NVIDIA crushes It, AI thesis Intact – Salesforce joins In as cybersecurity becomes the next trade

I ended yesterday’ note with this.

“In the end – all Jensen has to do is validate the ‘entire’ AI investment thesis. My gut says he will not disappoint – let’s see what the algo’s think.”

Well, let’s just say it – he did NOT disappoint….. He basically said ‘we cannot keep up with customer demand’……

Revenue came in at $96.2 billion versus the expected $92.3 billion—up 106% from a year ago and 18% quarter over quarter. Data-center revenue surged to $89 billion versus the expected $85.7 billion, up 117% year over year.

The company returned $26 billion to shareholders through buybacks and dividends. It still has another $99 billion authorized for repurchases.

And the guidance? BAM! Third-quarter revenue is expected to be $108 billion (BINGO!) plus or minus 2%, with gross margins of approximately 74%. Importantly, that forecast assumes ZERO data-center compute revenue from China.

So, no—the AI trade is not dead. The AI infrastructure buildout is not slowing. And the hyperscalers are not suddenly putting their checkbooks away.

Jensen called it an inflection point: AI is doing useful work, its tokens are productive and profitable, and compute is now revenue.

That, ladies and gentlemen IS the whole story.

And just like I said – the initial move was for the algo’s and traders to hit the sell button in the moments after the announcement – they sold it off about 3% and then they took it right back and this morning the stock is trading up 7% in the pre-mkt – trading at $225/sh.

And as if that wasn’t enough – Salesforce impressed as well – and they sent that stock up 11% after they reassured investors that they CAN compete—and MONETIZE in the AI era. This morning it is trading at $230/sh. And if you look at that chart – it screams ‘beautiful’.

That matters because the AI story cannot live on chips alone. Infrastructure spending ultimately has to produce useful applications, productivity and revenue. Salesforce gave investors another piece of evidence that the monetization phase is beginning to broaden.

And speaking of the broader AI opportunity—let’s talk about cybersecurity.

Cybersecurity names* have come under pressure lately. CIBR is down approximately 11% from its highs, although it remains up about 31% year to date. To me, that pullback creates an opportunity because, going into 2027 and beyond, cybersecurity will become one of the most important secular technology themes out there.

And AI is very much part of that story—in fact, AI makes cybersecurity MORE important.

(*Names in the sector include PANW, FTNT, CRWD, CSCO, AVGO, ZS, NET and OKTA.)

Think about it. The more AI we deploy, the more data we move to the cloud and the more autonomous agents we place inside corporate systems, the larger the attack surface becomes. And guess what? The bad guys have AI too.

So, AI becomes both the problem AND the solution.

AI makes hackers faster and smarter. It produces better phishing attempts, more convincing impersonations, more sophisticated attacks and automated vulnerability discovery.

I mean, come on—have you not noticed how much more sophisticated the texts and emails have become over the past six months? Every time I turn around, I am getting another unsolicited text from an unknown number, just waiting for me to “click the link below.”

But then we have AI agents—and this is where the game really changes. We are moving from people simply using AI to AI agents actually doing things: accessing databases, moving information, writing code, retrieving credentials and communicating directly with other systems.

Every one of those agents becomes another identity, another access point and another door that somebody has to protect. And look at what happened during Anthropic’ s cybersecurity testing. Claude models reached the live internet from evaluation environments and gained access to real systems. That does not mean the models woke up one morning and decided to become criminals -but what it does demonstrate is what can happen when powerful autonomous agents are given tools, access and objectives without sufficient guardrails.

That is the risk. AND it is also the opportunity.

The same AI that allows attackers to operate faster can help cybersecurity companies identify abnormal behavior, detect threats and respond to attacks in real time. As the attacks become more automated, the defense has to become more automated as well.

Global information-security spending is expected to reach approximately $244 billion in 2026, up nearly 12%, and that number should continue growing as companies are forced to protect their cloud systems, data, employees and now their AI agents.

So, for me, the recent weakness opens the door to an investment opportunity. You can own the individual leaders, or you can use CIBR to own the broader theme and reduce the company-specific risk.

Either way, the investment thesis is straightforward: the more AI we deploy, the more cybersecurity we are going to need. AI is creating the threat—and cybersecurity companies are building the defense.

In the end – do your homework, reach your own conclusions, I am not telling you to go all in, but I am saying start with this basic premise and then move on from there.

Ok – so now that that’s over – can we move on?

Stocks spent Wednesday doing a whole lot of nothing as investors waited for Jensen to take the stage after the bell. At the end of the day - the Dow lost 113 points, the S&P gave back less than 2 points, the Nasdaq lost 21 points and the Russell ended essentially flat, the Transports added 127 pts, the Equal Weight S&P lost 4 while the May 7 gave back 45 pts.

It wasn’t a selloff. It wasn’t a rally. It was just the market holding its breath ahead of the most important earnings report of the quarter.

Of the 11 Sectors – Industrials, Utilities, Tech, Energy and Basic Materials all advanced…

Healthcare lost 1%, while Communications, Staples, Discretionary and Real Estate all came under pressure with Financials closing unchanged.

Airlines got whacked – losing 1%, the Value Trade gained 0.7%, Semi’s up 0.3% while Cybersecurity gained 1.3%.... Metals & Miners lost ground – down 0.5%, Software gained 0.5%, while Aerospace & Defense gained 0.9%.

Bonds lost a bit of ground – the TLT and TLH both down 0.2% leaving yields mostly unchanged. The 2 yr is now yielding 4.22%, the 10 yr is at 4.66% while the 30 yr is at 5.18%. Now this leaves the long end of the curve just below ‘my’ danger zone definition – but let’s not kid ourselves – it is still high enough to pressure stock valuations, raise mortgage costs, raise corporate borrowing costs and raise the government’s interest expense.

Yesterday’s eco data - Headline PCE - the Fed’s preferred inflation gauge - rose 0.2% in July and remained at 3.7% y/y, slightly hotter than the expected 3.6%. Core PCE rose 0.2% for the month and 3.3% over the year.

Personal income rose 0.4%, 2 x’s the estimate, while spending increased 0.2%, also better than expected. Second-quarter GDP was unrevised at an annualized 1.5%, but the headline does not tell the whole story. Final sales to private domestic purchasers was revised up to 4.2%, while corporate profits surged by $400.9 billion.

Durable goods orders reinforced that point. Headline orders rose 1.1% versus the expected 0.5%, led by transportation. Ex-transportation orders gained 0.4%, while orders excluding defense rose 1.3%.

So, here’s the message to take home…..the economy is NOT collapsing. Consumers still have income. Businesses are still investing. Corporate America is still making money. But inflation remains well above the Fed’s 2% target.

And that means the Fed still does not have a reason to lower rates (just to be clear), but I am not sure they have a reason to raise them either…. But what it will do is keep the hawks in the room.

Oil, though, continued to offer relief. WTI slipped another 0.2% to settle at $82.23, while Brent fell 0.8% to $87.84. This morning – WTI is flat while Brent is up 50 cts.

The move in oil a direct reaction to the conversations between Iran and Oman and the possibility of an open Strait of Hormuz.

In addition, the EIA reported that U.S. crude inventories rose by 95,000 barrels to 428.9 million—the fourth consecutive weekly build. Recall – the IEA also reported an increase in crude inventories on Tuesday.

So, while oil is backing off, do not confuse it with a resolution of the Middle East problem. It is not - geopolitical risk has not disappeared and any disappointment over negotiations can put the geopolitical risk premium right back into price of oil.

Gold also came under a bit of pressure as bonds declined and yields held steady. Yesterday it lost $64 or 1.3% leaving it at $4,593. This morning gold is down another $12 at $4,581. Nothing about the long-term gold story changed - trendline support is $4,520 with short term resistance at $4,700. A failure to hold support will see it test $4,380.

So, we are back to the same place - earnings are supporting stocks, while rates are limiting how much investors should be willing to pay for those earnings. This does not mean abandon technology or the AI theme. It is the moment to recognize that leadership is broader than seven stocks and I discussed that with Liz yesterday as well.

Consumer Staples – likely the most boring sector in the group – other than Utilities – is having a heck of year…. the group is up 11.5% - individual names up even more – we named 3 yesterday – KO +28% ytd, ADM + 39% & TGT + 67% and that is just a ‘taste’ of what’s out there.

Meanwhile, an equal-weighted Mag 7 portfolio is up only about 2.4% YTD. Within the Mag 7, performance is wildly dispersed: Apple +14%, Nvidia +13%, Amazon +13%, Alphabet +11%, Microsoft +2%, while Meta is -14% and Tesla -21%. And that speaks volumes about having a well designed and balanced portfolio to help you achieve your goals.

Yes, you can own the brains, the power, energy, infrastructure, cooling, memory, networking, software, but you should also own financials, healthcare, consumer staples, SMID’s and high-quality industrial companies that round out a good portfolio. Because a great portfolio is not built around one story.

Eco data today – nothing that will be a market mover at all.

Jackson Hole has now officially kicked off…. everyone is making a big deal about what Kevy will or won’t say…. I’m in the camp that he will not say anything about what the FOMC is thinking and I doubt he says anything about the tricks that Scotty is pulling…. My gut says – ‘less is more’ and Kevy has made it clear that that is also how he feels. And btw – the theme of this year’s boondoggle is payments and processing – and that has nothing to do with inflation or monetary policy.

This morning – European markets are lower.

US futures are confused - Dow futures are down 30 pts, S&Ps are up 21, Nasdaq is up 290 while the Russell is down 5 pts. I think it is clear why the S&P and Nasdaq are up….

The S&P closed at 7,675 – down 1 pt…. We are right in the middle of the trading range – 7550/7800. The NVDA beat is helping to push the broader market up - will we test the highs of 7800? Not today…..