Tiernan Ray

The scorecard for this week...

Brutal

I’ve been interviewing executives during earnings season for decades now, and the challenge is always to get a message across that is coherent and that’s beyond the moment in the midst of what can be mild panic in after-hours trading. I think Khozema Shipchandler of Twilio was able to comport himself very well in that respect when we chatted yesterday evening, a day that was a rough one for all of tech not just his stock. Twilio CEO: ‘Buy the dip!’ Shares of software maker Twilio plummeted as investors sold the company’s lower-than-expected growth projection for 2027. But, there are several levers to the business that are under-appreciated, says CEO Khozema Shipchandler, in particular, the role of being essential infrastructure for two parts of AI infrastructure, automated voice communications and the new wave of consumer shopping bots. thetechnologyletter.com $TWLO

Hynix’s quarterly dividend of 20,000 Korean Won is $15 is a huge jump, year over year. That’s $1.50 for every American Depository Receipt. For a stock trading at 2.5 times projected earnings, that’s a steal of a deal. You can understand why everyone wants to believe these good times will keep rolling right along. SK Hynix surges: Memory’s in great shape, a huge payout, what could go wrong? The memory-chip market continues to see incredible trends according to SK Hynix, whose results are trouncing expectations. The company’s stock is surging 13% as it hands over an enormous dividend. Estimates are rising and analysts are pounding the table for the stock. The only real question is how fast will supply come on? thetechnologyletter.com $SKHY $MU

The TL Podcast for October 26th: Is this the soft landing? Are we in for a soft landing or a hard landing? Meaning, do stocks simply lose ground, lose altitude like a balloon slowly leaking air? Or are we headed for something of a much sharper sort of correction? We've seen a valuation, I wouldn't call it a reset, but we've seen a less-demanding valuation environment. Nvidia was trading at 9 times sales when I picked it for the October rebalancing. That was based on a reference date of October 7th. It is trading now for 8.2 times. Well, here's a hopeful thought: Maybe the rest of the year, the last sixty days of the year of 2026 are all about these stocks losing air like a balloon slowly deflating. And that would make any disappointment from the Apollo Globals of the world less jarring in 2027 should they in fact walk away from the multi-hundred billion dollar projects they have chosen to fund. thetechnologyletter.com

I had a delightful chat with Charlie Giancarlo of Everpure and board member Andy Brown. Their perspective of decades in building technology appeals to the historian in me. The problem they’ve addressed with Everpure’s software is a significant one. The piles of data sprawling across the IT “estates” is really a mess, in my view. The notion that “trillions” worth of white collar work can be automated via AI in short order is not realistic until this problem is confronted. Everpure CEO: AI is prompting a great ‘inversion’ of decades of technology investment Decades of buying information technology have left enterprises in a mess: piles of data that are redundant, inconsistent, and unmanageable. The matter could get worse as so-called AI agents enter the mix, say Everpure chief executive Charlie Gianncarlo and venture capitalist Andy Brown. Their solution is a new kind of “map” of enterprise data. It could be as big a change as the move from mainframes to mini computers. It could also boost Everpure’s stock valuation. There are deeper implications for the AI labs such as OpenAI and Anthropic, and for the AI trade itself. thetechnologyletter.com $P @EverpureData

I wouldn’t parse the Seagate results tonight too closely. It continues to be more of the same, which is to say, a phenomenal opportunity for the two dominant vendors of hard drives for the AI wave. Seagate sells off but the outlook is still very good After a 142% rise this year, it’s no surprise Seagate is trading lower on what could be construed as less-impressive upside. Clearly, the bar has been raised. But the forecast for this quarter’s sales suggests the market for hard drives continues to be very strong, and the profit-margin expansion here is simply stunning. thetechnologyletter.com $STX $WDC

I continue to be amazed not only by the rapid expansion of Celestica’s business but also by the way that they’ve been able to turn that into higher profitability. There were lots of nice things heard, also, on Tuesday from the company that portend well for various tech vendors such as Arista Networks. Celestica surges as the AI chip race keeps going The custom-chip market for AI is fueling growth next year for Celestica well above what the Street has been projecting. And profit margin is going higher as well. There are also positive signs here for the computer networking and data storage complex with bodes well for Arista, Ciena, Everpure and others. thetechnologyletter.com $CLS $JBL $FLEX

There’s no discussion of pricing in the Anthropic draft IPO filing. My sense is this market definitely will see pricing pressure, which calls into question the majority of revenue that is “consumption”-based, and that is not entirely at fixed, agreed-to prices. That’s one of the biggest flies in the ointment. Anthropic: Not sure it’s sane nor bold, maybe wasteful Anthropic has committed to over three quarters of a trillion dollars just from what it discloses of compute capacity agreements. Add that to a “controlled company” stock, founders with a lock on voting, a massive convertible debt possibility, interest rate exposure via money markets, a incalculable insurance risk and this IPO looks like a dog. Is a fast-growth business of $12 billion a quarter worth all this? thetechnologyletter.com @AnthropicAI

Merrill Lynch’s Andrew Obin conducts what is becoming an annual ritual of exhaustively going through all the vendors of data centers. It’s a great exercise if you want to take your mind off of the very bothersome matter of where all the money for this is supposed to come from… It’s the Great AI Rotation, but you can still pick ‘winners’ Street wisdom is divided over the AI trade, with the hopeful perspective depicting trillions in liquidity to fuel more building and the negative slant being just rotate out of the infrastructure vendors. But, you can stil pick winners in the data center. And, SpaceX’s massive cellular investment comes into focus and with it ominous signs for the telcos. thetechnologyletter.com $SPCX $DELL $MRVL

Investors are deciding to get out while the getting’s good. Stellar results only portend possible heartbreak as far as the AI trade, it seems. However, I suspect what most investors miss is that it’s supply not demand that they have a hard time really guess-timating. That’s an important distinction in these times. It’s time to sell the winners again as Western Digital, Bloom report outstanding results, shares drop Another raft of excellent financial reports Thursday by Bloom Energy and Western Digital prompted sell-offs. The longer that business continues to hum right along, the more it raises concerns that it can’t last. Hopefully, the selling is a kind of “soft landing” for stocks, a way to take the pressure out of a very pressured stock market. thetechnologyletter.com $WDC $BE

It can be useful to talk to vendors if you know the right questions to ask. As regards Artificial Intelligence, I had a stimulating chat last week with Snowflake executives Jonathan Beaulier, chief revenue officer; Anahita Tafvizi, chief data and AI officer; Denise Persson, chief marketing officer; and Christian Kleinerman, executive vice president of product. We’re still very, very early in the deployment of AI by most companies. There are signs of hope, however. Use of AI is boosting Snowflake’s revenue while mortal companies may take longer Software giant Snowflake is in the top tier of companies finding they can automate tasks inside the company such as financial reporting and the identification of sales prospects. It’s already boosting revenue and profit. There are encouraging signs for ordinary companies using AI but it’s clear they still have a very steep learning curve to “transform” their businesses. thetechnologyletter.com $SNOW @Snowflake

Last week’s simply awful trend for the AI trade is reversing nicely today, with the TL20 group of stocks to consider up 5% week to date and the newly formed TL20 Special Situations — somewhat of an odd group of companies — up an even better 6%. thetechnologyletter.com

SpaceX is lighting up gigawatts of compute faster than indicated ninety days ago, leading to tonight’s surprising peek into 2027 Q1 revenue. Oh, and spending is going way higher too. CFO Bret Johnson sees the credit market as just fine, which is also surprising. SpaceX shares rise on an eye-popping peek at 2027’s revenue SpaceX’s AI revenue nearly triples, but the big disclosure is a peak at Q1’s revenue in 2027, $33 billion to $37 billion, more than fifty percent higher than current expectations as the company lights up more gigawatts than previously forecast. Oh, and the spending, of course, is going way up starting this quarter. thetechnologyletter.com @SpaceX @elonmusk $SPCX

An interesting chat with Paddy Srinivasan last week as everything in AI was melting down. I don’t think anything will escape a market collapse, but I do appreciate the relative safety of not being massively debt-laden. They used to call 7-Up the “uncola” in the 1970s. Perhaps DigitalOcean is something of the sort compared to the Neoclouds such as CoreWeave and Nebius. “Supply chain arbitrage is not a sustainable moat." DigitalOcean CEO: ‘We are not going to be extraordinarily leveraged like some others’ At the end of an awful week for the AI trade, DigitalOcean CEO Paddy Srinivasan makes the case that having valuable software means not having to sell a commodity, something more than the mere running of “tokens.” His company’s stock could benefit from the distinction. thetechnologyletter.com $DOCN $NBIS $CRWV

A couple weeks ago I met with Zscaler CEO Jay Chaudhry, and CFO Kevin Rubin, and we talked about why the company’s stock doesn’t always get its proper due relative to Cloudflare and CrowdStrike and Palo Alto. One thing is for sure, this market that is trying to figure out artificial intelligence in the enterprise is buying a lot more cyber-security technology because you never know what could go wrong. Zscaler CEO and CFO: We have the opportunity of a lifetime Cyber-security vendor Zscaler’s stock has underperformed that of its peers. Part of turning that around is telling the story more consistently, say CEO Jay Chaudhry and CFO Kevin Rubin. The risks of “rogue AI” could add to the company’s prospects in a big way. thetechnologyletter.com $ZS

One of the things that’s different about The Technology Letter is ACCESS. I’ve done 232 interviews of CEOs and CFOs of public companies in 6 years, about 40 interviews a year. That gives me unusual insight into the intentions, the strategy, the ways that these executives have of thinking about where there businesses are going. thetechnologyletter.com

The eighth rebalancing of the TL20 group of stocks to consider continues to track a broad semiconductor renaissance, the best of times for chip makers — but also a time filled with uncertainty over massive spending plans for AI infrastructure. Seven names are out, seven are in. In addition, a second index, the TL20 Special Situations is an eclectic mix of companies with astronomical potential, sometimes beaten down valuations, and sometimes prospects years out in the future. thetechnologyletter.com