With nearly 180 S&P 500 companies reporting, a Fed decision on deck and Anthropic’s S-1 now public, the final week of a challenging October promises to be frenetic.

In this video, Chris Versace explains why the Pro Portfolio will focus on what Microsoft (MSFT), Amazon (AMZN) and Google (GOOGL) say about cloud backlogs, margins and free cash flow. And with the Fed expected to hold rates steady while sounding incrementally hawkish, we plan to tread carefully.

Chris also answers member questions on telecom stocks amid SpaceX’s (SPCX) push, the Portfolio and bonds, Motorola Solutions (MSI) versus Axon (AXON) and many more of your latest Office Hours questions.

Transcript

Hey folks, Chris Versace here. It is Monday, October 26th, and so far the market is in the green. I hate to say “but,” but you know I have to. If you read this morning’s 8 Key Things alert, or even Friday’s Weekly Roundup, then you know we have an extremely busy week ahead of us as we close out what has been a very challenging month for the stock market and, yes, for the portfolio.

All told, we have almost 180 S&P 500 companies reporting this week. It’s going to be frenetic, with a lot of data to consume and a lot of data points to connect, and we will be doing that as we move through the week. Remember, too, that among those nearly 180 companies are the big hyperscalers: Google, Microsoft and Amazon. That’s a lot of weight inside the S&P 500 and, of course, the Nasdaq.

Here’s the thing heading into these reports: we know that SpaceX and Meta are both increasing their capital spending, both in the current quarter and for 2027. We also know that SpaceX has completed an offering of around $40 billion, and Meta was expected to do a deal of around that size. As the Wall Street Journal is reporting this morning, it is indeed doing at least one leg of close to $40 billion, with another $60 billion at-the-market offering program being set up. That tells us the company is likely to take a staged approach to raising capital in the coming months, perhaps through most of 2027. We will see. We also heard from Amazon CEO Andy Jassy that AWS is sold out into 2028.

As we think about all this, it tells us we’ll want to focus on what we hear over the next couple of days from Microsoft, Amazon and Google about their cloud backlog levels, sizing them up against the levels reported in the June and March quarters. What we want to see is backlog continue to step up. That will tell us AI adoption and usage are continuing to accelerate. We will also want to focus on what those companies have to say about their margins and free cash flow expectations, especially coming off what we heard last week from SpaceX and Meta.

It’s an interesting time, by the way, to see those deals get done just as Anthropic finally files its S-1. That S-1 will give us a lot of reading later today and tomorrow, with some 400 pages to parse for implications. Not only for what it says about AI adoption and usage, the build-out of AI infrastructure and any potential pushback, but also for what it says between the lines about capital spending levels, and how that all comes together amid other companies aiming to raise big dollars: SpaceX, Meta, Anthropic and OpenAI, which is also expected to close its funding round of around $30 billion this week. So there’s a lot to parse on that front.

As we move through the hyperscaler earnings and reports from other companies, we will be paying very close attention to what is said about AI adoption and usage levels. What we want to gather over this week and next is a fuller picture of AI adoption and usage, where it’s headed and how quickly. We also want to gauge the real demand for cloud and data center capacity, and how that ties into demand for chips, AI data center networking and networking solutions like those provided by Arista Networks.

Our suspicion is this: AI adoption, and more importantly usage, is continuing to rise. The amount of data it is creating and consuming, along with other non-AI factors, continues to eat up available capacity as it comes on stream, even at companies planning to add substantial capacity. Remember what Meta said about Muse? It’s planning for about a billion Muse users. That tells us capacity is likely to be constrained for some time, especially if, as the staged component of Meta’s offering suggests, new capacity comes on stream in a more disciplined fashion. I don’t think that’s a bad thing. But remember, too, Andy Jassy’s comment that Amazon Web Services is sold out into 2028. Incremental usage on top of that means the capacity constraint is likely to be with us for some time.

It’s not just data center capacity that’s constrained, either. There are other components, including power, as we heard from Nokia last week. This means that hyperscalers and others, at least in the near term (and by that I don’t mean the next month or quarter, I mean the next couple of years), will have to continue to tap neoclouds and others, because they have the capacity and, most importantly, access to power, which we know is a big gating factor.

What this means, in my view, is that the market will continue to be in this push-pull until some of the neoclouds are able to raise the funds needed to deliver the build-outs they’ve committed to. Until that overhang is removed, I think these capital raises will keep the market a little bumpy on the AI side.

Now, here’s the thing. Think back to what we wrote to you, I believe it was in December 2025, when we really started talking about the concept of AI adoption and usage, likening it to internet adoption and, more importantly, usage. We shared then that other industries, over time (and that’s not a month or a quarter, but several years), tend to consolidate around a handful of players, with the majority of market share going to the top four or five, sometimes even the top three. That’s what we see in the PC market, the smartphone market and others. Can there be niche players? Certainly. But that’s typically how the bulk of the market share settles out, and it evolves that way over time.

That is why our focus is on AI adoption, but really, our focus is on AI usage. As we pointed out back in December, it’s when the usage growth rate starts to slow that the real question over excess industry capacity will come. For now, so long as the confluence of data points indicates that AI adoption, and more importantly usage, is rising, and because we understand the demand that creates for capacity, we’re inclined to remain bullish and focus on the medium to longer term with AI infrastructure names. It does mean, however, that we’ll be mindful of where we can potentially improve the cost basis of various AI infrastructure positions in the portfolio.

One last comment before we move on to office hours questions. Alongside all the earnings this week, we have the Fed’s policy decision, which isn’t expected to rock the boat on the fed funds rate. According to the CME FedWatch tool, there’s a better than 90% probability the Fed does nothing, but I do expect incrementally hawkish comments. We also have additional economic data and, of course, headlines that will only increase as we march toward the midterm elections. Put it all together, and the market has a recipe that could keep it very volatile over the next couple of days.

That means we will want to tread carefully. There may be one or two small moves, depending on what develops, but by and large, expect us to tread carefully, doing a lot of dot-connecting back to the portfolio and, of course, breaking down all of the portfolio’s earnings reports this week.

Office Hours Questions

Now, let’s get to some office hours questions. Since there was an overwhelming response to the new format for office hours, here’s what we’re going to do: once, and sometimes twice, a week, we will put out a call for questions. Post them in the forum using #OfficeHours, which will flag them for us so we can collect them and answer them in this format, which I think the vast majority of you have said you like. So with that, here we go.

Telecom

The first question comes from Hans: “With what looks like a rotation into safety stocks starting, do you think the recent slump in the telecom space represents an opportunity for the portfolio?” Interesting question. I say that because when folks think about the telecom space, they typically think of steady-Eddie, slower growers whose appeal is really the dividend. This time around, there is a change to the landscape that seems to be evolving, and yes, I’m referring to SpaceX. Until we have a better picture of SpaceX’s plans and how AT&T, Verizon, T-Mobile and others plan to respond, there are going to be questions about those telecom names. Is it price? Because price hits margins, and margins hit the bottom line. So we’ll put that off to the side for now.

Bonds

Vasilios, I hope I got that right, asks: “Hi Chris, you have a few ETFs in your portfolio. What are your thoughts on adding bonds, particularly given the current interest rate environment?” That’s a great question, Vasilios, and I can certainly understand why people are asking it as the risk-free rate has moved up. However, by design, the Pro Portfolio is an equity-driven vehicle. We might contemplate it, but candidly I’d give it a low probability since it falls outside the Pro Portfolio’s charter, although, as you know, we have tweaked things from time to time by including ETFs and a few other strategies. If you’re very interested in bonds, there are other contributors at TheStreet Pro you should be following. They do a wonderful job, it really is a talented team here, and I would look for their comments.

Motorola Solutions vs. Axon

Moving on, Tom Z. asks: “Hi Chris, I haven’t figured out why Motorola Solutions is so much more solid than Axon.” Well, Tom, I’d say a few things. I was first exposed to Motorola back in the ’90s, when it was a mini-conglomerate spanning handsets, wireless infrastructure, public safety infrastructure and a few other businesses. Even then, the business that would become Motorola Solutions was very well positioned, arguably entrenched, in the public safety market. Axon, by contrast, is a company that has come in and is taking share, while facing competition not just from Flock, as we’re seeing right now, but also from Motorola Solutions and other providers.

So I think there’s still a bit of legacy credibility at work for Motorola. Remember, its big business was not body cameras but portable two-way radios, the walkie-talkie business that was really the hallmark that allowed it to penetrate the public safety market. But as we’re seeing, many other technologies and tools are coming into play, and that is where I think Axon will continue to push forward as it leverages not only Taser and body cameras, but also AI and its other capabilities.

Morgan Stanley

William01 says: “Chris, can you comment on Morgan Stanley? The stock went above your $225 target and now is at your $180 panic point. Maybe we should have sold some when it went through the target.” I’d just remind you that we did sell some at $215 in mid-June. We didn’t exactly top-tick it. However, since you raise our panic point, think about the number of deals we’re hearing about: Anthropic, which Morgan Stanley is obviously leading, OpenAI, the capital raises from SpaceX and Meta, as well as the EQT M&A deal. That has us taking another hard look at Morgan Stanley shares, thinking that perhaps the decline, given the cooling in the IPO market, might be a little overdone.

Broadcom, Nvidia and Chip Exposure

I’m going to group several questions from Stock Stacker, Roro Lady, Babe7 and Brad402Ike together, since they share one theme. Are we adding more Broadcom below $330, or is it better to wait given the risks? What are your thoughts on adding to Broadcom, and is the plan to let the AI names settle out? And with capital in such high demand, what impact, if any, might that have on Nvidia shares?

Building on my comments a few minutes ago, I think we’ll want to get through the hyperscaler earnings reports and get a better sense of their backlog, capex and free cash flow levels. Once we do, we’ll have a better sense of which names we may or may not add to. Given the multi-year capacity constraints we appear to face, I do think demand for these chips will be very robust, so I can’t rule out acting. But when we look at the portfolio’s overall chip position, meaning Broadcom, Marvell and Nvidia, plus the AMD we hold in the EPS All-Stars basket, we have to be mindful of the aggregate exposure. That’s simple, prudent portfolio management, folks. We’ll also look at position sizes across the board to determine where we have a little room to level up, and that will really influence our thinking. I know that’s not quite the answer folks were looking for, and it’s a bit of a “TBD,” but that’s the smart way to approach it, I’m afraid.

EPS All-Stars Basket

Babe7 asks: “I know it’s not a core holding, but since Bloom Energy reported, can the team provide a one-page summary of the basket once all have reported?” We’ll have to give this some thoughtful consideration. You know we like to be of as much value to members as we can, particularly those who closely track the portfolio. However, the EPS All-Stars strategy is something of a black box, so there is no real fundamental recommendation there. I’d also reiterate that there are Pro contributors outside the portfolio who may touch on some of these names, and I’d suggest taking a look at what they’re writing. But we’ll see what we can do. No promises.

Stock Stacker also asked: “Have the recent declines changed your conviction in any EPS All-Stars holdings?” Stock Stacker, when we look at the basket against the expected ramp we’re hearing about in capex and the capacity constraints (again, SpaceX, Meta, Amazon), the conviction underlying the outsized EPS prospects for the names in the current basket remains very vibrant. So there is little to no change in our conviction.

I think the better question is whether there’s any change in our conviction about why the EPS All-Stars strategy should work over time. The strategy ties back to a one-two punch: outsized EPS growth and what that means for a premium valuation. That one-two punch helps generate alpha over time. There can be stretches when outside forces affect that, or at least raise questions about it. But our experience, and we’ve back-tested the data, is that over time the strategy continues to drive outperformance. So there’s no change in our conviction in the EPS All-Stars strategy over the medium to longer term.

Waste Management

PJSmuckers asks: “Chris, is it time to trim some Waste Management? It looks overbought.” PJ, I’m glad you brought that up, because two things aren’t lost on us. First, the relative strength index (RSI) is over 78, signaling a classic overbought condition in the shares. Second, the shares have climbed from early October to around $240 as of Friday and earlier today. That’s a big move in under a month. We’re glad we picked up shares near $206 on September 30th for the portfolio. As we saw in the flash October PMI, the manufacturing economy continues to hum, which is good for Waste Management’s non-residential business, and to the extent consumers are still consuming, the residential business looks good too. But at the end of the day, my friends, the stock has run pretty far, pretty fast, and as you can tell, that observation isn’t lost on us. We’re evaluating everything, so continue to check your emails and alerts.

SpaceX

Finally, Brad402Ike asks: “At what level would SpaceX be considered for the portfolio?” Brad, we’re not going to tip our hand until we have a more concrete answer. We’ve already taken baby steps by saying we continue to do our work on it, and we’ve added SpaceX shares to the Bullpen. But I still have some things to work through, including the impact of the $40 billion raise that Elon Musk said was completed over the weekend. We also want to think a bit more about the lockups, the number of deals out there, and what that means for available capital and investor appetite as more of those lockups expire.

Those are our answers for this round of office hours. Thank you, my friends, for asking those questions. As you can tell, we have a busy week ahead. Continue to check your emails and alerts, because we’ll have a lot more coming your way. Thank you for watching. See you soon.

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At the time of publication, TheStreet Pro Portfolio was long MSFT, AMZN, GOOGL and AXON.

VIDEO: Answering Your Questions as We Navigate a Frenetic Week