Good afternoon. QQQs -1.3% on fairly quiet day. Oil +6% as tensions in the Middle East increased as two tankers were struck with projectiles Tues morning and U.S. launched a fresh round of airstrikes against IRGC targets Tues afternoon. Yields rose 2-5bps across the curve while Fed expects ticked up in a hawkish direction with market now pricing in 40bps worth of hikes vs 25bps pre Jackson hole. Odds of a sept hike now near 70bps.
In Tech, a lot of red with Semis/Software both down 2% and Internet -1%. Broad low liquidity de-grossing day: everything red except Telecom (+0.3%), with the damage concentrated in the high multiple growth: Security SW -5.3% (CRWD/S/NET/ZS/FTNT all -5% to -7%), Expensive Software -4.3%, Optical -3.9% (CRDO -8.6%, CIEN -6%, LITE -5%, ALAB -6% all underperformed), Neoclouds/Miners -3.6%, plus the EDA pair (CDNS -7.6%, SNPS -5.6%). Bitcoin Related was the worst factor at -6% (COIN, CRCL) and took fintech down with it (AFRM, XYZ, UPST). BTC -2%.
Post-close Earnings:
MDB -13%: Sentiment & positioning had sneakily increased into the print and the the ~13% selloff is about Atlas, not the headline revenue beat: 29% growth fell short of the 30%+ buyside hurdle. Q3 Atlas guidance, potentially coming on the call, will be key focus where buyside wants to see at least 27%
Q2 revenue: $772M vs. $735M Street, 5% ahead; Atlas growth +29%.
Q3 revenue guide: $758.5M vs. $745M Street, 1.8% above.
FY revenue guide: $3.01B from $2.94B, a $70M increase versus $37M of Q2 upside.
DELL +10% looks really good. Another massive guidance raise, with FY $25.50 vs. $17.90 taken up past where buyside was at $25 and comfortably above the low-$20s buyside bar. Revenue $192B, up 15% from prior guidance; AI-server revenue $74B, above bogeys of $70B and street in mid 60s.
PANW +4% very solid despite high expectations as near-term security demand continues unabated and enough for bulls. NGS cleared bogeys. NGS ARR +63% vs. +59–60% guided, adding roughly $970M of net new ARR vs bogeys of low 900s. Guided NGS ARR of $9.54–9.56B (+63%) vs. $9.2B (+57%) Street; total revenue growth of 33–34%, versus roughly 14% a year earlier.
Let’s get to the good stuff…
AI/SEMIS
Fable 5.1 out today and benchmarks look really good:
Good pod from Alex Heath with Sam Altman. Key Quote:
“We delayed a frontier RL training run. We definitely have not slowed down, paused or delayed all training. This is specifically about frontier RL runs, where we think the biggest risk surface currently is. The model that caused the Hugging Face incident is, in AI-adjusted time, a relatively old and much weaker model.”
More…
1. Compute: demand keeps absorbing efficiency gains, but neocloud overbuilding is becoming speculative
Sam remains confident OpenAI can fund and profitably use its committed capacity, but sees new neoclouds announcing enormous buildouts without customers or supporting revenue. He warns that investing regardless of cost could produce poor returns if better chips and infrastructure sharply reduce compute costs. OpenAI is not immune to a broader downturn, but he distinguishes that risk from concerns about its own commitments.
Sam says efficiency savings repeatedly get consumed by rising token demand rather than relieve capacity constraints. Bringing broader adoption anywhere near today’s heaviest users, alongside larger and more capable models, requires substantially more abundant and cheaper compute.