The AI Stock Rally is BACK. For Now.
Overall Thesis
The AI stock rally is resuming following Nvidia's earnings beat, with the host expressing optimism about AI-related stocks and expecting continued market strength in tech and cybersecurity names.
Narratives
Kevin sees Nvidia's earnings beat as a bullish near-term catalyst for a 'hardware rally 2.0,' driven by massive capital raises from Google, SpaceX and others being funneled into Nvidia purchases. However, he repeatedly flags that the long-term foundations of this spending (OpenAI, Anthropic, circular financing) are unstable and expects the AI trade to eventually 'come down' even as he remains bullish in the near term.
Key Arguments
- Nvidia's beat-and-raise was fueled by massive capital raised by cloud/AI customers being spent on Nvidia hardware
- Sustainability of AI spending depends on Anthropic and future cloud provider spending, not Nvidia itself
- Long-term foundations (OpenAI/Anthropic revenue triangle) are described as unstable
Predictions (1)
Kevin expects a near-term 'hardware rally 2.0' fueled by AI capex and a dovish/no-hike Fed outcome at Jackson Hole to push the Nasdaq-100 (the Qs) to new all-time highs within the next six months, while separately maintaining a longer-term bearish view on AI spending sustainability.
Key Arguments
- Post-Nvidia earnings clearing event should let markets rally as uncertainty resolves
- Fed (via Myron's Jackson Hole setup) is expected to avoid a hawkish surprise, reducing the odds of a rate hike weighing on stocks
- Software sector (IGV, CRWD, CRM, PATH) rallying alongside hardware supports a broad market push higher
Predictions (1)
Kevin is strongly bullish on CrowdStrike, arguing that AI-driven cyberattacks (the 'agentic swarm') are creating an arms race that will structurally boost cybersecurity spending, and that Wall Street's growth estimates for CrowdStrike's ARR are far too conservative. He personally holds the stock and believes it deserves a much higher valuation than current Street numbers imply.
Key Arguments
- CrowdStrike raised ARR growth guidance to 34%, beating expectations by double digits
- AI adoption increases endpoints and cheaper open-weight models increase attack surface, creating a self-reinforcing cycle of more attacks and more security spending
- Falcon Flex/Falcon Shield revenue is growing 100%+ and could mask true underlying growth
- Data network effects (more customers → more data → better protection → more customers) create a strong moat
Predictions (1)
Kevin is bullish on Salesforce following its earnings, citing the new Agentforce/Claude-powered CRM product, strong free cash flow growth, and major new enterprise customer wins as validation that the AI-disruption fears were overblown.
Key Arguments
- Announced 'Claude Force,' an AI CRM product built with Anthropic
- Free cash flow up 81% year-over-year
- Major new customer wins including Booz Allen, Mercedes-Benz, World Cup, Robinhood
Kevin views Palantir as having a better valuation than CrowdStrike given its higher net revenue retention and expanding role in cybersecurity via its Apollo platform, though he does not hold a specific price target.
Key Arguments
- Net revenue retention around 150% on relatively low customer growth, described as very attractive
- Expanding into autonomous cyber remediation via its Apollo platform
- Used by companies like Boston Scientific as an enterprise data layer, showing broad platform stickiness
Kevin notes Google's stock has fallen significantly since its large debt and equity raises earlier in the year, interpreting the market's punishment of that fundraising as a sign that financial conditions are not overly loose — which he sees as supportive of the Fed holding rates rather than hiking.
Key Arguments
- Google raised $84B in equity (including a Berkshire-backed portion) in June and a $32B bond deal (including a 100-year sterling tranche) in February, both followed by stock declines
- Market's negative reaction to the raises is used as evidence financial conditions aren't excessively loose
Kevin remains bullish on Atlassian, referencing his earlier call that the stock was undervalued, and highlights improving operating margins and strong free cash flow allocation to buybacks as reasons the company could re-rate higher over time.
Key Arguments
- Operating margins projected by Wall Street to rise from ~2% to an average of 20% over the next four years
- 75% of free cash flow going back to buybacks
- Seed expansion and positive net income noted as bullish signals
Hedges & Caveats
- Questions about Nvidia's ability to utilize balance sheet to generate extra revenues
- Sustainability of AI rally may depend on future cloud service provider spending and Anthropic developments
- Commenter suggests this could be the last AI rally before companies realize they're losing money on AI investments
- Host acknowledges uncertainty about whether this marks the start of 'AI rally 2.0'