1. SanDisk rewrites the “Memory” rulebook.

SanDisk sent analysts scrambling to rewrite their models after blowout earnings turned out to be the second headline. The real story is a permanent structural shift: hyperscalers are now signing five-year supply contracts with financial guarantees, effectively turning a cyclical chip company into something closer to a subscription business.
Five multi-year partnerships locked in a minimum $42B in committed revenue, with gross margin guided toward 80%.
SK Hynix and Samsung Electronics were jumping another 12% higher. They are still only valued at a forward P/E of 5.
Hyperscaler capex spending as well as margin improvement are key industry data points for the “longer and higher up-cycle” and support the long-term multiple re-rating of the stocks.

2. Hyperscaler capex.

The combined forecast for the three hyperscalers has increased from $174bn at the start of 2024, to $407bn at the start of 2026, and has increased a further 67% year-to-date to $679bn.

Below: Amazon + Microsoft + Alphabet capex forecasts

3. The momentum divide between hardware and software.

Part of the challenge for fund flows into Software and Services has been the sheer EPS momentum divide between the software and hardware complex (semis, semi-cap, memory etc.) over the past year. If investors are looking for signs of data centre capex slowing as a potential reason to rotate back into software, this week's trio of results from the big 3 hyperscalers - Amazon, Microsoft, Alphabet - gave little reason to think the tide of technology investor focus is likely to shift in the short-term.
But the valuation of the software universe is attractive.

4. Earnings strength continues.

Resiliency this earnings season is broader than appreciated with a median stock EPS growth rate of 16% and a beat rate of 6% (strongest in four years).

Below: Earnings have been resilient amid recent risks. Blue line.

5. Chipmakers are dominating EM stock markets.

Below: Weightings of MSCI EM and S&P500.

Not a subscriber yet?