Weekly Research Briefing: Enjoy Your Chips
Hopefully you own a few semiconductor stocks across your portfolios. Semis are the building blocks of the digital age which is currently running at a London Marathon pace due to AI. As demand for AI data centers has increased, semiconductor demand has gone vertical, not just for GPUs, but also for CPUs, memory and analog chips. Everything is being bought for placement in data center equipment or in the devices using AI and creating agents in our offices and homes. The nearly 50% move in semiconductor stocks this month indicates that the AI data center ramp is accelerating.
We are not only seeing semiconductor company earnings pop higher this earnings period. They are joined by power generation equipment manufacturer GE Vernova, power generation company NextEra Energy, and construction rental equipment company United Rentals. This week we will see how AI might benefit the revenues of the largest data center builders as Microsoft, Google, Amazon and Facebook all report earnings. These are truly fortunate times for the global economy and the financial markets. Who would have thought that AI's current impact on earnings could make us worry a bit less about the Strait of Hormuz.
Speaking of the Middle East, with no progress in US-Iran talks, year-end Brent crude oil futures returned to the $85 level. Prices this high will keep the average US gasoline gallon above $4 and force global airlines to cut future schedules. And look at that lineup of low cost airlines now running to the government with their pockets turned out. High energy prices heading into the summer will only continue the slow frog boil of GOP candidates running for office in November.
This week, earnings reports for about 45% of the S&P 500 are due. Wall Street technology analysts will be pulling an all-nighter on Wednesday as Microsoft, Amazon, Meta and Alphabet all report after the close. Caterpillar, Sandisk, and Apple will also be of high AI interest on Thursday. Away from earnings, the FOMC will meet in Washington for what should be Fed Chair Powell's final meeting. There should be no changes to interest rates as some watch for a Grateful Dead reference in his final press conference as Chairman. Kevin Warsh is next up for the gavel as Congress rushes to approve his appointment. Financial markets will also closely watch this week's IPO slate as last week's offerings were well received. Have a great week.
Why do we watch semiconductor stock performance so closely?
Credit spreads are my first crystal ball. Semi stock prices are one of my next favorites. Bank stock performance is right there also.
"...upside breakout blue collar semis (ON, STM, MCHP, TXN...) implies surge in US ISM to >60 (Chart 4)...up-in-chips saying up-in-cyclicals."
BofA Global
This has been an incredible move in stock price and earnings estimate performance…
The Philadelphia Stock Exchange Semiconductors index, universally known as the SOX, has gained 47% in the 18 trading days since the broader stock market perceived a thaw in the Iranian position. It has advanced in every one of those days, the longest string of wins in its history.
That might seem crazy, but chipmakers are the prime and immediate beneficiaries of the AI boom as companies building data centers or large language models have to start by buying chips. Over the last month, expectations for the sector’s earnings this year have rocketed.
And the move in Semis is not narrow and isolated to Nvidia. It is very broad based across all types of silicon…
@bespokeinvest: Every stock in the SOX, yes, all 30 of them, is outperforming the S&P 500 since 3/30.
Boom! From the TXN conference call: “Data center grew about 90% year on year.”
Full top level revenue details on the earnings blowout:
1Q26 industrial revenue increase of 20%+ Q/Q was better than the company's 1Q revenue guidance of up ~8% QoQ which suggests a cyclical recovery across the supply chain. Automotive was roughly flat QoQ, personal electronics was up low-single digits QoQ, communications equipment was up 30% QoQ, and datacenter revenue was up 25% QoQ in 1Q.
Goldman Sachs
Earnings expectations continue to move higher as companies report this month…
S&P 500 forward EPS hit another record high at $344.30 last week. The analysts’ consensus estimates from which we derive forward EPS are $326.78 for 2026 and $380.37 for 2027. Both continue to be revised higher.
What the Strait of Hormuz took away, corporate earnings has returned…
While many stock prices have returned to their highs, the underlying forward earnings have grown even faster causing the lower P/E multiple today than in January.
@DualityResearch
This week's very big earnings slate…
@eWhispers
AI is driving all demand higher. The world is constrained from data center capacity to power capacity to CPU availability to even the of electricians…
“I think the main thing to know is. We have more demand than supply. For the first time in my 32 years at this company, we cannot give everybody everything they want to buy. So we need to build out this expansion... if you have sales, you can’t make because you don’t have capacity, and as soon as the capacity comes online, you actually start making more money. It’s about as simple as that.” - Microsoft President Brad Smith “
I think for the next 10 years, there will always be more demand than supply...there’s always a shortage, there’s never enough.” - Alphabet Google Cloud CEO Thomas Kurian “
These swarms of agents actually just took humans out of the loop. We have a whole other scaling law, where before, the chatbot only needed to be as fast as you could read, and you could type. Now I’ve got a chatbot that actually can read and write as fast as another chatbot can read and write another chatbot, and you can see where this is going. It’s causing an explosion of a need for more compute and also another path to optimize.” - NVIDIA VP of Hyperscale and High-Performance Computing Ian Buck “
Orders remain strong at roughly 2.5x revenue and increased 86% year-over-year to approximately $7.1 billion due to growing grid equipment demand, partially to support data center development.” - GE Vernova CFO Kenneth Parks “
Q1 revenue would have been meaningfully higher, but demand continues to outpace our growing supply. Our collective AI-driven businesses now represent 60% of revenue and grew 40% year-over-year..Even as we improve factory output, demand continues to run ahead of supply for all our businesses, especially for Xeon server CPUs, where we expect sustained momentum this year and next.” - Intel CEO Lip-Bu Tan “
We’re gonna need another half million electricians in this country, and it may be in two years, it may be in five or seven, but the reality is you can’t have more electricity without more electricians. And it means working with organized labor with community colleges across the country to give people the skills so they can fill these jobs.” - Microsoft President Brad Smith
In Christopher Lloyd's 'Doc Brown' voice… "200 giga-watts!"
Data center sites have exploded, with 11,200+ globally today, while capacity is set to double to 200GW by 2030E. Meanwhile, AI-specific capacity has tripled in just 18 months. This is a transition era resource shock, attracting $7tn of investment by 2030E, consuming more electricity than Japan annually, drinking New York’ entire annual water use, and accounting for up to 6% of global critical metal demand.
By 2030, data centers could exceed 3% of global electricity demand, straining grids with large, inflexible loads as GPU power use grows c.30% annually. Hyperscalers have responded by moving upstream, driving 80% of top 10 corporate clean energy procurement, accelerating battery storage and locking in nearly half of SMRs capacity.
BofA Global
NextEra Energy moved to all-time new highs on their reported earnings last week which showed a robust pipeline of power plants on the project board…
33 GW of power generation/storage in the backlog now through 2032 after adding 4 GW of power in the Q1. If you don't own NextEra, hopefully the other companies that you own are suppliers to them or customers of them. Or as NEE said on their earnings call, “…demand for electricity in this country is not slowing down. In fact, it's accelerating. Our customers need power now and speed to power is essential.”
Big power generator demand is so strong right now that GEV just slid up its entire backlog by a year sending its stock to all-time new highs and a 200% gain year over year…
GE Verona pulled forward its $200bn backlog to 2027 from 2028. That move, which seems to serve as evidence that order momentum is accelerating, drove a ~$40bn market cap increase on a single day. (J.P. Morgan)
Energy expert ponders oil prices…
What is the long-term impact of this war?
A good measure might be to look at deferred futures contracts. The blue line is the December 2026 Brent Crude Oil Futures contract. It made a new high today, holding its uptrend, and up 42+% YTD.
@biancoresearch
Chevron CEO sees the negative impact on the global airline industry to be more severe…
Chevron CEO Mike Wirth to @margbrennan: "We've seen some upward pressure on gasoline prices now. I think aviation is clearly an area where it's going to probably get worse over the next few weeks… We are seeing jet fuel tighten very quickly in Europe, in Asia, and we're seeing airlines announce adjustments in their flight schedules. We're seeing it flow through into fares. I think that's one of the first places it will be felt most broadly.”
@annmarie
Wendy Sherman was in 'The Room Where It Happened'…
A great interview with the architect of the 2015 Iranian nuclear deal and what is different with the negotiations today.
How to Negotiate with Iran - Wendy Sherman, the former US deputy secretary of state and architect of the 2015 nuclear deal, says the current situation in Iran is harder, riskier and strategically misjudged.
Eight weeks on from the start of the US-Israel war with Iran, the conflict is being watched with increasing alarm by Wendy Sherman. The former top US negotiator spent years sitting across the table from Iranian officials, and sees a far more volatile landscape today. Her concerns also go beyond the Middle East, where she sees China and Russia as among the beneficiaries of this war.
Meanwhile, EV sales are surging in Europe right now as consumers look to run away from soaring diesel fuel prices…
European battery electric vehicle (BEV) registrations surged 51% in March 2026 across 15 key EU + EFTA markets, as renewed conflict in the Middle East brought the continent's reliance on oil sharply into focus. New data published today by New Automotive and E-Mobility Europe reveals that over 224,000 new electric passenger cars were registered in March alone, accounting for 22% of all new car sales across tracked markets (and an estimated 21.2% EU-wide).
In the first quarter of 2026, EU member states registered more than 500,000 new electric cars, a 33.5% increase on the same period last year.
BEV registrations accelerated across every major EU market in the first quarter of 2026. Europe's five largest countries - Germany, France, Spain, Italy, and Poland – all recorded BEV growth above 40% year-to-date.
Would a 900 mile EV battery convince you to give up your gas guzzler? What about a full charge in 6.5 minutes?
CATL has developed a battery capable of allowing an electric vehicle to drive 1,500km on a single charge, the Chinese group claimed on Tuesday, as it challenges BYD for supremacy on range and charging speed.
The company’s latest version of its condensed Qilin battery has a greater range than the distance by road from London to Barcelona and marks a leap from the 1,000km limit of its previous edition.
CATL also released an upgrade to its Shenxing, which can charge from 10 per cent to 98 per cent in six-and-a-half minutes, an improvement from the previous edition which charged from 5 per cent to 80 per cent in 15 minutes. It is also considerably faster than the nine minutes taken for BYD’s latest Blade battery, which was unveiled last month, to charge from 10 to 97 per cent.
CATL and BYD, which together account for more than half of the global EV battery market, are pouring billions of dollars into research and development, targeting innovations in cell chemistry and manufacturing.
“The boundaries of electrochemistry are still far from being reached, and the possibilities of materials science are still far from being exhausted,” Robin Zeng, CATL’s billionaire founder, told reporters and investors in Beijing on Tuesday.
Another four IPO pricings last week all ended in the green from the IPO price…
IPO pricings thru Friday's close. A good, green string of gains for deals launched since the war started.
The barn door has opened. Now which unicorn wants to go public?
Brace for a thundering herd of unicorns. Since the term (for private companies worth more than a billion dollars) was coined in 2013, unicorns have gone forth and multiplied. A trawl of databases by BestBrokers finds that there are now 1,727 globally, with their numbers swelling by 70 in the first quarter of this year.
So much value has accrued at the largest unicorns under a private corporate structure…
Historically, it’s unusual for companies to get this big before floating. Funds from venture capital and private equity have changed the calculus. Founders needn’t cash in so quickly, and can enjoy the extra freedom that their private funders will permit.
If private market valuations are right, the biggest unicorns have far outperformed public markets since the pandemic. That extra return will forever belong to those currently backing them, not investors in index funds.
It won't be long before the Emerging Market bankers begin to hit the IPO markets with their best private companies…
You just can't ignore the hottest area of the global equity markets right now. Feed the fish while they are biting.
Just another $115 billion in M&A hitting the tape in the last week…
- SpaceX (private for now) said it secured the right to buy artificial-intelligence coding startup Cursor (private) for $60 billion later this year. SpaceX announced that the companies were working closely together on coding and AI, and that it had an option to purchase Cursor later this year. If there isn’t a purchase SpaceX could pay $10 billion for work in the partnership. The company last closed a round of financing in November that valued it at $29.3 billion.
- Canadian AI model company Cohere (private) is combining with Germany's Aleph Alpha (private), in a deal that will value it around $20 billion after a concurrent Series E closes. Aleph Alpha is a leading developer of "sovereign" large language models (LLMs) and generative AI designed for highly regulated government and industrial sectors.
- Shell plc (SHEL/UK) to acquire ARC Resources Ltd. (ARX/Canada) for US$13.6 billion (a 27% premium to last close). In buying ARC, Shell is taking over one of the suppliers to a giant LNG export terminal that it partly owns in British Columbia—a key facility used to serve customers in Asia. ARC mainly produces gas and gas liquids from the Montney basin in Western Canada.
- Sun Pharmaceutical Industries (SUNPHARMA/India) will acquire Organon & Co (OGN) in an all cash deal, valuing the U.S. drugmaker at about $11.75 billion including debt. As part of the deal, Sun Pharma will buy all the outstanding shares of Organon for $14.00 per share, the companies said in a joint statement, representing a premium of more than 100% to the April 9, 2026 unaffected trading date.
- Helix (HLX) and Hornbeck (HOS) agreed an all-stock deal with Helix shareholders owning ~45% and Hornbeck ~55%. The pro forma business would operate a ~73 vessel fleet with a fair market value of $2.8 billion and about $2 billion of combined backlog, increasing exposure to deepwater, defense and renewables markets and leveraging ROV and trenching capabilities. The new company will keep Hornbeck name & ticker HOS.
- Daiwa Securities Group Inc. (8601/Japan) will buy Orix Corp. (8591/Japan) banking unit for ¥370 billion ($2.3 billion), its largest acquisition in almost two decades, as Japan’s second-biggest brokerage deepens its foray into commercial lending.
- Eli Lilly (LLY) is paying up to $2.3 billion for Ajax Therapeutics (private) in a deal that bolsters the drugmaker’s blood-cancer portfolio. Eli Lilly, which participated in a $95 million funding round for Ajax in 2024, said the $2.3 billion purchase price includes an undisclosed upfront payment and subsequent payments based on the achievement of certain milestones.
- Apollo Global Management Inc. agreed to buy Forvia SE (FRVIA/France) auto interiors business for an enterprise value of €1.82 billion ($2.1 billion), helping the French supplier cut debt and streamline its business. The sale of the interiors unit, which makes parts including door panels and center consoles, is part of a strategy to streamline its profile and accelerate growth.
- Amneal Pharmaceuticals (AMRX) to acquire Kashiv BioSciences (private) for $1.1 Billion ($750M upfront + $350M milestones). Kashiv BioSciences is a biotechnology firm specialized in developing and manufacturing complex biosimilars and specialty injectables.
- Medical equipment maker Thermo Fisher Scientific (TMO) said it would sell its microbiology business to private equity firm Astorg for about $1.08 billion.
- American Industrial Partners (private) to acquire Honeywell (HON) Warehouse unit - Acquisition Price: >$935 Million (Estimated) Honeywell Warehouse and Workflow Solutions (WWS) provides automated sortation, conveyor systems, and robotics solutions for the global logistics and e-commerce industry.
Various News Sources
This one is not just for fans of boardgames Chess and Go…
If you are looking for an excellent book on the history of AI, the current state of AI and the many top characters involved in the race, I would highly recommend this one. A must read for any investor in AI.
The Infinity Machine: Demis Hassabis, DeepMind, and the Quest for Superintelligence - Sebastian Mallaby
From one of our leading chroniclers of the intersection of innovation and capitalism, a landmark reckoning — based on unprecedented access — with one of the world’s most brilliant and driven tech visionaries and his game-changing company.
Learn more about the Hamilton Lane Strategies
DISCLOSURES
The author has current equity ownership in: Nvidia Corp., Alphabet Inc., Caterpillar Inc. and Apple Inc.
The information presented here is for informational purposes only, and this document is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities. Some investments are not suitable for all investors, and there can be no assurance that any investment strategy will be successful. The hyperlinks included in this message provide direct access to other Internet resources, including Web sites. While we believe this information to be from reliable sources, Hamilton Lane is not responsible for the accuracy or content of information contained in these sites. Although we make every effort to ensure these links are accurate, up to date and relevant, we cannot take responsibility for pages maintained by external providers. The views expressed by these external providers on their own Web pages or on external sites they link to are not necessarily those of Hamilton Lane.