Everyone is Waiting for Godot, in a sense, with software stocks, something to deliver the group from their misery. M&A is one possibility. Three names stand out as good acquisition candidates. Software bloodbath: TWLO, NTNX, DOCN anyone? Prices and stock valuations keep going lower for software stocks as AI despair sets in. Twilio, Nutanix and DigitalOcean are three names that seem worth a look as potential M&A candidates. $DOCN $TWLO $NTNX thetechnologyletter.com
Some things make absolute sense, like the gradual replacement of copper by optics in the backplane of equipment racks. We’re in a climate, however, where some of it is being rushed by one company’s agenda. Worth keeping in mind as one contemplates the very bright opportunity in front of laser suppliers such as Lumentum and Coherent. Lumentum and Nvidia push ‘scale up,’ but is it real? Nvidia’s vision for computing is supercomputers dedicated to AI. A lot rests on the fiber-optic components that Lumentum, Coherent, Broadcom and others make. It could be a big expansion of their market opportunity. Risks include the possibility that the world won’t completely accept Nvidia’s vision for everything. $LITE $COHR $NVDA thetechnologyletter.com
I’ve been writing for over a decade about a semiconductor renaissance taking place. That development is building now every day, with hundreds of companies such as Google having become chip designers. This week I rebalanced the TL20 group of stocks to consider, which is up 320% in three and a half years. One of the new additions is Celestica, the principal maker of the TPU under contract with Google. Celestica is in that bunch of contract electronics manufacturers (EMS) that do an amazing job of getting by with thin margins and still generating real cash profits. In a little over 3.5 years, the TL20 is up 315% even in this tumultuous market. The TL20 rebalancing: The biggest thing since the microprocessor Whatever you think about speculative excess in AI, the fact is that we are at an historic moment in the history of computer chips, a semiconductor renaissance that has been gathering steam for years. That very profound change is sending ripples through the tech market. Nvidia is a big part of the story. Here are other ways an investor can capture the seismic shift. thetechnologyletter.com $CLS
Micron could go as high as $700 as the numbers are just incredible Micron Technology turned in an astounding second-quarter report, with gross profit of seventy-five percent, and a twenty-billion-dollar-per-quarter DRAM business that is tripling. Price targets are as high as $700. And yet, people are selling on the news. The chief risk to Micron is over-supply, and Micron itself doesn’t know how much supply would be too much. Probably, over-supply risk is remote at the moment, even if it’s not zero. thetechnologyletter.com $MU $NVDA
It’s funny because Nvidia is facing gigantic capital returns to its shareholders, but the stock is not moving. And I suspect it has something to do with the fact that nothing Jensen Huang says about AI is reassuring these days. The way he describes the It world is basically as slaves to OpenAI and Anthropic, which is depressing. He’s got to find a new narrative. Nvidia could have half-trillion in buybacks and dividends the next few years Nvidia CEO Jensen Huang used his meeting with analysts on Tuesday to emphasize a trillion dollars in orders. Equally astounding is the potential for half a trillion dollars in buybacks and dividends over the next three years that his CFO, Colette Kress, implied. Once again, though, Huang’s remarks about the AI bubble were a bit tone-deaf. thetechnologyletter.com $NVDA
Adobe badly needs a visionary at the helm The Narayan era at Adobe was one of talking up business metrics such as “RPO” and other very dry stuff about “SaaS.” The company became trapped in that kind of language and that mindset. The problem is it no longer impresses investors, and it can’t possibly be exciting for customers. Adobe’s competitors such as Canva and Figma are doing a better job of articulating what working with AI might look like. Adobe desperately needs a visionary to show how the company will lead in an era of change. thetechnologyletter.com/the-… $ADBE
Cohesity CEO: ‘AI is a tsunami coming at you, you’re either buried or you surf it’ Please enjoy my interview with Cohesity CEO Sanjay Poonen. Sanjay Poonen of privately held Cohesity is glad his company is still private in a stock market that is very unfriendly to software shares at the moment. Still, he is optimistic that in coming quarters, major software makers will prove the “Death by AI” mania is wrong. In the meantime, he boasts that an increasing amount of Cohesity code can be automated via AI. “Thirty to forty percent of our code now is being generated with Claude Code.” thetechnologyletter.com/the-… $RBRK $CVLT
Please enjoy my interview with Twilio CEO Khozema Shipchandler Twilio CEO: Making the bets for seven years out Changes are happening in the telecommunications world, such as the build-out of satellite links. And the world of identity technology is changing with AI. Both things
The TL Podcast for August 26th: Software’s not dead yet The past two weeks have brought disappointments in earnings such as Coherent and Applied Materials, but also successes such as Analog Devices and Palo Alto Networks. Commercial software vendors such as Salesforce face a
Wall Street’s Best Ideas: Will software survive AI? Investors are in a panic that all of commercial software will be decimated by artificial intelligence, which can both fuel competitive startups and remove the boundaries between apps. Probably, the future belongs to a young
