Today’s Sponsor
The Fed held rates, inflation is still above target, and uncertainty is rising — that means the "buy anything AI" trade is over. Smart money is rotating fast toward the companies actually building AI infrastructure: chips, cloud capacity, and mission-critical data tools. Big Tech alone is projected to spend $635B–$665B on AI in 2026 — and not all of it is going where most investors are looking.
We've identified 9 AI stocks worth watching right now — including a lesser-known chip name tied to U.S. AI infrastructure, a cloud player with improving setup, and a data analytics company with government exposure. This isn't hype. It's about following where capital is actually being deployed.
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Election promises meet bond math. Defense and chips keep compounding. Big Tech keeps trimming. Pharma goes back to execution.
Image via NBC News
Democrats Ran on Prices. Now They Have to Fight the Bond Market.
Democrats just got a clear mandate on one word: affordability. Voters don’t care about your framework. They care about rent, groceries, insurance, and car payments. The campaign is easy: say you’ll bring prices down. The governing part is where it gets ugly.
Inflation isn’t a press release problem. It’s a supply, labor, and energy problem colliding with deficits and the cost of capital. If Washington tries to legislate lower prices with subsidies and new spending, the market will do what it always does: push long rates up until somebody blinks.
If they go the other way and get serious on housing supply, permitting, competition, and targeted cost fixes, that’s slower but real. Either path comes with winners and losers across sectors.
📈 Fred's Take: This is a rates story masquerading as a politics story. If Democrats deliver affordability via stimulus, expect term premium to reprice higher: long bonds down, rate-sensitive equities and small caps back under pressure, and the dollar firmer on yield. If they deliver via supply-side housing and deregulated buildout, that’s bullish for homebuilding inputs and disinflation-sensitive duration trades over 6 to 18 months.
📎 NBC News
Europe Reprices Ukraine: More Spending, More Industrial Policy, More Volatility
Europe is staring at a post-midterm Washington and recalculating the Ukraine endgame. The question isn’t values. The question is budget, stockpiles, and how fast European industry can scale without blowing up deficits and politics at home.
Defense earnings out of Europe’s big players are the cleanest real-time read on policy. Order books tell you what governments are actually signing, not what they’re saying at summits. The market cares about backlog quality, production constraints, and whether margins get capped by “patriotic pricing.”
If Europe decides it can’t rely on the U.S. cycle, you get a multi-year procurement ramp and more EU-style industrial coordination. That means long runway for primes and suppliers, but also more headline risk around export controls and budget fights.
📈 Fred's Take: Stay long the trend: Europe is being forced into structural defense capex, and markets will keep paying up for visible backlog. The risk is not demand; it’s execution and politics: margin pressure from governments and supply bottlenecks that delay deliveries. If you want to express it, favor companies with components and consumables exposure, not just the shiny prime contractors.
Image via Fox Business
Google Buyouts Go Global: AI Capex In, Headcount Out
Google is expanding voluntary buyouts across five countries as AI spending keeps swelling the bill. This is the new mega-cap model: pour money into compute, model training, and datacenter buildouts, then squeeze everything else to protect margins.
The market has stopped rewarding “we’re investing for the future” when the spend is open-ended. Investors want a sentence that ends in free cash flow. Buyouts are the cleanest, least confrontational way to resize payroll while management sells discipline.
Read through the HR language and you’ll see the capital allocation story. AI is not just a product bet. It’s a balance sheet bet. Whoever can fund it internally without blowing up profitability will lead the tape.
📈 Fred's Take: Alphabet is telling you the truth: AI is a margin war before it’s a revenue miracle. Near term, cost actions support the stock and keep buyback capacity intact, which matters in a market that punishes “profits later” narratives. Longer term, the winners won’t be the companies with the best demos; they’ll be the ones with the lowest unit compute costs and the best ad monetization defensibility.
Image via South China Morning Post
Hua Hong Bets on Silicon Photonics: China Wants the Next Bottleneck
Hua Hong is pushing into silicon photonics, aiming at the next choke point in the AI buildout: moving data fast, cheap, and with less power. As GPUs scale, the plumbing becomes the constraint. Interconnect, packaging, and optical links are where performance and energy budgets go to die.
For China, this is strategic. If advanced logic stays constrained by tools, controls, and node access, you pivot to adjacent domains where you can leapfrog or at least build domestic depth. Photonics can sit at the intersection of semiconductors, datacenters, and telecom, which makes it a natural target for industrial policy.
Execution is the question. Photonics is hard, integration-heavy, and ecosystem-dependent. But the direction is clear: the AI boom is widening the semiconductor battlefield beyond just leading-edge logic.
📈 Fred's Take: This is not about a single company’s product roadmap; it’s about where future pricing power lives. Photonics and advanced packaging are the picks-and-shovels layer for AI, and that means higher strategic value and tighter geopolitics. If you’re allocating risk, treat China’s push here as a signal: the supply chain fight is moving upstream into interconnect, not cooling down.
Image via Fortune
Pfizer Names Its First Female CFO: The Real Tell Is Capital Discipline
Pfizer promoted Cecile Guegan as its first female CFO, landing at a moment when women’s share of global CFO appointments is slipping. Symbolism matters, but the market is going to grade this hire on one thing: capital allocation.
Big pharma is living in the post-pandemic hangover: digestion of deals, patent cliffs, and investor demand for cleaner earnings quality. CFO credibility shows up in how aggressively you rationalize costs, how you prioritize pipeline versus buybacks, and whether you stop overpaying for growth.
A strong CFO can change the narrative faster than a new drug readout, because it changes what investors believe about downside protection. In this tape, that matters.
📈 Fred's Take: Pfizer doesn’t need a new story; it needs tighter math. If the new CFO can enforce ROI discipline on R&D and M&A while defending cash flow, the multiple stabilizes and the stock starts trading like a real defensive again. Watch guidance quality, not the press release: cleaner ranges, fewer adjustments, and a credible path to margin durability is what gets paid.
📎 Fortune
That’s the board. Trade the incentives, hedge the promises, respect the rate curve. — Fred
— Fred Frost
