One of the things that’s different about The Technology Letter is ACCESS. I’ve done 232 interviews of CEOs and CFOs of public companies in 6 years, about 40 interviews a year. That gives me unusual insight into the intentions, the strategy, the ways that these executives have of thinking about where there businesses are going. thetechnologyletter.com

Merrill Lynch’s Andrew Obin conducts what is becoming an annual ritual of exhaustively going through all the vendors of data centers. It’s a great exercise if you want to take your mind off of the very bothersome matter of where all the money for this is supposed to come from… It’s the Great AI Rotation, but you can still pick ‘winners’ Street wisdom is divided over the AI trade, with the hopeful perspective depicting trillions in liquidity to fuel more building and the negative slant being just rotate out of the infrastructure vendors. But, you can stil pick winners in the data center. And, SpaceX’s massive cellular investment comes into focus and with it ominous signs for the telcos. thetechnologyletter.com $SPCX $DELL $MRVL

Investors are deciding to get out while the getting’s good. Stellar results only portend possible heartbreak as far as the AI trade, it seems. However, I suspect what most investors miss is that it’s supply not demand that they have a hard time really guess-timating. That’s an important distinction in these times. It’s time to sell the winners again as Western Digital, Bloom report outstanding results, shares drop Another raft of excellent financial reports Thursday by Bloom Energy and Western Digital prompted sell-offs. The longer that business continues to hum right along, the more it raises concerns that it can’t last. Hopefully, the selling is a kind of “soft landing” for stocks, a way to take the pressure out of a very pressured stock market. thetechnologyletter.com $WDC $BE

It can be useful to talk to vendors if you know the right questions to ask. As regards Artificial Intelligence, I had a stimulating chat last week with Snowflake executives Jonathan Beaulier, chief revenue officer; Anahita Tafvizi, chief data and AI officer; Denise Persson, chief marketing officer; and Christian Kleinerman, executive vice president of product. We’re still very, very early in the deployment of AI by most companies. There are signs of hope, however. Use of AI is boosting Snowflake’s revenue while mortal companies may take longer Software giant Snowflake is in the top tier of companies finding they can automate tasks inside the company such as financial reporting and the identification of sales prospects. It’s already boosting revenue and profit. There are encouraging signs for ordinary companies using AI but it’s clear they still have a very steep learning curve to “transform” their businesses. thetechnologyletter.com $SNOW @Snowflake

Last week’s simply awful trend for the AI trade is reversing nicely today, with the TL20 group of stocks to consider up 5% week to date and the newly formed TL20 Special Situations — somewhat of an odd group of companies — up an even better 6%. thetechnologyletter.com

SpaceX is lighting up gigawatts of compute faster than indicated ninety days ago, leading to tonight’s surprising peek into 2027 Q1 revenue. Oh, and spending is going way higher too. CFO Bret Johnson sees the credit market as just fine, which is also surprising. SpaceX shares rise on an eye-popping peek at 2027’s revenue SpaceX’s AI revenue nearly triples, but the big disclosure is a peak at Q1’s revenue in 2027, $33 billion to $37 billion, more than fifty percent higher than current expectations as the company lights up more gigawatts than previously forecast. Oh, and the spending, of course, is going way up starting this quarter. thetechnologyletter.com @SpaceX @elonmusk $SPCX

An interesting chat with Paddy Srinivasan last week as everything in AI was melting down. I don’t think anything will escape a market collapse, but I do appreciate the relative safety of not being massively debt-laden. They used to call 7-Up the “uncola” in the 1970s. Perhaps DigitalOcean is something of the sort compared to the Neoclouds such as CoreWeave and Nebius. “Supply chain arbitrage is not a sustainable moat." DigitalOcean CEO: ‘We are not going to be extraordinarily leveraged like some others’ At the end of an awful week for the AI trade, DigitalOcean CEO Paddy Srinivasan makes the case that having valuable software means not having to sell a commodity, something more than the mere running of “tokens.” His company’s stock could benefit from the distinction. thetechnologyletter.com $DOCN $NBIS $CRWV

A couple weeks ago I met with Zscaler CEO Jay Chaudhry, and CFO Kevin Rubin, and we talked about why the company’s stock doesn’t always get its proper due relative to Cloudflare and CrowdStrike and Palo Alto. One thing is for sure, this market that is trying to figure out artificial intelligence in the enterprise is buying a lot more cyber-security technology because you never know what could go wrong. Zscaler CEO and CFO: We have the opportunity of a lifetime Cyber-security vendor Zscaler’s stock has underperformed that of its peers. Part of turning that around is telling the story more consistently, say CEO Jay Chaudhry and CFO Kevin Rubin. The risks of “rogue AI” could add to the company’s prospects in a big way. thetechnologyletter.com $ZS

The eighth rebalancing of the TL20 group of stocks to consider continues to track a broad semiconductor renaissance, the best of times for chip makers — but also a time filled with uncertainty over massive spending plans for AI infrastructure. Seven names are out, seven are in. In addition, a second index, the TL20 Special Situations is an eclectic mix of companies with astronomical potential, sometimes beaten down valuations, and sometimes prospects years out in the future. thetechnologyletter.com

It’s damned if you do, damned if you don’t, as the raging AI market creates terrific demand, but then limits upside for chip equipment makers because they can’t fulfill all the demand. Fact is, business is outstanding at the moment, even if no one wants to buy these stocks. Scarcity is the boogey man for ASML, Applied Materials Business is on fire for equipment makers ASML and Applied Materials, but that’s not helping the shares. The theme of scarcity dominates, the various factors that are limiting the upside for the companies and the pervasive fear should that scarcity go away and supply actually comes into balance with demand. thetechnologyletter.com $ASML $AMAT

The eighth rebalancing of the TL20 group of stocks to consider continues to track a broad semiconductor renaissance, the best of times for chip makers — but also a time filled with uncertainty over massive spending plans for AI infrastructure. Seven names are out, seven are in. In addition, a second index, the TL20 Special Situations is an eclectic mix of companies with astronomical potential, sometimes beaten down valuations, and sometimes prospects years out in the future. thetechnologyletter.com $CBRS

Like high quality footwear Just like bespoke suits or small-batch whisky, the investment choices of the Technology Letter 20 are made by hand. The latest rebalancing of the TL20 introduces a second index of twenty stocks, Special Situations. The eighth rebalancing of the TL20 group of stocks to consider continues to track a broad semiconductor renaissance, the best of times for chip makers — but also a time filled with uncertainty over massive spending plans for AI infrastructure. Seven names are out, seven are in. The TL20 Special Situations is an eclectic mix of companies with astronomical potential, sometimes beaten down valuations, and sometimes prospects years out in the future. It’s been a rough first two days for these two indices, the TL20 down 3%, the TL20 SS down fractionally. But I think it’ll turn around. Subscriptions to the newsletter, and the TL20 and TL20 SS, are $1 a week for the first four weeks. thetechnologyletter.com

It has been apparent for a while now that there is a lot of extra engineering work of the plain-old-fashioned hard engineering type, to make AI stuff work correctly in an enterprise setting. I had an interesting chat with Progress Software CEO Yogesh Gupta this week about how the acquisition of Domo fits into that. I’ll be interested to see if they can move the ball forward with this technology. Progress CEO has an answer to tokenomics: ‘Combine the meters’ “If it was within our environment, we would optimize the LLM meter.” Progress Software, having purchased a “consumption-based” software startup called Domo, has an intriguing opportunity to combine the token-counting of AI with Progress’s own consumption pricing. “We would optimize the LLM meter,” says CEO Yogesh Gupta. thetechnologyletter.com $PRGS @ProgressSW

I have for a while now thought that enterprise artificial intelligence is going to require a lot of extra engineering work of the plain old variety. Some of it can be automated, however, claim Rick McConnell of Dynatrace and Jason Lopatecki of Arize, which just joined Dynatrace. The approach, a coding “loop” of iteration and correction, with automatic evaluation, makes sense. It’s still early, however, for the entire industry to see how many “9s” of reliability are reached. Dynatrace CEO: Soon, humans aren't going to be writing code Dynatrace’s $815 million acquisition of AI startup Arize will expand the company’s audience for its tools by bringing in the developers writing code. Increasingly, though, there is a feedback loop taking shape where automated software fixes the code and iterates again, a world without human code writers, says Dynatrace CEO Rick McConnell. “My R&D leader is telling me that is his goal, that over the next six months or so, if not earlier, we would expect little to no human-written code going into production,” says McConnell of Dynatrace’s internal development. thetechnologyletter.com $DT

It’s entirely possible Nvidia and peers will build more AI chips than the market can absorb Merrill Lynch’s Vivek Arya has done a great job gathering all the data points on chip companies and what they may be able to sell to Google and the other cloud giants. What concerns me is all the spending by the cloud giants still isn’t enough for rosy expectations of semiconductor sales growth. A separate study by UBS suggests chip stocks are undervalued, which has been my view generally, but the market clearly doesn’t trust all the chip sales forecasts. Forecasts for chip sales for AI are upbeat for years to come, but they’re not entirely supported by the spending plans of the cloud giants and the Neoclouds and sovereign states, as a new Merrill Lynch report shows. thetechnologyletter.com $MU $NVDA $AMD

Micron turned around a pre-market loss, rising 3% today. I think the “smart money” is looking at the prospect of higher margins being sustainable, and also the increased capital returns that will come with that. Momentum walks away from Micron Technology but cash is king Stock traders have concluded the surging prices of DRAM and NAND will moderate going forward, and so, they’re taking some profits on Micron Technology. But, the fundamentals of the business and its industry have only gotten stronger. The real focus going forward will be the enormous balance sheet now cruising toward a $100 billion in cash. thetechnologyletter.com $MU

Animal spirits are firmly in charge again as worries about the AI bubble yield to fervor for rising AI leasing estimates for SpaceX and others. The TL20 has snapped the losing streak it was on early in the month, now up 8% for September, ahead of all relevant benchmarks. thetechnologyletter.com

While estimates have risen for SpaceX’s AI compute revenue, it’s important to also take into account just how much is uncertain and unknown about those estimates. There is a verrrrrrrrrrrry wide range of estimates for AI revenue for next year and beyond. SpaceX’s Launch 14 impresses but AI revenue is the thing Analysts gushed over SpaceX’s Starship launch on Monday, but it’s still a long journey to prove “rapid” reusability of the rocket. The more nuts and bolts work is trying to guess how fast AI revenue rises. Also, Merrill Lynch helpfully says there’s no reason to worry about the AI trade unless it implodes. thetechnologyletter.com $SPCX @spacexai @SpaceX @elonmusk

Ever the salesman, Nvidia CEO Jensen Huang tends not to have much of any profundity to offer on the social issues that the world keeps trying to drag him into regarding AI. On the matter of a pause on AI, he urged the reverse, buying more of his company’s chips to speed up the whole affair and make it safer. On the matter of public outcries over data centers, Huang reflected, vaguely, that “it could have been handled better.” On his company’s stock, he is bullish, calling it undervalued and even cheap. “We’ll be buying hundreds of billions more of our stock,” he said. On that last point he’s probably right. Nvidia’s Huang’s answer to AI fears: buy more chips, and buy his stock thetechnologyletter.com $NVDA @JensenHuang @nvidia