The AI investment theme is broadening beyond leaders like NVIDIA, creating opportunities in latecomers such as Oracle (ORCL) and the next wave of software and data storage companies. Consider regional banks as an attractive value play, potentially benefiting from future Fed rate cuts and increased M&A activity. For long-term growth, explore mid-cap defense companies with innovative technology, such as drone-maker Kratos Defense (KTOS), as an alternative to legacy giants. Note the divergence between safe-haven assets, as Gold is breaking out to all-time highs while Bitcoin (BTC) has been underperforming. Be cautious with leveraged crypto-proxy stocks like MicroStrategy (MSTR), which carry significant risk and have underperformed Bitcoin recently.

Oracle (ORCL)

• The stock was up 22% in the aftermarket following its earnings report. This was described as a two to three standard deviation move, far exceeding the expected move priced by the options market.
• The quarterly results themselves were described as just "okay," with underperformance on EPS and negative cash flow.
• The massive stock move was driven by the company's strong guidance for its fiscal year 2026.
• Oracle is seen as a "late addition to the AI party," a 50-year-old company like IBM where sentiment has not caught up to the improving fundamentals.
• Expectations for Oracle were not as high as for other AI names like NVIDIA, leaving room for a positive surprise.
• A key fundamental driver mentioned was Oracle's flexible business model, which allows customers to use any Large Language Model (LLM) on top of their database. They recently signed three large customers worth billions in contracts.

Takeaways

• Oracle's significant post-earnings rally suggests the market is rewarding "up and coming" AI players, indicating the AI investment theme may be broadening beyond the usual suspects.
• Investors are currently prioritizing strong future guidance over mixed current-quarter results, especially in the AI sector.
• For options traders, the event was a reminder of the risks of selling volatility into earnings. Those who bought options (premium) likely did very well, while those who sold options likely faced significant losses.

AI & Software Sector

• The discussion highlighted a potential rotation in the AI trade. While established leaders like NVIDIA (NVDA), Microsoft (MSFT), and Palantir (PLTR) have stalled post-earnings, latecomers like Oracle are seeing significant interest.
• The "next leg" of the AI trade is predicted to be in software and databases, as companies build applications on top of the foundational models.
• Salesforce (CRM) and Adobe (ADBE) were cited as examples of frustrating software companies that have not yet delivered on their AI promise, causing their stocks to underperform.
  • Salesforce is down about 20% on the year and is seen as attractively valued at 22 times earnings with 80% gross margins, but the market has lost patience waiting for AI to boost results.
  • Adobe is described as a "melting ice cube" that has been "cut in half" because it lacks a strong AI story compared to competitors like Figma.
• Pure Storage (PSTG) was mentioned as a software/hardware company that has started to benefit from the AI trade due to the need for data storage.

Takeaways

• Consider looking for investment opportunities in the "second wave" of AI beneficiaries, particularly in software, database, and data storage companies that may have been overlooked.
• For underperforming software giants like Salesforce (CRM) and Adobe (ADBE), patience is required. While they have potential, the market is currently punishing them for a lack of execution on their AI strategy.
• The options market suggests Salesforce (CRM) options are relatively cheap (low implied volatility), which could favor strategies that involve buying options. Conversely, Adobe (ADBE) options are relatively expensive (high implied volatility), which could favor strategies that involve selling options.

IPO Market & Figma (FIGMA)

• The Initial Public Offering (IPO) market is starting to pick up, with recent listings like Circle, Figma, and CoreWeave.
• A key question raised is whether most of the gains in these companies are already made in the private markets before they go public.
• The speakers warn that post-IPO performance can be extremely volatile. Figma (FIGMA) was used as a prime example:
  • It was priced at $38.
  • It opened at $84.
  • It peaked around $142.
  • It was trading at $53 at the time of the podcast, all within a matter of weeks.
• Figma disappointed investors in its first quarterly report as a public company, causing the stock to drop 18%. This is a red flag, as companies typically try to set a low bar for their first report.

Takeaways

• Be extremely cautious when investing in recent IPOs. The initial pop can be deceptive, and volatility is very high.
• Avoid using market orders on the first day of trading for a hot IPO, as you could end up paying a much higher price than you intended.
• When evaluating an IPO, focus on the long-term (3-5 year) business fundamentals and growth catalysts rather than the short-term trading noise.
• Pay close attention to a newly public company's first earnings report. A disappointment right out of the gate, like with Figma, can be a significant warning sign.

The "Mag 7" / "Faithful Eight"

• The speakers believe the "Mag 7 is no longer the Mag 7." The group is seeing bifurcation, with some stocks performing well while others lag.
• Examples of this split: Alphabet (GOOGL) and Meta (META) are near highs, while Apple (AAPL) is off its highs and Tesla (TSLA) "can't get out of its own way."
• Because this group of stocks has such a large weight in the S&P 500, their "grindy" and mixed performance is expected to make it difficult for the overall index to achieve large gains for the rest of the year.
• Apple (AAPL) was discussed specifically, noting that it has been overtaken by Microsoft (MSFT) and, for a time, NVIDIA (NVDA) in market capitalization, signaling a potential shift in leadership.

Takeaways

• Investors should no longer treat the "Mag 7" as a monolithic group. It's crucial to analyze each company on its own fundamentals and prospects.
• The mixed performance within this group could lead to a "grindy" or sideways market for the S&P 500, suggesting that better opportunities may be found in other sectors or individual stocks.

Defense Sector

• This sector was highlighted as an interesting and attractive secular theme due to a "new paradigm shift" in defense spending.
• The speakers suggest that instead of focusing only on legacy giants like Raytheon (RTX) and Lockheed Martin (LMT), investors should look at mid-cap companies.
• Kratos Defense & Security Solutions (KTOS), a company involved in drones, was mentioned as an example of a stock that has performed very well, going from $20 to $64 in the past year.

Takeaways

• The defense sector may offer long-term growth opportunities due to increased government spending.
• To gain exposure, consider looking beyond the largest, most well-known defense contractors to smaller and mid-sized companies with innovative technology (like drones).
• For those who don't want to pick individual stocks in a niche sector, an equal-weight defense ETF could be a way to get diversified exposure.

Regional Banks

• This sector is viewed as an attractive investment opportunity.
• Bullish catalysts include:
  • A steeper yield curve resulting from Fed rate cuts, which would improve bank profitability (net interest margin).
  • The potential for deregulation after years of tight oversight since 2008.
  • The likelihood of increased Mergers & Acquisitions (M&A) activity.
• Regional banks are seen as a better value play compared to large-cap banks like JPMorgan (JPM), which is trading near its most expensive valuation ever.

Takeaways

• Regional banks could be an attractive contrarian play, potentially benefiting from the expected start of a Fed rate-cutting cycle and a favorable regulatory environment.
• They are considered cheaper and may have more upside than their large-cap counterparts.

Bitcoin (BTC) & Gold

• A notable divergence has occurred between Gold and Bitcoin (BTC).
• Gold has broken out to near all-time highs. This strength is attributed to:
  • Its role as a "disaster hedge" amid rising Middle East tensions.
  • Falling interest rates, which make a non-yielding asset like gold more attractive.
  • Concerns over the U.S. budget deficit.
• Bitcoin has been underperforming, down 10% from recent highs, and "can't get out of its own way" despite sharing some of the same bullish drivers as gold.
• A potential bubble was identified in "Treasury strategies," where companies like MicroStrategy (MSTR) issue debt and equity to buy Bitcoin, acting as leveraged proxies for the cryptocurrency. MicroStrategy is down nearly 30% over the last month, much more than Bitcoin itself.

Takeaways

• The classic safe-haven asset, Gold, is currently outperforming the "digital gold," Bitcoin. This could signal a flight to more traditional assets amid geopolitical uncertainty.
• Be cautious of stocks that act as leveraged plays on cryptocurrencies, like MicroStrategy (MSTR). These can fall much harder and faster than the underlying asset and carry significant company-specific risk. The speaker warned this area could be the source of the next crypto "blow up."