Wolfspeed, Inc. (NYSE:WOLF) said AI data center revenue more than doubled in fiscal 2026 compared with fiscal 2025 and increased approximately 20% sequentially in the fourth quarter. The company did not disclose the category’s dollar contribution. Total revenue remained near $150 million for a second consecutive quarter, showing that AI growth has not yet lifted consolidated sales.

Bull Case

Wolfspeed, Inc. (NYSE:WOLF) has a credible opportunity to expand beyond electric vehicles. Silicon carbide can improve power density and efficiency in high-voltage data center systems as rising AI workloads place greater demands on electrical infrastructure.

Wolfspeed, Inc. (NYSE:WOLF) launched a dedicated data center solutions team, introduced its fifth-generation silicon carbide MOSFET and partnered with LITEON on 800-volt direct-current power platforms. These initiatives could become material if design activity converts into high-volume orders.

Wolfspeed, Inc. (NYSE:WOLF) ended June with $1.09 billion of cash, cash equivalents and short-term investments. Company-defined non-GAAP free cash flow was negative $60.9 million, calculated as operating cash flow less net property-and-equipment and patent spending. The measure excludes mandatory debt-service payments.

The 2025 restructuring reduced debt by approximately 70% and annual cash interest expense by roughly 60%, extending the company’s financial runway.

Bear Case

Wolfspeed, Inc. (NYSE:WOLF) still has a manufacturing-economics problem. GAAP gross margin was negative 25%, while non-GAAP gross margin was negative 20%. The non-GAAP calculation excluded $2 million of stock-based compensation and $5 million of restructuring and facility-closure costs.

Company-defined adjusted EBITDA was negative $62.4 million versus negative $40.7 million in the prior-year quarter, although Wolfspeed, Inc. (NYSE:WOLF) says its post-emergence Successor results are not comparable with Predecessor periods. First-quarter fiscal 2027 guidance calls for revenue of $140 million to $160 million, with non-GAAP gross margin expected to remain negative.

Wolfspeed, Inc. (NYSE:WOLF) also faces continuing dilution risk. The company had approximately 53.0 million common shares outstanding as of August 13. As of June 28, it had reserved approximately 58.7 million shares for potential issuance under convertible notes and warrants, plus approximately 12.1 million shares for outstanding and future equity awards. Holders also converted $46 million of notes into equity during the fourth quarter.

Insider Monkey’s Hedge Fund Data

Insider Monkey’s hedge fund database shows that 31 hedge fund portfolios held positions in Wolfspeed, Inc. (NYSE:WOLF) at the end of the first quarter, compared with 25 portfolios at the end of the preceding quarter. These figures reflect holdings as of March 31 and do not capture subsequent trades or reactions to the latest results.

Conclusion

Wolfspeed, Inc. (NYSE:WOLF) has established genuine AI data center momentum, but that business remains too small to overcome negative margins, losses and dilution risk. The stock remains highly speculative until rising utilization produces visible and sustained gross-margin recovery.

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While we acknowledge the potential of WOLF as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Non-GAAP operating income at BILL Holdings, Inc. (NYSE:BILL) climbed 80% to $101.6 million. The reported number of businesses using its solutions declined to 479,300 from 493,800 in the preceding quarter. However, Integrated Platform businesses increased by 2,700, while the aggregate decline came entirely from Embedded Solutions and Other. Businesses using multiple solutions are counted separately, making this a measure of solution relationships rather than unique companies.

Bull Case

The bull case for BILL Holdings, Inc. (NYSE:BILL) starts with activity. The company processed $98 billion in total payment volume and 37 million transactions during the quarter, with both measures increasing 14% year over year. Transaction-fee revenue advanced 17%, while subscription revenue increased 11%.

Activity outpaced the reported business count, reflecting stronger average use and a mix shift toward larger customers. BILL Holdings, Inc. (NYSE:BILL) also said more than 175,000 businesses had used its AI agents. Its invoice-coding agent had reached more than 60,000 businesses, while the W-9 agent was being used by over 40,000 organizations. These tools can save customers time, potentially increasing customer stickiness.

The efficiency gains may also continue. BILL Holdings, Inc. (NYSE:BILL) expects fiscal 2027 non-GAAP operating income of $421 million to $451 million, up from $323.7 million in fiscal 2026. It also forecast 11% to 14% core revenue growth under its historical presentation, before the planned netting of rewards expense against revenue.

Bear Case

The earnings-quality concern is the gap between adjusted and reported profitability. BILL Holdings, Inc. (NYSE:BILL) recorded a $34.3 million GAAP operating loss, wider than the $22.3 million loss a year earlier. Its non-GAAP operating income excludes stock-based compensation and related payroll taxes, depreciation and amortization, restructuring costs, acquisition and integration expenses, and activist-related advisory fees.

BILL Holdings, Inc. (NYSE:BILL) announced a workforce reduction of up to 30% in May. A smaller cost base can support margins, but reduced sales, onboarding, or customer-support capacity could slow core customer additions. The rise in Integrated Platform businesses is encouraging; the next test is whether that growth accelerates as the restructuring progresses.

Conclusion

BILL Holdings, Inc. (NYSE:BILL) produced real operating progress: core revenue, payment volume, transactions, and AI adoption all grew while non-GAAP profit expanded. The wider GAAP operating loss and slower core customer additions keep the turnaround incomplete. The shares look promising if core customer additions recover over the next two quarters, providing evidence that the efficiency push has not weakened the company’s growth engine.

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While we acknowledge the potential of BILL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Second-quarter revenue increased to $62.7 million from $26.7 million sequentially as polysilicon sales volume rose to 15,190 metric tons. However, Daqo’s average selling price fell to $4.04 per kilogram, compared with an average cash production cost of $4.57 and an average total production cost of $5.95.

At the quarter’s average selling price, revenue per kilogram remained below both measures of average production cost. Daqo New Energy Corp. (NYSE:DQ) consequently recorded an $82.7 million gross loss and a negative 132% gross margin.

The margin improved from negative 521.5% in the first quarter, primarily because inventory impairment provisions declined to $55.7 million from $98.9 million. Company-defined non-GAAP EBITDA also improved to negative $29.3 million from negative $83.1 million. The losses became less severe, but the business did not reach an operating inflection point.

Bull Case

Daqo New Energy Corp. (NYSE:DQ) ended June with a company-defined $1.92 billion aggregate of cash and other readily convertible assets at the consolidated level. The total includes cash, short-term investments, bank notes receivable, held-to-maturity investments, and fixed-term deposits. Not all of the amount is unrestricted or attributable entirely to ADS holders, but the company also reported no debt.

This financial position gives Daqo New Energy Corp. (NYSE:DQ) room to adjust utilization, manage inventory, and wait for weaker competitors to leave the market. The company operated at approximately 57% of nameplate capacity during the quarter, demonstrating its ability to reduce output during unfavorable market conditions.

A recovery in polysilicon prices could produce substantial operating leverage. Daqo reduced average cash production cost to $4.57 per kilogram from $5.12 a year earlier. If Chinese industry discipline, capacity rationalization, or stronger solar demand lifts pricing above production cost, margins could improve quickly.

Bear Case

The financial cushion is already being consumed. Daqo New Energy Corp. (NYSE:DQ) used $276.2 million in operating cash during the first six months of 2026, compared with $105.4 million a year earlier. Its consolidated liquidity aggregate also declined from $2.00 billion at the end of March.

Production exceeded sales by 28,485 metric tons during the quarter, while reported inventory increased to $363.5 million from $258.3 million. That combination heightens the risk of further impairment charges if polysilicon prices remain depressed.

At the August 20 close, Daqo’s approximately $1.0 billion equity value was below its $1.92 billion consolidated liquidity aggregate. However, that aggregate is not equivalent to net cash attributable to ADS holders. Daqo New Energy Corp. (NYSE:DQ) owns about 72.8% of its principal operating subsidiary, and its consolidated balance sheet included nearly $1.5 billion of non-controlling interests.

Hedge Fund Data

The filings available so far reflect positions held before Daqo New Energy Corp. (NYSE:DQ) reported the latest results. Insider Monkey’s database showed 20 hedge funds holding DQ at the end of 1Q26, unchanged from three months earlier.

Conclusion

Overall, Daqo New Energy Corp. (NYSE:DQ) remains a speculative solar-cycle recovery trade rather than an operating turnaround. Liquidity determines how long Daqo can wait, but the selling-price-to-cost gap will determine whether shareholder value is ultimately preserved.

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While we acknowledge the potential of DQ as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Shares of ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) closed at $28.25 on August 21, approximately 19.3% below Hapag-Lloyd’s $35 cash offer. Reaching the offer price would provide 23.9% gross upside. The spread reflects Israeli and regulatory approval risk, the expected closing timetable, freight-cycle uncertainty, and ZIM’s potential value if the transaction fails.

Bull Case

ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) generated $386 million of company-defined free cash flow, calculated as operating cash flow minus net capital expenditures. Carried volume increased 3%, while the average freight rate rose 8% to $1,590 per TEU. Pacific volume increased approximately 20%, strengthening the company’s position in transpacific trade.

ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) reported $491 million of adjusted EBITDA and issued full-year guidance for $2.0 billion to $2.4 billion. Adjusted EBITDA is a company-defined non-IFRS measure. The company reported a $2.53 billion total cash position and $2.46 billion of net cash excluding lease liabilities. However, net debt including lease liabilities was $2.77 billion, underscoring the capital commitments attached to its chartered fleet.

Bear Case

Shareholders have approved the acquisition of ZIM Integrated Shipping Services Ltd. (NYSE:ZIM), but the transaction still requires regulatory clearances and approval from the State of Israel under its Special State Share, commonly called the Golden Share. Several Israeli ministries have reportedly raised national-security concerns.

The plan to transfer part of ZIM Integrated Shipping Services Ltd. (NYSE:ZIM)’s Israeli operations and 16 vessels to a FIMI-controlled company is designed to address those concerns. The government’s approval nevertheless remains a substantive closing condition.

Shipping-cycle risk could also reduce the potential break price. ZIM Integrated Shipping Services Ltd. (NYSE:ZIM)’s $386 million of second-quarter free cash flow declined year over year from $426 million. First-half average freight rates also remained below the prior-year level, showing that the second-quarter improvement has not fully reversed broader pricing pressure.

The February 13 closing price for ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) was $22.20. Stronger results may support a higher standalone valuation, but a failed deal could still produce a material decline from the August 21 closing price.

Hedge Fund Sentiment

The filings available so far reflect positions held before ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) released its fiscal second-quarter results. Insider Monkey’s database showed 34 hedge funds holding ZIM at the end of March 2026, up from 23 funds three months earlier.

Conclusion

ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) remains more attractive as a merger-arbitrage setup than as a conventional shipping investment. Stronger operating results improve the downside case, but Israeli approval, other regulatory clearances and the closing timetable remain the primary drivers of the prospective return.

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While we acknowledge the potential of ZIM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.

The objection looks stronger… until we do the math.

Starship Changes the Equation

SpaceX says AI1 will deliver 120 kilowatts of average compute while achieving vehicle efficiency of 70 kilowatts per metric ton. That works out to roughly 14.3 kilograms of spacecraft per kilowatt of compute.

SpaceX also says a fully and rapidly reusable Starship could eventually cut launch costs by at least 99% from NASA’s historical $18,500-per-kilogram benchmark. A 99% reduction would eventually imply about $185 per kilogram. At AI1’s claimed mass efficiency, that translates into only about $2,640 of launch cost per kilowatt of compute.

For perspective, an April study examining orbital data-center economics used roughly $10,000 to $40,000 per kilowatt as the cost of terrestrial data-center infrastructure. The comparison has its limitations: SpaceX’s $2,640 figure covers launch cost only.

Satellite manufacturing cost is a different question. SpaceX’s Redmond factory averaged roughly 70 Starlink satellites per week from December through April, while the company says AI1 will use proven Starlink technology and be more streamlined than satellites it already mass-produces.

Quilty Space estimates Starlink V3 costs around $1 million to manufacture. If AI1’s non-compute hardware approached that level, its roughly 1.7-ton mass would put manufacturing plus launch at about $11,000 per kilowatt, near the low end of terrestrial infrastructure costs. AI1’s larger solar arrays and radiators make that an optimistic benchmark, and SpaceX has disclosed no manufacturing cost, but the math suggests the spacecraft need not become extraordinarily cheap for orbital economics to start closing.

Wall Street Is Still Betting SpaceX Can Solve It

Institutional investors appear much less concerned. Insider Monkey’s Q2 database showed 119 hedge funds holding long positions in SpaceX. Goldman Sachs recently identified SpaceX as one of only six stocks that both hedge funds and mutual funds are overweight. Cathie Wood’s ARK Invest added roughly $27 million of SpaceX shares on August 21.

There is plenty of skepticism on the other side of Wall Street. Short interest reached 207.8 million shares as of July 31, up 25.9% from mid-July. David Einhorn has also questioned SpaceX’s valuation, calling its $1.75 trillion IPO valuation a possible marker of a speculative market top.

At roughly $1.86 trillion, the company trades around 80 times trailing revenue. Even against current consensus estimates for 2027, its enterprise value works out to roughly 17 times sales and 28 times EBITDA. Goldman Sachs separately puts the stock at about 93 times projected 2027 earnings. For a company spending heavily on Starship, AI infrastructure and Starmind, the market is already assuming that today’s extraordinary capital requirements eventually produce superior long-term economics that SpaceX promises for AI infra.

My read is that Reddit’s skepticism overstates the problem. If Starship reaches full reusability and AI1 achieves SpaceX’s claimed mass efficiency, launch economics look surprisingly workable. I would give SpaceX the edge on technical and economic feasibility, but not yet on proven economics. SpaceX’s valuation gives it almost no room for the economics to disappoint.

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While we acknowledge the potential of SPCX as investment, we believe certain other AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Comparable sales increased 1.7%, while U.S. comparable sales rose 1.3%. Comparable transactions declined 1%, while comparable average ticket increased 2.8%. The transaction and ticket metrics exclude SRS Distribution and HD Supply. The central question is whether Pro-led share gains can produce durable growth before housing turnover recovers.

BULL CASE: PRO INVESTMENTS ARE PRODUCING RESULTS

Professional-customer comparable sales at The Home Depot, Inc. (NYSE:HD) were positive and outperformed do-it-yourself demand. Strength appeared in Pro-heavy categories including decking, dimensional lumber, concrete, pipe and fittings, fasteners, and portable power.

Big-ticket comparable transactions above $1,000 increased 2.4%, although The Home Depot, Inc. (NYSE:HD) did not identify that metric as Pro-specific.

The SRS Distribution and GMS acquisitions are extending The Home Depot, Inc. (NYSE:HD) into specialty distribution, complex project sales, and job-site delivery. SRS performed above the company average, while 90% of retail stores completed an SRS sale through QuoteCenter during the past year. Online comparable sales increased 11%, and 13 of 16 merchandising departments produced positive comparable sales.

The Home Depot, Inc. (NYSE:HD) reaffirmed fiscal 2026 guidance for total sales growth of 2.5% to 4.5% and comparable-sales growth between flat and 2%.

BEAR CASE: THE REFUND MATERIALLY BENEFITED EARNINGS

The Home Depot, Inc. (NYSE:HD) received $730 million of IEEPA tariff refunds. Of that amount, $685 million reduced second-quarter cost of goods sold, while $45 million remained in inventory and is expected to flow through cost of goods sold as the related inventory is sold.

Management said the recognized refund added approximately 145 basis points to gross margin. Roughly 60 basis points of unplanned fuel, energy, and other input costs reduced the net refund benefit to approximately 85 basis points. Another 60-basis-point drag from acquisition mix left reported gross-margin improvement at about 25 basis points, bringing the margin to 33.7%.

Using the 24.5% second-quarter tax rate and 996 million diluted shares, the $685 million benefit equals approximately $0.52 per diluted share after tax. That is an illustrative calculation, not company-reported adjusted EPS, but it shows that the refund materially benefited reported adjusted EPS.

GAAP operating margin declined to 14.3% from 14.5%. Company-defined non-GAAP adjusted operating margin, which excludes acquired intangible-asset amortization but includes the tariff refund, slipped to 14.7% from 14.8%. Management expects unplanned costs to offset the refund’s annual benefit and maintained its outlook for company-defined non-GAAP adjusted diluted EPS growth between flat and 4% from fiscal 2025’s $14.69.

Comparable transactions remain a source of weakness. Smaller projects and Pro purchases supported sales, but large discretionary renovations remain pressured by high borrowing costs and limited housing turnover. Acquisitions can lift reported revenue without proving the underlying cycle has turned.

INSIDER MONKEY’S HEDGE FUND DATA

The filings available so far reflect positions held before The Home Depot, Inc. (NYSE:HD) released its fiscal second-quarter results. Insider Monkey’s database showed 100 hedge funds holding The Home Depot, Inc. (NYSE:HD) at the end of March 2026, down from 98 funds three months earlier.

CONCLUSION

The Home Depot, Inc. (NYSE:HD) delivered better comparable sales, Pro outperformance, and broad category strength. However, weaker comparable transactions, lower operating margins, and the substantial refund contribution make this an execution and market-share story rather than a housing recovery. A stronger inflection would combine positive comparable-transaction growth with margin resilience after the refund benefit passes.

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While we acknowledge the potential of HD as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.

Burry recently called Etched, a four-year-old AI chip startup, “serious competition” for Nvidia. The timing makes the warning harder to dismiss. Etched just raised $700 million in a Jane Street-led round that valued it at $21 billion, more than double its valuation less than a month earlier. Reuters says the company has already secured more than $1 billion in customer contracts.

Why Burry May Be Right

Etched is not really trying to beat Nvidia at everything. It is attacking AI inference, where cost per token, latency and power efficiency increasingly matter as AI companies move from training enormous models to serving them at scale.

Michael Burry of Scion Asset Management

Burry cited an industry source who believes Etched could deliver roughly 10 times the performance at lower cost. There is also an uncomfortable talent angle for Nvidia: about 15% of Etched’s 400-plus employees previously worked there. Etched’s leadership includes Brian Loiler, a 22-year Nvidia veteran who helped build the HGX and DGX systems.

If those economics hold up as deployments scale, Etched does not need to dethrone Nvidia. Taking meaningful share in inference could be enough to pressure Nvidia’s extraordinary pricing power and margins.

Nvidia’s own actions suggest specialized inference is worth taking seriously. Late last year, the company struck a deal to license Groq’s inference technology and hire key members of its team, including founder Jonathan Ross. Nvidia has since incorporated Groq technology into its own inference products. That strengthens Burry’s broader argument that specialized inference hardware matters, while also showing Nvidia is hardly standing still.

Why Nvidia Bulls Aren’t Panicking

Etched still has to prove it can manufacture and deploy its systems at Nvidia-like scale. Its performance claims have not yet been independently demonstrated across the enormous range of workloads Nvidia supports. Nvidia also sells far more than chips: CUDA, networking, rack-scale systems and software create switching costs that a faster specialized chip does not automatically erase.

And the financial machine is hardly sputtering. Nvidia’s latest quarter produced $81.6 billion in revenue, up 85% year over year, including $75.2 billion from data centers. BofA analyst Vivek Arya recently maintained a $350 target, implying more than 50% upside from recent levels.

Institutional positioning is also nowhere near panic mode, as shown in Insider Monkey’s hedge fund database. Fisher Asset Management held 90.9 million Nvidia shares in Q2, while AQR increased its position 18% and Arrowstreet added 10%. Nvidia short interest actually fell 9.7% by July 31 to about 292.7 million shares, roughly 1.2% of shares outstanding.

Etched therefore looks like a credible threat, not yet an Nvidia killer. The bigger danger is that specialized inference chips slowly chip away at Nvidia’s dominance and compress its margins. With Nvidia still growing at breakneck speed and trading around low-to-mid-20s times forward earnings, the stock looks increasingly attractive if meaningful weakness creates a better entry point. However, Burry has identified a competitive threat Nvidia investors can no longer comfortably ignore.

[im-yf-promo]

While we acknowledge the potential of NVDA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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READ NEXT: NVIDIA (NVDA): What Foxconn and Super Micro Are Telling Us about the AI Boom  and Pony AI Is Scaling Robotaxis Fast—Can the Stock Reach BofA’s $17 Target?

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Under Baidu, Inc. (NASDAQ:BIDU)’s company-defined revenue classification, Core AI-powered Business reached RMB12.5 billion, up 25% year over year and equal to 50% of General Business revenue. It remained larger than Legacy Business, which declined 23% to RMB10.4 billion. However, Core AI-powered Business fell 8% sequentially, while Legacy Business increased 3%. These figures come from the company’s internal, unaudited management records.

BULL CASE: GPU CLOUD IS ACCELERATING

Baidu, Inc. (NASDAQ:BIDU) generated RMB7.3 billion from AI Cloud Infrastructure, up 50% year over year. Within that category, GPU Cloud revenue surged 283%, accelerating from 184% growth in the first quarter. Management expects strong AI Cloud Infrastructure growth in the second half and said a richer GPU Cloud mix, better utilization, and scale should support further improvement in AI Cloud Infrastructure margins.

Baidu, Inc. (NASDAQ:BIDU) also produced RMB3.4 billion in operating cash flow, marking a fourth consecutive positive quarter. Its company-defined total cash and investments measure reached RMB283.1 billion as of June 30. The measure is broader than liquid cash because it includes restricted cash, long-term time deposits and held-to-maturity investments, but it still highlights substantial balance-sheet resources for cloud infrastructure, ERNIE development and Apollo Go’s international expansion.

BEAR CASE: AI GROWTH HAS NOT STOPPED THE CONTRACTION

Online marketing revenue at Baidu, Inc. (NASDAQ:BIDU) fell 19% to RMB13.1 billion, and management expects the business to remain under pressure in the second half. AI Applications revenue grew only 3% to RMB2.5 billion, while AI-native marketing services were roughly flat at RMB2.6 billion. The AI growth story remains heavily dependent on infrastructure.

Profitability also weakened. Baidu, Inc. (NASDAQ:BIDU) reported attributable net income of RMB2.3 billion, down 68% year over year. Cost of revenue increased 4%, primarily because of higher AI Cloud costs, while total other income fell to RMB184 million from RMB4.9 billion. GAAP operating margin was 10%, and non-GAAP operating margin was 12%.

INSIDER MONKEY’S HEDGE FUND DATA

Insider Monkey’s first-quarter database showed 50 hedge funds holding Baidu, Inc. (NASDAQ:BIDU) at the end of March 2026, down from 57 three months earlier. Those positions predate the second-quarter results.

CONCLUSION

Under Baidu’s internal classification, Core AI-powered Business has surpassed Legacy Business within General Business. GPU Cloud growth supports the strategic case, but the second-quarter sequential slowdown, continued advertising decline, and lower profit show that the economic crossover has not arrived. The AI transition remains credible, but a stronger investment case now depends on renewed sequential AI growth and improving margins.

[im-yf-promo]

While we acknowledge the potential of BIDU as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.

Those figures point to a quarter with real volume and mix improvement, but less earnings leverage than the headline net-income growth suggests. For Performance Food Group Company (NYSE:PFGC), the more useful question is not whether inflation lifted sales, but whether the underlying business improved enough to support growth after pricing moderates.

Performance Food Group Company (NYSE:PFGC) delivered its strongest operating signal in independent foodservice. Total independent case volume rose 8.0%, and organic independent case volume increased 5.8%. Independent customers accounted for 43.1% of Foodservice segment sales. The company says these customers tend to produce higher gross profit because they use additional services.

That mix shift helped gross profit increase 8.3%, faster than sales, while gross profit per case improved by $0.34. Companywide non-GAAP adjusted EBITDA rose 7.4% to $587.5 million. However, Foodservice adjusted EBITDA advanced only 2.2%. Higher personnel and fuel expenses, additional operating costs from recent acquisitions, and insurance costs absorbed much of the segment’s gross-profit growth.

Bull Case

The bull case for Performance Food Group Company (NYSE:PFGC) rests on better-quality volume and cash generation. Organic independent-foodservice volume grew well ahead of total organic case volume, supporting a more profitable customer mix. Full-year operating cash flow reached $1.41 billion, while non-GAAP free cash flow increased to $1.03 billion from $704.1 million.

Performance Food Group Company (NYSE:PFGC) also guided for fiscal 2027 sales of $72.5 billion to $73.0 billion and non-GAAP adjusted EBITDA of $2.125 billion to $2.225 billion. The midpoint implies continued EBITDA growth, although the outlook includes a 53rd week.

Bear Case

Inflation still did much of the work in the reported sales number. Product cost inflation of 4.7% was substantial relative to 6.4% sales growth, although the two rates do not provide a direct decomposition of reported growth. Organic volume increased a more modest 1.8%. At Performance Food Group Company (NYSE:PFGC), this makes mix and expense control more important if inflation cools.

The quarter’s 2.6% increase in non-GAAP adjusted diluted EPS was modest compared with the 23.4% rise in net income. Higher labor and fuel costs limited operating leverage, including an approximately $16 million net impact from higher diesel expense. Full-year non-GAAP free cash flow also benefited from $52.3 million of income-tax refunds and lower capital spending, making the entire increase unlikely to recur automatically.

Insider Monkey’s Hedge Fund Data

Insider Monkey’s hedge fund database shows that 44 hedge funds held positions in Performance Food Group Company (NYSE:PFGC) at the end of the first quarter of 2026, unchanged from the end of the preceding quarter. These figures do not capture trades made after that date or investors’ reactions to the recent results.

Conclusion

Performance Food Group Company (NYSE:PFGC) produced more than inflation-driven growth, with case volume, independent-customer mix and gross profit all moving in the right direction. The $1 billion-plus free-cash-flow result adds weight to the bull case.

Still, the slower increase in adjusted EPS shows that cost pressure is consuming a meaningful share of the operating improvement. The result is modestly positive for Performance Food Group Company (NYSE:PFGC), but stronger earnings leverage would provide clearer evidence that its real growth is translating into shareholder value.

[im-yf-promo]

While we acknowledge the potential of PFGC as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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The headline growth was concentrated. AEVEX Corp. (NYSE:AVEX) generated $72.2 million from the EUCOM Deep Strike program, representing nearly 36% of quarterly revenue and more than 70% of the year-over-year dollar increase. Tactical Systems revenue climbed 141.6% to $174.2 million, while Global Solutions revenue declined 5.0% to $27.6 million.

BULL CASE: BLACKSEA CREATES A MULTI-DOMAIN PLATFORM

AEVEX Corp. (NYSE:AVEX) currently derives most of its momentum from aerial autonomous systems. BlackSea materially expands AEVEX’s surface and subsea scale and Navy access. BlackSea operates a 57,000-square-foot Baltimore facility and reports overall capacity of approximately 40 small unmanned surface vessels per month. The combination would span aerial, surface, and subsea systems rather than relying primarily on drone programs.

Management expects BlackSea to generate approximately $150 million of 2026 revenue, with adjusted EBITDA margins approximately in line with AEVEX. It also brings more than $110 million of funded backlog and over $250 million of unfunded backlog. The latter represents potential contract opportunities rather than funded, firm orders.

The existing business also has visibility. AEVEX Corp. (NYSE:AVEX) raised 2026 revenue guidance from $600 million-$620 million to $700 million-$720 million and increased its non-GAAP adjusted EBITDA outlook from $88 million-$94.5 million to $105 million-$111.5 million. The guidance excludes BlackSea, while 95.1% of AEVEX’s $259.8 million funded backlog is expected to convert within 12 months.

BEAR CASE: THE DEAL ADDS SHARES BEFORE THE MIX IS PROVEN

AEVEX Corp. (NYSE:AVEX) will pay approximately $250 million in cash and issue about 12.7 million shares valued at $350 million under the agreement. Another $50 million is tied to performance-based earnout consideration. The stock component limits immediate borrowing, but spreads future earnings across a larger share base.

The cash requirement exceeds the company’s $215.2 million quarter-end cash balance. AEVEX Corp. (NYSE:AVEX) had $100 million of debt and $275 million of undrawn delayed-term and revolving facilities, giving it financing capacity but potentially reversing part of the balance-sheet improvement achieved through its April IPO.

Management expects near-term EPS accretion before noncash purchase-accounting amortization. Investors still lack detailed pro forma margins, integration costs, and a full per-share earnings bridge. That matters because quarterly GAAP net income was only 3.3% of revenue, while the current growth profile remains heavily dependent on Deep Strike.

INSIDER MONKEY’S HEDGE FUND DATA

Insider Monkey’s first-quarter database contained no positions in AEVEX Corp. (NYSE:AVEX) because the shares began trading on April 17, after the March 31 reporting date.

CONCLUSION

AEVEX’s growth is real, and BlackSea provides credible diversification into maritime autonomy. The target adds products, customers, and production capacity that AEVEX did not previously possess at scale.

For AEVEX Corp. (NYSE:AVEX), the next proof point is per-share economics. The deal becomes attractive if BlackSea maintains comparable adjusted EBITDA margins, its funded backlog converts cleanly, and the combined platform reduces dependence on Deep Strike. Until those details emerge, the outlook is cautiously bullish, but conditional on disciplined integration rather than revenue expansion alone.

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While we acknowledge the potential of AVEX as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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READ NEXT: ConocoPhillips (COP): Wall Street Sees More Upside Despite Leadership Shakeup and Here is Why Chevron (CVX) is a Favorite Among Hedge Funds

Disclosure: None. This article is originally published at Insider Monkey.

Hedge Fund Investor Letters and Updates for 2026 Q2

]]> https://www.insidermonkey.com/blog/fulcrum-fulc-is-allocating-95-of-the-combined-company-to-slate-and-pipe-investors-is-the-270m-dividend-enough-1821459/ Tue, 25 Aug 2026 18:28:24 +0000 https://www.insidermonkey.com/blog/?p=1821459 Fulcrum Therapeutics, Inc. (NASDAQ:FULC) signed an all-stock merger agreement with Slate Medicines that would turn the public company into a migraine-focused biotechnology business. Slate is contributing its drug assets, while new investors are supplying $245 million. Legacy Slate holders would own approximately 55.9% of the combined company, PIPE investors 39.1%, and legacy Fulcrum holders 5%, subject to adjustment.

Before closing, Fulcrum Therapeutics, Inc. (NASDAQ:FULC) expects to distribute an estimated $270 million cash dividend. Using the 76.2 million shares outstanding on July 23, that equals an illustrative $3.54 per share. The transaction assigns $31.3 million of value to Fulcrum holders’ 5% retained stake, or roughly $0.41 per July 23 share. Together, the dividend and stub equal about $3.95 in gross illustrative value, 11 cents above Monday’s $3.84 closing price. The actual dividend will depend on closing net cash, the share count, and other transaction adjustments.

The deal follows the June decision by Fulcrum Therapeutics, Inc. (NASDAQ:FULC) to discontinue pociredir after the FDA raised a class-level malignancy concern involving PRC2 inhibitors. Fulcrum said no new clinical safety signal had emerged, but the regulatory feedback left no viable path for the program. The company then cut its workforce by 85% and pursued strategic alternatives.

Bull Case

The clearest attraction is that Fulcrum Therapeutics, Inc. (NASDAQ:FULC) would convert most of its cash into a direct shareholder payment rather than spend it rebuilding a discontinued pipeline. The 5% interest adds exposure to Slate’s migraine programs without requiring legacy holders to finance them alone.

Slate secured commitments for a company-described oversubscribed $245 million private placement expected to close concurrently with the merger, subject to conditions. Frazier Life Sciences is leading the financing, with Forbion, RA Capital Management, Deep Track Capital, Foresite Capital, OrbiMed, RTW Investments and Mingxin Capital participating. Fulcrum Therapeutics, Inc. (NASDAQ:FULC) and Slate expect the financing and available cash to fund the combined company into 2029, assuming the deal closes and development proceeds as planned.

Bear Case

The retained stake is small, and Fulcrum Therapeutics, Inc. (NASDAQ:FULC) shareholders are accepting clinical risk for limited residual ownership. Slate’s lead asset, SLTE-1009, has no publicly disclosed human efficacy data and has not yet reported efficacy results in migraine patients. The antibody targets PACAP and VIP and is intended for quarterly subcutaneous dosing, but that profile still needs clinical validation.

Fulcrum Therapeutics, Inc. (NASDAQ:FULC) and Slate expect an Australian Phase 1 study to produce initial pharmacokinetic and safety data in mid-2027, followed by migraine development. They expect SLTE-2100 to enter clinical testing in the second half of 2027. Those timelines depend on financing completion and trial execution. The merger is targeted for the fourth quarter of 2026, after stockholder and regulatory approvals, with the combined company expected to trade on Nasdaq as SLTE.

Insider Monkey’s Hedge Fund Data

Insider Monkey’s first-quarter database shows 38 hedge funds holding FULC during the first quarter from 47 in the preceding quarter; the data does not capture recent developments.

Conclusion

Fulcrum Therapeutics, Inc. (NASDAQ:FULC) is best viewed as a cash distribution plus a small biotechnology option, not a Fulcrum turnaround. The estimated $3.54 dividend supplies most of the value, while the roughly $0.41 stub offers upside if Slate’s migraine pipeline succeeds. If the merger or PIPE fails to close, that structure does not materialize, and taxes could reduce the dividend’s net value. At $3.84, the roughly 3% gross illustrative spread is too narrow to ignore those risks.

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While we acknowledge the potential of FULC as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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READ NEXT: ConocoPhillips (COP): Wall Street Sees More Upside Despite Leadership Shakeup and Here is Why Chevron (CVX) is a Favorite Among Hedge Funds

Disclosure: None. This article is originally published at Insider Monkey.

In its Q2 2026 investor letter, Sound Shore Fund highlighted Marvell Technology, Inc. (NASDAQ:MRVL). Marvell Technology, Inc. (NASDAQ:MRVL), a semiconductor company that delivers data infrastructure solutions across the data center core, cloud, enterprise, and network edge, contributed to the Fund’s performance this quarter. On August 24, 2026, Marvell Technology, Inc. (NASDAQ:MRVL) closed at $229.29 per share, reflecting a market capitalization of $216.86 billion. Marvell Technology, Inc. (NASDAQ:MRVL) posted a one-month return of 38.69%, while its shares gained 225.86% over the past 52 weeks.

Sound Shore Fund stated the following regarding Marvell Technology, Inc. (NASDAQ:MRVL) in its Q2 2026 investor letter:

“Sound Shore’s portfolio also benefited from the AI wave in the second quarter. Sound Shore has always had exposure to IT (approximately 15% weight during Q2), but our value discipline will steer us away from the most expensive parts of the market. Qualcomm and Marvell Technology, Inc. (NASDAQ:MRVL), were two of our strongest contributors in 2Q. Both are excellent case studies, which we profiled in our first quarter letter as businesses marrying secular technology tailwinds with compelling valuations. Meanwhile, Marvell Technology benefited from its data center exposure which stems from the company’s dominant networking and optical business and is now expanding into custom silicon (ASIC) tailored chips for hyperscalers. The trick from here remains how long will the cycle last and how much exposure is appropriate, given the unprecedented move in this part of the market. More on that later.”

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Marvell Technology, Inc. (NASDAQ:MRVL) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 96 hedge fund portfolios held Marvell Technology, Inc. (NASDAQ:MRVL) at the end of the first quarter, compared to 79 in the previous quarter. In the first quarter of fiscal 2027, Marvell Technology, Inc. (NASDAQ:MRVL) reported record revenue of $2.418 billion reflecting 9% sequential and 28% year over year growth. While we acknowledge the potential of Marvell Technology, Inc. (NASDAQ:MRVL) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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In another article, we covered Marvell Technology, Inc. (NASDAQ:MRVL) and shared the list of stocks on Jim Cramer’s radar. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years.

Disclosure: None. This article is originally published at Insider Monkey.

In its Q2 2026 investor letter, Sound Shore Fund highlighted Elevance Health, Inc. (NYSE:ELV) as a notable contributor. Elevance Health, Inc. (NYSE:ELV) is a US-based health benefits company. On August 24, 2026, Elevance Health, Inc. (NYSE:ELV) closed at $402.63 per share, reflecting a market capitalization of $87.32 billion. Elevance Health, Inc. (NYSE:ELV) posted a one-month return of 3.64%, while its shares gained 28.94% over the past 52 weeks.

Sound Shore Fund stated the following regarding Elevance Health, Inc. (NYSE:ELV) in its Q2 2026 investor letter:

“Importantly, we had more breadth in our return than the indices. Away from tech, health benefits leader Elevance Health, Inc. (NYSE:ELV) was a strong contributor. Elevance offers network-based managed care plans to large and small employer, individual, Medicaid, and Medicare markets. We identified the stock after it had sold off on investor concerns over regulatory risk and weak margins in its Medicaid and Medicare businesses. Trading below normal at 13 times earnings with double digit earnings growth, we feel the market is underestimating the strength of the franchise. Management is focused on improving margins in the near term and the company consistently returns capital to shareholders via stock repurchases and dividends. Of note, CEO Gail Boudreaux has highlighted that internal artificial intelligence tools have slashed prior authorization denials by nearly 70% and optimized payment integrity. This translates directly into lower administrative overhead and expanding operating margins, proving that the productivity benefits of AI are reverberating far beyond the technology sector itself.”

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Elevance Health, Inc. (NYSE:ELV) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 84 hedge fund portfolios held Elevance Health, Inc. (NYSE:ELV) at the end of the second quarter, compared to 87 in the previous quarter. While we acknowledge the potential of Elevance Health, Inc. (NYSE:ELV) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Our coverage of Elevance Health, Inc. (NYSE:ELV) in another article included commentary from Greenskeeper Asset Management, another investment advisor. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years.

Disclosure: None. This article is originally published at Insider Monkey.

In its Q2 2026 investor letter, Sound Shore Fund highlighted QUALCOMM Incorporated (NASDAQ:QCOM) as a notable contributor. QUALCOMM Incorporated (NASDAQ:QCOM) is a semiconductor and communication technology company focused on developing and commercializing foundational technologies for the wireless industry. On August 24, 2026, QUALCOMM Incorporated (NASDAQ:QCOM) closed at $158.53 per share. The one-month return of QUALCOMM Incorporated (NASDAQ:QCOM) was -2.08%, and its shares gained 0.20% over the past 52 weeks. QUALCOMM Incorporated (NASDAQ:QCOM) has a market capitalization of $167.55 billion.

Sound Shore Fund stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q2 2026 investor letter:

“Sound Shore’s portfolio also benefited from the AI wave in the second quarter. Sound Shore has always had exposure to IT (approximately 15% weight during Q2), but our value discipline will steer us away from the most expensive parts of the market. QUALCOMM Incorporated (NASDAQ:QCOM) and Marvell Technology, were two of our strongest contributors in 2Q. Both are excellent case studies, which we profiled in our first quarter letter as businesses marrying secular technology tailwinds with compelling valuations. A leading semiconductor supplier, Qualcomm (QCOM) is rapidly diversifying its business; its developer tools are accelerating edge AI functionality in new markets, driving demand for QCOM chips. We believe Qualcomm possesses the strategic flexibility required to capture the immense AI opportunity ahead. Notably, we believe Qualcomm is trading for an attractive 10 times earnings power once the new business kicks in.”

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QUALCOMM Incorporated (NASDAQ:QCOM) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 95 hedge fund portfolios held QUALCOMM Incorporated (NASDAQ:QCOM) at the end of the second quarter, compared to 71 in the previous quarter. While we acknowledge the potential of QUALCOMM Incorporated (NASDAQ:QCOM) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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In a previous article, we highlighted QUALCOMM Incorporated (NASDAQ:QCOM) and examined its new phase of growth. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years.

Disclosure: None. This article is originally published at Insider Monkey.

Together with the recently acquired MagCanica, the two businesses cost approximately $890 million, or roughly 12 times estimated fiscal-2027 company-defined adjusted EBITDA, a non-GAAP measure. For Arxis, Inc. (NASDAQ:ARXS), the question is whether that multiple reflects disciplined underwriting or places too much confidence in earnings that have not yet arrived.

BULL CASE: Specialized Components Can Support Attractive Returns

Omnetics designs proprietary Micro-D-Sub and Nano-D-Sub connectors and interconnect assemblies for defense, space, commercial aerospace and medical applications. These components operate where size, weight, and reliability are mission-critical. Arxis says its designed-in products face certification and requalification hurdles, while Omnetics holds hard-to-replicate preferred-source positions.

That makes Omnetics a logical fit for Arxis, Inc. (NASDAQ:ARXS), which focuses on highly engineered electronic and mechanical components for demanding applications. The purchase also uses equity rather than additional debt. The issued shares are subject to lockup provisions, limiting immediate selling pressure from the former owners.

Arxis, Inc. (NASDAQ:ARXS) enters the integration with supportive operating momentum. Second-quarter revenue increased 25% to $500.7 million, including 21% company-defined organic growth. Company-defined adjusted EBITDA rose 38% to $211.5 million, while company-defined free cash flow reached $127.3 million. Those non-GAAP figures show that recently purchased revenue was not the only source of growth.

However, second-quarter adjusted EBITDA also excluded $107.1 million of share-based compensation, compared with approximately $2.5 million of acquisition, integration, and deal-related expenses. The unusually large share-based compensation adjustment was associated with the company’s initial public offering.

The balance sheet offers additional room. Arxis, Inc. (NASDAQ:ARXS) ended June with company-defined net leverage of 1.8 times, down from 4.0 times at March 31 after using IPO proceeds to repay debt. Because Omnetics was acquired with stock, the transaction does not directly reverse that deleveraging.

BEAR CASE: The Headline Multiple Depends on Future Earnings

The 12-times multiple cited by Arxis, Inc. (NASDAQ:ARXS) combines Omnetics with MagCanica and uses estimated fiscal-2027 adjusted EBITDA rather than current earnings. Investors therefore cannot determine from the disclosed figure how much of the valuation depends on growth, margin expansion, or integration benefits.

Acquisition-heavy companies can also make underlying performance harder to judge over time. Arxis excludes acquisition and integration expenses, transaction costs, and several other items from adjusted EBITDA. Such exclusions become more important when buying businesses is a recurring part of the operating model.

Arxis, Inc. (NASDAQ:ARXS) has also completed Micro-Tronics, MagCanica and Blue Line acquisitions in 2026. Omnetics adds another organization, product portfolio, and customer base to integrate. Strong organic growth reduces the immediate concern, but maintaining it while completing several integrations will be the more revealing test.

INSIDER MONKEY’S HEDGE FUND DATA

Insider Monkey’s database does not yet provide a completed-quarter hedge-fund count for Arxis, Inc. (NASDAQ:ARXS), which began trading on April 16.

CONCLUSION

The company is acquiring a specialized connector business without adding acquisition debt. The share issuance produced approximately 3.1% dilution to total common shares, although it equaled roughly 17% of the June 30 Class A share count.

Disciplined roll-ups are proven through returns on invested capital, not deal volume. Arxis, Inc. (NASDAQ:ARXS) must show that Omnetics can deliver the earnings embedded in the purchase multiple without weakening organic growth or creating persistent integration costs.

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While we acknowledge the potential of ARXS as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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READ NEXT: ConocoPhillips (COP): Wall Street Sees More Upside Despite Leadership Shakeup and Here is Why Chevron (CVX) is a Favorite Among Hedge Funds

Disclosure: None. This article is originally published at Insider Monkey.

Lithium and derivatives revenue at Sociedad Química y Minera de Chile S.A. (NYSE:SQM) rose nearly 300% to $1.78 billion. Total lithium sales volume reached a record 84,100 metric tons of lithium carbonate equivalent, up 59%, while the realized price in the Novandino business was about $21.80 per kilogram, up 23% sequentially. Management said battery-energy-storage demand helped offset slower-than-expected growth in the battery-electric-vehicle market.

The near-term outlook also improved. Sociedad Química y Minera de Chile S.A. (NYSE:SQM) expects third-quarter lithium prices to remain broadly in line with the first-half average and sales volumes to stay near second-quarter levels. Management also expects third-quarter production costs to remain similar sequentially and below 2025 levels. That combination supports a tighter market, but stable pricing is not the same as another leg higher.

Bull Case

The bull case for Sociedad Química y Minera de Chile S.A. (NYSE:SQM) rests on operating leverage. Record volume, a sequential price recovery, and cost efficiencies can sustain strong margins even without another sharp price increase. Management’s demand forecast also indicates that energy storage is broadening lithium consumption beyond electric vehicles. The company ended the quarter with $3.38 billion of cash and another $976 million in current financial assets, alongside approximately $5.22 billion of total debt. That balance sheet provides liquidity for the investment cycle, but the debt load limits the strength of the cash argument.

Bear Case

The recovery comes with a large capital bill. Sociedad Química y Minera de Chile S.A. (NYSE:SQM) plans approximately $3 billion of capital spending from 2026 through 2028, including roughly $300 million of annual sustaining investment. Salar Futuro could require about $3 billion over seven years after approvals, with spending concentrated in years three and four. SQM did not fully reconcile whether part of the Salar Futuro spending could overlap with the 2026-to-2028 program, so the two estimates are not automatically additive. Adjusted EBITDA also excludes capital expenditures, working-capital needs, interest and taxes. The company accrued more than $1.6 billion in payments to the Chilean state during the first half, including amounts that had not yet been paid. Stronger operating profit will therefore not translate mechanically into free cash flow.

Insider Monkey’s Hedge Fund Data

Insider Monkey’s first-quarter database shows 32 hedge funds holding SQM during the first quarter, up from 28 in the preceding quarter, allowing these funds exposure before the second-quarter beat.

Conclusion

Record volumes, firmer pricing and management’s lower-cost outlook suggest that the downturn is ending for Sociedad Química y Minera de Chile S.A. (NYSE:SQM). That supports a cautiously bullish view of the lithium cycle, but the recovery is not yet a simple free-cash-flow story. The next test is whether those gains can fund a multibillion-dollar expansion program without weakening shareholder economics.

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While we acknowledge the potential of SQM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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READ NEXT: ConocoPhillips (COP): Wall Street Sees More Upside Despite Leadership Shakeup and Here is Why Chevron (CVX) is a Favorite Among Hedge Funds

Disclosure: None. This article is originally published at Insider Monkey.

In its Q2 2026 investor letter, Sound Shore Fund highlighted Southwest Airlines Co. (NYSE:LUV) as a meaningful contributor. Southwest Airlines Co. (NYSE:LUV) is a leading U.S passenger airline company that provides scheduled air transportation services. On August 24, 2026, Southwest Airlines Co. (NYSE:LUV) closed at $40.71 per share, reflecting a market capitalization of $19.92B billion. Southwest Airlines Co. (NYSE:LUV) posted a one‑month return of -12.11%, while its shares gained 21.86% over the past 52 weeks.

Sound Shore Fund stated the following regarding Southwest Airlines Co. (NYSE:LUV) in its Q2 2026 investor letter:

“Leading airline Southwest Airlines Co. (NYSE:LUV) was also a meaningful contributor this quarter. Having weathered a difficult industry environment over the last 5 years, management is implementing a number of changes to boost margins, including premium services like increased legroom, preferred seating, and charging for checked bags. These initiatives allow Southwest to better price its product and restore returns to historical standards. With an estimated earnings power of $6 or more per share, we believe this investment maintains a compelling position in the portfolio.”

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Southwest Airlines Co. (NYSE:LUV) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 57 hedge fund portfolios held Southwest Airlines Co. (NYSE:LUV) at the end of the second quarter, which was 54 in the previous quarter. While we acknowledge the potential of Southwest Airlines Co. (NYSE:LUV) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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In another article, we covered Southwest Airlines Co. (NYSE:LUV) and offered a comparison with The Boeing Company. Southwest Airlines Co. (NYSE:LUV) negatively impacted Sound Shore Fund’s performance last quarter, amid fears of prolonged war, yet the fund maintained its conviction in the holding. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years.

Disclosure: None. This article is originally published at Insider Monkey.

Alphabet Inc. (NASDAQ:GOOGL) remains operationally strong. Second-quarter revenue increased 24% to $119.8 billion, while operating income rose 30% to $40.8 billion. Google Cloud revenue jumped 82% to $24.8 billion, and its operating margin expanded to 35.6%. However, capital expenditures doubled to $44.9 billion against $39.1 billion of operating cash flow, producing negative non-GAAP free cash flow of $5.9 billion. Trailing-12-month free cash flow remained positive at $53.3 billion.

Bull Case: Strong Demand Provides Financing Flexibility

The bull case for Alphabet Inc. (NASDAQ:GOOGL) begins with the bond order book. Demand exceeding A$18 billion allowed the company to spread borrowing across four maturities rather than depend on a single refinancing date. The offering further diversified Alphabet’s funding currencies beyond the U.S. dollar market, following earlier transactions in sterling, Swiss francs, euros and yen.

Alphabet Inc. (NASDAQ:GOOGL) is borrowing while its core businesses and operating income are expanding, although the specific use of proceeds from the Australian offering was not disclosed. Cloud growth and margin expansion provide early evidence that infrastructure investments are producing revenue and operating leverage. If the assets support AI search, cloud computing, and model deployment for many years, matching them with longer-term debt can be more efficient than funding every investment from current-period cash.

Bear Case: Fundraising Is Becoming Repetitive

The concern is that Alphabet Inc. (NASDAQ:GOOGL) has moved from occasional borrowing to repeated capital-market fundraising. Management raised its 2026 capital-expenditure forecast to $195 billion-$205 billion, suggesting that the second-quarter cash deficit may not be the peak of the spending cycle. Additional debt also introduces interest and refinancing obligations that were previously less important to the investment case.

Alphabet Inc. (NASDAQ:GOOGL) generated enough operating cash to fund enormous capital programs for years. The first negative quarter shows that this internal funding advantage has narrowed as AI spending accelerated. If monetization develops more slowly than infrastructure commitments, debt could continue rising while buybacks and other shareholder returns face greater competition for cash.

Insider Monkey’s Hedge Fund Data

Insider Monkey’s hedge fund database shows that 265 hedge funds held positions in Alphabet Inc. (NASDAQ:GOOGL) at the end of the first quarter of 2026, compared with 288 funds at the end of the preceding quarter. These figures reflect holdings as of March 31 and do not capture trades made after that date or investors’ reactions to the Australian-dollar bond offering.

Conclusion

Alphabet Inc. (NASDAQ:GOOGL) executed the bond sale well, and the oversubscribed order book shows strong investor demand for the Australian-dollar notes at the offered terms. The transaction does not create an immediate balance-sheet problem, but it reinforces how quickly AI has increased the company’s capital intensity. The decisive test is whether cloud and AI revenue can grow fast enough to restore positive quarterly free cash flow before repeated fundraising becomes a permanent feature.

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While we acknowledge the potential of GOOGL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

[/im-yf-promo]

READ NEXT: ConocoPhillips (COP): Wall Street Sees More Upside Despite Leadership Shakeup and Here is Why Chevron (CVX) is a Favorite Among Hedge Funds

Disclosure: None. This article is originally published at Insider Monkey.

That matters because Aegon Ltd. (NYSE:AEG) is moving toward a U.S. domicile and plans to adopt the Transamerica name. The transformation is intended to align the parent company with the market that drives most of its business, but investors still need evidence that the strategy can produce durable growth rather than another round of restructuring promises.

Bull Case

The strongest point in favor of Aegon Ltd. (NYSE:AEG) is that Transamerica’s operating momentum now sits alongside a healthy capital position. Growth across the U.S. franchise supports management’s case that the pivot is improving the underlying business, while a 420% risk-based capital ratio remains above the company’s 400% operating level.

Aegon Ltd. (NYSE:AEG) is also returning excess capital instead of allowing it to accumulate on the balance sheet. The increase takes the capital-return portion of its 2026 buybacks to €550 million, combining the €200 million first-half authorization with the new €350 million second-half program. If operating capital generation remains strong, the repurchases can support earnings per share while reinforcing confidence in future remittances from Transamerica.

For Aegon Ltd. (NYSE:AEG), this is the clearest evidence yet that its U.S. strategy is moving beyond portfolio cleanup. Transamerica is growing, capital remains strong, and shareholders are receiving a larger portion of the surplus.

Bear Case

The first-half beat does not remove the execution risks facing Aegon Ltd. (NYSE:AEG). Favorable market performance helped results, making it important to separate structural progress from benefits that could reverse if equity markets weaken or other favorable market conditions reverse.

The redomiciliation also carries an expected €350 million of implementation costs through the first half of 2028. Aegon Ltd. (NYSE:AEG) must manage a new legal domicile, U.S. reporting requirements, and organizational changes without disrupting capital generation. Will Fuller’s appointment as president and chief operating officer from January 2027 adds another leadership change while the redomiciliation remains underway.

A 420% risk-based capital ratio provides a useful buffer, but it is not unlimited. A severe market setback, weaker remittances or higher transition spending could narrow the room for future buybacks.

Insider Monkey’s Hedge Fund Data

Insider Monkey’s hedge fund database shows that 14 hedge funds held positions in Aegon Ltd. (NYSE:AEG) at the end of the first quarter of 2026. These holdings reflect positions as of March 31, 2026, and do not capture subsequent trading or investors’ reactions to the first-half results and expanded buyback.

Conclusion

The latest update supports a cautiously bullish view of Aegon Ltd. (NYSE:AEG). Transamerica’s growth, the capital-generation beat, and the larger buyback provide operating evidence that the American pivot is working. Favorable market conditions and redomiciliation costs still complicate the story, but the strategy now has measurable progress behind it. The next test is whether Aegon can repeat that performance while completing the transition.

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Disclosure: None. This article is originally published at Insider Monkey.