Markets
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Luke Kawa

The return of AI credit risk is crushing data center stocks, tipping over other speculative trades in the process

The upstarts participating in the disruptive industry of today as well as the speculative trades that mark the industries of the future are getting crushed on Friday.

It’s a sign of the creeping investor revolt against the capex binge.

The poster child for the move is CoreWeave, which is sinking after reporting Q4 capex figures that were larger than expected along with a 2026 investment budget that also surprised to the upside.

Neoclouds and data center companies like Nebius, IREN, Applied Digital, and Cipher Digital are also getting whacked. So too are the quantum computing companies: IonQ, D-Wave Quantum, Rigetti Computing, and Infleqtion.

What’s the common link between these two things?

Well, as we’ve discussed, speculative stocks tend to have common owners and trade in a relatively correlated fashion. And once again, this simultaneous swoon is coinciding with a perceived escalation in AI credit risk.

These smaller AI companies that have effectively bet their existence on this boom and the willingness of capital markets to fund their expansion plans would have the most to lose if either demand or access to credit shrinks. And, of course, the latter would impact other companies in nascent industries that need capital to grow.

The private credit industry, which has been broadly overweight software companies in their lending activities, is coming under severe pressure as those firms face competition from AI tools.

Block’s job cuts, regardless of any previous mismanagement CEO Jack Dorsey is willing to cop to, will do little to allay fears that software executives may take dramatic actions to grapple with the impacts of this emergent technology.

Meanwhile, the source of that disruption — AI — is also continuing to suck in a lot of capital without much in the way of returns. It feels like the credit market simultaneously doesn’t want to fund software because of the AI disruption threat and doesn’t want to fund upstart AI firms because of the lack of visibility into free cash flow generation. Not great, Bob!

Oracle, the large-cap stock most used as a barometer for AI credit risk, enjoyed a sharp improvement in its perceived creditworthiness after management said on February 1 that about half their funding needs this year would come from equity, rather than fully from debt. Now, its five-year credit default swap spreads are poised to close at their widest level since 2009.

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Tasha Matsumoto
13h
Stocks close week with new records powered by tech gains and ceasefire optimism

The S&P 500 gained for the ninth straight week, its longest winning run since 2023.

Michael Jordan #23, Shooting Guard and Small Forward for the Chicago Bulls wearing a warm up jacket looks on during player introductions before the NBA Midwest Division basketball game against the Denver Nuggets
markets
Luke Kawa

BlackBerry is on one of its hottest rallies of all time

History suggests that BlackBerry does extremely well when 1) it’s considered to be pioneering a transformative technology, or 2) there’s widespread retail enthusiasm for stocks.

If you squint (or dream), you could argue that both are going on right now.

Shares of the once-upon-a-time smartphone giant are up more than 160% over the past three months. The only times the shares have had a hotter run of form than this are at the tail end of the dot-com bubble, and in early 2021 when was it part of the meme stock craze headlined by GameStop.

Let’s start with the easy part first — here’s Scott Rubner, head of equity and equity derivatives strategy at Citadel, on retail’s significant footprint in the shares’ rally:

“Retail traders are the new price setters in the market. May volumes across our retail cash equities and options platforms are currently tracking at record levels. Daily volumes on our cash platform are setting new highs and are on pace to finish nearly ~10% above the previous record established during the January 2021 meme-stock era.”

And then there’s the harder part, part of the story that the traders bidding up BlackBerry now are dreaming about: the QNX division, which offers software that the company is positioning as an operating system for robots.

QNX’s software has early uptake in the field of autonomous driving, with BlackBerry eyeing a much more widespread role: in April, it announced a partnership to deploy this technology on Nvidia’s robotics platform. Nvidia’s Jensen Huang, for his part, has long been calling for agentic AI adoption to be followed by physical AI (i.e., robots).

In a QNX press release unveiling a report this week, the company argued that software, not hardware, is the real problem in terms of making sure robotics works.

I supposed it would be poetic, in a way, if the company at the leading edge of the smartphone revolution also plays a big role in the proliferation of robotics.

markets
Luke Kawa

Micron and Sandisk rally on new Street-high price targets from Susquehanna

Micron and Sandisk both hit fresh all-time highs in early trading after Susquehanna bestowed new Wall Street-high price targets on the two memory stocks.

Analyst Mehdi Hosseini upped his view on the former to $1,750 from $600, and to $3,250 from $2,000 for the latter.

“Supply is now expected to remain tight through 2027, sustaining elevated margins and thus warranting valuation re-rating,” he wrote, per Bloomberg.

It’s the fifth time in the past year that the average price target on Micron has gone up by more than 10% in a week. UBS’s Tim Arcuri more than tripled his price target on Micron earlier this week, and has already lost the title of “most bullish.”

But even as analysts are tripping over themselves to raise their price targets on these stocks, the ferocity of the rally in Micron has outpaced their best efforts.

The high-bandwidth memory specialist traded at a record premium to the consensus Wall Street price target this week, based on data going back to 2008.

markets
Helena Cheng

Okta soars on Q1 earnings beat, raised outlook driven by AI security demand

Okta shares are surging in early trading Friday after the identity security provider posted Q1 fiscal 2027 financial results that exceeded Wall Street estimates. The strong results are fueled by accelerating corporate demand for cybersecurity software, as well as the deployment of autonomous AI systems.

Key numbers:

  • Adjusted earnings per share of $0.91 compared to analysts’ estimate of $0.85.

  • Revenue of $765 million compared to an estimate of $752.7 million.

The company generated subscription revenue of $750 million, up 11% year over year. Okta also has $271 million in free cash flow, up from $238 million in the prior year’s quarter.

While standard cybersecurity software protects human workers, the latest catalyst sparking Okta’s strong corporate performance is the rapid emergence of autonomous AI agents that can access sensitive corporate databases and interact with privileged executive accounts.

“AI agents are rapidly becoming a new workforce inside every organization, creating a wave of identities that must be secured and governed alongside human users,” said Todd McKinnon, CEO and cofounder of Okta. “We’re expanding our opportunity as the world’s leading independent and neutral identity provider and helping customers make identity the unified control plane for their secure agentic enterprise.”

Okta raised its fiscal 2027 revenue guidance to between $3.185 billion and $3.205 billion, roughly in line with estimates of $3.18 billion. The company formally dropped its long-term projected non-GAAP tax rate from 26% down to 21%. This adjustment is a direct byproduct of the federal corporate tax frameworks under the One Big Beautiful Bill Act.

Shares of Okta have risen around 9% since the beginning of this year.

markets
Helena Cheng

HPE, SMCI surge after Dell’s Q1 beat on strong AI server demand

HP Enterprise and Super Micro Computer shares are surging in premarket trading, getting a big boost from rival Dell’s strong Q1 results.

Dell’s $16.1 billion in AI-optimized server sales for the quarter alone proved that enterprise data center demand is accelerating faster than Wall Street had anticipated. The company posted revenue of $43.8 billion, exceeding Street estimates of $35.5 billion. Management now sees full-year sales of about $167 billion, well above the $142 billion expected by analysts.

The read-through is particularly relevant for Super Micro, one of the largest suppliers of Nvidia-powered AI server systems, and HPE, which has been expanding its AI infrastructure and liquid-cooling offerings through its partnership with Nvidia.

The moves suggest investors view AI infrastructure as a broad spending cycle that benefits server makers across the entire ecosystem.

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