, how customers are responding to promotions, at what rate sentiment is changing.

The goal is to shorten the loop: data → insight → action. In retail, weeks make the difference: if we overprice a product when the customer has already left for a competitor, it's too late. AI and analytics in India are supposed to be exactly that "speed transfer".

Business context: three years of declining sales, $2 billion in AI and stores

Meanwhile, Target is not in a position to "painlessly experiment".

• The company's revenue has been declining for the last three years - pressure on price, some customers shifting to cheaper alternatives, weaker demand for discretionary goods.

• New CEO Michael Fiddelke has set a plan to increase capex by about $2 billion - a combination of new stores, remodels and AI initiatives.

• So the company will increase investment when the top line is stagnant or declining - making it a classic "turnaround + tech" story.

From a stock perspective:

• AI isn't just a cool topic for an earnings call

• but a tool that Target needs to use to fight its way back into revenue and margin growth.

• but at the same time, AI (via token pricing models) can make that plan more expensive

What should an investor address

Instead of asking "how much AI is Target using" it's more interesting to ask:

1. Where exactly is AI adding EBIT

   • Specific use-case: inventory management, pricing, promo personalization?

   • What are the expected impacts (lower markdowns, lower stock-outs, higher online conversions)?

2. How Target manages AI costs

   • Does it have internal metrics like "tokens/order" or "AI cost/saved markdown"?

   • Does it make more sense to build more on proprietary models vs. pure reliance on large providers?

3. Capacity to deliver change

   • 40% tech people in India is an advantage on the cost side, but also an organizational test: how well can they handle remote alignment between US business teams and Indian engineering?

The timing couldn't be better. Micron is experiencing arguably the strongest demand environment in its history: all of its 2026 HBM4 capacity is sold out in long-term contracts, server DRAM prices are up 60-70% year-over-year, revenue jumped 57% last quarter, and EPS grew 412%.

Top points of analysis

• Micron has started production of the most advanced memory technology made on US soil - 1α (1-alpha) DRAM - at its Manassas, Virginia facility; expects full production qualification by the end of 2026.

• The investment in Manassas exceeds $2 billion, with the federal government contributing $275 million. The project creates more than 3,100 jobs.

• The Virginia fab is part of a much larger $200 billion US investment plan ($150 billion for manufacturing + $50 billion for R&D) involving fabs in Idaho and New York; the goal is to produce 40% of all Micron DRAM in the US by 2030.

• Production in Manassas primarily targets long-term markets - automotive, defense, aerospace, industrial, networking and medical - where customers pay a premium for reliability and domestic manufacturing.

• The overall context is brutally favorable: all of Micron's 2026 HBM4 capacity is sold out, server DRAM prices are up 60-70% y/y, Q1 FY26 revenue jumped 57% to $13.6 billion, and EPS is growing at a crazy pace.

• Micron is the only US memory chip maker - that status gives it a strategic premium with US government, defense and AI hyperscalers looking to diversify dependence on Asian suppliers.

A small milestone with big context

On the face of it, this is industry news: Micron has started DRAM production in Manassas. In fact, it's the first visible step in one of the most ambitious industrial plans in the history of American chipmaking - a company that has bet $200 billion that the future of AI will need American-made memory.

Yet Manassas is a specific plant: it doesn't make HBM for large AI datacenters, but 1α DDR4 DRAM for "long-lifecycle" applications - automotive, defense, aerospace, industrial, medical. These are markets where customers don't prefer the lowest price, but reliability, certifications, long-term availability and increasingly domestic manufacturing origins. In other words, this is the foundation of American sovereignty in memory manufacturing and the first validation that the $200 billion plan is being put into action.

What's interesting to us as investors is that this move comes at a time when Micron is experiencing arguably the strongest demand environment in the company's history - and when it is transforming itself from a cyclical manufacturer to a structural beneficiary of AI infrastructure.

What happened at Manassas and why it's not just "another fab"

Micron's $MU plant in Manassas, Virginia has been around for over three decades and has long served as a hub for "specialty" and "long-lifecycle" memories. The latest major expansion came in 2018, when the company announced a $3 billion investment through 2030. In December 2024, the next step came: the Department of Commerce signed a tentative $275 million agreement to buy the company. USD 275 million from the CHIPS and Science Act to upgrade and modernize the plant; the total investment by Micron is expected to exceed USD 2.17 billion and create 340 new manufacturing jobs plus over 2,700 community positions on top of the project.

A key technology step is the start of production at the 1α (1-alpha) node. What it means exactly:

• 1α DRAM is a 14nm technology - the most advanced node Micron has ever deployed in Manassas, and the most advanced memory technology ever made on U.S. soil.

• Unlike cutting-edge HBM or LPDDR5 for AI servers, the 1α DDR4 at Manassas targets long-life markets: automotive (controllers, ADAS), defense and aerospace (military electronics, satellites, drones), medical devices, networking, and industrial automation.

• Manufacturing this node in the U.S. literally eliminates dependence on Taiwan and Asia for these critical applications - Micron has previously manufactured this technology exclusively in Asia.

Capacity-wise, the new node has a major effect: 1α DDR4 quadruples the performance of DDR4 wafers in Manassas compared to previous nodes. Micron expects full production qualification by the end of 2026, an industry-standard verification process after which production can be fully launched into customer contracts.

My thesis: why Virginia is not just CHIPS Act PR, but a strategic move

There's a temptation to see Manassas as a "political" move - CHIPS Act money, American jobs, pics with politicians. We see something more concrete.

Micron is the only U.S. manufacturer of memory chips. Samsung and SK Hynix are South Korean companies whose manufacturing sits mostly in Korea, China and other Asian locations. In an environment where the U.S. is building hundreds of billions a year of defense and AI infrastructure, "American-made memory" is a very tangible competitive advantage:

• DoD and government contracts have a strong preference for domestic suppliers and technologies with a clean "supply chain" - Micron is the only choice if a customer needs DRAM without Asian risks.

• Automotive and industrial customers looking to certify long-term memory availability outside of geopolitical risk (Taiwan Strait, Korean politics) have a clear domestic alternative in Manassas.

• Hyperscalers and cloud players who are publicly talking about supply chain diversification for AI infrastructure see Micron as a natural strategic partner.

This position is not a one-off, in our view: as Micron launches more factories (Idaho 2027, New York in the second half of the decade), overall US manufacturing capacity will grow, and with it the strength of this argument for customers.

What Micron's overall investment plan looks like: from Virginia to a $200 billion manufacturing empire

Virginia is just the first visible step of a much larger plan that Micron announced in June 2025 alongside the Trump administration:

Virginia (Manassas) - Today:

• Investment of $2.17 billion by 2030, $275 million by 2030. US$1 billion from the CHIPS Act.

• 1α DRAM production for automotive, defense, aerospace, industrial.

• Target: full production qualification by end of 2026.

Idaho (Boise) - first fab, start-up 2027:

• USD 25 billion investment in first leading-edge fab, DRAM production and HBM packaging.

• Second Idaho fab (additional USD 30bn) to come before New York.

• Location next to Micron's global R&D center will enable faster technology transfer.

New York (Clay) megafactory by end of decade:

• Largest project: up to 4 leading-edge high-volume fabs, original estimate of $100 billion over two decades.

• Preparations begin this year, first production in the second half of the decade.

Overall plan:

• USD 150 billion for production + USD 50 billion for R&D = approx. USD 200 billion by the end of the 30s.

• 6.44 billion from CHIPS Act ($6.165 billion for Idaho+NY, $275 million for Virginia).

• Target: 40% of all Micron DRAM production in the US.

• 90,000 direct and indirect jobs.

From an investor's perspective, this is critical: this is a multi-decade CAPEX plan that will result in Micron having a significantly more diversified and geographically robust manufacturing operation. Customers signing long-term contracts today are buying access to future capacity that will not be dependent on Asian politics.

AI context: why Micron is a very different company today than it was four years ago

While the Virginia fab serves "long-lifecycle" markets, Micron's overall story has changed significantly over the past two years - and Virginia is one part of a transformation that extends from commodity to AI infrastructure:

HBM as the new profit engine

Micron has strategically skipped HBM3 and bet all its strength on HBM3E and HBM4. HBM4 entered volume production in 2025 - with speeds of over 2.8 TB/s and 36 GB per stack - and is primarily designed for Nvidia's Vera Rubin architecture. The entire 2026 HBM4 capacity is sold out in long-term contracts. Yet the ramp rate is 2x faster than HBM3E, according to management.

Pricing power like the memory market has never seen before

Server DRAM prices up 60-70% YoY in Q1 2026, conventional DRAM up 55-60% QoQ, NAND up 33-38% QoQ. We're talking about leapfrog repricing in a segment that has historically been legitimately cyclical and where manufacturers have in turn struggled painfully to maintain prices. Today, on the other hand, Samsung and SK Hynix are rejecting long-term contracts and sticking to quarterly contracts in anticipation of further price increases.

The figures that confirm this

Micron reported Q1 FY26 revenue of $13.6 billion (+57% YoY), cloud memory segment +100% YoY, EPS grew 412% YoY. The outlook for Q3 FY26 (results around June 24) is targeting around USD 33.5bn in revenue. Analysts have price targets ranging from $800 (Mizuho) to $950 (BofA) to $1,100 (Melius Research).

Pivoting from consumer to AI

Micron is weaning its consumer brand Crucial and shifting the mix to high-margin server and HBM products. This is a symbolic but important move: the company is explicitly leaving the battle for lowest price in commodity memory and focusing on premium segments with pricing power.

Our assessment and scenarios

Why this is structurally different from previous AI cycles

The memory market has historically been brutally cyclical: boom, then oversupply, then margin squeeze. Why do we think this time might be different - at least for a longer period of time?

First, AI datacenter CAPEX is a multi-year commitment, not a single-year purchase. Microsoft $MSFT, Amazon $AMZN, Google $GOOG, Meta $META invest hundreds of billions a year and sign memory contracts (especially HBM) for years, not quarters. This gives Micron unprecedented revenue visibility.

Second, HBM is physically difficult to scale quickly. HBM production requires advanced packaging (stacking), which is capacity constrained and different from standard DRAM. Even if Samsung and SK Hynix want to aggressively add capacity, they face technological and manufacturing constraints.

Third, Micron is uniquely positioned as the only U.S. manufacturer, giving it a natural premium on defense and government contracts and a growing advantage with hyperscalers seeking supply chain diversification outside Asia.

Our scenarios for the MU investor:

Conservative scenario:

AI capex cycle fades faster than the market expects (around 2027-28), memory prices normalize, and Micron falls back into a more traditional cyclical model with lower margins. CAPEX of $200 billion is proving to be an exorbitant investment. The stock trades at a normalized P/E of ~12-15x, which at lower EPS would imply a significantly lower valuation than today.

Realistic scenario (our base):

AI infrastructure boom lasts until at least 2028-29 and beyond, HBM4 and next-gen hold pricing power, Micron's US expansion gives consistently higher margins and premium with government/defense customers. EPS continues to grow, stock gradually stabilizes from cyclical labels and gets higher multiple. Analysts have targets of $800-$1,100, and we think realistic fair value is somewhere in this range within 12-18 months.

Aggressive scenario:

Micron becomes the de facto primary US HBM vendor for government and enterprise, earnings from verticals (defense, health AI, autonomous vehicles) add a stable long-lifecycle layer to cyclical HBM and commodity DRAM. The company is rebalancing closer to high-quality semiconductor infrastructure players (ASML, TSMC style). In such a world, targets over $1,000 are not unrealistic.

Risks: what can break the story

1) The cycle will turn before capacity grows

Reinvestment in AI capex (hyperscalers will slow CAPEX), the arrival of new memory technologies, or geopolitical de-escalation around Taiwan could increase available capacity quickly and depress prices. Historically, the memory market overshoots both ways.

2) Competition in HBM will intensify

Samsung and SK Hynix are aggressively ramping up their own HBM capacity. SK Hynix now holds ~53% share of the HBM market. If catching up with the technology gap happens faster, Micron's pricing power will shrink. Moreover, both Korean players are actively fighting for the same engineers, including headhunting in Micron itself.

3) CAPEX risk and free cash flow

A $200 billion US investment is a giant commitment. Both FCF margins and dividend capacity may be under pressure for years of the investment phase. This is a standard "growth vs. cash" dilemma, but with an investment of this magnitude, it is a real risk for short-term shareholders.

4) Geopolitics and trade war

Restrictions on memory exports to China, tariff disputes, or attacks on Asian manufacturers can paradoxically hurt Micron in the short term (via supply chain disruptions and customer losses). In the long run, US manufacturing is a safety net, but in the short run these shocks are unpredictable.

5) Technological leapfrogging by competitors

If Samsung or SK Hynix achieve a significant technology leap in HBM4 or subsequent generations sooner, Micron could lose key collaborations at Nvidia and others. Meanwhile, Micron's business depends a lot on being designed into Vera Rubin and other AI platforms.

As we look at it

Our view is that this time the structural factor is stronger than the typical cycle - a combination of multi-year AI contracts, HBM physical bottleneck, US supply chain premium and a massive CAPEX plan that gives customers certainty of long-term availability. The start of production in Manassas is tiny compared to the overall plan, but it's the first physical proof that the $200 billion promise is not just a slide in an investor presentation, but a real build.

For the conservative investor, Micron is still a cyclical bet with significant beta and a potentially brutal drawdown if AI capex slows. For an investor who believes the AI boom is structural rather than cyclical and that US manufacturing is gaining a sustained premium, $MU looks like one of the most "undervalued quality" names in the entire sector - and the Virginia fab launch is exactly the type of milestone that shows the story is coming true.

In the current environment, analyst consensus is increasingly focused on companies that combine several key attributes. Structural growth opportunities linked to the digitisation of the economy, artificial intelligence or demographic trends. A strong competitive position with high barriers to entry for potential new players. And last but not least, the ability to generate stable cash flow even in a more challenging macroeconomic environment. It is these six stocks that have been the focus of analyst attention in recent weeks and months.

Mastercard $MA

Mastercard is one of the most significant players in the global payments infrastructure and one of the cleanest ways to invest in the ongoing digitization of financial flows. The company does not lend money or bear credit risk. Instead, it operates a network that processes payment transactions between banks, merchants and consumers around the world. This model allows it to generate very high margins with relatively low capital requirements.

It is the quality of Mastercard's business model that is often highlighted by analysts in their recommendations. The company benefits from every transaction passing through its network, with its costs growing significantly slower than the volume of payments processed. This creates extremely strong operating leverage. As the volume of cashless payments grows around the world, so does the value of Mastercard's platform. Moreover, the shift from cash payments to digital transactions is a trend that still has a long way to go, especially in emerging economies.

Growth catalysts

In addition to the traditional payments business, Mastercard is expanding its portfolio into higher value-added areas. Services in the areas of data and analytics, cybersecurity or open banking solutions play an important role. These segments are growing faster than transaction processing alone and also have higher margins. It is the diversification of revenue beyond traditional network fees that is one of the reasons why analysts see Mastercard as a more attractive investment than some competing platforms.

The firm is also actively investing in technologies related to real-time payments, central bank digital currencies and cross-border payment solutions. International payments have historically been complex, expensive and slow. Mastercard is building products in this space that can greatly simplify cross-border payment flows for businesses and consumers. If it can gain a significant share in this segment, it could be a significant long-term source of growth.

Valuation and analyst sentiment

The consensus analyst price target for Mastercard is well above the current market price. Most major investment houses have a Buy or Outperform rating on the stock. They justify this with a combination of a structural growth story, high profitability and a relatively attractive valuation given the fundamental quality of the business. In addition, Mastercard regularly returns capital to shareholders through dividends and share buybacks, which, with steady earnings growth, has a positive effect on shareholder value.

The latter is currently also at its fair price according to the Fair Price Index on Bulios.

The regulatory environment for payment fees, which is tightening in some jurisdictions, remains a risk. Also, a potential global economic slowdown could put pressure on transaction volumes in the short term. However, in the long term, analysts view Mastercard as a defensive growth stock with very solid fundamentals.

Broadcom $AVGO

Broadcom has been in the investor spotlight in recent quarters, primarily due to its exposure to building AI infrastructure. The company makes chips for networking, data storage, and server connectivity that are essential to the operation of modern data centers. While most discussions about AI revolve around Nvidia's $NVDA GPUs, Broadcom plays a key role in connecting these accelerators into functional clusters capable of communicating and sharing data efficiently.

It is this position in the AI infrastructure supply chain that is a major reason why analysts view Broadcom as one of the most undervalued stocks in the technology sector. Demand for high-speed networking chips and custom AI ASICs is growing in parallel with investments by hyperscalers like Microsoft $MSFT, Amazon $AMZN or Google $GOOG in their AI capabilities. Yet Broadcom is among a very small group of vendors capable of delivering these solutions at the scale and quality required.

Software business as a stabiliser

In addition to the semiconductor segment, Broadcom owns an extensive software portfolio, acquired mainly through acquisitions of companies such as VMware or CA Technologies. This software business generates stable subscription revenues with high margins and acts as a counterweight to the cyclical semiconductor industry. The combination of the two segments creates a more diversified and stable cash flow profile than pure semiconductor companies.

Analysts often highlight the quality of Broadcom's management and its ability to integrate large acquisitions without destroying value. The recent takeover of VMware was one of the largest technology deals in history, and the market has so far appreciated the way the company is integrating the business into its portfolio. If Broadcom is able to realize the projected synergies from the VMware acquisition, it could significantly strengthen its position in the enterprise software segment.

Target price and rating

The consensus target price for Broadcom is around $790 per share, which represents significant upside potential relative to the current price. Most analysts have a Buy rating on the stock, reasoning that the company is benefiting from both the AI boom and long-term growth in cloud infrastructure. Additionally, the valuation is still more attractive than some other AI players, reducing the risk of an overheated valuation.

Microsoft $MSFT

Microsoft Azure is one of the three largest cloud platforms in the world, and the firm has successfully monetized its exposure to AI in recent years, primarily through integration into Azure services. It is the cloud segment that is the main driver of revenue growth and profitability for the entire company, and analysts expect this trend to continue in the coming years.

Microsoft's key competitive advantage is integration across its entire product portfolio. Azure is not an isolated cloud platform, but part of an ecosystem that includes Windows, Office 365, Teams, LinkedIn and other products. This interconnectedness creates very high switching costs for enterprise customers and makes it less likely that competitors will be able to win them over.

AI as a long-term catalyst

Microsoft has invested billions of dollars in OpenAI and obtained exclusive rights to commercialise its technology. This move is now proving to be strategically brilliant. The company is integrating AI into virtually all of its products, from Office apps to Azure to the Bing search engine. Copilot for Microsoft 365 is gradually becoming a paid feature with the potential to significantly increase average revenue per user.

In particular, analysts see AI integration as a long-term story of incrementally increasing the value of existing products. Microsoft doesn't need to reinvent categories or acquire entirely new customers. It just needs to be able to sell AI features to its existing hundreds of millions of users. It is this model that has the potential to generate a very high return on investment in AI.

Gaming and revenue diversification

The acquisition of Activision Blizzard has strengthened Microsoft's position in the gaming industry and created another pillar of revenue diversification. While the gaming segment does not yet account for the majority of the company's revenues, it is growing faster than traditional software licenses and has the potential to become a significant source of cash flow over time. The consensus analyst target price for Microsoft is around $500 per share.

Walt Disney $DIS

Disney has gone through a difficult period in recent years transforming from a traditional media conglomerate to a streaming entertainment company. That change has been costly and painful, but many analysts believe the company is now at an inflection point where the streaming business should start generating steady profitability instead of the losses it has been losing.

The Disney+ platform has shown improvement in both subscriber numbers and average revenue per user in recent quarters. The combination with Hulu and ESPN+ creates a portfolio of streaming services covering different audience segments. Analysts expect this segment to turn a profit in 2026 and then begin to contribute significantly to the company's overall profitability.

Theme parks as a stable cash flow generator

While streaming is the growth story of the future, Disney's traditional business with parks and resorts remains a massive cash generator. This segment is benefiting from post-pandemic demand for experiential activities, and the company has gradually increased admission prices without a significant decline in attendance. This segment provides a stable cash flow base that allows the company to invest in streaming and film production.

A major advantage for Disney is its ownership of a unique content portfolio including Marvel, Star Wars, Pixar and classic animated films. This content has global appeal and creates significant barriers to entry for competitors. The quality and breadth of the movie portfolio is why analysts believe in Disney's long-term competitiveness in the streaming business.

Rating and Outlook

The analysts' consensus target price for Disney is well above the current market price. Most recommendations include a Buy or Overweight rating, with the stock undervalued given the fundamentals of the streaming business and the steady performance of the parks. The risk remains streaming competition, especially from Netflix $NFLX, and a potential economic slowdown that could negatively impact both subscriptions and park attendance.

BlackRock $BLK

BlackRock is the largest asset manager in the world with more than $11 trillion under management. The firm is benefiting from a long-term trend of rising savings going into the capital markets and a structural shift from active to passive investing through ETFs. Specifically, BlackRock is a dominant player in the ETF space with its iShares platform, which covers virtually all asset classes and investment strategies.

Analysts especially appreciate BlackRock's stability and predictability of cash flow. The firm generates fees based on the volume of assets under management, which means it benefits from the growth of the markets as well as the inflow of new investments. The model is capital-efficient and highly scalable. As asset volumes grow, revenues grow, while fixed costs remain relatively stable.

The Aladdin technology platform

In addition to traditional asset management, BlackRock operates the Aladdin technology platform, which provides risk and portfolio management tools to institutional investors around the world. This segment is growing faster than traditional asset management and has higher margins. It also represents another pillar of revenue diversification and reduces the firm's reliance solely on the performance of the capital markets.

The consensus analyst recommendation on BlackRock is mostly positive with a target price slightly above current levels. The firm is viewed as a stable defensive investment in the financial sector with a long-term growth story and the ability to generate an attractive dividend.

Uber $UBER

Uber has undergone a dramatic transformation over the past few years. From a company that was burning capital in pursuit of growth and market share, it has become a profitable platform with growing cash flow and disciplined capital allocation. This change has translated into a significant reassessment of the stock by analysts and investors in recent quarters.

A key milestone was the achievement of regular profitability in both the ridesharing and delivery segments. Uber is now generating stable operating cash flow and management has signaled that the priority is to further improve margins rather than aggressively expand into new markets. This shift away from growth at all costs to profitable expansion is exactly what analysts have long called for.

Network effects as a competitive advantage

Uber benefits from very strong network effects. The more drivers on the platform, the shorter the waiting times for customers. The more customers use the service, the higher the revenue for drivers. This cycle creates a significant competitive advantage and high barriers to entry for new players. Moreover, Uber's position as a dominant player in most key markets allows it to gradually increase prices without a significant drop in demand.

The delivery segment of Uber Eats has grown significantly in recent years and now accounts for a significant portion of total revenue. The company benefits from its existing network of drivers and can effectively share infrastructure between the ridesharing and delivery business. The combination of the two segments creates a more diversified revenue profile and reduces dependence on only one business.

The autonomous vehicle perspective

In the long term, the potential of autonomous vehicles remains an interesting prospect. Uber is actively working with several autonomous system manufacturers and its platform is ready for a future where a portion of rides will be provided without a human driver. This could increase Uber's margins as it removes the need to pay drivers.

The consensus analyst target price is around $90 to $100 per share. The prevailing outlook is positive, with the stock having room for further upside in the context of improving profitability and rising cash flow. The risk remains regulatory pressure in some regions and countries and a potential economic slowdown that could reduce demand for services.

Strategic view

The common denominator of these six stocks is a combination of several factors that analysts value in the current market environment. All of the firms have strong competitive positions in their segments with high barriers to entry. Most of them are benefiting from structural trends such as the digitalization of the economy, the growth of AI infrastructure or the shift to cashless payments.

Also important is the quality of management and the ability of companies to adapt to the changing environment. Uber was able to transform a loss-making business into a profitable platform. Disney is undergoing a challenging transformation of its media model. Broadcom is successfully integrating major acquisitions. These capabilities create analyst confidence in the future performance of these companies.

From a valuation perspective, these stocks offer a fairly broad range of profiles. Some, like Mastercard and Microsoft, trade at premium valuations, but analysts consider these to be justified by the quality of the business. Others like Disney or Uber are seen as undervalued given the fundamental improvement in their businesses.

What to watch next

The analyst consensus is not infallible, and history has shown many instances where a widely shared positive recommendation has been proven wrong. Still, it provides a useful perspective on which companies professional investors perceive as attractive given the current market and macroeconomic environment.

These six stocks represent different sectors and investment profiles, but are united by analysts' belief that they have room for further growth. Some are benefiting from transformative technology trends such as AI or digital payments. Others are undergoing a fundamental business model transformation toward greater profitability. And still others represent stable quality businesses with long-term growth prospects.

However, it's important to understand that analyst recommendations are just one of many inputs into investment decisions. Each stock has its own specific risk factors and performance will depend on the ability of companies to deliver results in line with expectations. Therefore, in an environment of heightened uncertainty and volatility, it is always useful to diversify across sectors rather than betting everything on a single company.

While Porsche, Lamborghini and other manufacturers have rather put the brakes on their EV plans in recent months, Ferrari has chosen the opposite direction. The Luce is meant to be a technological showcase, proof that pure electric power can handle the company's dynamics while delivering something that Ferrari's internal combustion car never could - five full-size seats and a giant trunk.

Why Ferrari is betting on EVs now

Ferrari $RACE entered the pure EV era at a moment when much of the luxury market was retreating. Ford $F announced write-downs and losses totaling nearly $20 billion related to EV programs and model cancellations, and along with General Motors $GM and Honda $HMC scaled back investment plans. Lamborghini, meanwhile, canceled its planned all-electric Lanzador, saying demand in the target segment was "near zero" and the brand was shifting back to plug-in hybrids. Porsche $P911.DE has cut back on its own battery projects in 2025 and slowed electrification targets.

Ferrari itself has softened its original target of having up to 40% of sales in its pure-electric portfolio by the end of the decade - it's now talking more like 20%. Still, it decided to launch the Luce and build a story of generational technological change around it. According to boss Benedetto Vigna, the model is the result of five years of work and is intended to be proof that "the best Ferrari for a particular segment may not necessarily be electric".

Technology: four engines, over 1,000 hp and a 122 kWh battery

The Ferrari Luce is the first five-seater model in the brand's history and the first production EV with the cavallino rampante logo. Basic specifications:

• four synchronous electric motors - one for each wheel - with a combined output of around 830 kW, or over 1,100 hp.

• 0-100 km/h acceleration in 2.5 seconds, 0-200 km/h in about 6.8 seconds, top speed over 310 km/h

• 122 kWh battery (NMC cells from SK On) with a claimed range of over 530 km according to WLTP

• 800V architecture with fast charging up to 350 kW

• weight of around 2260 kg, centre of gravity reduced by 95 mm compared to the Purosangue SUV and torsional rigidity increased by around 35% thanks to the integration of the battery into the floor

Performance is therefore more in line with a hypercar than a "family" car. Ferrari has sought to exploit the four-motor layout to the full - including independent torque vectoring at each wheel - while grappling with the physics of a two-tonne car through optimised weight distribution, a low centre of gravity and an active chassis.

An interesting detail is the "synthetic sound": engineers use accelerometers on the rear axle to sense vibrations from the transmission and engine components, which the VCU then filters and amplifies like an electric guitar to create a mechanically faithful sonic signature of the powertrain both inside and outside the cabin.

A strategic bet on ultra-luxury families

Luce is targeting customers who want to use the Ferrari as an "everyday" car while having more than half a million euros in the bank.

• Five full-size seats and a large trunk open up a new type of use for the brand - family travel, longer routes and everyday operation

• a range of over 500 km and fast DC charging solves some of the practical concerns

• the all-electric platform made it possible to make better use of space and offer comfort that would have been difficult to achieve with a front-engined internal combustion engine and conventional gearbox

But at the same time, Ferrari doesn't want to sacrifice exclusivity. Production is to be limited and target the brand's existing clientele - Vigna and product marketing boss Emanuele Carando have been open about the fact that customer reaction will be "very mixed" and some traditional fans will hate the car. That's also why the automaker is talking about the Luce as a long-term project, intended to bring more than 60 new patents and serve as a technological foundation for future models, not a mass-market bestseller.

Ferrari results and analysts' view on RACE stock

On the numbers side, Ferrari entered the Luce launch from a position of strength. The company beat Wall Street expectations in the first quarter of 2026:

• Adjusted earnings per share reached 2.33 euros (about $2.72)

• Sales of 1.85 billion euros meant year-on-year growth of just over 3% compared to 1.79 billion a year ago

• The automaker confirmed its outlook for 2026, including net revenues of around €7.5 billion and adjusted operating profit of at least €2.22 billion

Shares of Ferrari (RACE) were trading around $347 apiece, which, with a market capitalization of about $86 billion, corresponded to a P/E of about 33 and a dividend yield of about 1.2%. According to Wall Street data, the company still had a bullish consensus: the median 12-month target price was around $475, with a range of about $406 to $572 depending on individual houses.

Vigna repeatedly emphasizes three pillars: exclusivity (limited supply), brand appeal and disciplined production. The electric strategy is to be based on this - no mass-produced EVs, but expensive, technically exceptional pieces with high margins.

Gamble in a time of electrical uncertainty

When a brand that defined the idea of a "roaring" internal combustion supercar launches a five-seat all-electric sedan and claims that electric propulsion was a necessary condition for the creation of such a car, it sends a strong signal to the entire industry.

Ferrari argues that:

• a five-seat sedan with more than 1,000 horsepower, individually controlled motors at each wheel, active suspension and rear steering would be virtually impossible to build with an internal combustion engine in such a combination of power, handling and space

• electric drive is not only 'sufficient' but in some segments can be better than an internal combustion solution in terms of dynamics and control

At the same time, he recognises that it is a risk: Carando has openly admitted that part of the customer base will love the Luce and part will hate it. At a time when competitors are backing away from EVs and writing billions of dollars of write-offs, it's a bet against the tide - but that's what Ferrari has done often in the past, and its influence on car culture has always been significantly greater than the sheer volume of sales.

In other words, the market got a clear AI story, fresh contracts and strong fundamentals all in one moment - and quickly overestimated how big a role Arm could play in AI infrastructure in the coming years. The result was an aggressive repricing valuation that added dozens of percent in one week, while opening up the question of where the growth story ends and the bet on the perfect scenario begins.

What set the stock in motion: 46.5% for the week and a new ceiling

During the last five trading days of the previous week, Arm Holdings $ARM stock jumped roughly 46.5% to finish at all-time highs around $306.5. The main immediate impetus was the news that customers had committed in advance to about $2 billion of Arm's new autonomous silicon designs for the coming years, double the original internal expectations. Growth was thus not just based on "AI hype" but on a concrete backlog of orders for the new product direction.

These numbers came shortly after the company reported record fourth fiscal quarter results, so the positive fundamentals and new outlook combined into one big "perfect storm" moment for the bulls.

Bernstein: fivefold earnings growth and the return of CPUs to the center of AI

The catalyst for sentiment was new coverage from investment bank Bernstein. The latter initiated a recommendation on Arm with an "Outperform" rating and a $300 price target, slightly below where the stock ultimately ended up after the rally, but clearly above the then-market price at the time of the report. The key thesis was:

• Arm's profits could grow roughly fivefold by 2030

• Arm has room to significantly increase its share of the CPU market in servers and data centres

• and the total addressable market it is targeting is estimated at around $137 billion

At the same time, analyst David Dai pointed out that the generative AI paradigm is shifting from "chatbots" (AI 1.0) to "agents" (AI 2.0), autonomous systems that plan, decide and execute tasks on their own. This, he says, brings central processing units (CPUs) back to the center of the action, as they are the ones that coordinate, control and complement specialized accelerators (GPUs, NPUs) in complex AI pipelines. This is where Arm is uniquely positioned, thanks to its architecture and years of experience with efficient CPU cores.

New AGI CPU: $2 billion in orders in just a few months

An important concrete pillar of the story was the new datacenter processor that Arm unveiled in the spring. It was the first datacenter CPU designed specifically for "autonomous AI" tasks - that is, for scenarios where AI systems run large, long, and with high coordination and control requirements.

The company said in March that it had pre-confirmed orders for this AGI CPU of around $1 billion over a two-year horizon. In the ensuing period, that customer commitment has increased to more than $2 billion, double the original expectation. Management explained at the results that data centers designed for autonomous AI require several times more computing power than traditional servers - and that Arm's new generation of CPUs are optimized for these deployments.

The analytical comments added an interesting detail: in so-called agent-based AI systems, the volume of processed "tokens" grows orders of magnitude more than in first-generation generative AI. This means a much higher load on the infrastructure - including CPU - and therefore a higher potential for companies that can effectively design this type of computing architecture.

Record Q4 2026: revenue +20%, profit +49%

Fundamentally, Arm had a very strong fourth fiscal quarter 2026, which provided a solid foundation for the rally. For the period ended 31 March, the company reported:

• Revenue of around $1.49 billion, which was roughly 20% year-over-year growth and a new record for quarterly revenue

• net income of about $313 million versus $210 million in the same period a year ago

• Significant improvement in licensing revenue, which grew by a low double-digit percentage to about $670 million

Licensing revenue was driven by continued adoption of the newer Armv9 architecture and Core System Solutions (CSS), as well as increasing deployment of Arm-based chips in data centers. Importantly, royalty revenues in the data center segment in particular roughly doubled year-over-year - which fits with the thesis that Arm is rapidly moving from the mobile and embedded world into the "heavy" data center business.

CPU market share: quadruple and a $137 billion "pie"

Bernstein estimated in his analysis that Arm's share of the server CPU market could quadruple to roughly fourfold in the next few years. Combined with the fact that the overall addressable CPU market for data centre and AI applications is growing, the bank said this created scope for a multi-fold increase in profits by 2030.

A key competitive advantage that analysts highlighted was energy efficiency:

• Arm-based processors have a reputation for being extremely energy efficient

• In the era of AI, where data centres face limits on power consumption and heat dissipation, low power consumption is becoming one of the main competitive weapons

• this was already reflected in the numbers: licensing revenues in the data centre segment roughly doubled year-on-year, indicating that Arm was really making inroads in this market, and it was not just a "powerpoint" story

SoftBank: from 40 to 260+ billion and a return of over 500%

The clear winner of the rally was Masashi Sonna's SoftBank Group, which held approximately 87% of Arm.

• SoftBank had acquired Arm in a 2016 privatization deal for around $32 billion and later increased and restructured its stake, bringing the cumulative investment to an estimated $40 billion

• After the IPO and subsequent share price growth, the book value of its stake climbed to over $220 billion

• this meant a gross return of around 500-550% on a mark-to-market basis, before any further sales and taxes

What an investor could take from this

Several lessons were offered from the dramatic week around Arm:

• AI infra isn't just GPUs - while the market's attention has long been focused mainly on Nvidia-type accelerators, Arm reminded that CPUs that can efficiently run AI agent systems in data centers will also play a key role.

• Valuation may be breaking away from reality - 46% growth in a week and a valuation of over $300 billion stands on a combination of real fundamentals and very aggressive expectations through 2030. This is both an opportunity and a risk for investors.

• SoftBank's "single bet" worked, but with a lot of attrition - it's not realistic for retail to have 80+% of assets in one company, but Arm's example showed how a concentrated bet on the right technology at the right time can work out.

The war in Iran has for almost three months been keeping the world by the throat through high energy prices and fear of inflation — but now a cautious relief is arriving, because there is talk of a possible agreement that would eventually reopen Hormuz, through which about a fifth of the world’s oil and LNG flowed before the conflict. The euphoria is, however, held back precisely by the fact that no one knows the date: until it’s clear when tankers will return to normal passage through the strait, nervousness about energy prices and costs for businesses and households will remain high.

But a closer look reveals that this company - the world's first publicly traded land-banking REIT, created by a spinoff from one of America's largest homebuilders in February 2025 - was structured from the start primarily for the benefit of the founding client, not the minority shareholders. A dual share class with 10 times the voting power of a non-traded Class B, external management receiving a fixed fee of 1.25% of gross assets per annum with no performance component, and the contractual right of the largest customer to halve payments for 6 months without penalty, combine to form a system that the market is correctly pricing at a 25% discount to book value despite solid operating results.

Top points of analysis:

• The world's first publicly traded land-banking REIT, a spinoff completed in February 2025, with a market capitalization of $4.3 billion and total assets of $9.6 billion.

• The business model is based on option contracts with homebuilders: the company buys land, develops it, and sells the finished lots at a pre-negotiated price, with the builder paying monthly option fees - a model with predictable, contractually determined cash flow with no exposure to real estate price movements.

• Q1 2026: sales of 194.9 million EUR. USD 125.9 million, AFFO USD 125.9 million. USD 1,125 (USD 0.76 per share), zero option cancellations since inception across the entire portfolio of 143,000+ parcels in 904 communities.

• Invested capital of $8.7 billion, 31% of which is outside the founding client at 16 other builders with an average return of 10.7% vs. 8.5% on the founding program.

• Dividend yield 10-11% quarterly covered by AFFO at 100%, series of gradual increases since inception.

• Governance is key risk: dual share class, management fee of 1.25% of assets per annum with no performance component and contractual right of largest customer to halve payments for 6 months twice formally and potentially indefinitely going forward.

• Valuation with a P/B of 0.73x despite zero credit loss since inception reflects the market's correctly identified governance discount; analyst consensus targets $37-39.50 vs. current price of about $27.

Company performance

Millrose Properties $MRP was formed as a spinoff from Lennar on February 7, 2025, with Lennar distributing approximately 80% of Millrose shares to its shareholders at a ratio of 1 MRP share for every 2 LEN shares. The total value of the spun-off assets at inception was $5.8 billion ($5.5 billion in land assets plus $1 billion in cash). The firm is headquartered in Miami, Florida, has 11 employees and is managed externally by an entity called Kennedy Lewis Land and Residential Advisors LLC.

Millrose is the first publicly traded land-banking REIT - an entity that is not a traditional residential, office or commercial REIT, but is based on a very different model. The firm buys land, does the horizontal development (roads, utilities, site preparation) and sells the finished lots to homebuilders through option agreements on pre-negotiated terms. It calls this model the Homesite Option Purchase Platform (HOPP'R) and aims to be the builder's equivalent of just-in-time supply in the industry - where the builder knows how many lots he will get and when, without having to tie up capital in the ground.

The move from the traditional development model, where Lennar owned the land on its own balance sheet, to a model where an independent REIT holds it, was a deliberate transformation of Lennar into an asset-light homebuilder. For Lennar, it was a strategic achievement: it got rid of a capital-intensive part of the business, freed up over $5 billion from its balance sheet, and boosted its return on equity. For Millrose investors, the question is what exactly they are buying and on what terms.

The business model

The core of the business is option contracts. A builder comes up with a project, identifies a parcel of land, Millrose buys it and does the horizontal development, the builder pays monthly option fees (de facto as interest on borrowed capital), and then buys the parcels at the originally negotiated price - without Millrose's share of any appreciation. In practice, this means that Millrose has a cash flow more akin to a credit business than a traditional REIT: fixed contractual returns, with no upside potential from rising property prices, but also no direct downside exposure if the builder buys out.

In their analysis, Warden Capital described this model very bluntly as a de facto 85% LTV loan to Lennar for land development at a fixed rate of 7-10% that Millrose must make with virtually no right to refuse - and on terms that a conventional commercial lender would never negotiate. The key contractual asymmetry is that Lennar contributes only 5% as a down payment, Millrose finances the rest, but the purchase price is always equal to the cost - so Millrose does not participate in any increase in parcel prices.

The second segment is development loans - direct loans to builders for project financing with coupons of around 12-13%, which yield above average returns but come with credit risk. In Q1 2026, development loan income was $9.6 million versus option income of $185.3 million - a relatively small component so far.

Homebuilders pay the construction banker for simplicity and flexibility. In Q1 2026, Millrose reported zero option cancellations since the start of trading for its entire portfolio of over 143,000 lots in 904 communities in 30 states - a signal that so far builders are making buyouts and not giving up on the option even in a more difficult macro environment. It's also telling that although public builders reported gross margin compression of 200-500 basis points year-over-year in Q1 2026, demand for the Millrose platform has remained steady and Millrose has added two new contrarian names to the portfolio, including a top-10 national builder.

Corporate governance - a key risk

Here we are in an area where Millrose's analysis becomes significantly more complicated and where the core of the valuation lies. The governance structure of the company is a combination of several elements, each of which on its own would be only slightly substandard, but which together form a system with very limited minority shareholder protection.

The dual share class is the first problem. Class A has 1 vote per share and is listed on the NYSE; Class B has 10 votes per share and is not listed on any exchange, so there is no liquid market for it. As of the date of the 2026 Annual Meeting, there are 154,183,686 Class A shares and 11,819,811 Class B shares outstanding, and while Class B makes up only 7% of the share count, given its 10 times voting power, Class A effectively controls the voting where Class B is concentrated in the hands of key insiders. This structure is standard for technology start-ups, but in the context of a REIT where minority shareholders are dependent on a trustee with potential conflicts of interest, it is a different category of risk.

The second issue is the structure of external management. Millrose, managed by Kennedy Lewis Land and Residential Advisors LLC, pays a fixed fee of 1.25% of gross tangible assets per year. On the numbers: at $9.5 billion in assets, that translates to about $119 million per year in management fees alone, and in Q1 2026 management fee expense reached $28.2 million per quarter. A fixed fee on asset size (not performance) creates a direct incentive for the manager to grow assets, not to optimize shareholder returns - a classic problem with externally managed REITs, and one that has been critically described in the literature for other externally managed structures.

The third and most concrete risk is Lennar's contractual right to a "pause period." The contractual documentation allows Lennar to activate up to two formal pause periods during which Millrose's payments are halved to 50% for 6 months - without any penalty or compensation. In addition, after both standard pause periods, there is a contractual mechanism for additional pause periods, with the only "cost" to Lennar being the loss of fixed rates (i.e., the parties would have to negotiate a new rate). In practice, for the Millrose investor, this means that the most important counterparties - Lennar and those builders with similar contractual terms - can legally cut Millrose's payments in half in times of stress, precisely when the investor needs the dividend most.

Market, position and competition

Millrose exists in a segment that did not exist before its creation as a publicly traded company. Private land-banking entities have operated as off-balance-sheet structures for large builders, but have never marketed themselves as REITs available to retail investors. That's a first-mover advantage on the one hand, but on the other hand, it means there's no good historical precedent for how this structure works in a recession or in an environment of significant house price declines.

Direct competitors in the private land-banking segment include partners like Annaly Capital $NLY and various private equity firms, but none of them have a comparable public market product with transparent results. The real competition is the balance sheets of the homebuilders themselves - the degree to which Lennar $LEN, D.R. Horton $DHI, NVR $NVR and others will want to maintain their own land versus outsource to Millrose determines the overall TAM for the business. In Q1 2026, CEO Richman openly said that the compression of builder margins acts as a catalyst for working with Millrose - and that makes sense: the less profitable a home builder is, the more it matters how much capital the builder ties up in land.

Management and strategy

CEO Darren Richman came to head Millrose from Kennedy Lewis, the firm's administrator, and is therefore a figure with a direct link to the external management structure. From an investor perspective, this is not entirely a problem, but it does create a structural conflict of interest: the manager receives a fixed fee from the assets, and the CEO is from the same camp.

The strategic plan is clear and makes sense as a business thesis: gradually diversify away from Lennar (now 69% of the portfolio) to other developers (31% and growing), while maintaining a conservative leverage of up to 33% debt-to-capitalization, and recycling capital from parcel sales back into new land acquisitions each year. As part of this strategy, in Q1 2026 Millrose added a top-10 national builder to the portfolio and in May 2026 announced land-banking support for Dream Finders Homes as part of their $704 million bid to acquire Beazer Homes. If this transaction goes through, it would be an interesting precedent for Millrose's ability to enter M&A transactions as a land-banking partner even in non-standard situations.

The question remains, however, whether management is truly looking out for the interests of Class A shareholders or the interests of the manager, whose fee increases with each new acquisition. Warden Capital raised this question very specifically in their analysis, and to this day there is no conclusive answer.

Financial performance

Millrose has only existed as a standalone company since February 2025, so historical comparative data is limited. The 2024 accounting year showed only pre-spin costs and zero revenues, while 2025 brought the first full year of operations with total revenues of $600.5 million and net income of $404.8 million according to annual data.

For Q1 2026:

Revenue of $194.9m (+135% YoY, but the comparison with Q1 2025 is skewed by the fact that Q1 2025 was the first truncated quarter since the spinoff). Option income was $185.3 million, development loan income was $9.6 million. Net income was $122.9 million ($0.74 per share) and AFFO was $125.9 million ($0.76 per share). Management fee expense of $28.2 million for the quarter - a significant portion of operating expenses, annualized over $112 million.

Key metric is weighted average yield on invested capital: 8.5% on Lennar Master Program Agreement and 10.7% on other contracts, overall average of 9.2%. Implied quarterly income run rate is $200 million at current portfolio.

AFFO payout ratio is 100% - the firm distributes everything it earns in AFFO, fulfilling its promise to distribute 100% of revenue. This is typical for REITs and is consistent with an income vehicle position, not a growth compounder. If Millrose wants to grow, it must either raise debt (to a maximum of 33% debt-to-cap) or issue new shares - both have risks.

Cash flow

Balance sheet as of 3/31/2026: total assets $9.57 billion (including $9.18 billion of homesites under option contracts and $323 million of development loans), debt $2.42 billion, equity $5.85 billion. Debt-to-capitalization ratio of 29%, capped at 33% by the firm's own policy.

In Q1 2026, Millrose converted the credit facility from a secured to an unsecured structure and added a $500 million delayed draw term loan, expanding total capacity to $1.835 billion and liquidity to $1.5 billion. This is a positive signal: banks Goldman Sachs $GS and JPMorgan $JPM are willing to provide unsecured credit, reflecting their confidence in the credit quality of the portfolio.

Valuation and discount to book value

At the time of writing, MRP shares are trading at around $27, while book value per share is around $35.3 ($5.85 billion of equity divided by 166 million shares) - a P/B of around 0.73×. Analysts consensus target an average price of USD 37-39.50, with 75% recommending a strong buy and 25% a buy.

Why such a large discount? The market values land assets at less than their book valuation for two reasons. First, land has historically been the most volatile of all real estate assets on the downside - with a 10% decline in home prices, the price of undeveloped land can go to zero. Second, governance risk, fixed management fees and Lennar's contractual rights reduce the quality of the asset from an investor's perspective, and the market overvalues this at a discount to NAV.

With a P/E of around 9-10x (depending on current price and net income), a forward dividend yield of around 10-11% and a discount to NAV of around 25%, this is an unusual combination. If the thesis of cash flow robustness and diversification holds, there is potential for a repricing towards classic P/B values close to 1× or higher. If a governance failure or housing recession triggers Lennar's worst contract rights, there is downside to a price well below today's levels.

Conservative projections

Starting point: Q1 2026 AFFO of $0.76 per share, management forecasts Q2 2026 exit run rate of $0.78-0.80, and annual AFFO growth of around 10%.

Under conservative assumptions - 8% annual AFFO growth, no large acquisitions from equity issuance, stable Lennar share around 65-70% of portfolio:

AFFO could reach approximately $3.28 per share annualized in 2027, and approximately $3.54 in 2028. Keeping P/AFFO around 9x (today's valuation) implies a share price of USD 29.5-31.9 - only a slight increase from today's USD 27, but add to that a dividend yield of 10-11% per annum. The total annual yield could then be around 12-13% in USD terms.

In an optimistic scenario, where diversification outside Lennar accelerates (target 50% by 2028), AFFO growth reaches 12-15% per annum and the market re-prices the company to a P/AFFO of around 12-13x, the price could exceed US$40 within two years - plus an ongoing yield.

Risks

Lennar's contractual risk is the biggest specific risk: the right to halve payments for 6 months twice formally and potentially unlimited times informally, coupled with purchase prices equal only to costs with no share of appreciation, creates a situation where in a worse macro Millrose suffers disproportionately.

The governance risk is a combination of an external manager receiving 1.25% of assets (annualized over $100 million in fees with the existing portfolio), a dual share class with limited Class A voting power, and the absence of a compelling internal governance mechanism to protect shareholders in the event of a conflict of interest.

Housing cycle: compression of builder margins, higher rates and the cost of building material tariffs are putting pressure on demand for new homes in 2026. So far builders have not abandoned the Millrose platform, but with a significant decline in housing starts, pressure on the portfolio would be inevitable.

Concentration: 69% of the portfolio still comes from a single client - Lennar. The loss or slowdown of Lennar has no quick replacement as the pace of diversification depends on the speed of onboarding new builders.

Credit risk of development loans: part of the portfolio is made up of direct loans to builders with coupons of 12-13%, which carry higher credit risk than standard option contracts in a worse macro environment.

Dividend and its sustainability

A quarterly dividend of USD 0.76 per share (USD 3.04 per annum) at the current price of approximately USD 27 implies a dividend yield of around 11.3%. Since the company's launch, the dividend has gradually increased: the first pro-rated dividend for Q1 2025 was $0.38 (equivalent to $0.65 on a normalised basis), the first full quarterly dividend of $0.69 in June 2025, then $0.70, $0.73 and now $0.76. That's a nice series of gradual increases.

The key to sustainability is the payout ratio: Millrose pays 100% AFFO, so AFFO must at least cover the dividend. In Q1 2026, AFFO of $0.76 per share = dividend of $0.76 per share - exactly 100% coverage. Any decline in AFFO would immediately create pressure on the dividend.

Investment scenarios (3-5 years)

Optimistic Scenario: Diversification outside of Lennar surpasses 50% of portfolio by 2028, AFFO grows 12-15% annually, housing market stabilizes with a modest recovery after rates decline, market values Millrose closer to NAV at 0.95-1.0x book value, and pause periods from Lennar have never been triggered. The share price is moving towards $38-45, plus an interim dividend yield of around 10%. Total return over 3 years well over 50%.

Realistic scenario: AFFO grows at 8-10% per year, Lennar remains 65-70% of the portfolio, valuation is in the 0.75-0.85× NAV range, market has no reason to close the dividend discount completely. The share price is in the $28-35 range, but an ongoing dividend yield of around 10-11% gives investors a solid total return. Over 3 years, a total return of around 35-45%.

Pessimistic Scenario: Housing market slows down significantly, one or more builders activate a pause period or stop buying up lots altogether, management fees further destroy performance, and the market revalues the company to 0.60x NAV or lower. Price drops to $20-22, dividend may be temporarily reduced if AFFO drops. Total return in 3 years below 0%, even with dividend.

What to take away from the article

Millrose Properties (MRP) is the first publicly traded land-banking REIT, fundamentally different from traditional residential or commercial REITs, offering a 10-11% dividend yield backed by contractual cash flows from option contracts with US homebuilders.

The yield is enticing and the business model is working - the firm reports zero option cancellations since inception, increasing diversification outside of Lennar, and consistent AFFO over dividend.

Governance is a weakness that objectively limits upside: a dual share class with no liquid market for Class B, a fixed management fee of 1.25% of assets with no performance component, and Lennar's contractual right to halve payments without penalty are structural disadvantages that the market correctly values at a discount to NAV.

For an investor, it may make sense as an income-oriented position in USD with above-average yield in the dividend portion of the portfolio, but certainly not as a substitute for more conservative and transparent net-lease REITs. Ideally as a smaller position knowing that we are buying yield for a specific governance trade-off and full exposure to the US housing cycle.

Final View

Millrose Properties (MRP) is a fascinating new entrant to the market - the first of its kind, with a business that actually works and solves a real problem for US homebuilders. Diversification from Lennar is moving in the right direction, and the ability to add a top-10 national builder in a single quarter shows the platform has traction.

But at the same time, what Warden Capital wrote is objectively true: Millrose was structurally designed primarily for the benefit of Lennar, not Class A shareholders. Fixed management fees without a performance component, contractual rights to pause periods, and the absence of a compelling internal governance mechanism are real, not hypothetical, problems. Analysts know it, management knows it, and the market is pricing in a 25% discount to NAV.

For an investor looking for a high USD dividend yield knowing the risks described above, this is an acceptable - not optimal - choice. For the investor looking for a transparent, well-managed dividend company without unnecessary conflicts of interest, there are comparable or better names in the net-lease sector, albeit with lower yields. This is exactly the situation where the higher dividend yield reflects the higher risk - and the question is whether the premium for that risk is sufficient for a particular investor.

The ratio of share price to earnings per share is one of the most closely watched metrics in fundamental analysis. A low P/E can signal an undervalued opportunity where the market does not believe in future growth or where temporary problems are pushing valuations down. But it can also be a so-called value trap, where a company is cheap precisely because its business model is losing relevance or facing structural problems that the market has correctly identified and priced in.

In the current market environment, valuation differences between sectors and firms are widening significantly. While technology giants and AI beneficiaries are trading at high multiples of future earnings, some traditional sector segments remain well behind the market average. It is often within this range that interesting investment stories lie, which can combine solid fundamentals with significantly undervalued valuations.

Comcast $CMCSA

Comcast is one of the largest U.S. media and telecommunications conglomerates with a market capitalization in excess of $90 billion. The company operates cable networks, internet services, Universal movie studios and the NBC media platform. Although it is an established company with a diversified portfolio, its stock currently trades at a P/E ratio of less than 5, well below the broader market and technology sector average.

Business structure and revenue sources

Comcast's broadband and cable TV segment is the mainstay of its business, generating stable cash flow. The company operates one of the largest cable networks in the United States and benefits from a dominant position in a number of regional markets. This segment is also the source of most investor concern. Traditional cable TV is facing a massive outflow of customers towards streaming platforms, pushing the linear TV segment into long-term decline.

NBC Universal, which includes TV stations, movie studios and theme parks, is also a significant part of the business. This segment has higher growth potential than the traditional cable business, but is also more sensitive to cyclical swings in consumer spending. Meanwhile, the streaming platform Peacock, which Comcast launched in response to Netflix $NFLX and Disney+ $DIS, is generating losses and requires massive investment in content.

Why the P/E is so low

A key factor in the low valuation is uncertainty about the long-term sustainability of the traditional cable business. Investors correctly identify a structural decline in demand for linear TV and worry that this segment will continue to lose customers at a faster rate than Comcast can compensate for with growth in other areas.

Another risk is the regulatory environment. Comcast faces pressure from regulators regarding net neutrality, service pricing, and potential abuse of dominance in certain markets. Any change in regulation could have a significant impact on margins and the company's ability to raise broadband prices.

High debt levels are another factor of concern to investors. The firm has significant commitments related to acquisitions, infrastructure development and investment in content for the Peacock platform. In a higher interest rate environment, the cost of servicing this debt is increasing, which is putting pressure on free cash flow.

Potential and risks

The company continues to generate robust operating cash flow, pays a dividend (5.24%) and has a dominant position in the broadband market, which remains critical infrastructure even in the streaming era. If management can successfully transform the business model towards data services and digital content, the current valuation could be attractive.

However, if the structural decline in the cable business continues and Peacock's streaming business does not find its way to profitability soon, current earnings may be the top of the cycle and a low P/E may be fully justified.

But there is no getting away from the fact that at the current price relative to earnings, revenue, and other financial metrics, $CMCSA stock is currently below its fair value.

Suzano $SUZ

Suzano is the world's largest producer of pulp for direct sale and a major player in the pulp industry. The Brazilian company benefits from huge eucalyptus plantations and an efficient production model that allows it to supply raw material for paper, hygiene products and packaging materials around the world. Despite being a global leader in its segment, the stock trades at an extremely low P/E ratio of around 5.

Business model and competitive advantage

Suzano' s key competitive advantage is the geographic position and climatic conditions of Brazil, which allow for very rapid growth of eucalyptus forests. While in the Nordic countries the tree takes decades to grow, in Brazil eucalyptus reaches maturity in seven years. This gives the company a significant cost advantage over competitors from Scandinavia or North America.

The company operates an integrated model from plantation to pulp production to logistics and export. Suzano supplies raw material mainly to China, Europe and North America, where pulp is used for paper, hygiene products and increasingly also as a raw material for the textile industry or biodegradable packaging.

Factors behind the low valuation

Suzano's low P/E primarily reflects the highly cyclical nature of the commodities business. Pulp prices fluctuate significantly depending on global demand, buyers' inventory levels and the economic cycle in key buyer countries. Investors view the business as highly volatile and difficult to predict, which pushes valuations down.

Exposure to the Chinese market is another risk factor. China is Suzano's most important customer (28% of its products go there) and any cooling of the Chinese economy or changes in import policy will immediately translate into demand for pulp. Geopolitical tensions and trade policy can therefore have a very direct impact on the company.

Currency risk is also material. Suzano generates most of its revenue in dollars, while a significant portion of its costs are denominated in Brazilian reals. The volatility of the Brazilian currency can significantly affect the firm's profitability and creates an additional layer of uncertainty for international investors.

Long-term perspective

In the long term, Suzano can benefit from the growing demand for sustainable materials and biodegradable packaging. The global push to reduce plastic waste creates an opportunity for the pulp industry, which can offer greener alternatives. If this trend accelerates, it could significantly boost structural demand for Suzano products.

The low valuation may thus reflect a combination of a cyclical bottom in commodity prices and excessive pessimism about the long-term outlook.

This thesis is supported by the fair price on Bulios, which is calculated to be more than double the current value for $SUZ shares.

Lyft $LYFT

Lyft represents the US alternative to the dominant Uber $UBER. The company has undergone a tumultuous evolution in recent years, from IPO to pandemic collapse to a gradual recovery in demand. The current P/E ratio of around 2 reflects the market's skeptical view of the firm's ability to compete with Uber and generate sustainable profitability over the long term.

Competition with Uber and market structure

Lyft' s key concern is its position as the second player in a duopoly market. Uber has significantly broader global operations, a more diversified business model including food delivery and freight, and typically a higher market share in key US cities. Lyft remains a purely U.S. platform focused solely on passenger transportation, which limits business scalability and bargaining power.

Price competition is intense in this segment. Both platforms must balance the need to attract drivers with sufficiently high earnings with the need to keep passenger prices at a level that ensures demand. This model is inherently capital intensive and generates low margins, making profitability fragile.

The path to profitability

Lyft has moved into the black in recent quarters and has been able to post an operating profit, a significant milestone after years of losses. Management has focused on improving operational efficiency, optimizing the cost base and improving the economics of individual rides. The market has rewarded this shift with a rise in the stock, but remains skeptical about the sustainability of margins.

The growth of autonomous vehicles presents both opportunity and risk for Lyft. The company is partnering with autonomous technology manufacturers and could benefit from lower driver costs in the future. But it also runs the risk that tech giants or automakers will create their own platforms and bypass Lyft as an intermediary.

An investment perspective

A low P/E may reflect a realistic valuation for a company operating in an intensely competitive environment with limited room for margin expansion.

On the other hand, if the company can steadily generate profits and maintain a significant share of the U.S. market, the current valuation could be interesting. The key will be the ability to maintain a balance between investment in growth and operational discipline.

A fair price based on DCF and relative valuation shows that the stock is currently fairly valued. This is despite being 84% below the 2020 ATH.

Danaos Corporation $DAC

Danaos is a Greek company focused on operating container ships through long-term charters. The company owns a fleet of modern container vessels that it charters to global shipping companies. The stock trades at a P/E ratio of under 5, an extremely low valuation even in the context of the traditionally cheaply valued shipping industry.

Specifics of the charter model

Unlike conventional shipping companies, Danaos does not have direct exposure to volatile spot rates for container shipping. Instead, the company enters into long-term charter contracts with fixed prices, which creates a predictable revenue stream. This model reduces revenue volatility but also limits the firm's ability to profit from sharp increases in spot rates, as happened during the pandemic.

Since the 2020 low, the stock has managed to rise 5,060% to date.

The majority of the fleet is leased on contracts of several years. Management therefore has a clear idea of minimum revenue for several years ahead, which should in theory support a higher valuation than companies exposed purely to the spot market.

Why such a low valuation

The extremely low P/E primarily reflects the market's fundamental distrust of the shipping industry. The sector has a history of cyclical crashes, over-investment in new capacity and subsequent periods of excess tonnage that have destroyed profitability for decades. Investors have in mind that shipping companies have been able to burn value quickly during previous cycles.

High debt is another risk factor for Danaos. Buying and financing container ships requires massive capital, and the company operates with significant leverage. In the event of a decline in charter rates when refinancing existing contracts, the company could face pressure on its ability to service debt.

Dividend as compensation

In recent years, Danaos has paid dividends funded by cash flow generated by charter contracts. The dividend is currently at 2.75%. For some investors, this is an attractive way to monetise a low valuation without having to rely on share price growth. However, it should be noted that the stock has appreciated significantly this year. They are already up 37% since the beginning of the year.

Sabre Corporation $SABR

Sabre is one of the largest providers of technology solutions to the travel industry. The company operates airline reservation systems, hotel capacity management and other infrastructure that connects airlines, hotels and travel agencies with end customers. The stock is currently trading at a P/E ratio below 2, reflecting the segment's long-term structural issues.

Pandemic shock and slow recovery

The travel industry was among the hardest hit sectors during the COVID pandemic, and Sabre, as a technology provider directly dependent on transaction volume, faced a dramatic decline in revenue. Recovery has been slower than in other segments of the economy, primarily due to the long-term downturn in corporate travel and changes in consumer behavior.

Sabre generates the majority of its revenue from transaction fees for each booking made through its platform. Thus, the decline in bookings is immediately reflected in revenues. Although travel has recently returned to pre-pandemic levels, the corporate segment remains weaker and the overall demand structure has changed.

Competition

The growing trend of direct bookings directly on airline and hotel websites is bypassing traditional distribution systems such as Sabre. This change reduces the relevance of traditional GDS (global distribution systems) platforms and puts pressure on their market share. In addition, new technologies and mobile apps allow consumers to compare prices more easily, further reducing the value of intermediaries.

The debt burden

The company entered the pandemic with significant debt and the forced liquidity build-up during the crisis exacerbated this situation. The firm now faces high debt servicing costs in a higher interest rate environment, which is squeezing free cash flow and limiting room for investment in platform upgrades.

The company's market capitalization of $604 million is very low compared to its debt of more than $4 billion. In fact, the stock trades for less than $2 even though it traded for more than $24 in 2020, before the pandemic.

A possible turnaround?

If the company can successfully upgrade its technology platform, expand into new segments such as travel data management or personalized offers, it could resume its growth trajectory.

The low P/E thus reflects a combination of structural issues, high debt and uncertainty about the long-term relevance of the traditional GDS model. For most investors, this is more of a warning sign than an attractive opportunity.

A strategic view

A common feature of all five companies is the significant gap between current profitability and market valuation. In each case, however, there are different factors behind the low P/E.

For Comcast, these are the structural decline of the traditional business and regulatory risks. Suzano faces cyclical volatility in the commodities market. Lyft faces intense competition in an environment with low barriers to entry. Danaos represents a sector with a historically poor reputation with investors. Sabre is a case of a company hit by pandemics and technological competition.

For value investors, a low P/E can be an entry filter to identify potentially undervalued opportunities. But the key is to distinguish between temporarily undervalued firms and value traps. Temporarily undervalued companies face temporary problems that the market over-penalizes. Value traps, on the other hand, are cheap precisely because their business model is losing relevance or facing intractable structural challenges.

Of today's picks, Comcast offers the most stable combination of cash flow and dividend, but an uncertain long-term outlook.

What to watch next

For companies with low P/Es, the key is to monitor free cash flow trends and the ability to maintain or increase dividends. If a company can generate growing cash flow despite a low valuation, it may be a truly undervalued opportunity.

Changes in management or strategy can be a catalyst for a reassessment. The arrival of new management with a clear plan for business transformation or restructuring often leads to a gradual restoration of investor confidence.

The macroeconomic environment plays a role, particularly for cyclical companies such as Suzano or Danaos. Global economic growth, interest rate developments and commercial policy can significantly affect the performance of these companies.

Regulatory changes can have a significant impact on companies like Comcast or Sabre. Any tightening of rules or, conversely, deregulation can dramatically change the economics of their businesses.

Technological advances pose a key risk for Lyft and Sabre.

The low P/E ratios of these five companies are no accident. In each case, they reflect real problems, risks or structural challenges facing the companies. The key is to identify where the market is overly penalizing temporary problems and where there is a path to future improvement.

Some of these companies may present interesting opportunities for patient investors with a long-term horizon and a tolerance for volatility. Others are cheap precisely because their best years are likely behind them. Distinguishing between these two categories requires deep fundamental analysis, an understanding of the structural trends in their industries, and a realistic assessment of the likelihood of a successful transformation or resumption of growth.

All of Bulios' tools are fully at your disposal to do this.

Lately I've been looking more at sectors and markets where sentiment is weak.

Not where everything is flying up.

Not where everyone chases the same AI or semiconductor story.

But where quality companies trade under pressure, investors avoid them, sentiment is bad, and valuations start to look interesting.

And one of those markets, in my view, is China.

---

Chinese stocks have been a very controversial topic for years.

Many investors avoid them altogether.

And honestly, I understand why.

China has a lot of risks:

🔹 political risk

🔹 regulatory interventions

🔹 geopolitical tension

🔹 uncertainty around VIE structures

🔹 a weaker Chinese consumer

🔹 problems in the real estate sector

🔹 low foreign investor confidence

🔹 risk that shareholders won't always come first

This is not a market like the U.S.

For U.S. companies I mainly focus on the business, valuation, cash flow, moat and management.

With China I also have to consider the state, regulations, geopolitics and the rules of the game.

And that's exactly why I would never treat Chinese stocks as a simple or safe investment.

---

On the other hand, that's precisely why sentiment there is so poor.

And when sentiment is extremely bad, sometimes an opportunity can arise.

Not automatically.

Not with every company.

But with some quality businesses, yes.

China still has a huge market, hundreds of millions of digital consumers, large tech platforms, e-commerce, online advertising, gaming, payments, cloud, AI and logistics.

Companies like Tencent, Alibaba, JD.com, PDD, Baidu or Meituan are not small insignificant businesses.

They are massive platforms that, in a different geopolitical environment, the market might value very differently.

---

The one that interests me the most personally is Tencent.

I view Tencent as one of the highest-quality Chinese internet businesses.

It has WeChat, gaming, advertising, payments, a digital ecosystem and a huge user base.

WeChat is more than just an app in China.

It's a communication platform, payment infrastructure, social network, mini-app ecosystem and a daily tool for hundreds of millions of people.

That's a very strong moat.

If I had to pick one company in China that most resembles a high-quality platform with long-term potential, Tencent would be very high on the list.

---

Alibaba is a different story.

On one hand it has e-commerce, cloud, AI, logistics, a large customer base and strong share buybacks.

On the other hand it has years of regulatory pressure behind it, weaker sentiment, competition and questions around growth.

Today Alibaba, in my opinion, looks more like a value/turnaround story.

It's not a clean compounder without problems.

But if sentiment towards China improves and Alibaba can stabilize growth, improve the cloud business and continue buybacks, I think there's potential for re-rating.

---

JD.com is interesting mainly because of its logistics.

JD has its own infrastructure, warehouses, delivery and a more controlled retail model.

That's an advantage, but also a disadvantage, because such a business is more capital-intensive and has lower margins than pure platforms.

JD can be cheap.

But cheap doesn't automatically mean good.

Here I'd like to see whether the company can sustainably improve margins, cash flow and return on capital.

---

PDD might be the most interesting growth company in this group.

The theme: Pinduoduo—extreme growth, aggressive model, low prices, strong execution.

But at the same time it's a company I have more questions about.

Sustainability of margins.

Transparency.

Regulatory risk.

Relationships with suppliers.

Long-term business quality.

PDD can be a huge winner, but for me it's a riskier bet than Tencent.

---

Baidu is more of an AI/search/cloud/autonomous-driving turnaround story.

It has AI assets, search, cloud and Apollo.

But the question is whether it can actually monetize AI and convince the market again that it's not just an old Chinese Google with slower growth.

Baidu can be cheap.

But in my view it needs a clearer catalyst.

---

For a retail investor it may be interesting to look at ETFs like KWEB.

Not because it's the ideal solution.

But because with China the risk of individual companies is high.

Regulation, politics, sentiment, accounting, geopolitics — all of this can hit a specific company very hard.

An ETF gives at least broader exposure to the Chinese internet sector.

On the other hand, you also buy companies you might not pick individually.

---

My personal point on China is simple.

China can be interesting.

But not as a large core position.

Rather as a smaller contrarian exposure.

Something like:

📌 0.5% to 2% of the portfolio

📌 only if you understand the risks

📌 ideally through the highest-quality names or a broader basket

📌 without the illusion that it's a safe market

📌 with the willingness to endure high volatility

For me China would not replace companies like Microsoft, Alphabet, Meta, Mastercard or S&P Global.

More of a complement.

A smaller bet that extremely poor sentiment will one day improve and quality Chinese platforms will get better valuations.

---

What would need to happen?

For Chinese stocks to work, we need several things:

✅ more stable regulations

✅ improvement in investor confidence

✅ a stronger Chinese consumer

✅ a better economic outlook

✅ the return of foreign capital

✅ continuation of buybacks

✅ less geopolitical fear

✅ evidence that the big platforms can still grow

If this succeeds at least partially, re-rating could be attractive.

But if political and economic risks worsen, Chinese stocks can remain cheap for a very long time.

And a cheap stock can be cheap for a good reason.

---

That's why I'd approach China very cautiously.

Not in the style of:

"It's cheap, I'm going all-in."

But rather:

"There is bad sentiment, potentially quality platforms, low expectations and big risks. Maybe it makes sense as a small contrarian position."

I think that's a healthier approach.

---

If I had to make a personal watchlist of Chinese stocks, it would look roughly like this:

🔹 Tencent – the highest-quality platform in my view

🔹 Alibaba – value/turnaround + buybacks

🔹 JD.com – logistics and e-commerce, but lower margins

🔹 PDD – biggest growth, but also more questions

🔹 Baidu – AI/search/cloud turnaround

🔹 KWEB – broader exposure to the Chinese internet

Of these, I would personally watch Tencent and Alibaba the most.

Tencent for quality.

Alibaba for valuation and potential re-rating.

---

My final thought:

China is not popular today.

And that's exactly why it makes sense to at least keep an eye on it.

Not because a generational opportunity is definitely forming there.

But because markets often offer the best opportunities where sentiment is bad, expectations are low and most investors are scared.

You just need to distinguish between bad sentiment around a good business and bad sentiment around a broken business.

And for China this distinction is even more important than for U.S. stocks.

This is not investment advice. It's just my personal view on Chinese stocks and why I'm currently watching them.

In a letter to European finance ministers, the management of DHL Express Europe, FedEx Europe and UPS EMEA write that the new rules introduce a level of complexity that cannot reasonably be implemented by 1 July. They warn that without a "stable and workable legal framework" there is a real risk of delays to shipments at EU borders - and that this will not just affect low-cost fashion parcels, but also deliveries to which the day-to-day running of businesses and parts of the healthcare sector are linked.

What the EU wants to change and why

The new customs rules target a surge in cheap parcels from Chinese e-shops that take advantage of exemptions for low-value shipments. Today, many orders are "broken up" into small packages below the limit to avoid duty or VAT. The EU therefore plans to:

• introduce a flat duty of €3 on low-value shipments

• tighten data requirements for shippers and carriers

• better track the fair value, origin and flow of goods

The aim is to reduce tax and customs evasion, level the playing field for European sellers and better control what flows into the EU and in what volume. The problem, logistics firms say, is timing and implementation - not the idea of greater control.

What DHL, FedEx and UPS say

In a letter to EU finance ministers, top executives from the three logistics giants propose a compromise approach:

• Introduce only a simple flat duty of €3 on low-cost shipments from 1 July

• postpone the more complex parts of the reform (extended data requirements, IT connectivity, process details) until the legal framework is fully in place and systems are tested in practice

They argue that:

• the new data requirements are so complex that they cannot be implemented in real time across Europe

• in the current state, there is a high risk that shipments will 'hang at the border' because customs and freight forwarders' systems will not be able to transfer and process data correctly

• for some types of goods (e.g. some medical supplies), this could cause disruptions

In other words: the big players are not saying "no" to regulation, but "slow down and do it in two steps or it could block traffic".

What are the risks to the European supply chain

Should the EU insist on full implementation of all elements of the reform by one date without delay, there are several practical implications:

• Border delays - The flood of cheap parcels from Asia is now huge and often automated. Any outage or delay in data interfaces can quickly lead to queues of shipments waiting for data to be completed or manually checked.

• Reaching beyond "Shein and Temu" - While the new regime focuses on low-cost e-commerce packages, it will technically affect the entire ecosystem - including shipments of smaller components, consumables and some of the medical and lab shipments that are often in the low-end today.

• Pressure on small e-tailers and logistics companies - Big players like DHL $DHL.DE, FedEx $FDX and UPS $UPS will eventually get the hang of it. The most vulnerable will be smaller logistics companies and e-tailers that don't have a team of customs and IT specialists. For them, a step change in the rules could mean both costs and loss of competitiveness.

Why this is a warning especially for Europe

There is a wider theme behind all this: Europe is trying to regulate the flow of cheap goods from Asia more tightly, but at the same time is extremely dependent on the smooth running of global supply chains. Any "overreach" in setting customs rules could mean:

• short-term shortages or price increases for some goods

• a tightening of the screws on Chinese e-shops, but ultimately more red tape for European firms

• higher demands on digitalisation and data at all links in the chain

What DHL, FedEx and UPS are indirectly saying to the EU is: yes, regulating cheap imports makes sense, but if done too quickly and too complexly all at once, it may do more harm than good for Europe in the short term.

Who stands to gain from the new rules

It is not only "who loses", but also potential winners.

• European e-tailers and bricks-and-mortar retailers, who are now losing the price war with Chinese platforms as they benefit from tax exemptions.

• Local logistics players who specialise in intra-EU shipping where customs duties and complex data do not play such a role.

• Companies that produce or supply software for customs declarations, compliance and data integration (the IT layer around logistics).

What smaller carriers and e-shops will have to do

DHL, FedEx and UPS can handle it - but what about the rest of the market?

• What specific steps do the smaller carriers need to take: modifying IT systems, integrating with customs APIs, training staff on new data requirements.

• What this means for small e-tailers importing goods from Asia: more administration, need to keep better records of value and origin, possibly need for external customs agents.

• The risk that some small businesses simply give up - and the market becomes even more concentrated.

Below are the highlights of the story: what exactly is the server export issue, what exactly Huang said, how Super Micro has reacted since March, what the stock price is doing, what the company's numbers look like despite the case, and how analysts are looking at it.

What happened: Taiwan's first crackdown on 'circumventing' export restrictions

Taiwanese authorities detained three people this week on suspicion of helping to circumvent US export rules for AI servers to China. They were reportedly making false statements about servers made by US firm Super Micro to get them into China, Hong Kong and Macau despite restrictions on the export of high-performance chips such as Nvidia's AI accelerators.

So it was a classic "intermediate layer" in the chain: hardware with Nvidia chips was assembled at Super Micro, but the information in the accompanying documentation was meant to obscure the actual final market. For Taiwan, this is the first visible crackdown directly on smuggling or circumvention of controls in the semiconductor and AI server sectors, suggesting that US pressure to enforce restrictions is also translating into practice in regions where hardware is actually manufactured and re-exported.

Huang's message: Super Micro needs to get its act together

Jensen Huang commented on the whole thing right after arriving in Taiwan, which is unusual in itself - he doesn't usually comment publicly on his partner companies' compliance. But this time he stressed:

• Nvidia, he said, "rigorously" explains export regulations to all its partners.

• At the same time, he added that "at the end of the day, Super Micro has to run its own company".

• He expressed hope that Super Micro will improve its compliance so that similar situations do not happen again.

That tone is clear between the lines:

• Nvidia is making it clear that it doesn't want to bear reputational or regulatory risk for what happens "further down the chain."

• At the same time, it is putting pressure on Super Micro to tighten up processes internally and clearly demonstrate that it takes export rules seriously.

For Nvidia's shareholders, this is a signal that the company recognizes the sensitivity of exporting to China and is trying to transfer risks to partners. For Super Micro shareholders, it's a warning finger: if the company fails to correct its mistakes, it could complicate its relationship with a key chip supplier.

March indictments in the US: three people, company still in the shadows

But the story didn't start in Taiwan, but back in March in the US. At the time, the Justice Department charged three people associated with Super Micro $SMCI with violating export control laws.

• The charges face Yih-Shyan "Wally" Liaw, a longtime senior vice president of business development and board member.

• Also, Ruei-Tsang "Steven" Chang, a sales manager in Taiwan.

• And Ting-Wei "Willy" Sun, outside contractor.

Super Micro, as a company, was not named as a defendant in the indictment, but it has a reputational connection to the case. Management's response was:

• put two employees on administrative leave.

• terminated the relationship with the supplier immediately

• Wally Liaw resigned as a board member effective March 20

• the company stressed that the actions of the accused were in violation of internal compliance policies

• and declared full cooperation with investigators and a commitment to comply with U.S. export and re-export laws

From a risk management perspective, this is an exemplary response: cut individuals loose, strengthen verbal commitments, and cooperate. Whether this will be enough for state authorities and partners like Nvidia $NVDA will be seen in the coming months. May 26 is also an important date, reportedly a milestone in the investor class action lawsuit.

What makes the SMCI exchange rate: high volatility in an environment of high expectations

Super Micro shares have been volatile in recent weeks. We have a mix of news:

• short-term gains following the announcement of strong results and margin expansion

• but in the week following Huang's comments and Taiwan's intervention, they fell by around the low teens from a local peak before recovering some of the fall

It's a typical "AI winner under the magnifying glass" profile: the numbers look strong, but as soon as a legal or supplier issue appears on the horizon, the market reaction tends to be violent.

Fundamentals: over 10 billion in sales in the quarter and profit growth

Despite the legal issues, Super Micro reported very strong results for the third quarter of fiscal 2026.

• Net sales were approximately $10.2 billion (down from $12.7 billion in the second quarter, but more than double the $4.6 billion in the same period a year ago).

• Net income of about $483 million, versus $401 million in the second quarter and $109 million a year ago.

• Diluted earnings per share around $0.72 (vs. $0.60 in Q2 and $0.17 last year).

Investors reacted positively to the results, with the stock jumping about a fifth after the announcement, even though revenue missed analysts' highest estimates by more than $2 billion. The main driver was the return of gross margin to a level that was nearly half of market expectations - this is often even more important in AI infrastructure than the top line itself.

Management Outlook:

• Fiscal fourth quarter revenue in the range of approximately $11 billion to $12.5 billion

• For the full year 2026, expected revenue between approximately $38.9 billion and $40.4 billion

CEO Charles Liang added that "business fundamentals are stronger than ever", which from a fundamental perspective supports the thesis that demand for AI servers remains robust. The question is how much it may be hampered by supply issues and regulatory constraints.

What this means for Nvidia, Super Micro and the entire AI chain

From an investment perspective, there are three layers intersecting here:

• Nvidia needs its partners to be "clean" in terms of export rules. Any scandal in the chain jeopardizes reputation and the ability to sell accelerators to sensitive countries without further political pressure. It is no coincidence that Jensen Huang is publicly pushing for better compliance.

• Super Micro is sitting on a strong AI infrastructure foundation (revenue growth, margins, demand), but it also carries a "legal overhang" that won't be resolved in one quarter. For the stock, this means it can be punished for every investigative report, even if the numbers remain good.

• The AI hardware chain as a whole is getting a clear signal: the era of looser exports to China is over, and attempts at creative workarounds will be addressed even at the individual and local branch level.

The company Booking Holdings $BKNG is an undisputed global leader in online travel booking. Today I’ll try to introduce the company to you in a bit more detail.

Company profile: How does this digital empire work?

Booking Holdings doesn’t own hotels, airplanes, or rental car fleets. It operates as a pure technology intermediary (the so‑called "asset‑light" model). It connects service providers with end customers and takes a commission from each successful transaction.

This model generates extremely high margins because the costs of maintaining the platform and marketing are far lower than the costs of physically operating hotel networks. The whole group consists of six key brands, each targeting a slightly different market segment:

- Booking.com (approx. 80–85% of group revenue): The absolute flagship. It’s the world’s most popular platform for booking hotels, guesthouses, and alternative accommodations (apartments). Its strength lies in a huge network effect — the more hotels use the platform, the more customers it attracts, which in turn attracts more properties.

- Agoda (approx. 8–10% of group revenue): A key Singapore‑based brand focused on the Asia‑Pacific region. Asia is one of the fastest‑growing travel markets and Agoda gives the group a strong competitive advantage there.

- Priceline (approx. 4–5% of group revenue): A brand primarily aimed at the North American market, known for discount models and flexible package searches for U.S. customers looking for deals (flight + hotel + car).

- Rentalcars.com (approx. 2% of group revenue): A global comparator and broker for car rentals, tightly integrated into the booking flows on Booking.com.

- Kayak (approx. 1–2% of group revenue): A metasearch engine that compares flight, accommodation, and car rental prices across hundreds of other sites. Its revenues come mainly from advertising and referral fees.

- OpenTable (less than 1% of group revenue): The restaurant reservation system is a strategic complement for local experiences, though it contributes only a small fraction of total revenues.

Q1 2026: Quarterly results and shareholder policy

1) Key financials

- Revenue: USD 5.53 billion (year‑on‑year increase of 16%), which beat market expectations set at USD 5.51 billion.

- Adjusted earnings per share (EPS): USD 1.14 (year‑on‑year increase of 14%, analysts expected USD 1.08).

- Gross bookings: USD 53.8 billion (year‑on‑year increase of 15%). This shows the total volume of money that flowed through Booking’s platforms.

- Adjusted EBITDA: USD 1.29 billion (increase of 19%).

- Number of booked nights: 338 million (up 6% year‑on‑year).

2) Shareholder policy as a key pillar

Because Booking’s business model doesn’t require large capital investments in physical assets, the company generates a huge amount of free cash (USD 3.1 billion in Q1 2026), which it returns to shareholders very aggressively. The Q1 2026 results clearly demonstrate this:

- Share buybacks: During Q1 2026 alone, the company repurchased its own shares totaling USD 3.6 billion.

- Dividends: Adjusted to the new post‑split price, the company pays a steady quarterly dividend of USD 0.42 per share (yield 1.04%), which is a nice additional yield.

Why did the stock decline and what are the main risks?

Despite solid Q1 results, Booking Holdings’ stock has lost roughly 25% of its value since the start of 2026.

1) Reasons for the decline

- Management’s cautious outlook (Guidance): Although Q1 results beat estimates, management signaled a slightly more conservative outlook for the upcoming summer season. A market used to constant beats reacted to this slowdown in growth with a sell‑off.

- Geopolitical situation: Ongoing tensions in the Middle East directly affect travel to the region. According to management’s estimates, this geopolitical conflict cost the company roughly 2 percentage points of nights growth (without this impact, nights would have grown 8% in Q1 instead of 6%). At the same time, the conflict can still affect inflation, meaning people may need to save more and discretionary spending like travel is one of the first things to be cut — the market is well aware of that.

2) Main risks for the future

- Regulatory pressure in the European Union (DMA): The EU has designated Booking.com as a so‑called "gatekeeper" under the Digital Markets Act (DMA). This means Booking can no longer enforce so‑called parity clauses — hotels can now offer lower prices on their own sites than on Booking. That could theoretically weaken Booking’s position if hotels succeed in shifting customers to direct bookings.

- Macroeconomic slowdown: If the global economy slips into a deeper recession or if high inflation persists (for example due to higher oil prices) reducing household savings, travel is one of the first areas where people cut spending.

- Competition (Google and Airbnb): Google keeps improving its "Google Travel" search, trying to bypass traditional intermediaries. At the same time, Airbnb maintains a strong position in experiential accommodation, even though Booking is investing heavily in alternative accommodations and it already represents a meaningful part of its offering.

My view

Personally, I see the geopolitical tensions in the Middle East as temporary and not something that will fundamentally impact long‑term results; I’m more concerned about a potential recession, which would hit the company far more significantly. Right now, however, my real long‑term worry is Google. Google controls the flow of traffic, and the development of its own Google Travel service could gradually cut Booking off from direct customers. If Google increasingly prioritizes its accommodation results on the main page, Booking will have to spend huge sums on advertising, which would negatively affect its high margins.

Overall, I really like Booking Holdings. While it’s not an outright monopoly, its massive network effects, strong global brands, and extraordinary cash‑generation capacity make it very close to an excellent business. It’s a well‑oiled money machine with a textbook shareholder policy.

After the recent 25% drop following the stock split, the current valuation (with a P/E of around 21.2x) makes sense to me and I see it as an opportunity to buy a first‑class company at a reasonable price. That’s why I plan to open a starter position in the company.

What’s your view on the company? Did you already take advantage of the dip?