That disconnect is now starting to close. After several years of uneven momentum, the company is entering a phase where new products, broader indications, and faster-growing cardiovascular interventions are aligning. Analysts increasingly see a credible path back to double-digit revenue growth, turning what once looked like stagnation into a renewed acceleration story.

Top points of the analysis

• High-margin business with a strong position in cardiovascular medical technologies.

• Return to double-digit revenue growth from new products and indications.

• TMT segment growing at a rate of over 50% year-over-year in constant currencies.

• Very strong balance sheet with a net cash position and high liquidity.

• Premium valuation that stands and falls with growth expectations being met.

Edwards Lifesciences - business, products and market position

Edwards Lifesciences $EW operates in the medical device business with a focus on structural heart disease and critical care therapies. A key pillar of the business is minimally invasive cardiovascular solutions that replace traditional surgical procedures and allow a broader range of patients to be treated with a lower risk of complications. This provides the company with a long-term structural tailwind based on the aging population and the increasing prevalence of heart disease.

The product portfolio is divided into several main areas, with the transcatheter mitral and tricuspid therapies (TMT) segment playing a dominant role. It is here that the company is currently experiencing its fastest growth, driven by a combination of new devices, expanding clinical indications and gradual penetration into additional geographic markets. Alongside this, hemodynamic monitoring and critical care remain important pillars.

The Company's customers are primarily hospitals, specialty cardiology centers and health systems in both developed and emerging markets. The company has a strong presence in the US, Europe and Asia and benefits from long-standing relationships with the medical community, regulatory bodies and healthcare payers. These relationships create high barriers to entry for competitors and stabilize demand across economic cycles.

Management and leadership

The company is led by CEO Bernard J. Zovighian, who has a long career in the healthcare sector and a detailed understanding of the regulated medical device environment. Under his leadership, the company emphasizes long-term investment in research and development, clinical trials, and gradually building a portfolio capable of generating growth over many years.

Management has a long-standing preference for organic growth over aggressive acquisitions. This is reflected in a relatively clean balance sheet, high return on capital and consistent allocation of resources to areas with the highest potential for clinical and commercial impact. Strategic decisions are not focused on short-term profit optimization, but on strengthening competitive advantage.

An important element is a corporate culture that encourages close collaboration with physicians and clinical sites. It is this link that enables the company to respond quickly to market needs, increase the adoption of new technologies and expand indications for existing products.

Goldman Sachs and the return of growth

Goldman Sachs is among the analyst "houses" that have significantly changed their tone toward the company in recent months. While in previous years there was caution due to slowing growth and uncertainty about the next phase of the product cycle, current Goldman Sachs analysis is working with a scenario of a return to sustainable double-digit revenue growth.

Goldman Sachs' key argument is a combination of several overlapping growth layers over the coming years. The bank expects the firm to return to 10% or higher organic revenue growth, with the transcatheter mitral and tricuspid therapies segment to be the main driver. It is here that analysts point to year-on-year growth of around 50%+ in constant currencies, which is not yet fully reflected in long-term market models.

At the same time, Goldman Sachs stresses that growth should not be based on a single product, but on a gradual expansion of indications, new device generation and geographic expansion. This 'layered growth' approach reduces the risk of an investment thesis standing on a single binary clinical outcome. As a result, the Bank considers the growth profile to be more sustainable than in the previous cycle.

From a valuation perspective, Goldman Sachs acknowledges that the stock trades at a premium multiple, but considers this premium defensible when the growth scenario is met. In its models, it works with a target price implying roughly 20-25% upside to the then market price, and sees long-term potential primarily in a combination of profitability growth and maintaining high margins.

An important detail is that Goldman Sachs sees the main risk not in the balance sheet or liquidity, but solely in the execution of growth. Should a return to double-digit growth be delayed or the TMT segment fail to meet expectations, the bank admits pressure on multiples. Conversely, on confirmation of clinical and commercial milestones, it views the current valuation as a transitional phase before further revaluation.

Financial performance: stable base with room for acceleration

In terms of long-term results, the company is on track to generate revenues of around US$5-5.5bn per annum. The year 2024 brought a return to growth, with sales up 8.6% to US$5.44 billion, an improvement on the weaker year of 2023. Gross profit reached US$4.32 billion, corresponding to a very strong gross margin of over 78%.

Operating profitability remains strong, although it has fluctuated in recent years depending on investments in development and clinical trials. Operating profit in 2024 was US$1.38 billion and EBITDA was US$1.72 billion. These figures confirm the company's ability to generate high operating cash even in periods when some of the growth has not yet taken full effect.

Net income in 2024 increased significantly, with EPS reaching $6.98, a year-on-year increase of over 200%. This jump was partly driven by one-off factors, but also shows the strong operating leverage the company has when growth returns.

Balance sheet, liquidity and capital structure

One of the company's greatest strengths is its exceptionally strong balance sheet. The company has a net cash position with net debt deep in negative territory. Total debt is approximately USD 700 million, while cash and current assets far exceed liabilities.

Shareholders' equity is over USD 10 billion and working capital is nearly USD 4.8 billion. A current ratio of 4.0 and a quick ratio of 2.86 confirm a very comfortable liquidity position. This gives management considerable flexibility to fund development, potential acquisitions or share buybacks.

The low leverage also significantly reduces the risk in the event of a macroeconomic slowdown or regulatory changes. The company is not forced to optimize cash flow to service debt, which sets it apart from many other players in the healthcare sector.

Valuation: premium price for quality and growth

From a valuation perspective, the stock trades at a significant premium to the market. A P/E of around 37, a P/S of over 8 and an EV of around $48 billion clearly show that investors are already pricing in a return to higher growth. The market is therefore giving the company the status of a quality growth stock with high confidence in management and the product portfolio.

This valuation is only defensible if the scenario of a return to sustainable revenue growth above 10% per annum comes to fruition. If growth remains in single digits, multiples would be difficult to sustain and the scope for revaluation would be limited.

On the other hand, the exceptional quality of the business, high margins, low earnings volatility and virtually zero balance sheet risk must be taken into account. From this perspective, this is not a speculative growth bet, but a long-term investment in an innovator with very strong fundamentals.

Why growth can accelerate again

A key catalyst for growth is the TMT segment, which is currently growing at around 54% year-on-year in constant currencies. This segment is benefiting from new products, wider adoption and the gradual expansion of clinical indications, which is increasing the addressable market.

The next layer of growth is geographic expansion and gradual penetration into less saturated markets. The company is also investing in physician education and clinical data development, which supports long-term adoption of its technology.

Analysts expect the combination of these factors to enable a return to revenue growth of over 10% annually, with consensus suggesting approximately 22% share price growth potential if this scenario is realized.

Business risks

The main risk remains the high dependence of valuation on growth expectations. Any slowdown in new product adoption, delays in regulatory approvals or weaker clinical data could lead to a rapid valuation correction.

Another risk is competitive pressure from other innovators in structural heart therapies. The healthcare sector is highly regulated and a technological lead is never sustainable.

The political and regulatory risks associated with healthcare reimbursement, particularly in the US, cannot be overlooked. Changes in the reimbursement system may affect the pace of adoption of new technologies.

Investment scenarios

Optimistic scenario - return to growth + revaluation of quality

In the optimistic scenario, the analysts' thesis of a return to sustainable revenue growth above 10% per annum will come to fruition, mainly due to acceleration of the TMT segment, expansion of indications and improved geographic penetration. In this case, revenues could move from the current ~USD 5.4bn towards USD 7-7.5bn over 3-4 years, with high gross and operating margins ensuring disproportionately faster profit growth.

EPS in such a scenario could be steadily in the $9-10 per share range without the need to dramatically increase costs. The market would be willing to maintain or slightly increase a premium multiple, such as a P/E of 35-38, which is historically defensible for high-quality medical device companies.

➡️ Implied share price: $315-380

This scenario is consistent with the view of analysts who see approximately 20-25% upside as conservative today, but concede significantly higher long-term potential with a fully developed pipeline.

Realistic scenario - solid growth but no multiple expansion

In the realistic scenario, the company actually accelerates growth from previous years, but does not fully reach double-digit growth. Revenue will grow more in the 7-9% per annum range, with TMT remaining the driver but other segments holding back the overall momentum.

Profitability will remain high, and EPS could gradually get to $7.5-8.5, but without a dramatic change in the investment story. The market will retain respect for the quality of the business, but will be unwilling to pay an even higher premium than today.

➡️ Implied share price: $250-290

This scenario fits the "buy-and-hold" profile - solid yield, low balance sheet risk, but no price explosion.

Negative scenario - growth disappoints, multiples normalize

In the negative scenario, the growth acceleration turns out to have been short-lived. The TMT segment may be growing, but it cannot compensate for weaker momentum elsewhere in the long term. Revenues return to 5-6% pace, EPS stagnates around $6-6.5.

In this case, premium valuation becomes unsustainable. The market would begin to value the company more as an "ex-growth" medical device company, which historically implies a P/E of 25-28.

➡️ Implied share price: $160-200

Even in this scenario, the company remains financially healthy and profitable - the risk is primarily valuation, not existential.

What to take away from the article

• The firm has very strong fundamentals and a clean balance sheet.

• The growth story is built on innovation and expanding indications.

• The TMT segment is a key driver of future growth.

• Valuation is high and sensitive to meeting expectations.

• It is a quality investment, not a cheap one.

At the start of 2026, the market is teetering between two directions. On the one hand, the technology sector remains supported by long-term trends such as digitization, artificial intelligence, automation and the growth of data infrastructure. On the other, however, the gap between companies' fundamental growth and valuation growth is widening. While the revenues and profits of many companies are growing in the single digits or lower tens of percentages, share prices have shifted to levels that implicitly assume a nearly flawless development in the coming years for part of the market.

The NASDAQ is thus once again entering an environment where much of the index's performance is concentrated in a limited number of titles. It is this concentration that has historically increased market vulnerability. When performance is driven by a narrow group of stocks, sensitivity to macroeconomic surprises, disappointing results or rate changes increases sharply.

Monetary policy developments are also an important factor. Following the December rate cut, the market is moving into a phase in 2026 where further easing does not appear to be a given. This brings back into play the sensitivity to bond yields and to discount rates, which have a strong impact on highly valued equities.

The evolution of the 10-year US Treasury yield from 2020 - Daily Garf (US10Y)

It is in this context that companies whose market price has gradually moved away from not only historical multiples but also realistic growth scenarios are beginning to come to the fore. These are not necessarily bad companies. They are companies with a combination of high expectations, increased media attention and valuations that offer little room for error. For these companies, the market is not asking if, but when and how big the correction will be.

Teradyne $TER

Teradyne is one of the world's largest manufacturers of semiconductor and electronics test equipment. Its systems are a key part of the chip manufacturing chain. Without Teradyne's test platforms, it would not be possible to efficiently manufacture advanced processors, memories or specialized AI accelerators. It is this link to the growth in semiconductor and data center spending that has significantly increased investor interest in the company's stock in recent years.

Teradyne's business model, however, is inherently highly cyclical. The company's revenues are directly dependent on the capital expenditures of chipmakers, which typically increase their investments significantly during technology booms and sharply reduce them during slowdowns. As a result, Teradyne's results have historically been characterized by significant fluctuations. Periods of very strong growth have been repeatedly followed by phases of stagnation or declining sales. This cyclical nature of the business has not changed significantly over the past two years, despite the fact that $TER s share price itself has increased significantly.

From a financial perspective, Teradyne remains a quality company. The stock detail on Bulios shows solid profitability, high gross margins typical of a technology equipment manufacturer (around 20%) and a strong balance sheet with low debt. The company has been generating positive operating and free cash flow for a long time, which allows it to finance development and acquisitions without pressure on its balance sheet. From this perspective, Teradyne does not operate as a financially risky company.

However, the risk is not concentrated in the balance sheet, but in the valuation and expectations. According to valuation, Teradyne trades at 2026 multiples that have historically corresponded to semiconductor cycle peaks rather than the average environment. Both the P/E and EV/EBITDA are well above the firm's long-term averages and imply a scenario in which the current wave of AI infrastructure investment turns into a long-term stable growth trend without major fluctuations. This is where the main valuation tension emerges. According to the Fair Price Index, Teradyne shares are currently trading 50.68% above their intrinsic fair price. Investors are therefore paying a significant premium for them on the stock market today.

The market therefore values Teradyne as a structural growth company rather than a cyclical capital equipment supplier. This means that even a slight slowdown in semiconductor investment, the postponement of some projects or a lower rate of order growth can have a very strong impact on the share price. We could have seen this in 2024, for example, when the stock initially rose, but wrote off over 20% in the second half of the year and fell another 53% in the first half of 2025. Meanwhile, the AI trend hasn't gone anywhere.

Another factor is the concentration of optimism around AI. Much of the current valuation is built on the assumption that the AI investment cycle will not only be strong, but also smooth and growing over the long term. Any sign of a normalisation in the pace of spending, a shift in chipmakers' priorities or geopolitical intervention in supply chains could very quickly translate into a revaluation for a title valued this way.

Meanwhile, while the company remains a quality player in a key segment of the technology value chain, it is at a point where the gap between a good company and a well-priced stock is widening significantly.

Roku Inc. $ROKU

Roku is one of the most visible companies associated with the transformation of the television market. It was also undoubtedly helped to fame by Kathie Wood, CEO of ARK Innovation $ARKK, who has had it in her portfolio for a long time. The company operates the largest independent streaming platform in the US, connecting smart TV manufacturers, content providers and advertisers. Its business model today is built primarily on advertising and on monetizing its user base, not on direct subscriptions. This shift to an advertising ecosystem is a major reason why Roku is often seen by investors as a digital advertising platform rather than a traditional media company.

Streaming continues to take a bite out of linear TV share, ad budgets are shifting to digital channels for the long term, and Roku has direct access to tens of millions of active accounts. At the same time, it is a business that is extremely sensitive to the macroeconomic environment. Advertising is one of the first items companies cut when growth slows, and fluctuations in ad spending have historically translated very quickly into revenue and margins at Roku. From 2022 to 2024, the company didn't make a single dollar and lost money. Even when revenue grew (to $4.1 billion in 2024) it wasn't enough to turn a profit.

Roku's financial profile remains ambiguous in 2026. The stock detail shows that the company has long struggled with consistent profitability despite revenue growth. Operating margins are around the tipping point, free cash flow is volatile and heavily dependent on the advertising cycle. While the company has a solid cash reserve and low debt, giving it some operational flexibility, its ability to generate stable profits over the long term has not yet been fully demonstrated.

Still, Roku's valuation has shifted again to levels that anticipate significant improvement in platform economics. According to the Fair Price Index, the stock is trading at high earnings multiples, and the market clearly expects Roku to be able to not only grow but also expand margins substantially in the coming years. They are currently overvalued by 46.3% according to the index! That said, the stock price includes a scenario of successful monetization of the user base, steady growth in ad spend, and the ability to withstand pressure from large technology platforms.

This is where the main risk is concentrated. Roku does not operate in a low-competitive environment. The streaming and advertising market is dominated by global technology players with significantly greater financial capacity, stronger ecosystems and integrated platforms. At the same time, there is increasing pressure on advertising prices and on the share of revenues that platforms can sustain over the long term.

Roku is therefore an example of a company in 2026 where the optimistic structural story is once again coming into conflict with the realities of the business. The company has a strong position in the streaming ecosystem, but its economics remain sensitive to the cycle, competition and advertising sentiment. If the pace of ad spend growth disappoints or the platform's margin potential proves more limited, the scope for a repricing would be significant. Conversely, the scope for a potential price crash has increased significantly in recent months. The stock is trading today at its highest price since April 2022.

Sirius XM $SIRI

Sirius XM is a special case. Unlike most growth titles, this is not a company built on technology optimism, but one with a relatively stable, highly cash-flow oriented satellite radio and audio content model. It is this stability, high margins and strong ability to generate cash that has been the reason the stock has been in the Berkshire Hathaway $BRK-B portfolio for a long time.

Sirius XM's business is primarily based on paid subscriptions to in-car satellite radio, supplemented by podcasts, advertising and digital audio. The model is defensive on its face - recurring revenue, relatively low sensitivity to the economic cycle, and very high operating margins. The company detail on Bulios shows that Sirius has long generated strong operating cash flow and is one of the companies with a strong ability to return capital to shareholders.

However, there is a structural problem lurking beneath the surface that has already manifested itself in 2024. The core satellite radio segment has been under pressure for a long time. Subscriber numbers have been stagnant or declining, mainly due to changing consumer behavior, the emergence of streaming services, and the gradual transformation of the automotive market. The company's growth in recent years has not relied on organic expansion of its user base, but rather on pricing adjustments, content acquisitions, and cost optimization. Margins in 2024 have declined, and very significantly. They fell from the previous 14% to negative 19%, and the company ended the year in the red for the first time in a long time.

The data from Bulios support this picture. Revenues are growing very slowly or stagnating, while profitability is maintained mainly through cost control and high monetisation of existing customers. At the same time, debt levels are higher than those of the previous two companies, which is not an immediate problem in a stable rate environment, but increases the company's sensitivity to longer-term structural weakening of the business.

The risk of a correction for Sirius XM in 2026 stems not from excessive growth optimism, but from a different kind of mismatch: the market has in recent months begun to re-price the firm as a stable money machine with limited risk, even though the fundamental trend of its core product remains downward. Valuations have moved above levels that historically corresponded to companies with zero growth, implicitly assuming that Sirius will be able to offset the long-term decline of traditional subscribers with new digital formats. The Fair Price Index, which is based on DCF and relative valuations, now signals a high overvaluation of $SIRI stock, by nearly 46%!

But even that hasn't deterred Warren Buffett from buying more shares. Even before his exit, he increased his position in the firm by 4.2% to 37% today. We will have to wait and see how the new management of Berkshire will approach this position.

Sirius XM thus represents a different type of risk than Teradyne $TER or Roku $ROKU. This is not a stock inflated by rapid growth, but a title whose price has been falling for several years, but still not enough to meet the company's intrinsic value. But maybe the market is wrong and Buffett saw something more in this company...

Conclusion

The tech-oriented NASDAQ is entering 2026 at a stage where the gap between company fundamentals and market valuations is beginning to widen again. The index's strong rise in recent months has been driven by a limited number of titles and supported by optimism around long-term technology trends as well as expectations of looser monetary policy. However, this mix also creates an environment in which the market's sensitivity to any disappointment increases significantly. As valuations detach from historical and sector benchmarks, price movements become increasingly dependent on market psychology and the ability of companies to meet extremely ambitious targets.

The common denominator of stocks with higher correction risk today is not poor financial health, but the tension between expectations and reality. Whether cyclical businesses priced for structural growth, platforms whose economics remain immature, or stable companies facing long-term structural change, they all share the same characteristic: limited room for error. In an environment where investors are relearning to distinguish between business quality and share price after years of cheap money, this factor may be the main trigger for increased volatility and corrections in the technology market.

The second fiscal quarter matters less as a snapshot and more as proof of execution. Rising earnings, an improved outlook, and the approaching separation of the Freight business together signal whether cost discipline and network optimisation are translating into sustainable value. For investors, this quarter helps define how FedEx should be valued once the transformation moves from promise to permanence.

How was the last quarter?

FedEx $FDX delivered year-over-year improvement across key metrics in the second fiscal quarter of 2026, despite a difficult external environment. Revenue was $23.5 billion, a solid increase from $22.0 billion in the same period last year. More importantly, however, is the improvement in profitability: operating profit on an adjusted basis rose to US$1.61 billion and operating margin moved to 6.9%, up from 6.3% a year ago.

Net income on an adjusted basis was $1.14 billion and adjusted earnings per share were $4.82, a significant shift from $4.05 a year ago. This growth was driven by a combination of higher revenue from US domestic shipments, stronger margins on International Priority packages and continued structural savings from the transformation program. Conversely, negative impacts came primarily from global trade policy, higher labor costs and increased external freight costs.

From a segmental perspective, two dynamics were clearly separated. The Core Express and Parcel business benefited from network optimisation and higher revenue per shipment, while FedEx Freight experienced a decline in operating profit due to weaker volumes and one-off costs related to spin-off preparations. However, these costs of USD 152 million are seen by the market as transitory and not structurally detrimental to the group's long-term potential.

• Full presentation with results.

Management commentary

In his comments, CEO Raj Subramaniam stressed that the second quarter confirms the workability of the chosen strategy. He believes that FedEx can simultaneously grow, improve efficiency and invest in the long-term transformation of the network, even in an environment of increased volatility. Particularly significant is the ability to improve revenue per shipment without aggressively increasing volumes, which signals a qualitative shift in the business.

At the same time, management openly acknowledges that the environment remains challenging in the short term. Wage pressures, the impact of regulatory changes and uncertainty in international trade will persist in the quarters ahead. That is why management believes it is critical to complete the separation of FedEx Freight and allow both companies to independently optimize their capital structure and strategic priorities.

Outlook

After a strong second quarter, FedEx raised its full-year outlook for fiscal 2026. It now expects revenue growth of 5-6% year-over-year, up from its previous range of 4-6%. Adjusted earnings per share before accounting adjustments for pension plans was raised to $14.80-16.00, while after adjusting for costs related to the Freight spin-off and other one-time items, the firm now targets $17.80-19.00.

At the same time, FedEx lowered its expected pension contributions to $275 million and reaffirmed a $4.5 billion capital spending plan, with an emphasis on automation, fleet upgrades and network efficiency improvements. A key structural highlight of the outlook remains the FedEx Freight separation, which is scheduled to be completed on 1 June 2026 and is set to fundamentally change the profile of the Group.

Long-term results

Looking at a longer time series, it is clear that FedEx is going through a period of stabilisation after several years of pressure on revenues. Total annual revenues have been in the range of US$87-93 billion for the past four years, with fiscal 2025 delivering modest growth to US$87.9 billion. However, the cost structure has improved significantly, particularly at the cost of revenue level, which has fallen by almost 6% year-on-year.

Gross profit grew by more than 22% in 2025, confirming that network transformation and a better service mix are starting to work. Operating profit may have declined year-on-year, but the long-term trend points to stable EBIT in the USD 5-6 billion range. Also important is the systematic decline in the number of shares outstanding, which supports earnings per share growth even in an environment of stagnant revenues.

Shareholder structure

FedEx has a very strong institutional base, with more than 80% of its shares held by institutional investors. The largest shareholders are Vanguard, BlackRock and Dodge & Cox, signaling the long-term confidence of traditional asset managers in the company's transformational story. The relatively high insider stake also suggests an alignment of management interests with shareholders.

Analyst expectations

Analysts currently agree that the key catalyst for FedEx stock in 2026 will not be volume growth alone, but the completion of the FedEx Freight separation and visible margin improvement in the core package business. A number of investment houses expect that post-spin-off, the market will start to view FedEx as an "asset-light" logistics platform with higher returns on capital, rather than a conglomerate with a heavy capital profile.

In the short term, analysts expect results to fluctuate depending on the global business environment, but over the medium term, operating margins are expected to gradually return towards higher single digits. This could mean a significant increase in free cash flow with stable sales, creating room for further share buybacks and an attractive return for shareholders.

US President Donald Trump announced today that the state defense budget will be increased from 1 trillion USD to 1.5 trillion USD per year. The increase is therefore considerable.

Shares in the defense industry are responding with strong gains, led by $LMT, $RTX and $NOC.

Stock prices after the market opened, for example at Northrop Grumman $NOC, rose by as much as 10%. They were thus within reach of a new all-time high. By evening, however, the excitement and the gains had slightly subsided.

In Europe, the defense industry is also still a very "hot" topic. Shares of Rheinmetall $RHM.DE climbed by 1.98% today and are trading just below the 1,900 EUR mark.

We even have a local representative.

Company Czechoslovak Group, which is owned by Czech billionaire Michal Strnad, could be heading to the stock market. It is now being reported that the owner may have released up to 15% of his shares into circulation. The IPO is planned on the Amsterdam exchange.

According to recent estimates, the company could be valued at 820 billion to 1.2 trillion korunas (35-50 billion EUR).

Are you invested in this sector?

What sets this move apart is its regulatory realism. Level 3 systems transfer driving responsibility to the vehicle under clearly defined conditions, a fundamental departure from today’s driver-assistance features. For investors, this signals a strategy built around deployable technology and legal clarity, not speculative timelines—an approach that may prove more sustainable in the long run.

The new electric platform as the technological basis

A key element of the overall strategy is a new electric platform being developed by a dedicated Ford $F team in California. The first model based on this architecture is due to arrive in 2027 - it will be a mid-sized electric pick-up with a target price of around $30,000. It's on this platform that Level 3 technology is set to make its first appearance, though not as standard equipment.

Ford has not yet specified which specific model will get the autonomous software first, nor how much the feature will cost. Management says it is still considering whether it will be a one-time premium or a form of subscription. This suggests that the automaker sees autonomy not just as a technology, but as a long-term source of recurring revenue - similar to the BlueCruise system today.

The business of autonomy: software instead of manufacturing margins

From an investment perspective, it is key that Ford is explicit about finding the right business model. Assistance systems are fast becoming one of the few ways traditional carmakers can increase margins at a time when car prices are coming under pressure from competitors, particularly from China.

Ford already offers a Level 2 BlueCruise system in the form of:

• a monthly subscription of about $50.

• an annual payment of around $495

Level 3 should logically be even more expensive, but also more attractive because it shifts some of the responsibility from the driver to the car company. That makes it a potentially high-value digital product, not just an add-on to the car.

Lidar vs. cameras: Ford goes up against Tesla

On the technical side, Ford has confirmed that it is counting on the use of lidar for Level 3. In doing so, the automaker is clearly setting itself against the philosophy of Tesla $TSLA, whose CEO has long argued that autonomy can only be solved with cameras and software. The result is a paradoxical situation: Tesla has a massively expanded Full Self-Driving system, but formally remains at Level 2, while Ford is heading towards legally recognized autonomy.

WhileLidar increases costs, it also simplifies regulatory approvals and increases confidence in the safety of the system. This is one of the reasons Level 3 is so far limited exclusively to highways, where traffic situations are significantly more predictable than in cities.

Competition: Ford is not alone, but it is betting on accessibility

Ford is entering a space where several players already operate - but each with a different strategy:

• Mercedes-Benz $MBG.WA already offers Level 3 in the U.S. in select markets, but only on expensive models and in limited circumstances.

• General Motors $GM also plans to deploy Level 3 in 2028, starting with the luxury Cadillac Escalade IQ, priced at over $125k.

• Stellantis $STLA, on the other hand, has put its Level 3 program on hold due to high costs and uncertain demand.

So Ford is trying to find a compromise: offer a technology that is not only the prerogative of the luxury segment, but at the same time is not mass deployed without an economic payoff.

Autonomy as an intermediate step towards robotaxis and AI cars

Level 3 is not the end station. For Ford - as for the sector as a whole - it is an intermediate step towards fully autonomous cars and potentially fleets of robotaxis. At the same time, the automaker plans to expand the role of AI directly into the user experience. The upcoming AI assistant is expected to work first as a mobile app and later directly in the car, where it will help with practical tasks - from load planning to image work.

In doing so, Ford is also trying to catch up with the software lead of its competitors, with General Motors already deploying Google Gemini-based conversational AI and other brands integrating their own digital assistants.

What to take away from Ford's announcement

Ford is getting back into the advanced autonomy game after years of hesitation, but it's doing so pragmatically:

• It's not promising full self-driving

• builds on the legally graspable Level 3

• connects technology with a long-term software business

• and targets a wider audience than luxury competitors

For investors, this means that Ford doesn't just want to be a car maker, but is gradually moving towards a software-driven mobile platform. But success will depend on whether it can reconcile safety, price and customers' willingness to actually pay for autonomy.

What makes the platform strategically compelling is not just its scale, but the nature of its data. Users come to Pinterest with ideas they intend to act on, whether related to purchases, lifestyle changes, or long-term planning. In the hands of a company focused on applied AI and intent-driven discovery, that behavioral signal could become far more valuable than advertising reach alone, reshaping how such a platform is monetized.

Top points of analysis

• Pinterest has a unique position between a social network, search engine and e-commerce platform that is often undervalued by the market.

• The company's value lies not primarily in MAU growth, but in data quality and user purchase intent.

• Acquisition speculation shifts the investment story from operational metrics to the strategic value of the platform.

• OpenAI makes sense as a buyer because of synergies in multimodal AI, search and advertising.

• Weaker monetization in the US is a short-term problem, but a long-term opportunity for a stronger owner.

• The stock has significantly underperformed the S&P 500 in 2025, lowering market expectations and increasing return asymmetry.

Why OpenAI would make strategic sense

In terms of synergies, OpenAI is the most frequently mentioned name. Not because OpenAI necessarily needs a social network, but because Pinterest $PINS has what OpenAI acutely lacks: a structured, legally usable database of visual data linked to human intent.

Pinterest has billions of images, pins, and collections that are manually sorted, labeled, and ordered by users. For models focused on multimodal search, visual queries, and shopping assistants, this is extremely valuable training and application material. The combination of OpenAI's conversational interface with Pinterest's visual search would create a product that doesn't exist in full form in the market today - dialogic search inspired by buying, not just information.

Equally important is the advertising dimension. Pinterest is already running a functional advertising business with a growing number of outbound clicks to advertisers. For OpenAI, which is still looking for a sustainable monetization model beyond subscriptions, this would be a ready-made infrastructure that could be further developed in the area of purchase recommendations and performance advertising.

Monetization: a weakness for Pinterest, an opportunity for buyers

One of the main reasons Pinterest has long disappointed investors is slower ARPU growth in the key US and Canada region. While the global user base continues to grow, the North American market is hitting limits, where the company can't match the ad ecosystems built by Meta $META, Alphabet $GOOG or Amazon $AMZN.

However, this is not necessarily a product structural issue, but rather a limitation of the standalone firm. Pinterest doesn't have the data breadth or technology stack to monetize user intent as aggressively and effectively as its larger competitors. This is where a strategic owner could fundamentally change the trajectory.

A case in point is Pinterest's newly launched Performance+ package, which integrates bidding, targeting and budgets into one solution. According to management, retail advertisers are achieving an average 24% higher conversion lift on these campaigns, suggesting that the monetization potential is still there - it just hasn't been fully tapped yet.

Competitive interest: it's not just about OpenAI

Although OpenAI fits the narrative best, it's certainly not the only potential bidder. Historically, names such as Microsoft, Alphabet and Amazon have been mentioned in connection with Pinterest. Each of these players would pursue a different goal - Microsoft could use Pinterest as a data add-on for AI and advertising, Alphabet as a search extension, and Amazon as a shopping inspiration channel.

From an investment perspective, this means Pinterest represents real value. Even if an acquisition does not happen, the mere possibility of strategic interest limits the long-term downside of valuation. If a transaction were to occur, the premium would likely be well above the current market capitalization, which still reflects frustration with growth rather than the value of the data and platform.

Share performance and investment angle

Pinterest shares ended 2025 roughly 11% in the red, while the S&P 500 added approximately 17%. This relative underperformance is key - the market is not currently assigning a strategic premium to the company, but rather assessing it as a slowing second-tier social platform.

However, this is where the investment asymmetry lies. The base case assumes continued gradual growth and margin pressure. But the Bull scenario is based on Pinterest being bought not for MAU growth but for data, intent and infrastructure, factors that common social valuations often undervalue.

Risks that cannot be ignored

The biggest risk remains that management will not be able to convincingly jumpstart growth in key markets and Pinterest will gradually become a "nice to have" addition to advertising budgets. Another risk is the regulatory environment - especially if the buyer is one of the big tech firms, antitrust hurdles could make the transaction significantly more difficult.

Nor can we rule out a scenario where no strategic buyer eventually emerges and Pinterest remains a stand-alone company that will have to manage its transformation on its own.

Two investment stories: a stand-alone Pinterest and an acquisition scenario

For an investor, it is crucial to distinguish between two distinct investment stories, which often overlap in the case of Pinterest but work differently in terms of valuation and market expectations. The first is the evolution of the company as a standalone business, and the second is a scenario of a potential takeover by a strategic player. These two levels need to be viewed separately so that investment considerations are not based solely on acquisition speculation.

In the case of a stand-alone Pinterest, the main issue will be the ability to improve monetisation in key regions, especially in the US and Canada. User growth here is likely to remain limited and investor attention will therefore shift to revenue per user growth, the effectiveness of advertising tools and deeper integration of Performance+ solutions. This scenario assumes a gradual improvement in revenue quality and stabilisation of margins rather than a rapid revaluation of the stock.

The potential takeover scenario represents an additional investment opportunity, not the basis of the entire thesis. In such a case, Pinterest would not be viewed primarily as an advertising platform, but as a strategic asset - a source of data, user intent and technological infrastructure at the intersection of search and e-commerce. Interest from firms like OpenAI would reflect the long-term value of the platform in the broader technology ecosystem, not the short-term evolution of operational results.

Importantly from an investment perspective, the acquisition scenario is not a condition of investment. The underlying logic is that the market today values Pinterest primarily on social networking metrics, while the true value of the company is closer to search and shopping infrastructure. A potential takeover would only accelerate and make this difference more visible.

What could change the market's mind: key catalysts for 2026

For Pinterest's investment story to move from the "interesting option" phase to the actual re-rating phase, there are several specific signals the market will be watching for in 2026. This is not a one-off event, but a combination of operational and strategic impulses that would gradually change the way investors perceive the company.

One of the main catalysts will be the evolution of ARPU in the US and Canada. Any sign of acceleration in monetization in these regions would be a strong signal that Pinterest can better leverage the high purchase intent of users and that Performance+ is not just a short-term experiment, but a structural change to the advertising model.

Another factor is the adoption of Performance+ by large retail advertisers. If this package starts to gain traction with larger budgets and across a wider range of clients, it could change the perception of Pinterest from a complementary channel to a full-fledged performance platform.

A deeper integration of AI into the product itself, rather than just at the level of marketing messages, would also be a significant boost. The market will be watching to see if AI translates into better relevancy of results, higher conversions and longer user interactions with the platform. This is where a company's strategic value would begin to materialize the most.

Last but not least, strategic partnerships can play a catalytic role - even without a full-fledged acquisition. A collaboration with a major technology player in AI, search or e-commerce would signal that Pinterest is not seen as just another social network, but as an infrastructural element of the broader digital ecosystem.

Analyst expectations

UBS maintained its Buy rating and $50.00 price target. The firm reported mixed regional results, noting that while Pinterest faced hurdles due to slowing advertiser spending in the Asia-Pacific region in the second quarter of 2025, the company reported accelerating revenue growth in markets in Europe and the rest of the world. Despite regional challenges, Pinterest maintains strong fundamentals with an "EXCELLENT" financial health score according to analysis, supported by robust revenue growth of 17% over the past twelve months.

UBS slightly raised its revenue estimates for Pinterest by approximately 1% for 2026 and 2027, while raising its EBITDA estimates by 1% and 2% for those years, citing the industry's natural operating leverage.

What to take away from the article

• Pinterest is not a traditional social network, but an infrastructure for search and purchase decisions.

• The market is valuing the company conservatively because it is valuing it on the wrong metrics.

• Acquisition is not a prerequisite for an investment thesis, but it significantly increases the potential upside.

• It will be key to monitor the evolution of monetization, the adoption of Performance+, and management's strategic moves.

• For the long-term investor, this is a title with optionality, not a pure growth or value story.

Why the JOLTS report is a better indicator for the Fed than unemployment itself

At first glance, JOLTS (Job Openings and Labor Turnover Survey) is just another labor market statistic. But it actually tells the Fed things that you won't see in the traditional unemployment rate in time. Unemployment is often a lagging indicator: firms first stop hiring, slow down the pace of hiring, and only later do the layoffs come. JOLTS shows just the leading edge of the cycle, i.e. whether firms want to hire at all, how fast they are hiring, and how willing people are to leave. This is key to inflationary pressures through wages.

Moreover, the Fed has relied heavily in recent years on the concept of labor market tightness, which is often described through the relationship between unemployment and job openings(the Beveridge curve). What matters is not just how many people are out of work, but also how many firms are struggling to hire new employees and under what conditions. Research directly from the US Federal Reserve shows that the link between "vacancies", unemployment and inflation exists, but can change as the Beveridge curve shifts. This is why it is valuable for the central bank to monitor the detailed components of JOLTS.

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From a practical perspective, two indicators are most important to the Fed. First, the number of job openings and second, the quits rate. Vacancies signal how aggressively firms are demanding labor. Quits, in turn, tell us how confident employees are. When people quit more often, they usually believe they will find a better job quickly, and this is usually associated with upward pressure on wages. For this reason, JOLTS can often shift rate expectations even when other indicators look neutral.

December's rate cut was close and the Fed may take a pause in 2026

Investor sentiment toward JOLTS will be even more sensitive this year because of what happened in December. On December 10, 2025, the Fed cut rates by 25 basis points to a range of 3.50%-3.75%, while also highlighting in its own report that uncertainty remains elevated and that risks towards employment have increased.

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But subsequent information showed that this was a decision with significant internal debate. According to information from the Fed meeting, investors learned that some officials considered the move to cut rates to be very close and that there was a dispute within the Fed over whether persistent inflation or a gradual weakening of the labor market was the greater threat.

If JOLTS confirms cooling labor demand, the market may revert to a faster rate cut scenario. If, on the other hand, it shows stabilization, the December rate cut could be the last for a while.

What the latest JOLTS data showed and why the market has turned its attention

December's labor marketdata is effectively made up of several reports, but JOLTS is important because it gives markets a detailed analysis of labor market dynamics. The latest available JOLTS data (for November 2025, released on January 7, 2026) showed that the number of job openings was at about 7.1 million, but down about 885,000 year-over-year. Recruitment was around 5.1 million, and departures around 3.2 million.

These numbers send a clear signal to the markets: the US labour market is not moving into a mode of massive layoffs and firings, but into a mode where companies are not hiring as many new people, while still not firing aggressively. The AP described it as a market where hiring is subdued but layoffs remain low, creating a strange late-cyclical equilibrium.

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Crucially for investors, the job openings-to-unemployed ratio also comes into play in November for the first time in a long time, exactly the type of cooling that the Fed may read as a gradual easing of wage pressures.

Why the current data may change rate expectations now

Timing is important. The market entered 2026 with the idea that there may be a pause after the December cut. For the Fed, the current situation is a paradoxical dilemma: inflation could fall further, but the economy does not yet make a clear case for a quick further cut. Markets are now working more with a scenario of a limited number of rate cuts in 2026, and labour market data are and will be key to this outlook.

For the Fed, the JOLTS data is not an isolated statistic. They are part of a broader framework the central bank is using to assess whether the labor market is still a source of inflationary pressures. In recent years, the Fed has repeatedly emphasized that the key issue is not just the unemployment rate, but more importantly the mismatch between labor demand and supply.

The Fed's internal analysis has long been that high vacancy rates mean that firms are competing for workers, pushing up wages and, in turn, prices. Research published by the Fed's regional offices shows that changes in the number of vacancies and the quits rate have a significant link to wage dynamics and inflation expectations.

The Fed therefore looks at three things in particular for JOLTS.

The first is the trend in job openings: whether labor demand is actually cooling or just stagnating.

The second is the hiring rate, which shows whether firms are actively expanding or just replacing natural attrition.

The third and often most sensitive component is quits - voluntary departures of employees. These are considered one of the best indicators of workers' bargaining power. If they are high, it means that employees believe in the availability of better positions and higher wages.

The current data show just the combination the Fed has long wanted to see: declining vacancies, low hiring, but still relatively low layoffs.

What scenarios are the market considering today

From a financial markets perspective, three basic scenarios are emerging today, all of which will be based on the labour market data.

• The first is a scenario of gradual cooling without recession. Vacancies continue to fall slowly, hiring remains subdued but layoffs do not grow. In this case, the Fed would likely adopt a wait-and-see strategy and hold rates at current levels for an extended period of time.

• The second scenario is one of faster depreciation. If the data started to show an increase in layoffs and a faster decline in vacancies, the market would immediately start pricing in another rate cut. This is where JOLTS would act as a warning signal that would sound before the changes are fully reflected in unemployment.

• The third scenario is a stabilization or even a re-energization of the labor market. If the number of job openings were to stop declining or the quits rate were to increase, the Fed could find itself in an awkward position: inflation would be lower than in previous years, but wage pressures would remain elevated. This would significantly reduce the likelihood of further rate cuts in 2026.

Conclusion

December's rate cut has moved monetary policy into a new phase in which it is no longer about fighting acute inflation, but about delicately balancing between price stability and maintaining economic activity. In this environment, the labour market becomes a key guide. Unemployment alone is not enough for the Fed today. The structure of labor demand, the willingness of firms to hire new workers, and the bargaining power of employees are critical. That's why attention is shifting to detailed reports like JOLTS that reveal changes in market dynamics before they show up in traditional indicators.

In 2026, it will be very important to track these indicators of the real strength of the economy, as it will be these, along with real company results, that will set the markets' future direction.

For investors, this phase is about credibility rather than momentum. Management is prioritising portfolio discipline, wholesale relationships, and structural fixes over short-term margin optimisation. The real question is not whether Nike can post stable sales today, but whether these choices lay the groundwork for a durable brand and earnings recovery over the next cycle.

How was the last quarter?

The second fiscal quarter presented a very mixed picture. The company's revenue came in at $12.4 billion, up 1% year-over-year, while adjusted for currency effects, it remained virtually flat. Thus, at the absolute revenue level, Nike $NKE was able to stabilize performance, but the growth structure reveals continued strains in the business model.

A major positive is the return to growth in the wholesale channel. Revenue from wholesale grew 8% to $7.5 billion, driven primarily by strong demand in North America and renewed collaboration with key retail partners. This shift confirms that the company is gradually correcting its previous overly aggressive bet on direct sales to end customers.

Conversely, the NIKE Direct segment remains a weak spot on the income statement. Direct sales fell 8% to $4.6 billion, with Nike's digital sales falling as much as 14%. Its own brick-and-mortar stores fared slightly better, but even here digital failed to fully offset the shortfall. This development confirms that consumers are more price sensitive and less willing to spend in premium online channels.

Converse's performance was also a significant negative factor. Its sales fell 30% year-on-year to USD 300 million, across all regions. Converse thus continues to emerge as a structural weakness in the portfolio that is not acting as a stabilizer at this stage of the cycle.

• Full presentation with results.

Margins, costs and profitability

Gross margin declined by a significant 300 basis points to 40.6%. The main reasons were higher tariffs in North America and a generally higher cost base associated with supply chain restructuring. This margin pressure was a key theme throughout the quarter and a major drag on a faster return to higher profitability.

Operating costs remained relatively under control. Total selling and administrative expenses increased only 1% to $4.0 billion. However, there is significant overlap within these: marketing and demand support expenses rose 13%, while overhead costs fell 4%. Thus, Nike is clearly prioritising investment in brand and sports marketing over across-the-board savings.

Net profit came in at $792 million, down 32% year-on-year. Earnings per share fell at the same rate, to $0.53. This decline is not a surprise - it is a direct result of lower margins and a conscious decision by management to sacrifice short-term profitability in favor of long-term stabilization.

Management Commentary

CEO Elliott Hill referred to fiscal 2026 as a comeback period, which aptly describes the current phase of the cycle. He said Nike is following the Win Now plan, which includes reorganizing teams, improving relationships with partners, and returning to the brand's athletic DNA. It is placing particular emphasis on the so-called sport offense - that is, product innovation geared toward specific sports and athletes, not just the lifestyle segment.

CFO Matthew Friend stressed that the company is managing the current turbulence without disrupting its financial stability. He said Nike is making the necessary shifts in its portfolio and distribution to return to full growth once the consumer environment stabilises.

Outlook

The company did not provide a detailed quantitative outlook, but management comments suggest that margins and profitability will remain under pressure in the short term. Fiscal 2026 is expected to be primarily a year of transformation, not profit maximization. Key variables will be the continued evolution of tariffs, the pace of recovery in the digital channel and the ability to restart growth in China.

Continued inventory control, down 3% to $7.7 billion, and strong capital discipline are positive signs. Cash and short-term investments of $8.3 billion provide the company with ample room to maneuver.

Long-term results

For Nike $NKE, the long-term financials are primarily a story of a skewed cycle. After a strong post-pandemic period where the company benefited from demand acceleration, high margins and aggressive growth in the Direct channel, the last two fiscal years have seen a significant turnaround. Revenues have virtually stalled since 2023 and are already down nearly 10% year-over-year in 2025, clearly showing that the original growth model has hit its limits.

This break-even is even more pronounced at the level of operating profitability. While Nike generated an operating profit of over $6.5 billion in 2021-2022, by 2025 operating income has fallen to around $3.7 billion. This represents a decline of over 40% in three years, although absolute revenues remain well above pre-pandemic levels. Margin pressure is not coming from a single source, but from a combination of higher production costs, tariffs, inventory revaluation and, most importantly, a change in sales mix.

The experiment with the Direct-to-Consumer strategy has played a crucial role in the long-term trend. In recent years, Nike has systematically prioritised its own digital channels and limited its collaboration with wholesale partners. This approach increased margins in the short term but also weakened brand reach, reduced volumes and increased operating costs. In the long-term numbers, this has translated into stagnating sales and a significant decline in EBIT and EBITDA, which have fallen by tens of percent year-on-year in 2025.

Shareholding structure

Nike remains a strongly institutionally owned company. Approximately 83% of shares are held by institutional investors, with Vanguard, BlackRock and State Street among the largest. This type of shareholder base typically implies a high emphasis on long-term strategy, cash flow stability, and disciplined capital policy, rather than short-term performance optimization.

Analyst expectations

The analyst community has a generally moderately positive to neutral outlook for Nike stock through 2026, although there is considerable uncertainty about revenue and margin growth in the near term. Consensus from multiple sources indicates that the average 12-month price target is around $77-83, with high estimates as high as $120 and low estimates as low as around $35-38, reflecting differing views among institutional analysts regarding the pace of brand recovery and pressure on profitability.

The carrier ordered 110 new aircraft, of which 105 are 737 MAX 10s and five are widebody 787-10 Dreamliners. This is the largest order in Alaska’s history and a strong signal that airlines once again believe in long-term demand and Boeing’s ability to deliver a modern fleet.

This order also doesn’t come out of nowhere. In recent months Boeing has been securing large contracts, especially for the 737 MAX and 787 models, and is trying to stabilize production rates after years of problems with quality, certification, and reputation. The return of trust from major airlines is crucial—not only because of the volumes themselves, but mainly because the backlog and cash flow from these programs will decide whether the company can return to sustainable profitability.

From an investment perspective, we’re at an interesting crossroads. Boeing still faces tough execution challenges and regulatory pressure, but large orders suggest the cycle may slowly be turning.

Do you take these orders as evidence that Boeing is truly rising from the bottom, or do you think it’s still too early to talk about a turnaround and the biggest risks are yet to come?

Yet Discord is not a typical social network. Its scale, engagement depth, and role as infrastructure for digital communities position it differently from legacy platforms. For the market, an eventual IPO would serve less as a valuation event and more as a signal: whether investors are ready to back the next generation of social platforms built around participation rather than pure reach.

What is Discord and why is its business unique

Discord started in 2015 as a voice communication tool between gamers, but has gradually transformed into a universal community platform. Today, it combines text chat, voice, video, livestreaming and community management in one environment. Unlike traditional social networks, it is not built on a public feed, but on closed servers that are managed by the users themselves.

This model is a key differentiator. Discord is not a platform primarily focused on advertising and algorithmic content distribution, but rather an infrastructure for digital communities. It is used not only by gamers and streamers, but also by developers, crypto-communities, educational projects, brands and fan groups. The company reportsmore than 200 million monthly active users, making it one of the largest communication platforms outside of traditional social networks.

Monetization: a strong community but a complex path to profit

One of the main question marks of a potential IPO is the monetisation model. Discord has long built primarily on the Discord Nitro subscription, which offers users higher quality streaming, more storage, better personalisation and other features. In addition, the company is testing sales of digital add-ons and community creator tools.

Unlike its competitors, Discord has so far avoided massive advertising, which strengthens user loyalty but also complicates the path to quick profitability. For investors, this presents a classic dilemma: a strong and engaged user base on the one hand, the question of long-term margin and scalability of revenue on the other. An IPO could increase the pressure for more transparent financial results as well as the search for new revenue streams.

IPO market in 2025: better sentiment but still selective

Discord's intention comes at a time when the US IPO market is gradually reopening after nearly three years of stagnation. The year 2025 has brought several larger IPOs, but has also shown that investors are significantly more cautious than during the tech boom of 2020-2021. Volatility associated with trade tariffs, political uncertainty and the correction in AI-related stocks are dampening the willingness to bet on growth stories without a clear path to profit.

For Discord, this means that a potential IPO will not be about hype, but about a credible business story. The company will have to convince the market that its community model can generate steady cash flow without destroying the user experience that underpins its popularity.

Strategic reasons to go public now

Confidential filing gives Discord flexibility. The company can test investor interest without publicly committing to a term sheet or valuation. Going public would also open up access to new capital that could fund further development of the platform, investments in infrastructure, security or potential acquisitions.

At the same time, an IPO would provide liquidity to early investors and employees, a logical step after nearly a decade of the company's existence. But it is also a strategic decision for Discord's management: becoming a public company means increased oversight, regulatory demands and pressure for results, which may not be in line with the platform's long-term community DNA.

What to watch next

The key will be whether Discord actually proceeds with a public listing or sticks with non-public status. If an IPO does take place, investors will focus primarily on the pace of revenue growth, cost structure, and signals as to whether the company can gradually increase monetization without user churn. Discord may be one of the most interesting technology stock market entries of recent years, but it is also one of the most analyzed.

For investors, the key question is not whether the business generates cash, but who ultimately controls it. Strong operations lose much of their appeal if debt absorbs most of the upside. In this case, valuation alone is a poor guide unless it is weighed against balance-sheet constraints and refinancing risk.

Top points of the analysis

• The operating business is stable, diversified and generates high EBITDA over the long term.

• Extreme financial leverage and a weak balance sheet remain key issues.

• The low market valuation primarily reflects debt, not the collapse of operations.

• Any fall in rates or improvement in refinancing could lead to a significant revaluation

• Investment is a test of patience rather than a growth bet.

Caesars Entertainment $CZR - business, brands and geographic reach

Caesars Entertainment is one of the largest operators of casinos, hotels and entertainment resorts in the US. Its portfolio includes iconic properties on the Las Vegas Strip, a strong regional network of casinos across the United States as well as digital assets in online betting and iGaming. This combination provides some diversification across regions and customer types.

Key competitive advantages include established brands, loyalty programs and the ability to monetize customers across multiple channels - lodging, gaming, entertainment, dining and online platforms. The company is not a pure bet on Las Vegas, but on broader consumer demand for entertainment, which has helped mitigate regional fluctuations in the past.

On the other hand, it is a capital-intensive business with high fixed costs. Hotels, casinos and resorts require ongoing investment in maintenance, upgrades and marketing. This increases operational stability but also limits flexibility in times of weaker demand.

Products, services and customers

Physical gaming operations remain the mainstay of revenue, where the company generates revenue from gaming, hotel services and ancillary activities. This segment is relatively stable, particularly in regional markets where competition is more limited and clientele more local.

The digital segment represents a strategic but so far less profitable part of the business. Online betting and iGaming have long-term growth potential, but also entail high marketing costs and strong competition. For the company, it is more about defending market position than an immediate source of profitability.

The customer base is broad - from tourists and high-rollers to regional clients. It is regional diversification that has proven to be a stabilizing element in recent years, while the Las Vegas Strip faces higher volatility and sensitivity to price and international tourism.

Management and corporate governance

The company is headed by Thomas Robert Reeg, who has led the company through a challenging period of consolidation and deleveraging. His role is not about expansion at any cost, but about stabilizing cash flow, refinancing liabilities and gradually reducing risk.

Management's long-term focus is on operational efficiency, portfolio optimization and limiting capital-intensive projects. This translates into relatively stable EBITDA despite fluctuating revenues and a challenging macroeconomic environment.

On the other hand, it must be said that management's room for manoeuvre is limited. High debt means that most strategic decisions have to be subordinated to creditors and refinancing conditions, not to maximising shareholder value in the short term.

Financial performance over time: what the numbers really say

Looking at revenues over the past four years, it is clear that the company peaked in 2023, when revenues exceeded $11.5 billion. 2024 brought a slight decline, but that in itself does not indicate a structural problem. Operating income remains well above the levels of the post-pandemic years.

Operating profit and EBITDA show a long-term upward trend, although the rate of growth is slowing. EBITDA of around USD 3.6 billion confirms that the business as a whole is capable of generating significant cash. The problem arises at the net profit level, where interest, depreciation and amortisation and tax effects have a negative impact.

The net profit is extremely volatile and in 2024 it is back in the red. This is not a result of explain collapse of operations, but evidence that the capital structure significantly distorts the bottom line for shareholders. Thus, an investor cannot just look at sales or EBITDA, but must look at the entire value stream all the way to equity.

Cash flow and the ability to create value

Operating cash flow remains relatively stable and high in absolute terms. The company is able to generate billions of dollars a year before investments and financing. This confirms the quality of the underlying business and its resilience to short-term fluctuations.

However, after interest and capital expenditures are paid, there remains limited room for rapid debt reduction or return of capital to shareholders. Free cash flow is positive, but much of it is absorbed by debt servicing. This is a key limit of the investment thesis.

Until this ratio changes fundamentally, shareholder value remains secondary to the needs of creditors. From this perspective, time is the investor's main ally and enemy - the company must last long enough in an environment of stable revenues and declining rates.

Balance sheet and financial leverage

Total debt exceeds $25 billion, while equity is around $4 billion. Net debt to EBITDA is approximately 6.7 times, a level that severely limits the company's flexibility and increases its sensitivity to macroeconomic shocks.

An interest coverage ratio below 1 indicates that the company is operating on the edge of comfort. Any negative fluctuation in operating profit or increase in interest expense can quickly deteriorate financial stability.

A positive factor is the maturity structure, which reduces short-term liquidity pressure. The firm is not immediately at risk, but in the long run remains highly dependent on the capital markets and their willingness to refinance debt on acceptable terms.

Valuation

A market capitalisation of around USD 5 billion with an enterprise value approaching USD 29 billion clearly shows that the market is pricing primarily debt risk. Low P/S or P/FCF multiples may look attractive at first glance, but are misleading without context.

Low valuations are not an expression of lack of confidence in the operating business, but the price of balance sheet uncertainty. The market implicitly assumes that much of the future value will be consumed by debt servicing, not equity growth.

However, any shift in refinancing, falling rates or faster deleveraging could lead to rapid repricing. Equities thus represent an asymmetric bet where a small change in macro conditions can have a significant impact on valuations.

Regulation and partial growth catalysts

Regulatory changes in Nevada that reduce the role of intermediaries in data and betting content distribution may slightly improve margins in the racebook segments. The impact on overall results is likely to be limited, but the trend is positive.

Regional gaming markets show different developments. While the Las Vegas Strip is facing short-term pressures, regional locations are experiencing growth. Diversification is thus fulfilling its stabilising role and reducing overall revenue volatility.

Another potential catalyst is the consolidation of the digital segment. If the company can reduce marketing costs and improve the monetization of online platforms, this segment can become a more significant contributor to cash flow.

Business risks

The main risk remains the combination of high leverage and cyclicality of consumer spending. Long-term higher rates, a recession or a decline in tourism can quickly impair a company's ability to generate cash.

Another risk is the regulatory environment, which can vary across states and segments. Any tightening of gambling or online betting rules could negatively impact growth ambitions.

Competitive pressures cannot be overlooked, especially in the digital segment where the company faces aggressive players with higher marketing budgets and lower fixed costs.

Looking ahead: where the story may be breaking

The company's near-term outlook is closely tied to the macroeconomic environment, particularly the evolution of interest rates and consumer spending in the US. Management does not anticipate explosive revenue growth, but rather a stabilisation at a high level and a gradual improvement in operational efficiency. Therefore, market expectations are set relatively low, which reduces the risk of negative surprises but also limits the short-term growth story.

In the medium term, the focus shifts to refinancing and optimising the capital structure. The firm openly communicates that the main objective is not expansion, but improving the quality of cash flow and reducing leverage. If EBITDA can be maintained around current levels while gradually reducing interest costs, the investment story will begin to shift from defensive to neutral.

The long-term outlook is binary. Either the company will be able to use time, stable operations and macro relief to reduce debt, or high leverage will become a permanent structural problem. It is this asymmetry that makes the title attractive to a certain group of investors, but also makes it unsuitable for conservative capital.

Where a company can grow or positively surprise

The first source of positive surprise may be a faster-than-expected decline in interest rates. Given the size of the debt, even a relatively small change in interest rates has a disproportionately large impact on net income and free cash flow. This is a factor that is often underestimated by the market, as it is not reflected in earnings but only deep in the income statement.

The second potential catalyst is a further shift in the regulation of the gambling and betting market. Changes such as the deregulation of distribution models in Nevada, while not in themselves changing corporate results, are gradually improving the economics of each segment. If similar moves were to spread to other jurisdictions, this could cumulatively increase margins.

The third factor is the rationalization of the digital segment. If management can reduce marketing spend, improve customer retention and increase monetisation, the online part of the business can turn from a long-term burden into a relevant contributor to cash flow. This would be a qualitative shift in the investment story.

Investment scenarios

Optimistic scenario - turning debt into leverage

In the optimistic scenario, there is a gradual decline in rates, stabilization of the macro and maintenance of EBITDA above $3.5 billion. The company refinances key portions of the debt on significantly better terms, bringing interest coverage above comfort levels. Free cash flow is beginning to increase not only in absolute terms but also relative to market capitalization.

The market ceases to view the company primarily as a highly leveraged problem and begins to value it as a stable operating business with a solvable balance sheet. The risk premium compresses and the stock can undergo a significant revaluation without having to significantly increase sales or margins.

Realistic scenario - the business works, value is released slowly

In the realistic scenario, rates remain relatively higher for longer and refinancing is gradual. EBITDA remains stable but there is limited scope for rapid deleveraging. The company is generating cash, but its main challenge is to maintain the status quo and prevent a deterioration of the balance sheet.

The stock moves in a broader range in this scenario with no clear trend. Investing becomes a strategy based on patience and waiting for macro momentum rather than a growth story. Returns are possible, but spread out over time and associated with high volatility.

Negative scenario - debt remains a structural problem

In the negative scenario, higher rates persist, consumer demand weakens and EBITDA begins to decline. Refinancing becomes more expensive and interest cover deteriorates further. The company is forced to take defensive steps such as selling assets, reducing investments or restructuring liabilities.

In this case, the low valuation proves justified and shareholder value may be further eroded. Yet even this scenario would not mean the collapse of the business - rather, it would confirm that creditors, not shareholders, remain the primary beneficiaries of value.

What to take away from the article

• The operating business is sound, but the capital structure is extremely constraining.

• Low valuations reflect debt, not business collapse.

• Investment is primarily a bet on time, rates and refinancing.

• Return potential is asymmetric, but risk remains high.

• The stock is only suitable for investors who understand the role of leverage.

What is your opinion on $NU?

The year 2026 begins with a significant selection bias in equity markets. While some investors continue to bet on technology and AI, another part of the market is gradually returning to more traditional businesses. This means to the stability of earnings, the resilience of demand and the ability of companies to generate cash across the economic cycle. It is in this environment that consumer-defensive companies whose business is based on everyday products are coming to the fore again.

The macroeconomic environment remains indecisive in 2026. While inflation has slowed from the peaks of previous years, food, energy and service prices have stabilised at higher levels, keeping pressure on household budgets. Consumers are more cautious, more price conscious and spending less on surplus goods. This shift in consumer behaviour has traditionally favoured companies operating in the staple food, packaged goods and simple protein segments - where demand has fallen only minimally even in a slowing economy.

At the same time, a shift in the investment mindset of retailers is also evident. After several years of markets being driven by valuation expansion and expectations of future growth, investors are increasingly returning to questions of return on capital, margin stability and cash flow sustainability in 2026. In this regard, the consumer defensive sector offers a combination that is relatively rare in today's environment: low valuations, solid balance sheets and the ability to pass some of the cost pressures on to customers through higher prices.

Another important factor is that many defensive titles have been overlooked in recent years. While capital has flowed primarily into technology and growth stocks, consumer companies have remained on the sidelines even though their financial performance has remained relatively stable. This has led to a situation where parts of the sector are trading at multiples that historically correspond to recessionary periods rather than an environment where margins and demand are relatively resilient. And all of the stocks in today's analysis are well below their Fair Price as measured by the Fair Price Index.

Cal-Meine Foods $CALM

Cal-Maine Foods is a specific title in terms of consumer defensiveness. Unlike traditional food concerns that have broad brand portfolios, $CALM is essentially a pure bet on the U.S. egg market. It is this narrow specialization that causes the company's results to fluctuate significantly from year to year, but it also gives it a strong position in a segment where demand is among the most resilient in the entire food industry. Eggs remain a staple item in the consumer basket regardless of the economic cycle.

Cal-Maine's business model is based on vertical integration. The company controls the entire chain from the rearing of laying hens to distribution to retail and grocery chains. This allows it to respond flexibly to price fluctuations, optimise costs and to some extent pass on input growth to customers. In an environment where consumers are more price-sensitive but at the same time cannot simply eliminate staple foods from consumption, this model has an important stabilising function.

From a financial perspective, Cal-Maine has long been one of the companies with a very strong balance sheet. Bulios's low debt and high cash-to-assets ratio are particularly evident in the stock detail, giving the company considerable flexibility during periods of price fluctuations. In recent years, the company has been able to generate strong operating cash flow, which has allowed it not only to finance investments in capacity and biosecurity, but also to pay exceptional dividends in periods of high profitability. Moreover, Cal-Maine's dividend policy is variable and directly linked to earnings, making it more of a capital return vehicle than a stable dividend in the classic sense. The current payout ratio is 6.97%.

The company's profitability remains cyclical but structurally supported in 2026. Cal-Maine's long-term operating margins have been high (28% in 2024) in periods of strong pricing and a very low cost of capital. It is this combination of low debt, high cash and the ability to generate cash flow quickly that explains why the company does not look financially vulnerable even in the face of weaker sector sentiment. For investors, it is important that the company is not dependent on external financing and can move relatively smoothly through the less favourable phases of the cycle.

From a valuation perspective, Cal-Maine ranks as a stock with relatively low earnings multiples and a conservative asset valuation. While the market clearly reflects volatility in earnings and sector risk in the share price, it also values a company that has minimal debt and long-term positive free cash flow. According to the fair price on Bulios, which is calculated based on DCF and relative valuation, the stock is currently trading 60% below its intrinsic value!

Cal-Maine's key risks remain primarily biological and regulatory. An outbreak of avian flu, changes in breeding standards, or significant fluctuations in feed prices could materially impact results in the short term. Still, the company enters 2026 as a business with a high degree of financial resilience, a strong position in the core food segment and the ability to generate cash beyond the peak of the cycle. It is this combination that explains why Cal-Maine is often viewed as an undervalued defensive title that the market has long valued based on volatility rather than actual financial strength.

General Mills $GIS

General Mills is one of the most classic representatives of the consumer defensive sector. A portfolio of global brands, a strong distribution network, and long-standing relationships with retail chains give the company a stable position in segments where demand is slow to change. In 2026, General Mills' investment story will be less about volume growth and more about the ability to maintain margins, optimize costs and generate cash in an environment where consumers are carefully weighing their spending.

The company's business model is built on a broad range of food products, from breakfast cereals and snacks to prepared meals and pet food. This diversification reduces dependence on one particular segment and allows the company to smooth out fluctuations in demand. It also creates room for incremental adjustments in pricing and packaging, where General Mills has faced rising input costs in recent years. Pricing power and brand loyalty are among the main reasons the company has been able to maintain relatively stable operating margins even in an environment of higher inflation.

General Mills' financial profile in 2026 is typical of a defensive company. The stock detail on Bulios shows long-term stable profitability, solid operating margins, and predictable operating cash flow. The company generates enough cash to fund operations, investments and shareholder returns. Debt remains manageable (albeit higher) and is supported by stability in earnings, reducing the risk of financial stress during an economic slowdown.

One of the key elements of General Mills' investment profile is the dividend. The company is one of the established dividend payers and has long been viewed as an income-oriented title. The dividend yield itself, and especially its coverage from free cash flow, which remains relatively comfortable, is important to shareholders over the long term. In the coming year's environment, where parts of the market remain highly sensitive to interest rate changes, this company's stable dividend stream represents a significant element of return. The current annual dividend of $GIS is 5.57%.

General Mills' valuation on Bulios is at levels that historically correspond to cautious sentiment rather than an environment in which the company continues to generate steady earnings. The market is pricing the stock to reflect pressure on consumer budgets, slower volume growth, and private label competition. At the same time, this caution creates room for even slightly better margin or cost developments to lead to a gradual reassessment of valuation. The stock has fallen 52% over the past 2 years and is thus trading (according to the Fair Price Index) 55% below its fair intrinsic value.

The main risks to General Mills include a long-term consumer shift to cheaper alternatives, retailer pressure on prices, and input volatility. However, the company enters 2026 as a business with global reach, strong brands and the ability to generate cash even in a weaker growth environment. It is this combination that explains why General Mills is often seen as an undervalued defensive title whose stability is largely taken for granted by the market.

Hormel Foods $HRL

Hormel Foods is one of America's traditional food companies whose business is firmly tied to basic consumption. However, the company's current position is more complicated than most defensive titles. The company is in a period of transformation as it seeks to gradually shift its portfolio toward higher value-added products and more stable margins, while its core segments, particularly meat and animal protein, remain sensitive to commodity price and cost trends.

Hormel's business model is built on a broad portfolio of brands including meat products, prepared foods, peanut butters, protein products and foodservice. This breadth provides the company with some protection against fluctuations in individual segments, but it also makes it difficult to increase margins quickly. Management is now focusing primarily on optimizing the portfolio, developing more premium products and gradually reducing exposure to the segments with the lowest return on capital.

From a financial perspective, Hormel remains a relatively conservatively managed company despite more volatile profitability, debt and long-term positive operating cash flow in recent years. The company is not financially vulnerable, although its operating margins are under pressure. This margin pressure is one of the main reasons why Hormel shares are trading at lower multiples than they have historically. It's also why its price has declined 58% since 2022, when it reached an absolute peak at $55.

The problem for investors is mainly the long-term declining margins. The company's margins have halved since 2021 from around 8% by 2025. While management is trying to work on a remedy, its efforts are not yet translating into the real results investors need to start investing in the company again. But for those with a longer investment horizon and a detailed analysis of the company and an understanding of its business and aspirations, this could represent an interesting opportunity. According to the Fair Price Index, the company is now valued 24% below its fair price due to the decline over the past few years.

Hormel has also long been known as a dividend title. The company is one of those with a very long history of regular dividend increases, making it a favorite for income-oriented investors. Not only the dividend yield itself can be tracked on Bulios, but more importantly the payout ratio and its relationship to free cash flow. The dividend yield is currently 5.1%. In 2026, the key question for investors will be whether the company can stabilise margins sufficiently to remain able to combine a dividend policy with business transformation financing.

The market's current share price reflects cost pressures, slower growth and greater uncertainty about margins returning to long-term averages. But it also means that expectations are relatively low. If the company can demonstrate that transformational steps lead to more stable profitability, this discount may gradually narrow.

Hormel's main risks remain linked to commodity price volatility, sensitivity to agricultural cycles and strong competition in the food sector. Yet it enters 2026 as a company with a long history, a strong distribution network and a portfolio of products that are among the staple items in the consumer basket. It is this combination that makes Hormel a title that is often overlooked by the market, despite offering a potentially interesting balance between stability and valuation.

Conclusion

The consumer defensive sector enters 2026 in a position that is rather exceptional in equity markets. While much of the market remains sensitive to interest rate movements, the business cycle and technology-related expectations, consumer staples firms continue to operate in an environment of relatively stable demand. This creates a contrast between fluctuating sentiment and the actual performance of companies whose sales and cash flow are much less dependent on macroeconomic fluctuations.

At the same time, it is evident that stability has become a less attractive feature for the market than growth potential in recent years, leading to a long-standing overlooking of part of the defensive sector. As a result, valuations are starting to look attractive to many investors. In 2026, the sector is portrayed as a market place that may well offer higher valuations than currently overpriced technology titles.

For investors, the appeal lies in predictability. Membership-driven revenue, disciplined margins, and steady cash generation create resilience even when broader consumer trends soften. Costco’s growth story is not about acceleration, but about durability—an increasingly valuable trait in a late-cycle consumer landscape.

How was the last quarter?

Costco $COST grew total revenue to roughly $67.3 billion in the first fiscal quarter of 2026, with merchandise sales alone up just over 8%. Growth was primarily driven by higher traffic and solid comparable sales growth across regions. Another positive signal was the very strong growth in digitally supported sales, which grew significantly faster than brick-and-mortar stores.

Membership fees reaffirmed their role as a key stabilising element of the business. Membership revenues increased year-on-year and remain highly profitable, allowing Costco to keep merchandise prices low while generating a stable operating profit. It is this model that has been the company's long-term competitive advantage.

Net income in the quarter was approximately $2.0 billion and earnings per share rose to $4.50. Results were partially impacted by a tax benefit related to employee stock-based compensation, but even after adjusting for this, performance remains very solid. Operating profit grew at a pace consistent with sales growth, confirming that Costco is managing costs even as it expands its store network.

• Full presentation with results.

Management commentary

CEO Ron Vachris ' comments highlighted steady customer behavior and continued emphasis on member value. According to management, Costco is benefiting from consumers' preference for retailers with clear pricing policies and trusted brands during a period of heightened uncertainty. It was also noted that the company does not see a significant deterioration in customer behavior, even in discretionary categories.

Management also confirmed that it is continuing to open new warehouses in a controlled manner and invest in logistics and digital infrastructure. The goal is not to maximize short-term profit, but to strengthen the long-term relationship with members and improve operational efficiency.

Outlook

Costco does not provide a detailed quarterly outlook, but management comments suggest cautious optimism. The company expects continued solid revenue growth driven by a combination of new stores, steady comparable sales and growth in the membership base. Consumer demand and cost inflation, particularly in wages and transportation, remain key drivers.

From an investor perspective, it will be important to watch whether Costco can maintain its membership growth rate and whether digital sales remain a strong complement to the traditional warehouse model.

Long-term results

Costco's long-term performance shows a clear upward trend. Revenues have increased steadily over the past few years and the company has been able to grow even in periods when the retail industry has faced significant pressures. The rate of growth is not extreme, but it is very consistent, which is key for a company of this size.

Operating profit and pre-tax profit have been rising over the long term, suggesting that Costco can scale its model without significantly impairing efficiency. Net profit has also increased gradually, although the rate of growth fluctuates depending on cost factors and tax effects. Importantly, the company maintains a strong ability to generate cash.

From a debt perspective, Costco remains very conservative. Debt is relatively low relative to the size of the company and is well covered by operating cash flow. Thus, the balance sheet provides ample room for further expansion, warehouse investment, and potentially increasing returns to shareholders.

News

Costco has continued to expand its warehouse network and strengthen its online sales channels in the recent period. At the same time, the company's long-standing Kirkland private label remains one of its primary tools for maintaining member loyalty and differentiation from competitors. International expansion has also played a significant role, particularly in Asia and Europe, where Costco is gradually increasing its presence.

Shareholding structure

Costco's shareholder structure is predominantly institutional. Approximately 72% of the shares are held by institutional investors, dominated by Vanguard Group, BlackRock, State Street and Geode Capital. The proportion of insiders is very low, which is common for an established company with a broad shareholder base. The shareholder structure suggests strong long-term capital confidence.

Analysts' expectations

Analysts view Costco as a quality defensive title with long-term stable growth. The stock's valuation has traditionally been higher than most retail competitors, reflecting confidence in the business model, stable cash flow and strong brand. The company's ability to sustain membership growth and manage cost pressures without disrupting pricing remains a key theme going into the next few quarters.

What matters for investors is the strategic direction. Nvidia is positioning itself as the architect of how artificial intelligence is built, deployed, and embodied in the physical world. By linking compute, data, and real-world interaction into one platform, the company is moving from enabling AI demand to structurally shaping it.

Ruby: the computational foundation for the next generation of AI

At the heart of the entire strategy is the new Rubin computing platform, which Nvidia has introduced as a direct successor to the Blackwell architecture. What's crucial is not just the increased performance, but the change in philosophy: Rubin is designed for agent-based AI, advanced reasoning and mixture-of-experts models, i.e. systems that decide for themselves which "expert" should tackle a given task.

The combination of one Vera CPU and two Rubin GPUs in a single superchip greatly increases efficiency in both training and inference. Nvidia $NVDA claims that Rubin will enable:

• Reduce the number of GPUs needed to train the same models by up to four times.

• Reduce inference costs by an order of magnitude due to better token handling

• scale extremely large models with trillions of parameters more efficiently

But Ruby is not just a chip. It's an entire ecosystem that includes new network elements, DPUs, NVLink 6, and the ability to build massive systems like NVL72 and DGX SuperPODs. It is these systems that are now being bought by hyperscale players like Microsoft $MSFT, Google $GOOG, Amazon $AMZN and Meta $META at volumes in the tens of billions of dollars per year.

Humanoid robots: when Ruby leaves data centres

https://www.youtube.com/embed/x5lFw6nz3t0?rel=1

The fundamental shift of CES 2026 is that Nvidia has shown where it wants Ruby's computing power to go. One major area is humanoid robotics - and not as a futuristic demonstration, but as an industrial tool.

Nvidia isn't trying to make its own humanoid. It's repeating a strategy from the AI cloud: it wants to be the platform on which robots are created. He adds:

• AI models capable of perception, planning and decision making

• simulation environment for risk-free training

• hardware and edge AI for real-time control

Companies such as Boston Dynamics, Caterpillar, LG Electronics and NEURA Robotics are using Nvidia technology to develop robots to operate in environments designed for humans - factories, warehouses, logistics or services.

The key argument is economic: a humanoid robot does not require rebuilding infrastructure. It can use the same tools, move in human space and adapt to new tasks. This significantly reduces the barriers to deployment compared to conventional industrial robotics.

Autonomous systems and physical AI

The extension of AI models for autonomous driving and so-called physical AI fits into the same strategy. Nvidia has introduced new models for self-driving vehicles that use reason chaining and context work - a similar principle to what Rubin is targeting for advanced language models.

Importantly, Nvidia is increasingly relying on virtual training. Whether it's robots or cars, the goal is to teach systems in simulation millions of scenarios, before releasing them into the real world. This reduces costs, risks and regulatory barriers.

One strategy, not three separate stories

Ruby, humanoids and autonomous systems are not separate topics. They are three layers of one strategy:

• Ruby provides extreme computing power

• the software stack enables training and inference

• physical AI (robots, cars, machines) creates a new source of demand

In doing so, Nvidia is trying to address a key investor question: what comes after data centers? The answer is: moving AI from screens to the physical world.

Investor insight: why CES 2026 is more important than the chip itself

In the short term, Rubin is likely to maintain Nvidia's lead in AI infrastructure. But in the long term, something else is more important: Nvidia is systematically building its position as an indispensable layer for physical AI.

If humanoid robots and autonomous systems make even partial inroads in industry, logistics or services, a new investment cycle will emerge - and one that will again require:

• computing power

• network infrastructure

• software for training and simulation

These are precisely the areas where Nvidia has the strongest market position today.

The underlying shift is structural. Demand is no longer driven primarily by consumer electronics, but by long-term capital investment into AI, high-performance computing, and hyperscale data centers. These end markets follow different rules: longer planning horizons, higher barriers to entry, and greater tolerance for premium pricing. That change helps explain why higher valuation multiples are starting to look sustainable rather than excessive.

Top points of the analysis

• TSMC $TSM is shifting from a cyclical semiconductor title to a digital economy infrastructure company.

• The upgrade from Goldman Sachs reflects a structural change in demand, not short-term sentiment.

• Massive capital expenditures are reinforcing the technology edge and barriers to entry.

• The firm is uniquely positioned against AI leaders and has strong bargaining power.

• Higher valuations may be the new normal, not the exception.

Why Goldman Sachs is raising the target price by 35% and why it's not excessive

Goldman Sachs' increase in target price to 2,330 Taiwan dollars ($74) $GS is not based on a one-time improvement in outlook, but on the belief that AI represents a multi-year investment cycle that fundamentally changes demand for the most advanced manufacturing processes. Goldman's analysis assumes that high-end node order volumes will grow faster than the overall semiconductor market and that TSMC will benefit disproportionately from this trend.

A key argument is TSMC's dominance in the production of high-end chips for customers such as Nvidia $NVDA and Apple $AAPL. In the AI accelerator and advanced logic chip segments, there is virtually no full-fledged alternative today that can offer the same combination of yield, volume and technology reliability. This gives TSMC not only order certainty, but also significant bargaining power.

Moreover, from an investor perspective, it is crucial that Goldman also expects margins to improve, despite massive investments in capacity. This suggests that demand for high-end chips is not price-sensitive and that customers are willing to accept higher prices in exchange for a technological edge and stable supply.

Valuation framework: why the market is reassessing how much TSMC should be worth

Goldman Sachs ' increase in its$TSM target price for Taiwan Semiconductor Manufacturing Company shares cannot be seen as just a technical adjustment to the model. Historically, the company has been valued primarily as a cyclical semiconductor manufacturer whose profits fluctuate based on consumer demand and electronics investment cycles.

In the current context, however, this view is changing. Demand for TSMC's manufacturing capabilities is increasingly driven by artificial intelligence, data centres and high-performance computing, segments that are more long-term, structural in nature. This allows the market to operate at higher multiples because the company's earnings capacity is less sensitive to short-term economic fluctuations and more dependent on customers' multi-year investment plans.

Implicit in Goldman's repricing is the notion that TSMC is no longer just a "manufacturing capability" but a critical infrastructure of the AI economy. In this case, valuations are not driven solely by historical semiconductor cycles, but rather by the logic of strategic technology assets where long-term demand, pricing power and high barriers to entry are key. It is this change in framework that explains why the market is willing to accept a target price of around USD 74 without appearing excessive.

What might challenge this investment story

Despite the strong AI narrative, there are factors that could undermine TSMC's current repricing. The first is the pace of investment in AI infrastructure. If the tech giants' spending proves to have been too aggressive and there is a significant slowdown, demand for the most advanced manufacturing processes could grow more slowly than the market expects today.

Another risk is the sheer capital intensity of the business. Investments of around $150 billion over three years make sense only if they are met by high capacity utilisation over the long term. Any scenario in which new factories reach a lower utilisation phase would put pressure on margins and returns on capital.

The geopolitical situation around Taiwan remains a specific and long-standing risk. Although the market has perceived this risk for a long time and partially ignored it, any escalation would immediately change investment sentiment. It is therefore crucial for the long-term investor to understand that TSMC combines an exceptional strategic position with an irreducible geopolitical discount.

Capital expenditure: risk at first sight, competitive advantage in practice

The plan to invest approximately $150 billion over the next three years is one of the most ambitious capital programs in the history of the semiconductor industry. At first glance, such a large capex may appear to be a risk, especially in an industry that investors have long associated with overcapacity and sharp swings in profitability. However, the current situation is qualitatively different.

Today, TSMC is not investing "in inventory" but responding to specific and long-term orders from the world's largest technology companies. Building and expanding capacity in 3nm and future 2nm processes is directly tied to the roadmaps of customers who are planning their own AI infrastructure investments in the tens of billions of dollars per year. In this context, TSMC's capex is not speculation, but a necessary condition for maintaining a technology edge.

Moreover, in the long run, these investments act as a strong barrier to entry. Very few companies in the world are able to finance, operate and optimise production at the most advanced nodes in the long term. TSMC is thus using the capital intensity of its business to build a moat that is virtually insurmountable for competitors.

TSMC as the backbone of the global AI ecosystem

The current AI revolution is often presented as a software story, but in reality it is primarily a physical computing infrastructure story. Every new model, every training cycle, and every data center expansion means an exponential increase in demand for computing power. Without advanced manufacturing processes, this evolution would not be possible.

In this ecosystem, TSMC plays the role not of one of many suppliers, but of a central node on which the entire chain depends. Chip designs may change and shift between companies over time, but the ability to manufacture at the top nodes remains extremely concentrated. This gives TSMC an exceptional position, akin to infrastructure firms in the energy or telecommunications industries.

For an investor, this means that TSMC is not just an exposure to one product or one customer, but to the very foundation of digital transformation. It is this role that is changing the way the market values the company.

The competitive landscape: why Samsung is falling behind

Against the backdrop of TSMC's growth, other Asian technology titles are also gaining strength, including Samsung Electronics. But the difference between the two firms is fundamental and key for investors. Samsung remains heavily exposed to memory chips, which are highly cyclical and sensitive to excess capacity.

TSMC, on the other hand, is focused on high value-added logic chips, where demand is structural and supported by long-term investments in AI and cloud infrastructure. This different exposure explains why investors view TSMC as a "cleaner bet" on the AI trend, while other semiconductor firms remain more tied to traditional consumer electronics cycles.

Thus, in terms of long-term valuation, it is not just about technological superiority, but the quality and stability of demand that TSMC serves.

Risks that cannot be ignored

Despite the strong fundamental story, there are risks that cannot be ignored. These include geopolitical tensions around Taiwan, the extreme capital intensity of manufacturing, and the possibility that the pace of investment in AI will slow at some stage. Each of these factors can lead to transitory margin pressure or higher stock volatility.

In the long run, however, these risks represent the price of exposure to the key technology trend of the decade. An investor who chooses to hold TSMC should be prepared for fluctuations, but also understand that it is one of the few companies that the global AI ecosystem cannot do without.

TSMC investment scenarios: how earnings capacity and valuation may evolve

In the case of Taiwan Semiconductor Manufacturing Company, it is key to understand that this is not a binary "AI succeeds/fail" bet. The real investment difference between the scenarios arises from a combination of three variables: revenue growth rate, return on capital expenditure and the ability to sustain margins in the face of massive capacity expansion.

Baseline scenario - structural growth without euphoria (most likely)

In this scenario, AI remains a multi-year growth engine, but the pace of investment gradually normalizes. Hyperscalers continue to invest in computing power, but with a greater emphasis on efficiency. TSMC maintains its technology lead in 3nm and 2nm processes, and new capacity is gradually filled without significant outages.

Operational impact (indicative framework)

• Revenue growth: 10-13% CAGR (2026-2029)

• Gross margin: stabilisation in the 52-55% range

• Operating margin: return to ~45% after capex peak fades

• Free cash flow: gradual improvement after 2027

Capex of ~$150bn over three years is defensible in this scenario as new plants reach high utilisation. Return on capital, while declining in the short term, stabilizes in the long term at levels consistent with infrastructure technology firms.

Valuation implications

• The market accepts higher but stable multiples than historically

• Shares are trading around fair value implied by Goldman Sachs-type target prices

• Price range: roughly $70-80 on standard sentiment

Optimistic scenario - AI infrastructure as the new oil of the digital economy

Here we see that AI is not just another technology cycle, but a fundamental change in the economic structure. Demands for computing power are growing faster than expected, new models are significantly more demanding, and customers are willing to pay a premium for instant access to the most advanced nodes.

TSMC is not only filling capacity in this scenario, but gaining significant pricing power. Competition is not keeping pace technologically and barriers to entry are further increased.

Operational impact

• Revenue growth: 15-18% CAGR

• Gross margin: expansion towards 56-58%

• Operating margin: return above 47%

• Cash flow: very strong, rapid return on new investment

Capex is proving to be a strategically brilliant decision in this scenario - TSMC invested "early and sufficiently" and is reaping the rewards today. The company is definitely moving into the category of global technology infrastructure, not manufacturer.

Valuation implications

• The market is willing to work with premium multiples, similar to key infrastructure assets

• There is further re-rating of the stock

• Price range: $85-95, higher in an extremely strong AI environment

Negative scenario - overcapex and cooling of AI investments

In the negative scenario, it appears that some AI investment has been too aggressive. Hyperscalers start to optimize spending, the pace of data center construction slows, and some new TSMC capacity enters a lower utilization phase. At the same time, the depreciation burden remains high.

To this may be added geopolitical risk, which will again remind that TSMC carries a structural discount that cannot be completely eliminated.

Operational impact

• Revenue growth: slowdown to 5-7%

• Gross margin: pressure towards 48-50%

• Operating margin: decline towards ~40%

• Cash flow: significantly weaker in years after capex peak

In this scenario, TSMC again starts to behave like a capital-heavy cyclical title, even though technologically it remains a top performer.

Valuation implications

• Market lowers multiples back to historical average for the semiconductor sector

• Geopolitical discounting comes to the fore again

• Price range: US$50-60

How to read these scenarios as an equity investor

• The base case scenario supports a long-term hold without the need to time the market

• Optimistic scenario explains why TSMC can still have significant upside even after strong growth

• Negative scenario reminds us that higher valuation is contingent on sustainable AI capex

The key point is that risk and reward are not symmetric: the downside is limited by the company's technological edge, while the upside depends on whether AI actually proves to be an infrastructure phenomenon similar to electricity or the internet.

What to take away from the article

• Goldman Sachs' 35% target price increase is not a reaction to one quarter, but a reflection of a change in the long-term investment view on TSMC.

• TSMC is shifting from a cyclical semiconductor title to an infrastructure company in the global AI ecosystem.

• Demand for the most advanced manufacturing processes is driven structurally by AI, not consumer electronics.

• Massive capital expenditure is not a weakness, but a tool to maintain technology lead and barriers to entry.

• Improving margins suggest strong pricing power even in a capital-intensive environment.

• Higher valuations may be the new normal if the AI investment cycle lasts longer than one technology cycle.

• Investing in TSMC means exposure to a key global trend, but also accepting geopolitical and capital risk.

What's happening?

Major manufacturers of these memories such as Samsung $BC94.L, SK Hynix $HY9H.FMicron $MU are now facing decisions to allocate their production lines. The prioritization of high-margin and essential memory for AI platforms means that traditional DDR5 modules for PCs and servers are increasingly being suppressed. And one of those companies, has made that dreaded move. It has cut back very significantly on traditional memory production and is focusing mainly on those for AI. Its stock is up 280% in 2025 on the Korean stock exchange.

Memory chips - particularly DRAM (Dynamic Random Access Memory) and HBM (High Bandwidth Memory) - have long been considered a cyclical segment in the semiconductor sector. In the past, their prices and production capacities have varied according to the demand of consumer electronics (PCs, laptops, smartphones). Today, the situation is different.

While technology trends such as cloud and AI infrastructure are significantly increasing the demand for high throughput and low latency memories, supply is shifting towards high yield segments and traditional consumer memories are taking a back seat.

This shift has two main effects:

• Production capacity for traditional DRAM and other mainstream memories is shrinking as production lines are prioritized for datacenter and AI chip products.

• Prices for conventional memory are rising dramatically as supply fails to meet demand. Both DRAM and NAND prices have increased by tens of percent in recent months, with some segments exceeding 100% year-on-year growth.

This is impacting not only manufacturers but also PC and smartphone makers, who are now warning of price increases for their products in 2026 precisely because of the rising cost of memory and other components.

Structural supply crunch: why are prices rising and not coming back down?

The difference between the traditional supply and demand cycle in the memory sector and today's situation lies in the structural reallocation of production capacity. Whereas previously, capacity and production grew in parallel with consumer demand, today a large part of production lines are moving towards AI infrastructure-oriented products.

This causes:

• Short and medium term undersupply of DRAM/NAND for end devices such as personal computers,

• a sharp increase in memory prices in a market that behaves more like an asset with limited availability than a standard component,

• and the unclear prospect of prices returning to pre-AI boom levels - because it is a change in the demand structure

The memory market is effectively an oligopoly. It is dominated by a trio of manufacturers who control the majority of global supply. But by 2026, it's no longer just a game of who can make more memory. It is about who can produce the right type of memory, in the right packaging, at the right quality and on time, and who can justify this ability on price. This is where today's "memory inflation" arises. Wall Street is describing this situation as an AI-driven memory boom, while pointing out that the shift in production to AI-oriented chips is tightening the supply of traditional DRAM and pushing prices higher.

So it's important to understand that memory today is not a single commodity. A type of HBM is a product with a different margin structure, different barriers to entry, and often different contracts. While conventional DRAM has historically behaved cyclically and suffered from oversupply, HBM is more likely to be unavailable across the AI chain in 2026.

Samsung Electronics $BC94.L

Samsung is the largest memory manufacturer in the world. The market today is mainly addressing the fact that Samsung has long produced huge volumes of "conventional" DRAM, which paradoxically helps it in the AI era as general DRAM supply is tight and prices are rising. According to the latest information, Samsung is expected to report a jump in operating profit growth in Q4, with memory chips and AI demand being the main drivers.

But for Samsung, it's important to look at the company's entire memory business and not be blinded by AI demand alone. For the company, we could divide this into two main segments.

The first is cyclical - rising memory prices lift profitability.

The second is structural - Samsung needs to monetize HBM generations (HBM3E, prospectively HBM4) at a higher rate because the highest margins come from these products.

Samsung's shares added 127% on the Korean bourse last year, marking a complete reversal of its share price performance to date. In fact, their price has only fallen since 2021 and they have fallen 46.5% since the peak in the same year to January 2025. However, thanks to the tremendous growth in 2025, the price has reached new highs, which it continues to surpass at the beginning of this year.

The company's margins have also increased in a big way in 2025. They have gotten so much higher than they were in 2024. They were around 11%. A year earlier, they were even lower.

SK hynix $HY9H.F

SK hynix is one of the main reasons for the rising prices of classic PC memory for end customers. The company decided last year to significantly reduce their production and will focus mainly on production for large AI companies.

In recent years, the company has emerged as the leader in HBM memory and is often perceived by the market as the company that benefits most directly from HBM. In terms of results, it is interesting to note that SK hynix was already very profitable during the year; the results summaries mention record sales and exceptionally high operating margins in an environment of rising memory prices.

But for 2026, the outlook is even more important. In its 2026 outlook, SK hynix explicitly projects the situation as an HBM-drawn supercycle, and also refers to estimates that it may have a very strong position in HBM4 shipments for next-generation AI platforms. In addition, independent sources describe that a portion of HBM and tied memory production is virtually sold out in advance by some manufacturers, which is exactly the mechanism that keeps prices high and reduces the likelihood of a quick return to the old commodity cycle.

So for SK hynix, it makes the most sense to watch operating margin, FCF, and also debt in the context of capital expenditures. In an AI boom, one can make money very quickly, but also "overshoot" capex very quickly. The important thing is whether the margin spills over into cash flow after accounting for the investments in capacity and advanced packaging (not meaning the box or plastic packaging, but the way the chips themselves are physically put together) that are necessary for AI.

Micron $MU

Micron is the only major US player in the memory space. In 2026, it will likely continue to benefit from the same market realities as its rivals.

From an investor perspective, what's attractive about Micron is its combination of cyclical turnaround and relatively sober valuation. At the end of last week, several companies upgraded $MU stock which had a direct impact on the stock, which shot up several percent to reach a brand new peak.

More importantly, Micron itself has been very open about the fact that 2026 will be characterized by supply constraints. In its earnings materials, the company states that it expects DRAM and NAND shipment growth in 2026 to be around ~20%, but it also stresses that growth is limited by supply across the industry.

This is exactly the type of message investors are looking for, as it confirms that this is not just a one-off price jump, but a tighter market balance.

Micron also officially announced that it has decided to exit the branded consumer business Crucial to strengthen supply and support for larger strategic customers and high-growth segments in data centers - explicitly in the context of AI demand. This is an extremely strong signal of structural change. When a manufacturer voluntarily exits a visible consumer segment, it does not signify "weakness." It means that the margins and contracts in the AI chain are so attractive that it is worth reallocating capacity even at the cost of the average customer seeing worse availability and higher prices. Sk Hynix expects its conventional memory supply constraints to last until 2028.

As with previous companies, Micron's stock has been rising strongly in 2025. They gained 270%.

Signs that the market may be breaking

There are several specific indicators worth watching in 2026, as they will determine whether the rise in memory prices will persist or whether a turning point is approaching.

The first signal is the pace and structure of capital spending. If manufacturers massively increase investment in capacity, this has historically meant future pressure on prices. But what matters today is where the investment goes: whether it is in HBM or in traditional DRAM/NAND. Paradoxically, the market can remain tight even at high capex if most of the capacity is reserved for AI memory.

The second signal is how fast HBM supply is growing and whether yield is improving. As yield improves and new generations of HBM are rolled out in bulk, some of the pressure may be relieved. SK hynix itself frames 2026 as a transition phase, with HBM3E memory remaining the standard while the transition to HBM4 is gradually being prepared. TDestimates that HBM3E may account for about two-thirds of HBM shipments in 2026, while HBM4 will gradually gain share. For investors, the key point is that as long as HBM3E is the main driver and HBM4 is in the ramp-up phase, the market is fundamentally fragile: supply shortfalls or qualification delays at large customers will be immediately reflected in prices.

The third signal is the demand for hyperscalers and AI infrastructure. If there is a significant slowdown in AI datacenter investment in 2026, this would ease pressure on HBM and consequently on some server DRAM. However, this scenario is not yet indicated.

Risks that could break the investment thesis

From the perspective of memory stocks, the biggest risk is the classic scenario: the market stays extremely profitable for a few quarters, companies invest too aggressively, and 12-24 months later there is excess capacity. Even in 2026, this scenario is still possible - especially if multiple sources of supply, including Chinese players, come into full swing. According to Reuters, investors should focus on competition from China, which has plans to expand, led by CXMT.

The second risk is demand shock: if AI investment cools significantly, memory prices could normalize more quickly.

The third risk is geopolitics and export restrictions, which could change the flow of technology and capacity.

Summary

The memory sector is at a point in 2026 that is markedly different from previous cycles. Price growth is not just the result of short-term supply and demand fluctuations, but reflects a deeper change in who and what memory capacity is primarily designed for. The shift of production lines to AI infrastructure has created a more permanent tension in the traditional market that is reflected in prices and manufacturers' financial results. The market must now be seen as a strategic part of the technology chain, where barriers to entry, technology level and the ability to monetise limited capacity are critical.

For investors, this marks a meaningful shift in perception. Micron is increasingly viewed not as a pure cyclical bet, but as a beneficiary of structural demand from data centers and AI workloads. Expanding margins and accelerating cash generation suggest that this phase of the cycle is supported by fundamentals that extend well beyond short-term memory pricing dynamics.

How was the last quarter?

Micron $MU achieved $13.64 billion in revenue in the first fiscal quarter of 2026, marking strong quarter-over-quarter and year-over-year growth. Profitability improved across the board, with gross margin rising to about 56% on a GAAP basis and even higher on a non-GAAP basis. Operating margins moved into a range that Micron has historically only achieved during the strongest phases of the memory cycle.

GAAP net income was $5.24 billion and earnings per share were $4.60. On a non-GAAP basis, the result was even slightly stronger. Cash performance also improved very significantly, with operating cash flow jumping to $8.41 billion, a dramatic shift from prior periods. Despite high capital expenditure of USD 4.5 billion, the company was able to generate approximately USD 3.9 billion of free cash flow.

From a business-by-business perspective, it is evident that growth is broad-based. The cloud memory division is growing fastest, benefiting from demand for HBM and other AI accelerator memories. However, very strong margin improvement is also seen in mobile, client and automotive solutions, confirming that the overall pricing environment in the memory market is improving.

• Full presentation with results.

CEO commentary

CEO Sanjay Mehrotra called the quarter a record one, highlighting that Micron not only achieved its highest ever revenue, but also its highest ever free cash flow. He said margins improved significantly across all business units and the company is poised for further acceleration during fiscal 2026. A key theme of his comments was Micron's role as a key supplier of memory for AI infrastructure.

Mehrotra also stressed that Micron is investing with a focused approach and with an eye on return on capital. He said the company does not want to repeat the mistakes of past cycles, where over-investment led to a supply glut. This time around, the strategy is built on technological leadership and disciplined capacity management.

Outlook

The outlook for the second fiscal quarter of 2026 is extremely strong. Micron expects sales of around $18.7 billion and further significant margin improvement, with gross margins expected to be in the upper 60s percent or so. Earnings per share expectations suggest that profitability should continue to grow significantly quarter-on-quarter.

Management has also indicated that it expects performance to continue to strengthen throughout fiscal 2026. AI infrastructure remains a key driver, but positive developments are also expected in more traditional segments such as personal computers, mobile devices and automotive.

Long-term results

A long-term view of Micron's performance shows the typical cyclical nature of the memory business, but also a significant shift in the quality of results in recent years. After a very weak 2023, when the company generated a loss, there was a sharp turnaround in 2024 and especially in 2025. Revenues have recovered significantly and profitability has returned to high levels.

Gross profit and operating profit showed extreme improvement, reflecting a combination of higher memory prices, better product mix, and lower unit costs. Net income was again in the billions of dollars in the last fiscal year, contrasting with the deep loss two years earlier. This development clearly shows how sensitive Micron is to the cycle phase, but also that the current phase is one of the strongest.

From a balance sheet perspective, it is important that the company can generate massive cash in strong years, which it can use to reduce debt, fund investments and return capital to shareholders. It is this ability to survive weak years and significantly strengthen its financial position in strong years that is key for long-term investors.

News

Micron announced a continuation of its regular dividend in the last quarter, while confirming a high level of investment in manufacturing capabilities and advanced technologies, particularly in HBM memory. The company also continues to strengthen its relationships with key customers in the AI and data center space, increasing visibility of future revenue.

Shareholding structure

Micron's shareholder structure is strongly institutional. The largest shareholders include Vanguard Group, BlackRock, Capital World Investors, State Street and Fidelity. The presence of these long-term investors indicates the market's confidence in the company's current strategy and its ability to manage the cyclical nature of the memory market.

Analyst expectations

Analysts currently view Micron as one of the purest bets for AI infrastructure growth in the memory space. The focus is primarily on the evolution of margins, the sustainability of high free cash flow, and whether the company can maintain discipline in investments even in times of strong demand. If these assumptions hold true, Micron has the potential to remain one of the most interesting titles in the semiconductor sector for years to come.

I currently have some cash available.

I'm toying with the idea of opening a small position in $NFLX — how do you personally view this company? I've looked into some information and their price looks interesting to me. I've been following this company for a while, but I'd be interested in more people's perspectives.

I also have an interesting position in $AMZN, where I see huge long-term potential; I'd even be tempted to buy more at current prices.

What's your take on the current market situation, and what are you buying? 💰

Markets are already debating the long-term implications rather than the immediate impact. Years of underinvestment, deteriorated infrastructure, and talent drain mean that any production recovery would take time and capital on a scale few are prepared to assume quickly. For oil prices, Venezuela represents not an imminent supply shock, but a latent risk factor that could reshape expectations over the coming decade.

Why Venezuela could once again affect global oil prices

The very fact that Venezuela holds the world's largest proven oil reserves makes it a potential game changer. If the political situation were to stabilise and the US actually opened the way for US firms to resume production, the market would have to start factoring in higher future supply.

Meanwhile, Goldman Sachs analysts have not changed their price estimates - they continue to expect Brent to average around $56 per barrel and WTI around $52 for this year. But they also warn that the combination of stronger production in the US, surprisingly high output in Russia and the potential return of Venezuela increases the risk of a price decline after 2027. It is this long-term outlook that is key for investors.

Who would benefit most from Venezuela's return

Paradoxically, the primary beneficiaries of a geopolitical intervention might not be oil producers, but oil services, infrastructure and upstream technology firms. Venezuela will not be able to resume production without external help, and this opens up the space for several clear winners:

• Halliburton $HAL and Schlumberger $SLB - the technology and services backbone for well workovers, field maintenance and production upgrades.

• Baker Hughes $BKR - compressors, turbines, power infrastructure.

• US midstream companies (pipelines, export terminals) if oil starts to be exported in larger volumes again.

These companies have historically benefited from investment cycles regardless of whether oil prices are high or low because their business is based on project volume, not directly on the price of the commodity.

Who, on the other hand, might face pressure

On the other hand, Venezuela's long-term return to the market would be a negative factor for large integrated producers and especially for companies heavily tied to high oil prices. Among the most sensitive are:

• Exxon $XOM

• Chevron $CVX

• Occidental Petroleum $OXY

While these firms have strong balance sheets, their valuations are largely based on the assumption that global supply will remain relatively constrained. Any structural increase in production after 2027 would distort this story.

Short term chaos, long term supply pressures

Prior to Maduro's detention , the US imposed a partial tanker blockade, leading to Venezuelan warehouses filling up and further supply disruptions. This is one reason why the market has not collapsed yet and Brent is holding around $60 a barrel.

But in the long run, investors need to start working with the idea that oil may no longer remain a structurally scarce commodity if the geopolitical map is truly rewritten and capital returns to regions that have been off the table for decades.

What investors should take away from this

Venezuela is not a short-term trade catalyst, but a five- to ten-year strategic story. If the ambitions of Washington and US energy companies are realised, it will be one of the largest investment projects in global oil infrastructure. But in terms of shares, this does not mean "buying oil", but carefully distinguishing between producers and the companies that profit from rehabilitation, servicing and construction.

Oil as a commodity may face pressure. Energy services and infrastructure, on the other hand, face a potentially very long investment cycle.

The reality, however, is more complex. Behind the stable cash flows of a regulated electricity business lies a risk factor capable of rapidly reshaping both valuation and dividend confidence. Wildfire exposure in California introduces a structural uncertainty that can shift investor sentiment from complacency to crisis mode in a matter of weeks. This is not a dividend story built on simplicity, but on understanding where stability truly comes from—and where it can abruptly break.

Top points of analysis

• A dividend yield of around 6% is a major magnet, but the market provides it as compensation for specific "event risk".

• Valuation is low (P/E 7.85; EV/EBITDA 7.10), which creates re-rating potential, but also signals that the market doesn't believe in a "trouble-free" profile.

• Profitability has held up in recent years: 2024 sales of $17.6 billion and net income of $1.55 billion; EPS of 3.33, which supports the dividend story fundamentally.

• Free cash flow is negative (-0.69bn USD in 2024) due to massive CapEx; this is common for a utility, but for a dividend investor, it is important to understand that dividend cover is more about regulation and access to capital than FCF.

• The key dividend question is not "does the payout come out today" but whether the company can maintain investment plan fundability, rating and stability in a contingency environment.

Company performance

Edison International $EIX is a holding company over a regulated electric utility business in California, with Southern California Edison (a subsidiary) as its key asset. From an investment perspective, this means that the "driver" of value lies not in expansion into new markets, but in the ability to invest in the grid, safety and reliability over the long term and to translate those investments into regulated returns over time.

This is the typical infrastructure model: capital intensive, with long payback cycles, but very predictable with good regulation. It is not a question of whether a company will "surprise" the market with growth next year, but whether it can maintain the pace of investment, justify it to the regulator, while keeping in check the risks that can trigger extraordinary costs.

It is also important to perceive geographical concentration. California is a huge opportunity in terms of electrification, renewables and grid modernization, but it is also the epicenter of climate risk. This mix is why Edison may be attractive to a dividend investor, but it will never be a "risk-free bond substitute."

Competition and market position

Edison International' s dividend story cannot be evaluated in isolation. It only makes sense when compared to other large U.S. utilities that an investor typically considers as alternatives in an income portfolio. The differences are not whether they pay a dividend, but how the dividend is covered, in what environment, and with what type of risk.

Duke Energy $DUK - stability at the cost of lower yield

Duke Energy operates in several states with relatively predictable regulatory environments and doesn't have the extreme event risk of California.

• Duke's advantage: greater cash flow predictability, fewer legal and climate shocks.

• Disadvantage to EIX: lower dividend yield and higher valuation.

• Conclusion: Duke offers lower stress, lower yield. Edison offers higher yield, higher risk premium.

Southern Company $SO - higher yield, but project risk

Southern Company is one of the highest dividend payers in the sector, but its profile is weighed down by large capital projects (historically mainly nuclear) that increase execution risk.

• Southern's advantage: attractive dividend yield, strong payout history.

• Disadvantage to EIX: project risk and pressure on balance sheet.

• Conclusion: both Southern and Edison are "revenue utilities" but each carries a different type of risk
  - Southern: CapEx and projects
  - Edison: event risk and jurisdiction

Management and capital discipline

Edison International is led by Pedro J. Pizarro, who has been CEO since 2016. He is not an outside "Wall Street executive" but a longtime utility sector insider whose career has been closely tied to the regulated energy business and large-scale infrastructure operations.

Pizarro has more than three decades of experience in the energy industry. He came to Edison International after a long tenure at Southern California Edison, where he held key operational and strategic roles, including president. His professional background is strongly technical and operational, not financially speculative - essential for a dividend investor. He is not a CEO pushing aggressive growth or acquisitions, but a manager focused on grid stability, regulation and long-term return on capital.

Key managerial "results" under his leadership

Under Pedro Pizarro's leadership, the company has gone through some very challenging phases that are more important to management evaluation than periods of dormancy:

• Maintaining dividend continuity even in years when California utilities faced extreme pressure due to wildfires and legal uncertainty.

• Stabilizing relations with regulators, where the company was able to defend its extensive grid security investment programs and gradually reflect them in regulated revenues

• Managing the capital-intensive CapEx cycle without destroying the dividend policy or sharply deteriorating the credit profile

Financial performance

At an income statement level, the recent period has been relatively solid. Revenues in 2024 grew to $17.6 billion, up approximately 7.7% year-over-year, gross profit increased to $7.2 billion and operating profit to $2.93 billion. Net income reached $1.55 billion and EPS reached 3.33. This trend shows that with stable operations, the company is able to move profitability progressively higher, although the dynamics are not linear.

The significant jump in 2023 versus 2022 shows that results can be sensitive to specific items and environments. Still, in the longer view, a "utility" character emerges: growth is not explosive, but it is present, and operating profit looks more robust than a few years ago. For a dividend investor, this is important because the dividend relies on the ability to generate steady earnings over the long term, not one-off growth.

Cash flow and dividend cover

Here's the biggest investment "aha". In the data, we see that operating cash flow in 2024 was $5.0 billion, but investment cash flow was $5.5 billion, and the resulting free cash flow remained negative (-0.69 billion). This is not a model error or necessarily a sign of weakness - it is common for regulated utilities to have massive CapEx overlaying operating cash flow.

Therefore, it is key to dividend sustainability to understand that Edison pays a dividend not on what is "left over after investments" but on what is recognizable under regulation over the long term and what the company can fund with a sensible approach to debt and equity. If the regulatory framework is constructive, CapEx is gradually reflected in rates and increases the future earnings base.

The risk comes when three things come together: high CapEx, higher interest costs and fire contingencies. In such a combination, the room for dividend flexibility quickly narrows, even if "normal" operations look healthy.

Dividend: history, sustainability and growth rate

The company has a long history of dividend increases and has itself communicated a number of consecutive years of dividend growth.

In practical terms, we see that the quarterly dividend has risen gradually in recent years: for example, from $0.70 in 2022 to $0.7375 in 2023, $0.78 in 2024 and $0.8275 in 2025, depending on dividend history.

The latest move is to increase the quarterly dividend to $0.8775, which annualizes to about $3.51 per share and implies a yield of about 5.8%.

This increase is also important for sustainability: MarketBeat reports a payout ratio of around 43% and the company is targeting a long-term payout range of 45-55% "core earnings."

For dividend utilities, the dividend growth rate versus the growth rate of "core" earnings is key. If the company simultaneously confirms a core EPS growth outlook in the order of one percent per year, the investor has a basic map: the dividend can grow at a similar rate without the payout running into dangerous levels. Edison mentions the outlook in earnings materials and confirms the core EPS growth trajectory for the coming years, which is essential to the dividend thesis.

Dividend stress test

The stress-test at Edison must account for two types of stress: financial and "event-driven" (fires). Purely financial, the biggest test is the combination of higher rates and a high investment cycle. Interest coverage, suggests that the space is not unlimited, and as the cost of debt rises, management may be pushed to prioritize credit metrics over aggressive dividend growth.

The second stress channel is fire risk. The market has shown in the past that it can react in extremes for California utilities - not just to cost realities, but to uncertainty itself. In such moments, dividend sustainability is evaluated not just through payout ratios, but through access to capital, regulatory protections and risk-sharing mechanisms. Reuters describes how Edison believes in the importance of the Wildfire Fund as an element that can protect the balance sheet if the event is qualified and the processes are run according to the framework.

For the dividend investor, the practical issue is simple: even if the dividend is covered by "core" earnings today, in an extreme scenario the dividend growth rate may be temporarily slowed to protect the company's rating and funding. This is not a failure of the thesis, but the natural behavior of a utility in crisis mode.

Dividend scorecard

The scorecard below is written for an investor to use as a quick "checklist" - what is strong, what is weak and what needs to be watched (1/5 weak, 5/5 strong).

1) Dividend yield and attractiveness

• Current dividend yield:~6% → 5/5
  High, immediately relevant to the income investor.

• Dividend "market signal": 3/5
  Yield is attractive, but also highlights that the market has priced in risk.

2) Dividend history and continuity

• History and Discipline: 4/5
  The nature of the utility typically supports stability of payout.

• Dividend growth "interruption" risk: 3/5
  It is not primarily about the normal cycle, but about the ability to manage extraordinary costs and financing.

3) Dividend cover by earnings

• Payout vs. EPS (indicative): 4/5
  EPS of 3.33 (2024) and an annualized dividend of around $3.5 mean there is coverage, even if it is not "luxury".

• Payout sensitivity to EPS decline: 3/5
  Should EPS decline significantly, the dividend comfort becomes thinner.

4) Dividend cash flow coverage

• Free cash flow: 1/5
  FCF is negative (2024: -0.69 billion USD).

• Quality (CapEx-driven): 3/5
  For utilities, FCF may be negative in the long term, but sustainability is based on regulation, financing and tariff ROI.

5) Balance sheet and interest rate risk

• Debt leverage (D/E 2.30): 2/5
  Increases vulnerability to stress.

• Interest Coverage (3.16): 2/5
  "Ok" but not comfortable, especially with higher rates or rising risk premium.

6) Business stability (utility factor)

• Beta 0.83: 4/5
  Usually a more stable price profile than the market.

• Regulated nature of returns: 4/5
  Gives predictability if regulatory framework is constructive.

7) Specific risks (this is the core of the investment thesis)

• Event risk (contingencies): 2/5
  This is the biggest reason for low valuations and high returns.

• Regulatory/legislative uncertainty: 3/5
  It's not just "if" a problem will happen, but "how" the costs and liability will be reflected in the system.

8) Valuation as a safety cushion

• P/E of 7.85 and EV/EBITDA of 7.10: 4/5
  Cheap valuation can cushion the downside, barring an extreme scenario.

• Re-rating potential: 3/5
  It exists but is contingent on stabilization of the risk premium.

What to watch next (practical KPIs for the dividend investor)

• Interest cover development (trend, not one quarter) and refinancing conditions

• Regulatory decisions: how quickly CapEx translates into tariffs and returns

• CapEx plan vs. financing: whether pressure on external capital is increasing

• EPS development and stability: whether there is a sustained decline

• Dividend policy: whether the company continues to hold dividend growth or goes into "pause"

Management credibility lens

For this title, management credibility is about whether it can deliver on three promises over the long term: keeping payout in the target range, managing the investment plan without breaking the balance sheet, and reducing the risk of fire events. The firm's materials repeatedly frame dividend policy through target payout while emphasizing fire risk mitigation and network investment.

The second part of credibility is communicating the outlook. The market appreciates when a firm is not "overly optimistic" but can continually refine guidance and explain the reasons. In October 2025, Edison published results and narrowed core EPS guidance for FY2025 to 5.95-6.20 while reaffirming confidence in the growth framework for the years ahead.

Importantly for a dividend investor, this communication creates an anchor for dividend growth rate expectations.

Valuation

From a valuation perspective, Edison looks cheap: a P/E multiple of around 8 and EV/EBITDA of around 7, implying that the market is still pricing in a risk premium. This premium may be justified, but it also creates an asymmetry: if the risk narrative improves, re-rating may be faster than for utilities with a "clean" profile.

For dividend titles, it is useful to consider a combination of three things: the dividend yield, the likely dividend growth rate, and the probability of a valuation change. Edison today offers a high current yield while having a dividend policy tied to a payout band that supports sustainability if core earnings hold the trajectory.

On the other hand, it is important to consider that a high yield may also be a signal that the market is demanding compensation for event risk. With Edison, this is exactly the case where "cheap" can stay cheap for a long time if the uncertainty around the fires keeps coming back.

Analyst expectations and market framework

The consensus on Wall Street is currently rather cautious. MarketBeat lists a consensus "Hold" from 16 analysts and an average 12-month price target of $63.50, suggesting the market is willing to wait for further confirmation of stability and outlook.

At the same time, we see that results and guidance may improve sentiment in the short term, with MarketBeat's review citing the quarter's beat on estimates and the aforementioned FY2025 guidance.

However, it is important for the dividend investor that analyst targets tend to be secondary for such a title. The primary question is whether the dividend will remain stable and continue to rise - and that's more about regulation, capital intensity and contingency risk than it is about "momentum" in a single quarter.

Market opportunities and risks

The opportunity part of the story is the long-term electrification and upgrade of the grid. California will require huge investments in infrastructure, security and reliability. In such an environment, a regulated utility can grow "slowly but surely," and if the regulatory framework is constructive, the earnings base that feeds the dividend can grow as well.

The risks, however, are structural. Fire risk is key and has two layers: the actual cost and cost of capital through rating and financing. Added to this is rate sensitivity because the capital structure of utilities is largely debt. And finally, regulatory risk: even a good investment plan can stumble if a regulator slows down cost recognition or lowers the allowed rate of return.

Investment scenarios

🟢 Optimistic scenario: dividend yield + re-rating

The optimistic scenario confirms that the regulatory framework in California remains constructive and that fire risks are manageable within existing mechanisms. The firm continues with its investment plan, but without having to dramatically increase its debt burden or compromise its credit profile. Core EPS remains stable or is growing modestly.

Dividend and share impact:

• Dividend: continued moderate growth (2-4% per annum)

• Payout: stable in target range

• Dividend yield: declining towards 4.5-5% (due to share price growth)

• Share price: +20 to +30% over 18-24 months

👉 In this scenario, the investor collects a high ongoing income while benefiting from the gradual return of market confidence.

Realistic scenario: stable dividend, limited price growth

The most likely scenario assumes that the company will operate "as the market sees it today". The regulatory environment remains complex but manageable, investment in the network continues and contingencies are not outside the historical framework. Management favours balance sheet stability over aggressive dividend increases.

Dividend and share impact:

• Dividend: stable or very moderate growth (0-2% per annum)

• Payout: controlled, no downward pressure

• Dividend yield: 5.5-6.5%

• Share price: -5 to +10% (rather sideways trend)

👉 This scenario makes the title a pure income vehicle - the stock serves as a source of cash, not capital appreciation.

🔴 Pessimistic scenario: balance sheet protection from dividend

In a negative scenario, a combination of unfavorable factors will occur: higher extraordinary costs, rating pressure, or more expensive financing. Management is forced to reassess capital priorities and prioritises balance sheet stability and access to capital over maintaining the dividend trajectory in the short term.

Impact on dividend and share:

• Dividend: freeze or cut

• Payout: adjusted downwards

• Dividend yield: high in the short term but unsustainable

• Share price: -20 to -35%

👉 This scenario is why the market is holding the stock at a low valuation and why the yield is not "free".

What to take away from the article

• A yield of around 6% is attractive, but it is not "risk free" - it is a yield bought with specific uncertainty.

• The yield at the income statement level looks healthy, which gives the dividend a foundation, but the comfort is not unlimited.

• Negative FCF is not in itself a red flag, for a utility it is often a consequence of CapEx, but it adds to the importance of regulation and fundability.

• The balance sheet and interest cover are the weaker link, and it is this that can hinder the rate of dividend growth in bad times.

• A low valuation is both a cushion and a warning: the market has already priced in some of the risk, but will not forgive negative surprises.

• For a dividend investor, this can be an interesting title if they accept that it is a "risk-reward" yield, not a sterile utility.

The Chinese stock market enters 2026 in a strange balance between deep pessimism and gradually stabilizing fundamentals. After several years of poor performance, foreign capital outflows and a significant fall in valuations, investor confidence remains low, even though the business environment itself has in many ways stopped deteriorating further. China's main Hang Seng index is trading today at the same levels as in 2007.

Macroeconomically, the main theme is the persistent weakness in domestic demand and the fading effects of the property crisis, which continue to affect consumer behaviour and investment activity. At the same time, however, the Chinese economy appears more stable than in previous years. Growth rates are lower but less chaotic, fiscal and monetary policies remain supportive, and the government's rhetoric towards the private sector is markedly more pragmatic. This in itself does not mean a market turnaround, but it does create an environment in which investors can refocus on individual firms rather than just systemic risks.

Geopolitics remains a key factor. Tensions with the United States and the West more generally will continue to be a source of a persistent risk premium in 2026, which is deeply embedded in Chinese equity prices. This geopolitical discount is one of the reasons why many large Chinese titles trade at historically low multiples, even when they generate stable cash flow and have strong domestic market positions.

Alibaba $BABA

Alibaba enters 2026 as a company where the investment debate has shifted from questions of survival to questions of confidence and return on capital. The underlying regulatory and political risks that dominated previous years are no longer a major source of uncertainty. Rather, the market is now addressing whether Alibaba can offer strong numbers in an environment of slower growth in the Chinese economy that would justify the higher valuation from late last year. Indeed, the stock is up 73% in 2025. Notably, from very low levels.

The company's business model is significantly more stable today than in the past. Domestic e-commerce remains a key pillar, with the Taobao and Tmall platforms maintaining their dominant position in Chinese online retail. Transaction volume growth is moderate for 2025, but the revenue structure is of higher quality, with a higher share of better margin services (13%), advertising and monetization of the merchant ecosystem. Alibaba is less about expansion and more about optimizing profitability, a shift that investors have long called for. The company's profit jumped $50 billion last year to $130 billion.

The second important segment remains the cloud. Alibaba Cloud is no longer seen as an aggressive growth project, but as a strategic infrastructure with growing importance for the enterprise sector and government procurement. In 2026, the focus will be on the cloud's ability to generate stable operating profit and maintain competitiveness in data services and AI solutions within the domestic market. From the perspective of global investors, the cloud business is constrained by geopolitics, but remains a key technology asset for the Chinese economy.

Alibaba's financial health is one of its greatest strengths. The company has long generated strong operating cash flow, has a strong cash position and low net debt. Until 2026, this financial stability is one of the main reasons why the stock remains one of the most followed stocks. This is because even with weaker growth, Alibaba has sufficient resources for investment, share buybacks or potential acquisitions.

Alibaba's valuation is a contentious issue for many investors. Some believe it is too squeezed by geopolitics, while others interpret geopolitics as the main bogeyman they cannot get over. According to the Fair Price Index on Bulios, which is based on DFC and relative value, $BABA stock is currently 8.5% above its fair value.

Even the broader market primarily reflects geopolitical discounting, uncertainty around long-term Chinese consumption growth and limited transparency into the price. But it also means that much of the downside is already priced in. Despite all this, we saw a significant upward movement in Alibaba's stock last year. If the company continues to grow, the stock price may not stop at current levels.

The main risks remain structural. These include a long-term slowdown in the Chinese economy, a possible resumption of regulatory pressure, and geopolitical tensions that may continue to limit foreign capital interest. Alibaba, however, enters 2026 as a company with a clear business case, a strong balance sheet and the ability to generate cash even in a less favourable environment. It is this combination that explains why it remains one of the most followed Chinese stocks in the Bulios community and on Wall Street.

JD.com $JD

JD.com enters 2026 in a different position than most Chinese tech companies. While some of the sector is dominated by growth or regulatory issues, JD is all about efficiency and business model credibility. The company has long been perceived as the top player in Chinese e-commerce in terms of logistics, supply chain control and reliability. However, it is these qualities that present both an advantage and a structural challenge in an environment of weaker consumer demand.

JD.com's business model is based on direct sales of goods with in-house logistics, which allows the company to control quality, speed of delivery and customer experience. However, unlike pure platform models, this means higher capital intensity and lower operational flexibility.

Margins remain a key theme for JD.com in 2026. Competition in e-commerce is fierce and pricing pressure persists, limiting the scope for rapid profitability improvement. JD is looking to offset this pressure with a higher proportion of higher margin services, third party platform development and more efficient use of logistics infrastructure. Logistics in particular, which used to be perceived as a cost burden, is now gradually becoming a competitive advantage - not only for its own e-commerce, but also as a stand-alone service for external partners.

$JD has long struggled with margins. In 2024, their value was only 3.57%. While this may seem low at first glance (and it is) the positive that investors can take away from this is that margins have only been increasing since 2021 and have managed to move from negative to profitable in that time.

From a financial perspective, JD.com remains a relatively conservatively managed company. The company has a healthy balance sheet, manageable debt and stable cash flow from operations. In 2026, investors will focus primarily on whether the company can maintain positive free cash flow over the long term without aggressive volume growth. It is the ability to generate cash in a weaker demand environment that is one of the main reasons why JD remains one of the most followed names in the Bulios community.

JD.com' s valuation reflects the defensive nature of the company rather than a growth one. The stock trades at low multiples that largely reflect the risk of long-term lower margins and a structural slowdown in consumption. But it also means that the market is not assigning high expectations to the firm. Thus, JD may offer a relatively stable profile in 2026 with limited downside if the economic environment in China stabilises at least slightly. It is also the most undervalued company, according to the Fair Price Index, of today's selection.

The company's shares have been heavily punished by the market since the covid boom. They are trading 73% lower today since the 2021 peak. It is thus on par not only with its 2023 high, but perhaps even with its 2014 high.

Baidu $BIDU

Baidu enters 2026 as a company that is often ambiguously classified from an investor perspective. On the one hand, it is an established Chinese internet search leader with long-term stable cash flow, and on the other, a company that is trying to redefine its relevance through artificial intelligence and autonomous technologies. It is this transition from the "old" internet to a new technological infrastructure that is the main theme of Baidu's investment story in 2026.

Baidu's core business is still based on online search and advertising, which remain a key source of revenue and profitability. Although growth in this segment has been rather moderate in recent years, its stability is crucial for the company. Advertising revenues provide Baidu with a sufficient financial cushion to invest in research and development over the long term without incurring significant debt. It is this ability to fund innovation from its own resources that sets Baidu apart from many smaller technology players in China.

A key strategic direction is the development of artificial intelligence and related platforms. In recent years, Baidu has profiled itself as one of the major domestic AI solution providers, both in language models and in cloud and industrial applications. Investors are now focusing less on the technology level itself and more on the practical monetization of AI. It will be absolutely critical for a company to be able to integrate AI into products and services in a way that translates into revenue and margins over the long term.

Autonomous driving and smart mobility projects remain an important part of the story. These activities are capital intensive and their returns are difficult to predict, which increases the volatility of the stock. Currently, therefore, Baidu is rated by investors more as a hybrid title that combines a stable core business and long-term technology operations. However, the market assigns very little value to the second, technology, part and the company's chart looks accordingly. The stock is now trading at levels comparable to 2011 even though the price has appreciated 93% over the past 12 months.

Financially, Baidu remains in good shape. The company has a solid cash position, low debt and generates enough operating cash flow to cover its investments. This reduces the risk that ambitious technology projects could threaten the stability of the company. But it also means that the pace of profitability growth in 2026 will depend largely on management's ability to cut loss-making projects and focus capital on areas with the highest returns.

Baidu's valuation remains relatively low compared to global technology firms with similar profiles. The market is reflecting not only geopolitical discounting in the price, but also uncertainty about the long-term role of search in the era of generative AI. However, if Baidu manages to convince investors that it can be a key AI infrastructure provider for the domestic market, this discount may gradually narrow over the course of 2026.

The main risks are related to the speed of monetization of new technologies, the regulatory environment, and competition in AI platforms. However, Baidu enters 2026 as a company with a clear technology background, a strong balance sheet and a stable core business.

NIO $NIO

NIO is one of the most talked-about titles in the Chinese stock market earlier this year, largely because of the contrast between technological ambition and financial reality. While the brand has built a strong position in the premium electric vehicle segment and is one of the most visible innovators in battery technology and the user ecosystem, investors are evaluating NIO much more harshly today than in the past. The key question is no longer whether the company can produce attractive products, but whether its business is sustainable over the long term without a constant flow of capital.

NIO's business model is built on a combination of car sales, services and a technology ecosystem that includes a battery swapping system. This approach clearly differentiates the company from its competitors, but also significantly increases capital intensity. Price wars are squeezing margins across the sector and NIO does not have the same scope for economies of scale as the major players here. It is crucial to know that NIO is still a loss-making company. In 2023, the firm had negative margins of 38% and for 2024, although there has been improvement, margins were -34%.

A key theme for NIO in 2026 is cost management and the ability to improve operational efficiency. The company is looking to rationalise production capacity, reduce fixed costs and gradually increase the proportion of models with better margins. Yet profitability remains a distant goal and free cash flow remains under pressure. This increases the stock's sensitivity to any news on financing, strategy changes or macroeconomic developments in China.

NIO's financial health will therefore be a key focus for investors in 2026. The company has some cash reserves, but its capital burn remains significant. Any deterioration in market conditions or slowdown in sales may increase the need for external financing, which risks further dilution to current shareholders. It is this factor that explains why NIO's shares trade at a significant discount to historical levels despite the technology potential.

The price per share of $NIO is now $5.03 on the exchange. That's down 92% from its 2021 peak of just under $67.

The company's valuation reflects a high degree of uncertainty. The market attributes limited confidence to the company's ability to achieve stable profitability in the foreseeable future, while factoring in risks associated with competition and capital intensity.

The main risks are obvious: an ongoing price war, pressure on margins, the need for financing and uncertainty about the long-term return on infrastructure investment. On the other hand, NIO remains one of the most technologically advanced players in the segment.

Conclusion

The Chinese stock market in 2026 does not present the classic growth story that investors are used to in, say, the US or Japan (beyond 2025). Instead, it offers an environment where long-term structural decline meets gradual stabilization in policy, regulation and corporate fundamentals. Valuations remain low, but they are not low for no reason. A combination of geopolitical risks, weaker domestic demand and limited visibility of further growth are priced in.

Exposure to China in 2026 requires a selective approach and a higher degree of patience. The stocks that are most watched today are popular not because of optimism, but because they represent a potential turning point - either towards gradual revaluation or confirmation that low valuations reflect a deeper structural problem. It is this uncertainty that makes the Chinese market in 2026 investment-intensive but also extremely interesting.

What stands out is not just the pace of revenue growth, but the quality behind it. Strong margins and robust cash generation suggest that Broadcom is monetising AI demand in a fundamentally different way than many capital-intensive peers. For investors, this combination of scale, profitability, and visibility reshapes how the business should be valued in an AI-driven market.

How was the last quarter?

Broadcom $AVGO fiscal fourth quarter 2025 revenue was $18.0 billion, up 28% year-over-year. Growth was driven primarily by the semiconductor division, where revenue grew 35% to $11.1 billion. A key factor was a sharp increase in AI chip revenue, which management said grew 74% year-on-year.

Profitability improved at an even stronger pace than revenue itself. GAAP net income reached $8.5 billion, nearly doubling from the same period last year. GAAP earnings per share rose 93% to $1.74, while non-GAAP EPS reached $1.95, up 37% year-over-year. Adjusted EBITDA was $12.2 billion, equivalent to an exceptionally high margin of approximately 68% of sales.

Cash development was also very strong. Operating cash flow was USD 7.7 billion and free cash flow was USD 7.5 billion, representing about 41% of sales. Thus, even with rapid growth, Broadcom has maintained an extremely high ability to generate cash, which is key for further investments, acquisitions and return of capital to shareholders.

• Full presentation with results.

CEO commentary

CEO Hock Tan called the quarter a record quarter and highlighted that the main driver was AI semiconductor growth, particularly in custom accelerators and Ethernet switches for AI datacenters. The trend is not stopping, he said, and the firm expects AI chip revenue to double again year-on-year in the first quarter of fiscal 2026.

CFO Kirsten Spears added that strong EBITDA growth and free cash flow enabled the dividend to increase further. Management, she said, remains disciplined in its capital allocation and aims to continue to combine growth, high profitability and regular increases in shareholder returns.

Outlook

For the first quarter of fiscal year 2026, Broadcom expects revenue of around $19.1 billion, which would imply further year-on-year growth of around 28%. Adjusted EBITDA is expected to be around 67% of revenue, confirming that the company does not expect significant margin pressure even as it continues to expand AI capabilities.

Continued strong demand for AI infrastructure, particularly from hyperscalers and large technology firms investing in proprietary AI models and data centers, remains a key driver of the outlook.

Long-term results

A long-term view of Broadcom's performance shows a company that has undergone a significant transformation towards a highly profitable technology business. Revenue grew from approximately $33.2 billion in fiscal 2022 to $63.9 billion in 2025. This growth has not been uniform, but has accelerated significantly in the last two years, largely due to expansion in AI and infrastructure software.

Gross profit has grown to $43.3 billion and margins have remained very high over the long term. Operating profit reached USD 25.5 billion in 2025, almost double the 2023 figure. Net profit jumped to USD 23.1 billion, with a significant role played not only by operational performance but also by an efficient tax structure.

Earnings per share increased from $2.74 to $4.91 over the past four years, despite a slight increase in the number of shares outstanding. EBITDA rose to $35.5 billion, clearly confirming the company's extraordinary ability to generate cash across cycles.

News

The company announced a 10% increase in its quarterly dividend to $0.65 per share, marking the fifteenth consecutive dividend increase since its introduction. At the same time, Broadcom continues to strengthen its position in custom AI chips and networking solutions that are critical to running modern data centers.

Shareholder Structure

Broadcom has a strongly institutional shareholder structure. Approximately 79% of shares are held by institutions, with Vanguard Group, BlackRock, JPMorgan Chase and State Street being the largest shareholders. Insider ownership is low, which is typical for a firm of this size, and the shareholder base is predominantly comprised of long-term capital.

Analyst expectations

Analysts view Broadcom as one of the best ways to participate in the growth of AI infrastructure. The company is valued not only for its rapid growth in AI segments, but more importantly for its ability to turn that growth into high margins, strong cash flow and a growing dividend. It is this combination of growth and financial stability that makes Broadcom a title that is often ranked among the most attractive large technology stocks today.

Fair Price

Shares are up more than 7% today, bringing them close to the record levels from November. However, the price still sits below the resistance level of $44. If $INTC shares can get past that level, they could return to the prices investors saw at the company before 2022.

In 2025 Intel enjoyed a strong rebound. It received billions of dollars in investments not only directly from the government, but companies like Nvidia $NVDA also joined in the investment push.

Do you have Intel in your portfolio and are you waiting for the company to pull through its current weak period, or have you long since written it off?