NVIDIA Leads, Hard to Bet Against
After NVIDIA (NVDA) reported results and gave guidance, there is little to dislike. The company has moved past being only the "picks and shovels" of AI. It now supplies the picks, the shovels, the land, and the "subway" - the whole build. This is a stock that is hard not to own. Shorting it makes no sense; betting against it means getting in the ring with Mike Tyson, and you end up unhappy.
Many people push back and worry about circular financing, where AI firms fund each other in loops. NVIDIA (NVDA) addressed this on the earnings call, which brought relief to many investors. It did not make the worry smaller for those who already see it as a real problem, but at least the topic was raised. The stock trading higher after that is a good sign.
The Backdrop Supports Stocks
The fundamentals stay supportive for equity markets, and not only from earnings growth. The consumer and jobs look solid. New weekly jobless claims are still around the 200,000 range. On top of that, huge sums are going into AII investment.
The Real Risk Is Debt Supply
The biggest risk sits in the debt markets. The Treasury raised the amount of purchases it makes, and that is too much supply. This is a supply problem, not a central bank discipline problem. The hyperscalers alone are bringing $250 billion of investment-grade bond issuance. The Treasury also runs its operations weekly. That adds up to a lot of debt hitting the market during the mid-summer holiday season, when liquidity is thin. The Treasury's decision may have been meant to add some liquidity into a market that has little right now.
After Labor Day the picture should look different. Even so, credit default swaps - the cost to insure against default - are widening on Broadcom (AVGO) and NVIDIA (NVDA). That signals limited appetite to absorb this debt in the short term. Over the long term the market can take it all in, but it cannot be crammed into one or two months. It has to happen more slowly.
Midterms and Seasonality
Everyone seems to be trying to push deals through before the midterm elections. The expectation is that Anthropic goes public before then, since firms want to avoid the messiness markets see around midterms. Seasonality and midterm talk is low-hanging fruit for content-starved market commentators. Volatility does pick up in September and around midterms. But coming out of the midterm elections, the data is clear: the market is very strong. Returns are solid over any three-month, six-month, nine-month, and one-year window, with an almost 100% hit rate since 1990. There is no reason to sit on the sidelines for long.
The most common winning theme this year has been the pain trade. Find where everyone is crowded, then take the other side. Right now that crowd is in cash, and there is probably too much cash. A strong print from NVIDIA (NVDA) plus a benign report from Marvell (MRVL) tomorrow could push that cash back in. The market is looking for a reason - for approval to go higher - and that likely comes in September, a usually heavy month.
Stock Picks
Arista (ANET) and Cisco (CSCO). Cisco (CSCO) also gains from campus networking upgrades. That gear is past its service-agreement years, and companies delayed replacing it during the pandemic, so upgrades are due. Arista (ANET) leads in switching and switch equipment inside data centers. Both benefit from "scale across." Even if there is political pushback or "not in my backyard" resistance to new data centers, you can still raise how much you get out of existing compute by linking data centers together. Data center interconnect (DCI) ports total under a million today. That grows fast over the next four years, reaching maybe 20, 30, or 40 million ports by the end of the decade - a massive addressable market for switch makers. These use Jericho-style Broadcom (AVGO) chips or Marvell (MRVL)-style switch gear, and Cisco (CSCO) and Arista (ANET) are the leaders.
Snowflake (SNOW). Part of a group of software names built for the inference economy, and near the top of that list. NVIDIA (NVDA) itself is up more than 50% year to date.
Twilio (TWLO), Shopify (SHOP), Cloudflare (NET). Coming out of second-quarter earnings, these join the inference-economy group. Shopify's (SHOP) recent results were strong on engagement; its Sidekick platform was up 3.6 times year over year in the second quarter - a hockey-stick move. Cloudflare (NET) added 2 million new developers in the second quarter alone, after adding 1.5 million in all of 2025. The next earnings prints for these names matter a lot.
Palo Alto Networks (PANW). Up more than 80% year to date, much of the move recent. Palo Alto (PANW) is the first security company to put every piece together into one platform, and customers increasingly want that platform approach. Traction this quarter has been very strong and is not built into company guidance. When Palo Alto (PANW) reports next week, it should raise its 2026 numbers and introduce 2027 numbers well above where the buy side sits now. Strong results from CrowdStrike (CRWD) and Okta (OKTA) point to strong cybersecurity demand as well.
