Retail traders are getting bulled up on Nvidia and Microstrategy

The trade war is over and risk appetite is high.

That’s the message from Bank of America’s September survey of fund managers with $426 billion in assets, who are collectively their most optimistic since February 2025 (an intermediate peak for the S&P 500).

Key to this view seems to be that investors have capitulated on the idea that higher prices on US imports and disruptions to cross-border trade are the top threat to economic activity. “Trade war triggers global recession” was deemed the number one tail risk from the February through August surveys. It’s now #4, trailing a second wave of inflation, the loss of Fed independence/US dollar debasement, and a disorderly rise in bond yields.

Positioning among institutional investors is “starting to close the gap to retail investors’ stock allocation,” writes Bank of America chief investment strategist Michael Hartnett.

Implicit in this increasing bullishness is a desire for companies to take part in the AI boom and invest for growth and efficiency.

“Asked what companies should do with their cash flow, 39% of fund manager survey investors said they want companies to increase capital spending (the most since Dec'24) while 27% said they want companies to improve balance sheets (lowest since Feb'22),” writes Hartnett.

Oscar Health fell as much as 5.1% in premarket trading on Tuesday after the company announced it will terminate its revolving credit line with Wells Fargo, thanks to a $355 million proposed private convertible note offering.

The company announced it will offer $355 million in 2.25% Convertible Senior Subordinated Notes maturing in 2030. Oscar said the raise will fund "general corporate purposes, including future expansion opportunities fueled by strategic AI and member experience initiatives as well as the potential extension of enhanced premium tax credits."

Oscar, like many health insurance companies that offer government-sponsored plans, has had a tumultuous year amid rising costs. The company recently reiterated its full-year guidance after making a huge cut in July.

Bank of America analysts bumped up price targets for hard disk drive (HDD) industry leaders — and S&P 500 top stocks — Seagate Technology Holdings and Western Digital as surging AI data center demand for these low-cost, long-term data storage devices continues to ramp up. They wrote:

“We raise our calendar year hard disk drive exabyte shipment forecast to 1,602 exabytes (+28% y/y) from 1,575 exabytes (+26% y/y) and see room for further upside as demand continues to outpace supply. Despite double digit percentage increases in total capacity... from STX & WDC so far during C25, HDD industry supply remains tight.”

BofA boosted its price target for Seagate from $170 a share to $215, slightly above where the stock is trading on Monday. The analysts also increased their stock price target on Western Digital from $100 to $123, implying a roughly 20% premium to where its share were trading Monday afternoon shortly before 2 p.m. ET.

Besides being an influential market driver this year, demand for hard disk data storage also reflects the vast amounts of data that the boom in AI is expected to generate. (A single exabyte is the equivalent of 1 billion gigabytes.)

As a result, hard drive makers like Seagate and Western are focusing on the next generation of high-capacity data storage gizmos that pack more data bits. These devices are also more profitable than traditional disk drives, which has helped to boost the profitability of the industry, BofA analysts said.

“As HDD demand continues to outpace supply, STX & WDC have seen profitability metrics hit all-time highs,” they wrote.

Those profitability metrics could help explain why the stocks have suddenly caught the fancy of traders.

“We estimate that STX & WDC can get above 42-43% corp gross margin levels exiting [calendar year 2028],” they wrote. “But if pricing is stronger than expected or if manufacturing efficiencies lower COGS, we believe margins could go even higher. Key risks include pause in hyperscaler capex (low probability) and tariffs.”

Seattle-based Alaska Air is trading lower Monday afternoon after the airline warned investors that its third-quarter profits will likely come in on the low end of its prior outlook.

When Alaska Air reported its second-quarter results in July, the airline said it expected third-quarter earnings to land between $1 and $1.40 per share. As of early Monday, analysts polled by FactSet estimated $1.35.

A host of issues are behind the company’s expectations of a dent to earnings. ALK said it’s projecting fuel costs to climb to between $2.50 and $2.55 per gallon, up from its previous estimate of $2.45, due to West Coast refinery disruptions. Weather and air traffic control issues “led to increased costs from overtime, premium pay and passenger compensation,” Alaska said.

With Monday afternoon’s move, ALK shares are down about 8% year to date.