PepsiCo has long been regarded as a cornerstone holding for conservative investors, built on resilient cash flow, global distribution, and an unmatched portfolio of brands. That same stability, however, has increasingly become a constraint. Growth in traditional sugary beverages is slowing, consumer preferences are shifting toward wellness-oriented products, and premium functional drinks are capturing a disproportionate share of incremental demand. The acquisition of Poppi is therefore less about adding another label to the shelf and more about reaccelerating growth where PepsiCo needs it most: beverages.

The ambition to turn Poppi into a billion-dollar brand may sound bold, but it closely mirrors PepsiCo’s historical playbook. From Gatorade to SodaStream, the company has repeatedly demonstrated its ability to scale niche concepts into global franchises. What sets Poppi apart is its positioning at the intersection of health, culture, and functionality. It is not merely a flavor innovation, but a product aligned with long-term consumer behavior—giving PepsiCo exposure to one of the fastest-growing segments in the global drinks market.

Top points of the analysis

• PepsiCo wants to build Poppi into a billion-dollar brandlike Gatorade or Mountain Dew
• Poppi operates in a fast-growing category prebiotic and low-sugar functional beverages
• Acquisition for USD 1.65 billion + earn-out is strategic, not immediately accretive
• Poppi has so far ~$100m. USD salesbut extremely high growth rate
• Poppi's success may change the growth profile of PepsiCo's beverage business, failure will be financially manageable

How Poppi fits into PepsiCo's strategy and why it matters so much to the company

PepsiCo today operates one of the broadest beverage portfolios in the world, but most of its billion-dollar brands were created in an era when consumers weren't looking for functional benefits, but for taste, energy or hydration. The market has shifted in the meantime. The traditional soda category is structurally stagnant, while growth is shifting to lower-sugar, functional value-added segments with a clear "health narrative."

Poppi embodies exactly this shift. It is a low-sugar prebiotic soda that builds its brand on a combination of taste, functionality and lifestyle marketing. For PepsiCo, it is key that Poppi is not an "internal innovation" but a brand that has already proven itself capable of organic growth. Its sales have multiplied every year since 2020, reaching roughly $100 million in 2023 without a global distribution network behind it.

This is where PepsiCo comes into play. The company has one of the strongest distribution infrastructures in FMCG sectorthe ability to rapidly expand brand availability and experience in monetising premium drinks. This gives Poppi access to channels it would have spent decades building on its own.

Market size and growth potential: where is Poppi's realistic ceiling

Prebiotic soda is still a relatively small category, today roughly US$440 millionbut with well above average growth. Analysts' estimates project that the market will grow by 2030 to nearly double by 2030.even without factoring in the wider expansion of functional beverages into the mainstream.

Today, Poppi holds a significant share of the category, but PepsiCo's ambitions go further. If Poppi succeeds:

• expand distribution into mass retail channels
• enter international markets
• expand its portfolio of flavours and formats

the brand can move beyond its original niche and compete with broader better-for-you sodas. In this case, it's no longer just about share in prebiotic soda, but entering the multi-billion dollar functional beverage space.

Unit economics and margins: why Poppi makes sense long-term, not right away

From an investment perspective, it is important to highlight that Poppi is not accretive in the short term. A $1.65 billion acquisition on sales of around $100 million implies a high multiple that would not make sense for a mature brand. But PepsiCo is betting on a different model here:

• High gross margins on functional beverages
• premium price positioning
• scalability without linear cost growth

Once Poppi gets past a certain distribution critical mass, its operating margins can improve significantly. In addition, PepsiCo can optimize production, logistics and marketing spend, which a standalone brand could never do on a similar scale.

Projections: what a billion-dollar Poppi would mean for PepsiCo $PEP

Poppi growth scenario (rough model):

• 2023: ~$100m. USD 100 billion in sales
• 2026: $300-400 million. USD 400 USD (US + wider distribution)
• 2028-2030: USD 800m-USD 1.2bn (international expansion + new products)

If Poppi actually achieves USD 1 billion in sales at an operating margin of 20-25%, it would generate:

• 200-250 mil. 200 USD operating profit
• a positive impact on PepsiCo's EPS in the order of 1-2 %

This alone won't "overwrite" PepsiCo, but combined with other premium brands it can change the growth rate of the beverage segmentwhich is the main drag on valuation today.

Risks: where the story may fail

Poppi is not without risks, and PepsiCo is clearly aware of them - which is why it is part of the deal earn-out mechanism.

Key risks:

• the trend for functional beverages may fade away
• competition from Coca-Cola and smaller DTC brands
• pressure on prices in the event of an economic slowdown
• potential regulatory issues around health claims
• risk of brand losing authenticity once integrated into a corporation

However, PepsiCo spreads these risks across its portfolio. Poppi's failure would not threaten the company financially, while success has asymmetrically positive impact.

Reality check: Why the move makes sense even for a conservative investor

From a stock investor's perspective, this is not a "bet-the-company" bet, but a smart growth option feature. PepsiCo stays:

• Strongly cash-flow positive
• dividend attractive
• defensive over the cycle

Poppi adds growth opportunitythat the company has long lacked. If it succeeds, it will change the perception of PepsiCo from an "ex-dividend title" to a company that can grow in new consumer trends.

When will Poppi start to make a real difference to PepsiCo's results

One of the most common investment misconceptions with acquisitions like this is the expectation of immediate financial impact. Poppi is not a short-term EPS catalyst, and PepsiCo isn't hiding it. In the first two years after the acquisition, the brand will primarily consume capital and management attention. Integration into the distribution network, production expansion, marketing support, and entry into new markets will lead to higher operating costs that will dampen beverage segment margins in the short term.

However, the tipping point typically occurs when a brand crosses a certain distribution and volume critical mass. For Poppi, this point realistically looms in the two to four year timeframe. Once the brand is widely available in major retail channels in the U.S. and also begins to expand beyond the domestic market, unit costs will begin to decline and operating leverage will quickly turn in favor of profitability. At this stage, Poppi will no longer be a growth story, but will start to contribute to cash flow, which is when the market will start to take notice.

In the long term - five years or more out - Poppi can play the same role that Gatorade, for example, plays today: a stable, high-margin growth pillar that helps offset the stagnation of traditional sodas. It is this time dimension that is key for investors who want to set expectations correctly and not be subject to short-term fluctuations.

Why the market hasn't priced Poppi yet - and when that may change

Despite the media attention, Poppi is virtually unreflected in PepsiCo's current valuation. The reason is simple: with sales of around $100 million, it represents less than one per cent of the group's total revenue. For analytical models that focus on the quarterly evolution of margins, volumes and FX effects, Poppi is statistically insignificant.

However, this also creates an interesting investment case. The market today values PepsiCo primarily as a defensive dividend stock with moderate growth. However, once there are clear signs that Poppi can accelerate the growth of the beverage segment over the long term, the entire narrative around the stock may change. Investors would stop seeing it as just a stable "income" title and would start looking at it through a growth lens again.

Historically, it's the change in narrative - not the numbers themselves - that tends to be the biggest driver of valuation for large consumer companies. If Poppi contributes to accelerating organic growth in the beverage segment by even one or two percentage points, it could lead to a revaluation of multiples, especially for forward P/E and EV/EBITDA. This effect would be disproportionately larger than Poppi's absolute contribution to revenue alone.

When should an investor be alert: signals that the Poppi bet is not materializing

Although the risk is asymmetrically tilted in PepsiCo's favour, there are clear situations that investors should not ignore. The biggest warning sign would be a slowdown in the brand's growth shortly after distribution expansion. If Poppi can't maintain sales momentum after entering the mass chains, it would suggest that demand is niche rather than structural.

Another risk is the pressure on prices. In a slowing economy, consumers may start to move away from premium functional drinks and look for cheaper alternatives. If PepsiCo had to aggressively support Poppi with discounts and promotions, it would erode margins and weaken the long-term investment story.

Last but not least, there are reputational and regulatory issues to watch. Functional beverages often stand on health claims, which can come under scrutiny from regulators. Any interference with marketing communications could reduce the attractiveness of the brand, especially with younger consumers who are extremely sensitive to authenticity.

Investment scenarios

In an optimistic scenario Poppi succeeds in growing from a fast-growing niche brand into a fully-fledged global product. PepsiCo will use its distribution network to expand rapidly in the US and abroad, and Poppi will approach the $1 billion mark in sales within a few years. In this situation, PepsiCo's beverage segment will be back on a higher growth trajectory, which will lead to an upward revaluation of the stock. In such a case, investors could view PepsiCo not only as a stable dividend title, but also as a company capable of generating structural growth, which could translate into share price growth in the tens of percent range over the longer term.

A realistic scenario assumes that Poppi grows at a solid but not explosive pace. The brand will become an important addition to the portfolio, help stabilize the beverage division and gradually start contributing to cash flow without dramatically changing the overall profile of the company. In this scenario, PepsiCo stock would continue to offer a combination of moderate growth and an attractive dividend, with Poppi serving as a hedge against long-term stagnation in traditional sodas rather than as a major growth engine.

Pessimistic scenario assumes that demand for prebiotic sodas proves to be a temporary trend and Poppi fails to cross the mid-sized brand threshold. In this case, the acquisition would remain marginal in terms of financial impact and PepsiCo would absorb it without major disruption to its business. It would be a disappointing growth story for investors, but not an existential problem. The stock would likely return to a purely defensive profile with lower growth but retained dividend stability.

What to take away from the article

• Poppi is not just another brand, but a strategic bet on the future of beverages
• Billion-dollar brand target is ambitious but realistic as it scales distribution
• In the short term it is not an EPS catalyst, in the long term it is
• Risks exist but are limited by the size of PepsiCo as a whole
• For investors, this is proof that PepsiCo is not just defending positions, but looking for new growth

In the ever-evolving landscape of American finance, a select group of banking giants continues to dominate both market capitalization and investor attention. From the industrial heft of the largest players to their strategic responses to interest rate shifts, these stocks offer a window into broader economic trends and risk-reward dynamics. We break down the top names that matter most for long-term portfolios and active traders alike, with a focus on performance drivers and valuation signals.

The US banking sector

The US banking sector has had one of the most turbulent periods in its modern history. From the global financial crisis of 2008. through a decade of extremely low interest rates to the sharp reversal of monetary policy after 2022, banks have repeatedly had to adapt to an environment that has changed dramatically. For markets, this meant a long period of uncertainty during which bank stocks often underperformed the broader market, despite being key pillars of the US economy.

It is only in recent years that the true nature of the banking business has begun to be revealed again. Higher interest rates have restored the relevance of traditional banking, that is, the ability to make a profit on the difference between interest on deposits and loans. What was virtually suppressed in the era of zero interest rates has once again become a major source of profitability. At the same time, however, it has become clear that not all banks are equally well prepared for such an environment.

The years 2023 and 2024 were watershed years in this respect. The collapse of regional banks in the US (Silicon Valley Bank, which was the second largest US bank failure since 2008) reopened issues of risk management, deposit structure and liquidity. While smaller institutions with a narrow client base and a high concentration of unrealised losses failed, the largest US banks emerged relatively stronger from the crisis. It is not only this ability to survive stress scenarios that is a key reason why investor attention has begun to refocus on the banking giants.

From an investment point of view, the banking sector is specific in that it straddles the line between cyclical and defensive business. On the one hand, banks are sensitive to the economic cycle, interest rate developments and the quality of their loan portfolio. On the other hand, the largest institutions have diversified sources of income, strong capital buffers and regulatory protection. These characteristics are key in assessing their long-term investment potential.

U.S. banks today operate in an environment that is paradoxically more favorable from a profitability perspective than at any time in the past decade. Higher rates are supporting net interest income, while sector consolidation is reducing competitive pressure. At the same time, however, regulatory demands, capital requirements and risk management costs are rising. This means that differences between banks are widening further.

This is where the importance of the largest US banks becomes apparent. These institutions not only have a broad customer base, but also the infrastructure to absorb regulatory changes, invest in technology and diversify revenues across segments. Investment banking, asset management, consumer lending, payment systems and corporate banking create a robust ecosystem that is more resilient to fluctuations than smaller players.

Looking at the data found on Bulios, it is clear that the largest banks have more stable returns on capital, higher operating margins and stronger cash flow than the rest of the sector.

Another key aspect is valuation. The banking sector has been valued below historical averages for a long time, mainly due to regulatory concerns and low profitability. Even today, some banks trade at relatively low P/E or P/B multiples compared to technology firms. However, this in itself does not mean an automatic investment opportunity. The critical factor is whether the bank can generate a return on capital above its costs and maintain a stable dividend policy over the long term.

That's why it makes sense to focus on a few institutions that dominate the U.S. banking market not only in size but also in management quality, revenue diversification, and ability to adapt.

JPMorgan Chase $JPM

JPMorgan Chase is not only the largest U.S. bank by market capitalization, but more importantly, an institution that has repeatedly demonstrated in recent years that it can thrive across different phases of the economic cycle. In an environment where the banking sector is facing regulatory pressure, interest rate volatility and increasing competition from non-bank financial services, JPMorgan is profiling itself as a winner whose size and diversification are not a weakness but a key competitive advantage.

From a business model perspective, JPMorgan is one of the best diversified banks in the world. Its activities range from traditional retail banking, to corporate and investment banking, to asset and wealth management for its wealthiest clients. It is this breadth that allows the bank to stabilise returns in periods when some segments are suffering. While investment banking is cyclical and sensitive to capital market movements, retail banking and asset management provide JPMorgan with recurring and more predictable income.

Data on Bulios has long shown that JPMorgan is among the highest and most stable return on capital in the U.S. financial sector. Return on equity has been well above the sector average in recent years, which is extraordinary for a bank of this size. More importantly, however, is consistency - JPMorgan has been able to generate solid profits not only in times of economic growth, but also in periods of heightened volatility, as was clearly demonstrated both during the pandemic and in the years of subsequent sharp interest rate changes.

Its margins have remained well above 20% for the past four years. In 2021, margins were as high as a colossal 38%! But revenues are not lagging. When margins have declined in recent years but are still high, revenues continue to grow. As of 2021, they managed to climb from $127 billion to $271 billion last year. This has resulted in a steady rise in the bank's net income, which was a record $58 billion in 2024.

One of the key factors in JPMorgan's success is its ability to work effectively with the interest rate environment. High rates have significantly increased banks' net interest income in recent years, but not all institutions have been able to translate this benefit into sustainable profitability. With its large deposit base and strong position in retail banking, JPMorgan has benefited from relatively low deposit costs, which has translated positively into margins.

Another important aspect is the quality of the loan portfolio. The bank has traditionally been considered one of the most conservatively managed large banks in the US. This is reflected in a low NPL ratio and relatively moderate provisions even during the economic slowdown. From an investor perspective, this is crucial, as loan losses tend to be a major source of problems in banking crises. JPMorgan has repeatedly demonstrated its ability to absorb shocks without having to significantly weaken its capital position.

Management also playsan important role in $JPMs long-term performance . Jamie Dimon, the bank's CEO, is considered one of the best bankers today. His emphasis on risk management, long-term planning and technology investments has made JPMorgan an institution that can compete not only with traditional banks but also with fintech companies. JPMorgan's investments in technology and digitization amount to tens of billions of dollars annually, which is reflected in operational efficiency and quality of service to clients.

From a valuation perspective, JPMorgan represents an interesting combination of quality and relatively reasonable valuation. Although it is the largest bank in the US, its valuation has historically been closer to the sector average rather than significantly above it. Moreover, the bank is severely undervalued, by as much as 31%, according to the DCF-based fair value and relative valuation on Bulios.

From an investment perspective, JPMorgan is often seen as a sort of "benchmark" for the entire US banking sector. If JPMorgan does well, the rest of the sector usually does well. However, if there were more significant problems at this particular bank, it would be a signal of systemic risk. This in itself speaks volumes about its importance and central role in the US financial system.

For long-term investors, JPMorgan represents a combination of stability, quality and growth potential. The firm also pays a dividend, which, while common in the industry, a 2% yield is sure to please. This is not the only reason why JPMorgan is a staple of many portfolios.

Bank of America $BAC

From an investment perspective, Bank of America represents a different type of banking giant than JPMorgan. While $JPM is often seen as the best-managed and most diversified U.S. bank, Bank of America is a much more direct bet on the macroeconomic cycle, particularly interest rate trends and U.S. consumer behavior. It is this characteristic that makes it one of the most sensitive large banks to changes in Fed monetary policy and also one of the most interesting bank stocks from the perspective of active investors. Not that the legendary Warren Buffett is known mainly for any trades, but he has held Bank of America in his portfolio for a long time (since 2007). In doing so, he owns 10-12% of all $BAC shares .

The cornerstone of Bank of America's business model is its large retail base. The bank has tens of millions of customers in the U.S., has one of the largest deposit bases in the country, and has a strong presence in mortgage, consumer lending, and payment services. It is the high proportion of low-cost deposits that means Bank of America can benefit significantly from net interest margin growth in a higher interest rate environment. This effect was clearly evident in 2022 and 2023, when the bank experienced sharp increases in net interest income due to the Fed's rapid rate hikes.

Data on Bulios has long shown that Bank of America is among the banks with the greatest sensitivity to yield curve changes. A small upward shift in rates has a significantly larger impact on profitability for this bank than for competitors that have more complex and less interest-rate dependent income structures. This is both an advantage and a risk. In a high rate environment, Bank of America generates above-average returns, but in a rapidly declining rate environment, it may face margin pressure more quickly than, say, JPMorgan.

This can be seen beautifully in the evolution of margins since 2021. It was in 2021, when the Federal Reserve was raising rates to historic highs, that margins shot up, reaching above 34%at $BAC. But in recent years, when rates have no longer risen and have rather been stable or even declining in recent months, Bank of America's margins have come under pressure. But they were still 14.1% for 2024. What didn't decline during this period, however, were earnings. They grew nearly 100% from 2021 to 2024, moving from $94 billion to $192 billion. But the decline in margins was faster, and so the company's profits fell by $5 billion to $27 billion over the same time period.

Importantly from an investment perspective, Bank of America has deliberately adjusted its portfolio structure in recent years to be less reliant on short-term trading and volatile capital markets. It has placed greater emphasis on stable interest income, wealth management and traditional banking products. This shift reduces the short-term volatility of results, but also means that the bank is less flexible when the market environment changes sharply.

According to data on Bulios, Bank of America trades at lower valuation multiples than JPMorgan (P/E around 14), reflecting precisely the higher cyclical risk. The price-to-book ratio has been below JPM's for a long time, making it an attractive title for investors who expect rates to stabilize or decline modestly without a dramatic slowdown in the economy. In such a scenario, Bank of America can offer a combination of solid earnings, dividend yield and repricing potential.

At a fair price, however, $BACstock is now overvalued by 21.7%, unlike $JPM. Warren Buffett himself has gradually divested some Bank of America stock in recent years. Last year, he sold a nearly 9% stake in the bank.

The bank's capital position is also a significant factor. Bank of America maintains robust capital ratios that allow it to absorb potential loan losses while continuing to pay dividends. It is evident that even in periods of heightened uncertainty, the bank maintains a disciplined approach to capital return, whether through dividends or share repurchases. This is particularly important for long-term investors looking for stable returns, not just short-term price movements.

Exposure to the consumer segment remains a risk. If there were a significant rise in unemployment or a weakening of the U.S. consumer, Bank of America would be hit harder than banks with more investment banking or global exposure. At the same time, however, the current credit quality of the portfolio remains solid, based on available data, and the bank is building sufficient reserves for a potential deterioration in economic conditions.

Wells Fargo $WFC

Wells Fargo is one of the largest and most historically important U.S. banks, but its story has been fundamentally different from JPMorgan or Bank of America in recent years. While competitors were able to grow smoothly after the financial crisis, Wells Fargo has long been tied down by the consequences of its own failures in risk management, internal culture, and regulation. It is this divergent trajectory that today makes it a bank that is perceived by investors as a firm that has risen from the ashes again rather than a stable banking leader.

A fundamental point that has defined Wells Fargo since 2018 is the regulatory cap on balance sheet size. The Federal Reserve has imposed asset growth limits on the bank due to serious misconduct in the past, most notably in the areas of fake accounts and failed internal controls. This cap has caused Wells Fargo to be unable to grow at the same rate as other large banks, losing some market share and profit potential. For investors, this meant years of stagnation, stock underperformance, and a sustained discounting of valuations to competitors.

However, looking at the data available on Bulios, it is clear that Wells Fargo has made significant progress in recent years. The bank has undergone a major restructuring, replaced management, invested billions of dollars in IT systems and risk management, and gradually simplified its business model. The result is an institution that is much more operationally efficient today than in the past and that can generate solid profits without aggressive balance sheet growth.

Wells Fargo's profitability is primarily driven by its strong position in traditional retail and commercial banking in the US. The bank has a large deposit base, which allows it to fund loans relatively cheaply, especially in a higher interest rate environment. It is the growth in net interest margin (26.6% in 2021) that has been one of the main factors improving financial performance in recent years.

Unlike JPMorgan or Bank of America, Wells Fargo is less exposed to investment banking and capital markets. This reduces its sensitivity to market volatility, but also limits its growth potential during periods of strong market activity. Wells Fargo's investment story is therefore less about expansion and more about optimizing its existing business. For investors, this means lower growth but potentially more stable and predictable cash flow.

Valuation-wise, Wells Fargo is trading above its intrinsic value today, according to the fair price on Bulios, but that doesn't mean it can't continue to grow. The price-to-book value ratio remains lower than both JPMorgan and Bank of America, reflecting lingering regulatory risks and distrust in parts of the market. But it also creates room for a revaluation of the stock should the regulatory cap on assets be lifted. It is this moment that is often cited by analysts as a potential catalyst that could fundamentally change the market's perception of Wells Fargo.

Wells Fargo's dividend policy is another important element of the investment thesis. The bank is gradually returning to attractive payouts to shareholders after years of restrictions. The current 2% dividend is supported by a solid capital position and the ability to generate earnings even in a more conservative growth mode.

However, risks remain significant and cannot be ignored. The biggest of these is still regulatory uncertainty. If further failures are identified or regulators are not satisfied with the pace of remediation, the process of removing restrictions could be significantly prolonged. Another risk is the macroeconomic environment, in particular the potential increase in NPLs in the event of an economic slowdown. Wells Fargo is strongly tied to the U.S. economy, which means that a recession would quickly affect the quality of its loan portfolio.

Wells Fargo is a bank for patient investors. It does not offer dynamic growth or technological dominance like some other financial institutions, but rather the possibility of gradual appreciation if the transformation is successfully completed. If the bank can finally close the chapter on its regulatory problems, the market may reassess its valuation and bring it closer to that of its competitors. This would represent an interesting upside without the need for significant earnings growth.

Bonus: Berkshire Hathaway $BRK-B

Berkshire Hathaway represents a very unique case in the context of the U.S. banking sector. It is not formally a bank, it does not have a banking license, it does not accept deposits, and it is not subject to the same regulatory regime as JPMorgan, Bank of America, or Wells Fargo. Yet its real impact on the financial system, the capital markets and the banking sector as a whole is comparable to, and in some ways even greater than, that of traditional bank stocks.

A fundamental reason why Berkshire is often seen as a bank is its ability to work with capital on a scale that is commonly seen in large financial institutions. The holding company has long managed huge amounts of cash, investing it in financial assets, corporate bonds and equities, while generating stable cash flow from its subsidiaries. This model creates a bank-like effect: Berkshire accumulates capital, allocates it to high-yielding assets, and benefits from the difference between the cost of capital and the return on investment.

According to data on Bulios, Berkshire Hathaway has long been one of the largest companies in the world by market capitalization, hovering above $1 trillion. It also holds one of the largest cash cushions in the corporate world. This is a key element of Berkshire's investment thesis. While banks must hold a large portion of capital as regulatory reserves, Berkshire has the flexibility to manage its cash as investment opportunities arise, allowing it to react quickly and seize interesting opportunities.

In addition, Berkshire Hathaway's investment portfolio has a strong banking presence. The holding company is one of the largest shareholders of Bank of America $BAC and historically had significant holdings in other financial institutions. Thus, Berkshire indirectly contributes to the profitability of the banking sector without bearing the full regulatory burden of the banks itself. From an investor's perspective, this is a crucial distinction. While banks are sensitive to changes in capital requirements, interest rates, and regulatory rules, Berkshire has much more leeway.

Another key aspect that brings Berkshire closer to the banking model is the role of the insurance business. Subsidiaries such as GEICO and Berkshire Reinsurance generate funds from premiums that the company holds before claims are paid. This flow works much like deposits in a bank. It is cheap or even costless capital that Berkshire can invest. And it is one of the main reasons Berkshire's return on capital is so high over the long term. It's one of the best forms of financing because it doesn't come with interest costs in the traditional sense.

In terms of profitability, Berkshire Hathaway differs from banks in that its results are not dependent on net interest margin. While banks such as JPMorgan and Bank of America benefit primarily from the difference between interest on loans and interest on deposits, Berkshire generates profits from a combination of operating business, investment income and capital appreciation. This gives its results a different risk profile. In periods when banks face margin pressure due to changes in rates or regulation, Berkshire can benefit from growth in the value of its investments or from the operating earnings of its non-financial subsidiaries.

Berkshire is often perceived as a conservative financial colossus, which is largely true. The volatility of its shares tends to be lower than that of pure banking titles, precisely because of the diversification of earnings. While the banking sector is cyclical and reacts strongly to economic developments, Berkshire has exposure across the entire economy - from insurance to industrials to consumer brands. This makes it a stabilizing element of the portfolio, especially during periods of heightened uncertainty.

In conclusion, Berkshire Hathaway complements traditional banks exactly where their model leaves off. It offers exposure to finance without reliance on net interest margin, without direct regulatory pressure, and with long-tested capital discipline.

Table

Závement

The U.S. banking sector has undergone a fundamental transformation over the past decade, which accelerated significantly following the financial crisis, pandemic and subsequent period of high interest rates. Today's largest banking institutions can no longer be viewed as a homogeneous group with similar risk and return profiles. On the contrary, the differences between them have widened to such an extent that size by market capitalisation alone is no longer a sufficient measure of true strength.

Looking at the four institutions we have analyzed, it is clear that the U.S. banking sector today is not defined solely by asset size or balance sheet size. Quality of management, diversification of revenues, relationship with regulators, and ability to adapt to changing economic conditions are becoming critical factors. Banks that manage these aspects are able to navigate the uncertain environment with greater stability, while others remain constrained by structural or reputational issues.

Overall, the largest US banks thus represent a reflection of the evolution of the entire financial system.

JPMorgan Chase has executed one of the largest and least visible reallocations of capital in modern U.S. banking. Over a relatively short period, the bank moved nearly $350 billion away from balances held at the Federal Reserve and redirected most of that liquidity into U.S. Treasuries. This was not a defensive reaction to market stress, nor a liquidity-driven maneuver. It was a deliberate, forward-looking decision rooted in expectations about the direction of interest rates.

While much of the market focused on the timing and messaging of the Fed’s eventual rate cuts, JPMorgan acted earlier. By reshaping its balance sheet ahead of the cycle, the bank locked in yields at levels it considers attractive and positioned itself for margin normalization as rates decline. For an institution managing over $4 trillion in assets, this move offers a rare glimpse into how the most systemically important players interpret the next phase of monetary policy—and how quietly they are willing to act on that view.

Why this move is exceptional

Moving cash at JPMorgan $JPM is not a routine portfolio optimization, but a systemically significant decision. The decline in the bank's balances at the Fed from over $400 billion to roughly $50 billion. means that JPMorgan has virtually single-handedly explained most of the decline in reserves throughout the US banking system. In other words, what thousands of smaller banks combined did not change, JPMorgan turned around with a single strategic decision.

Timing is also important. The bank avoided this move in 2020 and 2021, when rates were extremely low and long-term bonds were a risk. This allowed it to avoid the massive paper losses that later hit competitors during the sharp rise in rates in 2022. Now JPMorgan is stepping into Treasuries as rates begin to fall, and it is doing so from a position of strength, not necessity.

The move also confirms that the largest US bank does not view the current rate cut as a short-term episode. On the contrary - the balance sheet suggests an expectation of a longer period of lower rates, which needs to be prepared for in advance.

What JPMorgan gains - and what it deliberately gets rid of

Holding cash at the Fed has been extremely advantageous for banks in recent years. The interest on reserves has allowed JPMorgan to collect steady returns without credit risk and without having to increase credit exposure. But this model stops working the moment the Fed starts cutting rates. The yield on reserves quickly becomes thinner and less predictable.

Moving into US Treasuries allows the bank to lock in yields at levels that were unaffordable not long ago. JPMorgan thereby:

• Locking in higher interest yields for longer periods
• reduces the sensitivity of its results to a further fall in rates
• stabilises future net interest income
• while minimizing the regulatory and political risk associated with interest on reserves

From a balance sheet management perspective, this is a textbook example "front-runningof the monetary cycle. JPMorgan exits the variable yield when its attractiveness declines and moves capital into an instrument that offers greater certainty and better yield predictability.

What's behind the decision: rates, policy and past experience

JPMorgan's decision cannot be read in isolation. In addition to monetary policy, the growing political pressure on the Fed's interest rate on reserves. These payments are increasingly being criticised as "bank subsidies" and it cannot be ruled out that the regime will change in the future. By shifting funds elsewhere, JPMorgan is reducing its reliance on this mechanism before it could be politically constrained.

At the same time, it confirms the bank's long-standing conservative approach to risk management. JPMorgan has repeatedly shown that it does not chase short-term returns at the cost of future problems, but works systematically with the entire cycle - from expansion to restriction to easing.

What investors should take away from this

This move is not speculation, but a strategic decision by the best-managed US bank. For investors, it means:

• greater stability of future earnings in a falling rate environment
• lower risk of unpleasant surprises at the balance sheet level
• confirmation of strong risk management
• and an indirect signal that the cycle of lower rates may last longer than the market currently expects

JPMorgan shows once again that the really important moves in financial markets often happen quietly - without dramatic press conferences, but with an impact of hundreds of billions of dollars.

Alibaba’s latest quarter signals a clear strategic inflection point rather than a traditional earnings story. Revenue growth remains modest, but the internal composition of the business is shifting rapidly. Management is actively pruning lower-return activities, simplifying the corporate structure, and reallocating capital toward areas with the strongest long-term optionality. Cloud computing, artificial intelligence, and high-frequency local services are now firmly at the center of Alibaba’s capital allocation and execution priorities.

This repositioning comes with an explicit short-term cost. Operating profit and cash generation declined, not because demand weakened, but because investment intensity increased sharply. For investors, Q3 is best interpreted as a transition phase: Alibaba is trading near-term margin stability for strategic depth, technological relevance, and future scalability. The key question is no longer whether profits dipped this quarter, but whether these investments can re-establish Alibaba as a core infrastructure player in China’s next digital cycle.

What was the last quarter like?

In the third quarter of 2025, Alibaba's consolidated sales of $BABAreached CNY 247.8 billion, representing a year-on-year growth of approximately 5%. However, this figure is heavily skewed by changes in the company's portfolio. Adjusted for divested businesses, mainly Sun Art and Intime, organic revenue growth would be around 15%, which better reflects the actual dynamics of key segments. The core business is therefore growing at a solid pace, but it is not "strength-based" growth - it is a combination of higher monetisation, improved user experience and the expansion of higher value-added services.

The operating result, on the other hand, was significantly weaker. Operating profit was only CNY5.4 billion, down more than 80% year-on-year. Adjusted EBITA fell to CNY9.1 billion, also with a dramatic year-on-year decline. However, this development is not the result of a collapse in demand or price pressure, but a direct result of consciously increased investment. In the quarter, Alibaba significantly increased spending on AI model development, cloud infrastructure expansion, logistics network and fast delivery support within China's e-commerce ecosystem.

Net profit attributable to shareholders was CNY21.0 billion, down approximately 53% year-on-year. On a non-GAAP basis, the decline was even more pronounced, confirming that the current quarter is primarily weighed down by operating expenses rather than one-off accounting items. From an investment perspective, the key point is that this is not a deterioration in margins in the core segments, but a transitional phase of increased capital intensity.

Cash flow development was also significantly weaker. Operating cash flow fell to CNY10.1 billion and free cash flow went into negative territory, at around CNY21.8 billion. However, again, high capital expenditure was the main factor. Over the past four quarters, Alibaba has invested roughly CNY120 billion in AI and cloud infrastructure, a level unprecedented in the company's history. However, a strong cash position in excess of CNY 570 billion gives the firm comfort to fund this investment cycle without pressure on its balance sheet.

• Full presentation with results.

CEO commentary

CEO Eddie Wu identified the current period as a key phase of long-term transformation. He emphasized that the goal is not to maximize short-term profits, but to build a technology and infrastructure platform that will enable Alibaba to remain relevant in the era of AI-driven economy. According to the management, decisions are being made now on who will dominate cloud, enterprise AI solutions and digital consumption in Asia in the next decade.

CFO Toby Xu followed up by saying that the company is willing to accept short-term volatility in profitability in exchange for long-term ROI. He also stressed that financial discipline remains a priority and that any major investment is assessed for future returns and scalability.

Outlook

Management did not provide specific numerical guidance at the profit level, but clearly indicated the direction of future developments. Investment in AI and cloud is expected to remain high in the coming quarters, with the growth rate of the cloud segment expected to accelerate further. In e-commerce, unit economics are expected to gradually improve, particularly in the fast delivery area, where economies of scale are already starting to show.

Thus, in the short term, a return to historical operating margins cannot be expected, but in the long term, management believes that the combination of cloud, AI services and more advanced monetization of the user base will lead to higher and more stable profitability than in the past.

Long-term results

A look at Alibaba $BABA's long-term numbers shows a company that has been able to maintain steady growth despite regulatory and macroeconomic turmoil. Revenues have grown from CNY853 billion in 2022 to nearly CNY996 billion in 2025, representing a cumulative growth of over 16%. This growth is all the more significant given that it took place in an environment of a slowing Chinese economy and increased competition.

Gross profit grew from CNY314 billion to CNY398 billion over the same period, an increase of more than 25%. Gross margin improved gradually, reflecting a shift towards higher value-added services, particularly in cloud and digital services. Operating profit rose from CNY69.6 billion in 2022 to CNY140.9 billion in 2025, more than doubling in three years.

Net profit development is even more significant. This increased from CNY62.2 billion in 2022 to CNY130.1 billion in 2025, an increase of more than 100%. Moreover, EPS growth has been supported by a systematic reduction in the number of shares outstanding through share buybacks, which have reduced the average number of shares by more than 10% during the period under review.

EBITDA rose from CNY128 billion in 2022 to CNY183 billion in 2025, confirming that the company's underlying cash-generating capability remains strong even in a period of increased investment. The long-term numbers thus clearly show that the current cash flow pressure is cyclical, not structural.

News

Key developments include the continued expansion of AI products in the cloud segment, where Alibaba recorded its ninth consecutive quarter of triple-digit growth in AI services revenue. The company is also further expanding its data center infrastructure and strengthening its collaboration with large enterprises and the public sector.

In e-commerce, Alibaba is focusing on fast delivery, improved user interface, and deeper integration of payment and logistics services to increase customer loyalty and the long-term value of its user base.

Shareholding structure

Institutional investors hold approximately 12% of Alibaba's shares, a relatively low proportion compared to US tech giants. The largest institutional holders include JPMorgan, Primecap, Fidelity and Goldman Sachs. Low institutional exposure means higher volatility, but also potential room for a change in sentiment if global investor confidence in China's technology sector improves.

Analysts' expectations

Analyst views remain divided. The more optimistic part of the market sees the current investments as a necessary step for Alibaba to remain a technology leader in the AI era. More conservative analysts point to near-term cash flow pressures and the risk that investment returns may come later than the market expects.

Fair Price

In an environment where generous dividends are often used to mask slowing growth or appease impatient shareholders, truly resilient payout stories are becoming rare. The most compelling cases are no longer defined by headline yield, but by the mechanics underneath: rising operating cash flow, controlled capital spending, and a balance sheet that improves even as capital is returned to investors. That combination signals a business paying dividends because it can, not because it must.

An annual dividend of $6.20 per share fits precisely into that framework. The payout is not stretched, not promotional, and not reliant on leverage. Instead, it is supported by free cash flow that has expanded faster than distributions, while net debt trends steadily downward. For long-term income investors, this is the difference between a dividend that survives the cycle and one that disappears when conditions tighten.

Top points of the analysis

• Annual dividend of USD 6.20 per share with a forward yield of approximately 3.4%, with no signs of downward pressure
• Free cash flow of $357 million. USD over the past 12 months, well in excess of dividend commitments
• Revenue growth for four consecutive years with double-digit growth and stable margins
• Operating margins over 60%which creates a significant cushion for dividends and investment
• Declining net debt and moderate leverage, reducing the sensitivity of the dividend to interest rates

Company performance

EastGroup Properties $EGP is a real estate company specializing in industrial and logistics properties that form the foundation of modern supply chains. Its portfolio is geographically concentrated in the southern and southeastern U.S. states, regions where population growth, manufacturing relocation, e-commerce development and regional distribution expansion have long intersected. This focus is not a cyclical bet, but a structural strategy to target markets with consistently higher demand for flexible industrial space.

The business model combines the ownership of completed facilities with the ongoing development of new properties, with an emphasis on return on invested capital and long-term tenant relationships. The result is high visibility of future income and cash flow stability, which is key to the dividend policy. In contrast to cyclical real estate segments, income here is not dependent on short-term price fluctuations, but on the long-term functionality of the infrastructure.

This model is clearly reflected in the financial results. Revenues increased from EUR 409 million in 2010 to EUR 1.5 million in 2011. USD 639 million in 2021. USD 639 million in 2024, while operating profit increased from USD 278 million in 2021 to USD 739 million in 2024. USD 443 million in 2024. The growth is therefore not only driven by volume, but also by efficiency improvements, which have a direct positive impact on the ability to pay and grow the dividend.

Competition and market position

Three direct competitors EastGroup Properties in the U.S. industrial and logistics real estate segment are:

Prologis $PLD - the largest player in logistics and distribution parks, with a global portfolio and strong exposure to e-commerce and modern distribution centers.

First Industrial Realty Trust $FR - focuses on light industrial and logistics properties in key US metropolitan areas, often in the same markets as EastGroup.

STAG Industrial $STAG - Owns a broadly diversified portfolio of industrial properties throughout the United States, with an emphasis on mid-sized markets and long-term leases.

The industrial real estate market is competitive, but differences between players are pronounced in access to financing and dividend policy. While some of the competitors are opting for aggressive debt-financed expansion, this analysed company has long favoured a more sustainable growth rate. While this approach does not lead to the fastest increase in portfolio size, it significantly reduces the risk of future refinancing problems.

This setup makes the firm less sensitive to interest rate changes and capital market volatility. This is crucial for the dividend investor in particular, as historically dividend cuts have occurred primarily at companies that combine a high payout with high leverage. Here the situation is reversed - the dividend is set conservatively relative to cash flow and balance sheet.

In addition, the regional focus and quality of the portfolio allow the company to maintain high occupancy and gradually increase rents without having to significantly reduce prices during a slowdown. This creates a stable basis for further growth in cash flow and dividends.

Management and capital discipline

The Company's management is focused on long-term return on capital, not on maximising short-term yield. An ROIC of almost 20% confirms that new projects are only undertaken if they make economic sense even under conservative assumptions. This approach is key to dividend stability because it eliminates the risk of future cash flow having to be used to rehabilitate inefficient investments.

At the same time, management demonstrates a high degree of balance sheet discipline. In an environment where many real estate companies are facing pressure from rising interest costs, there is a reduction in net debt. This creates additional room for dividend policy and reduces the likelihood of having to revise it in the future.

The pace of dividend increases is consistent with real cash flow growth and shows no signs of aggressive switching. This is a positive signal in the long run, as a stable, moderately growing dividend has a higher probability of sustainability than a rapid jump increase.

CEO

Marshall A. Loeb is President and Chief Executive Officer (CEO) of EastGroup Properties, a position he has held since January 2016. He rejoined the company in 2015 as President and COO after serving EastGroup in various roles from 1991 to 2000, including Asset Manager and Senior Vice President. His previous roles include President and COO at Glimcher Realty Trust, where he led a retail REIT, and previously Chief Financial Officer (CFO) at Parkway Properties, giving him more than thirty years of experience with publicly traded real estate investment trusts (REITs). Loeb has a strong background in real estate industry, finance, operations and property development, and has also served on management and audit committees at other companies and organizations.

Financial Performance

Financial performance over the past four years has shown exceptional consistency. Revenues have grown at a double-digit rate each year, with EBIT increasing from $151 million in 2010 to $151 million in 2011. USD 253 million. USD 253 million and EBITDA reached USD 414 million. Net profit increased to USD 228 million. USD 228, with growth taking place despite a gradual increase in the number of shares.

Crucial to the dividend thesis is that earnings growth is accompanied by cash flow growth. Operating cash flow grew by more than 60% over four years, confirming that earnings are not just accounting but actually generating cash. This is a key difference from companies whose profits are growing but cash flow is stagnant.

Moreover, high margins create a substantial buffer to absorb any negative shocks without having to resort to a dividend policy.

Cash flow and dividend cover

The free cash flow of EUR 357 million is the highest in the Group. USD 357 million represents one of the strongest pillars of the dividend thesis. This amount arises after capital expenditure on maintenance and portfolio development, which means that the dividend is financed from real surplus cash. This is a fundamental difference from companies that pay a dividend before covering investment needs.

The ratio between FCF and dividend liabilities provides a comfortable buffer. Even in the event of a slowdown in growth, the firm would be able to maintain the dividend without having to increase debt. This relationship between cash flow and dividend is stable over the long term and supports continued increases in the payout.

In addition, FCF growth at a rate of over 24% year-over-year creates room for further dividend increases without increasing risk.

Dividend: history, sustainability and potential

EastGroup Properties is one of the most stable dividend REITs in the industrial real estate segment over the long term. Company has paid a dividend continuously for more than 45 yearsspecifically, more than 180 consecutive quarterly payouts. In terms of dividend growth, EGP is also very consistent - the dividend has increased its dividend every year for the last 14 years or so. and overall has had more than three decades where the dividend has been at least maintained without a reduction. The current annual dividend is around USD 6.2 per sharepaid quarterly.

The dividend is paid over the long term and increases have been consistent for more than a decade. This is a strong signal of quality in the real estate sector, as it is the long history of growth that demonstrates the company's ability to manage through different phases of the economic cycle. The dividend here is not a marketing tool, but the result of a gradual increase in portfolio value and cash flow.

The sustainability of the dividend is underpinned by a combination of high margins, rising FCF and falling debt. Even under a conservative scenario of revenue stagnation, the current dividend level would remain covered. This significantly reduces the risk of unpleasant surprises for the long-term investor.

The potential for further dividend growth is mainly linked to continued portfolio expansion and efficiency improvements. This is not a title that promises a rapid doubling of the payout, but one where there is a high probability of gradual, long-term sustainable growth.

Dividend stress test: when would the dividend really be at risk

The current dividend thesis rests on a combination of high margins, rising free cash flow and a disciplined balance sheet. But for the analysis to hold up in the eyes of the conservative investor, an uncomfortable question must be asked: what exactly would have to happen for the dividend to cease to be safe. In other words, where do the real limits of dividend sustainability lie.

The first stress scenario is a decline in occupancy and pressure on rents due to the economic slowdown. Even in this case, however, high operating margins of over 60% provide a significant cushion. Operating cash flow would have to decline significantly for the company to reach a situation where dividend commitments begin to compete with operating needs or portfolio maintenance investments. The current level of free cash flow of €357 million is not sufficient. The USD 357 million suggests that the firm would be able to absorb even a significant decline in earnings without having to cut the dividend immediately.

The second scenario is rising interest costs. The key here is the interest cover at 7.6× and the fact that net debt has been declining in recent years. This means that even with higher rates, the company has enough room to service debt without having to reach for the dividend. In practice, management would likely slow the pace of portfolio growth or defer new projects first, rather than adjusting the payout to shareholders.

The third and harshest scenario would be the combined effect of falling occupancy, stagnant rents and higher rates. However, even here the cash flow structure suggests that the dividend would be one of the last variables the firm would touch. That's a key difference from titles where the dividend is set at the margin and the first casualty in times of trouble.

Who is this title for - and who is it not for

This title is not a one-size-fits-all solution for every dividend investor, and this selectivity is its strength.

This stock is not suitable for investors looking for a high immediate dividend yield in the six to eight per cent range. The dividend here is not set aggressively and will not serve as a substitute for a high coupon bond. Nor is it a title for tactical traders or investors with short time horizons who expect the market to reprice quickly.

On the contrary, it is a title suitable for investors building a stable core dividend portfoliowhere predictability, low risk and gradual growth of payout over time is a priority. This type of investor appreciates that the dividend is not dependent on optimistic scenarios, but on actual cash generated. It acts as a stabilising element in the portfolio to offset more volatile growth or cyclical positions.

From a long-term perspective, this title is best suited to investors who are thinking over a ten-year or longer horizon and want to combine ongoing cash income with gradual dividend growth, rather than maximising yield in the short term.

Balance sheet and financial stability

Total debt decreased to $1.55 billion and net debt decreased year-over-year. Debt to asset and equity ratios remain moderate and the interest cover of 7.6x provides a significant safety cushion. The Altman Z-Score of 3.2 confirms the low risk of financial distress.

From a dividend perspective, the balance sheet is a key stabilising element. The company is not forced to sacrifice the dividend in favor of refinancing and has ample room to react to changes in the interest rate environment.

Valuation - the price for the quality of the dividend

Share valuation is a key part of the investment consideration in this case, as this is not a title with an extreme dividend yield, but a company where the investor is paying a premium for stability, predictability and long-term sustainability of the dividend. With a market capitalization of approximately $9.8 billion and an enterprise value of about $11 billion, the stock is trading at about 22 times net income and about 14 times operating cash flow. At first glance, this doesn't look like a cheap valuation, but in the context of the quality of cash flow and low dividend risk, it's a valuation that makes sense.

From a dividend investor's perspective, the key is comparing the share price to its ability to generate cash. Free cash flow of €357m is a good value for money. USD 357 implies an FCF yield of around 3.5%, which is very close to the dividend yield itself. This means that the market is not pricing in a significant decline in cash flow at the current price, but neither is it pricing in aggressive growth. In other words, the stock is priced as a stable, high-quality dividend title, not a growth bet. This is a positive for the conservative investor because the valuation is not based on optimistic assumptions.

The price to book value ratio is also an important perspective. A price-to-book of around 2.8 may look higher for a real estate company, but it needs to be read in the context of return on capital. ROIC of nearly 20% and ROE of over 12% suggest that the company can capital appreciate significantly better than the sector average. Thus, the higher multiples are not a reflection of speculation but of portfolio quality and management efficiency.

From a dividend perspective, the key point is that the current valuation does not require extreme dividend growth to make the investment make sense. The investor here is not buying a future promise, but an existing cash flow that is relatively safe. If the dividend were to grow only at a low single-digit rate in line with cash flow growth, the current price would still offer a solid long-term yield without the need to reprice the market.

On the other hand, it is fair to say that the scope for significant share price appreciation is limited. The valuation already reflects the quality of the business and the dividend, and therefore the market cannot be expected to significantly reprice the stock without further acceleration in cash flow growth. However, this is not a weakness from a dividend investor's perspective, but rather a confirmation that this is a title suitable for long-term holding rather than tactical speculation.

Overall, the valuation can be summed up by saying that the investor is paying a "fair price for peace of mind" here. The shares are not cheap, but neither are they overpriced. The valuation is consistent with the stability of the cash flow, the quality of the balance sheet and the long history of a sustainable dividend. For an investor looking for reliable dividend income with low risk, this balance between price and quality is one of the main arguments in favour of the title.

What to take away from the article

• Dividend of $6.20 per year is not a lure of yield, but the result of a long-term growing and high-quality cash flow.
• Free cash flow of $357 million. USD provides a significant buffer over dividend liabilities and confirms the high sustainability of the payout.
• More than a decade of dividend growth demonstrates the company's ability to manage through different phases of the economic cycle.
• Declining net debt and interest coverage of 7.6 times significantly reduce the risk of the dividend being sacrificed to the balance sheet.
• Valuation is not lowbut is consistent with the quality of the business and the low risk of the dividend.
• This is a title to hold for the long termnot a speculation for a quick revaluation.
• The dividend has room for further gradual growthwithout increasing financial risk.

In a recent interview, tech pioneer Bill Gates cautioned investors that the rapid surge in artificial intelligence valuations doesn’t guarantee success for all players. With an increasingly competitive landscape and stretched market expectations, many AI startups could struggle to turn hype into profitability. Gates urges a discerning view on current AI investments, highlighting the difference between transformative innovation and overvalued ventures.

In recent years, AI has become a word that can move markets faster than macroeconomic data or rates. All it takes is a mention in an earnings call or a new data center contract, and investors are able to reprice an entire sector in a matter of weeks. Yet right now comes one warning from a man who has seen the technology revolution, created it himself, and most importantly, managed to translate it into economic reality. He is none other than Microsoft founder Bill Gates.

Gates in a recent interview warned that AI is and will be an extremely competitive environment and that not all valuations will continue to grow. A significant portion of them, he believes, will go down significantly with the market price because a reasonable percentage of today's highly valued companies will not be as valuable in the future. Gates points out that investor logic can (and perhaps already is to a greater extent) become detached from economic reality, especially in an environment where capital becomes concentrated in a few themes and investors begin to lack the willingness to wait for a return on investment.

This caveat is extremely important because the most common mistake most investors make in technology cycles is not that they buy a bad stock, but that they buy a great stock at a point when too much optimism is already built into the price and then the market only needs to disappoint with monetization rates, margins, or growth costs and the price goes plummeting. And that is the basic framework in which Gates' message makes the most sense: AI as a technology can succeed, but that doesn't mean that every AI stock will succeed, nor does it mean that every valuation of AI companies today is defensible.

Bubble is a word that is used almost automatically whenever technologies grow rapidly. It's just that Gates has chosen a nuance that's worth paying attention to. He doesn't say, "AI is a bubble and it will burst." He's basically saying, "AI is a promising technology, but the market is so competitive that there will be fewer winners than investors think now, and valuations won't grow linearly for everyone." That's a view that has been borne out historically with many revolutions. The Internet changed the world, but most companies from the dot-com era did not survive. Smartphones changed the world, but only a few players reaped economic gains. The cloud changed IT, but the economics of the cloud were largely reaped by giant companies with the advantage of large seed capital.

A chart of the S&P 500 Index between 1995 and 2003

And that's exactly what AI is today. It's not just about models. It's about access to data, about distribution channels, about capital for data centers, about the ability to hold margins, and most importantly, about who can turn AI into recurring revenue without destroying profitability. Competition in AI means that even if demand grows, margins may be split between too many players, or CAPEX will burn through and returns will come later than the market expects.

Hyperscale players (Microsoft $MSFT, Alphabet $GOOG, Amazon $AMZN, Meta $META, Oracle $ORCL and others) are expected to spend over $400 billion on AI infrastructure in 2025 and over $500 billion in 2026. That's a number that is impossible to get around in investment logic, because such investments have two sides: on the one hand, massive orders for AI chip, server, network and datacenter infrastructure vendors; on the other, cash flow pressure and the question of whether the return on those investments will show up in time in the form of margins and profits.

The market is addressing how quickly they will translate into profits and who will get those profits. And that is why investor sensitivity increases at any signal that companies will have to spend more than they expected or that monetization is proceeding more slowly. When things go wrong, it can look like Oracle $ORCLright now . After Oracle's weaker outlook, fears that CAPEX is growing faster than certainty of return have run rampant among investors. Investors punished this with a significant sell-off in the stock.

Another factor that retail often underestimates comes into play, namely market concentration. When much of the growth in the indices relies on a narrow group of large technology companies, volatility can return quickly as any disappointment at one node in the chain is transmitted to the entire market. IMF warns that new technologies can increase efficiency but also create new forms of risk in market structure and concentration.

And by 2025, institutions and central banks have already started to explicitly name it in terms of valuations. Financial Times reported on the ECB's warning that FOMO could push valuations of major US tech titles to very high levels where companies are vulnerable to disappointment.

The problem is not necessarily high P/Es

Investors often use P/E as a simple filter: when it's high, it's expensive; when it's low, it's cheap. But the AI cycle works differently: high valuations can be fine if they are underpinned by a combination of growth and real profitability. And they can be lethal if they're backed only by expectations.

Some companies have extreme multiples - Palantir $PLTR with a P/E of over 400, for example - and other companies have very high multiples at certain times that imply long years of near-perfect results.

CAPEX as a silent growth killer

AI is not just software. Modern AI is unusually capital intensive. Even companies that sell software or models often need massive computing capacity. And those aren't cheap. This creates two layers of investment.

The first layer is "picks and shovels" - infrastructure suppliers: chips, networks, servers, cooling, datacenters. These companies can benefit from the fact that CAPEX is growing.

The second layer is the firms that sell AI to end customers: applications, platforms, enterprise software, agents, products. These firms may benefit from monetization, but they are also exposed to the fact that the cost of AI operations may grow faster than revenue.

Moreover, in December 2025, there are new signs that investors are becoming more sensitive to any slightest doubt. Analysts at this article described a situation where a weaker outlook and rising expenses at Oracle have reopened fears of an AI bubble. This is exactly the type of environment the markets are currently in. You don't need bad earnings to sell off, just that they are slightly lower than expected.

Late in the trend, it's often not just high valuations, but also a change in investor behavior: greater risk appetite, lower liquidity buffers, higher portfolio concentration. Wall Street analysts say that global asset managers have reduced cash to record lows and that the AI rally is only being driven by optimism. This is exactly the environment in which the market may be poised for a correction.

Add to this the fact that even highly respected voices in the investment world are warning of a possible downturn. Howard Marks has pointed out that some AI bets resemble a lottery and that he prefers to own profitable giants rather than mainstream startups with no returns. Similarly, Google DeepMind CEO Demis Hassabis talked about how some AI startups can be insanely overvalued and that a correction in these titles is more than likely.

And when you couple this with Gates' warning...

The AI trend is real, but investment-wise we are at a stage where more than enthusiasm is needed. Investors need discipline above all else and not to get pulled back via FOMO.

As the AI trend grows, so does the incentive for companies that are not directly focused on AI to look that way even if their real exposure to the field is small. The U.S. SEC has previously warned companies to be precise in how they talk about AI in annual reports and marketing because investors may be misled. Recall the warnings of the chief SEC Gary Gensler's warning towards companies that exaggerate AI to avoid misleading messages.

What the IMF says about AI and financial stability

The IMF (International Monetary Fund) published a study "Artificial Intelligence and its Impact on Financial Markets and Financial Stability", which describes how AI can bring many benefits, but at the same time can create new risks in the market structure.

Conclusion

Bill Gates is not really saying that markets will go down as a whole. He is giving a warning against the simple mentality that controls many stocks today and sounds: AI = certain returns. He is saying that AI will be hyper-competitive, and that it will therefore be investment selective. In practice, this means that the next phase of the AI cycle will not be about who talks the loudest about AI, which may have worked so far, but about who can demonstrate three things: the ability to monetize, the ability to hold margins even with competitive pressure, and the ability to survive CAPEX races without destroying cash flow.

For years, autonomous driving lived in the uncomfortable space between promise and postponement. Investors heard bold projections, cities hosted pilot programs, but real economic scale remained elusive. That perception is now shifting. Waymo is reportedly preparing a funding round that would value the company near $100 billion, signaling that autonomy is no longer judged as speculative R&D, but as a business with measurable traction and expanding revenue potential.

What makes this moment different is execution. Waymo operates fully driverless robotaxi fleets across multiple U.S. cities, completing hundreds of thousands of paid rides each week without safety drivers. The company is no longer optimizing algorithms in isolation; it is refining pricing, fleet utilization, city-by-city rollout, and regulatory playbooks. Investors are responding not to futuristic narratives, but to operational proof that autonomous mobility can scale into a durable, defensible market.

Waymo is no longer a pilot project

Today, Waymo is is the only company in the U.S. to operate a fully autonomous taxi without a safety driver in the cab and without remote monitoring. These are not tests or limited demonstrations of the technology - the service is available to ordinary customers in major cities.

The fleet numbers over 2,500 autonomous vehicles and operations are running in, among other places:

• San Francisco
• Phoenix
• Los Angeles
• Austin

What sets Waymo apart from the competition is not just the quality of the software, but the fact that the company has passed through the regulatory net in the most stringent jurisdictions. It is this that creates a lead that is very hard to make up.

Growth that already counts

One of the key arguments for a high valuation is Hard operating numbers. According to internal data, Waymo is gradually increasing ridership at a rate that can no longer be described as experimental.

Back in the spring, there was talk of roughly 250,000 rides per week. Today, volumes are approaching 450,000 rides per week. - and the trend continues to grow. This is not a one-off jump in one city, but a combination:

• the expansion of traffic zones
• higher frequency of repeat customers
• a gradual increase in public confidence

This is exactly the stage where a technology project becomes a service.

Expansion: from a city service to a national network

Waymo does not plan to remain a local player. It plans to enter the more than a dozen additional U.S. citiesincluding Dallas, Houston, Denver and San Diego.

This is where the nature of the story changes. It's no longer just about "does it work?", but about questions:

• how quickly can the service be replicated
• what are the unit costs
• where the tipping point lies between investment and return

It's the ability to scale without having to produce our own cars that gives Wavy a distinct advantage.

Partnership instead of a closed world

Waymo relies on a collaborative model. It does not build its own cars, but integrates the autonomous system into the platforms of different manufacturers. In doing so, it avoids the capital intensive nature of the traditional automotive industry and focuses purely on software, data and operations.

The partnership with Uber $UBERis also crucial . If regulation allows wider integration, Waymo will gain access to a huge user base without having to build its own distribution channels. Strategically, this is a move that can dramatically accelerate monetization.

Contrast with Tesla $TSLA: two philosophies of autonomy

Comparisons with Tesla are inevitable, but it is important to understand the difference in approach.

• Waymo already operates and sells autonomy as a service.
• Tesla has yet to promise autonomy, and much of its valuation depends on it.

For Alphabet $GOOG, Waymo is an optional growth engine. For Tesla, autonomy is an existential issue. That creates a very different risk profile - and a different investor story.

Why a $100 billion valuation may not be excessive

If Waymo can build a large-scale autonomous transportation network, it opens up a market on the order of hundreds of billions of dollars a year. It's not just about city taxis, it's about:

• corporate fleets
• logistics
• airport and regional transport
• long-term contracts with cities

In addition, Waymo benefits from Alphabet's technological background, vast amounts of data and regulatory lead. A combination that no one else has today on such a scale.

What investors should take away from Waymo

Autonomous transportation is finally breaking away from the hype phase and entering a period where numbers, traffic and the ability to scale are the deciding factors. Waymo is profiling itself as an infrastructure player in the future of mobilitynot just a technology demonstrator.

For investors, this means one thing: AI is no longer just about models and the cloud. The real value is created where AI enters the physical world - and Waymo is the furthest along of all today.

This issue has been discussed for many years, but with the rise of AI it's become even more prominent, because consumption has increased and accelerated dramatically. Energy. Specifically electricity. People keep talking about there being too little of it in the future.

Decades pass and not much changes (not even the Green Deal changed things much). However, this could really change now thanks to AI-driven consumption. An enormous amount of energy will be needed, and aside from renewables modular reactors will play a leading role.

Companies like $OKLO and $SMR and $LEU (listed from largest to smallest market cap) are among the best in the US, and indeed in the world. They haven't received the publicity they deserve so far. So, what do you think of them, and which would you invest in and why? And if you'd choose a different one, please let me know in the discussion which.

NIO’s third quarter of 2025 marks a clear inflection point after years of skepticism around cash burn and operating leverage. Vehicle deliveries accelerated sharply, but more importantly, margins moved in the right direction as production efficiency improved and pricing stabilized. Losses narrowed not because of accounting effects, but due to tangible progress in cost control and utilization.

What stands out is the strategic shift beneath the numbers. By expanding beyond a single premium brand and building a multi-brand ecosystem, NIO is finally achieving the scale needed to absorb fixed costs. In a Chinese EV market that is rapidly maturing, this transition may prove more important than headline delivery growth alone.

How was the last quarter?

In the third quarter of 2025 $NIOdelivered a total of 87,071 vehicles, representing a year-on-year growth of 40.8% and a quarter-on-quarter growth of 20.8%. The delivery structure confirms the company's strategic shift. The premium brand NIO delivered 36,928 vehicles, the family-oriented brand ONVO delivered 37,656 vehicles and FIREFLY, focused on smaller smart EVs, added 12,487 vehicles. It was ONVO and FIREFLY that played a key role in increasing volumes and making better use of production capacity.

Total sales reached 21.79 billion yuan, up 16.7% year-on-year and 14.7% quarter-on-quarter. Vehicle sales alone were 19.20 billion yuan, growing faster than total sales, thanks to both higher shipments and a gradual stabilization of prices. Lower average sales mix had a negative impact, but this was fully offset by volume.

Significant improvement is evident at the level of margins. Gross profit increased by more than 50% year-on-year to 3.02 billion yuan and gross margin reached 13.9%, compared to 10.7% a year ago and 10.0% in the previous quarter. More importantly, the automotive margin improved to 14.7%. This shift is the result of a systematic reduction in material costs per vehicle, better supply chain management and higher production utilisation.

At the operational level, NIO continued to reduce losses. The operating loss decreased to 3.52 billion yuan, representing a year-on-year reduction of 32.8% and a quarter-on-quarter reduction of 28.3%. Adjusted for stock-based compensation and non-recurring items, the adjusted operating loss decreased by even more than 30%. Net loss was 3.48 billion yuan, also with a significant improvement over the previous periods.

Cash flow is also an important signal. The company achieved positive operating cash flow in the quarter, and after accounting for capital expenditures, the cash balance remained positive. Together with the $1.16 billion capital raise, this significantly strengthened the balance sheet and short-term financial stability.

• Full presentation with results.

Management commentary

Founder and CEO William Li described Q3 as the beginning of a new phase of accelerated growth. He highlighted that all three brands - NIO, ONVO and FIREFLY - are now addressing their target segments and that demand is being supported by both product competitiveness and expanding battery swap station and charging infrastructure.

CFO Stanley Yu Qu then highlighted the improvement in margins and the decline in losses. He said the focus on efficiencies across development, manufacturing and sales is starting to yield tangible results. Management also indicated that this trend is expected to continue in future quarters.

Outlook

The outlook for the fourth quarter is significantly more optimistic than in previous years. NIO expects deliveries in the range of 120,000 to 125,000 vehicles, which would represent year-over-year growth of 65% to 72% and a new all-time record. If this target is met, it will be clear evidence that the company has managed not only demand but also production and logistics capacity.

The key will be whether margins can be maintained or further improved with such rapid volume growth. If so, NIO may approach a point in 2026 where the operating loss begins to narrow significantly faster, possibly approaching operational break-even.

Long-term results

The long-term numbers show a company that is still growing at a very fast pace, but at the cost of high losses. Sales in 2024 rose to 65.7 billion yuan, up more than 18% year-on-year. Gross profit more than doubled, indicating that the revenue and cost structure is gradually improving.

On the other hand, the operating result remains deep in the red. The operating loss exceeds 21 billion yuan and the net loss nearly 22.7 billion yuan. However, there is a positive trend - the growth rate of losses is slowing down and there is absolute improvement in some areas. The number of shares outstanding has increased significantly, which is the price of strengthening the balance sheet, but also reduces liquidity risk.

News

Key events include the completion of a $1.16 billion capital raise and the issuance of new shares for employee incentive plans. Product wise, the new NIO ES8, which quickly surpassed the 10,000 units shipped mark, and the ONVO L90, which became the best-selling large BEV SUV in its segment.

Shareholding structure

NIO's shareholding structure is less institutional compared to Western manufacturers. The institution holds approximately 15% of the shares, with Aspex Management, UBS and Jane Street among the largest investors. The relatively low institutional stake reflects the company's higher risk profile, but also means there is potential scope for a change in sentiment if profitability improves.

Analyst expectations

Analysts remain divided into two camps. Optimists see NIO as a company that has finally found the right mix of products, volumes and cost discipline. Skeptics point to persistently high losses and the risk of further stock dilution. Q3 2025, however, has clearly shifted the balance of the arguments towards a more positive scenario.

If NIO can maintain the pace of deliveries, continue to improve margins and stabilize cash flow in 2026, the company's investment story could fundamentally change from "growth at any cost" to "growth with a path to sustainability."

Fair Price

Statistics say that the well-known "Santa Claus rally" only starts toward the end of December and continues into early January. In recent days, however, stocks have been falling. It's possible that the situation could change because of a Santa rally, but it's by no means certain that such a scenario will actually play out.

What do you think? Will we get a Santa Claus rally this year or not?

The renewal of Chevron’s operating license in Venezuela is far more than a routine regulatory move. It represents a calculated decision by Washington to preserve influence over a strategically sensitive oil supply at a time when global energy markets remain tight. By allowing Chevron to continue limited production and exports, the U.S. effectively secures a controlled flow of Venezuelan crude while maintaining broader sanctions pressure.

Chevron remains the only major U.S. oil company permitted to actively operate in Venezuela and export its oil back to the United States. Moreover, the licence renewal comes at a time of heightened tensions between Washington and Caracas, with US forces recently seizing a sanctioned tanker off the Venezuelan coast. This underscores the fact that the licence is not the result of political detente, but a pragmatic decision to stabilise oil supplies and limit the space for other global players.

Top points

• Chevron remains the only US company with an active oil production license in Venezuela.
• The licence covers four joint ventures s PDVSA and allows the export of oil to the US.
• Production from Venezuela helps stabilize the supply of heavy crude for U.S. refiners.
• The financial benefit to Chevron is limited in the short term but highly significant strategically.
• The biggest risk remains political uncertainty and the possibility of sudden license revocation.

What exactly the license means and what Chevron $CVX actually gains

Renewed license allows Chevron to continue operations in four joint ventures with Venezuela's state oil company PDVSA. These projects are primarily focused on heavy and extra-heavy oil production in the Orinoco Belt, one of the largest oil reserves in the world. Chevron is not acting here as a traditional full-scale commercial producer, but as an operator, providing technical expertise, infrastructure maintenance and incremental production increases.

In terms of volumes, Chevron's Venezuelan production is in the tens of thousands of barrels per day, with the potential for gradual growth. In absolute terms, this is not a key pillar of Chevron's overall production, which produces over three million barrels of oil equivalent per day. Nevertheless, this production is of high value because it is a type of oil that is difficult to replace and crucial for some US refineries.

In addition, according to earlier reports by Bloomberg, the new terms of the licence provide for part of the production or revenues to be paid to the Venezuelan government. This reduces the net economic benefit to Chevron, but also strengthens the political sustainability of the entire deal. It is important for investors to understand that the license is not about maximizing profits, but about maintaining a strategic presence.

Macro and micro impacts: energy, geopolitics and Chevron's position

At the macro level, the license fits into a broader US effort to diversify oil resources and reduce dependence on the volatile regions of the Middle East. Venezuela has the largest proven oil reserves in the worldbut its production has been drastically curtailed due to sanctions and long-term underinvestment. Every barrel that reaches the market thanks to Chevron helps to stabilise global supply and put pressure on prices, especially for heavy oil blends.

• Venezuela accounts for a fifth of the world's oil.

At the micro level, this is a unique competitive advantage for Chevron. While most Western oil companies have been pushed out of Venezuela, Chevron has maintained continuity, local know-how and relationships. This gives the company a potential edge in the event that sanctions are further eased in the future. In such a scenario, Chevron could quickly ramp up production and gain access to assets that are currently unavailable to other players.

Financially, Venezuelan operations will have a more indirect impact. It is not a major contribution to EBITDA, but it will stabilize the portfolio of upstream activities and provide raw materials for the downstream segment. This is particularly important in an environment of fluctuating oil prices and increasing competition from state producers.

Risks: why the licence is not a guarantee of long-term benefits

The main risk remains political uncertainty. The licence is an exception, not a permanent right, and can be withdrawn or significantly reduced at any time depending on the evolution of relations between the US and the Venezuelan government. Any political incident could lead to an immediate halt in operations.

Another risk is the technical condition of the infrastructure. Venezuela's oil sector has suffered from a long-term lack of investment, which increases operating costs and the risk of outages. Chevron has to invest in maintenance and security without having full control over the entire value chain.

Reputational risk cannot be overlooked. Collaborating with PDVSA and diverting part of its production to the Venezuelan government can be criticised politically and publicly, especially in the context of human rights and sanctions policies.

An investment perspective: what it means for Chevron's stock

In the short term, the license renewal will not be a significant catalyst for Chevron's stock growth. The financial impact is relatively small and largely anticipated by the market. In the long term, however, the license increases the company's strategic flexibility and strengthens its position in the global energy system.

It gives Chevron a profile as a company that can operate in geopolitically complex regions without violating sanctions frameworks. This can be an advantage at a time when energy security is once again becoming a key issue.

How Venezuela fits into Chevron's overall portfolio

In terms of absolute numbers, Venezuela is today for Chevron a small part of productionbut in terms of portfolio structure it is a highly specific and strategic asset. Chevron produces approximately 3.1 million barrels of oil equivalent per day in 2025, with Venezuelan production in the 130-150 thousand barrel per day range under permitted joint ventures. This means less than 5 % of total productionand therefore of marginal relevance to the current results.

But Venezuela is not 'conventional oil'. It is mostly heavy oilwhich has direct applications in refineries on the US Gulf Coast, where Chevron has a strong downstream position. While Permian Basin production maximizes volumes and flexibility, Venezuela fits into the integrated upstream → downstream modelthat stabilizes margins across the cycle.

Importantly, Venezuelan assets are long-term amortised. These are not new projects requiring massive capex, but existing fields where each additional permit means a high incremental benefit at a relatively low cost. This is why Venezuela operates more like an option element in the portfolio than as a classic growth pillar.

Scenario axis: what happens if sanctions are further eased or tightened

Venezuela is a textbook example of a binary geopolitical asset. There is no "smooth evolution" here, but rather a step change in the regimethat can happen with a political decision in a matter of weeks.

A gradual easing scenario

If the US were to extend the license beyond the current regime:

• Chevron could increase production to 200-250k bpd without the need for major investment.
• There would be better monetization of exports and a more stable supply to the US.
• Venezuela would go from a marginal part of the portfolio to a a meaningful cash flow stabilizer.

In this scenario, Venezuela would not rank alongside Permian, but would function as a a low-decline, high-margin additionthat enhances the returns of the entire upstream segment.

Tightening/licensing scenario

Otherwise:

• Chevron would have to reduce operations to a minimum (maintenance mode).
• Production would fall close to zero, with no significant one-off impact on results.
• The impact would be psychological and headline-drivennot fundamental.

That's the key: a negative scenario does not threaten Chevron's investment thesisbut a positive one could strengthen it.

Why licensing is an advantage for Chevron, but not for the sector as a whole

One of the most common investor misconceptions is the assumption that the license release is a sector signal. It is not. It is a a firm-specific exemption.

Chevron:

• has in the ground a continuous presence in the country for over 100 years.
• maintained technical and personnel base even during sanctions
• has existing JV structures with PDVSA that can be quickly activated,
• is perceived as a "controllable" partner from the US perspective

On the contrary:

• ExxonMobil has left Venezuela
• European companies do not have the same political capital
• new entries are virtually impossible

Licenses so does not increase the value of the sectorbut it increases the relative value of Chevron relative to its competitors. For an investor, it's the difference between a macro story and the competitive advantage of a particular company.

Impact model: production, cash flow, EPS

Basic inputs

• Current Venezuelan production: ~140k bpd
• Potential on release: ~230k bpd
• Incremental growth: +90 k bpd
• Realized price (netback): ~55-60 USD/barrel
• Operating costs: low (existing infrastructure)

Impact on annual cash flow

90,000 bpd × 365 days × ~55 USD
≈ USD 1.8 billion per year in revenues

At a conservative operating margin of 40%:
→ ~700-750 million bpd. USD 170-700 of additional operating cash flow

Impact on EPS

Chevron has ~1.85 billion shares.

750 mln. USD / 1.85 billion.
≈ +$0.40 per share per year

For context:

• Chevron's EPS is around $12-14,
• So Venezuela could add ~3% to EPSwithout a significant capex.

Negative scenario

License revocation:

• Loss of these ~$0.40 EPS
• no existential impact
• only short-term pressure on sentiment

What to take away from the article

• The renewed license in Venezuela is not a short-term financial catalyst, but a strategic exception with long-term value.
• Chevron remains the only US oil company with an active presence in Venezuela, giving it a unique geopolitical advantage.
• The economic benefit of the licence is limited today, but it acts as an option for future sanctions relief.
• For the US, Venezuelan oil is particularly important because of the type of heavy crude suitable for domestic refineries.
• The political risk is high, but it is managed and consciously accepted by both sides.
• For investors, the license signals a disciplined Chevron strategy, not a speculative bet.
• Venezuela alone won't change Chevron's stock, but it may amplify its defensive profile in a period of geopolitical volatility.

For years, solar stocks were valued mainly on growth expectations and installed capacity. That era is fading. On NASDAQ, a small group of energy companies is now standing out for a very different reason: consistently high margins and real cash flow. As rising interest rates and capital discipline reshape the market, profitability is becoming the ultimate filter separating durable businesses from fragile solar stories.

Energy will rule the world

The energy sector is one of the most cyclical, yet strategically important parts of the global economy. After years of relative investor disinterest, when technology and growth stocks dominated, energy has recently come back into the spotlight of the capital markets. And this return is neither accidental nor short-lived. It is the result of profound structural changes that combine geopolitics, transforming energy systems, technological advances and changing investor behaviour.

Just a few years ago, the energy sector was perceived as outdated, capital intensive and not very attractive from a growth perspective. Traditional oil and gas companies were struggling with low commodity prices, pressure to decarbonise and capital flight towards technology firms. At the same time, however, another part of the sector has begun to grow in parallel - renewables, solar, battery storage and energy infrastructure linked to the electrification of the economy.

It is this duality that defines the modern energy sector today. On one side are the oil and gas companies, which benefit from a more disciplined capital policy, high margins and the return of cash to shareholders. On the other are renewable energy companies whose valuations are more dependent on long-term growth, regulation and technological developments.

In terms of recent years, the energy sector has performed significantly better than many investors would have expected. Traditional energy companies have benefited from rising commodity prices, limited investment in new production and an increased emphasis on return on capital. Renewables, on the other hand, benefited from massive investment in energy transition, government support and long-term contracts. As a result, energy has once again become not just an overlooked sector, but a very important component of many portfolios of large institutions, banks and investors.

From an investment point of view, the energy sector differs from most other sectors mainly because of its link to the real economy. While technology companies often grow based on expectations of future innovation, energy companies generate value through physical assets, long-term contracts and stable cash flows. This makes them an attractive addition to a portfolio in an environment of, for example, higher inflation, geopolitical uncertainty and volatile interest rates. Is it a coincidence that the current market environment meets all these points?

NASDAQ as the home of modern energy

When people talk about energy stocks, many investors automatically think of the stock market NYSE and the traditional oil giants. But the reality of recent years is different. A growing number of innovative energy companies are flocking to the NASDAQwhich has gradually become the home of not only technology, but also technology-driven energy companies.

NASDAQ has historically profiled itself as an exchange for growth, innovation and higher volatility. It is these characteristics that make it an ideal environment for companies at the intersection of energy and technology. Solar companies, energy semiconductor manufacturers, companies focused on energy transmission efficiency or the digitization of energy grids find capital, investors and analyst coverage here.

At the same time, energy stocks on the NASDAQ differ significantly from traditional "utility" titles. These are not stable, regulated, slow-growth companies, but firms whose valuations are sensitive to expectations of future demand, technological advances and policy decisions. This makes them attractive but volatile investments that require investors to have a higher level of market knowledge. But that's what Bulios is here to help you with.

NASDAQ also allows investors to easily compare companies across sectors. Here, energy stocks compete directly with tech giants for capital, creating pressure for efficiency, transparency and long-term growth. Companies that succeed here typically have a strong business, a clear strategy and the ability to convince investors of their long-term value.

In this environment, three energy companies stand out today, representing three different investment approaches, three different parts of the energy chain and three different risk and return profiles. Detailed analysis of these top 3 companies will now follow. In addition, at the end of the article you will find an elaborate summary table comparing all companies.

First Solar $FSLR

First Solar has established itself as one of the leaders in photovoltaic panels for large-scale solar projects. Unlike many other companies in the industry that focus on manufacturing solar panels for residential and commercial installations, First Solar primarily targets utility-scale projects. This means its products are used for massive solar farms that produce electricity on a large scale for the grid. This specialization gives First Solar a unique position in the solar ecosystem, as it targets a segment that requires specific technology, larger capacities and robust infrastructure support.

While companies such as Enphase Energy $ENPH focus on residential solar technologies where competition is strong and margins are lower, First Solar builds its strategy on providing high performance and efficient panels that can supply entire regions with electricity. Because of this specialization, First Solar tends to benefit from high barriers to entry in a market where high capital and technological know-how are needed.

From an investment perspective, First Solar is seen as a more stable investment than some other solar stocks. This is due to the fact that its products are positively evaluated in international solar farm tenders, where the company competes with several other global players. As a result, First Solar has stable revenue from long-term contracts that help mitigate the volatility associated with cyclical changes in the renewable energy market.

Based on the stock detail on Bulios, sentiment around First Solar appears to be stable, but slightly less bullish than some of the pure-play technology solar players. While market data points to solid growth in revenue and free cash flow generation, the upside potential associated with First Solar is rather modest. Based on DCF-based fair value calculations and relative valuations, the company is currently right at its fair value. That's not necessarily a bad thing for investors looking for stability, but it does mean that the stock doesn't have as much upside potential as some of the fast-growing technology firms in the solar energy space. It also certainly doesn't mean the stock can't continue to grow.

The data also shows that the P/E ratio has hovered around 20 in recent years, which is a solid but not excessive valuation for a stable PV panel maker. Given that First Solar generates stable cash flow and has a relatively low debt load, it may benefit from continued global trends in renewables in the future. In general, the company is expected to benefit from the growing demand for solar energy, especially in developing regions where solar projects are starting to be implemented on a massive scale. Given these factors, First Solar is well positioned to maintain steady growth.

The success in steadily increasing revenues, profits and margins has spilled over into the performance of the share price itself this year. After last year, which saw $FSLRstock end the year with a modest gain of around 6%, this year is a completely different story for investors. For 2025, First Solar shares are up 43.6% and are less than 17% below their absolute peak. That, by the way, is at $307.82 per share for First Solar, where the price was last last summer. But we said that the stock didn't gain much last year - so that alone shows that while it is a company that is growing, it is still one of those companies that has a much lower market capitalization ($27.5 billion) compared to the big giants, making it more susceptible to similar swings of tens of percent in a matter of months.

Market outlook and strategy

Investors following First Solar should keep in mind that the company's growth is directly dependent on the success of the global solar transformation and government support for renewables. While First Solar has contracts with many international customers, investment in new solar farms is largely determined by policy decisions on subsidies and incentives. This means that any slowdown in policy support for renewables could affect the company's growth.

On the other hand, in the event of continued solar expansion in the form of government incentives, including increased demand for clean energy, First Solar benefits from the scalability of its projects and technology, which is well adaptable to large and complex energy systems.

A look at the community sentiment on Bulios shows that investors expect solid stability in the medium term, but with limited upside potential if the global expansion of renewables does not continue.

Nextracker $NXT

From an investment perspective, Nextracker is one of the purest examples of where profits are actually being made in solar today. The company operates in a segment that is unassuming at first glance but extremely attractive from a margin and return on capital perspective. Its tracking systems for utility-scale solar power plants are not a commodity, but a technology solution that directly impacts the performance of the entire project. And it is this position that has enabled Nextracker to achieve profitability that has few competitors within the solar sector.

According to data tracked on Bulios, Nextracker is among the absolute top solar companies in terms of margins on the NASDAQ in 2024. While a large portion of solar companies are in single digits or struggling with operating losses, Nextracker has been able to achieve margins that are more comparable to industrial technology companies rather than energy hardware manufacturers.

Already in 2023, the company was able to surpass a net margin of 12%, reaching 12.25%. Last year, the company was able to increase its margins even further to 17.21%. That's a very solid performance indeed. But along with margins, the amount of revenue is also growing, reaching a record $3 billion last year. Logically, the company's profits also increased, which were $509 million for 2024.

The business model plays a crucial role here. Nextracker is not simply a supplier of mechanical structures. An increasing part of the value comes from software, data solutions and long-term cooperation with solar park developers. These elements increase not only the efficiency of energy production, but also the barriers to entry for competitors. In terms of margins, this means higher pricing power and better cost control, which translates directly into profitability.

Bulios at Nextracker shows very clearly that margin improvement is not a one-off phenomenon. The trend is long term and related to the growth of utility-scale projects around the world. These projects are planned years in advance, giving the company a high degree of visibility into future revenues. It is this combination of growth and predictability that is exceptional in the solar sector. Revenues, margins and profits have been growing steadily for the past few years.

Because of its business model, Nextracker is often seen as a lower-risk stock in the solar boom. The company is benefiting from the expansion of renewables, but is not facing the same pressures as panel makers, who are facing global competition and price wars. Nextracker is higher up the value chain, where technology value-add, not production volume, is the deciding factor.

In 2024, according to data available from Bulios, Nextracker ranks among the most profitable solar companies traded on the NASDAQ, not just in absolute numbers, but more importantly in profit-to-revenue ratio. This fact is crucial because it shows that the solar energy industry is no longer just about growth in installed capacity, but about efficiency in its operation.

In the long term, Nextracker is an example of a company that can benefit from the energy transition without having to take extreme technological or regulatory risks. Its profitability is directly tied to infrastructure expansion, not subsidies or short-term incentives. This makes it one of the best-performing solar stocks on the NASDAQ in terms of margins and return on capital.

Enlight Renewable Energy $ENLT

At first glance, Enlight Renewable Energy may not spark investors' desire for more in-depth analysis, but that's a big mistake. At a time when the solar sector on the NASDAQ is often associated with high volatility, inflated valuations and volatile profitability, Enlight is a company that has taken the opposite path. It hasn't relied on aggressive expansion or technological hype, but on carefully managed growth, strict capital discipline and a consistent focus on projects that make economic sense even without ideal market conditions.

The core pillar of Enlight's business model is the development, construction and long-term operation of renewable energy sources, primarily solar and wind. The company does not focus on the production of hardware, but on the entire life cycle of an energy project - from land acquisition to financing and construction to operation and sale of electricity. This approach is crucial to understanding its profitability. This is because Enlight does not profit from one-off sales, but from stable, long-term cash flows that are backed by real contracts.

Unlike traditional companies in this sector, Enlight maintains a growth mindset as it actively expands its portfolio of projects, particularly in markets with high demand for clean energy. Yet it has been able to maintain margins that are above average in the solar sector.

The fair price based on DCF and relative valuation currently shines a rather cautionary light, but that doesn't mean the stock can't continue to thrive. Quite the contrary. This year alone, $ENLTstock has outperformed by 128.5%! Even though the company was only listed in 2021, the stock price is already up 118% today. Investors see stability in the company and an attractive business model that can generate cash flow.

Data on Bulios has long shown that Enlight is one of the solar companies with one of the best earnings profiles on the NASDAQ. The company's gross and operating margins are stable and significantly less volatile than panel makers. This is due to the aforementioned revenue structure. The electricity generated from Enlight's projects is sold under long-term contracts or in regulated markets, which provides the company with a high degree of predictability. This predictability in turn translates into the ability to plan capital expenditure, optimise financing and protect margins even in a higher interest rate environment.

The data in the case of this firm illustrates well that the key to its profitability is not maximum growth rate but selectivity. The firm does not enter every project that is politically attractive or media visible. Instead, it focuses on locations and markets where it can achieve a return on capital above its long-term target.

The margins speak clearly. Last year the company managed to achieve a profitability of 11.09% which is a very good result, Revenues reached an all-time high at $399 million. Together, this gives us a profit of $44 million for 2024. However, sales and net profit have been growing for several years in a row and there is no indication that this will change in any way in the near future.

In terms of capital structure, Enlight is also an interesting example of a sound approach to financing. Projects are financed so that debt matches asset life and cash flow generated. This reduces the risk of having to refinance while protecting shareholders from unexpected fluctuations in the cost of capital. It is this aspect that distinguishes long-term successful energy companies from those that depend on constant access to cheap capital.

Enlight's profitability is also the result of geographic diversification. The company does not operate in just one market, but spreads its activities across multiple regions, reducing regulatory and political risk. At the same time, it is not an uncontrolled expansion. Each new market is assessed in terms of the stability of legislation, long-term energy demand and the possibility of concluding contracts that ensure sufficient margins. This approach is directly reflected in the financial results. 52% of the company's revenues come from Europe, 41% from the Middle East, 4.2% from the US and the rest from other markets.

In the broader context of the solar energy industry, Enlight is proof that the highest profitability is not generated by companies with the largest media profile, but by those that can effectively manage the entire value chain. The development, construction, operation and monetization of projects form a closed ecosystem in which Enlight has a distinct competitive advantage. And that's why it ranks among the most profitable solar companies traded on NASDAQ in 2024.

Table

You can find all the companies compared in this table.

Conclusion

The NASDAQ energy sector today is undergoing a fundamental transformation that may be more important to investors than the energy transformation itself. After years in which the solar segment was defined primarily by rapid growth, the ability to generate profits, protect margins, and work with capital over the long term is coming to the fore. It is this shift that separates companies that can create value from those that merely respond to external incentives.

The companies analysed represent different parts of the solar value chain, yet they share a common denominator. First, they are the highest-margin solar companies on NASDAQ, but they are not companies whose success is built on one-off subsidies, short-term trends, or exaggerated market expectations. Their business models are designed to hold up in an environment of higher interest rates, slowing investment rates and increasing competition. This translates directly into their profitability, which is above average and, most importantly, sustainable in the solar industry.

One of the key takeaways is that the highest margins in solar are not where the technology itself is produced, but where the energy is operated, optimised and monetised over the long term. Companies that control the operational phase of a project, work with long-term contracts and have control over the entire asset lifecycle can generate stable cash flow even when the market is under pressure.

In conclusion, the future of solar energy will not belong to those who install the most megawatts of plants, but to those who can make a sustainable profit from each megawatt. Investors who grasp this change early and are able to work with data in a broader context will gain a significant advantage in the years to come. And that's exactly what Bulios can help you do.

Ford’s decision to write down nearly $19.5 billion marks a turning point in the global electric vehicle narrative. What was once framed as an inevitable and rapid transition has collided with slower consumer adoption, persistent cost pressures, and an unforgiving competitive landscape. The move signals that scale alone does not guarantee success in EV manufacturing, especially when pricing power remains elusive.

More importantly, Ford’s reset is a warning shot for legacy automakers. Electrification is proving to be capital-intensive, margin-dilutive, and far less predictable than early forecasts suggested. The industry is entering a phase where discipline, hybrid strategies, and profitability matter more than headline EV targets.

Electric cars have hit market realities

Symbolic of the end of the current generation of electric F-150 Lightning pickup truck. The model that was supposed to be proof that even the "American truck" could be electric sold well below expectations. So Ford is shifting capacity and staff back to internal combustion and hybrid versions, where margins and demand remain stable.

The problem has not been the technology itself, but a combination of factors: high prices, uncertainty around range, inadequate infrastructure and customers' willingness to pay a premium. Ford thus faces the same barrier as most traditional car companies - the mass customer does not yet want to be an early adopter.

The new course: less ideology, more pragmatism

Instead of a further escalation of investment in clean EVs comes a change in philosophy. Ford $F is betting on hybrids, EREV models and a gradual transition. Electromobility remains part of the portfolio but no longer as the only right way to go.

The main pillars of the new strategy:

• Hybrid drives as the main source of volume
• EREV solutions that combine an electric motor with a generator
• cheaper EV platforms for a wider audience
• emphasis on return on capital rather than growth at any cost

The goal is not to beat Tesla $TSLA, but to stabilize the business.

Unexpected move: Ford wants to make money on batteries, not just cars

One of the most interesting elements of the change is the decision to use battery capacity outside the automotive sector. Ford plans to produce battery energy storage for data centres, energy and industry.

This is strategically important:

• Demand for storage is growing with AI and renewables
• margins are more stable than for cars
• Ford monetises CAPEX already spent

The car company is partly becoming an energy-technology supplierwhich may reduce the cyclicality of the business in the long term.

The bill for the experiment: $19.5 billion

The price for changing course is high. Ford announced:

• Cancellation of EV projects
• asset write-downs
• restructuring of factories
• taking full control of the battery plants

Most of the costs will be short-term, which will weigh on results, but it also "clears the table". This is a classic situation for investors: pain today, less risk tomorrow.

What this means for investors

• Short-term pressure on stocks - The $19.5 billion write-down will weigh on results and sentiment. The market will view Ford as a company in a correction mode, not a growth mode.
• Positive impact on cash flow going forward - Retreat from aggressive EV strategy reduces capital expenditures and risk of further "cash burn".
• Hybrids and EREVs stabilize sales - Ford returns to segments where there is demand and margin. This increases the predictability of the business.
• Battery storage as the new bonus story - Getting into energy storage can bring less cyclical revenue outside the automotive market.
• Ford $F remains a value play - It is a bet on stability, dividends and gradual transformation, not rapid EV growth.

How long do you usually invest in stocks? What is your investment horizon?

I invest long-term, and when a company's fundamentals aren’t changing and the business is growing steadily, I don’t mind holding shares for 15–20 years. I’m young, so that horizon is really long for me, and sometimes I even play around with stocks that I hold for maybe just two years.

Target’s third quarter shows a retailer operating in a restrained consumer environment, where spending remains selective and discretionary categories continue to lag. Revenue pressure persists, but the story is no longer just about weaker demand. The company is deliberately reshaping its business toward areas with higher resilience, including digital fulfillment, advertising services, and membership-driven loyalty.

Rather than signaling a sharp turnaround, the quarter reflects a phase of controlled adjustment. Target is prioritizing margin stabilization and operational flexibility while positioning itself for the most critical shopping period of the year. For investors, the key takeaway is not acceleration, but durability — the ability to adapt while consumer confidence remains fragile.

How was the last quarter?

Third-quarter sales were $25.3 billion, down 1.5% year-over-year. This was primarily driven by weaker merchandise sales, where merchandise sales declined 1.9%. Consumers continue to limit purchases of surplus merchandise and favor basic categories, which is particularly negative for fashion, home accessories and higher price segments. Total comparable sales declined by 2.7%, with brick-and-mortar stores recording a 3.8% decline.

On the other hand, digital channels continue to improve gradually. Digital comparable sales increased by 2.4%. This growth is closely linked to the programme Target Circle 360which strengthens purchase frequency and customer loyalty. Digital is thus acting as a stabilising element in an environment of weaker footfall in brick-and-mortar stores.

Positive developments are also evident in the sales structure. Food & Beverage and the Hardlines segment were able to grow in the quarter, confirming that Target maintains a strong position in everyday shopping and affordable categories. Non-merchandise revenue growth was even stronger, up nearly 18% year-over-year. Advertising Platform Roundel, membership programs and marketplace are generating double-digit growth rates and gradually improving the quality of revenues as they are less sensitive to cyclical swings in consumer demand.

Profitability remains under pressure. GAAP EPS was $1.51 versus $1.85 a year ago, while adjusted EPS was $1.78. Operating profit fell to $0.9 billion and was $1.1 billion after adjusting for one-time items. Operating margin and operating margin declined to 3.8% and 4.4%, respectively, on an adjusted basis. Gross margin remained relatively stable at 28.2%, with higher markdowns offset by advertising revenue growth, lower shrinkage losses and improved efficiencies in logistics and digital fulfillment.

• Full presentation with results.

Management commentary

Incoming CEO Michael Fiddelke described the results as fully in line with internal expectations and highlighted the company's readiness for the Christmas season. He said management is focused on three key priorities: strengthening business authority in key categories, improving the overall shopping experience and deeper use of technology across the business.

Management's comments indicate that improving margins is not the main focus in the short term. The priority is to stabilize volumes, strengthen customer loyalty and build revenue streams that have higher long-term returns than net merchandise sales.

Outlook

The outlook for the fourth quarter remains conservative. Target continues to expect year-over-year sales declines in the low single-digit percentages, reflecting continued consumer caution during the holidays. Full-year GAAP EPS is expected to be in the range of $7.70 to $8.70, while adjusted EPS is now expected to be between $7.00 and $8.00.

The key question remains whether an aggressive pricing strategy, broader product mix and a focus on value can attract higher volumes without further pressure on margins. The Christmas season will test Target's ability to combine affordability, fast delivery and attractive offerings in an environment where competition is extremely strong.

Long-term results

The long-term view shows Target $TGT as a company that is in a normalization phase after an exceptionally strong 2022. Revenues have hovered around $106-109 billion in recent years, and 2025 brought an interim slight decline. Gross profit remains stable, reflecting resilient pricing and effective cost management at the supply chain level.

However, operating and net profits are significantly lower than at the peak of the cycle. Net income for 2024 was $4.1 billion and diluted EPS was $8.96, roughly 35% lower than 2022. On the positive side, the stable number of shares outstanding and EBITDA of around $8.7 billion gives the company room for dividends, investments and maintaining a strong balance sheet.

News

Target $TGT enters the holiday season with one of its broadest offerings in years. More than 20,000 new items, more than half of which are exclusive, are set to add to the appeal of the assortment. The company is also pushing hard on the perception of value - from a holiday menu for four under $20 to thousands of gifts priced from $5.

There is also a strong focus on logistics and convenience. Expanding next-day delivery to more than half of the U.S. population and strengthening same-day service is intended to help Target compete not only on price, but also on speed and availability.

Shareholder Structure

Target's ownership structure is highly institutional. Over 85% of the stock is held by institutions, with the largest shareholders being Vanguard Group with nearly 13%, State Street with over 8%, and BlackRock with approximately 8%.

Analyst expectations

Analysts remain cautious in the near term, but are tracking several positive structural trends. Digital revenue growth, advertising platform expansion and stabilizing margins in grocery may gradually improve earnings quality. A key catalyst through 2026 remains the return of discretionary demand and Target's ability to turn digital traffic into sustainable profits.

Fair Price

The European Union is preparing a significant recalibration of its climate strategy as policymakers acknowledge that the transition away from internal combustion engines is proving more complex than originally planned. Mounting pressure from major automotive nations and manufacturers has exposed structural weaknesses in Europe’s industrial competitiveness, particularly as Chinese and U.S. rivals accelerate ahead in scale, pricing, and technology.

Rather than a clean ideological retreat, the shift reflects a pragmatic response to economic reality. Slower EV adoption, uneven charging infrastructure, and margin pressure on European automakers have forced Brussels to consider flexibility—whether through delays, exemptions, or broader acceptance of alternative powertrains. The green transition is not ending, but it is clearly entering a more market-driven phase.

Why the original plan stopped working

The 2023 law was intended to accelerate the transition to electromobility by allowing only new cars with zero CO₂ emissions to be sold from 2035. But reality showed that the pace of the transition was overestimated. Electric cars remain expensive, charging infrastructure is uneven across Europe and some consumers are still reluctant to buy.

In addition, European carmakers have come under pressure from cheaper Chinese manufacturers such as BYD $BY6.F or Geely $GELYY and US technology leaders such as Tesla $TSLA. This has gradually turned what was originally an environmental debate into a question of industrial survival.

Automakers vs. the EV sector: a clash of two visions

Traditional manufacturers like Volkswagen $VWA.BR or Stellantis $STLA are pushing for a relaxation of the rules arguing that strict emissions targets threaten production, employment and price competitiveness. They say it is unrealistic to rely solely on battery vehicles within a decade.

On the other side is the pure electric segment, which warns that any retreat from the internal combustion engine ban will weaken investment certainty and further open the door to Chinese dominance in electric mobility. EV manufacturers point out that the technology and infrastructure are ready - and the problem is more one of political courage.

The multi-technology path: compromise instead of prohibition

The debate is thus shifting from ideology to pragmatism. The European Commission has previously indicated openness to e-fuels and advanced biofuels, which would allow the operation of internal combustion engines with a significantly lower carbon footprint. At the same time, carmakers are pushing for a mix of technologies - battery electric cars, plug-in hybrids, extended range cars and CO₂-neutral combustion engines.

From the industry's perspective, it is not about going backwards, but about spreading the risk and time. The internal combustion engine would not disappear, it would only be gradually transformed.

What this means for investors

For investors, this is a major signal of a change of course. If the EU does indeed back down from a hard ban, traditional car companies will have time to stabilise their portfolio, monetise existing platforms and spread capital expenditure over a longer period. This can improve their cash flow and valuations.

Conversely, the pure electric segment may face greater regulatory uncertainty. At the same time, new investment space is opening up for companies focused on alternative fuels, hybrid drive components or internal combustion engine upgrades.

Europe between the US and China

The decision reflects a broader geopolitical shift. The European Union finds itself caught between the United States, which massively subsidises its domestic industry, and China, which dominates both batteries and low-cost electric cars. Climate policy is thus becoming subordinated to the issue of competitiveness and industrial security.

The internal combustion engine is not coming to an end. It is changing

Whatever the final form of the proposal, one thing is clear: the internal combustion engine will not end in Europe in 2035. Its role, technology and the way it fits into the wider transport transformation is changing. For investors, this means having to rethink the stakes across the entire automotive value chain - because the game is being played again.

The AI gold rush is no longer limited to chips, models, and cloud platforms. As hyperscale data centers multiply, the real bottleneck is becoming far more physical: electricity. Power grids in the U.S. and Europe are struggling with permitting delays, transmission constraints, and a lack of fast-deployable capacity. In this environment, the winners are not just those who build intelligence—but those who can reliably power it.

While investors spent much of 2025 chasing nuclear projects and semiconductor leaders, a different group of companies has begun to surface. These firms solve the AI revolution’s least visible problem: delivering large amounts of clean, on-site energy without waiting years for grid upgrades. A recent partnership with Oracle highlights this shift, positioning energy infrastructure as a strategic asset rather than a background utility.

Top points of the analysis

• The partnership with Oracle moves the firm from the margins of the market to a strategic position
• Revenues grow at double-digit rates, firm nears operating profitability
• Gross margin improved significantly, operating loss nearly erased
• Business is capital intensive, cash flow still weak
• Valuation is extremely challenging and assumes significant future growth
• It's about an asymmetric betnot a defensive investment

Why partnering with Oracle is key - and what it really means

The Bloom Energy partnership $BE and Oracle $ORCL is not a conventional commercial collaboration, but rather a signal to the market about how the energy infrastructure for the next generation of data centers will be addressed. As part of its expansion into cloud and artificial intelligence, Oracle is facing the same problem as other hyperscale players - available power grid capacity is no longer keeping pace with the pace of building new computing capacity.

Bloom Energy's choice of technology shows that some technology companies are willing to prioritise speed and reliability of power delivery over optimizing long-term costs. Fuel cells make it possible to power data centres locally, without having to wait for transmission grid reinforcements or the approval of new sources. This is a fundamental shift in thinking about data center power, where energy is no longer seen as a commodity and is becoming a strategic input.

It is not just the contract itself that is important, but its replicability. If this model proves successful, it is not a one-off project, but a reference that other technology companies can follow. It is the reference from a global player like Oracle that is crucial for Bloom Energy, as it lowers the barriers to further contracts and moves the company from the role of an alternative solution to a potential standard for a specific type of infrastructure.

From Bloom Energy's perspective, it is crucial that the company is able to approximately double production capacity within six months, suggesting that any increase in demand would not necessarily hit an immediate operational ceiling. If the cooperation with Oracle were extended to even a few more sites, the annual order book could be in the range of in the hundreds of millions of dollarswhich would be significant in relation to the company's current annual revenues of around US$1.5 billion.

Company introduction

Bloom Energy is an American company focused on the development and manufacture of fuel cells that enable local, low-emission electricity generation. Its key products are energy systems based on solid oxide fuel cell technology, which can be deployed at the customer's site - without the need to connect to a congested grid.

Major customers are large corporations (e.g. $T, $CRWV, $WMT, $MDT) industrial enterprises and now increasingly data center operators. For these entities, reliability, speed of deployment and scalability are key , not just the cost of electricity. This is where Bloom Energy has a competitive advantage over traditional sources and some renewable alternatives.

A major breakthrough is the collaboration with Oracle, which has decided to use Bloom Energy technology to power its data centers. According to Morgan Stanley, Bloom is one of the few players in the market that are able to to double production capacity in six months and deliver systems within 90 days - a key capability in the context of AI infrastructure.

Competition and market position

Bloom Energy does not operate in the traditionally competitive energy segment, but rather at the intersection of energy, infrastructure and technology. Its indirect competitors include electricity grid operators, back-up generators, gas turbines and, in the longer term, nuclear projects.

Bloom Energy's main advantage is Time. While it takes years to expand the grid or build a nuclear power plant, Bloom systems can be deployed in months. This is exactly what hyperscale customers need today. The disadvantages are higher capital intensity and dependence on fuel prices, which limits margins.

So Bloom is not the cheapest solution, but it is the fastest and most flexiblewhich gives it a strategic advantage at the current stage of the AI cycle.

Management and leadership

Bloom Energy is led by KR Sridhar, the company's founder and long-time CEO, who has been behind the company's technology direction since its inception. Sridhar is a technically oriented leader with an academic background, which is reflected in a strong focus on research, development and long-term technology relevance.

In recent years, management has shifted the company from a pure loss-making model towards operational stability. The year 2024 brought for the first time a positive operating resultan important psychological and financial milestone. At the same time, however, it is clear that management is prioritizing growth and expansion over short-term cash flow optimization.

For investors, it is crucial that management openly communicates production capacity, delivery time horizons and business limits - which increases credibility but also confirms that this is not a "done deal" company.

Financial performance

Bloom Energy's financial performance over the past four years consistent revenue growth. Revenues have grown from just under $1 billion in 2021 to $1.47 billion in 2024, a steady double-digit rate. This confirms that demand for the company's products is not a one-off.

A major improvement is seen in the level of gross profit, which will increase in 2024 more than doubled in 2024 to 405 million euros in 2024. USD 405 MILLION. A gross margin in excess of 30% is a significant shift from previous years and indicates that the company is entering a phase of operating leverage.

Operating profit has swung into positive territory, albeit only symbolically so far. Net profit remains negative, but the loss has been reduced by more than 90% year-on-year. All of this points to a company that is in a transitional phase between growth and profitability.

Cash flow and financial reality

Despite the improvement in profitability, cash flow remains a weakness of the investment thesis. Operating cash flow is still negative and free cash flow will reach approximately USD -1.4 billion in 2024. This means that growth is still financed by a combination of debt and equity.

On the positive side, liquidity is very strong - the company has a high current ratio and cash ratio and has working capital of over USD 1.6bn. This gives it time to execute its growth story without the immediate risk of financial distress.

However, an investor must realize that Bloom Energy is still capital-intensive businesswhere return on investment comes with volume.

Risks

• Persistent negative cash flow
• High capital intensity of production
• concentration on a few large customers
• technological competition and alternative energy sources
• Dependence on AI investment cycle
• high valuation sensitive to sentiment

Valuation: the market values the success scenario, not the status quo

Bloom Energy's valuation is a key point of the entire investment thesis and a major source of risk. The stock trades at approximately 9 times earnings and almost 40 times book valueeven though the company is still net loss making and generating negative operating and free cash flow. The market here is not pricing in today's financial realities, but the future scenarioin which Bloom Energy becomes a standard part of the power infrastructure for data centers.

The current valuation implicitly assumes several things at once: that demand for local power generation for AI data centers will be long-term, that Bloom Energy can ramp up production quickly without significant margin pressure, and that operating leverage will translate into dramatic profitability growth in the years ahead. In other words, the stock price today includes the expectation of a smooth transition from growth to stable profitability.

From a conservative investor's perspective, it is important to note that the valuation here offers no safety cushion. Any disappointment - whether in the pace of delivery, margins or ability to generate positive cash flow - can lead to a sharp downward revaluation. Conversely, if the rapid data centre expansion scenario comes to fruition and Bloom Energy confirms its ability to deliver at scale, the current valuation may look justified in hindsight.

Comparison with alternative "AI-energy" bets is also important. Compared to nuclear titles or infrastructure manufacturers, Bloom Energy offers speed of deploymentbut lacks long-term contracting certainty and stable cash flow. The market therefore attributes a growth premium to it, not an infrastructure valuation. The investor is not betting on a stable yield, but on that the company will be in a different valuation league.

Thus, from an investment perspective, Bloom Energy is not cheap even on a relative basis - it is expensive even relative to growth titles. It only makes sense if the investor believes that the company can transition to sustainable profitability within a few years and that the current demand for AI energy is not a short-term cycle but a structural change.

What's already priced in today - and what's not yet

Bloom Energy's current share price already carries fairly ambitious assumptions about the company's future development. The market has clearly priced in the strategic importance of the partnership with Oracle and the fact that, in general, demand for data center energy is growing significantly as a result of the AI boom. In other words, investors are now buying the stock not as an unknown experiment, but as a company that is on the radar of the big tech players and has a real chance to participate in the infrastructure part of the AI cycle.

At the same time, Bloom Energy's ability to rapidly ramp up production capacity and deliver solutions in months, not years, is at least partially priced in. The market therefore implicitly trusts that the company can handle scaling both technologically and operationally, and that its solution is not just a one-off but repeatable across other projects. This explains why the stock remains highly valued even after the surge.

Conversely, the long-term stability of margins and the transition to sustainable positive cash flow are not yet fully factored in. While the market is speculating on improving profitability, it remains skeptical about how quickly and under what conditions the company will be able to convert revenue growth into consistent cash flow. Herein lies the key difference between what is "believed" and what is so far only a possibility.

The sensitivity of the investment thesis: What the story is most dependent on

Bloom Energy's investment story is highly sensitive to several key factors, the most important of which is the pace of data center construction and expansion. If AI infrastructure expands faster than expected, not only will order volumes grow, but so will the pressure for fast, local energy solutions - precisely the area where Bloom Energy has a competitive advantage. Conversely, a slowdown in investment by hyperscale players would quickly translate into orders and investor sentiment.

The second sensitivity is the company's ability to maintain or improve margins as production volumes grow. The current gross margin improvement is encouraging but still relatively fragile. If higher volumes lead to pricing pressure or cost growth faster than expected, the whole operating leverage story could slow down significantly. In such a scenario, the investment thesis would shift from growth to defensive - without a corresponding valuation.

The third factor is the availability of capital. Bloom Energy is still a company that finances growth from external sources and is therefore sensitive to changes in capital market conditions. Tighter financing, a higher cost of debt, or a deterioration in sentiment toward loss-making companies could significantly increase the risk premium the market demands for the stock.

Analysts' expectations

UBS raised its target on Bloom Energy Corp. from $41.00 to $105.00, while maintaining a Buy rating. The investment firm cited Bloom Energy's "time-to-power advantage" as a major change for the company, especially in the data center market where power needs are immediate, not several years away. This strategic positioning has contributed to the company's robust 22.72% revenue growth over the past twelve months.

UBS identified the expansion of orders from American Electric Power (AEP) and Oracle as near-term catalysts for Bloom Energy's growth.

The firm expects more utilities beyond AEP to work with Bloom Energy, noting that Bloom fuel cells can be deployed in 3-6 months, while the industry average deployment time is 4-5 years.

Investment Scenarios: Where the potential lies and where the risk lies

Bull case - AI infrastructure becomes the standard

• Oracle and other hyperscale customers are rapidly expanding collaboration
• Bloom Energy doubles production capacity without major margin pressure
• Operating margins move into higher single digits
• Cash flow tilts into positive territory
• the market begins to see the company as an infrastructure player, not an experiment

➡ Result: high share price growth, current valuation appears justified in retrospect.

Base case - growth continues, but expensive

• Demand for data centres remains strong
• Revenue growth continues but capital intensity remains high
• the company is approaching profitability but cash flow remains weak
• Valuations do not change significantly

➡ Result: average return with high volatility, no significant rerating.

Bear case - cyclical sobering

• Data center construction pace slows
• customers defer investment or negotiate prices
• Bloom Energy fails to improve margins quickly
• Capital markets start punishing loss-making companies again

➡ Result: sharp valuation correction, loss of investor confidence.

What to take away from the article

• Bloom Energy is A pure bet on the energy infrastructure AI boomnot a traditional energy company.
• The partnership with Oracle is strategic breakthroughbut not yet proof of long-term profitability
• Financially, this is a company in a transition phasewith significantly improved margins but weak cash flow
• Valuation is very challenging and assumes a successful scenario
• The investment only makes sense as asymmetric growth addition to the portfolio, not as a core
• The biggest risk is not the technology, but the pace of monetization of demand

With the S&P 500 hovering just below all-time highs, investors face a familiar but unresolved dilemma. Traditional valuation metrics suggest caution, yet market dynamics have changed dramatically over the past decade. From AI-driven growth to liquidity and rate expectations, this analysis explores whether today’s prices are excessive — or simply the cost of participating in a transformed market.

S&P 500 Index since the beginning of 2025 (1D chart)

Let's start with the simplest concept, but one that people often use incorrectly: the P/E. The price-to-earnings ratio, in the case of an index, tells you how many dollars investors are willing to pay for one dollar of expected earnings of the companies in the index. It sounds trite, but there's a whole market psychology encoded in it. When the P/E is high, the market typically believes in either high future earnings growth or low interest rates (or both). When the P/E is low, the market either doesn't believe in earnings or demands a high risk premium because the environment is uncertain.

Crucially today, the most quoted metric, the "forward 12M P/E" for the S&P 500, is well above long-term averages. This study puts the forward P/E at around 22-23x while explicitly showing that it is above both the 5-year and 10-year averages. Thus, the market is more expensive than usual, even after adjusting for normal historical comparisons.

But that doesn't mean the market must automatically fall. It "just" means that returns in the coming years are likely to be more dependent on whether expectations are met. A high P/E is like a high bar: if you jump it, no one is surprised, but if you stumble an inch, the reaction can be unpleasant. And since we are near all-time highs, the question naturally looms in investors' minds: is this the end of the cycle, or is this just the beginning of a new phase where high valuations make sense because the structure of the economy and corporate profitability has changed.

The first big pillar of the ongoing bull market is earnings growth. If earnings are growing fast, the P/E may remain higher, and yet the market may not be overbought in a practical sense. Wall Street expects continued earnings growth for the U.S. companies in the index (either in the calendar year or over the outlook for subsequent quarters), which is one reason many strategists still hold positive targets. The second pillar is the macro environment and interest rates: when bond yields are not extremely high and inflation is kept in check, the discount rate for stocks falls and a higher P/E is easier to defend. But this is where the most important nuance is happening today: the market is no longer returning to the world of zero rates that investors have become accustomed to post-2008. Instead, they are trying to price in a new normal where rates are lower than in the restrictive phase, but not so low as to automatically justify high multiples.

Evolution of the 10-year US Treasury yield from June 2020 (1D chart)

This is where a concept that investors often underestimate comes into play: the equity risk premium. It's basically the reward you want for holding a riskier asset (stocks) instead of a relatively safer one (bonds). The problem is that the risk premium cannot be measured by a single number and there are many models for it. The New York Fed has an excellent overview on this topic "The Equity Risk Premium: A Review of Models"which shows how different approaches differ and why they can give different conclusions at the same time. The bottom line for the investor is simple: a high P/E can be "acceptable" either when the risk premium is still reasonable (because bond yields are lower) or when the market believes in sustained higher earnings growth. But if bond yields stay higher while earnings growth slows, the risk premium compresses and the market becomes more vulnerable.

This is exactly why Wall Street is once again inflecting this model and the various variations of comparing earnings yield (E/P) against bond yields. It sounds tempting. When the earnings yield is higher than the yield on a 10-year bond, stocks are "cheap." But the academic literature shows that the relationship is not as mechanical as investors would like. For example, the work of Bekaert et al. describes how inflation and nominal yields affect the interpretation of the Fed model and why this approach can be misleading in certain regimes. For the retail investor, the important conclusion is this: comparing P/E to bond yields is useful as a guide, but it should not be the only measure of the market. Otherwise, it is easy to simplify the world into one equation and overlook that corporate profits are cyclical, while bond yields reflect inflation, premiums and Fed expectations.

This is why some analysts prefer to look at cyclically adjusted valuations like Shiller CAPEthat average earnings over a longer period, thereby dampening the effect of short-term earnings euphoria or, conversely, temporary downturns. This data is standard in the investment world because it goes deep into history and allows comparisons to be made between today and previous cycles. Their point is not to tell you that next month there will be a downturn or a rise. The point is that they provide a long-term framework for expected future returns: when valuations are extremely high, future average returns tend to be lower because much of the optimism is already priced in. This is also consistent with the reducibility of returns, where various indicators (P/E, dividend yield, etc.) show some predictive signal for long horizons. For example, The work of published directly by the Federal Reserve summarizes that the valuation ratio is among the variables that historically carry information about expected returns, although the short-term prediction remains highly uncertain.

Shiller P/E ratio since 1870

Now the important part: the market can hold dear for a long time. And it can be expensive for good reasons. If you look at the structure of the S&P 500 today versus, say, twenty years ago, the index is much more driven by companies with high margins, strong balance sheets, and often structural growth. Digitization, software, cloud, semiconductors, data infrastructure and monetization of networks have changed the profit profile of much of the index. From this perspective, it makes sense that the P/E of the index may be higher than the historical average because the average has been shaped by a different economy. But even this argument has its limits. There is a difference between when an index is more expensive because of better quality earnings, and when it is more expensive just because investors believe in growth ad infinitum. And it is on this edge that stock markets are today.

Another layer that retail often overlooks is concentration. The S&P 500 is weighted by market capitalization, which means that the few largest companies have a disproportionately large impact on the entire index. So when you hear "the S&P 500 is expensive", what it often means in practice is "the largest part of the index is expensive". If much of the valuation is concentrated in a few sectors (typically technology and communications services), the index can look overvalued even when much of the rest of the market is reasonably valued. Conversely, if market breadth improves and growth reaches other sectors, the index may rise even without further inflating valuations because earnings and prices will rise in more companies. This is exactly one of the key signals that investors will be watching in the coming months.

TOP 8 (Alphabet is broken down into what A and C stock) companies, by weight of representation in the S&P 500 index. All of these firms are pure technology companies and control 37.24% of the entire index = high concentration of capital

And now the macro. Valuations are not isolated. Valuations are a derivative of the economic regime. In a regime of low inflation and stable growth, the market will usually afford higher multiples. In a regime of higher inflation, higher rates, and uncertainty, multiples fall. Crucially for 2025 and the outlook to 2026, global growth is expected to IMF (International Monetary Fund) is more likely to slow down and the risks are skewed to the downside. This supports the narrative that the economy can go through another phase of normalisation without a dramatic break. The IMF in World Economic Outlook (October this year) describes slowing global growth and specific inflation risks, including that inflation in the US may remain more resilient than elsewhere. This is relevant for equities because more resilient inflation typically means less room for aggressive rate cuts, and thus potentially less room for further expansion in valuations.

If markets are holding just below ATH and forward P/E is well above average, then further index growth can come from either earnings growth or further multiple expansion. But multiple expansion today requires bond yields to fall or investors to start demanding a lower risk premium. This is harder to justify in an environment where inflation is not definitively under control and geopolitical and trade risks remain in play. Moreover, the IMF has warned in recent reports of structural risks of fragmentation and trade frictions that can act as a cost shock.

And this is where the circle comes full circle back to Wall Street. The outlooks of the big banks give very high targets for the S&P 500 for 2026, which are usually based on a combination of optimistic earnings projections and the assumption that the economy will remain strong enough. However, these expectations assume that the worst-case assumptions do not come true, i.e., that there is not a significant slowdown in earnings and higher returns at the same time.

Expensive markets are often at their most dangerous stage not when they are expensive, but when the expectations that justify those valuations change. In 1999, the problem was not just high expectations; the problem was that expectations about the future profitability of many companies were unrealistic in practice. In 2007, the problem wasn't just P/E; the problem was the credit system and overleveraging.

The decline in private sector indebtedness after 2008

So what can go wrong in the current situation? Technology concentration, yield sensitivity, and the question of whether the AI investment wave will deliver real productivity and monetization over the time horizon the market expects are often mentioned. Even large institutions today are grappling with how to distinguish structural growth from a bubble, while acknowledging that valuations in AI themes can be high without automatically implying collapse.

High valuations therefore do not mean that investors should immediately unload all positions, but they do mean lowering expectations and increasing discipline as rapid declines may be more common. In a high P/E environment, returns are more likely to be more dispersed over a longer period of time and to come gradually and with increased volatility.

So where might the markets be headed? In principle, there are three realistic scenarios, which differ in what happens to earnings and to rates. In the first scenario, profits will rise as expected, inflation will be fully under the Fed's control, and bond yields will gradually decline or at least not rise. This is an environment where the S&P 500 can outperform ATH and continue higher, albeit perhaps more slowly and with more corrections along the way. In the second scenario, earnings will rise but yields will remain higher as inflation becomes resilient. Then the market may stagnate. In the third scenario, profits disappoint while yields remain relatively high - an option that typically brings a faster and more painful correction.

Nvidia’s latest quarter confirms something investors were still quietly questioning: the company is no longer just riding an AI wave — it is defining the infrastructure cycle itself. Revenue expansion is now happening at a scale where most large-cap tech firms would inevitably slow down. Nvidia did not. Instead, it accelerated, proving that hyperscalers, sovereign AI projects, and enterprise platforms are still competing for capacity faster than supply can realistically expand.

What makes this phase different is not just demand, but quality of earnings. Margins remain structurally elevated, capital intensity is being absorbed without stress, and cash generation is reaching levels that fundamentally change Nvidia’s financial flexibility. This is no longer a growth story driven by anticipation. It is a cash machine operating at full load, with visibility that stretches well beyond a single product cycle.

How was the last quarter?

From a purely numerical perspective, Q3 was another record quarter. But more important is the pace and quality of growth. Revenues of $57.0 billion were more than $10 billion higher than the previous quarter and nearly $22 billion higher than a year ago. Such rapid growth in absolute terms is exceptional for a company of this size. Yet gross margin remains near all-time highs - 73.4% on a GAAP basis and 73.6% on a non-GAAP basis. While margins are down slightly year-over-year, they have improved quarter-over-quarter, which is important in a period of massive ramp-up of a new generation of products.

Profitability grew even faster than revenue. Operating profit was $36.0 billion, up 65% year-on-year and 27% quarter-on-quarter. Net profit of $31.9 billion was 21% higher than Q2 and also 65% higher than a year ago. Earnings per share of $1.30 represented growth of 20% from last quarter and 67% year-over-year. On the positive side, GAAP and non-GAAP EPS are virtually identical, which increases confidence in the quality of the reported results.

The main driver remains the datacenter segment. Revenues of $51.2 billion are up 25% vs. Q2 and 66% YoY. In other words, NVIDIA added more than $10 billion in sales in this segment alone in the three months. CEO Jensen Huang commented bluntly that Blackwell sales are "off the chart" and cloud GPUs are sold out. This clearly shows that the main limit to growth is not demand, but available production capacity, giving the company a strong bargaining position going into the next quarters.

The other segments today operate more as a complement to AI infrastructure, but their development remains solid. Gaming brought in $4.3 billion, slightly weaker quarter-over-quarter but up 30% year-over-year. Professional Visualization reached $760 million, very strong quarter-over-quarter and year-over-year growth. The Automotive segment reported $592 million and continues to deliver consistent growth that reinforces NVIDIA's long-term optionality in autonomy, robotics, and physical AI.

On the cost side, the company continues to invest aggressively, but operating leverage remains exceptionally strong. Operating expenses grew at a double-digit rate, but relative to revenue and operating profit, this is a clear demonstration of the scalability of the business. At the same time, NVIDIA continues to make massive share buybacks. In the first nine months of the year, it returned $37 billion to shareholders and still has more than $62 billion under authorization.

• Full presentation with results.

CEO commentary

Jensen Huang emphasized in his comments that NVIDIA has entered what he called the "virtuous cycle of AI." The demand for computing power is self-reinforcing, he said, as AI rapidly expands into other industries, regions and application types. Importantly, both training and inference workloads are growing exponentially, making AI a long-term infrastructure investment, not a one-off technology experiment.

Huang also made it clear that Blackwell is not just the next generation of chips, but a fundamental platform leap. The sell-out of cloud GPUs and the push for capacity confirm that NVIDIA remains a key infrastructure supplier for hyperscalers, AI labs and government projects.

Outlook

The outlook for the fourth quarter suggests further acceleration. NVIDIA expects revenue of around $65 billion, another significant increase from an already record Q3. Gross margins should move even higher, to around 75%, which combined with growing volume is a very strong signal. Operating costs are set to continue to rise, reflecting investment in platform, ecosystem and manufacturing, but the guidance structure suggests that operating leverage will remain.

For investors, it is key that the company is simultaneously increasing sales and margins. This typically means an improving product mix, a strong pricing position and a gradually stabilising supply chain. If NVIDIA delivers on this outlook, the thesis that Blackwell represents a long-term highly profitable platform, not a short-term cycle, will be confirmed.

Long-term results

The long-term view shows an extreme shift in the company's scale and profitability. Revenues for 2024 reached $60.9 billion, more than double from 2023 and nearly quadruple from 2021. Gross profit rose to $44.3 billion and operating profit to nearly $33 billion. The net profit of $29.8 billion shows how dramatically the company's economics have changed in a very short period of time.

The evolution of costs is also crucial. While revenues grew by more than 125% in 2024, operating expenses remained almost unchanged. This is a prime example of operating leverage and one of the main reasons why NVIDIA has become the most profitable company of the AI era. In addition, the share count has been declining slightly over the long term, increasing the impact of earnings growth on EPS.

News

The third quarter was packed with strategic announcements. NVIDIA confirmed that Blackwell is delivering top results in independent benchmarks and delivering significant improvements in power efficiency. The strategic partnership with OpenAI, which envisions deploying a minimum of 10 GW of NVIDIA systems, significantly increases long-term demand visibility. Also important is Anthropic's decision to scale its models on NVIDIA infrastructure.

The company is also deepening integration with cloud players, expanding the networking layer, strengthening the role of NVLink as a standard, and entering the areas of quantum and physical AI systems. These moves move NVIDIA from its role as a chip supplier to a comprehensive infrastructure partner.

Shareholder Structure

NVIDIA's shareholder structure is highly institutional. Approximately 69% of shares are held by institutions and more than 72% of the free float is held by professional investors. The largest shareholders include Vanguard, BlackRock, Fidelity and State Street. The company's stock is held by nearly 7,000 institutions, confirming its position as a key global position in both index and actively managed portfolios.

Analyst expectations

Following these results, analysts are primarily focused on the sustainability of the pace of data center growth, the evolution of margins in the Blackwell era, and the company's ability to increase supply in an environment where demand is outpacing supply. Guidance for Q4 pushes expectations higher again and supports the narrative that AI infrastructure investments are not a short-term boom but a multi-year cycle.

If NVIDIA continues to deliver results of this type, the market consensus will increasingly lean towards the view that the company is not just a winner of one technology wave, but a key building block of the new digital infrastructure.

Morgan Stanley's Joseph Moore raised the bank's price target to $250 from $235. The new target is among the highest on Wall Street.

Fair Price

The United States has entered a new phase of artificial intelligence governance, one that decisively shifts power away from individual states and toward Washington. President Donald Trump has signed an executive order that sharply limits the ability of states to introduce their own AI regulations, placing federal policy as the sole benchmark for what is permitted. For states like California and New York, long seen as regulatory trendsetters, this marks a major loss of influence. The administration’s intent is now unmistakable: accelerate AI development by removing regulatory fragmentation, even if that means sidelining local oversight.

Trump argues that AI is too strategically important to be governed by fifty different rulebooks. According to the White House, a patchwork of audits, safety mandates, and liability regimes would slow innovation and weaken US competitiveness. The executive order establishes a new federal enforcement mechanism under the Department of Justice, tasked with challenging state-level AI laws that conflict with national policy. It also introduces a powerful lever: the federal government may withhold funding from states that pursue regulations deemed to obstruct technological progress. For Big Tech, the signal is clear—Washington is choosing scale, speed, and global competition over decentralized control.

The regulation is also a victory for big tech companies. OpenAI, Google $GOOG, Andreessen Horowitz, and hardware manufacturers led by Nvidia $NVDAlobbied intensively for its enforcement for many months . According to several sources, the architect of the plan was the president's "AI advisor" David Sackswho has long promoted the idea that datacenter, model and chip development cannot be coordinated in an environment of legislative chaos. That's why a number of tech leaders welcomed Trump's executive order as a move that could put the US ahead of both Europe and China in the pace of technological development.

Moreover, Trump argues for a geostrategic necessity: artificial intelligence is key to American competitiveness, he says. He warns that China could gain a technological edge if the US is unable to accelerate the construction of data centres, energy infrastructure and the development of AI models. That's why the federation wants to keep control of crucial permits and regulations that affect the sector. In his mind, it's not just about technology, but about national security and the economy.

But the opposition is reacting sharply. Critics point out that executive orders limit the ability of states to protect their own citizens from the risks associated with artificial intelligence. Organizations such as Center for Democracy & Technology warn that the move puts Washington on the side of corporations and weakens corporate accountability to the public. The backlash is also coming from some governors, including Republican ones, who see the encroachment on states' rights as an unacceptable precedent. The dispute is thus moving from a technological to a political and constitutional dimension.

The effects of the regulation could be profound and far-reaching. If the federal government does indeed begin to challenge state AI laws, it will open up a new legal battle that could end up in the Supreme Court. States will have to carefully consider whether to embark on legislation that could be immediately challenged. For technology companies, on the other hand, an era of greater predictability and easier scaling of their AI products and data infrastructures is opening up. The US approach is thus moving away from the European model of regulation and towards maximising the speed of innovation - albeit at the cost of weakening local democracy and control over algorithm behaviour.

Trump's decision is therefore more than just an administrative act. It is a turning point in how the United States understands AI and what price it is willing to pay to stay ahead in the race with China. The outcome of this clash will show whether the centralisation of power in the hands of the federation will actually accelerate innovation, or unleash another political crisis in which AI itself is a means - not an end.

Analysts are now raising target prices for $RIVN. That of course helps the stock, and yesterday it rose by roughly 15%. I haven't bought the shares yet; I'm waiting for further results to see if the fundamentals improve. In my opinion the potential is enormous, but it's also tied to quite a few risks.

What are your thoughts on $RIVN?

At first glance, a stock that has already surged more than 250% in a year should be running out of fuel. Yet analysts at Needham argue the opposite. By initiating coverage with a Buy rating and a $357 price target, they are effectively stating that the market is still underestimating the company’s long-term strategic value. The rally so far reflects excitement — but not full recognition of the role this business is positioned to play in reshaping the U.S. nuclear fuel supply chain.

What makes the story compelling is not uranium prices alone, but positioning. The company has transitioned from a niche supplier into a critical domestic producer of next-generation nuclear fuel, backed by regulatory approval no competitor currently holds. As the U.S. accelerates its push for energy independence and advanced reactors move closer to commercialization, this firm sits at the intersection of policy, security, and technology. In such environments, valuation resets are not gradual — they are structural.

Top Points

For an investor, it's helpful to frame the story with a few key facts that explain why this company is getting the spotlight:

• YTD shares +259%, but Needham still sees more potential
• HALEU's only licensed producer in the U.S.
• record SWU prices → rising margins
• $3.9 billion backlog providing revenue visibility for years to come
• USD 1.6 billion cash → balance sheet safer than most industrial companies
• geopolitics and federal legislation clearly support domestic enrichment capacity

Company profile: transformation from a retailer to a strategic industrial pillar

Centrus Energy $LEU was created as a commercial intermediate in the nuclear fuel chain whose role has long been relatively simple: to secure the supply of low-enriched uranium. This business model was profitable, but there were no long-term competitive barriers, and the company was therefore not seen as strategic by investors. In recent years, however, the situation has changed dramatically. Centrus has invested in its own enrichment technology, obtained a full NRC license - an extremely difficult and time-consuming process - and was the first in the US to commission capacity capable of producing HALEU.

This is what moved the company from the periphery to the very heart of US energy policy. HALEU fuel production requires not only technological infrastructure, but also safety standards that are among the most stringent in the entire energy sector. Thus, competition will not emerge in months or years; rather, it is a barrier to entry that can be measured in decades. The company is now conceived of as a US industrial and national asset - much like LNG exporters a decade ago or semiconductor manufacturers after 2020.

Another aspect that is fundamentally changing the company's profile is the approach of the government and the Department of Energy. Nuclear fuel is no longer a purely commercial commodity. It is a matter of strategic security, geopolitics and military self-sufficiency. And Centrus is the first link in this infrastructure on which to build an entire renaissance of domestic nuclear capability.

Where business can grow fastest: structural drivers for the next decade

There are several opportunities, but three of them are fundamental and will determine the company's growth well into its 30s.

1. HALEU as the fuel of the future

Most modular reactors (TerraPower, X-Energy, NuScale) are designed specifically for HALEU. Without it, SMR construction will not take off. Companies that want to be the first producers of the next generation of reactors need a steady supply of HALEU - and Centrus is the only supplier in the US that can provide it. The market could grow by hundreds of percent in 10 years.

2. Russia's exit from the global enrichment market

Russia held between 35 and 40% of the world's enrichment capacity. After the sanctions, there is a huge deficit that the Western world needs to fill quickly. SWU prices have therefore soared to record highs and analysts expect them to remain high for many years. Companies with their own enrichment capacity - which in the US is virtually only Centrus - have unique pricing power.

3. Federal contracts and military programs

The Department of Energy is developing a long-term fuel cycle renewal program. The U.S. military is testing SMRs for bases, logistics centers, and remote operating areas. All of these programs need fuel in a mode that is safe, domestic, and geopolitically independent.

Analyzing the SMR market - why Centrus is at the center of the nuclear renaissance

The small modular reactor (SMR) market has transformed from a rapidly emerging segment into a strategic priority for the US, the EU and energy companies around the world. SMRs are not just a technological innovation - they are the answer to the problems of large nuclear units: long construction times, high costs, complex regulatory processes and political uncertainty. The US sees SMRs as one of the key pillars of the future energy sector, mainly because of the decarbonisation of the industry, the stabilisation of the energy grid and the need to strengthen energy security.

What is critical for investors?

Most SMRs use HALEU (High-Assay Low-Enriched Uranium)which is a fuel enriched to 5-20%. And this is where a unique market asymmetry arises: the US HALEU does not produce, Russia (TENEX) is virtually the only global source, and imports from politically risky countries are restricted by US legislation. This creates an environment where the domestic producer - Centrus - is at the centre of the whole industry.

Specific SMR projects that HALEU needs:

• TerraPower Natrium, funded in part by the federal government
• X-Energy Xe-100one of the leaders in high-temperature reactors
• Ultra Safe Nuclear Micro-Modular Reactorsuitable for remote locations
• BWXT micro-reactors, defence and space projects in collaboration with NASA
• Holtec SMR-300, where DOE also expects demand for HALEU

The implication for Centrus is clear: any real SMR rollout means a leap in demand for HALEU, and there is no other capacity in the US that can meet this demand in the short term.

Comparison with competitors: who can realistically enter the market and why Centrus' moat is extremely strong

Centrus has several layers of competition that together create an unusually strong barrier to entry in the enrichment segment. Indeed, competition in the nuclear fuel cycle is not unlike consumer goods - it is a field with strong regulation, a high capital threshold, and technologies that few countries control.

Real Alternatives Today:

Europe - Urenco

A European consortium is producing enriched uranium, however:

• its capacity is long booked.
• politically, it primarily supplies the EU
• does not have a licence for HALEU production in the US

France - Orano - Technically capable player but constrained by European politics and capacity.

Canada - Considering entering the HALEU segment but is in the study phase.

China - Has its own production but cannot export HALEUs to the US market for geopolitical reasons.

Russia - TENEX - Historically the dominant producer of HALEU. However, the U.S. is gradually reducing imports, which directly strengthens Centrus.

Result:

Centrus is the sole holder of NRC license. in the U.S. and the only one with a working production line. In addition to its technological edge, it has a regulatory advantage - it takes time to obtain a permit in the U.S. yearsif it even passes politically. This creates a moat that is quite unique in the nuclear industry.

Timeline of key events

The last ten years represent a dramatic transformation of the company. Here is a comprehensive overview:

2014-2018: reorganisation and stabilisation

• The company exits the Russian material-dependent model.
• Restructuring and preparation for in-house AC-100M centrifuge technology is underway.

2019-2021: Licensing milestones and first government contracts

• Acquisition of key NRC licenses for enrichment in the US.
• Award of pilot contract with DOE for HALEU test production.

2022: Geopolitical turning point - Russian invasion of Ukraine.

• US begins planning for complete removal of Russian nuclear material.
• DOE launches HALEU Availability Program.
• Centrus is identified as the only domestic manufacturer.

2023: Completion of the HALEU demonstration line.

• First U.S. production of HALEU in more than 70 years.
• Additional federal contracts awarded.

2024: Backlog grows to $3.9 billion.

• Company transforms into a strategic manufacturing company.
• DOE increases projected future delivery volumes.

2025: Uplisting to NYSE and massive growth in the stock.

• Entry among the big stock market players.
• Stock appreciates by more than 300% as the market appreciates structural demand.
• Needham, UBS and Evercore raise targets, SMR projects close to implementation.

Management - why leadership is one of the company's greatest assets

Nuclear is not a sector where just anyone can succeed. Dealing with regulation, safety standards and government contracts requires experience that most companies in the market don't have. Management Centrus is exceptional in this regard.

Daniel Poneman (CEO)

• Former U.S. Deputy Secretary of Energy.
• Long career in nuclear policy, security and international energy.
• Considered one of the most competent leaders in the civil nuclear cycle.

His contacts in DOE, NRC and the defense sector have been instrumental in the company's a strategic advantage for the company.that is difficult to measure in financial statements, but significantly affects the ability to win contracts.

Natalia Shakhlevich (Chief Nuclear Officer)

• Expert in enrichment technologies and operation of HALEU lines.
• Participated in certification processes and technical audits with NRC.

Daniel Beck (CFO)

• Focuses on maintaining high liquidity and contract management with DOE.
• Instrumental in strengthening cash position to $1.6 billion.

Management combines experience in government, nuclear infrastructure, and strategic management. For an investor, this is critical - in the nuclear sector, decisions are often made the competence of the team more than the product itself.

Financial performance: capital cycle on the rise

Revenues - fastest growth in the company's history, but with a very different structure

Revenues grew from USD 298 million in 2021 At USD 442 million in 2024, representing 47% growth over three years. However, it is not only the pace but also the nature of the growth that matters:

• 2024: +38% yoy - the strongest dynamics of the decade
• 2023: +9% yoy - stabilisation year
• 2022: slight decline -1.5%, due to cyclical supply and timing of contracts

Structure of growth is key: revenues now more than ever reflect the mix of enrichment production, DOE contracts and SWU prices, not just brokerage. This increases revenue visibility into future years.

Gross profit - stagnation points to a transition phase

While revenues are skyrocketing, gross profit is in between ~$112-118 million for the last four years, even dropping slightly in 2024 to USD 111.5 million.

What does this mean?

• Growth has not yet been generated by higher margins
• the company is still in a period of calibrating the costs associated with HALEU production
• the benefits of production will only become apparent once full capacity is up and running

So margins aren't growing now - but growth may be yet to come, which is why analysts have such aggressive price targets on the stock.

Operating profit - a gradual decline that may herald a turnaround

Operating profit declined from US$68.3 million (2021) to USD 48 million (2024).
The market would view this dynamic as a cautionary tale for a cyclical company, but in the context of Centrus it is investment stage:

• HALEU capacity preparation costs have risen significantly
• the company was increasing employment in the nuclear segment
• fixed costs were growing faster than sales

If Needham and the DOE are right with their estimate of HALEU demand, this curve will turn up in the next few years. And dramatically so.

Net income - extreme volatility reflects one-time tax items

The firm's net profit is the most distorted in the time series:

• 2021: 175 million. USD 1.5 billion (driven by one-time tax item and reverse adjustments)
• 2022: 52.2 million. USD
• 2023: 84.4 million. USD
• 2024: 73.2 million. USD

On the face of it, this is a -13% decline in 2024, but the reality is different:

• Revenue grows +38%.
• Margins improve
• the decline is mainly due to an extremely low tax provision in 2023which has normalised this year

Important: Profitability is stable, not decliningwhen one-off items are removed.

Valuation: expensive company or unique monopoly?

At first glance, valuation may appear aggressive. P/E over 34, P/S over 6 and P/B over 12 are not standard values for an energy company. However, Centrus is no longer a traditional energy company - it is a unique producer in a sector where there is virtually no substitution or competition.

Therefore, analysts value the stock at a different multiple than an investor would expect for a commodity player. Needham uses a multiple of 45× 2027 EPS, Evercore targets up to $390, UBS sees potential of $245, and Daiwa (the most conservative) still holds a Buy rating. The common denominator is the belief that the company is entering the most significant growth cycle in its history.

The high multiples thus reflect not current performance, but positioning in a value chain that is now being created virtually from scratch.

Analysts' expectations

The highest growth potential attributed by analysts to Centrus Energy today comes from the investment bank Evercore ISI. The latter, after updating its models, has set a target price USD 390which, at the current price of around $278, implies a roughly +40% upside. Meanwhile, Evercore is one of the most respected analyst houses in the energy sector and its reasoning is based on the long-term shortage of enrichment capacity in the US, the growing demand for SWU and the key role that Centrus plays in the production of HALEU fuel for new reactor types. According to Evercore, the company is the only commercial player that can realistically meet US demand, giving it a competitive advantage with extraordinary pricing power for years to come.

Other analysts add additional layers of argument, but it is Evercore that has the most ambitious model based on the assumption that Centrus will become the central supplier for the U.S. nuclear program. Needham sees room for growth of around 25-30%, UBS sees the potential more modest but positive, while Evercore is working with full monetization of HALEU capacity and structural changes in the US fuel-cycle. This explains why their target price is significantly higher than their competitors - they view Centrus not as a fuel broker, but as a future monopoly infrastructure critical to US energy security.

Investment scenarios

Optimistic scenario - US accelerates nuclear renaissance

If the government's SMR programs get off the ground faster than currently anticipated, Centrus will be a major supplier of fuel for the first generation of modular reactors. DOE is allocating more contracts, HALEU lines are transitioning to full commercial operation, and SWU prices remain high due to global shortages. As a result, the company is entering a period of double-digit revenue and profit growth, while investors appreciate the stability of earnings. In this scenario, the stock may trade above USD 360-420.

Realistic scenario - gradual growth based on contract visibility

The most likely scenario is that DOE will release contracts gradually, SMR projects will move forward but without dramatic acceleration. The company increases HALEU capacity, revenues grow at a moderate pace, cash flow is strong, margins stabilize. The stock finds an equilibrium range of around $260-330, with investors valuing in particular the secure balance sheet and strategic positioning.

Pessimistic scenario - administrative delays and slow SMR take-up

If some SMR programs are delayed or DOE delays the allocation of some contracts, Centrus' growth will slow down. Revenues stagnate, earnings fluctuate with the project cycle, and valuation normalizes at $180-220. However, the company remains a strategic enterprise with a strong cash pile and virtually zero existential risk.

What to take away from the article

• The firm is at the center of the U.S. effort to reset the nuclear fuel cycle - a structural, not cyclical, trend.
• As HALEU's only U.S. producer Centrus has a strategic position that cannot be quickly replaced, either technologically or regulatorily.
• It has USD 3.9 billion backlogwhich provides revenue visibility for years to come.
• USD 1.6 billion of cash.
• Record SWU prices represent a strong driver for margin growth in the years ahead.
• Needham, Evercore, UBS and Daiwa all rate the stock positively due to DOE's long-term priorities and the renaissance of SMR programs.
• The key risk is not fundamentals, but the timing of government contracts and the market's high expectations for rapid growth in the stock.
• The company's profile is shifting from trader to strategic industrial pillar - which fundamentally changes its valuation.
• The investment is asymmetric: the structural room for growth is significant while the existential risks are low.

Recent U.S. labor data have shaken investor confidence, with unemployment filings climbing just as major indices flirt with record highs. As market participants debate whether this reflects a genuine cooling of economic momentum or a short-lived fluctuation, the implications for Fed policy and equity valuations hang in the balance. This report dissects what the latest figures could mean for stocks, interest rates, and broader economic trends.

U.S. unemployment claims from 2023

Yesterday's release of data on new unemployment claims in the United States was a reminder once again of how sensitive financial markets are to even seemingly minor changes in macroeconomic indicators when they take place in an environment where equity indices are near all-time highs.

Initial jobless claims have long been one of the most closely watched short-term labour market indicators, as they provide an almost immediate view of whether firms are starting to lay off or whether they are still maintaining high demand for labour. According to data from the U.S. Department of Labor new claims rose to 236,000, a significant week-on-week increase and above market expectations. Nevertheless, this is still a level that is rather low in a historical context and does not in itself indicate the arrival of a recession.

It is this discrepancy between the short-term surprise and the longer-term context that is key to understanding why markets have reacted rather optimistically even though it may seem strange at first glance.

However, in addition to the number of new claims for unemployment benefits, it is also necessary to look at the number of continuing claims, i.e. the number of people receiving unemployment benefits repeatedly. While initial claims capture the immediate shock of new layoffs, continuing claims provide a deeper insight into whether people are able to return to the labour force relatively quickly or whether they remain unemployed for a longer period of time. It is the rise in continuing claims that is considered a much more dangerous signal than a one-off increase in new claims, as it indicates more structural problems in the labour market. According to analyses by the Federal Reserve Bank of Cleveland, continuing claims have historically had a stronger correlation with recessions than initial claims alone, especially if their growth persists for several months in a row.

United States Continuing Jobless Claims (1W chart) by 2023

Economists agree that jobless claims are among the so-called leading indicators, that is, indicators that tend to change direction before the changes are fully reflected in the real economy. This view is confirmed, for example, by the work of published by the Federal Reserve Bank of St. Louis, which analyses the relationship between jobless claims and business cycles and shows that a persistent rise in jobless claims often precedes a slowdown in economic activity, but not necessarily every short-term spike. It is the word persistent that is key in this context, as historical data show that one-off jumps in weekly numbers can be caused by seasonal factors, administrative changes or temporary disruptions in certain sectors of the economy.

Economists therefore often use a four-week moving average to eliminate short-term noise. In the current case, this average has risen only slightly, suggesting that it is not yet a clear signal of structural deterioration in the labour market. This approach is supported by academic studies such as a paper published in the Journal of Economic Dynamics and Controlwhich shows that a combination of several indicators is important for identifying economic breaks.

Market reaction

The reaction of financial markets to yesterday's data was relatively subdued, reflecting the fact that investors have been anticipating a gradual cooling of the US labour market for some time. The S&P 500 index was slightly in the red in the first minutes after the data was released, but there was no sharp sell-off. However, the index managed to end yesterday's day with a gain of around a quarter of a percent, despite being down 0.8% in premarket trading in the morning. This development is all the more interesting as US stocks are currently just below their all-time highs. This means that the market is theoretically more vulnerable to negative surprises as valuations are elevated and investor expectations are relatively optimistic. Still, investors appeared to see the current data as confirmation of a gradual slowdown rather than a warning of a sudden downturn.

One reason why markets have not reacted significantly negatively is the interpretation of this data in relation to monetary policy. Weaker labour market data may increase the likelihood that the Fed will continue to ease monetary conditions in the coming months. This mechanism is well described in a number of studies on the monetary policy transmission mechanism, for example in the Bank for International Settlementswhich explains how rate expectations affect financial asset prices before the central bank actually acts.

From a macroeconomic point of view, the labour market in the US is crucial, as household consumption accounts for around two-thirds of US GDP. High employment and wage growth have been a key factor in recent years, allowing the economy to grow even in an environment of higher interest rates. However, if the labour market were to begin to deteriorate more sharply, this would be reflected relatively quickly in consumer spending and subsequently in corporate profits. This relationship is confirmed by study published by the National Bureau of Economic Research, which analyses the link between unemployment, consumption and economic growth.

It is important for investors to note that the current labor market situation is different from typical recession scenarios of the past. Although the unemployment rate has risen slightly in recent months, it is still at relatively low levels. At the same time, job openings remain high, suggesting that demand for labour has not completely disappeared, but rather is normalising after an extremely tight post-pandemic period.

The proximity to all-time highs on the S&P 500 adds another dimension to the situation. Historically, it has often been the case that markets have reached new highs just as macroeconomic indicators were beginning to deteriorate. This paradox is explained by the fact that financial markets discount the future and often react to expected central bank actions before the economic slowdown is fully manifested. Academic literature describes this phenomenon as "bad news is good news", a situation where weaker macro data leads to higher equity prices due to expectations of monetary easing.

Chart of the S&P 500 Index (Wednesday 20:00 - Friday 10:00) 1H

Impact on the economy

Another important aspect is the impact of the labour market on corporate performance and management outlook. Rising unemployment may reduce upward pressure on wages in the short term, helping firms stabilize margins, especially in an environment of slowing inflation. In the longer term, however, a weaker labour market implies lower consumer demand, which may negatively affect firms' earnings across the economy. Investors should therefore monitor not only the macro data itself, but also how companies react to it in their earnings conferences, particularly in the form of changes to the outlook for the next quarter.

From a retail investor perspective, it is therefore crucial to understand that yesterday's rise in unemployment claims is not an isolated signal, but part of a broader macroeconomic story. The labour market is gradually cooling, which may increase volatility in the short term, but it may also create an environment conducive to lower interest rates and continued support for equity valuations. The key will be whether the surge in jobless claims proves to be a one-off or whether it is confirmed by other data in the coming weeks and months.

Conclusion

At the current stage, the economy is on the edge between a soft landing scenario and a harder slowdown. If the rise in unemployment claims proves temporary and the labour market remains relatively resilient, the US economy may go through a period of mild slowdown without a significant rise in unemployment, which would be a positive outcome for equity markets. Conversely, a sustained rise in jobless claims, accompanied by a worsening corporate outlook and a decline in consumer confidence, could increase the risk of a deeper market correction. This is why the coming weeks and months will be crucial to confirm whether yesterday's data will be a footnote or the start of a more significant macroeconomic trend.

Markets within reach of new all-time highs!

The S&P 500 index, which reacted positively to the rate cut yesterday in the first hours, pulled back overnight and in the morning and was even more than 0.8% in the red today.

However, once retail was let into the market (from 15:30) sentiment immediately reversed.

The shift was so radical that the leading US index closed today’s session up 0.23% and is literally within reach of a new ATH. The rise was supported both by a looser Fed monetary policy and by the labor market report.

So it looks like this December is well set to fulfill the long-term pattern of year-end gains. Today could have been the start of a Santa Claus Rally, but we’ll have to wait for its full confirmation.

Nubank’s third quarter of 2025 marks another decisive step in its transformation from a disruptive fintech into one of the world’s most efficient and scalable digital banking platforms. With its customer base surpassing 127 million users and growth accelerating in all core regions, the company has firmly established itself as Brazil’s financial default. Engagement remains exceptionally high, monetization is improving, and the expansion in Mexico and Colombia is gaining the kind of traction that signals long-term structural growth. Revenue reached a record $4.2 billion, net income surged to $783 million, and ROE climbed to an impressive 31%, underscoring a business model operating at remarkable scale and profitability.

What makes this quarter particularly significant is the deepening of Nubank’s technology advantage. Operating costs per customer remain under $1, while ARPAC has risen above $13, highlighting a monetization engine that becomes stronger as the platform grows. The company is now accelerating its shift toward an AI-first architecture designed to automate processes, enhance risk evaluation, and personalize financial services at a scale unmatched by traditional banks. Q3 2025 confirms that Nubank is not only dominating Latin America’s fintech landscape but is also emerging as a global blueprint for the next generation of digital banking.

How was the last quarter?

The third quarter of 2025 was clearly the best everfor $NU. Revenues grew 39% year-on-year to $4.2 billion (FX-neutral), reflecting rapid growth in the client base, higher user activity and acceleration in monetisation. Key metrics show that Nu is able to combine expansion with increasing efficiency - the efficiency ratio fell to 27.7%, an exceptionally low level in the context of the fintech sector and traditional banking. Net profit reached $783m, up 39% FX-neutral year-on-year, and return on equity rose to 31%, a level that ranks among the absolute top in the banking sector.

The credit business, which is an increasingly important pillar of growth alongside payments, also showed significant improvement, with a loan portfolio of $30.4 billion, up 42% year-on-year (FX-neutral), and presenting a diversified structure: credit cards grew at a double-digit rate and secured loans added a strong 133%, while unsecured loans grew 63%. At the same time, portfolio quality remains under control, with the 15-90 day NPL in Brazil at 4.2% and the 90+ NPL only slightly up at 6.8%, in line with expected seasonality and market dynamics.

From a funding perspective, Nu has once again confirmed that it can attract cheap deposits in large volumes. Deposits grew 34% year-on-year (FXN) to $38.8 billion and funding costs represent only 89% of the interbank rate. The loan-to-deposit ratio is 46%, a comfortable level allowing for further credit expansion without pressure on more expensive funding sources. Interest-Earning Portfolio also grew significantly, increasing 54% to $17.7 billion, demonstrating that Nu is increasingly moving towards a universal digital bank model with a strong yield profile.

Client activity remains extremely robust: 106 million active users at 83% activity shows extremely high user retention. Payment volumes reached $36.5 billion, up 20% from a year ago. ARPAC has risen to $13.4 from $11 a year ago, while cost of service is holding at $0.9 - this combination represents one of Nu's largest competitive differentiators globally. As a result, the firm is able to monetize users many times more efficiently than most global fintechs, while maintaining a lower cost burden than traditional banks.

Overall, Nu demonstrated a unique combination in Q3 2025: the fastest growth in the region's client base, record user monetization, strong portfolio quality, and sharp profitability growth. This quarter confirms that Nu's model is not only scalable but also highly profitable.

• Full presentation with results.

CEO commentary

David Vélez highlighted that Q3 2025 is a symbol for Nu that the company can "grow and mature". According to him, Nu is entering a new phase where it is no longer just a hyper-expansive fintech startup, but a technology-driven financial institution that combines massive customer growth with increasing profitability. Vélez underlined that the company is working on an AI-first transformation, aiming to build an interface where banking interactions become more automated and personalised the more users use the platform. AI is set to fundamentally impact risk-modeling, customer support, product recommendation and operations.

The CEO also highlighted that the growth in Mexico and Colombia confirms the scalability of the model outside Brazil. Mexico already serves 14% of the adult population and Colombia is approaching 4 million clients. According to Vélez, it is the ability to replicate geographically that is one of the company's greatest assets. Thus, he says the results show not just short-term growth, but a structural shift by the company towards being Latin America's dominant digital banking player.

Outlook

Nu enters the next quarters with extremely strong momentum and some clear priorities. The firm expects continued client growth across all markets, with Brazil already focused more on monetisation than on expanding the customer base itself. Management expects ARPAC to continue to grow through cross-selling, expansion of credit products and investment services. From a portfolio perspective, the goal is to maintain high growth while managing risk, particularly in the phase of expanding unsecured lending outside of Brazil.

Nu is also investing heavily in architecture based on foundation models. This transformation is expected to lead to further reductions in customer servicing costs, faster onboarding processes and more efficient risk-scoring. The firm also plans to leverage its strong deposit base to further grow its loan book, with an LDR of 46% giving significant room for expansion. The trend that analysts expect is steady profitability growth and further improvement in ROE, which should continue to remain well above the sector average.

Long-term results

Nu's long-term development confirms that the company is one of the fastest growing financial institutions in the world. Revenues for 2024 are up 45% to $11.1 billion, following previous growth of 70% and nearly 200% in 2022 and 2021, respectively. This trajectory points to exponential expansion not only in absolute client numbers but also in monetization, driven by loan products, higher transaction activity and growth in investment services.

Gross profit for 2024 is up 52%, operating profit is up 82% to $2.8 billion, and net income has nearly doubled to $1.97 billion. Particularly significant is the turnaround from 2022, when the company was still in the red - since then, Nu has transformed into a steadily profitable company with soaring earnings per share. EPS for 2024 was $0.41, nearly double 2023's, while EBITDA was $2.87 billion. The number of shares outstanding is growing only marginally, supporting earnings per share growth.

Over the long term, this is a story of a fintech that has not only grown rapidly, but more importantly, has successfully transitioned into a highly scalable and profitable bank whose key metrics - revenue, profitability, margins and return on capital - are growing in parallel.

News

The most notable news of the quarter is the progressive transformation of Nu into an AI-first banking platform, which is set to fundamentally change the way the company delivers services and manages its own operations. In particular, the integration of foundation models relates to risk management, predictive analysis of client behaviour and customer care automation. The firm is also strengthening its presence in Mexico and Colombia, where it sees huge scope for growth in financial services penetration.

Nu is also expanding its investment products, insurance, payment services and secured lending, which are gaining traction quickly due to its easy onboarding process. The rapid growth in deposits is also significant news, which increases funding stability and reduces reliance on capital markets. Short-term trends thus point to a technologically and commercially mature company that is maintaining a high growth rate across regions.

Shareholding structure

Nu has a strongly institutional shareholder structure: over 80% of the shares are held by large global investors and the float is 84% owned by institutions. The largest shareholders include BlackRock with 7.64%, Baillie Gifford with 6.64%, JPMorgan with nearly 5% and Capital Research with 4.9%. Insiders own only 4.7% of the shares, which is typical for publicly traded financial platforms after an expansion phase. The nearly 1,200 institutions holding shares is indicative of the high level of long-term capital interest in the company's growth story.

Analyst expectations

Analysts view the Q3 2025 results as further confirmation that Nu can grow over the long term at a pace unmatched in the global banking industry. Continued growth in the client base, further increases in ARPAC and expansion of the loan book are expected while maintaining stable asset quality. AI-first transformation is also a key focus for analysts, which can further reduce customer servicing costs and strengthen risk management.

The consensus outlook expects Nu to maintain an ROE of around 30% and continue to grow at double-digit rates on both revenue and earnings. Mexico is expected to gradually approach the penetration levels known from Brazil, while Colombia should be another growth driver in the coming years. If Nu delivers on its vision of an AI-first platform and maintains its current momentum, it could become one of the most profitable and scalable fintechs in the world.

Fair Price

Eli Lilly is once again stretching the boundaries of what modern obesity treatment can achieve. In its phase 3 TRIUMPH-4 study, the company reported that its new triple-agonist injection, retatrutide, produced an average 28.7% reduction in body weight over 68 weeks—a result that surpasses even the blockbuster Zepbound. For a portion of participants, the weight loss translated to more than 70 kilograms, setting a new benchmark for the entire GLP-1 category and solidifying Lilly’s leadership in next-generation metabolic medicine.

The broader market for weight-loss therapies is entering a new acceleration phase. Demand for GLP-1–based drugs such as Zepbound and Wegovy has already reshaped the pharmaceutical landscape, but retatrutide signals that the industry is only at the beginning of a multi-wave innovation cycle. Rather than representing the peak of the trend, today’s treatments may soon be seen as the first chapter of a much more potent “Obesity 2.0” revolution.

What exactly did retatrutide prove in phase 3

Retatrutide is given once a week and belongs to a class of so-called incretins - drugs that mimic the effects of gut hormones that affect hunger, metabolism and blood sugar regulation. Unlike the products used today, it has several key differences.

In the first large late-stage study, TRIUMPH-4, targeting patients with obesity and knee osteoarthritis, it showed:

• average 28.7% weight loss after 68 weeks at the highest dose
• an absolute loss of up to 71.2 pounds (over 32 kg) in some patients
• at the same time significant relief of knee pain and improvement in physical function
• more than one in eight patients was virtually free of knee pain after treatment

In doing so, Lilly has delivered numbers that exceed even the ambitious expectations of analysts. Previous mid-stage data showed approximately 24% weight loss after 48 weeks, and this bar was significantly raised in the late phase.

"Triple G": why is this mechanism different from Zepbound or Weg's

Today's obesitology hits like Zepbound or Wegovy are based on the agents tirzepatide and semaglutide, which target GLP-1 (or a combination of GLP-1 and GIP). Retatrutide goes even further and activates three receptors right away:

• GLP-1 - suppresses appetite, slows gastric emptying, helps lower glycemia
• GIP - another incretin hormone that modulates the metabolic response
• glucagon - a hormone that affects energy metabolism and fat burning

This "triple agonist" architecture has earned retatrutide the nickname "triple G" and experts expect that it is the combination of the three receptors that accounts for deeper and faster weight loss than today's standards. But at the same time, cross-study comparisons have their limitations - the population, baseline BMI, length of follow-up and method of data evaluation vary.

The competition is not sleeping: Novo Nordisk $NVO and the race for 'second generation' obesity drugs

Eli Lilly $LLY isn't the only one trying to take the GLP-1 era to the next level. Rival Novo Nordisk is developing its own "triple G" candidate, UBT251, which it licensed to its portfolio from China's United Laboratories. What this means for the market is that the battle for the next generation of obesity drugs will not just be between semaglutide and tirzepatide, but also between a new class of triple-agonists.

At the same time, it is becoming increasingly apparent that today it is not just about weight loss per se. Pharma is moving towards an "obesity-plus" model - that is, drugs that affect other comorbidities besides weight, such as:

• Osteoarthritis
• type 2 diabetes
• cardiovascular risk
• liver disease (e.g. non-alcoholic steatosis and NASH)

In this context, retatrutide is interesting precisely because it shows both massive weight reduction and joint pain relief and functional improvement in the same study.

Risks that investors must not ignore

But such a significant effect never comes without risks. There have been questions around retatrutide tolerance before, and even the first late-stage data show that:

• the proportion of patients who discontinue therapy due to adverse events is higher than for placebo
• common problems are nausea, indigestion and other typical gastrointestinal side effects
• a proportion of patients discontinued treatment due to 'too much' weight loss, which is a signal of strength of effect from a medical perspective but a potential complication from a real-world clinical practice perspective

Thus, regulators will be looking not only at absolute efficacy, but also at the safety and long-term tolerability profile - especially in patients who have other chronic diseases in addition to obesity.

The implications for Eli Lilly investors

From an investor perspective, retatrutide confirms several important theses:

• Lilly is consolidating its technology lead - Zepbound is already one of the most successful products on the market today, but retatrutide shows that the company has an even "sharper tool" in the pipeline for the heaviest obese patients.
• The obesity market will be multi-tiered - Cheaper, oral and less effective products may target the mass segment, while triple-agonists like retatrutide may target patients with extreme obesity and osteoarthritis-type complications.
• Competitive pressure on smaller players will intensify - Companies that have built an investment story on the "next GLP-1 candidate" may come under significant pressure if the second generation (triple-agonists) turn out to deliver even better numbers.
• Eli Lilly's valuation is already expecting a lot - $LLY stock has the huge success of the GLP-1 portfolio priced in, and retatrutide works more as a confirmation and extension of the story than as an entirely new narrative. A failure in the indication part would therefore be punished by the market.

Timing will also be important. Lilly itself states that seven other late-stage studies of retatrutide in obesity and diabetes are expected to end in 2026. Until then, investors will be looking primarily at the stability of the results, the safety profile, and whether the data will be as compelling outside the relatively specific patient population of obesity and knee arthritis.

Where the story may shift by 2030

If retatrutide proves successful across indications and the regulatory process goes smoothly, it has the potential to take the entire GLP-1 business to the next level by the end of the decade. Obesity will then definitively become a chronic, pharmacologically managed diagnosis, not just a "lifestyle problem", and revenues from this category could be comparable to the biggest blockbusters in history for the big pharma houses.

On the other hand, pressure for reimbursement, access regulation and long-term safety will intensify. For investors, retatrutide is thus not just about "a bigger percentage of the scale" but about whether Eli Lilly can maintain political, regulatory and social support for a massive expansion of these drugs into mainstream practice.

IBM’s plan to acquire Confluent marks one of its most consequential strategic moves za poslední dekádu. As AI adoption accelerates inside large enterprises, access to real-time, high-fidelity data has become the bottleneck limiting the deployment of mission-critical AI systems. By bringing Confluent’s streaming backbone into its ecosystem, IBM fills a gap that neither Watson.x nor Red Hat OpenShift could vyřešit samy: the ability to ingest, process and activate live operational data at global scale. In the corporate world, where milliseconds matter, this shift moves IBM from “AI tooling provider” to a genuine infrastructure leader.

The deeper significance lies in the fusion of Confluent’s Kafka-based engine with IBM’s enterprise reach. Financial institutions, telecoms, manufacturers and cyber-security operators increasingly depend on automated decision systems that must react to events in real time rather than historical snapshots. With Confluent’s subscription-driven model and high-margin architecture, IBM stands to strengthen not only its technological position but also the growth profile of its software division. Analysts already estimate that the acquisition could add more than two percentage points to Software growth in 2026–2027, underscoring how transformative this deal may become.

Top points:

• The acquisition of Confluent fundamentally strengthens IBM's ability to work with real-time data - a key component for AI.
• Confluent can add ~$600 million annually to IBM's Software segment revenues between 2026 and 2027.
• The technology enables IBM to connect the mainframe, hybrid cloud and Watson.x into one integrated system.
• It gives IBM a platform to compete with hyperscalers (AWS, Google Cloud, Azure) in real-time applications.
• The transaction increases the value of Red Hat OpenShift, Instana, Turbonomic and IBM's overall AI strategy.

Key acquisition

IBM $IBM has long built on two pillars: mainframe + enterprise software. In the last five years, a third has been added: Red Hat and hybrid cloud. But this whole architecture had one weak link - IBM didn't have its own strong technology for real-time data flows.

And real-time data is everything today.

• Generative AI needs a continuous flow of real-time data
• Enterprises are moving from static databases to event-driven systems
• IoT generates trillions of signals per day
• Financial institutions demand millisecond responses
• Cybersecurity relies on real-time streaming data

Confluent $CFLT is exactly the piece that IBM $IBM has been missing.

And not just technologically. Confluent is one of the fastest growing enterprise software companies in the world, with a robust subscription model and thousands of customers in mission-critical industries. This gives IBM not only a product, but also extensive market access.

Watson.x + Confluent = AI that works with actual data

Watson.x has been a powerful but partially isolated platform until now. Without real-time data, generative AI can only work with static files.

Confluent opens up unlimited access to AI models:

• transactional data
• customer interactions
• logistics events
• industrial sensors
• IT telemetry and security alerts

IBM finally offers AI that is not just smart on paper - it responds in real time.

Red Hat OpenShift gets a major upgrade

Confluent has native integration for containers and Kubernetes.

This means:

• Easier deployment in hybrid environments.
• Higher scalability
• a unified data layer across clouds

OpenShift was strong in control-plane management but weaker in event-driven data - Confluent erases this weakness.

Mainframe modernization - bridging old and new generations

Mainframe customers:

• Banks
• Insurance companies
• Governments
• large enterprise systems

These systems generate huge volumes of data, but rarely get it into modern cloud applications in real time.

Confluent will enable:

• stream events from the mainframe to modern cloud applications
• update data lines without overwriting legacy systems
• create a hybrid architecture that keeps pace with fintech/AI competitors

IBM no longer sells "old hardware" but the data backbone of future financial systems.

Real-time data is the new API of the world

Hyperscalers have been fighting this battle for years:

• Google $GOOG has Pub/Sub, Dataflow, Vertex AI
• AWS $AMZN dominates with Kinesis and MSK
• Microsoft $MSFT has Event Hubs and Azure Synapse

IBM suddenly found itself in a situation where:

• its customers need real-time infrastructure
• AI becomes a major competitive advantage
• hyperscalers are pushing into the enterprise sector

Recurring revenue of +$600 million per year (BofA $BAC estimate)

IBM's software segment has margins of 78-82%. Confluent runs on a subscription model ⇒ predictable revenue.

This means:

• EBIT growth
• stronger cash flow
• a higher share of software in total revenue

Synergies can be much higher than added revenue

The impact will not just be in Confluent's contribution. The biggest change will be Increase in the value of other IBM products:

• Higher adoption of Watson.x
• higher adoption of OpenShift
• mainframe modernization → additional revenue from consulting services
• acceleration of growth in the software segment

If IBM's software segment growth accelerates even from 5% to 7-8%, IBM's valuation could shift substantially.

Risks

• integration of cloud products tends to be challenging
• Tug-of-war between talent and key developers
• Customers may prefer Confluent Cloud for hyperscalers
• IBM must maintain speed of development → historically a weakness
• Regulatory limits on data flows in banking

Risks are manageable, but IBM needs to be faster technologically than it has been in the past.

Acquiring Confluent is not just a technology bet. It is a pure financial calculation to enable IBM to grow at a pace that would be unattainable without streaming technology. Confluent generates mostly subscription revenue, has gross margins of over 75%, and belongs to the data infrastructure segment, which is growing between 20-25% per year. This makes it exactly the type of asset that IBM has lacked for years - scalable, high-margin software that complements Red Hat i Watson.x.

Bank of America estimates that Confluent can add roughly $600 million in annual saleswhich represents 2% acceleration in IBM Software growth between 2026 and 2027. If this synergy materializes, IBM will gain a growth trajectory that will bring it closer to the valuation of modern software companies once again. But the key financial logic lies elsewhere: enterprise AI systems are not usable without real-time data. And it is Confluent that will enable IBM to offer an end-to-end solution - from the data layer to inference - that increases the value of every customer across IBM's entire portfolio.

So IBM isn't just buying a company. It's buying higher growth velocity, addressable market expansion, margin enhancement and acceleration of the cross-sell cycle across enterprise clients. In investment parlance, Confluent is not an expense, but a growth multiplier.

• Don't overlook: IBM | Q3 2025: The old giant accelerates and bets everything on AI

Valuation rerating scenario:

• Software segment growth above 10% → IBM Software P/S may rise from 3x to 4-5x.
• AI pipeline expansion due to Confluent → higher FCF multiple.
• IBM will strengthen share in enterprise AI, data infrastructure and hybrid cloud segments → growth phase similar to post Red Hat acquisition.

Investment scenarios

Optimistic scenario

In a best-case scenario, IBM manages to integrate Confluent faster than analysts expect, thereby significantly lifting the value of its software portfolio. The real-time data layer will immediately begin to increase the use of Watson.x, which, according to IBM's historical models, means a jump in enterprise adoption. Customers who have only been using IBM for part of their IT stack will move to comprehensive contracts that include AI, hybrid cloud and data integration. In practice, this synergy is far more powerful than any direct revenue from Confluent - in fact, it is accelerating the growth of the entire IBM Software category, which has the highest margins within the company. If this scenario comes to fruition, IBM can actually strengthen its position alongside hyperscalers, and the market will begin to value the company as a leader in real-time AI infrastructure. In such a situation, investors could see the stock rise 40% to 55% over the next 12-18 months, as IBM's valuation today still does not reflect the potential of modern AI services.

A realistic scenario

In the most likely scenario, the acquisition of Confluent will occur gradually. IBM will be able to organically integrate Confluent into Watson.x and Red Hat, but growth will unfold step by step, without dramatic leaps. The key effect will be to stabilize and slightly accelerate the growth of the software segment - something investors have long been calling for as IBM continues to fall behind the pace of hyperscalers. Real-time streaming will become the standard for IBM's large customers in banking, telecoms and the public sector, but the full synergies will only become apparent within two to three years. The company will begin to gradually improve margins and cash flow because Confluent's subscription model is predictable and highly profitable. In this scenario, the stock could rise 15-30% in 12 months, especially if IBM confirms that it can strengthen its software business faster than in past cycles.

Pessimistic scenario

In a negative turn of events, the integration of Confluent will prove more challenging than IBM anticipated. Integration costs may squeeze short-term margins, while some Confluent customers may stick with cloud-native versions that run on AWS or Google Cloud - which would weaken the cross-sell effect that IBM relies heavily on. In addition, hyperscalers may aggressively discount their alternatives (MSK, Pub/Sub), creating pricing pressure on IBM, which traditionally has not played the role of disruptive price leader. Add to that the slow implementation of real-time streaming into Watson.x, and the acquisition could act as a drag, not a catalyst, in the short term. In that case, investors would likely revise expectations downward and the stock could move in a range of stagnation to a 10-20% decline, especially if IBM fails to demonstrate clear synergies in the first 12 months after the deal closes.

What to take away from the article

• The acquisition of Confluent is exactly the type of move that IBM has been missing for a long time.
• AI without real-time data is a half-baked product - and IBM is gaining an absolutely critical data layer with this acquisition.
• Confluent can add about $600 million a year and accelerate the growth of IBM's software segment.
• This puts IBM in the middle of the hyperscaler war for real-time data and hybrid AI infrastructure.
• For investors, this may be the most important IBM deal in a decade.