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Table of Contents
🔥 Here’s What’s Happening Now
One of the worst up 77bps days I think I have ever seen. Curious how much of the up move we saw in the indices was due to AAPL (not curious enough to do the math).
Advance/Decline was bad, small caps were down (long time readers know I think IWM sucks), lots of bad earnings moves (see SMCI commentary from yesterday).
Narrow markets usually aren’t a good thing, and ultimately lead to down markets. On the other hand this could be a one day wonder. I’m still a bit overhedged for my tastes but a bunch of my options expire this week and will put me back in normal hedging position next week.
After the close Trump announced 100% tariffs on semi conductors not made in the US, so futures are up nicely, most likely on hopes of what companies will be exempt.
🧠 Cracks in the Capex Boom
Fluor Corp (FLR) has been one of our favorite AI infrastructure names. It collapsed 27% on Friday after earnings……
Which begs the question, is this just a single name not executing or a signal of something broader?
🔻 Fluor ($FLR): A Canary in the Capex Coal Mine?
Fluor’s earnings collapse (-27%) was due to:
Subcontractor design errors and cost overruns (execution risk)
Delayed capex from clients
Lowered EBITDA and EPS guidance for FY25 due to "client hesitation" and macro uncertainty
This is significant: FLR is a pure-play on industrial-scale capex — infrastructure, energy, datacenters, manufacturing. A broad slowdown here implies:
The AI capex supercycle may be concentrated in hyperscaler core tech, but not translating evenly to EPC (engineering, procurement, construction) names.
🔍 Stifel's Data Center Capex Call
Stifel came out with a report over the weekend, which offers a seemingly opposite view:
"If there were still any concerns about peaking data center capex, those should have been erased... visibility extends into 1H26."
And they're not wrong — capex at the hyperscaler level is booming:
$MSFT Azure +39% y/y, ahead of guidance
$GOOG GCP also strong, both indicating ongoing spend
But there's nuance:
$AMZN AWS was just “stable,” suggesting marginal flattening
$CFLT (-37%) cited customers bringing infra in-house — signal of local optimization replacing cloud elasticity
So we’re not seeing an AI Capex bust yet — we’re seeing a segmented boom:
Winners: Vendors directly supplying hyperscaler GPU, power, cooling, software orchestration
Losers: Broad infrastructure vendors dependent on diversified customer capex or public sector projects
🧩 What This Means
🔺 FLR Is No Longer a Proxy for AI Infra
In early 2023–2024, one could make a case for long $FLR as a "next-order" AI infrastructure beneficiary. That’s breaking down.
Why?
AI hyperscaler buildouts are vertically integrated, modular, and vendor-consolidated
Players like Microsoft, Meta, and Amazon increasingly bypass EPCs in favor of pre-engineered pods, built by vendors like $VRT, $MOD, $SMCI, and $AMRC
So $FLR’s macro exposure to infrastructure doesn’t translate to AI capex leverage.
🏆 Winners: Companies Still in the AI Capex Flow
✅ Direct Capex Winners (high confidence)
Ticker | Company | Why It Wins |
|---|---|---|
$NVDA | Nvidia | GPU capex still core driver |
$SMCI | Supermicro | Rack-level supplier, margin expanding |
$VRT | Vertiv | Power + thermal, hyperscaler-embedded |
$MOD | Modine | HVAC/cooling for dense clusters |
$CRWV | CoreWeave | GPU cloud infra, still raising capital |
$AMRC | Ameresco | Energy integration for AI power needs |
$MPWR | Monolithic Power | High-vol DC/DC conversion chips |
✅ Service Layer Winners (still durable)
Ticker | Company | Why It Wins |
|---|---|---|
$PLTR | Palantir | AI agents + orchestration in gov/defense |
$SNOW | Snowflake | Data layer for enterprise AI |
$MSFT | Microsoft | Copilot + Azure scaling |
❌ Losers: Cracks Emerging
⚠️ Infra Vendors with Execution/Macro Risk
Ticker | Company | Problem |
|---|---|---|
$FLR | Fluor | Customer hesitation + execution risk |
$ACN | Accenture | Weak IT services + discretionary spend |
$EPAM | EPAM | Under pressure on margins and visibility |
$DOCN | DigitalOcean | SME AI capex flattening |
$CFLT | Confluent | Pull-in of infra in-house |
$FORM | FormFactor | Semi capex cycle softness |
⚠️ Chip / Component Players Showing Weakness
Stifel's note highlights:
Weak prints from $QCOM, $QRVO, $ARM, $COHU, $TOKYO ELECTRON
China pull-in may be frontloading, not sustainable demand
🔐 Tactical Implications
🧠 1. Don't Overgeneralize AI Infrastructure Exposure
FLR’s crash is not an indictment of AI — it’s proof that you need to be precise
Stick with direct hyperscaler-exposed vendors, not second-order industrial proxies
🧠 2. Short EPCs with Flat Guidance or Public Sector Leverage
Names like $FLR, $J, $KBR could all see multiple compression if they miss FY25 capex visibility
Especially if tied to infrastructure stimulus or energy transition projects, which are lagging
🧠 3. Long “Hardware to Workload” AI Plays
Core infrastructure (GPUs, racks, cooling) still has visibility through at least 1H26
But shift into service layer (like $PLTR, $SNOW) as physical capex reaches plateau
🧠 4. Monitor Transition from Cloud Spend to On-Prem AI
Signals like $CFLT’s guidance and Microsoft’s Azure spend mix matter
The next leg may be in private LLM orchestration and custom GPU cluster management — not just cloud hyperscaler rental
📊 Watchlist
Long Ideas | Short Ideas |
|---|---|
$SMCI, $MOD, $VRT | $FLR, $ACN, $EPAM |
$PLTR, $SNOW | $CFLT, $DOCN |
$MPWR, $NVDA | $FORM, $COHU |
A new report from Brendan Wood & Partners (BWTG)
📈 Stock Corner
Today’s stock is Pan American Silver (PAAS)…..
One of my favorite silver companies, so I am often long. Had earnings last night and looks like a blow out. Doesn’t really trade pre market so hard to be sure of market reaction.
Had some unusual options activity ahead of earnings so I added to my position (I usually do not add to anything ahead of earnings but looked like somebody knew something).
📬 In Case You Missed It
Duh…..
Research finds that investors need to pay attention to the length of time to maturity
Look at a monthly chart of TLT…..
It looks more like a shitco than a bond ETF. It’s basically been cut in half since the start of 2020. You think something like this reduces portfolio risk?
There’s a reason I get my bond exposure through Tbills, preferred shares, and indirectly through P&C companies. Duration is a killer, unless interest rates go back to 20%, in which case I back up the truck.
🤝 Before You Go Some Ways I Can Help
ETFs: The Antidote to Wall Street
Inside HEAT: Our Monthly Live Call on What Wall Street Doesn’t Want You To Know
Financial HEAT Podcast https://www.youtube.com/@TuttleCap Freedom from the Wall Street Hypocrisy
Tuttle Wealth Management: Your Wealth Unshackled
Advanced HEAT Insights: Matt’s Inner Circle, Your Financial Edge
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