Futures are mostly higher, but the picture is split. The 10-year Treasury yield is down five basis points this morning. Expect sector-by-sector splitting today. Everything was green early, but NASDAQ futures are now flat. Chip names are pulling back. Data center stocks like CoreWeave and Nebius are under pressure. Tesla (TSLA) and SpaceX are down after Elon Musk's bid to boost Republicans in the midterm elections failed.
Gridlock and sector effects
Congress is turning blue while the president keeps veto power, setting up gridlock in Washington. Historically, gridlock gives equities and risk-on assets a small bounce over the next quarter or so. This time may differ because many ballots carried measures on AI and data centers, which investors now have to work through.
Healthcare stocks are showing strength on the Democrats taking back Congress. Defense stocks are under pressure. Bitcoin is up slightly. Gold is reversing. A lower dollar, lower crude oil prices, and lower yields all help equities. Crude has posted steep losses for a second day in a row. The NASDAQ has been in correction territory this week. Data due today includes ADP and ISM services PMI numbers. Some early optimism may be fading, but a full trading day remains, and markets historically post solid gains after midterm elections.
AMD (AMD)
Earnings beat and guidance was raised. Data center revenue, the strongest growth area, grew 97% year-over-year. Earnings per share came in at $2.09 versus $1.97 expected. Revenue was nearly $13.4 billion, up 45% from a year ago. The data center arm brought in $8.5 billion and keeps growing, taking some market share from Nvidia (NVDA). Client business revenue, which includes PC sales, was about $2.9 billion, below expectations of over $3.05 billion. Gaming business sales came in at $773 million, down 40% year-over-year but above street estimates.
Fiscal year 2027 revenue growth is expected to top 80%. CEO Lisa Su was upbeat on the conference call and said demand for Instinct and EPYC products strengthened through the quarter. The consumer business should get through its rough patch, with a bottom expected in Q3. This same weakness drove Intel (INTC) down about 29% last Friday after its earnings. Good report on top and bottom lines with raised guidance, but the open question is whether the elections stall AI data center buildouts, even as chip demand still outstrips supply.
Arista Networks (ANET)
Shares rallied in the pre-market but came off their highs. The company makes cloud computing networking gear, and strong cloud growth from the hyperscalers benefits it. Earnings rose 60% from a year ago to $1.20 per share adjusted. Revenue jumped to $3.66 billion, up 58% year-over-year. Guidance predicts about $3.95 billion for the current quarter, the midpoint of the range. Fiscal year 2027 revenue is expected at about $18.5 billion versus consensus just under $16.5 billion. That points to year-over-year growth of about 38% to 40%. Biggest customers are Microsoft (MSFT) and Meta Platforms (META), with newer customers Oracle (ORCL) and Alphabet (GOOGL). Expanding cloud growth rates explain the jump in guidance.
Datadog (DDOG)
Shares were hit hard in the pre-market, down double digits despite a beat. Earnings came in at about 81 cents versus 64 cents expected. Revenue was $1.2 billion, above the near $1.15 billion expected, up 35% year-over-year. Operating cash flow was about $290 million. The company runs monitoring and analytics tools for software developers and IT departments and has a big contract with Amazon Web Services (AMZN). The bar was high: the stock was up about 62% in 2026 so far, even after a roughly 26% pullback from all-time highs last month. Current quarter EPS is guided to 69 to 71 cents versus consensus of 64 cents. Revenue midpoint is about $1.195 billion versus consensus of about $1.2 billion, basically in line. Fiscal year 2026 revenue guidance was raised to $4.52 billion from $4.46 billion at the midpoint. A good quarter, but in-line current-quarter guidance plus the big run-up made it a sell-the-news event, worsened by the tech turnaround this morning.
